Recovery Act: States' and Localities' Uses of Funds and Actions Needed to Address Implementation Challenges and Bolster Accountability
GAO-10-604
Published: May 26, 2010. Publicly Released: May 26, 2010.
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Highlights
This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest in a series of reports 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. This report also responds to GAO's mandate to comment on the jobs estimated in recipient reports. 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 individual federal officials.
As of May 7, 2010, approximately $114.8 billion, or 41 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. Most outlays to date have been for health and education and training, but, increasingly, investments in transportation, community development, energy, and the environment will characterize new spending. As of April 16, 2010, the 16 states and the District had drawn down about $14.3 billion (64 percent) of their State Fiscal Stabilization Fund (SFSF) for education stabilization; $3.2 billion (56 percent) SFSF for government services; $1.8 billion (28 percent) for Elementary and Secondary Education Act (ESEA) Title I, Part A; and $2.1 billion (29 percent) for Individuals with Disabilities Education Act (IDEA), Part B. Nationwide, the Federal Highway Administration obligated $26.2 billion for over 12,000 projects, and the Federal Transit Administration obligated $8.7 billion for about 1,000 grants. Highway funds were used primarily for pavement improvement projects, and public transportation funds were used primarily for upgrading transit facilities and improving bus fleets. The Recovery Act provides $5 billion for weatherization funding nationwide. As of March 31, 2010 (the most recent data available), recipients had spent about $659 million to weatherize about 80,000 homes; this represents about 13 percent of the 593,000 homes originally planned for weatherization. As of March 31, 2010, the 16 states and the District have drawn down about $12.7 billion in increased FMAP funds for the first two quarters of fiscal year 2010, representing over 92 percent of the total grant award available for this time period. Housing agencies met the March 17, 2010, deadline to obligate, reject, or return a portion of the $3 billion in formula grants. As of May 1, 2010, agencies had drawn down about $1 billion of these funds for projects such as replacing roofs or windows. HUD is reviewing obligations made just before the deadline to determine if any should be recaptured. HUD plans to redistribute any recaptured or returned funds this summer. As of March 31, 2010, at least $426.6 million (about 34 percent) of funds allotted to states had been drawn down, according to Labor estimates. The Recovery Act appropriated $4 billion for the Environmental Protection Agency's (EPA) Clean Water State Revolving Fund (SRF) and $2 billion for the Drinking Water SRF. Nationwide, these funds are being used to support over 3,000 projects. As of March 16, 2010, the Office of Head Start (OHS) had committed 93 percent of the $1.5 billion in Recovery Act funds designated for expansion. One of the purposes of the Recovery Act is to stabilize state and local government budgets. Recovery Act funds were used by states and localities to fund a range of programs and services and thereby helped to partially address budget gaps. OMB met some objectives in its Single Audit Internal Control Project to encourage earlier reporting of internal control deficiencies and corrective actions, but further efforts are needed.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| To provide housing finance agencies (HFA) with greater tools for enforcing program compliance, in the event the Section 1602 Program is extended for another year, Congress may want to consider directing Treasury to permit HFAs the flexibility to disburse Section 1602 Program funds as interest-bearing loans that allow for repayment. | We have closed this Matter for Congresstional Consideration because the Section 1602 Program has not been extended. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Transportation | To better understand the impact of Recovery Act investments in transportation, we believe that the Secretary of Transportation should ensure that the results of these projects are assessed and a determination made about whether these investments produced long-term benefits. Specifically, in the near term, the Secretary should direct the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) to determine the types of data and performance measures they would need to assess the impact of the Recovery Act and the specific authority they may need to collect data and report on these measures. |
In its response, DOT noted that it expected to be able to report on Recovery Act outputs, such as the miles of road paved, bridges repaired, and transit vehicles purchased, but not on outcomes, such as reductions in travel time, nor did it commit to assessing whether transportation investments produced long-term benefits. DOT further explained that limitations in its data systems, coupled with the magnitude of Recovery Act funds relative to overall annual federal investment in transportation, would make assessing the benefits of Recovery Act funds difficult. DOT indicated that, with these limitations in mind, it was examining its existing data availability and, as necessary, would seek additional data collection authority from Congress if it became apparent that such authority was needed. However, DOT has not committed to assessing the long-term benefits of Recovery Act investments in transportation infrastructure, and does not intend to act upon the recommendation. Therefore, we are closing it as unimplemented.
