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Report to Congressional Requesters: 

February 2006: 

Rural Economic Development: 

More Assurance Is Needed That Grant Funding Information Is Accurately 
Reported: 

GAO-06-294: 

GAO Highlights: 

Highlights of GAO-06-294, a report to congressional requesters: 

Why GAO Did This Study: 

GAO was asked to update its 1989 report on the distribution of economic 
development funding using newer tools now available for measuring the 
distribution of federal funds to rural areas. GAO agreed to (1) 
identify federal economic development programs, (2) determine the best 
way to identify rural areas for this report, (3) determine the amount 
and share of economic development funding that rural areas receive, and 
(4) discuss the way federal agencies report data on economic 
development funding. 

What GAO Found: 

Based on prior GAO reports, other research studies, and information 
provided by federal program officials and external rural development 
groups, GAO developed a list of activities as criteria to identify 
economic development programs. This list included job creation, 
infrastructure development. and other activities that are generally 
acknowledged to directly affect overall economic growth. Using this 
list, GAO identified 86 federal programs in 10 federal agencies and 3 
regional commissions and authorities that provide economic development 
funding. 

Because federal agencies use different criteria as to what constitutes 
rural, determining how much funding has targeted rural areas required 
determining which method of defining rural was the best for tracking 
funding. Classification systems that can track funding data at the 
census tract level or below can better differentiate between rural and 
urban areas because they better reflect the economic and social 
diversity than do county-based systems that are based on political 
boundaries. Because limitations in the data did not allow tracking all 
the funding data to local levels, GAO used a system that used 
population and commuting relationships to classify census tracts and 
then classify each county as rural or urban based on the county’s 
dominant commuting pattern. 

The 86 programs in 2002-2004 provided approximately $200 billion in 
total economic development funding, about $150 billion of which could 
be tracked to the county level or below. However, the amount of funding 
provided to rural areas varied widely by program, agency, state, and 
region. These calculations were complicated by significant problems 
with the data from the programs that federal agencies were reporting to 
Census. Although all federal agencies are required to submit 
obligations data for their programs quarterly, 44 of the programs GAO 
analyzed did not report any data or reported incomplete or inaccurate 
data for all or part of fiscal years 2002, 2003, or 2004. As a result, 
the reported obligations were off by more than $11 billon. Further, 
some 19 programs provided no information on obligations of about $4.5 
billion, and another 25 programs reported amounts that varied 
significantly from actual obligations. The FAADS reporting requirement 
has been in place since 1982. But a lack of knowledge among program 
officials about the requirement and poor oversight has affected 
compliance with it. 

What GAO Recommends: 

GAO recommends that the Office of Management and Budget (OMB) (1) 
regularly reach out to individual agencies on Federal Assistance Award 
Data System (FAADS) reporting requirements and on ways to improve the 
quality of data provided to the U. S. Census Bureau (Census), (2) amend 
its guidance to require agency officials to certify the accuracy and 
completeness of their FAADS data reported to Census and (3) provide 
support to Census with its work in notifying agencies not in compliance 
with reporting requirements. OMB and the Department of Commerce 
provided comments on a draft of this report and generally agreed with 
the recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-06-294. 

To view the full product, including the scope and methodology, click on 
the link above. To view the database on federal economic development 
funding, click on the following link: http://www.gao.gov/cgi-
bin/getrpt?GAO-06-436sp. For more information, contact William B. Shear 
at (202) 512-4325 or shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Economic Development Programs Fund Activities Related to Job and 
Business Creation, Infrastructure, and Markets: 

We Identified Rural Areas Using a System Based on Population and 
Commuting Patterns with Census Tracts: 

The Amount of Economic Development Funding Rural Areas Received Varied 
across Programs, Agencies, States, and Regions: 

Data Submitted to Census Were Often Inaccurate and Incomplete: 

Conclusions: 

Recommendations: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Funding Data for Selected Federal Programs That Fund 
Economic Development Activities: 

Appendix III: Comments from the Department of Commerce: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Classification Systems for Differentiating Urban and Rural 
Areas: 

Table 2: Program Funding Not Reported to Census by Agencies for Fiscal 
Years 2002-2004 (in thousands): 

Figures: 

Figure 1: Rural and Urban Areas as Defined by Census: 

Figure 2: Rural and Urban Areas as Defined by RUCA and Dominant RUCA 
Codes: 

Figure 3: Rural and Urban Areas as Defined by Rural-Urban Continuum 
Codes: 

Figure 4: Economic Development Funds by Agency, Including Pass-Through 
Funding,(FY 2002-2004): 

Figure 5: Economic Development Funds Tracked to Rural Areas (FY 2002- 
2004): 

Figure 6: Rural Share of Economic Development Assistance by State (FY 
2002-2004): 

Figure 7: Rural Economic Development Funding Per Capita, by State (FY 
2002-2004): 

Abbreviations: 

Census: U.S. Census Bureau: 

CFDA: Catalog of Federal Domestic Assistance: 

CFFR: Consolidated Federal Funds Report: 

DOD: Department of Defense: 

DOL: Department of Labor: 

DOT: Department of Transportation: 

ERS: Economic Research Service: 

HHS: Department of Health and Human Services: 

FAADS: Federal Assistance Award Data System: 

HUD: Department of Housing and Urban Development: 

Interior: Department of the Interior: 

OMB: Office of Management and Budget: 

RUCA: Rural-Urban Commuting Area: 

USDA: U.S. Department of Agriculture: 

Letter February 24, 2006: 

The Honorable Norm Coleman: 
The Honorable Mike Crapo: 
United States Senate: 

In response to a congressional request, we issued a report in 1989 that 
sought to determine the portion of overall federal economic development 
funding that was being directed to rural areas to ensure that rural 
America is not left behind.[Footnote 1] Our 1989 report sought to 
determine how much of $29 billion in economic development funding from 
88 programs in 1987 had gone to rural counties. In that report, we 
defined rural counties as those counties with urban populations of less 
than 20,000 (based on the 1980 Census)--a definition that was widely 
accepted at the time. We found that while about 16 percent of the 
population lived in rural counties, those counties received about 17 
percent of the funding for the programs for which we were able to 
report data. 

Since our report was issued, researchers have developed more exact 
methods of differentiating flows of federal funds between rural and 
urban areas. The new systems generally rely on census tracts, which are 
far more numerous than counties, and use software programs to 
"geocode," or track, federal funding to that level.[Footnote 2] Because 
of these developments and ongoing concerns about the amounts rural 
areas have been receiving compared with their urban counterparts, you 
asked us to update our 1989 report and examine the share of economic 
development funds that support rural areas today. 

Examining this question requires defining and identifying what 
constitutes an economic development program, defining what constitutes 
a rural area, and obtaining and analyzing data on federal funding 
provided to these programs. As we reported in 1989 and again in 2000, 
there is a lack of agreement on the definition of "economic 
development."[Footnote 3] As a result, we agreed to (1) develop a way 
to identify federal economic development programs, (2) determine which 
system of classifying geographical areas as rural or urban best suits 
the purposes of this report, (3) use the economic development framework 
and classification system to identify rural areas and report the amount 
and share of economic development funding these areas have received, 
and (4) examine issues related to reporting requirements for federal 
agencies that disburse economic development funds. 

We identified economic development programs using the same list of 
economic development activities that we used for our 2000 report, 
supplemented by activities we identified through other research studies 
and information provided by federal program officials and external 
rural development groups.[Footnote 4] Using this list as our criteria, 
we identified about 135 programs from the Catalog of Federal Domestic 
Assistance (CFDA) that appeared to fit our framework.[Footnote 5] We 
discussed these programs and our reasons for choosing them with the 
administering federal agencies, regional commissions, and regional 
authorities. Based on those discussions and a more detailed review of 
the programs, we modified our framework somewhat and reduced the number 
of programs to 86. We then attempted to obtain obligation data for each 
of the programs from the Federal Assistance Award Data System (FAADS), 
which is maintained by the U.S. Census Bureau (Census) for the Office 
of Management and Budget (OMB) and used to prepare the annual 
Consolidated Federal Funds Report (CFFR).[Footnote 6] If we found that 
agencies were reporting inaccurate or incomplete data to FAADS, in most 
cases we obtained the corrected data directly from the federal agencies 
and regional commissions and authorities. Following a recommendation we 
made in 2004 on defining rural areas, we used a classification system 
that is based on characteristics at the census tract level and geocoded 
the data to differentiate between rural and urban areas.[Footnote 7] We 
compared our findings using both this new system and the system that we 
used in our 1989 report. Appendix I contains a full description of our 
scope and methodology. 

We conducted our review from January 2005 through December 2005 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

Because federal agencies do not have a standard definition of what 
constitutes economic development, we used a list of activities as 
criteria for identifying economic development programs that are 
generally accepted as being directly related to economic development by 
federal agencies and external rural development groups. Our list 
includes economic development activities we developed in our 2000 
report on economic development issues and others we chose specifically 
for this report. These activities range from constructing and repairing 
roads, airports, and water systems to establishing business incubators 
and developing and improving tourist areas. In general, we included 
activities that provide direct assistance, primarily through job 
creation or retention, rather than activities that relate directly to 
individual quality-of-life issues, such as housing, education, and 
health care. 

We determined that, for purposes of this report, the best system for 
differentiating rural from urban areas would be based on census tracts 
rather than on counties. Because the number of census tracts in the 
nation (about 62,000) is so much larger than the number of counties 
(about 3,000), classification systems based on census measures offer a 
more precise means of identifying rural areas than the older county- 
based systems. Further, such a system would allow us to track federal 
funding to the subcounty level. However, because data limitations meant 
that we could track only about 50 percent of the funding to the 
subcounty level, we chose to use a system developed in 2001 that uses 
the population and commuting patterns of census tracts to classify 
counties as rural or urban. With this system, we found that 19 percent 
of the U.S. population resided in rural areas--a figure comparable to 
the 20 percent figure cited in the 2000 Census. For purposes of 
comparison, we also analyzed the data using the classification system 
from our 1989 report. 

The 86 economic development programs we identified provided about $200 
billion in economic development funding for fiscal years 2002 through 
2004 to the 50 states and Washington, D.C. Using our classification 
system, we were able to track about $150 billion to the county level or 
below. We found that the amount of funding rural areas received varied 
by program, agency, state, and region. For example, when we analyzed 
the funding by the agency providing it, we found that the amounts 
provided to rural areas ranged from about 7 percent for the Department 
of Labor (DOL) to more than 60 percent for the Appalachian Regional 
Commission. On a state-by-state basis, the percentages varied somewhat, 
but rural areas received a greater share of the economic development 
funding per capita than urban areas in most of the states. Detailed 
information about the share of federal economic development funding by 
program, agency, state, and county can be viewed at 
http://www.gao.gov/cgi-bin/getrpt?GAO-06-436sp. 

