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entitled 'Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability' which was released on May 26, 2010.
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Report to the Congress:
United States Government Accountability Office:
GAO:
May 2010:
Recovery Act:
States' and Localities' Uses of Funds and Actions Needed to Address
Implementation Challenges and Bolster Accountability:
GAO-10-604:
GAO Highlights:
Highlights of GAO-10-604, a report to the Congress.
Why GAO Did This Study:
This report responds to two ongoing GAO mandates under the American
Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest
in a series of reports on the uses of and accountability for Recovery
Act funds in 16 selected states, certain localities in those
jurisdictions, and the District of Columbia (District). These
jurisdictions are estimated to receive about two-thirds of the
intergovernmental assistance available through the Recovery Act. This
report also responds to GAO’s mandate to comment on the jobs estimated
in recipient reports. GAO collected and analyzed documents and
interviewed state and local officials and other Recovery Act award
recipients. GAO also analyzed federal agency guidance and spoke with
individual federal officials.
What GAO Found:
As of May 7, 2010, approximately $114.8 billion, or 41 percent of the
approximately $282 billion of total Recovery Act funds for programs
administered by states and localities, had been paid out by the
federal government. Most outlays to date have been for health and
education and training, but, increasingly, investments in
transportation, community development, energy, and the environment
will characterize new spending.
Education:
As of April 16, 2010, the 16 states and the District had drawn down
about $14.3 billion (64 percent) of their State Fiscal Stabilization
Fund (SFSF) for education stabilization; $3.2 billion (56 percent)
SFSF for government services; $1.8 billion (28 percent) for Elementary
and Secondary Education Act (ESEA) Title I, Part A; and $2.1 billion
(29 percent) for Individuals with Disabilities Education Act (IDEA),
Part B. Much of the Recovery Act education funds have been used to pay
teachers and other education staff. Education is continuing to award
SFSF funds and taking actions to ensure monitoring of funds. To
address concerns GAO raised, Education required states to submit plans
to monitor their subrecipients’ use of SFSF funds and will be
following up with states.
Highway Infrastructure Investment and Public Transportation Funding:
Nationwide, the Federal Highway Administration obligated $26.2 billion
for over 12,000 projects, and the Federal Transit Administration
obligated $8.7 billion for about 1,000 grants. Highway funds were used
primarily for pavement improvement projects, and public transportation
funds were used primarily for upgrading transit facilities and
improving bus fleets. GAO recommends that DOT determine the types of
data, performance measures, and authority needed to collect data and
report on whether these investments produced long-term benefits.
Publicly available data overstates the amount of Recovery Act funds
benefiting economically distressed areas. GAO recommends that DOT
advise states to correct their reporting on distressed area
designations to reflect current DOT decisions. DOT is considering GAO’
s recommendations. DOT concurred in part with GAO’s March 2010
recommendation that it gather and report more timely information on
the progress states are making in meeting the maintenance-of-effort
requirements; GAO plans to continue to monitor DOT’s actions.
Weatherization Assistance Program:
The Recovery Act provides $5 billion for weatherization funding
nationwide. As of March 31, 2010 (the most recent data available),
recipients had spent about $659 million to weatherize about 80,000
homes; this represents about 13 percent of the 593,000 homes
originally planned for weatherization. GAO makes several
recommendations to DOE to develop and clarify program guidance in such
areas as training and certification of workers. DOE generally agrees
with all of GAO’s recommendations.
Federal Medical Assistance Percentage (FMAP):
As of March 31, 2010, the 16 states and the District have drawn down
about $12.7 billion in increased FMAP funds for the first two quarters
of fiscal year 2010, representing over 92 percent of the total grant
award available for this time period. The increased FMAP continues to
help states cover their increased caseloads and frees up states’
funds, which help finance other needs. Medicaid enrollment continued
to grow, and the increase remains primarily attributable to children.
States and the District remain concerned about the sustainability of
their programs without these funds and most have already reduced or
frozen certain provider payment rates or imposed new provider taxes.
For other program changes, states will need to consider how
maintenance of eligibility requirements within the Patient Protection
and Affordable Care Act, passed in 2010, could affect the financing of
their Medicaid programs.
Public Housing Capital Fund, Tax Credit Assistance Program (TCAP), and
the Recovery Act Section 1602 Program (Section 1602 Program):
Housing agencies met the March 17, 2010, deadline to obligate, reject,
or return a portion of the $3 billion in formula grants. As of May 1,
2010, agencies had drawn down about $1 billion of these funds for
projects such as replacing roofs or windows. HUD is reviewing
obligations made just before the deadline to determine if any should
be recaptured. HUD plans to redistribute any recaptured or returned
funds this summer. As of April 30, 2010, HUD had obligated $2.25
billion for TCAP and Treasury had obligated $5.45 billion for the
Section 1602 Program to develop or rehabilitate units. State Housing
Finance Agencies (HFA) reported concerns about their responsibility to
recapture program funds from noncompliant projects and restrictions on
using interest-bearing repayable loans. GAO recommends that Treasury
define the actions HFAs must take to recapture funds—Treasury agrees—
and that Congress consider directing Treasury to permit HFAs to
disburse funds as interest-bearing repayable loans.
Other Selected Recovery Act Programs:
Workforce Investment Act (WIA) Dislocated Workers Program: As of March
31, 2010, at least $426.6 million (about 34 percent) of funds allotted
to states had been drawn down, according to Labor estimates. States
reported training considerably more participants than they did during
the same time period in the previous year; half the states reported at
least doubling the number of participants in training. However,
Labor’s data on spending is limited by state reporting nconsistencies.
GAO recommends that Labor assess and monitor whether states are
reporting financial information that adheres to Labor’s requirements.
Labor agrees. Clean Water and Drinking Water State Revolving Funds:
The Recovery Act appropriated $4 billion for the Environmental
Protection Agency’s (EPA) Clean Water State Revolving Fund (SRF) and
$2 billion for the Drinking Water SRF. Nationwide, these funds are
being used to support over 3,000 projects. Although EPA and states
have expanded their oversight, current procedures, such as site
inspections, may not be adequate. GAO recommends that EPA work with
the states to implement specific oversight procedures to monitor and
ensure subrecipients’ compliance with Recovery Act provisions. EPA
neither agrees nor disagrees. Head Start and Early Head Start
Programs: As of March 16, 2010, the Office of Head Start (OHS) had
committed 93 percent of the $1.5 billion in Recovery Act funds
designated for expansion. As of March 31, 2010, grantees had drawn
down 10 percent of the first-year awards. OHS had awarded 832 grants
intended to expand programs to an additional 59,000 children. However,
some grantees faced start-up challenges, and incomplete data and
management information hinder OHS’s oversight. GAO recommends that OHS
take steps to address specific management information needs. OHS
disagrees; GAO continues to believe OHS should do so. Justice
Assistance Grants (JAG) and Community Oriented Policing Services
Hiring Recovery Program (CHRP): JAG recipients generally funded law
enforcement and other personnel and purchased police equipment. CHRP
recipients hired new officers or retained positions.
State and Local Fiscal Issues:
One of the purposes of the Recovery Act is to stabilize state and
local government budgets. Recovery Act funds were used by states and
localities to fund a range of programs and services and thereby helped
to partially address budget gaps. However, officials reported that
they continued to take actions to further address existing budget
shortfalls. Several states’ budget documents assumed that Congress
will enact an extension of the increased Medicaid FMAP.
Accountability and Recipient Reporting:
OMB met some objectives in its Single Audit Internal Control Project
to encourage earlier reporting of internal control deficiencies and
corrective actions, but further efforts are needed. GAO recommends OMB
issue more timely Single Audit guidance and help ensure federal
agencies provide more timely management decisions on corrective action
plans. OMB agrees. Progress continues to be realized in improving
completeness and quality of recipient data; however, errors and
reporting inconsistencies remain. GAO makes recommendations to
Education, HUD, and OMB for improving reporting guidance. Education
and OMB agree; HUD agrees to take action on one recommendation but not
on another. GAO continues to believe that further guidance from HUD on
reporting subcontractor jobs is needed.
What GAO Recommends:
GAO updates the status of agencies’ efforts to implement previous GAO
recommendations and makes 24 new recommendations to improve management
and strengthen accountability to the Departments of Education,
Transportation (DOT), Energy (DOE), Housing and Urban Development
(HUD), Treasury, Labor, and Health and Human Services, and to the
Environmental Protection Agency (EPA), and to the Office of Management
and Budget (OMB), and their responses are shown on the following
pages. GAO also proposes a matter for congressional consideration
described on the following page.
View [hyperlink, http://www.gao.gov/products/GAO-10-604] or key
components. For state summaries, see GAO-10-605SP. For more
information, contact J. Christopher Mihm at (202) 512-6806 or
mihmj@gao.gov.
[End of section]
Contents:
Letter:
Background:
States and Localities Continue Use of Recovery Act Funds as Their
Fiscal Conditions Remain Challenging:
Recipients Are Gaining More Experience Reporting, but FTE Data Quality
Continues to Be a Major Concern:
Oversight and Accountability Efforts Continue:
State and Local Governments' Use of Funds for Recovery Act Programs
Reflects Current Fiscal Challenges:
New and Open Recommendations; Matters for Congressional Consideration:
Appendix I: Objectives, Scope and Methodology: Objectives and Scope:
States' and Localities' Uses of Recovery Act Funds: Medicaid Federal
Medical Assistance Percentage: SFSF, ESEA Title I, and IDEA:
Federal-Aid Highway Surface Transportation Program: Transit Capital
Assistance Program:
Edward Byrne Memorial Justice Assistance Grants (JAG): Community
Oriented Policing Services (COPS): Workforce Investment Act of 1998
Dislocated Worker Program: Clean and Drinking Water State Revolving
Fund: Weatherization Assistance Program:
Public Housing Capital Fund:
Tax Credit Assistance Program (TCAP): Head Start and Early Head Start:
Recipient Reporting:
Single Audit Pilot Program:
Recovery Accountability and Transparency Board Initiatives: State and
Local Accountability:
State and Local Budget:
Data and Data Reliability:
Appendix II: Implemented and Closed Recommendations:
Appendix III: Comments from the Department of Health and Human
Services:
Appendix IV: Comments from the Department of Labor:
Appendix V: Program Descriptions:
Clean and Drinking Water State Revolving Funds: Education:
Emergency Food and Shelter Program:
Head Start/Early Head Start:
Highway Infrastructure Investment Program: Public Transportation
Program:
Medicaid Federal Medical Assistance Percentage: Public Housing Capital
Fund:
Weatherization Assistance Program:
Workforce Investment Act of 1998 Title I-B Grants: State and Local
Budget:
Appendix VI: Entities Visited by GAO in Selected States and the
District of Columbia:
Appendix VII:GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: GAO's May 2010 Recovery Act Coverage of States and Localities:
Table 2: Composition of State and Local Recovery Act Funding, Fiscal
Year 2009 Actual and Fiscal Years 2010 through 2019 Estimated:
Table 3: Original and Preliminary Increased Third Quarter 2010 FMAP
Rates and Components of the Increase for 16 States and the District:
Table 4: FMAP Grant Awards for the First and Second Quarters of
Federal Fiscal Year 2010 and Funds Drawn Down for 16 States and the
District, as of March 31, 2010:
Table 5: Percentage of Awarded Recovery Act Education Stabilization,
Government Services, ESEA Title I, and IDEA, Part B Funds Drawn Down
by States as of April 16, 2010:
Table 6: Recovery Act Edward Byrne Memorial JAG Program's State
Allocations, Local Allocations, and Total Allocations for 16 States
and the District:
Table 7: Examples of Planned Uses of Recovery Act JAG Funds for Seven
States:
Table 8: Recovery Act Funding Awarded through CHRP for 16 states and
the District:
Table 9: Types of Training Provided by States and Number of
Participants Served from Time State Began Using Recovery Act Funds
through January 31, 2010:
Table 10: Use of Recovery Act Funds:
Table 11: Allocation of First-Year Expansion Funds by Type of Grant,
as of March 16, 2010:
Table 12: Number of Grants, Clients, and Total First-Year Award
Amounts for both Head Start and Early Head Start Expansion, by State
and Territory, as of March 16, 2010:
Table 13: Number of Children and Families Funded to Be Served Under
Recovery Act Expansion Grants, by Type of Grantee, as of March 16,
2010:
Table 14: Status of OHS Monitoring Activities:
Table 15: Number, Final Report, and Project Status of Prime Recipient
Reports Not Appearing in Round Three:
Table 16: Examples of FTE Methodological Variations Observed in IHEs
and LEAs Where We Reviewed FTE Calculations:
Table 17: Number of LEAs and IHEs We Reviewed Where We Identified
Potential Issues with FTE Calculations:
Table 18: Selected Examples of Local Governments' Use of Recovery Act
Funds:
Table 19: Selected Grant Programs and Their Administering Federal
Agency or Office:
Table 20: Education Entities Visited by GAO:
Table 21: Transit Entities Visited by GAO:
Table 22: Edward Byrne Memorial Justice Assistance Grants Entities
Visited by GAO:
Table 23: Community Oriented Policing Services Hiring Recovery Program
Entities Visited by GAO:
Table 24: Workforce Investment Act of 1998 Summer Youth Program
Entities Visited by GAO:
Table 25: Workforce Investment Act of 1998 Dislocated Worker Entities
Visited by GAO:
Table 26: Clean and Drinking Water Entities Visited by GAO:
Table 27: Weatherization Entities Visited by GAO:
Table 28: Housing Entities Visited by GAO:
Table 29: Tax Credit Assistance Program Entities Visited by GAO:
Table 30: Local Governments Visited by GAO (Government Type,
Population, and Unemployment):
Figures:
Figure 1: Estimated versus Actual Federal Outlays to States and
Localities under the Recovery Act:
Figure 2: State Reported Top Priorities for Government Services Fund
Spending:
Figure 3: Cumulative Recovery Act Highway and Public Transportation
Funds Reimbursed by FHWA and FTA Nationwide:
Figure 4: Nationwide Recovery Act Highway and Public Transportation
Obligations by Project Type:
Figure 5: Timeline of Maintenance-of-Effort Reporting and Decisions:
Figure 6: Distribution of Recovery Act Funds to the Dislocated Worker
Program:
Figure 7: National Drawdown Rates for Recovery Act Funds for the WIA
Dislocated Worker Program, as of March 31, 2010:
Figure 8: State-Reported Increases in Intensive Services and Training
Compared to the Same Time Period in the Previous Year (July 1-December
30, 2009 versus July 1-December 30, 2008):
Figure 9: Greatest Challenges States Experienced in Striving to
Increase Training Participants Using Recovery Act Funds:
Figure 10: Recovery Act-Funded and WIA Dislocated Worker Program
Activities Being Monitored by States:
Figure 11: Share of Recovery Act Funds Provided to Clean Water SRF
Projects in 14 States, by Category:
Figure 12: Clean Water SRF Projects Awarded Recovery Act Funds in 14
States, by Category:
Figure 13: Drinking Water SRF Projects Awarded Recovery Act Funds in
14 States, by Category:
Figure 14: Green Reserve Projects Awarded Recovery Act Funds in 14
States, by Category:
Figure 15: Pointing Out Ceiling Cracks During an Energy Audit of a
Home in Georgia:
Figure 16: Heating Systems Laboratory, Weatherization Training Center
at the Pennsylvania College of Technology in Williamsport,
Pennsylvania:
Figure 17: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as
of May 1, 2010:
Figure 18: Timeline for Public Housing Capital Fund Competitive Grants
under the Recovery Act:
Figure 19: Total Estimated Tax Credit Equity, 2004-2009:
Figure 20: Range of Average Price Paid Per Tax Credit at Project
Closing in 2007, 2008, and 2009:
Figure 21: Average LIHTC Prices at Closing, by HFA in 2009:
Figure 22: Summary of Major TCAP and Section 1602 Program Requirements:
Figure 23: TCAP and Section 1602 Obligations and Outlays for the 16
States and the District of Columbia as of April 30, 2010:
Figure 24: Number of Projects and Tax Credit Units Expected to Be
Developed under TCAP and the Section 1602 Program:
Figure 25: Examples of TCAP and Section 1602 Program Funded LIHTC
Projects:
Figure 26: Ranking of HFA Selection Criteria Based on Level of
Importance for TCAP and Section 1602 Program Funds:
Figure 27: Timeline of TCAP and Section 1602 Program Implementation,
February 2009-February 2010:
Figure 28: Expected Percentage Cost Increases for Complying with Davis-
Bacon, by HFA Survey Response:
Figure 29: Number of HFAs Citing Delays in Starting Construction
Caused by NEPA Compliance:
Figure 30: Budget Categories for and Amount of Expansion Funds Awarded
for the First Year of the Grant Cycle, as of March 16, 2010:
Figure 31: Portion of Total Funded Enrollment for Early Head Start and
Head Start Programs That Is Funded by Recovery Act Expansion Grants,
as of March 16, 2010:
Figure 32: Timeline with Drawn Down and Cumulative Fiscal Year 2010
Awards and Fiscal Year 2011 Amounts:
Figure 33: Potential Issues in FTE Reporting That Can Arise When Funds
Are Reallocated to Cover Costs Incurred in Previous Quarters:
Figure 34: Comparison of OMB Circular A-133 Single Audits and OMB's
Single Audit Internal Control Project Timelines for June 30 Fiscal
Year-Ends:
Figure 35: Selected Local Governments Included in Our May 2010 Review:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 26, 2010:
Report to the Congress:
States and local governments continue to rely heavily on funds from
the American Recovery and Reinvestment Act of 2009 (Recovery Act).
[Footnote 1] Fiscal stresses remain, however, and many states and
localities are still experiencing declines in revenues due to the
effects of the recession. The most recent simulations in our state and
local fiscal model show that the state and local government sector
continues to face growing long-term fiscal challenges over time, which
have been exacerbated by the current recession. Our model projects
operating deficits of about $39 billion for 2010 and $124 billion for
2011. The cumulative 2-year projected operating deficit totals
approximately $163 billion.[Footnote 2]
The Recovery Act's recurring mandate specifies several roles for GAO,
including conducting bimonthly reviews of how Recovery Act funds are
being used in selected states and whether they are achieving the
stated purposes of the act.[Footnote 3] Specifically, the stated
purposes of the Recovery Act are to:
* preserve and create jobs and promote economic recovery;
* assist those most impacted by the recession;
* provide investments needed to increase economic efficiency by
spurring technological advances in science and health;
* invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits; and:
* stabilize state and local government budgets in order to minimize
and avoid reductions in essential services and counterproductive state
and local tax increases.
In this report, the latest in a series in response to the act's
mandate, we update and add new information on the following: (1)
selected states' and localities' uses of Recovery Act funds, (2) the
approaches taken by the selected states and localities to ensure
accountability for Recovery Act funds, and (3) states' plans to
evaluate the impact of the Recovery Act funds they received. As in
GAO's previous reports, we collected and reported data on programs
receiving substantial Recovery Act funds in 16 selected states,
certain localities, and the District of Columbia, and have made
recommendations when changes could result in improvements.[Footnote 4]
Individual summaries for the selected states and the District are
compiled into an electronic supplement, GAO-10-605SP, and are also
accessible through GAO's Recovery Act page at [hyperlink,
www.gao.gov/recovery/]. The selected jurisdictions for our in-depth
reviews contain about 65 percent of the U.S. population and are
estimated to receive collectively about two-thirds of the
intergovernmental assistance available through the Recovery
Act.[Footnote 5] For this report, we visited a nonprobability sample
of more than 300 entities within the 16 states and the District for
our program reviews. These entities represented a range of types of
governments and the program areas shown in table 1. The local
governments also varied by population sizes and economic conditions
(unemployment rates greater than or less than the state's overall
unemployment rate).
Table 1: GAO's May 2010 Recovery Act Coverage of States and Localities:
Number of States Visited; 16[A].
Number of Local Governments Visited to Review Overall Use of Funds; 45.
Number of Entities Visited by Program Area:
Education: 54;
Transit Capital Assistance Program: 7;
Edward Byrne Memorial Justice Assistance Grants: 38;
Community Oriented Policing Services Hiring Recovery Program: 13;
Workforce Investment Act of 1998: 18;
Clean and Drinking Water State Revolving Funds: 44;
Weatherization Assistance Program: 42;
Public Housing Capital Fund: 50;
Tax Credit Assistance Program: 26.
Source: GAO Analysis of States' and Localities' Use of Recovery Act
funds.
Note: Entities include government officials and agencies,
transportation and transit authorities, school districts, charter
schools, housing authorities, public utilities, police departments and
nonprofit organizations. Appendix VI provides a complete list of the
entities visited for this report.
[A] The District of Columbia is also included in GAO's bimonthly
reviews of the use of Recovery Act funds.
[End of table]
As in past reports, the programs we selected for review were chosen
primarily because they have begun disbursing funds to states or have
known or potential risks. The risks can include existing programs
receiving significant amounts of Recovery Act funds or new programs.
In some cases, we have also collected data from all states, and from
an array of localities, to augment the in-depth reviews. This report
focuses on the following programs:
* Federal Medical Assistance Percentage (FMAP);
* State Fiscal Stabilization Fund (SFSF);
* Title I, Part A of the Elementary and Secondary Act of 1965 as
amended (ESEA);
* Parts B and C of the Individuals with Disabilities Education Act, as
amended (IDEA);
* Federal-Aid Highway Surface Transportation and Transit Capital
Assistance Programs;
* Edward Byrne Memorial Justice Assistance Grants (JAG);
* Community Oriented Policing Services (COPS) Hiring Recovery Program
(CHRP);
* Workforce Investment Act of 1998 (WIA) Dislocated Worker Program;
* Clean Water State Revolving Fund;
* Drinking Water State Revolving Fund;
* Weatherization Assistance Program;
* Public Housing Capital Fund;
* Tax Credit Assistance Program (TCAP):
* Section 1602 Program; and:
* Head Start and Early Head Start.
The Recovery Act also requires us to comment on the estimates of jobs
created or retained after the recipients have reported. In this
report, we provide updated information concerning recipient reporting
in accordance with our mandate for quarterly reporting.[Footnote 6]
The Recovery Act requires that nonfederal recipients of Recovery Act
funds, including grants, contracts, and loans, submit quarterly
reports which are to include a list of each project or activity for
which Recovery Act funds were expended or obligated and information
concerning the amount and use of funds and jobs created or retained by
these projects and activities.[Footnote 7] The latest of these
recipient reports covered the activity as of the Recovery Act's
passage through the quarter ending March 31, 2010.
In this report, we also discuss state and local budget stabilization;
federal requirements and guidance; and oversight, transparency, and
accountability issues related to the Recovery Act and its
implementation. The report provides overall findings, discusses agency
actions in response to the open recommendations we made in our prior
reports, and presents new recommendations. GAO's oversight of Recovery
Act programs have resulted in more than 43 Recovery Act products. See
the GAO Related Products section of this report for a list these
products.
In conducting our work for this report, we analyzed guidance and
interviewed officials at the Office of Management and Budget (OMB). We
also analyzed grant awards--as well as relevant regulations and
federal agency guidance on programs selected for this review--and
spoke with relevant program officials at the Departments of Education,
Energy, Health and Human Services (Centers for Medicare & Medicaid
Services and Office of Head Start), Housing and Urban Development,
Transportation, Justice, and Labor, as well as the Environmental
Protection Agency. In addition, we spoke to entities that play roles
in oversight of Recovery Act spending, including federal agency
inspectors general, state and local auditors, as well as the Recovery
Accountability and Transparency Board, which was established by the
Recovery Act.[Footnote 8] We also integrated information from our
prior Recovery Act reports into this review where appropriate.
Where statements about state law are attributed to state officials, we
did not analyze state legal materials for this report but relied on
state officials and other state sources for description and
interpretation of relevant state constitutions, statutes, legislative
proposals, and other state legal materials. The information obtained
from this review cannot be generalized to all states and localities
receiving Recovery Act funding. A detailed description of our scope
and methodology can be found in appendix I.
We conducted this performance audit from March 4, 2010, to May 26,
2010, 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 its report on the economic impact of the Recovery Act, the Council
of Economic Advisors (CEA) reported that as of March 31, 2010,
approximately $373.4 billion had been outlayed or provided to
households and businesses in the form of tax reductions. In addition
to that amount, CEA reported that another $151.2 billion had been
obligated. The CEA found that after being stable at roughly $80 to $85
billion per quarter over the last three quarters of calendar year
2009, total Recovery Act funding outlays plus tax cuts rose to $112
billion in the first quarter of 2010. This is consistent with what we
have said in past reports: that projected outlays will peak in fiscal
year 2010, with outlays expected to be more than twice the level of
fiscal year 2009 outlays. Figure 1 shows the estimated federal outlays
(in billions of dollars) to states and localities for fiscal years
2009 through 2016. It also shows actual outlays as of May 7, 2010, as
reported by federal agencies on [hyperlink, http://www.Recovery.gov].
Figure 1: Estimated versus Actual Federal Outlays to States and
Localities under the Recovery Act:
[Refer to PDF for image: vertical bar graph]
Federal fiscal year runs October 1 to September 30.
Fiscal year: 2009;
Original estimate: $48.9 billion;
Actual as of May 7, 2010: $52.9 billion.
Fiscal year: 2010;
Original estimate: $107.7 billion;
Actual as of May 7, 2010: $61.9 billion.
Fiscal year: 2011;
Original estimate: $63.4 billion.
Fiscal year: 2012;
Original estimate: $23.3 billion.
Fiscal year: 2013;
Original estimate: $14.4 billion.
Fiscal year: 2014;
Original estimate: $9.1 billion.
Fiscal year: 2015;
Original estimate: $5.7 billion.
Fiscal year: 2016;
Original estimate: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data.
[End of figure]
As shown in figure 1, actual federal outlays to states and localities
under the Recovery Act totaled approximately $114.8 billion through
May 7, 2010. More than half--$61.9 billion--has been paid out since
the start of fiscal year 2010 on October 1, 2009. Outlays not only
vary in amounts over time, but also have shifted by sector. As shown
in table 2, outlays in health and education and training constituted
88 percent of total outlays to states and localities in fiscal year
2009, while outlays for transportation, income security, energy and
the environment, and community development were all substantially
less. However, by fiscal year 2012, investments in highways, transit,
high-speed rail, and other transportation infrastructure will be the
largest share of state and local Recovery Act funding, albeit of a
substantially smaller total outlay. Taken together, transportation
spending--along with investments in the community development, energy,
and environmental areas--that are geared more toward creating long-
term economic growth opportunities will represent approximately two-
thirds of state and local Recovery Act funding after 2011. Thus,
across the years, it is projected that spending will shift from a
primary focus on recovery to a primary focus on investment.
Table 2: Composition of State and Local Recovery Act Funding, Fiscal
Year 2009 Actual and Fiscal Years 2010 through 2019 Estimated:
Health;
Composition of outlays in percent: Actual: 2009: 60;
Composition of outlays in percent: Estimated: 2010: 39;
Composition of outlays in percent: Estimated: 2011: 17;
Composition of outlays in percent: Estimated: 2012-2019: 1.
Education and training;
Composition of outlays in percent: Actual: 2009: 28;
Composition of outlays in percent: Estimated: 2010: 37;
Composition of outlays in percent: Estimated: 2011: 46;
Composition of outlays in percent: Estimated: 2012-2019: 8.
Transportation;
Composition of outlays in percent: Actual: 2009: 6;
Composition of outlays in percent: Estimated: 2010: 9;
Composition of outlays in percent: Estimated: 2011: 14;
Composition of outlays in percent: Estimated: 2012-2019: 40.
Income security;
Composition of outlays in percent: Actual: 2009: 3;
Composition of outlays in percent: Estimated: 2010: 7;
Composition of outlays in percent: Estimated: 2011: 10;
Composition of outlays in percent: Estimated: 2012-2019: 21.
Community development;
Composition of outlays in percent: Actual: 2009: 3;
Composition of outlays in percent: Estimated: 2010: 5;
Composition of outlays in percent: Estimated: 2011: 7;
Composition of outlays in percent: Estimated: 2012-2019: 13.
Energy and environment;
Composition of outlays in percent: Actual: 2009: 1;
Composition of outlays in percent: Estimated: 2010: 3;
Composition of outlays in percent: Estimated: 2011: 7;
Composition of outlays in percent: Estimated: 2012-2019: 17.
Total;
Composition of outlays in percent: Actual: 2009: 100%;
Composition of outlays in percent: Estimated: 2010: 100%;
Composition of outlays in percent: Estimated: 2011: 100%;
Composition of outlays in percent: Estimated: 2012-2019: 100%.
Total dollars in billions;
Actual: 2009: $52.9;
Estimated: 2010: $103.7;
Estimated: 2011: $63.4;
Estimated: 2012-2019: $61.9.
Source: GAO analysis of CBO, FFIS, and Recovery.gov data.
Note: Percentages may not total due to rounding.
[End of table]
States and Localities Continue Use of Recovery Act Funds as Their
Fiscal Conditions Remain Challenging:
Increased FMAP Continues to Help States Finance Their Growing Medicaid
Programs, but States Remain Concerned about Sustainability of Their
Programs:
Medicaid is a joint federal-state program that finances health care
for certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The rate at which
states are reimbursed for Medicaid service expenditures is known as
the Federal Medical Assistance Percentage (FMAP), which may range from
50 percent to no more than 83 percent. The Recovery Act provides
eligible states with an increased FMAP for 27 months from October 1,
2008, to December 31, 2010.[Footnote 9] On February 25, 2009, the
Centers for Medicare and Medicaid Services (CMS) made increased FMAP
grant awards to states, and states may retroactively claim
reimbursement for expenditures that occurred prior to the effective
date of the Recovery Act. Generally, for fiscal year 2009 through the
first quarter of fiscal year 2011, the increased FMAP, which is
calculated on a quarterly basis, is comprised of three components: (1)
a "hold harmless" provision, which maintains states' regular FMAP
rates at the highest rate of any fiscal year from 2008 through 2011,
(2) a general across-the-board increase of 6.2 percentage points in
states' FMAPs, and (3) a further increase to the FMAPs for those
states that have a qualifying increase in unemployment rates.
Increased FMAP Key to States' Continued Efforts to Finance Medicaid
Program Growth:
The increased FMAP available to the 16 states and the District for the
third quarter of fiscal year 2010 averaged nearly 11 percentage points
higher than the original 2010 FMAP rates, with increases ranging from
about 9 percentage points in Iowa to nearly 13 percentage points in
Florida. For all states, the largest proportion of the increased FMAP
was attributable to the across-the-board increase of 6.2 percentage
points; however, qualifying increases in unemployment rates also
contributed to the increase in each of the states. The "hold harmless"
provision further contributed to the increased FMAP in five sample
states, albeit to a lesser extent (see table 3). With the exception of
Iowa, all of the sample states and the District have reached the
maximum unemployment increase component possible under the Recovery
Act.[Footnote 10]
Table 3: Original and Preliminary Increased Third Quarter 2010 FMAP
Rates and Components of the Increase for 16 States and the District:
State: Arizona;
Original FMAP, fiscal year 2010[A]: 65.75;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 75.93;
Percentage point FMAP increase: 10.18;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 61;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 35;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 4.
State: California;
Original FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Colorado;
Original FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: District of Columbia;
Original FMAP, fiscal year 2010[A]: 70.00;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 79.29;
Percentage point FMAP increase: 9.29;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 67;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 33;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Florida;
Original FMAP, fiscal year 2010[A]: 54.98;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 67.64;
Percentage point FMAP increase: 12.66;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 49;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 36;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 15.
State: Georgia;
Original FMAP, fiscal year 2010[A]: 65.10;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 74.96;
Percentage point FMAP increase: 9.86;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 63;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 37;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Illinois;
Original FMAP, fiscal year 2010[A]: 50.17;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 61.88;
Percentage point FMAP increase: 11.71;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 46;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 1.
State: Iowa;
Original FMAP, fiscal year 2010[A]: 63.51;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 72.55;
Percentage point FMAP increase: 9.04;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 69;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 31;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Massachusetts;
Original FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Michigan;
Original FMAP, fiscal year 2010[A]: 63.19;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 73.27;
Percentage point FMAP increase: 10.08;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 62;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 38;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Mississippi;
Original FMAP, fiscal year 2010[A]: 75.67;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 84.86;
Percentage point FMAP increase: 9.19;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 67;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 26;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 7.
State: New Jersey;
Original FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: New York;
Original FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: North Carolina;
Original FMAP, fiscal year 2010[A]: 65.13;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 74.98;
Percentage point FMAP increase: 9.85;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 63;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 37;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Ohio;
Original FMAP, fiscal year 2010[A]: 63.42;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 73.47;
Percentage point FMAP increase: 10.05;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 62;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 38;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Pennsylvania;
Original FMAP, fiscal year 2010[A]: 54.81;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 65.85;
Percentage point FMAP increase: 11.04;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 56;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 44;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 0.
State: Texas;
Original FMAP, fiscal year 2010[A]: 58.73;
Preliminary increased FMAP, fiscal year 2010, third quarter[A]: 70.94;
Percentage point FMAP increase: 12.21;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 51;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 34;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 15.
State: Average;
Percentage point FMAP increase: 10.77;
Component and its percentage contribution to the FMAP increase[B]:
Across the board: 58;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 39;
Component and its percentage contribution to the FMAP increase[B]:
Hold harmless: 2.
Source: GAO analysis of HHS data.
Note: Fiscal year refers to the federal fiscal year, which begins
October 1st and ends September 30th. Beginning in the third quarter of
fiscal year 2009, HHS changed how it calculates the increased FMAP
rates. Specifically, HHS calculates preliminary FMAP rates using
Bureau of Labor Statistics unemployment estimates and adjusts these
FMAP rates once the final unemployment numbers become available.
[A] The original fiscal year 2010 FMAP rates were published in the
Federal Register on February 2, 2010. The third quarter fiscal year
2010 FMAP rates are preliminary.
[B] Average percentage does not add to 100 percent due to rounding.
[End of table]
For states to qualify for the increased FMAP, they must comply with a
number of requirements, including the following:
* States generally may not apply eligibility standards, methodologies,
or procedures that are more restrictive than those in effect under
their state Medicaid programs on July 1, 2008.[Footnote 11]
* States must comply with prompt payment requirements.[Footnote 12]
* States cannot deposit or credit amounts attributable (either
directly or indirectly) to certain elements of the increased FMAP in
any reserve or rainy-day fund of the state.[Footnote 13]
* States with political subdivisions--such as cities and counties--
that contribute to the nonfederal share of Medicaid spending cannot
require the subdivisions to pay a greater percentage of the nonfederal
share than would have been required on September 30, 2008.[Footnote 14]
In addition, CMS requires states to separately track and report on
increased FMAP funds.
To help states comply with these requirements, CMS provided guidance
in the form of State Medicaid Director letters and written responses
to frequently asked questions,[Footnote 15] and the agency continues
to work with states on an individual basis to resolve any compliance
issues that may arise. Although 12 sample states initially reported
making adjustments to their Medicaid program to comply with Recovery
Act requirements, such as rescinding prior program changes or
canceling planned changes, most states recently reported that--beyond
minor adjustments to some of their prompt payment tracking mechanisms--
they have not made additional changes to comply with the requirements.
As of March 31, 2010, the 16 states and the District have drawn down
$12.7 billion of $13.8 billion, or over 92 percent of the total award
for the first two quarters of federal fiscal year 2010[Footnote 16]
(see table 4). The national drawdown mirrors the experiences of our
sample states, with the 50 states, the District, and largest U.S.
insular areas having drawn down about 92 percent of the total grant
award for this time period, or $18.6 billion of $20.3 billion awarded.
Table 4: FMAP Grant Awards for the First and Second Quarters of
Federal Fiscal Year 2010 and Funds Drawn Down for 16 States and the
District, as of March 31, 2010 (Dollars in thousands):
Arizona;
First and second quarter 2010 increased FMAP grant awards[A]: $469,246;
Funds drawn down: $452,850;
Percentage of funds drawn down: 96.51.
California;
First and second quarter 2010 increased FMAP grant awards[A]:
$2,365,250;
Funds drawn down: $2,249,542;
Percentage of funds drawn down: 95.11.
Colorado;
First and second quarter 2010 increased FMAP grant awards[A]: $203,343;
Funds drawn down: $126,142;
Percentage of funds drawn down: 62.03.
District of Columbia;
First and second quarter 2010 increased FMAP grant awards[A]: $84,130;
Funds drawn down: $72,877;
Percentage of funds drawn down: 86.62.
Florida;
First and second quarter 2010 increased FMAP grant awards[A]:
$1,086,366;
Funds drawn down: $1,028,785;
Percentage of funds drawn down: 94.70.
Georgia;
First and second quarter 2010 increased FMAP grant awards[A]: $357,401;
Funds drawn down: $357,401;
Percentage of funds drawn down: 100.00.
Illinois;
First and second quarter 2010 increased FMAP grant awards[A]: $808,943;
Funds drawn down: $576,710;
Percentage of funds drawn down: 71.29.
Iowa;
First and second quarter 2010 increased FMAP grant awards[A]: $138,325;
Funds drawn down: $127,011;
Percentage of funds drawn down: 91.82.
Massachusetts;
First and second quarter 2010 increased FMAP grant awards[A]: $671,348;
Funds drawn down: $613,475;
Percentage of funds drawn down: 91.38.
Michigan;
First and second quarter 2010 increased FMAP grant awards[A]: $513,618;
Funds drawn down: $513,618;
Percentage of funds drawn down: 100.00.
Mississippi;
First and second quarter 2010 increased FMAP grant awards[A]: $188,409;
Funds drawn down: $160,759;
Percentage of funds drawn down: 85.32.
New Jersey;
First and second quarter 2010 increased FMAP grant awards[A]: $534,986;
Funds drawn down: $464,522;
Percentage of funds drawn down: 86.83.
New York;
First and second quarter 2010 increased FMAP grant awards[A]:
$2,762,154;
Funds drawn down: $2,568,269;
Percentage of funds drawn down: 92.98.
North Carolina;
First and second quarter 2010 increased FMAP grant awards[A]: $481,742;
Funds drawn down: $481,742;
Percentage of funds drawn down: 100.00.
Ohio;
First and second quarter 2010 increased FMAP grant awards[A]: $718,673;
Funds drawn down: $627,765;
Percentage of funds drawn down: 87.35.
Pennsylvania;
First and second quarter 2010 increased FMAP grant awards[A]: $926,901;
Funds drawn down: $866,119;
Percentage of funds drawn down: 93.44.
Texas;
First and second quarter 2010 increased FMAP grant awards[A]:
$1,448,391;
Funds drawn down: $1,440,493;
Percentage of funds drawn down: 99.45.
Sample total;
First and second quarter 2010 increased FMAP grant awards[A]:
$13,759,226;
Funds drawn down: $12,728,082;
Percentage of funds drawn down: 92.51.
National total[B];
First and second quarter 2010 increased FMAP grant awards[A]:
$20,266,960;
Funds drawn down: $18,627,696;
Percentage of funds drawn down: 91.91.
Source: GAO analysis of HHS data as of March 31, 2010.
[A] The FMAP grant awards listed are for the first and second quarters
of federal fiscal year 2010, through March 31, 2010.
[B] The national total includes the 50 states, the District of
Columbia, and five of the largest U.S. insular areas.
[End of table]
While the increased FMAP funds are for Medicaid services only, the
receipt of these funds may free up funds that states would otherwise
have had to use for their Medicaid programs. Similar to their reported
uses in fiscal year 2009, states and the District most commonly
reported using or planning to use these freed-up funds in fiscal year
2010 to cover increased Medicaid caseloads, maintain Medicaid
eligibility levels, and finance general state budget needs. For
example, most states reported that the availability of the increased
FMAP has been a major factor in their ability to support continued
Medicaid enrollment growth, which has continued to increase during
fiscal year 2010. Between October 2009 and February 2010, overall
enrollment across the 16 states and the District grew by about 1
percent, with a cumulative increase of 13.5 percent since October
2007.[Footnote 17] The increase in Medicaid enrollment continues to be
attributable primarily to children, a population that is sensitive to
economic downturns.[Footnote 18]
In addition, more than half of the states and the District also
reported using freed-up funds to maintain benefits and services and to
maintain payment rates for practitioners and institutional providers.
Five states reported using these funds to meet prompt pay
requirements, and two states and the District reported using these
funds to help finance their State Children's Health Insurance Program
or other local public health insurance programs. Although virtually
all of the sample states and the District reported using these funds
for multiple purposes, two states--North Carolina and Ohio--reported
that they plan to continue using freed-up funds exclusively to finance
general state budget needs.
Most States Remain Concerned about Sustaining Their Medicaid Programs
without Increased FMAP Funds:
When asked about the longer-term outlook for their Medicaid programs,
all but two states continued to report a concern regarding the
sustainability of their Medicaid programs after increased FMAP funds
are no longer available.[Footnote 19] Due to these concerns, all but
one state reported having implemented or proposed actions to adjust
their Medicaid programs. Most commonly, states reported reducing or
freezing Medicaid payment rates for practitioners or institutional
providers. In addition, for the remainder of fiscal year 2010 and for
fiscal year 2011, 10 states reported proposed reductions or freezes to
Medicaid payment rates to certain providers; 7 states reported
proposed reductions in benefits and services; and 5 sample states and
the District reported new proposed provider taxes.[Footnote 20]
Under the Recovery Act, the temporary increase in the FMAP ends on
December 31, 2010. Most states have indicated that legislation
extending the increased FMAP funding would help address their concerns
about program sustainability. Although such legislation has been
proposed but not enacted, 10 sample states and the District reported
that their proposed 2011 budgets had assumed a continuation of
increased FMAP for an additional 6 months.[Footnote 21] Regardless of
when increased FMAP funding ultimately ends, however, states' shares
of Medicaid payments will increase. For example, when compared to
preliminary third quarter fiscal year 2010 increased FMAP rates, we
estimate that sample states' 2011 FMAP rates will decrease by an
average of 10.5 percentage points, ranging from 7 percentage points in
Michigan to 12 percentage points in Florida.[Footnote 22],[Footnote
23] How states will react to the return to regular FMAP rates will
differ based on multiple factors, including their unique economic
conditions and the size of their Medicaid populations. For example,
while several states were not certain as to what they would do after
Recovery Act funding ends, three states and the District reported that
they would consider tightening Medicaid eligibility standards. When
deciding about changes to program eligibility standards, however,
states will need to consider provisions within the recently enacted
Patient Protection and Affordable Care Act (PPACA).[Footnote 24]
Similar uncertainty may exist in terms of states' responses to other
provisions of PPACA. For example, the law requires states to expand
Medicaid eligibility by 2014 to cover a new category of persons--
generally those who are not otherwise already covered under mandatory
eligibility categories, such as adults under age 65 who are not
disabled, pregnant, or living with dependent children. By 2014, states
must cover persons in this group with income levels up to 133 percent
of the federal poverty level. However, states have the option to
expand eligibility immediately, or to phase in coverage at lower
income levels via a state plan amendment and to begin receiving
federal funds for these individuals at the regular FMAP rate.[Footnote
25] It remains to be seen how states will respond to this option or
other provisions in the legislation.
Education Is Continuing to Award SFSF Funds, Beginning to Award
Recovery Act School Improvement Grants, and Taking Actions to Ensure
the Monitoring of Recovery Act Expenditures:
Draw Down Rates for Education Recovery Act Funds Increase and Continue
to Vary by State:
Rates of draw down of education funds under the Recovery Act increased
and continue to vary by state and program. As of April 16, 2010,
states covered by our review had drawn down 64 percent ($14.3 billion)
of the awarded education stabilization funds, 56 percent ($3.2
billion) of the government services funds,[Footnote 26] 28 percent
($1.8 billion) of Recovery Act funds for Title I of the Elementary and
Secondary Education Act of 1965 (ESEA), and 29 percent ($2.1 billion)
of Recovery Act funds for Part B of the Individuals with Disabilities
Education Act (IDEA). Also, as of April 16, 2010, the Department of
Education (Education) had approved the State Fiscal Stabilization Fund
(SFSF) Phase II applications of 10 of the 17 states covered by our
review, thereby awarding these 10 states 100 percent of the education
stabilization funds that the Department had allocated to them. The
seven remaining states were awaiting approval of their Phase II
applications, and therefore, had not yet been awarded the final
portion of their education stabilization funds.[Footnote 27] Three
states had drawn down 90 percent or more of their awarded education
stabilization funds, and four had drawn down 90 percent or more of
their government services funds.[Footnote 28] Only the District of
Columbia had not drawn down any education stabilization funds.
[Footnote 29] (See table 5.)
Table 5: Percentage of Awarded Recovery Act Education Stabilization,
Government Services, ESEA Title I, and IDEA, Part B Funds Drawn Down
by States as of April 16, 2010:
Numbers in percentage.
Arizona;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 61[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 39;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
33;
Percentage of awarded Recovery Act funds drawn down: IDEA: 31.
California;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 90;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 100;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
41;
Percentage of awarded Recovery Act funds drawn down: IDEA: 32.
Colorado;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 91;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 70;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
20;
Percentage of awarded Recovery Act funds drawn down: IDEA: 22.
District of Columbia;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 0;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 22;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
1;
Percentage of awarded Recovery Act funds drawn down: IDEA: 4.
Florida;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 35[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 32;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
33;
Percentage of awarded Recovery Act funds drawn down: IDEA: 33.
Georgia;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 87[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 54;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
22;
Percentage of awarded Recovery Act funds drawn down: IDEA: 25.
Illinois;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 100[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 87;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
16;
Percentage of awarded Recovery Act funds drawn down: IDEA: 35.
Iowa;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 78[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 67;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
32;
Percentage of awarded Recovery Act funds drawn down: IDEA: 54.
Massachusetts;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 64[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 52;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
22;
Percentage of awarded Recovery Act funds drawn down: IDEA: 28.
Michigan;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 71[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 99;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
22;
Percentage of awarded Recovery Act funds drawn down: IDEA: 20.
Mississippi;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 73;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 34;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
19;
Percentage of awarded Recovery Act funds drawn down: IDEA: 13.
New Jersey;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 87[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 98;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
9;
Percentage of awarded Recovery Act funds drawn down: IDEA: 17.
New York;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 39;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 15;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
20;
Percentage of awarded Recovery Act funds drawn down: IDEA: 18.
North Carolina;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 47[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 90;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
32;
Percentage of awarded Recovery Act funds drawn down: IDEA: 38.
Ohio;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 38[B];
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 23;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
27;
Percentage of awarded Recovery Act funds drawn down: IDEA: 34.
Pennsylvania;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 43;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 33;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
39;
Percentage of awarded Recovery Act funds drawn down: IDEA: 34.
Texas;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 38;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 7;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
28;
Percentage of awarded Recovery Act funds drawn down: IDEA: 27.
Total;
Percentage of awarded Recovery Act funds drawn down: Education
stabilization funds: 64;
Percentage of awarded Recovery Act funds drawn down: Government
services funds: 56;
Percentage of awarded Recovery Act funds drawn down: ESEA Title I[A]:
28;
Percentage of awarded Recovery Act funds drawn down: IDEA: 29.
Source: GAO analysis of U.S. Department of Education data.
[A] ESEA Title I draw down percentages do not include Title I School
Improvement Grants.
[B] Denotes states with approved SFSF Phase II applications that had
been awarded 100 percent of their allocated education stabilization
funds as of April 16, 2010.
[End of table]
Education's SFSF Phase II Applications Require Data Collection and
Reporting Intended to Increase Transparency and Advance Reform, but
Some States Face Challenges in Providing Data:
To receive the second phase of SFSF funding (Phase II), states had to
complete an application in which they described their ability to
provide data to address 37 indicators and descriptors that support the
four assurances they made to receive their initial SFSF funding: to
advance reforms in achieving equity in teacher distribution; enhancing
standards and assessments; supporting struggling schools; and
establishing a statewide longitudinal data system. Whereas in Phase I
SFSF applications, governors were required to make these four
assurances, in Phase II applications, governors are required to
confirm that they are or will be able to provide specific data related
to each assurance area and make them publicly available.[Footnote 30]
Education believes the data and information that states will publicly
report under the indicators and descriptors will better enable states
and other stakeholders to identify strengths and weaknesses in
education systems and determine where concentrated reform effort is
warranted, and enable Education to verify that a state is fulfilling
the commitments it made in order to receive SFSF funds. These 37
indicators and descriptors include, for example, the percentage of
core academic courses taught by teachers who are highly qualified in
the highest-poverty and lowest-poverty schools, and the number and
percentage of students who graduate from high school in 4 years, at
the state, local, and school level, broken down by subgroups.
As of May 13, 2010, Education had approved applications for 11 of the
17 states in our review. Education officials reported that they had
received initial applications from every state, and the applications
that have not yet been approved have required follow-up but generally
need minor changes and clarifications. Education will conduct either a
desk or on-site review of SFSF spending in each state annually, with
half of the states receiving the on-site review each year. Prior to a
desk review or on-site visit, Education staff will request that the
state submit specific documentation relating to the allocation and
uses of funds, fiscal oversight, maintenance-of-effort, progress in
the four reform areas, subrecipient monitoring, and recipient
reporting.
Phase II applications represented a significant effort by Education
that will allow it to document and track the status of the SFSF
assurances. Education released proposed requirements for Phase II in
July 2009, and after receiving comments from 60 parties on the
proposed requirements, definitions, and approval criteria, it released
final requirements and state applications in November 2009. The final
requirements made some changes to the proposed requirements in
response to comments, including clarifying that states are required to
maintain a public Web site that provides the data and information that
are responsive to the indicator and descriptor requirements and
reducing the burden on states by not requiring states to provide
estimates of teacher impact on student achievement but instead
requiring that states provide student growth data to teachers.
State officials expect challenges with collecting some of the data
required by Education. For example, Iowa reported that it collects
data for 25 of the 37 indicators and descriptors and provided
information on how it planned to address the remaining 12. However, in
a letter to Education, Iowa officials expressed various concerns about
some of the indicators and descriptors, including concerns over being
able to protect the privacy of students. Other state officials
expressed concerns about their ability to obtain student data,
especially when students leave the state for college, and when it
would be costly to obtain data from private institutions of higher
education. Conversely, Massachusetts officials said that the state is
collecting much of the data, and a significant benefit of these data
collection and reporting requirements is that this information will
now be publicly available in one place.
State officials described other implementation challenges. Arizona
officials said that rural or small districts with limited capacity for
submitting data into a statewide data warehouse might face challenges
in getting quality and timely data to the state. According to
Massachusetts officials, funding is another challenge, in that nearly
all of the state's annual budget for elementary and secondary
education (inclusive of federal, state, and other sources) goes to
local educational agencies (LEA), and state education officials said
that it is hard to get funding for statewide initiatives such as a
teacher quality data system. Finally, North Carolina officials noted
that while the state could sign that it was meeting the assurances
related to intervening in the lowest-performing schools, the funds are
awarded to the LEA and the state cannot control LEA decisions in
allocating funding to particular schools.
Further, some state officials reported that their states are simply
continuing or building on previous initiatives to meet the SFSF
assurances. According to Iowa Education officials, as a result of
prior actions, Iowa has highly qualified teachers dispersed across the
state and will not have to take other actions to address the SFSF
assurance on equitable teacher distribution. Massachusetts officials
explained that improving teacher quality--which includes efforts
related to the assurance on equitable teacher distribution--was a
priority for the department before the Recovery Act. Also, even though
SFSF education stabilization funds flow to LEAs and institutions of
higher education (IHE), some state officials reported that these
subrecipients faced financial challenges implementing reform efforts
to further the goals contained in the four assurance areas. Arizona
officials noted that, given the state's budget situation, the SFSF
money has not been used directly toward education reform efforts by
many of its LEAs--although Arizona officials told us that LEAs and
IHEs are actively working toward the assurances. Education officials
said that states are only required to sign that they will meet the
assurances and do not have to undertake new initiatives or otherwise
indicate that Recovery Act funds are being directly spent on meeting
the assurances. We will continue to monitor state challenges and
efforts to address the assurances in our subsequent Recovery Act
reports.
In other cases, states' applications for Phase II funding describe
plans and initiatives that are conditioned on the receipt of funds, in
addition to SFSF, under separate federal competitive grants which have
not been awarded yet. While Education has approved some of these
applications containing these conditional plans, Education officials
said they will require states to amend their plans and their
applications, if the state cannot carry them out. Colorado's
application, for example, included a plan for collecting education
data that hinges in part on receiving an additional $400,000 in
federal or private funds, according to state officials. Additionally,
North Carolina's application included a "plan A" and "plan B" for its
longitudinal data system, based on whether or not it received a Race
to the Top grant.[Footnote 31] According to state officials, if North
Carolina received such a grant, it would spend $5 million on its data
system compared to $54,700 if it did not, but even if the state is
unable to implement plan A, it would meet SFSF requirements but would
not have all of the Web-based tools for local entities or the ability
to collate certain information at the state level.
About Half of States in GAO's Review Have Been Approved for School
Improvement Grants, Which Require States and LEAs to Focus Their
Intervention Efforts on a Smaller Number of Schools Than in the Past:
The Recovery Act appropriated $3 billion for the ESEA Title I School
Improvement Grant (SIG) Program, which provides funds to states for
use in ESEA Title I schools identified for improvement[Footnote 32] in
order to substantially raise the achievement of their students. These
funds are made available by Education to states based upon a formula
and are then awarded by states to LEAs on a competitive basis.
According to Education officials, this was due to new program
requirements and was a major change from previous years, in which
state educational agencies (SEA) could distribute the funds
noncompetitively. Under ESEA, states must give priority for grants to
LEAs that demonstrate the greatest need for such funds and the
strongest commitment to ensuring that such funds are used to enable
the lowest-achieving schools to raise student achievement. The
regulatory requirements, effective in February 2010,[Footnote 33]
direct states to prioritize the use of SIG funds in each state's
persistently lowest-achieving Title I schools.[Footnote 34] To receive
funds, states must identify their persistently lowest-achieving
schools, and an LEA that wishes to receive a SIG grant must submit an
application to its SEA identifying which schools with the greatest
need it commits to serve and how it will use SIG funds to implement
four school intervention models in these schools. The four models are:
* turnaround model, which includes replacing the principal and
rehiring no more than 50 percent of the school's staff;
* restart model, in which an LEA converts the school or closes and
reopens it as a charter school or under an education management
organization;
* school closure model, in which an LEA closes the school and enrolls
the students who attended the school in other, higher-achieving
schools in the LEA; or:
* transformation model, which addresses four specific areas intended
to improve schools, including replacing the principal and implementing
a rigorous staff evaluation and development system.
As of April 19, 2010, 9 of the 17 states in GAO's review had been
approved to receive SIG funds.[Footnote 35] On that date, Education
officials indicated that they had received initial applications from
all states, but had asked some to resubmit their applications.
Education officials said they have worked with states to facilitate
their competitive grant process, with much of the discussion between
states and Education focused on developing processes and criteria by
which states would evaluate LEA applications and capacity to implement
the improvement models. According to Education officials, the
department worked to coordinate the definition of persistently lowest-
achieving schools to ensure alignment between SIG and SFSF.[Footnote
36] Starting in November 2009, Education began hosting a series of 10
Webinar calls, and by April 2010, Education officials reported that
many of these calls had been used to address particular concerns of
individual states.
States have had varying reactions to the changes to the SIG program.
According to Education officials, the new competitive nature of the
funding for LEAs has required states to change their mindset from
thinking of the SIG program as a formula grant--through which many
schools get smaller percentages of the program's funds--to one in
which priorities must be set, and fewer schools receive more
substantial funds. In the past, Massachusetts SEA officials said they
were overextended by the rising number of schools identified as
needing improvement and stated that the new approach capitalizes on
recent state legislation that gave the state more tools and authority
over low-performing schools. Iowa officials, by contrast, expressed
concerns that their persistently lowest-achieving schools--
representing a small proportion of schools--will be eligible to apply
for up to $2 million over 3 years, while other low-performing schools
may receive no funds for school improvement. Arizona officials told us
that some of the schools that have been identified as persistently
lowest-achieving are rural, and officials felt that the intervention
models under SIG might be more difficult to implement than they would
be in urban areas, particularly with regard to replacing staff.
The States We Reviewed Reported That They Met SFSF Maintenance-of-
Effort Requirements or Obtained a Waiver in 2009:
In order to meet maintenance-of-effort (MOE) requirements under SFSF,
a state must maintain state support for K-12 education and IHEs at
least at fiscal year 2006 levels in fiscal years 2009, 2010, and 2011.
[Footnote 37] While maintaining state support at no less than fiscal
year 2006 levels, states must first use education stabilization funds
to restore funding to the greater of fiscal year 2008 or 2009 levels
for state support provided to K-12 LEAs and IHEs in fiscal years 2009
through 2011. Education disseminated several guidance documents to
states in the spring and summer of 2009 to assist them in defining
their MOE amounts. In determining, for MOE purposes, the state level
of support for K-12 education in fiscal year 2006, Education guidance
said states must include funding provided through their primary
formulas for distributing funds to school districts. However,
Education also allowed states some flexibility in choosing the basis
they use to measure MOE, as well as in what they include or exclude in
their MOE definition. For example, state support for education can be
measured on the basis of either aggregate or per-pupil expenditures.
While every state, as part of its initial application for SFSF, had to
assure it would either meet the MOE levels or waiver requirements,
Education directed states to amend their SFSF applications to reflect
any final budget changes and, in the amended applications, provide a
final assurance that they will meet MOE levels. Specifically,
according to Education guidance, a state must amend its SFSF
application if there are changes to the reported levels of state
support for education that were used to determine the MOE amount or to
calculate the amounts needed to restore state support for education to
the fiscal year 2008 or 2009 level. Education officials reported they
are continually reviewing the resubmissions, and Education developed a
plan to monitor state implementation of the SFSF program that includes
obtaining documentation substantiating the state's level of support
for MOE purposes, for both K-12 and IHEs. We had recommended in
November 2009 that the Secretary of Education take further action to
enhance transparency by requiring states to include an explanation of
changes to MOE levels in their SFSF application resubmissions.
Education agreed with our recommendation, but in March 2010, we
reported that guidance from Education did not require states to
include an explanation for changes made to MOE calculations. However,
in May 2010, in keeping with our recommendation, Education notified
states that, if states made changes to their MOE data in their SFSF
applications, they must provide a brief explanation of the reason the
data changed. Also, in April 2010, Education sent a letter to states
noting that Education continues to monitor each state to ensure that
it meets its fiscal obligations, and that if Education determines that
a state is failing to do so, it will take appropriate enforcement
actions, including recovering previously awarded SFSF funds.
The states we reviewed reported that they met SFSF MOE levels in
fiscal year 2009 or obtained waivers, but some have ongoing concerns
about maintaining spending in the future. For fiscal year 2009 and
2010, Arizona's budget provided funding for K-12 LEAs and IHEs at 2006
levels, as required. However, for fiscal year 2011, maintaining
education funding at the 2006 level to meet MOE requirements was
contingent on a statewide sales tax increase, state officials said.
[Footnote 38] According to Iowa officials, the Iowa Department of
Education had submitted a MOE waiver application for higher education
funding for fiscal year 2010. However, the state legislature, later in
the fiscal year, provided funding to meet the MOE and the waiver was
withdrawn, Iowa officials said. Looking forward to fiscal year 2011,
Iowa officials are not sure that the state legislature will allocate
enough funds toward higher education in the state's upcoming
appropriations bills to meet MOE requirements, and if not, the SEA
plans to apply for another waiver from Education.
States Are Using Existing Processes, with Some Additions, to Monitor
LEAs' Use of Recovery Act Funds for ESEA Title I and IDEA:
States reported using a variety of existing processes for monitoring
LEAs' use of Recovery Act funds for ESEA Title I and IDEA Part B and,
in some cases, making changes to those processes to increase their
oversight of Recovery Act funds. SEAs that receive federal education
funds, including funds provided under the Recovery Act, and then pass
those funds on to subrecipients, typically LEAs, are required to
monitor the subrecipients' use of the funds to ensure compliance with
federal laws and regulations. Federal education funds provided under
ESEA Title I and IDEA Part B, including Recovery Act funds, flow from
the federal government to the states and generally flow to LEAs under
funding formulas defined in federal statute. SEAs reported using the
following processes to monitor LEAs' use of Recovery Act funds for
ESEA Title I and IDEA Part B:
* Review of LEAs' planned uses for funds: Prior to awarding federal
funds for ESEA Title I and IDEA Part B each year, states review and
approve LEA applications describing how the LEAs plan to use the
funds. A number of SEAs we reviewed with respect to LEA monitoring,
such as Arizona, Colorado, the District of Columbia, Iowa, and Ohio,
required LEAs to submit additional applications or information on
their planned use of Recovery Act education funds.[Footnote 39]
Officials in Arizona, Colorado, and Ohio reported using these approved
applications throughout the year to determine if LEAs' funding
requests are for approved purposes.
* Review of spending data throughout the year: North Carolina's SEA
receives monthly financial reports from LEAs containing information on
the amount and type of expenditures, including those from the Recovery
Act. In Ohio, throughout the year, LEAs submit detailed requests to
the SEA for cash drawdowns that the SEA reviews to ensure LEAs are
using the funds appropriately. In other states, such as Arizona,
Colorado, Iowa, and Massachusetts, reporting on expenditures from LEAs
occurs at the end of each year.
* Site visits and other targeted reviews: SEAs conduct detailed
reviews, such as site visits or desk reviews of relevant documents,
for selected LEAs during the year. SEAs select the LEAs for these
targeted reviews based on risk factors such as amount of funds
received and past audit findings. For example, Ohio monitors all LEAs
in a 3-year period using a mixture of 4 approaches--site visits, desk
reviews, telephone surveys, and self-evaluations. In determining which
approach to use on an LEA, Ohio considers certain risk factors such as
improvement status, allocation amount, previous audit results, and
staffing changes.[Footnote 40]
* End-of-year comparison of planned to actual expenditures: SEAs
require LEAs to submit end-of-year financial reports that the SEAs
then compare with the LEAs' approved applications or budgets to verify
that those LEAs' actual expenditures conform to their approved planned
uses of funds.
Review of annual audits: SEAs are required to determine whether their
subgrantees have met audit requirements under the Single Audit Act and
ensure they have taken appropriate corrective action on instances of
noncompliance with federal laws and regulations. SEAs also use
information from LEAs' Single Audits to identify which LEAs are at
higher risk of misusing federal funds and to help target monitoring
efforts.
Some states made additions to their monitoring plans this year that
could enhance their monitoring of Recovery Act education funds. As
discussed above, a number of states required LEAs to submit separate
applications for Recovery Act funds for ESEA Title I and IDEA Part B.
The District of Columbia developed a new protocol for monitoring LEAs'
use of federal education funds, including Recovery Act funds.[Footnote
41] The new monitoring protocol includes on-site monitoring visits and
desk reviews, both of which include testing expenditures to verify
that the funds were used appropriately.[Footnote 42] According to
District officials, they plan to conduct both an on-site monitoring
visit and a desk review of all District LEAs that received Recovery
Act funds.
However, we identified issues with monitoring of ESEA Title I and IDEA
Part B in some states we visited. For example, more than 10 months
after the end of the state's 2009 fiscal year, the Colorado Department
of Education had not yet completed its 2009 annual financial reviews
for the 6 LEAs that expended Recovery Act funds for the ESEA Title I
program in that year, nor had it completed the end-of-year reviews for
the 11 LEAs that spent Recovery Act IDEA Part B funds in fiscal year
2009. Also, the North Carolina Department of Public Instruction (DPI)
continued with year five of its original 5-year plan to visit LEAs,
starting with the highest-risk LEAs in year one and ending in year
five with the lowest-risk LEAs, and did not modify its existing
process for selecting LEAs for on-site monitoring after the receipt of
Recovery Act education funds. As a result, during fiscal year 2010
when LEAs are using a large amount of Recovery Act funds, North
Carolina DPI is conducting on-site visits to LEAs with low-risk
ratings. Our reviews of Recovery Act expenditures at two LEAs in North
Carolina found one LEA may have used some Recovery Act funds for
possibly unallowable expenses under federal regulations and both LEAs
made some equipment purchases that, according to LEA officials, were
not in compliance with a state procurement directive.[Footnote 43] We
have referred those findings to DPI and they are following up.
States Have Developed Plans for Monitoring SFSF, Including Government
Services Funds:
All the 16 states and the District of Columbia have developed written
monitoring plans for SFSF and have submitted them to Education for
review, according to Education officials. Unlike ESEA Title I and IDEA
Part B, SFSF is a new program established under the Recovery Act and
states did not have established processes for monitoring subrecipients
of SFSF funds. In September 2009, we reported that some states faced
challenges in developing monitoring plans for SFSF funds, and we
recommended that Education take action such as collecting and
reviewing documentation of state monitoring plans to ensure that
states understand and fulfill their responsibility to monitor
subrecipients of SFSF funds. Education acted on our recommendation and
required states to submit SFSF monitoring plans to Education by March
12, 2010. According to Education officials, Education is reviewing the
plans to ensure the plans are adequate and will contact states to
discuss any problems they identify with the plans. Officials in
several states we met with said they were waiting for Education to
approve their plans. For example, officials in the Colorado Governor's
office said they had been waiting for feedback from Education about
Colorado's SFSF monitoring plan before implementing the plan, but when
they had not heard from Education by April 30, 2010, they decided to
move ahead with implementation. We informed Education that some states
might be delaying their SFSF monitoring efforts until they received
feedback from Education, and on May 10, 2010, Education sent an e-mail
updating states about its SFSF monitoring plans. The e-mail said that
Education will be reaching out to states with feedback on state SFSF
monitoring plans soon and that states should not wait until they
receive feedback to begin their monitoring efforts.
In some states, developing monitoring arrangements for SFSF funds
involved multiple state agencies and required some state agencies to
provide oversight in areas in which they did not have responsibility
for monitoring in the past, as discussed in the following examples:
* In North Carolina, the Office of State Budget and Management (OSBM)
is responsible for administering SFSF government services funds and
monitoring the use of funds by other agencies including the Department
of Corrections and the Administrative Office of the Courts. OSBM has
not administered federal funds in the past, and to prepare for
monitoring other state agencies' use of the government services funds,
it reviewed other states' monitoring plans, worked with its internal
auditors to design a monitoring protocol, and hired four internal
auditors.
* In the District of Columbia, the Office of the State Superintendent
of Education (OSSE) is responsible for monitoring the Metropolitan
Police Department's (MPD) use of government services funds. Because
OSSE normally does not have authority to oversee the MPD, the two
agencies are developing a memorandum of understanding outlining their
respective roles and responsibilities in regard to the SFSF government
services funds.
* In New York, three state agencies are responsible for overseeing the
use of SFSF funds--the New York State Education Department, the
Division of Budget, and the Division of Housing and Community Renewal.
New York developed an SFSF monitoring plan that includes reviews of
all SFSF applications and quarterly reports, and on-site monitoring
visits, desk reviews, and audits of a sample of school districts,
community colleges, and vendors that received mortgage foreclosure
prevention grants funded with government services funds.[Footnote 44]
Officials in Massachusetts and Pennsylvania said they plan to contract
with private firms to monitor LEAs' use of SFSF funds. We reported in
December 2009[Footnote 45] that Massachusetts planned to primarily use
the Single Audit to monitor SFSF expenditures.[Footnote 46] Since that
time, Massachusetts has expanded this plan to include supplemental on-
site audits conducted by a public accounting firm that will provide a
more detailed review of SFSF funded transactions.
Pennsylvania contracted with a private firm to monitor LEAs' use of
SFSF funds.[Footnote 47] According to Pennsylvania officials,
monitoring activities over the next 2 years will include on-site
visits to LEAs in the state, desk reviews of Recovery Act funding
documentation from LEAs, and a survey of all LEAs. According to
Pennsylvania officials, monitoring activities are focused on the use
of Recovery Act funds, internal controls, and compliance with state
regulations.
States Cite Resource Limitations as a Challenge to Their Monitoring
Activities:
At a time when effective oversight is needed because of the influx of
Recovery Act funds, officials in a number of states said their
offices' resource limitations and added workload created by the
Recovery Act pose a challenge to effective monitoring. For example,
Colorado officials said that they had not completed their 2009 end-of-
year reviews of LEAs' uses of Recovery Act funds because of the
increased workload associated with reviewing, approving, and
monitoring Recovery Act applications and budgets. Ohio officials said
that the number of requests for funds from LEAs that they receive and
review as part of their oversight processes increased substantially
because of the Recovery Act. Officials at the Iowa Department of
Education expressed concern that recent staff reductions at the state
level and a steady loss of experienced business managers in many LEAs
across the state could result in less oversight of funds. North
Carolina Department of Public Instruction officials reported that
their ability to conduct on-site fiscal monitoring visits to LEAs had
been limited because the fiscal monitoring office had only one staff
member assigned to on-site monitoring until it hired a second person
in February 2010. Similarly, officials in the Arizona Department of
Education's Audit Unit expressed concerns about the unit's ability to
provide comprehensive, cyclical monitoring of IDEA Part B funds
because it only has two auditors to perform on-site fiscal monitoring.
Finally, because of resource constraints, California stopped ESEA
Title I on-site monitoring for about a year starting in February 2009
but resumed the monitoring in 2010.
Education OIG Has Identified State Weaknesses in Subrecipient
Monitoring and Cash Management:
Education's Office of Inspector General (OIG) has identified issues
with states' internal controls over Recovery Act funds, such as
weaknesses in subrecipient monitoring and cash management. During the
past year, the OIG has issued reports on the results of its audits of
internal controls over Recovery Act funds in a number of states,
including California,[Footnote 48] Illinois,[Footnote 49] New York,
[Footnote 50] Pennsylvania, [Footnote 51] and Texas.[Footnote 52]
[Footnote 53]
The OIG identified weaknesses in SEAs' monitoring of subrecipients in
several states, including in Texas, California and Pennsylvania, and
in a separate audit of non-Recovery Act funds, it identified
significant problems at a Pennsylvania subrecipient--the Philadelphia
School District. The OIG concluded that the procedures that the Texas
Higher Education Coordinating Board (THECB) had in place as of
September 30, 2009, to monitor recipients of SFSF government services
funds might not provide reasonable assurance that Recovery Act funds
are safeguarded. However, the IG noted that subsequent to their audit
that THECB established policy and procedures to ensure adequate
oversight of all subrecipients receiving Recovery Act SFSF government
services funds. The OIG recommended that California and Pennsylvania
improve their on-site monitoring procedures for ESEA Title I and IDEA
because their procedures did not address LEAs' use of Title I and IDEA
funds.[Footnote 54] The OIG reported that the California and
Pennsylvania SEAs rely on Single Audits to monitor whether LEAs are
spending federal funds in accordance with applicable laws and
regulations, and this approach will not identify or resolve issues
with LEAs' administration of federal funds in a timely manner. The OIG
also found that the California and Pennsylvania SEAs did not ensure
that LEA Single Audit findings were resolved in a timely manner. The
OIG's review of the Philadelphia School District found that the
district did not have adequate fiscal controls over the use of federal
funds and had used federal funds for millions of dollars of
unallowable costs, among other problems.[Footnote 55] The OIG
concluded that federal funds provided to the Philadelphia School
District, including those from the Recovery Act, are at significant
risk of not being used in compliance with program requirements, and it
recommended that Education designate the district as a high-risk
grantee.[Footnote 56]
In October 2009, the OIG issued a report focused on weaknesses in cash
management systems in California, Illinois, New York, and
Pennsylvania.[Footnote 57] The OIG reported that it found a number of
instances in these states where SEA cash management systems (1)
disburse Recovery Act funds without adequate information on whether
LEAs are ready to spend the funds and (2) do not ensure LEAs remit
interest earned on Recovery Act funds received in advance of LEA
needs. According to the OIG report, although one of the key principles
of the Recovery Act is to distribute funding quickly to save and
create jobs and promote economic activity, Recovery Act funding should
not be distributed to LEAs until the funds are needed to pay Recovery
Act-authorized expenses. The report also states that if funding is
distributed in advance of when it is needed, SEAs should ensure that
LEAs minimize the time between receipt and disbursement of the funds
and remit interest earned on the advanced funds in a timely manner.
[Footnote 58]
Most States We Reviewed Reported Public Safety as Their First Priority
for SFSF Government Services Funds:
The Recovery Act provides that SFSF government services funds must be
used for public safety and other government services, which may
include assistance for education and for modernization, renovation, or
repairs of public schools and IHEs.[Footnote 59] The act requires
recipients to report quarterly on a wide range of items pertaining to
how Recovery Act funds, including government services funds, are being
used. Information from these recipient reports is available to the
public on Recovery.gov, the official Web site for Recovery Act funds.
Ten out of the 16 states and the District of Columbia included in our
review reported public safety as their first priority for how they
spent or planned to spend SFSF government services funds.[Footnote 60]
For example, Michigan used a majority of its government services funds
for over 1,100 full-time jobs within the Michigan State Police and
over 3,400 full-time corrections officers, mental health
professionals, and food service staff positions within the Michigan
Department of Corrections. Colorado reported that the government
services funds were used for salaries of corrections personnel
responsible for supervising and managing violent and nonviolent
offenders. Figure 2 illustrates top priorities for government services
funds spending as reported by state officials.
Figure 2: State Reported Top Priorities for Government Services Fund
Spending:
[Refer to PDF for image: horizontal bar graph]
Priority: Public safety;
Number of states reporting use of funds as top priority: 10.
Priority: Education;
Number of states reporting use of funds as top priority: 6.
Priority: Multiple priorities[A];
Number of states reporting use of funds as top priority: 1.
Source: GAO analysis of information provided by state officials from
the 16 states and the District of Columbia included in our review.
[A] Iowa did not specify a top priority but reported using government
services funds for a range of activities, including education and
public safety.
[End of figure]
Officials in five other states and the District of Columbia reported
education as their top priority for how they spent or planned to spend
SFSF government services funds.[Footnote 61] For example, Texas
officials reported they used approximately half of their government
services funds to purchase elementary and secondary school textbooks
for public schools and most of the remainder of their funds for public
IHEs. Texas officials also reported that most public community and
junior colleges that received government services funds will use them
for technology equipment and upgrades; to create or retain jobs to
support enrollment growth; and to purchase instructional materials,
furniture, or supplies. Florida officials reported government services
funds are being used for education purposes in K-12 schools and IHEs.
For K-12 education, government services funds will primarily replace
state aid to retain instructional and noninstructional staff in every
school district in the state that would have been laid off without the
SFSF government services funds. In public IHEs (the state college
system and public universities), the grant will enable institutions to
hire additional adjunct faculty to maintain course offerings in light
of increased student enrollment. Officials in Iowa reported using
government services funds for a wide range of activities, including
education and public safety. They reported that six state agencies
used government services funds for retention and ongoing support of
employees.[Footnote 62]
States and DOT Made Progress toward Meeting Recovery Act Requirements,
although DOT Could Improve Data and Better Assess Impact of Funds:
States Met the 1-Year Obligation Deadline after Facing Challenges:
The states in our review met the 1-year deadline for obligating
Recovery Act transportation funds in part because state officials were
working with a familiar federal framework. The existing federal
surface transportation structure has well-established programs and
processes that were understood by state departments of transportation
and transit agencies, and others that regularly work in conjunction
with these federal programs. Specifically, the Recovery Act highway
funds were distributed under rules governing the Federal-Aid Highway
Program generally and its Surface Transportation Program in
particular. As a result, officials at state departments of
transportation were well-acquainted with the type of projects eligible
for, and the federal requirements associated with this funding.
Similarly, public transportation funds were primarily distributed
through well-established programs, with the largest share of these
funds distributed through the Transit Capital Assistance Program. Like
state departments of transportation, project sponsors (typically
transit agencies) were familiar with federal grant application
processes.
Obligating funds in a timely manner is an important feature of the
Recovery Act, as an economic stimulus package should, as we have
previously reported, include projects that can be undertaken quickly
enough to provide a timely stimulus to the economy.[Footnote 63] About
$35 billion that the Recovery Act provided for highway infrastructure
and public transportation was obligated by the 1-year deadline;
therefore, no Recovery Act funds were withdrawn for redistribution.
[Footnote 64] The Federal Highway Administration (FHWA) obligated
about $26.2 billion of the $26.7 billion that was apportioned to all
50 states and the District of Columbia for over 12,000 highway
infrastructure and other eligible projects nationwide. In addition, by
the March 2, 2010, deadline, about $420 million of the apportioned
amount that was not obligated to highway projects was transferred from
FHWA to the Federal Transit Administration (FTA) to be obligated for
transit projects.[Footnote 65] FTA obligated all of the approximately
$8.4 billion that was apportioned to fund public transportation
projects as well as all but $78 million of the about $420 million
transferred from FHWA to FTA. FTA awarded these funds to about 1,000
grants nationwide by the March 5, 2010, deadline.[Footnote 66] The
U.S. Department of Transportation (DOT) has determined that once
Recovery Act highway funds are transferred to FTA, these funds are not
subject to the Recovery Act's 1-year obligation deadline for either
FHWA or FTA because they are subject to the provisions of the law that
apply generally to the transfer of highway funds to FTA.[Footnote 67]
We do not express an opinion on DOT's determination at this time but
are currently exploring this issue further. DOT officials have stated
that transferred Recovery Act funds must be obligated by September 30,
2010, after which time funds are no longer available for obligation,
consistent with requirements of the Recovery Act.
In our prior reports, we identified several challenges that states
struggled to overcome in making progress toward the 1-year time frame
for obligations. These issues required DOT to exercise diligence as
the deadline approached to ensure that Recovery Act funds were not
only obligated in a timely manner but also were used to meet the goals
of the act.
Obligations Lagged in Suballocated Areas:
In our prior Recovery Act reports, we reported that obligations for
projects in suballocated areas generally lagged behind those for
statewide projects in many states and considerably behind those in a
few states.[Footnote 68] Projects funded through suballocated funds
may be awarded and administered through local transportation agencies,
which are often city or county agencies. Around $2.8 billion of the
Recovery Act funds were under contract as of May 3, 2010, and were
being administered by local agencies, according to DOT. These agencies
have, according to local, state, and federal officials, experienced
difficulties conforming to the federal processes, requirements, and
time frame, which created challenges. Challenges associated with
locally administered projects are not new. FHWA's April 2009 Recovery
Act Risk Management Plan cited oversight by states and lack of
experience by local agencies as a risk area needing to be mitigated,
and DOT's Office of Inspector General is conducting reviews of locally
administered projects.
As the 1-year obligation deadline approached, FHWA increased its
oversight. For example, Illinois DOT officials stated they were
challenged to complete requests to FHWA to obligate about $28 million
of the funds suballocated to Illinois local governments in a timely
manner. Specifically, local governments in Illinois struggled to meet
the "project readiness" requirement, which demonstrates the extent to
which the proposed project can quickly meet various requirements, such
as completing preliminary engineering, obtaining right-of-way,
securing agency agreements, and local fund matching, when identifying
projects for the transportation enhancement program.[Footnote 69] The
local governments ultimately were able to identify projects in time to
meet the 1-year obligation time frame, with 2 weeks to spare. In
Georgia, one metropolitan planning organization was challenged to help
complete obligations of about $5 million in part because of
difficulties related to obtaining right-of-way. However, in mid-
February the local organization and state DOT collaborated to re-
prioritize several other locally-sponsored and state-level projects
thus ensuring that the state met the 1-year obligation deadline.
We previously identified three states--Arizona, Massachusetts, and New
Jersey--as having suballocated areas that lagged considerably behind.
For example, according to Arizona DOT officials, some local agencies
lacked the staff and experience to meet various federal requirements,
such as obtaining right-of-way and environmental clearances. DOT
officials told us that extensive guidance and oversight from state DOT
and FHWA Division Offices to local transportation agencies in Arizona
ensured that all suballocated funds were obligated on time. The
Arizona DOT initiated a two-pronged oversight strategy to ensure that
local agencies met their obligation goals. First, Arizona DOT
officials set an internal state deadline and informed local agencies
that if their Recovery Act funds were not obligated by late January
2010, the state would replace their local projects with "ready-to-go"
projects available in their regions. Second, the Arizona DOT hired
several state management consultants and requested that local agencies
hire local management consultants to provide assistance in
understanding, processing, and meeting various federal requirements.
As a result, each state successfully met the 1-year obligation time
frame. We will continue to monitor issues related to projects in
suballocated areas.
FHWA Transferred Funds to FTA Close to the 1-Year Deadline:
Close to the 1-year deadline, states increased the number of requests
for FHWA to transfer unobligated Recovery Act highway infrastructure
funds to FTA for eligible transit projects. For example, Georgia DOT
requested FHWA transfer $5 million to FTA for use by the Metropolitan
Atlanta Rapid Transit Authority to make rail line improvements.
Anticipating an increase in requests and to ensure the agency had
enough time to complete requests, FHWA stopped accepting transfer
requests 2 weeks before the March 2, 2010, deadline and allowed the
states to put the funds on an alternate project if the transfer fell
through. In the month preceding the obligation deadline, the rate of
highway obligations and transfers from FHWA to FTA increased. FTA must
obligate these funds through grant agreements, though FTA permits
transfers of funds from highway to transit purposes only if states
have identified specific "ready-to-go" projects for funding. In our
previous report, we noted that, as of February 1, 2010, FHWA had
transferred approximately $332 million. As of March 2, FHWA had
transferred about $420 million--an increase of $88 million in a 4-week
period. By May 3, 2010, FTA had obligated about $369 million to 58
grants.
Massachusetts requested that FHWA transfer the largest amount of
funds--about $59.7 million--to FTA with $46.9 million of this request
occurring within 2 months of the March deadline. However, as of March
5, 2010, about $41 million of this transferred amount was not
obligated. State and FHWA officials stated that the transferred amount
would support 22 grants for "ready-to-go" transit projects that had
been identified through the state's annual planning process. Officials
further noted that since Massachusetts is a highly urbanized state
with chronically underfunded transit needs, they typically transfer
about $45 million every year from highway funding to balance
transportation priorities in their state.
Highway Contracts Were Awarded for Less Than the Original Cost
Estimates:
Deobligations increased in the weeks following the 1-year obligation
time frames, primarily because highway contracts were awarded for less
than the original cost estimates. These contract award savings allowed
states to fund more projects with the Recovery Act funding than were
initially anticipated.[Footnote 70] Among the 16 states and District
of Columbia that were included in our review, about $225 million in
highway infrastructure project funds were deobligated between the 1-
year obligation deadline and April 26, 2010, with about $197 million
of these deobligations resulting from contract award savings. With
respect to public transportation, FTA has not deobligated any funding
but has been able to use grant amendments to redistribute the
resulting funding from contract award savings.
We previously reported that, for known contract award savings, it was
important for DOT to carefully monitor and determine that states did
not attempt to circumvent the 1-year requirement, which was intended
to ensure that funds were put to use quickly. FHWA regulations and
guidance direct states to request that FHWA deobligate funds within 90
days of determining that the estimated federal share of project costs
had decreased by $250,000 or more.[Footnote 71] However, our analysis
of data from the 16 states and the District indicated that for the
period from March 2, 2010, through April 26, 2010, about $16 million
in deobligations resulting from contract award savings occurred more
than 90 days after the contract was awarded. FHWA was looking into the
issue and noted that it was possible some funds went unnoticed and
missed the 90-day time frame. Nevertheless, the amount of funds not
deobligated within 90 days was a small portion of the total funds
available.
Contracts Are Being Awarded, but Contract Award Data Accuracy Is of
Concern and Reimbursements Slowed Largely Due to Inclement Weather:
Contract data from FHWA suggests that states made progress in awarding
contracts and initiating work. The data show that as of May 3, 2010,
about $22.5 billion (about 87 percent) of the $25.9 billion obligated
by FHWA has been awarded for contracts. About $16 billion in contracts
are underway or completed and about $2.6 billion have construction
completed. About $19.6 billion of the contracts awarded are being
administered by states and about $2.8 billion of the contracts are
being administered by local agencies. However, the accuracy of
contract data being obtained from FHWA's Recovery Act Data System is
of concern. Four of the 16 states and the District in our review
reported having awarded more funds for contracts than were obligated
for those contracts. In 1 state, the amount of funding under contract
was overstated by $136 million, or over 25 percent. This occurred
because the state reported the date funds had been obligated by FHWA
as the date the contract was awarded to the contractor, and reported
the amount obligated as the contract award amount. FHWA officials told
us they were working on this issue and others we found in reviewing
the data. We intend to follow up on these issues in our future reviews.
However, since we last reported in March, the pace of highway
reimbursements has slowed. After federal funds have been obligated,
and once portions of the work have been completed, states and transit
agencies may request reimbursement from FHWA and FTA.[Footnote 72]
Therefore, reimbursements generally lag behind obligations since it
takes time for a state or transit agency to bid, award, and start work
on specific projects. As of May 3, 2010, FHWA has reimbursed about
$7.6 billion (about 29 percent of the funds available to obligate) to
states nationwide, and FTA has reimbursed about $2.8 billion (about 32
percent) to states and transit agencies nationwide. Reimbursements
nationwide from FHWA to the states each month from January through
April 2010 slowed to about half to two-thirds of the dollars that were
being reimbursed each month from September through December 2009 (see
figure 3).
Figure 3: Cumulative Recovery Act Highway and Public Transportation
Funds Reimbursed by FHWA and FTA Nationwide:
[Refer to PDF for image]
Month: March 2009;
Highway funds: $1.7 million;
Public transportation funds: 0.
Month: April 2009;
Highway funds: $9.8 million;
Public transportation funds: 0.
Month: May 2009;
Highway funds: $71.1 million;
Public transportation funds: $56.7 million.
Month: June 2009;
Highway funds: $264.2 million;
Public transportation funds: $196.0 million.
Month: July 2009;
Highway funds: $676.2 million;
Public transportation funds: $498.1 million.
