This is the accessible text file for GAO report number GAO-10-223 
entitled 'Recovery Act: Recipient Reported Jobs Data Provide Some 
Insight into Use of Recovery Act Funding, but Data Quality and 
Reporting Issues Need Attention' which was released on November 19, 
2009. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to the Congress: 

United States Government Accountability Office: 
GAO: 

November 2009: 

Recovery Act: 

Recipient Reported Jobs Data Provide Some Insight into Use of Recovery 
Act Funding, but Data Quality and Reporting Issues Need Attention: 

GAO-10-223: 

GAO Highlights: 

Highlights of GAO-10-223, a report to the Congress. 

Why GAO Did This Study: 

The American Recovery and Reinvestment Act of 2009 (Recovery Act) 
requires recipients of funding from federal agencies to report 
quarterly on jobs created or retained with Recovery Act funding. The 
first recipient reports filed in October 2009 cover activity from 
February through September 30, 2009. GAO is required to comment on the 
jobs created or retained as reported by recipients. This report 
addresses (1) the extent to which recipients were able to fulfill their 
reporting requirements and the processes in place to help ensure data 
quality and (2) how macroeconomic data and methods, and the recipient 
reports, can be used to assess the employment effects of the Recovery 
Act. GAO performed an initial set of basic analyses on the final 
recipient report data that first became available at [hyperlink, 
http://www.recovery.gov] on October 30, 2009; reviewed documents; 
interviewed relevant state and federal officials; and conducted 
fieldwork in selected states, focusing on a sample of highway and 
education projects. 

What GAO Found: 

As of September 30, 2009, approximately $173 billion of the $787 
billion—or about 22 percent—of the total funds provided by the Recovery 
Act had been paid out by the federal government. Nonfederal recipients 
of Recovery Act-funded grants, contracts, and loans are required to 
submit reports with information on each project or activity, including 
the amount and use of funds and an estimate of jobs created or 
retained. Of the $173 billion in funds paid out, about $47 billion—a 
little more than 25 percent—is covered by this recipient report 
requirement. Neither individuals nor recipients receiving funds through 
entitlement programs, such as Medicaid, or through tax programs are 
required to report. In addition, the required reports cover direct jobs 
created or retained as a result of Recovery Act funding; they do not 
include the employment impact on materials suppliers (indirect jobs) or 
on the local community (induced jobs). (See figure.) 

Figure: Fiscal Year 2009 Recovery Act Funds Paid Out and Recipient 
Reporting Coverage: 

[Refer to PDF for image: pie-chart and illustration] 

Recovery Act funds paid out, end of fiscal year 2009 (in billions): 
Entitlements: $63.7; 
Tax relief: $62.5; 
Contracts, grants, and loans: $47; 
Total: $173. 

Potential employment effects of Recovery Act contracts, grants and 
loans: 
Contracts, grants, and loans: 
Recipient reporting coverage: Direct. 

[End of figure] 

On October 30, www.recovery.gov (the federal Web site on Recovery Act 
spending) reported that more than 100,000 recipients reported hundreds 
of thousands of jobs created or retained. Given the national scale of 
the recipient reporting exercise and the limited time frames in which 
it was implemented, the ability of the reporting mechanism to handle 
the volume of data from a wide variety of recipients represents a solid 
first step in moving toward more transparency and accountability for 
federal funds. Because this effort will be an ongoing process of 
cumulative reporting, GAO’s first review represents a snapshot in time. 

Data Reporting and Quality: 

While recipients GAO contacted appear to have made good faith efforts 
to ensure complete and accurate reporting, GAO’s fieldwork and initial 
review and analysis of recipient data from www.recovery.gov, indicate 
that there are a range of significant reporting and quality issues that 
need to be addressed. 

For example, GAO’s review of prime recipient reports identified the 
following: 

Erroneous or questionable data entries that merit further review: 

* 3,978 reports that showed no dollar amount received or expended but 
included more than 50,000 jobs created or retained; 

* 9,247 reports that showed no jobs but included expended amounts 
approaching $1 billion, and; 

* Instances of other reporting anomalies such as discrepancies between 
award amounts and the amounts reported as received which, although 
relatively small in number, indicate problematic issues in the 
reporting. 

Coverage: While OMB estimates that more than 90 percent of recipients 
reported, questions remain about the other 10 percent. 

Quality review: While less than 1 percent were marked as having 
undergone review by the prime recipient, over three quarters of the 
prime reports were marked as having undergone review by a federal 
agency. 

Full-time equivalent (FTE) calculations: Under OMB guidance, jobs 
created or retained were to be expressed as FTEs. GAO found that data 
were reported inconsistently even though significant guidance and 
training was provided by OMB and federal agencies. While FTEs should 
allow for the aggregation of different types of jobs—part time, full 
time or temporary—differing interpretations of the FTE guidance 
compromise the ability to aggregate the data. 

To illustrate, in California, two higher education systems calculated 
FTE differently. In the case of one, officials chose to use a 2-month 
period as the basis for the FTE performance period. The other chose to 
use a year as the basis for the FTE. The result is almost a three-to-
one difference in the number of FTEs reported for each university 
system in the first reporting period. Although the Department of 
Education provides alternative methods for calculating an FTE, in 
neither case does the guidance explicitly state the period of 
performance of the FTE. 

Although there were problems of inconsistent interpretation of the 
guidance, the reporting process went relatively well for highway 
projects. Transportation had an established procedure for reporting 
prior to enactment of the Recovery Act. In the cases of Education and 
Housing, which do not have this prior reporting experience, GAO found 
more problems. Some of these have been reported in the press. State and 
federal officials are examining these problems and have stated their 
intention to deal with them. 

GAO will continue to monitor and review the data reporting and quality 
issues in its bimonthly reviews and fieldwork on the use of funds in 
the 16 states and the District of Columbia, and in GAO’s analysis of 
future quarterly recipient reporting. 

Recommendations for Executive Action: 

To improve the consistency of FTE data collection and reporting, OMB 
should (1) clarify the definition and standardize the period of 
measurement for FTEs and work with federal agencies to align this 
guidance with OMB’s guidance and across agencies; (2) given its 
reporting approach, consider being more explicit that “jobs created or 
retained” are to be reported as hours worked and paid for with Recovery 
Act funds; and (3) continue working with federal agencies and encourage 
them to provide or improve program-specific guidance to assist 
recipients, especially as it applies to the full-time equivalent 
calculation for individual programs. 

OMB should also work with the Recovery Accountability and Transparency 
Board and federal agencies to re-examine review and quality assurance 
processes, procedures, and requirements in light of experiences and 
identified issues with this round of recipient reporting and consider 
whether additional modifications need to be made and if additional 
guidance is warranted. 

Employment Effects: 
Even if the data quality issues are resolved, it is important to 
recognize that the FTEs in recipient reports alone do not reflect the 
total employment effects of the Recovery Act. As noted, these reports 
solely reflect direct employment arising from the expenditure of less 
than one-third of Recovery Act funds. Therefore, both the data reported 
by recipients and other macroeconomic data and methods are necessary to 
gauge the overall employment effects of the stimulus. The Recovery Act 
includes entitlements and tax provisions, which also have employment 
effects. The employment effects in any state will vary with labor 
market stress and fiscal condition, as discussed in this report. 

What GAO Recommends: 

GAO is recommending steps OMB should take in continuing to work with 
federal agencies to increase recipients’ understanding of the reporting 
requirements and guidance. OMB staff generally agreed with our 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-10-223] or key 
components. For more information, contact J. Christopher Mihm at (202) 
512-6806 or mihmj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Recipients of Recovery Act Funds We Contacted Appear to Have Made Good 
Faith Efforts to Ensure Complete and Accurate Reporting, but It Will 
Take Time to Improve Data Quality: 

Recommendations for Executive Action: 

Despite Limitations, Economic Methods and Recipient Reports Together 
Can Provide Insight into the Employment Effects of Fiscal Stimulus: 

Agency Comments: 

Appendix I: Calculating Full-Time Equivalent Data--Examples of Guidance 
and Challenges: 

Appendix II: Department of Education Calculations to Determine Full-
Time Equivalents (FTE) for Jobs Created or Retained: 

Appendix III: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Jobs Created or Retained by States as Reported by Recipients 
of Recovery Act Funding: 

Table 2: Jobs Created or Retained by Federal Program Agency as Reported 
by Recipients of Recovery Act Funding: 

Table 3: Count of Prime Recipient Reports by Presence or Absence of 
FTEs and Recovery Act Funds Received or Expended: 

Table 4: Aggregation of FHWA FTE Data: 

Table 5: OMB's Cumulative FTE versus a Standardized Measure: 

Table 6: Prime Recipient Reports Reviews and Corrections: 

Table 7: Estimated Multipliers for Recovery Act Spending and Tax 
Expenditures: 

Table 8: State Unemployment Rates, Peak and Most Recent: 

Table 9: Change in Employment, December 2007 to September 2009: 

Table 10: Derivation of Number of Hours Created or Retained: 

Figures: 

Figure 1: The Potential Employment Effects of Recovery Act Funds: 

Figure 2: Recipient Reporting Time Frame: 

Figure 3: Distribution of Recovery Act Funds through the End of Fiscal 
Year 2009: 

Figure 4: FHWA's Recipient Reporting Data Structure: 

Figure 5: Composition of Recovery Act Outlays by Jobs Multiplier 
Category: 

Figure 6: State Unemployment Rates, September 2009: 

Figure 7: State Unemployment Rate Growth during Recession (Percent 
Increase): 

Figure 8: State and Local Tax Receipts: 

Figure 9: Total Year-End Balances as a Percentage of Expenditures, 
Fiscal Year 2009: 

Abbreviations: 

CBO: Congressional Budget Office: 

CCR: Central Contractor Registration: 

CEA: Council of Economic Advisers: 

CFDA: Catalog of Federal Domestic Assistance: 

CIO: chief information officer: 

DOT: Department of Transportation: 

EBO: Equitable Business Opportunities: 

Education: Department of Education: 

FDOT: Florida Department of Transportation: 

FHWA: Federal Highway Administration: 

FRPIN: Federal Reporting Personal Identification Number: 

FTE: full-time equivalent: 

GDOT: Georgia Department of Transportation: 

GDP: gross domestic product: 

HHS: Department of Health and Human Services: 

HUD: Department of Housing and Urban Development: 

IG: inspector general: 

LEA: local education agency: 

OIG: Office of Inspector General: 

OMB: Office of Management and Budget: 

RADS: Recovery Act Data System: 

RAMPS: Recovery Act Management and Performance System: 

Recovery Act: American Recovery and Reinvestment Act of 2009: 

Recovery Board: Recovery Accountability and Transparency Board: 

SEA: state education agency: 

SFSF: State Fiscal Stabilization Fund: 

TAS: Treasury Account Symbol: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

November 19, 2009: 

Report to the Congress: 

Congress and the new administration crafted the American Recovery and 
Reinvestment Act of 2009 (Recovery Act)[Footnote 1] with the broad 
purpose of stimulating the economy. One of the express purposes of the 
act was to preserve and create jobs. To help measure the progress of 
this effort, Congress and the administration built into the act 
numerous provisions to increase transparency and accountability over 
spending that require recipients of Recovery Act funding to report 
quarterly on a number of measures. Nonfederal recipients of Recovery 
Act funded grants, contracts, or loans are required to submit reports 
with information on each project or activity, including the amount and 
use of funds and an estimate of the jobs created or retained.[Footnote 
2] Neither individuals nor recipients receiving funds through 
entitlement programs, such as Medicaid, or tax programs are required to 
report. The first of these recipient reports cover cumulative activity 
since the Recovery Act's passage in February 2009 through the quarter 
ending September 30, 2009. The Recovery Act requires GAO to comment on 
the estimates of jobs created or retained in the recipient reports no 
later than 45 days after recipients have reported.[Footnote 3] The 
final recipient reporting data for the first round of reports were 
first made available on October 30, 2009. 

The transparency that is envisioned for tracking Recovery Act spending 
and results is unprecedented for the federal government. Both Congress 
and the President have emphasized the need for accountability, 
efficiency, and transparency in the expenditure of Recovery Act funds 
and have made it a central principle of the act. As Congress finished 
work on the Recovery Act, the House Appropriations Committee released a 
statement saying, "A historic level of transparency, oversight and 
accountability will help guarantee taxpayer dollars are spent wisely 
and Americans can see results for their investment." In January, the 
new administration pledged that the Recovery Act would "break from 
conventional Washington approaches to spending by ensuring that public 
dollars are invested effectively and that the economic recovery package 
is fully transparent and accountable to the American people." However, 
tracking billions of dollars that are being disbursed to thousands of 
recipients is an enormous effort. The administration expects that 
achieving this degree of visibility will be an iterative process in 
which the reporting process and information improve over time and, if 
successful, could be a model for transparency and oversight beyond the 
Recovery Act. 

This report, the first in response to the Recovery Act's section 1512 
mandate that GAO comment on the estimates of jobs created or retained 
by direct recipients of Recovery Act funds, addresses the following: 
(1) the extent to which recipients were able to fulfill their reporting 
requirements and the processes in place to help ensure recipient 
reporting data quality and (2) how macroeconomic data and methods, and 
the recipient reports, can be used to assess the employment effects of 
the Recovery Act, and the limitations of the data and methods. 

To meet our objectives, we performed an initial set of edit checks and 
basic analyses on the final recipient report data that first became 
available at www.recovery.gov, the federal government's official Web 
site on Recovery Act spending, on October 30, 2009. We calculated the 
overall sum, as well as sum by states, for the number of full-time 
equivalents (FTE) reported, award amount, and amount received and found 
that they corresponded closely with the values shown for these data on 
Recovery.gov. We built on information collected at the state, local, 
and program level as part of our bimonthly reviews of selected states' 
and localities' uses of Recovery Act funds. These bimonthly reviews 
focus on Recovery Act implementation in 16 states and the District of 
Columbia, which contain about 65 percent of the U.S. population and are 
estimated to receive collectively about two-thirds of the 
intergovernmental federal assistance funds available through the 
Recovery Act. A detailed description of the criteria used to select the 
core group of 16 states and the District is found in appendix I of our 
April 2009 Recovery Act bimonthly report[Footnote 4]. Prime recipients 
and delegated subrecipients[Footnote 5] had to prepare and enter their 
information by October 10, 2009. The days following up to October 30, 
2009, included the data review period, and as noted previously, on 
October 30, 2009, the first round of recipient reported data was made 
public. Over the course of three different interviews, two with prime 
recipients of Recovery Act funding and one with subrecipients, we 
visited the 16 selected states and the District of Columbia during late 
September and October 2009. We discussed with prime recipients projects 
associated with 50 percent of the total funds reimbursed, as of 
September 4, 2009, for that state, in the Federal-Aid Highway Program 
administered by the Department of Transportation (DOT). Prior to the 
start of the reporting period on October 1, we reviewed prime 
recipients' plans for the jobs data collection process. After the 
October 10 data reporting period, we went back to see if prime 
recipients followed their own plans and subsequently talked with at 
least two vendors in each state to gauge their reactions to the 
reporting process and assess the documentation they were required to 
submit. 

We gathered and examined issues raised by recipients in these 
jurisdictions regarding reporting and data quality and interviewed 
recipients on their experiences using the Web site reporting mechanism. 
During the interviews, we used a series of program reviews and 
semistructured interview guides that addressed state plans for 
managing, tracking, and reporting on Recovery Act funds and activities. 
In a similar way, we examined a nonjudgmental sample of Department of 
Education (Education) Recovery Act projects at the prime and 
subrecipient level. We also collected information from transit agencies 
as part of our bimonthly Recovery Act reviews. In addition, we 
interviewed federal agency officials who have responsibility for 
ensuring a reasonable degree of quality across their program's 
recipient reports. We assessed the reports from the Inspector Generals 
(IG) on Recovery Act data quality review from 15 agencies. We are also 
continuing to monitor and follow up on some of the major reporting 
issues identified in the media and by other observers. For example, a 
number of press articles have discussed concerns with the jobs 
reporting done by Head Start grantees. According to a Health and Human 
Services (HHS) Recovery Act official, HHS is working with the Office of 
Management and Budget (OMB) to clarify the reporting policy as it 
applies to Head Start grantees. We will be reviewing these efforts as 
they move forward. 

To address our second objective, we analyzed economic and fiscal data 
using standard economic principles and reviewed the economic literature 
on the effect of monetary and fiscal policies for stimulating the 
economy. We also reviewed guidance that OMB developed for Recovery Act 
recipients to follow in estimating the effect of funding activities on 
employment, reviewed reports that the Council of Economic Advisers 
(CEA) issued on the macroeconomic effects of the Recovery Act, and 
interviewed officials from the CEA, OMB, and the Congressional Budget 
Office (CBO). 

We conducted this performance audit with field work beginning in late 
September 2009 and began analysis of the recipient data that became 
available on October 30, 2009, in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Background: 

In December 2007, the United States entered what has turned out to be 
its deepest recession since the end of World War II. Between the fourth 
quarter of 2007 and the third quarter of 2009, gross domestic product 
(GDP) fell by about 2.8 percent, or $377 billion. The unemployment rate 
rose from 4.9 percent in 2007 to 10.2 percent in October 2009, a level 
not seen since April 1983. The CBO projects that the unemployment rate 
will remain above 9 percent through 2011. 

Confronted with unprecedented weakness in the financial sector and the 
overall economy, the federal government and the Federal Reserve 
together acted to moderate the downturn and restore economic growth. 
The Federal Reserve used monetary policy to respond to the recession by 
pursuing one of the most significant interest rate reductions in U.S. 
history. In concert with the Department of the Treasury, it went on to 
bolster the supply of credit in the economy through measures that 
provide Federal Reserve backing for a wide variety of loan types, from 
mortgages to automobile loans to small business loans. The federal 
government also used fiscal policy to confront the effects of the 
recession. Existing fiscal stabilizers, such as unemployment insurance 
and progressive aspects of the tax code, kicked in automatically in 
order to ease the pressure on household income as economic conditions 
deteriorated. In addition, Congress enacted a temporary tax cut in the 
first half of 2008 to buoy incomes and spending[Footnote 6] and created 
the Troubled Asset Relief Program[Footnote 7] in the second half of 
2008 to give Treasury authority to act to restore financial market 
functioning.[Footnote 8] 

The federal government's largest response to the recession to date came 
in early 2009 with the passage of the Recovery Act, the broad purpose 
of which is to stimulate the economy's overall demand for goods and 
services, or aggregate demand. The Recovery Act is specifically 
intended to preserve and create jobs and promote economic recovery; to 
assist those most impacted by the recession; to provide investments 
needed to increase economic efficiency by spurring technological 
advances in health and science; to invest in transportation, 
environmental protection, and other infrastructure that will provide 
long-term economic benefits; and to stabilize the budgets of state and 
local governments.[Footnote 9] The CBO estimates that the net cost of 
the Recovery Act will total approximately $787 billion from 2009 to 
2019. 

The Recovery Act uses a combination of tax relief and government 
spending to accomplish its goals. The Recovery Act's tax cuts include 
reductions to individuals' taxes, payments to individuals in lieu of 
reductions to their taxes, adjustments to the Alternative Minimum Tax, 
and business tax incentives. Tax cuts encompass approximately one-third 
of the Recovery Act's dollars. Recovery Act spending includes temporary 
increases in entitlement programs to aid people directly affected by 
the recession and provide some fiscal relief to states; this also 
accounts for about one third of the Recovery Act. For example, the 
Recovery Act temporarily increased and extended unemployment benefits, 
temporarily increased the rate at which the federal government matched 
states Medicaid expenditures, and provided additional funds for the 
Supplemental Nutrition Assistance and the Temporary Aid to Needy 
Families programs, among other things. Other spending, also accounting 
for about a third of the act falls into the category of grants, loans, 
and contracts. This includes government purchases of goods and 
services, grants to states through programs such as the State Fiscal 
Stabilization Fund for education and other government services, and 
government investment in infrastructure, health information technology, 
renewable energy research, and other areas. 

