Recovery Act:

One Year Later, States' and Localities' Uses of Funds and Opportunities to Strengthen Accountability

GAO-10-437: Published: Mar 3, 2010. Publicly Released: Mar 3, 2010.

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This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the fifth in a series of reports since passage of the Recovery Act on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. It is also the second report in which GAO is required to comment on the jobs created or retained as reported by recipients of Recovery Act funds. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and spoke with officials at federal agencies overseeing Recovery Act programs.

As of February 12, 2010, $88.7 billion, or a little more than 30 percent, of the approximately $282 billion of total Recovery Act funds for programs administered by states and localities had been paid out by the federal government. Of that amount, approximately $36 billion has been paid out since the start of federal fiscal year 2010. As of January 29, 2010, the 16 states and the District have drawn down about $30 billion in increased Federal Medical Assistance Percentage (FMAP) funds, representing nearly 100 percent of these states' grant awards for federal fiscal year 2009 and about 57 percent for the first and second quarters of federal fiscal year 2010. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Most states reported that the increased FMAP funds were integral to maintaining current eligibility levels, benefits, and services and to avoiding further program reductions. As of February 16, 2010, the Federal Highway Administration (FHWA) had obligated $25.1 billion and the Federal Transit Administration (FTA) had obligated about $7.5 billion--combined about $32.6 billion (over 93 percent) of the $35 billion that the Recovery Act provided for highway infrastructure projects and public transportation. Nationwide, Recovery Act funding has been obligated for over 11,000 eligible highway projects. However, some requirements, such as the Recovery Act's maintenance-of-effort requirement--which is designed to prevent states from substituting federal funds for state funds--have proven challenging. Many states have yet to complete a maintenance-of-effort certification that DOT finds fully acceptable, and this, coupled with states' fiscal challenges, raises questions as to whether this requirement will achieve its intended purpose. As of January 22, 2010, the 16 states and the District had drawn down, in total, about $13.3 billion (56 percent) from the State Fiscal Stabilization Fund (SFSF); $1.1 billion (17 percent) of Elementary and Secondary Education Act (ESEA) Title I, Part A funds; and $1.2 billion (17 percent) of Individuals with Disabilities Education Act (IDEA), Part B, Recovery Act funds available to them. Much of the Recovery Act education funds have been used to pay education staff, including teachers. Housing agencies are to obligate the $3 billion in Public Housing Capital Fund formula grant Recovery Act funds they received by March 17, 2010. As of January 30, 2010, about 31 percent of these funds had not been obligated. Over 200 agencies reported obligating no funds. Housing and Urban Development (HUD) has worked hard to implement the Recovery Act but has faced challenges in simultaneously carrying out public housing programs mandated by the Recovery Act, including designing and carrying out a $1 billion grant competition, while meeting its continuing responsibilities for the ongoing Public Housing Capital Fund program. As a result, HUD delayed obligating its fiscal year 2009 funds by 3 months. With regard to the Weatherization Assistance Program, as of December 31, 2009, the Department of Energy (DOE) had obligated about $4.73 billion to states for weatherization activities. On February 24, 2010, DOE reported that about 5 percent of the approximately 593,000 homes DOE originally planned to weatherize using Recovery Act funds had been weatherized as of December 31, 2009. Progress was achieved in addressing some data quality and reporting issues identified in the first round; however data errors, reporting inconsistencies, and decisions by some recipients not to use the new job reporting guidance for this round compromise data quality and the ability to aggregate the data.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to our recommendation, Education issued clarifying guidance on August 26, 2010, that explained that the length of a full-time contract (i.e., 10 or 12 months) should not affect FTE calculations.

    Recommendation: To improve the consistency of full-time equivalent (FTE) data collected and reported, the Secretary of the Department of Education (Education) and the Director of the Office of Management and Budget (OMB) should provide clarifying guidance to recipients on how to best calculate FTEs for education employees during quarters when school is not in session.

    Agency Affected: Department of Education

  2. Status: Closed - Implemented

    Comments: Because of the action taken by the Department of Education issuing clarifying guidance on August 26, 2010, we consider this recommendation to be closed as implemented.