In developing the funding information, we identified significant 
problems with agencies' reporting of their program obligation data to 
FAADS. For example, 44 of the 86 economic development programs we 
analyzed either did not report any funding data or reported incomplete 
or inaccurate data to FAADS during all or part of fiscal years 2002, 
2003, and 2004. As a result, the obligations reported by these agencies 
for the 86 programs were off by more than $11 billion during this 
time.[Footnote 8] Some 19 programs (22 percent) provided no information 
on obligations of about $4.5 billion. Another 25 programs reported to 
FAADS amounts that varied significantly from the programs' annual 
obligations, and some programs had always reported expenditure data 
rather than obligation data, resulting in differences of millions of 
dollars. After working with agency officials to find the reasons behind 
the missing or incorrect data, we received corrected data from seven 
agencies and three regional commissions, and determined that these data 
were sufficiently reliable for our analysis. Although the quarterly 
FAADS reporting requirement has been in place since 1982, several 
factors have affected compliance with it, including Census' inability 
to assure that agencies were submitting the data, a lack of knowledge 
among program officials about the reporting requirements, and poor 
oversight and coordination at the agencies. After we discussed the 
problems with Census, they and OMB began jointly meeting with the 
agencies to improve reporting compliance for all federal programs. 

To help ensure that Census receives accurate funding information from 
federal agencies, this report makes recommendations to OMB for 
improving its oversight of compliance with FAADS reporting 
requirements. 

Background: 

According to the National Academy of Public Administration, federal 
participation in economic development evolved during the 20th century. 
Economic development programs implemented during the 1930s 
characteristically involved direct federal action, bypassing state and 
local governments. During the 1940s and 1950s, these programs were 
intended to improve housing and commercial districts in central cities. 
In the 1960s, the federal government created programs to provide 
economic development assistance to economically distressed areas. These 
programs were expanded in the 1980s and 1990s to utilize new 
technologies to create new transit systems, clean up hazardous waste 
sites, and carry out other economic development activities in urban and 
rural areas.[Footnote 9] Most recently, economic development 
initiatives have included the revitalization of disaster areas, 
including lower Manhattan after the September 11, 2001, terrorist 
attacks and the Gulf Coast after the 2005 hurricane season. 

A variety of federal programs and federally funded regional commissions 
and authorities have helped advance economic development in communities 
throughout the United States, including many communities that are 
considered rural. Most of the nationwide programs do not have specific 
rural economic development objectives, but the regional commissions and 
authorities target economic rural areas specifically. For this reason, 
a narrow definition of economic development programs that only included 
those focusing exclusively on rural areas would include few programs 
and limited dollars. 

The nationwide programs also do not have a standard definition of 
economic development. Department of Commerce officials, for example, 
consider economic development programs as those that save or create 
jobs. U.S. Department of Agriculture (USDA) officials consider economic 
development broadly as activities that increase economic opportunities 
and improve residents' quality of life. Officials at other federal 
agencies, including the Department of Defense (DOD), the Department of 
Transportation (DOT), and the Department of Housing and Urban 
Development (HUD), said that they did not have definitions of economic 
development. 

Like the concept of economic development, the notion of what 
constitutes rural and urban areas has evolved over several decades, 
partly in response to changes in residential and commuting patterns. As 
the cities and suburbs have expanded and more remote areas have become 
accessible, distinctions between rural and urban areas have blurred. 
Federal agencies use different criteria as to what constitutes a rural 
area. Depending on the agency and the program, the criterion most often 
used to define rural areas is population, especially at USDA, which 
uses varying thresholds ranging from 2,500 or less to 50,000. Some 
agencies and programs that fund economic development activities do not 
focus on serving rural or urban areas but instead provide competitive 
or formula-based grants to eligible applicants from any 
location.[Footnote 10] 

FAADS is a centralized reporting system that OMB established in April 
1980 to gather and disseminate information on the domestic financial 
assistance provided by federal agencies. Authorized by the Consolidated 
Federal Funds Report Act of 1982,[Footnote 11] FAADS is a quarterly 
report of financial assistance awards made by each federal agency. OMB 
has designated Census as its executive agent to manage and operate the 
system, which the Congress and public officials use for policy and 
trend analyses, revenue forecasting, oversight, and legislative 
initiatives. Federal agencies and regional commissions and authorities 
that administer financial assistance programs are required to report 
quarterly to FAADS on the financial assistance awards they make. 

Economic Development Programs Fund Activities Related to Job and 
Business Creation, Infrastructure, and Markets: 

Because federal agencies do not have a standard definition of what 
constitutes economic development, we developed a list of activities 
that were generally accepted as being directly related to economic 
development. As agreed with your office, we based our framework on our 
prior work, a review of other research studies, and discussions with 
federal officials and rural development groups.[Footnote 12] We also 
held discussions with the administering federal agencies, regional 
commissions, and regional authorities to reach consensus on the 
activities and programs we selected. 

Our framework includes nine economic development activities: 

* planning and developing strategies for job creation and retention; 

* constructing and renovating commercial buildings; 

* establishing business incubators (facilities to help small businesses 
get started); 

* constructing industrial parks; 

* developing infrastructure by constructing and repairing roads, water 
and sewer systems, and airports; 

* supporting entrepreneurial activities; 

* promoting the development of new markets for existing products; 

* developing telecommunications and broadband infrastructure and 
enabling technology transfer; and: 

* developing and improving areas for tourism. 

The first five activities listed above, with the exception of 
developing airports, are from our 2000 report.[Footnote 13] That list 
was developed based on a general consensus of officials from (1) the 
Department of Commerce's Economic Development Administration, whose 
mission is to help economically distressed areas, (2) other federal 
agencies involved with economic development, and (3) several national 
associations familiar with economic development. For this report, we 
confirmed the 2000 list with officials from the same federal agencies 
and organizations and also reached a general consensus on the four 
additional items. In general, we focused on activities that directly 
affected the overall development of an area, such as job creation, 
rather than on activities that improved individuals' quality of life, 
such as housing and education. However, we did include job training 
that had a direct impact on economic development by, for example, 
preparing employees for work in a specific industry or business in a 
particular area. 

We identified 86 federal programs at 10 federal agencies and 3 regional 
commissions that included one or more of the activities in our economic 
development framework. Many of these programs were not labeled as 
economic development programs, but some of their activities suggested 
that they supported this goal. For example: 

* The goal of USDA's Empowerment Zone and Enterprise Community program 
for rural areas is to stimulate the creation of new jobs, particularly 
for the disadvantaged and long-term unemployed, and to revitalize 
economically distressed rural areas. 

* The Department of the Interior's (Interior) Bureau of Indian Affairs 
Facilities Operations and Maintenance program provides funding for 
basic services at noneducational facilities located on reservations. 

* The Department of Commerce's Trade Adjustment Assistance program 
provides assistance to firms and industries adversely affected by 
increased imports. 

* The Appalachian Regional Commission, which oversees the Appalachian 
Development Highway System, aims to open up areas with development 
potential where commerce and communication have been inhibited by lack 
of adequate access.[Footnote 14] 

The number of programs each agency and commission administered that met 
one or more of the components of our economic development framework 
varied from one at the Denali Commission--established in 1998 to 
address the needs of rural Alaska--to 29 at USDA. We included only 
economic development programs that received funding during our review 
period (fiscal years 2002 to 2004). Thus, we did not include programs 
such as DOD's base closing economic assistance programs because DOD 
reported no obligations for these programs during those years. Appendix 
II contains more detailed information on each of the 86 programs. 

We Identified Rural Areas Using a System Based on Population and 
Commuting Patterns with Census Tracts: 

Since our 1989 report, which used county-level data to classify rural 
and urban areas, a variety of more sophisticated classification systems 
have been developed that use census tracts to differentiate between 
rural areas and urban areas. These classification systems provide a 
more precise way of differentiating between rural and urban areas than 
county-based systems. Further, computer software programs can now 
geocode federal funding data below the county level. Due to data 
limitations that only allowed us to identify subcounty level recipients 
for about half of the funding, we chose to use a system developed in 
2001 which relies on both population and commuting patterns of census 
tracts to classify each county as rural or urban based on the counties 
dominant commuting patterns. Although this approach does not fully 
resolve all the classification problems inherent in county-based 
systems that are based on political boundaries rather than demographic 
characteristics, it allowed us to geocode most of the data and was most 
comparable to census population data. 

We considered a number of county-based and subcounty systems for 
analyzing the data (table 1). 

Table 1: Classification Systems for Differentiating Urban and Rural 
Areas: 

Classification system: Rural-Urban Continuum Codes; 
Developed by: USDA/Economic Research Service (ERS); 
Geographic unit: County; 
First developed: 1975. 

Classification system: Urban Influence Codes; 
Developed by: USDA/ERS; 
Geographic unit: County; 
First developed: 1993. 

Classification system: 2000 Census-urbanized areas and urban clusters; 
Developed by: Census; 
Geographic unit: Census tracts; 
First developed: 2001. 

Classification system: Rural-Urban Commuting Area (RUCA); 
Developed by: Office of Rural Health Policy, Department of Health and 
Human Services (HHS) and USDA/ERS; 
Geographic unit: Census tracts or zip codes; 
First developed: Late 1990s. 

Classification system: Dominant RUCA; 
Developed by: Washington Office of Community and Rural Health; 
Geographic unit: County based on dominant census tracts; 
First developed: 2001. 

Source: ERS, HHS, and the State of Washington's Office of Community and 
Rural Health: 

[End of table] 

We found shortcomings with most of these systems. For example: 

* Many studies that have evaluated the rural share of federal programs, 
including our 1989 report, have used the rural-urban continuum codes 
devised by the Economic Research Service (ERS) of the USDA.[Footnote 
15] These codes distinguish counties by their degree of urbanization 
and proximity to a metropolitan area or areas. While using rural-urban 
continuum codes allows geocoding at the county level, the results are 
often skewed, particularly in the western states, where counties often 
are very large. For example, using this approach, more than 50 percent 
of the nation's rural population would live in counties that would be 
considered urban (based on the 2000 Census). 

* Urban influence codes, which were developed by ERS in 1993 as a way 
to measure rurality by quantifying the influence of urban areas on 
rural areas, use only county-level data and are based solely on urban 
factors. As a result, the classifications are heavily skewed toward 
urban. 

Beginning in the 1990s, ERS and other organizations have developed 
subcounty classification systems that attempt to better capture 
differences between rural and urban areas. These subcounty 
classification systems include elements such as commuting zones and 
labor market areas that are more precise than the county level systems 
in order to capture the economic and social diversity of rural 
areas.[Footnote 16] Some use census tracts (about 62,000) or other 
geographic areas smaller than counties (about 3,000) that can better 
reflect rural-urban differences. 

Census's urbanized areas and urban cluster system defines rural areas 
by exclusion--that is, it views as rural all areas that it has not 
already identified as urban. Census defines urbanized areas as 
continuously built up areas with a population of at least 50,000 and 
compromising one or more places and adjacent densely settled areas. 
Urban clusters are densely settled territories with at least 2,500 but 
fewer than 50,000 people. Collectively, urbanized areas and urban 
clusters are referred to as urban areas and essentially depict densely 
settled territory as it may appear from the air (see fig. 1). 

Figure 1: Rural and Urban Areas as Defined by Census: 

[See PDF for image] 

[End of figure] 

On the basis of these definitions, data from the 2000 Census suggest 
that 59 million Americans (20 percent of the population) reside in 
rural areas. As we reported in our 2004 report, using urbanized areas 
and urban clusters is an effective way to make consistent eligibility 
determinations for individual rural economic development programs when 
data is available at the census tract level.[Footnote 17] However, we 
found that our ability to track funds to the local level varied 
significantly across agencies. For example, while rural housing and 
most other USDA program data could be geocoded to the local level, most 
DOT spending could be tracked only to the counties. Thus, while 
geocoding data using urbanized areas and urban clusters would 
effectively show rural and urban differences, limitations with the data 
would only allow us to geocode about half of the data under this 
classification system. 