In interpreting recipient reporting data, it is important to recognize 
that the recipient reporting requirement only covers a defined subset 
of the Recovery Act's funding. The reporting requirements apply only to 
nonfederal recipients of funding, including all entities receiving 
Recovery Act funds directly from the federal government such as state 
and local governments, private companies, educational institutions, 
nonprofits, and other private organizations. OMB guidance, consistent 
with the statutory language in the Recovery Act, states that these 
reporting requirements apply to recipients who receive funding through 
the Recovery Act's discretionary appropriations, not recipients 
receiving funds through entitlement programs, such as Medicaid, or tax 
programs. Recipient reporting also does not apply to individuals. In 
addition, the required reports cover only direct jobs created or 
retained as a result of Recovery Act funding; they do not include the 
employment impact on materials suppliers (indirect jobs) or on the 
local community (induced jobs). Figure 1 shows the division of total 
Recovery Act funds and their potential employment effects. 

Figure 1: The Potential Employment Effects of Recovery Act Funds: 

[Refer to PDF for image: pie-chart and illustration] 

Total Recovery Act funds (in billions): 
Entitlements: $224; 
Tax relief: $288; 
Contracts, grants, and loans: $275; 
Total: $787. 

Potential employment effects of Recovery Act contracts, grants and 
loans: 
Contracts, grants, and loans (concentric circles): 
Indirect (small circle): Tax relief employment effect; 
Indirect (large circle): Entitlements employment effect; 
Direct (smallest circle): Recipient reporting coverage. 

Source: GAO. 

Note: The potential employment effects of the different types of 
Recovery Act funds are based on historical data and are reflected in 
the size of the circles. 

[End of figure] 

Tracing the effects of the Recovery Act through the economy is a 
complicated task. Prospectively, before the act's passage or before 
funds are spent, the effects can only be projected using economic 
models that represent the behavior of governments, firms, and 
households. While funds are being spent, some effects can be observed 
but often relevant data on key relationships and indicators in the 
economy are available only with a lag, thereby complicating real-time 
assessments. When a full range of data on outcomes becomes available, 
economic analysts undertake retrospective analyses, where the findings 
are often used to guide future policy choices and to anticipate effects 
of similar future policies. Stimulus spending under the broad scope of 
the Recovery Act will reverberate at the national, regional, state, and 
local levels. Models of the national economy provide the most 
comprehensive view of policy effects, but they do not provide insight, 
except indirectly, about events at smaller geographical scales. The 
diversity and complexity of the components of the national economy are 
not fully captured by any set of existing economic models. Some 
perspective can be gained by contemporaneous close observation of the 
actions of governments, firms, and households, but a complete and 
accurate picture of the Recovery Act's impact will emerge only slowly. 

Section 1512 of the Recovery Act requires recipients of recovery funds 
to report on those funds each calendar quarter. These recipient reports 
are to be filed for any quarter in which a recipient receives Recovery 
Act funds directly from the federal government. The recipient reporting 
requirement covers all funds made available by appropriations in 
division A of the Recovery Act. The reports are to be submitted no 
later than 10 days after the end of each calendar quarter in which the 
recipient received Recovery Act funds. Each report is to include the 
total amount of Recovery Act funds received, the amount of funds 
expended or obligated to projects or activities, and a detailed list of 
those projects or activities. For each project or activity, the 
detailed list must include its name and a description, an evaluation of 
its completion status, and an estimate of the number of jobs created or 
the number of jobs retained by that project or activity. Certain 
additional information is also required for infrastructure investments 
made by state and local governments. Also, the recipient reports must 
include detailed information on any subcontracts or subgrants as 
required by the Federal Funding Accountability and Transparency Act of 
2006.[Footnote 10] Section 1512(e) of the Recovery Act requires GAO and 
CBO to comment on the estimates of jobs created or retained reported by 
recipients. 

In its guidance to recipients for estimating employment effects, OMB 
instructed recipients to report only the direct employment effects as 
"jobs created or retained" as a single number.[Footnote 11] Recipients 
are not expected to report on the employment impact on materials 
suppliers (indirect jobs) or on the local community (induced jobs). 
According to the guidance, "A job created is a new position created and 
filled or an existing unfilled position that is filled as a result of 
the Recovery Act; a job retained is an existing position that would not 
have been continued to be filled were it not for Recovery Act funding. 
Only compensated employment... should be reported. The estimate of the 
number of jobs... should be expressed as 'full-time equivalents (FTE),' 
which is calculated as total hours worked in jobs created or retained 
divided by the number of hours in a full-time schedule, as defined by 
the recipient." Consequently, the recipients are expected to report the 
amount of labor hired or not fired as result of having received 
Recovery Act funds. It should be noted that one FTE does not 
necessarily equate to the job of one person. Firms may choose to 
increase the hours of existing employees, for example, which can 
certainly be said to increase employment but not necessarily be an 
additional job in the sense of adding a person to the payroll. 

To implement the recipient reporting data requirements, OMB has worked 
with the Recovery Accountability and Transparency Board (Recovery 
Board)[Footnote 12] to deploy a nationwide data collection system at 
[hyperlink, http://www.federalreporting.gov] (Federalreporting.gov), 
while the data reported by recipients are available to the public for 
viewing and downloading on [hyperlink, http://www.recovery.gov 
(Recovery.gov). Recovery.gov, a site designed to provide transparency 
of information related to spending on Recovery Act programs, is the 
official source of information related to the Recovery Act. The 
Recovery Board's goals for the Recovery Act Web site include promoting 
accountability by providing a platform to analyze Recovery Act data and 
serving as a means of tracking fraud, waste, and abuse allegations by 
providing the public with accurate, user-friendly information. In 
addition, the site promotes official data in public debate, assists in 
providing fair and open access to Recovery Act opportunities, and 
promotes an understanding of the local impact of Recovery Act funding. 

In an effort to address the level of risk in recipient reporting, OMB's 
June 22, 2009, guidance[Footnote 13] on recipient reporting includes a 
requirement for data quality reviews. OMB's data quality guidance is 
intended to address two key data problems--material omissions and 
significant reporting errors. Material omissions and significant 
reporting errors are risks that the information is incomplete and 
inaccurate.[Footnote 14] As shown in figure 2, OMB gave specific time 
frames for reporting that allow prime recipients and delegated 
subrecipients to prepare and enter their information on days 1 through 
10 following the end of the quarter. During days 11 through 21, prime 
recipients will be able to review the data to ensure that complete and 
accurate reporting information is provided prior to a federal agency 
review and comment period beginning on the 22nd day. During days 22 to 
29 following the end of the quarter, federal agencies will perform data 
quality reviews and will notify the recipients and delegated 
subrecipients of any data anomalies or questions. The original 
submitter must complete data corrections no later than the 29th day 
following the end of the quarter. Prime recipients have the ultimate 
responsibility for data quality checks and the final submission of the 
data. Since this is a cumulative reporting process, additional 
corrections can take place on a quarterly basis. 

Figure 2: Recipient Reporting Time Frame: 

[Refer to PDF for image: illustration] 

No less than 35 days prior to the end of the quarter: 
* Prime and subrecipient registration. 

1-10 days after end of quarter (Recipient report adjustments possible): 
* Prime recipients and delegated subrecipients enter draft reporting 
data; 
* Initial submission. 

11-21 days after end of quarter (Recipient report adjustments possible) 
(Agency "view only"): 
* Prime recipients review data submitted by subrecipients; 
* Prime recipients and subrecipients make corrections. 

22-29 days after end of quarter (Recipient report adjustments possible) 
(Agency comment period): 
* Agency review of data submitted; 
* Prime recipients and subrecipients make corrections. 

30 days after end of quarter: 
* Recipients reports published on Recovery.gov. 

90 days after end of quarter: 
* Next quarterly reporting cycle begins—updates reflected cumulatively. 

Source: OMB. 

[End of figure] 

OMB guidance does not explicitly mandate a methodology for conducting 
data quality reviews at the prime and delegated subrecipient level or 
by the federal agencies. Instead, the June 22, 2009, guidance provides 
the relevant party conducting the data quality review with discretion 
in determining the optimal method for detecting and correcting material 
omissions or significant reporting errors. The guidance says that, at a 
minimum, federal agencies, recipients, and subrecipients should 
establish internal controls to ensure data quality, completeness, 
accuracy, and timely reporting of all amounts funded by the Recovery 
Act. 

The Recovery Board published the results of the first round of 
recipient reporting on Recovery.gov on October 30, 2009. According to 
the Web site, recipients submitted 130,362 reports indicating that 
640,329 "jobs" were created or saved as a direct result of the Recovery 
Act. These data solely reflect the direct FTEs reported by recipients 
of Recovery Act grants, contracts, and loans for the period beginning 
when the act was signed into law on February 17, 2009 through September 
30, 2009. As shown in figure 3, grants, contracts, and loans account 
for about 27 percent, or $47 billion, of the approximately $173 billion 
in Recovery Act funds paid out as of September 30, 2009. 

Figure 3: Distribution of Recovery Act Funds through the End of Fiscal 
Year 2009: 

[Refer to PDF for image: pie-chart] 

Entitlements ($63.7 billion): 37%; 
Tax relief ($62.5 billion): 36%; 
Contracts, grants, and loans ($47 billion): 27%; 
Total: $173 billion. 

Source: Recovery.gov. 

[End of figure] 

Recipients in all 50 states reported jobs created or retained with 
Recovery Act funding provided through a wide range of federal programs 
and agencies. Table 1 shows the distribution of jobs created or 
retained across the nation as reported by recipients on Recovery.gov. 
Not surprisingly, California, the most populous state, received the 
most Recovery Act dollars and accounted for the largest number of the 
reported jobs created or retained. 

Table 1: Jobs Created or Retained by States as Reported by Recipients 
of Recovery Act Funding: 

Rank: 1; 
State: California; 
Jobs: 110,185. 

Rank: 2; 
State: New York; 
Jobs: 40,620v 

Rank: 3; 
State: Washington; 
Jobs: 34,517. 

Rank: 4; 
State: Florida; 
Jobs: 29,321v 

Rank: 5; 
State: North Carolina; 
Jobs: 28,073. 

Rank: 6; 
State: Georgia; 
Jobs: 24,681. 

Rank: 7; 
State: Illinois; 
Jobs: 24,448. 

Rank: 8; 
State: New Jersey; 
Jobs: 24,109. 

Rank: 9; 
State: Michigan; 
Jobs: 22,514. 

Rank: 10; 
State: Texas; 
Jobs: 19,572. 

Rank: 11; 
State: Indiana; 
Jobs: 18,876. 

Rank: 12; 
State: Puerto Rico; 
Jobs: 17,597. 

Rank: 13; 
State: Ohio; 
Jobs: 17,095. 

Rank: 14; 
State: Missouri; 
Jobs: 15,149. 

Rank: 15; 
State: Minnesota; 
Jobs: 14,315. 

Rank: 16; 
State: Massachusetts; 
Jobs: 12,374. 

Rank: 17; 
State: Arizona; 
Jobs: 12,283. 

Rank: 18; 
State: Wisconsin; 
Jobs: 10,073. 

Rank: 19; 
State: Oregon; 
Jobs: 9,653. 

Rank: 20; 
State: Tennessee; 
Jobs: 9,548. 

Rank: 21; 
State: Louisiana; 
Jobs: 9,136. 

Rank: 22; 
State: Oklahoma; 
Jobs: 8,747. 

Rank: 23; 
State: Virginia; 
Jobs: 8,617. 

Rank: 24; 
State: South Carolina; 
Jobs: 8,147. 

Rank: 25; 
State: Colorado; 
Jobs: 8,094. 

Rank: 26; 
State: Connecticut; 
Jobs: 7,551v 

Rank: 27; 
State: Pennsylvania; 
Jobs: 7,427. 

Rank: 28; 
State: Maryland; 
Jobs: 6,748. 

Rank: 29; 
State: Utah; 
Jobs: 6,598. 

Rank: 30; 
State: Montana; 
Jobs: 6,427v 

Rank: 31; 
State: Kansas; 
Jobs: 5,935. 

Rank: 32; 
State: Nevada; 
Jobs: 5,667. 

Rank: 33; 
State: Iowa; 
Jobs: 5,323. 

Rank: 34; 
State: New Mexico; 
Jobs: 5,230. 

Rank: 35; 
State: Alabama; 
Jobs: 4,884. 

Rank: 36; 
State: Kentucky; 
Jobs: 4,202. 

Rank: 37; 
State: Arkansas; 
Jobs: 3,742. 

Rank: 38; 
State: New Hampshire; 
Jobs: 3,528. 

Rank: 39; 
State: Mississippi; 
Jobs: 3,433. 

Rank: 40; 
State: Nebraska; 
Jobs: 2,840. 

Rank: 41; 
State: West Virginia; 
Jobs: 2,409. 

Rank: 42; 
State: Alaska; 
Jobs: 2,315. 

Rank: 43; 
State: District of Columbia; 
Jobs: 2,274. 

Rank: 44; 
State: South Dakota; 
Jobs: 2,198. 

Rank: 45; 
State: Idaho; 
Jobs: 2,103. 

Rank: 46; 
State: Vermont; 
Jobs: 2,030. 

Rank: 47; 
State: Rhode Island; 
Jobs: 2,012. 

Rank: 48; 
State: Maine; 
Jobs: 1,613. 

Rank: 49; 
State: Hawaii; 
Jobs: 1,545. 

Rank: 50; 
State: North Dakota; 
Jobs: 1,293. 

Rank: 51; 
State: Delaware; 
Jobs: 1,170. 

Rank: 52; 
State: Wyoming; 
Jobs: 860. 

State: Other; 
Jobs: 1,232. 

State: Total; 
Jobs: 640,329. 

Source: Recovery.gov. 

Notes: 

Includes the District of Columbia and Puerto Rico. 

"Other" includes all other U.S. territories and data that could not be 
assigned to a specific state. 

Total may not add due to rounding. 

[End of table] 

Table 2 shows the number and share of jobs created or retained by 
federal program agencies as reported by recipients of Recovery Act 
funding. The Department of Education accounted for nearly 400,000 or 
close to two-thirds of the reported jobs created or retained. According 
to the Department of Education, this represents about 325,000 education 
jobs such as teachers, principals, and support staff in elementary and 
secondary schools, and educational, administrative, and support 
personnel in institutions of higher education funded primarily through 
the State Fiscal Stabilization Fund (SFSF).[Footnote 15] In addition, 
approximately 73,000 other jobs (including both education and 
noneducation positions) were reported saved or created from the SFSF 
Government Services Fund, the Federal Work Study Program, and Impact 
Aid funds. 

Table 2: Jobs Created or Retained by Federal Program Agency as Reported 
by Recipients of Recovery Act Funding: 

Department/agency: Education; 
Jobs: 398,006; 
Percent of total: 62.2. 

Department/agency: Labor; 
Jobs: 76,223; 
Percent of total: 11.9. 

Department/agency: Transportation; 
Jobs: 46,593; 
Percent of total: 7.3. 

Department/agency: Health and Human Services; 
Jobs: 28,616; 
Percent of total: 4.5. 

Department/agency: Housing and Urban Development; 
Jobs: 28,559; 
Percent of total: 4.5. 

Department/agency: Defense; 
Jobs: 11,239; 
Percent of total: 1.8. 

Department/agency: Energy; 
Jobs: 10,021; 
Percent of total: 1.6. 

Department/agency: Agriculture; 
Jobs: 6,273; 
Percent of total: 1.0. 

Department/agency: Justice; 
Jobs: 5,575; 
Percent of total: 0.9. 

Department/agency: Corps of Engineers; 
Jobs: 4,354; 
Percent of total: 0.7. 

Department/agency: Environmental Protection Agency; 
Jobs: 4,191; 
Percent of total: 0.7. 

Department/agency: National Science Foundation; 
Jobs: 2,510; 
Percent of total: 0.4. 

Department/agency: Federal Communications Commission; 
Jobs: 1,929; 
Percent of total: 0.3. 

Department/agency: Interior; 
Jobs: 1,780; 
Percent of total: 0.3. 

Department/agency: Treasury; 
Jobs: 1,454; 
Percent of total: 0.2. 

Department/agency: Homeland Security; 
Jobs: 1,305; 
Percent of total: 0.2. 

Department/agency: All others; 
Jobs: 11,701; 
Percent of total: 1.8. 

Department/agency: Total; 
Jobs: 640,329; 
Percent of total: 100.0. 

Source: Recovery.gov. 

Note: Totals may not add due to rounding. 

[End of table] 

Recipients of Recovery Act Funds We Contacted Appear to Have Made Good 
Faith Efforts to Ensure Complete and Accurate Reporting, but It Will 
Take Time to Improve Data Quality: 

While recipients GAO contacted appear to have made good faith efforts 
to ensure complete and accurate reporting, GAO's fieldwork and initial 
review and analysis of recipient data from www.recovery.gov, indicate 
that there are a range of significant reporting and quality issues that 
need to be addressed. Collecting information from such a large and 
varied number of entities in a compressed time frame, as required by 
the Recovery Act, is a huge task. Major challenges associated with the 
new Recovery Act reporting requirements included educating recipients 
about the reporting requirements and developing the systems and 
infrastructure for collecting and reporting the required information. 
While recipients in the states we reviewed generally made good faith 
efforts to report accurately, there is evidence, including numerous 
media accounts, that the data reporting has been somewhat inconsistent. 
Even recipients of similar types of funds appear to have interpreted 
the reporting guidance in somewhat different ways and took different 
approaches in how they developed their jobs data. The extent to which 
these reporting issues affect overall data quality is uncertain at this 
point. As existing recipients become more familiar with the reporting 
system and requirements, these issues may become less significant 
although communication and training efforts will need to be maintained 
and in some cases expanded as new recipients of Recovery Act funding 
enter the system. Because this effort will be an ongoing process of 
cumulative reporting, our first review represents a snapshot in time. 

Initial Observations on Recipient Reporting Data Identify Areas Where 
Further Review and Guidance Are Needed: 

We performed an initial set of edit checks and basic analyses on the 
recipient report data available for download from Recovery.gov on 
October 30, 2009. Based on that initial review work, we identified 
recipient report records that showed certain data values or patterns in 
the data that were either erroneous or merit further review due to an 
unexpected or atypical data value or relationship between data values. 
For the most part, the number of records identified by our edit checks 
was relatively small compared to the 56,986 prime recipient report 
records included in our review. 

As part of our review, we examined the relationship between recipient 
reports showing the presence or absence of any FTE counts with the 
presence or absence of funding amounts shown in either or both data 
fields for amount of Recovery Act funds received and amount of Recovery 
Act funds expended. Forty four percent of the prime recipient reports 
showed an FTE value. As shown in table 3, we identified 3,978 prime 
recipient reports where FTEs were reported but no dollar amount was 
reported in the data fields for amount of Recovery Act funds received 
and amount of Recovery Act funds expended. These records account for 
58,386 of the total 640,329 FTEs reported. 

Table 3: Count of Prime Recipient Reports by Presence or Absence of 
FTEs and Recovery Act Funds Received or Expended: 

Recovery Act funds: Received or expended funds reported[A]; 
Reports with FTEs: 21,280; (84%); 
Reports without FTEs: 9,247; (29%). 

Recovery Act funds: No received or expended funds reported; 
Reports with FTEs: 3,978; (16%); 
Reports without FTEs: 22,481; (71%). 

Recovery Act funds: Total; 
Reports with FTEs: 25,258; (100%); 
Reports without FTEs: 31,728; (100%). 

Source: GAO analysis of Recovery.gov data. 

[A] Prime recipient reports showing a non zero dollar amount in either 
or both Recovery Act funds received or expended data fields. 

[End of table] 

As might be expected, 71 percent of those prime recipient reports shown 
in table 3 that did not show any FTEs also showed no dollar amount in 
the data fields for amount of Recovery Act funds received and amount 
expended. There were also 9,247 reports that showed no FTEs but did 
show some funding amount in either or both of the funds received or 
expended data fields. The total value of funds reported in the 
expenditure field on these reports was $965 million. Those recipient 
reports showing FTEs but no funds and funds but no FTEs constitute a 
set of records that merit closer examination to understand the basis 
for these patterns of reporting. 