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| Department of Housing and Urban Development | To ensure housing agencies use the correct job calculation, the Secretary of HUD should clearly emphasize to housing agencies that they discontinue use of the outdated jobs calculator provided by HUD in the first round of recipient reporting. |
In response to our recommendation, HUD sent an e-mail to housing agencies on June 30, 2010, that explicitly instructed them not to use the outdated jobs-counting calculator, as it was not correctly computing the FTE calculation per updated OMB guidance. This e-mail also included a link to HUD's new online jobs-counting calculator and instructed housing agencies to use this calculator for the July and all future reporting periods.
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| Department of Housing and Urban Development | To help clarify the recipient reporting responsibilities of housing agencies and to improve the consistency and completeness of jobs data reported by housing agencies, the Secretary of HUD should issue guidance that explains when full time equivalents (FTE) attributable to subcontractors should be reported by the prime recipient. |
In response to our recommendation, HUD notified housing agencies in a June 30, 2010, e-mail that it had developed additional guidance for housing agencies to use when determining whether prime recipients should report FTEs for subcontractors and provided a link to the guidance on its Web site. The guidance noted that housing agencies should include Recovery Act-funded hours that contractors and subcontractors worked as part of their FTE calculation.
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| Department of Education | To ensure that FTEs are properly accounted for over time, the Secretary of the Department of Education should clarify how local educational agencies (LEA) and institutions of higher education (IHE) should report FTEs when additional Recovery Act funds are received in a school year and are reallocated to cover costs incurred in previous quarters, particularly when the definite term methodology is used. |
On August 26, 2010 U.S. Department of Education issued clarifying guidance that addressed our recommendation.
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| Department of Education | To ensure that subrecipients do not underreport vendor FTEs directly paid with Recovery Act funds, the Secretary of the Department of Education should re-emphasize the responsibility of subrecipients to include hours worked by vendors in their quarterly FTE calculations to the maximum extent practicable. |
On August 26, 2010 the U.S. Department of Education released clarifying guidance that addressed our recommendation.
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| Department of Education | To improve consistency in how FTEs generated using the definite term are calculated, the Secretary of the Department of Education and the Director of OMB should clarify whether IHE and LEA officials using this methodology should include the cost of benefits in their calculations. |
On August 26, 2010 the U.S. Department of Education issued clarifying guidance that addressed our recommendation.
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| Department of Labor | To enhance Labor's ability to manage its Recovery Act and regular WIA formula grants and to build on its efforts to improve the accuracy and consistency of financial reporting, the Secretary of Labor should, to determine the extent and nature of reporting inconsistencies across the states and better target technical assistance, conduct a one-time assessment of financial reports that examines whether each state's reported data on obligations meet Labor's requirements. |
Labor reported that it has taken actions to implement ourrecommendations. To determine the extent of reporting inconsistencies,Labor awarded a contract in September 2010 and completed theassessment of state financial reports in June 2011.