Ultimately, we chose the dominant RUCA system, developed by the 
Washington State Office of Community and Rural Health in 2001, because 
it uses both census tracts and county codes to determine which areas 
are rural. Using this system we were able to code 99 percent of the 
economic development funding.[Footnote 18] The dominant RUCA system is 
based on the 10-tiered subcounty RUCA system developed by ERS in 
conjunction with the Department of Health and Human Services (HHS) in 
the late 1990s. RUCA reflects both where people live and work by using 
both population and commuting relationships to classify census tracts. 
The dominant RUCA system classifies each county as rural or urban based 
on the dominant commuting patterns. 

Figure 2 shows a map of the rural and urban areas as defined by both 
the census tracts on which the RUCA codes are based and by the dominant 
RUCA system that we used due to the data limitations. 

Figure 2: Rural and Urban Areas as Defined by RUCA and Dominant RUCA 
Codes: 

[See PDF for image] 

[End of figure] 

Although the census tract RUCA code map better reflects where people 
live and work, using the dominant RUCA system we determined that 19 
percent of the U.S. population resided in rural areas. This figure is 
comparable to the 20 percent figure cited in the 2000 Census. 

The rural-urban continuum classification system does not explicitly 
define rural. However, the rural-urban continuum codes can be combined 
to create rural and urban designations. (See fig. 3.) 

Figure 3: Rural and Urban Areas as Defined by Rural-Urban Continuum 
Codes: 

[See PDF for image] 

[End of figure] 

For example, in our 1989 report we defined as rural any county whose 
urban population was less than 20,000 people. Using this definition, 
slightly more than 10 percent of the U.S. population resides in rural 
areas, or only half the 20 percent rural figure cited in the 2000 
Census. 

The Amount of Economic Development Funding Rural Areas Received Varied 
across Programs, Agencies, States, and Regions: 

The 86 economic development programs we identified that met one or more 
of the criteria from our list of economic development activities 
provided about $200 billion in funding to the 50 states and Washington, 
D.C. for fiscal years 2002 through 2004.[Footnote 19] We were able to 
use geocoding to track about $150 billion of those dollars to the 
county level or below. We could not track beyond the state level 
another $50 billion that was passed through state capitals to county 
and local jurisdictions because we could not identify final recipients. 
If we had geocoded the funding for pass-through programs at the state 
capitals, the share of spending associated with urban areas--where 
state capitals are typically located--would have been overstated. For 
the approximately $150 billion that we could geocode to the county 
level or below, our analysis showed that during fiscal years 2002 
through 2004, rural areas received more economic development program 
assistance dollars per capita than their urban counterparts. The 
overall shares of funding varied by the administering program and 
agency, and by the state and region receiving the money, with rural 
areas receiving a greater share of the funding in some cases and urban 
areas in others. 

When we analyzed economic development funding by program, we found wide 
variations in the percentage of funding that went to rural areas. The 
funding ranged from a high of 100 percent for the Interior's 
Improvement and Repair of Indian Detention Facilities Program down to 
about 1 percent for DOT's Transit Planning and Research Program and 
HUD's Brownfields Economic Development Initiative. The programs with 
the highest percentage of rural funding tended to be from USDA, whose 
funding decisions are primarily based on specific definitions of rural, 
and from Interior and the commissions and authorities whose programs 
serve rural areas. In contrast, HUD, the Environmental Protection 
Agency (EPA), and DOL were among the agencies with the lowest 
percentage of funding reaching rural areas who also had significant 
pass-through dollar amounts. Most program funding by these agencies to 
eligible applicants is done using a formula or on a competitive basis 
without differentiating between rural and urban areas. 

USDA had the most programs providing economic development funding for 
rural areas, but DOT provided the largest amount of economic 
development funding overall (fig.4).[Footnote 20] DOT also accounted 
for the largest overall amount of pass-through dollars ($37.9 billion), 
but higher percentages of funds from EPA, DOL, and HUD were sent to 
state capitals. We were unable to track 88 percent of EPA's funding, 79 
percent of DOL's, or 75 percent of HUD's below the state level, and 
excluded those dollars from our analysis. Examples of programs that we 
could not track below the state level are DOL's Employment Service 
program and EPA's capitalization grants for clean water and drinking 
water.[Footnote 21] 

Figure 4: Economic Development Funds by Agency, Including Pass-Through 
Funding,(FY 2002-2004): 

[See PDF for image] 

[End of figure] 

Figure 5 shows the approximately $150 billion in economic development 
funding that we could track below the state level by agency under both 
the dominant RUCA and rural-urban continuum models during fiscal years 
2002-2004. Under both models, the amount of federal agency, regional 
commission, or authority funding to rural areas varied widely. For 
example, using the dominant RUCA model we found that the amounts 
provided to rural areas ranged from 7 percent or less for the portion 
of DOL and EPA funding we could track to about 58 percent for USDA and 
77 percent for the Delta Regional Authority. 

Figure 5: Economic Development Funds Tracked to Rural Areas (FY 2002- 
2004): 

[See PDF for image] 

[End of figure] 

The share of economic development funding that rural areas received 
also varied by state. Under the dominant RUCA model, the shares varied 
from 85 percent of the total funding in Wyoming to 3 percent in 
Massachusetts. Figure 6 shows the percentage of economic development 
funding in each state that went to rural areas. 

Figure 6: Rural Share of Economic Development Assistance by State (FY 
2002-2004): 

[See PDF for image] 

[End of figure] 

The amounts also varied by region of the country. As shown in figure 7, 
rural residents in the western states generally received more economic 
development funding per capita than residents in the mid-Atlantic and 
midwest states. For example, Alaska and North Dakota residents received 
more than $1,200 a year during fiscal years 2002 through 2004, while 
residents of all states east of the Mississippi River received $800 or 
less per year during the same time period. 

Figure 7: Rural Economic Development Funding Per Capita, by State (FY 
2002-2004): 

[See PDF for image] 

[End of figure] 

Detailed information on the share of federal economic development 
funding that rural areas received, listed by program, agency, state, 
and county under both the dominant RUCA and rural-urban continuum 
classification systems, can be viewed at http://www.gao.gov/cgi-
bin/getrpt?GAO-06-436sp. 

Data Submitted to Census Were Often Inaccurate and Incomplete: 

OMB requires that all federal agencies submit financial assistance 
award data to Census for their programs on a quarterly basis, but our 
review showed that the data submitted were often inaccurate and that 
some data were missing altogether. We worked with Census officials to 
find the reasons for the incorrect and missing data, and ultimately we 
received corrected information from seven agencies and three 
commissions. With these corrections, we determined that the data were 
sufficiently reliable for our analysis. The agencies involved took a 
number of significant actions in order to provide corrected data for 
the programs we reviewed, and these actions should improve FAADS 
reporting in the future. 

During our review, which covered fiscal years 2002 through 2004, we 
looked at the quarterly files of standardized records that FAADS 
maintains on financial assistance awards made by federal agencies. For 
those programs for which information had been submitted to FAADS, we 
checked the amounts against agency obligation data provided by the 
agency or the CFDA record. When we found significant discrepancies, we 
contacted the agencies to determine the reasons for these differences. 
If the FAADS data were deemed incorrect, in most cases we obtained 
corrected information from the agencies and replaced the FAADS 
information with that data for our analysis. In cases where the 
discrepancy could not be resolved, we used the agency obligations data 
provided to us by the agency. 

We found that for 44 of the 86 economic development programs included 
in our analysis, the administering agencies either did not report any 
funding data or reported incomplete or inaccurate data to FAADS during 
all or part of fiscal years 2002 through 2004. Total obligations that 
were reported to Census during those years for these programs were off 
by more than $11 billion, including obligations of about $4.5 billion 
for 19 programs (22 percent) that had not been reported at all, and a 
total of about $7 billion for 25 programs that was either over-or 
underreported. The programs we reviewed accounted for less than 10 
percent of the federal programs that should be providing obligation 
information to FAADS. Since the FAADS reporting requirements are the 
same for all federal agencies and commissions that administer financial 
assistance programs--not just those involved in economic development-- 
the amount of unreported and misreported funding is likely far greater 
than the $11 billion we identified during our review. 

Even though the FAADS reporting requirement has been in place since 
1982, for the agencies we reviewed, several factors affected the extent 
of compliance with the FAADS requirements. These factors included: 

* a lack of controls and resources at Census to determine whether 
agencies were actually submitting the data, 

* a lack of knowledge among program officials about the FAADS reporting 
requirements, and: 

* poor oversight and coordination at the agencies responsible for 
ensuring both compliance with the reporting requirement and the 
accuracy of the data submitted. 

A Census official noted that, over the years, Census has worked with 
agencies to increase reporting compliance, but with limited success. 
Because we identified so many programs for which data had not been 
reported to FAADS, we worked with agency officials to identify the 
agencies' reasons for not submitting the information. The agencies were 
either unaware of the requirements, did not have computer databases 
containing the necessary information, or were using expenditure instead 
of obligation data. Several program officials subsequently instituted 
corrective actions to improve FAADS reporting, and these improvements 
should eventually be reflected in the annual CFFR. 

Census Cannot Assure Compliance with FAADS Reporting Requirements: 

Our review showed that Census could not ensure that federal agencies 
were complying with the FAADS reporting requirements. According to our 
Standards for Internal Control in the Federal Government and related 
documents, an agency's system of internal control should include 
appropriate measures that will ensure the validity, accuracy, and 
completeness of the data in agency systems and capture erroneous data 
that can then be reported, investigated, and promptly 
corrected.[Footnote 22] However, according to a Census official, a lack 
of resources had kept the bureau from establishing an effective system 
to monitor whether agencies were submitting the required information. 
Further, Census does not have an adequate process for determining 
whether an agency has failed to report particular program data in a 
given year. 

Although Census prepares quarterly compliance reports showing whether 
agencies are meeting their reporting requirements, the reports we 
reviewed did not capture the extent of the misreporting we found. While 
Census officials told us that they had attempted to "persuade" agencies 
to submit data in the past, it became apparent from our findings that 
the effect of these efforts had been limited. During the course of our 
review, we talked with Census officials about the significant lack of 
compliance with FAADS reporting requirements, and officials from Census 
and OMB held several discussions about the problem. The culmination of 
these discussions was a meeting held in April 2005 between OMB, Census, 
and most of the agencies responsible for reporting information to 
FAADS. The purpose of the meeting was to allow OMB and Census to 
explain to the agencies the importance of submitting their obligation 
information on all programs on a quarterly basis as required. In 
addition, in June 2005, officials from the two agencies met with 
representatives of HUD to emphasize the need for compliance and 
accurate reporting, and in November 2005 Census and OMB held a second 
multiagency meeting. 

Even after this renewed emphasis on compliance and accurate reporting, 
Census officials told us that some agencies had continued to submit 
improper data that were not necessarily reliable, forcing Census to 
devote staff resources to cleaning up the information. For example, the 
officials said that even though they had frequently pointed out data 
problems to HUD, the same errors kept occurring with each submission. 
HUD officials told Census and OMB staff at a June 2005 meeting that 
they would try to improve their reporting accuracy. According to a HUD 
official, the agency was commended by OMB at the November 2005 
multiagency meeting for reducing its error rate by half. However, 
Census officials told us that while HUD's progress is commendable, 
HUD's error rate remains higher than that of most agencies. 

