Recovery Act
One Year Later, States' and Localities' Uses of Funds and Opportunities to Strengthen Accountability Gao ID: GAO-10-437 March 3, 2010This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the fifth in a series of reports since passage of the Recovery Act on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. It is also the second report in which GAO is required to comment on the jobs created or retained as reported by recipients of Recovery Act funds. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and spoke with officials at federal agencies overseeing Recovery Act programs.
As of February 12, 2010, $88.7 billion, or a little more than 30 percent, of the approximately $282 billion of total Recovery Act funds for programs administered by states and localities had been paid out by the federal government. Of that amount, approximately $36 billion has been paid out since the start of federal fiscal year 2010. As of January 29, 2010, the 16 states and the District have drawn down about $30 billion in increased Federal Medical Assistance Percentage (FMAP) funds, representing nearly 100 percent of these states' grant awards for federal fiscal year 2009 and about 57 percent for the first and second quarters of federal fiscal year 2010. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Most states reported that the increased FMAP funds were integral to maintaining current eligibility levels, benefits, and services and to avoiding further program reductions. As of February 16, 2010, the Federal Highway Administration (FHWA) had obligated $25.1 billion and the Federal Transit Administration (FTA) had obligated about $7.5 billion--combined about $32.6 billion (over 93 percent) of the $35 billion that the Recovery Act provided for highway infrastructure projects and public transportation. Nationwide, Recovery Act funding has been obligated for over 11,000 eligible highway projects. However, some requirements, such as the Recovery Act's maintenance-of-effort requirement--which is designed to prevent states from substituting federal funds for state funds--have proven challenging. Many states have yet to complete a maintenance-of-effort certification that DOT finds fully acceptable, and this, coupled with states' fiscal challenges, raises questions as to whether this requirement will achieve its intended purpose. As of January 22, 2010, the 16 states and the District had drawn down, in total, about $13.3 billion (56 percent) from the State Fiscal Stabilization Fund (SFSF); $1.1 billion (17 percent) of Elementary and Secondary Education Act (ESEA) Title I, Part A funds; and $1.2 billion (17 percent) of Individuals with Disabilities Education Act (IDEA), Part B, Recovery Act funds available to them. Much of the Recovery Act education funds have been used to pay education staff, including teachers. Housing agencies are to obligate the $3 billion in Public Housing Capital Fund formula grant Recovery Act funds they received by March 17, 2010. As of January 30, 2010, about 31 percent of these funds had not been obligated. Over 200 agencies reported obligating no funds. Housing and Urban Development (HUD) has worked hard to implement the Recovery Act but has faced challenges in simultaneously carrying out public housing programs mandated by the Recovery Act, including designing and carrying out a $1 billion grant competition, while meeting its continuing responsibilities for the ongoing Public Housing Capital Fund program. As a result, HUD delayed obligating its fiscal year 2009 funds by 3 months. With regard to the Weatherization Assistance Program, as of December 31, 2009, the Department of Energy (DOE) had obligated about $4.73 billion to states for weatherization activities. On February 24, 2010, DOE reported that about 5 percent of the approximately 593,000 homes DOE originally planned to weatherize using Recovery Act funds had been weatherized as of December 31, 2009. Progress was achieved in addressing some data quality and reporting issues identified in the first round; however data errors, reporting inconsistencies, and decisions by some recipients not to use the new job reporting guidance for this round compromise data quality and the ability to aggregate the data.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Report to the Congress:
United States Government Accountability Office:
GAO:
March 2010:
Recovery Act:
One Year Later, States' and Localities' Uses of Funds and
Opportunities to Strengthen Accountability:
GAO-10-437:
GAO Highlights:
Highlights of GAO-10-437, a report to the Congress.
Why GAO Did This Study:
This report responds to two ongoing GAO mandates under the American
Recovery and Reinvestment Act of 2009 (Recovery Act). It is the fifth
in a series of reports since passage of the Recovery Act on the uses
of and accountability for Recovery Act funds in 16 selected states,
certain localities in those jurisdictions, and the District of
Columbia (District). These jurisdictions are estimated to receive
about two-thirds of the intergovernmental assistance available through
the Recovery Act. It is also the second report in which GAO is
required to comment on the jobs created or retained as reported by
recipients of Recovery Act funds. GAO collected and analyzed documents
and interviewed state and local officials and other Recovery Act award
recipients. GAO also analyzed federal agency guidance and spoke with
officials at federal agencies overseeing Recovery Act programs.
What GAO Found:
As of February 12, 2010, $88.7 billion, or a little more than 30
percent, of the approximately $282 billion of total Recovery Act funds
for programs administered by states and localities had been paid out
by the federal government. Of that amount, approximately $36 billion
has been paid out since the start of federal fiscal year 2010. The
following table shows the composition of Recovery Act funding by
sector for fiscal years 2009-2011 and 2012-2019.
Table: Composition of outlays in percent:
Health:
Actual, 2009: 60%;
Actual, 2010: 39%;
Estimated, 2011: 17%;
Estimated, 20122-2019: 1%.
Education and Training:
Actual, 2009: 28%;
Actual, 2010: 37%;
Estimated, 2011: 46%;
Estimated, 20122-2019: 8%.
Transportation:
Actual, 2009: 6%;
Actual, 2010: 9%;
Estimated, 2011: 14%;
Estimated, 20122-2019: 40%.
Income security:
Actual, 2009: 3%;
Actual, 2010: 7%;
Estimated, 2011: 10%;
Estimated, 20122-2019: 21%.
Community development:
Actual, 2009: 3%;
Actual, 2010: 5%;
Estimated, 2011: 7%;
Estimated, 20122-2019: 13%.
Energy & environment:
Actual, 2009: 1%;
Actual, 2010: 3%;
Estimated, 2011: 7%;
Estimated, 20122-2019: 17%.
Total:
Actual, 2009: 100%;
Actual, 2010: 100%;
Estimated, 2011: 100%;
Estimated, 20122-2019: 100%.
Total dollars in billions:
Actual, 2009: $52.9;
Actual, 2010: $103.7;
Estimated, 2011: $63.4;
Estimated, 20122-2019: $61.9.
Source: GAO analysis of CBO, FFIS, and Recovery.gov data.
Note: Percentages may not total due to rounding.
[End of table]
Increased Medicaid Funding:
As of January 29, 2010, the 16 states and the District have drawn down
about $30 billion in increased Federal Medical Assistance Percentage
(FMAP) funds, representing nearly 100 percent of these states‘ grant
awards for federal fiscal year 2009 and about 57 percent for the first
and second quarters of federal fiscal year 2010. Most states reported
that, without the increased FMAP funds, they could not have continued
to support the substantial Medicaid enrollment growth they have
experienced, most of which was attributable to children. Most states
reported that the increased FMAP funds were integral to maintaining
current eligibility levels, benefits, and services and to avoiding
further program reductions. As for the longer-term outlook for their
Medicaid programs, the District and all but one of the selected states
expressed concern about sustaining their programs after the increased
FMAP funds are no longer available, beginning in January 2011.
Highway Infrastructure Investment and Transit Funding: As of February
16, 2010, the Federal Highway Administration (FHWA) had obligated
$25.1 billion and the Federal Transit Administration (FTA) had
obligated about $7.5 billion”combined about $32.6 billion (over 93
percent) of the $35 billion that the Recovery Act provided for highway
infrastructure projects and public transportation. Nationwide,
Recovery Act funding has been obligated for over 11,000 eligible
highway projects. However, some requirements, such as the Recovery Act‘
s maintenance-of-effort requirement”-which is designed to prevent
states from substituting federal funds for state funds”have proven
challenging. Many states have yet to complete a maintenance-of-effort
certification that DOT finds fully acceptable, and this, coupled with
states‘ fiscal challenges, raises questions as to whether this
requirement will achieve its intended purpose. In addition, the
Recovery Act does not require DOT to determine whether states have met
this requirement until around 6 months after the provision‘s covered
time period expires. GAO recommends that DOT gather timely information
and report preliminary information to Congress within 60 days of the
certified period (Sept. 30, 2010) on whether states met required
program expenditures, the reasons that any states did not meet these
certified levels, and lessons learned from the process. DOT is
considering GAO‘s recommendation.
Education:
As of January 22, 2010, the 16 states and the District had drawn down,
in total, about $13.3 billion (56 percent) from the State Fiscal
Stabilization Fund (SFSF); $1.1 billion (17 percent) of Elementary and
Secondary Education Act (ESEA) Title I, Part A funds; and $1.2 billion
(17 percent) of Individuals with Disabilities Education Act (IDEA),
Part B, Recovery Act funds available to them. Much of the Recovery Act
education funds have been used to pay education staff, including
teachers. In response to GAO‘s recommendation that Education ensure
states monitor subrecipients of SFSF funds, Education announced a plan
for reviewing states‘ SFSF subrecipient monitoring plans. GAO is
continuing to work with Education to address our recommendation to
enhance transparency by requiring states to include an explanation of
changes to maintenance-of-effort levels in their SFSF application
resubmissions.
Other Selected Recovery Act Programs:
Housing agencies are to obligate the $3 billion in Public Housing
Capital Fund formula grant Recovery Act funds they received by March
17, 2010. As of January 30, 2010, about 31 percent of these funds had
not been obligated. Over 200 agencies reported obligating no funds.
HUD has worked hard to implement the Recovery Act but has faced
challenges in simultaneously carrying out public housing programs
mandated by the Recovery Act, including designing and carrying out a
$1 billion grant competition, while meeting its continuing
responsibilities for the ongoing Public Housing Capital Fund program.
As a result, HUD delayed obligating its fiscal year 2009 funds by 3
months. HUD does not have a management plan to determine how to meet
these competing demands. GAO recommends that HUD develop such a plan
to determine the adequate level of staffing needed to administer its
Recovery Act and regular capital funds and to determine the most
effective use of the staff it currently has. While HUD disagrees with
GAO's recommendation, GAO continues to believe HUD would benefit from
developing such a plan. With regard to the Weatherization Assistance
Program, as of December 31, 2009, the Department of Energy (DOE) had
obligated about $4.73 billion to states for weatherization activities.
On February 24, 2010, DOE reported that about 5 percent of the
approximately 593,000 homes DOE originally planned to weatherize using
Recovery Act funds had been weatherized as of December 31, 2009. State
and local officials reported that weatherization activities had been
slowed by concerns over compliance with the Davis-Bacon and National
Historic Preservation Acts. The Recovery Act also included $1.2
billion for Workforce Investment Act (WIA) youth activities, including
summer employment. As of December 31, 2009, $765 million of WIA youth
funds had been drawn down nationwide. Over 355,000 youths reportedly
participated in Recovery Act WIA activities.
Recipient Reporting:
Progress was achieved in addressing some data quality and reporting
issues identified in the first round; however data errors, reporting
inconsistencies, and decisions by some recipients not to use the new
job reporting guidance for this round compromise data quality and the
ability to aggregate the data. For example in the education area,
which was the largest category of jobs reported, GAO found that a
number of states reported job numbers using the old methodology.
Overall, while significant issues remain, the second round of
reporting appears to have gone more smoothly as recipients have become
more familiar with the reporting system and requirements. GAO expects
that the simplified jobs reporting guidance and reporting system
enhancements will ultimately result in improved data quality and
reliability. GAO makes specific recommendations to Education, HUD, and
OMB for improving reporting guidance. Education, HUD, and OMB
generally agreed with the recommendations.
Accountability:
GAO has recommended that OMB adjust the Single Audit process to help
mitigate the risks posed by Recovery Act funding. Although OMB has
taken steps to implement our recommendations, these efforts do not yet
fully address the significant risks over Recovery Act funds. OMB‘s
steps include a voluntary Single Audit Internal Control Project that
encourages earlier reporting of deficiencies, so that corrective
action can be taken. Auditors of states participating in the project
submitted internal control reports to OMB by December 31, 2009. For 13
of the 16 states, auditors reported over 70 internal control
deficiencies that affected the states‘ compliance with federal
requirements for Recovery Act funds. These states also provided
corrective action plans for the deficiencies. OMB plans to analyze the
project‘s results to identify improvements to the Single Audit process
by the spring of 2010.
What GAO Recommends:
GAO updates the status of agencies‘ efforts to implement GAO‘s 23
previous recommendations and makes 5 new recommendations to the Office
of Management and Budget (OMB) and the Departments of Transportation
(DOT), Housing and Urban Development (HUD), and Education. GAO
continues to believe that Congress should consider changes related to
the Single Audit process. Agency responses to new GAO recommendations
are included on the following page.
View [hyperlink, http://www.gao.gov/products/GAO-10-437] or key
components. For more information, contact J. Christopher Mihm at (202)
512-6806 or mihmj@gao.gov.
[End of section]
Contents:
Letter:
Background:
Uses of Recovery Act Funds by States and Localities in the First Year:
The Second Round of Recipient Reporting Showed That Improving Data
Quality Is a Work in Progress:
Oversight and Accountability Efforts in the First Year:
Recovery Act Funds Alleviate Some Fiscal Pressures as State and Local
Governments Respond to the Current Recession and Confront Long-Term
Challenges:
New, Implemented, and Open Recommendations; Matters for Congressional
Consideration:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
States' and Localities' Uses of Recovery Act Funds:
Recipient Reporting:
Assessing Safeguards and Internal Controls:
Accountability:
State and Local Budget:
Data and Data Reliability:
Appendix II: Comments from the Office of Management and Budget:
Appendix III: Program Descriptions:
Medicaid Federal Medical Assistance Percentage:
Highway Infrastructure Investment Program:
Public Transportation Program:
Education:
Workforce Investment Act Youth Program:
Public Housing Capital Fund:
Weatherization Assistance Program:
Head Start/Early Head Start:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Composition of State and Local Recovery Act Funding, Fiscal
Year 2009 Actual and Fiscal Years 2010 through 2012 Estimated:
Table 2: Increase in State Share between Preliminary First Quarter
Fiscal Year 2010 Increased FMAP and Fiscal Year 2011 Regular FMAP:
Table 3: Percentage of Awarded Education Stabilization, ESEA Title I,
and IDEA, Part B Recovery Act Funds Drawn Down by States as of January
22, 2010:
Table 4: DOE's Recovery Act Weatherization Assistance Program
Obligations:
Table 5: Selected States' Drawdowns of Recovery Act WIA Youth Funds
and Drawdowns Nationwide as of December 31, 2009:
Table 6: WIA Youth Served with Recovery Act Funds in Selected States
and Nationwide, as of November 30, 2009:
Table 7: Recovery Act-Funded WIA Youth Participation in Summer
Employment in Selected States and Nationwide, as of November 30, 2009:
Table 8: Work Readiness Attainment Rate for Youth in Summer Employment
in Selected States and Nationwide, as of November 30, 2009:
Table 9: Fourth Quarter, 2009--Count of Prime Recipient Reports by
Presence or Absence of FTEs and Recovery Act Funds Received or
Expended:
Table 10: Project Status of Fourth Quarter, 2009 Prime Recipient
Reports Marked As Final Report with Less Than 75 Percent of Funds
Received or Expended:
Table 11: FederalReporting.gov Edit Checks for January 2010 Recipient
Reporting:
Table 12: Fourth Quarter 2009 Prime Recipient Reports Reviews and
Corrections:
Table 13: Parameters HUD Established to Identify Significant Errors
for the Capital Fund:
Table 14: Number of Potential Significant Errors Identified by Field
for the October 2009 and January 2010 Reporting Cycles:
Table 15: Status of FraudNet Allegations:
Figures:
Figure 1: Estimated versus Actual Federal Outlays to States and
Localities under the Recovery Act:
Figure 2: Components of Fiscal Year 2009 FMAP Increases:
Figure 3: Cumulative Increased FMAP Funds Drawn Down by the Sample
States and the District by Month, February 2009 through January 2010:
Figure 4: Cumulative Quarterly Medicaid Enrollment Growth in the
Sample States and the District since October 2007:
Figure 5: Cumulative Recovery Act Highway and Public Transportation
Funding and Obligations Nationwide:
Figure 6: Cumulative Recovery Act Highway and Public Transportation
Funds Reimbursed by FHWA and FTA Nationwide:
Figure 7: Nationwide Recovery Act Highway and Public Transportation
Obligations by Project Type:
Figure 8: Estimated Percentage of LEAs Nationally with Funding
Decreases and Increases of 5 Percent or More for School Year 2009-
2010, by Source of Funding:
Figure 9: Estimated Percentage of LEAs Expecting Decreases in the
Number of Jobs, Even with Recovery Act SFSF Funds, by State:
Figure 10: Estimated Percentage of LEAs Nationally Planning to Use
More Than 25 Percent of Their Recovery Act Funds from the SFSF, ESEA
Title I, and IDEA Programs for Professional Development, Technological
Equipment, and Instructional Materials:
Figure 11: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as
of January 30, 2010:
Figure 12: Housing Agencies' Obligations of Recovery Act Funds by
Quartile as of January 30, 2010:
Figure 13: National Drawdown Rates for Recovery Act Funds for the WIA
Youth Program, as of December 31, 2009:
Figure 14: The Potential Employment Effects of Recovery Act Funds:
Figure 15: State and Local Model Operating Balance Measure, as a
Percentage of Gross Domestic Product (GDP):
Figure 16: State and Local Government Taxes, as a Percentage of GDP:
Figure 17: State and Local Government Grants, as a Percentage of GDP:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 3, 2010:
Report to the Congress:
The American Recovery and Reinvestment Act of 2009 (Recovery Act) was
enacted on February 17, 2009, in response to what is generally
reported to be the most serious economic crisis since the Great
Depression.[Footnote 1] The purposes of the Recovery Act include
promoting economic recovery, making investments, and minimizing and
avoiding reductions in state and local government services.
Specifically, the stated purposes of the Recovery Act are to:
* preserve and create jobs and promote economic recovery;
* assist those most impacted by the recession;
* provide investments needed to increase economic efficiency by
spurring technological advances in science and health;
* invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits; and:
* stabilize state and local government budgets in order to minimize
and avoid reductions in essential services and counterproductive state
and local tax increases.
Initially estimated to cost $787 billion, the Recovery Act includes an
estimated $580 billon of federal outlays, of which nearly half--or
approximately $282 billion--will flow to states and localities
affecting about 50 state formula and discretionary grants as well as
about 15 entitlement and other countercyclical programs. The remaining
Recovery Act funds are in the form of a wide variety of tax provisions
assisting individuals, businesses, and state and local governments.
These include, for example, the Making Work Pay tax credit, various
energy-related incentives, and special bond financing provisions for
state and local governments. On February 10, 2010, we issued a report
reviewing various tax-related aspects of the Recovery Act.[Footnote 2]
The volume of funds, the number of entities involved in their
distribution, and short time frames all speak to the need for
oversight to ensure transparency and accountability. Indeed, GAO has
been given a number of roles related to oversight of these Recovery
Act programs and has issued more than 39 Recovery Act products. See
the Related GAO Products section for a list of these products. Federal
agency inspectors general, state and local auditors, as well as the
Recovery Accountability and Transparency Board (the board),[Footnote
3] which was established by the Recovery Act, all play roles in
oversight of Recovery Act spending.
In response to a Recovery Act mandate, we have conducted bimonthly
reviews of programs for which states and localities have received
major funding.[Footnote 4] Specifically, in four previous reports, we
have collected and reported data on programs receiving substantial
Recovery Act funds during this first year of implementation in 16
selected states, certain localities, and the District of Columbia, and
made recommendations when changes could result in improvements.
[Footnote 5] The selected jurisdictions for our in-depth reviews
contain about 65 percent of the U.S. population and are estimated to
receive collectively about two-thirds of the intergovernmental
assistance available through the Recovery Act.[Footnote 6]
This report, the fifth in response to the Recovery Act's mandate,
updates and adds new information on the following: (1) selected states
and localities use of Recovery Act funds for specific programs, (2)
the approaches taken by selected states and localities to ensure
accountability for Recovery Act funds, and (3) state activities to
evaluate the impact of the Recovery Act funds they receive. The
programs we selected for review were chosen primarily because they
have begun disbursing funds to states or have known or potential
risks. The risks can include existing programs receiving significant
amounts of Recovery Act funds or new programs. In some cases we have
also collected data from all states, and from a broader array of
localities, to augment the in-depth reviews. This report focuses on
the following programs:
* Federal Medical Assistance Percentage (FMAP).
* Federal-Aid Highway Surface Transportation and Transit Capital
Assistance Programs.
* State Fiscal Stabilization Fund (SFSF).
* Title I, Part A of the Elementary and Secondary Act of 1965, as
amended (ESEA).
* Parts B and C of the Individuals with Disabilities Education Act, as
amended (IDEA).
* Public Housing Capital Fund.
* Weatherization Assistance Program.
* Workforce Investment Act of 1998 (WIA) Youth Program.
The Recovery Act also requires that nonfederal recipients of Recovery
Act funded grants, contracts, or loans submit quarterly reports on
each project or activity, including information concerning the amount
and use of funds and jobs created or retained.[Footnote 7] The first
of these recipient reports was to cover the cumulative activity since
the Recovery Act's passage through the quarter ending September 30,
2009. The Recovery Act requires us to comment on the estimates of jobs
created or retained after the recipients have reported. We issued our
initial report related to recipient reporting, including
recommendations for recipient report improvements, on November 19,
2009.[Footnote 8] A second major focus of the current report is to
provide updated information concerning recipient reporting in
accordance with our mandate for quarterly reporting.[Footnote 9]
This report also discusses state and local budget stabilization,
federal requirements and guidance, and oversight, transparency, and
accountability issues related to the Recovery Act and its
implementation. It also provides information on the status of our
prior recommendations related to the Recovery Act and includes
additional new recommendations.
We analyzed guidance and interviewed officials at the Office of
Management and Budget (OMB). We also analyzed grant award amounts--as
well as relevant regulations and federal agency guidance on programs
selected for this review--and spoke with relevant program officials at
the Departments of Education, Energy, Health and Human Services
(Centers for Medicare and Medicaid Services), Housing and Urban
Development, and Transportation. We also integrated information from
our prior Recovery Act reports into this review where appropriate.
Where statements about state law are attributed to state officials, we
did not analyze state legal materials for this report but relied on
state officials and other state sources for description and
interpretation of relevant state constitutions, statutes, legislative
proposals, and other state legal materials. The information obtained
from this review cannot be generalized to all states and localities
receiving Recovery Act funding. A detailed description of our scope
and methodology can be found in appendix I.
We conducted this performance audit from December 5, 2009, to March 3,
2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
The Congressional Budget Office (CBO) originally estimated that the
Recovery Act's combined spending and tax provisions would cost $787
billion through 2019, with more than 90 percent of the spending and
tax reductions occurring before the end of fiscal year 2011. As of
December 31, 2009, the Council of Economic Advisors (CEA) reported
that approximately one-third of the $787 billion (or $263 billion) had
been outlayed or provided to households and businesses in the form of
tax reductions. In addition to that amount, CEA reported that another
$150 billion had been obligated.
On January 26, 2010, CBO updated its estimate of the cost of the
Recovery Act. It now estimates that the Recovery Act will cost $75
billion more than originally estimated--or a total of $862 billion
from 2009 through 2019. It cited the following key reasons for the
increase:
* Unemployment compensation will be $21 billion more than originally
estimated due to higher than anticipated unemployment.
* Supplemental Nutrition Assistance Program is now expected to cost
$34 billion more than originally estimated because the increased
family benefit amount under the Recovery Act is now estimated to
exceed the unadjusted benefit amount through 2019.
* Participation in the Build America Bond program is significantly
higher than originally estimated. More than $60 billion in new bonds
have been issued since the program began in April, leading CBO to
increase its projected cost of the program by $26 billion.
With the intent of disbursing funds quickly to create and retain jobs
and stabilize state and local budgets, major Recovery Act funding to
states and localities is front-loaded into the first 3 years since the
enactment. Nearly 80 percent of funding to states and localities is
projected to be distributed within the first 3 years, with about 56
percent in just the first 2 years. Peak projected outlays are in
fiscal year 2010, with outlays that year projected to be more than
twice the level of fiscal year 2009 outlays. Figure 1 shows the
projected federal outlays to states and localities for fiscal years
2009 through 2016, as well as actual outlays to date as reported by
federal agencies on Recovery.gov.
Figure 1: Estimated versus Actual Federal Outlays to States and
Localities under the Recovery Act:
[Refer to PDF for image: vertical bar graph]
Federal fiscal year (Oct. 1 to Sept. 30): 2009;
Original estimate: $48.9 billion;
Actual as of February 12, 2010: $52.9 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2010;
Original estimate: $107.7 billion;
Actual as of February 12, 2010: $35.7 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2011;
Original estimate: $63.4 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2012;
Original estimate: $23.3 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2013;
Original estimate: $14.4 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2014;
Original estimate: $9.1 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2015;
Original estimate: $5.7 billion.
Federal fiscal year (Oct. 1 to Sept. 30): 2016;
Original estimate: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data
Note: Data reflect estimated and actual federal outlays for a select
set of Recovery Act funded programs administered by states and
localities. The Supplemental Nutrition Assistance Program (food
stamps) and unemployment compensation payments are not included.
[End of figure]
As shown in table 1, actual federal outlays to states and localities
under the Recovery Act were slightly above the projected level in
fiscal year 2009. Across the United States, as of February 12, 2010,
the Department of the Treasury has paid out $88.7 billion in Recovery
Act funds for use in states and localities. Of that amount,
approximately $36 billion has been paid out since the start of fiscal
year 2010 on October 1, 2009.
In addition to variation in outlays over the years, outlays also vary
substantially by sector. As shown in table 1, outlays in health and
education and training constituted 88 percent of total outlays to
states and localities in fiscal year 2009. Outlays for transportation,
income security, energy and the environment, and community development
are all substantially smaller. However, by fiscal year 2012,
investments in highways, transit, high-speed rail, and other
transportation infrastructure will be the largest share of state and
local Recovery Act funding, albeit of a substantially smaller total
outlay. Taken together, transportation spending--along with
investments in the community development, energy, and environmental
areas--that is geared more toward creating long-run economic growth
opportunities will represent approximately two-thirds of state and
local Recovery Act funding after 2011. Thus, across the years,
spending shifts from a primary focus on recovery to a primary focus on
reinvestment.
Table 1: Composition of State and Local Recovery Act Funding, Fiscal
Year 2009 Actual and Fiscal Years 2010 through 2012 Estimated:
Composition of outlays in percent:
Health:
Actual: 2009: 60%;
Estimated: 2010: 39%;
Estimated: 2011: 17%;
Estimated: 2012-2019: 1%.
Education and training:
Actual: 2009: 28%;
Estimated: 2010: 37%;
Estimated: 2011: 46%;
Estimated: 2012-2019: 8%.
Transportation:
Actual: 2009: 6%;
Estimated: 2010: 9%;
Estimated: 2011: 14%;
Estimated: 2012-2019: 40%.
Income security:
Actual: 2009: 3%;
Estimated: 2010: 7%;
Estimated: 2011: 10%;
Estimated: 2012-2019: 21%.
Community development:
Actual: 2009: 3%;
Estimated: 2010: 5%;
Estimated: 2011: 7%;
Estimated: 2012-2019: 13%.
Energy and environment:
Actual: 2009: 1%;
Estimated: 2010: 3%;
Estimated: 2011: 7%;
Estimated: 2012-2019: 17%.
Total:
Actual: 2009: 100%;
Estimated: 2010: 100%;
Estimated: 2011: 100%;
Estimated: 2012-2019: 100%.
Total dollars in billions:
Actual: 2009: $52.9;
Estimated: 2010: $103.7;
Estimated: 2011: $63.4;
Estimated: 2012-2019: $61.9.
Source: GAO analysis of CBO, FFIS, and recovery.gov data.
Note: Percentages may not total due to rounding.