    Recommendation: To improve the consistency of full-time equivalent (FTE) data collected and reported, the Secretary of the Department of Education (Education) and the Director of the Office of Management and Budget (OMB) should provide clarifying guidance to recipients on how to best calculate FTEs for education employees during quarters when school is not in session.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  3. Status: Closed - Implemented

    Comments: HUD implemented our recommendation. HUD provided us with an email dated March 26, 2010, that it had sent to public housing agencies instructing them not to use the jobs-counting calculator originally posted on HUD's Recovery Act Web site in October 2009. The email also provided a link to the revised jobs-counting calculator on HUD's Web site. HUD provided us with subsequent emails to housing agencies that reminded them of the new jobs-counting calculator.

    Recommendation: The Secretary of Housing and Urban Development should instruct housing agencies to discontinue use of the jobs calculator provided by HUD in the first round of recipient reporting for subsequent rounds of reporting to ensure the correct job calculation is used.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: In response to our recommendation, HUD developed a management plan for administration of Recovery Act funds, including the need for an additional 11 FTEs to carry out Recovery Act responsibilities. In July 2010, HUD also provided us with its management plan for the Public Housing Capital Fund program. The plan summarized the key activities HUD undertakes to monitor and facilitate the use of these funds by program area, including rule and policy development, planning, program awards, program management, technical assistance, and reporting. The plan also included the specific activities, tasks, and resources used for each of these existing program areas, identifying approximately 91 existing FTEs in its headquarters and field offices to support these activities. According to HUD's management plan, HUD's current staffing level is sufficient to manage its existing Capital Fund program, but the agency could more efficiently utilize its current resources. As a result, HUD plans to realign current staff to focus on its core missions including Recovery Act responsibilities.

    Recommendation: To help HUD achieve Recovery Act objectives and address challenges with its continued administration of Recovery Act funds, the Secretary of Housing and Urban Development should develop a management plan to determine the adequate level of agency staff needed to administer both the Recovery Act funds and the existing Capital Fund program going forward, including identifying future resource needs and determining whether current resources could be better utilized to administer these funds.

    Agency Affected: Department of Housing and Urban Development

  5. Status: Closed - Implemented

    Comments: On January 27, 2011, the Secretary of Transportation sent a report to Congress that addressed each reporting element we recommended. DOT reported that 29 states and the District of Columbia met their planned level of expenditure and 21 states did not. It also summarized reasons states did not meet the certified levels, such as a reduction in dedicated revenues for transportation or a state legislature approving a lower-than-expected level of transportation funding in the state budget. Finally, DOT's report provided its perspectives on lessons learned from the process, including identifying barriers to effectively implementing the maintenance-of-effort requirement. For example, it noted that the lack of clarity around statutory definitions regarding what constituted "state funding" and the substantial decreases in state dedicated transportation revenues were barriers to states producing an accurate certification and meeting the certified level.

    Recommendation: The Secretary of Transportation should gather timely information on the progress states are making in meeting the maintenance-of-effort requirement and report preliminary information to Congress within 60 days of the certified period (Sept. 30, 2010), (1) on whether states met required program expenditures as outlined in their maintenance-of-effort certifications, (2) the reasons that states did not meet these certified levels, if applicable, and (3) lessons learned from the process.

    Agency Affected: Department of Transportation

  6. Status: Closed - Implemented

    Comments: On March 22, 2010, the Office of Management and Budget issued updated guidance which highlighted the steps federal agencies must take to review data quality of recipient reports during the new continuous review period. The guidance specified that federal agencies must, at a minimum, conduct a final review of the data upon the close of the continuous corrections period, given that all records are open and subject to edits and corrections during that time. Previously, recipient reported data was locked and no longer correctable once the reporting period for that quarter closed and the information was published on Recovery.gov. Now, the Recovery Accountability and Transparency Board reflects corrected data on Recovery.gov approximately every two weeks, allowing federal agencies time to review and provide feedback in the interim.

    Recommendation: OMB should work with the Recovery Accountability and Transparency Board and federal agencies, building on lessons learned, to establish a formal and feasible framework for review of recipient changes during the continual update period and consider providing more time for agencies to review and provide feedback to recipients before posting updated reports on Recovery.gov.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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