Ten recipient reports accounted for close to 30 percent of the total 
FTEs reported. All 10 reports were grants and the majority of those 
reports described funding support for education-sector related 
positions. For reports containing FTEs, we performed a limited, 
automated scan of the job creation field of the report, which is to 
contain a narrative description of jobs created or retained. We 
identified 261 records where there was only a brief description in this 
job creation field and that brief text showed such words or phrases as 
"none," "N/A," zero, or variants thereof. For most of these records, 
the value of FTEs reported is small, but there are 10 of these records 
with each reporting 50 or more FTEs. The total number of FTEs reported 
for all 261 records is 1,776. While our scan could only identify 
limited instances of apparently contradictory information between the 
job description and the presence of an FTE number, we suspect that a 
closer and more extensive review of the job description field in 
relation to the count of FTEs would yield additional instances where 
there were problems, and greater attention to this relationship would 
improve data quality. 

In our other analyses of the data fields showing Recovery Act funds, we 
identified 132 records where the award amount was zero or less than 
$10. There were also 133 records where the amount reported as received 
exceeded the reported award amount by more than $10. On 17 of these 
records, the difference between the smaller amount awarded and the 
larger reported amount received exceeded $1 million. While there may be 
a reason for this particular relationship between the reported award 
amount and amount received, it may also indicate an improper keying of 
data or an interpretation of what amounts are to be reported in which 
fields that is not in accordance with the guidance. 

We calculated the overall sum and sum by states for number of FTEs 
reported, award amount, and amount received. We found that they 
corresponded closely with the values shown for these data on 
Recovery.gov. Some of the data fields we examined with known values 
such as the Treasury Account Symbol (TAS) codes and Catalog of Federal 
Domestic Assistance (CFDA) numbers[Footnote 16] showed no invalid 
values on recipient reports. However, our analyses show that there is 
reason to be concerned that the values shown for these data fields in 
conjunction with the data field identifying who the funding or awarding 
agency is may not be congruent. Both TAS and CFDA values are linked to 
specific agencies and their programs. We matched the reported agency 
codes against the reported TAS and CFDA codes. We identified 454 
reports as having a mismatch on the CFDA number--therefore, the CFDA 
number shown on the report did not match the CFDA number associated 
with either the funding or awarding agency shown on the report. On TAS 
codes, we identified 595 reports where there was no TAS match. Included 
in the mismatches were 76 recipient reports where GAO was erroneously 
identified as either the funding or awarding agency. In many instances, 
review of these records and their TAS or CFDA values along with other 
descriptive information from the recipient report indicated the likely 
funding or awarding agencies. These mismatches suggest that either the 
identification of the agency or the TAS and CFDA codes are in error on 
the recipient report. 

Another potential problem area we identified was the provision of data 
on the number and total amount of small subawards of less than $25,000. 
There are data fields that collect information on small subawards, 
small subawards to individuals, and small subawards to vendors. There 
were 380 prime recipient report records where we observed the same 
values being reported in both small subawards and small subawards to 
individuals. We also identified 1,772 other records where it could be 
clearly established that these values were being reported separately. 
While we are able to establish that these data are not being 
consistently reported, it is not possible to assess from the data alone 
the full extent to which subaward data are being combined or reported 
separately across all recipient reports. Additionally, we noted 152 
reports where, in either the subawards or subawards to individuals data 
fields, the value for the number of subawards and the total dollar 
value of subawards were exactly the same and, as such, most likely 
erroneous. 

While most recipient report records were not identified as potential 
problems in these initial edit checks and analyses thus far, our 
results do indicate the need for further data quality efforts. 

Various Interpretations of How to Report FTEs Produced Questionable 
Data on Jobs Created or Retained: 

Under OMB guidance, jobs created or retained were to be expressed as 
FTEs. We found that data were reported inconsistently even though 
significant guidance and training was provided by OMB and federal 
agencies. While FTEs should allow for the aggregation of different 
types of jobs--part-time, full-time or temporary--differing 
interpretations of the FTE guidance compromise the ability to aggregate 
the data. 

In addition to issuing guidance, OMB and federal agencies provided 
several types of clarifying information to recipients as well as 
opportunities to interact and ask questions or receive help with the 
reporting process. These included weekly phone calls between OMB and 
groups representing the state budget and comptrollers offices, weekly 
calls between all state reporting leads, webinars, a call center, and e-
mail outreach. State officials reported they took advantage of and 
appreciated this outreach. For example, Ohio state officials said they 
were generally satisfied with the technical assistance and guidance 
provided by OMB--specifically, the assistance it received from the 
Federalreporting.gov help desk staff. OMB estimated that it had a 
better than 90 percent response rate for recipient reporting and said 
that they answered over 3,500 questions related to recipient reporting. 

The data element on jobs created or retained expressed in FTEs raised 
questions and concerns for some recipients. OMB staff reported that 
questions on FTEs dominated the types of questions they fielded during 
the first round of recipient reporting. Although the recipient reports 
provide a detailed account of individual projects, as Recovery.gov 
shows, these projects represent different types of activities and start 
and end at various points throughout the year, and recipients had 
various understandings of how to report an FTE. In section 5.2 of the 
June 22 guidance, OMB states that "the estimate of the number of jobs 
required by the Recovery Act should be expressed as 'full-time 
equivalents' (FTE), which is calculated as the total hours worked in 
jobs retained divided by the number of hours in a full time schedule, 
as defined by the recipient." Further, "the FTE estimates must be 
reported cumulatively each calendar quarter." In section 5.3, OMB 
states that "reporting is cumulative across the project lifecycle, and 
will not reset at the beginning of each calendar or fiscal year." 

FTE calculations varied depending on the period of performance the 
recipient reported on. For example, in the case of federal highways 
projects, some have been ongoing for six months, while others started 
in September 2009. In attempting to address the unique nature of each 
project, DOT's Federal Highway Administration (FHWA) faced the issue of 
whether to report FTE data based on the length of time to complete the 
entire project (project period of performance) versus a standard period 
of performance such as a calendar quarter across all projects. 
According to FHWA guidance, which was permitted by OMB, FTEs reported 
for each highway project are expressed as an average monthly FTE. This 
means that for a project that started on July 1, 2009, the prime 
recipient would add up the hours worked on that project in the months 
of July, August, and September and divide that number by [(3/12 x 2,080 
hours)]. For a project that started on August 1, 2009, the prime 
recipient should add up the hours worked on that project in the months 
of August and September and divide that number by [(2/12 x 2,080 
hours)]. For a project that started on September, 1, 2009, the prime 
recipient should add up the hours worked on that project in the month 
of September and divide that number by [(1/12 x 2,080 hours)]. The 
issue of a standard performance period is magnified when looking across 
programs and across states. To consistently compare FTEs, or any type 
of fraction, across projects, one must use a common denominator. 
Comparison of FTE calculations across projects poses challenges when 
the projects have used different time periods as denominators. Tables 4 
and 5 below provide more detail on the problems created by not having a 
standard performance period for calculating FTEs. 

Table 4 is an application of the FHWA guidance for three projects with 
varying start dates. This example illustrates the way FHWA applied the 
OMB guidance and that the way FTEs are aggregated in 
Federalreporting.gov could overstate the employment effects. In this 
example, because the 30 monthly FTE data were aggregated without 
standardizing for the quarter, FTEs would be overstated by 10 relative 
to the OMB guidance. A standardized quarterly measure and job-years are 
included as examples of a standard period of performance. A job-year is 
simply one job for 1 year. Regardless of when the project begins, the 
total hours worked is divided by a full years worth of time (12 
months), which would enable aggregation of employment effects across 
programs and time. 

Table 4: Aggregation of FHWA FTE Data: 

Start date: 
Project A: July 1; 
Project B: August 1; 
Project C: September 1. 

Full-time employees: 
Project A: 10; 
Project B: 10; 
Project C: 10. 

Duration of project as of September 30: 
Project A: 3 months; 
Project B: 2 months; 
Project C: 1 month. 

Average monthly FTE per FHWA: 
Project A: 10; 
Project B: 10; 
Project C: 10. 

Cumulative FTE per OMB guidance: 
Project A: 10; 
Project B: 6.67; 
Project C: 3.33. 

FTE standardized on a quarterly basis: 
Project A: 10; 
Project B: 6.67; 
Project C: 3.33. 

Job-years: 
Project A: 2.5; 
Project B: 1.67; 
Project C: 0.83. 

Source: GAO analysis of FHWA FTE data. 

Notes: 

Total FTE as calculated by FHWA and aggregated on Federalreporting.gov 
= 30. 

Total cumulative FTE per OMB guidance = 20. 

Total FTE on a standardized quarterly basis = 20. 

Total job-years = 5 (standardized FTE). 

[End of table] 

Table 5 is an application of the OMB guidance for two projects with 
varying start dates. In this example, the OMB guidance understates the 
employment effect relative to the standardized measure. Cumulative FTE 
per OMB guidance would result in 20 FTE compared with 30 FTE when 
standardized on a quarterly basis. Both a standardized quarterly FTE 
measure and a job-year measure are included as examples of a standard 
period of performance. Regardless of when the project begins, the total 
hours worked is divided by a full year's worth of time (12 months), 
which would enable aggregation of employment effects across programs 
and time. 

Table 5: OMB's Cumulative FTE versus a Standardized Measure: 

Start date: 
Project X: July 1; 
Project Y: October 1. 

Full-time employees: 
Project X: 10; 
Project Y: 10. 

Duration of project as of December 30:
Project X: 6 months; 
Project Y: 3 months. 

Cumulative FTE per OMB guidance: 
Project X: 10; 
Project Y: 10. 

FTE standardized on a quarterly basis: 
Project X: 20; 
Project Y: 10. 

Job-years: 
Project X: 5; 
Project Y: 2.5. 

Source: GAO analysis of OMB FTE calculation guidance. 

Notes: 

Total Cumulative FTE per OMB guidance = 20. 

Total FTE on a standardized quarterly basis = 30. 

Total job-years = 7.5 (standardized FTE). 

[End of table] 

There are examples from other DOT programs where the issue of a project 
period of performance created significant variation in the FTE 
calculation. For example, in Pennsylvania, each of four transit 
entities we interviewed used a different denominator to calculate the 
number of full-time equivalent jobs they reported on their recipients 
reports for the period ending September 30, 2009. Southeastern 
Pennsylvania Transportation Authority in Philadelphia used 1,040 hours 
as its denominator, since it had projects underway in two previous 
quarters. Port Authority of Allegheny County prorated the hours based 
on the contractors' start date as well as to reflect that hours worked 
from September were not included due to lag time in invoice processing. 
Port Authority used 1,127 hours for contractors starting before April, 
867 hours for contractors starting in the second quarter, and 347 hours 
for contractors starting in the third quarter. Lehigh and Northampton 
Transportation Authority in Allentown used 40 hours in the 1512 report 
they tried to submit, but, due to some confusion about the need for 
corrective action, the report was not filed. Finally, the Pennsylvania 
Department of Transportation in the report for nonurbanized transit 
systems used 1,248 hours, which was prorated by multiplying 8 hours per 
workday times the 156 workdays between February 17 and September 30, 
2009. In several other of our selected states, this variation across 
transit programs' period of performance for the FTE calculation also 
occurred. 

The issue of variation in the period of performance used to calculate 
FTEs also occurred in Education programs. Across a number of states we 
reviewed, local education agencies and higher education institutions 
used a different denominator to calculate the number of FTEs they 
reported on their recipient reports for the period ending September 30, 
2009. For example, two higher education systems in California each 
calculated the FTE differently. In the case of one, officials chose to 
use a two-month period as the basis for the FTE performance period. The 
other chose to use a year as the basis of the FTE. The result is almost 
a three-to-one difference in the number of FTEs reported for each 
university system in the first reporting period. Although Education 
provides alternative methods for calculating an FTE, in neither case 
does the guidance explicitly state the period of performance of an FTE. 
[Footnote 17] 

Recipients were also confused about counting a job created or retained 
even though they knew the number of hours worked that were paid for 
with Recovery Act funds. For example, the Revere Housing Authority, in 
administering one Recovery Act project, told us that they may have 
underreported jobs data from an architectural firm providing design 
services for a Recovery Act window replacement project at a public 
housing complex. The employees at the architecture firm that designed 
the window replacement project were employed before the firm received 
the Recovery Act funded contract and will continue to be employed after 
the contract has been completed, so from the Revere Housing Authority's 
perspective there were no jobs created or retained. As another example, 
officials from one housing agency reported the number of people, by 
trade, who worked on Recovery Act related projects, but did not apply 
the full-time equivalent calculation outlined by OMB in the June 22 
reporting guidance. Officials from another public housing agency told 
us that they based the number of jobs they reported on letters from 
their contractors detailing the number of positions rather than FTEs. 
OMB staff said that thinking about the jobs created or retained as 
hours worked and paid for with Recovery Act funds was a useful way to 
understand the FTE guidance. While OMB's guidance explains that in 
applying the FTE calculation for measuring the number of jobs created 
or retained recipients will need the total number of hours worked that 
are funded by the Recovery Act, it could emphasize this relationship 
more thoroughly throughout its guidance. 

OMB's decision to convert jobs into FTEs provides a consistent lens to 
view the amount of labor being funded by the Recovery Act, provided 
each recipient uses a standard time frame in considering the FTE. The 
current OMB guidance, however, creates a situation where, because there 
is no standard starting or ending point, an FTE provides an estimate 
for the life of the project. Without normalizing the FTE, aggregate 
numbers should not be considered, and the issue of a standard period of 
performance is magnified when looking across programs and across 
states. 

Technical Reporting and Processing Glitches Occurred, but Recipients 
Were Able to Report: 

Recipients we interviewed were able to report into and review data on 
Federalreporting.gov. Particularly given the scale of the project and 
how quickly it was implemented, within several months, the ability of 
the reporting mechanisms to handle the volume of data from the range of 
recipients represents a solid first step in the data collection and 
reporting process for the fulfillment of the section 1512 mandate. 
Nonetheless, there were issues associated with the functional process 
of reporting. For example, state officials with decentralized reporting 
structures reported problems downloading submitted information from 
Recovery.gov to review top-line figures such as money spent and jobs 
created or retained. The Iowa Department of Management, which did 
Iowa's centralized reporting into Federalreporting.gov, said that, 
overall, the system was very slow. In addition to the slowness, as the 
system was processing input from Iowa's submission, every time it 
encountered an error, it kicked back the whole submission--but it 
showed only the one error. After fixing the one errant entry, the state 
resubmitted its information, which would then be completely sent back 
the next time an error was encountered. Iowa officials believe it would 
have been more efficient if the system identified all errors in 
submission and sent back a complete list of errors to fix. Other 
recipient reporters we interviewed highlighted issues around DUNS 
[Footnote 18] numbers and other key identifiers, along with the 
inability to enter more than one congressional district for projects 
that span multiple districts. The expectation is that many of these 
entry and processing errors were captured through the review process, 
but the probability that all errors were caught is low. 

Generally, state officials from our 17 jurisdictions reported being 
able to work through technical reporting and processing glitches. For 
example, Florida officials reported that they encountered many 
technical issues but were able to solve the problems by contacting the 
Recovery Board. Ohio officials noted that, although they were initially 
concerned, in spite of the tremendous amount of data being submitted, 
Federalreporting.gov held up well. While they faced some challenges, 
California officials reported that, overall, they were successful in 
reporting the numbers into Federalreporting.gov. They worked with the 
technical team at Federalreporting.gov and performed a test on October 
1, 2009, to see if the upload of the job data was going to work. During 
the October reporting time frame, New Jersey officials reported that 
they generally did not experience significant recipient reporting 
problems. The few reporting problems New Jersey experienced occurred in 
relation to issues uploading the data onto Federalreporting.gov and 
issues requiring clarifying guidance from the relevant federal agency. 

Notwithstanding the concerns over the slowness of the reporting system 
and error checks, Iowa officials also reported that the process worked 
rather well, determining that most of their state reporting problems 
seemed to stem from a few recipients not fully grasping all of the 
training the state had provided and thus not knowing or having key 
information like DUNS numbers and in some cases submitting erroneous 
information. The state department of management plans to specifically 
address the 30 or so recipients associated with these issues--just 
about all of which were school districts. As a follow-up from this 
first reporting cycle, several states have developed a list of lessons 
learned to share with OMB and other federal agencies. An example in 
appendix I illustrates problems public housing authorities had with 
both the recipient reporting processing functions and the FTE 
calculation. 

In addition to the Federalreporting.gov Web site, the Recovery Board 
used a revised Recovery.gov Web site to display reported data. The 
revised site includes the ability to search spending data by state, ZIP 
code, or congressional district and display the results on a map. The 
Recovery Board also awarded a separate contract to support its 
oversight responsibilities with the ability to analyze reported data 
and identify areas of concern for further investigation. In addition, 
the board plans to enhance the capabilities of Federalreporting.gov. 
However, the Recovery Board does not yet use an adequate change 
management process to manage system modifications. Without such a 
process, the planned enhancements could become cost and schedule 
prohibitive. The board has recognized this as a significant risk and 
has begun development of a change management process. Finally, the 
board has recognized the need to improve the efficiency of its help 
desk operation to avoid dropped calls and is working on agreements to 
address this risk. 

Processes Are in Place at the States and Federal Agencies for Recipient 
Reporting Data Quality Review: 

State Level Data Quality Review: 

Recipient reporting data quality is a shared responsibility, but often 
state agencies have principal accountability because they are the prime 
recipients. Prime recipients, as owners of the recipient reporting 
data, have the principal responsibility for the quality of the data 
submitted, and subrecipients delegated to report on behalf of prime 
recipients share in this responsibility.[Footnote 19] In addition, 
federal agencies funding Recovery Act projects and activities provide a 
layer of oversight that augments recipient data quality. Oversight 
authorities including OMB, the Recovery Board, and federal agency IGs 
also have roles to play in ensuring recipient reported data quality, 
while the general public and nongovernmental entities can help as well 
by highlighting data problems for correction. 

All of the jurisdictions we reviewed had data quality checks in place 
for the recipient reporting data, either at the state level or a state 
agency level. State agencies, as entities that receive Recovery Act 
funding as federal awards in the form of grants, loans, or cooperative 
agreements directly from the federal government, are often the prime 
recipients of Recovery Act funding. Our work in the 16 states and the 
District of Columbia showed differences in the way states as prime 
recipients approach recipient reporting data quality review. Officials 
from nine states reported having chosen a centralized reporting 
approach meaning that state agencies submit their recipient reports to 
a state central office, which then submits state agency recipient 
reports to Federalreporting.gov. For example, Colorado's Department of 
Transportation provided its recipient report to a central entity, the 
Colorado Office of Information Technology, for submission to 
Federalreporting.gov. States with centralized reporting systems 
maintain that they will be able to provide more oversight of recipient 
reporting with this approach. Advocates of centralized reporting also 
expect that method will increase data quality, decrease omissions and 
duplicate reporting, and facilitate data cleanup. 

Officials from the remaining eight jurisdictions reported using a 
decentralized reporting system. In these cases, the state program 
office administering the funds is the entity submitting the recipient 
report. In Georgia, for example, the State Department of Transportation 
is responsible for both reviewing recipient report data and submitting 
it to Federalreporting.gov. Illinois, as is the case for four other 
decentralized states, is quasi-decentralized where the data are 
centrally reviewed and reported in a decentralized manner. When the 
audit office informs the Office of the Governor that its review is 
complete and if the Office of the Governor is satisfied with the 
results, the Illinois state reporting agency may upload agency data to 
Federalreporting.gov. Appendix I provides details on California's 
recipient reporting experiences. 

