Recovery Act
Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed (Appendixes), an E-supplement to GAO-09-1016 Gao ID: GAO-09-1017SP September 23, 2009This supplementary report to GAO-09-1016 provides individual state appendixes for 16 states and the District of Columbia for GAO's work on the third of its bimonthly reviews of the American Recovery and Reinvestment Act (Recovery Act). GAO's work focused on nine federal programs that are estimated to account for approximately 87 percent of federal Recovery Act outlays in fiscal year 2009 for programs administered by states and localities.
GAO-09-1017SP, Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed (Appendixes)
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2009:
Recovery Act:
Funds Continue to Provide Fiscal Relief to States and Localities, While
Accountability and Reporting Challenges Need to Be Fully Addressed
(Appendixes):
GAO-09-1017SP:
Contents:
Appendix I: Arizona:
Appendix II: California:
Appendix III: Colorado:
Appendix IV: District of Columbia:
Appendix V: Florida:
Appendix VI: Georgia:
Appendix VII: Illinois:
Appendix VIII: Iowa:
Appendix IX: Massachusetts:
Appendix X: Michigan:
Appendix XI: Mississippi:
Appendix XII: New Jersey:
Appendix XIII: New York:
Appendix XIV: North Carolina:
Appendix XV: Ohio:
Appendix XVI: Pennsylvania:
Appendix XVII: Texas:
[End of section]
Appendix I Arizona:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Arizona. The full report on all of our work,
which covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery/].
We reviewed two programs in Arizona funded under the Recovery Act--
Highway Infrastructure Investment and the Weatherization Assistance
Program. We selected these for different reasons. Contracts for highway
projects using Highway Infrastructure Investment funds have been under
way in Arizona for several months, and provided an opportunity to
review financial controls, including the oversight of contracts. The
Weatherization Assistance Program funding provided a significant
addition to the annual appropriations for the program assisting more
low-income households to achieve energy efficiency while providing
long- term financial relief. Furthermore, it provided an opportunity to
determine the state and local procedures in place to ensure monitoring,
tracking, and measurement of weatherization program success. We
reviewed contracting procedures and examined four specific contracts
under Recovery Act Highway Infrastructure Investment funds. In addition
to these two programs, we also updated funding information on three
Recovery Act education programs with significant funds being
disbursed-- the U.S. Department of Education (Education) State Fiscal
Stabilization Fund (SFSF) and Recovery Act funds under Title I, Part A,
of the Elementary and Secondary Education Act of 1965 (ESEA), as
amended, and the Individuals with Disabilities Education Act (IDEA),
Part B. Consistent with the purposes of the Recovery Act, funds from
the programs we reviewed are being directed to help Arizona and local
governments stabilize their budgets and to stimulate infrastructure
development and expand existing programs--thereby providing needed
services and potential jobs. The following provides highlights of our
review of these funds:
Highway Infrastructure Investment:
* The U.S. Department of Transportation's (DOT) Federal Highway
Administration (FHWA) apportioned $522 million in Recovery Act funds to
Arizona. As of September 1, 2009, the federal government has obligated
$293 million to Arizona and $18 million has been reimbursed by the
federal government.
* As of September 3, 2009, Arizona has awarded 47 contracts totaling
$135.1 million for statewide highway projects. Arizona has provided for
at least one construction contract for Recovery Act highway project in
each of its 15 counties with all counties receiving at least $100,000
in statewide Recovery Act Federal Highway funds and 13 of the 15
counties each receiving at least $1.8 million.
* Arizona has awarded only three construction contracts for local
highway projects because of a lack of local shovel-ready projects. The
lack of projects was due to some localities' not understanding the
allocations that they would receive as well as their unfamiliarity with
federal highway requirements.
Weatherization Assistance Program:
* The U.S. Department of Energy has allocated to Arizona about $57
million in funding for the Recovery Act Weatherization Assistance
Program for a 3-year period. As of September 1, 2009, approximately $49
million has been allocated to local service providers to conduct
weatherization training and make energy efficiency improvements with
approximately $28.5 million eligible for reimbursement.
* Arizona expects to expend the full Recovery Act funding allocation
before the 3-year period and plans to weatherize approximately 6,400
units statewide, which according to state officials, could result in as
much as $1.8 million in overall energy savings annually.
* As of September 11, 2009, Arizona had expended $771,485 of Recovery
Act weatherization funds, or about 1.4 percent of the total allocation.
While most local service providers were ready to begin weatherization
work, they waited until they were provided final Davis-Bacon Act local
wage requirements.
Updated Funding Information on Education Programs:
* Education has awarded Arizona approximately $557 million of the
state's approximately $1 billion of SFSF available funds. Of that,
Arizona had planned to provide approximately $250 million to elementary
and secondary local education agencies and approximately $183 million
to public institutions of higher education. As of September 8, 2009,
Arizona had not disbursed any SFSF funds to local education agencies or
community colleges, but has disbursed approximately $154 million to the
state's three universities.
* Additionally, Education has awarded Arizona about $195 million in
Recovery Act ESEA Title I funds. Arizona has allocated about $185
million, or 95 percent of these funds, to local education agencies
(LEA). Based on information available as of September 8, 2009, Arizona
has disbursed about $3 million to local education agencies. These funds
are to be used to help educate disadvantaged youth.
* Education has also awarded Arizona about $184 million in Recovery Act
funds under IDEA, Part B. As of September 8, 2009, local education
agencies have been allocated all $184 million and have received $2.2
million of the funds. The IDEA funds are to be used to support special
education and related services for children and youth with
disabilities.
Arizona Using Recovery Act Funds to Provide Short-Term Relief;
Anticipates Fiscal Challenges to Continue after Recovery Act Funds
Expire:
In the face of declining revenues and economic activity, Arizona is
using Recovery Act funding to help balance the state budget and
minimize the large program reductions to the fiscal years 2009 and 2010
budgets. According to state budget officials, Arizona's general fund
full year collections for fiscal year 2009 were $7.69 billion, a
decrease of 18.4 percent compared to fiscal year 2008, after various
accounting adjustments, such as fund transfers. To address this revenue
gap, the state reduced its overall general fund appropriations by
approximately $1.4 billion in fiscal year 2009, or 14 percent compared
to fiscal year 2008, and applied $750 million in Recovery Act funding
to reduce expenditures, according to the Joint Legislative Budget
Committee.[Footnote 2] However, despite these cuts and the Recovery Act
federal assistance, Arizona had an estimated remaining budget shortfall
of $479 million. While the state has a balanced budget requirement,
according to the budget committee staff, the Arizona constitution
permits the state to address any year-end shortfall in the next fiscal
year. As a result, Arizona's fiscal year 2009 estimated shortfall of
$479 million was carried over and addressed in the fiscal year 2010
budget.
For fiscal year 2010, which began in Arizona on July 1, 2009, Recovery
Act funding will continue to temporarily stabilize the state budget. As
of September 4, 2009, Governor Brewer has signed, vetoed or line item
vetoed all fiscal year 2010 budget bills transmitted to her by the
Arizona legislature. Arizona's anticipated shortfall for fiscal year
2010 of $3.16 billion was largely resolved by the Governor's actions on
the budget bills, according to the Joint Legislative Budget Committee.
The budget includes Recovery Act funding of approximately $1.13
billion.[Footnote 3] However, according to the Governor, the bills did
not amount to a comprehensive state revenue strategy for fiscal year
2010 and future fiscal years. In particular, the Governor exercised
line item veto authority on the Department of Education and Department
of Economic Security reductions, while acknowledging this level was
higher than the state's current available revenues can sustain. In her
transmittal letter, the Governor cited her intent to restore education
funding and preserve spending levels to meet Recovery Act requirements.
The Governor vetoed legislation which affected funding and the
assessment of fees for a number of smaller state agencies and
commissions and also allowed the 3-year-old temporary suspension of the
State Equalization Assistance Property Tax, which supports K-12
education, to expire, according to the Governor's budget office.
[Footnote 4] As officials explained, because this tax is levied at the
local level--increasing the proportional contribution of local monies
to education funding--the return of this tax effectively means a
decrease in the state's formula contribution to education funding.
According to the Governor's budget officials, the legislature had made
several additional cuts to state support for education funding which
would have pushed Arizona below the education expenditure level that it
must maintain to meet requirements for SFSF funds.[Footnote 5] However,
the Governor exercised line item veto authority on certain Department
of Education reductions in order to maintain education expenditures at
the required levels. The Joint Legislative Budget Committee now
estimates a remaining shortfall of approximately $350 million. The
Governor is now planning to call the legislature back into session to
address the outstanding budgetary challenges. In addition to the budget
shortfall, reduced revenues have resulted in the state treasurer having
to make short-term borrowings from other state and local government
funds to cover cash deficits in order to continue state operations. In
addition, the state is preparing to establish an external line of
credit of $500 million, according to the Governor's office.
The Governor has proposed that she and the legislature continue to work
to address the state's revenue shortfall. As part of a five-part long-
term solution to Arizona's fiscal condition, the Governor has asked the
legislature to consider a temporary sales tax increase, particularly in
light of the fact that the Recovery Act funding will expire. The staff
of the Joint Legislative Budget Committee has estimated that a voter-
approved temporary sales tax increase of 1 cent for the first 24 months
and a half-cent for the following 12 months would generate revenue
totaling approximately $2.5 billion for fiscal years 2010 through 2013.
In addition, the Governor called for a state tax reform to promote
investment in Arizona, revenue stability and job growth and
sustainability. According to state officials, members of the
legislature have proposed individual and corporate income tax
reductions--estimated to reduce revenue by $400 million in fiscal years
2012 and 2013--and to permanently repeal the State Equalization
Assistance Property Tax--estimated to cost $250 million in fiscal year
2010 and up to $281 million in fiscal year 2013.
Arizona is currently looking for additional ways to address its
projected fiscal challenges and is developing budgetary plans to avoid
a sudden drop in revenues as the Recovery Act funding period ends,
according to Governor's staff members. The $750 million spent in fiscal
year 2009 and $1.13 billion obligated for fiscal year 2010 to address
budget shortfalls leave Arizona with only a projected $417 million in
Recovery Act funding remaining for fiscal year 2011. Current estimates
project a deficit between $0.89 billion and $2.2 billion in the state's
general fund for fiscal year 2011, depending on various budget
solutions being considered. The Governor's staff continues to develop
plans to work with state agencies on internal organizational changes
that can help reduce expenditures. In addition, on August 17, 2009, the
Arizona Senate President established the Arizona Budget Commission,
which will assess how appropriations are allocated by state agencies;
streamline the agencies' organization, operation and costs; and create
a best-practices management model for state government.
Arizona May Have Insufficient Funds to Cover Administration Costs of
Recovery Act Oversight without Expeditious Review of State Proposals:
Given Arizona's budgetary challenges, officials in the Governor's
Office of Economic Recovery (OER) and the Arizona State Comptroller
expressed their concern about having adequate funding to cover the
additional administrative costs associated with compliance of the
Recovery Act provisions. States have been given the option to recoup
costs for central administrative services, such as providing oversight
and meeting reporting requirements of the Recovery Act, as outlined in
Office of Management and Budget (OMB) memorandum M-09-18.[Footnote 6]
The OMB memo presented two alternative methods--using estimated costs
or billing for services. Both alternatives are longstanding methods
that have been allowed under the guidance in OMB Circular A-87.
However, as understood by the state's Comptroller, the cost recovery
processes that OMB currently allows will not cover all the additional
administrative costs under the Recovery Act, and he expressed two major
concerns over the OMB Circular A-87 cost allocation methodologies.
First, according to the Comptroller, the state will not be able to
fully recapture the cost of depreciable equipment that is dedicated
specifically for Recovery Act purposes. For example, equipment such as
a computer server that is purchased by the state to comply with
Recovery Act reporting or monitoring would be depreciated over the life
of the asset and not over the period of Recovery Act programs. The life
of the asset would be longer than the period of Recovery Act programs,
resulting in the state receiving an allowance for depreciation for a
shorter period. Therefore, the state comptroller maintains that Arizona
would not receive full cost recovery. Second, the traditional cost
allocation methodologies require that the state charge administrative
costs according to a formula based on the actual amount of money spent.
To address Arizona's concerns about insufficient funds to cover the
administrative costs, the Arizona State Comptroller, along with other
state comptrollers, collaborated with their national association, the
National Association of State Auditors, Comptrollers, and Treasurers
(NASACT), to address these issues, and on August 7, 2009, requested on
behalf of the states, a waiver of certain requirements of OMB Circular
A-87. The request asked for a change (1) to increase the allowance for
depreciation of assets that are dedicated to Recovery Act purposes; and
(2) to allow states to apply a prorated allocation of central service
agency costs based on the ratio of state agency Recovery Act funds
received as compared to total Recovery Act funds received by the state.
Additionally, Arizona submitted a proposal to the Department of Health
and Human Services's (HHS) Division of Cost Allocation to simplify the
calculation and accounting for central administrative costs related to
Recovery Act programs.[Footnote 7] Arizona proposed that it be allowed
to base the allocation of central service agency costs based on
budgeted dollars that would not be adjusted to the actual amount of
money spent.
According to the state Comptroller, OMB reviewed the waiver request and
advised that the request to increase the depreciation allowance was a
policy issue and would not be treated as a waiver. Regarding the second
waiver request, OMB advised that the Division of Cost Allocation would
approve cost allocation methodologies on a state-by-state basis.
As of September 15, 2009, Arizona is awaiting a decision from OMB on
the policy issue for depreciation allowance and from HHS for approval
of the cost allocation methodology. The state, pending a decision from
HHS on the cost allocation methodology, plans to go forward using the
second option--billing for services--allowed by OMB Memorandum M-09-18.
However, the state comptroller is concerned that by the time OMB and
HHS make a decision, recipients of Recovery Act funds in Arizona will
have already spent significant portions of these funds leaving the
state with a much smaller pool of remaining funds from which the state
could collect the administrative costs. Therefore, the ability of the
state to collect for all administrative costs could be jeopardized.
Arizona's Strategy to Meet October Reporting Deadline Is Based on
Implementing a System Intended to Centrally Collect and Report Data on
State Agencies' Use of Recovery Act Funds:
Recipients of Recovery Act funds are required to submit quarterly
reports under section 1512 of the act to the federal agencies providing
those Recovery Act funds. These reports are to include, among other
requirements, (1) the total amount of Recovery Act funds received by
each recipient from the federal agency, (2) a list of all projects and
activities for which Recovery Act funds were expended or obligated, (3)
an evaluation of the completion status of each project or activity, and
(4) an estimate of the number jobs created and number of jobs retained
by each project or activity. Recipients are to submit the first report
by October 10, 2009, for the quarter ending September 30, 2009. The
Recovery Act requires that the reporting be done by entities, other
than individuals, that receive money directly from the federal
government. These entities are to submit their data using [hyperlink,
http://www.federalreporting.gov] which will then be made available to
the public at [hyperlink, http://www.recovery.gov].
Arizona officials from the Governor's office explained that the
Governor envisions her office as the responsible party for Recovery Act
funds received by the state of Arizona. Therefore, OER plans to
centrally collect data and to submit these quarterly 1512 reports for
the state agencies. Some of the benefits envisioned by the Governor for
single reporting are the ability to expedite the reporting process,
provide a common system for reporting, and use built-in audit
capabilities. Arizona will employ a centralized reporting solution
that, according to OER officials, will comply with OMB reporting
guidance. The centralized solution is based on a software application
known as Stimulus 360 that is customized to meet the Recovery Act
reporting requirements. State agencies that receive Recovery Act funds
will send the required reporting data to the OER team. The Governor's
OER team will compile this data into a single entry and report the
information through [hyperlink, http://www.federalreporting.gov], the
reporting portal, to [hyperlink, http://www.recovery.gov].
Using this centralized approach, the Governor's team will extract
financial data already available from the state's accounting system on
Recovery Act funds that state agencies are using, add in any other data
from the agencies, and upload these combined data into the centralized
reporting solution. (See figure 1.) According to OER officials, their
team will provide reporting and auditor resources to review data
quality and perform data validation and data cleanup. The state
comptroller noted that the inherent risk of double reporting certain
data elements, such as the number of jobs created, by both the state
agency and other subrecipients, such as a vendor performing the work,
would be reduced with centralized reporting.
Figure 1: Arizona's Centralized Reporting System for October Reporting:
[Refer to PDF for image: illustration]
A pyramid-shaped diagram that illustrates the Recovery Act projects‘
hierarchical reporting scheme in Arizona. It starts with individual
projects at the bottom of the pyramid, then up to state agencies, up to
the governor‘s office, and finally up to [hyperlink,
http://www.federalreporting.gov] and [hyperlink,
http://www.recovery.gov] at the top of the pyramid.
Source: GAO.
[End of figure]
As an additional check on data accuracy, each state agency will be
responsible for validating its data prior to submitting it to the
state. For example, as discussed later in this appendix, data for
transportation projects are housed in the Arizona Department of
Transportation's (ADOT) existing reporting system, LCPtracker, and will
undergo numerous levels of review by ADOT prior to reporting these data
to OER for inclusion in the centralized reporting system.
To coordinate with and obtain cooperation from the state agencies on
using the centralized solution, the Governor's team started meeting in
July 2009 with the directors of state agencies. The Governor's team
explained its preference for the centralized reporting method over each
state agency reporting separately. The team also gathered information
on reporting requirements and subsequently began planning for a test
run of the centralized reporting method. According to OER officials, as
of September 8, 2009, all state agencies plan to use the Governor's
centralized reporting methodology.
Early Identification of Key Long-Term Recovery Act Impacts on the State
Could Help the State, Its Agencies, and Localities Ensure They Will
Have the Necessary Data and Tools to Ensure Accountability:
Recognizing that the state and agencies have focused their limited
resources in the short term on putting the Recovery Act funds to work
in Arizona and meeting the October reporting deadline, staff in OER are
beginning to think about what unique economic impact of Recovery Act
funds the state would want to track and measure over the long term,
separately from the federal government data requirements. By doing so,
the state will be positioned to identify any lessons learned from its
implementation of the Recovery Act program and to provide
accountability to the public on the act's effects. OER staff
acknowledged, however, that they have limited resources to do longer
term planning, but are moving forward as resources become available.
Determining at the start of the Recovery Act program which long term
effects to track would help the state to ensure it is collecting data
from the outset that it will need, as well as has the systems and
skilled staff in place to complete analysis.
For agencies, localities, and other Recovery Act funding recipients
outside of OER, considering ways to use collected data and measure
long- term effects of Recovery Act funding is valuable, assuming
resources for planning and analysis are available. Officials within the
Arizona Department of Education stated that they hope to use data to
identify correlations between uses of program funds and improvements in
student performance. Consequently, they can continue successful efforts
if alternative funding is available. Likewise, officials managing the
ESEA Title I education program acknowledged the benefits of determining
research questions on final Recovery Act impacts so that they can
prepare as needed. In addition, officials within the state Department
of Commerce managing the Recovery Act weatherization funds are
positioning the department to estimate the amount of energy saved as a
result of work completed with these funds. These are positive steps
consistent with the state's long-term planning objectives. The state
could also help to ensure that other agencies and localities, as
appropriate, are taking such steps to make the best use of funds.
SFSF Funds Help Address Education Cuts in Some Programs, but K-12 Funds
Delayed:
The Recovery Act created the State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHE). The initial award of SFSF
funding required each state to submit an application to Education that
provided several assurances. These included assurances that the state
will meet maintenance-of-effort requirements (or it will be able to
comply with waiver provisions) and that it will implement strategies to
meet certain educational requirements, including increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at fiscal year 2006 levels, states must use education
stabilization funds to restore state funding to the greater of fiscal
years 2008 or 2009 levels for state support to school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use education
stabilization funds, but states have some ability to direct IHEs in how
to use these funds.
In July 2009, we reported that the Governor had applied to the U.S.
Department of Education for SFSF funds that would allow the state to
offset budget cuts and that Education approved this application.
According to the Governor's office, Arizona plans to use the government
services funds for programs to support children's services, community
health centers, and officer salaries in the state's Department of
Corrections. As of August 28, 2009, Education had awarded to Arizona
approximately $557 million of its nearly $1 billion in available SFSF
funds. The state had planned to provide $433 million to school
districts and charter schools (otherwise referred to as local education
agencies) and public IHEs for fiscal year 2009 expenditures, with
approximately $250 million available to local education agencies (LEA)
and approximately $183 million to public IHEs. However, based on
guidance from Education, the state now plans to provide some of these
funds in fiscal year 2010 instead, as discussed in the following
section.
Arizona Plans to Make First Round of SFSF Funds Available to LEAs in
Fiscal Year 2010 Rather than 2009 as Planned after Additional Guidance
from U.S. Department of Education:
The OER is creating an application process and deadlines for the LEAs
and plans to distribute the first round of $250 million SFSF funds to
LEAs in fiscal year 2010. In our July 2009 report, we reported that
because Arizona was facing a nearly $3 billion budget deficit, the
Governor and legislature had backfilled $250 million in general fund
appropriation reduction for K-12 programs with SFSF funds. However,
based on communications with Education after the issuance of our
report, Arizona was not able to effect this budgetary change.[Footnote
8] Education and OER have agreed to procedures that will allow SFSF
funds to be utilized in Arizona consistent with the intent of the
Recovery Act. OER revised its original approach and plans to make the
SFSF funds available in September 2009, upon receipt of applications
from LEAs.
According to the Governor's office and Joint Legislative Budget
Committee staff, the postponement in draw down of the funds has
complicated the state's budget balancing efforts. In addition, the
state had to borrow money in order to cover the first monthly state aid
payment to LEAs in fiscal year 2010 because the SFSF funds were not
available, according to the Office of the Arizona State Treasurer.
[Footnote 9] Office of the Treasurer staff noted this has increased the
total amount the state has borrowed to maintain cash flow for state
operations, and has played a role in the state's bond rating being
placed on negative watch by one rating agency. Furthermore, according
to a Governor's office budget official, the state anticipated
challenges to making a scheduled state aid payment to school districts
for September 2009 due to the state's cash flow situation. Therefore,
the state intends to provide up to $300 million in SFSF funds to
schools in lieu of a September 15 state aid payment, according to a
Governor's office budget official.
SFSF Funds Help Institutions of Higher Education Avoid Steep Tuition
Surcharges, and Cuts in Personnel and Student Services:
Of the $182.8 million in SFSF funds originally planned for public IHEs
in fiscal year 2009, the Governor allocated about $154 million to the
three universities in the state and the remaining approximately $29
million to the 11 eligible community college districts. In fiscal year
2009, the level of state support for public IHEs was approximately
$1.06 billion.[Footnote 10] As of August 3, 2009, the three public
universities each had submitted applications for SFSF and received the
full amount of allocated SFSF funds. The three universities requested
the SFSF monies as a reimbursement for fiscal year 2009 employee
benefits, personnel services--such as salaries for faculty and
instructors--and supplies. As of September 8, 2009, the community
colleges are in the process of completing inter-government agreements
with the state with respect to their SFSF disbursements.
According to the Arizona Board of Regents and the three university
presidents in their SFSF applications, the SFSF funds helped the
universities absorb budget reductions the state had implemented in
order to address budget deficits. More specifically, the universities
had their state support reduced by $29 million in fiscal year 2008 and
$163 million in fiscal year 2009, amounting to approximately 17 percent
of the overall state appropriations in fiscal year 2009 for the
universities. Faced with these reductions, the universities took
various actions such as operating reductions, academic restructuring,
and layoffs and furloughs for faculty, staff, and administrators. In
addition, the universities anticipated an average tuition surcharge for
the 2009-2010 academic year of $2,051 before receiving Recovery Act
funding, according to Regents' staff calculations. Table 1 shows the
state appropriation reductions and the anticipated tuition surcharges
for each university for fiscal year 2009.
Table 1: State Fiscal Stabilization Funding for Arizona's Public
Universities:
Arizona State University;
Student body: 67,082;
General fund appropriation reduction, fiscal year 2009 (dollars in
millions): $66.1;
SFSF funding, fiscal year 2009 (dollars in millions): $69.82;
Anticipated tuition surcharge before Recovery Act offset (2009-2010):
$1,609;
Actual tuition surcharge (2009-2010): $510.
University of Arizona; Student body: 38,057; General fund appropriation
reduction, fiscal year 2009 (dollars in millions): $69.0;
SFSF funding, fiscal year 2009 (dollars in millions): $60.82;
Anticipated tuition surcharge before Recovery Act offset (2009-2010):
$2,568;
Actual tuition surcharge (2009-2010): $766.
Northern Arizona University;
Student body: 22,307; General fund appropriation reduction, fiscal year
2009 (dollars in millions): $19.2;
SFSF funding, fiscal year 2009 (dollars in millions): $23.49;
Anticipated tuition surcharge before Recovery Act offset (2009-2010):
$1,975;
Actual tuition surcharge (2009-2010): $422.
Source: Arizona Board of Regents.
[End of table]
According to the three university presidents, the SFSF monies were
necessary to avoid additional personnel reductions and furloughs and
the resulting reduction of programs and student services. Furthermore,
the availability of SFSF monies allowed the universities to
significantly reduce the tuition surcharges for the 2009-2010 academic
year to an average of $566, based on Regents' staff calculation. From
this perspective, the state universities and Board of Regents executive
staff deemed the Recovery Act a success. Nevertheless, the tuition
calculations show surcharges escalating for the 2012-2013 academic
year, by approximately $2,693 on average, once Recovery Act funding
expires. Absent additional state or federal funding, the universities
will need to develop budget plans to explicitly address their
anticipated funding challenges.
Funds Starting to Flow to LEAs As Arizona Has Approved Many
Applications for ESEA Title I Funding:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through Title I, Part A of ESEA. The Recovery Act
requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of the funds by September 30, 2010.[Footnote 11] Education is
advising LEAs to use the funds in ways that will build the agencies'
long-term capacity to serve disadvantaged youth, such as through
providing professional development to teachers. Education made the
first half of states' Recovery Act Title I, Part A funding available on
April 1, 2009, and announced on September 4, 2009, that it had made the
second half available.
The state educational agency (SEA) in Arizona has allocated $185
million of the $195 million in ESEA Title I Recovery Act funds to LEAs.
The SEA official said that the remaining $10 million has been set aside
for administration and reallocation to LEAs. In the ESEA Title I
Recovery Act funding process, each LEA submits an application that
contains a detailed plan on how and when the funds will be used, and
SEA officials review the application to ensure that LEAs' spending
plans comply with applicable laws and regulations. When the SEA
approves an LEA's application it also obligates ESEA Title I funds to
the LEA. As seen in table 2 below, as of September 8, 2009, the SEA had
approved 84 applications for about $46.3 million. SEA officials expect
to approve all applications and obligate $185 million of ESEA Title I
funds by September 30, 2009.
Table 2: Number and Dollar Value of LEA Applications for Recovery Act
ESEA Title I by Status, September 8, 2009:
Applications approved by SEA;
Number of applications: 84;
Dollar value (in millions): $46.3;
Amount of ESEA Title I Recovery Act funds disbursed to LEAs (in
millions): $3.0.
Applications submitted but not approved; Number of applications: 133;
Dollar value (in millions): $38.9;
Amount of ESEA Title I Recovery Act funds disbursed to LEAs (in
millions): [Empty].
Applications to be submitted;
Number of applications: 209;
Dollar value (in millions): $99.4;
Amount of ESEA Title I Recovery Act funds disbursed to LEAs (in
millions): [Empty].
Total LEAs eligible for ESEA Title I Recovery Act funds; Number of
applications: 426;
Dollar value (in millions): $184.7.
Source: SEA grants management system for Recovery Act funds for state
fiscal years 2009 and 2010.
Note: Totals may not add due to rounding.
[End of table]
LEAs with approved applications submit monthly cash management reports
to SEA and the SEA provides funds to them with Recovery Act funds for
their expected Recovery Act ESEA Title I program expenditures. As of
September 8, 2009, LEAs had received $3.0 million in ESEA Title I
Recovery Act funds. SEA officials stated that the grants approved are
in accordance with ESEA Title I and related statutory and regulatory
requirements to improve students' academic achievement, and include
projects such as hiring specialists to provide strategic and intensive
reading intervention to students who are not meeting Arizona's reading
standards.
SEA Applied for Authority to Approve LEAs' Requests to Waive Certain
Requirements in the Use of ESEA Title I Recovery Act Funds:
On August 26, 2009, the SEA applied to Education for the authority to
grant LEAs' requests to waive various requirements for ESEA Title I
Recovery Act funding.[Footnote 12] As we reported in our July 2009
Recovery Act report, some LEAs will likely seek waivers from
requirements to provide funds for public school choice-related
transportation and supplemental educational services, such as tutoring,
because they go unused, and this waiver will provide more funding for
other ESEA Title I projects in those districts.[Footnote 13] As seen in
table 3, as of September 8, 2009, a number of the 84 LEAs with approved
applications are requesting waivers for various required activities.
Table 3: Number of LEAs Requesting Waivers:
Waiver to exclude the Recovery Act funds when calculating the 20
percent requirement for transportation and supplemental educational
services;
Number of LEAs requesting waivers: 23.
Waiver to exclude the Recovery Act funds when calculating the per pupil
amount (PPA) of funds available for supplemental educational services;
Number of LEAs requesting waivers: 20.
Waiver to exclude the Recovery Act funds when calculating the 10
percent set aside required for professional development when an LEA is
identified for improvement;
Number of LEAs requesting waivers: 16.
Waiver that allows a school to factor out some or all of its LEA's
Recovery Act funds when calculating the required 10 percent set aside
for professional development when a school is identified for
improvement;
Number of LEAs requesting waivers: 18.
Waiver to authorize LEAs to offer supplemental educational services in
addition to public school choice to eligible students in schools in the
first year of school improvement;
Number of LEAs requesting waivers: Note[A].
Waiver to authorize LEAs and schools identified for improvement to
apply to become supplemental educational services providers; Number of
LEAs requesting waivers: Note[A].
Waiver to authorize the SEA to waive the carryover limitation for LEAs
more than once every three years;
Number of LEAs requesting waivers: Note[A].
Source: SEA grants management system for Recovery Act funds for state
fiscal year 2010.
[A] SEA has not asked LEAs if they need the waiver.
[End of table]
According to SEA officials, if the SEA's application to waive Title I
requirements for LEAs is granted by Education, the SEA will be able to
decide which LEAs' requests for waivers should be approved and thereby
provide flexibility in the use of Title I funds. As of September 8,
2009, Education had not granted the SEA authority to grant LEAs waivers
but Education expects to consider Arizona's request soon.
Arizona LEAs Have Submitted Applications for IDEA Part B Funding and
Some Have Been Approved, Allowing Funds to Flow to the LEAs:
The Recovery Act provided supplemental funding for programs authorized
by Parts B of IDEA, the major federal statute that supports the
provisions of special education and related services for children, and
youth with disabilities. Part B funds programs that ensure preschool
and school-aged children with disabilities access to a free and
appropriate public education and is divided into two separate grants--
Part B grants to states (for school-aged children) and Part B preschool
grants (section 619). Education made the first half of states' Recovery
Act IDEA funding available to state agencies on April 1, 2009, and
announced on September 4, 2009, that it had made the second half
available.
The SEA has allocated all of the $184 million of the Recovery Act IDEA
Part B funds to LEAs. Specifically, it allocated $178 million to LEAs
for school-age children and $5.7 million to LEAs with preschool
programs for preschool grants. To receive Recovery Act funds, each LEA
must submit an application that outlines how it will use the funds.
Subsequently, the SEA officials review the application to ensure that
spending plans comply with applicable laws and regulations. When the
SEA approves an application, this action also obligates the funds to
the LEA. As seen in table 4, many LEAs have submitted applications and
some have been approved.
Table 4: Number and Dollar Value of LEA Applications for Recovery Act
IDEA by Status, September 8, 2009:
Applications approved;
Grants for school-age children: Number of applications: 121; Grants for
school-age children: Dollar value (in millions): $14.9; Grants for
preschool programs: Number of applications: 45; Grants for preschool
programs: Dollar value (in millions): $1.0.
Applications submitted but not approved; Grants for school-age
children: Number of applications: 149; Grants for school-age children:
Dollar value (in millions): $36.0; Grants for preschool programs:
Number of applications: 27; Grants for preschool programs: Dollar value
(in millions): $0.8.
Applications to be submitted;
Grants for school-age children: Number of applications: 284; Grants for
school-age children: Dollar value (in millions): $127.5; Grants for
preschool programs: Number of applications: 114; Grants for preschool
programs: Dollar value (in millions): $3.9.
Total LEAs eligible for Recovery Act IDEA grants; Grants for school-age
children: Number of applications: 554; Grants for school-age children:
Dollar value (in millions): $178.4; Grants for preschool programs:
Number of applications: 186; Grants for preschool programs: Dollar
value (in millions): $5.7.
Source: SEA grants management system for Recovery Act funds for state
fiscal years 2009 and 2010.
[End of table]
Specifically, as of September 8, 2009, the SEA had approved 22 percent
of the 554 applications for about $14.9 million of Part B grants to
states and 24 percent of the 186 applications for about $1 million of
Part B preschool grants. LEAs with approved applications submit monthly
cash management reports to SEA and the SEA provides funds to them with
Recovery Act funds for their expected Recovery Act IDEA program
expenditures, and as of September 8, 2009, the LEAs had received $2.2
million of Recovery Act funds. SEA officials stated that the IDEA
grants approved are in accordance with statutory and regulatory
requirements and include projects such as professional development and
assistive technology that may help the student participate in classroom
activities (such as special computer software or a device to assist
students in holding a pencil).
SEA Expects to Meet Recovery Act Reporting Requirements Primarily
through Use of Existing Grants Management System for ESEA Title I and
IDEA:
The Arizona Governor's office is requesting that its state agencies use
a centralized reporting methodology and report through the Governor's
office. According to SEA officials, they plan to use this reporting
methodology for Recovery Act funds for both ESEA Title I and IDEA
funds. The SEA plans to obtain much of the reporting information for
the LEAs from the existing grants management system that LEAs use for
non-Recovery Act grants as LEAs use these same systems for non-Recovery
Act funds as they do for Recovery Act fund. LEAs currently use this
system to apply for grants and it already contains much of the
information required for Recovery Act reporting, such as LEA name, LEA
officials' names, award number, and amount disbursed. Any required
additional information will be collected in a web application that is
being developed by the Arizona Department of Education Information
Technology unit. According to state education officials, they do not
expect to have difficulties meeting Recovery Act reporting
requirements.
Arizona Education Audit Unit Has Processes to Monitor the SEA's and
LEAs' Internal Controls and the Corrective Actions They Take to Address
Problems Identified through Single Audits:
Arizona's SEA has an audit unit (the Arizona Education Audit Unit) that
performs two functions that help to safeguard Recovery Act funds. The
audit unit monitors how the SEA and LEAs are correcting problems or
issues identified during the Single Audits and it also reviews the
internal controls the LEAs have in place in their financial systems.
[Footnote 14] The audit unit has developed a system to monitor whether
LEAs who receive yearly federal funding of $500,000 or more obtain
Single Audits, and to monitor corrective actions taken by the SEA and
LEAs for problems identified in their Single Audit reports. For fiscal
year 2008, 164 or 29 percent of the 572 LEAs that were allocated
Recovery Act funds had a single audit conducted. Audit officials noted
that with the additional federal funds that LEAs will be receiving due
to the Recovery Act, additional LEAs will likely exceed the $500,000
threshold in federal funds for fiscal year 2010 and thus will be
required to have Single Audits. The audit unit also conducts fiscal
monitoring of a sample of LEAs' internal controls and in fiscal year
2009, the audit unit also reviewed the internal controls of 21 LEAs'
financial accounting systems.
The Arizona Education Audit Unit is currently monitoring the SEA's and
LEAs' responses to Single Audit findings that could affect the
safeguarding of Recovery Act funds. According to the audit officials,
they plan to continue their oversight during calendar year 2009 using
fiscal year 2008 Single Audit reports and will also continue their
fiscal monitoring reviews. The audit unit is monitoring six findings
for the SEA that were particular to the ESEA Title I and IDEA programs
in the fiscal year 2008 Single Audit Reports. Specifically, they
included the following findings:
* The SEA did not verify that LEAs complied with ESEA Title I
requirements by consulting with private schools within their boundaries
to provide services to eligible private school children, their
teachers, and their families or to report that there are no eligible
private schools within the LEA boundaries;
* Some LEA annual financial reports were incomplete or contained
accounting errors and inconsistent information that prevented the SEA
from determining whether LEAs met the IDEA program requirement--that
state and local funding cannot be lower than it was in the previous 2
years;
* The SEA needed to provide additional documentation to support that it
verified the number of students with disabilities to validate the
accuracy of the Report of Children with Disabilities Receiving Special
Education, Part B (an IDEA program);
* Some LEAs lacked adequate procedures to ensure compliance with
Education's requirements to submit monthly cash management reports;
* The Title I and IDEA grants management system did not have adequate
controls because it did not require users to periodically change
passwords, did not always maintain a history of user access, and
permitted some internal users with access rights that were incompatible
with their job responsibilities or that enabled them to change data
without supervisory approval; and:
* The SEA did not comply with the subrecipient monitoring requirements
of ESEA Title I and IDEA, because it did not obtain Single Audit
reports within 9 months of the subrecipient's fiscal year-end, did not
retain documents to support that the SEA tried to ensure audit
requirements were met, and did not issue management decisions within 6
months after receipt of subrecipient Single Audit reports.
According to the audit officials, the SEA has been taking corrective
action on these findings that will strengthen the safeguards for
Recovery Act funds.
Arizona Continues to Move Forward with Statewide Highway Projects, but
the Slow Pace of Local Projects and Impending Deadlines Are Cause for
Concern:
As we previously reported, $522 million was apportioned to Arizona in
March 2009 for highway infrastructure and other eligible projects. As
of September 1, 2009, $293 million had been obligated. As of September
1, 2009, $18 million had been reimbursed by FHWA.[Footnote 15]
Almost 72 percent of Recovery Act highway obligations for Arizona have
been for pavement projects. Specifically, $210 million of the $293
million obligated as of September 1, 2009, is being used for pavement
projects, including $202 million for pavement preservation and roadway
widening. State officials told us they selected this type of project
specifically because they knew the projects could be completed within 3
years. Figure 2 shows obligations by the types of road and bridge
improvements being made.
Figure 2: Highway Obligations for Arizona by Project Improvement Type
as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (72 percent, $210 million): Pavement widening
($121.4 million) 41%; Pavement improvement ($80.2 million) 27%; New
road construction ($8.4 million) 3%.
Bridge projects total (9 percent, $27.1 million): New bridge
construction ($14.8 million) 5%; Bridge improvement ($10.5 million) 4%;
Bridge replacement ($1.8 million) 1%.
Other (19 percent, $55.8 million):
Other ($55.8 million) 19%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
Arizona has Awarded Contracts on its Statewide Highway Projects and
Started Construction on Many:
As of September 1, 2009, FHWA has obligated 71 percent of the Recovery
Act funds apportioned to Arizona for statewide highway projects.
[Footnote 16] Of these Recovery Act funds, most, about $350 million,
were to be spent on statewide projects, or those highway projects
selected by Arizona Department of Transportation (ADOT) from Arizona's
5-year transportation plan. The remainder of the highway funds is to be
suballocated to localities across the state. These statewide projects
were selected based on a number of factors, including the level of
priority of the project, the ability of the state to award contracts
and begin construction in a timely manner, and the location of these
projects in economically distressed areas of the state. The Recovery
Act mandates that 50 percent of apportioned Recovery Act funds be
obligated within 120 days of apportionment (before June 30, 2009). The
50 percent rule applied only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated, primarily based on population, for metropolitan,
regional, and local use. In addition, states are required to ensure
that all apportioned funds--including suballocated funds--are obligated
within 1 year. The Secretary of Transportation is to withdraw and
redistribute to other states any amount that is not obligated within
these time frames. As we previously reported, Arizona has met the 50
percent obligation requirement. By September 1, 2009, approximately 71
percent of Recovery Act funds had been obligated for statewide highway
projects.
Arizona provided for at least one construction contract for a Recovery
Act highway project in each of its 15 counties (see table 5), with all
counties getting at least $100,000 in statewide Recovery Act Federal
Highway funds and 13 of the 15 counties each receiving at least $1.8
million.
Table 5: Number and Amount of Construction Contracts for Statewide
Highway Projects in Arizona by County:
County: Apache;
Number of construction contracts: 3;
Dollar value of construction contracts: $2,997,320.
County: Cochise;
Number of construction contracts: 5;
Dollar value of construction contracts: $7,967,748.
County: Coconino;
Number of construction contracts: 5;
Dollar value of construction contracts: $13,174,891.
County: Gila;
Number of construction contracts: 5;
Dollar value of construction contracts: $11,537,077.
County: Graham;
Number of construction contracts: 1;
Dollar value of construction contracts: $133,331.
County: Greenlee;
Number of construction contracts: 1;
Dollar value of construction contracts: $567,178.
County: La Paz;
Number of construction contracts: 2;
Dollar value of construction contracts: $7,969,226.
County: Maricopa;
Number of construction contracts: 5;
Dollar value of construction contracts: $39,903,012.
County: Mojave;
Number of construction contracts: 3;
Dollar value of construction contracts: $6,426,321.
County: Navajo;
Number of construction contracts: 4;
Dollar value of construction contracts: $8,882,830.
County: Pima;
Number of construction contracts: 5;
Dollar value of construction contracts: $7,336,759.
County: Pinal;
Number of construction contracts: 1;
Dollar value of construction contracts: $13,133,079.
County: Santa Cruz;
Number of construction contracts: 1;
Dollar value of construction contracts: $1,873,811.
County: Yavapai;
Number of construction contracts: 1;
Dollar value of construction contracts: $1,899,987.
County: Yuma;
Number of construction contracts: 2;
Dollar value of construction contracts: $9,360,932.
County: Statewide[A];
Number of construction contracts: 3;
Dollar value of construction contracts: $1,957,769.
County: Total;
Number of construction contracts: 47;
Dollar value of construction contracts: $135,121,271.
Source: GAO analysis of ADOT data.
[A] Statewide projects are multiple projects in various parts of
Arizona with a similar scope.
[End of table]
Arizona's original plan was to undertake 41 statewide highway projects
under the Recovery Act, but due to significant underbidding by
contractors, Arizona has, as of August 30, 2009, been able to add 2
additional statewide highway projects, both roadway widening projects,
in Maricopa County, Arizona's most populous. In addition, Arizona is
hoping to add even more Recovery Act projects with the existing cost
savings, which, as of August 30, 2009, were about $60 million. ADOT
officials believe that this underbidding is caused by the current low
levels of economic activity in the construction industry due to the
state's economic downturn, as well as lower prices for commodities like
asphalt and oil.
Arizona officials told us that, for the most part, Arizona's statewide
projects could be started quickly and completed within 3 years. All of
the statewide highway projects undertaken by Arizona were already on
the State Transportation Improvement Plan (STIP). ADOT officials told
us that most of the projects that the state undertook with Recovery Act
funds were relatively simple and able to be completed within 3 years,
such as pavement preservation, roadway widening, and lighting and
signage (see figure 3).
Figure 3: Map Depicting Arizona's Initial Statewide Recovery Act
Highway Projects:
[Refer to PDF for image: map of Arizona]
A map of the state of Arizona divided by county that identifies the
geographic location and type of Recovery Act funded ADOT highway
projects. Types of projects depicted are:
Bridge;
Pavement preservation;
Reconstruct roadway;
Roadway widening;
Lighting and signage;
Other.
Source: Arizona Department of Transportation (data and map).
[End of figure]
Arizona Has Awarded Only Three Construction Contracts for Local Highway
Projects Due to a Lack of Shovel-Ready Projects, Among Other Reasons,
Which Could Pose Challenges in Meeting Recovery Act Time Lines:
In contrast to the rapid awarding of contracts that the statewide
Recovery Act highway projects have seen, three construction contracts
for suballocated local projects have been awarded as of September 1,
2009. ADOT and FHWA both indicated that local projects have lagged
behind statewide projects because of a lack of local shovel-ready
projects. The lack of projects was due to some localities' not having
an understanding of the allocations that they would receive as well as
the unfamiliarity of some local agencies with federal highway
requirements. Under the Recovery Act in Arizona, about $157 million was
suballocated to localities for federal highway construction. These
funds were allocated to regional bodies known as Metropolitan Planning
Organizations[Footnote 17] (MPO) members of which decide the highway
projects they will undertake. Table 6 shows the distribution of funds
across these regional bodies as well as the number of contracts awarded
and total dollars obligated for these locality-led projects.
Table 6: Localities' Total Recovery Act Allocations, Number of
Construction Contracts Awarded, and Total Funds Obligated for
Construction as of September 1, 2009:
Region: Maricopa Region;
Total allocation: $104,578,340;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: Pima Region;
Total allocation: $34,876,167;
Number of construction contracts awarded: 1; Total funds obligated for
construction: $276,000.
Region: Northern Arizona Counsel of Governments; Total allocation:
$4,112,608;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: Central Yavapai Metropolitan Planning Organization; Total
allocation: $1,283,485;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: Western Arizona Council of Governments; Total allocation:
$2,464,687;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: Central Arizona Association of Governments; Total allocation:
$3,258,973;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: South Eastern Arizona Governments Organization; Total
allocation: $2,795,080;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: Yuma Metropolitan Planning Organization; Total allocation:
$2,257,052;
Number of construction contracts awarded: 2; Total funds obligated for
construction: $2,075,000.
Region: Flagstaff Metropolitan Planning Organization; Total allocation:
$961,128;
Number of construction contracts awarded: 0; Total funds obligated for
construction: 0.
Region: Total; Total allocation: $156,587,520; Number of construction
contracts awarded: 3; Total funds obligated for construction:
$2,351,000.
Source: GAO analysis of ADOT and FHWA data.
[End of table]
When the Recovery Act was enacted, localities submitted a number of
what they considered to be shovel-ready projects to ADOT for its
approval and subsequent FHWA obligation of funds. An ADOT official told
us that the department did not approve any projects and sent them back
to the localities because either the scope of the project was too
large; the project would exceed the localities' Recovery Act
allocation; or the project was not designed to meet federal
requirements. To explain, prior to the Recovery Act, Arizona had a
program called the Highway Users Revenue Fund (HURF) exchange program.
Through this program, local agencies sent their Federal Aid highway
funds to ADOT in exchange for state funds. This allowed ADOT to design
and administer highway projects to federal standards, including federal
environmental standards, with which they have considerable experience,
and allowed localities to use their own experience with the state
standards to design and build highway projects to state standards.
However, the HURF exchange program was suspended due to lack of funds
in September 2008, so the Recovery Act represented the first time in
years that many localities would have to design highway projects to
federal specifications. To address the problems above, ADOT and FHWA
held a number of training sessions to educate localities on their
responsibilities under the Recovery Act. According to state and local
officials we interviewed, nevertheless, some localities were still
confused about the federal requirements they had to meet, particularly
the environmental clearance requirements.
Because of the suspension of the HURF exchange program, which meant
that localities would have to design federal highway projects on their
own, and recognizing that the Recovery Act would represent a large
amount of work for the localities to redesign and prepare highway
projects to meet federal standards, ADOT has required that many
localities work with management consultants to help design and submit
for obligation their highway projects undertaken through the act.
According to agency officials, these consultants are costing localities
from 5 percent to 15 percent of their allocations under the act. ADOT
said that the management consultants provide localities the means and
expertise to design highway projects to federal standards, and
concluded that were it not for the consultants, these local agencies
would not be able to meet the March 2010 obligation deadline.[Footnote
18]
Despite having the benefit of the management consultants to help them
design their Recovery Act highway projects, ADOT and two of the local
officials we spoke with are still concerned that meeting the March 2010
obligation deadline could be a challenge. To address this concern, ADOT
has instituted an internal deadline of December 2, 2009, by which they
expect to receive submissions from all localities regarding the highway
projects that they propose to undertake under the Recovery Act. Without
this internal, statewide deadline, ADOT was concerned that there could
be a glut of submissions to the agency and to FHWA requesting
obligations just prior to the March 2010 deadline. According to an ADOT
official, by moving the date forward to December, they can process all
of the suballocated projects and send them on to FHWA for obligation
and still meet the Recovery Act time frames. In addition, ADOT is
considering actions that could be taken in the event localities are
unable to submit shovel-ready projects by the March 2010 deadline.
According to management consultants who are working with the
localities, meeting the December time frame will be a major challenge,
but they will submit as many of their highway proposals to ADOT as
quickly as they can.
Arizona's Department of Transportation Does Not Anticipate Problems in
Meeting Recovery Act Reporting Requirements and Intends to Participate
in Centralized Statewide Reporting:
To meet Recovery Act reporting requirements, the state has mandated in
all of its contracts relating to Recovery Act highway work that all
contractors shall report monthly to ADOT on the number of jobs created
and preserved. The state has implemented the use of a database,
LCPtracker, that allows contractors to simply enter financial and
employment information into this database and submit that information
electronically to ADOT. The agency is then able to transfer that
information to the FHWA, as mandated by the Recovery Act. According to
an agency official, ADOT is able to sort all contractor information,
determine any penalties that need to be applied for incomplete or
incorrect reporting, and run reports on the numbers of jobs created and
preserved, as well as the wages paid for this Recovery Act work. Figure
4 shows an interface of the database with various reports that are able
to be generated using contractor-supplied reporting information.
Figure 4: ADOT Database Used to Receive Recovery Act Information from
Contractors and Report to FHWA and Descriptions of Database Report
Mechanisms:
[Refer to PDF for image: illustration]
A screenshot of the ADOT Web application used to collect and report
Recovery Act requirements, such as the status of highway projects and
employment information. Specifically depicted are the following:
Run Report 1587:
Monthly Recipient Project Status Report – Information on the status of
all Recovery Act projects. These data will be used for meeting the
reporting requirements of Sections 1201 and 1512 and are due to FHWA no
later than the 20th day of each month for the preceding month‘s data.
Run Report 1589:
Monthly Employment Report – Monthly employment information on each ARRA
project is used by States for meeting the reporting requirements of
Sections 1201 and 1512. In order for States to fulfill their reporting
obligations, the States must collect and analyze certain employment
data for each ARRA funded contract.
Run Report Missing Recovery Act Non-prevailing Wage Data: Missing non-
prevailing wage data – A report showing each Recovery Act- funded
project and associated non-prevailing wage data.
Source: GAO analysis of Arizona Department of Transportation
information.
[End of figure]
To gain perspective on this issue, we visited three statewide highway
projects in various areas in Arizona. Among other topics, we asked
contractors working on these projects about their experiences in
reporting wage and employment information to ADOT and whether they had
experienced any problems in working with ADOT's reporting system,
LCPtracker. For all three projects, the contractors hired laborers from
the areas where the projects were located, and reported having no
problems in identifying and reporting the numbers of jobs created and
preserved by their work on the Recovery Act projects. ADOT officials
and contractors told us this is due, in large part, to training that
ADOT conducted in the use of LCPtracker, which was used in a limited
manner prior to Recovery Act projects, but made mandatory for all
contractors working on Recovery Act projects.
Both the state and the contractors conduct numerous levels of review in
order to verify the number of jobs reported as well as the wages paid
to workers on Recovery Act highway projects. For example, one
contractor we spoke with said she conducts periodic interviews with
laborers on a highway project to determine that what the contractor
reported to ADOT in monthly employment reports through LCPtracker was
in fact the work that the laborer was doing on that particular day, as
well as that those laborers were paid accurately according to Davis-
Bacon Act prevailing wage requirements. In addition, ADOT officials
told us they are conducting periodic site visits to determine that the
number of laborers working on a particular day match the number that
the contractor submits to ADOT in those monthly reports. In addition,
according to ADOT officials, they visit the site of Recovery Act
highway projects and examine the records kept by the contractors to
verify that the number and type of jobs being reported to ADOT
accurately reflect the number and type of jobs on the individual
projects. When contractors do not report this information properly, a
number of financial penalties are triggered that ADOT can impose on the
contractors. As of September 4, 2009, no contractors have been found to
misreport this required information, so no financial penalties have
been levied on contractors.
FHWA's Arizona Division has also developed an inspection plan specific
to Recovery Act highway projects. These inspections, conducted by FHWA
staff, cover multiple levels of the project, including traffic control,
changes to the contracts, material testing, and other construction
activities. Inspections will be based on FHWA's assessment of the risk
of each project, with new and reconstruction projects having the
highest risk due to higher project costs, among other factors. FHWA
considers pavement preservation projects with a cost of over $5 million
as medium risk, and miscellaneous projects with a cost under $5 million
as low risk. FHWA plans for approximately half of all Recovery Act
highway projects in Arizona to have an initial inspection, which will
be completed before 30 percent of the highway project is complete. FHWA
plans intermediate inspections for a sample of the Recovery Act highway
projects based on findings from initial inspections; the size,
complexity, and scope of a project; and other factors. These
inspections, when FHWA deems them necessary, will occur when the
project is 30 percent to 95 percent complete. Some projects will
receive a final inspection to determine that the project was completed
in a manner that conformed to the plans, specifications, and authorized
changes. If FHWA finds that a project is not in compliance, it will
then take corrective actions.
ADOT intends to send information on the number of jobs created and
preserved as well as other financial and performance metrics required
by OMB both to FHWA, as required by the Recovery Act, as well as to the
Governor's office, to be part of Arizona's planned centralized
reporting system. The data integrity manager at ADOT does not think
that the Recovery Act poses any new challenges to ADOT in terms of
either reporting to FHWA, which ADOT has done for years prior to the
Recovery Act, or to the state for centralized reporting, which the
agency has also done in the past. The issue of centralized reporting,
however, is one that the Arizona State Comptroller's Office said might
present a problem because ADOT uses different accounting codes than are
used in the state's system, and reconciling those codes might become a
challenge. But an ADOT official said that the issue of different
accounting codes has existed for some time, and he does not foresee
this becoming a major issue.
Contracts We Reviewed Indicate That ADOT Contracts for Recovery Act
Work Were Awarded Competitively:
We selected a total of four contracts, worth a total of $40.7 million,
to discuss with ADOT contracting officials to determine how the
contracts were being awarded. ADOT awarded these contracts to conduct
work in support of Recovery Act highway projects. We selected two
contracts for work to be conducted in urban areas, and two contracts
for work to be conducted in rural areas. According to an agency
official, each of the contracts we reviewed was awarded competitively.
For each of the contracts, the agency official stated that a project
development process, an FHWA/ADOT operating partnership, ADOT standard
specifications, and Recovery Act specifications were followed when the
contracts were awarded. Further, the official said specific Recovery
Act objectives were included in the solicitations that resulted in the
contracts awarded pursuant to the act. Among other things, according to
the ADOT standard specifications, prior to submitting a bid, ADOT will
have to prequalify a bidder (unless waived by ADOT). The official
indicated that all bidders for the contracts we reviewed were
prequalified. Additionally, ADOT provided information to potential
bidders on its Web site that explicitly stated that by submitting a bid
for a Recovery Act funded project, the bidder agrees to be bound by
conditions and reporting requirements in the contract, which identifies
penalties for noncompliance. According to an ADOT official, the work on
the contracts we reviewed was awarded using unit fixed price contracts.
Determining Weatherization Wage Rates Has Delayed Contracts; Arizona
Has Procedures in Place to Monitor and Report Program Results, but Is
Still Uncertain about Counting Jobs Created:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation, sealing leaks, and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, the Weatherization Assistance Program has assisted more than 6.2
million low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, and
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE has provided to the states $2.3
billion of the $5 billion in weatherization funding under the Recovery
Act. Use of the Recovery Act weatherization funds is subject to Section
1606 of the act, which requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined
under the Davis-Bacon Act.[Footnote 19] Because the Davis-Bacon Act had
not previously applied to weatherization, the Department of Labor
(Labor) has not established prevailing wage rates for weatherization
work. In July 2009, DOE and Labor issued a joint memorandum to
Weatherization Assistance Program grantees authorizing them to begin
weatherizing homes using Recovery Act funds, provided they pay
construction workers at least Labor's wage rates for residential
construction, or an appropriate alternative category, and compensate
workers for any differences if Labor establishes a higher prevailing
wage rate for weatherization activities. Labor then surveyed five types
of "interested parties" about labor rates for weatherization work.
[Footnote 20] The department completed establishing prevailing wage
rates in all of the 50 states and the District of Columbia by September
3, 2009.
Arizona Department of Commerce Had Weatherization Contracts Ready to Go
as Soon as Davis-Bacon Wage Requirements Were Established:
DOE has allocated approximately $57 million to Arizona for the Recovery
Act Weatherization Assistance Program over a 3-year period (2009-2012),
with about $10 million of the total allocation to support initial ramp
up activities, such as training center expansion, curricula
development, staff training, and equipment purchases. On June 5, 2009,
DOE approved Arizona's Recovery Act Weatherization Assistance Program
plan and the Arizona Department of Commerce (ADOC) allocated about $49
million of the approximate $57 million to local service providers to
conduct ramp up and weatherization activities. Approximately $28.5
million, or about half of the total allocation, is currently eligible
for reimbursement. ADOC is the prime recipient as defined by OMB, while
the subrecipients are the local service providers and the contractors
that conduct the weatherization work. ADOC obligates funding to local
service providers to weatherize low-income households by making long-
term energy efficiency improvements, such as installing insulation or
modernizing heating and cooling systems.[Footnote 21] After a local
service provider determines that a home is eligible[Footnote 22] to
receive weatherization work, the local service provider may employ in-
house construction crews, hire contractors, or use a combination of
both approaches to make the improvements. As the state does not have a
centralized procurement system for purchasing weatherization materials,
local service providers are delegated the responsibility of procuring
their weatherization materials. ADOC officials expect to expend the
full allocation before the 3-year period and plan to weatherize 6,409
units statewide, which, according to ADOC officials, could result in as
much as $1.8 million in overall energy savings annually. This is an
almost threefold increase beyond the total number of units weatherized
in the previous 3 years using regular program and other sources of
funding.[Footnote 23] Table7 shows Arizona's local service providers,
their obligated funding amounts, the number of units they expect to
weatherize from 2009 through 2012, and the cities and counties they
serve.
Table 7: Arizona Local Service Provider Funding Obligations, Projected
Number of Weatherized Units (2009-2012), and the Cities and Counties
Served:
Arizona local service provider: Maricopa County Human Services
Department, Community Service Division; Funding obligation:
$11,911,987;
Projected number of units: 1,604;
County/city served: Maricopa County coverage except cities of Phoenix
and Mesa.
Arizona local service provider: Northern Arizona Council of Governments
(NACOG);
Funding obligation: $7,500,359;
Projected number of units: 997;
County/city served: Apache, Navajo, Coconino, and Yavapai Counties.
Arizona local service provider: City of Phoenix Neighborhood Services
Department;
Funding obligation: $7,222,865;
Projected number of units: 960;
County/city served: City of Phoenix.
Arizona local service provider: Western Arizona Council of Governments
(WACOG);
Funding obligation: $5,911,442;
Projected number of units: 778;
County/city served: Yuma, La Paz, and Mohave Counties.
Arizona local service provider: Tucson Urban League, Inc.; Funding
obligation: $4,749,363;
Projected number of units: 618;
County/city served: Cities of Tucson and South Tucson.
Arizona local service provider: Southeastern Arizona Community Action
Program (SEACAP);
Funding obligation: $4,654,446;
Projected number of units: 603;
County/city served: Graham, Greenlee, Cochise and Santa Cruz Counties.
Arizona local service provider: Community Action Human Resource Agency
(CAHRA);
Funding obligation: $2,269,618;
Projected number of units: 275;
County/city served: Pinal County.
Arizona local service provider: Gila County Community Action Program;
Funding obligation: $1,744,457;
Projected number of units: 204;
County/city served: Gila County.
Arizona local service provider: Pima County, Community Development and
Neighborhood Conservation Department;
Funding obligation: $1,705,544;
Projected number of units: 199;
County/city served: Pima County coverage except cities of Tucson and
South Tucson.
Arizona local service provider: Mesa Community Action Network (Mesa
CAN);
Funding obligation: $1,500,512;
Projected number of units: 171;
County/city served: City of Mesa.
Arizona local service provider: Total;
Funding obligation: $49,170,593;
Projected number of units: 6,409.
Source: GAO analysis of ADOC data.
[End of table]
As of September 11, 2009, Arizona had expended $771,485 of Recovery Act
weatherization funds, or about 1.4 percent of the total allocation.
According to ADOC, while most local service providers were ready to
begin weatherization work, they had to wait until they were provided
final Davis-Bacon local wage requirements before they could proceed
because most providers did not have an existing in-house Davis-Bacon
compliance officer providing them guidance on wage rates, and they
preferred to avoid having to reconcile if wages in the awarded
contracts differed from the required rates. Local service providers
submitted their city's or county's weatherization wage surveys directly
to Labor and received final wage determinations on August 30, 2009.
State and local service providers we met with have incorporated the
Davis-Bacon Act requirements in their contracts stipulating that all
laborers and mechanics employed by contractors and subcontractors for
Recovery Act-funded weatherization work be paid the prevailing wage for
their skill set in their locality. For example, the average hourly wage
rate for heating and cooling installation workers in Arizona was about
$16.00, however, using the Davis-Bacon prevailing wage determination,
the hourly wage for those same workers will be $24.38 in Maricopa
County and $15.63 in Pima County. The final wage rates differ amongst
the weatherization specialties and vary throughout the state of Arizona
as determined by Labor. According to ADOC officials, the effect of the
increased wages will not change the number of homes expected to be
weatherized.
The City of Phoenix decided not to wait on the Davis-Bacon wage
determination and began weatherizing eligible homes because Phoenix
officials conducted their own wage determination analysis, consulted
with their long-established Davis-Bacon compliance officer on relevant
DOE and Recovery Act guidance, and were prepared to reconcile any wage
differences. ADOC officials stated that they did not have concerns
about the City of Phoenix moving forward prior to a final prevailing
wage determination as they believe Phoenix officials were capable of
meeting requirements and reconciling any wage differences. According to
Phoenix officials, in mid-August, a three-bedroom single-family home
was the first Recovery Act-funded weatherization project completed in
Phoenix. The home had shade screens installed, an evaporative cooler
removed, and a gas stove replaced that was found to be emitting
potentially dangerous levels of carbon monoxide. This weatherization
work resulted in a safer and more energy efficient home, which is
expected to decrease the family's energy bill by 30 to 40 percent.
Phoenix officials added that the project employed 6 full-time and 12
part-time workers over a 2-week period.
Recovery Act Funding and Program Requirements Result in Increased State
and Local Support and Training to Effectively Manage Weatherization
Activities:
States and localities have had to increase the number of support
activities needed to manage the increased funding and program
requirements under the Recovery Act. According to ADOC officials, their
organization ramped up from 5 to a total of 12 full-time staff to
support Recovery Act requirements. Three of the seven program
administration staff were hired to ensure Davis-Bacon compliance,
weatherization database management, and general administration. Four of
the five energy monitors were hired to assist with the additional
weatherization monitoring and inspections. ADOC has also provided
funding to hire two additional weatherization training center
consultants and one contractor to conduct public outreach activities.
Also, the number of energy auditors qualified to support weatherization
monitoring and inspections is expected to increase from 137 to about
250 before the end of the 3-year Recovery Act period. In an effort to
support more weatherization activities and effectively administer the
program, Northern Arizona Council of Governments officials have
proposed to establish two satellite field offices in rural communities
to increase their capacity to conduct and monitor weatherization
activities and provide local outreach while minimizing travel time and
the associated costs.
Furthermore, ADOC has partnered with a local training center that is
recognized as one of twelve National Weatherization Training Centers in
the nation to develop additional courses and expand existing facilities
necessary to train the number of weatherization contractors and
auditors required to meet the Recovery Act weatherization program goals
for Arizona.[Footnote 24] ADOC has obligated $300,000 of the
approximate total of $10 million, or 3 percent, in Recovery Act
training and technical assistance funding to the training center. By
late September 2009, the center plans to spend (1) $40,000 of this
amount to expand the training classroom space to accommodate the
increased contractors requiring basic and advanced weatherization
training, (2) $10,000 to develop training curricula, and (3) $250,000
to expand the training center's capabilities to include a larger
laboratory for conducting hands-on diagnostic and heat performance
testing and demonstrations.
Specifically, the increase in the number of contractors needed requires
that they be trained and certified to conduct weatherization work.
[Footnote 25] Training center officials told us that a large number of
contractors have expressed interest in becoming weatherization
contractors. According to training officials, they have screened
potential weatherization contractor viability by explaining the
training and materials costs and type of activities involved in
becoming a weatherization contractor as well as the training process,
and provided hands-on experience to ensure they are highly motivated to
remain in and succeed as a weatherization contractor. The
weatherization training entails receiving hands-on training and testing
in energy principles, heat performance, health and safety, diagnostics,
and applied repair. Furthermore, if contractors are interested in
becoming a certified energy auditor, they must complete one required
course in building performance auditing. According to the training
center officials, before the Recovery Act, they were training about
four to six contractors per month, but now are training 20 to 40
weatherization professionals per month, a tenfold increase since June
2009. Since early January 2009, 52 people have completed weatherization
training and more than 70 energy auditors have been certified at both
the state and local levels. ADOC has also obligated $150,000 in
Recovery Act training and technical assistance funding to establish a
free statewide weatherization contractor mentorship program designed to
ensure the field readiness of every new weatherization contractor in
Arizona. Specifically, experienced weatherization contractors approved
and managed by the training center will mentor new weatherization
contractors on the program and technical requirements, work techniques,
and other aspects of successfully completing weatherization jobs.
State and Local Agencies Have Procedures for Monitoring Work Achieved
and Uses of Recovery Act Weatherization Funds:
Arizona has two key state and local procedures in place to ensure
monitoring, tracking, and measurement of weatherization program
success. These procedures involve multi-tiered monitoring and
inspections and the statewide participation in an ADOC-developed
weatherization Web-based reporting database. First, three levels of
monitoring and inspections occur during the weatherization process: (1)
by the contractor who made the improvements, (2) by the local service
provider who employed the contractor or in-house crew, and (3) by the
state who oversees the program and subrecipients. Contractors, local
service providers, and ADOC officials conduct 100 percent mandatory
file reviews on proposed weatherization projects to monitor whether
contractors are making cost-effective improvements and that no
opportunities are missed to further weatherize the eligible homes.
Contractors and service providers also conduct 100 percent of the
mandatory physical inspections for all completed weatherization jobs to
ensure that the weatherization work meets safety and program
requirements as well as results in energy savings. Also, according to
ADOC, it regularly conducts physical inspections on about 20 percent of
the weatherized homes, thereby exceeding the DOE requirement of
conducting physical inspections on 5 percent of homes.
Second, the state and local service providers utilize a state-
developed, Web-based reporting database to centralize audit data,
facilitate the inspection process, and reduce the risk of fraud by
weatherization contractors. Data collected during weatherization audits
are entered into the Web-based reporting database and are only
accessible by the contractor entering the data, its respective local
service provider, and ADOC until they are submitted for state review at
which point, data manipulation cannot be made. According to state
officials, these internal control features, linking field-based work
with a Web-based database and limiting accessibility to audit data,
ensure proper monitoring and data integrity, and are essential in
tracking the quantity and quality of weatherization work throughout the
state.
According to ADOC officials, they conduct risk assessments of their
local service providers and if any are determined to be at risk as a
result of low weatherization production activities compared to funding
received or noncompliance with health, safety, and program
requirements, or if inspection files are incomplete, these
weatherization contractors will receive additional oversight until they
are in compliance and have reduced or eliminated their program risks.
According to ADOC officials, one local service provider is currently
undergoing increased monitoring to correct management and in-house crew
deficiencies that resulted in inaccurate data collection and reporting
and poor quality weatherization workmanship. The increased monitoring
will continue for at least 2 months after the local service provider
demonstrates better program administration and contract work
compliance. The Arizona Office of the Auditor General has not audited
the Weatherization Assistance Program as a major program in the Single
Audit for the last 5 years and, therefore, cannot determine whether
there are any internal control weaknesses in the state program.
However, according to ADOC officials, the normal monitoring of their
state weatherization program and independent program reviews of their
local weatherization service providers have not identified internal
control weaknesses for 9 of their 10 local service providers. Although
state and training center officials consider the program's principal
risk to be the fast-growing number of weatherization contractors
requiring increased oversight, they believe these risks are mitigated
by the following:
1. Rigorous contractor vetting process conducted by the national
training center. This process identifies viable and long-term
weatherization professionals.
2. Requirement to have contractor weatherization training and auditor
certification to conduct and monitor state-funded weatherization
activities.
3. Limiting of new contractors to one weatherization job at a time
until they prove reliable, when they can then eventually be given up to
five jobs.
4. State and local inspection framework and procedures conducted at
multiple levels and performed at various phases of weatherization work.
5. Requirement to use the state's weatherization Web-based reporting
system capturing mandatory monitoring and reporting information.
6. Proven abilities of state and local program management who have
successfully accomplished weatherization activities, some for more than
25 years.
City of Phoenix officials described two additional mechanisms they use
to minimize weatherization contractor-related risks and to ensure their
program success. First, they subsidize half of the required training
costs for individuals who have demonstrated that they can be long-term,
viable weatherization contractors. Second, the Phoenix program
officials require that all new weatherization contractors participate
in a city-managed weatherization mentoring program designed to assess
their ability to conduct the weatherization field work and meet
reporting requirements.
In addition to taking steps to monitor the use of funds, state
officials are using performance measures to determine the effectiveness
of Recovery Act weatherization funds that will meet and extend beyond
the DOE required performance measurements. For example, ADOC officials
have partnered with local utility companies to access 5 years of
utility data to compare the pre and post energy consumption of
weatherized homes to analyze whether improvements are achieving energy
effectiveness over time. The tracking of post-weatherization energy
savings will provide on-going feedback to weatherization staff,
highlighting measures or processes that provide high returns. According
to ADOC, local operational changes can be based on this information,
thereby improving cost-effectiveness.
ADOC Expects to Meet Federal Reporting Requirements and to Use the
State's Centralized Reporting Process:
ADOC is responsible for reporting on performance measures required
under the Recovery Act to DOE, including the program expenditures, the
number of homes weatherized, the number of jobs created and preserved,
and the energy savings achieved. Currently, local service providers
report to ADOC on regular Weatherization Assistance Program activity
quarterly, but are now expected to report on Recovery Act-related
activities monthly. In order to meet such requirements, ADOC plans to
report performance measurement data collected in the ADOC Web-based
reporting database described above to both DOE and to the Governor's
centralized statewide reporting system quarterly. While ADOC officials
expect all subrecipients to adjust as necessary to comply with Recovery
Act Section 1512 reporting requirements,[Footnote 26] ADOC does not
anticipate any issues with local service providers' ability to comply
in a timely manner, because of their established Web-based reporting
structure and monitoring procedures. ADOC plans to report actual
figures on program expenditures, weatherization units completed, and
the number of jobs created and preserved for the first report due in
October 2009.
Despite Guidance, Local Officials Remain Uncertain about How to
Accurately Count Jobs Created and Need Further Clarification from ADOC:
According to state and local officials, some local service providers
remain uncertain about how to accurately count jobs created and need
further clarification from ADOC. ADOC is developing an alternative
methodology to assist local service providers in properly counting and
tracking the number of jobs created as required by the Recovery Act
reporting requirements. Currently, weatherization reports track the
number of housing units completed, not hours worked. ADOC officials
anticipate that local service providers would have difficulty gathering
this information because contractors have tracked and reported housing
units completed, use of funds, and the results of work completed,
rather than the number of hours worked or number of jobs created.
Furthermore, local service providers expressed concern that smaller
contractors may not have the tracking mechanisms and administrative
controls in place to manage the different reporting requirements and
administrative tasks required of them to be in compliance.
In an effort to have consistent and cost-effective reporting from
subrecipients, ADOC officials are developing an alternative way to
determine the number of weatherization jobs created in order to comply
with Recovery Act requirements without increasing reporting burdens on
the contractors conducting the work. Their alternative methodology for
determining the number of jobs created will use a statewide average
number of hours it takes to complete different weatherization job tasks
(such as duct insulation, window replacements, and weather stripping of
doors), then apply those averages to the contracted work completed to
generate the total number of Recovery Act-related hours worked which
can be translated into the number of full-time equivalent jobs created.
ADOC officials are currently sending out surveys to local service
providers to obtain average number of hours worked for different
weatherization tasks. ADOC officials plan to discuss this alternative
for measuring the number of jobs created with DOE officials before the
end of September. ADOC officials believe that this alternative will be
an easier and more cost-effective way to count the number of
weatherization hours worked and number of weatherization jobs created
in their state, however, it is too early to assess whether this
alternative methodology can successfully assist state and local
officials in meeting Recovery Act reporting requirements.
State Comments on This Summary:
We provided the Governor of Arizona with a draft of this appendix on
September 8, 2009. The Director of the Office of Economic Recovery
responded for the Governor on September 16, 2009. Also, on September
10, 2009, we received technical comments from the State of Arizona's
Office of the Auditor General. The state agreed with our draft and
provided some clarifying information which we incorporated.
GAO Contacts:
Eileen Larence, (202) 512-6510 or larencee@gao.gov:
Charles Jeszeck, (202) 512-7036 or jeszeckc@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Steven Calvo, Assistant
Director; Lisa Brownson, auditor-in-charge; Rebecca Bolnick; Aisha
Cabrer; Steven Rabinowitz; Jeff Schmerling; and Ann Walker made major
contributions to this report.
[End of section]
Footnotes For Appendix I:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] In our April 2009 report we noted that Arizona depleted its budget
stabilization fund, or rainy-day fund.
[3] Recovery Act funds used to stabilize the state's operating budget
include approximately $816 million in state funds made available as a
result of the increased Federal Medical Assistance Percentage for
Medicaid (discussed in detail in [hyperlink,
http://www.gao.gov/products/GAO-09-1016]) and $311 million in SFSF
funding. These figures do not include $250 million in SFSF funds for
elementary and secondary education that were anticipated in fiscal year
2009, but which will now be made available in fiscal year 2010.
[4] Arizona Senate Bill 1025: The General Revenue Act. In her
transmittal letter, the Governor stated her willingness to support a
permanent repeal, but as part of a comprehensive proposal that
addresses the state's revenue shortfall.
[5] Among other provisions, the Recovery Act requires states to assure
that states' support for education will not fall below the levels
provided in fiscal year 2006. Also, the return of this tax could affect
the LEAs' budgets and LEAs may have to modify their applications for
SFSF monies.
[6] OMB Memorandum, M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities (May 11, 2009),
provides that states may charge Recovery Act grants up to 0.5 percent
of total Recovery Act funds received by the state under cost recovery
processes under current guidance of OMB Circular A-87, Cost Principles
for State, Local and Indian Tribal Governments. Under the provisions of
OMB Circular A-87, states can recoup administrative costs through the
Statewide Cost Allocation Plan (SWCAP), which is submitted to the
Department of Health and Human Services annually for review and
approval. There are two alternatives, use of estimated costs for
centralized services, or billed services.
[7] The Division of Cost Allocation within HHS administers state cost
allocation plans, which provide a process whereby state central service
costs can be identified and assigned to benefited activities.
[8] Education advised the state that this action would be inconsistent
with some of the Recovery Act requirements, as at the time of the
state's initial drawdown request, LEAs had not been asked to submit
applications for the SFSF funds. In addition the funds would have gone
to the state's general fund and only indirectly to LEAs, although
Education noted that, per the act, the funds must go directly to LEAs.
[9] As part of the fiscal year 2009 budget plans adopted by the Arizona
governor and state legislature in June 2008, Arizona shifted $602.6
million for K-12 education, effectively delaying 2 months of fiscal
year 2009 school payments to fiscal year 2010. According to the Office
of the Treasurer, this was accomplished by rolling over half of the May
2009 and all of the June 2009 payments to July 1, 2009. In addition, in
May 2009, a further adjustment was made for fiscal year 2009, according
to the Office of the Treasurer staff, such that the remainder of the
May 2009 payment was deferred until October 2009.
[10] Public Higher Education in Arizona is comprised of two systems;
the state universities and the community colleges. The universities'
governing body is the Arizona Board of Regents (ABOR), which provides
policy guidance to Arizona State University, Northern Arizona
University, and the University of Arizona in such areas as academic
affairs, financial and human resource programs, tuition and financial
aid, and strategic planning. The community colleges operate
independently as districts, each governed by an elected board.
[11] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver,
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[12] Under ESEA Title I, states are required to establish performance
goals and hold their ESEA Title I schools accountable for students'
performance by determining whether or not schools have made adequate
yearly progress (AYP). Schools that have not made AYP goals for 3 or
more consecutive years must offer students an opportunity to transfer
to a higher-performing school (public school choice) or supplemental
educational services (SES). Districts are required to provide an amount
not less than 20 percent of their ESEA Title I, Part A allocation to
cover public school choice-related transportation costs and SES. Unless
a waiver is granted, this requirement would apply to ESEA Title I
Recovery Act funds also.
[13] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[14] The Single Audit Act of 1984, as amended (31 U.S.C ch. 75),
established the concept of the single audit to replace multiple grant
audits with one audit of a recipient as a whole. As such, a Single
Audit is an organization wide audit that focuses on the recipient's
internal controls and its compliance with laws and regulations
governing federal awards. It requires that each state, local
government, or nonprofit organization that expends $500,000 or more a
year in federal awards must have a Single Audit conducted for that year
subject to applicable requirements, which are generally set out in OMB
Circular No. A-133, Audits of States, Local Governments and Non-Profit
Organizations (June 27, 2003). If an entity expends federal awards
under only one federal program, the entity may elect to have an audit
of that program.
[15] States request reimbursement from FHWA as the state makes payments
to contractors working on approved projects.
[16] For the Highway Infrastructure Investment Program, the U.S.
Department of Transportation has interpreted the term "obligation of
funds" to mean the federal government's contractual commitment to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement.
[17] Metropolitan planning organizations, federally mandated regional
organizations, representing local governments and working in
coordination with state departments of transportation, are responsible
for comprehensive transportation planning and programming in urbanized
areas. MPOs facilitate decision making on regional transportation
issues including major capital investment projects and priorities.
[18] The Recovery Act mandates that all apportioned funds, including
suballocated funds, need to be obligated by, March 2010, 1 year from
apportionment.
[19] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[20] The five types of interested parties are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[21] Building rehabilitation projects that are in a state of disrepair
where failure is imminent and the condition cannot be resolved cost-
effectively are beyond the scope of the Weatherization Assistance
Program.
[22] A household is eligible for Recovery Act weatherization services
if they are at or below 200 percent of the federal poverty level.
Priority service is given to the elderly, people with disabilities,
families with children, or high residential energy users, and
households with a high energy burden.
[23] Local service providers partner with and receive other sources of
funding from local, state, and federal utility and energy programs to
maximize the return on investment for energy conservation-related
activities, such as the Weatherization Assistance Program.
[24] The Southwest Building Science Training Center, in Phoenix, is one
of twelve National Weatherization Training Centers, providing beginner
and advanced classroom-style and hands-on weatherization training to
contractors in California, Nevada, and Arizona.
[25] In Arizona, Building Performance Institute (BPI) certification is
recommended, but not required to be a weatherization technician,
monitor, or inspector. BPI certified professionals diagnose, evaluate,
and optimize the critical performance factors of a building that can
impact health, safety, comfort, energy efficiency, and durability.
[26] Office of Management and Budget (OMB) Memorandum M-09-21
Implementing Guidance for the Reports on Use of Funds Pursuant to the
American Reinvestment Act of 2009 (June 22, 2009) provides guidance for
carrying out the federal reporting requirements included in Section
1512 of the Recovery Act. However, this guidance does not impact other
program-specific requirements in the Recovery Act and, as a result,
agencies may issue additional and similar reporting requirements.
[End of section]
Appendix II: California:
Overview:
The following summarizes GAO‘s work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)1
spending in California. The full report covering all of GAO‘s work in
16 states and the District of Columbia, is available at [hyperlink,
http://www.gao.gov/recovery/].
GAO‘s work in California focused on specific programs funded under the
Recovery Act, as well as general issues involving the effect of
Recovery Act funds on the state‘s budget and the state‘s readiness to
report on the use and effect of these funds by program. The programs we
reviewed”Highway Infrastructure Investment funds, Transit Capital
Assistance Program, Weatherization Assistance Program, and the
Workforce Investment Act (WIA) Youth Program”were selected primarily
because they recently have begun disbursing funds to states or include
existing programs receiving significant amounts of Recovery Act funds.
For example, the Transit Capital Assistance funds had a September 1,
2009, deadline for obligating a portion of the funds. Additionally, the
WIA Youth program had a summer employment component which was under way
during our review. In addition to these programs, we also updated
funding information on three Recovery Act education programs with
significant funds being disbursed”the U.S. Department of Education
(Education) State Fiscal Stabilization Fund (SFSF) and Recovery Act
funds under Title I, Part A, of the Elementary and Secondary Education
Act of 1965 (ESEA), as amended, and the Individuals with Disabilities
Education Act (IDEA), Part B. Consistent with the purposes of the
Recovery Act, program funds are being directed to help California state
and local governments stabilize their budgets and to stimulate
infrastructure development and expand existing programs”thereby
providing needed services and potential jobs. With the programs, GAO
focused on how funds were being used; how safeguards were being
implemented, including those related to procurement of goods and
services; and how results were being assessed. Our review in California
covered the following areas:
State Budget Stabilization:
* On July 24, the state enacted $24 billion in additional budget
measures, including $16 billion in cuts to programs, to balance its
fiscal year 2009-10 budget.
* While its immediate fiscal crisis is resolved, the long-term fiscal
outlook is still of concern.
State Reporting under Section 1512:
* The state intends to centrally report for all California agencies and
their subrecipients of Recovery Act funds.
* The state developed and is now testing a reporting tool to collect
data from state agencies and then upload that information to the
federal government.
* While the state Recovery Act Task Force is confident that they will
meet Recovery Act deadlines, the quality of the data, especially from
subrecipients, is uncertain.
Highway Infrastructure Investment:
* The U.S. Department of Transportation's (DOT) Federal Highway
Administration (FHWA) apportioned $2.570 billion in Recovery Act funds
to California.
* As of September 1, 2009, the federal government has obligated $1.978
billion to California, and $22 million had been reimbursed by the
federal government.
* As of September 1, California had awarded contracts for 185 projects
worth $1.245 billion and advertised an additional 180 projects for bid.
The majority of these projects involve pavement widening and
improvement projects, but the state is also using highway
infrastructure funds for numerous safety and transportation enhancement
projects.
Transit Capital Assistance Program:
* DOT's Federal Transit Administration (FTA) apportioned $1.002 billion
in Recovery Act funds to California and urbanized areas in the state.
* As of September 1, 2009, FTA has obligated $911 million to California
and urbanized areas in the state.
* As part of our current review, we visited four local transit
agencies--the Los Angeles County Metropolitan Transit Authority; the
Orange County Transportation Authority; the San Joaquin Regional Rail
Commission; and the San Joaquin Regional Transit District.
Selected Education Programs:
* As of August 28, 2009, California has distributed about $3.7 billion
in Recovery Act funding to local education agencies (LEA), special
education learning plan areas[Footnote 2] (SELPA), and institutes of
higher education through three education programs. This includes SFSF
education stabilization funds ($2.5 billion to K-12 and about $268
million to each of the state's university systems), ESEA Title I funds
($450 million), and IDEA Part B funds ($269 million).
* The state's cash management practices for education funds,
particularly ESEA Title I Recovery Act funding, continue to be a
concern and will require close monitoring.
Weatherization Assistance Program:
* California has received 50 percent--about $93 million--of its
Recovery Act weatherization allocation, and it has obligated about $9.4
million of these funds for various planning, procurement, and training
purposes. As of August 31, 2009, the state had paid invoices totaling
approximately $1.4 million.
* California plans to weatherize 50,330 homes with Recovery Act funds.
However, state officials decided not to spend these funds to weatherize
homes until prevailing wage rate determinations under the Davis-Bacon
Act were resolved by the Department of Labor, which occurred on
September 3, 2009. State officials now hope to issue, by the end of
September 2009, contract amendments allowing service providers to begin
weatherizing homes with these funds.
Workforce Investment Act Youth Program:
* The U.S. Department of Labor (Labor) allotted about $187 million to
California in WIA Youth Recovery Act funds.
* The state has allocated about $159 million to the 49 local workforce
investment areas in the state after reserving 15 percent for statewide
activities. As of August 20, 2009, local agencies had drawn down $31
million. California reported to Labor on August 15 that 14,078 youth
participants were involved in the summer employment activities of the
WIA Youth Program under the Recovery Act.
* The two local workforce investment areas we visited in California,
the City and County of San Francisco and the City of Los Angeles,
differed in scope, size, and approach in providing their Recovery Act
summer youth employment programs under WIA.
California's Fiscal Year 2010 Budget Resolves the Immediate Fiscal
Crisis, but Long-Term Fiscal Prospects Remain of Concern:
As discussed in our last report, California was not able to revise its
budget prior to the new fiscal year that began on July 1. As a result,
the state was unable to avoid severe cash deficits, which forced the
Controller's Office to start issuing registered warrants, called IOUs,
beginning on July 2 to meet the state's payment obligations.[Footnote
3] After extensive negotiations between the Governor and Legislature,
on July 24, the Legislature passed amendments authorizing $16.1 billion
in cuts to the 2009-10 fiscal year budget, bringing the total budget
cuts enacted by the state since February to $31 billion. These cuts,
combined with tax increases of $12.5 billion, over $8 billion in
Recovery Act funds, and other budgetary actions shown in table 1, were
made to balance California's budget this year.
Table 1: Overview of Actions to Close California's Budget Gap During
2009 (Dollars in millions):
Budget cuts:
February budget agreement: $14,893;
July amendments: $16,125;
Total: $31,018;
Percent of total: 51.7.
Fund shifts, deferring expenses, borrowing, and other actions: February
budget agreement: $402;
July amendments: $8,034;
Total: $8,436;
Percent of total: 14.1.
Tax increases:
February budget agreement: $12,513;
July amendments: [Empty];
Total: $12,513;
Percent of total: 20.9.
Recovery Act funds:
February budget agreement: $8,016;
July amendments: [Empty];
Total: $8,016;
Percent of total: 13.3.
Total:
February budget agreement: $35,824;
July amendments: $24,159;
Total: $59,983;
Percent of total: 100.
Source: California Department of Finance.
[End of table]
While the $16.1 billion in budget cuts enacted by the Legislature in
July were widespread, some cuts are dependent upon future federal
actions. For example, $1 billion of the cuts to Medi-Cal (the state's
Medicaid program), shown in table 2, are based on the assumption that
the state can obtain reimbursements of certain payments from federal
programs[Footnote 4] and receipt of additional federal funds under
existing initiatives. The remaining cuts are expected to be achieved
through program savings during the year. Another budget solution relies
on delaying state payroll payments by 1 day to push the expense into
the 2010-11 fiscal year. In addition, some cuts could be overturned by
lawsuits challenging their legitimacy.
Table 2: Overview of California 2009-10 Budget Cuts Enacted in July
(Dollars in millions):
General fund program: K-12 and community colleges; Dollars: $6,519.1;
Percent of total: 40.4.
General fund program: Higher education; Dollars: $1,999.8;
Percent of total: 12.4.
General fund program: Shift in funds from local redevelopment agencies
to education;
Dollars: $1,700.0;
Percent of total: 10.5.
General fund program: Medi-Cal;
Dollars: $1,381.8;
Percent of total: 8.6.
General fund program: Employee compensation; Dollars: $846.1;
Percent of total: 6.8.
General fund program: Corrections and rehabilitation; Dollars: $785.5;
Percent of total: 4.9.
General fund program: CalWorks;
Dollars: $509.6;
Percent of total: 3.2.
General fund program: Supplemental Security Income/State Supplementary
Payment Program;
Dollars: $108.2;
Percent of total: 0.6.
General fund program: Developmental services; Dollars: $284.0;
Percent of total: 1.8.
General fund program: In-home supportive services; Dollars: $263.5;
Percent of total: 1.6.
General fund program: Healthy families; Dollars: $178.6;
Percent of total: 1.1.
General fund program: Mental health;
Dollars: $163.9;
Percent of total: 1.0.
General fund program: Courts;
Dollars: $168.6;
Percent of total: 1.0.
General fund program: Child welfare services and foster care; Dollars:
$120.6;
Percent of total: 0.7.
General fund program: Other;
Dollars: $1,095.3;
Percent of total: 6.8.
Total:
Dollars: $16,124.6;
Percent of total: 100.
Source: California Department of Finance.
[End of table]
Despite the state's budget challenges, the state does not anticipate
having to request any maintenance-of-effort waivers in any programs
having such requirements,[Footnote 5] according to state Recovery Act
Task Force (Task Force) officials. However, some agencies, such as the
California Department of Education (CDE), may request certain waivers
for specific Recovery Act programs. For example, officials in several
school districts we contacted are requesting that CDE submit a request
for a blanket waiver allowing school districts to carry over more than
15 percent of the ESEA Title I Recovery Act funds received this year
into the next fiscal year.
State officials believe that the newly revised budget will provide a
solution to the state's cash shortage for the remainder of this fiscal
year. On August 13, the California Controller announced that the
Department of Finance's revised cash projections from the new budget,
coupled with the state Treasurer's assurances that California can
secure revenue anticipation loans, would provide sufficient cash for
the state to stop issuing IOUs on September 4.
California's budget situation is likely to remain challenging for some
time to come. Preliminary projections by California's Department of
Finance indicate an additional $7 billion budget shortfall during the
next fiscal year and potentially larger shortfalls in future years.
This outlook is shared by the state's Legislative Analyst's Office,
whose officials told us that they expect the state to experience cash
flow deficits over the next 3 to 5 years, which may require significant
borrowings and delayed tax refunds and other payments.
The severity of California's budget situation is compounded by a
limited rainy-day fund.[Footnote 6] At the time of our last report, the
state expected to end the 2008-09 fiscal year with $1.5 billion in
budget reserve funds and the 2009-10 fiscal year with $4.5 billion.
However, according to California's Department of Finance, the state
actually ended the last fiscal year with a deficit of $4.5 billion. The
Legislature's amendments to the 2009-10 budget eliminated the deficit
but left the state with little cushion going forward. The Governor used
his line item veto authority to cut an additional $489 million to give
the state a small cushion to respond to unforeseen events. This
cushion, however, could be eliminated if the Governor's line item
vetoes or other budget cuts are overturned in the courts as a result of
ongoing or anticipated future lawsuits.
The lack of rainy-day funds makes planning for the end of the Recovery
Act funds even more challenging. Further exacerbating the challenge is
that, according to State officials, temporary State tax increases
enacted as part of the February 2009 budget agreement, unless amended,
will end in 2011, around the same time that Recovery Act funds have
been depleted. Nevertheless, Department of Finance officials cited
several initiatives that could be considered as a way to assist the
state with the decline of Recovery Act funds. These initiatives
include:
* pursuing reforms in a variety of programs and processes to generate
additional budget savings;[Footnote 7]
* transitioning seniors and persons with disabilities served by Medi-
Cal from a "fee-for-service" model to a "managed care" model to help
achieve greater savings;
* pursuing various options to stimulate the state's economy, including
expanding private-public partnership on redevelopment projects,
changing some rules to lower corporate taxes, and expediting
infrastructure project initiation; and:
* looking for ways to change the state's tax and revenue structure to
produce a less volatile revenue stream.[Footnote 8]
Oversight Activities Continue Despite State Officials' Concerns over
Cost Reimbursements:
Oversight of and reporting for Recovery Act funds requires considerable
investment by numerous state entities. For example, the State Auditor's
Office estimated its cost for audit and oversight activities of
Recovery Act funds at over $6.5 million through fiscal year 2010-11. As
we have previously reported, the state has implemented both internal
and external audit and control activities to help oversee Recovery Act
funds. In addition to the State Auditor's efforts, the Department of
Finance is conducting readiness reviews, and the state's Recovery Act
Inspector General, whose office has been charged with helping to
prevent and detect fraud, waste, and abuse involving Recovery Act
funds, is attempting to monitor all Recovery Act funds flowing into the
state either through state agencies or directly as local grants. The
Controller, Treasurer, Office of the State Chief Information Officer
(CIO), and individual state agencies' internal control functions are
all also involved in oversight activities. In addition, the state is
incurring considerable expense in developing its Section 1512 reporting
tool for quarterly reports to OMB, as discussed in the next section.
State officials expressed frustration in their attempt to obtain
reimbursement for their costs of oversight over Recovery Act funds,
made more critical by the state's difficult budget environment. Under
OMB's Recovery Act guidance, states are allowed to recover central
administration costs, such as those discussed above, subject to a limit
of 0.5 percent of the Recovery Act funds received by the state. OMB
guidance[Footnote 9] issued on May 11 detailed a process which involves
modifying the Statewide Cost Allocation Plans (SWCAP) approved by the
Department of Health and Human Services' (HHS) Division of Cost
Allocation (DCA), to recoup Recovery Act related administrative costs,
including expediting SWCAP's typical reimbursement procedures. However,
Task Force officials told us that the new SWCAP process will not allow
them to claim many of their oversight costs or obtain funding in
advance. Specifically, based on the Task Force's interpretation of OMB
guidance, they raised the following concerns about using a modified
SWCAP process for Recovery Act reimbursement:
* Only a limited number of activities will qualify for the supplemental
Recovery Act administrative funding. For example, according to Task
Force officials, if the state did not perform any specific
administrative activities related to the increased Medicaid Federal
Medical Assistance Percentage (FMAP) Recovery Act funds, then it could
not claim the 0.5 percent administrative fee for the Medicaid Recovery
Act funds flowing into the state, even if some Recovery Act activities,
such as those performed by the state's Recovery Act Inspector General,
help deter fraud, waste, and abuse in Medicaid, as well as in other
programs. As a result, preliminary calculations by the Department of
Finance estimate that the state will recover, at best, 25 percent of
their administrative costs associated with the Recovery Act.
* Under SWCAP, states are reimbursed after administrative costs have
been incurred, which in the case of California, could exacerbate its
already strained cash flow situation. Task Force members said that
although the state's operations are not currently impacted by the
inability to obtain administrative funding, in a few months, operations
could be impacted by cash flow issues.
* SWCAP is based on years of operating history, which provides a basis
for estimating costs and obtaining reimbursement. That history,
however, may not be applicable to Recovery Act administration.
Task Force members said that these concerns are shared by budget
officials in other states, and accordingly, the Task Force is working
through the National Association of State Budget Officers and the
National Association of State Auditors, Controllers, and Treasurers to
obtain approval from OMB and HHS to use a further modified SWCAP
process. California has proposed modifications that would allow states
to draw administrative funds immediately using either the Governor's
discretionary portion of SFSF funds or, if such funds are not
available, through an advance payment from the federal
government.[Footnote 10] The Task Force members told us that authority
to use an alternative process has not yet been granted, although
significant time has been spent working with OMB and DCA officials on
this issue, and even if granted, it would not allow the state to claim
the full amount of its oversight costs.
California Is Developing a Tool to Centrally Submit Section 1512
Information, but Ability to Capture Subrecipient Data Is Unknown:
As the Recovery Act's first quarterly recipient reporting date
approaches on October 10, the state is working to develop a centralized
statewide reporting mechanism in time to meet this deadline.[Footnote
11] The state plans to centrally report for all state agencies
receiving Recovery Act funds, including the total amount of funds
received and amounts spent on projects and activities, the status of
specific projects and activities, estimates of jobs created or
retained, and details on sub-awards and other payments.[Footnote 12]
The first quarterly report will summarize Recovery Act activity from
the date of enactment through September 30, 2009, and each successive
quarterly report will present cumulative information through that
quarter.
As discussed in our last report, California was attempting to procure a
reporting system from an outside vendor because the state does not have
a centralized data management and accounting system that is capable of
tracking Recovery Act activities across state agencies. However, the
state's attempts to procure an off-the-shelf system have not been
successful because none of the 18 vendors bidding on the project had a
system that would meet the state's requirements without extensive
modifications. Consequently, the state's CIO, as a member of the Task
Force, is leading an in-house effort to develop a custom software
system that can be used to upload the state's data to the central
nationwide data collection system at the FederalReporting.gov Web site
until a final solution is found.
The state's interim centralized reporting tool will be fed data from
each state agency and then uploaded to the national
FederalReporting.gov Web site. According to CIO officials, the state
agencies and grantees are responsible for the quality of their data
submissions to the centralized reporting tool. However, some state
agency officials told us they are facing challenges in developing their
own reporting systems, especially with regard to the quality and
completeness of information received from subrecipients. These concerns
are discussed in more detail in the program-specific sections of this
report.
CIO and other Task Force officials are conducting several dry runs in
August and September to identify and resolve issues prior to the final
reporting in October. For example, in mid-August the CIO conducted a
dry run with three state agencies that, according to CIO officials,
went very well overall and resulted in the development team identifying
some minor issues. According to CIO officials, this dry run was
particularly useful because the development team was able to test all
three methods that state agencies have available to submit data to the
centralized reporting tool, including through Excel spreadsheets, an
online Web form, or directly as an XML spreadsheet.[Footnote 13]
Similarly, CIO would like to conduct a dry run with the
FederalReporting.gov site prior to October to test whether it can
accept the state's data.
CIO and Task Force officials intend to perform some high-level quality
checks of the information that will be submitted to the centralized
reporting tool by state agencies. For example, CIO plans to review
agency submissions to identify missing data and also cross-check the
activity reported with Recovery Act receipt data reported by the state
Controller's Office to identify potential gaps. Further, depending on
the results of future dry runs, CIO may expand the use of data
integrity checks on agency data submissions before the final
submission.
California Continues to Award Highway Contracts Using Existing
Contracting Procedures and Internal Controls to Ensure Appropriate Use
of Funds:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to states through federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highways program is generally 80 percent, under the
Recovery Act, it is 100 percent.
As we reported in April 2009, $2.570 billion was apportioned to
California in March 2009 for highway infrastructure and other eligible
projects. As of September 1, 2009, $1.978 billion had been obligated
[Footnote 14] and $22 million had been reimbursed by Federal Highway
Administration (FHWA).[Footnote 15]
Funds Obligated for Highway Projects in California Continue to Grow:
The majority of Recovery Act highway obligations for California have
been for pavement widening and improvement projects. Specifically, 67
percent ($1.316 billion) of the $1.978 billion obligated to California
as of September 1, 2009, is being used for pavement widening and
improvement projects, while 31 percent ($614 million) is being used for
safety and transportation enhancement projects and 2 percent ($48
million) is being used for bridge replacement and improvement projects.
As we reported in July 2009, state officials told us they prioritized
projects that could be started quickly in selecting projects to receive
Recovery Act funds. Figure 1 shows obligations in California by the
types of road and bridge improvements being made.
Figure 1: Highway Obligations for California by Project Improvement
Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (62%, $1,316.2 million): Pavement improvement
($1,036.7 million): 52%; Pavement widening ($274.3 million): 14%; New
road construction ($5.3 million): 0%.
Bridge projects total (2 percent, $48.3 million): Bridge replacement
($24.3 million): 1%; Bridge improvement ($24 million): 1%.
Other (31 percent, $613.9 million):
Other ($613.9 million): 31%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
As of September 1, 2009, California's Department of Transportation
(Caltrans), had awarded 185 contracts for state and local highway
projects, 96 of which had begun construction and 13 of which had
completed construction. The total value of the contracts awarded is
$1.245 billion.[Footnote 16] An additional 180 projects for state and
local highway projects were advertised or in the bid review process.
Caltrans expects to place an additional 429 planned projects out to bid
over the next 2 fiscal years.
California Has Contracting Procedures in Place Intended to Ensure
Appropriate Use of Funds:
According to state officials, the state has well-defined contract
requirements for all highway projects, and Caltrans awards all highway
contracts competitively to the lowest responsive and responsible
bidder. Caltrans reviews all low bids to ascertain that the potential
contractor's estimated costs are balanced across the length of the
contract and match historical prices for similar work. Caltrans
officials stated that, in order to be awarded a contract, potential
contractors must possess the appropriate licenses and bonds; pass
safety and record checks; and demonstrate their experience completing
similar work. Contractors are required to report during the
solicitation process whether they have been found "not responsible"
under evaluations in any previous solicitation. Caltrans officials
stated that contracts are normally awarded as fixed unit price, wherein
the price for certain items may be adjustable. For example, if the
price of oil increases or decreases more than a prespecified
percentage, Caltrans can make adjustments to an existing contract.
State officials told us that Caltrans oversees construction contracts
administrated by local agencies on the state highway system to ensure
compliance with applicable state and federal regulations and Caltrans
standards and practices. Officials stated that Caltrans also provides
procedural and policy guidance on contract administration to local
agencies completing projects that are not located on the state highway
system. In addition, Caltrans officials stated that they added
requirements specific to the Recovery Act, such as reporting
requirements, to the Recovery Act contracts. Caltrans officials stated
that for contracts drafted prior to enactment of the Recovery Act, but
funded in part by Recovery Act appropriations, reporting requirements
were appended to the contracts.
We selected two contracts to review and discussed them with the
relevant contracting officials in greater depth.[Footnote 17] At the
state level, Caltrans awarded a contract to resurface, restore, and
rehabilitate a segment of Interstate 80 in Solano County, California.
This contract was awarded on April 21, 2009, at a total value of $13.4
million, with a start date of May 19, 2009. At the local level, the
City of Seaside awarded a contract to rehabilitate a section of Del
Monte Boulevard. This contract was awarded on July 16, 2009, at a total
value of $168,000. (See table 3.)
Table 3: Summary of Contract Information for Two Highway Projects
Visited:
Interstate 80 Project--Road Resurfacing, Restoration and Rehabilitation
in Solano County, California:
* Estimated contract value: $13.4 million;
* Fixed unit price contract awarded competitively; 13 bidders;
* Estimated project duration: May to November 2009.
Del Monte Boulevard Project--Pavement Rehabilitation in Seaside,
California:
* Estimated contract value: $168,000;
* Fixed unit price contract awarded competitively; 5 bidders;
* Estimated project duration: September to October 2009.
Source: GAO analysis.
[End of table]
The Caltrans official in charge of contract oversight for the
Interstate 80 project stated that Caltrans follows the standard
procedures set forth in the Caltrans Construction Manual, which
Caltrans uses to monitor all of its state highway contracts.[Footnote
18] For example, to ensure the work performed matches contract
specifications and meets quality standards established in the contract,
Caltrans reviews materials testing reports submitted monthly by the
contractor and independently conducts inspections and materials
testing. The Caltrans resident engineer for each project also verifies
that work performed by the contractor matches contract specifications.
According to the project manager for the Del Monte Boulevard pavement
rehabilitation project, the City of Seaside relies on Caltrans district
office engineers to provide guidance regarding project oversight. The
project manager monitors 100 percent of the invoices that contractors
submit to ensure invoice requests for reimbursement match work
performed and that work performed matches contract specifications. City
officials stated that the city inspects and manages ongoing work and
relies on consultants for materials testing and engineering support.
Caltrans officials stated that these oversight procedures are standard
for local road projects.
Caltrans Is Preparing for Reporting Required by Recovery Act Section
1512, but Has Concerns about Subcontractor Data Quality:
Caltrans has been collecting employment data and information on project
implementation and expenditures and is preparing to provide compiled
data for Section 1512 reporting to the CIO and the rest of the Task
Force. According to Caltrans officials, Caltrans is modifying its data
collection system to comply with OMB guidance on Section 1512
reporting. As we reported in July 2009, Caltrans requires contractors
to collect and report information, including number of workers and
payroll amounts, on a monthly basis. In addition to reporting this
information for their own employees, contractors are also required to
gather and report subcontractor data to Caltrans. Caltrans officials
stated that they may have difficulty obtaining consistent data at the
subcontractor level because Caltrans does not have direct visibility
over data collection at the subcontractor level. Officials stated that
Caltrans may assess the reliability and accuracy of contractor data in
the future.
Transit Agencies in California Are Beginning to Use Transit Capital
Assistance Recovery Act Funding, but Some Have Concerns about Section
1512 Reporting Requirements:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 19] The majority of the public transit
funds, $6.9 billion (82 percent), were apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program.[Footnote 20] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. Recovery Act funds were also
apportioned to the states under the nonurbanized area formula grant
program using the program's existing formula. Transit Capital
Assistance Program funds may be used for such activities as vehicle
replacements, facilities renovation or construction, preventive
maintenance, and paratransit services. Up to 10 percent of apportioned
Recovery Act funds may also be used for operating expenses.[Footnote
21] Under the Recovery Act, the maximum federal fund share for projects
under the Transit Capital Assistance Program is 100 percent.[Footnote
22]
Funds appropriated through the Transit Capital Assistance Program must
be used in accordance with Recovery Act requirements, including the
following:
* Fifty percent of Recovery Act funds apportioned to urbanized areas or
states are to be obligated within 180 days of apportionment (before
September 1, 2009) and the remaining apportioned funds are to be
obligated within 1 year. The Secretary of Transportation is to withdraw
and redistribute to other urbanized areas or states any amount that is
not obligated within these time frames.[Footnote 23]
* Project sponsors must submit periodic reports, as required under the
maintenance-of-effort for transportation projects section (1201(c) of
the Recovery Act) on the amount of federal funds appropriated,
allocated, obligated, and outlayed; the number of projects put out to
bid, awarded, or work has begun or completed; project status; and the
number of jobs created or sustained. In addition, grantees must report
detailed information on any subcontractors or subgrants awarded by the
grantee.
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) submit to FTA for Recovery Act funding.[Footnote 24]
FTA reviews the project sponsor's grant applications to ensure that
projects meet the eligibility requirements and then obligates the
Recovery Act funds by approving the grant application. Project sponsors
must follow the requirements of the existing programs, which include
ensuring the projects funded meet all regulations and guidance
pertaining to the Americans with Disabilities Act (ADA), pay a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, and comply with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of contracts.
In March 2009, $1.002 billion in Transit Capital Assistance Recovery
Act funds were apportioned to California and urbanized areas in the
state for transit projects. As of September 1, 2009, $911 million had
been obligated. California's six largest urbanized areas were
apportioned approximately $764.7 million in Transit Capital Assistance
funding, or 78 percent of California's total apportionment. The largest
urbanized area in California (Los Angeles-Long Beach-Santa Ana) was
apportioned about 50 percent of these funds, or $388.5 million. In
addition to apportionments to urbanized areas, approximately $34
million was apportioned to nonurbanized areas in California and will be
administered by Caltrans.
FTA Found That Recovery Act Obligation Deadline Was Met:
All of the urbanized areas in California and Caltrans, on behalf of the
state's nonurbanized areas, submitted grant applications in time for
FTA to obligate at least 50 percent of the amount apportioned to each
by the September 1 deadline.[Footnote 25] As of September 1, 2009, FTA
concluded that the 50 percent obligation requirement had been met for
California and urbanized areas located in the state. For ten urbanized
areas--Bakersfield, Indio-Cathedral City-Palm Springs, Lancaster-
Palmdale, Mission Viejo, San Jose, San Diego, Santa Rosa, Stockton,
Temecula-Murrieta, and Victorville-Hesperia-Apple Valley--FTA obligated
100 percent of their respective apportionments. FTA was also able to
obligate 100 percent of funds apportioned under the nonurbanized area
formula grant program to Caltrans.
Selected Transit Agencies in California Are Using Transit Capital
Assistance Recovery Act Funds for Preventive Maintenance, Capital
Costs, and Access Enhancements:
Caltrans and four transit agencies we visited--Los Angeles County
Metropolitan Transportation Authority (Metro), Orange County
Transportation Authority (OCTA), San Joaquin Regional Rail Commission,
and San Joaquin Regional Transit District (San Joaquin RTD)--are using
their Transit Capital Assistance Recovery Act funds for a variety of
capital projects. For example, Metro distributed its Transit Capital
Assistance Recovery Act funds, approximately $226 million, among eight
projects, including an overhaul of its aging bus fleet, the purchase of
140 compressed natural gas buses, improvements to electrical support
systems for its rail line, and enhancements to a rail station entrance.
(See table 4.) While Metro chose to fund multiple projects, the San
Joaquin Regional Rail Commission dedicated its funds, approximately $3
million, to a single project to construct new track and upgrade the
railbed for San Joaquin's regional commuter trains. FTA Region IX,
which includes California, provided guidance to local transit agencies
on selecting projects, which emphasized selection of projects that
could be started quickly. Officials at the four transit agencies we
visited stated that they used this guidance in their project selection
process.
Table 4: Overview of Los Angles County Metropolitan Transportation
Authority Transit Capital Assistance Projects:
Project name: Metro Blue Line traction power station; Project
description: Replacement of up to 20 aging traction power substations.
New substations are expected to consume approximately 5 percent less
energy than existing stations; Cost: $62,785,048.
Project name: Bus replacement;
Project description: Procurement of 90 45-foot compressed natural gas
composite buses;
Cost: $60,000,000.
Project name: Bus Midlife Program (preventive maintenance); Project
description: Approximately 376 buses with an average age of 8 years in
service have accumulated at least 40 percent of their useful life and
will be overhauled, including repower of engine packages, suspension
replacement/repair work, and operator control panel refurbishment;
Cost: $47,000,000.
Project name: Electrify CNG compression; Project description:
Electrification of all system compressors to comply with regional air
quality regulations; Cost: $28,000,000.
Project name: Bus replacement;
Project description: Procurement of 50 (30-to 32-foot) compressed
natural gas buses;
Cost: $24,000,000.
Project name: Replacement of fiber optics; Project description:
Purchase of fiber optic transmission equipment to replace the existing
communications system equipment for the Metro Rail system;
Cost: $2,500,000.
Project name: Metro transit enhancement project; Project description:
Improvements along the El Monte and Harbor Busway Stations;
Cost: $1,030,644.
Project name: Red Line station egress project; Project description:
Design and construction of stairway entrances to the 7th Street and
Metro Center Station to meet fire and safety requirements;
Cost: $800,000.
Total:
Cost: $226,155,692.
Source: Los Angeles County Metropolitan Transportation Authority.
Note: Metro used its Recovery Act Transit Capital Assistance Program
apportionment to fund eight capital projects. Of these projects, one,
the Bus Midlife Program, is being completed by Metro employees, while
the remaining seven projects will be contracted. Metro reported that
seven of the eight projects are under way, on schedule, and on budget.
As of August 2009, Metro was still preparing to issue the request for
proposals for the Metro Transit Enhancement project.
[End of table]
Transit agencies we visited are also using Transit Capital Assistance
funds for preventive maintenance, as the Recovery Act funds could be
spent quickly and the work could be performed primarily by agency
employees rather than contractors.[Footnote 26] For example, OCTA is
using approximately 60 percent of its Transit Capital Assistance
Recovery Act funds, about $45.5 million, for preventive maintenance,
which includes vehicle fleet and bus facility maintenance, as well as
the salaries and benefits of employees performing such tasks. (See fig.
2.) According to OCTA officials, funding projects to expand service was
not desirable because it would create long-term operating costs that
could not be sustained.
Figure 2: Examples of Projects Selected by the Orange County
Transportation Authority:
[Refer to PDF for image: two photographs]
Two photos showing transit projects in California funded through
Recovery Act Transit Capital Assistance funds. The photo on the left
shows an Orange County Transportation Authority employee performing
maintenance and repair on a bus from the authority‘s bus fleet. The
photo on the right shows a contractor applying joint sealant to
concrete slabs at an Orange County Transportation Authority bus base.
Source: Orange County Transportation Authority.
[End of figure]
Officials from all four agencies we met with reported that Recovery Act
funds allowed them to fund projects that otherwise would have not been
funded this fiscal year because state and local funding sources were
suspended or fell short. For instance, officials at the San Joaquin RTD
told us that Transit Capital Assistance Recovery Act funds are being
used largely to fill the funding gap for capital expenses that were
previously funded by State Transit Assistance funds and local tax
revenue.[Footnote 27] San Joaquin RTD and OCTA also plan to use Transit
Capital Assistance Recovery Act funds to compensate funding shortfalls
for operating expenses. While OCTA plans to use some of the allowed 10
percent of the Los Angeles-Long Beach-Santa Ana urbanized area
apportionment for operating expenses and the San Joaquin RTD is
considering using some of the 10 percent allowance for the Stockton
urbanized area, Metro officials stated that time constraints imposed by
the Recovery Act requirement to obligate at least 50 percent of the
urbanized area's apportionment by September 1, 2009, made it difficult
to include the 10 percent allowance in their grant applications to FTA.
Metro developed its grant application before the announcement that
operating expenses were eligible, and according to Metro officials, it
could have taken up to 3 months to amend their state and regional
transportation planning documents to include use of funding for
operations, which could have resulted in missing the September 1
deadline. According to transit agency officials, their budgetary
challenges may continue, in part, due to the elimination of the State
Transit Assistance fund for fiscal years 2010 through 2013. In
addition, transit agencies may receive less revenue from local funding
sources such as sales taxes.
Some transit agencies also received funds for projects through the
transfer of Recovery Act highway funding.[Footnote 28] FHWA transferred
$27.2 million in highway funds to FTA for use on transit projects in
California, nearly 10 percent of the total funds transferred from FHWA
to FTA nationwide. Caltrans and regional transit agencies worked with
MPOs to identify transit projects to complete with transferred funds.
For example, in Stockton, the San Joaquin Regional Rail Commission
worked with its MPO to identify an eligible project, and both entities
coordinated with Caltrans to execute the transfer of approximately $1.7
million. Under the nonurbanized area program, Caltrans funded two
transit projects with approximately $2 million in transferred highway
funds.
Selected Regional Transit Agencies and Caltrans Are Using Existing
Policies and Procedures to Monitor Transit Capital Assistance Funds:
The transit agencies we visited and Caltrans are using existing
processes and controls to monitor Recovery Act funds under the Transit
Capital Assistance Program. For instance, Metro, OCTA, the San Joaquin
Regional Rail Commission, the San Joaquin RTD, and Caltrans are all
using existing processes to manage Recovery Act contracts, including
following FTA contract management procedures. These procedures include:
* inspections to verify that work performed on projects adheres to
contract specifications;
* supervisory reviews of purchase orders and invoices to ensure items
are properly billed and authorized; and:
* reconciliations of receipts and payments to accounting records to
ensure the completeness and accuracy of the records for each project.
* While control policies were similar across transit agencies we
visited and at Caltrans, the level of internal assessment of the
management of Recovery Act funds varied. (See table 5.) While all four
transit agencies we visited and Caltrans were subject to various
external audits--such as Single Audits, financial statement audits, and
FTA's triennial review[Footnote 29]--the two largest transit agencies
we visited, Metro and OCTA, and Caltrans had internal audit departments
and conducted risk assessments on an annual or biennial basis to
develop their annual audit plans. Transit agency officials at the two
agencies told us that the management of Recovery Act funds has been
classified as "high risk" or "moderate to high risk" in their fiscal
year 2009 risk assessments.
Table 5: Examples of Internal Control Policies at Selected California
Transit Agencies:
Transit agency: Caltrans;
Internal controls: External audits: [Check]; Internal controls:
Internal audits: [Check]; Internal controls: Risk assessments: [Check];
Internal controls: Inspections: [Check]; Internal controls: Supervisory
reviews: [Check]; Internal controls: Reconciliations: [Check].
Transit agency: Los Angeles County Metropolitan Transportation
Authority (Metro);
Internal controls: External audits: [Check]; Internal controls:
Internal audits: [Check]; Internal controls: Risk assessments: [Check];
Internal controls: Inspections: [Check]; Internal controls: Supervisory
reviews: [Check]; Internal controls: Reconciliations: [Check].
Transit agency: Orange County Transportation Authority (OCTA); Internal
controls: External audits: [Check]; Internal controls: Internal audits:
[Check]; Internal controls: Risk assessments: [Check]; Internal
controls: Inspections: [Check]; Internal controls: Supervisory reviews:
[Check]; Internal controls: Reconciliations: [Check].
Transit agency: San Joaquin Regional Transit District; Internal
controls: External audits: [Check]; Internal controls: Internal audits:
[Empty]; Internal controls: Risk assessments: [Empty]; Internal
controls: Inspections: [Check]; Internal controls: Supervisory reviews:
[Check]; Internal controls: Reconciliations: [Check].
Transit agency: San Joaquin Regional Rail Commission; Internal
controls: External audits: [Check]; Internal controls: Internal audits:
[Empty]; Internal controls: Risk assessments: [Empty]; Internal
controls: Inspections: [Check]; Internal controls: Supervisory reviews:
[Check]; Internal controls: Reconciliations: [Check].
Source: GAO analysis of interviews with transit agency and Caltrans
officials.
[End of table]
Selected Transit Agencies Face Challenges Interpreting and Implementing
Latest Section 1512 Reporting Guidance, Including Reporting Information
about Jobs Created:
Caltrans and regional transit officials charged with implementing
Section 1512 reporting guidance expressed confusion about aspects of
reporting requirements and stated that they would like additional
guidance from FTA on how to interpret OMB's guidance on Section 1512.
For example, officials at transit agencies we visited were not sure
whether to classify contractors performing work on Recovery Act-funded
projects as vendors or subrecipients--a distinction that may impact the
information included in recipient reports and the amount of information
transit agencies are required to collect from contractors performing
Recovery Act-funded work.[Footnote 30] While some transit agencies had
sought clarification or additional guidance on reporting from FTA or
other transit agencies, all were still developing plans to implement
Section 1512 reporting requirements. Caltrans, which is responsible for
gathering Section 1512 reporting data from nonurbanized area grant
recipients, provided guidance to entities that will report information
to Caltrans. Caltrans officials stated that they have also sought
clarification and received guidance on Section 1512 reporting
requirements from the Task Force.
All four transit agencies we visited were still determining how to
apply Section 1512 reporting guidance to calculate direct jobs created
from Recovery Act-funded contracts. Methodologies for estimating direct
job data to report to OMB differed across transit agencies. For
instance, officials at OCTA plan to calculate direct jobs by dividing
the average payroll of an OCTA employee into the total dollars spent on
each Recovery Act-funded project. Additionally, OCTA officials stated
that they only plan to include direct hours worked by contractors in
their jobs estimates. By contrast, officials at the San Joaquin RTD
plan to base job estimates primarily on specific hour and pay data
pulled from internal payroll systems and certified payroll documents
completed by contractors and subcontractors. The San Joaquin RTD plans
to include all hours of contractors working on Recovery Act-funded
projects in their direct job estimates.
In addition to reporting job and spending data to OMB, transit agencies
are also required under Recovery Act section 1201(c) to submit periodic
reports to FTA on the status of Recovery Act funds. The four transit
agencies we visited reported to FTA for the first time on August 16,
2009. Agency officials told us they did not experience problems
collecting the data to report to FTA for the reporting deadline.
Transit agencies for which FTA obligated Recovery Act funds by July 31,
2009, were required to report in August on the status of these funds,
including the amount obligated and expended, the number of contracts
and their implementation status, and number of hours associated with
direct jobs created or maintained by all projects and activities funded
by the grant.
Most Education Funds Awarded to California Have Been Drawn Down;
Concerns Remain about Cash Management and Section 1512 Reporting:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHEs).[Footnote 31] After maintaining
state support for education at 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 school
districts or public IHEs. When distributing these funds to school
districts, states must use their primary education funding formula, but
they can determine how to allocate funds to public IHEs. In general,
school districts maintain broad discretion in how they can use
stabilization funds, but states have some ability to direct IHEs in how
to use these funds.
The Recovery Act provides $10 billion to help local educational
agencies (LEAs) educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965. The Recovery
Act requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 32] The U.S.
Department of Education is advising LEAs to use the funds in ways that
will build the agencies' long-term capacity to serve disadvantaged
youth, such as through providing professional development to teachers.
The U.S. Department of Education made the first half of states'
Recovery Act ESEA Title I, Part A funding available on April 1, 2009
and announced on September 4, 2009 that it had made the second half
available.
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act
(IDEA), the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities have
access to a free and appropriate public education and is divided into
two separate grants--Part B grants to states (for school-age children)
and Part B preschool grants (section 619). Part C funds programs that
provide early intervention and related services for infants and
toddlers with disabilities--or at risk of developing a disability--and
their families. The U.S. Department of Education made the first half of
states' Recovery Act IDEA funding available to state agencies on April
1, 2009 and announced on September 4, 2009 that it had made the second
half available.
As of August 28, 2009, California has distributed about $3.7 billion in
Recovery Act funding to LEAs, special education learning plan areas
(SELPA)[Footnote 33], and IHEs through three education programs. This
includes SFSF education stabilization funds (about $2.5 billion to K-12
schools and about $268 million to each of the state's two university
systems), Recovery Act ESEA Title I funds ($450 million), and IDEA Part
B funds ($269 million).
Funds Have Been Distributed to K-12 Schools and Universities, but Not
Yet to Community Colleges:
The California Department of Education (CDE) released the first phase
of Recovery Act education funds to LEAs and SELPAs beginning in late
May 2009, with the second phase, depending on the program, expected to
be distributed to LEAs and SELPAs later in 2009 through early 2010.
According to CDE officials, they will not know how much of the funding
has been obligated or spent until LEAs and SELPAs submit the data to
CDE as part of the required Recovery Act Section 1512 report to be
released on October 10, 2009. (See table 6.)
Table 6: Recovery Act SFSF, ESEA Title I, and IDEA Funding for
Education, as of August 28, 2009 (Dollars in millions):
Program: ESEA Title I;
Made available by Education: $562.5;
Drawn down by California: $450.3;
Distributed to LEAs or IHEs: $450.3.
Program: IDEA, Part B;
Made available by Education: $633.9;
Drawn down by California: $268.9;
Distributed to LEAs or IHEs: $268.9.
Program: SFSF Education Stabilization;
Made available by Education: $3,266.6;
Drawn down by California: $3,020.2;
Distributed to LEAs or IHEs: $3,020.2.
Program: Total;
Made available by Education: $4,463.0;
Drawn down by California: $3,739.4;
Distributed to LEAs or IHEs: $3,739.4.
Source: GAO analysis of CDE and Education data.
[End of table]
As we previously reported in July 2009, California's two university
systems received a total of $537 million in SFSF funds in May 2009. The
funding was spent primarily on personnel costs, in part to avert
layoffs resulting from state budget cuts. Officials from both systems
said they are not certain how much they will receive in SFSF funding
for state fiscal year 2009-10. Officials from both systems said they
again plan to use the Recovery Act funding for personnel costs, in part
to avert layoffs in light of continuing state funding reductions.
California's initial SFSF funding to IHEs did not include funding for
the state's community college system, as mentioned in our prior report.
However, in response to increased budget cuts, the state submitted an
amended SFSF application that revised the higher education allocation
going forward to include community colleges. According to a community
college system official, they originally expected the amount to be
about $130 million but, because of state budget revisions, now expect
it to be considerably less. The official said the SFSF funding they
receive will be spent to restore state budget cuts to student services,
such as counseling and orientation, and to instructional services such
as tutoring.
ESEA Title I Recovery Act Cash Management Continues to Be a Concern:
As we previously reported, concerns exist regarding CDE and LEA ESEA
Title I cash management practices. Specifically, both the U.S.
Department of Education (Education) Office of the Inspector General and
the California State Auditor have raised issues about early drawdowns
and the calculation and remittance of interest on the cash balances.
[Footnote 34] These concerns extend to CDE's drawdown of ESEA Title I
Recovery Act funding and the release of $450 million of the funds to
LEAs on May 28, 2009. According to CDE officials, the drawdown of ESEA
Title I Recovery Act funds was in advance of its normally scheduled
drawdown of school year 2008-09 regular Title I funds. As a result, CDE
anticipated that the LEAs would be ready to use these funds quickly
under approved Title I plans for the current school year. However, in
August, when we contacted the 10 LEAs that received the largest amounts
of ESEA Title I Recovery Act funding, we found that all reported
maintaining large Title I Recovery Act cash balances. Each of these
LEAs had received between $4.5 million and $140.5 million in ESEA Title
I funds in early June, with a total of more than $200 million received
by all 10. As of August 7, only three reported spending a small
fraction of the funds received. Seven LEAs reported not spending any of
the funds received. Further, officials in two of the LEAs we contacted
pointed out that part of the ESEA Title I Recovery Act funding will pay
salaries--which typically extend over several months or longer--and
officials in all 10 LEAs said they planned to spend the funds over the
course of this and next fiscal year, thus continuing to maintain
considerable unspent Recovery Act cash balances. Any such cash balances
will require the calculation and remittance of interest to the federal
government.
In responding to our concerns about the drawdown and distribution of
ESEA Title I Recovery Act funds to LEAs and the appropriate calculation
of interest on the cash balances, CDE officials told us that they had
conducted an informal survey of 180 LEAs in July 2009 to determine
whether LEAs were maintaining ESEA Title I cash balances. According to
CDE officials, nearly all of the 64 LEAs responding reported having
spent more regular ESEA Title I funds than they received--thus having
unreimbursed expenses rather than cash balances. Further, CDE told us
that they determined that the unreimbursed expenses would largely
offset the ESEA Title I Recovery Act fund cash balances for the
majority of these LEAs and they believe that the calculation of
interest on the Recovery Act balances would incorporate this offset. We
discussed this issue with Education officials, but they have yet to
make a final determination of whether such unreimbursed expenses can be
offset against ESEA Title I Recovery Act balances for the purpose of
calculating interest due to the federal government.
CDE has taken several actions in an effort to address its overall cash
management issues and help ensure that LEAs properly calculate interest
on cash balances. In a December 2008 letter, CDE notified LEAs of
federal cash management requirements and advised them to coordinate
with their county Office of Education and call CDE with any questions,
which, according to CDE officials, numerous LEAs did. Additionally, as
we previously reported, CDE implemented a pilot program to help them
monitor LEA compliance with federal cash management requirements which
uses a Web-based quarterly reporting process to track LEA cash
balances. The pilot program is scheduled to commence in October 2009.
However, it does not include monitoring of ESEA Title I funds, which
will be phased in after the cash management system and processes are
better understood and operating as intended.
Nine of the LEAs we contacted told us they have processes in place to
calculate and remit interest on unused ESEA Title I funds. However, we
found that the processes for calculating interest and remitting payment
varied from location to location at the 10 LEAs we contacted. For
example, some LEAs calculate interest using a daily cash balance, while
some calculate it using a monthly cash balance. Additionally, one LEA
we contacted sends a single interest check to CDE covering all
programs, but includes back up documentation for each program, while
another sends separate checks for each program.
CDE officials told us they are attempting to respond to LEA cash
management concerns by:
* selectively monitoring LEA compliance with cash management
requirements by reviewing LEAs' reported federal cash balances,
calculating interest, and posting interest remittances in CDE's
accounting records, and:
* conducting periodic open teleconference forums to answer LEA
questions about Recovery Act funding, including cash management
requirements.
Although CDE has taken several steps to notify and inform LEAs of their
cash management responsibilities, LEA officials reported receiving
varying degrees of guidance.[Footnote 35] Officials from five LEAs
reported receiving guidance ranging from a single notice from CDE to
multiple letters, emails and bulletins from CDE, Education and their
local County Office of Education. Officials in three LEAs reported they
had been part of the Education Inspector General's audit discussed
earlier, and had received guidance during that process. Officials from
one LEA we contacted said they had not received any guidance. In light
of the inconsistent guidance reported by LEAs, CDE should consider
formalizing its cash management guidance to ensure that all LEAs are
fully informed. This guidance should incorporate, once available,
Education's final determination of the earlier described offset issue.
CDE Is Preparing for Reporting Required by Recovery Act Section 1512
but Is Concerned about Reporting Deadlines:
CDE officials said they are currently working on a Recovery Act
reporting system in response to state and OMB guidance on Recovery Act
Section 1512 requirements. According to CDE officials, two CDE working
groups have been formed to develop the reporting system. The groups
meet every 2 weeks and coordinate with and submit data to the Task
Force. Officials said the reporting system will be ready for internal
testing in early September 2009, and the LEAs will begin submitting
data to CIO in mid-September. However, CDE officials said they are
still working on the specifications of internal control measures to
ensure accurate and complete information, and are still developing
their policies and procedures for documenting data quality reviews.
Officials also expressed general concern about getting the LEAs to
report Recovery Act information, as well as CDE's ability--given the
limited time available--to validate the information received to ensure
its reliability. They said they are aware that data can be verified
until October 21, 2009, after it is entered into the
FederalReporting.gov Web site. However, the state deadline for
submitting data is September 28, 2009, and there will be limited
opportunity to review the data after that. Additionally, they said that
while they were aware that data can be updated and corrected in
subsequent reporting cycles, they would prefer to enter the correct
data the first time around and believe they are mandated to do so.
Finally, CDE officials said that although they have received helpful
advice from CIO, they remain concerned about the reporting deadlines.
The Majority of California's Weatherization Funds Have Not Been
Obligated or Spent:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation; sealing leaks; and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, the Weatherization Assistance Program has assisted more than 6.2
million low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved the weatherization plans of
all but two of the states, the District of Columbia, the territories,
and Indian tribes--including all 16 states and the District of Columbia
in our review. DOE has provided to the states $2.3 billion of the $5
billion in weatherization funding under the Recovery Act. Use of the
Recovery Act weatherization funds is subject to Section 1606 of the
act, which requires all laborers and mechanics employed by contractors
and subcontractors on Recovery Act projects to be paid at least the
prevailing wage, including fringe benefits, as determined under the
Davis-Bacon Act.[Footnote 36] Because the Davis-Bacon Act had not
previously applied to weatherization, the Department of Labor (Labor)
had not established a prevailing wage rate for weatherization work. In
July 2009, DOE and Labor issued a joint memorandum to Weatherization
Assistance Program grantees authorizing them to begin weatherizing
homes using Recovery Act funds, provided they pay construction workers
at least Labor's wage rates for residential construction, or an
appropriate alternative category, and compensate workers for any
differences if Labor establishes a higher local prevailing wage rate
for weatherization activities. Labor then surveyed five types of
"interested parties" about labor rates for weatherization work.
[Footnote 37] The department completed establishing prevailing wage
rates in all of the 50 states and the District of Columbia by September
3, 2009.
California has received 50 percent--about $93 million--of its Recovery
Act weatherization allocation. As of August 31, 2009, the California
Department of Community Services and Development (CSD),[Footnote 38]
the state agency responsible for administering the program in
California, had obligated about $9.4 million of these funds for
purposes such as state and local planning, training and technical
assistance, and procurement,[Footnote 39] and it had spent about $1.4
million.[Footnote 40] California plans to spend its entire Recovery Act
weatherization allocation--about $186 million--6 months prior to its
federal deadline of March 2012 for spending these funds. California
plans to weatherize 50,330 homes with its allocation.
CSD is currently using Recovery Act funds to train weatherization
workers, including making enhancements to the state training program.
According to CSD officials, California's local service providers are
also developing marketing and outreach strategies and negotiating with
potential contractors and suppliers, including educating them about
opportunities to participate in the weatherization program. These
officials told us that some service providers are also hiring and
training administrative staff and weatherization workers.[Footnote 41]
CSD also plans to add staff, including fiscal and program auditors and
information technology consultants, to help administer the increased
funds.
California's Use of Weatherization Funds Has Been Limited by Davis-
Bacon Act Prevailing Wage Requirements and Other Factors:
CSD officials decided not to spend Recovery Act funds to weatherize
homes until Labor had established a prevailing wage rate, as determined
under the Davis-Bacon Act for weatherization work. On September 3,
2009, Labor provided CSD with prevailing wage rates for weatherization
work in California. CSD officials explained that they waited to spend
these funds because the prevailing wage determinations could pose
staffing challenges for the state's service providers and their
contractors, who typically use the same workers for a variety of
weatherization programs, which, other than the Recovery Act program,
are not subject to prevailing wage requirements. According to CSD,
depending on the wage rate determinations, these organizations might be
forced to alter their service delivery strategies, such as by paying
the same workers different rates from project to project or by
dedicating their highest-paid workers to Recovery Act projects. CSD
officials also stated concerns that weatherizing homes prior to the
wage rate determinations could increase the liability risks of service
providers and CSD for non-compliance with the Davis-Bacon Act. In
addition, they noted that weatherizing homes prior to the wage rate
determinations could create an administrative burden associated with
making retroactive payments to workers receiving less than the wage
rates. As a result, service providers have not yet certified any
contractors to perform weatherization activities, including contractors
they have used in the past. CSD officials told us that, now that Labor
has established prevailing wage rates for weatherization work, they
hope to issue, by the end of September 2009, contract amendments to
their service providers that would allow them to begin weatherizing
homes with Recovery Act funds. They said that they continue to receive
many questions about the Davis-Bacon Act from their service providers
and that concerns are still emerging in response to evolving directives
and guidance from Labor and DOE.
On July 29, 2009, CSD sent a letter to DOE detailing many of its
general concerns about the Recovery Act weatherization program, as well
as issues regarding compliance with the Davis-Bacon Act. The concerns
are in the areas of payroll certification, workforce development,
monitoring frequency, energy-efficiency measures, reporting
requirements, dwelling assessments, leasing and purchasing vehicles,
and program and fiscal benchmarks. Regarding these concerns, CSD
officials told us that, as of September 8, 2009, DOE had only fully
addressed the concern about payroll certification. Some of these
concerns are discussed in further detail below.
* Payroll certification. The letter requested that DOE confirm whether
CSD would be required to directly perform weekly payroll certification
of all service providers and contractors to ensure compliance with the
Davis-Bacon Act, as opposed to CSD's plan to require service providers
to obtain independent, third-party payroll certification. CSD requested
that DOE provide any requirement in writing so that it could justify
additional staff to conduct certification activities.
* Workforce development. The letter requested that DOE confirm whether
CSD could request an exemption from the Davis-Bacon Act requirements
for weatherization workers hired through its federal, state, and local
workforce development partnerships aimed at creating training and
employment opportunities for youth and dislocated workers. It stated
that the Davis-Bacon Act threatens to weaken or eliminate workforce
development as a significant component of California's weatherization
program. CSD officials told us that this is because paying high,
prevailing wages to the inexperienced, entry-level workers typically
hired through these programs could have a negative financial impact on
service providers and their contractors and also threaten their more
experienced, full-service workers, who could be paid the same rates.
* Monitoring frequency. The letter requested that DOE confirm whether
CSD would be required to perform on-site monitoring of service
providers on a quarterly basis, as suggested by DOE officials during a
recent site visit to CSD. The letter stated that quarterly reporting
would require CSD to increase its staffing significantly and requested
that DOE provide any such requirement in writing so that it could
justify additional staff to conduct reporting activities. CSD officials
told us that they are concerned that they may not have enough staff to
conduct quarterly reviews, since they currently conduct such reviews
annually. On the other hand, they noted that they already collect data
for such reviews and already have a standardized method for analyzing
these data.
* Program and fiscal benchmarks. The letter requested that DOE provide
the program and fiscal benchmarks and timeline required for California
to receive the final 50 percent of its allocation so that CSD can
include the benchmarks in the contracts with service providers that it
plans to issue in September 2009.
* The estimates for jobs created and homes weatherized that are
currently in the state weatherization plan could change based on
revisions to the local weatherization plans prepared by service
providers. Any revisions were due to CSD by August 31, 2009. However,
in mid-August, CSD advised its service providers that future revisions,
including the estimates for jobs created and homes weatherized, would
be allowed in response to the prevailing wage rate determination and
other requirements impacting planning. CSD officials stated that, if
revisions are submitted, they would either be due to the impact of the
Davis-Bacon Act or the overall costs of required performance measures.
California Has a Variety of Accountability Approaches to Monitor the
Use of Weatherization Funds:
CSD has processes aimed at ensuring that weatherization funds are used
for their intended purposes and in accordance with the Recovery Act.
For example, prior to receiving Recovery Act funding, CSD formed a
team--chaired by the Chief Deputy Director and including key managers
and staff--to design and implement work plans to help ensure compliance
with OMB, DOE, and related state requirements and Recovery Act goals.
CSD also has an internal auditing group that conducts an ongoing
internal risk assessment specific to Recovery Act funds. In response to
a Recovery Act readiness review conducted by the California Department
of Finance, CSD audit and program staff have conducted internal and
external risk assessments, resulting in a corrective action plan that
the team evaluates weekly. These risk assessments include a review of
all service providers to identify those that may warrant more intensive
monitoring or other special conditions; as of September 8, 2009, CSD
had identified four service providers whose Recovery Act funding could
be subject to special conditions and/or distributed to another agency.
CSD has provided service providers with contract requirements,
provisions, and related guidance specific to the Recovery Act. In
addition, CSD has required fraud training for its entire staff and is
providing training and technical assistance for service providers,
including mandatory training regarding Recovery Act accountability and
transparency requirements, OMB principles, contract procurement
standards, internal controls, direct and indirect cost principals, and
audit requirements.
CSD's oversight of its existing weatherization program includes a
combination of monthly, quarterly, and annual desk reviews; routine on-
site program monitoring; and an annual review of independent auditors'
reports. CSD currently conducts annual on-site monitoring of service
providers and requires them to ensure that all contractors' post-
installation work meets standards; CSD plans to increase the frequency
of the post-installation inspections to a quarterly basis. CSD also
plans to review service providers for program compliance, track
expenditures, document support time spent on projects, and conduct
field inspections of 5 to 20 percent of weatherized homes once the
Recovery Act funds are provided to service providers. The state's most
recent Single Audit report did not include the weatherization program
because it was too small to warrant coverage. However, CSD officials
told us that they review Single Audit reports for service providers and
that they follow up with them regarding findings.
CSD Officials Expect to Be Able to Meet Section 1512 Reporting
Requirements, but Have Concerns about DOE Performance Reporting
Requirements:
CSD officials told us that they anticipate no problems tracking the
number of jobs created or retained on either a monthly or quarterly
basis because their service providers have many years of experience
administering the program and CSD has already provided guidance to
weatherization contractors on how to measure employee full-time
equivalents. For all reporting purposes, CSD requires the service
providers to provide information directly to CSD, which then reviews it
for accuracy and completeness. For example, CSD conducts monthly data
quality reviews on expenditures. CSD then reports information on behalf
of the program to state officials, OMB, and DOE. Regarding the Section
1512 reporting requirements, CSD is California's prime recipient, and
the service providers are the subrecipients. CSD plans to report all
Section 1512 information to the state's Task Force, which will then
report all state data to OMB. CSD officials believe they will meet the
Section 1512 reporting requirements in a timely manner.
As of September 8, 2009, California had not begun measuring the impact
of its weatherization program because no homes in California had been
weatherized with Recovery Act funds. However, CSD officials told us
that if DOE requires additional performance measures, then costs could
increase if the measures require changes to procurement practices,
extra equipment and training for weatherization crews, quality
assurance changes, or increased monitoring of contractors. CSD
officials are waiting for final federal guidance on additional
performance measures, especially regarding energy savings. For example,
these officials anticipate that DOE will propose a new methodology for
measuring energy savings and, as a result, they have not issued any
state guidance to assist service providers in understanding reporting
requirements for this performance measure. They recommended that, in
order to obtain credible information on energy savings, DOE should
negotiate agreements to obtain energy usage data directly from
utilities. They also recommended that DOE provide guidance that allows
for standardized reporting and, therefore, the comparison of
information across all states.
California Used Recovery Act Funds to Expand Summer Youth Services, but
Faced Some Challenges:
The Recovery Act provides an additional $1.2 billion in funds for the
Workforce Investment Act (WIA) Youth Program, including summer
employment. Administered by the Department of Labor (Labor), the WIA
Youth program is designed to provide low-income in-school and out-of-
school youth 14 to 21 years old, who have additional barriers to
success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 42] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 43] Local areas may design summer
employment opportunities to include any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job; (2) learn work readiness
skills on the job; and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 44]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Labor allotted about $187 million to California in WIA Youth Recovery
Act funds. The WIA Youth program is administered by the state
Employment Development Department (EDD) in California. After reserving
15 percent of the $187 million for statewide activities, the state
allocated the remainder, about $159 million, to the 49 local workforce
investment areas in the state. EDD officials said that they have not
set targets for either enrollment in summer youth employment activities
or the amount of money to be spent by a certain date, although the
Governor issued a letter encouraging the local agencies to expend the
majority of funds on summer activities. California officials reported
to Labor on August 15 that the 49 local areas had used Recovery Act
funds to enroll 33,789 youth in the WIA Youth program, of which 14,078
were placed in summer employment activities. However, local area
officials we visited in Los Angeles and San Francisco said that they
will not have complete results on their summer youth employment
activities until October. Recovery Act funds must be expended by June
30, 2011, and, based on past experience, EDD thinks it is very likely
that the state will spend all of these funds by that date. Each of
California's 49 local areas are free to determine how much of their
Recovery Act WIA Youth funding will be spent on summer activities.
Recovery Act Summer Youth Work Activities in Two Local Areas in
California Differed in Scope, Size, and Approach:
Two local areas we visited, the City and County of San Francisco and
the City of Los Angeles, had different levels of experience in
providing summer youth employment programs prior to the Recovery Act
and used different approaches to provide the programs, as described in
table 7. For example, Los Angeles implemented its summer youth
employment activities in two phases, while San Francisco used one
period for summer employment activities.
Table 7: Description of WIA Youth Programs Reviewed by GAO:
City: Administering agencies;
Los Angeles: Los Angeles Community Development Department (LACDD); San
Francisco: San Francisco Office of Economic and Workforce Development.
City: Recovery Act WIA Youth Program funding allocation; Los Angeles:
$20.3 million;
San Francisco: $2.3 million.
City: Locally planned allocation for WIA Youth summer employment
activities;
Los Angeles: $11.1 million;
San Francisco: $1.1 million.
City: Locally targeted number of WIA summer youth participants; Los
Angeles: 5,550; San Francisco: 455.
City: Prior Experience with a stand-alone summer youth employment
program;
Los Angeles: Yes;
San Francisco: No, but previous experience with youth employment
programs.
City: Program duration;
Los Angeles: Two phases from May 1, 2009, to September 30, 2009; San
Francisco: June 29 to August 29, 2009.
City: Service providers;
Los Angeles: A "mixed model" using city agencies and 15 community-based
organizations;
San Francisco: Nine community-based organizations.
City: Eligibility determination;
Los Angeles: Determined by the service providers and reviewed by the
Los Angeles Community Development Department (LACDD); San Francisco:
Determined by the service providers and reviewed by the San Francisco
Human Services Agency.
City: Monitored by the state;
Los Angeles: Yes;
San Francisco: Yes.
City: Youth hours and payment;
Los Angeles: Up to 140 hours at $8 an hour (Youth ages 20 to 25 could
work more hours);
San Francisco: In-school youth up to 130 hours and out-of-school youth
up to 170 a hours at $9.79 an hour.
City: Type of employment;
Los Angeles: Mostly public and nonprofit sector with private-for-profit
providing less than 2 percent of the jobs; included healthcare,
construction, and green jobs;
San Francisco: Mostly public and nonprofit sector with private-for-
profit providing about 10 percent of the jobs; included clerical,
teacher's aid, and maintenance jobs.
City: Summer youth participants in green jobs; Los Angeles: 422 youth
participants hired through one service provider with emphasis on green-
collar jobs;
San Francisco: Seven youth participants in green
technology/construction jobs, with a total of 47 green jobs officials
identified in various industries; officials encountered difficulties
defining and developing green jobs.
Source: GAO analysis based on information provided by the California
Employment Development Department, Los Angeles Community Development
Department, and San Francisco Office of Economic and Workforce
Development.
[End of table]
At the local agencies in San Francisco and Los Angeles, we visited two
selected service providers in each city and spoke with 24 youth
participants at six work sites in San Francisco and Los Angeles. We
also spoke with six youth participants who had completed the program in
Los Angeles. In San Francisco, we visited Larkin Street Youth Services,
a nonprofit agency that is an established WIA service provider, and the
Vietnamese Youth Development Council, a nonprofit agency that is a
service provider new to the WIA program. We spoke to youth participants
assigned to work sites through Larkin Street Youth Services, the
Bayview Opera House/Urban YMCA, the African American Art & Culture
Complex, and a retail store. In Los Angeles, we visited two experienced
service providers: the Boyle Heights Technology Center, a city-managed
service provider, which completed its Recovery Act funded summer youth
employment program on June 30, and the Los Angeles Conservation Corps,
a nonprofit agency specializing in green jobs. We spoke to youth
participants who had finished their employment at the Boyle Heights
Technology Center, White Memorial Hospital, and East Los Angeles
College and to youth participants assigned to work sites through Clean
and Green and Million Trees LA. In San Francisco and Los Angeles, we
also spoke with work site supervisors or employers, depending on
availability.
As previously noted, the WIA Youth program is designed to provide low-
income, in-school and out-of-school youth, who have additional barriers
to success, with services that lead to educational achievement and
successful employment, among other goals. Local areas may design summer
employment opportunities funded by the Recovery Act to include any set
of allowable WIA Youth activities--such as tutoring and study skills
training, occupational skills training, and supportive services--as
long as it also includes a work experience component. We asked youth
participants about the types of work experiences they had during their
summer employment, which included a variety of positions such as
teachers' aids, clerical positions, and green jobs, and received
positive feedback.
Figure 3: Examples of Youth Participants at Summer Youth Employment
Activities in Los Angeles:
[See PDF for image: photographs]
Two photos showing youth participants in the summer employment
activities of the WIA Youth Program funded by the Recovery Act in the
City of Los Angeles. The photo on the left shows a WIA Youth Program
participant providing child care at a local hospital. The photo on the
right shows a WIA Youth Program participant performing work for the
L.A. Conservation Corps.
Source: Photographs provided by the Boyle Heights Technology Youth
Center, Youth Opportunity Movement, Los Angeles Community Development
Department.
[End of figure]
In addition to the work experience component, both San Francisco and
Los Angeles programs also provided training in work readiness,
financial literacy, and workplace safety. The two programs, however,
differed in the other types of allowable WIA Youth activities they
provided. San Francisco officials estimated that, given the short
duration of the program, only about 15 percent of the youth received
structured academic training as part of their program. Los Angeles
officials said that none of the youth received academic training
through the summer youth employment programs funded by the Recovery
Act. Instead, Los Angeles directed youth with academic training needs
to two locally funded "Work and Learn" summer youth employment
programs, which included structured academic training and had a target
enrollment of 2,000 youth participants. Los Angeles officials said the
infusion of Recovery Act funds allowed the city of Los Angeles to
expand these programs, which operate at local expense. With respect to
optional occupational training, San Francisco officials said that
approximately 20 percent of their youth received training in areas of
construction project management, youth work, philanthropy, and grant
management and small business operations. Los Angeles officials said
that, although none of their youth received formal WIA-defined
occupational skills training,[Footnote 45] youth were introduced to the
fields of health care, green jobs, and construction and trades.
Figure 4: Examples of Youth Participants at Summer Youth Employment
Activities in Los Angeles:
[See PDF for image: photographs]
Two photos showing youth participants in the summer employment
activities of the WIA Youth Program funded by the Recovery Act in the
City of Los Angeles. The photo on the left shows a WIA Youth Program
participant working in a clerical position at an engineering
association. The photo on the right shows WIA Youth Program
participants helping to prepare packets for the Aids Walk.
Source: Photographs provided by the Boyle Heights Technology Youth
Center, Youth Opportunity Movement, Los Angeles Community Development
Department.
[End of figure]
Mixed Results in Developing Green Jobs:
The selected summer youth employment programs we reviewed had mixed
results in developing, as Labor encouraged, work experiences that
introduced youth to opportunities in "green" educational and career
pathways. San Francisco officials said they had difficulties in
defining and developing green jobs, although they had hoped to define
them as recycling, landscaping, solar panel installation,
weatherization, and green construction. San Francisco officials said
they identified seven youth participants as working in green technology
and construction jobs. Officials also identified 47 green jobs that
included not only organic farming and landscaping, but also clerical,
customer service, and sales positions at green industries, as well as
janitorial and landscaping positions at government agencies. Los
Angeles, however, contracted with one service provider, the Los Angeles
Conservation Corps, with an emphasis on providing green jobs. This
service provider had 422 youth participants during Phase II of the
summer youth employment program, most of whom engaged in green jobs,
which, as defined by the service provider, included planting trees,
cleaning streets and alleys, and other green activities. Sponsors of
the Los Angeles Conservation Corps include federal agencies, such as
the Environmental Protection Agency and the U.S. Forest Service, and
private entities, such as Shell Oil and the Sierra Club. One of the
employers under the Los Angeles Conservation Corps was the Million
Trees LA project, a city of Los Angeles project that works with the
U.S. Forest Service on its Urban Forest Project.
Challenges in Meeting Enrollment:
While the state did not provide enrollment or spending targets for
summer youth employment activities, San Francisco and Los Angeles
officials developed their own enrollment targets for their summer youth
employment programs. Los Angeles officials also said they planned to
spend all their WIA Recovery Act Youth funds by June 30, 2010. At the
time of our site visits in August 2009, neither San Francisco nor Los
Angeles had met their own summer enrollment targets.
San Francisco officials told us that they had enrolled about 392 youth
(86 percent of the target), and although the program was ongoing at the
time of our visit, they expect to fall short of their goal of enrolling
455 youth. San Francisco officials stated that they were able to
identify enough youth participants, but not enough work sites. They
cited the short time frames to develop their programs as a challenge,
which officials identified at the outset. San Francisco contracted with
two organizations for work site development, both of which conducted
on- site orientation and monitored visits with each work site prior to
youth being placed there. The visits were designed to provide program
orientation, assess work sites for safety regulations, and explain and
verify work site requirements.
At the time of our visit, Los Angeles had met about 90 percent of their
targeted enrollments in the first two phases of its summer youth
employment activities,[Footnote 46] and officials believed they would
meet their overall goal to have all funds obligated or expended by June
30, 2010. For Phase I (May to June 30, 2009), Los Angeles had a target
enrollment of 1,250 youth participants; approximately 1,100 youth
completed the employment activities (88 percent of their goal),
although Los Angeles officials said they are still collecting and
collating the data from this phase. For Phase II (July 1 to September
30), Los Angeles officials had a target enrollment of 4,300 youth
participants. Enrollment as of August 7, 2009, was 3,910, or 91 percent
of the goal. Despite not being at their enrollment goal in August, Los
Angeles officials anticipate reaching their overall enrollment goal by
September 30. Beyond the Labor-defined summer period of May 1 to
September 30,[Footnote 47] Phase III, called the Reconnections Academy,
is planned to run from October 1 through December 31 and has a goal of
providing 1,000 positions to 21 to 24 year olds. In addition, a Phase
IV is planned for the year-round program. Los Angeles said that their
plan is to spend all of their Recovery Act WIA Youth funds by June 30,
2010, and the current plan is to spend 80 percent of the funds by
September 30, 2009, at the end of Phase II. Subsequent to our visit,
Los Angeles officials reported that, as of August 31, 2009, 5,300 youth
were enrolled in summer youth employment activities, or about 95
percent of their goal.
Los Angeles officials said they did not face any major issues in
developing summer youth work sites. The city has previously provided
locally funded summer youth employment activities under an umbrella
program known as Hire LA's Youth, which complemented the year-round WIA
program. The request for proposal for this city-funded 2009 summer
youth employment program was released in October 2008 and closed in
December 2008. Thus, according to Los Angeles Community Development
Department (LACDD) officials, when the Recovery Act provided WIA funds
for youth summer employment in 2009, Los Angeles was already fully
engaged in developing work sites and service providers for summer youth
employment programs.
Successes with Out-of-School Youth and Youth Ages 22 to 24:
San Francisco and Los Angeles officials believe that they had
successfully targeted out-of-school youth and reached out to youth ages
22 to 24. Of the youth currently enrolled in the San Francisco program,
178 out of the 392 youth (about 45 percent) were out-of-school youth.
Additionally, 67 out of the 392 youth (about 17 percent) were between
the ages of 22 and 24.[Footnote 48] According to a San Francisco
official, younger participants are directed to the Mayor's youth
employment program, which serves high school youth. One of the service
providers we interviewed, Larkin Street Youth Services, focused on the
homeless youth population of San Francisco. Larkin Street Youth
Services officials said that their population is largely an out-of-
school youth population. Only 4 of the 50 youth participating with this
service provider were under the age of 18.
Los Angeles officials told us that they are still collecting
demographics on their participants to determine whether they met their
goal of out-of school youth constituting at least 30 percent of the
program participants.[Footnote 49] Officials at the city-based service
provider we visited said that they focused entirely on out-of-school
youth for the WIA summer youth employment activities. Los Angeles
officials told us that they are also still gathering data on the number
of summer youth program participants ages 21 to 24. Phase III of the
youth employment activities, however, will focus on this age group,
with a goal of targeting 1,000 participants.