[End of table]
There is also a major change in the amount of flexibility states will
have concerning the use of funds. Health and education and training
funds are the predominant sectors of funding in the first 2 years.
Education and training funds allowed states some flexibility in how
they chose to use the funds. States also experienced flexibility as to
their use of state funds made available as a result of the increased
FMAP. In later years, this flexibility will be reduced as funds are
specifically designated by purpose.
Uses of Recovery Act Funds by States and Localities in the First Year:
Timely Access to Increased FMAP Funds Facilitated States' Efforts to
Support Medicaid Enrollment Growth and Minimize Program Reductions,
but States Remain Concerned about Longer-Term Program Sustainability:
Medicaid is a joint federal-state program that finances health care
for certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The rate at which
states are reimbursed for Medicaid service expenditures is known as
the Federal Medical Assistance Percentage (FMAP), which may range from
50 percent to no more than 83 percent. The Recovery Act provides
eligible states with an increased FMAP for 27 months from October 1,
2008, to December 31, 2010.[Footnote 10] On February 25, 2009, the
Centers for Medicare & Medicaid Services (CMS) made increased FMAP
grant awards to states, and states may retroactively claim
reimbursement for expenditures that occurred prior to the effective
date of the Recovery Act. Generally, for fiscal year 2009 through the
first quarter of fiscal year 2011, the increased FMAP, which is
calculated on a quarterly basis, includes (1) a "hold harmless"
provision, which maintains states' regular FMAP rates at the highest
rate of any fiscal year from 2008 through 2011, (2) a general across-
the-board increase of 6.2 percentage points in states' FMAPs, and (3)
a further increase to the FMAPs for those states that have a
qualifying increase in unemployment rates.
As a result, the increased FMAP available to the 16 states and the
District of Columbia (the District) by the fourth quarter of fiscal
year 2009 averaged over 10 percentage points higher than their regular
2009 FMAP rates, with increases ranging from about 8 percentage points
in Iowa to about 12 percentage points in Florida. For all states, the
largest proportion of the increased FMAP was attributable to the
across-the-board increase of 6.2 percentage points; however,
qualifying increases in unemployment rates also contributed to the
increase in each of the states. The "hold harmless" provision further
contributed to the increased FMAP in 4 states in our review, albeit to
a lesser extent. (See figure 2.) In the first quarter of fiscal year
2010, qualifying increases in unemployment rates or increases in
regular FMAP rates have contributed to further increases in FMAP rates
for half of the sample states.
Figure 2: Components of Fiscal Year 2009 FMAP Increases:
[Refer to PDF for image: stacked vertical bar graph]
State: Arizona;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 3.53%;
Hold-harmless provision: 0.43%;
Total: 10.16%.
State: California;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 5.39%;
Hold-harmless provision: 0;
Total: 11.59%.
State: Colorado;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 5.39%;
Hold-harmless provision: 0;
Total: 11.59%.
State: District of Columbia;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 3.09%;
Hold-harmless provision: 0;
Total: 9.29%.
State: Florida;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 4.61%;
Hold-harmless provision: 1.43%;
Total: 12.24%.
State: Georgia;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 3.73%;
Hold-harmless provision: 0;
Total: 9.93%.
State: Iowa;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 1.89%;
Hold-harmless provision: 0;
Total: 8.09%.
State: Illinois;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 5.36%;
Hold-harmless provision: 0;
Total: 11.56%.
State: Massachusetts;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 5.39%;
Hold-harmless provision: 0;
Total: 11.59%.
State: Michigan;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 4.21%;
Hold-harmless provision: 0;
Total: 10.41%.
State: Mississippi;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 1.75%;
Hold-harmless provision: 0.45
Total: 8.40%.
State: North Carolina;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 3.71%;
Hold-harmless provision: 0;
Total: 9.91%.
State: New Jersey;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 5.39%;
Hold-harmless provision: 0;
Total: 11.59%.
State: New York;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 5.39%;
Hold-harmless provision: 0;
Total: 11.59%.
State: Ohio;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 4%;
Hold-harmless provision: 0;
Total: 10.20%.
State: Pennsylvania;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 4.87%;
Hold-harmless provision: 0;
Total: 11.07%.
State: Texas;
Across-the-board increase: 6.2%;
Qualifying increase in unemployment: 3.09%;
Hold-harmless provision: 1.12
Total: 10.41%.
Source: GAO analysis of HHS data.
[End of figure]
For states to qualify for the increased FMAP available under the
Recovery Act, they must comply with a number of requirements,
including the following:
* States generally may not apply eligibility standards, methodologies,
or procedures that are more restrictive than those in effect under
their state Medicaid programs on July 1, 2008.[Footnote 11]
* States must comply with prompt payment requirements.[Footnote 12]
* States cannot deposit or credit amounts attributable (either
directly or indirectly) to certain elements of the increased FMAP in
any reserve or rainy-day fund of the state.[Footnote 13]
* States with political subdivisions--such as cities and counties--
that contribute to the nonfederal share of Medicaid spending cannot
require the subdivisions to pay a greater percentage of the nonfederal
share than would have been required on September 30, 2008.[Footnote 14]
In addition, CMS requires states to separately track and report on
increased FMAP funds.
Reliance on Existing Payment System to Distribute Increased FMAP Funds
and CMS Efforts to Provide Guidance Facilitated States' Access to
Available Funds:
CMS distributed the increased FMAP funds to states through an existing
payment management system, thereby providing states with timely access
to the funds.[Footnote 15] Specifically, by March 27, 2009--30 days
after the increased FMAP grant awards first became available--13 of
the sample states and the District had drawn down nearly $5.7 billion,
or just over one-half of the funds available at that time, and by
April 30, 2009, all sample states and the District had drawn down
increased FMAP funds.[Footnote 16] Through January 29, 2010, the
sample states and the District have drawn down about $30 billion in
increased FMAP funds and in the aggregate have done so at a fairly
continuous pace. (See figure 3.)
Figure 3: Cumulative Increased FMAP Funds Drawn Down by the Sample
States and the District by Month, February 2009 through January 2010:
[Refer to PDF for image: line graph]
Month: February 2009;
Funds drawn: $1.007 billion.
Month: March 2009;
Funds drawn: $7.936 billion.
Month: April 2009;
Funds drawn: $11.808 billion.
Month: May 2009;
Funds drawn: $12.538 billion.
Month: June 2009;
Funds drawn: $15.124 billion.
Month: July 2009;
Funds drawn: $17.241 billion.
Month: August 2009;
Funds drawn: $19.183 billion.
Month: September 2009;
Funds drawn: $21.283 billion.
Month: October 2009;
Funds drawn: $23.337 billion.
Month: November 2009;
Funds drawn: $25.836 billion.
Month: December 2009;
Funds drawn: $28.038 billion.
Month: January 2010;
Funds drawn: $29.988 billion.
Source: GAO analysis of HHS Payment Management System data.
Note: The amounts shown represent the funds that had been drawn down
as of the end of each month. The funds were first available on
February 25, 2009.
[End of figure]
The $30 billion in increased FMAP funds drawn by the sample states and
the District through January 29, 2010, represents nearly 100 percent
of these states' grant awards for fiscal year 2009,[Footnote 17] and
about 57 percent of the grant awards for the first and second quarters
of fiscal year 2010. Nationally, the 50 states, the District, and
several of the largest U.S. insular areas combined have drawn down
about $44 billion.
In addition to distributing the increased FMAP funds through the
existing Medicaid payment system, CMS provided guidance to states to
facilitate their timely access to these funds. For example, CMS issued
three State Medicaid Director letters that provided specific guidance
on how to comply with certain Recovery Act requirements, including the
prompt payment and maintenance of eligibility requirements.[Footnote
18] CMS also issued fact sheets and written responses to states'
frequently asked questions, and hosted conference calls for all states
in February and March 2009 to discuss issues related to compliance
with these requirements. Because of the variation in state operations,
funding processes, and political structures, CMS frequently worked
with states on an individual basis to resolve compliance questions.
For example, CMS advised Arizona that it would have to reverse a
change the state had made to the frequency with which it conducted
eligibility determinations in order to qualify for the increased FMAP,
[Footnote 19] and consulted with California on issues related to its
compliance with the Recovery Act's requirement related to political
subdivisions. Although most sample states and the District reported no
delay in drawing down increased FMAP funds, 10 states indicated that
it had been somewhat difficult or difficult to comply with the
Recovery Act's eligibility requirements, and 12 reported making
adjustments to their Medicaid programs in order to comply.
Increased FMAP Funds Were Critical to States' Efforts to Support
Increasing Medicaid Enrollment Growth and Minimize Program Reductions:
Most states reported that without the increased FMAP funds, they could
not have continued to support the substantial Medicaid enrollment
growth they have experienced. Overall Medicaid enrollment in the
sample states and the District increased by 11.3 percent between the
beginning of fiscal year 2008 and the end of fiscal year 2009, with
the majority of enrollment growth occurring in fiscal year 2009. (See
figure 4.) Specifically, in fiscal year 2008, overall Medicaid
enrollment among the 16 states and the District increased by 4
percent, with increases in individual states ranging from 1.6 percent
in New York to 12 percent in Ohio. By the end of fiscal year 2009,
overall enrollment had further increased by 7.3 percent, with
increases in individual states ranging from 4.6 percent in California
to 15.4 percent in Arizona. For over two-thirds of the sample states
and the District, the rate of enrollment growth in fiscal year 2009
was double or nearly double the rate of growth in fiscal year 2008.
Most of the enrollment growth in both fiscal years was attributable to
children, a population group that is sensitive to economic downturns.
Figure 4: Cumulative Quarterly Medicaid Enrollment Growth in the
Sample States and the District since October 2007:
[Refer to PDF for image: line graph]
Month: October 2007;
Percent increase: 0;
Month: December 2008;
Percent increase: 0.81%.
Month: March 2008;
Percent increase: 1.8%.
Month: June 2008;
Percent increase: 2.72%.
Month: September 2008;
Percent increase: 4%.
Month: December 2008;
Percent increase: 5.13%.
Month: March 2009;
Percent increase: 7.1%.
Month: June 2009;
Percent increase: 9.18%.
Month: September 2009;
Percent increase: 11.32%.
Source: GAO analysis of state reported data.
[End of figure]
Given enrollment growth, most states reported that the increased FMAP
funds were integral to their efforts to maintain current eligibility
levels, benefits and services, and to avoid further program
reductions. For example, Georgia reported using these funds to avoid
reductions in eligibility and optional benefits, and Colorado reported
using the funds to reduce planned cuts to provider payment rates.
However, most states reported that the availability of the increased
FMAP funds did not fully prevent the need for Medicaid program
reductions. Nine states reported reducing or freezing provider rates,
and 5 states reported reducing certain optional Medicaid benefits or
services in fiscal years 2009 or 2010; for example, California
reported cutting adult dental services. Given that the District and
all but 2 states reported that the amount of increased FMAP funds was
not fully sufficient to maintain their Medicaid programs in fiscal
year 2010, such program reductions may become more common.[Footnote
20] Looking ahead to fiscal year 2011, 5 states and the District
reported they were considering eligibility reductions; 8 states and
the District reported considering reductions to benefits and services;
and 10 states and the District reported considering reductions to
provider payment rates.
While the increased FMAP funds are for Medicaid services only, the
receipt of these funds may free up funds that states would otherwise
have had to use for their Medicaid programs. Virtually all of the
sample states and the District reported using the freed-up funds for
multiple Medicaid purposes as well as for other purposes, such as
financing general state budget needs. Only 2 states--North Carolina
and Ohio--reported using freed-up funds exclusively to finance general
state budget needs.
States Reported Concerns about the Sustainability of Their Medicaid
Programs once Increased FMAP Is No Longer Available:
As for the longer-term outlook for their Medicaid programs, the
District and all but 1 of the sample states expressed concern about
sustaining their Medicaid programs beginning in January 2011, after
the increased FMAP funds are no longer available. When asked about the
factors driving their concerns, virtually all of the states and the
District cited the increase in the state's share of Medicaid payments
that will occur in January 2011 because of the end of the increased
FMAP--an increase that will range from about 7.5 percentage points to
about 12.2 percentage points (an average of 10.5 percentage points)
compared with the first quarter 2010 increased FMAP. (See table 2.)
Table 2: Increase in State Share between Preliminary First Quarter
Fiscal Year 2010 Increased FMAP and Fiscal Year 2011 Regular FMAP:
State: Arizona;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 75.93%;
Fiscal year 2011 regular FMAP[B]: 65.85%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 10.08%.
State: California;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%;
Fiscal year 2011 regular FMAP[B]: 50.00%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%.
State: Colorado;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%;
Fiscal year 2011 regular FMAP[B]: 50.00%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%.
State: District of Columbia;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 79.29%;
Fiscal year 2011 regular FMAP[B]: 70.00%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 9.29%.
State: Florida;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 67.64%;
Fiscal year 2011 regular FMAP[B]: 55.45%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 12.19%.
State: Georgia;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 74.96%;
Fiscal year 2011 regular FMAP[B]: 65.33%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 9.63%.
State: Illinois;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.88%;
Fiscal year 2011 regular FMAP[B]: 50.20%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 11.68%.
State: Iowa;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 72.55%;
Fiscal year 2011 regular FMAP[B]: 62.63%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 9.92%.
State: Massachusetts;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%;
Fiscal year 2011 regular FMAP[B]: 50.00%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%.
State: Michigan;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 73.27%;
Fiscal year 2011 regular FMAP[B]: 65.79%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 7.48%.
State: Mississippi;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 84.86%;
Fiscal year 2011 regular FMAP[B]: 74.73%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 10.13%.
State: New Jersey;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%;
Fiscal year 2011 regular FMAP[B]: 50.00%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%.
State: New York;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%;
Fiscal year 2011 regular FMAP[B]: 50.00%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%.
State: North Carolina;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 74.98%;
Fiscal year 2011 regular FMAP[B]: 64.71%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 10.27%.
State: Ohio;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 73.47%;
Fiscal year 2011 regular FMAP[B]: 63.69%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 9.78%.
State: Pennsylvania;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 65.85%;
Fiscal year 2011 regular FMAP[B]: 55.64%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 10.21%.
State: Texas;
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 70.94%;
Fiscal year 2011 regular FMAP[B]: 60.56%;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 10.38%.
State: Average difference;
Percentage point difference in state share between preliminary first
quarter 2010 increased FMAP and 2011 regular FMAP: 10.5%3.
Source: GAO analysis of HHS data.
[A] The preliminary increased FMAP rates listed for the first quarter
of federal fiscal year 2010 were provided by CMS on November 13, 2009.
[B] The fiscal year 2011 FMAP rates were published in the Federal
Register on November 27, 2009.
[End of table]
The size of the increase in state share does not necessarily reflect
the difficulty that a state may have in absorbing these costs.
Ultimately, the impact of states' increased share in Medicaid payments
will vary depending on factors such as program enrollment and state
fiscal circumstances. For example, according to Kaiser Family
Foundation estimates, about 27 percent of New York's population was
enrolled in Medicaid in 2006 compared with about 11 percent of New
Jersey's population.[Footnote 21] Similarly, state fiscal
circumstances also vary considerably among the 16 states and the
District. The December 2009 unemployment rate, which is one indicator
of fiscal circumstances, varied from 6.6 percent in Iowa to14.6
percent in Michigan. As a result, the impact of the increased state
share of Medicaid payments will vary on a state-by-state basis.
Recovery Act Transportation Projects on Track to Meet Legislative Time
Frames, but Other Requirements Presented Challenges:
Recovery Act Transportation Projects on Track to Meet Legislative Time
Frames:
Using the existing federal surface transportation program structure,
states and transit agencies were on track to meet the March 2010
legislative deadline for obligating all Recovery Act highway and
public transportation funds when we completed our work.[Footnote 22]
The existing federal surface transportation structure has well-
established programs and processes that were understood by state
departments of transportation, local transit agencies, and others. For
example, Recovery Act highway funds were distributed under the rules
governing the Federal-Aid Highway Program generally and its Surface
Transportation Program in particular. State departments of
transportation were well acquainted with the type of projects eligible
for and the federal requirements associated with this funding.
Similarly, public transportation funds were primarily distributed
through well-established programs, with most of the funds distributed
through the Transit Capital Assistance Program. Like state departments
of transportation, project sponsors (typically transit agencies) are
familiar with the grant application processes of these programs.
Federal surface transportation programs are administered through
established federal-state or federal-local partnerships, where each
agency is aware of its specific roles and responsibilities. For
example, the Federal Highway Administration (FHWA) has an office in
every state and the District of Columbia to work with state
transportation departments, and the Federal Transit Administration
(FTA) has 10 regional offices that work with transit providers.
Finally, there is a long-standing transportation planning process that
states and metropolitan areas are required by law to follow for both
short-range and long-range transportation planning.[Footnote 23] This
transportation planning process is meant to foster better
transportation investment decisions.
Using existing programs and processes, state departments of
transportation and local transit agencies were able to identify over
11,000 highway projects and submit over 960 grant applications
[Footnote 24] for transit funds, respectively, that could be quickly
started and promote state and local transportation goals, with the
following results:
* The majority of the approximately $35 billion that the Recovery Act
provided for highway infrastructure projects and public transportation
has been obligated. As of February 16, 2010, FHWA has obligated $25.1
billion of the $26.7 billion (around 95 percent)[Footnote 25] that was
apportioned to all 50 states and the District of Columbia for over
11,000 highway infrastructure and other eligible projects nationwide.
In addition, FTA has obligated about $7.5 billion of the $8.4 billion
(around 89 percent)[Footnote 26] that was appropriated to fund public
transportation throughout the country by awarding over 740 grants
nationwide.[Footnote 27] Figure 5 shows Recovery Act highway and
transit funding and obligations nationwide. As provided for in the
Recovery Act, 50 percent of apportioned highway funds were obligated
before June 30, 2009, and 50 percent of Transit Capital Assistance
Program and Fixed Guideway Infrastructure Investment program funds
were obligated before September 1, 2009.[Footnote 28]
Figure 5: Cumulative Recovery Act Highway and Public Transportation
Funding and Obligations Nationwide:
[Refer to PDF for image: vertical bar graph]
Highway apportionment: $26.7 billion;
Public transportation appropriation: $8.4 billion.
Month: March 2009;
Highway funding: $4.69 billion;
Public transportation funding: $0.046 billion.
Month: April 2009;
Highway funding: $8.92 billion;
Public transportation funding: $0.049 billion.
Month: May 2009;
Highway funding: $12.97 billion;
Public transportation funding: $0.53 billion.
Month: June 2009;
Highway funding: $16.14 billion;
Public transportation funding: $2.22 billion.
Month: July 2009;
Highway funding: $17.2 billion;
Public transportation funding: $3.79 billion.
Month: August 2009;
Highway funding: $17.96 billion;
Public transportation funding: $7.15 billion.
Month: September 2009;
Highway funding: $19.12 billion;
Public transportation funding: $7.2 billion.
Month: October 2009;
Highway funding: $19.88 billion;
Public transportation funding: $7.2 billion.
Month: November 2009;
Highway funding: $20.42 billion;
Public transportation funding: $7.2 billion.
Month: December 2009;
Highway funding: $22.25 billion;
Public transportation funding: $7.2 billion.
Month: January 2010;
Highway funding: $23.69 billion;
Public transportation funding: $7.23 billion.
Month: February 2010;
Highway funding: $25.1 billion;
Public transportation funding: $7.24 billion.
Source: GAO analysis of FHWA and DOT data.
Note: Public transportation obligation amounts include obligations
associated with funds that were transferred from FHWA to FTA for
public transportation projects. February 2010 data are as of February
16, 2010.
[End of figure]
* Reimbursements continue to increase. After federal funds have been
obligated, and once portions of the work have been completed, states
and transit agencies may request reimbursement from FHWA and FTA.
[Footnote 29] Therefore, reimbursements generally lag behind
obligations since it takes time for a state or transit agency to bid,
award, and start work on specific projects. As of February 16, 2010,
FHWA has reimbursed $6.29 billion (25 percent) to states nationwide,
and FTA has reimbursed $1.8 billion (24 percent) to states and transit
agencies nationwide, with the amount of reimbursements almost doubling
since September 2009 (see figure 6). Even though reimbursement rates
for Recovery Act highway funds have been increasing nationwide, our
analysis shows that wide differences exist across states, mainly
because of the complexity of the types of projects that states
undertook and the extent to which projects were administered by local
governments. The reimbursement rate for Recovery Act funds for public
transportation projects has also been increasing. Transit officials we
interviewed noted that their agencies are reimbursed as work is
completed. Therefore, while for some projects, such as the
construction projects, agencies may request reimbursement quickly as
the projects meet certain schedule milestones, for other projects,
such as bus purchases, agencies may not request any reimbursements
until the actual delivery dates, which could be years from now.
Figure 6: Cumulative Recovery Act Highway and Public Transportation
Funds Reimbursed by FHWA and FTA Nationwide:
[Refer to PDF for image: vertical bar graph]
Month: March 2009;
Highway: $1.7 million;
Public transportation: $0.
Month: April 2009;
Highway: $9.8 million;
Public transportation: $0.01 million.
Month: May 2009;
Highway: $71.1 million;
Public transportation: $56.8 million.
Month: June 2009;
Highway: $264.2 million;
Public transportation: $196 million.
Month: July 2009;
Highway: $676.2 million;
Public transportation: $498.1 million.
Month: August 2009;
Highway: $1.437 billion;
Public transportation: $781.8 million.
Month: September 2009;
Highway: $2.376 billion;
Public transportation: $953.7 million.
Month: October 2009;
Highway: $3.661 billion;
Public transportation: $1.179 billion.
Month: November 2009;
Highway: $4.627
Public transportation: $1.350 billion.
Month: December 2009;
Highway: $5.603 billion;
Public transportation: $1.577 billion.
Month: January 2010;
Highway: $6.039 billion;
Public transportation: $1.753 billion.
Month: February 2010;
Highway: $6.291 billion;
Public transportation: $1.784 billion.
Source: GAO analysis of FHWA and DOT data.
Note: February 2010 data are as of February 16, 2010.
[End of figure]
* States and transit agencies have used Recovery Act funding to meet
transportation goals. While many officials noted that they selected
projects that could be started quickly, states and transit agencies
have used the considerable latitude they have under the existing
federal surface transportation structure to address a variety of state
and local goals. For example, Iowa officials stated that they used a
significant portion of their Recovery Act funds for resurfacing
projects, which will reduce the demand for these types of projects and
free up federal and state funding for larger, more complex projects in
the near future. Massachusetts officials told us that the focus of the
state's projects for reconstructing and rehabilitating roads is to
select projects that promote the state's broader long-term economic
development goals. Pennsylvania used nearly a third of its Recovery
Act funds for bridge improvement and replacement (compared with 10
percent nationally), in part because a significant percentage of its
bridges are structurally deficient. In addition, many transit agency
officials told us that they decided to use Recovery Act funding for
transit infrastructure construction projects and related activities--
ranging from large-scale projects, such as upgrading power
substations, to a series of smaller projects, such as installing
enhanced bus shelters--since they were high-priority projects that
either improve safety or would otherwise not have been funded. The
Metropolitan Transportation Authority in New York State, for example,
funded a number of public transportation projects that had been
postponed because of budget constraints. Figure 7 shows obligations by
the types of highway and public transportation projects funded.
Figure 7: Nationwide Recovery Act Highway and Public Transportation
Obligations by Project Type:
[Refer to PDF for image: two pie-charts]
Highway obligations:
Pavement improvement: reconstruction/rehabilitation ($6.0 billion):
25%;
Pavement improvement: resurface ($5.4 billion): 23%;
Pavement widening ($3.5 billion): 15%;
New road construction ($1.5 billion): 7%;
Bridge replacement ($1.2 billion): 5%;
Bridge improvement ($1.2 billion): 5%;
New bridge construction ($626 million): 3%;
Other ($4.2 billion): 18%.
Public transportation obligations:
Transit infrastructure construction ($3.7 billion): 50%;
Bus purchases and rehabilitation ($2 billion): 26%;
Other capital expense ($906 million): 12%;
Preventive maintenance ($622 million): 8%;
Rail car purchases and rehabilitation ($281 million): 4%;
Operating expense ($6 million): Less then 1%.
Source: GAO analysis of FHWA and FTA data.
Notes: Highway percentages may not add to 100 because of rounding.
"Other" includes safety projects, such as improving safety at railroad
grade crossing, and transportation enhancement projects, such as
pedestrian and bicycle facilities, engineering, and right-of-way
purchases.
Public transportation percentages may not add to 100 because of
rounding. "Transit infrastructure construction" includes engineering
and design, acquisition, construction, and rehabilitation and
renovation activities. "Other capital expenses" includes leases,
training, finance costs, mobility management project administration,
and other capital programs. This amount does include Recovery Act
funds that were transferred from FHWA to FTA.
Highway data are as of February 1, 2010 and public transportation data
are as of January 15, 2010.
[End of figure]
Recovery Act Requirements Have Presented Challenges to Transportation
Agencies:
While funding is apportioned under the rules governing the current
federal surface transportation structure, the Recovery Act has
additional requirements that limit the latitude and flexibility that
states and transit agencies normally have under the existing programs.
Three Recovery Act requirements in particular have presented some
challenges to some states and transit agencies, which have required
the U.S. Department of Transportation (DOT) and the Office of
Management and Budget (OMB) to issue multiple sets of clarifying
guidance over the course of the year since the passage of the Recovery
Act.
One Recovery Act requirement is to give priority to projects that can
be completed within 3 years and are that are located in economically
distressed areas.[Footnote 30] As we previously reported, there has
been substantial variation in the extent to which states prioritized
projects in economically distressed areas and how they identified
these areas. For example, we found instances of states developing
their own eligibility requirements for economically distressed areas
using data or criteria not specified in the Public Works and Economic
Development Act. State officials told us that they did so to respond
to rapidly changing economic conditions and, according to DOT
officials, several states found that the data specified in the Public
Works and Economic Development Act failed to recognize areas that
suffered severe economic disruption, in part due to the difficulty in
obtaining current data. In response to our July 2009 recommendation,
FHWA, in consultation with the Department of Commerce, issued guidance
to the states in August 2009 on (1) identifying and giving priority to
economically distressed areas and (2) criteria to identify "special
need" economically distressed areas that do not meet the statutory
criteria in the Public Works and Economic Development Act. Three
states in our review-- Arizona, California, and Illinois--developed
their own eligibility requirements or applied a special need criterion
that would have increased the number of counties being designated as
economically distressed in these states. California's use of the
special need criteria resulted in an increase from 49 to all 58
counties being designated as distressed. FHWA reviewed the
documentation provided by the three states and determined that the
types of data used by those states are not consistent with FHWA
guidance. FHWA is working with those states to identify conforming
special need criteria.[Footnote 31] As we previously reported,
widespread designations of special need areas would give added
preference to highway projects for Recovery Act funding; however, it
would also make it more difficult to target Recovery Act highway
funding to areas that have been the most severely affected by the
economic downturn.
Another Recovery Act requirement is for the governor of each state to
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 2010.[Footnote 32] However, the
challenges that states have faced in submitting their certifications
coupled with their fiscal challenges raise questions as to whether the
maintenance-of-effort provision will achieve its intended purpose of
preventing states from substituting federal funds for some of their
planned spending on transportation programs. Maintenance-of-effort and
similar provisions are important mechanisms for helping ensure that
federal economic stimulus spending achieves its intended effect of
providing countercyclical assistance and increasing overall spending
and investment. This can be particularly important in the highway
program, as we have found in previous work that increasing federal
highway funds influences states and localities to substitute federal
funds for funds they otherwise would have spent on highways.[Footnote
33] Such substitution makes it difficult to target an economic
assistance package that results in increased spending and investment.