As a centralized reporting state, Iowa officials told us that they 
developed internal controls to help ensure that the data submitted to 
OMB, other federal entities, and the general public, as required by 
section 1512 of the Recovery Act, are accurate. Specifically, Iowa 
inserted validation processes in its Recovery Act database to help 
reviewers identify and correct inaccurate data. In addition, state 
agency and local officials were required to certify their review and 
approval of their agency's information prior to submission. Iowa state 
officials told us that they are working on data quality plans to 
include being able to reconcile financial information with the state's 
centralized accounting system. According to Iowa officials, the number 
of Recovery Act grant awards improperly submitted was relatively small. 

As a decentralized reporting state, New Jersey officials reported that 
a tiered approach to data quality checks was used for all Recovery Act 
funding streams managed by the state. Each New Jersey state department 
or entity was responsible for formulating a strategy for data quality 
reviews and implementing that strategy. The New Jersey Department of 
Community Affairs, for example, directed subrecipients to report data 
directly into an existing departmental data collection tool modified to 
encompass all of the data points required by the Recovery Act. This 
system gave the Department of Community Affairs the ability to view the 
data as it came in from each subrecipient. From this data collection 
tool, the department uploaded prime and subrecipient data to 
Federalreporting.gov. All departmental strategies were reviewed by the 
New Jersey Governor's office and the New Jersey Recovery Accountability 
Task Force. The Governor's office conducted a review of the reports as 
they were uploaded to Federalreporting.gov on a program-by-program, 
department-by-department basis to identify any outliers, material 
omissions, or reporting errors that could have been overlooked by 
departments. 

Federal Agency Data Quality Review: 

To help ensure the quality of recipient report data, the Recovery Board 
encouraged each federal Office of Inspector General overseeing an 
agency receiving Recovery Act funds to participate in a governmentwide 
Recovery Act Reporting Data Quality Review. The Recovery Board 
requested the IG community to determine the following: (1) the 
existence of documentation on the agencies' processes and procedures to 
perform limited data quality reviews targeted at identifying material 
omissions and significant reporting errors, (2) the agencies' plans for 
ensuring prime recipients report quarterly, and (3) how the agencies 
intend to notify the recipient of the need to make appropriate and 
timely changes. In addition, IGs reviewed whether the agency had an 
adequate process in place to remediate systemic or chronic reporting 
problems and if they planned to use the reported information as a 
performance management and assessment tool. We reviewed the 15 IG 
reports that were available as of November 12, 2009. Our review of 
these reports from a range of federal agencies found that they had 
drafted plans or preliminary objectives for their plans for data 
quality procedures. 

Published IG audits on agencies' Recovery Act data quality reviews that 
we examined indicated that federal agencies were using a variety of 
data quality checks, which included automated or manual data quality 
checks or a combination. Computer programs drive the automated 
processes by capturing records that do not align with particular 
indicators determined by the agency. Agencies may use a manual process 
where a designated office will investigate outliers that surface during 
the automated test. For example, the automated process for Education 
performs data checks to validate selected elements against data in the 
department's financial systems. As part of its data quality review, 
Education officials are to examine submitted reports against specific 
grant programs or contract criteria to identify outliers for particular 
data elements. Of the IG reports that we reviewed that mentioned 
systemic or chronic problems, 9 of the 11 found that their agencies had 
a process in place to address these problems. Although some of the IGs 
were unable to test the implementation of their agency's procedures for 
reviewing the quarterly recipient reports, based on their initial 
audit, they were able to conclude that the draft plan or preliminary 
objectives for data quality review were in place. 

According to OMB's guidance documents, federal agencies must work with 
their recipients to ensure comprehensive and accurate recipient 
reporting data. A September 11, 2009, memorandum from OMB directed 
federal agencies to identify Recovery Act award recipients for each 
Recovery Act program they administer and conduct outreach actions to 
raise awareness of registration requirements, identify actual and 
potential barriers to timely registration and reporting, and provide 
programmatic knowledge and expertise that the recipient may need to 
register and enter data into Federalreporting.gov. Federal agencies 
were also expected to provide resources to assist state and select 
local governments in meeting reporting requirements required by the 
Recovery Act. In addition, federal agencies were to identify key 
mitigation steps to take to minimize delays in recipient registration 
and reporting. 

OMB also requires that federal agencies perform limited data quality 
reviews of recipient data to identify material omissions and 
significant reporting errors and notify the recipients of the need to 
make appropriate and timely changes to erroneous reports. Federal 
agencies are also to coordinate how to apply the definitions of 
material omissions and significant reporting errors in given program 
areas or across programs in a given agency to ensure consistency in the 
manner in which data quality reviews are carried out. Although prime 
recipients and federal agency reviewers are required to perform data 
quality checks, none are required to certify or approve data for 
publication. However, as part of their data quality review, federal 
agencies must classify the submitted data as not reviewed by the 
agency; reviewed by the agency with no material omissions or 
significant reporting errors identified; or reviewed by the agency with 
material omissions or significant reporting errors identified. If an 
agency fails to choose one of the aforementioned categories, the system 
will default to not reviewed by the agency. 

The prime recipient report records we analyzed included data on whether 
the prime recipient and the agency reviewed the record in the OMB data 
quality review time frames. In addition, the report record data 
included a flag as to whether a correction was initiated. A correction 
could be initiated by either the prime recipient or the reviewing 
agency. Table 6 shows the number and percentage of prime recipient 
records that were marked as having been reviewed by either or both 
parties and whether a correction was initiated. OMB's guidance provided 
that, a federal agency, depending on the review approach and 
methodology, could classify data as being reviewed by the agency even 
if a separate and unique review of each submitted record had not 
occurred. 

Table 6: Prime Recipient Reports Reviews and Corrections: 

Reviewed by agency: No; 
Reviewed by prime recipient: No; 
Correction: No; 
Number of prime recipient reports: 2,959; 
Percentage: 5. 

Reviewed by agency: No; 
Reviewed by prime recipient: No; 
Correction: Yes; 
Number of prime recipient reports: 8,201; 
Percentage: 14. 

Reviewed by agency: No; 
Reviewed by prime recipient: Yes; 
Correction: Yes; 
Number of prime recipient reports: 1; 
Percentage: 1<. 

Reviewed by agency: Yes; 
Reviewed by prime recipient: No; 
Correction: No; 
Number of prime recipient reports: 37,911; 
Percentage: 67. 

Reviewed by agency: Yes; 
Reviewed by prime recipient: No; 
Correction: Yes; 
Number of prime recipient reports: 7,900; 
Percentage: 14. 

Reviewed by agency: Yes; 
Reviewed by prime recipient: Yes; 
Correction: No; 
Number of prime recipient reports: 13; 
Percentage: 1<. 

Reviewed by agency: Yes; 
Reviewed by prime recipient: Yes; 
Correction: Yes; 
Number of prime recipient reports: 1; 
Percentage: 1<. 

Reviewed by agency: Total; 
Reviewed by prime recipient: [Empty]; 
Correction: [Empty]; 
Number of prime recipient reports: 56,986; 
Percentage: 100%. 

Source: GAO analysis of Recovery.gov data. 

[End of table] 

As shown in table 6, more than three quarters of the prime recipient 
reports were marked as having undergone agency review. Less than one 
percent was marked as having undergone review by the prime recipient. 
The small percentage reviewed by the prime recipients themselves during 
the OMB review time frame warrants further examination. While it may be 
the case that the recipients' data quality review efforts prior to 
initial submission of their reports precluded further revision during 
the review time frame, it may also be indicative of problems with the 
process of noting and recording when and how the prime recipient 
reviews occur and the setting of the review flag. Overall, slightly 
more than a quarter of the reports were marked as having undergone a 
correction during the OMB review time frames. 

Highway and Education Projects Illustrate State and Federal Agency 
Joint Responsibility for Data Quality: 

Highway Projects: 

The Federal-Aid Highway Program provided a good case study of federal 
agency data quality reviews because the responsible federal agency, 
FHWA, had previous experience estimating and reporting on the 
employment effects of investment in highway construction. As a result, 
FHWA would seem to be better positioned than some other federal 
agencies to fulfill the job creation or retention reporting 
requirements under the Recovery Act and may have data quality review 
processes that other federal agencies could replicate. We met with 
officials and reviewed available documentation including federal 
highway reporting documents and payroll records at the selected state 
departments of transportation and selected vendors. Overall, we found 
that the state departments of transportation as prime recipients had in 
place plans and procedures to review and ensure data quality. We 
followed up with the state departments of transportation to confirm 
that these procedures were followed for highway projects representing 
at least 50 percent of the Recovery Act highway reimbursements as of 
September 4, 2009 in the 17 jurisdictions where we are conducting 
bimonthly reviews and reviewed available documentation.[Footnote 20] 
Appendix I illustrates recipient reporting processes and data quality 
checks at the Florida Department of Transportation. 

In addition to the section 1512 reporting requirements, recipients of 
certain transportation Recovery Act funds, such as state departments of 
transportation, are subject to the reporting requirements outlined in 
section 1201(c) of the Recovery Act. Under section 1201(c), recipients 
of transportation funds must submit periodic reports on the amount of 
federal funds appropriated, allocated, obligated, and reimbursed; the 
number of projects put out to bid, awarded, or work has begun or 
completed; and the number of direct and indirect jobs created or 
sustained, among other things.[Footnote 21] The Recovery Act section 
1201(c) requirement called for project level data to be reported twice 
before the first Recovery Act section 1512 report was due.[Footnote 22] 
DOT is required to collect and compile this information for Congress, 
and it issued its first report to Congress in May 2009. Consequently, 
DOT and its modal administrations, such as FHWA, and state departments 
of transportation gained experience collecting and reporting job 
creation and retention information before the first Recovery Act 
section 1512 report was due in October 2009 and required FHWA to have 
its data collection and review process in place in advance of October 
1, 2009, the start of the section 1512 reporting. 

To help fulfill these reporting requirements, FHWA implemented a 
reporting structure that ties together the federal and state levels of 
reporting, creating both a chain of evidence and redundancy in the 
review of the reported data. Figure 4 shows the reporting structure. As 
part of this reporting structure, FHWA also created the Recovery Act 
Data System (RADS), with the updated version of the system released in 
early September 2009. RADS is primarily designed as a repository of 
data for states, but it also serves as an important oversight tool for 
FHWA because it links federal financial data to project data reported 
by the states. The system helps ensure consistent definitions of fields 
and enables FHWA to auto-populate identification fields, including DUNS 
numbers, award numbers, and total award amounts, to both reduce the 
burden at the project level and to reduce the data entry errors. In 
addition, monthly reporting requirements include payroll records, hours 
worked, and data quality assurances, in individual contracts for 
highway projects funded with Recovery Act funds. FHWA may withhold 
payments if a recipient is found to be in noncompliance with the 
reporting requirements. 

Figure 2: FHWA's Recipient Reporting Data Structure: 

[Refer to PDF for image: illustration] 

FHWA's Recipient Reporting Data Structure is illustrated as a pyramid, 
as follows: 

Base level: 
Project information from awardees (subrecipients of federal awards) to 
appropriate state DOTs. 

Second level: 
* States with centralized reporting: AZ, CA, CO, FL, IA, MA, MI, OH, 
PA; 
- State offices of economic recovery: Data submissions to 
FederalReporting.Gov: 
1) Initial; 
2) State reviewed; 
3) Federal reviewed. 

* States and district with decentralized reporting[A]: DC, GA, IL, MS, 
NC, NJ, NY, TX. 

Third level: 
FederalReporting.Gov: 
* Federal agency review to U.S. Department of Transportation; 
* U.S. Department of Transportation: return to address discrepancies to 
centalized and decentralized states; 
* U.S. Department of Transportation: Data due October 30 to 
Recovery.Gov. 

Top level: 
Recovery.Gov. 

Source: GAO. 

[A] Four states, Georgia, Illinois, New York, and North Carolina, plus 
the District of Columbia, review data centrally but report in a 
decentralized manner. 

[End of figure] 

To meet the reporting requirements of the Recovery Act, FHWA required 
that prime contractors of transportation projects funded with Recovery 
Act dollars report project level activity on a monthly basis to the 
state departments of transportation. Specifically, prime contractors 
are required to submit the total number of people working on the 
project, the total number of hours worked on the project, and the total 
payroll on the project for each month. These reports are to include 
this information for both the prime contractors and subcontractors. 
FHWA also requires that prime contractors provide documentation to 
verify the hours funded through the Recovery Act, a higher standard 
than the OMB guidance requires for section 1512 reporting purposes. 
FHWA's monthly reporting requirement is included in individual 
contracts for each highway project funded with Recovery Act dollars. 
Prior to the Recovery Act, FHWA required contractors to maintain 
similar information and make it available for inspection. However, 
while discussing project level activity with transportation contractors 
and officials across the 17 jurisdictions, we found that many had been 
reporting this information to state departments of transportation on a 
monthly basis. 

Within our 17 jurisdictions, we had discussions with prime contractors 
from 36 highway projects funded by Recovery Act dollars. In several 
cases, these prime contractors were also prime contractors or 
subcontractors for other Recovery Act funded projects. Activities 
conducted by these contractors included projects such as highway 
repaving, interstate resurfacing, and bridge replacement. To meet the 
reporting requirements, a number of prime contractors we visited 
developed data systems to collect required project information from the 
subcontractors. In some cases, we also found that prime contractors 
reinforced the reporting requirements by including the requirements in 
their contracts with subcontractors, providing contractors with the 
necessary leverage to help ensure compliance with the reporting 
requirements. Appendix I details recipient reporting examples for 
contractors in Georgia and Massachusetts. 

FHWA has taken several steps to help ensure the reliability of the 
information contained in RADS. First, FHWA compared information states 
recorded in RADS to the information states submitted to 
Federalreporting.gov to identify inconsistencies or discrepancies. 
Second, as part of an ongoing data reliability process, FHWA monitors 
select fields in RADS, such as number of projects, types of projects, 
and where projects are located, and performs data validation and 
reasonableness tests. For example, it checks if a rate of payment in 
dollars per hour is too high or too low. When potential issues are 
identified, FHWA division offices work with the state department of 
transportation or central office to make necessary changes. 

For this round of recipient reporting, FHWA used an automated process 
to review all of the reports filed by recipients. These automated 
reviews included various data validation and reasonableness checks. For 
example, FHWA checked whether the range of FTEs reported were within 
its own economic estimates. For any reports that were out of range, 
FHWA would comment on these reports. As described earlier, only 
recipients could make changes to the data. In making a comment, FHWA 
let the recipient know there was potential concern with the record. The 
recipient then had the opportunity to either change or explain the 
comment raised by FHWA. According to FHWA officials, they reviewed 100 
percent of more than 7,000 reports submitted by recipients of Recovery 
Act highway funds and found that the final submissions were generally 
consistent with department data. Although there were problems of 
inconsistent interpretation of the guidance, the reporting process went 
well for highway projects. 

Education Projects: 

Education has engaged in numerous efforts to facilitate jobs reporting 
by states[Footnote 23] and local educational agencies (LEA). States and 
LEAs have also taken action to collect and report jobs data and to 
ensure data quality. Despite these efforts, state and local officials 
we spoke with raised some concerns about the quality of jobs data 
reported in October 2009, such as insufficient time to incorporate 
updated guidance on estimating job counts. To address these concerns, 
Education and many state officials we interviewed said they plan to 
take steps to improve the reporting and data quality processes before 
the next reports are due in January 2010. Our review focused on the 
State Fiscal Stabilization Fund, as well as Recovery Act grants made 
for the Elementary and Secondary Education Act of 1965, Title I, Part A 
and for the Individuals with Disabilities Education Act, Part B. To 
collect this information, we interviewed Education officials and 
officials in 10 states--Arizona, California, Colorado, Florida, 
Georgia, Illinois, Massachusetts, New Jersey, New York, and North 
Carolina--the District of Columbia, and 12 LEAs, including a mix of 
LEAs in urban and rural areas. States were selected from the 16 states 
and the District of Columbia in which we conduct bi-monthly reviews of 
the use of Recovery Act funds as mandated by the Recovery Act. We also 
reviewed federal and state guidance and other documentation. 

Education's efforts to facilitate jobs reporting by states and LEAs 
include coordinating with OMB, providing guidance and technical 
assistance to states and LEAs, and reviewing the quality of the jobs 
data reported. Education has coordinated its efforts regarding 
recipient reporting with OMB in a number of ways, including 
participating in cross-agency workgroups and clearing its guidance 
materials with OMB prior to disseminating them. On August 10, 2009, 
Education hosted a web-based technical assistance conference on 
reporting requirements that included information on OMB's guidance on 
estimating and reporting jobs data. On September 11, the department 
issued guidance specifically related to estimating and reporting jobs 
created or retained by states and LEAs receiving Recovery Act grants. 
[Footnote 24] Education updated its jobs guidance and hosted another 
web-based technical assistance conference on September 21, providing 
detailed instructions to states and LEAs on a range of topics, such as 
how to estimate the number of hours created or retained for a teacher 
who works less than 12 months in a year. In addition, according to 
Education officials, the department developed and implemented a draft 
plan to review the jobs data that states and LEAs reported to 
Federalreporting.gov in October. This plan addresses the roles and 
responsibilities of several Education offices to assist with the data 
quality review throughout the 30-day reporting timeline (for example, 
Oct. 1 through Oct. 30, 2009).[Footnote 25] According to the plan, 
these responsibilities include continuous evaluation of recipient and 
subrecipient efforts to meet reporting requirements, as well as 
providing limited data quality reviews and notifying the recipient of 
the need to make appropriate and timely corrections. The plan says that 
reviewers are to conduct two types of data quality checks - an 
automated and a manual review. The automated review will validate 
various data elements for financial assistance against its grant 
management system, such as prime award numbers, recipient DUNS numbers, 
and amounts of awards. The manual review will identify outliers in 
certain data elements, such as whether the reported number of jobs 
created is reasonable. According to Education officials, upon their 
initial review of recipient reported data, the most common errors were 
relatively small--such as mistyped award numbers or incorrect award 
amounts--and were easily addressed and corrected during the agency 
review period. Department officials told us that they provided 
technical assistance to states and were able to have states correct the 
errors such that almost all of them were corrected before the October 
30 deadline. Furthermore, state officials generally provided positive 
feedback to the department for these efforts, according to Education 
officials. Education's Office of Inspector General (OIG) examined 
Education's process for reviewing the quality of recipient reported 
data and found that Education's data review process was generally 
adequate.[Footnote 26] The OIG's review determined that Education has 
established a process to perform limited data quality reviews intended 
to identify problems, such as questionable expenditure patterns or job 
estimates. OIG also acknowledged that Education developed a process to 
correct any issues that Education officials find by contacting the 
recipients who submitted the report. In addition, OIG noted that the 
department plans to review quarterly data at a state level to determine 
whether there are systemic problems with individual recipients and that 
Education plans to use the reported information as a management tool. 

State educational agencies (SEA) also have taken action to collect and 
report jobs data and to ensure data quality.[Footnote 27] State 
officials in Arizona, Massachusetts, New Jersey, and New York and 
officials in the District of Columbia told us that they adapted their 
existing data systems or created new ones to track and report jobs 
data. For example, Massachusetts Department of Education officials 
created an online quarterly reporting web site to collect jobs data 
from its LEAs and detailed information on personnel funded by Recovery 
Act grants. In addition, many SEA and LEA officials we spoke with 
reported taking steps to ensure data quality, such as pre-populating 
data fields (that is, inserting data, such as DUNS numbers, into the 
recipient reporting template for the LEAs), checking the reasonableness 
of data entered, and looking for missing data. In addition to tracking 
and reporting jobs data and taking steps to ensure data quality, SEA 
officials reported providing technical assistance, such as written 
guidance and Web-based seminars, that explain how LEAs should report 
job estimates. For example, California state officials had LEAs submit 
their data through a new web-based data reporting system and, prior to 
implementing the new system, provided written guidance and offered a 
web-based seminar to its LEAs. 