State and Selected Local Agencies Have Procedures for Monitoring
Recovery Act WIA Youth Summer Funds and Contracts:
The state and local workforce investment agencies that we visited have
monitoring procedures over the use of Recovery Act WIA Youth funds in
place. While the state and local agencies have similar monitoring
procedures (see table 8), the performance of these monitoring efforts
differ in important ways. For example, EDD plans to conduct visits to
work sites established by each of the 49 local areas in the state. EDD
officials told us that, during these site visits, they review a
nonstatistical sample of participant case files and interview
participants and work site supervisors to confirm proper documentation
for participant work permits, verify participant eligibility, and
ensure that participants are provided meaningful employment
opportunities. EDD also reviews program administration and operations
and examines contract procurements, expenditure reports, expense
payments, and small purchases. EDD officials stated that they typically
select for review work sites that have a high level of risk. They base
risk on factors such as geographic location, the type of work being
conducted, and the age of the participants. EDD issues a written report
of its findings to the local agencies, which then must respond with
corrective action plans addressing any compliance or deficiency issues
raised in the report.
Table 8: Examples of Oversight Activities at California State and
Select Local Workforce Agencies:
External audits (e.g., Single Audits) conducted; State agency:
Employment Development Department (EDD): [Check]; Local agencies: Los
Angeles Community Development Department (LACDD): [Check];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Check].
Risk assessments on work sites performed; State agency: Employment
Development Department (EDD): [Check]; Local agencies: Los Angeles
Community Development Department (LACDD): [Empty];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Empty].
Recovery Act-specific training provided; State agency: Employment
Development Department (EDD): [Check]; Local agencies: Los Angeles
Community Development Department (LACDD): [Check];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Check].
Youth participant eligibility verified; State agency: Employment
Development Department (EDD): [Check]; Local agencies: Los Angeles
Community Development Department (LACDD): [Check];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Check].
Work site checked for safety;
State agency: Employment Development Department (EDD): [Check]; Local
agencies: Los Angeles Community Development Department (LACDD):
[Check];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Check].
Participant payroll verified;
State agency: Employment Development Department (EDD): [Check]; Local
agencies: Los Angeles Community Development Department (LACDD):
[Check];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Check].
Meaningful work and adequacy of supervision assessed; State agency:
Employment Development Department (EDD): [Check]; Local agencies: Los
Angeles Community Development Department (LACDD): [Check];
Local agencies: San Francisco Office of Economic and Workforce
Development: [Check].
Source: GAO analysis of information provided by the California
Employment Development Department, Los Angeles Community Development
Department, and San Francisco Office of Economic and Workforce
Development.
Note: All monitoring activities are conducted on a sample basis.
[End of table]
The local agencies we visited have adopted many of the state's
monitoring tools for their own monitoring purposes, including many of
the interview questionnaires for participants and supervisors, and
supplement these tools with their own procedures. San Francisco
officials told us that their compliance specialists visit service
providers to inspect work sites for safety and suitability. They also
review a sample of case files, interview participants, and provide
guidance on reporting requirements. San Francisco contracted its
payroll and work site certification functions to the Japanese Community
Youth Center, a nonprofit agency. San Francisco officials also hold
weekly meetings with all service providers to review participant
timesheets and address any concerns raised by the providers.
Los Angeles officials told us that they visit a sample of their work
sites to ensure that they comply with workplace safety requirements.
These officials stated that, in addition, their service providers' many
years of experience with the city's summer program and its work sites
provides another level of control. Los Angeles has already conducted
one programmatic monitoring visit of its service providers, including
case file reviews, monitoring work sites, and interviewing participants
and work site supervisors. LACDD also plans to review 10 percent of all
the case files for its summer program to check that participants meet
eligibility requirements, and it plans to visit 10 percent of its work
sites. Service providers have 30 days to respond to and implement
corrective actions for any findings. The city negotiates a time frame
with contractors for correcting any unresolved findings, based on the
amount of work required to resolve them.
We reviewed monitoring approaches at each of the four service providers
that we visited. Since the Boyle Heights Technology Center in Los
Angeles is a city-run service provider, it is responsible for
implementing LACDD's internal control procedures, as described above.
Alternatively, the Los Angeles Conservation Corps has two internal
auditors and an audit committee that leads its internal monitoring
efforts, including eligibility and payroll documentation of
participants. In San Francisco, officials with Larkin Street Youth
Services told us that they conduct a risk assessment of their internal
controls for accounts payable, payroll, information technology, and
revenue procedures. Officials at the Vietnamese Youth Development
Center in San Francisco explained that, although the WIA Youth program
is their first federally funded program, they have extensive experience
offering summer youth employment programs, in general, and therefore,
they already have safeguards in place to ensure that youth are provided
meaningful employment opportunities. For example, in connection with
their earlier programs, the Vietnamese Youth Development Center
required all program supervisors to attend an orientation that included
guidance on safety issues and job responsibilities.
We reviewed two of the contracts awarded by the city of Los Angeles to
service providers for its summer program and discussed the contracts
with local officials. According to local officials, one contract is
with the Los Angeles Unified School District for a maximum of $225,000,
and the other is with the Los Angeles Conservation Corps for an amount
not to exceed an estimated price of $845,000--both involve providing
workplace training for youth participants. (See table 9 for information
on LACDD's preaward and contracting procedures for these two
contracts.) According to LACDD, Los Angeles added a requirement to an
existing contract with the Los Angeles Unified School District. This
modification enabled the district to quickly begin the first phase of
its summer youth program on May 1, 2009. Labor granted a waiver to
California on the competitive requirement. This waiver allowed LACDD to
select an existing youth service provider and modify its current
contract amount by up to 150 percent of the original contract price.
Other contracts were also modified in this manner during the first
phase. The official also said that the services to be performed under
the program were awarded pursuant to a cost-reimbursement contract with
a line item price of $2,000 per participant, with an estimated price of
$225,000 to serve approximately 113 youth participants. LACDD decided
to use a cost reimbursement contract, rather than a fixed-price
contract, to account for possible changes in the number of participants
enrolled in the program. According to LACDD officials, this program met
its target of 113 enrollees. The other contract we reviewed and
discussed with local officials was with the Los Angeles Conservation
Corps, which was competitively awarded during the second phase of the
Los Angeles summer youth program. Los Angeles workforce officials
selected a total of 15 service providers out of the 22 that had
submitted offers. The Los Angeles Conservation Corps contract was also
a cost reimbursement contract with a not-to-exceed estimated price of
$845,000, serving a total of 422 youth participants.
Table 9: Preaward and Contracting Procedures Used by the Los Angeles
Community Development Department (LACDD) in Contracts Reviewed by Local
Officials and GAO:
LACDD stated it took the following steps before awarding the contracts:
* Verified that the bidder or offeror was in good standing by reviewing
the debarred bidders list of federal and state agencies, checking with
the special investigation section of the California Bureau of Contract
Administration, and ensuring that the bidder did not have outstanding
claims with the city's financial management division;
*Confirmed that the bidder or offeror submitted a completed bid or
proposal, including all necessary attachments and a signature from an
authorized representative;
* Scored the bid or proposal using evaluation factors that considered
demonstrated ability, such as prior experience providing youth programs
and positive performance in recent years, as well as service design and
approach.
Once the contract was awarded, LACDD monitored contract performance by:
* Internal monitoring of files and fiscal transactions;
* Conducting bimonthly compliance monitoring, made recommendations,
tracked open findings from prior year fiscal review, and followed up on
status of single audit reports;
* Tracked compliance with contract terms and conditions and provided
technical assistance to assist contractors to improve their operations
and performance;
* Verified that appropriate funding allocations are used, adequate and
auditable financial records are maintained, costs are allowable, and
contract provisions and regulations are complied with;
* Validated a closeout report to general ledger and sampled
expenditures reported;
* Compared amounts of expenditures claimed on the expenditure reports
to the general ledger, and selected a sample of expenditures from the
general ledger and examined their supporting documentation;
* Evaluated internal controls based on fiscal review checklist
completed by contractors.
Source: GAO analysis of information provided by Los Angeles Community
Development Department.
[End of table]
California Does Not Anticipate Problems with Recovery Act Reporting
Requirements for the WIA Summer Youth Program, but Work Readiness
Measures Differ:
California officials said that they do not anticipate any problems
reporting Recovery Act WIA Youth program results as required by Section
1512 of the act. As defined by OMB guidance on Section 1512 reporting
requirements, California is the prime recipient of WIA Youth Recovery
Act funds, and the 49 local areas are the subrecipients. California has
not delegated reporting responsibilities under Section 1512 to the
subrecipients. EDD officials stated they will rely on guidance provided
by Labor and the state to comply with Section 1512 reporting
requirements, and do not anticipate any challenges in collecting data
from subrecipients or in reporting this data to the Task Force.
[Footnote 50]
The Recovery Act provided that, of the WIA Youth program measures, only
the work readiness measure,[Footnote 51] is required to assess the
outcomes of the summer-only employment for youth served with Recovery
Act funds. Within the parameters set forth in federal agency guidance,
local areas may determine their methodology to measure work readiness
gains. San Francisco and Los Angeles will use different methodologies
for measuring work readiness, including assessing different factors in
different ways.
San Francisco will assess all of its participants using its Work
Readiness Assessment, which includes participant self-identified goals,
self evaluation, a basic math and reading skills assessment, and a pre-
and post-Secretary's Commission on Achieving Necessary Skills[Footnote
52] (SCANS) evaluation. A participant's final assessment will be
completed by the work site supervisor and will include a five-point
rating system on 15 factors, such as attendance, punctuality, team
member participation, understanding workplace expectations, problem
solving, responsibility, listening, and speaking. Work site supervisors
assess youth participants on the frequency the measure is demonstrated,
such as never, hardly ever, sometimes, usually, or always. The
assessment also includes five additional skills the work site
supervisors identify as specific to the participant's job. For these
five skills, the youth participants are rated on level of performance
such as unsatisfactory, marginal, average, above average, and
outstanding.
In Los Angeles, all participants will be assessed on work readiness
skills and at least 50 percent will be assessed for basic skills using
the Comprehensive Adult Student Assessment Systems (CASAS).[Footnote
53] Los Angeles will use two sets of tools based on SCANS skills to
measure work readiness. Preassessment will be completed using the
Individual Service Strategy, which requires the youth participant to
answer questions about career aspirations, educational goals, and hopes
for the summer work experience, among other questions. There is also a
pre-and postassessment based on the work site supervisor's evaluation
of progress completed on the work site evaluation form. This pre-and
postassessment is a four-point rating system--with ratings for needs
development, competent, proficient, or advanced--which evaluates the
level at which the participants perform at least four of six factors,
such as interacting with co-workers, accepting direction and criticism,
attendance and appearance, speaking, listening, and self-management.
Los Angeles also provides a Job Keeping Skills Checklist designed for
older youth who have been in the workforce previously, as well as
administers an exit survey of youth participants.
State Comments on This Summary:
We provided the Governor of California with a draft of this appendix on
September 8, 2009.
California state officials generally agreed with our draft and provided
some clarifying information, which we incorporated, as appropriate.
GAO Contacts:
Linda Calbom, (206) 287-4809 or calboml@gao.gov:
Randy Williamson, (206) 287-4860 or williamsonr@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Paul Aussendorf, Assistant
Director; Joonho Choi; Michelle Everett; Chad Gorman; Richard Griswold;
Don Hunts; Delwen Jones; Al Larpenteur; Susan Lawless; Brooke Leary;
Heather MacLeod; Eddie Uyekawa; and Lacy Vong made major contributions
to this report.
[End of section]
Footnotes for Appendix II:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] SELPAs are made up of LEAs and county offices of education within
particular geographic areas. Small LEAs join together so they can
receive IDEA funding to provide a full range of services to students
with special needs.
[3] According to the California Controller's Web site, a total of $1.95
billion in registered warrants have been issued since July 2. A
registered warrant is a "promise to pay," with interest, that is issued
by the state when there is not enough cash to meet all of its payment
obligations. Based on the recommendation of the Pooled Money Investment
Board (PMIB), the State started redeeming IOUs on September 4, 2009.
The interest rate is 3.75 percent per year.
[4] Examples provided by officials from the California Department of
Finance include Social Security Disability Insurance payments that they
believe should have been paid by Medicare, duplicate Part B Medicare
premium payments caused by systemic errors, and adjustments to payments
in connection with Medicare prescription drug coverage.
[5] Some Recovery Act programs require that states agree to
maintenance- of-effort requirements in the level of state spending for
programs to which the requirement applies, unless the maintenance-of-
effort requirements are waived.
[6] According to Department of Finance officials, California has not
had funds in the separate rainy-day reserve account for several years.
California's budget reserve consists of a line item in the General Fund
budget officially called the Special Fund for Economic Uncertainties.
[7] Specific examples cited are the Temporary Assistance for Needy
Families (TANF) program, In-home Health Supportive Services program,
Department of Corrections and Rehabilitation, and state contracting
processes.
[8] The state has a bipartisan Tax Commission studying options that
could report out its findings soon. Then, the Governor could convene a
special session of the Legislature to take up Tax Commission
recommendations.
[9] OMB Memorandum M-09-18 titled Payments to State Grantees for
Administrative Costs of Recovery Act Activities states that "central
administrative costs incurred by State recipients in the management and
administration of Recovery Act programs are allowable costs under the
current guidance of OMB Circular A-87.— Generally, these costs are
recovered as indirect costs to the programs. The methodology used to
reimburse State recipients for central administrative costs is captured
in the indirect cost rates provided for in OMB Circular A-87—. Under
the provisions of OMB Circular A-87, States can recoup Recovery Act
administrative costs through the State-wide Cost Allocation Plan
(SWCAP), which is submitted to the Department of Health and Human
Services (HHS) annually for review and approval. The costs can either
be included as 'centralized services' costs (commonly known as 'Section
I costs') or as 'billed services' costs (commonly known as 'Section II
costs'). These costs can be included in the SWCAP as an addendum plan
pertaining only to Recovery Act programs and activities, thus providing
transparency to the total amount of Recovery Act administrative costs
and its allocation to the programs."
[10] California decided to commit its entire $1.1 billion allocation of
SFSF government services funds (the discretionary portion of SFSF
funds) to paying for California's Department of Corrections and
Rehabilitation (CDCR) payroll costs and not for oversight costs. As
discussed in our last report, CDCR spent its first drawdown of $727
million in the 2008-09 fiscal year on payroll. According to California
Department of Finance officials, CDCR is slated to receive another $358
million in September which, similarly, will be used for payroll.
[11] Section 1512 of the Recovery Act requires recipients to report on
the use of Recovery Act funding and provide detailed information on
projects and activities funded by the Recovery Act. Pub. L. No. 111-5.
Sec. 1512. 123 Stat. 115.287 (Feb. 17, 2009). Recipients are required
to report no later than the 10th day after the end of each calendar
quarter, beginning the quarter ending on September 30, 2009. Under OMB
guidance, prime recipients, such as state agencies, have the 11th
through the 21st day to review and correct data. The federal government
will report out to the public 30 days after the quarter ends. Further
implementation guidance on Section 1512 reporting is contained in OMB
Memorandum M-09-21, which was released on June 22, 2009.
[12] Recipient reports will include payments to subrecipients and
vendors. A vendor is defined as a dealer, distributor, merchant, or
other seller providing goods or services required for the conduct of a
federal program. Additional data elements were identified for vendor
payments when reporting expenditures of more than $25,000. These
include the vendor's Dun and Bradstreet Universal Numbering System
(DUNS) number, payment amount, and purchase description. A requirement
was also added for subrecipients to report the DUNS number or name and
ZIP code of the vendor's headquarters for payments to vendors in excess
of $25,000.
[13] XML (Extensible Markup Language) is a set of rules for encoding
documents electronically.
[14] For the Highway Infrastructure Investment Program, the U.S.
Department of Transportation has interpreted the term obligation of
funds to mean the federal government's contractual commitment to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement. This amount does
not include obligations associated with the $27 million of apportioned
funds that were transferred from FHWA to the Federal Transit
Administration (FTA) for transit projects. Generally, FHWA has
authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made
available for transit projects to FTA.
[15] States request reimbursement from FHWA as they make payments to
contractors working on approved projects.
[16] The total amount of Recovery Act funds obligated for these
projects is $1.104 billion. The total value of the contracts awarded
exceeds the obligation total due to the contribution of local agency,
state, and other federal funds to the overall financing of these
projects.
[17] We reported on the projects associated with these two contracts in
our July 2009 report.
[18] The Caltrans Construction Manual establishes policies and
processes for the construction phase of Caltrans projects. The manual
includes information on contract administration, sampling and testing,
environmental requirements, and employment practices. The manual also
includes information on contract administration for projects
administered by local agencies for roads on the state highway system.
Caltrans officials stated that the construction manual includes FHWA
contract oversight provisions and has FHWA approval.
[19] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[20] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[21] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[22] The federal share under the existing formula grant program is
generally 80 percent.
[23] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[24] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and metropolitan planning
organizations designated for the area. Metropolitan planning
organizations are federally mandated regional organizations,
representing local governments and working in coordination with state
departments of transportation that are responsible for comprehensive
transportation planning and programming in urbanized areas. MPOs
facilitate decision making on regional transportation issues including
major capital investment projects and priorities. To be eligible for
Recovery Act funding, projects must be included in the region's
Transportation Improvement Program and the approved State
Transportation Improvement Program (STIP).
[25] For the Transit Capital Assistance Program, the U.S. Department of
Transportation has interpreted the term obligation of funds to mean the
federal government's commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a grant agreement.
[26] Under FTA circular 9030.1c, preventive maintenance is an eligible
grant activity and is classified under capital project activities.
Preventive maintenance costs are defined as all maintenance costs.
[27] Some state funding for transit purposes is supported through two
funding sources: (1) the State Transit Assistance fund, which is
derived from a statewide sales tax on gasoline and diesel fuel, and (2)
the Local Transportation Fund, which is derived from one-quarter of a
cent of the general sales tax collected statewide.
[28] Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to
transfer funds made available for transit projects to FTA.
[29] FTA's triennial review evaluates urbanized area formula grantees'
performance at least once every 3 years in carrying out transit
programs, including adherence to statutory and administrative
requirements.
[30] OMB guidance on Section 1512 of the Recovery Act states that prime
grant recipients are required to report different data elements for
vendors and subrecipients. According to transit agency officials,
contractors do not have the required registrations needed for
subrecipient reporting and it may be difficult for some contractors to
obtain this information in time for the October 10, 2009, Recovery Act
Section 1512 reporting deadline.
[31] The initial award of SFSF funding required each state to submit an
application to the U.S. Department of Education that provides several
assurances, including that the state will meet maintenance-of-effort
requirements (or it will be able to comply with waiver provisions) and
that it will implement strategies to meet certain educational
requirements, such as increasing teacher effectiveness, addressing
inequities in the distribution of highly qualified teachers, and
improving the quality of state academic standards and assessments. In
addition, states were required to make assurances concerning
accountability, transparency, reporting, and compliance with certain
federal laws and regulations. States must allocate 81.8 percent of
their SFSF funds to support education (these funds are referred to as
education stabilization funds), and must use the remaining 18.2 percent
for public safety and other government services, which may include
education (these funds are referred to as government services funds).
[32] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[33] SELPAs are made up of LEAs and county offices of education within
particular geographic areas. Small LEAs join together so they can
receive IDEA funding to provide a full range of services to students
with special needs.
[34] Both the California State Auditor and the Education Inspector
General have recently cited deficiencies in CDE and LEA ESEA Title I
cash management. The Single Audit issued by the State Auditor in May
2009 found that CDE had disbursed over $1.6 billion to LEAs during the
fiscal year ending June 30, 2008, with no assurances that the LEAs
minimized the time between the receipt and disbursement of federal
funds, as required by federal regulations. The report also noted that
CDE did not ensure that interest earned on federal program advances is
returned on at least a quarterly basis. (See State of California
Internal Control and State Federal Compliance Audit Report for the
Fiscal Year Ended June 30, 2008, May 2009, Report 2008-002.)
Additionally, the Education Inspector General reported in March 2009
that CDE needed to strengthen controls to ensure that LEAs correctly
calculate and promptly remit interest earned on federal cash advances.
(See ED-IG/A09H0020, March 2009.)
[35] The Task Force has also taken steps to provide guidance on cash
management and two Recovery Act bulletins were issued to state agencies
in August related to cash management rules and training opportunities.
[36] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[37] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[38] CSD delivers weatherization services through a network of local
service providers, including community action agencies, nonprofit
organizations, and local governments.
[39] California does not have centralized procurement of weatherization
materials with established prices and suppliers; instead, procurement
is delegated to local service providers.
[40] CSD officials clarified that, in reporting the amount of
weatherization funds spent in California, they can only report the
amount drawn through the Controller's Office as of a particular date,
which is generally not the amount actually spent by service providers
and contractors as of that date. They explained that this is because
the weatherization program typically reimburses claims for expenses
already incurred by service providers and contractors. Therefore, funds
are only drawn from the Controller's Office whenever a service provider
submits an invoice to the state for reimbursement, and this occurs
monthly. Meanwhile, service providers and contractors continue to spend
funds on weatherization-related activities.
[41] Some service providers in California outsource 100 percent of
their weatherization activities, but most are hybrids, conducting
traditional weatherization services in-house and outsourcing specialty
services.
[42] H.R. Rep. No. 111-16, at 448 (2009).
[43] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[44] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[45] According to Labor's Training and Employment Guidance Letter 17-05
(Feb. 17, 2006) Attachment B, occupational skills training should be
(1) outcome-oriented and focused on a long-term goal as specified in
the Individual Service Strategy, (2) be long-term in nature and
commence upon program exit rather than being short-term training that
is part of services received while enrolled in Employment and Training
Act-funded youth programs, and (3) result in attainment of a
certificate awarded in recognition of an individual's attainment of
measurable technical or occupation skills necessary to gain employment
or advance within an occupation.
[46] Los Angeles also provided summer employment for 2,000 youth
participants through two locally funded programs, Learn and Earn and LA
Scholars, which offered work experience with academic components.
[47] Labor's Training and Employment Guidance Letter 14-08 (Mar. 18,
2009): 23.
[48] As noted above, the Recovery Act extended eligibility through age
24 for youth receiving services funded by the act.
[49] The 30 percent goal was included in the service provider
contracts.
[50] EDD uses their Job Training Automation (JTA) system to track
subrecipient data by reviewing accrued reports, cash disbursements, and
contracts. EDD's Workforce Services Branch and Fiscal Programs
Division, as well as the local workforce investment boards, other state
agencies, and community based organizations enter data into and
retrieve data from the JTA system. Over 200 program partners rely on
information from the JTA system to meet local, state, and Federal
Management Information System requirements. The JTA system tracks
program client participation in the relevant programs, reports program
expenditures and obligations, and administers the WIA required Eligible
Training Provider List.
[51] A work readiness skills goal, according to Labor's Training and
Employment Guidance Letter 17-05 (Feb. 17, 2006) Attachment B, is a
"measurable increase in work readiness skills including world-of-work
awareness, labor market knowledge, occupational information, values
clarification and personal understanding, career planning and decision
making, and job search techniques (resumes, interviews, applications,
and follow-up letters). Work readiness skills also encompass survival/
daily living skills such as using the phone, telling time, shopping,
renting an apartment, opening a bank account, and using public
transportation. They also include positive work habits, attitudes, and
behaviors such as punctuality, regular attendance, presenting a neat
appearance, getting along and working well with others, exhibiting good
conduct, following instructions and completing tasks, accepting
constructive criticism from supervisors and co-workers, showing
initiative and reliability, and assuming the responsibilities involved
in maintaining a job. This category also entails developing motivation
and adaptability, obtaining effective coping and problem-solving
skills, and acquiring an improved self image."
[52] In 1990, the Secretary of Labor appointed a commission to
determine the skills our young people need to succeed in the world of
work. The commission's fundamental purpose was to encourage a high-
performance economy characterized by high-skill, high-wage employment.
Although the commission completed its work in 1992, according to Labor,
its findings and recommendations continue to be a valuable source of
information for individuals and organizations involved in education and
workforce development.
[53] According to Labor's Training and Employment Guidance Letter 17-05
(Feb. 17, 2006), CASAS scores can be used to estimate basic adult
educational levels.
[End of section]
Appendix III: Colorado:
Overview:
The following summarizes GAO's work on its third bimonthly review of
American Recovery and Reinvestment Act (Recovery Act)[Footnote 1]
spending in Colorado. The full report on all of our work, which covers
16 states and the District of Columbia, is available at [hyperlink,
http://www.gao.gov/recovery/].
Colorado is targeting Recovery Act funds to help restore the state's
budget and to meet key program needs during the current budget crisis.
Our work in Colorado focused on specific Recovery Act programs,
including a detailed review of three programs--State Fiscal
Stabilization Fund (SFSF), Transit Capital Assistance, and
Weatherization Assistance. We reviewed these programs in detail for
different reasons. The state has allocated major portions of SFSF funds
to institutions of higher education (IHE), and we therefore reviewed
this program. We included transit funds because of a Recovery Act
deadline for obligating a portion of funds by September 1, 2009, in
addition to the fact that the state received a significant amount of
transit funds. Finally, we included the weatherization program in our
review because of the large influx of funds the state received and the
increased risks associated with managing those funds. In addition to
the detailed review of these three programs, we updated funding
information for three other programs--Highway Infrastructure
Investment; Individuals with Disabilities Education Act (IDEA), Part B;
and Title I, Part A, of the Elementary and Secondary Education Act
(ESEA) of 1965. For all programs, we identified the use of Recovery Act
funds; examined safeguards over these funds, including those related to
procurement of goods and services; and considered how the effects of
Recovery Act spending would be reported by the state of Colorado.
Budget stabilization: As we reported in July 2009, Colorado estimated
it will receive a total of $3.5 billion in Recovery Act funds.[Footnote
2] While Recovery Act funds helped Colorado balance its budget for
fiscal year 2009 and will provide additional support for the state's
budgets in fiscal years 2010 and 2011, the state still faces
significant revenue shortfalls in those 2 years. As a result, the state
has made $318 million in budget cuts in the fiscal year 2010 budget and
anticipates making more drastic cuts in fiscal year 2011.
In summary, for the Recovery Act programs we reviewed, we found the
following:
* U.S. Department of Education (Education) State Fiscal Stabilization
Fund (SFSF). Education has allocated $760 million in SFSF funding to
Colorado and Colorado plans to spend the majority of the funds on
higher education. As of September 2, 2009, state IHEs had been
reimbursed $155 million from SFSF funds. The two state institutions we
reviewed used the funds to restore teaching positions and programs and
to limit tuition increases. Recent budget cuts at the state level have
caused the state to plan to reallocate $81 million in SFSF funds from
K- 12 to higher education in fiscal year 2010. The budget cuts
decreased the state's spending on higher education below levels
required to meet Recovery Act requirements. As a result, on September
9, 2009, the state submitted a request to Education to waive the
requirement to maintain state education spending at certain levels in
fiscal year 2010.
* Transit Capital Assistance. The U.S. Department of Transportation's
(DOT) Federal Transit Administration (FTA) apportioned $103 million in
Recovery Act Transit Capital Assistance funds to Colorado and urbanized
areas in the state. Of that total, $90.2 million was apportioned to
urbanized areas and the remaining $12.5 million was apportioned to the
state for spending in nonurbanized or rural areas. As of September 1,
2009, FTA had obligated $96.3 million for the state and urbanized areas
in Colorado. Officials from Colorado transit agencies told us they
directed Recovery Act funds toward high-priority projects that were
facing a funding shortfall, including capital maintenance, safety
improvements, and light rail projects.
* Weatherization Assistance Program. The U.S. Department of Energy
(DOE) allocated about $79.5 million in Recovery Act weatherization
funding to Colorado, as we reported in July 2009. As of September 15,
2009, DOE had provided almost $39.8 million to the state and Colorado
had obligated $17.3 million of these funds, of which about $4.1 million
had been spent. Colorado's weatherization plan was approved by DOE on
August 13, 2009. Officials from some weatherization agencies in
Colorado were concerned that Davis-Bacon Act wage requirements have
increased the wages that they will pay for weatherization work,
potentially limiting the amount of weatherization activities that can
be completed in Colorado.
* Highway Infrastructure Investment funds. DOT's Federal Highway
Administration (FHWA) initially apportioned almost $404 million in
Recovery Act funds to Colorado. Of these funds, $18.6 million was
transferred to FTA for transit projects, leaving $385 million for
highway projects in the state. As of September 1, 2009, FHWA had
obligated almost $290 million for Colorado projects and about $16.5
million had been reimbursed by the federal government.
* Individuals with Disabilities Education Act (IDEA) Part B. As of
August 31, 2009, Education had allocated $154 million to Colorado for
IDEA Part B. As of the same date, Colorado had reimbursed almost $4.1
million in Part B funds to local education agencies (LEA).
* Title I, Part A, Elementary and Secondary Education Act (ESEA) of
1965. As of August 31, 2009, Education had awarded Colorado $111
million for ESEA Title I, Part A and Colorado had reimbursed almost
$280,000 in ESEA Title I, Part A funds to LEAs.
* General administrative costs. The Office of Management and Budget
(OMB) released guidance on May 11, 2009, allowing states to recover
costs related to central administrative activities to manage Recovery
Act programs and funds.[Footnote 3] Such activities include oversight
of the state's reporting and auditing of Recovery Act programs.
Colorado submitted a cost allocation plan to the Department of Health
and Human Services Division of Cost Allocation (DCA), the agency
charged with approving such plans, on August 13, 2009. State officials
expect DCA to review the plan within 60 days; as of September 14, 2009,
the plan had not been approved. The State Controller is concerned that
timing and methodology difficulties will delay its approval, thereby
delaying the state's ability to recover these costs and hindering the
state's ability to oversee Recovery Act programs and funds.
Contracting: Colorado has taken several steps to facilitate the timely
and efficient management of Recovery Act contracts. First, legislation
was enacted permitting a waiver of its procurement code requirements
under certain circumstances, although the state has not yet used the
waiver.[Footnote 4] Second, the State Purchasing Office developed and
provided procurement guidance regarding the use of Recovery Act funds.
Third, Colorado identified the need to hire 16 staff in the Department
of Personnel and Administration and several state agencies in the areas
of purchasing, accounting, contracts, and risk management; the state
plans to use general administrative funds to pay for some of these
staff and program administrative funds for others. Finally, Colorado
implemented a new Contract Management System on July 1, 2009, to
facilitate centralized data collection and reporting on all state
contracts. Various Colorado agencies have begun awarding Recovery Act
contracts, including the Colorado Department of Transportation (CDOT)
and the Governor's Energy Office.
Reporting: Colorado is planning to use a centralized process to report
Recovery Act data to OMB rather than having state agencies report
individually. However, a number of unresolved issues may affect
Colorado's ability to report to OMB in a complete and timely manner.
For example, Colorado's centralized reporting process is new and
testing is ongoing, which may lead to problems when the state tries to
upload data to OMB's online portal, [hyperlink,
http://www.federalreporting.gov], by the October 10, 2009, deadline.
The Office of the State Controller has issued guidance on Recovery Act
reporting, and the state is conducting meetings with state agencies to
train them in the new policies and systems for reporting.
While Recovery Act Funds Have Helped Colorado's Budgets, Revenue
Shortfalls Will Continue and Need to Be Addressed:
As Colorado faces continued declining revenues compared to forecasts,
Recovery Act funding helped the state balance its fiscal year 2009
budget, which ended June 30, 2009, and has also been a major factor in
closing the gap for the current year's (fiscal year 2010) $19 billion
budget. However, on August 25, 2009, the Governor made cuts to balance
the fiscal year 2010 budget, and state officials anticipate that
continuing revenue shortfalls and increasing program caseloads will
likely require even deeper cuts for fiscal year 2011. During the same
year, the state will have to manage the fact that Recovery Act funds
will be reduced or eliminated and these funding sources will no longer
be available to support the state's budget.
Although Recovery Act funds are helping stabilize the state's budgets,
they are not expected to make up entirely for the state's lost revenue
over the next 2 fiscal years and the state has begun to make budget
cuts.[Footnote 5] As we reported in July, in May 2009, Colorado adopted
a balanced budget for fiscal year 2010 based on the state's March 2009
economic forecast. To help balance the budget, state officials included
more than $500 million in Recovery Act funds, including SFSF funding
for education (over $150 million) and funds made available as a result
of the increased Federal Medical Assistance Percentage (FMAP, over $340
million).[Footnote 6] The state's June 2009 economic forecast, however,
indicated that revenues would decline further than expected and would
be insufficient to cover the fiscal year 2010 budget. As a result, in
August 2009, the Governor presented a budget-balancing plan totaling
$318 million in cuts and adjustments, which included $258 million in
general fund reductions, $40.6 million in cash fund transfers, and $19
million in other adjustments. As a result of these changes, state
officials expect 300 full-time equivalent jobs to be eliminated.
[Footnote 7]
For fiscal year 2011, state officials are very concerned that state
revenues will continue to decline and demand for services will continue
to increase at the same time that the elimination or reduction of
Recovery Act funding occurs. State projections show that lower revenues
will contribute to a budget shortfall in fiscal year 2011 of several
hundred million dollars. Revenues will not return to fiscal year 2008
levels until fiscal year 2012.[Footnote 8] During that time, state
officials expect caseload increases in Medicaid and Corrections, as
well as increases in higher education and K-12 enrollments. At the same
time these fiscal challenges exist, major Recovery Act funds will be
ending. In particular, the additional Recovery Act funding for Medicaid
FMAP is scheduled to end December 31, 2010, and Colorado has allocated
its SFSF funds over 3 years, ending in fiscal year 2011. As a result,
Colorado officials expect that they will need to find additional
revenue sources and/or make further budget cuts. State officials
anticipate that even if economic recovery is underway, budgetary
shortfalls will be "brutal" and "painful" through fiscal year 2011 and
the fiscal situation will not improve until fiscal year 2012.
As a result of the state's current budget challenges, the Colorado
General Assembly created an interim commission to study long term
fiscal stability.[Footnote 9] The joint resolution creating the
commission directs it to study the fiscal stability of the state,
including solutions for education and transportation funding,
affordable access to health care, state-owned assets, and the creation
of a rainy day fund. The resolution also calls for the commission to
develop a strategic plan for state fiscal stability and to present any
written findings and recommended legislation by November 6, 2009.
According to Legislative Council staff, the commission plans to discuss
state constitutional provisions that constrain legislative options by
limiting tax increases or mandating increased funding levels for
programs such as K-12 education.
SFSF Funds Continue to Support Higher Education but Budget Cuts Have
Caused the State to Seek a Waiver from State Spending Requirements:
The Recovery Act created SFSF in part to help state and local
governments stabilize their budgets by minimizing budgetary cuts in
education and other essential government services, such as public
safety. Stabilization funds for education distributed under the
Recovery Act must be used to alleviate shortfalls in state support for
education to school districts and public IHEs. The initial award of
SFSF funding required each state to submit an application to the U.S.
Department of Education (Education) that provides several assurances,
including that the state will meet maintenance-of-effort requirements
(or it will be able to comply with waiver provisions) and that it will
implement strategies to meet certain educational requirements, such as
increasing teacher effectiveness, addressing inequities in the
distribution of highly qualified teachers, and improving the quality of
state academic standards and assessments. In addition, states were
required to make assurances concerning accountability, transparency,
reporting, and compliance with certain federal laws and regulations.
States must allocate 81.8 percent of their SFSF funds to support
education (these funds are referred to as education stabilization
funds), and must use the remaining 18.2 percent for public safety and
other government services, which may include education (these funds are
referred to as government services funds). After maintaining state
support for education at 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 school
districts or public IHEs. When distributing these funds to school
districts, states must use their primary education funding formula, but
they can determine how to allocate funds to public IHEs. In general,
school districts maintain broad discretion in how they can use
stabilization funds, but states have some ability to direct IHEs in how
to use these funds.
Colorado Plans to Spend a Majority of Stabilization Funds on Higher
Education and Is Seeking a Waiver from the Maintenance-of-Effort
Requirement:
As we reported in July 2009, Colorado has been allocated more than $760
million in SFSF funds, $622 million of which will be education
stabilization funds and $138 million of which will be government
services funds. Initially, the state planned to allocate the majority
of its SFSF education stabilization funds to higher education ($452
million over a 3-year period) and the remaining $170 million over a 2-
year period to the state's K-12 system. Given the state's emphasis on
using SFSF to fund higher education, we focused our work for our third
bimonthly review on IHEs. We met with officials from the University of
Colorado System, the largest 4-year college system in Colorado, and the
Colorado Community College System, a system of 13 2-year community
colleges, to discuss their use of SFSF funds. As both college systems
allocate funds to their individual campuses, we also met with officials
from the University of Colorado at Boulder, one of the universities
under the University of Colorado System, and from Red Rocks Community
College, one of the community colleges under the Colorado Community
College System.
Because of a recent $81 million budget cut in the state's general fund
contribution to higher education for fiscal year 2010, Colorado plans
to allocate more SFSF funds to higher education than it had originally
planned. Colorado had allocated about $302 million of the education
stabilization funds in fiscal year 2010, with $150.7 million going to
higher education and $152 million going to K-12 education programs.
However, on August 25, 2009, the Governor, in the fiscal year 2010
budget-balancing plan submitted to the Colorado General Assembly, cut
$81 million from the state's $660 million general fund contribution to
higher education, causing the state's share of funding to fall below
the SFSF maintenance-of-effort level (2006 funding level) required
under the Recovery Act.[Footnote 10] As a result, the state has
requested a waiver from Education of the SFSF state maintenance-of-
effort funding requirement for fiscal year 2010. The state plans to
offset the budget cuts by targeting additional SFSF funds to higher
education and decreasing the SFSF funds for K-12 by $80.8
million.[Footnote 11] Assuming that the waiver is granted, Colorado
expects to allocate a total of $320.5 million in fiscal year 2010, with
$231.5 million going to higher education and $89 million to K-12. This
will leave $150.7 million in SFSF funds for higher education in fiscal
year 2011.
SFSF funds have had a significant effect on higher education programs
and staffing in Colorado. As of September 2, 2009, IHEs had spent (been
reimbursed) $155 million in fiscal years 2009 and 2010.[Footnote 12]
Colorado officials told us that the use of SFSF funds in fiscal years
2009 and 2010 has prevented layoffs, protected academic programs, and
avoided increased class size. For example, University of Colorado
System officials said that its share of SFSF funding, $50 million in
fiscal year 2009, prevented layoffs and reductions in some programs.
According to officials, budget cuts would have been "horrible" without
SFSF funding. Similarly, Red Rocks Community College officials said
that in fiscal year 2009, without its share of the $25.3 million of
SFSF funds allocated to the Colorado Community College System, the
college would have had difficulty meeting certification requirements
for some of its programs due to increasing enrollment and associated
costs. Officials said that enrollment at the college increased almost
18 percent over the last two-year period as a result of poor employment
opportunities and the need for retraining in the current economy. At
the same time, many of the college's classes are relatively expensive
career and technical education courses that have costly instructional
materials and require small class size to meet the accreditation
requirements of certain career-focused professions. Further, in fiscal
year 2010, officials said they would have had to make significant cuts
in positions beginning in the fall of 2009 if they had not received
SFSF funds.
The use of SFSF funds also enabled Colorado to significantly limit
potential tuition increases in fiscal year 2010. Tuition increases
could have been greater in fiscal year 2010, but Colorado's Governor,
citing the Recovery Act section that discusses mitigating tuition
increases for public IHEs, vetoed a portion of the state's fiscal year
2010 appropriations bill that would have allowed tuition increases
greater than 9 percent. Colorado also required IHEs to sign letters of
assurance that included limitations on tuition increases. For example,
the University of Colorado System limited tuition increases at its
institutions to an 8.5 percent average. Officials said, drawing a
comparison to tuition increases of 25 percent that resulted from
similarly severe budget cuts to higher education in the mid-2000s, that
the increase could have been significantly larger without SFSF funds
and the Governor's guidance. Officials at Red Rocks Community College
said SFSF funds have had a similar impact on tuition at their school.
They said the college's tuition increase of 9 percent, or $7 per credit
hour, could have been 15 percent without SFSF funds.
Officials from both college systems expressed concern about future
funding levels for fiscal year 2012, the year after the state's final
planned distribution of SFSF funds to IHEs. University of Colorado
System officials said they were planning for the cliff effect that will
happen when Recovery Act funds end by trying to develop revenue-
enhancing programs in the interim. Colorado Community College System
officials also expressed concerns about the exhaustion of SFSF funds,
but said they are hoping to get additional revenues from new gaming tax
revenues earmarked for community colleges that they say may be
commensurate with SFSF funding.
University of Colorado System and Red Rocks Community College Plan to
Use Existing and Additional Controls for Recovery Act Funds:
Officials representing the University of Colorado System and Red Rocks
Community College said that they have added specific internal controls
to manage Recovery Act funds, augmenting the institutions' established
control environments and procedures. Officials with the University of
Colorado System told us that the institution has extensive control
procedures, as well as fiscal and purchasing policies approved by the
President of the University of Colorado at Boulder. Red Rocks Community
College officials said their established controls include monthly
budgetary and transactional reviews at all levels, direct control and
oversight of all fiscal activities by the Vice President of
Administrative Services and the Controller, and anonymous tip and
online reporting. Both the University of Colorado System and Red Rocks
Community College officials said they have staff with extensive
financial experience to manage Recovery Act funds, as well as personnel
with certified public accountant licenses and auditing backgrounds.
According to these officials, no material weaknesses in internal
controls have been reported by internal or external auditors.
Additional controls over Recovery Act funds installed at University of
Colorado System institutions include new accounting codes to track
Recovery Act funds, a designated point person to coordinate all
Recovery Act-funded activities, and new written guidance on Recovery
Act funds. Red Rocks Community College officials said that the college
added an additional review of all expenses to be charged to Recovery
Act grant funds. In addition, the financial status of Recovery Act
funds will be monitored through unique organization and account codes
in the college system.
State Transit Authorities Are Using Recovery Act Funds for High-
Priority Projects:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 13] The majority of the public transit
funds--$6.9 billion (82 percent)--was apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program.[Footnote 14] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. Recovery Act funds were also
apportioned to states under the nonurbanized area formula grant program
using the program's existing formula. Transit Capital Assistance
Program funds may be used for such activities as vehicle replacements,
facilities renovation or construction, preventive maintenance, and
paratransit services. Up to 10 percent of apportioned Recovery Act
funds may also be used for operating expenses.[Footnote 15] Under the
Recovery Act, the maximum federal fund share for projects under the
Transit Capital Assistance Program is 100 percent.[Footnote 16]
The State and Urbanized Areas Have Met Recovery Act Obligation Dates
for Transit Capital Assistance Funds and Transit Agencies Are Directing
Funds to High-Priority Projects:
In March 2009, FTA apportioned $103 million in Transit Capital
Assistance Recovery Act funds to the state and urbanized areas in
Colorado for transit projects. Of that amount, $90.2 million was
apportioned to urbanized areas and the remaining $12.5 million was
apportioned to the state to use in nonurbanized or rural areas.
[Footnote 17] The Recovery Act requires that 50 percent of funds
apportioned to urbanized areas or states must be obligated within 180
days (before September 1, 2009) and that the remaining apportioned
funds are to be obligated within 1 year. The Secretary of
Transportation is to withdraw and redistribute to other urbanized areas
or states any amount that is not obligated within these time frames. As
of September 1, 2009, FTA concluded that the 50 percent obligation
requirement had been met for the state and urbanized areas located in
the state. Specifically, $96.3 million of the total funds, or almost 94
percent, had been obligated.[Footnote 18] Seventy percent of Recovery
Act Transit Capital Assistance Program obligations in Colorado have
been made in the greater Denver metropolitan area for capital
improvements or projects to extend light rail service.
We reviewed one urban and one rural transit agency in Colorado that are
receiving a large portion of Transit Capital Assistance funds. The
urban transit agency we reviewed is the Regional Transportation
District (RTD), which covers the Denver metropolitan area and is the
state's largest transit agency. RTD received $72.1 million in Transit
Capital Assistance Recovery Act funds.[Footnote 19] The rural transit
agency we reviewed is Summit County, which received $10.3 million in
Transit Capital Assistance Recovery Act funds through CDOT.
Officials from RTD and CDOT told us they directed Recovery Act funds
toward high-priority projects that were facing a funding shortfall.
Among other things, these projects involve capital maintenance, safety
improvements, infrastructure to support operating improvements, and
light rail projects. For example, RTD is using $17.1 million in
Recovery Act funds to replace aging farebox equipment on its buses,
$10.2 million to conduct preventive maintenance on its bus and rail
fleet, and $7.6 million to create queue jumps (infrastructure that
helps buses bypass traffic at certain intersections) along U.S. Highway
36. RTD officials stated that the projects they are planning to fund
with Recovery Act dollars are needed projects that, because of
financial constraints, would likely have been deferred. Moreover, RTD
officials told us that they had implemented a service reduction
totaling over $4.5 million before receiving Recovery Act funds, so
these funds have enabled them to preserve jobs and avoid even larger
service reductions. CDOT is using $10.3 million in Recovery Act funds
to construct a bus maintenance facility in rural Summit County, a
mountainous area west of Denver, and is also planning a $2.2 million
project that will provide new buses and related equipment to rural
transit authorities throughout the state.[Footnote 20] CDOT and Summit
County officials stated that the planned bus maintenance facility is
very important to the ongoing maintenance of the transit fleet in
Summit County and will help the county improve and expand maintenance
services. These officials told us that without Recovery Act funding,
the new facility may never have been built--Summit County would have
done the minimum repairs needed for safety to keep using it but would
probably have had to contract out some of its maintenance.
In selecting projects to fund with Recovery Act dollars, RTD and CDOT
screened projects according to whether they were critical projects that
could be undertaken quickly and would offset funding shortfalls. RTD
also followed an existing formula they use for allocating funds among
various transit projects, directing 60 percent of available funds to
capital improvements, including preventive maintenance and projects to
improve safety, and 40 percent to projects extending light rail
service. CDOT selected eligible projects based, among other things, on
the extent to which they would (1) increase transportation options and
transit ridership, (2) increase mobility on congested portions of the
state highway system, and (3) leverage funding from other sources. For
example, CDOT selected the $10.3 million bus maintenance construction
project because this project was identified as one of the state's
highest rural transit priorities in 2008 and as a high priority in the
state's long-range transit plan. The project also leverages local funds
as Summit County has agreed to pay 31 percent of the total project cost
since the facility will be used to service nontransit vehicles in
addition to transit buses. As of August 31, 2009, two RTD Capital
Assistance project contracts and one CDOT grant had been awarded; no
projects had been completed.
Both RTD and CDOT reported that they expect to realize bid savings on
some of the Recovery Act project contracts and grants and that they
will redirect any savings to other Transit Capital Assistance projects.
For example, on July 31, 2009, CDOT awarded a contract to Summit County
to competitively bid the bus maintenance facility project, according to
CDOT officials. The county has awarded the contract to a company that
bid $8.4 million, about $1.9 million less than the estimated cost of
$10.3 million, potentially freeing up funds for other projects.
RTD is not considering using Recovery Act funds to cover operating
expenses, although CDOT is considering using some funds to cover
operating shortfalls in rural parts of the state. On June 24, 2009,
Congress enacted the Supplemental Appropriations Act, which provided
that up to 10 percent of apportioned Recovery Act Transit Capital
Assistance funds could be used for operating expenses.[Footnote 21]
Despite the provision allowing Recovery Act funds for operating
expenses, RTD officials told us that they do not plan to use any of the
Recovery Act funds for operating expenses because they want every
available dollar to go to specific planned projects. CDOT stated that
they are studying whether any of their transit contractors in rural
parts of the state need funding to cover operating shortfalls because
such shortfalls may lead to layoffs or service reductions. CDOT
recently proposed to its Transportation Commission that a process be
established to offer operating funds to its grantees in rural areas
according to need. The commission approved CDOT's proposal and, as of
September 1, 2009, CDOT continued to gather data to assess grantee
needs.
RTD and CDOT Plan to Use Existing Internal Controls to Manage Recovery
Act Funds:
RTD and CDOT plan to use their existing internal controls and processes
to manage and expend Recovery Act funds. For example, RTD is using its
standard accounting system with established procedures and controls to
manage Recovery Act funds, as it has done with federal grants received
in the past. According to officials, RTD's Board of Directors reviews
and approves all projects, which provides an additional level of
control over projects selected for Recovery Act funds. To meet Single
Audit Act requirements,[Footnote 22] RTD is reviewed annually by
external auditors. We reviewed RTD's audit reports for the last 3
calendar years and found no material weaknesses or significant
deficiencies identified for financial statements or for federal awards.
In 2008, FTA reviewed RTD's compliance with statutory and
administrative requirements, as is required every 3 years, a process
known as a triennial review.[Footnote 23] The 2008 review identified
deficiencies in four areas, which RTD has taken action to correct. CDOT
is also using existing processes to manage Recovery Act funds and
projects. CDOT was recently reviewed by an external consultant to
assess compliance with federal requirements for several federally
funded programs, including Transit Capital Assistance. The July 2009
report identified deficiencies in nine areas, including program
management, grant administration, financial management, and Buy
American requirements. CDOT and FTA officials told us that CDOT is
working to correct the deficiencies.
Colorado Is Going Forward with Weatherization Activities but Davis-
Bacon Act Requirements May Limit Amount of Weatherization Work:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which DOE administers through each
of the states, the District of Columbia, and seven territories and
Indian tribes. The program enables low-income families to reduce their
utility bills by making long-term energy efficiency improvements to
their homes by, for example, installing insulation; sealing leaks; and
modernizing heating equipment, air circulation fans, or air
conditioning equipment. Over the past 32 years, the Weatherization
Assistance Program has assisted more than 6.2 million low-income
families. By reducing the energy bills of low-income families, the
program allows these households to spend their money on other needs,
according to DOE. The Recovery Act appropriation represents a
significant increase for a program that has received about $225 million
per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, the
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE has provided to the states $2.3
billion of the $5 billion in weatherization funding under the Recovery
Act. Use of the Recovery Act weatherization funds is subject to Section
1606 of the act, which requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined
under the Davis-Bacon Act.[Footnote 24] Because the Davis-Bacon Act had
not previously applied to weatherization, the Department of Labor
(Labor) had not established a prevailing wage rate for weatherization
work. In July 2009, DOE and Labor issued a joint memorandum to
Weatherization Assistance Program grantees authorizing them to begin
weatherizing homes using Recovery Act funds, provided they pay
construction workers at least Labor's wage rates for residential
construction, or an appropriate alternative category, and compensate
workers for any differences if Labor establishes a higher local
prevailing wage rate for weatherization activities. Labor then surveyed
five types of "interested parties" about labor rates for weatherization
work.[Footnote 25] The department completed establishing prevailing
wage rates in all of the 50 states and the District of Columbia by
September 3, 2009.
Colorado's Plan for Recovery Act Weatherization Funds Has Been Approved
by DOE and Colorado Is Going Forward with Weatherization Activities:
DOE approved Colorado's weatherization plan for Recovery Act funds on
August 13, 2009,[Footnote 26] and as of September 15, 2009, DOE had
provided almost $39.8 million in weatherization funds to Colorado, 50
percent of the total $79.5 million in Recovery Act weatherization
funding that Colorado will receive over a 3-year period. In Colorado,
the Governor's Energy Office is responsible for administering the
weatherization program and the office contracts with local
administering agencies to implement weatherization activities in
various regions across the state[Footnote 27]. These agencies, in turn,
either conduct weatherization work in-house or contract for
weatherization activities with local contractors. From June through
September 2009, Colorado awarded 10 contracts to local administering
agencies to conduct weatherization activities throughout the state. In
addition, the Governor's Energy Office plans to award one statewide
contract to a local administering agency to conduct weatherization
activities at multi-family units. As of September 15, 2009, the
Governor's Energy Office had obligated $17.3 million or 22 percent of
its total weatherization funds, of which about $4.1 million had been
spent. We visited two local administering agencies: Arapahoe County, a
local government agency that conducts weatherization activities in
Arapahoe and Adams Counties in the Denver metropolitan area; and
Housing Resources of Western Colorado, a nonprofit agency that conducts
weatherization activities in the western part of the state. We selected
these two agencies to visit because they received varying amounts of
Recovery Act funds, one covers an urban area and one covers a rural
area, and they have varying performance records.
In Colorado, the Governor's Energy Office and the local administering
agencies together are using Recovery Act weatherization funds for a
variety of activities, including training weatherization workers,
conducting energy audits of homes eligible for weatherization funds,
purchasing equipment and materials, and weatherizing qualified homes.
For example, officials from Arapahoe County told us that they are using
Recovery Act funds for basic weatherization activities, such as
installing insulation, as shown in figure 1. The picture on the left
shows a technician blowing insulation into the walls of a home in
Aurora, Colorado, while the picture on the right shows the holes that
the insulation is blown into; once insulation is installed, the holes
are filled and sealed. Arapahoe County conducts most weatherization
activities in-house but officials said they plan to award contracts to
about six contractors in the next few years to help with the expanded
weatherization program.[Footnote 28] Similarly, officials from Housing
Resources of Western Colorado are using Recovery Act funds to install
energy-efficient appliances and insulation, among other weatherization
activities. They conduct all weatherization activities in-house and do
not plan to award any contracts for weatherization work.[Footnote 29]
Figure 1: Arapahoe County Weatherization Worker Installing Insulation
at a Home in Aurora, Colorado:
[Refer to PDF for image: photographs]
In this figure, the picture on the left shows a weatherization
technician blowing insulation into the walls of a home in Aurora,
Colorado, while the picture on the right shows the holes that the
insulation is blown into.
Source: GAO.
[End of figure]
Of the 10 local administering agencies that the Governor's Energy
Office is contracting with, 8 are legacy agencies that the office has
contracted with in the past and 2 are new agencies.[Footnote 30] One of
the legacy local administering agencies, which provides weatherization
services in Denver and Jefferson Counties, was only awarded a 6-month
interim contract because officials from the Governor's Energy Office
had concerns about the agency's performance. The Governor's Energy
Office discovered, through a partial audit in 2009, that the agency had
reported units as completed despite ongoing work, demonstrated cost
allocation problems, and overextended its budget and thus had to
furlough staff for the month of June 2009. Officials in the Governor's
Energy Office plan to competitively award the contract this fall with a
new contract to begin in January 2010, shortly before the 6-month
contract ends. The legacy agency will be able to compete for the new
contract but will not be given preferred status, which would have
provided the agency with additional points when the Governor's Energy
Office scores the grant applications.[Footnote 31] In the meantime,
officials from the Governor's Energy Office have increased their
monitoring of the agency and are conducting a full financial audit.
According to officials, they can terminate the interim contract if any
significant issues are discovered.
Davis-Bacon Act Wage Requirements May Limit Amount of Weatherization
Activities in Colorado:
Some weatherization officials in Colorado are concerned about Davis-
Bacon Act wage requirements, noting that paying prevailing wages may
increase the cost of weatherizing homes, thereby limiting the amount of
weatherization activities that can be completed. Officials from the
Governor's Energy Office told us that they did not wait for Labor to
establish Colorado's weatherization wage rates before awarding
contracts to local administering agencies. They said that the local
agencies selected the "best-available" wage rate to pay weatherization
workers in the interim as well as taking additional steps to comply
with the Davis-Bacon Act, such as implementing weekly payroll. They
said that any difference in wages would be paid retroactively once
weatherization wage rates were issued; Labor issued the weatherization
wage rates for Colorado on September 1, 2009.[Footnote 32] In some
cases, the new weatherization wage rates are higher than the rates the
local administering agencies were paying weatherization workers in the
past.
Because of the increased weatherization wages, the Governor's Energy
Office may adjust one of its weatherization performance measures so as
not to limit the amount of weatherization activities the local
administering agencies can complete in Colorado. The office uses two
performance measures to track Recovery Act weatherization funds: (1)
the amount of funds spent per home; and (2) a savings to investment
ratio for each weatherization measure. DOE and the Governor's Energy
Office require weatherization measures to be cost-effective or they
cannot be installed. While DOE requires a cost-benefit ratio of 1:1 for
all weatherization work (i.e., for every $1 that is spent on
weatherization measures, at least $1 must be saved over the life of the
measure) the Governor's Energy Office requires a cost-benefit ratio of
1:1.7 for insulation measures and a ratio of 1:1.2 for furnaces and
energy-efficient appliances. However, because the increased
weatherization wages required for Recovery Act funds make some
weatherization measures less cost-effective, the Governor's Energy
Office requested approval from DOE on September 9, 2009, to move to a
1:1 cost-benefit ratio in Colorado so as not to limit the amount of
weatherization activities. Officials from the Governor's Energy Office
told us that they have to get approval from DOE to make any changes to
their savings to investment ratios even though their proposed ratio
meets DOE's minimum requirement because their plan is approved with the
higher ratios.
Officials at the two local administering agencies we visited told us
that they had concerns about Davis-Bacon Act wage rates and one agency,
Arapahoe County, decided to conduct all Recovery Act weatherization
work in-house rather than awarding contracts because of the
requirements. Because Arapahoe County is a local government entity, its
staff will not be affected by Davis-Bacon Act but any contractors would
be subject to the requirements, which could have increased the cost of
the weatherization contracts.[Footnote 33] However, Arapahoe County is
receiving non-Recovery Act weatherization funding that is not subject
to Davis-Bacon Act wage requirements, so they plan to use contractors
for a portion of that work instead of for Recovery Act work, as
initially planned, to avoid the wage requirements. Officials from
Housing Resources of Western Colorado were concerned that, because
Colorado's weatherization wages are higher than what they were
previously paying, weatherization work will not be as cost-effective,
resulting in fewer weatherization measures being installed in each
home.[Footnote 34]
Colorado Is Using Existing Controls to Manage the Use of Recovery Act
Weatherization Funds and Plans to Increase Monitoring:
The Governor's Energy Office is using its existing internal controls to
manage Recovery Act weatherization funds but is planning to increase
its site visits to local administering agencies to monitor the programs
and funds. Officials in the Governor's Energy Office told us that they
plan to conduct monthly visits to all agencies, in contrast to the
semiannual or annual visits they made in the past, and that they plan
to do more comprehensive monitoring of each agency twice per year. When
the Governor's Energy Office visits local administering agencies, it
sends staff from multiple disciplines, which allows for cross-
functional monitoring of different aspects of the weatherization
program. Officials plan to inspect at least 5 percent of all
weatherized units, as has been done in the past, and will inspect
additional units if any issues are discovered. Officials at the two
local administering agencies we visited said that following completion
of weatherization work on every unit, a final inspection is done by a
person who was not involved with the initial energy audit of the unit.
In addition, as we discussed in our previous report, the Governor's
Energy Office is implementing a new Web-based tracking system that
officials hope will help them track weatherization activities in real-
time and assist in identifying problems at their inception. However,
officials at one of the local agencies we visited had some concerns
about using the new system, which were mainly related to new required
data elements that they did not previously track.
Colorado Continues to Spend Highway and Education Funds:
As we previously reported, Colorado is receiving a large amount of
Highway Infrastructure Investment and education funds, which the state
continues to spend. Colorado is receiving about $385 million in Highway
Infrastructure Investment Recovery Act funds, of which $289,604,854 had
been obligated as of September 1, 2009. In addition, the U.S.
Department of Education (Education) provided, as of August 31, 2009,
the state's $154 million allocation for IDEA Part B, of which
$4,091,882 had been reimbursed to local education agencies (LEA).
Colorado was awarded about $111 million in funding for Title I, Part A,
of the ESEA, of which $278,962 had been reimbursed to LEAs as of August
31, 2009.
CDOT Projects Are Under Way with 41 Contracts Awarded and 36 of 92
Planned Projects Located in Economically Distressed Areas:
The Recovery Act apportions funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through existing Federal-Aid Highway
Program mechanisms and states must follow the requirements of the
existing program including planning, environmental review, contracting,
and other requirements. However, the federal fund share of highway
infrastructure investment projects under the Recovery Act is as much as
100 percent, while the federal share under the existing Federal-Aid
Highway Program is usually 80 percent.
As we previously reported, DOT apportioned $403,924,130 to Colorado in
March 2009 for highway or other eligible projects.[Footnote 35] As of
September 1, 2009, $289,604,854 had been obligated and $16,455,759 had
been reimbursed by FHWA.[Footnote 36] Fifty-six percent of Recovery Act
highway obligations for Colorado have been for pavement improvement
projects. Specifically, over $161 million of the funds obligated for
Colorado projects as of September 1, 2009, is being used for projects
such as reconstructing or rehabilitating deteriorated roads. State
officials told us they selected a large percentage of resurfacing and
other pavement improvement projects because they did not require
extensive environmental clearances, were quick to design, could be
quickly obligated and advertised for bid, could employ people quickly,
and could be completed within 3 years. In addition, about $71.4
million, about 25 percent of Colorado Recovery Act highway obligations,
has been for pavement widening. As of August 31, 2009, CDOT reported
that contracts for 41 of the 92 planned Recovery Act projects had been
awarded, 37 of these were under construction, and construction was
completed on 3 projects.[Footnote 37]
Figure 2: Highway Obligations for Colorado by Project Improvement Type
as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (86 percent, $248.3 million): Pavement
improvement ($161.3 million): 56%; Pavement widening ($71.4 million):
25%; New road construction ($15.7 million): 5%.
Bridge projects total (7 percent, $19.3 million): Bridge replacement
($19.3 million): 7%.
Other (8 percent, $21.9 million):
Other ($21.9 million): 8%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
The Recovery Act directs states to prioritize projects in economically
distressed areas and CDOT is planning to complete a total of about 36
Recovery Act projects in such areas.[Footnote 38] However, as we
reported in July 2009, selecting projects in economically distressed
areas was not initially one of CDOT's top priorities when CDOT and its
local partners began planning in anticipation of the Recovery Act in
December 2008, before the Recovery Act was passed. Figure 3 shows
planned projects by county and by economically distressed county.
Figure 3: Planned Recovery Act Highway Projects in Colorado by County:
[Refer to PDF for image: map]
This map of the state of Colorado shows the location, by county, of
each planned Recovery Act Highway Infrastructure project. Economically
distressed counties are shaded in gray.
Additionally, the following are depicted on the map: CDOT project;
Transportation Management Area project; CDOT/Transportation Management
Area project.
Source: GAO analysis of CDOT data.
Note: Data points exceed total planned projects because two planned
projects have more than one location.
[End of figure]
As of August 31, 2009, Colorado had awarded contracts at a total value
of $39,360,281 less than the engineers' estimates, according to CDOT
officials. CDOT officials reported that bids for 32 of the 41 awarded
Recovery Act projects had come in lower than the engineers' estimates.
CDOT officials told us that the low bids are due to the economic
recession--since many contractors are in need of work, they are
submitting lower bids. FHWA has been deobligating funds as a result of
contracts being awarded for less than originally estimated. CDOT plans
to use these savings for additional projects, including projects in
economically distressed areas of the state. In September 2009, CDOT
will present a list of potential additional projects to the
Transportation Commission, including potential projects in economically
distressed areas.
Colorado Continues to Spend Recovery Act Funding for IDEA Part B:
The Recovery Act provided supplemental funding for programs authorized
by Part B of IDEA, the major federal statute that supports the
provisions of early intervention and special education and related
services for children and youth with disabilities. Part B funds
programs that ensure preschool and school-age children with
disabilities access to a free and appropriate public education and is
divided into two separate grants--Part B grants to states (for school-
age children) and Part B preschool grants (section 619). Education
provided the first half of Colorado's $154 million IDEA Recovery Act
allocation for Part B grants on April 1, 2009, under Colorado's
existing application.[Footnote 39] Education released the second half
of these funds to Colorado on August 31, 2009. As of August 31, 2009,
Colorado had reimbursed $4,091,882 in Part B funds for school-age
children to LEAs.
Colorado Continues to Spend Elementary and Secondary Education Act
Funds Allocated for ESEA Title I, Part A and Received Waivers from Some
Spending Requirements:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through ESEA Title I, Part A. The Recovery Act
requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of the funds by September 30, 2010.[Footnote 40] Education is
advising LEAs to use the funds in ways that will build the agencies'
long-term capacity to serve disadvantaged youth, such as through
providing professional development to teachers. In addition, there are
requirements related to the amount of ESEA Title I, Part A funds that
LEAs must spend on various services, such as public school choice-
related transportation and supplemental educational services.[Footnote
41] Education made the first half of Colorado's $111 million ESEA Title
I, Part A Recovery Act allocation available on April 1, 2009, under the
state's ESEA consolidated application and the second half on August 31,
2009. Each LEA submits individual applications to the Colorado
Department of Education to access its Title I, Part A funds. As of
August 31, 2009, Colorado had reimbursed $278,962 in ESEA Title I, Part
A funds to LEAs.
Colorado has received four waivers from Education from some of the
spending requirements associated with ESEA Title I, Part A Recovery Act
funds. In July 2009, the Colorado Department of Education requested
waivers from some of these spending requirements to provide LEAs with
more flexibility in spending Recovery Act funds.
On August 11, 2009, the Colorado Department of Education received
approval from Education for the following waivers for which LEAs can
apply to the state:
* Waiver of the requirement for LEAs to spend an amount equal to 20
percent of their fiscal year 2009 ESEA Title I, Part A, Subpart 2 funds
for public school choice-related transportation and supplemental
educational services;[Footnote 42]
* Waiver of the requirement for LEAs identified for improvement
[Footnote 43] to spend 10 percent of their fiscal year 2009 ESEA Title
I, Part A, Subpart 2 funds on professional development;[Footnote 44]
* Waiver of professional development spending requirements for schools
that are identified for improvement. Like LEAs, schools in improvement
are also required to spend 10 percent of their fiscal year 2009 ESEA
Title I, Part A funds on professional development;[Footnote 45] and:
* Waiver of inclusion of some or all of ESEA Title I, Part A Recovery
Act funds in calculating the per-pupil amount for supplemental
educational services.[Footnote 46] An agency's allocation would be
doubled with ESEA Title I, Part A Recovery Act funds, which would
therefore increase the amount the state would have to spend for
supplemental educational services on each student. This waiver allows
Recovery Act funds to be excluded from the per-pupil calculations for 1
year.
While Education approved these waivers for Colorado, each LEA must
individually apply for the waivers to the Colorado Department of
Education, which plans to review each LEA's request to ensure that the
LEA provides all the information required by Education. There are
several different assurances that LEAs must agree to, such as assuring
that they will comply with statutory and regulatory obligations for the
funds; use the funds freed up by the waiver to address needs identified
based on data, such as statewide or formative assessment results; and
comply with all of their other ESEA Title I, Part A funds or amend
their existing applications to reflect the strategies they intend to
use to address those needs. As of August 31, 2009, the Colorado
Department of Education had received 39 applications for waivers, as
follows:
* Twelve requests to waive the requirement that LEAs spend an amount
equal to 20 percent for school choice-transportation and supplemental
educational services;
* Nine requests to waive the requirement that LEAs identified for
improvement spend 10 percent for professional development;
* Eight requests to waive the requirement that schools identified for
improvement spend 10 percent for professional development; and:
* Ten requests to waive the requirement that LEAs include some or all
of the ESEA Title I, Part A Recovery Act funds in calculating the per-
pupil amount for supplemental educational services.
According to Education guidance, the Colorado Department of Education
may not deny a request from an LEA to implement the waiver if the LEA's
request includes all of the required information and meets all
conditions on the Colorado Department of Education's waiver.
Colorado Is Concerned about Funding Availability to Meet the
Accountability and Transparency Functions of the Recovery Act:
State officials have identified the need to pay for central
administrative activities, such as reporting on and auditing Recovery
Act programs, to help ensure that Recovery Act funds are spent in an
accountable and transparent way. States do not generally recover
central administrative costs upfront, but instead are reimbursed for
such expenses after they are incurred. OMB's May 11, 2009, guidance
allows each state to recover central administrative costs associated
with Recovery Act activities. As a follow up to this guidance, the
federal Division of Cost Allocation (DCA) within the Department of
Health and Human Services issued a set of frequently asked questions on
how states should prepare an addendum to their cost allocation plans to
recover these central administrative costs. Colorado's Controller has
developed such an addendum, but has, in conjunction with several other
controllers and the National Association of State Auditors,
Comptrollers, and Treasurers (NASACT), identified what they consider
several difficulties in implementing the OMB and DCA guidance. On
August 7, 2009, NASACT sent a letter to OMB requesting that OMB waive
certain depreciation and cost allocation methods for Recovery Act
funds. According to Colorado officials, however, OMB has recently
stated that each state will have to submit its individual waiver
request.
Colorado officials are concerned that the state does not have the
necessary resources to oversee the state's use of Recovery Act funds in
addition to its normal government activities. In particular, officials
believe budget and staffing cuts facing the government will affect the
state's ability to fill vacant positions needed to conduct functions
related to the oversight of Recovery Act funds. Colorado officials have
identified two primary functions related to Recovery Act funds that are
conducted by central state offices that do not receive direct Recovery
Act funding to pay for those functions. These two functions include
oversight of the state's Recovery Act activities, including developing
a centralized reporting process to meet Recovery Act reporting
requirements, and auditing Recovery Act spending. According to state
officials, several state offices are involved in overseeing the state's
management and use of Recovery Act funds and for ensuring the overall
accountability and transparency of the state's processes through
reporting on its Recovery Act activities. These offices include the
Governor's Recovery Office; Office of Information Technology; the
Office of State Planning and Budgeting; the Department of Personnel and
Administration (DPA), which houses the Office of the State Controller
and the State Purchasing Office; the Office of the Treasurer; and
others. State officials have estimated that they will need an
additional $1.8 million in fiscal year 2010 to pay for this oversight.
In addition, the State Auditor is responsible for conducting
independent financial and performance audits of state funds, including
Recovery Act funds, spent by the state's agencies, colleges, and
universities, and is also responsible for performing the state's Single
Audit, which reviews programs that spend federal funds in excess of a
certain amount. As we reported in July 2009, the State Auditor believes
the audit workload related to the Recovery Act for fiscal year 2009 is
manageable. However, the State Auditor is concerned that her office
will require advance funding in fiscal year 2010 to award contracts for
the additional audit work related to the Recovery Act. The bulk of
Recovery Act funds will be spent in fiscal years 2010 and 2011, and the
State Auditor has estimated that it will cost an additional $446,000 in
fiscal year 2010 to cover the increased audit costs related to the
Recovery Act.
OMB released guidance on May 11, 2009, allowing states to use existing
processes under OMB Circular A-87 to recover costs related to central
administrative services and limiting the amount recovered to 0.5
percent of the total Recovery Act funds received by the state.[Footnote
47] OMB Circular A-87 requires states to submit a statewide cost
allocation plan that identifies and assigns central administrative
costs to activities or programs that receive the benefits of the
central activities, using a consistent cost allocation basis.[Footnote
48] On July 2, 2009, DCA issued a set of frequently asked questions to
provide guidance to states on how to prepare an addendum to state cost
allocation plans under the OMB memo. The addendum to the cost
allocation plan must be approved by DCA.
Colorado submitted an addendum to its cost allocation plan to DCA on
August 13, 2009, but the State Controller is concerned that certain
difficulties will delay the approval of the plan and therefore delay
the state's recovery of the funds needed to pay for activities
conducted by central state offices, including oversight of the state's
reporting to meet Recovery Act requirements and auditing of Recovery
Act programs. The Controller has identified three areas in which
Colorado may have difficulties getting its cost allocation plan
approved in a timely manner, as follows:
* Cost allocation method. Colorado officials believe that the
activities conducted by central state offices related to Recovery Act
requirements benefit all Recovery Act programs. Therefore, the state's
cost allocation plan allocates central oversight and related
administrative costs based on the ratio of state agency Recovery Act
funds received to the total Recovery Act funds received by the state,
rather than varying the allocation depending on how much a program
benefits from the central service. According to the Controller, this
allocation method meets the requirements of OMB Circular A-87 to
allocate costs to benefiting activities, but he is unsure whether DCA
agrees and believes it may delay the approval of Colorado's plan.
* Time to approve the state's plan. According to Colorado's Controller,
DCA has informed states that it will try to review individual cost
allocation plans on a case-by-case basis within 60 days of their
submission rather than approve a model cost allocation plan upfront
that would allow states to start recovering central administrative
costs now. The Controller is concerned that this case-by-case review
could cause delays in approving Colorado's cost allocation plan.
According to the Controller, states cannot start recovering funds until
their statewide cost allocation plans and subsequent state agency plans
are approved. Once Recovery Act funds are spent, states cannot recoup
central administrative costs; therefore, any delay hinders the state's
ability to recoup costs.
* Cash flow. The Controller said that the state needs a pool of funding
from which to pay for central administrative costs prior to recouping
costs. However, the state does not have such a pool of cash available
[Footnote 49] and it is the Controller's understanding that the
existing processes outlined in OMB's May 11, 2009, guidance will not
allow the state to recover central administrative costs before the
costs are incurred. The Controller has proposed "borrowing" funds from
the government services portion of the SFSF funds to pay for these
central administrative costs, but the state has not heard from
Education whether this is an allowable use of those funds. The borrowed
funds would be repaid when the oversight costs are recovered from the
Recovery Act grants. According to state officials, the state has set
aside these SFSF funds in case they are needed for borrowing to cover
central administrative costs.
On August 7, 2009, NASACT sent a letter to OMB requesting a waiver for
two A-87 requirements regarding (1) certain depreciation methods and
(2) requirements for cost allocation in accordance with relative
benefits received. According to NASACT, the waiver is necessary to
implement the cost recovery guidance in a timely manner. However,
according to Colorado officials, OMB has recently stated that each
state should submit a letter requesting a waiver. The state has not yet
submitted this letter; the State Controller said that he is awaiting an
OMB response on the concepts included in the NASACT letter before he
sends the request.
Colorado Has Developed Guidance for Recovery Act Procurement and Will
Use a New Contract Management System to Track Recovery Act Contracts:
The Colorado state government has begun awarding numerous contracts
funded with Recovery Act dollars in various program areas such as
Highway Infrastructure Investment and the Weatherization Assistance
Program. To facilitate the timely and efficient management of Recovery
Act contracts, various Colorado government officials have taken several
steps since passage of the Recovery Act. First, state officials
informed us that legislation was enacted permitting a waiver of
procurement code requirements to the extent the waiver is necessary to
expedite the use of Recovery Act funds in a transparent and accountable
way or to the extent strict adherence to the code would substantially
impede Colorado's ability to spend the money in a manner or within the
time required by the Recovery Act.[Footnote 50] Second, the Director of
the State Purchasing Office provided procurement guidance to state
agencies regarding the use of funds received under the Recovery Act.
The State Purchasing Office has delegated different levels of authority
for contracting to state agencies, such as the Colorado Department of
Labor and Employment, Governor's Energy Office, and IHEs, depending on
their management capacity to handle contracting responsibilities.
Third, the Executive Director of DPA analyzed state agency personnel
needs to facilitate Recovery Act implementation in the areas of
purchasing, accounting, contracts, and risk mitigation. Finally, the
State Controller is using a new Contract Management System designed to
facilitate centralized data collection and reporting on all state
contracts to separately track and report on contracts funded with
Recovery Act dollars.
To begin assessing Colorado's management of Recovery Act funds carried
out by contractors, we selected five contracts for initial review. They
consist of two Highway Infrastructure contracts awarded by CDOT, two
Weatherization Assistance Program contracts awarded by the Governor's
Energy Office, and one contract awarded by the Governor. We reviewed
contract documentation, interviewed selected contract awarding and
oversight officials, and visited one transportation site and two
weatherization sites where project work was ongoing. We examined
guidance developed by the Director of the State Purchasing Office that
was provided to state agencies regarding their use of funds received
under the Recovery Act. We also interviewed state officials involved in
developing (1) 2009 legislation allowing waivers of established
procurement requirements, (2) the state's new Contract Management
System, and (3) the state's analysis of projected staffing shortfalls.
Colorado Recovery Act Procurement Waiver Has Not Yet Been Used:
State officials informed us that on May 20, 2009, the state enacted
legislation establishing a process for waiving state procurement
requirements if funding for a procurement action includes money
received under the Recovery Act. According to state officials, the
procurement waiver had not yet been used as of September 14, 2009, nor
had any agencies requested use of the waiver. According to a state
legal official familiar with development of the legislation, there was
no specific aspect of the procurement code that the legislature
believed needed revision, but the legislature wanted to provide a
"safety valve" in case the state encountered any procurement
impediments to spending Recovery Act funds. They did not want Colorado
to lose Recovery funds because procurement or contracting provisions
prevented their expenditure within Recovery Act required time frames.
In order to ensure that any procurement waiver did not compromise
transparency or accountability, state officials said that they built
controls into the waiver. Waiver requests must be in response to a
clear need; made in writing by the agency's executive director; made
public on the state's Web site; and reviewed and approved by the
Executive Director of DPA and the Colorado Attorney General.
Furthermore, officials told us that such requests cannot be used to
waive an entire process; rather, the written request for a waiver must
describe the new process that will be followed and the way in which
strict compliance with the procurement code is unworkable. According to
state officials, the basis for requesting a procurement waiver could be
very broad (e.g., to shorten procurement time frames by a couple of
days) but the methods by which to apply for a waiver and have it
approved are tight.
Colorado Developed Additional Procurement Guidance for State Agencies:
In June 2009, the Director of DPA's State Purchasing Office developed
and provided to state agencies procurement guidance regarding the use
of Recovery Act funds. Updated in August 2009, this guidance reiterates
the goals of the Recovery Act, lists planning principles that agencies
should follow to award Recovery Act contracts and grants, specifies
requirements for evaluating and awarding contracts and grants, and
identifies supplemental contract clauses specific to the Recovery Act
that are now required in Recovery Act contracts. The Colorado guidance
restates a number of the goals of the Recovery Act including the
preservation and creation of jobs and promotion of economic recovery,
and the investment in transportation, environmental protection, and
other infrastructure that will provide long-term economic benefits. It
also states that agencies that award Recovery Act contracts and grants
obtain maximum competition; minimize vendors' cost, schedule, and
performance risks; and ensure that an adequate number of sufficiently-
trained staff are available to plan, evaluate, award, and monitor
contracts and grants. The guidance specifically discourages agencies
from using noncompetitive (e.g., sole source) procurements, unless
fully justified.[Footnote 51] In addition, the guidance states that, to
the maximum extent practicable, Recovery Act contracts should be
awarded as fixed price contracts. It also addresses detailed state
reporting requirements established in Section 1512 of the Recovery Act
as well as the Buy American and prevailing wage requirements.
On August 21, 2009, the State Controller's office issued Recovery Act
Supplemental Provisions for Contractors who receive Recovery Act funds.
The office also provided guidance to agencies and IHEs on how these
supplemental provisions should be used with existing contracts, grants,
and purchase orders and with new Recovery Act contracts, grants, and
purchase orders, and how agencies and IHEs should address new guidance
on reporting issued by OMB.
Procurement Requirements Have Created Staffing Shortages at State
Agencies, According to State Officials:
Procurement requirements associated with Recovery Act contracts and
grants have created staffing shortages at some Colorado agencies,
according to officials. On April 28, 2009, DPA reported on the results
of a survey it conducted of the personnel needs necessary to facilitate
implementation of the Recovery Act in the areas of purchasing,
accounting, contracts, and risk mitigation. The survey involved DPA as
well as the Governor's Energy Office, Department of Local Affairs, and
Colorado Department of Education. These three agencies were surveyed
because DPA expects a significant increase above the normal level of
contracts that the agencies--with DPA assistance--will award, given the
increase in Recovery Act funds and the agencies' limited delegations of
procurement authority.
The results of the survey indicated that, altogether, DPA and the other
three agencies need a total of 16 staff at an estimated total annual
cost of almost $1.1 million to handle the increase in purchasing and
contract administration and oversight expected with the influx of
Recovery Act funding. Specifically, the survey found that DPA needs a
total of six staff, including three in purchasing and three in
contracts; the Governor's Energy Office needs a total of eight staff,
including three in purchasing, three in accounting, and two attorneys
to negotiate and assist in monitoring contracts; the Department of
Local Affairs needs an internal auditor to assist with risk mitigation;
and the Colorado Department of Education needs one purchasing agent. In
addition, the Colorado Department of Education indicated that it
submitted a separate request for one accountant and one accounting
technician. According to a budget official, the results of this survey
have not been approved through the state's budget process and therefore
are estimated needs.
On August 27, 2009, DPA officials informed us that the specific
analysis cited above had not been updated but that personnel needs
associated with Recovery Act work were now being addressed through the
Controller's statewide cost allocation plan. The Director of the State
Purchasing Office said that some agencies such as the Governor's Energy
Office and Department of Local Affairs have some administrative funding
available that is being used to pay for this staffing. For example, he
said that the Governor's Energy Office is using administrative funds to
hire employees on a "temporary" basis. In contrast, the Controller
pointed out that the state's central agencies such as DPA currently do
not have any funding for such purposes and are awaiting approval of the
state's cost allocation plan. In addition, the Office of the State
Controller does not have any Recovery Act administrative funding
available and therefore cannot fill two current vacancies that are
directly related to Recovery Act oversight.
Agencies Plan to Use Colorado's New Centralized Contract Management
System to Track Recovery Act Contracts:
On July 1, 2009, Colorado implemented a new statewide Contract
Management System, which is being used to track all state contracts,
including those for Recovery Act activities and funds. Contracting
officials in DPA said that from 1994 until June 30, 2009, Colorado used
a decentralized data collection system embedded within the state's
Colorado Financial Reporting System (COFRS) to monitor and report on
contracts. They described this system as being decentralized with each
state agency tracking contract data separately. For example, Colorado's
IHEs each conducted contract monitoring and reporting independently
while other agencies used Microsoft Access or Excel spreadsheets to
track their contracts. Contracting officials said that in 2007, the
Colorado legislature called for a new contracts database and that when
the state received Recovery Act funds in 2009, state officials decided
to use the state's new system to gather data on those contracts.
Contracting officials said that all agencies and IHEs are required to
report all contract and grant information into the Contract Management
System regardless of dollar value or purpose. They stated that the new
system generally involves eight steps: (1) determination of a need for
a contract, (2) application of the procurement process, (3) contract
creation, (4) contract negotiation, (5) contract review and approval,
(6) contract monitoring, (7) contract payments, and (8) contract
closeout. Officials in the Colorado State Purchasing Office also stated
that they are primarily responsible, in most cases, for the first five
steps of the procurement process leading to the award of contracts
subject to the state procurement code. Once a contract is awarded,
primary responsibility for contract administration, or the final three
steps of the process, rests with the agency program staff. Contracting
officials told us that they are now providing training on the Contract
Management System to about 200 employees at agencies and IHEs who are
involved in contract administration.
Colorado's Recovery Act Contracts Reflect Diverse Situations:
Colorado has already awarded a number of Recovery Act contracts for a
variety of programs and these contracts reflect diverse needs and
contracting situations. In each case, we reviewed the contract and
discussed it with officials, as follows:
* Johnson Village North Project. On May 6, 2009, CDOT awarded the
Johnson Village North project contract to conduct work in support of
the Highway Infrastructure Investment program. The contract has a total
value of $5.2 million with a project start date of July 13, 2009, and a
projected completion date of October 23, 2009. The contract was awarded
to repave 12.6 miles of mountainous highway and includes work related
to curbs, gutters, signs, and traffic control. According to the CDOT
awarding official, the contract was awarded competitively following
CDOT's contracting procedures; five bidders submitted sealed proposals
and CDOT selected the low bid, which was 23 percent lower than the
agency's estimate for the work. The official told us that the work was
awarded using a fixed unit price contract. The contract includes a
provision for the contractor to provide information to the state to
meet its Recovery Act reporting requirements, according to an agency
official. The official said that contract oversight personnel were
assigned before the contract was awarded and that oversight would be
performed in accordance with CDOT project administration standards. A
project engineer as well as inspectors and materials testers will
oversee the project and measure compliance with the contract
specifications before providing contractor payments.
* C-470 Project. On May 27, 2009, CDOT awarded the C-470 project
contract to conduct work in support of the Highway Infrastructure
Investment program. The contract has a total value of $25.8 million
with a project start date of July 9, 2009, and a projected completion
date of August 15, 2010. The contract was awarded to remove existing
asphalt pavement patches, remove and replace concrete slab, seal
concrete pavement cracks, and conduct asphalt overlay and guardrail
construction on highway C-470 in the Denver metropolitan area.
According to the CDOT awarding official, the contract was awarded
competitively following CDOT's contracting procedures; seven bidders
submitted sealed proposals and CDOT selected the lowest bid, which was
15 percent lower than the agency's estimate for the work. The official
told us that the work was awarded using a fixed unit price contract.
Like the Johnson Village North project, the official stated that the
contract includes a provision for the contractor to provide information
to the state to meet its Recovery Act reporting requirements. The
official said that contract oversight personnel were assigned before
the contract was awarded and that oversight would be performed in
accordance with CDOT project administration standards. A project
engineer as well as inspectors and materials testers will oversee the
project and measure compliance with the contract specifications before
providing contractor payments.
* Arapahoe County Weatherization Division. On April 17, 2009, the
Governor's Energy Office awarded a contract for support of the
Weatherization Assistance Program to the Arapahoe County Weatherization
Division. This contract has a total value of $2.9 million with a
project start date of July 1, 2009, and a projected completion date of
June 30, 2010. The contract was awarded as a fixed price contract. It
provides for weatherizing 641 housing units at a cost of $4,562.52 per
unit. According to officials from the Governor's Energy Office, the
contract was not competitively awarded because it is considered a grant
agreement and such agreements with local administering agencies, such
as Arapahoe County, are not subject to the state's procurement code and
thus not required to be awarded competitively. The contracts were
competitively awarded to Arapahoe County and other local administering
agencies in 1997 but have not been competed since this time, according
to officials. However, beginning in fiscal year 2011, officials from
the Governor's Energy Office told us that they are planning on
competing future contracts for weatherization services. They also
stated that the Arapahoe County contract did not contain a provision
for the contractor to provide information to the state to meet its
Recovery Act reporting requirements, according to an official from the
Governor's Energy Office, but will be modified to incorporate such
requirements. Arapahoe County officials told us that inspectors conduct
oversight of weatherization work through a final inspection process
that follows completion of work at each housing unit. In addition, the
Governor's Energy Office annually inspects a minimum of 5 percent of
all housing units.
* Housing Resources of Western Colorado. On April 28, 2009, the
Governor's Energy Office awarded a contract for support of the
Weatherization Assistance Program to Housing Resources of Western
Colorado. This contract has a total value of almost $1.3 million with a
project start date of July 1, 2009, and a projected completion date of
June 30, 2010. The contract was awarded as a fixed price contract. It
provides for weatherizing 325 housing units at a cost of $3,913.60 per
unit. The contract calls for the installation of weatherization
measures, such as insulating homes, correcting air leaks, repairing
windows and doors, and purchasing energy-efficient appliances. Like
Arapahoe County, the contract was not competitively awarded but will be
competed starting in fiscal year 2011, according to state officials.
The contract did not contain a provision for the contractor to provide
information to the state to meet its Recovery Act reporting
requirements, but will be modified to incorporate such requirements,
according to an official from the Governor's Energy Office. Also
similar to Arapahoe County, inspectors from Housing Resources of
Western Colorado conduct oversight of weatherization work following
completion of work at each housing unit and the Governor's Energy
Office annually inspects a minimum of 5 percent of all housing units.
* Governor's legal services contract. On April 2, 2009, the Governor of
Colorado entered into a contract with an international law firm to
represent the Governor's Office in analyzing the Recovery Act. More
specifically, a state official said that the law firm agreed to help
the Governor and his representatives complete the certifications
required in the Recovery Act in order for Colorado to receive and
distribute its full share of Recovery Act funds in the most transparent
and efficient manner possible. In addition, according to this official,
the firm waived its standard practice of requiring a retainer and
agreed to provide the services of three attorneys at an hourly rate
discounted from its standard rate for attorneys. According to state
officials, this contract was not competitively awarded because the
state's procurement requirements contain an exception for elected
officials to use sole-source contracts.
Colorado Plans to Report Centrally but Unresolved Issues May Affect Its
Ability to Report Recovery Act Data to OMB in a Complete and Timely
Manner:
Colorado Recovery officials are planning to use centralized reporting
to meet Recovery Act reporting requirements. Section 1512 of the
Recovery Act requires that, no later than 10 days after the end of each
calendar quarter, every entity that received Recovery Act funds from a
federal agency report on those funds. This reporting requirement
applies to any entity, including states that received Recovery Act
funds directly from the federal government and includes funds received
through a grant, loan, or contract.[Footnote 52] This report must
include:
* the total amount of Recovery Act funds received from that federal
agency;
* the amount of Recovery Act funds expended or obligated to projects or
activities;
* a detailed list of all projects or activities for which Recovery Act
funds were expended or obligated, including the name and description of
each project or activity; an evaluation of the completion status of
each project or activity, and an estimate of the number of jobs created
and retained by each project or activity; and certain other information
for infrastructure investments made by state and local governments;
and:
* certain detailed information on any subcontracts or subgrants awarded
by the recipient, including information required to comply with the
Federal Funding Accountability and Transparency Act of 2006.[Footnote
53]
The first deadline for these reports is October 10, 2009.
To ensure that the Section 1512 reporting requirements are carried out,
OMB issued guidance on June 22, 2009, describing how recipients and
subrecipients of Recovery Act funds are to report on their use of those
funds.[Footnote 54] Generally, prime recipients--nonfederal entities
that receive Recovery Act funds from federal agencies--are to submit
information to [hyperlink, http://www.federalreporting.gov], an online
portal that will collect Recovery Act information. Subrecipients--any
nonfederal entity that is responsible for program requirements and
spends federal funds awarded by a prime recipient--may or may not be
delegated reporting responsibility by a prime recipient. The June
guidance also identified the data elements to be reported, including
project description and status, expenditure amount, and job narrative
and number. These data elements were updated by OMB in August 2009 and
include almost 100 items.
While Colorado Recovery officials determined that a centralized process
provides more control and ability to prevent duplicate reporting than
the alternate decentralized process described in OMB guidance,
unresolved issues with the processes and procedures being developed and
their integration with OMB's online portal may affect the completeness
and timeliness of the state's report. Unresolved issues include being
able to upload consolidated data to OMB and completing the development
and testing of the elements that will be used in the centralized
process to collect data from grant recipients, including the
compilation of jobs data. We discussed these issues with officials in
the Recovery Office and the Controller's office and with officials in
several state agencies who will be responsible for implementing the
reporting procedures being developed.
Colorado Is Developing a Centralized Process for Reporting Recovery Act
Data to OMB:
Colorado is planning on centrally reporting Recovery Act data to OMB
rather than having state recipients and subrecipients report to
[hyperlink, http://www.federalreporting.gov] individually. Colorado
officials believe that a centralized process is necessary to oversee
data collection, improve data quality, ensure completeness, and prevent
duplication of data. In addition, a centralized process allows the
state to capture data and report on its own Recovery Web site. Because
of the numerous state agencies involved, potentially large numbers of
Recovery Act projects, and many data elements that must be reported to
OMB, state officials believe that creating a process to collect and
report most of the data through a central location would increase the
overall reliability of the data. To emphasize the importance of the
process, the Governor's Recovery Office assigned a staff member to
focus on Recovery Act reporting requirements and coordinate the
activities of the different offices providing reporting information to
ensure reporting occurs as required by OMB.
To report centrally, Colorado's Controller and the Governor's Office of
Information Technology are developing new processes and procedures that
will collect Recovery Act data to report to OMB. The State Controller
issued a series of three alerts in May, July, and August 2009
explaining the state's policies and accounting and reporting
requirements, defining prime recipients and subrecipients from the
state perspective, and directing state agencies to use the centralized
process.[Footnote 55] The alerts set up a coding structure in the
state's accounting system to track Recovery Act funds awarded to, and
expended by, state agencies and external subrecipients that receive
Recovery Act funds from the state agencies. The most recent alert
describes how the state's new Contract Management System will be used
to input Recovery Act nonfinancial information, such as jobs created or
retained and subrecipient's congressional district. According to state
officials, they had to develop new capabilities in the Contract
Management System to capture and report Recovery Act data. As shown in
figure 4, the state will gather agencies' financial data from the
state's accounting system, COFRS, and nonfinancial data from the
state's Contract Management System, and consolidate the data in the
state's Financial Data Warehouse (FDW).[Footnote 56] Data for agencies
that do not use COFRS as their primary system, such as CDOT and IHEs,
will be collected separately in the warehouse. Data on jobs will be
gathered by prime recipients from all state agencies for vendors and
subrecipients using manually prepared summary documents.
Figure 4: Colorado's Planned Process for Reporting Recovery Act Data to
OMB:
[Refer to PDF for image: illustration]
This chart shows the flow of information from state agencies using the
COFRS accounting system as their primary system and state agencies,
such as IHEs and CDOT, that do not use COFRS as their primary
accounting system.
State agencies using COFRS:
Job information:
Contract Management System–nonfinancial information; COFRS–financial
information;
Process flow to: Colorado‘s Financial Data Warehouse.
State agencies not using COFRS (IHEs, CDOT): Job information:
Collect financial and nonfinancial information;
Process flow to: Colorado‘s Financial Data Warehouse.
From Colorado‘s Financial Data Warehouse, to: [hyperlink,
http://www.federalreporting.gov]; then to: [hyperlink,
http://www.recovery.gov].
Source: GAO analysis of state information.
Note: State agencies can act as either a recipient or an internal
recipient of Recovery Act funds. Job information is gathered and
submitted by the primary recipients.
[End of figure]
Once the state's Recovery Act data are gathered centrally, the state
plans to upload the data to [hyperlink,
http://www.federalreporting.gov]. State agencies are responsible for
reviewing and verifying their information once it is compiled and
reported by the state. OMB's June 22, 2009, guidance provided a
timeline for agencies to review their data and make any necessary
corrections. For the first cycle, recipient reports are due by October
10, 2009, state corrections can be made from October 11 through October
21, and corrections from federal agency reviews can be made from
October 22 through October 29. Final reports will be posted on the
[hyperlink, http://www.recovery.gov] Web site on October 30, 2009. To
prepare state agencies for reporting, officials with the Governor's
Recovery Office and the Controller's office have been meeting with
state agencies to provide briefings and answer questions specific to
each agency on what their roles and responsibilities will be relative
to reporting data and reviewing the data on the Web site.
Colorado's centralized reporting process does not apply to local
entities that receive Recovery Act funds directly from federal
agencies, which is explained in the Controller's alerts. According to
state officials, the state has no authority over local entities, such
as RTD and other transit agencies, that receive Recovery Act funds
directly from federal agencies rather than through a state agency. The
state cannot dictate the reporting of such entities, but it is expected
that the local entities will report directly to OMB.
Colorado Faces Challenges in Developing Its Reporting Process and
Unresolved Issues May Affect Colorado's Ability to Report during the
Recovery Act's First Quarterly Reporting Cycle:
Colorado officials face two primary challenges in developing the
state's process to consolidate and report the necessary Recovery Act
information to OMB, which may limit the state's ability to ensure the
completeness and timeliness of the reported information. First, state
officials are working to resolve certain security control issues
related to the uploading of Colorado's data to [hyperlink,
http://www.federalreporting.gov], and second, Colorado's plan for
submitting data to OMB is in the process of being developed and tested.
Colorado officials are working on security control issues that must be
resolved before the state will be able to upload agency data to OMB's
Web site. According to OMB's June 22, 2009, guidance, part of the
security measures require recipients to register on the OMB Web site to
be able to submit and review the information. To do this, the
recipients must be registered in the federal government's Central
Contractor Registration (CCR) database and must also have a Dun and
Bradstreet (DUNS) number.[Footnote 57] A users' guide posted on
[hyperlink, http://www.recovery.gov] identifies various steps that the
state will have to take before it will be able to upload the state
agencies' Recovery Act information.[Footnote 58] Based on the user
guide, the Controller has informed the state agencies of the actions
they must take immediately for the state to be able to meet OMB's
reporting deadline. These actions include updating their DUNS and CCR
information on the respective Web sites. Of particular importance is
updating the CCR information for each agency's point of contact.
According to the user guide, the agency points of contact will have to
provide authorization on [hyperlink, http://www.federalreporting.gov]
before the state can report all grant award information associated with
the DUNS numbers for the respective agencies. Without the authorization
from the points of contact, the state will not be able to upload the
data. To further that process, the Controller has instructed all state
agencies to identify all awards of Recovery Act funds so that an
inventory of applicable DUNS numbers can be compiled. The inventory is
critical for the identification of all authorizations that must be
obtained from the points of contact.
According to state officials, they have learned that other states
planning to do centralized reporting have also identified significant
limitations with the security design of the [hyperlink,
http://www.federalreporting.gov] Web site. According to Colorado
officials, the Recovery Accountability and Transparency Board has
proposed an enhancement to the system that would address many of the
states' centralized reporting concerns. The main feature of the
enhancements is that the state could more easily upload its data by
making one data submission without the currently required multiple
points of contact authorization. State officials did not have
information on any milestones for the enhancements that are being
developed. State officials said that they plan to use the new process
for uploading data, but will proceed with the actions they are
currently taking to report centrally as a backup strategy for reporting
should the board's proposed uploading process not be available.
In addition to security challenges, Colorado's process for centralized
reporting involves new codes, reports, and programs to gather the
information necessary to meet OMB's requirements and not all elements
of the process have been fully developed or tested. Testing of the
process is ongoing, as is development of various data formats and data
accumulation media. For example, the formats for inputting the
nonfinancial information into the Contract Management System and for
compiling and uploading the information from the FDW to the OMB Web
site have not been finalized. In addition, revisions will need to be
made to the process state agencies had planned to use to review their
data because of changes to the OMB Web site announced by the Recovery
Accountability and Transparency Board on September 14, 2009. Colorado
officials initially told us that for the first quarterly reporting
cycle, the state agencies could review their data on [hyperlink,
http://www.recovery.gov]. The data were expected to be available on
October 11, 2009. However, according to the September 14 announcement,
all data will now be displayed on October 30, 2009, which, according to
state officials, will not allow state agencies to review their data as
planned. Because of the change, the Controller's office is now working
to develop the capability for agencies to review their Recovery Act
financial data in FDW and nonfinancial data in the Contract Management
System before it is submitted to [hyperlink,
http://www.federalreporting.gov\. The Controller stated that he is
uncertain whether his office has the resources to accomplish that task.
Finally, because testing of Colorado's system is ongoing, it is
uncertain whether the state will be able to report its data as
scheduled. The Controller has set October 7, 2009, as the date the
state's information will be uploaded to OMB. Until testing is
completed, the Controller's office will not know how much time will be
required to consolidate the data after the end of the month and whether
there will be sufficient time before October 7, 2009, to consolidate
all of the data.
Colorado's Comments on this Summary:
We provided officials in the Colorado Governor's Recovery Office, as
well as other pertinent state officials, with a draft of this appendix
for comment. State officials agreed with this summary of Colorado's
Recovery efforts to date. The officials provided technical comments,
which were incorporated into the appendix, as appropriate.
GAO Contacts:
Robin M. Nazzaro, (202) 512-3841 or nazzaror@gao.gov:
Brian Lepore, (202) 512-4523 or leporeb@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Paul Begnaud, Steve Gaty,
Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer Leone, Tony Padilla,
Kathleen Richardson, Lesley Rinner, and Mary Welch made significant
contributions to this report.
[End of section]
Footnotes for Appendix III:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] GAO, Recovery Act: States' and Localities' Current and Planned Uses
of Funds While Facing Fiscal Stresses (Colorado), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[3] OMB memorandum, M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities (Washington, D.C., May
11, 2009).
[4] 2009 Colo. Legis. Serv. Ch. 285 (S.B. 09-297) (West).
[5] The use of Recovery Act funds must comply with specific program
requirements but also, in some cases, enables states to free up state
funds to address their projected budget shortfalls.
[6] FMAP is discussed in detail in [hyperlink,
http://www.gao.gov/products/GAO-09-1016].
[7] Programs that were not part of this budget-balancing plan were (1)
K-12 education, which the Governor identified as protected by the
Colorado Constitution, and (2) CDOT and the Colorado Department of
Labor and Employment, which receive no general fund monies. Budget cuts
were in addition to actions taken prior to the start of fiscal year
2010 to reduce the budget, such as instituting four furlough days for
nonessential state employees, transferring funds from cash funds to the
general fund, using $45 million of the SFSF funds to balance the
budget, and reducing the statutory reserve from 4 percent to 2 percent.
[8] Revenue forecasts are from the Legislative Council's June 22, 2009,
forecast.
[9] Colorado Senate Joint Resolution 09-044, adopted in May 2009.
[10] In cutting the budget, the Governor's budget office cited
statutory authority that authorizes the Governor to suspend or
discontinue, in whole or in part, the functions or services of any
department, board, bureau, or agency of the state government during any
fiscal period when there are not sufficient revenues available for
expenditures.
[11] According to a state official, this reduction will not cause the
state funding to drop below the state maintenance-of-effort level
required for K-12.
[12] The state has allocated funds to LEAs for 2010, but according to
Colorado officials, they have not yet spent SFSF funds.
[13] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment Program and the
Capital Investment Grant Program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment Program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant Program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[14] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[15] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[16] The federal share under the existing formula grant program is
generally 80 percent.
[17] CDOT's Transit Unit manages the state's nonurbanized Transit
Capital Assistance formula programs in rural areas with populations
less than 50,000.
[18] For the Transit Capital Assistance Program, DOT has interpreted
the term "obligation of funds" to mean the federal government's
commitment to pay for the federal share of the project. This commitment
occurs at the time the federal government signs a grant agreement.
[19] RTD also received $18.6 million in Recovery Act funds transferred
from FHWA to FTA through DOT's flexible funding provisions. Flexible
funds are legislatively-specified funds that may be used either for
highway or transit purposes. The Denver Regional Council of Governments
(DRCOG, the Denver area's large Metropolitan Planning Organization)
requested this transfer. FTA has obligated 100 percent of these funds;
the $18.6 million will be used to provide partial funding for Denver
Union Station, a $500 million multi-modal transit hub. In particular,
the funds will be used to pay for a part of the design and construction
of bus bays at Denver Union Station.
[20] FTA has not obligated funds for the $2.2 million project to buy
buses and other vehicles. CDOT officials stated that they expect to
submit the project to FTA by December 30, 2009; FTA officials stated
that they expect to obligate funds for this project by March 5, 2010.
[21] Pub. L. No. 111-32, § 1202, 123 Stat. 1859, 1908 (June 24, 2009).
[22] The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507),
requires that each state, local government, or nonprofit organization
that expends $500,000 or more a year in federal awards must have a
Single Audit conducted for that year subject to applicable
requirements, which are generally set out in OMB Circular No. A-133,
Audits of States, Local Governments and Non-profit Organizations (June
27, 2003). If an entity expends federal awards under only one federal
program, the entity may elect to have an audit of that program.
[23] The requirements for reviews of Urbanized Area Formula Grant
activities are contained in 49 U.S.C 5307(i) and consist of reviewing
grantees' compliance with federal requirements in 23 areas. This
process is described in a recent GAO report, GAO, Public
Transportation: FTA's Triennial Review Program Has Improved, but
Assessments of Grantees' Performance Could Be Enhanced, GAO-09-603
(Washington, D.C.: June 30, 2009).
[24] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[25] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[26] In our last Recovery Act report, GAO-09-830SP, we reported that
officials from the Governor's Energy Office were concerned about a
potential delay in DOE's approval of their weatherization plan.
According to these officials, DOE had told Colorado that they were
planning to approve Colorado's plan on July 1, 2009, the same day that
some of the Governor's Energy Office's contracts with local
administering agencies were scheduled to begin. While DOE was delayed
in approving Colorado's plan, officials from the Governor's Energy
Office told us that the delay did not affect weatherization activities
in Colorado and that they were able to move forward with contracts
based on the award amount even though the plan was not yet approved.
[27] State officials told us that the contracts between the Governor's
Energy Office and the local administering agencies are considered grant
contracts and are therefore not subject to the procurement code nor do
they need to be competed. The local administering agencies follow their
own procurement processes to award contracts to local contractors.
[28] Arapahoe County does not plan to hire any contractors to conduct
Recovery Act weatherization work; rather, they plan to have contractors
conduct weatherization work using other sources of weatherization
funding.
[29] Housing Resources of Western Colorado currently uses a contractor
to conduct some administrative activities. In the past, Housing
Resources of Western Colorado contracted with another agency to conduct
weatherization work in Southwestern Colorado. However, the Governor's
Energy Office is contracting with a new local administering agency to
conduct weatherization activities in that area of the state.
[30] As we reported previously in July 2009, when the Governor's Energy
Office first learned that they would be receiving an influx of
weatherization funds from the Recovery Act and began developing its
state plan for spending the funds, officials from the office talked to
the local administering agencies to determine how much weatherization
funding the agencies believed they could reasonably spend. In 2008,
Colorado received almost $5.5 million from DOE for the weatherization
program, compared to almost $80 million allocated under the Recovery
Act, and officials from the Governor's Energy Office recognized that
not all agencies may be equipped to handle the resulting influx of
funds. In compiling the numbers from the agencies, officials at the
Governor's Energy Office determined that there was a gap between
available Recovery Act funds and the amount of work the agencies
believed they could deliver, so the office initiated two new requests
for applications and has awarded contracts to two new agencies to fill
in the gaps to conduct weatherization work in certain regions of the
state.
[31] In selecting a subgrantee, grantees are to give preference to any
agency that has or is currently administering an effective program, as
defined in regulation. 10 C.F.R. § 440.15(a)(3). When scoring local
administering agencies' applications for weatherization contracts, the
Governor's Energy Office plans to give a 15-point bonus to all agencies
in good standing.
[32] The Governor's Energy Office directed all of the local
administering agencies to complete the Labor weatherization survey. The
two agencies we visited told us that they completed the survey.
[33] Davis-Bacon Act prevailing wage requirements do not apply to local
government employees. 29 C.F.R. § 5.2 (h); see also Department of Labor
Advisory Letter to Department of Energy, dated June 1, 2009.
[34] According to officials, because there was no weatherization wage
rate before the Davis-Bacon Act weatherization wage rates were
released, Housing Resources of Western Colorado paid weatherization
workers the Davis-Bacon Act labor wage rate in the interim.
[35] This does not include obligations associated with $18.6 million of
apportioned funds that were transferred from FHWA to FTA for transit
projects. Generally, FHWA has authority pursuant to 23 U.S.C. §
104(k)(1) to transfer funds made available for transit projects to FTA.
[36] DOT has interpreted the term "obligation of funds" to mean the
federal government's contractual commitment to pay for the federal
share of the project. This commitment occurs at the time the federal
government signs a project agreement. States request reimbursement from
FHWA as the state makes payments to contractors working on approved
projects.
[37] CDOT initially planned 92 projects, but plans to present new
projects to the Transportation Commission later in September; at that
time it will remove 1 project from the list of certified projects and
may add more.
[38] Economically distressed areas are defined by the Public Works and
Economic Development Act of 1965, as amended (42 U.S.C. § 3161).
According to this act, to qualify as an economically distressed area,
the area must (1) have a per capita income of 80 percent or less of the
national average; (2) have an unemployment rate that is, for the most
recent 24-month period for which data are available, at least 1 percent
greater than the national average unemployment rate; or (3) be an area
the Secretary of Commerce determines has experienced or is about to
experience a "special need" arising from actual or threatened severe
unemployment or economic adjustment problems resulting from severe
short-term or long-term changes in economic conditions. GAO recommended
in our July 2009 report that the Secretary of Transportation develop
clear guidance on identifying and giving priority to economically
distressed areas.
[39] During our second bimonthly review of Recovery Act spending in
Colorado, we reviewed IDEA Part C, which we did not review during this
cycle.
[40] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver,
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[41] Schools that have missed academic achievement targets for 3
consecutive years must offer students public school choice or
supplemental educational services, which are additional academic
services, such as tutoring or remediation, designed to increase the
academic achievement of students.
[42] 20 U.S.C. § 6316(b)(10).
[43] An LEA is identified for improvement if it has missed academic
achievement targets for 2 consecutive years.
[44] 20 U.S.C. § 6316(c)(7)(A)(iii).
[45] 20 U.S.C. § 6316(b)(3)(A)(iii).
[46] Under ESEA, the amount that an LEA provides for supplemental
educational services for each child is the lesser of the amount of: the
agency's Title I, Part A, Subpart 2 allocation divided by the number of
children below the poverty level in the LEA or the actual costs of the
supplemental educational services received by the child. 20 U.S.C. §
6316(e)(6).
[47] OMB Circular A-87 establishes a choice of two methodologies states
may use to reimburse state recipients for central administrative costs
and provide a uniform approach for determining costs and promote
effective program delivery and efficiency.
[48] A statewide cost allocation plan identifies, accumulates, and
allocates costs incurred by agencies or develops billing rates based on
the allowable costs of services provided by a governmental unit to its
departments and agencies. The costs of these services may be allocated
or billed to benefiting agencies.
[49] According to the Controller, the state legislature must approve
any uses of the state's statutory reserve and the legislature is not in
session until January 2010; similarly, the state can borrow funds from
its pool of investment funds, but cannot do so without guarantee of
repayment.
[50] 2009 Colo. Legis. Serv. Ch. 285 (SB09-297) (West).
[51] According to Colorado's Recovery Act procurement guidance, in
those circumstances where an agency determines that it must use a
noncompetitive contract, the agency must fully justify this action and
provide evidence in the contract file that appropriate action has been
taken to protect the taxpayer. Procurement officials stated that use of
a noncompetitive contract must also be approved by officials in
Colorado's Recovery Office.
[52] This reporting requirement does not apply to individuals.
[53] Pub. L. No. 109-282, 120 Stat. 1186 (Sept. 26, 2006).
[54] OMB memorandum, M-09-21, Implementing Guidance for the Reports on
Use of Funds Pursuant to the American Recovery and Reinvestment Act of
2009 (Washington, D.C., June 22, 2009).
[55] Office of the State Controller, Alert #184, Coding Requirements
Established for Recovery Act Monies, Compensated Absences Liability,
and Electronic Funds Transfers for Employee Reimbursements, May 13,
2009; Alert #185, Recovery Act Funds-Schedule of Expenditures of
Federal Awards Reporting Requirements, New Recovery Act Grant Tracking
Requirements, Recovery Act Oversight Costs: Recent Guidance from Health
and Human Services Division of Cost Allocation, Revised Fiscal Rule 5-
1: Travel Effective July 1, 2009, Electronic Funds Transfer Travel
Reimbursement COFRS Programming Changed on July 6, 2009, Lease-Purchase
Threshold Increased with Passage of HB09-1218, Office of State
Controller Staffing Changes, July 10, 2009; and Alert #186, Recovery
Act Policies and Additional Recovery Act Grant Tracking Requirements,
August 4, 2009.
[56] FDW is a Web-based reporting tool that allows the state's users to
pull data on a daily basis.
[57] A DUNS number is a unique number that identifies businesses,
including government agencies.
[58] Recovery Accountability and Transparency Board, ARRA In-bound
Recipient Reporting FederalReporting.gov Recipient Point of Contact/
DUNS Administrator User Guide-Registration and Next Steps Version 1.0
(undated).
[End of section]
Appendix IV: District of Columbia:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of the American Recovery and Reinvestment Act (Recovery
Act)[Footnote 1] spending in the District of Columbia (District). The
full report on all of our work in 16 states and the District is
available at [hyperlink, http://www.gao.gov/recovery/].
In the District, we reviewed three Recovery Act programs funded by the
U.S. Department of Education (Education), and the Transit Capital
Assistance program funded by the U.S. Department of Transportation's
Federal Transit Administration (FTA). These programs were selected
primarily because they include existing programs receiving significant
amounts of Recovery Act funds. In addition, Education has designated
the District's Office of the State Superintendent for Education (OSSE)
as a high-risk grantee, for weaknesses related to financial management
and grants management for several of the programs receiving Recovery
Act funds. Further, the Transit Capital Assistance funds had a
September 1, 2009, deadline for obligating a portion of the funds, and
also provided an opportunity to review nonstate entities that receive
Recovery Act funds. We also reviewed contracting procedures and
examined four contracts awarded with Recovery Act funds--two for
highway infrastructure projects, and two for public housing projects--
to examine how District agencies were implementing the Recovery Act.
Consistent with the purposes of the Recovery Act, funds from the
programs we reviewed are being directed to help the District stabilize
its budget and to stimulate infrastructure development and expand
existing programs--thereby providing needed services and potentially
jobs. We focused on how funds were being used; how safeguards were
being implemented, including those related to procurement of goods and
services; and how the District plans to meet the Recovery Act reporting
requirements. The funds include the following:
* U.S. Department of Education (Education) State Fiscal Stabilization
Fund: As of August 28, 2009, Education had awarded the District about
$65.3 million of the District's total Education State Fiscal
Stabilization Fund (SFSF) allocation of about $89.3 million. As of
September 1, 2009, the District had not allocated any of these funds to
local education agencies (LEA). An OSSE official told us that the
District plans to submit a revised SFSF application to Education that
proposes increasing the percentage of SFSF funds to school districts to
restore the District's fiscal year 2010 funding for elementary and
secondary education to the fiscal year 2008 funding level.
* Title I, Part A, of the Elementary and Secondary Education Act of
1965 (ESEA): Education allocated about $37.6 million in Recovery Act
funds to the District to be used to help improve teaching, learning,
and academic achievement for students from families that live in
poverty. As of September 1, 2009, the District had made preliminary
allocations of $33.8 million to LEAs, which have not drawn down these
funds. The remaining $3.8 million was set aside for school recognition
financial awards, school improvement, and administration.
* Individuals with Disabilities Education Act (IDEA), Parts B and C:
Education allocated about $18.8 million to the District to be used to
support early intervention, special education, and related services for
infants, toddlers, children, and youth with disabilities. As of
September 1, 2009, the District has made preliminary allocations of the
$16.7 million in IDEA Part B funds to LEAs, which had not yet drawn
down these funds. The remaining $2.1 million are IDEA Part C funds that
had not been allocated as of September 1, 2009.
* Transit Capital Assistance Program: FTA apportioned $214.6 million of
Recovery Act Transit Capital Assistance funding to the National Capital
Region, which consists of Washington, D.C., and surrounding counties in
Maryland and Virginia. As of September 1, 2009, FTA had obligated
almost 100 percent of the apportioned funds for transit projects in the
DC/Maryland/Virginia Urbanized Area. The Washington Metropolitan Area
Transit Authority (WMATA), the National Capital Region's largest
recipient of Recovery Act Transit Capital Assistance funding, was
apportioned $201.8 million in grants that it plans to use to fund
capital projects, such as equipment purchases, station upgrades, and
purchases of buses and vans.
* Highway Infrastructure Investment Funds: The U.S. Department of
Transportation's Federal Highway Administration (FHWA) apportioned $124
million to the District in March 2009 for highway infrastructure and
other eligible projects. As of September 1, 2009, $115.7 million had
been obligated. The District Department of Transportation (DDOT) is
using its apportioned funds for 15 "shovel ready" projects to repave
streets and interstates, rehabilitate bridges, improve and replace
sidewalks and roadways, and expand the city's bike-share program. We
selected one contract and one task order for two ongoing projects to
discuss in greater depth with the relevant agency contracting
officials. The task order was for a streetlight upgrade on Dalecarlia
Parkway, Northwest Washington D.C., and the contract was for sidewalk
repair at various locations in the District.
* Public Housing Capital Fund: The U.S. Department of Housing and Urban
Development (HUD) has allocated $27 million to the District of Columbia
Housing Authority (DCHA). DCHA plans to use the Recovery Act funds on
18 projects that include the rehabilitation of nearly 2,000 housing
units and the installation of new energy-efficient projects at public
housing facilities. As of September 3, 2009, 9 of the projects were
underway. We selected two contracts to discuss in greater depth with
the relevant agency contracting officials. The first contract we
reviewed was for balcony repairs at the Greenleaf Gardens public
housing community, and the second contract we reviewed was for kitchen
and bathroom upgrades at the Benning Terrace public housing community.
Recovery Act Funds Have Helped the District Close Its Budget Gap:
The infusion of Recovery Act funds has helped mitigate the negative
effects of the recession on the District's budget. On June 22, 2009,
the District revised its revenue projections downward for fiscal year
2009 and subsequent years.[Footnote 2] As a result, the District faced
a $190 million projected revenue shortfall for fiscal year 2009, and a
$150 million projected shortfall for fiscal year 2010. Since fiscal
year 2009 was nearly three-quarters completed at the time of the June
2009 revenue revision, District officials decided that it was too late
to attempt to increase revenues by increasing taxes or fees. District
officials decided to make up the $190 million gap with funds from its
general fund balance.[Footnote 3] For fiscal year 2010, the District
eliminated its $150 million budget gap through a combination of savings
from reduced spending by District agencies, using $36 million in
Recovery Act SFSF funds, as well as funds from the District's general
fund, and new revenue proposals, as discussed below.
To balance its fiscal year 2010 budget, the District will eliminate 250
full-time equivalent positions through a combination of layoffs and
attrition. In addition, the chancellor of the District of Columbia
Public Schools (DCPS) recently announced that an unspecified number of
teachers would be laid off as a result of a funding shortfall in the
District's fiscal year 2010 education budget. District officials noted
that without the Recovery Act funds, job cuts would have been much
larger. For example, according to District officials, hundreds of
additional teaching positions would have been eliminated without the
Recovery Act funds.
In addition to the expenditure reductions and additional Recovery Act
funding, the District enacted the Budget Support Emergency Act of 2009,
which included a sales tax increase, along with increased taxes on
gasoline and cigarettes, to help close its 2010 budget gap. The Act
also postponed the increase in income tax deduction levels, which
should result in increased revenue to the District. District officials
told us that they decided not to use the District's Rainy Day fund to
close its budget gaps because by law if the Rainy Day funds are used
they must be paid back in full over the following 2 years--with one
half of the funds being repaid in the first year and the remainder of
the funds repaid in the second year. According to the District's Chief
of Budget Execution, District officials decided to use a combination of
spending reductions, general fund balance, and some revenue proposals
to help close the budget gaps for fiscal years 2009 and 2010, instead
of tapping the Rainy Day fund. The District has had to prepare for the
effects of the drop-off in Recovery Act funds beginning in fiscal year
2011, because, officials explained, the District is required by law to
maintain a 5-year balanced budget. As a result, District officials have
fully accounted for the future decrease in Recovery Act funds in
budgets for fiscal years 2011 to 2013.
District officials have been working with the U.S. Department of Health
and Human Services (HHS) to develop a cost-allocation plan for
reimbursement of Recovery Act central administrative costs, based on
OMB's guidance. Once the plan is completed, the District will apply for
reimbursement of allowable Recovery Act administrative costs.
Allocation of Recovery Act Education Funds and Distribution of Guidance
to LEAs Are in Early Stages:
Education has allocated Recovery Act funds to the District for three
programs--SFSF, ESEA Title I, and IDEA, as discussed in the following
sections.
The District Plans to Use Additional SFSF Funds to Help Address
Shortfalls in Funding for Elementary and Secondary Education:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHE). The initial award of SFSF
funding required each state to submit an application to Education that
provides several assurances, including that the state will meet
maintenance-of-effort requirements (or the state will be able to comply
with waiver provisions) and that it will implement strategies to meet
certain educational requirements, such as increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
On June 16, 2009, Education approved the District's application for
SFSF funds and as of August 28, 2009, Education had awarded the
District $49 million in education stabilization funds out of a total
SFSF allocation of $73.1 million.[Footnote 4] Due to unanticipated
shortfalls in the District's projected revenue for fiscal year 2010,
OSSE plans to modify its SFSF application to allocate a larger
percentage of SFSF funds to restore the District's fiscal year 2010
funding for elementary and secondary education to the fiscal year 2008
funding level. The approved SFSF application included $17.9 million to
restore the level of the District's support for elementary and
secondary education in fiscal year 2009 to fiscal year 2008 levels, and
indicated that no SFSF funds would be needed to restore District
funding for fiscal year 2010.[Footnote 5] In addition, the District had
initially allocated 20 percent of the government services fund for
elementary and secondary education; however, an OSSE official told us
that OSSE anticipates that the District will allocate an additional 40
percent of the government services fund for this purpose (for a total
of 60 percent of the funds).[Footnote 6] OSSE has not yet provided
guidance to LEAs on the use of SFSF funding.
OSSE Has Made Preliminary Allocations of ESEA Title I Recovery Act
Funds to LEAs:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through Title I, Part A of the Elementary and
Secondary Education Act (ESEA) of 1965. The Recovery Act requires these
additional funds to be distributed through states to LEAs using
existing federal funding formulas, which target funds based on such
factors as high concentrations of students from families living in
poverty. In using the funds, LEAs are required to comply with current
statutory and regulatory requirements and must obligate 85 percent of
the funds by September 30, 2010.[Footnote 7] Education is advising LEAs
to use the funds in ways that will build the agencies' long-term
capacity to serve disadvantaged youth, such as through providing
professional development to teachers. Education made the first half of
states' Recovery Act ESEA Title I, Part A funding available on April 1,
2009, and announced on September 4, 2009, that it had made the second
half available.
As of September 4, 2009, the District had received $37.6 million in
ESEA Title I Recovery Act funds, and OSSE had allocated $33.8 million
across 51 of its 58 LEAs, with the largest LEA, the District of
Columbia Public Schools (DCPS), receiving $23.4 million.[Footnote 8]
The District plans to use the remaining funds as follows--$1.9 million
for school recognition financial awards, $1.5 million for school
improvement activities, and $400,000 for state administration. Before
any ESEA Title I Recovery Act funds are distributed, OSSE requires LEAs
to submit an application that describes how the funds will be used and
provide assurances that the uses will comply with the Recovery Act.
According to OSSE officials, all LEAs that are eligible to receive ESEA
Title I Recovery Act funds have submitted their assurances regarding
the management, use, and reporting of ESEA Title I Recovery Act funds.
On September 11, 2009, OSSE distributed the applications for the LEAs
to describe their specific plans for expenditures of ESEA Title I
Recovery Act funds. OSSE officials told us that while the LEAs could
obligate ESEA Title I Recovery Act funds and expend their own funds
without an approved plan, LEAs could not submit receipts for
reimbursement until OSSE approved the LEAs' individual plans for
expenditures. An OSSE official noted that some LEAs have ESEA Title I
carry over funds from prior years that should be expended by the LEAs
before the funds expire on September 30, 2009, and prior to expending
any new ESEA Title I funds, including Recovery Act funds.
OSSE Plans to Offer Additional Training on ESEA Title I Recovery Act
Funds and Has Yet to Determine Monitoring Protocols:
OSSE provided Web-based training sessions in June and July 2009 on
allowable uses of ESEA Title I Recovery Act funds, the purpose and
guiding principles of the Recovery Act education funds, and a brief
introduction to tracking and reporting the funds. According to OSSE
officials, representatives from 28 LEAs participated in the training,
including representatives from the 3 LEAs we visited. Officials from 2
of the LEAs we visited reported that the Web-based training was
informative and useful. OSSE also held a four-day grants-management
training course that included information on Recovery Act fund
management, as well as management of other federal funds. At the
training course, OSSE distributed information packets that included
each LEA's allocation of ESEA Title I Recovery Act funds, as well as
guidance on the appropriate uses of these funds, and information on
tracking and reporting expenditures. Further, an OSSE official told us
that OSSE plans to conduct mandatory Web-based technical assistance on
tracking and reporting ESEA Title I Recovery Act funds in September
2009, and as needed by the LEAs. The official told us that OSSE had
received guidance from Education on tracking jobs created and saved
with Recovery Act funds, however OSSE is still comparing the Education
guidance with the District's internal reporting requirements.
Officials from the LEAs we visited shared their preliminary plans for
using ESEA Title I Recovery Act funds. Officials from all three LEAs we
visited told us that some ESEA Title I Recovery Act funds would be used
for activities to supplement the school day, such as after-school
programs. One of the three LEAs we visited has obligated ESEA Title I
Recovery Act funds. Officials from that LEA told us that the LEA
obligated the funds to hire a consultant to help them target academic
interventions aimed at improving student skills, such as reading and
math skills. According to the LEA officials, the consultant will use
data to determine the effectiveness of interventions on specific
student populations, as well as evaluate the cost-effectiveness of such
actions.
OSSE officials told us that they would finalize their ESEA Title I
monitoring protocols and schedule in September 2009. As of September
11, 2009, OSSE officials had not determined the methodology for
monitoring the LEAs' use of ESEA Title I Recovery Act funds. However,
OSSE officials told us that their monitoring would be partially based
on risk assessments accomplished through their ongoing collection and
review of financial data, such as the rate money has been expended, and
reimbursement requests that OSSE determined were for unallowable or
disallowed expenses.[Footnote 9] In addition, OSSE plans to use the
quarterly reports submitted by the LEAs, as well as information from
other sources--such as audits and past monitoring visits--to complete
their risk assessments. While OSSE has not determined the relevant risk
of the individual charter school LEAs, an OSSE official told us such an
assessment was a priority for OSSE.
Education has designated OSSE as a high-risk grantee due to weaknesses
in financial management and grants management, including ESEA Title I.
On July 31, 2009, OSSE submitted a corrective action plan report to
Education addressing these concerns. The report describes five working
groups and their plans, including time frames, to address findings
concerning financial support services, business support services, grant
allocations, grant monitoring, and grant reporting.
OSSE Made Preliminary Allocations of IDEA Recovery Act Funds to LEAs:
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act
(IDEA), the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities have
access to a free and appropriate public education and is divided into
two separate grants--Part B grants to states (for school-age children)
and Part B preschool grants (section 619). Part C funds programs that
provide early intervention and related services for infants and
toddlers with disabilities, or at risk of developing a disability, and
their families. Education made the first half of states' Recovery Act
IDEA funding available to state agencies on April 1, 2009, and
announced on September 4, 2009, that it had made the second half
available.
OSSE has determined the preliminary IDEA Part B Recovery Act
allocations to the LEAs. However, these preliminary amounts have not
been adjusted in consideration of an August 17, 2009, proposal by
Education to increase the amount state education agencies are allowed
to set aside for administration. The allocated amounts are also
expected to change after enrollment audits are complete. OSSE allocated
about $13.3 million of its federal fiscal year 2009 IDEA Part B
Recovery Act funds to the District's largest LEA, DCPS, which serves
about 64 percent of the District's public school students, and serves
as the IDEA LEA for 17 of the District's charter school LEAs. As of
September 11, 2009, OSSE had not finalized the application the LEAs
must complete describing their specific plans for expenditures of IDEA
Recovery Act funds. An OSSE official told us that while the LEAs could
obligate IDEA Recovery Act funds and expend their own funds, they could
not receive reimbursements until OSSE approved the LEAs' individual
plans for expenditures.
OSSE officials told us that they held Web-based sessions in June and
July 2009, related to IDEA funds in general with limited information on
Recovery Act funds, and on IDEA Recovery Act funds, respectively. While
34 LEAs attended the more general Web-based training, only 5 LEAs
participated in the Web-based guidance session focused on IDEA Recovery
Act funds. This second session included information on the guiding
principles of Recovery Act funds for education, time frames for
accessing and using the funds, and allowable uses of the funds, with
examples. Officials from one LEA we visited told us that they had not
received any information on IDEA Recovery Act funds and had not
participated in any Web-based sessions for these funds, officials from
a second LEA told us that the staff person who may have attended had
since left the LEA, and an official with the third LEA we visited told
us that someone from the LEA had participated.
Education has designated OSSE as a high-risk grantee, for weaknesses
related to financial management and grants management, including IDEA.
OSSE officials noted that Education may hold $500,000 of OSSE's fiscal
year 2009 IDEA, Part B state-level funds, generally used for
administration of IDEA funds. This action was due to noncompliance
found in the fiscal year 2007 single audit. On July 31, 2009, OSSE
submitted a corrective action plan report to Education outlining how it
plans to address the various findings. The report describes five
working groups and their plans, including time frames, to address
findings concerning financial support services, business support
services, grant allocations, grant monitoring, and grant reporting. The
corrective action plan report notes that 33 findings have been resolved
and 169 findings remain unresolved. Many of the findings are long-
standing weaknesses. Nine unresolved issues or areas of concern are
related to OSSE's administration of IDEA Recovery Act funds, including
OSSE's process for determining IDEA allocations across LEAs. OSSE's
initial grant application for its LEAs includes a section with
additional Recovery Act assurances to inform and ensure that the LEAs
will be held accountable for spending these funds appropriately.
OSSE Plans to Safeguard Recovery Act Funds Are in Early Phases:
OSSE plans on holding LEAs accountable for Recovery Act funds by
reviewing all LEA applications for Recovery Act grants for SFSF, ESEA
Title I, and IDEA funds, and by monitoring the use of the funds. An
OSSE official told us that relevant LEA information will be posted to
the agency Web site including LEA allocations and draw down rates. LEAs
must submit grant applications to OSSE in order to request and receive
Recovery Act funds. As part of the applications, an LEA is required to
provide a signed statement that the LEA agrees to take adequate and
appropriate steps to ensure that it has the capacity to comply with the
Recovery Act requirements, as well as administer each Recovery Act
program in accordance with all applicable statutes and regulations. The
grant applications require the LEA to provide OSSE a description of how
the LEA will spend its requested grant funds in accordance with the
requirements and objectives of the Recovery Act. According to OSSE
officials, they plan to review each application and determine if the
LEA's expenditure plan complies with the allowed uses of funds under
the Recovery Act.
OSSE uses its reimbursement tracking system as its principal monitoring
tool to ensure expenditures made using federal grant funds, including
SFSF, ESEA Title I and IDEA funds, are allowable. According to an OSSE
official, the reimbursement tracking system was developed in February
2009, and LEAs began implementing the system in April 2009. The system
is centralized, so OSSE can track all reimbursement requests submitted
by LEAs, and payments made to LEAs. The system allows OSSE to track and
report on expenditures for individual grants, as well as for all OSSE
grants.
An LEA spends its own funds in accordance with its grant application,
after which the LEA submits a reimbursement request to OSSE that
describes what the funds were spent on and how much was spent. OSSE
officials review the reimbursement request and compare it to the LEA's
grant application. If the costs are consistent with the LEA's
expenditure plan, OSSE reimburses the LEA. If the costs are
questionable or they are unallowable based on the application and
Education guidelines, OSSE contacts the LEA to resolve the discrepancy,
and arranges for technical assistance, if needed. Payment to the LEA is
only made after the discrepancy is resolved. If the discrepancy is not
resolved, the LEA will not receive its requested funds.
The reimbursement system is linked to OSSE's subgrantee budget tracking
system, which uses many linked spreadsheets to produce summary reports
of the District LEAs' budget information. It tracks the amount an LEA
has expended and compares it to the LEA's application, budget, and set-
asides.[Footnote 10] By comparing the three factors, OSSE officials
monitor the cash flow of the LEA and provide technical assistance if
warranted. OSSE officials stated that the two systems enable the agency
to gather data on LEA drawdown rates and track LEA reimbursement
requests. OSSE can analyze the data to identify problem areas that LEAs
have in grant funding management. Because the reimbursement system has
only recently been implemented, not enough data have been collected to
analyze LEA performance.
OSSE Is Preparing to Meet Recovery Act Recipient Reporting
Requirements:
OSSE is a prime recipient of Recovery Act funds as defined by OMB's
guidance.[Footnote 11] The Office of the City Administrator (OCA)
provided guidance to all District agency directors that required them
to assign grant managers to each Recovery Act grant. Grant managers are
responsible for ensuring that all required information for the grant,
including data from subrecipients and vendors, is submitted to OCA in
accordance with the Recovery Act Section 1512 recipient reporting
requirements. OSSE officials stated that they had assigned grant
managers to SFSF, ESEA Title I and IDEA grants.
According to an OSSE official, LEAs were provided written guidance
about OMB reporting requirements, as well as the LEAs' responsibilities
for meeting those requirements, during the recent four-day training
course. An OSSE official also told us that OSSE will collect the
required information from LEAs, and then enter the information into the
District's centralized Web-based system. OSSE officials also told us
they were considering other ways in which to measure the impact of the
Recovery Act funds directly on students, as well as indirectly on
parents and the community.
The District's Inspector General Plans to Provide Additional Oversight
of OSSE's IDEA Recovery Act Management Practices:
The District's Office of Inspector General (OIG) fiscal year 2010 audit
and inspection plan, issued August 31, 2009, includes a focus on
Recovery Act spending by District agencies. If resources permit, the
OIG plans to audit the Recovery Act funds appropriated for IDEA. The
objectives would be to determine whether (1) OSSE properly managed and
distributed Recovery Act funds to LEAs and (2) DCPS used Recovery Act
funds for their intended purposes. The OIG is reviewing DCPS' use of
IDEA funds because of the past problems identified in DCPS' handling of
IDEA funds, and to protect the District from incurring disallowed
costs, and subsequently reimbursing the federal government for those
disallowed costs. The OIG also plans to review whether OSSE ensures an
appropriate level of accountability and transparency for OSSE-received
Recovery Act funds.
DC/Maryland/Virginia Urbanized Area Has Met a Key Recovery Act
Obligation Deadline for Transit Projects:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 12] The majority of the public transit
funds, $6.9 billion (82 percent), were apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program.[Footnote 13] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. The Recovery Act funds were
also apportioned to the states under the nonurbanized area formula
grant program using the program's existing formula. Transit Capital
Assistance Program funds may be used for such activities as vehicle
replacements, facilities renovation or construction, preventive
maintenance, and paratransit services. Up to 10 percent of apportioned
Recovery Act funds may also be used for operating expenses.[Footnote
14] Under the Recovery Act, the maximum federal fund share for projects
under the Transit Capital Assistance Program is 100 percent.[Footnote
15]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) will submit to FTA for Recovery Act funding.[Footnote
16] FTA reviews the project sponsors' grant applications to ensure that
projects meet the eligibility requirements and then obligates Recovery
Act funds by approving the grant application. Project sponsors must
follow the requirements of the existing programs, which include
ensuring the projects funded meet all regulations and guidance
pertaining to the Americans with Disabilities Act (ADA), pay a
prevailing wage in accordance with federal Davis-Bacon requirements,
and comply with goals to ensure disadvantaged businesses are not
discriminated against in the awarding of contracts.
Funds appropriated through the Transit Capital Assistance Program must
be used in accordance with Recovery Act requirements. Specifically, 50
percent of Recovery Act funds apportioned to urbanized areas or states
are to be obligated within 180 days of apportionment (before September
1, 2009) and the remaining apportioned funds are to be obligated within
1 year. The Secretary of Transportation is to withdraw and redistribute
to other urbanized areas or states any amount that is not obligated
within these time frames.[Footnote 17]
FTA apportioned $214.6 million in Transit Capital Assistance program
funds to the National Capital Region in March 2009. The National
Capital Region includes transit agencies serving the District and
surrounding counties in Maryland and Virginia. The transit agencies
within the region include the Washington Metropolitan Area Transit
Authority (WMATA), the Maryland Transit Administration (MTA), the
Potomac and Rappahannock Transportation Commission (PRTC), the Virginia
Railway Express (VRE), and Fredericksburg Regional Transit (FRED).
According to FTA, as of September 1, 2009, FTA had obligated $213.0
million of the Transit Capital Assistance funds (99.3 percent)
apportioned to the National Capital Region, thus meeting the Recovery
Act requirement that 50 percent of the funds be obligated by September
1, 2009.
WMATA Has Started Awarding Contracts for Recovery Act Transit Projects:
Within the National Capital Region, we focused on WMATA's use of
Recovery Act funds because it was apportioned the largest amount of
Recovery Act transit funding. WMATA operates the second largest rail
transit system, sixth largest bus network, and eighth largest
paratransit network in the United States. As of August 18, 2009, WMATA
was awarded $201.8 million in Recovery Act funds, $182.5 million for
the purchase of 47 buses, 74 vans, and station upgrades, and $17.7
million for rail improvement and equipment purchases.
WMATA Used a New Strategic Prioritization Process to Select Recovery
Act Projects:
WMATA developed a new strategic prioritization process for selecting
projects that met Recovery Act requirements and supported WMATA's
short- term needs and long-term goals. Through this process, WMATA
identified about $530 million in shovel-ready projects. Agency
officials stated that the strategic prioritization process began with
WMATA analyzing over $11 billion worth of capital projects needed to
maintain, expand, and improve WMATA's three transit services--
Metrorail, Metrobus, and MetroAccess paratransit service. To identify
projects for Recovery Act funding, WMATA identified projects that were
ready to start, eligible for federal funding, and could not be
implemented without additional funds. These projects were then refined
and prioritized based on how well they linked to WMATA's five strategic
goals and 12 strategic objectives. The projects selected included the
replacement of WMATA's oldest buses, construction of a new bus body and
paint shop, replacement of the Southeastern bus garage, replacement of
crumbling platforms at select Metrorail stations, purchase of new
communications equipment for the operations control center, and
upgrades to the three oldest Metrorail stations. The following figure
shows the distribution of capital projects for FTA Recovery Act formula
grants by category.
Figure 1: WMATA's Planned Use of Recovery Act Funds:
[Refer to PDF for image: pie-chart]
Maintenance facilities: 33%;
Vehicles and vehicle parts: 20%;
Maintenance and repair equipment: 15%;
Operations systems: 10%;
Passenger facilities: 10%;
Safety and security: 6%;
Information technology: 5%;
Funds for reprogramming: 1%.
Source: GAO analysis based on WMATA data as of August 18, 2009.
Note: According to a WMATA official, some of the funds in the
Operations Systems, Maintenance and Repair Equipment, Passenger
Facilities, Maintenance Facilities, and Vehicles and Vehicle Parts
program categories will be used for safety projects.
[End of figure]
WMATA officials stated that they are in the early stages of
implementing the 30 projects supported with Recovery Act funds, and
have awarded about 70 contracts for Recovery Act funds. According to
WMATA officials, WMATA has begun awarding contracts for the replacement
of the oldest buses with new hybrid/electric buses, expansion and
replacement of the MetroAccess paratransit fleet, and purchase and
reconditioning of emergency tunnel evacuation carts. Since contracts on
these projects were only recently awarded, it is too early to tell
whether the projects are on schedule.
WMATA Is Applying for about $122 Million in Additional Recovery Act
Funding:
WMATA officials stated that they used its new strategic prioritization
process to guide the agency's application for about $122 million in
additional Recovery Act funding in the form of discretionary grants.
WMATA has already been selected to receive $9.6 million in funds over 3
years through the Transit Security Grant Program.[Footnote 18]
According to WMATA officials, the Transit Security Grant funds will be
used to hire 20 full-time officers to form five antiterrorism teams,
fund the purchase of vehicles and specialty equipment and provide
training. Additionally, WMATA officials stated that they are applying
for discretionary grants for the following two programs:
* The Transportation Investments Generating Economic Recovery program
(TIGER):[Footnote 19] WMATA officials stated that they have contributed
to the development of the TIGER grant proposal submitted by the
Washington Council of Governments, which was approved by the
Transportation Planning Board (TPB) on July 15, 2009.[Footnote 20] This
proposal consists of a variety of services and infrastructure
improvements such as a new transit-way, a bike-sharing system, and
enhanced bus service. WMATA officials noted that while some of the
projects within this proposal would aid WMATA-operated services, WMATA
would not directly implement or manage them. WMATA officials added that
they are preparing a separate TIGER grant proposal to request about $90
million in funds for construction of bus facilities that would support
enhanced bus service in the TIGER grant.
* Transit Investments in Greenhouse Gas and Energy Reduction program:
[Footnote 21] WMATA officials stated that they also submitted an
application for $22.4 million that would be used to fund the
installation of more energy-efficient lighting in 50 underground
Metrorail stations and 112 adjacent tunnels, as well as lighting
upgrades in center tracks, platform edges, along escalators, and in
retaining walls. Award announcements for this program are planned for
September 2009.
WMATA has Developed Procedures to Track Recovery Act Funds and Intends
to Use Its Existing System to Meet Recovery Act Reporting Requirements:
According to WMATA officials, they have developed a process to track
funding by project using their existing accounting system. Recovery Act
funds received by WMATA are assigned a unique fund number. WMATA uses
this fund number to identify Recovery Act funding sources to keep
sources segregated. All transactions are tagged with a specific project
identification (ID) code. WMATA officials said they have also developed
a Recovery Act-specific project ID and all payments using Recovery Act
funds are tracked using that ID. A unique project ID is assigned to
each Recovery Act-funded project at inception and is used for
individual transactions as they are processed through WMATA's
accounting system.
WMATA officials stated that they have established a hierarchy of roles
and responsibilities to coordinate management to comply with Recovery
Act objectives. The designation of roles brings together key offices to
manage financial controls covering contract and project spending,
monitoring, and reporting. WMATA designated the agency's Chief
Administrative Officer (CAO) as the overall Recovery Act program
manager. Existing project management and financial reporting processes
remain intact, but are coordinated through the CAO.
According to WMATA officials, the agency should not have a problem in
meeting the recipient reporting requirements under section 1512 of the
Recovery Act, because WMATA has already provided similar information to
the House Committee on Transportation and Infrastructure. At the
Committee's request, WMATA has submitted reports in April, May, June
and July 2009. WMATA officials told us that they have already
established the reporting procedures that will enable the agency to
collect and report the recipient data required by the Recovery Act.
WMATA officials also told us they were considering developing
performance measures that could be used to assess the impact of the
Recovery Act funds.
The District Is Using Existing Contracting and Oversight Procedures for
Recovery Act Highway Funds:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated primarily based on
population, for regional and local use. Highway funds are apportioned
to states through federal-aid highway program mechanisms, and states
must follow the existing program requirements, which include ensuring
the project meets all environmental requirements associated with the
National Environmental Policy Act (NEPA), paying a prevailing wage in
accordance with federal Davis-Bacon Act requirements, complying with
goals to ensure disadvantaged businesses are not discriminated against
in the awarding of construction contracts, and using American-made iron
and steel in accordance with Buy America program requirements. While
the maximum federal fund share of highway infrastructure investment
projects under the existing federal-aid highway program is generally 80
percent, under the Recovery Act it is 100 percent.
The District was apportioned $124 million in March 2009 for highway
infrastructure and other eligible projects. As of September 1, 2009,
$115.7 million had been obligated. The U.S. Department of
Transportation has interpreted the term "obligation of funds" to mean
the federal government's contractual commitment to pay for the federal
share of the project. This commitment occurs at the time the federal
government approves a project and a grant agreement is executed. The
District Department of Transportation (DDOT) is using its apportioned
funds for 15 "shovel ready" projects to repave streets and interstates,
rehabilitate bridges, improve and replace sidewalks and roadways, and
expand the city's bike-share program. Figure 2 shows obligations by the
types of road and bridge improvements being made in the District.
States request reimbursement from FHWA as the state makes payments to
contractors working on approved projects. The first project to be
completed was the repaving of Interstate 395 in the District. As of
September 1, 2009, $556,440 had been reimbursed by FHWA.
Figure 2: Highway Obligations for the District of Columbia by Project
Improvement Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total ($46.8 million): 40%; Bridge projects total
($35.9 million): 31%; Other ($33.1 million): 29%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
According to DDOT's Chief Contracting Officer, no changes have been
made to the contract or financial management processes specifically for
Recovery Act contracts because DDOT officials deemed its existing
processes as suitable to track the use of the funds. According to the
same official, DDOT uses a competitive bid process for awarding highway
contracts. Each bidder's qualifications are reviewed before a contract
is awarded. The review process analyzes information on the bidder's
past contracts, financial information, personnel, equipment, and past
performance history, including checking references and conducting site
visits to the contractor's ongoing projects.
Prior to awarding contracts for projects funded with Recovery Act
funds, DDOT held a prebidding conference with potential bidders that
described the bidding process and additional reporting requirements
mandated by the Recovery Act. DDOT officials have also participated in
a roundtable discussion given by the District's Office of Contracting
and Procurement to discuss Recovery Act projects. DDOT's Chief
Contracting Officer stated that DDOT has seen an increase in bids for
Recovery Act projects, including bids from new contractors, and that
thus far it has accepted the lowest bids for each project.
As discussed in our July 2009 report, DDOT has procedures in place to
track the expenditure of Recovery Act funds.[Footnote 22] According to
DDOT officials, they are using their existing system to track Recovery
Act funds. In addition, DDOT officials assigned unique labels to
Recovery Act funds that tie to Recovery Act--related projects, allowing
DDOT to separately track and identify funds. DDOT's financial
management system is also integrated with FHWA's financial management
system, providing an additional layer of oversight.
We selected one contract and one task order for two ongoing projects to
discuss in greater depth with the relevant agency contracting
officials. See table 1 below for a summary of contract information for
the two projects.
Table 1: Key Information for Two District Highway Projects Reviewed:
Streetlight upgrade on Dalecarlia Parkway, Northwest Washington, D.C.;
Projected cost: $2,182,469;
Project start: April 2009;
Expected completion: January 2010.
Sidewalk repair at various locations in the District; Projected cost:
$3,500,000;
Project start: June 2009;
Expected completion: December 2009.
Source: DDOT.
[End of table]
We reviewed a task order for a streetlight upgrade on Dalecarlia
Parkway, Northwest Washington D.C. A task order was issued on April 13,
2009, for an amount not to exceed $2,182,469. The project started on
April 13, 2009, and is projected to be completed by January 20, 2010.
The task order requires the contractor to furnish all necessary labor,
equipment, materials, and other incidentals for upgrading street lights
on Dalecarlia Parkway and to furnish and install fixtures and cables.
According to DDOT's Chief Contracting Officer, to expedite the project
an order for the work was placed against an existing indefinite
delivery/indefinite quantity (IDIQ) contract, which was awarded
competitively. The Chief Contracting Officer also stated that DDOT
saved money by not having to advertise a new contract and prepare new
contract documents.
The second contract we reviewed was for sidewalk repair at various
locations in the District. A task order for this work was issued on
June 11, 2009, for an amount not to exceed $3,500,000 with a project
start date of June 11, 2009, and a projected completion date of
December 17, 2009. The task order requires the contractor to construct
new sidewalks and replace existing sidewalks in locations to be
determined in the order. According to a DDOT official an existing IDIQ
competitively-awarded contract was modified to expedite the project.
The official also noted that because DDOT had to identify shovel-ready
projects to be funded with Recovery Act money, both projects already
had a design in place which could be easily added to an existing DDOT
IDIQ contract.
According to DDOT officials, both the task order and contract require
the contractor to provide DDOT with information to support the agency's
Recovery Act reporting requirements regarding job creation. As required
by the District's Chief Procurement Officer, DDOT has added specific
clauses in its Recovery Act contracts that describe the specific
Recovery Act reporting requirements, provide the reporting template and
give specific instructions on how to complete the report, and advise
the contractors that GAO and the relevant Inspector General have the
ability to examine the contractors' records and interview the
contractors' employees. According to DDOT officials, the clauses
require the contractor to report the number of direct on-the-project
jobs for its workforce and the workforce of its subcontractors during
the reporting month.
In addition, according to a DDOT official, the agency has standard
procedures for oversight on all contracts. These procedures include
having DDOT personnel or qualified consultants retained by DDOT, or
both, perform regular inspections on each project. After the project
manager receives the schedule for the project and approves it, an
inspection plan is generated. The inspection plan includes site visits
and reviews of materials and personnel being used on the project. DDOT
personnel or qualified consultants are on-site on a daily basis
checking on the status of the project. They are responsible for
generating a daily report that describes the number of tasks completed
that day, and the number of people and types of equipment used on the
project. DDOT personnel or qualified consultants are also required to
verify the reports with the contractor so there will not be any
conflicting views on any issues that may arise. In addition, according
to the same official, the DDOT contracting staff holds regular meetings
with the contractor, where issues and action items are discussed.
The District Is Using Existing Contracting and Oversight Procedures for
Recovery Act Public Housing Capital Funds:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management.[Footnote 23] The Recovery Act
requires the U.S. Department of Housing and Urban Development (HUD) to
allocate $3 billion through the Public Housing Capital Fund to public
housing agencies using the same formula for amounts made available in
fiscal year 2008. Recovery Act requirements specify that public housing
agencies must obligate funds within 1 year of the date on which they
are made available to public housing agencies, expend at least 60
percent of funds within 2 years, and expend 100 percent of the funds
within 3 years. Public housing agencies are expected to give priority
to projects where contracts can be awarded based on bids within 120
days from the date on which the funds are made available, as well as
projects that rehabilitate vacant units, or those already underway or
included in their current required 5-year capital fund plans.
HUD is also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofit investments. In a Notice
of Funding Availability published May 7, 2009, and revised June 3,
2009, HUD outlined four categories of funding for which public housing
agencies could apply:
* creation of energy-efficient communities ($600 million);
* gap financing for projects that are stalled due to financing issues
($200 million);
* public housing transformation ($100 million); and:
* improvements addressing the needs of the elderly or persons with
disabilities ($95 million).
For the creation of energy-efficient communities, applications (which
were due July 21, 2009) were to be rated and ranked according to
criteria outlined in the Notice of Funding Availability. The last three
categories will be threshold-based, meaning applications that meet all
the threshold requirements will be funded in order of receipt. If funds
are available after all applications meeting the thresholds have been
funded, HUD may begin removing thresholds after August 1, 2009, in
order to fund additional applications in the order of receipt until all
funds have been awarded. Applications in these three categories were
accepted until August 18, 2009.
HUD has allocated $27 million to DCHA. As of September 5, 2009, DCHA
had obligated about $5 million or about 19 percent of the $27 million
it received in capital grant funds, and drawn down about $1.5 million
from DCHA's Electronic Line of Credit Control System account with HUD.
DCHA plans to use the Recovery Act funds on 18 projects that include
the rehabilitation of nearly 2,000 housing units and the installation
of new energy-efficient projects at public housing facilities. As of
September 3, 2009, 9 of the projects were underway.
DCHA is using its existing contract-management procedures to monitor
the use of Recovery Act funds.[Footnote 24] According to a DCHA
contracting official, no changes have been made to contract or
financial management processes specifically for Recovery Act contracts
because DCHA believes its existing processes are suitable to monitor
the use of the funds. According to the same official, DCHA uses job-
order contracting to establish a competitive bid process for awarding
housing contracts.[Footnote 25] DCHA officials stated that job-order
contracting procedures minimize unnecessary engineering, design, and
other procurement processes by awarding long-term contracts to
contractors for a wide array of project improvements and renovations.
According to DCHA officials, DCHA currently has 11 job-order contracts
and assesses each of the contractor's qualifications, current workload,
and past performance in order to decide which contractor will be
awarded a job order for each specific Recovery Act project.
As discussed in our July 2009 report, DCHA has procedures in place to
track the expenditure of Recovery Act funds. According to DCHA
officials, its existing accounting system is used to track Recovery Act
funds. DCHA officials stated that Recovery Act funds have an "S" at the
end of their accounting code and can be identified by project number
and task order.
We selected two contracts to discuss in greater depth with the relevant
agency contracting officials. See table 2 below for a summary of
contract information for the two contracts.
Table 2: Key Information for Two Public Housing Capital Projects
Reviewed:
Balcony repairs at Greenleaf Gardens;
Projected cost: $1,259,424;
Project start: March 2009;
Expected completion: November 2009.
Kitchen and bathroom upgrade at Benning Terrace; Projected cost:
$839,798;
Project start: August 2009;
Expected completion: May 2010.
Source: DCHA.
[End of table]
The first contract we reviewed was for balcony repairs at the Greenleaf
Gardens public housing community. The job order was placed on March 27,
2009, for an amount not to exceed $1,259,424. The project started on
March 27, 2009, and is projected to be completed by November 28, 2009.
The job order requires the contractor to repair concrete balconies and
rails, remove and reinstall metal balcony rails, and paint all rails,
walls, ceilings, and floors. According to a DCHA official, the use of
job-order contracting helps expedite the award of the project by
awarding the work as a job order on an existing contract.
The second contract we reviewed was for kitchen and bathroom upgrades
at the Benning Terrace public housing community. The job order was
placed on August 4, 2009, for an amount not to exceed $839,798. The
project started on August 4, 2009, and has a projected completion date
of May 1, 2010. The job order requires the contractor to furnish all
necessary labor, tools, transportation, supervision, material, and
equipment required to renovate 84 kitchens and bathrooms at the Benning
Terrace property.
According to DCHA officials, the agency has already been collecting the
information necessary to meet its Recovery Act reporting requirement
regarding job creation. Specifically, DCHA is already required to
comply with the Section 3 HUD mandate that requires recipients of HUD
funds, to the greatest extent possible, to provide job training,
employment, and contract opportunities for low-or very-low-income
residents in connection with projects and activities in their
neighborhoods. DCHA has been collecting the number of jobs created and
retained by contractors or subcontractors on all projects.