Month: August 2009;
Highway funds: $1,436.8 million;
Public transportation funds: $789.2 million.
Month: September 2009;
Highway funds: $2,376.2 million;
Public transportation funds: $958.2 million.
Month: October 2009;
Highway funds: $3,660.7 million;
Public transportation funds: $1,185.3 million.
Month: November 2009;
Highway funds: $4,627.0 million;
Public transportation funds: $1,374.3 million.
Month: December 2009;
Highway funds: $5,603.0 million;
Public transportation funds: $1,611.5 million.
Month: January 2010;
Highway funds: $6,039.1 million;
Public transportation funds: $1,795.2 million.
Month: February 2010;
Highway funds: $6,434.3 million;
Public transportation funds: $2,003.3 million.
Month: March 2010;
Highway funds: $6,987.6 million;
Public transportation funds: $2,421.8 million.
Month: April 2010;
Highway funds: $7,607.5 million;
Public transportation funds: $2,754.4 million.
Source: GAO analysis of DOT data.
[End of figure]
Reimbursements slowed primarily as a result of delays in construction
work from poor weather conditions in late 2009 and early 2010 in many
states around the nation. FHWA and state officials stated that the
northern states typically tend to have a reduced period of contract
activity during the winter. For example, according to Massachusetts
DOT officials, their typical rate of reimbursements is not linear.
Normally, much more of their highway construction work occurs during
the spring and summer months, which results in about 42 percent of
highway reimbursements occurring in the fall months as contractors
complete work and submit bills to the state. Several state DOT
officials expect to have increased reimbursement rates through
September 2010, but an increase is dependent on two factors: (1) good
weather that will allow increased construction work and (2)
contractors submitting their invoices in a timely manner after
projects are completed.
Funds Were Primarily Obligated for Projects Like Improving Pavement
and Bridge Conditions, but Assessing the Impact of These Projects on
the Transportation System Remains to Be Done:
States Used Funds Primarily for Repaving Projects and Addressing
Maintenance Backlogs:
States and transit agencies continue to use Recovery Act funding to
improve the condition of the transportation system. Nationwide, about
half (or over $12 billion) of the highway infrastructure Recovery Act
funds were obligated primarily for pavement improvement
reconstruction, rehabilitation, and resurfacing. About half of the
public transportation funds (or over $4 billion) has been obligated
for transit infrastructure construction, such as upgrading power
substations or enhancing bus shelters.
Figure 4: Nationwide Recovery Act Highway and Public Transportation
Obligations by Project Type:
[Refer to PDF for image: 2 pie-charts]
Highway obligations:
Pavement improvement: reconstruction/rehabilitation ($6.4 billion):
25%;
Pavement improvement: resurface ($5.8 billion): 22%;
Pavement widening ($4 billion): 16%;
New road construction ($1.6 billion): 6%;
Bridge replacement ($1.3 billion): 5%;
Bridge improvement ($1.2 billion): 5%;
New bridge construction ($735 million): 3%;
Other ($4.7 billion): 18%.
Public transportation obligations:
Transit infrastructure construction ($4.4 billion): 51%;
Bus purchases and rehabilitation ($2.1 billion): 24%;
Other capital expense ($1 billion): 12%;
Preventive maintenance ($726 million): 8%;
Rail car purchases and rehabilitation ($334 million): 4%;
Operating expense ($92 million): 1%.
Source: GAO analysis of DOT data.
Notes: Highway and public transportation percentages may not add to
100 because of rounding.
"Other" includes safety projects, such as improving safety at railroad
grade crossings, and transportation enhancement projects, such as
pedestrian and bicycle facilities, engineering, and right-of-way
purchases. "Transit infrastructure construction" includes engineering
and design, acquisition, construction, and rehabilitation and
renovation activities. "Other capital expenses" includes leases,
training, finance costs, mobility management project administration,
and other capital programs. This amount includes Recovery Act funds
that were transferred from FHWA to FTA.
Highway and public transportation data are as of May 3, 2010.
[End of figure]
States and transit agencies were given added flexibility to use a
portion of Recovery Act funds to defray the costs associated with
operating their transit systems (as opposed to capital expenses),
[Footnote 73] and about 82 transit operators have used about $92
million, or about 1 percent of overall Recovery Act funding,
nationwide. FTA and transit agency officials have stated that a small
amount of Recovery Act funds were used for operating assistance
because the provision allowing this particular use was not enacted
until late June 2009--4 months after Recovery Act funding was made
available. Therefore, most transit agencies had already used their
transit funds for capital projects and programmed their operating
assistance to be paid for by other funding streams. Also, the number
of transit agencies using Recovery Act funding for operating expenses
could increase, as transit agencies may amend their grant agreements
in order to use Recovery Act funding already received for operating
expenses.
DOT Is Not Currently Assessing the Impact of Recovery Act Funds on the
Transportation System but Is Considering Ways to Better Understand and
Measure Impacts:
The goals of the Recovery Act were not only to promote economic
recovery and to preserve and create jobs but also to make investments
in transportation and other infrastructure that would provide long-
term economic benefits. However, the Recovery Act did not include
requirements that DOT or states measure the impact of funding on
highway and transit projects to assess whether these projects
ultimately produced long-term benefits.
Although DOT developed a series of performance plans, released in May
2009, to measure the impact of Recovery Act transportation programs,
these plans generally did not contain an extensive discussion of the
specific goals and measures to assess the impact of Recovery Act
projects. For example, while the plan for the highway program
contained a section on anticipated results, three of its five measures
were the percent of funds obligated and expended and the number of
projects under construction. The fourth measure was the percentage of
vehicle miles traveled on pavement on the National Highway System
[Footnote 74] rated in good condition. The plan noted before the
Recovery Act was passed that the goals were to improve such conditions
from 57 percent in 2009 to 60 percent in 2012, but the plan said that
goals for improvement with Recovery Act funds were yet to be
determined. The fifth goal was number of miles of roadway improved.
The plan reported the target for number of miles that were expected to
be improved before the Recovery Act was passed, but it said that even
with the addition of Recovery Act funds, the new target would remain
the same. In its performance plans for transit, also issued in May
2009, DOT set more specific goals, including specific numeric
estimates of how Recovery Act funds would improve the condition of the
nation's rail and bus fleets.
As we have reported, it is important for organizations both to measure
performance to understand the progress they are making toward their
goals and to produce a set of performance measures that demonstrates
results.[Footnote 75] As our prior work has noted, most surface
transportation programs lack links to the performance of the
transportation system or of the grantees, and programs in some areas
do not use the best tools and approaches--such as rigorous economic
analysis--to ensure effective investment decisions.[Footnote 76] Our
work has discussed a range of options for providing decision makers
with better analytic information for making more fully informed
investment decisions and helping ensure that projects can be evaluated
according to their results. These options range from improving the
quality of available data and modeling to better evaluating the
results of completed transportation projects and increasing use of
benefit-cost analysis.[Footnote 77]
DOT officials told us their May 2009 Program Performance Plans are
being updated and that they anticipate that both Congress and the
public will be interested in understanding the impact of Recovery Act
funds on transportation. Officials also said DOT currently maintains
several databases to which states are accustomed to reporting, and
that these databases collect information on the condition and
performance of highways, transit, and bridge systems. Officials said
they are looking for opportunities to use these data to better
understand and measure the outcomes and impact of Recovery Act
projects, but plans to do so have not been finalized. For example, the
Highway Performance Monitoring System collects data on the condition
of highways, including travel and pavement roughness data on the
National Highway System and on a sample of other roadways. FHWA
officials said they are considering whether they could determine if
Recovery Act repaving projects improved the overall condition on that
system. The National Transit Database obtains comprehensive data on
the finances and operations of transit systems as well as on the
condition of transit system revenue-vehicle assets. FTA officials are
considering whether they could determine how Recovery Act funds
affected levels of transit service, transit ridership, and changes in
the average age of transit vehicle fleets. The National Bridge
Inventory, which includes all public bridges, could help FHWA study
the impact of Recovery Act funds on the condition and performance of
the nation's bridges, including whether these funds improved the state
of repair.
Finally, DOT officials stated that benefit-cost analysis would help
DOT gain insight into the impact of Recovery Act funds. For instance,
combining outcome measures from the databases described above with
financial data that DOT maintains on expenditures across states could
be used to understand the relative benefits produced by Recovery Act
projects. Although DOT does not commonly use benefit-cost analysis to
assess the use of formula funds to states, such as those provided for
highways and transit under the Recovery Act, it does have some
experience using this tool in other programs. For example, DOT used
benefit-cost analysis as part of its process to determine the relative
value of grant applications for the Transportation Investment
Generating Economic Recovery, a discretionary grant program also
established by the Recovery Act. Similarly, DOT has a tool to
determine the cost to maintain a section of highway relative to the
cost to improve that section of road. This analysis can be used to
guide investment decisions and is also available for states to use.
Similarly, DOT has a tool to evaluate the cost of maintaining the
existing level of transit service, relative to the cost of improving
transit service, and is working on making a version of this tool
available to transit systems for use in making capital investment
decisions.
In addition to identifying opportunities to assess the impact of
Recovery Act funds, DOT also noted challenges that could limit the
scope of their assessment. First, DOT has not traditionally evaluated
the economic benefits of their projects and therefore, according to
officials, does not have sufficient data and measures to make
defensible claims about economic benefits derived from transportation
investment at the DOT level. In addition, DOT would need to collect
more extensive data from states than it does today to assess the
impact of Recovery Act funds and would need to prescribe specific
measures and methodologies for data collection. The quality of data
collection varies across states, and some states currently measure,
collect, and track extensive performance metrics, based on their
individual priorities and definitions. According to DOT officials, the
department lacks the authority to require states to provide
information that is not provided for by law.
Second, because several of DOT's databases use a sampling approach for
most roads, it may be difficult to use sampled data to parse the
impacts of specific programs like the Recovery Act. In addition, DOT
captures data on highways and transit conditions in separate databases
from data on expenditures, and these databases cannot currently be
linked and analyzed to produce comprehensive performance measures.
FHWA has a project underway that will link databases, including
finance, pavement, and bridge data, among others, to facilitate future
assessments. FTA recently received an appropriation to collect
additional data on capital asset conditions.
Finally, officials noted that separating the economic benefit of
Recovery Act funds from DOT's regular programs would be difficult.
Many transportation projects use multiple sources of funds, including
funding from one or more DOT programs, state funding sources, and
local government funding. This analysis could be further complicated
by the variety of uses of the funds by the decision-making entities
(such as states and transit authorities), DOT's ability to isolate
other causal factors in the transportation environment (such as the
number of vehicle miles traveled), variance in the impact of the
recession on various localities relative to the amount of additional
funding provided to those areas through Recovery Act programs, and
other factors. According to DOT officials, as part of the Conditions
and Performance Report, DOT regularly assesses the state of the
nation's highways and transit systems. This assessment does not
include changes in conditions or performance from one report to the
next, nor does it attribute any such changes to specific programs,
such as the Recovery Act.
States echoed concerns with respect to separating the impact of
different funding sources. For example, Colorado DOT officials
explained that they use a statewide measure to assess road quality but
typically do not connect individual projects or funding sources to
long-term systemwide metrics. New Jersey DOT officials similarly
stated that it would be difficult and potentially time consuming to
distinguish the impact of highway infrastructure improvements
supported by Recovery Act funds from the numerous local, state, and
federal funding streams. At least one state was in the process of
developing a state-based program to evaluate transportation
investments, but this program was not yet ready to begin collecting
and analyzing data. For example, the Massachusetts DOT recently
developed an Office for Performance Management that will eventually
focus on measuring the impact of the state's entire portfolio of work,
but the office is in its early stages of development, and it is
uncertain as to when the office will be able to produce results.
Recovery Act Maintenance-of-Effort Requirement Was Challenging to
Implement and Warrants Evaluation If Congress Wishes to Apply Such a
Requirement in Future Legislation:
The Recovery Act required governors to certify that their states will
maintain the level of spending for the types of transportation
projects funded by the Recovery Act that it planned to spend the day
the Recovery Act was enacted. As part of this certification, the
governor of each state was required to identify the amount of state
funds planned to be spent from February 17, 2009, through September
30, 2010.[Footnote 78]
Maintenance-of-Effort Certification Process Was Challenging but Is
Nearing Completion:
The maintenance-of-effort requirement has proven challenging for DOT
and states to implement. Although the Recovery Act gave the states 30
days after enactment of the act to provide their certifications, most
states have only recently completed a maintenance-of-effort
certification that DOT finds fully acceptable (in compliance with the
statute and DOT guidance) for highways. DOT had not yet completed its
review for transit and other programs covered by the requirement when
we completed our work, but officials stated they expect to complete
all reviews by June 1, 2010. As we reported in March 2010, in
reviewing earlier certifications, DOT found inconsistencies and
confusion among the states, including how states calculated their
planned expenditures and how states treated funding related to in-kind
contributions, bond proceeds, and aid to local governments. Beginning
in March 2010, 38 states submitted revised certifications; these
revised certifications often contained new categories of expenditures
that were not included in the earlier certifications. DOT had
completed its review of the highways portion of the revised
certifications but had not yet completed its review for transit and
other programs covered by the requirement when we completed our work.
Until DOT completes its reviews, states will not know with certainty
the expenditure amount they need to meet by the September 30, 2010
deadline. In addition, as we reported in March 2010, in revising their
certifications, states were in the position of determining what they
planned to expend over a year ago and adjust these planned expenditure
levels to reflect guidance from DOT, but could not adjust for the
economic and budgetary changes states have experienced over the last
year.
We have reported on the process DOT used to implement the maintenance-
of-effort requirement in our previous reports. Figure 5 provides an
overview of that process.
Figure 5: Timeline of Maintenance-of-Effort Reporting and Decisions:
[Refer to PDF for image: timeline]
February 17, 2009:
The American Recovery & Reinvestment Act Enactment, 2009 (ARRA) [Pub.
L. 111-5] was signed into law. States were apportioned $26.7 billion
for highway investment funds and $8.4 billion for public ransportation
funds.
February 27, 2009:
Guidance #1: DOT directed State Governors to identify the amount of
funds states planned to expend as of February 17, 2009.
March 19, 2009:
1st Certification Deadline: States submit their first maintenance-of-
effort certifications identifying the amount of funds they planned to
expend from February 17, 2009 through September 30, 2010.
April 22, 2009:
Guidance #2: Informed states that conditional or explanatory
certifications are not permitted.
May 13, 2009:
Guidance #3: Informed states to include in-kind contributions but not
soft-matches, such as toll credits, in maintenance of effort
certifications.
May 22, 2009:
2nd Recertification Deadline: 48 states amend their maintenance-of
effort certification by removing conditional and explanatory language
as directed by DOT guidance.
June 26, 2009:
Guidance #4: Informed states to include expenditures on projects from
bond proceeds but not from the repayment of bonds and clarified what
was considered an in-kind contribution.
July 1, 2009:
Guidance #5: Informed states to include all funds that the state and
local government planned to expend on projects that are of the type
that could be funded using Recovery Act dollars. This guidance
substantially increased the certification amount of many states.
September 24, 2009:
Guidance #6: Clarified types of projects that are funded by the
appropriation and provided more detailed guidance on local
expenditures and reporting.
February 9, 2010:
Guidance #7: Clarified how states should calculate their planned and
actual levels of expenditures and advised states to submit amended
certification addressing prior guidance and corrected calculations for
highway programs.
March 11, 2010:
3rd Recertification Deadline: 37 states amend their maintenance–of-
effort certifications to align with previous guidance on how to
calculate planned and actual levels of expenditures as directed by DOT
guidance. One state submits an amended certification later.
About 7 months:
Period between the 3rd recertification deadline and the maintenance-of-
effort expenditure deadline.
September 30, 2010:
Deadline for states to have met their certified expenditure amounts or
be prohibited from participating in the August 2011 redistribution of
funds.
Source: GAO analysis of Department of Transportation guidance.
[End of figure]
DOT Does Not Have Timely Information on State Progress toward
Maintenance-of-Effort Requirements:
In March 2010, we reported that timely information on the progress
states are making in meeting the maintenance-of-effort requirements
could better inform policymakers' decisions on the usefulness and
effectiveness of the maintenance-of-effort requirements and of
including similar provisions in future legislation. Timely information
is also important to assessing the impact of Recovery Act funding and
whether it achieves its intended effects of providing countercyclical
assistance and increasing overall spending.
Although nearly 80 percent of the maintenance-of-effort time period
has expired, DOT does not have current information on the progress
states are making toward meeting their certified amounts. States are
required by the Recovery Act to periodically report actual
expenditures, and the most recent report was due on February 17, 2010.
However, 38 states had yet to revise their certification on that date.
As a result, some states calculated their February expenditure report
based on an earlier certification, while others used the March
certification as the basis for their expenditure report.
DOT officials stated they cannot compare reported expenditures to the
states' most recent maintenance-of-effort certification to assess
their progress because they do not know how many states used the older
certification and how many states used their most recent certification
to calculate their 1-year expenditures. DOT officials noted that some
states update their expenditure reports periodically. Also, DOT plans
to ask the states to update their expenditure report this fall to
reflect expenditures included in the states' most recent
certification. However, DOT officials stated that it does not have the
authority to require states to submit information outside of the
requirements established in the Recovery Act.
Our March 2010 report recommended that DOT gather timely information
on the progress states are making in meeting the maintenance-of-effort
requirements.[Footnote 79] We reported that because the Recovery Act
does not require states to again report actual expenditures until
February 2011, DOT will not make a determination as to whether states
have met their required program expenditures until around 6 months
after the maintenance-of-effort provision covered time period expires
on September 30, 2010. We recommended that DOT gather these data and
report preliminary information to Congress within 60 days of the
certified period (Feb. 17, 2009, through Sept. 30, 2010) on (1)
whether states met required program expenditures as outlined in their
maintenance-of-effort certifications; (2) the reasons that states did
not meet these certified levels, if applicable; and (3) lessons
learned from the process.
In response to our March 2010 recommendation, DOT officials partially
concurred, stating that DOT will (1) encourage states to report
preliminary data for the certified period ending September 30, 2010,
and (2) deliver a preliminary report to Congress within 60 days of the
certified period. However, DOT also noted that states are not legally
obligated to submit final actual expenditure amounts before February
17, 2011. As a result, while we are encouraged and DOT has agreed to
provide more timely information that could better inform policymakers'
decisions on the usefulness and effectiveness of the maintenance-of-
effort requirements, no assurance exists that DOT will receive the
information it needs from states to provide this information to
Congress.
Although Most of the 16 States and the District of Columbia in Our
Review Are on Track, Progress Can Be the Result of Circumstance:
Although DOT does not have national data, we obtained data from the 16
states and the District in our review to assess the progress they are
making toward meeting the required amount for their maintenance-of-
effort certification. The data show these states are on track.
[Footnote 80] As of January 31, 2010---the end of the time frame for
the most recent required state expenditure report--with 59 percent of
the maintenance-of-effort time period having expired, these states
ranged from 46 percent to 114 percent toward meeting their required
maintenance-of-effort certified expenditure amounts. In general, these
states and the District indicated they would meet their maintenance-of-
effort certification, but most faced declines in the revenues
typically used to fund transportation, which could make meeting the
required amount for their certification more challenging. For example,
our analysis showed by the end of January that Pennsylvania was about
53 percent of the way toward its certified amount[Footnote 81] The
major source of state revenue for Pennsylvania's transportation system
is the state's Motor License Fund, which includes revenues from motor
license fees and the state fuel tax. In March 2010, state officials
said that the fund is facing a $150 million revenue shortfall compared
with the February 2009 revenue projections when the Recovery Act was
enacted.
States' progress toward the certification may have more to do with
circumstances that developed after February 17, 2009, than states'
efforts to comply with maintenance-of-effort requirements. For
example, prior to February 17, 2009, the state of California canceled
a bond program it typically uses to fund transportation due to market
conditions. As a result, the state did not have to include any revenue
from this program in its maintenance-of-effort certification. However,
later in the year, bond market conditions had improved and the state
went forward with the bond sale. Because the state made this decision
after the enactment date, it does not have to include this revenue in
its maintenance-of-effort certification, even though the state has had
to revise the certification for other reasons. California officials
said that the program will raise enough revenue to allow the state to
easily meet its maintenance-of-effort certification despite other
state highway revenues being down.
Similarly, in January 2009, the Arizona legislature took action to
address revenue shortfalls in the state's Highway User Revenue Fund--a
fund that collects motor fuel taxes, vehicle registration, and other
fees. Among the actions it took was to reduce funding for highways
that the state provided through its DOT to local governments. When the
Recovery Act was passed, Arizona was able to substitute Recovery Act
funds to pay for the aid to local governments it had previously
financed with the Highway User Revenue Fund. However, because the
budget decisions to reduce state spending on transportation were made
before the enactment date, Arizona was not required to include funding
it had typically spent in previous years in its certification.
The converse was also true for some states. States that had decreased
expenditures for some projects after the enactment date because of
situations beyond their control were not permitted to adjust their
certifications downward. For example, Illinois was required to include
a state match of $925,000 that was part of a $1.85 million federal
grant for a rail project that the state had applied for prior to the
enactment date. However, later in the year, the state learned that it
would only receive $1.55 million from the federal government, which
lowered the state's matching contribution by $150,000. Yet because
this decision was made after the Recovery Act was enacted, the state
was not allowed to lower its maintenance-of-effort certification by a
similar amount and may therefore miss the requirement by about
$150,000. Illinois is evaluating whether new state expenditures could
be credited to this type of activity to address the shortfall. State
DOT officials in Georgia and Massachusetts stated that, while they
expect to make their maintenance-of-effort certification, poor weather
this winter caused some delays in initiating construction, which will
add to the time lag in which contractors complete their work and
submit invoices. These invoices must be submitted and reimbursed by
September 30, 2010, to be included in states' maintenance-of-effort
expenditure reports.
In Addition to Timely Reporting, an Opportunity Exists to Evaluate
Lessons Learned:
A number of programs in the Recovery Act accounting for about $100.5
billion in Recovery Act appropriations contained new maintenance-of-
effort provisions spanning the areas of transportation, education,
housing, and telecommunications. These are important mechanisms to
help ensure that federal economic stimulus spending achieves its
intended effect of providing countercyclical assistance and increasing
overall spending and investment. These mechanisms are particularly
important in the highway program, as we have found in previous work
that increasing federal highway funds influences states and localities
to substitute federal funds for funds they otherwise would have spent
on highways.
Maintenance-of-effort provisions of this scope have never been
attempted before in the surface transportation program. Consequently,
policymakers may have some interest in understanding "lessons learned"
and to consider similar provisions in either future stimulus
legislation or as part of the regular DOT program. As our prior
reports have said, the challenges to implementing a maintenance-of-
effort provision have been tremendous, to the point that as of May
2010, 15 months into the 19-1/2 month reporting time frame provided
for in the Recovery Act, not all states have final certifications in
place that DOT finds fully acceptable. As we have reported, these
implementation challenges, coupled with the fiscal challenges states
have faced raise questions as to whether the maintenance-of-effort
provision will achieve its intended purpose of preventing states from
substituting federal funds for some of their planned spending on
transportation programs. That said, this provision required DOT,
through its FHWA division offices in each state, to invest a
significant amount of time and to work closely with its state partners
to ensure consistency across states on how compliance with the act
would be certified and reported. As a result, much of the work--such
as developing compliance and oversight processes, reporting
requirements, and identifying data for tracking purposes--that can
ensure smoother implementation of similar provisions in the future has
been accomplished. DOT is in an advantageous position to understand
lessons learned--what worked, what did not, and what could be improved
in the future.
In addition to implementation challenges, issues we have raised in
this and other reports highlight concerns about the design of the
Recovery Act maintenance-of-effort requirement. Through our
discussions with federal and state officials, a number of lessons
learned and suggestions for improvement emerged. Some officials
suggested an averaging of prior expenditures and commitments would be
more workable than a point-in-time estimate, although this might also
commit states to spending levels that were established when the
economy was stronger. A number of officials raised the issue of
compliance being measured by expenditures (outlays). Highway projects
can take a number of years to build, and, as such, expenditures in any
given year generally represent not only a commitment of funds that
year but also commitments made potentially for as long as 4 to 5 years
prior. Also, outlays are subject to some uncertainty: As Georgia and
Massachusetts officials reported, although they expect to make their
maintenance-of-effort commitment, meeting the commitment was made more
challenging because outlays slowed during the winter of 2009 to 2010.
Another approach would be to include an escape clause that would allow
states to adjust their commitment if state revenues dip below a
predetermined point.
Besides these challenges, an understanding of the impact of the
policy--how the maintenance-of-effort requirements affected state
budgets and decision making--would be useful. The decline in states'
fiscal positions appears likely to affect many states' ability to meet
the maintenance-of-effort requirement; however, programs subject to a
maintenance-of-effort requirement may have fared better than those
lacking such a requirement in state decision making. It would be worth
exploring, for example, whether and how states made trade-offs between
programs. Reducing budgets for some programs, such as health care and
prisons, can be difficult even in tough economic times.
Publicly Available Data Currently Overstate the Amount of Recovery Act
Funds Directed to Economically Distressed Areas:
Another Recovery Act requirement is to give priority to projects that
can be completed in 3 years and are located in economically distressed
areas. These areas are defined by the Public Works and Economic
Development Act of 1965, as amended. To qualify as an economically
distressed area, an area must (1) have a per capita income of 80
percent or less of the national average; (2) have an unemployment rate
that is, for the most recent 24-month period for which data are
available, at least 1 percent greater than the national average
unemployment rate; or (3) be an area that the Secretary of Commerce
determines has experienced or is about to experience a "special need"
arising from actual or threatened severe unemployment or economic
adjustment problems resulting from severe short-or long-term changes
in economic conditions.
We previously reported instances of states developing their own
eligibility requirements for economically distressed areas using data
or criteria not specified in the Public Works and Economic Development
Act.[Footnote 82] State officials told us they did so to respond to
rapidly changing economic conditions, and, according to DOT officials,
several states found that the data specified in the Public Works and
Economic Development Act failed to recognize areas that suffered
severe economic disruption, in part due to the difficulty in obtaining
current data. Three states in our review--Arizona, California, and
Illinois--developed their own eligibility requirements or applied a
special-need criterion that would have increased the number of
counties being designated as economically distressed. As we reported
in March 2010,[Footnote 83] widespread designations of special-need
areas would give added preference to highway projects for Recovery Act
funding but would also make it more difficult to target Recovery Act
highway funding to areas that have been the most severely affected by
the economic downturn.
In early February 2010, FHWA determined that the state DOTs'
documentation for Arizona, California, and Illinois for meeting
special-need criteria--specifically, demonstrating severe job
dislocation resulting from actual or threatened business closure or
restructuring--was not consistent with FHWA guidance.[Footnote 84]
However, FHWA also told these states that it would evaluate other
options for them to consider in determining whether an area should be
classified as economically distressed using the special-need criteria.
According to DOT officials, the analysis of other options for the
three states is complete; however, they declined to discuss these
options with us because the matter was under review.
Prior to FHWA's decision, Arizona, California, and Illinois coded
these projects in the Recovery Act Data System as being in
economically distressed areas. These states have not changed the
status of these projects because DOT advised states no change was
necessary until FHWA completes its evaluation of other options. As a
result, information currently available to the public and disseminated
by DOT on the number of projects and funding directed to economically
distressed areas is overstated in the Recovery Act Data System. For
example, in California, we identified 219 projects with an estimated
cost of $1.1 billion[Footnote 85] coded as being in economically
distressed areas that currently should not be counted as such.
California intends to submit additional data to FHWA once FHWA issues
additional guidance on the types of data the state should submit;
thus, decisions about whether these areas will ultimately be
considered economically distressed are not final. However, information
available to the public currently overstates the amount of Recovery
Act funds benefiting economically distressed areas.
Recommendations:
To better understand the impact of Recovery Act investments in
transportation, we believe that the Secretary of Transportation should
ensure that the results of these projects are assessed and a
determination made about whether these investments produced long-term
benefits. Specifically, in the near term, we recommend the Secretary
direct FHWA and FTA to determine the types of data and performance
measures they would need to assess the impact of the Recovery Act and
the specific authority they may need to collect data and report on
these measures.
To ensure that the public has accurate information regarding
economically distressed areas, we also recommend that the Secretary of
Transportation direct FHWA to issue guidance to the states advising
them to correct information in the Recovery Act Data System to reflect
current DOT decisions concerning the special-need criteria. Projects
in areas currently lacking documentation that these areas meet the
criteria to be designated as economically distressed should be
reported as projects in noneconomically distressed areas.
DOT concurred in part with our March 2010 recommendation that it
gather and report more timely information on the progress states are
making in meeting the maintenance-of-effort requirements. Because more
timely information could better inform policymakers' decisions on the
usefulness and effectiveness of the maintenance-of-effort requirements
and is important to assessing the impact of Recovery Act funding in
achieving its intended effect of increasing overall spending, we are
leaving this recommendation open and plan to continue to monitor DOT's
actions.
Edward Byrne Memorial Justice Assistance Grant Funds Continue to Help
States Support Law Enforcement Priorities:
The Recovery Act provides $2 billion in Edward Byrne Memorial Justice
Assistance Grant (JAG) Program funds in fiscal years 2009 and 2010 to
state and local governments to be used over the program's 4-year grant
period. JAG funds can be used to support a range of activities in
seven broad program areas covering (1) law enforcement; (2)
prosecution and courts; (3) crime prevention and education; (4)
corrections; (5) drug treatment and enforcement; (6) program planning,
evaluation, and technology improvement; and (7) crime victim and
witness programs.
The Department of Justice's Bureau of Justice Assistance (BJA)
allocates JAG funds based on a statutory formula determined by
population and violent crime statistics, in combination with a minimum
allocation to ensure that each state and eligible territory receives
some funding. BJA awards 60 percent of a state's allocation directly
to the state, and the state, in turn, must allocate a formula-based
share of these funds to its local governments. BJA awards the
remaining 40 percent of the state's allocation directly to eligible
units of local government within the state. Table 6 shows BJA's
Recovery Act JAG formula-based state allocations for the 16 states and
the District of Columbia, as well as BJA's Recovery Act JAG direct
allocations to localities.
Table 6: Recovery Act Edward Byrne Memorial JAG Program's State
Allocations, Local Allocations, and Total Allocations for 16 States
and the District:
State: Arizona;
Recovery Act JAG state allocation[A]: $25,306,956;
Recovery Act JAG direct local allocation[B]: $16,659,310;
Recovery Act total allocation: $41,966,266.
State: California;
Recovery Act JAG state allocation[A]: $135,641,945;
Recovery Act JAG direct local allocation[B]: $89,712,677;
Recovery Act total allocation: $225,354,622.
State: Colorado;
Recovery Act JAG state allocation[A]: $18,323,383;
Recovery Act JAG direct local allocation[B]: $11,534,788;
Recovery Act total allocation: $29,858,171.
State: District of Columbia;
Recovery Act JAG state allocation[A]: $11,741,539;
Recovery Act JAG direct local allocation[B]: N/A[C];
Recovery Act total allocation: $11,741,539.
State: Florida;
Recovery Act JAG state allocation[A]: $81,537,096;
Recovery Act JAG direct local allocation[B]: $53,582,326;
Recovery Act total allocation: $135,119,422.
State: Georgia;
Recovery Act JAG state allocation[A]: $36,210,659;
Recovery Act JAG direct local allocation[B]: $22,835,094;
Recovery Act total allocation: $59,045,753.
State: Illinois;
Recovery Act JAG state allocation[A]: $50,198,081;
Recovery Act JAG direct local allocation[B]: $33,465,389;
Recovery Act total allocation: $83,663,470.
State: Iowa;
Recovery Act JAG state allocation[A]: $11,777,401;
Recovery Act JAG direct local allocation[B]: $6,925,317;
Recovery Act total allocation: $18,702,718.
State: Massachusetts;
Recovery Act JAG state allocation[A]: $25,044,649;
Recovery Act JAG direct local allocation[B]: $15,749,229;
Recovery Act total allocation: $40,793,878.
State: Michigan;
Recovery Act JAG state allocation[A]: $41,198,830;
Recovery Act JAG direct local allocation[B]: $25,807,514;
Recovery Act total allocation: $67,006,344.
State: Mississippi;
Recovery Act JAG state allocation[A]: $11,199,389;
Recovery Act JAG direct local allocation[B]: $7,194,656;
Recovery Act total allocation: $18,394,045.
State: New Jersey;
Recovery Act JAG state allocation[A]: $29,754,315;
Recovery Act JAG direct local allocation[B]: $17,994,820;
Recovery Act total allocation: $47,749,135.
State: New York;
Recovery Act JAG state allocation[A]: $67,280,689;
Recovery Act JAG direct local allocation[B]: $43,311,580;
Recovery Act total allocation: $110,592,269.
State: North Carolina;
Recovery Act JAG state allocation[A]: $34,491,558;
Recovery Act JAG direct local allocation[B]: $21,853,798;
Recovery Act total allocation: $56,345,356.
State: Ohio;
Recovery Act JAG state allocation[A]: $38,048,939;
Recovery Act JAG direct local allocation[B]: $23,596,436;
Recovery Act total allocation: $61,645,375.
State: Pennsylvania;
Recovery Act JAG state allocation[A]: $45,453,997;
Recovery Act JAG direct local allocation[B]: $26,918,846;
Recovery Act total allocation: $72,372,843.
State: Texas;
Recovery Act JAG state allocation[A]: $90,295,773;
Recovery Act JAG direct local allocation[B]: $57,234,982;
Recovery Act total allocation: $147,530,755.
Source: Bureau of Justice Assistance data.
[A] Due to rounding, these amounts may not exactly equal 60 percent of
the total JAG award.
[B] Due to rounding, these amounts may not exactly equal 40 percent of
the total JAG award.
[C] For the District of Columbia, all JAG funds are awarded directly
to the District.
[End of table]
State and Local JAG Recipients Have Received Their Recovery Act JAG
Awards and Have Obligated Funds:
In July 2009, we reported that the 16 states and the District of
Columbia in our review had not obligated their JAG awards, in part
because they were determining how the funds would be used and passed
through to local entities. In preparation for our May 2010 report, we
visited 7 of these states and found that all 7 had obligated their
Recovery Act JAG awards and reported planned uses that are consistent
with their states' priorities and BJA's allowable uses of JAG funds.
[Footnote 86] Table 7 provides some examples of planned uses of JAG
funds for these states.
Table 7: Examples of Planned Uses of Recovery Act JAG Funds for Seven
States:
State: Arizona;
Examples of planned uses of JAG funds reported by state and local
officials: To support drug task forces, prosecution projects, and
forensics. According to state officials, without Recovery Act funds,
the state faced budget cuts and would have had to severely cut or
discontinue at least half of the projects previously funded with JAG
money.
State: California;
Examples of planned uses of JAG funds reported by state and local
officials: To support local gang and drug reduction efforts, prevent
human trafficking, pursue a regional approach to reducing
methamphetamine production and distribution, and develop
communications infrastructure.
State: Illinois;
Examples of planned uses of JAG funds reported by state and local
officials: To purchase law enforcement equipment, such as in-car video
systems, and fund efforts and programs that, according to local
officials, in the absence of JAG grants, would have gone unfunded.
These efforts and programs include, for example, support for overtime
wages of law enforcement agents, mentoring programs and drug treatment
programs, domestic violence programs, and specialty courts for
nonviolent, repeat offenders.
State: Massachusetts;
Examples of planned uses of JAG funds reported by state and local
officials: According to local officials, to supplement current state
public safety programs, retain jobs, and support core services,
including supporting local police departments through funding officer
and crime analyst salaries in localities adversely affected by local
budget conditions.
State: New York;
Examples of planned uses of JAG funds reported by state and local
officials: To support the implementation of recent drug law reform,
including helping assistant district attorneys in reducing the number
of prison commitments, and continue recidivism pilot programs.
State: Ohio;
Examples of planned uses of JAG funds reported by state and local
officials: According to local officials, to largely support personnel
costs, especially the retention of police officers who would otherwise
have been laid off given adverse local budget conditions. Additional
funds were also used to support the purchase of law enforcement
equipment such as a license plate reader.
State: Pennsylvania;
Examples of planned uses of JAG funds reported by state and local
officials: To purchase law enforcement equipment and support personnel
costs related to district attorneys' and probation offices. According
to state officials, to also support criminal justice priorities, such
as juvenile services programs that were adversely affected by budget
cuts. Additional funds were used to support initiatives such as
records management improvement, prisoner re-entry programs, and at-
risk youth employment programs.
Sources: State and selected local Recovery Act JAG administering
agencies.
[End of table]
The Department of Justice's Office of Justice Programs Continues to
Oversee, Monitor, and Measure Results Achieved by Recovery Act JAG
Funds:
As we reported in July 2009, BJA and the Office of Justice Programs
(OJP)--which oversees BJA and establishes minimum standards for grant
monitoring--have reported using many of its existing grant award and
oversight processes and procedures to oversee, measure, and monitor
Recovery Act JAG funds.[Footnote 87] For example, OJP conducts
programmatic, administrative, and financial monitoring of its
grantees.[Footnote 88] This monitoring, among other activities,
includes reviews of grantee compliance with program guidelines, as
well as on-site monitoring of grantee performance. According to OJP
officials, should they determine that a recipient is spending money
outside of allowable uses or committing fraud, the officials have
several options for action. For example, depending on the severity of
the grantee's misuse of OJP funds or fraud, OJP may suspend or
terminate a grant. If the underlying offense warrants further action,
OJP can refer the recipient or its officials to the Department of
Justice debarment official for consideration of a governmentwide
suspension or debarment.[Footnote 89] Grant recipients that spend
money outside of allowable uses may have funds temporarily frozen and
reimbursements withheld. Additionally, OJP may refer instances to the
Department of Justice's Office of Inspector General (OIG) Audit
Division or its Fraud Detection Office. According to OJP officials, as
part of any type of DOJ or OIG audit or investigation, recipients are
required to develop and implement corrective action plans that address
any noncompliance issues noted. Recipients that do not address
noncompliance issues are designated as high risk and are subject to
sanctions on current or future awards.
As part of its monitoring efforts, OJP has reported plans to conduct
on-site monitoring of no less than 30 percent of open, active Recovery
Act grants and conducts routine assessments of recipient reporting as
required under the act. For example, OJP conducted its first on-site
monitoring of a Recovery Act JAG recipient in the city of Lakewood,
Colorado, in November 2009, which, according to OJP's report, did not
result in any significant findings or recommendations for corrective
actions. OJP also monitors reporting submitted by Recovery Act grant
recipients to a nationwide data collection system at
www.federalreporting.gov and conducts a review of recipient
information before it is publicly posted on the Recovery.gov Web site
each quarter.
In addition to two performance measures on the number of jobs created
and preserved that are required under the Recovery Act recipient
reporting requirements, OJP requires JAG grantees to report quarterly
on additional performance measures.[Footnote 90] Each performance
measure is associated with one or more activities within the seven JAG
program areas. For example, if JAG Recovery funds are used to support
a drug treatment program, the grantee would be required to report on
the number of participants who completed the services, among other
measures. In addition, recipients must respond to annual narrative
questions that ask, among other things, about accomplishments,
problems, or barriers the recipient may have encountered, planned
activities, and any fiscal or programmatic changes to the recipients'
original application. According to BJA officials, they plan to analyze
performance measurement data to better determine the usage of Recovery
Act JAG funding. We previously reported that BJA has also developed an
online performance measurement tool (PMT) for JAG grantees to use to
report data. According to BJA, the PMT was refined during the yearlong
review that ended in March 2010, and about three-quarters of the
grantees are using the new PMT as of May 3, 2010. We will continue
monitoring the impact and use of the new reporting tool.
DOJ's OJP Office Conducts Grant Monitoring through Progress Reports
and Site Visits:
JAG grant recipients are required to submit an annual programmatic
report and quarterly financial status reports to BJA. In addition, JAG
grantees are required to meet quarterly Recovery Act recipient
reporting requirements. Grantees are also expected to provide
quarterly progress reports on programmatic performance measures on
activities funded by the Recovery Act, using BJA's PMT. OJP also
conducts grantee site visits to ensure compliance with grant terms and
conditions. In addition, the DOJ Office of Inspector General has made
Recovery Act oversight a priority and has issued five reports on the
Recovery Act involving JAG, addressing aspects of the awards process
and improving transparency.[Footnote 91]
COPS Hiring Recovery Program Enhances Community Policing Efforts,
though Some Recipients Expressed Concern about the Impact of Fiscal
Challenges on Long-Term Police Officer Retention:
The Recovery Act's Community Oriented Policing Services (COPS) Hiring
Recovery Program (CHRP) is a competitive grant program administered by
DOJ that provided $1 billion in fiscal year 2009 funding to law
enforcement agencies to create and preserve jobs and to increase
community policing capacity and crime-prevention efforts. CHRP grants
to local law enforcement agencies provide 100 percent funding for
approved entry-level salaries and benefits for 3 years for newly
hired, full-time sworn police officers.[Footnote 92] In particular,
grantees can use CHRP funds to fill existing, unfunded vacancies or to
rehire officers who have been laid off, or are scheduled to be laid
off, as a result of budget cuts. At the conclusion of the CHRP grant
term, grantees must retain all sworn police officer positions funded
through CHRP for at least 1 year. Unlike previous COPS program grants
that predate the Recovery Act, CHRP does not impose a local fund
matching requirement.[Footnote 93]
To distribute CHRP funds, DOJ's COPS developed an open, competitive
solicitation for all local, state, and federally recognized tribal law
enforcement agencies that have primary law enforcement authority. In
April 2009, 7,272 law enforcement agencies responded to the
solicitation and submitted applications requesting $8.3 billion to
fund more than 39,000 officer positions. By July 2009, DOJ awarded
CHRP funds to 1,046 agencies and funded 4,699 positions from the
available $1 billion. According to DOJ officials, COPS did not deny
the nonfunded applications but rather retained them for future funding
should additional funds become available.
In its award solicitation, COPS officials requested information from
applicants on fiscal health, crime rates, and community policing-
related plans.[Footnote 94] Fiscal health factors accounted for 50
percent of the total score, and reported crime and planned community
policing activities accounted for 50 percent of the final score.
According to DOJ officials, this 50-50 split strikes a balance between
the purposes of the Recovery Act, which highlights the role that
community policing plays in economic recovery, and the underlying COPS
statute and historical mission of supporting public safety and
community policing. The results of the scoring were made available for
review on the COPS Web site, so that localities (including those that
were not funded) could see how they scored.
Under the CHRP statutory provisions, half of award funds are to be
made to agencies in communities with populations greater than 150,000
and half are to be made to agencies in communities with populations of
150,000 or less. In addition, at least one-half of 1 percent of the
hiring funding available (in this case $5 million) was allocated to
each state or territory with eligible applicants. All agencies were
also capped at receiving an award to fund no more than 5 percent of
their current actual sworn force strength as reported in their
application, up to a maximum of 50 officers.
The 16 states and the District of Columbia in our review received a
total of 532 awards funding 2,896 officers with a total value of
$674,262,410 (see table 8). A few localities received awards that
would fund the maximum of 50 sworn police officers, but most awards
were for smaller numbers of officers.
Table 8: Recovery Act Funding Awarded through CHRP for 16 states and
the District:
State: Arizona;
CHRP awards: 13;
Officers: 56;
Award total in state: $12,632,168.
State: California;
CHRP awards: 109;
Officers: 649;
Award total in state: $211,192,695.
State: Colorado;
CHRP awards: 13;
Officers: 23;
Award total in state: $5,019,925.
State: District of Columbia;
CHRP awards: 1;
Officers: 50;
Award total in state: $12,146,550.
State: Florida;
CHRP awards: 66;
Officers: 428;
Award total in state: $87,873,220.
State: Georgia;
CHRP awards: 48;
Officers: 184;
Award total in state: $31,758,831.
State: Illinois;
CHRP awards: 21;
Officers: 106;
Award total in state: $25,867,708.
State: Iowa;
CHRP awards: 5;
Officers: 22;
Award total in state: $5,085,712.
State: Massachusetts;
CHRP awards: 13;
Officers: 131;
Award total in state: $28,984,695.
State: Michigan;
CHRP awards: 46;
Officers: 160;
Award total in state: $34,587,894.
State: Mississippi;
CHRP awards: 20;
Officers: 41;
Award total in state: $5,055,231.
State: North Carolina;
CHRP awards: 50;
Officers: 202;
Award total in state: $30,956,114.
State: New Jersey;
CHRP awards: 18;
Officers: 123;
Award total in state: $26,813,422.
State: New York;
CHRP awards: 12;
Officers: 96;
Award total in state: $19,931,056.
State: Ohio;
CHRP awards: 47;
Officers: 336;
Award total in state: $79,294,927.
State: Pennsylvania;
CHRP awards: 19;
Officers: 93;
Award total in state: $20,163,683.
State: Texas;
CHRP awards: 31;
Officers: 196;
Award total in state: $36,898,579.
State: Total for 16 states and the District of Columbia;
CHRP awards: 532;
Officers: 2,896;
Award total in state: $674,262,410.
Source: GAO analysis of Recovery Act CHRP awards.
[End of table]
CHRP Funds Have Facilitated Hiring and Helped Avoid Layoffs:
We visited six states and the District of Columbia to specifically
discuss the implementation of CHRP. [Footnote 95] Overall, we found
that local law enforcement agencies have used CHRP grants to hire
additional officers and enhance their community policing efforts. In
California, for example, CHRP funds allowed Los Angeles to hire 50
officers and start academy classes to put new officers on the street
to address the city's gang problems. In the District of Columbia, 49
new recruits are expected to graduate from training at the
Metropolitan Police Academy in August 2010, which should enable the
District to increase the number of officers on patrol in the
community. According to District of Columbia Police Department
officials, the CHRP-funded police officers will be assigned to
neighborhood patrols and work closely with community members to fight
crime. In Pennsylvania, the Philadelphia Police Department was able to
start 31 new officers at its training academy and place an additional
19 new officers with previous experience into a shorter training
program.
Communities receiving smaller awards generally placed newly hired
officers into specific community policing settings. In New Jersey,
Trenton officials said that the 18 positions filled under the CHRP
grant are expected to enhance the police department's community
policing efforts by going beyond core functions to include
implementing foot and bike patrols in high-crime areas, having
officers attend community events, and generally increasing police
presence, which they believe will deter criminals and reduce overall
crime. In Harrisburg, Pennsylvania, 8 new officers are to be assigned
to foot and bike patrol in designated high-crime areas when they
complete their training. In Arizona, Flagstaff applied for and
received CHRP funding for 6 police officers. As of February 1, 2010, 3
officers had begun duty on the Flagstaff police force and 3 were at
the police academy. According to Flagstaff officials, CHRP funds for
staffing for the Drug Abuse Resistance Education program saved it from
elimination.
In other localities, law enforcement agencies have used CHRP funding
to prevent layoffs. For example, in Toledo, Ohio, city officials said
they were planning to retain 31 police officer positions through CHRP
funding. In Youngstown, officials stated that the city uses the CHRP
award to retain 9 additional officers within the police department who
would otherwise have been laid off. Massachusetts officials also
indicated that several cities used CHRP funds to avoid police layoffs.
In Florida, Orlando officials reported they used CHRP funds to restore
15 of the 29 officer positions originally cut from their current 2009-
2010 budget. In Arizona, Mesa is currently researching the possibility
of requesting a grant modification so that it can retain 25 officers
rather than hire 25 new ones since budget cuts occurred after the
original application for funds was submitted.
Local Officials Are Generally Confident They Can Retain Officers Hired
under CHRP, but Some Expressed Concerns:
While many officials were confident they would be able to meet the
commitment to fund positions created or preserved through CHRP for at
least 1 year after the 3-year CHRP grant term expires, law enforcement
officials in some locations with whom we spoke were less sure.
Officials in several localities (including East Orange and Trenton,
New Jersey) expect they will be able to sustain funding with general
revenues and with predicted attrition within their departments. In
addition, officials from two of the localities we visited--Mesa and
Flagstaff, Arizona--did not express concerns with the retention
requirement. On the other hand, officials in at least five localities
in different states expressed concerns about how they are going to
fund positions for the officers hired with CHRP grants after the
federal funds run out, and they told us they have begun strategizing
to ensure a smooth transition. In Pennsylvania, for example,
Harrisburg officials speculated that financial difficulties may affect
the city's ability to fund the positions after the award ends. In
particular, Harrisburg officials said they may need to leave vacant
officer positions unfilled and use newly budgeted money to cover
salaries for the CHRP positions already filled. In Florida, Orlando
officials said they are still working on strategies to determine how
to pay for the 15 officers funded by the CHRP grant after the program
ends. Notably, at the conclusion of CHRP, agencies that fail to retain
the additional officer positions awarded under the program may be
ineligible to receive future COPS grants for a period of 1 to 3 years.
DOJ's COPS Conducts Grant Monitoring through Progress Reports and Site
Visits:
CHRP grant recipients are required to periodically submit program
progress reports and financial status reports to COPS. In addition,
CHRP grantees are required to meet Recovery Act Section 1512 reporting
requirements every quarter. Grantees are also expected to provide
quarterly progress reports describing how CHRP funding is being used
to assist the jurisdiction in implementing its community policing
strategies. COPS also conducts grantee site visits to ensure
compliance with grant terms and conditions. In addition, the DOJ
Office of Inspector General (OIG) issued a report in mid-May 2010,
assessing COPS's selection process for CHRP recipients. According to
the OIG's report, technical inaccuracies in the COPS's scoring process
at DOJ prevented 34 grantees from receiving CHRP grants and allowed 45
CHRP grantees to receive awards when they should not have. In
addition, six grantees received more officer positions than they
should have and six received fewer officer positions. Further, amidst
other shortcomings, the OIG found weaknesses in the procedures COPS
used to identify inflated crime statistics in CHRP applications. In
sum, the OIG made seven recommendations to COPS. COPS concurred with
each and agreed to take the necessary remedial steps. In particular,
COPS has agreed to apply the corrected scoring formulas to the CHRP
application list and incorporate additional steps to its grantee
selection process for fiscal year 2010 grants to ensure those
applicants and grantees that were negatively affected by the
inaccurate formulas are awarded appropriate fiscal year 2010 funds.
States Used Recovery Act Funds to Increase Training for WIA Dislocated
Workers, but National Information on Spending Is Limited:
Introduction:
The Recovery Act provides an additional $1.25 billion in funds for
Workforce Investment Act (WIA) Dislocated Worker Program activities.
Administered by the Department of Labor (Labor), the WIA Dislocated
Worker Program is designed to provide workers who have been laid off,
or notified that they will be laid off, with employment and training
services to help them find employment.[Footnote 96] The Recovery Act
funds were distributed to states in the same manner as regular WIA
Dislocated Worker Program funds. Labor allots funds to states using a
statutory formula based on various measures of unemployment. As shown
in figure 6, states can reserve up to 15 percent of those funds for
statewide activities and up to 25 percent for statewide rapid response
services to dislocated workers affected by layoffs and plant closings.
States distribute at least 60 percent of the funds to local workforce
investment areas. These funds must be expended by June 30, 2011. The
local areas, through their local workforce investment boards (WIB),
have flexibility to decide how to use the funds to benefit dislocated
workers in their localities.
Figure 6: Distribution of Recovery Act Funds to the Dislocated Worker
Program:
[Refer to PDF for image: illustration]
Department of Labor:
* Individual states:
- Distributed to local workforce areas by formula (60% minimum);
- State rapid response (25% maximum);
- Statewide activities (15% maximum).
Source: Department of Labor and P.L. 105-220.
[End of figure]
Recovery Act funds can be used for all activities allowed under the
WIA Dislocated Worker Program, including core services, such as job
search and placement assistance; intensive services, such as skill
assessment and career counseling; and training services, including
occupational skills training, on-the-job training, registered
apprenticeship, and customized training. Labor advised states that
training should be a significant focus for Recovery Act funds, but
before a dislocated worker can be enrolled in training, local one-stop
centers must determine that the individual cannot get or retain a job
with the core and intensive services noted above.[Footnote 97] Labor
also advised states that needs-related payments and supportive
services, such as transportation and child-care, should be made
available for individuals who need these services to participate in
job training. WIA emphasized customer choice in training services, and
therefore most training is typically purchased by WIA participants
using individual training accounts (ITA).[Footnote 98] To facilitate
increased training for high-demand occupations, the Recovery Act
expanded the methods for providing training with Recovery Act funds,
allowing states to directly enter into contracts with institutions of
higher education or other training providers.[Footnote 99]
For this report, we conducted a nationwide Web-based survey of state
workforce agencies regarding their use of Recovery Act funds for
dislocated workers. We received a response from all 50 states and the
District of Columbia for a response rate of 100 percent. We
supplemented our survey results by conducting site visits in five
states (California, Florida, Massachusetts, Michigan, and North
Carolina), which were chosen based on factors such as the unemployment
rate, geographic region, and the amount of Recovery Act funds
allotted. During these site visits, we interviewed state and local
workforce officials for a total of five state-level agencies and 10
local WIBs. We also reviewed Labor's guidance issued to state and
local areas receiving Recovery Act funds and analyzed national
drawdown data provided by Labor.
States Have Made Progress Using Recovery Act Funds for Dislocated
Workers, However Labor's Data on Spending Activity Is Limited by State
Reporting Inconsistencies:
States have made progress in using Recovery Act funds for the WIA
Dislocated Worker Program. As of March 31, 2010, at least 34 percent
of these Recovery Act funds ($426.6 million) allotted to the states
had been drawn down nationwide, according to Labor estimates.[Footnote
100] Drawdowns represent cash transactions: funds drawn down by states
and localities to pay for program expenses.[Footnote 101] Across the
50 states and the District of Columbia drawdowns have been steadily
increasing since April of 2009 (see figure 7).
Figure 7: National Drawdown Rates for Recovery Act Funds for the WIA
Dislocated Worker Program, as of March 31, 2010:
[Refer to PDF for image: line graph]
Date: April 2009;
Percentage of funds spent: 0.08%.
Date: May 2009;
Percentage of funds spent: 0.56%.
Date: June 2009;
Percentage of funds spent: 1.91%.
Date: July 2009;
Percentage of funds spent: 4.12%.
Date: August 2009;
Percentage of funds spent: 6.44%.
Date: September 2009;
Percentage of funds spent: 9.64%.
Date: October 2009;
Percentage of funds spent: 14.01%.
Date: November 2009;
Percentage of funds spent: 18.05%.
Date: December 2009;
Percentage of funds spent: 22.63%.
Date: January 2010;
Percentage of funds spent: 26.4%.
Date: February 2010;
Percentage of funds spent: 30.17%.
Date: March 2010;
Percentage of funds spent: 34.47%.
Source: GAO analysis of Department of Labor data.
Note: According to officials, drawdown amounts for the month of
January are not available because Labor transitioned to a new computer
system.
[End of figure]
However, drawdowns do not provide a complete picture of the extent to
which states and localities have used WIA funds to provide services,
since actual payments for services can occur long after funds are
contractually obligated and services are provided. To determine how
much funding states have available for spending, Labor collects
additional information, including data on expenditures--actual cash
disbursements--and obligations--financial commitments made by states
and local areas for which payment has not yet been made.[Footnote 102]
Labor requires states to submit quarterly financial reports on both
the Recovery Act and the regular WIA-funded Dislocated Worker Program
and reviews these reports to assess states' spending activity.
Accurate data on obligations are necessary not only to monitor state
spending, but also to determine whether or not unused program funds
should be recaptured and redistributed. WIA allows Labor to recapture
funds from states that are not spending their funds within established
timeframes and redistribute them to states that have met certain
benchmarks. Specifically, Labor may recapture state funds when total
obligations do not meet 80 percent of their annual allotment.[Footnote
103] While Labor has used its recapture authority to a limited extent
in the past, Labor officials told us they do not anticipate the
recapture of Recovery Act dislocated worker funds because of the
demonstrated need for Recovery Act funding in state and local areas
across the country.
However, state-reported data on obligations are not always consistent.
For example, Labor officials said that some states may report
obligations made at the local level--the point at which services are
delivered--while other states may sometimes report funds as obligated
when they are simply allocated from the state to the local level. In a
2002 report on WIA spending, we found that states did not use a
consistent definition for obligations and that what they reported to
Labor on obligations differed.[Footnote 104] In response to our
recommendation in the 2002 report, Labor issued revised guidance that
clarified that states should include data on obligations made at the
local level in their financial reports.[Footnote 105] At the same
time, Labor provided financial training and technical assistance to
states.[Footnote 106] Despite previous efforts, during our current
review some state officials noted confusion about federal reporting
requirements on obligations. Labor officials also told us that
ensuring the consistency of state-reported data on obligations is an
ongoing grant management challenge that is complicated by employee
turnover at state and local WIA agencies, as well as state-level
financial terminology that may differ from that used by the federal
government. Labor officials said they have recently taken additional
steps to address this challenge by convening a work group of federal,
state, and local officials to discuss reporting issues and conducting
training Webinars on financial reporting requirements. In addition,
they emphasized that the state officials who certify financial reports
have a responsibility to ensure their accuracy.[Footnote 107]
While Labor officials have recently increased technical assistance to
improve the consistency of reported data, they have not assessed the
extent and nature of reporting inconsistencies for these data. Labor's
regional offices examine states' quarterly financial reports by
performing edit checks before forwarding reports to Labor's national
headquarters, and they conduct on-site comprehensive reviews of
states' WIA programs every 3 years.[Footnote 108] However, officials
said that while they review every state certified financial report for
errors and omissions, they do not routinely scrutinize the accuracy of
the obligations data reported to Labor unless they find an obvious
irregularity.[Footnote 109] Of the five states we visited during our
study, we found that Florida's quarterly reports to Labor do not
include data on obligations made at the local level, as required.
[Footnote 110] Labor officials said that they had not identified this
as an issue in past WIA comprehensive reviews and will work closely
with Florida to address the issue. Despite the issues raised during
our review, Labor officials expressed confidence in the accuracy of
state-reported data on obligations, but they acknowledged that they
have not assessed the extent or nature of reporting inconsistencies
across the states.
States Reported Using Recovery Act Funds to Increase the Number of
Dislocated Workers Served to Help Meet High Demand:
Many states said they experienced a considerable increase in demand
for services by dislocated workers due to high unemployment and few
available jobs, according to our survey. According to a number of
states that we visited, these economic conditions contributed to
serving a much higher number of dislocated workers than previous
years, which was reflected by a large increase in customer volume at
many one-stop centers. For example, Michigan state officials said that
customer volume for the typically slow month of December jumped from
7,000 customers in 2007 to 14,000 customers in December of 2009.
Given the increased demand, 48 states reported that they served more
dislocated workers with intensive services, such as comprehensive
assessments and case management, between July 1 and December 30, 2009,
than they did during the same time period in the prior year (see
figure 8). At least 43 states attributed this increase directly to
Recovery Act funds. In addition, states must provide more intensive
services--including career counseling, individual employment plans,
and assessments to determine the best training options for each
individual--in order to place more workers in training as encouraged
by Labor. As New Hampshire noted, without the additional Recovery Act
funds, they would not have had the capacity to maintain the level of
intensive services to an increased number of program participants.
Overall, states estimated that they increased intensive services by as
much as 571 percent, with a median increase of 83 percent, since the
same time period the previous year.[Footnote 111]
With regard to training, all states and the District of Columbia said
that they provided more dislocated workers with training than they did
during the same time period in the prior year (see figure 8). At least
46 states responded that this increase was linked directly to the
availability of Recovery Act funds. For example, officials in Los
Angeles, California, stated that Recovery Act funds have increased the
availability of training programs and their area's ability to train
more job seekers for high growth sectors, which would not have
otherwise been possible. Overall, states reported a median increase of
100 percent in the number of dislocated workers trained, with some
experiencing increases as much as 608 percent, compared to the same
time period the previous year.[Footnote 112]
Figure 8: State-Reported Increases in Intensive Services and Training
Compared to the Same Time Period in the Previous Year (July 1-December
30, 2009 versus July 1-December 30, 2008):
[Refer to PDF for image: 2 illustrated maps of the U.S.]
Intensive Services:
1-50 Percentage increase in intensive services provided:
Alaska:
California:
Hawaii:
Maryland:
Minnesota:
Nebraska:
Nevada:
North Carolina:
North Dakota:
Virginia:
50-100 Percentage increase in intensive services provided:
Arkansas:
Georgia:
Illinois:
Kansas:
Idaho:
Massachusetts:
Missouri:
New Jersey:
New York:
Ohio:
South Carolina:
Tennessee:
Texas:
Utah:
Washington:
100-150 Percentage increase in intensive services provided:
Maine:
Michigan:
Pennsylvania:
Vermont:
West Virginia:
Wisconsin:
150 or more Percentage increase in intensive services provided:
Alabama:
Arizona:
Connecticut:
District of Columbia:
Florida:
Kentucky:
New Hampshire:
New Mexico:
Oklahoma:
Oregon:
Rhode Island:
South Dakota:
No response:
Colorado:
Delaware:
Indiana:
Iowa:
Louisiana:
Mississippi:
Montana:
Wyoming:
Training Services:
1-50 Percentage increase in training:
Alaska:
Colorado:
District of Columbia:
Indiana:
Kansas:
Louisiana:
Minnesota:
Mississippi:
Missouri:
Nebraska:
Nevada:
North Carolina:
50-100 Percentage increase in training:
Arkansas:
California:
Georgia:
Hawaii:
Maryland:
Massachusetts:
Michigan:
South Carolina:
Texas:
Utah:
Washington:
100-150 Percentage increase in training:
Idaho:
Illinois:
Maine:
New Jersey:
Ohio:
Tennessee:
Vermont:
150 or more Percentage increase in training:
Alabama:
Arizona:
Connecticut:
Delaware:
Florida:
Kentucky:
Montana:
New Hampshire:
New Mexico:
New York:
Oklahoma:
Oregon:
Pennsylvania:
Rhode Island:
South Dakota:
Virginia:
West Virginia:
Wisconsin:
No response:
Iowa:
North Dakota:
Wyoming:
Source: GAO survey; National Atlas of the United States of America
(base map).
[End of figure]
More than half of the states reported that they set spending targets
or provided incentives or guidance to encourage local areas to use the
Recovery Act funds for training of dislocated workers. At least 30
states said that they provided incentives and/or guidance to encourage
local areas to use Recovery Act funds for training WIA dislocated
workers. For example, Washington's state legislature provided $7
million as an incentive, matching 75 percent of every regular WIA or
Recovery Act dollar used for group training, and 25 percent of every
such dollar used for ITAs. In addition, 27 states set a spending
target for training, specifying either (1) a target date by which a
certain percentage of dislocated worker funds should be spent or (2) a
target amount of dislocated worker funds that should be spent on
training activities. For example, in Arizona local areas were given a
target date of June 30, 2010 to have all funds expended, and in New
York, a state policy directed local areas to spend 50 percent of their
dislocated worker allocations on training. Of the 27 states that set a
spending target, 22 reported that they were "very likely" to meet
their target given the current rate of expenditures.
Despite widespread increases in the number of participants receiving
intensive services and training, some states reported factors that may
have prevented or limited an increase in these services. Twenty-five
states and the District of Columbia experienced a decrease in program
year 2009 WIA Dislocated Worker formula funding, and at least two
reported that the decrease in formula funding limited their ability to
increase the number of participants receiving intensive services and
training.[Footnote 113] For example, Michigan's WIA Dislocated Worker
formula funds decreased by approximately 43 percent between program
years 2008 and 2009, and as a result, Michigan state officials said
that the Recovery Act funds essentially replaced the loss in funding.
In addition, some states and local areas said that some dislocated
workers were not interested in training because they believed their
job loss was temporary or would prefer a job instead of receiving
training.
While Most States Continued to Rely Primarily on Traditional WIA
Training, Over Half the States Used Their New Flexibility to Contract
for Training Classes:
Most states primarily used Recovery Act funds for ITAs, which allowed
dislocated workers to purchase training from community colleges and
other training providers, as they do with regular WIA funds. As shown
in table 9, 43 states that could report on types of training funded by
Recovery Act funds said they used these funds for ITAs, according to
our state survey.[Footnote 114] While 36 states reported that they
used Recovery Act funds for on-the-job training, far fewer dislocated
workers participated in this type of training (see table 9).
Massachusetts officials we visited said that it is difficult to work
with employers to provide this type of training in the current economy
because so few jobs are available. Florida officials told us they
received a waiver to reimburse employers up to 90 percent of
participants' wages and on-the-job training costs rather than the 50
percent allowed under WIA, but it too soon to tell if this incentive
will increase opportunities for this type of training. As also shown
in table 9, some states reported using Recovery Act funds for
customized training and apprenticeships. For example, Michigan
officials said they are using some of their 15 percent statewide funds
to develop apprenticeships in energy conservation jobs.
Table 9: Types of Training Provided by States and Number of
Participants Served from Time State Began Using Recovery Act Funds
through January 31, 2010:
Types of Training: Individual training accounts;
Number of states that reported using at least some Recovery Act
dollars to provide these services to dislocated worker participants:
43;
Number of dislocated worker participants who received services funded
in whole or part by Recovery Act dollars: 96,544.
Types of Training: On-the-job training;
Number of states that reported using at least some Recovery Act
dollars to provide these services to dislocated worker participants:
36;
Number of dislocated worker participants who received services funded
in whole or part by Recovery Act dollars: 3,102.
Types of Training: Customized training;
Number of states that reported using at least some Recovery Act
dollars to provide these services to dislocated worker participants:
15;
Number of dislocated worker participants who received services funded
in whole or part by Recovery Act dollars: 774.
Types of Training: Apprenticeships;
Number of states that reported using at least some Recovery Act
dollars to provide these services to dislocated worker participants: 5;
Number of dislocated worker participants who received services funded
in whole or part by Recovery Act dollars: 54.
Source: GAO survey.
[End of table]
To quickly increase training capacity, the Recovery Act expanded the
authority of local areas to contract with institutions of higher
education and other training providers for group classes and over half
the states reported that they are making use of this new flexibility.
While some states did not track this information, 26 states reported
that local areas used some of their Recovery Act funds to contract for
training classes. Several of the local areas we visited told us they
are contracting for training, which included some practices that may
prove promising.
* In San Diego, California, for example, the local board set aside
about 40 percent of their Recovery Act training funds to contract for
classes. They used this opportunity to develop new partnerships with
employers, community colleges, and public universities and purchased
classes that addressed local in-demand industries such as health care,
biotechnology, and green technology. The board required that 90
percent of participants who take these Recovery Act-funded classes
complete them. To ensure that participating colleges are able to meet
this requirement, the one-stop centers screened participants'
likelihood to succeed before enrolling them in these classes.
However, some states and local areas we visited reported that
contracting for training was not always a viable option. For example,
in Grand Rapids, Michigan, officials said that community colleges were
reluctant to develop group training programs because Recovery Act
funds are temporary and would not be available to support these
programs once the funds are exhausted. In addition, officials in
Bristol County, Massachusetts, said that they needed to quickly place
people in training because of high demand for services, so they did
not have time to develop contracts for training.
States Faced Some Challenges in Increasing Training Opportunities and
Providing Training for Green Jobs:
All but one state reported that they faced challenges in their efforts
to enroll more dislocated workers in training.[Footnote 115] The most
frequently reported challenges were insufficient staffing capacity and
difficulty identifying training for available jobs (see figure 9).
Staffing capacity challenges affected both one-stop centers and
training providers. For example, Florida officials said that it was
difficult to quickly ramp up one-stop centers' staffing capacity
because many applicants did not want temporary jobs funded by the
Recovery Act, and new hires needed to be trained. As shown in figure
9, 13 states reported challenges related to availability of training
classes: 8 states reported that classes were not available because
they were full, and 5 reported that classes were not available when
needed. For example, officials in Detroit, Michigan, said that
community college training classes had long waiting lists and a few
participants were traveling as far as Toledo, Ohio, to attend a
community college.
Figure 9: Greatest Challenges States Experienced in Striving to
Increase Training Participants Using Recovery Act Funds:
[Refer to PDF for image: horizontal bar graph]
Greatest challenge to increasing the number of training participants:
In-house staffing capacity is not sufficient:
Number of states answering: 14.
It is difficult to identify training for which jobs are available:
Number of states answering: 14.
Classes are not available because they are full:
Number of states answering: 8.
Classes are not available when needed:
Number of states answering: 5.
Other:
Number of states answering: 9.
Source: GAO survey.
[End of figure]
Although Labor encouraged states to provide training for green jobs, a
number of state officials told us they had not yet determined what
constituted green jobs, making it difficult to provide training in
this area. Three states said that they were waiting for Labor to
provide additional guidance on this topic; however, 18 states reported
on our survey that they established their own definition for green
jobs or occupations. In our September 2009 Recovery Act report, we
recommended that Labor provide additional guidance on the nature of
green jobs to better support providing youth with employment and
training in green jobs and Labor is taking steps to do this (see the
New and Open Recommendations section of this report).[Footnote 116] In
addition, officials in one state agency and one local area we visited
told us they found fewer opportunities to train for green jobs than
anticipated. For example, Massachusetts officials told us that a
couple of local areas in the state thought they would be able to
provide training for weatherization jobs funded by the Recovery Act.
However, rather than creating new jobs, most of the weatherization
jobs were taken by workers who already had the necessary skills.
Nearly All States Reported Monitoring Local Areas for Compliance with
Recovery Act and WIA Requirements:
Forty-nine states and the District of Columbia reported in our survey
that they monitor or plan to monitor local areas for compliance with
Recovery Act and WIA requirements. Labor's regulations and guidance
require that each state and local area conduct regular oversight and
monitoring of the program to determine compliance with WIA,
programmatic, accountability, and transparency provisions of the
Recovery Act, and Labor's guidance. Monitoring of local areas varied
by state, but often included assessments for program activities, such
as whether dislocated workers meet eligibility requirements of the
program or priority of service is given to veterans (see figure 10).
In some cases, states reported that they do not currently monitor for
a given activity, but plan to do so. In addition, states noted several
other types of monitoring activities they undertake, such as reviews
to ensure the appropriate reporting of data elements.
Figure 10: Recovery Act-Funded and WIA Dislocated Worker Program
Activities Being Monitored by States:
[Refer to PDF for image: stacked horizontal bar graph]
Status of state efforts to monitor for: Dislocated workers meeting
program eligibility requirements:
No plans to monitor: 0;
Will monitor in future: 6;
Currently monitoring for activity: 44.
Status of state efforts to monitor for: Priority of service given to
veterans:
No plans to monitor: 0;
Will monitor in future: 9;
Currently monitoring for activity: 41.
Status of state efforts to monitor for: Local areas using Recovery Act
WIA funding to supplement, not supplant, existing funding:
No plans to monitor: 1;
Will monitor in future: 7;
Currently monitoring for activity: 40.
Status of state efforts to monitor for: Training providers on the
eligible training provider list:
No plans to monitor: 1;
Will monitor in future: 5;
Currently monitoring for activity: 44.
Status of state efforts to monitor for: Local areas following
appropriate procedures for entering into direct contracts with
training providers:
No plans to monitor: 3;
Will monitor in future: 8;
Currently monitoring for activity: 37.
Status of state efforts to monitor for: Local areas meeting required
or expected expenditure rates:
No plans to monitor: 1;
Will monitor in future: 4;
Currently monitoring for activity: 44.
Source: GAO survey of state administrators.
Note: The number of states reporting on each activity may not total 51
in all cases due to some states responding "don't know" or not
providing a response. Twenty states also detailed additional
activities being monitored.
[End of figure]
The five states we visited said that they are relying on existing WIA
monitoring structures to oversee the use of Recovery Act funds. State
and local officials generally noted that because implementation of the
Recovery Act-funded WIA Dislocated Worker Program was so similar to
the traditional WIA program, minimal changes to fiscal and
programmatic monitoring structures and tools were required. State-
level monitoring of WIA Dislocated Worker Program varied by state, but
nearly all states monitoring activities included financial auditing,
site visits, and file reviews.
Beyond required WIA program and fiscal monitoring, several audit
institutions have also conducted studies of the states' use of
Recovery Act and other funds for WIA programs, including the
Dislocated Worker Program. For example, the Office of Inspector
General for the Florida Agency for Workforce Innovation recently found
unallowable use of federal funds for some meals purchased by the Tampa
Bay Workforce Alliance and recommended repayment with nonfederal
funds.[Footnote 117] In California, the Legislative Analyst's Office
found that Recovery Act and WIA reports are not easily available to
the state legislature or to the public. They recommended that copies
of reports be made available to the legislature and available online.
[Footnote 118] At the federal level, Labor's Office of Inspector
General recently issued a report which found that Labor issued
comprehensive and timely guidance to the states on Recovery Act
provisions and use of funds, but recommended that Labor focus on
strategies to promote consistency in the WIA plans submitted by local
workforce investment boards.[Footnote 119]
Labor Has Taken Actions to Support the Use of Recovery Act Funds for
Dislocated Workers and Increase Transparency, although Participant
Information Is Not Yet Publicly Available:
Labor has provided support for state and local efforts by taking
actions such as issuing guidance, monitoring implementation, providing
technical assistance, and conducting a program evaluation. In March
2009, Labor announced state allotments and issued comprehensive
guidance on implementing the Recovery Act. Shortly thereafter, Labor
administered a checklist to gauge each state's readiness for
implementing Recovery Act activities and to help federal officials
target technical assistance. The checklist covered a broad range of
topics, including states' plans for training staff and monitoring
activities. In addition, Labor held conferences in each of its regions
to provide a forum for discussing experiences and issues in
implementing Recovery Act-funded programs, including WIA dislocated
worker activities. Labor also began a 2-year evaluation on July 1,
2009, to assess state actions in implementing the Recovery Act for the
WIA Dislocated Worker Program, among others.
Although Labor made some changes to its WIA reporting requirements to
enhance transparency and provide participant information on dislocated
workers served with Recovery Act funds, this information is not yet
publicly available. In May 2009, Labor issued guidance requiring
states to submit monthly summary reports on all participants who were
served with both Recovery Act funds and regular WIA formula funds
starting on July 15, 2009. While Labor has not publicly disseminated
this information, officials told us they developed a statistical model
to estimate the number of participants who received Recovery Act-
funded services, which is still being tested for its accuracy. In
addition, Labor required states to begin submitting detailed quarterly
data on individual participants on May 15, 2010. In the past, this
information--called the WIA standardized record data (WIASRD)--was
submitted once a year and only on individuals who exited the program.
For this quarterly data submission, Labor also changed a data field to
allow states to report on participants funded in whole or in part by
Recovery Act funds and track outcomes for those participants such as
job placement and employment retention.
Conclusions:
Labor has taken steps to ensure transparency and accountability for
WIA Dislocated Worker Recovery Act funds. Requiring states to submit
information on participants who received services funded by the
Recovery Act and their outcomes is an important step toward this goal.
When this information is available, it may provide a picture of the
role Recovery Act funds played in helping dislocated workers. In
addition, Labor monitors states' use of funds through drawdowns and
state-submitted quarterly financial reports. However, Labor and some
state workforce officials noted that confusion still exists among the
states and reported obligations data continue to be inconsistent.
Without an indication of the extent and nature of the problem, it will
be difficult for Labor to determine whether its technical assistance
to states has resulted in improvements in the quality of states' data
on obligations.
Recommendations for Executive Action:
To enhance Labor's ability to manage its Recovery Act and regular WIA
formula grants and to build on its efforts to improve the accuracy and
consistency of financial reporting, we recommend that the Secretary of
Labor take the following actions:
* To determine the extent and nature of reporting inconsistencies
across the states and better target technical assistance, conduct a
one-time assessment of financial reports that examines whether each
state's reported data on obligations meet Labor's requirements.
* To enhance state accountability and to facilitate their progress in
making reporting improvements, routinely review states' reporting on
obligations during regular state comprehensive reviews.
Agency Comments:
We provided Labor a draft of this report section for review. The
department provided written comments, which are reprinted in appendix
IV. Labor agreed with our recommendations to improve the accuracy and
consistency of financial reporting. Labor indicated that the lack of
consistency across states and local areas in understanding both the
definition and application of certain financial terms, along with
variations in accounting methods among state and local WIA agencies,
makes it difficult to draw reliable conclusions from the reported
financial data. Labor noted that they have already taken a number of
steps to address the issue, including the provision of extensive
training, the formation of an internal working group dedicated to this
issue, and it plans to issue a Training and Employment Guidance Letter
to ensure that state and local areas are aware of the correct
definitions of key financial terms. Labor also noted that it is
monitoring Florida's progress on correcting reporting deficiencies and
will continue to provide technical assistance to ensure the state's
compliance with reporting requirements.
Projects Funded by EPA's Clean Water and Drinking Water State
Revolving Funds Are Under Way, although Procedures May Not Be in Place
to Ensure Adequate Oversight:
The Recovery Act appropriated $4 billion for the Environmental
Protection Agency's (EPA) Clean Water State Revolving Fund (SRF)
program and $2 billion for the Drinking Water SRF program.[Footnote
120] These funds were used to help support over 3,000 projects and are
a significant increase compared to federal funds awarded as annual
appropriations to the SRF programs in recent years. From fiscal years
2000 through 2009, annual appropriations averaged about $1.1 billion
for the Clean Water SRF program and about $833 million for the
Drinking Water SRF program.[Footnote 121] EPA's Clean Water and
Drinking Water SRF programs, established in 1987 and 1996,
respectively, provide states and local communities independent and
permanent sources of subsidized financial assistance, such as low-or
no-interest loans for projects that protect or improve water quality
and that are needed to comply with federal drinking water regulations.
In addition to providing increased funds, the Recovery Act included
some new requirements for the SRF programs. For example, states were
required to have all Recovery Act funds awarded to projects under
contract within 1-year of enactment--which was February 17, 2010--and
EPA was directed to reallocate any funds not under contract by that
date.[Footnote 122] According to EPA, all 50 states met the 1-year
deadline. Further, states were required to use at least 50 percent of
Recovery Act funds to provide assistance in the form of principal
forgiveness, negative interest loans, or grants. These types of
assistance are referred to as additional subsidization and are more
generous than the low-or no-interest loans that the Clean Water and
Drinking Water SRF programs generally provide. States were also
required to use at least 20 percent of funds as a "green reserve" to
provide assistance for green infrastructure projects, water-or energy-
efficiency improvements, or other environmentally innovative
activities.[Footnote 123] In addition, under the Recovery Act, states
should give priority to projects that were ready to proceed to
construction within 12 months of enactment.
Despite Challenges, States Met Recovery Act Requirements for the SRFs:
The 14 states we reviewed for the Clean Water and Drinking Water SRF
programs met all Recovery Act requirements specific to the SRFs.
[Footnote 124] Specifically, the states we reviewed had all projects
under contract by the 1-year deadline and also took steps to give
priority to projects that would be ready to proceed to construction
within 12 months of enactment. Eighty-eight percent of projects were
under construction within 12 months of enactment. In addition, the
Clean Water and Drinking Water SRF programs in the 14 states we
reviewed exceeded the 20 percent green reserve requirement, using 29
percent of Recovery Act SRF funds in these states to provide
assistance for projects that met EPA criteria for the green reserve.
In addition, these states met or exceeded the 50 percent additional
subsidization requirement.[Footnote 125] Overall, the 14 states
distributed a total of 76 percent of Recovery Act funds as additional
subsidization.
SRF officials in most of the states we reviewed said that they faced
challenges in meeting Recovery Act requirements, especially the 1-year
contracting deadline. Under the base program, it could take up to
several years from when funds are awarded to a state before a loan
agreement is signed, according to EPA officials. The compressed time
frame imposed by the Recovery Act posed challenges, and some state SRF
officials told us that their workloads increased significantly as a
result of the 1-year deadline. Among the factors affecting workload
were the following:
* Reviewing applications for Recovery Act funds was burdensome.
Officials in some states said that the number of applications
increased significantly, in some cases more than doubling compared
with prior years, and that reviewing these applications was a
challenge. For example, New Jersey received twice as many applications
than in past years, according to Clean Water and Drinking Water SRF
officials in that state.
* Explaining new Recovery Act requirements was time-consuming. Because
projects that receive any Recovery Act funds must comply with Buy
American requirements and Davis-Bacon wage requirements, state SRF
officials had to take additional steps to ensure that both applicants
for Recovery Act funds and those awarded Recovery Act funds--referred
to as subrecipients--understood these requirements.
* Some applicants and subrecipients required additional support. Many
states took steps to target Recovery Act funds to new recipients.
According to SRF officials in some states, some new applicants and
subrecipients required additional support in complying with SRF
program and Recovery Act requirements. In the states we reviewed,
nearly half of Clean Water SRF subrecipients had not previously
received assistance through that program, and nearly two-thirds of
Drinking Water SRF subrecipients had not previously received
assistance through that program.
* Project costs were difficult to predict. Officials in some states
told us that actual costs were lower than estimated for many projects
awarded Recovery Act funds and, as a result, some states had to
scramble to ensure that all Recovery Act funds were under contract by
the 1-year deadline. For example, in January 2010, officials from
Florida's SRF programs told us that some contracts for Recovery Act-
funded projects in the state had come in below their original project
cost estimates, and that this was likely to be the program staff's
largest concern as the deadline approached. However, lower estimates
also allowed some states to undertake additional projects that they
would otherwise have been unable to fund with the Recovery Act funding.
States used a variety of techniques to address these workload concerns
and meet the 1-year contracting deadline, according to state SRF
officials with whom we spoke. Some states hired additional staff to
help administer the SRF programs, although SRF officials in other
states told us that they were unable to do so because of resource
constraints. For example, New Jersey hired contractors to help
administer the state's base Clean Water and Drinking Water SRF funds,
allowing experienced staff to focus on meeting Recovery Act
requirements, according to SRF officials in that state. Moreover, some
states hired contractors or used contractors provided by EPA to
provide assistance to both applicants and subrecipients. For example,
California hired contractors--including the Rural Community Assistance
Corporation--to help communities apply for Recovery Act funds.
Furthermore, states took steps to ensure that they would have all
Recovery Act funds under contract even if some projects dropped out
because of Recovery Act requirements or time frames. For example, most
of the states we reviewed awarded a combination of Recovery Act and
base funds to projects to allow for more flexibility in shifting
Recovery Act funds among projects.
States also used a variety of techniques to ensure that they would
meet the green reserve requirement. For example, state SRF officials
in some states told us that they gave preference to green reserve
projects, and sometimes ranked these projects higher than other
projects with higher public health benefits. Further, some of the
states we reviewed conducted outreach to communities and nonprofit
organizations to solicit applications for green projects. State and
local officials told us that communities can face challenges in
funding green projects because these projects often lack a designated
funding stream (such as user fees). In order to make green projects
more attractive to communities, some states offered additional
subsidization to all green projects. In addition, a few states relied
on a small number of high-cost green reserve projects to meet the
requirement. For example, New York's Drinking Water SRF program
provided approximately $23 million in green reserve funds to a single
project, and SRF officials from that state told us that, absent this
project, they would have been nervous about meeting the requirement
for drinking water projects. SRF officials in some states told us that
few types of drinking water projects--relative to clean water
projects--qualify for green reserve funds.
Recovery Act Funds Went to Many Disadvantaged Communities and New
Recipients:
The 14 states we reviewed distributed more than $2.8 billion in
Recovery Act funds among nearly 1,400 water projects through their
Clean Water and Drinking Water SRF programs. These states took a
variety of approaches to distributing funds. For example, three states
distributed at least 95 percent of Recovery Act funds as additional
subsidization, while three other states distributed only 50 percent as
additional subsidization, the smallest amount permitted under the
Recovery Act. Overall, these 14 states distributed approximately 76
percent of Recovery Act funds as additional subsidization, with most
of the remaining funds provided as low-or no-interest loans that will
recycle back into the programs as subrecipients repay their loans. As
the funds are repaid, they can then be used to provide assistance to
SRF recipients in the future. Furthermore, some states distributed
funds among a large number of projects, while other states distributed
funds among a relatively small number of projects. For example, Ohio
distributed approximately $279 million among 336 projects, while Texas
distributed more than $326 million among 46 projects. Some states
funded more projects than originally anticipated because other
projects were less costly than expected, according to officials. For
example, Texas was able to provide funds to 10 additional projects
because costs--especially material costs--were lower than anticipated
for other projects.
States we reviewed used at least 43 percent of Recovery Act project
funds ($1.2 billion) to provide assistance for projects that serve
disadvantaged communities.[Footnote 126] Most of the states we
reviewed took steps to target some or all Recovery Act funds to these
low-income communities, generally by considering a community's median
household income when selecting projects and determining which
projects would receive additional subsidization in the form of
principal forgiveness, negative interest loans, or grants. According
to state officials from 10 Drinking Water SRF programs and 9 Clean
Water SRF programs,[Footnote 127] 49 percent of all projects funded by
those states' SRF programs serve disadvantaged communities, and more
than 99 percent of these disadvantaged communities were provided with
additional subsidization. State and local officials in some states
told us that Recovery Act funds--especially in the form of additional
subsidization--have provided benefits to disadvantaged communities in
their states. For example, according to officials from California's
Clean Water SRF program, that state used funds to provide assistance
for 25 wastewater projects that serve disadvantaged communities, and
approximately half of these projects would not have gone forward as
quickly or at all without additional subsidization. Officials from the
City of Fresno confirmed that one of these projects--which will
replace septic systems with connections to the city's sewer systems in
two disadvantaged communities--would not have gone forward without
additional subsidization. Local officials told us that this project
will decrease the amount of nitrates in the region's groundwater,
which is the source of the city's drinking water.
The Clean Water SRF programs from the 14 states we reviewed used
Recovery Act funds to provide assistance for 890 projects that will
meet a variety of local needs. Figure 11 shows how the 14 states
distributed Recovery Act funds across various categories, and figure
12 shows the number of projects that fall into each of these
categories.