Despite efforts to ensure data quality, state and local officials we 
spoke with raised some concerns about the quality of jobs data reported 
in October 2009. For example, LEAs were generally required[Footnote 28] 
to calculate a baseline number of hours worked, which is a hypothetical 
number of hours that would have been worked in the absence of Recovery 
Act funds. LEA officials were to use this baseline number to determine 
the number of hours created or retained and to subsequently derive the 
number of FTEs for job estimates. Each LEA was responsible for deriving 
its own estimate. New Jersey state officials we interviewed told us 
that it was likely that LEAs used different methods to develop their 
baseline numbers, and as a result, LEAs in the same state may be 
calculating FTEs differently. (See appendix II for a complete 
description of the calculations used to determine baseline number of 
hours worked, number of hours created or retained, and FTEs for jobs 
created or retained). According to Illinois state officials, some of 
their LEAs had double-counted the number of positions, attributing the 
positions to both state fiscal year 2009 (which ended on June 30, 2009) 
and fiscal year 2010 (beginning July 1, 2009), in part because the 
reporting period covered both of the state's fiscal years. Also, 
according to Illinois officials, other school districts estimated that 
zero positions were attributable to the Recovery Act. In those cases, 
LEA officials received Recovery Act funds before finalizing staff lay- 
offs. Since they had not officially laid off any staff, Illinois 
officials told us that LEA officials were unsure as to whether those 
jobs would count as "jobs saved" and believed it best to report that no 
jobs had been saved because of Recovery Act funding. Illinois officials 
told us that Education reviewed Illinois' data, but did not ask them to 
make any corrections, but instead asked the state to disaggregate the 
job estimates by type of position, such as teachers and administrators. 
Also, one LEA official from New York reported that he did not have 
enough time to conduct the necessary data quality checks he wanted to 
perform. Education officials acknowledged that many state and local 
officials reported various challenges in understanding the instructions 
and methodology that Education suggested they use to calculate job 
estimates.[Footnote 29] According to Education officials, when states 
contacted the department to report these problems, Education officials 
provided technical assistance to resolve the state's specific issues. 

States faced challenges due to the timing of guidance or changes in 
guidance on how to estimate jobs attributable to the Recovery Act, 
according to Education officials and several state officials we 
interviewed. For example, Colorado officials reported that, based on 
June 22, 2009 guidance from OMB, they believed that subrecipient 
vendors' jobs would be considered "indirect jobs" and therefore LEAs 
would not have to provide estimates of their vendors' jobs in their 
reports. Colorado officials told us they received guidance at 
Education's August technical assistance conference indicating that 
subrecipients (in this case, LEAs) are supposed to include vendor job 
estimates based on those jobs directly funded by Recovery Act grants. 
However, Education's guidance did not clearly distinguish between 
direct and in-direct vendor jobs, according to state officials, making 
it difficult for LEAs to determine which vendor jobs to include in 
their section 1512 reports. State officials also reported receiving 
further guidance on estimating jobs from Education on September 15 and 
attending a related technical assistance conference on September 21. On 
September 16, the Colorado SEA issued guidance stating that LEAs would 
be responsible for including vendor jobs in the job estimates they 
would be reporting. (Colorado's LEA reports were due to the SEA on 
September 25, because the SEA was required to submit its data to the 
state controller's office on September 29 for centralized reporting.) 
Also, officials in California--where LEAs had to report to the SEA on 
September 23--said they were not notified until Education's September 
21 conference that all LEAs that received Recovery Act funds had to 
register in the Central Contractor Registration. They told us that this 
contradicted previous guidance from Education and would have required 
LEAs to register within 2 days to meet their state's September 23 
deadline. California officials advised federal officials that the state 
would implement this requirement for the second quarterly reporting 
period. 

Education officials and officials in two states mentioned actions that 
might improve the reporting and data quality processes before the next 
reports are due in January 2010. Education officials suggested a number 
of possible changes in Federalreporting.gov, such as allowing Education 
to pre-populate some basic state data, such as grant award numbers and 
amounts, would decrease the workload for states and help avoid some 
technical errors. Also, in response to problems such as LEAs counting 
jobs in two fiscal years, Education plans to provide more guidance in 
early December 2009 to states on calculating job estimates. At the 
state level, officials in Georgia reported plans to make changes to the 
state's processes, such as adding internal edit checks so that those 
who enter the data will have to make corrections as part of the data 
entry process. Also, Illinois has created an office to work with state 
agencies to improve their data reporting processes, according to a 
state official. The state also plans to build in more checks to its 
review of agency data, for example, a check that would compare jobs 
data against existing employment data to confirm that districts are not 
reporting more positions than exist in the district. 

GAO Will Continue to Follow These Issues and Highlight Concerns in 
Subsequent Reports: 

As recipient reporting moves forward, we will continue to review the 
processes that federal agencies and recipients have in place to ensure 
the completeness and accuracy of data, including reviewing a sample of 
recipient reports across various Recovery Act programs to assure the 
quality of the reported information. As existing recipients become more 
familiar with the reporting system and requirements, these issues may 
become less significant; however, communication and training efforts 
will need to be maintained and in some cases expanded as new recipients 
of Recovery Act funding enter the system. In addition to our oversight 
responsibilities specified in the Recovery Act, we are also reviewing 
how several federal agencies collect information and provide it to the 
public for selected Recovery Act programs, including any issues with 
the information's usefulness. Our subsequent reports will also discuss 
actions taken on the recommendations in this report and will provide 
additional recommendations, as appropriate. 

Recommendations for Executive Action: 

We are making two recommendations to the Director of OMB. To improve 
the consistency of FTE data collected and reported, OMB should continue 
to work with federal agencies to increase recipient understanding of 
the reporting requirements and application of the guidance. 
Specifically, OMB should: 

* clarify the definition and standardize the period of measurement for 
FTEs and work with federal agencies to align this guidance with OMB's 
guidance and across agencies, 

* given its reporting approach consider being more explicit that "jobs 
created or retained" are to be reported as hours worked and paid for 
with Recovery Act funds, and: 

* continue working with federal agencies and encourage them to provide 
or improve program specific guidance to assist recipients, especially 
as it applies to the full-time equivalent calculation for individual 
programs. 

OMB should work with the Recovery Board and federal agencies to 
reexamine review and quality assurance processes, procedures, and 
requirements in light of experiences and identified issues with this 
round of recipient reporting and consider whether additional 
modifications need to be made and if additional guidance is warranted. 

Despite Limitations, Economic Methods and Recipient Reports Together 
Can Provide Insight into the Employment Effects of Fiscal Stimulus: 

The jobs data reported by recipients of Recovery Act funds provide 
potentially useful information about a portion of the employment effect 
of the act. At this point, due to issues in reporting and data quality 
including uncertainty created by varying interpretations of the 
guidance on FTEs, we cannot draw a conclusion about the validity of the 
data reported as a measure of the direct employment effect of spending 
covered by the recipient reports. Even after data quality issues are 
addressed, these data will represent only a portion of the employment 
effect. Beyond the jobs that are reported, further rounds of indirect 
and induced employment gains result from government spending. The 
Recovery Act also includes entitlement spending and tax benefits, which 
themselves create employment. Therefore, both the data reported by 
recipients and other macroeconomic data and methods are necessary to 
understand the overall employment effects of the stimulus. 

Economists will use statistical models to estimate a range of potential 
effects of the stimulus program on the economy. In general, the 
estimates are based on assumptions about the behavior of consumers, 
business owners, workers, and state and local governments. Against the 
background of these assumptions, themselves based on prior research, 
the effects of different policies can be estimated. Any such estimate 
is implicitly a comparison between alternative policies. The 
reliability of any alternative scenario that is constructed depends on 
its underlying assumptions and the adequacy of evidence in support of 
those assumptions, as well as on the accuracy of the data that form the 
basis for what is observed and on how well the model reflects actual 
behavior. 

In the broadest terms, economic research using macroeconomic models 
suggests general rules of thumb for approximating the job impact and 
the GDP increase for a given amount of stimulus spending. In 
constructing their estimates of the employment impacts of the act, CEA 
observed that a one percent increase in GDP has in the past been 
associated with an increase in employment of approximately 1 million 
jobs, about three quarters of 1 percent of national employment. 
Similarly, CBO economists have assumed that a one percent increase in 
output generates somewhere between 600,000 and 1.5 million jobs. As a 
result, projections of the employment impact of the Recovery Act can be 
generated from macroeconomic models that estimate output, providing the 
basis for estimates of changes in employment. 

CEA estimates of the employment effects of the Recovery Act have been 
based on statistical projections and allocations using historical 
relationships. In January 2009, the incoming administration projected 
the anticipated effects of fiscal stimulus on output and employment in 
the economy, specifying a prototypical spending package of tax cuts, 
payments to individuals, and direct spending by federal and state 
government. The effects of such additional spending on output (GDP) 
were projected using multipliers, values based on historical experience 
that estimate the output change per unit of different types of changes 
in government spending. These output increases were translated into 
employment effects using a rule of thumb, again based on history, that 
a 1 percent rise in GDP yields 1 million jobs. 

The incoming administration's January 2009 analysis of a prototypical 
stimulus package found that it would be expected to increase GDP by 3.7 
percent and increase jobs by 3,675,000 by the fourth quarter of 2010. 
The analysis compared the unemployment rate with and without the 
stimulus. At that time, the unemployment rate for 2009 was projected to 
be 8 percent with a stimulus and closer to 9 percent without. In May 
2009, CEA reported on the anticipated employment effects of the actual 
Recovery Act as passed by Congress and signed into law by the 
President. That analysis was consistent with the January projections 
that the Recovery Act (which was deemed to closely resemble the 
prototypical package earlier assumed) would result in approximately 3.5 
million jobs saved or created by the end of 2010, compared to the 
situation expected to exist in the absence of the act. Later, when the 
actual unemployment rate rose beyond 9 percent, the administration 
acknowledged that its earlier projections of unemployment were too low 
but asserted that, without the Recovery Act, the rate would have been 
even higher than observed. 

In September 2009 CEA reported on the effects of Recovery Act spending 
through the end of August. It noted that statistical analysis of actual 
economic performance compared to that which might have been expected in 
the absence of the Recovery Act suggested that the Recovery Act had 
added "roughly" 2.3 percentage points to GDP in the second quarter and 
was likely to add even more in the third. Translating that output gain 
into employment, CEA surmised that employment in August was 1 million 
jobs higher than it would have been without the act. 

The recipient reports are not estimates of the impact of the Recovery 
Act, although they do provide a real-time window on the results of 
Recovery Act spending. Recipients are expected to report accurately on 
their use of funds; what they are less able to say is what they would 
have done without the benefit of the program. For any disbursement of 
federal funds, recipients are asked to report on the use of funds to 
make purchases from business and to hire workers. These firms and 
workers spend money to which they would not otherwise have had access. 
Recipients could not be expected to report on the expansionary effects 
of their use of funds, which could easily be felt beyond local, state, 
or even national boundaries. Neither the recipients nor analysts can 
identify with certainty the impact of the Recovery Act because of the 
inability to compare the observed outcome with the unobserved, 
counterfactual scenario (in which the stimulus does not take place). At 
the level of the national economy, models can be used to simulate the 
counterfactual, as CEA and others have done. At smaller scales, 
comparable models of economic behavior either do not exist or cover 
only a very small portion of all the activity in the macroeconomy. 

The effect of stimulus on employment depends on the behavior of the 
recipient of aid. For consumers, it depends on the extent to which 
their total spending increases. For business firms, it depends on the 
increase, if any, in their purchases from other business firms or their 
payrolls. For state and local governments, it is the increase in their 
purchases of goods and services and their own employment rolls. Within 
any given group of recipients, choices to spend or save will vary. For 
example, a consumer with a large credit card balance may use a tax cut 
to pay down the balance or save more rather than increasing spending. 
Given that the personal savings rate fell to essentially zero before 
the recession, households may well choose to rebuild savings rather 
than spend. A business firm might not see additional capital spending 
or hiring as advantageous. A state government might decide to bolster 
its reserves where permitted under law rather than increase its outlays 
or cut its taxes. In each case, the strength of the program as 
immediate stimulus is weakened to the extent that all funds are not 
spent. 

The extent to which the initial spending reverberates throughout the 
economy is summarized by a multiplier, a measure of the cumulative 
impact on GDP over time of a particular type of spending or tax cut. 
The resulting change in output translates into a change in employment. 
In the context of the Recovery Act recipient reports, the output and 
employment effects will likely vary with the severity of the economic 
downturn in a recipient's location (as reflected by distress in labor 
markets and the fiscal positions of governments), and the amount of 
funds received by the recipient. The nature of the projects or 
activities to which the recipient applies its funds also matters, 
whether the projects use labor intensively and whether those who are 
hired will themselves spend or save their earnings. 

Potential Effect of Different Types of Fiscal Stimulus: 

Economists use computer models of the U.S. economy with historical data 
on employment, GDP, public spending, taxes, and many other factors to 
study the effects of monetary (e.g., changes in interest rates) and 
fiscal policies (e.g., changes in government taxing and spending) 
designed to affect the trajectory of the economy. In general, a fiscal 
stimulus program like the Recovery Act is aimed at raising aggregate 
demand - the spending of consumers, business firms, and governments. 
This may be accomplished by means of tax cuts, grants-in-aid, or direct 
Federal spending. In response, the recipients may purchase more goods 
and services than they would have otherwise. This could lead to 
governments and business firms refraining from planned dismissal of 
employees or to hiring additional workers. The stimulus may lead to an 
overall, net increase in national employment and economic output. 
Models of the nation's economy can provide estimates of changes in GDP 
and employment that result from changes in monetary or fiscal policies. 
In assessing the effects of fiscal policies such as additional 
government spending or tax cuts on GDP, macroeconomic models can be 
used to estimate "multipliers," which represent the cumulative impact 
on GDP over time of a particular type of spending or tax cut. 
Multipliers translate the consequences of a change in one variable, 
such as in the demand for goods and services brought about by economic 
stimulus, on other variables, such as the supply of those goods and 
services and employment, taking into account "ripple effects" that 
occur throughout the economy. 

The size of the multiplier depends on the extent to which changes in 
additional government spending or revenue translates into changes in 
spending by recipients and beneficiaries of the additional spending. 
Spending increases the multiplier, and saving reduces it. The 
multiplier is also larger when there is slack in the economy 
(unemployed persons and idle productive capacity). Also, the 
expansionary effects of government spending are greater when stimulus 
funds are borrowed rather than raised by taxation. Finally, the 
multiplier effect in the U.S. will be greater to the extent that new 
spending, whether by government or individuals, is devoted to 
domestically-produced goods and services. 

In general, macroeconomic models and estimated multipliers can provide 
insights on the potential effect of different types of public spending. 
Because of the limited historical experience with fiscal stimulus of 
the magnitude of the Recovery Act, there is uncertainty about the 
extent to which the multipliers estimated using historical data about 
the effect of previous business cycles will accurately reflect the 
stimulus effect this time around. Economic research, however, has 
developed a basis for constructing reasonable ranges of values. In 
projecting the anticipated effect of the Recovery Act on national 
output, the CBO grouped the act's provisions according to the size of 
the multiplier--that is, the magnitude of the effect of a particular 
provision's spending on GDP (see table 7). Drawing on analyses based on 
past experience with the results of government spending, CBO has 
identified a range of 1.0 to 2.5 for multipliers. For example, a 
multiplier of 1.0 means a dollar of stimulus financed by borrowing 
results in an additional dollar of GDP. CBO assumes larger multipliers 
for grants to state and local governments for infrastructure spending, 
and lower values--0.7 to 1.9--for transfers not related to 
infrastructure investment.[Footnote 30] Figure 5 shows the distribution 
of Recovery Act funds by multiplier. 

Table 7: Estimated Multipliers for Recovery Act Spending and Tax 
Expenditures: 

Category: Purchases of goods and services by federal government; 
Estimated policy multiplier: High: 2.5; 
Estimated policy multiplier: Low: 1. 

Category: Transfers to state and local governments for infrastructure; 
Estimated policy multiplier: High: 2.5; 
Estimated policy multiplier: Low: 1. 

Category: Transfers to state and local governments for other than 
infrastructure; 
Estimated policy multiplier: High: 1.9; 
Estimated policy multiplier: Low: 0.7. 

Category: Transfers to persons; 
Estimated policy multiplier: High: 2.2; 
Estimated policy multiplier: Low: 0.8. 

Category: One-time payments to retirees; 
Estimated policy multiplier: High: 1.2; 
Estimated policy multiplier: Low: 0.2. 

Category: 2-year tax cuts for lower-and middle-income people; 
Estimated policy multiplier: High: 1.7; 
Estimated policy multiplier: Low: 0.5. 

Category: 1-year tax cuts for higher income people; 
Estimated policy multiplier: High: 0.5; 
Estimated policy multiplier: Low: 0.1. 

Category: Extension of first-time homebuyer credit; 
Estimated policy multiplier: High: 1.0; 
Estimated policy multiplier: Low: 0.2. 

Category: Tax provisions for businesses primarily affecting cash flow; 
Estimated policy multiplier: High: 0.4; 
Estimated policy multiplier: Low: 0. 

Source: CBO. 

[End of table] 

Figure 5: Composition of Recovery Act Outlays by Jobs Multiplier 
Category: 

[Refer to PDF for image: illustration] 

Share of Recovery Act by policy multiplier categories: 

Payments to individuals: 

Payments to retirees: 2%; 
Payments to individuals: 13%; 

Tax relief: 

First-time home buyer tax credit: 1%; 
Business tax credits: 3%; 
Higher-income tax cuts: 9%; 
Lower- and middle-income tax cuts: 21%; 

Other: 
Other: 7%; 

Spending: 

Transfers to states and localities for infrastructure: 6%; 
Purchases by federal government: 11%; 
Transfers to states and localities, noninfrastructure: 27%. 

Total: $787 billion. 

Source: CBO. 

[End of figure] 

State Labor Market Conditions Will Affect Results of Recovery Act 
Spending: 

The employment effects of Recovery Act funds will likely vary with the 
strength of the labor market in a recipient's location. Recipients 
located in areas where labor markets are weak, that is, where 
unemployment is high, may find it easier to hire people and may be able 
to do so at lower wages than those located in areas where the recession 
has had little effect on labor markets. Consequently, recipients 
located in areas with weak labor markets may be able to employ more 
people than those located in areas with strong labor markets, all else 
being equal. 

The percentage of the nation's labor force that is unemployed has 
reached a level not seen in decades. For example, the unemployment rate 
reached 10.2 percent in October 2009, its highest rate since April 
1983. The national unemployment rate was 4.9 percent in December 2007, 
the month that marked the end of the last business cycle and the 
beginning of the current recession. In general, the unemployment rate 
rises and falls over the course of the business cycle, generally 
increasing during a recession and decreasing during an expansion. 
Cyclical changes in the national unemployment rate reflect changes in 
state unemployment rates. State unemployment rates vary over time in 
much the same way that the national unemployment rate varies-- 
increasing during recessions, decreasing during expansions, but 
changing direction at different times. 

Estimates of current labor market strength, as measured by the 
unemployment rate, differ across states. Figure 6 ranks states 
according to the most recent available unemployment data--September 
2009. While the national unemployment rate at the time was 9.8 percent, 
state unemployment rates ranged from a minimum of 4.2 percent in North 
Dakota to a maximum of 15.3 percent in Michigan. Twenty-seven states 
had unemployment rates in September 2009 that were less than the 
national unemployment rate by one percentage point or more, and nine 
states and the District of Columbia had unemployment rates that 
exceeded the national unemployment rate by one percentage point or 
more, and 14 states had unemployment rates that were within one 
percentage point of the national unemployment rate. 

Figure 6: State Unemployment Rates, September 2009: 

[Refer to PDF for image: horizontal bar graph] 

State: North Dakota; 
Unemployment rate, September 2009: 4.2%. 

State: South Dakota; 
Unemployment rate, September 2009: 4.8%. 

State: Nebraska; 
Unemployment rate, September 2009: 4.9%. 

State: Utah; 
Unemployment rate, September 2009: 6.2%. 

State: Iowa; 
Unemployment rate, September 2009: 6.7%. 

