[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1737.61]

[Page 336-337]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1737--PRE-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND GUARANTEED TELECOMMUNICATIONS LOANS--Table of Contents
 
              Subpart G--Project Cost Estimation Procedures
 
Sec. 1737.61  Cost allocation for rural and nonrural areas.

    (a) Pursuant to the requirements in 7 CFR part 1735, if loan funds 
are proposed for facilities to serve subscribers in nonrural areas, RUS 
shall allocate costs between rural and nonrural areas. This allocation 
will be used to determine whether the use of loan funds in nonrural 
areas is necessary and incidental to furnishing and improving telephone 
service in rural areas. Cost estimates shall be provided by the borrower 
in the LD. See subpart D of this part. RUS will use the following method 
to review the cost breakdowns and to determine their appropriateness:
    (1) The costs of facilities associated directly with particular 
subscribers shall be allocated to those subscribers.
    (2) The costs of facilities that serve both rural and nonrural 
subscribers shall be allocated based on the relative number of rural and 
nonrural subscribers receiving service from those facilities.
    (3) When a borrower's exchange that includes a nonrural community 
will have an extended area of service (EAS) with other exchanges of the 
borrower, the breakdown of subscribers and funds

[[Page 337]]

in the allocation for rural and nonrural areas included in the proposed 
loan shall show the number of rural and nonrural subscribers and the 
costs to serve each group, as determined per paragraphs (a)(1) and 
(a)(2) of this section, in the subject exchange and in all exchanges 
connected by EAS.
    (b) If RUS determines that costs cannot be adequately allocated 
using the procedures in paragraphs (a)(1) through (a)(3) of this 
section, RUS shall, on a case by case basis, allocate costs between the 
rural and nonrural subscribers using whatever methodology it deems 
reasonable. All allocations in paragraphs (a) and (b) of this section 
shall be documented.