Federal Agency Staff Lacked Knowledge about FAADS Reporting 
Requirements: 

A number of federal program officials who had not submitted FAADS 
information to Census were not aware that they were required to do so. 
In fact, a number of federal agency and regional commission officials 
told us that they had never heard of FAADS. As shown in table 2, CFDA 
program funding not reported to Census for fiscal years 2002, 2003, or 
2004, accounted for about $4.5 billion. 

Table 2: Program Funding Not Reported to Census by Agencies for Fiscal 
Years 2002-2004 (in thousands)A: 

CFDA program number: 10.353; CFDA program name: National Rural 
Development Partnership; 
Agency: USDA; 
FY 2002: $2,283; 
FY 2003: $2,802; 
FY 2004: $2,664; 
Total: $7,749. 

CFDA program number: 10.665; 
CFDA program name: Schools and Roads/Grants to States; 
Agency: USDA; 
FY 2002: $357,009; 
FY 2003: $713,639; 
FY 2004: $739,998; 
Total: $1,810,646. 

CFDA program number: 10.666; 
CFDA program name: Schools and Roads/Grants to Counties; 
Agency: USDA; 
FY 2002: $4,905; 
FY 2003: $4,956; 
FY 2004: $6,834; 
Total: $16,694. 

CFDA program number: 10.673; 
CFDA program name: Wood In Transportation; 
Agency: USDA; 
FY 2002: $0; 
FY 2003: $0; 
FY 2004: $392; 
Total: $392. 

CFDA program number: 10.674; 
CFDA program name: Forest Products Lab: Technology Marketing Unit; 
Agency: USDA; 
FY 2002: $0; 
FY 2003: $548; 
FY 2004: $0; 
Total: $548. 

CFDA program number: 10.855; 
CFDA program name: Distance Learning and Telemedicine Loans and Grants; 
Agency: USDA; 
FY 2002: $118,707; 
FY 2003: $138,815; 
FY 2004: $685,905; 
Total: $943,427. 

CFDA program number: 10.859; 
CFDA program name: Assistance to High Energy Cost/Rural Communities; 
Agency: USDA; 
FY 2002: $0; 
FY 2003: $18,500; 
FY 2004: $31,104; 
Total: $49,604. 

CFDA program number: 12.002; 
CFDA program name: Procurement Technical Assistance For Business Firms; 
Agency: DOD; 
FY 2002: $17,410; 
FY 2003: $22,324; 
FY 2004: $13,220; 
Total: $52,954. 

CFDA program number: 14.246; 
CFDA program name: Community Development Block Grants Brownfields 
Economic Development Initiative; 
Agency: HUD; 
FY 2002: $25,314; 
FY 2003: $0; 
FY 2004: $0; 
Total: $25,314. 

CFDA program number: 14.248; 
CFDA program name: Community Development Block Grants (CDBG)/Section 
108 Loan Guarantees; 
Agency: HUD; 
FY 2002: $310,974; 
FY 2003: $333,683; 
FY 2004: $289,082; 
Total: $933,739. 

CFDA program number: 14.250; 
CFDA program name: Rural Housing and Economic Development; 
Agency: HUD; 
FY 2002: $25,000; 
FY 2003: $0; 
FY 2004: $0; 
Total: $25,000. 

CFDA program number: 15.048; 
CFDA program name: Bureau of Indian Affairs Facilities/Operations and 
Maintenance; 
Agency: Interior; 
FY 2002: $56,773; 
FY 2003: $44,664; 
FY 2004: $35,400; 
Total: $136,837. 

CFDA program number: 15.063; 
CFDA program name: Improvement and Repair of Indian Detention 
Facilities; 
Agency: Interior; 
FY 2002: $0; 
FY 2003: $0; 
FY 2004: $569; 
Total: $569. 

CFDA program number: 15.124; 
CFDA program name: Indian Loans/Economic Development; 
Agency: Interior; 
FY 2002: $4,500; 
FY 2003: $4,717; 
FY 2004: $3,143; 
Total: $12,360. 

CFDA program number: 20.907; 
CFDA program name: Minority Institutions; 
Agency: DOT; 
FY 2002: $442; 
FY 2003: $442; 
FY 2004: $200; 
Total: $1,084. 

CFDA program number: 20.930; 
CFDA program name: Payments For Small Community Air Service 
Development; 
Agency: DOT; 
FY 2002: $20,000; 
FY 2003: $19,863; 
FY 2004: $21,803[B]; 
Total: $61,666. 

CFDA program number: 90.100; 
CFDA program name: Denali Commission; 
Agency: Denali Commission; 
FY 2002: $91,594; 
FY 2003: $93,961; 
FY 2004: $120,074; 
Total: $305,630. 

CFDA program number: 90.201; 
CFDA program name: Delta Area Economic Development; 
Agency: Delta Regional Authority; 
FY 2002: $26,570; 
FY 2003: $7,203; 
FY 2004: $3,595; 
Total: $37,368. 

CFDA program number: 93.768; 
CFDA program name: Medicaid Infrastructure Grants to Support the 
Competitive Employment of People With Disabilities; 
Agency: HHS; 
FY 2002: $21,228; 
FY 2003: $19,727; 
FY 2004: $17,945; 
Total: $58,900. 

CFDA program number: Total; 
FY 2002: $1,082,709; 
FY 2003: $1,425,844; 
FY 2004: $1,971,928; 
Total: $4,480,481. 

Source: GAO analysis of agency data. 

[A] Possible minor differences between actual funding and the amounts 
and the totals in the schedule are due to rounding: 

[B] This amount includes $1,929,901 that was reallocated from fiscal 
years 2002 and 2003: 

[End of table] 

In the following examples of nonreporting that we found during our 
review, the agency officials involved were not familiar with FAADS: 

* Staff at two of the three regional commissions and authorities we 
included in our analysis had never heard of FAADS or the CFFR and were 
not aware of the reporting requirements. We provided information to 
these officials about FAADS and the Census's involvement in collecting 
the data. Between the two organizations, more than $340 million had not 
been reported to FAADS during our 3-year review period. As a result of 
our discussions about FAADS, officials at both commissions said that 
they would contact Census and begin reporting the information. 

* Two different HUD program officials noted that they were not familiar 
with FAADS or the requirements to submit quarterly data. As a result, 
for fiscal year 2002 more than $50 million dollars in funding provided 
by the Brownfields Economic Development Initiative and the Rural 
Housing and Economic Development program was not reported to FAADS. 

* A DOD program official was not familiar with FAADS and was only 
vaguely familiar with his program's CFDA number. As a result, $53 
million in program obligations was not reported in fiscal years 2002 
through 2004. Initially, the FAADS data we received directly from DOD 
indicated that the program had received no funding for the 3 years we 
included in our review. However, subsequent discussions with the DOD 
official revealed that this particular program had about $53 million in 
obligations for fiscal years 2002 through 2004 that was not reported to 
FAADS and reflected in the CFFR. 

A Lack of Oversight and Coordination at Federal Agencies Caused 
Inaccurate Reporting to FAADS: 

While other program managers were aware of the FAADS reporting 
requirements, the information they submitted to Census was either 
incomplete or inaccurate, resulting in the misreporting of another 
approximately about $7 billion dollars from various agencies during 
fiscal years 2002 through 2004. Several factors affected the quality of 
the reporting. First, in some cases data from several programs were 
combined. Second, program officials sometimes did not capture all the 
necessary information. And finally, agencies lacked the controls needed 
to ensure that all of the programs and the correct data were submitted, 
resulting in significant over-and underreporting of obligations. 

The following examples show some of the different scenarios that 
affected the completeness and accuracy of agencies' submissions to 
FAADS: 

* Although the Appalachian Regional Commission had four separate CFDA 
program numbers, for many years the agency had submitted all of its 
information under one program. As a result, three CFDA program accounts 
showed no funding, even though each represented a distinct program. We 
also determined that the amount of funding data submitted to FAADS 
appeared to be more than $30 million higher than the Appalachian 
Regional Commission's annual appropriation in fiscal year 2002 and more 
than $4 million higher than the Commission's fiscal year 2003 
appropriation. The Appalachian Regional Commission subsequently 
determined that it had counted a portion of its FAADS submission twice 
and agreed to submit revised data that would reapportion its data 
correctly among the four CFDA program accounts and correct for the over-
counting. These changes should lower its fiscal year 2002 total by more 
than $31 million, and its fiscal year 2003 total by $4.5 million. Also, 
the Appalachian Regional Commission told us that it has instituted 
internal controls to prevent duplicate submissions to FAADS and to 
prevent the reporting of all investments under one CFDA number. 

* Interior had not updated its "cross-walk" of internal data codes that 
is intended to keep current with changes in the CFDA. As a result, 
Interior had underreported its FAADS data by nearly $56 million for 
fiscal years 2002 and 2003. The staff member in charge of reporting to 
FAADS told us that he had learned that some of his data codes were out 
of date only after we questioned some inaccuracies in the data. 
Interior has since rerun its data with the new codes and planned to 
resubmit corrected information to Census for fiscal year 2004. 

* Also, Interior's Outdoor Recreation, Acquisition, Development and 
Planning program reported to FAADS obligations amounting to about $64 
million. Data we subsequently obtained from the agency showed 
obligations totaling more than $290 million. An agency official 
explained that until recently, there had been no monitoring of the 
information submitted to FAADS. 

* HUD has consistently submitted to FAADS expenditure rather than 
obligation data.[Footnote 23] When questioned about this practice, a 
HUD official told us that the agency's systems were set up to capture 
expenditure data. We found significant differences between expenditures 
and obligations in the funding information for two of the six HUD 
programs we evaluated. HUD met with Census and OMB in June 2005 about 
the issue and was considering ways to change its system to supply the 
required obligations data. Subsequently, another HUD official told us 
that a new system that would collect and report program obligation data 
rather than expenditure data to Census would be operational some time 
during 2006. 

* We questioned a FAADS submission by HHS for the department's Native 
American programs for fiscal year 2002 because the more than $82 
million in obligations reported for that year totaled more than three 
times the $26.2 million budget for this program. For fiscal year 2003, 
the $37 million reported to FAADS was about $16 million more than the 
$20.8 million actual obligation amount provided to us by HHS. For 
fiscal year 2004, the $37 million reported to FAADS was about $13 
million more than the $23.9 million reported to us by HHS. An HHS 
official said that she could not explain the discrepancies. 

* For HHS's Health Care and Other Facilities program, the FAADS 
submission for Fiscal Year 2002 totaled $620 million--more than $300 
million more than what HHS's internal system showed. An HHS official 
agreed that the appropriate figure for the year was about $314 million 
and said that HHS planned to review its data system to correct the 
discrepancy. 

* We also questioned the figure of $1.3 billion that HHS reported for 
its Community Services Block Grant Discretionary Awards program for 
fiscal year 2002, because the department's internal grant-tracking 
system showed a figure of about $55 million. After looking into the 
discrepancy, an HHS official indicated that the department had for 
several years mistakenly combined the Community Services Block Grant 
program and the Discretionary Awards program under the Discretionary 
Awards CFDA program number. However, the $1.3 billion total reported to 
FAADS also appeared to be incorrect, as the total obligations for the 
two programs combined in fiscal year 2002 was about $700 million--about 
$600 million less than what was reported to Census. HHS has agreed to 
correct the discrepancy, beginning with its fiscal year 2006 
submission. 