State: Oklahoma; 
Unemployment rate, September 2009: 6.7%. 

State: Vermont; 
Unemployment rate, September 2009: 6.7%. 

State: Virginia; 
Unemployment rate, September 2009: 6.7%. 

State: Montana; 
Unemployment rate, September 2009: 6.7%. 

State: Wyoming; 
Unemployment rate, September 2009: 6.8%. 

State: Kansas; 
Unemployment rate, September 2009: 6.9%. 

State: Colorado; 
Unemployment rate, September 2009: 7%. 

State: Arkansas; 
Unemployment rate, September 2009: 7.1%. 

State: Maryland; 
Unemployment rate, September 2009: 7.2%. 

State: Hawaii; 
Unemployment rate, September 2009: 7.2%. 

State: New Hampshire; 
Unemployment rate, September 2009: 7.2%. 

State: Minnesota; 
Unemployment rate, September 2009: 7.3%. 

State: Louisiana; 
Unemployment rate, September 2009: 7.4%. 

State: New Mexico; 
Unemployment rate, September 2009: 7.7%. 

State: Texas; 
Unemployment rate, September 2009: 8.2%. 

State: Delaware; 
Unemployment rate, September 2009: 8.3%. 

State: Wisconsin; 
Unemployment rate, September 2009: 8.3%. 

State: Connecticut; 
Unemployment rate, September 2009: 8.4%. 

State: Alaska; 
Unemployment rate, September 2009: 8.4%. 

State: Maine;
Unemployment rate, September 2009: 8.5%. 

State: Pennsylvania; 
Unemployment rate, September 2009: 8.8%. 

State: Idaho; 
Unemployment rate, September 2009: 8.8%. 

State: New York; 
Unemployment rate, September 2009: 8.9%. 

State: West Virginia; 
Unemployment rate, September 2009: 8.9%. 

State: Arizona; 
Unemployment rate, September 2009: 9.1%. 

State: Mississippi; 
Unemployment rate, September 2009: 9.2%. 

State: Massachusetts; 
Unemployment rate, September 2009: 9.3%. 

State: Washington; 
Unemployment rate, September 2009: 9.3%. 

State: Missouri; 
Unemployment rate, September 2009: 9.5%. 

State: Indiana; 
Unemployment rate, September 2009: 9.6%. 

State: New Jersey; 
Unemployment rate, September 2009: 9.8%. 

State: Georgia; 
Unemployment rate, September 2009: 10.1%. 

State: Ohio; 
Unemployment rate, September 2009: 10.1%. 

State: Illinois; 
Unemployment rate, September 2009: 10.5%. 

State: Tennessee; 
Unemployment rate, September 2009: 10.5%. 

State: Alabama; 
Unemployment rate, September 2009: 10.7%. 

State: North Carolina; 
Unemployment rate, September 2009: 10.8%. 

State: Kentucky; 
Unemployment rate, September 2009: 10.9%. 

State: Florida; 
Unemployment rate, September 2009: 11%. 

State: District of Columbia; 
Unemployment rate, September 2009: 11.4%. 

State: Oregon; 
Unemployment rate, September 2009: 11.5%. 

State: South Carolina; 
Unemployment rate, September 2009: 11.6%. 

State: California; 
Unemployment rate, September 2009: 12.2%. 

State: Rhode Island; 
Unemployment rate, September 2009: 13%. 

State: Nevada; 
Unemployment rate, September 2009: 13.3%. 

State: Michigan; 
Unemployment rate, September 2009: 15.3%. 

Source: GAO analysis of U.S. Bureau of Labor Statistics data. 

Note: State unemployment rates are seasonally adjusted state 
unemployment rates for September 2009 from the Local Area Unemployment 
Statistics produced by the U.S. Bureau of Labor Statistics. Estimates 
of state employment rates for September 2009 are preliminary. 

[End of figure] 

Labor markets in every state weakened over the course of the recession, 
but the degree to which this has occurred varies widely across states. 
Figure 7 shows the geographic distribution of the magnitude of the 
recession's impact on unemployment as measured by the percent change in 
unemployment between December 2007 and September 2009. Alabama's 
unemployment rate has grown the most over this period, increasing by 
about 182 percent. Other states with relatively high unemployment rate 
growth over this period include Florida, Hawaii, Wyoming, Idaho, and 
Nevada, all of which have seen their unemployment rates increase by 
more than 120 percent. At the other end of the spectrum are states like 
Minnesota, Mississippi, Arkansas, North Dakota, and Alaska. 
Unemployment rates in these states have grown by less than 60 percent 
between December 2007 and September 2009. Alaska's unemployment rate 
growth during this period has been the slowest, measuring only about 33 
percent. 

Figure 7: State Unemployment Rate Growth during Recession (Percent 
Increase): 

[Refer to PDF for image: U.S. map and accompanying data] 

States in the bottom third of the unemployment rate growth 
distribution: 

Alaska: 33.3%; 
Arkansas: 44.9%; 
Connecticut: 71.4%; 
Colorado: 70.7%; 
Iowa: 76.3%; 
Kansas: 68.3%; 
Maine: 80.9%; 
Minnesota: 52.1%; 
Mississippi: 50.8%; 
Missouri: 79.2%; 
Montana: 76.3%; 
Nebraska: 81.4%; 
North Dakota: 35.5%; 
Ohio: 74.1%; 
South Dakota: 77.8%; 
Vermont: 67.5%; 
Wisconsin: 84.4%. 

States in the middle third of the unemployment rate growth 
distribution: 

District of Columbia: 96.6%; 
Georgia: 98%; 
Illinois: 87.5%; 
Kentucky: 98.2%; 
Louisiana: 89.7%; 
Maryland: 10%; 
Massachusetts: 106.7%; 
New Hampshire: 105.7%; 
New York: 93.5%; 
Oklahoma: 86.1%; 
Pennsylvania: 91.3%; 
South Carolina: 100%; 
Tennessee: 98.1%; 
Texas: 86.4%; 
Utah: 106.7%; 
Virginia: 103%; 
Washington: 102.2%. 

States in the top third of the unemployment rate growth distribution: 

Alabama: 181.6%; 
Arizona: 111.6%; 
California: 106.8%; 
Delaware: 118.4%. 
Florida: 129.2%; 
Hawaii: 132.3%; 
Idaho: 114.4%; 
Indiana: 113.3%; 
Michigan: 109.6%; 
Nevada: 155.8%; 
New Jersey: 117.8%; 
New Mexico: 113.9%; 
North Carolina: 116%; 
Oregon: 117%; 
Rhode Island: 116.7%; 
West Virginia: 107%; 
Wyoming: 134.5%. 

Source: Copyright © Corel Corp. All rights reserved (map); GAO analysis 
of U.S. Bureau of Labor Statistics data. 

Note: State unemployment rate growth is the percent change in the 
seasonally adjusted state unemployment rate from December 2007 to 
September 2009. 

[End of figure] 

While the recession has weakened labor markets in every state, those in 
some states may be showing signs of recovering. Table 8 lists the 
states for which unemployment rates in September 2009 are less than 
their peak unemployment rates. The unemployment rate peaked in some 
states as early as May 2009. In several additional states, the 
unemployment rate was higher in June or July than it was in September. 
Although unemployment rates in these states may start to increase again 
in the future, for the moment it seems that labor markets in these 
states are getting stronger. 

Table 8: State Unemployment Rates, Peak and Most Recent: 

State: Minnesota; 
Unemployment rate (percent): Sept 2009: 7.3; 
Unemployment rate (percent): Peak: 8.4; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -13.1; 

State: Colorado; 
Unemployment rate (percent): Sept 2009: 7.0; 
Unemployment rate (percent): Peak: 7.8; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -10.3; 

State: Indiana; 
Unemployment rate (percent): Sept 2009: 9.6; 
Unemployment rate (percent): Peak: 10.7; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -10.3; 

State: Ohio; 
Unemployment rate (percent): Sept 2009: 10.1; 
Unemployment rate (percent): Peak: 11.2; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -9.8; 

State: Vermont; 
Unemployment rate (percent): Sept 2009: 6.7; 
Unemployment rate (percent): Peak: 7.4; 
Unemployment rate (percent): Peak month: May; 
Unemployment rate (percent): Percent change: -9.5; 

State: Kansas; 
Unemployment rate (percent): Sept 2009: 6.9; 
Unemployment rate (percent): Peak: 7.5; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -8.0; 

State: Wisconsin; 
Unemployment rate (percent): Sept 2009: 8.3; 
Unemployment rate (percent): Peak: 9.0; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -7.8; 

State: Oregon; 
Unemployment rate (percent): Sept 2009: 11.5; 
Unemployment rate (percent): Peak: 12.2; 
Unemployment rate (percent): Peak month: May; 
Unemployment rate (percent): Percent change: -5.7; 

State: Virginia; 
Unemployment rate (percent): Sept 2009: 6.7; 
Unemployment rate (percent): Peak: 7.1; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -5.6; 

State: Mississippi; 
Unemployment rate (percent): Sept 2009: 9.2; 
Unemployment rate (percent): Peak: 9.7; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -5.2; 

State: Louisiana; 
Unemployment rate (percent): Sept 2009: 7.4; 
Unemployment rate (percent): Peak: 7.8; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -5.1; 

State: Arkansas; 
Unemployment rate (percent): Sept 2009: 7.1; 
Unemployment rate (percent): Peak: 7.4; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -4.1; 

State: South Carolina; 
Unemployment rate (percent): Sept 2009: 11.6; 
Unemployment rate (percent): Peak: 12.1; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -4.1; 

State: South Dakota; 
Unemployment rate (percent): Sept 2009: 4.8; 
Unemployment rate (percent): Peak: 5.0; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -4.0; 

State: Tennessee; 
Unemployment rate (percent): Sept 2009: 10.5; 
Unemployment rate (percent): Peak: 10.8; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -2.8. 

State: Hawaii; 
Unemployment rate (percent): Sept 2009: 7.2; 
Unemployment rate (percent): Peak: 7.4; 
Unemployment rate (percent): Peak month: May; 
Unemployment rate (percent): Percent change: -2.7. 

State: Kentucky; 
Unemployment rate (percent): Sept 2009: 10.9; 
Unemployment rate (percent): Peak: 11.2; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -2.7. 

State: North Carolina; 
Unemployment rate (percent): Sept 2009: 10.8; 
Unemployment rate (percent): Peak: 11.1; 
Unemployment rate (percent): Peak month: May; 
Unemployment rate (percent): Percent change: -2.7. 

State: North Dakota; 
Unemployment rate (percent): Sept 2009: 4.2; 
Unemployment rate (percent): Peak: 4.3; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -2.3. 

State: West Virginia; 
Unemployment rate (percent): Sept 2009: 8.9; 
Unemployment rate (percent): Peak: 9.1; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -2.2. 

State: Nebraska; 
Unemployment rate (percent): Sept 2009: 4.9; 
Unemployment rate (percent): Peak: 5.0; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -2.0. 

State: Georgia; 
Unemployment rate (percent): Sept 2009: 10.1; 
Unemployment rate (percent): Peak: 10.3; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -1.9. 

State: Oklahoma; 
Unemployment rate (percent): Sept 2009: 6.7; 
Unemployment rate (percent): Peak: 6.8; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -1.5. 

State: Delaware; 
Unemployment rate (percent): Sept 2009: 8.3; 
Unemployment rate (percent): Peak: 8.4; 
Unemployment rate (percent): Peak month: June; 
Unemployment rate (percent): Percent change: -1.2. 

State: Maine; 
Unemployment rate (percent): Sept 2009: 8.5; 
Unemployment rate (percent): Peak: 8.6; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -1.2. 

State: Arizona; 
Unemployment rate (percent): Sept 2009: 9.1; 
Unemployment rate (percent): Peak: 9.2; 
Unemployment rate (percent): Peak month: July; 
Unemployment rate (percent): Percent change: -1.1. 

State: Idaho; 
Unemployment rate (percent): Sept 2009: 8.8; 
Unemployment rate (percent): Peak: 8.9; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -1.1. 

State: California; 
Unemployment rate (percent): Sept 2009: 12.2; 
Unemployment rate (percent): Peak: 12.3; 
Unemployment rate (percent): Peak month: August; 
Unemployment rate (percent): Percent change: -0.8. 

Source: GAO analysis of U.S. Bureau of Labor Statistics data. 

Note: Peak unemployment rates are the maximum employment rates since 
December 2007. Peak dates are the most recent month and year during 
which the unemployment rate was equal to its maximum value since 
December 2007. 

[End of table] 

State and Sectoral Employment Trends: 

Table 9 shows the change in employment between December 2007 and 
September 2009. Employment in Arizona, Florida, Georgia, Michigan, 
Nevada, and Oregon in September 2009 was over 7 percent lower than it 
was in December 2007 in each state. On the other hand, employment in 
Louisiana and South Dakota fell by less than two percent over the same 
period, and employment in Alaska, North Dakota, and the District of 
Columbia has increased during that time. 

Table 9: Change in Employment, December 2007 to September 2009: 

State: Alabama; 
Change in employment (1,000s): -118.1; 
Percent change in employment (percent): -5.9; 

State: Alaska; 
Change in employment (1,000s): 1.8; 
Percent change in employment (percent): 0.6; 

State: Arizona; 
Change in employment (1,000s): -267.7; 
Percent change in employment (percent): -10.0; 

State: Arkansas; 
Change in employment (1,000s): -37.7; 
Percent change in employment (percent): -3.1; 

State: California; 
Change in employment (1,000s): -988.9; 
Percent change in employment (percent): -6.5; 

State: Colorado; 
Change in employment (1,000s): -110.5; 
Percent change in employment (percent): -4.7; 

State: Connecticut; 
Change in employment (1,000s): -82.2; 
Percent change in employment (percent): -4.8; 

State: Delaware; 
Change in employment (1,000s): -26.1; 
Percent change in employment (percent): -6.0; 

State: D.C.; 
Change in employment (1,000s): 4.3; 
Percent change in employment (percent): 0.6; 

State: Florida; 
Change in employment (1,000s): -617.5; 
Percent change in employment (percent): -7.8; 

State: Georgia; 
Change in employment (1,000s): -316.1; 
Percent change in employment (percent): -7.6; 

State: Hawaii; 
Change in employment (1,000s): -36.9; 
Percent change in employment (percent): -5.9; 

State: Idaho; 
Change in employment (1,000s): -43.2; 
Percent change in employment (percent): -6.6; 

State: Illinois; 
Change in employment (1,000s): -356.5; 
Percent change in employment (percent): -6.0; 

State: Indiana; 
Change in employment (1,000s): -176.4; 
Percent change in employment (percent): -5.9; 

State: Iowa; 
Change in employment (1,000s): -45.7; 
Percent change in employment (percent): -3.0; 

State: Kansas; 
Change in employment (1,000s): -54.7; 
Percent change in employment (percent): -3.9; 

State: Kentucky; 
Change in employment (1,000s): -113.3; 
Percent change in employment (percent): -6.1; 

State: Louisiana; 
Change in employment (1,000s): -26.4; 
Percent change in employment (percent): -1.4; 

State: Maine; 
Change in employment (1,000s): -27.4; 
Percent change in employment (percent): -4.4; 

State: Maryland; 
Change in employment (1,000s): -78; 
Percent change in employment (percent): -3.0; 

State: Massachusetts; 
Change in employment (1,000s): -114.4; 
Percent change in employment (percent): -3.5; 

State: Michigan; 
Change in employment (1,000s): -416.2; 
Percent change in employment (percent): -9.8; 

State: Minnesota; 
Change in employment (1,000s): -132; 
Percent change in employment (percent): -4.8; 

State: Mississippi; 
Change in employment (1,000s): -54.4; 
Percent change in employment (percent): -4.7; 

State: Missouri; 
Change in employment (1,000s): -89.5; 
Percent change in employment (percent): -3.2; 

State: Montana; 
Change in employment (1,000s): -9.6; 
Percent change in employment (percent): -2.1. 

State: Nebraska; 
Change in employment (1,000s): -20; 
Percent change in employment (percent): -2.1. 

State: Nevada; 
Change in employment (1,000s): -110.5; 
Percent change in employment (percent): -8.5. 

State: New Hampshire; 
Change in employment (1,000s): -19.1; 
Percent change in employment (percent): -2.9. 

State: New Jersey; 
Change in employment (1,000s): -168.5; 
Percent change in employment (percent): -4.1. 

State: New Mexico; 
Change in employment (1,000s): -31.7; 
Percent change in employment (percent): -3.7. 

State: New York; 
Change in employment (1,000s): -213.2; 
Percent change in employment (percent): -2.4. 

State: North Carolina; 
Change in employment (1,000s): -250.3; 
Percent change in employment (percent): -6.0. 

State: North Dakota; 
Change in employment (1,000s): 5.2; 
Percent change in employment (percent): 1.4. 

State: Ohio; 
Change in employment (1,000s): -321.5; 
Percent change in employment (percent): -5.9. 

State: Oklahoma; 
Change in employment (1,000s): -31.1; 
Percent change in employment (percent): -2.0. 

State: Oregon; 
Change in employment (1,000s): -124.3; 
Percent change in employment (percent): -7.2. 

State: Pennsylvania; 
Change in employment (1,000s): -208; 
Percent change in employment (percent): -3.6. 

State: Rhode Island; 
Change in employment (1,000s): -29.7; 
Percent change in employment (percent): -6.1. 

State: South Carolina; 
Change in employment (1,000s): -100.2; 
Percent change in employment (percent): -5.1. 

State: South Dakota; 
Change in employment (1,000s): -4.4; 
Percent change in employment (percent): -1.1. 

State: Tennessee; 
Change in employment (1,000s): -157.6; 
Percent change in employment (percent): -5.6. 

State: Texas; 
Change in employment (1,000s): -240.2; 
Percent change in employment (percent): -2.3. 

State: Utah; 
Change in employment (1,000s): -64.3; 
Percent change in employment (percent): -5.1. 

State: Vermont; 
Change in employment (1,000s): -14.9; 
Percent change in employment (percent): -4.8. 

State: Virginia; 
Change in employment (1,000s): -125.6; 
Percent change in employment (percent): -3.3. 

State: Washington; 
Change in employment (1,000s): -126.9; 
Percent change in employment (percent): -4.3. 

State: West Virginia; 
Change in employment (1,000s): -25.1; 
Percent change in employment (percent): -3.3. 

State: Wisconsin; 
Change in employment (1,000s): -156.8; 
Percent change in employment (percent): -5.4. 

State: Wyoming; 
Change in employment (1,000s): -6.6; 
Percent change in employment (percent): -2.2. 

Source: GAO analysis of U.S. Bureau of Labor Statistics data. 

Note: Employment is total nonfarm seasonally adjusted employment among 
people age 16 and over from the Current Employment Statistics produced 
by the U.S. Bureau of Labor Statistics. 

[End of table] 

Employment has declined since December 2007, when the current recession 
began. However, some signs have appeared that the losses in employment 
are slowing. Job losses in October 2009 numbered 190,000. This number 
is about equal to average job losses of about 188,000 per month in 
August, September, and October 2009. The rate at which employment has 
declined over the past three months is thus lower than the rate at 
which it declined in May, June, and July 2009, when job losses averaged 
about 357,000 per month. The rate at which employment has declined over 
the past three months is thus also lower than the rate at which it 
declined between November 2008 and April 2009, when job losses averaged 
about 645,000 per month. 

The current employment contraction has been more pronounced in the 
goods-producing sector, in which employment fell by about 17 percent 
between December 2007 and October 2009, than the service-providing 
sector, in which employment fell by about three percent over the same 
period. The goods-producing sector includes the construction and 
manufacturing industries, in which employment has fallen by about 21 
percent and 15 percent, respectively, between December 2007 and October 
2009. The goods-producing sector also includes the mining and logging 
industry, which lost about 6 percent of its jobs during the same time. 
Service-providing industries include financial activities, information, 
professional and business services, and trade, transportation, and 
utilities, all of which had employment declines of more than six 
percent between December 2007 and October 2009. Employment declines in 
the leisure and hospitality industry were about three percent, and 
employment in education and health services increased by about 4 
percent at the same time. 

