Tag Archives: in-kind matching

When To Use In-Kind Matching

A lot of ISPs that seek grant money take advantage of in-kind matching rules. In-kind contributions recognize non-cash benefits of property, goods, or services that will benefit a grant project. Many grant programs allow in-kind matches to be used in calculating the matching funds being provided by a grant applicant.

The BEAD grant process explicitly allows for in-kind matches. The use of in-kind matches for any federal program is described in federal regulation § 200.306 – Cost Sharing or Matching. I must warn you that the federal rules for in-kind matches are confusing, even for accountants.

The FAQ for BEAD lists the following kinds of in-kind matching that might be allowed: employee or volunteer services, equipment, supplies, indirect costs, computer hardware and software, use of facilities, access to rights of way, pole attachments, conduits, easements, and access to other types of infrastructure.

In-kind matching does not automatically help a grant applicant, and in some cases, it can make it harder to win a grant. It all boils down to how a specific grant program scores and chooses grant winners. Consider how in-kind matching affects two different kinds of grant scoring.

Scoring Based on Percent Matching. There have been a number of state broadband grants that reward ISPs for taking a smallest percentage of grant funding. Consider a grant that requires that an applicant provide at least 50% of the matching funds, and further rewards them for providing even more matching.

In this kind of grant, using in-kind matching funds is a direct benefit. The percent an ISP would be matching is calculated as follows:

Dollar Matching plus In-kind Matching / Total Grant Infrastructure plus In-kind Infrastructure

In this situation, in-kind matching can increase the calculated percent matching as long as some of the matching is comprised of existing assets. Using matching would decrease the calculated percent matching if all of the in-kind is from expenses and not in-kind infrastructure.

Scoring Based on Cost per Passing. Many State BEAD grant rules award a lot of grant points based on the cost per passing. That cost is calculated as follows:

Total Grant Infrastructure plus In-kind Infrastructure / Grant Passings

With this scoring, using any in-kind matching from assets will increase the cost per passing. If your BEAD grant is in a competitive area, adding in-kind matching could push your costs higher than your competitors. In-kind matching could also push a BEAD grant into a high-cost situation where States might consider alternate technologies.

The bottom line is that in-kind matching could be a detriment in a BEAD grant application. But this depends on the specific state grant scoring. In-kind can help if a state focuses on the percent of ISP matching and can hurt if the state focuses on cost per passing.

An Effective Federal Broadband Program, Part 1

eyeballThere are a lot of rumors flying around the industry that there is going to be a big nationwide federal program to fund rural broadband infrastructure. So I’ve been thinking about what such a program might look like. We have the experience a few years back of a few billion dollars being handed out for broadband by the stimulus plan. It’s vital to learn from past mistakes, and so today I look at lessons learned from earlier federal grant programs.

This is the first in a series of blogs that will look a how a federal broadband program could be done to get the most bang for the federal buck. We might only get one chance at this as a country, so I hope we can do this right.

So, in starting with lessons learned from the past, here are a few things that a nationwide federal broadband build-out should avoid:

Don’t Impose Unnecessary Restrictions. There were three rules associated with the stimulus grants that added a lot of cost and delay to projects. A federal project could get a lot more bang for its buck by eliminating the following:

  • Environmental Impact Studies. Telecom networks are built almost entirely in existing rights-of-ways within a few feet of paves roads. So there is no reason to impose a time-eating study to prove that a fiber cable won’t bother endangered plants or animals unless the fiber is being built outside of the existing rights-of-ways.
  • Historical Preservation Rules. Having to check that fiber is not going to somehow disturb historic sites is also silly unless the fiber is being built across open fields. There should be no requirement to do archeological studies for work done in the narrow shoulders of existing highways that have been dug up in the past.
  • Prevailing Wages. I saw projects where requiring prevailing wages added 20% to the cost of the whole project. Prevailing wages sounds like a good idea, but in practice what happens is that large city wages structures are imposed on construction companies that have been building in rural areas for decades. Making these companies pay much higher wages to employees who have worked for them for years is great for employees, but is a terrible waste of the federal dollars.

Don’t Overwhelm the Industry. A federal broadband buildout could be a magnitude larger than the stimulus program and even that program overwhelmed the industry. There are only a finite (and small) number of consultants, engineers and construction companies available in the market and if the government tries to build a lot of infrastructure in a hurry, then a lot of projects are going to be designed and built by companies with no experience.

The stimulus program also showed that it’s not hard to overwhelm the companies that make broadband products. The stimulus program caused a shortage of fiber and prices spiked. There was also a shortage of some kinds of common fiber electronics that delayed projects. It’s hard to imagine what would happen if we tried to build a lot faster than the stimulus program.

Don’t Give Money to Start-ups. The stimulus program gave a lot of money to start-up businesses and a number of these networks have not done well. There was unfortunately a lot of fiber built to nowhere with stimulus funds that even today is barely carrying any traffic. Existing carriers already have the underlying talents and systems in place that are needed to be a successful telecom company. It does not good to get the fiber built to people’s homes unless the company doing so is poised to be a long-term successful ISP.

Hire Experienced People to Review Applications. There was no existing pool of experienced people to review the stimulus grant applications, and so the agencies involved scurried to try to find bodies. I’ve written about this before, but to see if the process was as bad as I feared I encouraged a guy who did my landscaping to apply to be a reviewer. He had done some computer coding years earlier but otherwise had zero experience with telecom. To both of our astonishment he was offered a position as a grant reviewer. If there are a lot of grant funds available there will be a ton of unworthy and faulty applications and it takes seasoned industry veterans to be able to distinguish the good ones from the bad ones.

Take Only Real Matching Funds. The stimulus grants required a significant amount of matching for the federal grant dollars. Unfortunately not all of the matching was with cash and they accepted ‘in-kind’ matching. In-kind matchings were supposed to be an asset that had significant and quantifiable benefits to the project. I reviewed a number of successful grant applications and saw that many of them had made outlandish claims of in-kind matchings that the feds accepted. As an example, I saw one grant that claimed a huge dollar benefit for already having existing rights-of-ways on state highways. The fact is that these same rights-of-ways are available to anybody who meets the qualifications. But the in-kind matching meant that the applicant didn’t need to have any actual matching cash to get the grant.

Get the Industry to Design the Grant Forms. I’ve been doing telephone accounting since the 70’s and the stimulus grants asked for expenses and capital expenditures in a format that baffled me at times. Most telecom companies keep similar books and it’s not hard to ask for financial information in a way that everybody understands.