* The Small Business Administration (SBA) did not include in its FAADS 
submission the funding for a special loan program under its Small 
Business Loan program that was set up to assist the World Trade Center 
area after the September 11, 2001, terrorist attacks. As a result, the 
agency's obligations were underreported by about $828 million for 
fiscal year 2003 and about $3.1 billion for fiscal year 2004. According 
to an SBA official, the agency will review the data that it provides to 
FAADS more closely in order to avoid such discrepancies in the future. 

According to the Census official who oversees the FAADS program, most 
of the agency staffs who submitted the data to Census had very little 
involvement with program operations, adding that the individual program 
managers who were most knowledgeable about the data's accuracy and 
completeness generally did not get involved. OMB has required since 
fiscal year 1982 that agency officials review and sign off on a 
compliance form when submitting quarterly data. The form contains a 
series of statements, including one that reads, "All agency financial 
assistance award programs are covered in agency's FAADS sources." 
However, the official we spoke with who oversaw the program and had 
been involved with it since 1996 said that he had never seen a 
compliance form accompanying a quarterly report. It appeared that 
neither Census nor OMB was enforcing the requirement. Both Census and 
OMB staff told us that OMB had previously considered amending its 
guidance (Circular A-89) on reporting financial assistance data to 
specifically require that each agency appoint an official responsible 
for certifying that the FAADS data were accurately reported to Census. 
However, at the time of our review, the guidance had not been amended. 

Officials in a number of agencies commented about the lack of controls 
for submissions of data to FAADS and told us that requiring data 
certification would likely improve data quality. For example, one FAADS 
coordinator noted that the agency had no internal control checks in 
place to determine which programs should report cost information in any 
particular quarter or whether program personnel were submitting the 
required cost information. Other agency officials indicated that their 
agencies had no controls over FAADS data, including having individuals 
responsible for certifying that the data submitted was correct. 
Finally, one USDA official noted that USDA had been recording some 
FAADS information manually rather than through an electronic system but 
added that the agency is expected to automate the data collection 
system in 2006. 

Conclusions: 

The federal government funds a wide variety of programs that provide 
rural areas with economic development money. These programs provide 
assistance that directly supports communities' economic well-being 
through such activities as creating and helping to retain jobs; 
constructing and repairing roads, airports, and water systems; 
establishing business incubators; and developing and improving tourist 
areas. Exactly how much assistance rural areas receive from the various 
economic development programs depends on how "rural" is defined, a 
definition which is constantly changing as advances in transportation, 
computer technology, and telecommunications--along with the spread of 
suburbia--continue to blur many of the distinctions between rural and 
urban life. We found that the amount of economic development funding 
provided to rural areas varied widely by program, agency, state, and 
region. 

However, both the Congress and the public are at a disadvantage in 
trying to assess the exact levels of funds rural areas receive because 
agencies have not provided accurate funding data for economic 
development programs. Our review showed that the data were often 
inaccurate or had not been reported at all. As a result, the 
information published by Census in reports issued to the Congress and 
the general public for the programs we examined was off by billions of 
dollars. We reviewed fewer than 10 percent of the programs that are 
required by OMB to provide obligation information to Census. Because 
the reporting requirements do not differ for the remaining 90 percent 
or more of the programs that are required to report to FAADS, the 
accuracy of the remaining program data are likely questionable. OMB has 
recently begun to meet with agency officials to improve agency 
reporting, and several agencies have agreed to implement changes that 
should ensure more accurate and complete compliance. Such efforts 
should improve the data submitted to FAADS. But the types of errors we 
identified will persist unless OMB emphasizes the importance of 
establishing improved controls at the agencies and at Census, including 
requirements that agencies certify their FAADS submissions and that 
Census notify agencies when significant errors occur. 

Recommendations: 

To better ensure that Census receives accurate funding information from 
federal agencies, OMB should consider improving its oversight of 
compliance with FAADS reporting requirements. We recommend that the 
Director of the Office of Management and Budget: 

* regularly reach out to individual agencies on FAADS reporting 
requirements and on ways to improve the quality of the data provided to 
Census, and: 

* amend its guidance to require agency officials to certify the 
accuracy and completeness of their FAADS data reported to Census, and: 

* provide support to Census with its work in notifying agencies that do 
not report or significantly misreport their FAADS data. 

Agency Comments and Our Evaluation: 

We provided Commerce and OMB with a draft of this report for review and 
comment. The Deputy Secretary of Commerce provided written comments 
that are provided in appendix III. OMB provided oral comments, stating 
that it agreed that improvements are needed in the FAADS reporting 
process. OMB officials said that they would continue to regularly reach 
out to individual agencies on FAADS reporting requirements, and when 
requested by Census, will provide support in notifying agencies that do 
not report or significantly misreport their FAADS data. They also said 
that they would discuss the need for having higher-level agency 
officials certify FAADS data submitted to Census at their next 
agencywide outreach meeting in April 2006. 

The Deputy Secretary of Commerce wrote that the Census generally agrees 
with the report's conclusions and recommendations and that the 
difficulties GAO encountered with FAADS provide insights into the 
breadth and depth of the complexities involved for its staff in 
collecting, analyzing, and tabulating this large governmentwide data 
set. He wrote that the department will work with OMB and the individual 
reporting agencies to identify additional resources and streamlined 
methodologies to make future data more complete and accurate. 

The Census official who oversees FAADS provided us with oral comments 
that expanded on the Deputy Secretary's comments, stating that he 
agreed with the need for OMB to regularly outreach to individual 
agencies and to require agency officials to certify the accuracy and 
completeness of data reported to FAADS. He also agreed that there is a 
need to identify and notify agencies that do not report or 
significantly misreport their FAADS obligation data, and noted that his 
office has been routinely reporting problems to agencies. However, he 
said that his office needs more support from OMB to succeed in this 
area. For example, he said that Census contacted 12 federal agencies in 
mid-September 2005 informing them about significant data problems with 
their fiscal year 2004 FAADS data submissions, including many of the 
items we reported as missing in this report. However, he said that 7 of 
the 12 agencies did not respond in any way as to how they planned to 
correct the types of discrepancies in the future. In light of this new 
information, we revised our recommendation to acknowledge that OMB 
should provide additional support to Census in notifying agencies that 
do not report or significantly misreport their FAADS obligation data. 

In addition to the comments we obtained from OMB and Commerce, we also 
obtained technical comments from most of the other agencies and 
commissions included in our review. We incorporated the comments in the 
report as appropriate. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from its issuance date. At that time we will send copies of the report 
to interested members of Congress and congressional committees. We will 
also send copies of this report to the Secretary of the Department of 
Commerce and the Director of the Office of Management and Budget and we 
will make copies available to others upon request. In addition, 
detailed information about the share of federal economic development 
funding by program, agency, state, and county will be available at no 
charge on the GAO website at http://www.gao.gov/cgi-bin/getrpt?GAO-06-
436sp. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-4325 or at [Hyperlink, shearw@gao.gov]. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. Key contributors to this 
report are listed in Appendix IV. 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendixes: 

Appendix I: Scope and Methodology: 

To examine the share of federal economic development funds that support 
rural areas today, we (1) developed a framework for identifying federal 
economic development funding; (2) determined the most informative 
classification system for differentiating between rural and urban 
areas; (3) used the economic development framework and classification 
system to identify rural areas and report the amount and share of 
economic development funding these areas have received; and (4) 
examined federal agencies' reporting of economic development funds. We 
interviewed officials from the U.S. Departments of Agriculture (USDA), 
Commerce (Commerce), Defense (DOD), Housing and Urban Development 
(HUD), Labor (DOL), Health and Human Services (HHS), Interior 
(Interior), and Transportation (DOT). We also interviewed officials 
from the Small Business Administration (SBA), Environmental Protection 
Agency (EPA), Appalachian Regional Commission, Denali Commission, and 
Delta Regional Authority. 

Because there is no commonly accepted definition of what constitutes 
federal economic development, we developed a framework for discussing 
economic development using our prior reports and research studies by 
the National Council for Urban Economic Development, the Progressive 
Policy Institute, the Cornell Community and Rural Development 
Institute, and the Northeast-Midwest Institute's Center for Regional 
Policy. We also used information provided by federal program officials 
and external rural development groups, including the Aspen Institute 
Community Strategies Group, the Sonoran Institute, the Southern Rural 
Development Initiative, and the Progressive Policy Institute. We then 
used the framework to define activities that were generally accepted as 
being related to economic development and reviewed program descriptions 
from the Catalog of Federal Domestic Assistance (CFDA) to assess which 
programs fostered or assisted with economic development. We originally 
identified about 135 programs and held discussions with the 
administering agencies, regional commissions, and authorities on our 
framework and the programs selected. Based on those discussions we 
modified our framework and eliminated programs that did not meet the 
modified framework. In some cases we obtained more detailed information 
on programs beyond that in the CFDA program descriptions. We settled on 
86 programs to include in our analysis. 

In finalizing the framework, we focused on economic development 
activities that directly affect the overall development of an area-- 
particularly saving or creating jobs--rather than on activities that 
improve individuals' quality of life, such as housing or general 
education. For example, we did include job training that had a direct 
impact on economic development in an area by, for example, preparing 
employees for a specific industry or business located in a particular 
area. However, we did not include general educational programs, housing 
loan programs, research and development programs, or other programs 
that do not directly impact the economic development of an area. 

To examine federal agencies' reporting of economic development funds, 
we reviewed the extent to which agencies reported information to the 
Federal Assistance Award Data System (FAADS) for the 86 programs we 
selected for review during fiscal years 2002 through 2004. FAADS 
produces a quarterly file of standardized records on financial 
assistance awards made by federal agencies. Each transaction record 
identifies, by CFDA program code number, the type and amount of 
financial assistance, the type and location of the recipient, and the 
geographic place of performance. We assessed the reliability of the 
FAADS data by (1) performing electronic testing of the required data 
elements for obvious errors in accuracy and completeness, (2) comparing 
program totals by fiscal year to similar data from the Consolidated 
Federal Funds Report (CFFR) database, (3) reviewing related 
documentation, and (4) interviewing the Census Bureau official 
knowledgeable about the data. 

For those programs for which information had been submitted to FAADS, 
we checked the amounts against agency obligation data provided by the 
agency or the CFDA record. When there were significant discrepancies, 
we contacted the agencies to determine the reasons for the 
discrepancies. If the FAADS data were deemed incorrect, in most cases 
we obtained the corrected information from the agencies and replaced 
the FAADS information for our analysis. In cases where the discrepancy 
could not be resolved, we used the agency obligations data provided to 
us by the agency. Because HUD had submitted expenditure data instead of 
obligation information as required by FAADS, we obtained obligation 
information from HUD on each of the programs included in our analysis. 
In addition to the more than 20 programs for which we identified 
discrepancies, we also identified another 20 programs for which the 
agencies had not submitted any information to FAADS for one or more of 
fiscal years 2002 through 2004. For each of these programs, we 
contacted agency staff to determine why no information had been 
submitted to FAADS and what the obligation information amounts were for 
each of the fiscal years. Also, because the FAADS data provides 
detailed information on program recipients, such as zip codes, we 
requested that each agency provide us with similar information on 
program recipients so that we could geocode the information. 