In addition, according to a DCHA official, the agency has standard
procedures for oversight on all contracts. These procedures include
having DCHA contracting personnel perform regular inspections on each
project. Contractors must also file a weekly progress report. DCHA's
project inspectors and the contractors have to agree on the level of
project completion each week and sign a certification document, in
order to ensure there will not be any conflicts about what work has
been completed and appropriate payments are made. In addition,
according to DCHA officials, before projects are started in a
particular housing community, the residents are consulted and continue
to remain involved throughout the life of the project. DCHA also
sometimes hires community residents as project monitors.
The District Has Made Preparations for Meeting Recovery Act Reporting
Requirements:
The Office of the City Administrator (OCA) has taken several actions to
address the recipient reporting requirements in section 1512 of the
Recovery Act.[Footnote 26] OCA has designed a centralized Web-based
system to collect all required data and submit them into
federalreporting.gov, the Web site the federal government established
for recipients to report Recovery Act data. OCA considered two
approaches for meeting the Recovery Act reporting requirements--
developing the software application internally or purchasing a Recovery
Act reporting package offered by several firms. OCA researched six
commercial vendors that provide software to support recipient reporting
data collection. After consulting with senior District officials and
the Office of the Chief Technology Officer (OCTO), OCA officials
decided that developing a recipient reporting system internally would
better ensure accountability and the need for rapid implementation.
Also, OCTO staff had experience in developing similar systems for the
District government. The system is based on an approach the District
has used for several other applications, and is available only to
District officials responsible for Recovery Act funds, at
reporting.dc.gov beginning September 1, 2009.
All District agencies are considered prime recipients for reporting
purposes. On July 23, 2009, OCA issued guidance to all District agency
directors discussing the requirements of Section 1512 and the
responsibilities agencies have regarding the requirements.[Footnote 27]
The guidance defines multiple tiers of accountability and the
responsibilities assigned to each tier. Each tier consists of positions
that are held accountable for recipient reporting data management and
collection or for quality assurance. Specifically, the guidance
instructs agency directors to assign an individual staff member as the
grant manager for each Recovery Act grant award received by the agency.
The grant manager is responsible for day-to-day management of the grant
including submitting required reporting data accurately and within the
deadlines. In addition, the grant manager is responsible for submitting
required information for subrecipients and vendors for that grant.
Grant managers can choose to submit data for subrecipients or delegate
the responsibility to subrecipients to submit data directly. The
guidance instructed all agency directors to either declare that the
agency has not received and does not expect to receive any Recovery Act
funds or provide a list of all Recovery Act grants expected by the
agency, and the identities of all responsible parties.
OCA and OCTO developed a Web-based system to serve as a central
repository for the Recovery Act data the District plans to submit
directly to federalreporting.gov. According to District officials,
setting up its own Web site (reporting.dc.gov) allows OCA to review the
aggregate data before it is submitted to federalreporting.gov. Grant
managers will use the OCA Web site starting September 1, 2009, to enter
all required data as the prime recipient. OCA conducted three Recovery
Act training sessions for grant managers during August 2009 on the
reporting.dc.gov tool and overall expectations for Recovery Act grant
reporting. In addition, OCTO has held several sessions with grant
managers specifically on how to use the reporting.dc.gov tool. The
training included a review of the reporting requirements, key tasks,
and instructions on how to use the new system.
The District plans on testing the system beginning September 1, 2009.
Grant managers will create an account at OCA's Web site and submit
required Recovery Act recipient reporting data through August 31, 2009.
The test will give OCTO a chance to test the system and resolve issues
before the actual reporting date. Grant managers are required to input
the data every month, so reviewers perform quality reviews and detect
errors and omissions as soon as possible, instead of waiting until the
end of a quarter to review the data. OCTO officials stated that they
developed quality and data controls into the system.
Key Efforts to Safeguard the District's Use of Recovery Act Funds Have
Been Delayed or Cutback:
Two key components of the District's oversight efforts to safeguard
Recovery Act funds have encountered delays or cutbacks that could
impede the District's efforts to correct previously identified internal
control weaknesses in programs that are receiving Recovery Act funds.
The District uses the single audit[Footnote 28] to aid in determining
whether the District's internal controls provide reasonable assurances
that there is reliable reporting for federal funds, that accountability
is maintained over assets, and that operations are effective and
efficient. The District's fiscal year 2008 Single Audit was required to
be submitted to the federal government by June 30, 2009; however, as of
September 11, 2009, it had not been completed by the District's
auditors. According to District officials, the fiscal year 2008 Single
Audit was delayed because some District agencies had difficulties in
providing requested documentation to the external auditor to complete
the single audit. The District was granted an extension for completing
the fiscal year 2007 single audit by the Department of Health and Human
Services. However, an Office of Integrity and Oversight (OIO) official
stated that the department did not grant the District an extension for
completing the fiscal year 2008 Single Audit. The official stated that
the District was expecting the extension to be approved as had happened
in previous years. The official stated that the 2008 Single Audit may
be completed in late-September 2009.
In our July 2009 report, we stated that the District relies on Single
Audit findings as a key source of oversight of its agencies. Untimely
single audit reporting deadlines and delays in the completion of single
audit reports make it difficult for the District to resolve material
weaknesses before more federal funds, including Recovery Act funds are
received. Therefore, because the District has not received its single
audit findings, these federal funds are subject to the same material
weaknesses from the previous year and are at risk of mismanagement,
fraud, waste, and abuse. Both the District's past single audits and
District OIG reports have identified numerous internal control
weaknesses in four District programs that are receiving Recovery Act
funds.
The District has also cut back plans to conduct a comprehensive review
of internal controls in all District agencies. In our July 2009 report,
we noted that although the District government and agencies have
various internal controls, the controls are not integrated or included
in a citywide internal control program. Past reports from the OIG have
identified numerous weaknesses in the District's internal controls. In
September 2008, the Office of the Chief Financial Officer (OCFO)
contracted with an independent accounting firm to identify areas in the
office with internal control problems and deficiencies. The District
planned to have the firm expand its review to District agencies after
it completed its OCFO assessment. On August 17, 2009, an OCFO official
informed us that review will be limited to just the OCFO and the firm
will not expand its review to District agencies. The contract expires
at the end of September 2009. According to District officials, funding
concerns prompted the District Council to reduce the length of the
contract, which officials stated is unlikely to be extended. The
official added that the OCFO's new Chief Risk Officer will be
addressing internal control risks by developing an internal control
program for the OCFO.
Both District OIG reports and Single Audit reports have identified
internal control weaknesses. The most recent Single Audit report, for
fiscal year 2007, identified 89 material weaknesses in internal
controls over both financial reporting and compliance with requirements
applicable to major federal programs. There were material weaknesses in
financial reporting found in the District's Medicaid program and DCPS.
The single audit report identified material weaknesses in compliance
with requirements applicable to major federal programs including
Medicaid's Federal Medical Assistance Percentage (FMAP), ESEA Title I
Education grants, and Workforce Investment Act programs, all of which
are receiving Recovery Act funds. The findings were significant enough
to result in a qualified opinion for that section report. Fiscal year
2008 single audit findings were not available to examine at the time of
our review.
The District OIG Plans on Providing Additional Recovery Act Oversight
If Resources Permit:
The District's OIG's fiscal year 2010 audit and inspection plan was
issued on August 31, 2009. The plan focuses on providing additional
oversight on Recovery Act spending at District agencies. The plan
includes audits of the following areas:
* qualifications and background checks for contracting officials;
* Recovery Act funds appropriated for IDEA;
* FMAP increase under the Recovery Act; and:
* DDOT construction contracts awarded under the Recovery Act.
Additionally, the OIG is recommending that the Comprehensive Annual
Financial Report auditors expand their scope to cover spending of
Recovery Act funds by District agencies. The OIG stated that the plans
can only be initiated provided there are adequate resources to support
the work.
District Comments on This Summary:
We provided the Office of the Mayor of the District, the District
agencies for the programs we examined, and WMATA with a draft of this
summary on September 8, 2009. On September 10 and 11, 2009, the Office
of the Mayor, the District agencies, and WMATA provided technical
comments, which we have incorporated where appropriate.
GAO Contact:
William O. Jenkins, Jr., (202) 512-8757 or jenkinswo@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, John Hansen, Assistant
Director; Mark Tremba, analyst-in-charge; Laurel Beedon; Sunny Chang;
Marisol Cruz; Nagla'a El-Hodiri; Linda Miller; Justin Monroe; Melissa
Schermerhorn; and Kathy Smith made major contributions to this report.
[End of section]
Footnotes for Appendix IV:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] The District's fiscal year begins on October 1 and ends on
September 30.
[3] The District's general fund is the fund that is supported by local
revenue, including taxes and nontax revenue. The funds used by the
District to close the budget gap were not dedicated for specific policy
goals or for emergency cash reserves.
[4] As of August 28, 2009, Education had also awarded the District
$16.3 million in SFSF funds for the government services fund.
[5] The District also plans to use about $1.4 million of SFSF funds to
restore funding in fiscal years 2009 and 2010 to its sole IHE, the
University of the District of Columbia. After restoring education
spending through 2011, any remaining education funds will be
distributed across LEAs in accordance with the District's ESEA Title I
funding formula.
[6] The additional 40 percent being allocated to education was
previously designated as "undetermined." The District has not changed
its proposed use of the remaining 40 percent of the government services
fund, which is to assist low-and moderate-income residents with down
payments and closing costs on their first homes.
[7] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A, funds by September 30, 2010, unless granted a waiver,
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[8] Five of the seven LEAs that did not receive ESEA Title I
allocations do not serve children ages 5 to 17, but serve either
preschool-age children or adults. One LEA was eligible for ESEA, Title
I Recovery Act funds but opted out. The other LEA was not eligible,
based on the District's ESEA, Title I eligibility criteria.
[9] According to OSSE officials, some LEA reimbursement requests are
disallowed because the LEA has overspent in a budgetary category.
[10] Set-asides are grant amounts that are held by the LEA to be used
for specific projects, as allowed or required by the federal program.
[11] OMB Memorandum, M-09-21, Implementing Guidance for the Reports on
Use of Funds Pursuant to the American Recovery and Reinvestment Act of
2009 (June 22, 2009).
[12] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[13] Urbanized areas are defined as areas encompassing a population of
not less than 50,000 people that has been defined and designated in the
most recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are defined as areas encompassing a
population of fewer then 50,000 people.
[14] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[15] The federal share under the existing formula grant program is
generally 80 percent.
[16] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and metropolitan planning
organizations designated for the area. MPOs are federally mandated
regional organizations, representing local governments and working in
coordination with state departments of transportation that are
responsible for comprehensive transportation planning and programming
in urbanized areas. MPOs facilitate decision making on regional
transportation issues including major capital investment projects and
priorities. To be eligible for Recovery Act funding, projects must be
included in the region's Transportation Improvement Program (TIP) and
the approved State Transportation Improvement Program (STIP).
[17] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[18] The Recovery Act provided $150 million for the Transit Security
Grant Program.
[19] The Recovery Act appropriated $1.5 billion of discretionary grant
funds to be awarded by the Department of Transportation for capital
investments in surface transportation infrastructure projects. The
Department of Transportation refers to these grants as "Grants for
Transportation Investment Generating Economic Recovery" or "TIGER
Discretionary Grants." According to the National Capital Region's
Transportation Planning Board officials, National Capital Region TIGER
projects, which are developed in conjunction with local jurisdictions,
consist of: (1) K Street Transitway from 9th to 23rd Street, N.W.; (2)
enhanced bus service (example--dedicated bus lanes); (3) a bike-sharing
system; (4) improvements to two Metrorail stations (example--high-speed
elevators) and the creation of one new transit center at the Takoma/
Langley Transit Center; (5) existing and planned managed High Occupancy
Vehicle/High Occupancy Toll lanes; and (6) additional bus priority
treatments across two Potomac River crossings and along three
arterials.
[20] The TPB is the National Capital Region's metropolitan planning
organization. The TPB oversees project selections, including Recovery
Act project selections, through a formal approval process called the
TIP, a 6-year financial program that describes the schedule for
obligating federal funds to state and local projects.
[21] Public transportation agencies are eligible to receive Transit
Investments for Greenhouse Gas and Energy Reduction (TIGGER) Program
grants. TIGGER grants are for projects that either reduce energy
consumption or greenhouse gas emissions through a capital investment.
[22] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[23] Public housing agencies receive money directly from the federal
government (HUD). Funds awarded to the public housing agencies do not
pass through the District's budget.
[24] According to the District's Chief Procurement Officer, DCHA is
exempt from both the District of Columbia Procurement Practices Act of
1985, and the District Office of Contracting and Procurement authority.
[25] A Job Order Contract is a specially designed indefinite quantity
contract that is awarded on a periodic basis to one or more
contractors.
[26] Pub. L. No. 111-5, div A, § 1512, 123 Stat. 115, 287 (Feb. 17,
2009).
[27] Office of the City Administrator memo: ARRA 09-2, Defining
Accountabilities for Implementing the American Recovery and
Reinvestment Act Reporting Requirements (July 23, 2009).
[28] The Single Audit Act, as amended (31 U.S.C. §§ 7501-7507),
requires states, local governments, and nonprofit organizations
expending more than $500,000 in federal awards in a year to obtain an
audit for that year in accordance with the requirements set forth in
the act. A Single Audit consists of (1) an audit and opinions on the
fair presentation of the financial statements and the Schedule of
Expenditures of Federal Awards; (2) gaining an understanding of and
testing internal control over financial reporting and the entity's
compliance with laws, regulations, and contract or grant provisions
that have a direct and material effect on certain federal programs
(i.e., the program requirements); and (3) an audit and an opinion on
compliance with applicable program requirements for certain federal
programs.
[End of section]
Appendix V: Florida:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
spending in Florida.[Footnote 1] The full report covering all of our
work in 16 states and the District of Columbia is available at
[hyperlink, http://www.gao.gov/recovery].
GAO's work focused on three federal programs funded under the Recovery
Act: the Workforce Investment Act (WIA) Youth Program, the
Weatherization Assistance Program, and the Highway Infrastructure
Investment Program. These programs were selected primarily because they
have begun disbursing Recovery Act funds or are existing programs that
are receiving significant amounts of these funds. Specifically, we
selected WIA because a summer youth program was implemented in Florida
this summer with Recovery Act funds. We selected the weatherization
program based on discussions with the Florida Chief Inspector General,
who considers the program high risk; and we selected the Highway
Infrastructure Investment Program because it is one of the largest
programs receiving Recovery Act funds flowing to the state and
localities. Consistent with the purposes of the Recovery Act, funds
from the programs we reviewed are being directed to help Florida and
local governments stabilize their budgets and stimulate infrastructure
development and expand existing programs intended to provide needed
services and jobs.
We conducted site visits at two regional workforce boards for WIA in
Broward and Hillsborough Counties because these boards are among the
largest recipients of Recovery Act WIA dollars in the state and had the
highest numbers of anticipated participants. In these counties we
visited two contractors administering summer youth programs. We
selected two contracts managed by Florida Department of Transportation
(FDOT) district offices located in Lake City in Columbia County and
Chipley in Washington County because they were among the largest dollar
contracts that had been awarded as of July 20, 2009.
The following provides highlights from our review:
WIA Youth Program:
* The state of Florida received almost $43 million for WIA youth
activities under the Recovery Act and set a goal of serving 16,000
youth in 2009 through its WIA summer employment activities for youth
program. As of August 15, 2009, the Agency for Workforce Innovation
estimates that it has expended $22.3 million or 52 percent of its total
and in its July 31, 2009 report to the Department of Labor (Labor) said
it had served 11,902 youth.
* The agency expects to meet its enrollment goal by the end of the
summer program. However, Broward and Hillsborough counties' summer
youth programs overcame several implementation challenges. Both
counties were challenged by recruiting participants under tight time
frames, and other factors, such as screening applicants for
eligibility.
* Broward County and Hillsborough County workforce boards have taken
steps to monitor activities performed with Recovery Act WIA Youth
funds, such as work experience and work-based learning activities.
However, Hillsborough County's on-site monitoring activities for older
participants is limited in comparison to Broward County. Employers and
youth we talked with praised the summer youth programs in Broward and
Hillsborough counties, but data on the extent to which youth achieved
gains in work readiness are not yet available.
Weatherization Assistance Program:
* The Department of Energy (DOE) has allocated about $176 million over
3 years to Florida for the Recovery Act Weatherization Assistance
Program to weatherize over 19,000 homes. On June 18, 2009, DOE had
provided to the state about $88 million, or about half the total fund
allocation. As of August 31, 2009, the Florida Department of Community
Affairs (DCA) had obligated about $4.2 million and expended about $1.1
million of the initial $88 million allocated by DOE.
* Florida has begun using Recovery Act weatherization funds to increase
the capacity of local providers to weatherize homes. Florida is
intending to implement training and internal controls to help ensure
quality and oversight of Recovery Act spending on weatherization.
However, as of August 31, 2009, Florida has not yet started
weatherizing homes.
* Recovery Act funds for weatherization have created jobs in Florida.
State officials still have questions about reporting requirements and
concerns about the required documentation for the Davis-Bacon Act.
Recovery Act funding has created 109 jobs.
Highway Infrastructure Investment:
* The U.S. Department of Transportation's (DOT) Federal Highway
Administration (FHWA) apportioned $1.35 billion in Recovery Act funds
to Florida. As of September 1, 2009, the federal government has
obligated $1 billion, and $196,000 has been reimbursed by FHWA to the
state for payments to contractors.
* While some progress has been made in awarding contracts for statewide
highway projects (25 contracts out of 45 FHWA-approved projects,
totaling $726 million as of August 28, 2009), few contracts have been
awarded by localities (5 contracts out of the 395 FHWA-approved
contracts, totaling $1 million). According to state officials, unlike
the state's funds, which were required to be obligated before June 30,
2009, funds that were suballocated to local agencies were not subject
to the 120-day rule. As a result, the local agencies were given more
time to obligate funds, advertise bids, and award contracts.
* State officials consider current processes and procedures adequate
for highway contract solicitation and management, and the Florida
Department of Transportation districts use consultants to assist with
project monitoring. To report data on jobs created, the Florida
Department of Transportation has developed an automated system, which
was put into operation on May 29, 2009. For the months of June and
July, the Florida Department of Transportation reported to FHWA that a
total of 155 jobs were created as a direct result of Recovery Act-
funded highway projects.
Updated Information on Safeguards and Transparency:
* Florida continues to take steps to provide safeguards and
transparency. State Inspectors General have provided fraud training,
prepared agencies to implement reporting requirements, and assessed
internal controls, among other activities. Florida's Office of Economic
Recovery continues to develop a database to collect Recovery Act data
from state agencies that it will then upload to the federal database.
While the fiscal year 2009 Single Audit is currently under way, the
state auditor is awaiting additional federal guidance from the Office
of Management and Budget (OMB) on Single Audits on Recovery Act
programs.
While Its Economy Remains Sluggish, Florida Plans Ahead for Funds
Expiration, but with Concerns Regarding Costs of Recovery Act-Related
Oversight:
Florida's fiscal condition is expected to improve slowly beginning in
spring 2010, according to Florida's August 2009 projections. However,
declines in general revenues persist while expenditure pressures
continue due to increased demands for some services, such as Medicaid,
education, and prison construction. For example, collection of sales
tax--the largest component of the state's general revenue budget--are
projected to fall as a result of reductions in consumer and business
purchases for state fiscal year 2009-2010. Nevertheless, state
estimates and national economic data suggest that economic conditions
may improve beginning later this calendar year or early next year.
[Footnote 2] For example, the Florida legislature's Office of Economic
and Demographic Research reports that despite a weakening employment
picture, falling housing prices could attract buyers and lead to an
improvement in the economy.[Footnote 3] Moreover, Florida's fiscal year
2010-2011 revenue collections forecast remains positive, marking an end
to 4 consecutive years of declining revenue. However, predicting the
future course of the economy is uncertain, especially given the current
degree of economic disruption.
State agencies are beginning preparation of their state fiscal year
2010-2011 budget requests in light of fiscal stress while planning for
when Recovery Act funds will no longer be available. (Florida's fiscal
year runs from July 1 through June 30.) For the upcoming fiscal year
2010-2011 budget, Florida budget officials said they project using $2.5
billion in Recovery Act funds. For this current fiscal year, a year-end
shortfall is currently not expected, according to an August 2009
Florida General Revenue Estimating Conference.[Footnote 4] In our July
2009 report, we noted that Florida closed a $4.8 billion budget gap in
the current fiscal year 2009-2010 General Revenue Fund in part, by
using about $1.6 billion of the $5.3 billion in Recovery Act
funds.[Footnote 5]
As part of its annual budget process, state agencies will receive
instructions for developing long-range program plans that include
strategies for when projected federal outlays to states and localities
under the Recovery Act are expected to substantially decrease after
2011, according to state budget officials. As we reported in July,
Florida has also planned for this "cliff effect" by increasing revenue
producing initiatives--such as a cigarette surcharge, motor vehicle
fees, and court fees--that are expected to produce more than $2 billion
in new general revenues on a recurring basis beginning in 2009-2010--
while at the same time reducing state expenditures. Ultimately, Florida
state officials see the current fiscal constraints as cyclical (short
term) rather than structural (long term), so they believe as the
economy improves, the state will be prepared for when Recovery Act
funds will no longer be available.
State officials said that Florida may not utilize the federal process
for identifying administrative costs related to Recovery Act activities
because the state has already appropriated and prescribed the use of
Recovery Act funds for fiscal year 2009-2010 for programs and services.
According to OMB guidance, central administrative costs incurred by
state recipients in the management and administration of Recovery Act
programs are allowable costs that can be recovered out of program funds
as indirect costs to the program[Footnote 6]. Florida executive branch
officials said this challenge is due in part to audit and reporting
requirements of the Recovery Act, even though the state did not budget
some or any of the Recovery Act funds for administrative activities.
For example, to comply with Recovery Act reporting requirements, the
Florida Office of Economic Recovery is developing a reporting system to
compile information from agencies and upload it to the federal system.
State officials said they have reservations about requesting funds for
oversight from already appropriated sums to programs. As a result, a
senior official said the state is considering absorbing Recovery Act
administrative costs within existing state resources rather than
seeking reimbursement through the federal process and shifting funds
from programs and services.
Broward and Hillsborough Counties' Summer Youth Programs Overcame
Several Implementation Challenges but Do Not Yet Know If Participants
Met Work Readiness Measures:
The Recovery Act provides an additional $1.2 billion in funds for the
Workforce Investment Act (WIA) Youth program, including summer
employment. Administered by the U.S. Department of Labor (Labor), the
WIA Youth program is designed to provide low-income in-school and out-
of-school youth 14 to 21 years old,[Footnote 7] who have additional
barriers to success, with services that lead to educational achievement
and successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 8] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 9] Local areas may design summer
employment opportunities to include any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job, (2) learn work readiness
skills on the job, and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 10]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Florida Expects to Meet Its WIA Youth Enrollment Goal:
The state of Florida received almost $43 million for WIA youth
activities under the Recovery Act and set a goal of serving 16,000
youth in 2009 through its WIA summer employment activities for youth
program. A 45-member board appointed by the Governor oversees and
monitors the administration of the state's workforce policy, programs,
and services. These programs are carried out by the 24 business-led
Regional Workforce Boards and Florida's Agency for Workforce
Innovation, which operates the state's workforce system. As of August
15, the Agency for Workforce Innovation estimates that it has expended
$22.3 million or 52 percent of its total and in its July 31, 2009
report to Labor, said it had served 11,902 youth. The agency attributed
the lower number of reported youth placed to late reporting by some
local programs and expects to meet its enrollment goal by the end of
the summer program. Table 1 shows selected characteristics of youth in
the program.
Table 1: Selected Characteristics of Youth in Florida's Summer Youth
Program as of July 31, 2009:
Category: Youth age 22 to 24;
Number of youth: 1,245.
Category: Youth age 19 to 21;
Number of youth: 3,190.
Category: Youth age 14 to 18;
Number of youth: 7,467.
Category: Total;
Number of youth: 11,902.
Category: Out-of-school youth;
Number of youth: 5,371.
Source: Florida Agency for Workforce Innovation.
[End of table]
According to a state Agency for Workforce Innovation official, the
state workforce agency will collect and ensure the validity of Recovery
Act data collected on the summer programs. The official told us that
Florida did not delegate subrecipient quarterly reporting requirements
to local workforce boards, and they would collect the required
information using its existing reporting system. Once the quarterly
reporting process begins in September, agency staff will review the
submitted data remotely and will go onsite to the workforce boards and
review case samples for data validation. The official also told us that
the agency already has staff out in the field working with workforce
boards to ensure the validity of the first quarterly reports.
Broward and Hillsborough Counties Used Recovery Act Funds to Expand
Summer Youth Services:
We selected two regional workforce boards--Workforce One, Employment
Solutions (Broward County) and the Tampa Bay WorkForce Alliance
(Hillsborough County). We evaluated their implementation of the
Recovery Act-funded summer youth program in Florida because these
boards are among the largest recipients of Recovery Act WIA Youth funds
in the state and had the highest numbers of anticipated participants.
In addition, each program represented a different geographic region of
the state. Table 2 shows the amount of funds Hillsborough County and
Broward County received and how much they have expended to date as of
August 31, 2009.
Table 2: Allocations Workforce Boards Received and Funds Expended as of
August 31, 2009:
Workforce board: Broward County;
Funds received: $2,362,791;
Funds expended: $2,321,460.
Workforce board: Hillsborough County;
Funds received: $2,534,737;
Funds expended: $792,076.
Source: Workforce boards.
[End of table]
Both Broward and Hillsborough counties took advantage of the Recovery
Act's extended age eligibility by operating work experience programs
for older youth--Broward for ages 19 to 24 and Hillsborough for ages 20
to 24. Each county provided work-readiness training for participants
covering soft employment skills, such as appropriate dress and showing
up for work on time. Both used pre-and post-tests to measure learning
gains by training participants. At the completion of their work-
readiness training, participants were placed in a wide variety of jobs
with public, private, and nonprofit employers.[Footnote 11] Neither
county identified "green" jobs for youth placement because officials
said there is currently no federal or state definition of what
constitutes a "green" job,[Footnote 12] and neither county offered
academic or occupational skills training as part of their summer youth
programs. Broward officials told us they did not offer academic or
occupational skills because they felt that in these economic times a
job/work experience would be most valuable for the older youth. In
addition to its work experience program for older youth, Hillsborough
County is using its Recovery Act funds on a separate work-based
learning program for younger participants.[Footnote 13] For this
program, Hillsborough County enrolled 803 youth ages 17 to 19 in a 4-
week Employment and Leadership Exploration program.[Footnote 14] The
instruction covered business ethics and business simulation models
during the first 2 weeks, with pre-and post-tests administered to
measure learning gains. In the third and fourth weeks, participants
formed teams and applied the skills learned to create a simulated
online magazine of their choice. Participants also completed a skills
assessment and participated in one onsite visit to an employer. (See
table 3 for more information on participants and placements.)
Table 3: Selected Data on Broward County's and Hillsborough County's
Summer Youth Programs:
Total participants;
Broward County: 724;
Hillsborough County: 1049.
Employment and Leadership Exploration program; Broward County: N/A;
Hillsborough County: 803.
Work Experience program;
Broward County: 724;
Hillsborough County: 246.
Type of participants: Out-of-school youth; Broward County: 722;
Hillsborough County: 565.
Type of participants: Youth 22-24 years old; Broward County: 152;
Hillsborough County: 97.
Percentage of work experience jobs available by sector[A]: Public;
Broward County: 52;
Hillsborough County: 14.
Percentage of work experience jobs available by sector[A]: Private;
Broward County: 17;
Hillsborough County: 66.
Percentage of work experience jobs available by sector[A]: Nonprofit;
Broward County: 31;
Hillsborough County: 21.
Source: Workforce boards.
[A] Numbers may not total to 100 percent due to rounding.
[End of table]
Broward and Hillsborough Counties Were Both Challenged by Recruiting
Participants under Tight Time Frames and Other Factors:
Broward County set a goal of 900 participants for its work experience
program and faced recruiting challenges, exacerbated by time
constraints. Youth were initially unresponsive to Broward's offer to
pay $7.21 per hour to participants. A Broward official told us that the
pay was not competitive with local businesses. However, after the
Workforce Board raised the hourly wage to $9.00, more than 3,000
applications were submitted by the deadline, forcing the county to
reduce the goal for the number of participants from 900 to 724 because
of the higher wage. The response was so overwhelming during the final 2
weeks of the application period (which ran from March 3 to May 29) that
officials said they worked weekends to meet their time frames.
Determining participant eligibility and, at least initially, paying
participants were also problems cited by Broward officials. Officials
said youth often had difficulty producing eligibility information, for
example, income information and proof of Selective Service
registration, and had to return several times to produce the necessary
paperwork. Broward officials said if they operate a summer youth
program again, they would use One-Stop staff to oversee the eligibility
process. In addition to determining eligibility, some employers
required youth background checks and some checks revealed multiple
offenses, including theft and fraud, making the youth hard to place.
Broward County also initially had issues paying participants. The
county wanted to use direct deposit for payment and encouraged
participants to open accounts at a local credit union or bank. However,
many youth wanted to receive their pay via a popular pre-paid debit
card, and there were initial problems getting paychecks credited to
those cards. In other instances, banks kept portions of paychecks that
were direct deposited into overdrawn accounts to recover the overdrawn
amounts.
Finally, for Broward County, there were some issues with employers when
participants reported on the first scheduled day of work. Some
employers pulled out of the program,[Footnote 15] others asked for more
employees than they needed and then sent some back to the workforce
board, and others used the first work day to interview participants
rather then put them to work. As a result, Broward officials had to
find new work assignments for some participants.
Hillsborough County greatly exceeded its recruiting goals for its work
experience program, but officials said they struggled with the 60-day
time frame they had from the time Labor issued its program guidance to
the time they launched their programs. Hillsborough set a goal of 60 to
80 participants for its work experience program and 1,000 participants
for its work-based learning program. Initially, Hillsborough officials
anticipated a rush of applications but no rush materialized. To boost
enrollment, officials began advertising on radio, television news
programs, movie theaters, and many other places. As a result, they
enrolled 803 participants in the work-based learning program and
enrolled 246 in the work experience program, greatly exceeding their
80- participant goal. The limited time to get the program up and
running was cited by officials as one of their biggest challenges.
Hillsborough County did not report any issues in gathering eligibility
information and in some cases used wage information from the
Unemployment Insurance system to verify income. The county found that
some of the program participants failed employer and other eligibility
requirements: Some employers required background checks, and all work
experience participants were screened for drugs. Of the 246
participants placed in work experience jobs by Hillsborough, 15 were
terminated because they failed the drug test. In contrast to Broward,
Hillsborough County didn't experience any problems using pre-paid debit
cards or paychecks, primarily for older participants. Hillsborough
County officials took steps to avoid problems with employers pulling
out of the program by pre-screening youth for level of education and
work experience, and then allowing employers to interview participants
at two job fairs in advance of start dates and make the decisions on
who they wanted to hire.
Work-Site Monitoring of Older Youth Was More Extensive in Broward
County than in Hillsborough County:
In Broward County, workforce officials said WIA program advisors visit
each of the 280 work sites regularly. Officials said 26 WIA program
advisors visit each site at least twice a week to speak with
supervisors, obtain time sheets, and provide feedback to participants.
The WIA program advisors document their site visit in notes placed in
each participant's case file. Workforce officials said they also tasked
work-site supervisors with conducting job performance evaluations for
each participant after one week of work using a standardized evaluation
form to rate the participant. Supervisors can also provide comments on
the individual's strengths and weaknesses.[Footnote 16] The performance
evaluation results are shared with the participant. Officials told us
that a second performance evaluation will be administered 6 weeks into
the program, and both evaluations, like the pre-and post-tests, would
be used to assess any gains in work-readiness skills during the summer
youth program-provided employment.
A Hillsborough official also told us they developed a work-site
monitoring plan and instituted it in mid August after receiving
feedback from Labor in late July.[Footnote 17] The Hillsborough County
official said that business consultants are to visit each of the 52
work sites once during the two and one-half month period. According to
Hillsborough's monitoring plan, consultants are to assess whether the
site meets health and safety standards, determine if participants' job
descriptions match work assigned, and elicit from the work-site
supervisors their experience with time-or record-keeping processes and
if any type of performance evaluation will be completed for the
employee. In addition, the monitoring plan calls for the WIA Youth
program staff to interview one participant at each work site. Interview
topics to be covered include whether the supervisor provides feedback,
if someone is in charge when the supervisor is not around, and whether
the participant signs in and out every day. A Hillsborough official
told us that youth have an opportunity to address work-site issues when
they come to the workforce board to collect their pay checks every 2
weeks. Both youth and employers are expected to contact the WIA program
staff when issues arise. A monitoring plan summary shows that work-site
visits were conducted between August 1 and August 31, 2009.
For its work-based learning program for 17-19 year olds, the
Hillsborough County workforce board is monitoring the performance of
contractors who administer the program. According to officials,
monitoring began with Hillsborough County workforce officials from
procurement, programmatic, and WIA Youth program departments conducting
a review of 13 competing proposals. Officials told us a thorough on-
site inspection was conducted prior to awarding 9 contracts.[Footnote
18] We reviewed 2 of the 9 work-based learning site contracts,
discussed the contracts with workforce board officials, and interviewed
officials at the two corresponding sites. According to workforce board
officials, the contracts we reviewed were cost-reimbursement contracts
with a fixed-price agreement for a maximum amount of deliverables. Each
contract contained a detailed description of services to be provided by
the contractor and a list of deliverables for which supporting
documentation was required for payment. According to Hillsborough
County workforce officials, ongoing monitoring of contractors consists
of two WIA career managers, under the direction of a WIA supervisor,
who visit the work-based learning sites twice a week to observe,
examine, and collect documentation, such as time sheets. WIA managers
are responsible for collecting these documents to verify contractor
performance for compensation purposes and to assess the work readiness
of the youth participants.
The Counties Took Different Approaches in Measuring Gains in Work
Readiness of Youth:
Broward County and Hillsborough County use different approaches to
measure youths' gains in work readiness. Within the restrictions set by
federal agency guidance, local boards may determine the methodology
used to measure work readiness gains as required for Recovery Act
funds. Although both counties use pre-and post-tests, each county's
test differed in length and content. Broward used a 30-question
multiple choice and true/false test; Hillsborough used a 10-question
multiple choice test.[Footnote 19] Hillsborough's test focused on what
to do in an interview; Broward's test focused on work-related skills
and behaviors. As mentioned previously, Broward also uses performance
evaluations at the work site to assess participants' work readiness.
Although both counties have administered their pre-and post-tests and
Broward has conducted its performance evaluations, neither have
completed their assessments of work-readiness gains. Officials said
they will not have results until the youth complete their programs, the
latest being in September 2009.
Although data on gains in work readiness is not yet available, work-
based learning supervisors and employers we interviewed said summer
youth programs have been a success. In Broward County, we spoke with
employers and youth at two different work sites and found they were
very pleased with the program. At one work site, the employer told us
he is planning to offer positions to 7 of the 17 summer youth program
participants when their summer program ends. At the second work site,
one participant shared a slide presentation of a project plan and
campaign she developed to help the company "go green." The participant
had presented her plan to the CEO, and her employment had been extended
2 weeks so she could assist with the implementation of her project. In
addition, we also spoke with two contract work-based learning site
supervisors in Hillsborough County, who said the work-based learning
experience, introduced youth to business principals and ethics,
encouraged teamwork, and broadened their horizons. Furthermore, the 20-
to 24-year old youth we spoke to said they felt the job fair process
used to match employers and participants was very well organized, that
they were able to learn valuable new skills in their work experience
jobs, and would participate again if the program is offered next
summer.
Florida Is Funding Local Service Providers and Program Infrastructure,
but Has Not Yet Started Weatherizing Homes:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation; sealing leaks; and modernizing heating equipment, air
circulation fans, or air conditioning. Over the past 32 years, the
Weatherization Assistance Program has assisted more than 6.2 million
low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved the weatherization plans of
all but two of the states, the District of Columbia, the territories,
and Indian tribes--including all 16 states and the District of Columbia
in our review. DOE has provided to the states almost $2.3 billion of
the $5 billion in weatherization funding under the Recovery Act. Use of
the Recovery Act weatherization funds is subject to Section 1606 of the
act, which requires all laborers and mechanics employed by contractors
and subcontractors on Recovery Act projects to be paid at least the
prevailing wage, including fringe benefits, as determined under the
Davis-Bacon Act.[Footnote 20] Because the Davis-Bacon Act had not
previously applied to weatherization, Labor had not established a
prevailing wage rate for weatherization work. In July 2009, DOE and
Labor issued a joint memorandum to Weatherization Assistance Program
grantees authorizing them to begin weatherizing homes using Recovery
Act funds, provided they pay construction workers at least Labor's wage
rates for residential construction, or an appropriate alternative
category, and compensate workers for any difference if Labor
established a higher local prevailing wage rate for weatherization
activities. Labor then surveyed five types of "interested parties"
about labor rates for weatherization work.[Footnote 21] Labor completed
establishing prevailing wage rates in all of the 50 states and the
District of Columbia by September 3, 2009. As of September 4, 2009,
Labor had posted wage rates for 44 states, including Florida.
DOE has allocated about $176 million over 3 years to Florida for the
Recovery Act Weatherization Assistance Program. On June 18, 2009, DOE
approved Florida's state plan for the program for 2009-2012 and had
provided a total of about $88 million, or half the state's allocation.
The state's Department of Community Affairs (DCA) is responsible for
administering the program. As stated in the state plan, DCA's goals
include weatherizing at least 19,090 dwellings, which according to a
DCA official could result in as much as $5.7 million in overall energy
savings annually. Of the $176 million the state will receive, the
planned allocation includes about $137 million for weatherization of
homes and about $30 million for training and technical assistance.
DCA awards contracts to local service providers, which include
nonprofit organizations or local governments, to assist low-income
households by making long-term energy efficiency improvements to their
residences, including measures such as installing insulation, sealing
leaks around doors and windows, or modernizing heating equipment and
air circulating fans. Once a local service provider determines that a
household is eligible for the program, it sends an inspector to the
home to determine if it is suitable for improvements and to perform an
energy audit to identify appropriate improvements.[Footnote 22] Once
the inspector has completed the home inspection and energy audit, they
prepare a work order that lists the improvements to be made to the
home. The local service providers may employ either in-house
construction crews or use contractors or a combination of both to make
the home improvements. When completed, the improvements are checked by
an inspector.
Florida Has Begun Using Recovery Act Weatherization Funds to Increase
the Capacity of Local Providers to Weatherize Homes:
As of August 31, 2009, DCA had obligated about $4.2 million and
expended about $1.1 million of the initial $88 million provided by DOE
for the Weatherization Assistance Program on expenses such as payroll
for DCA staff, contracts with local service providers to expand their
capacity to weatherize homes, training and travel for new DCA and local
provider staff, and supplies.
DCA has obligated about $3.6 million of the $4.2 million to award
initial contracts to 26 of its 29 current local service providers, and
used about $1 million of the $1.1 million expended for these same
contracts. These local service providers can use the funds for
nonproduction weatherization operating costs, such as planning, hiring
staff, sending inspectors to training, purchasing equipment, obtaining
liability insurance, and verifying income eligibility for clients on
their waiting lists for weatherization. The funds may also be used to
conduct the home inspections and energy audits. DCA officials explained
that once a local service provider meets performance measures detailed
in the DCA contract, DCA will award the providers a final contract to
weatherize homes. DCA officials said they expect to award these final
contracts by early September 2009.[Footnote 23]
Of the $4.2 million obligated, $498,750 is provided for training home
inspectors. To meet increased production goals--weatherizing an
additional 19,090 homes over the next 3 years--the number of inspectors
employed by local service providers could significantly increase from
39 to more than 100, according to DCA officials. To address the need
for training, DCA awarded a contract to the University of Central
Florida Solar Energy Center to develop and provide weatherization
inspector training.
Florida Is Implementing Training and Internal Controls to Help Ensure
Quality and Oversight of Recovery Act Spending:
DCA officials said they plan to increase oversight and monitoring of
Recovery Act weatherization funds by increasing DCA staff and by
performing more audits of local service providers. They plan to award
contracts for field inspectors, fiscal monitors, and monitoring and
technical assistance for compliance with Davis-Bacon Act requirements.
Local service providers that administer the weatherization program have
inspectors who perform home inspections to determine needed
weatherization services and afterward, to determine if work is
completed. DCA awarded a contract to the University of Central Florida
Solar Energy Center to provide 1 week of training and field testing for
up to 150 inspectors and new hires that will include an introduction to
weatherization, health and safety issues, building diagnostics and
guidance on weatherizing homes. A DCA official told us that as of
August 24, 2009, two training sessions had been held at the Solar
Energy Center with 34 attendees, including at least one home inspector
from each of the 28 local service providers awarded contracts by DCA.
According to DCA officials, two additional sessions have been scheduled
to begin late August and early September.
To add an extra layer of home inspection over and above what is done by
local service providers and to conduct compliance monitoring of these
providers, a DCA official said the agency will hire contractors. DCA's
goal is to have contractor-provided field inspectors in place in all 67
Florida counties. These contractors will ensure that at least 50
percent of the weatherized homes funded by the Recovery Act are
inspected by DCA. DOE guidelines require DCA to inspect at least 5
percent of all weatherized homes. For this statewide inspection
program, DCA issued a request for proposals on July 13, 2009. Proposals
were due to DCA by August 7, 2009, and the anticipated award date is
September 11, 2009. In addition to conducting field inspections, these
contractors are to review 100 percent of local service providers' files
to ensure they contain the correct documentary support for each home
weatherization project, including such paperwork as invoices, building
permits, and resident income verification. Monitoring of contractors
will be done by in-house DCA staff, which DCA plans to hire. In
addition to the contractor-led inspections, DCA staff will inspect
other homes to achieve its goal of having 60 percent of the homes
weatherized with Recovery Act funds inspected, according to a DCA
official.
Lastly, DCA plans to issue requests for proposals for contractors who
will provide local service providers with:
* fiscal monitoring and technical assistance on implementing program
procedures, establishing and maintaining files, developing internal
controls and accounting protocols, correcting problems reported by the
Inspector General and independent auditors;
* oversight, training, and technical assistance on the Davis-Bacon Act
wage and reporting requirements; and:
* procurement training because procurement for services and goods is
done locally, not statewide.
Prior to the Recovery Act, most local service providers in Florida did
not receive enough federal weatherization funding to be subject to the
Single Audit Act/A-133 requirements: each provider would have had to
expend at least $500,000 in federal funding. With the allocation of
additional weatherization funding through the Recovery Act, all local
service providers in Florida will meet the funding threshold and be
subject to single audit. The DCA Inspector General told us her office
has allocated 600 hours to auditing Recovery Act weatherization
projects during the 2009-2010 state fiscal year. According to the
Inspector General, a risk assessment was used to develop the audit
plan, which includes evaluating internal processes and implementation
of Recovery Act guidelines for accountability and transparency. The
Inspector General said these audits will cover the DCA program office,
DCA statewide contractors, and local service providers. The Inspector
General plans to enter into a contract with an individual who will work
full time on Recovery Act Weatherization Assistance Program audits and
reallocate another existing employee's work half time to the audits.
In June 2009, the Inspector General issued a weatherization program
audit report that identified internal control weaknesses. Although the
report did not focus on Recovery Act funds, the Inspector General told
us the findings are still applicable. For example, one of the three
local service providers reviewed could not provide complete and
accurate supporting documentation for incurred expenses reimbursed by
DCA, and submitted final status reports prior to completion of work.
The Inspector General said DCA's plan to use a contractor to implement
a statewide inspection plan for Recovery Act weatherization projects
should correct this control weakness. DCA considers its principal risk
for Recovery Act spending to be poor quality work. The risk is
mitigated by the fact that 28 of the 29 local service providers have
previous experience managing weatherization of homes--some for as many
as 30 years.
Recovery Act Funds for Weatherization have Created Jobs in Florida, but
State Officials Still Have Questions about Reporting Requirements and
Compliance with the Davis-Bacon Act:
DCA has started collecting performance measurement data on the number
of jobs created and retained with Recovery Act funds for
weatherization. DCA officials told us that as of August 27, 2009, 109
jobs have been created or retained in Florida as a result of the
Recovery Act weatherization funds.
DCA will also measure energy savings, and plans to track kilowatts used
before and after weatherization, primarily with information from
utility companies. DCA officials said they are using kilowatts used
versus dollars saved because the cost of a unit of energy can vary over
time and location. DCA officials said measuring actual kilowatts saved
will be more accurate than DOE's methodology for calculating energy
savings, which looks at total cost savings from all the energy
efficiency improvements that could be made to a home versus the actual
changes made to the home.
DCA officials stated that they will be reporting the results of
expenditures of Recovery Act Weatherization Assistance Program funds to
both DOE and OMB as required. DCA is responsible for reporting on
performance measures to DOE, including jobs created and retained,
documentation to support compliance with the Davis-Bacon Act, number of
homes weatherized, and energy savings achieved. Currently, DCA reports
quarterly to DOE on the non-Recovery Act-funded Weatherization
Assistance Program. DCA officials stated that they are still waiting
for final DOE guidance, but anticipated that Recovery Act reporting
will be monthly. DCA will also report as required by OMB on jobs
created and retained.[Footnote 24] DCA officials said they will enter
the information in the state's new automated Web-based Recovery Act
reporting system. Currently, this new reporting system is being
populated and tested.
To meet DOE and OMB reporting requirements, DCA plans to collect
performance measurement data from local service providers using its
Web- based eGrants system, an existing grant administration tool. DCA
program staff will monitor the system to ensure local service providers
report by the 15th of each month. In addition, DCA plans to validate
data submitted before reporting it to the DOE and the state Web-based
Recovery Act reporting system by using planned statewide contracts for
financial monitoring and field inspections. These contractors will
validate data submitted to DCA on information such as number of jobs
created and retained, number of homes weatherized, and number of
individuals served by the units weatherized (e.g., size of family),
according to DCA officials.[Footnote 25] The DCA Inspector General will
also be responsible for validating job data submitted by DCA to the
state's Recovery Act Web-based reporting system.
DCA officials expressed concerns about the application of the Davis-
Bacon Act to Recovery Act weatherization projects, which was not
applicable to non-Recovery Act weatherization projects.[Footnote 26]
They have questions about increased documentation that local service
providers may need to collect to support the certified payroll and
prevailing wages and benefits information required by Labor. According
to DCA officials, many Florida contractors, particularly smaller firms,
have shared concerns about the documentation and administrative tasks
they must perform to be in compliance. Officials told us that the DCA
contracts awarded to local service providers will stipulate that all
laborers and mechanics employed by contractors and subcontractors for
Recovery Act-funded weatherization work be paid not less than the
prevailing wage for their skill set based on the county where the
project is located and as listed on Labor's Web site.[Footnote 27] DCA
officials said current prevailing wages for construction workers in
Florida are significantly above minimum wage, and they believe the
results of the new Labor weatherization wage and benefit survey for
weatherization construction workers will mirror those rates. On
September 2, 2009, Labor published the new wage and benefit survey
results for weatherization workers in Florida. The wages averaged about
$14 to $15 per hour, while the state's hourly minimum wage rate is
$7.25. DCA officials received but did not complete the Labor survey on
wages because the survey was for local service providers to complete.
DCA officials also said they do not have information on which
organizations or businesses in the state of Florida were surveyed other
than their local service providers. As of August 28, 2009, 13 of the 28
local service providers had provided DCA with a copy of the completed
survey they retuned to Labor.
DCA has not issued guidance to local service providers on final
Recovery Act reporting requirements because officials said they are
waiting for final guidance from DOE and OMB. The DCA officials said
final contracts awarded to local service providers for actual
weatherization of homes will include a provision stating that the
contracts are subject to change in reporting requirements for Davis-
Bacon as guidance is received from OMB and DOE. A local service
provider we interviewed stated that DCA has made them aware that final
reporting requirements, including those related to the Davis-Bacon Act,
are subject to change until guidance is finalized by OMB and DOE.
While Some Progress Has Been Made in Awarding Statewide Highway
Contracts, Few Local Contracts Have Been Awarded; Yet, State Officials
Said Monitoring and Reporting Processes Are in Place:
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to states through federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
The U.S. Department of Transportation's (DOT) Federal Highway
Administration (FHWA) apportioned $1.35 billion in Recovery Act funds
to Florida. As of September 1, 2009, the federal government has
obligated[Footnote 28] $1 billion and $196,000 has been reimbursed
[Footnote 29] by the FHWA. The state, in turn, allocated $902 million--
67 percent--to statewide projects; and $404 million[Footnote 30]--30
percent--was suballocated to local agencies, which includes, but is not
limited to, a county, an incorporated municipality, or a metropolitan
planning organization (MPO) based on population;[Footnote 31] and the
remaining $40 million--3 percent--to local highway enhancement
projects, such as sidewalk construction. According to the Florida
Department of Transportation (FDOT), FHWA has approved 519 Recovery
Act- funded projects proposed by Florida, and as of August 28, 2009, 25
of 45 statewide highway construction contracts with a total value of
$726 million had been awarded.[Footnote 32] In addition, as of
September 1, 2009, 5 out of 395 local projects have been awarded
contracts with a total value of $1 million.
Almost 40 percent of Recovery Act highway obligations for Florida have
been for pavement widening projects. Specifically, $401 million of the
$1 billion obligated for Florida as of September 1, 2009, is being used
for highway widening projects that will add capacity to existing
highways and interstates. Figure 1 shows obligations by the types of
road and bridge improvements being made.
Figure 1: Highway Obligations for Florida by Project Improvement Type
as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (69 percent, $690.7 million): Pavement widening
($401.1 million): 40%; Pavement improvement ($173.2 million): 17%; New
road construction ($116.4 million): 12%.
Bridge projects total (14 percent, $144.3 million): New bridge
construction ($89.6 million): 9%; Bridge improvement ($54.8 million):
5%.
Other (17 percent, $165.9 million):
Other ($165.9 million): 17%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
Florida's Focus on Capacity May Explain Rate of Progress in Awarding
Contracts:
In an August 6, 2009, letter to the Governor of Florida, the Chairman
of the U.S. House of Representative's Committee on Transportation and
Infrastructure expressed concern about Florida's progress in spending
the transportation funding provided by the Recovery Act for
transportation projects. In their joint response to the Chairman, the
FDOT Secretary and Special Advisor to the Governor noted that Florida
selected projects with the greatest economic impact, such as increasing
road capacity, as a way to explain the pace of obligations. (Even
though Florida was among the last to begin seeking obligation of
Recovery Act transportation funds, it was one of the first states to
meet the act's requirement to obligate 50 percent of the apportioned
funds before the June 30, 2009 deadline.) In addition, state officials
said because most of the statewide projects are large in scale and
involve federal-aid roadways, they face more federal requirements
relating to environmental issues and acquisition of rights of way and
thus require more time before bids can be requested and contracts can
be awarded. For example, they noted that many other states are using
Recovery Act money to resurface roads--less complicated projects to
initiate. In Florida, officials said design drawings and environmental
impact studies may need updating before a detailed scope of work can be
prepared for requests for proposals (RFP), thus delaying the bid
advertisement process. In addition, new construction requires more
preparation onsite. For example, in Nassau County, Florida, a projected
$26 million Recovery Act project will add two lanes to provide four 12-
foot-wide travel lanes to State Road 200, a primary commuter and
hurricane evacuation route. However, starting the project will require
phased construction including temporary pavement and median
construction for business and residential access. In Okaloosa County,
Florida, state officials said utility companies must relocate utility
and gas lines and crews must remove trees from rights of way before
construction can begin on a projected $25 million project to widen
sections of State Roads 85 and 123. FDOT officials said that even
though many of these major projects are ongoing, they required the
funding provided by the Recovery Act to proceed with the next phase in
design, RFPs, and on-site preparation.
While large-scale, statewide projects require more time, FDOT officials
said the state had little need to invest Recovery Act funds in more
quickly bid paving or bridge projects because Florida's roads were in
good condition. According to the officials, 2 percent of highways
eligible for federal-aid were reported in poor condition and less than
1 percent of bridges were categorized as in need of critical repairs.
State officials said Recovery Act money is better invested in
increasing road capacity and improving traffic flow. For example, the
$26 million Recovery Act funded construction project in Nassau County
between Callahan and Fernandina Beach should provide about 6 miles of
four travel lanes, 4-foot wide bicycle lanes, and a 5-foot-wide
sidewalk on each side of the road in the urban section. The
improvements will facilitate hurricane evacuation and provide an
alternative route for tourists and truck traffic traveling between
Interstates 10 and 95, officials said, as well as a connector between
east and west Nassau County.
Officials said that at the local level, many of the contracts have not
been awarded because localities were given more time to bid the
projects. Under the act, states are required to ensure that all
apportioned funds--including suballocated funds--are obligated within 1
year. Fifty percent of the funds apportioned to the state had to be
obligated within 120 days of the apportionment (i.e., before June 30,
2009). However, unlike the states' funds, the funds that were
suballocated to local agencies were not required to meet the 120-day
rule. As a result, the local agencies were given more time to obtain
approval of grant agreements, advertise bids, and award contracts. FDOT
officials said their local agency program administrators are working
closely with local agencies to provide assistance in bid advertisement
and contract award processes. However, state officials emphasized that
the local agencies are responsible for advertising and awarding
contracts for the projects.
State Officials Consider Current Processes and Procedures Adequate for
Highway Contract Solicitation and Management:
FDOT is a decentralized state agency, and many of its contract-
monitoring functions are performed by its seven district offices and
Florida's Turnpike Enterprise.[Footnote 33] To obtain an understanding
of Florida's highway contracting procedures and processes, we selected
two statewide contracts that were awarded as of July 20, 2009, to
review--a $25 million contract managed by the Chipley FDOT District
Office in Washington County and a $26 million contract managed by the
Lake City FDOT District Office in Columbia County. According to FDOT
officials, controls and oversight of the two projects included ensuring
that:
* contractors who submitted bids met prequalification requirements,
which included assessment of contractor's ability, prior work history,
financial capability, and record checks for debarment and suspension,
* contracts were awarded on a fixed-price and competitive basis,
* contract requirements were linked to Recovery Act objectives, and:
* trained personnel were in place when the contracts were awarded.
According to state officials, Florida requires all contractors to meet
specific qualifications before bidding on state construction projects
costing in excess of $250,000. Officials explained that the
prequalification process saves time during bid reviews by establishing
contractor competency and adequate financial resources to perform the
work while awaiting reimbursement from the FDOT. State officials said
Florida advertised both projects for 60 days and received nine bids
total; both contracts were awarded at 50 percent less than estimated
project bid amounts. In addition, in both instances, the contracts were
awarded to the lowest responsive bid. Lastly, both contracts contained
specific provisions for contractor compliance with Recovery Act
reporting requirements.
FDOT Districts Use Consultants to Assist with Project Monitoring:
While district offices typically have responsibility for managing
highway construction projects from start to completion, FDOT officials
said private consultants are used to assist. Chipley and Lake City
district offices have contracted with private consultants and other
companies to assist in overseeing the Recovery Act-funded projects
reviewed here. According to FDOT officials, consultants will perform
about 80 percent of daily project management duties for the two
district offices. Consultants will provide routine monitoring and
inspection of the highway projects to ensure compliance with the
state's quality standards and with specific performance requirements in
the construction contract. Within the district offices, project
managers will perform daily reviews of the work of the consultants to
ensure that they are also in compliance with the terms of its contracts
and conducting adequate inspections of the contractors' work. For
example, according to state officials in the Lake City District Office,
project managers should spend about 20 percent of their time providing
oversight of the consultants, and the office has adequate resources to
manage this workload.
FDOT Developed Automated System to Report Data on Jobs Created:
In addition to other reporting requirements, the Recovery Act requires
states to report on the number of direct jobs created or sustained,
indirect jobs (to the extent possible), and total increase in
employment since the act. The FDOT Office of Inspector General is
responsible for ensuring compliance with the act's reporting
requirements, and has developed an automated system--which was placed
into operation on May 29, 2009--that captures and reports by contract
the total number of employees, hours worked, and contractor's payroll
amounts. For the months of June and July, the FDOT reported to FHWA
that a total of 155 jobs were created as a direct result of Recovery
Act-funded highway projects. FDOT officials stated FHWA will report
data on the number of indirect jobs that were created. FDOT officials
said they will also enter the information in the state's new automated
Web-based Recovery Act reporting system.
Inspectors General Continue to Take Steps to Provide Oversight of
Recovery Act Funds:
Florida's Inspectors General reported taking a number of actions to
provide oversight of Recovery Act funds. These included (1) providing
fraud training; (2) reviewing reporting requirements, providing
briefings, and monitoring agencies' progress toward implementation; (3)
developing or modifying databases for reporting and planning to ensure
data quality; (4) reviewing whether respective agencies had appropriate
internal controls in place for the use of Recovery Act funds; (5)
carrying out reviews of contracts and files of authorized projects; and
(6) allocating staff and/or including oversight of Recovery Act funds
in their work plans. For example, as a partner in one effort, the
Office of the Chief Inspector General helped train 459 government
auditors, investigators, Inspectors General, and procurement employees
on detecting fraud as of September 9, 2009. The Florida Department of
Law Enforcement (FDLE) reviewed all Recovery Act reporting requirements
and helped modify the agency's data system to capture required Recovery
Act data. FDLE also assigned an auditor to provide independent
oversight and monitoring of Recovery Act funding and added this
oversight to its work plan. At the Agency for Workforce Innovation, the
Inspector General initiated an internal audit of Recovery Act
monitoring by the agency's program areas. And last, the Office of the
Inspector General at the Florida Department of Transportation conducted
a post-authorization file review of Recovery Act funded transportation
projects in a number of the state's transportation districts.
Florida Has Efforts Under Way to Meet Recovery Act Reporting
Requirements:
The Florida Office of Economic Recovery has provided agencies with
guidance on reporting requirements. It has done this through a series
of conference calls and a memo released in early September, which
outlines the basic requirements, plans, and time lines for agencies to
meet the requirements of the Recovery Act. According to the head of the
office, the recovery czar, Florida is waiting to finalize its guidance
because officials want to make certain they fully understand the
federal approach, which they believe has been shifting. State staff
have broadly participated in the OMB Webinars.[Footnote 34]
Agencies receiving Recovery Act funds will compile the information
required for Recovery Act reporting. Florida is developing a reporting
system which will gather this information and upload it to the federal
system. Each agency will have the option to delegate data entry to
subrecipients or to enter Recovery Act information for them.
Subrecipients will be required to use the state system for funds where
the recipient is a state agency. Entities that are not state agencies
but are recipients of Recovery Act funds directly from a federal agency
will not report to the state system but directly to the federal system.
According to the Recovery Czar, the state has begun gathering
identifying information such as award numbers and loading it into the
database that will comprise the initial data load of the state
reporting system. The Recovery Czar said his office has identified all
15 state agencies which are Recovery Act recipients subject to
reporting requirements; loaded subrecipient information for 12 of the
15; and will be loading the others in the near future.
Officials have developed a draft data quality protocol and plan to have
staff review the information in the state reporting system. At the
agency level, the protocols require agencies to clearly communicate
reporting requirements to subrecipients, including the data elements
and the mechanics of the reporting process, and to have a process for
verifying the information submitted, among other things. The draft
protocols suggest that at the state level there will be reviews of
summary level reports to look for outliers as well as evaluations of
period-to-period changes. These would be coupled with procedures to
identify and/or eliminate potential double counting due to delegation
of reporting responsibility to subrecipients. According to the Recovery
Czar, these protocols have not been finalized and will likely change
when tested against the realities of data reporting.
To prepare for recipient reporting, the Recovery Czar said his office
has performed an initial pilot by having three agencies provide the
data to populate the state database. Dry runs and submission of test
data to OMB are planned once they have the capability of receiving it.
Staff have developed large and complex systems in the past, according
to the Recovery Czar, and are developing and testing a system to
generate the data extract required for inputs to the federal system.
Florida state officials have a number of concerns regarding Recovery
Act reporting requirements. A major concern pertains to duplicate
reporting. According to Florida Office of Economic Recovery meeting
summaries, some federal agencies informed their state counterpart
agencies that they should report information directly to the federal
agency, in addition to, or instead of the federal site for data
collection. Other concerns were the amount of work required to
implement the reporting requirements; the fact that OMB guidance has
left many questions unanswered--for example, which identifier to use
for reporting on FHWA construction projects, and the logistics of
uploading data to the federal site. Based on available guidance,
Florida originally understood that it would be able to upload
information on all awards across all agencies in a single transfer, but
learned later that data would have to be uploaded separately for each
agency.[Footnote 35] Finally, Florida officials said they are concerned
that lack of clarity on how to calculate the number of jobs retained
and created--for instance, the number of hours that constitute full-
time work--could lead to inconsistencies among the states and recipient
entities.
State Auditor Awaiting Additional OMB Guidance for Single Audit on
Recovery Act Programs:
The Florida Auditor General's office is awaiting additional OMB
guidance on the Single Audit process. Officials said they need
clarification of the required testing of internal controls at state
agencies for fiscal years 2009 and 2010 under the Recovery Act. The
Single Audit, a key accountability mechanism, assists in determining
whether expenditures of federal funds are in compliance with applicable
laws and regulations and the effectiveness of key internal controls
related to the Recovery Act.[Footnote 36] Although OMB provided
guidance to states in August 2009,[Footnote 37] officials in the
Auditor General's office said it does not appear to reflect the final
expectations for testing, time frames, and reporting on internal
controls related to the Recovery Act. Similarly, Florida officials said
the August guidance does not yet clearly address OMB audit requirements
for Recovery Act reporting. Given that Recovery Act funds are to be
distributed quickly, GAO reported that effective internal controls are
critical to help ensure effective and efficient use of resources,
compliance with laws and regulations, and accountability, including
preparing reliable financial statements and other financial reports.
The Auditor General's office is awaiting the issuance of the next
addendum to OMB's Circular A-133 Compliance Supplement, which is due
September 30, 2009. Meanwhile, the fiscal year 2009 single audit is
under way and the Auditor General's office officials said they are
concerned the September guidance will contain requirements they did not
anticipate in planning their work, necessitating additional work on an
accelerated time frame. Without more clearly defined and complete
federal guidance, the officials said they have not yet established
plans for fiscal year 2010 interim testing.
State Comments on This Summary:
We provided the Special Advisor to Governor Charlie Crist, Florida
Office of Economic Recovery, with a draft of this appendix on September
8, 2009, and he responded on September 10, 2009. The Florida official
generally concurred with the information in the appendix and provided
technical suggestions that were incorporated, as appropriate.
GAO Contacts:
Andrew Sherrill, (202) 512-7252 or sherrilla@gao.gov:
Zina Merritt, (202) 512-5257 or merrittz@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Fannie Bivins, Patrick di
Battista, Lisa Galvan-Trevino, Kevin Kumanga, Frank Minore, Brenda
Ross, Cherie' Starck, and James Whitcomb made major contributions to
this report. Susan Ashoff assisted with writing, and Amy Anderson,
Rachel Frisk, and Kenrick Isaac assisted with quality assurance.
[End of section]
Footnotes for Appendix V:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Although some economists have pointed to signs of economic
improvement, associations representing states have also reported that,
in general, states' fiscal conditions historically lag behind any
national economic recovery.
[3] The Florida Legislature, Office of Economic and Demographic
Research, Florida: An Economic Overview (Tallahassee, Fla., Aug. 4,
2009).
[4] Florida uses the General Revenue Estimating Conference for
forecasting revenues. Comprised of one member from each of the staffs
of the Office of the Governor, the Senate, the House of
Representatives, and the Division of Economic and Demographic Research,
a major purpose for the conference is to provide a common ground with
respect to the funds available for budgeting. The General Revenue Fund
is Florida's primary operating fund that is subject to annual
allocation through the legislative process, funding programs such as
education and human services.
[5] Florida enacted a $66.5 billion budget for 2009-2010 before the
start of its July 1 fiscal year and in doing so, used Recovery Act
funds, withdrew some of its available reserves, cut spending, and
raised additional sources of revenue. As we reported in July, Florida
budgeted a total of $5.3 billion of Recovery Act funds or about 8
percent of its budget. Recovery Act funds used to stabilize the state's
operating budget included funds made available as a result of increased
Federal Medical Assistance Percentage and State Fiscal Stabilization
Fund monies.
[6] OMB guidelines state that the budgeted or estimated administrative
cost amount for administrative or indirect costs should not be in
excess of 0.5 percent of total Recovery Act funds received by the
State. Based on OMB guidance, a state is to modify its Statewide Cost
Allocation Plan (SWCAP) to allow for charge backs for costs associated
with centralized services. See OMB, Memorandum M-09-18: Payments to
State Grantees for Administrative Costs of Recovery Act Activities (May
11, 2009).
[7] An out-of-school youth is an individual who (a) is an eligible
youth who is a school dropout; or (b) is an eligible youth who has
either graduated from high school or holds a General Educational
Development (GED) credential, but is basic skills deficient, is
unemployed, or underemployed.
[8] H.R. Rep. No. 111-16, at 448 (2009).
[9] Department of Labor, Training and Employment Guidance Letter No.
14- 08 (Mar. 18, 2009).
[10] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[11] In Broward County the types of jobs filled include library page,
clerical, camp counselor and recreation aide, cafeteria and teacher
assistant, and custodial. In Hillsborough County the types of jobs
filled include Boys & Girls Club youth development specialist, customer
sales and service, cashier, clerical, and hotel worker.
[12] Hillsborough County also offered an optional 12-hour green
training initiative to create awareness among participants in its work-
based learning experience titled "Your Role in the Green Economy." A
national certification is issued to participants who pass the test at
the conclusion of the program.
[13] Broward County is using its general revenues to fund its younger
summer youth program.
[14] According to Hillsborough officials, program administration was
competitively contracted out to nine public or nonprofit groups.
Officials told us that contractors are paid based on documented
deliverables such as the pre-and post-tests, trainee skill assessments,
and program completion.
[15] Officials told us that some employers pulled out of the program
because they did not like the way the youth presented themselves the
first day, they did not think the youth had the skills to perform the
required work, or the employer's business had taken a turn for the
worse since they first requested the youth and they no longer needed
the help.
[16] The performance evaluation form is signed by the supervisor, the
summer youth program participant, and the WIA summer youth program
advisor.
[17] Hillsborough's summer youth program for 20-24 year olds started
July 14 and will end September 30.
[18] There were a total of 10 work-based learning sites, but only a
total of 9 contracts were awarded, since one learning site was a
Hillsborough workforce facility.
[19] In Hillsborough County younger youth were given a Junior
Achievement pre-and post-test.
[20] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[21] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[22] Homes that are in disrepair, such as those needing a new roof, are
considered unsuitable for improvements because the poor condition of
the home would result in damage to the improvements or render them
ineffective.
[23] According to DCA officials, as of August 17, 2009, DCA had
delivered the contracts to the local service providers. At least three
of the local service providers had met the benchmarks in their capacity
contracts. As of September 4, 2009, DCA had obligated funds for one of
the three local service providers, which can begin weatherizing homes.
[24] According to state officials, in the state of Florida as defined
by OMB, DCA is considered the prime recipient and the local service
providers and statewide contractors are considered the subrecipients of
Recovery Act weatherization funds.
[25] According to DCA officials, they will obtain information directly
from the utility companies on the energy savings for homes weatherized
with Recovery Act funds.
[26] The Recovery Act requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wages as determined under the Davis-Bacon Act.
Recovery Act, div. A, title XVI, §1606. Under the Davis-Bacon Act,
Labor determines the prevailing wage for projects of a similar
character in the locality. 40 U.S.C. §§ 3142-3148.
[27] [hyperlink,
http://www.dol.gov/esa/whd/recovery/dbsurvey/weather.htm].
[28] For the Highway Infrastructure Investment Program, the U.S. DOT
has interpreted the term obligation of funds to mean the federal
government's contractual commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement.
[29] States request reimbursement from FHWA as the state makes payments
to contractors working on approved projects.
[30] Of the $404 million allocated to local agencies, the federal
government has obligated $270 million and $81,400 has been reimbursed
by the FHWA.
[31] MPOs, federally mandated regional organizations, representing
local governments and working in coordination with state departments of
transportation, are responsible for comprehensive transportation
planning and programming in urbanized areas. MPOs facilitate decision
making on regional transportation issues including major capital
investment projects and priorities.
[32] The state dedicated over 67 percent or $902 million of its $1.35
billion in apportioned Recovery Act funds to these projects.
[33] FDOT District Offices and the Florida Turnpike Enterprise are
located in Bartow (Polk County), Lake City (Columbia County), Chipley
(Washington County), Fort Lauderdale (Broward County), Deland (Volusia
County), Miami (Miami-Dade), Tampa (Hillsborough County), and Ocoee
(Orange County), Florida.
[34] Seven Webinars in total covered such topics as how to calculate
and report job creation estimates and reporting from the perspective of
the subrecipient.
[35] According to Florida officials, they are continuing to work with
OMB and others as these issues evolve.
[36] In Florida, the Auditor General is appointed by Florida's
legislature and serves as the state's independent auditor for the
Single Audit.
[37] OMB, "OMB Circular A-133 Compliance Supplement-Addendum #1" (June
2009). Although it is dated June 2009, OMB did not make the guidance
available until August 2009.
[End of section]
Appendix VI: Georgia:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
spending in Georgia.[Footnote 1] The full report on all of our work,
which covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery/].
We reviewed three programs in Georgia funded under the Recovery Act--
the Transit Capital Assistance Program, the Weatherization Assistance
Program, and the Workforce Investment Act (WIA) Youth Program. We
selected these programs for different reasons. The Transit Capital
Assistance Program had a September 1, 2009, deadline for obligating a
portion of the funds and provided an opportunity to review nonstate
entities that received Recovery Act funds. Georgia received a
substantial increase in Weatherization Assistance Program funds, and
work got under way in late August 2009. The focus of the WIA Youth
Program in Georgia was a summer employment program that was well under
way. For these programs, we focused on how funds were being used; how
safeguards were being implemented, including those related to the
procurement of goods and services; and how results were being assessed.
In addition to these three programs, we also updated information on
Highway Infrastructure Investment funds because significant Recovery
Act funds had been obligated. We reviewed five contracts financed with
Recovery Act Highway Infrastructure Investment funds and four contracts
under the WIA Youth Program. Consistent with the purposes of the
Recovery Act, funds from the programs we reviewed are being directed to
help Georgia and local entities stabilize their budgets and to
stimulate infrastructure development and expand existing programs--
thereby providing needed services and potential jobs. The following
provides highlights of our review of these funds:
Transit Capital Assistance Program:
* The U.S. Department of Transportation's Federal Transit
Administration (FTA) apportioned $141 million in Recovery Act funds to
Georgia and urbanized areas located in the state. As of September 1,
2009, FTA had obligated $120 million.
* As of September 1, 2009, FTA concluded that the 50 percent obligation
requirement had been met for Georgia and urbanized areas located in the
state.
* The Metropolitan Atlanta Rapid Transit Authority (MARTA), the largest
transit agency in Georgia, will use the majority of its $55.4 million
to fund a fire protection system upgrade and preventive maintenance.
Weatherization Assistance Program:
* The U.S. Department of Energy (DOE) allocated about $125 million in
Recovery Act weatherization funding to Georgia for a 3-year period. As
of September 1, 2009, DOE had provided $62.4 million to Georgia, and
the state had obligated $22.9 million of these funds.
* Georgia has awarded contracts to all 22 service providers that it
plans to use to weatherize homes, and weatherization activities got
under way in late August 2009. With the Recovery Act funds, the state
expects to weatherize at least 13,000 homes.
WIA Youth Program:
* The U.S. Department of Labor (Labor) allotted about $31.4 million in
WIA youth Recovery Act funds to Georgia. According to Labor, $16
million had been expended in the state as of August 31, 2009.
* As of September 15, 2009, the local workforce boards had received
more than 30,000 applications, and 10,717 youth had been enrolled in
summer youth programs statewide. Georgia exceeded its target of serving
10,253 youth.
* The three workforce boards we interviewed focused on offering youth
summer work experience. Work sites included government agencies, a
private company that packages supplies for health-care providers, and a
nonprofit organization that recycles computers.
Highway Infrastructure Investment:
* The U.S. Department of Transportation's Federal Highway
Administration (FHWA) apportioned $932 million in Recovery Act funds to
Georgia for highway infrastructure and other eligible projects. As of
September 1, 2009, $546 million had been obligated, and $10 million had
been reimbursed by FHWA.
* Almost 70 percent of Recovery Act highway obligations for Georgia
have been for pavement projects. Specifically, $376 million of the $546
million obligated as of September 1, 2009, is being used for pavement
improvement, pavement widening, and new road construction projects.
* The Georgia Department of Transportation (GDOT) is completing its
second, and final, phase of Recovery Act planning. As of September 1,
2009, the state had awarded 108 contracts with a total value of $391
million.
Georgia Made Budget Cuts in Face of Continuing Fiscal Challenges and
Plans More Cuts:
Georgia's fiscal condition continues to decline, as evidenced by the
following:
* The state's net revenue collections for June 2009 were 15.7 percent
less than they were in June 2008, representing a decrease of
approximately $255 million in total taxes and other revenue. Because
the state did not meet its revenue projections for fiscal year 2009
(which ended June 30, 2009), the Governor's Office of Planning and
Budget started fiscal year 2010 by withholding 5 percent of agencies'
state general fund allotments and requiring employees to take 3
furlough days during the first half of the fiscal year.[Footnote 2]
* Unemployment in Georgia continues to increase, with the state
reporting a 10.3 percent unemployment rate in July 2009 compared with
6.2 percent in July 2008. The unemployment insurance benefits paid out
in June 2009 were $167 million, about $100 million more than benefits
paid in June 2008. The increase in unemployment claims has started to
deplete the state's unemployment trust fund. As of November 2008, the
trust fund contained $1 billion; by August 2009, the balance had
decreased to $431 million, a 59 percent reduction.
Georgia is preparing for the cessation of Recovery Act funding by
continuing to reduce state spending levels. The Governor's Office of
Planning and Budget has asked each state agency to provide budget
reduction plans of 4 percent, 6 percent, and 8 percent for the amended
fiscal year 2010 and fiscal year 2011 budgets. The office has
instructed state agencies to consider the fiscal year 2010 funding
reductions as permanent reductions for future years and stated that any
need for additional funding should be accomplished with a
redistribution of existing funds within an agency's budget. For the
fiscal year 2011 budget, the state has implemented a new process
requiring agencies to rate each of their programs in the following
areas using a scale of one to five: whether it is a core state service,
whether it is of strategic importance, the numbers of Georgians served,
the relationship between funding and level of service (that is, the
impact of a 10 percent cut in state funding on services), its
performance relative to recognized industry standards, and the
proportion of funding from state sources. The Governor's Office of
Planning and Budget will use the score for each state program to help
prioritize decisions.
Given its fiscal challenges, Georgia is seeking to recover
administrative costs associated with overseeing Recovery Act funds.
States may recoup costs for central administrative services such as
oversight and reporting, as provided in the May 11, 2009, U. S. Office
of Management and Budget (OMB) guidance.[Footnote 3] The guidance
discusses two ways that states might recoup central administrative
costs through State-wide Cost Allocation Plans (SWCAP), which states
submit to the U.S. Department of Health and Human Services (HHS)
annually. States may estimate costs for centralized services or
describe their methodology for billing services. The guidance states
that any estimated cost amount should not exceed 0.5 percent of the
total Recovery Act funds received by the state. On July 22, 2009,
Georgia officials submitted a number of questions about this guidance;
for example, they asked if the allowed 0.5 percent was an aggregate cap
or a limitation on individual awards and if the 0.5 percent could be
captured after funds were obligated, but not expensed. On August 3,
2009, HHS provided answers to some questions and referred Georgia to
OMB for responses to the rest. Georgia officials are also working
through the National Association of State Auditors, Comptrollers and
Treasurers to get additional guidance on recouping administrative
costs.
While awaiting further guidance, Georgia has begun developing an
addendum to its SWCAP for Recovery Act oversight costs.[Footnote 4] The
state plans to submit the addendum to HHS for approval at the end of
September 2009. The state plans to use both alternatives for cost
reimbursement by billing for certain services and estimating the costs
of centralized services. The Georgia Recovery Act Accountability
Officer has informed state agencies that they are to set aside 0.5
percent of their Recovery Act funds for the state's administrative
costs. The state took this step prior to the approval of its SWCAP
addendum to provide agencies the opportunity to plan for the
possibility of such expenses. With the 0.5 percent, the state hopes to
cover costs associated with additional Recovery Act audits to be
conducted by the State Auditor and Inspector General; the State
Accounting Office's oversight of Recovery Act reporting; maintaining
Georgia's Recovery Act Web site to promote transparency; and general
oversight of Recovery Act funds by the office of the Recovery Czar.
[Footnote 5]
More Than Half of Georgia's Transit Capital Assistance Program Funds
Have Been Obligated for a Variety of Projects:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing FTA grant programs,
including the Transit Capital Assistance Program.[Footnote 6] The
majority of the public transit funds--$6.9 billion (82 percent)--was
apportioned for the Transit Capital Assistance Program, with $6.0
billion designated for the urbanized area formula grant program and
$766 million designated for the nonurbanized area formula grant
program.[Footnote 7] Under the urbanized area formula grant program,
Recovery Act funds were apportioned to urbanized areas--which in some
cases include a metropolitan area that spans multiple states--
throughout the country according to existing program formulas. Recovery
Act funds were also apportioned to states under the nonurbanized area
formula grant program using the program's existing formula. Transit
Capital Assistance Program funds may be used for such activities as
vehicle replacements, facilities renovation or construction, preventive
maintenance, and paratransit services. Up to 10 percent of apportioned
Recovery Act funds may also be used for operating expenses.[Footnote 8]
Under the Recovery Act, the maximum federal fund share for projects
under the Transit Capital Assistance Program is 100 percent.[Footnote
9]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) submit to FTA for Recovery Act funding.[Footnote 10]
FTA reviews the project sponsors' grant applications to ensure that
projects meet eligibility requirements and then obligates Recovery Act
funds by approving the grant application. Project sponsors must follow
the requirements of the existing programs, which include ensuring the
projects funded meet all regulations and guidance pertaining to the
Americans with Disabilities Act (ADA), pay a prevailing wage in
accordance with federal Davis-Bacon Act requirements, and comply with
goals to ensure disadvantaged businesses are not discriminated against
in the awarding of contracts.
Fifty percent of Recovery Act funds apportioned to urbanized areas or
states are to be obligated within 180 days of apportionment (before
Sept. 1, 2009) and the remaining apportioned funds are to be obligated
within 1 year. The Secretary of Transportation is to withdraw and
redistribute to other urbanized areas or states any amount that is not
obligated within these time frames.[Footnote 11] In March 2009, $141
million in Recovery Act Transit Capital Assistance Program funds were
apportioned to Georgia and urbanized areas located in the state for
transit projects.[Footnote 12] As of September 1, 2009, FTA concluded
that the 50 percent obligation requirement had been met for Georgia and
urbanized areas located in the state. For the Transit Capital
Assistance Program, the U.S. Department of Transportation has
interpreted the term "obligation of funds" to mean the federal
government's commitment to pay for the federal share of the project.
This commitment occurs at the time the federal government signs a grant
agreement. As of September 1, 2009, FTA had obligated $120 million.
Transit Providers in Georgia Are Funding Vehicle Replacements and
Preventive Maintenance:
Recipients of funds from the Transit Capital Assistance Program include
both GDOT and transit providers. More specifically, GDOT is the
recipient of $37.9 million for the small urban areas under 200,000 and
rural areas in Georgia. It oversees seven small urban transit agencies
and 90 rural transit providers. In March 2009, GDOT issued a call for
projects to the small urban and rural transit providers in the state.
They were asked to submit a list of projects that were (1) eligible for
Recovery Act funds, (2) ready for implementation ("shovel ready") with
all planning and environmental program requirements completed, and (3)
included in their region's transportation improvement plans. In June
2009, the state selected a number of projects, including construction
of a transportation facility in Albany, Georgia. To ensure that all of
the Recovery Act funds are obligated, GDOT announced another call for
projects on September 15, 2009.
We visited two transit providers that are Recovery Act recipients,
MARTA and Gwinnett County, to discuss how they planned to use and
safeguard the funds. MARTA received a $55.4 million Transit Capital
Assistance grant, while Gwinnett County received about $9.4 million.
The urbanized area intends to use the maximum 10 percent of Transit
Capital Assistance Program funding apportioned to the urbanized area
for operating expenses and the remaining grant money to fund capital
projects. Table 1 describes the various capital projects that MARTA and
Gwinnett County selected. MARTA officials told us they focused on
projects that were a high priority and that enabled them to address
safety concerns identified in a recent facility audit. According to
Gwinnett County officials, they focused on existing priorities for
safety and operations and projects most likely to provide local
economic benefits.
Table 1: Recovery Act Projects Selected by MARTA and Gwinnett County:
Project: MARTA: Fire protection system upgrade; Project description:
Comprehensive upgrade or replacement of the fire protection system at
MARTA transit facilities systemwide; Estimated project cost: $27.3
million.
Project: MARTA: Preventive maintenance; Project description: Ongoing
maintenance of transit vehicles, facilities, and equipment to keep them
in good operating order; Estimated project cost: $20 million.
Project: MARTA: Bus purchase;
Project description: Acquisition of 18 clean fuel-powered buses;
Estimated project cost: $7.6 million.
Project: MARTA: Security enhancements;
Project description: Upgrade and renovation of lighting in rail
passenger stations to increase security, safety, and energy efficiency;
Estimated project cost: $555,000.
Project: Gwinnett County: Bus overhaul; Project description: Mid-
lifecycle overhaul of 28 transit buses, including complete engine
overhaul and body work; Estimated project cost: $3.7 million.
Project: Gwinnett County: Installation of audio-video and surveillance
equipment;
Project description: Technology will help to more effectively manage
the fleet, increase system security and safety, and provide customers
with real-time transit service information; Estimated project cost:
$3.3 million.
Project: Gwinnett County: Pedestrian access and walkways; Project
description: Will provide safe access and enhanced ADA access by
improving bus stop access; includes installing or upgrading walkway
connections, shelters, and signs;
Estimated project cost: $1.5 million.
Project: Gwinnett County: Bus shelters; Project description: Install
bus shelters at high-activity bus stops; Estimated project cost:
$800,000.
Project: Gwinnett County: Paratransit buses; Project description:
Replacing two obsolete paratransit buses currently operating beyond the
typical useful service life; Estimated project cost: $161,000.
Sources: MARTA and Gwinnett County Transit.
[End of table]
GDOT Plans to Modify Current Oversight Processes for Recovery Act Grant
Funding in Response to an FTA Review; the Transit Providers We
Interviewed Will Use Existing Processes:
Due to a recent review that had multiple findings, GDOT's
administration of Recovery Act transit grants will be closely
scrutinized by FTA.[Footnote 13] FTA's final report, dated June 29,
2009, noted nine material weaknesses and four significant deficiencies,
including that GDOT did not adequately monitor its subgrantees and did
not have adequate entity-level controls for grants management.[Footnote
14] FTA delayed the obligation of Recovery Act funds to GDOT until it
submitted an acceptable corrective action plan, which it did on July
29, 2009. Among other corrective actions, GDOT hired a consultant to
review and revise its transit oversight process and has been seeking a
transportation consultant to help improve its oversight of the state's
small urban, intercity, and rural transit programs and assist with
management and execution of projects, programs, and grants related to
the Recovery Act. FTA accepted GDOT's corrective action plan on August
7, 2009, subject to implementation progress. FTA will continue to
monitor GDOT through monthly status meetings and on-site reviews every
2 months. In addition, FTA has developed an oversight strategy to
monitor how GDOT is implementing the plan through an FTA triennial
review scheduled for the week of September 7, 2009, and during its
follow-up financial management oversight review scheduled for 2010.
[Footnote 15]
Both MARTA and Gwinnett County intend to administer their Recovery Act
funds using existing internal control procedures. FTA most recently
reviewed MARTA's internal control procedures for federally funded
transit projects in March 2009 as part of a financial management
oversight review. As a result of advisory comments from that review,
MARTA has been updating its accounting policies and procedures manual.
According to Gwinnett County officials, the county will use its
current, standard internal control procedures for all transit projects.
According to the officials, FTA vets these internal controls through
the triennial review process, which was most recently completed in May
2008. The final report for the 2008 review identified deficiencies in 9
of 23 areas, including financial and technical. Gwinnett County agreed
to correct all deficiencies by September 2008. All corrective actions
were officially closed in October 2008.
Project Sponsors Must Meet FTA Reporting Requirements:
Project sponsors must submit periodic reports, as required under the
maintenance-of-effort for transportation projects section (§1201(c) of
the Recovery Act) on the amount of federal funds appropriated,
allocated, obligated, and outlayed; the number of projects put out to
bid, awarded, or on which work has begun or been completed; project
status; and the number of jobs created or retained. In addition,
grantees must report detailed information on any subcontractors or
subgrants awarded by the grantee. Because FTA had obligated money for
Gwinnett County projects before July 31, 2009, the transit provider was
required to submit its report in August 2009, which it did. The report
contained information on the total amount of funds awarded, the number
of contract solicitations issued related to funds under the grant, and
the estimated amount of funds associated with the contract
solicitations. GDOT and MARTA are not required to submit their first
1201(c) reports until February 2010.
Georgia Is Taking Steps to Get Its Weatherization Assistance Program
Under Way and Safeguard Funds:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which DOE administers through each
of the states, the District of Columbia, and seven territories and
Indian tribes. The program enables low-income families to reduce their
utility bills by making long-term energy efficiency improvements to
their homes by, for example, installing insulation, sealing leaks, and
modernizing heating equipment, air circulation fans, or air
conditioning equipment. Over the past 32 years, the Weatherization
Assistance Program has assisted more than 6.2 million low-income
families. By reducing the energy bills of low-income families, the
program allows these households to spend their money on other needs,
according to DOE. The Recovery Act appropriation represents a
significant increase for a program that has received about $225 million
per year in recent years.
As of September 14, 2009, DOE had approved the weatherization plans of
all but two of the states, the District of Columbia, the territories,
and Indian tribes--including all 16 states and the District of Columbia
in our review. DOE had provided to the states almost $2.3 billion of
the $5 billion in weatherization funding under the Recovery Act. Use of
the Recovery Act weatherization funds is subject to Section 1606 of the
act, which requires all laborers and mechanics employed by contractors
and subcontractors on Recovery Act projects to be paid at least the
prevailing wage, including fringe benefits, as determined under the
Davis-Bacon Act.[Footnote 16] Because the Davis-Bacon Act had not
previously applied to weatherization, Labor had not established a
prevailing wage rate for weatherization work. In July 2009, DOE and
Labor issued a joint memorandum to Weatherization Assistance Program
grantees authorizing them to begin weatherizing homes using Recovery
Act funds, provided they pay construction workers at least Labor's wage
rates for residential construction, or an appropriate alternative
category, and compensate workers for any differences if Labor
establishes a higher local prevailing wage for weatherization
activities. Labor then surveyed five types of "interested parties"
about labor rates for weatherization work.[Footnote 17] The department
completed establishing prevailing wage rates in all of the 50 states
and the District of Columbia by September 3, 2009.
Under the Recovery Act, the Georgia Environmental Facilities Authority
(GEFA), the state agency that administers the Weatherization Assistance
Program, will receive approximately $125 million. With the funding,
GEFA expects to weatherize at least an additional 13,000 units over the
next 2 to 3 years. DOE approved Georgia's weatherization plan on June
26, 2009, for a project period of April 1, 2009, through March 31,
2012. As of September 1, 2009, the state had received $62.4 million (50
percent of its weatherization allocation), obligated $22.9 million, and
spent about $9,000.
GEFA Has Awarded Contracts for Recovery Act Weatherization Projects,
and Work Began in August:
GEFA has awarded contracts to service providers, and weatherization
work is under way. GEFA is using the same 22 service providers--
comprising a combination of community action agencies, nonprofit
agencies, and local governments--that currently provide weatherization
services under the state's non-Recovery Act weatherization program.
GEFA gave each service provider 10 percent of the service provider's
total allocation to help with implementation costs such as hiring
staff, renting additional space, training employees, and procuring
vehicles, field equipment, and services. As of September 10, 2009, all
22 service providers had been awarded contracts. According to GEFA
officials, each service provider received an advance of 25 percent of
its total allocation upon contract award. Each of the providers will be
responsible for hiring subcontractors to conduct weatherization work,
which began in late August 2009.
As part of its implementation strategy, GEFA plans to contract with a
vendor to provide training to its service providers. The training will
include a combination of field training and training at the vendor's
facilities in Atlanta. The vendor will provide classes, a circuit rider
(a trainer that will spend 1 to 2 days in the field answering questions
and providing on-site assistance), a Web site, and technical
assistance. These classes began in early September 2009. The vendor is
hoping to train all new crew members 30 to 120 days after they begin
working for a service provider.
Despite Uncertainty about Davis-Bacon Act Requirements, Weatherization
Work Will Proceed as Planned:
Although weatherization work is under way, service providers expressed
concerns about wage rate determinations and other Davis-Bacon Act
requirements. Officials at weatherization agencies across the state
received a survey from Labor in July 2009, which was used to determine
the Davis-Bacon Act prevailing wage for weatherization workers. Labor
set the wage rates in Georgia on August 29, 2009. Consistent with
guidance from DOE and Labor, GEFA did not withhold funding to the
service providers while the prevailing wage was being set.
However, at the preaward kick-off meeting that GEFA held on August 5
and 6, 2009 (which we attended), the service providers expressed
confusion about the Davis-Bacon Act requirements and how they would
apply to the weatherization program. Specifically, the service
providers were concerned about the requirements for a weekly payroll
and were confused as to which employees would fall under the act's
guidelines. Some of the service providers discussed signing contracts
for each individual house to limit the contract amount to below the
Davis-Bacon Act threshold of $2,000.
As part of its monitoring efforts, GEFA is requiring each service
provider to submit reports on compliance with Davis-Bacon Act
requirements (as discussed below in more detail). GEFA is hiring a
fiscal monitor who will be responsible for gauging the subrecipients'
and vendors' compliance with the Davis-Bacon Act, along with other
provisions of the Recovery Act.
State Officials Established Risk-Assessment, Fiscal, and Performance
Monitoring Processes for Service Providers Receiving Weatherization
Funds:
GEFA has taken a number of steps to monitor the use of Recovery Act
weatherization funds. First, the agency completed a risk assessment of
its service providers that involved assessing the level of performance
at each provider and rating their performance as high, standard, or at
risk. In addition, GEFA examined the providers' internal controls,
audited financial statements, and previous history with federal awards.
Second, GEFA has established financial reporting requirements. Each of
the service providers must submit a monthly financial report that
includes all reimbursable expenses for production completed during the
previous month, such as administrative costs, labor, and materials.
Each of the providers also must provide a regular invoice that tracks
expenses to date and the contract balance. GEFA is planning to
implement an online tool to collect these invoices by the first quarter
of 2010. According to GEFA officials, the online system will make it
easier for them to identify potential "red flags" and track the
progress of the providers. As noted above, GEFA will hire a fiscal
monitor to review the financial records of the subrecipients and
vendors for accuracy.
Third, GEFA plans to contract with a vendor to monitor whether the
service providers are in compliance with all applicable DOE regulations
and other requirements, including the policies and procedures in the
Georgia Weatherization Assistance Program's operations manual. For
purposes of monitoring, the state is being divided into 12 territories.
Each territory will house a weatherization educator and a
weatherization inspector. The weatherization educator will review file
documentation, report problems, and work with the service provider to
prevent errors in future reporting by providing educational
opportunities to the service provider's staff and contractors. The
educator also will provide information to the homeowner about the need
for weatherization, its benefits, and the procedures that will occur
during the process. This homeowner education component is new for
Georgia's Recovery Act weatherization program. Monthly, the
weatherization inspector will randomly select at least 10 percent of
the homes in each county to evaluate the service providers' work.
Fourth, GEFA has developed a process intended to replace ineffective
weatherization providers. GEFA plans to replace any service provider
that does not meet its contractual obligations--for example, by failing
to maintain adequate fiscal controls and accounting procedures, filing
late or inaccurate financial and programmatic reports, misusing program
funds, failing to adhere to the schedule for goals and objectives, or
not providing quality weatherization. GEFA's service provider contract
included language describing the terms for terminating the contract.
GEFA plans to issue a request for information to identify potential
replacement providers and has developed a policy for selecting
replacements. The policy states that GEFA will consider the potential
provider's (1) experience and performance in weatherization or housing
renovation activities; (2) experience in assisting low-income persons
in the area to be served; and (3) capacity to undertake a timely and
effective weatherization program.
State Has Plans to Assess the Impact of Recovery Act Weatherization
Funds:
GEFA plans to use a number of performance measures to determine the
impact of Recovery Act weatherization funds. In addition to measuring
home energy savings after weatherization based on DOE's methodology, it
plans to track the number of units weatherized, the number of people
assisted, and the number of jobs created and retained. The service
providers are responsible for reporting this data to GEFA in monthly
reports. Specifically, the service providers will provide information
including the types of housing units served, information on the
clients, and the estimated energy savings. Additionally, the service
providers have to provide regular reports separate from the monthly
financial and production reports to GEFA that are intended to track the
impact of the funds. The reports must include jobs created and retained
by state and local contractors, hours trained, and equipment purchases
exceeding $5,000.
Georgia Used Recovery Act Funds to Expand Summer Youth Services, but
Implementation Methods Varied across the State:
The Recovery Act provides an additional $1.2 billion in funds for the
WIA Youth Program, including summer employment. Administered by Labor,
the WIA Youth Program is designed to provide low-income in-school and
out-of-school youth 14 to 21 years old, who have additional barriers to
success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 18] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth Program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 19] Local areas may design summer
employment opportunities to include any set of allowable WIA youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job; (2) learn work readiness
skills on the job; and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 20]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth Program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Labor allotted about $31.4 million to Georgia in WIA Youth Recovery Act
funds. The Georgia Department of Labor (GDOL), which is the state's
administering agency, allocated $26.7 million of these funds to local
workforce boards. According to Labor, $16 million had been expended in
the state as of August 31, 2009. GDOL encouraged local areas to spend
their funding quickly, but wisely and in accordance with the rules and
regulations governing the funds. The local workforce boards we
interviewed--the Atlanta Regional Workforce Board, Coastal Workforce
Services, and the Richmond/Burke Job Training Authority--had a goal of
spending the majority of their funds by September 30, 2009.[Footnote
21]
Local Workforce Areas Largely Met the Georgia Department of Labor's
Participant Targets:
As of September 15, 2009, the state had served 10,717 youth through its
Recovery Act funded summer youth program, exceeding its target of
10,253 youth. The state set enrollment targets for each of the state's
20 workforce boards. The state developed these targets by dividing the
allocation amount for each workforce board by $2,600, which was the
amount that the state estimated would be required to serve one youth.
As shown in table 2, 11 of the workforce boards have exceeded their
targets, while 9 are still below their targeted levels of enrollment.
For example, the Macon/Bibb workforce board adopted a policy that
limited participants' work hours to 20 hours per week, which allowed it
to increase the number of youth served. State officials explained that
boards below their targets may be slow in entering data into the
state's tracking system. However, in some cases, other circumstances
have delayed enrollment. For example, the Southwest Georgia workforce
board began the second phase of the program focusing on older youth in
August 2009.
Table 2: Projected and Enrolled Youth by Workforce Area, as of
September 15, 2009:
Local area: Macon/Bibb[A];
Projected number of youth to be served: 244; Number of applications
received: 1,176; Number of youth enrolled: 554;
Percentage of target enrolled: 227.
Local area: Atlanta Regional;
Projected number of youth to be served: 1,184; Number of applications
received: 1,784; Number of youth enrolled: 1,637;
Percentage of target enrolled: 138.
Local area: Coastal;
Projected number of youth to be served: 535; Number of applications
received: 4,739; Number of youth enrolled: 722;
Percentage of target enrolled: 135.
Local area: Lower Chattahoochee;
Projected number of youth to be served: 355; Number of applications
received: 1,800; Number of youth enrolled: 464;
Percentage of target enrolled: 131.
Local area: Northeast Georgia;
Projected number of youth to be served: 610; Number of applications
received: 3,020; Number of youth enrolled: 785;
Percentage of target enrolled: 129.
Local area: East Central Georgia;
Projected number of youth to be served: 324; Number of applications
received: 600;
Number of youth enrolled: 409;
Percentage of target enrolled: 126.
Local area: Fulton;
Projected number of youth to be served: 252; Number of applications
received: 400;
Number of youth enrolled: 289;
Percentage of target enrolled: 115.
Local area: South Georgia;
Projected number of youth to be served: 331; Number of applications
received: 512;
Number of youth enrolled: 368;
Percentage of target enrolled: 111.
Local area: Heart of Georgia;
Projected number of youth to be served: 607; Number of applications
received: 2,477; Number of youth enrolled: 636;
Percentage of target enrolled: 105.
Local area: Atlanta;
Projected number of youth to be served: 1,055; Number of applications
received: 3,000; Number of youth enrolled: 1,098;
Percentage of target enrolled: 104.
Local area: Cobb Works;
Projected number of youth to be served: 445; Number of applications
received: 1,484; Number of youth enrolled: 447;
Percentage of target enrolled: 100.
Local area: DeKalb;
Projected number of youth to be served: 895; Number of applications
received: 1,200; Number of youth enrolled: 836;
Percentage of target enrolled: 93.
Local area: Southeast Georgia;
Projected number of youth to be served: 168; Number of applications
received: 509;
Number of youth enrolled: 153;
Percentage of target enrolled: 91.
Local area: Northwest;
Projected number of youth to be served: 820; Number of applications
received: 1,301; Number of youth enrolled: 741;
Percentage of target enrolled: 90.
Local area: Richmond/Burke;
Projected number of youth to be served: 394; Number of applications
received: 1,320;
Number of youth enrolled: 352;
Percentage of target enrolled: 89.
Local area: Middle Georgia;
Projected number of youth to be served: 298; Number of applications
received: 967;
Number of youth enrolled: 232;
Percentage of target enrolled: 78.
Local area: Georgia Mountains[B];
Projected number of youth to be served: 264; Number of applications
received: 536;
Number of youth enrolled: 181;
Percentage of target enrolled: 69.
Local area: Southwest Georgia[C];
Projected number of youth to be served: 704; Number of applications
received: 1,700; Number of youth enrolled: 404;
Percentage of target enrolled: 57.
Local area: West Central Georgia[B];
Projected number of youth to be served: 578; Number of applications
received: 1,458; Number of youth enrolled: 316;
Percentage of target enrolled: 55.
Local area: Middle Flint[B];
Projected number of youth to be served: 190; Number of applications
received: 339;
Number of youth enrolled: 93;
Percentage of target enrolled: 49.
Local area: Total;
Projected number of youth to be served: 10,253; Number of applications
received: 30,322; Number of youth enrolled: 10,717;
Percentage of target enrolled: 105.
Source: Georgia Department of Labor.
[A] The Macon/Bibb workforce board adopted a policy that limited the
participants' work hours to 20 hours per week, which allowed the board
to serve more youth.
[B] This workforce board is taking advantage of a waiver from Labor to
serve older youth through March 2010.
[C] The Southwest Georgia workforce board began a second phase of the
program focusing on older youth in August 2009.
[End of table]
Implementation Approaches Varied across Georgia's Local Workforce
Areas:
The local workforce boards implemented their WIA summer youth programs
in a variety of ways across the state. As shown in table 3, the local
entities we interviewed differed in the length of their programs, wages
paid, and whether they operated the program in-house or contracted with
service providers.
Table 3: Overview of Selected Local Workforce Boards:
Number of counties served:
Atlanta Regional: 7;
Coastal: 9;
Richmond/Burke: 2.
Program implementation:
Atlanta Regional: Contracted with service providers; (Nine previous
providers and one new provider for payroll); Coastal: Contracted with
service providers; (Three previous providers); Richmond/Burke: Managed
in-house by the workforce board.
Program design:
Atlanta Regional: Focused on work experience; Coastal: Focused on work
experience;
Richmond/Burke: Focused on work experience with academic portion for
younger youth.
Length of program:
Atlanta Regional: 4 to 8 weeks, depending on service provider; Coastal:
120 hours per youth;
Richmond/Burke: 30 hours per week for 7 weeks.
Length of work readiness training and incentives paid: Atlanta
Regional: 6 to 20 hours; Unpaid to $175; Coastal: 3 to 5 days; $75 to
$150;
Richmond/Burke: 1 week; Unpaid.
Identifying youth and determining eligibility: Atlanta Regional:
Determined by service providers; Coastal: Board centrally identified
youth and provided a prescreened list to service providers, who were
responsible for determining final eligibility;
Richmond/Burke: Conducted in-house by workforce board staff.
Identifying work sites:
Atlanta Regional: Service providers and workforce board identified and
recruited;
Coastal: Service providers identified and recruited; Richmond/Burke:
Workforce board identified and recruited.
Wage range:
Atlanta Regional: Minimum wage to $14;
Coastal: Minimum wage to $7.55;
Richmond/Burke: Minimum wage.
[End of table]
Source: GAO.
Recruiting Work Sites:
Of the three workforce boards we interviewed, two stated they did not
have trouble recruiting work sites. These two areas relied on their
service providers to identify various work sites for the youth. For
example, one of the service providers for the Atlanta Regional
Workforce Board contacted local Chambers of Commerce, business
associations, and faith-based agencies and advertised in local
newspapers. One service provider for Coastal Workforce Services was
affiliated with the city of Savannah and worked to develop work sites
within other city departments, such as storm water management services
and economic development. While neither board had problems recruiting
work sites, their service providers reported some difficulty placing
youth 14 to 15 years old. The other area, Richmond/Burke Job Training
Authority, had challenges recruiting private companies as work sites.
The board overcame the challenge of placing younger youth by adding an
academic portion to the younger youth's summer program. The board
developed a classroom learning experience for youth 14 to 15 years old
that focused on skills such as searching and applying for colleges and
jobs. Youth enrolled in the program spent 12 hours a week in the
classroom and 18 hours a week with an employer.
The boards we interviewed took a number of different steps to ensure
that their work sites were safe. The Atlanta Regional Workforce Board
contracted with a vendor to provide workers' compensation insurance.
Prior to providing the insurance, the vendor assessed the safety of
each work site. The other two workforce boards (or their service
providers) used a risk-based approach to determine which work sites to
visit. All three local workforce boards assessed the safety of the work
sites either through monitoring visits or work site agreements
validating the safety of the site.
All three boards we interviewed designed their summer youth programs to
focus on work experience, rather than academic training. The service
providers we interviewed used different processes to match youth with
work sites. Some service providers held job fairs or had youth
interview at the various sites, while other service providers placed
youth at work sites based on their interests and only involved the work
sites in the process upon request. The Richmond/Burke Job Training
Authority determined the youth's interest and then had the youth
contact the work site to schedule an interview.
The three boards we interviewed offered a variety of work
opportunities. More specifically, we found the following examples:
* About 100 youth participated in a summer learning program offered by
a service provider. Youth at this site received training and work
experience in the areas of drama, video production, and other visual
arts. These youth worked with industry professionals in these areas and
were expected to complete a project related to their area of study. For
example, the youth in the drama program were responsible for developing
and producing a play that was held at the end of the summer program.
They also attended occupational workshops and participated in basic
life and career skills training.
* A private company in the health-care sector employed youth in its
warehouse, where the youth learned to gather the supplies that would be
packaged for health-care providers.
* Some youth worked at various county or city government agencies. For
example, one site was a county library, at which the youth categorized
materials, among other tasks.
* A youth center utilized youth participants as summer camp counselors
and administrative clerks.
GDOL provided the local areas with some guidance on how to identify
green jobs, including summarizing guidance provided by Labor and
listing examples of green jobs. Despite this guidance, local officials
expressed confusion about the definition of a green job. Some local
workforce board officials suggested that while a site might be
considered a green work site, the work experience opportunity for the
youth might not be a green job. For example, an organic food company
was considered a green employer; however, at least one of the youth was
performing clerical duties. GDOL officials noted that it was correct to
classify this work experience as a green job based on guidance from
Labor. In addition, officials at one service provider told us they
thought it was more important to find meaningful work experiences for
the youth than it was to focus on identifying and developing green
jobs.
All three workforce boards we interviewed identified some green work
sites but estimated they were a small portion of the total number of
job opportunities. For instance, the Atlanta Regional Workforce Board
worked with a local technical college to develop a 4-week water
management camp for youth. This camp combined work experience and
classroom activities in bioscience and environmental science to help
youth develop marketable skills applicable to the water quality
management industry. Coastal Workforce Services recruited a nonprofit
organization that developed a computer refurbishing and recycling
program for at-risk youth to learn how to refurbish computers that
would have ended up in land fills (see fig. 1). The program combined
work experience and classroom activities. The Richmond/Burke Job
Training Authority placed some youth at the Burke County Forestry
Commission, where they performed clerical and office duties.
Figure 1: Computer Recycling Program at a Nonprofit Organization:
[Refer to PDF for image: photographs]
The photo on the left shows two used computers being prepared for
refurbishing at a youth work site recruited by Coastal Workforce
Services. The photo on the right shows multiple stacks of used
computers that will also be refurbished at the same work site.
Source: GAO.
[End of figure]
Recruiting and Determining Eligibility of Youth:
Georgia did not have challenges recruiting youth. Local workforce
boards across the state received more than 30,000 applications for
about 10,000 slots. According to the local workforce boards we
interviewed, they recruited youth through the school systems, the
state's foster care agency, the juvenile justice system, one-stop
career centers, and other sources. Each of the local workforce boards
we interviewed developed a checklist to determine the youth's
eligibility to participate in the program. Each one outlined the income
eligibility requirements and barriers to employment, such as the need
for additional assistance to complete an educational program or secure
employment.
Youth Wages and Length of Program:
Consistent with the Fair Labor Standards Act, GDOL required that youth
be paid the federal minimum wage.[Footnote 22] However, the wage range
varied across the three workforce boards we interviewed. Two workforce
boards consistently paid youth at or slightly above the federal minimum
wage. The other workforce board paid wages that varied from the minimum
wage to $14 an hour. Local workforce board officials explained that
wages were set at $12 or higher to match the wages of other employees
at the work site with the same job description but not in the summer
youth program.
The local workforce boards we visited also served youth for varying
lengths of time. Two of the local workforce boards we interviewed set a
standard for the number of hours a youth could work during the summer
youth program, while one did not. For example, in the Coastal region,
youth could work up to 120 hours, spread over 6 weeks. Similarly, in
the Richmond/Burke area, youth were required to work for 30 hours per
week for 7 weeks to complete the program. However, the Atlanta Regional
Workforce Board did not set a time frame. In some instances, youth
worked about 8 weeks, while others worked 4 to 5 weeks.
State and Local Areas Have Implemented Multiple Monitoring Tools:
The summer youth programs were monitored at the state and local level.
GDOL plans to conduct a three-phase monitoring approach for the summer
youth programs.[Footnote 23] The first phase consisted of a preprogram
assessment to determine each local workforce board's readiness to
implement a summer youth program. This phase concluded on June 1, 2009.
GDOL conducted informal discussions with local area workforce boards to
ensure the boards were acting in accordance with the Recovery Act. The
second phase included monitoring work sites and reviewing program and
financial records. More specifically, GDOL staff visited a sample of
work sites and randomly tested participant eligibility. These reviews
are scheduled to be completed by September 30, 2009. To guide its
monitoring efforts, GDOL created a monitoring tool that addressed areas
such as programmatic design and oversight, transparency, file reviews,
work site evaluation, and contract monitoring activities. In December
2009, GDOL plans to complete the third phase, which will focus on
reporting and closing out the program.
GDOL identified a number of findings during its phase-two monitoring
visits and will include corrective actions plans for the local
workforce boards in the final reports, which are scheduled to be
completed by October 31, 2009. More specifically, at the local
workforce boards we interviewed, GDOL identified issues related to
contracting, overobligation of funds, and time sheet signatures. Due to
the timing of the reviews, the department was able to work with some
local workforce boards to correct some findings prior to the completion
of their summer youth programs. Table 4 describes some of the findings
that GDOL had at each local workforce board we interviewed.
Table 4: Georgia Department of Labor's Findings at Local Workforce
Boards We Interviewed:
Workforce board: Atlanta Regional Workforce Board; Status of finding:
Preliminary;
GDOL finding: Amendments to service provider contracts did not include
some of the required Recovery Act language (for example, language
requiring the provider to ensure that work sites adhere to applicable
federal and state wage, labor, and workers' compensation laws); Local
workforce board's response: According to Atlanta Regional Workforce
Board officials, they did not receive from GDOL the contract language
GDOL told them they needed to include.
Workforce board: Atlanta Regional Workforce Board; Status of finding:
Preliminary;
GDOL finding: The board overobligated its funding and went over its
enrollment target by approximately 470 youth. The issue arose because
the board did not turn away any eligible youth. GDOL is working with
the board to identify weaknesses in its financial and management
information systems;
Local workforce board's response: According to Atlanta Regional
Workforce Board officials, non-Recovery Act WIA funding will be used to
meet its overobligation, which means that a large portion of youth
served with non-Recovery Act WIA funding will be recruited from the
Recovery Act summer youth program.
Workforce board: Coastal Workforce Services; Status of finding:
Preliminary;
GDOL finding: GDOL raised concerns about the meaningfulness of the
board's work readiness measure;
Local workforce board's response: GDOL and board officials worked to
develop a more meaningful measure.
Workforce board: Richmond/Burke Job Training Authority; Status of
finding: Final;
GDOL finding: Agreements with educational service providers did not
include some of the required Recovery Act language (for example,
language on Recovery Act wage rate requirements); Local workforce
board's response: Workforce board has 90 days to respond to the final
monitoring report.
Workforce board: Richmond/Burke Job Training Authority; Status of
finding: Final;
GDOL finding: Some time sheets did not have supervisor signatures;
Local workforce board's response: Workforce board has 90 days to
respond to the final monitoring report.
Sources: Georgia Department of Labor and workforce board officials.
Note: GDOL sent a final monitoring report to the Richmond/Burke Job
Training Authority on August 31, 2009. The results of GDOL's monitoring
visits to the Atlanta Regional Workforce Board and Coastal Workforce
Services are still preliminary.
[End of table]
The three local workforce boards we interviewed stated they had
monitoring efforts in place for the service providers and work sites.
For example, the Atlanta Regional Workforce Board developed a
monitoring plan for its summer youth service providers. These service
providers were visited at least twice over the course of the summer and
in one case five times between June 11, 2009, and July 31, 2009. These
reviews consisted of desk and contract reviews, reviews of participant
and work site files, and interviews with youth participants, service
provider staff, and work site supervisors, among others. Coastal
Workforce Services planned to review 100 percent of its work sites over
the course of the program and review eligibility of all participants
before paying final invoices to service providers. The Richmond/Burke
Job Training Authority stated that 25 percent of the work sites would
be monitored.
Work Readiness Measures Varied among Local Workforce Boards:
Consistent with federal program guidance, GDOL allowed the three local
areas we interviewed to determine their own work readiness performance
measure. GDOL issued guidance to help local workforce boards develop
the measure. According to the GDOL training provided to the workforce
boards, youth have attained work readiness if they demonstrate a
measurable increase in skills, including world-of-work awareness, labor
market knowledge, occupational information, values clarification and
personal understanding, career planning and decision making, and job
search techniques.[Footnote 24] The local workforce boards were given
flexibility in defining goals and choosing an assessment tool. They
record the date and the outcome of the work readiness measure in the
information system the state uses to manage the WIA programs (they
enter "yes" or "no" under the category "Attained Recovery Act Work
Readiness Increase"). The state plans to track other outcome measures
in this system, such as youth hired into unsubsidized employment.
The Atlanta Regional Workforce Board allowed its service providers to
choose from one of three different measures of work readiness. The
first measure would require the youth to pass a postparticipation test
one level above the preparticipation test benchmark using a series of
assessments that measure applied math, reading, and other skills. The
second measurement would require the youth to earn Georgia WorkReady
Certification, which is an assessment of skills in math, reading, and
work habits. The third measure makes use of the work site supervisor's
performance evaluation as the pre-, mid-, and post-test measure, with
youth passing this measurement if they were rated higher at the end of
the summer than they were at the beginning. The two service providers
we visited used the third measure, relying on evaluations by the
supervisor. The form they used asked the supervisor to rate the youth
on work performance, work behavior, and critical thinking skills, among
other things. For a youth to be deemed work ready, the providers were
looking for a 50 percent increase in evaluated skills.
In response to a monitoring finding, Coastal Workforce Services worked
with GDOL to develop an evaluation that supervisors were asked to
complete at the end of each pay period. The survey rated the youth in
10 areas, including overall performance, quality of work, and ability
to solve problems. The board decided to use the first survey as the
"pretest" measure and the last survey as the "posttest" measure. Youth
were deemed to have attained work readiness if there was an increase in
their rating by the end of the summer. The workforce board did not set
a specific goal for improvement.
The Richmond/Burke Job Training Authority used two methods to determine
if youth had attained work readiness. The first was to have youth take
the same test at the beginning and end of the summer. The test covered
15 competencies such as preparing a resume, job interviewing,
completing tasks effectively, and demonstrating a positive attitude.
The youth would attain work readiness if they passed one competency
that they previously failed. If the youth failed this measure or did
not take the tests, the youth's work readiness would be determined
using supervisor evaluations. For example, the form required
supervisors to rate youth as "poor," "average," or "exceeds" in areas
such as completing tasks effectively and being punctual.
Recovery Act Funds in Georgia Continue to Be Obligated for Federal-Aid
Highway Projects:
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to states through federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
As we reported in July 2009, $932 million was apportioned to Georgia in
March 2009 for highway infrastructure and other eligible projects.
[Footnote 25] As of September 1, 2009, $546 million had been obligated.
[Footnote 26] For the Highway Infrastructure Investment Program, the
U.S. Department of Transportation has interpreted the term "obligation
of funds" to mean the federal government's contractual agreement to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement. As of September
1, 2009, $10 million had been reimbursed by FHWA.[Footnote 27]
Almost 70 percent of Recovery Act highway obligations for Georgia have
been for pavement projects. Specifically, $376 million of the $546
million obligated as of September 1, 2009, is being used for pavement
improvement, pavement widening, and new road construction projects.
Another $49 million was obligated for bridge projects. State officials
told us they selected projects based on various factors, including
eligibility requirements, whether the project was shovel ready, and
geographic dispersion across the state. Figure 2 shows obligations by
the types of road and bridge improvements being made.
Figure 2: Highway Obligations for Georgia by Project Improvement Type,
as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (69 percent, $376.1 million): Pavement
improvement ($185.9 million): 34%; New road construction ($110.3
million): 20%; Pavement widening ($79.9 million): 15%.
Bridge projects total (9 percent, $49.1 million): Bridge replacement
($49.1 million): 9%.
Other (22 percent, $120.9 million):
Other ($120.9 million): 22%.
Source: GAO analysis of FHWA data.
Note: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
[End of figure]
GDOT is completing its second, and final, phase of Recovery Act
planning. The final list of projects was approved by the State
Transportation Board in August 2009. Projects selected include safety
improvements, bridge repair, and interstate rehabilitation. GDOT
officials noted they might add more projects if, as we discuss later,
bids continue to come in as low as they have in recent months. As of
September 1, 2009, the department had awarded 108 contracts with a
total value of $391 million.[Footnote 28]
We selected five highway contracts to discuss in greater depth with the
relevant contracting officials--three state-administered projects in
Charlton, Fulton, and Greene Counties and two locally administered
projects in Gwinnett County.[Footnote 29] We focused on how the
contracts were awarded and how they will be monitored. The three
contracts GDOT awarded were for pavement improvement projects (grading,
repaving, and road marking) on state road sections in three counties.
The department awarded the contracts on May 29, 2009, with a projected
completion date of April 30, 2010, for all three contracts. According
to department officials, the contracts were awarded competitively to
contractors on the state's prequalified list.[Footnote 30] The
officials stated that the successful bids were from 12 percent to 26
percent lower than the department's estimate for the work, in part
because of the reduced cost of materials. As we discussed in our July
2009 report, GDOT has established internal controls intended to
safeguard Recovery Act projects.[Footnote 31] Contract engineers are to
perform monthly construction audits on all Recovery Act projects, and
on-site inspectors will review project progress daily. In addition,
GDOT's internal audit department plans to perform compliance testing on
selected contracts.
Gwinnett County's two projects are intended to manage traffic more
effectively through the use of surveillance equipment and remote
traffic signal controls. The contracts were awarded on July 21, 2009,
with a projected completion date of October 28, 2011. According to
county officials, the county awarded the contracts competitively to the
lowest, responsive bidders. Only contractors that are on GDOT's
prequalified list could bid on the projects. County officials stated
that bids came in from 30 percent to 35 percent lower than the county's
original estimates. According to county officials, the projects will be
overseen by an engineering firm hired to monitor and validate completed
work compared with contract requirements. More specifically, the firm
will provide construction engineering supervision services such as
interpretation of specifications, testing and material certification,
contract changes, construction documentation, and intermediate and
final inspections.
GDOT has created an electronic application to meet FHWA reporting
requirements on the use of Recovery Act funds. The data collected from
subrecipients include the number of employees working on a project for
the month, the number of hours worked on the project for the month, and
the total payroll for the project that month. In addition to the data
reported to FHWA on jobs created, GDOT tracks performance measures such
as the percentage of construction projects completed within the
expected completion period and percentage of state highways with
pavements that meet or exceed minimum standards for the Governor's
Office of Planning and Budget.
Although Reporting Will Be Decentralized, Georgia Has Been Preparing
State Agencies for Recovery Act Reporting:
Since our last Recovery Act report, Georgia has decided to decentralize
Recovery Act reporting. Although individual state agencies will be
responsible for reporting, the State Accounting Office is taking a
number of steps to prepare agencies.
Georgia Has Instituted a Decentralized Reporting Approach:
Since the issuance of OMB's June 22, 2009, guidance, Georgia has
modified its approach to Recovery Act reporting.[Footnote 32] We
reported in July 2009 that the State Accounting Office planned to use a
Web-based system to capture information from state agencies and then
centrally report the data to OMB.[Footnote 33] However, on August 7,
2009, the State Accounting Office issued a memorandum instituting a
decentralized approach to Recovery Act reporting. The reasons for the
change in approach included the following:
* OMB's guidance clarified that "prime recipients" (that is, the state
agencies) were responsible for recipient and subrecipient data, not the
state.
* Decentralized reporting would avoid duplication of effort because
several state agencies were required to report additional information
to federal agencies.
* Funds needed to adequately develop a long-term centralized data
warehouse had not materialized as anticipated.
* Many state agencies had requested permission to pursue a
decentralized reporting approach.
Figure 3 illustrates the decentralized Recovery Act reporting approach
in Georgia.
Figure 3: Decentralized Recovery Act Reporting Structure in Georgia:
[Refer to PDF for image: illustration]
The figure illustrates the decentralized Recovery Act reporting
approach in Georgia. This approach requires lead state agencies in
Georgia, who are prime recipients and are also responsible for
subrecipient data, to report directly to OMB.
Source: GAO.
[End of figure]
The August 7, 2009, memorandum from the State Accounting Office further
established the roles and responsibilities of state agencies and their
subrecipients. Each state agency, institution, or authority that
received the initial award of Recovery Act funds is responsible for
reporting required information into OMB's Web reporting system.
Agencies generally will not be allowed to delegate the reporting
responsibility to subrecipients, so that the state will have better
control over the accuracy, timeliness, and completeness of the reported
information. Agency heads and chief financial officers will be held
accountable for the accuracy, completeness, and timeliness of
reporting. As a standard internal control to ensure a proper level of
review, the State Accounting Office will require a certification of the
data from each agency head and chief financial officer prior to
submission to OMB. By signing the certification, the agency head and
chief financial officer confirm that (1) the report does not contain
any misleading information or untrue statement of material fact, (2)
the report does not omit any required information, and (3) the agency
has designed and evaluated the effectiveness of its internal controls
over reporting to provide reasonable assurance about the reliability
and preparation of the report.
Although individual state agencies will be responsible for Recovery Act
reporting to OMB, the state still will collect some information
centrally. The State Accounting Office plans to develop a state summary
report that will capture consolidated Recovery Act information for
Georgia's Recovery Act Web site, the Governor, the legislature, and
other stakeholders. The exact format of the report still has not been
determined.
Georgia Plans to Provide Technical Assistance to State Agencies and
Monitor Recovery Act Reporting:
The state's Recovery Act implementation team and State Accounting
Office plan to work with state agencies to help them prepare for
Recovery Act reporting and monitor their submissions.[Footnote 34] For
the first report due on October 10, 2009, the implementation team plans
to hold weekly "countdown" meetings from August 26, 2009, to November
15, 2009, to help prepare state agencies for the reporting deadline. At
these countdown meetings, agency officials will have an opportunity to
ask questions, propose different scenarios for discussion, and discuss
lessons learned after their initial submission. In addition, the State
Accounting Office plans to provide training to state agencies. The
training will be targeted to Recovery Act reporting coordinators, chief
financial officers, and other agency staff involved in Recovery Act
reporting. It will focus on the reporting requirements and include a
detailed example of how to complete OMB's data collection tool.
Officials from the State Accounting Office also plan to work
individually with selected agency heads and chief financial officers to
assess their agencies' reporting readiness. The State Accounting Office
started conducting these readiness reviews in early September 2009.
These reviews will be mandatory for seven agencies selected based on
factors such as the amount of Recovery Act funds received. The State
Accounting Office has developed a questionnaire to help agencies
prepare for these reviews. The agency will have 60 minutes to present
to a team of reviewers, including staff from the State Accounting
Office, Governor's Office of Planning and Budget, and other agency
heads. The presentations are to focus on the following:
* how the agency plans to collect the information for the reports,
* the controls in place to review and validate the prime recipient data
and data from subrecipients,
* the certification and submission process, and:
* postsubmission data quality reviews.
The State Accounting Office may ask other state agencies to present
their process and procedures for Recovery Act reporting, as necessary.
The State Accounting Office plans to monitor state agencies' Recovery
Act reporting using a risk-based approach; that is, it developed an
audit risk tool to prioritize resources and identify high-risk
agencies. The tool identifies high-risk agencies based on the following
criteria: (1) award amount, (2) prior audit findings, (3) operational
process or system complexity, (4) new program, (5) number of
subrecipients or vendors, (6) lack of manpower or resources, and (7)
analysis of the risk-management plans required by the Governor's Office
of Planning and Budget.[Footnote 35] Each of these criteria will be
graded using a three-level scale (high, medium, and low risk). A
composite score will be derived to determine the overall audit risk of
the agency. The State Accounting Office plans to contract with an
accounting firm to assist with Recovery Act monitoring. The plan is for
the selected firm to perform reviews of agency internal controls and
perform detailed testing based upon the risks and agencies identified
in the ranking tool.
State Agencies or Other Direct Recipients Are Taking Steps to Prepare
for Recovery Act Reporting:
State agencies are taking a number of different steps to prepare for
Recovery Act reporting. For the Federal-Aid highway program, GDOT has
developed an electronic tool to capture data from subrecipients.
Information on jobs created and retained is collected from
subrecipients on a monthly basis and includes the number of employees
working on the project each month, number of hours worked on the
project, and the total payroll for the month. GDOT field personnel and
headquarters staff in the construction division review the data. The
internal audit department will perform spot checks of contractor
employment records.
In contrast to the highway program, where GDOT is responsible for all
of the Recovery Act reporting in the state, both GDOT and transit
providers that are recipients of Transit Capital Assistance grants are
responsible for Recovery Act reporting (see fig. 4). GDOT will report
data supplied by the small urban and rural transit providers it
oversees. To date, GDOT has not issued guidance on Recovery Act
reporting to its subrecipients. To capture the data from its
subrecipients, the department plans to use a system similar to the one
it has developed for the highway program. GDOT's internal audit
department plans to perform a review of the data submitted to OMB.
Among other things, it will verify reported projects, subrecipients,
and vendors; analyze the reasonableness of job impact numbers; and
identify missing data that should be reported.
Figure 4: Transit Recovery Act Reporting Structure for GDOT and Transit
Providers in Metropolitan Atlanta:
[Refer to PDF for image: illustration]
The figure illustrates the Transit Recovery Act reporting structure for
the Georgia Department of Transportation (GDOT) and transit providers
in metropolitan Atlanta. Both GDOT and the transit providers in
metropolitan Atlanta will report directly to OMB. Seven metropolitan
Atlanta transit agencies are responsible for Recovery Act reporting,
which includes MARTA, the Georgia Regional Transportation Authority,
and the following counties, Cobb, Douglas, Gwinnett, Cherokee, and
Henry. GDOT will report for its small urban and rural subrecipients,
and MARTA will report for its subrecipient, Clayton County.
Source: GAO.
[End of figure]
Both of the transit providers with which we spoke still were
determining how to meet Recovery Act reporting requirements. For
example, after reviewing guidance from FTA and OMB, Gwinnett County had
not yet determined how it would account for job creation among its
contractors. Officials cited their bus overhaul project as an example
of how complicated it could be to estimate jobs. The bus overhaul work
was awarded to a single contractor with subcontracts for engine
overhaul, cooling system upgrades, and bus paint and body work.
Gwinnett County plans to work with its contractors to come up with a
methodology for estimating jobs created. MARTA had formed a working
group to develop plans for Recovery Act reporting. For activities such
as preventive maintenance, it plans to use the factors in the OMB
guidance to convert staff hours to full-time equivalents. For its fire
prevention system upgrade, it has issued an addendum to the proposed
contract documents requiring information on jobs created and retained.
Officials noted that it was unclear if they should track jobs
associated with their bus purchase. FTA's guidance on its reporting
requirements indicated that transit providers did not need to report
jobs associated with the vehicle manufacturing process because they
were indirect jobs; however, OMB's guidance did not clearly indicate
that jobs associated with vehicle procurements were indirect jobs.
For the weatherization program, GEFA will report data supplied by its
service providers. According to GEFA officials, its contracts with
service providers require them to provide GEFA with a report on the use
of Recovery Act funding within 5 days of the end of each quarter. These
reports are to include the total amount of funds received and spent; a
list of the projects and activities funded, including a program
description, completion status, and an estimate of the jobs created or
retained; and details on subawards and other payments. GEFA officials
are developing an electronic data collection tool to meet reporting
requirements. This tool is projected to be implemented by September 30,
2009. All of the service providers must use the tool and certify that
the information presented is correct. According to GEFA officials, the
agency has not yet provided guidance to its service providers on
Recovery Act reporting, but a webinar is planned for September 24,
2009.
For the WIA Youth Program, GDOL will be responsible for submitting
information supplied by the local workforce boards. The local workforce
boards will be required to submit data as of August 30, 2009. GDOL set
this early cutoff date in order to have the data ready by October 10,
2009, as required. The department issued an OMB-developed spreadsheet
for the local workforce boards to complete and guidance on August 28,
2009. The department plans to assess data quality during its regular
monitoring visits, which include a financial component.
Georgia's Comments on This Summary:
We provided the Governor of Georgia with a draft of this appendix on
September 8, 2009, and a representative from the Governor's office
responded on September 9, 2009. The official agreed with our draft,
stating that it accurately reflects the current status of the Recovery
Act program in Georgia.
GAO Contacts:
Terri Rivera Russell, (404) 679-1925 or russellt@gao.gov:
Alicia Puente Cackley, (202) 512-7022 or cackleya@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Paige Smith, Assistant
Director; Nadine Garrick, analyst-in-charge; Chase Cook; Erica
Harrison; Marc Molino; Daniel Newman; Barbara Roesmann; David
Shoemaker; and Robyn Trotter made major contributions to this report.
[End of section]
Footnotes for Appendix VI:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] According to state budget officials, the only exceptions to the 5
percent budget cut were the Medicaid, PeachCare (the state's health
program for children), and Education programs--which were cut by 3
percent--and the Georgia Department of Behavioral Health &
Developmental Disabilities (the department that provides mental health
services), which was not cut at all. Medicaid Federal Medical
Assistance Percentage grant awards under the Recovery Act are discussed
in detail in [hyperlink, http://www.gao.gov/products/GAO-09-1016].
[3] See OMB Memorandum, M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities (May 11, 2009).
[4] Georgia is behind on its SWCAP plans. It is currently working from
its 2004 plan. The State Auditor cited the state's failure to prepare
and submit a SWCAP plan as a finding in its 2008 Single Audit report.
[5] For the fiscal year 2009 Single Audit report, the State Auditor
estimates its workload will increase by about 3,500 audit hours because
of new internal control and program requirements associated with the
Recovery Act. For this Single Audit report, the State Auditor plans to
audit Recovery Act funds expended at four state agencies, including the
Georgia Departments of Labor and Transportation.
[6] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[7] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[8] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[9] The federal share under the existing formula grant program is
generally 80 percent.
[10] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and MPOs designated for the
area. MPOs are federally mandated regional organizations, representing
local governments and working in coordination with state departments of
transportation that are responsible for comprehensive transportation
planning and programming in urbanized areas. MPOs facilitate decision
making on regional transportation issues including major capital
investment projects and priorities. To be eligible for Recovery Act
funding, projects must be included in the region's transportation
improvement plan and the approved State Transportation Improvement
Program (STIP).
[11] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[12] The jurisdiction of some urbanized areas within this state crosses
into at least one other state. Therefore, some urbanized areas are
included in multiple state totals.
[13] The financial management oversight review examined the
effectiveness of GDOT's internal controls as they related to compliance
with FTA requirements for financial management systems.
[14] A material weakness is a deficiency or deficiencies in internal
control that raises a reasonable possibility that a material
misstatement of the entity's financial statements will not be prevented
or detected on a timely basis. Significant deficiencies are less severe
than material weaknesses, yet important enough to merit attention by
those charged with governance.
[15] FTA's triennial review program evaluates grantee adherence to
federal requirements at least once every 3 years. See GAO, Public
Transportation: FTA's Triennial Review Program Has Improved, But
Assessments of Grantees' Performance Could Be Enhanced, [hyperlink,
http://www.gao.gov/products/GAO-09-603] (Washington, D.C.: June 30,
2009).
[16] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[17] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[18] H.R. Rep. No. 111-16, at 448 (2009).
[19] U.S. Department of Labor, Training and Employment Guidance Letter
No. 14-08 (Mar. 18, 2009).
[20] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[21] We visited the Atlanta Regional Workforce Board and Coastal
Workforce Services and interviewed officials at the Richmond/Burke Job
Training Authority. We also interviewed five service providers and one
contractor who provided payroll and workers' compensation services. In
addition, we visited four work sites. We selected these local areas
based on the amount of WIA youth funds they received and geographic
distribution.
[22] The federal minimum wage changed from $6.55 to $7.25, effective
July 24, 2009.
[23] These monitoring efforts were in addition to the normal monitoring
process, in which each local workforce board is reviewed annually.
[24] Local areas' work readiness measures should include, among other
things, a preassessment to identify work readiness skills at the start
of the experience and a postassessment to determine attainment of
goals.
[25] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses (Georgia), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[26] This does not include obligations associated with $25 million of
apportioned funds that were transferred from FHWA to FTA for transit
projects. Generally, FHWA has authority pursuant to 23 U.S.C. §
104(k)(1) to transfer funds made available for transit projects to FTA.
[27] States request reimbursement from FHWA as the state makes payments
to contractors working on approved projects.
[28] This amount represents only those contracts awarded by the Georgia
Department of Transportation. Some localities within Georgia also may
have awarded contracts with Recovery Act funds.
[29] We selected the state-administered highway projects based on
geographic distribution and total award amounts (more than $2 million).
We selected the two Gwinnett County projects because they were
described in our July 2009 report.
[30] As stated on GDOT's subcontractor application, in order to be
added to the state's prequalified contractor's list, the contractor
must receive a favorable review of its application, which includes
disclosure of general company information, work history, company
management structure, past job performance evaluations, fixed assets,
claims of damage or violations, and reference letters.
[31] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[32] OMB Memorandum, M-09-21, Implementing Guidance for the Reports on
Use of Funds Pursuant to the American Recovery and Reinvestment Act of
2009 (June 22, 2009).
[33] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[34] As noted in our April 2009 report, Georgia's Recovery Act
implementation team includes a senior management team, officials from
various state agencies, and a group to support accountability and
transparency. 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.: April 23, 2009).
[35] As stated in our July 2009 report, the Governor's Office of
Planning and Budget required state agencies receiving Recovery Act
funds to complete risk management plans. The State Accounting Office
plans to evaluate these plans to help it determine where to apply audit
resources. Some of the risks identified by state agencies included
risks associated with reporting requirements, subrecipient issues,
information system issues, and insufficient staff. See GAO-09-830SP.
[End of section]
Appendix VII: Illinois:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery
Act)[Footnote 1] spending in Illinois. The full report on all of our
work, which covers 16 states and the District of Columbia, is available
at [hyperlink, http://www.gao.gov/recovery/].
GAO's work in Illinois updated funding information on three education
and one public housing program, and focused on three other programs
funded under the Recovery Act--Highway Infrastructure Investment, the
Transit Capital Assistance Program, and the Workforce Investment Act
(WIA) Youth Program. The three programs we focused on were selected for
different reasons:
* Illinois developed its own criteria to define economically distressed
areas for projects to be funded with Highway Infrastructure Investment
funds. We followed up to determine if Illinois reassigned any of its
transportation projects in light of any feedback from federal or state
officials pertaining to the state's criteria in identifying distressed
areas. In addition, highway contracts have been underway in Illinois
and provided an opportunity to review oversight procedures for use of
Recovery Act funds.
* The deadline for obligating a portion of Transit Capital Assistance
funds was September 1, 2009, and, further, this program provided an
opportunity to review non-state entities that receive Recovery Act
funds.
* The Recovery Act provided funding for WIA Youth Program activities
including summer employment and, therefore, provided an opportunity to
review a program that was well underway in Illinois.
For these three programs in Illinois, GAO focused on how funds were
being used; how safeguards were being implemented, including those
related to procurement of goods and services; and how results were
being assessed. Consistent with the purposes of the Recovery Act, funds
from the programs we reviewed are being directed to help Illinois and
local governments stabilize their budgets, stimulate infrastructure
development and expand existing programs.
* Three education programs under the Recovery Act. The U.S. Department
of Education (Education) has awarded Illinois approximately $1.5
billion in U.S. Department of Education State Fiscal Stabilization Fund
(SFSF) funds. These funds have helped the state restore its school
districts' funding shortages. As of September 1, 2009, local
educational agencies (LEAs) have drawn down $1.2 billion. Additionally,
Education has awarded Illinois $210 million in Recovery Act funds under
Title I, Part A, of the Elementary and Secondary Education Act (ESEA)
of 1965. These funds are to be used to help educate disadvantaged
youth; for example, through providing professional development to
teachers on how to relate to this special population. Based on
information available as of September 1, 2009, LEAs have drawn down
$431,500. Education has also awarded Illinois $253 million of its
Recovery Act funds under the Individuals with Disabilities Education
Act (IDEA), Part B. These funds are to be used to support special
education and related services for infants, toddlers, children, and
youth with disabilities. Illinois LEAs have drawn down $1.4 million in
IDEA funds as of September 1, 2009. While the first half were available
as of April 1, 2009, Education announced on September 4, 2009 that the
second half of Title I and IDEA Recovery Act funds were available.
* Highway Infrastructure Investment. The U.S. Department of
Transportation's (DOT) Federal Highway Administration (FHWA)
apportioned $936 million in Recovery Act funds to Illinois for highway
infrastructure projects. As of September 1, 2009, $736 million had been
obligated and $200 million, the most of any state in the country, had
been reimbursed by the federal government.
* Transit Capital Assistance Program. The U.S. Department of
Transportation's Federal Transit Administration (FTA) apportioned
$375.5 million in Recovery Act funds to Illinois and urbanized areas
located in the state. Of this amount, $354.3 million was for urbanized
areas, and $21.2 million was for non-urbanized areas. As of September
1, 2009, the federal government's obligation for Illinois and urbanized
areas located in Illinois was $360.9 million.
* Workforce Investment Act Youth Program. The U.S. Department of Labor
(Labor) allotted about $62 million to Illinois in Workforce Investment
Act Youth Program Recovery Act funds. The state has allocated about $53
million to local workforce investment boards, and as of September 1,
2009, expended about $22 million. As of the end of August, almost
13,000 youth had been placed in summer employment activities across the
state. Illinois expects to meet its target for youth summer employment
activities of 15,000 youth, and the local workforce area in the state
receiving the most funds--the Chicago local workforce area--has met its
target of 7,300 youth. We found that the type of summer employment
opportunities varied across the two workforce areas we visited and
included positions such as office assistants, teacher's aides, camp
counselor assistants, and clerical aides.
* Public Housing Capital Fund. Illinois has 99 public housing agencies
that, in total, have received $221 million in Recovery Act-funded,
Public Housing Capital Fund formula grants. As of September 5, 2009, 83
of these public housing agencies have obligated a total of $76 million
and 56 have drawn down a total $6 million.
Recipient Reporting: States and localities are among those receiving
Recovery Act funds directly from federal agencies that are expected to
report quarterly on a number of measures--including use of the funds,
an estimate of the number of jobs created and the number of jobs
retained. In preparation for these reporting requirements, Illinois
issued guidance since our last report requiring state agencies to
develop procedures for collecting, entering, reviewing and reconciling
these data elements. The state is also in the process of conducting a
trial run of the reporting process for state agencies required to
report on the impact of the act. In reviewing plans for complying with
recipient reporting, we found that state and local agencies varied in
their approach to, and understanding of, reporting requirements. For
example, the Illinois State Board of Education is currently working on
a collection tool that will be used by LEAs in reporting Recovery Act
required data elements to the Board, while officials from transit
agencies told us that they largely had existing systems in place to
report required information. Local workforce board officials told us
that while they are tracking required information for reporting, they
were unclear on how to report potential jobs created or retained
through the WIA program's summer youth component.
As Illinois Begins Fiscal Year 2010 Facing Fiscal Stress, Recovery Act
Funds Continue to Provide Financial Relief:
Large decreases in Illinois' state revenues in fiscal year 2009
contributed to an anticipated shortfall of $3.7 billion that will be
carried into fiscal year 2010, which began on July 1, 2009. The budget
for fiscal year 2010 was passed in July 2009, appropriating $26.1
billion against $29.3 billion in estimated revenues and transfers in as
well as $2.8 billion in statutory transfers out, such as debt payments.
The appropriation for fiscal year 2010 is over $4 billion less than
that of fiscal year 2009, although the fiscal year 2010 appropriation
does not include funds to pay down the estimated $3.9 billion backlog
in unpaid bills from fiscal year 2009. The state borrowed $1.250
billion in August 2009 to assist in paying down this backlog of bills.
The $29.3 billion in revenue budgeted for fiscal year 2010 is about
$150 million more than estimated fiscal year 2009 revenues. However,
state revenue sources have declined significantly since fiscal year
2008. See Table 1. Budgeted state revenue sources in fiscal year 2010
are nearly $3 billion less than those earned in fiscal year 2008.
Federal revenue sources increased substantially over the same time
period, from $4.815 billion in fiscal year 2008 to a budgeted $7.131
billion in fiscal year 2010.
Table 1: State of Illinois Revenue Summary for Fiscal Years 2008, 2009
and 2010 (in billions of dollars):
Total Revenues:
Fiscal Year 2008 Actual: $27.759;
Fiscal Year 2009 Estimated as of 9/9/09: $27.551; Fiscal Year 2010
Budget as of 7/15/09: $27.078.
State Sources:
Fiscal Year 2008 Actual: $22.944;
Fiscal Year 2009 Estimated as of 9/9/09: $20.984; Fiscal Year 2010
Budget as of 7/15/09: $19.947.
Federal Sources:
Fiscal Year 2008 Actual: $4.815;
Fiscal Year 2009 Estimated as of 9/9/09: $6.567; Fiscal Year 2010
Budget as of 7/15/09: $7.131.
Statutory Transfers In:
Fiscal Year 2008 Actual: $1.900;
Fiscal Year 2009 Estimated as of 9/9/09: $1.593; Fiscal Year 2010
Budget as of 7/15/09: $2.221.
Total Operating Revenues Plus Transfers In: Fiscal Year 2008 Actual:
$29.659;
Fiscal Year 2009 Estimated as of 9/9/09: $29.144; Fiscal Year 2010
Budget as of 7/15/09: $29.299.
Source: Illinois Governor's Office data.
[End of table]
The fiscal year 2010 budget included $3.4 billion in borrowing to cover
required pension costs, which would make additional funds available for
other needs. The General Assembly granted the Governor discretion over
these additional funds by allocating $2.2 billion to human services
programs and $1.2 billion to undesignated programs in lump sums, as
opposed to specific line items, requiring the Governor to make the
final decision as to which programs to fund.
Governor Quinn also signed a 6-year, $31 billion capital budget in July
2009, funded by bonds from the state in addition to federal and local
matching funds. State officials expect over $3.7 billion in Recovery
Act funding for projects included in the capital budget, depending upon
the extent to which the state obtains additional grant money available
through the Act. The state's anticipated contribution to the overall
plan is $13 billion. The capital plan calls for increases in a variety
of motorist fees, in addition to the September 1, 2009 increases to
sales taxes on candy, alcoholic beverages and other products to support
the bonds. State officials also anticipated a new revenue stream of
$300 million annually from video gaming terminals to support the bonds,
although revenues from the terminals were expected to be limited in
fiscal year 2010 while the new program was implemented.
Recovery Act funds continued to assist the state in stabilizing its
distressed financial condition. According to the Commission on
Government Forecasting and Accountability, the receipt of Recovery Act
funds allowed Illinois to avoid its largest ever 1-year decrease in
revenue in fiscal year 2009. State officials expected the receipt of
Recovery Act funding to allow the state to include an additional $1.965
billion in services in the fiscal year 2010 budget. This includes
$1.016 billion from SFSF and $949 million made available as a result of
the increased FMAP, compared to $1.039 billion from SFSF and $1.145
billion[Footnote 2] made available as a result of the increased FMAP in
fiscal year 2009. State officials said that the state did not have any
reserve funds available from prior years.
An official from the Illinois Office of Management and Budget said that
the state is likely to seek an increase in tax revenues later in fiscal
year 2010 and expected to see enhanced revenues as a result of an
economic recovery from the recession over the next two fiscal years.
This official anticipated that the revenue increases would provide the
support necessary to transition into fiscal year 2011 when SFSF from
the Recovery Act are not expected to be available. This state official
also acknowledged that the state is likely to maintain a balance of
approximately $3.7 billion in unpaid bills at the end of fiscal year
2010. While this is a decrease from the expected balance of $3.9
billion in unpaid bills at the end of fiscal year 2009, any balance at
the end of fiscal year 2010 will still affect the budget for fiscal
year 2011. The state has also formed a Pension Modernization Task Force
to consider options for pension reform, as its pension plans contended
with over $54 billion in unfunded liabilities as of the state's most
recently published calculation at the end of fiscal year 2008.
Following the federal Office of Management and Budget's (OMB) guidance
on central administrative costs, an official from the Illinois
Governor's Office said that Illinois had not determined the method by
which to submit reimbursement requests[Footnote 3]. However, this
official noted that the state was leaning towards the billed services
option because of the fluidity remaining in the fiscal year 2010
budget. The alternate option would rely on budgeted or estimated costs
instead of actual costs, which would present a challenge for Illinois
while its budget was still undergoing changes. The decision as to which
method to use in claiming reimbursement for administrative costs was
being delayed upon advice from the state's contractor for Statewide
Cost Allocation Plan issues, who suggested that further legislation may
be required in order for the state to comply with OMB's guidance.
According to the official, the contractor advised the state that
applying for reimbursement of administrative costs would be premature
before the passage of H.R. 2182, currently under consideration in
Congress[Footnote 4]. The state sought clarification from the U.S.
Department of Health and Human Services to address this concern, but as
of September 10, 2009 had not received a response. The official
confirmed that the state has identified programs for which it could
eventually receive reimbursement for administrative costs and believed
that the costs would fall within OMB's defined limit of 0.5 percent of
Recovery Act funds received. This official further stated that Illinois
may have been better positioned to monitor Recovery Act activities more
aggressively and proactively if the funding for the administrative
costs of doing so were more readily available.
State Fiscal Stabilization Fund Largest Disbursement of Recovery Act
Education Funds:
SFSF:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHE). The initial award of SFSF
funding required each state to submit an application to the U.S.
Department of Education that provides several assurances, including
that the state will meet maintenance-of-effort requirements (or it will
be able to comply with waiver provisions) and that it will implement
strategies to meet certain educational requirements, such as increasing
teacher effectiveness, addressing inequities in the distribution of
highly qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
ESEA Title I:
The Recovery Act provides $10 billion to help local educational
agencies (LEA) educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965. The Recovery
Act requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 5] The U.S.
Department of Education is advising LEAs to use the funds in ways that
will build the agencies' long-term capacity to serve disadvantaged
youth, such as through providing professional development to teachers.
The U.S. Department of Education made the first half of states'
Recovery Act ESEA Title I, Part A funding available on April 1, 2009
and announced on September 4, 2009 that it had made the second half
available.
IDEA:
The Recovery Act provided supplemental funding for programs authorized
by Part B of the Individuals with Disabilities Education Act (IDEA),
the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities have
access to a free and appropriate public education and is divided into
two separate grants--Part B grants to states (for school-age children)
and Part B preschool grants (section 619). The U.S. Department of
Education made the first half of states' Recovery Act IDEA funding
available to state agencies on April 1, 2009 and announced on September
4, 2009 that it had made the second half available.
Illinois' Allocation of Recovery Act Funds from the Department of
Education:
As of September 1, 2009, Illinois had been awarded $1.5 billion, $210
million, and $253 million in SFSF; ESEA Title I, Part A; and IDEA, Part
B Recovery Act funds, respectively. Of these amounts, approximately
$1.2 billion in SFSF; $431,500 in Title I, Part A; and $1.4 million in
IDEA, Part B funds have been disbursed to LEAs. Illinois did not use
any SFSF funds to restore funding to public institutions of higher
education (IHEs) for fiscal year 2009.
In fiscal year 2010, both LEAs and IHEs will receive SFSF funds to
offset cuts in state education funding. SFSF distributions in 2010 are
estimated to represent about 13 percent of the state's spending of $7.3
billion in general funds on K-12 education. The state's total fiscal
year 2010 budget for K-12 education is projected to be approximately
$11 billion, of which about $2.3 billion represents non-Recovery Act
federal spending. In fiscal year 2010, the Governor plans to also use
all SFSF government services funds for education. Eighty-six percent of
government services funds will be used to fund LEAs and 14 percent will
be used for public higher education. Table 2 below shows how funds were
awarded and disbursed for three Education programs in Illinois.
Table 2: Awards and Disbursements of IDEA-Part B, SFSF, and ESEA Title
I-Part A Recovery Act Funds:
Program Name--2009 Funding: IDEA--Part B; Amount Awarded to State: $253
million;
Amount State Disbursed to LEAs: $1.4 million.
Program Name--2009 Funding: SFSF;
Amount Awarded to State: $1.5 billion;
Amount State Disbursed to LEAs: $1.2 billion.
Program Name--2009 Funding: ESEA Title I--Part A; Amount Awarded to
State: $210 million;
Amount State Disbursed to LEAs: $431,500.
Source: GAO analysis of U.S. Department of Education data and Illinois
State Board of Education data.
[End of table]
There was little Recovery Act activity related to the ESEA Title I and
IDEA programs in Illinois in fiscal year 2009. Only four LEAs applied
for 2009 ESEA Title I Recovery Act funds, and 11 LEAs applied for 2009
IDEA Recovery Act funds. Local officials said that they did not apply
for these funds in 2009 because of a burdensome application process
over a relatively short time span, in addition to the fact that the
funds available in fiscal year 2009 would still be available in fiscal
year 2010.
OIG Reviewing Illinois Education Recovery Act Internal Controls:
The U.S. Department of Education's Office of the Inspector General
(OIG), Chicago/Kansas City/Dallas Region, is currently reviewing the
internal controls used by entities in Illinois--such as LEAs --that are
responsible for handling Recovery Act funds. This review will be
performed in two phases. Phase I determines whether entities charged
with responsibility for overseeing Recovery Act funds have designed
internal control systems that are sufficient to provide reasonable
assurance of compliance with the Recovery Act, program regulations, and
guidance. During Phase II, reviewers will test controls to determine
whether they are effective, and determine whether the entity is
complying with applicable laws and regulations.
The scope of the review will be limited to controls over data quality,
cash management, sub-recipient monitoring, and use of Recovery Act
funds for the SFSF, ESEA Title I, and IDEA programs. The OIG has
selected a small, medium, and large LEA for its detailed fieldwork. It
will also include the Illinois State Board of Education's (ISBE's) role
in distributing these funds in the scope of its review. The OIG plans
to release its Phase I report on September 30, 2009.
Funds Distribution, Cash Management, and Reporting:
ISBE is using the SFSF stabilization education funds to fill budget
shortfalls in its General State Aid payments to LEAs. Therefore, ISBE
officials explained, IBSE is required by state law to distribute these
funds on a predetermined schedule of payments--semi-monthly, in equal
installments on the 10TH and 20TH of each month. However, SFSF funds
are federal funds governed by the applicable federal cash management
rules.[Footnote 6] In general, these rules require executive agencies
implementing federal assistance programs and states participating in
them to minimize the time elapsing between the transfer of federal
funds to a state and the disbursement of those funds by the state and
the time elapsing between a state's disbursement of federal funds to
subgrantees, such as LEAs, and the disbursement of those funds by
subgrantees.[Footnote 7]
ISBE has used SFSF funds for its semi-monthly payments to LEAs since
April 2009, but has not documented cash needs for these payments as
required prior to making the semi-monthly disbursements. State
officials explained that ISBE does not have the ability to identify
specific cash needs from LEAs prior to distributing SFSF. Failure to
adequately manage cash needs could result in two possible adverse
effects on the federal government. First, ISBE may draw down SFSF funds
unnecessarily by not minimizing the time elapsing between its drawdown
and its payments to LEAs, effectively borrowing money from the federal
government contrary to the general cash management rules. Second, the
federal government may be subsidizing excess cash balances by LEAs if
ISBE makes unnecessary payments to the LEAs and the LEAs do not then
remit interest on the balances to the federal government.
ISBE, as part of its quarterly expenditure reporting process, completes
a Cash Summary report designed to identify excess cash balances
maintained by LEAs. According to state officials, LEAs are considered
to be maintaining excess cash balances when they do not expend the
funds they receive within the established timeframe. Cash management by
ISBE and LEAs in Illinois is an issue we intend to continue addressing
in future reports. The OIG is also currently evaluating Illinois'
timeliness in monitoring excess cash among LEAs.
Illinois Is Managing Highway Projects and Will Be Asked to Review Its
Determinations of Economically Distressed Areas:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through federal-aid highway program
mechanisms and states must follow the existing program requirements,
which include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
Illinois was apportioned $936 million in March 2009 for highway
infrastructure and other eligible projects. As of September 1, 2009,
$736 million has been obligated. For the Highway Infrastructure
Program, the U.S. Department of Transportation has interpreted the term
obligation of funds to mean the federal government's contractual
commitment to pay for the federal share of the project. This commitment
occurs at the time the federal government signs a project agreement. As
of September 1, 2009, $200 million has been reimbursed by FHWA, the
highest amount for any state in the country. States request
reimbursement from FHWA as the state makes payments to contractors
working on approved projects.
The majority of Highway Infrastructure Investment funds apportioned to
Illinois under the Recovery Act have been obligated, but some funds
remain unobligated at both the state and local levels. At the state
level, about $38 million in funds available for highways have not been
obligated largely because contractors' bids came in below estimated
costs. At the local level, less than half of the funds available for
highway projects have been obligated. As of September 1, 2009, a total
of $736 million had been obligated in Illinois, resulting in 423
highway projects. See Table 3 for data on the amount of allocated,
obligated, and unobligated funds.
Table 3: Illinois's Highway Funds Allocated, Obligated, and
Unobligated:
70 percent for use on state highways:
Allocated: $654,914,893;
Obligated: $616,685,395;
Unobligated: $38,229,498.
30 percent of apportioned funds suballocated for metropolitan, regional
and local use:
Allocated: $280,677,811;
Obligated: $118,825,790;
Unobligated: $161,852,021.
Total:
Allocated: $935,592,704;
Obligated: $735,511,185;
Unobligated: $200,081,519.