Fiscal Condition of States Will Affect the Results of Recovery Act 
Spending: 

The employment effects of Recovery Act funds allocated to state and 
local governments will also likely vary with their degree of fiscal 
stress, as well as with the factors mentioned above. Because recessions 
manifest in the form of lower output, employment, and income, among 
other things, reductions in output, employment, and income lead state 
and local governments to collect less tax revenue and at the same time 
cause households' demand for publicly provided goods and services to 
increase. State governments often operate under various constraints, 
such as balanced budget requirements, so they generally must react to 
lower tax revenues by raising tax rates, cutting publicly provided 
programs and services, or drawing down reserve funds, all but the last 
of which amplify recessionary pressure on households and businesses. 
Local governments must do the same unless they can borrow to make up 
for lost tax revenue. By providing funds to state and local 
governments, the Recovery Act intends to forestall, or at least 
moderate, their program and service cuts, reserves liquidation, and tax 
increases. 

In addition to the type of spending undertaken, the size of the 
multiplier and resultant employment effects will depend on the extent 
to which aid is not diverted to reserves. Generally speaking, states 
with weaker economies and finances will be more likely to spend 
Recovery Act dollars. States that may suffer little or no harm from a 
national downturn are less motivated to make full use of any federal 
assistance.[Footnote 31] Rather than increase spending, they may choose 
to cut taxes or, where permitted by law, add to their reserves. Tax 
cuts would have some simulative effect, but additions to reserves would 
reduce any multiplier effect. The increased FMAP available under the 
Recovery Act is for state expenditures for Medicaid services. However, 
the receipt of this increased FMAP may reduce the state share for the 
Medicaid programs. States are prohibited from using any funds directly 
or indirectly attributable to the increased FMAP for state rainy day 
funds,[Footnote 32] but states have reported using funds made available 
a result of the increased FMAP for a variety of purposes including 
offset of general fund deficits and tax revenue shortfall. 

The availability of reserves and the possibility of borrowing points 
out the difficulties of gauging the impact of federal policy by the 
observed timing of aid flows. The expectation of aid could encourage 
governments to draw more out of reserves or to borrow more than they 
would otherwise. The rationale is that the expected aid would replace 
the reserves or liquidate the new debt. In this way, the timing of aid 
could postdate the impact. Research on individual consumption has long 
wrestled with the problem of how expectations influence household 
decisions. State and local governments must also look forward in making 
fiscal decisions. 

The recession has substantially affected the states' fiscal conditions. 
In recessions, state and local governments are motivated to enact "pro- 
cyclical" measures that aggravate the downturn. Balanced budget 
requirements and other constraints cause them to reduce spending and 
raise taxes, generating what is called "fiscal drag." Federal 
assistance can reduce the need for such measures. In this way, the 
negative employment effects of fiscal drag can be precluded and 
existing jobs can be saved. With sufficient aid, it is possible for 
state and local governments to go beyond saving existing jobs to 
creating additional ones. However, there are likely to be limits to the 
abilities of governments to spend aid quickly enough to affect 
employment: 

The recession has substantially reduced states' and local governments' 
combined tax revenues. Figure 8 indicates that tax revenue collected in 
the second quarter of 2009 fell from the peak in the second quarter of 
2008 by more than $130 billion. 

Figure 8: State and Local Tax Receipts: 

[Refer to PDF for image: line graph] 

Date: 2001Q1: $1,118.9 billion. 

Date: 2001Q2: $1,123.46 billion. 

Date: 2001Q3: $1,088.79 billion. 

Date: 2001Q4: $1,094.02 billion. 

Date: 2002Q1: $1,093 billion. 

Date: 2002Q2: $1,088.49 billion. 

Date: 2002Q3: $1,118.67 billion. 

Date: 2002Q4: $1,122.77 billion. 

Date: 2003Q1: $1,116.59 billion. 

Date: 2003Q2: $1,113.86 billion. 

Date: 2003Q3: $1,154.36 billion. 

Date: 2003Q4: $1,173.33 billion. 

Date: 2004Q1: $1,179.45 billion. 

Date: 2004Q2: $1,182.97 billion. 

Date: 2004Q3: $1,207.02 billion. 

Date: 2004Q4: $1,232.96 billion. 

Date: 2005Q1: $1,258.66 billion. 

Date: 2005Q2: $1,269 billion. 

Date: 2005Q3: $1,278.64 billion. 

Date: 2005Q4: $1,296.05 billion. 

Date: 2006Q1: $1,321.62 billion. 

Date: 2006Q2: $1,330.83 billion. 

Date: 2006Q3: $1,325.32 billion. 

Date: 2006Q4: $1,329.09 billion. 

Date: 2007Q1: $1,350.59 billion. 

Date: 2007Q2: $1,354.45 billion. 

Date: 2007Q3: $1,355.69 billion. 

Date: 2007Q4: $1,364.35 billion. 

Date: 2008Q1: $1,364.74 billion. 

Date: 2008Q2: $1,377.03 billion. 

Date: 2008Q3: $1,357.16 billion. 

Date: 2008Q4: $1,304.99 billion. 

Date: 2009Q1: $1,272.21 billion. 

Date: 2009Q2: $1,238.1 billion. 

Source: GAO analysis of U.S. Bureau of Economic Analysis data. 

Note: State and local tax receipts are real state and local tax 
receipts in billions of 2009 dollars, seasonally adjusted at annual 
rates (the quarterly amount multiplied by four). 

[End of figure] 

State and local revenues are not likely to return to their previous 
levels until well after the recession has ended. After the 2001 
recession, tax receipts did not begin to recover until after second 
quarter of 2003, well after the 'official' end of the recession in 
fourth quarter of 2001. However, the fall in receipts after the second 
quarter of 2008 is dramatic. In a survey of the nation's state 
governments, the National Governors Association reported that outlays 
for current services provided through states' general funds decreased 
by 2.2 percent in fiscal year 2009, which ended in June 2009 for most 
states. Spending for fiscal year 2010 is projected to fall by 2.5 
percent. In light of average annual increases of five percent for total 
state and local government outlays, any decrease is a significant 
adjustment. 

Most states have some sort of requirement to balance operating budgets. 
However, most state governments are able to establish reserve funds. 
Maintenance of a baseline of five percent of annual outlays for a 
state's fund is regarded by state budget officers as prudent. A lower 
level could increase a state's borrowing costs. Since 2006 these funds 
have decreased. In the wake of the 2001 recession, according to an 
analyst at the Rockefeller Institute of Government, state governments 
in fiscal year 2002 drew as much as 4.8 percent of their revenues from 
fund balances.[Footnote 33] The National Governors Association reports 
that fund balances peaked in 2006 at $69 billion, at 11 percent of 
general fund expenditures. The funds declined to 9.1 percent by 2008 
and were estimated at 5.5 percent--$36.7 billion--in June 2009. 
However, by fiscal year 2010, these funds are projected to fall to 5.3 
percent of outlays. 

In addition, for 2009 there is variation in state government reserves. 
For example, 11 states had total reserves in excess of 10 percent of 
outlays, while others, such as California, had total reserves less than 
1 percent of outlays. This may be seen in figure 9. 

Figure 9: Total Year-End Balances as a Percentage of Expenditures, 
Fiscal Year 2009: 

[Refer to PDF for image: U.S. map and associated data] 

Less than one percent: 
Arizona: -4.6%; 
Arkansas: 0%; 
California: -2.5%; 
Kansas: 0.9%; 
Kentucky: 0.5%; 
Michigan: 0%; 
Rhode Island: 0.3%; 
Washington: -0.3%. 

1.0 percent to 4.9 percent: 
Alabama: 3.0%; 
Colorado: 2.0%; 
Florida: 4.5%; 
Hawaii: 2.6%; 
Illinois: 1.4%; 
Maine: 2.5%; 
Minnesota: 3.4%; 
New Hampshire: 3.3%; 
New Jersey: 2.3%; 
New York: 2.7%; 
Ohio: 4.7%; 
Pennsylvania: 1.9%; 
North Carolina: 2.7%; 
South Carolina: 2.5%; 
Virginia: 4.6%; 
Wisconsin: 1.5%. 

5.0 to 9.9 percent: 
Connecticut: 6.5%; 
Idaho: 7.2%; 
Indiana: 9.3%; 
Iowa: 9.8%; 
Maryland: 7.9%; 
Massachusetts: 5.3%; 
Mississippi: 7.3%; 
Missouri: 5.7%; 
Nevada: 5.1%; 
New Mexico: 9.5%; 
Oregon: 5.7%; 
South Dakota: 9.3%; 
Tennessee: 6.3%; 
Utah: 7.6%; 
Vermont: 5.2%. 

10 percent or more: 
Alaska: 108.4%; 
Delaware: 11.4%; 
Georgia: 12.4%; 
Louisiana: 17.5%; 
Montana: 17.6%; 
Nebraska: 25%; 
North Dakota: 55.3%; 
Oklahoma: 14.5%; 
Texas: 20.5%; 
West Virginia: 10.3%; 
Wyoming: 15.5%. 

Source: Copyright © Corel Corp. All rights reserved (map); GAO analysis 
of U.S. Bureau of Labor Statistics data. 

[End of figure] 

Diversity in the economic and fiscal conditions of the states and 
differences in the size and composition of Recovery Act funds they 
receive suggest that the potential for employment gains varies across 
states. We will continue work in this area, along with our other work 
on federal-state fiscal interactions. 

Agency Comments: 

In commenting on a draft of our report, OMB staff told us that OMB 
generally accepts the report's recommendations. It has undertaken a 
lessons learned process for the first round of recipient reporting and 
will generally address the report's recommendations through that 
process. 

We are sending copies of this report to the Office of Management and 
Budget and to the Departments of Education, Housing and Urban 
Development, and Transportation. The report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact J. Christopher Mihm or Susan Offutt at (202) 512-5500. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix III. 

Signed by: 

Gene L. Dodaro: 
Acting Comptroller General of the United States: 

List of Addressees: 

The Honorable Nancy Pelosi:
Speaker of the House of Representatives: 

The Honorable Robert C. Byrd:
President Pro Tempore of the Senate: 

The Honorable Harry Reid:
Majority Leader:
United States Senate: 

The Honorable Mitch McConnell:
Republican Leader:
United States Senate: 

The Honorable Steny Hoyer:
Majority Leader:
House of Representatives: 

The Honorable John Boehner:
Minority Leader:
House of Representatives: 

The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate: 

The Honorable Dave Obey:
Chairman:
The Honorable Jerry Lewis:
Ranking Member:
Committee on Appropriations:
House of Representatives: 

The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate: 

The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell E. Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives: 

[End of section] 

Appendix I: Calculating Full-Time Equivalent Data--Examples of Guidance 
and Challenges: 

The Office of Management and Budget (OMB) and federal agencies have 
provided wide-ranging guidance to states on how to report full-time 
equivalent (FTE) data--that is, jobs created or retained. OMB staff 
reported that questions on FTEs dominated the inquiries they fielded 
during the first round of recipient reporting, and recipients had 
various understandings of how to report an FTE. Following are selected 
examples of the challenges of reporting and calculating FTEs, as seen 
through public housing agencies and four states--California, Florida, 
Georgia, and Massachusetts. 

Public Housing Agencies Experienced Problems with the Process of 
Recipient Reporting and the FTE Calculation: 

As we reported in September 2009, the Department of Housing and Urban 
Development (HUD) is using two methods to satisfy reporting 
requirements for public housing agencies under the Recovery Act. First, 
OMB and the Recovery Act Board have created and manage [hyperlink, 
http://www.Federalreporting.gov] (Federalreporting.gov), a Web site 
where all Recovery Act recipients can report on the nature of projects 
undertaken with Recovery Act funds and on jobs created or retained. 
Second, HUD developed the Recovery Act Management and Performance 
System (RAMPS) in response to reporting requirements outlined in 
section 1609 of the Recovery Act.[Footnote 34] HUD officials said 
approximately 96 percent of housing agencies had successfully reported 
into Federalreporting.gov. Initial reports suggested a lower reporting 
rate, but this was due to a substantial number of housing agencies 
incorrectly entering values into certain identification fields, such as 
the award ID number, the awarding agency, or the type of funding 
received. HUD officials said that the system did not have validation 
measures in place to ensure the correct award ID numbers were entered. 
In addition, housing agencies could not edit the award ID number 
without submitting a new report. According to a HUD official, OMB 
initially classified reports that could not be matched with a federal 
agency as "orphaned." The HUD official told us HUD program and Recovery 
team staff reviewed reports submitted with nonmatching award ID numbers 
and OMB's list of reports that could not be matched to determine if 
they matched HUD awards. 

According to HUD officials, public housing agencies encountered 
challenges related to registration and system accessibility. For 
example, a HUD official said the registration process for 
Federalreporting.gov requires several steps such as obtaining a DUNS 
number, registering with the Central Contractor Registration (CCR) and 
obtaining a Federal Reporting Personal Identification Number (FRPIN). 
The HUD official told us these steps are necessary for validating the 
recipient reports because they ensure the appropriate points of contact 
at the appropriate organizations--in this case, public housing 
agencies--are reporting for each program. The Federalreporting.gov Web 
site states that each recipient's point of contact information is taken 
directly from the CCR and if an organization changes its point of 
contact information it will take 48 hours for Federalreporting.gov to 
receive the change and e-mail the FRPIN and temporary password to the 
new point of contact. According to the HUD official, a housing agency's 
contact information in CCR is sometimes outdated and the systems are 
often not updated in time for access to be correctly transferred. 
Additionally, one housing agency official reported he saved his data 
entry as a draft before being timed out of the system, but was unable 
to retrieve the data when he reentered the reporting Web site. A HUD 
official said in the future, HUD and OMB will need to improve the 
function of the system and the official said that they are working to 
ensure all housing agencies have access to the reporting systems. 

According to a HUD official, there was widespread misunderstanding by 
public housing agencies about OMB's methodology for calculating the 
number of jobs created or retained by the Recovery Act, in part because 
housing agencies are not familiar with reporting jobs information. In a 
few cases, we found that public housing agencies had reported the 
number of jobs created or retained into Federalreporting.gov without 
converting the number into full-time equivalents. For example, 
officials from one housing agency reported the number of people, by 
trade, who worked on Recovery Act related projects, but did not apply 
the full-time equivalent calculation outlined by OMB in the June 22 
reporting guidance. Additionally, officials from another public housing 
agency told us that they based the number of jobs they reported into 
Federalreporting.gov on letters from their contractors detailing the 
number of positions rather than full-time equivalents created as a 
result of their Recovery Act-funded projects. In another case, a 
housing agency official reported having difficulty locating guidance on 
calculating job creation. As a result, the housing agency may have 
underreported jobs data from an architectural firm providing design 
services for a Recovery Act window replacement project at a public 
housing complex. 

HUD officials cited the fact that OMB and HUD provided additional 
clarification and guidance close to the deadline for recipient 
reporting as a factor in housing agencies' confusion about the 
methodology for counting jobs. According to a HUD official, HUD was in 
discussions with OMB about finalizing and clarifying portions of the 
June 22, 2009, job guidance right up to the end of September. In early 
September, HUD posted the OMB guidance to its Web site and provided 
information by e-mail to housing agencies on registration for 
Federalreporting.gov, as well as links to Web seminars and training 
provided by OMB. HUD issued further guidance to public housing agencies 
by e-mail on September 25, 2009, approximately 2 weeks before the 
October 10, 2009, deadline for recipient reporting, providing templates 
and data dictionaries tailored to the Public Housing Capital Fund. The 
guidance also reiterated the recipient reporting responsibilities for 
public housing agencies. 

HUD officials told us they did not have enough time to translate some 
of the terminology into concrete terms that would be clearer to housing 
agency officials. For example, HUD posted a jobs calculator spreadsheet 
to its Web site, and HUD field staff would direct housing agencies to 
this guidance when they asked specific questions about how to calculate 
jobs. Nonetheless, greater instruction may be needed beyond what was 
provided to housing agencies on the job calculator's instructions page. 
A HUD official said it seemed like some housing agencies may have 
pulled information for the recipient reports from the wrong fields in 
the job calculator, which produced errors. A HUD official stated they 
will work with OMB to improve housing agencies' understanding of the 
methodology for reporting in full-time equivalents prior to the next 
round of recipient reporting in January 2010. 

California's Experiences with Recipient Reporting Requirements: 

State officials from the California Recovery Task Force and the 
California Office of the State Chief Information Officer (CIO) 
explained that while the centralized reporting structure had several 
benefits, challenges with changing reporting requirements from federal 
agencies and technological glitches still occurred. 

As a centralized reporting state, each state agency reported directly 
to the CIO through the California ARRA Accountability tool. The Task 
Force is responsible for uploading the data to Federalreporting.gov. 
However, according to state officials, local government agencies that 
received direct Recovery Act dollars from the federal government are 
not under the Task Force's purview of the state officials and report to 
Federalreporting.gov on their own. State officials stated that a 
centralized reporting structure allows the CIO to act as a liaison 
between OMB and the state for faster reconciliation of issues. The CIO, 
on behalf of the task force, was responsible for collecting, 
validating, and uploading data from state agencies to 
Federalreporting.gov. The state officials believed the process went 
well overall and commended their state team for successfully reporting 
into Federalreporting.gov. The Task Force officials believed the 
reporting process could be improved if OMB provided a comprehensive 
list of awards to better crosscheck reporting. California officials 
stated that many of the challenges in reporting did not come from the 
additional information requested during October 11 to 20, but from 
changes immediately prior to the September 30 cut-off date. These 
changes included issues such as the Department of Education's request 
to include Central Contract Registration numbers on September 21, and 
FHWA's changes to four of the data elements, including the award 
amounts. 

California officials have a greater appreciation of what to expect 
during the reporting process. They believe that the continuous 
communication with the state agencies, including weekly data group 
meetings at which as many as 60 people attended, contributed to the 
overall success of the reporting process. They also have been 
developing their own internal logic checks to assist with data 
validation. California officials continue to be concerned that problems 
at Federalreporting.gov and changing agency requirements will cause 
subrecipient data, initially correctly collected in accordance with 
federal guidance, to be rejected, which will result in penalties for 
late submissions. 

Florida Department of Transportation's Experiences with Reporting and 
Data Quality Reviews: 

The Florida Department of Transportation (FDOT) has reporting 
requirements under both sections 1512 and 1201 of the Recovery Act. 
Although the state had an existing system in place that could be used 
for section 1201 reporting, officials decided to develop two additional 
systems for 1512 reporting. One system was created to assist FDOT in 
reporting information to the state Recovery Czar and a second system 
for employment reporting was created to allow subrecipients to enter 
total number of employees, payroll, and employee hours for Recovery Act-
funded highway projects. According to state officials, the system was 
launched on May 29, 2009, and is currently in use. FDOT officials 
experienced no significant reporting problems while submitting more 
than 400 reports. 

Florida began preparing for reporting early and conducted extensive 
training to assist contractors, consultants, and local agencies in the 
collection of employment data required by the Recovery Act. For 
example, FDOT's Office of Inspector General (OIG) developed five 
computer-based training modules to assist department staff and external 
partners in the use of the electronic reporting system. FDOT also 
partnered with its OIG and the Florida Division of the Federal Highway 
Administration (FHWA) to conduct town hall presentations for its seven 
District Offices and Florida's Turnpike Enterprise. The presentations 
were designed to ensure consistent use of the electronic employment 
data application. In September, OIG followed up with a survey to local 
agencies to determine the levels of proficiency for using the 
department's electronic employment reporting system and to solicit 
feedback. 

FDOT's electronic employment data reporting system provides for several 
levels of data review and approval. For example, once the subrecipient 
enters their monthly employment data into the electronic system, the 
data is available for review and subsequent approval by the local 
agency project manager. Once approved, the data is available for review 
and approval by the department's district office project manager. The 
district office project manager performs a reasonableness check of the 
submitted data prior to electronically approving the same. 

