Denali Commission: Options Exist to Address Management Challenges
Highlights
What GAO Found
The Denali Commission has faced two key challenges in fulfilling its statutory purpose of providing, among other things, infrastructure and economic development services to rural communities; but options exist to address them. First, a 90 percent decrease in Commission funding from its peak in fiscal year 2007 has raised concerns about whether the Commission can sustain its current approach as primarily a grant-making agency. Given its funding challenge, stakeholders GAO interviewed identified several options for how the Commission could approach fulfilling its statutory purpose in the future, such as shifting its focus to facilitating economic development projects or maintaining existing infrastructure rather than funding new projects. Even though the Commission has taken some steps to reassess its long-term approach, such as conducting statewide listening sessions on how best to assist rural Alaskans in the future, it has not finalized such an approach in a new multiyear strategic plan. Second, the Department of Justice's 2006 determination on the applicability of the principal federal conflict-of-interest law has resulted in a Commission that is, at times, deprived of the expertise of its six commissioners. Concerns about possible criminal prosecution for conflicts of interest have resulted in commissioners regularly recusing themselves from Commission decision-making activities. Based on various sources, GAO identified four options for restructuring the Commission so that it can better leverage the expertise of its commissioners in light of the 2006 determination. Each of the options would require changes to the Denali Commission Act, which established the Commission.
The Commission has faced several challenges that have hindered its daily operations, including having periodic vacancies in the Federal Cochair position and not having an attorney. Having a vacancy in the Federal Cochair position has twice stymied the Commission because only the Federal Cochair is authorized to take certain critical actions, such as approving new grants. The Denali Commission Act does not provide for an acting Federal Cochair and does not allow the Federal Cochair to delegate authority to another person or to remain in office beyond the expiration of his or her 4-year term (holdover). In addition, even in the face of numerous complex legal questions, such as the applicability of the principal federal conflict-of-interest law, the Commission has never had a full-time attorney to provide it with legal advice and support on a routine and consistent basis. Without an attorney to help the Commission identify and navigate risks consistent with federal standards for internal control, the Commission is at increased risk for making legal mistakes.
The Commission has some key procedures in place for administering its grants, but GAO found several shortcomings in how the Commission has managed its grants. Both the Commission's internal checklists and its online grants database meet established criteria for good grant management and oversight. However, the Commission does not have documented grant-making policies in place, leading to inconsistencies in how it awards and manages grants. For example, the Commission's awarding of grants has not always been open or competitive, and its monitoring of grant and project recipients has been inconsistent. Unless it issues grant management policies, the Commission may not be setting clear expectations for grantees, making it difficult to hold them accountable for fulfilling the terms of grant agreements.
Why GAO Did This Study
Since establishment in 1998 by statute, the Denali Commission has awarded over $1 billion in federal grants to help develop Alaska's remote communities. The Commission has a Federal Cochair and six other commissioners.
GAO was asked to review the management of the Commission. This report examines (1) challenges the Commission has faced in fulfilling its statutory purpose and options to address them; (2) challenges that hindered the Commission's daily operations; and (3) the Commission's policies and procedures for managing grants and the extent of compliance with them. GAO reviewed key laws and policies; interviewed former and current commissioners and such stakeholders as state agencies that received grants; and analyzed a random sample of 100 projects funded by Commission grants for fiscal years 1999 through 2013.
Recommendations
Congress should consider amending the Denali Commission Act to, among other things, restructure the Commission to better leverage the commissioners' expertise, and create a delegation of authority or holdover provision for the Federal Cochair position. GAO recommends, among other things, that the Commission consider options for fulfilling its statutory purpose and finalize its approach in a new strategic plan; obtain a full-time attorney; and issue grants management policies. The Denali Commission, including its commissioners, agreed with GAO's conclusions and recommendations.