Once we created the final database of spending for the 86 programs, we 
used the information in the file to identify the locality that received 
the funds. However, for approximately 50 percent of the funding, we 
could not identify a recipient below the county level. Based on this 
finding and consultations with USDA's Economic Research Service, we 
decided to analyze the dollars flowing to rural areas using the 
dominant Rural-Urban Commuting Area (RUCA) approach. RUCA data is based 
on census tracts, but the State of Washington's Office of Community and 
Rural Health has developed a system to classify counties based on their 
dominant RUCA code if census tract data is not available. In order to 
produce county-level RUCA estimates, we applied this approach to the 
entire country by assigning dominant RUCA categories to every county. 
These analyses allowed us to classify every county as urban or rural. 
Using the county-level RUCA file, we were able to assign a dominant 
RUCA code to over 99 percent of the program dollars. We also classified 
every county as urban or rural using ERS's rural-urban continuum 
system, including those counties considered completely rural or that 
contained urban populations of less than 20,000 as rural counties, and 
other counties as urban counties. 

Another data issue involved pass-through programs, or programs for 
which the data showed the recipient to be the state government. For 
most of these programs, state governments subsequently passed these 
funds through to counties or local governments. However, we could not 
identify the subsequent recipients. Using the CFDA program 
descriptions, we determined that 12 of 86 programs appeared to meet 
this criterion, along with the portion of the highway spending program 
that went to state governments. For example, both DOT's Formula Grants 
Program for Other than Urbanized Areas and HUD's Community Development 
Block Grant/State's program showed no funding going to rural areas. 
Both these programs pass through funding to rural areas, but the data 
only coded the funding to the state capitals. If we had geocoded 
funding for such pass-through programs, the share of spending 
associated with urban areas, where state capitals are typically 
located, would have been overstated. Excluding the pass-through funding 
reduced the total spending we analyzed from about $200 billion to about 
$150 billion. 

Significant noncompliance by a number of agencies that had failed to 
submit obligation information for one or more programs, restricted our 
ability to use the CFFR database to identify how all economic 
development program funds were dispersed. While the reliability of the 
databases used by Census to prepare the CFFR has been tested, we did 
not know the extent to which agency data we obtained and analyzed 
directly from the agencies were reliable. As a result, we contacted 
agency officials to determine the controls used to ensure that the data 
they provided to us were reliable and accurate. Specifically, we 
requested information concerning the accuracy and completeness of the 
data, the use of the data in developing financial statements about the 
programs, and any reviews or audits of the quality of the data. The 
respondents indicated that the data were correct and told us why they 
believed the information was accurate. In addition, we questioned 
whether agency staff was aware of the FAADS reporting requirements and 
in some cases requested data directly from agencies. While the data we 
received directly from agencies were generally not as comprehensive as 
the CFFR requires, we found that the information was sufficient for our 
purposes. 

We conducted our review from January 2005 through December 2005 in 
accordance with generally accepted government auditing standards. 

[End of section] 

Appendix II: Funding Data for Selected Federal Programs That Fund 
Economic Development Activities: 

The following table lists each agency program by CFDA number and 
program objective, the source we used to obtain fiscal year 2002-2004 
funding data, and whether or not missing or corrected data was obtained 
from the agency. 

USDA: 

CFDA number: 10.064; 
Agency program: Forestry Incentives; 
Objectives: To bring private non-industrial forest land under 
intensified management; to increase timber production; to assure 
adequate supplies of timber; and to enhance other forest resources 
through a combination of public and private investments on the most 
productive sites on eligible individual or consolidated ownership of 
efficient size and operation; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.212; 
Agency program: Small Business Innovation Research; 
Objectives: To stimulate technological innovation in the private 
sector, strengthen the role of small businesses in meeting Federal 
research and development needs, increase private sector 
commercialization of innovations derived from USDA supported research 
and development efforts, and foster and encourage participation, by 
women-owned and socially disadvantaged small business firms in 
technological innovation; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.353; 
Agency program: National Rural Development Partnership; 
Objectives: To improve the quality of life in rural America by 
supporting and maintaining a network of State Rural Development 
Councils that create and facilitate cross-program collaborations; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.411; 
Agency program: Rural Housing Site Loans and Self-Help Housing Land 
Development Loans; 
Objectives: To assist public or private nonprofit organizations 
interested in providing sites for housing; to acquire and develop land 
in rural areas to be subdivided as adequate building sites and sold on 
a cost-development basis to families eligible for low-and very-low-
income loans, cooperatives, and broadly based nonprofit rural rental 
housing applicants; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.446; 
Agency program: Rural Community Development Initiative; 
Objectives: To develop the capacity and ability of private, nonprofit 
community-based housing and community development organizations, and 
low income rural communities to improve housing, community facilities, 
community and economic development projects in rural areas; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.603; 
Agency program: Emerging Markets; 
Objectives: A foreign market access program that provides funding for 
generic technical assistance activities which take place abroad. 
The program provides cost-share assistance to small-and medium-sized 
U.S. agriculture and agribusiness organizations that desire to promote, 
enhance or expand the exports of U.S. agricultural commodities and 
products into eligible low-and middle-income foreign countries; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.664; 
Agency program: Cooperative Forestry Assistance; 
Objectives: With respect to nonfederal forest and other rural lands, to 
assist in the advancement of forest resources management; the 
encouragement of the production of timber; the control of insects and 
diseases affecting trees and forests; the control of rural fires; the 
efficient utilization of wood and wood residues, including the 
recycling of wood fiber; the improvement and maintenance of fish and 
wildlife habitat; and the planning and conduct of urban and community 
forestry programs; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.665; 
Agency program: Schools and Roads/Grants to States; 
Objectives: To share receipts from the national forests with the states 
in which the national forests are located; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.666; 
Agency program: Schools and Roads/Grants to Counties; 
Objectives: To share receipts from national grasslands and land 
utilization projects with the counties in which the national grasslands 
and land utilization projects are located; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.670; 
Agency program: National Forest/Dependent Rural Communities; 
Objectives: Provide accelerated assistance to rural communities faced 
with acute economic problems associated with federal, state, or private 
sector resource management decisions and policies that are located in 
or near a national forest and are economically dependent upon forest 
resources. Aid is extended to these rural communities to help them 
develop strategic action plans to diversify their economic base and to 
improve the economic, social, and environmental well-being of rural 
areas; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.672; 
Agency program: Rural Development, Forestry, and Communities; 
Objectives: To help rural areas analyze and assess forest resource 
opportunities, maximize local economic potential through market 
development and expansion, and diversify communities' economic base; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.673; 
Agency program: Wood In Transportation; 
Objectives: To provide funds, on a cost-share basis, for the 
construction of demonstration modern timber bridges and modern timber 
bridge technology transfer projects. Primary focus is to assist in the 
development and commercialization of new technologies that incorporate 
underutilize timber and related resources to the extent that is 
economically feasible; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.674; 
Agency program: Forest Products Lab: Technology Marketing Unit; 
Objectives: To assist small forest products businesses, community 
leaders, entrepreneurs, non-profits, and others turn small diameter and 
underutilized wood species into marketable forest products, including 
biomass energy. Programs may include: (1) technical assistance for 
processing and manufacturing of small diameter or low value hardwoods 
and softwoods; (2) prototype development of potential new products; (3) 
demonstration projects that showcase innovative uses for small diameter 
and low-value hardwoods and softwoods; (4)economic feasibility 
assessments related to using small diameter and low-valued hardwoods 
and softwoods; and (5) market assessments for using small diameter and 
low-valued hardwoods and softwoods; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.760; 
Agency program: Water and Waste Disposal Systems for Rural Communities; 
Objectives: To provide basic human amenities, alleviate health hazards, 
and promote the orderly growth of the rural areas of the nation by 
meeting the need for new and improved rural water and waste disposal 
facilities; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.763; 
Agency program: Emergency Community Water Assistance Grants; 
Objectives: Through the Emergency Community Water Assistance Grant 
program, the Rural Utility Service (RUS) is authorized to help rural 
residents who have experienced a significant decline in quantity or 
quality of water to obtain adequate quantities of water that meet the 
standards of the Safe Drinking Water Act; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.766; 
Agency program: Community Facilities Loans and Grants; 
Objectives: To construct, enlarge, extend, or otherwise improve 
community facilities providing essential services to rural residents; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.767; 
Agency program: Intermediary Re-lending; 
Objectives: To finance business facilities and community development; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.768; 
Agency program: Business and Industry Loans; 
Objectives: To assist public, private, or cooperative organizations 
(profit or nonprofit), Indian tribes or individuals in rural areas to 
obtain quality loans for the purpose of improving, developing or 
financing business, industry, and employment and improving the economic 
and environmental climate in rural communities including pollution 
abatement and control; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.769; 
Agency program: Rural Business Enterprise Grants; 
Objectives: To facilitate the development of small and emerging private 
business, industry, and related employment for improving the economy in 
rural communities; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.770; 
Agency program: Water and Waste Disposal Loans and Grants (Section 
306C); 
Objectives: To provide water and waste disposal facilities and services 
to low-income rural communities whose residents face significant health 
risks; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.771; 
Agency program: Rural Cooperative Development Grants; 
Objectives: To establish and operate centers for rural cooperative 
development to improve economic conditions in rural areas by promoting 
the development of new cooperatives and/or the improvement of existing 
cooperatives; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.772; 
Agency program: Empowerment Zones; 
Objectives: To provide for the establishment of empowerment zones and 
enterprise communities in rural areas to stimulate the creation of new 
jobs, particularly for the disadvantaged and long-term unemployed, and 
to promote the revitalization of economically distressed areas; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.773; 
Agency program: Rural Business Opportunity Grants; 
Objectives: To promote sustainable economic development in rural 
communities with exceptional needs; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.850; 
Agency program: Rural Electrification Loans and Loan Guarantees; 
Objectives: To assure that people in eligible rural areas have access 
to electric services comparable in reliability and quality to the rest 
of the nation; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.851; 
Agency program: Rural Telephone Loans and Loan Guarantees; 
Objectives: To assure that people in eligible rural areas have access 
to telecommunications services comparable in reliability and quality to 
the rest of the nation; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.852; 
Agency program: Rural Telephone Bank Loans; 
Objectives: To provide supplemental financing to extend and improve 
telecommunications services in rural areas; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.854; 
Agency program: Rural Economic Development Loans and Grants; 
Objectives: To promote rural economic development and job creation 
projects, including funding for project feasibility studies, start-up 
costs, incubator projects, and other reasonable expenses for the 
purpose of fostering rural development; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 10.855; 
Agency program: Distance Learning and Telemedicine Loans and Grants; 
Objectives: To encourage and improve the use of telemedicine, 
telecommunications, computer networks, and related advanced 
technologies to provide educational and medical benefits through 
distance learning and telemedicine projects to people living in rural 
areas and to improve rural opportunities; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 10.859; 
Agency program: Assistance to High Energy Cost/Rural Communities; 
Objectives: To provide assistance to rural communities with extremely 
high energy costs; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Department of Commerce: 