This requirement has proven challenging to implement. Although the
Recovery Act gave the states 30 days after enactment of the act to
provide their certifications, many states have yet to complete a
maintenance-of-effort certification that DOT finds fully acceptable.
[Footnote 34] For example, as we reported in July 2009, most states
had to revise their initial certifications because DOT found that many
states submitted explanatory or conditional certifications that were
subject to certain assumptions, future legislative action, or other
conditions. DOT informed the states that such explanatory or
conditional certifications were not permitted by the Recovery Act.
Subsequently, in assessing the states' certified amounts for
reasonableness, DOT found inconsistencies and confusion among the
states, including how states calculated their planned expenditures and
how states treated funding related to in-kind contributions, bond
proceeds, and aid to local governments. Given the inconsistencies and
confusion, and in response to questions from the states, DOT has
issued multiple guidance documents to the states and some states have
submitted multiple revisions to their certifications. On February 9,
2010, DOT requested that each state review its current certification
and take any corrective action with regard to the state's calculation
of the maintenance-of-effort amount on or before March 11, 2010.
[Footnote 35] According to FHWA officials, they expect many states to
submit revised certifications, including 12 of the 16 states and the
District that we reviewed for our study. As a result, these states are
now in the position of determining what they planned to spend over a
year ago on transportation from February 17, 2009, through September
30, 2010, and adjusting these planned expenditure levels to reflect
various guidance from DOT but not for the economic and budgetary
changes their states have experienced over the last year. According to
DOT officials, DOT has not determined a date for finalizing its review
of these certifications because department officials are uncertain
what will be included in the certifications and whether they will
comply with DOT guidance.
Given the fiscal condition of many states, it is unclear whether
states will be able to maintain the certified levels of effort.
Although the state officials we spoke with are committed to trying to
meet the maintenance-of-effort requirements, several told us that the
current decline in state revenues, such as declines in state fuel tax
and other sources used for state and state-funded local highway
projects, as well as possible reductions in their departments' fiscal
years 2010 or 2011 budgets, may make it more difficult for them to
maintain their levels of transportation spending. For example,
Mississippi and Ohio transportation officials stated that if their
legislatures reduce their respective departments' budget for fiscal
years 2010 or 2011, the departments may have difficulty maintaining
certified spending levels.
DOT officials told us they will continue to monitor the progress
states are making to meet their maintenance-of-effort requirements and
to collect and disseminate lessons learned from the process. However,
the Recovery Act does not require DOT to make a determination as to
whether states have met their required program expenditures until
around 6 months after the maintenance-of-effort provision covered time
period expires on September 30, 2010. Specifically, the act does not
require states to report the amount of funds they planned to expend
and the actual expenditures from state sources until February 2011,
and DOT to assess the penalty for not meeting the requirement until
August 2011. More timely information from the states on the progress
they are making in meeting the maintenance-of-effort requirements
could better inform policymakers' decisions on the usefulness and
effectiveness of the maintenance-of-effort requirements and of
imposing similar provisions in future legislation.
State highway and transit officials have also had challenges in
complying with the reporting requirements under Section 1201(c) and
the Section 1512 recipient reporting requirements of the Recovery Act,
which have necessitated multiple issuances of supplemental guidance
from both DOT and OMB. Section 1201(c) is only required for recipients
of Recovery Act transportation funds, while the Section 1512 recipient
reporting requirement is required for recipients of any Recovery Act
funds. While DOT and OMB have provided training and guidance, such as
conducting webinars--three on the Section 1201(c) reporting process
and four on the recipient reporting process--and issuing implementing
guidance on recipient reporting, we found that there was confusion
among states about a number of reporting requirements, including how
to calculate the number of jobs created or sustained. For example,
four transit agencies in Pennsylvania used different denominators to
calculate the number of full-time equivalent (FTE) jobs they reported
for their September 30, 2009, recipient report submissions. The
conflicting requirements between Section 1201(c) and Section 1512, of
direct and indirect jobs created or retained, posed challenges as to
how transit agencies should report project contractors and
subcontractors and what FTE methodology recipients should use for the
first recipient reporting period. OMB issued guidance on December 18,
2009, that simplified the FTE calculation and the period of
performance for the recipient reporting requirement. In addition, on
February 1, 2010, FTA issued guidance to transit agencies instructing
them to use the same methodology for calculating jobs retained through
vehicle purchases under Section 1201 as they had been using for the
recipient reporting. This revised previous guidance that had
instructed transit agencies to use different methodologies for vehicle
purchases under Section 1201 and Section 1512. The Recovery Act
requirements and supplemental guidance have created many challenges
for state highway and transit program officials who were only
accustomed to meeting normal reporting requirements.
Another Recovery Act requirement is for states and transit agencies to
ensure that all apportioned Recovery Act funds are obligated within 1
year--the Secretary of Transportation is to withdraw and redistribute
to eligible states any amount that is not obligated within this time
frame. As of February 16, 2010, when we completed fieldwork, states
and transit agencies were well on their way to meeting the 1-year
deadline. Obligating funds in a timely manner is an important feature
of the Recovery Act, as an economic stimulus package should, as we
have reported, include projects that can be undertaken quickly enough
to provide a timely stimulus to the economy.[Footnote 36] However, our
prior reports have also identified challenges and issues associated
with the 1-year deadline, in particular, for highways. These
challenges and issues have required DOT, through FHWA, to exercise
diligence as the deadline approached to ensure that Recovery Act funds
were not only obligated in a timely manner, but also used to meet the
goals of the act. Specifically, we have previously reported the
following:
* Obligations for projects in suballocated areas generally lagged
behind obligations for statewide projects in many states and lagged
considerably in a few states, but these obligations have been
increasing. As of February 16, 2010, all states and suballocated areas
appeared to be on track to meet the deadline. However, some states
needed to obligate a significant amount of funds quickly as the
deadline approached, and this posed some challenges for both states
and FHWA. For example, according to a senior FHWA official, some
states have minimal "shelf depth," that is, projects that are ready to
be started and are eligible for Recovery Act funding. This requires
states to either accelerate project planning or have those Recovery
Act funds withdrawn. As the DOT Office of Inspector General has
reported, FHWA faces oversight challenges when states accelerate
project planning, as hastily amended plans could result in states or
localities selecting imprudent projects or ones that do not meet
Recovery Act goals.[Footnote 37] We will continue to monitor the
states' and FHWA's actions leading up to the 1-year deadline for our
subsequent Recovery Act bimonthly reports.
* Many highway contracts were awarded for less than the original cost
estimates. These "bid savings" allowed states to fund more projects
with the Recovery Act funding than were initially anticipated. To use
bid savings, a state may need to request that DOT deobligate the funds
associated with the bid savings and then obligate the funds for a new
project. In addition, any funds that were deobligated prior to the
March 2, 2010, deadline must also have been obligated for a new
project before March 2 to avoid being withdrawn for redistribution to
other states. However, if funds are deobligated after the March 2,
2010, deadline, those funds will be available for obligation to new
projects until September 30, 2010. Thus, for known bid savings, it was
important for DOT to carefully monitor and determine that states did
not attempt to circumvent the 1-year requirement--which is intended to
ensure that funds are put to use quickly. To that end, in December
2009 and January 2010, FHWA provided guidance to its field offices
reminding them that the FHWA regulations require that within 90 days
of determining that the estimated federal share of project costs has
decreased by $250,000 or more, states are required to request that
FHWA deobligate these funds. FHWA's guidance also stated that above
and beyond the 90-day rule, it was in the states' best interest to
ensure that as much as possible was deobligated before the Recovery
Act 1-year deadline, consistent with normal state processes for such
activities. While states have been having FHWA deobligate Recovery Act
funds regularly since the passage of the act, some states with known
bid savings decided not to request that FHWA deobligate funds for
projects for contracts awarded after mid-December 2009 because,
according to these states, there was not sufficient time to deobligate
funds and submit new projects for obligation before the March 2, 2010,
deadline. We will continue to report on the status of contract bid
savings and the deobligation of Recovery Act highway funds after the
March deadline for our subsequent Recovery Act bimonthly reports and
to monitor whether actions states took were consistent with state
processes and FHWA guidance.
* FHWA has the authority to transfer Recovery Act highway
infrastructure funds to FTA for eligible transit projects.[Footnote
38] In September and December 2009, we reported that FHWA had
transferred approximately $290 million to FTA. As of February 1, 2010,
this amount increased to $332 million, and, as of February 16, to $407
million--an increase of $75 million in a 2-week period. DOT officials
believe that Recovery Act funds transferred to FTA do not have to
comply with either the highway or transit Recovery Act 1-year
obligation deadline because other provisions of law govern how funds
made available through transfers for projects or transportation
planning are treated, but that transferred funds must meet the
Recovery Act's requirement that all funds be fully obligated by the
September 30, 2010. Thus, according to DOT's interpretation, a state
that did not have 100 percent of its highway funds obligated as it
approached the 1-year deadline could request a transfer of highway
funds to FTA for an identified transit project after which it would
have until September 2010 to have FTA obligate these funds. We will
continue to monitor the status of transferred funds, including the
amounts transferred and how these funds were used.
While we will continue to monitor DOT's efforts other government
entities are also planning audit activity related to Recovery Act
funds. For example, DOT's Inspector General has completed an audit on
DOT's implementation of the Recovery Act. The DOT Inspector General is
also conducting several audits on other Recovery Act issues such as
job creation and DOT oversight. In addition, eleven of our selected
states and the District have completed, are conducting, or plan to
conduct audit activities involving Recovery Act funded
transportation/highway projects.
Recommendation for Executive Action:
The Secretary of Transportation should gather timely information on
the progress states are making in meeting the maintenance-of-effort
requirements and report preliminary information to Congress within 60
days of the certified period (Sept. 30, 2010), on (1) whether states
met required program expenditures as outlined in their maintenance-of-
effort certifications, (2) the reasons that states did not meet these
certified levels, if applicable, and (3) lessons learned from the
process.
Recovery Act Education Funds Have Been Used Primarily to Fund
Education Staff and, to a Lesser Extent, Innovation and Reform:
Even with the influx of Recovery Act funds, the budget condition of
local educational agencies (LEA) across the country is mixed, with
some still facing large budget cuts. The Recovery Act provided $53.6
billion[Footnote 39] in appropriations for the State Fiscal
Stabilization Fund (SFSF) to be administered by the U.S. Department of
Education (Education), as well as additional funds for existing
education programs, including Title I, Part A of the Elementary and
Secondary Education Act of 1965 (ESEA), as amended, and parts B and C
of the Individuals with Disabilities Education Act (IDEA), as amended.
Education, in its guidance and communications to states and LEAs, has
emphasized the opportunity for education funds under the Recovery Act
to be used for innovation and reform. Most LEAs reported that they
considered Education's stated goals to be important when planning for
uses of Recovery Act funds, although in the context of decreasing
state and local revenues, much of the Recovery Act education funds
have been used to fund education staff positions, including teachers.
Other uses include items that could help build long-term capacity and
advance educational goals and reform while also avoiding recurring
costs for LEAs. Education has worked closely with states and
localities in helping them use Recovery Act funds, but the influx of
funds has illustrated the need for Education to work with states to
ensure that they have adequate cash management processes in place, as
well as transparent means to establish that they are complying with
maintenance-of-effort provisions. Education has also engaged in
numerous efforts to facilitate reporting by states and LEAs on jobs
created and retained by the Recovery Act, but state and local
officials we spoke with raised some concerns about the quality of jobs
data reported in October 2009.
Even with Recovery Act Funds, LEAs' Budget Situations Vary:
Even with the current infusion of Recovery Act funding for education
programs, the budget condition of LEAs across the country is mixed,
according to our national survey of LEAs. According to the
Congressional Research Service, the Recovery Act provided
approximately $100 billion for discretionary education programs--
elementary, secondary, and postsecondary--in fiscal year 2009, which,
when combined with regular appropriations, represents about a 235
percent increase in federal funding compared to fiscal year 2008.
Based on our national survey results, we estimate that approximately
the same amount of LEAs--17 percent--face decreases of 5 percent or
more in total education funding--federal, state, and local--as face
funding increases of 5 percent or more for the current school year. On
the other hand, an estimated 57 percent of LEAs reported smaller or no
funding changes for the current school year. Education funding in the
United States primarily comes from state and local governments. Prior
to the influx of Recovery Act funding for education from the federal
government, LEAs, on average, derived about 48 percent of their fiscal
year 2007 funding budget from state funds, 44 percent from local
funds, and 9 percent from federal funds.[Footnote 40] Figure 8 shows
the estimated percentage of LEAs nationally that are facing budget
fluctuations of 5 percent or more by funding source--state, local, and
federal.
Figure 8: Estimated Percentage of LEAs Nationally with Funding
Decreases and Increases of 5 Percent or More for School Year 2009-
2010, by Source of Funding:
[Refer to PDF for image: horizontal bar graph]
Source of funding: State;
Percentage of LEAs with decrease of 5 percent or more: 41%;
Percentage of LEAs with increase of 5 percent or more: 7%.
Source of funding: Local;
Percentage of LEAs with decrease of 5 percent or more: 17%;
Percentage of LEAs with increase of 5 percent or more: 9%.
Source of funding: Federal;
Percentage of LEAs with decrease of 5 percent or more: 6%;
Percentage of LEAs with increase of 5 percent or more: 50%.
Source of funding: Total funding;
Percentage of LEAs with decrease of 5 percent or more: 17%;
Percentage of LEAs with increase of 5 percent or more: 17%.
Source: GAO survey of LEAs.
Notes: Percentage estimates for these nationwide estimates have
margins of error, at the 95 percent confidence level, of plus or minus
5 percentage points or less.
[End of figure]
The budgetary picture for LEAs ranges widely across states. According
to our survey, we estimate that nearly 40 percent of LEAs in
California, Georgia, and North Carolina face overall funding cuts of 5
percent or more, while about 30 percent of LEAs in Texas, Mississippi,
and New Jersey reported total education funding increases of 5 percent
or more.[Footnote 41]
States Varied in the Rate at Which They Have Drawn Down Recovery Act
Funds for Education Programs:
Rates of spending for education under the Recovery Act have varied: as
of January 2010, 9 states had drawn down 75 percent or more of their
awarded education stabilization funds, while 3 states and the District
of Columbia had drawn down less than 25 percent of these funds.
[Footnote 42] (See table 3.) Budget debates at the state level delayed
the initial allocation and spending of education-related funds in some
states. According to officials in 3 of the states we visited, the
state budget process slowed the release of funds and the ability of
local and state educational agencies to finalize their plans for using
ESEA Title I Recovery Act funds. For example, in Pennsylvania, ESEA
Title I and IDEA funds could not be expended until the legislature
passed a stopgap budget in August 2009, according to state officials.
Also, the rate of spending was affected by how quickly some states
were able to obtain assurances and applications from their LEAs that
the funds would be used in accordance with applicable provisions of
the Recovery Act and other requirements. Nearly all of the 16 states
and the District of Columbia required each LEA to submit an
application, a budget, or a detailed plan as a condition for receiving
Recovery Act funding, but the amount of time needed to complete these
processes varied. According to a Pennsylvania official, in February
2010, the state completed its review of LEAs' SFSF applications and
was finalizing the documentation needed to provide the funds to LEAs,
and most LEAs were expected to receive SFSF funds in March 2010.
Table 3: Percentage of Awarded Education Stabilization, ESEA Title I,
and IDEA, Part B Recovery Act Funds Drawn Down by States as of January
22, 2010:
Percentage of awarded Recovery Act funds drawn down:
State: Arizona;
Education stabilization funds: 90%;
ESEA Title I: 18%;
IDEA, Part B: 14%.
State: California;
Education stabilization funds: 90%;
ESEA Title I: 41%;
IDEA, Part B: 22%.
State: Colorado;
Education stabilization funds: 75%;
ESEA Title I: 4%;
IDEA, Part B: 6%.
State: District of Columbia;
Education stabilization funds: 0;
ESEA Title I: 0;
IDEA, Part B: 0.
State: Florida;
Education stabilization funds: 34%;
ESEA Title I: 19%;
IDEA, Part B: 24%.
State: Georgia;
Education stabilization funds: 89%;
ESEA Title I: 10%;
IDEA, Part B: 12%.
State: Illinois;
Education stabilization funds: 92%;
ESEA Title I: 6%;
IDEA, Part B: 22%.
State: Iowa;
Education stabilization funds: 82%;
ESEA Title I: 32%;
IDEA, Part B: 40%.
State: Massachusetts;
Education stabilization funds: 76%;
ESEA Title I: 11%;
IDEA, Part B: 17%.
State: Michigan;
Education stabilization funds: 85%;
ESEA Title I: 14%;
IDEA, Part B: 7%.
State: Mississippi;
Education stabilization funds: 49%;
ESEA Title I: 8%;
IDEA, Part B: 2%.
State: New Jersey;
Education stabilization funds: 92%;
ESEA Title I: 1%;
IDEA, Part B: 4%.
State: New York;
Education stabilization funds: 10%;
ESEA Title I: 1%;
IDEA, Part B: 6%.
State: North Carolina;
Education stabilization funds: 57%;
ESEA Title I: 20%;
IDEA, Part B: 26%.
State: Ohio;
Education stabilization funds: 41%;
ESEA Title I: 16%;
IDEA, Part B: 20%.
State: Pennsylvania;
Education stabilization funds: 0;
ESEA Title I: 30%;
IDEA, Part B: 25%.
State: Texas;
Education stabilization funds: 16%;
ESEA Title I: 14%;
IDEA, Part B: 15%.
State: Total;
Education stabilization funds: 58%;
ESEA Title I: 17%;
IDEA, Part B: 17%.
Source: GAO analysis of U.S. Department of Education data.
[End of table]
With Many LEAs Facing Budget Cuts and Fiscal Pressures, Job Retention
Is the Primary Planned Use of Recovery Act Education Funds:
Our survey results indicate that job retention for education staff,
including teachers, was the top planned use for Recovery Act funds for
LEAs across the three federal education programs we reviewed. An
estimated 63 percent of LEAs plan to use more than 50 percent of their
Recovery Act SFSF funds to retain jobs, while an estimated 25 percent
and 19 percent of LEAs said they planned to use over half of their
Recovery Act funds on job retention under ESEA Title I, Part A and
IDEA, Part B, respectively. In one example, education officials in the
small, rural school district of Jasper-Troupsburg in upstate New York
told us that they would use 95 percent of their Recovery Act funds to
retain jobs. Because employee-related expenditures are the largest
category of school expenditures--with salaries and benefits accounting
for more than 80 percent of local school expenditures, according to
Education's most recent estimates--it is understandable that LEAs
would use much of their Recovery Act funds for staff salaries. Also,
given the fiscal uncertainty and substantial budget shortfalls facing
states, federal funds provided by the Recovery Act give LEAs
additional support for the retention of teachers and other education
staff. Overall, the nationwide impact of Recovery Act education funds
on job retention may be significant because K-12 public school systems
employ about 6.2 million staff, based on Education's estimates, and
make up about 4 percent of the nation's workforce.
However, an estimated 32 percent of LEAs nationally expected to lose
jobs, even with SFSF funds, but the percentage of LEAs expecting to
lose jobs varies by state. (See figure 9.) Among the states with
higher percentages of LEAs expecting job losses even with SFSF funds
were Georgia, Florida, North Carolina, and California.[Footnote 43]
According to our analysis, in all of these states except for Florida,
the proportion of LEAs that experienced decreases of 5 percent or more
in total education funding from last year was larger than the national
average of 17 percent.
Figure 9: Estimated Percentage of LEAs Expecting Decreases in the
Number of Jobs, Even with Recovery Act SFSF Funds, by State:
[Refer to PDF for image: vertical bar graph]
National average: 32%.
State: Georgia;
LEAs Expecting Decreases in the Number of Jobs: 64.6%.
State: Florida;
LEAs Expecting Decreases in the Number of Jobs: 55.51%.
State: North Carolina;
LEAs Expecting Decreases in the Number of Jobs: 54.36%.
State: California;
LEAs Expecting Decreases in the Number of Jobs: 49.52%.
State: Michigan;
LEAs Expecting Decreases in the Number of Jobs: 44.72%.
State: Arizona;
LEAs Expecting Decreases in the Number of Jobs: 34.2%.
State: New York;
LEAs Expecting Decreases in the Number of Jobs: 33.86%.
State: Iowa;
LEAs Expecting Decreases in the Number of Jobs: 31.49%.
State: Massachusetts;
LEAs Expecting Decreases in the Number of Jobs: 28.11%.
State: Texas;
LEAs Expecting Decreases in the Number of Jobs: 20.16%.
State: Mississippi;
LEAs Expecting Decreases in the Number of Jobs: 19.65%.
State: Ohio;
LEAs Expecting Decreases in the Number of Jobs: 12.53%.
State: New Jersey;
LEAs Expecting Decreases in the Number of Jobs: 12.46%.
State: Illinois;
LEAs Expecting Decreases in the Number of Jobs: 10.06%.
State: Pennsylvania;
LEAs Expecting Decreases in the Number of Jobs: 6.21%.
Source: GAO survey of LEAs.
Notes: Colorado was not included in our analysis of SFSF fund use
because the state did not allocate these funds to LEAs. Given its
ongoing fiscal support to LEAs, Colorado allocated its education
stabilization funds to institutions of higher education.
Percentage estimates for states have margins of error, at the 95
percent confidence level, of plus or minus 12 percentage points or
less (Arizona, Iowa, Mississippi, and Pennsylvania have a margin of
error of 13 percent; New Jersey has a margin of error of 15 percent;
and Massachusetts has a margin of error of 16 percent). The nationwide
percentage estimates have a margin of error of plus or minus 5
percentage points.
[End of figure]
In our survey, LEAs reported that they planned to spend some of their
Recovery Act funds on items that could help build long-term capacity
and advance educational goals and reform while also avoiding recurring
costs for LEAs. In addition to helping stabilize budgets and retain
and create jobs, Education's guidance released to states in April 2009
noted that education funds under the Recovery Act "provide a unique
opportunity to jump start school reform and improvement efforts," and
suggested possible ways to use Recovery Act funds in several
categories. We estimate that most LEAs--about 80 percent--gave great
or very great importance to "improving results for students" in
deciding how to use Recovery Act funds, while "increasing educators'
long term capacity" was the next most cited. After job retention and
creation, LEAs surveyed also reported several onetime expenditures,
such as purchasing technological equipment, including new computers;
providing professional development for instructional staff; and
purchasing instructional materials, as among the highest uses of
funds. Figure 10 shows the national estimated percentages of LEAs that
reported planning to use more than a quarter of their Recovery Act
funds for these three nonrecurring budgetary items across the three
education programs.
Figure 10: Estimated Percentage of LEAs Nationally Planning to Use
More Than 25 Percent of Their Recovery Act Funds from the SFSF, ESEA
Title I, and IDEA Programs for Professional Development, Technological
Equipment, and Instructional Materials:
[Refer to PDF for image: vertical bar graph]
Recovery Act funding source: IDEA;
Providing professional development for instructional staff: 12.73%;
Purchasing technological equipment: 21.65%;
Purchasing instructional materials: 11.4%.
Recovery Act funding source: Title I:
Providing professional development for instructional staff: 15.08%;
Purchasing technological equipment: 18.36%;
Purchasing instructional materials: 12.45%.
Recovery Act funding source: SFSF:
Providing professional development for instructional staff: 8.41%;
Purchasing technological equipment: 8.88%;
Purchasing instructional materials: 8.17%.
Source: GAO survey of LEAs.
Note: Percentage estimates for these nationwide estimates have margins
of error, at the 95 percent confidence level, of plus or minus 5
percentage points or less.
[End of figure]
Education Continues to Work with Some States to Address Cash
Management Challenges:
The substantial increase in federal education funds going to states
because of the Recovery Act has increased the importance of having
cash management systems in place to ensure that funds are spent timely
once they are drawn down by states. However, several states did not
initially have cash management systems in place for SFSF funds that
could disburse funds to LEAs when they were needed and ensure the
calculation and remittance of any interest due.[Footnote 44] For
example, Illinois has distributed SFSF funds to LEAs in semimonthly
payments, but according to state officials, the state did not have the
ability to identify specific cash needs from LEAs prior to
distributing these funds. Also, California drew down 80 percent of its
available ESEA Title I, Part A Recovery Act funds in May 2009 and
immediately distributed them to LEAs. According to Education
officials, California Department of Education (CDE) officials said
that the drawdown was in lieu of its normally scheduled drawdown of
school year 2008-2009 ESEA Title I funds, and therefore the schools
would be ready to use the funds quickly. However, in August, we
contacted the 10 LEAs in California that had received the largest
amounts of ESEA Title I, Part A Recovery Act funds and found that 7
had not spent any of these funds and that all 10 reported large cash
balances--ranging from $4.5 million to about $135 million--which
raised issues about the state's compliance with applicable cash
management requirements. In order to address its cash management
issues, CDE has implemented a pilot project to test its Web-based cash
management data collection system. CDE officials said they plan to
expand the pilot to include regular and Recovery Act ESEA Title I and
SFSF cash balances by October 2010.[Footnote 45] Illinois has also
taken action to help ensure compliance with cash management
requirements, and Education is providing these states, and others,
with targeted technical assistance on cash management. Education's
Office of Inspector General has also focused on cash management
practices in its work and issued an alert memo on October, 21, 2009,
which pointed out that states need to ensure that funds are
distributed to LEAs when they are needed to pay program costs, and
that states need to have controls in place to ensure that LEAs remit
interest earned on Recovery Act fund balances at least quarterly.
[Footnote 46] We will continue to monitor cash management issues
related to Recovery Act education funds.
Education Is Developing Plans to Monitor and Enforce State Compliance
with Maintenance-of-Effort Requirements and Subrecipient Monitoring:
The Recovery Act requires that each state make assurances that it
would meet maintenance-of-effort (MOE) requirements for elementary and
secondary (K-12) education and public institutions of higher education
(IHE) as a condition of receiving SFSF funds. Education required
governors in their phase I SFSF applications to provide assurances
that their states will meet MOE requirements or that they will be able
to comply with waiver provisions,[Footnote 47] and for phase II states
are required to attest that they met MOE requirements in fiscal year
2009. In order to meet SFSF MOE requirements, a state must maintain
state support for K-12 education and IHEs at least at fiscal year 2006
levels in fiscal years 2009, 2010, and 2011.
After maintaining state support at no less than fiscal year 2006
levels, states must first use education stabilization funds to restore
state funding to the greater of fiscal year 2008 or 2009 levels for
state support to K-12 school districts and IHEs in fiscal years 2009
through 2011. Education disseminated several guidance documents to
states in the spring and summer of 2009 to assist states in defining
their MOE amounts. In determining, for MOE purposes, the state level
of support for K-12 education in fiscal year 2006, Education guidance
said states must include funding provided through their primary
formulas for distributing funds to school districts. However,
Education also allowed states some flexibility in choosing the basis
they use to measure MOE, as well as in what they include or exclude in
their MOE definition. Further, Education directed states to amend
their SFSF applications to reflect any final budget changes and, in
the amended applications, provide final assurance that they will meet
MOE levels or apply for waivers. Specifically, according to Education
guidance, a state must amend its SFSF application if there are changes
to the reported levels of state support for education that were used
to determine the MOE amount or to calculate the amounts needed to
restore state support for education to the fiscal year 2008 or 2009
level. Education officials said adjustments were made to fiscal year
2006 MOE levels because, as state fiscal year 2009 budgets become
final, states are attempting to develop equivalent information for
both their fiscal year 2006 levels of support calculation and their
calculations for fiscal year 2009. However, guidance from Education
does not require states to include an explanation for changes made to
MOE calculations in their resubmitted applications, reducing
transparency in terms of what has changed from previously approved
applications. Given that some states decreased their fiscal year 2006
MOE funding levels by billions of dollars, an explanation of why this
change was made would allow the public and policymakers alike the
ability to better understand the action. We recommended in November
2009 that the Secretary of Education take further action to enhance
transparency by requiring states to include an explanation of changes
to MOE levels in their SFSF application resubmissions.[Footnote 48]
Education agreed with our recommendation, and we are continuing to
work with Education to ensure that actions are taken to enhance
transparency of state MOE changes.