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| Department of Labor | To enhance Labor's ability to manage its Recovery Act and regular WIA formula grants and to build on its efforts to improve the accuracy and consistency of financial reporting, the Secretary of Labor should enhance state accountability and to facilitate their progress in making reporting improvements, routinely review states' reporting on obligations during regular state comprehensive reviews. |
To enhance states' accountability and facilitate their progress in making improvements in reporting, Labor issued guidance on federal financial management and reporting definitions on May 27, 2011, and conducted training on its financial reporting form and key financial reporting terms such as obligations and accruals. Labor also reported that it routinely monitors states' reporting on obligations as part of its oversight process and comprehensive on-site reviews.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that establishes best practices for how income eligibility should be determined and documented and issues specific guidance that does not allow the self-certification of income by applicants to be the sole method of documenting income eligibility. |
In response to our recommendation on issuing guidance and establishing best practices to determine income eligibility, DOE issued guidance--"Weatherization Program Notice 10-18, 2010 Poverty Income Guidelines and Definition of Income"--on September 20, 2010. In this guidance, DOE clarified the definition of income and strengthened income eligibility requirements. For example, the guidance clarified that self-certification of income would only be allowed after all other avenues of documenting income eligibility are exhausted. Additionally, for individuals to self-certify income, a notarized statement indicating the lack of other proof of income is required.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that clarifies the specific methodology for calculating the average cost per home weatherized to ensure that the maximum average cost limit is applied as intended. |
In our May 2010 report titled, "Recovery Act: States' and Localities' Uses of Funds and Actions Needed to Address Implementation Challenges and Bolster Accountability," we reported on a number of concerns related to implementing the Weatherization Assistance Program under the Recovery Act, including the Department of Energy's (DOE) ability to ensure the consistent calculation of average cost per unit. Our report recommended that DOE, in conjunction with state and local weatherization agencies, develop and clarify weatherization program guidance that clarifies the specific methodology for calculating the average cost per home weatherized to ensure that the maximum average cost limit is applied as intended. In response to this recommendation, DOE issued Weatherization Program Notice 11-1A 2010 on September 1, 2011. In this guidance, DOE clarified the methodology for calculating the average cost per unit weatherized and further defined the allowable cost categories used in calculating the average cost per unit.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that accelerates current DOE efforts to develop national standards for weatherization training, certification, and accreditation, which is currently expected to take 2 years to complete. |
DOE does not appear to have accelerated its efforts to complete national standards, which had been expected to take about 2 years and are just now being completed, about two years later. DOE reports that it has completed certain milestones toward developing national standards for weatherization, training, certification, and accreditation. For example, DOE reports that it has completed analysis of the knowledge, skills and abilities required to perform four specific weatherization jobs (residential energy auditor, retrofit installer, crew leader, and quality control inspector.) Based on this analysis, DOE states that its accreditation of energy efficiency training programs is now operational. Other components of this effort, such as the finalization of the national certification program, are not expected to be finalized until September 2012, according to DOE officials. Completion of other components of this program is not expected until 2013.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that develops a best practice guide for key internal controls that should be present at the local weatherization agency level to ensure compliance with key program requirements. |
In response to our recommendation that it develop and clarify guidance that develops a best practice guide for key internal controls, DOE distributed a memorandum dated May 13, 2011, to grantees reminding them of their responsibilities to ensure compliance with internal controls and the consequences of failing to do so. DOE officials stated that they rely on existing federal, state, and local guidance; their role is to monitor states to ensure they enforce the rules. DOE officials felt that there were sufficient documents in place to require internal controls, such as the grant terms and conditions and a training module. Because all of the guidance is located in one place, the WAPTAC Web site, DOE officials commented that a best practice guide would be redundant. Therefore, DOE officials stated that they do not intend to fully implement GAO's recommendation.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that sets time frames for development and implementation of state monitoring programs. |
On December 1, 2011 DOE issued guidance that establishes DOE's monitoring expectations for state and local weatherization agencies. This guidance requires states to submit a description of their monitoring plan in their annual State Plan for the program. The guidance also sets time frames for implementation such as monitoring visits and reporting requirements.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that revisits the various methodologies used in determining the weatherization work that should be performed based on the consideration of cost-effectiveness and develops standard methodologies that ensure that priority is given to the most costeffective weatherization work. To validate any methodologies created, this effort should include the development of standards for accurately measuring the long-term energy savings resulting from weatherization work conducted. |
DOE contracted with Oak Ridge National Laboratory in 2010 to conduct an assessment of aspects of program performance such as costs and benefits for program years 2008-2010, covering both annual appropriation funds and the Recovery Act. In September 2014, Oak Ridge National Laboratory completed the retrospective study focusing on the Weatherization Program for Program Year 2008 to evaluate the program before the Recovery Act period. In July 2015, Oak Ridge National Laboratory completed the retrospective study focusing on the Weatherization Program for Program Year 2010 to evaluate the program during the Recovery Act period. In both retrospective studies, Oak Ridge National Laboratory evaluated long-term energy savings and cost effectiveness both program-wide and for specific weatherization measures. DOE plans to use the results of the retroactive studies to enhance the Weatherization Assistance Program.