CFDA number: 11.300; 
Agency program: Grants for Public Works and Economic Development 
Facilities; 
Objectives: To promote long-term economic development in areas 
experiencing substantial economic distress and investments to support 
the construction of rehabilitation of essential public infrastructure 
and develop facilities necessary to generate high-skill, higher-wage 
jobs and private investment; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 11.302; 
Agency program: Economic Development/Support for Planning 
Organizations; 
Objectives: To help states, sub-state planning units, Indian Tribes, 
and/or local governments strengthen economic development planning 
capability and formulate and establish comprehensive economic 
development, process and strategies designed to reduce unemployment and 
increase incomes; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 11.303; 
Agency program: Economic Development/Technical Assistance; 
Objectives: To promote economic development and alleviate 
underemployment and unemployment in distressed areas by (1) enlisting 
the resources of designated university centers in promoting economic 
development, (2) supporting innovative economic development projects, 
(3) disseminating information and studies of economic development 
issues of national significance, and (4) financing feasibility studies 
and other projects leading to local economic development; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 11.307; 
Agency program: Economic Adjustment Assistance; 
Objectives: To assist state and local interests design and implement 
strategies to adjust or bring about change to an economy. Program 
focuses on areas that have experienced or are under threat of serious 
structural damage to the underlying economic base. Such economic change 
may occur suddenly or over time, and generally results from industrial 
or corporate restructuring, new federal laws or requirements, reduction 
in defense expenditures, depletion of natural resources, or natural 
disaster. Aids the long-range economic development of areas with severe 
unemployment and low-family-income problems; aids in the development of 
public facilities and private enterprises to help create new, permanent 
jobs; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 11.313; 
Agency program: Trade Adjustment Assistance; 
Objectives: To provide trade adjustment assistance for firms and 
industries adversely affected by increased imports; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 11.611; 
Agency program: Manufacturing Extension Partnership; 
Objectives: To establish, maintain, and support manufacturing extension 
centers and services that improve the competitiveness of firms by 
accelerating the usage of appropriate manufacturing technology by 
smaller U.S.-based manufacturing companies. To also partner with states 
to develop such technical assistance programs and services; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 11.617; 
Agency program: Congressionally-Identified Projects; 
Objectives: To assist various organizations identified by Congress to 
achieve objectives specified by Congress; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

Department of Defense: 

CFDA number: 12.002; 
Agency program: Procurement Technical Assistance For Business Firms; 
Objectives: To increase assistance by the DOD for eligible entities by 
furnishing Procurement Technical Assistance to business entities, and 
to assist eligible entities in the payment of the costs of establishing 
and carrying out new programs and maintaining existing programs; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 12.607; 
Agency program: Community Economic Adjustment Planning Assistance; 
Objectives: To assist local governments or states, on behalf of local 
governments, to undertake community economic adjustment-planning 
activities to respond to military base closures and realignments; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Department Housing and Urban Development: 

CFDA number: 14.219; 
Agency program: Community Development Block Grants/Small Cities; 
Objectives: To develop viable urban communities by providing decent 
housing; a suitable living environment; and expanding economic 
opportunities, principally for persons of low and moderate income; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 14.228; 
Agency program: Community Development Block Grants/State's; 
Objectives: To develop viable urban communities by providing decent 
housing; a suitable living environment and expanding economic 
opportunities, principally for persons of low and moderate income; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 14.244; 
Agency program: Empowerment Zones; 
Objectives: To provide for the establishment of Empowerment Zones, 
Enterprise Communities and Renewal Communities in urban and rural 
areas, to stimulate the creation of new jobs empowering low- income 
persons and families receiving public assistance to become economically 
self-sufficient, particularly for the disadvantaged and long-term 
unemployed and to promote revitalization of economically distressed 
areas; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 14.246; 
Agency program: Community Development Block Grants/Brownfields Economic 
Development Initiative; 
Objectives: To return brownfields to productive use by assisting public 
entities eligible under the Section 108 Loan Guarantees program to 
carry out qualified economic development projects. Grant assistance 
must enhance the security of loans guaranteed under the Section 108 
program or improve the viability of projects financed with loans 
guaranteed under the Section 108 program; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 14.248; 
Agency program: Community Development Block Grants/Section 108 Loan 
Guarantees; 
Objectives: To provide communities with a source of financing for 
economic development, housing rehabilitation, public facilities, and 
large-scale physical development projects; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 14.250; 
Agency program: Rural Housing and Economic Development; 
Objectives: To expand the supply of affordable housing and access to 
economic opportunities in rural areas; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 14.862; 
Agency program: Indian Community Development Block Grant; 
Objectives: To assist Indian tribes and Alaska Native villages in the 
development of viable Indian communities; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Department of the Interior: 

CFDA number: 15.033; 
Agency program: Road Maintenance/Indian Roads; 
Objectives: To provide limited routine maintenance on paved, gravel, 
earth, and unimproved roads, bridges, and airstrips; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 15.038; 
Agency program: Minerals and Mining on Indian Lands; 
Objectives: To assist and support the inventory and prudent development 
of energy and mineral resources on Indian lands; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 15.039; 
Agency program: Fish, Wildlife, and Parks Programs on Indian Lands; 
Objectives: To promote conserving, developing, and using fish, 
wildlife, and recreational resources for the sustenance, cultural 
enrichment, economic support, and maximum benefit of Indians; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 15.048; 
Agency program: Bureau of Indian Affairs Facilities/Operations and 
Maintenance; 
Objectives: To provide funds for basic operating and maintenance 
services of non-education facilities that are owned or operated by the 
Bureau of Indian Affairs and located on reservations; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 15.063; 
Agency program: Improvement and Repair of Indian Detention Facilities; 
Objectives: To provide safe, functional, code-and-standards compliant, 
economical, and energy- efficient adult and/or juvenile detention 
facilities; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 15.124; 
Agency program: Indian Loans/Economic Development; 
Objectives: To assist federally recognized Indian tribal governments, 
Native American organizations, and individual American Indians in 
obtaining financing from private sources to promote business 
development initiatives on or near federally recognized Indian 
reservations; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 15.225; 
Agency program: Recreation Resource Management; 
Objectives: To manage recreational resource values on the public lands 
administered by the Bureau of Land Management and to increase public 
awareness and appreciation of those values; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 15.228; 
Agency program: National Fire Plan - Wildland Urban Interface Community 
Fire Assistance; 
Objectives: To implement the National Fire Plan and assist communities 
at risk from catastrophic wildland fires by providing assistance in the 
following areas: provide community programs that develop local 
capability including: assessment and planning, mitigation activities, 
and community and homeowner education and action; plan and implement 
hazardous fuels reduction activities on federal land or on adjacent 
nonfederal land that mitigate the threat of catastrophic fire to 
communities and natural resources in high risk area; enhance local and 
small business employment opportunities for rural communities; enhance 
the knowledge and fire protection capability of rural fire districts by 
providing assistance in education and training, protective clothing and 
equipment purchase, and mitigation methods on a cost -hare basis; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 15.916; 
Agency program: Outdoor Recreation/Acquisition, Development, and 
Planning; 
Objectives: To provide financial assistance to the states and their 
political subdivisions for the preparation of Statewide Comprehensive 
Outdoor Recreation Plans and acquisition and development of outdoor 
recreation areas and facilities for the general public, to meet current 
and future needs; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Department of Labor: 

CFDA number: 17.207; 
Agency program: Employment Service; 
Objectives: To assist persons to secure employment and labor market 
information by providing a variety of job search assistance and labor 
market information services without charge to job seekers and to 
employers seeking qualified individuals to fill job openings; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

Department of Transportation: 

CFDA number: 20.106; 
Agency program: Airport Improvement; 
Objectives: To assist sponsors, owners, or operators of public- use 
airports in developing a nationwide system of airports adequate to meet 
the needs of civil aeronautics; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.205; 
Agency program: Highway Planning and Construction; 
Objectives: To assist state transportation agencies in planning and 
developing an integrated, interconnected transportation system by 
constructing and rehabilitating the National Highway System, including 
the Interstate System; and for transportation improvements to all 
public roads except those functionally classified as local; to provide 
aid for the repair of federal-aid roads following disasters; to foster 
safe highway design; to replace or rehabilitate deficient or obsolete 
bridges; and to provide for other special purposes; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 20.219; 
Agency program: Recreational Trails; 
Objectives: To provide funds to the States to develop and maintain 
recreational trails and trail-related facilities for both non- 
motorized and motorized recreational trail use; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.509; 
Agency program: Formula Grants for Other than Urbanized Areas; 
Objectives: To improve, initiate, or continue public transportation 
service in non-urbanized areas and to provide technical assistance for 
rural transportation providers; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.514; 
Agency program: Transit Planning and Research; 
Objectives: To foster innovation in public transit systems, through 
local demonstrations of promising, but risky, new technologies and 
service or operational concepts; to address economic and social issues 
resulting from human impacts on the environment and develop risk 
assessment methodologies, integrated assessments, and other analytical 
tools for effective policy formulation; to develop practical know-how 
for solving fundamental industry-wide problems, such as how to 
accommodate the travel needs of persons with disabilities, how to 
finance transit infrastructure construction, and how to meet the 
requirements of the Clean Air Act; and to support developing 
information and technical assistance to convey the results of research, 
technology development, and innovative demonstrations for adaptation 
and local implementation; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.516; 
Agency program: Job Access/Reverse Commute; 
Objectives: To provide competitive grants to local governments, 
nonprofit organizations, and designated recipients of Federal transit 
funding to develop transportation services to connect welfare 
recipients and low-income persons to employment and support services. 
Job Access grants will be for capital projects to finance operating 
costs of equipment, facilities and associated support costs related to 
providing access to jobs. The Reverse Commute grants will assist in 
funding the costs associated with adding reverse commute bus, train, 
carpool or service from urban areas, urbanized areas, and other than 
urbanized areas to suburban work places; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.901; 
Agency program: Payments for Essential Air Services; 
Objectives: To assure that air transportation is provided to eligible 
communities by subsidizing air carriers when necessary to provide 
service; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.907; 
Agency program: Minority Institutions; 
Objectives: To increase the participation of minority institutions in 
federally funded programs. Also, to use the resources of minority 
institutions to develop training and technical assistance programs to 
enhance small women-owned and disadvantaged business enterprises to 
successfully compete for Department of Transportation contracts and 
projects. The program is also geared to attracting young talent to 
transportation-related careers; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 20.930; 
Agency program: Payments For Small Community Air Service Development; 
Objectives: To help smaller communities enhance air service and 
increase access to the national transportation system; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Appalachian Regional Commission: 

CFDA number: 23.002; 
Agency program: Appalachian Area Development; 
Objectives: To create opportunities for self- sustaining economic 
development and improved quality of life in the Appalachian region; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 23.003; 
Agency program: Appalachian Development Highway System; 
Objectives: To provide a highway system which, in conjunction with 
other federally-aided highways, will open up areas with development 
potential within Appalachia where access to commerce and communication 
have been inhibited; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 23.009; 
Agency program: Appalachian Local Development District Assistance; 
Objectives: To provide planning and development resources in multi-
county areas, to help develop the technical competence essential to 
sound development assistance, and to meet the objectives stated under 
the Appalachian Regional Development program; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 23.011; 
Agency program: Appalachian State Research, Technical Assistance, and 
Demonstration Projects; 
Objectives: To assist the Appalachian Regional Commission in 
accomplishing its objectives by expanding the knowledge of the region 
through state- sponsored research; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Small Business Administration: 

CFDA number: 59.007; 
Agency program: 7(j) Technical Assistance; 
Objectives: To provide business development assistance to socially and 
economically disadvantaged businesses by contracting with qualified 
service providers who have the capacity to provide business development 
assistance to these businesses or individuals; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 59.011; 
Agency program: Small Business Investment Companies; 
Objectives: To establish privately owned and managed investment 
companies to provide equity capital and long term loans to small 
businesses, and to provide advisory services to small businesses; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 59.012; 
Agency program: Small Business Loans; 
Objectives: To provide guaranteed loans for small businesses that are 
unable to obtain financing in the private credit marketplace but can 
demonstrate an ability to repay loans; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 59.041; 
Agency program: Certified Development Company Loans (504 Loans); 
Objectives: To assist small businesses by providing long-term, fixed-
rate financing for fixed assets through the sale of debentures to 
private investors; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 59.046; 
Agency program: Microloan program; 
Objectives: To assist women, low-income, and minority entrepreneurs, 
business owners, and other individuals possessing the capability to 
operate successful business concerns and to assist small businesses in 
areas experiencing lack of credit due to economic downturns; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