Education has informed states of the requirements for monitoring
subrecipients' use of SFSF funds, but it is not clear that states have
focused on this requirement. Education enumerated administrative
requirements in the SFSF application and required governors to provide
assurances that they would comply with the requirements. However, we
previously reported in September 2009 that it was not clear that all
states had begun to put in place subrecipient monitoring systems that
comply with Education's requirements, which include a monitoring
schedule, procedures, and processes to verify that corrective actions
are implemented. We recommended that the Secretary of Education take
further action, such as collecting and reviewing documentation of
state monitoring plans, to ensure that states understand and fulfill
their responsibility to monitor subrecipients of SFSF funds and
consider providing training and technical assistance to states to help
them develop and implement state monitoring plans for SFSF. Education
developed a plan to monitor state implementation of the SFSF program
that will include reviewing state processes and documents for
monitoring subrecipients and making site visits to selected states.
Education officials also said they are taking several steps both to
monitor information they are receiving from states and to provide
technical assistance to states. For example, according to Education
officials, prior to approving SFSF awards, Education reviewed each
state's application to ensure that the state complied with statutory
requirements to receive the funds.[Footnote 49]
Housing Agencies Have Continued to Make Progress on Obligating
Recovery Act Funds, but Capacity Issues Have Presented Challenges to
Both HUD and Some Housing Agencies:
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. HUD allocated Capital Fund
formula dollars to public housing agencies shortly after passage of
the Recovery Act and, after entering into agreements with more than
3,100 public housing agencies, obligated these funds on March 18,
2009.[Footnote 50] A HUD Inspector General report found that HUD had
allocated the funds appropriately and met the requirements of the
Recovery Act.[Footnote 51] As of January 30, 2010, 2,910 public
housing agencies (93 percent of the housing agencies that entered into
agreements with HUD for Recovery Act funds) had reported to HUD that
they had obligated a total of $2.07 billion, or about 69 percent of
the total Capital Fund formula funds HUD allocated to them (see figure
11). According to HUD officials, housing agencies report obligations
after they have entered into binding commitments to undertake specific
projects. Housing agencies previously were required to report
obligations at least once per month, but in December 2009 HUD
officials requested that housing agencies report obligations as funds
are obligated in order to provide HUD with up-to-date data to inform
monitoring and outreach efforts. A majority of housing agencies that
had obligated funds--2,514 of 2,910 housing agencies--had also drawn
down funds in order to pay for project expenses already incurred. In
total, as of January 30, 2010, public housing agencies had drawn down
almost $653 million, or about 22 percent of the total HUD allocated to
them. The Recovery Act requires 60 percent of the funds to be expended
by March 2011 and 100 percent by March 2012.
Figure 11: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as
of January 30, 2010:
[Refer to PDF for image: 3 pie-charts]
Funds obligated by HUD: 99.9%; $2,982,579,023;
Funds obligated by public housing agencies: 69.5%; $2,073,764,791;
Funds drawn down by public housing agencies: 21.9%; $653,217,419.
Number of public housing agencies:
Entering into agreements for funds: 3,122;
Drawing down funds: 2,910;
Obligating funds: 2,514.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
The Recovery Act requires that housing agencies obligate 100 percent
of their funds within 1 year from when the funds became available,
which means they have until March 17, 2010, to obligate 100 percent of
their funds. As of January 30, 2010, 559 housing agencies (18 percent)
had reported obligating 25 percent of their funds or less, including
212 (7 percent) that had reported obligating none of their Recovery
Act funds (see figure 12). However, about half of housing agencies had
reported obligating 100 percent of their funds as of January 30, 2010,
placing them ahead of the Recovery Act's 12-month deadline. An
additional 522 housing agencies (17 percent) had reported obligating
more than 75 percent of their funds as of January 30, 2010.
Figure 12: Housing Agencies' Obligations of Recovery Act Funds by
Quartile as of January 30, 2010:
[Refer to PDF for image: vertical bar graph]
Percent of fund obligated: 0-25%;
Percentage of housing agencies: 18%.
Percent of fund obligated: 25.01-50%;
Percentage of housing agencies: 6%.
Percent of fund obligated: 50.01-75%;
Percentage of housing agencies: 9%.
Percent of fund obligated: 75.01-100%;
Percentage of housing agencies: 67%.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
Public housing agencies may use Recovery Act funds for any eligible
uses allowed under the regular Capital Fund program, except that no
funds may be used for operations or rental assistance, and HUD
regulations limit the amount of funds that can be used for
administration and management improvements. We examined 83 projects at
47 selected housing agencies in greater depth. Housing agency
officials stated that 31 of these projects include roofing or gutter
work, 23 include replacing windows or doors, 19 involve rehabilitating
unit interiors, and 16 projects include replacing heating, cooling, or
hot water systems. Other uses we encountered include renovating common
areas, repairing sidewalks, repaving parking lots, and replacing
security systems. Depending on the scope of the projects, multiple
activities could be undertaken for a single project.
The Recovery Act required housing agencies to give priority to
projects already under way or in their 5-year plans, projects that can
award contracts based on bids within 120 days, and projects that
rehabilitate vacant rental units. Housing agencies generally selected
projects that were in their 5-year plans. In addition, HUD required
housing agencies that wanted to use Recovery Act funds on work items
not already in an approved annual or 5-year plan to revise their plans
to include the work items and resubmit the plans for HUD approval.
Twenty-eight of the 47 housing agencies we selected said they were
able to award at least one contract based on bids within 120 days of
the funds becoming available. Most of the selected housing agencies
reported having few vacant units. Some of their projects involved
rehabilitating a few vacant units at one or more properties, while
others focused on other priorities. For a few housing agencies we
spoke with, however, vacant units were a major issue, and these
housing agencies were more likely to include projects that
rehabilitate vacant units in their plans for Recovery Act funds. In
particular, 5 housing agencies--Newark Housing Authority in New
Jersey, Philadelphia Housing Authority, San Francisco Housing
Authority, Cuyahoga Metropolitan Housing Authority in Ohio, and
Chicago Housing Authority--planned to use Recovery Act funds to
rehabilitate a total of about 1,400 vacant units.[Footnote 52]
The 47 selected housing agencies were able to address several
priorities of the Recovery Act with some project selections. Across
all their projects, 12 of the 47 selected housing agencies reported
that they were able to address all three priorities by selecting
projects from an approved 5-year plan, awarding at least one contract
within 120 days, and rehabilitating 1 or more vacant units. Of the 83
projects we examined in greater depth at the 47 selected housing
agencies, housing agency officials said 9 projects addressed all three
priorities, while 36 projects addressed two of the three priorities.
The selected housing agencies were more likely to have projects for
which they could award one or more contracts within 120 days than to
have projects that rehabilitate vacant rental units.
In addition to awarding Capital Fund formula dollars, HUD was also
required under the Recovery Act to award nearly $1 billion to public
housing agencies based on competition for priority investments,
including investments that leverage private sector funding or
financing for renovations and energy conservation retrofitting. HUD
accepted applications from June 22 to August 18, 2009, and according
to a HUD official, 746 housing agencies submitted 1,817 applications
for these competitive grants. In September 2009, HUD awarded 396
competitive grants in the amount of $995 million for the creation of
energy-efficient communities, gap financing for projects stalled
because of financing issues, public housing transformation, and
improvements addressing the needs of the elderly or persons with
disabilities. As of January 30, 2010, housing agencies had reported
obligations totaling about $79 million for 128 grants.
Some Housing Agencies Lacked Capacity to Apply for and Administer
Recovery Act Grants:
Capacity, especially with regard to staffing levels, was a substantial
barrier to applying for competitive grants for a variety of housing
agencies we visited, including at least three housing agencies that
were awarded competitive grants.[Footnote 53] Some housing agency
officials that we interviewed stated that timing constraints presented
issues when applying. For example, officials from one agency had a
contractor assist with the application because their staff did not
have the capacity to complete it in time. These officials further
stated that the timing for the competitive grant applications drained
limited resources and caused delays in administering the formula grant
funds. Also, the officials stated that the Recovery Act did not allow
recipients to adequately strengthen their workforces to handle the
additional workloads brought on by the act's funding. Similarly,
officials from another housing agency stated that the agency lacked
the time and staff to complete the water and energy consumption
assessments to include in their competitive grant application. They
instead used conservative water-and energy-saving estimates, which
resulted in a lower application score and which they believe
contributed to their agency not receiving any competitive grant
funding. In addition, officials from one housing agency believed that
larger housing agencies were able to put together better applications
and were more likely to be awarded grants because they had
professional staff in-house to put the applications together. Another
housing official also felt that the process favored large housing
agencies and preferred that HUD allocate the money using the same
formula as other Recovery Act Capital Funds. Public housing industry
officials correspondingly stated their desire for HUD to provide
formula grants as opposed to competitive grants, since smaller members
would be less likely to receive competitive grant funds than larger
members.
Similarly, at least six public housing agencies we visited did not
apply for Recovery Act competitive grants because of insufficient time
and resources to do so. For example, officials from four housing
agencies we visited stated they did not apply because they did not
have enough time or staff to pull together the information required
before the deadline. Agency officials from one housing agency stated
they did not apply because they were not sure that they had the
capacity to administer the competitive grant within the time frames
specified in the Recovery Act. Another housing agency did not apply
for competitive grants because of resource constraints. Housing
officials at the agency questioned whether it was worthwhile to apply
for some projects. They stated that it did not make sense to expend
resources satisfying the multiple requirements to apply for
competitive grants for fairly small projects, such as window
replacements. HUD officials stated that if housing agencies did not
have the capacity to apply for the competitive grants, this might be
an indicator that they do not have the capacity to administer another
grant. HUD officials noted that they developed an electronic version
of the competitive grant application to simplify the process for
housing agencies and extended the deadline for initial application
submissions to enable smaller housing authorities to have sufficient
time to submit an application.
Capacity issues also affected the ability of housing agencies to
administer Recovery Act funds. According to recent reviews conducted
by HUD's Office of Inspector General, some housing agencies had
capacity deficiencies that limited their ability to effectively
administer Recovery Act funds. For example, 1 housing agency that
received approximately $114,000 in capital funds under the Recovery
Act did not have the capacity to administer these funds in accordance
with applicable rules and regulations. The HUD Inspector General noted
that this housing agency had been rated as troubled for years, and
despite intense technical assistance from HUD was unable to establish
sound financial and operational management.[Footnote 54] In response
to these findings, the housing agency has selected a management
services agency to take over its management and has also entered into
a memorandum of agreement with a local nonprofit agency to oversee its
Recovery Act work. Another housing agency that received $4.9 million
in Recovery Act funds had weaknesses that the HUD Inspector General
noted could adversely affect its ability to administer these funds,
including failure to adequately document monitoring of its Capital
Fund activities as well as not maintaining complete contract files.
[Footnote 55] In response to these findings, the housing agency took
actions to monitor and verify work performed by its contractor and
noted that it had taken steps to ensure that an independent cost
estimate is performed on every project.
HUD Has Taken Steps to Help Housing Agencies Obligate Recovery Act
Funds:
HUD has taken several steps to assist public housing agencies in
obligating Recovery Act funds. HUD officials stated in recent months
they have been emphasizing the formula grant 1-year deadline of March
17, 2010, to housing agencies, and they pointed to notices, frequently
asked questions, and Web seminars as evidence. In addition, they have
stressed that the Recovery Act does not provide HUD with any way to
grant exceptions or extensions. HUD will recapture any funds not
obligated by the deadline and will reallocate those funds to other
housing agencies. According to HUD officials, in November 2009 HUD
field staff began to contact housing agencies that have not obligated
any Recovery Act funds by phone, by e-mail, or in person in order to
understand where these housing agencies are in the process of awarding
contracts and obligating funds, and they continue to do so. They
repeated the process for housing agencies below obligation levels of
100 percent in early December. For housing agencies that continued to
struggle to obligate their funds, HUD officials said they provide
additional technical assistance, including answering procurement
questions. HUD officials noted that the technical assistance required
varies by the size of the housing agencies and the tenure of their
staff.
HUD has made progress in completing its remote and on-site reviews of
housing agencies' administration of the Recovery Act for both
nontroubled and troubled agencies, as determined under its Public
Housing Assessment System.[Footnote 56] According to HUD officials,
HUD had completed remote reviews of all 172 troubled housing agencies
by December 2009, and as of February 3, 2010, had completed 2,891 out
of 2,950 remote reviews of nontroubled housing agencies, which HUD
planned to complete by January 15, 2010.[Footnote 57] HUD officials
also noted that on-site reviews are in progress. As of February 3,
2010, HUD field staff had completed all of the on-site reviews of
troubled housing agencies. HUD had also completed 278 of 542 on-site
reviews of nontroubled housing agencies, which were to be completed by
February 15, 2010. According to HUD officials, these systematic
reviews across the country have identified potential issues and led to
better guidance to housing agencies on obligations and procurement
policies, among other topics. For example, on December 11, 2009, HUD
sent an e-mail to housing agencies clarifying the proper procedures
for obligating and drawing down funds for administration of Recovery
Act grants. HUD officials told us that they are developing additional
guidance to be issued to housing agencies and field staff on topics
including physical needs assessments and procurement issues.
To determine what additional steps HUD should take to assist housing
agencies in meeting the March 2010 deadline for obligating 100 percent
of Recovery Act funds, HUD field staff prepared status reports in
December 2009 for housing agencies that had obligated less than 50
percent of their funds. As noted above, HUD has also decided to ask
housing agencies to report obligations as funds are obligated--
agencies usually report monthly--so that HUD can have up-to-date
information to determine ongoing outreach and monitoring efforts, and
notified all housing agencies of this reporting change in early
December. HUD officials told us they are also creating a database to
collect project-level information from its field offices on 985
formula grants, which will capture housing agency obligation and
expenditure timeline projections and their backup plans for ensuring
funds are obligated prior to the deadline.[Footnote 58] In addition,
HUD officials noted that they sent a letter to all housing agencies
below 100 percent obligations as of February 12, 2010, with contact
information for the HUD field offices. As the March deadline
approaches, HUD officials expect more housing agencies will achieve
100 percent obligations, allowing HUD to better target its outreach
efforts.
HUD Administration of Recovery Act Funds Has Been Challenged by
Capacity Issues and Would Benefit from a Management Plan:
HUD has taken several steps in recent months to assist housing
agencies with obligating funds prior to the March 2010 deadline.
However, HUD's overall administration of Recovery Act funds as well as
its existing Capital Fund program has been challenged over the past
year by capacity issues that HUD has not addressed. As we reported in
September 2009, the large response to HUD's Capital Fund Recovery
Competition program created a slower than expected review process for
HUD staff.[Footnote 59] While HUD dedicated 40 to 50 staff members to
review these applications, a number of applications had lengthy
narratives needing review. HUD was required to complete these reviews
and obligate all funds by September 30, 2009. In part because of
dedicating so many staff members to reviewing competitive grant
applications, HUD did not obligate fiscal year 2009 funds for its
existing Capital Fund program until September 2009, 3 months later
than anticipated. HUD officials emphasized that they obligated these
funds by the end of the fiscal year.[Footnote 60] According to public
housing industry officials, while housing agencies understood that HUD
was overwhelmed with Recovery Act issues, not having their regular
capital funds when expected may have resulted in significant delays in
capital expenditures. HUD staff then concentrated their efforts on the
October 2009 recipient reporting period, when they were not only to
help housing agencies comply with the reporting guidelines but also to
conduct quality reviews of recipient-reported data. HUD officials told
us that in November 2009, they were able to focus their efforts on
trying to assist those housing agencies with low obligation rates in
meeting the March 17, 2010, obligation deadline. Overall, HUD
officials stated that their internal collaboration permitted it to
distribute the workload and meet Recovery Act and ongoing program
requirements. HUD also noted that it is now developing a second-year
strategy for monitoring and overseeing housing agencies.
HUD has not yet finalized how it will reallocate formula grant funds
not obligated by the March 17, 2010, deadline. While HUD's goal is
that agencies achieve 100 percent obligations, officials said that
realistically some housing agencies probably will not obligate all of
their funds in time. HUD officials said that part of the process of
reaching out to housing agencies with low obligations is to identify
which housing agencies do not expect to make the deadline so that HUD
can begin planning for recapturing and reallocating the funds. HUD
officials have drafted a memorandum for recapturing and reallocating
unobligated formula grant funds. The memorandum includes an outline of
how and when HUD proposes to notify housing agencies at risk of not
meeting the obligation deadline about the recapture process, how HUD
proposes to recapture funds, and how the recaptured funds will be
redistributed. However, HUD officials told us that they cannot
establish a deadline for redistributing these funds until they
determine the amount of funds to be recaptured. Finalizing this
memorandum quickly would position HUD to meet Recovery Act goals of
managing and expending the funds quickly.
HUD officials told us that given the additional responsibilities that
would be associated with administering the Recovery Act funds, they
conducted a personnel needs assessment in February 2009 but did not
develop a management plan to determine how best to meet the competing
demands of administering both the Recovery Act funds and the existing
Capital Fund program. In its initial assessment, HUD determined that
it would need to hire five staff members at the headquarters level to
administer the new funds. As of December 2009, HUD had hired only
three additional staff members and was in the process of hiring a
fourth. HUD had canceled its solicitation for the fifth position, but
as of December 2009 was working to reissue the solicitation. HUD
officials also stated they had hired three additional staff members
and were in the process of hiring a fourth to help with the existing
capital funds program. At the Field Operations level, HUD hired two
additional staff members to handle Recovery Act work. HUD officials
noted that the agency has not developed a management plan that
addresses all of its added responsibilities under the Recovery Act,
although it did develop a spending plan for the approximately $20
million it received to fund administration of the Recovery Act funds.
HUD officials stated that it would be beneficial to determine the
optimal level of resources needed to address all of the agency's added
responsibilities under the Recovery Act. However, HUD has not done so
because of the volume of daily work and near-term challenges
associated with meeting Recovery Act deadlines. Instead of developing
a formal plan for managing its resource needs, the agency has been
addressing staffing needs for Recovery Act work by shifting resources
between field offices and within headquarters on an as-needed basis
rather than determining the most efficient use of its resources. A
management plan would help HUD to identify not only any additional
staffing needs but also how to most effectively use the resources it
currently has.[Footnote 61] Without a plan, HUD cannot be assured that
its staffing levels are sufficient not only to administer its existing
Capital Fund program but also to continue its administration of
Recovery Act funds, including monitoring of housing agency obligations
and expenditures, as well as potentially recapturing and reallocating
any funds not obligated by HUD's deadlines.
HUD and Public Housing Agencies Faced Challenges with Recipient
Reporting during the First Reporting Period:
For the first quarterly reporting period, ending on September 30,
2009, we found that a lack of system input controls in the
FederalReporting.gov system made it difficult for HUD to locate and
validate recipient data because some grantees had entered incorrect
information.[Footnote 62] For example, HUD initially achieved a
reporting rate of approximately 84 percent because of a substantial
number of housing agencies incorrectly entering values into certain
identification (ID) fields, such as the award ID number, the awarding
agency, or the type of funding received. HUD officials said the system
did not have validation measures in place to ensure the correct award
ID numbers were entered. In addition, housing agencies could not edit
the award ID number without submitting a new report. For example, one
housing agency official told us HUD instructed him to file a second
recipient report with the correct award number, which led to two
reports for the same award being posted on the Recovery.gov Web site
for the first reporting period. The housing agency official told us he
cannot delete a recipient report once it is created.[Footnote 63]
After an intensive review of all reports submitted with nonmatching
award ID numbers and the Office of Management and Budget's (OMB) list
of reports that could not be matched to a federal agency, HUD was able
to determine a rate of reporting of approximately 96 percent.
According to a HUD official, there were 152 Capital Fund formula and
competitive grant awards for which a report was required but for which
no report was found. HUD officials told us they sent warning e-mails
on December 4, 2009, to the 152 nonreporting housing agencies
reminding them to report in the second reporting period.
In November 2009, OMB issued a memo requiring federal agencies to take
steps to improve compliance with recipient reporting requirements in
future reporting cycles. OMB requires agencies to identify and
document any noncompliance, and continue to monitor recipients'
reporting activity during the following reporting cycle. In cases
where noncompliance appears to be fraudulent, OMB instructs the agency
to refer the matter to the appropriate agency officials, such as the
officer responsible for criminal investigation. HUD notes on its Web
site that a housing agency's failure to report is a violation of the
agreement it entered into with HUD in order to receive Recovery Act
funds, which subjects the housing agency to further actions. HUD also
developed a Recovery Act Non-Reporting Enforcement Plan in September
2009 that states that all recipients who fail to report in
FederalReporting.gov by the end of their first applicable reporting
cycle will receive a warning letter from HUD program staff. If
recipients fail to report a second time, HUD will initiate further
enforcement actions, which can include formal or informal hearings,
suspension of access to funds, or other actions.
To address the issue of making corrections to recipient reports, in
November 2009 HUD submitted recommendations to OMB that, among other
things, allowed for (1) grantees to make corrections to the award
number field after the initial reporting period or (2) the award
number field to be validated against a list provided by the agency to
OMB. Subsequently, OMB published guidance on December 18, 2009, that
announced that starting with the data submitted for the current
quarter, the FederalReporting.gov solution will be open for periods of
continuous corrections of all data submitted. Furthermore, recipients
will have the ability to make corrections up until the start of the
next reporting period. The guidance also requires federal agencies to
provide recipients with key award information such as the award
number, funding agency code, and awarding agency code in a single
source document by December 24, 2009. According to a HUD official,
Office of Field Operations staff sent an e-mail for each grant on
December 23 containing the data for the specified data fields, such as
the award number, award amount, and award date, along with detailed
instructions about reporting. The HUD official told us this
information was sent again on January 13, 2010, to housing agencies
that had not yet reported.
According to HUD officials, public housing agencies encountered
challenges related to registration and system access controls for the
FederalReporting.gov system. For example, a housing agency official
stated that she was initially unable to access the reporting system
during the first round of recipient reporting because the personal
identification number (PIN) was sent only to the housing agency's
Executive Director, who could not be contacted. However, the housing
agency official reported she was able to contact a support
representative on October 10, at which point she received a temporary
PIN and had no further problems submitting her report. The
FederalReporting.gov system takes each recipient's point of contact
information directly from the Central Contractor Registration (CCR),
and if an organization changes its point-of-contact information, it
takes 48 hours for FederalReporting.gov to receive the change and e-
mail the Federal Reporting Personal Identification Number (FRPIN) and
temporary password to the new point of contact. According to a HUD
official, housing agencies are responsible for entering any changes in
their contact information in the CCR system, but the housing agencies
often do not update the system in time for access to be correctly
transferred. HUD made an additional recommendation to OMB in November
2009 requesting an alternative procedure for validating reports or
obtaining an FRPIN. However, the procedure for obtaining an FRPIN and
validating recipient reports for the second reporting cycle still
relies on point-of-contact information contained in the CCR system. A
HUD official told us that OMB allows for sufficient feedback from
federal agencies, but not all of HUD's recommendations could be
accommodated in time for the January recipient reporting cycle.
As we reported in December 2009, during the first quarterly reporting
period there was widespread misunderstanding by public housing
agencies about OMB's methodology for calculating the number of jobs
created or retained by the Recovery Act, in part because housing
agencies are not familiar with reporting jobs information. In a few
cases, we found that public housing agencies had reported the number
of jobs created or retained into FederalReporting.gov without
converting the number into full-time equivalents. In early September,
HUD posted the OMB guidance from June 22, 2009, to its Web site and
provided information by e-mail to housing agencies on registration for
FederalReporting.gov, as well as links to Web seminars and training
provided by OMB. HUD issued further guidance to public housing
agencies by e-mail on September 25, 2009, approximately 2 weeks before
the October 10, 2009, deadline for recipient reporting, providing
templates and data dictionaries tailored to the Public Housing Capital
Fund. HUD also posted a jobs calculator spreadsheet to its Web site,
and HUD field staff directed housing agencies to this guidance when
they asked specific questions about how to calculate jobs. HUD
officials told us they did not have enough time to translate some of
the terminology into concrete terms that would be clearer to housing
agency officials, partly because of their continuing discussions with
OMB on clarifying its guidance. According to a HUD official, HUD held
a Web seminar in December 2009 on reporting jobs created as well as on
reporting obligations.
The revised guidance OMB published on December 18, 2009, required
federal agencies to submit their guidance documents to OMB for review
and clearance by December 22, 2009, and from time to time thereafter
as required by OMB in order to promote consistency between OMB
guidance and agency supplemental guidance. According to a HUD
official, HUD submitted two documents to OMB pertaining to job
guidance on December 28. The first document was a bullet point summary
of the December 18 OMB guidance followed by some hypothetical job-
counting scenarios using HUD grantees. The HUD official told us OMB
approved the use of this document and it is currently posted on HUD's
Recovery Act Web site. HUD also provided its job-counting calculator
spreadsheet to OMB according to the HUD official. The HUD official
told us that OMB asked HUD not to use the calculator for the current
reporting period because OMB wanted to have the opportunity to have
several offices review the calculator before it is publicly released.
As a result, the HUD official told us HUD did not distribute the jobs
calculator spreadsheet to housing agencies.
HUD Is Improving Registration for the Recovery Act Management and
Performance System and Expanding the System to Measure Performance
Outcomes:
HUD developed the Recovery Act Management and Performance System
(RAMPS) to meet the requirements for reporting on environmental
assessments as outlined in Section 1609 of the Recovery Act.[Footnote
64] HUD officials said that while public housing agencies have had to
comply with the National Environmental Policy Act (NEPA) since it was
enacted in 1970, reporting on environmental assessments is a new
requirement for public housing agencies. A HUD official told us most
of the challenges that housing agencies faced with RAMPS during the
first quarterly reporting period were related to registration and
accessing the system rather than entering data. For example, some
housing agencies reported having difficulty gaining access to RAMPS.
An official from a public housing industry association told us that
HUD has since conducted outreach programs to housing agencies
regarding accessing RAMPS, which the industry group's members found to
be effective. According to a HUD official, to ensure that housing
agencies do not face similar registration issues in the future, HUD
has registered all users from other HUD systems for RAMPS, where
previously it registered only one administrative staff member per
housing agency. Also, HUD centralized the registration process through
its Recovery Act Web site. According to a HUD official, this required
HUD to construct an agencywide access system that previously did not
exist. HUD is also cleaning up data in order to resolve registration
issues that were caused by data matching errors.
According to HUD guidance, HUD added a new core activities module to
RAMPS to capture information at the project level on development,
modernization, and energy efficiency work funded by the Recovery Act.
Specifically, the core activities module of RAMPS collects information
on units of affordable housing developed or modernized using Capital
Fund Recovery Grant funds as well as data on energy efficiency
improvements included in those units. A HUD official told us that HUD
began collecting this information through RAMPS on December 29, 2009.
A HUD official told us that in December 2009 HUD asked each housing
agency to prepare a Recovery Act Performance Report as a temporary way
of gathering this information. According to a HUD official, HUD
populated RAMPS with the data collected through the Recovery Act
Performance Reports, and housing agencies are updating the data in
RAMPS during the current reporting cycle. The official told us he
expects the data will be vastly improved both in RAMPS and in the
recipient reports now that housing agencies have had experience with
the systems and the data elements.