Figure 11: Share of Recovery Act Funds Provided to Clean Water SRF
Projects in 14 States, by Category:
[Refer to PDF for image: pie-chart]
Secondary treatment: 34%;
Sanitary sewer overflow: 18%;
New sewers: 12%;
Advanced treatment: 12%;
Nonpoint source projects: 8%;
Combined sewer overflow: 7%;
Other[A]: 4%;
Storm water sewers: 3%;
Recycled water distribution: 2%.
Source: GAO analysis of EPA data and information provided by states.
[A] Three states--California, Massachusetts, and Texas--reported
awarding Recovery Act funds to other types of Clean Water SRF projects
or project components. These projects include, for example, expanding
a disposal system, constructing a reclaimed water delivery system, and
constructing a wind turbine.
[End of figure]
In the states we reviewed, the Clean Water SRF programs used more than
70 percent of Recovery Act project funds to provide assistance for
projects in the following categories:
* Secondary treatment and advanced treatment. States we reviewed used
nearly half of all Recovery Act project funds to support wastewater
infrastructure intended to meet or exceed EPA's secondary treatment
standards for wastewater treatment facilities. Projects intended to
achieve compliance with these standards are referred to as secondary
treatment projects, while projects intended to exceed compliance with
these standards are referred to as advanced treatment projects. For
example, Massachusetts' Clean Water SRF program awarded over $2
million in Recovery Act funds to provide upgrades intended to help the
City of Leominster's secondary wastewater treatment facility achieve
compliance with EPA's discharge limits for phosphorous.
* Sanitary sewer overflow and combined sewer overflow. States we
reviewed used about 25 percent of Recovery Act project funds to
support efforts to prevent or mitigate discharges of untreated
wastewater into nearby water bodies. Such sewer overflows, which can
occur as a result of inclement weather, can pose significant public
health and pollution problems, according to EPA. For example,
Pennsylvania used 56 percent of its Clean Water SRF project funds to
address sewer overflows from municipal sanitary sewer systems and
combined sewer systems.[Footnote 128] In another example, Iowa's Clean
Water SRF program used Recovery Act funds to help the City of Garwin
implement sanitary sewer improvements. Officials from that city told
us that during heavy rains, untreated water has bypassed the city's
pump station and backed up into basements of homes and businesses, and
that the city expects all backups to be eliminated as a result of
planned improvements.
In addition to funding conventional wastewater treatment projects, 9
of the 14 Clean Water SRF programs we reviewed used Recovery Act funds
to provide assistance for projects intended to address nonpoint source
pollution--projects intended to protect or improve water quality by,
for example, controlling runoff from city streets and agricultural
areas. The Clean Water SRF programs we reviewed used 8 percent of
project funds to support these nonpoint source projects, but nonpoint
source projects account for 20 percent (179 out of 890) of all
projects (see figure 12). A large number of these projects--131 out of
179--were initiated by California or Ohio. For example, California
used Recovery Act funds to provide assistance for the Tomales Bay
Wetland Restoration and Monitoring Program, which restores wetlands
that had been converted into a dairy farm.
Figure 12: Clean Water SRF Projects Awarded Recovery Act Funds in 14
States, by Category:
[Refer to PDF for image: vertical bar graph]
Sanitary sewer overflow:
Number of projects: 244.
Secondary treatment:
Number of projects: 201.
Nonpoint source projects:
Number of projects: 179.
New sewers:
Number of projects: 140.
Advanced treatment:
Number of projects: 106.
Combined sewer overflow:
Number of projects: 54.
Storm water sewers:
Number of projects: 47.
Other[A]:
Number of projects: 16.
Recycled water distribution:
Number of projects: 13.
Source: GAO analysis of EPA data and information provided by states.
Note: Some projects fall into more than one category.
[A] Three states--California, Massachusetts, and Texas--reported
awarding Recovery Act funds to other types of Clean Water SRF projects
or project components. These projects include, for example, expanding
a disposal system, constructing a reclaimed water delivery system, and
constructing a wind turbine.
[End of figure]
With regard to Drinking Water SRF programs, the 14 states we reviewed
used Recovery Act funds to provide assistance for 504 projects. EPA
does not require states to report the amount of funds awarded for
Drinking Water SRF projects by category, but we collected information
on the types of projects funded by the 14 Drinking Water SRF programs.
[Footnote 129] Figure 13 shows how many projects received Recovery Act
funds across a variety of categories.
Figure 13: Drinking Water SRF Projects Awarded Recovery Act Funds in
14 States, by Category:
[Refer to PDF for image: vertical bar graph]
Transmission and distribution:
Number of projects: 264.
Drinking water treatment:
Number of projects: 142.
Maintaining drinking water sources:
Number of projects: 91.
Other[A]:
Number of projects: 89.
Storage capacity:
Number of projects: 86.
Project planning, design, and other pre-project costs:
Number of projects: 78.
Source: GAO analysis of EPA data and information provided by states.
Note: Some projects fall into more than one category.
[A] Other Drinking Water SRF projects or project components include,
for example, consolidating drinking water supplies, creating new
systems, and implementing drinking water security measures.
[End of figure]
The Drinking Water SRF programs in these 14 states used Recovery Act
funds to support projects that are largely concentrated in two
categories:
* Transmission and distribution. More than half (264) of Drinking
Water SRF projects awarded Recovery Act funds in these 14 states
involve installing or replacing transmission pipes and distribution
networks to improve water pressure or prevent possible contamination
caused by leaks or breaks in the system. For example, Colorado used
Recovery Act funds to help the City of Lamar construct a new
transmission main line. As another example, Arizona used Recovery Act
funds to help the City of Eloy implement, among other things,
improvements to its North Toltec water distribution system. Officials
from Eloy told us that the improvements to the distribution system
would help address concerns about low water pressure and discolored
water in that city.
* Drinking water treatment. Approximately 28 percent (142) of projects
funded in the states we reviewed include drinking water treatment
costs, which are expenses related to the installation, replacement, or
upgrade of treatment facilities. These projects may include the
installation of new nitrate treatment facilities, improved filtration
methods for surface water, or construction improvements for chlorine
storage techniques. For example, in Texas, the City of Laredo is using
Recovery Act funds to provide upgrades to the upper plant of its
Jefferson Street Water Treatment Facility. The facility is composed of
an upper plant and a lower plant, but the lower plant, which was built
in the 1930s and is located in a flood plain, has experienced water
quality issues. The upgrades to the upper plant are intended to meet
the current capacity of both plants.
Of the 1,394 projects awarded Recovery Act funds by the Clean Water
and Drinking Water SRF programs in the states we reviewed, more than
one-third (506) address the green reserve requirement. Of these green
projects, 467 (92 percent) were awarded additional subsidization.
Figure 14 shows the number of projects that fall into each of the four
green reserve categories included in the Recovery Act. Many of these
projects are intended to improve energy or water efficiency and are
expected to result in cost savings for some communities as a result of
these improvements. For example, the Massachusetts Water Resources
Authority is using Recovery Act funds provided through that state's
Clean Water SRF program to help construct a wind turbine at the
DeLauri Pump Station, and the Authority estimates that, as a result of
this wind turbine, more than $350,000 each year in electricity
purchases will be avoided. Furthermore, some projects provide green
alternatives for infrastructure improvements. For example, New York's
Clean Water SRF program provided Recovery Act funds to help construct
a park designed to naturally filter stormwater runoff and reduce the
amount of stormwater that enters New York City's sewers. More than
half of the city's sewers are combined sewers, and during heavy rains,
sewage sometimes discharges into Paerdagat Basin, which feeds into
Jamaica Bay.
Figure 14: Green Reserve Projects Awarded Recovery Act Funds in 14
States, by Category:
[Refer to PDF for image: vertical bar graph]
Green Infrastructure:
Clean Water SRF: $165 million (128 projects);
Drinking Water SRF: $5.1 million (3 projects).
Energy efficiency:
Clean Water SRF: $320 million (117 projects);
Drinking Water SRF: $65 million (83 projects).
Water efficiency:
Clean Water SRF: $36.5 million (30 projects);
Drinking Water SRF: $171.9 million (114 projects).
Environmentally innovative:
Clean Water SRF: $68.5 million (65 projects);
Drinking Water SRF: $20.1 million (28 projects).
Source: GAO analysis of EPA data and information provided by states.
Note: Some projects fall into more than one category.
[End of figure]
Although EPA and States Have Expanded Existing Oversight Procedures to
Address Recovery Act Requirements, They May Not Have Procedures in
Place to Ensure Adequate Oversight:
EPA has modified its existing oversight of state SRF programs by
planning additional performance reviews beyond the annual reviews it
is already conducting, but these reviews do not include an examination
of state subrecipient monitoring procedures. Specifically, EPA is
conducting midyear and end-of-year Recovery Act reviews in fiscal year
2010 to assess how each state is meeting Recovery Act requirements. As
part of these reviews, EPA has modified its annual review checklist to
incorporate elements that address the Recovery Act requirements.
Further, EPA officials will review four project files in each state
for compliance with Recovery Act requirements and four federal
disbursements to the state to help ensure erroneous payments are not
occurring. According to EPA officials, because of these added reviews,
EPA is providing additional scrutiny over how states are using the
Recovery Act funds and meeting Recovery Act requirements as compared
with base program funds. As of May 14, 2010, EPA completed field work
for its mid-year Recovery Act reviews in 13 of the states we reviewed
and completed final reports for 3 of these states (Iowa, Ohio, and
Pennsylvania). EPA has plans to begin field work in the final state at
the end of May 2010.
Although the frequency of reviews has increased, these reviews do not
examine state subrecipient monitoring procedures. In 2008, the EPA
Office of Inspector General (OIG) examined state SRF programs'
compliance with subrecipient monitoring requirements of the Single
Audit Act and found that states complied with the subrecipient
monitoring requirements but that EPA's annual review process did not
address state subrecipient monitoring procedures.[Footnote 130] The
OIG suggested that EPA include a review of how states monitor
borrowers as part of its annual review procedures. EPA officials told
us that they agreed with the idea to include a review of subrecipient
monitoring procedures as part of the annual review but have not had
time to implement this suggestion because EPA's SRF program officials
have focused most of their attention on the Recovery Act since the OIG
published its report. EPA officials also told us that they believe the
reviews of project files and federal disbursements could possibly
identify internal control weaknesses that may exist for financial
controls, such as weaknesses in subrecipient monitoring procedures.
These reviews occur as part of the Recovery Act review and aim to
assess a project's compliance with Recovery Act requirements and help
ensure that no erroneous payments are occurring.
In terms of state oversight of subrecipients, EPA has not established
new subrecipient monitoring requirements for Recovery Act-funded
projects, according to EPA officials. Under the base Clean and
Drinking Water SRF programs, EPA gives states a high degree of
flexibility to operate their SRF programs based on each state's unique
needs and circumstances in accordance with federal and state laws and
requirements. According to EPA officials, although EPA has established
minimum requirements for subrecipient monitoring, such as requiring
states to review reimbursement requests, states are allowed to
determine their own subrecipient monitoring procedures, including the
frequency of project site inspections.
While EPA has not deviated from this approach with regard to
monitoring Recovery Act-funded projects, it has provided states with
voluntary tools and guidance to help with monitoring efforts. For
example, EPA provided states with an optional inspection checklist to
help states evaluate a subrecipient's compliance with Recovery Act
requirements, such as the Buy American and job reporting requirements.
EPA has also provided training for states on the Recovery Act
requirements. For example, as of May 14, 2010, EPA has made available
11 on-line training sessions (i.e., webcasts) for state officials to
help them understand the Recovery Act requirements. EPA has also
provided four workshops with on-site training on its inspection
checklist for state officials in California, Louisiana, New Mexico,
and Puerto Rico.
Although EPA has not required that states change their subrecipient
oversight approach, many states have expanded their existing
monitoring procedures in a variety of ways. However, the oversight
procedures in some states may not be sufficient given that (1) federal
funds awarded to each state under the Recovery Act have increased as
compared with average annually awarded amounts; (2) all Recovery Act
projects had to be ready to proceed to construction more quickly than
projects funded with base SRF funds; and (3) EPA and states had little
previous experience with some of the Recovery Act's new requirements,
such as Buy American provisions, according to EPA officials. The
following are ways in which oversight procedures may not be sufficient:
* Review procedures for job data. According to OMB guidance on
Recovery Act reporting, states should establish internal controls to
ensure data quality, completeness, accuracy, and timely reporting of
all amounts funded by the Recovery Act.[Footnote 131] We found that
most states we reviewed had not developed review procedures to verify
the accuracy of job figures reported by subrecipients using supporting
documentation, such as certified payroll records. As a result, states
may be unable to verify the accuracy of these figures. For example,
Mississippi SRF officials told us that they do not have the resources
to validate the job counts reported by comparing them against
certified payroll records. However, these officials said they review
the job counts reported by subrecipients for outliers. In addition,
during interviews with some subrecipients, we found inconsistencies
among subrecipients on the types of hours that should be included and
the extent that they verified job data submitted to them by
contractors. Specifically, in New Jersey one subrecipient told us they
included hours worked by the project engineer in the job counts, while
another subrecipient did not. Furthermore, in Ohio, we interviewed
subrecipients from 25 of the largest SRF projects in the state that
had awards by the end of 2009 to learn about how they verified job
counts reported by contractors. Of the 16 projects that had activity
to report, 14 did not have a process to verify contractor job counts
with payroll or other records.
* Review procedures for loan disbursements. According to EPA
officials, the agency requires states to verify that all loan payments
and construction reimbursements are for eligible program costs. In
addition, according to EPA guidance, states often involve technical
staff who are directly involved in construction inspections to help
verify disbursement requests because these staff have additional
information, such as the status of construction, that can help states
accurately approve these requests. However, we found that in two
states we reviewed, technical or engineering staff did not review
documentation supporting reimbursement requests from the subrecipient
to ensure these requests were for legitimate project costs. For
example, officials in Pennsylvania told us that technical staff from
the state's Department of Environmental Protection--which provides
technical assistance to SRF subrecipients--do not verify monthly
payments to subrecipients that are made by the Pennsylvania
Infrastructure Investment Authority, the state agency with funds
management responsibility for the state's SRF programs. Instead,
Department of Environmental Protection staff approve project cost
estimates prior to loan settlement, when they review bid proposals
submitted by contractors, and Pennsylvania Infrastructure Investment
Authority officials verify monthly payments against the approved cost
estimates.
* Inspection procedures. According to EPA officials, the agency
requires that SRF programs have procedures to help ensure
subrecipients are using Recovery Act SRF funding for eligible
purposes. While EPA has not established required procedures for state
project inspections, it has provided states its optional Recovery Act
inspection checklist to help them evaluate a subrecipient's compliance
with Recovery Act requirements, such as the Buy American and job
reporting requirements. Some states we reviewed have adopted EPA's
Recovery Act inspection checklist procedures and modified their
procedures accordingly. For example, California and Arizona plan to
implement all elements of EPA's checklist for conducting inspections
of Recovery Act projects, according to officials in these states.
Other states have modified their existing inspection procedures to
account for the new Recovery Act requirements. For example, officials
from Georgia said they added visual examination of purchased materials
and file review steps to their monthly inspections to verify that
subrecipients are complying with the Buy American provision. Some
states modified their inspection procedures in ways that were
different from EPA's guidance. For example, we found that the
Massachusetts Department of Environmental Protection's inspection
checklist included procedures for reviewing Buy American requirements,
but these procedures were different from EPA's guidance. The EPA
checklist specifies the type of documents that should be used to
support compliance with Buy American, while the Massachusetts
Department of Environmental Protection checklist does not specify what
types of documentation the inspector should review. Massachusetts
officials explained that they developed the state's Recovery Act
inspection procedures before EPA had made its Recovery Act checklist
available to states.
In contrast, the Pennsylvania Department of Environmental Protection's
inspection procedures do not include a review of Recovery Act
requirements. For example, we found that inspection reports for three
Recovery Act projects we visited in Pennsylvania did not include
inspection elements that covered Davis-Bacon or Buy American
provisions. Instead, the Pennsylvania Infrastructure Investment
Authority requires subrecipients to self-certify their compliance with
these Recovery Act requirements when requesting payment from the
state's funds disbursement system. Registered professional engineers
who work for the subrecipients must sign off on these self-
certifications and subrecipients could face loss of funds if a
certification is subsequently found to be false, according to the
Executive Director of the Authority.
* Frequency and timing of inspections. According to EPA officials, the
agency does not have formal requirements on how often a state SRF
program must complete project inspections, and the frequency and
complexity of inspections vary by state for the base SRF programs.
Officials from several states told us they have increased the
frequency of project site inspections. For example, Colorado SRF
officials said the state is conducting quarterly project site
inspections of each of the state's Recovery Act funded SRF projects,
whereas under the state's base SRF programs, Colorado inspects project
sites during construction only when the state has concerns. In
addition, state SRF officials from New York and Texas told us that
they each were in the process of hiring a contractor to inspect
Recovery Act-funded projects. In New York, inspections will document
and report on compliance with Recovery Act requirements and any
suspicions or incidents of fraud, waste, and abuse. Similarly, in
Texas, inspections will aim to detect and prevent fraud, waste, and
abuse. However, we found that two states--Ohio and Arizona--either did
not conduct site inspections of some projects that are complete or had
not yet inspected projects that were near completion. For example, as
of April 19, 2010, Ohio EPA had inspected about 41 percent of its
Clean Water SRF projects, but our review of Ohio's inspection records
showed that at least 6 projects are complete and have not been
inspected, and a number of others are nearing completion and have not
been inspected. In Arizona, we found that the state's existing
procedures for scheduling on-site project observations, which are
based on a project's schedule for drawing down funds, did not always
ensure that the state conducted inspections before construction was
complete or nearly complete because projects did not draw down funds
at the same rate construction was completed. As a result, two projects
we visited were completed or nearly completed, but Arizona SRF
officials had not yet inspected them because the subrecipients had not
drawn down enough funds to trigger an inspection.
* Monitoring compliance with Recovery Act requirements. We found
issues in several states during interviews with SRF subrecipients that
raise concerns about some subrecipients' compliance with Recovery Act
requirements. For example, in Arizona, we found that a contractor had
installed some water meters that were marked as made in Mexico. We
reported this to the subrecipient, who confirmed our finding, and as a
result, the contractor replaced approximately 100 meters with American-
made products at the contractor's expense. In addition, we interviewed
one subrecipient in Ohio whose documentation of Buy American
compliance raised questions as to whether all of the manufactured
goods used in its project were produced domestically. In particular,
the specificity and detail of the documentation provided about one of
the products left questions as to whether it was produced at one of
the manufacturer's nondomestic locations. Further, another
subrecipient in Ohio was almost 2 months late in conducting interviews
of contractor employees to ensure payment of Davis-Bacon wages.
[Footnote 132]
The Federal and State Accountability Community Is Conducting Oversight
of the Use of Recovery Act Funds Awarded through the SRFs:
The Recovery Act provided the EPA OIG $20 million available through
September 30, 2012, to perform oversight activities, including
oversight of the Clean Water and Drinking Water SRF programs. The OIG
is conducting performance audits of EPA's and states' use of Recovery
Act funds for the SRF programs and unannounced forensic site
inspections of Recovery Act-funded SRF projects, as well as providing
training to states and subrecipients on how to detect fraud, waste,
and abuse.
Since December 2009, the EPA OIG has published two performance audit
reports of the SRF programs and currently has two under way:
* EPA's implementation of green reserve project guidance. The OIG
reported on February 1, 2010, that EPA had not provided states with
clear and comprehensive guidance on how to determine the eligibility
of green reserve projects awarded through the Clean Water and Drinking
Water SRF programs.[Footnote 133] The OIG recommended, and EPA agreed,
that EPA should develop and revise green reserve guidance for states
and review states' submitted green reserve projects and accompanying
business cases.
* Preparation to meet the 1-year deadline to have projects under
contract. The OIG reported on December 17, 2009, on the steps EPA and
states had taken or could take to ensure that drinking water projects
would meet the Recovery Act deadline to be under contract or
construction by February 17, 2010.[Footnote 134] The OIG made several
recommendations that EPA implemented, including that EPA identify and
monitor projects not under contract, establish a contingency action
plan, and complete its written procedures for reallocating funds not
under contract.
* Evaluation of EPA's and states' oversight activities. The OIG has a
performance audit currently under way that is reviewing how
effectively EPA and states ensure Recovery Act Clean Water SRF
projects achieve intended project and environmental goals. This OIG
audit is focused on how states oversee projects and how EPA oversees
states. OIG officials told us that part of this audit will examine
what requirements the states have for monitoring SRF projects.
* Evaluation of EPA's internal controls for recipient reports. While
not exclusive to the SRF programs, the OIG is also conducting a
performance audit of EPA's data quality review processes for recipient
reporting, including those receiving SRF funds. That audit is
assessing whether EPA has effective internal controls to ensure
recipient reports are complete, accurate, and timely and to identify
and correct material omissions.
In addition, the OIG is inspecting subrecipients in all 10 EPA
Regions. According to the Director of the EPA OIG's Forensic Audit
Product Line, as of May 1, 2010, the OIG has initiated site reviews in
5 of the 10 EPA Regions, and the site reviews have resulted in two
reports being issued and other matters being referred for further
review. The purpose of these site visits is to determine compliance
with selected Recovery Act requirements for SRF subrecipients. In
particular, the reviews concentrate on the Buy American and Davis-
Bacon requirements, as well as the propriety of the subrecipient's
procurement actions. The OIG's site visits include a tour of the
project, interviews with the subrecipient and contractor personnel,
review of the subrecipient's systems to be used for reporting
purposes, and review of procurement documentation.
The OIG is also conducting investigations into allegations of fraud in
Recovery Act-funded projects. The allegations have come through
proactive efforts, audit referrals, and hotline complaints. The OIG
has also been providing Recovery Act-specific fraud training and fraud
awareness and education materials to EPA and state officials, and
subrecipients and contractors. As of January 31, 2010, the OIG had
conducted 95 briefing and training sessions to over 3,300 participants
to help them deter and detect fraud schemes.
State auditors and evaluators in four of the states we reviewed have
published audit reports of their state's SRF programs' use of Recovery
Act funds or have audit activities under way.
* The Ohio Office of Internal Audits (OIA) published a Recovery Act
program audit of the state's Clean Water and Drinking Water SRF
programs in March 2010.[Footnote 135] The division reported that Ohio
EPA did not use risk analysis to select project site inspections and
recommended that Ohio EPA develop a risk-based approach to monitoring.
In addition, Ohio's OIG completed an investigation of a Clean Water
SRF Recovery Act project and concluded that the project may not comply
with the Buy American requirements.[Footnote 136] The Ohio OIG
recommended that Ohio EPA consult with the U.S. EPA to review and make
a compliance determination.
* Pennsylvania's Bureau of Audits, which performed a risk assessment
of about 90 state programs that received Recovery Act funds, rated
both the Clean Water and Drinking Water SRF programs and 13 other
state programs as high risk. The bureau initiated compliance audits of
two SRF projects in March 2010 and has plans to complete compliance
audits of six additional projects.
* Officials from the Florida Auditor General told us in January 2010
that the agency had begun preliminary risk assessment procedures at
the Florida Department of Environmental Protection with respect to the
Clean Water and Drinking Water SRF programs.
* In Colorado, a 2009 Single Audit Act report on the SRF programs
identified a deficiency in the Colorado Water Resources and Power
Development Authority's internal controls over the Recovery Act SRF
programs. According to the audit report, the authority did not
determine whether its subrecipients had valid Central Contractor
Registration certifications on file before issuing the SRF loans, a
requirement under the Recovery Act and accompanying regulations. The
Authority concurred with the finding and stated that it was unaware of
the requirement--which was one among several new requirements
associated with the Recovery Act--until EPA provided a Recovery Act
training manual in September 2009. Because Colorado had set an early
deadline for its localities to have all projects under contract by
September 31, 2009--more than 4 months earlier than the Recovery Act
deadline--it had already executed the majority of the loans by the
time it learned of the need to check the certifications. According to
the report, once the Authority and Colorado Department of Public
Health and Environment officials learned of the requirement, the
department notified all subrecipients, and by December 31, 2009, all
subrecipients had complied. Responsible officials also stated they
would verify that appropriate procedures are in place for future
subawards.
Conclusions:
EPA and the states successfully met the Recovery Act deadlines for
having all Clean Water and Drinking Water SRF projects under contract
by the 1-year deadline, and almost all projects were under
construction by that date as well. Furthermore, Recovery Act funds
were distributed to many new recipients and supported many projects
that serve disadvantaged communities. Clean Water and Drinking Water
SRF program funds have supported a variety of projects that are
expected to benefit clean water and public health in a variety of
ways. However, as demonstrated above, the oversight mechanisms used by
EPA and the states may not be sufficient to ensure compliance with all
Recovery Act requirements. The combination of a large increase in
program funding and number of projects undertaken, compressed time
frames, and new Recovery Act requirements present a significant
challenge to EPA's current oversight approach.
Recommendation for Executive Action:
We recommend that the EPA Administrator work with the states to
implement specific oversight procedures to monitor and ensure
subrecipients' compliance with the provisions of the Recovery Act-
funded Clean Water and Drinking Water SRF programs.
Agency Comments:
We provided EPA with a draft of this section for review and comment.
EPA neither agreed nor disagreed with the recommendation. The agency
also provided technical comments, which we incorporated into the
section as appropriate.
The Department of Energy's Recovery Act Weatherization Program Faces
Challenges in Meeting Increased Production Targets While Ensuring
Program Requirements Are Being Met:
According to the Department of Energy (DOE), during the past 33 years
the Weatherization Assistance Program has helped more than 6.4 million
low-income families by making such long-term energy-efficiency
improvements to their homes as installing insulation; sealing leaks;
and modernizing heating equipment, air circulation fans, and air
conditioning equipment. According to DOE, these improvements enable
families to reduce energy bills, allowing these households to spend
their money on more pressing needs. DOE distributes Weatherization
Assistance Program funds through grants to state-level agencies in
each of the states, the District of Columbia (District), and five
territories and two Indian tribes. State-level agencies (recipients)
then contract with local agencies to deliver weatherization services
to eligible residents.
Recovery Act Provides for a Large Increase in Weatherization
Production:
The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program, which represents a significant increase for a
program that has received about $225 million per year in recent years.
In addition to Recovery Act funds, DOE continued to receive
appropriations for weatherization of $200 million for fiscal year
2009, $250 million in supplemental funding appropriated by the
Consolidated Security, Disaster Assistance, and Continuing
Appropriations Act of 2009, and another $210 million for fiscal year
2010.[Footnote 137] Because yearly DOE appropriations for
weatherization are considered "no year money," recipients of these
funds may carry over balances from previous fiscal years. DOE guidance
instructs recipients to spend their Recovery Act weatherization funds
first, but also encourages recipients to use their appropriations in
the appropriate year to avoid carrying over balances. In addition to
the DOE funds, states and territories have access to Low Income Home
Energy Assistance Program (LIHEAP) funds administered and distributed
by the U.S. Department of Health and Human Services, of which up to 15
percent may be spent on weatherization, according to LIHEAP guidance.
About $752 million in fiscal year 2009 and about another $737 million
in fiscal year 2010 were available to states and territories for
weatherization through LIHEAP. This represents a significant increase
from previous years.[Footnote 138] Using Recovery Act funds, DOE plans
to weatherize approximately 593,000 homes by March 2012.[Footnote 139]
One of DOE's goals is to increase total weatherization production to a
rate of 30,000 homes per month by the end of 2010.[Footnote 140] When
compared to the average rate of production in recent years before the
Recovery Act was passed, which was around 100,000 homes annually, this
new targeted production is more than three and a half times the
previous production rates.
During 2009, DOE obligated about $4.73 billion of the Recovery Act's
weatherization funding to the states, territories, and tribes, while
retaining about 5 percent of funds to cover the department's expenses,
such as those for training and technical assistance, and management
and oversight for the expanded weatherization program. DOE first
provided each recipient with the first 10 percent of its allocated
funds, which could be used for start-up activities such as hiring and
training staff, purchasing needed equipment, and performing energy
audits of homes, among other things (see figure 15).[Footnote 141]
Figure 15: Pointing Out Ceiling Cracks During an Energy Audit of a
Home in Georgia:
[Refer to PDF for image: photograph: Energy audit of home in Georgia]
Source: GAO.
[End of figure]
Before recipients could receive the next 40 percent of their funds,
DOE required each to submit a weatherization plan outlining how it
would use its Recovery Act weatherization funds. These plans identify
the number of homes to be weatherized and include strategies for
monitoring and measuring performance. By the end of 2009, DOE had
approved the weatherization plans of all 58 recipients, including all
of the states, the District, all five territories and two Indian
tribes. Each recipient now has access to at least 50 percent of its
funds, and DOE plans to provide access to the remaining funds once a
recipient has completed weatherizing 30 percent of the homes
identified in its weatherization plan and meets other requirements.
The other requirements include the recipient fulfilling the monitoring
and inspection protocols established in its weatherization plan;
monitoring its local agencies at least once each year to determine
compliance with administrative, fiscal, and state policies and
guidelines; ensuring that local quality controls are in place;
inspecting at least 5 percent of completed units during the course of
the respective year; and submitting timely and accurate progress
reports to DOE, and monitoring reviews confirm acceptable performance.
Under Section 1603 of the Recovery Act, funds are available for
obligation by DOE until September 30, 2010, and DOE officials told us
they plan to meet this requirement. DOE officials told us that as of
May 12, 2010, although DOE had obligated a total of $4.73 billion of
the Recovery Act's weatherization funding to the recipients, about
$1.4 billion of that total had not yet been obligated by recipients to
their respective local weatherization agencies. DOE has indicated that
the recipients are to spend their Recovery Act weatherization funds by
March 31, 2012.
DOE officials indicated that its goals are for each recipient to have
weatherized 30 percent of the homes identified in their respective
weatherization plans and obligated 100 percent of their respective
allocations to their local agencies by September 30, 2010. However,
DOE's funding announcement does not clarify whether these goals are
fixed deadlines for all recipients, nor has DOE clarified how
recipients are to obligate funds without having access to the
remaining 50 percent of their allocation. Some recipients are
concerned about the consequences of not meeting these targets. For
example, a large association representing local weatherization
agencies told us that state agencies are very concerned their funds
will be reallocated if they do not meet these production and spending
targets. In addition, in February 2010, a California state official
told us that DOE urged timely obligation and expenditure of funds and
strongly encouraged larger states to aggressively achieve the 30
percent production goal; as a result, California established the
September 30 target for meeting this goal. In an audit issued February
2, 2010, the California State Auditor expressed concern that
California would lose the remainder of its Recovery Act weatherization
allocation if the Department of Community Services and Development,
which administers the state's weatherization program, were unable to
weatherize 30 percent of the homes in its state plan by September 30,
2010, and recommended that the agency seek an extension of this
milestone from DOE.[Footnote 142] In regard to this increased pressure
to spend Recovery Act funds and weatherize homes rapidly, a DOE
Inspector General (IG) report issued in February 2010 indicated that
the DOE IG is concerned that the understandable desire to spend the
weatherization funds on a catch-up basis may lead to an environment
conducive to wasteful, inefficient and, perhaps even abusive,
practices.[Footnote 143]
Recipients' Ability to Meet Targets for Weatherizing Homes Using
Recovery Act Funds Varies Greatly:
Recipients' ability to use available funds for weatherization and to
weatherize the number of homes targeted varies considerably.
Recipients have only used a small percentage of their Recovery Act
funds, but DOE has indicated that the recipients are to spend the
funds by March 31, 2012. As of March 31, 2010, recipients had spent
about $659 million. With 2 years until the deadline, this only
represents about 14 percent of the total $4.73 billion in Recovery Act
funds available for weatherization activities.
Although Some States Are Meeting or Exceeding Targets, Others Are
Behind Schedule:
Although nationwide weatherization funds are being spent slowly, many
of the states in our review are meeting or exceeding their targets for
weatherization production outlined in their respective weatherization
plans. For example, officials from the Illinois Department of Commerce
and Economic Opportunity, which administers the state's weatherization
program, expect to meet or exceed their goals of spending 40 percent
of the Recovery Act funds and weatherizing 40 percent of the total
homes in its Recovery Act plan by June 30, 2010. In Florida, the
Department of Community Affairs indicated that the state was about 30
percent below its overall goal as of March 31, 2010, but that with a
recent increase in production, they should meet their target of
weatherizing at least 5,700 homes statewide by the end of September
2010, and at least 19,090 dwellings by March 31, 2012. Officials in
Iowa and Mississippi also indicated the states are exceeding their
targets for weatherizing homes with Recovery Act funds. As of March
31, 2010, local agencies in Iowa had spent about $14.1 million and had
completed weatherizing 1,176 homes, or about 16 percent of the state
plan's target for using Recovery Act funds. In Mississippi, which DOE
identified as one of the front-runners nationwide in meeting its
targets, the state's Division of Community Services reported that it
had weatherized about 45 percent of the total of 5,468 planned as of
March 31, 2010, which was ahead of its scheduled production. New
York's Division of Housing and Community Renewal reported that
although agencies in the state had only weatherized about 3 percent of
the total of 45,000 homes planned, agency officials were confident
that they would not only meet but exceed their goal. Because New York
has used most of its Recovery Act funding on multifamily units,
production there may appear slow even though many units are in
process. According to state officials, this may be because units in
multifamily projects cannot be counted as completed until all work on
each unit is finished and the project has been inspected and accepted
as complete by the local weatherization agency.[Footnote 144]
Other recipients in our review, such as the District, Georgia, and
North Carolina, are behind schedule. The District, which only began
spending Recovery Act funds to weatherize homes in March 2010, had
only completed about 14 percent of the total homes in its plan as of
March 31, 2010. As of the end of March 2010, 1,538 homes had been
weatherized in Georgia using Recovery Act funds, about 11 percent of
the homes identified in its state plan. Although Georgia did not meet
its goal of weatherizing about 500 homes per month in March 2010, DOE
has asked the state to increase its monthly production to 700 units
from April through September 2010. According to North Carolina's
weatherization program manager, as of March 31, 2010, local agencies
there had only completed weatherizing 1,715 homes, or approximately 7
percent, of the homes identified in the state plan. Although
California was not in our review during this reporting cycle, we have
previously noted delays in the implementation of California's Recovery
Act weatherization program. By March 31, 2010, California had only
weatherized 2,934 homes, less than 7 percent of the 43,400 total homes
to be weatherized with Recovery Act funds.
Nationwide, as of March 31, 2010, about 80,000 homes had been
weatherized throughout the United States with Recovery Act funds, or
about 13 percent of the 593,000 homes originally planned for
weatherization. According to DOE, only two states--Washington and
Idaho--had completed the weatherization of at least 30 percent of the
homes outlined in their state plans and had therefore been given
access to the remaining 50 percent of their funds. DOE also indicated
that six other states--Delaware, Maine, Mississippi, Ohio, Tennessee,
and Vermont--were very close to meeting the 30 percent target as of
March 31, 2010.
State Officials Offered a Number of Reasons for Delays in Spending
Program Funds:
State officials provided several reasons for the delay in spending
weatherization funds. Some state and local agencies needed time to
develop the infrastructure required for managing the significant
increase in weatherization funding and ensuring compliance with
Recovery Act requirements. Several states in our review, such as
Illinois and Iowa, waited to begin weatherizing homes using Recovery
Act funds until the Department of Labor had issued the Davis-Bacon
prevailing wage rate for weatherization work.[Footnote 145] In
Florida, local agencies did not begin weatherizing homes using
Recovery Act funds until September 2009 because the state agency and
local agencies needed time to hire and train new staff, identify and
certify new contractors, and implement Davis-Bacon wage requirements.
In Pennsylvania, officials told us that their Recovery Act-funded
weatherization program was delayed, in part because it took time to
implement a training and certification program for workers.
Concerns about hiring more workers may have also contributed to the
difficulty in rapidly increasing production. As state and local
agencies hire new employees, they must also find a way to adequately
train these workers. Moreover, the temporary nature of Recovery Act
funds has led to long-term concerns about having to lay off workers;
for example, some state and local agencies told us they are reluctant
to use funds to hire nontemporary employees because of concerns about
the "cliff effect" of having to lay them off when Recovery Act funds
are no longer available after March 2012. In Georgia, for example, one
service provider told us they decided to initially use contractors
instead of the in-house crews they had used, in part because they did
not want to hire staff and then lay them off just 2 years later.
[Footnote 146] Two local agencies in New York told us that they do not
wish to hire employees if they would have to lay them off after
Recovery Act funds are gone. North Carolina officials also said that
they do not like to hire employees if they would have to lay them off.
They eventually did hire additional personnel, but told them their
term of employment was only through the end of the Recovery Act
funding. Nationwide, DOE plans to add over 30,000 jobs to its network
of weatherization providers by the end of 2011. According to available
sources, as of March 31, 2010, 14,600 jobs have been created through
the use of Recovery Act weatherization funds.
Inconsistent Program Implementation Raises Concerns as to Whether
Program Requirements Are Being Met:
Recipients and local weatherization agencies face the challenge of
using their Recovery Act funds to increase production significantly,
while ensuring that these funds are spent in compliance with Recovery
Act requirements and the weatherization program requirements. While
the Recovery Act prioritizes moving funds into the economy quickly,
recipients of funds are also expected to invest these funds with a
high level of transparency and are held accountable for results under
the Act. DOE relies upon recipients to ensure that about 900 local
agencies nationwide are in compliance with program requirements. Among
the requirements that DOE has for the use of its weatherization funds
are those relating to verifying client eligibility, limiting the
maximum statewide average expenditure per home, training for the
weatherization workforce, ensuring local agencies have adequate
internal controls, state monitoring of weatherization work, and
ensuring that weatherization be cost-efficient, meaning that the
resulting energy savings from the work should be at least equal to the
amount spent on the work.
In our review, we found that these DOE requirements are not being
consistently implemented and it is unclear whether these requirements
are being met. In general, we found that this is due to a combination
of a wide degree of discretion in DOE guidance relative to some of
these requirements and state and local agencies that have not
implemented the program in a consistent manner. We identified
consistency concerns in these areas:
* Determination and documentation of client income eligibility varies
between states and local agencies.
* Different methodologies exist for determining the $6,500 maximum
average weatherization expenditure limit per home.
* Training and certification requirements for weatherization workers
vary greatly among the states.
* Internal controls to ensure local weatherization agencies comply
with program requirements are applied inconsistently.
* Some states have implemented monitoring systems, but other states
have not yet fully developed their monitoring systems.
* States' methods to ensure weatherization work is cost-effective vary
and many states are only just beginning to measure long-term energy
savings.
Determination and Documentation of Client Income Eligibility Varies:
The Recovery Act amended requirements on client eligibility to
increase the number of households that would qualify for
weatherization. Previously, a household was only eligible to receive
weatherization services through this program if the household income
was at or below 150 percent of the federal poverty threshold. The
Recovery Act increased eligibility from 150 percent to 200 percent of
the federal poverty threshold.
In determining income eligibility, DOE indicates that agencies should
verify income by checking documents such as proof that the person
receives Supplementary Security Income or Temporary Assistance for
Needy Families, either of which makes a person automatically eligible.
Other proof of income, such as W-2 forms or documentation of LIHEAP
eligibility, is also acceptable. DOE guidance further indicates that
this proof of income must be for the year before the application date.
DOE gives recipients discretion in determining the method of
calculating eligibility, so long as recipients are using a consistent
policy throughout their territory. In particular, DOE allows the
income data for the year to be annualized in order to determine
eligibility--for example, by multiplying by four the amount of income
received by the applicant during the most recent three months.
[Footnote 147] Regarding documentation of eligibility, DOE guidance
indicates that local agencies should maintain proof of client
eligibility in their case files, but leaves to the discretion of each
recipient what sort of proof of eligibility its local agencies should
maintain. Finally, if no other documents for verification are
available, DOE also allows applicants to self-certify their income.
However, allowing self-certification without additional documentation
does not adequately prevent ineligible participants from potentially
receiving program benefits.
In our review of local agency practices, we found that the flexibility
in the DOE guidance allows for a great deal of variation in how
eligibility was determined, thereby generating concerns as to whether
program requirements are being met. For example, regarding eligibility
determination, one local agency in Illinois concluded that if the
applicant has previously qualified for LIHEAP, then the applicant
automatically qualified for weatherization since the LIHEAP income
level is 150 percent of poverty level--a lower threshold than the 200
percent needed for weatherization. In Pennsylvania, at one local
agency where we reviewed files, we found two client files where income
information was more than 12 months old and eligibility was confirmed
simply by calling the client and asking if their income had changed.
While in some cases eligibility requirements were adequately
documented, in others it did not appear that local agencies were
consistently adhering to DOE guidance. For example, we found that the
files we reviewed at one local agency in Illinois appeared to meet
documentation guidance. Applicants provided documents that
demonstrated their income, such as wage statements, W-2s, and
unemployment insurance letters. Income eligibility was annotated on
the weatherization application form and documentation was copied and
put in the file. In other states, however, the case files did not
consistently include appropriate documentation. For example, the
checklist on Georgia's application does not include all types of
income listed in DOE's guidance, and the 25 files we reviewed did not
include evidence that interest or dividend information--specifically
listed as income on DOE's guidance--was considered during application.
In Florida, the 36 client files we reviewed typically contained the
required eligibility information, but there were exceptions. For
example, several files were missing required documentation, including
proof of a disability (required for priority services) or a copy of a
Social Security card, and these problems were not noted by the state
field monitors. Similarly, a report issued by the New Jersey Office of
the State Auditor found that the process to determine program
eligibility in New Jersey was inadequate.[Footnote 148] The report
indicated that auditors could not determine the eligibility of sample
households receiving weatherization assistance because of the lack of
supporting documentation for income and number of household members
and the lack of Social Security numbers maintained by the
weatherization agencies. New Jersey auditors identified 12 instances
in which applicants with household incomes that exceeded $100,000 in
2008 were approved because they did not provide complete information
about their annual income.
Methodology for Calculating the $6,500 Maximum Average Varies:
Since 2001, the average expenditure limit per home for DOE
weatherization was about $2,500 but was adjusted annually to reflect
changes in consumer prices. The Recovery Act increased this limit to
$6,500. According to DOE, recipients are provided flexibility in
establishing costs per unit limits, but are responsible for ensuring
that local agencies in their territory comply with these limits. DOE
guidance indicates that this average expenditure limit may be based on
all work performed in a respective state instead of on a unit-by-unit
basis. DOE regulations indicate that allowable expenditures to use
when calculating this statewide average include labor, materials, and
related matters; additionally, cost categories for administration are
fixed at no more than 10 percent of the allocation. We found that
states used a variety of methods in determining the items included in
the calculation, making it difficult to establish that recipients are
following DOE's guidance. For example, in New York, state officials
determined how many total units to weatherize using Recovery Act funds
by taking the state's total allocation, subtracting costs to local
agencies for administration, liability insurance, capital expenditures
such as for vehicles, and costs for financial audits, and then
dividing the remaining allocation by $6,500. Texas' Recovery Act state
weatherization plan indicates that it plans to measure average
expenditures per home by dividing the state's total expenditures for
program operations by total homes weatherized using Recovery Act
funds. In Georgia, the average cost calculation includes materials,
labor, and program support, and state officials said agencies have the
discretion to include some administrative costs under program support,
if amortized. However, the calculation excludes administration,
training and technical assistance, and health and safety items.
Officials in North Carolina told us that the average amount that local
agencies are permitted to spend is up to $4,000 per home. In Illinois,
the maximum cost per home for labor and materials is $5,200; the
remaining $1,300 is for program support. Mississippi's state agency
has directed local agencies to spend no more than $4,500 to purchase
labor and materials for each home. The remaining $2,000 per home may
be spent on overhead costs, such as program staff salaries, travel,
supplies, rent, and utilities.
Worker Training and Certification Requirements Vary among the States:
DOE required recipients to address in their weatherization plans how
the training of the respective state's current and expanded workforce
(employees and contractors) would be conducted. According to DOE, the
agency is in the process of developing a national platform for
weatherization training and national standards for weatherization
certification and accreditation standards program, which it estimates
will take about 2 years. DOE's guidance for recipients indicates that
training activities and technical assistance should be designed to
maximize energy savings; minimize production costs; improve program
management and crew and contractor "quality of work;" or reduce the
potential for waste, fraud, abuse and mismanagement. The local service
providers should be the primary recipients of training and technical
assistance activities.
Most of the states that we visited require their weatherization
workers to be trained and certified, but requirements varied between
states, raising concerns as to whether workers were adequately trained
to weatherize homes. In Iowa, for example, all crews and contractors
are required to have training in lead paint safe work practices, and
all auditors are required to receive training in areas such as basic
furnace maintenance; mold, moisture, and ventilation; and combustion
health and safety. The state reimburses local agencies for travel,
meals, and lodging when workers attend state-sponsored training and
the state provides local agencies with non-DOE funds that can be used
for crew and contractor training and to obtain other weatherization-
related training. In contrast, Texas does not require certification of
local agency staff--although training is provided on topics such as
heating and cooling systems, Lead Safe Weatherization, manufactured
housing, and material installation techniques. In the District,
officials told us there is no requirement that contractors receive
special weatherization training or certification.
Other states we visited have training and certification requirements
that seem less stringent than Iowa but more involved than Texas or the
District. In Pennsylvania, for instance, state officials said that
workers are required be certified or "on a path to certification" by
July 2010. This means that all incumbent and existing weatherization
workers would need to submit an application to be approved for
certification, or approved with recommended coursework, prior to July
2010 (see figure 16). In Illinois, contractors are trained in a 1-week
training course, usually offered through the local community college.
One week training sessions in Illinois include basics of heat transfer
and heat loss, construction fundamentals, residential energy use,
energy measures, basic HVAC systems, and weatherization program
overviews. According to state officials, the agency that administers
the program in New York does not require certification for all
weatherization workers, but it does mandate that all workers receive
training in specific areas and encourages all local weatherization
agencies to provide their workers with appropriate training.
Figure 16: Heating Systems Laboratory, Weatherization Training Center
at the Pennsylvania College of Technology in Williamsport,
Pennsylvania:
[Refer to PDF for image: photograph: Weatherization training center at
the Pennsylvania College of Technology in Williamsport, Pennsylvania]
Source: GAO.
[End of figure]
Extent of Internal Controls Varied Greatly across the States We
Visited:
DOE has issued guidance requiring recipients of Recovery Act
weatherization funds to implement a number of internal controls to
mitigate the risk of fraud, waste, and abuse. DOE provides recipients
with the discretion to develop and implement these internal controls
in accordance with each state's weatherization plan. Local agencies
use various methods to prevent fraudulent or wasteful use of Recovery
Act funds, such as conducting risk assessments. For example, some
local agencies reported that new contractors are subjected to a higher
level of scrutiny than more experienced contractors.
The extent to which local weatherization agencies have established
controls to ensure compliance with weatherization program and Recovery
Act requirements varies greatly by state. While we found that internal
controls existed at the local agencies we visited, we often found
evidence that local officials did not consistently adhere to them,
thereby making it difficult to mitigate the risk of fraud, waste, and
abuse. In Florida, for instance, in over half of the 36 client files
that we reviewed, we found one or more instances in which work listed
as completed was not consistent with the work that was recommended.
For example, installation of a new hot water heater, refrigerator, or
smart thermostat was either recommended in the audit but not done, or
done without a recommendation that it was needed, and the reasons for
these actions were not recorded. In 22 of the 29 homes we visited in
Florida, we found that all work charged to the program was authorized,
performed, and appeared to be of acceptable quality, but for the other
7, some of the authorized improvements were either not completed or of
questionable quality. Moreover, we found three potential health or
safety issues that had not been addressed.
The state agency in Mississippi found deficiencies at one local agency
relating to inventory control, health and safety issues, wage rates
required by the Recovery Act's Davis-Bacon provision, and internal
controls. In Pennsylvania, we found that the state's program
guidelines do not specify how the agencies should manage the work
subcontractors perform. For example, according to agency officials at
one local agency, most changes are handled verbally, especially if
they are minor--that is, below $100. However, 8 of the 13 client files
we reviewed at this agency did not contain any evidence that changes
to the work order were authorized. Two of these changes were
significant: a total of about $6,000 in one case and about $3,000 in
another.
Although Some States Have Implemented Monitoring Systems, Others Are
Still in Development:
According to DOE officials, its monitoring policy has been
significantly strengthened under the Recovery Act. DOE is in the
process of hiring staff to provide national oversight to the Recovery
Act weatherization program. DOE officials told us that they have
increased monitoring of recipients from every two years to quarterly
in most cases, and they are planning to hire a contractor to review at
least 5 percent of the homes weatherized independent of the state
monitoring process. DOE officials told us that each recipient will be
assigned a project officer who will review the recipient's fiscal and
programmatic reports. Project officers will also be responsible for
coordinating site visits to the state and local agencies responsible
for weatherization, as well as visiting a sample of projects being
weatherized with Recovery Act funds. As part of this enhanced
monitoring, DOE's weatherization project officers will be able to
track each state's performance using monthly reports submitted by
recipients on homes weatherized, funds spent, and other information.
DOE also requires state weatherization agencies to conduct on-site
monitoring of all weatherization service providers to inspect the
management of funds and the production of weatherized homes. These
monitoring visits consist of a financial review of the service
provider's records pertaining to salaries, materials, equipment, and
indirect costs; program reviews of the service provider's records,
contracts, and client files; and a production review, consisting of
the inspection of weatherized homes by the state agencies and by the
service provider. DOE requires that each state agency inspect at least
5 percent of the weatherized homes and each service provider inspect
all of the completed homes or homes in the process of being
weatherized. If an inspection reveals reporting inconsistencies,
quality control issues, or other problems, the state agency is
generally required to increase the number of homes monitored and
frequency of inspections.
We found that some states in our review, such as Mississippi and New
York, have monitoring systems in place that impose additional
monitoring requirements beyond those set forth by DOE. Mississippi has
three levels of oversight. The first level is conducted by an
independent division of the state agency that administers the program;
officials from this division told us that they monitor 10 percent of
the total number of homes weatherized. The division scrutinizes fiscal
and programmatic records to determine, for example, whether community
action agencies are meeting Davis-Bacon wage rate requirements and
whether activities performed by contractors relate to the appropriate
funding source. The second level of review is conducted by regional
weatherization coordinators, and includes monitoring an additional 20
percent of the total number of homes. Weatherization staff from the
state's Division of Community Services are responsible for the third
level of review, which includes monitoring 10 percent of the homes
that were monitored by the regional coordinators, as well as an
additional 2.5 percent of homes not reviewed by the regional
coordinators. The second-and third-level reviews will include
examining local agency files and monitoring contractor performance.
New York's state weatherization agency has two sets of inspectors--
program inspectors and fiscal inspectors--and both visit each local
agency at least once every 2 months. Program inspectors review files
to ensure that the local agency has followed program guidelines in
determining eligibility and that the work has been properly inspected.
Fiscal inspectors perform on-site reviews of agency accounting
procedures in which they determine whether funds are properly
accounted for and that the agency has proper internal controls in
place.
Through active monitoring, some states have imposed more stringent
monitoring or terminated contracts for local agencies found to be not
in compliance with requirements. In New York, for example, two
recipients of Recovery Act weatherization funds have been placed under
"special conditions," which means that before any vouchers can be
submitted for reimbursement, they must first be reviewed and approved
by the on-site fiscal monitor. In Iowa, inspectors identified 12 major
and 12 minor findings at one local agency. They found numerous
weaknesses in the local agency's oversight of contractors' work, and
noted that the work completed on numerous homes did not meet the
required state standards. Although Recovery Act funds had not been
used, the state agency believed the weaknesses were so serious that it
suspended Recovery Act funding to the agency in September 2009.
Mississippi also terminated the contract of a local agency, citing
substandard performance by staff and contractors. Poor staff
performance was attributed to a lack of supervision and oversight by
local agency management, as well as the hiring of unqualified staff.
Monitoring systems in other states we visited, however, were not yet
complete. In Georgia, for example, the administering agency has
contracted with the University of Georgia Cooperative Extension for
program oversight to be conducted by 26 monitors--13 desk monitors and
13 field monitors. However, monitoring did not start until March 2010,
and 5 of the 26 positions were vacant as of April 1, 2010. As of
March, 31, 2010, the state agency in Illinois had not inspected any
homes at 19 local agencies; these 19 agencies received more than a
quarter of the state's weatherization program allocation. Finally,
some state agencies have not been meeting their own monitoring
standards in the past. In Pennsylvania, for example, the state agency
guidelines indicate program monitoring should be conducted a minimum
of twice during the program year. We found, however, that none of the
five local agencies whose files we reviewed had been monitored more
than once per year, and four of the agencies did not receive an annual
monitoring visit during 1 of the past 3 program years prior to the
Recovery Act.
States' Methods to Ensure Weatherization Work Is Cost-Effective Vary
and Many States Are Only Just Beginning to Measure Long-Term Energy
Savings:
A long-term goal of the weatherization program is to increase energy-
efficiency through cost-effective weatherization work, and DOE relies
on its recipients to ensure compliance with this cost-effectiveness
requirement. By focusing more on energy savings, DOE can better ensure
that the cost-effectiveness of weatherization work can be maximized.
Federal regulations require that weatherization materials installed
must be cost-effective, resulting in energy cost savings over the
lifetime of the measures.[Footnote 149] This is often reflected in a
savings to investment (SIR) ratio of at least 1.0--meaning that the
resulting energy savings from the work should be at least equal to the
amount spent on the work. DOE leaves to the discretion of recipients
how to ensure that their local agencies are in compliance with this
measure. To assist in this measure, DOE developed the National Energy
Audit Tool (NEAT) to determine the types of weatherization measures
that are cost-effective in single-family homes and small multifamily
buildings with fewer than five units, and developed the Manufactured
Home Energy Audit (MHEA) for mobile homes. In lieu of using the NEAT
and MHEA processes, recipients may develop priority lists that must be
approved by DOE every 5 years. Recipients that use priority lists must
ensure cost-effectiveness by developing separate priority lists for
single-family homes, multifamily buildings, and mobile homes.
We found variation in how some local officials are determining what
weatherization work should be performed based on consideration of cost-
effectiveness.[Footnote 150] Within Texas, for example, we found some
local agencies are using various DOE approved processes; including
NEAT, a 12-category priority list, and another energy audit tool. The
Texas priority list identifies cost-effective recurring measures that
can be performed on eligible homes. The approved measures are grouped
by 12 major categories and include measures aimed at reducing air
infiltration; sealing ducts; installing attic, sidewall, and floor
insulation; replacing refrigerators and water heaters; and installing
sun screens on windows. The priority list does not include replacing
windows or doors but does state that a maximum of $400 can to be
expended on miscellaneous repairs, such as repairing windows. In
Texas, we found that by using NEAT, one agency justified spending a
significant amount of Recovery Act funding installing new windows and
doors, even though these measures produce a much lower payback in
terms of reducing the energy costs of low-income recipients (about a
1.4 SIR) and are not included in the priority list. Conversely,
another agency in Texas relied on the priority list to support
installing basic weatherization measures, such as measures to reduce
air infiltration and attic and wall insulation that offered much
greater energy savings (some with SIRs of 14 or more) for the money
invested than the windows and doors allowed by NEAT. However, based on
a comparison of these two approaches, it appears that if Texas
emphasized the use of the priority list whenever possible, more energy
cost savings would be provided, and at the same time, less money per
home would be spent on the installed weatherization measures.
In regards to measuring long-term energy savings, DOE guidance also
indicates that local agencies should conduct energy audits before and
after completing weatherization work and record the results. DOE has
conducted surveys on the amount of energy savings over time from
weatherization efforts and is currently in the process of undertaking
such a survey. According to DOE officials, the agency is conducting an
independent evaluation of energy savings through Recovery Act-funded
weatherization and reductions in clients' energy bills. This
evaluation, which is being conducted under the supervision of Oak
Ridge National Laboratory, uses billing data from before and after the
weatherization work took place. It will provide statistics on a
regional basis and by primary heating fuel and housing type. The
results are scheduled to be issued in 2012. DOE has indicated it will
focus on developing better methods for measuring energy savings in the
future by, for example, working with utility companies to gain access
to the utility statements of clients whose homes have been weatherized.
While some states are actively measuring energy savings, others are
only just beginning to do so. Without such data, assessment of program
effectiveness based upon energy savings will not be possible. Some
states, such as New York and Iowa, are actively measuring energy
savings. In its Recovery Act state plan submitted to DOE, New York
estimated the energy savings for the 2009 program year, both on an
annual basis and after 15 years. Iowa engages a private consultant
each year to assess program costs and results. The most recent
assessment, completed June 1, 2009, found first-year client fuel
savings averaged $388. Other states have plans to measure energy
savings. The Pennsylvania state agency, for example, has entered into
an agreement with Pennsylvania State University to prepare an annual
report that will include, among other things, an analysis of the
energy savings for the homes weatherized by each weatherization agency
and an analysis of the cost-effectiveness of the individual
weatherization measures. One local agency in the state was working
with utility companies to obtain 13 months of energy statements for
clients whose homes had been weatherized to measure energy savings
over time. Georgia is implementing a statewide Web-based reporting
tool expected to be in place by July 2010 that will provide real-time
information about energy savings in weatherized homes. In addition,
monitors will educate clients on energy savings tips and track the
results of those efforts. Each of the three local agencies we visited
in Georgia already collects copies of energy bills as part of the
application process. Mississippi also plans to measure energy savings
in weatherized homes by comparing homeowner-supplied energy bills 12
months before weatherization efforts begin to bills from the
subsequent 12 months.
Weatherizing Multifamily Units Presents New Concerns and Program
Officials Are Still Developing Expertise:
Multifamily housing units present new concerns for agencies
administering the program. DOE officials have acknowledged that
multifamily projects are distinct from the weatherization of single-
family homes. For example, in a study prepared for DOE's Office of the
Weatherization and Intergovernmental Program in 2007, the department's
Oak Ridge National Laboratory noted that program funds are used
primarily for weatherization of single-family homes and evaluating the
performance of multifamily residences is more complex. Although
weatherizing multifamily buildings can improve production numbers
quickly, state and local officials have found that expertise with
multifamily projects is limited and that they lack the technical
expertise for weatherizing large multifamily buildings. We also found
that state agencies are not consistently dividing weatherization costs
for multifamily housing with landlords. Finally, state agencies can
feel compelled to focus upon multifamily units as a way to quickly
increase their production numbers.
Some state and local officials with whom we spoke acknowledged their
limited expertise with multifamily projects. Officials from one local
agency in Pennsylvania told us that 2 years ago, they discovered that
there were no energy auditors in the state who were familiar with
auditing multifamily projects. They noted that the state agency's
guidance neither addresses audits nor includes a priority list for
multifamily housing. North Carolina does not have an approved energy
audit program or priority list to complete multifamily units, and
Georgia is in the process of developing an approach to weatherize
multifamily units. Iowa officials told us that they are currently
developing guidelines for local agencies to pursue weatherization of
multifamily buildings if they wish. They said they are not certain
that they have the technical expertise for weatherizing large
multifamily buildings and believed that a local agency would have to
contract with an engineer or other expert to run an audit. According
to state officials, it is unclear whether any Iowa local agencies will
tackle a building larger than five floors because their audit tool is
not appropriate for those buildings.
In contrast to most of the other states we visited, New York
weatherizes a large number of multifamily dwellings. In its approved
plan, the state agency in New York estimated that multifamily projects
would constitute over half of its units weatherized using Recovery Act
funds. But New York officials acknowledged that many factors delay the
completion of multifamily projects. For example, while all local
weatherization agencies in the state are approved to conduct energy
audits of one-to four-family homes, only 6 out of 65 local agencies
are approved to conduct their own audits of multifamily projects. The
remaining agencies must contract with a state-approved entity. Local
agencies' demand for more energy audits as a result of the influx of
funding from the Recovery Act has created a backlog, resulting in
delays in starting projects. The state agency is in the process of
training local agencies to allow them to conduct their own energy
audits of multifamily projects, but according to state officials, this
process takes at least 1 year. The state agency hopes to have over 30
local agencies approved to do multifamily energy audits by the end of
the year.
Multifamily housing weatherization also disrupts normal reporting of
production. According to state officials, units in a multifamily
project cannot be counted as completed until all work on each unit is
finished and the project has been inspected and accepted by the local
weatherization agency. At one agency we visited in New York, over 100
one-to four-family homes had been weatherized by March 1, 2010. The
director noted that in March, two multifamily projects totaling 300
units would be completed, raising the agency's production from 100 to
over 400 in just 1 month.
Finally, state agencies are not consistently sharing weatherization
costs for multifamily housing with landlords. In New York, the state
agency's policies indicate that the owners of a multifamily project
must contribute to the overall cost of the project. This contribution
typically covers 25 percent of the project's cost, but the exact terms
of the ownership participation are up for negotiation. In Texas,
however, owners of multifamily rental properties are not required to
make any contribution to weatherization project costs. Similarly, Iowa
state officials said that its current state policy does not require
landlords to contribute to weatherization costs.
Despite the lack of familiarity with weatherizing multifamily units,
states can feel compelled to focus upon them as a way to quickly
increase their production numbers. For example, the Texas state agency
that administers weatherization at the state level recognized that
achieving its weatherization target will be dependent upon increased
attention to weatherizing multifamily units. Moreover, Texas state
officials told us DOE encouraged the weatherization of multifamily
units. However, Texas state officials also recognize that they and
staff in their local agencies have limited experience and training on
weatherizing multifamily units. The state agency's on-site inspections
of 27 multifamily units weatherized by one local agency found that the
work completed on 13 units was not acceptable and return visits to
correct workmanship deficiencies would be required. These findings
were consistent with our own observations at one multifamily site.
Accordingly, they have been working with DOE to develop critically-
needed training.
Conclusions:
The weatherization program requires cooperation and coordination
between numerous federal, state, and local agencies. Together, these
entities face challenges in meeting increased production targets while
ensuring program requirements are being met in a consistent manner. We
have identified a number of concerns related to the program's
implementation, including (1) ensuring the eligibility of clients, (2)
calculating maximum average cost per unit, (3) establishing training
and certification for workers, (4) installing and enforcing internal
controls at local agencies, (5) monitoring of the work, and (6)
developing and implementing standards for measuring the cost-
effectiveness of weatherization work. Furthermore, although
weatherizing multifamily units is considered a way to quickly increase
the number of weatherized homes, it presents new concerns for agencies
administering the program, including a lack of technical expertise for
weatherizing large multifamily buildings, inconsistencies in cost-
sharing arrangements with landlords, and a tendency to rely upon the
weatherization of multifamily units as a way to quickly increase
production numbers.
Recommendations for Executive Action:
Given the concerns we have raised about whether program requirements
are being met, we recommend that DOE, in conjunction with both state
and local weatherization agencies, develop and clarify weatherization
program guidance that:
* establishes best practices for how income eligibility should be
determined and documented and issues specific guidance that does not
allow the self-certification of income by applicants to be the sole
method of documenting income eligibility.
* clarifies the specific methodology for calculating the average cost
per home weatherized to ensure that the maximum average cost limit is
applied as intended.
* accelerates current DOE efforts to develop national standards for
weatherization training, certification, and accreditation, which is
currently expected to take 2 years to complete.
* develops a best practice guide for key internal controls that should
be present at the local weatherization agency level to ensure
compliance with key program requirements.
* sets time frames for development and implementation of state
monitoring programs.
* revisits the various methodologies used in determining the
weatherization work that should be performed based on the
consideration of cost-effectiveness and develops standard
methodologies that ensure that priority is given to the most cost-
effective weatherization work. To validate any methodologies created,
this effort should include the development of standards for accurately
measuring the long-term energy savings resulting from weatherization
work conducted.
* considers and addresses how the weatherization program guidance is
impacted by the introduction of increased amounts of multifamily units.
In addition, given that state and local agencies have felt pressure to
meet a large increase in production targets while effectively meeting
program requirements and have experienced some confusion over
production targets, funding obligations, and associated consequences
for not meeting production and funding goals, we recommend that DOE
clarify its production targets, funding deadlines, and associated
consequences while providing a balanced emphasis on the importance of
meeting program requirements.
Agency Comments and Our Evaluation:
We provided a draft of this report to DOE for review and comment. In
its response, DOE officials generally agreed with our recommendations
and indicated that they will take steps to develop and clarify program
guidance related to the issues GAO raised. DOE also provided technical
comments reflecting recent agency actions and achievements, which we
incorporated, as appropriate.
While Housing Agencies Met the Recent Recovery Act Obligation
Deadline, HUD Has Not Finalized Its Strategy for Monitoring Recovery
Act Funds Going Forward:
The Recovery Act required the U.S. Department of Housing and Urban
Development (HUD) to allocate $3 billion through the Public Housing
Capital Fund to public housing agencies using the same formula for
amounts made available in fiscal year 2008. HUD allocated Capital Fund
formula dollars to 3,134 public housing agencies shortly after passage
of the Recovery Act and, after entering into agreements with housing
agencies, obligated these funds on March 18, 2009. Public housing
agency officials said they are using these funds to support a variety
of improvement projects at public housing sites, including roofing and
gutter work, replacing windows and doors, rehabilitating unit
interiors, and replacing heating, cooling, and hot water systems.
The Recovery Act required that housing agencies obligate 100 percent
of their formula grant funds within 1 year of when the funds became
available to them and directed HUD to recapture funds not obligated at
that time and to reallocate them to housing agencies in compliance
with the obligation requirement. According to HUD officials, all
housing agencies met the March 17, 2010, formula grant obligation
deadline by either obligating all of their funds by March 17, 2010, or
rejecting or returning a portion of their formula grant funds. The
Recovery Act also required that housing agencies expend 60 percent of
their formula grant funds within 2 years from when the funds became
available and expend 100 percent of their funds within 3 years from
when the funds became available. According to HUD data as of May 1,
2010, 2,901 housing agencies had drawn down funds totaling $1.08
billion from HUD, or about 36 percent of the total allocated to
housing agencies, in order to pay for project expenses already
incurred (see figure 17). There were 1,852 housing agencies that had
already drawn down at least 60 percent of their funds, including 944
that had drawn down 100 percent.
Figure 17: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as
of May 1, 2010:
[Refer to PDF for image: 3 pie-charts; 1 horizontal bar graph]
Funds obligated by HUD: 99.9%; $2,981,736,924;
Funds obligated by public housing agencies; 99.9%; $2,981,736,924;
Funds drawn down by public housing agencies: 36.3%; $1,084,118,576.
Number of public housing agencies:
Were allocated funds: 3,134;
Obligated 100% of funds: 3,113;
Have drawn down funds: 2,901.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
Although they met the obligation deadline, officials with some of the
37 housing agencies we visited told us they experienced challenges in
obligating their Recovery Act funds but no single factor was widely
shared among them. In a few cases, housing agency officials noted that
adhering to the Buy American provision of the Recovery Act impacted
their obligation of Recovery Act funds. For example, officials with
one housing agency noted that because HUD's guidance on the Buy
American provision was delayed, the housing agency decided not to use
Recovery Act funds to install security cameras in their public housing
communities and instead switched to other projects. The housing agency
officials later learned that the cameras, although foreign-made, may
have been eligible because they were manufactured by a U.S. trade
partner. Officials with two housing agencies noted that it took time
to amend their procurement documents to reflect the Buy American
provision. Finally, officials with four housing agencies noted they
experienced challenges in finding products or supplies for their
projects that would comply with the Buy American provision. For
example, officials with one housing agency told us that it was more
difficult than expected to find bathroom and plumbing fixtures that
would satisfy the Buy American requirement. Going forward, housing
agencies may face similar challenges in meeting the September 2010
obligation deadline for the Recovery Act competitive grants.
Another challenge raised by officials with two of the public housing
agencies we visited was complying with HUD's Section 3 requirement to
try to employ low-income persons residing within the public housing
community.[Footnote 151] Officials with one housing agency noted that
they did not have a list of Section 3-compliant contractors in the
area, so the housing agency had to take time to ensure that the
contractors bidding on its Recovery Act project could satisfy the
requirement. Officials with the other housing agency noted that the
Section 3 requirement created confusion among some contractors who
wanted to bid on Recovery Act work, as the contractors were not
previously aware of the requirement or had not previously entered into
contracts with the government. The housing agency officials noted,
however, that they ultimately received many bids for their project and
were able to meet the obligation deadline. Again, housing agencies may
face similar challenges complying with the Section 3 requirements in
meeting the competitive grants obligation deadline.
HUD officials credit their additional communication with and outreach
to housing agencies in the months and weeks leading up to the deadline
for enabling so many housing agencies to obligate all of their funds
on time. For example, HUD field staff in Texas said they held weekly
conference calls with housing agencies and followed up individually
with housing agencies that experienced challenges or requested
assistance. HUD field staff in New Jersey told us they sent out urgent
notices via e-mail to remind housing agencies of the importance of
obligating all their funds by the March 17 deadline, while field staff
in Illinois told us they had daily contact with housing agencies that
still had funds to obligate as the deadline approached in order to
strategize ways to expedite the obligation process with them. In
addition to regular communication with housing agencies, HUD field
staff also provided technical assistance--often related to
procurement--that housing agency officials said was essential in
helping them meet the deadline. For example, officials at one New
Jersey housing agency said they relied heavily on the HUD field office
to help them meet the deadline. These officials noted that the HUD
field office provided them with a checklist that identified necessary
documents to be included in their contracts, as well as specific
language about Recovery Act requirements to be included in their bid
solicitations in order to meet the obligation deadline. Similarly, a
housing agency official in Illinois said that HUD field staff provided
tremendous assistance related to a mixed-finance project, with which
the housing agency had no prior experience. As a result of HUD's
assistance, the housing agency was able to award the contract in
February 2010, about a month before the deadline. Other housing agency
officials noted that HUD field staff provided valuable assistance
related to evaluating bids and making change orders to contracts to
ensure all funds were used. As housing agencies strive to meet the
upcoming competitive grant deadline, it may be important for HUD field
staff to continue to provide additional communication with and
outreach to housing agencies.
Housing Agencies Continue to Make Progress Obligating Competitive
Grant Funds:
In addition to awarding Capital Fund formula dollars, HUD was also
required under the Recovery Act to award nearly $1 billion to public
housing agencies based on competition for priority investments,
including investments that leverage private sector funding or
financing for renovations and energy conservation retrofitting. HUD
accepted applications from June 22 to August 18, 2009, and according
to a HUD official, 746 housing agencies submitted 1,817 applications
for these competitive grants. In September 2009, HUD awarded 396
competitive grants totaling $995 million for the creation of energy-
efficient communities, gap financing for projects stalled due to
financing issues, public housing transformation, and improvements
addressing the needs of the elderly or persons with disabilities:
* For the creation of energy-efficient communities, HUD awarded 36
grants totaling $299.7 million for substantial rehabilitation or new
construction and 226 grants totaling $305.8 million for moderate
rehabilitation. For example, in Georgia, funds for substantial
rehabilitation are being used to install exterior insulation, new
roofs, photovoltaic panels, energy-efficient appliances, heat pumps,
and windows in public housing units. In Arizona, funds for moderate
rehabilitation are being used to retrofit 281 units with improvements
such as low-flow faucets, showerheads, and toilets.
* For gap financing for projects that were stalled due to financing
issues, HUD awarded 38 grants totaling $198.8 million.
* For public housing transformation, HUD awarded 15 grants totaling
$95.9 million to revitalize distressed or obsolete public housing
projects.
* For improvements addressing the needs of the elderly or persons with
disabilities, HUD awarded 81 grants totaling $94.8 million.
As of May 1, 2010, housing agencies had reported obligations totaling
about $174 million for 265 grants, according to HUD data. The Recovery
Act requires housing agencies to obligate 100 percent of these funds
within 1 year from the date when they received their grants, or by
September 2010 (see figure 18).
Figure 18: Timeline for Public Housing Capital Fund Competitive Grants
under the Recovery Act:
[Refer to PDF for image]: timeline]
June 22-August 18, 2009:
HUD accepted applications for competitive grant funds.
September 30, 2009:
HUD required to obligate nearly $1 billion in competitive grant funds to
public housing agencies (which they did).
September 2010:
Public housing agencies are to have obligated 100 percent of their
competitive funds by this date.
September 2012:
Public housing agencies are to have drawn down 100 percent of their
competitive funds by this date.
Source: GAO.
[End of figure]
HUD Plans to Redistribute Returned and Recaptured Funds after
Reviewing Selected Housing Agencies' Obligations:
Some housing agencies have returned to HUD all or a portion of the
competitive and formula grant Recovery Act funds awarded to them,
according to HUD officials. As of April 1, 2010, three housing
agencies had returned approximately $14.2 million in competitive grant
funds. In addition, twenty-one housing agencies refused to accept or
returned to HUD approximately $3.26 million in Recovery Act formula
grant funds, according to HUD officials. Of these 21 housing agencies,
18 either did not accept the funds allocated to them or returned all
of the funds allocated to them--a total of $2.96 million--prior to the
obligation deadline. According to HUD officials, 9 of these 18 housing
agencies had disposed of their public housing units (by, for example,
demolishing or selling them) or soon would be doing so. The remaining
9 housing agencies gave other reasons for either not accepting the
funds or returning them later:
* three housing agencies stated that they did not have a need for the
funds;
* three others said they thought Recovery Act projects would be too
time-consuming;
* two housing agencies simply said they could not meet the obligation
deadline; and:
* one housing agency's units are vacant because they are in a
Superfund site and all residents were relocated by the Environmental
Protection Agency.[Footnote 152]
In addition, three housing agencies returned a portion of their
formula grants--$303,015 of the $700,663 total allocated to them--to
HUD prior to the deadline. According to HUD officials, all three of
the housing agencies that returned a portion of their formula grants
had trouble obligating all of their funds and therefore had funds left
over. One had bids come in lower than expected, another had disposed
of some of its public housing units, and the third did not have any
eligible work items to which funds could be obligated before the
deadline. Knowing they would be unable to meet the March 17, 2010,
deadline, these three housing agencies chose to return their
unobligated Recovery Act funds.
According to HUD officials, HUD will redistribute the $17.46 million
of competitive and formula grant funds that were rejected or returned
by housing agencies by awarding a new set of competitive grants. HUD
plans to redistribute these funds to qualified housing agencies that
previously applied for competitive grants but did not receive them
because HUD had obligated all of the nearly $1 billion allocated to
the program. Given HUD's emphasis on green, energy efficient housing,
HUD will limit the redistribution of funds to those applications for
energy retrofit projects. Prior to funding any of the remaining
applications, HUD plans to verify that potential recipients are still
able to complete the work outlined in their original applications and
that they are currently in compliance with Recovery Act requirements.
According to HUD officials, HUD will redistribute these funds once the
final amount to be redistributed is determined. HUD is concerned that
it may have to recapture additional funds, as housing agencies may not
have followed proper procedures or may have directed funds to
ineligible uses in the rush to meet the formula grant obligation
deadline. According to HUD officials, 548 (about 18 percent) of the
3,113 housing agencies that met the Recovery Act formula grant funds
obligation deadline had obligated less than 90 percent of those funds
as of February 26, 2010. HUD field staff planned to conduct a quick-
look review of all Recovery Act formula grant obligation documents
generated between February 26, 2010, and March 17, 2010, by these 548
housing agencies. This review is to include questions such as whether
necessary approvals were in place for work items and whether
obligations correspond to work items in the housing agency's approved
annual plan. The officials stated that they expect to complete these
reviews by June 1, 2010. HUD officials told us they plan to recapture
any affected funds and add them to the $17.46 million to be
redistributed. HUD officials estimated that they may be able to
redistribute these funds by early to mid-summer 2010.
HUD's Plans for Monitoring of Recovery Act Funds Continue to Evolve:
During the first year of implementation, HUD's strategy for monitoring
Recovery Act formula funds included conducting remote and on-site
reviews of housing agencies' administration of Recovery Act
requirements. HUD conducted these reviews for both nontroubled and
troubled agencies, as determined under its Public Housing Assessment
System.[Footnote 153] According to a HUD official, they completed
remote reviews of all 3,116 housing agencies that did not return their
formula grant funds and on-site reviews of 172 troubled housing
agencies and 538 nontroubled housing agencies that HUD identified
through its risk-level classification. Based on these reviews, HUD
officials identified three common areas of concern that it will
continue to monitor going forward: (1) procurement issues, (2)
contract administration, and (3) failure to include Recovery Act work
items in HUD-approved 5-year work plans. For example, HUD officials
stated that they are currently providing their field office staff with
additional training on procurement and contract administration
requirements, so that they may provide housing agencies with
additional technical assistance in these areas. In addition, HUD
officials told us that their field offices are working with housing
agencies to ensure that their 5-year plans are updated to include any
missing Recovery Act work items and that the plans subsequently go out
for public comment for the requisite 10 days.[Footnote 154]
HUD has developed a second-year strategy for monitoring Recovery Act
funds but has not finalized its approach. For example, HUD has
developed a draft four-tier approach for monitoring formula grant
funds that includes:
* the quick-look review, described above, of Recovery Act formula
grant obligation documents generated between February 26, 2010, and
March 17, 2010;
* either onsite or remote reviews of all troubled and approximately 25
percent of nontroubled housing agencies, which HUD will identify
through a risk-level classification that is presently still being
developed;
* quality assurance and quality control reviews by HUD's Office of
Field Operations; and:
* independent reviews of housing agencies identified by HUD as being
the top 100 to 125 funded agencies with the largest formula grant
award amount, which will be performed by an outside contractor.
While it is an important step forward for HUD to establish a strategy
for monitoring Recovery Act funds, HUD has not fully specified the
steps to be taken in other elements of its second year monitoring
strategy. For example, HUD has not yet finalized the internal controls
it will need to ensure housing agencies comply with statutory and
regulatory guidance. Finally, HUD is still developing a data
collection and analysis plan for internal reporting activities on
elements such as grant performance, progress, and outcomes.
Similarly, HUD's second-year strategy also includes a draft four-tier
approach for monitoring competitive grant funds. For the first tier,
HUD plans to conduct remote reviews for all 393 competitive grants by
August 20, 2010. For the second tier, HUD plans to conduct quality
assurance and quality control reviews for a random sample of 20 to 25
percent of remote reviews by September 2010. The third tier will
consist of a review of obligations made by housing agencies that had
not fully obligated their grant funds within 2 weeks of the September
2010 deadline. HUD expects this review to occur in October and
November 2010. Finally, the fourth tier of HUD's monitoring strategy
includes onsite reviews of the 8 troubled housing agencies that
received competitive grant funds and were designated as troubled as of
September 30, 2009. HUD expects to conduct these onsite reviews from
January to March 17, 2011.
As part of its second year strategy, HUD also developed an estimate of
the agency's resource needs to carry out its Recovery Act
responsibilities. The officials noted that they developed this
estimate in response to our recent recommendation that HUD develop a
management plan to address its resource needs to administer both the
Recovery Act funds and the existing Capital Fund. HUD noted that
during the first recipient reporting period, an estimated 600 staff
hours were spent on entering comments into FederalReporting.gov. HUD
officials also noted that in the most recent recipient reporting
process, the agency review period again required a substantial staff
effort that was difficult to sustain. HUD determined that it will need
an additional 11 full-time equivalent staff to provide services
including recipient reporting support, training on energy efficiency
requirements, and data analysis. However, this estimate does not
include any resources for managing the regular Capital Fund program.
We believe it is essential for HUD to put in place a strategy for
monitoring Recovery Act funds going forward that specifies the steps
to be taken, and as we previously recommended, the resources that will
be required for administering both the Recovery Act and existing
Capital Fund program.[Footnote 155]
Officials in some HUD field offices also stated that they encountered
difficulties monitoring Recovery Act activities alongside their
regular duties, while operating at unchanged or reduced staffing
levels. For example, officials at one field office stated that over a
five month period, 37 of their 40 staff members were devoted nearly
full-time to Recovery Act-related work, such as conducting reviews and
providing technical assistance. Another field office experienced a 20
percent reduction in its staffing over the past 2 years. The officials
from the field office stated that their staff that traditionally have
not been involved in the Capital Fund program have assisted with
remote reviews or desk reviews in order for HUD's Capital Fund staff
to complete the larger number of on-site reviews required for
monitoring of the Recovery Act funding. Officials in another field
office told us that it received additional funding to conduct
oversight but also lost staff, therefore making it more difficult to
keep up with both Recovery Act and routine work providing monitoring
of HUD's Section 8 program. HUD staff in another field office told us
that the administration of Recovery Act grants limited their ability
to conduct timely monitoring and technical assistance over other
program areas. For example, the field office postponed some planned
monitoring activities for other HUD programs, such as Section 8 and
Hope VI, until later in fiscal year 2010. In part because of the
additional time HUD staff spent assisting housing agencies, all
housing agencies met the obligation deadline by either obligating all
of their funds by March 17, 2010, or rejecting or returning a portion
of their formula grant funds. As the deadline for obligating the
competitive grant funds approaches, HUD staff may again have less time
to dedicate to their regular duties. As we previously recommended, HUD
needs to develop a management plan to determine the adequate level of
agency staff needed to administer both the Recovery Act funds and the
existing Capital Fund program going forward.
The HUD Office of Inspector General's reviews of public housing
agencies echoed the need for continued monitoring of Recovery Act
funds, and it continues to conduct capacity and performance audits on
housing agencies nationwide. As of April 30, 2010, the HUD Inspector
General had issued 19 Public Housing Capital Fund audit reports, and
it is in the process of conducting 10 others. For example, it found
that one troubled housing agency that received $34.5 million in
Recovery Act funds had weaknesses related to internal controls,
financial operations, procurement, and inventory, which the HUD
Inspector General determined could hinder the expenditure of Capital
Funds.[Footnote 156] It recommended, among other things, that HUD
ensure that the housing agency provide documentation for or repay
eight unsupported disbursements totaling $321,462; maintain adequate
staffing levels and amend its financial policies to specify approving
officials and procedures; and modify its procurement policy to ensure
contractor compliance. The housing agency concurred with all nine of
these recommendations and had closed one of them as of March 4, 2010.
The HUD Inspector General also found that although another housing
agency had the capacity to administer its approximately $423 million
in Recovery Act funds, 7 out of 10 contracts reviewed did not contain
information regarding the energy-efficiency and Buy American
provisions and lacked written procedures to document and verify
contractors' compliance with the Buy American provision.[Footnote 157]
Correspondingly, the HUD Inspector General recommended that the
Director of the New York Office of Public Housing instruct the housing
authority to ensure that contracts contained appropriate language
related to both these provisions, develop written procedures to
determine contractors' compliance, and finalize its policies and
procedures manual to document the responsibilities of its different
departments. The housing agency has until July 10, 2010, to submit
management decisions to the HUD Inspector General regarding the
recommendations.
Many Housing Agencies Reported No Problems with Concurrently Managing
Recovery Act and Regular Capital Fund Grants, but Some Face Challenges:
Public housing agencies were responsible for continuing to manage
their regular Capital Fund grants while striving to meet the Recovery
Act grant obligation deadline. During the first year prior to the
obligation deadline, housing agencies had to make decisions about how
to spend not only their Recovery Act funds but also their regular
Capital Funds from grant years 2007, 2008, and 2009. Most housing
agencies we visited reported that Recovery Act-related activities did
not have any noticeable effect on their ability to administer their
regular Capital Fund programs, and they expected to obligate their
regular Capital Funds by the deadline.
To determine whether housing agencies may have moved more slowly in
obligating their regular Capital Funds, we compared the 1-year
obligation rates for ten housing agencies' regular Capital Funds for
grant years 2008 and part of year 2009 against their 1-year obligation
rates for grant years 2006 and 2007.[Footnote 158] We did not observe
any common trends in obligation rates among the ten housing agencies
that provided us with their obligation rate data. After 1 year, some
housing agencies had obligated their 2008 funds at a faster rate than
in prior years, while other housing agencies had obligated their 2008
funds more slowly. For example, an official with a housing agency in
Ohio--which had regular Capital Fund 1-year obligation rates of 28
percent for 2008, 33 percent for 2007, and 92 percent for 2006--
stated that managing the agency's Recovery Act funding delayed its
ability to obligate its 2008 regular Capital Fund grant by about 4 to
6 months, as the agency wanted to concentrate its efforts on meeting
the Recovery Act obligation deadline. This official noted that now
that they have met the obligation deadline for the Recovery Act
funding, they are focused on meeting the 2008 regular Capital Fund
obligation deadline in June 2010. In contrast, a housing agency in
Georgia had obligated a greater percentage of its 2008 regular Capital
Funds after 1 year (90 percent) than it had obligated of its 2007 (83
percent) and 2006 (62 percent) regular Capital Funds after 1 year.
Housing agencies we visited had generally obligated less of their 2009
regular Capital Funds than they had obligated of prior year funds,
which is not surprising given that the agencies have only had a few
months to obligate these funds rather than a full year. For example, 6
months after receiving its funds, another housing agency in Ohio had
obligated none of its 2009 regular Capital Funds, while after 1 year
it had obligated 31 percent of its 2008 regular Capital Funds.
Officials with this housing agency attributed part of the delay in
obligating their regular 2009 funds to efforts needed to manage their
Recovery Act funds.
Officials with one housing agency told us they also experienced delays
in receiving approvals from HUD that have created delays in their
regular Capital Fund projects. Officials with a housing agency in
Illinois told us that they did not have access to their 2009 regular
Capital Funds until several months later than expected, which they
attributed in part to HUD's focus on Recovery Act issues. According to
HUD field office officials in Illinois, many of the housing agencies
in that state did not receive access to their 2009 regular Capital
Fund grants in the Line of Credit Control System until 3 or 4 months
or more after the grants were awarded in September 2009 because the
field office decided to provide a higher level of oversight to ensure
the housing agencies were in compliance with environmental review
regulations. The officials told us that this extra scrutiny was a
direct result of issues that they identified in the course of
conducting their remote and on-site reviews of Recovery Act grants.
HUD has recognized that housing agencies may be moving more slowly in
obligating their regular Capital Funds in part because of having to
also manage their Recovery Act funds. In its fiscal year 2011 budget
request for the Capital Fund, HUD is requesting approximately $450
million less than it requested for fiscal year 2010. HUD notes in its
request that this reduced amount takes into consideration the
additional $4 billion appropriated to the Capital Fund in the Recovery
Act. According to HUD's request, there remains an estimated $18 to $24
billion backlog of modernization needs that housing agencies are
trying to address through the Recovery Act funds and their regular
Capital Fund grants.
Congress Responded to Declining Demand for Low-Income Housing Tax
Credits by Creating Two New Programs:
In recent years, the Low-Income Housing Tax Credit (LIHTC) program has
been regarded as the primary vehicle for affordable housing production
and preservation. In 2008 and 2009, the program was severely disrupted
when the credit markets collapsed and project owners could not obtain
backing for projects that would have qualified for the credit. In
February 2009, Congress created two new programs as part of the
Recovery Act--the Tax Credit Assistance Program (TCAP), administered
by HUD, and the Grants to States for Low-income Housing Projects in
Lieu of Low-income Housing Credits Program under Section 1602 of the
Recovery Act (the Section 1602 Program), administered by Treasury.
[Footnote 159] These programs address the gap in financing for LIHTC
projects caused by the decline in investor demand and the resulting
low prices for tax credits.
Congress established the LIHTC program in 1986 as an incentive for
project owners and investors to provide affordable rental housing for
households with incomes at or below specified levels. The incentive
was needed because rental income and other returns from investment in
low-income housing would generally not be sufficient to cover the
costs of developing and maintaining such properties. Under the LIHTC
program, Treasury allocates tax credits to state housing finance
agencies (HFA), which in turn award the tax credits to affordable
rental housing projects. Project owners sell the tax credits to
private investors and use the proceeds (tax credit equity) to build
affordable housing. In return for contributing tax credit equity to
the projects, private investors receive tax credits over a 10-year
period. Projects must comply with LIHTC requirements for 15 years,
including maintaining affordable housing units. Since its inception in
1986, the LIHTC program has provided financing for more than 1.7
million units of affordable housing and attracted increasing levels of
equity that reached nearly $9 billion in 2006. Equity generated by the
sale of LIHTCs began to decline in 2007, dropped sharply to about $5.5
billion in 2008, and was predicted to fall to about $4.5 billion in
2009 (see figure 19).
Figure 19: Total Estimated Tax Credit Equity, 2004-2009:
[Refer to PDF for image: line graph]
Year: 2004;
Estimated Tax Credit Equity: $6.2 billion.
Year: 2005;
Estimated Tax Credit Equity: $6.7 billion.
Year: 2006;
Estimated Tax Credit Equity: $8.9 billion.
Year: 2007;
Estimated Tax Credit Equity: $8.4 billion.
Year: 2008;
Estimated Tax Credit Equity: $5.5 billion.
Year: 2009;
Estimated Tax Credit Equity: $4.5 billion.
Source: Ernst & Young estimates.
[End of figure]
The onset of financial struggles for large national banks and for
Fannie Mae and Freddie Mac contributed greatly to the decline in
demand for tax credits.[Footnote 160] As the demand for tax credits
declined, so did the prices investors were willing to pay for them.
The price paid per dollar of credit has declined since 2007, creating
funding gaps in projects that had received tax credit allocations in
2007 and 2008. As a consequence, many planned construction and
rehabilitation projects have stalled. Figure 20 summarizes the range
of average prices per tax credit paid at closing in 2007, 2008, and
2009 as reported by the HFAs. For example, the 54 HFAs reported that
average tax credit prices paid by investors in 2007 range from a high
of 97 cents to a low of 80 cents. By 2009, the averages had dropped to
82 cents and 48 cents, respectively.
Figure 20: Range of Average Price Paid Per Tax Credit at Project
Closing in 2007, 2008, and 2009:
[Refer to PDF for image: vertical bar graph]
Year: 2007;
Range: $0.80 to $0.97.
Year: 2008;
Range: $0.65 to $0.92.
Year: 2009;
Range: $0.48 to $0.82.
Source: GAO survey of HFAs.
[End of figure]
Figure 21 shows the range of average LIHTC price at project closing
for each HFA in 2009. For example, Colorado reported the highest
average tax credit price (82 cents) and Puerto Rico reported the
lowest (48 cents).
Figure 21: Average LIHTC Prices at Closing, by HFA in 2009:
[Refer to PDF for image: illustrated map of the U.S.]
Range is $0.48 to $0.82.
Alabama: $0.50;
Alaska: $0.72;
Arizona: $0.65;
Arkansas: $0.71;
California: no data;
Colorado: $0.82;
Connecticut: $0.71;
Delaware: $0.60;
District of Columbia: $0.74;
Florida: $0.72;
Georgia: $0.65;
Hawaii: $0.75;
Idaho: $0.67;
Illinois: $0.67;
Indiana: $0.58;
Iowa: $0.62;
Kansas: $0.72;
Kentucky: $0.63;
Louisiana: $0.60;
Maine: $0.72;
Maryland: $0.70;
Massachusetts: $0.70;
Michigan: $0.62;
Minnesota: $0.70;
Mississippi: $0.66;
Missouri: $0.73;
Montana: $0.62;
Nebraska: $0.70;
Nevada: $0.70;
New Hampshire: $0.72;
New Jersey: $0.70;
New Mexico: $0.62;
New York: $0.73;
North Carolina: $0.67;
North Dakota: $0.66;
Ohio: $0.68;
Oklahoma: $0.65;
Oregon: $0.65;
Pennsylvania: $0.68;
Puerto Rico: $0.48;
Rhode Island: $0.65;
South Carolina: $0.60;
South Dakota: $0.73;
Tennessee: $0.60;
Texas: $0.70;
Utah: $0.73;
Vermont: $0.80;
Virgin Islands: $0.60;
Virginia: $0.70;
Washington: $0.70;
West Virginia: $0.66;
Wisconsin: no data;
Wyoming: $0.59.
Source: GAO survey of HFAs; Map Resources (map).
[End of figure]
The two new programs that Congress designed, TCAP and the Section 1602
Program, would be implemented by the HFAs themselves as a means of
boosting the production of affordable housing projects, including
those that had been stalled by decreased demand and falling prices.
These programs were designed primarily as stopgap measures for
affordable housing until demand for LIHTC could be restored.
* TCAP provides gap financing to be used by HFAs in the form of grants
or loans for capital investment in LIHTC projects through a formula-
based allocation to HFAs.[Footnote 161] HUD obligated $2.25 billion in
TCAP funds to HFAs. The HFAs were to award the funds competitively
according to their qualified allocation plans, which explain selection
criteria and application requirements for housing tax credits (as
determined by the states and in accordance with Section 42 of the
Internal Revenue Code).[Footnote 162] Projects that were awarded low-
income housing tax credits in fiscal years 2007, 2008, or 2009 were
eligible for TCAP funding, but HFAs had to give priority to projects
that were "shovel-ready" and expected to be completed by February
2012. Also, TCAP projects had to include some tax credit equity from
the sale of LIHTCs. HFAs must commit 75 percent of their TCAP awards
by February 2010 and disburse 75 percent by February 2011. Project
owners must spend all of their TCAP funds by February 2012. As of the
end of April 2010, 52 HFAs were participating in the program, and all
(except for South Carolina) had committed 75 percent of their funds by
February of this year.[Footnote 163] HUD can recapture TCAP funds from
any HFA whose projects do not comply with TCAP requirements. In these
cases, HFAs are responsible for recapturing funds from project owners.
Furthermore, because TCAP funds are federal financial assistance, they
are subject to certain federal requirements, such as Davis-Bacon
[Footnote 164] and the National Environmental Policy Act (NEPA).
[Footnote 165] These acts, respectively, require that projects
receiving federal funds pay prevailing wages and meet federal
environmental requirements.
* The Section 1602 Program allows HFAs to exchange returned and unused
tax credits for a payment from Treasury at the rate of 85 cents for
every tax credit dollar. HFAs can exchange up to 100 percent of unused
2008 credits and 40 percent of their 2009 allocation.[Footnote 166]
HFAs may award Section 1602 Program funds to finance the construction
or acquisition and rehabilitation of qualified low-income buildings in
accordance with the HFA's Qualified Allocation Plan, which establishes
criteria for selecting LIHTC projects. Section 1602 Program funds may
be committed to project owners that have not sold their LIHTC
allocation to private investors, as long as the project owner has made
good faith efforts to find an investor. However, some HFAs have
required Section 1602 Program projects to include some tax credit
equity from private investors. Section 1602 Program funds are subject
to the same requirements as the standard LIHTC program, and like TCAP
funds, may be recaptured if a project does not comply with the
requirements. HFAs may submit applications to Treasury for Section
1602 Program funds through 2010. The last day for HFAs to commit funds
to project owners is December 31, 2010, but they can continue to
disburse funds for committed projects through December 31, 2011,
provided that the project owners paid or incurred at least 30 percent
of eligible project costs by the end of 2010. Congress appropriated
'such sums as may be necessary' for the operation of the Section 1602
Program. The Joint Committee on Taxation originally estimated the
budget impact of this program at $3 billion. As of the end of April
2010, however, Treasury had obligated more than $5 billion to HFAs in
Section 1602 Program funds. A Treasury official stated that the agency
did not expect to receive many additional applications before the
December 31, 2010 deadline. Section 1602 Program funds are not
considered by Treasury to be federal financial assistance and,
therefore, the Section 1602 Program is not subject to many of the
requirements placed on TCAP. On December 9, 2009, the U.S. House of
Representatives passed the Tax Extenders Act of 2009 (H.R. 4213),
which includes an extension of the Section 1602 Program for 1 year.
The Senate passed the bill renamed the American Workers, State, and
Business Relief Act of 2010 with amendments on March 10, 2010. As of
May 1, the bill was awaiting reconciliation.
Figure 22 summarizes the similarities and differences between the two
programs.
Figure 22: Summary of Major TCAP and Section 1602 Program Requirements:
[Refer to PDF for image: illustrated table]
TCAP:
Administered by: HUD;
Submissions: Statement of Intent to receive TCAP funds from HFAs due to
HUD June 3, 2009. Single application;
Allocation method/type: Formula allocation, to be administered as
grant or loan program;
Tax credits required in funded projects? Yes;
Reporting requirements: Complex (IDIS, RAMPS, federalreporting.gov);
Other requirements:
Federal requirements apply (NEPA, Davis Bacon, and others);
Projects must adhere to requirements of the Section 42 LIHTC program
(rent, income, use restrictions);
HFAs responsible for asset management;
HFAs must impose recapture conditions and restrictions.
Section 1602 Program:
Administered by: Treasury;
Submissions: Rolling applications from HFAs to Treasury accepted through
December 31, 2010. Multiple applications accepted;
Allocation method/type: Exchange of tax credits at $0.85/$1.00, to be
administered as a cash payment or noninterest bearing, nonrepayable
loan program;
Tax credits required in funded projects? No;
Reporting requirements: Simple (Treasury Spreadsheet);
Other requirements:
Projects must adhere to requirements of the Section 42 LIHTC program
(rent, income, use restrictions);
HFAs responsible for asset management;
HFAs must impose recapture conditions and restrictions.
Source: GAO analysis of TCAP and Section 1602 Program information.
[End of figure]
As of April 30, 2010, HUD reported that it had made outlays of about
$371 million (16.5 percent) from the $2.25 billion in TCAP funds
obligated to all HFAs. Treasury had made outlays of about $742 million
(13.6 percent) from the $5.45 billion in Section 1602 Program funds
obligated to all HFAs. In five previous Recovery Act reports, we have
collected and reported data on programs receiving substantial Recovery
Act funds in 16 selected states and the District of Columbia. These 16
states and the District of Columbia together have about 65 percent of
the U.S. population and will receive an estimated two-thirds of the
TCAP funds and about 60 percent of the Section 1602 Program funds.
Figure 23 lists the TCAP and Section 1602 Program obligations and
outlays for the 16 states and the District of Columbia as of April 30,
2010.
Figure 23: TCAP and Section 1602 Obligations and Outlays for the 16
States and the District of Columbia as of April 30, 2010:
[Refer to PDF for image: illustrated table]
State: Arizona;
TCAP Obligations: $32.3 million;
TCAP Outlays: $13.5 million;
Percentage: 41.7%;
Section 1602 Program Obligations: $37.6 million;
Section 1602 Program Outlays: $0.0;
Percentage: 0.0%.
State: California;
TCAP Obligations: $325.9 million;
TCAP Outlays: $25.5 million;
Percentage: 7.8%;
Section 1602 Program Obligations: $478.1 million;
Section 1602 Program Outlays: $42.4 million;
Percentage: 8.9%.
State: Colorado;
TCAP Obligations: $27.4 million;
TCAP Outlays: $7.2 million;
Percentage: 26.5%;
Section 1602 Program Obligations: $17.8 million;
Section 1602 Program Outlays: $5.6 million;
Percentage: 31.5%.
State: Washington, D.C.
TCAP Obligations: $11.6 million;
TCAP Outlays: $5.7 million;
Percentage: 49.3%;
Section 1602 Program Obligations: $33.8 million;
Section 1602 Program Outlays: $0.2 million;
Percentage: 0.7%.
State: Florida;
TCAP Obligations: $101.1 million;
TCAP Outlays: $16.7 million;
Percentage: 16.5%;
Section 1602 Program Obligations: $580.4 million;
Section 1602 Program Outlays: $22.9 million;
Percentage: 3.9%.
State: Georgia;
TCAP Obligations: $54.5 million;
TCAP Outlays: $13.3 million;
Percentage: 24.4%;
Section 1602 Program Obligations: $195.6 million;
Section 1602 Program Outlays: $27.6 million;
Percentage: 14.1%.
State: Illinois;
TCAP Obligations: $94.7 million;
TCAP Outlays: $22.9 million;
Percentage: 24.2%;
Section 1602 Program Obligations: $264.5 million;
Section 1602 Program Outlays: $16.9 million;
Percentage: 6.4%.
State: Iowa;
TCAP Obligations: $19.0 million;
TCAP Outlays: $4.5 million;
Percentage: 23.9%;
Section 1602 Program Obligations: $72.8 million;
Section 1602 Program Outlays: $33.9 million;
Percentage: 46.6%.
State: Massachusetts;
TCAP Obligations: $59.6 million;
TCAP Outlays: $10.2 million;
Percentage: 17.1%;
Section 1602 Program Obligations: $110.3 million;
Section 1602 Program Outlays: $4.1 million;
Percentage: 3.8%.
State: Michigan;
TCAP Obligations: $64.0 million;
TCAP Outlays: $9.2 million;
Percentage: 14.4%;
Section 1602 Program Obligations: $285.9 million;
Section 1602 Program Outlays: $12.3 million;
Percentage: 4.3%.
State: Mississippi;
TCAP Obligations: $21.9 million;
TCAP Outlays: $0.0;
Percentage: 0.0%;
Section 1602 Program Obligations: $29.7 million;
Section 1602 Program Outlays: $0.0;
Percentage: 0.0%.
State: New Jersey;
TCAP Obligations: $61.2 million;
TCAP Outlays: $3.6 million;
Percentage: 5.9%;
Section 1602 Program Obligations: $123.5 million;
Section 1602 Program Outlays: $29.5 million;
Percentage: 23.9%.
State: New York;
TCAP Obligations: $252.7 million;
TCAP Outlays: $63.7 million;
Percentage: 25.2%;
Section 1602 Program Obligations: $0.0;
Section 1602 Program Outlays: $0.0;
Percentage: 0.0%.
State: North Carolina;
TCAP Obligations: $52.2 million;
TCAP Outlays: $3.0 million;
Percentage: 5.8%;
Section 1602 Program Obligations: $95.0 million;
Section 1602 Program Outlays: $48.9 million;
Percentage: 51.4%.
State: Ohio;
TCAP Obligations: $83.5v
TCAP Outlays: $5.5 million;
Percentage: 6.6%;
Section 1602 Program Obligations: $118.1 million;
Section 1602 Program Outlays: $19.5 million;
Percentage: 16.5%.
State: Pennsylvania;
TCAP Obligations: $95.1 million;
TCAP Outlays: $17.8 million;
Percentage: 18.7%;
Section 1602 Program Obligations: $229.9 million;
Section 1602 Program Outlays: $76.0 million;
Percentage: 33.0%.
State: Texas;
TCAP Obligations: $148.4 million;
TCAP Outlays: $4.6 million;
Percentage: 3.1%;
Section 1602 Program Obligations: $594.1 million;
Section 1602 Program Outlays: $15.2 million;
Percentage: 2.6%.
State: Total;
TCAP Obligations: $1,504.9 million;
TCAP Outlays: $227.0 million;
Percentage: 15.1%;
Section 1602 Program Obligations: $3,267.0 million;
Section 1602 Program Outlays: $355.0 million;
Percentage: 10.9%.
Source: GAO analysis of HUD and Treasury data.
[End of figure]
The differences in the TCAP obligations across the states and the
District of Columbia are a result of HUD's HOME formula, which is
based on population size and which HUD used to set the amount of TCAP
funds for each HFA as required by the Recovery Act. This formula
results in larger states receiving more TCAP funds. The difference in
the Section 1602 Program obligations across the states and the
District of Columbia is the result of the levels requested by each
HFA. In those states that had a larger number of unused and returned
tax credits and in which there was a demand for affordable housing
projects, the HFAs may have requested a larger obligation of Section
1602 Program funds. The difference in spending across the 16 states
and the District of Columbia depends on the level of construction
activity, the HFA's implementation timeline, and when the HFA
requested Section 1602 Program funds. For example, Treasury officials
told us that the Mississippi Home Corporation requested funds for the
first time in February 2010. As figure 23 shows, Arizona, Colorado,
New York, and the District of Columbia have disbursed more than 25
percent of their TCAP funds, and Colorado, Iowa, North Carolina, and
Pennsylvania have disbursed more than 25 percent of their Section 1602
Program funds.
State Housing Finance Agencies Expected TCAP and the Section 1602
Program to Help Fund More Than 116,000 Units Subject to LIHTC
Requirements Nationwide:
To determine the magnitude of the impact that HFAs expected from the
two programs, we conducted a Web-based survey of all 54 HFAs that
received TCAP and Section 1602 Program funds. All HFAs
responded.[Footnote 167] Almost two-thirds of the HFAs (35) reported
that the two programs would have a high impact on developing a healthy
affordable housing market, and an additional 14 said that the two
programs would have some impact. Four thought that the two programs
would have "little or no" impact, and one did not know. The HFAs
reported that they were expecting to develop or rehabilitate more than
116,000 tax credit units in about 1,700 projects using TCAP and the
Section 1602 Program.[Footnote 168]
Figure 24 illustrates the number of projects and tax credit units that
states expect to develop under each program and, in some instances, by
combining programs.
Figure 24: Number of Projects and Tax Credit Units Expected to Be
Developed under TCAP and the Section 1602 Program:
[Refer to PDF for image: 2 pie-charts]
Projects:
Section 1602 Program only: 48% (825);
TCAP only: 35% (597);
Both programs: 17% (293).
Total projects: 1,715.
Tax credit units:
Section 1602 Program only: 45% (52,308);
TCAP only: 40% (46,539);
Both programs: 15% (17,500).
Total tax credit units: 116,347.
Source: GAO survey of HFAs.
[End of figure]
HFAs told us that 411 of the 1,715 projects expected to be developed
had previously been stalled--that is, construction had been put on
hold due to financing issues. Of these stalled projects, HFAs said
that 63 had received LIHTC allocations in 2007, 242 had received
allocations in 2008, and 106 had received allocations in 2009. About
129 of the 411 stalled projects were restarted with TCAP funds, 178
were restarted with Section 1602 Program funds, and about 50 were
restarted using both TCAP and Section 1602 Program funds. The
remaining projects (54) were either restarted without TCAP or Section
1602 Program funds or remained stalled.
As previously noted, about 16.5 percent of TCAP funds and 13.6 percent
of Section 1602 Program funds had been disbursed by HFAs to projects
as of April 30, 2010. Many projects are in the planning or early
construction phase and, therefore, significant amounts of funds have
not been disbursed. Other projects, however, are further along. Figure
25 includes examples of TCAP and Section 1602 funded projects in
various phases of development.
Figure 25: Examples of TCAP and Section 1602 Program Funded LIHTC
Projects:
[Refer to PDF for image: 4 photographs]
1 & 2) Denver Gardens located in Denver, Colorado is a 100 unit
project funded with TCAP funds by the Colorado Housing and Finance
Authority (CHFA). CHFA’s Denver Gardens was the first TCAP project in
the country to receive TCAP funds. The project owner of Denver Gardens
is rehabilitating all units and common areas including expanding the
activities room pictured on the right.
3) Southview Senior Apartments is a 40 unit building for seniors in
Des Moines, Iowa. The Iowa Finance Authority (IFA) committed Section
1602 funds to the project after the project's initial investor refused
to provide its Tax Credit Equity just after the project owner had
finished construction. The Section 1602 funds filled a substantial
financing gap, and the project owner was able to make arrangements
with a new investor despite the drop in tax credit prices over time.
IFA told us that this project would have faced foreclosure without the
assistance of Section 1602 program funds.
4) The project owner of Bayside Village in Pascagoula, Mississippi is
preserving the exterior windows and many of the blackboards and
lockers in the historic renovation of a high school built in 1937. The
school will be renovated into 57 apartment units for the independent
elderly using Section 1602 Program funds from the Mississippi Home
Corporation.
Source: GAO.
[End of figure]
Consistent with Recovery Act requirements to give priority to TCAP
projects expected to be completed by February 2012 and to meet
commitment and disbursement deadlines under both the TCAP and Section
1602 Program, HFAs reported that the most important criterion for
selecting projects under both programs was the project owners' ability
to meet program deadlines. In both survey comments and follow-up
interviews, HFAs cited readiness to proceed as the major determinant
in drafting selection criteria for both programs. In the case of TCAP,
HFAs noted previous compliance with federal requirements such as NEPA
and Davis-Bacon as the second most important selection criterion. HFAs
indicated that the status of financing was critical for both programs.
Most of the selection criteria reflect the priority for shovel-ready
projects, such as having engineering and construction drawings
completed and plans submitted for local approval. Figure 26 ranks HFA
selection criteria based on the relative frequency with which HFAs
responding to our survey reported that a particular criterion was very
important when committing TCAP and Section 1602 Program funds.
Figure 26: Ranking of HFA Selection Criteria Based on Level of
Importance for TCAP and Section 1602 Program Funds:
[Refer to PDF for image: illustrated table]
TCAP: Selection criteria ranking:
1. Ability to complete project within program deadlines.
2. Project has met or will meet federal requirements including
prevailing wage and environmental review.
3. Status of financing.
4. Commitment of investors.
5. Development team capacity and track record.
6. Status of engineering and construction drawings completed.
7. Submission of plans or approvals to local government.
8. Certified documentation of estimated date of closing.
9. Job creation.
Section 1602 Program:
1. Ability to complete project within program deadlines.
2. Status of financing.
3. Development team capacity and track record.
4. Extent to which projects meet critical housing needs in your state.
5. Status of engineering and construction drawings completed.
6. Certified documentation of estimated date of closing.
7. Submission of plans or approvals to local government.
8. Amount of tax credits with investor commitment Job creation.
9. Job creation.
10. Tax credit allocation year (e.g., preference for projects
allocated older tax credits).
Source: GAO survey of HFAs.
[End of figure]
HUD and Treasury Had Limited Resources and Time to Develop New Program
Guidance:
Because TCAP and the Section 1602 Program were new programs for HUD
and Treasury, respectively, the agencies needed to develop guidance
that covered all aspects of the programs. Further, both TCAP and the
Section 1602 Program had to be structured to be consistent with the
existing LIHTC program, so the guidance had to be carefully crafted.
Moreover, HUD had to develop additional guidance to address the
federal requirements that applied to TCAP. To meet these challenges,
HUD and Treasury issued initial program guidance in early May 2009 and
followed up with clarifying guidance as shown in the following Figure
27.
Figure 27: Timeline of TCAP and Section 1602 Program Implementation,
February 2009-February 2010:
[Refer to PDF for image: timeline]
TCAP:
2009:
February 17: Event;
Recovery Act signed into law.
May 4: Event;
TCAP Program announcement from HUD.
May 4: Guidance;
TCAP Q &A, Q&A on federal requirements including NEPA and Section 504.
May 5: Guidance;
Lead Based Paint Guidance.
May 29: Guidance;
Department of Labor Guidance regarding Davis Bacon Wage requirements for
ARRA funded programs.
June 3: Event;
Statement of Intent to receive TCAP funds from HFAs due to HUD.
July 17: Guidance;
Guidance on Davis Bacon, IDIS, and TCAP Agreement Requirements.
July 27: Guidance;
Revised TCAP Program Announcement.
July 29:Guidance;
IDIS Guidance Updated.
September 18: Guidance;
Guidance on Asset Management and Projects with an Existing Environmental
Review.
September 21: Guidance;
Job Count Guidance.
October 1: Guidance;
Job Count Guidance Updated.
October 2: Guidance;
Federal Reporting Q&A.
October 5: Guidance;
Federal Reporting TipSheet.
October 10: Event;
First quarter reports due from HFAs.
2010:
February 16: Event;
HFAs must commit at least 75% of TCAP funds to projects.
Section 1602:
2009:
February 17: Event;
Recovery Act signed into law.
May 4: Event; Guidance;
Initial program announcement: Applications from HFAs accepted until
12/2010.
July 9: Guidance;
"Frequently asked questions, Q&A".
August 31: Guidance;
Treasury Interim Rule - Deadline to disburse 100% of Section 1602 funds
extended from December 31, 2010 to December 31, 2011.
September 14: Guidance;
Updated Q&A including additional information on recapture.
October 14: Event;
First quarter reports due from HFAs.
Source: GAO analysis of TCAP and Section 1602 Program information.
[End of figure]
The timing of HUD's guidance for TCAP, which HUD revised frequently,
presented challenges to some HFAs. HUD required that HFAs apply for
TCAP funds by June 3, 2009, just 30 days after the initial program
announcement. According to our survey, by July 31, 2009, at least 16
HFAs had begun accepting applications from project owners for TCAP
funds. However, HUD continued issuing clarifying guidance on certain
TCAP requirements on 10 separate dates between May and November 2009.
In our Web survey of 54 HFAs, 10 HFAs noted challenges in program
implementation related to HUD's gradual release of guidance. However,
many HFAs recognized the challenges posed by the creation of a new
program and, when asked whether they were satisfied with the
assistance they received, gave HUD a positive score. Overall, about
two-thirds (34) of the HFAs told us that they were very or somewhat
satisfied with HUD assistance. Nine responded that they were somewhat
dissatisfied, and one said that it was very dissatisfied. Nine HFAs
said they were neither satisfied nor dissatisfied, and one HFA did not
answer the question. In response to open-ended questions about HUD
assistance, 10 HFAs specifically commented on the challenge of
developing the program given the timing of TCAP guidance.
According to HUD officials, developing TCAP (and its associated forms
and guidance) represented a significant challenge because the agency
was granted no additional administrative resources. HUD's Office of
Affordable Housing Programs administers TCAP, and four existing staff
from the HOME program have been given the additional task of working
part-time on the program. In addition to the limited resources
dedicated to developing and administering the program, HUD officials
noted the tight statutory timelines for implementation as a challenge
to developing guidance. Congress passed the Recovery Act in February
2009, and HUD issued its initial announcement on TCAP in May 2009 so
that HFAs could begin to implement TCAP at the state level. As we have
seen, HUD must ensure that TCAP recipients are compliant with federal
requirements such as Davis-Bacon and NEPA and must also meet the
recipient reporting requirements of the Recovery Act. HUD noted that
creating guidance on these requirements took special consideration,
especially because some of the requirements were unfamiliar to many
participants in the LIHTC program.
Treasury also faced challenges in implementing a new program that had
to be consistent with the existing LIHTC program within a short time
frame. Treasury officials told us that they operate the Section 1602
Program with five staff who work on the program about 25 percent of
the time. Unlike TCAP, where HUD did not received funds for
administrative expenses, Treasury received funds to assist in its
implementation of the Section 1602 Program. According to Treasury
officials, of the amount appropriated to Treasury under the Recovery
Act to cover administrative expenses, approximately $3 million has
been made available to the Office of the Fiscal Assistant Secretary to
operate both the Section 1602 and Section 1603 (Renewable Energy)
Programs. The program director said that staff assigned to the program
also had the benefit of guidance from two Internal Revenue Service
(IRS) staff that were very knowledgeable with LIHTC requirements.
Treasury's approach was to issue guidance at the beginning of the
program and then follow up with clarifying "Frequently Asked
Questions" in response to specific inquiries posed by industry
participants such as HFAs, project owners, and attorneys. Treasury
issued its initial program announcement in May 2009 as well but did
not provide additional guidance until July, when it issued
clarifications in the form of frequently asked questions, which it
updated in September 2009. Treasury designed a program that accepted
multiple applications from HFAs for an extended period (until December
31, 2010). This approach allowed HFAs time to gauge needs and apply
for funds accordingly. Treasury noted that the speed at which the
program needed to be implemented combined with the need to make the
program guidance consistent with existing LIHTC rules took time and
posed challenges. However, because the Section 1602 Program was not
subject to the same federal requirements as TCAP, Treasury was able to
develop a more streamlined program.
Overall HFAs were pleased with the assistance Treasury provided. In
response to our survey, the majority of HFAs (46) reported that they
were very or somewhat satisfied with Treasury's assistance, 6 were
neutral, and 1 was dissatisfied. In response to an open-ended question
asking for comments on the type of assistance received from Treasury,
20 HFAs said that Treasury staff were responsive to their inquiries. A
few HFAs commented that the guidance was sensible (6), but others said
that it was delayed or unclear (7).
HFAs Expressed Concerns with Restrictions on Structuring Section 1602
Program Disbursements and Potential Liability for Recapture of Funds
under Both Programs:
HFAs Were Concerned about Requirements for Structuring Section 1602
Program Disbursements:
HFAs said they were limited by Section 1602 Program restrictions that
prevented them from structuring their disbursements to project owners
as conventional loans. Treasury's initial program announcement on May
1, 2009, required HFAs to disburse Section 1602 Program funds as
grants rather than loans, and later clarified its guidance to allow
non-interest-bearing, nonrepayable loans. Treasury guidance states
that funds are repayable in the event of recapture due to
noncompliance. In response to our open-ended survey questions on how
the Section 1602 Program could be improved and how HFAs plan to manage
program compliance, seven HFAs recommended changing Treasury's
guidance to allow HFAs to disburse funds as repayable loans. In our
follow-up interviews, HFAs cited three reasons for their concerns.
First, some HFAs we interviewed told us that grants and the loans
allowed by Treasury were more difficult to secure and enforce in both
the short-and long-term than conventional loans. HFAs told us that
using conventional loans gave them a better bargaining position when
negotiating with other lenders to establish the order in which funds
will be repaid when due and upon events of default. HFAs also said
they can use loan provisions to demand repayment in the event the
project owner does not comply with Section 1602 Program requirements
and the funds need to be recaptured and returned to Treasury during
the 15-year compliance period. Further, HFAs said courts are more
familiar with enforcing conventional loans.
Second, some HFAs we interviewed reported that projects may be capable
of covering debt service and noted that the inability to require these
projects to repay Section 1602 Program funds represented a lost source
of funding for future affordable housing development by HFAs. One
national investor with whom we spoke also noted that while repayable
loans might pose some accounting concerns for investors, repaid loans
would be a source of needed resources in further developing affordable
housing. This investor stated that if HFAs could choose how to
structure disbursement of these funds on a case-by-case basis, they
could optimize the use of federal funds while ensuring that the
structure fits the investor's terms for the transaction.
Third, some HFAs said that Section 1602 Program funds should be
treated the same as TCAP funds. Both programs were designed to provide
gap financing for LIHTC projects. HUD allows HFAs to provide TCAP
funds to projects through grants or loans and gives the HFAs
flexibility to make the decision on a case-by-case basis. The Director
of the Office of Affordable Housing Programs, which implements TCAP,
told us that TCAP is included under the HOME section of the Recovery
Act and so HUD allowed loans as it does under the HOME program.
Further, HUD said that the Recovery Act did not prohibit HFAs from
making loans by HFAs to project owners, and thus HUD gave HFAs the
flexibility to make loans or grants as appropriate for each project.
In contrast, a Treasury official told us that Treasury considered
allowing conventional loans after receiving feedback from HFAs and
project owners; however, Treasury determined that the Recovery Act did
not provide the authority for HFAs to issue loans. Without the
flexibility to disburse Section 1602 Program funds as conventional
loans, HFAs would be limited in securing their interests and enforcing
program requirements in the short-and long-term.
Many HFAs Fear That They Could Be Liable for Recapture of TCAP and
Section 1602 Program Funds:
HFAs raised concerns about their liability for recapturing and
repaying funds to Treasury and HUD if project owners failed to comply
with LIHTC requirements. Although TCAP and the Section 1602 Program
helped provide gap financing for low-income housing projects, 16 of
the 54 HFAs in our survey responded to open-ended questions by citing
concerns about HFA liability under both the TCAP and Section 1602
Program recapture provisions. HFAs are responsible for returning funds
to HUD and Treasury if a project is not placed in service or fails to
comply with LIHTC requirements. Under both programs, HFAs are
responsible for imposing recapture conditions and restrictions on
project owners. In contrast, under the conventional LIHTC program,
HFAs are not liable for recapturing funds if a project owner fails to
comply with LIHTC requirements. Rather, their obligation is to report
any noncompliance to the IRS, and the IRS takes any further action
with respect to recapture.
With respect to TCAP, HFA officials told us that they viewed HUD's
guidance on recapture as too stringent because HUD required HFAs to
fully return all TCAP funds to HUD if a project owner did not comply
with TCAP deadlines or LIHTC requirements. In contrast, the
conventional LIHTC program requires project owners, rather than the
HFAs, to return a graduated amount of their tax credits, with the
amounts based on the timing of the noncompliance over the 15-year
compliance period.
With regard to the Section 1602 Program, in May 2009, Treasury
provided initial guidance on recapture, but the information was
unclear about recapture amounts and HFA liability in the event it is
unable to recapture funds from project owners. In September 2009,
Treasury clarified that the amount recaptured would be the amount of
the Section 1602 Program award minus one-fifteenth of the total for
each year of the 15-year compliance period in which compliance was not
at issue. Also, it established that if an HFA was unable to collect
the recapture amount from a liable party, then Treasury would not
require the HFA to return the Section 1602 Program funds for that
project, as long as the HFA took "all appropriate actions" to collect
the funds from the liable party. While some HFAs said that Treasury's
September guidance was helpful, others said they thought Treasury
should more clearly specify what it would consider appropriate actions.
Treasury officials told us they are concerned that any attempt to
apply a nationwide definition of "appropriate action" to all HFAs and
to all circumstances could be counterproductive. Treasury officials
said that noncompliance is fact specific and actions appropriate in
one instance are not necessarily appropriate in other instances. State
laws as well as specific contract terms may also impact HFA actions.
Additionally, Treasury officials were concerned that HFAs may
interpret such guidance as a justification to limit their activities
to those provided in the guidance in circumstances where other actions
may be more appropriate. Treasury said they will be conducting
compliance reviews with each HFA and suggested that a more effective
approach may be to discuss and evaluate each HFA's plans with respect
to recapture during the reviews. However, we believe that the absence
of clearly defined actions that HFAs must take could lead to
inconsistent enforcement of the recapture requirement across HFAs.
Treasury can make clear that these actions represent the minimum that
should be done but are not the only actions HFAs are expected to take
to recapture funds from project owners.
In our interviews with HFAs, one HFA official told us that concerns
about risk and liability related to recapture of funds from either
program delayed his agency's board decision to approve participation
in the programs. As a result, this agency did not request Section 1602
Program funds under Treasury's rolling application process until
February 2010, thereby delaying the implementation of the Section 1602
Program in his state. In addition, in response to an open-ended
question in our survey that asked about managing the recapture
provisions, HFAs noted they were unsure whether they would have
sufficient resources to return funds to HUD or Treasury if they were
unsuccessful or delayed in obtaining funds from the project owners.
Two HFAs commented on state law limitations to enforcing recapture or
the possibility of lengthy court proceedings related to enforcing
recapture. These challenges are made more complex without the HFA
knowing what efforts they need to take to meet Treasury requirements
in taking appropriate actions. Without greater specific guidance for
HFAs on what constitutes appropriate recapture actions, Treasury
cannot fully ensure consistent program compliance across all locations.
HFAs Reported Other Challenges Associated with Implementing TCAP:
Responses to our survey of the 54 HFAs suggested that implementing
TCAP challenged the agencies in several ways. As we have seen, many
HFAs reported that both TCAP and the Section 1602 Program had a high
impact in terms of funding construction projects, particularly those
that had been stalled. TCAP contained requirements that were not
included in the LIHTC or Section 1602 Programs. HFAs said these
requirements increased their administrative costs and prevented them
from fully reporting TCAP program impact. As TCAP is a temporary
program in which HFAs had committed more than 75 percent of funds and
project owners are taking steps to comply with these requirements, it
may not be feasible to fully consider and address these issues. The
HFAs' perception of these issues may be useful to policymakers in
designing similar programs in the future.
First, TCAP was subject to the Davis-Bacon provisions of the Recovery
Act, which require that all laborers and mechanics employed by
contractors and subcontractors on Recovery Act-funded projects be paid
at least the prevailing wage, including fringe benefits.[Footnote 169]
This provision applied to all TCAP projects, regardless of size. In
contrast, Davis-Bacon is not triggered under other HUD programs unless
the project includes a minimum number of units. For example, Davis-
Bacon is not triggered unless a project financed with HOME funds
includes 12 or more units. Forty-eight HFAs reported that a total of
681 projects (40 percent of all expected TCAP projects) would not have
been required to comply with Davis-Bacon prior to receipt of TCAP
funds. In a prior report, we found that federal, state, and local
officials responsible for programs that are newly subject to Davis-
Bacon requirements had mixed views on the extent to which they
expected these requirements would affect program costs.[Footnote 170]
Our survey of HFAs participating in TCAP generally showed that they
expected increases in both the cost to administer the program and
delays in construction as a result of meeting these requirements. In
one case, the requirement more than doubled an HFA's monitoring
workload compared with its past HOME-funded projects. In addition, 32
HFAs reported increases in administrative costs of up to 10 percent
due to complying with Davis-Bacon monitoring and reporting. HFAs also
reported increases in project development costs as a result of
applying Davis-Bacon wages. Fifteen HFAs said that they expected
increased project costs of up to 5 percent, 9 reported increases of 5
to 10 percent, 4 reported increases of 11 to 15 percent, and 6
reported increases of 16 to 20 percent. Figure 28 shows the expected
administrative and project development costs related to Davis-Bacon
compliance.
Figure 28: Expected Percentage Cost Increases for Complying with Davis-
Bacon, by HFA Survey Response:
[Refer to PDF for image: illustrated table]
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: None;
Number of HFAs: Increased HFA administrative costs: 6;
Number of HFAs: Average increased per project development costs: 4.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: More than 0% to less than 5%;
Number of HFAs: Increased HFA administrative costs: 17;
Number of HFAs: Average increased per project development costs: 15.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: 5-10%;
Number of HFAs: Increased HFA administrative costs: 15;
Number of HFAs: Average increased per project development costs: 9.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: 11-15%;
Number of HFAs: Increased HFA administrative costs: 2;
Number of HFAs: Average increased per project development costs: 4.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: 16-20%;
Number of HFAs: Increased HFA administrative costs: 0;
Number of HFAs: Average increased per project development costs: 6.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: 21-25%;
Number of HFAs: Increased HFA administrative costs: 0;
Number of HFAs: Average increased per project development costs: 2.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: 26-30%;
Number of HFAs: Increased HFA administrative costs: 2;
Number of HFAs: Average increased per project development costs: 2.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: More than 30%;
Number of HFAs: Increased HFA administrative costs: 3;
Number of HFAs: Average increased per project development costs: 1.
Expected cost increase Number of HFAs associated with Davis Bacon
compliance: Don't know (did not respond);
Number of HFAs: Increased HFA administrative costs: 8 (1);
Number of HFAs: Average increased per project development costs: 8 (3).
Source: GAO survey of HFAs.
[End of figure]
Some HFAs, project owners, and investors reported that projects in
rural areas were likely to face the most difficulties in introducing
Davis-Bacon wages because the wages negotiated in construction
contracts in rural areas are often lower than wages required by Davis-
Bacon. For example, an HFA we interviewed told us that one of its
rural project owners applied for Section 1602 Program funds, which do
not require Davis-Bacon compliance, because it expected the Davis-
Bacon wages would make its projects cost-prohibitive. In our prior
reports, we recognized that HUD, in implementing its Lead Hazard
Reduction Program under the Recovery Act, reported that grantees were
provided additional time to complete their work plans to ensure
contractors understood Davis-Bacon requirements. Federal officials and
program participants should consider the needed time and costs for
meeting these requirements as they establish plans and guidance.
Likewise, in creating similar programs with differing requirements,
policymakers should recognize that program participants will select
those projects with the least restrictions.
Second, the Recovery Act requires TCAP projects to comply with NEPA
requirements for environmental reviews. HFAs told us that they
expected this requirement would delay the start of construction on
TCAP projects. Twenty HFAs expected up to a 3-month delay in start of
construction between a project owner's application for TCAP funds and
HUD's approval to use TCAP funds, 19 HFAs expected a 3 to 6 month
delay, and 6 expected a 6 to 9 month delay (see figure 29). One HFA
stated that it set a 120-day closing deadline on project owners after
committing TCAP funds and that the environmental review process was
the most common reason projects could not meet this deadline.
Figure 29: Number of HFAs Citing Delays in Starting Construction
Caused by NEPA Compliance:
[Refer to PDF for image: illustrated table]
Expect up to a 3 month delay: 20;
Expect a 3-6 month delay: 19;
Expect a 6-9 month delay: 6;
Answered “Don’t Know”: 2;
Did not answer the questions: 7.
Source: GAO survey of HFAs.
[End of figure]
Half of the HFAs expected up to a 5 percent increase in HFA
administrative costs related to compliance with NEPA. HFAs said that
the costs, which must be paid from HFA funds, relate to staff time and
contract fees for outsourcing NEPA reviews and compliance monitoring.
One HFA we conducted a follow-up interview with reported that the cost
would be about $160,000 in staff time and resources. Another HFA
reported the cost of hiring an engineering firm to conduct
environmental reviews was $200,000. Four of the 10 HFAs we interviewed
told us that some projects were delayed because the HFA had to repeat
the NEPA process for projects in which a different funding entity had
already completed a previous review. For example, if a local
jurisdiction had completed an environmental review for a project under
the HOME program that later received a commitment of TCAP funds from
an HFA, in many cases, the project would have to undergo a second NEPA
review. A HUD official told us that unless the environmental condition
of the property had changed since the completion of the last review,
the new review should be straightforward because the HFA can accept
the existing environmental tests and studies. However, even in the
case where there is no change in environmental condition, the HFA
still must comply with paperwork and public notice requirements. The
HUD official we interviewed said that in these circumstances, the
administrative and public notice process adds a minimum 30-day delay
to the release of TCAP funds. HUD could not tell us the number of
projects that needed second NEPA reviews. One HFA with no NEPA
experience told us that it had selected TCAP projects with previously-
completed NEPA reviews because it understood that no additional review
would be required for these projects. When it discovered that it would
need to hold a public comment period, this HFA initially thought that
HUD had changed its NEPA guidance. Later this HFA recognized that it
had misunderstood the process. In the future, clearer guidance from
federal officials to recipients that have little experience with
program requirements may avoid such misunderstandings. Also, federal
officials should consider how to best implement streamlined processes
while ensuring compliance with environmental assessment provisions.
Finally, HFAs also noted that they were concerned about underreporting
jobs that TCAP funds created because of OMB's requirement that they
count only jobs directly resulting from TCAP funding. However, in some
cases, TCAP funds were used to purchase land or acquire existing
properties and therefore had limited, if any, direct jobs impact. But
most of the HFAs we followed up with said that most of the projects
receiving TCAP funds would not have moved forward without TCAP and
that no jobs would have been created or retained without the injection
of those funds. We previously reported that some program recipients
were concerned with how jobs were counted.[Footnote 171]
Conclusions:
HUD and Treasury had limited resources and time to develop two new
programs, TCAP and the Section 1602 Program, respectively. Overall,
HFAs have been satisfied with assistance received from HUD and
Treasury and report that the programs will have a high impact on the
health of affordable housing in their states. However, two major
concerns noted by HFAs in our survey and follow-up interviews related
to what constitute appropriate HFA actions for recapture of Section
1602 Program funds if the project owners fail to comply with program
requirements and the inability to structure Section 1602 Program
financing as conventional loans.
Under the TCAP and Section 1602 Program, HFAs have greater
responsibility for recapturing funds than they do under the
conventional LIHTC program. Treasury requires HFAs to return a portion
of the funds from project owners who have not complied with LIHTC
requirements. Some HFAs said they were concerned about paying back
funds themselves if they could not recover funds from the owners.
Although Treasury has said that HFAs would not be liable if they had
taken all appropriate actions to collect the funds, it has not
specified what actions they would have to take in order to avoid
liability. Treasury expressed concern that a definition of appropriate
actions that would apply nationwide would be counterproductive,
because each case of noncompliance was likely to be different.
Further, Treasury feared that HFAs would seek to meet only the
established standards and would not pursue all possible avenues for
recapturing funds on a case-by-case basis and that it preferred to
discuss and evaluate each HFA's plans with respect to recapture during
compliance reviews. However, the absence of clearly defined actions
that HFAs must take could lead to inconsistent enforcement of the
recapture requirement across HFAs. Treasury can make clear that these
actions represent the minimum that should be done but are not the only
actions that HFAs are expected to take to recapture funds from project
owners.
Treasury's decision that Section 1602 Program funds must be
administered as a grant or non-interest-bearing, nonrepayable loan
limits the leverage HFAs have in enforcing and securing their
interests. It also limits HFAs' ability to enforce compliance over
projects in both the short-and long-term and prevents HFAs from using
repaid Section 1602 Program funds for affordable housing development.
The primary Treasury official overseeing the Section 1602 Program told
us that they were aware of these concerns, but that the Recovery Act
did not provide the authority for HFAs to disburse funds as interest-
bearing, repayable loans. While the precise extent of Treasury's
authority under the statute is not clear, we agree that the Recovery
Act does not explicitly state that Treasury can permit the HFAs the
flexibility to disburse Section 1602 funds as interest-bearing loans
that provide for repayments.[Footnote 172] Allowing HFAs to choose
whether the disbursement of Section 1602 Program funds as grants or
interest-bearing loans that require repayment, as they can under the
TCAP program, would simplify enforcement and better secure their
interests.
Recommendation to the Secretary of the Treasury:
In order to increase the likelihood that HFAs will comply with
Treasury's requirements for recapturing funds, the Secretary of the
Treasury should define what it considers appropriate actions by HFAs
to recapture funds in order to avoid liability when they are unable to
collect funds from project owners that do not comply.
Matter for Congressional Consideration:
To provide HFAs with greater tools for enforcing program compliance,
in the event the Section 1602 Program is extended for another year,
Congress may want to consider directing Treasury to permit HFAs the
flexibility to disburse Section 1602 Program funds as interest-bearing
loans that allow for repayment.
Agency Comments and Our Evaluation:
We provided a draft of this report to Treasury for review and comment.
In a response from an official from the Office of the Fiscal Assistant
Secretary, Treasury stated that it agreed with the recommendation that
Treasury define what it considers to be appropriate action by HFAs to
recapture funds in order to avoid liability. Treasury added that it
believed any additional guidance must be focused on assisting HFAs in
better understanding their obligations by providing more clearly
defined standards and expectations, yet be sufficiently flexible to
take into account these variations.
The Office of Head Start Awarded Most Expansion Funds within a Year of
the Recovery Act's Passage, but Start-Up Challenges and Data
Limitations Remain:
Within a year of enactment of the Recovery Act, the Office of Head
Start (OHS) had awarded most of the Recovery Act funds to expand the
Head Start and Early Head Start programs.[Footnote 173] As of March
16, 2010, OHS had committed 93 percent of the $1.5 billion in Recovery
Act funds OHS designated for expansion, making 832 grants, with a few
remaining grants pending.[Footnote 174] The Recovery Act provided $2.1
billion for Head Start and Early Head Start programs, of which the
agency designated a total of $1.5 billion for expanding the number of
children and families served by both programs through fiscal year
2011, as shown in table 10.[Footnote 175] Consistent with the Recovery
Act, a portion of the funds OHS designated for expansion were used to
provide for training and technical assistance (T/TA) to the expansion
grantees and to monitor the expansion grantees. Grantees provide
services to children and families including educational, health,
nutritional, social, and other services intended to promote the school
readiness of low-income children.
Table 10: Use of Recovery Act Funds:
Dollars in millions.
Head Start expansion:
Recovery Act funds: $200.
Early Head Start expansion;
Recovery Act funds: $1,178.
Head Start and Early Head Start expansion training and technical
assistance:
Recovery Act funds: $114.
Expansion subtotal:
Recovery Act funds: $1,492.
Quality improvement for existing grantees[A]:
Recovery Act funds: $354.
Cost of living adjustment for existing grantees[B]:
Recovery Act funds: $122.
OHS monitoring of grantees:
Recovery Act funds: $33.
State advisory councils[C]:
Recovery Act funds: $100.
Nonexpansion subtotal[D]:
Recovery Act funds: $609.
Total;
Recovery Act funds: $2,100.
Source: GAO analysis of OHS data.
Note: The subtotals may not equal the total due to rounding.
[A] These funds can be used for improvements such as facilities
upgrades, improving compensation, and increasing the hours of
operation.
[B] Existing grantees were eligible to receive cost of living
adjustment funds of 1.8 percent for each eligible staff member.
[C] State Advisory Councils encourage collaboration among grantees and
states. Applications for these one-time grants are due August 1, 2010.
[D] According to OHS, the amounts designated for quality improvements,
cost of living adjustments, monitoring, and state advisory councils
were determined consistent with the requirements of the Head Start Act.
[End of table]
Organizations that were already operating a Head Start or Early Head
Start program, as well as organizations that had not operated a
program previously, were eligible to apply for the Early Head Start
expansion grants. Only existing Head Start grantees were eligible to
apply for the Head Start expansion. As shown in table 11, OHS awarded
funds to both Head Start and Early Head Start programs. Some of the
Early Head Start funds went to programs that serve two specific
populations: American Indian and Alaska Native (AIAN) programs
enrolling children and families from federally recognized tribes or
native Alaskan children and families, and Migrant and Seasonal Head
Start (MSHS) programs enrolling children of migrant farm workers.
[Footnote 176] In addition, 59 of the Early Head Start awards made as
of March 16, 2010 went to grantees that had never operated either a
Head Start or Early Head Start program.
Table 11: Allocation of First-Year Expansion Funds by Type of Grant,
as of March 16, 2010:
Dollars in millions.
Early Head Start:
Funds awarded: $618;
Number of grants: 616.
AIAN:
Funds awarded: $17;
Number of grants: 21.
MSHS:
Funds awarded: $16;
Number of grants: 11.
Head Start:
Funds awarded: $96;
Number of grants: 216.
Total:
Funds awarded: $713;
Number of grants: 832.
New grantees:
Funds awarded: $57;
Number of grants: 59.
Existing grantees:
Funds awarded: $656;
Number of grants: 773.
Total:
Funds awarded: $713;
Number of grants: 832.
Source: GAO analysis of OHS data.
[End of table]
OHS awarded grants in all 50 states and U.S. territories, as shown in
table 12. A formula in the Head Start Act allocates Head Start funds
across states and territories. Organizations within each state compete
for the funds. Consistent with this formula, California received the
most Recovery Act funding, followed by Texas and New York.
Table 12: Number of Grants, Clients, and Total First-Year Award
Amounts for both Head Start and Early Head Start Expansion, by State
and Territory, as of March 16, 2010:
State or territory: Alabama;
Number of grants: 21;
Children and families to be served: 1,128;
Total amount awarded for the first year: $15,869,603.
State or territory: Alaska;
Number of grants: 6;
Children and families to be served: 266;
Total amount awarded for the first year: $2,824,526.
State or territory: Arizona;
Number of grants: 16;
Children and families to be served: 1,461;
Total amount awarded for the first year: $16,003,545.
State or territory: Arkansas;
Number of grants: 8;
Children and families to be served: 501;
Total amount awarded for the first year: $6,313,296.
State or territory: California;
Number of grants: 72;
Children and families to be served: 7,438;
Total amount awarded for the first year: $88,353,551.
State or territory: Colorado;
Number of grants: 16;
Children and families to be served: 812;
Total amount awarded for the first year: $9,676,172.
State or territory: Connecticut;
Number of grants: 8;
Children and families to be served: 325;
Total amount awarded for the first year: $3,366,791.
State or territory: Delaware;
Number of grants: 2;
Children and families to be served: 104;
Total amount awarded for the first year: $1,031,277.
State or territory: District of Columbia;
Number of grants: 3;
Children and families to be served: 133;
Total amount awarded for the first year: $1,077,636.
State or territory: Florida;
Number of grants: 36;
Children and families to be served: 3,086;
Total amount awarded for the first year: $40,018,934.
State or territory: Georgia;
Number of grants: 25;
Children and families to be served: 1,831;
Total amount awarded for the first year: $22,675,558.
State or territory: Hawaii;
Number of grants: 4;
Children and families to be served: 124;
Total amount awarded for the first year: $1,810,462.
State or territory: Idaho;
Number of grants: 12;
Children and families to be served: 293;
Total amount awarded for the first year: $3,209,489.
State or territory: Illinois;
Number of grants: 29;
Children and families to be served: 2,580;
Total amount awarded for the first year: $31,913,810.
State or territory: Indiana;
Number of grants: 25;
Children and families to be served: 1,383;
Total amount awarded for the first year: $13,872,177.
State or territory: Iowa;
Number of grants: 14;
Children and families to be served: 460;
Total amount awarded for the first year: $5,784,414.
State or territory: Kansas;
Number of grants: 23;
Children and families to be served: 592;
Total amount awarded for the first year: $6,498,184.
State or territory: Kentucky;
Number of grants: 19;
Children and families to be served: 1,024;
Total amount awarded for the first year: $13,015,408.
State or territory: Louisiana;
Number of grants: 10;
Children and families to be served: 675;
Total amount awarded for the first year: $9,591,673.
State or territory: Maine;
Number of grants: 5;
Children and families to be served: 232;
Total amount awarded for the first year: $2,540,600.
State or territory: Maryland;
Number of grants: 12;
Children and families to be served: 577;
Total amount awarded for the first year: $7,289,188.
State or territory: Massachusetts;
Number of grants: 20;
Children and families to be served: 769;
Total amount awarded for the first year: $10,090,446.
State or territory: Michigan;
Number of grants: 28;
Children and families to be served: 2,141;
Total amount awarded for the first year: $20,623,761.
State or territory: Minnesota;
Number of grants: 16;
Children and families to be served: 918;
Total amount awarded for the first year: $12,995,166.
State or territory: Mississippi;
Number of grants: 13;
Children and families to be served: 880;
Total amount awarded for the first year: $14,581,938.
State or territory: Missouri;
Number of grants: 24;
Children and families to be served: 1,143;
Total amount awarded for the first year: $14,532,652.
State or territory: Montana;
Number of grants: 4;
Children and families to be served: 224;
Total amount awarded for the first year: $2,519,080.
State or territory: Nebraska;
Number of grants: 14;
Children and families to be served: 393;
Total amount awarded for the first year: $4,946,028.
State or territory: Nevada;
Number of grants: 4;
Children and families to be served: 346;
Total amount awarded for the first year: $4,881,057.
State or territory: New Hampshire;
Number of grants: 4;
Children and families to be served: 132;
Total amount awarded for the first year: $1,659,939.
State or territory: New Jersey;
Number of grants: 27;
Children and families to be served: 1,215;
Total amount awarded for the first year: $13,625,931.
State or territory: New Mexico;
Number of grants: 14;
Children and families to be served: 576;
Total amount awarded for the first year: $6,987,851.
State or territory: New York;
Number of grants: 67;
Children and families to be served: 3,460;
Total amount awarded for the first year: $42,914,770.
State or territory: North Carolina;
Number of grants: 36;
Children and families to be served: 2,050;
Total amount awarded for the first year: $28,051,615.
State or territory: North Dakota;
Number of grants: 5;
Children and families to be served: 158;
Total amount awarded for the first year: $1,744,890.
State or territory: Ohio;
Number of grants: 36;
Children and families to be served: 2,715;
Total amount awarded for the first year: $26,804,290.
State or territory: Oklahoma;
Number of grants: 21;
Children and families to be served: 1,073;
Total amount awarded for the first year: $13,817,759.
State or territory: Oregon;
Number of grants: 23;
Children and families to be served: 1,049;
Total amount awarded for the first year: $14,266,118.
State or territory: Pennsylvania;
Number of grants: 41;
Children and families to be served: 2,008;
Total amount awarded for the first year: $22,670,352.
State or territory: Puerto Rico;
Number of grants: 16;
Children and families to be served: 1,147;
Total amount awarded for the first year: $16,891,473.
State or territory: Rhode Island;
Number of grants: 4;
Children and families to be served: 170;
Total amount awarded for the first year: $1,373,942.
State or territory: South Carolina;
Number of grants: 22;
Children and families to be served: 1,067;
Total amount awarded for the first year: $13,235,933.
State or territory: South Dakota;
Number of grants: 4;
Children and families to be served: 160;
Total amount awarded for the first year: $1,637,248.
State or territory: Tennessee;
Number of grants: 21;
Children and families to be served: 753;
Total amount awarded for the first year: $9,950,162.
State or territory: Texas;
Number of grants: 57;
Children and families to be served: 4,632;
Total amount awarded for the first year: $54,632,804.
State or territory: Utah;
Number of grants: 11;
Children and families to be served: 514;
Total amount awarded for the first year: $5,926,852.
State or territory: Vermont;
Number of grants: 4;
Children and families to be served: 74;
Total amount awarded for the first year: $768,197.
State or territory: Virgin Islands;
Number of grants: 1;
Children and families to be served: 72;
Total amount awarded for the first year: $1,194,500.
State or territory: Virginia;
Number of grants: 25;
Children and families to be served: 974;
Total amount awarded for the first year: $11,350,911.
State or territory: Washington;
Number of grants: 28;
Children and families to be served: 1,272;
Total amount awarded for the first year: $16,784,652.
State or territory: West Virginia;
Number of grants: 10;
Children and families to be served: 472;
Total amount awarded for the first year: $5,618,418.
State or territory: Wisconsin;
Number of grants: 17;
Children and families to be served: 1,027;
Total amount awarded for the first year: $11,741,796.
State or territory: Wyoming;
Number of grants: 2;
Children and families to be served: 72;
Total amount awarded for the first year: $1,731,552.
State or territory: Grand total;
Number of grants: 985;
Children and families to be served: 58,681;
Total amount awarded for the first year: $713,288,377.
Source: GAO analysis of OHS data.
[End of table]
OHS regional staff allocate expansion awards among budget categories
through a Financial Assistance Award document (FAA). FAAs are legally
binding and outline how grantees are expected to spend their funds.
They state the terms and conditions of the grants, document each
grantee's grant number and total award amount, and allocate the funds
to budget categories representing different program elements, such as
supplies. During the application process, reviewers analyze the
applicant's budget for reasonableness; the amounts recorded in the FAA
budget categories represent OHS's conclusions about how organizations
should generally spend their funds.[Footnote 177]
As shown in figure 30, the budget category that received the largest
allocation of funds across grantees was staffing, including funds for
personnel and benefits, which comprised about 40 percent of total
expansion grant awards. Staffing covers a range of personnel including
teachers, home visitors, bus drivers, food preparers, and
administrators.
Significant funds were allocated to "other" purposes. Apart from
staffing, budget categories included travel, equipment, supplies,
facilities, contracts, and "other."[Footnote 178] "Other" funds
totaled $167 million for the first year of the 2-year grant,
representing 23 percent of total expansion awards, and the second-
largest category after staffing, as of March 16, 2010. These funds can
be used for various activities such as insurance, food, and
administrative costs.
In addition to the budget categories, the FAA divides funds by start-
up phase (totaling $247.5 million nationwide) and ongoing costs of
operating the program ($434 million nationwide for the first year of
the grants). Some funds were also designated for T/TA, which is used
to hire or obtain expertise on developing a Head Start or Early Head
Start program and conforming to the Head Start Performance Standards,
the regulations against which all grantees are monitored ($31 million
nationwide for the first year of the grants).
Figure 30: Budget Categories for and Amount of Expansion Funds Awarded
for the First Year of the Grant Cycle, as of March 16, 2010:
[Refer to PDF for image: pie-chart]
Staffing: $283 million;
Contractual: $83 million;
Supplies: $69 million;
Facilities/construction: $51 million;
Equipment: $36 million;
Indirect costs: $18 million;
Travel: $6 million;
Other: $167 million.
Source: GAO analysis of OHS data.
[End of figure]
As of March 16, 2010, OHS had provided expansion funds for grantees to
serve about 59,000 additional children and families: 12,000 children
under the Head Start program, and about 47,000 additional infants,
toddlers, and pregnant women under the Early Head Start program. These
figures represent a relatively small increase in total funded capacity
for Head Start but a significant increase for Early Head Start, as
shown in figure 31. While the Head Start program was established in
1965, the Early Head Start program began in 1994 and has not been
funded to enroll as many children and families as Head Start. In
August 2009, before Recovery Act funding was provided for additional
children and families, reported enrollment for Head Start and Early
Head Start together was fewer than 900,000 clients. Reported
enrollment had declined slightly in 3 of the past 5 years. The
expansion funds will also add children and families to MSHS and AIAN
Early Head Start programs, as shown in table 13.
Figure 31: Portion of Total Funded Enrollment for Early Head Start and
Head Start Programs That Is Funded by Recovery Act Expansion Grants,
as of March 16, 2010:
[Refer to PDF for image: 2 pie-charts]
Early Head Start:
Non-Recovery Act funded enrollment, as of August 31, 2009: 57%
(61,148);
Recovery Act funded enrollment, as of March 16, 2010: 43% (46,576).
Head Start:
Non-Recovery Act funded enrollment, as of August 31, 2009: 99%
(829,013);
Recovery Act funded enrollment, as of March 16, 2010: 1% (12,105).
Source: GAO analysis of OHS data.
[End of figure]
Table 13: Number of Children and Families Funded to Be Served Under
Recovery Act Expansion Grants, by Type of Grantee, as of March 16,
2010:
Early Head Start:
Number of children and families to be served: 46,576.
AIAN:
Number of children and families to be served: 1,088.
MSHS:
Number of children and families to be served: 1,116.
Head Start:
Number of children and families to be served: 12,105.
Total:
Number of children and families to be served: 58,681.
New grantees:
Number of children and families to be served: 4,906.
Existing grantees:
Number of children and families to be served: 53,775.
Total:
Number of children and families to be served: 58,681.
Source: GAO analysis of OHS data.
[End of table]
OHS's initial calculation of the number of children and families to be
served by Recovery Act expansion funds underestimated the costs of
serving each child. OHS originally thought Recovery Act funds would
serve 14,100 additional children and families under Head Start and an
additional 55,000 pregnant women, infants, and toddlers under Early
Head Start. However, as of March 16, 2010, OHS had provided funding
for about 12,000 under Head Start and about 47,000 under Early Head
Start.[Footnote 179] According to OHS officials, the initial goals
were problematic for two reasons. First, they said that these
projections were based on the average ongoing costs of serving
children, but the averages incorporated many existing grantees that
serve children for part of the day, while applicants for expansion
funds more often sought funds to care for children all day, citing
community demand. Historically, many Head Start programs have provided
services for part of the day, which cost less than full-day services
and enables the same funds to cover more children, albeit with fewer
hours of service. However, mothers are now more likely to be in the
workforce than when Head Start was established in 1965, so a partial-
day schedule is somewhat less likely to meet families' needs than in
the past unless it can be complemented by other types of child care.
Second, officials also told us that higher costs for teachers than in
the past may have affected the accuracy of projections for the number
of children they thought programs could serve. Recent statutory
changes increased the credential requirements for Early Head Start
teachers starting September 10, 2010.[Footnote 180] While participants
in focus groups we conducted with Recovery Act expansion grantees
remarked that job applicants were plentiful, many noted that finding
qualified applicants was a challenge.[Footnote 181]
Prolonged Grant-Making Process for Early Head Start Resulted in Low
National Drawdown of Funds and Shortened Start-Up Periods for Some
Grantees:
OHS did not meet its initial goal to award Early Head Start expansion
grants by the end of fiscal year 2009 due to several factors,
contributing to a low drawdown (spending) rate and shortened start-up
periods for some grantees. OHS posted the full Head Start and Early
Head Start expansion grant announcements online May 4, 2009 and May 8,
2009, respectively, nearly 3 months after the Recovery Act was enacted
(a synopsis of the announcement was published on April 2, 2009). The
following month, OHS officials predicted that they would award most of
the funds by the end of September 2009. However, by that time, only
$96 million in first-year funds had been awarded, all to Head Start
grantees, as shown in figure 32. Awarding of Early Head Start
expansion grants began in November 2009 and continued through March
2010.
OHS officials explained that several factors slowed the process of
making Early Head Start awards:
* High volume of applications. Instead of the 1,000 applications OHS
expected, about 1,200 potential grantees applied for the $1.5 billion
available for expansion. These applications could be lengthy. OHS
allowed 60 pages for the narrative section and an additional 60 pages
for appendixes and other required submissions. According to OHS
officials, panel reviews of all applications took about 6 weeks due to
this unexpectedly high volume.
* Application audits. The Department of Health and Human Services
(HHS) Office of the Inspector General (OIG) audited the fiscal
management capabilities of potential brand-new grantees, those that
had not previously received a Head Start or Early Head Start grant. As
part of the application review process, OHS is required to review new
potential grantees' fiscal capability.[Footnote 182] For Recovery Act
expansion applicants, the OIG conducted the audits. Each of the 83
audits of potential new grantees lasted more than a week, according to
officials, and some audits resulted in the exclusion of applicants
from consideration. Once a potential grantee was excluded, OHS had to
select a replacement. Sometimes the replacement applicant had to be
reviewed by the OIG as well.[Footnote 183]
* Governor approval. The Head Start Act requires that OHS give the
governor of each state with new grantees 45 days to disapprove the
funds.[Footnote 184] While no governor declined the funds, officials
reported that response times varied.
The extended award-making process and payment delays may have
contributed to the low amount that grantees have drawn down, or spent,
as shown in figure 32. Once awards were made, some grantees
experienced delays in receiving funds. OHS officials explained that a
clerical problem caused delays in some grantees being able to access
their grant funds through HHS's Payment Management System. Normally
the system is designed to transfer funds to grantees within 1 or 2
business days, but HHS staff encountered problems entering some
Recovery Act grants into the system. According to OHS officials, the
problems caused delays for a few grantees in two regions. However,
some participants in our focus groups told us that they could not
access their funds for several days or weeks. As of March 31, 2010,
more than a year after the Recovery Act was enacted, grantees had only
drawn down 10 percent of the total $713 million in first-year awards.
The figure also shows that second-year commitments bring the total of
committed funds to $1.4 billion.
Figure 32: Timeline with Drawn Down and Cumulative Fiscal Year 2010
Awards and Fiscal Year 2011 Amounts:
[Refer to PDF for image: combined timeline and line graph]
April 2, 2009: OHS posts advance notice of Head Start and Early Head
Start expansion grant announcements;
June 23, 2009: Head Start grant application deadline;
July 9, 2009: Early Head Start grant application deadline;
September 2009: First batch of Head Start grants awarded;
November 2009: First batch of Early Head Start grants awarded;
February 2010: One year since Recovery Act enacted.
Awarded for FY 2010:
September 2009: $95.7 million;
March 2010: $713.3 million.
Drawdown:
September 2009: $0;
March 2010: $73.1 million.
Committed for FY 2011:
September 2009: $94.6 million;
March 2010: $686.7 million.
Total funds:
September 2009: $190.3 million;
March 2010: $1.4 billion.
Source: GAO analysis of OHS data.
Note: While OHS posted an advance notice of the Head Start and Early
Head Start expansion announcements on April 2, the full text of the
announcements was not available until May 4 and May 8, respectively.
[End of figure]
The prolonged award-making process also resulted in a shortened start-
up period for some grantees. In their applications, grantees were
generally required to propose a future date when they would begin
enrolling children and families. This date was based on their
understanding of the date at which they would receive the grant funds.
However, many Early Head Start awards were certified later than
grantees had expected, due to the factors discussed above, among
others. Despite these delays, some focus group participants told us
that regional staff pressured grantees to open their programs within
the timeline proposed in their application. OHS officials explained
that as a result of Recovery Act goals to enroll and serve children
and spend Recovery Act funds quickly, some regional staff pressured
grantees to start their programs with shortened start-up periods.
Officials at OHS central office said that they had discussed with some
regional staff members the need to balance the goal of adding services
for children and families quickly with the goal of providing high-
quality services.
Several grantees explained how the shortened start-up periods put
pressure on their organizations. In one focus group, all six
participants said that the stress caused by delays in funding was a
significant challenge. For example, one focus group participant
explained how the delay in receiving notification of the award caused
problems in meeting the target opening date specified in the grant
application. To meet the date, the regional office wanted the agency
to shorten the original start-up period proposed in the organization's
application. However, the organization had waited to get notification
of the expansion award before beginning its start-up process, which
included working with its board and partner organizations. By the time
the organization received its award, some of the potential partner
organizations were no longer available.
Another focus group participant told us that her organization applied
for an Early Head Start expansion grant in June 2009 and received a
call from an HHS official in August 2009 saying that it would be
awarded the grant, but it was not until December that the organization
received the grant funds. When it submitted its application, the
organization had planned to develop partnerships with child care
centers in its county. The focus group participant told us that since
that time, the child care centers had closed because many unemployed
parents had no money to pay for childcare. These closures reduced the
options for partnerships. Similarly, a focus group participant from a
rural state said that by the time her organization had access to its
grant funds, the facility it wanted to use was unavailable, so a new
facility had to be found.
OHS Has Helped Grantees Meet Program Requirements and Initiated
Monitoring, but Incomplete Data Hinder Oversight:
OHS has taken steps to assist expansion grantees, and focus groups
made up of expansion grantees generally indicated they were receiving
the assistance they needed. OHS has provided several forms of
assistance to Head Start and Early Head Start expansion grantees.
* OHS provided written guidance, records of conference calls, and
other materials on its Web sites--the Early Head Start National
Resource Center (ehsnrc.org) and the Early Childhood Learning and
Knowledge Center (eclkc.ohs.acf.hhs.gov/hslc)--which are
clearinghouses for OHS official guidance, research, tip sheets, and
answers to commonly asked questions.
* OHS funded a series of five orientation sessions for Early Head
Start expansion grantees in Washington, D.C., in early 2010, at which
the new grantees could also learn from existing grantees. At least one
regional office conducted its own orientation session.[Footnote 185]
* OHS e-mailed guidance to grantees on Recovery Act requirements and
Recipient Reporting, with ongoing e-mail reminders from OHS to
complete Recipient Reporting.
OHS also uses third parties to assist grantees with T/TA and with
selecting and training start-up planners. For example, OHS used $1.04
million in Recovery Act funds to expand its contract with Zero to
Three, a national nonprofit research and consulting organization, to
conduct T/TA. OHS also awarded a competitive contract to Zero to Three
to identify and train start-up planners who may assist grantees in
initiating programs that comply with Early Head Start standards.
[Footnote 186] The list of Early Head Start start-up planners that OHS
selected for the training was posted to an OHS Web site as of March
2010 and training began April 26, 2010. Most grantees received their
awards in November and have begun the start-up phase. At one focus
group held in March 2010, we asked the participants if they had hired
a start-up planner, and four of the six new grantees had already hired
a start-up planner.
Focus groups made up of expansion grantees generally indicated that
they had experienced some challenges in implementing their expansion
grant but varied in whether they felt additional assistance from OHS
was needed. Some groups suggested additional assistance, such as
formal clarifications of policies and more OHS staff, while one focus
group had no suggestions for additional assistance.
Most focus groups noted difficulties with Recovery.gov reporting,
including reporting on jobs created and retained, and cited inadequate
reporting guidance. For example, after OMB's clarifications December
18, 2009, some focus groups noted confusion about how to calculate
jobs created and retained. However, three focus groups indicated that
reporting requirements had presented little to no challenge. As GAO
has previously reported, some grantees had difficulties reporting
reliable job figures.[Footnote 187] Progress in improving the quality
of reporting among recipients of Recovery Act funds in general is
discussed in the Recipient Reporting section of this report and will
continue to be a focus of GAO review.
Focus groups often praised OHS regional staff for the assistance they
provided. Regional staff serve as a point of contact for grantees'
questions. Nevertheless, we also heard in several focus groups that
grantees sometimes doubted the reliability of guidance from regional
staff and one focus group mentioned taking precautions against future
citations by obtaining written confirmation of oral guidance.
Additionally, some focus group members said it was difficult to use
HHS's Payment Management System.
OHS Has Taken Some Steps to Monitor Expansion Grantees:
OHS has taken initial steps to monitor Recovery Act expansion
grantees, as shown in table 14. OHS generally monitors grantees
through regional offices that report selected information to the OHS
central office in Washington, D.C.[Footnote 188] OHS regional offices
directly monitor grantees by conducting periodic on-site monitoring
and communicating with grantees about issues ranging from enrollment
to a program's financial and governance systems.[Footnote 189] The OHS
central office also monitors key data, including total award amounts
and monthly reported enrollment, and oversees regional monitoring.
Table 14: Status of OHS Monitoring Activities:
OHS monitoring of grantees: Expanded monitoring contract: OHS
contracted with Danya International to provide monitoring services to
augment regional staff efforts. According to officials, the contract
will support the oversight of all Head Start and Early Head Start
programs, including approximately 500 first-year reviews for new Early
Head Start grantees under the Recovery Act. Danya must review all
Recovery Act grantees by March 30, 2011;
Status: Work began on the contract May 1, 2010.
OHS monitoring of grantees: Initial on-site monitoring: OHS regional
staff conducts initial on-site visits to support grantees in meeting
the Performance Standards, and identify any early concerns;
Status: As of March 19, 2010, regional staff had conducted 65 initial
on-site monitoring visits.
OHS monitoring of grantees: 1-year on-site monitoring: OHS will
conduct on-site monitoring reviews after 1 year of funding to review
grantee files and records for compliance with the Performance
Standards. Among other things, OHS staff indicated these reviews will
validate grantees' periodic enrollment reporting. Under the Head Start
Act, OHS requires an on-site monitoring review after a newly
designated agency has provided a Head Start or Early Head Start
program for 1 year. 42 U.S.C. § 9836a(c)(1)(C);
Status: As of March 19, 2010, OHS was in the process of developing
instructions for the annual on-site monitoring.
OHS monitoring of grantees: Risk management calls: Regional staff call
grantees within the first 30 days, within the next 45 days, and then
quarterly. Calls may be more frequent, as needed. Through the risk
management meetings, OHS's objective is to understand what the grantee
is doing, how far along they are in the expansion process, and the
amount of the award spent. Participants include regional office staff
and the Regional Program Manager, if needed;
Status: OHS has developed a risk management protocol for the calls,
which are ongoing.
OHS monitoring of grantees: Monthly enrollment and annual reporting:
Grantees are required to report their enrollment at the end of each
month, so OHS can compare it to the enrollment for which they were
funded. Low enrollment triggers monitoring actions by regional and OHS
central offices. Also, all grantees will complete an annual, more
comprehensive survey known as the Program Information Report;
Status: Expansion grantees began reporting enrollment data monthly in
October 2009. For the annual Program Information Report survey in
August 2010, OHS does not plan to ask expansion grantees to report
Recovery Act activities separately from their ongoing Head Start or
Early Head Start program data. Instead, grantees will report both
ongoing and Recovery Act program activities together.
Source: GAO analysis of OHS data.
[End of table]
Incomplete Data Limit Oversight of Grantee Activities:
Incomplete data and management information limit regional offices'
ability to monitor grantees and OHS's ability to ensure consistent
regional monitoring of Recovery Act grantees and monitor adherence to
key Recovery Act goals, such as growth in Head Start and Early Head
Start services. Specifically, OHS regional officials sometimes lacked
key budget information necessary to monitor grantees' expenditures and
the OHS central office did not access information needed to monitor
regions' granting of waivers of matching funds. Finally, OHS lacked
management information needed to assess in a timely way the extent to
which services have been provided to children and families enrolled by
Recovery Act grantees.
Budget allocation. In some cases OHS awarded grants without an
accompanying budget to guide oversight of grantees' spending. Based in
part on budgets submitted by grantees, regional offices generally
allocated grant funds among several explicit budget categories--
including staffing, equipment, and facilities--to provide a structure
for overseeing grantees' subsequent expenditures. However, OHS data
show that in some cases, regions allocated entire expansion awards to
the "other" budget category. As of March 16, 2010, 77 grantees' entire
awards were allocated to the "other" category, totaling $73.5 million
out of $713 million in Recovery Act funds for the first program year.
Additionally, we found that staff in regional offices used the "other"
category inconsistently. Two of 12 regional offices are responsible
for 73 of the 77 FAAs for which all funds were allocated to "other,"
as of March 16, 2010.
In an effort to release awards quickly to meet the goals of the
Recovery Act, OHS officials said some regional offices sometimes
allocated all funds to the "other" category instead of taking the time
to analyze each grantee's budget needs. Several FAAs were revised
weeks or months after grant funds were issued to distribute the funds
among specific budget categories, and OHS officials said that all FAAs
attributing all funds to "other" will be revised. However, 77 FAAs
remained unrevised as of March 16, 2010. When we met with OHS on April
25, 2010, they did not indicate that this had changed. Without a
reliable budget framework, OHS regional staff cannot ensure that
grantees are retaining sufficient funds to address key program
priorities through the end of the grant period, such as adequate
staffing. As more funds are drawn down, the continued absence of a
budget framework would pose additional difficulties in assuring that
funds last throughout the grant period.
Waivers of matching funds. The OHS central office did not routinely
review Recovery Act grants to determine whether grantees received a
waiver of a requirement to match federal funds with nonfederal
resources for 20 percent of the approved program costs. The OHS
central office can approve a waiver of certain grantee requirements,
including the matching requirement. For Recovery Act grants, the
central office delegated the authority for granting waivers for that
requirement to the regional offices.[Footnote 190] Regional offices
varied in the number of waivers they granted. For example, our
analysis of FAA data found that three regions issued no waivers;
Region X issued waivers for 33 percent of grants; and other regions
issued waivers to between 1 and 21 percent of grants.
Regional staff keep track of waiver data, and the OHS central office
does not receive reports on the data. Officials at OHS's central
office told us they do not regularly review waiver information.
Without timely review of waivers of the nonfederal matching
requirement, OHS cannot readily determine how pervasive grantees'
total dependence on federal funds may be to take timely action to
address any grantees or regional areas in which community support for
Head Start and Early Head Start programs is lacking. In addition, the
OHS central office is unable to identify inconsistent regional
policies or determine whether there are inconsistent criteria for
granting waivers, which could result in grantees in some regions
obtaining waivers while those with similar circumstances in other
regions may not.
Provision of service to children and families. The OHS central office
receives regular monthly data on enrollment for each Head Start and
Early Head Start grantee and separately for Recovery Act grantees, but
has not tracked the number of children and pregnant women that
expansion grantees are currently serving, as might be indicated by a
routine measure of attendance. Grantees are expected to monitor their
own monthly average daily attendance and, in some cases, must take
action to help families improve children's attendance.[Footnote 191]
Attendance data are not regularly reported to the OHS regional or
central office; instead, the attendance records are provided as part
of a larger on-site review, which occurs 1 year into services for
Recovery Act expansion grantees.[Footnote 192] In addition, enrollment
does not necessarily signify that services are being provided.
Enrollment is defined under the program as the official acceptance of
a child by a Head Start program and the completion of all procedures
necessary for a child and family to begin receiving services.[Footnote
193] For monthly enrollment reporting, grantees should "report the
total number of children and/or pregnant women enrolled on the last
operating day of the month. Report the total number of enrollees, not
the number in attendance."[Footnote 194] In contrast, Program
Information Reports submitted annually by grantees are more likely to
result in some record of services provided than the monthly enrollment
reports. Program Information Reports include the definition of "actual
enrollment," defined more narrowly (for purposes of the report)
[Footnote 195] as children--and, for Early Head Start, children and
pregnant women--who are not only enrolled but for whom at least one-
time services have been provided. However, the Program Information
Report does not include monthly average daily attendance or any other
measure of regular services provided.[Footnote 196] Also, for such
reports, OHS has not required grantees to report separately on
Recovery Act enrollment; rather, data on children and families will be
aggregated by reporting organization to include enrollment under
grants that programs held before the Recovery Act expansion.
The discrepancies between definitions of enrollment and provision of
services may be a reason why expansion grantees' drawdown of awarded
funds has lagged behind reported enrollment. At the end of March 2010,
grantees reported almost 29,000 children and families enrolled--49
percent of the number of children and families they are funded to
serve--while they had drawn down just 10 percent of awarded funds.
Several expansion grantees reported enrollment numbers to the online
data collection system but also added comments explaining that they
are not yet serving some enrolled children. Further, in recent
undercover tests of the enrollment process at certain Head Start
centers, GAO found that one Head Start center admitted two fictitious
children and left them on its enrollment records for a month.[Footnote
197] In addition, GAO documented vulnerabilities in the enrollment
process and found instances in which staff at some Head Start centers
with empty enrollment slots disregarded income to give the impression
that applicants should receive higher priority for enrollment than
they were actually due. Because Recovery Act grantees are entering a
period of rapid enrollment, we will further review enrollment issues
as part of our ongoing review of Head Start's use of Recovery Act
funds.
Measuring the extent to which Head Start and Early Head Start are
serving children and families is essential to understanding the
program's effect, particularly in a period of start-up when service
provision may substantially lag enrollment (as defined by regulation
and in monthly reporting).[Footnote 198] It is not clear that OHS
would know if expansion grantees served fewer children and families
than they were funded to serve, or for how long this might have been
the case, because reported enrollment could meet its target even as
enrolled children waited for classrooms to open.[Footnote 199]
Calculating attendance, which fluctuates, may be challenging, but OHS
already offers guidance on calculating average daily attendance on its
Web site. Moreover, an advisory committee to the Secretary of HHS has
specifically recommended that attendance be considered along with
other factors in determining whether or not OHS should renew an
individual grant or make the grant available for competition among
organizations. This recommendation has not been implemented; OHS
officials indicated that regulations governing the redesignation
system are under preparation.[Footnote 200]
Conclusions:
The Recovery Act's expansion of Head Start and Early Head Start
significantly expands OHS's responsibility to monitor grantees' use of
funds and ensure that children and families are receiving high-quality
services. The short duration of services funded through the Recovery
Act makes monitoring more critical because grantees have little time
to affect children and families and OHS has little time to correct
problems. However, OHS's lack of available data regarding decisions
and activities of its regional offices and grantees limits its ability
to consistently oversee this rapid expansion and program performance.
OHS's emphasis on awarding funds expeditiously, in accordance with the
goals of the Recovery Act, is understandable, although OHS did not
meet its goal for awarding Early Head Start funds. However, allocating
all awarded funds to the "other" category for some grantees limits
appropriate record-keeping, reporting, and oversight in the future.
Even if these awards are eventually revised to allocate funds to
specific budget categories, the short duration of the Recovery Act
grants limits the amount of time in which errors, omissions, and
misuse can be identified and remedied.
Without timely review of comprehensive management information about
waivers of the 20 percent nonfederal matching requirement OHS central
office's ability to understand whether regions are treating grantees
consistently is limited. Without reviewing such information, grantees
in some regions could obtain waivers while others similarly situated
in other regions may not.
Finally, the number of children and families served by Head Start and
Early Head Start is an essential measure of the program's impact. Yet,
OHS lacks assurance that grantees actually serve the numbers of
children in each program they report having enrolled, and for which
they are receiving funds. Under the current definition of
"enrollment," grantees--particularly those experiencing obstacles in
start-up--could reasonably report full enrollment, while some
classrooms sit empty, perhaps due to licensure or other delays. In
fact, our recent testimony on irregularities in Head Start enrollment
showed that one grantee enrolled a fictitious child who never received
services. Reporting figures to Congress and the American public that
do not represent children and families for whom services have been
provided fails to provide a transparent measure of the important work
undertaken by these programs. In addition, without monitoring
information on services actually provided, OHS could miss
opportunities to assist grantees who are experiencing significant
delays in their ability to serve the children they have enrolled.
Recommendations to the Director of the Office Head Start:
To provide grantees with appropriate guidelines on their use of Head
Start and Early Head Start grant funds, and enable OHS to monitor the
use of these funds, the Director of OHS should direct regional office
staff to stop allocating all grant funds to the "other" budget
category, and immediately revise all FAAs in which all funds were
allocated to the "other" category.
To facilitate understanding of whether regional decisions regarding
waivers of the program's matching requirement are consistent with
Recovery Act grantees' needs across regions, the Director of OHS
should regularly review waivers of the nonfederal matching requirement
and associated justifications.
To oversee the extent to which grantees are meeting the program goal
of providing services to children and families and to better track the
initiation of services under the Recovery Act, the Director of OHS
should collect data on the extent to which children and pregnant women
actually receive services from Head Start and Early Head Start
grantees.
Agency Comments and Our Evaluation:
GAO provided a draft of this report to the Department of Health and
Human Services and OHS for comment. HHS disagreed with our conclusion
that lack of management information limits its ability to consistently
oversee the rapid expansion under the Recovery Act and provided
additional information on its actions and capabilities related to our
recommendations. HHS also provided technical comments, which we
incorporated as appropriate.
With respect to our recommendation that it direct regional office
staff to stop allocating entire grants to the "other" budget category
and immediately revise all grant awards in which all funds were
allocated to the "other" category, HHS noted that it anticipated
within the next 15 to 20 days it would complete issuing revised
budgets to grantees who had received awards allocated in this fashion.
HHS cited automated alerts on unusual levels of monthly drawdown as a
supplementary check on the rate of grantee spending, but such alerts
do not ensure spending corresponds to program objectives and are not
designed to replace ongoing monitoring. The other checks that HHS
cited were semiannual and quarterly reports that would rely at least
in part on analysis of budget variances that cannot be assessed in the
absence of an approved budget.
With respect to our recommendation that it track and review waivers of
the non-federal matching requirement and associated justifications,
HHS reported that it has a system in place to track waivers of the
matching requirement and indicated it is aware of the two regions that
have not granted waivers, stating that these regions will use their
flexibility to consider such waivers later in the process. We revised
our report to reflect HHS's clarification on how waiver data is
tracked. However, our recommendation focuses on timely review of
waiver award patterns in addition to tracking.
Finally, with respect to our recommendation that OHS better review the
initiation of services, as distinct from enrollment, by collecting
data on the extent to which children and pregnant women have received
services from Early Head Start and Head Start grantees, HHS expressed
confidence that enrollment is a valid indicator of service delivery.
In this period of rapid expansion, we remain concerned that
enrollment, particularly as defined for monthly reporting purposes,
could overstate actual service delivery. We are also concerned that
OHS has no plans to ask grantees to separately report on Recovery Act
enrollment under the narrower definition of "enrollment" discussed in
its comments and more likely to result in some record of services
provided. Further, HHS stated that on-site monitors routinely collect
and verify attendance data. However, OHS's on-site monitoring protocol
call for attendance records to be reviewed only to determine whether
the causes of absenteeism are documented, and no mention is made of
collecting attendance data. In addition, given the central role of
service delivery in assessing program performance, we believe that a
valid measure of this remains an important objective.
Recipients Are Gaining More Experience Reporting, but FTE Data Quality
Continues to Be a Major Concern:
According to Recovery.gov, as of April 30, 2010, recipients reported
on over 179,000 awards indicating that the Recovery Act funded
approximately 683,000 jobs during the quarter ending March 31, 2010.
As reported by the Board, the job calculations are based on the number
of hours worked in a quarter and funded under the Recovery Act and
expressed in full-time equivalents (FTEs).[Footnote 201] Under the
continuous corrections period that the Board implemented in the last
reporting round, recipients will be able to modify their third round
submissions during the period that began on May 3, 2010, and runs
through June 14, 2010. The final update of the third round of
recipient reported data is planned for June 16, 2010.
Under the Recovery Act, recipients are to file reports for any quarter
in which they receive Recovery Act funds directly from the federal
government and are required to submit reports no later than 10 days
after the end of each calendar quarter. The Board extended the
reporting deadline by several days for all three rounds of reporting.
The reports are to be made public 30 days after the end of the
quarter; the reports have been made public by this deadline. Reporting
requirements apply to nonfederal recipients of funding, including
entities such as state and local governments, educational
institutions, nonprofits, and other private organizations. In
addition, these 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 provisions. Certain other exceptions apply, such as
for 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).
Recipient reporting under the Recovery Act represents a step forward
in federal spending transparency. However, the exercise is also
highlighting problems in obtaining quality recipient reported data due
to the overall complexity of funded programs and the nationwide scope.
The recipient reporting process is going more smoothly than in the
first two rounds as recipients have become familiar with the reporting
system and requirements. OMB and the Board's responsiveness to
feedback, reflected in updated guidance and system enhancements, has
also helped improve recipient reported data quality and reliability.
The FTE calculations, however, continue to result in noncomparable
data across Recovery Act funded programs and pose problems for some
recipients as evidenced through our field work in selected
jurisdictions covering education and public housing programs.
Updated OMB Guidance Is Aimed at Continuing to Improve the Quality of
Recipient Reported Data:
In our March 3, 2010, Recovery Act report, we noted the lack of
guidance to federal agencies on data quality reviews during the
continuous corrections period and the difficulty in cross-referencing
reports from the first and second submission of reports.[Footnote 202]
On March 22, 2010, OMB issued updated guidance on the Recovery Act
covering the continuous corrections period, categories of data quality
issues, approval process for program specific guidance, and other
reporting requirements.[Footnote 203] The guidance establishes a
framework for review of recipient changes during the continuous
corrections period. Federal agencies are also required to update their
data quality plans to reflect actions planned during the continuous
review period. The guidance further states that federal agencies must
conduct a final review of the data at the close of the continuous
corrections period. In addition, a new administrative and technical
category for describing problems identified during the quality review
process was established.[Footnote 204] One of the key controls
established by the guidance to ensure compliance and avoid duplication
of records is a requirement that federal agencies compile a
comprehensive list of all awards subject to recipient reporting.
In order to ensure compliance with Recovery Act reporting
requirements, the administration issued a memorandum on April 6, 2010,
directing federal agencies to use every means available to identify
any prime recipient required to file a report on FederalReporting.gov
who has failed to do so and hold such recipients accountable to the
fullest extent permitted by law.[Footnote 205] OMB reviewed existing
guidance and issued a memorandum to federal agencies on May 4, 2010,
that outlined actions and strategies designed to assist agencies in
fulfilling their responsibility to hold recipients accountable for
reporting compliance.[Footnote 206] Ultimately, federal agencies are
instructed to take appropriate actions against noncompliant recipients
of funds that can include restricting access to the awarded funds
until the recipient becomes responsive and implementing other
sanctions and remedies.
Third Round Recipient Reporting Data Quality Improved but Remains a
Work in Progress:
For this third round of recipient reports, we repeated many of the
analyses and edit checks we performed and reported on in previous
reports covering the first two rounds of recipient reporting.[Footnote
207] The intent of these analyses is to identify recipient report
records that showed certain data values or patterns in the data that
were either erroneous or suggested that some further review could be
merited due to an unexpected or atypical data value or relationship
between data values. These analyses are repeated to gauge the extent
to which previously identified instances of anomalous data values or
patterns continue to recur. We also performed some new analyses
examining the relationship between reports across the three rounds of
quarterly reporting. We used the data covering the period January 1,
2010, through March 31, 2010 (the first calendar quarter of 2010),
from Recovery.gov on April 30, 2010. There were 70,657 prime recipient
report records downloaded from Recovery.gov for this third round. This
was 4,830 more than submitted in the previous quarter and represents
about a 7 percent increase from round two. In our analyses, we also
used the round one and round two data from the biweekly updates posted
on Recovery.gov as of March 17 and March 24, respectively. Between
round one and round two, there was a 16 percent increase in prime
recipient reports.
We Identified Fewer Reports with Potential Problems and
Inconsistencies but Continued Focus on Data Quality Is Necessary:
The number of reports identified in our various edit checks has, for
the most part, continued to diminish. For example, in our review of
the previous round of quarterly reports, we examined the apparent
consistency or coherence between the final report data field and other
report data fields. We conducted this same analysis for third round
reports. For those reports indicating that they were final reports, we
looked at the project status data field and whether the dollar amount
shown for Recovery Act funds received or Recovery Act funds expended
was close to the award amount. For this third round of reports, a
total of 4,502 prime recipient reports, roughly 6 percent of all prime
recipient reports, indicated that the current report was to be the
final report. As with the previous round, almost all of those reports
showed a "Completed" project status. Unlike the previous round where
there were 279 reports where project status was either "Not Started"
or "Less Than 50% Completed," there were 118 such reports reflecting a
disconnect between the final report and project status data fields.
For all recipient reports marked as final, we also repeated our
analysis to identify final reports showing either possible
overspending or notable underspending by counting those reports where
the amount reported for both Recovery Act funds received or expended
was less than 75 percent of the award amount or exceeded the award
amount by 10 percent or more. As before, we did not find any reports
where both the amount shown as received or expended exceeded the award
amount by 10 percent or more. In round two, we observed about 9
percent of the reports marked as final where neither the value for
amount received or expended was within 75 percent of the award amount.
In round three, it was about 3 percent of all reports marked as final.
Fewer reports are showing incongruence between the reported project
status and funding.
Likewise, when we repeated our match of the data fields for Treasury
Account Symbol (TAS) codes and Catalog of Federal Domestic Assistance
(CFDA) numbers to see if they were congruent with their associated
agency name fields,[Footnote 208] we found fewer mismatches in this
round than the previous round. In the previous round there were 232
reports as having a mismatch on the CFDA number and 157 reports where
there was no TAS match. For the current round, there were 112 CFDA and
117 TAS mismatches. Our examination of data on the number and total
amount of small subawards of less than $25,000 also showed modest
reductions of roughly 30 to 50 fewer erroneous reports than identified
in the previous round. As in the past, we did not find any reports
where the amount reported as received exceeded the reported award
amount by more than $10. However, we did note an increase in the
number of recipient reports where the award amount was zero or less
than $10 which may suggest data entry errors or other mistakes. In the
previous round, there were 31 such reports; in this round, there were
74 such reports. For each of these analyses, the number of records
identified is less than half a percent of the 70,657 prime reports
filed. The prime recipient report records also include data on whether
or not the federal agency reviewed the record during the data quality
review time frames. Our prior analysis and our initial analysis in
this round of this data element, in conjunction with our discussions
with agency officials, have indicated potential problems and
inconsistencies with the data field, which we will be investigating
further.
Linking of Reports Has Improved but Problems Persist:
In our previous report, we performed a match between round one and
round two prime recipient reports using an award key data field.
[Footnote 209] For users of the recipient report data downloadable
from Recovery.gov, this data element would be used to track recipient
reports across quarters. The presence of unlinked or mislinked reports
makes analyses of spending or FTEs over quarters problematic in
relation to specific projects or programs. Our analysis suggested that
there were prime recipient reports that appeared in the first round
only or in the second round only but should have been linked to a
report in the other round--that is, these unmatched reports were for
the same reporting entity. As such, we noted that there would be some
double counting of amounts reported. OMB, in its response to that
report, described its own analysis of first round reports that did not
appear to have a matching report in the second round. OMB reported
doing a line-by-line review of first round recipient reports that were
flagged as not having a second round report. OMB's response stated
that, as a result of the analysis, approximately 93 percent of those
unmatched first round reports were filed in the second quarter but,
due to a technical issue, could not be matched to the prior quarter
report. OMB reported that it was working with the Board to
appropriately link reports. In addition, OMB issued guidance to
agencies to instruct recipients to follow reporting procedures that
would create and preserve a link from a previous quarter's report to
the new quarterly report to be submitted. In May 2010,
FederalReporting.gov posted information about a new function for
recipients that allows them to link or unlink reports in the current
reporting cycle to a report submitted in the previous reporting cycle.
We will follow up on this development during the next cycle of
reporting.
To assess the extent of matching that occurred in subsequent updates
to the round one and round two data posted on Recovery.gov, after we
performed our initial match on data available as of January 30, 2010,
we reran the match using the updated data posted on Recovery.gov as of
the March 17 and March 24 dates noted above. In our initial match, we
observed a match rate of 55 percent between first and second round
reports. When we reran the match, the match rate was 71 percent, which
shows an improvement in the number of linked reports between quarters.
For this third round of recipient reports, we performed a set of match
operations on prime recipient reports using all three rounds of report
data. Our intent in this match effort was to further review the
tracking of reports from one quarter to the next and identify
potential groups of recipient reports that could be indicative of
mismatches across quarters or reports not matched but possibly should
be. For example, we identified 1,358 prime recipient reports that
matched between round one and round three, but did not match with any
round two report. While it might be the case that there were
recipients that were required to report in rounds one and three, but
not round two, it seems unlikely that this would be the case for all
these reports. We also identified from our match operations three
groups of reports that did not appear in round three:
* recipient reports that appeared in round one only,
* reports that appeared in round two only, and:
* reports that matched and were in both rounds one and two.
We examined the final report status field for these three sets of
reports since these reports are presumably the last reports from these
projects because they were not linked to round three reports. As shown
in table 15, we found that more than half of the reports were not
marked as final. Similarly, across these three groups, 39 to 46
percent also showed project status as "Not Started" or "Less Than 50%
Completed."
Table 15: Number, Final Report, and Project Status of Prime Recipient
Reports Not Appearing in Round Three:
Prime recipient reports: Reports appearing in round one only;
Number of reports: 2,920;
Percent not marked as final report: 57;
Percent project status is "Not Started" or "Less Than 50% Complete:"
46.
Prime recipient reports: Reports appearing in round two only;
Number of reports: 4,503;
Percent not marked as final report: 57;
Percent project status is "Not Started" or "Less Than 50% Complete:"
42.
Prime recipient reports: Reports matched between round one and round
two;
Number of reports: 4,692;
Percent not marked as final report: 52;
Percent project status is "Not Started" or "Less Than 50% Complete:"
39.
Source: GAO analysis of Recovery.gov data.
[End of table]
Based on these results showing projects that were not marked as final
and indicating that they were in the earlier stages of their effort,
it seems reasonable to expect that a third round quarterly report
should have been filed, but the necessary linkage has not been made.
Alternatively, these fields may not show the correct status.
In performing the match, we also encountered some anomalies with the
award key values on some recipient reports. Within a round of
quarterly reports, the award key value helps link together the prime
and subrecipients and vendors for a given award. This linkage is
important in tracking Recovery Act funds as they flow from a prime
recipient of an award to their subrecipients and vendors. It can be
used to show who a prime recipient's subrecipients and vendors are and
the amounts they received. For the round three recipient reports, we
counted 26 instances where a unique award key value was associated
with more than one prime recipient report rather than a single prime
report as expected. We also identified 239 instances of a subrecipient
report having a unique award key value. As such, these subrecipient
reports could not be associated with a prime recipient report and
therefore it is unclear as to who provided their award funding.
Anomalous Local Award Values Raise Concerns about Reported
Subrecipient and Prime Award Amounts:
For this third round of recipient reports, we also examined a data
field referred to as the local amount, which is intended to account
for the money flowing in and out of a given geographic region.
According to the Recovery.gov Web site's "Download Center User Guide,"
this calculated local amount value for a prime recipient is defined as
the total amount of the award minus the sum of awards to
subrecipients. We identified 327 prime recipient reports where the
local amount value was negative. Our examination of some of these
reports show that associated subrecipient's local amount exceeds the
award amount shown on the prime recipient report. While the occurrence
of a negative local amount on a prime recipient report indicates the
need for further examination of the funding values shown on the prime
report and all associated subrecipient reports, it also raises
concerns about other instances of inaccurate reporting of funds on
either the prime or related subrecipient reports when the local amount
calculation does not produce a negative local amount value and
therefore is not as readily detected.
The overall results of our edit checks and analyses of this third
round of recipient reports were similar to what was observed in the
previous round. For some analyses, there was some reduction in the
number of recipient reports identified as having either erroneous or
anomalous data values. Our matching analyses showed more recipient
reports are being linked across quarters, but also suggests that there
may be some reports that were linked that should not have been and
some reports that were not linked for which a report filed in a
subsequent quarter may exist. Although the number of records
identified by most of our edit checks and analyses continues to be
relatively small compared to the total number of prime recipient
reports submitted, the results continue to demonstrate that there is a
basis for attention to the quality of information being reported.
State Officials Reported Fewer Third Round Reporting Problems:
Despite some problems with FederalReporting.gov during the reporting
period, most of the states in our review indicated that the third
round of recipient reporting proceeded in a relatively smooth fashion.
State officials credited their growing familiarity with compiling and
reporting the data as a key reason recipient reporting is becoming
easier. For example, District of Columbia officials noted that the
process went smoothly primarily because the District agencies have
been reporting for several rounds, and there were no changes to the
reporting process this quarter. In addition, several state officials
indicated OMB's extension of the reporting deadline by a few days
because of the issues with FederalReporting.gov helped with their
submission of third round data. State officials in Arizona, for
example, noted that the extended timeline allowed them additional time
to make corrections in data submissions, resulting in more accurate
data.
State officials had varying opinions regarding the new continuous
corrections period and whether it affects the quality of the recipient
reported data. Some indicated that the corrections period provides
some benefit, while others were neutral or cited concerns about the
reporting change. Officials in Ohio, for example, said that they used
the continuous corrections period to revise second round jobs
information to conform to the new FTE calculation methodology.
Officials in Georgia said they thought it was a good feature to have,
but most state agencies had not used the period to change their
reports. A Pennsylvania official noted that the continuous corrections
period improves data quality by providing additional opportunities to
revise data if errors are subsequently identified. However, it does
increase the resources spent on reporting by having to respond to
federal agency inquiries throughout the continuous corrections period.
Other states also reported that the corrections period requires
additional resources. Michigan officials commented that, from their
perspective, the quality of the recipient reported data is not
affected by the continuous corrections period. They said that they
strive to ensure that all reports are submitted with accurate data by
the deadline and that the only changes made are done during the
recipient review period immediately following the reporting deadline.
States highlighted the challenges presented by the short timeline for
recipient reporting and data review. Officials noted that it takes
several days following the end of the quarter to compile the data.
This leaves few days to ensure that the data are successfully
submitted or that data quality issues are corrected before the
submission deadline, which creates a situation where recipients are
reporting during the last few days of the initial window. Several
states suggested that the reporting period should be extended beyond
10 days and that holidays and weekends should be taken into account
for the final reporting date. For example, Pennsylvania officials
suggested that an additional 5 days should be added to the recipient
reporting deadline to improve data quality by providing recipients
additional time to compile and review the data. In addition, Colorado
officials noted the continuous corrections period does not compensate
for a short review period since new entries cannot be made then. They
added that the public pays the most attention to the data released at
the end of the reporting period rather than data corrected after the
initial release.
When asked about the perceived costs and benefits of the recipient
reporting exercise, state officials reported benefits resulting from
the reporting requirements. Several state officials said that data
generated during this reporting process are being used to communicate
more directly with citizens. For example, Iowa officials said that the
Recovery Act has given the state the impetus to provide citizens with
better information on how federal funds are spent in their state.
Officials in Massachusetts indicated that they are revising the
state's Web site so citizens and state-level managers can see how
public money is spent. District of Columbia officials stated that,
prior to the Recovery Act, the District had data analysis
infrastructure in place. Due to Recovery Act reporting requirements,
however, the District is now able to apply this same data analysis to
grants management. In addition, officials in Georgia noted that the
new requirements are helpful for state agencies in that they are more
focused on internal controls and fiduciary responsibility.
Regarding the costs of recipient reporting, several states pointed out
that although there are benefits to improving transparency in how
funds are being used and assuring the accuracy of data reported, there
are definite costs in terms of time, effort, and other resources. For
example, Iowa officials said the technology costs to develop the
state's centralized model and its Recovery Act Web site totaled
approximately $300,000. Pennsylvania officials remarked that because
of the extra resources devoted to recipient reporting, fewer resources
are available to provide other services to state agencies. New Jersey
officials echoed Pennsylvania's concerns, noting that the significant
staff hours focused on recipient reporting are diverted from program
implementation and resolving program problems.
Department of Education Recipients Illustrate Some Difficulties
Surrounding the FTE Calculations:
As in previous reporting periods, FTE positions funded by Education
grants accounted for a large proportion of all reported FTEs.
Specifically, Education recipients reported approximately 469,000
FTEs, which represent 69 percent of the approximately 683,000 FTEs
reported this period. We found considerable variation among the
approaches used by LEA and IHE officials to generate FTE estimates.
This could be because officials tended to select a particular
methodology based upon what information would be readily available
using their existing payroll and financial systems.
OMB guidance allows for two broad approaches to calculating FTEs for a
quarter. The first, referred to in guidance as the "general"
methodology involves dividing the number of hours worked and funded
with Recovery Act dollars in the quarter by the number of hours in a
full-time schedule. Most of the LEAs we visited and half of the IHEs
we visited used a variation of this approach for at least one of their
FTE calculations.[Footnote 210] For example, officials at one IHE we
reviewed used the actual hours worked during the quarter while
officials at several LEAs and one IHE estimated the hours worked
during the quarter for employees. We observed a variety of approaches
to estimating the hours worked by salaried staff, whose exact hours of
work are not always recorded. The second approach, which OMB and
Education refer to as the "definite term" methodology, involves
estimating the FTE impact of Recovery Act funds over a longer period
of time, such as a school year or fiscal year, and then reporting the
same FTE figure for each quarter of that time period. Rather than
looking at hours worked, this approach generates FTE estimates by
comparing annual salary expenses to the Recovery Act allocation. For
example, some IHEs using the "definite term" methodology divide the
award amount by the average cost of supporting one FTE at the
institution to generate a total FTE estimate.
We found that IHEs varied in several ways in how they made this
calculation. For example, we found that the University of Colorado and
Kutztown University of Pennsylvania included salaries and benefits in
their calculation of FTEs, while the University of California and
Ramapo College of New Jersey included salaries but did not include
employee benefits in their calculations. The decision to include or
not include employee benefits in these calculations could
significantly impact the reported FTEs. Specifically, dividing the
SFSF allocation by a larger denominator (including benefits would
result in a higher average cost per FTE) results in a lower FTE
estimate. For example, University of California officials told us that
average benefits at the university are approximately 23 percent the
cost of salary; we calculated that including this level of benefits in
addition to the average salary figure they used in their calculation
would lower the estimated FTE count by nearly 1,800 FTEs, from just
over 9,600 FTEs to just over 7,800 FTEs. This is because dividing the
SFSF allocation by approximately $91,500 (average salary plus benefits
costing 23 percent of salary) would result in fewer estimated FTEs
than dividing the same allocation by just over $74,500 (average salary
without benefits). When we raised this issue with Department of
Education officials, they told us that they had not issued any
guidance on this topic but would review whether benefits should be
included and would discuss the issue with subrecipients. OMB officials
told us they will consider whether additional guidance is needed on
this issue. Table 16 provides more detailed examples of methodological
variations we found at the 17 LEAs and 14 IHEs where we reviewed FTE
calculations.
Table 16: Examples of FTE Methodological Variations Observed in IHEs
and LEAs Where We Reviewed FTE Calculations:
Variations of the quarterly "general" methodology calculation:
* The "general" methodology divides hours worked by the number of
hours in a full-time schedule for the quarter;
Differences in calculation of hours worked (numerator):
* Actual hours worked;
* Estimated hours worked:
- by dividing teachers' quarterly salaries by hourly wage rates;
- using information from employee work assignments (e.g., typical
hours worked per day or week) and the number of work days or weeks in
the quarter;
Differences in full time schedule (denominator):
* 520 hours per quarter, assuming a 40-hour work week;
* adjusted to account for full time schedules that are less than 40
hours a week, such as 37.5-hour work weeks.
Variations in calculations done once for a longer, "definite term"
such as a school or fiscal year:
* The "definite term" methodology derives an FTE figure from annual
salary data and this figure is reported for each quarter of the
definite term. Variations of the calculation include:
- determining the percent of FTEs funded by the Recovery Act (by
dividing the Recovery Act allocation by the total cost of payroll
expenses) and multiplying this percentage by the total number of FTEs
in the institution;
* Some institutions included benefits while others did not;
- dividing the amount of Recovery Act funds available for salaries by
an average salary figure;
* one institution using this approach included benefits while others
did not;
* assuming all or only a portion of SFSF allocation was used to pay
salaries;
- applying entire SFSF allocation to salaries or;
- applying the same proportion of the SFSF allocation to salaries as
the IHE spends on salaries compared to total expenses;
* making assumptions about which employees were paid with SFSF funds
and;
- including only instructional faculty;
- including both instructional and non-instructional employees;
* using a different number of months of salary data when calculating
an institution's annual salary cost;
- 9 months of actual salary data or;
- one single two week payroll.
Source: GAO analysis.
[End of table]
We also found that the actual dates underlying the reported data
varied across LEAs and in some cases did not correspond exactly to the
January 1 to March 31 reporting period. For instance, Chicago Public
Schools generated their FTE estimates using payroll data from January
4 to March 12 and will report data from the next payroll as part of
its fourth quarterly reporting cycle, and an LEA in Springfield,
Massachusetts, reported FTE data through March 19. In North Carolina,
recipient reported data for LEAs lags behind the official reporting
period by 1 month, but includes 3 months of expenditures, December
2009 through February 2010.[Footnote 211] Similarly, in California,
where the deadline for LEAs to report data to the state was March 15,
officials at Long Beach Unified School District told us they reported
on data beginning December 8 and ending March 8, and officials at San
Diego Unified School District said their data were from the end of
November to the end of February. Such variations in the actual dates
underlying reported data could affect comparability.
We also found variation in whether LEAs reported FTEs during the
quarter that employees worked or only after being reimbursed with
Recovery Act funds. For example, officials at Newark Public Schools
told us that during the current reporting period they had reported
FTEs for positions paid for using local funds in anticipation of being
reimbursed. In contrast, an official at the School District of the
City of York in Pennsylvania reported three quarters worth of SFSF
FTEs during the March reporting period when the state disbursed SFSF
funds. According to U.S. Department of Education officials, it is
important that all FTEs paid for with Recovery Act funds be reported
even if this does not occur in the quarter that hours were worked, and
that officials at each LEA should take a consistent approach in
whether they report FTEs when the hours are originally worked or when
the LEA is reimbursed with Recovery Act funds. Variation among LEAs in
whether FTEs are reported when worked or when reimbursed may also
affect comparability of the data in a given quarter. The quarterly
tallies do provide a snapshot of the number of FTE positions paid for
in a given quarter, including a mix of those positions worked in that
quarter or reimbursed in that quarter. Over time, the total number of
quarterly FTEs reported should be the same, provided each LEA
accounted for FTEs from previous periods properly and consistently.
However, the FTE count in a given quarter may or may not reflect the
number of annual full-time positions paid with Recovery Act funds over
the course of the year.
Most Reported Jobs Figures at Selected LEAs and IHEs Appeared
Reasonable and Were Supported by Documentation, but Several Factors
Could Lead to Misreporting of FTEs:
For the 17 LEAs and 14 IHEs where we reviewed FTE calculations, we
generally found that officials could provide documentation to support
their reported FTEs paid for with Recovery Act funds and that those
estimates appeared to be reasonable, but we did find a number of
potential issues that could lead to misreporting of FTEs. In total,
the 17 LEAs and 14 IHEs where we reviewed FTE calculations together
reported approximately 32,400 FTEs for ESEA Title I, IDEA Part B, and
SFSF, accounting for about 11 percent of the 284,385 reported FTEs for
these three programs by the 16 states in our review and the District
of Columbia. We identified potential issues in the FTE calculations of
11 of these 31 IHEs and LEAs. Nine of these involved potential
underreporting of FTEs either in this quarter or in previous quarters.
Table 17 shows the number of LEAs and IHEs where we identified
potential issues with FTE calculations.
Table 17: Number of LEAs and IHEs We Reviewed Where We Identified
Potential Issues with FTE Calculations:
Potential issues identified: Vendor FTEs not reported on service
contracts;
Number of LEAs and IHEs: 5.
Potential issues identified: Cost of benefits not included in FTE
calculations that derive FTE estimate from salary information
("definite term" methodology);
Number of LEAs and IHEs: 2.
Potential issues identified: Funding increases received during the
"definite term" were applied to the entire time period without
adjusting for closed quarters;
Number of LEAs and IHEs: 2.
Potential issues identified: Other errors, such as computational
mistakes or only reporting FTEs for those staff who had not been paid
with Recovery Act funds in prior quarters;
Number of LEAs and IHEs: 3.
Source: GAO analysis.
Note: One LEA we reviewed is included twice in the above table as we
identified two of the potential issues at that LEA.
[End of table]
Five LEAs we reviewed did not include vendor information in their
initial FTE calculations, and officials in several LEAs misunderstood
the requirement to report vendor jobs or told us they did not know
this was required.[Footnote 212] This could lead to underreporting of
FTEs paid for with Recovery Act funds. For example, Detroit Public
Schools officials reported using contractors to a significant degree,
including a $40 million dollar contract that is 30 percent completed,
but told us in April that they had not reported any vendor jobs
because they were not aware that this was a requirement. Officials at
the Michigan Department of Education told us that vendor reporting on
jobs is required and noted that Detroit Public Schools had submitted
information on vendors after learning of the requirement. Officials at
one California LEA also reported being unaware that there was a
requirement to report vendor jobs and therefore reported no vendor
jobs despite awarding Recovery Act contracts to vendors for an
estimated $3 million, many of which are for services. In contrast, an
official from another LEA in California told us that for the second
quarterly report the number of vendor jobs the LEA reported increased
from 12 to 79 when LEA officials learned that job estimates needed to
be collected from all vendors with Recovery Act contracts. Finally, we
also found that the process that the North Carolina Department of
Public Instruction uses to report FTEs for all LEAs in the state does
not incorporate any jobs information on vendors hired with Recovery
Act funds and therefore likely underreports total FTEs paid for with
these funds.[Footnote 213] Department of Education officials told us
that subrecipients should report FTE information for vendors when
direct jobs could be identified.
Midyear funding changes also pose reporting challenges for some
subrecipients and in one case may have led to underreporting of FTEs.
For example, officials may decide to change how they use Recovery Act
funds during the year, which could make the FTE numbers they reported
in previous, closed quarters incorrect. Officials in at least one
university we reviewed were unsure of whether and how to adjust their
reporting in the current reporting cycle in cases where funds had been
reallocated, in effect, to reimburse themselves for their prior
expenses from previous quarters. For example, officials at Michigan
State University received SFSF funds in February 2010 and plan to
reallocate these funds to cover salary expenses from previous
quarters. These officials said they were not sure how to accurately
reflect FTEs over this period and said they would seek guidance on
this issue from the state. Officials in Springfield Public Schools in
Massachusetts told us they also plan to reallocate these funds to
cover salary expenses from previous quarters and that they plan to
report those FTEs in the next reporting cycle.
Officials at the Massachusetts Department of Elementary and Secondary
Education told us that they will likely issue guidance to their LEAs
about how to report FTEs when SFSF funds are reallocated to cover
expenses from previous quarters, and that they expect to see a spike
in reported FTEs next reporting quarter as multiple quarters worth of
FTEs are reported. U.S. Department of Education officials acknowledged
that such spikes would likely occur and said that these FTEs should be
reported. In contrast, Georgia officials do not plan to adjust their
reporting to account for changes in funding levels that affect the FTE
numbers they reported in previous quarters, given their method for
calculating FTEs. In Georgia, IHEs and LEAs received additional
allotments of SFSF funding in the last quarter of 2009 and the first
quarter of 2010. The new, higher levels of funding were used to
recalculate the impact of FTEs funded by SFSF, resulting in an
increase in the number of FTEs reported each quarter. However, the
definite term methodology, which Georgia uses, assumes the same FTE
figure will be reported for each quarter of the definite term. Neither
OMB nor Education guidance explains how to adjust FTE reporting when
funding levels change during the definite term and
FederalReporting.gov does not allow for adjustments to previous
quarterly reports once the continuous corrections period has closed.
In the absence of such guidance, Georgia officials told us they
thought it was more important to reflect the annualized impact
accurately in the current quarter and in future quarters than to
"catch up" for previous quarters. In addition, they stated that they
did not think it would be appropriate to retroactively assign FTEs to
the first and second quarter of recipient reporting because the higher
levels of funding had not been available at that time.[Footnote 214]
They also noted that they had discussed their formula with an
Education official after each round of reporting and had not been told
to make any changes to it.
In the case when additional Recovery Act funds become available and
are reallocated to cover expenses in previous quarters, not adjusting
FTE estimates accordingly may result in undercounting. Figure 33 shows
potential issues that could arise when using the definite term
methodology if funds are reallocated to cover expenses in previous
quarters. Recalculating the FTE impact during the definite term could
result in undercounting over time unless adjustments are made because
the quarterly FTE impact of additional funds is captured after the
adjustment, but not in previous quarters, even though the impact of
the funds is being calculated over the entire time period. A
Department of Education official agreed that Georgia's method could
result in undercounting and said that it would be more appropriate to
calculate the FTE impact of the additional funding on a quarterly
basis using the "general" methodology described above and to add this
figure to the original FTE count generated at the beginning of the
definite term.
Figure 33: Potential Issues in FTE Reporting That Can Arise When Funds
Are Reallocated to Cover Costs Incurred in Previous Quarters:
[Refer to PDF for image: illustration]
Recipient reporting period:
First: Q3, 2009;
Second: Q4, 2009;
Third: Q1, 2010;
Fourth: Q2, 2010;
Funding changes:
2009: Funds received at the beginning of year;
2010: Additional funds received.
Spreading effect of additional money over entire definite term:
Number of FTEs reported:
Under count: Only reflects an increase in the quarter when funds
received and in subsequent quarters:
First: Q3, 2009: 2;
Second: Q4, 2009: 2;
Third: Q1, 2010: 8;
Fourth: Q2, 2010: 8;
Total quarterly FTEs: 20.
Hypothetical reporting: If larger allocation had been available in Q3,
this is how FTEs would have been reported Q1:
First: Q3, 2009: 8;
Second: Q4, 2009: 8;
Third: Q1, 2010: 8;
Fourth: Q2, 2010: 8;
Total quarterly FTEs: 32.
Adjusted reporting: Additional FTEs are reported in Q1 to ensure all
FTEs funded with Recovery Act funds are captured, including those that
would have been reported in Q3 and Q4 if the higher funding level had
been known:
First: Q3, 2009: 2 (closed);
Second: Q4, 2009: 2 (closed);
Third: Q1, 2010: 20;
Fourth: Q2, 2010: 8;
Total quarterly FTEs: 32.
Continuing original definite term reporting with adjustments to
account for additional funds received:
Adjusted reporting: Original definite term calculation continued, and
FTE impact of additional funds computed separately and added to this
amount:
First: Q3, 2009: 2;
Second: Q4, 2009: 2;
Third: Q1, 2010: 14;
Fourth: Q2, 2010: 14;
Total quarterly FTEs: 32.
Source: GAO.
[End of figure]
Department of Education Officials Reported Enhanced Data Control
Systems:
Department of Education officials said that the third round of
recipient reporting had gone more smoothly than the first two rounds,
with department officials identifying fewer serious errors and
receiving fewer requests for technical assistance from recipients.
Education officials said program staff from SFSF, ESEA Title I, and
IDEA review every recipient report submitted through
FederalReporting.gov and comment on those that need further attention
from recipients. Education officials reported that enhanced data
control systems in place through their department and
FederalReporting.gov have eliminated many of the "fatal flaw" errors
that were problematic in previous rounds of reporting, such as when
the award amount, DUNS number, or amount drawn down is inconsistent
with the department's records. Rather, the majority of errors they
encountered during the third round of recipient reporting were
administrative or technical in nature. Officials continued to provide
technical assistance to grantees and posted additional clarifying
guidance on Education's Recovery Web site about recipient reporting,
but reported receiving fewer questions this round than in the first
two rounds.
Education had few experiences with nonreporters in this round, as most
recipients submitted reports on time. Officials reported that 100
percent of SFSF recipients reported in all three quarters thus far.
One state did not submit a report this round for ESEA Title I, and
officials were in communication with this recipient. For IDEA funding,
one state had not yet submitted its Part C report due to a change in
its lead agency; officials stated that they were working with the new
agency to help it understand its responsibilities. One of the
territories had not spent any funds and did not realize it needed to
report.
Officials said that the continuous review period, which concluded
after our last review of recipient reporting and pertained to the
second submission, had been a positive step toward developing quality
recipient reported data. The first continuous review period began on
February 2, 2010, and lasted until March 15, 2010, during which prime
recipients could submit corrections to the data they reported during
the second recipient reporting period. Education officials reported
that the continuous review period had allowed recipients and the
federal agency more time to review and improve the quality of the data
initially submitted.
Officials told us that prepopulating fields for recipients could
improve data quality and ease some reporting problems experienced by
prime recipients. For example, when subrecipients make mistakes in
entering a DUNS number or a congressional district, prime recipients
experience difficulty uploading reports and must spend time
identifying and fixing these data entry errors. Education officials
indicated that since this information is available at the federal
level, it would be ideal if these data could be prepopulated for
recipients. Education officials told us it was their understanding
that federal agencies would not be allowed to prepopulate information,
so that it would be clear these data come from the recipients directly
rather than the federal government. Officials also stated that
prepopulation should be considered if subrecipient reporting is
extended to non-Recovery Act programs in the future. OMB officials
stated that it was their understanding that the Board is considering
the possibility of prepopulation for some data fields in the future.
Education is using recipient reported data to monitor spending in two
new ways. First, vendor data are being used in risk management to
identify spending that warrants further review. For example, if a
vendor address is located far from the subrecipient, or if funds are
being used for restaurants and entertainment, potentially unallowable
activities, the cognizant program office will be contacted so
officials can follow-up and ensure that funds are being spent for
allowable purposes. Education officials also told us that Education's
Office of the Inspector General has used these data to select which
subrecipients to visit and determine what questions to ask. Second,
program officials told us that examining subrecipient expenditures has
also been helpful in identifying which LEAs to monitor and in
preparing for monitoring visits.
Although Many Housing Agencies Used Correct Jobs-Counting Methodology,
Unclear Guidance Resulted in Some Underreporting of Hours Worked by
Subcontractors:
For the third round reporting period, recipients of Public Housing
Capital Fund formula grants and competitive grants reported about
11,000 jobs funded by Recovery Act projects, or just over half of the
total jobs reported for HUD programs, according to data from
Recovery.gov. We reviewed the jobs-counting methodologies used by 16
housing agencies in 15 states and the District of Columbia for an in-
depth review of prime recipient jobs-counting methodologies. We found
that 13 of the housing agencies followed OMB's December 18, 2009,
guidance. Specifically, these 13 housing agencies collected the number
of hours worked by contractors or staff that were funded by the
Recovery Act and divided that total by 520 hours. However, the other
three housing agencies used somewhat different methodologies to
estimate the number of jobs. For example, officials from a housing
agency in Massachusetts told us they calculated the number of FTEs by
summing the number of full-time workers funded by the Recovery Act in
each week of the quarter and dividing the total by the number of weeks
in a quarter. Because all the workers worked full-time schedules, we
found that this methodology produced an equivalent FTE calculation to
the OMB methodology. However, this methodology may not accurately
estimate FTEs when part-time workers are included in the calculation.
In contrast, officials from a housing agency in Florida told us the
jobs number they reported was based on a headcount provided by their
contractors of the number of workers hired for each of the two
projects. The housing agency's contractors said the workers did not
work full days and that the project did not last the full quarter. By
counting each part-time position as a full-time position, this
methodology overstates the number of FTEs funded. Finally, although
officials at a North Carolina housing agency said they used the
calculation outlined in the OMB guidance, they also added the jobs
they had previously reported from December 2009, resulting in
cumulative jobs reported rather than the jobs for only the most
recently completed quarter, as required by the OMB guidance.
HUD posted a revised jobs-counting calculator to its Web site in March
2010 for housing agencies to use to calculate and report their jobs
information. HUD also sent an e-mail to all housing agencies with a
link to the calculator. Of the 16 housing agencies we visited, only 3
reported using HUD's calculator for the third round reporting period.
Officials at several of the remaining housing agencies told us they
did not use HUD's calculator for a variety of reasons. For example, an
official at a housing agency in Colorado told us he did not use the
jobs-counting calculator because there was not time to evaluate its
effectiveness, accuracy, and ease of use. Furthermore, public housing
officials at a housing agency in Michigan felt the jobs-counting
calculator was overly complex for what they are trying to capture.
According to HUD officials, OMB gave HUD permission to distribute the
calculator, but OMB did not officially approve or sanction it. OMB
also noted that it had neither reviewed nor approved HUD's calculator.
Instead of using HUD's jobs-counting calculator, officials at 12
housing agencies said they created their own tools to calculate the
number of FTEs they reported.[Footnote 215] Public housing officials
in Michigan told us they required each contractor to submit a jobs
tool containing the number of hours worked for the quarter as well as
the number of FTEs and then created a spreadsheet that aggregated all
of the FTE information from each contractor. Similarly, public housing
officials in Illinois told us they developed jobs-tracking templates
that each Recovery Act funded contractor had to complete and submit to
the housing agency on a monthly basis. Contractors could use the
templates to record the hours worked by each employee and
subcontractor employee. The housing agency officials told us that by
having contractors complete their jobs-tracking template
electronically, the template could automatically calculate the number
of FTEs for each contractor. The housing agency officials told us they
reviewed the FTE calculation for each contractor and developed a
master worksheet with information from all projects at the end of the
reporting period.
Officials from a Pennsylvania housing agency and officials from an
Ohio housing agency both reported using an out-of-date version of
HUD's jobs-counting calculator. In March 2010, we had recommended that
HUD instruct housing agencies to discontinue using this calculator,
which HUD had previously removed from its Web site, because it did not
reflect the change from a cumulative FTE calculation to a quarterly
FTE calculation made by OMB in its December 2009 guidance. HUD did so
in a March 26, 2010, e-mail to housing agencies. However, the
instruction to stop using the outdated calculator was not featured
prominently in the e-mail, but rather was included in a list of
updates and reminders in the second half of the e-mail. After meeting
with us, the official from the housing agency in Pennsylvania was able
to resubmit a corrected FTE calculation using the updated HUD jobs-
counting calculator. Similarly, after meeting with us, the official
from the housing agency in Ohio stated that the earlier version of the
jobs-counting calculator would not be used for its recipient report.
Instead, the official stated that the housing agency would use an
internally generated tool to calculate the FTE value. HUD officials
said they have continued to include this instruction in subsequent
correspondence with housing agencies and would emphasize in future
correspondence with housing agencies not to use the outdated jobs-
counting calculator. However, HUD's previous instruction does not
appear to have been effective in ensuring that all housing agencies
are using the correct jobs calculation. Without further action from
HUD, housing agencies may continue to incorrectly calculate jobs using
the outdated jobs-counting calculator.
OMB guidance states that recipients should use reasonable judgment in
determining the appropriate sources of information for determining
their jobs estimates. HUD suggested that housing agencies use weekly
payroll information to collect hours worked from contractors. Ten
public housing agencies reported using payroll documentation as the
primary source to determine the number of hours worked by employees on
Recovery Act funded projects. Some examples of the payroll documents
used by housing agencies include Davis-Bacon wage reports, contractor-
certified payroll records, and paychecks. However, six public housing
agencies collected information from different sources. For example,
public housing officials in Michigan told us they used a contractor-
certified spreadsheet containing information on the number of hours
worked by employees and the FTE calculation. While the officials told
us they did not require the contractors to provide documentation
supporting their FTE calculation, they told us they reviewed the
information for reasonableness. Public housing officials in the
District of Columbia told us their contractors are responsible for
maintaining and reporting information on the number of hours worked
and funded by the Recovery Act for the quarter and entering it into
the District of Columbia government's reporting Web site. The housing
agency officials told us that they do not use payroll records to
verify information the contractors report. Instead, they verify the
contractors' reported hours by comparing the data reported online
through the District of Columbia Web site with hours reported directly
to the housing authority through monthly reporting. According to
housing officials, all data are compared to summary information on
hours worked provided by contractors before uploading it from the
District of Columbia's Web site into FederalReporting.gov.
OMB's December 2009 guidance states that to the maximum extent
practicable, information should be collected from all subrecipients
and vendors in order to generate the most comprehensive and complete
job impact numbers available. For the Public Housing Capital Fund
grants, public housing agencies are prime recipients, and contractors
are considered vendors rather than subrecipients. While OMB has an on-
line frequently asked question that discusses the difference between a
subrecipient and a vendor, OMB and HUD guidance could more clearly
specify whether and when subcontractors are also to be considered
vendors--that is, whether the prime recipient is responsible for
reporting hours worked by subcontractors employed by contractors of
the prime recipient. OMB's guidance defines a vendor as "a dealer,
distributor, merchant, or other seller providing goods or services
that are required for the conduct of a federal program." We found that
at least seven housing agencies included in their FTE calculations the
hours worked by contractor and subcontractor employees. However, at
least one housing agency did not report this information for
subcontractors even when subcontractors were providing essential goods
and services for Recovery Act funded projects. Officials at this
housing agency told us they only require contractors awarded Recovery
Act work to report hours worked for individuals who they directly
employ and are working on Recovery Act projects, which does not
include any data for work performed by subcontractors on Recovery Act-
funded jobs. We believe it is important for housing agencies to have
clear guidance on whether and when subcontractors should be included
in their FTE calculations in order to have consistent and complete
jobs data.
HUD's Data Quality Reviews of Recipient Reports Continue to Find
Errors, and Recent OMB Changes Have Facilitated HUD's Reviews:
HUD continued to use automated data checks to flag values in specific
fields that were incorrect or that fell outside of parameters HUD had
defined as reasonable and to generate comments to notify housing
agencies of the potential errors. However, HUD changed its criteria
for flagging errors. Specifically, HUD replaced the criteria used in
previous reporting cycles to identify potential jobs errors with
criteria to identify major jobs overcounts and undercounts, as well as
probable jobs overcounts and undercounts.[Footnote 216] Further, HUD
increased the number of fields it reviewed to flag technical and
administrative errors. Overall, HUD flagged 2,965 errors--including
1,097 potential jobs errors--in 1,932 recipient reports, which
resulted in comments being sent to these housing agencies on April 21,
2010, notifying them that they needed to review the information they
entered for the values flagged as errors. In comparison, for the
previous quarter HUD flagged 1,877 errors (in fewer fields) in 1,578
recipient reports. HUD headquarters staff from the Office of Field
Operations followed up with these recipients to assist with
identifying the correct information to be entered in
FederalReporting.gov. One week after the start of the federal agency
review period, 732 recipients had updated their reports in response to
the comments HUD had sent.
According to HUD officials, its existing approach to data quality
review was consistent with the changes OMB outlined in the March 22,
2010, guidance to federal agencies. First, the OMB guidance introduced
a new category of errors--administrative and technical errors--for
federal agencies to identify and track. HUD officials said they
already had been working with housing agencies since October 2009 to
correct technical errors, such as incorrect award ID numbers;
eliminate duplicate reports; and address "egregious" errors.[Footnote
217] Second, OMB provided guidance on the steps federal agencies
should take to review recipient reports during the continuous
corrections period. HUD officials said the process they used during
the continuous corrections period after the January reporting period
was consistent with the OMB guidance. However, HUD officials told us
that the extent to which they were able to work with recipients to
correct errors during the April federal agency review period has
allowed them to provide assistance to housing agencies with more minor
errors to ensure those are corrected as well. As a result, they
believe the quality of the data is improving with each reporting cycle.
In a change from prior reporting cycles, the Board and OMB permitted
federal agencies to upload comments in bulk rather than manually
entering each one. As a result, the commenting step required fewer
staff hours to complete. HUD officials said this change allowed them
to redirect staff resources to respond to questions from housing
agencies and to identify recipients with errors most in need of follow
up.
HUD officials told us they are using the continuous corrections period
to follow up on the egregious errors that remain unaddressed as of the
end of the federal agency review period, as well as minor errors, if
time permits. HUD officials are monitoring the list of recipient
reports that are updated and are periodically reviewing them to ensure
recipients do not introduce additional errors when they make changes
to their reports in response to the comments they received. HUD staff
will determine the frequency with which they follow up with recipients
that have unaddressed errors in their reports as the continuous
corrections period progresses. During the continuous corrections
period for the round two reporting period, HUD officials said they
focused on having housing agencies address the 99 egregious errors
that remained unaddressed after the federal agency review period. HUD
officials told us they also performed a data quality review of the
reports approximately two times per week during this period to monitor
corrections and identify any new errors introduced by housing agencies
correcting their report. While they were concerned that new errors
might be introduced by housing agencies during this period, HUD
officials said that they found few new errors and that, in general,
the data quality was improved. According to HUD officials, 50 of the
99 egregious errors were resolved during the first week of March.
In the third round reporting period, Public Housing Capital Fund
formula grant recipients achieved a reporting rate of nearly 100
percent, with all but 5 of 2,704 recipients required to report
successfully submitting reports into FederalReporting.gov, according
to HUD officials. Additionally, 100 percent of the 391 capital fund
competitive grant recipients required to report successfully reported
into FederalReporting.gov by the end of the initial submission period
on April 16, 2010. HUD officials said that two of the five recipients
that did not report had technical difficulties and submitted reports
to HUD outside of FederalReporting.gov using an Excel template from
HUD's Web site. A third recipient submitted its report as a
subrecipient rather than as a prime recipient. HUD officials told us
that the other two simply failed to report and received a warning
letter reminding them of their obligation to report on April 29, 2010.
As we reported in March 2009, HUD previously took action to address
housing agencies' noncompliance with the reporting requirement. HUD
identified six grants for which no report was found in both the first
and second reporting cycles and followed up with each housing agency
by phone. According to HUD officials, HUD subsequently sent the six
housing agencies formal sanction letters and locked their grants in
HUD's Electronic Line of Credit Control System. HUD officials told us
this disabled the housing agencies' ability to draw down funds until
they could demonstrate compliance by either completing the official
reporting template developed by OMB and provided by HUD to the housing
agency by e-mail or reporting in the third round reporting period. HUD
noted that five housing agencies took steps to demonstrate compliance:
two completed the template and e-mailed it back to HUD in March 2010,
and the other three reported in the April reporting period. The sixth
housing agency returned its Recovery Act grant to HUD.
Additionally, the 32 housing agencies that did not report in the
second reporting cycle received a warning letter from HUD on March 22.
In the April recipient reporting period, HUD officials told us none of
the 32 housing agencies had a second consecutive nonreported award.
According to HUD officials, some housing agencies with nonreported
awards are small and have limited capacity and sophistication, which
can make the requirement to report overwhelming for their staff. HUD
field staff continue to provide technical assistance to housing
agencies having trouble with the reporting requirements.
DOE Reported Improved Data Quality in the Third Round but Had
Suggestions for Further Improvements:
Overall, according to a senior DOE official in the department's
Recovery Operations Group, recipient reporting went more smoothly
during the third round of reporting. The DOE official attributed this
in part to OMB's March 2010 guidance, which he thought helped to
further improve data quality by calling attention to administrative
and technical data quality issues. During this round of reporting,
DOE's automated review process examined report fields including award
type, award amount, jobs calculated, and project status. The DOE
official stated that all of the over 3,700 DOE recipient reports
submitted to Recovery.gov are reviewed. During this round of
reporting, DOE also made enhancements to its quality assurance process
and provided additional training on the process to about 400 field
staff.
During the quarter ending March 31, 3,749 DOE recipients were required
to report and 3,725 did so, which is a 99.4 percent reporting rate.
Although DOE had an additional 1,000 recipients reporting this
quarter, there were only 24 nonreporters compared to 40 nonreporters
during the last quarter. The primary reason, cited by DOE agency
reviewers for nonreporting was that recipients were experiencing
technical problems with uploading data on FederalReporting.gov. Other
examples included lateness or recipients deciding to decline awards.
The official attributed the drop in nonreporters this reporting round
to efforts by DOE's Recovery Act Clearing House to contact new
recipients to make them aware of their reporting responsibilities.
Even though recipient reporting is going more smoothly than in
previous quarters, the official reported that problems still persist
due to human error, technological obstacles, and system inflexibility.
For example, the agency review flag has been a source of frustration
for DOE. The DOE official said that on April 21, 2010, all DOE
recipient reports were erroneously marked by an unidentified
individual on FederalReporting.gov as reviewed with no comments. This
resulted in a systematic lock down of all DOE recipient reports, not
only for this quarter but for the previous two quarters as well.
According to the official, FederalReporting.gov was unable to reverse
this action. As a result, the agency had to resort to a manual system
to track which reports were reviewed with no changes and which needed
corrections. Given the design of the review screen on
FederalReporting.gov, the official stated that it would not be
difficult for an individual to accidentally change the status of all
reports while reviewing an individual report. He noted that the agency
had raised this concern with the Board on two occasions before this
error occurred. As an additional safeguard, DOE suggested that the
Board add two columns to the continuous review data extract provided
by FederalReporting.gov, including the name of the person reporting
and a date and time stamp for the agency review flag.
In spite of these issues, the DOE official maintained that
Recovery.gov is an excellent model that would benefit from continued
refinement in guidance from OMB on not only what needs to be reported
but who should report. To further improve data quality in recipient
reports, the DOE official also suggested that prepopulation of data
elements, such as award amounts and award IDs on the
FederalReporting.gov Web site would be beneficial.
Recovery Act Recipient Reporting Lessons Learned Can Help Build
Greater Transparency in Federal Spending:
The implementation of the Recovery Act's reporting and transparency
requirements represents a step forward toward achieving the federal
government's stated desire to enter into a new age of openness about
federal spending. The April 6, 2010, OMB memorandum on federal
spending transparency noted that it was building on the achievements
and lessons learned from implementing the Recovery Act. The directive
outlined OMB's plans to implement Federal Funding Accountability and
Transparency Act of 2006 (FFATA) requirements for recipients of
federal grants, contracts, cooperative agreements, and other financial
assistance.[Footnote 218]
Signed into law on September 26, 2006, FFATA aimed to increase federal
spending transparency through the creation of a publicly available and
easily searchable online database of federal funding awards. This
database was to reflect a variety of data elements related to awards
from a federal agency to a nonfederal entity, the prime recipient, and
eventually the subawards given by the prime recipient to
subrecipients. While a pilot program to implement FFATA at the
subrecipient level was undertaken in the fall of 2008, it left many
questions unanswered. With the Recovery Act, OMB was able to use
lessons learned from recipient reporting in the implementation of
subaward reporting requirements for FFATA.
The OMB directive acknowledged that an important goal is to improve
federal spending data quality and that more needs to be done to ensure
the accuracy and completeness of federal spending data.
USAspending.gov, the Web site created in response to FFATA, has been
widely critiqued because of quality problems with the federal agency
reported data. OMB plans to improve the technology behind USAspending
by October 1, 2010, when federal agencies will be required to report
subawards for new grants, contracts, and task and delivery orders. The
directive also establishes the USAspending.gov Control Board,
consisting of the Federal Chief Information Officer, Federal
Controller, and Administrator for Procurement Policy, which will
coordinate policies and systems that support the collection and
presentation of data on federal contracts, grants, loans, and other
spending. As part of this effort, agencies are required to establish
metrics for timeliness, completeness, and accuracy of federal spending
information and publicly display them on dashboards to measure
progress toward improving data quality. The dashboards, updated
quarterly, are intended to provide the public with the ability to
monitor agencies' progress. OMB has set a goal of 100 percent of
awards data being reported on time, completely, and accurately (free
of error) by the end of the fourth quarter fiscal year 2011.
The administration has stated that a cornerstone to open government is
transparency, which includes full and easy access for the public to
gather information on government spending and promotes accountability
by allowing detailed tracking and analysis of the deployment of
government resources. To provide information on how recipient reported
data are being gathered and tracked, we met with representatives from
a variety of research and public policy organizations to solicit
feedback from data users about their use of recipient reported data
and suggestions they had for improving the recipient reporting process
and the data.[Footnote 219] We did not assess the feasibility of their
suggestions.
Representatives from all of the organizations we interviewed agreed
with the importance of instilling a culture of federal spending
transparency. One representative said, for example, that because
information is posted on Recovery.gov, state officials know that if
they do not follow the guidance, they will end up in the spotlight,
which results in more incentive for the states to use the funds
properly and to follow the rules. Representatives from a transparency
organization commented that Recovery.gov signifies a paradigm shift by
moving to subrecipient reporting, which they felt could help blaze a
federal spending reporting trail. Data users noted that it is a
positive development to have quarterly data showing where federal
funds are flowing, adding that the ability to download and manipulate
the data is very important. Another representative characterized
Recovery.gov as a good effort with an impressive amount of data.
While the consensus among the representatives was that the federal
government has taken an important step toward creating a culture of
openness in government spending, they expressed concerns about the
quality of data reported on Recovery.gov. Many of their concerns
revolved around the FTE calculation. One representative, for example,
felt that the FTE measure adds to a sense of confusion about the
amount of real employment activity stimulated by the Recovery Act
because it represents only a subset of employment, while another
pointed out that the emphasis on job creation or retention has
overshadowed other impacts and goals of the Recovery Act. Additional
examples of concerns regarding data quality included the capacity of
recipients to report correctly, difficulty with determining the flow
of awarded funding through state capitals or state agencies down to
the local level, and the difficulty using the data across quarters
because of the FTE calculations. Several also noted that agency
reported data does not always match Recovery.gov.
While noting that the data quality of Recovery.gov has shown
significant improvement since the first submission of recipient
reports, the representatives had several suggestions for improving the
quality of the recipient reporting data. Several said county level
data would be more valuable than tracking by congressional district,
since a large share of federal statistical data is available at the
county level, which is a more stable area over decades for long-term
comparison. Another suggestion included moving to biannual reporting
rather than quarterly reporting, reasoning that less frequent reports
with improved data would be more helpful than more frequent reports
with questionable data quality. In addition, several representatives
suggested that giving the states more time to compile and submit the
data would enhance the quality of the recipient reported data.
Representatives we interviewed had varying opinions regarding the
Recovery.gov Web site. For example, while some we interviewed liked
the geographically displayed data, several representatives suggested
that Recovery.gov has too much data displayed in a way that the
general public cannot use. Conversely, researchers using the data
remarked that the data were not complete or were not arrayed in a way
that was particularly useful for their purposes, requiring researchers
to draw from other sources to supplement Recovery.gov. For example,
one representative said that her organization combined Recovery.gov
data with USAspending.gov data to get a more complete picture of
Recovery Act funding. Transparency group representatives said that the
public should have a full picture of every entity that has benefited
from the Recovery Act. In their opinion, without complete multitier
reporting, the public will not know the identity of a large number of
Recovery Act recipients.
The April 6, 2010, OMB directive on federal spending transparency
noted that a clear lesson from the federal government's experience
with the Recovery.gov Web site is that, given the numerous
stakeholders involved in the federal spending process and the
complexity of underlying systems, all efforts to improve transparency
must include thoughtful consideration of the costs and benefits of
various implementation approaches. The directive concluded that this
consideration should be guided by a long-range vision of how optimal
transparency will be achieved.
Recommendations for Executive Action:
To ensure that FTEs are properly accounted for over time, we recommend
that the Secretary of the Department of Education clarify how LEAs and
IHEs should report FTEs when additional Recovery Act funds are
received in a school year and are reallocated to cover costs incurred
in previous quarters, particularly when the definite term methodology
is used.
To ensure that subrecipients do not underreport vendor FTEs directly
paid with Recovery Act funds, we recommend that the Secretary of the
Department of Education re-emphasize the responsibility of
subrecipients to include hours worked by vendors in their quarterly
FTE calculations to the maximum extent practicable.
To improve consistency in how FTEs generated using the definite term
are calculated, we recommend that the Secretary of the Department of
Education and the Director of OMB clarify whether IHE and LEA
officials using this methodology should include the cost of benefits
in their calculations.
To ensure housing agencies use the correct jobs calculation, we
recommend that the Secretary of Housing and Urban Development clearly
emphasize to housing agencies that they discontinue use of the
outdated jobs calculator provided by HUD in the first round of
recipient reporting.
To help clarify the recipient reporting responsibilities of housing
agencies and to improve the consistency and completeness of jobs data
reported by housing agencies, we recommend that the Secretary of
Housing and Urban Development issue guidance that explains when FTEs
attributable to subcontractors should be reported by the prime
recipient.
Agency Comments and Our Evaluation:
We provided a draft of this section to Education, HUD, and OMB for
review and comment. Education had technical comments, which we
addressed. In a response from HUD's Director, Office of Capital
Improvements, HUD generally concurred with our recommendation to
clearly emphasize to housing agencies that they discontinue use of the
outdated jobs calculator. While HUD officials believe that they
provided ample notification to ensure the current jobs calculator was
employed, we found that 2 of the 16 housing agencies we visited
continued to use the outdated version of HUD's jobs-counting
calculator. In response to our draft, HUD noted they plan to emphasize
this instruction and will reconfirm the message in a separate e-mail
message to grantees specific to using the correct job calculator
before the next reporting cycle.
Regarding our recommendation to issue guidance explaining when FTEs
attributable to subcontractors should be reported by the prime
recipient, HUD provided additional details regarding OMB's and HUD's
guidance and noted OMB requires federal agency guidance to be
consistent with guidance released by OMB. Specifically, HUD officials
said that OMB guidance demonstrates that the prime recipient is not
responsible for reporting "subvendors" of vendors, and they noted that
HUD's guidance explains that Public Housing Capital Fund prime
recipients only have vendors. However, OMB's guidance states that jobs
information should be collected to the maximum extent possible. We
believe OMB's definition of vendor could be interpreted to apply to
both contractors and subcontractors. In fact, we reported that some
housing agencies included information on hours worked by
subcontractors on Recovery Act funded projects in the FTE calculation,
while at least one did not. Because prime recipients are interpreting
the guidance in different ways, we continue to believe that further
guidance from HUD is needed on whether and when subcontractors should
be included in their FTE calculations in order to have consistent and
complete jobs data.
OMB provided comments, which we incorporated as appropriate. OMB
stated that they and the Board continue to work with program agencies
to improve data quality and ensure that reports are properly
identified and linked to prime recipients. OMB generally agreed with
our recommendations related to Education programs and will consider
providing guidance or address the issues in the frequently asked
questions posted to its Recovery Act guidance Web site. Regarding our
recommendations to HUD, OMB said that it will review the FTE
calculator issue and noted that there is a frequently asked question
about the difference between recipients and vendors on its guidance
Web site. We found, however, that housing authorities are not
implementing this guidance consistently, which we believe calls for
further clarification.
Oversight and Accountability Efforts Continue:
OMB Made Progress in Implementing Several GAO Recommendations, but
Further Efforts for Improving the Single Audit Process Are Needed:
In response to several of our previous recommendations regarding
earlier communication of audit deficiencies, OMB implemented a Single
Audit Internal Control Project (project) in October 2009. As of May
14, 2010, the project was nearing its completion. The project has been
a collaborative effort between volunteer states receiving Recovery Act
funds, their auditors, and the federal government. One of the
project's goals was to achieve more timely communication of internal
control deficiencies for higher-risk Recovery Act programs so that
corrective action can be taken more quickly. GAO assessed the results
of the project and found that it met several of its objectives and
that the project was helpful in identifying critical areas where
further OMB actions are needed to improve the Single Audit process
over Recovery Act funding. As of May 14, 2010, OMB had not yet
completed its evaluation of the project or committed to a timeframe
for communicating its next steps.
In addition, the project required that federal awarding agencies issue
management decisions by April 30, 2010 to the cognizant agency for
audit regarding the corrective action plans developed by auditee
management. The Department of Health and Human Services (HHS) is the
cognizant agency for audit for the 16 states participating in the
project.[Footnote 220] By April 30, 2010, the HHS Office of Inspector
General (OIG)--responsible for carrying out some of the cognizant
duties for HHS--had received only three management decisions from two
federal awarding agencies. By May 14, 2010, after follow-up with the
agencies, the HHS OIG had received five additional management
decisions from another agency. Thus, only three of the seven federal
agencies had submitted some management decisions by May 14, 2010. The
HHS OIG official responsible for receiving these management decisions
stated that this amount represented a relatively small number of the
management decisions that are due for the project. We also found that
OMB's Single Audit guidance needs to be more timely. OMB issued its
2009 guidance for Single Audits in May and August 2009, after the
Single Audits for entities with a June 30, 2009, fiscal year-end were
already under way. Moreover, we surveyed the state auditors who
participated in the project and they said that OMB's guidance for the
project was issued too late, which caused inefficiencies and
disruptions in the planning of audit procedures.
OMB has fully implemented four and partially implemented three of the
recommendations that we made for improving the Single Audit process.
We discuss the implemented recommendations elsewhere in this report.
The partially implemented recommendations are for the Director of OMB
to (1) explore various options to provide auditors with additional
flexibility needed to select smaller programs that are considered high
risk, (2) take additional efforts to provide more timely reporting on
internal controls for Recovery Act programs for 2010 and beyond, and
(3) evaluate options for providing relief relating to audit
requirements for low-risk programs to balance new audit
responsibilities associated with the Recovery Act. In addition, we are
making two new recommendations in this report. Specifically, we
recommend that OMB issue its Single Audit guidance, such as its OMB
Circular No. A-133 Audits of States, Local Governments, and Non-Profit
Organizations Compliance Supplement, in a timely manner so that
auditors can efficiently plan their audit work. We also recommend that
OMB explore alternatives to help ensure that the federal awarding
agencies provide their management decisions on the auditees'
corrective action plans in a timely manner.
To perform our audit work, we reviewed the project's guidelines,
official reports, and other documents, as well as interviewed state
and federal officials. We also conducted a survey of the state
auditors and state program and finance officials that participated in
the project. We analyzed and summarized the responses to our survey.
We conducted our surveys in March 2010 and interviewed several state
auditors, the cognizant agency for audit (HHS), and officials from
awarding federal agencies whose programs were selected for audit under
the project. We also participated in an OMB-led discussion of the
project's participants to obtain their views on the project.
OMB's Single Audit Project Met Some of Its Original Objectives but
Highlights Areas Needing Further Attention:
We assessed the results of the project and found that the project met
its original objectives of (1) achieving more than 10 volunteer states
participating in the project, (2) having the participating auditors
issue interim internal control reports for the selected programs at
least 3 months earlier, and (3) having auditee management issue
corrective action plans to resolve audit deficiencies at least 2
months earlier than required by OMB Circular No. A-133. The project
also increased the level of awareness by the auditors of some of the
risks associated with Recovery Act funds and, in some cases, increased
the communication and interaction between the auditors, program
officials, and the cognizant agency for audit concerning audit
deficiencies related to Recovery Act funds. For example, many of the
auditors who responded to our survey stated that the project increased
awareness of internal control deficiencies and focused attention on
the need for federal agencies to be more involved in pursuing
corrective actions to develop more timely corrective action plans for
internal control deficiencies related to programs receiving Recovery
Act funding. Thirteen of the 16 auditors for the states participating
in the project stated that risk factors relating specifically to
Recovery Act programs affected the planning of their audits.
The project exceeded OMB's objective of obtaining at least 10 states
to volunteer as participants. The following 16 states elected to
participate: Alaska, California, Colorado, Florida, Georgia,
Louisiana, Maine, Missouri, Nevada, North Carolina, Ohio, Oklahoma,
South Dakota, Tennessee, Texas, and Virginia. OMB has stated that by
participating in the project, the auditors and auditees are
demonstrating to Congress and the general public their deep interest
in safeguarding the Recovery Act funds against fraud, waste, and
abuse. The characteristics of the participating states varied and
included states with population and geographic diversity, as well as
states that use auditors within state government, external auditors,
or both to conduct Single Audits. OMB designed the project to be
voluntary and OMB officials stated that, overall, they were satisfied
with the population and geographic diversity among the states that
volunteered. Although the project's coverage could be more
comprehensive to provide greater assurance over Recovery Act funding,
we believe that the results of the project could provide meaningful
insight for making improvements to the Single Audit process.
The project also met its goal for auditors to identify and communicate
significant deficiencies and material weaknesses in internal control
over compliance for selected major Recovery Act programs 3 months
sooner than the 9-month time frame currently required under statute.
For the 16 states participating in the project, 15 states had June 30
fiscal year-ends, and one state had an August 31 fiscal year-end. All
states that reported internal control findings provided the results
within 6 months of their fiscal year end. Auditors for 2 states
reported that while they performed interim procedures as required,
they did not identify any significant deficiencies or material
weaknesses and, therefore, did not issue written reports. Thirteen
states' internal controls reports identified and reported over 70
internal control deficiencies, although some of the deficiencies were
identified as repeat findings from prior year audit reports. Seven of
the 16 auditors that participated in the project responded that early
reporting of control weaknesses allowed program managers to begin
formulating corrective action plans earlier.[Footnote 221] Moreover,
under the project's guidelines, all corrective action plans were
completed 2 months earlier than the time frames under OMB Circular No.
A-133. The project also met its goal for corrective action plans for
audit deficiencies to be provided to the cognizant federal agency. Of
the 14 states with internal control findings, 11 submitted their
corrective action plans concurrently with the internal control reports
and 3 submitted them separately but within the project's required time
frame. Figure 34 compares OMB Circular No. A-133 Single Audits and
OMB's Single Audit Internal Control Project timelines for June 30
fiscal year-ends.
Figure 34: Comparison of OMB Circular A-133 Single Audits and OMB's
Single Audit Internal Control Project Timelines for June 30 Fiscal
Year-Ends:
[Refer to PDF for image: illustrated timeline]
Circular A-133 Single Audit:
5/26/09: Compliance supplement issued.
6/30/09: Auditee’s fiscal year end.
8/6/09: Compliance supplement addendum #1 issued.
3/31/10: Single Audit reporting package due.
9/30/10: Federal awarding agencies management decisions due.
OMB Single Audit Project:
10/16/09: OMB project began; 16 states volunteered to participate.
12/31/09: Interim internal control reports due.
1/31/10: Corrective action plans due.
4/30/10: Federal awarding agencies management decisions due.
Single Audit reporting package includes audited financial statements,
reports on internal controls, corrective action plans, and other
schedules according to OMB Circular A-133 guidance.
Audited interim internal control reports for the selected Recovery Act
programs according to project guidance.
Corrective Action Plan to address each audit finding identified in the
auditor’s reports.
Source: GAO.
[End of figure]
The earlier reporting of audit deficiencies and the earlier
implementation of actions to correct these deficiencies were
beneficial in helping to mitigate risks associated with Recovery Act
programs, according to several survey participants. Seven of the 16
participating auditors surveyed responded that early reporting of
internal control deficiencies allowed program managers to begin
formulating corrective action plans earlier. Moreover, about one-third
of program managers (10), whose programs were selected for
participation in the project, responded that it was helpful to receive
an audit report of internal controls deficiencies earlier rather than
after completion of the Single Audit, which is usually 9 months after
the fiscal year-end.
The auditor's internal control report for one state resulted in
corrective actions being taken prior to December 31, 2009--3 months
earlier than would be possible if the state agency had waited for the
Single Audit report to be issued by March 31, 2010. The auditor
reported as of November 30, 2009, that the lack of cash management
procedures in place for minimizing the time between receipt and
disbursement of federal funds affected this state's Recovery Act funds
for the State Fiscal Stabilization Fund (SFSF) Cluster. According to
the internal control report, of the $64.6 million in federal drawdowns
recorded for fiscal year ending June 30, 2009, the state spent $33.4
million within 8 to 14 business days after the drawdown. However, the
remaining $31.2 million was returned to the federal government 19
business days after the drawdown as it was not required to meet
immediate cash needs. To ensure compliance with cash management
procedures in the future, the state agency implemented nine corrective
action procedures to address this condition.
The auditor for another state reported, as of December 1, 2009, that
one of the state boards receiving Recovery Act funding had not
previously received federal funds and, therefore, did not have
detailed processes and policies for disbursing and managing federal
funds. In its internal control report, the auditor stated that, based
on its findings, the lack of grant management processes for this board
posed a significant risk to the state government and could result in
severe penalties for noncompliance with federal laws. The auditor also
noted that during fiscal year 2010, this state board will be receiving
more Recovery Act funds for an additional program. In its corrective
action plan included with the auditor's report, state board management
described the corrective actions it had already taken as of the date
of the auditor's report and those additional steps it planned to take
to correct the reported deficiencies.
The Project Highlighted Areas Where Improvements in the Single Audit
Process Are Needed:
OMB's project also highlighted areas where efforts are needed for
improving the Single Audit process over Recovery Act funding. Our
assessment of the project's results indicated that, as of April 30,
2010, most federal awarding agencies had not provided their management
decisions on the states' corrective action plans as required under the
project's guidelines. Generally, the project did not provide the
intended audit relief to the auditors as indicated in its guidelines
primarily because OMB started the project in mid-October 2009, when
most audits were nearing their completion. Thus, most auditors had
already completed the work for which the project's guidelines were
intended to provide relief. Finally, 14 of the 16 auditors we surveyed
responded that OMB needs to be more timely in providing guidance both
for the project and overall for Single Audits of Recovery Act programs.
With regard to the federal awarding agencies management decisions, the
project's guidelines called for the federal awarding agencies to (1)
perform a risk assessment of the audit deficiencies to identify the
ones with the greatest risk to Recovery Act funding and (2) identify
corrective actions taken or planned by the auditee by April 30, 2010.
OMB guidance called for this information to be included in a
management decision that the federal agency would issue to the
auditee's management, auditor, and the cognizant agency for audit.
Several of the state auditors and state program officials we surveyed
indicated the need for more timely communication with the federal
awarding agencies. The internal control reports for the project
contained findings for a total of 24 Recovery Act programs awarded by
seven federal agencies. The project's guidelines required that the
federal agencies issue a management decision as promptly as possible
and no later than 90 days after the date the corrective action plan is
received by the cognizant agency for audit.
By April 30, 2010, the HHS OIG had received only three management
decisions from two federal awarding agencies. By May 14, 2010, after
follow-up with the agencies, the HHS OIG had received five additional
management decisions from another agency. Only three of the seven
federal agencies had submitted some management decisions by May 14,
2010 and thus, most management decisions were not received. The
issuance of timely management decisions by federal agencies is
important because in many cases it can affect the timeliness of the
auditees' implementation of its corrective action plan relating to
Recovery Act funds. According to the HHS OIG official, auditees
sometimes wait until they receive a management decision before taking
corrective action on audit deficiencies. On March 22, 2010, OMB issued
memorandum M-10-14, Updated Guidance on the American Recovery and
Reinvestment Act, which among other things, instructs federal agencies
to take immediate action as appropriate to review and act on Single
Audit findings. However, further efforts by OMB are needed to help
ensure that federal agencies provide their management decisions on the
corrective action plans in a timely manner.
The project's guidelines included incentives to provide the
participating auditors with some relief in their workload as an
incentive for participating in the project. The relief included that
under the project's guidelines, auditors were not required to perform
risk assessments of smaller federal programs and OMB modified the
requirements under Circular No. A-133 to reduce the number of low-risk
programs that must be included in some project participants' Single
Audits. However, since OMB started the project in mid-October 2009 and
the auditors were to complete their internal control work as of
November 30, 2009, and report audit deficiencies by December 31, 2009,
most of the auditors had already completed the risk assessments by the
time the project had started. Thus, these auditors did not experience
audit relief as provided for by the project. The majority of the
auditors we surveyed (11 of the 16) stated that they experienced no
audit relief as provided for under the project.
The project also highlighted the need for OMB to issue its Single
Audit guidance in a more timely manner. For example, 12 of the 14
state auditors responded that guidance for any future OMB projects
would need to be more timely. In addition, more than half of the
auditors that responded to our survey indicated that they had concerns
with timeliness issues relating to the release of the 2009 Compliance
Supplement. Several of these auditors stated that they needed the
information as early as February, or at least by April, to effectively
plan their work. OMB officials told us that they plan to issue the
2010 Compliance Supplement in late May 2010. In addition, OMB
officials have stated that they planned to evaluate the results of the
project and, based upon the results, take measures to improve the
Single Audit process over Recovery Act funds. As of May 14, 2010, OMB
had not yet completed its evaluation of the project or committed to a
time frame for communicating its next steps.
Open and New Recommendations to Improve the Single Audit Process for
Recovery Act Programs:
OMB has fully implemented four recommendations, which we discuss
elsewhere in this report. In addition, OMB has partially implemented
three of the recommendations that we made for improving the Single
Audit process. We are also making two new recommendations to OMB for
improving the Single Audit process for Recovery Act funds.
OMB Has Partially Implemented Three of Our Prior Recommendations:
Explore various options to provide auditors with additional
flexibility needed to select programs that are considered high risk:
We have been concerned that smaller Recovery Act programs might not be
selected for audit under the Single Audit guidance, which relies
heavily on the amount of federal expenditures in a fiscal year and
whether findings were reported in previous years to determine whether
detailed compliance testing is required for a given program. Under
this approach, smaller programs with high risk would not likely
receive adequate audit coverage. Since the Recovery Act was enacted in
February 2009, it was anticipated that while some Recovery Act funds
would be expended in fiscal year 2009, the majority of Recovery Act
expenditures would occur in fiscal years 2010 and beyond. Therefore,
we recommended that OMB provide more direct focus on Recovery Act
programs through the Single Audit to help ensure that smaller, higher-
risk programs receive audit coverage in the area of internal controls
and compliance.
To address this recommendation, OMB provided guidance in the 2009 OMB
Circular No. A-133 Compliance Supplement that required auditors to
consider all federal programs with expenditures of Recovery Act awards
to be considered higher-risk programs when performing the standard
risk-based tests for selection of programs to be audited. OMB also
issued clarifying information on determining risk for programs with
Recovery Act expenditures. However, because much of the funding for
Recovery Act programs will be expended in 2010 and beyond, we remain
concerned that some smaller programs with high risk would not likely
receive adequate audit coverage due to the lower amount of federal
funds expended. As a result, we continue to recommend that OMB explore
various options to provide auditors with additional flexibility needed
to select smaller programs that are considered high risk, even though
the amount of federal expenditures may be less for those programs than
other federal programs.
Additional efforts are needed to provide more timely reporting on
internal controls for Recovery Act programs for 2010 and beyond: In
making this recommendation, we were concerned that significant
expenditures of Recovery Act funds would be made before internal
controls could be strengthened prior to the expenditure of the
majority of Recovery Act funds. OMB encouraged earlier reporting by
auditors of identified control deficiencies related to Recovery Act
funding in its 2009 Compliance Supplement Addendum #1 but did not add
requirements for auditors to take these actions. To encourage earlier
reporting by auditors, OMB implemented its Single Audit Internal
Control Project, which called for auditors to issue their internal
control reports 3 months earlier than required under OMB Circular No.
A-133. The project resulted in more timely identification and
reporting of audit deficiencies for certain Recovery Act programs;
however, the overall scope of the project was limited. As of May 14,
2010, OMB had not communicated how the project's results may affect
future Single Audits of Recovery Act programs. Therefore, we continue
to recommend that OMB take additional efforts to provide more timely
reporting on internal control for Recovery Act programs for 2010 and
beyond--years when considerable amounts of Recovery Act funds will be
expended.
Evaluate options for providing relief related to audit requirements
for low-risk programs: We previously reported in 2009 that the Single
Audit process could be adjusted to provide some relief on current
audit requirements for low-risk programs to offset the additional
workload demands associated with Recovery Act funds. Toward that end,
OMB implemented the Single Audit Internal Control Project, which
offered a relief option to participating auditors. Specifically,
participating auditors were not required to perform risk assessments
of smaller federal programs. Auditors conduct these risk assessments
to identify which federal programs will be subject to internal control
and compliance testing. OMB also modified the requirements under OMB
Circular No. A-133 to reduce the number of low-risk programs to be
included by the states participating in the project. However, because
the participants started the project in October 2009, the relief was
not experienced as intended, since most audits were nearing their
completion. Moreover, most auditors stated that this option was not
helpful because the project was started in October 2009, well after
their audit work was under way. Therefore, we continue to recommend
that OMB evaluate options for providing relief related to audit
requirements for low-risk programs to balance new responsibilities
associated with the Recovery Act.
New Recommendations to OMB:
We recommend that the Director of OMB (1) issue Single Audit guidance
in a timely manner so that auditors can efficiently plan their audit
work, and (2) explore alternatives to help ensure that federal
awarding agencies provide their management decisions on the corrective
action plans in a timely manner.
Fraud, Waste, and Abuse Allegations GAO Has Received That Are Related
to the Recovery Act:
As of April 21, 2010, we have received 202 allegations of Recovery Act
wrongdoing from the public. We have closed 137 of these cases because
the allegations were nonspecific or lacked information about fraud,
waste, or abuse. Another 34 were investigated further and closed by us
or the appropriate agency inspector general (IG) when no violations
were found. Of those allegations that are open and currently under
investigation, 11 are being handled by us and 20 by an IG. We
generally refer allegations to an IG when that office is already
pursuing the same or a similar complaint. We periodically contact the
IGs to determine the status of our referrals. We will continue to
evaluate all Recovery Act allegations received through FraudNet and
provide updates in future reports.
Recovery Accountability and Transparency Board Initiatives:
The Recovery Accountability and Transparency Board (the Board)
continues to take steps to identify and report on potential areas of
risk to fraud, waste, and mismanagement of Recovery Act funds. The
Board recently published two reports identifying concerns with the
potential impact of Recovery Act workloads on the federal contracting
and grants workforces and on recipient reporting data quality. In
addition, the Board has a variety of ongoing and new initiatives for
detecting potential instances of risk in Recovery Act contracting that
have identified a number of potential instances that the Board has
turned over to the appropriate inspectors general for further review.
The Board continues to organize coordinated reviews performed by its
inspectors general working group aimed at further assessments of the
management and oversight of Recovery Act spending. As many of the
Board's initiatives and its recommendations are not yet fully
implemented, we will continue to monitor the Board's progress and the
effectiveness of its efforts.
Board Reports:
In March 2010, the Board reported on the results of a survey that the
inspectors general administered to their respective agencies in August
2009 to assess their overall workforce capacity for handling the
management and oversight of contracts and grants being awarded with
Recovery Act funds.[Footnote 222] The 26 responding federal agencies
reported that the workload from the Recovery Act has put a strain on a
significant portion of their contract and grants workforces.
Specifically, 47 percent of the 317 responding contracting groups
reported that they have sufficient staff to accomplish the Recovery
Act work but are experiencing impacts on their non-Recovery Act work,
and 25 percent indicated that their staffing is not sufficient for the
Recovery Act work. In addition, 56 percent of the 225 responding
grants groups reported that they have sufficient staff to accomplish
the Recovery Act work but are experiencing impacts on their non-
Recovery Act work, and 28 percent indicated that their staffing is not
sufficient for the Recovery Act work.
The federal agencies reported that the Recovery Act workload has
resulted in non-Recovery Act work being delayed and an increase in
staff hours needed to complete their work. Furthermore, they expect a
significant impact on non-Recovery Act work, including decreases in
postaward monitoring of awards. In response to its findings, the Board
recommended that agencies continue to closely monitor their staffing
of both Recovery Act and non-Recovery Act work to ensure that all
contracts and grants are properly awarded and monitored. Currently,
the Board does not have any additional work planned related to these
workforce capacity issues.
In February 2010, the Board reported on the results of the second of
three phases of its inspectors general working group's review of
actions taken by agencies, the Office of Management and Budget, and
the Board to improve the quality of data that recipients of Recovery
Act funds are providing for posting to the public Web site.[Footnote
223] The Board concluded that the actions taken to date and the high
level of cooperation among the stakeholders should improve the quality
of recipient reported data but that further actions are needed.
Board Initiatives:
The Board continues to use a variety of initiatives to monitor
Recovery Act spending in an effort to identify potential areas at risk
to fraud, waste, and abuse. The Board's current oversight initiatives--
both ongoing and new--and their initial results include the following:
* reviewing contracts awarded to small businesses to determine if the
contractor still qualifies as a small business. If an issue is
discovered related to an individual contract, the Board refers the
matter to the agency or its inspector general for resolution. The
method of resolving the issue depends on the situation; however, a
Board representative noted that in one instance where the contractor
no longer qualified as a small business, the agency rescinded the
contract.
* maintaining a Fraud Hotline, which receives complaints of potential
fraud, waste, and abuse from the public, and referring potential cases
to the respective inspector general for further review. As of March
31, 2010, the Board had received 1,446 complaints and had referred 107
leads to various inspectors general.[Footnote 224] To date, 8 of these
leads have resulted in opening an investigation.
* performing data analyses on publicly available information about
Recovery Act recipients. The Board continues to modify its analytical
efforts to provide insights on potential risk areas for the oversight
community. Since the Board established its center for such analyses in
October 2009, 16 leads were generated from these analyses, which were
referred to the respective inspector general for review. To date, 2 of
these leads have resulted in opening an investigation. In addition,
the Board has assisted a number of federal agencies and states by
performing data analyses on specific topics.
* reviewing data in the Federal Audit Clearinghouse related to
findings reported in state Single Audits regarding businesses and
states identified as having poor internal controls or receiving other
than clean opinions on their financial statements. As a result of its
review to date, the Board has issued three letters to federal entities
alerting them to potential issues. Two of the letters were sent to the
U.S. Departments of Justice and Energy regarding concerns with one
entity's internal controls that warrants evaluation with respect to
Recovery Act funds that it may be receiving. The third letter was sent
to the Office of Management and Budget discussing concerns about
oversight of states that have received qualified, adverse, or
disclaimer opinions related to major federal programs.
Board Coordination and Monitoring of Inspectors General Initiatives:
The Board continues to coordinate audits carried out by the inspectors
general working group and monitor the independent efforts of the
inspectors general related to the Recovery Act. The inspectors general
working group currently has two audits under way related to assessing
the accuracy of recipient reporting data. The first is the third
review of the effectiveness of agencies' data quality review processes
for recipient reporting. The majority of the work is completed, and
the results of the review are expected to be issued in June 2010. The
second is reviewing the accuracy of selected fields of recipient
reporting data. The work is expected to be completed by the end of
July 2010 and a report issued in September 2010.
The Board continues to review monthly reports submitted by the
inspectors general on the number and status of Recovery Act-related
audits and investigations each has initiated. As of March 31, 2010,
the inspectors general reported they have 245 active investigations,
87 investigations closed without action, and 448 audits, inspections,
evaluations, or reviews in process. The inspectors general also
reported they have completed 510 work products on Recovery Act-related
issues since the act was passed--362 of which are published on
Recovery.gov and 148 are not publicly available since they contain
proprietary or sensitive information.[Footnote 225] In addition, the
inspectors general reported that they have conducted 1,724 training
and outreach sessions related to Recovery Act issues. Recently, the
Board asked the inspectors general to report to the Board on the
number of complaints received directly by their offices. As of March
31, 2010, the inspectors general have received 1,029 complaints
related to the Recovery Act.
Presidential Recovery Act Advisory Panel:
The President of the United States appointed an Advisory Panel in
March 2010 that is expected to recommend additional ways to detect and
prevent fraud, waste, and abuse in Recovery Act programs. The
backgrounds of the panel members include financial services, fraud
expertise, public and private sector management, and statistics and
data visualization. The Advisory Panel held its first planning meeting
in April 2010. It plans to hold a second planning meeting in June 2010
and its first public meeting in August 2010.
Audit Activities Involving Recovery Act Funds Are Under Way at the
State and Local Levels:
There are a wide variety of entities across all of the states and the
District of Columbia that are involved in oversight and audit of
Recovery Act programs in addition to audit and oversight work
conducted by us and the federal inspector general community. Many of
our 16 selected states and the District established task forces or
created new entities with oversight responsibility for Recovery Act
funds. For instance, Arizona, California, Colorado, Georgia, Iowa,
Massachusetts, Michigan, New Jersey, New York, North Carolina,
Pennsylvania, and Texas created new offices, positions or task forces,
in part, to ensure that their state complied with certain Recovery Act
requirements, including reporting on Recovery Act expenditures. In
addition, state agency internal auditors and state inspectors general
have been actively involved in monitoring and oversight of Recovery
Act funds in a number of states.
Audits of Recovery Act funds are generally conducted through the state
Single Audit process. This is not surprising, since Recovery Act funds
comprise a portion of federal funds going to these jurisdictions and
the Single Audit is a long standing well established accountability
mechanism for overseeing federal funds at the state and local levels.
Given recent budgeting challenges, both state and local governments
have reduced staffing levels, and audit organizations have not been
spared from budget reductions. For instance, several state and local
jurisdictions reported that resource constraints have limited their
capacity to perform audits involving Recovery Act funds.
Recently completed 2009 Single Audits, which for many of our selected
states ended on June 30, 2009, covered only a portion of Recovery Act
program funds since a greater portion of Recovery Act funds will be
expended during fiscal years 2010 and 2011.[Footnote 226] In addition,
Single Audit results are typically published nine months after the end
of the fiscal year, therefore, many of our selected states have only
recently released or plan to release their Single Audit for the state
fiscal year 2009. Finally, some states are just beginning work on
Single Audits for state fiscal year 2010 which will include reviews of
Recovery Act program funds.
Through either the Single Audit process or other practices, states and
localities have completed or plan to complete audits of Recovery Act
funds in areas such as cash management, internal controls, and civil
rights compliance. In addition, these audits have spanned many
programs including weatherization, education, transportation, and
health care (as mentioned in previous sections of this report). In
some cases, state and local auditors have pursued audits for programs
funded by the Recovery Act that they deemed as at higher risk for
mismanagement of funds. For example, the weatherization program was
targeted in many state audits, because this program saw a large
increase in federal funding through the Recovery Act. In previous
years, the weatherization program had not been subject to the Single
Audit process in many of our selected states since this program had
not received funding levels over the threshold for Single Audit
inclusion. Also, some states chose to target audits toward programs
with a history of inadequate internal controls or mismanagement.
There are many examples of audit results from the audit community in
our selected states and localities. For example:
* The California State Auditor reported that delays in meeting
performance targets by California's Department of Community Services
and Development (CSD) could jeopardize timely access to $93 million in
remaining Recovery Act weatherization funds. In its response to the
report, CSD stated that it plans to meet DOE's performance milestones
by redirecting funds from areas without service providers to providers
with the capacity to weatherize more homes. CSD also outlined steps it
is taking to provide weatherization services to unserviced areas where
it is either seeking a new service provider or withholding funds.
* The Colorado Office of the State Auditor reported significant
deficiencies with the internal controls over the Colorado Child Care
Assistance Program, including errors found on the form used to report
fiscal year expenditures of federal awards. The report stated that
errors occurred because the Colorado Department of Human Services
(CDHS) does not have adequate written procedures and lacks supervisory
review and adequate training for completing the expenditure reports.
CDHS agreed with the recommendations in the report.
* The Georgia State Auditor reported on three significant deficiencies
and one material weakness at the Georgia Department of Transportation.
One of the significant deficiencies identified in their report was in
the control category of cash management. The State Auditor noted that
failure to have adequate cash management policies and procedures in
place could result in noncompliance with federal regulations and may
affect the proper recording of federal program revenues, causing
misstatements within the financial statements. The Georgia Department
of Transportation agreed with the findings and noted that it had
implemented changes to address them.
* The Mississippi Office of the State Auditor reported that the
Mississippi Department of Employment Security (MDES) did not record
$23,999,054 of Recovery Act funding for unemployment insurance on its
accounting records even though these funds were expended, thereby
understating both revenues and expenditures by this amount. In
addition, the agency did not report these funds on the Schedule of
Expenditures of Federal Awards.[Footnote 227] As a result of these
audit findings, MDES recorded these funds on its accounting records
and agreed to strengthen controls and improve supervisory review of
these funds while moving financial management responsibilities for the
Unemployment Insurance Trust Fund to the Office of the Comptroller.
* The Office of the State Auditor in New Jersey reported that
processes for determining eligibility for the state's weatherization
program were inadequate because of the lack of supporting
documentation for household income and size, as well as the lack of
social security numbers maintained by the weatherization agencies. As
a result, ineligible program applicants were determined to be eligible
and could receive weatherization services. According to the State
Auditor, the state agency responsible for administering this program
has taken steps to implement the audit report recommendations. The
recommendations included, among other things, requiring the inclusion
of social security numbers for applicants and all household members to
minimize the potential for fraud and program abuse, as well as
strengthen controls and edit checks in the software system used by
weatherization agencies.
* The Office of the New York State Comptroller (OSC) reported that
local governments followed sound procurement procedures when awarding
highway contracts with Recovery Act funds; however, OSC uncovered an
issue with vendor responsibility on a contract being let by the New
York State Department of Transportation (NYSDOT). In response, OSC did
not approve this contract and now requires more documentation of
vendor responsibility for all NYSDOT contracts over $100,000.
* The Ohio Auditor of State found that the Ohio Department of
Transportation (ODOT) did not have procedures in place to identify the
amount of Recovery Act funding disbursed to local governments who are
locally administering transportation projects. Without such
procedures, adequate transparency into the use of Recovery Act funding
at local levels may be impaired. In response to this audit finding,
ODOT has enhanced the department's Web-based construction project
management system to identify the portion of Recovery Act funds for
each disbursement when applicable, among other things.
* The Pennsylvania Bureau of Audits completed an audit of a Recovery
Act bridge project to determine if contractors were being paid
prevailing federal minimum wage rates, if monthly job reports were
submitted, and whether steel and iron products utilized on the project
were produced in the United States. This completed audit showed no
major findings.
* The Texas State Auditor's Office reviewed jobs and expenditure
reporting in two Texas Education Agency (TEA) programs, ESEA Title I
and IDEA and, although they found TEA had established an adequate
process to ensure required information on expenditures and job
creation was collected and reported by LEAs, two LEAs incorrectly
reported the number of jobs by 45 percent and 6 percent, respectively.
State and Local Governments' Use of Funds for Recovery Act Programs
Reflects Current Fiscal Challenges:
For this report, we continued our focus on the use of Recovery Act
funds at the local government level while also updating our review of
states' use of Recovery Act funds in current and future budget cycles.
As shown in figure 35, we visited 45 local governments in our 16
selected states to collect information regarding their use of Recovery
Act funds. Similar to the approach taken for our December 2009
report,[Footnote 228] we identified localities representing a range of
types of governments (cities and counties), population sizes, and
economic conditions (unemployment rates greater and less than the
state's overall unemployment rate). We balanced these criteria with
logistical considerations, including other scheduled Recovery Act
work, local contacts established during prior reviews, and the
geographic proximity of the local government entities. The 45
localities we visited ranged in population from 15,042 in Newton,
Iowa, to 8,363,710 in New York City. Unemployment rates in our
selected localities ranged from 5.8 percent in Flagstaff, Arizona, to
27 percent in Flint, Michigan.[Footnote 229]
Figure 35: Selected Local Governments Included in Our May 2010 Review:
[Refer to PDF for image: U.S. map]
Local Governments Included in Our May 2010 Review are depicted on the
map:
Albany, GA;
Allentown, PA;
Austin, TX;
Bladen County, NC;
Bergen County, NJ;
Boston, MA;
Burlington County, NJ;
Cape May County, NJ;
Cook County, IL;
Council Bluffs, IA;
Everett, MA;
Dallas, TX;
Dauphin County, PA;
Dekalb County, GA;
Des Moines, IA;
Flagstaff, AZ;
Flint, MI;
Fort Collins, CO;
Grand Junction, CO;
Greenwood, MS;
Halifax County, NC;
Hattiesburg, MS;
Houston, TX;
Jacksonville, NC;
Lansing, MI;
Los Angeles, CA;
Mesa, AZ;
Newark, NJ;
Newton, IA;
New York City, NY;
Orange County, FL;
Orlando, FL;
Philadelphia, PA;
Putnam County, OH;
Sacramento, CA;
San Diego, CA;
San Francisco, CA (city and county);
Savannah, GA;
Springfield, MA;
Toledo, OH;
Winnebago County, IL;
Westchester County, NY;
Worcester, MA;
York County, PA.
Sources: U.S. Census Bureau, U.S. Department of Labor, Bureau of Labor
Statistics, and Local Area Unemployment Statistics (data); MapInfo
(map).
[End of figure]
Local Governments Use Recovery Act Funds to Initiate Capital Projects,
Retain Jobs, Maintain Services, and Fund Programs While Budget
Challenges Persist:
Local officials reported their governments' use of Recovery Act funds
in a range of program areas such as public safety (COPS and JAG),
Energy Efficiency and Conservation Block Grants (EECBG), housing
(Homelessness Prevention and Rapid Re-Housing Program, or HPRP, and
the Community Development Block Grant program), transportation and
transit, workforce investment (WIA), human services (Community
Services Block Grant program), and education (SFSF).[Footnote 230]
Some examples of these programs appear in table 18.
Table 18: Selected Examples of Local Governments' Use of Recovery Act
Funds:
Recovery Act grant: Communities Putting Prevention to Work (CPPW);
Local government receiving funds: Cook County, IL;
Example of local use of funds: Cook County Department of Public Health
was awarded a $15.9 million CPPW grant for preventive services.
Recovery Act grant: Smart Grid Investment Grant;
Local government receiving funds: Fort Collins, CO;
Example of local use of funds: The City of Fort Collins has been
allocated $18.1 million for use under the Smart Grid Investment Grant
to integrate renewable energy sources into the electric grid. This
project is estimated to reduce the City's operating costs by $800,000
a year.
Recovery Act grant: Edward Byrne Memorial Justice Assistance Grant
(JAG);
Local government receiving funds: Los Angeles, CA;
Example of local use of funds: Los Angeles received more than $11
million in JAG Recovery Act funds to support gang reduction efforts
and develop communications infrastructure aimed at increasing response
capabilities of law enforcement and crisis personnel.
Recovery Act grant: Staffing for Adequate Fire and Emergency Response
Grants (SAFER);
Local government receiving funds: Flint, MI;
Example of local use of funds: Flint, Michigan, received $6.7 million
to train 39 firefighters.
Recovery Act grant: Transportation Investment Generating Economic
Recovery (TIGER);
Local government receiving funds: Dallas, TX;
Example of local use of funds: This $23 million competitive TIGER
grant from the U.S. Department of Transportation is to be used to
start work on a project for a proposed streetcar line in downtown
Dallas to improve connectivity between jobs and residents.
Source: GAO analysis of local governments' reported use of funds.
[End of table]
All local government officials reported that Recovery Act funds
allowed their governments to maintain services, retain staff
positions, or begin infrastructure and public works projects that
otherwise would have been delayed or canceled. For example, Lansing,
Michigan, reported using Recovery Act funds from the COPS grant to
continue funding public safety positions that would have been
eliminated without federal funding. Similarly, Toledo, Ohio, and
Winnebago County, Illinois, reported using Recovery Act funds from the
JAG program to fund the salaries and benefits of law enforcement
officials and correctional officers, respectively. With regard to
infrastructure and public works projects, Grand Junction, Colorado, is
using Recovery Act funds from the EECBG program to help construct a
compressed natural gas fueling station. In several cases, Recovery Act
funds were used as one-time investments in capital improvement
projects, thereby ensuring local governments did not create ongoing
funding commitments that could be difficult to sustain once Recovery
Act funds end. Officials in Council Bluffs, Iowa, said Recovery Act
funds helped them accelerate progress on some capital projects already
planned by the city.
In most cases, local government officials reported working in
partnership with other local entities, such as nonprofit
organizations, school entities, public housing authorities, transit
authorities, and other local jurisdictions to administer Recovery Act
funds. For example, officials in the Newark, New Jersey, Mayor's
office said the city and its community partners have received almost
$360 million in Recovery Act funds. Specifically, Newark reported
receiving $62 million, and its community partners reported receiving
$297 million.[Footnote 231] Officials in Allentown, Pennsylvania,
reported that the city contracted with nonprofit organizations in a
partnership to provide services under HPRP. Officials in the city of
San Francisco reported that they helped community partners, such as
the school district and housing authorities, apply for Recovery Act
funds.
Local government officials reported that they have experienced revenue
declines and budget gaps even after incorporating Recovery Act funds
in their budgets. Overall, officials we met with from four local
governments--Los Angeles, Sacramento, San Diego, and San Francisco--
reported that Recovery Act funds have helped to preserve services, but
they still need to address budget deficits for the remainder of fiscal
year 2010 and the next fiscal year. In Des Moines, Iowa, city
officials cited reductions in revenue from property taxes and other
sources, as well as increases in costs for health insurance and other
employee benefits, as examples of their current fiscal challenges.
Halifax County, North Carolina, officials stated that their fiscal
situation deteriorated as sales tax revenues declined more than
expected. Toledo, Ohio, city officials said that their fiscal
condition has declined as their budget deficit increased from $20
million in October to almost $50 million in January.
A few local governments reported declining fiscal conditions due to a
decrease in state aid. In Worcester, Massachusetts, city officials
noted a roughly 25 percent cut in state aid. Officials in Everett,
Massachusetts, also said there have been significant decreases in
revenues, including local aid from the state, but they have been
diligent about collecting the local taxes they are due. Flint,
Michigan, officials cited the decline in income tax revenue as well as
the decrease in state revenue-sharing. New York City officials also
anticipated cuts to state aid that may equal $1.3 billion. Westchester
County, New York, officials also reported cuts in state aid, as well
as lower tax revenues.
Officials in several localities reported that they are prepared for
the end of Recovery Act funding as a result of the nature of the funds
as one-time investments or temporary or non-recurring services. DeKalb
County, Georgia, officials used Recovery Act funds mostly for one-time
capital projects. Consequently, the county's strategy for winding down
their use will be to rely on prior capital funding sources. Newton,
Iowa, city officials stated that because the Recovery Act funds had
gone to one-time expenses for capital improvements they did not have a
strategy to address budgetary shortfalls once it uses available
Recovery Act funds. In Springfield, Massachusetts, city officials
stated that some of their Recovery Act funding had gone to one-time
purchases. Officials in a few localities said they would attempt to
continue funding Recovery Act programs using local government funds or
by pursuing other funds after the Recovery Act funding ends. Other
local officials said they would reduce funding to the levels in place
before the infusion of Recovery Act funds. A number of localities
stated they would eliminate Recovery Act-funded projects or reduce
staff for these programs after Recovery Act funds end.
States Close Budget Gaps by Using Recovery Act Funds to Provide
Services, Continuing Budget Actions, and Assuming that Congress Enacts
an Extension of the Increased Medicaid FMAP:
Officials in a few of our selected states and the District reported
that Recovery Act-funded programs helped them provide services while
closing current and anticipated budget shortfalls for fiscal years
2010 and 2011 as they continue to experience revenue declines. A few
states reported using Recovery Act funds for specific programs to
address their current fiscal year budgets and several states reported
addressing their current fiscal year budget gaps through corrective
budget actions. These actions included tax and fee increases, spending
reductions, layoffs, and use of reserve or rainy-day funds. For
example, in Florida, the legislature addressed a projected $6 billion
gap for the fiscal year 2010 state budget by raising fees by $1.1
billion, cutting spending by $231.2 million and by using $582 million
in reserves, among other actions. In Arizona, Recovery Act funds for
fiscal year 2010 totaled $1.3 billion, reducing the state's shortfall
to about $2 billion. The Arizona legislature met in several special
sessions and closed the shortfall in March 2010 by significantly
reducing spending, acquiring additional debt, and "sweeping" surpluses
from state funds. Some states, such as Florida, Iowa, Massachusetts,
Mississippi, and Pennsylvania, also reported tapping into their
reserve or rainy-day funds or reducing the amount expected to be drawn
down in order to balance their budgets. In contrast, the receipt of
Recovery Act funds helped Colorado and the District avoid tapping into
their reserve funds.
In addition to these budget actions, several states reported
accelerating their use of Recovery Act funds to stabilize
deteriorating budgets. For example, in Georgia, lower-than-expected
revenue caused the state to use more Recovery Act funds in fiscal year
2010 than it had anticipated using. In Colorado, state officials
reported accelerating the use of $5.5 million in SFSF allocations to
backfill an additional general fund reduction for higher education,
leaving fewer funds available to fill the budget gap for fiscal year
2011. Similarly, officials from New York said the state had to
accelerate the use of $391 million in SFSF funds to address the
midyear budget gap in fiscal year 2009-2010. In Massachusetts, state
officials reported that the state had hoped to leave a sizable amount
of its SFSF allocation available for 2011 but had to accelerate its
use of these funds because of its deteriorating fiscal condition.
Some of our selected states (California, Colorado, Iowa, Illinois,
Massachusetts, Michigan, Pennsylvania, New Jersey, and New York) and
the District assumed Congress will enact an extension of the increased
Medicaid FMAP in their proposed budgets. The impact on the states'
budgets of this assumption ranged from approximately $107 million to
more than $1 billion. These states' estimates of additional federal
fiscal relief are based on their expectation that Congress will extend
the temporary increase in the FMAP beyond the increase provided under
the Recovery Act.[Footnote 232]
States' approaches to preparing for the end of Recovery Act funding
vary, depending on budget gaps and governments' balanced-budget
requirements. Officials discussed a desire to avoid what they referred
to as the "cliff effect" associated with the dates when Recovery Act
funding ends for various federal programs. For example, in Michigan,
the Governor has proposed a series of cost reductions and
restructuring of the state's sales and use tax to fill an anticipated
gap. Officials in Georgia are also preparing for the cessation of
Recovery Act funds by continuing to reduce spending levels. The
District has prepared for the end of Recovery Act funding and is
required by law to prepare an annual balanced budget and multiyear
financial plan. As a result, District officials have accounted for the
future decrease in Recovery Act funds in planning budgets for fiscal
years 2011 to 2014. In anticipation of continuing revenue shortfalls
in Mississippi and the end of Recovery Act funding, the Governor has
proposed a number of steps to reduce spending and restructure how the
government operates as part of the fiscal year 2011 budget.
New and Open Recommendations; Matters for Congressional Consideration:
For this report, GAO both updates the status of agencies' efforts to
implement GAO's open 9 recommendations and makes 24 new
recommendations to the Departments of Education, Transportation (DOT),
Energy (DOE), Housing and Urban Development (HUD), Treasury, Labor,
and Health and Human Services, and to the Environmental Protection
Agency (EPA), and to the Office of Management and Budget
(OMB).[Footnote 233] Agency responses to our new recommendations are
included in the program sections of this report. Lastly, we update the
status of our Matters for Congressional Consideration and add an
additional Matter for Congressional Consideration.
Department of Transportation:
New Recommendations:
To better understand the impact of Recovery Act investments in
transportation, we believe that the Secretary of Transportation should
ensure that the results of these projects are assessed and a
determination made about whether these investments produced long-term
benefits. Specifically, in the near term, we recommend the Secretary
direct FHWA and FTA to determine the types of data and performance
measures they would need to assess the impact of the Recovery Act and
the specific authority they may need to collect data and report on
these measures.
To ensure that the public has accurate information regarding
economically distressed areas, we also recommend that the Secretary of
Transportation direct FHWA to issue guidance to the states advising
them to update information in the Recovery Act Data System to reflect
current DOT decisions concerning the special-need criteria. Projects
in areas currently lacking documentation that it meets the criteria to
be designated as economically distressed should be reported as a
project in a noneconomically distressed area.
Open Recommendation:
The Secretary of Transportation should gather timely information on
the progress they are making in meeting the maintenance-of-effort
requirement and to report preliminary information to Congress within
60 days of the certified period (September 30, 2010), (1) on whether
states met required program expenditures as outlined in their
maintenance-of-effort certifications, (2) the reasons that states did
not meet these certified levels, if applicable, and (3) lessons
learned from the process.
Agency Actions:
DOT concurred in part with our March 2010 recommendation that it
gather and report more timely information on the progress states are
making in meeting the maintenance-of-effort requirements. Because more
timely information could better inform policymakers' decisions on the
usefulness and effectiveness of the maintenance-of-effort requirements
and is important to assessing the impact of Recovery Act funding in
achieving its intended effect of increasing overall spending, we are
leaving this recommendation open and plan to continue to monitor DOT's
actions.
Department of Housing and Urban Development:
New Recommendation:
To ensure housing agencies use the correct job calculation, we
recommend that the Secretary of HUD clearly emphasize to housing
agencies that they discontinue use of the outdated jobs calculator
provided by HUD in the first round of recipient reporting.
New Recommendation:
To help clarify the recipient reporting responsibilities of housing
agencies and to improve the consistency and completeness of jobs data
reported by housing agencies, we recommend that the Secretary of HUD
issue guidance that explains when FTEs attributable to subcontractors
should be reported by the prime recipient.
Open Recommendation:
To help HUD achieve Recovery Act objectives and address challenges
with its continued administration of Recovery Act funds, we recommend
that the Secretary of HUD develop a management plan to determine the
adequate level of agency staff needed to administer both the Recovery
Act funds and the existing Capital Fund program going forward,
including identifying future resource needs and determining whether
current resources could be better utilized to administer these funds.
Agency Actions:
In response to our recommendation, HUD officials from the Office of
Capital Improvements and the Office of Field Operations are jointly
developing a management plan for implementing the Recovery Act that
will include an estimation of their resource needs for both Recovery
Act grants and the regular Capital Fund program. HUD officials have
completed a strategic plan for implementing the Recovery Act,
including resource needs, but are still working on the plan and
resource needs estimates for implementing the regular Capital Fund
program.
Department of Education:
New Recommendation:
To ensure that FTEs are properly accounted for over time, we recommend
that the Secretary of the Department of Education clarify how LEAs and
IHEs should report FTEs when additional Recovery Act funds are
received in a school year and are reallocated to cover costs incurred
in previous quarters, particularly when the definite term methodology
is used.
New Recommendation:
To ensure that subrecipients do not underreport vendor FTEs directly
paid with Recovery Act funds, we recommend that the Secretary of the
Department of Education re-emphasize the responsibility of
subrecipients to include hours worked by vendors in their quarterly
FTE calculations to the maximum extent practicable.
New Recommendation:
To improve consistency in how FTEs generated using the definite term
are calculated, we recommend that the Secretary of the Department of
Education and the Director of OMB clarify whether IHE and LEA
officials using this methodology should include the cost of benefits
in their calculations.
Open Recommendation:
To improve the consistency of FTE data collected and reported, we
recommend that the Secretary of Education and the Director of the
Office of Management and Budget provide clarifying guidance to
recipients on how to best calculate FTEs for education employees
during quarters when school is not in session.
Agency Actions:
The department agrees that additional guidance on how to calculate
FTEs for education employees would improve the quality and consistency
of the data reported by states. The department is in the process of
working with OMB to draft this guidance and expects to make it
available to states in time for them to use in preparing their July
2010 reports about the number of jobs created or retained with
Recovery Act funds.
Department of Labor:
New Recommendations:
To enhance Labor's ability to manage its Recovery Act and regular WIA
formula grants and to build on its efforts to improve the accuracy and
consistency of financial reporting, we recommend that the Secretary of
Labor take the following actions:
* To determine the extent and nature of reporting inconsistencies
across the states and better target technical assistance, conduct a
one-time assessment of financial reports that examines whether each
state's reported data on obligations meet Labor's requirements.
* To enhance state accountability and to facilitate their progress in
making reporting improvements, routinely review states' reporting on
obligations during regular state comprehensive reviews.
Open Recommendations:
Our September 2009 bimonthly report identified a need for additional
federal guidance in two areas--measuring the work readiness of youth
and defining green jobs--and we made the following two recommendations
to the Secretary of Labor:
* To enhance the usefulness of data on work readiness outcomes,
provide additional guidance on how to measure work readiness of youth,
with a goal of improving the comparability and rigor of the measure.
* To better support state and local efforts to provide youth with
employment and training in green jobs, provide additional guidance
about the nature of these jobs and the strategies that could be used
to prepare youth for careers in green industries.
Agency Actions:
Labor agreed with both of our recommendations and has begun to take
some actions to implement them. With regard to the work readiness
measure for WIA Youth summer employment activities, Labor issued
guidance on May 13, 2010, for the WIA Youth Program that builds on the
experiences and lessons learned during implementation of Recovery Act-
funded youth activities in 2009. Labor broadly identified some
additional requirements for measuring work readiness of youth that it
plans to address in future guidance. This includes having the employer
observe and assess workplace performance and determine what worksite
skills are necessary to be successful in the workplace.
Regarding our recommendation on the green jobs, Labor told us that the
Bureau of Labor Statistics published a Federal Register Notice on
March 16, 2010, for comment on a proposed definition for measuring
green jobs, which includes an approach for identifying environmental
industries and counting associated jobs. Labor officials hope this
will inform state and local workforce development efforts to identify
and target green jobs and their training needs. While Labor also plans
to leverage the results of Recovery Act-funded competitive grants for
green job training to provide insights on delivering services to
youth, and others, along green career pathways, Labor officials told
us that the grants have not been in place long enough to shed light on
effective strategies.
Department of Energy:
New Recommendations:
Given the concerns we have raised about whether program requirements
are being met, we recommend that DOE, in conjunction with both state
and local weatherization agencies, develop and clarify weatherization
program guidance that:
* establishes best practices for how income eligibility should be
determined and documented and issues specific guidance that does not
allow the self-certification of income by applicants to be the sole
method of documenting income eligibility.
* clarifies the specific methodology for calculating the average cost
per home weatherized to ensure that the maximum average cost limit is
applied as intended.
* accelerates current DOE efforts to develop national standards for
weatherization training, certification, and accreditation, which is
currently expected to take 2 years to complete.
* develops a best practice guide for key internal controls that should
be present at the local weatherization agency level to ensure
compliance with key program requirements.
* sets time frames for development and implementation of state
monitoring programs.
* revisits the various methodologies used in determining the
weatherization work that should be performed based on the
consideration of cost-effectiveness and develops standard
methodologies that ensure that priority is given to the most cost-
effective weatherization work. To validate any methodologies created,
this effort should include the development of standards for accurately
measuring the long-term energy savings resulting from weatherization
work conducted.
* considers and addresses how the weatherization program guidance is
impacted by the introduction of increased amounts of multifamily units.
In addition, given that state and local agencies have felt pressure to
meet a large increase in production targets while effectively meeting
program requirements and have experienced some confusion over
production targets, funding obligations, and associated consequences
for not meeting production and funding goals, we recommend that DOE
clarify its production targets, funding deadlines, and associated
consequences while providing a balanced emphasis on the importance of
meeting program requirements.
Environmental Protection Agency:
New Recommendation:
We recommend that the EPA Administrator work with the states to
implement specific oversight procedures to monitor and ensure
subrecipients' compliance with the provisions of the Recovery Act-
funded Clean Water and Drinking Water SRF program.
Department of Health and Human Services: Office of Head Start:
New Recommendation:
To provide grantees with appropriate guidelines on their use of Head
Start and Early Head Start grant funds, and enable OHS to monitor the
use of these funds, the Director of OHS should direct regional office
staff to stop allocating all grant funds to the "other" budget
category, and immediately revise all FAAs in which all funds were
allocated to the "other" category.
New Recommendation:
To facilitate understanding of whether regional decisions regarding
waivers of the program's matching requirement are consistent with
Recovery Act grantees' needs across regions, the Director of OHS
should regularly review waivers of the nonfederal matching requirement
and associated justifications.
New Recommendation:
To oversee the extent to which grantees are meeting the program goal
of providing services to children and families and to better track the
initiation of services under the Recovery Act, the Director of OHS
should collect data on the extent to which children and pregnant women
actually receive services from Head Start and Early Head Start
grantees.
Department of Treasury:
New Recommendation:
In order to increase the likelihood that HFAs will comply with
Treasury's requirements for recapturing funds, the Secretary of the
Treasury should define what it considers appropriate actions by HFAs
to recapture funds in order to avoid liability when they are unable to
collect funds from project owners that do not comply.
Executive Office of the President: Office of Management and Budget:
New Recommendations:
We recommend that the Director of OMB (1) issue Single Audit guidance
in a timely manner so that auditors can efficiently plan their audit
work, and (2) explore alternatives to help ensure that federal
awarding agencies provide their management decisions on the corrective
action plans in a timely manner.
Open Recommendations:
To leverage Single Audits as an effective oversight tool for Recovery
Act programs, in our prior bimonthly reports, we recommended that the
Director of OMB should:
(1) provide more direct focus on Recovery Act programs through the
Single Audit to help ensure that smaller programs with higher risk
have audit coverage in the area of internal controls and compliance;
(2) take additional efforts to provide more timely reporting on
internal controls for Recovery Act programs for 2010 and beyond; and:
(3) evaluate options for providing relief related to audit
requirements for low-risk programs to balance new audit
responsibilities associated with the Recovery Act.
Agency Actions:
OMB has taken several steps in response to our recommendations. Its
efforts, however, are ongoing, and further actions are needed to fully
implement our recommendations to help mitigate risks related to
Recovery Act funds. We include a summary of OMB's efforts to implement
these recommendations.
To focus auditor risk assessments on Recovery Act-funded programs and
to provide guidance on internal control reviews for Recovery Act
programs, OMB worked within the framework defined by existing
mechanisms--Circular No. A-133 and the Circular No. A-133 Compliance
Supplement (Compliance Supplement).[Footnote 234] In this context, OMB
has made limited adjustments to its Single Audit guidance. OMB issued
the Compliance Supplement in May 2009, which focused risk assessments
on Recovery Act-funded programs. In August 2009, OMB issued the
Circular No. A-133 Compliance Supplement Addendum I, which provided
additional guidance for auditors and modified the Compliance
Supplement to, among other things, focus on new Recovery Act programs
and new program clusters.
In October 2009, OMB began a Single Audit Internal Control Project
(project), which is nearing its completion as of May 14, 2010. One of
the project's goals is to encourage auditors to identify and
communicate significant deficiencies and material weaknesses in
internal control over compliance for selected major Recovery Act
programs 3 months sooner than the 9-month time frame currently
required under OMB Circular No. A-133. OMB plans to analyze the
results to identify the need for potential modifications to improve
OMB guidance related to Single Audits.
Although OMB noted the increased responsibilities falling on those
responsible for performing Single Audits, it has yet to issue
proposals or plans to address this issue. States that volunteered to
participate in the project were eligible for some relief in their
workloads because OMB modified the requirements under Circular No. A-
133 to reduce the number of low-risk programs for inclusion in the
Single Audits.
Open Recommendation:
To provide more direct focus on Recovery Act programs through the
Single Audit with regard to smaller programs with higher risk, OMB
provided guidance in the 2009 OMB Circular No. A-133 Compliance
Supplement that required auditors to consider all federal programs
with expenditures of Recovery Act awards to be considered higher risk
programs when performing the standard risk-based tests for selection
of programs to be audited. OMB also issued clarifying information on
determining risk for programs with Recovery Act expenditures. However,
since most of the funding for Recovery Act programs will be expended
in 2010 and beyond, we remain concerned that some smaller programs
with higher risk would not likely receive adequate audit coverage. One
approach for OMB to consider in helping to ensure that smaller
programs with higher risk have audit coverage is to explore various
options to provide auditors with the flexibility needed to select
programs that are considered high risk, even though the federal
expenditures for a smaller program may be less than the expenditure
threshold provided under the Single Audit Act.
With regard to developing requirements for reporting on internal
controls during 2009 before significant Recovery Act expenditures
occur, as well as for ongoing reporting, in October 2009, OMB
implemented the Single Audit Internal Control Project. The project's
objective was to help address the issue of more timely identification
and reporting of audit deficiencies. One of the project's goals was to
encourage auditors to identify and communicate audit deficiencies in
internal control over compliance for selected major Recovery Act
programs 3 months sooner than the 9-month time frame required under
OMB Circular No. A-133 so that corrective actions can be taken more
timely. The project resulted in the earlier communication of audit
deficiencies to auditee management, the development of corrective
action plans earlier for the 14 states reporting audit deficiencies,
and several management decisions from federal awarding agencies that
reviewed the auditees' plans for corrective action. The project is
nearing its completion as of May 14, 2010. However, OMB has not yet
put into place measures to achieve earlier communication of internal
control deficiencies for 2010 and beyond--years where considerable
amounts of Recovery Act funds will be expended. We recommend that OMB
take additional efforts to provide more timely reporting on internal
controls for Recovery Act programs for 2010 and beyond.
OMB designed its Single Audit Internal Control Project to grant some
relief to the auditors for the states that volunteered to encourage
participation in the project. Specifically, participating auditors
were not required to perform risk assessments of smaller federal
programs. OMB had also modified the requirements under Circular No. A-
133 to reduce the number of low-risk programs that must be included in
some project participants' Single Audits. Although the project which
begin in October 2009, was designed to provide the auditors some
relief in their workload, many auditors had already completed their
risk assessment for audits with fiscal years ending June 30, 2009 and,
as a result did not experience the audit relief intended by the
project.
Matters for Congressional Consideration:
Matter:
To the extent that appropriate adjustments to the Single Audit process
are not accomplished under the current Single Audit structure,
Congress should consider amending the Single Audit Act or enacting new
legislation that provides for more timely internal control reporting,
as well as audit coverage for smaller Recovery Act programs with high
risk.
GAO continues to believe that Congress should consider changes related
to the Single Audit process.
Matter:
To the extent that additional coverage is needed to achieve
accountability over Recovery Act programs, Congress should consider
mechanisms to provide additional resources to support those charged
with carrying out the Single Audit Act and related audits.
GAO continues to believe that Congress should consider changes related
to the Single Audit process.
Matter:
To provide housing finance agencies (HFA) with greater tools for
enforcing program compliance, in the event the Section 1602 Program is
extended for another year, Congress may want to consider directing
Treasury to permit HFAs the flexibility to disburse Section 1602
Program funds as interest-bearing loans that allow for repayment.
We are sending copies of this report to the Office of Management and
Budget; the Departments of Health and Human Services (Centers for
Medicare and Medicaid Services, Office of Head Start), Education,
Energy, Housing and Urban Development, Justice, Labor, and
Transportation; and the Environmental Protection Agency. In addition,
we are sending sections of the report to officials in the 16 states
and the District and the 45 local governments covered in our review.
The report is 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 me 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 VII.
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:
Republican 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: Objectives, Scope and Methodology:
This appendix describes our objectives, scope, and methodology for
this sixth of our bimonthly reviews on the Recovery Act. A detailed
description of the criteria used to select the core group of 16 states
and the District of Columbia (District) and programs we reviewed is
found in appendix I of our April 2009 Recovery Act bimonthly report.
[Footnote 235]
Objectives and Scope:
The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states' and localities' use of funds
made available under the act. As a result, our objectives for this
report were to assess (1) selected states' and localities' uses of and
planning for Recovery Act funds, (2) the approaches taken by the
selected states and localities to ensure accountability for Recovery
Act funds, and (3) state activities to evaluate the impact of the
Recovery Act funds they have received to date. We selected programs
for review primarily because they have begun disbursing funds to
states or because they have known or potential risks. The risks can
include existing programs receiving significant amounts of Recovery
Act funds or new programs. In some cases, we have also collected data
from all states, and from a broader array of localities, to augment
the in-depth reviews.
Our teams visited the 16 selected states, the District, and a
nonprobability sample of entities (e.g., state and local governments,
local education agencies, public housing authorities) during the
period March 2010 through May 2010.[Footnote 236] As with our previous
Recovery Act reports, our teams met with a variety of state and local
officials from executive-level and program offices. During discussions
with state and local officials, teams used a series of program review
and semistructured interview guides that addressed state plans for
management, tracking, and reporting of Recovery Act funds and
activities. We also reviewed state statutes, legislative proposals,
and other state legal materials for this report. Where attributed, we
relied on state officials and other state sources for description and
interpretation of state legal materials. Appendix VI details the
states and localities visited by GAO. Criteria used to select
localities within our selected states follows below.
The act requires that nonfederal recipients of Recovery Act-funded
grants, contracts, or loans submit quarterly reports on each project
or activity including information concerning the amount and use of
funds and jobs created or retained.[Footnote 237] The first of these
recipient reports covered cumulative activity since the Recovery Act's
passage through the quarter ending September 30, 2009. The Recovery
Act requires us to comment on the estimates of jobs created or
retained after the recipients have reported. We issued our initial
report related to recipient reporting, including recommendations for
recipient report improvements, on November 19, 2009.[Footnote 238] In
the current report we provide updated information concerning recipient
reporting in accordance with our mandate for quarterly reporting.
[Footnote 239]
States' and Localities' Uses of Recovery Act Funds:
Using criteria described in our earlier bimonthly reports, we selected
the following streams of Recovery Act funding flowing to states and
localities for review during this report: Medicaid Federal Medical
Assistance Percentage (FMAP) grant awards; the State Fiscal
Stabilization Fund (SFSF); Title I, Part A of the Elementary and
Secondary Education Act of 1965, as amended (ESEA); Parts B and C of
the Individuals with Disabilities Education Act, as amended (IDEA);
the Federal-Aid Highway Surface Transportation Program; the Transit
Capital Assistance Program; Edward Byrne Memorial Justice Assistance
Grants (JAG); Community Oriented Policing Services (COPS) Hiring
Recovery Program (CHRP); the Public Housing Capital Fund; the
Weatherization Assistance Program; Workforce Investment Act of 1998
(WIA) Dislocated Worker Program; Clean and Drinking Water State
Revolving Fund (SRF); Tax Credit Assistance Program (TCAP); and, Head
Start and Early Head Start. We also reviewed how Recovery Act funds
are being used by states and localities. In addition, we analyzed
www.recovery.gov data on federal spending.
Medicaid Federal Medical Assistance Percentage:
For the increased FMAP grant awards, we obtained increased FMAP grant
and draw down figures for each state in our sample and the District
from the Centers for Medicare and Medicaid Services (CMS). To examine
Medicaid enrollment, states' efforts to comply with the provisions of
the Recovery Act, and related information, we relied on our web-based
survey, asking the 16 states and the District to provide new
information as well as to update information they had previously
provided to us. We also interviewed CMS officials regarding the
agency's oversight of increased FMAP grant awards and its guidance to
states on Recovery Act provisions. To assess the reliability of
increased FMAP draw down figures, we interviewed CMS officials on how
these data are collected and reported. To establish the reliability of
our web-based survey data, we pre-tested the survey with Medicaid
officials in several states and also conducted consistent follow up
with all sample states. Based on these steps, we determined that the
data provided by CMS and submitted by states were sufficiently
reliable for the purposes of our engagement.
SFSF, ESEA Title I, and IDEA:
To learn about state educational agencies' (SEA) monitoring of local
educational agencies' (LEA) uses of Recovery Act funds under ESEA
Title I, IDEA, and the State Fiscal Stabilization Fund's (SFSF)
education stabilization fund, we met with SEA officials responsible
for monitoring and reviewed relevant SEA documents such as monitoring
plans. We conducted this work in Arizona, California, Colorado, the
District of Columbia, Iowa, Massachusetts, New York, North Carolina,
and Ohio. We also visited two LEAs in North Carolina and reviewed
supporting documentation for a nongeneralizable sample of
disbursements made with Recovery Act funds to determine if the
Recovery Act funds were used appropriately.
To learn about challenges states are facing in funding the education
reform assurances required by the Recovery Act we met with SEA
officials in Arizona, Colorado, Iowa, Massachusetts, North Carolina,
and Pennsylvania. To learn about the challenges states are facing in
fulfilling the requirements necessary for SFSF maintenance-of-effort
requirements and School Improvement Grants, we met with SEA officials
in Arizona, Iowa, Massachusetts, and North Carolina.
To learn about states' monitoring plans and uses for SFSF government
services funds, we met with state officials in the governor's office
or other state office with primary responsibility for implementing and
monitoring government services funds in each of the 16 states and
Washington, D.C. that are covered in our review. We also reviewed
relevant documents such as applications, monitoring plans, and gleaned
some information from Recovery.gov on specific state uses of
government services funds.
We also interviewed officials at the U.S. Department of Education
(Education) and reviewed relevant federal laws, regulations, guidance,
and communications to the states. Further, we obtained information
from Education about the amount of funds these states have drawn down
from their accounts with Education.
Federal-Aid Highway Surface Transportation Program:
For highway infrastructure investment, we reviewed status reports and
guidance to the states and discussed these with the U.S. Department of
Transportation (DOT) and Federal Highway Administration (FHWA)
officials. We obtained funding data and maintenance-of-effort
reporting data for each of the 16 states and the District in our
review. We also interviewed and obtained information from state DOT
officials in Arizona, California, Colorado, Georgia, Illinois,
Massachusetts, New York, New Jersey, Ohio, and Pennsylvania regarding
the status and progress of their projects, performance measurement
efforts, and maintenance-of-effort certifications.
Transit Capital Assistance Program:
For public transit investment, we reviewed status reports and guidance
to the states and transit agencies and discussed these with the U.S.
DOT and Federal Transit Administration (FTA) officials as part of our
review of the Transit Capital Assistance Program and Fixed Guideway
Infrastructure Investment program. We obtained funding data and
maintenance-of-effort reporting data for each of our urbanized and
nonurbanized areas. We also interviewed state and transit agency
officials in Massachusetts, North Carolina, and Pennsylvania regarding
the status and progress of their grants, performance measurement
efforts, maintenance-of-effort certifications, and their use of
Recovery Act funds to pay for operating expenses.
Edward Byrne Memorial Justice Assistance Grants (JAG):
For the Edward Byrne Memorial JAG Program, we reviewed relevant
regulations and guidance for Recovery Act implementation and met with
Department of Justice officials who administer the program at the
federal level to discuss Recovery Act monitoring and reporting. In
addition, for this report, we collected information, including the
amount of funds obligated in seven broad program areas from seven
selected states on their JAG Recovery Act program activities. We
conducted semistructured interviews of officials in selected states'
agencies that administer the pass through portion of the program and
with local law enforcement and municipal officials who represented the
recipients of the local JAG grants. During these interviews, we
discussed states' use of Recovery Act JAG funds, the impacts these
funds have had on job creation and preservation, accountability
processes and measures, and reporting requirements under the Recovery
Act.[Footnote 240]
Community Oriented Policing Services (COPS):
For the COPS Hiring Recovery Program (CHRP), we reviewed relevant
regulations and federal guidance and interviewed Department of Justice
officials who administer the program at the federal level to discuss
the application and awards process. In addition, we collected
information on the impacts these funds have had on jobs from selected
localities and the District of Columbia by conducting semi-structured
interviews with officials in selected localities that received grant
funding under the CHRP program. This information included data about
each locality's use of funds, retention plans, and federal reporting
requirements under the Recovery Act.[Footnote 241]
Workforce Investment Act of 1998 Dislocated Worker Program:
We reviewed the Recovery Act-funded WIA Dislocated Worker Program by
conducting a nationwide Web-based survey of state workforce agencies,
as well as in-depth site visits in 5 states (California, Florida,
Massachusetts, Michigan, and North Carolina) to obtain detailed
information beyond the scope of the survey. These states were chosen
based on factors such as the unemployment rate, geographic region, and
the amount of Recovery Act funds allocated. During these site visits,
we interviewed state and local workforce development officials for a
total of five state-level agencies and 10 local workforce investment
boards (WIB). In addition, we collected data from six other WIBs. We
also reviewed Labor's guidance to states and local areas on Recovery
Act funds, and completed an analysis of national drawdown data
provided by Labor.
The nationwide Web-based survey was administered to state workforce
agencies in the 50 states and the District of Columbia. Survey topics
included expenditures, services and training offered to dislocated
workers, and monitoring and oversight. The survey was conducted using
a self-administered electronic questionnaire posted on the Web. We
collected the survey data between March 2010 and April 2010. We
received completed surveys from 50 states and the District of
Columbia, for a 100-percent response rate. Because this was not a
sample survey, there are no sampling errors. However, the practical
difficulties of conducting any survey may introduce nonsampling
errors, such as variations in how respondents interpret questions and
their willingness to offer accurate responses. To minimize nonsampling
errors, we pretested draft survey instruments with state workforce
officials in Massachusetts, Wyoming, Wisconsin, and Idaho to determine
whether the survey questions and terms were clear and unbiased, and
whether respondents were able to provide the information we sought.
Because respondents entered their responses directly into our database
of responses from the Web-based surveys, possibility of data entry
errors was greatly reduced.
We also performed computer analyses to identify inconsistencies in
responses and other indications of error, and a second independent
analyst verified that the computer programs used to analyze the data
were written correctly. The scope of this work did not include
contacting workforce officials from each state to verify survey
responses.
Clean and Drinking Water State Revolving Fund:
For the Clean Water and Drinking Water SRF programs, we reviewed
relevant regulations and federal guidance and interviewed
Environmental Protection Agency (EPA) officials that administer the
programs in headquarters and four of the 10 EPA Regions.[Footnote 242]
We reviewed the Recovery Act-specific documentation for the Clean and
Drinking Water SRF programs in 14 of our selected states.[Footnote
243] In these states, we conducted semistructured interviews with
state officials that administer the SRF programs and with 44 local
subrecipients who received Recovery Act funds. The interviews with
state and local officials covered how the states used the funds,
implemented Recovery Act requirements, and ensured accountability of
the funds. We selected local subrecipients based on criteria that
allowed us to review at least one subrecipient that had not received
SRF funds in the past and one subrecipient undertaking a qualified
green project, wherever possible.
We obtained data from EPA from its Clean Water State Revolving Fund
Benefits Reporting system and its Drinking Water SRF Projects Benefits
Reporting system for each of the 14 states, including the amounts and
types of financial assistance that each SRF program provided using
Recovery Act funds, the type of Clean Water SRF projects these funds
helped support, and the contract completion and construction start
dates for these projects. From state SRF officials, we also obtained
information on the type of Drinking Water SRF projects that Recovery
Act funds helped support, which subrecipients of Recovery Act funds
were first-time recipients of the SRF program that awarded them
Recovery Act funds, and which projects serve disadvantaged
communities. Using the EPA data and project lists confirmed by state
officials, we determined the amount of Recovery Act funds that states
used to fund categories of clean water projects and the number of
projects in each of these categories. In addition, we used data
supplied by EPA and state officials to categorize drinking water
projects. To assess the reliability of EPA data, we interviewed EPA
officials on how these data are collected and reported. For selected
data fields, we also asked state SRF officials to review the EPA data
and provide corrected data where applicable. Based on these steps, we
determined that the data provided by EPA were sufficiently reliable
for the purposes of our engagement.
Weatherization Assistance Program:
For the Weatherization Assistance Program, we reviewed relevant
regulations and federal guidance and interviewed Department of Energy
officials who administer the program at the federal level. In
addition, for this report, we collected updated information from nine
of our selected states and the District of Columbia on their
weatherization programs.[Footnote 244] We conducted semi-structured
interviews of officials in the states' agencies that administer the
weatherization program and with local service providers responsible
for weatherization production. These interviews covered updates on the
use of funds, the implementation of the Davis-Bacon requirements,
accountability measures, and impacts of the Recovery Act on the
Weatherization program. We interviewed officials at a total of 31
local service providers in the District of Columbia and the nine
states, and reviewed local agencies' client case files for homes
weatherized with Recovery Act funds. We also conducted site visits in
each of the 9 states and the District of Columbia to interview local
providers of weatherization and to observe weatherization activities.
We continued to collect data about each state's total allocation for
weatherization under the Recovery Act, as well as the allocation
already provided to the states and the expenditures-to-date.
Public Housing Capital Fund:
For Public Housing, we obtained data from HUD's Electronic Line of
Credit Control System on the amount of Recovery Act funds that have
been obligated and drawn down by each housing agency in the country
that received public housing capital funds. To monitor progress on how
housing agencies are using these funds, we visited 37 housing agencies
in nine states.[Footnote 245] For each state, we selected two housing
agencies that had obligated less than 50 percent of their formula
grant funds and two housing agencies that had obligated more than 50
percent of their formula grant funds as of January 30, 2010.[Footnote
246] At the selected agencies, we interviewed housing agency officials
and conducted site visits of Recovery Act projects. We also
interviewed HUD officials to understand their procedures for
monitoring public housing agency obligations and uses of Recovery Act
funds and to understand HUD's capacity to administer Recovery Act
funds. We also interviewed HUD officials to understand their
procedures for validating data that housing agencies reported to
FederalReporting.gov.
Tax Credit Assistance Program (TCAP):
To further assess state implementation of TCAP and Section 1602
program, we asked managers of state housing finance agencies in all 50
states, the District of Columbia, Puerto Rico, Guam, and the U.S.
Virgin Islands to complete a web survey. Our questionnaire asked about
the status of program delivery, program design, safeguards and
controls, expected results, and challenges to implementation. We
designed and tested the self-administered questionnaire in
consultation with experts, representatives of housing finance
stakeholders, and state agency managers. Survey data collection took
place in November and early December of 2009. We received usable
responses from all 54 agencies.
While all state agencies returned questionnaires, and thus our data is
not subject to sampling or overall questionnaire nonresponse error,
the practical difficulties of conducting any survey may introduce
other errors in our findings. We took steps to minimize errors of
measurement, question-specific nonresponse, and data processing. In
addition to the questionnaire development activities listed above, and
pretesting the questionnaire with four state agency officials before
the survey, GAO analysts also recontacted selected respondents to
follow up on answers that were missing or that required clarification.
In addition, GAO analysts resolved respondent difficulties in
answering our questions during the survey. Before the survey, we also
contacted each agency to determine whether our originally identified
respondent was the most appropriate and knowledgeable person to answer
our questions, and made changes to our contact list as necessary.
Finally, analysis programs and other data analyses were independently
verified.
Head Start and Early Head Start:
We took a number of steps to address our objectives, which were to
determine (1) how the Office of Head Start (OHS) has used Recovery Act
funds to expand the Head Start and Early Head Start programs and (2)
what OHS has done to assist and monitor expansion grantees. To
understand how OHS has used Recovery Act funds to expand Head Start
and Early Head Start programs, we met with agency officials and
national grantee associations; attended OHS's orientation for new
Early Head Start grantees; attended grantee conferences--including the
2010 National Migrant and Seasonal Head Start Conference and the 2010
Native American Child and Family Conference; reviewed relevant laws
and regulatory documentation; analyzed award and expenditure data; and
conducted seven focus groups with expansion grantees. Focus group
participants represented a variety of programs, including existing
Head Start and Early Head Start grantees that received funds to expand
their programs, existing Head Start programs that received funds to
create a new Early Head Start program, and grantees entirely new to
the Head Start and Early Head Start programs. For most focus groups,
we recruited participants from those attending Head Start-related
conferences. To recruit new grantees, we obtained a list of grantees
from OHS that had not previously received a Head Start or Early Head
Start grant. The focus groups discussed challenges faced in
implementing their expansion grants and the adequacy of support from
OHS, among other things. Sixty-one individuals participated in the
focus groups. Despite the representation across types of grantees and
operating regions, information from focus groups is not representative
of all expansion grantees under the Recovery Act. We also analyzed
several databases used by the Office of Head Start to understand
grantees' characteristics and the features of the grant awards. We
analyzed six years of Program Information Report (PIR) data on
enrollment and staffing levels, as well as all End of Month (EOM)
enrollment data for Recovery Act grantees and all other grantees' EOM
data since October 2008. Both the PIR and EOM data collection
instruments are administered through the Head Start Enterprise System,
a user-restricted Web-based database. PIR is a more comprehensive,
annual survey administered to all Head Start and Early Head Start
grantees. Grantees submit EOM data each month, which include reported
enrollment and an explanation for enrollment that falls below a
grantee's funded enrollment. We assessed data reliability for all
computer-processed data we used, including reviewing documentation of
processes supporting the databases, conducting logic tests for key
variables, and assessing data for out-of-range values. We did not
validate the enrollment reports by comparison to actual enrollment
records or review OHS's procedures for doing so, but assessed the
process used to report enrollment and determined that internal
inconsistencies in the functioning of edit checks were limited to a
small number of grantees or instances and that the processes used to
handle the data were not likely to introduce significant error. For
example, OHS indicated that the reporting system should not permit a
grantee reporting that its program is not operational to also report
some enrollment. However, we found that in a small number of
instances, the system did allow grantees to report both that they were
not operational and also to report some enrollment. Although we have
some concerns about quality controls for the monthly enrollment data
and the format for data reporting, we determined that data used for
our report are sufficiently reliable for our purposes of reporting the
most recent total reported enrollment.
To assess what OHS has done to assist and monitor grantees, we
interviewed agency officials, reviewed OHS documentation, analyzed its
awards database, and discussed issues with grantees in focus groups.
We also met with officials from the Department of Health and Human
Services Office of the Inspector General to better understand their
role in the expansion grant-making process and in monitoring grantees.
Recipient Reporting:
The recipient reporting section of this report responds to the
Recovery Act's mandate that we comment on the estimates of jobs
created or retained by direct recipients of Recovery Act funds. For
our review of the third submission of recipient reports, covering the
period from January 1, 2010 through March 31, 2010, we built on
findings from our first and second reviews of the reports, covering
the period from February 2009 through December 31, 2009. We performed
edit checks and basic analyses on the third submission of recipient
report data that became publicly available at Recovery.gov on April
30, 2010. We reviewed OMB's guidance on recipient reporting to
determine the extent of changes and clarifications for the third
submission of recipient reports. In addition, we interviewed federal
agency officials from the Departments of Education, Energy, and
Housing and Urban Development, who have responsibility for ensuring a
reasonable degree of quality across their program's recipient reports.
We also interviewed federal data users and transparency organizations
to solicit feedback about their use of recipient reported data. We
included eight organizations in our sample: the Association for
University Business and Economic Research, the Council of State
Governments, Federal Funds Information for the States, IBM Center for
the Business of Government, the Metropolitan Policy Program of the
Brookings Institution, the National Association of Counties, OMB
Watch, and ProPublica.
From the third submission of recipient reports, we reviewed reports
for education and public housing programs to assess methodologies for
calculating full-time equivalents (FTE) funded by the Recovery Act.
Our teams in the 16 states and the District of Columbia interviewed
recipients responsible for these reports during late March and
throughout April 2010. Each team made a nonstatistical selection of
approximately 6 recipient reports from our program areas to review,
usually including at least one public housing authority (PHA), one
institution of higher learning (IHE), one local educational authority
(LEA) and the state educational authority (SEA). State teams
coordinated with the SEA in their state to select an LEA and an IHE
that received among the 5 highest SFSF allocations in the state. For
LEAs, further preference was given to selecting a district that also
reported FTEs for ESEA Title I and IDEA in addition to SFSF. Five
states also included a state-level IHE authority in their reviews.
State teams interviewed recipients and subrecipients to ascertain the
methodology they used to calculate FTEs. We reviewed supporting
documentation to reconcile reported expenditures with quarterly FTE
reports, and assessed the validity of those processes in complying
with all OMB guidance. In addition, state teams also interviewed
government officials from 13 states and the District of Columbia to
discuss issues that arose in the third reporting period statewide,
specifically related to data quality and the impact of the continuous
corrections period. We asked these officials about ongoing state plans
for managing, tracking, and reporting on Recovery Act funding and
activities. We solicited feedback from state officials regarding the
costs and benefits of recipient reporting, how states are using data
generated from the recipient reporting effort, and ways the recipient
reporting process could be improved.
Single Audit Pilot Program:
To perform our audit work, we reviewed the project's guidelines,
official reports, and other documents, as well as interviewed state
and federal officials. We also conducted a survey of the state
auditors and state program and finance officials that participated in
the project. We analyzed and summarized the responses to our survey.
We conducted our surveys in March 2010 and interviewed several state
auditors, the cognizant agency for audit, and officials from awarding
federal agencies whose programs were selected for audit under the
project. We also participated in an OMB-led discussion of the
project's participants to obtain their views on the project.
Recovery Accountability and Transparency Board Initiatives:
To determine the status and results of oversight activities of the
Recovery Accountability and Transparency Board (the Board), we met
with representatives of the Board to discuss the initiatives they have
taken to coordinate and monitor the efforts of the inspectors' general
oversight activities as well as the Board's initiatives to prevent and
detect fraud, waste, and abuse of Recovery funds. We reviewed
available documentation related to the Board's efforts.
State and Local Accountability:
To assess actions taken by the state and local audit community to
monitor the use of Recovery Act funds, we have interviewed selected
state and local auditors and state inspectors general about their
ongoing and planned audit activities. We have also reviewed state and
local audit reports. We have also spoken to some of the Recovery Act
oversight entities created in many of the selected states. In
addition, in an effort to update the audit community concerning our
Recovery Act work and participate in information sharing about
Recovery Act issues, we are working with state and local auditors and
their associations to facilitate routine telephone conference calls to
discuss Recovery Act issues with a broad community of interested
parties. The conference call participants include the Association of
Government Accountants; the Association of Local Government Auditors;
the National Association of State Auditors, Comptrollers, and
Treasurers; OMB; the Board; federal inspectors general; the National
Governors Association; and the National Association of State Budget
Officers. In an effort to ensure information sharing about allegations
of fraud, we are also working with state and local auditors to develop
plans for routine sharing of information.
State and Local Budget:
We continued our review of the use of Recovery Act funds for the 16
states, the District and selected localities. We conducted interviews
with budget officials and reviewed proposed and enacted budgets and
revenue estimates to update our understanding of the use of Recovery
Act funds in the selected states and the District.
To select local governments for our review, we identified localities
representing a range of types of governments (cities and counties),
variations in population sizes, and economic conditions such as total
operating budget and unemployment rates both above and below the
state's overall unemployment rate). We balanced these selection
criteria with logistical considerations including other scheduled
Recovery Act work, local contacts established during prior reviews,
and the geographic proximity of the local government entities. The
teams visited a total of 45 local government entities that ranged in
population from approximately 15,042 in Newton, Iowa, to 8,363,710
million in New York City. Unemployment rates in our selected
localities ranged from 5.8 percent in Flagstaff, Arizona, to 27
percent in Flint, Michigan.[Footnote 247] Due to the small number of
jurisdictions visited and judgmental nature of their selection, GAO's
findings are not generalizable to all local governments.
To gain an understanding of local governments' use of Recovery Act
funds, we met with the chief executives, recovery coordinators, and
finance officials at the selected local governments. The topics
covered in our meetings included what Recovery Act funds the locality
received, how the locality used the funds, and the locality's exit
strategy to prepare for the end of Recovery Act funding. In the course
of our discussions with officials we explored the extent to which
Recovery Act funds have stabilized the state and local budgets in the
selected states. We also reviewed reports and analyses regarding the
fiscal conditions of local governments.
The list of local governments selected in each state is found in
appendix VI.
Data and Data Reliability:
We collected funding data from www.recovery.gov and federal agencies
administering Recovery Act programs for the purpose of providing
background information. We used funding data from www.recovery.gov--
which is overseen by the Recovery Accountability and Transparency
Board--because it is the official source for Recovery Act spending.
Based on our examination of this information thus far, we consider
these data sufficiently reliable with attribution to official sources
for the purposes of providing background information on Recovery Act
funding for this report. Our sample of states, localities, and
entities has been purposefully selected and the results of our reviews
are not generalizable to any population of states, localities, or
entities.
We conducted this performance audit from March 4, 2010, to May 26,
2010, 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.
[End of section]
Appendix II: Implemented and Closed Recommendations:
The following are 22 GAO recommendations that Departments of
Transportation (DOT), Housing and Urban Development (HUD), Education,
and the Office of Management and Budget (OMB) have implemented since
we began conducting bimonthly reviews in April 2009.[Footnote 248] We
have also closed two recommendations.
Department of Transportation:
Implemented Recommendation:
Recipients of highway and transit Recovery Act funds, such as state
departments of transportation and transit agencies, are subject to
multiple reporting requirements. Both the DOT and OMB have issued
implementation guidance for recipient reporting. Despite these
efforts, state and local highway and transit officials expressed
concerns and challenges with meeting the Recovery Act reporting
requirements. We recommended in our September 2009 report that the
Secretary of Transportation should continue the department's outreach
to state departments of transportation and transit agencies to
identify common problems in accurately fulfilling reporting
requirements and provide additional guidance, as appropriate.
Agency Actions:
In September 2009, in responding to our recommendation, DOT said that
it had conducted outreach, including providing technical assistance,
training, and guidance to recipients, and will continue to assess the
need to provide additional information. For example, in February 2010,
FTA continued three training Webinars to provide technical assistance
in complying with reporting requirements under section 1201(c) of the
Recovery Act. In addition, on February 1, 2010, FTA issued guidance to
transit agencies instructing them to use the same methodology for
calculating jobs retained through vehicles purchased under section
1201 as they had been for the recipient reporting. This reversed
previous guidance that had instructed transit agencies to use a
different methodology for vehicle purchases under sections 1201 and
recipient reporting.
Implemented Recommendation:
DOT and the Federal Highway Administration (FHWA) have yet to provide
clear guidance regarding how states are to implement the Recovery Act
requirement that economically distressed areas (EDA) are to receive
priority in the selection of highway projects for funding. We found
substantial variation both in how states identified EDAs and how they
prioritized project selection for these areas. To ensure states meet
Congress's direction to give areas with the greatest need priority in
project selection, we recommended in our July 2009 report that the
Secretary of Transportation develop clear guidance on identifying and
giving priority to EDAs that are in accordance with the requirements
of the Recovery Act and the Public Works and Economic Development Act
of 1965, as amended, and more consistent procedures for the FHWA to
use in reviewing and approving states' criteria.
Agency Actions:
In August 2009, in response to our recommendation, FHWA, in
consultation with the Department of Commerce, developed guidance that
addresses our recommendation. In particular, FHWA's August 2009
guidance defines "priority," directing states to give priority to
projects that are located in an economically distressed area and can
be completed within the 3-year time frame over other projects. In
addition, FHWA's guidance sets out criteria that states may use to
identify EDAs based on "special need." The criteria align closely with
special need criteria used by the Department of Commerce's Economic
Development Administration in its own grant programs, including
factors such as actual or threatened business closures (including job
loss thresholds), military base closures, and natural disasters or
emergencies.
Department of Housing and Urban Development:
Implemented Recommendation:
We recommended in March 2010 that the Secretary of HUD instruct
housing agencies to discontinue use of the jobs calculator provided by
HUD in the first round of recipient reporting for subsequent rounds of
reporting to ensure the correct job calculation is used.
Agency Actions:
In a March 26, 2010, e-mail to housing agencies, HUD included
instructions to discontinue use of the jobs calculator originally
posted on the HUD Recovery Act Web site in October 2009. HUD
reiterated these instructions in a subsequent email it sent to housing
agencies on March 31, 2010.
Implemented Recommendation:
To enhance HUD's ability to prevent, detect, and correct noncompliance
with the use of Recovery Act funds, we recommended in September 2009
that the Secretary of HUD expand the criteria for selecting housing
agencies for on-site reviews to include housing agencies with open
Single Audit findings that may affect the use of and reporting on
Recovery Act funds.
Agency Actions:
In October 2009, HUD expanded its criteria for selecting housing
agencies for on-site reviews to include all housing agencies with open
2007 and 2008 Single Audit findings as of July 7, 2009, relevant to
the administration of Recovery Act funds. HUD has identified 27 such
housing agencies and planned to complete these on-site reviews by
February 15, 2010.
Department of Education:
Implemented Recommendation:
We recommended in September 2009 that the Secretary of Education take
further action such as collecting and reviewing documentation of state
monitoring plans to ensure that states understand and fulfill their
responsibility to monitor subrecipients of SFSF funds and consider
providing training and technical assistance to states to help them
develop and implement state monitoring plans for SFSF.
Agency Actions:
In February 2010, Education instructed states to submit to Education
for review their plans and protocols for monitoring subrecipients of
SFSF funds. Education also issued its plans and protocols for
monitoring state implementation of the SFSF program. The plan includes
on-site visits to about half the states and desk reviews of the other
states to be conducted over the next year.
Implemented Recommendation:
We recommended in November 2009 that the Secretary of Education take
further action to enhance transparency by requiring states to include
an explanation of changes to maintenance-of-effort levels in their
SFSF application resubmissions.[Footnote 249]
Agency Actions:
Education notified states that, if states made changes to their
maintenance-of-effort data in their SFSF applications, they must
provide a brief explanation of the reason the data changed.
Executive Office of the President: Office of Management and Budget:
Implemented Recommendation:
We were concerned that since the scope of Single Audit workloads due
to Recovery Act programs being subject to Single Audits will increase,
consideration should be given to determining what funds can be used to
support Single Audit efforts related to Recovery Act programs,
including whether legislative changes are needed to specifically
direct resources to cover incremental audit costs related to Recovery
Act programs. We recommended that the Director of OMB develop
mechanisms to help fund the additional Single Audit costs and efforts
for auditing Recovery Act programs.
Agency Actions:
OMB addressed our recommendation by issuing guidance[Footnote 250] to
executive departments and agencies to help states with various
approaches to recover administrative costs associated with the wide
range of activities to comply with the Recovery Act. Administrative
costs include, but are not limited to, oversight and audit costs and
the costs of performing additional Single Audits. OMB issued the
guidance to clarify actions (within the existing legal framework for
identifying allowable reimbursable costs) that states could take to
recover administrative costs more timely. In addition to our
recommendation to OMB, as we previously noted in our bimonthly
reports, it is our view that, to the extent that additional audit
coverage is needed to achieve accountability over Recovery Act
programs, Congress should consider mechanisms to provide additional
resources to support those charged with carrying out the Single Audit
Act and related audits.
Implemented Recommendation:
We reported in July 2009 that OMB was encouraging communication of
weaknesses to management early in the audit process, but did not add
requirements for auditors to take these steps. This step did not
address our concern that internal controls over Recovery Act programs
should be reviewed before significant funding is expended. Under the
current single audit framework and reporting timelines, the auditor
evaluation of internal control and related reporting will occur too
late--after significant levels of federal expenditures have already
occurred. As a result of our recommendation, OMB implemented a Single
Audit Internal Control Project under which a limited number of
voluntarily participating auditors performing the Single Audits for
states would communicate in writing internal control deficiencies
noted in the single audit within 6 months of the 2009 fiscal year-end,
rather than the nine months required by the Single Audit Act. We
recommended that the Director of OMB take steps to achieve sufficient
participation and coverage in OMB's Single Audit Internal Control
Project that provides for early written communication of internal
control deficiencies to achieve the objective of more timely
accountability over Recovery Act funds.
Agency Actions:
OMB implemented its Single Audit Internal Control Project in October
2009. The project called for a minimum of 10 participants. OMB
solicited the 50 states, the District of Columbia, Puerto Rico, and
Guam, from which 16 states volunteered to participate.[Footnote 251]
The volunteer states were diverse in geographic characteristics and
population and included states that use auditors within state
government as well as external auditors to conduct Single Audits. In
addition, the volunteer states included California and Texas, which
are among the top three states with the highest levels of Recovery Act
obligations from the federal government. Each state selected at least
two Recovery Act programs from a list of 11 high-risk Recovery Act
programs for internal control testing. OMB designed the project to be
voluntary and OMB officials stated that, overall, they were satisfied
with the population and geographic diversity among the states that
volunteered. Although the project's coverage could be more
comprehensive to provide greater assurance over Recovery Act funding,
the results of the project could provide meaningful insight for making
improvements to the Single Audit process.
Implemented Recommendation:
The Single Audit Act requires that recipients submit their financial
reporting packages, including the Single Audit report, to the federal
government no later than 9 months after the end of the period being
audited. As a result, an audited entity may not receive feedback
needed to correct an identified internal control or compliance
weakness until the latter part of the subsequent fiscal year. The
timing problem is exacerbated by the extensions to the 9-month
deadline that are routinely granted by the awarding agencies,
consistent with OMB guidance. We made two recommendations in this
area. Firstly, we recommended that the Director of OMB formally advise
federal cognizant agencies to adopt a policy of no longer approving
extensions of the due dates of Single Audit reporting package
submissions beyond the 9-month deadline. Secondly, we also recommended
that the Director of OMB widely communicate this revised policy to the
state audit community and others who have responsibility for
conducting Single Audits and submitting the Single Audit reporting
package.
Agency Actions:
On March 22, 2010, OMB addressed these two recommendations by issuing
memorandum M-10-14, Updated Guidance on the American Recovery and
Reinvestment Act. This guidance directed federal agencies to not grant
any requests made to extend the Single Audit reporting deadlines for
fiscal years 2009 to 2011. OMB further stated that to meet the
criteria for a low risk auditee in the current year, the auditee must
have submitted the prior 2 years' audit reports by the required due
dates. OMB communicated this revised policy though the OMB website,
the American Institute of Certified Public Accountants, and the
National Association of State Auditors, Comptrollers and Treasurers.
Implemented Recommendation:
OMB should work with the Recovery Accountability and Transparency
Board (the Board) and federal agencies, building on lessons learned,
to establish a formal and feasible framework for review of recipient
changes during the continual update period and consider providing more
time for agencies to review and provide feedback to recipients before
posting updated reports on Recovery.gov.
Agency Actions:
In our March 2010 report, we recommended that OMB work with the Board
and federal agencies to establish a formal and feasible framework for
review of recipient changes during the new continuous review period
and consider providing more time for federal agencies to review and
provide feedback to recipients before posting updated reports on
Recovery.gov. On March 22, 2010, OMB issued updated guidance which
highlighted the steps federal agencies must take to review data
quality of recipient reports during the continuous review period. The
guidance specified that federal agencies must, at a minimum, conduct a
final review of the data upon the close of the continuous corrections
period. In addition, now the Recovery Board reflects corrected data on
Recovery.gov approximately every two weeks, allowing federal agencies
time to review and provide feedback in the interim period.
Implemented Recommendation:
States have been concerned about the burden imposed by new
requirements, increased accounting and management workloads, and
strains on information systems and staff capacity at a time when they
are under severe budgetary stress. We recommended in April 2009 that
the Director of OMB clarify what Recovery Act funds can be used to
support state efforts to ensure accountability and oversight,
especially in light of enhanced oversight and coordination
requirements.
Agency Actions:
On May 11, 2009, OMB released M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities, clarifying how state
grantees could recover administrative costs of Recovery Act activities.
Implemented Recommendation:
States and localities are expected to report quarterly on a number of
measures, including the use of funds and an estimate of the number of
jobs created and the number of jobs retained as required by section
1512 of the Recovery Act. We recommended in our July 2009 report that
to increase consistency in recipient reporting of jobs created and
retained, the Director of OMB should work with federal agencies to
have them provide program-specific examples of the application of
OMB's guidance on recipient reporting of jobs created and retained.
Agency Actions:
OMB has issued clarifications and frequently asked questions (FAQ) on
Recovery Act reporting requirements. During the first reporting
period, OMB also deployed regional federal employees to serve as
liaisons to state and local recipients in large population centers and
established a call center for entities that did not have an on-site
federal liaison. In addition, federal agencies issued additional
guidance that builds on the OMB June 22 recipient reporting guidance
for their specific programs. This guidance is in the form of FAQ, tip
sheets, and more traditional guidance that builds on what was provided
on June 22, 2009. Federal agencies have also taken steps to provide
additional education and training opportunities for state and local
program officials on recipient reporting, including web-based seminars.
Implemented Recommendation:
To foster timely and efficient communications, we recommended in April
2009 that the Director of OMB should continue to develop and implement
an approach that provides easily accessible, real-time notification to
(1) prime recipients in states and localities when funds are made
available for their use, and (2) states--where the state is not the
primary recipient of funds but has a statewide interest in this
information.
Agency Actions:
In response to our recommendation, OMB has made important progress in
notifying recipients when Recovery Act funds are available,
communicating the status of these funds at the federal level through
agency Weekly Financial Activity reports, and disseminating Recovery
Act guidance broadly while actively seeking public and stakeholder
input. OMB has taken the additional step of requiring federal agencies
to notify Recovery Act coordinators in states, the District of
Columbia, commonwealths, and territories within 48 hours of an award
to a grantee or contractor in their jurisdiction.
Implemented Recommendation:
Responsibility for reporting on jobs created and retained falls to
nonfederal recipients of Recovery Act funds. As such, states and
localities have a critical role in determining the degree to which
Recovery Act goals are achieved. Given questions raised by many state
and local officials about how best to determine both direct and
indirect jobs created and retained under the Recovery Act, we
recommended in April 2009 that the Director of OMB continue OMB's
efforts to identify appropriate methodologies that can be used to: (1)
assess jobs created and retained from projects funded by the Recovery
Act; (2) determine the impact of Recovery Act spending when job
creation is indirect; and (3) identify those types of programs,
projects, or activities that in the past have demonstrated substantial
job creation or are considered likely to do so in the future. We also
recommended that the Director of OMB consider whether the approaches
taken to estimate jobs created and retained in these cases can be
replicated or adapted to other programs.
Agency Actions:
On June 22, 2009, OMB issued additional implementation guidance on
recipient reporting of jobs created and retained, (OMB memoranda, M-09-
21, Implementing Guidance for the Reports on Use of Funds Pursuant to
the American Recovery and Reinvestment Act of 2009). This guidance is
responsive to much of what we recommended. The June 2009 guidance
provided detailed instructions on how to calculate and report jobs as
full-time equivalents (FTE). It also describes in detail the data
model and reporting system to be used for the required recipient
reporting on jobs. It clarifies that the prime recipient and not the
subrecipient is responsible for reporting information on jobs created
or retained. Federal agencies have issued guidance that expanded on
the OMB June 22 governmentwide recipient reporting guidance and
provided education and training opportunities for state and local
program officials. Agency-specific guidance includes FAQs and tip
sheets. Additionally, agencies are expected to provide examples of
recipient reports for their programs, which is also consistent with
what we recommended. In addition to the federal agency efforts, OMB
has issued FAQs on Recovery Act reporting requirements. The June 22
guidance and subsequent actions by OMB are responsive to much of what
we said in our recommendation.
Implemented Recommendation:
We have noted in prior reports that in order to achieve the delicate
balance between robust oversight and the smooth flow of funds to
Recovery Act programs, states may need timely reimbursement for these
activities. We recommended in September 2009 that to the extent that
the Director of OMB has the authority to consider mechanisms to
provide additional flexibilities to support state and local officials
charged with carrying out Recovery Act responsibilities, it is
important to expedite consideration of alternative administrative cost
reimbursement proposals.
Agency Actions:
In response to this recommendation, OMB issued a memorandum on October
13, 2009, to provide guidance to address states' questions regarding
specific exceptions to OMB Circular A-87, Cost Principles for State,
Local and Indian Tribal Governments. In the memorandum, OMB provided
clarifications for states regarding specific exceptions to OMB
Circular A-87 that are necessary in order for the states to perform
timely and adequate Recovery Act oversight, reporting, and auditing.
We believe the October 2009 OMB guidance provides the additional
clarification needed for states and localities to proceed with their
plans to recoup administrative costs.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommended in November 2009 that OMB clarify the definition and
standardize the period of measurement for the FTE data element in the
recipient reports.
Agency Actions:
After the first round of reporting by states on their use of Recovery
Act funds in October 2009, OMB updated the recipient reporting
guidance on December 18, 2009. According to the agency, this guidance
aligns with GAO's recommendation by requiring recipients to report job
estimates on a quarterly rather than a cumulative basis. As a result,
recipients will no longer be required to sum various data on hours
worked across multiple quarters of data when calculating job
estimates. The December guidance incorporated lessons learned from the
first round of recipient reporting and also addressed recommendations
we made in our November 2009 report on recipient reporting.[Footnote
252] According to OMB, the December guidance is intended to help
federal agencies improve the quality of data reported under Section
1512 and simplifies compliance by revising the definitions and
calculations needed to define and estimate the number of jobs saved.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we also
recommended in November 2009 that OMB consider being more explicit
that "jobs created or retained" are to be reported as hours worked and
paid for with Recovery Act funds.
Agency Actions:
In response to our recommendation, OMB issued guidance on December 18,
2009, that no longer requires recipients make a subjective judgment of
whether jobs were created or retained as a result of the Recovery Act.
Instead, recipients will more easily and objectively report on jobs
funded with Recovery Act dollars.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we also
recommended in our November 2009 report that OMB continue working with
federal agencies to provide or improve program-specific guidance to
assist recipients, especially as it applies to the full-time
equivalent calculation for individual programs.
Agency Actions:
In response to our recommendation, OMB issued guidance on December 18,
2009, that required federal agencies to submit their guidance
documents to OMB for review and clearance to ensure consistency
between federal agency guidance and the guidance released by OMB.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommended in November 2009 that OMB 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 the
initial round of recipient reporting and consider whether additional
modifications need to be made and if additional guidance is warranted.
Agency Actions:
In response to our recommendation, on December 18, 2009, OMB issued
updated guidance on data quality, nonreporting recipients, and
reporting of job estimates. The agency stated that the updated
guidance incorporates lessons learned from the first reporting period
and further addresses GAO's recommendations. The guidance also
provides federal agencies with a standard methodology for effectively
implementing reviews of the quality of data submitted by recipients.
Implemented Recommendation:
In our July 2009 report we recommended that to strengthen the effort
to track the use of funds, the Director of OMB should (1) clarify what
constitutes appropriate quality control and reconciliation by prime
recipients, especially for subrecipient data, and (2) specify who
should best provide formal certification and approval of the data
reported.
Agency Actions:
Although OMB clarified that the prime recipient is responsible for
www.federalreporting.gov data in its June 22 guidance, no statement of
assurance or certification will be required of prime recipients on the
quality of subrecipient data. Moreover, federal agencies are expected
to perform data quality checks, but they are not required to certify
or approve data for publication. We continue to believe that there
needs to be clearer accountability for the data submitted and during
the subsequent federal review process. OMB agreed with the
recommendation in concept but questioned the cost/benefit of data
certification given the tight reporting time frames for recipients and
federal agency reviewers. OMB staff stated that grant recipients are
already expected to comply with data requirements appropriate to the
terms and conditions of a grant. Furthermore, OMB will be monitoring
the results of the quarterly recipient reports for data quality issues
and would want to determine whether these issues are persistent
problems before concluding that certification is needed.
Through issuance of additional guidance and clarification we are now
satisfied OMB has implemented this recommendation.
Implemented Recommendation:
In consultation with the Recovery Accountability and Transparency
Board and States, the Director of OMB should evaluate current
information and data collection requirements to determine whether
sufficient, reliable and timely information is being collected before
adding further data collection requirements. As part of this
evaluation, OMB should consider the cost and burden of additional
reporting on states and localities against expected benefits.
Agency Actions:
OMB has taken steps to ensure data quality through issuance of
additional guidance. OMB has also worked with the states to minimize
the extent possible the new reporting burdens under the Recovery Act.
Closed Recommendation:
We recommended in our April report the addition of a master schedule
for anticipated new or revised federal Recovery Act program guidance
and a more structured, centralized approach to making this information
available, such as what is provided at www.recovery.gov on recipient
reporting.
Agency Actions:
Closed because no longer applicable.
Closed Recommendation:
In addition to providing additional types of program-specific examples
of guidance, the Director of OMB should work with federal agencies to
use other channels to educate state and local program officials on
reporting requirements, such as Web-or telephone-based information
sessions or other forums.
Agency Actions:
In addition to the federal agency efforts, OMB has issued FAQs on
Recovery Act reporting requirements. The June 22 guidance and
subsequent actions by OMB are responsive to much of what we said in
our April 2009 report. OMB deployed regional federal employees to
serve as liaisons to state and local recipients in large population
centers. The objective was to provide on-site assistance and, as
necessary, direct questions to appropriate federal officials in
Washington, D.C. OMB established a call center for entities that do
not have an on-site federal liaison. These actions by OMB, together
with an overall increase in state and local program officials'
knowledge of reporting requirements, have made this recommendation
inapplicable.
[End of section]
Appendix III: Comments from the Department of Health and Human
Services:
Department Of Health & Human Services:
Office of the Assistant Secretary for Legislation:
Washington, D.C. 20201:
May 19, 2910:
Cornelia M. Ashby:
Director, Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Ms. Ashby:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) draft report entitled, "RECOVERY ACT: States' and Localities'
Uses of Funds and Actions Needed to Address Implementation Challenges
and Bolster Accountability" (GAO 10-604).
The Department appreciates the opportunity to review this report
before its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
Enclosure:
[End of letter]
General Comments Of The Department Of Health And Human Services (HHS)
On The Government Accountability Office's (GAO) Draft Report Entitled,
"Recovery Act: States' And Localities' Uses Of Funds And Actions
Needed To Address Implementation Challenges And Bolster
Accountability" (GAO-10-604):
The Department appreciates the opportunity to comment on the
Government Accountability Office (GAO) draft report. ACF is interested
in continually improving management processes and oversight. We are
providing the following comments on GAO's three recommendations
throughout the report regarding the sufficiency of ACF's management
information and the ability of ACF to effectively oversee this
important expansion work.
GAO Recommendations:
To provide grantees with appropriate guidelines on their use of Head
Start and Early Head Start grant funds, and enable OHS to monitor the
use of these funds, the Director of OHS should direct regional office
staff to stop allocating all grant funds to the "other" budget
category, and immediately revise all FAAs in which all funds were
allocated to the "other" category.
To facilitate understanding of whether regional decisions regarding
waivers of the program's matching requirement are consistent with
Recovery Act grantees' needs across regions, the Director of OHS
should track and review waivers of the nonfederal matching requirement
and associated justifications.
To oversee the extent to which grantees are meeting the program goal
of providing services to children and families and to better track the
initiation of services under the Recovery Act, the Director of OHS
should collect data on the extent to which children and pregnant women
actually receive services from Head Start and Early Head Start
grantees.
HHS Comments:
Financial Assistance Awards Issued With Funds in the "Other" Budget
Category:
Funds awarded in the "other" category initially allowed ACF to reduce
further delays in funding so grantees could move forward on
implementing the projects while details of budget lines were
finalized. Budgets received through the announcement process were
adequate to make competitive funding decisions but grantees were often
awarded fewer "slots" than they requested. Program and fiscal staff
worked diligently with grantees to arrive at final line item figures
supported by adequate documentation.
An initial review is performed by OHS to determine the appropriate
level of funding and review the program's financial resources and the
relationship between project costs and the achievement of project
objectives. A Financial Assistance Application Approval/Negotiation
Sheet is prepared and submitted to the Office of Grants Management
(OGM) for final negotiation. OGM performs a cost analysis to determine
that computations are correct and to assure that costs identified are
necessary, reasonable and allowable in accordance with the Cost
Principles. OGM also reviews the budget for consistency of charges
between direct and indirect costs, and whether there has been proper
application of an indirect cost rate. Grantees were instructed to
submit revised SF-424, 424A and budget justifications in the amount of
the approved level of funding within 30 days of receipt of the award.
Revised information was needed for both federal and non-federal
budgets for some awards. Some applications required additional
documentation related to facilities.
The issuance of awards in the "Other" category occurred primarily in
one or two regions. OGM continues to issue revised FAAs placing grant
funds in appropriate budget categories and should complete this task
over the next 15 to 20 days. Systems will be implemented to provide
continuity across regions to assure this situation does not occur in
the future.
On page 20, first full sentence, GAO states that even if budgets are
revised so funds are allocated to specific budget categories and not
the "other" category, "...the short duration of the Recovery Act
grants limits the amount of time in which errors, omissions, and
misuse can be identified and remedied." To address this, in addition
to revising the remaining FAAs that place grant funds in the "other"
category, ACF also has a number of other important processes and check-
and-balances that are in place to assist in the management and
oversight of these funds and to detect errors, omissions, and misuses
of funds. Specific examples include:
* Grantee expenditures are monitored in multiple ways. OGM staff
access Program Payment Management System (PMS) reports (from the HHS
Program Support Center) that indicate the amount of the American
Recovery and Reinvestment Act (ARRA) Federal funds drawn down by the
grantee for the previous month. PMS sends automatic alerts to ACF's
OGM if grantees draw down an unusually large amount of funds relative
to what has been obligated. Some grantees have been placed on a cost
reimbursement plan, limiting the ability for the grantee to draw funds
prior to actual expenditures.
* Grantees are required to file detailed Financial Status Reports
(Standard Forms 269 and 272) semi-annually and after the close of the
fiscal year. Grantees are also required to complete an annual audit
and to submit management information and findings to ACF within 30
days of completion.
* Grantees report ARRA expenditures each quarter and a calculation is
applied to the expenditures based on the award date and amount to
determine unusually large or small expenditures and/or jobs. This
information is provided to the regional offices for follow up and
further analysis. ACF's compliance rate with ARRA reporting was 99.9
percent this quarter for nearly 2,400 individual grant awards. Less
than eight percent of grantees' April ARRA reports were identified as
having an error during the Office of Head Start's review of initial
agency submissions. At the end of the reporting period, less than 1.5
percent of reports contained any errors. ACF is actively leveraging
the continuous correction period to address the outstanding errors.