Environmental Protection Agency: 

CFDA number: 66.458; 
Agency program: Capitalization Grants for Clean Water State Revolving 
Funds; 
Objectives: To create state revolving funds that will provide a long-
term source of financing for constructing wastewater treatment 
facilities and implementing other water quality management activities; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 66.468; 
Agency program: Capitalization Grants for Drinking Water State 
Revolving Funds; 
Objectives: To create state revolving funds that will provide a long-
term source of financing for the costs of infrastructure needed to 
achieve or maintain compliance with requirements of the Safe Drinking 
Water Act and to protect public health; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 66.814; 
Agency program: Brownfields Training, Research, and Technical 
Assistance Grants and Cooperative Agreements; 
Objectives: To support Brownfields training, research, and technical 
assistance related to the following categories: (1) community 
involvement, (2) health impacts of Brownfields sites, (3) science and 
technology relating to Brownfields assessment, remediation, and site 
preparation, (4) integrated approaches to Brownfields cleanup and 
redevelopment, (5) economics of Brownfields cleanup and redevelopment, 
(6) results analysis, and (7) state, local and tribal government 
Brownfields programs; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 66.815; 
Agency program: Brownfields Job Training Cooperative Agreement; 
Objectives: To provide training to facilitate assessment, remediation, 
or preparation of Brownfield sites; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 66.817; 
Agency program: State and Tribal Response Program Grants; 
Objectives: To establish or enhance the capacity for state and tribal 
response programs and to capitalize revolving loan funds and support 
insurance mechanisms for Brownfields Cleanup; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

CFDA number: 66.818; 
Agency program: Brownfields Assessment and cleanup Cooperative 
Agreements; 
Objectives: To provide funding: (1) to inventory, characterize, assess, 
and conduct planning and community involvement related to Brownfield 
sites; (2) to capitalize a revolving loan fund (RLF) and provide sub-
grants to carry out cleanup activities at Brownfield sites; and, (3) to 
carry out cleanup activities at Brownfield sites that are owned by the 
grant recipient; 
Source of funding data: CFFR; 
Met Census reporting requirements. 

Denali Commission: 

CFDA number: 90.100; 
Agency program: Denali Commission; 
Objectives: A Federal and State partnership designed to provide 
critical utilities and infrastructure throughout Alaska, particularly 
in distressed communities; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Delta Regional Authority: 

CFDA number: 90.201; 
Agency program: Delta Area Economic Development; 
Objectives: To (1) develop the transportation infrastructure of the 
region for the purpose of facilitating economic development in the 
region, (2) assist the region in obtaining the job training, employment 
related education, and business development (with an emphasis of 
entrepreneurship) that are needed to build and maintain strong local 
economies; (3) provide assistance to severely distressed and 
underdeveloped areas that lack financial resources for improving basic 
public services; and (4) provide assistance to severely distressed and 
underdeveloped areas that lack financial resources for equipping 
industrial parks and related facilities; 
Source of funding data: Agency; 
Provided missing or corrected data. 

Department of Health and Human Services: 

CFDA number: 93.570; 
Agency program: Community Services Block Grant/Discretionary Awards; 
Objectives: To support program activities of national or regional 
significance to alleviate the causes of poverty in distressed 
communities; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 93.593; 
Agency program: Job Opportunities for Low-Income Individuals; 
Objectives: To create new permanent employment opportunities for low-
income individuals using four project designs priority areas: (1) 
expansion of existing businesses through technical and financial 
assistance; (2) self-employment/microenterprise; (3) new business 
ventures; and (4) non-traditional employment initiatives that lead to 
economic self-sufficiency for eligible participants; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 93.612; 
Agency program: Native American Programs; 
Objectives: To provide financial assistance to Native American 
community organizations to develop and implement social and economic 
development strategies that promote self-sufficiency, improve social 
and economic conditions, and increase the effectiveness of Tribes and 
Native American Organizations in meeting social and economic goals; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 93.768; 
Agency program: Medicaid Infrastructure Grants to Support the 
Competitive Employment of People With Disabilities; 
Objectives: To support State efforts to enhance employment options for 
people with disabilities by building Medicaid infrastructure; 
Source of funding data: Agency; 
Provided missing or corrected data. 

CFDA number: 93.887; 
Agency program: Health Care and Other Facilities; 
Objectives: To construct, renovate, expand, equip, or modernize health 
care facilities and other health care related facilities; 
Source of funding data: Agency. 

Source: GAO and the Catalog of Federal Domestic Assistance: 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Commerce: 

THE DEPUTY SECRETARY OF COMMERCE: 
Washington, D.C. 20230: 

February 9, 2006: 

Mr. William B. Shear: 
Director, Financial Markets and Community Investment: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Shear: 

Thank you for your letter regarding your draft report entitled Rural 
Economic Development: More Assurance Is Needed That Grant Funding 
Information Is Accurately Reported (GAO-06-294). 

The U.S. Census Bureau has reviewed this report and generally agrees 
with its conclusions and recommendations. The Government Accountability 
Office (GAO) review encompassed less than one-quarter of the federal 
agencies and less than 10 percent of the federal programs covered by 
the Federal Assistance Award Data System (FAADS) and Consolidated 
Federal Funds Report (CFFR). The difficulties GAO encountered provide 
insights into the breadth and depth of the complexities involved for 
our staff in collecting, analyzing, and tabulating this large Federal 
Government-wide data set. We will continue to work with the Office of 
Management and Budget, the program sponsor, and the FAADS/CFFR 
reporting agencies to identify additional resources and streamlined 
methodologies to make future data more complete and accurate. 

If you have any further questions, please call me or Nat Wienecke, 
Acting Assistant Secretary for Legislative and Intergovernmental 
Affairs, at (202) 482-3663. 

Sincerely, 

Signed by: 

David A. Sampson: 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear, (202) 512-4325, [Hyperlink, shearw@gao.gov]: 

Staff Acknowledgments: 

In addition to those named above, Andy Finkel, Assistant Director; 
Emily Chalmers; Mark Egger; John McGrail; Rich LaMore; John Mingus; 
Marc Molino; and Tom Taydus made key contributions to this report. 

(250222): 

FOOTNOTES 

[1] GAO, Rural Development: Federal Programs That Focus on Rural 
America and Its Economic Development (GAO/RCED-89-56BR, January 19, 
1989) 

[2] Geocoding is the process that assigns a latitude-longitude 
coordinate to an address. Once a latitude-longitude coordinate is 
assigned, the address can be displayed on a map or used in a spatial 
search. 

[3] GAO/RCED-89-56BR; Economic Development: Multiple Federal Programs 
Fund Similar Economic Development Activities (GAO/RCED/GGD-00-220, 
Sept. 29, 2000). 

[4] GAO/RCED/GGD-00-220. 

[5] The CFDA is a governmentwide compendium of federal programs and 
activities that is coordinated by the OMB and compiled by the General 
Services Administration. It contains both financial and nonfinancial 
information about programs administered by federal departments and 
agencies. As of September 2005, the catalog lists 1,622 programs that 
are administered by 59 federal agencies. Unlike federal agencies, the 
regional commissions and authorities were established to help 
particular areas of the United States with unique infrastructure and 
business development issues. For purposes of this report, we use the 
term commissions to cover both commissions and authorities. 

[6] Federal agencies are required to submit to FAADS quarterly records 
on financial assistance awards, including obligations made to all types 
of recipients for each of their programs. 

[7] GAO, Rural Housing: Changing the Definition of Rural Could Improve 
Eligibility Determinations (GAO-05-110, Dec. 3, 2004). 

[8] Obligations reflect the amount of orders placed, contracts awarded, 
services received and similar transactions during a given period that 
will require payments during the same or future period. 

[9] See National Academy of Public Administration A Path to Smarter 
Economic Development: Reassessing the Federal Role (Washington, D.C., 
Nov. 1996). 

[10] We did not evaluate whether or not agencies used specific rural 
definitions in distributing program funds. 

[11] Public Law 97-326. 

[12] Among the research studies we examined were the following 
GAO/RCED/GGD-00-220; National Council for Urban Economic Development, 
What is Economic Development? A Primer, (Washington, D.C.: Jan. 1996); 
Robert D. Atkinson, "Reversing Rural America's Economic Decline: The 
Case for a National Balanced Growth Strategy," PPI Policy Report 
(Washington, D.C.: Progressive Policy Institute, Feb. 2004); Robert 
Rich, "The Cattaraugus Partnership---Solving the Economic Development 
Puzzle," Innovations in Community and Rural Development (Ithaca, N.Y.: 
Cornell Community and Rural Development Institute (Sept. 1991); Matt 
Kane, "Public-Sector Economic Development: Concepts and Approaches," 
Northeast-Midwest Institute, The Center for Regional Policy 
(Washington, D.C., Nov. 2004). See appendix I for additional details of 
our methodology. 

[13] GAO/RCED/GGD-00-220. 

[14] Funding for the Appalachian Regional Commission's highway program 
is provided through DOT's federal aid highway program and is included 
under that program for our analysis. 

[15] GAO/RCED-89-56BR. 

[16] John B. Cromartie and Linda L. Swanson, "Census Tracts More 
Precisely Define Rural Populations and Areas," Rural Development 
Perspectives, vol. 11, no. 3 (Washington, D.C.: June 1996) 

[17] GAO-05-110. 

[18] Washington State Department of Health, "Guidelines for Using Rural-
Urban Classification Systems for Public Health Assessment," 2001. 

[19] For a limited number of programs in our analysis, not all the 
funding went directly for economic development activities. However, it 
was not practical to evaluate every individual program grant to 
determine whether all of the funding went to activities that met our 
criteria for economic development. 

[20] We included DOT's Highway Planning and Construction program 
because it assists in developing infrastructure by constructing and 
repairing roads, which is one of the elements included in the framework 
we used to identify federal economic development programs. Based on our 
definition of rural, this program provided over $18 billion directly to 
rural areas during fiscal years 2002 through 2004. 

[21] According to an EPA staff person, while EPA can not geocode grants 
provided by the Clean Water State Revolving Fund down to the community 
level, nearly $3 billion has been provided during fiscal years 2002 
through 2004 to communities of fewer than 10,000 people. 

[22] GAO, Standards for Internal Control in the Federal Government, GAO-
AIMD-00-21.3.1 (Washington, D.C.: Nov. 1999) provides guidance to 
agencies to help them assess, evaluate, and implement effective 
internal controls that can improve their operational processes; GAO, 
Internal Control Management and Evaluation Tool, GAO-01-1008G 
(Washington, D.C., Aug. 2001) helps agencies maintain or implement 
effective internal controls and, when needed, helps them determine 
what, where, and how improvements can be made. 

[23] Obligations reflect the amounts of orders placed, contracts 
awarded, services received and similar transactions during a given 
period that will require payments during the same or future period. 
Expenditures, or outlays, reflect the issuance of checks, disbursements 
of cash, or electronic transfers of funds made to liquidate a federal 
obligation. 

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