Recommendation for Executive Action:
To help HUD achieve Recovery Act objectives and address challenges
with its continued administration of Recovery Act funds, we recommend
that the Secretary of Housing and Urban Development develop a
management plan to determine the adequate level of agency staff needed
to administer both the Recovery Act funds and the existing Capital
Fund program going forward, including identifying future resource
needs and determining whether current resources could be better
utilized to administer these funds.
Agency Comments and Our Evaluation:
We provided a draft of this report to HUD for review and comment. In a
response from HUD's Director, Office of Capital Improvements, HUD
noted that the report documented its efforts under way and the status
of implementation of the Recovery Act work to date but thought the
report could more fully reflect actions and achievements. In response,
we provided greater descriptions of HUD's efforts to assist agencies
applying for competitive grants and HUD efforts to monitor agencies
with low obligation rates. HUD also provided some technical comments
that we incorporated, as appropriate.
HUD did not concur with our recommendation to develop a management
plan to determine the adequate level of staff needed to administer
both the Recovery Act and the existing Capital fund program. HUD cited
what it considered effective and efficient collaborative efforts to
meet the requirements of the act. We continue to believe HUD would
benefit from developing a management plan as it continues to address
the Recovery Act challenges. In its comments, HUD notes that the
competitive grant program has expanded the complexity of the program,
and the increased focus on transparency and accountability has
increased significantly its oversight and monitoring responsibilities.
HUD has thus far relied on shifting resources to meet demands.
However, we continue to believe that without a detailed management
plan, HUD cannot be assured that its staffing levels are sufficient
not only to administer its existing Capital Fund program but also to
continue its administration of Recovery Act funds.
Most States Are Just Beginning to Use DOE's Weatherization Assistance
Program Recovery Act Funds to Weatherize Homes:
The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program, which the Department of Energy (DOE) is
distributing to each of the states, the District of Columbia
(District), and seven territories and Indian tribes. During the past
32 years, the program has helped more than 6.2 million low-income
families by making such long-term energy-efficiency improvements to
their homes as installing insulation; sealing leaks; and modernizing
heating equipment, air circulation fans, and air conditioning
equipment. These improvements enable families to reduce energy bills,
allowing these households to spend their money on more pressing 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.
During 2009, DOE obligated about $4.73 billion of the Recovery Act's
weatherization funding to the states, while retaining about 5 percent
of funds to cover the department's expenses, such as those for
training and technical assistance, and management and oversight for
the expanded weatherization program. DOE first provided each state
with the initial 10 percent of its Recovery Act funds, which could be
used for start-up activities such as hiring and training staff,
purchasing needed equipment, and performing energy audits of eligible
homes, among other things.[Footnote 65] The District and the states in
our review all received their initial 10 percent in March and April
2009.[Footnote 66] DOE required each state to submit a weatherization
plan outlining how it would use its Recovery Act weatherization funds
before DOE provides states with the next 40 percent of their
respective funds. These plans included the states' strategies for
monitoring and measuring performance and the number of homes to be
weatherized, among other things. By the time we issued our December
Recovery Act report, DOE had approved the weatherization plans of all
of the states, the District, and seven territories and Indian
tribes.[Footnote 67] Each now has access to 50 percent of its funds,
and DOE plans to provide access to the remaining funds once a state
has completed weatherizing 30 percent of the homes identified in its
state weatherization plan. Under Section 1603 of the Recovery Act,
funds are available for obligation by DOE until September 30, 2010,
and DOE has indicated that the states are to spend the funds by March
31, 2012.
Table 4: DOE's Recovery Act Weatherization Assistance Program
Obligations:
Funding recipients:
States we reviewed:
State: Arizona;
Total obligations: $66,091,428.
State: California;
Total obligations: $185,811,061.
State: Colorado;
Total obligations: $79,531,213.
State: District of Columbia;
Total obligations: $8,089,022.
State: Florida;
Total obligations: $175,984,474.
State: Georgia;
Total obligations: $124,756,312.
State: Illinois;
Total obligations: $242,526,619.
State: Iowa;
Total obligations: $80,834,411.
State: Massachusetts;
Total obligations: $122,077,457.
State: Michigan;
Total obligations: $243,398,975.
State: Mississippi;
Total obligations: $49,421,193.
State: New Jersey;
Total obligations: $118,821,296.
State: New York;
Total obligations: $394,686,513.
State: North Carolina;
Total obligations: $131,954,536.
State: Ohio;
Total obligations: $266,781,409.
State: Pennsylvania;
Total obligations: $252,793,062.
State: Texas;
Total obligations: $326,975,732.
Other states and territories:
State/Territory: Alabama;
Total obligations: $71,800,599.
State/Territory: Alaska;
Total obligations: $18,142,580.
State/Territory: American Samoa;
Total obligations: $719,511.
State/Territory: Arkansas;
Total obligations: $48,114,415.
State/Territory: Connecticut;
Total obligations: $64,310,502.
State/Territory: Delaware;
Total obligations: $13,733,668.
State/Territory: Hawaii;
Total obligations: $4,041,461.
State/Territory: Guam;
Total obligations: $1,119,297.
State/Territory: Idaho;
Total obligations: $30,341,929.
State/Territory: Indiana;
Total obligations: $131,847,383.
State/Territory: Kansas;
Total obligations: $56,441,771.
State/Territory: Kentucky;
Total obligations: $70,913,750.
State/Territory: Louisiana;
Total obligations: $50,657,478.
State/Territory: Maine;
Total obligations: $41,935,015.
State/Territory: Maryland;
Total obligations: $61,441,745.
State/Territory: Minnesota;
Total obligations: $131,937,411.
State/Territory: Missouri;
Total obligations: $128,148,027.
State/Territory: Montana;
Total obligations: $26,543,777.
State/Territory: Nebraska;
Total obligations: $41,644,458.
State/Territory: Nevada;
Total obligations: $37,281,937.
State/Territory: New Hampshire;
Total obligations: $23,218,594.
State/Territory: New Mexico;
Total obligations: $26,855,604.
State/Territory: North Dakota;
Total obligations: $25,266,330.
State/Territory: Northern Mariana Islands;
Total obligations: $795,206.
State/Territory: Oklahoma;
Total obligations: $60,903,196.
State/Territory: Oregon;
Total obligations: $38,512,236.
State/Territory: Puerto Rico;
Total obligations: $48,865,588.
State/Territory: Rhode Island;
Total obligations: $20,073,615.
State/Territory: South Carolina;
Total obligations: $58,892,771.
State/Territory: South Dakota;
Total obligations: $24,487,296.
State/Territory: Tennessee;
Total obligations: $99,112,101.
State/Territory: Utah;
Total obligations: $37,897,203.
State/Territory: Vermont;
Total obligations: $16,842,576.
State/Territory: Virginia;
Total obligations: $94,134,276.
State/Territory: Virgin Islands;
Total obligations: $1,415,429.
State/Territory: Washington;
Total obligations: $59,545,074.
State/Territory: West Virginia;
Total obligations: $37,583,874.
State/Territory: Wisconsin;
Total obligations: $141,502,133.
State/Territory: Wyoming;
Total obligations: $11,195,471.
Total obligations: states and territories;
Total obligations: $4,728,750,000.
DOE departmental expenses, such as training and technical assistance,
management and oversight, etc.:
Total obligations: $271,250,000.
Total obligations: $5,000,000,000.
Source: GAO analysis of DOE information.
[End of table]
Although each state has access to half of its Recovery Act
weatherization funds, the states have used only a small percentage of
their available funds in 2009, mostly because state and local agencies
needed time to develop the infrastructures required for managing the
significant increase in weatherization funding and for ensuring
compliance with Recovery Act requirements.[Footnote 68] According to
DOE officials, many local weatherization agencies have been spending
their DOE annual appropriation funds--which are not subject to some
key Recovery Act requirements--to weatherize homes before using their
Recovery Act funds. As of December 31, 2009, according to available
DOE data, 47 states and 5 territories reported they had begun to use
Recovery Act weatherization funds, while 3 states, the District of
Columbia, and two Indian tribes reported they had not used any
Recovery Act funds.[Footnote 69] The 52 states and territories also
reported that, as of December 31, 2009, they had spent about $372
million, or about 8 percent, of the $4.73 billion for weatherization
activities. States and territories have separated their Recovery Act
expenditures into various categories, including expenditures for
program operations, administration, training and technical assistance,
and other activities. According to DOE, variances among the states in
the percentage of funds devoted to program operations reflect
different levels of maturity in, for example, providing the
infrastructure needed to manage the expanded weatherization program.
Federal, State, and Local Governments Have Experienced Challenges
Using Recovery Act Funds for Weatherization:
During 2009, federal, state, and local governments planning to use
Recovery Act funds to weatherize homes were challenged by concerns
about ensuring that weatherization activities complied with various
requirements. A significant challenge involved compliance with Davis-
Bacon provisions, which were applied by the Recovery Act to the
weatherization program for the first time in 2009.[Footnote 70]
Specifically, weatherization contracts were delayed because state and
local officials had concerns that wage rates for weatherization had
not yet been determined by the Department of Labor (Labor). The Davis-
Bacon provisions of the Recovery Act require that all laborers and
mechanics employed by contractors and subcontractors on Recovery Act-
funded projects be paid at least the prevailing wage, including fringe
benefits, as determined by the Secretary of Labor. State and local
officials also had concerns about whether local agencies could handle
increased administrative tasks and had the proper infrastructure in
place to administer the program requirements related to the Davis-
Bacon provisions. Finally, some state officials expressed concerns
about compliance with the National Historic Preservation Act,
specifically the increased number of homes that may fall under the
protection of the act that require historic preservation reviews.
[Footnote 71]
Regarding the Davis-Bacon provisions, officials in about half of the
states we reviewed had decided to wait to begin weatherizing homes
until Labor had determined county-by-county prevailing wage rates for
their state to ensure compliance with Davis-Bacon requirements. These
officials explained that they wanted to avoid having to pay back wages
to weatherization workers who started working before the prevailing
wage rates were known.[Footnote 72] Arizona officials said all but one
of its local service providers decided to wait to weatherize homes
using Recovery Act funds until the prevailing wage rates were
determined because they were concerned about the time required to
reconcile differences in wage rates. Similarly, Iowa officials told us
paying back wages would be especially burdensome to smaller
contractors. California officials were also concerned about the
prevailing wage rates, and they wrote DOE to inquire about the
possibility of requesting an exemption from the Davis-Bacon
requirements for weatherization workers hired through the state's
federal, state, and local workforce development partnerships aimed at
creating training and employment opportunities for youth and
dislocated workers. California officials told us that the application
of Davis-Bacon provisions could weaken or eliminate workforce
development as a significant component of its weatherization program,
stating that paying prevailing wages to the inexperienced, entry-level
workers typically hired through these programs would not be
appropriate.[Footnote 73] According to DOE officials, as a result of
these concerns, some local agencies held off on spending their
Recovery Act money, instead spending money obtained from DOE's annual
appropriations--which are not subject to Davis-Bacon requirements.
However, one of the states we reviewed, Ohio, started to use Recovery
Act funds before wage rates were determined. While officials in about
half of the states reviewed were concerned about prevailing wage rates
prior to Labor's determination, officials in North Carolina and
Mississippi were not concerned because they expected that the
prevailing wage rates would be similar to the existing wages being
paid to weatherization workers.
On September 3, 2009, Labor completed its initial determination of
wage rates for weatherization work conducted on residential housing
units in each county of the 50 states and the District.[Footnote 74]
However, state and local officials in several states expressed concern
over the need to use different wage rates for weatherization
activities in different types of buildings. Labor determined that the
revised prevailing wage rates for weatherization workers were limited
to multifamily residential buildings of four or fewer stories.
However, Labor's commercial building construction wage rates (which
apply to plumbers, carpenters, and other laborers) apply to
multifamily residential buildings of five or more stories. As a
result, local agencies conducting weatherization work on multifamily
units in high-rise buildings must pay their workers wage rates that
can be significantly higher than what local agencies pay
weatherization workers for residential housing units. For example, in
New York County (Manhattan), commercial prevailing wage rates were
three times the rates for residential weatherization laborers.
Representatives of two local agencies in New York told us that they
intend to subcontract out all weatherization work conducted on
buildings over four stories because they could not pay their workers
vastly different wages based on the type of building involved.
According to Ohio officials, some local agencies had delayed projects
in larger multifamily buildings until they could better estimate
project costs. Under 10 CFR §440.21(d), weatherization materials
installed must be cost effective, resulting in energy cost savings
over the lifetime of the measure. However, because of higher wage
rates required for weatherization work done on building of five or
more stories (high-rise buildings), materials installed on high-rise
buildings may not have been able to meet the cost-effectiveness
requirement established by regulation. In response to states'
concerns, DOE's November 10, 2009, guidance allows the states to
calculate the cost effectiveness over the lifetime of a project by
using the new weatherization wage rates rather than the prevailing
commercial wages for plumbers, carpenters, and other laborers working
on high-rise buildings.
Concerns about administrative burdens of the Davis-Bacon provisions
also affected use of Recovery Act funds in several states. For
example, several state agencies delayed disbursing Recovery Act funds
to local agencies because of concerns about the impact of these
administrative tasks on small contractors, citing that these
contractors generally have fewer resources and less experience with
accounting processes. Some state agency officials said they were not
satisfied that local agencies had the proper administrative
infrastructure in place to comply with Davis-Bacon requirements,
including the requirement that contractors submit weekly certified
payroll records to the contracting agency. For example, Pennsylvania
officials told us that delays occurred because some local agencies had
initially submitted management plans that had not included language
describing how they would comply with the Davis-Bacon requirements. In
California, where according to state officials local agencies must
certify that they can comply with the Davis-Bacon requirements before
these agencies are provided with Recovery Act funds to weatherize
homes, only 2 of California's 35 local agencies that were awarded
Recovery Act funds accepted these required amendments by the initial
October 30, 2009, deadline.
Many state and local agencies took time to hire additional staff or
make infrastructure upgrades to better ensure compliance with
administrative requirements. For example, Michigan officials told us
their agency planned to add 22 staff members, including a Davis-Bacon
analyst, and told us that federal administrative requirements, such as
weekly certified payroll, required them to make technological upgrades
in their weatherization division to ensure compliance with Recovery
Act requirements. District of Columbia officials told us that their
agency had not expended Recovery Act funds to weatherize homes because
they have been developing the infrastructure to administer the program
by, for example, hiring new staff. Local agencies in California,
Michigan, New York, and Ohio had also hired new staff to process Davis-
Bacon paperwork.
State officials noted that the National Historic Preservation Act may
present another challenge that could slow the use of the Recovery
Act's weatherization funds.[Footnote 75] Enacted in 1966, the National
Historic Preservation Act requires federal agencies to, among other
things, take into account the effect of any federal or federally
assisted undertaking on historical properties included in a national
register of historic sites, buildings, structures, and objects.
Michigan state officials told us that, under the act, its State
Historic Preservation Office is allowed to conduct a historic review
of every home over 50 years of age if any work is to be conducted.
They explained that, in Michigan, this could mean an estimated 90
percent of the homes to be weatherized would need such a review, which
could cause significant delays. However, in November 2009, Michigan
state officials signed an agreement with the State Historic
Preservation Office that is designed to expedite the review process.
With this agreement in place, state officials said they are confident
that the historic preservation requirements can be met without causing
further delays. New York officials told us that several entire
neighborhoods in their state fall under the protection of the act and
noted that the State Historic Preservation Office may have to conduct
a review before any residential units in such a neighborhood can be
weatherized. State officials in Iowa expressed similar concerns. State
officials in New York and Iowa have contacted their respective
historic preservation offices to develop approaches for addressing the
review process.
DOE Has Issued Guidance to Mitigate Risk in the Weatherization
Program, but Federal, State, and Local Agencies Face Challenges in
Monitoring the Use of Recovery Act Weatherization Funds:
DOE has issued guidance requiring recipients of Recovery Act
weatherization funds to implement a number of internal controls to
mitigate the risk of fraud, waste, and abuse.[Footnote 76]
Specifically, DOE requires state weatherization agencies to conduct on-
site monitoring of all weatherization service providers to inspect the
management of funds and the production of weatherized homes.[Footnote
77] These monitoring visits consist of a financial review of the
service provider's records pertaining to salaries, materials,
equipment, and indirect costs; program reviews of the service
provider's records, contracts, and client files; and a production
review, consisting of the inspection of weatherized homes by the state
agencies and by the service provider. DOE requires that each state
agency inspect at least 5 percent of the weatherized units and each
service provider inspect all of the completed units or units in the
process of being weatherized. If an inspection reveals reporting
inconsistencies, quality control issues, or other problems, the state
agency is required to increase the number of units monitored and
frequency of inspection. DOE is implementing an enhanced monitoring
plan that would allow DOE's weatherization project officers to track
each state's performance. As part of this enhanced monitoring, DOE
submitted a deviation request to the Office of Management and Budget
(OMB) to require the states to submit monthly, rather than quarterly,
reports. OMB approved this request on December 1, 2009. As a result of
the significant increase in program funding, many of the states are
reporting a need to increase staff to implement internal controls.
DOE is hiring staff to provide national oversight to the Recovery Act
weatherization program. DOE officials told us that each state will be
assigned a project officer who will review the state's fiscal and
programmatic reports. Project officers will also be responsible for
coordinating site visits to the state and local agencies responsible
for weatherization, as well as visiting a sample of projects being
weatherized with Recovery Act funds.
DOE provides state agencies with the discretion to develop and
implement these internal controls in accordance with each state's
weatherization plan. One way that state officials can determine the
effectiveness of a recipient's internal controls is through an
assessment conducted as part of the Single Audit Act.[Footnote 78]
These audits review the performance and management of nonfederal
entities receiving $500,000 or more in federal awards. Some state
weatherization programs, however, have been considered too small to be
monitored during the state's Single Audit. Other risk mitigation
strategies include annual reviews of independent auditors' reports,
increased frequency of on-site monitoring of service providers and
weatherized homes, fraud detection training, the requirement of
monthly reports from service providers, and the use or proposed use of
a Web-based reporting database. Some states, however, believe that
current controls are sufficient, but they will need to hire additional
staff to accommodate the increase in Recovery Act funding.
While the states have spent relatively little of their total funds and
we have reviewed weatherization activities in only a few locales, we
have identified challenges for DOE and the states to address in order
to ensure that Recovery Act funds are spent prudently and that the
performance of local agencies is well-managed. For example, in Ohio we
found during our site visits that grantees had inconsistent practices
for reporting the number of homes weatherized and, in one case, a
grantee used Recovery Act funds to weatherize the home of an
ineligible applicant. Faced with these early implementation
challenges, on November 20, 2009, Ohio officials issued new guidance
to all state agencies regarding reporting requirements. The guidance
indicated that state officials will begin administrative monitoring in
December 2009 and fiscal monitoring in January 2010. Challenges in
Pennsylvania include expanding the state's oversight capacity,
training and certifying of weatherization workers, and implementing a
statewide procurement system for weatherization materials purchased
with Recovery Act funds. Among the challenges that California will be
handling will be the monitoring of local agencies. For example, the
state's Inspector General has identified one local agency designated
as high risk because of questionable spending.[Footnote 79]
Some state officials have also cited the substantial influx of new
money as a reason to audit the spending of weatherization funds. For
example, because of the large increase in weatherization funding
received by Texas, the Internal Auditor of the Texas Department of
Housing and Community Affairs is currently auditing the department's
monitoring and oversight of the program. Also, in a few states, prior
audits have identified deficiencies in weatherization programs. For
example, Michigan's State Auditor General found that the Michigan
Department of Human Services' internal controls over the
weatherization program did not ensure compliance with federal laws and
regulations regarding subrecipient monitoring during the 2-year period
that ended on September 30, 2008.
Local agencies also utilize risk assessments to prevent fraudulent or
wasteful use of Recovery Act funds. For example, some local agencies
reported that new contractors are subjected to a higher level of
scrutiny than more experienced contractors. Local agency officials in
New York, California, and Ohio told us a long history of
weatherization service mitigates the risk that a contractor will
improperly use funds. Furthermore, most local agencies have procedures
in place to ensure they do not contract with service providers that
have been placed on the "Excluded Parties List" due to a history of
fraudulent business practices.[Footnote 80] Local agencies reported
the most common procedure to evaluate a contractor's reputation was to
check the contractor's name online against the "Excluded Parties
List." Other local agencies require contractors to sign documentation
stating that they have not been debarred or bankrupt.
Reporting on the Impacts of Recovery Act Funds Is Still Limited:
In March 2009, DOE issued guidance that directed the states to report
on the number of housing units weatherized and the resulting impacts
to energy savings and jobs created and retained at both the state and
local agency level. However, reporting about impacts, especially
energy savings, is still somewhat limited. On February 24, 2010, DOE
reported that 30,252 homes have been weatherized with Recovery Act
funds as of December 31, 2009. This represents about 5 percent of the
approximately 593,000 total homes that DOE originally planned to
weatherize using Recovery Act funds.[Footnote 81] In addition,
available data shows that about 8,500 jobs have been created through
the use of Recovery Act weatherization funds.[Footnote 82] But
although many local officials have collected data about new hires,
none could provide us with data on energy savings. Contributing to the
lack of information about impacts is that most state and local
agencies either are just beginning to use Recovery Act funds to
weatherize homes or have not yet begun to do so.
Some states told us they plan to use performance measures developed by
DOE, while others have developed their own measures. For example,
Florida officials told us they plan to measure energy savings by
tracking kilowatts used before and after weatherization, primarily
with information from utility companies. In addition, local agencies
in some states either collect or plan to collect information about
other aspects of program operations. For example, local agencies in
both California and Michigan collect data about customer satisfaction.
In addition, a local agency in California plans to report about
obstacles, while an agency in New York will track and report the
number of units on the waiting list.
In regard to recipient reporting, officials in all eight states that
we reviewed for the December Recovery Act report said they submitted
these reports on schedule, although weatherization officials from
Massachusetts and Ohio cited issues with the reporting requirements
that existed prior to the changes that came about as a result of the
December 18, 2009, guidance. In Massachusetts, state officials told us
of confusion that had been associated with terminology related to new
or retained jobs, and local officials said that the Massachusetts
Recovery and Reinvestment Office requires additional information about
demographics not required by OMB. Ohio officials told us that for
reporting purposes, they had estimated the number of jobs that could
potentially be created. The inconsistency between potential positions
and actual hours worked resulted in an inaccurate reporting of jobs
created. One of the local agencies we visited reported 36 jobs
created, but officials acknowledged they had only filled 20 positions
at the time of our visit. Another local agency reported 14 agency and
8 contractor jobs created, but an official confirmed that only 6
agency and 7 contractor positions had been filled. According to Ohio
officials, the process followed by the local agencies that resulted in
these inaccurate reports of jobs created has since been corrected in
the second quarter recipient reports.
WIA Youth Program Outcomes Show States Provided Many Youth with Summer
Employment and Training Opportunities:
The Recovery Act provides an additional $1.2 billion in funds for
Workforce Investment Act (WIA) Youth Program activities, including
summer employment.[Footnote 83] 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. The Recovery
Act also extended eligibility through age 24 for youth receiving
services funded by the act. 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 84] the
conferees stated that they were particularly interested in states
using these funds to create summer employment opportunities for youth.
While summer employment is a required component of the WIA Youth
Program, Labor issued guidance indicating that local areas have the
flexibility to implement stand-alone summer youth employment
activities with Recovery Act funds.[Footnote 85] 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.
Gearing up to provide or expand summer employment activities presented
challenges for many state and local areas. Once the Recovery Act was
passed, officials had a few months to get their summer youth
employment activities up and running. Moreover, in implementing the
year-round service requirements of the WIA Youth Program, many states
and local areas had greatly reduced their summer youth employment
programs and no longer offered a stand-alone summer program--or they
had found funding sources other than WIA, such as state, local, or
foundation funds, to cover it. Local areas without recent experience
had to build the program from the ground up.
States Have Drawn Down about Two-thirds of Funds:
As of December 31, 2009, 66 percent of Recovery Act WIA youth funds
($765 million) had been drawn down nationwide, according to Labor
data--an increase of 32 percentage points from the 34 percent we
reported as of August 31, 2009 (see figure 13).
Figure 13: National Drawdown Rates for Recovery Act Funds for the WIA
Youth Program, as of December 31, 2009:
[Refer to PDF for image: line graph]
Month: May;
Percentage of fund spent: 1%.
Month: June;
Percentage of fund spent: 7%.
Month: July;
Percentage of fund spent: 19%.
Month: August;
Percentage of fund spent: 34%.
Month: September;
Percentage of fund spent: 47%.
Month: October;
Percentage of fund spent: 56%.
Month: November;
Percentage of fund spent: 61%.
Month: December;
Percentage of fund spent: 66%.
Source: GAO analysis of Department of Labor data.
[End of figure]
Among the 16 states, the percentage drawn down ranged from 51 percent
for Arizona to 82 percent for Mississippi (see table 5).
Table 5: Selected States' Drawdowns of Recovery Act WIA Youth Funds
and Drawdowns Nationwide as of December 31, 2009:
State: Arizona;
Allotment: $17.8 million;
Amount drawn down: $9.1 million;
Percentage drawn down: 51%.
State: California;
Allotment: $186.6 million;
Amount drawn down: $99.9 million;
Percentage drawn down: 54%.
State: Colorado;
Allotment: $11.9 million;
Amount drawn down: $8.3 million;
Percentage drawn down: 70%.
State: Florida;
Allotment: $42.9 million;
Amount drawn down: $31.9 million;
Percentage drawn down: 74%.
State: Georgia;
Allotment: $31.4 million;
Amount drawn down: $23.1 million;
Percentage drawn down: 74%.
State: Illinois;
Allotment: $62.2 million;
Amount drawn down: $44.5 million;
Percentage drawn down: 72%.
State: Iowa;
Allotment: $5.2 million;
Amount drawn down: $3.9 million;
Percentage drawn down: 75%.
State: Massachusetts;
Allotment: $24.8 million;
Amount drawn down: $15.7 million;
Percentage drawn down: 63%.
State: Michigan;
Allotment: $73.9 million;
Amount drawn down: $51.4 million;
Percentage drawn down: 70%.
State: Mississippi;
Allotment: $18.7 million;
Amount drawn down: $15.3 million;
Percentage drawn down: 82%.
State: New Jersey;
Allotment: $20.8 million;
Amount drawn down: $12.4 million;
Percentage drawn down: 60%.
State: New York;
Allotment: $71.5 million;
Amount drawn down: $41.6 million;
Percentage drawn down: 58%.
State: North Carolina;
Allotment: $25.0 million;
Amount drawn down: $16.9 million;
Percentage drawn down: 68%.
State: Ohio;
Allotment: $56.2 million;
Amount drawn down: $40.0 million;
Percentage drawn down: 71%.
State: Pennsylvania;
Allotment: $40.6 million;
Amount drawn down: $21.5 million;
Percentage drawn down: 53%.
State: Texas;
Allotment: $82.0 million;
Amount drawn down: $62.0 million;
Percentage drawn down: 76%.
State: Nationwide;
Allotment: $1,167.2;
Amount drawn down: $765.0;
Percentage drawn down: 66%.
Source: GAO analysis of Department of Labor data.
[End of table]
Recovery Act-Funded WIA Youth Program Served over 355,000 Youths:
Nationwide, as of November 30, 2009, 355,320 youths had participated
in Recovery Act-funded WIA youth activities--a 20 percent increase
from the 297,169 youth who had participated as of July 31, 2009. Sixty-
four percent of youth participants were 14 to 18 years old, making up
the largest category of participants. Nine percent of youth were ages
22 to 24, the new age category authorized under the Recovery Act. Of
the youth served with Recovery Act funds, 36 percent were out-of-
school youth.[Footnote 86] Table 6 provides information on WIA youth
served with Recovery Act funds nationwide and in our 16 study states.
Table 6: WIA Youth Served with Recovery Act Funds in Selected States
and Nationwide, as of November 30, 2009:
State: Arizona;
Number served[A]: 3,404;
Percentage who were 14-18 years old: 75;
Percentage who were 19-21 years old: 19;
Percentage who were 22-24 years old: 6;
Percentage who were out-of-school youth: 31.
State: California;
Number served[A]: 45,267;
Percentage who were 14-18 years old: 68;
Percentage who were 19-21 years old: 24;
Percentage who were 22-24 years old: 8;
Percentage who were out-of-school youth: 41.
State: Colorado;
Number served[A]: 3,328;
Percentage who were 14-18 years old: 69;
Percentage who were 19-21 years old: 24;
Percentage who were 22-24 years old: 7;
Percentage who were out-of-school youth: 40.
State: Florida;
Number served[A]: 14,548;
Percentage who were 14-18 years old: 62;
Percentage who were 19-21 years old: 27;
Percentage who were 22-24 years old: 11;
Percentage who were out-of-school youth: 39.
State: Georgia;
Number served[A]: 11,192;
Percentage who were 14-18 years old: 72;
Percentage who were 19-21 years old: 21;
Percentage who were 22-24 years old: 7;
Percentage who were out-of-school youth: 30.
State: Illinois;
Number served[A]: 17,868;
Percentage who were 14-18 years old: 64;
Percentage who were 19-21 years old: 26;
Percentage who were 22-24 years old: 10;
Percentage who were out-of-school youth: 46.
State: Iowa;
Number served[A]: 1,375;
Percentage who were 14-18 years old: 52;
Percentage who were 19-21 years old: 35;
Percentage who were 22-24 years old: 14;
Percentage who were out-of-school youth: 45.
State: Massachusetts;
Number served[A]: 6,917;
Percentage who were 14-18 years old: 79;
Percentage who were 19-21 years old: 16;
Percentage who were 22-24 years old: 5;
Percentage who were out-of-school youth: 25.
State: Michigan;
Number served[A]: 20,649;
Percentage who were 14-18 years old: 68;
Percentage who were 19-21 years old: 23;
Percentage who were 22-24 years old: 9;
Percentage who were out-of-school youth: 33.
State: Mississippi;
Number served[A]: 6,742;
Percentage who were 14-18 years old: 62;
Percentage who were 19-21 years old: 27;
Percentage who were 22-24 years old: 10;
Percentage who were out-of-school youth: 46.
State: New Jersey;
Number served[A]: 6,195;
Percentage who were 14-18 years old: 62;
Percentage who were 19-21 years old: 27;
Percentage who were 22-24 years old: 10;
Percentage who were out-of-school youth: 42.
State: New York;
Number served[A]: 25,323;
Percentage who were 14-18 years old: 71;
Percentage who were 19-21 years old: 21;
Percentage who were 22-24 years old: 7;
Percentage who were out-of-school youth: 27.
State: North Carolina;
Number served[A]: 6,436;
Percentage who were 14-18 years old: 65;
Percentage who were 19-21 years old: 25;
Percentage who were 22-24 years old: 10;
Percentage who were out-of-school youth: 42.
State: Ohio;
Number served[A]: 17,861;
Percentage who were 14-18 years old: 56;
Percentage who were 19-21 years old: 30;
Percentage who were 22-24 years old: 13;
Percentage who were out-of-school youth: 39.
State: Pennsylvania;
Number served[A]: 9,359;
Percentage who were 14-18 years old: 68;
Percentage who were 19-21 years old: 24;
Percentage who were 22-24 years old: 7;
Percentage who were out-of-school youth: 29.
State: Texas;
Number served[A]: 24,669;
Percentage who were 14-18 years old: 67;
Percentage who were 19-21 years old: 23;
Percentage who were 22-24 years old: 9;
Percentage who were out-of-school youth: 29.
State: Total for 16 states;
Number served[A]: 221,133;
Percentage who were 14-18 years old: 67;
Percentage who were 19-21 years old: 24;
Percentage who were 22-24 years old: 9;
Percentage who were out-of-school youth: 36.
State: Nationwide;
Number served[A]: 355,320;
Percentage who were 14-18 years old: 64;
Percentage who were 19-21 years old: 24;
Percentage who were 22-24 years old: 9;
Percentage who were out-of-school youth: 36.
Source: Department of Labor data based on information reported by the
states.
Note: The sum of percentages for youth in the age categories of 14-18,
19-21, and 22-24 in each of the states may not equal 100 percent due
to rounding. According to Labor, nationwide totals do not equal 100
percent due to data reporting issues in some of the other states and
territories.
[A] According to Labor, this represents the number of WIA youth served
with Recovery Act funds, which includes those youth who participated
in summer employment or other allowable WIA activities during the
summer months.
[End of table]
Nationwide, of the youth who participated in Recovery Act-funded WIA
youth activities, 313,821--88 percent--were placed in summer
employment, according to Labor's data. Eighty-two percent of youth
placed in summer employment completed their work experience, as shown
in table 7.[Footnote 87]
Table 7: Recovery Act-Funded WIA Youth Participation in Summer
Employment in Selected States and Nationwide, as of November 30, 2009:
State: Arizona;
Number of youth placed in summer employment: 2,982;
Percentage who completed their summer employment: 89.
State: California;
Number of youth placed in summer employment: 42,066;
Percentage who completed their summer employment: 87.
State: Colorado;
Number of youth placed in summer employment: 3,138;
Percentage who completed their summer employment: 80.
State: Florida;
Number of youth placed in summer employment: 13,652;
Percentage who completed their summer employment: 92.
State: Georgia;
Number of youth placed in summer employment: 11,027;
Percentage who completed their summer employment: 91.
State: Illinois;
Number of youth placed in summer employment: 16,626;
Percentage who completed their summer employment: 81.
State: Iowa;
Number of youth placed in summer employment: 1,270;
Percentage who completed their summer employment: 80.
State: Massachusetts;
Number of youth placed in summer employment: 6,795;
Percentage who completed their summer employment: 92.
State: Michigan[A];
Number of youth placed in summer employment: 18,364;
Percentage who completed their summer employment: 68.
State: Mississippi;
Number of youth placed in summer employment: 6,543;
Percentage who completed their summer employment: 75.
State: New Jersey;
Number of youth placed in summer employment: 5,888;
Percentage who completed their summer employment: 32.
State: New York;
Number of youth placed in summer employment: 23,888;
Percentage who completed their summer employment: 85.
State: North Carolina;
Number of youth placed in summer employment: 6,436;
Percentage who completed their summer employment: 71.
State: Ohio;
Number of youth placed in summer employment: 10,481;
Percentage who completed their summer employment: 85.
State: Pennsylvania;
Number of youth placed in summer employment: 9,238;
Percentage who completed their summer employment: 74.
State: Texas;
Number of youth placed in summer employment: 21,851;
Percentage who completed their summer employment: 87.
State: Total for 16 states;
Number of youth placed in summer employment: 200,245;
Percentage who completed their summer employment: 82.
State: Nationwide;
Number of youth placed in summer employment: 313,821;
Percentage who completed their summer employment: 82.
Source: Department of Labor data based on information reported by the
states.
[A] Because of delayed reporting, Michigan's denominator for its
summer employment completion rate does not include the full cohort of
youth who were placed in employment and may be understated by about
2,918 youth. Labor officials told us that some other states may have
also underreported this data element, but to a much lesser extent.
[End of table]
Those youth participating in Recovery Act-funded WIA youth activities
who were not placed in summer employment included younger in-school
youth and older youth who were participating in other allowable WIA
youth activities, within and outside of the summer months, such as
career exploration, classroom training, employment preparation
services, and academic improvement services, according to Labor.
Three Quarters of Youth Participants Achieved a Work Readiness Skill
Goal:
The Recovery Act requires that only the work readiness measure, also
referred to as the work readiness attainment rate, be used to assess
the effects of the summer-only youth employment activities. This
measure is defined as the percentage of participants in summer
employment who attain a work readiness skill goal. A work readiness
skill goal is defined as:
"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). It may 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. It may also include positive work habits,
attitudes, and behaviors such as punctuality, regular attendance,
presenting a neat appearance, getting along and working 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. It entails developing motivation and
adaptability, obtaining effective coping and problem-solving skills,
and acquiring an improved self-image."[Footnote 88]
Nationwide, the work readiness attainment rate was 75 percent. This is
a good baseline that shows a high level of achievement but leaves room
for growth, according to a Labor official. Among the 16 states, the
work readiness attainment rates ranged from 22 percent in New Jersey
to 91 percent in Georgia (see table 8).
Table 8: Work Readiness Attainment Rate for Youth in Summer Employment
in Selected States and Nationwide, as of November 30, 2009:
State: Arizona;
Work readiness attainment rate: 87%.
State: California;
Work readiness attainment rate: 74%.
State: Colorado;
Work readiness attainment rate: 79%.
State: Florida;
Work readiness attainment rate: 87%.
State: Georgia;
Work readiness attainment rate: 91%.
State: Illinois;
Work readiness attainment rate: 80%.
State: Iowa;
Work readiness attainment rate: 79%.
State: Massachusetts;
Work readiness attainment rate: 85%.
State: Michigan;
Work readiness attainment rate: 68%.
State: Mississippi;
Work readiness attainment rate: 72%.
State: New Jersey;
Work readiness attainment rate: 22%.
State: New York;
Work readiness attainment rate: 83%.
State: North Carolina;
Work readiness attainment rate: 62%.
State: Ohio;
Work readiness attainment rate: 89%.
State: Pennsylvania;
Work readiness attainment rate: 72%.
State: Texas;
Work readiness attainment rate: 83%.
State: Nationwide;
Work readiness attainment rate: 75%.
Source: Department of Labor.
[End of table]
The Second Round of Recipient Reporting Showed That Improving Data
Quality Is a Work in Progress:
The Recovery Act mandates that we comment on the estimates of jobs
created or retained as reported by recipients of Recovery Act funding.
Our initial report on November 19, 2009[Footnote 89] covered the first
period of recipient reports including activity since the Recovery
Act's passage in February 2009 through the quarter ending September
30, 2009. This section discusses our comments on the second round of
recipient reports covering the period October 1, 2009, through
December 31, 2009.
The raw data from recipients of federal contracts, grants, and loans
from the first round of recipient reporting contained many recipient
mistakes. For the second submission of reports, because many first
round recipients did not understand how to report correctly the number
of jobs created or retained, OMB clarified its guidance and is working
with federal agencies to improve the agencies' reviews of recipient
data for mistakes and other problems. In addition, for this second
round of reporting, the Board developed technical and content changes
to try to help improve the quality of recipient data and streamline
the reporting process.
On January 30, 2010, the Board published the results of the second
round of recipient reporting on Recovery.gov. According to the Web
site, recipients submitted over 160,000 reports indicating that the
Recovery Act funded nearly 600,000 jobs during the quarter ending
December 31, 2009. As reported by the Board, the job calculations are
based on the number of hours worked in a quarter and funded under the
Recovery Act. The data also solely reflect the direct hours worked and
funded by the Recovery Act and reported by recipients of grants,
contracts, and loans.
While significant issues remain, the second round of recipient
reporting appears to have gone more smoothly as recipients have become
more familiar with the reporting system and requirements. OMB and the
Board's responsiveness to feedback and lessons learned during the
first round led to new simplified jobs reporting guidance and system
enhancements that we believe will ultimately improve data quality and
reliability. This round of reporting represents somewhat of a
transition as recipients worked to implement the new reporting
guidance, but clearly progress was achieved in addressing some of the
major data quality and reporting issues identified in the first round.
As recipient reporting moves forward, we will continue to review the
processes that federal agencies and recipients have in place to ensure
the completeness and accuracy of data.
Economic Methods and Recipient Reports Together Are Needed to Provide
Insight into the Employment Effects of Fiscal Stimulus:
Tracing the effects of the Recovery Act through the economy is a
complicated task. Prospectively, before the act's passage or before
funds are spent, the effects can only be projected using economic
models that represent the behavior of governments, firms, and
households. While funds are being spent, some effects can be observed
but often relevant data on key relationships and indicators in the
economy are available only with a lag, thereby complicating real-time
assessments. When a full range of data on outcomes becomes available,
economic analysts undertake retrospective analyses, where the findings
are often used to guide future policy choices and to anticipate
effects of similar future policies. Stimulus spending under the broad
scope of the Recovery Act will reverberate at the national, regional,
state, and local levels. Models of the national economy provide the
most comprehensive view of policy effects, but they do not provide
insight, except indirectly, about events at smaller geographical
scales. The diversity and complexity of the components of the national
economy are not fully captured by any set of existing economic models.
Some perspective can be gained by contemporaneous close observation of
the actions of governments, firms, and households, but a complete and
accurate picture of the Recovery Act's impact will emerge only slowly.
The information reported by recipients can provide such insight into
the use and impact of Recovery Act funds in local communities and
regions.
The recipient reports are not estimates of the effects of the Recovery
Act, although they do provide a real-time window on the aftermath of
Recovery Act spending. Recipients are expected to report accurately on
their use of funds; recipients are not required to say what they would
have done without the benefit of the program. Neither the recipients
nor analysts can identify with certainty the impact of the Recovery
Act because of the inability to compare the observed outcome with the
unobserved, counterfactual scenario (in which the stimulus does not
take place). At the level of the national economy, models can be used
to simulate the counterfactual. At smaller scales, comparable models
of economic behavior either do not exist or cover only a very small
portion of all the activity in the macroeconomy.
In interpreting recipient reporting data, it is important to recognize
that the recipient reporting requirement covers a defined subset of
the Recovery Act's funding. The reporting requirements apply to
nonfederal recipients of funding, including all entities receiving
Recovery Act funds directly from the federal government, such as state
and local governments, private companies, educational institutions,
nonprofits, and other private organizations. OMB guidance, consistent
with the statutory language in the Recovery Act, states that these
reporting requirements apply to recipients who receive funding through
the Recovery Act's discretionary appropriations, not recipients
receiving funds through entitlement programs, such as Medicaid, or tax
provisions. Recipient reporting also does not apply to individuals. In
addition, the required reports cover only direct jobs created or
retained as a result of Recovery Act funding; they do not include the
employment impact on materials suppliers (indirect jobs) or on the
local community (induced jobs). Figure 14 shows the division of total
Recovery Act funds and their potential employment effects.
Figure 14: The Potential Employment Effects of Recovery Act Funds:
[Refer to PDF for image: illustration containing a pie-chart]
The Recovery Act‘s recipient reporting requirements cover only a
defined subset of the Recovery Act‘s funding. The Recovery Act
provided $787 billion in spending and tax benefits of which $275
billion is in the form of grants, contracts and loans. Only non-
federal recipients of grants, contracts, or loans are required to
report. Furthermore, only the direct jobs created or retained by
recipients of funds are reported. Indirect and induced jobs are not
reported. Finally, the employment effects of the entitlement spending
and tax benefits provided by the Recovery Act are not reflected in
recipient reporting.
Potential employment effects of Recovery Act funds:
Contracts, grants, and loans:
Induced;
Indirect;
Direct.
Tax relief employment effect:
Entitlements employment effect:
Recipient reporting coverage:
Contracts, grants,and loans: $275 billion;
Entitlements: $224 billion;
Tax relief: $288 billion;
Total: $787 billion.
Source: GAO.
Note: The potential employment effects of the different types of
Recovery Act funds are based on historical data and are reflected in
the size of the circles. The amounts shown reflect the original cost
estimate of the Recovery Act as reported on Recovery.gov.
[End of figure]
Recipients are to file reports for any quarter in which they receive
Recovery Act funds directly from the federal government, and
recipients are to submit reports no later than 10 days after the end
of each calendar quarter in which they received Recovery Act funds.
Each report is to include the total amount of Recovery Act funds
received, the amount of funds expended or obligated to projects or
activities, and a detailed list of those projects or activities. For
each project or activity, the detailed list must include its name and
a description of the project or activity, an evaluation of its
completion status, and an estimate of the number of jobs created or
the number of jobs retained by that project or activity. Certain
additional information is also required for infrastructure investments
made by state and local governments.
Updated OMB Guidance and Board Procedures Changed Important Reporting
Elements for Recipients:
In response to suggestions made by recipients, agencies, our
recommendations, and others, on December 18, 2009, OMB issued a
memorandum for the heads of executive departments and agencies
updating its guidance on the Recovery Act, data quality, nonreporting
recipients, and reporting of job estimates, among other important
reporting requirements.[Footnote 90] The updated guidance standardized
the period of measurement of jobs created or retained as one quarter
and removed the requirement that recipients must sum various data on
hours worked across multiple quarters of data when calculating jobs
estimates. OMB now defines FTEs as the total number of hours worked
and funded by Recovery Act dollars within the reporting quarter
divided by the quarterly hours in a full-time schedule. The guidance
also removed the need for recipients to make a judgment on whether
jobs were created or retained because of the Recovery Act and made
more explicit that jobs created or retained are to be reported as
hours worked and paid for with Recovery Act funds. The guidance
further clarified that jobs are to be counted only if a recipient will
eventually be reimbursed with Recovery Act funding and specified that
jobs will be counted based on the proportion of Recovery Act funding
provided for the job. In addition, the guidance provided a series of
practical examples of how the simplified formula for jobs calculation
should be applied.
The updated guidance also provided federal agencies with a list of
minimum actions that they must conduct regarding data quality reviews
including a review of significant errors in high priority data fields
and material omissions. Material omissions include not reporting on a
received award, or data in a report that is not responsive to a
specific data element. Federal agencies will be required to evaluate
continuously recipient and subrecipient efforts to meet recipient
reporting requirements, as well as the requirements of OMB
implementing guidance and any relevant federal program regulations.
The guidance requires that federal agencies inform OMB of recipients
who are noncompliant because they did not report on their uses of
funds and FTEs created or retained.
Additionally, the Board modified its procedures to (1) permit
continual correction by recipients of data in FederalReporting.gov
beginning February 2, 2010, as well as continuous review by federal
agencies; (2) implement updating of Recovery.gov at biweekly
intervals, beginning February 10, 2010; and (3) outline new internal
logic checks preventing errors such as misidentification of recipient
congressional districts and entry of expenditure data indicating
recipients expended more funds than they received.
Fewer Reports Show FTEs with No Funds Either Received or Expended:
In our previous review of the prior quarter's prime recipient reports,
we examined the relationship between recipient reports showing the
presence or absence of any FTE counts with the presence or absence of
funding amounts shown in either or both data fields for amount of
Recovery Act funds received and amount of Recovery Act funds expended.
While there were more reports, in terms of both percentage and count,
for reporting FTEs, there were fewer reports showing FTEs but no funds
either received or expended. Fifty-six percent of the prime recipient
reports, as compared to 44 percent from the previous quarter, showed
an FTE value. Previously, we identified 3,978 prime recipient reports
where FTEs were reported but no dollar amount was reported in the data
fields for amount of Recovery Act funds received and amount of
Recovery Act funds expended. These records constituted 16 percent of
all the reports showing FTEs and accounted for about 9 percent of the
total FTEs reported at that time. As shown in table 9, for the most
recent quarter, we identified 2,059 such reports, which accounted for
6 percent of all reports showing FTEs and about 1.4 percent of the
total FTEs. Our follow up with a sample of cases found that while
recipients made mistakes, some seemingly anomalous results were
reasonable. For example, DOT funds highway and transportation programs
on a reimbursement basis, so there is a time lag between the payment
of workers by contractors and reimbursement by DOT made with Recovery
Act dollars. We flagged four Mississippi transportation program
recipient reports because the amounts expended in comparison to the
FTEs seemed too high or too low. However, after we analyzed the data
the Mississippi Department of Transportation used to calculate FTEs,
we were able to verify that their calculations were correct. On the
other hand, we flagged a round one Georgia Head Start recipient report
because of the high number of FTEs reported. Officials did not know
the number reported in round one was wrong until after they submitted
the report. Although they believed the number seemed off, the
officials reported submitting it based on the direction of an official
representing the federal reporting hotline. The issue was not
applicable to round two reporting, as Head Start had issued guidance
after round one stating that recipients were not to include cost of
living adjustments or quality improvement in the calculation of the
jobs created or retained.
In addition, OMB's December guidance stated that recipients may decide
to begin hiring new employees as soon they are notified of the amount
of their Recovery Act award, but before Recovery Act dollars are
received or expended. In such a situation, where non-Recovery-Act
dollars that are paying the wages of the new employees are used as an
advance on the Recovery Act dollars awarded, recipients can
appropriately report these jobs as created or retained.
Table 9: Fourth Quarter, 2009--Count of Prime Recipient Reports by
Presence or Absence of FTEs and Recovery Act Funds Received or
Expended:
Recovery Act funds: Received or expended funds reported[A];
Report with FTEs: 35,045; (94%);
Reports without FTEs: 14,353; (50%).
Recovery Act funds: No received or expended funds reported;
Report with FTEs: 2,059; (6%);
Reports without FTEs: 14,370; (50%).
Recovery Act funds: Total;
Report with FTEs: 37,104; (100%);
Reports without FTEs: 28,723; (100%).
Source: GAO analysis of prime recipient reports for 4th quarter, 2009
from Recovery.gov as of January 30, 2010.
[A] Prime recipient reports showing a nonzero dollar amount in either
or both Recovery Act funds received or expended data fields.
[End of table]
In our previous report, we noted that 10 recipient reports accounted
for close to 30 percent of the FTEs reported. In this second round of
recipient reports, we noted 10 reports accounting for 25 percent of
the FTEs. Those 10 reports described funding support for education-
sector related positions.
Previously, 71 percent of those prime recipient reports that showed no
FTEs also showed no dollar amount in the data fields for amount of
Recovery Act funds received and amount expended. As shown in table 9
above, reports showing no FTEs are equally split between those
reporting and not reporting funds received or expended. The total
cumulative value of funds reported in the expenditure field for
recipient reports showing no FTEs but having received or expended
funds was $3.2 billion. The switch to reporting FTEs on a quarterly
basis while continuing to report Recovery Act funding on a cumulative
basis will mean that such comparisons will become less meaningful over
time and, therefore, must be made with care. For example, projects
that are completed during a reporting quarter may show few or no FTEs
but significant Recovery Act funding due to the cumulative funding
reporting and the delay in receiving funds in cases where funds are
used to reimburse expenses already incurred.
Interpretation of the FTE Data:
Several factors need to be taken into consideration when interpreting
the FTE data from the recipient reports. First, in our November
report, we noted that the concept of an FTE should allow for the
aggregation of different types of jobs--part-time, full-time, or
temporary--and should cover a standard period of performance. OMB's
updated guidance on the FTE calculation accomplished this. However,
our review of second round reporting indicates that some recipients,
particularly in the education area, did not follow the new calculation
and do not expect to do so until the third round of reporting. We
previously cautioned against aggregation of first round FTE data, and
it holds for this round of reporting as well. Because not all
recipients used the new calculation, we are not able to compare FTEs
across projects or add the FTEs together. As recipients follow the
updated guidance on calculating FTEs, this may be possible. Even if
all recipients had reported data consistent with the updated OMB
guidance, however, there are important implications to consider when
using an FTE number to analyze projects funded under the Recovery Act.
For example, firms may choose to increase the hours of existing
employees, which can certainly be said to increase employment but not
necessarily be an additional job in the sense of adding a person to
the payroll. FTE counts can also vary across projects that might
otherwise look similar and therefore should be considered in the
context of a specific project through its completion. In some cases,
Recovery Act funds were used to fund capital investment for a project,
not to fund direct hours. As part of its data quality checks, for
example, FHWA asked recipients to explain the relationship between
FTEs to the funds expended field relative to how large or small the
relationship is compared to expected values. In many cases, the
recipient noted that they used funds to initiate a project, which
could include purchasing items such as material and moving equipment.
Improved Data Quality Is a Work in Progress:
We performed an initial, limited set of edit checks and basic analyses
on the first quarter recipient report data that were posted and
available for download from Recovery.gov on October 30, 2009. Based on
that review work, we identified recipient report records that showed
certain data values or patterns in the data that were either erroneous
or suggested that some further review could be merited due to an
unexpected or atypical data value or relationship between data values.
As a means of assessing the extent to which instances of those data
values or patterns continued to recur, we performed these analyses
again as well as some new analyses on the second round of quarterly
recipient reports covering the period October 1, 2009, through
December 31, 2009 (the fourth calendar quarter of 2009), which we
downloaded from Recovery.gov on January 30, 2010. For the most part,
the number of records identified by our edit checks was relatively
small compared to the 65,827 prime recipient report records downloaded
from Recovery.gov. This number represents 8,841 more recipient reports
than the previous quarter and represents about a 16 percent increase.
About a third of this increase consists of reports covering highway
projects. Large increases were also seen in reports from the Army
Corps of Engineers and the Department of Energy. Reports from
recipients of funding from Health and Human Services programs also
showed a large increase.
While we noted a reduction in certain types of errors,
inconsistencies, or atypical patterns, others have persisted into the
second quarter of reports. The occurrence of such errors or
inconsistencies is indicative of inaccurate or incomplete data and
raises concerns about the quality of information in other data fields
that cannot be readily detected through various automated checks of
the data.
In our analyses of the data fields showing Recovery Act funds, we
previously identified 132 recipient reports where the award amount was
zero or less than $10, which suggests data entry errors or other
mistakes. For this second round of quarterly reports, there were just
31 such reports. Previously, we identified 133 records where the
amount reported as received exceeded the reported award amount by more
than $10. There were no such reports in the second round. It appears
that edit checks are, for the most part, successfully addressing these
issues.
In our review of the first round of recipient reports, we noted that
while the data fields for Treasury Account Symbol (TAS) codes and
Catalog of Federal Domestic Assistance (CFDA) numbers showed no
invalid values on recipient reports, the values on some reports were
not congruent with their associated agency name fields and either the
agency name or the code were likely to be erroneous.[Footnote 91] Both
TAS and CFDA values are linked to specific agencies and their
programs. In the first round of quarterly reports, we identified 454
reports as having a mismatch on the CFDA number, that is the CFDA
number shown on the report did not match the CFDA number associated
with either the funding or awarding agency shown on the report. On TAS
codes, we identified 595 reports where there was no TAS match
including 76 instances where GAO was erroneously identified as either
the funding or awarding agency. Our repeat of this analysis on the
second round of quarterly reports showed a reduction in but not an
elimination of the number of reports where a mismatch between the
codes occurred. We identified 232 reports as having a mismatch on the
CFDA number and 157 reports where there was no TAS match. In our TAS
match, we found no instances where GAO was erroneously identified.
Although the frequency of misalignment of TAS and CFDA values with
their appropriate agency names has been reduced, this small set of
reports where it continues calls into question the timeliness or
efficacy of any edit checks that were implemented to address this
issue.
To assess the congruence between the summary values of selected data
fields reported on Recovery.gov and the sums derived from those same
data fields using the downloaded reports, we calculated the overall
sum and sum by states for number of FTEs reported, award amount, and
amount received. We found that the FTE values matched the total
reported on Recovery.gov. The award amount and amount received data
fields corresponded closely with the values shown for the summary data
shown on Recovery.gov if the values in these data fields for all
reports that appear in either or both rounds of quarterly reports are
added together. However, there is some basis for concern that the
values being aggregated in this way may include some double counting.
The Board has noted that despite improvements in this round, they are
experiencing difficulties cross-referencing reports from the first and
second submission of reports because of inconsistencies in the way
recipients entered award identifiers. For example, in some cases
recipients used hyphens in their award key in round one but not in the
second round. Based on a match we performed between first and second
round reports on the basis of an award key data field,[Footnote 92] we
identified a subset of reports that appeared in the first round of
quarterly reports but not in the second round, a subset of reports
that appeared in the second round for the first time, and a subset of
reports that appeared in both rounds. When we further analyzed the
13,506 reports that only appeared in the first round but not the
second round, we found that 85 percent of them did not have the final
report data field marked as showing that this first round report was
to be the final report and that there would be no further quarterly
reports.[Footnote 93] Sixty-eight percent indicated in the project
status field that the project was either "Not Started" or "Less Than
50% Completed." Forty-eight percent showed the date of award as being
in the last half of the 2009 calendar year. In OMB's comments, the
Controller noted that OMB conducted a line-by-line review of the
13,506 reports that had been identified from round one that did not
appear to have a matching report in round two. According to the
Controller, preliminary indications are that "approximately 93 percent
of the 13,000 reports were filed in the second round of reporting but,
due to a technical issue, were not "matched" with the corresponding
prior-quarter report —" Overall, OMB believes that the actual number
of unmatched reports is fewer than 100 that should have had a
corresponding report from the most recent reporting quarter but did
not.
In addition, we note that 5,422 of the 22,337 reports (24 percent)
that appeared for the first time in the second round of recipient
reports, showed an award date as occurring in the first half of the
2009 calendar year. It seems unlikely that, for at least some of these
5,422 reports, there would not have been first round quarterly reports
submitted given the early award date.
To the extent that these first-round-only reports and second-round-
only reports comprised records that should have been linked, summing
the dollar amounts in the way noted above to obtain the overall totals
will result in some double counting of the amounts reported. For
example, for a first-round-only report and a second-round-only report
that should have been linked but was not, the amount received value
submitted in the first round, assuming it was a value greater than
zero, will also constitute part of the cumulative amount received
value shown in the unlinked second-round-only report. However, since
each report was treated as a separate project, both amount received
values were included in calculating the overall total with the amount
reported for the first round being counted twice. Moreover, it appears
that the downloadable records do not provide a way to track some
projects' recipient reports from one quarter to the next.
As part of our review of the second round of quarterly reports, we
examined further the apparent consistency or coherence between the
final report data field and other report data fields for all second
round reports. For those reports indicating that they were final
reports, we looked at the project status data field and whether the
dollar amount shown for Recovery Act funds received or Recovery Act
funds expended was close to the award amount. A total of 5,184 prime
recipient reports, roughly 8 percent of all prime recipient reports,
indicated that the current report was to be the final report. Although
almost all of those reports showed a "Completed" project status, there
were 279 reports where project status was either "Not Started" or
"Less Than 50% Completed." For all recipient reports marked as final,
we also conducted an analysis to identify those reports where the
amount reported for both Recovery Act funds received or expended was
less than 75 percent of the award amount or exceeded the award amount
by 10 percent or more. We did not find any reports where both the
amount shown as received or expended exceeded the award amount by 10
percent or more. We identified 453 reports, about 9 percent of reports
marked as final, where neither the value for amount received or
expended was within 75 percent of the award amount. The project status
for these 453 final reports showing less than 75 percent of funds
received or expended is shown in table 10.
Table 10: Project Status of Fourth Quarter, 2009 Prime Recipient
Reports Marked As Final Report with Less Than 75 Percent of Funds
Received or Expended:
Project status: Not started;
Number of reports: 90;
Percentage: 20.
Project status: Less than 50 percent completed;
Number of reports: 98;
Percentage: 22.
Project status: More than 50 percent completed;
Number of reports: 87;
Percentage: 19.
Project status: Completed;
Number of reports: 178;
Percentage: 39.
Project status: Total;
Number of reports: 453;
Percentage: 100.
Source: GAO analysis of prime recipient reports for fourth quarter
2009 from Recovery.gov as of January 30, 2010.
[End of table]
The apparent incongruence between the reported project status and
funding may warrant further examination or follow up with these
reports if the designation of final report status is determined not to
be in error and no further reports will be made. Identifying the
reasons for the occurrence of recipient reports with the particular
characteristics just described could help ensure that reports marked
as final are complete and account fully for the expenditure of funds.
A potential problem area we identified previously was the inconsistent
provision of data on the number and total amount of small subawards of
less than $25,000. There are data fields that collect information on
small subawards, small subawards to individuals, and small subawards
to vendors. We previously noted that there were 380 prime recipient
report records where we observed the same values being reported in
both small subawards and small subawards to individuals, and we
established that there were many more records where these values were
being reported separately. For this second round of quarterly reports,
we found 485 reports showing this pattern of the same values being
reported in both data fields. Similarly, we noted 152 reports in the
previous quarter's reports where, in either the subawards or subawards
to individuals data fields, the value for the number of subawards and
the total dollar value of subawards were exactly the same and, as
such, most likely erroneous. In this second round of reports, there
were 141 such records. These reports are not likely to be conveying
accurate information on the amount and dispersion of subawards.
Overall, while most recipient report records were not identified as
potential problems in our second round of edit checks and analyses,
and some areas of concern and error appear to have been addressed, our
results continue to indicate a need for further data quality efforts.
Further improvements in those areas of concern we are able to identify
could potentially yield a broader sense of assurance about the quality
of information reported in data fields or relationships not as
amenable to the type of edit checks and analyses we are able to
perform. According to OMB's Controller, OMB recently transmitted a
data file to the Board that reflects the analysis of the OMB-led
review and is working with the Board to appropriately link reports and
to make additional data corrections. We will request further
information from OMB about this data file to understand how OMB and
the Board are using it to address the report issues that we identified.
State Officials Reported That OMB's Updated Guidance Improved the
Round Two Recipient Reporting Process:
In response to concerns raised by recipients including states and
localities, issues identified by GAO, and lessons learned from the
first round of reporting, OMB issued revised guidance on December 18,
2009 for calculating FTEs and estimating jobs created or retained.
OMB's responsiveness to incorporate feedback and issue new guidance a
month after we issued our recommendations represents progress in
moving toward more transparency and accountability for federal funds.
However, with the compressed time frame, demands of the quarterly
reporting schedule, and the national scale of the recipient reporting
exercise, some state officials reported that the issuance of guidance
approximately two weeks before recipients were to begin reporting
presented challenges for them. For example, several Texas state
agencies acknowledged that OMB's FTE calculation simplified the
methodology for determining the jobs created or retained data element.
A number of them commented, however, that receiving the updated
guidance late in December strained their resources. Education state
officials reported that the timing of the guidance was particularly
challenging for them because its release coincided with the closing of
schools and universities for the winter break. As a result, the
calculation and reporting of FTE varied in the education area across
and even within some states. These issues are discussed in detail
later in this section.
In the updated guidance, OMB advised recipients that they should
implement the updated methodology to the greatest extent possible for
the January reporting period. OMB alerted state representatives in
teleconferences in November and early December that new guidance was
forthcoming. State agencies' responses to the release of the updated
guidance included actions such as disseminating their own updated
guidance, hosting trainings, and participating in Webinars to address
the challenges with the transition to the new guidance. Even with the
outreach efforts by state agencies, some recipients, however, did not
use the updated OMB guidance for the second reporting round. Other
recipients were planning to use the continuous editing process to
bring their reports into compliance.
OMB's guidance is essential to recipients' understanding of the
reporting requirements, which correlates directly with the quality of
the data reported by states. State officials in many of our selected
jurisdictions noted that the second round of recipient reporting was
easier because of OMB's updated guidance on the FTE calculation or
their familiarity with the reporting process. Under the old guidance,
recipients reported being confused about counting a job created or
retained even though they knew the number of hours that were paid for
with Recovery Act funds. For example, officials in the Pennsylvania
State Office of Accountability reported that during a national
conference call of state reporting leads in December, many
participants expressed their concern that neither federal agencies nor
recipients of Recovery Act funds truly understood how the previous
guidance worked and that the new instructions on job reporting were
much easier to follow. Pennsylvania's Accountability Office noted that
the changes in the guidance significantly reduced the number of pages
of instructions for subrecipients and vendors. As another example,
officials from the Ohio Office of Budget and Management said that the
second round of reporting was a smoother process, recipients
collaborated with their office, and they were more accustomed to the
process. Likewise, Illinois state officials in the Department of
Commerce and Economic Opportunity stated the determination of the
denominator in the FTE calculation was much easier in the second round
because it was less subjective and less time was needed to do the
reporting due to prior experience.
Although State Officials Reported Improvements in the Reporting
Process, Some New Technical Glitches Surfaced:
New edit checks were introduced for the second submission of recipient
reports to prevent recipients from making certain errors, particularly
those that received public attention in the first submission of
reports. Table 11 shows the complete list of edits. On December 23,
2009, the Board conducted a Webcast to educate recipients about
reporting system changes for the second submission of recipient
reports. The data entry system for recipients issued "soft error"
messages to flag questionable data and allowed recipients to move
forward with their answers or correct the fields before they submitted
their record. The system issued "hard error" messages when the
recipient entered certain inconsistent data, such as a ZIP code that
conflicted with the congressional district entered for a project, or
if the funds expended exceeded the funds awarded. Recipients would
have to correct these fields before the system would accept their
submissions.
Table 11: FederalReporting.gov Edit Checks for January 2010 Recipient
Reporting:
Hard edit checks--entries not allowed;
* Total Recovery Act Funds Received/Invoiced cannot be more than the
Amount of Award;
* If Project Status is "Fully Completed," Total Recovery Act
Expenditures cannot be more than the Amount of Award or Total Recovery
Act Funds Received/Invoiced;
* If Project Status is "Fully Completed," Total Recovery Act
Infrastructure Expenditures cannot be more than Amount of Award, Total
Recovery Act Funds Received/Invoiced, or Total Recovery Act
Expenditures;
* Congressional District must match ZIP code+4. A valid congressional
district must be entered;
* ZIP code must match State;
* Sub Award Amount must be greater than or equal to Sub Award
Disbursed.
Soft edit checks--provides alert only;
* Amount of Award and Total Recovery Act Funds Received/Invoiced is
$500,000 or more, but Number of Jobs created is less than 1;
* Project Status is "Fully Completed," Total Recovery Act Funds
Received/Invoiced, Total Recovery Act Expenditures, and Amount of
Award equal, and Number of Jobs equals zero (0);
* If Number of Jobs is greater than zero (0), then the Number of Jobs
cannot equal Amount of Award, Total Recovery Act Funds Received/
Invoiced, Total Recovery Act Expenditures, or Total Recovery Act
Infrastructure Expenditures;
* Project Status cannot have a "Fully Completed" status where Total
Recovery Act Funds Received/Invoiced equals zero (0);
* Project Status cannot have a "Fully Completed" status where Total
Recovery Act Expenditures equals zero (0) and Date of Award is greater
than 30 days from the date of final submission;
* Number of Jobs multiplied by $15,600 cannot exceed Amount of Award;
* Amount received equals zero (0), jobs created/saved is more than 50;
* Total Recovery Act Expenditures cannot be more than the Amount of
Award or Total Recovery Act Funds Received/Invoiced;
* Total Recovery Act Infrastructure Expenditures cannot be more than
Amount of Award, Total Federal Amount ARRA Funds Received/Invoiced, or
Total Federal Amount of ARRA Expenditures.
Source: Recovery Accountability and Transparency Board.
[End of table]
A number of recipients reported difficulties with hard errors related
to congressional districts and ZIP codes. According to the Board,
FederalReporting.gov was programmed using the U.S. Postal Service's
(USPS) database of ZIP codes and congressional districts. This
database was chosen in part because it is used by Congress for
constituent mailings. According to the Board, the USPS acknowledged
that some districts' ZIP codes matches to the correct congressional
district were still being corrected and resolved. Recipients who
failed the congressional district edit check were using a variety of
source data, not the USPS data which were provided on
FederalReporting.gov and through the error messages, which specified
both the recipient record and the congressional district (or range of
districts) that corresponded to the ZIP code provided. To help ensure
accountability, FederalReporting.gov confirms each recipient's
business identification through a Dun & Bradstreet DUNS number and
Central Contractor Registration (CCR).[Footnote 94] According to the
Board, many recipients found that they had errors in the ZIP codes in
their CCR registration. When recipients tried to enter their
congressional districts, if they did not match the ZIP codes they had
entered in CCR, they failed this edit check. Officials in
Massachusetts reported that they received information from federal
agencies, which led them to change some award numbers and DUNS numbers
before submission, preventing error flags later on. According to these
officials, the Department of Health and Human Services and the
Department of Energy listed business identification information for
each grant on their Web sites, a practice they would like to see other
federal agencies adopt.
Only recipients could edit their data submissions. However, federal
agencies could attach correction flags when they were reviewing
individual recipient reports. We interviewed a number of recipients
whose first round data were incorrect. Some of these recipients did
not report having a correction flag or any notification from their
agency that they needed to review their data. One Head Start agency,
with a recipient report that contained a high number of FTEs because
of a misplaced decimal, posted a notice on its Web site but was told
there was no way to correct the information posted in its recipient
report. With the new features on FederalReporting.gov, recipients will
be able to update their data for six weeks after the end of the
reporting period.
Department of Education Recipients Illustrate the Successes and
Challenges of the Second Reporting Period:
A number of state and local education officials we interviewed said
that, with the exception of the timing of the release of the guidance,
the recipient reporting process had been smoother during the second
reporting period and that the new jobs guidance will ultimately
simplify FTE calculations. Specifically, several state and local
education officials said that data collection from subrecipients had
been much easier in the second round of reporting. For example, an
Iowa state official told us that during the first round of reporting
the volume of calls for assistance from LEAs had been very high, but
he had received far fewer calls during the second round. Regarding the
new jobs calculation methodology, a number of state officials said
that the new methodology, which directs recipients to calculate FTEs
based on the hours worked and funded by the Recovery Act, is clearer
than the previous formula.[Footnote 95] The new calculation does not
require the subrecipient to make a subjective judgment about whether a
job would have existed in the absence of Recovery Act funds, and a
local official described the new methodology as more objective. These
results are encouraging, because funding for education is a
significant share of the Recovery Act with three programs--the State
Fiscal Stabilization Fund, Title I, and IDEA--receiving nearly $80
billion in new funding under the act and because approximately two
thirds of the jobs reported by recipients during both reporting
periods have been attributed to education funds, including funds for
government services included in the State Fiscal Stabilization Fund
administered by the Department of Education.
While a number of education officials said the new guidance simplified
the jobs calculations, they also said that the release of the guidance
on December 18, 2009, was problematic, particularly because the
release coincided with the closing of schools and universities for the
holiday break. Specifically, the timing made it harder for state
officials to communicate new expectations to districts and limited the
amount of time available to gather revised data from LEAs and IHEs.
Officials in several states told us that data collection from LEAs was
already well under way when the new guidance was issued. For example,
Pennsylvania allowed certain subrecipients that were scheduled to be
closed during the holidays to submit reports by December 17, 2009, and
then recertify the reports after the holidays if anything changed.
This deadline was one day before OMB released the new guidance, and,
therefore, Pennsylvania had to go back to certain subrecipients to ask
for new information to follow the revised job guidance. Similarly,
state officials in Iowa told us that by December 18, 2009, over 90
percent of the Education subrecipient reports in their state had
already been submitted to the state and verified by program staff.
When schools reopened on January 4, 2010, state officials sent an e-
mail to all subrecipients explaining the new requirements and asking
them to resubmit corrected data by January 8. Overall, state education
officials in 9 of our 17 jurisdictions told us they had required LEAs
to submit their data in December. In some of these states, officials
asked LEA officials to resubmit new data to follow the newly released
guidance.
In addition to having to resubmit reports, the fact that a number of
states required districts to submit data prior to the close of the
reporting period could affect data or the comparability of data across
states. Some, such as Iowa and New Jersey,[Footnote 96] asked LEAs to
project figures through the end of the quarter. In contrast, officials
in Massachusetts and the District of Columbia told subrecipients to
report data from the start of the quarter until submission to the
state or District (December 24 in Massachusetts and December 14 in the
District), to retain information on the intervening period (between
the cut-off date and December 31, 2009), and to include data on this
period in the third round of recipient reports. Officials in
California instructed LEAs that if good estimates were available for
funds expended or obligated through the end of their reporting period,
they should use them. However, if they did not estimate, but cut off
at the end of the previous month, they should do so for both jobs
created or retained and funds expended or obligated. Education
officials in Georgia told us that they anticipate setting an early cut-
off date for the round three reports since the deadline coincides with
spring break and the Easter holiday, and officials in Massachusetts
said they hope to have the reporting deadline in Massachusetts be the
last Friday of the month, at the end of the reporting cycle.
Although they faced challenges, several states were able to obtain
jobs data and report it following the updated OMB guidance. During a
joint conference call on January 11, 2010, OMB and Education officials
said prime recipients could use the corrections period in January to
clarify and refine numbers in light of the timing of the guidance.
Specifically, in Florida, Georgia, Iowa, Michigan, North Carolina, and
Pennsylvania, the prime recipients told LEAs to submit information
based on the updated OMB guidance or to resubmit such data if LEAs had
already submitted data using the old guidance. Further, officials in
Massachusetts[Footnote 97] and the District of Columbia told us they
had been able to report following OMB's December 18 guidance using the
information they had already collected from LEAs. Illinois officials
told us they had incorporated corrections for some, but not all of
Illinois' LEAs in January, and therefore submitted Education-related
recipient reports that included FTE counts generated using both the
new and old guidance. Specifically, Illinois asked the six districts
with the largest Recovery Act allocations in the state to recalculate
jobs data based on OMB's guidance in January and included these
revised figures in the state's Education recipient report.
Other states did not use OMB's updated guidance, but instead reported
following the old guidance for at least some of their education
program recipient reports. Officials in three of these states--
Arizona,[Footnote 98] California, and New Jersey--said they planned to
have LEAs submit updated figures during the continual corrections
period in February or March. However, officials in two other states--
Colorado[Footnote 99] and New York--said they did not plan on updating
the numbers to reflect the new guidance, but plan on implementing the
new guidance during the next reporting cycle. Officials in Arizona and
Colorado told us they had followed the updated guidance for State
Fiscal Stabilization Fund recipient reports.
Despite the updated guidance, some state and local officials still
have questions about how to calculate FTEs. A number of state and
local officials, including officials from the Pennsylvania Department
of Education, told us that they were unsure about how to calculate
FTEs for teachers during the quarters spanning the summer months and
that additional guidance would be useful. OMB's updated guidance
allows districts to define the number of hours in a full-time schedule
for a particular position (the number of hours in the denominator) to
account for differences in work schedules, but does not offer an
example of how to adjust this denominator in quarters when school is
not in session or provide guidance as to how to apply the numerator,
"hours worked and paid for with Recovery Act funds," to an education
context. While teachers typically work 10 months out of the year, in
some districts they are paid year round and are considered full-time
employees. Local officials we spoke to varied in whether they expected
to report FTEs for teachers during the summer months. For example, one
official told us he was concerned that if he reported actual hours
worked for teachers during the summer months he would not show any
FTEs, even though there would be salary expenditures. In contrast,
local officials in another district indicated that they would report
FTEs during the summer months for teachers because teachers are paid
12 months out of the year.
State education officials reported implementing a number of strategies
to improve the reliability of data and to validate jobs or expenditure
data submitted by LEAs. For instance, Arizona, Georgia, Iowa, North
Carolina and New Jersey indicated that they pre-populated a number of
fields for LEAs, such as by inserting DUNS numbers or the amount of
the grant award, which reduced the fields LEAs must complete. In
addition, officials from Arizona, Iowa, and Georgia said that they
compared data with information in their financial and budget planning
systems. Iowa, Michigan, and New York state officials also said they
compare an LEA's reported FTE calculation to the approved budget or
application for that district to see if the reported figure is
reasonable. Officials from Florida and Georgia said that they review
reported numbers for anomalies, such as FTE numbers greater than zero
with no related expenditures or expenditures greater than zero with no
related FTEs. Finally, many officials told us they check the data for
basic reasonableness.
State education officials told us they had taken steps to try to
ensure the completeness of their required recipient reports. For
instance, officials in Pennsylvania said they had compared reports of
recipients that had reported to the list of LEAs in the state who were
required to report and followed up with districts that had not
submitted reports. Officials in the District of Columbia told us that
their data collection method creates an added incentive for LEAs to
report--the data collection tool for the recipient reports is part of
the LEA's process to request reimbursement. In contrast, an Iowa
official reported that at least seven subrecipients had not reported
data for this reporting period, and as a result, the official had
entered zeros for these districts for jobs and expenditures. When we
followed up with the districts, two districts told us they thought
they had submitted the required information, three said they had
submitted initial reports during December but had missed the request
for updated data in January, and two districts, under the same
superintendent, had not reported because the superintendent had
difficulty accessing the system. Of these seven districts, two had not
yet spent any funds. We followed up with the Iowa official and he said
that he did not know why a report would not have been recorded if it
had been submitted, that even districts that had not spent funds were
required to submit reports, and that he did not plan to submit
corrections on the data.
Recommendation for Executive Action:
To improve the consistency of FTE data collected and reported, we
recommend that the Secretary of the Department of Education
(Education) and the Director of the Office of Management and Budget
(OMB) provide clarifying guidance to recipients on how to best
calculate FTEs for education employees during quarters when school is
not in session.
OMB's Updated Guidance Emphasizes Federal Data Quality Checks on
Recipient Reports:
Recipient reporting data quality is integral as part of the effort to
bring transparency and accountability to the Recovery Act funds. While
recipients we contacted during the first round of recipient reporting
appeared to have made good faith efforts to ensure complete and
accurate reporting, our fieldwork and analysis of first round data
indicated that there were a range of significant reporting and quality
issues that needed to be addressed. Collecting information from such a
large and varied number of entities in a compressed time frame, as
required by the Recovery Act will continue to be a huge task, and
developing systems to check the data submitted under these
circumstances takes on increased importance.
OMB's updated December 2009 guidance outlined steps to address the
issue of federal agency data quality checks on recipient reported
data. The guidance lays out ways in which agencies can help recipients
report better data. OMB reinforces that agencies, at a minimum, are to
establish data quality plans that articulate their review process to
focus on significant reporting errors and material omissions and
ensure complete, accurate, and timely reporting of all amounts funded
by the Recovery Act. In addition, agencies are now advised to provide
recipients with key award information, such as recipient name and
award amount. The agencies also are instructed to have recipients
examine their reports for logical inconsistencies, such as if a
recipient indicates that the project is fully completed but the funds
received are minimal compared to the award amount.
Federal agencies' recipient reporting data quality review efforts
continue to develop. In particular, from the federal agencies we
reviewed, various processes were in place for outreach, identifying
nonreporters, monitoring compliance, and identifying errors in
reporting. The prime recipient report records include data on whether
or not the federal agency reviewed the record during the data quality
review time frames. In addition, the report includes a flag as to
whether or not a correction was initiated. A correction could be
initiated by either the prime recipient or the reviewing agency. In
our review of the prior quarter reports, we examined the number and
percentage of prime recipient records that were marked as having been
reviewed by the federal agency. We repeated that analysis for the most
current quarter--table 12 below shows the results.
Table 12: Fourth Quarter 2009 Prime Recipient Reports Reviews and
Corrections:
Reviewed by agency: No;
Correction: No;
Percentage: 23;
Number of prime recipient reports: 15,178.
Reviewed by agency: No;
Correction: Yes;
Percentage: 11;
Number of prime recipient reports: 7,464.
Reviewed by agency: Yes;
Correction: No;
Percentage: 54;
Number of prime recipient reports: 35,269.
Reviewed by agency: Yes;
Correction: Yes;
Percentage: 12;
Number of prime recipient reports: 7,916.
Reviewed by agency: Total;
Correction: [Empty];
Percentage: 100;
Number of prime recipient reports: 65,827.
Source: GAO analysis of prime recipient reports for fourth quarter
2009 from Recovery.gov as of January 30, 2010.
[End of table]
Relative to the prior quarter, both the percent and number of prime
reports marked as reviewed by agency were lower in the 2009 fourth
quarter. In the prior quarter, 80 percent (45,825 records) of the
prime recipient reports were marked as having been reviewed by the
agency. As shown above in table 12, 66 percent (43,185 records) of the
prime recipient reports were marked.
Department of Education:
Education's efforts to facilitate jobs reporting and data quality
include coordinating with OMB, hosting conference calls, monitoring
recipients, and conducting data quality reviews. Education provided
guidance and technical assistance to states. As part of its guidance
and technical assistance efforts, Education hosted three conference
calls before and after the updated guidance was released to address
reporting changes.
Education developed a quality review plan that included processes for
identifying errors through various cross-checking mechanisms.
According to Education officials, one example of such a mechanism is a
series of comparisons of second round data to data reported in the
first quarter by using data elements such as number of jobs and job
descriptions. Similarly, Education compares various data elements in
recipient reports, such as award number and CFDA numbers, with
information in its grant management system to identify incorrect data
elements that could make it appear that a recipient had not submitted
a report. Before the federal agency review period began, officials ran
daily reports and compared these reports to first quarter reports to
check data, such as project status. According to a program official,
these reports were invaluable to the program offices because they made
it easier for them to assist state officials in fixing errors before
the actual corrections period.
To aid in identifying nonreporters, Education has implemented, through
a monitoring questionnaire sent to state officials for Title I and
SFSF, compliance measures, which in some circumstances also allow
Education officials to identify errors before the reporting deadline.
For example, Education officials we interviewed noted a situation in
Illinois where LEA reporting was lower than they expected. Illinois
officials also told us that they had observed that the number of LEAs
shown in the system was too low, that this error was due to an
incomplete upload of their report, and that they had subsequently
resubmitted the report. Finally, officials told us that the department
plans to do a reasonableness check on subrecipient reports from the
second quarter across programs. As part of this check, officials will
observe whether the number of reports for each grant appear to be
consistent with the number of LEAs they expect to see and will contact
state officials to discuss inconsistencies that arise.
Education officials said that the recipient reporting process has
improved their knowledge of states' cash management practices and that
this information will help them to monitor states and offer them
targeted technical assistance. For example, a department official told
us that as a result of the Recovery Act, program officials have
learned in more detail how funds flow from SEAs to LEAs in each state,
and that this information has been very important in helping program
staff interpret the expenditure numbers they see on the recipient
reports in their monitoring efforts. For instance, a state's reported
expenditures might appear low because the state operates on a
quarterly reimbursement basis and districts have been spending their
own funds expecting reimbursement--without the knowledge of the
state's cash management practices such numbers could be
misinterpreted. This official told us that her specific program office
will use this information to train program office staff in how to use
this information in their monitoring efforts. The official added that
the financial management information they have learned through the
recipient reporting process adds another layer to the information
gathered through broader, systems-based questions they have asked
during IDEA monitoring visits over the last 5 years. Further, she
believes that this more nuanced understanding of how state finances
work will help department officials provide more tailored technical
assistance to states.
Department of Housing and Urban Development:
In response to OMB's guidance, HUD has engaged in efforts to
facilitate timely and accurate jobs reporting. HUD's efforts included
outreach to recipients, developing processes for error detection, and
identifying nonreporters. According to officials, HUD contacted
recipients by e-mail with reminders to report and provided key
information that should be included in certain data fields. In
addition, HUD provided technical assistance to walk unfamiliar
recipients through the reporting process.
HUD also developed data quality review processes with cross-checking
mechanisms to detect errors. For example, the Recovery Act Management
and Performance System (RAMPS) compared data in four key fields from
FederalReporting.gov against parameters HUD established to identify
potential significant errors (see table 13).[Footnote 100] RAMPS also
flagged duplicate entries, awards entered incorrectly as contracts,
and reports entered with invalid award ID numbers.
Table 13: Parameters HUD Established to Identify Significant Errors
for the Capital Fund:
Data field: Award amount;
Parameter for determining significant error: Compared directly to
Office of the Chief Financial Officer (OCFO) obligation, with a 0%
variance allowed.[A]
Data field: Total received;
Parameter for determining significant error: Compared directly to OCFO
disbursement, with a +/-10% variance allowed.