Waiver of Matching Requirement:
Page 17, paragraph two, GAO notes that, "Without a way to track
waivers of the nonfederal matching requirement, OHS cannot readily
determine how pervasive grantees' total dependence on federal funds
may be to take timely action to address any grantees or regional areas
in which community support for Head Start and Early Head Start
programs is lacking."
While delegation of authority to grant ARRA waivers was formally
provided to the regional offices, ACF has a method in place to
centrally track waivers of the non-Federal matching requirement in the
Head Start Enterprise Reporting System. ACF also inquires about the
grantee's ability to reach their non-Federal share as part of Federal
site visits and during risk management calls, and reviews progress on
financial reports to assure concerns are addressed in a timely way.
GAO raised concern over consistency among regions in waiving the
matching requirement, and specifically that two regions have awarded
no waivers. ACF Central Office is tracking them and both regions are
using the flexibility to grant waivers later in the project period.
Grantees may submit waiver requests after the awards and prior to the
end of the fiscal year, so waiver intent is not complete early in the
budget year. We support regional offices exercising this discretion
based on the unique needs of the grantees and the circumstances
grantees confront throughout the project.
Tracking Services to Children and Families:
ACF is confident that reported enrollment is a valid measure of the
number of pregnant women and children receiving services and we have
procedures in place to verify the reported enrollment when we conduct
on-site monitoring.
Actual enrollment is defined as "all children who were included in the
funded enrollment and who have been enrolled in your program and have
attended at least one class or, for programs with home-based options,
received at least one home visit. Include all pregnant women who have
been enrolled in your program and received Early Head Start (EHS)
services."
Since September 2008, HHS has required programs to report their
enrollment on a monthly basis. Central and regional offices conduct
monthly reviews of reported ARRA enrollment. Enrollment is discussed
on risk management calls, and during site visits regional staff is
asked to visit each operational program option. Enrollment records are
validated during formal on-site monitoring reviews.
ACF agrees with the GAO and with the Secretary's Advisory Committee on
Designation Renewal (page 19, paragraph one) that attendance is
important both for individual children and as a means of looking at
program quality, which is why we routinely verify attendance during on-
site monitoring and discuss during risk management meetings. We do
note that the recommendation from the Secretary's Advisory Committee
on Designation Renewal was only that attendance be considered in
designation renewal. It was not related to monthly enrollment
reporting. The Committee understood that attendance data was collected
through on-site monitoring.
Additional Comments:
In addition to commenting on GAO's specific recommendations, ACF
offers the following clarifications to provide further context for its
implementation of the ARRA expansion.
Delays in Funding:
ACF experienced delays in funding, and consequently in draw downs, for
additional reasons than GAO has cited. HHS justifiably conducted
rigorous approval processes for spending plans and expansion
announcements which contributed to delays in publicly posting the
announcements.
ACF projected significant interest in EHS expansion and expected to
receive 1,000 applications. Interest exceeded ACF's expectations and
we received 1,200 applications. An additional two weeks of grant panel
reviews were added to provide adequate time to evaluate these
applications.
As GAO noted, the Office of Inspector General (01G) conducted 83
audits on applicants that had not previously received a Head Start
(HS) or EHS grant. While critical to ACF's funding decision, these
audits lasted several weeks when including time for OIG staff to be on-
site, time for the agency to respond, and the development of the
conclusion and final recommendation. In 17 percent of the cases, ACF
decided not to fund as a result of these audits. On a number of
occasions, the next grantee in ranking order also required an OIG
audit, beginning the process anew.
Additionally, final approvals from State governors varied; the final
gubernatorial approvals were received in April 2010. In many cases,
when applicants were not funded as a result of significant OIG
findings, the next applicant in rank order also required a governor's
letter, which again started anew the 45 day time frame in which a
governor has to respond.
Clarification on Figure 1: Budget Categories:
ACF would like to clarify comments GAO included on page 6 in the first
full paragraph. GAO described funds allocated to "staffing" as being
used to "...enable programs to hire additional staff to help reverse a
drop in the number of Head Start and Early Head Start staff
nationwide...," which is a mischaracterization of the purpose of
expansion funds. These funds were used to enable programs to serve an
increased number of pregnant women, children and families and only
staff to support these new services will be supported with these funds.
Conclusion:
In conclusion, ACF disagrees with GAO's conclusion on page 19 that
ACF's "...lack of available data regarding decisions and activities of
its regional offices and grantees limits its ability to consistently
oversee this rapid expansion and program performance." Since the GAO
report entitled "Head Start: A More Comprehensive Risk Management
Strategy and Data Improvement Could Further Strengthen Program
Oversight" (GAO-08-221), http://www.gao.gov/new.items/d08221.pdf,
issued February 2008, ACF has made significant improvements on the
implementation of a sound information management system that is
transforming access to data and information. ACF has done much to rise
to the challenge of effectively implementing and managing this
historically large expansion and we will continue to improve upon our
data systems and program oversight to ensure that all HS and EHS
programs provide high quality programs with sound management.
[End of section]
Appendix IV: Comments from the Department of Labor:
U.S. Department of Labor:
Assistant Secretary for Employment and Training:
Washington; D.C. 20210:
May 18, 2010:
Mr. J. Christopher Mihm:
Managing Director for Strategic Issues:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, D.C. 20548:
Dear Mr. Mihm:
On behalf of the U.S. Department of Labor (Department), I want to
thank you for the opportunity to review and comment on the Government
Accountability Office's (GAO) May 2010, bimonthly draft report on the
American Recovery and Reinvestment Act of 2009 (Recovery Act),
specifically the section pertaining to Workforce Investment Act (WIA)
Dislocated Worker program.
The Department is committed to doing its part in ensuring America's
economic recovery. A key element of that recovery is putting hard-
working Americans back to work in good, family-supporting jobs that
enable them to enter into or remain in the middle class. It has been
more than a year since the passage of the Recovery Act, a catalytic
investment in building our nation's workforce capacity and laying the
necessary infrastructure to continue to provide high quality training
well beyond the availability of stimulus funds. The additional
Recovery Act resources appropriated to the Department for the purpose
of assisting workers and their families during these challenging
economic times, has reenergized America's public workforce system by
providing a record number of individuals with career counseling, work-
related services, and training.
The report provides useful data on states' and localities' efforts to
extend workforce development services, most importantly training, to
more One-Stop Career Center customers made available by additional
Recovery Act funds. Specifically, the GAO report recommends the
Department bolster its efforts to improve the accuracy and consistency
of financial reporting of Recovery Act funded and regular WIA formula
grants:
* To determine the extent and nature of reporting inconsistencies
across the states and better target technical assistance, conduct a
one-time assessment of financial reports that examines whether each
state's reported data on obligations meet the Department's
requirements.
* To enhance state accountability and to facilitate their progress in
making reporting improvements, routinely review states' reporting on
obligations during regular state comprehensive reviews.
The Department concurs with GAO's above-referenced recommendations.
Some states and local workforce areas continue to confront issues with
accurately applying certain financial terms, such as "obligations,"
for Federal accounting and reporting purposes. The lack of consistency
across states and local areas in understanding both the definition and
application of such terms, along with variations in accounting methods
among the grantee community, makes it difficult for the Department to
draw on reliable conclusions from the reported financial data.
Grantees frequently report obligations as the projected need for
longer-term individual training accounts, training plans, and
encumbrances or other "commitments," even though such planned
activities do not meet the Federal definition of an "obligation" See
29 CFR 97.3 (2009). Inconsistency also arises from differences in
state and local accounting systems and practices, which can influence
how the term "obligation" is interpreted locally. The practical
rationale prompting this behavior is the need to guarantee services to
customers by setting aside funds for the planned duration due to the
uncertainty about future year funding allocations. Some states,
however, have developed systems that provide resources for longer-term
training without tying up funds in informal commitments. Therefore, we
acknowledge that additional monitoring of each state's reported
obligations may be necessary, coupled with increased efforts at
information sharing and technical assistance for grantees.
The Department has taken a number of steps to address this ongoing
management challenge:
* On June 24, 2009, the Employment and Training Administration (ETA)
issued Training and Employment Notice (TEN) 49-08 to inform the
workforce community of the availability of online financial management
training tutorials.
* ETA has provided extensive training to the grantee community on
reporting requirements and accrual accounting; and offered technical
assistance webinars, workshops at annual regional grantee forums, and
provided internal training for ETA's Federal Project Officers.
* ETA issued TEN 39-09 on April 12, 2010 to inform the grantee
community of the availability of additional financial management
training tutorials on the Workforce3One Web site.
* ETA has formed an internal workgroup to further enhance our efforts
to address this issue. Through our cooperative agreement with the
intergovernmental organization collaborative, ETA obtained input from
state and local leaders in this process.
* ETA also is planning to issue a Training and Employment Guidance
Letter to ensure all grantees and subgrantees are aware of the correct
definitions of key terms (obligations, expenditures, etc.).
In addressing the GAO finding related to Florida's financial quarterly
reports to the Department, ETA is monitoring Florida's progress on
correcting their reporting deficiencies and providing additional
technical assistance as needed. ETA will continue to provide technical
assistance to ensure that they are in compliance.
With regards to reporting participant data on dislocated workers
served with Recovery Act funds, the Department has available aggregate
monthly counts of participants who were served with Recovery Act and
regular WIA formula funds combined. As noted in the report, we are
currently testing the statistical model that would allow us to
estimate the number of participants receiving Recovery Act-funded
services.
This report is a timely reminder that there is more work to be done.
The Department is fully committed to ensuring the accountability and
transparency of Recovery Act funds.
Enclosed are ETA's technical comments on the draft report. If you
would like additional information, please do not hesitate to call me
at (202) 693-2700.
Sincerely,
Signed by:
Jane Oates:
Assistant Secretary:
Enclosure:
[End of section]
Appendix V Program Descriptions:
Following are descriptions of selected Recovery Act grant programs.
The table below provides a list of the federal agency or office
administering selected grant programs.
Table 19: Selected Grant Programs and Their Administering Federal
Agency or Office:
Federal agency: Department of Agriculture;
Agency office: Food and Nutrition Service;
Grant program or programs administered:
* Supplemental Nutrition Assistance Program.
Federal agency: Department of Agriculture;
Agency office: Forest Service;
Grant program or programs administered:
* Wildland Fire Management Program.
Federal agency: Department of Commerce;
Agency office: National Telecommunications and Information
Administration;
Grant program or programs administered:
* State Broadband Data and Development Program.
Federal agency: Department of Education;
Agency office: Office of Elementary and Secondary Education;
Grant program or programs administered:
* Elementary and Secondary Education Act of 1965, as amended Title I,
Part A grants;
* State Fiscal Stabilization Fund;
* Race to the Top Fund.
Federal agency: Department of Education;
Agency office: Office of Special Education and Rehabilitative Services;
Grant program or programs administered:
* Individuals with Disabilities Education Act Part B and C grants.
Federal agency: Department of Energy;
Agency office: Office of Electricity Delivery and Energy Reliability;
Grant program or programs administered:
* Renewable and Distributed Systems Integration;
* Smart Grid Investment Grant Program.
Federal agency: Department of Energy;
Agency office: Office of Energy Efficiency and Renewable Energy;
Grant program or programs administered:
* Clean Cities Program;
* Energy Efficiency and Conservation Block Grants;
* State Energy Program;
* Weatherization Assistance Program.
Federal agency: Department of Health and Human Services;
Agency office: Administration for Children and Families;
Grant program or programs administered:
* Child Care and Development Block Grants;
* Community Services Block Grants;
* Head Start/Early Start;
* Recovery Act Impact on Child Support Incentives;
* Title IV-E Adoption Assistance and Foster Care Programs.
Federal agency: Department of Health and Human Services;
Agency office: The Centers for Disease Control and Prevention;
Grant program or programs administered:
* Communities Putting Prevention to Work.
Federal agency: Department of Health and Human Services;
Agency office: The Centers for Medicare and Medicaid Services;
Grant program or programs administered:
* Medicaid Federal Medical Assistance Percentage.
Federal agency: Department of Health and Human Services;
Agency office: Health Resources and Services Administration;
Grant program or programs administered:
* Capital Improvement Program;
* Increased Demand for Services.
Federal agency: Department of Health and Human Services;
Agency office: Office of the National Coordinator for Health
Information Technology;
Grant program or programs administered:
* Health Information Technology Extension Program;
* State Health Information Exchange Cooperative Agreement Program.
Federal agency: Department of Homeland Security;
Agency office: Federal Emergency Management Agency;
Grant program or programs administered:
* Emergency Food and Shelter Program;
* Port Security Grant Program;
* Recovery Act Assistance to Firefighters Fire Station Construction
Grants;
* Staffing for Adequate Fire and Emergency Response.
Federal agency: Department of Housing and Urban Development;
Agency office: Office of Community Planning and Development;
Grant program or programs administered:
* Community Development Block Grants;
* Homelessness Prevention and Rapid Re-Housing Program;
* Neighborhood Stabilization Program 2.
Federal agency: Department of Housing and Urban Development;
Agency office: Office of Public and Indian Housing;
Grant program or programs administered:
* Public Housing Capital Fund.
Federal agency: Department of Justice;
Agency office: Office of Community Oriented Policing Services;
Grant program or programs administered:
* Community Oriented Policing Services Hiring Recovery Program.
Federal agency: Department of Justice;
Agency office: Office of Justice Programs;
Grant program or programs administered:
* Assistance to Rural Law Enforcement to Combat Crime and Drugs
Program;
* Edward Byrne Memorial Justice Assistance Grant Program;
* Internet Crimes Against Children Initiatives.
Federal agency: Department of Justice;
Agency office: Office on Violence Against Women;
Grant program or programs administered:
* Services*Training*Officers*Prosecutors Violence Against Women
Formula Grants.
Federal agency: Department of Labor;
Agency office: Employment and Training Administration;
Grant program or programs administered:
* Senior Community Service Employment Program;
* Workforce Investment Act of 1998 Title I-B Grants.
Federal agency: Department of Transportation;
Agency office: Federal Aviation Administration;
Grant program or programs administered:
* Airport Improvement Program.
Federal agency: Department of Transportation;
Agency office: Federal Highway Administration;
Grant program or programs administered:
* Federal-Aid Highway Surface Transportation Program;
* Transportation Enhancement Program.
Federal agency: Department of Transportation;
Agency office: Federal Railroad Administration;
Grant program or programs administered:
* High-Speed Intercity Passenger Rail Program.
Federal agency: Department of Transportation;
Agency office: Federal Transit Administration;
Grant program or programs administered:
* Fixed Guideway Infrastructure Investment Program;
* Transit Capital Assistance Program;
* Transit Investments for Greenhouse Gas and Energy Reduction Grant
Program.
Federal agency: Department of Transportation;
Agency office: Office of the Secretary;
Grant program or programs administered:
* Transportation Investment Generating Economic Recovery Discretionary
Grants Employment.
Federal agency: Environmental Protection Agency;
Agency office: Office of Air and Radiation;
Grant program or programs administered:
* Diesel Emission Reduction Act Grants.
Federal agency: Environmental Protection Agency;
Agency office: Office of Solid Waste and Emergency Response;
Grant program or programs administered:
* Brownfields Program.
Federal agency: Environmental Protection Agency;
Agency office: Office of Water;
Grant program or programs administered:
* Clean Water State Revolving Fund;
* Drinking Water State Revolving Fund.
Federal agency: National Endowment for the Arts;
Agency office: [Empty];
Grant program or programs administered:
* National Endowment for the Arts Recovery Act grants.
Source: GAO.
[End of table]
Clean and Drinking Water State Revolving Funds:
The Recovery Act appropriated $4 billion for the Clean Water SRF
programs and $2 billion for the Drinking Water SRF programs. These
amounts are a significant increase compared to federal funds awarded
as annual appropriations to the SRF programs in recent years. From
fiscal years 2000 through 2009, annual appropriations averaged about
$1.1 billion for the Clean Water SRF program and about $833 million
for the Drinking Water SRF program. The Environmental Protection
Agency (EPA) distributed the Recovery Act funds to the 50 states, the
District of Columbia, and Puerto Rico to make loans and grants to
subrecipients--local governments and other entities awarded Recovery
Act funds--for eligible wastewater and drinking water infrastructure
projects and "nonpoint source" pollution projects intended to protect
or improve water quality by, for example, controlling runoff from city
streets and agricultural areas.[Footnote 253] The Clean Water and
Drinking Water SRF programs, established in 1987 and 1996
respectively, provide states and local communities independent and
permanent sources of subsidized financial assistance, such as low or
no-interest loans, for projects that protect or improve water quality
and that are needed to comply with federal drinking water regulations
and protect public health.
In addition to providing increased funds, the Recovery Act included
specific requirements for states beyond those that are part of base
Clean Water and Drinking Water SRF programs. For example, states were
required to have all Recovery Act funds awarded to projects under
contract within 1-year of enactment--which was February 17,
2010[Footnote 254]--and EPA was directed to reallocate any funds not
under contract by that date.[Footnote 255]
Further, states were required to use at least 50 percent of Recovery
Act funds to provide assistance in the form of principal forgiveness,
negative interest loans, or grants.[Footnote 256] States were also
required to use at least 20 percent of funds as a "green reserve" to
provide assistance for green infrastructure projects, water or energy
efficiency improvements, or other environmentally innovative
activities.
Education:
State Fiscal Stabilization Fund:
The State Fiscal Stabilization Fund (SFSF) included approximately
$48.6 billion to award to states by formula and up to $5 billion to
award to states as competitive grants. The Recovery Act created the
SFSF in part to help state and local governments stabilize their
budgets by minimizing budgetary cuts in education and other essential
government services, such as public safety. Stabilization funds for
education distributed under the Recovery Act must first be used to
alleviate shortfalls in state support for education to local
educational agencies (LEAs) and public institutions of higher
education (IHE). States must use 81.8 percent of their SFSF formula
grant funds to support education (these funds are referred to as
education stabilization funds) and must use the remaining 18.2 percent
for public safety and other government services, which may include
education (these funds are referred to as government services funds).
The SFSF funds are being provided to states in two phases. Phase 1
funds - at least 67 percent of education stabilization funds and all
government services funds - were provided to each state after
Education approved the state's Phase 1 application for funds. Phase 2
funds are being awarded to states as Education approves each state's
Phase 2 application. The Phase 1 application required each state to
provide several assurances, including that the state will meet
maintenance-of-effort requirements (or will be able to comply with the
relevant waiver provisions); will meet requirements for
accountability, transparency, reporting, and compliance with certain
federal laws and regulations; and that it will implement strategies to
advance four core areas of education reform.[Footnote 257] The Phase 2
application requires each state to explain the information the state
makes available to the public related to the four core areas of
education reform or provide plans for making information related to
the education reforms publicly available no later than September 30,
2011. States must use education stabilization funds to restore state
funding to the greater of fiscal year 2008 or 2009 levels for state
support to LEAs and public IHEs. When distributing these funds to
LEAs, states must use their primary education funding formula, but
they can determine how to allocate funds to public IHEs. In general,
LEAs maintain broad discretion in how they can use education
stabilization funds, but states have some ability to direct IHEs in
how to use these funds.
ESEA Title I, Part A:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through Title I, Part A of the Elementary and
Secondary Education Act of 1965, as amended (ESEA).[Footnote 258]
These additional funds are distributed through states to LEAs using
existing federal funding formulas, which target funds based on such
factors as high concentrations of students from families living in
poverty. In using the funds, LEAs are required to comply with
applicable statutory and regulatory requirements and must obligate 85
percent of the funds by September 30, 2010.[Footnote 259] Education is
advising LEAs to use the funds in ways that will build the agencies'
long-term capacity to serve disadvantaged youth, such as through
providing professional development to teachers. The Recovery Act also
appropriated $3 billion for ESEA Title I School Improvement Grants
(SIG), which provides funds to states for use in ESEA Title I schools
identified for improvement[Footnote 260] in order to substantially
raise the achievement of their students.[Footnote 261] These funds are
awarded by formula to states, which will then make competitive grants
to LEAs. State applications for the $3 billion in Recovery Act SIG
funding as well as an additional $546 million in regular fiscal year
2009 SIG funding were due to the Department of Education on February
28, 2010. SIG regulatory requirements effective in February 2010,
[Footnote 262] prioritize the use of SIG funds in each state's
persistently lowest-achieving Title I schools.[Footnote 263]
To receive funds, states must identify their persistently lowest-
achieving schools, and an LEA that wishes to receive SIG funds must
submit an application to its SEA identifying which schools it commits
to serve and how it will use school improvement funds to implement one
of four school intervention models: (1) turnaround model, which
includes replacing the principal and rehiring no more than 50 percent
of the school's staff; (2) restart model, in which an LEA converts the
school or closes and reopens it as a charter school or under an
education management organization; (3) school closure, in which an LEA
closes the school and enrolls the students who attended the school in
other, higher-achieving schools in the LEA; or (4) the transformation
model, which addresses four specific areas intended to improve schools.
IDEA, Part B:
The Recovery Act provided supplemental funding for programs authorized
by Part B and C of the Individuals with Disabilities Education Act
(IDEA) as amended, the major federal statute that supports early
intervention and special education and related services for children,
and youth with disabilities. Part B funds programs that ensure
preschool and school-aged children with disabilities access to a free
and appropriate public education and is divided into two separate
grants--Part B grants to states (for school-age children) and Part B
preschool grants. Part C funds programs that provide early
intervention and related services for infants and toddlers with
disabilities--or at risk of developing a disability--and their
families.
Emergency Food and Shelter Program:
The Emergency Food and Shelter Program (EFSP), which is administered
by the Federal Emergency Management Agency (FEMA) within the
Department of Homeland Security (DHS), was authorized in July 1987 by
the Stewart B. McKinney Homeless Assistance Act to provide food,
shelter, and supportive services to the homeless.[Footnote 264] The
program is governed by a National Board composed of a representative
from FEMA and six statutorily designated national nonprofit
organizations.[Footnote 265] Since its first appropriation in fiscal
year 1983, EFSP has awarded over $3.4 billion in federal aid to more
than 12,000 local private, nonprofit and government human service
entities in more than 2,500 communities nationwide.
Head Start/Early Head Start:
The Head Start program, administered by the Office of Head Start of
the Administration for Children and Families within the Department of
Health and Human Services, provides comprehensive early childhood
development services to low-income children, including educational,
health, nutritional, social, and other services, intended to promote
the school readiness of low-income children. Federal Head Start funds
are provided directly to local grantees, rather than through states.
The Recovery Act provided an additional $2.1 billion in funding for
Head Start and Early Head Start programs. The Early Head Start program
provides family-centered services to low-income families with very
young children designed to promote the development of the children,
and to enable their parents to fulfill their roles as parents and to
move toward self-sufficiency.
Highway Infrastructure Investment Program:
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal Highway Administration's Federal-Aid Highway Surface
Transportation Program and for other eligible surface transportation
projects. The Recovery Act requires that 30 percent of these funds be
suballocated, primarily based on population, for metropolitan,
regional, and local use. Highway funds are apportioned to states
through federal-aid highway program mechanisms, and states must follow
existing program requirements. While the maximum federal fund share of
highway infrastructure investment projects under the existing federal-
aid highway program is generally 80 percent, under the Recovery Act,
it is 100 percent.
Funds appropriated for highway infrastructure spending must be used in
accordance with Recovery Act requirements. States were given a 1-year
deadline (March 2, 2010) to ensure that all apportioned Recovery Act
funds--including suballocated funds--were obligated.[Footnote 266] The
Secretary of Transportation was to withdraw and redistribute to
eligible states any amount that was not obligated by that time.
[Footnote 266] Additionally, the governor of each state was required
to certify that the state would maintain its level of spending for the
types of transportation projects funded by the Recovery Act it planned
to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state was required to identify the
amount of funds the state planned to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 267]
On March 2, 2009, the Federal Highway Administration apportioned
$799.8 million in Recovery Act funds to states for its Transportation
Enhancement program. States may use program funds for qualifying
surface transportation activities, such as constructing or
rehabilitating off-road shared use paths for bicycles and pedestrians;
conducting landscaping and other beautification projects along
highways, streets, and waterfronts; and rehabilitating and operating
historic transportation facilities, such as historic railroad depots.
[Footnote 268] The Recovery Act requires that 3 percent of Highway
Infrastructure Investment funds provided to states must be used for
Transportation Enhancement activities. Additionally, states may decide
to use additional Recovery Act Transportation Enhancement funds,
beyond the 3 percent requirement, for qualifying activities such as
those mentioned above. States determine the share of federal funds
used for qualifying Transportation Enhancement projects up to 100
percent of the projects' costs.
Public Transportation Program:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through existing Federal Transit Administration
(FTA) grant programs, including the Transit Capital Assistance
Program, and the Fixed Guideway Infrastructure Investment Program.
Under the Transit Capital Assistance Program's formula grant program,
Recovery Act funds were apportioned to large and medium urbanized
areas--which in some cases include a metropolitan area that spans
multiple states--throughout the country according to existing program
formulas. Recovery Act funds were also apportioned to states for small
urbanized areas and nonurbanized areas under the Transit Capital
Assistance Program's formula grant programs using the program's
existing formula. Transit Capital Assistance Program funds may be used
for such activities as vehicle replacements, facilities renovation or
construction, preventive maintenance, and paratransit services.
Recovery Act funds from the Fixed Guideway Infrastructure Investment
Program[Footnote 270] were apportioned by formula directly to
qualifying urbanized areas, and funds may be used for any capital
projects to maintain, modernize, or improve fixed guideway systems.
[Footnote 271] As they work through the state and regional
transportation planning process, designated recipients of the
apportioned funds--typically public transit agencies and metropolitan
planning organizations (MPO)--develop a list of transit projects that
project sponsors (typically transit agencies) submit to FTA for
approval.[Footnote 272]
Funds appropriated for the Transit Capital Assistance Program and the
Fixed Guideway Infrastructure Investment Program must be used in
accordance with Recovery Act requirements. States were given a 1-year
deadline (March 5, 2010) to ensure that all apportioned Recovery Act
funds were obligated.[Footnote 273] The Secretary of Transportation
was to withdraw and redistribute to each state or urbanized area any
amount that was not obligated within these time frames.[Footnote 274]
Additionally, the governor of each state was required to certify that
the state would maintain its level of spending for the types of
transportation projects funded by the Recovery Act it planned to spend
the day the Recovery Act was enacted. As part of this certification,
the governor of each state was required to identify the amount of
funds the state planned to expend from state sources from February 17,
2009, through September 30, 2010.[Footnote 275]
The Transit Investments for Greenhouse Gas and Energy Reduction
(TIGGER) Grant program, administered by the Federal Transit
Administration within the Department of Transportation, is a
discretionary program to support transit capital projects that result
in greenhouse gas reductions or reduced energy use. The Recovery Act
provides $100 million for the TIGGER program, and each submitted
proposal must request a minimum of $2 million.
Medicaid Federal Medical Assistance Percentage:
Medicaid is a joint federal-state program that finances health care
for certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The Centers for
Medicare & Medicaid Services, within the Department of Health and
Human Services, approves state Medicaid plans, and the amount of
federal assistance states receive for Medicaid service expenditures is
determined by the Federal Medical Assistance Percentage (FMAP). The
Recovery Act's temporary increase in FMAP funding will provide states
with approximately $87 billion in assistance.
Public Housing Capital Fund:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management. Under the Recovery Act, the
Office of Public and Indian Housing within the U.S. Department of
Housing and Urban Development (HUD) allocated nearly $3 billion
through the Public Housing Capital Fund to public housing agencies
using the same formula for amounts made available in fiscal year 2008
and obligated these funds to housing agencies in March 2009.
HUD was also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofitting. In September 2009,
HUD awarded competitive grants for the creation of energy-efficient
communities, gap financing for projects stalled due to financing
issues, public housing transformation, and improvements addressing the
needs of the elderly or persons with disabilities.
Weatherization Assistance Program:
The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program, which the Department of Energy (DOE) is
distributing to each of the states, the District of Columbia, and five
territories and two Indian tribes, to be spent by March 31, 2012. The
program, administered by the Office of Energy Efficiency and Renewable
Energy within DOE, enables low-income families to reduce their utility
bills by making long-term energy-efficiency improvements to their
homes by, for example, installing insulation, sealing leaks, and
modernizing heating equipment, air circulation fans, and air
conditioning equipment. Over the past 33 years, the Weatherization
Assistance Program has assisted more than 6.2 million low-income
families. By reducing the energy bills of low-income families, the
program allows these households to spend their money on other needs,
according to DOE. The Recovery Act appropriation represents a
significant increase for a program that has received about $225
million per year in recent years. DOE has approved the weatherization
plans of the 16 states and the District of Columbia that are in our
review and has provided at least half of the funds to those areas.
Workforce Investment Act of 1998 Title I-B Grants:
The Workforce Investment Act of 1998 (WIA) Youth, Adult, and
Dislocated Worker Programs, administered by the Employment and
Training Administration within the Department of Labor, provide job
training and related services to unemployed and underemployed
individuals. The Recovery Act provides an additional $2.95 billion in
funding for Youth, Adult, and Dislocated Worker employment and
training activities under Title I-B of WIA. These funds are allotted
to states, which in turn allocate funds to local entities pursuant to
formulas set out in WIA. The adult program provides training and
related services to individuals ages 18 and older, the youth program
provides training and related services to low-income youth ages 14 to
21, and dislocated worker funds provide training and related services
to individuals who have been laid off or notified that they will be
laid off.[Footnote 276]
Recovery Act funds can be used for all activities allowed under WIA,
including core services, such as job search and placement assistance;
intensive services, such as skill assessment and career counseling;
and training services, including occupational skills training, on-the-
job training, registered apprenticeship, and customized training. For
the youth program, Labor encouraged states and local areas to use as
much of these funds as possible to expand summer youth employment
opportunities. In addition, Labor advised states that training for
adults and dislocated workers should be a significant focus for
Recovery Act funds, and encouraged states to establish policies to
make supportive services and needs-related payments available for
individuals who need these services to participate in job training. To
facilitate increased training for high-demand occupations, the
Recovery Act expanded the methods for providing training under WIA and
allowed local workforce boards to directly enter into contracts with
institutions of higher education and other training providers, if the
local board determines that it would facilitate the training of
multiple individuals and the contract does not limit customer choice.
State and Local Budget:
The following grant programs were mentioned in the state and local
budget section of our Recovery Act reports.[Footnote 277]
Airport Improvement Program:
Within the Department of Transportation, the Federal Aviation
Administration's Airport Improvement Program provides formula and
discretionary grants for the planning and development of public-use
airports. The Recovery Act provides $1.1 billion for discretionary
Grant-in-Aid for Airports under this program with priority given to
projects that can be completed within 2 years. The Recovery Act
requires that the funds must supplement, not supplant, planned
expenditures from airport-generated revenues or from other state and
local sources for airport development activities.
Assistance to Rural Law Enforcement to Combat Crime and Drugs Program:
The Recovery Act Assistance to Rural Law Enforcement to Combat Crime
and Drugs Program is administered by the Bureau of Justice Assistance
(BJA), a component of the Office of Justice Programs, U.S. Department
of Justice. The purpose of this program is to help rural states and
rural areas prevent and combat crime, especially drug-related crime,
and provides for national support efforts, including training and
technical assistance programs strategically targeted to address rural
needs. The Recovery Act provides $125 million for this program, and
BJA has made 212 awards.
Brownfields Program:
The Recovery Act provides $100 million to the Brownfields Program,
administered by the Office of Solid Waste and Emergency Response
within the Environmental Protection Agency, for cleanup,
revitalization, and sustainable reuse of contaminated properties. The
funds will be awarded to eligible entities through job training,
assessment, revolving loan fund, and cleanup grants.
Capital Improvement Program:
The Department of Health and Human Services' Health Resources and
Services Administration has allocated $862.5 million in Recovery Act
funds for Capital Improvement Program grants to health centers to
support the construction, repair, and renovation of more than 1,500
health center sites nationwide, including purchasing health
information technology and expanding the use of electronic health
records.
Child Care and Development Block Grants:
Administered by the Administration for Children and Families within
the Department of Health and Human Services, Child Care and
Development Block Grants, one of the funding streams comprising the
Child Care and Development Fund, are provided to states, according to
a formula, to assist low-income families in obtaining child care, so
that parents can work or participate in education or training
activities. The Recovery Act provides $1.9 billion in supplemental
funding for these grants.
Clean Cities Program:
The Department of Energy's Clean Cities program, administered by the
Office of Energy Efficiency and Renewable Energy, is a government-
industry partnership that works to reduce America's petroleum
consumption in the transportation sector. The Department of Energy is
providing nearly $300 million in Recovery Act funds for projects under
the Clean Cities program, which provide a range of energy-efficient
and advanced vehicle technologies, such as hybrids, electric vehicles,
plug-in electric hybrids, hydraulic hybrids and compressed natural gas
vehicles, helping reduce petroleum consumption across the United
States. The program also supports refueling infrastructure for various
alternative fuel vehicles, as well as public education and training
initiatives, to further the program's goal of reducing the national
demand for petroleum.
Communities Putting Prevention to Work:
The Recovery Act provides $650 million to carry out evidence-based
clinical and community-based prevention and wellness strategies
authorized by the Public Health Service Act that deliver specific,
measurable health outcomes that address chronic disease rates. In
response to the Act, the Department of Health and Human Services
launched the Communities Putting Prevention to work initiative on
September 17, 2009. The goals of the initiative, which is to be
administered by the Centers for Disease Control and Prevention, are to
increase levels of physical activity, improve nutrition, decrease
obesity rates, and decrease smoking prevalence, teen smoking
initiation, and exposure to second-hand smoke through an emphasis on
policy and environmental change at both the state and local levels. Of
the $650 million appropriated for this initiative, approximately $450
million will support community approaches to chronic disease
prevention and control; $120 million will support the efforts of
States and Territories to promote wellness, prevent chronic disease,
and increase tobacco cessation; $32.5 million is allocated for state
chronic disease self-management programs; and $40 million is allocated
to establish a National Prevention Media Initiative and a National
Organizations Initiative to encourage the development of prevention
and wellness messages and advertisements.
Community Development Block Grants:
The Community Development Block Grant (CDBG) program, administered by
the Office of Community Planning and Development within the Department
of Housing and Urban Development, enables state and local governments
to undertake a wide range of activities intended to create suitable
living environments, provide affordable housing, and create economic
opportunities, primarily for persons of low and moderate income. Most
local governments use this investment to rehabilitate affordable
housing and improve key public facilities. The Recovery Act includes
$1 billion for the CDBG.
Community Services Block Grants:
Community Services Block Grants (CSBG), administered by the
Administration for Children and Families within the Department of
Health and Human Services, provide federal funds to states,
territories, and tribes for distribution to local agencies to support
a wide range of community-based activities to reduce poverty. The
Recovery Act appropriated $1 billion for CSBG.
Community Oriented Policing Services (COPS) Hiring Recovery Program:
The Recovery Act provided $1 billion through the Department of
Justice's (DOJ) Community Oriented Policing Service's (COPS) Hiring
Recovery Program (CHRP) for competitive grant funding to law
enforcement agencies to create and preserve jobs and to increase
community policing capacity and crime-prevention efforts. CHRP grants
provide 100 percent funding for three years to cover approved entry-
level salaries and benefits for newly-hired, full-time sworn officers,
including those who were hired to fill positions previously unfunded,
as well as rehired officers who had been laid off. CHRP funds can also
be used in the same manner to retain officers who were scheduled to be
laid off as a result of local budget cuts. There is no local funding
match requirement for CHRP. When the grant term expires after three
years, grantees must retain all sworn officer positions awarded under
the CHRP grant for at least one additional year.
The DOJ COPS office selected local law enforcement agencies to receive
funding based on fiscal health factors - such as changes in budgets
for law enforcement, poverty, unemployment and foreclosure rates - and
reported crime and planned community policing activities. DOJ awards
50 percent of CHRP funds to local law enforcement agencies with
populations greater than 150,000 and awards the remaining 50 percent
to local law enforcement agencies with populations of less than
150,000. Awards were capped at no more than 5 percent of the applicant
agency's actual sworn force strength (up to a maximum of 50 officers)
and a minimum of $5 million was allocated to each state or eligible
territory.
Diesel Emission Reduction Act Grants:
The program objective of the Diesel Emission Reduction Act Grants,
administered by the Office of Air and Radiation in conjunction with
the Office of Grants and Debarment, within the U.S. Environmental
Protection Agency (EPA), is to reduce diesel emissions. EPA will award
grants to address the emissions of in-use diesel engines by promoting
a variety of cost-effective emission reduction strategies, including
switching to cleaner fuels, retrofitting, repowering or replacing
eligible vehicles and equipment, and idle reduction strategies. The
Recovery Act appropriated $300 million for the Diesel Emission
Reduction Act grants. In addition, the funds appropriated through the
Recovery Act for the program are not subject to the State Grant and
Loan Program Matching Incentive provisions of the Energy Policy Act of
2005.
Edward Byrne Memorial Justice Assistance Grant Program:
The Recovery Act provided $2 billion through the Department of
Justice's (DOJ) Edward Byrne Memorial Justice Assistance Grant (JAG)
Program for grants to state and local governments for law enforcement
and criminal justice activities. JAG funds can be used to support a
range of activities in seven broad program areas: (1) law enforcement;
(2) prosecution and courts; (3) crime prevention and education; (4)
corrections; (5) drug treatment and enforcement; (6) program planning,
evaluation, and technology improvement; and (7) crime victim and
witness programs. Within these areas, JAG funds can be used for state
and local initiatives, training, personnel, equipment, supplies,
contractual support, research, and information systems for criminal
justice.
Although each state is guaranteed a minimum allocation of JAG funding,
states and localities therein must apply to DOJ's Bureau of Justice
Assistance (BJA) to receive their grant awards. BJA applies a
statutory formula based on population and violent crime statistics to
determine annual funding levels. After applying the formula, BJA
distributes each state's allocation in two ways:
BJA awards 60 percent directly to the state, and the state must in
turn allocate a formula-based share of these funds - considered a
"variable pass-through," to its local governments; and:
BJA awards the remaining 40 percent directly to eligible units of
local government within the state.
Energy Efficiency and Conservation Block Grants:
The Energy Efficiency and Conservation Block Grants (EECBG),
administered by the Office of Energy Efficiency and Renewable Energy
within the Department of Energy, provides funds through competitive
and formula grants to units of local and state government and Indian
tribes to develop and implement projects to improve energy efficiency
and reduce energy use and fossil fuel emissions in their communities.
The Recovery Act includes $3.2 billion for the EECBG. Of that total,
$400 million is to be awarded on a competitive basis to grant
applicants.
Health Information Technology Extension Program:
The Department of Health and Human Services' Health Information
Technology Extension Program, administered by the Office of the
National Coordinator for Health Information Technology, allocated $643
million to establish 60 Health Information Technology Regional
Extension Centers (RECs) and $50 million to establish a national
Health Information Technology Research Center (HITRC). The first cycle
of awards, announced February 12, 2010, provided $375 million to
create 32 RECs, while the second cycle of awards, announced April 6,
2010, provided $267 million to establish 28 RECs. RECs offer technical
assistance, guidance, and information on best practices for the use of
Electronic Health Records (EHRs) to health care providers. The HITRC
supports RECs efforts by collecting information on best practices from
a wide variety of sources across the country and by acting as a
virtual community for RECS to collaborate with one another and with
relevant stakeholders to identify and share best practices for the use
of EHRs. The goal of the RECs and HITRC is to enable nationwide health
information exchange through the adoption and meaningful use of secure
EHRs.
High-Speed Intercity Passenger Rail Program:
The High-Speed Intercity Passenger Rail Program (HSIPR) is
administered by the Federal Railroad Administration, within the
Department of Transportation. The purpose of the HSIPR Program is to
build an efficient, high-speed passenger rail network connecting major
population centers 100 to 600 miles apart. In the near-term, the
program will aid in economic recovery efforts and lay the foundation
for this high-speed passenger rail network through targeted
investments in existing intercity passenger rail infrastructure,
equipment and intermodal connections. In addition to the $8 billion
provided in the Recovery Act, the HSIPR Program also included
approximately $92 million in FY 2009 and remaining FY 2008 funds
appropriated under the existing State Grant Program (formally titled,
Capital Assistance to States - Intercity Passenger Rail Service). The
FY 2010 DOT Appropriation included $2.5 billion for high speed rail
and intercity passenger rail projects.
Homelessness Prevention and Rapid Re-Housing Program:
The Homelessness Prevention and Rapid Re-Housing Program, administered
by the Office of Community Planning and Development within the
Department of Housing and Urban Development, awards formula grants to
states and localities to prevent homelessness and procure shelter for
those who have become homeless. Funding for this program is being
distributed based on the formula used for the Emergency Shelter Grants
program. According to the Recovery Act, program funds should be used
for short-term or medium-term rental assistance; housing relocation
and stabilization services, including housing search, mediation or
outreach to property owners, credit repair, security or utility
deposits, utility payments, and rental assistance for management; or
appropriate activities for homeless prevention and rapid re-housing of
persons who have become homeless. The Recovery Act includes $1.5
billion for this program.
Increased Demand for Services:
The Department of Health and Human Services' Health Resources and
Services Administration (HRSA) has allocated Recovery Act funds for
Increased Demand for Services (IDS) grants to health centers to
increase health center staffing, extend hours of operations, and
expand existing services. The Recovery Act provided $500 million for
health center operations. HRSA has allocated $343 million for IDS
grants to health centers.[Footnote 278]
Internet Crimes Against Children Initiatives:
Internet Crimes Against Children Initiatives (ICAC), administered by
the Department of Justice, Office of Justice Programs' (OJP) Office of
Juvenile Justice and Delinquency Prevention (OJJDP), seeks to maintain
and expand state and regional ICAC task forces to address technology-
facilitated child exploitation. This program provides funding to
states and localities for salaries and employment costs of law
enforcement officers, prosecutors, forensic analysts, and other
related professionals. The Recovery Act appropriated $50 million for
ICAC.
National Endowment for the Arts Recovery Act Grants:
The Recovery Act provides $50 million to be distributed in direct
grants by the National Endowment for the Arts to fund arts projects
and activities that preserve jobs in the nonprofit arts sector
threatened by declines in philanthropic and other support during the
current economic downturn.
Neighborhood Stabilization Program 2:
The Neighborhood Stabilization Program (NSP), administered by the
Office of Community Planning and Development within the Department of
Housing and Urban Development, provides assistance for the
redevelopment of abandoned and foreclosed homes and residential
properties in order that such properties may be returned to productive
use or made available for redevelopment purposes. The $2 billion in
NSP2 funds appropriated in the Recovery Act are competitively awarded
to states, local governments, and nonprofit organizations.[Footnote
279] NSP is considered to be a component of the Community Development
Block Grant (CDBG) program and basic CDBG requirements govern NSP.
Port Security Grant Program:
The Port Security Grant Program provides grant funding to port areas
for the protection of critical port infrastructure from terrorism. The
Recovery Act provides $150 million in stimulus funding for the Port
Security Grant Program (PSGP) administered by the Federal Emergency
Management (FEMA), an agency of Homeland Security. PSGP funds are
primarily intended to assist ports in enhancing maritime domain
awareness, enhancing risk management capabilities to prevent, detect,
respond to and recover from attacks involving improvised explosive
devices, weapons of mass destruction and other non-conventional
weapons as well as training and exercises and Transportation Worker
Identification Credential implementation. Ports compete for funds and
priority is given to cost-effective projects that can be executed
expeditiously and have a significant and near-term impact on risk
mitigation.
Race to the Top Fund:
The Recovery Act includes up to $5 billion for the Race to the Top
Fund, administered by the Office of Elementary and Secondary Education
(OESE) within the Department of Education. According to Education,
awards in Race to the Top will go to states that are leading the way
with ambitious yet achievable plans for implementing coherent,
compelling, and comprehensive educational reform. Through Race to the
Top Education asks states to advance reforms in four specific areas:
adopting standards and assessments that prepare students to succeed in
college and the workplace and to compete in the global economy;
building data systems that measure student growth and success, and
inform teachers and principals about how they can improve instruction;
recruiting, developing, rewarding, and retaining effective teachers
and principals, especially where they are needed most; and turning
around our lowest achieving schools.
Recovery Act Assistance to Firefighters Fire Station Construction
Grants:
The Recovery Act Assistance to Firefighters Fire Station Construction
Grants, also known as fire grants or the FIRE Act grant program, is
administered by the Department of Homeland Security, Federal Emergency
Management Agency (FEMA), Assistance to Firefighters Program Office.
The program provides federal grants directly to fire departments on a
competitive basis to build or modify existing non-Federal fire
stations in order for departments to enhance their response capability
and protect the communities they serve from fire and fire-related
hazards. The Recovery Act includes $210 million for this program and
provides that no grant shall exceed $15 million.
Recovery Act Impact on Child Support Incentives:
The Child Support Enforcement (CSE) Program (title IV-D of the Social
Security Act) is a joint federal-state program administered by the
Administration for Children and Families (ACF), within the Department
of Health and Human Services. The program provides federal matching
funds to states to carry out their child support enforcement programs,
which enhance the well-being of children by, among other things,
establishing paternity, establishing child support orders, and
collecting child support. Furthermore, ACF makes additional incentive
payments to states based in part on their child support enforcement
programs meeting certain performance goals. States must reinvest their
incentive fund payments into the CSE program or an activity to improve
the CSE program; however, incentive funds reinvested in the CSE
program are not eligible for federal matching funds. Funds for the
federal matching payments and incentive payments are appropriated
annually and the Recovery Act does not appropriate funds for either of
them. However, the Recovery Act temporarily provides for incentive
payments expended by states for child support enforcement to count as
state funds eligible for the federal match. This change is effective
October 1, 2008, through September 30, 2010.
Renewable and Distributed Systems Integration:
The Renewable and Distributed Systems Integration (RDSI) program,
administered by the Office of Electricity Delivery and Energy
Reliability within the Department of Energy, focuses on integrating
renewable and distributed energy technologies into the electric
distribution and transmission system. In April 2008, DOE announced
plans to invest up to $50 million over five years (fiscal years 2008-
2012) in nine projects aimed at demonstrating the use of RDSI
technologies to reduce peak load electricity demand by at least 15
percent at distribution feeders--the power lines delivering
electricity to consumers. The program goal is to reduce peak load
electricity demand by 20 percent at distribution feeders by 2015.
Senior Community Service Employment Program:
The Senior Community Service Employment Program (SCSEP), administered
by the Employment and Training Administration within the Department of
Labor, is a community service and work based training program which
serves low-income persons who are 55 years or older and have poor
employment prospects by placing them in part-time community service
positions and by assisting them to transition to unsubsidized
employment. The Recovery Act provides $120 million for SCSEP.
Services*Training*Officers*Prosecutors (STOP) Violence Against Women
Formula Grants Program:
Under the STOP Program, the Office on Violence Against Women within
the Department of Justice, has awarded over $139 million in Recovery
Act funds to promote a coordinated, multidisciplinary approach to
enhance services and advocacy to victims, improve the criminal justice
system's response, and promote effective law enforcement, prosecution,
and judicial strategies to address domestic violence, dating violence,
sexual assault, and stalking.
Smart Grid Investment Grant Program:
Under the Recovery Act, states will receive $3.4 billion to deploy and
integrate advanced digital technology to modernize the electric
delivery network through the Smart Grid Investment Grant Program,
administered by the Office of Electricity Delivery and Energy
Reliability within the Department of Energy. The program funds a broad
range of projects aimed at applying smart grid technologies to
existing electric system equipment, consumer products and appliances,
meters, electric distribution and transmission systems, and homes,
offices, and industrial facilities.
Staffing for Adequate Fire and Emergency Response:
The Staffing for Adequate Fire and Emergency Response grants program,
administered by the Federal Emergency Management Agency within the
Department of Homeland Security, was created to provide funding
directly to volunteer, combination, and career fire departments to
help them increase staffing and enhance their emergency deployment
capabilities. The goal of SAFER is to ensure departments have an
adequate number of trained, frontline active firefighters capable of
safely responding to and protecting their communities from fire and
fire-related hazards. SAFER provides 2-year grants to fire departments
to pay the salaries of newly hired firefighters or to rehire recently
laid-off firefighters. Fire departments using SAFER funding to hire
new fire fighters commit to retaining the SAFER-funded firefighters
for one full year after the 2-year grant has been expended. The
retention commitment does not extend to previously laid-off
firefighters who have been rehired. In addition, volunteer and
combination firefighter departments are eligible to apply for SAFER
funding to pay for activities related to the recruitment and retention
of volunteer firefighters.[Footnote 280]
State Broadband Data and Development Program:
The Recovery Act appropriated $7.2 billion to extend access to
broadband throughout the United States. Of the $7.2 billion, $4.7
billion was appropriated to the Department of Commerce's (DOC)
National Telecommunications and Information Administration (NTIA) and
$2.5 billion to the Department of Agriculture's (USDA) Rural Utilities
Service (RUS). Of the $4.7 billion, up to $350 million was available
pursuant to the Broadband Data Improvement Act (DBIA) and for the
purpose of developing and maintaining a nationwide map featuring the
availability of broadband service. BDIA directs the Secretary of
Commerce to establish the State Broadband Data and Development Grant
Program and to award grants to eligible entities to develop and
implement statewide initiatives to identify and track the adoption and
availability of broadband services within each State. To accomplish
the joint purposes of the Recovery Act and BIDA, NTIA has developed
the State Broadband Data and Development projects that collect
comprehensive and accurate state-level broadband mapping data, develop
state-level broadband maps, aid in the development and maintenance of
a national broadband map, and fund statewide initiatives directed at
broadband planning.
State Energy Program:
Under the Recovery Act, states will receive $3.1 billion for energy
projects through the State Energy Program (SEP), administered by the
Office of Energy Efficiency and Renewable Energy within the Department
of Energy (DOE). States should prioritize the grants toward funding
energy efficiency and renewable energy programs, including expanding
existing energy efficiency programs, renewable energy projects and
joint activities between States. The State Energy Program's (SEP) 20
percent cost match is not required for grants made with Recovery Act
funds. DOE estimates that SEP funding will have an annual costs
savings of $256 million.
State Health Information Exchange Cooperative Agreement Program:
Under the Department of Health and Human Services' State Health
Information Exchange (HIE) Cooperative Agreement Program, $564 million
has been allocated to support states' efforts to develop the capacity
among health care providers and hospitals in their jurisdiction to
exchange health information across health care systems through the
meaningful use of Electronic Health Records (EHR). The meaningful use
of EHRs aims to improve the quality and efficiency of patient care. In
order to ensure secure and effective use of HIE technology within and
across state borders, grant recipients are expected to use their
authority and resources to implement HIE privacy and security
requirements, coordinate with Medicaid and state public health
programs in using HIE technology, and enable interoperability through
the creation of state-level directories and technical services and the
removal of barriers. The state HIE program uses a cooperative
agreement, or partnership between the grant recipient and the federal
government, to administer the awards (when the Federal government has
a substantial stake in the outcomes or operation of the program). The
state HIE cooperative agreements are 4-year agreements and recipients
will be required to match grant awards beginning in the second year of
the award, 2011.
Supplemental Nutrition Assistance Program (formerly the Food Stamp
Program):
The Supplemental Nutrition Assistance Program (SNAP), administered by
the Food and Nutrition Service within the Department of Agriculture,
serves more than 35 million people nationwide each month. SNAP's goal,
in part, is to help raise the level of nutrition and alleviate the
hunger of low-income households . The Recovery Act provides for a
monthly increase in benefits for the program's recipients. The
increases in benefits under the Recovery Act are estimated to total
$20 billion over the next 5 years.
Title IV-E Adoption Assistance and Foster Care Programs:
Administered by the Administration for Children and Families within
the Department of Health and Human Services, the Foster Care Program
helps states to provide safe and stable out-of-home care for children
until the children are safely returned home, placed permanently with
adoptive families or placed in other planned arrangements for
permanency. The Adoption Assistance Program provides funds to states
to facilitate the timely placement of children, whose special needs or
circumstances would otherwise make placement difficult, with adoptive
families. Federal Title IV-E funds are paid to reimburse states for
their maintenance payments using the states' respective Federal
Medical Assistance Percentage (FMAP) rates. The Recovery Act
temporarily increased the FMAP rate effective October 1, 2008 through
December 31, 2010, resulting in an estimated additional $806 million
that will be provided to states for the foster care and adoption
assistance programs.
Transportation Investment Generating Economic Recovery Discretionary
Grants:
Administered by the Department of Transportation's Office of the
Secretary, the Recovery Act provides $1.5 billion in competitive
grants, generally between $20 million and $300 million, to state and
local governments, and transit agencies. These grants are for capital
investments in surface transportation infrastructure projects that
will have a significant impact on the nation, a metropolitan area, or
a region. Projects eligible for funding provided under this program
include, but are not limited to, highway or bridge projects, public
transportation projects, passenger and freight rail transportation
projects, and port infrastructure investments.
Wildland Fire Management Program:
The Department of Agriculture's Forest Service administers the
Wildland Fire Management Program funding for projects on federal,
state, and private land. The goals of these projects include ecosystem
restoration, research, and rehabilitation; forest health and invasive
species protection; and hazardous fuels reduction. The Recovery Act
provided $500 million for the Wildland Fire Management program.
[End of section]
Appendix VI: Entities Visited by GAO in Selected States and the
District of Columbia:
Table 20: Education Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Mesa;
Entity: Mesa Unified School District #4.
States and the District of Columbia: California;
City/county: Long Beach;
Entity: Long Beach Unified School District.
City/county: Oakland;
Entity: University of California.
City/county: San Diego;
Entity: San Diego Unified School District.
States and the District of Columbia: Colorado;
City/county: Denver;
Entity: Denver County School District 1.
City/county: Denver;
Entity: University of Colorado System.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: District of Columbia Public Schools.
City/county: Washington;
Entity: Center City Public Charter School.
City/county: Washington;
Entity: Friendship Public Charter School.
States and the District of Columbia: Florida;
City/county: Miami;
Entity: Miami-Dade County Public Schools.
City/county: Tampa;
Entity: University of South Florida.
States and the District of Columbia: Georgia;
City/county: Atlanta;
Entity: Georgia Institute of Technology.
City/county: DeKalb;
Entity: DeKalb County School System.
States and the District of Columbia: Illinois;
City/county: Alton;
Entity: Alton Community Unit School District 11.
City/county: Chicago;
Entity: Chicago Public Schools.
City/county: Chicago;
Entity: Northeastern Illinois University.
City/county: Elgin;
Entity: School District U-46, Elgin.
City/county: Grayslake;
Entity: Prairie Crossing Charter School.
City/county: Kankakee;
Entity: Kankakee School District 111.
City/county: Riverdale;
Entity: Dolton-Riverdale School District 148.
City/county: North Chicago;
Entity: North Chicago Community Unit School District 187.
City/county: Peoria;
Entity: Peoria Public Schools District 150.
City/county: Rockford;
Entity: Rockford Public Schools District 205.
City/county: Schaumburg;
Entity: Schaumburg School District 54.
City/county: Waukegan;
Entity: Waukegan Public School District 60.
City/county: Wilmette;
Entity: Wilmette Public Schools District 39.
States and the District of Columbia: Iowa;
City/county: Ames;
Entity: Iowa State University.
City/county: Des Moines;
Entity: Des Moines Independent Community School District.
City/county: Johnston;
Entity: Heartland Area Education Agency.
States and the District of Columbia: Massachusetts;
City/county: Springfield;
Entity: Springfield Public Schools.
City/county: Springfield;
Entity: Springfield Technical Community College.
States and the District of Columbia: Michigan;
City/county: Detroit;
Entity: Detroit Public Schools.
City/county: East Lansing;
Entity: Michigan State University.
States and the District of Columbia: Mississippi;
City/county: Brandon;
Entity: Rankin County Schools.
City/county: Mississippi State;
Entity: Mississippi State University.
States and the District of Columbia: New Jersey;
City/county: Mahwah;
Entity: Ramapo College of New Jersey.
City/county: Newark;
Entity: Newark Public Schools.
States and the District of Columbia: New York;
City/county: Selden;
Entity: Suffolk County Community College.
City/county: Yonkers;
Entity: Yonkers City School District.
States and the District of Columbia: North Carolina;
City/county: Chapel Hill;
Entity: UNC-NC University System.
City/county: New Bern;
Entity: Craven County Schools.
City/county: Newland;
Entity: Newland - Avery County Schools.
City/county: Raleigh;
Entity: Wake County Schools.
City/county: Warrenton;
Entity: Warren County Schools.
City/county: Winston-Salem;
Entity: Winston-Salem/Forsyth County Schools.
States and the District of Columbia: Ohio;
City/county: Columbus;
Entity: The Ohio State University.
City/county: Toledo;
Entity: Toledo Public Schools.
States and the District of Columbia: Pennsylvania;
City/county: Kutztown;
Entity: Kutztown University of Pennsylvania.
City/county: Reading;
Entity: Reading School District.
City/county: York;
Entity: School District of the City of York.
States and the District of Columbia: Texas;
City/county: Austin;
Entity: Austin Independent School District.
City/county: Austin;
Entity: Texas Higher Education Coordinating Board.
City/county: Austin;
Entity: The University of Texas at Austin.
City/county: Round Rock;
Entity: Round Rock Independent School District.
Source: GAO.
Note: Total education entities visited by GAO is 54.
[End of table]
Table 21: Transit Entities Visited by GAO:
States and the District of Columbia: California;
City/county: Los Angeles;
Entity: Los Angeles County Metropolitan Transportation Authority.
City/county: Orange;
Entity: Orange County Transportation Authority.
States and the District of Columbia: Georgia;
City/county: Albany;
Entity: Albany Transit System.
City/county: Savannah;
Entity: Chatham Area Transit Authority.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Massachusetts Bay Transportation Authority.
City/county: Taunton;
Entity: Greater Attleboro Taunton Regional Transit Authority.
States and the District of Columbia: North Carolina;
City/county: Boone;
Entity: AppalCART.
Source: GAO.
Note: Total transit entities visited by GAO is 7.
[End of table]
Table 22: Edward Byrne Memorial Justice Assistance Grants Entities
Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Flagstaff;
Entity: Flagstaff Police Department.
City/county: Mesa;
Entity: Mesa Police Department.
City/county: Phoenix;
Entity: Arizona Criminal Justice Commission.
Stats and the District of Columbia: California;
City/county: Los Angeles;
Entity: Los Angeles Mayor's Office.
City/county: Los Angeles;
Entity: Los Angeles Police Department.
City/county: Sacramento;
Entity: California Emergency Management Agency.
City/county: San Diego;
Entity: San Diego Police Department.
City/county: San Francisco;
Entity: San Francisco Adult Probation Department.
City/county: San Francisco;
Entity: San Francisco Police Department.
City/county: San Francisco;
Entity: San Francisco Department of Children, Youth & Their Families.
City/county: San Francisco;
Entity: San Francisco Department of Public Health.
City/county: San Francisco;
Entity: San Francisco District Attorney's Office.
City/county: San Francisco;
Entity: San Francisco Office of the Controller.
City/county: San Francisco;
Entity: San Francisco Office of the Mayor.
City/county: San Francisco;
Entity: San Francisco Sheriff's Department.
City/county: San Francisco;
Entity: San Francisco Superior Court.
Stats and the District of Columbia: Illinois;
City/county: Chicago;
Entity: Cook County Sheriff's Office.
City/county: Chicago;
Entity: Illinois Criminal Justice Information Authority.
City/county: Rockford;
Entity: Rockford Police Department.
City/county: Rockford;
Entity: Winnebago County Sheriff's Office.
City/county: Springfield;
Entity: Illinois State Police Department.
Stats and the District of Columbia: Massachusetts;
City/county: Everett;
Entity: Everett Police Department.
City/county: Worcester;
Entity: Worcester Police Department.
Stats and the District of Columbia: New York;
City/county: Albany;
Entity: New York State Division of Criminal Justice Services.
City/county: New York;
Entity: New York City Office of the Criminal Justice Coordinator.
City/county: Utica;
Entity: Utica Police Department.
Stats and the District of Columbia: Ohio;
City/county: Columbus;
Entity: Columbus Division of Police.
City/county: Columbus;
Entity: Franklin County Office of Homeland Security and Justice
Programs.
City/county: Columbus;
Entity: Ohio Office of Criminal Justice Services.
City/county: Youngstown;
Entity: Youngstown Police Department.
Stats and the District of Columbia: Pennsylvania;
City/county: Allentown;
Entity: Allentown Police Department.
City/county: Bethlehem;
Entity: Bethlehem Police Department.
City/county: Harrisburg;
Entity: Harrisburg Bureau of Police.
City/county: Harrisburg;
Entity: Dauphin County Criminal Justice Department.
City/county: Philadelphia;
Entity: Philadelphia Police Department.
City/county: Philadelphia;
Entity: Philadelphia Courts - First Judicial District of Pennsylvania.
City/county: York;
Entity: York City Police Department.
City/county: York;
Entity: York County Planning Commission.
Source: GAO.
Note: Total Edward Byrne Memorial Justice Assistance Grant entities
visited by GAO is 38.
[End of table]
Table 23: Community Oriented Policing Services Hiring Recovery Program
Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Flagstaff;
Entity: Flagstaff Police Department.
City/county: Mesa;
Entity: Mesa Police Department.
States and the District of Columbia: California;
City/county: Los Angeles;
Entity: Los Angeles Police Department.
City/county: San Francisco;
Entity: San Francisco Police Department.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: Metropolitan Police Department.
States and the District of Columbia: Ohio;
City/county: Columbus;
Entity: Columbus Division of Police.
City/county: Youngstown;
Entity: Youngstown Police Department.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Boston Police Department.
City/county: Everett;
Entity: Everett Police Department.
States and the District of Columbia: New Jersey;
City/county: East Orange;
Entity: East Orange Police Department.
City/county: Trenton;
Entity: Trenton Police Department.
States and the District of Columbia: Pennsylvania;
City/county: Harrisburg;
Entity: Harrisburg Bureau of Police.
City/county: Philadelphia;
Entity: Philadelphia Police Department.
Source: GAO.
Note: Total Community Oriented Policing Services entities visited by
GAO is 13.
[End of table]
Table 24: Workforce Investment Act of 1998 Summer Youth Program
Entities Visited by GAO:
States and the District of Columbia: Michigan;
City/county: Detroit;
Entity: City Connect Detroit.
City/county: Detroit;
Entity: Detroit Workforce Development Department.
Source: GAO.
Note: Total Workforce Investment Act of 1998 Summer Youth Program
entities visited by GAO is 2.
[End of table]
Table 25: Workforce Investment Act of 1998 Dislocated Worker Entities
Visited by GAO:
States and the District of Columbia: California;
City/county: Los Angeles;
Entity: Los Angeles Community Development Department.
City/county: San Diego;
Entity: San Diego Workforce Partnership, Inc.
States and the District of Columbia: Florida;
City/county: Bartow;
Entity: Region 17: Polk County Workforce Development Board, Inc.
City/county: Daytona Beach;
Entity: Region 11: Workforce Development Board Center for Business
Excellence.
City/county: Lake City;
Entity: Region 7: Florida Crown Workforce Board, Inc.
City/county: Madison;
Entity: Region 6: North Florida Workforce Development Board.
City/county: Miami;
Entity: Region 23: South Florida Workforce Board.
City/county: Orange Park;
Entity: Region 8: First Coast Workforce Development, Inc.
City/county: Orlando;
Entity: Region 12: Workforce Central Florida.
City/county: Port St. Lucie;
Entity: Region 20: Workforce Solutions.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Boston Private Industry Council.
City/county: Fall River;
Entity: Bristol Workforce Investment Board.
States and the District of Columbia: Michigan;
City/county: Detroit;
Entity: Detroit Workforce Development Department.
City/county: Grand Rapids;
Entity: Area Community Services Employment Training Council.
States and the District of Columbia: North Carolina;
City/county: Charlotte;
Entity: Charlotte-Mecklenburg Workforce Development Board.
City/county: Lumberton;
Entity: Lumber River Workforce Development Board.
Source: GAO.
Note: Total Workforce Investment Act Dislocated Worker entities
visited by GAO is 16.
[End of table]
Table 26: Clean and Drinking Water Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Buckeye;
Entity: Town of Buckeye Water Resources Department.
City/county: Eloy;
Entity: City of Eloy.
City/county: Flagstaff;
Entity: City of Flagstaff.
City/county: Mesa;
Entity: City of Mesa WaterResources Department.
City/county: Payson;
Entity: Town of Payson.
States and the District of Columbia: California;
City/county: Fresno;
Entity: City of Fresno, Department of Public Utilities.
City/county: Marin County;
Entity: Tomales Bay Watershed Council Foundation.
City/county: Monterey County;
Entity: Monterey County Department of Public Works.
City/county: Sacramento;
Entity: City of Sacramento Department of Utilities.
States and the District of Columbia: Colorado;
City/county: Georgetown;
Entity: Town of Georgetown.
City/county: Manitou Springs;
Entity: City of Manitou Springs.
City/county: Pagosa Springs;
Entity: Pagosa Area Water and Sanitation District.
States and the District of Columbia: Florida;
City/county: North Miami Beach;
Entity: City of North Miami Beach.
City/county: Stuart;
Entity: City of Stuart.
States and the District of Columbia: Georgia;
City/county: Marietta;
Entity: Cobb County Water System.
City/county: Tennille;
Entity: City of Tennille.
States and the District of Columbia: Iowa;
City/county: Garwin;
Entity: City of Garwin.
City/county: Newton;
Entity: City of Newton.
City/county: Spencer;
Entity: Town of Spencer.
States and the District of Columbia: Mississippi;
City/county: Decatur;
Entity: City of Decatur.
City/county: Hernando;
Entity: DeSoto County Regional Utility Authority.
City/county: Natchez;
Entity: Natchez Water Works.
States and the District of Columbia: New Jersey;
City/county: Bayonne;
Entity: Bayonne Municipal Utilities Authority.
City/county: Beach Haven;
Entity: Borough of Beach Haven.
City/county: Long Branch;
Entity: Long Branch Sewerage Authority.
City/county: Newark;
Entity: Newark City.
City/county: Princeton;
Entity: Stony Brook Regional Sewerage Authority.
States and the District of Columbia: New York;
City/county: New York;
Entity: New York City Department of Environmental Protection,
Paerdegat Basin Combined Sewer Overflow Facility.
City/county: Poestenkill;
Entity: Town of Poestenkill.
City/county: Westchester County;
Entity: Mamaroneck Wastewater Treatment Plant.
States and the District of Columbia: North Carolina;
City/county: Charlotte;
Entity: City of Charlotte.
City/county: Raleigh;
Entity: City of Raleigh.
City/county: Perquimans;
Entity: Town of Perquimans.
States and the District of Columbia: Ohio;
City/county: Chagrin Falls;
Entity: Geauga County McFarland Wastewater Treatment Plant.
City/county: Cleveland;
Entity: Cleveland Division of Water.
City/county: Columbus;
Entity: Columbus Department of Public Utilities.
City/county: Cuyahoga Heights;
Entity: Northeast Ohio Regional Sewer District-Southerly Wastewater
Treatment Plant.
City/county: Jackson;
Entity: Jackson County Water Company.
City/county: Parma;
Entity: City of Parma.
States and the District of Columbia: Pennsylvania;
City/county: Harrisburg;
Entity: Chesapeake Bay Foundation.
City/county: Hazleton;
Entity: Hazleton City Authority Water Department.
City/county: Mount Carmel;
Entity: Mount Carmel Municipal Authority.
States and the District of Columbia: Texas;
City/county: Austin;
Entity: Austin Water Utility.
City/county: Laredo;
Entity: City of Laredo Utilities Department.
Source: GAO.
Note: Total Clean and Drinking Water entities visited by GAO is 44.
[End of table]
Table 27: Weatherization Entities Visited by GAO:
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: African Heritage Dancers and Drummers.
City/county: Washington;
Entity: District Department of the Environment.
City/county: Washington;
Entity: Prosperity Media Enterprise.
City/county: Washington;
Entity: United Planning Organization.
States and the District of Columbia: Florida;
City/county: Indiantown;
Entity: Indiantown Non-Profit Housing, Inc.
City/county: Live Oak;
Entity: Suwannee River Economic Council, Inc.
City/county: St. Petersburg;
Entity: Pinellas County Urban League.
States and the District of Columbia: Georgia;
City/county: Albany;
Entity: City of Albany.
City/county: Gainesville;
Entity: Ninth District Opportunity, Inc.
City/county: Savannah;
Entity: Economic Opportunity Authority for Savannah-Chatham County
Area, Inc.
States and the District of Columbia: Iowa;
City/county: Council Bluffs;
Entity: West Central Community Action.
City/county: Des Moines;
Entity: Polk County Public Works Department, Developmental Services
Division.
City/county: Harlan;
Entity: West Central Community Action.
City/county: Marshalltown;
Entity: Mid-Iowa Community Action, Inc.
States and the District of Columbia: Illinois;
City/county: Elgin;
Entity: Community Contacts, Inc.
City/county: Joliet;
Entity: Will County Center for Community Concerns.
City/county: Waukegan;
Entity: Community Action Partnership of Lake County.
States and the District of Columbia: Mississippi;
City/county: Columbia;
Entity: Pearl River Valley Opportunity, Inc.
City/county: D'Lo;
Entity: South Central Community Action Agency.
City/county: Jackson;
Entity: Mississippi Department of Human Services Division of Community
Services.
City/county: Jackson;
Entity: Mississippi Department of Human Services Division of Program
Integrity.
City/county: McComb;
Entity: Southwest Mississippi Opportunity, Inc.
City/county: Meridian;
Entity: Multi-County Community Service Agency.
States and the District of Columbia: New York;
City/county: Centereach;
Entity: Community Development Corporation of Long Island Inc.
City/county: Long Island City;
Entity: Community Environmental Center Inc.
City/county: Syracuse;
Entity: People's Equal Action and Community Effort, Inc.
States and the District of Columbia: North Carolina;
City/county: Boone;
Entity: WAMY Community Action Inc.
City/county: Laurinburg;
Entity: Four County Community Services, Inc.
City/county: Raleigh;
Entity: North Carolina Department of Commerce - Weatherization
Assistance Program.
City/county: Williamston;
Entity: Martin County Community Action.
States and the District of Columbia: Pennsylvania;
City/county: Harrisburg;
Entity: Pennsylvania Housing Finance Agency.
City/county: Lancaster;
Entity: Thaddeus Stevens College of Technology.
City/county: Philadelphia;
Entity: Energy Coordinating Agency.
City/county: Pittsburgh;
Entity: ACTION-Housing, Inc.
City/county: Pittsburgh;
Entity: Community College of Allegheny County.
City/county: Williamsport;
Entity: Pennsylvania College of Technology: Weatherization Training
Center.
City/county: York;
Entity: York County Planning Commission.
States and the District of Columbia: Texas;
City/county: Austin;
Entity: Texas Department of Housing and Community Affairs.
City/county: Houston;
Entity: City of Houston.
City/county: Houston;
Entity: Sheltering Arms Senior Services.
City/county: San Antonio;
Entity: Alamo Area Council of Governments.
City/county: Sherman;
Entity: Texoma Council of Governments.
Source: GAO.
Note: Total Weatherization entities visited by GAO is 42.
[End of table]
Table 28: Housing Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Casa Grande;
Entity: Pinal County Housing Department.
City/county: Flagstaff;
Entity: Housing Authority of the City of Flagstaff.
City/county: Nogales;
Entity: Nogales Housing Authority.
City/county: Phoenix;
Entity: City of Phoenix Neighborhood Services Department.
City/county: Phoenix;
Entity: Housing Authority of Maricopa County.
City/county: South Tucson;
Entity: South Tucson Housing Authority.
City/county: Tucson;
Entity: City of Tucson Department of Housing and Community Development.
States and the District of Columbia: California;
City/county: San Francisco;
Entity: San Francisco Housing Authority.
States and the District of Columbia: Colorado;
City/county: Denver;
Entity: Housing Authority of the City and County of Denver.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: District of Columbia Housing Authority.
States and the District of Columbia: Florida;
City/county: Hialeah;
Entity: The Hialeah Housing Authority.
City/county: Lakeland;
Entity: The Housing Authority of the City of Lakeland.
City/county: Orlando;
Entity: The Housing Authority of the City of Orlando.
City/county: Pasco County;
Entity: Pasco County Housing Authority.
City/county: Sarasota;
Entity: Sarasota Housing Authority.
States and the District of Columbia: Georgia;
City/county: Atlanta;
Entity: Housing Authority of the City of Atlanta.
City/county: Macon;
Entity: Housing Authority of the City of Macon.
City/county: McDonough;
Entity: Housing Authority of the City of McDonough.
City/county: Villa Rica;
Entity: Housing Authority of the City of Villa Rica.
States and the District of Columbia: Illinois;
City/county: Centralia;
Entity: Marion County Housing Authority.
City/county: Chicago;
Entity: Chicago Housing Authority.
City/county: Chicago;
Entity: Housing Authority of the County of Cook.
City/county: Ottawa;
Entity: Housing Authority for LaSalle County.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: Des Moines Municipal Housing Authority.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Boston Housing Authority.
City/county: Cambridge;
Entity: Cambridge Housing Authority.
City/county: Clinton;
Entity: Clinton Housing Authority.
City/county: Lowell;
Entity: Lowell Housing Authority.
City/county: Revere;
Entity: Revere Housing Authority.
City/county: Taunton;
Entity: Taunton Housing Authority.
States and the District of Columbia: Michigan;
City/county: Detroit;
Entity: Detroit Housing Commission.
City/county: Lansing;
Entity: Lansing Housing Commission.
City/county: Mount Clemens;
Entity: Mount Clemens Housing Commission.
City/county: Port Huron;
Entity: Port Huron Housing Commission.
States and the District of Columbia: Mississippi;
City/county: Corinth;
Entity: Corinth Housing Authority.
States and the District of Columbia: New Jersey;
City/county: Elizabeth;
Entity: Housing Authority of the City of Elizabeth.
City/county: Englewood;
Entity: Housing Authority of Bergen County.
City/county: Newark;
Entity: Newark Housing Authority.
City/county: Rahway;
Entity: The Housing Authority of the City of Rahway.
City/county: Trenton;
Entity: Trenton Housing Authority.
States and the District of Columbia: Ohio;
City/county: Chillicothe;
Entity: Chillicothe Metropolitan Housing Authority.
City/county: Columbus;
Entity: Columbus Metropolitan Housing Authority.
City/county: Dayton;
Entity: Dayton Metropolitan Housing Authority.
City/county: London;
Entity: London Metropolitan Housing Authority.
City/county: Warren;
Entity: Trumbull Metropolitan Housing Authority.
States and the District of Columbia: Pennsylvania;
City/county: Harrisburg;
Entity: Harrisburg Housing Authority.
States and the District of Columbia: Texas;
City/county: El Paso;
Entity: Housing Authority of the City of El Paso.
City/county: Ferris;
Entity: Ferris Housing Authority.
City/county: McKinney;
Entity: McKinney Housing Authority.
City/county: San Antonio;
Entity: San Antonio Housing Authority.
Source: GAO.
Note: Total housing entities visited by GAO is 50.
[End of table]
Table 29: Tax Credit Assistance Program Entities Visited by GAO:
States and the District of Columbia: Colorado;
City/county: Denver;
Entity: Colorado Housing and Finance Authority.
City/county: Denver;
Entity: Denver Gardens.
City/county: Denver;
Entity: Yale Station.
States and the District of Columbia: Florida;
City/county: Tallahassee;
Entity: Florida Housing Finance Corporation.
States and the District of Columbia: Georgia;
City/county: Atlanta;
Entity: Georgia Housing and Finance Authority.
City/county: Albany;
Entity: The Landing at South Lake, Albany.
City/county: Atlanta;
Entity: Baptist Towers Apartments.
City/county: Dublin;
Entity: Riverview Heights.
City/county: Dublin;
Entity: Waterford Estates.
City/county: Sandersville;
Entity: Camellia Lane L.P.
City/county: Savannah;
Entity: Sustainable Fellwood.
States and the District of Columbia: Illinois;
City/county: Chicago;
Entity: Illinois Housing Development Authority.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: Iowa Finance Authority.
City/county: Des Moines;
Entity: Southview Senior Apartments.
City/county: Des Moines;
Entity: Homes of Oakridge.
City/county: Des Moines;
Entity: MLK Brickstone Development LP.
States and the District of Columbia: Michigan;
City/county: Lansing;
Entity: Michigan State Housing Development Authority.
States and the District of Columbia: Mississippi;
City/county: Jackson;
Entity: Mississippi Home Corporation.
City/county: Jackson;
Entity: The Rose of Jackson.
City/county: Pascagoula;
Entity: Bayside Village.
City/county: Gulfport;
Entity: Crown Hill I Apartments.
States and the District of Columbia: Ohio;
City/county: Columbus;
Entity: Ohio Housing Finance Agency.
City/county: Dayton;
Entity: East End Twin Towers Crossing.
States and the District of Columbia: Pennsylvania;
City/county: Allentown;
Entity: Greystone Apartments.
City/county: Harrisburg;
Entity: Pennsylvania Housing Finance Agency.
City/county: Stewartstown;
Entity: Hopewell Courtyard.
Source: GAO.
Note: Total Tax Credit Assistance Program entities visited by GAO is
26.
[End of table]
Table 30: Local Governments Visited by GAO (Government Type,
Population, and Unemployment):
States: Arizona;
Local government: Flagstaff;
Type of local government: City;
Population: 60,222;
Unemployment Rate: 5.8.
Local government: Mesa;
Type of local government: City;
Population: 463,552;
Unemployment Rate: 8.0.
States: California;
Local government: San Diego;
Type of local government: City;
Population: 1,279,329;
Unemployment Rate: 11.0.
Local government: San Francisco;
Type of local government: City;
Population: 808,976;
Unemployment Rate: 10.3.
Local government: Los Angeles;
Type of local government: City;
Population: 3,833,995;
Unemployment Rate: 13.5.
Local government: Sacramento;
Type of local government: City;
Population: 463,794;
Unemployment Rate: 13.1.
States: Colorado;
Local government: Fort Collins;
Type of local government: City;
Population: 136,509;
Unemployment Rate: 8.2.
Local government: Grand Junction;
Type of local government: City;
Population: 49,688;
Unemployment Rate: 10.3.
States: Florida;
Local government: Orlando;
Type of local government: City;
Population: 230,519;
Unemployment Rate: 11.5.
Local government: Orange County;
Type of local government: Urban;
Population: 1,086,480;
Unemployment Rate: 12.0.
States: Georgia;
Local government: Albany;
Type of local government: City;
Population: 75,831;
Unemployment Rate: 12.5.
Local government: Dekalb County;
Type of local government: Suburban;
Population: 747,274;
Unemployment Rate: 10.4.
Local government: Savannah;
Type of local government: City;
Population: 132,410;
Unemployment Rate: 9.8.
States: Illinois;
Local government: Cook County;
Type of local government: Urban;
Population: 5,287,037;
Unemployment Rate: 11.3.
Local government: Winnebago County;
Type of local government: Urban;
Population: 299,702;
Unemployment Rate: 17.5.
States: Iowa;
Local government: Council Bluffs;
Type of local government: City;
Population: 59,536;
Unemployment Rate: 6.2.
Local government: Des Moines;
Type of local government: City;
Population: 197,052;
Unemployment Rate: 8.4.
Local government: Newton;
Type of local government: City;
Population: 15,042;
Unemployment Rate: 9.6.
States: Massachusetts;
Local government: Boston;
Type of local government: City;
Population: 609,023;
Unemployment Rate: 8.1.
Local government: Everett;
Type of local government: City;
Population: 37,353;
Unemployment Rate: 9.9.
Local government: Springfield;
Type of local government: City;
Population: 150,640;
Unemployment Rate: 13.7.
Local government: Worcester;
Type of local government: City;
Population: 175,011;
Unemployment Rate: 10.4.
States: Michigan;
Local government: Flint;
Type of local government: City;
Population: 112,900;
Unemployment Rate: 27.0.
Local government: Lansing;
Type of local government: City;
Population: 113,968;
Unemployment Rate: 16.3.
States: Mississippi;
Local government: Greenwood;
Type of local government: City;
Population: 16,084;
Unemployment Rate: 15.1.
Local government: Hattiesburg;
Type of local government: City;
Population: 51,993;
Unemployment Rate: 10.5.
States: New Jersey;
Local government: Bergen County;
Type of local government: Urban;
Population: 895,250;
Unemployment Rate: 8.5.
Local government: Burlington County;
Type of local government: Suburban;
Population: 446,108;
Unemployment Rate: 9.6.
Local government: Cape May County;
Type of local government: Rural;
Population: 96,091;
Unemployment Rate: 16.3.
Local government: Newark;
Type of local government: City;
Population: 278,980;
Unemployment Rate: 15.5.
States: New York;
Local government: New York;
Type of local government: City;
Population: 8,363,710;
Unemployment Rate: 9.9.
Local government: Westchester County;
Type of local government: Suburban;
Population: 955,962;
Unemployment Rate: 7.2.
States: North Carolina;
Local government: Bladen County;
Type of local government: Rural;
Population: 32,343;
Unemployment Rate: 12.2.
Local government: City of Durham;
Type of local government: Urban;
Population: 223,284;
Unemployment Rate: 7.4.
Local government: Halifax County;
Type of local government: Rural;
Population: 54,582;
Unemployment Rate: 13.2.
Local government: City of Jacksonville;
Type of local government: Rural;
Population: 76,233;
Unemployment Rate: 8.5.
States: Ohio;
Local government: Putnam County;
Type of local government: Rural;
Population: 34,377;
Unemployment Rate: 11.7.
Local government: Toledo;
Type of local government: City;
Population: 293,201;
Unemployment Rate: 13.3.
States: Pennsylvania;
Local government: Allentown;
Type of local government: City;
Population: 107,250;
Unemployment Rate: 13.2.
Local government: Philadelphia;
Type of local government: City;
Population: 1,447,395;
Unemployment Rate: 11.3.
Local government: Dauphin County;
Type of local government: Urban;
Population: 258,934;
Unemployment Rate: 8.7.
Local government: York County;
Type of local government: Urban;
Population: 428,937;
Unemployment Rate: 9.6.
States: Texas;
Local government: Austin;
Type of local government: City;
Population: 757,688;
Unemployment Rate: 6.5.
Local government: Dallas;
Type of local government: City;
Population: 1,279,910;
Unemployment Rate: 8.8.
Local government: Houston;
Type of local government: City;
Population: 2,242,193;
Unemployment Rate: 8.0.
Source: U.S. Census Bureau and U.S. Department of Labor, Bureau of
Labor Statistics (BLS), Local Area Unemployment Statistics (LAUS) data.
Notes: City population data are from the latest available estimate,
July 1, 2008. County population data are from the latest available
estimate, July 1, 2009. Unemployment rates are preliminary estimates
for March 2010 and have not been seasonally adjusted. Rates are a
percentage of the labor force. Estimates are subject to revisions.
Total number of local governments visited by GAO is 45.
[End of table]
[End of section]
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
J. Christopher Mihm, Managing Director for Strategic Issues, (202) 512-
6806 or mihmj@gao.gov:
For issues related to Head Start/Early Head Start, WIA, SFSF, and
other education programs: Barbara D. Bovbjerg, Managing Director of
Education, Workforce, and Income Security, (202) 512-7215 or
bovbjergb@gao.gov:
For issues related to Medicaid programs: Dr. Marjorie Kanof, Managing
Director of Health Care, (202) 512-7114 or kanofm@gao.gov:
For issues related to highways, transit, and other transportation
programs: Katherine A. Siggerud, Managing Director of Physical
Infrastructure, (202) 512-2834 or siggerudk@gao.gov:
For issues related to clean and drinking water state revolving funds,
energy and weatherization: Patricia Dalton, Managing Director of
Natural Resources and Environment, (202) 512-3841 or daltonp@gao.gov:
For issues related to public housing: Richard J. Hillman, Managing
Director of Financial Markets and Community Investment, (202) 512-9073
or hillmanr@gao.gov:
For issues related to internal controls and Single Audits: Jeanette
Franzel, Managing Director of Financial Management and Assurance,
(202) 512-2600 or franzelj@gao.gov:
For issues related to contracting and procurement: Paul Francis,
Managing Director of Acquisition and Sourcing Management, (202) 512-
4841 or francisp@gao.gov:
For issues related to Justice Assistance Grant (JAG) program or the
COPS Hiring Recovery Program: Cathleen A. Berrick, Managing Director
of Homeland Security and Justice, (202) 512-8777 or berrickc@gao.gov:
For issues related to fraud, waste, and abuse: Gregory D. Kutz,
Managing Director of Forensic Audits and Special Investigations, (202)
512-6722 or kutzg@gao.gov:
Staff Acknowledgments:
The following staff contributed to this report: Stanley Czerwinski,
Denise Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas
James, James McTigue, and Michelle Sager, (Assistant Directors);
Sandra Beattie (Analyst-in-Charge); and David Alexander, Judith
Ambrose, Peter Anderson, Thomas Beall, Noah Bleicher, Jessica
Botsford, Anthony Bova, Lauren Calhoun, Richard Cambosos, Ralph
Campbell Jr., Virginia Chanley, Tina Cheng, Andrew Ching, Marcus
Corbin, Robert Cramer, Fran Davison, Michael Derr, Helen Desaulniers,
Ruth "Eli" DeVan, David Dornisch, Kevin Dooley, Abe Dymond, Holly Dye,
Janet Eackloff, Lorraine Ettaro, Christopher M. Farrell, James Fuquay,
Alice Feldesman, Kevin Finnerty, Alexander Galuten, Ellen Grady, Anita
Hamilton, Geoffrey Hamilton, Joel Hannah, Tracy Harris, Kristine
Hassinger, Lauren Heft, Bert Japikse, Mitchell Karpman, Karen Keegan,
Stanley Kostyla, John Krump, Jon Kucskar, Hannah Laufe, Jean K. Lee,
Teague Lyons, Natalie Maddox, Stephanie May, Sarah M. McGrath, John
McGrail, Jean McSween, Sean Merrill, Donna Miller, Kevin Milne, Marc
Molino, Mimi Nguyen, Ken Patton, Anthony Pordes, Brenda Rabinowitz,
Carl Ramirez, James Rebbe, Andrew Redd, Beverly Ross, Sylvia Schatz,
Sidney Schwartz, John Smale Jr., Don Springman, Andrew J. Stephens,
Alyssa Weir, Crystal Wesco, Craig Winslow, Elizabeth Wood, William T.