Source: GAO analysis of FHWA data.
[End of table]
About 78 percent of Recovery Act highway obligations are for Illinois's
highway pavement projects, compared with 9 percent for bridges and 12
percent for other projects. Specifically, $577 million of the $736
million obligated for Illinois state highway projects as of September
1, 2009, is being used for highway pavement projects. This includes
$554 million for pavement improvements, such as resurfacing. State
officials told us they selected pavement improvement projects because
these types of projects can be completed quickly and can create jobs
immediately. Figure 1 shows obligations by the types of road and bridge
improvements being made.
Figure 1: Highway Obligations for Illinois by Project Improvement Type
as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (78 percent, $577.1 million): Pavement
improvement ($553.9 million): 75%; New road construction ($18.4
million): 3%; Pavement widening ($4.8 million): 1%.
Bridge projects total (9 percent, $67.6 million): Bridge improvement
($53 million): 7%;
Bridge replacement ($10.3 million): 1%; New bridge construction ($4.3
million): 1%.
Other (12 percent, $90.8 million):
Other ($90.8 million): 12%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. States are required to do the following:
* Ensure that 50 percent of apportioned Recovery Act funds were
obligated within 120 days of apportionment (before June 30, 2009). The
50 percent rule applies only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated, primarily based on population, for metropolitan,
regional, and local use. In addition, states are required to ensure
that all apportioned funds--including suballocated funds--are obligated
within 1 year. The Secretary of Transportation is to withdraw and
redistribute to other states any amount that is not obligated within
these time frames.[Footnote 8]
* Give priority to projects that can be completed within 3 years and to
projects that are located in economically distressed areas. Distressed
areas are defined by the Public Works and Economic Development Act of
1965, as amended.[Footnote 9] According to this act, to qualify as
economically distressed, the area must (1) have a per capita income of
80 percent or less of the national average; (2) have an unemployment
rate that is, for the most recent 24-month period for which data are
available, at least 1 percent greater than the national average
unemployment rate; or (3) be an area the Secretary of Commerce
determines has experienced or is about to experience a special need
arising from actual or threatened severe unemployment or economic
adjustment problems resulting from severe short-or long-term changes in
economic conditions. [Footnote 10]
* Certify that the state will maintain the level of spending for the
types of transportation projects funded by the Recovery Act that it
planned to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state is required to identify the
amount of funds the state plans to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 11]
FHWA Will Ask Illinois to Review Its Economically Distressed Areas:
As of September 1, 2009, Illinois DOT had contracts for 197 of its 223
Recovery Act highway construction projects, or 88 percent, in the 85
counties that the state classified as economically distressed. These
were the same projects the state had reported in June 2009, except for
three new projects in distressed counties that previously had projects.
To determine which counties would be considered economically
distressed, Illinois developed its own criteria, based on the Recovery
Act provision that a distressed area can be one that has experienced a
special need arising from severe unemployment or economic adjustment
problems arising from severe changes in economic conditions, as
determined by the Secretary of Commerce. Illinois's criteria reflected
the most current data available to the state based on changes in
unemployment for each of the state's 102 counties.[Footnote 12] Use of
these criteria allowed the state to focus its Recovery Act projects on
areas that were most severely affected by the recent economic downturn,
according to Illinois Department of Transportation (IDOT) officials.
The state could have used the original criteria described by FHWA and
supported by maps of each county on FHWA's website. Using those
criteria, Illinois would have had 87 of its 223 Recovery Act projects,
or 39 percent, in the 74 counties that FHWA classified as economically
distressed. FHWA has since issued additional guidance which clarifies
the special need criteria, changing the locations that can be
classified as economically distressed.
Use of Illinois's criteria led the state to identify several distressed
areas in more populous areas of the state that were not originally
identified as economically distressed under FHWA's criteria. By FHWA's
criteria, 12 of the 15 most populous counties in the state were not
economically distressed. These included the Chicago area (Cook County
and its five collar counties) where IDOT put 95 projects, plus several
other counties with smaller population centers, such as Champaign-
Urbana, Bloomington, Peoria, Rock Island-Moline, and Springfield. While
most of the available funds are already obligated, IDOT officials said
they would consider placing projects in the 35 distressed counties,
according to Illinois criteria, that have no projects.
We recommended in our July report that the Secretary of Transportation,
in consultation with the Secretary of Commerce, develop (1) clear
guidance on identifying and giving priority to economically distressed
areas, and (2) more consistent procedures for FHWA to use in reviewing
and approving states' criteria for designating distressed areas. In
response to the recommendation, FHWA, in consultation with the
Department of Commerce, developed guidance that addresses our
recommendation. In particular, FHWA's August 2009 guidance directs
states to give priority to projects that are located in an economically
distressed area and can be completed within the 3-year timeframe over
other projects. In the guidance, FHWA also directs states to maintain
information as to how they identified, vetted, examined, and selected
projects located in economically distressed areas. In addition, FHWA's
guidance sets out criteria that states may use to identify economically
distressed areas based on "special need." The criteria aligns closely
with criteria used by the Department of Commerce's Economic Development
Administration (EDA) in designating special needs areas in its own
grant programs, including factors such as actual or threatened business
closures (including job loss thresholds), military base closures, and
natural disasters or emergencies. According to EDA, while the agency
traditionally approves special needs designations on a case-by-case
basis for its own grant program, it does not have the resources to do
so for the purpose of Recovery Act highway funding.[Footnote 13]
Rather, in supplemental guidance issued August 24, 2009, FHWA required
states to document their reliance on "special need" criteria and
provide the documentation to FHWA Division Offices, thereby making the
designation of new "special need" areas for the for Recovery Act
highway funding "self executing" by the states, meaning the states will
apply the criteria laid out in the guidance to identify these areas. We
plan to continue to monitor FHWA's and the states' implementation of
the economically distressed area requirement, including the states'
application of the special needs criteria, in our future reviews. FHWA
Illinois Division Office officials said they notified an Illinois DOT
official about release of the new guidance in early September 2009 but
had not yet discussed its application with state officials. FHWA
Division Office officials said they will ask Illinois DOT officials to
reassess their determinations of economically distressed areas in the
state.
State Officials Expect to Meet the State's Maintenance-of-Effort
Requirement:
Illinois state officials were satisfied with the state's ability to
maintain spending levels for transportation. Illinois passed a capital
plan on July 13, 2009, that should fund transportation infrastructure
projects, even if the state has an unexpected revenue shortfall. As
such, while DOT is continuing to enforce the Recovery Act requirement
that states maintain their February 2009 level of effort, Illinois
officials say they expect to meet their maintenance-of-effort
requirements.
States are required to certify that the state will maintain the level
of spending that it had planned on the day the Recovery Act was
enacted. Because the state's initial certification submitted in March
2009 contained extra explanatory language and required an adjustment in
an amount computed for the state's maintenance of effort, the state was
asked to resubmit its certification with revisions. As we reported in
July 2009, Illinois resubmitted its certification on May 20, 2009, to
the DOT and DOT concluded that the form of the Illinois's resubmitted
certification was consistent with its additional guidance. FHWA has
gathered data to evaluate Illinois's method of calculating the amounts
it planned to expend for the covered programs to determine if the
state's calculation complies with DOT guidance, but, according to FHWA
Illinois Division officials, FHWA has not yet completed its evaluation.
Illinois Is Using Existing Contracting and Oversight Procedures to
Oversee Recovery Act Highway Funds:
According to state officials, Illinois uses the same contracting
procedures for Recovery Act projects as it does for all other highway
construction projects. According to officials, the City of Chicago,
which awards contracts for its own projects, also follows its normal
contracting procedures. A contract in each area is discussed below (see
Tables 4 and 5). Both entities use construction performance bonds to
assure the work is completed satisfactorily. According to officials,
both entities also incorporate the Recovery Act requirements into the
written contracts. Illinois DOT has implemented enhanced oversight
procedures for Recovery Act highway funds. Specifically, the services
of consultants have been retained to assist management with additional
oversight activities. Using a risk-based selection approach to
oversight, the goal is to conduct additional on-site reviews of 25
percent of state let state projects, 40 percent of state let local
projects, and 100 percent of local let local projects, including the
City of Chicago. The enhanced oversight includes additional
documentation reviews, materials testing and independent weight checks.
These activities are being coordinated and overseen by in-house
management.
Table 4: Summary of Contract Information for State Administered
Contract:
Grundy County--11 Miles of Milling and Resurfacing on IL Route 47 from
IL Route 113 to Interstate 55:
* Cost--$2,270,771;
* Project start--August 2009;
* Expected completion--40 working days.
Source: Illinois Department of Transportation data.
[End of table]
IDOT awards and manages contracts related to Recovery Act construction
projects in Illinois outside of the City of Chicago. According to IDOT
officials, to perform the work for this project, the new contract was
awarded competitively, using a fixed-price contract. The contract was
reviewed by FHWA before the award to ensure it met Recovery Act
requirements. Agency officials stated that IDOT construction
requirements, which are located in the IDOT Construction Manual, were
followed when the contract was awarded. The officials also stated that
the federal suspension and debarment list maintained by the General
Services Administration (GSA) is not checked prior to contract award;
however, contractors and subcontractors are required to certify that
they have not been disbarred or suspended. According to officials, DOT
regulations state that participants in the program are not required to
make the check, but are encouraged to develop a procedure to verify
eligibility. Illinois DOT is developing a procedure to verify whether
or not contractors are on the GSA "Excluded Parties List System" (EPLS)
prior to contract award and will check all Recovery Act contractors
(including Aeronautics) against the EPLS to ensure no contracts were
awarded to debarred/suspended contractors. Additionally, Illinois DOT
is exploring the possibility of automating the procedure to verify
whether or not contractors are on the GSA EPLS prior to contract award.
According to agency officials, the agency has standard procedures for
monitoring construction projects. Inspectors will review the work and
check material quantities, and conduct spot interviews with employees
to ensure employees are paid the prevailing wage rates.
Table 5: Summary of Contract Information for Locally Administered
Contract:
Chicago Project--9 miles of Arterial Streets Resurfacing--North Area:
* Cost--$7,985,964;
* Project start--July 2009;
* Expected completion--December 2009.
Source: Chicago Department of Transportation data.
[End of table]
The Chicago Department of Transportation (CDOT) manages Chicago
construction projects. The Chicago Department of Procurement Services
awards the contracts, and for the Chicago project we identified,
according to officials, a new contract was awarded to perform the
project work. According to CDOT officials, the contract was awarded
competitively, using a fixed-price contract. Agency officials stated
that they followed their usual contracting procedures of conducting
pre- bid meetings, and providing the bidders with the terms and
conditions for construction contracts, instruction and execution
documents, and detailed specifications in the bid books that the
bidders receive. CDOT officials stated that they check a city
suspension and debarment list, and that contractors and subcontractors
are required to certify that they have not been disbarred or suspended.
They also stated that IDOT reviews the contracts before they are
awarded to ensure they meet the Recovery Act requirements. According to
officials, the contract includes requirements for the contractor to
report monthly employment data as required by Section 1512 of the
Recovery Act. According to agency officials, the agency:
* has standard procedures for monitoring construction projects;
* has job site inspections conducted by resident engineers and the
material quantities are reviewed; and:
* utilizes compliance officers and IDOT engineers to conduct site
visits as well.
Most Illinois Transit Agency Urbanized Area Formula Program Funds Have
Been Obligated:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 14] The majority of the public transit
funds--$6.9 billion (82 percent)--was apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program. [Footnote 15] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. Recovery Act funds were also
apportioned to states under the nonurbanized area formula grant program
using the program's existing formula. Transit Capital Assistance
Program funds may be used for such activities as vehicle replacements,
facilities renovation or construction, preventive maintenance, and
paratransit services. Up to 10 percent of apportioned Recovery Act
funds may also be used for operating expenses.[Footnote 16] Under the
Recovery Act, the maximum federal fund share for projects under the
Transit Capital Assistance Program is 100 percent.[Footnote 17]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) submit to FTA for Recovery Act funding.[Footnote 18]
FTA reviews the project sponsors' grant applications to ensure that
projects meet eligibility requirements and then obligates Recovery Act
funds by approving the grant application. Project sponsors must follow
the requirements of the existing programs, which include ensuring the
projects funded meet all regulations and guidance pertaining to the
Americans with Disabilities Act (ADA), pay a prevailing wage in
accordance with federal Davis-Bacon Act requirements, and comply with
goals to ensure disadvantaged businesses are not discriminated against
when awarding contracts.
Funds appropriated through the Transit Capital Assistance Program must
be used in accordance with Recovery Act requirements, including the
following:
* Fifty percent of Recovery Act funds apportioned to urbanized areas or
states are to be obligated within 180 days of apportionment (before
Sept 1, 2009) and the remaining apportioned funds are to be obligated
within 1 year. The Secretary of Transportation is to withdraw and
redistribute to other urbanized areas or states any amount that is not
obligated within these time frames.[Footnote 19]
* State governors must certify that the state will maintain the level
of state spending for the types of transportation projects, including
transit projects, funded by the Recovery Act that it planned to spend
the day the Recovery Act was enacted. As part of this certification,
the governor of each state is required to identify the amount of funds
the state plans to expend from state sources from February 17, 2009,
through September 30, 2010.[Footnote 20] This requirement applies only
to state funding for transportation projects. The Department of
Transportation will treat this maintenance-of-effort requirement
through one consolidated certification from the governor, which must
identify state funding for all transportation projects.
* Project sponsors must submit periodic reports, as required under the
maintenance-of-effort for transportation projects section (§1201(c) of
the Recovery Act) on the amount of federal funds appropriated,
allocated, obligated and outlayed; the number of projects put out to
bid, awarded, or work has begun or completed; project status; and the
number of jobs created or sustained. In addition, grantees must report
detailed information on any subcontractors or subgrants awarded by the
grantee.
The Recovery Act requires that 50 percent of the funds apportioned to
urbanized areas or states for the Transit Capital Assistance Program be
obligated before September 1, 2009. FTA concluded that, as of September
1, 2009, the 50 percent obligation requirement had been met for
Illinois and urbanized areas located in the state. More specifically,
* In March 2009, a total of $354.3 million in Transit Capital
Assistance Recovery Act funds was apportioned to urbanized areas in
Illinois. As of September 1, 2009, $349.4 million, or 99 percent had
been obligated by FTA. [Footnote 21]
* Over 90 percent of these funds, $327.6 million, were apportioned to
the Chicago region, and within the Chicago region, the Regional
Transportation Authority allocated funds among three transit agencies--
the Chicago Transit Authority (CTA), Metra (the commuter rail system),
and Pace (the suburban bus system)--according to an existing regional
formula. As of September 1, 2009, $325.6 million, or 99 percent of the
funds apportioned to the Chicago region, had been obligated.[Footnote
22]
* Other urbanized areas in Illinois also received apportionments. A
total of $26.7 million in urbanized area formula funds was apportioned
to other urban areas in, or partially in, Illinois.[Footnote 23] All of
these areas have met the 50 percent obligation requirement.
Large Transit Agencies Have Emphasized Repair and Rehabilitation of
Vehicles:
A significant portion of Recovery Act Transit Capital Assistance
program obligations for the urbanized areas in Illinois have been for
the repair and rehabilitation of transit vehicles, including the
Chicago Transit Authority's use of $75.2 million to overhaul and
rehabilitate bus and rail fleet cars, and Metra's use of $71 million to
rebuild aging locomotives. Local transit officials told us they
selected these projects for a large percentage of funding due to their
agency's large maintenance backlogs. Transit agencies will also use the
funds for other purposes. Metra, for example, will use funds to repair
tracks and structures, upgrade signal systems, rehabilitate several
stations, replace air conditioning units on rail cars, and build
additional station parking. The agency will apply $6.8 million to pay
most of the cost of the new station and intermodal facility on its Rock
Island District at 35th Street in Chicago. The CTA also will use funds
to repair track and buy 50 hybrid buses, and expects that all of its
Recovery Act capital projects will be completed by the end of 2010.
According to transit agency officials, identifying projects for
Recovery Act funds was not difficult. Both the CTA and Metra had future
planned projects identified in the regional transportation plan that
were not yet funded, but could quickly be implemented. Projects they
could quickly advance were selected, placed in a revised regional plan,
and submitted to FTA for approval. Both agencies have ongoing contracts
funded by federal grants and are familiar with federal project
requirements, which facilitated the process.
Illinois Has Met the Obligation Requirement for Nonurbanized Areas:
Illinois was apportioned about $21.2 million in Recovery Act Funds for
the nonurbanized area formula grant program. The state of Illinois is
the primary recipient of nonurbanized area funds, and small transit
agencies will receive Recovery Act funds through IDOT. IDOT has
obtained an $11.5 million grant, primarily to buy 74 new buses and 24
paratransit vehicles for these small agencies, to meet the 50 percent
obligation requirement. For the remaining nonurbanized area funds, IDOT
is working with small transit providers to identify which additional
infrastructure projects are shovel-ready, and plans to submit these in
a second proposal.
Lack of a Capital Transit Program in Illinois Eliminates the
Maintenance-of-Effort Requirement:
The Recovery Act includes provisions for the maintenance-of-effort on
the part of states, specifically to continue funding existing programs
at the planned level, and not reduce their level of financial effort.
In the case of Illinois, the state did not have a capital program for
transit for the 5 years prior to the passage of the Recovery Act, and
the state was not providing capital funds to transit districts. As a
result, Illinois effectively has no maintenance-of-effort threshold to
meet. Illinois has not transferred any Recovery Act highway funds into
transit programs.
Illinois Expects to Meet Its Participation and Expenditure Targets for
Youth Placed in WIA Summer Employment Activities and Has Begun to
Monitor Use of Recovery Act Funds:
The Recovery Act provides an additional $1.2 billion in funds for
Workforce Investment Act (WIA) Youth Program activities, including
summer employment. Administered by the Department of Labor (Labor), the
WIA Youth program is designed to provide low-income in-school and out-
of-school youth 14 to 21 years old, who have additional barriers to
success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 24] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 25] Local areas may design summer
employment opportunities to include any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job (2) learn work readiness skills
on the job, and (3) acquire measurable communication, interpersonal,
decision-making, and learning skills. Labor has also encouraged states
and local areas to develop work experiences that introduce youth to
opportunities in "green" educational and career pathways. Work
experience may be provided at public sector, private sector, or
nonprofit work sites. The work sites must meet safety guidelines, as
well as federal and state wage laws.[Footnote 26] Labor's guidance
requires that each state and local area conduct regular oversight and
monitoring of the program to determine compliance with programmatic,
accountability, and transparency provisions of the Recovery Act and
Labor's guidance. Each state's plan must discuss specific provisions
for conducting its monitoring and oversight requirements.
The Recovery Act made several changes to the WIA Youth Program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Illinois Expects to Meet Expenditure and Participation Targets:
Illinois was awarded a total of about $62 million in Recovery Act funds
for the WIA Youth Program. The Department of Commerce and Economic
Opportunity (DCEO), the state's workforce agency, set aside 15 percent
of this amount for statewide activities and allocated the remaining
funds to the local workforce investment areas. As of September 1, 2009,
about $22 million of the $62 million had been expended across the
state, with $270,000 of this amount expended from the state's 15
percent set-aside for statewide youth activities. In addition, a total
of about $57 million had been obligated by the state as of that date,
including nearly $4 million from the state's 15 percent set-aside.
State officials told us that they expect to meet participation targets
for youth placed in summer employment activities. The state targeted
15,000 youth to be placed in Recovery Act-funded WIA summer youth
employment activities. As of August 31, Illinois reported that almost
13,000 participants had been placed in summer employment activities
across the state. DCEO officials told us that they expect the state to
meet its target of 15,000 youth placed in employment activities as more
participant reports come in from local workforce areas. The Chicago
local workforce area targeted 7,300 youth to be placed in summer
employment activities, and surpassed this target in August. Department
of Family and Support Services (DFSS) officials we spoke with told us
that they were able to work with a total of 34 contractors to help meet
this target. The Grundy-Livingston-Kankakee local workforce area
targeted 205 youth for summer employment activities, and a local
workforce board official told us that the area was able to place 75 of
the targeted 205 youth for the summer. According to officials, the area
was not able to achieve its target largely due to eligibility--either
youth that were recruited by contractors not being eligible, or youth
that may have been eligible failing to submit the required
documentation. However, in addition to the 175 currently enrolled, 130
youth served through the traditional year-round program are having
summer employment activities supplemented by Recovery Act funds.
DCEO did not set a spending target for local areas' Recovery Act
funding for the WIA Youth Program but the agency issued guidance in May
and June advising local workforce investment areas to expend
significant Recovery Act funds in the summer of 2009, so long as they
have the necessary infrastructure in place to quickly implement
programming. The two local workforce areas we visited--Chicago and
Grundy-Livingston-Kankakee--had set spending targets for summer youth
employment activities in their areas. The Chicago local workforce area,
which was allocated about $17 million in Recovery Act WIA Youth funds,
set a target to expend its entire allocation by September 30. According
to officials we met with from the Chicago Workforce Investment Board
and the Chicago DFSS, they expect to meet this target.[Footnote 27]As
of September 10, about 50 percent of the area's allocation had been
expended. The Grundy-Livingston-Kankakee local workforce area targeted
about $400,000 of its roughly $900,000 Recovery Act WIA Youth Program
allocation to be expended by September 30. Officials from the local
workforce investment board stated that they expect about $370,000 to be
expended by that date. However, this local workforce area also used
Recovery Act funds to cover youth from the WIA year-round program who
were enrolled in summer employment activities. According to a program
official, a total of about $195,000 in additional Recovery Act funds
will be spent for this purpose by September 30.
Local Workforce Areas Faced Challenges Related to WIA Youth Eligibility
and Took Steps to Address Them:
Officials from both local workforce areas we visited told us that
challenges existed in determining and documenting WIA youth
eligibility. Officials told us that they had a limited amount of time
to determine whether youth applying for summer employment were
eligible, and to obtain the necessary documentation from them. In the
Chicago local workforce area, DFSS officials also faced a large number
of applications, as a total of about 79,000 youth had applied for
summer youth employment opportunities. To address these issues, DFSS
officials told us that they provided training to their contractors on
WIA eligibility, assigned a liaison to each contractor to provide
assistance, and conducted file reviews for youth selected for
employment by contractors to ensure that eligibility criteria were met.
They also utilized other employees within the department to adequately
implement eligibility tasks. A Grundy-Livingston-Kankakee Workforce
Board official told us that, for new contractors--those not part of the
WIA year-round program--a staff member was assigned to go on-site to
assist the contractor in determining eligibility and obtaining proper
documentation from youth. Board officials explained that the limited
amount of time for youth to provide documentation contributed to the
workforce area's inability to meet its target for youth participation.
Finally, a contractor for WIA summer youth employment activities in the
Grundy-Livingston-Kankakee workforce area also stated that eligibility
restrictions-low-income youth without additional employment barriers
were not eligible to participate in the program--added another
challenge in recruiting and enrolling youth.[Footnote 28]
Summer Youth Employment Encompassed Various Demographic Categories and
Sectors:
WIA summer youth employment activities in Illinois encompassed various
demographic categories, such as out-of-school and older youth, and in
some cases, incorporated academic or occupational skills training. For
example, as of August 31, a little less than half of all youth
participants placed in employment activities across the state were out-
of-school youth. Further, while about two-thirds of participants
statewide were youth 14 to 18 years of age, about 10 percent were older
youth--ranging from 22 to 24 years of age. We also found participation
by various demographic categories at the local workforce areas we
visited. In Chicago, more than half of youth placed in employment
activities as of September 1 were out-of-school youth, and a little
less than 10 percent were older youth. In the Grundy-Livingston-
Kankakee workforce area, a little less than half of the youth were out-
of-school youth, and a little over 5 percent were older youth. See
Table 6 for data on the age of youth placed in summer employment
activities across the state.
Table 6: Age of Illinois Youth Placed in Summer Employment Activities,
as of August 31, 2009:
Category: Youth age 14 to 18;
Number of youth: 8,152;
Percentage: 63.
Category: Youth age 19 to 21;
Number of youth: 3,420;
Percentage: 26.
Category: Youth age 22 to 24;
Number of youth: 1,384;
Percentage: 11.
Category: Total;
Number of youth: 12,956;
Percentage: 100.
Source: Illinois Department of Commerce and Economic Opportunity data.
[End of table]
According to officials in both workforce areas, about one-fourth of the
youth received academic skills training as part of their summer work
employment. In the Chicago local workforce area, DFSS officials also
told us that one-fourth to one-half received occupational skills
training in areas such as hospitality, marketing, and health and
nutrition. Further, one contractor we spoke with in Chicago included a
financial literacy component for younger youth to teach them how to
manage their finances, and youth spent the first week of their summer
experience learning life skills, such as how to prepare for a job and
address issues in the workplace. In the Grundy-Livingston-Kankakee
workforce area, officials told us that occupational skills training was
not required and, instead, was offered informally by contractors. These
officials estimated that about one-half of the youth they placed were
receiving training of this type.
WIA youth summer program participants were also placed in a range of
jobs at the two local workforce areas we visited. In the Chicago local
workforce area, contractors had flexibility in designing their own
summer program based on the types of jobs they wanted to offer and the
youth they wanted to target. Overall, youth were employed in a variety
of work sites, such as Chicago Public Schools, City Colleges of
Chicago, the Chicago Park District, local museums, retail stores,
hotels, and community centers. The jobs included positions such as
office assistants, teacher's aides, data entry positions, and clerical
aides, and some included supervisory positions of other summer youth
participants. One worksite we visited---the Museum of Science and
Industry---enrolled youth as peer educators who facilitated science
activities to youth and young children at various locations across the
city, such as libraries and schools. The museum also enrolled some
participants as staff who supervised youth presenting science
activities at the museum. Another work site we visited employed youth
at a retail clothing store, where they assisted with customer service
and various retail tasks, such as inventory and cataloging.
In the Grundy-Livingston-Kankakee workforce area, youth were employed
in jobs such as office assistants, camp counselor assistants, and
groundskeepers at various worksites such as a local park district,
community resource center, and community college. At one worksite we
visited, older youth were mentoring and tutoring younger youth on basic
education skills, such as math and reading. At both local workforce
areas, officials stated that some youth were participating in green
jobs, such as recycling positions at park districts. One contractor we
interviewed in Chicago had about 25 percent of youth employed in green
jobs. In the Grundy-Livingston-Kankakee workforce area, about one-
fourth of employers had youth enrolled in green jobs. Officials in both
local workforce areas did not identify any issues with how to define a
green job. However, they primarily defined jobs as green based on their
own criteria or criteria they identified as appropriate.
State and Local Efforts to Monitor WIA Youth Summer Employment Focus on
File Reviews and Site Visits:
The Illinois Department of Commerce and Economic Opportunity indicated
that staff has begun to monitor aspects of the Recovery Act-funded
summer youth employment activities, such as whether youth have met
eligibility requirements of the program, and the extent to which work
sites are adhering to workplace safety guidelines and federal/state
wage laws. The state will utilize similar procedures for monitoring and
oversight of Recovery Act WIA funds as it does for other WIA funds. For
example, according to officials, the agency utilizes a file review
instrument and samples files from all 26 local workforce areas to check
that eligibility requirements are being met. The agency also conducts
site visits to the local workforce areas to verify information such as
participation and completion rates. However, the fiscal year 2008
Statewide Single Audit contained a finding that the agency did not
adequately document supervisory reviews of on-site monitoring
procedures for the program, and did not communicate findings to sub-
recipients in a timely manner. The agency noted to us that in the
process of monitoring summer employment activities thus far, it has
encountered some eligibility documentation issues, such as participant
files missing signatures or documentation of citizenship status. The
agency has notified local workforce areas that they must produce
documentation to prove compliance with eligibility, or costs associated
with their program participants will not be reimbursed. The agency is
also conducting additional file reviews where eligibility issues have
been found to determine the costs that could be disallowed. Further,
officials indicated that, as of August 31, programmatic monitoring
plans were incorporated into the state's automated system for WIA file
reviews.
The two local workforce areas we visited relied primarily on file
reviews and site visits to conduct monitoring of Recovery Act-funded
summer youth activities. Chicago's DFSS officials explained that, in
addition to providing training on WIA eligibility to summer youth
contractors, DFSS officials conducted file reviews of youth placed in
summer employment activities to confirm that the proper eligibility
documents were in place. DFSS officials stated that the department also
has an auditing unit that will be conducting file reviews of 20 percent
of the applications submitted for summer youth employment. Furthermore,
of the two contractors we visited in Chicago, one used a checklist for
documenting youth eligibility, and the other required youth to meet
with in-house staff members that typically work with youth on the WIA-
year-round program, to obtain the necessary documentation. Officials
from the latter contractor also told us that they hired eight
additional staff to assist with determining eligibility, among other
program implementation tasks. As mentioned earlier, officials with the
Grundy-Livingston-Kankakee Workforce Board told us that for new
contractors--those not part of the WIA year-round program--a staff
member was assigned to go on-site to assist the contractor in
determining eligibility and obtaining proper documentation from youth,
and conducted file reviews to ensure the necessary documents were in
place.
Both local workforce areas also utilized site visits to monitor whether
youth had meaningful work, and whether worksites met safety
requirements. In Chicago, DFSS officials told us that a liaison
assigned to the contractor and staff from the monitoring division of
the department conduct announced and unannounced site visits to work
sites. After a site visit, a report is completed that describes whether
youth employment activities correspond to descriptions submitted by the
contractor, timesheets are completed on a weekly basis, and the extent
to which participants have completed work readiness requirements.
According to officials in the Grundy-Livingston-Kankakee workforce
area, workforce board staff conducts two site visits to each worksite
over the course of the summer and fills out a similar report for each
visit. We also found that contractors conduct site visits to their work
sites. For example, one contractor that has multiple work sites in
Chicago told us that staff conducts weekly site visits to ensure that
youth are performing meaningful work. Similarly, a contractor we
interviewed in Kankakee also told us that staff members visit each work
site twice throughout the summer.
State and Local Workforce Areas Are Attempting to Measure Program
Outcomes:
State and local officials we spoke with stated that they are attempting
to measure the outcome of Recovery Act-funded summer youth employment
activities. The Recovery Act specifies that, of the WIA Youth Program
performance measures, only the work readiness measure is required to
assess the effectiveness of summer-only employment for youth. Work
readiness focuses on personal traits--such as work ethic and
professionalism--and communication and interpersonal skills.
In Illinois, local workforce boards are required to utilize the WorkNet
system to measure work readiness. The system contains an online portal
with a work readiness feature that requires youth to take a pre-test,
work through several modules such as interviewing and workplace skills,
and then take a post-test to measure work readiness gains. In addition
to tracking the work readiness measure, Illinois also plans to rely on
existing systems that track measures under the traditional WIA year-
round program to track more information on summer employment
activities, such as the number of participants enrolled and completion
rates, per Labor's requirements. A DCEO official told us that a few
modifications were made to reporting fields based on program features
in the Recovery Act. For example, the agency made changes to account
for youth ages 22 to 24 since they became eligible for WIA Youth
Program activities through funds made available under the Recovery Act.
Workforce Investment Board officials from both local areas we visited
told us that they will also be tracking work readiness, and
participation and completion rates through their existing systems, and
will also be attempting to track the extent to which any youth are
hired on permanently after their summer employment activities are over.
Officials in both workforce areas explained that since the end-date for
summer employment activities is September 30, 2009, information on all
youth would not be available until after that date.
Illinois Public Housing Agencies Continue to Obligate and Draw Down
Recovery Act Formula Grants:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management.[Footnote 29] The Recovery Act
requires the U.S. Department of Housing and Urban Development (HUD) to
allocate $3 billion through the Public Housing Capital Fund to public
housing agencies using the same formula for amounts made available in
fiscal year 2008. Recovery Act requirements specify that public housing
agencies must obligate funds within 1 year of the date on which they
are made available to public housing agencies, expend at least 60
percent of funds within 2 years, and expend 100 percent of the funds
within 3 years. Public housing agencies are expected to give priority
to projects that can award contracts based on bids within 120 days from
the date on which the funds are made available, as well as projects
that rehabilitate vacant units, or those already under way or included
in their current required 5-year capital fund plans.
HUD is also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofit investments. In a Notice
of Funding Availability published May 7, 2009, and revised June 3,
2009, HUD outlined four categories of funding for which public housing
agencies could apply:
* creation of energy-efficient communities ($600 million),
* gap financing for projects that are stalled due to financing issues
($200 million),
* public housing transformation ($100 million), and:
* improvements addressing the needs of the elderly or persons with
disabilities ($95 million).
For the creation of energy-efficient communities, applications (which
were due July 21, 2009) were to be rated and ranked according to
criteria outlined in the Notice of Funding Availability. The last three
categories will be threshold based, meaning applications that meet all
the threshold requirements will be funded in order of receipt. If funds
are available after all applications meeting the thresholds have been
funded, HUD may begin removing thresholds after August 1, 2009, in
order to fund additional applications in the order of receipt until all
funds have been awarded. Applications in these three categories were
accepted until August 18, 2009.
Illinois has 99 public housing agencies that have received Recovery Act
formula grants. In total, these public housing agencies received $221
million in Public Housing Capital Fund formula grants (see fig. 4). As
of September 5, 2009, 83 of these public housing agencies have
obligated $76 million and 56 have drawn down $6 million. We visited two
public housing agencies in Illinois for our July report. They are the
Chicago Housing Authority and the Housing Authority for LaSalle County.
We will provide updated information on these housing agencies in a
future report.
Figure 2: Percentage of Public Housing Capital Funds Allocated by HUD
that Have Been Obligated and Drawn Down in Illinois, as of September 5,
2009:
[Refer to PDF for image: 3 pie-charts]
Funds obligated by HUD: 100%; $221,498,521; Funds obligated by public
housing agencies: 34.2%; $75,704,050; Funds drawn down by public
housing agencies: 2.8%; $6,266,406.
Number of public housing agencies:
Entering into agreements for funds: 99; Obligating funds: 83;
Drawing down funds: 56.
Source: GAO analysis of HUD data.
[End of figure]
State and Local Agencies We Met with Varied in Their Approaches to, and
Understanding of, Recipient Reporting Requirements:
States and localities are among those receiving Recovery Act funds
directly from federal agencies that are responsible for tracking and
reporting on those funds.[Footnote 30] More specifically, they are
expected to report quarterly on a number of measures, including the use
of funds and an estimate of the number of jobs created and the number
of jobs retained. The jobs created and jobs retained numbers are part
of the recipient reports required under section 1512(c) of the Recovery
Act and will be submitted by recipients starting in October 2009. In
preparation for reporting, Illinois has disseminated guidance to state
agencies on federal reporting requirements, including preliminary
guidance on jobs created and retained. Since our last report, the
state's Recovery Act Executive Committee issued a memorandum to state
agencies requiring that they develop procedures and reconciliations for
the collection of data elements, entry of data, and review of data.
[Footnote 31] The Executive Committee has also sent a questionnaire to
state agencies inquiring about award amounts, number of subrecipients
and related contract information, project status documentation, and job
creation information to assess the potential timeliness and accuracy of
reporting. Further, Illinois is in the process of utilizing the
templates made available through federalreporting.gov to conduct a
'test run' by each of the state agencies required to report on the
impact of the act on October 10th. According to state officials, the
main benefit of conducting the test run is that it will provide
additional information for the state to proactively identify areas
where reporting and technical questions still exist. It will also allow
the state to identify misconceptions or conflicts to previously issued
guidance and provide clarifications prior to the October deadline. The
reporting deadline for the test run was September 9, 2009. As of
September 15TH, specific results from the test run had not yet been
completely finalized.
Education Programs:
The Governor's Office has directed ISBE to perform certain functions
related to the administration of Recovery Act SFSF funds, including
collection of data and reporting, in meeting the requirements of
Section 1512. ISBE is currently working on a collection tool that will
be used by LEAs in reporting Recovery Act required data elements to
ISBE. The electronic expenditure reports generated will be collected
along with required Recovery Act data on jobs saved, created, and
vendor information. ISBE will capture and forward all of these required
data to federalreporting.gov. ISBE officials have also met with staff
in the Governor's office responsible for Recovery Act reporting to
ensure that they are adequately prepared. ISBE has also received
guidance from the state on job creation and retention, and officials
have attended all OMB Recovery Act reporting online seminars to ensure
they are familiar with, and meeting, OMB requirements. Lastly, ISBE is
working with a technical assistance team from the U.S. Department of
Education Risk Management Service office to resolve questions and
issues related to the Recovery Act, including reporting.
Highway Infrastructure Investment:
For highway projects, Illinois collects and reports employment data and
information related to project implementation and expenditures.
Illinois transportation officials stated that they require contractors
and subcontractors to submit monthly employment information, including
the number of employees, the amount they are paid, and hours worked.
According to Illinois Department of Transportation officials, they use
a Web application called IDOT American Recovery and Reinvestment Act--
Contractor/Consultant Reporting to track the number of jobs created
through Recovery Act highway funds. This contractor reporting system
was originally developed around FHWA's Recovery Act monthly employment
data requirements, but is being modified to capture additional data
specified in OMB's recent guidance.[Footnote 32] For any project that
receives FHWA Recovery Act funds, the state must require its
contractors to report on its own workforce as well as the workforces of
any subcontractors that were active for the reporting month, and to
report data quarterly to OMB's federalreporting.gov Web site.
Both state and local highway officials were unclear on how to treat one
reporting requirement described in OMB's guidance. The requirement
calls for recipients and subrecipients to report the names and
compensation for each of their five most highly compensated officers
for the calendar year in which the award is given. State and local
officials stated that while this could apply for contractors, they were
uncertain as to how it should be applied to government agencies. IDOT
officials said they had asked FHWA for clarification. In September
2009, FHWA provided guidance explaining that this reporting requirement
only applies to certain recipients--contractors working for a state or
local agency do not have to report and state or local governments only
have to report if they meet specific reporting thresholds.[Footnote 33]
Illinois governments do not meet those reporting thresholds, according
to an Illinois DOT official.
Transit Capital Assistance:
The Recovery Act also provides reporting requirements for transit
agencies to track funds they receive. Officials from the large transit
agencies we visited for this review--the Chicago Transit Authority and
Metra--did not consider the reporting requirements to present
compliance problems. Officials from both agencies said existing
information systems could readily segregate Recovery Act funds and
accommodate the reporting requirements. For example, Metra's existing
grants tracking system produces detailed reports on the financial
status of all projects by funding source, including Recovery Act
funding. Likewise, IDOT officials said that existing systems can be
used to collect and report the transit information required under the
Recovery Act.
WIA Summer Youth Activities:
For WIA summer youth employment activities, officials with the
Department of Commerce and Economic Opportunity told us that they are
not delegating any Section 1512 reporting to subrecipients, and expect
that this will avoid any potential double-counting. Officials told us
that they are confident in the agency's ability to report on the amount
of funds spent using the agency's own system, which tracks information
on obligations and expenditures. However, officials told us that
specific information regarding vendors of subrecipients--entities that
the local workforce boards contract with--may not be readily available
or easily verified. They also told us that the agency is working on a
system or a Web site to capture this information, but the details of
how this information will be collected had not been finalized at the
time of our meeting. Officials at both local workforce areas we visited
told us that they are tracking jobs created or retained through use of
Recovery Act funds either at their local offices or by vendors to
support implementation of the program, but are not clear on how to
report this information due to little guidance they have seen. Further,
officials are attempting to track the number of youth hired permanently
with employers after their summer employment activities are completed,
but are also unsure of how to report this information. They anticipate
receiving additional guidance from the Department of Commerce and
Economic Opportunity.
State Comments on This Summary:
We provided the Office of the Governor of Illinois with a draft of this
appendix on September 11, 2009. The Deputy Chief of Staff responded for
the Governor on September 14, 2009. The state concurred with our
statements and observations. The official also provided technical
suggestions that were incorporated, as appropriate.
GAO Contacts:
Leslie Aronovitz, (312) 220-7712 or aronovitzl@gao.gov:
Cindy Bascetta, (202) 512-7114 or bascettac@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above Paul Schmidt, Assistant
Director; Tarek Mahmassani, analyst-in-charge; Rick Calhoon; Dean
Campbell; Robert Ciszewski; Roberta Rickey; and Rosemary Torres Lerma
made major contributions to this report.
[End of section]
Footnotes for Appendix VII:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Of the $1.145 billion made available as a result of the increased
FMAP in fiscal year 2009, $527 million was made available by the
increased FMAP and $618 million was made available to assist in
decreasing the state's Medicaid payment cycle to 30 days.
[3] OMB Memorandum, M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Activities, provides two alternatives
for states to recoup costs for central administrative services, such as
oversight and reporting. Alternative 1, Use of Estimated Costs for
Centralized Services, authorizes the state to use budgeted or estimated
costs in the submission of Statewide Cost Allocation Plans (SWCAP).
Alternative 2, Billed Services, allows a state to submit the
methodology for identifying, recording and charging administrative
costs.
[4] H.R. 2182, 111th Cong. (2009). H.R. 2182 passed in the House of
Representatives on May 19, 2009, but, as of September 8, 2009, had not
passed the Senate. As passed by the House, H.R. 2182 would allow state
and local governments to set aside 0.5 percent of Recovery Act funds,
in addition to funds already allocated to administrative expenditures,
to conduct planning and oversight to prevent and detect waste, frauds,
and abuse.
[5] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[6] The Cash Management Improvement Act of 1990, as amended, requires
the Secretary of the Treasury, along with the states, to establish
equitable funds transfer procedures so that federal financial
assistance is paid to states in a timely manner and funds are not
withdrawn from Treasury earlier than they are needed by the states for
grant program purposes. The act requires that states pay interest to
the federal government if they draw down funds in advance of need and
requires the federal government to pay interest to states if federal
program agencies do not make program payments in a timely manner. The
Department of the Treasury promulgates regulations to implement these
requirements. 31 C.F.R. pt. 205. However, cash management by
subgrantees, such as LEAs, is subject to Department of Education grant
administration regulations, which may require subgrantees to remit to
the U.S. government interest earned on excess balances. See 34 C.F.R.
§§ 74.22, 80.21.
[7] For the Department of Education, see 34 C.F.R. § 80.21(b). The
specific requirements can vary depending on whether the program (1) is
listed in the Catalogue of Federal Domestic Assistance, (2) meets the
threshold for a major federal assistance program, and (3) is covered by
an agreement between the U.S. Treasury Department and the state, among
other circumstances.
[8] Pub. L. No. 111-5, 123 Stat. 115, 206 (Feb. 17, 2009).
[9] 42 U.S.C. § 3161
[10] 42 U.S.C. § 3161(a). Eligibility must be supported using the most
recent federal data available or, in the absence of recent federal
data, by the most recent data available through the government of the
state in which the area is located. Federal data that may be used
include data reported by the Bureau of Economic Analysis, the Bureau of
Labor Statistics, the Census Bureau, the Bureau of Indian Affairs, or
any other federal source determined by the Secretary of Commerce to be
appropriate (42 U.S.C. § 3161(d)).
[11] Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009).
[12] IDOT classified counties as economically distressed based on (1)
whether the 2008 year-end unemployment rate was at or above the
statewide average, (2) whether the change in the unemployment rate
between 2007 and 2008 was at or above the statewide average, or (3)
whether the number of unemployed persons for 2008 had grown by 500 or
more.
[13] FHWA's guidance specifies that special needs determinations will
be solely for Recovery Act highway funding and will not apply to EDA
grant programs.
[14] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[15] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[16] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[17] The federal share under the existing formula grant program is
generally 80 percent.
[18] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and metropolitan planning
organizations designated for the area. Metropolitan planning
organizations are federally mandated regional organizations,
representing local governments and working in coordination with state
departments of transportation that are responsible for comprehensive
transportation planning and programming in urbanized areas. MPOs
facilitate decision making on regional transportation issues including
major capital investment projects and priorities. To be eligible for
Recovery Act funding, projects must be included in the region's TIP and
the approved State Transportation Improvement Program (STIP).
[19] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[20] Pub. L. No. 111-5, §1201(a), 123 Stat. 115, 212 (Feb. 17, 2009).
[21] For the Transit Capital Assistance Program, the U.S. Department of
Transportation has interpreted the term obligation of funds to mean the
federal government's contractual commitment to pay for the federal
share of the project. This commitment occurs at the time the federal
government signs a grant agreement.
[22] Illinois also received a significant amount of Recovery Act
transit assistance under the Fixed Guideway program. Specifically, the
Chicago Transit Authority (CTA) has received $48.9 million, and Metra,
the Chicago regional commuter railroad, received 46.6 million.
Illinois' Fixed Guideway funds are 100 percent obligated.
[23] The jurisdiction of some urbanized areas within this state crosses
into at least one other state. These urbanized areas are reflected in
each state that it is located. Therefore, some urbanized areas are
included in multiple state totals.
[24] H.R. Rep. No. 111-16, at 448 (2009).
[25] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[26] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[27] The WIA Youth Program in Chicago is implemented by the Chicago
Department of Family Support Services in coordination with the Chicago
Workforce Investment Board.
[28] One or more of the following barriers to employment must be
demonstrated for eligibility: (1) school dropout; (2) basic literacy
skills deficiency; (3) homeless, runaway, or foster child; (4) pregnant
or a parent; (5) an offender; or (6) needs help completing an
educational program or securing and holding a job.
[29] Public housing agencies receive money directly from the federal
government (HUD). Funds awarded to the public housing agencies do not
pass through the state budget.
[30] Pub. L. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009).
[31] The Recovery Act Executive Committee is comprised of state
executives, including the Deputy Chief of Staff for Economic Recovery,
the Chief Internal Auditor, the Budget Director, and the Chief
Information Officer
[32] Recent OMB reporting guidance includes its June 22, 2009, memo and
a recipient reporting data model (version 2.0 and version 3.0).
[33] A state or local government would meet the reporting threshold if
it received 80 percent or more of its annual gross revenues in the
preceding fiscal year from federal awards, and it received $25 million
or more in annual gross revenues in the preceding fiscal year from
federal awards, and the public does not have access to the information
through Securities and Exchange Commission or Internal Revenue Service
filings as specified in the Federal Funding Accountability and
Transparency Act of 2006.
[End of section]
Appendix VIII: Iowa:
Overview:
The following summarizes our work on the third of our bimonthly reviews
of American Recovery and Reinvestment Act (Recovery Act)[Footnote 1]
spending in Iowa. The full report on all of our work, which covers 16
states and the District of Columbia, is available at [hyperlink,
http://www.gao.gov/recovery/].
Our work in Iowa examined the state's actions to stabilize its budget,
to report on Recovery Act results to the federal Office of Management
and Budget (OMB), and to monitor controls over Recovery Act funds. We
updated funding information on Recovery Act education programs. In
addition, for three programs--higher education, highway infrastructure,
and weatherization--we reviewed the use of Recovery Act funds; the
implementation of safeguards over these funds, including those related
to the procurement of goods and services; and efforts to assess results
from the use of these funds. We selected these three programs because
they are among the programs receiving the greatest amount of Recovery
Act funds in Iowa and have recently begun to disburse or are already
using significant amounts of Recovery Act funds. Specifically, Iowa
institutions of higher education have received their first
disbursements of Recovery Act funds, providing the opportunity to
examine the use of Recovery Act funds by nonstate entities. Iowa has
obligated funds for several highway infrastructure projects, providing
an opportunity to review contract administration for four selected
projects--two state-administered and two locally administered--located
in different highway districts and counties. Finally, Iowa's
Weatherization Assistance Program has received 50 percent of its total
Department of Energy (DOE) allocation, providing the opportunity to
examine the use of some of these funds and review Iowa's program to
weatherize more than 7,000 homes of low-income residents.
Consistent with the purposes of the Recovery Act, funds from the
programs we reviewed are being directed to help Iowa and its local
governments stabilize their budgets and promote economic recovery--
thereby providing needed services and potentially creating and saving
jobs. In addition, the use of Recovery Act funds must comply with
specific program requirements but also, in some cases, enables states
to free up state funds to address their projected budget shortfall. The
following provides highlights of our review:
Education Programs Funded under the Recovery Act:
* As of August 31, 2009, the U.S. Department of Education (Education)
has made available about $439.1 million of the total $566.6 million in
Recovery Act funds Iowa expects to use for education.
* As of August 31, 2009, Education had made available to Iowa about
$51.5 million in Recovery Act funds under Title I, Part A, of the
Elementary and Secondary Education Act (ESEA) of 1965. The Iowa
Department of Education had disbursed about $16.2 million to school
districts. These funds are to be used to help educate disadvantaged
youth.
* As of August 31, 2009, Education had also made available to Iowa
about $126.2 million in Recovery Act funds under the Individuals with
Disabilities Education Act (IDEA), Part B. The Iowa Department of
Education had disbursed about $25.2 million to school districts and
area education agencies. These funds support special education and
related services for children and youth with disabilities.
* As of August 31, 2009, Education had made available to Iowa about
$261.4 million of the $388.9 million in State Fiscal Stabilization Fund
(SFSF) funds for education stabilization and government services funds
that Iowa plans to use for education. Iowa had disbursed about $40
million to school districts, $13.2 million to public universities, and
$4.3 million to community colleges. Iowa plans to use these funds to
restore state aid to school districts and community colleges and to
restore state appropriations to public universities. Iowa plans to use
an additional $83.5 million in SFSF government services funds for other
programs, including public assistance and Medicaid.
Institutions of Higher Education:
* Of the $388.9 million in SFSF funds Iowa plans to use for education,
it is using approximately $105 million to support institutions of
higher education--about $79.4 million for public universities, and
about $25.6 million for community colleges. As of August 31, 2009,
public universities had received about $13.2 million, and community
colleges had received about $4.3 million in SFSF funds. The two
institutions of higher education that we visited are using Recovery Act
funds to stabilize their budgets, mitigate tuition increases, and save
jobs.
Highway Infrastructure Investment Program:
* The U.S. Department of Transportation's Federal Highway
Administration (FHWA) apportioned $358 million in Recovery Act funds to
Iowa. As of September 1, 2009, the federal government had obligated
$320 million for Iowa projects,[Footnote 2] and Iowa had been
reimbursed $91 million for work submitted for payment by highway
contractors.[Footnote 3]
* According to state transportation officials, citing Iowa's most
recent report to the U.S. House Committee on Transportation and
Infrastructure, the Recovery Act funded 2,724 highway contractor
employees in July 2009. Officials said that, cumulatively, Iowa's
Department of Transportation has reported to the committee that the
Recovery Act has funded more than 363,000 hours of work.
* Iowa transportation officials estimated that for projects completed
as of August 17, 2009, Recovery Act funding has contributed to the
repair of more than 110 miles of state, county, and city roads.
Weatherization Assistance Program:
* The U.S. Department of Energy (DOE) allocated $80 million in Recovery
Act funds to Iowa for the Weatherization Assistance Program. Iowa plans
to use these funds to help more than 7,000 low-income families reduce
their utility bills by making long-term energy-efficient improvements
to their homes.
* As of August 31, 2009, Iowa had received about $40.4 million, or 50
percent of its total DOE allocation, but had spent only about 5 percent
of the funding received. No homes had been weatherized using Recovery
Act funds, but Iowa has used funds to provide training and technical
assistance and purchase vehicles and equipment--"ramp up" activities--
that will be used when the Recovery Act Weatherization Program is fully
implemented in the state.
* Home weatherization activities were on hold in Iowa until August 19
when the Department of Labor (Labor) established a prevailing wage rate
for weatherization work in the state. On August 20, state officials
received notification that prevailing wages had been determined and
notified local agencies that they could accept bids and issue contracts
for weatherization.
While Recovery Act Funds Helped Iowa Respond to Declining Revenues, the
State Is Planning for the Possibility of Additional Budget Shortfalls:
Iowa's use of approximately $710.3 million in Recovery Act funds for
fiscal years 2009 and 2010 has helped stabilize its state budgets for
these fiscal years by replacing some of the state's lost tax revenues.
[Footnote 4] The Iowa Department of Management expects the fiscal year
2009 budget to be balanced after the Iowa Department of Management
reconciles the books in September 2009, while the Legislative Services
Agency expects a year-end revenue shortfall for the fiscal year 2009
budget. Senior officials from the Iowa Department of Management
indicated that, in addition to the use of Recovery Act funds as
allocated by the General Assembly, the Governor has the authority to
transfer up to $50 million from Iowa's Economic Emergency Fund to
balance the fiscal year 2009 budget. Additionally, state officials
expect a reduction in revenues for the state budget in fiscal years
2010 and 2011. The Governor also has the authority to continue controls
on certain administrative expenditures and to implement across-the-
board reductions in agency budgets if the Iowa Revenue Estimating
Conference (REC) reduces revenue projections for fiscal year 2010
according to state officials. Further, some agencies are planning for
furloughs and layoffs in fiscal year 2010.[Footnote 5] Depending on the
decision by the REC, the state is also considering the need for further
reductions in agencies' budgets in fiscal year 2011.
As of July 2009, state officials reported that gross General Fund
receipts for fiscal year 2009 had declined more than previously
expected,[Footnote 6] primarily due to a reduction in revenues
collected from personal income, corporate income, and taxes on
insurance premiums. Iowa had already used approximately $166.2 million
in Recovery Act funds to offset revenue losses in fiscal year 2009,
thereby avoiding layoffs, program cuts, and furloughs. Nonetheless, in
the Iowa Department of Management's monthly 2009 General Fund receipts
memorandum, budget officials reported that year-to-date gross fiscal
year 2009 receipts for Iowa's General Fund were about $57.7 million
below the March 2009 revenue projections made by the REC. Similarly,
the Iowa Legislative Services Agency reported on July 1, 2009 that
fiscal year 2009 revenues could be as much as $161 million below
projections.[Footnote 7] If additional funding is needed, state
officials said that they cannot use Recovery Act funds because the
General Assembly did not provide the statutory authority for the
Governor to use Recovery Act funds to mitigate such shortfalls.
However, senior officials from the Iowa Department of Management said
that the Governor has the authority to transfer up to $50 million from
Iowa's Economic Emergency Fund to balance the state's fiscal year 2009
budget, and to continue controls on certain administrative expenditures
such as association memberships and out-of-state travel. In addition,
senior officials from the Iowa Department of Management said that the
Governor can call a special session of the General Assembly; however,
the Governor has indicated that he would not schedule a special
session. Senior officials from the Iowa Department of Management expect
that the fiscal year 2009 budget will be balanced when the Iowa
Department of Management closes the fiscal year 2009 books, because
refunds are lower than projected by the REC and the return of
appropriated funds from state agencies are higher than expected due to
non-program expenditure controls.
While senior officials from the Iowa Department of Management said that
the state's fiscal year 2010 budget is balanced using current revenue
projections from the REC, the REC could lower its estimate of revenues
available for fiscal year 2010 at its next meeting, which is scheduled
to occur on October 7, 2009. According to senior officials from the
Iowa Department of Management, the Governor's executive authority
provides various options to address any resulting projected shortfalls
in the state's budget. For example, the Governor may implement across-
the-board reductions in the state's General Fund appropriations through
an Executive Order,[Footnote 8] increase efficiencies in programs and
services, or continue current controls on certain expenditures such as
out-of-state travel. Senior officials from the Iowa Department of
Management said that the Governor also has the authority to call the
General Assembly into a special session to address budgetary issues.
Iowa plans to use approximately $544.1 million in Recovery Act funds in
fiscal year 2010 for, among other things, maintaining funding levels
for existing education and health care programs.[Footnote 9] However,
senior officials from the Iowa Department of Management noted that if
the estimated revenues are lowered, and the Governor implements an
across-the-board reduction in General Fund appropriations, some state
agencies may have to begin laying off state workers during the fiscal
year. Furthermore, a few state agencies are already developing
contingency plans for furloughs of state employees throughout fiscal
year 2010.
At the direction of the Governor, Iowa's budget director sent a letter
on July 23, 2009 to state agencies requiring that they draft a "status
quo" General Fund budget request for fiscal year 2011, in view of a
potential decline in General Fund revenues. Each agency was requested
to limit its fiscal year 2011 budget to its 2010 General Fund
expenditures, after adjusting for certain one-time appropriations, such
as those from Recovery Act funds. Additionally, senior officials the
Iowa Department of Management suggested that agencies draft
recommendations for reducing the General Fund appropriation from their
fiscal year 2010 appropriation. According to senior officials from the
Iowa Department of Management, agencies are required to submit their
budget requests to the Governor by October 1, 2009. The Governor will
then use the agencies' requests and revenue estimates from the December
2009 REC to formulate a consolidated fiscal year 2011 budget proposal
for consideration by the General Assembly.
Additionally, state officials are seeking ways to improve government
efficiency. For example, to make the delivery of state services more
efficient, the Governor has hired a performance-review consultant to
identify operational efficiencies and cost savings, such as eliminating
any duplicate government services provided by different state agencies.
State officials also said they planned to seek public input for
identifying cost savings and to develop a Web site for the public to
track state plans for streamlining government operations. Similarly,
the bipartisan State Government Reorganization Commission, made up of
10 General Assembly members, held its first meeting on September 9,
2009. The Commission is to consider options for reorganizing state
government to improve efficiency, modernize processes, eliminate
duplication, reduce costs, and increase accountability. It is also to
address the expanded use of the Internet and other technology. It is
scheduled to meet again on December 10, 2009.
Senior officials from the Iowa Department of Management said that Iowa
does not plan to take advantage of the federal OMB's recent memorandum
on recouping administrative costs related to Recovery Act activities
because the General Assembly has already appropriated and prescribed
the use of Recovery Act funds for fiscal years 2009 and 2010.[Footnote
10] Consequently, according to senior officials from the Iowa
Department of Management, the Governor does not have the authority to
reallocate such funds for administrative costs. Senior officials from
the Iowa Department of Management added that the General Assembly had
already allocated $400,000 in the fiscal year 2010 budget for the
central administration of Recovery Act funds in Iowa, and noted that
state agencies are already spending most Recovery Act funds.
Iowa Is Developing a Centralized Database to Report Financial and
Performance Information on the Recovery Act to OMB:
Through a Recovery Act implementation working group, the Iowa
Department of Management is developing a centralized database to report
Recovery Act information--funds received and expended, and performance
measures, such as jobs created and saved--to OMB, other federal
entities, and the general public, as required by section 1512 of the
Recovery Act.[Footnote 11] However, state officials said that they need
specific answers from OMB to help them report information centrally.
Iowa is implementing procedures and controls in its centralized
database to help ensure the completeness, accuracy, and consistency of
the information it reports. In addition to the Recovery Act database,
Iowa's "Results Iowa" Web site provides information about Iowa's
efforts towards achieving results in areas such as workforce
development, economic growth, health care, and education and may offer
an additional opportunity to demonstrate results of Recovery Act
funding.
Iowa's Executive Working Group Is Collaborating with State Agencies and
Localities to Create a Centralized Database for Reporting on the
Recovery Act:
In March 2009, Iowa established a Recovery Act implementation executive
working group to provide a coordinated process for (1) reporting on
Recovery Act funds available to Iowa through various federal grants and
(2) tracking the federal requirements and deadlines associated with
those grants. The implementation working group comprises
representatives from nearly two dozen state agencies, led by the
executive working group, and assisted by groups that will focus on
implementation issues such as budget and tracking, intergovernmental
coordination, and communications. Officials from this group told us
that they are working with Iowa agency officials to create a
centralized database to collect and summarize Recovery Act information,
such as funds received and expended and the number of jobs created and
saved, to be reported to OMB and the general public. Iowa officials
noted that their first priority is to report on funds received and
expended by state agencies and then those funds received directly by
localities throughout the state.
To centralize reporting on the Recovery Act, Iowa officials told us
that they are developing a Web-based system that is to collect and
summarize financial and performance information by state agencies and
localities receiving funds through state distributions to communicate
how Recovery Act funds are being used in Iowa, as well as the results
of those funds. To facilitate this process, Iowa officials told us that
they provided instructions to state agencies, and are building
instructions into their database program on how to account for and
report Recovery Act funds, among other things. Iowa officials also
completed a summary of data element descriptions to help ensure the
consistency of the data reported. To help ensure their readiness to
report on Recovery Act funding by October 10, 2009, Iowa officials
planned to perform two tests of their Recovery Act reporting system.
From August 13 through 21, 2009, Iowa tested the appropriateness of the
data elements and reviewed controls over Recovery Act subrecipients who
have been delegated reporting responsibilities under section 1512 of
the Recovery Act. The results of the first test revealed program
errors, such as difficulties in uploading spreadsheet data, that Iowa
officials plan to promptly correct. For the second test, to be held
September 8 through 18, 2009, all agencies are required to report
Recovery Act funds received in the state's reporting database.
In addition, Iowa officials told us that they have created a working
group to develop a consistent methodology to measure jobs created and
saved from Recovery Act funds as well as from Iowa's I-JOBS program--a
state program to invest in infrastructure--and federal flood recovery.
Consistently measuring jobs created and saved can help provide greater
transparency of the benefits of these programs.
Iowa Is Developing Internal Controls to Help Ensure Accurate Reporting
of Recovery Act Results:
According to officials with the Iowa executive working group, they are
developing internal controls to help ensure that information reported
to OMB and the general public from Iowa's centralized reporting
database is accurate. For example, all Recovery Act funds are
identified by unique codes in state agencies' accounting systems. In
addition, data validation processes are being built into the database
to help reviewers identify and correct any inaccurate data. As an added
measure, the executive working group plans to reconcile Recovery Act
funds received against expenditures using reports generated from the
Recovery Act reporting database as well as Iowa's existing accounting
system. The executive working group also plans to incorporate a
tracking function into the database so the state can identify Recovery
Act recipients and subrecipients and notify appropriate officials if
reporting time frames are not met.
As a way to help improve the completeness, accuracy, and consistency of
the information, state agency and locality officials will be required
to certify their approval of their agency's Recovery Act Section 1512
information prior to submission. For example, Iowa transportation
officials told us that it has a dedicated group that is responsible for
reviewing Iowa transportation information before it is submitted.
Similarly, Iowa education officials told us that they are developing
policies and procedures for the Recovery Act to improve the quality of
the information.
Iowa Seeks More Specific Information from OMB on Reporting the Results
of the Recovery Act:
Since June 22, 2009, OMB has provided guidance on the reporting
requirements of the Recovery Act, including how to calculate the number
of jobs created and saved. Iowa officials told us that they have asked
OMB for specific guidance on the reporting requirements included in
Section 1512 of the Recovery Act but as of September 11, 2009, OMB had
not responded. For example, the state would like to confirm that it may
use a single Dun & Bradstreet, or D-U-N-S, number because the state
intends to report Section 1512 information centrally.[Footnote 12]
State officials are also seeking an answer on whether OMB would serve
as Iowa's sponsor so that Iowa officials could access the federal
Central Contractor Registration (CCR) database[Footnote 13] to help
them validate that Recovery Act subrecipients are registered in the CCR
system, and use this information to verify whether its subrecipient
data is consistent with federal data requirements.
"Results Iowa" Web Site Provides Opportunities for Iowa to Demonstrate
Results of Recovery Act Funding:
Iowa created the "Results Iowa" Web site, [hyperlink,
http://www.resultsiowa.org], to provide information about its efforts
toward achieving results in areas such as workforce development,
economic growth, health care, and education. Furthermore, for each
state agency under the authority of the Governor, "Results Iowa"
provides strategic and performance plans linking agency programs and
strategies to specific performance goals, as well as performance
reports detailing agencies' progress on such goals. Additionally,
"Results Iowa" allows agencies to highlight and update selected
performance measures as desired. The "Results Iowa" Web site is an
existing reporting mechanism that could demonstrate the effects of
Recovery Act funding on agency programs and initiatives.
As a next step, Iowa could use "Results Iowa" to demonstrate how
Recovery Act funding is affecting key performance measures, such as the
state's unemployment and other key economic indicators. Iowa could also
modify agency documents, including strategic and performance plans and
performance reports, to demonstrate how Recovery Act funding is
affecting progress towards achieving agency wide performance goals, and
send guidance to agencies on how to integrate the use of Recovery Act
funding into performance plans. Furthermore, Iowa could integrate
information from the "Results Iowa" Web site with its Economic Recovery
Web site's proposed "dashboard" feature[Footnote 14]--a user-friendly
search capability that is to provide detailed information on how and
where Recovery Act funds are spent. Such efforts would enable the state
to link Recovery Act spending for specific programs to statewide and
agency wide performance goals, which, in turn, would allow Iowa to
better demonstrate to citizens, state officials, and other policymakers
how the Recovery Act is affecting Iowa's government and economic
climate. In response, state officials agreed that using "Results Iowa"
to demonstrate the effect of Recovery Act funding could help to
integrate this information onto Iowa's Economic Recovery Web site.
However, they acknowledged that resources were limited and not
generally available to immediately modify the "Results Iowa" Web site.
State officials also agreed that acknowledging the receipt of Recovery
Act funds in state agency performance plans was important and said they
would consider providing guidance to agencies to adjust their plans to
reflect these funds.
Iowa's State Auditor and Iowa Accountability and Transparency Board
Continue to Monitor Controls over Recovery Act Funds:
The Office of the State Auditor is in the final stages of updating its
2009 audit plan. State audit officials expect to complete the audit
plan shortly after the state's fiscal year 2009 accounting records are
closed in September 2009. According to state audit officials, their
audit plan reflects the increased risk associated with Recovery Act
funding, as well as agency risk assessments submitted by agency
auditors. In addition, state audit officials told us that although
their appropriation was recently reduced by 30 percent, this reduction
is not expected to affect their ability to oversee Recovery Act funds
because of their ability to bill state agencies directly for work
associated with auditing federal funds. However, this reduction to the
State Auditor's appropriation will likely result in a qualified opinion
on the state of Iowa comprehensive annual financial report because the
Office of the State Auditor may not be able to conduct enough audit
work on certain state agencies to issue an unqualified opinion.
As we reported in April and July 2009, the Governor created the Iowa
Accountability and Transparency Board (Iowa Board). The Iowa Board has
several purposes: ensure that Iowa meets or exceeds the accountability
and transparency requirements of the Recovery Act; monitor Iowa's use
of Recovery Act funds to prevent fraud, waste, and abuse; and make
recommendations to the Governor, as needed, to ensure that best
practices are implemented. Most recently, the Iowa Board has created an
Internal Control Evaluation Team (Evaluation Team) composed of
representatives from Iowa's Department of Management, the Auditor's
Office, and the Legislative Services Agency to perform an internal
control evaluation of state agencies receiving Recovery Act funds. To
assess agencies' risk levels, the evaluation team has reviewed
agencies' single audit reports and risk assessment questionnaires
filled out by state agency officials and has prepared a report for the
Iowa Board that includes recommendations for improvement.[Footnote 15]
The report from the Evaluation Team identified six high-priority
programs from the 82 programs surveyed that the Evaluation Team expects
will have some difficulty in fully complying with the accountability
and transparency requirements in the Recovery Act. The six high-
priority programs are as follows:[Footnote 16]
* Office of Energy Independence--State Energy Program,
* Office of Energy Independence--Energy Efficiency and Conservation
Block Grants,
* Office of Energy Independence--Energy Efficient Appliance Rebates
Program,
* Department of Education--State Fiscal Stabilization Fund,
* Department of Human Rights--Weatherization Assistance Program, and:
* Iowa Utilities Board--State Electricity Regulatory Assistance Grant.
The primary reasons for recommending additional technical monitoring
for these programs were that they received a significant increase in
funding, were newly created, or have personnel with limited experience.
The Evaluation Team's Internal Controls Evaluation made three
recommendations for the Iowa Board. First, all agencies receiving
Recovery Act funding should receive training in internal controls and
procurement from the U.S. Department of Energy Office of the Inspector
General and the U.S. Department of Justice Antitrust Division. Second,
each agency ranked as a high priority should implement a comprehensive
accountability plan to review Recovery Act activities. Third, an
internal agency team should conduct reviews of all high priority
agencies to ensure that agencies are complying with the accountability
plan.
Iowa Is Disbursing Education Recovery Act Funds and Expects to Disburse
Most Funds by the End of Fiscal Year 2010:
Iowa will use approximately $566.6 million in Recovery Act funds for
education through three U.S. Department of Education (Education)
programs: (1) Title I, Part A, of the Elementary and Secondary
Education Act of 1965 (ESEA); (2) Individuals with Disabilities
Education Act (IDEA), Part B; and (3) the State Fiscal Stabilization
Fund (SFSF) for education stabilization and government services. The
majority of this amount--about $478.8 million--will be disbursed to
school districts and institutions of higher education by the end of
fiscal year 2010. As of August 31, 2009, about $439.1 million of these
funds had been made available to the Iowa Department of Education and
the Department of Management, which had disbursed approximately $98.9
million to school districts, area education agencies,[Footnote 17] and
institutions of higher education, as seen in figure 1.
Figure 1: Recovery Act Education Funding Allocated, Made Available, and
Disbursed in Iowa, as of August 31, 2009 (Dollars in millions):
[Refer to PDF for image: vertical bar graph]
Total Allocated to Iowa:
Program: Title I, Part A: $51.5;
Program: IDEA, Part B: $126.2;
Program: SFSF: $388.9.
Total Made Available to Iowa:
Program: Title I, Part A: $25.7;
Program: IDEA, Part B: $63.1;
Program: SFSF: $261.4.
Total Disbursed:
Program: Title I, Part A: $16.2;
Program: IDEA, Part B: $25.2;
Program: SFSF: $57.5.
Source: GAO analysis of Iowa Department of Education and Board of
Regents data.
Note: In this figure, SFSF funds include only funds for education
stabilization and government services that have been designated for
school districts, community colleges, and public universities.
[End of figure]
ESEA Title I, Part A. The Recovery Act provides $10 billion nationally
to help school districts educate disadvantaged youth by making
additional funds available beyond those regularly allocated through
ESEA Title I, Part A. The Recovery Act requires these additional funds
to be distributed through states to school districts using existing
federal funding formulas, which target funds based on such factors as
high concentrations of students from families living in poverty. In
using the funds, school districts are required to comply with current
statutory and regulatory requirements and must obligate 85 percent of
these funds by September 30, 2010.[Footnote 18] Education is advising
school districts to use the funds in ways that will build their long-
term capacity to serve disadvantaged youth, such as through providing
professional development to teachers. Education made the first half of
states' Recovery Act ESEA Title I, Part A, funding available on April
1, 2009, and announced on September 4, 2009, that it had made the
second half available.
As of August 31, 2009, Education had made available to the Iowa
Department of Education its estimated $51.5 million ESEA Title I, Part
A, allocation under the Recovery Act. In turn, the Iowa Department of
Education had disbursed a total of $16.2 million to school districts
through two of six planned disbursements to school districts. The next
disbursement to districts is planned for October 1, 2009, and the Iowa
Department of Education plans to disburse the majority of its ESEA
Title I, Part A, funds--or an additional $24.3 million--before the end
of the state's fiscal year 2010.
IDEA, Part B. The Recovery Act provided supplemental funding for
programs authorized by IDEA, Part B, the major federal statute that
supports the provisions of early intervention and special education and
related services for children and youth with disabilities. IDEA, Part
B, funds programs that ensure preschool and school-aged children with
disabilities have access to a free and appropriate public education and
is divided into two separate grants--Part B grants to states (for
school-age children) and Part B preschool grants (section 619).
Education made the first half of states' Recovery Act IDEA funding
available to state agencies on April 1, 2009, and announced on
September 4, 2009, that it had made the second half available.
As of August 31, 2009, Education had made available to the Iowa
Department of Education its estimated $126.2 million IDEA, Part B,
allocation under the Recovery Act. In turn, the Iowa Department of
Education had disbursed a total of about $25.2 million to school
districts and area education agencies in the first of five planned
disbursements. The next disbursement to districts and area education
agencies is planned for October 1, 2009, and the Iowa Department of
Education plans to disburse approximately an additional 40 percent of
its allocation of IDEA, Part B, funds--or an additional $50.4 million--
in state fiscal year 2010.
State Fiscal Stabilization Fund (SFSF). The Recovery Act created the
SFSF in part to help state and local governments stabilize their
budgets by minimizing budgetary cuts in education and other essential
government services, such as public safety. Stabilization funds for
education distributed under the Recovery Act must be used to alleviate
shortfalls in state support for education to school districts and
public institutions of higher education. The initial award of SFSF
funding required each state to submit an application to Education that
provides several assurances, including that the state will meet
maintenance-of-effort requirements (or it will be able to comply with
waiver provisions) and that it will implement strategies to meet
certain educational requirements, such as increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF 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). After maintaining state support for education at
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 school districts or public institutions of
higher education. When distributing these funds to school districts,
states must use their primary education funding formula, but they can
determine how to allocate funds to public institutions of higher
education. In general, school districts maintain broad discretion in
how they can use stabilization funds, but states have some ability to
direct institutions of higher education in how to use these funds.
Education allocated to Iowa a total of about $472.3 million in SFSF
funds, of which about $386.4 million is specifically for education
stabilization and about $86 million is for government services. In
total, Iowa plans to use approximately $388.9 million of SFSF funds for
education. As of August 31, 2009 Iowa had disbursed a total of about
$40 million to school districts, $13.2 million to public universities,
and $4.3 million to community colleges. Specifically:
* As of August 31, 2009, two-thirds of Iowa's SFSF education
stabilization funds--or about $258.9 million--was made available to the
state. The Iowa Department of Education and the Department of
Management have begun disbursing education stabilization funds. As of
August 31, the Iowa Department of Education had disbursed a total of
$40 million in education stabilization funds to school districts and
about $3.9 million to community colleges. The Department of Management
had disbursed about $13.2 million to public universities. According to
education officials, these funds are replacing reduced state aid
payments to districts and community colleges, and replacing lost state
appropriations for public universities.
* As of August 31, all $86 million in SFSF government services funds
had been made available to Iowa. Of this amount, $2.5 million will go
to community colleges, and the Iowa Department of Education had already
disbursed about $420,000 of those funds to community colleges. Iowa
plans to use the rest of the government services funds for such
programs as public assistance, public safety, and Medicaid. Iowa has
allocated a total of approximately $63.4 million in government services
funds for fiscal year 2010.
University and Community College Officials Said They Will Use Recovery
Act Funds to Stabilize Budgets, Mitigate Tuition Increases, and Save
Jobs:
Iowa plans to provide approximately $105 million of its SFSF funds to
higher education. Specifically, Iowa's three public universities--Iowa
State University, the University of Iowa, and the University of
Northern Iowa--will share approximately $79.4 million in SFSF education
stabilization funds, and its 15 community colleges will share $23.1
million in SFSF education stabilization funds and $2.5 million in SFSF
government services funds. Funds are being disbursed to each university
and community college in 12 monthly payments, the first of which went
out in July 2009. As of August 31, 2009, public universities had
received about $13.2 million, and community colleges had received $4.3
million in SFSF funds. Iowa's public universities receive about 51
percent of their operating budgets from tuition and fees, about 43
percent from state appropriations, and the rest from other sources. The
Board of Regents, which governs Iowa's public universities, divided the
SFSF funds among the state's three universities in proportion to the
size of each university's budget.[Footnote 19] The Iowa Department of
Education, which oversees Iowa's community colleges, divided the
community college SFSF funds among the state's 15 community colleges
according to its usual state aid formula, which is based on a statutory
formula. Iowa community colleges receive about 47 percent of their
operating revenue from tuition, 37 percent from state aid, 5 percent
from local communities, and the rest from other sources.
We visited two institutions of higher education: Iowa State University
in Ames and Southwestern Community College in Creston. We selected
these institutions to include one university and one community college
located in a rural area. As of August 31, 2009, these two institutions
had received about 17 percent of their allocation. (See table 1 for
SFSF funds allocated and disbursed.)
Table 1: Recovery Act Allocations and Disbursements to Selected
Institutions of Higher Education, as of August 31, 2009 (Dollars in
thousands):
Institution: Iowa State University;
Allocations and disbursements: Allocated; SFSF education stabilization
funds: $31,600; SFSF government services funds: $0.
Institution: Iowa State University;
Allocations and disbursements: Disbursed; SFSF education stabilization
funds: $5,270; SFSF government services funds: $0.
Institution: Southwestern Community College; Allocations and
disbursements: Allocated; SFSF education stabilization funds: $570;
SFSF government services funds: $60.
Institution: Southwestern Community College; Allocations and
disbursements: Disbursed; SFSF education stabilization funds: $90; SFSF
government services funds: $10.
Source: GAO analysis of Iowa Department of Education and Board of
Regents data.
[End of table]
Institutions of Higher Education Plan to Spend All SFSF Funds in Fiscal
Year 2010 to Pay Salaries and Sustain Academic Services and Programs:
In December 2008, to balance the state's budget, the Governor issued an
executive order for a mid-year 1.5 percent across-the-board reduction
in its General Fund appropriations for the 2009 state fiscal year. As a
result of this and other reductions in state funding, Iowa State
University's $519 million fiscal year 2009 budget was reduced by about
$7.2 million, and Southwestern Community College's $10.2 million fiscal
year 2009 budget was reduced by $67,581. For fiscal year 2010, as state
funding levels continued to decline, Iowa State University's budget was
reduced to $502.7 million, a decrease of 3.1 percent compared with the
initial fiscal year 2009 budget. Southwestern Community College's 2010
state aid was reduced in total by about $600,000, representing about a
6 percent reduction to its operating budget compared to fiscal year
2009.
Iowa State University and Southwestern Community College will both
receive SFSF funds equal to or greater than the reduction to their 2010
state appropriations: $31.6 million and $630,027, respectively. In
addition, according to officials at Iowa State University,
appropriating legislation directed public universities to obligate or
spend all SFSF funds by the end of fiscal year 2010, or return the
funds to the state. Southwestern Community College plans to use all of
its $630,027 SFSF allocation in fiscal year 2010 to pay salaries and
employee benefits. According to the Southwestern Community College
chief financial officer, about 76 percent of the school's budget is for
salaries. Iowa State University plans to spend about $22.2 million, or
70 percent, of its $31.6 million SFSF allocation, to pay salaries.
Other expenses being paid for with SFSF funds include building repairs
($4.0 million), supplies and services ($3.6 million), and equipment
($1.1 million).
Iowa institutions of higher education plan to use SFSF funds to sustain
key educational programs and services even as enrollment increased and
budgets declined. For example, Iowa State University's enrollment for
the 2008-2009 school year increased by 2.5 percent over the prior year.
Southwestern Community College's enrollment for the 2009-2010 school
year increased by at least 7 percent over the prior year. Iowa State
University attributed much of its increased enrollment to an increase
in nonresident students, while Southwestern Community College
attributed its increased enrollment to layoffs in the local economy and
students returning to school to learn new skills. Officials from both
schools said that they expect enrollment to continue to increase at
least through the current academic year. Southwestern Community College
is using its SFSF funds to preserve associate degree and trade
programs, which are critical to students directly affected by the
downturn in the economy. For example, Southwestern Community College's
School of Nursing has a waiting list for enrollment, and the
institution plans to use SFSF funds to hire one nursing instructor.
Iowa State University used SFSF funds to hire about 10 new veterinary
medicine faculty in 2009 to educate an anticipated influx of veterinary
medicine students. Under an agreement with a university in another
state, veterinary medicine students will attend the out-of-state
university for their first 2 years after which they will transfer to
Iowa State University to complete their training.
Two Institutions of Higher Education Are Tracking SFSF Funds Using
Existing Systems and Methods:
Both Iowa State University and Southwestern Community College have
established new accounts within their existing accounting systems for
SFSF education stabilization and government services funds and plan to
separately track and monitor SFSF funds using existing processes and
procedures. Iowa State University sends monthly reports to the Board of
Regents and the Department of Management on its use of SFSF funds. Iowa
State University officials said they have received guidance on the use
of SFSF funds from the Iowa Board of Regents. As a matter of practice
for SFSF funds, the Board of Regents will approve all university
infrastructure expenditures of $500,000 or greater. Southwestern
Community College's chief financial officer said that she will prepare
all reporting on the use of Recovery Act funds and maintain file copies
of supporting documentation and reports submitted to the Iowa
Department of Education. She said she is also responsible for assuring
the accurate recording of all deposits and payments. According to the
chief financial officer, the college's accounts receivable department
will deposit SFSF funds into the appropriate accounts and the payroll
department will verify all payees and the amounts paid using SFSF
funds.
While Higher Education Institutions Report Positive Results from
Recovery Act Funds, They Plan to Improve Efficiency in Anticipation of
Ongoing Fiscal Constraints:
Officials at the Iowa institutions of higher education we visited told
us they have not yet reported on the use and results of Recovery Act
funds under Section 1512 because they are awaiting specific guidance on
how to report to Iowa's centralized reporting database. In the
meantime, officials told us, they have identified some savings and
efficiencies from the use of these funds. The universities and
community colleges report annually to the state on performance and
funding. For example, community colleges provide data to the state that
are published in an annual Condition of Iowa's Community Colleges
Report--a summary of fiscal and tuition data and enrollment and
graduation rates.
Iowa State University and Southwestern Community College officials also
told us that SFSF funds have allowed them to save jobs, based on their
own estimates. Iowa State University identified about 50 professional,
scientific, and other positions for potential layoffs by the end of
state fiscal year 2010. If the university determines that some layoffs
are necessary, it will use SFSF funds to pay employees' salaries until
the time that the layoffs become effective. The university is also
using SFSF funds to pay the salaries of 210 employees that accepted an
offer to retire by January 31, 2010--thereby temporarily saving these
jobs according to school officials. A Southwestern Community College
official estimated that SFSF funds allowed the school to save seven
jobs.
SFSF funds also allowed Iowa State University and Southwestern
Community College to limit tuition increases. The Board of Regents
increased tuition for academic year 2009-2010 by 4.2 percent for
resident undergraduate students at the three public universities,
including Iowa State University. According to the Iowa Board of
Regents, however, without SFSF funds, tuition might have increased by
as much as 8 percent at state universities to offset the loss of state
appropriations. Historically, when state budgets have declined, Iowa
State University's tuition has increased significantly. For example,
according to Iowa State University officials, when state budgets
declined in the early 2000s, the university raised tuition and fees by
18.5 percent, followed by a 17.6 percent tuition hike in the following
year. For Southwestern Community College, the result of the 2010 budget
shortfall was a potential $19 tuition increase per credit hour. (Annual
tuition increases have averaged $5.72 per credit hour for the past 9
years.) However, SFSF funds allowed Southwestern Community College to
limit the tuition increase to $5.50 per credit hour, about a $14
reduction for students compared to the potential increase.
SFSF funds have also provided institutions of higher education the
opportunity to plan strategically for the long term by restructuring
for greater efficiency and avoiding the funding cliff effect (i.e., the
shortfall when Recovery Act funds are spent). Iowa State University
asked each of its departments to submit plans for reducing costs by a
total of $38.8 million, an amount equal to the university's 2009 and
2010 budget cuts. Southwestern Community College also asked its
departments to submit plans to reduce their budgets by 5 percent (a
percentage greater than the 2009 statewide reduction, in anticipation
of future budget cuts). Department plans included proposals for staff
reductions and process improvements.
To reduce costs, both institutions have allowed vacant positions to
remain unfilled and reduced staffing levels through attrition and some
layoffs. Iowa State University also identified for layoffs 25 of about
800 professional and scientific staff, and, as discussed earlier,
officials reported that 210 general services employees will retire by
January 31, 2010, under the university's early retirement incentive
offer. SFSF funds will be used to pay the salaries of these employees
up to their retirement date. Southwestern Community College reduced the
number of instructors from 48 to 43: 2 instructors left voluntarily, 2
retired, and 1 was laid off. Both Iowa State University and
Southwestern Community College plan to retain or hire adjunct
professors or lecturers--adjunct faculty and lecturers do not have full
or permanent status and therefore are less costly. Iowa State
University plans to use technology, such as adding computers or
streaming video, to provide classroom instruction. Southwestern
Community College reduced its printing costs by eliminating paper
copies of the course catalog and student handbook--now both are
available only online.
Iowa State University officials told us that they do not expect to have
a funding cliff in 2010 because the university has reduced its payroll
through retirements and layoffs and has reengineered education by
increasing faculty workload and class size. Southwestern Community
College's strategy to avoid a funding cliff includes avoiding any new
long-term costs and to plan and operate under the assumption that state
funds will be cut again. According to Southwestern Community College,
it is important that the school budget conservatively because it is a
small, rural school and therefore has fewer funding resources.
Iowa Has Awarded Most of Its Highway Recovery Act Funds, and Reports
Funding over 2,700 Contractor Employees in July 2009:
The U.S. Department of Transportation's Federal Highway Administration
(FHWA) apportioned $358 million in Recovery Acts funds to Iowa for
highway construction. As of September 1, 2009, the federal government
had obligated $320 million for Iowa projects, and Iowa had been
reimbursed $91 million for work submitted for payment by highway
contractors. According to state transportation officials, citing the
state's most recent report to the U.S. House Committee on
Transportation and Infrastructure, the Recovery Act funded 2,724
highway contractor employees in July. Officials said, cumulatively, the
department has reported that more than 363,000 hours of work have been
funded by the Recovery Act. In addition, transportation officials
estimate that Recovery Act funding contributed to the repair of more
than 110 miles of state, county, and city roads.
The Recovery Act provides funding to the states to restore, repair, and
construct highways, and conduct other activities allowed under the
Federal-Aid Highway Surface Transportation Program. The act requires
that 30 percent of these funds be suballocated for projects in
metropolitan and other areas of the state. Highway funds are
apportioned to the states through existing federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act, paying a
prevailing wage in accordance with federal Davis-Bacon requirements,
complying with goals to ensure disadvantaged businesses are not
discriminated against in the awarding of construction contracts, and
using American-made iron and steel in accordance with Buy America
program requirements. While the maximum federal fund share of highway
infrastructure investment projects under the existing federal-aid
highway program is generally 80 percent, under the Recovery Act, it is
100 percent.
To receive Recovery Act funds for highway infrastructure spending,
states must meet certain requirements. For example, the states must do
the following:
* Ensure that 50 percent of apportioned Recovery Act funds were
obligated within 120 days of apportionment (before June 30, 2009). The
50 percent rule applies only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated primarily based on population, for metropolitan, regional,
and local use. In addition, states are required to ensure that all
apportioned funds--including suballocated funds--are obligated within 1
year. The Secretary of Transportation is to withdraw and redistribute
to other states any amount that is not obligated within these time
frames.
* Give priority to projects that can be completed within 3 years and to
projects located in economically distressed areas.
* Certify that the state will maintain the level of spending
(maintenance of effort) for the types of transportation projects funded
by the Recovery Act that it planned to spend the day the Recovery Act
was enacted. As part of this certification, the governor of each state
is required to identify the amount of funds the state plans to expend
from state sources from February 17, 2009, through September 30, 2010.
[Footnote 20]
Iowa has met, or is in the process of meeting, these requirements, and
the U.S. Department of Transportation is currently validating Iowa's
maintenance-of-effort calculations--the amount of state funds Iowa
planned to expend for the covered programs through September 30, 2010.
Iowa has also initiated I-JOBS, an $830 million state-funded program to
invest in infrastructure. A key component of this program is $115
million for transportation projects across the state, including $50
million for bridge safety, $45 million for city streets and secondary
roads, and the remainder for enhancing public transit and recreational
trails. As of September 1, 55 bridge safety projects under the state's
jurisdiction had been approved for I-JOBS funding in fiscal years 2010
and 2011.
Almost 90 Percent of Highway Recovery Act Funds Has Been Obligated for
Iowa Highway Projects:
As we previously reported, Iowa was apportioned $358 million for
highway infrastructure and other eligible projects. As of September 1,
2009, $320 million had been obligated (about 90 percent of available
funds) for 183 highway projects in 83 of the state's 99 counties.
[Footnote 21] For those projects where funds have been awarded, Iowa
Department of Transportation officials reported that 139 projects,
representing $268 million, had begun. As of September 1, 2009, $91
million had been paid to contractors and reimbursed by FHWA.[Footnote
22] Officials estimated that Iowa will spend and be reimbursed a total
of about $215 million of its Recovery Act transportation funds by the
end of December 2009.
About 87 percent of Recovery Act highway obligations for Iowa have been
for pavement improvement projects. Specifically, $277 million of the
$320 million obligated to Iowa, as of September 1, 2009, was being used
for pavement improvement projects, such as the $1.5 million patching
and resurfacing of 6.4 miles of County Route G35 in Cass County, Iowa
(discussed below). Additionally, $20 million is being used for bridge
replacements, such as the $1.1 million for Iowa State Route 92 bridge
over Keg Creek near Treynor, Pottawattamie County, Iowa (discussed
below). Figure 2 shows obligations by the types of road and bridge
improvements being made.
Figure 2: Highway Obligations for Iowa by Project Improvement Type as
of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (91 percent, $291.2 million): Pavement
improvement ($276.8 million): 87%; New road construction ($14.4
million): 5%.
Bridge projects total (6 percent, $20.9 million): Bridge replacement
($20.3 million): 6%; Bridge improvement ($0.5 million): 0%;
New bridge construction ($0.1 million): 0%.
Other (2 percent, $7.3 million):
Other ($7.3 million): 2%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
Iowa Department of Transportation Is Using Existing Procedures for
Internal Controls and Contract Administration of Highway Projects:
State program agencies, such as the Iowa Department of Transportation,
are responsible for establishing internal controls and procedures to
ensure that their agencies spend funds as intended by law. Among other
things, the department is responsible for ensuring contract award and
performance are in accordance with established standards and conducted
in compliance with laws and regulations. It is also responsible for
maintaining important contract and financial documentation.
The Iowa Department of Transportation has detailed procedures for the
administration and inspection of work performed by contractors,
including written contracting procedures, contractor qualification
standards, and material and construction specifications and guidelines.
For example, the manual provides detailed guidance on how to sample and
analyze materials such as freshly mixed concrete. The manual also
requires that all of the materials used in highway construction in the
state be listed on the state's list of approved manufacturers and brand
names. All of this information is published in hard copy, online, and
on compact discs. The state and local governments also employ
construction and material inspectors and technicians, and construction
engineers, to review, measure, and accept work performed by
contractors. According to officials at the Iowa Department of
Transportation, each item of work has a method of measurement and basis
of payment, as well as various associated construction and materials
specifications. The Iowa State Auditor's Single Audit Report for 2008
does not identify any material weaknesses in the Department of
Transportation's highway planning and construction program.
In addition, according to agencies officials, to help achieve
consistent contracting procedures across the state, the Iowa Department
of Transportation requires that all Recovery Act-funded highway
projects be advertised and bid centrally through the state contracts
office. For example, the department review includes ensuring that only
contractors that have been prequalified are requested to bid on
projects.
As part of our assessment for this cycle, we reviewed four highway
infrastructure projects--two resurfacing projects, a grading project,
and a bridge replacement project--to determine if the contracting
process for these projects reflected the state's published procedures.
Two of these projects were state-administered projects and two were
locally administered; they are located in different state highway
districts and different counties. The following describes these
projects:
* Project 1. The Cass County Board of Supervisors, in southwest Iowa,
awarded a contract to patch and resurface 6.4 miles of County Route
G35. This $1.5 million project is being administered locally by the
Cass County engineer.
* Project 2. The Iowa Department of Transportation awarded a contract
to replace the Iowa State Route 92 bridge over Keg Creek, 3 miles west
of Treynor, in Pottawattamie County, Iowa. This $1.14 million project
is being administered by Iowa Department of Transportation District 4.
* Project 3. The Iowa Department of Transportation awarded a contract
to regrade a 2.6 mile segment of Iowa State Route 141, northwest of
Mapleton, in western Iowa's Monona County. This $2.27 million project
to reduce snow blockage along this route is being administered by Iowa
Department of Transportation District 3.
* Project 4. The Polk County Board of Supervisors awarded a contract to
resurface 6 miles of N.W. 118th Avenue in northern Polk County, north
of the Des Moines metro area, in central Iowa. This $2.1 million
project, administered by the Polk County engineer, has been completed.
We reviewed these contracts and confirmed with state and county highway
officials that all four contracts:
* were competitively awarded to the lowest qualified bidder;
* were for a fixed price;
* considered only prescreened, qualified contractors;
* established financial penalties for failure to start or complete
work, as contracted;
* required reporting of contractor staff and hours worked on the
project; and:
* were regularly monitored and inspected by qualified state or local
engineers and inspectors.
Iowa's Department of Transportation Reports That the Recovery Act
Funded More Than 2,700 Contractor Employees in July 2009:
Like other Iowa agencies, the Department of Transportation has not yet
reported under Section 1512 of the Recovery Act. However, the
department continues to report project, financial, and employment
information to FHWA. This reporting is required by the Recovery Act to
provide greater accountability and transparency and includes, among
other things, monthly reporting of contracts awarded, projects in
process, employees working and employee hours worked. Also the
department reports this information to the U.S. House of
Representatives' Committee on Transportation and Infrastructure. In
addition, the department's Web site provides weekly updates on projects
funded and contracts awarded under the Recovery Act, and Recovery Act
funds spent on each project.
To support these reporting requirements, the Iowa Department of
Transportation established its own centralized reporting system, in
addition to the state's centralized reporting system, which allows the
department's district offices, local governments, and contractors to
enter and verify required Recovery Act financial and employment data.
This information provides the basis for the department's report to the
state's central system, FHWA, the House Committee on Transportation and
Infrastructure, the Iowa public, and the media.
In July 2009, according to state transportation officials, citing
Iowa's most recent report to the House Committee on Transportation and
Infrastructure, the Recovery Act funded 2,724 highway contractor
employees. For the same period, transportation officials said that more
than 160,000 hours of work were funded by the Recovery Act. Officials
said that, cumulatively, Iowa's Department of Transportation has
reported to the committee that more than 363,000 hours of highway
employee work have been funded by the Recovery Act. Iowa transportation
officials estimate that for projects completed as of August 17, 2009,
Recovery Act funding has contributed to the repair of more than 110
miles of state, county, and city roads.
Use of Weatherization Funds Has Been Limited because of Delay in
Setting Prevailing Wages for Workers:
Iowa has for years operated a Weatherization Assistance Program that
receives funding from several sources, including the U.S. Department of
Energy (DOE). Each year, Iowa uses this funding to weatherize
approximately 2,000 homes of low-income clients. The Division of
Community Action Agencies manages the state's Weatherization Assistance
Program, and it, in turn, relies on 18 local agencies, all experienced
in weatherization work, to carry out the program at the local level. In
2009, Iowa received $8.6 million in regular weatherization funding from
DOE. However, the amount significantly increased when the Recovery Act
provided a large increase in weatherization funding later in the year.
Using the Recovery Act funding, DOE allocated $80.8 million for the
Weatherization Assistance Program to be used over a 3-year period. Iowa
plans to use these funds to weatherize an additional 7,196 homes.
On July 2, 2009, DOE approved Iowa's weatherization plan under the
Recovery Act and released an additional $32.3 million of the total
$80.8 million allocated to the state. As of August 31, 2009, Iowa had
been awarded about $40.4 million, or 50 percent of its total DOE
allocation, but had spent only about 5 percent of the funding received.
Furthermore, no homes had been weatherized using Recovery Act funds.
Instead, Iowa has used these funds to provide training and technical
assistance and purchase vehicles and equipment--"ramp up" activities--
that will be used when the Recovery Act Weatherization Program is fully
implemented in the state.
According to state weatherization officials, they refrained from
spending Recovery Act funds on weatherization work until the U.S.
Department of Labor (Labor) established the prevailing wage rates for
weatherization workers covered by the Recovery Act Weatherization
Assistance Program.[Footnote 23] State officials told us that they and
all 18 local agencies that manage the Weatherization Assistance Program
responded to the Labor survey to gather wage and benefit data on
weatherization workers in Iowa by the requested date. The officials
understood that the prevailing wages for Iowa would be available by
July 25, 2009. On July 24, they received notice from Labor that the
wage rates would be delayed, but should be available by August 14,
2009. On August 19, 2009 Labor established a prevailing wage rate for
weatherization work in the state. On August 20, 2009 state officials
received notification that prevailing wages had been determined and
notified local agencies that they could accept bids and issue contracts
for weatherization.
Because the requirement that workers be paid at least the prevailing
wages, as determined by the Davis-Bacon Act, had not previously applied
to the weatherization program and prevailing wages were not yet
established, state officials provided general guidance to the local
agencies on the overall requirements of the Davis-Bacon Act and on
completing the Labor survey. However, officials told us that they were
reluctant to implement the Recovery Act Weatherization Assistance
Program without knowing the wages that local agencies and contractors
who do the work must be paid and because they had limited experience
with the Davis-Bacon Act. Many of the weatherization contractors are
small companies that employ few full-time staff, and most do not
provide benefits to their employees. According to these officials, if
wages and benefits paid to weatherization workers turned out to be less
than the prevailing wages, the contractors would be liable for back
payments. These back payments could be burdensome, especially for the
smaller contractors, and might also give the appearance that
contractors intentionally underpaid their employees. Furthermore, under
the Davis Bacon Act, the local agencies or contractors must prepare a
certified payroll each week and pay weatherization workers on a weekly
basis. Both of these requirements are new to the Iowa program.
Therefore, while waiting for Labor to determine the Davis-Bacon wage
issues, Iowa continued to use program funds made available through
annual DOE appropriations to weatherize homes.
Recovery Act Weatherization Funds Will Be Monitored Largely by Existing
Program Controls:
According to state weatherization officials we spoke with, Iowa did not
complete a risk-based assessment of the local agencies that implement
its weatherization program primarily because all the agencies have
demonstrated successful track records implementing a weatherization
program, as evidenced in annual evaluations. These officials also
consider existing program controls sufficient to ensure that
weatherization funds are used for their intended purpose. Seventeen of
the 18 agencies that implement the Weatherization Assistance Program
have done so for more than 25 years, and the newest agency has
implemented the program since 2006. In addition, state officials
informally assess each local agency's performance on a continuing
basis.
Controls over the Weatherization Assistance Program require the state
to conduct an annual fiscal evaluation of each local agency. An on-site
fiscal evaluation is completed under an established audit process and
includes an examination of documents and records pertaining to
salaries, materials, equipment, and indirect costs charged to the
Weatherization Assistance Program. According to state officials, the
same fiscal evaluation will be completed at all local agencies that
receive Recovery Act funds. In addition, according to state officials,
each local agency is contractually required to segregate, track, and
maintain Recovery Act funds independently of other revenue streams. We
found that the following audit steps are included in the state's fiscal
evaluation:
* A sample of files is reviewed to determine if expenses charged to the
program are adequately documented and comply with established limits.
The review includes a sample of invoices for materials and labor
charges and a review of timesheets and payroll ledgers.
* Inventory data for equipment costing $5,000 or more are reviewed and
tracked from year to year to assure that the local agency retains the
equipment and is properly accounting for the equipment on hand.
* The agency's procedures for handling interest earned on cash deposits
is reviewed to assure that the agency complies with federal rules
governing the amount of interest the agency may retain. For the
Weatherization Assistance Program, interest amounts up to $100 per year
may be retained.
* A sample of transactions for costs typically allocated to several
programs (such as copiers and phones) is reviewed to determine if the
cost allocation plan and procedures provide for a fair and equitable
distribution of costs.
Iowa Officials Plan to Use Existing Performance Measures to Monitor the
Results of Weatherization Funds:
State officials will use the existing program performance measures,
such as the number of homes weatherized and the resulting energy
savings, to evaluate the Iowa Recovery Act Weatherization Assistance
Program from an overall perspective and to assess the performance of
each local agency. In addition, according to state officials, the local
agencies are contractually required to track and report data on the
effect of Recovery Act funds, such as the number of jobs created, to
the Division of Community Action Agencies. The division, in turn, will
report this information to the state's data center operated by the Iowa
Department of Management. While state weatherization officials are
confident that they will be able to track and measure the effect of
Recovery Act funding, they are awaiting guidance on the specific items
they are to measure and report.
Under current DOE requirements, which will continue to be followed
under the Recovery Act program, each local agency must inspect all
homes weatherized to ensure that all work was completed properly, all
materials used were of good quality and installed properly, and no
health or safety problems were created. The state is required to
inspect at least 5 percent of the homes weatherized by each local
agency, but according to state officials, they typically inspect 7
percent to 9 percent of all homes weatherized. State officials are also
required to annually assess each agency's performance. During this
annual assessment, officials evaluate each agency's house inspection
process and determine the number of homes weatherized, the resulting
energy savings, and the attendance of the agency's staff at training
sessions and state meetings. In addition, state officials plan to
conduct several monitoring visits to each local agency each year to
determine how well each agency is spending Recovery Act funds and how
well it is tracking and reporting required data, such as the number of
jobs created. The state will be adding five staff to assist with the
monitoring of Recovery Act weatherization funding--two new staff have
already been hired in the Division of Community Action Agencies and
another has been reassigned to the program. Two new staff to assist in
monitoring the local agencies' fiscal controls over weatherization will
be added in the near future.
State Comments on This Summary:
We provided the Governor of Iowa with a draft of this appendix on
September 9, 2009. The Director, Iowa Office of State-Federal
Relations, and the Director for Performance Results, Department of
Management, responded for the Governor on September 14, 2009. Officials
agreed with our findings. The officials also offered technical
suggestions, which we have incorporated, as appropriate.
GAO Contact:
Lisa Shames, (202) 512-3841 or shamesl@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Thomas Cook, Assistant
Director; Christine Frye, analyst-in-charge; James Cooksey; Daniel
Egan; Ronald Maxon; Marietta Mayfield; Mark Ryan; and Carol Herrnstadt
Shulman made key contributions to this report.
[End of section]
Footnotes for Appendix VIII:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] This does not include obligations associated with $0.6 million of
apportioned funds that were transferred from FHWA to the Federal
Transit Administration (FTA) for transit projects. Generally, FHWA has
authority pursuant to 23 U.S.C. § 104(k) (1) to transfer funds made
available for transit projects to FTA.
[3] States request reimbursement from FHWA as they make payments to
contractors working on approved projects.
[4] The use of Recovery Act funds must comply with specific program
requirements but also, in some cases, enables states to free up state
funds to address their projected budget shortfalls.
[5] The REC, which is comprised of the Governor or a designee, the
director of the Legislative Services Agency or a designee, and a third
member agreed to by the other two, convenes quarterly to prepare the
state's estimates of tax-receipt revenues for use in preparing the
annual budget.
[6] Iowa's fiscal year begins July 1 and ends June 30.
[7] According to state budget officials, the Governor's calculations
for the gross fiscal year 2009 General Fund receipts currently do not
include estimated tax refunds for taxpayers, receipts of additional
federal funds, and transfers of surplus funds from agencies. Such
information will not be completed by state budget officials until the
state finishes processing revenues and expenses for fiscal year 2009,
which should occur by the end of September 2009. According to officials
from the Legislative Services Agency, the agency's calculations for
fiscal year 2009 revenues include estimated tax refunds for taxpayers
and monthly transfers to Iowa's school infrastructure refund account.
[8] In December 2008, because of declining revenue projections, the
Governor directed an across-the-board 1.5 percent reduction in the
state's General Fund appropriations.
[9] Recovery Act funds used to maintain funding levels include, but are
not limited to, Federal Medical Assistance Percentage funds (discussed
in GAO-09-1016) and State Fiscal Stabilization Fund monies.
[10] OMB, Memorandum M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Activities (May 11, 2009).
[11] Pub. L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009).
[12] The D-U-N-S number is used by the federal government to identify
business organizations.
[13] The CCR is the primary federal registrant database that collects,
validates, stores, and disseminates data in support of federal
agencies' acquisition missions, including agency contract and
assistance awards.
[14] [hyperlink, http://recovery.iowa.gov] (downloaded on Sept. 9,
2009).
[15] The Single Audit Act of 1984, as amended (31 U.S.C. ch. 75),
requires that each state, local government, or nonprofit organization
that expends $500,000 or more a year in federal awards must have a
single audit conducted for that year subject to applicable
requirements, which are generally set out in OMB Circular No. A-133,
Audits of States, Local Governments and Non-Profit Organizations (June
27, 2003). If an entity expends federal awards under only one federal
program, the entity may elect to have an audit of that program.
[16] Nine programs were not included in the risk assessment because
funding had not yet been awarded or the federal guidelines have not
been issued. These programs will be reviewed as awards are made or
guidelines issued.
[17] Iowa's 10 regional area education agencies, which were established
by the Iowa legislature in 1974 to provide equitable and economical
educational opportunities for Iowa's children, partner with public and
some private schools to provide education and instructional support
services.
[18] School districts must obligate at least 85 percent of their
Recovery Act ESEA Title I, Part A, funds by September 30, 2010, unless
granted a waiver and must obligate all of their funds by September 30,
2011. This will be referred to as a carryover limitation.
[19] The Iowa Board of Regents also governs two special schools: the
Iowa Braille and Sight Saving School and the Iowa School for the Deaf.
The Board of Regents allocated SFSF funds for these two special schools
to put them on par with the general K-12 education system in Iowa, and
allocated the remaining SFSF funds to Iowa's public universities.
[20] Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009).
[21] For the Highway Infrastructure Investment Program, the U.S.
Department of Transportation has interpreted the term obligation of
funds to mean the federal government's contractual commitment to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement.
[22] A state requests reimbursement from FHWA as it makes payments to
contractors working on approved projects.
[23] Use of Recovery Act weatherization funds is subject to Section
1606 of the act, which requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined
under the Davis-Bacon Act. See Pub. L. No. 111-5, § 1606, 123 Stat.
115, 303 (Feb. 17, 2009).
[End of section]
Appendix IX: Massachusetts:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Massachusetts. The full report on all of our
work, which covers 16 states and the District of Columbia, is available
at [hyperlink, http://www.gao.gov/recovery/].
We reviewed three programs in Massachusetts funded under the Recovery
Act--Highway Infrastructure Investment funds, Transit Capital
Assistance funds, and the Workforce Investment Act (WIA) Youth Program.
We selected these programs for different reasons:
* Contracts for highway projects using Highway Infrastructure
Investment funds have been under way in Massachusetts for several
months and provided an opportunity to review financial controls,
including oversight of contracts.
* The Transit Capital Assistance funds had a September 1, 2009,
deadline for obligating a portion of the funds and, further, provided
an opportunity to review nonstate entities that receive Recovery Act
funds.
* The WIA Youth Program in Massachusetts is largely directed toward a
summer employment program and, therefore, was in full operation.
With all of these programs, we focused on how funds were being used;
how safeguards were being implemented, including those related to
procurement of goods and services; and how results were being assessed.
We reviewed contracting procedures and examined two specific contracts
under both the Recovery Act Highway Infrastructure Investment funds and
the WIA Youth Program. In addition to these three programs, we also
updated funding information on three Recovery Act education programs
where significant funds are being disbursed--the U.S. Department of
Education (Education) State Fiscal Stabilization Fund (SFSF) and
Recovery Act funds under Title I, Part A, of the Elementary and
Secondary Education Act of 1965 (ESEA), as amended, and the Individuals
with Disabilities Education Act (IDEA), Part B. Consistent with the
purposes of the Recovery Act, funds from the programs we reviewed are
being directed to help Massachusetts and local governments stabilize
their budgets and to stimulate infrastructure development and expand
existing programs--thereby providing needed services and potential
jobs.
Following are the highlights of our review of these funds:
Highway Infrastructure Investment:
* The U.S. Department of Transportation's (DOT) Federal Highway
Administration (FHWA) apportioned $438 million in Recovery Act funds to
Massachusetts. As of September 1, 2009, the federal government has
obligated $203.2 million to Massachusetts and $4.8 million has been
reimbursed by the federal government.[Footnote 2] As of September 12,
2009, Massachusetts had awarded contracts or advertised for bids on 39
projects.
* Most of the projects involve road paving, but the state is beginning
to advertise more complex projects, such as a project making safety and
mobility improvements at four major intersections along the Dorchester
Avenue corridor in Dorchester.
* The commonwealth anticipates that the additional funds suballocated
to urban areas will be obligated by the March 2, 2010, deadline.
* State officials have some concerns about Massachusetts's ability to
meet its transportation maintenance-of-effort requirement because of
the commonwealth's difficult budget situation.
Transit Capital Assistance Funds:
* DOT's Federal Transit Administration (FTA) apportioned $290 million
in Recovery Act funds to Massachusetts and urbanized areas located in
the state. As of September 1, 2009, FTA has obligated $206 million.
* The Massachusetts Bay Transportation Authority (MBTA), the largest
transit provider in New England, will use the first round of funding
for a series of projects worth $112.6 million that include facility
improvements, fleet enhancements, and capital improvement projects, as
well as an enhancement of the MBTA's Silver Line rapid transit service.
* FTA found that the September 1, 2009, 50 percent obligation
requirement was met.
WIA Youth Program:
* The U.S. Department of Labor allotted about $24.8 million to
Massachusetts in WIA youth Recovery Act funds. The commonwealth
allocated $21.1 million to local workforce boards, and as of September
5, 2009, the local boards have drawn down about $11 million and served
6,850 youth.
* While the commonwealth met its goal of serving 6,500 youth, programs
faced challenges in getting youth on board in the initial weeks of the
summer. One reason for the delay was that youth had difficulty
supplying suitable documentation of eligibility.
Updated Funding Information on Education Programs:
* Education has awarded Massachusetts about $726 million, or about 73
percent of its total SFSF allocation. As of September 4, 2009, the
commonwealth has distributed $412 million to local educational
agencies, helping the state restore aid to school districts.
* Additionally, Education has awarded Massachusetts all of its Recovery
Act funds under Title I, Part A, of ESEA, as amended--about $164
million. Based on information available as of September 4, 2009, the
commonwealth has allocated $78 million to local educational agencies
and about $2 million has been drawn down by local educational agencies
(LEA). These funds are to be used to help improve teaching, learning,
and academic achievement for students in families that live in poverty.
* Education has also awarded Massachusetts all of its Recovery Act
funds under the Individuals with Disabilities Education Act (IDEA),
Part B--about $291 million. Massachusetts has allocated $145 million to
LEAs, which have drawn down almost $10 million as of September 4, 2009.
These funds are to be used to support special education and related
services for children, as well as youth with disabilities.
As Massachusetts Begins Its Fiscal Year 2010 Facing Fiscal Stress,
Recovery Act Funds Continue to Provide Fiscal Relief:
In our July 2009 report, we noted that the commonwealth of
Massachusetts needed to close a significant budget gap (approximately
$4 billion from its $28 billion budget) during fiscal year 2009, which
ended on June 30, 2009. This gap was largely driven by lower-than-
expected revenue collections and was addressed by a combination of
budget cuts and use of funding sources, such as Recovery Act funds and
state rainy-day funds.[Footnote 3] As fiscal year 2009 closed, revenue
collections have continued to be less than anticipated, while
supplemental funding was requested for some programs.[Footnote 4] For
example, according to the state's budget director, the state's Medicaid
program experienced higher-than-expected claims and utilization, and
these additions to the budget gap require further state action heading
into fiscal year 2010. The fiscal year 2010 budget was signed by the
Governor on June 29, 2009, prior to the start of the new fiscal year.
Fiscal year 2010 revenue estimates were lowered by more than $1.5
billion after the Governor submitted his initial fiscal year 2010
budget proposal. The spending level during fiscal year 2010 is
projected to be lower than the past 2 fiscal years.[Footnote 5] The
Executive Office for Administration and Finance is evaluating fiscal
risks for the fiscal year 2010 budget and beyond by working with state
agencies on spending plans. State officials noted that they will be
closely monitoring revenues throughout fiscal year 2010. Another area
requiring close attention is the state's Medicaid program, as
enrollments and costs have risen during the past several years.
The commonwealth plans to continue to use Recovery Act funds along with
state rainy-day funds during state fiscal year 2010 to help balance its
operating budget. The use of Recovery Act funds must comply with
specific program requirements but also, in some cases, enables states
to free up state funds to address their projected budget shortfalls.
The state plans to use Recovery Act funds to a greater extent in fiscal
year 2010 than it did in fiscal year 2009. In fiscal year 2009, the
commonwealth used $1.4 billion in Recovery Act funds to stabilize its
budget, while the commonwealth plans to use at least $1.7 billion in
fiscal year 2010 for the same purpose.[Footnote 6] State rainy-day
funds will also be used to help stabilize the state's budget but to a
lesser extent than in fiscal year 2009. The commonwealth used $1.39
billion in state rainy-day funds during fiscal year 2009, while the
state budget for fiscal year 2010 assumes the use of $214 million in
rainy-day funds. This leaves the state with a projected rainy-day fund
balance of $571 million at the end of fiscal year 2010 compared with
$2.1 billion at the beginning of fiscal year 2009.
The state is preparing for when Recovery Act funds will no longer be
available by trying to stabilize the state budget through a combination
of spending reduction and revenue generating strategies. During its
fiscal year 2010 spending plan process, the Executive Office for
Administration and Finance issued spending caps for each state
secretariat to help ensure that state spending levels are aligned with
future revenue projections. The state has also capped the number of
employees at each department to help prevent payroll increases or
reduce payroll spending. In addition, state officials are encouraging
state departments to minimize the need for forced layoffs by lowering
personnel costs in creative ways, such as through reduced work hours,
job sharing, and voluntary furloughs. Also, during the past fiscal
year, the state instituted a policy that employees paid from Recovery
Act funds would work only as long as those funds were available.
Furthermore, state officials are preparing agencies for possible
midyear budget reductions in the event that a new budget gap emerges
during the course of the fiscal year.[Footnote 7] In addition to
spending reductions, the appropriations act for fiscal year 2010
increased a state sales tax from 5 percent to 6.25 percent, effective
August 1, 2009, among other changes.[Footnote 8]
Senior state officials have expressed concern about their ability,
given the tight budget, to pay for extra oversight and reporting
activities needed on Recovery Act funds. U.S. Office of Management and
Budget (OMB) guidance discusses two options states have to recoup costs
for central administrative services, such as oversight and reporting.
[Footnote 9] The commonwealth plans to use the "billed services"
option, which charges agencies for central services and allocates them
to federal grants. Such services include both personnel and information
technology system costs for central oversight and reporting, such as
staff within the newly created Office of Infrastructure Investment and
the Office of the State Auditor. However, for two reasons, state
officials were concerned that this methodology, although preferred,
would not enable the state to recoup additional administrative costs of
Recovery Act implementation:
* Small grants may require significant central resources, while larger
grants may require proportionally fewer central resources, but this
approach, which includes a 0.5 percent limit on the amount allowed to
be recouped, may not adequately cover the state's costs if Recovery Act
programs may not be combined.
* The depreciation rules for information systems would require them to
allocate costs over the 5-year life of the system created for tracking
Recovery Act funds, yet the costs could be recovered only over the
shorter period during which they will receive funds.
As a result, the commonwealth submitted a proposal to the Division of
Cost Allocation, Department of Health and Human Services (HHS), to try
to improve flexibility in the formula to calculate and account for
these central administrative costs.[Footnote 10] According to state
officials, they received approval for their cost allocation proposal
from the Division of Cost Allocation on August 10, 2009, although it
included limitations on the depreciation methodology proposed.[Footnote
11] In addition, the National Association of State Auditors,
Comptrollers and Treasurers, representing all states, submitted a
waiver proposal to OMB related to the depreciation methodology for cost
recovery, among other issues. OMB approval for this waiver proposal is
pending.
Massachusetts Is Focusing on Developing Statewide Recovery Act
Reporting Procedures:
To report on Recovery Act funds as required under the Recovery Act, the
commonwealth designed ways to collect data and review data quality for
public reporting on both federal and state government Web sites. Senior
officials noted that the commonwealth is committed not only to
providing timely information on Recovery Act spending to meet federal
reporting requirements as outlined in Recovery Act section 1512,
[Footnote 12] but also to achieving the Governor's commitment to
providing transparent information on the state's recovery Web site.
Recovery Act reporting requirements include identifying the entities
receiving Recovery Act dollars--and the dollar amounts--projects or
activities being funded, projects' status, and an estimate of the
number of jobs created and the number of jobs retained by the projects
and activities. The lead state organization for developing reporting
processes, the Office of Infrastructure Investment, is hiring a manager
to develop reporting protocols and oversee Recovery Act reporting. The
state also appointed a "reporting" lead within each secretariat to
serve as a single point of contact on reporting issues. Information
will be gathered from both prime funding recipients, such as state
agencies, as well as subrecipients, such as private contractors. State
officials expressed concerns that public reporting of Recovery Act
funds will be challenging, especially reporting on funds going to
private and nonprofit entities that lack experience with such reporting
or that lack the administrative capacity to produce reports. Also,
officials noted that the definition of a "project" still required
clarification, and if not clarified, aggregating this information to
meet federal reporting requirements will be difficult.
One key required element in the Recovery Act is reporting an estimate
of the number of jobs created and the number of jobs retained by
projects and activities. Senior state officials noted that they awaited
further federal guidance on job reporting methodologies. They said that
for some federal agencies, guidance is clear, but facing an October
deadline, they decided to move ahead with developing job counting
methodologies across state agencies. The commonwealth's Executive
Office of Labor and Workforce Development took the lead. State
officials said the state may develop three or four different
methodologies for job counting, depending on the program area. They
also said that some entities, such as those familiar with Davis-Bacon
Act job reporting requirements, will have an easier time reporting on
jobs compared to entities in education or health care, for example,
where they do not have certified payrolls from which to draw these
data.
Massachusetts Is Managing Highway Projects but Faces Challenges
Regarding Funds Suballocated to Urbanized Areas:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through federal-aid highway program
mechanisms, and states must follow the requirements of the existing
program, which include ensuring the project meets all environmental
requirements associated with the National Environmental Policy Act
paying a prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
Massachusetts was apportioned $438 million in March 2009 for highway
infrastructure and other eligible projects. As of September 1, 2009,
$203.2 million has been obligated. The U.S. Department of
Transportation has interpreted the term "obligation of funds" to mean
the federal government's commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
approves a project and a project agreement is executed. As of September
1, 2009, $4.8 million has been reimbursed by FHWA. States request
reimbursement from FHWA as the state makes payments to contractors
working on approved projects. Almost 85 percent of Recovery Act highway
obligations for Massachusetts have been for pavement improvement. As of
September 1, 2009, $173.5 million of the $203.2 million obligated in
Massachusetts is being used for pavement improvement. Figure 1 shows
obligations by the types of road and bridge improvements being made.
Figure 1: Percentage of Highway Obligations for Massachusetts by
Project Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (85 percent, $173.5 million): Pavement
improvement ($173.5 million): 84%.
Bridge projects total (5 percent, $9.2 million): Bridge replacement
($6.7 million): 3%;
Bridge improvement ($2.5 million): 1%.
Other (10 percent, $20.6 million):
Other ($20.6 million): 10%.
Source: GAO analysis of FHWA data.
Note: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases. Totals may not add due to rounding.
[End of figure]
Highway Infrastructure Investment funds appropriated under the Recovery
Act continue to be obligated to projects, but the types of projects are
increasing in both size and complexity. The first several projects were
limited largely to paving, but more recent projects included
intersection improvements and design and construction of a new
interchange. In our July 2009 report, we stated that due to "use-it-or-
lose-it" requirements, Recovery Act funds had initially been obligated
for small, short-term projects that require little lead time for
planning and design, such as repaving and resurfacing projects that can
be completed within 2 years, and the majority of the cost estimates for
first-round projects came in at less than $5 million per project. As
the Massachusetts Executive Office of Transportation (EOT) continues to
select projects, the projects have increased in terms of both funding
amounts and complexity. New projects include the reconstruction of
Dorchester Avenue in Dorchester and construction of the North Bank
Bridge. The reconstruction of Dorchester Avenue in Dorchester, which
FHWA has approved, is estimated to cost $15 million and will make
safety and mobility improvements at four major intersections along the
Dorchester Avenue corridor in Dorchester. The North Bank Bridge, a
pedestrian bridge that will connect Cambridge and Charlestown, is
estimated to cost $30 million to $36 million, according to an official
at the EOT. Recovery Act funding for the North Bank Bridge project is
currently under review by FHWA and is contingent upon the state's
completion of the transfer of $30.5 million to the Massachusetts
Department of Conservation and Recreation as part of its approximately
$100 million mitigation commitment for enhancement projects for the
Central Artery Tunnel, commonly known as the "Big Dig." According to an
FHWA official, in order for the North Bank Bridge to be funded under
Recovery Act funds, the transfer of $30.5 million must be made prior to
March 2, 2010.
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. States are required to do the following:
* Ensure that 50 percent of apportioned Recovery Act funds were
obligated within 120 days of apportionment (before June 30, 2009). The
50 percent rule applies only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated, primarily based on population, for metropolitan,
regional, and local use. In addition, states are required to ensure
that all apportioned funds--including suballocated funds--are obligated
within 1 year. The Secretary of DOT is to withdraw and redistribute to
other states any amount that is not obligated within these time frames.
[Footnote 13]
* Give priority to projects that can be completed within 3 years and to
projects located in economically distressed areas. Distressed areas are
defined by the Public Works and Economic Development Act of 1965, as
amended.[Footnote 14] According to this act, to qualify as an
economically distressed area, the area must (1) have a per capita
income of 80 percent or less of the national average; (2) have an
unemployment rate that is, for the most recent 24-month period for
which data are available, at least 1 percent greater than the national
average unemployment rate; or (3) be an area the Secretary of Commerce
determines has experienced or is about to experience a "special need"
arising from actual or threatened severe unemployment or economic
adjustment problems resulting from severe short-or long-term changes in
economic conditions.[Footnote 15]
* Certify that the state will maintain the level of spending for the
types of transportation projects funded by the Recovery Act that it
planned to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state was required to identify the
amount of funds the state plans to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 16]
Massachusetts Is Working toward Having Funds Obligated to Suballocated
Areas but Faces Capacity Challenges:
As mentioned earlier, states were required to suballocate 30 percent of
their apportionment to metropolitan and other areas of the state. As of
September 1, 2009, $31 million for 7 projects have been obligated as
part of Massachusetts's 30 percent suballocation. According to the
Economic Stimulus Coordinator at the Massachusetts Executive Office of
Transportation (EOT), which oversees highway projects, there were
several reasons for obligating only 24 percent of these funds thus far.
Massachusetts Highway Department (MassHighway) faces challenges with
staffing and with the multistep nature of the process.[Footnote 17]
MassHighway's existing project planning and design personnel have been
strained by the increased workload associated with Recovery Act
projects and the state's recently implemented Accelerated Bridge
Program.[Footnote 18] Additionally, the state works collaboratively
with the metropolitan planning organizations (MPO),[Footnote 19] who
serve as regional transportation planning and programming agencies, to
identify projects for urbanized areas. The state and MPOs are working
to balance the preferences of individual cities and their broader
region. According to one MPO staff member, all federally funded highway
projects must be reviewed by MassHighway at various stages, and an MPO
official stated that the state-MPO approval process does not lend
itself to obligating new funds within a short time frame. Despite
challenges, the state and MPO officials are in the process of
identifying projects that are ready to go and predict they will have no
difficulty meeting the March 2010 deadline for the obligation of these
funds.
The EOT Economic Stimulus Coordinator also said there was some initial
confusion around obligating the 30 percent suballocation to urban areas
and that EOT received instruction from FHWA. The FHWA Massachusetts
Division Administrator said that to ensure continued progress in
advancing the federally funded statewide road and bridge projects on
the state's transportation improvement program while pursuing Recovery
Act projects, FHWA encouraged EOT to first focus on obligating the
state apportionment of the Recovery Act highway funds by the June 29,
2009, deadline because these projects were more likely to be shovel
ready. This strategy allowed the state to set priorities for obligating
the 30 percent suballocation while fully addressing all federal
requirements. According to this FHWA official MassHighway has made
strides in improving the quality and completeness of their final
project submissions for their regular federal aid program projects and
improved their ability to cut the time from award to notice to proceed
significantly. FHWA wanted to make sure that quality, timeliness and
readiness of projects not be compromised while the state identified and
vetted Recovery Act project priorities.
State Concerns about Meeting the Maintenance-of-Effort Requirement:
States were required to certify that the state will maintain the level
of spending that it had planned on February 17, 2009, the day the
Recovery Act was enacted. As part of the certification review, DOT will
evaluate Massachusetts's method of calculating the amounts it planned
to expend for the covered programs to determine if the state's
calculation complies with DOT guidance. Massachusetts officials are
awaiting the results of this review. Massachusetts state officials
continue to express concern about the state's ability to maintain
spending levels for transportation. According to the Governor's Deputy
Chief Counsel, the requirement that the state commit to spend in the
future what it planned to spend on February 17, 2009, puts the state in
a difficult position since the state transportation spending plan in
February 2009 was based on a 5-year capital plan that was developed
before the state's revenues dropped significantly. The state would like
to reserve the right to scale down its capital spending plan in line
with debt affordability analysis updates, but DOT is continuing to
enforce the Recovery Act requirement that states maintain their
February 2009 level of effort. Although the state realizes it is too
early to gauge whether it will be able to meet its maintenance-of-
effort requirements, the Deputy Chief Counsel stated that the
commonwealth would like to maintain a continuing dialogue with DOT
officials to see if they can alter the maintenance-of-effort
requirements given the significant change in the state's fiscal
situation. According to DOT, no provision for a waiver or relief is
provided in the Recovery Act.
Massachusetts Is Using Existing Contracting and Oversight Procedures
for Recovery Act Highway Funds:
EOT has controls and processes in place for the use of Recovery Act
funds. According to MassHighway documents and a MassHighway contracting
official, the state uses an established competitive bid process for
awarding all highway contracts, including the two Recovery Act highway
projects we reviewed (see table 1), and all bidders must be
prequalified by MassHighway. The annual prequalification process
requires each contractor to submit a completed application, original
bonding letter, and power of attorney from a surety company. According
to a MassHighway contracting official, after tabulating all bids and
analyzing their material soundness, MassHighway awards a unit price
contract to the lowest bidder[Footnote 20]. The contracts we examined,
and as confirmed by a MassHighway contracting official, contained
additional language that was inserted to explain the Recovery Act
requirements, notice of providing access to relevant federal inspectors
general, and whistleblower protection.
Table 1: Key Contract Information for Two Highway Projects:
Characteristic: Description;
Adams project: 1.5 miles of road resurfacing and sidewalk
reconstruction on Route 116;
Swansea project: Resurfacing of 5.7 miles of Route 6 from Somerset to
Rehobeth.
Characteristic: Estimated cost;
Adams project: $2,199,456;
Swansea project: $4,159,044.
Characteristic: Project start;
Adams project: April 2009;
Swansea project: April 2009.
Characteristic: Estimated completion;
Adams project: July 2010;
Swansea project: August 2010.
Source: GAO analysis of Massachusetts Highway Department information.
[End of table]
EOT officials stated they have an online database that allows
transportation officials to segregate, itemize, and track Recovery Act
funds. A MassHighway contracting official stated that all safeguards
and contract management are overseen by MassHighway engineers in
MassHighway's district offices. District office engineers provide
oversight based on an established Standards of Procedure guide and meet
with officials from the MassHighway construction office every other
month. Oversight personnel are assigned to a contract after the
contract is awarded. A MassHighway contracting official said that the
Resident Engineer, an employee of the MassHighway district office,
directly oversees projects within the districts. As we observed, the
Resident Engineer keeps a daily diary of each project to record the
number of hours worked by employees, the number and type of equipment
used, and the amount of building materials used that day. This
information is then entered into an online system that tracks the daily
expenditures of the job and prepares reports, which we also observed.
Reporting on Recovery Act Results Continues to Evolve:
Massachusetts continues to collect and report employment data and data
related to project implementation and expenditures. Data relating to
transportation projects is now available through the state's recovery
Web site. As we reported in July 2009, Massachusetts transportation
officials require contractors and subcontractors to submit monthly
employment information, including the number of employees, hours
worked, and payroll. However, it is unclear how this information will
be used to identify new and existing employees and how to ensure that
one employee working on two different projects is counted as one job
created and not two.
According to the Economic Stimulus Coordinator at EOT, EOT uses the
Equitable Business Opportunity (EBO) system to track the number of jobs
created through Recovery Act highway funds. EBO is a Web-based
contractor payroll information system. Massachusetts has integrated the
monthly employment data collection forms from the FHWA with the EBO
system to calculate number of workers and hours worked per project. The
FHWA form collects data from contractors, consultants, and the states.
For any project or activity that receives FHWA Recovery Act funds, the
state must complete the FHWA forms for any month where associated
employment occurs. The EOT official said that EOT submits the
employment data to FHWA on the 20th of each month, and that FHWA's
format for reporting this data has changed four times since EOT began
reporting after projects were approved. Additionally, the EOT official
expressed concern that after submitting the monthly reports, there has
been no feedback and little additional guidance from FHWA.
FTA Found Key Recovery Act Obligation Deadline Was Met, and
Massachusetts Will Use Funds for Fleet Improvements and Intermodal
Enhancements:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 21] The majority of the public transit
funds--$6.9 billion (82 percent)--was apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program.[Footnote 22] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. Recovery Act funds were also
apportioned to states under the nonurbanized area formula grant program
using the program's existing formula. Transit Capital Assistance
Program funds may be used for such activities as vehicle replacements,
facilities renovation or construction, preventive maintenance, and
paratransit services. Up to 10 percent of apportioned Recovery Act
funds may also be used for operating expenses.[Footnote 23] Under the
Recovery Act, the maximum federal fund share for projects under the
Transit Capital Assistance Program is 100 percent.[Footnote 24]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) submit to FTA for Recovery Act funding.[Footnote 25]
FTA reviews the project sponsors' grant applications to ensure that
projects meet eligibility requirements and then obligates Recovery Act
funds by approving the grant application. Project sponsors must follow
the requirements of the existing programs, which include ensuring the
projects funded meet all regulations and guidance pertaining to the
Americans with Disabilities Act (ADA), pay a prevailing wage in
accordance with federal Davis-Bacon Act requirements, and comply with
goals to ensure disadvantaged business are not discriminated against in
the awarding of contracts.
In March 2009, $290 million in Recovery Act Transit Capital Assistance
funds was apportioned to Massachusetts and urbanized areas located in
the state for transit projects.[Footnote 26] As of September 1, 2009,
FTA concluded that the 50 percent obligation requirement had been met
for Massachusetts and urbanized areas located in the state. Under the
Recovery Act, Massachusetts's only large urbanized area was apportioned
$199.8 million in Transit Capital Assistance funding. An additional
$37.9 million was apportioned to medium-size urbanized areas with
populations of 200,000 to 999,999, and $9.2 million was apportioned to
small urbanized areas with populations of 50,000 to 199,999. In
addition, the state was apportioned $5.2 million for transit projects
in nonurbanized areas. Transit Capital Assistance funds are
administered by transit agencies who are designated recipients of this
funding. The transit agencies in the urbanized area meet to develop an
agreement that spells out how the apportionment will be divided among
the various transit agencies in the urbanized area.[Footnote 27] The
state administers a smaller portion of the federal transit aid for
projects in smaller communities and rural areas of the state.
Massachusetts Transit Agencies Have Used Transit Capital Assistance
Apportionments for Fleet Improvements and Intermodal Access
Enhancements:
Massachusetts transit agencies are using Recovery Act funding to
finance a variety of fleet enhancement and capital improvement projects
that include replacing aging bus fleets with hybrid vehicles,
installing automatic vehicle locator systems on buses, adding solar
panels to bus shelters, and developing plans for a regional
interoperable rail fare system to allow transit users to transfer
between several different transit agency systems using one fare card.
According to the Executive Director of the Massachusetts Association of
Regional Transit Authorities, Recovery Act funding has allowed
Massachusetts transit agencies to fund projects that they otherwise
would not have been able to afford. For example, according to the
Massachusetts Bay Transportation Authority (MBTA), funds have been
obligated for projects worth $112.6 million, including a series of
smaller preventive maintenance projects, fleet enhancements, and
capital improvements, as well as an enhancement of MBTA's Silver Line
rapid transit service. MBTA officials told us they have received final
approval from FTA and are preparing bid announcements and procurement
packages[Footnote 28]. MBTA expects the first delivery of paratransit
vans funded under the Recovery Act in September 2009, and transit
construction projects are expected to be under way in the fall of 2009
and completed by October 2011. According to an MBTA official, the
federal transit capital funds are drawn down through the FTA's Web-
based Electronic Clearing House Operations System. MBTA is required to
reimburse vendors within 3 days of receiving the federal funds, but in
practice, MBTA generally pays its vendors the same day it draws down
the federal funds.
According to another transit agency we spoke with--the Pioneer Valley
Transit Authority (PVTA), which serves 24 communities in Hampden and
Hampshire Counties--funding has been obligated for projects worth $16.3
million, including purchasing 29 new buses, installing solar panels on
rural bus shelters to provide security lighting, making improvements to
transit facilities, and installing bicycle racks on buses (see table
2). PVTA officials report they have awarded contracts for projects
worth $10.7 million, including contracts for purchasing bicycle racks
and repairing maintenance facilities. PVTA officials expect these
projects to be completed by the first of the year and the remaining
projects to be completed by the end of 2010.
Table 2: Pioneer Valley Transit Authority Transit Capital Assistance
Grant Application:
Project description: Purchase bus shelters; Estimated cost: $25,000.
Project description: Purchase bicycle access, facilities and equipment
on buses;
Estimated cost: $80,000.
Project description: Buy 16 35-foot replacement buses; Estimated cost:
$5,934,500.
Project description: Buy 18 replacement vans; Estimated cost: $990,000.
Project description: Buy 13 40-foot replacement buses; Estimated cost:
$4,810,000.
Project description: Acquire 130 mobile fare-collection units;
Estimated cost: $2,600,000.
Project description: Acquire 200 mobile survey and security units;
Estimated cost: $740,000.
Project description: Renovate administration and maintenance facility;
Estimated cost: $847,953.
Project description: Renovate storage facility; Estimated cost:
$82,000.
Project description: Renovate yards and shops; Estimated cost:
$150,000.
Project description: Estimated total cost; Estimated cost: $16,259,453.
Source: GAO analysis of FTA data.
[End of table]
In addition, PVTA officials reported they have plans to purchase new
buses through a pre-existing contract awarded by another public transit
agency. Under this process, referred to by PVTA officials as piggyback
procurement, one transit agency may assign some or all of its existing
contract rights to another transit agency to purchase all or a portion
of that contract's supplies, equipment, or services under the same
contract terms and pricing as originally advertised, competed,
evaluated, and awarded. PVTA officials told us that piggyback
procurement is in the best interest of the agency because, they
believe, it saves time and money by lowering per-unit costs and
avoiding the lengthy procurement process. According to these officials,
they obtain a copy of the contract from the originating transit agency
and review it for compliance with FTA procurement regulations.
According to the administrator for FTA Region I, piggyback procurement
is a common practice among public transit agencies.
State EOT and transit agency officials we spoke with told us they used
several key criteria for selecting transit projects to be funded under
the Recovery Act, including shovel readiness (project readiness),
short- and long-term jobs creation, economic development, regional
equity, and modal equity.[Footnote 29] According to transit officials,
projects are placed on the Transportation Improvement Program after
considerable input from EOT and the regional MPO. Furthermore,
according to an EOT official, transit agencies, in conjunction with the
regional MPO, conduct extensive outreach with key community
stakeholders, including private bus companies, taxi companies, and
advocates for disabled and elderly transit users, to gauge public
opinion on proposed projects.
FTA Found That Massachusetts and Its Urbanized Areas Have Met the 50
Percent Obligation Requirement:
Funds appropriated through the Transit Capital Assistance Program must
be used as required by the Recovery Act; specific provisions include
the following:
* Fifty percent of Recovery Act funds apportioned to urbanized areas or
states were to be obligated within 180 days of apportionment (before
September 1, 2009) and the remaining apportioned funds are to be
obligated within 1 year. The Secretary of Transportation must withdraw
and redistribute to other urbanized areas or states any amount that is
not obligated within these time frames.[Footnote 30]
* Project sponsors must submit periodic reports, as required under the
maintenance-of-effort for transportation projects section (§ 1201(c) of
the Recovery Act) on the amount of federal funds appropriated,
allocated, obligated, and outlayed; the number of projects put out to
bid, awarded, or work has begun or completed; project status; and the
number of jobs created or sustained. In addition, grantees must report
detailed information on any subcontractors or subgrants awarded by the
grantee.
FTA found that the requirement to obligate 50 percent of the transit
funds apportioned for Massachusetts transit projects within 180 days
has been met.[Footnote 31] In order to get projects through the
approval process quickly, the regional FTA administrator encouraged
transit agencies to "bundle" multiple projects together under one grant
application.[Footnote 32] For example, FTA provided informal guidance
to MBTA to encourage the bundling of multiple projects for each
Recovery Act program (see table 3). MBTA is expected to receive
approximately $232 million in Recovery Act funds ($181 million of
Transit Capital Assistance urbanized area funds and $52 million of
Fixed Guideway Infrastructure Investment funds). According to the FTA
Region I Administrator, without bundling, MBTA could have filed 18
separate Recovery Act applications for 18 separate projects. According
to this official, bundling projects reduces the number of grants that
need to be managed and reported on and reduces the number of grants
needing FTA approval and Department of Labor certification. Thus,
bundling projects could reduce the time it takes to get an application
through the approval process. In addition, bundling grants provides
flexibility to transit agencies by providing them with the ability to
shift grant funds among projects within the same grant. In instances
where favorable bid conditions result in excess funds, bundling
provides an opportunity to move funds to another project within the
same grant that may cost more than the original estimate. According to
this official, given the advantages of bundling, FTA tries to promote
bundling projects to all transit agencies in Region I.
Table 3: MBTA Transit Capital Assistance Grant Applications:
First grant application:
Project description: RIDE vehicles - procurement of 108 vans; Estimated
cost: $5,500,000.
Project description: MBTA - replace and repair fencing; Estimated cost:
$3,800,000.
Project description: Back Bay Station - improve ventilation and air
quality in lobby area;
Estimated cost: $3,000,000.
Project description: Construction of enhanced bicycle parking
facilities at up to 50 stations;
Estimated cost: $4,803,250.
Project description: Bus stop amenities (e.g., shelters, benches,
signage, pavement markings, and amenities related to the Americans with
Disabilities Act) between Ashmont and Ruggles Station; Estimated cost:
$7,825,000.
Project description: Silver Line and Dudley-South Station - new bus
stops at Chinatown and South Station, queue jumper lanes, traffic
signal priority, and real-time arrival system; Estimated cost:
$1,700,000.
Total first grant:
Estimated cost: $26,628,250.
Second grant application:
Project description: MBTA - various bus facility improvements (e.g.,
bus washing equipment, pavement repairs, and heating, cooling, and
lighting systems at five bus garages);
Estimated cost: $14,636,188.
Project description: Fitchburg double-tracking project between West
Acton and Ayer, including Littleton Station work; Estimated cost:
$39,810,000.
Project description: Procurement of 25 articulated 60-foot hybrid buses
to replace aging buses;
Estimated cost: $30,700,000.
Project description: Silver Line - reconstruct Essex Street ramps;
Estimated cost: $800,000.
Project description: Total second grant; Estimated cost: $85,946,188.
Source: GAO analysis of MBTA data.
[End of table]
Massachusetts transferred $12.8 million in Recovery Act highway funding
to fund a transit project in Franklin County. The EOT Economic Stimulus
Coordinator told us the decision to transfer money from highway
projects to transit projects was a joint decision between EOT and the
Franklin Regional Transit Authority and was chosen because the
community of Greenfield, in Franklin County, needed the funds to
upgrade its maintenance facilities to address safety concerns and ease
significant congestion. Because Greenfield lacks a transportation
depot, riders assemble at city hall to catch the bus, causing traffic
delays. According to an EOT official, this situation has caused
significant congestion around city hall and raised concern for the
safety of riders who stand by the side of the road in a busy section of
the city. This official said that the planned intermodal facility that
will be funded with the $12.8 million is expected to reduce the
congestion and ease safety concerns by providing a central bus depot
for riders that will be also be a staging point for eventually
connecting the community to high-speed rail.
MBTA and PVTA Have Developed New Accounting Procedures to Track
Recovery Act Funds but Will Use Existing Procedures to Manage
Contracts:
MBTA and PVTA have developed budget codes to track Recovery Act funding
to segregate it from funding for projects under their regular formula
grants. PVTA maintains an internal tracking system that mirrors FTA's
Transportation Electronic Award Management system that enables them to
track expenditures in finer detail.[Footnote 33] MBTA has devised new
"mode codes" within the MBTA accounting system for Recovery Act funding
and has created a separate bank account for Recovery Act-funded
projects, which enables them to write separate checks for these
expenditures.
Officials from MBTA and PVTA have stated they are using existing
procedures to manage Recovery Act contracts and have engaged external
consultants to provide additional oversight and project management.
While both transit agencies are currently following existing contract
management procedures specified by FTA, MBTA has hired a consultant to
develop an oversight plan for Recovery Act-funded projects, and PVTA
officials reported that they will be using an external consultant to
provide off-site inspections of manufactured goods that are being
procured with Recovery Act funding. In addition, MBTA will hire
external management firms to provide oversight support for several
rail, bus, and transit station projects.
MBTA and PVTA Are Developing Plans for Reporting on Expenditures and
Jobs Created:
MBTA and PVTA reported they have received guidance from FTA on the
Recovery Act reporting requirements and a separate request for
information from the U.S. House of Representatives Transportation and
Infrastructure Committee (the Oberstar Report). They are currently
determining how to meet both sets of requirements. For example, PVTA
has questions concerning how to calculate indirect jobs created from
equipment purchases made with Recovery Act funding versus how to count
jobs created from Recovery Act-funded construction projects. Hoping to
get answers to these questions, officials from both MBTA and PVTA said
they planned to attend one of FTA's upcoming webinars. Neither transit
agency had job data for the U.S. House of Representatives
Transportation and Infrastructure Committee July report because they
did not have projects under way at that time, but both agencies expect
to be able to report job data for the next reporting cycle.
In addition to reporting job and spending data, transit agencies are
required to submit quarterly reports to FTA on scheduled milestones for
all projects funded under the Recovery Act. They are also required by
FTA to include both the purpose and the rationale for federal
investment in each grant application funded under the Recovery Act.
Grant applicants are asked to explain how the infrastructure investment
will contribute to one or more of the Recovery Act purposes, such as
the preservation or creation of jobs, the long-term economic benefits,
and whether the project addresses an immediate maintenance need.
According to the Deputy Director of Financial Planning, in the future,
MBTA may use these purpose and rationale indicators as performance
measures to assess how well transit projects funded under the act are
meeting their intended purpose, but the agency is not currently aware
of any requirements that it report on these additional measures.
According to this official, MBTA's ability to maintain schedule and
stay within the budget are the primary performance measures tracked and
reported to FTA for all grant-funded projects, including Recovery Act
grant programs. MBTA also provides information to the state through EOT
that includes information on Recovery Act project status and copies of
reports submitted to the U.S. House of Representatives Transportation
and Infrastructure Committee and FTA for Section 1201(c) reporting
requirements. According to this official, this information will then be
posted to the EOT Recovery Act Web site for public review.
Massachusetts Faced Challenges in Reaching Its Target Number of Summer
Youth Participants:
The Recovery Act provides an additional $1.2 billion in funds for
Workforce Investment Act (WIA) Youth Program, including summer
employment. Administered by the Department of Labor (Labor), the WIA
Youth Program is designed to provide low-income in-school and out-of-
school youth 14 to 21 years old, who have additional barriers to
success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 34] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth Program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 35] Local areas may design summer
employment opportunities to include any set of allowable WIA youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job (2) learn work readiness skills
on the job, and (3) acquire measurable communication, interpersonal,
decision-making, and learning skills. Labor has also encouraged states
and local areas to develop work experiences that introduce youth to
opportunities in "green" educational and career pathways. Work
experience may be provided at public sector, private sector, or
nonprofit work sites. The work sites must meet safety guidelines, as
well as federal and state wage laws.[Footnote 36] Labor's guidance
requires that each state and local area conduct regular oversight and
monitoring of the program to determine compliance with programmatic,
accountability, and transparency provisions of the Recovery Act and
Labor's guidance. Each state's plan must discuss specific provisions
for conducting its monitoring and oversight requirements.
The Recovery Act made several changes to the WIA Youth Program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Massachusetts was allotted $24,838,038 in Recovery Act WIA youth funds.
Labor stipulated that these funds be expended by June 30, 2011. The
Massachusetts Executive Office of Labor and Workforce Development
(EOLWD), the agency responsible for overseeing the commonwealth's WIA
Youth Program, allocated $21,112,332 of the WIA youth Recovery Act
funds to 16 workforce investment areas within the state. EOLWD
developed its own spending guidelines and instructed local workforce
investment boards (boards) to spend at least 60 percent of their
Recovery Act funds by September 30, 2009, and the remainder by
September 30, 2010. Although these are the formal deadlines, state
officials verbally encouraged the boards to spend all of their funding
as soon as possible to stimulate the economy. As of September 5, 2009,
local boards had drawn down about $11 million or 53 percent of WIA
youth Recovery Act funds.
Fewer Youth Than Planned Have Been Served with WIA Youth Funds by Some
Local Workforce Investment Boards:
State officials planned to provide 6,500 youth[Footnote 37] with summer
employment activities through the WIA Youth Program, but some local
boards had problems identifying eligible youth.[Footnote 38] While
EOLWD anticipated that the youth would participate throughout the
summer, fewer than expected youth were served in the beginning. As of
July 31, 2009, a few weeks into summer activities, Massachusetts
reported to Labor that it had served 5,640 youth, but as of August 24,
2009, it had met its goal and served over 6,750 youth.
When we met with local board officials in July 2009, they said they
were having difficulty recruiting eligible youth in some areas. The
Central Massachusetts Regional Employment Board, as of July 23, 2009,
had only about 65 of its goal of 100 participants in one of its areas.
The Merrimack Valley Workforce Investment Board reported 304
participants as of the week ending July 31, 2009, and was not sure it
would be able to reach its goal of 700 participants.
Local officials said they found it difficult to recruit eligible youth
in the short time they had to ramp up their programs. Local officials
said it was challenging for youth to provide all of the documents that
were required to demonstrate WIA Youth Program eligibility, especially
in such short time frames. Officials from the Central Massachusetts
board said that on average, youth had to come back to the program
office about two or three times to supply the proper documentation.
According to local board officials, it was especially onerous for
students to be required not only to demonstrate they were from families
at or below the poverty level, but also to prove they were eligible for
the program because of another barrier, such as being pregnant, a
parent, or an offender. According to local officials, parents and
community members were troubled to learn that low-income youth without
employment barriers were not eligible to participate in the program.
[Footnote 39]
The state has received a waiver from Labor that allows them the
flexibility to provide work experiences to out-of-school youth 18 to 24
years old through March 31, 2010. This waiver allowed local boards to
continue using only the work readiness indicator instead of all of the
WIA indicators. Thus, the streamlined program operated in the summer
will have additional time to serve other youth. Merrimack Valley
officials told us they will attempt to recruit and begin serving more
out-of-school youth and hope to meet their goal of serving 700
participants.
Challenges Still Exist with Implementing the Recovery Act WIA Youth
Program:
Local boards we met with faced additional challenges ramping up their
summer programs and supporting and monitoring youth. As mentioned in
our July 2009 report, both state and local officials commented that
setting up WIA youth summer employment activities was time consuming
and needed to be done within short time frames. State guidance required
that local boards spend at least 60 percent of their Recovery Act WIA
youth funds by September 30, 2009. Although these are formal deadlines,
state officials verbally encouraged the boards to spend all of their
funding as soon as possible. To achieve their goal of serving a large
number of youth in a short time frame, officials from one board said
that some staff were required to work extra hours and staff that
normally performed other duties were also assigned WIA Youth Program-
related work.
Local board officials made use of existing relationships with
community- based organizations, schools, and businesses to identify
employers and youth quickly. The Merrimack Valley board hosted
information sessions with local business organizations, like the
Chamber of Commerce, and with school and municipal officials. According
to local board officials, their relations with community-based
organizations were strained as a result of the restrictive eligibility
and documentation requirements of the WIA Youth Program. They noted
that youth who were recruited through these organizations were
subsequently not allowed to participate in the program because they
either did not have any barriers to employment or did not provide full
documentation to meet the requirements for additional barriers to
employment.
Local Workforce Boards Had Flexibility to Design and Administer Their
WIA Youth Programs:
While the state provided guidance on a number of issues, generally as
long as the programs complied with the Recovery Act, Labor
requirements, and state provisions, the local boards were provided with
the flexibility to design and administer their WIA youth programs as
they liked. The two boards we visited varied slightly in the
opportunities they provided to program participants. Both the Central
Massachusetts and the Merrimack Valley programs offered work
experiences; the Merrimack Valley program also offered some work
experience positions combined with academic instruction to their
participants. For example, we visited a work learning site where youth
were taught academic subjects such as reading and writing for part of
their day and then worked in a warehouse setting for the rest of the
day.
WIA youth summer participants were employed in a range of jobs. (See
table 4.) One of the local boards we spoke with placed some youth with
what they characterized as either green employers or green jobs.
According to local officials, some green jobs included work at an urban
farm and a light bulb efficiency start-up and manufacturing company.
Both state and local officials told us there is little guidance on what
technically constitutes a green job.
Table 4: Program Characteristics for Two Local WIA Youth Programs:
Program characteristics: Areas served;
Central Massachusetts Regional Employment Board: Greater Worcester,
South County, Blackstone Valley;
Merrimack Valley Workforce Investment Board: Area cities and towns,
including Haverhill, Lawrence, and Newburyport.
Program characteristics: Program design; Central Massachusetts Regional
Employment Board: One 25-hour paid week of pre-employment training; Six
or ten 25-hour weeks of paid employment;
Merrimack Valley Workforce Investment Board: 2-hour orientation; Up to
30-hour weeks of work and learning (work readiness employment and
academic learning ), or; Up to 30-hour weeks of paid employment.
Program characteristics: Compensation; Central Massachusetts Regional
Employment Board: Youth are paid $8 to $12 per hour; Merrimack Valley
Workforce Investment Board: Youth are paid $8 per hour for employment
and stipends of $8 per hour for academic learning activities.
Program characteristics: Length of program; Central Massachusetts
Regional Employment Board: July 6 to September 18, 2009[A];
Merrimack Valley Workforce Investment Board: July 6 to September 31,
2009.
Program characteristics: Outreach;
Central Massachusetts Regional Employment Board: Community
organizations, youth council, state youth-serving agencies, media, and
others;
Merrimack Valley Workforce Investment Board: Chambers of Commerce,
municipal and school officials, media, and others.
Program characteristics: Target number of participants; Central
Massachusetts Regional Employment Board: 500 youth; Merrimack Valley
Workforce Investment Board: 700 youth.
Program characteristics: Number of participants as of September 5,
2009;
Central Massachusetts Regional Employment Board: 537 youth; Merrimack
Valley Workforce Investment Board: 535 youth.
Program characteristics: Amount allocated to the board; Central
Massachusetts Regional Employment Board: $1,942,576; Merrimack Valley
Workforce Investment Board: $1,477,861.
Program characteristics: Amount expended by the board as of September
5, 2009;
Central Massachusetts Regional Employment Board: $1,389,036; Merrimack
Valley Workforce Investment Board: $706,587.
Program characteristics: Examples of job types; Central Massachusetts
Regional Employment Board: Camp counselors, Web design, landscaping,
weatherization crew work; Merrimack Valley Workforce Investment Board:
Cabinetmaker apprentice, museum docent, groundskeeper, laborers,
clerical positions.
Program characteristics: Work readiness measure; Central Massachusetts
Regional Employment Board: Completion of pre- employment training (1
week) and exit interview; Merrimack Valley Workforce Investment Board:
Completion of a section of the Massachusetts Work-based Learning Plan.
Source: GAO analysis of WIA Youth Program information.
[A] The majority of youth completed the program on August 21, 2009;
however, others were to complete the program on August 28 and September
18, 2009.
[End of table]
Multiple Monitoring and Tracking Activities Are Performed on Recovery
Act WIA Youth Funds:
State officials, as well as officials from the boards we met with, are
monitoring and tracking activities of Recovery Act WIA youth funds in
myriad ways. The two boards chose different administrative structures
for their programs--either administering funds internally and
contracting with providers directly (as in the case of the Merrimack
Valley board) or contracting with an external organization to
administer various program functions (as in the case of the Central
Massachusetts board). Our selection of two contracts to discuss in
greater depth with relevant agency contracting officials reflects this
distinction. According to officials, each contract we examined was
awarded competitively on a cost-reimbursement basis with a not-to-
exceed ceiling price.
In the case of the Central Massachusetts board, we examined a contract
awarded by the board to a community action agency for administration of
the WIA Youth Program. This contract was awarded on May 18, 2009, at a
total value of $873,362 with a project start date of April 24, 2009,
and a projected completion date of September 30, 2009. It is intended
to provide work readiness skills training for 300 WIA youth
participants in the greater Worcester area. We noted, and officials
confirmed, contract provisions requiring the submission of programmatic
and fiscal reports; the contract also made clear that if this
requirement and others are not met, program termination and withholding
of funds can result.