The electronic employment data is then available for review by OIG 
where two types of analyses are performed. First, OIG identifies 
whether the subrecipient should be reporting job data by comparing 
submitted data (and subrecipient identifiers) against the master list 
of awarded Recovery Act transportation projects. Second, OIG compares 
previously submitted subrecipient information against information 
contained in its current submission to determine any data anomalies or 
variances. Should any significant data anomalies or variances occur, 
OIG will contact the appropriate district and local agency. 

FDOT did not require subrecipients to submit verification of their job 
data but subrecipients were advised by FDOT to maintain documentation 
for review. For two subrecipients we visited, we found the extent to 
which documentation was being maintained varied. For example, one 
subrecipient kept time-sheets for all employees associated with 
Recovery Act projects, while another had documentation for its hourly 
employees but not its management employees. 

Reporting from a Georgia Highway Contractor's Perspective: 

Reporting Process: In Georgia, one of the highway contractors we 
visited noted that it was responsible for reporting on about 30 
Recovery Act-funded projects with approximately 10 subrecipients for 
each project. The contractor stated that they are required to fill out 
a monthly report (FHWA Form 1589) indicating the number of employees, 
the hours worked, and the dollars charged to the job through a direct 
portal created by Georgia Department of Transportation (GDOT). 
According to the contractor, this reporting requirement is in the 
contract, and GDOT will withhold payment if this report is not 
completed. As the general contractor, the firm is also responsible for 
collecting the 1589 information from its subcontractors on each job. 
Officials with the firm stated that they would withhold payment from 
the subcontractors if they fail to provide the information. We examined 
these contracts and confirmed these requirements. In addition to the 
1589 report, the contractor also submits certified payroll to GDOT on a 
monthly basis. 

Guidance and Challenges: In terms of guidance, the contractor noted 
that there was not a lot of training provided but that they did not 
necessarily need much training. The main challenges raised were issues 
with making changes within the GDOT system and the DUNS number field. 
For example, officials explained once a report was submitted into 
GDOT's system, it could not be edited, which made errors in entry or 
reporting difficult to correct. The contractor has discussed this issue 
with GDOT and hopes a solution will be reached for the next reporting 
cycle. 

The DUNS number requirement was an issue for several subrecipients 
since they did not have a number and they were under the impression 
that a cost was involved in obtaining a number, which there was not. 
After discussions with GDOT, it was determined that subrecipients did 
not need a DUNS number, but the field could not be blank. Therefore, 
GDOT advised the contractor to have its subrecipients complete the file 
by entering "not applicable." The contractor suggested that 
improvements in reporting could be achieved by delaying the reporting 
date to GDOT to allow more time to handle delays in payroll and 
obtaining supporting information. Overall, the contractor felt that the 
September report was the most accurate month reported to date and 
believed greater accuracy will be achieved over time. 

Data Quality: Officials of the highway contractor told us they think 
they have a handle on the process and were confident in the data 
submitted. In their words, "if it's inaccurate, we paid somebody wrong" 
since the report comes out of their payroll system. In terms of data 
from subcontractors, the officials noted that their confidence varied 
somewhat across subcontractors. Officials explained that information 
varied, based on the capacity and expertise of the subcontractor (that 
is, experience in reporting and if a certified payroll is in place). 
Officials explained they had greater confidence in subcontractors that 
had certified payroll. They provided several examples of subrecipients 
who were truckers or haulers who are not familiar with reporting and 
often are a small operation of one employee. Officials noted that the 
number of truckers or haulers on a project is often large in order to 
meet disadvantaged business requirements. Officials questioned if 
truckers and haulers should be part of the job creation or retained 
count since similar positions may not be counted for subcontractors 
that provide materials such as pipe. Officials believed over time, 
subcontractors would become more comfortable and familiar with the 
process. 

Reporting from a Massachusetts Highway Contractor's Perspective: 

Reporting Process: An official at a major highway contractor we 
interviewed in Massachusetts explained that one of his primary 
responsibilities as the Construction Cost Accountant is to certify 
payroll records and ensure compliance with federal labor standards. 
This company is the general contractor (or prime contractor) on six 
Recovery Act highway construction projects. 

A company official stated that there was no additional burden 
associated with filing the quarterly recipient reports because they 
routinely report employment data to the Massachusetts Department of 
Transportation (MassDOT), Highway Division for federal-highway funded 
projects through the MassDOT Highway Division's Equitable Business 
Opportunities (EBO) system. Although there were additional data 
elements required for Recovery Act projects, the company official noted 
that FHWA Form 1589 specifies these additional reporting elements, and 
they have been added to the EBO system to make it easier for 
contractors and subcontractors to report on a monthly basis. 

According to the company official, the process was very 
straightforward. Contractors and subcontractors log into the EBO system 
and can see detailed information on all the projects they are working 
on for the MassDOT Highway Division. Typically, by the 15th day of each 
month, contractors and subcontractors upload their certified payroll 
files into the EBO system. However, for the September submission, 
MassDOT's Highway Division required contractors to submit their 
employment reports early by October 9, so that they could meet the 
state's October 10 deadline of submitting the quarterly Recovery Act 
report. 

Guidance and Challenges: The official noted that the only guidance he 
received came from the MassDOT Highway Division in the form of training 
on the EBO system, which he said helped contractors and subcontractors 
transition from the old employment reporting system to the EBO system. 
He noted that for contractors that were used to working with complex 
accounting systems, this training was adequate, but for smaller 
contractors with little computer experience, the training could have 
been better. In general, the official observed that most contractors 
and subcontractors are very pleased with the new system because it 
interfaces so well with their existing accounting and certified payroll 
databases and because the cost is low. 

Data Quality: There are several steps for ensuring data quality. First, 
a company official explained that most large contractors and many 
subcontractors have accounting and payroll data systems that interface 
with the EBO database well, so they are able to upload data from these 
systems directly into the EBO system, eliminating the need to reenter 
employment data. However, some smaller contractors don't have these 
systems and thus must enter the data by hand each month. The company 
official stated that he is not concerned with the quality of data 
because it is verified both internally and by the MassDOT Highway 
Division. 

The official explained that the MassDOT Highway Division puts the 
responsibility for ensuring that subcontractors file monthly reports 
with the general contractor, and his company ensures subcontractor 
compliance by withholding their reimbursements. Although it is rarely 
needed, the official noted that withholding payments to subcontractors 
is a very effective tool for getting subcontractors to submit their 
monthly reports. Furthermore, all subcontractor employment reports are 
verified against the daily duty log that is kept by the project 
supervisor, who is an employee of the company. The MassDOT Highway 
Division also posts resident engineers at each job site on a daily 
basis, and they keep a daily diary of employment and work status that 
is used to verify the data submitted by general contractors in the 
MassDOT Highway Division project management system. This is the same 
system that is used to generate contractor invoices for reimbursement. 

[End of section] 

Appendix II: Department of Education Calculations to Determine Full-
Time Equivalents (FTE) for Jobs Created or Retained: 

According to Education's clarifying guidance on jobs estimation, local 
educational agencies (LEA) are generally required to calculate a 
baseline number of hours worked, consisting of a hypothetical number of 
hours that would have been worked in the absence of Recovery Act funds. 
Once LEA officials derive this number, they then deduct the number from 
actual hours worked by individuals whose employment is attributable to 
Recovery Act funding to determine the number of hours created or 
retained. They then derive the number of full-time equivalents (FTE) 
for jobs created or retained, as shown in table 10. 

Table 10: Derivation of Number of Hours Created or Retained: 

Direct employees: Employee 1; 
Employer: Prime recipient; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 520; 
Actual: Current quarter employees: Hours employed (actual): 520. 

Direct employees: Employee 2; 
Employer: Grantee; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 300; 
Actual: Current quarter employees: Hours employed (actual): 520. 

Direct employees: Employee 3; 
Employer: Grantee; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 0; 
Actual: Current quarter employees: Hours employed (actual): 520. 

Direct employees: Employee 4; 
Employer: Grantee; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 300; 
Actual: Current quarter employees: Hours employed (actual): 300. 

Direct employees: Employee 5; 
Employer: Vendor 1; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 200; 
Actual: Current quarter employees: Hours employed (actual): 300. 

Direct employees: Employee 6; 
Employer: Vendor 2; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 0; 
Actual: Current quarter employees: Hours employed (actual): 300. 

Direct employees: Total; 
Hypothetical: No Recovery Act funding (baseline): Hours employed 
(estimates): 1320; 
Actual: Current quarter employees: Hours employed (actual): 2460. 

Hours Created or Retained: 1140. 

Source: U.S. Department of Education. 

Note: The data were taken from Education's "Clarifying Guidance on 
American Recovery and Reinvestment Act of 2009 Reporting on Jobs 
Creation Estimates by Recipients" (September 2009). 

[End of table] 

Then, they divide the resulting number of hours created or retained by 
the number of FTE hours in the quarter or reporting period to determine 
the number of FTEs to report. For example, in the table above, 
Employees 3 and 6 went from being unemployed (0 hours of employment) in 
the hypothetical situation where no Recovery Act funds are available to 
full-time (520 hours) and part-time (300 hours) employment, 
respectively. Employee 2 went from part-time (300 hours) to full-time 
(520 hours). Employee 5 remained a part-time employee, but works an 
additional 100 hours in the reporting quarter. Taking the sum of actual 
hours worked in the reporting quarter (2460) and subtracting the hours 
worked in the hypothetical baseline quarter (1320), we are left with 
1140 created or retained hours. For the first reporting quarter, LEA 
officials divided the result by the number of FTE hours in that quarter 
(520).[Footnote 35] The total FTEs created or retained in Quarter 1 is 
2.19. 

Results should be reported cumulatively, so in the second reporting 
quarter (Q2), the total hours worked in Q2 will be added to the hours 
worked in Q1 and divided by the hours in a full-time schedule for two 
quarters (1040 hours). For example, if in quarter 2, all employees 
reported in quarter 1 are retained and the baseline remains unchanged, 
we would again have 1140 hours created or retained. To get the final 
cumulative FTE created or retained, officials would sum 1140 for 
quarter 1 with 1140 for quarter 2 to get 2280 total hours created or 
retained. Recipients should divide this by the sum of the hours in a 
full-time schedule for those two quarters (1040). The result is again 
2.19 FTE created or retained in quarter 2. 

[End of section] 

Appendix III: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

J. Christopher Mihm or Susan Offutt at (202) 512-5500. 

Staff Acknowledgments: 

The following staff contributed to this report: J. Christopher Mihm, 
Nancy Kingsbury, and Katherine Siggerud (Managing Directors); Susan 
Offutt (Chief Economist); Susan Irving, Yvonne Jones, Thomas McCool, 
and Mathew Scire (Directors); Angela Clowers (Acting Director); Robert 
J. Cramer (Associate General Counsel); Thomas Beall, James McTigue, Max 
Sawicky (Assistant Directors); Judith C. Kordahl (Analyst-in-Charge); 
and Jaime Allentuck, Darreisha Bates, Don Brown, Stephen Brown, Tina 
Cheng, Andrew Ching, Steven Cohen, Michael Derr, Robert Dinkelmeyer, 
Shannon Finnegan, Timothy Guinane, Philip Heleringer, Don Kiggins, 
Courtney LaFountain, John McGrail, Donna Miller, Elizabeth Morrison, 
Jason Palmer, Beverly Ross, Tim Schindler, Paul Schmidt, Jennifer 
Schwartz, Jonathan Stehle, Andrew J. Stephens, James Sweetman, and 
William Trancucci. The state teams for the bimonthly Recovery Act 
letter reports also contributed to this report. 

[End of section] 

Footnotes: 

[1] Pub. L. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

[2] Recovery Act, div. A, § 1512. We will refer to the quarterly 
reports required by section 1512 as recipient reports. 

[3] The Congressional Budget Office (CBO) is also required by the act 
to comment on the estimates of jobs created or retained no later than 
45 days after recipients have reported. 

[4] GAO, Recovery Act: As Initial Implementation Unfolds in States and 
Localities, Continued Attention to Accountability Issues Is Essential, 
[hyperlink, http://www.gao.gov/products/GAO-09-580] (Washington, D.C.: 
Apr. 23, 2009). 

[5] Prime recipients are nonfederal entities that receive Recovery Act 
funding as federal awards in the form of grants, loans, or cooperative 
agreements directly from the federal government. Subrecipients are 
nonfederal entities that are awarded Recovery Act funding through a 
legal instrument from the prime recipient to support the performance of 
any portion of the substantive project or program for which the prime 
recipient received the Recovery Act funding. Additionally, applicable 
terms and conditions of the federal award are carried forward to the 
subrecipient. 

[6] Economic Stimulus Act of 2008, Pub. L. No. 110-185, 122 Stat. 613 
(Feb. 13, 2008). 

[7] GAO, Troubled Asset Relief Program: One Year Later, Actions Are 
Needed to Address Remaining Transparency and Accountability Challenges, 
[hyperlink, http://www.gao.gov/products/GAO-10-16] (Washington, D.C.: 
Oct. 8, 2009). 

[8] Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, 
122 Stat. 3765 (Oct. 3, 2008), codified at 12 U.S.C. § § 5201 5261. 

[9] Recovery Act, § 3. 

[10] Pub. L. No 109-282, 120 Stat. 1186 (Sept. 26, 2006). 

[11] OMB Memoranda, M-09-21, Implementing Guidance for the Reports on 
Use of Funds Pursuant to the American Recovery and Reinvestment Act of 
2009 (June 22, 2009). 

[12] The Recovery Act created the Recovery Accountability and 
Transparency Board, which is composed of 12 Inspectors General from 
various federal agencies, who serve with a chairman of the board. 
Recovery Act, § 1522.The board issues quarterly and annual reports on 
Recovery Act activities to Congress and the President. The board is 
also to issue "flash reports" under the statute. 

[13] OMB Memoranda, M-09-21. 

[14] Material omissions are defined as instances where required data 
are not reported or reported information is not otherwise responsive to 
the data requests resulting in a significant risk that the public is 
not fully informed as to the status of a Recovery Act project or 
activity. Significant reporting errors are defined as those instances 
where required data are not reported and such erroneous reporting 
results in significant risk that the public will be misled or confused 
by the recipient report in question. 

[15] States must allocate 81.8 percent of their SFSF funds to support 
education (education stabilization funds), and must use the remaining 
18.2 percent for public safety and other government services, which may 
include education (government services funds). 

[16] The TAS codes identify the Recovery Act funding program source. 
The two leftmost characters of each TAS code form a data element that 
is identical with the two-digit numerical code used in the federal 
budgetary process to identify major federal organizations. The CFDA is 
a governmentwide compendium of federal programs, projects, services, 
and activities that provide assistance or benefits. It contains 
assistance programs administered by departments. Each program is 
assigned a unique number where the first two digits represent the 
funding agency. 

[17] California Task Force officials said that they believed that both 
education agencies determined the estimated number of jobs created or 
retained within applicable federal agency guidance. 

[18] A D-U-N-S number is a unique nine-digit sequence recognized as the 
universal standard for identifying and keeping track of 100 million 
businesses worldwide. 

[19] Prime recipients are nonfederal entities that receive Recovery Act 
funding as federal awards in the form of grants, loans, or cooperative 
agreements directly from the federal government. Subrecipients are 
nonfederal entities that are awarded Recovery Act funding through a 
legal instrument from the prime recipient to support the performance of 
any portion of the substantive project or program for which the prime 
recipient received the Recovery Act funding. Additionally, the terms 
and conditions of the federal award are carried forward to the 
subrecipient. 

[20] The Federal-Aid Highway Program is not a "cash up-front" program. 
No cash is actually disbursed until states incur costs. Projects are 
approved and work is started, then the federal government makes 
payments--also called reimbursements--to the states for costs as they 
are incurred on projects. The amount of cash paid to the states 
reflects only the federal share of the project's cost. 

[21] The first periodic report was due no later than 90 days after the 
date of enactment of the act, with updated reports due no later than 
180 days, 1 year, 2 years, and 3 years after enactment. 

[22] Section 1201(c) requires recipients of Recovery Act funds under 
certain federal transportation programs, including Federal-Aid Surface 
Transportation Program to make periodic reports. Among other 
information, these reports are to include the number of direct, on- 
project jobs created or sustained by federal funds, and, to the extent 
possible the estimated indirect jobs created or sustained in the 
associated supplying industries, including the number of job-years 
created and the total increase in employment since the enactment of the 
Recovery Act. 

[23] State reporting agencies involved in jobs reporting under section 
1512 of the Recovery Act may include governor's offices, recovery 
agencies, state educational agencies or other state offices, depending 
on whether the state is using a centralized reporting approach or 
decentralized reporting approach. 

[24] See U.S. Department of Education, Clarifying Guidance on American 
Recovery and Reinvestment Act of 2009: Reporting on Jobs Creation 
Estimates by Recipients (Washington, D.C., September 2009). 

[25] The plan delineates specific roles and responsibilities for the 
Office of the Deputy Secretary; the Office of the Chief Information 
Officer; the Office of the Chief Financial Officer, Financial 
Management Operations; the Office of the Chief Financial Officer, 
Contracts and Acquisition Management; Office of the Chief Financial 
Officer, Financial Systems Services; the Office of the Secretary, Risk 
Management Services Management Improvement Team; and various program 
offices. 

[26] For more information on the Inspector General findings, see U.S. 
Department of Education. Office of Inspector General, The Department's 
Process to Ensure Data Quality Under the Reporting Requirements of the 
American Recovery and Reinvestment Act of 2009, Final Audit Report No. 
ED-OIG/A19J0004. Oct. 29, 2009. 

[27] According to federal Recovery Act guidance, LEA officials are 
primarily responsible for developing job estimates and states--as prime 
recipients of the Recovery Act SFSF, Elementary and Secondary Education 
Act Title I, and Individuals with Disabilities Education Act grants-- 
are responsible to report those data to Federalreporting.gov. Both 
states and LEAs are responsible for ensuring that the reported data are 
accurate. 

[28] There are some exceptions to this requirement. For example, in 
limited circumstances and with approval from Education, recipients may 
use an Education-approved statistical methodology to generate jobs 
estimates. 

[29] In addition, Education officials told us they found a problem with 
some states' reports of jobs attributable to the SFSF. According to 
Education, in a small number of states, state officials had not 
finalized layoff plans prior to the Recovery Act's enactment and 
therefore they could not be certain about the number of jobs they would 
have lost in the absence of Recovery Act funding. Thus, job estimates 
from these states may need to be adjusted in the January 2010 report, 
and Education intends to provide guidance to address this issue. 

[30] Letter from Douglas Elmendorf (Director, Congressional Budget 
Office) to Senator Charles Grassley on the macroeconomic effects of 
ARRA, March 2, 2009. 

[31] We have ongoing work examining the implementation of maintenance 
of effort or similar provisions of the Recovery Act. Such provisions 
are designed to prevent recipients from substituting federal funds for 
other funds that would have otherwise have been spent. We expect to 
issue our report later this calendar year. 

[32] Recovery Act, div. B, § 50012(f)(3). 

[33] Donald J. Boyd, "Coping with Effects of Recession in the States" 
(presentation to the Governmental Research Association Annual 
Conference, Washington, D.C., July 2009), [hyperlink, 
http://www.rockinst.org/pdf/government_finance/2009-07-
Boyd_GRA_Presentation.pdf] (accessed November 13, 2009). 

[34] Section 1609 of the Recovery Act requires that adequate resources 
must be devoted to ensuring that applicable environmental reviews under 
the National Environmental Policy Act are completed on an expeditious 
basis and that the shortest existing applicable process under the 
National Environmental Policy Act shall be used. The National 
Environmental Policy Act protects public health, safety, and 
environmental quality by ensuring transparency, accountability, and 
public involvement in federal actions and in the use of public funds. 

[35] The value of hours worked in a quarter may vary with the number of 
full-time hours worked since the beginning of the reporting period and 
what the recipient regards as a full-time schedule. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: