Recovery Act
Planned Efforts and Challenges in Evaluating Compliance with Maintenance of Effort and Similar Provisions Gao ID: GAO-10-247 November 30, 2009To help prevent the substitution of federal funds for state, local, or private funds, the American Recovery and Reinvestment Act of 2009 (Recovery Act) contains maintenance of effort and similar provisions requiring that recipients maintain certain levels of spending for selected programs. This report provides information on selected programs in the Recovery Act with maintenance of effort or similar provisions, the guidance federal agencies have issued to implement these requirements, and how responsible federal agencies are determining whether recipients meet these requirements. To conduct this work, GAO identified eight programs in the Recovery Act that contain a new maintenance of effort or similar provision; account for at least $4 billion in appropriations by agency; and collectively account for about $100.5 billion of the $106.8 billion in Recovery Act appropriations with these provisions. The eight programs with maintenance of effort or similar provisions span the areas of education, highway, housing, rail, telecommunications, and transit. The specifics of each provision vary by responsible agency, such as whether a state must certify the amount of funding it will maintain, whether waivers are allowed, and the consequences (if any) of not meeting the provisions. The federal agencies responsible for these eight programs have issued guidance to states and other recipients on how to implement the maintenance of effort or similar provision requirements. However, federal and state officials have not completed key steps in implementing these provisions because of administrative and fiscal challenges.
(1) The Department of Transportation (DOT) has begun to assess the highway and transit levels that states certified to maintain; however, it has not estimated a date for completing this assessment and has not finalized plans for determining states' compliance with their transit certifications. Furthermore, according to a DOT official, the department has not made a decision as to whether the Recovery Act requires states to maintain a total level of effort for covered programs or to maintain their level of effort for each covered program. Officials from several state departments of transportation told GAO that while they plan to meet their maintenance of effort requirements, decreasing state revenues and budgets pose a challenge to doing so. (2) The Department of Education (Education) has begun to draft a monitoring plan to oversee and enforce state compliance with maintenance of effort requirements under the State Fiscal Stabilization Fund. Because the State Fiscal Stabilization Fund is a new program under the Recovery Act, Education has yet to finalize monitoring plans and processes. In addition, Education has not issued guidance to states on how to document that they met their required maintenance of effort level. (3) Department of Housing and Urban Development (HUD) officials said they are monitoring Capital Fund formula grants through ongoing efforts. Officials further stated that they are still developing a strategy for monitoring Capital Fund competitive grants. (4) The Department of Commerce's (Commerce) review of broadband grant applications for funding has been delayed because of scheduling and staffing challenges. In particular, the broadband grant program involves more applications and far more funds than the agency formerly handled, raising concerns whether the department has sufficient staff resources to implement the program in accordance with Recovery Act priorities. While Commerce originally anticipated that this review would be completed by November 7, 2009, the agency now estimates that it will not complete this review process and award the first round of grants until February 2010.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-247, Recovery Act: Planned Efforts and Challenges in Evaluating Compliance with Maintenance of Effort and Similar Provisions
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Report to the Republican Leader, U.S. Senate:
United States Government Accountability Office:
GAO:
November 2009:
Recovery Act:
Planned Efforts and Challenges in Evaluating Compliance with
Maintenance of Effort and Similar Provisions:
GAO-10-247:
GAO Highlights:
Highlights of GAO-10-247, a report to the Republican Leader, U.S.
Senate.
Why GAO Did This Study:
To help prevent the substitution of federal funds for state, local, or
private funds, the American Recovery and Reinvestment Act of 2009
(Recovery Act) contains maintenance of effort and similar provisions
requiring that recipients maintain certain levels of spending for
selected programs. This report provides information on selected
programs in the Recovery Act with maintenance of effort or similar
provisions, the guidance federal agencies have issued to implement
these requirements, and how responsible federal agencies are in
determining whether recipients meet these requirements. To conduct this
work, GAO identified programs in the Recovery Act that contain a new
maintenance of effort or similar provision; account for at least $4
billion in appropriations by agency; and collectively account for about
$100.5 billion of the $106.8 billion in Recovery Act appropriations
with these provisions. For these selected programs, GAO analyzed
program documents and interviewed federal and state officials.
What GAO Found:
GAO identified eight programs in the Recovery Act with new maintenance
of effort provisions. These programs span the areas of education,
highway, housing, rail, telecommunications, and transit, and account
for about $100.5 billion in Recovery Act appropriations. The
maintenance of effort or similar provisions are designed to prevent
recipients, such as state departments of transportation, public housing
agencies, and private companies, from substituting planned spending for
a given program with Recovery Act funds”that is, the provisions ensure
that the increased federal spending will supplement rather than replace
state, local, or private spending. Although the maintenance of effort
or similar provisions of these eight programs share a common purpose,
the specifics of each provision vary by responsible agency. These
variations include whether a state must certify the amount of funding
it will maintain, whether waivers are allowed, and the consequences (if
any) of not meeting the provisions. For example, the Recovery Act
allows the Secretary of Education to waive state maintenance of effort
requirements for the State Fiscal Stabilization Fund, under certain
circumstances, but other programs GAO reviewed for this study did not
have such a waiver provision.
Table: Selected Maintenance of Effort or Similar Provisions in the
Recovery Act:
Agency: Department of Transportation (DOT);
Spending provision summary: Governor of each state must certify that
the state will maintain its current level of transportation spending;
Covered time period: Feb. 17, 2009, through Sept. 30, 2010.
Agency: Department of Education;
Spending provision summary: Governors must provide assurances that
their state will maintain support for K-12 education and public
institutions of higher education at least at fiscal year 2006 levels;
Covered time period: Fiscal years 2009, 2010, and 2011.
Agency: Department of Housing and Urban Development (HUD);
Spending provision summary: HUD must institute measures to ensure
Recovery Act funds will supplement, not supplant, expenditures from
other sources. To meet this requirement, HUD is requiring public
housing agencies to sign an amendment to their annual contributions
contracts;
Covered time period: Varies based on time frames of grants.
Agency: Department of Commerce;
Spending provision summary: Grant applicants must demonstrate that, but
for federal assistance, the project would not have been implemented
during the grant period;
Covered time period: Varies based on time frames of grants.
Source: GAO analysis of the Recovery Act.
[End of table]
The federal agencies responsible for these eight programs have issued
guidance to states and other recipients on how to implement the
maintenance of effort or similar provision requirements. For example,
since February 2009, the Department of Transportation (DOT) has issued
several sets of guidance to reduce the variations in how states
calculate their maintenance of effort certifications. DOT anticipates
issuing further guidance to clarify some requirements, including how it
will evaluate whether states maintained their certified levels of
effort. The Department of Education also issued guidance allowing
states flexibility in defining maintenance of effort levels. However,
guidance from Education does not require states to include an
explanation for changes made to maintenance of effort calculations in
their resubmitted application, reducing transparency in terms of what
has changed from previously approved applications. Given that some
states plan to decrease their fiscal year 2006 maintenance of effort
funding by billions of dollars, an explanation of why this change was
made would allow the public and policymakers alike the ability to
better understand the action. State officials GAO spoke with said the
guidance from DOT was timely and that the agency was responsive to
officials‘ questions. Furthermore, applicants to the Department of
Commerce‘s broadband grant program did not have questions about the
program‘s issued guidance.
Federal and state officials have not completed key steps in the
implementation of the maintenance of effort or similar provisions
because of administrative and fiscal challenges associated with their
implementation.
* DOT has begun to assess the highway and transit levels that states
certified to maintain; however, it has not estimated a date for
completing this assessment and has not finalized plans for determining
states‘ compliance with their transit certifications. Furthermore,
according to a DOT official, the department has not made a decision as
to whether the Recovery Act requires states to maintain a total level
of effort for covered programs or to maintain their level of effort for
each covered program. According to this DOT official, DOT plans to make
a decision on this issue by the end of calendar year 2009.
* Education has begun to draft a monitoring plan to oversee and enforce
state compliance with maintenance of effort requirements under the
State Fiscal Stabilization Fund. Because the State Fiscal Stabilization
Fund is a new program under the Recovery Act, Education has yet to
finalize monitoring plans and processes. In addition, Education has not
issued guidance to states on how to document that they met their
required maintenance of effort level.
* Department of Housing and Urban Development (HUD) officials said they
are monitoring Capital Fund formula grants through ongoing efforts.
Officials further stated that they are still developing a strategy for
monitoring Capital Fund competitive grants”also subject to the
supplement-not-supplant requirement. According to HUD officials, their
focus has been on completing this award program, for which they made
awards in September 2009, and on reviewing Recovery Act reporting.
* Commerce‘s review of broadband grant applications for funding has
been delayed because of scheduling and staffing challenges. In
particular, the broadband grant program involves more applications and
far more funds than the agency formerly handled, raising concerns
whether the department has sufficient staff resources to implement the
program in accordance with Recovery Act priorities. While Commerce
originally anticipated that this review would be completed by November
7, 2009, the agency now estimates that it will not complete this review
process and award the first round of grants until February 2010. To
address this issue, GAO recently recommended that the Department of
Commerce develop a contingency plan to ensure sufficient resources for
oversight of Recovery Act-funded projects (GAO-10-80). Officials from
Commerce have agreed with our recommendation and plan to take all
appropriate steps to address our concern.
Officials from several state departments of transportation told GAO
that while they plan to meet their maintenance of effort requirements,
decreasing state revenues and budgets pose a challenge to doing so.
These delays and challenges coupled with the varying requirements of
the maintenance of effort and similar provisions we reviewed raise
questions about whether the provisions will achieve their intended
purpose. Accordingly, we plan to continue to periodically evaluate this
issue.
What GAO Recommends:
GAO recommends that Education take further action to enhance
transparency by requiring states to include an explanation of changes
to maintenance of effort levels in their State Fiscal Stabilization
Fund application resubmissions. All agencies agreed with GAO‘s
findings, and Education agreed with the recommendation.
View [hyperlink, http://www.gao.gov/products/GAO-10-247] or key
components. For more information, contact A. Nicole Clowers at (202)
512-2834; Cornelia Ashby at (202) 512-8403; or Mathew Scirč at (202)
512-8678.
[End of section]
Contents:
Letter:
Background:
Efforts to Implement and Evaluate Compliance with Maintenance of Effort
and Similar Provisions Are Ongoing and Proving to Be Challenging:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Selected Federal Programs Subject to a Maintenance of Effort
or Similar Provision under the Recovery Act, by Agency:
Table 2: Requirements of Recovery Act Maintenance of Effort or Similar
Provisions for Selected Programs:
Table 3: States and the District of Columbia Fiscal Year 2006
Maintenance of Effort Amount and Fiscal Year 2009 and 2010 Anticipated
State Support for K-12 Education:
Table 4: Programs and Appropriations, by Agency, with Maintenance of
Effort or Similar Provisions in the Recovery Act:
Figure:
Figure 1: Average Annual Applications for NTIA Telecommunications and
RUS Broadband Programs:
Abbreviations:
ACC: annual contributions contracts:
BTOP: Broadband Technology Opportunities Program:
DOT: Department of Transportation:
Education: Department of Education:
FHWA: Federal Highway Administration:
FRA: Federal Railroad Administration:
FTA: Federal Transit Administration:
HUD: Department of Housing and Urban Development:
IHE: institutions of higher education:
NOFA: notice of funds availability:
NTIA: National Telecommunications and Information Administration:
Recovery Act: American Recovery and Reinvestment Act:
RUS: Rural Utilities Service:
SFSF: State Fiscal Stabilization Fund:
STIP: Statewide Transportation Improvement Program:
TIP: Transportation Improvement Program:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 30, 2009:
The Honorable Mitch McConnell:
Republican Leader:
United States Senate:
Dear Senator McConnell:
The nation faces what is generally reported to be the most serious
economic crisis since the Great Depression. In response, the American
Recovery and Reinvestment Act of 2009 (Recovery Act) was enacted to
promote economic recovery, make investments, and minimize and avoid
reductions in state and local government services.[Footnote 1] The
Recovery Act, like previous fiscal stimulus packages, is designed to
stimulate the economy through direct spending by the government or
spending by the recipients of tax cuts or government transfers. The
Congressional Budget Office estimated that the Recovery Act's combined
spending and tax provisions will cost $787 billion over 10 years, of
which more than $580 billion will be in additional federal spending.
The Recovery Act contains maintenance of effort and similar provisions
to ensure that recipients maintain certain levels of spending for
certain programs as a condition of receiving federal funds. Such
provisions are designed to prevent recipients from substituting federal
funds for funds that otherwise would have been spent for some aided
programs--that is, to help ensure that increased federal spending will
supplement rather than replace state, local, or private spending.
[Footnote 2]
You asked us to provide information on maintenance of effort and
similar provisions in the Recovery Act. Accordingly, this report
discusses programs in the Recovery Act with new maintenance of effort
or similar provisions, the guidance federal agencies have issued to
implement these requirements, and how responsible federal agencies are
determining whether recipients meet these requirements.
To address these objectives, we reviewed the Recovery Act to identify
the programs with maintenance of effort or similar provisions. We
identified eight programs--administered by the Departments of Commerce,
Education, Housing and Urban Development, and Transportation--that (1)
contain a new maintenance of effort provision or similar language; (2)
account for at least $4 billion in appropriations, by agency; and (3)
account for a majority of the about $106.8 billion in Recovery Act
appropriations with new maintenance of effort or similar provisions.
(See table 1.) The eight programs we reviewed received about 94
percent--or $100.5 billion--of the Recovery Act appropriations for
programs with new maintenance of effort or similar provisions. We also
analyzed documents from and interviewed federal and state officials.
These documents included federal agency guidance on the eight programs
in the Recovery Act that we selected for this review and state
certifications on spending levels. We also obtained information from
the state departments of education in 6 states and the District of
Columbia and state departments of transportation in 16 states and the
District of Columbia on their use of the guidance issued by the
Departments of Education and Transportation on maintenance of effort
requirements--specifically, the state certification process. We spoke
with state departments of education in Arizona, California, Florida,
New Jersey, New York, North Carolina, and the District of Columbia and
state departments of transportation in Arizona, California, Colorado,
Florida, Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi,
New Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas. In
addition, we gathered documents from and interviewed education and
transportation officials in these 16 states and the District of
Columbia on the methodology they used to calculate their spending
levels and plans to monitor their compliance with the maintenance of
effort requirements. We also spoke with officials from 27 public
housing agencies in 10 states about supplementing, not supplanting,
funds from the Department of Housing and Urban Development (HUD). These
states are Arizona, Colorado, Georgia, Illinois, Iowa, Massachusetts,
Mississippi, New Jersey, North Carolina, and Texas. We selected these
states based on our ongoing Recovery Act reporting effort--which covers
a core group of 16 states and the District of Columbia.[Footnote 3]
Appendix I contains additional information about our scope and
methodology. We conducted this performance audit from August 2009 to
November 2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Table 1: Selected Federal Programs Subject to a Maintenance of Effort
or Similar Provision under the Recovery Act, by Agency:
Agency: Federal Highway Administration, Department of Transportation
(DOT);
Program: Highway Infrastructure Investment;
Description: Provides resources and technical assistance to state and
local governments for constructing, preserving, and improving highways;
Amount: $26.8 billion[A].
Agency: Federal Transit Administration, DOT;
Program: Transit Capital Assistance;
Description: Provides resources for major capital projects in growing
and high-density states;
Amount: $8.4 billion[B].
Agency: Federal Transit Administration, DOT;
Program: Fixed Guideway Infrastructure Investment;
Description: Provides funding for modernization for existing locally
planned, implemented, and operated transit "guideway" capital
investments (e.g., commuter rail).
Agency: Federal Transit Administration, DOT;
Program: Capital Investment Grants;
Description: Provides resources for new transit "guideway" capital
projects eligible under the New Starts/Small Starts program.
Agency: Federal Railroad Administration, DOT;
Program: Capital Assistance for High Speed Rail Corridors and Intercity
Passenger Rail Service;
Description: Establishes a federal-state partnership for intercity
passenger rail investment;
Amount: $8 billion.
Agency: Department of Education;
Program: State Fiscal Stabilization Fund;
Description: Created under the Recovery Act, provides funding in part
to help stabilize state and local government budgets by minimizing
reductions in education and other essential public services;
Amount: $48.6 billion.
Agency: Department of Housing and Urban Development;
Program: Public Housing Capital Fund;
Description: Provides funds for the capital and management activities
of public housing agencies, including modernization and development of
public housing;
Amount: $4 billion[C].
Agency: National Telecommunications and Information Administration,
Department of Commerce;
Program: Broadband Technology Opportunities Program;
Description: Created under the Recovery Act to provide grants to
support the deployment of broadband infrastructure in unserved and
underserved areas expand public computer center capacity, and for
innovative programs to encourage sustainable adoption of broadband
service;
Amount: $4.7 billion.
Total: $100.5 billion.
Source: GAO analysis of Recovery Act provisions.
[A] The Recovery Act appropriated $27.5 billion to the Highway
Infrastructure Investment program; however, $690 million of this amount
does not go to states.
[B] The $8.4 billion represents the sum of Transit Capital Assistance
($6.9 billion), Fixed Guideway Infrastructure Investment ($750
million), and Capital Investment Grants ($750 million).
[C] The $4 billion for the Public Housing Capital Fund consists of $3
billion to be distributed through HUD's regular Capital Fund formula
and $1 billion to be distributed through competitive grants.
[End of table]
Background:
Enacted on February 17, 2009, to jump-start the economy and encourage
long-term economic growth, the Recovery Act makes more than $780
billion available in supplemental appropriated funds to eligible state,
local, and sometimes private recipients. These funds are intended to
create and save jobs, spur economic activity, and promote high levels
of accountability and transparency in government spending, among other
things. We reported that as of September 23, 2009, the Department of
the Treasury had outlayed about $48 billion of the estimated $49
billion in Recovery Act funds projected for use in states and
localities in federal fiscal year 2009, which ran through September 30,
2009.[Footnote 4]
To ensure that Recovery Act funds supplement rather than replace other
spending, the Recovery Act contains requirements that the federal funds
not be substituted for state, local, and private support for some aided
programs. State and local governments are to be held accountable for
how the Recovery Act funds are used to support those programs, and the
federal agencies that oversee the programs will be responsible for
reviewing states' compliance with the requirements. These spending
requirements include the following:[Footnote 5]
Maintenance of effort. This requirement prohibits recipients from
replacing their own spending with federal dollars. In particular, a
maintenance of effort provision requires a state or its agency to
maintain certain levels of state spending for a certain program.
Supplement-not-supplant. This requirement does not hold recipients
responsible for maintaining their level of effort in supporting a
program, but it does require that funds provided for certain programs
serve only to supplement expenditures from other federal, state, or
local sources or from funds independently generated by the recipient.
But-for test. This requirement ensures appropriate use of Recovery Act
funds by requiring recipients to explain how a certain project would
not have been implemented during the grant period without the federal
grant. This requirement is described as the "but-for test" because, but
for the funds, the project would not be supported.
Efforts to Implement and Evaluate Compliance with Maintenance of Effort
and Similar Provisions Are Ongoing and Proving to Be Challenging:
Requirements for the programs that are subject to Recovery Act
provisions designed to guard against the substitution of federal funds
for state funds vary by responsible agency.[Footnote 6] In general, the
supplement-not-supplant requirements for HUD and the "but-for test" for
the Department of Commerce are different from the maintenance of effort
requirements for the Departments of Education and Transportation.
However, only recipients of funds administered by the Department of
Education can seek a waiver from the maintenance of effort
requirements. (See table 2.) The federal agencies responsible for these
programs have issued guidance to recipients on how to implement the
maintenance of effort or similar provision requirements. In addition,
the Department of Transportation (DOT) continues to issue further
guidance to clarify some requirements. To determine whether recipients
comply with maintenance of effort and similar provisions, agencies are
finalizing state certifications, reviewing applications, and developing
plans to review recipients' compliance with the provisions. However,
some agencies and states face challenges in implementing these
provisions. For example, the Department of Commerce's review of
applications to ensure that proposed projects would not be feasible
without federal funding has been delayed by scheduling and staffing
challenges. In addition, officials from several state departments of
transportation told us that while they plan to meet their maintenance
of effort requirements, decreasing state revenues and budgets pose a
challenge to doing so.
Table 2: Requirements of Recovery Act Maintenance of Effort or Similar
Provisions for Selected Programs:
Agency: Federal Highway Administration, DOT;
Program: Highway Infrastructure Investment;
Spending provision: Maintenance of effort;
State certification: Yes;
Responsible party: State;
Waiver: No;
Recovery Act consequences for recipients: Yes.
Agency: Federal Railroad Administration, DOT;
Program: Capital Assistance for High Speed Rail Corridors and Intercity
Passenger Rail Service;
Spending provision: Maintenance of effort;
State certification: Yes;
Responsible party: State;
Waiver: No;
Recovery Act consequences for recipients: Yes.
Agency: Federal Transit Administration, DOT;
Program: Transit Capital Assistance;
Spending provision: Maintenance of effort;
State certification: Yes;
Responsible party: State;
Waiver: No;
Recovery Act consequences for recipients: Yes.
Agency: Federal Transit Administration, DOT;
Program: Fixed Guideway Infrastructure Investment;
Spending provision: Maintenance of effort;
State certification: Yes;
Responsible party: State;
Waiver: No;
Recovery Act consequences for recipients: Yes.
Agency: Federal Transit Administration, DOT;
Program: Capital Investment Grants;
Spending provision: Maintenance of effort;
State certification: Yes;
Responsible party: State;
Waiver: No;
Recovery Act consequences for recipients: Yes.
Agency: Department of Education;
Program: State Fiscal Stabilization Fund (SFSF);
Spending provision: Maintenance of effort;
State certification: Yes[A];
Responsible party: State;
Waiver: Yes;
Recovery Act consequences for recipients: No[B].
Agency: HUD;
Program: Public Housing Capital Fund;
Spending provision: Supplement-not-supplant;
State certification: No;
Responsible party: Public housing agency;
Waiver: No;
Recovery Act consequences for recipients: No[C].
Agency: National Telecommunications and Information Administration,
Department of Commerce;
Program: Broadband Technology Opportunities Program;
Spending provision: But-for test;
State certification: No;
Responsible party: Public and private entities;
Waiver: No;
Recovery Act consequences for recipients: No[D].
Source: GAO analysis of the Recovery Act.
[A] Education required states to assure that they would meet
maintenance of effort requirements or waiver provisions in the state
applications for SFSF funding.
[B] Consequences for not meeting MOE requirements under SFSF are
covered by the General Education Provisions Act (20 U.S.C. §§ 1221 et
seq.)
[C] According to HUD, it will use its existing authorities to take
actions against public housing authorities found to have violated the
supplement-not-supplant requirement. See PIH Notice 2009-12 and 24
C.F.R. Parts 902, 941, and 968.
[D] NTIA's "but-for" provision is vetted through the grant approval
process, therefore this would be resolved prior to when the grant is
made.
[End of table]
DOT Is Finalizing Plans for Determining State Compliance, and Some
States Are Concerned about Meeting Maintenance of Effort Requirements:
DOT maintenance of effort provision: The Recovery Act provided about
$43.9 billion for highway, transit, and rail projects. This funding is
administered through DOT's operating administrations--the Federal
Highway Administration (FHWA), Federal Transit Administration (FTA),
and Federal Railroad Administration (FRA). To be eligible for these
funds, the Recovery Act specifies that the governor of each state must
certify that the state will maintain its current level of highway,
transit, and rail spending, among other things.[Footnote 7] The
certification must include a statement of the amount of funds the state
plans to spend from state sources from the date of enactment--February
17, 2009--through September 30, 2010, for the types of projects that
are funded by that appropriation. The Recovery Act required that the
Governor of each state submit this certification no later than 30 days
after enactment, or March 19, 2009. The Recovery Act does not provide
any waivers or exemptions for the states--for changes in economic
conditions, for example--from the maintenance of effort provision. The
consequence for a state of not maintaining the certified level of
effort is that the state will be prohibited from participating in the
redistribution of federal-aid highway obligation authority that will
occur after August 1, 2011.[Footnote 8] According to a DOT official,
the department has not made a decision as to whether the Recovery Act
requires states to maintain a total level of effort for covered
programs or to maintain their level of effort for each covered program.
For example, a state might not maintain its certified level of effort
for transit but might exceed its certified level of effort for
highways, thereby equaling or exceeding its total certified level for
transportation. How this question is interpreted has significance for
state flexibility in meeting maintenance of effort requirements and for
decisions about whether states will be eligible for redistributed
federal-aid highway obligations. According to this DOT official, DOT
plans to make a decision on this issue by the end of calendar year
2009.
DOT guidance to states: Ten days after the enactment of the Recovery
Act on February 17, 2009, DOT issued guidance to the states on the
FHWA, FTA, and FRA programs, among others, with maintenance of effort
provisions. This guidance included the principal requirements for a
governor's certification that a state will maintain its highway,
transit, and rail funding efforts, among others. Specifically, this
guidance included a sample form that states could complete to satisfy
the Recovery Act's certification requirement. In March 2009, as
required by the Recovery Act, all states submitted their
certifications; however, many states submitted explanatory
certifications--such as a statement that the certification was based on
"the best information available at the time"--or conditional
certifications, indicating that the certification was subject to
conditions or assumptions, future legislative action, future revenues,
or other conditions. In response, on April 22, 2009, DOT issued
guidance requiring such states to correct those problems through
recertification.
All states that submitted conditional certifications submitted a second
maintenance of effort certification to DOT without conditions. Since
April, DOT has issued supplemental guidance to reduce the variations in
how states calculate their maintenance of effort certifications. This
additional guidance is as follows:
* On May 13, 2009, DOT issued guidance in response to questions asked
by state representatives during a conference call.[Footnote 9] The
majority of this guidance addresses the types of expenditures to
include in their maintenance of effort calculation. For example, states
should include in-kind contributions from state sources in the planned
amount of the expenditures.
* In June and July 2009, FHWA posted several sets of frequently asked
questions to continue to provide states with information on the types
of expenditures to include in their maintenance of effort calculations--
and therefore reduce the variation in how states calculated their
maintenance of effort certifications. For example, states should
include planned expenditures from state sources regardless of which
agency or political subdivision in the state is responsible for
overseeing the expenditure of those funds. However, the maintenance of
effort calculation does not include any locally generated funds (i.e.,
funds produced by local taxes).
* In September 2009, DOT issued guidance that requires states to
include grants-in-aid to local governments as part of their maintenance
of effort calculation, which states generally did not count in their
previous calculations. This guidance will require some (if not many)
states to complete another certification.
Of the 17 departments of transportation we spoke with, officials from
13 stated that they had received timely guidance from DOT on
maintenance of effort certification and that DOT has generally been
responsive to their questions.[Footnote 10] For example, Mississippi
transportation officials told us that they had spoken and met with DOT
officials regularly since the enactment of the Recovery Act to discuss
Mississippi's maintenance of effort certification.
DOT plans for determining compliance with maintenance of effort
provision: DOT continues to work with state governments to finalize
their maintenance of effort certifications. As we reported in September
2009, DOT has concluded that the form of the revised state
certifications is consistent with its April 22, 2009, guidance, but it
is currently evaluating whether the states' method of calculating the
amounts they planned to expend for the covered programs is in
compliance with DOT guidance. As of November 30, 2009, FHWA, FTA, and
FRA had reached different stages in their reviews.
* In June 2009, FHWA began to review each state's maintenance of effort
calculation to ensure that the state included the correct planned
expenditures for highway investment. For example, FHWA division offices
evaluated, among other things, whether the amount certified (1) covered
the period from February 17, 2009, through September 30, 2010, and (2)
included in-kind contributions, as required. FHWA division staff then
determined whether the state certification needed (1) no further
action, (2) further assessment, or (3) additional information. In
addition, according to FHWA officials, their assessments indicated that
FHWA needed to clarify the types of projects funded by the
appropriations and the types of state expenditures that should be
included in the maintenance of effort certifications. As a result of
these findings, DOT issued the June, July, and September 2009 guidance
and plans to issue additional guidance on these issues.
Our review of FHWA division assessments for the 16 states and the
District of Columbia included in this study showed that 6 states needed
further assessment. In August 2009, FHWA staff in headquarters reviewed
the FHWA division staff findings for each state and proceeded to work
with each FHWA division office to make sure their states submit revised
certifications that will include the correct planned expenditures for
highway investment--including aid to local agencies. FHWA officials
said that of the 16 states and District of Columbia that we reviewed
for this study, they currently expect to have 12 states submit revised
certifications for state highway spending, while an additional 2 states
are currently under review and may have to revise their certifications.
DOT officials stated that they have not determined when they will
require the states to submit their revised consolidated certification.
According to these officials, they want to ensure that the states have
enough guidance to ensure that all programs with Recovery Act
maintenance of effort provisions have completed their maintenance of
effort assessments and that the states have enough guidance to ensure
that this is the last time that states have to amend their
certifications.
* FTA officials told us the agency plans to review each state's
maintenance of effort calculation to ensure that states included the
correct planned expenditures for transit projects covered under the
Recovery Act. According to FTA officials, FTA has begun this review,
but it is not complete. In October 2009, FTA officials compared each
state's certified transit maintenance of effort with the state funding
levels in that state's plans, specifically the Statewide Transportation
Improvement Program (STIP) and Transportation Improvement Program
(TIP). FTA found discrepancies between states' transit maintenance of
effort certifications and their STIPs and TIPs, and determined that
these state plans did not provide the best mechanism for comparison as
it was unclear what types of expenditures were included in the states'
STIP and TIP funding numbers. According to FTA officials, they will
work directly with these states to determine the methodology the states
used to calculate their transit maintenance of effort amount and,
subsequently, decide whether amended certifications are needed.
According to FTA officials, they have not established a timeline for
completing these reviews.