The Merrimack Valley board via its fiscal agent (the city of Lawrence's
Division of Grants Administration) awarded a contract to provide WIA
youth services. This contract was awarded on July 6, 2009, at a total
value of $6,839 with a project start date of July 6, 2009, and a
projected completion date of September 30, 2009. It is intended to
provide 10 eligible youth 18 to 24 years old who are disabled with a
combination of work and learning activities--e.g., manufacturing,
leadership, employability, and other skills. We noted, and officials
confirmed, provisions in the contract that require monthly contractor
expense reports and specify consequences (such as revocation of funds
and program termination) for failure to submit accurate and complete
reports within designated time periods.
In addition to overseeing contracts, state and local officials
discussed procedures in place to report on Recovery Act funds. Both
state and local officials we spoke with stated they are using separate
accounting codes to track Recovery Act funds, which will enable them to
report on these funds separately. Also, short-term staff were hired to
monitor the programs and funds. For example, on the state level, EOLWD
created the Economic Recovery Project Coordinator position, with
responsibilities for all Recovery Act monitoring and reporting
requirements. At the local level, the boards we met with created staff
positions to monitor work sites and keep abreast of each youth's work
performance.
Both the state and one of the boards we visited are conducting
compliance assessments for each work site. According to state
officials, staff from the Commonwealth Corporation, a quasi-public
agency created by the State Legislature, planned to visit each board at
least twice to monitor the boards' WIA youth summer programs. At the
time of our interview, the first visits had already occurred.
Commonwealth Corporation staff told us that during these monitoring
visits, they perform file reviews and assess work sites. Both local
boards we visited developed their own monitoring activities. For
example, the Merrimack Valley board generated weekly reports that
included enrollment, youth served, work-site data, and total
expenditures.
State and Local Officials Are Attempting to Measure Program Outcomes:
In accordance with Labor's guidance, the state requires each local
board to track and report the number of youth employed and program
completion rates. In addition, for WIA Youth Program performance
measures, only the work readiness measure (which focuses on skills like
work ethics, professionalism, communication skills, and interpersonal
skills) is required to assess the effectiveness of summer employment
for youth served with Recovery Act funds. Local boards may determine
the methodology they use to measure work readiness gains. EOLWD's
guidance instructed local boards to choose from a variety of assessment
tools, including work-site supervisor evaluations, work readiness skill
checklists administered by program staff, portfolio assessments, and
any other relevant forms of assessing work readiness skills.
We found that the local areas we visited use different assessment
instruments to determine work readiness skills upon beginning and
completing the summer experience. The Merrimack Valley board is using a
section of the Massachusetts Work-based Learning Plan, a goal-setting
and assessment tool designed to drive learning and productivity on the
job, to satisfy the work-readiness measure.[Footnote 40] Youth
receiving a work experience are evaluated weekly on their time sheets
by their supervisors according to such dimensions as work maturity
skills--e.g., punctuality and dressing professionally; personal skills,
such as teamwork and exercising leadership; and work-related skills,
such as use of computers and the Internet and customer service. These
evaluations will be used to evaluate the youth over time, identify
trends, and assess their work readiness. The Central Massachusetts
Regional Employment Board will use completion of the pre-employment
training as its measure of work readiness. An evaluation of youth
satisfaction will also be conducted.
Results of assessments were not yet available at the time of our visits
to local boards, although officials commented anecdotally that some
immediate results are apparent from the WIA youth summer program.
Officials from both boards we met with state that the youth they are
serving have been positively impacted by the programs. For example,
local officials stated that some youth expressed a sense of pride and
completion when they completed their orientation or training or when
they received their first paycheck. Some youth were also provided with
skills for activities of daily living, such as how to write a check.
At the time of our visit, the commonwealth had not yet decided how it
will address the OMB reporting requirements on jobs created and
retained, not only for the WIA Youth Program but also for other
Recovery Act-funded activities. However, subsequent to our visit, on
August 14, 2009, Labor issued guidance clarifying that participants in
employment and training programs, such as the WIA Youth Program, are
not to be reported in the jobs created and retained numbers. At the
local level, boards are compiling data on the number of non-youth
positions fully and partially funded with WIA youth funds.
Recovery Act Education Funds Continue to Be Distributed and Help
Address State Funding Shortfalls:
As of September 4, 2009, Massachusetts was awarded funds for the
following Recovery Act education programs: about $726 million through
the State Fiscal Stabilization Fund (SFSF), $164 million in ESEA Title
I, Part A, funds, and $291 million in funds through IDEA, Part B. Local
educational agencies (LEA) have received $412 million in SFSF funds,
$322 million in education stabilization funds, and $90 million, or
about half, of its government services funds. According to state
officials, Massachusetts, by the end of October, plans to restore
public higher education funding for fiscal years 2009 and 2010 using a
total of $54 million and $168 million, respectively of SFSF funds. Upon
receipt of the $268 million remaining of the state's SFSF Recovery Act
funds, the state plans to distribute an additional $168 million to LEAs
in SFSF funds in fiscal year 2010. Similar to fiscal year 2009, LEAs
and institutions of higher education will receive SFSF funds to offset
cuts in state education funding for fiscal year 2010. Also, the
Governor will use approximately $20 million of the $181 million
available from the SFSF government services fund for public safety in
fiscal year 2010 for grants to fire departments. Plans for use of the
remaining SFSF education stabilization and government services funds
have not been announced.
As of September 4, 2009, 99 of the state's 258 LEAs that were allocated
ESEA Title I funds have submitted and had approved by state officials
their state-required program applications. These LEAs have received
about $2 million in ESEA Title I Recovery Act funds. In addition, at
least 227 of the state's LEAs that were allocated IDEA, Part B,
Recovery Act funds have submitted their required application to the
state to begin accessing funds. These LEAs have received almost $10
million in IDEA, Part B, Recovery Act funds. (See figure 2 for funding
information.) According to state officials, LEAs are spending non-
Recovery Act ESEA Title I and IDEA, Part B, funds before spending
Recovery Act funds.
Figure 2: Financial Information on Three Recovery Act Education
Programs as of September 4, 2009 (Dollars in millions):
[Refer to PDF for image: vertical bar graph]
Program: SFSF;
Allocated by Education: $994;
Awarded to State: $726;
Received by LEAs: $412;
Program: ESEA Title I;
Allocated by Education: $164;
Awarded to State: $164;
Received by LEAs: $2.
Program: IDEA Part B;
Allocated by Education: $291;
Awarded to State: $291;
Received by LEAs: $10.
Source: GAO analysis of state reported data.
[End of figure]
State Comments on This Summary:
We provided the Governor of Massachusetts with a draft of this appendix
on September 3, 2009, and representatives from the Governor's Office
and the Office of the State Auditor responded on September 9 and 10,
2009. Officials agreed with our draft and in some cases provided
clarifying or technical suggestions that were incorporated, as
appropriate.
GAO Contacts:
Stanley J. Czerwinski, (202) 512-6806 or czerwinskis@gao.gov:
Laurie E. Ekstrand, (202) 512-6806 or ekstrandl@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Carol L. Patey, Assistant
Director; Ramona L. Burton, analyst-in-charge; Nancy J. Donovan;
Kathleen M. Drennan; Keith C. O'Brien; Salvatore F. Sorbello Jr.; and
Robert D. Yetvin made major contributions to this report.
[End of section]
Footnotes for Appendix IX:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Transportation has interpreted "obligation of funds" to mean the
federal government's commitment to pay for the federal share of the
project.
[3] Massachusetts officials refer to rainy-day funds--reserves built up
during more favorable economic conditions to be used during difficult
economic times--as stabilization funds. However, to avoid confusion
with the Recovery Act's State Fiscal Stabilization Fund, we will use
the term rainy-day funds.
[4] State revenues for fiscal year 2009 were $177 million lower than
the revised benchmark levels set in May, and the total fiscal year 2009
revenue gap was more than $3.2 billion.
[5] The projected budget for fiscal year 2010 is $27 billion compared
to $27.5 billion in spending during fiscal year 2009 and $28 billion in
spending in fiscal year 2008 (dollars are not adjusted for inflation).
[6] Recovery Act funds used to stabilize the state's operating budget
include funds made available as a result of the Federal Medical
Assistance Percentage funds (discussed in detail in GAO-09-1016), State
Fiscal Stabilization Fund funds, and Temporary Assistance for Needy
Families contingency funds.
[7] According to a state official, the Governor may invoke his power to
make budget reductions if revenue collections are below levels assumed
in the budget.
[8] Mass. Gen. Laws ch. 64H, § 2.
[9] OMB Memorandum M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities (May 11, 2009).
[10] The Division of Cost Allocation within HHS administers state cost
allocation plans, which provide a process whereby state central service
costs can be identified and assigned to benefited activities. The
Massachusetts submission proposes to amend the commonwealth's 2010
statewide cost allocation plan.
[11] The commonwealth submitted an amendment to its Statewide Cost
Allocation Plan on June 8, 2009. The Division of Cost Allocation at HHS
responded back to the state with a series of questions, to which the
state responded.
[12] Pub. L. No. 111-5, 123 Stat. 115, 287 (Feb. 17, 2009).
[13] Pub. L. No. 111-5, 123 Stat. 115, 206 (Feb. 17, 2009).
[14] 42 U.S.C. § 3161
[15] 42 U.S.C. § 3161(a). Eligibility must be supported using the most
recent federal data available or, in the absence of recent federal
data, by the most recent data available through the government of the
state in which the area is located. Federal data that may be used
include data reported by the Bureau of Economic Analysis, the Bureau of
Labor Statistics, the Census Bureau, the Bureau of Indian Affairs, or
any other federal source determined by the Secretary of Commerce to be
appropriate (42 U.S.C. § 3161(d)). As of August 29, 2009, Massachusetts
obligated an estimated total of $80.6 million to three projects located
in the state's only economically distressed area.
[16] Pub. L. No. 111-5, § 1201(a) 123 Stat. 115, 212 (Feb. 17, 2009).
[17] EOT oversees MassHighway, which is responsible for highway
projects.
[18] In May 2008, Governor Deval Patrick introduced the $3 billion
Accelerated Bridge Program to reduce the commonwealth's growing backlog
of structurally deficient bridges.
[19] MPOs are federally mandated regional organizations, representing
local governments and working in coordination with state departments of
transportation, and are responsible for comprehensive transportation
planning and programming in urbanized areas. MPOs facilitate decision
making on regional transportation issues, including major capital
investment projects and priorities.
[20] According to an official at MassHighway, with unit price contracts
at MassHighway, unit prices are fixed for quantities within 25 percent
over or under the specified quantity.
[21] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[22] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[23] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[24] The federal share under the existing formula grant program is
generally 80 percent.
[25] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of DOT, having an urbanized area population of more than 200,000, or
upon request from the Governor and MPO designated for the area.
Metropolitan planning organizations are federally mandated regional
organizations, representing local governments and working in
coordination with state departments of transportation that are
responsible for comprehensive transportation planning and programming
in urbanized areas. MPOs facilitate decision making on regional
transportation issues including major capital investment projects and
priorities. To be eligible for Recovery Act funding, projects must be
included in the region's Transportation Improvement Program (TIP) and
the approved State Transportation Improvement Program (STIP).
[26] The total apportionment includes funds apportioned to other states
because some urbanized areas cross state boundaries. For example, the
Providence, RI-MA urbanized area includes the Rhode Island Public
Transit Authority and two transit agencies located in southeastern
Massachusetts--the Greater Attleboro Taunton Regional Transit Authority
and the Southeast Regional Transit Authority.
[27] In Massachusetts, transit agencies are independent, quasi-public
authorities.
[28] According to FTA officials, transit projects recommended for
Recovery Act funding are initially submitted to FTA for review and
comment. Once all comments are addressed by the transit agency, the
project list is forwarded to the U.S. Department of Labor (Labor) for
certification, a process that may take up to 60 days. Labor reviews
transit grant applications to gauge the impact of the planned project
on local transit workers. Once Labor certifies the application, FTA
"approves" funding and the project is obligated.
[29] Modal equity refers to the practice of ensuring that all modes of
transportation are given equal consideration in deciding where to
obligate federal funds.
[30] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[31] The U.S. Department of Transportation has interpreted the term
"obligation of funds" to mean the federal government's commitment to
pay for the federal share of the project. This commitment occurs at the
time the federal government approves a project and a project agreement
is executed.
[32] Region I FTA officials encourage public transit agencies to
combine several projects into one application to expedite the approval
process and provide flexibility to grant recipients to move excess
funds from one project to another.
[33] The Transportation Electronic Award Management System is FTA's
online grant application and project management system, which allows
grant recipients to manage the grants awards, monitor project budgets
and milestones, and make budget and scope revisions.
[34] H.R. Rep. No. 111-16, at 448 (2009).
[35] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[36] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[37] As stated in our July 2009 report, the Governor's office estimated
that each of the 6,500 youth would work 30 hours per week for 8 weeks
at the rate of $8 per hour.
[38] In total, the Governor's office planned to create about 10,000
summer jobs for youth across the state by leveraging and coordinating
Recovery Act WIA youth funds, Recovery Act Edward Byrne Memorial
Justice Assistance Grant funds provided to the state Executive Office
of Public Safety and Security, and state-funded Youthworks funds. As of
August 6, 2009, the state had surpassed its goal of serving 3,565 youth
through the Youthworks program. The Recovery Act Edward Byrne Memorial
Justice Assistance Grant program served 4 youth as of early September
2009.
[39] One or more of the following barriers to employment must be
demonstrated for eligibility: (1) school dropout; (2) basic literacy
skills deficiency; (3) homeless, runaway, or foster child; (4) pregnant
or a parent; (5) an offender; or (6) needs help completing an
educational program or securing and holding a job.
[40] Youth will be assessed on attaining competencies in completing
applications, resume development, interviewing skills, job search
strategies, attendance and punctuality, workplace appearance,
interaction with co-workers and supervisors, initiative, communication
skills, money management, transportation, and workplace safety.
[End of section]
Appendix X: Michigan:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Michigan. The full report on our work, which
covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery/].
This appendix focuses on how Michigan used Recovery Act funds; how it
had implemented safeguards, such as controls over the procurement of
goods and services; and how recipients were assessing results of the
Recovery Act funding, such as the number of jobs created. In Michigan,
we reviewed six Recovery Act programs. We selected these programs
because they had a number of risk factors, including the receipt of
significant amounts of Recovery Act funds or a substantial increase in
funding from previous years' levels. Consistent with the purposes of
the Recovery Act, funds from the programs we reviewed are being
directed to help Michigan and local governments stabilize their budgets
and to stimulate infrastructure development and expand existing
programs--thereby providing needed services and jobs. Specifically,
work on contracts for highway projects using Highway Infrastructure
Investment funds had been under way in Michigan for several months, and
provided an opportunity for us to review the use of the funds and the
financial controls, including oversight of the contracts. Similarly,
the three U.S. Department of Education (Education) programs we reviewed
had also been under way in Michigan for several months and provided an
opportunity to review the use of the additional Recovery Act funds and
consider internal controls at the state and locality level, including
controls and financial management reforms under way at the Detroit
Public Schools (DPS). We also reviewed Michigan's weatherization
program because it experienced significant growth due to Recovery Act
funds. Finally, the WIA Youth Program in Michigan also experienced
significant growth due to Recovery Act funds and was largely directed
toward a summer employment program which was in full operation at the
time of our review. Highlights of these programs are:
Highway Infrastructure Investment Funds:
* The U.S. Department of Transportation's Federal Highway
Administration (FHWA) apportioned $847 million in Recovery Act funds to
Michigan. As of September 1, 2009, the federal government had obligated
$575 million to Michigan and $41 million had been reimbursed by the
federal government.
* As of September 1, 2009, Michigan had awarded 153 contracts for
highway projects. Of these 153 contracts, work had begun on 94
contracts and 1 had been completed. The majority of funds obligated in
Michigan are for highway pavement projects.
* According to transportation officials, because the contracts
generally have been awarded for less than the original estimates, the
state will be able to fund additional projects. The additional projects
will primarily be pavement and bridge improvements in economically
distressed areas.
* We reviewed two transportation contracts and spoke with officials who
stated that the Michigan Department of Transportation (MDOT) has
contracting procedures and internal controls in place for awarding and
overseeing highway infrastructure investment Recovery Act contracts.
Weatherization Assistance Program:
* The U.S. Department of Energy (DOE) allocated about $243 million in
Recovery Act Weatherization funding to Michigan for a 3-year period
ending in March 2012. Based on information available on August 31,
2009, DOE provided about $121.7 million to Michigan representing 50
percent of the amount allocated by DOE, and the state had obligated
about $198.7 million to subrecipients, subject to limitation based on
the availability of federal funds.
* According to state officials, as of August 31, 2009, Michigan had
awarded 32 weatherization contracts and had expended about $2 million.
* The state's goal is to weatherize at least 33,000 units, a large
increase over the 14,346 units weatherized during program years 2005
through 2007.
* To help monitor whether these funds are used appropriately,
Michigan's Department of Human Services (DHS) hired additional staff to
monitor the program and plans to hire several more.
State Fiscal Stabilization Fund:
* The U.S. Department of Education (Education) allocated $1.592 billion
in State Fiscal Stabilization Fund (SFSF) moneys to Michigan, with
$1.302 billion for education stabilization and $290 million to fund
government services.
* As of September 1, 2009, Education had made two-thirds of the total
education stabilization funds available to the Michigan Department of
Education (MDE)--$873 million. MDE officials told us that they
allocated $600 million of these funds to local educational agencies
(LEA).
* As of September 1, 2009, MDE had approved LEAs' applications for $599
million of the education stabilization funds and LEAs had drawn down
$584 million. MDE officials told us that LEAs plan to use most of the
funding for teacher salaries.
* State officials told us they planned to use the government services
portion of the SFSF to replace state general fund revenues and pay for
other state services; none of the funds will be provided to MDE.
Title I, Part A, of the Elementary and Secondary Education Act of 1965,
as Amended:
* As of August 18, 2009, Education made 50 percent of Michigan's total
Title I, Elementary and Secondary Education Act of 1965 (ESEA) Recovery
Act funds available to MDE--$195 million of the state's total
allocation of $390 million.
* According to MDE officials, they made a preliminary allocation of all
of these funds to the LEAs and planned to make final allocations to the
LEAs later in the fall of 2009 after reviewing their applications.
* MDE officials said they have encouraged LEAs to use their ESEA Title
I Recovery Act funds for programs such as professional development for
teachers and professional staff and for supplemental reading programs.
Individuals with Disabilities Education Act, Parts B and C:
* On April 1, 2009, Education made the first half of Michigan's total
$213 million in Individuals with Disabilities Education Act (IDEA)
Recovery Act funds available to the state--$207 million for the Part B
grants and about $6 million for Part C grants.
* As of August 14, 2009, MDE had allocated all of the IDEA Part B funds
for grants for school-aged children and youth, but it had not provided
any of the funds because it had not yet approved the grant
applications.
* According to MDE officials, LEAs intend to use the Part B grants to,
among other things, retain special education teachers; acquire new
technologies, including automated data systems and electronic smart
boards for use in classrooms; enhance professional development for
teachers; and provide additional bus transportation services to
students with disabilities.
* The MDE officials also said the Part C grant funds will be used for
early intervention services and, as of August 14, 2009, they had
approved 42 applications for almost $5 million of these funds.
Workforce Investment Act Youth Program:
* The U.S. Department of Labor (Labor) allotted about $74 million in
Workforce Investment Act (WIA) Youth Recovery Act funds to Michigan
and, as of August 31, 2009, Michigan had drawn down about $20.2
million. The state allocated $63 million to 25 Michigan Works! Agencies
(MWA).
* As of July 31, 2009, Michigan had enrolled 12,166 youth in summer
jobs through its Recovery Act-funded WIA summer employment programs.
The state Department of Energy, Labor and Economic Growth (DELEG)
provides overall program guidance to the MWAs, but the design,
implementation, monitoring, and reporting on the use of and accounting
for WIA Recovery Act funds is the responsibility of the MWAs.
* Although DELEG and MWA officials in Detroit initially said they did
not foresee any difficulties, they later cited several challenges in
running the program. Our work identified significant internal control
issues with payroll preparation and distribution; the process for
making eligibility determinations; and a lack of documentation
supporting such decisions in the Detroit summer youth program. Progress
is under way by state and local officials to address each of these
issues, although more work remains.
* Michigan officials continue to work towards developing a state-level
centralized system that the state will use to report to the Office of
Management and Budget (OMB) and satisfy Recovery Act reporting
requirements. The Director of Michigan's Economic Recovery Office
(Recovery Office) believes the state will be able to report centrally,
but said that state agencies could report directly to the federal
government if needed.
As Michigan's Overall Economic Condition Creates Pressure on the
State's Fiscal Position, Recovery Act Funds Will Continue to Provide
Partial Relief:
Michigan continues to face considerable economic difficulties and
significant fiscal challenges in meeting its balanced budget
obligations for fiscal years ending September 30, 2009, and beyond. The
state's overall unemployment rate was 15 percent in July 2009, up from
8.3 percent in July 2008. Michigan's manufacturing sector was
particularly hard hit, losing about 108,900 jobs between July 2008 and
July 2009, representing over 19 percent of all the manufacturing jobs
in the state.[Footnote 2] Local communities that have historically
relied on manufacturing jobs must deal with even higher unemployment
rates. For example, in July 2009 the city of Detroit had an
unemployment rate of 28.9 percent and the city of Flint's unemployment
rate was 28.6 percent.
This increase in unemployment has been accompanied by a continuing
decline in state revenues. As noted in our July 2009 report, the
state's May 2009 revenue estimate projected lower state revenues for
fiscal year 2009 compared not only to fiscal year 2008 revenues, but
also to revenue estimates published four months earlier.[Footnote 3]
Despite lowered expectations, actual revenue collections have continued
to fall short of projections. For example, according to the Senate
Fiscal Agency's monthly revenue reports, revenues for June and July
2009 totaled $110 million, which was 3.1 percent below what the May
revenue estimate had projected for this 2-month period. This decline
illustrates the rapid deterioration in the state's fiscal condition and
the difficulty in projecting Michigan state revenues. State budget
officials also reported that revenues that can only be used for
specified purposes, such as fees from game and wildlife licenses and
state parks, have also declined in recent months.
Michigan is using a combination of Recovery Act funds and cost-cutting
measures to balance the state's budget and is relying on Recovery Act
funds to substantially, although not entirely, fill growing budget
gaps. Over the 3 years ending September 30, 2011, Michigan expects $3.6
billion to be available, as a result of the Recovery Act funds, for
budget stabilization.[Footnote 4] For example, state officials expect
Recovery Act funds, in addition to almost $400 million in spending cuts
described below, to free up sufficient state revenue to address a $1.4
billion revenue shortfall and allow the state to end fiscal year 2009
with a balanced budget. As noted in our July 2009 report, for the
fiscal year ending September 30, 2009, Michigan's cost-cutting actions
included reducing revenue sharing to cities, villages, and townships by
10 percent; mandating 6 unpaid furlough days for 38,000 of the state's
52,000 state employees; laying off 400 employees (including 100 state
troopers); closing three correctional facilities; and enacting a 4
percent across-the-board cut for most state agencies. State Budget
Office officials told us that, despite initial hopes to use Recovery
Act funding for new projects, Michigan has used a large portion of
these funds to free up state revenues for the maintenance of existing
programs due to the state's ongoing fiscal challenges.
Michigan's "rainy day fund"--the Counter-Cyclical Budget and Economic
Stabilization Fund--does not offer assistance to meet the state's
existing fiscal challenges. Since fiscal year 2005, the fund has had a
balance of about $2 million, and the Senate Fiscal Agency did not
anticipate that any transfers out of this fund would occur during
fiscal years 2009 or 2010 because it would not adequately address
Michigan's budget situation.
State officials continued to express concerns about Michigan's fiscal
outlook when the Recovery Act funds run out. Rather than spending all
of its Recovery Act funds up front and creating the need for massive
spending cuts in fiscal year 2011, Michigan is considering a range of
options, including spending cuts and possibly tax increases, to balance
the state's annual budgets. State officials also said they are working
with state agencies to prioritize Recovery Act spending in ways that
could be sustained in 2011 and going forward after the majority of
Recovery Act funds expire. Officials from the House Fiscal Agency,
Senate Fiscal Agency, and State Budget Office told us their strategy is
to minimize the effects of the budget shortfall by using Recovery Act
funds in fiscal years 2010 and 2011, primarily by using state funds
that will be made available as the result of SFSF and the increased
Federal Medical Assistance Percentage (FMAP). However, the exact
allocation of Recovery Act funds remains uncertain as fiscal year 2010
budget negotiations continue and the state, as of September 17, 2009,
did not yet have an approved budget for fiscal year 2010.
According to state budget officials, Michigan will seek reimbursement
from the U.S. Department of Health and Human Services (HHS) for the
cost of the state's Economic Recovery Office (Recovery Office), which
is expected to be about $2 million for fiscal year 2009. On June 26,
2009, the state formally identified Recovery Office-related costs in an
amendment to its statewide cost allocation plan submitted to HHS. In
this amendment, Michigan opted to use the "billed cost" option
available for calculating administrative costs associated with the
Recovery Office. Officials told us that the state chose this option to
avoid any potential lag that might arise from trying to reconcile
estimated costs with actual costs.[Footnote 5] Further, they informed
us that HHS responded to Michigan's submission in August and the state
is planning to submit a revised addendum by the end of September.
Michigan Continues to Develop a Statewide Central Reporting System:
The Michigan Economic Recovery Office Director told us that, as of
September 1, 2009, the state plans to meet the October 10, 2009, due
date for reporting to the federal government on Recovery Act spending
through a centralized reporting process. The Recovery Office Director
believes the state will be able to report centrally, but said that
state agencies could report directly to the federal government if
needed. If reporting under a centralized approach is not practical for
the initial report due to the federal government in October 2009, then
state agencies will report directly to their cognizant federal
departments and to OMB. The Recovery Office Director said that the
state agencies have been instructed to register with the OMB, a
necessary procedure for direct reporting.
Michigan officials continue to work toward developing a state-level
centralized system that the state plans to use for reporting to OMB and
complying with the reporting requirements under Section 1512 of the
Recovery Act.[Footnote 6] These officials said they believe that a
centralized reporting system will provide the best mechanism for
reporting accurate and consistent data to the federal government and
enhance the state's oversight and monitoring. Specifically, Recovery
Office officials said they will be able to analyze the data they
receive from all state agencies for consistency and reasonableness in
relation to other state agency spending data. The officials also said
they believe that this level of review will not be as effective if each
state agency reports directly to the federal government under a
decentralized model. The Michigan Recovery Office has recommended that
state agencies not delegate reporting requirements to subrecipients of
Recovery Act funds so the state can maintain better control over the
reporting process. However, state agencies have the authority to
delegate reporting requirements to subrecipients.
Officials from the Michigan Department of Information Technology (MDIT)
said they had been working to develop the state-level centralized
reporting system and intended to begin testing the system in July 2009.
However, after receiving the OMB guidance in June, they recognized that
the system under development did not have provisions for all of the
data elements specified in the OMB guidance.[Footnote 7] Officials told
us they are working to include all required information in their
system.
Michigan Has Begun Several Highway Projects Using Recovery Act Funds:
As we reported in July 2009, FHWA apportioned $847 million to Michigan
in March 2009 for highway infrastructure and other eligible projects.
As of September 1, 2009, the state had obligated $575 million, or 68
percent, of these funds.[Footnote 8] In addition, as of September 1,
2009, FHWA had reimbursed $41 million to the state.[Footnote 9]
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to states through federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act, paying
prevailing wages in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
The Majority of Funds Obligated in Michigan Are for Highway Pavement
Projects:
About 77 percent of Recovery Act highway obligations for Michigan are
for pavement projects. Specifically, $334 million of the $575 million
obligated in Michigan as of September 1, 2009, is being used for
projects such as pavement improvement, including $120 million for road
resurfacing. MDOT officials told us that they selected mostly pavement
projects because the primary focus of Michigan's capital improvement
plan for highways has been maintaining existing roads and bridges and
improving pavement conditions. In addition, pavement projects met one
of the Recovery Act requirements that funds for highway infrastructure
investments be obligated within 120 days of apportionment. Figure 1
shows obligations by the types of road and bridge improvements being
made.
Figure 1: Highway Obligations for Michigan by Project Type as of
September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (77 percent, $442.3 million): Pavement
improvement ($334.3 million): 58%; Pavement widening ($108 million):
19%;
Bridge projects total (9 percent, $51 million): Bridge improvement
($40.8 million): 7%; Bridge replacement ($10.2 million): 2%.
Other (14 percent, $82.1 million):
Other ($82.1 million): 14%.
Source: GAO analysis of FHWA data.
Notes: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
[End of figure]
MDOT officials further told us that, as of September 1, 2009, Michigan
had awarded 153 contracts for highway projects. Of these 153 contracts,
work had begun on 94 contracts and 1 had been completed. According to
MDOT officials, the completed project, which started in April 2009 and
was completed in June 2009, involved preventive maintenance, including
concrete pavement repairs to about 11 miles of Interstate 75 on the
Ogemaw and Arenac County lines. The officials also said that the
contract had a total value of about $854,000. As of September 1, 2009,
38 contracts were pending award, 16 were out for bid, and MDOT planned
to advertise another 53 contracts. Since our July 2009 report, MDOT
officials stated that Michigan has continued to find that contracts for
Recovery Act projects are being awarded for less than the amounts it
had estimated when the funds were obligated for the projects, which
will allow them to allocate funds to additional projects. Because MDOT
initially identified more projects than it estimated could be funded
with the $847 million apportioned to Michigan for highway
infrastructure projects, officials plan to use the funds freed up by
the lower bids for these additional projects, which are primarily for
pavement and bridge improvements in economically distressed areas.
Michigan Is Using Existing Contracting Procedures and Internal Controls
for Awarding and Overseeing Recovery Act Contracts:
MDOT has processes in place for the award and oversight of contracts
using Recovery Act funds. We selected two contracts for pavement
improvement projects to review--one for more and one for less than $20
million. The first contract we reviewed was a state-administered
contract in a rural, economically distressed area with a value of $21.7
million--making it a large highway project for the state. MDOT awarded
this contract to resurface about 7 miles of Interstate 196 (I-196) in
Allegan County and building a new rest area. The project was scheduled
to begin in May 2009 and be completed by November 2009. The second
contract we reviewed was a locally-administered contract in an urban,
economically distressed area. MDOT awarded this contract, which totals
about $1.6 million, for concrete pavement and repair of about 1.2 miles
of Pasadena Avenue in Flint. It was scheduled to start in August 2009
and be completed by June 2010.
According to MDOT officials, they awarded these two contracts
competitively and followed the department's procurement procedures.
Officials provided the following facts about the procurement
procedures. Contactors seeking to bid on MDOT projects must be pre-
qualified to perform tasks such as road and bridge construction and
repair and concrete or hot mix asphalt paving. Only bidders who have
been prequalified by MDOT are allowed to submit bids on projects. As a
part of its review process, MDOT ensures that contractors that have
either had their prequalification suspended or have been
debarred[Footnote 10] are not allowed to bid. Contracts are then
awarded to the lowest prequalified bidder for each project. MDOT
received bids from four and six bidders for the I-196 and Pasadena
Avenue projects, respectively, and all bidders were prequalified and
had not been suspended or debarred, and the contracts were awarded to
the lowest bidders.
According to MDOT officials, these two contracts are fixed unit price
contracts with estimated quantities. Specifically, the unit price for
all construction material is fixed but the final price of the contract
depends on the quantity of materials used. For example, according to
state officials, the contractor for the Pasadena Avenue project is
required to repair the concrete base after removing the old asphalt,
but the quantity of concrete required for these repairs cannot be
determined until the asphalt is removed, which will affect the final
price of the contract.
According to officials, to help the state meet its Recovery Act
reporting requirements regarding job creation, the contracts require
the contractors to report to MDOT every month on the total (1) number
of employees who performed work on the contracts, (2) number of hours
worked by those employees, and (2) wages of the employees working on
the projects. In August 2009, MDOT began using a new Web-based system
to allow contractors to input employment and wage data directly into a
database rather than filling out a form to report these data. MDOT
officials told us that this system should increase efficiency and
reduce data entry errors.
Since construction on the I-196 project began on June 1, 2009,
contractors have submitted reports for June and July to MDOT. The July
2009 report showed that 108 employees worked on the project. To check
the accuracy and completeness of the data, MDOT field staff for this
project compared the information provided in the contractor's reports
with weekly payroll information and on-site inspection reports that the
MDOT Project Manager prepared.
MDOT officials intend to use the department's standard procedures to
monitor whether Recovery Act construction contractors deliver quality
goods and services in accordance with the contract terms. For example,
for the two contracts we reviewed, we discussed procedures with agency
officials who stated that all of the following monitoring activities
have taken place. After contract award, MDOT assigned a project manager
to oversee day-to-day construction activities and make sure the
contractor met all contract requirements. The project manager and his
oversight staff conducted routine inspections, reviewed testing and
certifications of materials used in the project, and drafted daily
inspection reports. The project manager also held regular on-site
meetings with the contractor, which provide a vehicle for identifying
issues that may arise so officials can take necessary actions to
resolve them.
MDOT uses a program/project management system that tracks the project
schedule and resource needs based on information received from the
project manager. A Project Steering Committee reviews the information
in this system and information from the contractors' monthly reports to
identify areas needing attention. MDOT uses separate accounting codes
to track Recovery Act projects and generate reports for FHWA and
Michigan's Economic Recovery Office.[Footnote 11]
Officials told us that, at the end of each project, the project manager
is required to reconcile and account for the work completed and the
materials used before issuing the final payment. Officials explained
that, before issuing final payment to a contractor, the project manager
is also required to evaluate a contractor's performance. Officials
stated that MDOT's Contractor Performance Evaluation Review team
reviews the performance evaluations for all prime contractors and
subcontractors. According to MDOT officials, this team's review is
intended to determine whether the contractor's performance on the
project has been satisfactory in meeting MDOT's performance standards
and whether staff have followed MDOT's procedures and guidelines in
rating contractors' performance.
Michigan's Use of Recovery Act Funds for Weatherization Assistance Is
Under Way:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the DOE administers through
each of the states, the District of Columbia, and seven territories and
Indian tribes. The program enables low-income families to reduce their
utility bills by making long-term energy efficiency improvements to
their homes by, for example, installing insulation, sealing leaks; and
modernizing heating equipment, air circulation fans or air conditioning
equipment. Over the past 32 years, the Weatherization Assistance
Program has assisted more than 6.2 million low-income families. By
reducing the energy bills of low-income families, the program allows
these households to spend their money on other needs, according to DOE.
The Recovery Act appropriation represents a significant increase for a
program that has received about $225 million per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, the
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE has provided to the states $2.3
billion of the $5 billion in weatherization funding under the Recovery
Act. Use of the Recovery Act weatherization funds is subject to Section
1606 of the act, which requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined
under the Davis-Bacon Act.[Footnote 12] Because the Davis-Bacon Act had
not previously applied to weatherization, Labor had not established a
prevailing wage rate for weatherization work. In July 2009, DOE and
Labor issued a joint memorandum to Weatherization Assistance Program
grantees authorizing them to begin weatherizing homes using Recovery
Act funds, provided they pay construction workers at least Labor's wage
rates for residential construction, or an appropriate alternative
category, and compensate workers for any differences if Labor
establishes a higher local prevailing wage rate for weatherization
activities. Labor then surveyed five types of "interested parties"
[Footnote 13] about labor rates for weatherization work. The department
completed establishing prevailing wage rates in all of the 50 states
and the District of Columbia by September 3, 2009.
Michigan's Weatherization Plan Provides Goals for Reducing Energy
Usage:
DOE allocated a total of $243 million in Recovery Act funds for a 3-
year period to Michigan and approved Michigan's weatherization plan on
July 6, 2009. As of August 31, 2009, DOE provided about $121.7 million
of the funds representing about 50 percent of the amount allocated by
DOE. Officials from Michigan's Department of Human Services (DHS),
which administers the Weatherization Assistance Program and is the
prime recipient of funds, stated that as of August 31, 2009, DHS had
obligated $198.7 million and expended about $2 million. According to
the officials, as of August 24, 2009, DHS had awarded contracts with 30
community action agencies (CAA) and 2 limited purpose agencies for the
total amount obligated.[Footnote 14] According to state officials, the
amount obligated by the state is subject to limitation based on the
availability of federal funds. DHS officials told us that each CAA that
uses subcontractors has prepared a request for quotation (RFQ) to
obtain vendors for weatherization materials and services and that they
plan to review all the RFQs. As of August 31, 2009, DHS officials had
reviewed almost 20 RFQs to ensure they met Recovery Act and state
requirements. The state's goal is to weatherize at least 33,000 units
with Recovery Act funds, a large increase over the 14,346 units
weatherized in program years 2005 through 2007.[Footnote 15] DHS is
also using Recovery Act funds to train weatherization workers, pre-
inspect homes to determine eligibility for weatherization, and hire and
train new DHS program staff. In addition, DHS has provided technical
assistance to CAAs through a workshop. Further, some agencies have
purchased specialized equipment that inspectors use to test for leaks
and heat loss in houses as part of the pre-inspection process. DHS has
established a statewide goal that 20 percent of those served will be
elderly and 15 percent will be persons with disabilities. Although a
CAA establishes individual goals, DHS must approve any goals that are
below the statewide goals.
Use of Recovery Act Weatherization Funds Was Slowed by the Need to
Determine Prevailing Wages under the Davis-Bacon Act:
According to agency officials, approval of expenditures for
weatherization contracts using Recovery Act funds was slowed by the
need for DHS to include prevailing wage rates for use in setting
contract terms with CAAs. Although CAAs could have used Recovery Act
funds to begin weatherizing homes (providing they paid construction at
least Labor's wage rates for residential construction or an appropriate
alternative category and compensate workers for any differences if
appropriate), DHS officials told us that most CAAs preferred to wait
for Labor to determine the prevailing wage rates. CAAs did not want to
face the administrative difficulties of correcting wages already paid.
In order to determine prevailing wages, Labor created a survey that DHS
forwarded to the CAAs along with instructions for completing it. On
August 12, 2009, Labor posted the prevailing wage rates for Michigan to
be paid under the requirements of the Davis-Bacon Act. According to
officials, DHS subsequently awarded contracts with all CAAs and two
limited purpose agencies.[Footnote 16]
Initial concerns that Michigan officials had before determining the
prevailing wage rates for weatherization activities have diminished. In
July 2009, DHS officials expressed concerns about determining the wage
rates for weatherization activities. According to DHS officials, job
classifications specific to weatherization had not been identified.
Additionally, they said that the wage rates for employment related to
weatherization work were inconsistent from one county to another. For
example, one CAA in the Lansing area, which provides weatherization
services in four counties, paid $18 an hour to workers in three of the
four counties and $42 an hour to workers in the remaining county.
However, Labor subsequently determined that the prevailing wage in this
remaining county is $28 an hour, a rate in better alignment with the
wage rates across the four counties. Additionally, in July 2009, DHS
officials expressed concerns that certain areas of the state had
prevailing wage rates that would be prohibitively high, which would
negatively affect their ability to work within the state's funding
limit of $6,500 per unit average for weatherization. However after
Labor released the prevailing wage rates for Michigan, officials found
the wage rates to be acceptable.
DHS Has Increased Staff to Monitor the Use of Recovery Act
Weatherization Funds:
Since June 2009, DHS officials have used Recovery Act funds to hire
five additional staff to monitor the use of Recovery Act funds related
to the Weatherization Assistance Program. Specifically, they said they
hired a manager to oversee the program, two staff to review
weatherization projects, a technical supervisor, and a fiscal analyst.
They also plan to hire 15 additional staff, including technical
specialists and administrative support staff, and are considering
hiring someone with expertise in the compliance and reporting
requirements of the Davis-Bacon Act.
DHS officials created a plan to monitor the Weatherization Assistance
Program and said that they plan to monitor the use of weatherization
funds by conducting annual visits to each CAA. These visits would
alternate between comprehensive and shorter monitoring visits. The
comprehensive visits would include a fiscal review, staff interviews,
job site visits, and reviews of client files. DHS officials also plan
to have their technical supervisors review at least 5 percent of all
weatherized units. Michigan's State Auditor General told us that the
Single Audit review of DHS for 2007 through 2008 is in process and
includes consideration of the Weatherization Assistance Program. The
most recent Single Audit report on DHS for the fiscal years 2005
through 2006 did not include a review of the state's Weatherization
Assistance Program.
DHS Officials Remain Concerned about Recovery Act Reporting:
On August 31, 2009, DHS officials told us that for the first Recovery
Act reporting period, ending September 30, 2009, they were planning to
report information directly to the federal government. DHS conducted a
workshop for CAAs on the reporting requirements of the Recovery Act so
that the CAAs could assist local subrecipients in understanding the
requirements. DHS officials plan to use the data elements supplied by
DOE and Labor to estimate job impact of the funds and noted they can
use much of the information they already collect for these reports.
However, DHS officials expressed concerns about the precision of the
data that will be reported. They said that, although the Recovery Act
requires them to report their use of the funds by October 10, 2009,
agency data for Michigan's fiscal year 2009, which ends on September
30, 2009, will not be finalized until October 24 or 25.
SFSF Will Be Used to Maintain Education Programs and Replace General
Fund Gaps Caused by Reductions in State Revenues:
The Recovery Act created a state fiscal stabilization fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHE). The initial award of SFSF
funding required each state to submit an application to Education that
provided several assurances, including that the state will meet
maintenance-of-effort requirements (or will be able to comply with
waiver provisions) and that it will implement strategies to meet
certain educational requirements, such as increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds) and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use education
stabilization funds, but states have some ability to direct IHEs in how
to use these funds.
Education allocated $1.592 billion in SFSF moneys to Michigan on April
1, 2009: $1.302 billion for education stabilization and $290 million in
government services funds. As of September 1, 2009, Education had made
$873 million (two-thirds of the total education stabilization funds)
available to MDE. MDE officials told us that LEAs had to submit
applications for the education stabilization funds to MDE. MDE
officials told us that they allocated $600 million of these funds to
LEAs and, as of September 1, 2009, had approved LEAs' applications for
$599 million of the education stabilization funds. These officials told
us that the states' LEAs had drawn down $584 million of the education
stabilization funds after MDE approved their applications. Two of the
state's LEAs--a charter school and a small district--did not apply for
education stabilization funds because, according to MDE, those LEAs had
decided not to accept Recovery Act funds. MDE officials also told us
that although they did not allocate any of these funds to IHEs--the
state's colleges and universities--for the 2008-2009 school year, they
plan to allocate $68 million to IHEs for the 2009-2010 school year.
According to the MDE officials, most LEAs plan to use the education
stabilization funds to restore items deleted from their budgets as a
result of cuts in state education funding made during the 2008-2009
school year. Therefore, they anticipated that most of the funds would
be applied to teacher salaries, which represents the bulk of the LEAs'
budgets.
Officials with Michigan's Office of the State Budget told us the state
will use the state's total SFSF government services allocation of $290
million to address areas where the state's general funds were cut as a
result of reductions in state revenues. As of September 16, 2009, the
state legislature had not yet specified the programs to be supported
with the state's government services portion of SFSF funds.
Michigan Has Made Preliminary Allocations of ESEA, Title I Recovery Act
Funds:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through Title I, Part A of the Elementary and
Secondary Education Act (ESEA) of 1965. The Recovery Act requires these
additional funds to be distributed through states to LEAs using
existing federal funding formulas, which target funds based on such
factors as high concentrations of students from families living in
poverty. In using the funds, LEAs are required to comply with current
statutory and regulatory requirements and must obligate 85 percent of
the funds by September 30, 2010.[Footnote 17] Education is advising
LEAs to use the funds in ways that will build the agencies' long-term
capacity to serve disadvantaged youth, such as through providing
professional development to teachers. Education made the first half of
states' Recovery Act ESEA Title I, Part A funding available on April 1,
2009, and announced on September 4, 2009, that it had made the second
half available.
As of August 18, 2009, Michigan had made preliminary allocations of the
$195 million in ESEA, Title I Recovery Act funds, which was about 50
percent of the $390 million Education made available to the state on
April 1, 2009. MDE officials told us they planned to make the final
allocations of these funds to LEAs in the fall of 2009 after approving
LEAs' applications. Applications from LEAs that had summer programs
were due to MDE by the end of July 2009, but applications from LEAs
without summer programs were not due until September 1, 2009. MDE
officials expressed concern that the Recovery Act funds they are
allowed to use for administrative support were not sufficient to cover
the resources required to review the large number of additional
applications for ESEA, Title I and other education-related Recovery Act
funds and to monitor LEAs' uses of the funds. They also said that
Education's proposal to adjust the statutory caps on administrative
costs did not fully address their concerns because these costs would be
capped at $1 million, which represents about .26 percent of their total
Title I, ESEA Recovery Act funds. In addition, based on their reviews
of the applications received to date, MDE officials said they expected
many LEAs would be required to revise their applications to provide
additional information on their planned use of the funds.
According to MDE officials, the carryover waiver they received from
Education for their ESEA Title I funds will be critical in allowing
LEAs to use the funds after the September 30, 2010, cutoff date for
obligating 85 percent of ESEA Title I funds. However, they also said
that some LEAs have expressed concern about challenges in meeting the
"supplement not supplant" provisions of ESEA Title I.[Footnote 18]
Specifically, LEAs rely on education funding provided by the state
through sales tax revenues, which have declined significantly in recent
years. As a result, LEAs may find it difficult to only use Recovery Act
funds to supplement their ESEA Title I programs rather than supplanting
them because of the recent declines in state funding for these
programs.
MDE has encouraged LEAs to use their ESEA Title I Recovery Act funds
for programs such as professional development for teachers and staff
and for supplemental reading programs. MDE officials said that the
applications they reviewed indicate that many LEAs also plan to
purchase equipment such as "smart boards"--electronic boards linked to
the Internet that can be used to display interactive educational
materials in the classroom. According to MDE officials, the LEAs'
applications for ESEA Title I Recovery Act funds describe a range of
activities because Michigan has LEAs that vary greatly in size,
including a few large urban districts and many that are small and
rural. For example, one LEA has fewer than 100 students, at least five
LEAs are made up entirely of one-room schools, and two LEAs are located
on islands only accessible by boat or plane during much of the school
year. In addition, 250 of the state's LEAs are public school academies
(charter schools) with no defined geographic boundaries that overlap
with those of the other LEAs. As a result, MDE must recalculate funds
provided via formula grants in order to determine the funds to be
allocated to the public school academies that are based on the income
eligibility of their students using the number of students who receive
free and reduced lunches rather than U.S. Census poverty data, which
are based on geographic boundaries.
Michigan Department of Education Has Not Approved All LEAs'
Applications for IDEA Recovery Act Funds:
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of Individuals with Disabilities Act (IDEA), the major
federal statute that supports the provisions of early intervention and
special education and related services for infants, toddlers, children,
and youth with disabilities. Part B funds programs that ensure
preschool and school-aged children with disabilities have access to a
free and appropriate public education and is divided into two separate
grants--Part B grants to states (for school-age children) and Part B
preschool grants (section 619). Part C funds programs that provide
early intervention and related services for infants and toddlers with
disabilities--or at risk of developing a disability--and their
families. Education made the first half of states' Recovery Act IDEA
funding available to state agencies on April 1, 2009, and announced on
September 4, 2009, that it had made the second half available.
On April 1, 2009, Education made the first half of Michigan's IDEA
Recovery Act funds available to the state--a total of $207 million for
both types of Part B grants and $6.2 million for Part C grants. As of
August 14, 2009, MDE had allocated all of the Part B funds for grants
for school-aged children and youth--$200.3 million--to LEAs through the
state's intermediate school districts (ISD) but none of the funds had
been provided because their applications had not been approved.
[Footnote 19] As of September 1, 2009, MDE officials said that they
were in the process of reviewing the applications but had not yet
approved any of them. As of August 14, 2009, MDE had allocated all of
the $6.7 million in Part B IDEA preschool grant funds to ISDs and LEAs
had drawn down $2.3 million of these funds. According to MDE officials,
as of August 14, 2009, they allocated all of the $6.2 million in Part C
IDEA grant funds to the ISDs and had approved 42 applications for $4.9
million of these funds.[Footnote 20]
MDE officials said that according to the applications they had
reviewed, LEAs intend to use the $200.3 million in IDEA Part B grants
for school-aged children and youth to, among other things, retain
special education teachers; acquire new technologies, including
automated data systems and electronic smart boards for use in
classrooms; enhance professional development for teachers; and provide
additional bus transportation services to students with disabilities.
According to MDE officials, $2.3 million in the applications for Part B
grants for preschool students approved by MDE will be used for salaries
and to purchase services. According to MDE officials, most of the Part
C grant funds will be provided to ISDs to purchase home-based early
intervention services, but some LEAs plan to use the Part C funds for
training programs in which the objective is to increase families'
understanding of how to meet the needs of their children with
disabilities. They also told us that about 10 LEAs plan to use their
IDEA Part C funds for new construction.
MDE Will Use Existing Systems for Tracking and Reporting on Recovery
Act Education Funds, but Challenges Remain:
MDE officials said that they will use their existing cash management
and grants management systems to track Recovery Act funds and meet the
reporting requirements. LEAs will input data on the use of Recovery Act
funds and on jobs created and retained into these systems. MDE
officials said they will test these data to help ensure that they are
timely, complete, and accurate. MDE has provided some guidance on the
reporting requirements to LEAs and plans to train them on how to comply
with the requirements. However, MDE officials said that LEAs vary
significantly in their capacity to accurately track the use of the
Recovery Act funds and the requirements present some challenges to
LEAs. For example, generally LEAs have not reported data on the use of
grant funds on a quarterly basis as required by the Recovery Act--they
have only reported on the use of the funds at the end of each grant. In
addition, some of the adjustments needed in the state's grants
management system to distinguish Recovery Act grant funds from regular
federal education grants and produce reports on the use of these funds
had not been completed, according to MDE officials. This may hinder
MDE's ability to track and report on the uses of Recovery Act funds.
MDE staff are responsible for reviewing and approving LEAs'
applications for Recovery Act funds and their use of the funds. As part
of the oversight and monitoring process, MDE officials said that they
plan to conduct on-site visits of schools to review their use of
Recovery Act funds. These visits, which will each take about 3 days,
will consist of MDE's internal auditors reviewing selected districts'
financial statements, improvement in the district's student achievement
on standardized tests, progress in implementing corrective action
plans, and compliance with federal regulations. To increase
accountability for Recovery Act funds, MDE also chairs a weekly
meeting, called the ARRA Education Core Team meeting, to facilitate
working with external partners, school boards, and public school
academies (also known as charter schools) to identify issues regarding
the use of Recovery Act funds. According to MDE officials, these
meetings have provided valuable feedback on the use of Recovery Act
funds.
The State Auditor General reported in a previous audit that MDE needs
to improve the completeness and accuracy of the education data reported
in the state's cash management and grants management systems.[Footnote
21] In addition, in its Single Audits reports on MDE, the State Auditor
General reported significant deficiencies in MDE's internal controls.
For example, in its 2005 through 2007 Single Audit report, the State
Auditor General found that the agency's internal controls over special
education programs did not ensure compliance with federal laws and
regulations regarding reporting and subrecipient monitoring.[Footnote
22] In April 2009, MDE issued its plan for corrective action to the
State Auditor General. MDE officials told us that they were
implementing their corrective action plan to improve the completeness
and accuracy of data reported through the department's cash management
and grants management systems.
MDE's Oversight of Detroit Public Schools Has Focused on Correcting
Weaknesses in Financial Management and Eliminating the District's
Budget Deficit:
The Detroit Public Schools (DPS) has faced many challenges in recent
years, including serious financial weaknesses, sizeable budget
deficits, and large reductions in its student population. Single Audit
reports on DPS identified several material weaknesses, including lax,
system-wide oversight and controls in DPS contracting.[Footnote 23] The
2008 Single Audit report contained 84 findings that identified
deficiencies in five areas: (1) internal controls, (2) financial
reporting, (3) policies and procedures, (4) training, and (5)
information technology. DPS developed a corrective action plan for 70
of the findings and has contracted with a consulting firm to review the
adequacy of its plan. The DPS Office of the Auditor General, an
internal audit operation, is responsible for audits and reviews of
district operations, including internal controls. The DPS Office of the
Auditor General recently completed reviews of all the district's 194
schools and found that 189 schools (97 percent) had inadequate
bookkeeping. The DPS Single Audit report dated December 10, 2008,
reported that material audit adjustments were necessary for the
financial statements to be fairly stated. Financial statements were not
available in a timely manner to meet statutory and other deadlines.
In addition, as a result of the July 2008 Education Office of Inspector
General audit of DPS's use of ESEA Title I funds, Education designated
DPS a high-risk district, requiring that all federal funds provided to
DPS receive additional Education and MDE oversight. To comply, DPS must
follow a checklist of required actions and develop strong internal
controls. Education and MDE are working with DPS to address the
district's financial management challenges. DPS officials said that
they meet weekly with MDE officials and monthly with officials from
Education's Office of Risk Management to discuss financial management
issues.
As a result of financial management weaknesses and DPS's budget
deficits, Michigan's Governor appointed an Emergency Financial Manager
for the district in March 2009. The Emergency Financial Manager also
appointed two oversight officials for the district to help improve its
financial oversight. Since the Emergency Financial Manager has been in
place, DPS has begun developing and implementing new policies and
procedures to address the district's financial management challenges.
DPS's Deficit Elimination Plan Outlines Many Actions to Be Taken:
For fiscal year 2008, DPS reported in its audited financial statements
an excess of expenditures over revenues of $154 million.[Footnote 24]
Further, in April 2009, DPS officials projected an excess of
expenditures over revenues of $166 million for fiscal year 2009.
Officials explained that in light of DPS's ongoing operating deficits
it was required by law to submit a deficit elimination plan to MDE. MDE
returned the district's first plan because it did not contain a long-
range plan for eliminating the entire cumulative deficit--it only
addressed the current year's deficit. DPS recently submitted a revised
deficit elimination plan to MDE for its review.
DPS has significantly reduced the number of teachers by eliminating
2,400 positions and reduced its central office staff by 72 percent.
However, according to DPS officials, further reductions will be
required because 80 to 85 percent of its budget consists of teacher
salaries and benefits. Over the past several years, DPS's budget
problems have been compounded by declines in student enrollment as many
former DPS students have moved or chosen to attend charter or private
schools. Six years ago, DPS had about 167,000 students; by the 2008-
2009 school year, its enrollment had declined to 93,000; and the
estimate for the 2009-2010 school year is 88,000. This is a significant
problem because the district's funding is based, in large part, on its
enrollment. This decrease in enrollment has resulted in the district
having many buildings with unused capacity; it recently closed 61
buildings. One of DPS's primary goals is to improve its academic
standards and performance to bring students back to the district and
increase its enrollment. DPS officials noted that establishing and
sustaining Recovery Act-funded initiatives will be difficult given the
challenges the district faces. In addition to reducing its cumulative
budget deficit under the direction of its Emergency Financial Manager
and with the approval of MDE, DPS must continue its operations in order
to meet the educational needs of students.
MDE Has Allocated Significant Recovery Act Funds to DPS:
MDE allocated $80 million in SFSF funding to DPS through fiscal year
2010. DPS plans to use most of its SFSF Recovery Act funds to backfill
state aid cuts and support teacher salaries. Specifically, DPS
officials said that they plan to pay the salaries of about 187 teachers
with a portion of the district's $80 million in SFSF Recovery Act
funds. DPS's SFSF application stated that it also intends to use the
funds to purchase a new information system that will track data such as
students' demographic characteristics, schedules, registration dates,
daily attendance, grades, and test scores.
MDE allocated $148 million in ESEA Title I Recovery Act funds to DPS
through fiscal year 2010. However, DPS had not received any of these
funds because MDE had not approved its Title I application. As of
September 10, 2009, DPS had been informed by MDE that its application
has been substantially approved and that final approval of the
application is pending. DPS officials plan to use the funds to develop
a system for assessing the academic performance of children in
kindergarten through third grade and a "Learning Village"--an
electronic compilation of model curricula that can be used as a
resource for enhancing student education and DPS's management of its
education programs.
MDE allocated $11.3 million in Recovery Act funds to DPS for IDEA Part
B grants and $700,000 for IDEA Part C grants. MDE provided the IDEA
funds to the Wayne Regional Educational Service Agency (Wayne RESA), an
intermediate school district. The Wayne RESA covers all LEAs in Wayne
County, Michigan, including DPS and 33 other school districts, and 82
public school academies in the Detroit area. None of the IDEA funds,
however, had been provided to DPS because MDE had not approved the
ISD's application for IDEA funds. DPS officials said that they did not
have an estimated date as to when the district will receive its IDEA
Recovery Act funds. DPS officials said that they planned to use these
funds to develop electronic individual development plans for students
with disabilities and to support an initiative to enhance teachers'
professional development.
DPS officials said that they will report information on the use of
SFSF, ESEA Title I, and IDEA Recovery Act funds using the state's cash
management and grants management systems. They also said that they are
not sure whether MDE will add any requirements for tracking and
reporting of Recovery Act funds.
Questions Remain about MDE's Ability to Accurately and Timely Report on
Recovery Act Funds:
Based on prior audit reports, questions remain about MDE's ability to
report accurately and timely on the use of Recovery Act funds
consistent with the accountability and transparency requirements of the
act. A strong system of internal controls provides checks and balances
against waste, fraud, abuse, and mismanagement and is an important
component of an organization's ability to operate efficiently and
effectively. GAO's guidance on internal controls may be useful in
assisting MDE officials in implementing effective internal control over
Recovery Act funds and determining what, where, and how improvement can
be implemented.[Footnote 25]
MDE and the state's largest LEA--DPS--do not have strong systems of
internal controls and will need to compensate for existing systems and
processes in order to meet the timing and other accountability
requirements of the Recovery Act. Given that the first comprehensive
report on the use of Recovery Act funds used through September 30,
2009, is due to the federal government by October 10, 2009, the risks
and challenges that MDE faces include timely accounting for the
significant amount of Recovery Act funds provided for education as well
as the use of Recovery Act funds by LEAs. In June 2008, the State
Auditor General reported significant deficiencies in MDE's internal
controls. Also, LEAs vary significantly in their capacity to accurately
track and report on the use of Recovery Act education funds. The poor
internal controls of MDE and LEAs and the large amount of Recovery Act
education funds allocated to the state result in increased risk that
Recovery Act funds will not be used and accounted for in accordance
with provisions of the act. According to MDE and DPS officials, the
LEAs plan to use existing systems and processes to track funds. DPS
will receive significant Recovery Act funds and plans to use its
existing systems and processes to account for and report on the use of
Recovery Act funds. The independent auditor for DPS reported as
recently as December 2008 that material weaknesses existed, including
weaknesses in systemwide oversight and controls. Further, the auditor
reported that material adjustments were necessary for DPS's financial
statements to be fairly stated and that financial information was not
available in a timely manner to meet statutory and other deadlines.
According to state and DPS officials, the district has a number of
initiatives under way to address its accountability challenges. For
example, in March 2009, Michigan's Governor appointed DPS's Emergency
Financial Manager who has initiated a number of important actions, such
as developing a strategic approach to address long-standing and often
repeated audit findings. However, as of September 2009, improvements in
the controls and processes for DPS remain a work in process. Many
identified control deficiencies are still in need of attention despite
numerous special efforts to transform accountability at DPS. Questions
remain about the reliability of DPS financial information and the
capacity of DPS to produce timely and accurate financial information.
Further, change actions implemented and those under way at DPS are
designed to address long-standing deficiencies through deliberate
processes; however, they are not aimed at short-term actions that may
be necessary to provide reasonable assurance that Recovery Act funds
used through September 30, 2009, are properly accounted for and
reported in October 2009, and that quarterly reports thereafter are
accurate and timely. Further, the results of change actions have not
yet been validated through external audit processes.
To provide accurate and timely Recovery Act reporting, MDE, in
coordination with DPS, will need to consider implementing policies and
procedures in the near term to provide reasonable assurance that
education-related Recovery Act funds, including those provided to DPS,
are reported accurately and timely, that jobs retained and created are
accurately and timely reported, and that funds are used only for
allowable purposes. It will also be important to implement targeted
accountability practices--internal and external--with timely validation
processes for reports on the use of education-related Recovery Act
funds, including those submitted by DPS in accordance with the act's
requirements.
WIA Recovery Act Funds Provided Summer Employment to Many of Michigan's
Low-Income Youth, but Significant Internal Control and Program
Challenges Exist:
The Recovery Act provides an additional $1.2 billion in funds for WIA
Youth program activities, including summer employment. Administered by
Labor, the WIA Youth program is designed to provide low-income in-
school and out-of-school youth 14 to 21 years of age, who have
additional barriers to success, with services that lead to educational
achievement and successful employment, among other goals. Funds for the
program are distributed to states based on a statutory formula; states,
in turn, distribute at least 85 percent of the funds to local areas,
reserving as much as 15 percent for statewide activities. The local
areas, through their local workforce investment boards, have the
flexibility to decide how they will use the funds to provide required
services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 26] the conferees stated that they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth program
requires a summer employment component to be included in its year-round
program, Labor issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 27] Local areas may design summer
employment opportunities including any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as they also include
a work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job; (2) learn work readiness
skills on the job; and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 28]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Michigan received $74 million in Recovery funds for the WIA Youth
program and, as of August 31, 2009, had drawn down $20.2 million. After
reserving 15 percent for statewide activities, the state allocated
$62.9 million to the 25 local Michigan Works! Agencies (MWA) to provide
services to youth. The Michigan's Department of Energy, Labor and
Economic Growth (DELEG)--the state agency that administers the program-
-set a goal to spend the majority of its allocation during the summer
of 2009. DELEG officials expected to serve 21,000 youth with Recovery
Act funds compared to about 4,000 youth served in the summer of 2008 in
the WIA year-round program.[Footnote 29] The 25 MWAs have local
flexibility in planning Recovery Act funded summer youth employment
activities. For example, local areas have discretion to determine
whether it is appropriate to link academic learning to summer
employment opportunities.
Characteristics of WIA Summer Youth Employment Activities:
We visited the MWAs in Detroit and Lansing. According to officials,
both locations contracted out all their summer youth employment
activities to other organizations. In Lansing, the MWA had contracts
for youth services with nine entities, including two faith-based
organizations. Jobs for summer youth in Lansing included positions with
Michigan State University and Lansing's Board of Water and Light.
Detroit Workforce Development Department (Detroit MWA) contracted with
an organization to recruit youth for employment in its 2009 summer
youth program. As of August 31, 2009, the contractor had filled 6,774
summer jobs at 221 worksites, including a retail pharmacy chain, Henry
Ford Hospital, the Detroit City Council, Detroit's police and fire
departments and Wayne County Community College District. Table 1
contains selected program features of the Detroit and Lansing local
workforce development agencies as well as for all programs in the
state.
Table 1: Program Characteristics of Two Local WIA Youth Programs and
for the State:
Program features: Michigan Works! Agency (MWA); Detroit MWA: Detroit
Workforce Development Department; Lansing MWA: Capital Area Michigan
Works!; Total for Michigan: 25 local workforce agencies of DELEG.
Program features: Areas served;
Detroit MWA: City of Detroit;
Lansing MWA: Ingham, Eaton, and Clinton Counties; Total for Michigan:
Statewide.
Program features: Program design;
Detroit MWA: Six 20-hour weeks, maximum 120 hours, of paid employment;
Lansing MWA: Under 18: Up to 40 hours per week, including remediation;
Over 18: Up to 40 hours per week, plus remediation if needed; Total for
Michigan: Determined by each MWA.
Program features: Length of program;
Detroit MWA: May 18 to September 30, 2009[A]; Lansing MWA: June 22 to
September 30, 2009[B]; Total for Michigan: Determined by each MWA.
Program features: Outreach;
Detroit MWA: Local schools, nonprofit organizations, neighborhood
initiatives, and word of mouth;
Lansing MWA: Public service announcements and schools; Total for
Michigan: Determined by each MWA.
Program features: Target number of participants; Detroit MWA: 7,000;
Lansing MWA: 600;
Total for Michigan: 21,000.
Program features: Actual number of participants; Detroit MWA: 6,774[C];
Lansing MWA: 725[C];
Total for Michigan: 12,166[D].
Program features: Amount allocated;
Detroit MWA: $14.5 million[E];
Lansing MWA: $3.3 million;
Total for Michigan: $73.9 million.
Program features: Amount expended;
Detroit MWA: $7.8 million[F];
Lansing MWA: $2.6 million[G];
Total for Michigan: $3.3 million[H].
Program features: Range of jobs;
Detroit MWA: Office assistant, senior citizens assistant, childcare
assistant, teacher assistant, forestry apprentice, and "green"
education coordinator;
Lansing MWA: Animal care, office assistant, environmental services, and
legislative aide;
Total for Michigan: Determined by each MWA.
Program features: Work readiness measure; Detroit MWA: Employability
skills, job search and workplace readiness; Measured at the completion
of the program by an assessment instrument; Lansing MWA: Interpersonal
and professional measures including punctuality, attendance, quality of
work, grooming, operation of tools and equipment, and personal
behavior; Measured at the beginning, middle and end of the program by
an assessment instrument; Total for Michigan: Determined by each MWA.
Source: GAO analysis of local and state information for the WIA Youth
program.
[A] According to a Detroit MWA official, out-of-school youth over 18
years old may continue participating in the program until March 31,
2010, or until program funds are exhausted, whichever occurs first.
[B] All participants were to receive a week of leadership training
before beginning work on June 22, 2009.
[C] As of August 31, 2009.
[D] As July 31, 2009.
[E] Of the $14.5 million awarded, of which $11.4 million is from
Recovery Act funds, Detroit MWA contracted with a contractor for $6.2
million and retained $8.3 million for participant payroll and
administration.
[F] As of September 3, 2009. Of the $7.8 million expended, Detroit MWA
paid approximately $2.1 million to the prime contractor and spent
approximately $5.7 million for youth payroll and administrative
expenses.
[G] As of August 14, 2009.
[H] Amount expended through June 30, 2009, the latest data available,
by Michigan's 25 MWAs according to DELEG was $3.3 million. DELEG
obtains expenditure information from the 25 MWAs through quarterly
expenditure reports. According to a DELEG official information through
the quarter ended September 30, 2009, is expected to be available on
October 20, 2009.
[End of table]
Detroit and Lansing Experienced Program Challenges for WIA Youth Summer
Employment and Detroit Has Significant Internal Control Issues:
Detroit and Lansing experienced challenges in implementing their WIA
youth summer employment program--including managing a significant
funding increase, the fact that the contractor for Detroit was new to
the program, few program monitors for both Detroit and Lansing, the
organizational complexity of the program delivery arrangement for
Detroit, and no written policies and procedures for Detroit's payroll
and its process for determining eligibility and a lack of documentation
supporting such decisions. Further, Detroit had significant internal
control problems with paying youth and weaknesses in its process for
making program eligibility determinations. Effective internal control
is a major part of managing any organization to achieve desired
outcomes and manage risk.[Footnote 30]
GAO guidance on internal controls describes challenges to the efficient
and effective achievement of organizational goals and objectives as
risk.[Footnote 31] GAO's Standards for Internal Control in the Federal
Government includes risk assessment as part of an overall framework for
establishing and maintaining internal control and for identifying and
addressing major performance challenges and areas at greatest risk for
fraud, waste, abuse, and mismanagement.[Footnote 32]
Further, the Recovery Act requires recipients of funds to comply with
federal internal control standards. The Office of Management and Budget
has stated that it will use its Circular No. A-133 Compliance
Supplement to notify auditors of program requirements that should be
tested for Recovery Act programs, and will issue interim updates as
necessary.[Footnote 33]
In May 2009, DELEG and MWA officials in Lansing and Detroit told us
that they did not foresee any difficulties in implementing their
Recovery Act funded WIA summer youth employment activities. State
officials initially said they expected a smooth transition in using
Recovery Act funds because of their experience running programs for
displaced workers combined with the experiences of local MWA directors.
However, in discussions throughout July and August 2009, officials
cited several challenges as the much larger program got under way.
In accordance with Labor's requirements, DELEG's overall guidance
states that MWA directors must conduct regular oversight and monitoring
of Recovery Act funds in order to monitor whether expenditures are made
against the appropriate cost categories and within cost limitations.
[Footnote 34] The guidance further states that oversight and monitoring
should determine compliance with programmatic, accountability, and
transparency requirements of the Recovery Act. To this end, DELEG set
up separate accounting codes to track Recovery Act funds. The agency
also holds monthly meetings with all 25 MWA directors to encourage
reporting of consistent information. State program officials said they
planned to conduct on-site monitoring visits of WIA worksites as well
as three site visits each year at each of their MWAs. As of September
9, 2009, DELEG officials said that they had not begun their review of
any of the MWAs.
Officials in both Detroit and Lansing told us that it was challenging
to implement a larger program than they had in the prior year in a
short time frame. Both Detroit and Lansing had more applicants than
available jobs, necessitating much more screening of applications than
in previous years. Detroit's summer youth program in 2009 had over two
times the number of youth participants than in the prior year. Detroit
MWA officials told us that they received 25,000 applications for 7,000
jobs. In August 2009, Detroit MWA officials told us that with 6,774
participants on August 31, 2009, they expect to reach their goal of
7,000 jobs before the end of the program. Lansing served over 100 more
youth than expected and exceeded its goal of employing 600 youth during
the summer of 2009. On September 16, 2009, DELEG officials told us that
the state has not met its target but expects to meet its target to
employ 21,000 youth.
In addition, Detroit MWA officials stated that they encountered several
challenges working with the prime contactor. The contractor and its
subcontractor were both new to the WIA program and one challenge was
obtaining approval to use them from the City Council, a process which
took several months. Detroit awarded the contract on May 4, 2009.
Officials told us that the new contractor, however, did not have
written policies or procedures or other related controls for payroll
processing and distribution of the payroll. According to Detroit MWA
officials, the previous contractor--that was not eligible to compete
for the summer 2009 contract--had been in place for several years and
had established policies and procedures for processing and distribution
of the payroll.
Detroit fell short of its initial staffing goals for monitoring the
program. Detroit MWA officials told us that the contractor's initial
plans were to hire up to 150 additional staff, including 50 worksite
monitors, by June 30, 2009. As of September 9, 2009, the contractor had
21 worksite monitors on staff. Detroit MWA and contractor officials
told us final contract negotiations resulted in reducing total staffing
to 140, including 21 worksite monitors. Lansing MWA officials told us
that finding staff to monitor program activities was a challenge
because of the limited amount of time available to recruit and employ
youths for the summer. Lansing MWA officials told us that they met
their goal and hired 3 staff to monitor over 200 worksites. Also,
Lansing officials indicated that they relied on their nine contractors
to provide monitoring assistance through periodic reports on monitoring
activities and results.
The design and delivery of WIA Youth summer employment activities was
complex and involved many parties. According to state and local program
officials this has proven to be challenging. For example, Detroit's
summer youth program involved roles and responsibilities spread among
multiple parties including the Michigan Works! Agency--the Detroit MWA,
the contractor and its subcontractor, an external payroll service
provider, as well as approximately 221 worksites, and nearly 7,000
youth.
Detroit Had Significant Internal Control Problems with Paying Youth
Participants on Time and in the Correct Amounts:
Some of the youth in Detroit's WIA summer youth program were not paid
for their employment in a timely manner and checks had incorrect
amounts, payee names, and addresses. The lack of written policies or
procedures for the preparation and distribution of payroll affected
Detroit's ability to ensure accountability for Recovery Act funds.
Progress is under way by Detroit MWA officials and the contractor to
document the process flow for the preparation and distribution of
payroll, identify problem areas, and develop written policies and
procedures, and they expect to complete the initial phase (documenting
the payroll process flow) by September 30, 2009.
As shown in table 2, 4 percent to 20 percent of youth in Detroit's
summer youth program were owed a paycheck but were not paid on time.
Table 2: Summary of Payroll Preparation Results for the First Three Pay
Periods:
Number of youths due a paycheck;
July 25, 2009: 2,614;
August 8, 2009: 4,686;
August 22, 2009: 5,617.
Number of checks printed;
July 25, 2009: 2,080;
August 8, 2009: 4,259;
August 22, 2009: 5,371.
Amount of checks printed;
July 25, 2009: $449,122;
August 8, 2009: $1,335,227;
August 22, 2009: $1,707,907.
Number of youth owed paychecks but not paid when due; July 25, 2009:
534;
August 8, 2009: 427;
August 22, 2009: 246.
Percentage of youth not paid when due;
July 25, 2009: 20.4;
August 8, 2009: 9.1;
August 22, 2009: 4.4.
Unclaimed checks;
July 25, 2009: Information not available; August 8, 2009: 459;
August 22, 2009: 977.
Source: Detroit summer youth program contractor data, unaudited.
[End of table]
In August 2009, contractor officials told us that they were exercising
due diligence in following up on providing all youth with checks in the
correct amounts and that they were seeking to resolve all issues with
paychecks as quickly as possible. At one of the worksites we visited
where 25 youth were employed, the site manager told us that 10 of the
youth were not paid the funds they were owed when they were due on
August 8, 2009. We followed up with the manager at this worksite who
said that, by the following week, all of the youth had been paid. There
has been improvement in performance, such as the percentage of youths
not paid when due, from the date of the first payroll on July 25, 2009,
to the payroll that we observed on August 22, 2009. However, issues
with payroll, such as youth owed paychecks but not paid when due,
remain and additional work is necessary to correct the internal control
problems with payroll processing and distribution.
There was also confusion as to where youth were to pick up their
paychecks at the first payroll distribution on July 25, 2009. The
logistics at the distribution site were not transparent and youth
reported to the contractors that they did not know which line to use or
whom to talk to in order to discuss problems with or questions about
their paychecks.
Youths were also working at worksites that had not completed the
registration process, and officials told us that as a result no checks
were prepared for these youths. There were also issues in resolving
problems, according to Detroit MWA officials, because youth initially
did not have a place to go to ask questions regarding errors in their
paychecks, including incorrect amounts, payee names and addresses, or
when they did not receive their paychecks.
Although payroll distributions had improved over the summer, some
problems remain. We observed the payroll distributions on August 8,
2009, and August 22, 2009, and found that the contractor had made some
improvements. For example, the contractor had established a customer
care unit to address the youth's concerns. The contractor also modified
the payroll distribution process and distributed checks alphabetically,
which decreased some of the confusion over the former worksite-based
distribution process that it had used. However, there were problems
during these two payroll distributions with the checks having the
incorrect amount, payee name or address, and with youths not receiving
their checks when due. In addition, we found that there were still
problems with long lines. At the August 22, 2009, distribution, we
observed that youth had to wait in lines as long as 4 hours while
standing in the rain to receive their paychecks. Detroit MWA officials
confirmed that the amount of time youths had to stand in line to
receive their paychecks was, on average, 3 to 4 hours. Further, we
observed on several occasions on August 22, 2009, local police were
called to assist with crowd control. Contractor officials told us that
the use of a larger venue for the September 4, 2009, payroll
distribution reduced the waiting time.
It will be important that DELEG work with the Detroit MWA and
contractors for the City of Detroit WIA Summer Youth Program to
continue to address the internal control issues with youth not being
paid on time and checks being prepared with incorrect amounts, payee
names, and addresses, as well as to resolve past payroll issues and
distribution challenges.
Detroit's Process for Determining Participation in Its WIA Summer Youth
Program Needs Improvement:
We found weaknesses in Detroit's process for making WIA Youth summer
program eligibility determinations and a lack of documentation
supporting such decisions. The federal requirements for WIA eligibility
are meeting (1) the income test (limit on family income), (2) the age
test (from 14 to 21),[Footnote 35] and (3) having any one of six
barriers to success.[Footnote 36] Labor authorized the states to
delegate the definition of the sixth barrier to local agencies.
[Footnote 37] Detroit MWA officials provided us with the City of
Detroit's Comprehensive 5-year Local Plan (Plan) which included the
definition for the sixth barrier. State officials told us that they had
approved the 2008 program year plan that contained the same definition
for the sixth barrier as in the plan currently under review as of
September 9, 2009. The applicable section of the Plan provides the
following definition:[Footnote 38]
"The Detroit WDB[Footnote 39] has defined "youth residing in high
poverty neighborhoods"[Footnote 40] as its locally developed sixth
criterion for eligibility. A high poverty neighborhood is one in which
30 percent[Footnote 41] or more of all households are beneath the
poverty line as defined by the U.S. Department of Health and Human
Services, Office of Management and Budget."
Although this definition was used in the Plan, neither Detroit MWA
officials nor contractor officials could explain how they used the
sixth criterion when making eligibility determinations. Further, these
officials provided no explanation about how staff made eligibility
determinations using this category absent guidance on how to interpret
this category in reviewing applications. Moreover, the local contractor
and subcontractor, told us they did not receive any instructions from
the Detroit MWA on required documentation for this eligibility
category. Therefore, the basis used for determining whether an
applicant was eligible for the program or not is unclear.
During our fieldwork, we selected a nonprobability sample of 11
participant files.[Footnote 42] Our review of these participant files
revealed inadequate or nonexistent support of WIA eligibility
determinations. One participant file's registration form did not claim
any barrier to success. While the other 10 participant's eligibility
determinations were based on the sixth criteria, we found that none of
these files had documentation to support eligibility for this program.
We discussed these issues with Detroit MWA officials and they told us
that based on their review of the 11 files we reviewed, it would not be
possible to determine eligibility based on the documentation in the
files. Progress is under way by Detroit MWA to assess the process for
determining eligibility and the documentation of eligibility
determinations. Officials told us that they are reviewing 100 case
files but as of September 8, 2009, this analysis had not been
completed. We did not review the Detroit MWAs methodology for selection
of the case files or for its review of the files.
On September 2, 2009, DELEG officials told us they are considering the
information that we brought to their attention over the course of our
work regarding the Detroit WIA program's eligibility process and the
absence of documentation to support decisions on eligibility. It will
be important for DELEG and Detroit officials to identify program risks
and implement the appropriate internal controls to address issues
involving eligibility determinations, and the lack of documentation
supporting eligibility decisions.
State and Local Officials Are Attempting to Measure the Outcomes of the
WIA Summer Youth Employment Activities:
In accordance with Labor requirements, the state requires each MWA to
track and report items such as the number of youth employed and program
completion rates. Although the Recovery Act requires states to report
the number of jobs created and retained through any activity supported
by Recovery Act funds, Labor has issued guidance stating that states
should not include WIA program participants in that number. In
addition, the Recovery Act provided that only the measurement of work
readiness gains is required to assess the effectiveness of summer-only
employment for youth served with Recovery Act funds. States and local
areas may decide the particular assessment tool to use to gauge work
readiness gains.
The local areas we visited used different assessment instruments to
determine work readiness skills. Youth participating in Lansing's
program are evaluated by their supervisors on dimensions such as
punctuality, grooming, quality of work, operation of tools and
equipment, and personal behavior. Youth in Detroit's program were
evaluated on employability skills and workplace readiness. Lansing
evaluated participants at the beginning, middle, and upon completion of
the program. Detroit evaluates participants using an external party
upon their completion of the program. Officials from Lansing and
Detroit said that the youth they are serving have been positively
affected by the program (see fig. 2). For example, local officials
stated that some youth expressed a sense of pride when they completed
their orientation training or when they received their first paycheck.
Other youth were provided with skills for independent activities of
daily living, such as how to write a check.
Figure 2: WIA Summer Youth Participant:
[Refer to PDF for image: photograph]
The picture depicts a female youth assisting in food preparation at a
Lansing, Michigan hospital.
Source: GAO.
[End of figure]
Officials at both MWAs that we visited were aware of the Recovery Act's
emphasis on "green" jobs. Detroit defined green jobs as those that
build awareness and understanding of the natural environment and
encourage careers in environmental sciences and industry. According to
Detroit MWA officials, their contractor's definition of a green job is
one that "builds awareness and understanding of the natural environment
and encourages careers in environmental sciences and industry." For
example, green sector jobs in Detroit are those where youth are engaged
in education as well as hands-on experience in activities such as
recycling, reducing waste or carbon emissions and reusing products in a
new and creative way. MWA officials in Detroit told us that they had
developed a task force to address this issue and planned to place 600
youths in green jobs. As of August 31, 2009, 446 of Detroit's 6,774 WIA
summer jobs (7 percent) were defined by city officials as "green" jobs.
Detroit MWA officials told us they expect to meet their goal by the end
of the program. Lansing officials told us that they had difficulty
identifying significant numbers of green jobs suitable for youths,
although they created 42 green jobs for youths at worksites such as the
Lansing Board of Water and Light and the School of Agriculture at
Michigan State University.
Michigan Used Existing Contracting Procedures for Recovery Act WIA
Funds:
According to DELEG officials, existing state policies and procedures
are intended to help safeguard the use of Recovery Act funds for the 25
MWA WIA Youth summer programs. We selected the Detroit MWA summer youth
contract for review because this contract was for the largest WIA
program in the state. According to the Detroit's MWA officials, they
follow city procurement practices and guidelines in awarding contracts,
including those for the WIA program. In addition, officials told us
that the Detroit MWA contract for the WIA program was competed.
Officials explained that after selection of the winning bidder, a
contract is drafted and reviewed by the city's purchasing, budget,
finance, and law departments before obtaining City Council approval.
DELEG allocated $14.5 million to the Detroit MWA for the WIA Youth
program of which $11.4 million is from Recovery Act funds.[Footnote 43]
According to officials, Detroit MWA awarded a cost reimbursement
contract not to exceed $6.2 million to a contractor for its WIA summer
youth program for the period May 1, 2009, to June 30, 2010, and
retained $8.3 million for payroll and administrative costs.[Footnote
44] This contract is funded by the Recovery Act and regular WIA
funding. According to officials, the contractor issued a cost
reimbursement subcontract not to exceed $3.7 million for program
delivery including payroll processing and worksite development and
monitoring from May 15, 2009, to June 30, 2010. We discussed the
contract with Detroit MWA procurement officials who told us that the
award process was generally consistent with that described to us.
State Comments on This Summary:
We provided the Governor of Michigan with a draft of this appendix, and
staff in the Michigan Governor's office and the Michigan Economic
Recovery Office reviewed the draft appendix and responded on September
15, 2009. In general, they agreed with its overview of the state's
activities in the six programs selected for analysis. Further they
stated that they believe that the report identifies several critical
challenges that all states, including Michigan, must address to ensure
timely, accurate and effective implementation of the Recovery Act. They
also stated that they remain committed to our efforts to work with
state agencies and local recipients to ensure that all implementation
challenges are identified and addressed. The officials also provided
technical suggestions that we incorporated, as appropriate.
GAO Contacts:
Susan Ragland, (202) 512-8486 or raglands@gao.gov:
Revae Moran, (202) 512-3863 or moranr@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Robert Owens, Assistant
Director; Jeffrey Isaacs, analyst-in-charge; Manuel Buentello; Leland
Cogliani; Ranya Elias; Kevin Finnerty; Henry Malone; Melanie Swift; and
Mark Ward made major contributions to this report.
[End of section]
Footnotes for Appendix X:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Within manufacturing, the automotive industry--including automotive
parts producers--declined by more than 42,000 jobs (28 percent) from
July 2008 to July 2009.
[3] The Michigan Department of the Treasury, House Fiscal Agency, and
Senate Fiscal Agency prepare the Consensus Revenue Estimate in January
and May of each year to help legislators prepare the state's budget.
[4] The state is expecting just over $2 billion in state funds to be
made available as a result of the enhanced Federal Medical Assistance
Percentage (FMAP) (discussed in detail in GAO-09-1016); $1.3 billion
through SFSF education stabilization funds and $290 million through
SFSF government services funds.
[5] The State Budget Office said it reviewed Office of Management and
Budget (OMB) Memorandum M-09-18, Payments to Grantees for
Administrative Costs of Recovery Act Activities (May 11, 2009) that
provides guidance to the states regarding the use of either "estimated
cost" or "billed cost" options for determining the amount of
administrative costs to be recovered. Because of the narrow scope of
administrative costs the state is pursuing, M-09-18 did not affect the
decision to use the "billed cost" option for Recovery Office costs.
[6] Recovery Act reporting requirements include identifying the
entities receiving Recovery Act dollars, the amounts, which projects or
activities are being funded, projects' completion status, and an
estimate of the number of jobs created and the number of jobs retained
by projects and activities.
[7] OMB Memorandum M-09-21, Implementing Guidance for the Reports on
Use of Funds Pursuant to the American Recovery and Reinvestment Act of
2009 (June 22, 2009).
[8] For the Highway Infrastructure Investment Program, DOT has
interpreted the term obligation of funds to mean the federal
government's contractual commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement.
[9] States request reimbursement from FHWA on an ongoing basis as the
state makes payments to contractors working on approved projects.
[10] According to officials, MDOT can debar a contractor if (1) the
contractor has been debarred by the federal government and is on the
debarment list posted on a federal website maintained by the General
Services Administration [hyperlink, https://www.epls.gov] that lists
contractors that are excluded from receiving federal contracts and
certain subcontracts or (2) the contractor has serious performance
issues, such as felony convictions, work performance and safety issues,
or contract violations.
[11] MDOT also provides project status updates to FHWA area engineers
and conducts site reviews on an as-needed basis.
[12] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[13] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[14] CAAs are agencies that support low-income residents' efforts to
achieve self-sufficiency primarily in the areas of housing, employment,
education, energy, nutrition, healthcare and transportation. Limited
purpose agencies are non-CAAs that perform weatherization for the state
of Michigan.
[15] This number includes units that may have been weatherized
previously.
[16] The only DOE weatherization projects to which Davis-Bacon applies
are those receiving Recovery Act funding.
[17] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver,
and must obligate all of their funds by September 30, 2011. This
requirement is referred to as a carryover limitation.
[18] In general, ESEA Title I requires states and LEAs to use federal
funds to supplement and not supplant the funds that would, in the
absence of federal funds, be made available from nonfederal sources.
[19] Unlike most other states, Michigan's IDEA funds are provided to
and managed by the state's 57 ISDs. IDEA funds provided to schools go
through the ISDs to the LEAs and then to individual schools. Some IDEA
funds, however, are provided directly by the ISDs to service providers
rather than LEAs and schools. Except for ISDs in the upper portion of
the state (the Upper Peninsula), an ISD generally corresponds to a
county. For example, the ISD in which Detroit's LEA is located covers
all 34 LEAs in Wayne County, Michigan and 82 public school academies.
[20] MDE provides the Part C IDEA funds to Michigan's ISDs, which
contract with public and private service providers such as public
health departments, mental health agencies, and private organizations
to provide home-based early intervention services to children with
disabilities. Some Part C funds are provided via the ISDs to LEAs, but
most funds are used by the ISDs to purchase services directly from
service providers.
[21] Michigan State Auditor General, Performance Audit of Selected
Payment and Related Systems, Michigan Department of Education and
Michigan Department of Information Technology, November 2008.
[22] Michigan State Auditor General, Financial Audit Including the
Provisions of the Single Audit Act of the Michigan Department of
Education, October 1, 2005 though September 30, 2007, June 2008.
[23] Independent Public Accountants: Detroit Public Schools, Single
Audit, For the Year Ended June 30, 2008 (December 10, 2008); Detroit
Public Schools, Single Audit Report, Fiscal Year Ended June 30, 2007
(February 13, 2008); The School District of the City of Detroit Public
Schools, Single Audit Report, Fiscal Year Ended June 30, 2006 (November
30, 2006).
[24] Detroit Public Schools, Comprehensive Annual Financial Report for
the Fiscal Year Ended June 30, 2008, Detroit Public Schools Division of
Financial Services, December 10, 2008.
[25] GAO, Internal Control and Management Tool, [hyperlink,
http://www.gao.gov/products/GAO-01-1008G] (Washington, D.C.: Aug. 1,
2001).
[26] H.R. Rep. No. 111-16, at 448 (2009).
[27] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[28] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[29] Revised from preliminary estimate of 25,500 as of July 2009 to
21,000 as of September 2009 based on updated operational and wage data.
[30] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[31] [hyperlink, http://www.gao.gov/products/GAO-01-1008G].
[32] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. See
also [hyperlink, http://www.gao.gov/products/GAO-01-1008G].
[33] The Office of Management and Budget's Circular No. A-133 sets out
implementing guidelines for the single audit and defines roles and
responsibilities related to the implementation of the Single Audit Act,
including detailed instructions to auditors on how to determine which
federal programs are to be audited for compliance with program
requirements in a particular year at a given grantee.
[34] Michigan State Workforce Investment Plan Modification,
Implementation of the American Recovery and Reinvestment Act of 2009,
July 1, 2009 through June 30, 2010 [hyperlink,
http://www.michigan.gov/mdcd/0,1607,7-122--217944--,00.html] (accessed
September 15, 2009).
[35] The Recovery Act extended eligibility to age 24.
[36] The six barriers to success are: (1) limited English language
proficiency, (2) school dropout, (3) foster child, homeless, or runaway
youth, (4) single parent, pregnant, or parenting youth, (5) offender,
or (6) is an individual (including a youth with a disability) who
requires additional assistance to complete an education program or to
secure and hold employment.
[37] 29 C.F.R. § 664.210.
[39] City of Detroit, "Revised Comprehensive Five-Year Local Plan July
1, 2000 - June 30, 2005 with an Extension From July 1, 2005 - June 30,
2010, Detroit Workforce Development Department [hyperlink,
http://www.ci.detroit.mi.us/Departments/DetroitWorkforceDevelopmentDepar
tment/CurrentRFPs/tabid/1665/] Default.aspx (accessed September 15,
2009).
[39] Workforce Development Board (WDB) is a policy unit in the Detroit
Michigan Works! Agency.
[40] Detroit MWA officials told us that they define the entire city of
Detroit as a high poverty neighborhood.
[41] The U.S. Census Bureau reported that the percentage of all
households in Detroit that were beneath the poverty level in 2007 was
estimated to exceed 30 percent.
[42] Because our selection was not statistical, our results may not be
projected to the population.
[43] Of the $11.4 million of Recovery Act funding allocated to Detroit
MWA, Detroit MWA contracted with a contractor for $3.1 million and
retained $8.3 million for participant payroll and administration.
[44] According to the Detroit officials, the prime contractor was
awarded the WIA summer youth program contract under the City's
procurement process on May 4, 2009. The contract with the prime
contractor was executed on July 8, 2009, following approval by city
council.
[End of section]
Appendix XI: Mississippi:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of the American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Mississippi. The full report on all of our
work, which covers 16 states and the District of Columbia, is available
at [hyperlink, http://www.gao.gov/recovery/].
Our work in Mississippi focused on specific programs funded under the
Recovery Act and included reviewing three Recovery Act programs in
detail, collecting summary data on two education programs, and updating
the state's fiscal condition since our July report. The programs we
reviewed in detail were the state's highway program, the Weatherization
Assistance Program, and Recovery Act funds being provided under Title
I, Part A of the Elementary and Secondary Education Act (ESEA) of 1965.
We selected the highway program because the state's full allocation of
Recovery Act funds was available for use and the state had work
underway, the weatherization program because the Recovery Act
significantly increased the program's funding, and the ESEA Title I
program because the state was expected to make the first release of
Recovery Act funds to schools during the time frame of our review. In
addition to these programs, we also updated funding information on the
U.S. Department of Education's (Education) State Fiscal Stabilization
Fund (SFSF) and the Individuals with Disabilities Education Act (IDEA).
Consistent with the purposes of the Recovery Act, funds from the
programs we reviewed are being directed to help Mississippi and local
governments stabilize their budgets and expand existing programs--
thereby providing needed services. We focused on how funds were being
used; how safeguards were being implemented, including those related to
procurement of goods and services; and how results were being assessed.
The funds include the following:
Highway Infrastructure Investment:
* The U.S. Department of Transportation's Federal Highway
Administration (FHWA) apportioned $355 million in Recovery Act funds to
Mississippi.
* As of September 1, 2009, the federal government has obligated $289
million to Mississippi and $21 million has been reimbursed by the
federal government.[Footnote 2]
* Almost 76 percent of Recovery Act highway obligations for Mississippi
have been for pavement projects, including roadway repaving, widening,
and new construction projects. Specifically, $154 million of the $289
million obligated for Mississippi's use as of September 1, 2009, is
being used for roadway repaving projects, including $4 million for
approximately 18 miles of repaving at a site we visited in the south
central region of the state.
Weatherization Assistance Program:
* The Department of Energy (DOE) allocated $49.4 million in Recovery
Act funding to Mississippi for the Weatherization Assistance Program.
As of September 1, 2009, DOE had provided the Mississippi Department of
Human Services (MDHS), the prime recipient of the funds, with $24.7
million.
* MDHS is contracting with Mississippi's 10 community action agencies
to perform weatherization work. These agencies are responsible for
purchasing materials and awarding labor contracts to make homes more
energy efficient. As of July 31, 2009, three community action agencies
that we visited had completed the weatherization of 134 homes.
* As of September 1, MDHS had disbursed $3.37 million to community
action agencies for home weatherization. MDHS plans to provide
community action agencies with a total of about $35.5 million from the
state's allocation of $49.4 million. With this the agencies are
expected to weatherize a total of at least 5,468 homes.
* MDHS expects to use the remaining $13.9 million, or 28 percent, for
administrative costs, technical and training assistance, and audit fees
for community action agencies' year-end audits by private accounting
firms.
ESEA Title I, Part A Funds:
* Education has awarded Mississippi $132.9 million in Recovery Act
funds under ESEA Title I, Part A.
* As of September 8, Mississippi had released no Recovery Act ESEA
Title I, Part A funds to local education agencies (LEA). Each agency is
required to submit an application to the state, outlining its planned
uses of these funds. According to MDE, it will review applications
through the end of September.
* Once funds are released, the agencies plan to use them for technology
upgrades and supplemental reading and math programs.
Updated Funding Information on Other Education Programs:
* As of September 4, 2009, the Governor of Mississippi had not released
any of the $262.7 million that Education allocated under the SFSF for
education stabilization. The Governor plans to release the education
stabilization funds after the state has resubmitted its application for
the funds to Education and after reviewing applications submitted by
LEAs that detail each agency's planned use of the funds.
* Education has also awarded Mississippi about $127 million in Recovery
Act funds under IDEA, Parts B and C, as of September 4, 2009. None of
these funds have been released to LEAs.
Mississippi Continues to Face Fiscal Challenges:
In the face of declining tax revenues, Mississippi continues to
experience significant fiscal challenges. Revenue collections for July
and August 2009, the first 2 months of fiscal year 2010, were $26.2
million and $5.5 million below expectations, respectively. As shown in
figure 1, total tax collections through fiscal year 2010 are down $31.7
million, which is nearly 6 percent below projections. The State Fiscal
Officer estimates that the budget shortfall for the fiscal year could
be more than $800 million, but is more likely to range from $175
million to $350 million. The major causes for decreasing tax revenue
are declines in sales taxes, individual income taxes, and other tax
commissions.
On September 3, the Governor ordered reductions in state agencies'
budgets totaling $171.9 million. The Governor took this action after
reviewing August tax revenues and determining that tax revenue
collections did not meet estimates for the first 2 months of fiscal
year 2010. The budget cuts reduce nearly all agencies' budgets to at
least 5 percent below fiscal year 2009 appropriation levels. According
to the Governor, he is statutorily prohibited from cutting an agency by
more than 5 percent until he has cut spending for all agencies by 5
percent. The Governor exempted only a few agencies and programs, such
as the Department of Corrections and Medicaid, from the budget
reductions.
The budget cuts reduce fiscal year 2010 funding for education agencies
by approximately $158.3 million while reducing funding for noneducation
agencies by about $13.7 million. According to the Governor, because
education spending makes up more than 60 percent of the state budget,
Mississippi cannot control spending without addressing the largest line
item in the state budget.
Figure 1: Mississippi July/August 2009 Tax Revenue:
[Refer to PDF for image: horizontal bar graph]
Figures in millions of dollars above or below the estimate:
Sales tax: -$13.2;
Individual income: -$8.5;
Corporate income: $1.3;
Use tax: -$2.9;
Insurance premium: $0.9;
Tobacco, ABC, and beer: $-2.0;
Gaming: $0.9;
Other tax commission: -$8.9;
Other than tax commission: $0.7;
All other transfers: $0.0;
Total collections: -$31.7.
Source: Mississippi Legislative Budget Office.
[End of figure]
The Legislature Took Various Actions to Stabilize the Fiscal Year 2010
Budget:
The use of Recovery Act funds must comply with specific program
requirements but also, in some cases, enables states to free-up state
funds to address their projected budget shortfalls. Mississippi was
able to use Recovery Act funds in this manner. On June 30, 2009, the
legislature approved the fiscal year 2010 Mississippi state budget
using more than $519 million of Recovery Act funds to bring it into
balance. The legislature appropriated $111.5 million and $19.6 million
of education stabilization funds to K-12 education and institutions of
higher education (IHE), respectively. This amount, plus $74.6 million
of Recovery Act funds appropriated in fiscal year 2009 that will carry
forward into fiscal year 2010, freed up $205.7 million in General Funds
that had been planned for K-12 education, IHEs, and community colleges.
In addition, a provision of the Recovery Act that increased the Federal
Medical Assistance Percentage[Footnote 3] requirement made another $313
million available by lowering the portion of Medicaid costs that
Mississippi must pay, thereby freeing up a like amount of state funds.
According to a state budget official, these state funds were redirected
to other programs.
To further balance the budget, the legislature transferred $65.2
million of "Rainy Day Funds"[Footnote 4] to the Budget Contingency Fund
[Footnote 5] to help cover projected shortfalls that appear likely to
occur in the General Fund. Officials explained that the legislature
also authorized an assessment on hospitals, amounting to $60 million,
to offset the costs of Medicaid. In addition, the legislature increased
General Fund revenues by raising the tax on each pack of cigarettes,
which is expected to raise $106.1 million in additional tax revenue.
Mississippi Continues to Develop Recovery Act Highway Projects, but Is
Challenged by Evolving Reporting Requirements and Tight Time Frames:
Figure 4: The Recovery Act provides funding to states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act, paying a
prevailing wage in accordance with federal Davis-Bacon requirements,
complying with goals to ensure disadvantaged businesses are not
discriminated against in the awarding of construction contracts, and
using American-made iron and steel in accordance with Buy America
program requirements. While the maximum federal fund share of highway
infrastructure investment projects under the existing federal-aid
highway program is generally 80 percent, under the Recovery Act, it is
100 percent.
As we previously reported, $355 million was apportioned to Mississippi
in March 2009 for highway infrastructure and other eligible projects.
As of September 1, 2009, FHWA had obligated $289 million for
Mississippi highway projects and had reimbursed the state $21 million.
A little more than 75 percent of all Recovery Act highway obligations
for Mississippi have been for pavement projects, including roadway
repaving, widening, and new construction projects. Specifically, $154
million of the $289 million obligated for Mississippi's use as of
September 1, 2009, is being used for roadway repaving projects,
including $4 million for approximately 18 miles of repaving at a site
we visited in the south central region of the state. Figure 2 shows the
types of road and bridge improvements for which funds have been
obligated.
Figure 2: Highway Obligations for Mississippi by Project Improvement
Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (75 percent, $218.4 million): Pavement
improvement ($154.2 million): 53%; Pavement widening ($41.7 million):
14%; New road construction ($22.5 million): 8%.
Bridge projects total (17 percent, $49.1 million): Bridge improvement
($25.3 million): 9%; Bridge replacement ($23.8 million): 8%.
Other (8 percent, $21.9 million):
Other ($21.9 million): 8%.
Source: GAO analysis of FHWA data.
Note: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
[End of figure]
Two Agencies Administer Mississippi Transportation Projects:
As we reported in July, Mississippi has two agencies administering
Recovery Act funding for transportation projects. These two agencies
are MDOT and the Office of State Aid Road Construction (OSARC). MDOT is
responsible for operating and maintaining 14,300 miles of roadway
statewide, including interstate highways, U.S. highways, and state
routes. Furthermore, MDOT oversees all road construction projects that
fall under the jurisdiction of any of the state's four metropolitan
planning organizations (MPO), which select and approve transportation
projects for cities and counties known as local public agencies (LPA).
[Footnote 6] MDOT also oversees projects carried out by LPAs that are
not part of MPOs. OSARC assists Mississippi's 82 counties in the
construction and maintenance of 19,019 miles of secondary, nonstate
roads, and bridges. The Governor appoints the State Aid Engineer; in
contrast, an elected commission, independent of the Governor, controls
MDOT. Since FHWA only recognizes one transportation agency in each
state, all federal funding must flow from FHWA through MDOT. Although
OSARC determines how Recovery Act funds will be allocated to
Mississippi counties for the improvement of eligible county roads and
then administers the funding, the agency must seek MDOT's approval for
each of the projects. After awarding contracts for federal projects,
OSARC pays all contractor bills and then submits a request for
reimbursement to MDOT.
The Majority of MDOT and OSARC Recovery Act Projects Are Under Way:
Of the approximately $355 million in Recovery Act funds that FHWA
allocated to Mississippi, MDOT is responsible for administering $343
million and OSARC has responsibility for $11.7 million. As of September
1, FHWA had obligated approximately $279 million of MDOT's $343
million, and MDOT had awarded contracts for 45 projects.[Footnote 7] By
that same date, FHWA had obligated approximately $10.1 million of
OSARC's $11.7 million and OSARC had awarded contracts for 10 projects.
Both MDOT and OSARC have awarded contracts for less than estimated.
MDOT awarded Recovery Act contracts for nearly 12 percent less than the
state's estimate. Officials mentioned one project in Jackson County
where increased competition resulted in the winning bid coming in 25
percent under the state estimate, something the officials had not
witnessed in years. Of the 45 projects, for which MDOT has awarded
contracts, contractors have begun construction on 39 and have completed
6. Similarly, OSARC awarded projects for nearly 15 percent less than
originally estimated. Of the 10 projects for which OSARC has awarded
contracts, 9 are under construction and 1 has been completed.
We examined three Recovery Act contracts awarded prior to September 1.
[Footnote 8] We reviewed the contracts and discussed them with MDOT and
OSARC officials, who told us that the contracts were awarded to the
lowest responsive bidder.[Footnote 9] Furthermore, according to MDOT
and OSARC officials, each MDOT and OSARC Recovery Act request for
proposal and contract includes the act's reporting requirements as well
as the U.S. Department of Labor's (Labor) Davis-Bacon requirements.
MDOT Implements an Internal Obligation Deadline to Prevent the State
from Losing Funds:
Included in the $343 million of Recovery Act funds that MDOT
administers is $94.7 million that is set aside for LPA projects.
Although the Recovery Act requires that these funds be obligated within
1 year of apportionment, MDOT chose to implement an internal deadline
of September 3, 2009. MDOT established this deadline to encourage the
LPAs to take action in advance of the final deadline, which reduces the
risk that the state will lose any of its Recovery Act funding.
As of September 1, FHWA had obligated $1.6 million of the $94.7 million
set aside for LPA projects. In late August, the MDOT engineer
responsible for LPAs told us that MDOT intended to ask LPAs to develop
alternate projects if, by the September 3 deadline, funds for their
projects were not close to being obligated or if the projects were
facing substantial challenges, such as acquiring right-of-way. However,
despite the fact that only 1 LPA project had funds obligated as of
September 9, 6 days after the deadline, the engineer said that MDOT had
reviewed the status of the LPA Recovery Act projects and determined
that the projects were progressing well.
LPAs Experience Challenges in Developing Projects:
In response to a 2006 national FHWA review that examined state
oversight of locally administered projects, FHWA-Mississippi Division
directed MDOT to enhance its oversight of LPA projects and update its
Project Development Manual for LPAs to document the new oversight
procedures. The updates include additional steps that LPAs must follow
to activate a project. For example, MDOT previously allowed LPAs to
certify that a project followed MDOT's project activation protocol.
LPAs now submit a written request to MDOT for project activation, along
with documentation detailing the purpose and need of the proposed
improvements, and LPA board meeting minutes. MDOT made the changes in
the project activation process because the department is ultimately
responsible for ensuring that the state's LPAs are in compliance with
applicable state and federal requirements. However, as a result of
these changes, LPAs undergo a much longer and more demanding protocol
to activate their projects. This caused some MPO officials, who select
and approve projects for the LPAs under their jurisdiction, to question
whether the September 3, 2009, obligation deadline was achievable.
Furthermore, officials at one MPO explained that MDOT's new project
activation process and the September 3 obligation deadline have
affected the types of projects that are being approved in Mississippi.
Officials from the Central Mississippi Planning and Development
District (CMPDD) stated that most of its LPAs would have preferred to
develop other projects with Recovery Act funds, such as new
construction projects. But the officials told us that CMPDD ended up
selecting more modest repaving and signal projects because of tight
deadlines. According to those officials, over 90 percent of the
Recovery Act projects that their MPO approved were repaving projects.
In contrast, officials from the Gulf Regional Planning Commission
(GRPC) told us that they chose to focus on safety improvement projects
such as pedestrian walkways, intersection improvements, and bridge
replacements rather than street-repaving projects because they felt
these projects better reflected the goals of the Recovery Act. But,
according to the officials, because projects were planned quickly to
meet tight time frames, some projects have run into unanticipated
issues that in some cases have caused costs to exceed the LPA
engineers' estimates. For instance, one locality had to deal with
unanticipated drainage problems before it could begin constructing a
planned sidewalk. According to GRPC officials, some LPAs had to come
back to GRPC to ask for additional funding. GRPC officials initially
told LPAs that if their engineers' estimates were low, the LPA would
have to pay the excess costs. However, GRPC officials stated that
because some localities did not have funds to cover the additional
costs, GRPC officials amended the transportation improvement program
[Footnote 10] and added funds from other sources to fully fund the
projects.
Finally, MDOT and MPO officials informed us that some LPAs' limited
project administration experience might affect their ability to handle
Recovery Act projects. According to CMPDD officials, two member LPAs
that were behind in the planning process have never managed a
transportation project. Furthermore, MDOT's State LPA Engineer also
stated that some LPAs were dealing with mayoral changes, and that some
new mayors simply did not know how to move projects forward. Officials
from the GRPC also told us that one of its member localities did not
receive funding because the town was in the midst of a mayoral change
and did not have any staff to develop a suitable project.
Reporting Requirements Present Challenges for FHWA, MDOT, and OSARC:
Officials from FHWA-Mississippi Division said that their counterparts
at FHWA headquarters proactively developed a two-part system to collect
and analyze Recovery Act project data on a monthly basis. This two-part
system was made-up of prime recipient and subrecipient hard copy
reporting forms as well as a computerized data base system, known as
the Recovery Act Data System (RADS). Officials from FHWA-Mississippi
Division told us that MDOT is experiencing challenges in meeting the
reporting requirements set out in Section 1512 of the Recovery Act
[Footnote 11] because FHWA developed RADS and the associated hard copy
reporting forms before June 22, 2009, when the Office of Management and
Budget (OMB) released Section 1512 reporting guidance. For example,
FHWA-Mississippi Division officials cited one challenge as being that
the original versions of RADS and prime recipient and subrecipient
reporting forms were not formatted to collect all of the Section 1512
reporting elements. Therefore, FHWA-Mississippi Division officials
explained that their counterparts at headquarters have been reworking
RADS and the hard copy reporting forms so that each is formatted to
collect all required information. FHWA wanted to complete the task by
August 31, 2009, so that it could conduct a test run during the
September monthly reporting cycle. The test run would help ensure that
RADS is ready before the states must submit their reporting information
for OMB's first quarterly report, which is set for release in October.
However, as of September 9, an FHWA-Mississippi Division official told
us that FHWA had not completed its work.
Officials from FHWA-Mississippi Division also explained that the
changes being made to RADS and the hard copy reporting forms may result
in prime recipients and subrecipients having to collect additional
information. The officials told us that prime recipients and
subrecipients may not have collected all information needed to comply
with Section 1512 reporting requirements because the original reporting
forms did not require the information. According to the officials, both
groups may find that they must retroactively collect data elements that
were not collected prior to the changes in FHWA's data collection
system.
For MDOT and OSARC officials tasked with compiling prime recipient and
subrecipient Section 1512 reporting elements, the implementation of an
evolving FHWA reporting system has constrained limited resources while
causing confusion. MDOT and OSARC officials are most concerned about an
ever-increasing workload as they are now required to carry out their
normal work duties as well as complete the monthly FHWA reporting
requirements. For example, MDOT officials explained that the MDOT
Contract Administration Department employs about 13 to 14 staff members
who typically oversee construction contracts with a total value of $300
to $400 million annually. MDOT officials stated that with the enactment
of the Recovery Act, the department now has an additional $355 million
worth of construction contracts to monitor, and the added reporting
requirements that come with the state's acceptance of this money. In
addition, MDOT cited another challenge in that it only has 10 calendar
days, from the 11th through the 20th of each month, to verify the
accuracy of the reporting elements provided to it from its own
subrecipients as well as the data provided by OSARC. MDOT officials
responsible for verifying these data said that 10 calendar days often
only gives them enough time to identify very noticeable irregularities
in the data, such as data fields that have been left completely blank
or reported numbers that do not make sense for the element being
reported.
Our Spot Checks of Three Construction Sites Found That Internal
Controls Were Being Implemented:
Given that Recovery Act funds are to be distributed quickly, effective
internal controls over the use of funds are critical to help ensure
effective and efficient use of resources, compliance with laws and
regulations, and accountability over Recovery Act programs. Internal
controls include management and program policies, procedures, and
guidance that help ensure effective and efficient use of resources;
compliance with laws and regulations; prevention and detection of
fraud, waste, and abuse; and the reliability of financial reporting.
During visits to three projects being funded under the Recovery Act, we
examined some of the internal controls that MDOT and OSARC have
adopted.[Footnote 12]
On Tuesday, August 11 and Wednesday, August 12, 2009, we conducted
three site visits at one MDOT and two OSARC Recovery Act construction
projects. Each of these site visits was conducted in association with
the FHWA-Mississippi Division; MDOT and OSARC management were not aware
that we planned to visit.[Footnote 13] The two OSARC site visits were
bridge reconstruction projects located in the northwest region of the
state, whereas the MDOT site visit was a repaving project located in
the south central region of the state.[Footnote 14] In table 1, the
findings of these site visits are summarized.
Table 1: Site Visit Findings with Regard to Certain MDOT and OSARC
Internal Controls:
Site visited: OSARC #1;
Was work being conducted which involved a pay item?: Yes; Was a
technician on-site?: Yes;
Was the daily diary/inspection report completed?: Yes; Were the Davis-
Bacon questionnaires completed?: Yes.
Site visited: OSARC #2;
Was work being conducted which involved a pay item?: No; Was a
technician on-site?: Yes;
Was the daily diary/inspection report completed?: Yes; Were the Davis-
Bacon questionnaires completed?: Yes.
Site visited: MDOT;
Was work being conducted which involved a pay item?: Yes; Was a
technician on-site?: Yes;
Was the daily diary/inspection report completed?: Yes; Were the Davis-
Bacon questionnaires completed?: Yes.
Source: GAO analysis.
[End of table]
During each of the three site visits we conducted, MDOT and OSARC
officials were following procedures at the required level or above.
According to MDOT and OSARC officials, both MDOT and OSARC require that
a technician be on-site whenever work is being conducted that involves
a contract pay item.[Footnote 15] Furthermore, MDOT and OSARC officials
stated that they require that the technician be certified in the line
of work involving that particular pay item. The contractor at the first
OSARC site explained to us that he was scheduled to pour concrete, and
the technician at that site was a certified concrete technician. At the
MDOT site, the division assistant construction engineer told us he was
there to fill the technician requirement by checking the density of the
asphalt being poured. However, at the second OSARC site, a technician
was on-site even though he specifically told us that no pay item work
was being completed.
Further, we verified that the MDOT and OSARC on-site technicians were
either in the process of completing or had completed the daily diary,
which is an MDOT and OSARC internal control requirement. The daily
diary includes information such as type(s) of work performed, location
of work, daily quantities of pay items, major pieces of equipment
located on-site, contractor's labor force, specific instructions given
to the contractor's foreman, and visitors to the project site. Each
technician at the two OSARC projects was able to verify that they were
required to complete a daily diary and each technician submitted a
completed daily diary to us for the day that the site visit was
conducted. At the MDOT site, we spoke with an engineer, who also
confirmed the required completion of a daily diary, and we reviewed the
form for the day that we visited.
We also asked the on-site technicians or, in the case of the MDOT
project, an engineer, for documentation showing that required Davis-
Bacon Labor questionnaires were being completed. These questionnaires
ask contractor employees to provide such information as their job
classification, their hourly pay rate, whether they received overtime
pay for time worked in excess of 40 hours during a work week, as well
as other information pertaining to whether they had filed a complaint
for being underpaid. MDOT officials stated that they require their
inspectors to complete at least one questionnaire every 2 weeks until
all contractor and subcontractor employees have been interviewed or
construction at the site is finished, while OSARC requires that its
inspectors complete at least one questionnaire every month until all
contractor and subcontractor employees have been interviewed or
construction at the site is finished. Both OSARC technicians and the
MDOT engineer were able to provide us with copies of questionnaires
they had recently completed. From the provided questionnaires, we were
able to verify that MDOT officials conducted interviews, at the site we
visited, every two weeks during June, as required. Also, for the OSARC
sites we visited, documentation showed that during the months of July
and August, officials conducted the interviews once per month as
required.
Weatherization Assistance Program Providing Assistance to Low-Income
Families:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation; sealing leaks; and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, the Weatherization Assistance Program has assisted more than 6.2
million low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, the
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE has provided to the states $2.3
billion of the $5 billion in weatherization funding under the Recovery
Act. Use of the Recovery Act weatherization funds is subject to Section
1606 of the act, which requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined
under the Davis Bacon Act.[Footnote 16] Because the Davis-Bacon Act had
not previously applied to weatherization, Labor had not established a
prevailing wage rate for weatherization work. In July 2009, DOE and
Labor issued a joint memorandum to Weatherization Assistance Program
grantees authorizing them to begin weatherizing homes using Recovery
Act funds, provided they pay construction workers at least Labor's wage
rates for residential construction, or an appropriate alternative
category, and compensate workers for any differences if Labor
establishes a higher local prevailing wage rate for weatherization
activities. Labor then surveyed five types of "interested parties"
about labor rates for weatherization work.[Footnote 17] The department
completed establishing prevailing wage rates in all of the 50 states
and the District of Columbia by September 3, 2009.
Mississippi Receives Large Increase in Weatherization Funding:
DOE allocated $49.4 million in Recovery Act funding to Mississippi for
the Weatherization Assistance Program. This represents a large increase
over prior years when DOE's allocation to Mississippi typically ranged
from $1.5 million to $2 million. MDHS, the state agency responsible for
administering the Weatherization Assistance Program, contracts with 10
community action agencies across the state to provide weatherization
services to households at or below 200 percent of the poverty
level.[Footnote 18] MDHS is giving priority to income-eligible
households with elderly members, disabled individuals, or young
children by allocating 90 percent of its Recovery Act weatherization
funds to these groups. The department intends to use the remaining 10
percent of the Recovery Act weatherization funds for income-eligible
customers with high levels of energy usage.
To receive weatherization funds from the Recovery Act, DOE required
each state to submit a preliminary plan laying out how weatherization
funds would be spent. MDHS submitted this plan on March 18, 2009, and
on April 3, 2009, DOE released a 10 percent allocation ($4.9 million)
to cover administrative costs, such as hiring and training new staff.
On May 11, 2009, MDHS submitted a comprehensive plan and certification
to DOE. This was followed by DOE's release of an additional 40 percent
of allocated funds, or $19.7 million. With this release, MDHS has
received 50 percent of its total allocation, or $24.7 million. DOE
expects to make the remaining 50 percent of the Recovery Act
weatherization funds available when the current award has been
successfully expended. As of September 1, 2009, MDHS had disbursed
$3.37 million to the community action agencies.
Of the total $49.4 million in Recovery Act weatherization funds that
MDHS is to receive, $35.5 million will be allocated to community action
agencies that purchase materials and contract for weatherization
services. MDHS expects to use the remaining $13.9 million, or 28
percent, for administrative costs, technical and training assistance,
and audit fees for community action agencies' year-end audits by
private accounting firms. According to information provided by MDHS, of
the $13.9 million, the department will expend approximately $8.6
million for training and technical assistance; $4.9 million, shared
equally by MDHS and the community action agencies, for administrative
costs; and $255,000 for the audits performed by the accounting firms.
The Recovery Act has allowed states to increase the amount of funds
that may be used to weatherize a home. Formerly, DOE allowed $2,500 to
weatherize a home, but the Recovery Act increased this to a maximum of
$6,500. MDHS has directed community action agencies to spend no more
than $4,500 of that amount to purchase labor and materials for each
home. The remaining $2,000 per home may be spent on overhead costs,
such as program staff salaries, travel, supplies, rent, and utilities.
[Footnote 19]
MDHS determined that it can weatherize a total of 5,468 homes with
Recovery Act funds ($35.5 million allocated to community action
agencies divided by $6,500). An agency official stated that the 5,468
homes are a minimum goal and are based on projected costs per home.
Should weatherization cost per home be less than $6,500, the agency
official told us that additional homes will be weatherized.
MDHS employed two formulas to determine the amount of funds that should
be allocated to each agency and the number of homes each community
action agency could need to weatherize. First, to determine how much
funding should be allocated to each community action agency, MDHS
multiplied the total programmatic funds ($35.5 million) by the
percentage of the state's impoverished population living within the
area. MDHS then determined the number of homes within each community
action agency's coverage area that could be weatherized by dividing
each agency's allocation of funds by the Recovery Act allowance per
home ($6,500). Table 2 shows the allocation of weatherization funds by
community action agency.
Table 2: Allocation of Weatherization Funds and Estimated Number of
Homes to Be Weatherized, by Community Action Agency:
Community action agency: Bolivar County; Allocation[A]: $1,524,867;
Estimated number of homes to be weatherized: 235.
Community action agency: Central Mississippi, Inc.; Allocation[A]:
$2,417,038;
Estimated number of homes to be weatherized: 372.
Community action agency: Lift, Inc.;
Allocation[A]: $2,601,871;
Estimated number of homes to be weatherized: 401.
Community action agency: Multi-County;
Allocation[A]: $3,255,893;
Estimated number of homes to be weatherized: 501.
Community action agency: Northeast;
Allocation[A]: $1,613,729;
Estimated number of homes to be weatherized: 248.
Community action agency: Pearl River Valley Opportunity; Allocation[A]:
$7,663,433;
Estimated number of homes to be weatherized: 1,179.
Community action agency: Prairie Opportunity; Allocation[A]:
$2,996,417;
Estimated number of homes to be weatherized: 462.
Community action agency: South Central; Allocation[A]: $4,837,631;
Estimated number of homes to be weatherized: 744.
Community action agency: Southwest Mississippi; Allocation[A]:
$3,298,546;
Estimated number of homes to be weatherized: 507.
Community action agency: Warren Washington Issaquena Sharkey;
Allocation[A]: $5,324,593;
Estimated number of homes to be weatherized: 819.
Community action agency: Total;
Allocation[A]: $35,534,018;
Estimated number of homes to be weatherized: 5,468.
Source: Mississippi Department of Human Services/Division of Community
Services.
Note: These figures are through March 12, 2012.
[A] This column refers to the programmatic allocation for each
community action agency, as opposed to the total allocation, which
includes funds for equipment, audit, and technical and training
assistance.
[End of table]
According to MDHS, a community action agency may weatherize a home if
it is occupied by a family unit that is qualified to participate in the
Weatherization Assistance Program.[Footnote 20] The local community
action agency must ensure eligibility of the family unit by verifying,
among other things, household income level, Social Security
information, and household energy expenses. Community action agency
personnel then perform a pre-weatherization audit to determine the
amount of weatherization that the home should receive. MDHS has
directed that improvements be made in the following order, with the
first three typically installed as a package. The remaining
improvements are then made (also in order) if needed and if funding is
available.
* Air sealing:
* Attic insulation:
* Dense-pack sidewalls:
* Floor insulation:
* Sealing and insulation of ducts:
* Smart thermostat:
* Compact fluorescent lamps:
* Replacing of refrigerator:
In addition, the following low-cost improvements may be made where
applicable:
* Weather stripping, caulking, glass patching:
* Water heater tank wrap:
* Pipe insulation:
* Installation of faucet aerators:
* Installation of low-flow showerheads:
* Installation of furnace filter:
* Reglazing of windows (as needed):
* Installation of carbon monoxide detectors, smoke alarms, and fire
extinguishers:
GAO Visited Three Community Action Agencies:
We visited three community action agencies in August 2009 to collect
information on weatherization contracts, including data on contractor
certifications, the costs incurred to weatherize a home, and how
community action agencies plan to measure program performance. We also
gathered information from the three agencies regarding compliance with
the Davis-Bacon Act, job creation, reporting requirements, and
oversight procedures.
We chose to visit the Multi-County Community Service Agency (Multi-
County), the South Central Community Action Agency (South Central), and
the Warren Washington Issaquena Sharkey Community Action Agency
(WWISCAA). We visited Multi-County because it had extensive experience
weatherizing homes, South Central because it had no previous experience
weatherizing homes, and WWISCAA because it received the second largest
allocation of funding, $5.78 million.
Agencies Have Awarded Contracts and Homes Have Been Weatherized:
An official at one of the community action agencies told us that
weatherization work on homes began in June 2009. Further, the official
explained that the agency had to hire and train staff and purchase
equipment before the work could begin. As of July 31, 2009, Multi-
County had completed 31 homes; South Central had completed 47; and
WWISCAA had completed 56 using Recovery Act funds.
To identify contractors to perform weatherization work, all of the
community action agencies we visited told us that they advertised
opportunities to bid for contracts through local media sources, the
Mississippi Department of Employment Security, and Mississippi job
centers. According to agency officials at the sites we visited, the
agencies selected contractors through a competitive bid process and
awarded contracts for labor only. The community action agencies
purchase materials that meet DOE standards for weatherization and
provide them to the contractors as needed.[Footnote 21] Agency
officials also told us that they procure materials competitively by
obtaining prices on a list of materials from vendors and then selecting
the lowest-cost materials.
DOE and the State of Mississippi both impose requirements on
contractors selected to weatherize homes. DOE requires the contractors
to purchase liability insurance and it strongly recommends that the
contractors also obtain special pollution insurance. (All three
community action agencies told us that they require both general
liability and the special pollution insurance.) In addition, MDHS
requires that contractors carry workers' compensation insurance and
obtain adequate bonding. The state also requires that all contractors
and laborers complete a minimum of 80 hours of annual training.
Training includes but is not limited to classes in gas leak detection,
DOE lead safe work practices, DOE energy-related mold and moisture
practices, and whole-house weatherization practices for both site-built
homes and mobile homes.
The average cost to weatherize a home using Recovery Act funds varied
among the three agencies, with costs ranging from $3,000 to $4,500 per
home.[Footnote 22] The differences in weatherization costs result from
differences in calculating contractor labor costs, the amount of
weatherization work performed, and, thus, the amount of materials used.
One agency estimates labor using a fixed labor cost of $2,100 per
house, a figure it arrived at when the labor rate for all bidders was
at or near $87.50 per hour and the agency estimated that each home
would require 24 hours of weatherization work.[Footnote 23] After
establishing the labor rate competitively, this community action agency
awards contracts to qualified contractors based on their availability.
The other two agencies base labor rates on material costs, with one
agency pricing labor at 125 percent of materials and another agency
pricing labor at 100 or 110 percent of materials, depending on the
distance the contractor has to travel to the work site. Officials at
each of the latter two agencies told us that the contractor for each
house is selected competitively based on the number of hours bid to
complete the work, but that the labor rates are a set percentage of
material costs.
The effect of weatherization on individual homes, and therefore regions
and the state as a whole, will take time to realize. MDHS requires the
community action agencies to measure program outcomes by collecting
residents' utility bills for the 12 months before a home is weatherized
and for 12 months afterwards. By comparing pre-and postweatherization
utility bills, the agencies will determine the savings resulting from
weatherization. MDHS has a goal of reducing energy usage by 17,000 MBtu
[Footnote 24] across the 5,468 homes it plans to weatherize.
Davis-Bacon Not a Concern for Community Action Agencies:
The Davis-Bacon Act requires that contractors and subcontractors pay
prevailing wage rates to laborers who are employed on construction
projects that receive federal assistance. The Weatherization Assistance
Program has not been previously subject to Davis Bacon wage
requirements. However, the Recovery Act requires all laborers and
mechanics employed by contractors and subcontractors on projects funded
directly by or assisted in whole or in part by and through the federal
government with Recovery Act funds be paid wages at rates that are not
less than those paid on local projects of a similar character as
determined by the Secretary of Labor.[Footnote 25] To that end, Labor
recently conducted a nationwide survey to determine wages for
weatherization contractors and laborers. MDHS required all agencies
receiving the survey to complete and return the survey to MDHS by July
31, 2009. MDHS submitted the surveys to Labor before August 14, 2009
and Labor posted prevailing wage rates for Mississippi on August 24,
2009.
When we visited the three community action agencies in August, none
were concerned with the outcome of the survey. Each of the three
agencies stated that the labor rates being paid by the agencies and
their contractors were at or above similar prevailing labor rates for
their respective areas. MDHS officials told us that they did not expect
Labor to release prevailing wage data that indicated a higher
prevailing wage rate than the agencies were paying weatherization
contractors and laborers. However, should this occur, a community
action agency official told us that contractors would receive back pay
from the community action agency, using Recovery Act funds.
Community Action Agencies Hired Additional Staff to Support
Weatherization Program:
The three community action agencies have each hired new staff as a
result of the increase in weatherization work because of Recovery Act
funding. Officials at each of the agencies visited could clearly
identify the number of internal jobs created as a result of the
funding. According to respective agency officials, Multi-County hired
seven weatherization coordinators and two administrative staff; South
Central hired four weatherization coordinators and two case managers;
and WWISCAA hired a bookkeeper, three weatherization coordinators, and
three case managers. In addition, officials at two of the three
agencies wanted to hire additional staff with Recovery Act funding and
would like to retain the new staff even after Recovery Act funds are no
longer available.
MDHS Working to Mitigate Potential Reporting Problems on the Use of
Funds:
The Recovery Act imposes upon states an extended level of
accountability and transparency in the use of federal funds. All prime
recipients of Recovery Act funding must submit their first report to
[hyperlink, http://www.FederalReporting.gov] by October 10, 2009.
MDHS officials told us that to prepare for Section 1512 reporting
requirements, MDHS plans to conduct two "trial runs" of data gathering
and report preparation before the October 10, 2009 reporting deadline.
In addition, MDHS requires the community action agencies to provide
monthly submissions of all data required under Section 1512, including
job creation/sustainment data. According to the officials, this will
help them understand what information is needed to comply with the
reporting requirements and give MDHS an opportunity to verify the
accuracy of data the agencies report. One of the community action
agencies we visited had limited data regarding jobs created by
contractors and had no data regarding jobs created by vendors. MDHS
officials stated that the community action agencies will collect both
sets of data and report the information to MDHS by the deadline. An
MDHS official stated that the department has registered as required in
preparation for Section 1512 reporting.
Oversight Is Carried Out at Multiple Levels:
State and local agencies are monitoring the Recovery Act Weatherization
Assistance Program in Mississippi. At the state level, MDHS provides
three levels of oversight. The first level is conducted by an
independent division of MDHS, the Division of Program Integrity, who
told us that they monitor 10 percent of the total number of homes
weatherized. The division monitors fiscal and programmatic records to
determine, for example, whether community action agencies are meeting
Davis-Bacon requirements and whether activities performed by
contractors relate to the appropriate funding source. The second level
of review is conducted by MDHS regional weatherization coordinators,
and includes monitoring an additional 20 percent of the total number of
homes. The Division of Community Services weatherization staff is
responsible for the third level review, which includes monitoring 10
percent of the homes that were monitored by the regional coordinators,
as well as an additional 10 percent of homes not reviewed by the
regional coordinators. The second and third level reviews will include
examining subgrantee files and monitoring contractor performance.
At the local level, MDHS requires all community action agencies to
conduct both pre-and postwork energy audits on homes. According to a
community action agency official, the purpose of a pre-audit is to
determine the most cost-effective measures for reducing energy costs
associated with inefficiencies in the home, whereas the purpose of a
postaudit is to determine whether appropriate improvements have been
made and whether further work is needed. The official also stated that
work on a particular home is not considered complete, nor is the
contractor paid for the job, until the postweatherization audit is
performed and the house passes the necessary criteria set out in the
preweatherization audit.
Mississippi Has Not Yet Distributed Recovery Act Education Funds to
LEAs:
The Recovery Act provides education funds to the State of Mississippi
through ESEA Title I, Part A; SFSF; and IDEA. Recovery Act funds
provided through ESEA Title I, Part A help local school districts
educate disadvantaged youth and are in addition to those funds
regularly allocated through the ESEA Title I program. The SFSF provides
funds to states to help avoid reductions in education and other
essential public services. Finally, the Recovery Act provides
supplemental funding for programs authorized by IDEA, the major federal
statute that supports special education and related services for
infants, toddlers, children, and youth with disabilities. We conducted
a detailed review of the Title I program and collected summary data for
the SFSF and IDEA, Part B programs.
MDE Providing Guidance and Reviewing LEAs' Applications for ESEA Title
I, Part A Recovery Act Allocations:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through ESEA Title I, Part A. The Recovery Act
requires these additional funds be distributed through states to LEAs
using existing federal funding formulas, which target funds based on
such factors as high concentrations of students from families living in
poverty. In using the funds, LEAs are required to comply with current
statutory and regulatory requirements and must obligate 85 percent of
these funds by September 30, 2010.[Footnote 26] Education is advising
LEAs to use the funds in ways that will build the agencies' long-term
capacity to serve disadvantaged youth, such as through providing
professional development to teachers. Education made the first half of
states' Recovery Act ESEA Title I, Part A funding available on April 1,
2009, and announced on September 4, 2009, that it had made the second
half available.
As of September 4, Mississippi has received $132.9 million in ESEA
Title I, Part A Recovery Act funds. The state had released none of
these funds to LEAs as of September 8. MDE officials told us that each
LEA is required to submit an application to the state, outlining its
planned uses of these funds. These applications were due to the MDE at
the end of July. As of September 8, 2009, several LEAs had not yet
submitted their applications. According to MDE, it will review
applications through the end of September.
Along with ESEA Title I Recovery Act application packets, MDE released
a guidance package to LEAs outlining the application process and
suggesting uses of ESEA Title I Recovery Act funds. In addition to
considering the guiding principles of the Recovery Act, MDE encouraged
the LEAs to use the funds in ways that would allow for increased
capacity, extended school days, professional development, instructional
supplies and materials, transparency and accountability, school reform,
and parental involvement. Included in the ESEA Title I, Part A Recovery
Act application package is an additional requirement that MDE normally
does not place on ESEA Title I, Part A funds. MDE is requiring that
each LEA address at least two of five ESEA performance goals and
indicators. One goal is to help all students attain high standards in
reading/language arts and mathematics, as indicated by the percentage
of students who perform at an acceptable level on state assessments.
Another goal is to enable all students with limited English skills to
achieve high academic standards, as indicated by state assessments.
Goals also include having "highly qualified" teachers teach all
students in safe, drug free environments that are conducive to
learning. Finally, ESEA performance goals include all students
graduating from high school. In the application, an LEA must provide
narrative on how they will achieve these goals, as well as a budget
narrative detailing how the ESEA Title I, Part A Recovery Act funds
will be used.
MDE Could Pursue ESEA Title I Waivers:
MDE officials told us that they are concerned about the LEAs' ability
to obligate Recovery Act ESEA Title I funds in addition to regular ESEA
Title I, Part A funds within the ESEA spending timeframes. That is, MDE
is concerned that the LEAs cannot obligate 85 percent of the funds by
September 30, 2010, and the full amount by September 30, 2011. MDE is
considering applying to Education for a waiver that would allow MDE to
waive the carryover limitation for individual LEAs. If granted, a LEA
could carry over more than 15 percent of its Recovery Act allocation
into the next fiscal year. Under ESEA, state education agencies
currently have authority to waive carryover limitations only once every
three years if the requests are reasonable and necessary. The waiver
MDE wishes to apply for would allow it to grant waivers to LEAs more
frequently if the LEAs needed additional time to expend their Recovery
Act allocations. MDE officials said that they are currently assessing
the guidance from Education on this issue, as well as surveying the
LEAs in the state to determine if there is concern and interest among
the LEAs in applying for such a waiver. In addition, MDE officials told
us that they are interested in applying for permission to use the SFSF
funds to satisfy maintenance-of-effort requirements for ESEA Title I.
[Footnote 27] According to MDE officials, they have asked for, but not
yet received, clarification on this issue from Education.
Visited LEAs Intend to Use ESEA Title I, Part A Recovery Act Funds for
Upgraded Technology in Classrooms and Supplemental Reading and Math
Programs:
We visited three LEAs in Mississippi to discuss their planned uses of
ESEA Title I, Part A Recovery Act funds: Jackson Public School
District, Rankin County School District, and Greenville Public Schools.
We chose to visit Jackson Public School District because it has a
number of schools that are categorized under ESEA Title I as needing
improvement, is an urban school district, and is receiving the largest
ESEA Title I Recovery Act allocation in the state. Jackson Public
School District is the largest LEA in the state in terms of student
enrollment. We visited Greenville Public Schools because it is located
in a rural town and is receiving the second largest ESEA Title I
Recovery Act allocation in the state. Greenville Public Schools is the
12th largest school district in student enrollment. Finally, we visited
Rankin County School District at the recommendation of Mississippi's
Office of State Auditor (OSA) and Office of the Governor, which cited
this LEA as one of several in the state that follows "best practices"
related to internal controls, compliance, and management. Rankin County
School District is the third largest district in the state in terms of
student population and is receiving the 15th largest ESEA Title I, Part
A allocation in the state.
Jackson Public School District is expected to receive a total
allocation of $15,683,083. In determining how to apply the district's
ESEA Title I, Part A Recovery Act funds, Jackson Public School District
officials solicited recommendations from district and school
administrators, private school administrators, and parents. In
addition, the district's test scores indicated a critical need to
address language arts and mathematics. In its application to the state,
Jackson Public School District indicated that it wishes to use the
additional ESEA Title I, Part A funds for supplemental instruction,
particularly in those subjects with low student test scores. For
example, officials told us that they plan to purchase math software
programs, as well as the associated technologies that will be needed to
use the software, such as computers and graphing calculators. Jackson
Public School District will also use some of the funds for professional
development for teachers.
Rankin County School District is expected to receive an ESEA Title I,
Part A Recovery Act allocation of $1,680,397. Rankin County School
District officials told us that they plan to use these funds for
technology upgrades in the classroom in order to create "21st century
learning centers" for students and teachers. District officials plan to
bring new technologies into classrooms, such as laptop computers,
interactive whiteboards, projectors, document cameras, digital video
cameras, and printers. The district made the decision to use the ESEA
Title I, Part A Recovery Act allocation in this way following a
comprehensive needs assessment and conversations and focus groups with
principals and teachers. District officials told us that efforts to
modernize and upgrade classroom technology were already under way, but
the additional Recovery Act funds will help the school district achieve
these goals. Additionally, the district wants to use the funds for
professional development of teachers, including instructing them on the
use of the new equipment purchased, as well as improving the teachers'
instructional practices.
Greenville Public Schools expect to receive an ESEA Title I, Part A
Recovery Act allocation of $4,329,295. School officials told us that
they plan to use the additional funds to purchase technology upgrades
for the classroom in order to create "model classrooms" at each grade
level. According to district officials, a model classroom is built
around a set of best practice methodologies for instruction and
motivation. Creating such a classroom involves purchasing upgraded
technologies, such as modern computers that are compatible with current
software, and providing corresponding instruction for teachers. With
upgraded technologies, Greenville Public Schools can invest in
supplemental instructional software in mathematics and language arts.
Based on statewide testing programs, the school district identified
these subjects as in need of intensive support and effective
interventions. Additionally, Greenville Public School officials want to
hire 15 additional teachers to offset teacher reductions caused by
previous budget cuts. This will change student-to-teacher ratio from
27: 1 to 22: 1. In determining how the additional allocation will be
used, Greenville Public Schools officials told us that they took into
account the opinions of stakeholders, such as parents, local
businesses, advocacy groups, teachers and administrators. Greenville
Public Schools held a public community meeting and then a central
office meeting to determine the best uses of the additional Recovery
Act funding before submitting its application to MDE for approval.
ESEA requires each LEA to use ESEA Title I, Part A funds for the
participation of children in private schools, as well as for homeless
and neglected children. The act also allows ESEA Title I, Part A funds
to be used for children living in local institutions for delinquent
children, as appropriate. For example, Jackson Public School District
officials told us that there are 11 private schools and 3 institutions
for delinquent children in their district that will receive Recovery
Act ESEA Title I, Part A Recovery Act funds.
In addition to the set-asides required for ESEA Title I, a 1996 policy
passed by the Mississippi State Board of Education permits LEAs in
Mississippi to reserve up to 20 percent of their regular Title I, Part
A allocation for administrative purposes.[Footnote 28] MDE has
instructed LEAs that the same policy applies to the Title I, Part A
Recovery Act allocation. MDE did not require LEAs to discuss in detail
their plans for the administrative set-asides. However, according to
state school board policy, such costs can include salaries, benefits,
travel, and office costs of ESEA Title I bookkeepers; cost of audits;
and indirect costs. As part of its review process, MDE will ensure that
set-asides do not exceed 20 percent of the total allocation. Rankin
County School District and Jackson Public School District officials
stated that they would consider using administrative funds to hire
additional bookkeeping staff to handle the additional workload of
tracking and monitoring the funds.
MDE Developing Internal Control Plans:
Mississippi's Department of Finance and Administration (DFA) has
required each state agency to develop and submit a written internal
control plan that covers safeguarding of agency assets, segregation of
duties by function, and execution of transactions in accordance with
laws of the State of Mississippi. The internal control plan will apply
to all state and federal funding received by the agencies. The plan for
MDE was still in draft as of September 4, 2009.
To monitor the LEAs' use of Recovery Act funds, MDE officials said that
they have an Educational Accountability Office with an Internal
Accountability division. MDE officials told us that this office is
responsible for reviewing each LEA's financial audit, following up on
findings with the LEAs, and assisting them in taking corrective action.
The audits are conducted annually by a private firm in conjunction with
OSA. The Internal Accountability Office has three staff to cover 152
LEAs.
MDE's Office of Federal Financial Management also monitors LEAs' use of
federal funds for proper use and compliance with appropriate laws. MDE
officials stated that LEAs are monitored on a 3-year cycle. At this
time, there are no definite plans for additional monitoring of Recovery
Act funds.
LEAs Plan to Use Existing Policies and Procedures to Control Recovery
Act Funds:
The three LEAs we visited said that they are not planning to make
significant changes to their current policies and procedures for
tracking federal funds in order to track the Recovery Act funds. The
LEAs will use their current systems but will use unique identifying
codes for the Recovery Act funds, as required by DFA. The LEAs we
visited have not completed written internal control plans or risk
assessments of internal control weaknesses.
Officials with Jackson Public School District told us that they will
set up a budget for each of the district's schools that is based on the
information the school provided to the district regarding how it plans
to use its Recovery Act funds. These budgets are subject to school
board approval to ensure that the uses fit within the district's goals
for improving instruction and comply with state guidelines.
Requisitions for Recovery Act funds first must be approved by each
school's principal. Requests for expenditures will then be checked
against these written budgets by Jackson Public School District's
federal programs and purchasing offices. At monthly grant review
meetings, the Executive Director of Finance and others will review
Recovery Act expenditures that were initiated centrally or at the
school level. Jackson Public School District officials stated that they
intend to be transparent with their uses of the Recovery Act funds.
They will update parents and the community via newsletters and public
access television programming.
Officials with Rankin County School District told us that each employee
is trained on accounting and purchasing rules. They plan to follow the
same set of procedures for tracking Recovery Act funds as they do for
all federal funds. An official in Rankin County Public Schools' Federal
Programs Department will be primarily responsible for tracking Recovery
Act funds. This person will develop a budget, enter and track purchase
orders, file invoices, and compile monthly reports to ensure that funds
are being properly utilized. Requisitions for Recovery Act funding will
be subject to approval by the Assistant Superintendent before being
turned into purchase orders. A purchase order will be subject to
approval by the accounting department at Rankin County School District,
and may be additionally reviewed by the Business Manager or Purchasing
Director. The accounting department will not approve a payment until
services or materials are received, an invoice is filed, and the school
board has approved the expenditure. School board meetings are open to
the public, and uses of Recovery Act funds will also be made public via
parent newsletters and email communications.
Greenville Public Schools officials said that they would not make any
significant changes to their plans for tracking federal funds, other
than that the Recovery Act funding would be coded and tracked
separately in the system. The Business Manager said that all staff are
trained in accounting, and he would update their training to deal with
the Recovery Act funds. Regarding the flow of funds to the individual
schools, the business manager said that a requisition will be approved
by the principal before being submitted to the district. The Greenville
Public Schools Federal Programs Director will review the requisition to
ensure that it addressed the district's instructional goals, and the
Business Office will ensure that the requisition complies with
applicable purchasing laws and that there is an adequate budget for it.
All funds will also be checked against the school's monthly budget. The
requisition will then become a purchase order. Purchase orders over a
$5,000 threshold will require additional approval from the
Superintendent. Also, computer purchases will require approval from the
Information Technology Department. Once a purchase is made and items
are delivered, the items are to be matched with the invoice and the
purchase order and tagged for delivery. Physical inventories are
conducted twice annually. The business manager said that the office is
probably adequately staffed to handle the additional workload, but once
the funds begin flowing, he will reevaluate the staffing needs.
MDE Concerned about Timing of Reporting Requirements, and LEAs Request
More Guidance:
MDE told us that it plans to use a centralized reporting approach,
collecting information for the required quarterly reports from the LEAs
and posting the data collectively rather than having each LEA do this
individually. However, MDE is concerned that the 10-day data quality
review period will not be sufficient to thoroughly review and validate
152 LEA submissions and correct any deficiencies before the reports are
released to federal agencies on [hyperlink,
http://www.FederalReporting.gov]. MDE is also unsure about how the
information is to be presented. Officials noted that they are working
to develop a template that will detail the information required so that
it can share this with the LEAs. MDE officials said that they requested
additional guidance on this issue from Education and were told that it
would be available in mid-September. Once additional guidance is
received, the Governor's office will advise state agencies on how to
fulfill the reporting requirements. Without the guidance they have
requested, MDE is concerned about meeting the reporting deadline of
October 10. The three LEAs we visited stated that they are unsure of
the specifics of reporting requirements and the format in which they
will be required to report the data. School officials said that they
would like for MDE to provide some clarity on this issue.
Mississippi Has Not Yet Released SFSF or IDEA Funds:
In addition to collecting detailed information on the ESEA Title I,
Part A program, we collected summary funding information on SFSF and
IDEA funds provided to Mississippi through the Recovery Act. We found
that none of these funds have been released.
The Recovery Act created SFSF in part to help state and local
governments stabilize their budgets by minimizing budgetary cuts in
education and other essential government services, such as public
safety. Stabilization funds for education distributed under the
Recovery Act must be used to alleviate shortfalls in state support for
education to school districts and IHEs. The initial award of SFSF
funding required each state to submit an application to Education that
provides several assurances, including that the state will meet
maintenance-of-effort requirements (or it will be able to comply with
waiver provisions) and that it will implement strategies to meet
certain educational requirements, such as increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
As of September 4, LEAs in Mississippi had drawn down none of the
$262.7 million of education stabilization funds allocated to the state
by Education. According to MDE officials, the Governor is requiring all
LEAs to submit applications for these funds. The SFSF application is in
draft and currently being reviewed by the Governor's office, but it has
not yet been sent to LEAs for completion. Additionally, the Governor is
in the process of resubmitting his application to Education. When the
initial application was submitted, Mississippi had not yet passed its
fiscal year 2010 budget. According to state officials, the state
funding information upon which the Governor based the original
application varied from the fiscal year 2010 budget that was later
passed by the legislature. The resubmitted application will include the
enacted budget information. No SFSF funds will be released to LEAs
until both the Governor's application and the individual LEA
applications are approved. However, according to MDE officials, LEAs
have been informed of their allocation amounts, so that they can begin
to make definite plans regarding the use of the funds.
The Recovery Act also provided supplemental funding for programs
authorized by Parts B and C of the Individuals with Disabilities
Education Act (IDEA), the major federal statute that supports the
provisions of early intervention and special education and related
services for infants, toddlers, children, and youth with disabilities.
Part B funds programs that ensure preschool and school-aged children
with disabilities have access to a free and appropriate public
education and is divided into two separate grants--Part B grants to
states (for school-age children) and Part B preschool grants (section
619). Education made the first half of states' Recovery Act IDEA
funding available to state agencies on April 1, 2009 and announced on
September 4, 2009 that it had made the second half available.
Education awarded Mississippi about $127 million in Recovery Act funds
under IDEA, Parts B and C, but as of September 9, 2009, none of these
funds have been released to LEAs. MDE is requiring each LEA to submit
an application to the state for their allocation of IDEA, Part B funds
and the department is currently reviewing the completed applications.
State Officials Continue to Express Concern over Reporting Requirements
and Administrative Costs:
Mississippi state officials continue to express concern regarding
Recovery Act reporting requirements and costs associated with the act.
These include the following:
Clarifying recipient reporting responsibilities: The Recovery Act
imposes upon states an extended level of accountability and
transparency in the use of Recovery Act funds. While the Governor of
Mississippi has determined that he is primarily accountable for the use
of Recovery Act funds, this responsibility is shared by each executive
officer of any entity that is a prime recipient or subrecipient of
Recovery Act funds. As required by the Section 1512 recipient report
requirement of the Recovery Act,[Footnote 29] all prime recipients
within the State of Mississippi are to submit their first report to
[hyperlink, http://www.FederalReporting.gov] by October 10, 2009. The
reports required under Section 1512 of the act will contain, among
other requirements, detailed information on the projects and activities
funded by the Recovery Act, including (1) the name and description of
each project or activity, (2) the total amount of Recovery Act funds
expended or obligated to each project or activity, and (3) an
evaluation of the completion status of projects or activities and an
estimate of the number of jobs created and the number of jobs retained
by each project or activity.
DFA officials continue to express concern as to whether the state is
responsible for all Recovery Act funds flowing into the state,
including those that do not flow through the state treasury or are not
reported through the state's central accounting system. DFA officials
told us that they do not have direct oversight of entities such as
community colleges, local governments, and institutions of higher
learning that may be receiving Recovery Act funding directly from
federal agencies. According to the officials, a query of
USAspending.gov completed in early August identified approximately 400
entities receiving Recovery Act funds directly from federal agencies.
To help ensure that the State of Mississippi is in compliance with
Recovery Act reporting requirements, the Governor issued a memo
outlining the state's reporting requirement in regard to these funds.
The memo explained that unless an entity receiving these funds has been
notified in writing by its federal granting/lending agency that the
entity is only accountable to the federal granting agency, it must
follow the state's reporting guidance.
On August 28, 2009, OMB issued guidance requiring that federal agencies
report all Recovery Act grants to the states. The report is intended to
inform states of Recovery Act funding obligated to nonfederal entities
such as states and state agencies, grantees, tribes, and local
governments. A DFA official stated that going forward the OMB guidance
should help the state identify all Recovery Act funds that do not flow
through the state's treasury or central accounting system. However, the
guidance does not help the state identify those funds if they were
obligated before August 2009, because the guidance does not require
retroactive reporting. According to the DFA Deputy Executive Director,
staff have used USAspending.gov to identify those Recovery Act funds
that flow into the state without the state's knowledge. However, DFA is
finding erroneous data are being posted to the Web site. For example,
the officials told us that USAspending.gov is reporting as Recovery Act
awards some loan guarantees that have not been identified as such to
the recipients.
Recovering oversight and auditing costs: Officials in Mississippi's OSA
told us that there is a need for clarity regarding reimbursement of
administrative costs associated with oversight of Recovery Act funding.
In commenting on recent OMB guidance, officials observed that even
though the Recovery Act provided no funding for state oversight
activities, OSA believes there are expectations that states will carry
out the act's transparency and accountability mandate. OSA requested
that OMB provide guidance as to what funds will be used to reimburse
states for oversight, auditing, and administrative activities and to
explain how reimbursement will take place. Although OMB's recent
guidance indicates that states can recoup Recovery Act administrative
costs through the State-wide Cost Allocation Plan (SWCAP) in amounts
that do not exceed 0.5 percent of their Recovery Act allocations,
officials believe that the 0.5 percent limit is inadequate.[Footnote
30]
State Comments on This Summary:
We provided the Governor of Mississippi with a draft of this appendix
on September 4, 2009. The Director of Federal Policy, who serves as the
stimulus coordinator, responded for the Governor on September 10, 2009.
The official provided technical suggestions that were incorporated, as
appropriate.
GAO Contacts:
John K. Needham, (202) 512-5274 or needhamjk1@gao.gov:
Norman J. Rabkin, (202) 512-9723 or rabkinn@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Barbara Haynes, Assistant
Director; James Elgas, analyst-in-charge; Ellen Phelps Ranen; Carrie
Rogers; Erin Stockdale; and Ryan Stott made major contributions to this
report.
[End of section]
Footnotes for Appendix XI:
[1] Pub. L. No. 111-5, 123 Stat. 115.287 (Feb. 17, 2009).
[2] For the Highway Infrastructure Investment Program, the U.S.
Department of Transportation has interpreted the term obligation of
funds to mean the federal government's contractual commitment to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement. States request
reimbursement from FHWA as the state makes payments to contractors
working on approved projects.
[3] Recovery Act funds used to stabilize the state's operating budget
includes, SFSF moneys, Temporary Assistance for Needy Families
contingency funds, and funds made available as a result of the
increased Federal Medical Assistance Percentage funds (see GAO-09-
1016).
[4] The Mississippi Rainy Day Fund, formally called the Working Cash-
Stabilization Reserve Fund, is intended, among other uses, to be used
to cover any projected deficits that may occur in the General Fund at
the end of a fiscal year as a result of revenue shortfalls. Miss. Code
§ 27-103-203.
[5] The Budget Contingency Fund was created in 2001 by the legislature
to identify nonrecurring funding that the legislature could use in the
budget process. The sources of funds deposited in the Budget
Contingency Fund can differ from Special Fund transfers to the General
Fund that are identified as nonrecurring.
[6] MPOs are federally mandated regional organizations, representing
local governments and working in coordination with state departments of
transportation, that are responsible for comprehensive transportation
planning and programming in urbanized areas. MPOs facilitate decision
making on regional transportation issues including major capital
investment projects and priorities.
[7] As we reported in July, MDOT met the requirement that 50 percent of
these funds be obligated by June 30 of this year. The 30 percent of
funds required to be suballocated, primarily based on population, for
metropolitan, regional, and local use were not subject to this
requirement.
[8] Our sample included two MDOT contracts and one OSARC contract.
[9] According to state officials, a responsive bidder is one that is
not on the federal suspension and debarment list and that has submitted
a balanced bid. A balanced bid is free from mathematical or material
deficiencies.
[10] The Transportation Improvement Program is the four year project
list for federally funded transportation projects located within the
jurisdiction of a MPO.
[11] Section 1512 of the Recovery Act requires that each recipient who
receives funds from a federal agency submit a report to that agency
that includes the amount of funds received, the projects and activities
for which the funds were expended or obligated, the completion status
of each project or activity and estimates of the number of jobs created
and the number of jobs retained by the project or activity. See, Pub.
L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009).
[12] Additional information on internal controls may be found in the
Mississippi appendix of GAO's second bimonthly review, which may be
accessed at [hyperlink, http://www.gao.gov/recovery/bimonthly/ms/ms-
july-09.php].
[13] However, only the first of the two OSARC site visits can be
classified as unannounced because the OSARC official at the second site
told us that he had been informed of the possible visit. Furthermore,
we cannot say that the conditions at the MDOT site, during the time of
the visit, would have been exactly the same as those that may have
existed because on the day of our visit to the site, FHWA had planned
its own inspection of the site and had informed MDOT officials of these
plans.
[14] The site visit locations were selected on the day of the visit as
the accessibility of projects under construction changes on a day-to-
day basis based on weather and contractor workload.
[15] A pay item is a specifically described unit of work for which a
price is provided in the contract.
[16] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[17] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[18] The Recovery Act raised the income eligibility for the program
from 150 percent of poverty to 200 percent of the poverty level. Pub.
L. No. 111-5 § 407, 123 Stat. 115, 145 (Feb. 17, 2009).
[19] The overhead costs charged to each home are in addition to
administrative costs that DOE allows the community action agencies to
recover.
[20] A renter or a homeowner may apply for the Weatherization
Assistance Program. If MDHS approves a renter's application, the owner
of the property must agree that the home may be weatherized and to
certain conditions laid out in a written agreement.
[21] MDHS does not develop an approved list of suppliers; instead,
agencies develop their own respective lists.
[22] Total cost per home consists of labor and materials.
[23] The figure of $87.50 per hour is a cumulative hourly labor rate
for all workers on a particular job.
[24] The British thermal unit (Btu) is a precise measure of the heat
content of fuels. It is the quantity of heat required to raise the
temperature of 1 pound of water by 1 degree Fahrenheit at the
temperature that water has its greatest density (approximately 39
degrees Fahrenheit). An MBtu is equal to 1,000 Btu.
[25] Pub. L. No. 111-5, §1606, 123 Stat. 115, 303 (Feb. 17, 2009).
[26] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[27] A state meets the maintenance-of-effort requirement if either the
combined fiscal effort for per student or the aggregate expenditures
within the state with respect to the provision of free public education
for the preceding fiscal year was not less than 90 percent of such
combined fiscal effort or aggregate expenditures for the second
preceding fiscal year (20 U.S.C. § 6337(e)(1)).
[28] Mississippi State Board of Education Policy 7802, "Expenditures of
Funds on Instruction," 1996.
[29] Pub. L. No. 111-5, § 1512, 123 Stat. 115,287 (Feb. 17, 2009).
[30] OMB's memorandum-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities, May 11, 2009, provides
that a state can recoup central administrative costs through SWCAP. The
guidance permits a state, after approval by the U.S. Department of
Health and Human Services, to bill these costs to Recovery Act
programs, but the costs so billed cannot exceed 0.5 percent of total
Recovery Act funds received by the state.
[End of section]
Appendix XII: New Jersey:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in New Jersey. The full report on all of our
work, which covers 16 states and the District of Columbia, is available
at [hyperlink, http://www.gao.gov/recovery].
We reviewed five programs in New Jersey funded under the Recovery Act--
Title I, Part A, of the Elementary and Secondary Education Act of 1965
(ESEA), as amended; the Individuals with Disabilities Education Act
(IDEA), Part B; Highway Infrastructure Investment funds; Transit
Capital Assistance funds; and the Weatherization Assistance Program. We
selected these programs for different reasons. To expedite spending of
ESEA Title I and IDEA, Part B Recovery Act funds, New Jersey's
Department of Education opened a request for applications for local
educational agencies (LEA) to use up to 50 percent of each LEA's
allocation during the summer recess. Contracts for highway projects
using Highway Infrastructure Investment funds have been under way in
New Jersey for several months, which provided an opportunity to review
and discuss with officials New Jersey's progress in suballocating funds
to local areas, as required by the Recovery Act, and the oversight of
contracts. The Transit Capital Assistance funds had a September 1,
2009, deadline for obligating a portion of the funds. The
Weatherization Assistance Program in New Jersey had begun to spend
Recovery Act funds on start-up activities related to the weatherization
of homes and, as in other states, the large influx of Recovery Act
funds posed a risk to program implementation. With these programs, we
focused on how funds were being used; how safeguards were being
implemented, including those related to procurement of goods and
services for highway and weatherization contracting; and how results
were being assessed. We reviewed and discussed with officials
contracting procedures and three specific contracts under the Recovery
Act Highway Infrastructure Investment funds program. In addition to
these five programs, we also updated funding information on the U.S.
Department of Education State Fiscal Stabilization Fund (SFSF) and the
U.S. Housing and Urban Development (HUD) Public Housing Capital Fund.
Consistent with the purposes of the Recovery Act, funds from the
programs we reviewed are being directed to help New Jersey and local
governments stabilize their budgets and to stimulate infrastructure
development and expand existing programs--thereby providing needed
services and potential jobs. The following provides highlights of our
review of these programs:
ESEA Title I, Part A and IDEA, Part B:
* New Jersey has allocated $91.5 million--50 percent of its total
allocation of $183 million--in Recovery Act funds to LEAs under ESEA
Title I, Part A. Similarly, New Jersey has allocated $186 million in
Recovery Act funds under IDEA, Part B to LEAs.
* As of September 1, 2009, New Jersey LEAs have not drawn down funds
for ESEA Title I or IDEA, Part B. However, state officials reported
that LEAs are spending on Recovery Act-funded activities such as summer
programs for at-risk students or purchases of equipment and materials
for students with disabilities.
* In an effort to expedite spending, New Jersey approved applications
in 199 of the state's 616 LEAs to implement summer activities and
procure materials and equipment for which they will receive
reimbursement with ESEA Title I and IDEA, Part B Recovery Act funds.
* Some pre-existing weaknesses with monitoring at the state department
of education and with managing funds at the local level, as well as
competing priorities for state department of education staff and
responsibility for monitoring 616 LEAs, will make monitoring the use of
education Recovery Act funds a challenge for New Jersey.
Highway Infrastructure Investment:
* The U.S. Department of Transportation's (DOT) Federal Highway
Administration apportioned $652 million in Recovery Act funds to New
Jersey, of which $196 million--30 percent--was suballocated to
metropolitan and other areas.
* As of September 1, 2009, the New Jersey Department of Transportation
(NJDOT) had awarded contracts, or advertised for bids on, 60 projects,
obligating a total of $473 million in highway infrastructure funds.
Most of these projects involve road paving, but many also involve
bridge replacement and improvements, along with streetscape
improvements.
Transit Capital Assistance Funds:
* DOT's Federal Transit Administration (FTA) apportioned more than $1
billion in Recovery Act Transit Capital Assistance funds to New Jersey
and urbanized areas that include New Jersey for transit projects. As of
September 1, 2009, FTA concluded that the 50 percent obligation
requirement had been met for New Jersey and the urbanized areas located
in the state.
* New Jersey Transit (NJT) is the primary public operator of bus and
commuter rail transit lines in New Jersey. As of August 20, 2009, NJT
had received nearly $357 million for Transit Capital Assistance
projects.
* The largest funded project is design and early construction of a new
rail tunnel under the Hudson River, which will receive $130 million in
Recovery Act funds.
Weatherization Assistance Program:
* As of August 31, 2009, the state had obligated $24.1 million of its
initial allocation of weatherization funds and disbursed $3.4 million
of these funds.[Footnote 2]
* New Jersey has begun to spend weatherization funds, particularly for
start-up activities such as hiring and training. The state plans to use
Recovery Act funds to weatherize 13,400 homes.
* The Department of Labor (Labor) has issued prevailing wage rate
information for weatherizaton work, which will facilitate
weatherization program implementation.
* The state agency administering the program will rely on the automated
systems it has used for non-Recovery Act weatherization work to track
accountability.
* New Jersey officials stated that they will be able to meet Recovery
Act reporting requirements.
Updated funding information on SFSF and the Public Housing Capital
Fund:
* The U.S. Department of Education has awarded New Jersey about $891
million, or about 67 percent of its total SFSF allocation. As of
September 1, 2009, New Jersey has allocated these funds to LEAs, but
LEAs have not drawn down funds. SFSF funds have helped New Jersey
restore and increase the state's portion of education aid to LEAs for
the 2009-2010 school year.
* New Jersey has 80 public housing agencies to which HUD allocated
Recovery Act formula grants. In total, these public housing agencies
received $104 million in Public Housing Capital Fund formula grants. As
of September 5, 2009, 64 of these public housing agencies have
obligated $31 million, and 46 of these public housing agencies have
drawn down $6.1 million.
Recovery Act Funds Continue to Assist in Stabilizing New Jersey's
Budget:
According to New Jersey state budget officials, the fiscal impact of
Recovery Act funds has not changed since they provided budget estimates
for GAO's July 2009 Recovery Act report.[Footnote 3] New Jersey budget
officials continue to estimate that the state will take in
approximately $4.0 billion less than originally projected for fiscal
year 2009 and have closed a budget gap of $8.25 billion for fiscal year
2010.[Footnote 4] New Jersey budget officials previously estimated
that, overall, about $5.6 billion of their estimated $17.5 billion
Recovery Act funding and tax benefits will actually pass through the
state budget. The use of Recovery Act funds must comply with specific
program requirements but also, in some cases, enables states to free up
state funds to address their projected budget shortfalls. In response
to our question about how New Jersey planned to phase out Recovery Act
funds, the Governor's Chief of Staff said that the state had not yet
finalized plans to phase out Recovery Act funds. In addition, as a
result of New Jersey's budget cycle, New Jersey does not begin budget
planning until October or November of this year. By late February,
according to state officials, the Governor is required to propose a
balanced budget and by then the Governor's Office would have to propose
measures that reflect a phasing out of the funds.
As previously reported, New Jersey budget officials said they used
their entire rainy-day reserve fund of $735 million in fiscal year 2009
to offset their revenue shortfall. Although the rainy-day fund
currently does not contain any funds, the state plans to maintain $500
million for fiscal year 2010. New Jersey budget officials referred to
this fund as a "free balance" account, which, they explained, means
that it contains unrestricted funds which can be used for any purpose.
Recovery Act Education Funds Allocated to New Jersey:
SFSF Funds:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHE). The initial award of SFSF
funding required each state to submit an application to the U.S.
Department of Education that provides several assurances, including
that the state will meet maintenance-of-effort requirements (or it will
be able to comply with waiver provisions) and that it will implement
strategies to meet certain educational requirements, such as increasing
teacher effectiveness, addressing inequities in the distribution of
highly qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
ESEA Title I, Part A:
The Recovery Act provides $10 billion to help local educational
agencies (LEA) educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965. The Recovery
Act requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 5] The U.S.
Department of Education is advising LEAs to use the funds in ways that
will build the agencies' long-term capacity to serve disadvantaged
youth, such as through providing professional development to teachers.
The U.S. Department of Education made the first half of states'
Recovery Act ESEA Title I, Part A funding available on April 1, 2009,
and announced on September 4, 2009, that it had made the second half
available.
IDEA, Part B:
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act
(IDEA), the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities have
access to a free and appropriate public education and is divided into
two separate grants--Part B grants to states (for school-age children)
and Part B preschool grants (section 619). The U.S. Department of
Education made the first half of states' Recovery Act IDEA funding
available to state agencies on April 1, 2009, and announced on
September 4, 2009, that it had made the second half available.
New Jersey Continues to Allocate Recovery Act Education Funds, but
Monitoring Challenges Exist:
As of September 1, 2009, New Jersey had not drawn down its initial
allocation of $729 million, $91.5 million, and $186 million in Recovery
Act funds for the SFSF, ESEA Title I, and IDEA, Part B programs,
respectively.[Footnote 6] According to state officials, the state will
draw down funds from the U.S. Department of Education in mid-September
for SFSF payments to LEAs and will begin to draw down funds for ESEA
Title I and IDEA, Part B after it makes final approvals of LEAs'
applications for the funds and receives requests for reimbursement from
the LEAs.
On July 7, 2009, the New Jersey Department of Education (NJED)
allocated $1 billion[Footnote 7] of SFSF education stabilization funds
and $39.4 million[Footnote 8] of SFSF government services funds to help
cover the state's portion of education funding for the 2009-2010 school
year. NJED issued guidance that strongly advised LEAs to spend SFSF
funds on salaries in order to minimize earning interest on the funds
and to more easily track the funds separately.[Footnote 9],[Footnote
10] NJED will disburse SFSF funds to LEAs through 18 semimonthly
payments that will begin in September 2009 and end in May 2010. New
Jersey is requiring LEAs to provide quarterly reports on their spending
of SFSF funds in order to monitor LEAs' compliance with the
requirements for expenditures of Recovery Act funds.[Footnote 11]
As reported in our July 2009 report, NJED has allocated ESEA Title I
and IDEA, Part B Recovery Act funds to all 616 LEAs. LEAs can begin to
submit claims for reimbursement and receive Recovery Act funds for ESEA
Title I and IDEA, Part B once NJED approves the formal electronic
applications submitted on or before September 14, 2009.[Footnote 12]
For ESEA Title I and IDEA, Part B funds, NJED disburses funding through
a reimbursement system in which LEAs spend their own funds and submit
claims to the department for reimbursement. NJED officials noted that
some LEAs are currently spending on approved activities under ESEA
Title I and IDEA, Part B for which they will later request
reimbursement with Recovery Act funds. For example, Newark Public
Schools officials reported spending $2.25 million for a summer program
for underperforming students in July and August 2009 and stated they
will request reimbursement with Recovery Act ESEA Title I funds.
New Jersey Targeted ESEA Title I and IDEA, Part B Funds Toward Summer
Education Activities to Expedite Spending:
As we previously reported in July 2009, New Jersey allocated ESEA Title
I and IDEA Part B Recovery Act funds to all 616 LEAs and, in an effort
to expedite spending, opened an application process for LEAs to use up
to 50 percent of their allocations on summer activities.[Footnote 13]
LEAs with approved plans for summer activities could implement these
activities with the assurance that they would receive
reimbursement.[Footnote 14] NJED officials noted that this expedited
process was essentially a preapproval process to ensure that LEAs
planned allowable activities under each program. These officials also
said the department did not track the implementation of summer plans
because, given the limited time, the state did not require LEAs to
implement all approved activities. NJED will not know which of the
approved activities LEAs were able to implement until their claims for
reimbursement go through the department's electronic accounting and
grants management system, known as the Electronic Web-Enabled Grant
System.
According to data provided by NJED, the department approved
applications for summer Recovery Act-funded activities in 199 of the
616 LEAs (32 percent). The number of LEAs with approved plans and the
corresponding spending projections are presented in table 1 below. As
noted in our July 2009 report, the majority of these approvals were for
IDEA Part B.[Footnote 15] NJED officials provided two possible reasons
for this. First, more LEAs in New Jersey receive IDEA Part B funding
than ESEA Title I funding. Second, finding activities on which to spend
money quickly is not as challenging with IDEA Part B, whereas it takes
more time for staff to develop ESEA Title I programs. One reason why
spending IDEA Part B funds may be less challenging is that,
traditionally, LEAs use the summer months to purchase equipment or
materials for students with disabilities for the upcoming school year.
Recovery Act funds provide a way for LEAs in the state to expand or
create in-district opportunities for students with disabilities, as
well as reinstate programs that LEAs may have cut due to a lack of
funds. For example, an official with the Newark Public Schools reported
that the district's 30-day extended year program[Footnote 16] for
students with disabilities in July and August 2009 was in jeopardy due
to a lack of funds, but the district was able to provide the program
using Recovery Act IDEA Part B funds.
Table 1: Summary of New Jersey's Approved Summer Education Recovery Act
Activities (Dollars in millions):
ESEA Title I; Dollars in millions:
Number of LEAs with approved plans: 78; Number of approved plans[A]:
141;
Total estimated funding approved: $12.4.
IDEA Part B; Dollars in millions:
Number of LEAs with approved plans: 155; Number of approved plans[A]:
455;
Total estimated funding approved: $20.1.
Source: GAO analysis.
[A] LEAs could submit multiple plans to NJED.
[End of table]
For ESEA Title I, NJED approved 141 plans in 78 LEAs on a range of
activities. The most frequently reported activities were summer
programs for at-risk students and professional development for
teachers, as well as for purchasing equipment such as interactive
computers for classrooms. For example, Newark Public Schools officials
reported that the district received approval for and provided a
professional development program for science teachers. District
officials said that without Recovery Act funds, the program would have
served only one or two teachers. ESEA Title I Recovery Act funds
allowed the district to increase participation by approximately 20
teachers.[Footnote 17] Figure 1 shows the approved activities or
procurements for ESEA Title I, by type, as reported by NJED.
Figure 1: Number of Activities or Procurements included in Approved
Recovery Act ESEA Title I, Part A Summer Plans, by Type:
[Refer to PDF for image: vertical bar graph]
Type: Professional development for staff; Number of activities or
purchases: 56.
Type: Summer program for students;
Number of activities or purchases: 51.
Type: Equipment technology or materials; Number of activities or
purchases: 26.
Type: Assessment and/or Data Systems;
Number of activities or purchases: 6.
Type: Summer program for parents;
Number of activities or purchases: 2.
Type: Other;
Number of activities or purchases: 15.
Source: GAO analysis.
Notes: Plans could include more than one activity or could include an
activity and a procurement. The "other" category mostly includes
activities for which the descriptions did not provide enough
information to categorize.
[End of figure]
For IDEA Part B, the department approved 455 plans in 155 LEAs on
activities such as extended school year programs, as well as for
equipment and materials, including smart boards and purchases of
reading programs designed for students with disabilities. For example,
one LEA planned to purchase 20 computers for students with disabilities
and another LEA planned to purchase seven wheelchair-accessible vans to
transport students with disabilities. NJED officials observed that the
speed with which the LEAs had to implement the summer programs was the
primary challenge. Thus, most of the planned activities for IDEA Part B
involved purchases of equipment, technology, and materials. Figure 2
shows the approved activities or procurements for IDEA Part B, by type,
as reported by NJED.
Figure 2: Number of Activities or Procurements included in Approved
Recovery Act IDEA Part B Summer Plans, by Type:
[Refer to PDF for image: vertical bar graph]
Type: Equipment technology or materials; Number of activities or
purchases: 196.
Type: Professional development for teachers; Number of activities or
purchases: 74.
Type: Extended school year;
Number of activities or purchases: 58.
Type: New or expanded program of classroom; Number of activities or
purchases: 38.
Type: Summary school program;
Number of activities or purchases: 38.
Type: Staff positions;
Number of activities or purchases: 24.
Type: Other;
Number of activities or purchases: 56.
Source: GAO analysis.
Notes: Plans could include more than one activity or could include an
activity and a procurement. The "other" category includes a range of
activities such as data management and planning efforts, as well as
activities for which the descriptions did not provide enough
information to categorize.
[End of figure]
NJED Faces Challenges in Monitoring Education Recovery Act Funds:
Pre-existing weaknesses with monitoring at the state level and with
managing funds at the local level, as well as competing priorities for
NJED staff and responsibility for monitoring 616 LEAs, will make
monitoring the use of education Recovery Act funds a challenge for New
Jersey. New Jersey's Single Audit[Footnote 18] for fiscal year 2008
cited a material weakness in the special education programs which
include IDEA, Part B; the audit found no evidence of NJED's monitoring
of LEAs' use of federal funds to provide assurance of compliance with
laws, regulations, or grant agreements. According to NJED officials,
the state primarily relies upon independent audits of LEAs to monitor
compliance at the local level. The department is responsible for
conducting desk reviews of these independent audit reports of LEAs.
However, the 2008 New Jersey Single Audit also found that NJED did not
update its tracking system to include 214 of the 333 independent audit
reports LEAs submitted to the department. The New Jersey Office of the
State Auditor (OSA) has also noted that LEAs in the state have had
weaknesses in accounting for and managing funds. For example, a 2009
OSA review of one district found numerous control deficiencies in key
accounting areas such as payroll, an area to which NJED is suggesting
LEAs apply their SFSF funds. Competing priorities for staff also pose a
challenge to the department's ability to fully monitor funds. NJED's
self-assessments for 2007, 2008, and 2009 document that inadequate
levels of staffing have been and continue to be a risk to internal
controls. In response to this, the department produced a corrective
action plan that includes hiring new staff. NJED officials reported
that the additional responsibilities that come with administering
Recovery Act funds have put a strain on the department's already lean
staff. While some staff have been reassigned to monitor Recovery Act
funds and activities, other staff have responsibilities that compete
with the Recovery Act among the department's priorities. For example,
in response to the Single Audit finding, the U.S. Department of
Education now requires New Jersey to conduct desk audits of 100 percent
of LEA audit reports. This will require an increased effort, as the
2008 New Jersey Single Audit also found that in 2008, staff conducted
22 desk reviews (7 percent) of the 333 audit reports LEAs submitted to
the department.[Footnote 19] These NJED staff are also responsible for
conducting background checks for a range of state and local education
employees. Responsibility for monitoring 616 LEAs will compound New
Jersey's pre-existing and current issues related to monitoring
education Recovery Act funds.
NJED officials have reported a range of strategies for mitigating
potential issues with compliance, some of which were mentioned in our
July 2009 report.[Footnote 20] Since our July report, much of the
department's efforts involved training LEA-and state-level staff on the
requirements of the Recovery Act as a "first line of defense." NJED
held several sessions across the state on the permissible uses of
Recovery Act funds, how to properly account for the funds, and
compliance with reporting requirements. The department also
participated in a series of information sessions with the New Jersey
Association of School Business Officials specifically for staff working
in LEA accounting offices. In partnership with the New Jersey Office of
the Inspector General, NJED conducted and videotaped training on
internal controls, which LEA staff can access through the department's
Web site. The New Jersey Recovery Accountability Task Force,[Footnote
21] the New Jersey Office of the Inspector General, and the Association
of Government Accountants provided an audio conference for state staff
on internal controls, a session NJED officials said that their staff
attended. Officials from the New Jersey Governor's Office noted that
the New Jersey Recovery Accountability Task Force also sent written
guidance on complying with the Recovery Act guidance to all of the
state's LEAs. NJED officials told us they were evaluating staffing
needs for the department, including considering additional
reassignments of staff, submitting a request to the Governor's Office
for a waiver of the hiring freeze, and options for hiring short-term
staff. According to these officials, in the short term, they have
decided to reassign staff previously responsible for other duties to
monitor the accounting for Recovery Act funds in the state's high-risk
LEAs. On August 17, 2009, the U.S. Department of Education announced a
proposal that would allow states to use more of their Recovery Act ESEA
Title I and IDEA, Part B funds for administration.[Footnote 22] NJED
officials said that this flexibility provides moderate relief as the
department has already allocated ESEA Title I and IDEA, Part B funds to
LEAs and encouraged summer spending of up to 50 percent of those funds.
These officials also said that any funds not already allocated would be
used for monitoring activities such as hiring staff. An official from
the New Jersey Governor's Office noted that NJED received approval on
September 15, 2009 to hire 32 additional staff in order to help address
deficiencies identified in the 2008 Single Audit and to assist with
monitoring LEAs' use of Recovery Act funds.
We previously reported that the department planned to review the
corrective action plans for the fiscal year ending June 30, 2008, for
follow-up on all findings in LEAs' independent audit reports related to
the Recovery Act. NJED officials initially told us this effort would
begin on July 1, 2009, but now state that staff are in the final stages
of planning a wider effort that will bring together auditors and other
types of monitoring staff (budget managers, grant administrators,
county administrators, for example) for a more comprehensive approach.
NJED officials reported plans to send teams of these staff to a select
number of LEAs to monitor the fiscal and programmatic aspects of LEAs'
use of Recovery Act education funds (including SFSF). Currently,
officials noted, they have a list of approximately 100 LEAs that may
require additional monitoring and comprise about 60 to 70 percent of
the Recovery Act education funds in New Jersey. According to NJED
officials, they created this list of LEAs using criteria such as
independent audit findings related to Recovery Act programs, presence
of a state fiscal monitor, and low scores in the state's accountability
system.[Footnote 23] However, officials noted that the current staffing
level is insufficient for intensive fiscal and programmatic monitoring
of Recovery Act funds in 100 LEAs, while also monitoring state-funded
and other federally-funded programs. NJED officials reported that they
are finalizing the monitoring plan for Recovery Act funds, determining
criteria for assigning a risk level to the LEAs in order to visit those
that pose the highest risk, and determining the staffing levels needed
to implement the effort. These officials said they plan to send
monitoring teams out to LEAs in October 2009.
NJED Is Implementing Plans to Meet Office of Management and Budget
Reporting Requirements:
NJED officials reported that the department is on track to meet Office
of Management and Budget (OMB) reporting requirements. NJED is not
delegating reporting responsibilities to subrecipients (LEAs). NJED
officials said the department already collects most of the data
required by OMB and plans to prepopulate a form with the data it
already collects and send the form to LEAs. LEAs will then be expected
to provide information about the number of jobs created and retained
with Recovery Act funds and vendors. Because the state will report for
LEAs, NJED officials said on July 31, 2009, that they were uncertain
about the extent of follow-up required for vendors, particularly when
LEAs cannot provide the number of jobs created. Finally, NJED is in the
early stages of its plan to collect statewide data on the impact of the
Recovery Act on a range of education-related performance measures,
including student and teacher outcomes. The department does not plan to
roll out this effort until data collection begins for the second
quarterly report to OMB.
New Jersey Has an Overall High State Obligation Rate for the Federal
Highways Program but the Obligation Rate of Funds to Suballocated Areas
within the State Has Been Slow:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through federal-aid highway program
mechanisms and states must follow the existing program requirements,
which include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
New Jersey Has an Overall High Obligation Rate:
FHWA has obligated New Jersey's Recovery Act funding to statewide
projects at a high rate. As of September 1, 2009, FHWA had obligated 73
percent for state highway projects. As we previously reported, $652
million was apportioned to New Jersey in March 2009 for highway
infrastructure and other eligible projects. As of September 1, 2009,
$473 million had been obligated.[Footnote 24] As of September 1, 2009,
$4 million had been reimbursed by FHWA.[Footnote 25]
This obligated total is for 60 projects--45 state and 15 local
projects. This compares with 53 projects obligated on July 31, 2009.
Almost 60 percent of Recovery Act highway obligations for New Jersey
have been for pavement improvement. Specifically, $285 million of the
$473 million obligated in New Jersey as of September 1, 2009, is being
used for pavement improvement. Many state officials told us they
selected pavement improvement projects because these projects were
already in their pipeline, were identified infrastructure needs, could
advance sooner than planned because funding was available, and had met
federal planning requirements. Figure 3 shows obligations by the types
of road and bridge improvements being made.
Figure 3: Highway Obligations for New Jersey by Project Improvement
Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (60 percent, $284.7 million): Pavement
improvement ($284.7 million): 60%.
Bridge projects total (19 percent, $88 million): Bridge replacement
($64.9 million): 14%; Bridge improvement ($23.1 million): 5%.
Other (21 percent, $100.3 million):
Other ($100.3 million): 21%.
Source: GAO analysis of FHWA data.
Note: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
[End of figure]
The Obligation Rate of Funds to Suballocated Areas within the State Has
Been Slow:
NJDOT works with the three Metropolitan Planning Organizations (MPO)
[Footnote 26] in the state to obligate the local highway infrastructure
funds. As required by the Recovery Act, 30 percent of Recovery Act
highway funds must be suballocated to local areas, and the entire
suballocation must be obligated by March 2010. New Jersey's three MPOs
work with their local officials to select projects within their region
that qualify for Recovery Act funding. Officials from two MPOs told us
they began the planning process before Recovery Act funding became
available because they wanted to have projects in place within their
region, including distribution mechanisms, once funding was approved.
Local highway infrastructure projects were selected based on their
ability to benefit all areas within the MPO region and to be obligated
within 1 year. MPO officials told us they endeavored to distribute the
funding equitably. For example, one MPO told us it distributed funding
in the region based on population, in addition to ensuring that every
county would receive at least 3 percent of Recovery Act funding--an
amount they considered sufficient in order to make substantial
infrastructure improvements in a particular county. Also, NJDOT and MPO
officials told us they looked for projects they could implement within
the timeframes of the Act, advance projects sooner than current funding
would have been available to do so, and were identified infrastructure
needs. For example, of 63 projects one MPO selected for Recovery Act
funding, 41 were for resurfacing, which can be accomplished in a
relatively short amount of time. Other commonly selected projects
include bridge repair, signalization, and streetscape improvements.
Officials from the MPO told us that resurfacing projects are
worthwhile, but given more time, they would have selected a wider
variety of projects, including more bridge work in their region.
Overall, officials from both MPOs told us that they looked for projects
that they could accelerate quickly, and in some cases moved new
projects on the region's transportation improvement plan (TIP) in order
to receive Recovery Act funding.
Despite early planning, local highway infrastructure funds are being
obligated locally at a low rate. As of September 1, 2009, FHWA has
obligated funding for only 15 local projects. An NJDOT official told us
he estimated that the three MPOs have identified approximately 100
local projects. Currently, New Jersey's obligation rate for the amount
suballocated to local areas is 19 percent, whereas the average rate
among the 16 states GAO is monitoring, plus the District of Columbia,
is 52 percent. NJDOT and MPO officials told us that despite selecting
faster-moving projects, funding was being obligated slowly, as many of
these local projects were new and needed more start-up time. Also,
officials told us that local staff working on many of the projects
needed time to navigate federal requirements such as the National
Environmental Policy Act (NEPA), which involves the environmental
review process. This is an issue, in part because the state had
previously planned to fund some of these projects entirely with state
funds, meaning the NEPA requirements may not have applied to the
projects. Nonetheless, New Jersey is not in immediate danger of failing
to meet the 100 percent obligation requirement within 1 year. However,
NJDOT and MPO officials have told us they are watching these obligation
rates closely and have safeguards in place to ensure the obligation
requirement is met. For example, if a project does not meet established
milestones or is in danger of not obligating within a year, officials
may replace a local project with a state project in the region. In an
effort to foster timely delivery, quality products and most
importantly, proper project oversight, New Jersey DOT held two training
sessions for counties and municipalities. These sessions included
modules conducted by both state and federal officials.
NJDOT Will Use Existing Procedures Intended to Help Ensure Appropriate
Use of Funds:
Our review of management procedures for state highway construction
contracts, as well as our discussions regarding three awarded
contracts, indicates that NJDOT is using existing procedures intended
to help ensure the appropriate use of Recovery Act funds. The three
contracts we reviewed and discussed with state officials included two
construction contracts and a design contract that NJDOT awarded.
[Footnote 27] An NJDOT official told us the state awards contracts
competitively, by soliciting bids for projects and then selecting
qualified contractors that provide the lowest responsible bid and are
not on the state's excluded-contractors list. GAO did not verify
NJDOT's process for awarding contracts; however, out of the three NJDOT
highway contracts we reviewed and discussed with officials, there was
an average of six bids per project. Additionally, NJDOT officials told
us that bids for all projects are coming in, on average, 20 percent
lower than expected, which could lead to more funding being available
for other highway projects not currently funded through the Recovery
Act.
According to officials, NJDOT is mandated by the state to use low-bid
fixed price contracts for construction projects. Officials stated that
for professional services, NJDOT's policy is to use a fixed price
contract for professional services with the exception of construction
inspection, construction engineering, litigation support, and instances
where it is difficult to estimate the work effort required to satisfy a
complex scope of work. In such cases, officials told us, NJDOT may
utilize a cost plus fixed fee contract, also known as a cost
reimbursable contract. For example, for the three contracts we reviewed
and discussed with NJDOT officials, New Jersey used fixed-price
contracts for the two construction contracts and a cost plus fixed fee
contract for the design project. NJDOT officials told us that fixed fee
contracts are mandated by the state, and in order to use a cost plus
fixed fee contract that an exemption has to be granted by NJDOT
Assistant Commissioner and documented to New Jersey's procurement
division. A NJDOT official told us that the rationale for a cost plus
fixed fee contract is that if a project is in its early phases, it
could have numerous potential changes that will affect price, such as
right of way, utility, and permit issues. According to an agency
official, regardless of contract type, NJDOT has standard procedures
for construction inspection and materials testing that are approved by
FHWA and are currently in place. NJDOT officials told us that they plan
to use these standard procedures for Recovery Act projects.
NJDOT is also beginning to use Single Audit results to monitor
localities where any state or Recovery Act funding is used. Previously,
FHWA officials told us that failure to track Single Audit findings
against subrecipients was a weakness in NJDOT's oversight structure. In
order to address this weakness, NJDOT officials told us that they have
begun developing a program for monitoring Single Act findings in
localities where any state or federal highway funds are being used. As
part of its process to ensure appropriate use of Recovery Act funds,
NJDOT reviews these Single Audit findings to determine if there are any
significant findings related to FHWA funds, including Recovery Act
funds. This provides NJDOT another mechanism to track Recovery Act
funding.
NJDOT Expects to Meet Reporting Requirements:
New Jersey has incorporated the Recovery Act's reporting requirements
into its existing FHWA reporting processes, and NJDOT officials said
that they are confident the state will be able to meet all
requirements. NJDOT officials told us that because of their familiarity
with existing FHWA reporting requirements, the additional reporting
requirements in the Recovery Act will not be difficult to fulfill.
Officials also said they expect to meet all of the Recovery Act
reporting requirements by October 10, 2009, per OMB's guidance. For
example, to meet the requirement to track the number of jobs created
and retained by Recovery Act-funded projects, NJDOT officials have set
up a statewide system using vendor reports from contractors and
consultants and have centralized this reporting system in order to have
statewide and local projects reported in the same database. NJDOT
intends to conduct spot checks of the data to review accuracy and also
will work with FHWA to achieve proper reporting of employment numbers.
FTA Found Key Recovery Act Obligation Deadline for Transit Funding Was
Met, and Efforts to Assure Compliance with Reporting Requirements Are
Under Way:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 28] The majority of the public transit
funds--$6.9 billion (82 percent)--was apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program.[Footnote 29] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. Recovery Act funds were also
apportioned to states under the nonurbanized area formula grant program
using the program's existing formula. Transit Capital Assistance
Program funds may be used for such activities as vehicle replacements,
facilities renovation or construction, preventive maintenance, and
paratransit services. Up to 10 percent of apportioned Recovery Act
funds may also be used for operating expenses.[Footnote 30] Under the
Recovery Act, the maximum federal fund share for projects under the
Transit Capital Assistance Program is 100 percent.[Footnote 31]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and MPOs--develop a list of transit projects
that project sponsors (typically transit agencies) submit to FTA for
Recovery Act funding.[Footnote 32] FTA reviews the project sponsors'
grant applications to ensure that projects meet eligibility
requirements and then obligates Recovery Act funds by approving the
grant application. Project sponsors must follow the requirements of the
existing programs, which include ensuring the projects funded meet all
regulations and guidance pertaining to the Americans with Disabilities
Act (ADA), pay a prevailing wage in accordance with federal Davis-Bacon
Act requirements, and comply with goals to ensure disadvantaged
business are not discriminated against in the awarding of contracts.
The Recovery Act requires that 50 percent of the funds apportioned to
urbanized areas or states for the Transit Capital Assistance Program be
obligated before September 1, 2009 and the remaining funds are to be
obligated within 1 year of apportionment. The Secretary of
Transportation is to withdraw and redistribute to other urbanized areas
or states any amount that is not obligated within these time frames.
[Footnote 33] As of September 1, 2009, FTA concluded that the 50
percent obligation requirement had been met for New Jersey and
urbanized areas located in the state. FTA data showed that 84.6 percent
of the funds had been obligated in the urbanized area that includes New
Jersey and portions of New York and Connecticut, while 83.6 percent of
the funds had been obligated in the Philadelphia urbanized area, which
also includes portions of New Jersey. Similarly, 83.9 percent of the
funds had been obligated in the Allentown-Bethlehem, Pennsylvania,
urbanized area, which includes parts of New Jersey, and exactly 50
percent of the funds had been obligated in the Atlantic City, New
Jersey urbanized area.
State governors must certify that the state will maintain the level of
state spending for the types of transportation projects, including
transit projects, funded by the Recovery Act that it planned to spend
the day the Recovery Act was enacted. As part of this certification,
the governor of each state is required to identify the amount of funds
the state plans to expend from state sources from February 17, 2009,
through September 30, 2010.[Footnote 34] This requirement applies only
to state funding for transportation projects. New Jersey Transit (NJT)
also stated that New Jersey is meeting the Recovery Act requirement
that the state maintain its level of funding support for transit and
not reduce its transit funding due to receiving Recovery Act funds. NJT
annually receives $675 million from the state's highway trust fund, and
this is the level of funding that applies to this requirement. In
addition, project sponsors must submit periodic reports, as required
under the maintenance of effort for transportation projects section on
the amount of federal funds appropriated, allocation, obligated, and
outlayed; the number of projects put out to bid, awarded, or for which
work has begun or is completed; project status; and the number of jobs
created or sustained. In addition, grantees must report detailed
information on any subcontractors or subgrants awarded by the grantee.
NJT Used Transit Capital Assistance Funds to Improve Its Existing
Transit System:
NJT, the nation's third-largest provider of bus, rail, and light rail
transit, is the primary public provider of transit service in New
Jersey. As of September 1, 2009, NJT anticipated receiving grants
totaling about $423.4 million, of which $356.8 million is through the
Transit Capital Assistance Program, both urban and nonurban, and $66.6
million is through the Fixed Guideway Modernization Program. The funds
were allocated to the state's three MPOs based on existing formulas
that consider overall population, population density, and existing
transit service levels.
NJT, in consultation with the MPOs in the state, selected 16 projects--
all of which are in its capital plan--to receive Recovery Act funds.
The largest funded project is the new rail tunnel under the Hudson
River, known as the ARC, or Access to the Region's Core, which will
receive $130 million of Recovery Act funds (the project's total cost is
about $8.7 billion). Overall, NJT expects to receive more than $1
billion in federal grants for capital projects for fiscal year 2009,
including Recovery Act funding.
Of the 16 Recovery Act projects, 15 received Transit Capital Assistance
funds. NJT officials stated that all of their Recovery Act projects are
capital projects, and all but four projects (Hackensack Bridge
improvements, enhanced track program, commuter rail rehabilitation, and
bus rehabilitation) are "capacity expansion" projects designed to
increase the number of riders that existing transit can serve. All
projects were selected because they could start quickly (were "shovel
ready"). Officials selected projects that had completed the
environmental review process, were projects that did not require
environmental analysis, or were far enough along in the environmental
review process to start work by the fall of 2009. As of September 1,
2009, all but one project had completed environmental review.
All projects selected to receive Recovery Act funds were in the
Statewide Transportation Improvement Plan (STIP) and approved by FTA,
the relevant MPOs, and NJDOT. Officials told us they tried to
distribute projects statewide in order to satisfy all of the MPOs and
to provide transportation improvements throughout New Jersey, rather
than concentrate them in one area of the state. FTA had also given NJT
preaward authority for selected projects to enter into contracts before
the grants were approved and funds obligated. As of July 31, 2009, FTA
had reimbursed NJT about $54.5 million.
According to NJT, work has begun on many of the capital projects, and
all are on schedule. Many of the projects (Edison Rail, Plauderville
Station, Danville, and Lower Hackensack Bridge Rehabilitation) were
projects that received federal funding in the past for a study or to
conduct an environmental clearance. Therefore, these projects were more
advanced but would not have been completed, according to NJT officials,
without Recovery Act funds.
Table 2: New Jersey Transit Capital Assistance Projects Funded with
Recovery Act Grants as of August 20, 2009 (Dollars in thousands):
Project: ARC Final Design;
Transit Capital Assistance: $110,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: ARC Tonnelle Avenue Construction; Transit Capital Assistance:
$20,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: Edison Rail Park & Ride;
Transit Capital Assistance: $11,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: Plauderville Station Improvements; Transit Capital Assistance:
$15,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): No.
Project: Lower Hackensack Bridge Improvements; Transit Capital
Assistance: $30,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): No.
Project: Morristown Line Signal Improvements; Transit Capital
Assistance: 25,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: Newark Penn Station Plaza Improvements; Transit Capital
Assistance: $17,300;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): No.
Project: River Line Cab Signals;
Transit Capital Assistance: $24,000;
Out to bid (Yes/No): No;
Work begun (Yes/No): No.
Project: Pennsauken Transfer Station Construction; Transit Capital
Assistance: $40,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): No.
Project: Bus Shelter Installation;
Transit Capital Assistance: $2,500;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: Commuter Rail Rehabilitation;
Transit Capital Assistance: $1,500;
Out to bid (Yes/No): N/A;
Work begun (Yes/No): Yes.
Project: Atlantic City Minibuses;
Transit Capital Assistance: $16,000;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: Bus Rolling Stock Rehabilitation; Transit Capital Assistance:
$35,000;
Out to bid (Yes/No): N/A;
Work begun (Yes/No): Yes.
Project: Enhanced Track Rehabilitation Program; Transit Capital
Assistance: $4,703;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): Yes.
Project: Rural Minibus Purchase;
Transit Capital Assistance: $4,838;
Out to bid (Yes/No): Yes;
Work begun (Yes/No): No.
Project: Total;
Transit Capital Assistance: $356,841;
Out to bid (Yes/No): [Empty];
Work begun (Yes/No): [Empty].
Source: NJT.
Note: N/A refers to projects done by in-house staff. No contract bids
were required.
[End of table]
No Recovery Act funds are currently being used for operating costs;
however, this could change if more funds become available. After NJT
and the MPOs decided which projects to fund, the 2009 Supplemental
Appropriations Act was enacted, which authorizes the use of up to 10
percent of each apportionment for operating expenses.[Footnote 35] When
the law was passed, NJT projects were already approved by the MPOs.
However, NJT officials told us that due to the slowness of the economy,
most project bids are coming in, on average, 20 percent below the
projected costs. As such, officials believe that, once all of the bids
are finalized and the MPOs are assured that all of the projects will be
completed, NJT may opt to use some of the remaining Recovery Act
funding for operating expenses.
NJT Efforts to Assure Compliance with Recovery Act Requirements:
NJT officials stated that it has been proactive in building the
management infrastructure needed to achieve accountability, compliance,
and reliable reporting mandated by the Recovery Act. NJT's independent
auditor provided an unqualified or "clean" opinion on its consolidated
financial statements for the years ended June 30, 2007 and 2008.
[Footnote 36] The auditor stated that NJT complied, in all material
respects, with the types of compliance requirements described in the
OMB Circular A-133 Compliance Supplement and the New Jersey State Grant
Compliance Supplement that are applicable to each of its major federal
and state programs. Although the independent auditor did not express an
opinion on NJT's internal controls,[Footnote 37] it considered NJT's
internal controls over financial reporting and compliance with the
federal and state requirements as a basis for designing its own
auditing procedures.
NJT has a long-standing process in place for handling federal funds.
Essentially, NJT uses the same funding control procedures for Recovery
Act funds as for its regular FTA funds. In most cases, the Recovery Act
reporting is an addition to existing reports submitted to FTA and U.S.
DOT. NJT sends financial data to FTA 10 days after the close of each
quarter and enters quarterly milestone and progress reviews into FTA's
reporting system.
NJT has taken additional steps to manage and account for Recovery Act
funds. For example, NJT holds biweekly meetings to monitor the progress
of Recovery Act projects. These meetings serve to review environmental,
design, and other key milestones, as well as ensure that progress and
workforce data collected are consistent and reported in a timely
manner. Additionally, NJT officials include Recovery Act projects in
project status meetings with the Executive Director of NJT every 6
weeks.
To assure compliance at the project level and minimize risk, NJT has
assigned project managers to each Recovery Act project. They prepare
detailed budget data and approve all purchase requisitions. NJT staff
also attended fraud awareness training sponsored by the U.S. DOT. In
addition, FTA participates in quarterly progress reviews with NJT to
review whether selected projects have an appropriate scope and budget
and have met all federal requirements, such as Davis-Bacon prevailing
wage rules and environmental review procedures. On June 1, 2009, FTA
issued its Combined State Management Triennial Review of NJT. Although
not an audit, the review provided an assessment of NJT's compliance
with Federal requirements determined by examining grant management
practices and program implementation activities. FTA's Triennial Review
of NJT reported no deficiencies in 20 of 26 areas reviewed, including
program and financial management and grants administration. Lack of
staffing and related resources associated with particular civil rights
programs generally contributed to NJT's deficiencies.[Footnote 38] FTA
regional officials told us it plans to hire more regional staff (for
example, engineers and transportation specialists) to regularly review
Recovery Act projects and provide more on-site monitoring.
NJT Is Preparing to Implement the Latest Recovery Act Reporting
Requirements:
NJT is preparing to implement the Recovery Act reporting requirements.
However, NJT officials are concerned that reporting job creation may
prove difficult when it comes to reporting job creation to various
authorities. In the past, based on a request from the U.S. House of
Representatives, Committee on Transportation and Infrastructure, NJT
submitted information on direct and indirect jobs created. U.S. DOT
reports that it will continue to collect estimates of both direct and
indirect jobs, but NJT plans to submit to OMB information only related
to jobs created directly due to Recovery Act funding.[Footnote 39]
Therefore, under the Recovery Act reporting requirement, the state
would not report on someone delivering materials to a job site, even
though that is creating employment, albeit indirectly. NJT officials
said that some jobs may be missed due to this calculation. Overall,
officials believe that estimates of job creation will be much easier to
track when in-house staff are used, rather than outside contractors.
Matching the old and new job creation reports may prove to be another
challenge if all previous reporting has to be redone to match the new
OMB guidance. No other performance measures are being used to evaluate
performance of Recovery Act funds for transit.
Finally, NJT reported no particular challenges related to managing and
reporting on Recovery Act projects. However, officials stated that
multiple federal and state oversight agencies asking for the same
program and financial information is burdensome. Officials told us that
they have not hired any additional staff to manage the reporting
requirements but that existing staff are working longer hours to
accommodate the workload.
New Jersey Is Administering, Monitoring, and Implementing Reporting
Requirements for Weatherization Assistance Program Funds, but Some
Challenges Remain:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy-
efficiency improvements to their homes by, for example, installing
insulation, sealing leaks; and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, the Weatherization Assistance Program has assisted more than 6.2
million low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved the weatherization plans for
all but two of the states, the District of Columbia, the territories,
and Indian tribes--including all 16 states and the District of Columbia
in our review. DOE has provided to the states $2.3 billion of the $5
billion in weatherization funding under the Recovery Act. Use of the
Recovery Act weatherization funds is subject to Section 1606 of the
act, which requires all laborers and mechanics employed by contractors
and subcontractors on Recovery Act projects to be paid at least the
prevailing wage, including fringe benefits, as determined under the
Davis-Bacon Act.[Footnote 40] Because the Davis-Bacon Act had not
previously applied to weatherization, the Department of Labor (Labor)
had not established a prevailing wage rate for weatherization work. In
July 2009, DOE and Labor issued a joint memorandum to Weatherization
Assistance Program grantees authorizing them to begin weatherizing
homes using Recovery Act funds, provided they pay construction workers
at least Labor's wage rates for residential construction, or an
appropriate alternative category, and compensate workers for any
differences if Labor establishes a higher local prevailing wage rate
for weatherization activities. Labor then surveyed five types of
"interested parties"[Footnote 41] about labor rates for weatherization
work. The department completed establishing prevailing wage rates in
all of the 50 states and the District of Columbia by September 3, 2009.
New Jersey Is Using Weatherization Funds for Start-up Activities:
DOE approved New Jersey's state plan on July 10, 2009, and provided 50
percent of the weatherization funds allocated to the state to New
Jersey's Department of Community Affairs (NJDCA), which administers the
weatherization program. [Footnote 42] According to the NJDCA officials,
they had anticipated issuing to each of the subgrantees--22 Community
Action Agencies (CAAs), which conduct weatherization work,
approximately 35 percent of the 50 percent of funds that DOE released
to New Jersey by August 31, 2009.[Footnote 43] However, the officials
commented that as of September 9, 2009, NJDCA had issued the full 35
percent of the weatherization funds to only six of its 22 CAAs. They
explained that NJDCA and the remaining 16 CAAs were still in various
stages of the grant agreement process, primarily due to technical
amendments NJDCA had to make to the grant agreements.[Footnote 44]
Also, according to officials from NJDCA and the New Jersey Governor's
Office, the process was further impacted because the New Jersey
Attorney General's office is reviewing some of the grant agreements as
an additional oversight measure.[Footnote 45] NJDCA officials also
noted that four CAAs had not received any funding as of September 9,
2009.[Footnote 46] Of these four CAAs, three are receiving additional
oversight by NJDCA and one is pending finalization of a memorandum of
understanding (MOU). NJDCA officials further commented that the status
of the grant agreement process progresses daily. They said they were
hopeful that the grant agreements between NJDCA and the CAAs would be
completed by September 30, 2009. See table 3 for the funds obligated
and disbursed as of September 9, 2009.
Table 3: Weatherization Funds Obligated and Disbursed in New Jersey as
of September 9, 2009:
Total amount of Recovery Act weatherization funds for New Jersey:
$118,821,296.
Total funds obligated[A]:
$24,142,983.
Total funds disbursed[B]:
$3,441,955.
Source: New Jersey Department of Community Affairs.
[A] Funds are deemed to be obligated once all approvals have been
satisfied in NJDCA's grants administration system, at which point an
award letter can be generated and only minor tasks need to be
accomplished in order for funds to be available for disbursement.
[B] Funds are deemed to be disbursed when there is a transfer of funds
from NJDCA to the grantee.
[End of table]
Subsequently, NJDCA will release additional funds, on a reimbursable
basis, after assessing a CAA's progress in successfully completing
weatherization work. Such assessments will include reviewing reports
such as those indicating the number of weatherization projects
completed. NJDCA also plans to reward those CAAs that complete all the
work in their grant agreement on a timely basis and meet quality
standards, by providing them more funds to do additional weatherization
work. NJDCA has allocated $9 million for such incentives.
As stated in New Jersey's approved weatherization plan, NJ DCA will
retain 28 percent of the Recovery Act funds that are allocated for
training and technical assistance purposes. Also, NJDCA will use some
of their Weatherization funds to hire four additional monitors to
improve program oversight. According to a senior NJDCA official, NJDCA
monitors inspect anywhere from 5 to 100 percent of weatherization
projects completed by each CAA, depending on the performance record of
a CAA. These staff inspect an average of 25 percent of the units.
According to program officials, the department will not release payment
to a CAA until a monitor signs off that the work inspected is complete
and meets quality standards. Program officials said that although New
Jersey has a hiring freeze, the state granted a waiver to NJDCA to hire
these workers for the weatherization program. This will bring NJDCA's
total number of monitors to nine, which officials said is necessary due
to the increased workload.
According to NJDCA officials, as early as April 2009, many CAAs started
using their initial allocation of weatherization funds for start-up
training and hiring activities.[Footnote 47] For example, one CAA
official reported that his organization used its initial Recovery Act
funds to establish a separate office for the weatherization program, to
physically separate it from the other approximately 40 community
programs that it operates.[Footnote 48]
New Jersey Established Weatherization Wage Rates Prior to Labor's
Determination:
Recovery Act weatherization projects must comply with the prevailing
wage as determined under the Davis-Bacon Act.[Footnote 49] On August
17, 2009, Labor issued Davis-Bacon prevailing wage rates for New
Jersey's 21 counties. Weatherization funds that states receive through
their regular appropriations are not subject to Davis-Bacon
requirements. As a result, Labor had not previously needed to establish
wage rates for weatherization work. Due to the Recovery Act guidance
and prior to Labor establishing these wage rates, New Jersey's State
Plan and Grant Application to the US Department of Energy established a
weatherization wage rate of $17.40 per hour (plus benefits) that CAAs
could use until the Labor wage rates became available. As noted in our
July 2009 report,[Footnote 50] NJDCA officials said they established
the rate to avoid unnecessary delays in starting weatherization work.
According to a NJDCA official, although New Jersey had established a
wage rate, some of the CAAs were concerned about encountering
unforeseen repercussions for using a Davis-Bacon rate that Labor had
not established. An official at one CAA we visited reiterated this
concern, adding that his CAA had not received information on the New
Jersey rate in writing. As a result, the official was reluctant to
commence weatherization work using Recovery Act funds. Accordingly, the
CAA used its initial Recovery Act weatherization funds for start-up
activities such as hiring, training, and procuring vehicles.
NJDCA officials said the department was not aware of any CAAs that had
begun actual weatherization work with the initial allocation of
Recovery Act funds, mitigating the need for likely wage adjustments. In
some instances, Labor's wage determinations (by county) were lower than
New Jersey's established rate of $17.40 per hour (plus benefits) for
all trades. For example, in Ocean County, the rate for weatherization
workers installing windows and doors was set at $14.09 per hour (plus
$4.08 per hour in benefits). Conversely, some of Labor's rates were
higher than what New Jersey established. For example, in Somerset
County, the HVAC's mechanic wage was $24.45 per hour (plus 0.77 per
hour in benefits). NJDCA officials commented that by establishing a
rate of $17.40 per hour (plus benefits) before Labor established its
rates, New Jersey was essentially able to ensure that wages and
benefits would not go below this floor rate, even if Labor set lower
rates for counties.
NJDCA weatherization program officials told us they had not received a
survey from Labor seeking input on wage rate determinations. However,
they were aware that Labor had sought guidance from other sources in
New Jersey, including CAAs, before making its wage determinations. As
we reported in July 2009, NJDCA officials anticipated Labor setting a
lower wage rate than what New Jersey established, primarily because New
Jersey has generally high wages and is a strong union state.[Footnote
51]
State Officials Are Relying on Existing Procedures to Monitor the Use
of Recovery Act Weatherization Funds, but Acknowledge Increased Risk:
NJDCA officials said they will rely on its existing systems and
procedures to determine risk and monitor procurement and disbursement
of funds.
To monitor risk associated with Recovery Act funds, DCA expects CAAs to
maintain detailed records in the Hancock Energy Software Weatherization
Assistance Program (HESWAP), an online reporting system that is NJDCA's
primary accountability tool for tracking and managing the use of
Recovery Act funds. While the agency has not performed a formal risk
assessment of the CAAs, NJDCA officials said that this assessment is
built into their approval and monitoring process. For example, they
said monitors review 100 percent of household applications for
weatherization, and NJDCA strictly enforces procurement procedures.
Further, NJDCA assigns a risk level of high, medium, or low to CAAs
based on their past performance and determines the level of funding
each should receive based in part, on their risk level. For example, as
of September 9, 2009, NJDCA officials designated three CAAs as "high
risk," and thus, these CAAs would receive the lowest amount of
weatherization Recovery Act funding--$500,000 each. In addition, NJDCA
officials said they analyze relevant audit results, such as those
obtained from Single Audit reviews, to assess CAAs' performance and
determine appropriate funding levels.
According to NJDCA program officials, the weatherization program relies
on a decentralized procurement system for the entire procurement
process.[Footnote 52] NJDCA has delegated purchasing responsibilities
to CAAs, although NJDCA officials said they were considering developing
a centralized list of approved weatherization materials suppliers.
Also, according to a NJDCA program official, contractors who attended a
NJDCA weatherization conference expressed a high level of interest in
joining a national buyers' group for weatherization activities in order
to obtain materials at a more cost-effective rate. In order to monitor
procurement activities, program officials said that NJDCA uses HESWAP
as an internal control to monitor the work activities of CAAs. HESWAP
tracks authorizations and project costs and creates payment invoices.
According to a NJDCA official, the system is designed to disallow
reimbursement for materials not on NJDCA's approved list.
Finally, NJDCA officials said they will monitor the disbursement of
Recovery Act funds to CAAs through its System for Administering Grants
Electronically (SAGE). SAGE assists their efforts to ensure that funds
are disbursed properly because it enables them to manage executed
grants. In addition, NJDCA officials said they would rely on HESWAP.
NJDCA officials cited SAGE and HESWAP as important internal controls in
monitoring grant expenditures.
New Jersey's Office of the State Auditor (OSA) has raised general
concerns about risks associated with the expenditure of Recovery Act
funds at the local level, though it has not yet specifically reviewed
DCA's weatherization program.[Footnote 53] As a result of these
concerns, OSA sent a letter to the Governor and the Legislature
recommending that oversight groups ensure transparency, accountability,
and compliance with specific programmatic goals before disbursing
substantial Recovery Act funds. OSA staff stated that deficiencies they
identified in some programs that were receiving Recovery Act funds have
serious implications for other Recovery Act programs, such as
weatherization assistance. They based their conclusions on their review
of independent financial and Single Audits of a sample of New Jersey
local entities for four Recovery Act programs that have been allocated
a total of $220.7 million in direct funding.[Footnote 54] OSA found
that these external audits revealed historical transparency and/or
accountability risks and grant compliance issues at a number of these
entities. For example, they discovered that one municipality that was
allocated a combined total of $2.7 million from three Recovery Act
programs had ineffective financial controls. At the time of our review,
OSA officials said they were preparing to undertake a similar audit of
a sample of programs, including weatherization, receiving Recovery Act
funding through the state's accounting system.
Another potential risk is that NJDCA is allocating the largest amount
of Recovery Act funds--$30 million for weatherization projects--to the
New Jersey Housing Mortgage & Finance Agency (NJHMFA), primarily to
weatherize multifamily units. NJHMFA is established under, but is not a
part of, the New Jersey Department of Community Affairs. It is
constituted as an instrument of the state, exercising public and
essential governmental functions, and for the purposes of
weatherization, considered a local government affiliate. According to
its 2008 financial statement, NJHMFA has extensive experience in
construction and property management, financing, and energy-efficient
design for multifamily dwellings.[Footnote 55] However, NJHMFA does not
have prior experience in weatherizing homes. According to NJHMFA
officials, NJDCA solicited the NJHMFA to participate in the Recovery
Act weatherization program, although the agency has not performed
weatherization work in the past. NJDCA officials explained that most of
the regular weatherization appropriations go toward weatherizing
single- family dwellings. With the availability of the Recovery Act
funds, NJDCA wanted to ensure that tenants who live in multifamily
units also benefit from these funds. To mitigate the fact that NJHMFA
has not conducted weatherization work in the past, NJDCA said that
monitors will inspect 100 percent of the approximately 3,900 units that
NJHMFA is expected to complete over a 3-year time frame. However, since
this is a substantial number of units, the inspections may not be
timely. Such inspection delays could result in payment delays and limit
the ability to complete other work. As of September 9, 2009, NJDCA had
not provided any weatherization funds to NJHMFA. NJDCA was still in the
process of drafting a memorandum of understanding with NJHMFA to focus
on weatherizing multifamily units in NJHMFA's portfolio.
Weatherization Program Not Included in 2007 and 2008 Single Audit
Reports:
The weatherization program was not included in the 2007 and 2008 Single
Audit reports in because New Jersey's independent auditor did not
identify this program as a major program based on risk criteria,
including minimum dollar thresholds, set out in the Single Audit Act
and OMB Circular No. A-133. According to NJDCA's internal auditor,
weatherization is being included in the 2009 Single Audit, given the
large influx of funds as a result of the Recovery Act.
The 2005 Single Audit report identified two findings in the
weatherization program, and one was a material weakness related to
reporting. Specifically, NJDCA did not establish a procedure to
reconcile the expenditures charged to the programs[Footnote 56] with
the amounts reported on the Schedule of Expenditures of Federal Awards,
which is generated by the New Jersey Department of Treasury. The
independent auditor issued a qualified opinion[Footnote 57] on New
Jersey's compliance with the weatherization program for 2005 because of
these findings.
The 2006 Single Audit report identified three findings in the program.
Two were related to reporting and were material weaknesses, one of
which was the same material weakness identified in 2005. The second
material weakness was that DCA did not have adequate policies and
procedures in place to ensure that the federal financial report was
properly completed, supported by accurate documentation, and reviewed
by a supervisor prior to its submission. The independent auditor also
issued a qualified opinion in 2006 on New Jersey's compliance with the
weatherization program for the year ending June 30, 2006, because of
these findings. The state implemented several corrective action plans
to address the Single Audit findings, including the timely
reconciliation of accounts and meeting reporting requirements.
Weatherization Program Officials Do Not Foresee Challenges in Meeting
Federal Reporting Requirements:
NJDCA Officials Say They Can Meet OMB Reporting Requirements:
NJDCA is the prime recipient of weatherization funds and is therefore
responsible for meeting Recovery Act reporting requirements. NJDCA
officials said they did not have concerns about their ability to meet
the various reporting requirements, including the Section 1512[Footnote
58] requirements for reporting on the use of funds and job creation and
retention.[Footnote 59] According to NJDCA officials, they will be able
to meet the reporting requirements primarily because HESWAP provides
access to real-time information about each CAA's weatherization
projects, including costs, and SAGE provides information about grant
management. Also, the CAAs are able to access this same information,
which facilitates their reporting on a timely basis.[Footnote 60] At
the time of our review, DOE required quarterly reporting for the
weatherization program. However, according to one of the NJDCA
officials, DOE indicated at a conference in July that it intended to
change this requirement to monthly reporting. NJDCA officials said they
did not anticipate such a change posing a challenge for them. NJDCA
officials further stated that they have participated in Webinars to
obtain clarification on guidance. They said they were beginning to
prepare for the required October 10 report to OMB, noting that CAAs are
encouraged to provide their reports to NJDCA by September 15.
NJDCA officials said they had not delegated any reporting requirements
responsibilities to the CAAs as OMB allows. However, officials from the
New Jersey Governor's Office stated that the New Jersey Recovery
Accountability Task Force had sent written guidance to state and local
entities concerning reporting requirements.
Program Officials Have Not Begun to Measure Impact of Recovery Act
Funds on Energy Savings:
A NJDCA official said they have not yet attempted to measure the impact
of Recovery Act weatherization funds on energy savings, primarily
because they have not yet received guidance from DOE on how to do so.
This official stated that using DOE's historical methodology to
calculate energy savings is logical. It is a formula-based approach
that is a part of the energy audit system that DOE uses to calculate a
savings-to-investment ratio. He further commented that DOE's
traditional approach has provided a clear indication of savings and
efficiencies for each measure used, and therefore would be appropriate
to measure the impact of Recovery Act funds on energy savings. This
NJDCA official said that for its regular weatherization appropriations
funding, they have relied on a list of "Priority Measures" that DOE
approved. These measures include assessing items such as health and
safety testing, attic insulation, and window and door replacement.
Update on Amount of Public Housing Capital Funds Obligated by Public
Housing Agencies in New Jersey:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; develop, finance, and modernize public housing
developments; and improve management.[Footnote 61] The Recovery Act
requires the U.S. Department of Housing and Urban Development (HUD) to
allocate $3 billion through the Public Housing Capital Fund to public
housing agencies using the same formula for amounts made available in
fiscal year 2008. Recovery Act requirements specify that public housing
agencies must obligate funds within 1 year of the date on which they
are made available to public housing agencies, expend at least 60
percent of funds within 2 years, and expend 100 percent of the funds
within 3 years. Public housing agencies are expected to give priority
to projects that can award contracts based on bids within 120 days from
the date on which the funds are made available, as well as projects
that rehabilitate vacant units, or those already under way or included
in their current required 5-year capital fund plans.
HUD is also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofit investments. In a Notice
of Funding Availability published May 7, 2009, and revised June 3,
2009, HUD outlined four categories of funding for which public housing
agencies could apply:
* creation of energy-efficient communities ($600 million);
* gap financing for projects that are stalled due to financing issues
($200 million);
* public housing transformation ($100 million); and:
* improvements addressing the needs of the elderly or persons with
disabilities ($95 million).
* For the creation of energy-efficient communities, applications (which
were due July 21, 2009) were to be rated and ranked according to
criteria outlined in the Notice of Funding Availability. The last three
categories will be threshold-based, meaning applications that meet all
the threshold requirements will be funded in order of receipt. If funds
are available after all applications meeting the thresholds have been
funded, HUD may begin removing thresholds after August 1, 2009, in
order to fund additional applications in the order of receipt until all
funds have been awarded. Applications in these three categories were
accepted until August 18, 2009.
* New Jersey has 80 public housing agencies to which HUD allocated
Recovery Act formula grants. In total, these public housing agencies
received $104 million in Public Housing Capital Fund formula grants
(see figure 4). As of September 5, 2009, 64 of these public housing
agencies have obligated $31 million and 46 of these public housing
agencies have drawn down $6.1 million. GAO visited four public housing
agencies in New Jersey for our July 2009 report. These are the Newark
Housing Authority, the Plainfield Housing Authority, the Rahway Housing
Authority, and the Trenton Housing Authority. We will provide updated
information on these housing agencies in a future report.
Figure 4: Percentage of Public Housing Capital Funds Allocated by HUD
That Have Been Obligated and Drawn Down in New Jersey as of September
5, 2009:
[Refer to PDF for image: 3 pie-charts]
Funds obligated by HUD: 100% ($104,165,767); Funds obligated by public
housing agencies: 29.6% ($30,855,617); Funds drawn down by public
housing agencies: 5.9 ($6,112,385).
Number of public housing agencies: Entering into agreements for funds:
80;
Number of public housing agencies: Obligating funds: 64; Number of
public housing agencies: Drawing down funds: 46.
Source: GAO analysis of HUD data.
[End of figure]
New Jersey's Comments on This Summary:
We provided the Governor of New Jersey with a draft of this appendix on
September 3, 2009. The Governor's Chief of Staff, who serves as the co-
chair for the Governor's Recovery Accountability Task Force, responded
for the Governor on September 8, 2009. The official provided technical
suggestions that were incorporated, as appropriate.
GAO Contacts:
David Wise, (202) 512-2834 or wised@gao.gov:
Gene Aloise, (202) 512-6870 or aloisee@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Raymond Sendejas, Assistant
Director; Tahra Nichols, analyst-in-charge; Diana Glod; Tarunkant
Mithani; Vincent Morello; Nitin Rao; Gary Shepard; and Cheri Truett
made major contributions to this report.
[End of section]
Footnotes for Appendix XII:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] New Jersey's Department of Community Affairs, the agency
administering the weatherization program, defines the term "obligate"
as monies available for Community Action Agencies (CAA) to draw down
and the term "disburse" as monies CAAs have drawn down.
[3] GAO, Recovery Act States' and Localities' Current and Planned Uses
of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[4] Recovery Act funds used to stabilize the state's operating budget
includes funds made available as a result of the increased Federal
Medical Assistance Percentage (discussed in detail in the main report--
see [hyperlink, http://www.gao.gov/products/GAO-09-1016], SFSF funds,
and Temporary Assistance for Needy Families contingency funds.
[5] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[6] See [hyperlink, http://www.gao.gov/products/GAO-09-1016] for a
detailed description of these programs.
[7] NJED officials allocated the total amount of SFSF education
equalization funds they expected to receive and that were included in
New Jersey's fiscal year 2010 budget.
[8] New Jersey received about $240 million in SFSF government services
funds and plans to use the funds for a range of budget stabilization
purposes, including education.
[9] According to the U.S. Department of Education's guidance on SFSF,
states must have an effective system to ensure that entities are able
to draw down funds as needed to pay program costs but that also
minimizes the time that elapses between the transfer of the funds and
their disbursement by the grantee or subgrantee, in accordance with
U.S. Department of the Treasury regulations at 31 C.F.R. Part 205.
Education requires grantees and subgrantees to remit interest earned on
advances to the department at least quarterly. 34 C.F.R. §80.21(i).
[10] Because New Jersey is using SFSF Recovery Act funds, LEAs will
have to separately track expenditures. According to guidance provided
by NJED regarding SFSF, LEAs will have to track three separate funding
sources--state funds, government services funds, and education
stabilization funds--that will equal the total amount of funding the
state would have provided. This requirement to track funds separately
will require LEAs to make the equivalent adjustment to expenditure
accounts. As such, NJED strongly recommended that LEAs make the
expenditure side adjustments in salary accounts to minimize accounting
errors. The guidance on SFSF also noted that while NJED recommends
using SFSF for salaries, LEAs can make the adjustments to expenditure
accounts in any general fund category consistent with the programs
authorized under ESEA, except for the prohibited categories.
[11] Officials from New Jersey's Office of the Governor noted that NJED
plans to use the quarterly reports to monitor compliance with federal
cash management requirements.
[12] The electronic applications contained LEAs' planned uses of
Recovery Act funds, as well as actual activities implemented. LEAs can
obligate funds after NJED designates applications as "substantially
approvable."
[13] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[14] NJED required LEAs to submit a plan for each Recovery Act-funded
activity.
[15] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[16] Extended school year services are special education and related
services that are provided to a child with a disability beyond the
normal school year, in accordance with the child's Individualized
Education Plan, and at no cost to the parents of the child.
[17] Newark Public Schools budgeted and was approved for 22 teachers;
however, 14 teachers actually participated.
[18] The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507),
requires that each state, local government, or nonprofit organization
that expends $500,000 or more a year in federal awards must have a
Single Audit conducted for that year subject to applicable
requirements, which are generally set out in Office of Management and
Budget Circular No. A-133, Audits of States, Local Governments and Non-
Profit Organizations (June 27, 2003). If an entity expends federal
awards under only one federal program, the entity may elect to have an
audit of that program.
[19] According to the 2008 Single Audit, NJED's records indicated that
staff conducted 22 desk reviews, but the department's tracking system
indicated that staff conducted 6 desk reviews. NJED's response to these
findings attributed the low number of desk reviews to a lack of staff.
[20] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[21] New Jersey's Governor created the New Jersey Recovery
Accountability Task Force to monitor the distribution of Recovery Act
funds in New Jersey and promote the efficient use of those funds. One
role of this entity is to provide guidance to agencies receiving
Recovery Act funds on merit-based project selection, internal controls,
accounting practices, and best practices in contract management and
grant administration.
[22] 74 Fed. Reg. 41402. These two programs have limits, in place
before the Recovery Act was passed, on the amount of funds states may
reserve for administration. The Recovery Act allows the Secretary of
Education to make reasonable adjustments to those limits to help states
meet the additional data collection burden related to administering,
monitoring, and reporting on the use of the funds.
[23] New Jersey's Quality Single Accountability Continuum (NJQSAC) is
used to monitor and evaluate LEA adherence to state goals by evaluating
LEAs' performance in five areas: instruction and program; personnel;
fiscal management; operations; and governance.
[24] For the Highway Infrastructure Investment Program, U.S. DOT has
interpreted the term obligation of funds to mean the federal
government's contractual commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement.
[25] States request reimbursement from FHWA as the state makes payments
to contractors working on approved projects.
[26] MPOs are federally mandated regional organizations, representing
local governments and working in coordination with state departments of
transportation that are responsible for comprehensive transportation
planning and programming in urbanized areas. MPOs facilitate decision
making on regional transportation issues, including major capital
investment projects and priorities.
[27] The three contracts we reviewed and discussed with New Jersey DOT
officials were for repaving, road rehabilitation, and for project
design. The three contracts were for a total value of $113 million and
are expected to be completed in the next 1 to 3 years.
[28] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[29] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[30] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, §1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast, under
the existing program, operating assistance is generally not an eligible
expense for transit agencies within urbanized areas with populations of
200,000 or more.
[31] The federal share under the existing formula grant program is
generally 80 percent.
[32] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and metropolitan planning
organizations designated for the area. Metropolitan planning
organizations are federally mandated regional organizations,
representing local governments and working in coordination with state
departments of transportation that are responsible for comprehensive
transportation planning and programming in urbanized areas. MPOs
facilitate decision making on regional transportation issues including
major capital investment projects and priorities. To be eligible for
Recovery Act funding, projects must be included in the region's TIP and
the approved State Transportation Improvement Program (STIP).
[33] Pub. L. No. 111-5, 123 Stat. 115,209 (Feb. 17, 2009).
[34] Pub. L. No. 111-5 §1201(a).
[35] Pub. L. No. 111-32, §1202.
[36] The independent auditor identified one significant deficiency
related to NJT's leveraged leases, whose outstanding amount as of June
30, 2008, is approximately $1.6 billion. Specifically, there is only
one NJT employee who has in-depth knowledge of how these transactions
are developed and monitored throughout the life of the lease. This
employee maintains the closing documents for each of the transactions.
As a result, a summary of outstanding leveraged lease obligations was
not prepared and monitored, thus preventing NJT management from
identifying and reporting that it was in technical default.
[37] Internal control is an integral component of an organization's
management that provides reasonable assurance that the objectives of
effectiveness and efficiency of operations, reliability of financial
reporting, and compliance with applicable laws and regulations are
being achieved. Internal controls also serve as the first line of
defense in safeguarding assets and preventing and detecting errors and
fraud. Organizations that award and receive grants need good internal
control systems to ensure that funds are properly used and achieve
intended results.
[38] FTA reviewed 26 areas, ranging from program management to safety
and security, and found 11 deficiencies in 6 areas, in particular civil
rights programs. In addition, 4 of the 11 deficiencies were related to
inadequate monitoring over compliance with the Disadvantaged Business
Enterprise (DBE) program. Specifically, NJT did not examine DBE
payrolls, payments, and equipment used to verify that work committed to
DBEs is actually performed by DBEs.
[39] OMB Memorandum M-09-21, Implementing Guidance for the Reports on
Use of Funds Pursuant to the American Recovery and Reinvestment Act of
2009 (June 22, 2009), states that recipients should not report on the
employment impact on materials suppliers and central service providers
(so-called "indirect" jobs) or on the local community ("induced" jobs).
Employees who are not directly charged to Recovery Act supported
projects or activities, who provide critical indirect support (e.g.,
clerical/administrative staff preparing reports, institutional review
board staff members, departmental administrators) are also not counted
as jobs created or retained.
[40] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[41] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[42] DCA is a state agency that provides administrative guidance,
financial support and technical assistance to local governments,
community development organizations, businesses, and individuals to
improve the quality of life in New Jersey.
[43] The 22 entities include 21 CAAs and a local government
organization.
[44] According to the NJDCA officials, when DOE released an additional
40 percent of weatherization funding in July 2009, they had to change
the CAAs' grant agreements to address these funds.
[45] According to a NJDCA official, the New Jersey Attorney General's
office is reviewing the grant agreements with a higher level of review
than typical grant agreements as a proactive measure.
[46] NJDCA defines these four entities as high risk due to performance
issues or being a new NJDCA weatherization entity.
[47] Approximately $6.1 million for training and technical assistance
purposes was available to CAAs and local government entities.
[48] This CAA is allocated a total of $3 million of Recovery Act
weatherization funds.
[49] Pub. L. No. 111-5, §1606, 123 Stat. 115, 303 (Feb. 17, 2009).
[50] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[51] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[52] However, according to NJDCA officials, CAA procurements must
adhere to a centralized list of approved materials.
[53] At the time of our review, state auditors were in the process of
completing one segment of a two-part audit on a sample of programs that
are receiving Recovery Act funds. The first part focused on monies
going directly municipalities from the federal entity. The second part
of the audit would involve Recovery Act funds that were passing through
the state to program agencies. They began this portion of the work in
August 2009.
[54] The four programs are: the Community Development Block Grant,
Homelessness Prevention/Rapid Re-housing Grant, Energy Efficiency and
Conservation Block Grant, and Public Housing Capital Fund Grant.
[55] NJHMFA's 2008 Annual Report states that the entity is dedicated to
increasing the availability of and accessibility to safe, decent, and
affordable housing for families. According to NJHMFA officials, the
entity operates similar to a bank; has been in existence for 42 years;
has completed 350 ongoing projects in New Jersey; and has modernized
over 45,000 units, including 10,000 single family units.
[56] Specifically, these programs were the Weatherization Assistance
for Low-Income Persons Program and Community Services Block Grant
Program.
[57] A qualified opinion report is issued when the auditor encountered
one of two types of situations which do not comply with the types of
compliance requirements described in OMB Circular No. A-133 Compliance
Supplement and the New Jersey State Grant Compliance Supplement that
are applicable to each of its major federal and state programs. This
type of opinion is very similar to an unqualified or "clean opinion,"
with a certain exception that the program did not comply with the
requirements of laws, regulations, contracts, and grants applicable to
each of its major federal and state programs.
[58] Pub. L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009).
[59] As of late August, the Director of the weatherization program
stated that some additional guidance from OMB was still pending on
minor issues involving counting jobs created.
[60] However, program officials acknowledged that NJDCA must allow for
the monitoring, review, and approval of an inspected unit. Once these
activities are complete, the information becomes real-time in HESWAP
and can then be submitted to DOE as a completed project.
[61] Public housing agencies receive money directly from the federal
government (HUD). Funds awarded to the public housing agencies do not
pass through the state budget.
[End of section]
Appendix XIII: New York:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in New York. The full report on all of our work,
which covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery/].
New York, the nation's third most populous state and home of the
nation's largest city and most important financial center, continues to
be hit hard by the current recession. It expects to receive about $26.7
billion in Recovery Act funds plus possible additional discretionary
program funds through the end of 2011. About $11 billion will be for
Medicaid; $5 billion will be for education; and another $2.4 billion
for highway and transit projects.
GAO's work in New York for this third bimonthly review focused on the
efforts of the state to stabilize its budget and meet the Recovery
Act's first reporting requirements for recipients of Recovery Act
funds. We also focused on three Recovery Act programs--the Transit
Capital Assistance Program, the Weatherization Assistance Program, and
the Workforce Investment Act Youth Program (WIA)--and updated funding
information on the highway construction and public housing programs. We
selected these programs for different reasons:
* The Transit Capital Assistance funds had a September 1, 2009 deadline
for obligating a portion of the funds and, further, provided an
opportunity to review transit agencies receiving Recovery Act funds,
including the Metropolitan Transportation Authority (MTA), which
manages the nation's largest transit system.
* The Weatherization Assistance Program in New York received an almost
400 percent increase in funding as a result of the Recovery Act. The
program began on June 26, 2009, providing us the opportunity to look at
how state and local agencies are planning to oversee and implement
financial controls, track funding, and report results.
* The WIA Youth program in New York also experienced significant growth
due to Recovery Act funds and many summer employment activities funded
by the Recovery Act were in full operation at the time of our review.
Within these programs, we focused on how funds were being used, how
internal controls and safeguards were being implemented, and how
results were being assessed. Consistent with the purposes of the
Recovery Act, funds from the programs we reviewed are being directed to
help New York and local governments stabilize their budgets and
stimulate infrastructure development and expand existing programs--
thereby providing needed services and potential jobs. The following
provides highlights of our review of these programs:
Budget Stabilization:
* New York State addressed a significant 2-year budget gap of $20.1
billion when it enacted its fiscal year 2009-2010 Budget Financial Plan
on April 28, 2009,[Footnote 2] with the help of approximately $6.2
billion in Recovery Act funds and other measures.
* Continued declining revenues and the current economic environment
resulted in a forecasted $2.1 billion budget gap for the state at the
end of its first quarter for fiscal year 2009-2010.
* The state's proposal to address this budget gap is expected to be
deliberated in early fall 2009.
Highway Infrastructure Investment Funds:
* The U.S. Department of Transportation's Federal Highway
Administration (FHWA) apportioned $1.12 billion in Recovery Act funds
to the New York State Department of Transportation (NYSDOT) in March
2009.
* As of September 1, 2009, the federal government had obligated about
$783 million to New York, and about $23 million had been reimbursed by
the federal government.
* According to NYSDOT, it has used Recovery Act funds to award
contracts for about 194 projects, 190 of which have begun construction.
Since June, NYSDOT has made progress in the number of contracts awarded
and the proportion of projects that are located in economically
distressed areas.
Transit Capital Assistance Program:
* The U.S. Department of Transportation's Federal Transit
Administration (FTA) apportioned over $1.3 billion in Recovery Act
funds to the state of New York and urbanized areas (UZA) that include
localities in New York. As of September 1, 2009, FTA had obligated $1.1
billion.
* FTA was slow to obligate these funds, because of its lengthy grant
review processes, but as of September 1, 2009, FTA concluded that the
50 percent obligation requirement had been met for New York and
urbanized areas located in the state.
* The Metropolitan Transportation Authority (MTA)--the largest transit
agency in the country and recipient of the most Recovery Act Transit
Capital Assistance Program funds in New York --used preaward authority
to begin Recovery Act projects in advance of FTA's obligation of the
funds.[Footnote 3] MTA will receive its Transit Capital Assistance
Program funding through two grants worth over $660.2 million.[Footnote
4] MTA plans to use these funds to pay for a series of maintenance and
capital projects throughout the MTA transit system.
Weatherization Assistance Program:
* On June 26, 2009, the U.S. Department of Energy (DOE) approved New
York State's plan for the use of Recovery Act funds in the
Weatherization Assistance Program authorizing expenditure of 50 percent
($197.3 million) of its total allocation for this program ($394.7
million).
* According to officials, as of August 31, 2009, no funds have been
disbursed. The state's Division of Housing and Community Renewal which
reviews the contract applications submitted by the 64 subgrantees that
implement the program for the state has approved nine contract
applications obligating $27.5 million. The division anticipates that
the remaining contract applications will be approved by October 15,
2009. However, officials told us that the need to address Davis-Bacon
requirements, which were not imposed on the program before the Recovery
Act, had complicated the contract-review process and created
uncertainty over labor costs until prevailing wage rates were
determined by September 3, 2009.
Workforce Investment Act Youth Program (WIA):
* The U.S. Department of Labor (Labor) allotted about $71.5 million to
New York in WIA Recovery Act funds.
* The state has allocated $60.8 million to the state's 33 local
workforce areas and, as of August 31, 2009, local areas had expended an
estimated $34.6 million.
* New York summer youth employment programs exceeded their goal by
enrolling over 24,000 youth in summer jobs.
* We visited the government entity managing the WIA Youth program in
Oneida County. It employed various strategies to help overcome
eligibility challenges and to retain older youth at the end of the
summer. For example, Oneida County hired four employees from May to
December 2009 that assisted youth in the eligibility process.
Public Housing Capital Fund:
* New York State has 84 public housing agencies that have received
Recovery Act formula grant awards through the Public Housing Capital
Fund, totaling $502.3 million.
* As of September 5, 2009, 59 of the state's 84 public housing agencies
have obligated $154.4 million, while 43 have expended $2.9 million.
Recovery Act Reporting:
* New York State has a major planning effort in place to meet the
Recovery Act's first recipient reporting deadline of October 10,
2009.[Footnote 5] However, some concerns remain about the ability of
recipients in the state that received Recovery Act funds to submit
complete reports by the October 10, 2009 reporting deadline, which is
10 days after the end of the quarter; ensure that all subrecipients'
data will be included; and report on specific performance measures.
* New York State has contracted with a consultant to assist the state
in meeting its first-round reporting requirements in October.
* State officials said that state agencies vary in their thoroughness
of planning and capability to meet Recovery Act reporting requirements.
Although Recovery Act Funds Helped New York Close a Budget Gap for
Fiscal Year 2009-2010, New York Now Estimates a Shortfall Due to
Decreased Tax Receipts:
As noted in our July 2009 report, New York closed budget gaps of $2.2
billion for fiscal year 2008-2009 and $17.9 billion for fiscal year
2009-2010.[Footnote 6] To help close the combined budget gap of $20.1
billion over these two fiscal years, New York used about $5 billion in
funds made available as a result of the increased Medicaid Federal
Medical Assistance Percentage (FMAP).[Footnote 7] In addition, the
state plans to use approximately $1.2 billion of Recovery Act State
Fiscal Stabilization Fund (SFSF) funds to further alleviate this gap.
New York State issued its 2009-2010 Financial Plan First Quarterly
Update on July 30, 2009. The state now estimates a General Fund budget
gap of $2.1 billion in the current fiscal year and projects budget
shortfalls growing to $18.2 billion by fiscal year 2012-2013. Based on
New York's first quarterly update, approximately 93 percent of the
state's current year gap is due to a forecast for a reduction in state
tax receipts. The remaining shortfall is due to General Fund
disbursement revisions for several areas, such as a decrease in
projected lottery receipts and escrow payments from other funds that
offset the General Fund costs. The state expects that out-year budget
gaps will be the result of both decreased receipts and increased
disbursements. Table 1 shows the state's revised gaps between its 2009-
2010 Enacted Budget Financial Plan and its 2009-2010 Financial Plan
First Quarterly Update.[Footnote 8]
Table 1: Comparison of New York State's 2009-2010 Enacted Budget
Financial Plan and Its 2009-2010 Financial Plan First Quarterly Update
(Dollars in millions):
Fiscal year: 2009-2010;
Enacted budget surplus/(gap) estimate: $0; First quarter revisions:
($2,123);
First quarterly update surplus/(gap) estimate: ($2,123).
Fiscal year: 2010-2011;
Enacted budget surplus/(gap) estimate: ($2,166); First quarter
revisions: ($2,457);
First quarterly update surplus/(gap) estimate: ($4,623).
Fiscal year: 2011-2012;
Enacted budget surplus/(gap) estimate: ($8,757); First quarter
revisions: ($4,519);
First quarterly update surplus/(gap) estimate: ($13,276).
Fiscal year: 2012-2013;
Enacted budget surplus/(gap) estimate: ($13,706); First quarter
revisions: ($4,457);
First quarterly update surplus/(gap) estimate: ($18,163).
Fiscal year: Cumulative total;
Enacted budget surplus/(gap) estimate: ($24,629); First quarter
revisions: ($13,556);
First quarterly update surplus/(gap) estimate: ($38,185).
Source: New York State's 2009-2010 Financial Plan First Quarterly
Update, July 30, 2009.
[End of table]
New York continues to plan for and use Recovery Act funds for its
current fiscal year. Specifically, budget officials said that, to date,
there have been no changes in the state's planned use of $3.7 billion
in funds made available as a result of the increased FMAP and $1.2
billion in SFSF funds for budget stabilization during the state's
current fiscal year. To address the current-year deficit, the Governor
will work with the legislature to develop an Economic and Fiscal
Recovery Plan in early fall 2009. According to these officials, the
plan will explore all avenues of state spending and will, through the
Governor's Office of Taxpayer Accountability, identify areas for
savings by examining opportunities to reduce waste, fraud, and abuse in
state government. In anticipation of these actions and the allocation
of Recovery Act funds, budget officials do not expect the state to use
its rainy-day or reserve funds.[Footnote 9]
State budget officials have taken two main preliminary steps to plan
for the eventual phase out of Recovery Act funds. Specifically, the
state has, wherever possible (1) applied the Recovery Act funds to
nonrecurring items and program restorations and (2) clearly identified
the restorations that are made possible with Recovery Act funds. State
officials expect to consider additional actions for mitigating the
phasing out of funds as they develop the 2010-2011 Budget Financial
Plan.
In response to the Office of Management and Budget's (OMB) May 11,
2009, memorandum,[Footnote 10] New York budget officials stated that
OMB's guidance has had little impact on the state's effort to recoup
Recovery Act centralized implementation and oversight costs. State
officials based this viewpoint on further discussion with federal
agencies and other state budget officials. The state understands the
OMB guidance as only allowing up to 0.5 percent reimbursement of total
Recovery Act funds for central administrative costs. Budget officials
added that their understanding is that this 0.5 percent can only be
applied against the subset of Recovery Act programs that specifically
allow reimbursement for administrative costs. In addition, New York
believes that any effort to secure reimbursement for centralized
implementation and oversight costs would reduce funding available to
state agencies for assisting in meeting their agency-specific
administrative and implementation costs. Finally, budget officials
believe that the Statewide Cost Allocation Plan (SWCAP)[Footnote 11]
process being used for recouping Recovery Act administrative costs is
cumbersome and lengthy. Due to these reasons, the state has not decided
whether to move forward with recouping these centralized costs.
New York Has Made Progress in Awarding Highway Contracts, with Over 40
Percent of Planned Recovery Act Projects Now under Construction:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The act requires that 30
percent of these funds be suballocated, primarily based on population,
for metropolitan, regional, and local use. Highway funds are
apportioned to the states through federal-aid highway program
mechanisms, and states must follow the existing program requirements,
which include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon requirements,
complying with goals to ensure disadvantaged businesses are not
discriminated against in the awarding of construction contracts, and
using American-made iron and steel in accordance with Buy America
program requirements. While the maximum federal fund share of highway
infrastructure investment projects under the existing federal-aid
highway program is generally 80 percent, under the Recovery Act, it is
100 percent.
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. One of the act's requirements is that
states must certify that they will maintain the level of spending for
the types of transportation projects funded by the Recovery Act that
they planned to spend the day the Recovery Act was enacted. As part of
this certification, the governor of each state is required to identify
the amount of funds the state plans to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 12]
As we previously reported in July 2009, $1.12 billion was apportioned
to New York in March 2009 for highway infrastructure and other eligible
projects. As of September 1, 2009, about $783 million had been
obligated[Footnote 13] and about $23 million, or 3 percent of
obligations, had been reimbursed by FHWA.[Footnote 14] This does not
include obligations associated with $175.5 million of apportioned funds
that were transferred from the Federal Highway Administration (FHWA) to
the Federal Transit Administration (FTA) for transit projects.[Footnote
15] Almost all of these funds ($175 million) are for a project to
rehabilitate seven ramps carrying bus and passenger traffic in and out
of the St. George Ferry facility on Staten Island. The transfer of
funds to this project was initiated by Governor Paterson. The New York
City Department of Transportation and FTA will be responsible for this
project and the associated Recovery Act reporting. This project is the
single largest use of Recovery Act highway funds for an individual
project in New York State, and accounts for about 16 percent of New
York's total apportionment. New York has transferred more of its
apportioned highway funds to transit projects than all other states
plus the District of Columbia combined. The $175.5 million New York has
transferred to transit projects accounts for about 61 percent of total
funds transferred to FTA by all states nationwide.
Approximately 46 percent of Recovery Act highway obligations for New
York have been for pavement improvement projects with only a small
percentage having been obligated for pavement widening and new road
construction. Specifically, $364 million of the $783 billion obligated
to New York as of September 1, 2009, is being used for pavement
improvement projects such as highway resurfacing and reconstruction,
including $143 million for resurfacing roads. In addition, as of
September 1, 2009, almost 30 percent of the funds obligated in New York
have been for bridge replacement and bridge improvement projects, which
is much higher than the national obligation average of 10 percent.
Figure 1 shows obligations by the types of road and bridge improvements
being made.
Figure 1: Highway Obligations for New York by Project Improvement Type
as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (50 percent, $389.9 million): Pavement
improvement ($363.5 million): 46%; Pavement widening ($12.3 million):
2%;
New road construction ($14 million): 2%.
Bridge projects total (30 percent, $235 million): Bridge improvement
($134.6 million): 17%; Bridge replacement ($100.4 million): 13%.
Other (20 percent, $158.3 million):
Other ($158.3 million): 20%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
According to NYSDOT, as of September 1, 2009, FHWA had obligated
funding for a total of about 358 projects. According to officials,
contracts have been awarded for about 194 of the authorized projects,
or 43 percent of the total 450 projects NYSDOT plans to complete using
Recovery Act funds. These awarded contracts total $412 million, or 37
percent of New York's total allocation. Of the projects with awarded
contracts, 190 of them, or 42 percent of all planned projects, were
under construction. In our July 2009 report, we reported that as of
June 17, 2009, 34 contracts had been awarded. The awarding of 160
contracts in 2 months has taxed NYSDOT's limited procurement staff as
well as staff in planning, design, construction, and information
technology. The Director of the NYSDOT Contracts Management Bureau
noted that they have hired no new procurement staff and that current
staff are working overtime in order to award the large number of
contracts.
NYSDOT officials reported that Recovery Act projects have often
received bids that are lower than the planned costs of the project,
resulting in contract prices as much as 10 to 12 percent lower than the
engineering cost estimates. This frees up funds for other projects on
the long backlog of New York transportation projects. A NYSDOT official
said the agency had anticipated that the construction market would be
saturated by now and that bid prices would begin rising. That has not
happened yet, however, and it reports that bids continue to come in
lower than the planned costs of the projects.
In July, we again visited the $14.9 million Delaware Avenue
reconstruction project in Albany, which we first visited in June. This
project is being managed by the City of Albany and was the first
construction contract funded by the Recovery Act awarded in the state.
This project started in April 2009, involves the complete
reconstruction of a 1.6-mile stretch of urban roadway, and employs
about 50 people. Project officials report that the project is currently
on budget, about 29 percent completed, and expected to be completed by
October 2010. Although the project is being funded entirely through the
Recovery Act, the City of Albany is currently paying the contractor and
billing NYSDOT for reimbursement.
We also visited a bridge included under a NYSDOT bridge painting
project that involves work in Herkimer and Oneida counties. This
contract was awarded on April 15, 2009, for $2.15 million. As we
reported previously, the original scope of this project was 8 bridges,
but, according to officials, NYSDOT was able to add 3 bridges to this
contract as a result of the Recovery Act funds. When we visited the
project worksite at the State Road 49 Bridge over Wood Creek near Rome
on July 29 (see figure 2), NYSDOT inspectors reported that the
contractor had 3 bridges remaining to be painted before the contract
completion date of November 30, 2009. NYSDOT officials reported that
the same crew of around 17 employees has worked on each bridge, and
that the additional 3 bridges allowed the crew to be employed later
into the season. The contractor for this project is based in western
New York and completes bridge and industrial painting projects in
Pennsylvania and Massachusetts.
Figure 2: Profile of a Highway Bridge Painting Project:
[Refer to PDF for image: map, 2 photographs, associated data]
Project: Highway Bridge Painting;
Lead agency: NYSDOT;
Description: Painting of 11 bridges;
Location: Herkimer and Oneida counties; Recovery Act Funds: $2.15
million;
Status: As of July 29, 8 bridges had been painted.
Map: Indicates the location of the project in New York State.
Photo #1:
Bridge painting enclosure on State Road 49 over Wood Creek, at the
border between town of Verona and city of Rome, New York.
Photo #2:
Bridge painting, which is funded by the Recovery Act, in progress
(brown paint is the new finish).
Sources: GAO (photographs); and Map Resources (map).
[End of figure]
As we reported previously, the Recovery Act requires states to give
priority to projects located in economically distressed areas, as
defined by the Public Works and Economic Development Act of 1965, as
amended.[Footnote 16] As of September 1, 2009, 58 percent of New York's
certified projects were in distressed areas. These projects currently
account for 33 percent of the total New York state Recovery Act funds,
up from about 25 percent in June.
NYSDOT Officials Believe That They Will Meet Recovery Act Reporting
Requirements:
NYSDOT officials reported that they are working to address OMB's June
22 guidance and are confident they will be able to meet the first OMB
reporting deadline of October 10. With the help of the consultant hired
by the state to assist state agencies in complying with Recovery Act
reporting requirements, NYSDOT has determined that approximately 80 to
90 percent of the data elements required by OMB are in its existing
database. NYSDOT is using OMB's data dictionary to program its database
with the remaining data elements. NYSDOT officials reported that to
meet the October 10 reporting deadline, they will gather information
from both the state-and local-let projects and will report directly to
OMB, in accordance with the current guidance from the New York
Governor's Office. For federal employment reporting purposes, all
Recovery Act-funded highway projects complete FHWA Form 1589 on a
monthly basis and record the total number of actual employees, number
of hours, and total payroll for the month. The information collected by
FHWA includes only employment information for jobs funded directly by
the Recovery Act.
Both of the Recovery Act highway projects we visited currently report
employment information monthly to NYSDOT but had not yet received
specific instruction on how to submit reporting information in
accordance with OMB's latest reporting guidance. For example, the
Delaware Avenue project's main contractor and consultant both fill out
the FHWA Form 1589 on a monthly basis on behalf of themselves and their
10 subcontractors. This form reports the number of employees on the
project, hours of work, and total payroll for the month. To date,
Delaware Avenue project officials have not received guidance from
NYSDOT regarding how it should report results in accordance with the
June 22 OMB Section 1512 reporting guidance, but are confident they
will be able to meet any new reporting requirements.
The NYSDOT Recovery Act Web site also reports on its certified highway
projects using other performance measures, such as miles of highway
resurfaced and number of bridges to be repaired. According to NYSDOT
officials, these performance measures were compiled using data from the
agency's management information system. See table 2 for a list of these
performance measures as of September 1, 2009.
Table 2: NYSDOT Planned Performance Measures by Project Type, for All
Projects Certified as of September 1, 2009:
Project type: Safety;
NYSDOT planned performance results for all Recovery Act projects
certified:
* 1,000 traffic signals;
* 11,208 large sign panels;
* 34 miles of guide rail.
Project type: Bridge repair;
NYSDOT planned performance results for all Recovery Act projects
certified:
* 269 bridges repaired;
* 234 bridges painted;
* 437 bridges cleaned.
Project type: Bridge replacement and rehabilitation; NYSDOT planned
performance results for all Recovery Act projects certified:
* 33 bridges replaced;
* 34 bridges rehabilitated.
Project type: Mobility, reliability, smart growth; NYSDOT planned
performance results for all Recovery Act projects certified:
* 1,131 new or improved street crossings;
* 97 miles of new or replaced sidewalks;
* 34 miles of new or replaced bike lanes.
Project type: Highway reconstruction and rehabilitation; NYSDOT planned
performance results for all Recovery Act projects certified:
* 372 lane-miles reconstructed;
* 220 lane-miles repaved;
* 22 large culverts replaced.
Project type: Highway repair;
NYSDOT planned performance results for all Recovery Act projects
certified:
* 1,575 lane-miles resurfaced;
* 299 lane-miles surface treated;
* 2,011 lane-miles of cracks and joints sealed;
* 188 large culverts repaired.
Source: NYSDOT data and GAO analysis.
[End of table]
NYSDOT Has Developed a Recovery Act Oversight Web site to Improve
Communication and Transparency but Has Not Addressed a Potential
Conflict of Interest Issue:
We reported on NYSDOT's internal controls over Recovery Act funds in
July 2009. In this report, we highlight NYSDOT's efforts to develop and
maintain a Web site that provides current information on Recovery Act
projects and report on a potential conflict of interest issue that was
first identified in an Office of the State Comptroller (OSC) audit
report.
The NYSDOT Recovery Act Web site, [hyperlink,
http://www.nysdot.gov/recovery], contains a wealth of information on
the state's highway infrastructure Recovery Act activity, such as the
total value, contractor, and status of projects that are searchable by
location, congressional district, and a variety of other
characteristics. NYSDOT officials reported that they view this Web site
as setting a new standard in terms of making Recovery Act status
information available to the public. NYSDOT plans to maintain the Web
site after the Recovery Act expires in September 2010 for its
traditional program and project activity for many programs, such as
transit, aviation, and rail.
The potential conflict of interest issue was reported on by the OSC in
January 2009. This issue involves the Director of NYSDOT's Audit and
Civil Rights Division who is also the department's Internal Control
Officer. As Director of the Audit and Civil Rights Division, this
individual's responsibilities include oversight of the Internal Audit
Bureau, which is charged under state law with reviewing agency
operations to assure compliance with management policies and the
effectiveness of internal controls. The Director was also designated as
the NYSDOT Internal Control Officer, who is charged under state law
with implementation and review of NYSDOT's internal control
responsibilities (the Enterprise Risk Management Bureau).[Footnote 17]
In addition, the Director was appointed to lead the Governor's Economic
Recovery and Reinvestment Cabinet Internal Controls and Fraud
Prevention Working Group. The working group is responsible for working
with state agencies to provide additional guidance on internal control
and fraud prevention to ensure compliance with the Recovery Act. In the
January 2009 report on the quality of NYSDOT's internal control
certifications, OSC recommended that, to effectively maintain
independence by avoiding a conflict of interest, NYSDOT should separate
the internal audit function and the internal control officer function.
The NYSDOT Executive Deputy Commissioner disagreed with this
recommendation.[Footnote 18] We agree with the OSC recommendation and
urge NYSDOT to reconsider its position.
The New York State Governmental Accountability, Audit, and Internal
Control Act of 1987[Footnote 19] (Internal Control Act) requires the
head of each agency to designate an internal control officer who
reports to the head of the agency and who is responsible for the
"implementation and review of the internal control responsibilities"
assigned to the agency head under the act. Agency heads are responsible
for establishing systems of internal control and programs of internal
control review, including periodic assessments of the adequacy of their
agency's ongoing internal controls. The act also states that the
internal audit function, when established in an agency, is to be headed
by an internal audit director, who is required to operate in accordance
with generally accepted professional standards for internal auditing.
These professional standards have been identified as the standards set
forth by the Institute of Internal Auditors (IIA) in the state's budget
guidance. IIA's standards state that "internal auditors must have an
impartial, unbiased attitude and avoid any conflict of interest."
[Footnote 20] The mandatory interpretation of this standard states
that, "conflict of interest is a situation in which an internal
auditor, who is in a position of trust, has a competing professional or
personal interest. Such competing interests can make it difficult to
fulfill his or her duties impartially. A conflict of interest can
create an appearance of impropriety that can undermine confidence in
the internal auditor, the internal audit activity, and the
profession.[Footnote 21] A conflict of interest could impair an
individual's ability to perform his or her duties and responsibilities
objectively."
A practice advisory to the IIA's standards states that "internal
auditors are not to accept responsibility for non-audit functions or
duties that are subject to periodic internal audit assessments. If they
have this responsibility, then they are not functioning as internal
auditors."[Footnote 22] In addition, the practice advisory states that
"when the internal audit activity, chief audit executive (CAE), or
individual internal auditor is responsible for, or management is
considering assigning, an operational responsibility that the internal
audit activity might audit, the internal auditor's independence and
objectivity may be impaired." The practice advisory lists the following
among the factors that the CAE needs to consider in assessing the
impact on independence and objectivity: audit coverage of the
activities or responsibilities undertaken by the internal auditor,
significance of the operational function to the organization, and
adequacy of separation of duties.
OSC also based its recommendation on its Standards for Internal Control
in New York State Government and on New York State's Division of the
Budget's Governmental Internal Control and Internal Audit Requirements,
known also as B-350. According to OSC's standards, "the internal
control officer helps establish specific procedures and requirements.
The effectiveness of these procedures and requirements must be audited
by someone who was not involved in the process of putting them into
place. In contrast, the organization's internal auditor is responsible
for evaluating the effectiveness of the system of internal control.
This individual must be independent of the activities that are
audited." Thus, this standard states that "for this reason, in most
instances, the internal auditor cannot properly perform the role of
internal control officer." B-350 states that "the IA [internal audit]
function should be independent of the internal control officer, but
should work closely with the internal control officer. Limitations
should be established on internal control activities where those duties
overlap. Agencies should identify impairments to the independence of
the director of internal audit that may be created where the director
of internal audit is performing the internal control officer function.
Furthermore, internal audit units should not assume operating
responsibilities, perform management functions, make management
decisions, or assume other monitoring roles (e.g., Information Security
Officer)."
In responding to OSC's recommendation, the NYSDOT Executive Deputy
Commissioner stated that the independence of the internal audit
function has been preserved by keeping it (the Internal Audit Bureau)
organizationally separate from the internal control responsibilities
(the Enterprise Risk Management Bureau). In addition, the NYSDOT
official who is both the director of audits and the internal control
officer told us that the department evaluated this organization issue
before and after she assumed these responsibilities and concluded both
times that there is no prohibition preventing her from holding both
positions in the state guidance and law. Further, she said that NYSDOT
has made full disclosure of this situation and that, in the case of any
actual or appearance of a conflict of interest, she would be recused
from making a decision. OSC officials told us in July 2009, however,
that there continues to be an inherent conflict of interest in being
able to effectively maintain independence.
As noted above, we support OSC's recommendation. While the NYSDOT
internal audit bureau and the internal control units are separate
within the Audit and Civil Rights Division, they are both headed by the
Director of the Division who can override any decisions made by staff
in charge of those units. The importance of auditor objectivity related
to internal control is highlighted in the IIA guidance, which indicates
that the auditor's objectivity is considered to be impaired if the
auditor is involved with the implementation of internal control
systems. Any work performed by an audit organization, regardless of
whether safeguards were placed between units, still reflects the
professional reputation of the entire organization. Having
responsibility for both managing and auditing an activity creates an
inherent conflict of interest that potentially weakens the integrity of
the organization's oversight.
NYSDOT officials provided comments on our draft appendix and disagreed
with our concurrence with OSC's recommendation. Their main arguments
against our concurrence included the following:
* The Director is responsible for implementing and reviewing the
internal control responsibilities established by the Internal Control
Act, not implementing the controls themselves. Further, in NYSDOT, the
Internal Control Officer (the Enterprise Risk Management Bureau) does
not establish specific procedures and requirements for the Department -
issuing procedures is a responsibility of agency managers. The Director
assists managers by facilitating the identification and evaluation of
risks and coaching management in responding to risks which, according
to the IIA, are totally appropriate roles for the CAE to perform.
NYSDOT has established an integrated approach to risk management
whereby the Internal Control Officer is a leader and facilitator,
serving as a coordinator - not a manager - of risks. Throughout the
NYSDOT each manager has responsibility for identifying, assessing, and
appropriately responding to (e.g. controlling) risks within his or her
own area.
* Other than simply stating that the internal audit function and the
internal control officer function should be separated, OSC did not
evaluate whether any impairments actually existed at NYSDOT.
Furthermore, this relationship was fully disclosed in NYSDOT's annual
internal control certification and summary report.
We also discussed this matter further with NYSDOT officials, who told
us that the Audit and Civil Rights Division interprets the Internal
Control Act in a manner consistent with IIA standards. In particular,
NYSDOT officials stated that they have interpreted the act to require
that their Enterprise Risk Management Bureau provide only guidance and
advice to program managers on internal controls and that the program
managers are primarily responsible for implementing internal control
programs, conducting reviews to assure adherence to controls, and
analyzing and improving control systems, including providing assurance
certifications that the Enterprise Risk Management Bureau does not
review. In addition, the officials said that the Enterprise Risk
Management Bureau's role as an advisor on internal control issues is
consistent with IIA standards.
We agree in theory that if the Director merely advises the program
managers on internal controls there is not a conflict of interest with
her internal audit role. However, the Director has the legal authority
to do more than advise. We note that according to B-350, the internal
control officer should be an individual with sufficient authority to
act on behalf of the agency head to implement and review the agency's
internal control program. We believe that because the NYSDOT internal
control officer has the legal authority to implement the internal
control program on behalf of the Commissioner, even if that authority
is not fully exercised under the Audit and Civil Rights Division's
interpretation of the underlying statute, there is the appearance of a
conflict of interest. Further, the NYSDOT officials told us that the
Internal Audit Bureau does not audit the internal control programs that
program managers are responsible for implementing. However, we found
that the Internal Audit Bureau reviews program internal controls as
part of other audits. Also, if the Internal Audit Bureau avoids
auditing matters on which the Enterprise Risk Management Bureau
personnel provided guidance and advice, there is a clear impairment to
the internal auditor's objectivity. Finally, we note that OSC did not
assert that impairments took place. OSC simply states that the
organization has an inherent conflict of interest with this structure.
GAO agrees that this structure creates an inherent conflict of interest
that potentially weakens the integrity of the organization's oversight.
Therefore, we continue to support OSC's recommendation.
FTA Concluded That the 50 Percent Obligation Requirement Was Met for
New York and Urbanized Areas in the State, but Program Impact Has Been
Limited by Slow Federal Grant Approval Process:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program.[Footnote 23] The majority of the public transit
funds--$6.9 billion (82 percent)--was apportioned for the Transit
Capital Assistance Program, with $6.0 billion designated for the
urbanized area formula grant program and $766 million designated for
the nonurbanized area formula grant program.[Footnote 24] Under the
urbanized area formula grant program, Recovery Act funds were
apportioned to urbanized areas--which in some cases include a
metropolitan area that spans multiple states--throughout the country
according to existing program formulas. Recovery Act funds were also
apportioned to states under the nonurbanized area formula grant program
using the program's existing formula. Transit Capital Assistance
Program funds may be used for such activities as vehicle replacements,
facilities renovation or construction, preventive maintenance, and
paratransit services. Up to 10 percent of apportioned Recovery Act
funds may also be used for operating expenses.[Footnote 25] Under the
Recovery Act, the maximum federal fund share for projects under the
Transit Capital Assistance Program is 100 percent.[Footnote 26]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) submit to FTA for Recovery Act funding.[Footnote 27]
FTA reviews the project sponsors' grant applications to ensure that
projects meet eligibility requirements and then obligates Recovery Act
funds by approving the grant application. Project sponsors must follow
the requirements of the existing programs, which include ensuring the
projects funded meet all regulations and guidance pertaining to the
Americans with Disabilities Act (ADA), pay a prevailing wage in
accordance with federal Davis-Bacon Act requirements, and comply with
goals to ensure disadvantaged business are not discriminated against in
the awarding of contracts.
Funds appropriated through the Transit Capital Assistance Program must
be used in accordance with Recovery Act requirements, including the
following:
* Fifty percent of Recovery Act funds apportioned to urbanized areas or
states are to be obligated within 180 days of apportionment (before
Sept. 1, 2009) and the remaining apportioned funds are to be obligated
within 1 year. The Secretary of Transportation is to withdraw and
redistribute to other urbanized areas or states any amount that is not
obligated within these time frames.[Footnote 28]
* State governors must certify that the state will maintain the level
of state spending for the types of transportation projects, including
transit projects, funded by the Recovery Act that it planned to spend
the day the Recovery Act was enacted. As part of this certification,
the governor of each state is required to identify the amount of funds
the state plans to expend from state sources from February 17, 2009,
through September 30, 2010.[Footnote 29] This requirement applies only
to state funding for transportation projects. The Department of
Transportation will treat this maintenance-of-effort requirement
through one consolidated certification from the governor, which must
identify state funding for all transportation projects.
* Project sponsors must submit periodic reports, as required under the
maintenance-of-effort for transportation projects section (§1201(c) of
the Recovery Act) on the amount of federal funds appropriated,
allocated obligated and outlayed; the number of projects put out to
bid, awarded, or work has begun or completed; project status; and the
number of jobs created or sustained. In addition, grantees must report
detailed information on any subcontractors or subgrants awarded by the
grantee.
Of the over $1.3 billion of Recovery Act Transit Capital Assistance
funding that was apportioned to the state of New York or to urbanized
areas (UZA) that include localities in New York, 98 percent was
apportioned through the urbanized area formula program. Under the
Recovery Act, New York's only large UZA (called the New York--Newark,
NY--New Jersey--Connecticut UZA) was apportioned nearly $1.2 billion in
Transit Capital Assistance funding. An additional $123.9 million was
apportioned to medium-sized UZAs with populations ranging from 200,000
to 999,999, and nearly $13.7 million was apportioned to the state of
New York for small UZAs with populations of 50,000 to 199,999. In
addition, the state was apportioned $26.25 million for transit projects
in nonurbanized areas. The majority of Transit Capital Assistance funds
are administered by transit agencies who are designated recipients of
this funding. In New York, some of the UZAs cross state borders into
Connecticut, New Jersey, and Pennsylvania.[Footnote 30] These states
have long-standing formulas that they use to divide the apportionments.
For UZAs that contain multiple transit agencies within the state, the
MPOs work with the transit agencies to develop a split agreement which
spells out how the apportionment will be divided among the various
transit agencies in the UZA. NYSDOT administers a small portion of the
federal transit aid for projects in smaller communities and rural areas
of the state.
FTA Concluded That the 50 Percent Obligation Requirement Was Met:
In March 2009, FTA apportioned over $1.3 billion in Transit Capital
Assistance Recovery Act funds to the state of New York and urbanized
areas in the state for transit projects. As of September 1, 2009, FTA
concluded that the 50 percent obligation requirement had been met for
New York and urbanized areas located in the state.[Footnote 31]
New York Transit Agencies Are Using Transit Capital Assistance
Apportionments for Fleet Improvements and Capital Construction:
New York transit agencies submitted grant applications to FTA to use
Recovery Act Transit Capital Assistance funds to finance a variety of
fleet enhancement and capital projects that would otherwise not have
been funded this year. These include rehabilitating or reconstructing
existing rail and bus buildings, improving rail yards, replacing aging
bus fleets with clean natural gas buses, and purchasing hybrid buses.
MTA sought Recovery Act Transit Capital Assistance funding for a number
of station, infrastructure, and equipment capital rehabilitation
projects bundled under one grant application worth $393.3 million and
funding for a large station reconstruction project under another grant
application worth $266.9 million--for a total of $660.2
million.[Footnote 32] MTA's smaller Recovery Act Transit Capital
Assistance projects include rehabilitating or reconstructing existing
rail and bus buildings, creating new locker/rest facilities for transit
agency personnel, and installing improved audio systems for the hearing
impaired. The large capital project is for improvements at the Fulton
Street Transit Center that will ultimately facilitate access and
provide intermodal connectivity, among other things. Although MTA's
first grant was not awarded until August 13, 2009, according to
officials, MTA used preaward authority to begin Recovery Act projects
in advance of FTA's obligation of the funds. According to officials, as
of August 31, 2009, MTA has entered into contracts with a total value
of $598.8 million for projects funded with Transit Capital Assistance
Program funds and expects to have most projects completed by the end of
August 2013.
We also visited Greater Glens Falls Transit (GGFT), because it was both
a smaller transit agency and among the first agencies in New York to
have its Transit Capital Assistance Program grant approved by FTA. GGFT
is part of a UZA with a population of 50,000 to 199,000 and serves 11
municipalities in upstate New York. It received a grant for projects
worth $1.2 million to purchase a hybrid expansion vehicle and for
various capital projects, including repairing an in-ground lift,
upgrading the computer and the public information systems, and
relocating and rehabilitating the Ridge Street bus transfer station in
downtown Glens Falls. For a photo of the existing transfer station and
additional description of this project, see figure 3.
Figure 3: GGFT Ridge Street Bus Transfer Station Project:
[Refer to PDF for image: map, photograph and accompanying data]
Project: Relocation and rehabilitation of Ridge Street bus transfer
station;
Lead agency: Greater Glens Falls Transit (GGFT); Description:
Relocation of bus transfer station that is currently located on public
land that the city is in the process of selling to a private entity.
Station will be moved 100 to 200 feet down the street to a location in
front of the high-rise pictured below; Location: Glens Falls, NY;
Recovery Act Funds: $120,000 out of $1.2 million awarded to GGFT;
Status: Grant has been awarded by FTA but contract has not been let.
Map: Indicates the location of the project in New York State.
Photo #1:
The Ridge Street Bus Transfer Station in downtown Glens Falls, New York
to be relocated and rehabilitated. The city is in the process of
selling the land it is currently on to a private owner.
Sources: GAO (photographs); and Map Resources (map).
[End of figure]
As of August 31, 2009, a GGFT official reported that they had awarded
contracts for projects with a total value of $623,767 that included
contracts for a hybrid bus, a service truck, and preventive
maintenance. GGFT expects the Recovery Act projects to be completed by
the end of 2010. See table 3 for a summary of all GGFT Transit Capital
Assistance Recovery Act projects.
Table 3: GGFT Transit Capital Assistance Projects:
Project name: Buy 30-foot bus for expansion; Project description: Buy
30-foot hybrid bus to provide needed additional capacity and help
demonstrate the benefits of hybrid propulsion technology in a small
fleet/small urban environment; Estimated cost: $575,000.
Project name: Preventive maintenance;
Project description: Cover capital preventive maintenance expenses for
calendar years 2009 and 2010;
Estimated cost: $200,000.
Project name: Rehabilitate/renovate bus passenger shelters; Project
description: Redesign and relocate two passenger shelters and
information kiosk located on Ridge St. in downtown Glens Falls. Also
add 2 shelters in other areas. Replace electronic display, and install
additional lighting and benches where needed at high use stops;
Estimated cost: $170,000.
Project name: Acquire shop equipment;
Project description: Rehabilitate/replace existing GGFT in-ground
vehicle lift and purchase new shop equipment; Estimated cost: $150,000.
Project name: Acquire miscellaneous support equipment; Project
description: GGFT's current telephone, tele-information system, and
computer systems are outdated and need to be replaced. Existing
telephone information system is inadequate to customer and service
demands;
Estimated cost: $100,000.
Project name: Acquire support vehicles; Project description: Replace
2000 pick-up truck and acquire new plow and salt spreader for
maintenance of transit facility in winter months; Estimated cost:
$30,000.
Project name: Project administration;
Project description: Funds used to administer the projects; Estimated
cost: $17,494.
Project name: Total;
Estimated cost: $1,242,494.
Source: GAO analysis based on GGFT data.
[End of table]
According to NYSDOT, almost 93 percent of the non-MTA Recovery Act
Transit Capital Assistance program funding obligated by FTA for the
urbanized and nonurbanized areas in New York have been for bus
purchases. Specifically, $134 million of the $144 million FTA obligated
for New York for non-MTA transit agencies as of September 1, 2009, is
being used for projects such as buses, including $15.7 million for
replacement buses for the Capital District Transportation Authority
(CDTA).
NYSDOT and transit agency officials we spoke with told us that they
used several key criteria for selecting transit projects to be funded
under the Recovery Act. At the state level, NYSDOT sought new projects
that were "shovel-ready" or existing projects that were out of funding
or could be accelerated with Recovery Act funding. Transit agencies
used a variety of criteria, including evaluating projects to see
whether they were needed to keep the system in a state of good repair;
may save or reduce the amount of local tax dollars spent on public
transit services, thereby reducing the need for local tax increases; or
may add or sustain jobs. According to NYSDOT, many state and local
transit officials told the agency that they selected a large percentage
of projects for bus replacement to improve reliability and lower
maintenance costs. Transit agencies, in conjunction with the MPO in the
region, complied with the public review and outreach requirements by
posting projects for public comment and holding public hearings.
Transit Agencies Will Use Existing Internal Control Mechanisms with
Some Planned Improvements to Oversee Recovery Act Grants:
Because transit authorities throughout the state rely on FTA grants,
they must comply with existing FTA oversight requirements pertaining to
the use of these funds. FTA evaluates grantees' adherence to grant
administration requirements through a comprehensive oversight program.
FTA's two major oversight mechanisms are Triennial Reviews of grantees
receiving Section 5307 urbanized area formula grants and State
Management Reviews of grantees receiving Section 5311 nonurbanized area
formula grants. The Triennial Review includes a review of the grantee's
compliance in 23 areas that include financial management, technical,
and reporting requirements. Thus, NYSDOT, MTA, and GGFT are using
existing systems that have been reviewed by FTA and enhanced, if
necessary, per FTA requirements to track Recovery Act Transit Capital
Assistance grants and oversee the related contracts. They have also
made or plan to make some enhancements to these processes as a result
of past reviews or audits or a desire to provide increased oversight
over Recovery Act funds.
Since MTA is responsible for overseeing the most Recovery Act Transit
Capital Assistance funds of any transit agency in the state of New
York, we focused on its processes. MTA is required to comply with the
New York State Governmental Accountability, Audit, and Internal Control
Act. In accordance with that act, MTA annually prepares an internal
control certification and summary, which, among other things, describes
MTA's internal control program including the identification of high-
risk activities and control weaknesses. The summary also describes the
corrective actions MTA has undertaken to resolve those identified
weaknesses. The risk-based approach takes into account recommendations
from prior audit findings, MTA management reviews, and internal control
testing. MTA facilitates monitoring by using a central database to
track all audit recommendations and the status of corrective actions.
MTA's 2008 to 2009 internal control summary identified some significant
deficiencies with regard to internal controls, including the lack of a
robust Disadvantaged Minority/Women's Business Enterprise Program
(DMWBE) contract tracking methodology in the Office of Civil Rights and
an estimated 40 percent staffing shortage of New York City subway
inspectors. MTA took corrective actions to resolve these deficiencies.
MTA has plans to increase monitoring for Recovery Act funded projects.
MTA's internal audit department plans to audit all Recovery Act
projects, when they would typically only audit a sample of the
projects, and MTA officials believe they possess the necessary skills
and resources to do so. In addition, MTA has an independent engineering
consultant who will also monitor the projects. MTA officials said that
it will perform more on-site visits to help ensure adequate monitoring
of their Recovery Act projects. MTA is also coordinating with the MTA
Office of the Inspector General (OIG), Department of Justice (DOJ), and
DOT, to develop a special training program that will be targeted to key
MTA staff. The training program is currently planned for September or
October 2009 and will focus on complying with the Recovery Act and
fraud awareness.
MTA also is subject to federal oversight. FTA holds quarterly capital
program oversight meetings on every project with MTA, and MTA submits
quarterly project reports to FTA. The DOT OIG conducts periodic reviews
of MTA. According to an MTA OIG official, the DOT OIG is planning to
increase its risk assessment and control environment reviews for
Recovery Act oversight.
GGFT is also required to comply with the FTA review and reporting
requirements and with the OMB Single Audit requirement. FTA's fiscal
year 2007 Triennial Review of GGFT found deficiencies in three areas--
Satisfactory Continuing Control,[Footnote 33] Disadvantaged Business
Enterprise (DBE),[Footnote 34] and Drug and Alcohol.[Footnote 35]
Advisory comments were made in the Safety and Security area. FTA
determined that GGFT took sufficient corrective actions to close the
deficiencies. The 2007 Single Audit report for GGFT provided an
unqualified opinion on its financial statements and on each major
program, including the FTA Operating Assistance and FTA Capital
Assistance programs. No significant deficiencies were identified
related to the audit of major federal awards or audit of financial
statements.
New York Transit Agencies Are Developing Plans to Implement Reporting
Requirements and Will Rely on DOT to Calculate Indirect Jobs Creation:
While transit agencies are generally prepared to meet the various
reporting requirements using existing grant reporting mechanisms, the
timing of FTA's Recovery Act reporting guidance and its slight
difference from the federal Office of Management and Budget (OMB)
requirements have created some problems. When we met with NYSDOT, GGFT,
and the Adirondack/Glens Falls Transportation Council--which is the MPO
for Glens Falls and is reporting for GGFT--the FTA guidance had not yet
been posted, and both NYSDOT and Adirondack/Glens Falls Transportation
Council were under the impression that FTA would follow the FHWA
reporting guidance and had developed plans accordingly. This did not
turn out to be the case. The main difference between their employment
reporting requirements is that FTA requires recipients to report on a
grant basis, while FHWA requires recipients to report on a project
basis. In addition, FHWA requires reporting on more types of data. For
example, FTA requires recipients to report the total number of hours
associated with direct jobs attributed to the grant that will be paid
by Recovery Act funds, whether worked by the recipient's staff,
contractors, or subcontractors. FHWA, on the other hand, requires
recipients to report for each contractor or consultant on a project the
number of project employees, the total number of hours those employees
worked, and the total amount of wages paid.
For each Recovery Act project, MTA told us that its agencies will
calculate employment data for their own staff and collect the required
information from contractors. This is the first time MTA has asked
contractors to count jobs. To do so, according to officials, MTA
included language in Recovery Act contracts requiring contractors to
report the number of full-time equivalent employees (FTEs) that are on
a Recovery Act job to comply with OMB's requirements. However, MTA
reported that the FTA guidance requires recipients to report work
hours. On September 10, 2009, MTA reported that it was developing a
reporting system to capture both in house and third party work hours
for the purposes of federal reporting.
NYSDOT and GGFT also had questions concerning how to calculate direct
jobs created from equipment purchases made with Recovery Act funding
versus how to count jobs created from Recovery Act funded construction
projects. MTA also had concerns about calculating FTEs from work hours.
An MTA official said MTA will need to determine the "normal" hours
worked in a year for each job title and divide the "normal" number of
hours by four to determine the quarterly hours worked.
MTA expects to have some jobs data to report in October. However,
NYSDOT reported that the impact of Recovery Act funds has been limited
by the time it took to obligate the funds. As such, NYSDOT said that
many transit agencies might not have contracts awarded by September 30,
2009, and, therefore, will not have associated jobs to report. Also,
after the recipients get their money, it can take up to a year to get
delivery of certain items, such as buses.
Transit agencies have limited plans to track performance measures other
than those required for federal reporting. GGFT officials told us that
they also planned to track local tax dollars saved as a performance
measure, but that other metrics to measure improvements to the quality
of service and maintenance of a state of good repair are more difficult
to identify. MTA did not have plans to track additional performance
measures beyond what was being required of them to report. However, MTA
was open to considering reporting additional performance measures, such
as the number of stations rehabilitated and customer satisfaction
before and after the rehabilitation.
The Department of Energy Has Approved New York's Weatherization Plan,
but Implementation Has Been Delayed by Davis-Bacon Act Concerns:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation; sealing leaks; and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, the Weatherization Assistance Program has assisted more than 6.2
million low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, the
territories and Indian tribes--including all 16 states and the District
of Columbia in our review. DOE has provided to the states $2.3 billion
of the $5 billion in weatherization funding under the Recovery Act. Use
of the Recovery Act weatherization funds is subject to Section 1606 of
the act, which requires that all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined by
the Davis-Bacon Act.[Footnote 36] Because the Davis-Bacon Act had not
previously applied to weatherization, the Department of Labor (Labor)
had not established a prevailing wage rate for weatherization work. In
July 2009, DOE and Labor issued a joint memorandum to Weatherization
Assistance Program grantees authorizing them to begin weatherizing
homes using Recovery Act funds, provided they pay construction workers
at least Labor's wage rates for residential construction, or an
appropriate alternative category, and compensate workers for any
differences if Labor establishes a higher local prevailing wage rate
for weatherization activities. Labor then surveyed five types of
"interested parties" about labor rates for weatherization work in each
of the 50 states.[Footnote 37] The department completed establishing
prevailing wage rates in all the 50 states and the District of Columbia
by September 3, 2009.
DOE officials approved New York's weatherization plan on June 26, 2009,
and provided an additional 40 percent of the state's allocation for the
Weatherization Assistance Program funded by the Recovery Act. This
brought the total funds provided New York to $197.3 million. According
to officials, in anticipation of DOE's approval, the New York State
Division of Housing and Community Renewal (DHCR) sent out contract
application packages to the 64 subgrantees that implement the program,
so they could apply for funding under the Recovery Act. According to
officials, as of August 31, 2009, nine contract applications with the
subgrantees have been approved by the state, obligating $27.5 million
of Recovery Act funds, though none has been spent. Meanwhile, according
to officials, several other contract applications have been received
and are currently being reviewed. DHCR expects to have additional
contract applications approved shortly and all of the contract
applications approved by October 15, 2009.
A major issue, according to program officials, in the submission of
contracts by the subgrantees to DHCR for approval has been the
uncertainty regarding the impact of the Davis-Bacon Act on Recovery Act
funding for the Weatherization Assistance Program. The Davis-Bacon Act
requirements do not apply to the annual weatherization program funded
by grant awards from DOE and the Low Income Home Energy Assistance
Program. Until Labor posted prevailing wage rates on September 3rd, the
subgrantees had to estimate what these rates would be in their
preparation of their budgets for their proposed use of Recovery Act
funds in the weatherization program. DHCR has allowed the subgrantees
the option of submitting contracts now and amending them later when the
wage rates were established or waiting until the rates were established
before submitting their contracts for review and approval.
In preparation for establishing wage rates for New York, Labor sent
wage surveys to each of the 64 subgrantees conducting weatherization
work in the state. These surveys were due back on July 31, 2009. DHCR
provided guidance to the subgrantees for completing this survey.
According to DHCR, almost all of the subgranteess submitted the survey.
The impact of Davis-Bacon on the Weatherization Assistance Program in
New York goes beyond the establishment of prevailing wage rates.
Because the only weatherization activities subject to Davis Bacon are
those funded by the Recovery Act, subgrantees have to determine a
strategy of how to incorporate it into their overall program. One
strategy that subgrantees can use is to subcontract all weatherization
work funded by the Recovery Act in order to limit the impact of Davis-
Bacon to just those subcontractors. Other subgrantees that use their
own employees to do most of their weatherization work are hoping that
the wage rates established by Davis-Bacon will be similar to what they
pay now. It would be difficult for them to pay different wages to their
workers doing the same work based on whether or not the weatherization
work was funded by the Recovery Act or some other source, according to
program officials.
If the prevailing wage rates established are significantly higher than
the rates currently being paid, DHCR officials are concerned that the
number of units weatherized and workers hired to do the work may be
fewer than what would have occurred if the Davis-Bacon Act had not been
applied to weatherization projects funded by the Recovery Act. DHCR
officials were hopeful that the wage rates established for many
counties will be similar to those already paid by the subgrantees who,
in many areas, are the predominant supplier of weatherization services.
Thus, the impact of Davis-Bacon on the program would be minimal.
Further, the administrative tasks required under Davis-Bacon, such as
wage verification, visits to job sites, and weekly payrolls, are new to
the subgrantees and represent a cost not previously experienced by the
program. DHCR coordinated training sessions on September 2nd in
Syracuse and September 10th in New York City on the proper
administration of Davis-Bacon requirements. All subgrantees were
encouraged to attend one of these sessions that were presented by
Labor.
According to DHCR officials, another potential programmatic impact of
Davis-Bacon is that it might reduce the weatherization activities that
are eligible for funding. To be eligible for funding under the
Weatherization Assistance Program, an activity must generally achieve a
Savings to Investment Ratio (SIR) of at least one. That is, one dollar
invested, one dollar saved. DHCR officials are concerned that, if wage
rates rise significantly due to Davis-Bacon, some activities such as
window or door replacement may no longer be able to achieve the
required SIR figure. This would preclude them from being completed as
part of the weatherization program.
Though no Recovery Act funds have been spent to date, DHCR said that
the subgrantees have been expanding their operational capabilities
through such actions as hiring and training additional staff and
purchasing vans and trucks. The subgrantees have been able to do this
by using their allocation of annual weatherization funding provided by
DOE and the Low Income Home Energy Assistance Program in anticipation
of Recovery Act funds being available shortly. Likewise, DHCR has been
using two contractors to provide ongoing training sessions for
subgrantees' workers. DHCR is using funds from it normal weatherization
program to fund all of its activities to date, including those related
to the Recovery Act weatherization program.
State Officials Plan to Use a Variety of Accountability Approaches to
Monitor the Use of Recovery Act Weatherization Funds:
DHCR officials stressed that an extensive fiscal and program monitoring
system was in place for the weatherization program prior to the passage
of the Recovery Act. Though the Recovery Act greatly increased the
funding available for the program, the state plans to use its current
program infrastructure to absorb this funding increase. It expects that
its existing network of subgrantees will be able to expand the program
to accommodate the increase in funding provided by the Recovery Act
through the expansion of their in-house capabilities, employing
additional subcontractors, or a combination of these two approaches.
DHCR anticipates that some of the subgrantees will demonstrate a
greater ability to expand production more than others. For that reason,
DHCR set aside $65 million from its allocation of Recovery Act funds to
direct additional funding to those subgrantees most able to make use of
it in weatherizing additional housing units.
DHCR uses a few mechanisms to perform oversight. DHCR conducts an
annual review of each subgrantee and program inspectors and fiscal
staff conduct 9 to 12 field visits to each agency. DHCR also reviews
the Single Audits conducted of each subgrantee in the weatherization
program and requires corrective action plans for any findings detected
by these audits. These corrective action plans are monitored by DHCR to
ensure that any issues are addressed. At the state level, there are no
open findings from the state's Single Audit related to the
Weatherization Assistance Program.
DHCR officials provide technical assistance to address any problems
discovered based on their review of a subgrantee's performance. They do
not characterize subgrantees as high risk or low risk. Based on their
experience, DHCR officials said that the performance of subgrantees can
change dramatically in a short period of time for various reasons,
including the turnover of key personnel. Therefore, they maintain a
high level of monitoring for all of the subgrantees in its
weatherization program.
In addition to its normal monitoring process, DHCR has established a
Weatherization Assistance Program database that allows DHCR to monitor
monthly production goals against actual work completed. When a contract
with a subgrantee funded by the Recovery Act is awarded, DHCR advances
25 percent of the contract award to the subgrantee. Further draw downs
of Recovery Act funds will only be permitted based on the actual work
completed. In addition, according to agency officials, the subgrantees
are required by DHCR to ensure that Recovery Act funds be clearly
separated from the regular weatherization funding that they receive.
For example, subgrantees are required to have a separate bank account
for Recovery Act funds. Further, all work done using Recovery Act funds
must be clearly identified and separate from work funded from other
sources. Recovery Act funds cannot be co-mingled with other funding.
DHCR has indicated that it intends to use its share of Recovery Act
funds earmarked for administration to increase the resources available
for on-site technical assistance provided to subgrantees, as well as
increase the number of staff available for on-site monitoring of the
program. Particular emphasis will be placed on both assisting and
monitoring the implementation of Davis-Bacon by the subgrantees.
Finally, to facilitate procurement of bulk weatherization materials for
the program, the New York State Weatherization Directors' Association
annually solicits suppliers to establish a statewide price schedule for
various weatherization materials. According to officials, this
solicitation is conducted in accordance with state procurement
guidelines and allows subgrantees to purchase weatherization materials
in bulk at statewide negotiated prices. According to DHCR, the Buy
American provision of the Recovery Act should not have a major impact
on this procurement effort.
State Officials Are Preparing to Measure the Impact of Recovery Act
Weatherization Funds and to Meet Its Reporting Requirements:
DHCR intends to use DOE performance measures to determine the impact of
Recovery Act weatherization funds in their state. For example, DHCR
will use DOE methodology to measure the energy savings achieved by the
use of Recovery Act funds in the weatherization program. With regard to
job creation and retention, DHCR is waiting for guidance from DOE on
how to measure and report these figures. It intends to follow that
guidance in reporting on job creation and retention. Similarly, DHCR
will comply with any other DOE guidance for measuring the impact of
Recovery Act funds, as well as provide training to the subgrantees
regarding compliance with any DOE requirements.
New York is considered the prime recipient, as defined by OMB, for
weatherization funds provided by the Recovery Act, and DHCR is
responsible for administering the weatherization program for the state.
The 64 subgrantees that operate the weatherization program for DHCR are
considered subrecipients. DHCR intends to collect all data required by
DOE for reporting purposes from the 64 subgrantees and report these
data for them. DHCR officials said that they already collect all of the
information that they expect DOE to require except figures for job
creation and retention. In addition, DHCR officials intend to perform
quality reviews of the data submitted by the subgrantees to detect and
correct any omissions or errors in the data being reported by the
subrecipients. Once DOE has issued final guidance to DHCR on the
reporting requirements under the Recovery Act, addressing such
outstanding issues as job creation and retention, DHCR will issue
guidance to its subgrantees.
New York Exceeded Its Goal for the Number of Youth Served in the WIA
Program This Summer, Despite Facing Challenges:
The Recovery Act provides an additional $1.2 billion in funds for the
Workforce Investment Act (WIA) Youth program, including summer
employment. Administered by the Department of Labor (Labor), the WIA
Youth program is designed to provide low-income in-school and out-of-
school youth 14 to 21 years old, who have additional barriers to
success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 38] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 39] Local areas may design summer
employment opportunities to include any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job (2) learn work readiness skills
on the job, and (3) acquire measurable communication, interpersonal,
decision-making, and learning skills. Labor has also encouraged states
and local areas to develop work experiences that introduce youth to
opportunities in "green" educational and career pathways. Work
experience may be provided at public sector, private sector, or
nonprofit work sites. The work sites must meet safety guidelines, as
well as federal and state wage laws.[Footnote 40] Labor's guidance
requires that each state and local area conduct regular oversight and
monitoring of the program to determine compliance with programmatic,
accountability, and transparency provisions of the Recovery Act and
Labor's guidance. Each state's plan must discuss specific provisions
for conducting its monitoring and oversight requirements.
The Recovery Act made several changes to the WIA Youth program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
New York was awarded about $71.5 million in Recovery Act WIA Youth
funds. The New York State Department of Labor (NYSDOL), the agency
responsible for overseeing the state's WIA Youth Program, allocated
$60.8 million (85 percent of the total WIA Youth Recovery Act funds) to
33 local workforce investment areas (LWIA) within the state. NYSDOL
used $3.35 million of their 15 percent WIA Youth state set-aside funds
to fund the State Parks' Conservation Corps Initiative. According to a
local official, the state encouraged LWIAs to try to spend all of their
funding as soon as possible to stimulate the economy. State officials
estimated that as of August 31, 2009, $34.6 million was spent by the
LWIAs. NYSDOL established a goal of serving about 23,600 youths in WIA
Youth summer employment programs; it reported that it exceeded that
goal and placed an estimated 24,208 youths in summer employment, as of
August 15, 2009. According to Labor data as of July 31, 2009, a
majority of these were youth 14 to 18 years old. Of all participants,
27 percent were out-of-school youth and less than one percent were
veterans (see table 4). We visited Oneida County Workforce Development
[Footnote 41]--the government entity that implements the WIA Youth
program in Oneida County--and two of their summer job sites and two
employers.[Footnote 42] The county served approximately 230 youth as of
August 31 and will place another 15 in jobs, almost reaching its target
of 250 youth participants.
Table 4: Demographics of New York State WIA Summer Youth Employment
Participants as of July 31, 2009:
Category: Youth 14 to 18 years old;
Number of youth: 15,114;
Percent of all youth in summer employment: 71.
Category: Youth 19 to 21 years old;
Number of youth: 4,730;
Percent of all youth in summer employment: 22.
Category: Youth 22 to 24 years old;
Number of youth: 1,531;
Percent of all youth in summer employment: 7.
Category: Total;
Number of youth: 21,375;
Percent of all youth in summer employment: 100.
Source: Labor data based on data reported by the states.
[End of table]
Oneida County Found Solutions to Challenges It Faced in Quickly
Expanding Its WIA Youth Program and Now Aims to Retain Older Youth in
the Workforce:
In our previous bimonthly report, local officials cited challenges
regarding youth eligibility, adequate supervision, and transportation
for youth. Oneida County staff found it more difficult this year to
determine the eligibility of applicants for the WIA Youth program than
in previous years because of the inclusion of older youth. Officials
said that older youth that are not employed or in school often do not
have documentation of their identity, such as a birth certificate or
social security card, their household income, or their citizenship.
Oneida County hired four employees from May to December 2009 to assist
the applicants with documentation of their eligibility. Officials
overcame such challenges as finding meaningful work opportunities with
adequate supervision and transportation for youth to job sites by
contacting local employers with existing relationships with Oneida
County Workforce Development and placing youth in jobs within a mile of
their homes. In addition, a local workforce official said that Oneida
County has managed stand-alone summer youth employment programs funded
by other sources in recent years and its familiarity with the process
allowed it to expand the program quickly.
During our visit, Oneida County workforce officials said that their
current challenge is retaining older youth, ages 19 to 24, in the
workforce or in pursuing some form of education after the summer
program ends. An official said connections that older youth made with
the workforce development community could be lost if youth do not have
existing education or work plans when the program ends. Oneida County
will engage the older youth from their summer youth employment program
year-round by providing continued job counseling and giving them
priority to enter a year-round workforce program that will begin this
year. Individual work sites also encouraged year-round involvement by
allowing summer participants access to a computer lab all year,
providing tours to a local community college and Job Corps facility,
and providing military enlistment information. Next year, Oneida County
plans to offer summer youth employment opportunities for older youth
with other funding sources if additional Recovery Act funds are not
awarded.
Oneida County Aimed to Place Youth in Jobs within High-Demand Trades:
Oneida County Workforce Development placed approximately 230 youth in
38 summer employment work sites using WIA Recovery Act funds, as of
August 31, 2009. Approximately 75 percent of the youth were employed at
public sector work sites, with the remaining 25 percent of youth at
nonprofit work sites. (For more information on work sites, see figure
4.) Officials placed an estimated 70 percent of the youth in jobs that
included occupational skills training, much of it focused on the
construction trade due to the demand for those skills. For example,
youth rehabilitated houses for the Utica Municipal Housing Authority.
Officials said about 10 percent of the jobs were defined as "green"
jobs and included some environmental and green technology. For example,
at a work site we visited where youth constructed an Internet café for
veterans, they learned about recycled construction materials and
energy- efficient light bulbs (see figure 5).
Figure 4: Percentage of Youth Working at Oneida County WIA Summer Youth
Employment Work Sites as of August 31, 2009:
[Refer to PDF for image: pie-chart]
Construction: 54%;
Maintenance: 15%;
Child care/youth care: 13%;
Clerical: 8%;
Elderly/social services: 7%;
Healthcare: 3%.
Source: GAO analysis of Oneida County Workforce Development data.
[End of figure]
Figure 5: Internet Café Constructed by WIA Summer Youth Participants:
[Refer to PDF for image: map, two photographs and accompanying data]
Project: WIA summer youth employment program;
Lead agency: Oneida County Workforce Development;
Description: Program for low-income youth to learn job skills during
the summer by constructing an internet café for veterans;
Location: Utica, NY;
Recovery Act Funds: $43,000;
Status: Completed.
Map: Indicates the location of the project in New York State.
Photo #1:
Similar conditions of walls before construction.
Photo #2:
The internet café space at 85% completion.
Sources: GAO (photographs); and Map Resources (map).
[End of figure]
In addition, youth out of school could enroll in a General Education
Diploma (GED) training course for 3 hours a day outside of their work
hours and get paid for 2 of the 3 hours. Officials said that programs
for 19 to 24-year-olds included more occupational training, while
programs for 14 to 18-year-olds included more academic skills training
due to, among other things, restrictions imposed by labor laws on
working conditions for minors. Some youth were taught work-appropriate
behavior and discussed their personal growth in the program with
supervisors. The youth constructing the Internet café were asked by
their employer to sign a code of conduct that governed their behavior
at the work site, requiring such things as respect to others, proper
dress, and language. Another work site we visited employed mentally and
physically handicapped youth between the ages of 17 and 19 at a
community park. The youth were taught skills related to taking
initiative, having ethics in the workplace, and using proper language.
Oneida County Uses Various Monitoring Techniques to Safeguard Its
Summer Youth Employment Program and Measure Outcomes Related to
Participation and Work Readiness:
To increase monitoring of the Recovery Act-funded program, Oneida
County hired four employees temporarily to manage the monitoring of
this program from May to December 2009. They worked to ensure all
eligibility documentation was obtained before youth were employed;
regularly performed site visits to all work sites throughout the summer
to visually inspect them for safety hazards and use of safety
equipment; and checked that appropriate work activities and adequate
supervision were provided. According to local officials, each employer
entered into a contract with Oneida County Workforce Development,
detailing the specific work experiences to be provided and including a
statement that two staff members would always be on site. One vendor
had a process to support correct attendance counts each day for youth
employed in landscaping activities. In this case, youth signed in and
signed out with a manager at one central location before and after
going to their work site, which could change daily.
The county measures completion and drop-out rates, daily attendance,
and work readiness determinations of youth before and after the
program. As of August 31, the completion rate for Oneida County was
87.5 percent and the drop-out rate was 12.5 percent. Of those that
completed the employment, 100 percent attained work readiness.
Table 5: Outcomes of Participants at Two Oneida County WIA Work Sites:
Completion: Enrolled;
Site A: number (percent): 30;
Site B: number (percent): 20.
Completion: Completed;
Site A: number (percent): 26 (86.7);
Site B: number (percent): 18 (90).
Work readiness: Achieved;
Site A: number (percent): 26 (100);
Site B: number (percent): 18 (100).
Future plans: Employed;
Site A: number (percent): 5 (19);
Site B: number (percent): 5 (28).
Future plans: Applied to community college; Site A: number (percent): 4
(15);
Site B: number (percent): 4 (22).
Future plans: Have or plan to take GED test; Site A: number (percent):
4 (15);
Site B: number (percent): 8 (44).
Future plans: Applying for job in trade; Site A: number (percent): 3
(12);
Site B: number (percent): 3 (17).
Future plans: Applied for year-round youth employment program; Site A:
number (percent): 0 (0);
Site B: number (percent): 14 (78).
Source: Utica Municipal Housing Authority and Mohawk Valley Community
College.
[End of table]
In addition, each youth jointly completed an individual service plan
with a job counselor that documents the youths' short-term and long-
term goals, among other things. Some program managers revisited the
individual service plan with the youth at the end of the program. Local
officials said that the daily attendance of older youth, ages 19 to 24,
was higher than they expected based on similar programs they had
conducted in the past. One local work site official said some youth
associate the program with President Obama and, as a result, feel an
obligation to complete the program.
NYSDOL Plans to Conduct Initial Reviews of Each of the 33 LWIAs by
November 2009 to Help Assure Compliance with Recovery Act Requirements:
As the agency responsible for administering WIA for New York, NYSDOL
has a monitoring system in place to oversee the WIA Youth program and
the activities of the LWIAs. For example, NYSDOL auditors plan to visit
each of the 33 LWIAs by November 2009. The state anticipates visiting
23 of the LWIAs by September 2009. These initial reviews will consist
of verifying that each LWIA has a budget and spending plan in place for
Recovery Act funds to help ensure that expenditures, accruals, and
obligations are properly reported and documented. Each LWIA will be
required to complete a questionnaire to assess their ability to comply
with the requirements of the Recovery Act and to determine if
additional technical assistance is required.
After these initial visits, NYSDOL intends to continue monitoring a
sample of the LWIAs with an emphasis placed on those LWIAs determined
to pose the highest risk. This monitoring, which will continue through
the life of the Recovery Act, involves both a fiscal and programmatic
review. Among the key programmatic elements reviewed are adherence to
workforce safety guidelines, conformity with applicable federal and
state laws in regards to both wage and work requirements, and the
eligibility of participants. The review is also expected to determine
whether local areas are using Recovery Act funds as a supplement to
their regular funding and not supplanting those funds.
NYSDOL Is Preparing to Measure the Outcomes of Recovery Act Funding for
the WIA Summer Youth Employment Program to Meet Its Reporting
Requirements, but Does Not Anticipate Meeting the 10-Day Reporting
Deadline:
NYSDOL officials said that each of the LWIAs regularly reports to it
and will continue to report on the achievement of work readiness by the
participants in their summer youth employment program. LWIAs did
request a waiver from Labor for reporting work readiness for ages 14 to
17 because they felt that the measure was less applicable to this age
group, as their WIA experience tended to emphasize educational
experiences. The waiver has not been approved yet, as of August 31.
NYSDOL allows each LWIA to develop its own work readiness measure, but
the state reviews it before it can be implemented. For long-range
outcomes, NYSDOL will track outcomes for those youth that were enrolled
in Recovery Act-funded WIA summer youth employment activities and later
receive youth services supported by regular WIA funding.
For reporting purposes, NYSDOL officials said the agency is the prime
recipient and each of its 33 LWIAs are subrecipients. NYSDOL officials
said that they will gather the data from the LWIAs, consolidate it, and
report it for them in order to comply with the Section 1512 reporting
requirements of the Recovery Act. They already gather extensive data
from the LWIAs through their Management Information System and they
anticipate modifying it to obtain whatever data are needed to comply
with anticipated requirements. NYSDOL noted that a major issue in
complying with these requirements was the delay in obtaining guidance
from Labor on what it will require. This guidance was not issued until
August 14, 2009. This delay has hampered their effort to provide
guidance to the LWIAs on what is expected from them. More detailed
information on NYSDOL's planned monitoring of Recovery Act expenditures
can be found in GAO's previous bimonthly report.
NYSDOL officials raised a concern about the 10-day reporting
requirement deadline. They do not believe that any state with multiple
work areas, such as New York with 33 LWIAs, will be able to comply with
that requirement unless estimates are used in place of actual numbers.
If actual numbers are required, it will take 20 to 30 days after the
end of the quarter to come up with reliable figures.
Public Housing Agencies Have Made Progress Utilizing Recovery Act
Funds:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management.[Footnote 43] The Recovery Act
requires the U.S. Department of Housing and Urban Development (HUD) to
allocate $3 billion through the Public Housing Capital Fund to public
housing agencies using the same formula for amounts made available in
fiscal year 2008. Recovery Act requirements specify that public housing
agencies must obligate funds within 1 year of the date on which they
are made available to public housing agencies, expend at least 60
percent of funds within 2 years, and expend 100 percent of the funds
within 3 years. Public housing agencies are expected to give priority
to projects that can award contracts based on bids within 120 days from
the date on which the funds are made available, as well as projects
that rehabilitate vacant units, or those already underway or included
in their current required 5-year capital fund plans.
HUD is also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofit investments. In a Notice
of Funding Availability published May 7, 2009, and revised June 3,
2009, HUD outlined four categories of funding for which public housing
agencies could apply:
* creation of energy-efficient communities ($600 million);
* gap financing for projects that are stalled due to financing issues
($200 million);
* public housing transformation ($100 million); and:
* improvements addressing the needs of the elderly or persons with
disabilities ($95 million).
For the creation of energy-efficient communities, applications (which
were due July 21, 2009) were to be rated and ranked according to
criteria outlined in the Notice of Funding Availability. The last three
categories will be threshold-based, meaning applications that meet all
the threshold requirements will be funded in order of receipt. If funds
are available after all applications meeting the thresholds have been
funded, HUD may begin removing thresholds after August 1, 2009, in
order to fund additional applications in the order of receipt until all
funds have been awarded. Applications in these three categories were
accepted until August 18, 2009.
New York State has 84 public housing agencies that have received
Recovery Act formula grant awards through the Public Housing Capital
Fund, totaling $502.3 million. Though we visited three housing agencies
for our previous report, we did not visit any housing agencies for this
report cycle. However, we continued to monitor the use of Recovery Act
funding by the 84 public housing agencies in New York State. As of
September 5, 2009, 59 of the state's 84 public housing agencies have
obligated $154.4 million, while 43 have expended $2.9 million, as
illustrated by figure 6.
Figure 6: Percentage of Public Housing Capital Funds Allocated by HUD
That Have Been Obligated and Drawn Down in New York as of September 5,
2009:
[Refer to PDF for image: 3 pie-charts]
Funds obligated by HUD: 100% ($502,345,293); Funds obligated by public
housing agencies: 30.7% ($154,407,656); Funds drawn down by public
housing agencies: 0.6% ($2,926,85959).
Number of public housing agencies:
Entering into agreements for funds: 84; Obligating funds: 59;
Drawing down funds: 43.
Source: GAO analysis of HUD data.
[End of figure]
New York Is Focusing Guidance and Training Efforts on Meeting Reporting
Requirements, but Concerns Remain:
The New York Recovery Cabinet is taking several actions to help
agencies comply with reporting requirements. For example, the
Governor's Office has designated an individual to oversee Section 1512
Recovery Act recipient reporting requirements. In June 2009, this
individual met with key officials in each agency, including finance,
internal control, and program staff, to determine whether agency staff
understood 1512 reporting requirements and were developing plans and
procedures to help ensure that the requirements will be met in a timely
manner. In addition, the New York State Division of the Budget
contracted with a consultant to (1) assess the optimal approach
(centralized, decentralized, or hybrid) to be used when reporting to
the federal government; (2) assess state agencies' ability to meet
Section 1512 reporting requirements; (3) provide assistance to agencies
identified as high risks in complying with the reporting requirements,
and (4) assess the state's ability to conduct centralized quality
assurance procedures for accurate and complete reporting to the federal
government. The Governor's Office identified 26 agencies or prime
recipients, including MTA, that are responsible for complying with the
reporting requirements.[Footnote 44] To help ensure that the state
meets its reporting requirements over the course of the Recovery Act,
the state also issued a request for proposal for a Recovery Act
consultant to serve on a longer-term basis in assisting state agencies.
The consultant has taken several actions to help New York meet its
reporting requirements. The consultant prepared a survey that was sent
to the 26 agencies, which are subject to the 1512 reporting
requirements. The consultant was to analyze the results of the survey,
work with the state to develop risk criteria, and assign a risk rating
to each agency and program. This work was to be completed during the
first week of July 2009.[Footnote 45] Based on the state's estimate, 16
to 18 of the 26 agencies that are subject to Recovery Act reporting are
considered high risk. For those agencies and programs assessed as high
risk, the consultant is conducting follow-up workshops to (1) assess
ability to report required data or data element capability,[Footnote
46] (2) assist agencies in meeting reporting requirements, and (3)
identify any gaps with the Recovery Act requirements. In addition, the
state has used a consultant to provide training on reporting
requirements to agencies and other recipients. For example, the
consultant conducted an in-person training session on section 1512
reporting requirements for state personnel in June and a Webinar for
non-state prime recipients or subrecipients (such as local governments,
nonprofits, and contractors) on section 1512 reporting requirements in
July.[Footnote 47] Additional training via Web cast is scheduled for
September 10th. The recovery czar said that 200 people attended the in-
person training and 1,500 people attended the Webinar.
On August 6, 2009, the New York recovery czar issued guidance to state
agencies about the collection of Recovery Act Section 1512 reporting
data. New York has chosen the decentralized approach for reporting
recipient information, so each state agency that is a prime recipient
will report directly to [hyperlink, http://www.federalreporting.gov].
In addition, the guidance states that each agency will report both
prime recipient and subrecipient data and that prime recipients will
not delegate reporting responsibility to a subrecipient. For example,
DHCR intends to collect all the data required by DOE for reporting
purposes from the 64 subgrantees running the state's weatherization
program and report it for them. In addition, prime recipients who
receive funds directly from a federal agency, such as MTA, will also
report directly to [hyperlink, http://www.federalreporting.gov].
According to the Governor's Office, many of the state agencies have
reporting plans in place, but they vary in their thoroughness of
planning and capabilities. Officials in the Governor's Office said that
they are less concerned about agencies such as NYSDOT and NYSDOL, which
are very experienced with federal reporting requirements, than some of
the programs or agencies, such as the weatherization program, that are
relying on local community-based organizations to administer Recovery
Act funds. Such local organizations may not have experience with
federal reporting requirements.
New York State is also taking measures to help ensure accurate and
complete reporting of the state's data elements. For example, the
consultant is assessing the state's 1512 data element capability and
quality assurance capability. In addition, officials at the Governor's
Office said that they will begin working on a formal process regarding
data quality reviews and that it plans to involve the state's quality
control office. According to the Governor's Office, on August 4,
affected agencies were informed that they are required to incorporate
quality control measures related to Section 1512 reporting in their
internal control and audit plans. The Governor's Office said that those
plans will be reviewed soon to determine whether agencies have complied
with this requirement. It is also developing a standard checklist of
items that should be reviewed in the 1512 data quality control process
for distribution to the agencies and plans to designate an individual
to provide central oversight of agency compliance with quality control
standards.
According to the Governor's Office, subrecipients will provide
information to state agencies, which will assess the quality of the
data and identify any issues such as double counting. A state official
said that some subrecipients may submit reports on paper, which will
require agencies to perform data entry. The state official also said
that agencies are prepared to make phone calls between September 30th
and October 10th to get the reports from sub-recipients. According to
Office of the State Comptroller (OSC) officials, New York State has
good systems to capture financial data, but it does not have good
systems to capture measurement or impact data, such as the number of
jobs created. The financial information in the state's central
accounting system will be used along with agency-specific reporting on
individual projects/activities to meet Recovery Act quarterly reporting
requirements. The state officials also said that the contract
information for state agencies can be obtained in real-time from Open
Book, which is managed by OSC.[Footnote 48]
The Governor's Office said that it is not certain about the extent of
the program results it will report on October 10, 2009. In addition, an
official from the Governor's Office said that some federal agencies are
requiring recipients to track other performance measures. However, the
official said that this can create confusion because OMB has separate
requirements from the federal agency with whom a recipient normally
interacts. For example, while OMB requires recipients, such as MTA, to
report the number of FTEs on a Recovery Act job, FTA guidance requires
the same recipients to report work hours.
State Comments on This Summary:
We provided the Governor of New York with a draft of this appendix on
September 9, 2009. Representatives from the Governor's Office and the
oversight agencies responded on or about September 11, 2009. In
general, except for NYSDOT's disagreement with our concurrence with
OSC's recommendation on the potential conflict of interest issue, they
agreed with our draft and provided some clarifying information, which
we incorporated. We addressed NYSDOT's comments in the respective
section. The officials also provided technical suggestions that were
incorporated, as appropriate.
GAO Contacts:
Susan Fleming, (202) 512-4431, or flemings@gao.gov:
Dave Maurer, (202) 512-9627, or maurerd@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Ronald Stouffer, Assistant
Director; Barbara Shields, Analyst-in-Charge; Jeremiah Donoghue, Holly
Dye, Colin Fallon, Christopher Farrell, Emily Larson, Sarah McGrath,
Tiffany Mostert, Joshua Ormond, Summer Pachman, Frank Putallaz, and Yee
Wong made major contributions to this report.
[End of section]
Footnotes for Appendix XIII:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] The 2-year budget gap of $20.1 billion was for fiscal years 2008-
2009 and 2009-2010.
[3] FTA operates on a reimbursement basis, which means the project
sponsor must have incurred a cost before they can draw funds.
[4] MTA expects to receive over $1 billion in Recovery Act funds,
including funds through FTA's Capital Assistance Grants, the Fixed
Guideway Infrastructure Investment Program, and the Capital Investment
Grant Program.
[5] Section 1512 of the Recovery Act requires that all recipients
prepare quarterly reports, which includes information such as who is
receiving Recovery Act dollars and the amounts, projects or activities
that are being funded, the completion status of project activities, and
an estimate of the number of jobs created and the number of jobs
retained by projects and activities.
[6] New York State operates on an April 1 through March 31 fiscal year.
[7] FMAP is discussed in detail in the main report; see [hyperlink,
http://www.gao.gov/products/GAO-09-1016].
[8] 2009-2010 Enacted Budget Financial Plan issued on April 28, 2009.
[9] New York has two rainy-day funds--its Tax Stabilization Reserve and
Rainy Day Reserve Funds, which according to state officials, must be
balanced at approximately $1 billion and $175 million, respectively, at
the end of each fiscal year. These reserve funds may be utilized for
cash flow purposes throughout the year; however, all funds must be
restored by the end of the fiscal year.
[10] OMB Memorandum, M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Activities, dated May 11, 2009.
[11] SWCAP is a process in which states can recoup administrative costs
on an annual basis by submitting cost detail to the Department of
Health and Human Services (HHS) for review and approval.
[12] Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009).
[13] For the Highway Infrastructure Investment Program, the U.S.
Department of Transportation has interpreted the term obligation of
funds to mean the federal government's contractual commitment to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement.
[14] States request reimbursement from FHWA as the state makes payments
to contractors working on approved projects.
[15] Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to
transfer funds made available for transit projects to FTA. The about
$175.5 million includes $466,000 in apportioned funds that were
transferred from FHWA to FTA for vehicle fleet replacements (e.g., not
buses) in Rochester by the Rochester-Genesee Regional Transportation
Authority.
[16] 42 U.S.C. § 3161.
[17] The Audit and Civil Rights Division comprises the Office of Civil
Rights, Internal Audit Bureau, Investigations Bureau, Enterprise Risk
Management Bureau (Internal Control Office), and the Contract Audit
Bureau.
[18] On May 8, 2009, the Governor appointed the Executive Deputy
Commissioner as Acting Commissioner. The Commissioner is the head of
the agency.
[19] N.Y. Exec. § 950-953.
[20] IIA, International Standards for the Professional Practice of
Internal Auditing, 1120, Individual Objectivity.
[21] IIA defines conflict of interest as "any relationship that is, or
appears to be, not in the best interest of the organization."
[22] IIA Practice Advisory 1130.A2-1, Internal Audit's Responsibility
for Other (Non-audit) Functions.
[23] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[24] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer then 50,000 people.
[25] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, § 1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast,
under the existing program, operating assistance is generally not an
eligible expense for transit agencies within urbanized areas with
populations of 200,000 or more.
[26] The federal share under the existing formula grant program is
generally 80 percent.
[27] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and metropolitan planning
organizations designated for the area. Metropolitan planning
organizations are federally mandated regional organizations,
representing local governments and working in coordination with state
departments of transportation that are responsible for comprehensive
transportation planning and programming in urbanized areas. MPOs
facilitate decision making on regional transportation issues including
major capital investment projects and priorities. To be eligible for
Recovery Act funding, projects must be included in the region's TIP and
the approved State Transportation Improvement Program (STIP).
[28] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[29] Pub. L. No. 111-5, § 1201(a), 123 Stat. 115, 212 (Feb. 17, 2009).
[30] The jurisdiction of some urbanized areas within a state may cross
into at least one other state. Therefore, some urbanized areas are
included in multiple state totals.
[31] For the Transit Capital Assistance Program, DOT has interpreted
the term obligation of funds to mean the federal government's
commitment to pay for the federal share of the project. This commitment
occurs at the time the federal government signs a grant agreement.
[32] Combining several projects into one application can expedite the
approval process and provide flexibility to grant recipients to move
excess funds from one project to another with FTA approval.
[33] Satisfactory Continuing Control compliance requires grantees to
maintain control over real property, facilities, and equipment and
ensure they are used in transit service. GGFT was found to be
deficient, because its contingency fleet plan included vehicles that
had been sold.
[34] DBE compliance requires a grantee to comply with the DOT's policy
that DBEs are ensured nondiscrimination in the award and administration
of DOT-assisted contracts. Grantees also must create a level playing
field on which DBEs can compete fairly for DOT-assisted contracts;
ensure that only firms that fully meet eligibility standards are
permitted to participate as DBEs; help remove barriers to the
participation of DBEs; and assist the development of firms that can
compete successfully in the marketplace outside the DBE program. GGFT
was found to be deficient because procurement files for trolley buses
reviewed during the site visit did not include the required Transit
Vehicle Manufacturer DBE certification.
[35] Drug and Alcohol compliance requires grantees to have a drug and
alcohol testing program in place for all safety-sensitive employees.
GGFT was found to be deficient because GGFT had hired 15 local school
bus operators to operate trolley service during the summer and believed
that the school bus operators' drug and alcohol testing program with
the school district was sufficient. GGFT was not aware of the
requirement to conduct a pre-employment test for these school bus
drivers prior to allowing them to perform safety-sensitive work in
accordance with FTA Drug and Alcohol regulations.
[36] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act. See Pub. L. No.
111-5, § 1606, 123 Stat. 115, 303 (Feb. 17, 2009).
[37] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[38] H.R. Rep. No. 111-16, at 448 (2009).
[39] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[40] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[41] Oneida County Workforce Development is part of Working Solutions,
the Workforce Investment Board that serves Herkimer, Madison, and
Oneida Counties.
[42] Scheduling conflicts with other federal and state auditors limited
our ability to visit our second planned site visit, the New York City
workforce development office.
[43] Public housing agencies receive money directly from the federal
government (HUD). Funds awarded to the public housing agencies do not
pass through the state budget.
[44] According to the Governor's Office, they have compiled an
inventory of prime recipients that is maintained and updated as
necessary by the Recovery Cabinet. Inventories of subrecipients are
being maintained by the agency making the subaward or contract.
[45] On August 18, 2009, we requested survey results, which include a
list of agencies that are considered high risk. However, as of
September 16, 2009, we still had not received the list.
[46] The specific data elements to be reported by prime recipients or
subrecipients includes award type, description, amount of Recovery Act
funds expended to projects/activities, project status, number of jobs
created and retained, and amount awarded to and received by
subrecipients.
[47] This Webcast is archived at [hyperlink,
http://www.recovery.ny.gov].
[48] Open Book does not include financial data for agencies, such as
MTA, that receive funds directly from federal agencies.
[End of section]
Appendix XIV: North Carolina:
The following summarizes GAO's work for the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in North Carolina. The full report covering all
of our work in 16 states and the District of Columbia is available at
[hyperlink, http://www.gao.gov/recovery/].
Our work in North Carolina focused on three programs funded under the
Recovery Act--the State Fiscal Stabilization Fund (SFSF) administered
by the U.S. Department of Education (Education), Highway Infrastructure
Investment funds administered by the U.S. Department of
Transportation's Federal Highway Administration (FHWA), and the
Weatherization Assistance Program administered by the U.S. Department
of Energy (DOE). Because SFSF is a new program and the state has
disbursed funds to localities, we reviewed the SFSF to determine how
the state was managing the allocation and distribution of funds. We
also reviewed selected localities' planned expenditures and contracting
procedures for education Recovery Act funds, including those that
expanded existing funding under Title I, Part A of the Elementary and
Secondary Education Act (ESEA) and Part B of the Individuals with
Disabilities Education Act (IDEA). In addition, we reviewed contracts
for highway projects using Highway Infrastructure Investment funds that
have been underway in North Carolina for several months, including
oversight of these contracts. As we have done in our previous reports,
we reviewed the Weatherization Assistance Program because it is
considered a high-risk area because it will receive significantly more
funds than in prior years. For each program, we reviewed the planning
and preparation efforts in place for the October 2009 Recovery Act
recipient reporting requirement. In addition to these programs, we also
reviewed challenges that rural small localities have faced in accessing
Recovery Act funds because several state officials have told us that
this is an area of risk in the state. We also reviewed and analyzed
preliminary data collected by the North Carolina League of
Municipalities (NCLM) on municipalities' efforts to pursue Recovery Act
funds. We determined this information to be reliable for our purposes.
Also, we updated information on North Carolina's budget situation and
how the Recovery Act funds will be used to stabilize the budget.
Recovery Act funds are being directed to helping North Carolina
stabilize its budget and support local governments, and to stimulate
infrastructure development and expand existing programs that will
provide needed services and potential jobs.
Budget:
* On August 7, 2009, the Governor of North Carolina signed the budget
bill (SB 202) into law, after the state used continuing resolutions to
keep the government operating from June 30--the end of the prior fiscal
year--until the budget was signed.
* To close the state's $4.8 billion shortfall, the state is using $1.4
billion of Recovery Act funds, making $2 billion in cuts to the state
budget, and closing the remaining gap with $1.4 billion in tax and fee
increases.
* Beginning in October 2008 and continuing through May 2009, the North
Carolina Division of Medical Assistance (DMA) overbilled the federal
Centers for Medicare & Medicaid Services (CMS) and received $291
million for federal reimbursement for Qualified Public Hospital medical
claims under Medicaid. The overbilling occurred because a DMA employee,
who was new to this area of responsibility, erroneously requested
federal reimbursement for this program rather than state funding.
However, according to state officials, none of the $291 million in
overbillings involved Recovery Act funds. Nevertheless, this will
impact the state's 2010 budget. To begin repaying the overbillings, the
North Carolina Department of Health and Human Services (NCDHHS)
requested $160 million less in federal reimbursement than actual
Medicaid expenditures incurred by the state for the period covered by
the July 31, 2009 reimbursement. The NCDHHS anticipates paying the
balance in quarterly installments over the remainder of fiscal year
2010 by reducing the federal reimbursement for its actual expenditures.
U.S. Department of Education State Fiscal Stabilization Fund; ESEA
Title I, Part A; and IDEA, Part B Funds:
* Education had approved North Carolina's application for the state's
SFSF award and released $1 billion to the state as of August 19, 2009.
* The state approved 115 applications from local educational agencies
(LEA) and 96 applications from charter schools,[Footnote 2] which are
also LEAs, for SFSF funds and released the funds in August 2009.
* As of September 1, 2009, the state had allocated $129 million in ESEA
Title I, Part A and $130 million in IDEA, Part B funds awarded under
the Recovery Act to LEAs. The state reported that as of August 31,
2009, LEAs had expended about $9.6 million and $27 million,
respectively, for these two programs.
* LEAs GAO visited reported using Recovery Act funds to save jobs of
school personnel.
* State officials report that after receiving guidance from Education
they are developing a comprehensive plan for monitoring SFSF use at the
local level.
Highway Infrastructure Investment:
* FHWA apportioned $736 million in Recovery Act funds to North
Carolina. As of September 1, 2009, the federal government had obligated
$452.9 million for North Carolina and $38 million had been reimbursed
by the federal government.
* As of September 1, 2009, the North Carolina Department of
Transportation (NCDOT) had advertised for bids for 101 proposed
contracts representing a total value of $386 million in estimated
Recovery Act funding. Of the 101 proposed contracts, 88 contracts had
been awarded for $348 million, and work has begun on 77 of these
contracts representing a total value of about $330 million. Many of
these contracts involve road paving.
* Based on the high-profile nature of the Recovery Act, the FHWA--NC
Division has increased oversight for Recovery Act highway projects.
* NCDOT is using its established process for awarding and overseeing
contracts for Recovery Act highway projects.
* NCDOT anticipates meeting the October 2009 recipient reporting
requirements for Section 1512 (c) of the Recovery Act.
Weatherization Assistance Program:
* Of the $132 million in Recovery Act weatherization funding North
Carolina is expected to receive, DOE has provided $66 million. State
weatherization officials are in the process of disbursing approximately
$13 million of the Recovery Act weatherization funds to local
weatherization agencies to fund start up activities such as buying
equipment and vehicles and funding public awareness campaigns.
* State weatherization officials do not have any concerns associated
with incorporating the Recovery Act weatherization requirements, such
as compliance with the Davis-Bacon Act, or with monitoring the use of
funds.
* State weatherization officials plan to follow both the normal and
Recovery Act reporting requirements, which include programmatic
quarterly reports, monthly financial status reports, and Office of
Management and Budget (OMB) Section 1512 reporting requirements.
Officials do not anticipate having any challenges with respect to
complying with these reporting requirements in a timely manner.
Rural Issues:
* North Carolina includes approximately 550 municipalities and 100
counties, many of which are small or rural. According to U.S.
Department of Agriculture 2008 estimates, about one-third of the
state's residents lived in nonmetropolitan counties, and these counties
had higher poverty rates and lower income than the statewide averages.
* North Carolina municipalities rely on a variety of sources in
obtaining information about the Recovery Act that include federal,
state, and nonprofit sectors. Officials from North Carolina's Office of
Economic Recovery and Investment (OERI) told us that they have held a
series of informational workshops across the state since April 2009
designed to provide a question and answer forum for local officials and
the general public. Still, officials in three of the municipalities we
visited reported a variety of challenges identifying information about
Recovery Act funding opportunities, such as navigating a "maze" of
funding opportunities and having staff-capacity issues.
* Several North Carolina state officials told us that many of the
state's small towns and cities have been historically understaffed and
may lack the expertise to apply for and administer federal grants.
Local officials we interviewed expressed concerns about their capacity
to apply for and administer Recovery Act funding. For example,
officials in two localities told us that they lack funds to meet the
federal matching requirements or other up-front costs needed for some
Recovery Act programs.
Recipient Reporting:
* OERI has undertaken initiatives to help ensure state agency Section
1512 Recovery Act Recipient Reports are complete, accurate, and
submitted on time.
* Based on the results of an assessment, the OERI official in charge of
reporting issues told us that he has a high level of confidence that
North Carolina state agencies will be ready to submit the required
reports in October.
* As of September 4, 2009, none of the respondents to a state survey on
subrecipient delegation and data quality requirements reported they
were planning to delegate reporting responsibility to subrecipients.
* Some state officials indicated concerns with the methodology to be
used for measuring jobs created or retained.
North Carolina Used Recovery Act Funds to Mitigate State's Budget
Shortfall:
On August 7, 2009, the Governor of North Carolina signed the biennial
budget bill (SB 202) into law, after the state used continuing
resolutions to keep the government operating from June 30--the end of
the prior fiscal year. The biennial budget includes about $19 billion
in appropriations for fiscal year 2010 and $19.5 billion in
appropriations for fiscal year 2011. In developing the budget, the
North Carolina Legislature faced a $4.8 billion budget shortfall in
fiscal year 2010. To close this shortfall, the state is using $1.4
billion of Recovery Act funds, making $2 billion in cuts to the state
budget, and closing the remaining gap with $1.4 billion in tax and fee
increases, according to state officials. Although the legislature cut
many state agency budgets, certain areas of the budget received
proportionately smaller cuts. For example, state budget officials told
us that the state Department of Public Instruction (DPI) took a
relatively small funding cut relative to the size of the agency's
budget. Although agencies will be operating at 95 percent of their
budgets for several months, officials from the Office of State Budget
and Management (OSBM) said they plan to ease restrictions on agencies'
discretionary spending put in place for the 2009 state fiscal year.
According to state officials, regarding tax increases, the budget
included increased income and sales tax rates.
In order to better track the flow of Recovery Act funds in North
Carolina, OSBM continues to develop an electronic data collection
system. The new system will serve as the state's Recovery Act tracking
tool and will pull data from several state accounting and procurement
systems in order to present a more comprehensive accounting of Recovery
Act funds. OSBM officials noted that it is their goal to have this
system available by February 2010.
North Carolina Overbilled Medicaid, Which Will Reduce State Fiscal Year
2010 Federal Medicaid Reimbursements:
According to officials with the North Carolina Department of Health and
Human Services (NCDHHS) and the North Carolina Office of the State
Auditor, beginning in October 2008 and continuing through May 2009, the
North Carolina Division of Medical Assistance (DMA) overbilled the
federal Centers for Medicare & Medicaid Services (CMS) and received
$291 million for federal reimbursement for Qualified Public Hospital
medical claims under Medicaid. The overbilling occurred because a DMA
employee, who was new to this area of responsibility, erroneously
requested federal reimbursement for this program rather than state
funding. According to the officials, none of the $291 million in
overbillings involved Recovery Act funds.
Although the overbillings did not involve Recovery Act funds, this will
impact the state 2010 budget. After the Medicaid billing error was
discovered, the Secretary of NCDHHS met with CMS officials on July 22,
2009, to self-report the overbillings and to discuss how to repay the
$291 million. CMS and NCDHHS officials agreed that North Carolina would
make its first repayment of the funds in the amount of $160 million on
July 31, 2009. This repayment was done by requesting $160 million less
in federal reimbursement than actual expenditures incurred by the state
for the period covered by the July 31, 2009 reimbursement. The NCDHHS
anticipates paying the balance in quarterly installments over the
remainder of state fiscal year 2010 by reducing the federal
reimbursement for its actual expenditures.
Recovery Act Funds for Education:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHEs). The initial award of SFSF
funding required each state to submit an application to the U.S.
Department of Education that provides several assurances, including
that the state will meet maintenance-of-effort requirements (or it will
be able to comply with waiver provisions) and that it will implement
strategies to meet certain educational requirements, such as increasing
teacher effectiveness, addressing inequities in the distribution of
highly qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
The Recovery Act provides $10 billion to help local educational
agencies (LEAs) educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965. The Recovery
Act requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 3] The U.S.
Department of Education is advising LEAs to use the funds in ways that
will build the agencies' long-term capacity to serve disadvantaged
youth, such as through providing professional development to teachers.
The U.S. Department of Education made the first half of states'
Recovery Act ESEA Title I, Part A funding available on April 1, 2009
and announced on September 4, 2009 that it had made the second half
available.
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act
(IDEA), the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities have
access to a free and appropriate public education and is divided into
two separate grants--Part B grants to states (for school-age children)
and Part B preschool grants (section 619). Part C funds programs that
provide early intervention and related services for infants and
toddlers with disabilities--or at risk of developing a disability--and
their families. The U.S. Department of Education made the first half of
states' Recovery Act IDEA funding available to state agencies on April
1, 2009 and announced on September 4, 2009 that it had made the second
half available.
State Fiscal Stabilization Funds Help North Carolina Address Large
Budget Shortages:
In its May 2009 SFSF application, North Carolina cited an "extreme and
historic revenue shortfall" that resulted in the state ordering most of
its agencies to return 11 percent of their state funding to the state.
The state also reported it had adopted several budget restrictions,
including freezing purchases of goods and services, limiting travel,
and prohibiting the filling of most vacant positions. Also, the state
cited an urgent need for funding to meet personnel costs, specifically
requesting $127 million in SFSF funds to cover May and June payroll for
state IHEs. The state made required assurances, including that it would
meet Recovery Act maintenance-of-effort requirements by maintaining
state support for education at no less than fiscal year 2006 levels of
$7.0 billion for elementary and secondary education and $2.6 billion
for public IHEs. The state also indicated it would not use SFSF funds
to restore state funding to elementary and secondary education in
fiscal year 2009, but would use $127 million cited above for IHEs in
fiscal year 2009. For 2010, the state projected using $721 million for
elementary and secondary education, but that it would not use SFSF
funds for IHEs. Education approved North Carolina's application and, as
of August 19, 2009, had released to the state $1.0 billion of its $1.4
billion total allocation.
An official from the state budget office told us the state is in the
process of amending its SFSF application and now plans to use
approximately $3.9 million of its governments services fund award to
support North Carolina Virtual Public School (NCVPS) program courses.
NCVPS provides online courses to high school students throughout the
state. The government services fund monies would support a portion of
the instructional costs of providing the courses in Spring semester
2010.
North Carolina's Department of Public Instruction (DPI) required LEAs
to apply for education stabilization funds by June 30, 2009. A North
Carolina education official told us they modeled the LEA application
for SFSF funds after the applications from a number of states,
including California. The application required LEAs to make several
assurances concerning the use and reporting of SFSF funds. For example,
LEAs must assure they will administer SFSF funds in accordance with
federal laws, including specific provisions of the Recovery Act,
federal regulations, and state requirements for school facility
construction. Although North Carolina was required to assure that it
would make progress toward educational reforms as a condition of
receiving SFSF funds, the state did not require LEAs to certify that
they would make such progress. While the state cannot tell LEAs how
they must use SFSF funds, Education's guidance for the program
specifically notes that a governor "may require an LEA to describe in
its local application how the LEA will assist the state in advancing
essential reforms in the four areas for which the state provides
assurances in its application for Stabilization funds."[Footnote 4]
According to a state Department of Public Instruction official, the
department did not require the education reform assurances in the LEA
applications, but they directed LEAs to Education's guidance on the
SFSF program. Further, the state official with responsibility for
overseeing SFSF emphasized that they were committed to making progress
toward education reforms, and said that they have accountability
measures in place to monitor progress.
DPI officials report that all 115 of North Carolina's LEAs, and the
state's 96 charter schools, which are also LEAs, applied for education
stabilization funds. State officials said they reviewed and approved
applications as they were received, and as of August 25, 2009, all
applications had been approved. DPI notified North Carolina's LEAs of
their allocation amounts and made the funds available to LEAs on August
19, 2009. As of that date, the state had allocated $380 million of
education stabilization funds to LEAs. In addition to education
stabilization funds, North Carolina had allocated, as of September 1,
2009, $129 million in ESEA Title I, Part A funds and $130 million in
IDEA Part B funds. As of August 31, 2009, the state reported that LEAs
have expended $14.3 million in SFSF funding, $9.6 million in ESEA Title
I, Part A funds, and $27 million in IDEA, Part B funds.
North Carolina Developing Plans to Monitor Local Use of Education
Stabilization Funds:
State officials told us they have not yet developed specific plans to
monitor local use of SFSF funds, but are now doing so in response to
guidance Education issued on August 27, 2009. Specifically, the
guidance--issued as a letter to state officials via Education's
listserv for SFSF grantees--references statutory and regulatory
requirements with which SFSF grant recipients must comply and advises
recipients that they must have a comprehensive SFSF monitoring plan in
place that includes a monitoring schedule, monitoring policies and
procedures, data-collection instruments, monitoring reports and
feedback to subrecipients, and processes for verification of
implementation of corrective actions at the subrecipient level.
DPI officials told us they planned to rely on existing procedures for
monitoring LEAs' uses of funds. The existing procedures, according to
the DPI official responsible for overseeing SFSF, include reviews of
LEAs budgets and expenditures to ensure that expenditures comply with
state-approved budgets. The official also said they trained certified
public accounting firms in monitoring the spending of federal funds,
and then review the firms' annual financial statement audits of LEAs.
Also, a DPI official told us they are modifying the state's data
collection system to capture additional data elements required to meet
recipient reporting requirements of the Recovery Act. Specifically, the
state official reported that they currently capture a majority of
required data elements, but that they would need to put procedures in
place to capture elements they do not collect, such as jobs created.
The state official said that the information that DPI reported for the
October quarterly report required under the Recovery Act would only
capture expenditures by LEAs through the end of August. The official
also said that they would not be able to report data through the end of
September because that would not give them sufficient time to ensure
the accuracy and completeness of the data.
Rural LEAs Visited:
GAO visited two LEAs in North Carolina to better understand the issues
facing rural LEAs and to review contracting practices when Recovery Act
funds are used. We chose Lincoln County Schools and Perquimans County
Schools because they are located in rural counties and information we
obtained from the state DPI indicated both counties had used Recovery
Act funds to contract for services. Lincoln County Schools had a total
school year 2007-2008 budget of about $100 million. The LEA's 24
schools served 12,193 students and employed 1,810 persons in school
year 2007-2008. Perquimans County serves 1,800 students through four
schools and employs about 150 licensed personnel. The Perquimans school
superintendent told us that the LEA's student population has been
decreasing annually, which, in turn, has led to a decrease in funds
from state and federal sources. Officials in both LEAs told us they
were facing budget shortages.
Rural LEAs Reported Recovery Act Funds Help Address State Budget Cuts
and Will Be Used to Save Jobs:
Officials in both LEAs told us they are using Recovery Act funds to
offset budget reductions. Lincoln County's school superintendent told
us the LEA had two overarching goals for its use of Recovery Act funds:
first, to save jobs, and second, to preserve the integrity of classroom
instruction by minimizing class-size increases. Lincoln officials also
expressed concern that budget cuts will prevent the LEA from continuing
some of the educational reforms it had already put in place.
Lincoln County school officials reported they were able to use Recovery
Act ESEA Title I funds to save teaching jobs, and SFSF funds to save
support positions. A Lincoln official told us they plan to use the
LEA's $2.8 million in SFSF funds primarily to save 119 custodial and
clerical positions, which were cut as a result of state budget cuts. He
also told us they will use Title I funds to save the jobs of 24 teacher
assistants and that IDEA funds will help save the jobs of 9 teachers
and 11 teacher assistants. Under both IDEA and Title I, a Lincoln
official said the district took steps when retaining positions to
ensure they did not violate federal "supplement, not supplant"
requirements. The supplement, not supplant requirements of ESEA and
IDEA generally require that federal funds must only supplement the
funds that would, in the absence of federal funds, be made available
from non-federal sources (for Title I) or state, local or other federal
funds (for IDEA).
While federal funds have helped to save jobs, Lincoln officials still
anticipate decreasing teaching positions, and, as a result, class sizes
will increase. While committed to maintaining class size at current
levels in kindergarten through grade 3, officials said they anticipate
increasing class size by one student in grades 4 through 12, but may
have to increase class size by two students in high schools. Also,
officials said that they will reduce the number of hours some clerical
staff work and leave some vacant positions unfilled. Officials said
that Recovery Act IDEA funds would allow them to expand services for
exceptional children. For example, Lincoln has hired two
"interventionists" who will work with regular classroom teachers
modeling effective instructional interventions in reading and
mathematics. These two positions are funded for the two years the LEA
will receive Recovery Act funds. Lincoln officials also said that
additional IDEA funds will help address the needs resulting from an
increase in the population of exceptional children they serve,
particularly children with hearing impairments and autism.
The Perquimans County School district is facing a similar fiscal
situation to that of Lincoln County and has also prioritized saving
jobs. The school superintendent said the LEA relies heavily on state
funding, but the state budget lowered funding for the LEA every year.
He also said the LEA began planning for budget cuts last year and has
been successful in bringing in additional funding from grants for which
it applied. The school superintendent told us Recovery Act funding will
get the LEA through this school year, but once Recovery Act funds are
expended, the LEA is likely to face a "funding cliff" that will result
in the LEA being in the same fiscal position it is now. Perquimans
officials said they had ideas for innovative practices they would have
liked to implement with education stabilization funds, but with the
continued deterioration of the state funding to education, the LEA must
use all funds available to it to save jobs. Perquimans officials said
they will use the Title I funds to save jobs in extended day and
preschool programs as well as IDEA funds to save jobs. One Perquimans
official told us they are working with a state university to provide
telespeech services for 23 students and plan to use Recovery Act IDEA
funds to pay for these services. That official told us this effort has
the potential of saving the LEA money.
Both LEAs reported they have received guidance from the state on the
use of education stabilization funds. Perquimans officials told us most
of the information they have received on Recovery Act education
programs came from the state, but they sometimes have sought
information directly from Education or other federal sources. Likewise,
a Lincoln County official said they had received preliminary guidance
from state officials and that the state's guidance to LEAs has improved
as Education has released more guidance. Lincoln County officials also
told us they shared all guidance they have received with teachers and
other employees.
LEAs Cite Challenges in Procurement:
Officials in both LEAs told us they face challenges in finding
qualified contractors. Perquimans officials said their LEA relies
heavily on contractors to provide needed services for exceptional
students because it is difficult to find the specialized staff
exceptional children need, and in some cases, they need to solicit
contractors from as far away as Virginia. Perquimans officials told us
they had received some guidance from DPI on contracting with Recovery
Act funds, and reported using Recovery Act funds to pay for contracted
services. Due to the shortage of qualified contractors locally,
Perquimans officials reported they plan on issuing a sole-source
contract for these services. A Perquimans official reported to us that
they often need to research and solicit contractors individually in
order to find a qualified person to meet their needs. The same
Perquimans official said that they often contact surrounding LEAs to
identify qualified contractors with which those districts have worked.
One official also reported that contracts usually set a maximum payment
to contractors based on a set wage rate and estimated number of hours
to be spent on contract activities. They told us that contracts are
generally for one school year. Lincoln officials also said they often
consult with other LEAs that have needs similar to their own in order
to identify qualified contractors. A Lincoln official also reported
that the typical period of contract performance is for the duration of
the school year and generally contracts are fixed price, based on a per
student cost. However, Lincoln officials told us they do not anticipate
using Recovery Act funds for contracting.[Footnote 5] Nonetheless,
according to a Lincoln official responsible for contracting, their
procurement policies and procedures are based on those of DPI and
require a formal process for all contract solicitations over $90,000.
The official stated for contract solicitations with an estimated value
between $30,000 and $90,000 the LEA would use a less-formal process
that includes a letter of interest to potential bidders and the
solicitation of at least three bids. The procurement official stated
that all procurements over $100,000 must be approved by the local Board
of Education.
Transportation: Highway Infrastructure Investments:
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to states through federal-aid highway program
mechanisms, and states must follow existing program requirements, which
include ensuring the project meets all environmental requirements
associated with the National Environmental Policy Act (NEPA), paying a
prevailing wage in accordance with federal Davis-Bacon Act
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
The Federal Highway Administration--North Carolina (FHWA--NC) Division
is one of the 52 operating federal-aid Division Offices of the federal
Highway Administration (FHWA) and is located in Raleigh, North
Carolina. The FHWA--NC Division is responsible for administrating the
federal-aid highway program to help maintain the integrity and safety
of North Carolina's roads and bridges. The staff has technical
expertise and other resources, and provides oversight and coordination
of the federal-aid program in North Carolina. The North Carolina
Department of Transportation (NCDOT) is the primary recipient of all
federal-aid highway funds in North Carolina. The NCDOT is responsible
for building, repairing, and operating highways, bridges, and other
modes of transportation, including ferries, in North Carolina.
Overview:
The U.S. Department of Transportation's FHWA apportioned $736 million
to North Carolina in March 2009 for highway infrastructure and other
eligible projects. As of September 1, 2009, $452.9 million[Footnote 6]
has been obligated for mainly pavement improvement projects. Also,
funds have been obligated for 101 contracts either begun or advertised
for bids. Based on the high-profile nature of the Recovery Act, the
FHWA--NC Division has increased oversight for Recovery Act highway
projects. According to agency officials, the NCDOT is using its
established process for awarding and overseeing contracts for Recovery
Act highway projects. Moreover, the NCDOT anticipates meeting the
October 2009 recipient reporting requirements for Section 1512 (c) of
the Recovery Act.
Recovery Act Funds Have Been Obligated for NCDOT and Expended Mainly
for Pavement Improvements Projects:
As we reported in July 2009, $736 million was apportioned to North
Carolina in March 2009 for highway infrastructure and other eligible
projects. As of September 1, 2009, $452.9 million had been obligated.
[Footnote 7] As of September 1, 2009, $38 million had been reimbursed
by FHWA.[Footnote 8]
Almost 83 percent of Recovery Act highway obligations for North
Carolina have been for pavement projects. Specifically, $376.6 million
of the $ 452.9 million obligated as of September 1, 2009, is being used
for pavement projects. As reported in our April 2009 report, NCDOT
officials told us that they identified these projects based on Recovery
Act direction that priority is to be given to projects that are
anticipated to be completed within a 3-year time frame, and that are
located in economically distressed areas. Figure 1 shows obligations by
the types of road and bridge improvements being made.
Figure 1: Highway Obligations for North Carolina by Project Improvement
Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (83 percent, $376.6 million):
Pavement improvement ($182 million): 40%;
Pavement widening ($137.5 million): 30%;
New road construction ($57.2 million): 13%;
Bridge projects total (5 percent, $24.2 million):
Bridge improvement ($12.7 million): 3%;
Bridge replacement ($11.5 million): 3%.
Other (12 percent, $52.2 million):
Other ($52.2 million): 12%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
According to the NCDOT, as of September 1, 2009, the Department had
publicized contract opportunities for 101 proposed contracts
representing a total value of $386 million in estimated Recovery Act
funding. According to officials, of the 101 proposed contracts, 88
contracts had been awarded for $348 million, and work has begun on 77
of these contracts representing a total value of about $330 million.
According to an NCDOT official, approximately 40 of the 101 proposed
contracts that had been solicited, representing $82 million, are
anticipated to be complete by December 1, 2009.
FHWA--NC Division Oversight Increased for Recovery Act Projects:
According to the FHWA--NC Division officials, the division will provide
oversight of all Recovery Act highway projects based on the high-
profile nature of the Recovery Act and its Risk Management Plan for the
Recovery Act. These officials stated that prior to the Recovery Act,
the FHWA--NC Division typically provided full oversight of federal-aid
projects only when the projects were on the National Highway System
(NHS)[Footnote 9] or if the project would be added to the Interstate
Highway System. FHWA--NC Division's full oversight of projects includes
coordination, review, and approval of several steps in the planning and
project-development phase and in the design and construction phase.
Normally, for those federal-aid projects not subject to the FHWA--NC
Division's full oversight, the division, after approval of the
environmental decision document, delegated authority to the NCDOT for
the remaining design and construction steps without project review by
the FHWA--NC Division.
The FHWA--NC Division increased its oversight for Recovery Act projects
based on a Risk Management Plan, completed on March 27, 2009, for such
projects. The Risk Management Plan identified six major risk areas that
needed to be managed for the successful implementation of Recovery Act
projects:
* quality of plans, specifications, and the engineering cost estimate;
* conformance to federal-aid regulations by projects administered by
local governmental agencies;
* adherence to civil rights provisions;
* construction monitoring and quality assurance in materials;
* fiscal oversight and eligibility of costs; and:
* achievement of Recovery Act program goals.
The FHWA--NC Division will provide oversight of all Recovery Act
projects. For all Recovery Act projects that affect the NHS, the FHWA--
NC Division will continue its traditional full oversight of these
projects. For all other Recovery Act projects, the FHWA--NC Division
will provide more limited oversight. This oversight will include
reviewing each project in regard to the first five risk areas cited
above and monitoring NCDOT reporting of Recovery Act data for the
program goal achievement risk area. Also, the FHWA--NC Division will
check whether (1) the project is on the State Transportation
Improvement Plan,[Footnote 10] (2) environmental and right-of-way
documentation is included, and (3) plans, specifications, and the
engineering cost estimate are included. Additionally, the FHWA--NC
Division conducts project preconstruction scoping reviews during the
design stage on several Recovery Act projects. During construction of
the Recovery Act projects, the FHWA--NC Division plans to conduct at
least one construction inspection on each Recovery Act project.
Established NCDOT Process for Awarding and Overseeing Contracts for
Highway Projects Will Remain the Same under the Recovery Act:
According to NCDOT, its process for awarding and overseeing contracts
for highway projects funded under the Recovery Act has not changed
except for processes to collect data for the new reporting requirements
under the Recovery Act. According to NCDOT officials, the NCDOT uses
the same overall process for awarding contracts involving Recovery Act
projects as it does for other federal-aid highway projects. Contracts
valued over $1.2 million are awarded by the NCDOT headquarters in
Raleigh, North Carolina and contracts valued at or below $1.2 million
may be awarded by NCDOT's 14 divisions[Footnote 11] or the NCDOT
headquarters.
According to NCDOT officials, prior to July 1, 2009, contractors
bidding on projects through the 14 highway divisions that were at or
below $1.2 million were not required to be prequalified. However, after
July 1, 2009, all contractors, regardless of the contract amount, are
required to be prequalified as responsible contractors by NCDOT to be
eligible for contract award. According to NCDOT officials, this change
did not occur as a result of the Recovery Act but was a process
improvement to make the prequalification requirements the same for all
contractors. NCDOT officials told us that their prequalification
process includes a review of the company's financial position, the
number and skill sets of its labor force, its equipment, and its safety
record. Specifically, officials told us that NCDOT examines the
company's prior year's audited financial statements and documentation
on (1) a surety company's willingness to issue performance and payment
bonds for its work, (2) the company's safety citations including those
for any safety-related injuries, (3) the company's labor workforce
including its skill certifications, (4) the condition and maintenance
of its equipment, and (5) the capacity of the company to perform the
type of work required. Also, included in the prequalification process
is an examination of the contractor's Non-Collusion Affidavit[Footnote
12] and Debarment Certification[Footnote 13] covering the prior 3 years
(from the date of the contractor's application for prequalification)
which are submitted with the contractor's application for
prequalification. NCDOT's prequalification of a contractor generally
covers a three-year period, with annual updates for any changes in
officers or safety record and annual affidavits regarding noncollusion.
According to NCDOT officials, a contractor involved in nonperformance
of a contract will be removed from NCDOT's list of prequalified
contractors and not allowed to bid on future contracts.
According to officials, after authorization of the project by the FHWA--
NC Division, NCDOT, using its normal process for federal-aid projects,
solicits bids by mailings to established contractors, placing legal
notices in newspapers with statewide circulation, and posting the
invitation for bids on NCDOT's official Website. Further, any bids
received that are 10 percent above or 15 percent below the NCDOT
engineering project cost estimate are specifically reviewed by the bid
review committee to examine whether the bid proposal includes omissions
or errors in material quantities. Also, a FHWA--NC Division official
said that a FHWA--NC Division representative attends the deliberations
of the NCDOT bid review committees as a nonvoting member for federal-
aid projects (including Recovery Act projects) over $1.2 million. FHWA--
NC Division officials said that the nonvoting observer role of its
representative in these deliberations is designed to avoid problems in
awarding the contract. For NCDOT Highway Division-awarded contracts
(valued at $1.2 million or less), the FHWA--NC Division conducts a
postaward review of selected contracts to assess whether the NCDOT
Highway Division has followed NCDOT policies and procedures.
To protect North Carolina and the federal government against prime
contractor nonperformance, NCDOT officials said that contract
performance and payment bonds[Footnote 14] covering 100 percent of the
project's contract amount are required for all highway projects
(including Recovery Act projects) valued over $300,000. An official
with a bonding company told us that his company exercises much due
diligence in examining companies before deciding to issue performance
and payment bonds for a contractor. This official further explained
that his bonding company investigates the financial position of the
company, the integrity and honesty of the officers, and capacity of the
contractor to perform the work before issuing performance and payment
bonds.
According to NCDOT officials, Recovery Act highway projects receive the
same level of monitoring and inspection received by other federal-aid
highway projects to ensure that quality goods and services are
received. Each project is assigned a resident engineer as well as other
on-site personnel who monitor and inspect the contractor's performance
under the contract.
We selected two Recovery Act highway improvement project contracts to
discuss in greater depth with NCDOT officials. One contract was
centrally awarded by NCDOT but is administered by NCDOT Highway
Division 4. The other contract was awarded and administrated by NCDOT
Highway Division 1.
NCDOT Centrally-Awarded Contract:
According to state officials, the NCDOT centrally awarded this contract
to conduct work utilizing Recovery Act Highway Infrastructure
Investment funds. This contract was awarded on April 29, 2009, for a
total value of $14.3 million with a project start date of June 1, 2009,
and a projected completion date of December 31, 2011. The contract was
awarded to construct a 2.3 mile extension of Booker Dairy Road in
Smithfield, North Carolina, from State Road 1003 to U.S. 70. This road,
which is not located in an economically distressed area, is considered
a major urban thoroughfare and will provide an alternate east-west
route improving access to residential, commercial, industrial, and
recreational areas. According to NCDOT officials, the fixed unit price
contract was awarded competitively, with nine contractors submitting
bids. The successful contractor's price was 20.6 percent lower than the
NCDOT official engineering estimate.
NCDOT Highway Division-Awarded Contract:
The NCDOT Highway Division 1 awarded this contract to conduct work
utilizing Recovery Act Highway Infrastructure Investment funds. This
contract was awarded on April 23, 2009, at a total value of $494,000
with a project start date of May 11, 2009, and a projected completion
date of October 30, 2009. The contract was awarded to resurface a 4.1
mile section of U.S. 13 from Modlin Hatchery Road (State Road 1130) to
N.C. 461 in Hertford County, North Carolina. This project, which is
located in an economically distressed area, is intended to improve the
ride quality of this stretch of U.S. 13 and extend the life of the
pavement. According to NCDOT officials, the fixed unit price contract
was awarded competitively, with three contractors submitting bids. The
successful contractor's price was 24 percent lower than the NCDOT
official engineering estimate.
According to NCDOT officials, both selected contracts require the prime
contractors to assist the state in complying with Recovery Act monthly
reporting requirements under Section 1512 (c) of the Recovery Act for
both the prime contractor's Recovery Act work and for its
subcontractors. According to NCDOT officials, contractors for both
selected contracts will receive the same level of monitoring and
inspection of the contractors' work that the NCDOT provides to
contractors for other federal-aid highway projects. This monitoring
includes a resident engineer and on-site personnel to provide day-to-
day monitoring of construction, as well as other engineers to oversee
roadway and structures construction, to make sure that the work is done
according to the contract specifications.
As described above, several mechanisms used by the FHWA--NC Division
and the NCDOT in contracting for Recovery Act projects could mitigate
some of the risks associated with contracting, if they are implemented
as intended. These quality-assurance mechanisms, based on our
discussions with FHWA--NC Division and NCDOT officials, include:
* increased review and inspection of Recovery Act projects by the FHWA--
NC Division,
* the FHWA--NC Division's nonvoting participation in the deliberations
of the NCDOT bid review committees prior to contract awards,
* NCDOT's current requirement that every NCDOT contractor be
prequalified by NCDOT to help ensure that contracts are awarded only to
responsible contractors,
* a requirement that all contractors selected for award of contracts
valued over $300,000 post contract performance and payment bonds
covering the full cost of the contract in the event of contractor
nonperformance,
* a requirement that contractors provide noncollusion and debarment
affidavits before they are awarded contracts, and:
* use of an established process of review and inspection of
construction by skilled NCDOT personnel to ensure that work meets
contract specifications and requirements.
NCDOT Anticipates Meeting Recovery Act Recipient Reporting
Requirements:
The NCDOT official serving as the focal point for collecting and
submitting the recipient reports to the Office of Management and Budget
(OMB), told us that NCDOT will be prepared to meet the requirements for
recipient reporting to OMB in October 2009. As defined under OMB's
guidance in memorandum M-09-21[Footnote 15] for the Recovery Act,
according to a NCDOT official, the NCDOT is classified as a prime
recipient, and the prime contractor for a Recovery Act-funded highway
project is classified as a vendor. According to a NCDOT official, the
prime contractor is responsible for reporting information to NCDOT
required by Section 1512(c)[Footnote 16] of the Recovery Act for all of
its subcontractors. As we previously reported in July 2009, the North
Carolina Office of Economic Recovery and Investment requested prime
recipients to address their readiness to meet the Recovery Act
reporting requirements in October 2009 by conducting a trial run.
According to the NCDOT official serving as the focal point for this
reporting, NCDOT's trial run went well.
To address the reporting requirement under the Recovery Act, NCDOT has
designated the Director of its Programs Management Office as the focal
point for receiving recipient reports from its 14 highway divisions,
according to a NCDOT official. Also, each division is responsible for
obtaining required reports from the prime contractors within the
division's area of responsibility. According to the NCDOT Director of
Programs Management, the NCDOT requires all first-time prime
contractors for Recovery Act projects to attend a training session
shortly after award of the contract at which NCDOT provides an
introduction to the Recovery Act and the act's reporting and record-
keeping requirements under Section 1512(c). This official also told us
that some contractors are surprised upon learning of the extensive
Recovery Act reporting requirements. In addition, NCDOT Highway
Division officials said that division personnel discuss the contract
reporting requirements for Recovery Act projects during the
preconstruction meetings with prime contractors (even if the current
contract is not their first involving a Recovery Act project). Division
officials told us that they review the overall reasonableness of
Section 1512(c) recipient reports submitted by the prime contractors
based on their on-site observations of how many contractor personnel
are on the job. In August 2009, FHWA--NC Division officials told us
they are not, at this time, planning to review the accuracy of NCDOT's
recipient reporting under Section 1512(c) of the Recovery Act.
U.S. Department of Energy Recovery Act Weatherization Assistance
Program:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation, sealing leaks, and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, DOE's Weatherization Assistance Program has assisted more than
6.2 million low-income families. By reducing the energy bills of low-
income families, the program allows these households to spend their
money on other needs, according to DOE. The $5 billion provided to the
Weatherization Assistance Program in the Recovery Act represents a
significant increase for a program that has received about $225 million
per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, the
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE had provided to the states $2.3
billion of the $5 billion in weatherization funding under the Recovery
Act. Use of the Recovery Act weatherization funds is subject to Section
1606 of the act, which requires all laborers and mechanics employed by
contractors and subcontractors on Recovery Act projects to be paid at
least the prevailing wage, including fringe benefits, as determined
under the Davis-Bacon Act.[Footnote 17] Because the Davis-Bacon Act had
not previously applied to weatherization, the Department of Labor
(Labor) had not established prevailing wage rates for weatherization
work. In July 2009, DOE and Labor issued a joint memorandum to
Weatherization Assistance Program grantees authorizing them to begin
weatherizing homes using Recovery Act funds, provided they pay
construction workers at least Labor's wage rates for residential
construction, or an appropriate alternative category, and compensate
workers for any differences if Labor establishes a higher local
prevailing wage rate for weatherization activities. Labor then surveyed
five types of "interested parties" about labor rates for weatherization
work.[Footnote 18] The department completed establishing prevailing
wage rates in all of the 50 states and the District of Columbia by
September 3, 2009.
Incorporating Recovery Act Requirements into North Carolina's Existing
Weatherization Procurement Process Is Not Expected to Cause Any
Difficulties:
DOE approved North Carolina's weatherization plan on June 18, 2009, and
provided North Carolina 50 percent (approximately $66 million) of its 3-
year Recovery Act weatherization allocation. As of August 25, 2009,
North Carolina had distributed approximately $13 million to local
weatherization agencies. The Office of Economic Opportunity (OEO)
within NCDHHS is responsible for administering the weatherization
program, and the program is administered locally through subgrantees,
generally community action agencies, which serve all 100 of the state's
counties. However, according to state weatherization officials, the
state will be transferring the weatherization program from OEO to the
State Energy Office within North Carolina's Department of Commerce so
that the program is located with all of the other state energy
programs. According to state weatherization officials, the first 10
percent of the Recovery Act weatherization funding is being disbursed
to local weatherization agencies to fund start-up activities such as
buying equipment and vehicles and funding public awareness campaigns.
State weatherization officials are planning to disburse an additional
40 percent of the Recovery Act weatherization funds to the local
weatherization agencies in September 2009. State weatherization
officials plan to use Recovery Act funds to weatherize approximately
24,224 units.
While wages paid to weatherization laborers and mechanics were not
previously subject to the Davis-Bacon Act, weatherization expenditures
made using Recovery Act funds must comply with the prevailing wage
requirements as determined under the act. To help determine the
prevailing wage for the Davis-Bacon Act, a Labor survey was sent out to
each state; however, North Carolina state weatherization officials said
they never received this survey and several local weatherization
agencies had reported not receiving it as well. State weatherization
officials said they obtained the survey and survey instructions from
Labor's Web site and provided this information to the local
weatherization agencies for them to directly submit their responses to
Labor. Even though the survey was not received directly from Labor,
state weatherization officials do not have any concerns about the
effect of the Davis-Bacon Act on the use of Recovery Act weatherization
funds. They said they obtained the information pertaining to Davis-
Bacon Act requirements they needed by attending the National
Weatherization Conference where Labor held several training sessions on
the Davis-Bacon Act. State weatherization officials said that the
prevailing wages established by Labor were similar to wages that were
already being paid by local weatherization agencies. State
weatherization officials plan to continue issuing contracts to spend
Recovery Act funding that will include the wage-rate provision.
In addition to receiving training on the Davis-Bacon Act, state
weatherization officials also received training at the National
Weatherization Conference on the contract award requirements applicable
to weatherization projects funded by the Recovery Act. State
weatherization officials plan to follow their existing procurement
process, which includes following the Recovery Act requirements for
awarding contracts, and issue guidance on the process to the local
weatherization agencies. According to state documents, weatherization
contracts will contain a list of Recovery Act requirements that must be
followed, including registering on the Central Contractor Registration
(CCR) system; obtaining a Data Universal Numbering System (DUNS)
number; supporting section 1512 reporting requirements; and using iron,
steel, and manufactured goods that are produced in the United States in
certain circumstances. State weatherization officials said they review
local weatherization agencies' procurement processes to make sure they
are following proper procedures. Based on their recent review of the
local weatherization agencies' procurement processes, state
weatherization officials do not have any concerns about these
processes.
According to state weatherization officials, the weatherization program
does not have centralized procurement or established prices and
suppliers of weatherizing materials; procurement is delegated to the
local weatherization agencies that are required to develop a fair-
market price list. Annually, the state weatherization office monitors
each local weatherization agency's fair-market price list and issues
guidance on price-list requirements; however, the guidance does not
spell out the process for developing the fair-market price and it is
left up to the local agency to determine how best to do this. State
weatherization officials also said they sometimes provide assistance to
local weatherization agencies to help them develop the fair-market
price list, but officials said most local agencies do Internet price
comparisons in order to develop the list.
North Carolina Weatherization Officials Have a Variety of
Accountability Approaches to Monitor the Use of Recovery Act Funds:
State weatherization officials plan to use existing processes to
monitor the disbursement of Recovery Act funds through monthly reviews
of the local weatherization agencies' financial status reports and
through programmatic and financial monitoring visits. They said that,
for the monthly financial status report reviews, they receive signed
hard copies of the financial status reports the weatherization agencies
generate from the Accountable Results for Community Action system.
These reports show the funding status and a list of homes that have
been completely weatherized. According to state weatherization
officials, the on-site monitoring is done annually as required by DOE.
They explained that the on-site monitoring of each weatherization
agency contains three parts: (1) a preassessment questionnaire is sent
to the agency to gather initial administrative and programmatic
information and is reviewed by the state weatherization officials to
determine if there are any issues; (2) an entrance meeting is held at
the start of the on-site visit, and officials conduct a file review,
equipment verification, and an invoice review; and (3) state
weatherization officials use a monitoring tool to conduct on-site field
inspections of weatherized homes. State weatherization officials said
DOE requires that at least 5 percent of weatherized homes be inspected.
They also said that this usually equates to inspecting 6 to 8
weatherized homes per local weatherization agency annually. State
weatherization officials told us that during these inspections they
compare the information reported in the preassessment questionnaire
with their on-site observations. If an issue is identified, a meeting
is held on site to describe the issues that were found, an assessment
report of the visit is discussed, and corrective actions are
prescribed. After the on-site visit, a formal report is issued to the
local weatherization agency. Local weatherization agencies must provide
a plan to meet the prescribed corrective actions along with proof that
the actions were taken before the state weatherization office will
close out a finding. However, state weatherization officials said most
weatherization agencies will have taken the necessary corrective action
during the on-site visit or immediately thereafter. State
weatherization officials said that if a weatherization agency is having
problems they may make additional site visits during the year to get
the agency back on track.
State weatherization officials acknowledged that the Recovery Act
funding for the weatherization program will significantly increase the
local weatherization agencies' workload. They said that in order to
meet the on-site monitoring requirements, they plan to hire an external
group to assist with these activities. With the increased workload due
to the Recovery Act funds, state weatherization officials anticipate
having to conduct 3 to 4 on-site visits a year to each local
weatherization agency rather than 1 on-site visit a year in order to
continue meeting DOE's annual 5 percent inspection requirement and to
meet North Carolina's newly established policy that requires an average
of 20 percent of weatherized homes be inspected.
In addition to these accountability approaches, state weatherization
officials have an existing risk-assessment process they use to review
local weatherization agencies' staff, goals, funding, and annual
audits. Based on the annual assessment, each weatherization agency is
assigned either a high or low level of risk. However, this year's
annual risk-assessment review will include a medium risk classification
which will help identify local weatherization agencies that may need
additional help so that they do not become high risk in the future. If
a local weatherization agency is identified as a high risk, state
weatherization officials may increase the amount of monitoring for that
agency in order to address any issues the agency is having. Based on
last year's risk assessment, officials said of the 30 local
weatherization agencies, there were two agencies that were identified
as a high risk. According to state weatherization officials, these
local weatherization agencies will not receive any Recovery Act funding
based on prior findings of noncompliance with laws and regulations. For
example, instances were found in which internal control policies and
procedures were not applied consistently, the agency charged
unallowable expenditures, and the agency's Board of Directors failed to
provide consistent oversight of operations. In addition to the state
weatherization office's annual risk-assessment process, OERI has hired
independent auditors to perform capacity audits; which include pre-and
post performance audit inspections, on all local weatherization
agencies that are participating in the weatherization program.
Specifically, OERI plans to have these auditors assess the capabilities
of local agencies before or shortly after Recovery Act funding is
awarded and to monitor the performance of agencies awarded grants
during the course of the grant projects.
North Carolina Weatherization Officials Plan to Follow Recovery Act
Reporting Requirements; However, Additional Guidance Is Needed:
According to state weatherization officials, both the normal and
Recovery Act reporting requirements, which include programmatic
quarterly reports, monthly financial status reports, and section 1512
reporting requirements, will be followed. State weatherization
officials do not anticipate having any challenges with respect to
complying with these reporting requirements in a timely manner. In
order to meet the section 1512 reporting deadlines, the state
weatherization office, which is the prime recipient,[Footnote 19] plans
to create templates based on the reporting requirements to collect
information from local weatherization agencies and then have them ready
for OERI and OMB by the 10th day of the following month for quarterly
reporting. The state weatherization agency has issued guidance in order
to assist local subrecipients in understanding reporting requirements
and to collect their financial information in a timely manner.
OMB provided guidance on measuring jobs saved and jobs created, which
state weatherization officials plan to use for calculating and
reporting this information. State weatherization officials said that
they understand the general framework of OMB's guidance, but the
information for calculating jobs saved and jobs created is unclear. For
example, state officials consider OMB's guidance to lack information on
who should be included in the calculation as a vendor. Specifically,
state weatherization officials are not sure if a subcontractor should
be counted as a vendor. State weatherization officials have asked DOE
for help, and DOE stated that technical briefs would be sent out to
address these issues.
North Carolina's Small Rural Localities Face Challenges Accessing
Recovery Act Funds:
According to the North Carolina League of Municipalities (NCLM), North
Carolina's cities, towns, and villages are incorporated municipalities
that have been granted a charter by the North Carolina General Assembly
authorizing the establishment of a government and outlining its powers,
authorities, and responsibilities. Municipalities provide a variety of
services, including access to water and sewer systems and police and
fire protection, according to NCLM. Under North Carolina law, all
municipalities must balance their budgets.[Footnote 20] Within North
Carolina's Treasury Department, the Local Government Commission (LGC)
has responsibility for monitoring fiscal, accounting, and debt-
management practices of local governments, as well as for providing
assistance and guidance on these matters.
North Carolina includes approximately 550 municipalities and 100
counties, many of which are small or rural. Specifically, according to
2008 Census estimates, 430 municipalities had a population of under
5,000 people. In addition, based on 2000 Census data, 60 of North
Carolina's counties were considered rural, and 21 of these counties
were completely rural, or had an urban population of less than 2,500.
[Footnote 21] According to 2008 U.S. Department of Agriculture
estimates, about one-third of the state's residents lived in
nonmetropolitan counties in 2008, and these counties had higher poverty
rates and lower income than the statewide averages in 2007.
While there are several sources of information and assistance
available, state officials, rural community leaders, and others have
told us about challenges rural areas have in accessing and
administering Recovery Act funding programs. According to state
officials, rural areas face a number of challenges affecting their
financial and administrative capacity, including diminishing budgets,
staffing shortages, and a lack of expertise and skill sets in key
areas. For example, the State Auditor identified small rural localities
as risk areas with respect to Recovery Act funds, due to staffing
shortages coupled with the additional reporting requirements of the
Recovery Act. Local officials we interviewed also cited some of these
challenges and expressed concerns about their capacity to apply for and
administer Recovery Act funds.
Based on our prior Recovery Act work in North Carolina and the state's
significant rural sector, we decided to focus part of this report on
the experiences of selected rural towns in North Carolina in accessing
and administering Recovery Act programs. Specifically, we selected the
towns of Bethel, Williamston, Woodfin, and the City of Hendersonville
based on their size and geographic dispersion. The populations in these
towns ranged from 1,743 to 12,005 according to the Census 2008
population survey. We interviewed officials in these towns to obtain
their perspectives on the Recovery Act. We also interviewed officials
from the U.S. Department of Agriculture's North Carolina Rural
Development office, OERI, NCLM, and the North Carolina Rural Economic
Development Center (Rural Center). During our interview with Rural
Center officials, we also met officials from the municipalities of
Elkin and Pinetops.
Opportunities Exist for Municipalities to Benefit from Various Recovery
Act Programs:
Under the Recovery Act, North Carolina localities can apply for funding
for a variety of federal programs either from state agencies or
directly from federal agencies. The Recovery Act contains many programs
that provide funding opportunities to municipalities, including the
Clean Water State Revolving Fund (CWSRF), the Drinking Water State
Revolving Fund (DWSRF), the Community Oriented Policing Services (COPS)
program, the Edward Byrne Memorial Justice Assistance Grant (JAG)
program, the Federal-Aid Highway Surface Transportation program, the
Broadband Initiatives Program, the Broadband Technology Opportunities
Program (BTOP), and the Rural Community Facilities Loans and Grants
program. (See table 1 for information on available funds and awards
made under these programs.) Several of these programs are targeted
specifically at small or rural communities. To increase the speed with
which Recovery Act funds are spent, the act added requirements or
priorities to several programs to focus on projects that could be
completed quickly.
Table 1: Selected Recovery Act Funding Opportunities for North Carolina
Municipalities (Dollars in millions):
Clean Water State Revolving Fund[B];
Funds available to localities from North Carolina agencies[A]: $71;
Funds awarded by North Carolina agencies to localities: $67;
Competitive funds available to localities directly from federal
agencies, (national totals): n.a.;
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: n.a.
Drinking Water State Revolving Fund[B];
Funds available to localities from North Carolina agencies[A]: $66;
Funds awarded by North Carolina agencies to localities: $64;
Competitive funds available to localities directly from federal
agencies, (national totals): n.a.;
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: n.a.
COPS Hiring Recovery Program;
Funds available to localities from North Carolina agencies[A]: n.a.;
Funds awarded by North Carolina agencies to localities: n.a.;
Competitive funds available to localities directly from federal
agencies, (national totals): $1,000;
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: $31.
Edward Byrne Formula and Competitive Grants;
Funds available to localities from North Carolina agencies[A]:
$34.5[C];
Funds awarded by North Carolina agencies to localities: No awards
made[C];
Competitive funds available to localities directly from federal
agencies, (national totals): $225;
Formula funds available to North Carolina localities directly from
federal agencies: $21.9;
Funds awarded by federal agencies directly to North Carolina
localities: $21.2.
Federal-Aid Highway Surface Transportation;
Funds available to localities from North Carolina agencies[A]: $736[D];
Funds awarded by North Carolina agencies to localities: n.a.;
Competitive funds available to localities directly from federal
agencies, (national totals): n.a.;
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: n.a.
Broadband Initiatives Program;
Funds available to localities from North Carolina agencies[A]: n.a.;
Funds awarded by North Carolina agencies to localities: n.a.;
Competitive funds available to localities directly from federal
agencies, (national totals): $2.5;
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: No awards made[E].
Broadband Technology Opportunities Program;
Funds available to localities from North Carolina agencies[A]: n.a.;
Funds awarded by North Carolina agencies to localities: n.a.;
Competitive funds available to localities directly from federal
agencies, (national totals): $4.7;
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: No awards made[E].
Community Facilities Loans and Grants Program;
Funds available to localities from North Carolina agencies[A]: n.a.;
Funds awarded by North Carolina agencies to localities: n.a.;
Competitive funds available to localities directly from federal
agencies, (national totals): $1,161[F];
Formula funds available to North Carolina localities directly from
federal agencies: n.a.;
Funds awarded by federal agencies directly to North Carolina
localities: $11.7[F].
Total; Funds available to localities from North Carolina agencies[A]:
$907.5;
Funds awarded by North Carolina agencies to localities: $131;
Competitive funds available to localities directly from federal
agencies, (national totals): $2,393.2;
Formula funds available to North Carolina localities directly from
federal agencies: $21.9;
Funds awarded by federal agencies directly to North Carolina
localities: $63.9.
Source: Federal and state agencies:
n.a.: Not applicable:
[A] This column captures funds apportioned, allotted, allocated,
awarded or otherwise made available by federal agencies to North
Carolina state agencies to be awarded or allocated to North Carolina
localities.
[B] Funding under these two programs is split evenly between principal
forgiveness and interest-free loans.
[C] $34.5 million was awarded to the state, of which about $13.2
million must be passed on to localities. No awards had been made to
localities as of August 11, 2009.
[D] While these funds will be administered by NCDOT, the projects will
impact some rural areas.
[E] Applications for first of three rounds of grants were due by August
24, 2009.
[F] Nationally $1.1 billion is available in loans and $61 million is
available in grants. In North Carolina, 11.7 million has been awarded
to localities, of which about $9.8 million was in loans and $1.8
million was in grants. Totals do not add up to $11.7 million due to
rounding.
[End of table]
Clean Water State Revolving Fund (CWSRF) and Drinking Water State
Revolving Fund (DWSRF) Capitalization Grants:
The total funding available for water and drinking water grants and
loans in North Carolina includes about $71 million for the CWSRF and
about $66 million for the DWSRF. The CWSRF assists in the funding of
the construction of publicly owned wastewater treatment facilities, the
implementation and management of non-point source pollution[Footnote
22] control programs, and the development and implementation of estuary
conservation and management plans. Under the Recovery Act, states are
to give priority to projects that are ready to proceed with
construction within 12 months of enactment of the act. The North
Carolina Department of Environment and Natural Resources (DENR) will
administer this program for North Carolina. DENR will award half of the
funds in the form of principal forgiveness,[Footnote 23] and the other
half in the form of interest-free loans, as required. There is a cap of
$3 million for each project award, and awards will not be increased for
bids that come in higher than the project award amount. As of July 20,
2009, the state had announced awards totaling about $67 million for
projects in 48 localities.
The DWSRF assists public water systems in complying with the national
primary drinking water regulations. Assistance cannot go to a public
water system[Footnote 24] that does not have the technical, managerial,
and financial capability to ensure compliance with federal Safe
Drinking Water Act (SDWA).[Footnote 25] Eligible uses include
replacement of aging infrastructure, planning studies, consolidation of
water systems, and source water rehabilitation. Ineligible uses include
dams or rehabilitation of dams, operation and maintenance costs,
projects mainly for fire protection, or projects primarily to
accommodate future growth. As with CWSRF, the main criteria for
Recovery Act awards for DWSRF will be how quickly a project can issue a
contract and proceed with construction. The Public Water Supply Section
(PWSS) of DENR will administer this program. PWSS will award half of
grant funds in the form of principal forgiveness, and the other half in
the form of an interest-free loan, with up to a 20-year payback period,
as required. There is a cap of $3 million for each project award, and
awards will not be increased for bids that come in higher than the
project award amount. As of July 20, 2009, the state has announced
awards totaling about $64 million to 63 localities.
COPS Hiring Recovery Program (CHRP):
The Recovery Act provides $1 billion for the CHRP program, administered
by the Office of Community Oriented Policing Services within the U.S.
Department of Justice (Justice), to provide funds directly to law
enforcement agencies to be used to hire and/or rehire career law
enforcement officers. CHRP grants provide 100 percent funding for 3
years for approved entry-level salaries and benefits for newly-hired,
full-time sworn officer positions or for rehired officers who have been
laid off, or are scheduled to be laid off. On July 28, 2009, Justice
announced that it had awarded $1 billion in CHRP funds, including
nearly $31 million to 50 North Carolina local agencies to fund a total
of 202 officers, including 183 new officers. In total, 216 North
Carolina local agencies applied to Justice for CHRP funds.
Edward Byrne Formula and Competitive Grants:
The Edward Byrne Memorial Justice Assistance Grant (JAG) program,
administered by the Bureau of Justice Assistance within Justice,
provides federal formula grants to state and local governments for law
enforcement and other criminal-justice activities, such as crime
prevention and domestic-violence programs, corrections, justice
information-sharing initiatives, and victims' services. Under the
Recovery Act, an additional $2 billion in grants are available to state
and local governments under the JAG program. JAG funds are allocated to
states on the basis of a formula that includes population size and
violent-crime statistics, in combination with a minimum allocation to
ensure that each state receives an appropriate share of funding. Using
this formula, 60 percent of the allocation is awarded to state
governments, which must in turn award a specified percentage to local
governments, and the remaining 40 percent is awarded by Justice
directly to local governments. The total JAG allocation for North
Carolina state and local governments under the Recovery Act is about
$56.3 million, of which, the localities will receive about $13.2
million from the state and about $21.9 million from Justice.
Applications from localities for funding were due to the state by June
17, 2009, but funds had not been awarded as of August 11, 2009.
Applications from localities for JAG funding to be awarded directly by
Justice were due to Justice by June 17, 2009, and as of September 8,
2009, Justice has awarded about $21.2 million to North Carolina
localities. In addition to the $56.3 million in JAG grant funds, $225
million in Recovery Act funds are also available nationally under the
Edward Byrne Competitive Grant Program to state, local, and tribal
governments, and to national, regional, and local nonprofit
organizations awarded directly by Justice. These competitive grants are
to prevent crime, improve the administration of justice, provide
services to victims of crime, support critical nurturing and mentoring
of at-risk children and youth, and for other similar activities.
Applications for the competitive Byrne grants were due by April 27,
2009, and Justice is in the process of awarding these grants and plans
to finish awarding them by September 30, 2009. Based on information
available as of September 4, 2009, no Byrne competitive grant awards
have been announced for North Carolina.
Federal-Aid Highway Surface Transportation Program:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation program administered by
the Federal Highway Administration (FHWA) in the U.S. Department of
Transportation. North Carolina is expected to receive $736 million
under the Recovery Act for highway and bridge improvements. Under the
Federal-Aid Highway Surface Transportation Program, funds are
apportioned annually to each state department of transportation (or
equivalent agency) to construct and maintain roadways and bridges on
the federal-aid highway system. North Carolina Department of
Transportation officials told us that they identified highway projects
based on Recovery Act direction that priority is to be given to
projects that are anticipated to be completed within a 3-year time
frame and that are located in economically distressed areas. Also, the
department collaborated with metropolitan and rural planning
organizations[Footnote 26] to select projects that are located across
the state. Projects were also evaluated based on several criteria,
including alignment with long-range investment plans and considerations
about geographical diversity and economic impact.[Footnote 27] As of
September 1, 2009, the state had awarded $348 million in highway
contracts.
Broadband Access:
The Recovery Act appropriated $7.2 billion to expand broadband access
in the United States. Specifically, the U.S. Department of Agriculture
(Agriculture) Rural Utility Service (RUS) was appropriated $2.5 billion
to extend loans, grants, and loan/grant combinations to facilitate
broadband development in rural areas.[Footnote 28] The U.S. Department
of Commerce (Commerce) National Telecommunications Information
Administration (NTIA) was appropriated $4.7 billion to make available
grants for deploying broadband infrastructure in unserved and
underserved areas in the United States, enhancing broadband
capabilities at public computing centers, and promoting sustainable
broadband adoption projects. [Footnote 29] NTIA and the RUS jointly
issued a Notice of Funds Availability (NOFA) and solicitation of
applications for the RUS's Broadband Initiative Program and NTIA's
Broadband Technology Opportunities program. The agencies are planning
three opportunities for eligible entities, including states, local
governments, or any agency, subdivision, instrumentality, or political
subdivision thereof to apply for these grants. The deadline for the
first round was extended from August 14, 2009, until August 24, 2009.
[Footnote 30] The current goal of the agencies is to issue a second
NOFA before the end of 2009 and a third in the spring of 2010. No
awards have been made under either program.
Community Facilities Loans and Grants Program:
The Recovery Act also added more funding to the Community Facilities
Loans and Grants program to build or improve essential public
facilities in cities and towns with no more than 20,000 in population.
Under the Recovery Act, $1.1 billion in loans and $61 million in grants
is made available for this program. Some examples of eligible projects
include health care facilities such as hospitals and clinics, nursing
homes, daycare centers, public safety facilities and equipment such as
fire trucks, community buildings, educational facilities such as
libraries, and activity centers for disabled persons. Localities apply
for the funds directly from the U.S. Department of Agriculture Rural
Development Center. In total, $11.7 million in loans and grants have
been awarded by the U.S. Department of Agriculture to North Carolina
localities for a variety of projects, including police and fire
equipment.
Municipalities Rely on a Variety of State and Other Resources for
Recovery Act Information:
North Carolina municipalities rely on a variety of sources in obtaining
information about the Recovery Act. According to a survey conducted by
NCLM, municipalities sought guidance and technical support from various
sources within the state, including OERI, the Rural Center, and NCLM.
We also heard from localities we visited that they rely on the School
of Government at the University of North Carolina--Chapel Hill and the
North Carolina Regional Councils[Footnote 31] for technical support and
guidance on Recovery Act issues.
Along with providing the oversight and monitoring of Recovery Act
funds, part of OERI's mission is to develop a communications network to
keep the public informed about the status and progress of the recovery
effort and funding opportunities. OERI officials told us that they have
held a series of informational workshops across the state since April
2009 designed to provide a question and answer forum for local
officials and the general public. According to OERI officials, these
meetings have been strategically scheduled in geographically diverse
sections of the state, including rural areas, in an effort to reach a
large portion of the state's population. To assist smaller towns and
cities with identifying and applying for Recovery Act funds, OERI
officials told us that they have hired a team of new staff to help
local officials in 19 rural counties to apply for and manage grants.
OERI officials selected the 19 counties based on rural areas with high
unemployment rates.
In addition to OERI, there are a number of other organizations in North
Carolina that provide assistance to rural communities. One such
organization, the Rural Center, provides a variety of services to the
state's rural areas. The Rural Center is a private, nonprofit
organization, funded by both public and private sources, that serves
the state's rural communities, with a special focus on individuals with
low to moderate incomes and communities with limited resources.
According to Rural Center officials, their office provides a variety of
services, including policy research and development, legislative
advocacy, topical workshops, technical assistance, leadership and
workforce training, and municipal and community capacity building
strategies. For example, in September 2009, the Rural Center, as part
of its efforts to reach out to minority populations, provided a forum
for a group of African-American-led community-development organizations
to discuss the Recovery Act.
NCLM, another source of information for North Carolina's rural areas,
is a nonpartisan association of municipalities in North Carolina that
provides member services that strengthen and support municipal
governments, including those in rural communities. According to an NCLM
official, the organization has compiled and posted to its Web site
guidance, including a listing of Recovery Act programs with funds still
available, aimed at helping municipalities in their pursuit of federal
Recovery Act funding. The official said that the guidance will be
updated regularly. Further, NCLM also prepared guidance regarding how
municipalities can increase their chances of obtaining federal funding.
In June 2009, NCLM initiated a statewide survey of the 551
municipalities in an effort to obtain information about their
experiences with the Recovery Act, and received a 91 percent response
rate. According to NCLM officials, a main reason they conducted the
survey was because the state did not have a centralized source of
information on which local governments in the state were pursuing
Recovery Act funding or what type of funding they were pursuing.
Also, University of North Carolina-Chapel Hill's School of Government,
in an effort to help smaller cities, towns and counties to research,
apply for, and acquire Recovery Act funds, created the Carolina
Economic Recovery Corps (CERC). The CERC is made up of eight graduate
students from UNC who spent 10 weeks over the summer working full time
as interns with councils of governments (COG).[Footnote 32] Among other
forms of support, the eight interns helped communities with Recovery
Act compliance, grant writing, and reporting requirements.
Further, 17 North Carolina Regional Councils serve regions that share
similar economic, physical, and social characteristics. Their function
is to aid, assist, and improve the capabilities of local governments in
administration, planning, fiscal management, and development, and all
of them are involved in providing technical assistance to their
members. In particular, the councils provide information on state and
federal programs of concern to local governments.
Two Municipalities That Received Recovery Act Funds Reported They Will
Help Address Needs:
Two of the municipalities we visited reported their applications for
JAG Recovery Act funds had been approved and that these awards would
help them address needs. For example, Williamston officials told us
they had been approved for a $35,157 JAG grant, which will be used to
upgrade its communications system for its police department. According
to Williamston officials, this system will enhance its communications
ability to conform with state recommendations. Officials from the City
of Hendersonville told us that their police department also received
JAG funds. The Hendersonville Police Department received $72,956 and
reported they had drawn down approximately $50,000 of the funds at the
time of our interview. The city plans to use the funds on concealment
devices for microphones and to support the work of its undercover
investigations. Neither Bethel nor Woodfin officials had been awarded
Recovery Act funds.
State Officials and Others Expressed Concerns over the Capacity of
Small Towns to Access and Administer Recovery Act Funds:
Several North Carolina state officials told us that many of the state's
small towns and cities have been historically understaffed and may lack
the expertise to apply for and administer federal grants. For example,
one state official indicated that these challenges can sometimes serve
as barriers to some small towns and cities in seeking federal recovery
assistance. Additionally, officials at the Rural Center told us that
many municipalities have expressed concerns about applying for Recovery
Act funds. Specifically, they said that municipalities are wary of
spending their limited funds to develop initiatives for competitive
grants when it is not certain that they would receive an award. Rural
Center officials said that the Recovery Act's "quick implementation"
requirements for some programs can be a barrier for smaller
municipalities because they lack resources to quickly develop
proposals. Further, many other municipalities face capacity challenges
as they lack a town manager or administrator. Specifically, according
to Rural Center officials, more than 200 North Carolina municipalities
do not have a town manager or administrator. As a result, many
management responsibilities are assumed by a clerk or unpaid mayors and
council members.
Many small municipalities do not plan to apply for Recovery Act funds,
according to the results of the NCLM 2009 survey that obtained
responses from North Carolina's municipalities on their plans to pursue
Recovery Act funds. Specifically, 207 municipalities with a population
of less than 5,000 people reported they were not planning to apply for
Recovery Act funds. This represents 41 percent of the communities that
responded to the survey, a figure that is significantly smaller than
the 3 percent of larger municipalities that indicated they would not
apply. According to our analysis of the NCLM 2009 survey information,
13 municipalities with a population over 5,000 reported they were not
planning to apply for these funds. Furthermore, of the 173 small
municipalities with populations less than 5,000 that reported they plan
to apply for Recovery Act funds, 94, or 54 percent, indicated that they
need technical assistance with the applications.
Local officials we interviewed expressed concerns about their capacity
to apply for and administer Recovery Act funding. For example,
officials from the Town of Woodfin told us that their ability to
identify and apply for Recovery Act funds was limited by their current
level of staff. The town has three staff--the town administrator, a
town clerk, and a code enforcement officer. The town administrator told
us that he has multiple duties, such as planning director, finance
officer, and head of town operations and that serving in these multiple
roles constrains his ability to pursue available Recovery Act funds.
Officials in two localities told us that they lack funds to meet the
federal matching requirements or other up-front costs needed for some
Recovery Act programs. Some local officials also told us that the
shovel-ready requirements of some Recovery Act programs made it
difficult for them to apply for funds because they would need to commit
funds to develop projects that were shovel-ready.[Footnote 33] The
officials said that smaller municipalities are disadvantaged by this
provision because larger municipalities tend to be in a better position
to meet the quick-spending objective of the Recovery Act.
However, officials were mixed in their views about their ability to
manage Recovery Act funds. Officials from both Bethel and
Hendersonville felt that they would be able to comply with reporting
and tracking requirements for Recovery Act funds. But, officials from
Williamston expressed concerns over their ability to hire additional
qualified staff, if necessary, to meet the reporting requirements under
the Recovery Act.
Municipalities Reported Challenges Identifying Information about
Recovery Act Programs:
Officials in three of the municipalities we met with reported a variety
of challenges identifying information about Recovery Act funding
opportunities. In particular, officials in the two municipalities that
had not received Recovery Act funding--Bethel and Woodfin--cited
challenges in identifying information about funding possibilities.
Bethel officials said that they attempted to identify funding
opportunities by conducting research on the Internet and contacting
state agencies and congressional offices. The City Manager
characterized their efforts as attempting to "navigate a maze" of
funding opportunities. As of August 11, 2009, Bethel has not identified
any programs that it would be eligible for or for which it has the
means to develop a proposal. For example, according to Bethel officials
they were advised they were not eligible for JAG funding due to having
a crime rate that is too low. Woodfin officials said that they had
received a lot of information, but that this information was not well
organized and that they were not aware of what funding opportunities
still remain. One representative of a Regional Council told us that the
Council has received a number of calls from localities that are under
pressure to obtain Recovery Act funds but do not know how to access
information about the programs.
Hendersonville officials told us that they began planning for the
Recovery Act early and were able to identify and apply for several
programs, including the JAG program, for which they received an award.
However, they said that the information and guidance they received from
state agencies for water and sewer programs and highway funding was not
always clear or timely. For example, they told us that the state issued
guidance on water and sewer projects after they had already submitted
their application. Hendersonville officials said that it would have
been helpful to have had more information when they applied for
funding.
While local officials did mention difficulties obtaining information,
they also noted some sources of information that were useful. For
example, Hendersonville officials mentioned that they relied on several
sources for information about the Recovery Act, including NCLM and
OERI. Woodfin officials told us that they rely heavily on their
contacts at the Land of Sky Regional Council for information pertaining
to the Recovery Act.
OERI Is Taking Steps to Help Ensure the Complete, Accurate, and Timely
Submission by State Agencies of Section 1512 Recovery Act Quarterly
Recipient Reports to OMB:
Beginning October 10, 2009, each state is required to submit a
quarterly report to OMB to meet the reporting requirements of Section
1512 of the Recovery Act. Under Section 1512, recipients (also known as
prime recipients) and subrecipients of Recovery Act funds are required
to report a number of data elements, including jobs created with
Recovery Act funds. In North Carolina, each state agency that receives
Recovery Act funds is responsible for the completion and submission of
Section 1512 Recovery Act quarterly recipient reports to OMB via a Web
site--FederalReporting.gov. OMB's June 22, 2009, reporting guidance
(M-09-21) gave prime recipients the option to delegate certain
reporting elements to their subrecipients.
OERI has undertaken several initiatives to help ensure state agency
Section 1512 Recovery Act recipient reports are complete, accurate, and
submitted on time. For example, OERI conducted a prime-recipient
readiness assessment to evaluate how prepared state agencies are to
provide recipient reports. Based on the results of the readiness
assessment, an OERI official in charge of reporting issues told us that
he has a high level of confidence that North Carolina state agencies
will be ready to submit the required reports in October.
On August 11, 2009, OERI sent the 16 state agencies that will be
submitting the Recovery Act recipient reports a survey to determine,
among other things, whether they (1) had delegated reporting
responsibility to subrecipients, (2) had put controls in place to
ensure accurate, complete, and timely reporting, and (3) had
coordinated responsibilities within the agency to avoid double
reporting. As of September 4, 2009, none of the 8 agencies that
responded reported they were planning to delegate reporting
responsibility to subrecipients. Most of the agencies reported they
either had or planned to have internal control systems. However, based
on state agencies' responses, it remains uncertain whether some of the
state agencies considered their controls adequate, at that time, to
ensure the submission of accurate, complete, and timely Recovery Act
Section 1512 reports in October.
OERI also began, on August 27, 2009, to hold regularly planned
roundtable discussions with state agency officials responsible for
Recovery Act reporting. OERI plans to continue these roundtable
discussions until the October 10 reporting deadline. According to an
OERI representative, the roundtable discussions are being held to share
information among recipients by having agencies (1) share any plans for
delegating reporting responsibilities to subrecipients, (2) identify a
single point of contact for each agency to avoid double reporting, (3)
discuss the data systems each agency will use for quarterly reporting
to FederalReporting.gov, and (4) develop expectations for quality
assurance common to all North Carolina state agencies that will be
reporting.
At the August 27 session, some state officials reported concerns about
the methodology to be used for measuring jobs created or retained. The
OERI representative urged state agency officials to ask cognizant
federal agencies for any specific guidance on measuring jobs created or
retained that the federal agency may have issued in addition to OMB's
reporting guidance. Also, agency officials at this session expressed
concerns over the availability of data by the September 30, 2009,
cutoff date for recipient reporting.
State Comments on This Summary:
We provided the Governor of North Carolina with a draft of this
appendix on September 14, 2009. The Director of OERI responded for the
Governor on September 16, 2009. In general, the comments were either
technical or were status updated. These were incorporated as
appropriate.
GAO Contacts:
Cornelia Ashby, (202) 512-8403 or ashbyc@gao.gov:
Terrell Dorn, (202) 512-6923 or dornt@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Bryon Gordon, Assistant
Director; Sandra Baxter; Carleen Bennett; Bonnie Derby; Steve Fox; Fred
Harrison; Leslie Locke; Stephanie Moriarty; Anthony Patterson, and
Scott Spicer made major contributions to this report.
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] A charter school LEA must receive SFSF funding on the same basis as
other LEAs in the state. State law determines whether a charter school
is an LEA or a school within an LEA.
[3] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[4] The four areas of education reform from the Recovery Act as
described by Education are: (1) making improvements in teacher
effectiveness and addressing inequities in the distribution of highly
qualified teachers, (2) making progress toward rigorous college and
career-ready standards and assessments that are valid and reliable for
all students, (3) providing targeted, intensive support and effective
interventions to turn around schools identified for corrective action
or restructuring, and (4) establishing a pre-K-through-college data
system to track student progress and foster improvement.
[5] We selected Lincoln County for review based on information from DPI
that indicated that Lincoln County had contracted for IDEA services
with Recovery Act funds. However, during our site visit, Lincoln County
officials informed us that what had been reported as contracted
services was actually a reclassification of costs from the LEA's state
funding account to the federal Recovery Act account due to reversions
in state aid.
[6] This does not include obligations associated with $4.9 million of
apportioned funds that were transferred from the FHWA to the Federal
Transit Administration (FTA) for transit projects. Generally, FHWA has
authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made
available for transit projects to FTA.
[7] For the Highway Infrastructure Investment Program, the U.S.
Department of Transportation has interpreted the term obligation of
funds to mean the federal government's contractual commitment to pay
for the federal share of the project. This commitment occurs at the
time the federal government signs a project agreement.
[8] States request reimbursement from FHWA as the state makes payments
to contractors working on approved projects.
[9] The NHS includes the Interstate Highway System as well as other
roads important to the nation's economy, defense, and mobility. The NHS
was developed by the Department of Transportation (DOT) in cooperation
with the states, local officials, and metropolitan planning
organizations (MPO). According to an FHWA--NC Division official, the
NHS for North Carolina includes about 1,000 miles of interstate and
about 5,400 miles of other designated highways.
[10] The State Transportation Improvement Plan is a 7-year outline of
the state's transportation priorities and needs identified through the
development of the comprehensive transportation plan prioritized by
each local planning organization and presented to the North Carolina
Board of Transportation for programming.
[11] NCDOT has 14 highway divisions and each division represents a
number of counties.
[12] The Non-Collusion Affidavit states "The person executing the bid,
on behalf of the Bidder, being duly sworn, solemnly swears (or affirms)
that neither he, nor any official, agent, or employee of the bidder has
entered into any agreement, participated in any collusion, or otherwise
taken any action which is in restraint of free competitive bidding in
connection with this bid, and that the Bidder intends to do the work
with its own bonafide employees or subcontractors and is not bidding
for the benefit of another contractor."
[13] According to a March 16, 2009, invitation to bid on a contract,
Debarment Certification essentially requires the bidder to certify that
it and its principals are not presently debarred, suspended, proposed
for debarment, declared ineligible, or voluntarily excluded from
covered transactions by any federal department or agency as well as
other certifications regarding criminal convictions and judgments.
[14] According to an NCDOT publication, a contract performance bond is
a bond furnished by the contractor and its corporate surety
guaranteeing the performance of the contract. A contract payment bond
is a bond furnished by the contractor and its corporate surety securing
the payment of those furnishing labor, materials, and supplies for the
construction of the project.
[15] OMB Memorandum, M-09-21, Implementing Guidance for Reports on Use
of Funds Pursuant to the American Recovery and Reinvestment Act of 2009
(June 2009).
[16] OMB Memorandum,M-09-21, at p.6, guidance implementing Section 1512
( c ) of the Recovery Act requires recipient reports to include, among
other things: (1) total amount of funds received and of that total, the
amount spent on projects and activities; (2) a list of those projects
and activities funded by name to include descriptions, completion
status, and estimates on jobs created or retained, and (3) details on
sub-awards and other payments.
[17] Program funds made available through annual appropriations are not
subject to the Davis-Bacon Act.
[18] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[19] The prime recipients are nonfederal entities other than
individuals that receive Recovery Act funding as federal awards in the
form of grants, loans, or cooperative agreements directly from the
federal government.
[20] Each local government and public authority in North Carolina must
operate under an annual balanced budget ordinance adopted and
administered according to North Carolina law. A budget ordinance is
balanced when the sum of estimated net revenues and appropriated fund
balances is equal to appropriations. N.C. Gen. Stat. § 159-8(a).
[21] Using Census data, OMB defines urban and rural counties based on
population size and the extent to which outlying counties are
economically tied to core counties as measured by work commuting.
[22] Non-point source pollution comes from diffuse sources. It is
generally caused by rainfall or snowmelt moving over and through the
ground. Non-point source pollutants could include excess fertilizers,
herbicides, and insecticides from agricultural lands and residential
areas; oil or grease from urban runoff; sediment from improperly
managed construction sites and forests; and bacteria and nutrients from
livestock.
[23] Principal forgiveness means that half of each loan will not need
to be repaid. The other half of the money will need to be repaid at a
zero percent interest rate. If a project's actual cost is lower than
originally projected or the scope of the project is reduced, the same
50-50 split will be maintained.
[24] A public water system can be any local unit responsible for the
collection, treatment, storage, and distribution of drinkable water
from a source to a consumer.
[25] Pub. L. No. 93-523, 88 Stat. 1660 (1974) (codified as amended at
42 U.S.C. §§ 300f through 300j-25).
[26] Metropolitan and rural planning organizations work cooperatively
with North Carolina Department of Transportation to plan transportation
systems in urban and rural areas.
[27] Projects selected were evaluated based on several other criteria,
including a state equity formula (North Carolina G.S. 136-17.2A) that
creates a target value for programming future expenditures in various
regions of the state.
[28] See, Recovery Act div. A, tit. I, 123 Stat. at 118.
[29] See, Recovery Act div. A, tit. II, 123 Stat. at 128; § 6001(b),
123 Stat. at 512-513.
[30] Applicants that had started the electronic application process
prior to the original application deadline were given until August 20,
2009 to complete the electronic submission of its applications. 74 Fed.
Reg. 41676 (2009). Applicants having difficulties uploading any of the
attachments to its application were given the opportunity to submit the
core application by August 20, 2009 and subsequently submit any
attachments that were not successfully uploaded by August 24, 2009. 74
Fed. Reg. 42644, 42645 (2009).
[31] North Carolina Regional Councils are multicounty planning and
development agencies serving different areas of the state.
[32] Councils of governments are regional bodies that exist throughout
the United States. Generally, councils of governments serve an area of
several counties, and address issues such as regional and municipal
planning, economic and community development, transportation, and
emergency planning.
[33] The term "shovel-ready" means the projects could be started and
completed expeditiously, in accordance with applicable Recovery Act
requirements.
[End of section]
Appendix XV: Ohio:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Ohio. The full report on all of our work,
which covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery/].
GAO's work in Ohio focused on the implementation of two programs: (1)
the Weatherization Assistance Program and (2) the Workforce Investment
Act (WIA) Youth Program. We selected these programs for different
reasons. The Weatherization Assistance Program in Ohio began on July 1,
2009, which provided an opportunity to compare local agencies'
implementation--including financial controls and oversight of
contracts. The Recovery Act funded WIA Youth Program in Ohio is largely
directed toward a summer employment program and was also in full
operation. With these programs, we focused on how funds were being
used; how safeguards were being implemented, including those related to
procurement of goods and services; and how results were being assessed
and reported. In addition, GAO is providing an update on the status of
expenditures of funds from the U.S. Department of Transportation's
Highway Infrastructure Investment Program; three programs from the U.S.
Department of Education: the Title I, Part A program, the IDEA Part B
program, and the State Fiscal Stabilization Fund (SFSF); and the Public
Housing Capital Fund. These programs, which were included in our July
2009 Recovery Act report, were selected to continue our ongoing
longitudinal analysis of the use of Recovery Act funds.
Recovery Act Funds Helped Stabilize the State Budget, but Budgetary
Uncertainty Remains:
On July 17, 2009, the Governor of Ohio signed the biennial budget for
state fiscal years 2010 and 2011. According to a senior state budget
official, the main operating budget and the transportation operating
budget, signed April 1, 2009 and effective July 1, 2009, appropriate
approximately $63.9 billion in state fiscal year 2010 and about $60.2
billion in fiscal year 2011, including about $7.6 billion from Recovery
Act funds over the biennium. Of the Recovery Act resources,
approximately $2.4 billion is increased federal reimbursement for
Medicaid. In addition, the state used its state rainy-day fund to close
a $1 billion shortfall in the fiscal year 2009 budget.
According to a senior state budget official, the recession brought
considerable uncertainty to the budget process in the state. In the
last year, the state realized double-digit revenue losses compared with
the previous year and, as a result, had to make adjustments to the
budget when revenues did not come in as expected. In developing the
enacted budget for this biennium, a senior state budget official said
Ohio had to aggressively revise revenue estimates downward; revenue
estimates are nearly 6.5 percent lower than the level originally
proposed in February 2009 when the budget was first submitted. The
budget office produces a monthly report that tracks actual revenues and
expenditures to ensure they meet the targets set in the budget. The
state met its revenue targets in the first month of the biennium (July
2009). The state budget director monitors budget performance closely
and has the authority to make adjustments to the spending targets
throughout the biennium if revenues do not meet the targets in the
budget.
According to a senior budget official, the enacted budget relies on a
new revenue source--proceeds from new video lottery terminals. The
budget assumes these terminals will be in place by November 2009 and
will bring in approximately $851 million in new revenues over the
biennium. These revenue estimates were vetted through a variety of
state economists and have been compared to the revenue generated in
other states with similar terminals. If the lottery revenues do not
meet these targets, then the budget director, within the scope of her
authority, could consider recommendations for further reductions in
other expenditures.
As noted in our July 2009 Recovery Act report, Ohio plans to collect
centralized administrative costs through a series of charge backs to
the state agencies that are administering the Recovery Act programs.
State budget officials said the amounts each agency would be asked to
pay for centralized administrative costs would be in proportion to the
Recovery Act funds each agency received. Senior state officials expect
to collect about $3 million for centralized administrative costs--far
less than the $40 million the state estimates it is eligible to collect
based on Office of Management and Budget (OMB) guidance.[Footnote 2]
State officials said they limited the amount of administrative costs
each agency could charge in order to maximize the impact of Recovery
Act resources in the state.
Ohio Began Weatherizing Homes Soon after DOE Approved Its State Plan:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia,
and seven territories and Indian tribes. The program enables low-income
families to reduce their utility bills by making long-term energy
efficiency improvements to their homes by, for example, installing
insulation; sealing leaks; and modernizing heating equipment, air
circulation fans, or air conditioning equipment. Over the past 32
years, the Weatherization Assistance Program has assisted more than 6.2
million low-income families. By reducing the energy bills of low-income
families, the program allows these households to spend their money on
other needs, according to DOE. The Recovery Act appropriation
represents a significant increase for a program that has received about
$225 million per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, the
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE had provided to the states
almost $2.3 billion of the $5 billion in weatherization funding under
the Recovery Act. Use of the Recovery Act weatherization funds is
subject to Section 1606 of the act, which requires all laborers and
mechanics employed by contractors and subcontractors on Recovery Act
projects to be paid at least the prevailing wage, including fringe
benefits, as determined under the Davis-Bacon Act.[Footnote 3] Because
the Davis-Bacon Act had not previously applied to weatherization, the
Department of Labor (Labor) had not established a prevailing wage rate
for weatherization work. In July 2009, DOE and Labor issued a joint
memorandum to Weatherization Assistance Program grantees authorizing
them to begin weatherizing homes using Recovery Act funds, provided
they pay construction workers at least Labor's wage rates for
residential construction, or an appropriate alternative category, and
compensate workers for any differences if Labor established a higher
local prevailing wage rate for weatherization activities. Labor then
surveyed five types of "interested parties"[Footnote 4] about labor
rates for weatherization work. The department completed establishing
prevailing wage rates in all of the 50 states and the District of
Columbia by September 3, 2009.
Ohio Relies on Grantees to Implement the Weatherization Program:
The Ohio Department of Development (ODOD) has obligated all of the
approximately $133.4 million that DOE provided to Ohio. Specifically,
Ohio has obligated these funds to its provider network of 34 grantees.
[Footnote 5] ODOD reserved 20 percent of these funds for contingencies
but plans to use these funds to weatherize eligible homes. An ODOD
official told us that as of September 15, 2009, 17 to 19 grantees
reported that they had spent approximately $5.4 million weatherizing
1,260 homes. According to the state weatherization plan--approved by
DOE on June 18, 2009--ODOD is using its existing network of grantees
located throughout the state to run its Home Weatherization Assistance
Program. Grantees began weatherizing homes on July 1, 2009, with
Recovery Act funds. Specifically, grantees have used Recovery Act funds
to hire and train program staff and weatherization workers, certify
contractors, perform energy audits on eligible homes, and weatherize
qualified homes.
We visited two of Ohio's 34 grantees, the Community Action Partnership
of the Greater Dayton Area (CAP-Dayton) in Dayton, Ohio and the Mid-
Ohio Regional Planning Commission (MORPC) in Columbus, Ohio to gain
information on program implementation as of August 31, 2009.
* CAP-Dayton had received about $1.8 million or 10 percent, of it's
approximately $18.1 million weatherization allocation from Ohio's total
$266.8 million allocation in Recovery Act funds for the Weatherization
Assistance Program. CAP-Dayton expects to weatherize approximately
2,100 homes with its $18.1 million using in-house crews and will
contract out for more skilled work, such as plumbing and electrical
work. To increase production from about 45 homes per month to about 100
homes per month, CAP-Dayton has hired six more crew leaders and 11 more
technicians to augment its planned weatherization workforce of 82 in-
house staff. During the 2-month period of July and August 2009, CAP-
Dayton expended about $801,100 of its allocation and weatherized 120
homes.
* MORPC has been allocated about $4.5 million of Ohio's $266.8 million
allocation in Recovery Act funds for the Weatherization Assistance
Program and plans to weatherize 538 homes with its portion of these
funds. MORPC expects to add 14 staff to augment its inspectors, case
managers, and quality assurance positions and has hired one additional
outside contractor. Until August 2009, MORPC used four contractors. To
meet its new production goals, MORPC solicited applications for
additional contractors. MORPC officials stated that while eight
weatherization contractors submitted proposals, only one met the
selection criteria --the contractor had to be appropriately licensed,
provide satisfactory references, and have experience or skills in
weatherization work. MORPC awarded the contract on August 1, 2009.
MORPC now uses five contractors to provide weatherization services in
the mid-Ohio region. During the two month period of July and August
2009, MORPC expended about $251,240 of its allocation and weatherized
36 housing units.
Davis-Bacon Act Is Not a Factor Limiting the Use of Recovery Act Funds:
Ohio began weatherizing homes before Labor had issued its guidance on
Davis-Bacon wage rates for weatherization work. ODOD officials directed
grantees to choose a wage rate of at least as much as an existing
prevailing wage for a similar position and begin weatherizing homes.
ODOD officials said that if these rates were lower than Labor's new
prevailing wage rate for weatherization work, the wages would be
retroactively adjusted. ODOD officials said that most of the 34
grantees that perform weatherization services already paid wages above
then existing prevailing wage categories.
On September 3, 2009, Labor published a county-by-county weatherization
wage determination for Ohio. The determination includes weatherization
work performed by a weatherization worker, such as minor repairs, batt
and blown insulation, window and door repair, and weather stripping,
solar film installation, air sealing, caulking, and other minor or
incidental structural repairs. The determination also identified
specialty weatherization work including replacement of doors and
windows, installation and repair of furnace and cooling systems, and
work associated with furnace and cooling systems such as electrical,
pipe, and duct work. A senior ODOD weatherization official told us,
however, that this determination was incomplete. Specifically, wage
determinations for six of Ohio's counties were not included and some
wage determinations for specific classifications of two counties seem
very high. ODOD has scheduled for Labor to provide prevailing wage
training in early October 2009.
Although the Davis-Bacon wage rates themselves were not a concern for
ODOD, officials said they will have to overcome some administrative
challenges concerning payroll processing required under the Davis-Bacon
Act. The act requires that employees are paid weekly; however, grantees
in Ohio have biweekly payrolls and will have to change their payroll
systems to implement the program with Recovery Act funds. An ODOD
official stated he was concerned that contractors may not participate
in the program due to these paperwork requirements. At the two grantees
we visited CAP-Dayton had advertised to hire a Davis-Bacon compliance
officer and MORPC officials told us they were considering hiring a
Davis-Bacon compliance officer.
Implementation of Weatherization Program Varies throughout Ohio:
Since ODOD relies on a network of grantees to implement the program,
there are variations in the way the program is implemented across the
state. While some grantees may need to hire more staff and inspectors
to weatherize homes in their area, others may rely on local contractors
to do the work. Another difference between grantees' program
implementation is how they acquire weatherization supplies. For
example, CAP-Dayton contracts with material suppliers for bulk
purchases of weatherization supplies. Whereas, MORPC does not purchase
weatherization materials; instead, it requires its contractors to
purchase the supplies they use. ODOD said it has developed a list of
suppliers of weatherization materials that emphasizes the use of Ohio
businesses, but it does not require its grantees to use suppliers from
the list. The grantees can purchase their own materials in bulk or
allow its contractors to purchase supplies, as long as the supplies
meet state established standards.[Footnote 6] In instances where a
grantee contracts out its weatherization services, the responsibility
of purchasing supplies and materials is often given to the contractor.
We reviewed MORPC's solicitation for a new contractor to gain a better
understanding of how it provides weatherization services and discussed
it with local officials, who told us that the contract was not
competitively bid. They explained that MORPC uses a set price list for
supplies and materials and establishes the wages for the contractor's
staff. The contractor has to agree to MORPC's price and wage
conditions. Further, an official stated that the contract does not set
total value; rather, its effective dates run from August 1, 2009,
through March 31, 2011, and MORPC will allocate production among all
its contractors until its meets its production goals.
Ohio Plans to Enhance Existing Monitoring to Accommodate Program
Growth:
Given the large increase in funding from the Recovery Act, ODOD plans
to enhance its monitoring activities. Currently, to ensure that
grantees are meeting program requirements, ODOD visits each grantee at
least once every 2 years to conduct administrative monitoring during
which files of at least 10 percent of total production are reviewed. In
addition, technical program monitoring occurs at least once a year
during which 5 percent of completed, weatherized units are inspected.
Going forward, ODOD intends to conduct both administrative and
technical monitoring on an annual basis. To further enhance its
monitoring under the Recovery Act, ODOD plans to assess each grantee
provider's performance and use of Recovery Act funds on a quarterly
basis. If deficiencies are noted, ODOD indicated it will work with the
grantee to meet program requirements. If ODOD finds that a particular
grantee cannot resolve its deficiencies, ODOD will look for another
grantee to provide services in that part of the state.
ODOD conducts on-site monitoring of a selected number of completed
units to help ensure that weatherization program standards are met. DOE
requires on-site inspections of at least 5 percent of production. The
enhanced funding level will require many more inspections; ODOD
officials said they plan to increase their staff from six to eight
staff in order to meet the requirements. ODOD officials said that if
its inspectors identify deficiencies, the contractors are required to
return to the home to complete the work. ODOD also plans to conduct
telephone satisfaction surveys to recipient households to monitor
whether local programs are effective and customer friendly.
Grantees also monitor production. For example, CAP-Dayton officials
told us that field supervisors oversee 100 percent of the housing units
weatherized as work is being done. A final inspector reviews work
crew's work before the project is closed. This inspection is done on
every project. CAP-Dayton weatherization directors randomly inspect
work sites. Finally, CAP-Dayton contacts every customer to obtain their
satisfaction with the work done and follow up on 25 percent of the
weatherized units to measure energy consumption. CAP-Dayton officials
noted they will continue with these monitoring procedures for the
Recovery Act projects. Similarly, an official at MORPC told us the
weatherization program manager reviews and signs off on every
application for weatherization service, quality assurance inspectors
verify that weatherization work was properly done on 100 percent of the
projects, and the program manager also checks completed units on a
random basis. MORPC staff conduct a telephone survey of at least 25
percent of weatherization customers. MORPC officials also said they
plan to continue these monitoring procedures on projects funded by the
Recovery Act.
Because the weatherization program has been small in recent years,
ODOD's monitoring activities have not been tested by an independent
audit in more than 10 years. However, monitoring procedures and
activities are subject to periodic review by the DOE. The lack of an
independent review through the Single Audit process heightens the risks
associated with the program. When considering risk during the Single
Audit process, auditors consider such items as the recipient's current
and prior audit experience with federal programs; the results of recent
oversight visits by federal, state, or local agencies; and the inherent
risk of the program. Ohio's Office of Internal Audit (OIA) recently
conducted a risk assessment of ODOD in order to help optimize use of
its audit resources. OIA plans to perform an interim review of the
adequacy of the internal controls at ODOD and will conduct assurance
testing of key controls as funds are disbursed to ODOD. Additionally,
the Auditor of State anticipates auditing Ohio's Weatherization
Assistance Program in 2010.
Ohio Will Use DOE Performance Measures to Assess Impact of Recovery Act
Funds and Help Meet Section 1512 Reporting Requirements:
ODOD officials plan to use DOE performance measures to determine the
impact of Recovery Act weatherization funds and are reporting several
metrics to DOE on a quarterly basis, including: financial data, units
weatherized, jobs created, monitoring activities, training provided,
and equipment purchased. Grantees are required to report production and
financial information monthly. ODOD, on a monthly basis, plans to
monitor grantees' productivity in relation to established production
goals and the quality standards and to adjust program funding and
identify grantee providers that may need additional guidance or
oversight.
To help meet Section 1512[Footnote 7] reporting requirements, ODOD said
it plans to report actual jobs created. ODOD will collect the data
through surveys of its grantees, aggregate the data, and report the
information to DOE and OMB. To allow adequate time to review the
subrecipient data before ODOD has to submit the data to Ohio's Office
of Budget and Management (OBM), ODOD plans to establish a reporting
deadline for its grantees that is 10 days in advance of the reporting
date. ODOD will check the data once they are received. If data appear
questionable, officials will compare the electronically submitted
information against hard-copy files. Although ODOD cannot verify the
data before it submits it to OBM, ODOD plans to verify the data during
its quarterly on-site visits.
In Ohio, all state agencies that receive Recovery Act funds are
responsible for reporting Recovery Act Section 1512 data--including the
number of jobs created and retained--to OMB. Ohio's OBM has issued
guidance on estimating jobs created and retained. Additionally,
guidance was provided to grantees at weatherization assistance program
meetings hosted by ODOD on March 3 and 4, 2009. However, grantee
officials told us that they had not received guidance on how to report
on jobs created. CAP-Dayton, which primarily uses in-house crews to
perform weatherization work, estimated that it will create 30 new jobs
under Recovery Act funding. MORPC officials plan to measure full-time
equivalent jobs and estimated that 14 jobs will be created within the
agency. MORPC contracts out the majority of its weatherization
services; MORPC surveyed its contractors and estimates that its
contractors will create 8 new jobs. ODOD officials said they expect to
issue additional Section 1512 reporting guidance in the near future.
Because of the centralized reporting requirements issued by OBM, ODOD
officials said they already possess most of the required identifying
data. As a result, relatively few additional reporting requirements for
subrecipients are anticipated.
Another challenge of measuring job creation will be separating job
creation by funding source. Ohio's Recovery Act weatherization program
receives funding from three different sources: DOE's Weatherization
Assistance Program, Health and Human Service's (HHS) Low-Income Heat
Assistance Program (LIHEAP), and Ohio's Electric Partnership Program
(EPP). Officials at both CAP-Dayton and MORPC told us they will use DOE
Recovery Act funds for in-house labor costs and will only report job
creation under DOE Recovery Act weatherization funds. However, MORPC
officials explained that contractors are able to use some LIHEAP funds
to pay salaries. ODOD officials stated they do not yet have a method to
report job creation by separate funding stream, but will seek guidance
from DOE.
Ohio Expanded Summer Youth Employment Activities but Faced Challenges
Reaching Intended Enrollments for Older Youth:
The Recovery Act provides an additional $1.2 billion in funds for the
Workforce Investment Act (WIA) Youth Program, including summer
employment. Administered by Labor, the WIA Youth Program is designed to
provide low-income in-school and out-of-school youth 14 to 21 years
old, who have additional barriers to success, with services that lead
to educational achievement and successful employment, among other
goals. Funds for the program are distributed to states based on a
statutory formula; states, in turn, distribute at least 85 percent of
the funds to local areas, reserving as much as 15 percent for statewide
activities. The local areas, through their local workforce investment
boards, have the flexibility to decide how they will use the funds to
provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 8] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth Program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 9] Local areas may design summer
employment opportunities to include any set of allowable WIA youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job; (2) learn work readiness
skills on the job; and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 10]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth Program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Ohio's Counties, in Conjunction with Local Workforce Investment Boards,
Design WIA Summer Youth Employment Activities:
The Ohio Department of Job and Family Services (JFS) administers the
state's workforce development system, including the WIA Youth Program,
in addition to administering other federally funded social service
programs. Ohio has 20 local Workforce Investment Boards (WIB), each
including a varying number of counties. County commissioners are
actively involved in decision making for the workforce system, and the
design of summer youth employment activities differs from county to
county, according to a senior JFS official. For our review of summer
youth employment activities, we visited three counties: Franklin,
Montgomery and Union, all of which we visited for our July 8, 2009,
report.[Footnote 11] We selected these counties to give us (1) a mix of
population sizes and (2) a mix of experience operating summer youth
programs. The counties are in two of Ohio's local area WIBs: Area 11,
the Central Ohio Workforce Investment Corporation (COWIC),[Footnote 12]
which covers Franklin County and the city of Columbus; and Area 7,
which covers 43 counties, including Union and Montgomery. (See
figure1.)
Figure 1: Map of Ohio's Workforce Investment Boards:
[Refer to PDF for image: map of Ohio]
Map of Ohio that shows the boundaries of the 20 individual workforce
investment areas. Each workforce area is individually numbered on the
map. Workforce Investment Area 7 is shaded since it is the only area
that is split into two noncontiguous areas. The three localities”
Montgomery, Union, and Franklin counties”that GAO visited are also
indicated by location on the map.
Sources: GAO presentation of Ohio Department of Job and Family Services
data; Map Resources (map).
[End of figure]
Local Areas' Ability to Meet Ohio's Expenditure Rate Target Is Unclear:
Ohio received $56.2 million in Recovery Act funds for the WIA Youth
Program and reserved 15 percent for statewide activities. As of August
15, 2009, JFS estimated it had expended $13.5 million of its allotment.
Though not required by the Recovery Act, JFS set an overall expenditure
rate target for the Recovery Act youth funds, requiring local areas to
expend at least 70 percent of the funds by October 31, 2009, and 90
percent by January 31, 2010. Local areas in Ohio that do not meet this
target risk having those funds recaptured by the state, according to
JFS. JFS reported that given current expenditures, it is unsure whether
the local areas would meet its October expenditure target.
As Localities Implemented WIA Summer Youth Employment Activities,
Meeting Enrollment Projections Proved Challenging:
As we reported in July 2009, counties reported facing some challenges
implementing their summer youth activities. For this report, we
returned to three counties we visited in July. Local officials said
they were able to overcome many of their initial concerns, but other
concerns--such as recruiting and serving older youth, and increased
workloads--remained.
The localities we visited each initially set a projected number of
youth they could serve and had varying success reaching those
projections. For our July 2009 report, JFS officials told us they
expected 14,205 youth participants this summer. As of July 31, 2009,
there were 12,530 youth participants statewide, with participation
expected to increase as some local areas continued enrolling.[Footnote
13] Similarly, at the three counties we visited, the number of
participants in the program at the time of our visit was below the
counties' projected numbers. Table 1 summarizes the projected,
eligible, and actual number of youth participants for the localities we
visited.
Table 1: Projected, Eligible, and Actual Numbers of Participants in
Three WIA Summer Youth Employment Programs:
COWIC:
Projected number of youth participants from our last visit: 2,500[B];
Actual number of youth determined eligible who could begin
activities[A]:
Total: 2,121;
Older[C]: 782;
Actual number of participants at the time of our latest visit:
Total: 1,492;
Older: 493; (as of Aug. 21, 2009).
Montgomery County:
Projected number of youth participants from our last visit: 750;
Actual number of youth determined eligible who could begin
activities[A]:
Total: 774;
Older: 774;
Actual number of participants at the time of our latest visit:
Total: 607;
Older: 607; (as of Aug. 18, 2009).
Union County:
Projected number of youth participants from our last visit: 30;
Actual number of youth determined eligible who could begin
activities[A]:
Total: 24;
Older: 6;
Actual number of participants at the time of our latest visit:
Total: 18;
Older: 5; (as of Aug. 14, 2009).
Sources: COWIC, Montgomery County JFS, and Union County JFS officials.
[A] Represents the final number of your found eligible after intake
periods ended.
[B] COWIC later revised the number of participants they could fund to
2,338 due to an increase in hourly wage for out-of-school youth.
[C] Older youth are ages 18 to 24.
[End of table]
Local officials said that older and out-of-school youth, including the
newly eligible 22-to 24-year-olds, were especially challenging to
recruit, enroll, and serve. Specifically, many 18-to 24-year-olds did
not follow through with program requirements, such as providing
eligibility documents. To help accommodate older youth, Montgomery
County and COWIC had rolling admission.[Footnote 14] For older youth in
COWIC's area, wages were an issue. Officials at COWIC originally
planned to serve about 1,250 out-of-school youth but only served 782.
COWIC told us that older youth said they could find jobs on their own
for minimum wage, so COWIC increased its hourly wage from $7.30 to $9
per hour, which helped increase participation. Once activities began,
older youth did not always show up for work readiness or orientation
sessions or to their job at the work sites, according to the local
officials we visited. For some youth, this was due to competing
responsibilities, such as child care. In Union County, the number of
eligible applicants was low for all ages of youth. This, combined with
initial concerns about meeting the state expenditure rate target,
allowed officials to offer 40 hours per week of work for most youth.
[Footnote 15]
In managing the program, local officials indicated it was a challenge
to quickly screen the large number of applicants or to collect the
documentation required for WIA eligibility. Compared with past summer
programs, the counties we visited experienced increased workloads
processing applications and documenting eligibility. To address the
volume, COWIC had youth use an online portal to input application
information with vendor staff. Montgomery County used an online form to
prescreen potential applicants, and both counties hired additional
staff to process applications and review eligibility documentation.
COWIC used five staff members, including one hired for Recovery Act
work, to review more than 2,300 applications processed by vendors.
Montgomery County hired seven staff to review more than 1,000
applications. Union County processed only 43 applications; while its
small staff did not have experience calculating WIA eligibility and the
process was slow, the relatively small number of applications allowed
them to process the applications themselves.
In the three counties we visited, local officials we spoke with put
varying levels of effort into identifying and defining green
opportunities. Despite Labor's encouragement for local areas to develop
opportunities to introduce youth to green careers, Union County
officials said finding green job placements was not a focus in their
county. A Montgomery County official expressed frustration at the lack
of definition for green jobs and said he was unsure how to define or
identify green jobs. On the other hand, COWIC officials said they are
working with industry leaders in the sector to identify green
opportunities. In COWIC's request for proposals, it describes green
initiatives as those that will help the conservation, recycling, or
preservation of our environment. Along those lines, four COWIC youth
were assigned to an internship in urban gardening, where they were to
participate in the development of soil, compost, and planning, as well
as learn about food business and soil conservation. However, some youth
working in jobs classified under a "green initiative" were not
necessarily working toward "green" educational or career paths. For
example, two youth were assigned to the Ohio State University Center
for Automotive Research, whose projects include alternative fuel
vehicles. While they were exposed to green technology, their actual
task was clearing brush and painting a fence at the center.
In implementing WIA summer youth employment activities, the local areas
we visited did not have a problem recruiting employers to the program.
In our visits, we found that the "work experience" component varied in
the counties we visited, with some work sites having more educational
elements than others. For example, 205 youth 14 to 17 years old in
COWIC's Camp IT are expected to strengthen computer skills; explore
careers; engage in soft skill development, team building, and personal
development; and access college and financial aid information. However
other in-school youth placed in jobs by COWIC assisted in children's
summer camps, did clerical work or customer service. In Montgomery and
Union Counties, work readiness sessions--lasting 1 hour in Montgomery
County and 1 week in Union County--were the only classroom time for
youth. The majority of youth in those counties did clerical or
custodial work at employers in a variety of fields.
Work readiness measures were developed by individual counties in Ohio.
In our July 2009 report, we noted that for officials in Montgomery
County, developing work readiness measures was one of their greatest
challenges. Montgomery County used work readiness measures developed by
a vendor for their in-school youth program.[Footnote 16] Similarly,
COWIC used different measures for in-school youth and out-of-school
youth, as developed by vendors who have worked on previous COWIC
programs.[Footnote 17] Union County used elements from a couple of
sources, including a pre-employment test given by a local business.
[Footnote 18]
Ohio Is Enhancing Its Existing Monitoring Approach for the WIA
Programs:
As the prime recipient of WIA funds, JFS is responsible for monitoring
the local area WIBs. JFS told us it plans on using its existing
monitoring approach for the WIA Youth Program, with some enhancements.
In April 2009, JFS issued guidance to local area WIB directors
communicating its monitoring approach for WIA Recovery Act funding.
According to this guidance, JFS will conduct multiple on-site visits,
desk reviews, and teleconferences with the local area WIBs to assess
the local area WIBs' readiness to implement services and activities
using Recovery Act funds, as well as the sufficiency of its oversight
procedures. JFS plans to provide the local area WIB with a written
summary of the results of each visit or teleconference and will share
these summaries with JFS staff so that they can address technical
assistance needs, as appropriate. To enhance its monitoring capability,
JFS plans on hiring additional staff to provide technical assistance,
perform reviews of the fiscal data, and coordinate reviews of program
data, as needed. To monitor activities provided with Recovery Act
funds, JFS has also created supplemental questions specific to Recovery
Act requirements.
In addition to reviewing the monitoring approach at the state level, we
also assessed the monitoring approach of the counties and local WIBs we
visited and noted both similarities and variations in their oversight
practices. Similar practices local officials told us about were as
follows:
* verifying eligibility by reviewing and signing off on each individual
application;
* verifying the accuracy of a sample of manually entered application
data (which was entered into the JFS reporting system, as electronic
applications are not linked into the state reporting system);
* having supervisors sign youth timesheets and by reviewing them for
accuracy;
* having employers file work-site agreements that detail the safety and
supervision requirements for the programs; and:
* using staff to make frequent on-site visits to monitor whether youth
work sites were complying with program rules.
An example of a varying practice between the WIBs we visited is that
COWIC officials told us it has an audit committee and had conducted
recent risk assessments of its summer youth service providers. It used
the results of these risk assessments to develop its fiscal monitoring
schedule for conducting desk reviews. Area 7 told us it does not have
an audit committee, and although it provided its monitoring schedule
indicating site visits had begun, it had not conducted a recent risk
assessment because it plans to visit every county.
In our July 2009 report, we noted that the Auditor of State had
declared one of the local area WIBs to be "unauditable." The Auditor of
State declares an entity "unauditable" when the condition of the
financial records is inadequate to complete the audit. The Area 7 WIB
was the local area WIB declared "unauditable" by the Auditor of State.
A senior JFS official responsible for overseeing the resolution of the
audit issues told us that Area 7's audit issues have been resolved, and
on September 10, 2009, the Auditor of State released Area 7's fiscal
year 2008 single audit report.
JFS is responsible for the accuracy and completeness of all
subrecipient reported information and plans to use a spreadsheet to
collect subrecipient information. As subrecipients, local areas are
responsible for reporting financial information to the state system
through reporting mechanisms and processes determined by the state. JFS
has issued initial guidance to its local area WIBs regarding its
subrecipient reporting responsibilities. According to a JFS official,
one of the challenges in meeting the October 10, 2009, reporting
deadline is the requirement to include Recovery Act funding information
through September 30, 2009. This is challenging because although local
WIBs provide information to JFS by the end of the month, JFS has to
review the information submitted, and this process normally takes about
10 days.
A WIA Summer Youth Contract Case Study:
We selected one contract to review and discuss in greater depth with
COWIC contracting officials. COWIC awarded this contract to a local
vendor to provide services in support of its WIA summer work program
for out-of-school youth. The contract was awarded on May 1, 2009, at a
total value of $160,068 with a project start date of May 1 and a
projected completion date of September 30, 2009. The contract provides
for the provision of services to 375 WIA eligible youth for their
development as working professionals, which includes providing case
management of individual participants, job readiness training, and
internship job opportunities related to each participant's career
interests.
According to a senior contracting COWIC official, the contract awarded
was one of six made by COWIC to public and private organizations to
serve a total of approximately 970 out-of-school youth 18 to 24 years
old during the summer of 2009. The official stated the contract was
awarded competitively using procedures that included a request for
proposal (RFP) open to any public or private organization capable of
performing the work described. According to the senior official, 11
vendors submitted letters of intent (LOI) to bid, and from a review of
those 11, it was determined that 9 vendors met the criteria established
to submit a full proposal in response to the RFP. The official stated
these LOI reviews were used to ensure the capability of each contractor
to perform the required services before actual contract award.
Officials told us that under COWIC Procurement Policy and Procedure,
the agency's policy specifies that all procurement transactions shall
be conducted in a manner to provide open and free competition in order
to ensure objective contractor performance and eliminate unfair
competitive advantage. This policy also states that contracts will be
awarded to the offeror whose bid is responsive to the solicitation and
is most advantageous to COWIC, price, quality, service, and other
factors considered.
According to the senior contracting official, the work was awarded
using a cost-reimbursable contract with a not-to-exceed amount.
Payments to the vendor are based on actual expenditures, with all
vendor invoices supported with detailed receipts. The official stated
that COWIC has used this type of contract with service providers in the
past and has achieved excellent outcomes. According to the contracting
official, the agency has standard procedures for monitoring contractor
performance with ongoing monitoring provided by COWIC compliance staff
to assure quality and performance is being met. These procedures
include conducting desk reviews of service provider information on
program performance and compliance, service provider site visits to
review records and interview contractor staff, and surveys to
participating employers and youth to determine program compliance and
assess service quality. A sample of work-site visits are also conducted
by COWIC staff, and program reports are completed to document key
quality and performance information. Other oversight activities include
clarifying the performance outcomes with the vendor during contract
negotiations and providing training for all selected vendors and their
partners after contract award.
FHWA Is Obligating Highway Funds for Ohio for More Complex Projects and
Has Increased Obligation Rates to Metropolitan Planning:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through federal-aid highway program
mechanisms, and states must follow the requirements of the existing
program, which include ensuring the project meets all environmental
requirements associated with the National Environmental Policy Act
(NEPA), paying a prevailing wage in accordance with federal Davis-Bacon
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act it is 100 percent.
The U.S. Department of Transportation's Federal Highway Administration
(FHWA) apportioned about $936 million in Recovery Act funds to Ohio. As
of September 1, 2009, the federal government had obligated about $429
million for 193 projects. This is about 46 percent of the $936 million
apportioned to Ohio in March 2009.[Footnote 19] Almost $290 million or
70 percent of Recovery Act highway obligations for Ohio have been for
highway pavement projects. More than $190 million of these obligated
funds are going for larger and more complex projects, such as the $18
million Greater Cleveland and Greater Akron Regional Intelligent
Transportation Systems for installing traffic cameras, dynamic message
boards, vehicle detectors, and advisory radios along highways across
seven Ohio counties. Figure 2 shows obligations by the types of road
and bridge improvements being made.
Figure 2: Highway Obligations for Ohio by Project Type as of September
1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (67 percent, $287.9 million):
Pavement improvement ($153.3 million): 36%;
New road construction ($129.8 million): 30%;
Pavement widening ($4.8 million): 1%.
Bridge projects total (20 percent, $85.3 million):
Bridge improvement ($40.9 million): 10%;
New bridge construction ($29.3 million): 7%;
Bridge replacement ($15.1 million): 4%.
Other (13 percent, $55.9 million):
Other ($55.9 million): 13%.
Source: GAO analysis of FHWA data.
Note: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
[End of figure]
We selected two highway contracts[Footnote 20] awarded by the Ohio
Department of Transportation (ODOT) contracting officials to gain a
better understanding of how projects were to be implemented. We
reviewed the contracts and discussed them with ODOT officials, who told
us that both projects were competitively bid and were awarded for a
fixed price. Officials also stated that one contract was for 7.7
percent less than the state's estimated cost, and the other contract
was for 15.1 percent more than the estimated cost. Also, in both cases,
these officials indicated that ODOT had incorporated FHWA Recovery Act
requirements into the contracts. As a result, the contractors are
required to provide information necessary for ODOT to meet its Recovery
Act reporting requirement.
Ohio Department of Transportation Monitors the Obligations and
Expending Rates of Recovery Act Transportation Funds for Metropolitan
Planning Organizations:
As of September 1, 2009, the federal government obligated $49.6
million, or 31 percent, of the $161.5 million of Recovery Act funds
suballocated to Metropolitan Planning Organizations (MPO)[Footnote 21]
throughout the state. These obligated funds went to 57 of the 153
approved MPO Recovery Act projects. ODOT officials said they were
monitoring the MPOs' obligation rates closely and have procedures in
place designed to ensure that all of the funds allocated for MPOs are
promptly expended. For example, according to ODOT officials, ODOT
requires the MPOs to submit contingency plans in case the actual
contract amount is lower than the amount obligated for a project. MPO
and ODOT district office officials meet regularly to discuss whether
follow-up action is needed with local political entities that are
sponsoring individual projects. In addition, ODOT central office
convenes monthly video conferences with MPO and local ODOT district
office officials to ensure that project phases are completed on
schedule.
We visited the four largest of Ohio's eight MPOs;[Footnote 22]
officials at all four MPOs expect there will be projects where
contracts will be awarded at less than the original Recovery Act
estimate. As of September 1, 2009, officials at one MPO identified four
contracts that will be awarded about $400,000 less than originally
estimated. According to an MPO official, the contingency plan calls for
removal of the unused funds from the original contract and obligating
those funds for use on other road surfacing projects.
ODOT officials told us they expect all Recovery Act funds to be
obligated on MPO approved projects by March 2, 2010. However, officials
at the MPOs we visited were unsure of the process that should be
followed to deobligate funds from projects and obligate those funds to
other projects. In addition, they were unaware of the time frame
available for completing the action. ODOT central office officials told
us that all deobligated funds from contracts that were awarded at less
than the original estimate need to be obligated on new projects by
September 30, 2010. ODOT officials said they plan to revisit the
procedures for obligating the unused Recovery Act funds with the MPOs
to make sure they understand the process; ODOT officials also stated
they may provide written guidance on the process.
Ohio Has Obligated Its Recovery Act Funds for State Fiscal
Stabilization Fund and Education, but Few Funds Have Been Expended:
State Fiscal Stabilization Fund:
The Recovery Act created the State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHE). The initial award of SFSF
funding required each state to submit an application to Education that
provided several assurances, including that the state will meet
maintenance-of-effort requirements (or will be able to comply with
waiver provisions) and that it will implement strategies to meet
certain educational requirements, such as increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds) and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at fiscal year 2006 levels, states must use education
stabilization funds to restore state funding to the greater of fiscal
year 2008 or fiscal year 2009 levels for state support to school
districts or public IHEs. When distributing these funds to school
districts, states must use their primary education funding formula, but
they can determine how to allocate funds to public IHEs. In general,
school districts maintain broad discretion in how they can use
education stabilization funds, but states have some ability to direct
IHEs in how to use these funds.
ESEA Title I:
The Recovery Act provides $10 billion to help local educational
agencies (LEA) educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965. The Recovery
Act requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of the funds by September 30, 2010.[Footnote 23] Education is
advising LEAs to use the funds in ways that will build the agencies'
long-term capacity to serve disadvantaged youth, such as through
providing professional development to teachers.
IDEA:
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act
(IDEA), the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities access
to a free and appropriate public education and is divided into two
separate grants--Part B grants to states (for school-age children) and
Part B preschool grants (section 619). Part C funds programs that
provide early intervention and related services for infants and
toddlers with disabilities--or at risk of developing a disability--and
their families. Education made the first half of states' Recovery Act
IDEA funding available to state agencies on April 1, 2009.
Ohio has allocated almost all Recovery Act funds made available for
ESEA Title I, IDEA, and SFSF, but limited funds have been expended. The
Ohio Department of Education (ODE) administers all Recovery Act funds
for education, including SFSF money, and will distribute those funds to
recipients as those entities request drawdowns. (See figure 3.)
Figure 3: Expenditures of Recovery Act Funding for Selected Education-
Related Programs as of September 15, 2009:
[Refer to PDF for image: vertical bar graph]
Program: ESEA Title I, Part A;
Made available to state: $372.7 million;
Allocated by state to subrecipients: $325.9 million;
Expended by subrecipients: $2.9 million.
Program: IDEA, Part B;
Made available to state: $451.1 million;
Allocated by state to subrecipients: $437.8 million;
Expended by subrecipients: $4.1 million.
Program: State Fiscal Stabilization Fund, K-12;
Made available to state: $566.2 million;
Allocated by state to subrecipients: $566.2 million;
Expended by subrecipients: $54.6 million.
Program: State Fiscal Stabilization Fund, Higher Education;
Made available to state: $414.5 million;
Allocated by state to subrecipients: $414.5 million;
Expended by subrecipients: $56.3 million.
Program: State Fiscal Stabilization Fund, Government Services Fund;
Made available to state: $325.7 million;
Allocated by state to subrecipients: $325.7 million;
Expended by subrecipients: $0 million.
Source: GAO analysis of data from the U.S. Department of Education and
the Ohio Department of Education.
Note: The U.S. Department of Education does not separately allocate
SFSF funds to states for K-12 and higher education, but this graph
reflects the division of funds appropriated by the Ohio legislature.
[End of figure]
While the final third of education stabilization funds have not yet
been made available to the state, the state's biennial budget
appropriates all the funds to be provided by the Recovery Act. In
addition, the budget allocated all of the state's government services
funds--a portion of the SFSF--to the Department of Rehabilitation and
Corrections (ODRC). Specifically, the budget allocated the following
over fiscal years 2010 and 2011:
* about $845 million in SFSF to LEAs as a portion of the state's
foundation funding that the state sends in grants to LEAs each year by
formula. This year, the state changed the formula it will use to
distribute this funding, known as foundation funding.[Footnote 24]
* nearly $619 million in SFSF for higher education. These funds are
being distributed to all 37 of Ohio's public institutions of higher
education as part of the state's share of instruction (SSI). A state
official said that, like the K-12 formula, the formulas used to
determine SSI distributions also changed this year: They will include
factors related to course completion and degree attainment, which are
expected to be phased into the formulas over the next two biennia.
Overall, the total SSI provided to IHEs increased by about 6 percent
from fiscal year 2009 to fiscal year 2010. Based on preliminary
calculations of SSI distributions, all main campuses of 4-year
universities received more funding through the SSI than in the previous
year except Youngstown State University and Central State University
(CSU), whose total allocation for SSI was projected to be reduced
compared with the previous year. Officials from CSU said the new
formula factors presented challenges for the school.
* nearly $326 million in SFSF over 2 years to the ODRC for operating
costs such as salaries and other expenses.
Ohio's Use of Public Housing Capital Fund Grants Is Increasing:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management.[Footnote 25] The Recovery Act
requires the U.S. Department of Housing and Urban Development (HUD) to
allocate $3 billion through the Public Housing Capital Fund to public
housing agencies using the same formula for amounts made available in
fiscal year 2008. Recovery Act requirements specify that public housing
agencies must obligate funds within 1 year of the date on which they
are made available to public housing agencies, expend at least 60
percent of funds within 2 years, and expend 100 percent of the funds
within 3 years. Public housing agencies are expected to give priority
to projects that can award contracts based on bids within 120 days from
the date on which the funds are made available, as well as projects
that rehabilitate vacant units, or those already under way or included
in their current required 5-year capital fund plans.
HUD is also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofit investments. In a Notice
of Funding Availability published May 7, 2009, and revised June 3,
2009, HUD outlined four categories of funding for which public housing
agencies could apply:
* creation of energy-efficient communities ($600 million),
* gap financing for projects that are stalled due to financing issues
($200 million),
* public housing transformation ($100 million), and:
* improvements addressing the needs of the elderly or persons with
disabilities ($95 million).
For the creation of energy-efficient communities, applications (which
were due July 21, 2009) were to be rated and ranked according to
criteria outlined in the Notice of Funding Availability. The last three
categories will be threshold-based, meaning applications that meet all
the threshold requirements will be funded in order of receipt. If funds
are available after all applications meeting the thresholds have been
funded, HUD may begin removing thresholds after August 1, 2009, in
order to fund additional applications in the order of receipt until all
funds have been awarded. Applications in these three categories were
accepted until August 18, 2009.
Ohio has 52 public housing agencies that have received Recovery Act
formula grant funds. In total, these agencies received about $128.3
million in Public Housing Capital Fund grant awards. We reported in
July 2009 that Ohio's public housing agencies had obligated
approximately $8.1 million or about 6.3 percent of the total grant
award allocation and had expended $794,847 or about 0.6 percent. As of
September 5, 2009, the Ohio public housing agencies have increased the
pace at which they are obligating and expending Recovery Act funds.
Figure 4 shows the funds allocated by HUD that have been obligated and
drawn down by Ohio public housing agencies as of September 5, 2009.
Figure 4: Percentage of Public Housing Capital Funds Allocated by HUD
That Have Been Obligated and Drawn Down in Ohio, as of September 5,
2009:
[Refer to PDF for image: 3 pie-charts]
Funds obligated by HUD: 100% ($128,325,949);
Funds obligated by public housing agencies: 21.7% ($27,807,450);
Funds drawn down by public housing agencies: 3.0% ($3,838,762).
Number of public housing agencies:
Entering into agreements for funds: 52;
Obligating funds: 36;
Drawing down funds: 28.
Source: GAO analysis of HUD data.
[End of figure]
As of September 5, 2009, 36 of 52 agencies in Ohio had obligated funds--
an increase of 9 since June 20, 2009--and 28 have drawn down funds--an
increase of 18 agencies. During the same time period, obligations have
increased to about $27.8 million, or 21.7 percent of the grant
allocations, and draw downs have increased to over $3.8 million, or
about 3.0 percent.
Ohio to Use a Centralized System for Recipient Reporting:
In Ohio, OBM is responsible for completion and submission of the
quarterly Section 1512 Recovery Act reports to the FederalReporting.gov
Web site. As a direct or prime recipient, state agencies contract with
subrecipients, monitor these subrecipients, and report Recovery Act
1512 data from subrecipients to OBM for processing and reporting. OBM
will monitor and report on Recovery Act funding that is managed by
state agencies or passed through to local government entities on a
subrecipient basis. OBM will neither monitor nor report funding and
programmatic information on Recovery Act dollars that local entities
may receive as prime recipients directly from federal grant programs.
Prime recipients are responsible for reporting information required by
Section 1512 directly to FederalReporting.gov.
To ensure the accuracy and completeness of Recovery Act reports to
federal agencies, OBM has designed a new information system--called the
Ohio American Recovery and Reinvestment Act Hub (Hub)--to centrally
collect and report on both financial and program data. Revenue and
expenditure data is directly input to the Hub through an interface with
the Ohio Administrative Knowledge System (OAKS). Programmatic
information, however, is being entered into the Hub by each of the
state agencies. State agencies that administer Recovery Act-funded
programs are also responsible for submitting subrecipient and vendor
information to the Hub. Each state agency that is a Recovery Act
funding recipient is working with the OBM's Office of Internal Audit to
complete detailed process maps and risk assessments. This process began
in March 2009 and is expected to continue for the duration of the
Recovery Act programs.
OBM Has Identified Risks and Controls within the Hub:
OBM identified four risk areas and established controls designed to
avoid two key data problems--material omissions and significant
reporting errors. Material omissions are when required data are not
reported or reported information is not responsive to the data
requested. Significant reporting errors occur when data is not reported
accurately.
OBM reviewed the process activities for Ohio's centralized reporting
system--the Hub--for the program initiation and quarterly reporting
process and identified four risk areas:
* commingling of Recovery Act funds with non-Recovery Act funds;
* insufficient or lack of internal controls in place to comply with
Recovery Act program requirements and goals or to minimize the fraud,
waste, and abuse;
* incomplete and inaccurate data; and:
* untimely submission of Recovery Act data to federal agencies.
OBM established six key controls designed to prevent or mitigate the
risk areas. These controls include:
* assigning a unique OAKS number to each program for both revenue and
expenditures,
* providing independent review of the Recovery Act process diagrams for
each agency,
* delivering and monitoring data and validation reports to determine
which programs are validating data to ensure compliance,
* reviewing OAKS data at month and quarter ends to ensure accuracy and
completeness,
* performing completeness checks on data pulled from the Hub and data
uploaded into FederalReporting.gov, and:
* evaluating the Recovery Act internal controls of each agency.
Because the Hub is a new application, implementation issues could
result. Recognizing this, in early August 2009, OBM performed an
initial test run of the Hub. This "dry run" had two purposes. First, it
allowed state agencies to become accustomed to the reporting timelines
and the internal work procedures needed to meet the timelines. Second,
it provided OBM with an opportunity to test its information system and
ensure it could pull together accurate central reports in a timely and
effective manner.
Initial Tests of the Hub Are Promising, but Challenges Exist:
In mid-August 2009, OBM completed initial Hub testing. According to
OBM, the test was designed as a basic system test. Specifically, the
test was designed to help ensure that state agencies report all data
elements required by Section 1512, that data were added to the
appropriate reports by program and in summary, and that financial data
from OAKS were fed properly into the Hub and were associated with the
appropriate program. Additionally, the test provided an impetus for
agencies to provide their program data, establish proper security for
their users, and use the validation function for an individual to
attest to the accuracy of program data.
OBM reported that the test was successful. Specifically, an OBM
official noted that (1) reports available to all Hub users contained
the required data, (2) financial data from OAKS were associated with
the proper Catalog of Federal Domestic Assistance number and appeared
correctly in reports, and (3) the validation and attest feature worked.
Further, the test prompted the agencies to become more familiar with
the Hub and spurred them to load their programmatic data. OBM plans
another Hub test in early September 2009. This second test is to
include available vendor and subrecipient data elements and will again
test a reporting period conclusion.
While initial tests of the Hub were successful, OBM faces additional
challenges before the system is fully operational and fully tested.
First, the "dry run" tested data of only 14 of the more than 20
Recovery Act programs. Second, all controls and validation procedures
may not be complete by the first quarterly reporting date of October
10, 2009. Third, notwithstanding the controls put into place and OBM's
"dry run" test, the Hub could still contain erroneous data because each
state agency has its own validation policy and is responsible for
validating the accuracy and completeness of subrecipient data, as well
as its own data. OBM officials told us they plan to review state
agencies' controls and make sure that agencies' data have been
independently reviewed.
State Comments on This Summary:
We provided the Governor of Ohio with a draft of this appendix on
September 4, 2009, and representatives of the Governor's office
responded on September 09, 2009.
In general, they agreed with our draft and provided some clarifying
information, which we incorporated. The officials also provided
technical suggestions that were incorporated, as appropriate.
GAO Contacts:
Cynthia M. Fagnoni, (202) 512-7202 or fagnonic@gao.gov:
David C. Trimble, (202) 512-9338 or trimbled@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Bill J. Keller, Assistant
Director; Sanford Reigle, analyst-in-charge; William Bricking; Matthew
Drerup; Laura Jezewski; Myra Watts-Butler; Lindsay Welter; Charles
Willson; and Doris Yanger made major contributions to this report.
[End of section]
Footnotes: for Appendix XV:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] OMB Memorandum M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Activities (May 11, 2009). This
guidance allows states to collect no more than 0.5 percent of the total
Recovery Act funds the state expects to receive.
[3] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[4] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[5] Three of these grantees use 24 local agencies--called delegates--to
provide weatherization services.
[6] Ohio requires weatherization materials installed conform to the
State of Ohio Weatherization Program Standards and Appendix A of 10 CFR
Part 440.
[7] Section 1512 of the Recovery Act requires direct recipients of
Recovery Act funds to report not later than 10 days after the end of
each calendar quarter beginning with the quarter ending September 30,
2009, including use of funds received from federal agencies, detailed
project or activity information, and an estimate of the number of jobs
created and the number of jobs retained for projects and activities.
Pub. L. No. 111-5, 123 Star. 115, 287 (Feb. 17, 2009)
[8] H.R. Rep. No. 111-16, at 448 (2009).
[9] Department of Labor, Training and Employment Guidance Letter No. 14-
08 (Mar. 18, 2009).
[10] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[11] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009). In the July report, we also visited Licking County, which is not
covered in this report.
[12] COWIC is a nonprofit entity that is eligible to receive and
administer funds granted under the Workforce Investment Act of 1998.
Also known as the Local Workforce Board for Area 11 within the state of
Ohio, it represents the city of Columbus and Franklin County, Ohio.
[13] Data provided by Labor based on information reported by Ohio.
[14] Labor specifies the dates for WIA summer youth employment to be
between May 1 and September 30, 2009. However, Ohio has a waiver from
Labor that allows work experience to continue for youth 18 to 24 years
old until March 30, 2010.
[15] Hourly wages for youth in Union County ranged from $7.30 to $10
per hour and were based on wages that employers pay non-WIA-funded
employees.
[16] Montgomery County's work readiness test is a true/false test
covering topics such as: money management, workplace communication,
conflict management, coping skills, and time management.
[17] In addition to completing work readiness tests, all COWIC
participants complete work readiness portfolios to document their
learning during their internship.
[18] Union County's work readiness test has questions on employment
requirements, math computation, past employment experiences, and how to
respond to workplace scenarios.
[19] All states have met the Recovery Act requirement that 50 percent
of apportioned funds be obligated within 120 days of apportionment
(before June 30, 2009). However, this requirement applies only to funds
apportioned to the state and not to the 30 percent of funds required by
the Recovery Act to be suballocated, primarily based on population, for
metropolitan, regional, and local use or to funds transferred to FTA.
The number reported above reflects the percentage of all apportioned
funds that have been obligated, including the suballocated amounts.
[20] The two contracts we reviewed included a project in Hancock County
to pave deteriorated sections along Interstate 75 and a project in
Cuyahoga County to repave the shoulders and widen the ramp between two
major interstates.
[21] Metropolitan planning organizations are federally mandated
regional organizations, representing local governments and working in
coordination with state departments of transportation that are
responsible for comprehensive transportation planning and programming
in urbanized areas. MPOs facilitate decision making on regional
transportation issues including major capital investment projects and
priorities. To be eligible for Recovery Act funding, projects must be
included in the region's TIP and the approved State Transportation
Improvement Program (STIP).
[22] MPOs visited were the Ohio-Kentucky-Indiana Regional Council of
Governments, Northeast Ohio Areawide Coordinating Agency, Mid-Ohio
Regional Planning Commission, and the Miami Valley Regional Planning
Commission. These four MPOs were allocated the largest amount of
Recovery Act funds in the state.
[23] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver,
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[24] The budget adopted an "evidence-based model" for school funding in
Ohio. The new model, which includes funding for universal all-day
kindergarten, will be phased in over 10 years. The total amount of
funding calculated under the model is termed the adequacy amount. The
adequacy amount includes eight major components: (1) instructional
services, (2) additional support, (3) administrative services, (4)
operations and maintenance, (5) gifted instruction and enrichment, (6)
technology resources, (7) professional development, and (8)
instructional materials. Certain components of the model are adjusted
to account for differences in the school district's educational
attainment, wealth, and concentration of economically disadvantaged
students.
[25] Public housing agencies receive money directly from the federal
government. Funds awarded to the public housing agencies do not pass
through the state budget.
[End of section]
Appendix XVI: Pennsylvania:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Pennsylvania. The full report on all of our
work, which covers 16 states and the District of Columbia, is available
at [hyperlink, http://www.gao.gov/recovery/.
We reviewed four programs in Pennsylvania funded under the Recovery
Act--Highway Infrastructure Investment funds, Transit Capital
Assistance Program funds, Weatherization Assistance Program, and the
Workforce Investment Act (WIA) Youth Program summer employment
activities. We selected these programs for different reasons. Contracts
for highway projects using Highway Infrastructure Investment funds have
been under way in Pennsylvania for several months, and provided an
opportunity to review financial controls, including the oversight of
contracts. The Transit Capital Assistance Program funds had a September
1, 2009, deadline for obligating a portion of the funds, and further,
provided an opportunity to review nonstate entities that receive
Recovery Act funds. The Weatherization Assistance Program received a
significant funding increase and is considered a high-risk program by
Pennsylvania's Bureau of Audits. We selected the WIA Youth Program in
Pennsylvania because many of the local workforce areas were setting up
summer youth employment activities for 2009. With these programs, we
focused on how funds were being used; how safeguards were being
implemented, including those related to procurement of goods and
services; and how results were being assessed. We reviewed contracting
procedures and examined two specific contracts under both the Recovery
Act Highway Infrastructure Investment funds and the WIA Youth Program.
In addition to these four programs, we also updated funding information
on three Recovery Act education programs--the U.S. Department of
Education (Education) State Fiscal Stabilization Fund (SFSF); Title I,
Part A, of the Elementary and Secondary Education Act of 1965 (ESEA),
as amended; and the Individuals with Disabilities Education Act (IDEA),
Parts B and C--which were awaiting spending authority under
Pennsylvania's state budget. We also updated the funding information
for the Public Housing Capital fund to provide perspective on nonstate
entities receiving Recovery Act funds. Consistent with the purposes of
the Recovery Act, funds from the programs we reviewed are being
directed to help Pennsylvania and local governments stabilize their
budgets and to stimulate infrastructure development and expand existing
programs--thereby providing needed services and potential jobs. We also
reviewed the Pennsylvania Accountability Office's plans for reporting
and assessing the effects of spending. The following provides
highlights of our review:
Updated Funding Information on Three Education Programs:
* For its SFSF, Education directed Pennsylvania to resubmit its
application before receiving the first portion of its $1.9 billion
allocation. In addition, because the Governor and General Assembly
disagree about how to use the SFSF funds, local school districts will
remain uncertain about this funding until Pennsylvania adopts a final
budget for the fiscal year that began July 1, 2009.
* For Title I, Part A, of ESEA, Education has awarded Pennsylvania
about $400.6 million in Recovery Act funds. Based on information
available as of September 3, 2009, Pennsylvania has allocated $368
million to local education agencies (LEA), but the stopgap budget--
adopted on August 5, 2009--provided authority to spend only $199.4
million. These funds are to be used to help educate disadvantaged youth.
* For IDEA, Parts B and C, Education has awarded Pennsylvania about
$456 million in Recovery Act funds. Pennsylvania had allocated $267
million to LEAs; however, the stopgap budget provided only $228.5
million in spending authority. These funds are to be used to support
special education and related services for infants, toddlers, children,
and youth with disabilities.
Highway Infrastructure Investment Funds:
* The U.S. Department of Transportation's (DOT) Federal Highway
Administration (FHWA) apportioned $1.026 billion in Recovery Act funds
to Pennsylvania, of which 30 percent was required to be suballocated
primarily based on population for metropolitan, regional, and local
use. As of September 1, 2009, the federal government had obligated
$874.9 million, and $50.5 million has been reimbursed by FHWA. As of
August 31, 2009, Pennsylvania had awarded contracts for 219 projects,
mainly for bridge improvements and roadway resurfacing.
* In July 2009, as a result of favorable bids on its original Recovery
Act projects, Pennsylvania used about $134.8 million of Recovery Act
funds to add 52 projects for a total of 293 projects. Four existing
projects using about $69 million in Recovery Act funds were also
modified. According to Pennsylvania, the additional projects and
modifications were covered by the original apportionment.
* Two Recovery Act projects we reviewed in depth have started and are
making progress. First, the bridge rehabilitation project in Bedford
County began in July 2009 and was 40 percent complete by early
September. This project is expected to be finished by November 2009.
Second, the transportation enhancement project in Chester County to
construct and upgrade over 1,000 access ramps for persons with
disabilities began in May 2009 and was estimated to have about 29
percent of the design and 21 percent of the construction work complete
by early September. This project is expected to be finished in May 2010.
Transit Capital Assistance Program Grants:
* DOT's Federal Transit Administration (FTA) apportioned $327.5 million
in Recovery Act Transit Capital Assistance formula grant funds to
urbanized and nonurbanized areas in Pennsylvania. As of September 1,
2009, $257.5 million had been obligated for urbanized areas, and $30.2
million had been obligated for nonurbanized areas.
* Three transit agencies we visited plan to use their Recovery Act
funds for rehabilitating rail lines and stations in Philadelphia,
completing a tunnel to extend rail service from downtown Pittsburgh to
its North Shore area, and constructing a transit center in Butler,
Pennsylvania, that would serve local bus lines. In Pittsburgh and
Butler, Recovery Act funds helped sustain projects that otherwise would
have been suspended or scaled down significantly. In Philadelphia,
favorable bids on its original Recovery Act projects allowed for six
additional Recovery Act projects.
* As of September 1, 2009, FTA concluded that the 50 percent obligation
requirement had been met for Pennsylvania and its urbanized areas.
Weatherization Assistance Program:
* The U.S. Department of Energy (DOE) allocated about $253 million in
Recovery Act weatherization funding to Pennsylvania for a 3-year
period. DOE provided Pennsylvania with its initial 10 percent
allocation (about $25 million) on March 27, 2009, and another 40
percent allocation (about $101 million) when DOE approved
Pennsylvania's weatherization plan on August 25, 2009.
* As of September 1, 2009, Pennsylvania had not obligated any of its
weatherization funds but was working to issue contracts to 43 local
weatherization agencies. Pennsylvania expects to begin work in November
2009 to weatherize 29,700 homes and create an estimated 940 jobs.
WIA Youth Program Summer Employment Activities:
* The U.S. Department of Labor (Labor) allotted about $40.6 million to
Pennsylvania in WIA Youth Program Recovery Act funds. Pennsylvania has
allocated $34.6 million to local workforce boards, and as of September
1, 2009, the local workforce boards had expended $11 million.
* Pennsylvania enrolled more than 8,800 youth, exceeding its enrollment
goal of 8,700. The two workforce investment boards we visited provided
employment activities that combined work readiness activities with
academic learning components. For example, one university-affiliated
contractor in Philadelphia ran an urban nutrition employment activity
at local high school sites with an educational component that required
participants to submit at least three applications to institutions of
higher education (IHE).
* While Pennsylvania exceeded its enrollment plans, local workforce
investment areas encountered challenges implementing the summer youth
employment activities. For example, in Philadelphia, the contractor
stated that the work start dates of approximately 25 percent of youth
participants were delayed because of delays in the enrollment paperwork
process.
Updated Funding Information on Public Housing Capital Funding:
* The U.S. Department of Housing and Urban Development (HUD) has
allocated about $212 million in Recovery Act funding to 82 public
housing agencies in Pennsylvania. Based on information available as of
September 5, 2009, about $65.0 million (31 percent) had been obligated
by 68 of those agencies.
Reporting and Assessing the Effects of Spending:
* Pennsylvania's Accountability Office plans to centralize submission
of quarterly recipient reporting for Recovery Act funds received by
Pennsylvania state agencies. State program agencies receiving Recovery
Act funds--the direct recipients--are responsible for collecting and
entering any additional data for their subrecipients and vendors into
the centralized Recovery Act data warehouse. The Accountability Office
is developing internal controls and a quality review process to help
ensure that the data are complete and accurate before submission.
Pennsylvania's Accountability Office expects to file at least 40
recipient reports for the October 10, 2009, deadline.
* Looking beyond the recipient reporting on jobs and project status,
Pennsylvania's Accountability Office is developing a performance
measure framework to track results of Pennsylvania's Recovery Act
spending and report meaningful outcomes to the public. After the first
round of recipient reporting is complete in October, Pennsylvania's
Accountability Office will continue work to finalize the performance
measures and begin collecting data for publication on Pennsylvania's
recovery Web site, [hyperlink, http://www.recovery.pa.gov].
Pennsylvania Budget Impasse Continues to Delay Release of Some Recovery
Act Funds:
Pennsylvania ended its fiscal year 2008-09 with a projected budget gap
of more than $1.9 billion, and lower-than-expected revenue collections
complicated efforts to balance the budget. The Pennsylvania Department
of Revenue reported that the shortfall in general fund revenue for
fiscal year 2008-09 was $3.3 billion, or 11.3 percent less than
estimated as of June 30, 2009. As we reported in July, Pennsylvania's
Office of the Budget does not expect revenues to grow in fiscal year
2009-10, which may contribute to a budget gap--where anticipated
expenditures are greater than anticipated revenues--in fiscal year 2009-
10.[Footnote 2] According to August 2009 revenue collection data
reported by the Pennsylvania Department of Revenue, general fund
revenues for the first 2 months of fiscal year 2009-10 were $3.3
billion, or 0.7 percent less than estimated.
While Recovery Act funds are expected to help Pennsylvania narrow its
budget gap and to minimize reductions in essential services and the
need for state tax increases, the General Assembly and the Governor
have not agreed on a final budget for fiscal year 2009-10, which began
July 1, 2009. In June 2009, the Governor revised his proposed budget
for fiscal year 2009-10, including $26.4 billion in general fund
spending. As we reported in July, the Governor also proposed
temporarily increasing the state's personal income tax rate from 3.07
to 3.57. However, the state Senate passed an appropriations bill--
Senate Bill 850[Footnote 3]--that differed substantially from the
Governor's proposed budget. The Governor's proposed budget and the
Senate bill differed on issues such as targeted tax increases, the use
of Pennsylvania's Rainy Day Fund,[Footnote 4] and education funding
(discussed below). Without a budget in place on July 1, Pennsylvania's
state government did not have spending authority. Although state
offices remained open, state employees faced delays in receiving their
paychecks during the budget impasse.[Footnote 5]
On August 5, 2009, the Governor signed Senate Bill 850 to provide a
"stopgap" budget measure to pay state employees and fund health and
public safety programs. According to the Governor's letter to the state
Senate, the Senate bill was not a constitutionally balanced budget and
would have led to a $1.7 billion shortfall.[Footnote 6] The Governor
used line item veto authority to veto all but $11 billion in
appropriations mainly for state employees' pay, as well as basic health
and safety services. The $12.9 billion in appropriations vetoed
included state basic and higher education funding, subsidized day care,
mental health and other health services, and county court
reimbursement.[Footnote 7] The Governor said that he could not approve
the Senate bill in its entirety because he viewed the funding for
education and other programs as insufficient. As of September 12, 2009,
the General Assembly had not passed and the Governor had not signed a
final budget for fiscal year 2009-10, which began on July 1.
Pennsylvania has used some Recovery Act funds to help narrow its budget
gap. The use of Recovery Act funds must comply with specific program
requirements but also, in some cases, enables states to free up state
funds to address their projected budget shortfalls. Pennsylvania plans
to use Recovery Act funds to a greater extent in fiscal year 2009-10
than they were used during fiscal year 2008-09. In fiscal year 2008-09,
Pennsylvania used $957 million in Recovery Act funds to help stabilize
its budget.[Footnote 8]
However, the extent to which Recovery Act funds will contribute to
Pennsylvania's fiscal stability is difficult to assess at this time
because Pennsylvania has not appropriated all federal Recovery Act
funds for state use. Under Pennsylvania law, federal funds must, in
general, be appropriated by the General Assembly.[Footnote 9] According
to analysis by Pennsylvania's Office of the Budget, the August stopgap
budget measure appropriated $3.3 billion in Recovery Act funding. Table
1 shows the amounts appropriated for the Recovery Act programs we
reviewed for this report. Highway infrastructure investment funds of
$1.026 billion did not require separate appropriation, according to
state budget officials, and Pennsylvania has been spending those funds
since last spring. Some Recovery Act programs, such as the competitive
grants that Pennsylvania has applied for, were not included in the
August stopgap budget measure and thus do not have spending authority
in place to move forward as Pennsylvania receives the federal funds.
Likewise, some Recovery Act programs received only partial
appropriations, and as discussed further below, the Governor vetoed the
SFSF appropriations.
Table 1: State Appropriations for Selected Recovery Act Programs in
Pennsylvania's August Stopgap Budget (Dollars in millions):
Highway Infrastructure Investment funds;
Amount available under the Recovery Act: $1,026.4;
Amount appropriated in the state stopgap budget: Not applicable[A].
Transit Capital Assistance grants for nonurbanized areas;
Amount available under the Recovery Act: $30.2;
Amount appropriated in the state stopgap budget: $30.0.
Weatherization Assistance Program;
Amount available under the Recovery Act: $252.8;
Amount appropriated in the state stopgap budget: $200.5.
WIA Youth Program[B];
Amount available under the Recovery Act: $40.6;
Amount appropriated in the state stopgap budget: $37.0.
Three education programs[C];
Amount available under the Recovery Act: $2,756.6;
Amount appropriated in the state stopgap budget: $427.9.
Total for selected programs;
Amount available under the Recovery Act: $4,106.6;
Amount appropriated in the state stopgap budget: $695.4.
Source: GAO analysis of Pennsylvania Office of the Budget data.
[A] Federal Highway Infrastructure funding does not require separate
appropriation, according to the Pennsylvania Office of the Budget.
[B] Pennsylvania also appropriated $15 million for statewide WIA
activities and administration, $16 million for WIA adult employment and
training, and $30 million for WIA dislocated worker activities.
[C] Includes SFSF and Recovery Act funds under ESEA Title I, Part A,
and IDEA Parts B and C.
[End of table]
Even as the Pennsylvania General Assembly and Governor debate how to
incorporate Recovery Act funds into the fiscal year 2009-10 budget,
budget officials are looking ahead for ways to balance future budgets
when this temporary funding ends. As we reported in July, budget
officials indicated that they are taking several steps to prepare for
when Recovery Act funds are phased out, including using a multiyear
budget planning process, emphasizing onetime uses of Recovery Act funds
where possible, and requiring agencies to use limited-term positions
when hiring using Recovery Act funds.[Footnote 10] State budget
officials acknowledged that Pennsylvania will need to make additional
cuts or consider revenue enhancements depending on how quickly the
economy improves. According to Pennsylvania's Secretary of the Budget,
if $1.7 billion in onetime nonrecurring revenues, such as the Rainy Day
Fund, are used to bridge the funding gap in fiscal year 2009-10, there
would still be about a $1.7 billion shortfall at the end of the fiscal
year. Without the addition of any recurring revenues, the projected
shortfall would grow to more than $4 billion at the end of fiscal year
2010-11. As of August 2009, the three nationally recognized bond rating
agencies have observed fiscal pressures, such as increased pension
contributions beginning in 2013 and the need to replace the temporary
Recovery Act funding, that could put downward pressure on
Pennsylvania's bond rating. One rating agency said that Pennsylvania's
rating outlook is negative if the budget continues to rely on
nonrecurring revenue sources, such as the Rainy Day Fund and Recovery
Act funding, and does not return to structural budget balance.
Pennsylvania Plans to Use Some Recovery Act Funds for Administrative
Costs:
Following OMB's guidance on central administrative costs, Pennsylvania
plans to bill central oversight costs to each Recovery Act award based
on the ratio of that award to total Recovery Act funds received by the
state. Central administrative costs will consist of $500,000 for the
Accountability Office, $1,750,000 for creating a reporting tool, and
$468,000 for Pennsylvania's Comptroller Office to perform risk
assessments and audits of high-risk Recovery Act-funded programs. Under
the proposed billing methodology, estimated costs will be billed to
Recovery Act-funded programs at the beginning of the fiscal year,
actual personnel and operating costs will be tracked during the fiscal
year, and the estimated and actual costs will be reconciled at the end
of the fiscal year. Any difference will be used to offset the costs
charged to that award in the subsequent fiscal year.
Pennsylvania may consider exempting certain Recovery Act programs and
funding, such as the increased Federal Medical Assistance Percentage,
which do not require quarterly recipient reporting under Section 1512
of the Recovery Act, from the allocation base. Also, where a Recovery
Act-funded program does not receive federal funding for administrative
costs, Pennsylvania may charge that cost share to other available
federal funding sources. Pennsylvania submitted its proposed billing
methodology to the U.S. Department of Health and Human Service's
Division of Cost Allocation for approval on August 28, 2009. According
to the Secretary of the Budget, Pennsylvania received preliminary
verbal approval for its proposed cost allocation plan on September 4,
2009.
Funding for Education Will Remain Uncertain until Pennsylvania Adopts
Its Final Budget:
As part of our review of Recovery Act education funding, we looked at
three programs administered by Education: SFSF; Title I, Part A, of
ESEA; and IDEA, Parts B and C. We obtained updated budget and spending
data from Pennsylvania's Office of the Budget.
As we reported in July, Pennsylvania's current budget debate centers on
the state basic education funding level, and according to state
officials, local school districts are unable to spend Recovery Act
funds until they are appropriated in the Pennsylvania budget.[Footnote
11] For fiscal year 2009-10, the Governor's application for SFSF funds
proposed to maintain state funding for elementary and secondary
education at the fiscal year 2008-09 level of about $5.2 billion and
use $418 million in education stabilization funds for elementary and
secondary education. In contrast, Senate Bill 850 proposed to reduce
appropriations for state basic education funding for school districts
to the fiscal year 2005-06 level of about $4.5 billion and use $729
million of Recovery Act funds for basic education.[Footnote 12] As we
reported in July, school districts would have received the same funding
for 2009-10 school year that they had during 2008-09 school year under
Senate Bill 850,[Footnote 13] whereas school districts would have
received an increase in funding under the Governor's budget. In the
stopgap budget measure signed on August 5, 2009, the Governor vetoed
funding for state basic education--the largest state appropriation for
local school districts. Without a final budget in place to provide
spending authority, the Pennsylvania Department of Education did not
make its monthly state basic education payments to school districts in
July and August.[Footnote 14] School district officials we interviewed
in the past reported that if the budget impasse continues into the
fall, they would need to borrow funds to pay bills or shut down. The
budget impasse has also affected funding for higher education. The
Pennsylvania Higher Education Assistance Agency does not know the
amount that will be available for state grant awards for college
students and is unable to finalize and disburse college tuition grants
for the 2009-10 academic year.
School Districts Remain Uncertain of State Fiscal Stabilization Funds
Because of the State Budget Impasse:
The Recovery Act created SFSF in part to help state and local
governments stabilize their budgets by minimizing budgetary cuts in
education and other essential government services, such as public
safety. Stabilization funds for education distributed under the
Recovery Act must be used to alleviate shortfalls in state support for
education to school districts and public IHEs. The initial award of
SFSF funding required each state to submit an application to Education
that provides several assurances, including that the state will meet
maintenance-of-effort requirements (or it will be able to comply with
waiver provisions) and that it will implement strategies to meet
certain educational requirements, such as increasing teacher
effectiveness, addressing inequities in the distribution of highly
qualified teachers, and improving the quality of state academic
standards and assessments. In addition, states were required to make
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. States must
allocate 81.8 percent of their SFSF funds to support education (these
funds are referred to as education stabilization funds), and must use
the remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). After maintaining state support for
education at 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 school districts or
public IHEs. When distributing these funds to school districts, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, school
districts maintain broad discretion in how they can use stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
As of September 1, 2009, Pennsylvania had not yet received approval for
the initial allocation of $1.3 billion of its total $1.9 billion
allocation of SFSF funds. Pennsylvania submitted an SFSF application on
June 26, 2009. This application excluded four IHEs that per the
Governor, are not under state control and, therefore, would not be
eligible to receive SFSF money.[Footnote 15] However, under
Pennsylvania's preliminary SFSF application in April 2009, these four
institutions would have been awarded $41.9 million. The SFSF guidance
requires states to use SFSF money to restore state spending for public
IHEs to the greater of fiscal year 2008 or 2009 levels of support. The
guidance further notes that a state may not choose to restore support
only for elementary and secondary education or only for public IHEs.
Education has directed Pennsylvania to resubmit its SFSF application
and include these four institutions as IHEs. Pennsylvania will resubmit
its application once a final fiscal year 2009-10 budget is in place.
In the stopgap budget measure signed on August 5, 2009, the Governor
vetoed the SFSF amounts included in Senate Bill 850, because the
General Assembly and the Governor did not agree on how to distribute
the funds. As we reported in July, Pennsylvania Department of Education
officials were uncertain of the funding levels for SFSF Recovery Act
funds given the budget uncertainty.
School Districts Received Partial Spending Authority for ESEA Title I,
Part A Funds:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through Title I, Part A of ESEA. The Recovery Act
requires these additional funds to be distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families living
in poverty. In using the funds, LEAs are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 16] Education is
advising LEAs to use the funds in ways that will build the agencies'
long-term capacity to serve disadvantaged youth, such as through
providing professional development to teachers. Education made the
first half of states' Recovery Act ESEA Title I, Part A funding
available on April 1, 2009, and announced on September 4, 2009, that it
had made the second half available.
Education has awarded Pennsylvania its total allocation of about $400.6
million in Recovery Act funds. Based on information available as of
September 3, 2009, Pennsylvania has allocated $368 million to LEAs.
However, the stopgap budget measure signed on August 5, 2009, provided
authority to spend only $199.4 million. Pennsylvania received its ESEA
Title I, Part A allocation and expended $23 million as of September 3,
2009.
Recovery Act IDEA, Parts B and C, Funding Received Partial
Appropriations:
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of IDEA, the major federal statute that supports the
provisions of early intervention and special education and related
services for infants, toddlers, children, and youth with disabilities.
Part B funds programs that ensure that preschool and school-aged
children with disabilities have access to a free and appropriate public
education and is divided into two separate grants--Part B grants to
states (for school-age children) and Part B preschool grants (Section
619). Part C funds programs that provide early intervention and related
services for infants and toddlers with disabilities--or at risk of
developing a disability--and their families. Education made the first
half of states' Recovery Act IDEA funding available to state agencies
on April 1, 2009, and announced on September 4, 2009, that it had made
the second half available.
For IDEA Parts B and C, Education has also awarded Pennsylvania its
total allocation of $456 million in Recovery Act funds. Pennsylvania
had allocated $267 million to LEAs, but the stopgap budget measure
provided only $228.5 million in spending authority. Pennsylvania
received its IDEA allocation but no funds have been expended as of
September 3, 2009.
FHWA Has Obligated for Pennsylvania 85 Percent of Recovery Act Funds
Primarily for Roadway Resurfacing and Bridges:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program, and for other
eligible surface transportation projects. The act requires that 30
percent of these funds be suballocated, primarily based on population,
for metropolitan, regional, and local use. Highway funds are
apportioned to the states through existing federal-aid highway program
mechanisms, and states must follow the requirements of the existing
program, including planning, environmental review, contracting, and
other requirements. However, the federal fund share of highway
infrastructure investment projects under the Recovery Act is up to 100
percent, while the federal share under the existing Federal-Aid Highway
Program is usually 80 percent.
As we previously reported, $1.026 billion was apportioned to
Pennsylvania for highway infrastructure and other eligible projects. As
of September 1, 2009, $874.9 million (85.2 percent) had been obligated.
DOT has interpreted the "obligation of funds" to mean the federal
government's contractual commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement. As of September 1, 2009, $50.5 million had
been reimbursed by FHWA. States request reimbursement from FHWA as the
states make payments to contractors working on approved projects.
Pennsylvania initially planned to fund 241 projects from its
apportionment.[Footnote 17]
Pennsylvania has awarded highway and bridge contracts and started work.
As of August 31, 2009, Pennsylvania had received bids for 245 projects
and awarded contracts for 219 projects representing about $604 million.
Of these, 212 projects representing $503 million were under way--that
is, a Notice to Proceed had been issued, which authorizes a contractor
to begin work. According to a Pennsylvania Department of Transportation
(PennDOT) official, the contracts would be "let"--that is, bids opened
or received--for the remaining projects by December 17, 2009. As we
previously reported, PennDOT officials expect all work to be completed
on Recovery Act projects within 3 years of the date the Recovery Act
was enacted.
We reported in July 2009 that bids for Recovery Act highway and bridge
projects were 14.6 percent less than original project cost estimates.
According to data from PennDOT, as of August 31, 2009, the total amount
across all bids received was 12 percent (or about $104 million) less
than original state estimates of total project costs. As a result of
the favorable bidding climate, on July 23, 2009, the Governor of
Pennsylvania certified to the U.S. Secretary of Transportation an
additional 52 Recovery Act projects and the modification of 4 existing
Recovery Act projects.[Footnote 18] The additional projects totaled
$134.8 million in Recovery Act funds and the modified projects about
$69.2 million. The certification letter stated that the addition of
these projects did not change Pennsylvania's Recovery Act apportionment
of $1.026 billion for highway infrastructure and other eligible
projects but rather were covered by the apportionment. With the
addition of these projects, Pennsylvania now plans to fund 293 projects
with its Recovery Act apportionment. PennDOT officials told us that
they track bid savings in each area of Pennsylvania represented by a
metropolitan or rural planning organization and that additional
projects funded by these savings would be selected by these
organizations. The additional projects will be located in 35 of
Pennsylvania's 67 counties, including 19 economically distressed areas
and 16 non-economically distressed areas. Recovery Act funds for the
projects range from $32.8 million for a highway reconstruction project
in Allegheny County to about $136,000 for a transportation enhancement
project in Schuylkill County.[Footnote 19]
Pennsylvania Has Primarily Used Recovery Act Funds for Pavement
Improvements and Bridge Improvements:
Pennsylvania selected highway and bridge projects that could be started
quickly and focused on roadway pavement needs and bridge deficiencies.
FHWA data show that as of September 1, 2009, most Recovery Act funds
for Pennsylvania have been obligated for pavement improvements and
bridges; lesser amounts have been obligated for other projects,
including safety and traffic management and transportation enhancements
(see figure 1). Specifically, $353.8 million of the $874.9 million
obligated was for pavement improvement projects and $251.0 million was
obligated for bridge improvements or replacements. The obligation of
Pennsylvania's Recovery Act funds for pavement improvement projects is
similar to the share of spending nationwide for this type of project--
40 percent for Pennsylvania compared with 48 percent nationwide. One
exception was pavement widening, for which FHWA has only obligated 1
percent of Pennsylvania's highway apportionment compared with 16
percent nationwide. In contrast, FHWA has obligated a larger share of
Pennsylvania's Recovery Act funds to bridge projects--about 29 percent
for Pennsylvania compared with 10 percent nationwide.[Footnote 20] As
we reported in July 2009, a significant percentage of the state's
bridges (we reported about 26 percent in 2008) are structurally
deficient--a reflection of the state's consistently poor bridge
conditions.[Footnote 21] Pennsylvania's initial Recovery Act program
planned to address 400 bridges, about 100 of which are structurally
deficient.
Figure 1: Highway Obligations for Pennsylvania by Project Improvement
Type as of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (42 percent, $363.4 million):
Pavement improvement ($353.8 million): 40%;
Pavement widening ($9.7 million): 1%.
Bridge projects total (30 percent, $258.2 million):
Bridge improvement ($219.6 million): 25%;
Bridge replacement ($31.4 million): 4%;
New bridge construction ($7.2 million): 1%.
Other (29 percent, $253.2 million):
Other ($253.2 million): 29%.
Source: GAO analysis of FHWA data.
Note: Totals may not add due to rounding. "Other" includes safety
projects, such as improving safety at railroad grade crossings, and
transportation enhancement projects, such as pedestrian and bicycle
facilities, engineering, and right-of-way purchases.
[End of figure]
Both Recovery Act projects we reviewed in our July 2009 report (a
bridge project in Bedford County and a transportation enhancement
project in Chester County) have begun. First, the bridge project in
Bedford County--an economically distressed area--consists of removing
an existing overlay from bridge beams on two structures and replacing
it with a concrete deck and paving. This $250,000 project began in May
2009 and is expected to be completed in November 2009. PennDOT
officials estimated that as of early September, this project was 40
percent complete. Second, a $4.4 million transportation enhancement
project to construct and upgrade over 1,000 access ramps for people
with disabilities in Chester County--a non-economically distressed
area--began in April 2009 and is expected to be completed in May 2010.
PennDOT officials estimated that as of early September, about 29
percent of the design work and 21 percent of the construction work for
this project was complete. In its August 2009 report to FHWA (with data
as of July 2009), PennDOT showed that 14 jobs had been created or
sustained for the Bedford project and 41 jobs were created or sustained
for the Chester project.
Pennsylvania Uses Existing Procedures to Solicit Bids for Recovery Act
Highway Contracts and Monitor Contractor Work:
PennDOT officials said that they are using existing procedures to
solicit bids for contracts for Recovery Act highway and bridge projects
and that their contracting must comply with federal acquisition
requirements. PennDOT officials told us that state law requires that
contracts be competitively bid and that the lowest responsible bidder
be selected unless there are extenuating circumstances. According to
PennDOT officials, all Recovery Act highway contracts have been
competitively bid, and bidding contractors were subject to
prequalification. This includes determining both financial and
nonfinancial responsibility and checking suspension and debarment
lists. Officials stated that bidders that do not meet this criterion
are not allowed to win bids, even if they are the lowest price bidders.
Of the two highway projects that we reviewed in depth, both the Bedford
bridge project and the Chester transportation enhancement project were
competitively bid, and PennDOT officials said that the bidders were
prequalified. PennDOT officials told us that the contractors were
selected based on the lowest responsible bids. These officials also
said that most PennDOT contracts awarded--including those for the
projects we reviewed--are contracts where a fixed price is assigned to
individual items to be supplied by a contractor (unit price). According
to PennDOT officials, the unit price is fixed but the quantities to be
supplied can be adjusted up or down by 25 percent before negotiations
are required. The 25 percent allowance recognizes that field conditions
may change after a contract is awarded, but significant changes to a
contract may require the use of a change order. PennDOT officials said
that in general, federal highway contracts require the use of Davis-
Bacon Act wages. The general exception is for rural connectors to
federal-aid highways where state prevailing wages are paid; however,
PennDOT officials said this exception does not apply to Recovery Act
projects. According to PennDOT, both the Bedford and Chester projects
used Davis-Bacon Act wages. Contractors were also notified of Recovery
Act reporting requirements when bids were solicited for contracts.
PennDOT will also use its existing procedures to monitor Recovery Act
contractor work and help ensure that quality goods and services are
received. The procedures include the following:
* Management oversight and controls. PennDOT's district offices are
heavily involved with highway projects, including assigning a PennDOT
assistant construction engineer to each project to provide oversight of
construction work. PennDOT is organized into 11 engineering districts.
Both the Bedford and Chester projects had assistant construction
engineers assigned, each with 30 years experience and each with various
certifications in concrete and other construction activities from
national associations. PennDOT's Bureau of Construction and Materials
also plays a role in project management and oversight. PennDOT
officials said that this bureau is responsible for the overall
management and oversight of highway construction projects and ensures
the quality of material used on construction projects through various
materials tests and certifications. Finally, PennDOT officials said
that the department uses an automated system to handle all aspects of
contracting, including advertising and accepting bids and financial and
nonfinancial contract management and reporting. A PennDOT official said
that this system is a database that can be used to generate a number of
reports on projects.
* Inspectors to monitor contractor performance. PennDOT assigns an
inspector-in-charge to each construction project who provides day-to-
day inspection of contractor work; such inspectors were assigned to the
two Recovery Act projects we reviewed. PennDOT officials said that
inspectors-in-charge maintain daily diaries of such things as work
performed, on-site workers, and wages paid. PennDOT officials said that
these diaries are used to determine how much contractors get paid and
to spot-check various contractor reports, including the reasonableness
of Recovery Act reports on jobs, work hours, and payroll. In some
instances, PennDOT will also contract for consultants to assist with
inspections. PennDOT officials said that the Chester project was using
one or two contracted consultant inspectors and that they work for the
PennDOT inspector-in-charge.[Footnote 22]
* Reports, meetings, and monitoring of project metrics. PennDOT
officials said that there are weekly reports it prepares on project
status and progress as well as weekly meetings with FHWA and
contractors to discuss completed work and contractor problems. PennDOT
district officials also said that there are various metrics being used
to monitor the Bedford and Chester projects we reviewed; for example,
PennDOT District 9 officials told us that they monitor various cost
metrics for the Bedford project as well as compliance with
disadvantaged business enterprise (DBE) goals.[Footnote 23] PennDOT
District 6 officials said that they monitor, among other things, the
amount of work done compared with the dollars spent on the Chester
project.
Recovery Act Highway Reporting Has Begun, and PennDOT Will Submit
Section 1512 Recipient Reports through Pennsylvania's Accountability
Office:
The Recovery Act requires various reports regarding the use of funds
provided. Section 1512[Footnote 24] in particular requires that any
entity that receives funds appropriated by the Recovery Act directly
from the federal government (whether through grant, loan, or contract)
is to provide regular recipient reports. The first Section 1512 report
is due October 10, 2009. FHWA has also established reporting
requirements, including monthly reports on project status and
employment. A PennDOT official told us that Pennsylvania's
Accountability Office will submit the recipient reports for PennDOT and
all other state agencies by the 10th day after each reporting quarter;
this centralized reporting is discussed further below. In addition,
PennDOT plans to report directly to FHWA as part of the federal
reporting requirement for Recovery Act funding. PennDOT noted that FHWA
has built a database to collect Section 1512 information and FHWA will
collect this information from states. However, states are still
responsible for submitting their own Section 1512 reports.
As we reported in July 2009, PennDOT has begun reporting to FHWA on the
number of people working on Recovery Act projects and hours worked. In
March 2009, PennDOT established policies and procedures for prime
contractors and consultants to report monthly, by project, the number
of employees, number of work hours, and the amount of payroll.[Footnote
25] PennDOT uses a Monthly Employment Report to collect the required
data from its contractors and consultants. PennDOT officials told us
that project inspectors in the district offices with daily contact with
contractors review the reports for reasonableness, and PennDOT's Bureau
of Construction and Materials compiles the reports for submission to
FHWA.
Pennsylvania's Transit Capital Assistance Funds Are Being Obligated,
and Transit Agencies Are Using Recovery Act Funds to Refurbish or
Construct Facilities and Extend Service:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through three existing FTA grant programs,
including the Transit Capital Assistance Program.[Footnote 26] The
majority of the public transit funds--$6.9 billion (82 percent)--was
apportioned for the Transit Capital Assistance Program, with $6.0
billion designated for the urbanized area formula grant program and
$766 million designated for the nonurbanized area formula grant
program.[Footnote 27] Under the urbanized area formula grant program,
Recovery Act funds were apportioned to urbanized areas--which in some
cases include a metropolitan area that spans multiple states--
throughout the country according to existing program formulas. Recovery
Act funds were also apportioned to states under the nonurbanized area
formula grant program using the program's existing formula. Transit
Capital Assistance Program funds may be used for such activities as
vehicle replacements, facilities renovation or construction, preventive
maintenance, and paratransit services. Up to 10 percent of apportioned
Recovery Act funds may also be used for operating expenses.[Footnote
28] Under the Recovery Act, the maximum federal fund share for projects
under the Transit Capital Assistance Program is 100 percent.[Footnote
29]
As they work through the state and regional transportation planning
process, designated recipients of the apportioned funds--typically
public transit agencies and metropolitan planning organizations (MPO)--
develop a list of transit projects that project sponsors (typically
transit agencies) submit to FTA for Recovery Act funding.[Footnote 30]
FTA reviews the project sponsors' grant applications to ensure that
projects meet eligibility requirements and then obligates Recovery Act
funds by approving the grant applications. Project sponsors must follow
the requirements of the existing programs, which include ensuring that
the projects funded meet all regulations and guidance pertaining to the
Americans with Disabilities Act, pay a prevailing wage in accordance
with federal Davis-Bacon Act requirements, and comply with goals to
ensure that disadvantaged businesses are not discriminated against in
the awarding of contracts.
Transit Agencies in Pennsylvania Plan to Use Funds for New and Ongoing
Projects to Refurbish or Construct Facilities and Extend Service:
In March 2009, $327.5 million in Transit Capital Assistance Recovery
Act funds were apportioned for transit projects to urbanized and
nonurbanized areas in Pennsylvania. As of September 1, 2009, $257.5
million had been obligated for urbanized areas, and $30.2 million had
been obligated for nonurbanized areas.[Footnote 31] Of the $237.8
million in Recovery Act funds apportioned to the large urbanized areas
of Philadelphia and Pittsburgh,[Footnote 32] $206.4 million had been
obligated as of September 1, 2009. The Southeastern Pennsylvania
Transportation Authority (SEPTA) in Philadelphia was apportioned $125.2
million[Footnote 33] and the Port Authority of Allegheny County (Port
Authority) in Pittsburgh was apportioned $44.0 million.[Footnote 34] As
of September 1, 2009, $112.8 million of SEPTA's apportionment and all
of Port Authority's apportionment had been obligated by FTA. PennDOT
was apportioned $30.2 million for intercity bus projects and transit
projects in nonurbanized areas, which was obligated by FTA in July
2009.[Footnote 35]
We met with PennDOT officials and visited three transit agencies--SEPTA
in Philadelphia, Port Authority in Pittsburgh, and Butler Transit
Authority in Butler, Pennsylvania. We selected SEPTA and Port Authority
because they are in the only two urbanized areas in Pennsylvania with
populations of more than 1 million, and they received the largest
Transit Capital Assistance Program apportionments in the state, with
about 51.7 percent of Pennsylvania's total transit apportionment. We
chose the Butler Transit Authority because its $5.3 million allocation
was one of the largest funding allocations among the transit agencies
in nonurbanized areas receiving Recovery Act money through PennDOT. We
also met with officials from the two MPOs related to the three transit
agencies.
Transit agency, MPO, and PennDOT officials we spoke with told us that
they selected projects for Recovery Act funding based on key criteria,
including readiness for construction and potential for job creation or
retention. In addition, SEPTA selected projects to serve a variety of
locations and transportation modes, and also projects that would reduce
long-term maintenance and operating costs.
SEPTA has a Transit Capital Assistance grant approved by FTA totaling
$112.8 million, with which SEPTA plans to fund all or part of 21
projects.[Footnote 36] For the most part, SEPTA will use its Recovery
Act funds for "state of good repair" projects,[Footnote 37] including
right-of-way and track maintenance, communication and signal
replacement, and station work.[Footnote 38] For example, Recovery Act
funds are paying for the rehabilitation of the structure of the
Tulpehocken Station building. (See figure 2.) Another project is the
rehabilitation of a rail bridge on SEPTA's Lansdale Regional Line. (See
figure 3.) Also included among SEPTA's Recovery Act projects is the
purchase of 40 additional hybrid buses.
Figure 2: Holes in the Roof of SEPTA's Tulpehocken Station That Will Be
Repaired Using Recovery Act Transit Capital Assistance Funds:
[Refer to PDF for image: photograph]
Source: Southeastern Pennsylvania Transportation Authority.
[End of figure]
Figure 3: Rail Bridge on SEPTA's Lansdale Regional Rail Line That Will
Be Rehabilitated Using Transit Capital Assistance Recovery Act Funding:
[Refer to PDF for image: photograph]
Source: Southeastern Pennsylvania Transportation Authority.
[End of figure]
Port Authority will use all of its Transit Capital Assistance (Section
5307) Recovery Act allocation of $44.0 million to continue work on its
North Shore Connector.[Footnote 39] The project will extend an existing
light rail line from a downtown Pittsburgh station to two new stations
on Pittsburgh's North Shore area through new twin tunnels below the
Allegheny River. (See figure 4.) According to Port Authority officials,
Recovery Act money will pay for rail installation, station
construction, elevators, and escalators. (See figure 5.) The North
Shore Connector project broke ground in October 2006 and as of August
20, 2009, the project had received $389.7 million of federal, state,
and local funding, with a Full Funding Agreement with FTA for $435
million. However, according to Port Authority officials, due primarily
to cost growth in construction materials and construction bid prices,
the project's total estimated cost was revised to $538.8 million in
early 2009, with a budget gap of $103.8 million. Without additional
funds, Port Authority faced the decision either to defer construction
until future funding could be identified or to cease construction
altogether. With the Recovery Act grant money approved, Port Authority
was able to continue the North Shore Connector project, and Port
Authority officials stated that the Recovery Act funding helped retain
approximately 600 direct jobs. As of September 2009, Port Authority
officials expected the entire project, including all Recovery Act work,
to be completed by March 2012. According to its estimates, Port
Authority will need $41.8 million to complete the project, which
officials expect to receive through county, state, and federal funding
streams in coming years.
Figure 4: Completed Tunnel beneath Allegheny River Awaiting Rail for
Port Authority's North Shore Connector Project Which Will Funded by
Recovery Act Money:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
Figure 5: Steel Girders for the Port Authority's North Shore Connector
Project, Near New Allegheny Avenue Station, Which Will Be Funded by
Recovery Act Money:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
For its nonurbanized Transit Capital Assistance grant of $30.2 million,
PennDOT selected projects in 15 transit agencies in nonurbanized areas
for Recovery Act funding based on such criteria as projects' readiness
and potential for creating jobs. One of these projects is the
construction of a new intermodal transit center in Butler,
Pennsylvania, which will serve city and county bus routes. The Butler
Transit Authority received $5.3 million of PennDOT's nonurbanized FTA
Section 5311 grant to fund construction of its new center, which will
include new administrative and maintenance facilities and was designed
for expandability to meet future demand. PennDOT officials told us that
without Recovery Act funding, Butler's project would not have been able
to proceed without being scaled down significantly. As of September
2009, Butler Transit Authority was soliciting bids for the project,
with work expected to start in November or December 2009 and to be
completed late 2010.
FTA Concluded That the Recovery Act Requirement That 50 Percent of
Funds Be Obligated by September 1, 2009, Has Been Met for Pennsylvania
and its Urbanized Areas, and Bid Savings Have Allowed Additional
Projects to Be Added to Some Grants:
The Recovery Act requires that 50 percent of Recovery Act transit funds
apportioned to urbanized areas or states be obligated within 180 days
of apportionment (or before September 1, 2009) and the remainder within
1 year.[Footnote 40] As of September 1, 2009, FTA concluded that the 50
percent obligation requirement had been met for Pennsylvania and its
urbanized areas. FTA awarded Recovery Act grants to SEPTA and Port
Authority in May 2009, and to PennDOT for nonurbanized areas in July
2009.
Agencies receiving Recovery Act Transit Capital Assistance
apportionments submitted applications to FTA for the funding by
consolidating multiple projects into one grant application for each
type of funding.[Footnote 41] According to FTA, if the list of projects
or the specific amount budgeted for projects within an approved grant
changes, a transit agency can submit a no-cost application to amend an
approved grant, as long as the total amount remains unchanged. For
example, SEPTA officials told us that bids for the original 26 projects
in their initially approved grants were awarded at around 15 percent
lower than estimates, for a savings of approximately $20.2 million in
Transit Capital Assistance funding. As a result, in late August 2009,
FTA approved SEPTA's applications to add 6 additional projects to its
grants to be funded by the $20.2 million.[Footnote 42] The additional
projects included such things as station building rehabilitation and
electrical substation overhaul.
PennDOT, SEPTA, Port Authority, and Butler Transit Authority Will Use a
Mix of Existing and Modified Procedures to Track Recovery Act Funds and
Manage Projects:
PennDOT, SEPTA, Port Authority, and Butler Transit Authority reported
that they will track Recovery Act funds and manage Recovery Act
projects by building upon existing internal procedures. Officials told
us that their accounting systems have unique budget codes for each
source of funding, and that these codes are being used to identify and
track Recovery Act funds. For its nonurbanized grant from FTA, PennDOT
is using its dotGrants system to track funds, and this system is tied
into the state's accounting system. The invoicing and payment processes
in dotGrants and the state's accounting system are used for PennDOT's
non-Recovery Act work as well. According to PennDOT officials, the
dotGrants system was established in 2008 and was modified in 2009 to
include Recovery Act identifiers.
Whereas the large transit agencies and PennDOT rely on their existing
systems, smaller transit agencies may need to modify their control
systems to track Recovery Act funds. For example, the Butler Transit
Authority, which has a permanent staff of three, created a dedicated
bank account to segregate its Recovery Act money, and started using
dedicated subaccount numbers to identify the Recovery Act funds in its
accounting system. Under its existing controls, the Butler Transit
Authority board must approve payment of all invoices. The Butler
Transit Authority will continue to rely on its contract accounting firm
to advise the staff on best practices and review monthly statements.
Butler Transit Authority officials told us that they were confident
that these procedures will be sufficient to track funds accurately.
For project management, SEPTA and Port Authority officials told us that
they plan to use existing procedures for their projects. SEPTA will use
a variety of in-house and contractor personnel to track project
progress. Port Authority's general construction management contractor
will continue to provide on-site oversight for the North Shore
Connector project, including the Recovery Act portions of the project.
Additionally, FTA will continue to provide an external project
management oversight consultant for the North Shore Connector project.
PennDOT officials said that they hired consultants specifically to
assist in Recovery Act project management. One firm was hired to help
transit agencies in urbanized and nonurbanized areas achieve
environmental compliance for their proposed Recovery Act projects. The
other firm was hired to provide more general project and construction
management services, including support and advice for agencies in
urbanized and nonurbanized areas receiving Recovery Act funds. A Butler
Transit Authority official told us that he had been in contact with
this PennDOT consultant. The PennDOT Bureau of Public Transportation
helped scope the Butler Transit Authority Recovery Act project. In
addition, PennDOT has recently added two headquarters personnel to
assist with Recovery Act project inspections and oversight, since the
Bureau of Public Transportation does not have a field staff structure
for these duties. Butler Transit Authority also hired its own
engineering firm for construction management of its Recovery Act
project.
Reporting for Recovery Act Transit Projects Has Begun, but SEPTA, Port
Authority, and PennDOT Are Still Preparing for the Section 1512 October
Reporting Deadline:
Recipients of Recovery Act funds for transit projects are submitting
reports in varying time frames to FTA, the federal government through
[hyperlink, www.FederalReporting.gov], and the U.S. House of
Representatives Committee on Transportation and Infrastructure (House
Committee) on funds received, project status, and jobs created or
sustained.[Footnote 43] PennDOT officials told us that they plan to
collect reports from all transit agencies statewide, including the
transit agencies in nonurbanized areas receiving funds through PennDOT
and the transit agencies in urbanized areas receiving Recovery Act
funds directly from FTA. SEPTA and Port Authority officials stated that
they had reported monthly to the House Committee through August 2009
and met the first required Section 1201(c) deadline to FTA on August
16, 2009.
As of September 2009, SEPTA and Port Authority were planning their
strategies for meeting the October 10, 2009, Section 1512 deadline for
reporting to the federal government. SEPTA and Port Authority officials
told us that they attended FTA conference calls and Webinars. For some
of the information related to jobs created, SEPTA and Port Authority
officials told us that they will rely on information from their
contractors and subcontractors. To manage the workload of reporting on
its numerous Recovery Act projects, SEPTA plans to use a consultant to
collect data from contractors. As of September 2009, Port Authority
officials said that they did not plan to add staff to oversee their
Recovery Act contracts. Instead, they will collect the data with the
help of their construction management firm.
PennDOT officials told us that they plan to use their engineering
consultant to assist with the collection of reporting data from the 15
nonurbanized area transit agency subrecipients receiving funding
through PennDOT's FTA nonurbanized Recovery Act grant. PennDOT planned
to distribute detailed reporting information and instructions to
transit agencies in urbanized and nonurbanized areas in early September
2009. Additionally, PennDOT and its consultant planned to contact
nonurbanized area subrecipient agencies, which will report directly to
PennDOT for their Recovery Act funds, to assist them with data
collection for the Section 1512 report. PennDOT will compile all
Section 1512 report data elements for its nonurbanized area
subrecipients and provide the summary information to Pennsylvania's
Accountability Office, which will report on behalf of all state
agencies in Pennsylvania receiving Recovery Act funding.
SEPTA officials told us that Recovery Act reporting requirements were a
source of confusion. Guidance issued by OMB in June 2009 about Recovery
Act Section 1512 reporting prompted questions from SEPTA about who is
required to report, through what mechanism, and to whom. In addition,
language in the OMB guidance required that certain "subrecipients"
submit the names and salaries of the five highest paid executives in
their organizations, and it was unclear to SEPTA whether this referred
to Recovery Act project subrecipients or subcontractors. As of
September 1, 2009, SEPTA officials told us that they had resolved their
questions using further guidance from the Recovery Act federal Web site.
Pennsylvania's Recovery Act Weatherization Plan Was Approved, and Work
Will Begin after Local Agency Contracts Are in Place:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which DOE administers through each
of the states, the District of Columbia, and seven territories and
Indian tribes. The program enables low-income families to reduce their
utility bills by making long-term energy efficiency improvements to
their homes by, for example, installing insulation; sealing leaks; or
modernizing heating equipment, air circulation fans, or air
conditioning equipment. Over the past 32 years, the Weatherization
Assistance Program has assisted more than 6.2 million low-income
families. By reducing the energy bills of low-income families, the
program allows these households to spend their money on other needs,
according to DOE. The Recovery Act appropriation represents a
significant increase for a program that has received about $225 million
per year in recent years.
As of September 14, 2009, DOE had approved the weatherization plans of
all but two of the states, the District of Columbia, the territories,
and Indian tribes--including all 16 states and the District of Columbia
in our review. DOE has provided to the states almost $2.3 billion of
the $5 billion in weatherization funding under the Recovery Act. Use of
the Recovery Act weatherization funds is subject to Section 1606 of the
act, which requires all laborers and mechanics employed by contractors
and subcontractors on Recovery Act projects to be paid at least the
prevailing wage, including fringe benefits, as determined under the
Davis-Bacon Act.[Footnote 44] Because the Davis-Bacon Act had not
previously applied to weatherization, Labor had not established a
prevailing wage rate for weatherization work. In July 2009, DOE and
Labor issued a joint memorandum to Weatherization Assistance Program
grantees authorizing them to begin weatherizing homes using Recovery
Act funds, provided they pay construction workers at least Labor's wage
rates for residential construction, or an appropriate alternative
category, and compensate workers for any differences if Labor
establishes a higher local prevailing wage rate for weatherization
activities. Labor then surveyed five types of "interested parties"
about labor rates for weatherization work.[Footnote 45] Labor completed
establishing prevailing wage rates in all of the 50 states and the
District of Columbia by September 3, 2009.
The Recovery Act provides $252.8 million for Pennsylvania's
Weatherization Assistance Program. This represents a substantial
increase above fiscal year 2008-09 funding levels. The Pennsylvania
Department of Community and Economic Development (DCED)--the prime
recipient of these funds--is responsible for program management,
contract oversight, public reporting, and other administrative
activities. DCED will disburse most of these funds to 43 subrecipient
agencies. These agencies are responsible for employing people to
weatherize homes in the commonwealth.
Pennsylvania Expects to Begin Recovery Act Spending on Weatherization
in November 2009:
As we reported in July, DOE provided the initial 10 percent allocation
(about $25.3 million) on March 27, 2009, but DCED was not authorized to
obligate or spend these funds until the Pennsylvania General Assembly
enacted the fiscal year 2009-10 budget. In the stopgap budget measure
signed by the Governor of Pennsylvania on August 5, 2009, DCED received
most of its appropriation authority for Recovery Act weatherization
funding. On August 25, 2009, DOE approved Pennsylvania's weatherization
plan and provided a 40 percent allocation of about $101.1 million.
[Footnote 46] As of September 1, 2009, DCED has not obligated or
expended any Recovery Act weatherization funds. That is, Pennsylvania's
weatherization activities through August, 2009 (including development
of the state weatherization plan and training plan), had been funded
through its annual appropriation of Weatherization Assistance Program
and Low Income Home Energy Assistance Program funds. The Weatherization
Program Manager of DCED's Office of Community Services estimates that
weatherization work will begin in November 2009.
Pennsylvania will use Recovery Act weatherization funds to help low-
income households decrease energy consumption and costs and also to
provide jobs. Pennsylvania plans to weatherize at least 29,700 housing
units over the next 2 to 3 years, and create an estimated 940 jobs. The
energy savings goal is to reduce energy usage by the equivalent of what
it might take to power about 7,000 homes per year. Of the total $252.8
million Pennsylvania will receive, $224.5 million will be allocated to
subrecipient agencies to weatherize homes, $20 million will be
administered by the Pennsylvania Department of Labor and Industry for
training and technical assistance, and $8.3 million will be retained by
DCED to cover its costs of program management, oversight, reporting,
and administration.
As of September 1, 2009, DCED was reviewing management plans submitted
by the 43 weatherization agencies. These plans are to contain agency
targets for the number of weatherized homes, energy reduction targets,
and information on staffing and production timelines. Once approved by
DCED, the plans will form the basis of contracts for the weatherization
agencies. Labor established Pennsylvania's weatherization prevailing
wage rates on September 3, 2009. DCED has since advised weatherization
agencies that the agencies may have to amend their plans if prevailing
wages differ from wages in their submitted plans.
Pennsylvania Plans to Increase Controls over the Weatherization
Program, Including Monitoring the Use of Funds:
Within Pennsylvania, the DCED weatherization program has been
considered a high-risk program in need of stronger oversight and
monitoring. In 2007, Pennsylvania's Auditor General reported that the
weatherization program had, among other things, weak internal controls,
weaknesses in contracting, and inconsistent verification and inspection
of subcontractor work.[Footnote 47] In June 2009, the Pennsylvania
Bureau of Audits completed a risk assessment of more than 90 programs
for which Pennsylvania expects to receive Recovery Act funds and
categorized the programs as high, medium, or low risk. Risk levels were
determined based on a variety of sources, including prior reports by
the Bureau of Audits and Auditor General, interviews with agency staff,
expected Recovery Act funding levels, and potential agency strengths or
weaknesses in administering this funding. DCED's weatherization program
was one of the 15 programs categorized as high risk by the Bureau of
Audits. The Executive Director of DCED's Office of Energy Conservation
and Weatherization said that he is concerned that the weatherization
agencies in Pennsylvania will be challenged by the large amount of
weatherization work funded by the Recovery Act, but he is confident
that they will get the job done.
DCED has worked to address program deficiencies and is aware that the
large investment in weatherization provided by the Recovery Act will
require greater capacity at all levels of the program's operation. In
program year 2008-09, DCED revised its guidelines and procedures to
provide local weatherization agencies with a clearer understanding of
the process of on-site monitoring. DCED also requested that each
weatherization agency describe in its management plan its capacity to
meet enhanced production targets with appropriate quality control and
financial safeguards. Agency management plans must contain a 3-year
budget and production timeline that demonstrates each agency's capacity
to expend at least half of its total Recovery Act funds by September
30, 2010, at least 80 percent of the funds by June 30, 2011, and 100
percent by March 31, 2012. DCED will evaluate whether local agencies'
initial performance meets capacity targets by looking at the number of
people hired and trained. DCED plans to use the Pennsylvania Housing
Finance Agency to increase statewide capacity to weatherize multifamily
rental housing units, and has reserved the right to add additional
subrecipient agencies, if necessary, to meet the weatherization
program's production goals. The Pennsylvania Department of Labor and
Industry will establish training and certification standards to provide
weatherization workers with an industry-recognized credential, and
beginning in fiscal year 2009-10, training will be required for all
weatherization auditors and installers.
The Executive Director of the DCED Office of Energy Conservation and
Weatherization expressed concern that the Davis-Bacon Act requirement
to pay workers on a weekly basis may increase the burden on
weatherization agencies, requiring additional recordkeeping and
tracking. Agencies must address how they will comply with Davis-Bacon
requirements and enhanced internal control requirements for Recovery
Act weatherization work in their management plans. For example, each
agency will need to appoint a unit or staff member at the agency
responsible for contract compliance, agency officers and directors are
required to file financial disclosure statements, and agency management
staff and purchasing personnel must file conflict of interest
statements.
DCED plans to establish a monitoring, compliance, and reporting system
and increase its full-time monitoring staff. According to
Pennsylvania's weatherization plan, DCED monitors will inspect 10
percent of weatherization units in progress to check compliance with
the energy audit and work priority requirements, and 10 percent of
completed units to check the installation work. A financial monitoring
team will spot-check agencies' financial records and will provide
financial management and technical assistance to strengthen internal
controls. DCED currently has three full-time monitors for the
weatherization program and plans to hire eight more to help with the
Recovery Act monitoring workload. Also, each weatherization agency must
hire a designated quality control person not involved in the actual
installation to inspect all completed units.
DCED plans to increase its financial controls over weatherization funds
and is developing a central procurement system for weatherization
materials. Agencies will be required to use Hancock Energy System
software, which contains an inventory function that will allow agencies
to monitor inventory down to the individual house level, and will allow
DCED to monitor purchasing within each agency and across agencies. DCED
reviews agency invoices for funds and uses an electronic invoice and
payment system to monitor the disbursement of funds. Further,
weatherization agencies will be required to purchase materials and
equipment through the Pennsylvania Department of General Services'
(DGS) cooperative purchasing program--COSTARS. According to the state
weatherization plan, if exceptional circumstances apply or if materials
are not available through the COSTARS program, DCED will require
agencies and their subcontractors to obtain at least three independent
bids for the materials. The COSTARS purchasing program is intended to
reduce the cost of materials so that more homes can be weatherized. In
May 2009, DGS opened COSTARS-22 to procure weatherization materials
only for work funded by the Recovery Act. As of August 2009, DGS said
that it had awarded contracts to four suppliers and received a fifth
bid from a prospective supplier; bids from prospective suppliers of
weatherization materials will be accepted on a continual basis.
Pennsylvania Plans to Assess Energy Savings but May Have Little to
Report in October 2009:
DCED officials plan to commission an annual independent evaluation of
the weatherization program to measure energy savings attributable to
the weatherization work completed by each subcontractor. DCED plans to
collect and maintain monthly energy use data directly from utility
companies for at least 1 year after weatherization occurs and will
report reductions in energy use as a measure of program success. Energy
savings achieved by each agency will also be reported in relation to
the cost of weatherization improvements per house. DCED also plans to
evaluate agencies' performance based on their ability to achieve energy
reduction and other targets specified in their management plans, and
will base subsequent funding allocations on performance.
As a prime recipient of Recovery Act funds for weatherization, DCED
must provide quarterly financial and progress reports to DOE pursuant
to Section 1512 of the Recovery Act. The first of these recipient
reports is due October 10, 2009. Subrecipient agencies will also be
required to report to DCED on any other requirements mandated by
federal or state government. DOE requires reporting on performance
measures to determine the impact of Recovery Act weatherization funds
in the state. For measures of job creation, agencies are required to
report to DCED on jobs created and jobs retained at the state and local
agency levels. DCED's Weatherization Program Manager was unclear about
some of the recipient reporting requirements under Section 1512 of the
Recovery Act, and said that agency management plans do not specifically
include recipient reporting requirements but may need to be adjusted to
include them. Pennsylvania's Accountability Office has since provided
training to DCED's Weatherization Office on 1512 reporting and is
working to ensure full compliance with recipient and subrecipient
reporting requirements. DOE has also since provided guidance to DCED
and other prime recipients of the Recovery Act funds for weatherization
to help them meet the Section 1512 reporting requirements.
Pennsylvania Used Recovery Act Funds to Provide Summer Youth Employment
Activities and Exceeded Its Enrollment Plans:
The Recovery Act provides an additional $1.2 billion in funds for the
WIA Youth Program, including summer employment. Administered by Labor,
the WIA Youth Program is designed to provide low-income in-school and
out-of-school youth 14 to 21 years of age, who have additional barriers
to success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 48] the conferees stated that they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth Program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 49] Local areas may design summer
employment opportunities to include any set of allowable WIA youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as they also include
a work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job; (2) learn work readiness
skills on the job; and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 50]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth Program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work readiness attainment rate and the summer employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
The Pennsylvania Department of Labor and Industry (L&I) administers
Pennsylvania's WIA Youth Program through local areas. Pennsylvania's 67
counties are divided into 23 local workforce investment areas, each led
by a workforce investment board whose purpose is to support the labor
and job training demands of industries and help students, job seekers,
and incumbent workers acquire skills and attain rewarding, family-
sustaining jobs. Local workforce investment areas vary widely in the
geographic area served, ranging from one that serves only the City of
Pittsburgh to a regional area that serves nine counties. Programs and
services may also vary within and among workforce investment areas. In
2008, 7 of Pennsylvania's 23 local workforce investment areas--
Allegheny, Central Counties, Northwest Counties, Philadelphia,
Pittsburgh, Pocono Counties, and Westmoreland/Fayette--had extensive
stand-alone summer youth employment programs, and 2,205 youth were
served statewide.[Footnote 51] These stand-alone summer youth
employment programs were funded from a variety of public (including
workforce, Temporary Assistance for Needy Families (TANF), and
community block grants), private, and nonprofit sources.
Pennsylvania Spent 27 Percent of Recovery Act Funds and Exceeded 2009
Enrollment Plans for the Recovery Act-Funded WIA Summer Youth
Employment Activities:
Pennsylvania was allotted about $40.6 million in Recovery Act funds to
support WIA Youth Program activities and services. In turn, $34.6
million (85 percent) was allocated to the 23 local workforce investment
areas, and L&I retained $6 million (15 percent) for possible statewide
activities, such as incentive grants to encourage best practices. As we
reported in July, only 40 percent of the allocations were available for
the local boards to spend before July 1, 2009. Since the enactment of
Pennsylvania's stopgap budget in August 2009, the local workforce
investment areas' full allocations were available for spending. As of
September 1, 2009, L&I had expended $11 million, or 27 percent, of
Pennsylvania's allotment. Pennsylvania uses a cost reimbursement
structure to administer these funds and officials stated that they
expect that additional funds will be drawn down over the coming months.
Based on the local boards' original Recovery Act plans, the 23 local
workforce investment areas planned to spend 70 to 90 percent of their
Recovery Act WIA Youth Program allocations by the end of September 2009.
Pennsylvania exceeded the number of youth that the local boards had
planned to serve. Pennsylvania did not set an overall target number of
youth to be served, but based on the local boards' plans, approximately
8,700 youth were to be served. Data from Labor show that Pennsylvania
served 5,102 participants, as of July 31, 2009.
According to data obtained from L&I, as of August 31, 2009 Pennsylvania
enrolled 8,817 participants in Recovery Act-funded WIA summer youth
employment activities (see table 2). Of those youth, 28 percent were
out of school and 6 percent were between the ages of 22 and 24 years.
According to L&I, four participants were veterans, as of July 31, 2009.
Table 2: Number of Recovery Act-Funded WIA Summer Youth Employment
Activity Participants, by Workforce Investment Board, as of August 31,
2009:
Workforce Investment Board: Allegheny;
Participants: Planned: 600;
Participants: Actual: 565;
Actual participants by age group: 14 to 18: 502;
Actual participants by age group: 19 to 21: 56;
Actual participants by age group: 22 to 24: 7;
In-school youth: 457;
Out-of-school youth: 108.
Workforce Investment Board: Berks;
Participants: Planned: 335;
Participants: Actual: 257;
Actual participants by age group: 14 to 18: 181;
Actual participants by age group: 19 to 21: 62;
Actual participants by age group: 22 to 24: 14;
In-school youth: 157;
Out-of-school youth: 100.
Workforce Investment Board: Bucks;
Participants: Planned: 121;
Participants: Actual: 123;
Actual participants by age group: 14 to 18: 76;
Actual participants by age group: 19 to 21: 33;
Actual participants by age group: 22 to 24: 14;
In-school youth: 64;
Out-of-school youth: 59.
Workforce Investment Board: Central;
Participants: Planned: 700;
Participants: Actual: 650;
Actual participants by age group: 14 to 18: 419;
Actual participants by age group: 19 to 21: 169;
Actual participants by age group: 22 to 24: 62;
In-school youth: 411;
Out-of-school youth: 239.
Workforce Investment Board: Chester;
Participants: Planned: 100;
Participants: Actual: 130;
Actual participants by age group: 14 to 18: 123;
Actual participants by age group: 19 to 21: 5;
Actual participants by age group: 22 to 24: 2;
In-school youth: 122;
Out-of-school youth: 8.
Workforce Investment Board: Delaware;
Participants: Planned: 100;
Participants: Actual: 44;
Actual participants by age group: 14 to 18: 9;
Actual participants by age group: 19 to 21: 26;
Actual participants by age group: 22 to 24: 9;
In-school youth: 0;
Out-of-school youth: 44.
Workforce Investment Board: Lackawanna;
Participants: Planned: 250;
Participants: Actual: 192;
Actual participants by age group: 14 to 18: 144;
Actual participants by age group: 19 to 21: 35;
Actual participants by age group: 22 to 24: 13;
In-school youth: 134;
Out-of-school youth: 58.
Workforce Investment Board: Lancaster;
Participants: Planned: 300;
Participants: Actual: 212;
Actual participants by age group: 14 to 18: 78;
Actual participants by age group: 19 to 21: 103;
Actual participants by age group: 22 to 24: 31;
In-school youth: 5;
Out-of-school youth: 207.
Workforce Investment Board: Lehigh Valley;
Participants: Planned: 200;
Participants: Actual: 417;
Actual participants by age group: 14 to 18: 302;
Actual participants by age group: 19 to 21: 82;
Actual participants by age group: 22 to 24: 33;
In-school youth: 304;
Out-of-school youth: 113.
Workforce Investment Board: Luzerne/Schuylkill;
Participants: Planned: 300;
Participants: Actual: 350;
Actual participants by age group: 14 to 18: 268;
Actual participants by age group: 19 to 21: 58;
Actual participants by age group: 22 to 24: 24;
In-school youth: 281;
Out-of-school youth: 69.
Workforce Investment Board: Montgomery;
Participants: Planned: 150;
Participants: Actual: 153;
Actual participants by age group: 14 to 18: 127;
Actual participants by age group: 19 to 21: 22;
Actual participants by age group: 22 to 24: 4;
In-school youth: 89;
Out-of-school youth: 64.
Workforce Investment Board: North Central;
Participants: Planned: 314;
Participants: Actual: 268;
Actual participants by age group: 14 to 18: 174;
Actual participants by age group: 19 to 21: 71;
Actual participants by age group: 22 to 24: 23;
In-school youth: 146;
Out-of-school youth: 122.
Workforce Investment Board: Northern Tier;
Participants: Planned: 134;
Participants: Actual: 141;
Actual participants by age group: 14 to 18: 94;
Actual participants by age group: 19 to 21: 41;
Actual participants by age group: 22 to 24: 6;
In-school youth: 90;
Out-of-school youth: 51.
Workforce Investment Board: Northwest;
Participants: Planned: 350;
Participants: Actual: 405;
Actual participants by age group: 14 to 18: 328;
Actual participants by age group: 19 to 21: 70;
Actual participants by age group: 22 to 24: 7;
In-school youth: 315;
Out-of-school youth: 90.
Workforce Investment Board: Philadelphia;
Participants: Planned: 2,533;
Participants: Actual: 2,578;
Actual participants by age group: 14 to 18: 2,260;
Actual participants by age group: 19 to 21: 285;
Actual participants by age group: 22 to 24: 33;
In-school youth: 2,394;
Out-of-school youth: 184.
Workforce Investment Board: Pittsburgh;
Participants: Planned: 313;
Participants: Actual: 320;
Actual participants by age group: 14 to 18: 303;
Actual participants by age group: 19 to 21: 17;
Actual participants by age group: 22 to 24: 0;
In-school youth: 307;
Out-of-school youth: 13.
Workforce Investment Board: Pocono;
Participants: Planned: 320;
Participants: Actual: 340;
Actual participants by age group: 14 to 18: 277;
Actual participants by age group: 19 to 21: 50;
Actual participants by age group: 22 to 24: 13;
In-school youth: 277;
Out-of-school youth: 63.
Workforce Investment Board: South Central;
Participants: Planned: 500;
Participants: Actual: 487;
Actual participants by age group: 14 to 18: 315;
Actual participants by age group: 19 to 21: 133;
Actual participants by age group: 22 to 24: 39;
In-school youth: 266;
Out-of-school youth: 221.
Workforce Investment Board: Southern Alleghenies;
Participants: Planned: 430;
Participants: Actual: 428;
Actual participants by age group: 14 to 18: 308;
Actual participants by age group: 19 to 21: 85;
Actual participants by age group: 22 to 24: 35;
In-school youth: 244;
Out-of-school youth: 184.
Workforce Investment Board: Southwest Corner;
Participants: Planned: 76;
Participants: Actual: 173;
Actual participants by age group: 14 to 18: 75;
Actual participants by age group: 19 to 21: 73;
Actual participants by age group: 22 to 24: 25;
In-school youth: 105;
Out-of-school youth: 68.
Workforce Investment Board: Tri-County;
Participants: Planned: 96;
Participants: Actual: 139;
Actual participants by age group: 14 to 18: 49;
Actual participants by age group: 19 to 21: 59;
Actual participants by age group: 22 to 24: 31;
In-school youth: 35;
Out-of-school youth: 104.
Workforce Investment Board: West Central;
Participants: Planned: 200;
Participants: Actual: 127;
Actual participants by age group: 14 to 18: 31;
Actual participants by age group: 19 to 21: 50;
Actual participants by age group: 22 to 24: 46;
In-school youth: 15;
Out-of-school youth: 112.
Workforce Investment Board: Westmoreland/Fayette;
Participants: Planned: 270;
Participants: Actual: 318;
Actual participants by age group: 14 to 18: 148;
Actual participants by age group: 19 to 21: 129;
Actual participants by age group: 22 to 24: 41;
In-school youth: 138;
Out-of-school youth: 180.
Workforce Investment Board: Total;
Participants: Planned: 8,692;
Participants: Actual: 8,817;
Actual participants by age group: 14 to 18: 6,591;
Actual participants by age group: 19 to 21: 1,714;
Actual participants by age group: 22 to 24: 512;
In-school youth: 6,356;
Out-of-school youth: 2,461.
Source: Pennsylvania Department of Labor and Industry, 2009.
[End of table]
Philadelphia and South Central Workforce Investment Boards Overcame
Some Challenges, but Other Challenges Remain in Implementing Summer
Youth Employment Activities in Pennsylvania:
We visited two local workforce investment areas--the Philadelphia
Workforce Investment Board and the South Central Workforce Investment
Board--to determine the status of their Recovery Act-funded WIA summer
employment activities. We also met with some of their service providers
and visited some work sites. We selected the Philadelphia local board
because it received the largest allocation of Recovery Act WIA Youth
Program funding in Pennsylvania and it had a summer youth employment
program in 2008. The Philadelphia local workforce board was allocated
$7.4 million, more than 20 percent of Pennsylvania's allotment. We
selected the South Central board--located in Harrisburg within Dauphin
County and serving seven neighboring counties--because it did not have
an extensive stand-alone summer youth employment program in 2008.
[Footnote 52] The South Central board was allocated $1.6 million. Using
Recovery Act WIA Youth Program funds, the Philadelphia Workforce
Investment Board planned to serve 2,533 youth participants and had
enrolled 2,578 youth as of August 31, 2009; the South Central Workforce
Investment Board planned to serve 500 youth and had enrolled 487 youth.
Ten of the 23 workforce boards in Pennsylvania had not yet met their
planned enrollment targets as of August 31, 2009. As of August 31,
2009, Philadelphia had enrolled 184 out-of-school youth and 33 youth
ages 22 to 24. South Central had enrolled 221 out-of-school youth and
39 youth ages 22 to 24.
As discussed in our July report, local workforce officials explained
that recruiting eligible youth to participate in the Recovery Act-
funded WIA summer youth employment activities and verifying eligibility
documentation was a challenge. For example, some youth did not have
access to documentation, such as birth certificates and Social Security
cards for each family member. Gathering 6 months of income
documentation was also challenging. To help address these challenges,
state officials, through a memorandum of understanding, released a list
of youth eligible for TANF and food stamps to the local workforce
boards. This information helped identify eligible youth for Recovery
Act-funded WIA summer youth employment activities. One contractor we
met with stated that some families were fearful about revealing income
information and access to these lists meant that families did not have
to provide such information. In Philadelphia, the contractor stated
that the work start dates of approximately 25 percent of youth
participants were delayed because of delays in the enrollment paperwork
process.
The employment activity start-up period was also noted as a challenge
in our July report. Philadelphia had a summer youth employment program
in 2008 but had to expand its program to serve 1,200 additional youth
with Recovery Act funds. The South Central Workforce Investment Board
did not have a separate stand-alone summer youth employment program in
2008 and had to build one this year. In dealing with the short
employment activity start-up periods, the contractors we interviewed
used existing relationships with employers to find work sites for the
youth. One contractor placed Recovery Act-funded youth with employers
who participated in the year-round WIA Youth Program.
Workforce investment boards and the contractors we met with stated that
the definition of "green jobs" was not clear.[Footnote 53] Officials at
one workforce board stated that they defined anything that improved the
health of the planet as "green," and officials acknowledged that this
broad definition could apply to almost every job. According to work
site data from the Philadelphia workforce investment area, 19 percent
(490 of 2,571) of its participants were placed in a "green" job and in
the South Central workforce investment area, 7 percent (42 of 564) of
its participants were placed in a "green" job. One South Central
official added that the board's count of "green" jobs would not include
work sites that provided "green" education or awareness. For example,
one construction work site included tours of recycling facilities,
discussed how to make homes more energy efficient, and exposed youth to
"green" careers, such as electricity consumption auditors, but this
would not have been included in the board's count of "green" jobs.
Other employment activities had a clearer "green" link. In one
Philadelphia employment activity, participants tested the permeability
of soil samples from the site of a major oil spill in Alaska.
Other challenges listed in our July report may have persisted and
challenged the implementation of Recovery Act-funded WIA summer youth
employment activities. For example, weak economic conditions may have
made it challenging to find youth placements as participants were not
allowed to be placed in an area that had recently experienced layoffs,
and state officials acknowledged that this restriction had limited the
number of placements in some areas. Also, officials reiterated that the
lack of public transportation was an implementation challenge. Youth
who participated in Recovery Act-funded WIA summer youth employment
activities told us that getting to and from work sites was a
significant challenge given the lack of public transportation in their
region. For example, in the South Central workforce investment area,
some job sites in York County were inaccessible by bus, and
participants at those sites either had to walk or rely on friends or
family for transportation.
Local Workforce Investment Boards Were Given Flexibility to Design and
Administer the Recovery Act-Funded Summer Employment Activities:
While the federal government provided guidance on a number of issues,
local workforce boards had the flexibility to design and administer
their Recovery Act-funded WIA summer youth employment activities. As
shown in table 3, the two workforce boards we visited varied slightly
in the opportunities they provided to participants. For example,
Philadelphia offered three types of employment activities to
participants:
* service learning (work teams to develop projects that provide active
service to communities or individuals),
* internships (career exposure and connections to public and private
sector employers), and:
* work and learning experiences (mixture of academic skill building,
college exposure, career exploration, and work readiness training).
Table 3: Overview of the Recovery Act-Funded WIA Summer Employment
Activities for Two Pennsylvania Local Workforce Investment Boards, 2009:
Areas served:
Philadelphia Workforce Investment Board: Philadelphia;
South Central Workforce Investment Board: Adams, Cumberland, Dauphin,
Franklin, Juniata, Lebanon, Perry, and York counties.
Employment activity design:
Philadelphia Workforce Investment Board: Participants worked
approximately 20 to 25 hours each week and were paid $7.25 per hour;
South Central Workforce Investment Board: Participants worked
approximately 25 to 30 hours each week and were paid between $7 and
$7.25 per hour, depending on the current minimum wage.
Length of employment activity:
Philadelphia Workforce Investment Board: Most were for 6 weeks, but a
few were compressed into 5 weeks;
South Central Workforce Investment Board: 6 to 8 weeks.
Types of employment activities:
Philadelphia Workforce Investment Board: Service learning, internships,
and work and learning experiences;
South Central Workforce Investment Board: Employment activities in the
private, public, and nonprofit sectors.
Examples of the range of employment activities:
Philadelphia Workforce Investment Board: Administrative assistant, camp
counselor, clerical aide, maintenance, teacher aide, sales associate,
office assistant, and researcher;
South Central Workforce Investment Board: Child care, electrical
maintenance, computer technology, community service, construction, and
manufacturing.
Work readiness measure:
Philadelphia Workforce Investment Board: Measured through a pre-and
post-test and employer pre-and post-evaluations;
South Central Workforce Investment Board: Contractors are required to
measure at the beginning and end of an employment activity, but the
decision on how to conduct this assessment was left up to the
individual contractors; both contractors we interviewed are using a pre-
and post-test.
Source: GAO analysis of information from local workforce investment
boards, 2009.
[End of table]
Both workforce investment boards we visited provided employment
activities that combined work readiness activities with academic
learning. For example, all participants in the Philadelphia Recovery
Act-funded WIA summer youth employment activity were to complete an
academic project that was aligned with state education goals. Certified
teachers evaluated the projects and youth were eligible for academic
credit. One university contractor stated that the employment activities
focused not only on work readiness skills but also on promoting higher
education. At one of the contractor's work sites we visited,
participants cleaned and painted a space to create an art gallery and
created a blog detailing their employment activities learning about
mixed media artwork. According to the contractor, by learning social
media skills like blogging and online collaboration, the participants
learned both social and business skills.
Another university-affiliated contractor in Philadelphia ran an urban
nutrition employment activity at local high school sites that included
cooking, farming, and an educational component. This educational
component, the College Access and Career Readiness program, worked with
participants to develop résumés and essays and required participants to
submit at least three applications to IHEs. One of the South Central
workforce board's contractors we visited provided training that
included occupational skills, workplace skills, and job readiness
skills. The contractor also held a 2-week orientation before placing
the youth at work sites. Participants we spoke with emphasized the
value of the key lessons they learned from the orientation, such as
punctuality and wearing appropriate attire.
Local Workforce Investment Boards Monitor Contractors for the WIA
Summer Youth Recovery Act Funds:
The Recovery Act-funded WIA summer youth employment activities are
administered by the Philadelphia Youth Network (PYN), a local nonprofit
organization. While the Philadelphia Workforce Investment Board
monitors PYN programmatically, the Philadelphia Workforce Development
Corporation holds the contract with PYN and conducts fiscal monitoring.
[Footnote 54] According to Philadelphia workforce board officials, the
Recovery Act contract was not awarded competitively. L&I applied and
was approved for a waiver from Labor to expand the scope of existing
competitively procured contracts. According to Philadelphia Workforce
Development Corporation officials, the requirements were added to an
existing cost reimbursement agreement. The officials added that they
used a cost reimbursement structure, the same structure used for the
year-round WIA Youth Program.
To safeguard the WIA Youth Program Recovery Act funding, Philadelphia
Workforce Development Corporation officials stated that they use key
procedures to monitor PYN and its contractors. These procedures include
ensuring that the age requirements are specified, reporting and
deliverables are met, fiscal internal controls exist, payment processes
are timely, fiscal and programmatic documentation exist, and if
applicable, support payments exist. PYN contracted with service
providers, and Philadelphia Workforce Development Corporation officials
stated that they check whether PYN is monitoring these contractors and
that all parties involved are adhering to Recovery Act policies. PYN
monitors its contractors through site visits to ensure things such as
the existence of eligibility documentation and compliance with work
site safety requirements. In addition, PYN trains contractors and
workplace supervisors on administrative responsibilities and employment
activity expectations.
The South Central Workforce Investment Board had five contractors
administer the Recovery Act-funded summer youth employment activities
in its area. According to the South Central workforce board officials,
the contracts were not awarded competitively as allowed under the L&I
waiver from Labor. Officials stated that because they had recently
competitively bid the contracts for the year-round WIA Youth Program,
they did not compete the Recovery Act-funded WIA summer youth
employment activity contracts.[Footnote 55] The officials asked the
five contractors that had recently been awarded year-round WIA Youth
Program contracts to submit proposals to cover the employment
activities funded by the Recovery Act WIA summer youth activity
dollars. The officials stated that the requirements were procured using
cost reimbursement contracts. The officials stated that this type of
format ensures that only actual costs are reimbursed in compliance with
the approved budget.
To safeguard Recovery Act WIA Youth Program funds, South Central
workforce board officials stated that they used different mechanisms to
monitor contractors. Informally, some workforce board officials
periodically visited work sites to ensure compliance with safety
requirements. Officials stated that some of these early site visits
yielded disconcerting observations, such as park crew participants
working without proper safety equipment or some not engaged in
meaningful work. Officials added that these observations were
relatively few and were quickly addressed by the contractors. In terms
of formal monitoring, officials stated that two staff visited
contractors and work sites. Before such visits, workforce board staff
conducted premonitoring visits to remind contractors that they would be
monitored and to review the standards with them. The monitoring tool
the officials used covered topics such as employment activity
supervision, time, and attendance.
Local Workforce Investment Areas Will Measure Work Readiness, and
Pennsylvania Plans Additional Evaluations to Identify Best Practices
for Serving Older Youth:
Work readiness is the only measure that is required to assess the
effectiveness of Recovery Act-funded WIA summer youth employment
activities. Within the parameters set forth in federal agency guidance,
local workforce investment areas may determine the methodology for
measuring work readiness gains. In the Philadelphia workforce
investment area, the same pre-and post-test work readiness assessment
is administered for all work sites. The Philadelphia work readiness
assessment focuses on seven skills--professionalism/work ethic, oral/
written communication, lifelong learning/self-direction, technology,
leadership, ethics and social responsibility, and teamwork and
collaboration. According to board officials, in the South Central
workforce investment area, contractors are required to measure work
readiness at the beginning and end of an employment activity, but the
decision on how to conduct the pre-and post-assessment was left up to
the individual contractors. Both contractors we interviewed stated that
they are using a pre-and post-test work readiness assessment. Without a
standard work readiness assessment tool statewide and in some cases
throughout the workforce investment area, Pennsylvania does not have
consistent measures of work readiness outcomes from different work
experience types, across workforce investment areas, or even across
contractors for some workforce investment areas. Currently, L&I
provides local workforce boards and contractors with a list of
acceptable assessment tools, and L&I officials said that they are
considering possible incentive grants for workforce boards and
contractors that use a tool recommended by the state.
L&I plans to review completion rates, work readiness outcomes,
expenditure rates, and characteristics of participants; analysis and
listing of work site types; and best practices and innovative
approaches to recruitment, retention, and work readiness. Recovery Act-
funded WIA summer youth employment activities information is collected
through Pennsylvania's Commonwealth Workforce Development System
(CWDS), a tracking and reporting data system used by the Pennsylvania
workforce boards. As we reported in July, local workforce investment
areas had to report data manually, but CWDS is now available online to
track and report Recovery Act-funded WIA summer youth employment
activity data. Should additional information be needed, the system can
be modified to collect those data from the workforce boards. The state
officials said that they will not delegate Recovery Act quarterly
recipient reporting responsibilities to any workforce boards. They also
stated that the reporting processes and systems have been designed to
ensure accurate and complete information. For example, officials said
that they have developed unique identifiers to monitor and track WIA
Youth Program activities separately from other funding streams. Through
routine staff monitoring and quality assurance, officials stated that
they will be able to ensure that reporting has all the required
information fields as well as assign categories and subcategories of
information. In terms of monitoring grantees, officials stated that
they have processes in place, such as reviewing local monitoring
documents, including those pertaining to service providers' financial
and progress reports.
State officials said that they intend to conduct long-term evaluations
of the Recovery Act-funded WIA summer youth employment activities. In
particular, they plan to study the outcomes and employment activities
for older youth from the ages of 22 to 24 years, as this was the first
time older youth were served. Officials also want to look at the
placements offered to all participants and whether certain placements
(e.g., private sector or public sector work sites) provided better
employment activities than others. State officials said that they plan
to look at not only participant outcomes, but also at what efforts were
successful and which activities and employment activities can be used
for future job training activities throughout the state.
Local Housing Authorities Have Obligated 31 Percent of Public Housing
Capital Fund Formula Grants:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management.[Footnote 56] The Recovery Act
requires HUD to allocate $3 billion through the Public Housing Capital
Fund to public housing agencies using the same formula for amounts made
available in fiscal year 2008. Recovery Act requirements specify that
public housing agencies must obligate funds within 1 year of the date
on which they are made available to public housing agencies, expend at
least 60 percent of funds within 2 years, and expend 100 percent of the
funds within 3 years. Public housing agencies are expected to give
priority to projects that can award contracts based on bids within 120
days from the date on which the funds are made available, as well as
projects that rehabilitate vacant units, or those already under way or
included in their current required 5-year capital fund plans.
HUD is also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofit investments. In a Notice
of Funding Availability published May 7, 2009, and revised June 3,
2009, HUD outlined four categories of funding for which public housing
agencies could apply:
* creation of energy-efficient communities ($600 million),
* gap financing for projects that are stalled because of financing
issues ($200 million),
* public housing transformation ($100 million), and:
* improvements addressing the needs of the elderly or persons with
disabilities ($95 million).
For the creation of energy-efficient communities, applications (which
were due July 21, 2009) were to be rated and ranked according to
criteria outlined in the Notice of Funding Availability. The last three
categories will be threshold based, meaning applications that meet all
the threshold requirements will be funded in order of receipt. If funds
are available after all applications meeting the thresholds have been
funded, HUD may begin removing thresholds after August 1, 2009, in
order to fund additional applications in the order of receipt until all
funds have been awarded. Applications in these three categories were
accepted until August 18, 2009.
Pennsylvania has 82 public housing agencies that have received Recovery
Act formula grants. In total these public housing agencies received
$212.2 million in Public Housing Capital Fund formula grants. (See
figure 6.) As of September 5, 2009, 68 of these public housing agencies
have obligated $65 million (31 percent), and 51 have drawn down $6.7
million. We visited two public housing agencies in Pennsylvania for our
July report: the Philadelphia Housing Authority and the Harrisburg
Housing Authority. We will provide updated information on these housing
agencies in a future report.
Figure 6: Percentage of Public Housing Capital Funds Allocated by HUD
That Have Been Obligated and Drawn Down in Pennsylvania, as of
September 5, 2009:
[Refer to PDF for image: 3 pie-charts]
Funds obligated by HUD: 100% ($212,155,156);
Funds obligated by public housing agencies: 30.6% ($64,986,026);
Funds drawn down by public housing agencies: 3.2% ($6,687,227);
Number of public housing agencies:
Entering into agreements for funds: 82;
Obligating funds: 68;
Drawing down funds: 51.
Source: GAO analysis of HUD data.82
[End of figure]
Pennsylvania's Accountability Office Plans Centralized Reporting for
Recovery Act Funds Received by the State and Is Developing Performance
Measures:
Pennsylvania's new Accountability Office, led by the Recovery Act Chief
Accountability Officer, plans a centralized approach for the quarterly
recipient reporting that state agencies must submit to comply with
Section 1512 of the Recovery Act. Under OMB guidance, these recipient
reports are to be submitted through [hyperlink,
www.FederalReporting.gov]. Pennsylvania's Accountability Office
coordinates a reporting working group, which also includes the Office
of Information Technology, the Governor's Budget Office, and the Office
of the Chief Accounting Officer, to plan and implement the recipient
reporting. Over the summer of 2009, the working group identified the
gaps between the information required for the recipient reporting and
data available from Pennsylvania's current enterprise resource planning
(ERP) system.[Footnote 57] As we previously reported, the Office of
Comptroller Operations established unique accounting codes within the
state's integrated accounting system (ERP system) to track Recovery Act
spending separately. Where practical, new data fields will be added to
the accounting system to support the data extract for Recovery Act
reporting. Whereas the financial data for Pennsylvania's state
recipient reports will be drawn from the ERP system, the Office of
Information Technology designed a new centralized Recovery Act data
warehouse--the Central Access to Recovery Data System (CARDS)--to
compile the other data elements gathered from program agencies and
their subrecipients and vendors. Pennsylvania's Accountability Office
is developing internal controls and a quality review process to help
ensure that the data are complete and accurate before submission.
According to Pennsylvania Recovery Act officials, many subrecipient and
vendor details, such as names and addresses, required under Section
1512 already existed within Pennsylvania's ERP system, since most
organizations receiving Recovery Act funds through state agencies were
already registered to do business with Pennsylvania state government.
State program agencies receiving Recovery Act funds--the direct
recipients--are responsible for collecting and entering any additional
data for their subrecipients and vendors into CARDS. For example,
PennDOT is the direct recipient for the Highway Infrastructure
Investment funds and will collect data from its vendors--the
contractors working on the highway and bridge projects. For the WIA
Youth Program, L&I as the direct recipient will compile data from the
local workforce area subrecipients, which in turn will gather data from
their vendors on the summer youth activities.
According to the Senior Advisor for Recovery Implementation, the
process of classifying subrecipients and vendors using the five-point
test in OMB's guidance has been surprisingly difficult. Pennsylvania's
Accountability Office plans to use the state ERP system coding to
preliminarily assign entities to one category or the other. Initially,
entities receiving Recovery Act funds coded as grant, debt service/
investment, and transfer payment categories will be treated as
subrecipients, and entities receiving Recovery Act funds coded as
operating expenses will be treated as vendors. Pennsylvania's
Accountability Office will override these preliminary classifications
in cases where the federal awarding agency's instructions are plainly
contrary.
On August, 26, 2009, Pennsylvania's Accountability Office issued
instructions for program agencies detailing their reporting
responsibilities and the timeline for preparing for the first recipient
reports due on October 10, 2009. On August 31, 2009, Pennsylvania's
Accountability Office issued companion instructions for use by the
program agencies' vendors, subrecipients, and subrecipient vendors. By
the end of August, each program agency was to identify its key
reporting personnel, verify its identification numbers, and complete a
onetime survey on its Recovery Act funding award received to date. In
early September 2009, agency staff will receive CARDS training and will
load onetime survey data from their outreach to vendors and
subrecipients. All onetime data entry is to be completed by September
25, and program agencies are to begin entering quarterly data--such as
the numbers of jobs, narrative on quarterly activities, and project
status--beginning on October 1. Subrecipients are to provide their data
by October 5, and the program agencies are to upload all data to CARDS
by October 6. Each program agency is responsible for using CARDS to
review and approve its final recipient report.
Pennsylvania's Accountability Office has registered at
FederalReporting.gov and plans to transmit the recipient reports for
Pennsylvania state agencies. As of September 11, 2009, the office
expects to file at least 40 recipient reports by the October 10, 2009,
deadline. To help oversee the reporting process, the reporting working
group will set up a centralized operation focused exclusively on the
recipient reporting effort from September 23 until October 30, 2009.
[Footnote 58] Pennsylvania's Accountability Office told the program
agencies that the first 10 days of October will be difficult but
manageable. Pennsylvania's Accountability Office will also manage the
process for program agencies to revise their reports and respond to any
issues flagged by federal agencies.
Looking beyond the recipient reporting on jobs and project status,
Pennsylvania's Accountability Office is developing a performance
measure framework to track results of Pennsylvania's Recovery Act
spending and report meaningful outcomes to the public. Pennsylvania's
Accountability Office has reached out to state agencies receiving
Recovery Act funds to identify performance measures for each Recovery
Act program. In addition to job creation measures, Pennsylvania's
Accountability Office plans to compile both program-specific output
measures as well as longer-term outcome measures. For example, output
measures for highway and bridge projects might include the number of
road miles resurfaced and the number of bridges rehabilitated, whereas
longer-term outcomes would be reducing the percentage of road miles
rated as in poor condition in terms of roughness and the share of
Pennsylvania bridges rated as structurally deficient. Where possible,
Pennsylvania's Accountability Office is trying to identify measures of
energy savings or environmental improvement. After the first round of
recipient reporting is complete in October, Pennsylvania's
Accountability Office will continue work to finalize the performance
measures and begin collecting data for publication on Pennsylvania's
recovery Web site, [hyperlink, www.recovery.pa.gov].
State Comments on This Summary:
We provided the Governor of Pennsylvania with a draft of this appendix
on September 9, 2009, and the Chief Implementation Officer and Chief
Accountability Officer responded for the Governor on September 11,
2009. These officials agreed with our draft and provided clarifying and
technical comments that we incorporated where appropriate.
GAO Contacts:
Phillip Herr, (202) 512-2834 or herrp@gao.gov:
Mark Gaffigan, (202) 512-3168 or gaffiganm@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, MaryLynn Sergent, Assistant
Director; Richard Jorgenson, analyst-in-charge; Waylon Catrett; Brian
Hartman; John Healey; Richard Mayfield; Andrea E. Richardson; and
Laurie F. Thurber made major contributions to this report:
[End of section]
Footnotes for Appendix XVI:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Pennsylvania's state fiscal year begins on July 1 and ends on June
30.
[3] S. 850, Gen. Assem. of 2009-2010, Reg. Sess. (Pa. 2009).
[4] As of February 2009, Pennsylvania's Rainy Day Fund balance was $753
million.
[5] In 2008, the Commonwealth Court of Pennsylvania held that the
federal Fair Labor Standards Act (FLSA) does not preempt the provision
of the state constitution requiring an appropriation by the state
legislature before any money can be paid out of the state treasury.
Council v.Com., 954 A.2d 706 (Pa. Comm. Ct. 2008). The court found that
FLSA "does not authorize an illegal raid on the State's treasury to
make payroll" and that the remedy for a violation of FLSA is the remedy
created by Congress, liquidated damages. Id. at 718. However, Labor's
Employment Standards Administration, Wage and Hour Division, initiated
an inquiry under the federal FLSA in response to state employee
complaints.
[6] According to the Secretary of the Budget, Senate Bill 850 was based
on an outdated estimate of the 2008-09 budget shortfall and assumed 1
percent growth in revenues.
[7] The stopgap budget included partial funding for mental health and
Medical Assistance to meet requirements for Pennsylvania to be eligible
for the increased Federal Medical Assistance Percentage funds under the
Recovery Act.
[8] Recovery Act funds used to stabilize the state's budget were the
Federal Medical Assistance Percentage funds (discussed in detail in GAO-
09-1016). Other funds available for states' budget stabilization
include SFSF moneys.
[9] 72 Pa. Cons. Stat. § 4615.
[10] As of August 14, 2009, Pennsylvania had filled 166 positions
specifically for Recovery Act programs, including 155 staff for food
stamp eligibility and processing. Another 154 positions are approved,
mostly to administer the workforce investment, unemployment
compensation, and food stamp programs.
[11] According to state education officials, local school districts may
obligate ESEA Title I, Part A and IDEA Recovery Act funds as soon as
their applications are received in an approvable form.
[12] S. 850, Gen. Assem. of 2009-2010, Reg. Sess. (Pa. 2009).
[13] S. 850, Gen. Assem. of 2009-2010, Reg. Sess. (Pa. 2009).
[14] School districts receive monthly subsidy payments from the state
on the last Thursday of every month.
[15] These four IHEs are Pennsylvania State University, University of
Pittsburgh, Temple University, and Lincoln University.
[16] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver
and must obligate all of their funds by September 30, 2011. This will
be referred to as a carryover limitation.
[17] According to a PennDOT official, one additional project was not
certified. This project was included in a subsequent certification.
[18] Federal regulations require states to maintain a process for
reviewing project cost estimates. In addition, the state shall seek to
revise the federal funds obligated for a project within 90 days after
it has determined that the estimated federal share of project costs has
decreased by $250,000 or more.(23 C.F.R. Part 630.106.) The funds
deobligated from this process may be used for other projects, once
funds have been obligated by FHWA.
[19] This latter project, which is to construct access ramps for people
with disabilities, has a total value of $1.1 million of which about
$136,000 in Recovery Act funds will be used.
[20] Pennsylvania's spending for other types of projects (such as
transportation enhancements) was similar to national averages.
[21] See GAO, Highway Bridge Program: Clearer Program Goals and
Performance Measures Needed for a More Focused and Sustainable Program,
[hyperlink, http://www.gao.gov/products/GAO-08-1043] (Washington, D.C.:
Sept. 10, 2008), for more information.
[22] In December 2007, Pennsylvania's Department of the Auditor General
reported on its investigation of PennDOT's procedures for evaluating,
selecting, and monitoring contracts with private firms that provide
inspection services. Among the findings were that PennDOT had failed to
verify individual inspector qualifications and, in some instances,
substitutes were used to do inspections rather than inspection staff
listed on bid documents. According to the Auditor General's report,
PennDOT took actions during 2007 to revise its procedures regarding
contract consultant inspectors to address the issues in the report,
including instituting procedures to ensure that inspector
qualifications are verified by district offices. For more information
see Commonwealth of Pennsylvania, Department of the Auditor General,
Special Investigation of the Pennsylvania Department of Transportation,
Construction Inspection Consultants, December 2007.
[23] In accordance with federal regulations, PennDOT maintains a DBE
program that among other things, ensures that there is no
discrimination in contracting opportunities for disadvantaged
businesses, for example, firms owned by women and minorities.
[24] Pub. L. No. 111-5, § 1512, 123 Stat. 115, 287 (Feb. 17, 2009).
[25] Reports are to include all subcontractors and subconsultants.
[26] The other two public transit programs receiving Recovery Act funds
are the Fixed Guideway Infrastructure Investment program and the
Capital Investment Grant program, each of which was apportioned $750
million. The Transit Capital Assistance Program and the Fixed Guideway
Infrastructure Investment program are formula grant programs, which
allocate funds to states or their subdivisions by law. Grant recipients
may then be reimbursed for expenditures for specific projects based on
program eligibility guidelines. The Capital Investment Grant program is
a discretionary grant program, which provides funds to recipients for
projects based on eligibility and selection criteria.
[27] Urbanized areas are areas encompassing a population of not less
than 50,000 people that have been defined and designated in the most
recent decennial census as an "urbanized area" by the Secretary of
Commerce. Nonurbanized areas are areas encompassing a population of
fewer than 50,000 people.
[28] The 2009 Supplemental Appropriations Act authorizes the use of up
to 10 percent of each apportionment for operating expenses. Pub. L. No.
111-32, § 1202, 123 Stat. 1859, 1908 (June 24, 2009). In contrast,
under the existing program, operating assistance is generally not an
eligible expense for transit agencies within urbanized areas with
populations of 200,000 or more.
[29] The federal share under the existing formula grant program is
generally 80 percent.
[30] Designated recipients are entities designated by the chief
executive officer of a state, responsible local officials, and publicly
owned operators of public transportation to receive and apportion
amounts that are attributable to transportation management areas.
Transportation management areas are areas designated by the Secretary
of Transportation as having an urbanized area population of more than
200,000, or upon request from the governor and MPOs designated for the
area. MPOs are federally mandated regional organizations, representing
local governments and working in coordination with state departments of
transportation, that are responsible for comprehensive transportation
planning and programming in urbanized areas. MPOs facilitate decision
making on regional transportation issues, including major capital
investment projects and priorities. To be eligible for Recovery Act
funding, projects must be included in the region's Transportation
Improvement Program and the approved State Transportation Improvement
Program.
[31] DOT has interpreted the term obligation of funds to mean the
federal government's commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement and a project agreement is executed.
[32] Philadelphia and Pittsburgh are Pennsylvania's only urbanized
areas with population of 1 million or more. Transit Capital Assistance
funds in the Philadelphia urbanized area were split between the
Southeastern Pennsylvania Transportation Authority and five other state
and regional transit entities in Pennsylvania, New Jersey, Maryland,
and Delaware. Funds in the Pittsburgh urbanized area were split between
the Port Authority of Allegheny County in Pittsburgh and five other
regional transit agencies.
[33] SEPTA's $125.2 million in Transit Capital Assistance funding is
from two allocations: $121.4 million from urbanized area formula (§
5307) funds and $3.8 million in "Growing States" (§ 5340) funds. SEPTA
was also awarded $65.7 million in Fixed Guideway Modernization (§ 5309)
Recovery Act funding by FTA, which combined with the Transit Capital
Assistance funding totals $190.9 million.
[34] Port Authority's $44.0 million in Transit Capital Assistance (§
5307) funding is from two allocations: $43.5 million in urbanized area
formula funds and $0.5 million in "Transportation Enhancement" funds.
Port Authority was also awarded $18.5 million in Fixed Guideway
Modernization (§ 5309) Recovery Act funding by FTA, which combined with
the Transit Capital Assistance funding totals $62.5 million.
[35] PennDOT's $30.2 million grant was awarded by FTA as a Transit
Capital Assistance § 5311 nonurbanized formula grant. PennDOT also
received $9.4 million in § 5307 Transit Capital Assistance funding and
§ 5309 Fixed Guideway Modernization funding for intercity rail.
[36] SEPTA officials reported that they have a total of 32 Recovery Act
projects being funded by a combination of Transit Capital Assistance (§
5307) funds and Fixed Guideway Modernization (§ 5309) funds. FTA has
approved $112.8 million of SEPTA's $125.2 million Transit Capital
Assistance (§ 5307 and § 5340) allocation; to use the remainder of its
allocation, SEPTA plans to amend its grant to add one more project when
its environmental assessment is complete.
[37] SEPTA declares an asset or system as in a "state of good repair"
when no backlog of needs exists and no component is beyond its useful
life. State of good repair projects correct past deferred maintenance
or replace capital assets that have exceeded their useful life.
[38] In its rail modernization report to Congress in April 2009, FTA
named SEPTA as one of seven transit agencies containing the nation's
oldest transit infrastructure, some of which has exceeded its expected
useful life.
[39] In addition to the $44.0 million Transit Capital Assistance (§
5307) Recovery Act grant, Port Authority will also use its $18.5
million Fixed Guideway Modernization (§ 5309) Recovery Act grant to
fund work on the North Shore Connector project.
[40] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009).
[41] These types of funding include Transit Capital Assistance formula
grants in urbanized areas (§ 5307) and nonurbanized areas (§ 5311), as
well as Fixed Guideway Infrastructure Investment grants (§ 5309).
[42] SEPTA submitted applications to amend two grants: its § 5307
Transit Capital Assistance urbanized formula grant and its § 5309 Fixed
Guideway Modernization grant.
[43] According to guidance from the House Committee on its Recovery Act
reporting requests, transit agencies in the 256 large urban areas
designated by FTA were the only transit agencies from which the
committee has requested monthly reporting.
[44] The Weatherization Assistance Program funded through annual
appropriations is not subject to the Davis-Bacon Act.
[45] The five types of "interested parties" are state weatherization
agencies, local community action agencies, unions, contractors, and
congressional offices.
[46] DOE did not approve Pennsylvania's state weatherization plan when
it was first submitted on May 12, 2009, in part because DCED did not
follow the required public notice and a hearing process when adding the
Pennsylvania Housing Finance Agency as the state's 43rd subrecipient
agency. DCED held a public hearing on August 5 for the Pennsylvania
Housing Finance Agency to apply as a subrecipient agency and to discuss
other changes to the state plan, DCED submitted Pennsylvania's amended
plan to DOE on August 10, and DOE approved the plan on August 25.
[47] Pennsylvania Department of the Auditor General, A Special
Performance Audit of the Department of Community and Economic
Development's Weatherization Assistance Program, August 2007.
Pennsylvania's Single Audit report for 2008 also found noncompliance
and internal control deficiencies in DCED's program monitoring of Low
Income Home Energy Assistance Program weatherization subrecipients.
Although Recovery Act funds will be administered under DOE's
Weatherization Assistance Program, and not under the U.S. Department of
Health and Human Services (HHS), this finding is relevant because it
relates directly to DCED's monitoring of weatherization subrecipients.
The Chief Operating Officer for DCED said that HHS is reviewing DCED's
corrective action plan to address the Single Audit findings.
[48] H.R. Rep. No. 111-16, at 448 (2009).
[49] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[50] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[51] The Central regional board includes Centre, Clinton, Columbia,
Lycoming, Mifflin, Montour, Northumberland, Snyder, and Union counties.
The Northwest regional board includes Clarion, Crawford, Erie, Forest,
Venango, and Warren counties. The City of Philadelphia is a countywide
city.
[52] The South Central regional board serves Adams, Cumberland,
Dauphin, Franklin, Juniata, Lebanon, Perry, and York counties.
[53] Officials made similar comments earlier, as reported in GAO,
Recovery Act: States' and Localities' Current and Panned Uses of Funds
While Facing Fiscal Stresses (Pennsylvania), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 2009).
[54] According to Philadelphia Workforce Development Corporation and
Philadelphia workforce board officials, PYN was the sole bidder for the
past two rounds for the competitive process to secure the
administration of YouthWorks, Philadelphia's comprehensive youth
workforce development program, which includes year-round and summer WIA
Youth Programs.
[55] South Central workforce board officials stated that potential
contractors were made aware that there would be additional Recovery Act
funding available for WIA summer youth employment activities for those
contractors that were successfully awarded year-round WIA Youth Program
contracts.
[56] Public housing agencies receive money directly from the federal
government (HUD). Funds awarded to the public housing agencies do not
pass through the state budget.
[57] An ERP solution is an automated system using commercial off-the-
shelf software and consisting of multiple, integrated functional
modules that perform a variety of tasks, such as accounts payable,
general ledger accounting, and grant management.
[58] The centralized efforts will reopen in late December for the next
quarterly recipient reporting round.
[End of section]
Appendix XVII: Texas:
Overview:
The following summarizes GAO's work on the third of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Texas. The full report covering all of our
work at 16 states and the District of Columbia is available at
[hyperlink, http://www.gao.gov/recovery].
Use of Funds: We reviewed three programs in Texas funded under the
Recovery Act Highway Infrastructure Investment funds, Workforce
Investment Act (WIA) Youth Program, and Weatherization Assistance
Program. We selected these programs for different reasons. The Highway
Infrastructure Investment fund was selected because highway projects
have been underway in Texas for several months, and provided an
opportunity to review contracts. The WIA Youth Program was selected
because Texas received a large increase in funding, the program was in
full operation, and it provided an opportunity to review contracts. We
selected the Weatherization Assistance Program because the Recovery Act
provided a 25-fold increase in Texas's funding. With these programs we
focused on how funds were being used; how safeguards were being
implemented, including those related to procurement of goods and
services; and how results were being assessed. We reviewed contracting
procedures and examined two specific contracts under both the Recovery
Act Highway Infrastructure Investment fund and the WIA Youth Program.
In addition to these three programs, we also updated funding
information on the use of Recovery Act funding in Texas's budget,
including the use of the U.S. Department of Education (Education) State
Fiscal Stabilization Fund (SFSF). Consistent with the purposes of the
Recovery Act, funds from the programs we reviewed are being directed to
help Texas and local governments stabilize their budgets and to
stimulate infrastructure development and expand existing programs--
thereby providing needed services and potential jobs. The following
provides highlights of our review of these funds:
* U.S. Department of Education State Fiscal Stabilization Fund.
Education approved Texas's application making more than $2 billion
available for education programs, including public schools and higher
education. As of September 8, 2009, the state has received 287
applications from school districts for these funds.
* Highway Infrastructure Investment Program. The U.S. Department of
Transportation's Federal Highway Administration (FHWA) apportioned
$2.25 billion in Recovery Act funds to Texas. As of September 1, 2009,
the federal government has obligated $1.19 billion for 287 projects to
Texas and $47 million has been reimbursed by the federal government.
Seventy-eight percent of highway obligations have been for pavement
improvements and roadway widening.
* Workforce Investment Act (WIA) Youth Program. The Texas Workforce
Commission has allocated approximately $70 million of the WIA Youth
Recovery Act funds, received from the Department of Labor, to 28
workforce development boards within the state. The goal is to expend at
least 70 percent of these funds by September 30, 2009. As of August 15,
2009, local workforce development boards had expended approximately
$31.5 million and enrolled over 19,500 youth in summer employment
activities throughout Texas. Texas is exceeding its target goal of
summer employment for 14,420 youth.
* Weatherization Assistance Program. On July 10, 2009, the U.S.
Department of Energy provided the Texas Department of Housing and
Community Affairs (TDHCA) access to $163.5 million of the state's $327
million Recovery Act funding allocation. On September 11, 2009, TDHCA
entered into contracts totaling $145.5 million with subrecipients. The
remaining $17.8 million will be used for TDHCA administration and
technical assistance and training for subrecipients and grantees.
Use of Recovery Act Funding in the Texas State Budget:
On September 1, 2009, Texas began a new 2-year budget cycle, formally
called the 2010-2011 biennium, making available about $12 billion in
Recovery Act funding for several programs, including Medicaid, public
schools, higher education, and transportation.[Footnote 2] However,
Texas officials would like the federal government to clarify the
process for recouping administrative costs and provide specific
guidance on which Recovery Act programs are subject to the 0.5 percent
administrative cap. In the longer term, the effect of the Recovery Act
on the state's fiscal position remains uncertain.
Texas Is Using Recovery Act Funds, but Seeks to Clarify Administrative
Cost Issues:
As Texas implements its budget for the 2010-2011 biennium, state
officials provided updated information on the use of Recovery Act
funds, including the State Fiscal Stabilization Fund (SFSF), to support
state programs. As the state begins to receive more Recovery Act funds,
officials with the Governor's office indicated that they would like
more federal guidance concerning administrative costs related to the
Recovery Act. Texas officials have participated in conference calls
with OMB officials, but did not receive requested guidance on what
Recovery Act funded programs are subject to the 0.5 percent
administrative cap.
Texas Preparing to Use State Fiscal Stabilization Fund:
On July 24, 2009, the U.S. Department of Education (Education) approved
Texas's application for the Recovery Act State Fiscal Stabilization
Fund (SFSF), making available more than $2 billion.[Footnote 3]
According to an assessment by the Texas Legislative Budget Board (LBB),
[Footnote 4] the 2010-2011 biennial budget uses SFSF funds to provide
funding for education programs, including public schools, higher
education and to the Texas Education Agency (TEA) for textbooks.
Officials in the Governor's office told us that the TEA is accepting
applications from school districts seeking SFSF funds. As of September
8, 2009, TEA reports that the agency has received 287 applications for
SFSF funds.[Footnote 5] The Governor's staff anticipated that school
districts would begin receiving SFSF funds in September 2009, and this
would include retroactive funding for cost incurred for the period
between the enactment date of the Recovery Act (February 17, 2009) and
the effective date of the application.
Texas Has Appropriated Funds to Pay Administrative Costs, but Seeks
Clarification on Federal Guidance:
The state legislature's conference committee report for the 2010-2011
budget identifies two sources of funding for administrative costs.
[Footnote 6] The legislature appropriated $10 million to the Governor's
office from the Recovery Act's government services fund for
administrative costs.[Footnote 7] State officials told us that the
Governor's office may provide this funding to other state agencies with
oversight responsibilities. The second source is money recovered from
the State-wide Cost Allocation Plans (SWCAP) for administrative costs.
On May 11, the Office of Management and Budget (OMB) issued a memo
describing how states could recover central administrative costs
related to carrying out Recovery Act programs and activities.[Footnote
8] However, officials with the Governor's office indicated that this
guidance does not fully address their concerns.
The OMB memo gives the states the option to recoup costs for central
administrative costs through SWCAP, which states submit to the U.S.
Department of Health and Human Services annually. The guidance states
that any estimated cost amount should not exceed 0.5 percent of the
total Recovery Act funds received by the state. However, the Governor's
staff said they were concerned about OMB's decision to use the SWCAP as
a mechanism for states to recover administrative costs. The officials
believe that using the SWCAP to recoup Recovery Act administrative
costs could require duplicate reporting by the Texas state government--
once for the Recovery Act and once for already established federal
programs.
The Governor's staff also stated they needed more guidance on what
programs were to be included in the total dollar amount that the 0.5
percent would be based on. For example, the Governor's staff said that
if Recovery Act funds Texas received for Medicaid were included; the
amount Texas could recoup in administrative costs would increase. For
the 2010-2011 biennium, the Texas LBB estimated that the Recovery Act
would increase federal funds for Medicaid by $2.513 billion, of which
0.5 percent is approximately $12.6 million. Texas officials told us
they participated in conference calls with OMB officials where they
requested guidance on this matter. Officials added that OMB has issued
clarifying questions and answers. However, Texas officials thought
further guidance is needed from OMB, including a listing of programs
that are subject to the 0.5 percent administrative cap.
State Is Assessing Future Budget Funding:
Our July and April reports noted that both the Governor and legislature
have provided extensive guidance to state agencies indicating that much
of the Recovery Act funding is temporary and should be used for
nonrecurring expenditures, such as onetime costs. The conference
committee report for the 2010-2011 appropriations bill directs state
agencies to "give priority to expenditures that do not recur beyond the
2010-2011 biennium."[Footnote 9] Similarly, the Governor in his
proclamation concerning the state budget reiterated that "state
agencies and organizations receiving these funds should not expect them
to be renewed by the state in the next biennium."[Footnote 10]
The LBB is asking state agencies to report on their uses of Recovery
Act funds, with the first report due in September 2009. LBB staff told
us that these reports will allow them to monitor spending on an ongoing
basis. A state legislative official noted that the LBB reports will be
sent to key leaders in the legislature. Moreover, the Texas
legislature's House Select Committee on Federal Economic Stabilization
Funding held a hearing in August to monitor how state agencies were
using Recovery Act funding.
LBB staff said that the Recovery Act had helped fill gaps in funding
education and Medicaid programs in the 2010-2011 budget. For example,
LBB staff anticipate SFSF funds being used to address what likely would
have been a gap in education funding for 2010-2011. More specifically,
the staff expected SFSF funds would be used to replace funding the
state usually receives from the state's Permanent School Fund,[Footnote
11] which has been adversely affected by financial market turmoil.
However, LBB staff indicated that financial market turmoil may prevent
the state from transferring Permanent School Fund money to support
education in 2010-2011. The 2010-2011 biennial budget uses SFSF funds
to support education. A senior official with the Governor's office
reiterated the state's commitment to fund education regardless of the
performance of the Permanent School Fund.[Footnote 12]
In our recent discussions, LBB staff noted the importance of
identifying revenue to support education spending as well as the
state's Medicaid program,[Footnote 13] when Recovery Act funding ends.
In the case of education, LBB officials reported that there is
uncertainty about whether the Permanent School Fund would provide a
distribution that could fund education in the 2012-2013 biennium.
Moreover, officials from two legislative offices told us that it may be
challenging for some state agencies to scale back, once the Recovery
Act funding ends. However, officials in the Governor's office reported
that they continue to provide guidance indicating that Recovery Act
funding is temporary. For example, a senior official said that the
application for school districts to use in applying for SFSF funds
makes clear that the SFSF funding is onetime.
Growth in Texas's Tax Revenue Has Declined:
The Texas Comptroller has certified that sufficient funding exists to
support the 2010-2011 biennium budget. However, in January 2009, the
Comptroller projected that Texas may have 10.5 percent less revenue
available for general purpose spending for the 2010-2011 biennium than
was available in 2008-2009. Specifically, the Comptroller's Biennial
Revenue Estimate anticipated that Texas would have $77.1 billion
available for general purpose spending in the 2010-2011 biennium,
compared to $86.2 billion in the previous 2008-2009 biennium. The
Comptroller's revenue estimate has important implications. According to
a report by the Texas legislature's House Research Organization, for an
appropriations bill to be valid, the Comptroller must certify that
there is enough revenue to cover the approved spending.[Footnote 14]
Of particular importance for Texas is the outlook for sales tax
revenue. For the past two decades, state sales tax revenues have
accounted for more than half of the state's general revenue related tax
collections.[Footnote 15] The Comptroller's projections suggest that
sales tax collections will slightly increase in 2009 and 2010. For
example, in fiscal year 2010, the Comptroller projects sales tax
revenue will increase by 0.5 percent. According to this report, this
slight increase expected in fiscal year 2010 would come after strong
revenue growth in fiscal year 2008. In fiscal year 2008, sales tax
receipts increased 6.6 percent from the previous year. The
Comptroller's report notes that, "loss of jobs, tighter credit, and
uncertainty about the economy are likely to keep consumers at home."
Moreover, figure 1 shows that the projected trend in sales tax
collections for 2010-2011 would contrast with more rapid growth in
sales tax collections in 2006 and 2007. Looking ahead, the Comptroller
anticipates that sales tax revenue will grow at a faster pace in 2011.
[Footnote 16]
Figure 1: Texas Sales Tax Collections: 2006-2011:
[Refer to PDF for image: line graph]
Year: 2006;
Sales tax collections: $18.2 billon.
Year: 2007;
Sales tax collections: $19.5 billon.
Year: 2008;
Sales tax collections: $21.6 billon.
Year: 2009;
Sales tax collections: $21.7 billon.
Year: 2010;
Sales tax collections: $21.8 billon.
Year: 2011;
Sales tax collections: $22.7 billon.
Source: GAO analysis of Texas Comptroller data from Biennial Revenue
Estimate: 2010-2011 and Biennial Revenue Estimate, 2008-2009.
Note: Figures for 2009-2011 as well as 2007 are estimates by the
Comptroller.
[End of figure]
State Officials' Perspectives on the Rainy Day Fund:
State officials had different perspectives concerning the potential
need in the future to use money from the state's rainy day fund, the
Texas Economic Stabilization Fund.[Footnote 17] Officials from several
legislative offices indicated it was likely that the state would need
to use rainy day funds in the 2012-2013 biennium. For example, one of
the officials noted that the state may face a "funding cliff," as
Recovery Act funding ends. Furthermore, the official pointed to 2003
when the state used money from the rainy day fund to address a budget
deficit. According to a report by the Texas legislature's House
Research Organization,[Footnote 18] rainy day funds were used in fiscal
2003 to support several state programs, including $460.3 million for
Medicaid acute care as well as $295 million for the Texas Enterprise
Fund to support economic development.[Footnote 19] A senior official in
the Governor's office did not anticipate the need to use money from the
rainy day fund in the 2010-2011 budget. Moreover, the Governor's
advisor noted that appropriating funds from the rainy day funds would
require a super-majority vote in the legislature.[Footnote 20]
There has been recent discussion in the Texas legislature regarding the
projected future balance of the rainy day fund. In an August hearing,
the chairman of the Texas legislature's House Select Committee on
Federal Economic Stabilization Funding requested updated information
concerning the balance in the rainy day fund. An official from the
Comptroller's office reported that the rainy day fund currently had a
balance of approximately $6.7 billion. In January 2009, the Comptroller
had anticipated that money would be transferred into the rainy day fund
in 2010-2011 and consequently the rainy day balance would reach $9.1
billion. According to a report by the Comptroller's office, the state
is required to transfer half of any General Revenue Fund surplus in
each biennium and 75 percent of any oil and natural gas production
taxes exceeding 1987 levels into the rainy day fund. In the Comptroller
office's August statement, officials continued to expect that the state
would transfer money into the rainy day fund in 2010-2011.
Specifically, the official estimated that $852 million would be
transferred in fiscal 2010 and $740 million in fiscal 2011. Oil and gas
production taxes continue to be an important source of revenue for the
rainy day fund. According to the Comptroller's office, $852 million
from oil and gas production taxes is anticipated to be transferred into
the rainy day fund in fiscal 2010. Figure 2 shows recent trends in the
rainy day fund's ending balance.
Figure 2: Texas Economic Stabilization Fund, Ending Balances (1990-
2009):
[Refer to PDF for image: line graph]
Fiscal year: 1990;
Ending balance: $0.03 billion.
Fiscal year: 1991;
Ending balance: $0 billion.
Fiscal year: 1992;
Ending balance: $0.24 billion.
Fiscal year: 1993;
Ending balance: $0.07 billion.
Fiscal year: 1994;
Ending balance: $0.04 billion.
Fiscal year: 1995;
Ending balance: $0.01 billion.
Fiscal year: 1996;
Ending balance: $0.01 billion.
Fiscal year: 1997;
Ending balance: $0.01 billion.
Fiscal year: 1998;
Ending balance: $0.08 billion.
Fiscal year: 1999;
Ending balance: $0.1 billion.
Fiscal year: 2000;
Ending balance: $0.11 billion.
Fiscal year: 2001;
Ending balance: $0.24 billion.
Fiscal year: 2002;
Ending balance: $1.08 billion.
Fiscal year: 2003;
Ending balance: $0.66 billion.
Fiscal year: 2004;
Ending balance: $0.42 billion.
Fiscal year: 2005;
Ending balance: $0.01 billion.
Fiscal year: 2006;
Ending balance: $0.43 billion.
Fiscal year: 2007;
Ending balance: $1.38 billion.
Fiscal year: 2008;
Ending balance: $4.42 billion.
Fiscal year: 2009;
Ending balance: $6.68 billion.
Source: GAO analysis of data from Texas Comptroller‘s office.
Notes: Figures have been adjusted to report the ending balance in
constant 2009 dollars using the GDP price index.
Figure for 2009 is preliminary data, year to date.
No data is available for 1991.
[End of figure]
Texas Is Proceeding with Highway Infrastructure Investment Projects:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The Recovery Act requires
that 30 percent of these funds be suballocated, primarily based on
population, for metropolitan, regional, and local use. Highway funds
are apportioned to the states through federal-aid highway program
mechanisms, and states must follow the requirements of the existing
program, which include ensuring the project meets all environmental
requirements associated with the National Environmental Policy Act
(NEPA), paying a prevailing wage in accordance with federal Davis-Bacon
requirements, complying with goals to ensure disadvantaged businesses
are not discriminated against in the awarding of construction
contracts, and using American-made iron and steel in accordance with
Buy America program requirements. While the maximum federal fund share
of highway infrastructure investment projects under the existing
federal-aid highway program is generally 80 percent, under the Recovery
Act, it is 100 percent.
As we reported in July 2009, $2.25 billion was apportioned to Texas in
March 2009 for highway infrastructure and other eligible projects, as
shown in figure 3. As of September 1, 2009, $1.19 billion had been
obligated for 287 projects. As of September 1, 2009, $47 million had
been reimbursed by FHWA. The U.S. Department of Transportation has
interpreted the term "obligation of funds" to mean the federal
government's contractual commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement. States request reimbursement from FHWA as
payments are made to contractors working on approved projects. Actual
payments to contractors by Texas totaled about $47 million.
Figure 3: Flow of Texas Recovery Act Highway Funds as of September 1,
2009:
[Refer to PDF for image: vertical bar graph]
Funds: Apportioned: $2.25 billion;
Funds: Obligated: $1.19 billion;
Funds: State payments to contractors: $0.05 billion;
Funds: Reimbursed: $0.05 billion.
Source: GAO analysis of U.S. Department of Transportation and Texas
Department of Transportation data.
[End of figure]
Spending Continues on Planned Projects:
Seventy-eight percent of Recovery Act highway obligations for Texas
have been for pavement improvements and widening. Specifically, $933.5
million of the $1.19 billion obligated, as of September 1, 2009, is
being used for projects such as resurfacing, repairing, and widening
roadways, including $513.5 million for pavement improvements and $420
million for roadway widening. Texas primarily selected highway
preservation projects, such as resurfacing, repair and widening, which
can be quickly started and completed. Figure 4 shows obligations by the
types of road and bridge improvements being made as of September 1,
2009.
Figure 4: Highway Obligations for Texas by Project Improvement Type as
of September 1, 2009:
[Refer to PDF for image: pie-chart]
Pavement projects total (84 percent, $1,005.9 million):
Pavement improvement ($513.5 million): 43%;
Pavement widening ($420 million): 35%;
New road construction ($72.4 million): 6%.
Bridge projects total (9 percent, $106.7 million):
New bridge construction ($82.4 million): 7%;
Bridge improvement ($13.4 million): 1%;
Bridge replacement ($10.9 million): 1%.
Other (7 percent, $82.2 million):
Other ($82.2 million): 7%.
Source: GAO analysis of FHWA data.
Note: "Other" includes safety projects, such as improving safety at
railroad grade crossings, and transportation enhancement projects, such
as pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
[End of figure]
Construction at Two Sites Is Ongoing and, According to State Officials,
Based on Competitively Awarded Fixed-Price Contracts:
In August 2009, we returned to two Recovery Act-funded projects we
visited for our July report.[Footnote 21] One project site was within
the Texas Department of Transportation's Fort Worth district office and
the other site was within the Dallas district office. For this report,
we revisited these two projects and observed work that was underway
using Recovery Act funds.
Figure 5 shows the Fort Worth district office project before
construction work started. This project is located in Tarrant County
and involves resurfacing a 5-mile section of Interstate 820 to improve
safety and maintain the roadway by performing pavement and bridge
repairs. Figure 6 shows the work in progress.
Figure 5: Fort Worth, Texas, Interstate 820 Roadway Deterioration Prior
to Resurfacing Using Recovery Act Funds:
[Refer to PDF for image: photograph]
This picture is of a highway project in Tarrant County, Texas, which is
funded with Recovery Act funds. The project involves resurfacing a 5-
mile section of Interstate 820 to improve safety and maintain the
roadway by performing pavement and bridge repair.
Source: Texas Department of Transportation.
[End of figure]
Figure 6: Fort Worth, Texas, Interstate 820 Resurfacing in Process to
Repair Roadway Deterioration Using Recovery Act Funds:
[Refer to PDF for image: photograph]
This is a picture of a highway project in Tarrant County, Texas, which
is funded with Recovery Act funds. The picture depicts the resurfacing
process on Interstate 820 to repair roadway deterioration.
Source: Texas Department of Transportation.
[End of figure]
The Dallas district project is located in Cedar Hill, Texas, and
involves the construction of intersection improvements including
widening of the intersection, signal upgrades, and the addition of turn
lanes at Farm-to-Market Road 1382 and Straus Road. Figure 7 shows the
intersection prior to the start of construction and figure 8 shows the
work site during our review.
Figure 7: Cedar Hill, Texas, Intersection at Farm-to-Market Road 1382
and Straus Road before Recovery Act-Funded Improvements:
[Refer to PDF for image: photograph]
The picture is of a highway project that involves an intersection in
Cedar Hill, Texas. The project is funded with Recovery Act funds and
entails the widening of an intersection, signal light upgrades, and the
addition of turn lanes.
Source: GAO.
[End of figure]
Figure 8: Cedar Hill, Texas, Intersection at Farm-to-Market Road 1382
and Straus Road, Temporary Turn Lane Constructed as Recovery Act-Funded
Improvements Advance:
[Refer to PDF for image: photograph]
This picture shows an intersection in Cedar Hill, Texas, under
construction.
Source: GAO.
[End of figure]
According to Texas Department of Transportation officials, the two
projects were initiated through competitively awarded contracts.
According to state officials, after soliciting proposals for the
projects, Texas received and evaluated 6 proposals for the Fort Worth
district project and 10 proposals for the Dallas district project.
Texas officials stated they followed the practice of awarding contracts
to the lowest responsive bidder, and awarded fixed-price contracts for
both projects.[Footnote 22] The Fort Worth and Dallas district
contracts were awarded to the low bidder for approximately $3.97
million and $1.38 million respectively.
Texas Is Meeting Recovery Act Highway Infrastructure Spending
Requirements, and Maintenance-of-Effort Certification Has Been
Accepted:
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. States are required to do the following:
* Ensure that 50 percent of apportioned Recovery Act funds were
obligated within 120 days of apportionment (before June 30, 2009). The
50 percent rule applies only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated, primarily based on population, for metropolitan,
regional, and local use. In addition, states are required to ensure
that all apportioned funds--including suballocated funds--are obligated
within 1 year. The Secretary of Transportation is to withdraw and
redistribute to other states any amount that is not obligated within
these time frames.[Footnote 23] As of September 1, 2009, approximately
$1.2 billion for highway projects has been obligated using Recovery Act
funds. Included is approximately $197 million obligated from the 30
percent of funds suballocated. The rate of obligation for suballocated
funds is about 29 percent compared to a 53 percent obligation rate for
Texas Recovery Act highway funds in general. Although the obligation of
suballocated funds has been slower, Texas officials anticipate that
suballocated funds will be obligated within the 1-year time frame
required.
* Certify that the state will maintain the level of spending for the
types of transportation projects funded by the Recovery Act that it
planned to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state is required to identify the
amount of funds the state plans to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 24] Following
an initial certification by Texas dated March 17, 2009, the U.S.
Secretary of Transportation informed Texas on April 20, 2009, that
conditional and explanatory certifications were not permitted, and
provided guidance. Subsequent to the Secretary's guidance, Texas
resubmitted certifications on May 22, 2009, and July 9, 2009. The
Office of the Secretary of Transportation accepted the Texas
certification, as of August 13, 2009.
Texas Transportation Agency Providing Monitoring and Oversight of
Highway Contracts:
According to Texas Department of Transportation officials, highway
construction project management includes daily oversight of both
contractors and subcontractors by on-site inspectors. Resident
engineers for each work site keep a daily log of the quantity of
materials delivered and installed. The engineers take measurements to
verify the quantity of materials used (e.g., loads of asphalt) and
whether those quantities conform to established specifications. As an
additional check, state officials told us that independent record
keepers verify the inspectors' calculations before payment to
contractors or subcontractors is authorized.
Workforce Investment Act (WIA) Youth Program:
The Recovery Act provides an additional $1.2 billion in funds for the
Workforce Investment Act (WIA) Youth program, including summer
employment. Administered by the Department of Labor (Labor), the WIA
Youth Program is designed to provide low-income in-school and out-of-
school youth 14 to 21 years old, who have additional barriers to
success, with services that lead to educational achievement and
successful employment, among other goals. Funds for the program are
distributed to states based on a statutory formula; states, in turn,
distribute at least 85 percent of the funds to local areas, reserving
as much as 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have the flexibility
to decide how they will use the funds to provide required services.
While the Recovery Act does not require all funds to be used for summer
employment, in the conference report accompanying the bill that became
the Recovery Act,[Footnote 25] the conferees stated they were
particularly interested in states using these funds to create summer
employment opportunities for youth. While the WIA Youth Program
requires a summer employment component to be included in its year-round
program, Labor has issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 26] Local areas may design summer
employment opportunities to include any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. A key goal of a summer employment program,
according to Labor's guidance, is to provide participants with the
opportunity to (1) experience the rigors, demands, rewards, and
sanctions associated with holding a job, (2) learn work-readiness
skills on the job, and (3) acquire measurable communication,
interpersonal, decision-making, and learning skills. Labor has also
encouraged states and local areas to develop work experiences that
introduce youth to opportunities in "green" educational and career
pathways. Work experience may be provided at public sector, private
sector, or nonprofit work sites. The work sites must meet safety
guidelines, as well as federal and state wage laws.[Footnote 27]
Labor's guidance requires that each state and local area conduct
regular oversight and monitoring of the program to determine compliance
with programmatic, accountability, and transparency provisions of the
Recovery Act and Labor's guidance. Each state's plan must discuss
specific provisions for conducting its monitoring and oversight
requirements.
The Recovery Act made several changes to the WIA Youth Program when
youth are served using these funds. It extended eligibility through age
24 for youth receiving services funded by the act, and it made changes
to the performance measures, requiring that only the measurement of
work readiness gains will be required to assess the effectiveness of
summer-only employment for youth served with Recovery Act funds.
Labor's guidance allows states and local areas to determine the
methodology for measuring work readiness gains within certain
parameters. States are required to report to Labor monthly on the
number of youth participating and on the services provided, including
the work-readiness attainment rate and the summer-employment completion
rate. States must also meet quarterly performance and financial
reporting requirements.
Texas Expects to Meet Expenditure and Participant Targets of WIA Youth
Recovery Act Funds:
Texas expects that it will meet its WIA Youth program expenditure and
participant targets for Recovery Act funds. Texas was awarded
approximately $82 million in WIA Youth Recovery Act funds. Labor issued
guidance stating that these funds are to be expended by June 30, 2011.
The Texas Workforce Commission (TWC), the agency responsible for
overseeing the state's WIA Youth Program, has allocated about $70
million of the WIA Youth Recovery Act funds to 28 workforce development
boards within the state.[Footnote 28] TWC's target is to expend at
least 70 percent of these funds by September 30, 2009, and the
remainder by September 30, 2010. Each workforce board receiving
Recovery Act funds is also expected to meet these targets. As of August
15, 2009, Texas had expended about $31.5 million, or 38.5 percent, and
state officials expect to fully meet their expenditure target. As of
August 15, 2009, over 19,500 youth had been enrolled in summer
employment activities throughout Texas, exceeding TWC's state-wide
participation target of 14,420 youth. Almost 25 percent of enrollees
were out-of-school youth and 74 percent were youth between the ages of
14 and 18. Approximately 6.5 percent of youth enrolled by Texas as of
August 15, 2009, were between the ages of 22 and 24.
Local Boards We Visited Faced Challenges:
In July and August 2009, we revisited the two boards that we reported
on in our July 2009 report. The Gulf Coast Development area, which
covers 13 counties[Footnote 29] and includes the cities of Houston and
Galveston, was allocated $14.8 million for its WIA youth program and
given a target of 3,054 participants for summer employment activities
by TWC. The local area exceeded its target and had placed 5,128 youth
to work sites and expended approximately $11.3 million, or 76 percent
of its allocation as of September 3, 2009. The North Central Texas
development area consists of 14 counties[Footnote 30] and received an
allocation of $4.5 million in WIA Youth Recovery Act funds and a
participant target of 927 youth. As of September 9, 2009, the board had
recruited 1,090 summer youth participants for summer employment
activities. Officials told us that as of August 31, 2009, it had
expended 41 percent of its allocation.
The North Central Workforce Development Board covers a predominately
rural area, and officials attributed their difficulty recruiting youth
to the lack of public transportation in its region and the distances
that must be traveled to work sites. Board officials have encouraged
car pools to facilitate youth mobility. The board also sought to
overcome recruiting challenges by targeting rural areas with various
types of media advertisements and on-site recruiting efforts.
Officials from both boards also cited challenges in dealing with
program eligibility requirements and income limits that they believe
are too low. Officials from one board said that they received 5-7
ineligible applications for every eligible youth recruited, creating a
backlog of files and consuming staff resources. Further, youth
participants and their parents do not always submit required
eligibility documentation in a timely manner, which forces local
officials to use their resources to obtain that documentation. Although
officials we spoke with did not express difficulties recruiting work
sites, they found it challenging to identify work sites that would hire
participants who were between 14 and 16 years old.
Local Boards Used Contractors to Place Youths at a Variety of Work
Sites:
According to officials, to implement Recovery Act-funded summer
employment activities, the Gulf Coast and North Central Workforce
Development Boards awarded contracts to a variety of organizations to
recruit youth, determine participant eligibility, identify potential
employers, and process payroll. According to officials, these
organizations were also responsible for conducting youth and supervisor
orientation sessions, assessing work sites' safety requirements, and
verifying that youth were performing meaningful work. Local workforce
officials from both boards relied on existing relationships with
community-based organizations, schools, and businesses that existed
through other workforce programs to quickly identify work sites and
recruit youth participants. In situations where additional work sites
were needed, North Central board contractors scheduled presentations
with business organizations and conducted outreach phone calls.
In order to recruit youth within the time frames for summer employment
activities prescribed by Labor, both boards and their contractors
purchased radio advertisements and distributed flyers and posters.
Program presentations were also made to youth at schools and community
colleges to notify them of the program. The North Central board
officials informed us that because their area included several rural
areas with declining populations they initiated media recruitment
efforts by purchasing radio and billboard advertisements to meet this
challenge. These efforts led, in part, to an influx of applicants,
including many that were not eligible for the program.
Boards Provided a Variety of Employment Opportunities:
TWC recommended to boards that they establish summer employment
opportunities that were linked, to the extent possible, with education
and training, and credential attainment. In addition to the work
experience component of its summer youth program, the Gulf Coast board
included computer technology occupational skills training and workshops
designed to prepare youth for work. North Central board officials
stated that their participants attended leadership and work training
seminars before beginning work and were given the opportunity to attend
a computer training class. Along with software training, the curriculum
emphasizes presentation skills, professionalism, and personal
responsibility.
Summer youth program participants in the 27 Texas counties covered by
the two workforce areas we visited have been engaged in work activities
offered by a variety of employers, including city and county
governments, community colleges, school districts, and private
companies. For example, one of the Gulf Coast Workforce board's
contractors was a charter school that enrolled 50 youth between the
ages of 14 and 16 for a 7-week entrepreneurship program. The program's
goal was to provide hands-on projects to youth in order to prepare them
for school and for the workforce. Youth were to learn various skills by
attending workshops and presentations by speakers who overcame economic
disadvantages while growing up. The youth had several responsibilities
that had to be completed before successfully completing the program.
For example, participants were required to create and market business
plans to a panel of judges.
Employers and Youth at Sites We Visited Cited Program Benefits:
We conducted work-site visits in order to observe work being performed
and to speak with youth and employers participating in the program. The
five employers we visited generally believed that program participants
were performing good work and recognized the importance of utilizing
youth for meaningful work activities. We spoke with a 23-year-old
program participant who had been placed at a glass distribution company
and who was offered permanent employment after 1 month in the program.
Representatives of the company were pleased with the youth's work and
stated their desire to hire additional program participants. Other
employers we spoke with stated that they would permanently hire youth
if their budgets allowed it. Seven program participants we spoke to
felt that the program was beneficial for them and allowed them to gain
necessary skills to enter the workforce. For example:
* A high-school senior placed as a teacher's assistant at Houston
learning academy attributed her new-found interest in becoming a
teacher to her summer youth work experience. While at the academy, the
high-school senior worked with students, prepared transcripts, and
marketed the school's services to various media outlets. The academy
owner stated that her goal was to teach her youth employees how to
behave at a work place and teach them interpersonal and computer
skills.
* Ten participants working for the City of Houston Human Resources
Department performed a variety of clerical work. One program
participant we spoke with added that he was responsible for helping
City of Houston job applicants without computer skills apply for jobs
online.
* A youth working at a city animal shelter was happy that the program
took her preferences into account when placing her at a work site. Her
goal is to become a veterinarian and she was able to gain first-hand
experience about what would be required of her. Her experience included
working with veterinarians, taking care of animals, cleaning kennels,
and completing intake paperwork.
TWC and Local Boards Oversee Compliance with WIA Youth Program
Requirements:
According to officials, procedures have been put in place to ensure (1)
youth are performing meaningful work activities with adequate
supervision; (2) work sites meet safety requirements; and (3) youth
payroll is accurate. TWC officials monitor the performance and the
financial expenditure of funding allocated to the local workforce
boards and meet monthly to discuss them. Technical assistance is
provided to boards that do not appear to be on track to meet their
participant or expenditure targets. According to officials, TWC also
used established monitoring procedures intended to ensure compliance
with Recovery Act requirements and the requirements established through
the contracts with boards. TWC's Subrecipient Monitoring Department
conducted nine board reviews during the summer and three Recovery Act-
specific reviews at boards receiving the largest youth allocation
amounts.
According to officials, workforce board officials and their contractors
employ monitors to ensure compliance with program requirements.
Contract monitors for the Gulf Coast board make unannounced visits to
select work sites at least twice a week to determine program
compliance. The local boards also employ their own monitors to conduct
additional reviews. For example, monitors from the Gulf Coast Workforce
board also conduct work site visits. The monitors interview youth and
their supervisors to determine whether youth are performing meaningful
work, whether all safety requirements are being met, and whether
supervisors require additional training. The monitors issue reports for
each work site with observations and recommendations. Although issues
have been reported by monitors, such as lack of supervisor training and
too many youth per supervisor, board employees have worked with their
contractors to rectify these problems. Officials from one contractor we
visited told us that work-site orientation sessions have been held to
confirm that employers are aware of program requirements.
Boards Are Using Different Work-Readiness Measures to Assess WIA Youth
Summer Employment Success:
The Recovery Act provided that, of the WIA Youth Program measures, only
the work-readiness measure is required to assess the effectiveness of
the summer-only employment for youth served with Recovery Act funds.
Within the parameters set forth in federal agency guidance, local
boards may determine the methodology they use to measure work readiness
gains. The Gulf Coast and North Central boards have developed different
tools to measure work readiness. The Gulf Coast board will, for
example, use a tool that assesses each youth on 12 factors with a four-
point system based on the frequency with which each factor is
demonstrated.[Footnote 31] Officials from the North Central board have
developed a Work Readiness Policy to identify the methodology for
determining a measurable gain of work-readiness skills.
TWC officials informed us that boards will encourage older out-of-
school youth to use workforce services for permanent employment
options. Automation systems will allow TWC to track summer youth
participants who continue to receive workforce services. This enables
TWC to track and report on their employment and retention experience.
Contracts Awarded to Administer Recovery WIA Summer Youth Employment
Activities:
We selected one contract from each of the boards we visited. In April
2009, the Gulf Coast board issued a request for proposals from entities
interested in providing the requested services. According to agency
officials, the board received 37 proposals from this request and
evaluated each one based on (1) experience performing the requested
services, (2) management approach; and (3) financial stability of the
bidding organization. According to officials, evaluation scores ranged
from 93 to 21, and the highest 13 scores with a range of 93 to 81 were
awarded fixed-price contracts.
The Gulf Coast Workforce Development Board contract we selected had a
score of 89 and was ranked seventh. We reviewed contract documentation
and spoke with agency officials, who explained the following; that the
contract was awarded to a nonprofit organization on April 21, 2009, at
a total value of $2.7 million with a project start date of May 1, 2009,
and a projected completion date of September 30, 2009; and that this
contract was awarded competitively. The contract requires the
organization to recruit young people from low-income families for
subsidized summer jobs, develop work sites or activities or both,
prepare participants for work, match participants to work sites,
counsel young people, and oversee work sites.
According to officials, the North Central Workforce Development Board
awarded only one new contract for its 2009 summer youth activities, and
the remainder of the work was performed by extending an existing
contract. We selected the board's new contract for our review and
reviewed contract documents. On March 17, 2009, the board issued a
request for proposals from entities interested in providing the
requested services. Officials told us the following: that the board
received five proposals from this request and had a panel of evaluators
review each one; that the contract was awarded to a nonprofit
organization on May 4, 2009, at a total value of $740,000, and a
completion date of November 30, 2009; and that this contract was
awarded competitively. The contract requires the organization to
recruit young people from low-income families for subsidized summer
jobs, prepare participants for work, match participants to work sites,
counsel young people, and oversee work sites.
Texas Expands the Weatherization Assistance Program:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the Department of Energy (DOE)
administers through each of the states, and the District of Columbia
and seven territories and Indian tribes. The Weatherization Assistance
Program enables low-income families to reduce their utility bills by
making long-term energy efficiency improvements to their homes by, for
example, installing insulation; sealing leaks; and modernizing heating
equipment, air circulations fans, or air conditioning equipment. Over
the past 32 years, DOE's Weatherization Assistance Program has assisted
more than 6.2 million low-income families. By reducing the energy bills
of low-income families, the program allows these households to spend
their money on other needs, according to DOE. The $5 billion provided
to the Weatherization Assistance Program in the Recovery Act represents
a significant increase for a program that has received about $225
million per year in recent years.
As of September 14, 2009, DOE had approved all but two of the
weatherization plans of the states, the District of Columbia, and the
territories, and Indian tribes--including all 16 states and the
District of Columbia in our review. DOE has provided to the states
almost $2.3 billion of the $5 billion in weatherization funding under
the Recovery Act. Use of the Recovery Act weatherization funds is
subject to Section 1606 of the act, which requires all laborers and
mechanics employed by contractors and subcontractors on Recovery Act
projects to be paid at least the prevailing wage, including fringe
benefits, as determined under the Davis-Bacon Act.[Footnote 32] Because
the Davis-Bacon Act had not previously applied to weatherization, the
Department of Labor (Labor) had not established a prevailing wage rate
for weatherization work. In July 2009, DOE and Labor issued a joint
memorandum to Weatherization Assistance Program grantees authorizing
them to begin weatherizing homes using Recovery Act funds, provided
they pay construction workers at least Labor's wage rates for
residential construction, or an appropriate alternative category, and
compensate workers for any differences if Labor establishes a higher
local prevailing wage rate for weatherization activities. Labor then
surveyed five types of "interested parties" about labor rates for
weatherization work.[Footnote 33] The department completed establishing
prevailing wage rates in all of the 50 states and the District of
Columbia by September 3, 2009.
State Fund Allocations to Texas Subrecipients Are Underway:
On June 26, 2009, DOE approved the weatherization plan developed by the
Texas Department of Housing and Community Affairs (TDHCA) and allocated
Recovery Act funding amounting to about $327 million for the
weatherization program. Funds are available over a 3-year period from
April 2009 through March 2012. On July 10, 2009, DOE provided 50
percent or $163.5 million of the funding allocation. As shown in figure
9, on July 30, 2009, the TDHCA Governing Board[Footnote 34] authorized
allocation of $145.7 million to subrecipients. TDHCA executed contracts
to subrecipients[Footnote 35] on September 11, 2009. The remaining
$17.8 million will be used for TDHCA administration and technical
assistance and training for the grantee and subrecipients. As of August
31 2009, TDHCA spent approximately $36,000 of the $17.8 million
allocated for TDHCA administration and training.
Figure 9: Allocation of Recovery Act Weatherization Program Funds:
[Refer to PDF for image: pie-chart]
Amount allocated for subrecipient contracts: $145,700,000;
Not allocated by DOE: $163,500,000;
Amount allocated for TDHCA administration: $7,200,000;
Amount allocated for training: $10,600,000.
Source: GAO analysis of Texas Department of Housing and Community
Affairs data.
[End of figure]
TDHCA Officials and Some Subrecipients Believe Davis-Bacon Requirements
May Delay Spending and Increase Administrative Costs:
TDHCA officials and some existing subrecipients believe that Davis-
Bacon requirements that contractors must meet may create delays and
increase costs. For example, a potential effect of the Davis-Bacon Act
is increased payroll and administrative costs to subcontractors,
according to TDHCA officials. Under Davis-Bacon, workers are paid
weekly based on an hourly rate. TDHCA officials told us that
subcontractors often pay employees a set amount for a construction job
rather than an hourly wage. Additionally, wage rates frequently differ
by county. One subcontractor may conduct weatherization work in several
counties and be required to pay different hourly wage rates depending
on the county in which the work is conducted. As a result, TDHCA
officials told us that the subcontractor may need to pay for changes in
the payroll structure due to these Davis-Bacon requirements. Texas
officials added that they believe Davis-Bacon requirements work against
finding the most economical and efficient way to attain the program
goals.
Risk-Assessment and Mitigation Approaches Exist or Are Under
Development to Monitor the Use of Funds:
As of August 2009, TDHCA officials told us that their internal audit
division is developing its annual risk assessment and is likely to
include audits of Recovery Act programs in the fiscal year 2010 audit
plan. To handle the increase of Recovery Act funds, TDHCA has hired one
new auditor and will be hiring two additional auditors with Recovery
Act funds this fall, increasing TDHCA's internal audit staff from three
to six. Internal audit staff will attend TDHCA Recovery Act meetings
and training, and serve in an advisory capacity to review and comment
on internal controls as Recovery Act funds are spent.
TDHCA also performs an annual risk assessment which includes existing
providers and takes into account funding levels, time elapsed since
last monitoring visit, number of monitoring findings, and the status of
any Single Audit issues.[Footnote 36] The risk-assessment process is
being modified to consider the expanded network of providers and
potential new risk factors. Additionally, TDHCA is taking the following
actions to mitigate risks:
* As part of the application process a review is conducted to ensure
the entity requesting funds does not have unaddressed compliance issues
under any TDHCA program. The previous participation review is required
by the Texas Government Code,[Footnote 37] and helps ensure the ability
of the applicant to administer TDHCA programs and to comply with
program rules. As a result of these Recovery Act reviews for
weatherization fund awards, five subrecipients were found to have
noncompliance issues associated with their administration of other
TDHCA housing programs. These five subrecipients were originally
allocated $27.3 million in weatherization funds before noncompliance
issues surfaced. TDHCA is in the process of reviewing alternatives to
disburse these funds to the affected communities.
* To mitigate risks associated with noncompliance and lack of
weatherization construction expertise, TDHCA is developing a new
training approach. A Request for Proposal was released asking potential
vendors to bid on establishing a training and technical assistance
academy. Submissions were due by August 7, 2009 and as of September 8,
2009, TDHCA was in process of selecting a vendor. The academy will
offer a range of weatherization, energy efficiency, and administrative
instruction through a combination of classroom teaching, online
instruction, and field work. The administrative portion will include
TDHCA regulations and reporting as well as financial accountability.
The courses are intended for weatherization subrecipients,
subcontractors, subcontractor employees, and TDHCA staff.
The financial status of Recovery Act funds at the local program level
will be monitored by TDHCA staff. According to TDHCA's DOE-approved
weatherization plan, the monitoring approach will be twofold,
consisting of a fiscal review, as well as a review of the quality and
scope of the work performed on dwellings. Monitoring will include
procurement, financial procedures, compliance, personnel policies, site
inspections, assessments, and staff procedures.
TDHCA is in the process of hiring 14 additional staff in its Energy
Assistance Section, including 7 staff to monitor subrecipient
weatherization of dwellings. The other new positions consist of four
weatherization trainers, one contract specialist, one administrative
assistant, and one Davis-Bacon specialist. Other monitoring steps
include the following:
* An Office of Accountability and Oversight Project Manager position
was created by TDHCA. This project manager helps develop and manage
performance, compliance, and expenditures systems, with a goal of
producing timely and accurate Recovery Act data.
* Work is underway on two major database systems to track and report on
Recovery Act weatherization funds: (1) modification of the Central
Database--the main information system for all TDHCA programs and
activities--to conform to the Recovery Act data-collection and
reporting requirements for subrecipients; and (2) development of the
Consolidated Recovery Act Reporting System--a database to track
information received from the Central Database and local programs such
as contracts awarded, funds awarded and expended, and households and
individuals served.
Plans Are Underway to Measure the Effect of Funds:
As the prime recipient of Recovery Act weatherization funds, TDHCA told
us it is in the process of modifying existing monitoring protocols to
address job reporting and other monitoring needs. They expect that
guidance from DOE will further define subrecipient reporting protocols
and facilitate monitoring. When this guidance is issued, TDHCA will
distribute it to the subrecipient network and incorporate reporting
requirements into its training curriculum. TDHCA officials told us that
training on the new and unfamiliar reporting requirements will be
necessary for all subrecipients and subcontractors. Officials added
that the new DOE reporting requirements are expected to include jobs
created or retained at the TDHCA, subrecipient, local agency, and local
contractor levels and on-site monitoring visits of dwellings where
weatherization has been completed.
TDHCA plans to calculate projected savings from the installation of
materials designed to reduce home energy consumption by using the DOE
methodology developed at the Oak Ridge National Laboratory. Measures to
be tracked and reported include the number of units weatherized, the
average cost per home served, and the percentage of eligible low-income
households that receive weatherization assistance.
Texas Efforts to Meet Recovery Act Section 1512 Reporting Requirements:
The Recovery Act established several reporting requirements, and OMB
issued guidance for meeting those requirements. Each recipient of
Recovery Act funds is required to periodically report on a number of
things including: (1) the total amount of Recovery Act funds received,
(2) the amount of Recovery Act funds that were expended or obligated to
projects or activities, and (3) an estimated number of jobs created and
retained by projects or activities.[Footnote 38] The first reporting
deadline is October 10, 2009, with quarterly reports due 10 days after
the end of each calendar quarter thereafter. OMB issued guidance on
meeting those reporting requirements in February 2009 and updated the
guidance in April and June 2009.[Footnote 39] The guidance established
that the reporting requirements apply to the prime nonfederal
recipients of the federal funding. The prime recipient is responsible
for reporting on how it used the funds as well as any subawards it
made. To train federal agencies and recipients of Recovery Act funding
on complying with their reporting responsibilities, OMB conducted a
series of "webinars" in July 2009 on topics such as developing job
creation estimates, prime and subrecipient reporting, and data quality
requirements. Texas officials commented that OMB guidance related to
Section 1512 reporting requirements continues to change. As an example,
they said that as recently as August 2009, programs covered and data
elements had changed. Texas officials believe these ongoing revisions
create additional administrative burdens for the state in designing and
maintaining Recovery Act reporting processes and systems.
Texas's Plans for Reporting Have Been Finalized:
Texas officials in the Office of the Governor told us in August 2009
that each state agency and institution would report directly to the
designated federal Web site,[Footnote 40] and the State Comptroller's
Office was establishing a process to receive copies of the report
submissions to perform a quality assurance role for accuracy,
completeness, and timeliness. Consistent with this quality assurance
role, the State Comptroller's Office also plans to perform field audits
beginning in August 2009 to help ensure appropriate policies and
processes are established for Section 1512 reporting.
Texas Has Issued Guidance and Conducted a Pilot Project to Prepare for
the Reporting Deadline:
In April 2009, the State Comptroller's Office issued guidance to state
agencies and institutions of higher learning related to the use and
subsequent reporting on Recovery Act funds.[Footnote 41] In May 2009,
the State Comptroller's Office, in conjunction with the Office of the
Governor and LBB, began requiring state agencies and 4-year
institutions of higher education to report weekly on all Recovery Act
funds allocated or requested. Additional guidance for the weekly
reporting was issued by the State Comptroller's Office in July 2009.
[Footnote 42] As of August 7, 2009, 42 state agencies reported about
$11.5 billion in Recovery Act awards and over $2.1 billion in
expenditures in the state's weekly activity reporting. The State
Comptroller's Office makes information, such as the amount of federal
awards received, available to the public on a Web site it maintains.
[Footnote 43]
To allow Texas agencies and institutions the opportunity to better
understand and fine-tune the recipient reporting requirements before
the October 2009 deadline, the State Comptroller's Office required all
state agencies and 4-year institutions of higher education that
received a Notification of Award for Recovery Act funds and had a
federal program subject to Section 1512 recipient reporting to
participate in a pilot project of reporting information to the State
Comptroller's Office by July 10, 2009. Guidance for this pilot process
was issued by the State Comptroller's Office in June 2009.[Footnote 44]
Using this pilot process, the State Comptroller's Office compiled all
questions and concerns related to the federal reporting for resolution
with the appropriate state or federal oversight entity, and convened a
Recovery Act working group on July 31, 2009. The State Comptroller's
Office reported that 27 of the 33 state agencies filed Section 1512
recipient reports for the pilot project.
Texas's Comments on This Summary:
We provided the Governor of Texas with a draft of this appendix on
September 8, 2009. A Senior Advisor, designated as the state's point of
contact for the Recovery Act, responded for the Governor on September
10, 2009. In general, the Senior Advisor agreed with the information in
this appendix, but expressed concern that our discussion on the future
of Texas's budget was outside the scope of our work and that we did not
acknowledge what the Office of the Governor has relayed to us in
numerous discussions, that Texas has a track record of living within
its means by cutting spending when necessary. We explained that the
purpose of the discussion in this section was to provide a perspective
on Texas's budget, beyond the current biennium, with the expiration of
Recovery Act funding. This particular section of the appendix reflects
the views and data provided by staff from the Governor's Office,
Comptroller's Office, the Legislative Budget Board, and the
legislature's House Select Committee on Federal Economic Stabilization
Funding. In discussing this section of the appendix with the Senior
Advisor, we made revisions to reflect the varied views of the State's
budget beyond the current biennium. In addition, more contextual
perspective was added to the appendix on how the state views the
guidance and directives received from the federal government on what is
expected on reporting and monitoring of Recovery Act funds. The Senior
Advisor also provided technical suggestions that we incorporated, where
appropriate.
GAO Contacts:
Carol Anderson-Guthrie, (214) 777-5700 or andersonguthriec@gao.gov:
Lorelei St. James, (214) 777-5719 or stjamesl@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Ron Berteotti, K. Eric Essig,
Fred Berry, Victoria De Leon, Wendy Dye, Ken Howard, Michael O'Neill,
and Daniel Silva made major contributions to this report.
[End of section]
Footnotes For Appendix XVII:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Texas budgets on a biennial basis. The 2010-2011 biennium will run
through August 31, 2011.
[3] Education also noted that Texas would be eligible to apply for
additional SFSF funds this fall.
[4] In Texas, the LBB is a permanent joint committee of the Texas
legislature that develops budget and policy recommendations for
legislative appropriations for all agencies of state government, as
well as completes fiscal analyses for proposed legislation.
[5] TEA reports an additional 606 local education agencies (LEA) of the
approximately 1,200 school districts and charters in the state have
started a draft of the application in TEA's eGrants system, but have
not finalized and submitted the application.
[6] Conference Committee Report for S.B. No. 1 General Appropriations
Bill, 81ST Leg. Sess., at XII-9.
[7] The conference report indicated that $10 million would be available
for administrative costs, provided that Texas receives more than $700
million from the government services fund of the SFSF.
[8] Office of Management and Budget Memorandum M-09-18, Payments to
State Grantees for Administrative Costs of Recovery Act Activities (May
11, 2009).
[9] Conference Committee Report for S.B. No. 1 General Appropriations
Bill, 81st Leg. Sess., at XII-9.
[10] Proclamation by the Governor of the State of Texas Concerning the
General Appropriation Act.
[11] The Permanent School Fund earns proceeds from the sale of state
lands and mineral-related revenue from these lands.
[12] We were told by LBB staff that there is a constitutional
requirement that fund returns over a 10-year period must exceed payouts
over the same period in order for there to be a distribution.
[13] Recovery Act funds used in the state's fiscal year 2010-2011
budget include Federal Medical Assistance Percentage funds (discussed
in [hyperlink, http://www.gao.gov/products/GAO-09-1016]).
[14] Texas House of Representatives, House Research Organization,
Writing the State Budget 81st Legislature, Report No. 81-1 (Feb. 2,
2009).
[15] Texas does not have a state income tax.
[16] Between 2010 and 2011, sales tax collections in Texas are expected
to increase 4.2 percent. This rate of increase will likely exceed the
rate of inflation, resulting in a real increase in sales tax revenue
collected by the state.
[17] The state's economic stabilization fund is commonly referred to as
the "rainy day fund."
[18] Texas House of Representatives, House Research Organization, State
Finance Report, Report No. 78-3 (Nov. 17, 2003).
[19] According to a description on the Governor's Web page, the Texas
Enterprise Fund is used primarily to attract new business to the state
or assist with the substantial expansion of an existing business as
part of competitive recruitment. The fund can be used for a variety of
economic development projects including infrastructure and community
development, job training programs, and business incentives.
[20] A report by the House Research Organization indicates that more
than a majority of members of the legislature must approve the use of
rainy day funds. The report explains that, "generally, money in the
rainy day fund can be spent only as approved by at least three-fifths
of the members present in each house. Spending from the fund generally
may not exceed the amount of any unanticipated deficit or revenue
shortfall, but any amount from the fund may be spent for any purpose if
at least two-thirds of the members present in each house approve it."
[21] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July
2009).
[22] According to Texas Department of Transportation officials, highway
construction contracts are awarded to the lowest responsible and
responsive bidder.
[23] Pub. L. No. 111-5, 123 Stat. 115, 206 (Feb. 17, 2009).
[24] Pub. L. No. 111-5, § 1201, 123 Stat. 115, 212 (Feb. 17, 2009).
[25] H.R. Rep. No. 111-16, at 448 (2009).
[26] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[27] Current federal wage law specifies a minimum wage of $7.25 per
hour. Where federal and state laws have different minimum wage rates,
the higher rate applies.
[28] TWC used a portion of its 15 percent WIA youth state set-aside
funds to fund employment opportunities for blind and deaf youth.
[29] The Gulf Coast Workforce Development Board administers the WIA
program throughout the following 13 counties: Austin, Brazoria,
Chambers, Colorado, Galveston, Fort Bend, Harris, Liberty, Matagorda,
Montgomery, Walker, Waller, and Wharton.
[30] The North Central Workforce Development Board administers the WIA
program throughout the following 14 counties: Collin, Denton, Ellis,
Erath, Hood, Hunt, Johnson, Kaufman, Navarro, Palo Pinto, Parker,
Rockwall, Somervell, and Wise.
[31] The factors include attendance, appearance, productivity,
interpersonal relationships, work habits and attitudes, motivation and
initiative, accepting direction, communication, and four additional
factors the work-site supervisors identify.
[32] Weatherization Assistance Program funded through annual
appropriations are not subject to the Davis-Bacon Act.
[33] The five types of "interested parties" are state weatherization
agencies, local community-action agencies, unions, contractors, and
congressional offices.
[34] The TDHCA Governing Board is the policy-making body of TDHCA.
[35] TDHCA subrecipients in three categories will receive Recovery Act
funds to provide weatherization services: (1) the existing subrecipient
network (Community Action Agencies, Regional Councils of Government,
and other nonprofit entities), who receive funds allocated by county
based proportionately on low-income, elderly poverty population, median
household income and climate data; (2) cities with populations over
75,000, where allocations were based on low-income households; and (3)
competitively awarded grants to small cities and nonprofits for
populations in rural areas that may not otherwise be served under the
other two subrecipient categories.
[36] The Single Audit Act of 1984, as amended (31 U.S.C. ch.75).
[37] Texas Government Code, § 2306.057.
[38] Pub. L. No. 111-5, Sec. 1512(c), 123 Stat. 115, 287 (Feb. 17,
2009).
[39] OMB Memorandums M-09-10, Initial Implementing Guidance for the
American Recovery and Reinvestment Act of 2009 (Feb. 18, 2009); M-09-
15, Updating Implementing Guidance for the American Recovery and
Reinvestment Act of 2009 (Apr. 3, 2009); and M-09-21 Implementing
Guidance for the Reports on Use of Funds Pursuant to the American
Recovery and Reinvestment Act of 2009 (June 22, 2009).
[40] [hyperlink, http://www.FederalReporting.gov].
[41] Texas Comptroller of Public Accounts, "Fiscal Policies and
Procedures, J.004" (Apr. 20, 2009). This guidance was superseded by the
State Comptroller's Office in August 2009.
[42] Texas Comptroller of Public Accounts, "Fiscal Policies and
Procedures, B.008" (July 15, 2009).
[43] [hyperlink,
http://www.window.state.tx.us/recovery/follow/received.php].
[44] Texas Comptroller of Public Accounts, "Fiscal Policies and
Procedures, B.009" (June 30, 2009).
[End of section]
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