Woods, and Kimberly Young.
Program Contributors:
[End of section]
The names of GAO staff contributing to information contained in the
sections on the selected program are as follows:
Clean and Drinking Water State Revolving Funds:
Nancy L. Crothers, Elizabeth Erdmann, Brian M. Friedman, Gary C.
Guggolz, Emily Hanawalt, Nicole A. Harkin,Carol L. Kolarik, and David
C. Trimble.
Education--SFSF, ESEA Title I, and IDEA:
Jaime Allentuck, Cornelia M. Ashby, Edward Bodine, Jessica Botsford,
Amy Buck, Karen Febey, Alex Galuten, Mark Glickman, Bryon Gordon,
Sonya Harmeyer, Jean McSween, Elizabeth Morrison, Kathy Peyman, James
M. Rebbe, Crystal Robinson, Scott Spicer, Michelle Verbrugge, Charles
Willson, and Sarah Wood.
Head Start/Early Head Start:
Cornelia M. Ashby, James Bennett, Anna Bonelli, Alexandra Edwards,
Angela Jacobs, Janet Lee, Perry Lusk, Kathleen Van Gelder, and Betty
Ward-Zukerman.
Justice Assistance Grants (JAG) and COPS Hiring Recovery Program
(CHRP):
Dorian Dunbar, George Erhart, Joy Gambino, Geoff Hamilton, David
Maurer, Debbie Sebastian, Adam Vogt, Rich Winsor, and Yee Wong.
Medicaid:
Susan Anthony, Emily Beller, Laura Brogan, Ted Burik, Julianne
Flowers, Martha Kelly, and Carolyn Yocom.
Public housing:
Don Brown, Don Kiggins, May Lee, John McGrail, Marc Molino, Deena
Richart, Paul Schmidt, Jennifer Schwartz, Mathew Scire, and Marie Webb.
Tax Credit Assistance Program (TCAP) and Section 1602 Program:
Jennifer Alpha, Emily Chalmers, Heather Chartier, Andrew Finkel, John
McGrail, Marc Molino, George Quinn, Carl Ramirez, Mathew Scire, and
Swati Thomas.
Recipient reporting:
Yvonne Jones, Judith Kordahl, Hayley Landes, James McTigue, Patricia
Norris, and Jon Stehle.
Safeguarding/Single Audit:
Phyllis Anderson, Andrew Grimaldi, Kim McGatlin, Diane Morris, Maria
Morton, Susan Ragland, Sandra Silzer, and Doris Yanger.
State and local budget:
Sandra Beattie, Stanley J. Czerwinski, Ioan Ifrim, Michelle Sager, and
Esther Toledo.
Transportation/highway and transit programs:
Aisha Cabrer, Steve Cohen, Phillip Herr, Joah Iannotta, Les Locke, Tim
Schindler, Raymond Sendejas, and David Wise.
Weatherization:
Jessica Bryant-Bertail, Mark Gaffigan, Kim Gianopoulos, Stuart Ryba,
and Jason Trentacoste.
WIA Dislocated Worker Program:
Dianne Blank, Susannah Compton, Laura Heald, Christopher Lyons, Lauren
Membreno, and Andy Sherrill.
Contributors to the Selected States and the District:
The names of GAO staff contributing to the selected states and the
District are as follows:
Arizona:
Karyn Angulo, Rebecca Bolnick, Tom Brew, Lisa Brownson, Steven Calvo,
Eileen Larence, Roy Judy, Radha Seshagiri, and Jeff Schmerling.
California:
Linda Calbom, Emily Eischen, Guillermo Gonzalez, Richard Griswold,
Susan Lawless, Gail Luna, Heather MacLeod, Emmy Rhine, Eddie Uyekawa,
and Lacy Vong.
Colorado:
Paul Begnaud, Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer
Leone, Brian Lepore, Robin Nazzaro, Tony Padilla, Leslie Pollock,
Kathleen Richardson, and Dawn Shorey.
District of Columbia:
Laurel Beedon, Labony Chakraborty, Sunny Chang, Nagla'a El-Hodiri,
Mattias Fenton, John Hansen, Nicole Harris, Adam Hoffman, William O.
Jenkins, Jr., and Leyla Kazaz.
Florida:
Michael Armes, Susan Aschoff, Patrick di Battista, Lisa Galvan-
Trevino, Cheri Harrington, Sabur Ibrahim, Kevin Kumanga, Frank Minore,
Brenda Ross, Andy Sherrill, Bernard Ungar, Margaret Weber, and James
Whitcomb.
Georgia:
Alicia Puente Cackley, Waylon Catrett, Chase Cook, Marc Molino, Daniel
Newman, John H. Pendleton, Nadine Garrick Raidbard, Barbara Roesmann,
Paige Smith, David Shoemaker, and Robyn Trotter.
Illinois:
Silvia Arbelaez-Ellis, Dean Campbell, Debra Draper, Gail Marnik, Cory
Marzullo, Paul Schmidt, Roberta Rickey, and Rosemary Torres Lerma.
Iowa:
Richard Cheston, Thomas Cook, Daniel Egan, Christine Frye, Ronald
Maxon, Mark Ryan, Raymond H. Smith, Jr., Lisa Shames, and Carol
Herrnstadt Shulman.
Massachusetts:
Stanley J. Czerwinski, Laurie Ekstrand, Anthony Bova, Nancy J.
Donovan, Kathleen M. Drennan, Lorin Obler, Keith C. O'Brien, Kathryn
O'Dea, Carol Patey, and Robert Yetvin.
Michigan:
Ranya Elias, Kevin Finnerty, Patrick Frey, Henry Malone, Giao N.
Nguyen, Robert Owens, Laura Pacheco, Susan Ragland, and Amy Sweet.
Mississippi:
James Elgas, Barbara Haynes, John K. Needham, Norman J. Rabkin, Anna
Russell, Gary Shepard, Erin Stockdale, and Ryan Stott.
New Jersey:
Gene Aloise, Kisha Clark, Anne Dilger, Diana Glod, Alexander Lawrence
Jr., Nancy Lueke, Tarunkant Mithani, Nitin Rao, and David Wise.
New York:
John H. Davis, Christopher Farrell, Susan Fleming, Emily Larson, Dave
Maurer, Tiffany Mostert, Summer Pachman, Frank Putallaz, Ronald
Stouffer, and Yee Wong.
North Carolina:
Laura G. Acosta, Cornelia Ashby, Sandra Baxter, Sarah Jane Brady,
Bonnie Derby, Kaleb Dumot, Bryon Gordon, Sara S. Kelly, Leslie Locke,
Tahra Nichols, Anthony Patterson, Paula Rascona, and Connie W. Sawyer.
Ohio:
Debra Cottrell, Matthew Drerup, Brian Egger, Bill J. Keller, Tranchau
Nguyen, Sanford Reigle, George A. Scott, Brian Smith, David C.
Trimble, Myra Watts-Butler, and Lindsay Welter.
Pennsylvania:
Eleanor Cambridge, Mark Gaffigan, John Healey, Phillip Herr, Richard
Jorgenson, Richard Mayfield, James Noel, Jodi M. Prosser, Matthew
Rosenberg, MaryLynn Sergent, and Stephen Ulrich.
Texas:
Fredrick D. Berry, Danny Burton, James Cooksey, K. Eric Essig, Erinn
Flanagan, Ken Howard, Michael O'Neill, Gloria Proa, Bob Robinson, and
Lorelei St. James.
[End of section]
Related GAO Products:
Health Coverage Tax Credit: Participation and Administrative Costs.
[hyperlink, http://www.gao.gov/products/GAO-10-521R]. Washington,
D.C.: April 30, 2010.
Energy Star Program: Covert Testing Shows the Energy Star Program
Certification Process Is Vulnerable to Fraud and Abuse. [hyperlink,
http://www.gao.gov/products/GAO-10-470]. Washington, D.C.: March 5,
2010.
Recovery Act: California's Use of Funds and Efforts to Ensure
Accountability. [hyperlink, http://www.gao.gov/products/GAO-10-467T].
Washington, D.C.: March 5, 2010.
Recovery Act: Factors Affecting the Department of Energy's Program
Implementation. [hyperlink, http://www.gao.gov/products/GAO-10-497T].
Washington, D.C.: March 4, 2010.
Recovery Act: One Year Later, States' and Localities' Uses of Funds
and Opportunities to Strengthen Accountability. [hyperlink,
http://www.gao.gov/products/GAO-10-437]. Washington, D.C.: March 3,
2010.
State and Local Governments' Fiscal Outlook March 2010 Update.
[hyperlink, http://www.gao.gov/products/GAO-10-358]. Washington, D.C.:
March 2, 2010.
Recovery Act: Officials' Views Vary on Impacts of Davis-Bacon Act
Prevailing Wage Provision. [hyperlink,
http://www.gao.gov/products/GAO-10-421]. Washington, D.C.: February
24, 2010.
Recovery Act: Project Selection and Starts Are Influenced by Certain
Federal Requirements and Other Factors. [hyperlink,
http://www.gao.gov/products/GAO-10-383]. Washington, D.C.: February
10, 2010.
Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting
and Enforcement Improvements Are Needed. [hyperlink,
http://www.gao.gov/products/GAO-10-349]. Washington, D.C.: February
10, 2010.
Status of the Small Business Administration's Implementation of
Administrative Provisions in the American Recovery and Reinvestment
Act of 2009. [hyperlink, http://www.gao.gov/products/GAO-10-298R].
Washington, D.C.: January 19, 2010.
Recovery Act: States' Use of Highway and Transit Funds and Efforts to
Meet the Act's Requirements. [hyperlink,
http://www.gao.gov/products/GAO-10-312T]. Washington, D.C.: December
10, 2009.
Recovery Act: Status of States' and Localities' Use of Funds and
Efforts to Ensure Accountability. [hyperlink,
http://www.gao.gov/products/GAO-10-231]. Washington, D.C.: December
10, 2009.
Recovery Act: Status of States' and Localities' Use of Funds and
Efforts to Ensure Accountability (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-10-232SP]. Washington, D.C.: December
10, 2009.
Recovery Act: Planned Efforts and Challenges in Evaluating Compliance
with Maintenance of Effort and Similar Provisions. [hyperlink,
http://www.gao.gov/products/GAO-10-247]. Washington, D.C.: November
30, 2009.
Recovery Act: Contract Oversight Activities of the Recovery
Accountability and Transparency Board and Observations on Contract
Spending in Selected States. [hyperlink,
http://www.gao.gov/products/GAO-10-216R]. Washington, D.C.: November
30, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into
Use of Recovery Act Funding, but Data Quality and Reporting Issues
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-223].
Washington, D.C.: November 19, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into
Use of Recovery Act Funding, but Data Quality and Reporting Issues
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-224T].
Washington, D.C.: November 19, 2009.
Recovery Act: Agencies Are Addressing Broadband Program Challenges,
but Actions Are Needed to Improve Implementation. [hyperlink,
http://www.gao.gov/products/GAO-10-80]. Washington, D.C.: November 16,
2009.
Recovery Act: Preliminary Observations on the Implementation of
Broadband Programs. [hyperlink,
http://www.gao.gov/products/GAO-10-192T]. Washington, D.C.: October
27, 2009.
First-Time Homebuyer Tax Credit: Taxpayers' Use of the Credit and
Implementation and Compliance Challenges. [hyperlink,
http://www.gao.gov/products/GAO-10-166T]. Washington, D.C.: October
22, 2009.
High Speed Passenger Rail: Developing Viable High Speed Rail Projects
under the Recovery Act and Beyond. [hyperlink,
http://www.gao.gov/products/GAO-10-162T]. Washington, D.C.: October
14, 2009.
Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer
Service and Enforcement for the 2010 Filing Season. [hyperlink,
http://www.gao.gov/products/GAO-09-1026]. Washington, D.C.: September
23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and
Localities, While Accountability and Reporting Challenges Need to Be
Fully Addressed. [hyperlink, http://www.gao.gov/products/GAO-09-1016].
Washington, D.C.: September 23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and
Localities, While Accountability and Reporting Challenges Need to Be
Fully Addressed (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-09-1017SP]. Washington, D.C.:
September 23, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-908T]. Washington, D.C.: September
10, 2009.
Recovery Act: States' Use of Highway Infrastructure Funds and
Compliance with the Act's Requirements. [hyperlink,
http://www.gao.gov/products/GAO-09-926T]. Washington, D.C.: July 31,
2009.
Unemployment Insurance Measures Included in the American Recovery and
Reinvestment Act of 2009, as of July 2009. [hyperlink,
http://www.gao.gov/products/GAO-09-942R]. Washington, D.C.: July 27,
2009.
Grants Management: Grants.gov Has Systematic Weaknesses That Require
Attention. [hyperlink, http://www.gao.gov/products/GAO-09-589].
Washington, D.C.: July 15, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-829]. Washington, D.C.: July 8,
2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-831T]. Washington, D.C.: July 8,
2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-09-830SP]. Washington, D.C.: July 8,
2009.
Recovery Act: The Department of Transportation Followed Key Federal
Requirements in Developing Selection Criteria for Its Supplemental
Discretionary Grants Program. [hyperlink,
http://www.gao.gov/products/GAO-09-785R]. Washington, D.C.: June 30,
2009.
High Speed Passenger Rail: Effectively Using Recovery Act Funds for
High Speed Rail Projects. [hyperlink,
http://www.gao.gov/products/GAO-09-786T]. Washington, D.C.: June 23,
2009.
Recovery Act: GAO's Efforts to Work with the Accountability Community
to Help Ensure Effective and Efficient Oversight. [hyperlink,
http://www.gao.gov/products/GAO-09-672T]. Washington, D.C.: May 5,
2009.
Recovery Act: Consistent Policies Needed to Ensure Equal Consideration
of Grant Applications. [hyperlink,
http://www.gao.gov/products/GAO-09-590R]. Washington, D.C.: April 29,
2009.
Recovery Act: Initial Results on States' Use of and Accountability for
Transportation Funds. [hyperlink,
http://www.gao.gov/products/GAO-09-597T]. Washington, D.C.: April 29,
2009.
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.:
April 23, 2009.
Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential.
[hyperlink, http://www.gao.gov/products/GAO-09-631T]. Washington,
D.C.: April 23, 2009.
Small Business Administration's Implementation of Administrative
Provisions in the American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-507R]. Washington, D.C.: April 16,
2009.
American Recovery and Reinvestment Act: GAO's Role in Helping to
Ensure Accountability and Transparency for Science Funding.
[hyperlink, http://www.gao.gov/products/GAO-09-515T]. Washington,
D.C.: March 19, 2009.
American Recovery and Reinvestment Act: GAO's Role in Helping to
Ensure Accountability and Transparency. [hyperlink,
http://www.gao.gov/products/GAO-09-453T]. Washington, D.C.: March 5,
2009.
Estimated Adjusted Medicaid Funding Allocations Related to the
Proposed American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-371R]. Washington, D.C.: February
5, 2009.
Estimated Temporary Medicaid Funding Allocations Related to Section
5001 of the American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-364R]. Washington, D.C.: February
4, 2009.
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] See GAO, State and Local Governments' Fiscal Outlook March 2010
Update, [hyperlink, http://www.gao.gov/products/GAO-10-358]
(Washington, D.C.: Mar. 2, 2010).
[3] Recovery Act, div. A, title IX, § 901, 123 Stat. 191.
[4] GAO, Recovery Act: One Year Later, States' and Localities' Uses of
Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C. Mar. 3,
2010); Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009); Recovery Act: Funds Continue to Provide Fiscal Relief to States
and Localities, While Accountability and Reporting Challenges Need to
Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: States' and Localities' Current and Planned Uses
of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-829] (Washington, D.C.: July 8,
2009); and 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] The selected states are Arizona, California, Colorado, Florida,
Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New
Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas. We
also visited the District of Columbia.
[6] The Recovery Act requires recipients of funding under the act to
report quarterly on the use of these funds, including jobs created or
retained with Recovery Act funding. The first recipient reports filed
in October 2009 cover activity from February 2009 through September
30, 2009. The second quarterly recipient reports were filed in January
2010 and cover activity through December 31, 2009. The third quarterly
recipient reports were filed in April 2010 and cover activity through
March 31, 2010.
[7] Recovery Act, div. A, § 1512, 123 Stat. 287-288. We will refer to
the quarterly reports required by section 1512 as recipient reports.
[8] The Recovery Act established the board to coordinate and conduct
oversight of covered funds to prevent fraud, waste, and abuse. The
board is composed of a chairperson and 12 inspectors general. To carry
out its oversight mission, the board employs 47 staff, of whom 19 are
detailed from agencies throughout the federal government. In addition,
the board established three committees drawn from the 12 inspectors
general on the board. Recovery Act, div. A, §§ 1521-1525, 123 Stat.
289-293.
[9] Recovery Act, div. B, title V, § 5001. The Department of Health
and Human Services (HHS) Office of Inspector General found that HHS's
Office of the Assistant Secretary of Planning and Evaluation and CMS
correctly calculated the increased FMAP in accordance with applicable
provisions of the Recovery Act. See HHS Office of the Inspector
General, Review of the Calculations of Temporary Increases in Federal
Medical Assistance Percentages Under the American Recovery and
Reinvestment Act, A-09-09-00075; and Review of the Calculation of
Additional Medicaid Funding Awarded Under the American Recovery and
Reinvestment Act, A-09-09-00080.
[10] Under the Recovery Act, once a state qualifies for an
unemployment increase, the increase is maintained through June 30,
2010, regardless of subsequent changes in unemployment rates.
Beginning in July 2010, states may experience reductions in increased
FMAP rates if their unemployment rates have declined.
[11] See Recovery Act, div. B, title V, §5001(f)(1)(A).
[12] Under the Recovery Act, states are not eligible to receive the
increased FMAP for certain claims for days during any period in which
that state has failed to meet the prompt payment requirement under the
Medicaid statute as applied to those claims. See Recovery Act, div. B,
title V, §5001(f)(2). Prompt payment requires states to pay 90 percent
of clean claims from health care practitioners and certain other
providers within 30 days of receipt and 99 percent of these claims
within 90 days of receipt. See 42 U.S.C. §1396a(a)(37)(A).
[13] A state is not eligible for certain elements of increased FMAP if
any amounts attributable directly or indirectly to them are deposited
in or credited to a state reserve or rainy-day fund. Recovery Act,
div. B, title V, §5001(f)(3).
[14] In some states, political subdivisions--such as cities and
counties--may be required to help finance the state's share of
Medicaid spending. Under the Recovery Act, a state that has such
financing arrangements is not eligible for certain elements of the
increased FMAP if it requires subdivisions to pay during a quarter of
the recession adjustment period a greater percentage of the nonfederal
share than the percentage that would have otherwise been required
under the state plan on September 30, 2008. See Recovery Act, div. B.,
title V, § 5001(g)(2). The recession adjustment period is the period
beginning October 1, 2008, and ending December 31, 2010.
[15] For example, as of May 3, 2010, CMS's Web site included State
Medicaid Director Letters related to the availability or use of
increased FMAP funds. See [hyperlink,
http://www.cms.hhs.gov/SMDL/SMD/list.asp?sortByDID=1a&submit=Go&filterTy
pe=none&filterByDID=-99&sortOrder=ascending&intNumPerPage=10].
[16] As of the same date, the sample states had drawn down $22.3
billion of $22.7 billion awarded for federal fiscal year 2009, or 98
percent of the total award. States can continue to draw from their
increased FMAP grant awards for third and fourth quarter fiscal year
2009 expenditures until CMS finalizes the grant awards for these
quarters, a process the agency has not yet completed. As part of the
normal Medicaid grant award process, CMS reconciles states' quarterly
estimated and actual Medicaid expenditures and finalizes the quarterly
grants once the reconciliation is complete.
[17] The percentage increase is based on state-reported monthly
Medicaid enrollment data, some of which are preliminary and subject to
change.
[18] While children comprised the largest proportion of the increased
enrollment, the rate of enrollment growth among the nondisabled,
nonelderly adult population group was twice the rate of enrollment
growth for children.
[19] When asked about the factors driving their concerns, most states
reported (1) the size of the increase in the state's share of Medicaid
payments, (2) the current projection of the state's economy and tax
revenues into 2011, and (3) the current projected growth in the
state's Medicaid enrollment in 2011. Ohio and Texas reported that they
were not concerned about program sustainability after increased FMAP
funding is no longer available.
[20] In general, Section 1903(w) of the Social Security Act provides
for a reduction of federal Medicaid funding based on state health care-
related taxes, including state taxes on providers, unless certain
requirements are met.
[21] See, for example, the Transitional Federal Medical Assistance
Percentage Act, H.R. 4260, 111th Cong; S. 2833, 111th Cong.
[22] Our estimates are based on the most recently available increased
FMAP rates and the 2011 regular FMAP rates. The actual change in FMAP
rates will depend on what the increased FMAP rates will be at the time
the Recovery Act funding ends.
[23] For example, if a state's FMAP decreases by 10 percentage points
from an increased rate of 60 percent to its regular 2011 FMAP rate of
50 percent, its federal match will drop from $1.50 to $1 for each $1
the state spends on eligible Medicaid expenditures.
[24] Pub. L. No. 111-148, as amended by the Health Care and Education
Reconciliation Act of 2010, Pub.L. No. 111-152. The act includes a
provision which generally precludes states from receiving federal
Medicaid funding if they apply eligibility standards that are more
restrictive than those in effect on the date of its enactment until
the date the Secretary determines that a health benefit exchange
established by the state is fully operational, which must be no later
than January 1, 2014. Pub. L. No. 111-148, § 2001(b)(2), 124 Stat.
118, ____. Beginning on January 1, 2011, this provision may have
limited applicability if a state certifies to the Secretary that it
has a budget deficit or projects to have a budget deficit in the
following fiscal year. According to CMS, the agency is currently
developing guidance on various PPACA provisions.
[25] CMS, State Medicaid Director Letter #10-005, New Option for
Coverage of Individuals under Medicaid (Apr. 9, 2010). See [hyperlink,
http://www.cms.gov/SMDL/SMD/itemdetail.asp?filterType=none&filterByDID=0
&sortByDID=1&sortOrder=descending&itemID=CMS1234610&intNumPerPage=10].
[26] States must use 81.8 percent of their SFSF formula grant funds to
support education (these funds are referred to as education
stabilization funds) and must use the remaining 18.2 percent for
public safety and other government services, which may include
education (these funds are referred to as government services funds).
[27] The 10 states covered by our review that had received approval on
their SFSF Phase II applications as of April 16, 2010, are Arizona,
Florida, Georgia, Illinois, Iowa, Massachusetts, Michigan, New Jersey,
North Carolina, and Ohio. As of May 13, 2010, another state covered by
our review--Colorado--had also received approval on its SFSF Phase II
application.
[28] Illinois drew down 100 percent of its awarded SFSF education
stabilization funds, including Phase II education stabilization funds,
and distributed the funding to local educational agencies (LEA) as
General State Aid payments.
[29] The District of Columbia's education office developed new
accountability measures for federal education funds prior to drawing
down funds. District LEAs reported expending about $16.4 million in
education stabilization funds as of April 16, 2010. However, these
expenditures were not reflected in Education's draw down data as of
April 16, 2010, because, according to District officials, there is a
lag between expending local funds and drawing down federal funds as
reimbursement.
[30] If a state is not currently providing such data, it must identify
data sources and submit a plan for ensuring this information will be
publicly reported no later than September 30, 2011. As a part of this
plan, each state will need to establish milestones and a date by which
the state expects to reach each milestone, describe the nature and
frequency of publicly available reports that the state will publish on
its progress, and identify the amount and source (federal, state, or
local) of funds that will support the efforts.
[31] Race to the Top is a competitive grant program, administered by
Education, to encourage and reward states that are implementing
significant reforms in the four education areas described in the
Recovery Act.
[32] Under ESEA, schools in improvement have failed to meet adequate
yearly progress for at least 2 consecutive years.
[33] Final requirements for SIG were published in December 2009 (74
Fed. Reg. 65618 (Dec. 10, 2009)) and were amended by interim final
requirements published in January 2010 (75 Fed. Reg. 3375 (Jan. 21,
2010)). These requirements were effective February 8, 2010.
[34] To identify the persistently lowest-achieving schools in the
state, a state educational agency must take into account both (1)
performance of all students in a school on the state's assessments in
reading/language arts and mathematics combined and (2) the lack of
progress by all students on those assessments over a number of years.
[35] State applications for the $3 billion in Recovery Act SIG
funding, as well as an additional $546 million in regular fiscal year
2009 SIG funding, were due to Education on February 28, 2010.
[36] SFSF and SIG, as well as the Race to the Top Fund, include
requirements related to struggling schools, so Education sought to
make the definitions and requirements for struggling schools
consistent among all three programs.
[37] The Recovery Act authorizes the Secretary of Education to waive
MOE requirements if a state demonstrates that it has funded education
at the same or greater percentage of the total state revenues than it
did in the preceding year.
[38] The Arizona sales tax increase was approved by Arizona voters on
May 18, 2010.
[39] We met with the following eight states and the District of
Columbia about their monitoring of LEAs' use of Recovery Act funds for
ESEA Title I and IDEA Part B: Arizona, California, Colorado, Iowa,
Massachusetts, New York, North Carolina, and Ohio.
[40] ESEA requires uniform statewide standards-based assessments and
an accountability system to determine whether Title I schools made
adequate yearly progress (AYP). Schools "in improvement" have failed
to make AYP for at least 2 consecutive years.
[41] According to District of Columbia officials, the new monitoring
protocols were needed because of multiple issues identified in past
audits related to the District's management of federal education funds
and because Education and the District of Columbia Office of Inspector
General designated the District's school system as a high-risk entity
with respect to management of its federal grants.
[42] According to District of Columbia officials, the expenditure
testing consists of the review of supporting documentation, such as
purchase requests, receipts, and invoices that validate the
expenditures.
[43] See the North Carolina appendix in the e-supplement to this
report [hyperlink, http://www.gao.gov/products/GAO-10-605SP] for more
details on these findings.
[44] The SFSF monitoring plan was recommended by Education's Office of
Inspector General in New York State System of Internal Control Over
American Recovery and Reinvestment Act Funds, Ed-OIG/A02J0006
(Washington, D.C., Nov. 10, 2009).
[45] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-232SP] (Washington, D.C.: Dec. 10,
2009).
[46] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, and provide a source of information on internal
control weaknesses, noncompliance with laws and regulations, and the
underlying causes and risks.
[47] According to Pennsylvania officials, the project plan for the
state's SFSF monitoring contract also covers monitoring of Title I and
IDEA funds.
[48] U.S. Department of Education Office of Inspector General, State
and Local Controls over ARRA Funds in California, ED-OIG/A09J0006
(Washington, D.C., Jan. 15, 2010).
[49] U.S. Department of Education Office of Inspector General, Systems
of Internal Control Over Selected ARRA Funds in the State of Illinois,
ED-OIG/A05J0012 (Washington, D.C., Feb. 23, 2010).
[50] U.S. Department of Education Office of Inspector General, New
York State System of Internal Control Over American Recovery and
Reinvestment Act Funds, ED-OIG/A02J0006 (Washington, D.C., Nov. 10,
2009) and U.S. Department of Education Office of Inspector General,
New York State Local Educational Agencies Systems of Internal Control
Over American Recovery and Reinvestment Act Funds, ED-OIG/A02J0009
(Washington, D.C., Feb. 17, 2010).
[51] U.S. Department of Education Office of Inspector General,
Commonwealth of Pennsylvania Recovery Act Audit of Internal Controls
over Selected Funds, ED-OIG/A03J0010 (Washington, D.C., Mar. 15, 2010).
[52] U.S. Department of Education Office of Inspector General, Systems
of Internal Control Over Selected ARRA Funds in the State of Texas, ED-
OIG/A06J0013 (Washington, D.C., Jan. 27, 2010).
[53] The OIG also conducted Recovery Act audits in Indiana, Puerto
Rico, and Tennessee.
[54] Pennsylvania executed a contract to monitor SFSF funds in
December 2009. Officials said they developed a plan for SFSF
monitoring and submitted it to Education on March 12, 2010, as a part
of the state’s SFSF Phase II application. State officials said the
plan includes monitoring of Title I and IDEA funds and addresses the
concerns of the OIG report regarding monitoring funds at LEAs.
[55] U.S. Department of Education Office of Inspector General,
Philadelphia School District's Controls Over Federal Expenditures, ED-
OIG/A03H0010 (Washington, D.C., Jan. 15, 2010).
[56] U.S. Department of Education Office of Inspector General, Alert
Memorandum re: Philadelphia School District Designation as a High-Risk
Grantee, ED-OIG/L03K0002 (Washington, D.C., Apr. 16, 2010).
[57] U.S. Department of Education Office of Inspector General, State
Educational Agencies' Implementation of Federal Cash Management
Requirements under the American Recovery and Reinvestment Act, ED-OIG/
L09J0007 (Washington, D.C., Oct. 21, 2009). The OIG report also
identified cash management weaknesses in Indiana.
[58] We also reported on Education's efforts to oversee states' cash
management of Recovery Act funds in September and December 2009. See
GAO, Recovery Act: Funds Continue to Provide Relief to States and
Localities, While Accountability and Reporting Challenges Need to be
Fully Addressed, [hyperlink, http://www.gao.gov/products/GAO-09-1016]
(Washington, D.C.: Sept. 23, 2009), pp. 57-59 and Recovery Act: Status
of States' and Localities Use of Funds and Efforts to Ensure
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-231]
(Washington, D.C.: Dec. 10, 2009), pp. 63-65.
[59] SFSF funds are available to be obligated until September 30, 2011.
[60] Based on expenditures, officials from Arizona, California,
Colorado, Georgia, Michigan, Mississippi, New Jersey, North Carolina,
Ohio and Pennsylvania reported public safety as their first priority
for government services funds.
[61] Based on expenditures, officials in the District of Columbia,
Florida, Illinois, Massachusetts, New York, and Texas reported
preschool education, elementary and secondary education, or higher
education as their top priority for government services funds.
[62] The state agencies included were the Iowa departments of
administrative services, corrections, human services, inspections and
appeals, public health, and public safety.
[63] GAO, Physical Infrastructure: Challenges and Investment Options
for the Nation's Infrastructure, GAO-08-763T (Washington, D.C.: May 8,
2008).
[64] The Secretary of Transportation was to withdraw and redistribute
to eligible states any amount that was not obligated by March 2, 2010,
for highway infrastructure and March 5, 2010, for public
transportation. The Department of Transportation (DOT) has interpreted
the term obligation of funds to mean the federal government's
commitment to pay for the federal share of the project. This
commitment occurs at the time the federal government signs a project
agreement (highways) or grant agreement (public transportation).
[65] Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1)
to transfer funds made available for transit projects to FTA. In
addition, about $26 million was transferred to DOT's Maritime
Administration (MARAD) for maritime industry projects.
[66] Recovery Act funding for public transportation was distributed
through three existing FTA formula grant programs, the Transit Capital
Assistance Program, the Fixed Guideway Infrastructure Investment
program, and the Capital Investment Grant program, and one
discretionary grant program, the New Starts program. An FTA grant may
be limited to one specific project or include multiple individual
projects.
[67] DOT officials stated that transferred funds are not subject to
FHWA's 120-day or 1-year obligation requirement because, consistent
with the Recovery Act's requirement that highway infrastructure
funding shall be administered as if apportioned under chapter 1 of
title 23, and 23 U.S.C. §104(k)(1), funds made available for transit
projects or transportation planning are transferred and administered
in accordance with chapter 53 of title 49. Thus, according to DOT
officials, upon transfer the budgetary resources are transit
resources; however, the funds are not subject to FTA's 120-day or 1-
year obligation requirement because the transferred funds were not
part of the FTA distribution formula but were identified by the state
for a specific project. Therefore, DOT officials believe
redistribution of these funds within the FTA formula would be
inappropriate.
[68] The Recovery Act requires that 30 percent of highway funds be
suballocated, primarily based on population, for metropolitan,
regional, and local use.
[69] Transportation Enhancement (TE) activities offer funding
opportunities to help expand transportation choices and enhance the
transportation experience through 12 eligible TE activities related to
surface transportation, including pedestrian and bicycle
infrastructure and safety programs, scenic and historic highway
programs, landscaping and scenic beautification, historic
preservation, and environmental mitigation. 23 U.S.C. § 101(a)(35).
[70] To use contract award savings, a state may need to request that
DOT deobligate the funds associated with the contract award savings
and then obligate the funds for a new project.
[71] Specifically, within 90 days after determining that the estimated
federal share of project costs has decreased by $250,000 or more,
states shall revise the federal funds obligated for a project. 23
C.F.R. § 630.106(a)(4). The funds deobligated through this process may
be used for other FHWA-approved projects once the funds have been
obligated by FHWA.
[72] States and transit agencies make payments to contractors for
completed work, and FHWA or FTA, through the U.S. Department of the
Treasury, pays the state or transit agency after it pays out of its
own funds for project-related purposes. All reimbursements under
transportation programs funded through the Recovery Act must be
completed by September 30, 2015, except those for administration,
management, and oversight purposes.
[73] Under the Supplemental Appropriations Act, 2009, recipients and
subrecipients of the Transit Capital Assistance Urbanized Area Program
funds and the Transit Capital Assistance Nonurbanized Area Program
funds may use up to 10 percent of the amount apportioned for operating
expenses. Pub. L. No. 111-32 § 1202 (June 24, 2009).
[74] The National Highway System comprises approximately 160,000 miles
of roadway, including the Interstate Highway System and other roads
important to the nation's economy, defense, and mobility.
[75] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: Jun.
1996)
[76] GAO, Surface Transportation: Restructured Federal Approach Needed
for More Focused, Performance-Based, and Sustainable Programs,
[hyperlink, http://www.gao.gov/products/GAO-08-400] (Washington, D.C.:
Mar. 6, 2008)
[77] GAO, Highway And Transit Investments: Options for Improving
Information on Projects' Benefits and Costs and Increasing
Accountability for Results, [hyperlink,
http://www.gao.gov/products/GAO-05-172] (Washington, D.C.: Jan. 24,
2005).
[78] A state that does not meet its level of effort will be prohibited
from participating in the redistribution of federal-aid highway
obligation authority scheduled to occur in August 2011.
[79] GAO, Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C.: Mar. 3,
2010).
[80] To conduct our analysis, we determined whether the expenditure
data in the state's February expenditure report matched the state's
expenditures from the second or third maintenance-of-effort
certification and then determined the percentage of progress they had
made toward the certification.
[81] According to Pennsylvania DOT officials, the state was about 72
percent toward meeting its certified amount as of April 30, 2010.
[82] In response to a recommendation we made, FHWA, in consultation
with the Department of Commerce, issued guidance on August 24, 2009,
that provided criteria for states to use for designating special-need
areas for the purpose of Recovery Act funding. The criteria align
closely with special-need criteria used by the Department of
Commerce's Economic Development Administration in its own grant
programs, including factors such as actual or threatened business
closures (including job loss thresholds), military base closures, and
natural disasters or emergencies. FHWA issued "questions and answers"
on November 12, 2009, to further address implementation questions.
[83] [hyperlink, http://www.gao.gov/products/GAO-10-437].
[84] Each state used FHWA's special-need criterion that relates to
severe job dislocation resulting from actual or threatened business
closure or restructuring. These states have been notified of FHWA's
determination and advised that in order to be consistent with the FHWA
guidance, the states must have data that show a connection between
demonstrated severe job losses and actual, identified firm closures
and restructurings.
[85] The Recovery Act project cost dollars are based on the original
estimated costs of the projects at a time that precedes the bidding on
the projects. As a result, the estimated costs may overstate or
understate the actual or current costs of the projects. At the time
GAO reviewed these costs, the estimated project costs exceeded the
current Recovery Act funds obligated to California by 17 percent.
[86] We will continue evaluating the impact and use of Recovery Act
JAG funds, including JAG funds obligated in the other nine states and
the District of Columbia, as well as states' and the District's use of
JAG funds, their reported impact, and DOJ's ongoing oversight role.
[87] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-829] (Washington, D.C.: July 8,
2009).
[88] During programmatic monitoring, grant managers are to assess the
performance of grant programs by addressing the content and substance
of a program. Administrative monitoring addresses compliance with
grant terms and grantee reporting and documentation requirements
(e.g., inventory records for property used for the grant), and
financial monitoring reviews expenditures compared to an approved
budget.
[89] According to OJP, debarment excludes or disqualifies a person or
company for a specific period of time--generally not longer than 3
years--from participating in federal government procurement contracts
and covered nonprocurement transactions. A suspension prohibits
participation for a temporary period pending completion of an agency
investigation and any judicial or administrative proceedings that may
ensue.
[90] The Office of Audit, Assessment, and Management (OAAM) serves as
the central source for grant management policy and procedures and
oversees the programmatic monitoring activities within OJP. In
addition, OAAM ensures financial grant compliance and auditing of
OJP's internal controls to prevent waste, fraud, and abuse and
conducts programmatic assessments of Department of Justice grant
programs.
[91] See Department of Justice (DOJ), Office of the Inspector General
(OIG), Management Advisory Memorandum, Improving Transparency in the
Office of Justice Programs' Planned Use of Edward Byrne Memorial
Justice Assistance Grant Program Funds Authorized by the Recovery Act
(March 2009); DOJ, OIG, Edward Byrne Memorial Justice Assistance Grant
Allocation of Recovery Act Funds to Local Municipalities in the State
of Illinois (April 9, 2009); DOJ, OIG, Recovery Act Oversight Plan
(May 2009); OIG, Recovery Act Oversight Plan Updated (October 2009);
and DOJ, OIG, Review of the Edward Byrne Memorial Justice Assistance
Grant Program Recovery Act Formula Awards Administered by the
Department of Justice's Office of Justice Programs (December 2009).
[92] CHRP grant funding is based on current entry-level salary and
benefits packages in each locality.
[93] The Community Oriented Policing Services program was created to
implement provisions in Title I of the Violent Crime Control and Law
Enforcement Act of 1994 (Pub.L. No. 103-322, 108 Stat. 1796 (1994)).
[94] These measures include such factors as changes in budgets for law
enforcement agencies and local governments, poverty, unemployment and
foreclosure rates, and reported crimes for the previous calendar year.
[95] In addition, we collected information from an additional six
states regarding CHRP awards in the context of their local fiscal and
budget situations.
[96] In general, a dislocated worker is an individual who has been
terminated or laid off, or who has received a notice of termination or
layoff, from employment; was self employed but is unemployed as a
result of general economic conditions in the community in which the
individual resides or because of natural disasters; or is a displaced
homemaker who is no longer supported by another family member.
[97] At a one-stop center, customers can access the services of a
variety of federally funded employment and training programs.
[98] Except in limited circumstances, WIA requires the use of
individual training accounts (ITA) through which WIA participants
purchase services from training providers.
[99] Under the Recovery Act, a local workforce area may enter into
such a contract only if the board determines that it would facilitate
the training of multiple individuals in high-demand occupations and
would not limit customer choice.
[100] According to Labor officials, the total amount of nationwide
drawdowns is a minimal estimate because of programming issues with
Labor's New Core Financial Management System. Labor expects the
programming concerns to be addressed within the next 30 days, and
Labor officials said that actual drawdown amounts will be posted at
that time.
[101] These cash drawdowns are from the Department of Health and Human
Services' Payment Management System. These funds may be drawn down no
more than 3 days in advance of paying bills.
[102] For example, an obligation would be incurred when the state or
local area enters into a contract with a service provider for
training, but training has not yet been completed or the service
provider has not yet been paid. More specifically, obligations refer
to the amounts of orders placed, contracts and subgrants awarded,
goods and services received, and similar transactions during a given
period that will require payment by the grantee during the same or a
future period. 29 C.F.R. § 97.3 (2009)
[103] Labor may recapture funds from states with total obligations
less than 80 percent of their annual allotment at the end of the first
program year. Labor officials said that for these purposes, total
obligations include cash disbursements and financial commitments for
which payment has not yet been made. Labor applies the same recapture
process to the end of the second program year. At both intervals,
Labor may redistribute these funds to other states that have met the
requisite total obligation rate. By the end of the three-year grant
period, Labor may recapture any state funds that have not been fully
expended. Because states' WIA grants expire after 3 years, funds
recaptured by Labor at the end of the third year may not be
redistributed to other states. Rather, Labor must return the funds to
the U.S. Treasury.
[104] GAO, Workforce Investment Act: States' Spending Is on Track, but
Better Guidance Would Improve Financial Reporting, [hyperlink,
http://www.gao.gov/products/GAO-03-239] (Washington D.C.: November 22,
2002). In addition, in 2009 Labor's Office of Inspector General found
that Congress should improve state and local reporting of WIA
obligations. For more information, see U.S. Department of Labor Office
of Inspector General, Semiannual Report to Congress, Volume 62 (April
1-September 30, 2009).
[105] On November 3, 2002, Labor issued Training and Employment
Guidance Letter 16-99, Change 1.
[106] Labor officials said that they aided the states on financial
issues in several ways, including by providing technical assistance,
classroom training, Labor and OMB guidance, and internet resources,
including live Webinars which are archived online and available to all
grantees.
[107] Labor officials were referring to organization-wide or program-
specific audits that are conducted under OMB Circular A-133, which
implements the Single Audit Act.
[108] Labor's comprehensive reviews cover programmatic, financial, and
compliance issues. The reviews are conducted in each state, at
minimum, every three years.
[109] Labor officials also said that one component of comprehensive
monitoring efforts is to review the accuracy of reports. However,
officials said that these comprehensive reviews address many program
elements, so they target their efforts and the specific program
elements examined may vary from review to review. For example, a
comprehensive review may examine quarterly financial reporting, but
not necessarily look specifically at local level obligations.
Officials did note that if there is a finding, reported data is
reviewed, validated, and corrected.
[110] Florida has been reporting funds as obligated when they were
allocated from the state to the local level and this data did not
reflect local level financial commitments.
[111] Eight states did not report a percent increase in intensive
services. GAO did not verify the methodology that states used to
determine the increase in the number of participants receiving
intensive services.
[112] Three states did not report a percent increase in training. GAO
did not verify the methodology that states used to determine the
increase in the number of participants receiving training.
[113] The WIA 2009 program year runs between July 1, 2009 and June 30,
2010. In addition, GAO has previously found that as states and
localities have implemented WIA, they have been hampered by funding
issues, including statutory funding formulas that are flawed. As a
result, states' funding levels may not always be consistent with the
actual demand for services. For more information see GAO, Workforce
Investment Act: Issues Related to Allocation Formulas for Youth,
Adults, and Dislocated Workers, [hyperlink,
http://www.gao.gov/products/GAO-03-636], (Washington, D.C.: April 25,
2003) and GAO, Workforce Investment Act: Potential Effects of
Alternative Formulas on State Allocations, [hyperlink,
http://www.gao.gov/products/GAO-03-1043], (Washington, D.C.: August
28, 2003).
[114] Eight states did not provide this information on our state
survey. Some states may not track this information because Labor did
not require them to report on dislocated workers who received services
funded by the Recovery Act separate from those who were served with
regular WIA formula funds.
[115] One state did not respond to this question.
[116] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to
States and Localities, While Accountability and Reporting Challenges
Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009).
[117] Agency for Workforce Innovation Office of Inspector General,
Investigation of Food Expenditures at Tampa Bay Workforce Alliance
(Jan. 20, 2010).
[118] Legislative Analyst's Office of California, Labor and Workforce
Development Programs: Overview of ARRA (Mar. 17, 2010).
[119] U.S. Department of Labor Office of Inspector General Office of
Audit, Recovery Act: Actions Needed to Better Ensure Congressional
Intent Can Be Met in the Workforce Investment Act Adult and Dislocated
Worker Programs (Mar. 31, 2010).
[120] The $4 billion in Recovery Act funds includes about $39 million
in Clean Water Act (CWA) Section 604(b) Water Quality Management
Planning Grants. Section 604(b) of the CWA requires the reservation
each fiscal year of a small portion of each state's CWSRF allotment -
usually 1 percent - to carry out planning under Sections 205(j) and
303(e) of the CWA. States generally use 604(b) grants to fund regional
comprehensive water quality management planning activities to improve
local water quality. In this section of the report, any reference to
Recovery Act funds excludes these planning grants.
[121] EPA allocates clean water funds to the states based on a
statutory formula and allocates drinking water funds to states based
on the 2003 Drinking Water Infrastructure Needs Survey.
[122] The Recovery Act requires states to have all funds awarded to
projects "under contract or construction" by the 1-year deadline. EPA
interprets this as requiring states to have all projects under
contract in an amount equal to the full value of the Recovery Act
assistance agreement by the deadline, regardless of whether
construction has begun, according to a September 2009 memorandum.
Thus, in this report, we use "under contract" when referring to this
requirement. Further, according to EPA's March 2, 2009, memorandum,
the agency will deobligate any Recovery Act SRF funds that a state
does not have awarded to projects under contract by the 1-year
deadline and reallocate them to other states.
[123] EPA interprets these requirements as applying separately to the
Clean Water and Drinking Water SRF programs in each state, such that
each SRF in a state must use at least 50 percent for additional
subsidization and 20 percent for green reserve projects, according to
a March 2, 2009, memorandum.
[124] The 14 states we reviewed are Arizona, California, Colorado,
Florida, Georgia, Iowa, Massachusetts, Mississippi, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, and Texas.
[125] Our initial review of EPA data found that North Carolina had
used 49 percent of its grant for additional subsidization. Staff from
that program had interpreted the Recovery Act as requiring that 50
percent of project funds, which do not include administrative set
asides, be awarded as additional subsidization. However, the 50
percent requirement was to be based on the full grant amount. When we
informed state program officials of the miscalculation, state
officials told us they would rectify this immediately. As of May 10,
2010, the issue was rectified and data systems were updated
accordingly.
[126] States differ in how they define disadvantaged communities. In
general, disadvantaged community status takes into account factors
such as median household income and community size. At least one state
included in this report determines disadvantaged community status at
the county level.
[127] Because two states do not maintain information on which projects
serve disadvantaged communities and four additional states maintain
only limited information on which projects serve disadvantaged
communities, we cannot provide complete information on the number of
projects that serve these communities.
[128] Combined sewer systems are designed to collect rainwater runoff,
domestic sewage, and industrial wastewater in the same pipe.
[129] For 12 of the 14 states, we collected this information from
state SRF officials. Officials in Pennsylvania and New York told us
that they had provided this information to EPA through the agency’s
Drinking Water SRF Project Benefits Reporting System (PBR), and we
obtained this information from EPA for those two states.
[130] EPA Office of Inspector General, Special Report: Innovative
Techniques for State Monitoring of Revolving Funds Noted, Report No.
08-P-0290 (Washington, D.C., Sept. 29, 2008). To comply with the
Single Audit Act Amendments of 1996, pass-through entities shall among
other things, monitor subrecipients' use of federal awards through
site visits, limited scope audits, or other means. Congress passed the
Single Audit Act to promote, among other things, sound financial
management, including effective internal controls, with respect to
federal awards administered by nonfederal entities. The Single Audit
Act requires an organization-wide financial audit that includes all
federal programs and an audit of the entity's compliance with laws and
regulations of each major federal program if the entity spends more
than $500,000 in federal funds during the year.
[131] OMB, Implementing Guidance for the Reports on Use of Funds
Pursuant to the American Recovery and Reinvestment Act of 2009, M-09-
21 (Washington, D.C., June 22, 2009).
[132] EPA's Award Terms and Conditions require subrecipients to
interview a sufficient number of contractor employees within the first
2 weeks of the initial payroll and within 2 weeks of the final payroll
for the project.
[133] EPA Office of Inspector General, EPA Needs Definitive Guidance
for Recovery Act and Future Green Reserve Projects, 10-R-0057 (Feb. 1,
2010).
[134] EPA Office of Inspector General, EPA Action Needed to Ensure
Drinking Water State Revolving Fund Projects Meet the American
Recovery and Reinvestment Act Deadline of February 17, 2010, 10-R-0049
(Dec. 17, 2009).
[135] Ohio Office of Budget and Management, Office of Internal Audit,
Environmental Protection Agency Clean Water and Drinking Water State
Revolving Funds ARRA Program Audit, Audit Period: December 1, 2009 to
February 12, 2010, 2010-EPA-01 (Mar. 9, 2010).
[136] Ohio Office of Inspector General, Report of Investigation, No.
2009398. March 10, 2010.
[137] DOE submitted a request for $300 million for fiscal year 2011
for Weatherization Assistance Program yearly appropriations.
[138] Although about $752 million in LIHEAP funds was potentially
available for weatherization in fiscal year 2009 and about another
$737 million was available in fiscal year 2010, these are estimates
based on 15 percent of the total of about $5 billion and about $4.9
billion in total LIHEAP funds that were available in fiscal year 2009
and fiscal year 2010, respectively. State agencies administering the
LIHEAP determine what percentage of total LIHEAP funding to use on
weatherization. In recent years, states have spent about 10 percent of
their LIHEAP funds on weatherization, but state agencies may ask for a
waiver in order to spend up to 25 percent of their respective LIHEAP
total allocations on weatherization. The U.S. Department of Health and
Human Services submitted a request for $3.3 billion in LIHEAP funding
for fiscal year 2011, of which 15 percent--about $495 million--would
potentially be available for weatherization. Up to 10 percent of total
LIHEAP funding may be carried over from one fiscal year to the next.
In previous years, the estimated amount available through LIHEAP for
weatherization ranged from about $256 million to about $362 million.
[139] Homes refers to housing units, which include single-family
units, units within a multifamily building, and mobile homes. DOE
defines a weatherized unit as a dwelling unit on which a DOE-approved
energy audit or priority list has been applied and weatherization work
has been completed, and the final energy audit has taken place.
[140] This total production goal of weatherizing about 360,000 homes
annually would include weatherization funded with Recovery Act funds,
as well as with DOE yearly appropriations.
[141] During an energy audit, auditors visually inspect the building
shell and mechanical systems; conduct diagnostic, health, and safety
tests; and record the location, condition, and dimensions of walls,
ceilings, floors, windows, doors, and mechanical systems. According to
DOE, before work is conducted, auditors should use this information to
select cost-effective measures which would make the unit more energy-
efficient and prepare work orders to ensure that appropriate measures
are installed. After weatherization work is completed, another energy
audit and final inspection should be conducted.
[42] California State Auditor, Bureau of State Audits, Department of
Community Services and Development: Delays by Federal and State
Agencies Have Stalled the Weatherization Program and Improvements Are
Needed to Properly Administer Recovery Act Funds, Letter Report 2009-
119.2 (Sacramento, Calif., Feb. 2, 2010).
[143] Department of Energy Office of the Inspector General, Special
Report: Progress in Implementing the Department of Energy's
Weatherization Assistance Program Under the American Recovery and
Reinvestment Act," OAS-RA-10-04 (Washington, D.C., Feb. 19, 2010).
[144] New York officials reported that work on 10,546 units was
currently under way and that energy audits --which are required before
weatherization can take place--of an additional 14,008 units had been
completed. Once these 24,554 units are completed, New York will have
weatherized about 58 percent of the units in its weatherization plan.
[145] The Davis-Bacon provisions of the Recovery Act require that all
laborers and mechanics employed by contractors and subcontractors on
Recovery Act-funded projects be paid at least the prevailing wage,
including fringe benefits, as determined by the Secretary of Labor.
Because the Weatherization Assistance Program, funded through annual
appropriations, is not subject to the Davis-Bacon Act, the Department
of Labor (Labor) had not previously determined prevailing wage rates
for weatherization workers. On September 3, 2009, Labor completed its
first determination of wage rates for weatherization work conducted on
residential housing units in each county of the 50 states and the
District. The rates were revised in December 2009.
[146] Service providers weatherize homes; local agencies manage
service providers but are sometimes qualified to provide
weatherization services themselves.
[147] In terms of prioritizing clients to serve, DOE provides
recipients with flexibility in targeting their services to maximize
program effectiveness. Its regulations indicate that recipients are to
give priority consideration to "high residential energy users" and
"households with a high energy burden" in addition to the other
priority categories of elderly, persons with disabilities, or families
with children.
[148] See New Jersey State Legislature, Office of Legislative
Services, Office of the State Auditor, Department of Community
Affairs, American Recovery and Reinvestment Act Weatherization
Assistance Program Eligibility (Apr. 1, 2009 to Dec. 4, 2009), 5.
[149] Under 10 C.F.R. § 440.21(d), each individual weatherization
material and package of weatherization materials installed in an
eligible dwelling unit must be cost-effective. These materials must
result in energy cost savings over the lifetime of the measures,
discounted to present value, that equal or exceed the cost of
materials, installation, and on-site supervisory personnel as defined
by DOE. States have the option of requiring additional related costs
to be included in the determination of cost effectiveness.
[150] In Texas, 18 of the 44 local agencies were using another energy
audit, Texas EZ, at the completion of our work. According to Texas
officials, the EZ audit tool is being phased out after all the
agencies are trained to use the NEAT audit tool. Both energy audit
tools work basically the same and are used to calculate a SIR that
can, in turn, be used to measure the cost-effectiveness of
weatherization measures.
[151] Section 3 is a provision of the Housing and Urban Development
Act of 1968 that helps foster local economic development, neighborhood
economic improvement, and individual self-sufficiency. Among other
requirements under this provision, housing agencies are to meet goals
including (1) 30 percent of the aggregate number of new hires shall be
Section 3 residents (low-and very low-income persons residing in the
community in which HUD funds are spent regardless of race and gender),
(2) 10 percent of all covered construction contracts shall be awarded
to Section 3 business concerns (businesses that substantially employ
low-and very low-income persons residing in the community in which HUD
funds are spent), and (3) 3 percent of all covered nonconstruction
contracts shall be awarded to Section 3 business concerns.
[152] Superfund is the name given to the environmental program
established to address abandoned hazardous waste sites. It is also the
name of the fund established by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980. A Superfund site is
an uncontrolled or abandoned place where hazardous waste is located,
possibly affecting local ecosystems or people.
[153] HUD developed the Public Housing Assessment System to evaluate
the overall condition of housing agencies and to measure performance
in major operational areas of the public housing program. These
include financial condition, management operations, and physical
condition of the housing agencies' public housing programs. Housing
agencies that are deficient in one or more of these areas are
designated as troubled performers by HUD and are statutorily subject
to increased monitoring.
[154] Housing agencies are required to submit to HUD a 5-year plan
that includes a statement of the goals and objectives of the public
housing agency. (42 U.S.C. 1437c-1(a)).
[155] GAO, Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C.: Mar. 3,
2010).
[156] HUD Office of Inspector General, HUD Needs to Ensure That the
Housing Authority of New Orleans Strengthens Its Capacity to
Adequately Administer Recovery Funding, 2010-AO-0801 (Dec. 15, 2009).
[157] Mandatory standards and policies for energy efficiency are
contained in a New York State energy conservation plan, issued in
compliance with the Energy Policy and Conservation Act (P.L. 94-163).
See HUD Office of Inspector General, The New York City Housing
Authority Had the Capacity to Administer Capital Funds Provided Under
the American Recovery and Reinvestment Act, 2010-NY-1803 (Mar. 12,
2010).
[158] One-year obligation rates refer to the percentage of funds
housing agencies obligated within 1 year of receiving the funds from
HUD. HUD provided housing agencies with their 2009 regular capital
fund grants in September 2009, so a 1-year obligation rate could not
yet be determined for these funds.
[159] Pursuant to the Recovery Act, GAO is to review the use of funds
of programs included under the act's Division A, Appropriations
Provisions. TCAP is a Division A program, while the Section 1602
Program is included under Division B, Tax and Other Provisions. GAO
chose to include the Section 1602 Program in its review because, like
TCAP, it supplements the LIHTC program, and state housing finance
agencies (HFA) are implementing the two programs simultaneously.
[160] Large banks, Fannie Mae, and Freddie Mac purchased the majority
of LIHTCs in recent years. Congress established Fannie Mae and Freddie
Mac with two key housing missions: to (1) provide stability in the
secondary market for residential mortgages and (2) serve the mortgage
credit needs of targeted groups such as low-income borrowers. On
September 6, 2008, the Federal Housing Finance Agency placed Fannie
Mae and Freddie Mac into conservatorship out of concern that their
deteriorating financial condition ($5.4 trillion in outstanding
obligations) would destabilize the financial system. See GAO, Fannie
Mae and Freddie Mac: Analysis of Options for Revising the Housing
Enterprises' Long-term Structures, [hyperlink,
http://www.gao.gov/products/GAO-09-782] (Washington, D.C.: Sep. 10,
2009).
[161] HFAs in each state, the District of Columbia, Puerto Rico, Guam,
and the U.S. Virgin Islands receive LIHTC allocations. The Recovery
Act directed HUD to distribute TCAP funds in accordance with the
fiscal year 2008 HOME Investment Partnerships Program (HOME) formula
allocations to state participating jurisdictions, thereby limiting the
funds to states as defined by the HOME (HOME formula). Guam and the
U.S Virgin Islands are defined as "insular areas" under HOME, rather
than as "states," and therefore, did not receive TCAP funds. While
TCAP funds were distributed based on the HOME formula, HOME
requirements generally do not apply to TCAP funds.
[162] This report uses the terms obligation and outlays when
discussing funds that HUD and Treasury provide to HFAs. By obligation,
we mean that the respective federal agencies have entered into
agreements with HFAs for a specified amount of funds. By outlays, we
mean that the federal agencies have released funds to an HFA. We use
the terms commitments and disbursements to discuss funds provided by
HFAs to projects. By commitments we mean the HFA has entered into an
agreement to provide funds to a project owner. By disbursement we mean
that the HFAs have released funds to project owners.
[163] HUD told us that South Carolina did not make the 75 percent
commitment deadline because it did not have enough projects that
needed TCAP assistance and that met the threshold requirements. HUD
has requested that all HFAs tell HUD whether they will have
uncommitted funds. HUD plans to reallocate uncommitted funds,
including any from South Carolina, during the summer of 2010 to HFAs
that need additional TCAP assistance.
[164] 40 U.S.C. 3141-3144, 3146-3148
[165] 42 U.S.C. 4321et seq.
[166] Forty-nine HFAs, the District of Columbia, Puerto Rico, Guam,
and the U.S. Virgin Islands participated in the Section 1602 Program
to date. New York is the only state that has not requested Section
1602 Program funds as of May 1, 2010.
[167] We also interviewed a cross-section of HFAs and conducted site
visits of projects that had received either TCAP or Section 1602
Program funds. The Georgia, Illinois, Ohio, and Pennsylvania
appendixes in the e-supplement of this report provide information on
our site visits (GAO-10-605SP).
[168] A "tax credit unit" is a unit that is subject to rent and income
restrictions under the LIHTC requirements.
[169] Section 1606 of the Recovery Act applies Davis-Bacon to all
programs under Division A of the act, which includes TCAP.
[170] GAO, Recovery Act: Officials' Views Vary on Impacts of Davis-
Bacon Act Prevailing Wage Provision, [hyperlink,
http://www.gao.gov/products/GAO-10-421] (Washington, D.C.: Feb. 24,
2010).
[171] GAO, Recovery Act: Recipient Reported Jobs Data Provide Some
Insight into Use of Recovery Act Funding, but Data Quality and
Reporting Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009) and Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, GAO-10-437
(Washington, D.C.: Mar. 3, 2010).
[172] Under the Section 1602 Program, the Treasury Department
disburses "grants" to the HFAs and they, in turn, disburse the grants
as "subawards" to the project owners. See section 1602(c)(1) ("A State
housing credit agency receiving a grant under this section shall use
such grant to make subawards to finance the construction or
acquisition and rehabilitation of qualified low-income buildings.").
[173] The Head Start program, administered by the OHS of the
Administration for Children and Families within the Department of
Health and Human Services, provides comprehensive early childhood
development services to low-income children. This report discusses the
use of Recovery Act expansion funds and how OHS has assisted and
monitored expansion grantees.
[174] OHS plans to award an additional $6.8 million in Recovery Act
funds for the first year of expansion grants in certain states and
territories within the next few months. When we spoke with OHS
officials on April 27, 2010, they anticipated that these grants would
all be awarded by the end of May 2010. These grants are part of the
$1.5 billion OHS designated for expansion under the Recovery Act.
According to OHS officials, in the first round of applications that
closed in June and July 2009, Alabama, Alaska, Arkansas, Connecticut,
Hawaii, Louisiana, Mississippi, New Mexico, Puerto Rico, Tennessee,
Wyoming, and other jurisdictions (Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States, and the Republic of Palau) had an insufficient
number of applicants that demonstrated the ability to provide high-
quality services and the full amounts available for those states and
jurisdictions could not be awarded. Because Head Start Act funds are
allocated under a prescribed formula ensuring that all states and
territories receive a specified portion of available funds (42
U.S.C.§§ 9832(25) and 9835), OHS was unable to award all the funds
required. OHS subsequently reissued a grant announcement for these
states and territories.
[175] 123 Stat. 178. The Recovery Act appropriated $1.1 billion
specifically for Early Head Start expansion and the rest for
activities under the Head Start Act generally. Of the latter amount,
OHS designated $200 million for Head Start expansion and $200 million
for Early Head Start expansion. The remaining $600 million in funds
was allocated for quality improvements, cost-of-living increases, and
other purposes.
[176] AIAN and MSHS programs also were eligible to apply for
additional appropriated funds--apart from the Recovery Act funds--to
expand Head Start programs. This expansion made $10 million available
each to existing AIAN and MSHS grantees to serve between 1,200 and
1,300 additional children and families. The Head Start Act permits
AIAN organizations to reallocate funds, at their discretion, between
Head Start and Early Head Start programs to address fluctuations in
client populations. 42 U.S.C. § 9840(d)(3).
[177] The FAA typically allocates funds for the budget categories for
the first year of the grant, which ends on September 29, 2010. For the
second year of the grant, the FAA states the amount of ongoing and
T/TA funds that have been approved, but not yet awarded. Department of
Health and Human Services policy requires OHS to annually renew
ongoing grants. According to OHS officials, dividing the grants over 2
years helps ensure the grantee has a reasonable budget in place to
meet grant objectives. To award second-year funds, OHS will generate a
new FAA near the end of fiscal year 2010 and divide the ongoing funds
for the second year among the budget categories.
[178] For example, contracts may be with entities such as start-up
planning consultants, agencies to which grantees delegate funds to
operate Head Start or Early Head Start programs, or food service
providers.
[179] As of March 31, 2010, Recovery Act grantees reported enrolling
nearly 29,000 children and families across both programs.
[180] 42 U.S.C. § 9840a(h)(1).
[181] We conducted seven focus groups with Recovery Act expansion
grantees. The groups included both Head Start and Early Head Start
grantees, as well as some brand new grantees. We asked participants
about the challenges they faced expanding their program, and their
experiences with OHS.
[182] 45 C.F.R. § 1302.10(b)(2) (2009).
[183] These OIG audits focused on internal controls, understanding of
Head Start program policies and procedures, board involvement,
nonfederal matching funds, and cash-flow. As of April 21, 2010, the
OIG had completed field work for 83 new Early Head Start expansion
applicant audits. As applicants were rejected, new potential grantees
would be reviewed. The OIG found conditions in 14 of its new applicant
audits that resulted in displacing the applicant from further
consideration. The individual results of these audits will not be
released to the public, but they will be summarized in a report that
characterizes the general findings.
[184] 42 U.S.C. § 9838.
[185] Region IX--which serves Arizona, California, Hawaii, Nevada, and
Pacific insular areas--conducted an orientation.
[186] OHS grant announcements for the expansion encouraged new Early
Head Start grant applicants to include a start-up planner as part of
their start-up budget and plan.
[187] We previously reported information in the media discussing
concerns with Head Start grantees' jobs reports. GAO, Recovery Act:
Recipient Reported Jobs Data Provide Insights into Use of Recovery Act
Funding, but Data Quality and Reporting Issues Need Attention,
[hyperlink, http://www.gao.gov/products/GAO-10-223] (Washington, D.C.:
Nov. 19, 2009), 10. We subsequently interviewed officials at two Head
Start programs, and also reported that HHS officials said that HHS
operating agencies were addressing data quality through outreach,
reporting error detection, and identifying nonreporters. GAO, Recovery
Act: One Year Later, States' and Localities' Uses of Funds and
Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C.: Mar. 3,
2010), 103-104.
[188] OHS monitors grantees' adherence to the Head Start Program
Performance Standards and other OHS regulations, which apply to both
Head Start and Early Head Start programs and cover many activities
designed to protect and teach children, promote health, and
responsibly manage federal funds.
[189] In 2006, OHS reorganized its 12 regional offices to streamline
program operations. Currently, OHS regional staff report directly to
the OHS central office rather than to regional office administrators.
GAO, Head Start: A More Comprehensive Risk Management Strategy and
Data Improvements Could Further Strengthen Program Oversight,
[hyperlink, http://www.gao.gov/products/GAO-08-221] (Washington, D.C.:
Feb.12, 2008).
[190] 42 U.S.C. § 9835(b). The purpose of the nonfederal match
requirement is to ensure that programs are not completely dependent on
federal funds and that the community has invested in the program.
Justifications for requesting this type of waiver can include local
economic hardship or the burden of providing a proportionate match for
a large increase in federal funding, like the expansion grants.
[191] Program attendance is defined as the actual presence and
participation in the program of a child enrolled in an Early Head
Start or Head Start program. 45 C.F.R. § 1304.3(a)(16) (2009).
[192] Currently, for all grantees, OHS monitors are required to
conduct limited reviews of enrollment and attendance data. Monitors
verify that enrollment records match grantees' monthly reported
enrollment, and that grantees analyze the causes of absenteeism when
center-based attendance falls below 85 percent. However, monitors are
not required to review any discrepancies between enrollment and
attendance or service provision to enrolled children and families.
These reviews take place after 1 year of services for Recovery Act
expansion grantees, and every 3 years for ongoing grantees.
[193] 45 U.S.C. § 1305.2(d). (2009).
[194] OHS, "Enrollment Frequently Asked Questions" (grantee guidance
on enrollment reporting, last updated April 28, 2009).
[195] The definition of "actual enrollment" in the Head Start Act does
not include any reference to services actually provided. 42 U.S.C. §
9836a(h)(1)(A).
[196] Grantees report data for the Program Information Report each
August and the data are compiled for use at the federal, regional, and
local levels.
[197] 45 C.F.R. § 1305.2(b) (2009). GAO, Head Start: Undercover
Testing Finds Fraud and Abuse at Selected Head Start Grantees,
[hyperlink, http://www.gao.gov/products/GAO-10-733T] (Washington,
D.C.: May 18TH, 2010).
[198] Serving low-income children and families is a part of the stated
purpose of the Head Start Act and a fundamental measure of Head Start
and Early Head Start program performance. 42 U.S.C. § 9831(2).
Standards for internal controls state that program managers need
operational data to determine whether they are meeting their agencies'
performance plans and meeting their goals for accountability for
effective and efficient use of resources. GAO, Internal Control:
Standards for Internal Control in the Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
November 1999).
[199] The Head Start Act requires entities carrying out a Head Start
program to report monthly on their actual enrollment for such program
and, if it is less than the funded enrollment, any apparent reason for
the discrepancy. 42 U.S.C. § 9836a(h)(2). However, this requirement
does not address any shortfall between enrollment and actual
attendance.
[200] Department of Health and Human Services, Secretary's Advisory
Committee on Re-designation of Head Start Grantees, A System of
Designation Renewal of Head Start Grantees (Washington, D.C., December
2008). The committee provided the Secretary of HHS guidance on
developing the system for redesignating grantees required by the
reauthorization of the Head Start Act in 2007. 42 U.S.C. § 9836(c).
[201] An FTE is a full-time equivalent, which is calculated as the
total hours worked divided by the number of hours in a full-time
schedule.
[202] [hyperlink, http://www.gao.gov/products/GAO-10-437].
[203] OMB Memorandum, Updated Guidance on the American Recovery and
Reinvestment Act, M-10-14 (Mar. 22, 2010).
[204] Administrative and technical matters, which may significantly
affect the reliability of information reported by recipients, include
inadvertent deactivation of reports, duplicate reports, unlinked
reports to be deactivated, or technical issues relating to a record
identifier.
[205] Executive Office of the President, Office of Management and
Budget, Open Government Directive--Federal Spending Transparency (Apr.
6, 2010).
[206] OMB Memoranda, Holding Recipients Accountable for Reporting
Compliance under the American Recovery and Reinvestment Act, M-10-17
(May 4, 2010).
[207] [hyperlink, http://www.gao.gov/products/GAO-10-223] and
[hyperlink, http://www.gao.gov/products/GAO-10-437].
[208] Both TAS and CFDA values are linked to specific agencies and
their programs. The TAS codes identify the Recovery Act funding
program source. The two leftmost characters of each TAS code form a
data element, which 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.
[209] An award key is a derived field that identifies an award. This
field is derived using a distinct combination of the following
component fields: Award_type, Prime_DUNS, Award_id and Order_number.
[210] Some LEAs use different methodologies to calculate the FTE
impact of different Recovery Act grants. For instance, some LEAs used
the general methodology to calculate FTEs for ESEA Title I and IDEA
Part B, but used the definite term methodology for SFSF.
[211] Officials reported that this is the case so that departments can
accurately validate the information prior to submission.
[212] OMB guidance says prime recipients should collect information
from subrecipients and vendors to the maximum extent practicable in
order to generate the most comprehensive and complete job impact. The
guidance does not require jobs reporting on materials suppliers or
central service providers (indirect jobs) or on the local community
(induced jobs).
[213] Department of Public Instruction officials told us that the
department will develop a Web based system to collect FTE information
from vendors for the July 2010 reporting period.
[214] In commenting on a draft of this report, Georgia officials
provided an example to illustrate that the increase in FTEs reported
in the third recipient reporting period accurately reflects the
increase in funding for that quarter and reiterated their position
that catching up for previous quarters was unnecessary.
[215] One of the 16 housing agencies did not use a jobs-calculating
tool.
[216] Previously, HUD identified potential jobs-counting errors by
dividing the grant amount by $205,000 to produce a source value. HUD
then compared this source value to the reported FTE value. If the
reported FTE value was more than 50 percent above or below the source
value, the report was flagged for a potential error. Under HUD's new
approach, it identifies a potential jobs overcount by dividing the
recipient's award amount by their reported FTEs. A "major jobs
overcount" is flagged when the recipient's real award amount divided
by their reported jobs is below $15,800, the annualized federal
minimum wage. A "probable jobs overcount" is flagged when the
recipient's real award amount divided by their reported jobs is below
$60,000. A "major jobs undercount" is flagged when (1) the recipient
received an award greater than $500,000, (2) the recipient indicated a
project completion status of "Greater Than 50% Complete," and (3) the
recipient reported creating less than one job. A "probable jobs
undercount" is flagged when (1) the recipient had drawn down $40,000
by the end of the quarter, (2) the recipient marked their project as
underway, and (3) the recipient reported less than 0.50 jobs.
[217] According to HUD officials, an egregious error is defined as one
in which the award ID contains incorrect numbers or letters, the award
amount entered differs from the actual award amount by more than
$500,000, or the award amount divided by the number of jobs reported
produces a wage rate below the federal minimum wage for each job.
[218] Pub. L. No. 109-282, 120, Stat. 1186 (Sept. 26, 2006), as
amended Pub. L. No. 110-252, § 6202(a) 122 Stat. 2323 (June 30, 2008)
(codified at 31 U.S.C. § 6101 note).
[219] We interviewed representatives from the Association for
University Business and Economic Research, Council of State Governors,
Federal Funds Information for States, IBM Center for the Business of
Government, the Metropolitan Policy Program of the Brookings
Institution, National Association of Counties, OMB Watch, and
ProPublica.
[220] Each award recipient expending more than $50 million is assigned
a cognizant agency for audit. Generally, the cognizant agency for
audit is the federal awarding agency that provides the predominant
amount of direct funding to a recipient unless OMB assigns this
responsibility to another agency. Some of the responsibilities of the
cognizant agency include performing quality control reviews,
considering auditee requests for extensions, and coordinating a
management decision for audit findings that affect federal programs of
more than one agency.
[221] Eleven program managers we surveyed said that it was helpful to
receive an interim audit report of internal control deficiencies,
rather than after the completion of the Single Audit, usually 9 months
after the fiscal year-end.
[222] Recovery Accountability and Transparency Board, Review of
Contracts and Grants Workforce Staffing and Qualifications in Agencies
Overseeing Recovery Act Funds (Washington, D.C., March 2010).
[223] Recovery Accountability and Transparency Board, Recovery Act
Data Quality: Errors in Recipients' Reports Obscure Transparency
(Washington, D.C., February 2010).
[224] According to the Board staff, the majority of the complaints
received via the fraud hotline did not contain any actionable
information; for example, some complaints contained a generalized
comment on the Recovery Act rather than any specific allegation of
wrongdoing. The Board refers those that are actionable to the
appropriate inspector general when there is a specific allegation of
wrongdoing or multiple factors indicate a possible area of risk.
[225] According to a Board official, 46 of the 362 inspectors general
products published on Recovery.gov are interim reports published to
raise important issues with agency management in an expedited manner.
[226] Information from 11 of the Single Audit reports that have been
issued for our selected states showed an average 25 percent increase
(with a range of 7 to 43 percent) in federal expenditures between
fiscal year 2008 and 2009, in part, due to Recovery Act funding.
[227] The Schedule of Expenditures of Federal Awards is prepared by
the auditee showing the activity of all federal awards programs within
the period covered by the auditee's financial statements.
[228] GAO, Recovery Act: Status of States' and Localities' Use of
Funds and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231[ (Washington, D.C.: Dec., 10,
2009).
[229] See appendix VI for a complete list of population and
unemployment rates for the selected local governments.
[230] See appendix V for descriptions of these Recovery Act programs.
[231] Newark budget officials defined community partners as
nonprofits, educational institutions, and faith-based and other
community organizations, as well as other governmental and quasi-
governmental organizations.
[232] See, for example, the Transitional Federal Medical Assistance
Percentage Act, H.R. 4260, 111TH Cong., and S. 2833, 111TH Cong.; and
American Workers, State, and Business Relief Act of 2010, H.R. 4213,
111th Cong.
[233] 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); Recovery Act: States' and
Localities' Current and Planned Uses of Funds While Facing Fiscal
Stresses, [hyperlink, http://www.gao.gov/products/GAO-09-829]
(Washington, D.C.: July 8, 2009); Recovery Act: Funds Continue to
Provide Fiscal Relief to States and Localities, While Accountability
and Reporting Challenges Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009); Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009); and Recovery Act: One Year Later, State's and Localities Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C. Mar. 3,
2010).
[234] The Compliance Supplement is issued annually to guide auditors
on what program requirements should be tested for programs audited as
part of the Single Audit.
[235] 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).
[236] States selected for our longitudinal analysis are Arizona,
California, Colorado, Florida, Georgia, Illinois, Iowa, Massachusetts,
Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, and Texas.
[237] Recovery Act, div. A, §1512, 123 Stat. 287-288. We will refer to
the quarterly reports required by section 1512 as recipient reports.
[238] GAO, Recovery Act: Recipient Reported Jobs Data Provide Insights
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009).
[239] The Recovery Act requires recipients of funding under the act to
report quarterly on the use of these funds, including jobs created or
retained with Recovery Act funding. The first recipient reports filed
in October 2009 cover activity from February 2009 through September
30, 2009. The second quarterly recipient reports were filed in January
2010 and cover activity through December 31, 2009. The third quarterly
recipient reports were filed in April 2010 and cover activity through
March 31, 2010.
[240] The JAG states we visited are Arizona, California, Illinois,
Massachusetts, New York, Ohio, and Pennsylvania.
[241] The COPS CHRP states we visited are Arizona, California,
District of Columbia, Massachusetts, New Jersey, Ohio, and
Pennsylvania.
[242] The EPA Regional Offices we interviewed are: Region 3
(Philadelphia), Region 6 (Dallas), Region 8 (Denver), and Region 9
(San Francisco).
[243] The states we visited and collected information from are
Arizona, California, Colorado, Florida, Georgia, Iowa, Massachusetts,
Mississippi, North Carolina, New Jersey, New York, Ohio, Pennsylvania,
and Texas.
[244] The nine states we collected information from are: Florida,
Georgia, Illinois, Iowa, Mississippi, New York, North Carolina,
Pennsylvania, and Texas.
[245] The states we visited are Arizona, Florida, Georgia, Illinois,
Massachusetts, Michigan, New Jersey, Ohio, and Texas.
[246] In one state we visited a total of five housing agencies.
[247] See appendix VI, for a complete list of population and
unemployment rates for the selected local governments.
[248] 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); Recovery Act: States' and
Localities' Current and Planned Uses of Funds While Facing Fiscal
Stresses, [hyperlink, http://www.gao.gov/products/GAO-09-829]
(Washington, D.C.: July 8, 2009); Recovery Act: Funds Continue to
Provide Fiscal Relief to States and Localities, While Accountability
and Reporting Challenges Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009); Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009); and Recovery Act: One Year Later, State's and Localities Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C. Mar. 3,
2010).
[249] For more details on the maintenance-of-effort requirements, see
GAO, Recovery Act: Planned Efforts and Challenges in Evaluating
Compliance with Maintenance of Effort and Similar Provisions,
[hyperlink, http://www.gao.gov/products/GAO-10-247] (Washington, D.C.:
Nov. 30, 2009).
[250] OMB, Payments to State Grantees for Administrative Costs of
Recovery Act Activities, M-09-18 (Washington, D.C., May 11, 2009), and
OMB, Payments to State Grantees for their Administrative Costs for
Recovery Act Funding - Alternative Allocation Methodologies, M-10-03
(Washington, D.C., Oct. 13, 2009).
[251] The following 16 states elected to participate: Alaska,
California, Colorado, Florida, Georgia, Louisiana, Maine, Missouri,
Nevada, North Carolina, Ohio, Oklahoma, South Dakota, Tennessee,
Texas, and Virginia.
[252] GAO, 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 (Washington, D.C.: Nov.
19, 2009).
[253] EPA allocated Recovery Act clean water SRF capitalization grants
to states based on a statutory formula. The agency allocated Recovery
Act drinking water SRF capitalization grants to states based on the
2003 Drinking Water Infrastructure Needs Survey. EPA allocates clean
water and drinking water SRF funds to the District of Columbia and
U.S. territories as direct grants for the same purposes.
[254] In this report we use the word "project" to mean an assistance
agreement, i.e. a loan or grant agreement made by the state SRF
program to a subrecipient for the purpose of a Recovery Act project.
[255] The Recovery Act requires states to have all funds awarded to
projects "under contract or construction" by the 1-year deadline. EPA
interprets this as requiring states to have all projects under
contract in an amount equal to the full value of the Recovery Act
assistance agreement by the deadline, regardless of whether
construction has begun, according to a September 2009 memorandum.
Thus, in this report, we use "under contract" when referring to this
requirement. Further, according to EPA's March 2, 2009 memorandum, the
agency will deobligate any Recovery Act SRF funds that a state does
not have awarded to projects under contract by the one year deadline
and reallocate them to other states.
[256] Under the base Drinking Water SRF, Congress has authorized
states to use an amount equal to up to 30 percent of their
capitalization grant to provide additional subsidies to communities
that meet state-defined criteria for being "disadvantaged." There is
no such statutory authorization for the Clean Water SRF program.
[257] The four core areas of education reform, as described by
Education, are: (1) increase teacher effectiveness and address
inequities in the distribution of highly qualified teachers; (2)
establish a pre-K-through-college data system to track student
progress and foster improvement, (3) make progress toward rigorous
college-and career-ready standards and high-quality assessments that
are valid and reliable for all students, including students with
limited English proficiency and students with disabilities; and (4)
provide targeted, intensive support and effective interventions to
turn around schools identified for corrective action or restructuring.
[258] For the purposes of this report, "Title I" refers to Title I,
Part A of the Elementary and Secondary Education Act of 1965 (ESEA),
as amended.
[259] LEAs must obligate at least 85 percent of their Recovery Act
ESEA Title I, Part A funds by September 30, 2010, unless granted a
waiver, and must obligate all of their funds by September 30, 2011.
This will be referred to as a carryover limitation.
[260] Under ESEA, schools in improvement have failed to meet adequate
yearly progress for at least two consecutive years.
[261] School Improvement Grants are authorized under Section 1003(g)
of ESEA.
[262] Final requirements for SIG were published in Dec. 2009 (74 Fed.
Reg. 65618 (Dec. 10, 2009)), and were amended by interim final
requirements published in Jan. 2010 (75 Fed. Reg. 3375 (Jan. 21,
2010)).
[263] To identify the persistently lowest-achieving schools in the
state, a state educational agency must take into account both
performance of all students in a school on the state's assessments in
reading/language arts and mathematics combined; and the lack of
progress by all students on those assessments over a number of years.
[264] Pub. L. No. 100-77, 101 Stat. 482 (July 22, 1987).
[265] Under the Act, the members of the EFSP National Board are to be
the Director of the Federal Emergency Management Agency, (Chair), and
6 members appointed by the Director from individuals nominated by the
following organizations: American Red Cross, Catholic Charities USA,
National Council of Churches of Christ in the USA, The Salvation Army,
The Council of Jewish Federations, Inc., (now known as The Jewish
Federations of North America), and the United Way of America (now
known as United Way Worldwide).
[266] For the Highway Infrastructure Investment program, the U.S.
Department of Transportation has interpreted the term "obligation of
funds" to mean the federal government's commitment to pay for the
federal share of the project. This commitment occurs at the time the
federal government signs a project agreement.
[267] Recovery Act, div. A, title XII, 123 Stat. 206.
[268] Recovery Act, div. A, title XII, § 1201(a).
[269] The full list of qualifying Transportation Enhancement
activities is defined in 23 U.S.C. § 101(a)(35).
[270] Fixed guideway systems use and occupy a separate right-of-way
for the exclusive use of public transportation services. They include
fixed rail, exclusive lanes for buses and other high-occupancy
vehicles, and other systems.
[271] Generally, to qualify for funding under the applicable formula
grant program, an urbanized area must have a fixed guideway system
that has been in operation for at least 7 years and is more than one
mile in length.
[272] Metropolitan planning organizations are federally mandated
regional organizations, representing local governments and working in
coordination with state departments of transportation, that are
responsible for comprehensive transportation planning and programming
in urbanized areas. MPOs facilitate decision making on regional
transportation issues, including major capital investment projects and
priorities. To be eligible for Recovery Act funding, projects must be
included in the region's Transportation Improvement and State
Transportation Improvement Programs.
[273] For the Transit Capital Assistance Program and Fixed Guideway
Infrastructure Investment Program, the U.S. Department of
Transportation has interpreted the term "obligation of funds" to mean
the federal government's commitment to pay for the federal share of
the project. This commitment occurs at the time the federal government
signs a grant agreement.
[274] Recovery Act, div. A, title XII, 123 Stat. 210.
[275] Recovery Act, div. A, title XII, § 1201(a).
[276] In general, a dislocated worker is an individual who has been
terminated or laid off, or who has received a notice of termination or
layoff, from employment; was self employed but is unemployed as a
result of general economic conditions in the community in which the
individual resides or because of natural disasters; or is a displaced
homemaker who is no longer supported by another family member. In
addition, the Recovery Act provides that youth up to age 24 may be
served with Recovery Act funds.
[277] GAO, Recovery Act: Status of States' and Localities' Use of
Funds and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009).
[278] The Recovery Act provided $2 billion to the Health Resources and
Services Administration (HRSA) for grants to health centers. Of this
total, $1.5 billion is for the construction and renovation of health
centers and the acquisition of HIT systems, and the remaining $500
million is for operating grants to health centers. Of the $500 million
for health center operations, HRSA has allocated $157 million for New
Access Point grants to support health centers' new service delivery
sites, and $343 million for Increased Demand Services grants.
[279] NSP, a term that references the NSP funds authorized under
Division B, Title III of the Housing and Economic Recovery Act (HERA)
of 2008, provides grants to all states and selected local governments
on a formula basis. Under NSP, HUD allocated $3.92 billion on a
formula basis to states, territories, and selected local governments.
The term "NSP2" references the NSP funds authorized under the Recovery
Act on a competitive basis.
[280] Per FEMA's definition, a "volunteer fire department is composed
entirely of members who do not receive compensation other than a
length of service retirement program (LSOP) and insurance. A career
department is one in which all members are compensated for their
services. A combination department has at least one volunteer, with
the balance being career members, or one career member with the
balance being volunteers. Also, if a volunteer fire department
provides stipends to their members or provides pay-on-call for their
members, the department is considered to be combination."
[281] Volunteer fire departments are eligible to apply for both Hiring
and Recruitment and retention grants. Combination fire departments are
eligible to apply for both Hiring and Rehiring of firefighters and
recruitment and retention of volunteer firefighters SAFER grants.
Career fire departments are only eligible to apply for SAFER hiring/
rehiring of firefighters grants.
[282] See the FMAP description in this appendix.
[End of section]
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