* FRA officials told us that the agency plans to review states'
maintenance of effort calculations to ensure that states included the
correct planned expenditures for rail projects covered under the
Recovery Act. However, the officials said they are still determining
the logistics and timeline for this process. Whereas FRA received
certifications that 12 states planned to spend state funds on rail
projects, FHWA received certifications from 50 states and the District
of Columbia that planned to spend state funds on highway projects and
FTA received certifications from 38 states and the District of Columbia
that planned to spend state funds on transit projects. However, FRA
plans to work with other states to determine whether they should have
certified that they planned to spend state funds for rail projects. FRA
officials said they expect to complete their review by February 2010.
FHWA has begun to monitor states' compliance with their certifications,
while FTA and FRA are developing monitoring plans. As of September
2009, FHWA was tracking every state's spending of state funds for the
kinds of projects funded under the Highway Infrastructure Investment
appropriation, while FTA and FRA were determining how they would track
state spending on covered transit and rail projects. Many of the state
departments of transportation we spoke to told us that they are
tracking their state expenditures on a monthly basis to determine if
their maintenance of effort requirements are being met; however, most
said they do not expect to determine whether they met their maintenance
of effort levels until sometime between September and October of 2010.
Following are examples illustrating these points:
* FHWA officials stated that FHWA has been using information from
Recovery Act reporting requirements to get a sense of whether states
are on track to meet their highway certifications. Ninety days after
the enactment of the Recovery Act, states were required to report the
amounts outlayed under each covered program.[Footnote 11] Then, states
submitted an update to this report 180 days after enactment and are
required to submit additional reports 1 year, 2 years, and 3 years
after the date of enactment. These reports track the actual aggregate
expenditures by each state, among other things. Using the 180 day
report, FHWA has been tracking each state's certified highway
maintenance of effort levels against its reported actual expenditures.
[Footnote 12] According to FHWA officials, this exercise provides FHWA
with an estimate of each state's rate of spending on highway investment
and has allowed the agency to identify states that appeared to have
abnormally high or low spending rates. FHWA officials have worked with
such states to understand whether the reasons are acceptable. For
example, from this spreadsheet, FHWA officials were able to determine
that California's spending rate on highway investment appeared to be
much higher than would have been expected based on the percentage of
the maintenance of effort time period that had elapsed. Upon further
investigation, including discussions with California, FHWA determined
that the state's rate was higher because improvements in the bond
market had allowed California to issue bonds it had not planned to
issue as of the February 17, 2009, maintenance of effort calculation
date. The expenditure of these bond proceeds on projects caused a
higher expenditure rate than expected. FHWA concluded that California's
explanation of its post-February 17, 2009, decision to issue the bonds
was acceptable and it provided a reason for a relatively higher
spending rate. In addition to using the Recovery Act reports, FHWA
officials stated that FHWA division staff will continue to work closely
with states to understand spending rates on highway investment and help
states address any potential problems states might have in complying
with their certified highway spending levels. FHWA officials stated
they will not be able to make a final determination as to whether
states have fully complied with their highway maintenance of effort
levels until after the maintenance of effort period concludes on
September 30, 2010.
* FTA and FRA officials told us they do not know when they will begin
to determine states' compliance with their transit and rail maintenance
of effort certifications. According to FTA and FRA officials, to
determine state compliance, they first need to assess each state's
transit and rail maintenance of effort certifications. FTA and FRA
officials told us that by September 30, 2010, they will work with each
state to determine its spending on eligible transit and rail projects
and thus determine if each state has complied with its transit and rail
certifications.
State challenges in meeting DOT maintenance of effort requirement: Most
states we spoke with are committed to trying to meet their maintenance
of effort requirements, but some states are concerned about meeting the
requirements. As we have previously reported, states face drastic
fiscal challenges, and most states are currently estimating that their
fiscal year 2009 and 2010 revenue collections will be well below
previously estimated amounts. In the face of these challenges, some
states told us that meeting the maintenance of effort requirements over
time poses significant challenges. In addition, according to the DOT
Deputy Assistant Secretary for Transportation Policy, the department
recognizes that many states may not be able to maintain the level of
effort specified in their certifications, given the continual decline
in their economy. If a state is not able to maintain its certified
level of effort, it will not be allowed to participate in the
redistribution of federal-aid highway obligations that will occur after
August 1, 2011.
In August 2008, states received about $1.2 billion through the federal-
aid highway redistribution. By way of context, this sum represents
about 5 percent of the nearly $27 billion states received through the
Recovery Act, or about 3 percent of the roughly $35 billion states
receive annually through the regular Federal Aid Highway Program.
However, of the 17 departments of transportation we spoke with,
officials from 15 stated that this prohibition on participating in the
fiscal year 2011 redistribution provides an incentive for their state
to meet its certified maintenance of effort level.[Footnote 13] For
example, Ohio officials stated they have received an average of $43
million in redistributed obligation authority over the past 3 years,
and they intend to meet the maintenance of effort levels and receive
additional funding. In addition, according to Georgia officials, the
potential addition of $40 million in redistributed funds is an
incentive for the state to meet its requirements.
Although the states we spoke with are committed to trying to meet the
maintenance of effort requirements, 7 state departments of
transportation told us the current decline in state revenues creates
major challenges in doing so. For example, Iowa, North Carolina and
Pennsylvania transportation officials said that a decline in state gas
tax and other revenues, used for state and state-funded local highway
projects, may make it more difficult for them to maintain their levels
of transportation spending. In addition, Georgia officials stated that
the current decline in the state's gas tax revenues is a challenge to
meeting its certified level of effort. Lastly, Mississippi and Ohio
transportation officials stated that if their state legislatures reduce
their respective department's budget for fiscal year 2010 or 2011, the
department may have difficulty maintaining its certified spending
levels.
Education's Guidance Allows States Flexibility in Defining Maintenance
of Effort Levels, and the Department Is Developing Plans to Monitor and
Enforce State Compliance:
Education maintenance of effort provision: The Recovery Act created the
State Fiscal Stabilization Fund (SFSF), which included approximately
$48.6 billion to award to governors by formula and another $5 billion
to award to states or school districts as competitive grants.[Footnote
14] The Recovery Act requires that each state meet maintenance of
effort requirements for elementary and secondary (K-12) education and
public institutions of higher education (IHE) as a condition of
receiving SFSF funds.[Footnote 15] The Department of Education
(Education) required governors in their SFSF application to provide
assurances that their state will meet maintenance of effort
requirements or that it will be able to comply with waiver provisions.
Specifically, in order to meet maintenance of effort requirements, 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. After
maintaining state support at no less than fiscal year 2006 levels,
states must use education stabilization funds to restore state funding
to the greater of fiscal year 2008 or 2009 levels for state support to
K-12 school districts and IHEs in fiscal years 2009 through 2011.
[Footnote 16]
Education guidance to states: Education disseminated several guidance
documents to states in the spring and summer of 2009 to assist them in
defining their maintenance of effort amounts. In determining, for
maintenance of effort 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
maintenance of effort, as well as in what they include or exclude in
their maintenance of effort definition. For example, state support for
education can be measured on the basis of either aggregate or per-pupil
expenditures. Measuring on a per-pupil basis gives more flexibility to
states with forecasts of declining student enrollment because they can
reduce aggregate state support for education but still meet maintenance
of effort requirements on a per-pupil basis. Also, states have the
flexibility to include or exclude additional state funding such as
state appropriations to local governments that support K-12 education
or other support that is not provided through primary funding formulas.
By not including education spending beyond funding distributed through
primary funding formulas in their definitions of maintenance of effort,
states maintain flexibility to reduce expenditures on other categories
of education spending and not affect their ability to comply with the
maintenance of effort requirement. For IHEs, states have some
discretion in how they establish the state level of support, with the
provision that they cannot include support for capital projects,
research and development, or amounts paid in tuition and fees by
students.
If states fail to meet the maintenance of effort requirements for K-12
education or IHEs, Education's guidance directed states to certify that
they will meet requirements for receiving a waiver--that is, that total
state revenues used to support education would not decrease relative to
total state revenues[Footnote 17]. Because the measure used to
determine eligibility for a waiver from maintenance of effort
requirements--state revenues used to support education--can be defined
differently from the maintenance of effort measure--state support for
education--states may have to track both measures to make sure they can
meet their assurances. States that need a waiver are directed to submit
a separate waiver application to Education.
While states generally are required to maintain state spending at or
above fiscal year 2006 levels of state support for education, we found
that five states and the District of Columbia reported in the approved
applications we reviewed that they would maintain state support above
that level in fiscal years 2009 and 2010. This gives them flexibility
to reduce state support in fiscal year 2010 to an amount below the
fiscal year 2009 level or in fiscal year 2011 below the fiscal year
2009 or 2010 level and still meet the maintenance of effort
requirement. Arizona, for example, reported it would maintain state
support in 2009 at about $500 million above the fiscal year 2006
levels. Because Florida reported it could not meet maintenance of
effort requirements in fiscal year 2009, the state has applied for a
waiver. While New York did not provide estimates of state support for
fiscal year 2009, 2010, or 2011 in its application, its governor
provided an assurance that the state would maintain state support for
education at or above its fiscal year 2006 maintenance of effort
level.[Footnote 18] Table 3 shows, for the states we reviewed and the
District of Columbia, the level of state support for elementary and
secondary education as required by the state's maintenance of effort
calculation. Specifically, the table provides the fiscal year 2006
maintenance of effort level for the states we reviewed and the
anticipated amount of state support for education for fiscal years 2009
and 2010 included by states in their application for SFSF.
Table 3: States and the District of Columbia Fiscal Year 2006
Maintenance of Effort Amount and Fiscal Year 2009 and 2010 Anticipated
State Support for K-12 Education (Dollars in billions, except for per-
pupil amounts):
State: Arizona;
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $3.46 billion;
Fiscal Year 2009 anticipated state support for education: $3.98
billion;
Fiscal Year 2010 anticipated state support for education: $3.93
billion.
State: California;
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $5,527 per pupil;
Fiscal Year 2009 anticipated state support for education: $5,783 per
pupil;
Fiscal Year 2010 anticipated state support for education: $5,548 per
pupil.
State: District of Columbia;
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $7,307 per pupil;
Fiscal Year 2009 anticipated state support for education: $8,585 per
pupil;
Fiscal Year 2010 anticipated state support for education: $8,660 per
pupil.