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| Department of Energy | Given the concerns we have raised about whether program requirements are being met, DOE should, in conjunction with both state and local weatherization agencies, develop and clarify weatherization program guidance that considers and addresses how the weatherization program guidance is impacted by the introduction of increased amounts of multifamily units. |
DOE officials identified several issues that impact the increased number of multi-family buildings to be weatherized and issued several guidance documents addressing multi-family buildings. For example, DOE issued Weatherization Program Notice 11-1, Program Year 2011 Weatherization family units. One section covered the eligibility of multi-family units for the weatherization program and the other section provided guidance on conducting energy audits on multi-family units. In reviewing the recently issued program guidance for this recommendation, we have concluded that DOE addressed the intent of these recommendations.
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| Environmental Protection Agency | The EPA Administrator should work with the states to implement specific oversight procedures to monitor and ensure subrecipients' compliance with the provisions of the Recovery Act-funded Clean Water and Drinking Water SRF program. |
EPA provided additional guidance to the states regarding their oversight responsibilities, with an emphasis on enhancing site specific monitoring and inspections. Specifically, in June 2010, the agency developed and issued an oversight plan outline for Recovery Act projects that provided guidance on the frequency, content, and documentation related to regional reviews of state Recovery Act programs and regional and state reviews of specific Recovery Act projects. EPA regions have reviewed all 50 states' Clean and Drinking Water SRF programs at least once since the Recovery Act was enacted, and have generally carried out the oversight instructions in EPA's plan. For example, regional officials reviewed files with state documents and information to ensure proper controls over Davis-Bacon, Buy American, and other Recovery Act requirements. Regional staff also visited one drinking water project in every state, but did not meet this goal for clean water projects due to time and budget constraints. EPA headquarters officials have been reviewing the regions' performance evaluation reports for states, and the officials said that they implemented a 60-day time frame for completing these reports. In the nine states that GAO reviewed, program officials described their site visits to projects and the use of the EPA inspection checklist (or state equivalent), according to EPA's oversight plan. State officials said they visit their Recovery Act projects at least once during construction and sometimes more frequently depending on the complexity of the project. We consider these agency actions to have addressed our recommendation.
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| Office of Head Start | To provide grantees with appropriate guidelines on their use of Head Start and Early Head Start grant funds, and enable OHS to monitor the use of these funds, the Director of OHS should direct regional office staff to stop allocating all grant funds to the "other" budget category, and immediately revise all financial assistance award (FAA) documents in which all funds were allocated to the "other" category. |
Since our May report, OHS revised all FAAs that had designated all of a grantee's awarded funds to the "other" budget category rather than more specific budget categories, such as "supplies" or "equipment." Further, OHS did not issue any FAAs that designated all funds to "other."
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| Office of Head Start | To facilitate understanding of whether regional decisions regarding waivers of the program's matching requirement are consistent with Recovery Act grantees' needs across regions, the Director of OHS should regularly review waivers of the nonfederal matching requirement and associated justifications. |
HHS reports that it has taken actions to address our recommendation. For example, HHS reports that the Office of Head Start has conducted a review of waivers of the nonfederal matching requirement and tracked all waivers in the Web-based data system. HHS further reports that OHS has determined that they are reasonably consistent across regions.
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| Office of Head Start | To oversee the extent to which grantees are meeting the program goal of providing services to children and families and to better track the initiation of services under the Recovery Act, the Director of OHS should collect data on the extent to which children and pregnant women actually receive services from Head Start and Early Head Start grantees. |
The Office of Head Start has reported that, in order to collect information on services provided to children and families, it plans to require grantees to report average daily attendance.