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| To better leverage the commissioners' expertise in the development of the annual work plan, Congress should consider amending the Denali Commission Act, potentially with one of the identified options. | Section 5002(a)(2) of the Water Infrastructure Improvements for the Nation Act (WIIN Act, enacted in December 2016) specified a conflict of interest provision for the Commissioners. This provision prohibits the Commissioners from participating, through recommendation, rendering of advice, investigation, or otherwise, in any proceeding in which the Commissioner, Commissioner's family member, or the organization for which the Commissioner serves as officer or director has a direct financial interest. This prohibition does not apply to decisions or approvals on the focus of applications to be considered, just the individual applications. In addition, the Denali Commission has broadened the wording and structure of its annual work plans--which are voted on by the Commissioners--such that these work plans are broadly worded and generally no longer identify specific grants, recipients, or projects. As a result, the Commissioners vote on broadly worded work plans and are not generally voting on individual grants. In light of the passage of the WIIN Act and the broadening of the Commission's annual work plan language, the conflict-of-interest issue has been resolved. | |
| To address barriers to the operation of the Commission, Congress should consider amending the Denali Commission Act to include either a holdover or delegation of authority provision when the Federal Cochair position is vacant. | The Water Infrastructure Improvements for the Nation Act (Public Law 114-322, Title IV, Section 5002) (enacted December 16, 2016) did not include a holdover or delegation of authority provision but it solved this problem by authorizing the appointment of an interim Federal Cochair. | |
| To allow for greater flexibility in the Commission's operations, Congress should consider amending the Denali Commission Act to modify or end the 5 percent cap on administrative expenditures. | As of August 2019, no legislation had been enacted to address this issue, and it is unclear that legislation will be taken up to do so in the future. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| The Denali Commission | To enhance the Commission's operations, the Commission's Federal Cochair should direct the Commission to consider options for fulfilling the Commission's statutory purpose and finalize that new approach in a new strategic plan. |
In October 2017, the Commissioners approved a new strategic plan covering FY 2018 - 2022 that generally outlines the vision for the agency's investments over the 5-year period and reflects its pivot towards more investments that maintain, sustain, and protect existing rural Alaska infrastructure.
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| The Denali Commission | To address the Commission's legal challenges, the Commission's Federal Cochair should direct the Commission to obtain a full-time attorney who would provide legal advice, including reviewing contracts and agreements, and serve as the Commission's designated ethics officer. |
In our March 2015 report on the Denali Commission, we found that one of the challenges that had hindered the Denali Commission's daily operations was limited legal support. More specifically, we found that the Denali Commission had never had a full-time attorney providing it with legal advice and support on a routine and consistent basis. We concluded that unless the Denali Commission obtains a full-time attorney to provide legal advice and serve as the Denali Commission's designated ethics officer, it may find it difficult to address current and future legal matters and will remain at risk of making costly legal mistakes. As a result, we recommended that the Denali Commission obtain a full-time attorney who would provide legal advice, including reviewing contracts and agreements, and serve as the Denali Commission's designated ethics officer. The recommendation to obtain a full-time attorney was included in the draft report that we provided to the Denali Commission for agency comments on September 5, 2014. In its comments, dated October 8, 2014, the Denali Commission agreed with the recommendation and noted that an advertisement for a full-time attorney had already closed and that a full-time attorney should be hired in the first quarter of fiscal year 2015. The Denali Commission's full-time attorney began work on January 12, 2015.
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| The Denali Commission | To improve the Commission's grants management, the Commission's Federal Cochair should direct the Commission to issue Commission-specific policies for awarding and managing grants. |
Since we made this recommendation, the Commission has issued "Recipient Guidelines and Requirements" and a "Reference Manual for Program Managers and the Grants Officer." The Commission has also issued updated templates, including for its financial assistance award terms and conditions. These Commission-specific documents clarify a number of aspects of awarding and managing grants, including the number of projects acceptable under each grant, the Commission's history of awarding grants based on need rather than competitively, and default reporting requirements for all awards. While these actions do not address every issue we identified in our report, such as criteria for deciding when to withhold funds from grant recipients, taken as a whole they are responsive to our recommendation and should help the Commission ensure that grants are awarded properly, clear expectations are set, and all parties are accountable.
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| The Denali Commission | To improve the Commission's grants management, the Commission's Federal Cochair should direct the Commission to establish a documented process for ensuring that the findings of single audits of grantees are promptly resolved and take action to resolve any recent single audits that showed evidence of a potential problem. |
As of August 2019, the Commission has implemented a process by which its staff download and review all single audits of its grantees, note any findings to be resolved, and follow up on all findings related to Denali Commission awards to verify that corrective actions have been implemented prior to finalizing awards. As part of this new process, the Commission has developed an award processing checklist which ensures that single audit findings are reviewed by the grants officer prior to finalizing awards.
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| The Denali Commission | To improve the Commission's grants management, the Commission's Federal Cochair should direct the Commission to continue efforts to close out grants and projects, including deobligating unspent grant funds in a timely manner. |
Our March 2015 report found that over $4 million in unspent funds from expired grants and projects remained as of September 2014. As a result, the Commission had fewer resources to meet its statutory purpose. Since the GAO report was issued, the Commission has reduced its backlog of expired grants and projects and decreased the amount of unspent funds to less than $100,000 as of August 2019.
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| The Denali Commission | To improve the Commission's grants management, the Commission's Federal Cochair should direct the Commission to take steps to consistently manage and retain Commission records, including implementing its record retention policy once it is approved. |
As of August 2019, the Commission has not made any additional progress toward getting its record retention policy approved.
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