State: Florida[A];
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $9.13 billion;
Fiscal Year 2009 anticipated state support for education: $8.56
billion;
Fiscal Year 2010 anticipated state support for education: $8.51
billion.
State: New Jersey;
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $8.75 billion;
Fiscal Year 2009 anticipated state support for education: $9.63
billion;
Fiscal Year 2010 anticipated state support for education: $9.45
billion.
State: New York[B];
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $19.86 billion;
Fiscal Year 2009 anticipated state support for education: not
available;
Fiscal Year 2010 anticipated state support for education: not
available.
State: North Carolina;
Fiscal Year 2006 state support for education (state's maintenance of
effort level): $5.34 billion;
Fiscal Year 2009 anticipated state support for education: $6.36
billion;
Fiscal Year 2010 anticipated state support for education: $5.98
billion.
Source: GAO analysis of approved state SFSF applications.
[A] Florida applied for a waiver for 2009 because state support for K-
12 education was below the maintenance of effort level.
[B] New York did not provide estimates for state support for education
in its application.
[End of table]
Most of the states we reviewed reported additional education spending
beyond what was included in maintenance of effort requirements. For
example, North Carolina officials told us that in fiscal year 2009 the
state spent about $2 billion on K-12 education programs above its state
support for K-12 education based on maintenance of effort calculations.
Since these funds do not count as state education support for
maintenance of effort determinations, states can reduce these funds
without affecting their compliance with SFSF maintenance of effort
requirements. However, these other funds would be factored into a
state's revenues to support education as a percentage of total state
revenues if the state needs to request a waiver from maintenance of
effort requirements.
Education officials reported they have already received several revised
SFSF applications and they expect that the majority of all states will
resubmit their SFSF application because most states used their
governor's budget proposal, as allowed, in their original application,
which often differs from final enacted spending levels. While every
state, as part of its initial application for SFSF, had to assure it
would either meet the maintenance of effort 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 maintenance
of effort 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 maintenance of effort 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 to ensure they contain the required
assurances from the governor and comply with other requirements. Of the
6 states and the District of Columbia we reviewed, 6 have either
resubmitted or plan to resubmit their SFSF application because their
level of support for fiscal year 2006 or 2009 had changed.
Two states we reviewed have lowered their calculated fiscal year 2006
level of education support for maintenance of effort purposes. For
example, North Carolina officials told us they revised their fiscal
year 2006 level of support for maintenance of effort determination from
nearly $7 billion down to about $5.3 billion, based on guidance from
Education, to reflect a change made in the definition of the state's
primary funding formula in the state's fiscal year 2010 budget
legislation, so that the state has comparable measures of support in
both years. California amended its application in May 2009 because the
state had originally included about $2 billion in one-time funds that
were actually appropriated in fiscal year 2007 and reduced its
maintenance of effort level of support for fiscal year 2006 by this
amount. California amended its application again in August 2009 to
change its maintenance of effort level from an aggregate measure to a
per-pupil basis. California's resubmitted application did not state why
the change to a per-pupil basis was made. Officials from California did
not offer an explanation of the changes.
Education officials told us they are allowing states to revise their
fiscal year 2006 maintenance of effort support levels and will review
them to see that they are in compliance with Recovery Act requirements
and Education's guidance. However, current guidance from Education does
not direct states to include an explanation for changes made to state
fiscal year 2006 maintenance of effort support levels and calculations
in their resubmitted application. Rather, states are directed to
provide information about what is included in its measure of state
support for education. Consequently, revised applications report
maintenance of effort support levels and provide information about how
states are defining state support, but it may not be readily apparent
what funds have been added or removed from one application to the next.
For example, California's August revision shows that maintenance of
effort is defined on a per-pupil basis, but there is no explanation why
they changed this basis or how it compares to its previous maintenance
of effort measure.
Education officials said adjustments are being made to fiscal year 2006
maintenance of effort levels because, as state fiscal year 2009 budgets
become final, states are attempting to develop equivalent information
for both their fiscal year 2006 levels of support calculation and their
calculations for fiscal year 2009. Also, according to Education
officials, states were initially unsure of precisely what information
to include in their maintenance of effort calculations because SFSF is
a new program, and, now, given more time, they are making adjustments
to their maintenance of effort calculations. Education officials told
us that once states submit their final audited fiscal year 2009
figures, they will not be allowed to change their fiscal year 2006
maintenance of effort calculations again.
Education officials told us that four states--Florida, New Jersey,
Rhode Island, and South Carolina--have requested maintenance of effort
waivers for fiscal year 2009. Florida has requested Education waive
maintenance of effort requirements for elementary and secondary
education, and New Jersey has requested Education waive maintenance of
effort requirements for public IHEs.[Footnote 19] Education officials
told us states will get final waiver approval in the form of a written
letter of approval after the states submit final maintenance of effort
amounts to Education. Education officials also told us they will work
closely with states on a case-by-case basis to ensure that the
information submitted complies with the waiver criteria under the
Recovery Act.[Footnote 20]
While four of the six states and the District of Columbia we reviewed
reported maintaining state support for education above the required
fiscal year 2006 maintenance of effort level,[Footnote 21] a recent
Alert Memorandum by Education's Inspector General shows that some
states have lowered state support for education while continuing to
meet maintenance of effort requirements.[Footnote 22] The report noted
that Education agreed with this finding and took steps to discourage
states from reducing such support. For example, in the proposed
application requirements for the Race to the Top program--a competitive
grant program under the Recovery Act providing up to $4.35 billion in
funding to states for education reform efforts--Education said that, in
making award determinations, it would take into consideration whether
states reduced their percentage of total revenues used to support
public education for fiscal year 2009 as compared to fiscal year 2008.
The Education Inspector General's recommendations to Education included
that it should implement a process to track state support for
elementary and secondary education, as well as for public IHEs, to
determine the extent to which state funding of public education is
being reduced.
Education plans for determining compliance with maintenance of effort
provision: Education has begun to draft a monitoring plan to oversee
and enforce state compliance with maintenance of effort requirements
under SFSF. Because SFSF is a new program established under the
Recovery Act, Education has yet to finalize monitoring plans and
processes. Education officials said they are developing an approach to
monitor SFSF maintenance of effort that will include site visits to
states to review state documentation of compliance with maintenance of
effort requirements. In the interim, Education officials said they are
taking several steps both to monitor information they are receiving
from states and to provide technical assistance to states. For example,
according to Education officials, prior to approving SFSF awards,
Education reviewed each state's application to ensure the state
complied with statutory requirements to receive the funds.
Education has not yet released guidance to states on the information
states need to collect to prove they have met their required
maintenance of effort level. Education officials told us that once the
monitoring plan is finalized, the guidance will be released to states.
However, previously released guidance to states on maintenance of
effort instructed that states must maintain adequate documentation that
substantiates the levels of state support the state has used in making
maintenance of effort calculations. Officials in most states we
reviewed for this report told us they plan to document that the state
met its maintenance of effort requirements through its state budget and
accounting procedures. They said these data would be available when
accounting for fiscal year 2009 is closed or finalized.
Education has authority under the General Education Provisions
Act[Footnote 23] to take various actions against states that fail to
the meet maintenance of effort requirements--even in future years. For
example, Education could recover funds if a state is found to be out of
compliance with the maintenance of effort requirements. However,
Education officials told us they have been working closely with states
to ensure compliance with maintenance of effort provisions in an effort
to ensure that no state is out of compliance.
HUD Plans to Determine Compliance with Supplement-Not-Supplant
Provision through Ongoing Monitoring Efforts:
HUD supplement-not-supplant provision: The Recovery Act provided $4
billion for the Public Housing Capital Fund, a program administered by
HUD for the capital and management activities of public housing
agencies--$3 billion to be allocated by formula and $1 billion to be
awarded by competition. HUD allocated nearly $3 billion 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. Then, in September 2009, HUD awarded 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. The Recovery Act
requires that these funds be used to supplement and not supplant
expenditures from other federal, state, or local sources or funds
independently generated by the grantees.[Footnote 24] In contrast to
the DOT and Education programs that distribute Recovery Act funds to
the states, the Public Housing Capital Fund distributes grants directly
to public housing agencies. As a result, the Recovery Act does not have
state certification, waiver, or noncompliance provisions as part of the
Public Housing Capital Fund's supplement-not-supplant provision.
HUD information to housing agencies: Public housing agencies were to
sign an amendment to their annual contributions contracts (ACC), which
includes a supplement-not-supplant provision, in order to receive the
Recovery Act formula funds. All but 13 of the 3,134 housing agencies
offered formula grants under the Recovery Act signed their ACC
amendments, enabling HUD to obligate the formula grant funds to them.
HUD provided information to housing agencies through a notice and
questions included in two sets of frequently asked questions to clarify
the supplement-not-supplant provision in the Recovery Act. According to
this information, public housing agencies with Public Housing Capital
Fund formula grants are to avoid using Recovery Act funds to supplant
funds from other sources that have already been obligated when, for
example, an agency is accelerating or expanding a project that is
already under way. One HUD official stated that the distinction between
funds that have already been obligated and funds that have not yet been
obligated should be clear to housing agencies. If they had already
obligated non-Recovery Act funds for a project, they could not replace
those funds with Recovery Act funds.
In addition, the applications for competitive grants included a
certification by the housing agencies that they would not use Recovery
Act grant funds to supplant other federal, state, or local funds,
including tax credit equity, loans, or other nonpublic housing funds.
The notice of funding availability also instructed applicants to
provide sufficient detail in their project description about how they
planned to ensure that Public Housing Capital Funds received as
competitive grants would not supplant funds from other sources. In
order to receive the competitive grant funds, HUD also had public
housing agencies sign a separate ACC amendment that included a
supplement-not-supplant provision.
HUD plans for determining compliance with supplement-not-supplant
provision: HUD officials stated that monitoring compliance with the
supplement-not-supplant provision was included in ongoing monitoring
efforts for formula funds provided under the Recovery Act.
Specifically, HUD is implementing strategies for monitoring all public
housing agencies that received Capital Fund formula grants under the
Recovery Act. HUD field staff are using checklists that contain
questions about supplementing and not supplanting other sources of
funds. These staff are conducting remote reviews (that is, reviews that
do not involve visits to the agency) of all 3,121 housing agencies that
received Recovery Act funds using these checklists, as well as on-site
reviews of 172 housing agencies designated as troubled performers and
of 533 nontroubled housing agencies identified through a risk-based
strategy.[Footnote 25] Remote reviews are to focus on grant initiation
activities, the annual statement, environmental compliance,
procurement, and Recovery Act grant performance, including compliance
with the supplement-not-supplant provision. Specifically, the remote
review questions related to supplement-not-supplant bring attention to
projects that use both Recovery Act funds and other funds and flag them
for further review to ensure Recovery Act funds are supplementing the
other funds. On-site reviews, which HUD teams conduct on the premises
of housing agencies, are to include following up on outstanding items
from the remote review. In addition, on-site reviews are to assess
whether the housing agency is appropriately and effectively
administering its Recovery Act Capital Fund grant. HUD officials stated
that all remote reviews of troubled housing agencies have been
completed, as have on-site reviews of troubled agencies deemed high
risk and medium risk. On-site reviews of troubled agencies deemed low
risk are ongoing and will be completed by December 31, 2009, according
to HUD officials. HUD officials stated that remote and on-site reviews
of nontroubled housing agencies are under way. They said the remote
reviews will be completed by January 15, 2010, and the on-site reviews
will be completed by February 15, 2010. The results of the reviews of
both troubled and nontroubled housing agencies are to be evaluated and
summarized in the coming months.
In addition to these monitoring strategies, HUD officials pointed to
other opportunities to oversee housing agencies' compliance with the
supplement-not-supplant requirement. For example, public housing
agencies submitted annual statements outlining their planned uses of
Recovery Act funds before being granted access to the funds, which HUD
reviewed and approved. In addition, HUD officials told us that
development projects are the types of projects that may rely on
financing from multiple sources, increasing the risk that a portion of
the financing might be supplanted by Recovery Act funds. However,
housing agency plans that include funds for development activities
trigger a special review by HUD staff, which requires additional levels
of approval. As part of that review, the staff examine the plans for
funding from outside the Capital Fund to ensure the housing agency is
not using Recovery Act funds to supplant other funds. HUD's Office of
Inspector General is also conducting reviews of housing agencies'
capacity for administering Recovery Act funds.[Footnote 26] One recent
report raised questions about whether one housing agency had used
Recovery Act funds to supplant other funds.[Footnote 27] HUD officials
that administer the Capital Fund stated they are investigating this
case to make a separate determination.
HUD officials said they are currently developing a strategy for
monitoring the competitive grants that were awarded in September 2009.
Monitoring compliance with the supplement-not-supplant provision will
be part of that effort. According to HUD officials, in reviewing
applications, HUD staff were to examine applicants' plans for ensuring
they would not supplant other funds. The monitoring strategy will
follow up on the specific commitments each housing agency made in its
application, including compliance with what each housing agency said it
would do to ensure it was not supplanting other funds. HUD officials
said they are currently reviewing the different projects to be funded
by Capital Fund Recovery Competition grants to ensure that the
appropriate HUD offices are involved in developing and implementing the
monitoring strategy.
HUD officials told us they will determine consequences for housing
agencies found to be supplanting funds on a case-by-case basis.
Possible consequences include recapturing funds, requiring
reimbursement of Recovery Act funds from sources that were supplanted,
and halting work on projects. Several housing agency officials noted
that the potential consequences of failing to comply with the
supplement-not-supplant provision were severe enough for them to take
care in selecting projects rather than be found in violation of the
provision.
Housing agency officials we spoke with at 27 agencies generally did not
see supplanting as a major challenge for their housing agency and have
not had trouble abiding by the requirement. Officials at several
housing agencies noted that because they had many more projects that
needed to be done than could be completed with only their regular
Capital Fund grants, it was not difficult to identify projects that did
not have any other funding. For example, the Boston Housing Authority
selected some projects from the second year of its 5-year plan that
could now be started earlier than previously planned. Officials from
the Housing Authority of LaSalle County in Illinois stated that the
Recovery Act funds allowed them to complete more projects from their 5-
year plan in less time than they would have completed with regular
Capital Fund dollars alone.
In addition, some housing agency officials told us they were keeping
track of their Recovery Act funds separately from their regular Capital
Fund grants in order to make clear that the Recovery Act funds were not
supplanting other funds that had already been obligated. Furthermore,
Atlanta Housing Authority officials said they went so far as to closely
examine their capital improvement plans and documents for 2008 and 2009
looking for evidence that they had previously planned to use other
funds for any of the proposed Recovery Act projects. They found two
projects they thought might raise questions and decided to pay for them
with other funds. Other housing agency officials stated that annual
statements and 5-year plans are reviewed multiple times--by the public,
by the housing agency's board, and by HUD--and that these layers of
review serve as a check to ensure that supplanting does not occur.
NTIA Faces Scheduling and Staffing Challenges in Reviewing Applications
to Determine If Projects Meet the "But-For" Test:
NTIA "but-for" provision: The Recovery Act provided $4.7 billion for
the Broadband Technology Opportunities Program (BTOP), administered by
the Department of Commerce's National Telecommunications and
Information Administration (NTIA). BTOP provides grants for
infrastructure projects to support the deployment of broadband
infrastructure to unserved and underserved areas, to enhance broadband
capacity at public computer centers, and to encourage sustainable
adoption of broadband service. To be eligible for a BTOP grant, an
applicant must, among other things, pass the "but-for test," meaning
that the applicant must demonstrate that, but for federal assistance,
the project would not have been implemented during the grant period.
NTIA guidance to applicants: NTIA provided guidance to applicants on
how to comply with this provision through their applications for BTOP.
Applications and supporting documentation were due by August 20, 2009,
for the first round of funding. NTIA's Notice of Funds Availability
(NOFA) for BTOP grants, issued on July 9, 2009, requires grant
applicants to provide documentation demonstrating that the project
would not have been implemented during the grant period without federal
grant assistance.[Footnote 28] This documentation includes, but is not
limited to, a denial of funding from a lending institution or the Rural
Utilities Service (RUS), a current fiscal year budget that shows a lack
of sufficient funding for the project, or a business case that shows
the project's viability depends on grant financing. In addition, the
July 31, 2009, grant guidelines for BTOP reiterate that grantees must
submit the above documentation to demonstrate that the project would
not have been implemented during the grant period without federal
assistance. Furthermore, NTIA and RUS held 10 informational workshops,
throughout the country to explain the program and the application
process and to answer questions. At each of these events, NTIA
highlighted the "but-for" requirement for attendees. Also, NTIA's Web
site includes a list of frequently asked questions about BTOP grants
that does not provide information on the "but-for test"; according to
NTIA officials, this information does not appear because applicants did
not frequently inquire about it.
NTIA plans for determining compliance with "but-for" provision: NTIA
originally planned to award the $4.7 billion in BTOP grant funding
through three rounds of applications. However, the agency has combined
the second and third rounds in order to expedite the process of
awarding grants, as well as give applicants and the agency additional
time to prepare and review proposals for the second round. The agency
has begun the second phase of a two-step rolling process for reviewing
applications for its first round of funding; this second phase includes
determining whether applicants have adequately documented that the
project would not have been implemented without Recovery Act funds. In
the first step of the review process, NTIA will evaluate and score
applications based on the criteria set forth in the July 9 Notice of
Funds Availability, such as project purpose and project viability.
During this initial step, the agency will review BTOP applications and
will select those applications that will proceed to the second step.
The second step--due diligence--involves requesting extra documentation
from applicants to confirm and verify information contained in an
application, including documentation of the "but-for" test. This two-
step process is designed both to reduce the burden of providing
unnecessary documentation for applicants that do not meet the basic
project purpose and viability criteria and to meet NTIA's need to
efficiently evaluate applications.
We recently reported that NTIA and RUS face scheduling and staffing
challenges that have delayed the agency's review of applications.
[Footnote 29] In order to award the $4.7 billion appropriated for BTOP
by September 30, 2010, NTIA and RUS must, within 18 months, establish
their respective programs, solicit and evaluate applications, and award
funds. In addition under BTOP, NTIA will for the first time award
grants to commercial entities. The compressed time frame is complicated
by the fact that NTIA and RUS also face an increase in the number of
applications that they must review and evaluate in comparison to
similar programs. BTOP involves more applications and far more funds
than the agency formerly handled through other programs (see fig. 1).
For example, the 1,770 applications that NTIA intends to review in the
first application round for BTOP far exceeds the annual average of 838
applications for the largest grant program the agency previously
administered--the Telecommunications Opportunities Program.
Furthermore, the $4.7 billion that NTIA must award for BTOP is more
than three times as much as the about $1.5 billion that the agency has
heretofore awarded annually for all other grant programs combined.
NTIA's initial risk assessment indicated that a lack of experienced and
knowledgeable staff was a key risk to properly implementing the program
in accordance with the priorities of the Recovery Act. Due to limited
staff, NTIA may have an inability to thoroughly review applications and
therefore the agency risks funding projects that might not meet the
objectives of the Recovery Act's "but-for" test. In its fiscal year
2010 budget request to Congress, NTIA estimated that it would need 30
full-time-equivalent staff in fiscal year 2009 and an additional 40
staff for fiscal year 2010 to review applications and administer BTOP.
To address this issue, we recently recommended that the Departments of
Commerce and Agriculture develop contingency plans to ensure sufficient
resources for oversight of Recovery Act-funded projects beyond fiscal
year 2010, among other things.[Footnote 30] Officials from both
departments have agreed with our recommendation and plan to take all
appropriate steps to address our concern.
Figure 1: Average Annual Applications for NTIA Telecommunications and
RUS Broadband Programs:
[Refer to PDF for image: stacked horizontal bar graph]
NTIA and RUS programs:
NTIA BTOP (first funding round):
Number of applications received: 940;
Number of applications reviewed by both BIP and BTOP: 830;
Total: 1,770.
NTIA Public Safety Interoperable Communications Program (FY 2007):
Number of applications received: 56[A].
NTIA Technology Opportunities Program (FY 1994-2004):
Number of applications received: 838.
RUS BIP (first funding round)[B]:
Number of applications received: 400;
Number of applications reviewed by both BIP and BTOP: 830;
Total: 1,230.