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| Department of the Treasury | In order to increase the likelihood that HFAs will comply with Treasury's requirements for recapturing funds, the Secretary of the Treasury should define what it considers appropriate actions by HFAs (Housing Financing Agencies) to recapture funds in order to avoid liability when they are unable to collect funds from project owners that do not comply. |
Treasury agreed with our recommendation and in response to our recommendation, Treasury provided additional guidance to state HFAs to clarify what constitutes appropriate actions by HFAs to recapture funds in order to avoid liability in the event of project owner noncompliance. Specifically, in August 2010, the agency developed and issued a Recapture Guidance for Recovery Act projects that receive Section 1602 Program funds that defines a recapture event, specifies the amount of funds owed in the event of recapture, describes an HFA's obligation and responsibilities in avoiding project owner noncompliance, sets forth the kinds of recapture actions an HFA may take in the event of noncompliance, and directs HFAs on how to report noncompliance.
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| Office of Management and Budget | The Director of OMB should issue Single Audit guidance in a timely manner so that auditors can efficiently plan their audit work. |
With regard to issuing Single Audit Guidance in a timely manner, and specifically the OMB Circular A-133 Compliance Supplement, generally OMB officials plan and coordinate with the respective federal officials involved in drafting and in developing the OMB Circular A-133 Compliance Supplement starting in the late summer and early fall time frames of the year preceding the planned issuance of this guidance. For a number of reasons, the agency has not issued the Compliance Supplement in a timely manner so that auditors can effectively plan their work. Specifically, for fiscal years 2012, 2013, 2014, and 2015, OMB issued the guidance in August 2012, July 2013, May 2014, and in July 2015, respectively. It is our view that the guidance should be issued by each March so that the auditors can effectively plan their work.
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| Department of Transportation | To ensure that the public has accurate information regarding economically distressed areas, the Secretary of Transportation should direct FHWA to issue guidance to the states advising them to update information in the Recovery Act Data System to reflect current DOT decisions concerning the special-need criteria. Projects in areas currently lacking documentation that it meets the criteria to be designated as economically distressed should be reported as a project in a noneconomically distressed area. |
In our reports mandated by the American Recovery and Reinvestment Act of 2009, we made recommendations to help further the implementation of the Act's requirements that funding be directed to areas most severely impacted by the recession. In particular, our May 2010 report found that publicly available data overstated the amount of Recovery Act highway funding being directed toward economically distressed areas. In February 2010, the Federal Highway Administration (FHWA) determined that documentation provided by three states which sought to designate additional economically distressed areas based on "special need" was not consistent with its criteria allowing such designations. Prior to FHWA's decision, these states coded these projects in the Recovery Act Data System as being in economically distressed areas. This included one state where we identified over 200 projects with an estimated cost of more than $1 billion counted as being in economically distressed areas that should not have been. We recommended that FHWA issue guidance to the states advising them to correct information in the Recovery Act Data System. In response, in June 2010, FHWA issued clarifying guidance to all states and letters to the three states directing them to correct the overstated project designations. As a result, policymakers will be better positioned to judge whether Recovery Act funding was directed to areas most severely impacted by the recession as the Act requires.
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| Department of Energy | Given that state and local agencies have felt pressure to meet a large increase in production targets while effectively meeting program requirements and have experienced some confusion over production targets, funding obligations, and associated consequences for not meeting production and funding goals, that DOE should clarify its production targets, funding deadlines, and associated consequences while providing a balanced emphasis on the importance of meeting program requirements. |
DOE did not provide evidence that it had clarified its production targets, funding deadlines, and associated consequences while providing a balanced emphasis on the importance of meeting weatherization program objectives. In January 2012, however, DOE allowed states the opportunity to extend their performance period deadline, which was originally set for March 31, 2012.
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| Office of Management and Budget | The Director of OMB should explore alternatives to help ensure that federal awarding agencies provide their management decisions on the corrective action plans in a timely manner. |
In December 2013, OMB released the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. With regard to the timeliness of management decisions, the guidance addressed our recommendation by stating that the Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the Federal Audit Clearinghouse. In addition, the auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon reciept of the audit report.
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