RUS Community Connect Grant Program (FY 2005-2008):
Number of applications received: 105.
RUS Rural Broadband Access Loan and Loan Guarantee Program (FY 2003-
2008):
Number of applications received: 35.
Source: GAO analysis of NTIA and RUS data.
[A] In 2007, through the Public Safety Interoperable Communications
grant program, NTIA coordinated with Department of Homeland Security's
grants office to review 56 grant applications from states and
territories, representing about 301 individual projects, and awarded
almost $1 billion in grant funds to assist public safety agencies in
enhancing communications interoperability nationwide.
[B] Broadband Initiatives Program.
[End of figure]
While NTIA originally anticipated that it would begin announcing awards
on or about November 7, 2009, the agency now estimates that it will
begin in December 2009 and will not finish awarding the first round of
grants until February 2010. NTIA is taking several steps to address
these challenges. According to NTIA officials, the two-step application
review process conserves scarce staff resources by screening
applications and eliminating those that do not meet the program's
criteria, thereby reducing the number of applications subject to a
comprehensive review. NTIA has also enlisted the aid of contractors and
independent experts to review applications and announced that it will
award all funds in two rounds of applications, rather than three rounds
as originally anticipated. We recently reported that, while these steps
address some challenges, the upcoming deadline for awarding funds may
pose risks to the thoroughness of the application evaluation process.
[Footnote 31] In particular, NTIA may lack time to apply lessons
learned from the first funding round and to thoroughly evaluate
applications for the remaining rounds.
Conclusions:
Maintenance of effort and similar provisions are important mechanisms
for helping ensure that federal spending achieves its intended effect.
Without such spending provisions, recipients may simply substitute
federal funds for some of their planned spending for a given program.
Therefore this would not increase the overall spending for the program.
While these spending provisions are important, our review illustrates
the administrative and fiscal challenges in implementing them, both
from federal and state perspectives. More than 9 months have elapsed
since the passage of the Recovery Act, but federal and state officials
have not completed key steps in the implementation of the maintenance
of effort or similar provisions, including finalizing state
transportation certifications and ensuring transparency of state
education support levels, for the covered programs under the Recovery
Act with maintenance of effort provisions. These challenges, coupled
with the varying requirements of the maintenance of effort and similar
provisions we reviewed, raise questions as to whether the provisions
will achieve their intended purpose.
The SFSF funds provided under the Recovery Act are intended to play a
critical role in helping state and local governments stabilize their
budgets by minimizing budgetary cuts in education. The maintenance of
effort requirement written into the Recovery Act requires states to
maintain a minimum level of state spending on education while
addressing educational reforms. The Department of Education has taken
important steps to ensure that states are maintaining their maintenance
of effort levels. For example, the department provides technical
assistance and reviews state applications to ensure compliance with
legal requirements. Education does not currently require states to
explain why their maintenance of effort levels change--even when states
change their fiscal year 2006 maintenance of effort levels, which serve
as the states' baseline level for the maintenance of effort requirement
in the law. Given that states' changes to their fiscal year 2006
maintenance of effort levels affect how much funding states are
required to provide to education, providing explanations of why the
changes occurred enhances transparency. Since some states have planned
to decrease their fiscal year 2006 maintenance of effort funding by
over a billion dollars, the public and policymakers alike would benefit
from knowing why the decreases occurred and what funding was impacted
by the change. Although Education reviews maintenance of effort changes
with state officials, it is difficult to monitor changes effectively
without explanations. Given the large investment in funding involved,
efforts to reinforce transparency could play a crucial role in ensuring
that states fulfill their responsibility to maintain state spending on
Education.
Recommendation for Executive Action:
We recommend that the Secretary of Education take further action to
enhance transparency by requiring states to include in their State
Fiscal Stabilization Fund applications an explanation of the changes
and why they want to change their 2006 maintenance of effort
calculations or levels when they resubmit these applications to the
Department of Education.
Agency Comments:
We provided copies of our draft report to DOT, Education, HUD, and
Commerce for review and comment. All four agencies provided e-mail
comments.
DOT agreed with our findings and provided technical comments on our
discussion of FHWA's plans for finalizing state compliance with
maintenance of effort levels. We incorporated DOT's technical comments
where appropriate.
Education agreed with our recommendation that it take further action to
enhance transparency by requiring states to include an explanation for
why they want to change their fiscal year 2006 maintenance of effort
calculations or levels when they resubmit applications for the SFSF.
Education noted that it has already asked each state amending its SFSF
application with regard to level of support to provide a description of
the reasons it is changing its level of support for any year covered,
and a table showing the revisions across years. In addition, Education
officials reported they are revising guidance on amending an
application and applying for a maintenance of effort waiver to indicate
that a state is expected to provide such a description of its reasons
for changing its data on the level of support for any year covered by
the SFSF maintenance of effort requirements.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to the
appropriate congressional committees, the Director of the Office of
Management and Budget, and the Departments of Commerce, Education,
Housing and Urban Development, and Transportation. In addition, we are
sending sections of the report to the officials in the 16 states and
the District of Columbia covered in our review. The report is also
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about issues in this report
related to the U.S. Departments of Commerce or Transportation, please
contact A. Nicole Clowers at (202) 512-2834 or clowersa@gao.gov; for
questions about U.S. Department of Education issues, please contact
Cornelia Ashby at (202) 512-8403 or ashbyc@gao.gov; and for questions
about U.S. Department of Housing and Urban Development issues, please
contact Mathew Scirč at (202) 512-8678 or sciremj@gao.gov. 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 II.
Sincerely yours,
Signed by:
Gene L. Dodaro:
Acting Comptroller General of the United States:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To determine the programs in the American Recovery and Reinvestment Act
of 2009 (Recovery Act) with maintenance of effort or similar
requirements, we searched the Recovery Act for maintenance of effort
and similar provisions. From this search, we identified 16 programs in
the Recovery Act with such provisions. These programs received a total
of about $106.8 billion in appropriations. (See table 4.) We did not
include any program with a pre-existing maintenance of effort or
similar requirement, and we did not factor in language applying to
programs that fall under a maintenance of eligibility clause.[Footnote
32] Twelve federal agencies administer these 16 programs.
Table 4: Programs and Appropriations, by Agency, with Maintenance of
Effort or Similar Provisions in the Recovery Act (Dollars in millions):
Agency: Department of Education;
Program: State Fiscal Stabilization Fund;
Amount appropriated: $48,600.
Agency: Federal Highway Administration, Department of Transportation
(DOT);
Program: Highway Infrastructure Investment;
Amount appropriated: $26,800[A].
Agency: Office of the Secretary, DOT;
Program: Supplemental Discretionary Grants for a National Surface
Transportation System;
Amount appropriated: $1,500.
Agency: Federal Transit Administration, DOT;
Program: Transit Capital Assistance;
Amount appropriated: $8,400[B].
Agency: Federal Transit Administration, DOT;
Program: Fixed Guideway Infrastructure Investment.
Agency: Federal Transit Administration, DOT;
Program: Capital Investment Grants.
Agency: Federal Railroad Administration, DOT;
Program: Capital Assistance for High Speed Rail Corridors and Intercity
Passenger Rail Service;
Amount appropriated: $8,000.
Agency: National Telecommunications and Information Administration,
Department of Commerce;
Program: Broadband Technology Opportunities Program;
Amount appropriated: $4,700.
Agency: Department of Housing and Urban Development (HUD);
Program: Public Housing Capital Fund;
Amount appropriated: $4,000[C].
Agency: Department of Health and Human Services;
Program: Payments to States for Child Care and Development Block
grants;
Amount appropriated: $2,000.
Agency: National Railroad Passenger Corporation (Amtrak);
Program: Capital Grants;
Amount appropriated: $1,300.
Agency: Federal Aviation Administration, DOT;
Program: Grants-in-aid for Airports;
Amount appropriated: $1,300[D].
Agency: Federal Aviation Administration, DOT;
Program: Supplemental Funding for Facilities and Equipment.
Agency: Department of Labor;
Program: Trade Adjustment Assistance for Communities: Community College
and Career Training Grant Program;
Amount appropriated: 100[E].
Agency: Department of Labor;
Program: Trade Adjustment Assistance for Communities: Sector
Partnership Grant Program.
Agency: Maritime Administration, DOT;
Program: Supplemental Grants for Assistance to Small Shipyards;
Amount appropriated: $100.
Agency: Total;
Amount appropriated: $106,800.
Source: GAO analysis of the Recovery Act.
Notes: The amounts appropriated in bold text represent the eight
programs we selected for review and account for about 94 percent--about
$100.5 billion--of the Recovery Act appropriations to programs with
maintenance of effort or similar provisions.
[A] The Recovery Act appropriated $27.5 billion to the Highway
Infrastructure Investment program; however, $690 million of this amount
does not go to states.
[B] The Recovery Act appropriated $6.9 billion to the Transit Capital
Assistance program and $750 million each to the Capital Investment
Grants and Fixed Guideway Infrastructure Investment programs.
[C] The $4 billion for the Public Housing Capital Fund consists of $3
billion to be distributed through HUD's regular Capital Fund formula
and $1 billion to be distributed through competitive grants.
[D] The Recovery Act appropriated $1.1 billion to the Grants-in-aid for
Airports program and $200 million to the Supplemental Funding for
Facilities and Equipment program.
[E] The Recovery Act appropriated $500,000 to the Community College and
Career Training Grant Program and $500,000 to the Sector Partnership
Grant Program.
[End of table]
To identify those agencies that received a significant amount of
Recovery Act appropriations and whose programs are subject to a
maintenance of effort or similar provision, we selected the agencies
that received Recovery Act appropriations totaling $4 billion or more.
This threshold captures about 94 percent of the total Recovery Act
appropriations--about $100.5 billion--for programs with maintenance of
effort or similar provisions. Eight programs--administered by the
Departments of Commerce, Education, Housing and Urban Development, and
Transportation--met our selection criteria and in total received
Recovery Act appropriations of about $100.5 billion. Within the
Department of Transportation (DOT), four agencies--the Federal Highway
Administration (FHWA), the Federal Railroad Administration, and the
Federal Transit Administration--administer five of these programs. To
describe the maintenance of effort or similar provisions that apply to
these eight programs, we reviewed and analyzed the Recovery Act.
To describe the steps that agencies have taken to implement these
requirements, we reviewed guidance from the six agencies, including
notices published by the Departments of Commerce and Housing and Urban
Development (HUD) on funding availability, guidance issued by DOT in
February, May, and September 2009 on maintenance of effort requirements
to governors and FHWA division offices, and the Department of
Education's guidance to states on the State Fiscal Stabilization Fund
program's maintenance of effort requirements. In addition, we
interviewed officials at these departments about their guidance and
plans, if any, to issue supplemental guidance on maintenance of effort
or similar requirements.
To determine how responsible federal agencies are determining whether
recipients meet maintenance of effort or similar requirements, we
reviewed documents on actions taken by the Departments of Commerce,
Education, Housing and Urban Development, and Transportation to monitor
state certifications and grant applications. Specifically, we reviewed
all 50 states' and the District of Columbia's certification
applications to the Secretary of Transportation; State Fiscal
Stabilization Fund applications from 6 states and the District of
Columbia; and nonprofit organizations' grant applications to the
Broadband Technology Opportunities Program. In addition, we reviewed
the procedures that these departments used to ensure that the state
certifications and grant applications met the maintenance of effort or
similar requirements. We also interviewed officials from these
departments about their plans for implementing and overseeing states',
public housing agencies', and other grantees' compliance with the
maintenance of effort or similar requirements in the Recovery Act.
Additionally, we interviewed these agencies about their plans to
address noncompliance with these requirements.
We also obtained information from selected state departments of
education and transportation on their use of the guidance issued by the
Departments of Education and Transportation on maintenance of effort
requirements--specifically, the state certification process. In
addition, we gathered documents from and interviewed state education
and transportation officials on the methodology they used to calculate
their spending levels and plans to monitor their compliance with the
maintenance of effort requirements. We selected the states based on our
ongoing Recovery Act bimonthly reporting effort. This effort includes a
core group of 16 states and the District of Columbia that we plan to
follow over the next few years to provide an ongoing longitudinal
analysis of the use of funds provided in conjunction with the Recovery
Act. These 16 states and the District of Columbia contain about 65
percent of the U.S. population and are estimated to receive
collectively about two-thirds of the intergovernmental federal
assistance funds available through the Recovery Act.[Footnote 33] From
these 16 states and the District of Columbia, we obtained information
from 17 departments of transportation, 7 departments of education, and
27 public housing agencies in 10 states.[Footnote 34] These states were
selected from our 16 states based on the time constraints of our
ongoing Recovery Act bimonthly reporting effort.
[End of section]
Appendix II: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
A. Nicole Clowers, (202) 512-2834 or clowersa@gao.gov (U.S. Departments
of Commerce and Transportation issues); Cornelia Ashby at (202) 512-
8403 or ashbyc@gao.gov (U.S. Department of Education issues); and
Mathew Scirč at (202) 512-8678 or sciremj@gao.gov (U.S. Department of
Housing and Urban Development issues).
Staff Acknowledgments:
In addition to the contacts named above, Sara Vermillion, Assistant
Director; Donald Brown; Jay Cherlow; Alexander Galuten; Byron Gordon;
Sonya Harmeyer; Cheryl Harris; David Hooper; John McGrail; Sara Ann
Moessbauer; Paul Schmidt; and Carrie Wilks made key contributions to
this report.
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] For a discussion on this issue, see GAO, Federal-Aid Highways:
Trends, Effect on State Spending, and Options for Future Program
Design, [hyperlink, http://www.gao.gov/products/GAO-04-802 (Washington,
D.C.: Aug. 31, 2004).
[3] In response to a mandate in the Recovery Act, we conduct bimonthly
reviews that focus on 16 states and the District of Columbia, where
about 65 percent of the U.S. population lives. About two-thirds of the
intergovernmental federal assistance available through the Recovery Act
is expected to go to these 17 entities.
[4] 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).
[5] For this report, we did not review maintenance of eligibility
provisions for the Medicaid program in the Recovery Act. In order to
qualify for Recovery Act Funds for Medicaid, states generally may not
apply eligibility standards, methodologies, or procedures that are more
restrictive than those in effect under their state Medicaid plans or
waivers on July 1, 2008. This maintenance of eligibility provision is
different from maintenance of effort provisions in that it does not
require a set level of state spending; the increase in the federal
share for Medicaid may reduce the funds that states would otherwise
have to use for their Medicaid programs.
[6] We reviewed the Recovery Act programs with new maintenance of
effort or similar provisions that had appropriations of $4 billion or
more. This allowed us to cover about 94 percent of the Recovery Act
appropriations that fund programs containing these provisions. For more
detailed information on how we selected the eight programs, see
appendix I.
[7] Pub. L. No. 111-5, div. A, title XII, §1201(a), 123 Stat. 115, 212.
In addition, the governor must certify to the Secretary of
Transportation that the state or local government to which funds have
been made available has completed a full review and vetting required by
law and determined that projects are an appropriate use of taxpayer
funds. Pub. L. No. 111-5, div. A, title XV, §1511, 123 Stat. 115, 287.
[8] As part of the federal-aid highway program, FHWA assesses the
ability of each state to have its apportioned funds obligated by the
end of the federal fiscal year (Sept. 30) and adjusts the limitation on
obligations for federal-aid highway and highway safety construction
programs by reducing for some states the available authority to
obligate funds and increasing the authority of other states.
[9] DOT's Office of the Secretary of Transportation approved FHWA's
June, July, and September 2009 guidance and indicated that this
guidance applies to the other modes with Recovery Act maintenance of
effort provisions.
[10] This includes 16 state departments of transportation and the
District of Columbia department of transportation. Of the 4 remaining
departments of transportation, officials from 2 stated that the
guidance from DOT was not timely, while officials from the other 2
departments of transportation did not answer this question.
[11] Pub. L. No. 111-5, div. A, title XII, §1201(c)(2) and (3), 123
Stat. 115, 212.
[12] When we completed our review, FHWA used the certified amounts as
of August 31, 2009, but because some states are recertifying, we expect
these amounts to change.
[13] We spoke with 16 state departments of transportation and the
District of Columbia's department of transportation. Of the 2 remaining
departments of transportation, officials from 1 stated that this
prohibition on participating in the fiscal year 2011 redistribution
does not provide an incentive for their state to meet its certified
maintenance of effort level, while the officials from the other
department of transportation did not answer this question.
[14] 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 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.)
[15] Pub. L. No. 111-5, div. A, title XIV, § 14005(d)(1), 123 Stat.
115, 282-283.
[16] Pub. L. No. 111-5, div. A, title XIV, § 14002(a)(2), 123 Stat.
115, 280.
[17] Waivers are granted based on a state's total level of support for
education as a percent of state revenue, while maintenance of effort
levels are based on a selected measure of state spending for education.
[18] Estimates were not required to be included in the SFSF
application, and Education officials told us they would collect these
numbers when they were available.
[19] Rhode Island and South Carolina were not included in the states we
reviewed, but Department of Education officials reported that these
states are requesting a waiver of maintenance of effort requirements
for fiscal year 2009.
[20] Pub. L. No. 111-5, div. A, title XIV, § 14012, 123 Stat. 115, 285-
286.
[21] The level of New York's fiscal years 2009 and 2010 education
support is not available. See table 3.
[22] U.S. Department of Education, Office of Inspector General, Alert
Memo, American Recovery and Reinvestment Act of 2009, Potential
Consequences of the Maintenance of Effort Requirements under the
American Recovery and Reinvestment Act State Fiscal Stabilization Fund,
ED-OIG/L03J0011 (Washington, D.C., Sept. 30, 2009).
[23] 20 U.S.C. §§ 1221 et seq.
[24] 123 Stat. 214.
[25] HUD developed the Public Housing Assessment System to evaluate the
overall condition of public housing agencies and to measure performance
in major operational areas of the public housing program. These areas
include the 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. The Recovery Act provided HUD with the authority
to decide whether to provide troubled housing agencies with Recovery
Act funds. Although HUD determined that troubled housing agencies have
a need for Recovery Act funding, it acknowledged that troubled housing
agencies would require increased monitoring and oversight to meet
Recovery Act requirements. These troubled housing agencies were placed
on a "zero threshold" for obligations and expenditures--which means
these housing agencies must submit all award documents (i.e.,
solicitations, contracts, or board resolutions, where applicable) to
their HUD field office for approval prior to obligating funds and
obtain HUD approval before drawing down funds.
[26] According to a HUD Office of Inspector General official, these
reviews include determining whether housing agencies supplanted
Recovery Act funds.
[27] HUD Office of Inspector General, The Puerto Rico Public Housing
Administration, San Juan, Puerto Rico, Mismanaged Its Capital Fund
Financing Program and Inappropriately Obligated $32 Million in Recovery
Act Funds, Audit Report No. 2009-AT-1015 (Washington, D.C.: Sept. 30,
2009).
[28] 74 Fed. Reg. 33104, July 9, 2009.
[29] GAO, 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.:
Nov. 16, 2009).
[30] [hyperlink, http://www.gao.gov/products/GAO-10-80].
[31] [hyperlink, http://www.gao.gov/products/GAO-10-80].
[32] For this report, we did not review maintenance of eligibility
provisions for the Medicaid program in the Recovery Act. In order to
qualify for Recovery Act Funds for Medicaid, states generally may not
apply eligibility standards, methodologies, or procedures that are more
restrictive than those in effect under their state Medicaid plans or
waivers on July 1, 2008. This maintenance of eligibility provision is
different from maintenance of effort provisions in that it does not
require a set level of state spending; the increase in the federal
share for Medicaid may reduce the funds that states would otherwise
have to use for their Medicaid programs.
[33] For more information on how we selected these states, see, 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).
[34] We selected a sample of 47 agencies in our sample of 16 states and
the District of Columbia. We selected these locations to obtain a mix
of large, medium, and small housing agencies, housing agencies
designated as troubled performers by HUD, those to which HUD allocated
significant amounts of Recovery Act funding, and housing agencies that
had drawn down funds at the time of our selection See, 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).
[End of section]
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