Data field: Total spent;
Parameter for determining significant error: May not exceed OCFO
obligation.
Data field: Jobs; Related to OCFO obligation.
Parameter for determining significant error: The number of jobs may
not exceed a +50% variance from the following: OCFO obligation/$205K.
Source: HUD officials.
[A] For the first round of recipient reports, this parameter allowed a
+/-10 percent variance.
[End of table]
Moreover, for the second cycle HUD officials told us they further
incorporated suggestions from OMB's guidance to agencies to improve
the data quality review process. The department identified some
material omissions by examining fields with narrative responses to
determine whether they contained a minimum number of characters as an
indicator of whether the responses adequately addressed requirements
for those fields. HUD officials said that the most prevalent errors in
reported data were in the number of jobs field. They said that
confusion persists among public housing agency officials regarding how
to calculate and count jobs, which is reflected in the number of
potential errors identified by the data quality review process. HUD
officials said they first followed up on the most egregious errors--
large overcounting or undercounting--that remained uncorrected after
their initial review of the data before addressing other errors. Table
14 identifies the number of potential significant errors identified by
HUD in each field for Public Housing Capital Fund formula grants and
competitive grants for each quarterly reporting cycle.
Table 14: Number of Potential Significant Errors Identified by Field
for the October 2009 and January 2010 Reporting Cycles:
Data field: Award amount;
Number of potential errors, October reporting cycle: 55;
Number of potential errors, January reporting cycle: 28.
Data field: Amount received;
Number of potential errors, October reporting cycle: 639;
Number of potential errors, January reporting cycle: 730.
Data field: Total spent;
Number of potential errors, October reporting cycle: 5;
Number of potential errors, January reporting cycle: 1.
Data field: Jobs;
Number of potential errors, October reporting cycle: 1,437;
Number of potential errors, January reporting cycle: 1,118.
Data field: Total;
Number of potential errors, October reporting cycle: 2,136;
Number of potential errors, January reporting cycle: 1,877.
Source: GAO analysis of HUD data.
Note: A single report can have multiple significant errors identified.
[End of table]
HUD's data quality process proposal defines material omissions as any
grantee that failed to report at all. HUD developed a Recovery Act Non-
Reporting Enforcement Plan in September 2009, which states that all
recipients who fail to report in FederalReporting.gov by the end of
their first applicable reporting cycle will receive a warning letter
from HUD program staff. If recipients fail to report a second time,
HUD will initiate further enforcement actions which can include formal
or informal hearings, suspension of access to funds, or other actions.
In the first recipient reporting cycle, HUD identified 152 Capital
Fund formula and competitive grants for which a report was required
but none was found, according to HUD officials. Officials told us HUD
provided technical assistance to housing agencies on its nonreporter
list, including walking them systematically through the reporting
process. HUD officials told us they also sent reminder e-mails on
December 4, 2009 to the 152 nonreporting housing agencies reminding
them to report in the second reporting period and warning them that
HUD may take additional action if they failed to report in the next
reporting period. In the second reporting cycle, HUD identified 27
grants for which a report was required but none was found, including 6
grants for which no report was found for either cycle. HUD officials
told us they followed up by phone with all housing agencies for which
no report was found for either cycle.
HUD officials questioned the accuracy and validity of the data
submitted through recipient reports and said they were not yet
comfortable relying on these data because of the level of confusion
expressed by housing agency officials regarding jobs reporting and the
large number of potential errors HUD identified in the "number of
jobs" field. In addition, they said HUD already has most of the
information collected through the recipient reports--jobs information
and project status were two exceptions--and uses other systems for
that information because HUD officials believe the data are more
reliable than the recipient-reported data. Although HUD has received
feedback from housing agencies that are confused or frustrated over
the reporting process, it has not received substantive feedback from
external stakeholders, such as OMB, the HUD IG, interest groups, or
the media on recipient data for the Capital Fund grant program.
For the first submission of recipient reports, we noted that public
housing agencies experienced problems with the process of recipient
reporting and the FTE calculation. These problems appeared to continue
in round two. For example, officials at one Mississippi housing
authority reported the same 6 jobs in round two that they reported in
round one. We determined their calculations did not conform to the OMB
guidance of December 18, and they did not recall receiving guidance
from HUD or OMB on job calculations for round two. However, HUD
officials told us HUD sent several e-mails to each grantee between
December 23 and the end of the reporting period that included a link
to HUD's explanation of the job count and the change in job count
guidance from OMB.
Officials from a Mississippi and a Pennsylvania housing authority
reported using a jobs calculator produced by HUD to calculate the
number of jobs they reported in the second round. HUD had posted a
jobs calculator for the first round of recipient reporting, which was
designed to calculate jobs cumulatively across reporting periods, but
removed it prior to the second round of reporting after OMB changed
the guidance for calculating jobs. According to a HUD official, their
jobs calculator for the second round--which reflected the changes in
OMB guidance for calculating jobs--was posted for about 1 week in
December 2009 before OMB requested that it be taken down in order to
review it further. After reviewing the HUD guidance to housing agency
officials, it appears that HUD did not take steps to instruct housing
agencies not to use the jobs calculator from the first round. As a
result, housing agencies may have incorrectly used the jobs calculator
from the first round to calculate the number of jobs for the second
round.
Recommendation for Executive Action:
We recommend that the Secretary of Housing and Urban Development
instruct housing agencies to discontinue use of the jobs calculator
provided by HUD in the first round of recipient reporting for
subsequent rounds of reporting to ensure the correct job calculation
is used.
Department of Transportation:
DOT officials noted that the combination of information sharing among
the operating administrations (OA),[Footnote 101] prior knowledge of
reporting by the recipients, and the dissemination of training and
guidance helped the department and recipients comply with reporting in
the second submission of reports. DOT's OAs engaged in several efforts
of outreach to assist in accurate recipient reporting. The OAs
conducted Webinars and meetings, sent e-mails, and made telephone
calls to brief and train their program recipients. According to
officials, they wanted to ensure that, along with keeping recipients
updated on requirement changes, first-time recipients would be
successful in reporting. In addition, during the first reporting
period, DOT learned that the OAs, working together as a group, allowed
sharing of information and mediation of reporting challenges.
To identify the nonreporters, the OAs compared the list of recipients
with reports found in FederalReporting.gov. As a result, they
identified 64 recipients that failed to report during the first
reporting period. The OAs worked one-on-one with these recipients and
received assurances from these nonreporters that they would comply
with future reporting requirements.
According to officials, DOT and its OAs took numerous steps to address
the quality of the recipient reported data and identify errors. To
address reporting, DOT modified contract terms and conditions to
include recipient reporting requirements and warnings that were sent
to recipients reminding them that reporting data is a condition of the
Recovery Act funding. Further, officials reported that each OA has
developed a written process to conduct data quality reviews. To
understand the reasons for identified inaccuracies in reported data,
DOT relied on direct contact and follow-up with its recipients. When
asked how DOT planned to use the recipient reported data, officials
said they did not have plans to use the information from recipient
reports in future decision making. Instead, they planned to rely on
other department data collection methods.
DOT took steps to promote consistency between OMB definitions and the
unique nature of FHWA programs. However, guidance provided by FHWA
raised concerns with some state and local officials we interviewed.
OMB encouraged federal agencies to provide supplementary reporting
guidance to their recipients. To improve consistency in the guidance
recipients receive, OMB requires agencies to clear any supplemental
guidance through OMB. FHWA approached OMB to clarify the number
recipients should report for total federal Recovery Act funds
received. To meet the statutory requirement of reporting at the
project or activity level, OMB and FHWA determined that recipients
should report the amount awarded and the amount received as the same
regardless of expenditures, since recipients report expenditures in a
subsequent field.
Some state officials stated that the supplementary guidance from FHWA
raised definitional and transparency issues. We also found that the
states we reviewed differed in the application of the guidance. In
some cases, states did not report the same number in the amount
awarded and amount received column. In one case, the state response
was that funding values for all amounts were taken from the state
accounting system and were consistent across all of the state
recipient reports. A few other states made the changes to conform to
the guidance, but expressed concerns about the definition of this
field and the transparency of the reporting. FHWA and OMB officials
are aware that some state officials have raised concerns with this
guidance and are working with state officials to try to resolve this
issue. However, as OMB clearly states in its guidance, although
federal agencies are able to comment and suggest changes to the
reports, prime recipients are ultimately responsible for the data
reported into FederalReporting.gov. We will continue to monitor this
matter.
Department of Energy:
DOE made several outreach efforts to their program recipients to
ensure timely reporting. These efforts included e-mail reminders for
registration and Webinars that provided guidance on reporting
requirements. For the first round of reporting, DOE developed a
quality assurance plan to ensure all prime recipients filed quarterly
reports, while assisting in identifying errors in reports. The
methodology for the quality assurance review included several phases
and provided details on the role and responsibilities for DOE
officials.
According to DOE officials, the data quality assurance plan was also
designed to emphasize the avoidance of material omissions and
significant reporting errors. More specifically, as reported by the
OIG and DOE officials, the plan outlined a qualitative comparison of
recipient data obtained from FederalReporting.gov to agency data
obtained from the department's financial and procurement systems. To
aid in the comparative analysis, DOE established threshold deviations
for the first round of recipient reporting. More specifically, the
jobs creation or retention thresholds were originally established by
the Political Economy Research Institute (PERI) at the University of
Massachusetts-Amherst, acting as a consultant to DOE. According to DOE
officials, PERI was able to create this list of expected job creation
from the project operation plan provided by DOE and used them in their
quality assurance analysis. DOE plans to adjust these thresholds based
on the first and second round of recipient reporting. OIG officials
noted that, based on their October review, DOE officials are
instructing programs to use information from the quality assurance
analysis when considering future funding and for management purposes.
Department of Health and Human Services:
To address data quality, HHS operating agencies engaged in various
efforts of outreach, reporting error detection, and identifying
nonreporters. HHS officials stated that they contacted recipients to
determine the cause of errors, correct errors, and offer assistance.
HHS was able to identify areas for improvement for the January
reporting period through their series on lessons learned within the
agency. Because of these efforts, HHS provided guidance to recipients
on how to correct the key award information when using the copy
forward feature in FederalReporting.gov during the January reporting
period. Lastly, during the first reporting period, HHS developed a Web
site, that provides recipients with award information needed to
complete their reports, such as award amount, award ID, and date of
award. Additionally, to aid with correcting errors, HHS reports that
the Health Resources and Services Administration has sent e-mail
notifications and initiated technical assistance calls emphasizing the
importance of correcting fields with identified errors during the
January reporting period. HHS reports that programs have been reaching
out to recipients that made errors to determine the cause of those
errors and to develop a strategy for correcting them.
Nonreporters are tracked by HHS on a master list that includes
recipients from their Operating Divisions. HHS relied on individual
Operating Divisions to provide information on the number of recipients
who did not report. According to HHS staff, these programs compared
the list of reports that they expected to receive with the list of
reports that they actually received in order to identify nonreporters.
HHS reports that each HHS Operating Division, or agency, is
responsible for contacting the recipient and providing technical
assistance as needed. Each Operating Division contacted all recipients
who did not report to identify the reasons for noncompliance. The HHS
Office of Recovery Act Coordination compiled these reasons in a master
spreadsheet and sent it to OMB.
A number of press articles in November 2009 discussed concerns with
the jobs reporting done by HHS Head Start grantees. During round two,
we followed up with two Head Start grantees in Georgia, who reported
that guidance from the Office of Head Start program after the last
round of reporting improved their understanding of the recipient
reporting process. While the grantees complied with OMB's new guidance
for reporting FTEs, there were a few errors in the recipient report
that one of the grantees initially submitted, resulting in revisions
to the ZIP code, congressional district, and award number.
Agency Officials Are Unclear about the Federal Agency Role during the
Continual Review Period:
Following the first round of recipient reporting, the Board made
several major reporting changes that took effect in the second round.
One of these changes allows recipients to correct reporting mistakes
on a continual basis. This new process began on February 2 and will
last until March 15 for the second submission of recipient reports.
According to Recovery.gov, recipients can change or correct their
reports multiple times during this extended review period. In
conjunction with this, OMB's December 18 guidance instructed federal
agencies to evaluate on a continuous basis recipient and subrecipient
reports. This differs from the framework of the initial review of
submissions during which agencies had 8 calendar days to review and
comment on submissions. During the initial review period, the reports
were locked and only the federal agency could unlock reports for
recipients to make changes. In contrast, during the continual review
period, recipients can make multiple changes up to midnight Monday the
week the data are posted on Recovery.gov. Federal agencies have a one-
day period to review the final submissions before the data are
downloaded and posted on Recovery.gov. This shortened period for
agency review of "final" reports may not allow for the same quality
assurance as in the initial review period. The Board released the
first updated data set on February 10 on Recovery.gov, and it
anticipates that the updates will occur every other Wednesday, with
the final update for the quarter ending December 31, 2009, occurring
on March 17, 2010.
Federal agency officials we spoke with are concerned about fulfilling
OMB's directive to evaluate recipient data on a continuous basis.
OMB's December 18 guidance states simply "federal agencies are
required to make reasonable efforts to monitor such corrections—" For
example, Education officials said that there is a need for more
guidance on how the new review period will work. They added that
developing monitoring plans or drafting policies and procedures is
difficult until guidance has been issued. Education officials told us
that during a conference call on February 3, 2010, OMB raised the
topic of creating agency guidance for the continuous corrections
process and that a number of Education officials had offered to help
develop the guidance. Education officials later told us that this
topic has been revisited during subsequent working group calls, and
that agencies and OMB concluded that more experience with this new
process was needed before meaningful guidance could be developed. HUD
officials told us that the department does not have a plan in place to
address the new period of continuous corrections and is waiting for
guidance from OMB and potentially the Board on what the expectations
are for federal agencies. HUD has had internal discussions regarding
monitoring corrections, but officials were not sure what types of
changes would be possible for a recipient to make during the second
round of reporting. HUD officials expressed concern that the new
continual corrections period for recipients may pose monitoring issues
for both HUD and prime recipients. DOT officials expressed similar
concern with the lack of formal guidance regarding the department's
role in reviewing recipient data during the continual update phase.
DOT continues to monitor the data submitted on a daily basis in
anticipation of OMB or the Board implementing a formalized process.
Officials also noted that keeping track of changes made by recipients
could be challenging due to the staff effort required to monitor the
changes and the fact that recipients can make multiple changes
throughout the period. In addition, a senior DOE official in the
department's Recovery Operations Group noted that without
understanding the Board and OMB's expectations for federal agencies
during the recipients' continual review period, agencies have had
difficulty developing their monitoring efforts. According to the
official, the continual edit capability now requires agencies to
inquire daily on what has changed in order to monitor the recipient
reports. DOE officials also expressed concern regarding the amount of
staff time required to maintain this level of review on a daily basis
for thousands of reports.
A senior Board official explained that they designed the new process
to address the concerns of state officials that under the old process,
they had limited opportunities to correct erroneous data. Under the
approach used in the first round of recipient reporting, recipients
could only correct data prior to their public release on Recovery.gov;
recipients were concerned that they could not address mistakes in the
data until the next official reporting cycle. During the first round
initial review period, only the federal agency could unlock reports
for recipients to make changes. According to FederalReporting.gov,
federal agencies under the new process are to identify errors in
recipient reports and add comments addressing those errors through the
entire continual review period. The senior Board official acknowledged
that this change was not one that many federal agencies' officials
agreed with because of the difficulty in tracking changes, but he
stressed that the states--often the prime recipients--had the most
accountability for the data, and that they needed more flexibility in
correcting data. The official said that he expected that the Board,
OMB, and federal agencies would discuss this issue at an upcoming
"lessons learned" session covering the second round of recipient
reporting and at weekly working group meetings that OMB has with
federal agency recipient reporting teams.
Recommendation for Executive Action:
OMB should work with the Board and federal agencies, building on the
lessons learned, to establish a formal and feasible framework for
review of recipient changes during the continual update period and
consider providing more time for agencies to review and provide
feedback to recipients before posting updated reports on Recovery.gov.
The Board Is Working with Federal Inspectors General to Establish a
Multiphased Recipient Data Federal Agency Review Process:
In light of the importance of the quality of the Recovery Act data,
the Board is working with Federal Inspectors General to establish a
multiphased federal agency review process to look at the quality of
the data submitted by Recovery Act recipients. Over the coming months,
the Board and the Federal Inspectors General plan to issue subsequent
reports that look at the causes of inaccurate reporting, the
effectiveness of the agency data quality review processes, and, in
some cases, Federal Inspectors General will review the accuracy of
specific recipient reports.
The Board's Recovery Funds Working Group, which includes
representatives from the 29 inspectors general, meets monthly to
discuss issues related to oversight of Recovery Act funds. In
addition, the Board's Working Group has taken steps to assess federal
agencies' efforts to review the quality of recipient reported data. In
December 2009, the 21 inspectors general reported that 17 federal
agencies had processes to perform limited data-quality reviews for
identifying material omissions or significant errors in the recipient
reported information and to notify recipients of the need to make any
changes, while 4 federal agencies--the Departments of Agriculture,
Defense, and Homeland Security, and the Small Business Administration--
had weaknesses in their respective processes.[Footnote 102]
Providing Information and Access to the Public:
The Board is responsible for providing information about Recovery Act
spending via Recovery.gov. This Web site promotes official data for
use in public debate, assists in providing fair and open access to
Recovery Act opportunities, and promotes an understanding of the local
impact of Recovery Act funding. Data reported by recipients of
Recovery Act funds through the nationwide data collection system at
FederalReporting.gov are available to the public for viewing and
downloading on Recovery.gov.
To increase the public's access to data, OMB encouraged states to post
information about the impact of Recovery Act funds on a state Recovery
Act Web site. These Web sites vary in content between states. For
example, Pennsylvania and Massachusetts presented information targeted
at citizens, including analysis of local impacts of the Recovery Act,
detailed explanations of FTE counts, ongoing project updates,
instructions in applying for Recovery Act funds, and definitions of
terms used to describe Recovery Act funding. Some states posted
information targeted at recipients, with basic FTE calculations or
links to reporting guidance. Many state Recovery Act Web sites also
encourage reporting of fraud and abuse of Recovery Act funds. Eight
states in our 17 jurisdictions--Arizona, California, Colorado,
Illinois, New Jersey, North Carolina, Pennsylvania and Texas--included
information about fraud reporting hotlines on their Recovery Web
sites. Michigan and Iowa instead posted links to federal fraud
reporting Web sites.
Oversight and Accountability Efforts in the First Year:
OMB Has Taken Steps toward Implementing GAO Recommendations for
Improving the Single Audit Process for Recovery Act Programs, and
Actions Are Ongoing:
Since our first bimonthly report in April 2009, we have made
recommendations to OMB for improving the accountability and oversight
of Recovery Act funds. These recommendations were intended to help
mitigate risks related to Recovery Act funds and to strengthen
internal controls over the use of those funds through the Single Audit
Act and OMB Circular No. A-133 for Single Audits.[Footnote 103] OMB
has taken steps to implement our recommendations. However, these
efforts do not yet fully address the significant risks related to
Recovery Act funds. In October 2009, in response to our
recommendations, OMB implemented a Single Audit Internal Control
Project (project), which is under way. The project is a collaborative
effort between the states receiving Recovery Act funds that
volunteered to participate, their auditors, and the federal
government. One of the project's goals is to achieve more timely
communication of internal control deficiencies for higher-risk
Recovery Act programs so that corrective action can be taken. The
project required the auditors for each of the 16 volunteer states to
issue interim reports on internal control of major Recovery Act
programs as of November 30, 2009. These reports were to be presented
to auditee management prior to December 31, 2009 (3 months sooner than
the 9-month time frame required by OMB Circular No. A-133). Under the
project, auditee management was to provide the report and a corrective
action plan to the appropriate federal agency by January 31, 2010.
When OMB completes the project, we plan to analyze the results and
other actions that OMB has taken to more fully implement our
recommendations to achieve improved and timelier oversight of Recovery
Act funds.
OMB Has Taken Steps to Implement GAO Recommendations:
OMB has taken several steps in response to our recommendations.
However, additional actions are needed to sufficiently address the
risks leading to our recommendations. As we previously reported,
Recovery Act funds engender unique risks that were not addressed in
OMB Circular No. A-133. The most significant of these risks are
associated with:
* new programs that may not have the internal controls and accounting
systems in place to help ensure that funds are distributed and used in
accordance with program regulations and objectives,
* Recovery Act funding increases for existing programs that may exceed
the capacity of existing internal controls and accounting systems,
* the more extensive accountability and transparency requirements for
Recovery Act funds that require the implementation of new controls and
procedures, and:
* increased risks because of the need to spend funds quickly.
To help mitigate risks relating to Recovery Act programs, in our
April, July, and September 2009 reports, we recommended that OMB
adjust the current Single Audit process to:
* focus the risk assessment auditors use to select programs to test
for compliance with 2009 federal program requirements on Recovery Act
funding;
* provide for review of the design of internal controls over programs
to receive Recovery Act funding during 2009, before significant
expenditures in 2010; and:
* evaluate options for providing relief related to audit requirements
for low-risk programs to help balance new audit responsibilities
associated with the Recovery Act.
Below is a summary of OMB's efforts to implement the recommendations
from our bimonthly reviews. We will continue to report on these
actions and subsequent OMB efforts, including the project's results.
* To focus auditor risk assessments on Recovery Act-funded programs
and to provide guidance on internal control reviews for Recovery Act
programs, OMB worked within the framework defined by existing
mechanisms--Circular No. A-133 and the Circular No. A-133 Compliance
Supplement (Compliance Supplement).[Footnote 104] In this context, we
reported in September 2009 that OMB had made limited adjustments to
its Single Audit guidance. OMB issued the Compliance Supplement in May
2009, which focused risk assessments on Recovery Act-funded programs.
In August 2009, OMB issued the Circular No. A-133 Compliance
Supplement Addendum I, which provided additional guidance for auditors
and modified the Compliance Supplement to, among other things, focus
on new Recovery Act programs and new program clusters.
* We reported in April and July 2009 that the Single Audit reporting
deadline is too late to provide audit results in time for the auditee
to take action on deficiencies noted in Recovery Act programs prior to
the expenditure of significant funds under those programs.[Footnote
105] The timing problem was exacerbated by the extensions to the 9-
month deadline that were routinely granted by the awarding agencies,
consistent with OMB guidance. The Department of Health and Human
Services, the cognizant agency[Footnote 106] for the 16 states
participating in the project, adopted a policy of no longer approving
requests for such extensions. OMB officials have stated that they plan
to eliminate allowing extensions across all agencies and programs but
have not yet issued any official guidance to this effect. In February
2010, OMB officials stated that they plan to discuss this issue with
federal agencies for governmentwide implementation.
* In our September 2009 report, we reported that OMB noted the
increased responsibilities falling on those responsible for performing
Single Audits. OMB issued two separate memoranda that allowed state
and local governments to more timely recover administrative costs
(including oversight, reporting and audit costs) related to Recovery
Act programs.[Footnote 107]
* In addition, states that volunteered to participate in the project
were eligible for some relief in their workloads because OMB modified
the requirements under Circular No. A-133 to reduce the number of low-
risk programs that must be included in the Single Audits.
* In December 2009, we reported that OMB implemented the project to
encourage timelier reporting by auditors to identify and communicate
deficiencies in internal control and corrective action by the auditee.
The project's scheduled completion is early spring 2010. While its
coverage could be more comprehensive, OMB's analysis of the project's
results could provide meaningful information for improving future use
of the Single Audits for oversight of Recovery Act programs.
OMB Has Made Progress in Implementing Its Single Audit Internal
Control Project:
OMB has made progress in implementing the project since we last
reported in December 2009. One of the project's goals is to encourage
auditors to identify and communicate significant deficiencies and
material weaknesses in internal control over compliance for selected
major Recovery Act programs 3 months sooner than the 9-month time
frame currently required under statute. If effective, the project
should allow auditee program management to expedite corrective action
and help mitigate the risk of improper Recovery Act expenditures. In
December 2009, we reported that OMB officials met their goals for the
scope of the project, stating that overall they were satisfied with
the range of populations and geographic diversity of the 16 states
that volunteered for the project.[Footnote 108] The project's first
interim milestone was scheduled for December 31, 2009. Under the
project, the auditors were required to issue, in writing based on OMB
Circular No. A-133, an early communication by that date of significant
deficiencies and material weaknesses in internal control over
compliance in effect for the period ended June 30, 2009, to auditee
management.
For the 16 states participating in the project, 12 auditors submitted
the required reports, which identified significant deficiencies,
material weaknesses, or both. In addition, an auditor for another
state provided a report but did not indicate whether the findings were
material weaknesses or significant deficiencies as required under the
project's guidelines. Auditors for 2 other states reported that while
they performed interim procedures as required, they did not identify
any significant deficiencies or material weaknesses and therefore did
not issue written reports. One state, with a fiscal year ending on
August 31, 2009, had until March 1, 2010, to report. OMB granted the
extension so that the auditor would have the same amount of time to
complete their test work as the auditors for the other project
participants. The project's second milestone required that auditee
management provide the interim communication report and a corrective
action plan to the cognizant federal agency by January 31, 2010. For
10 of the 13 states that submitted the required internal control
report, the corrective action plans were included in the interim
communication report. In three instances, the plans were provided in a
separate report.
We reviewed the internal control reports provided to OMB by the
auditors of the project's participants by December 31, 2009, and noted
that auditors for 13 of the 16 states reporting deficiencies had
identified over 70 instances where internal controls over compliance
were insufficient to prevent or detect noncompliance with federal
regulations over Recovery Act funding. Moreover, auditors for 5 states
identified findings that were of a more serious nature and qualified
as material weaknesses.[Footnote 109] In some instances, the state
auditors had previously reported the same deficiencies, including a
material weakness, but corrective action had not yet been taken or was
insufficient to resolve these issues.
Most of the deficiencies reported under the project varied by program
and state, but there were several that were similar across a number of
programs and states. Specifically, a number of auditors reported
concerns with (1) the auditees' ability to reliably report under the
financial reporting requirement on federal expenditures and awards of
Recovery Act funds, (2) the lack of documentation to determine whether
the federal expenditure was allowed based on federal requirements, and
(3) the lack of documentation to support whether payments of Recovery
Act funding were made to eligible recipients. For example, one auditor
reported that some documents required to determine eligibility for
child care subsidies were not in the case files, and the responsible
state agency did not have assurance that only eligible households are
receiving child care subsidies. For this finding, the state agreed in
October 2009 to implement a corrective action plan with full
implementation by November 2010 to help ensure that verification
documents are completed and maintained regarding family eligibility
for child care subsidies. The state agreed that a monthly audit on a
random sample of files would be conducted and that reimbursement of
questioned costs would be requested.
An example of a material weakness reported by one auditor was that a
state workforce commission paid about $21 million in Unemployment
Insurance benefits to other states during fiscal year 2009 without
recouping the cost of these claims from employers in the state. The
auditor also reported that the workforce commission had not
implemented procedures to determine if claimants filing in other
states were working in the audited state at the time the claims were
filed and during the duration of the claims. Effective internal
controls did not exist to help ensure that the workforce commission
notified employers of interstate claims and verified the work status
of claimants to reduce the risk of payments on fraudulent claims.
OMB said that it will determine the success of the project by
evaluating whether:
* there has been sufficient participation from the auditees, auditors,
and federal agencies;
* the early communication process provides auditee and federal program
management with useful information regarding internal control
deficiencies in the Recovery Act programs administered by the states,
thus resulting in expedited correction of deficiencies and reduced
risk to Recovery Act programs; and:
* the process accelerates the audit resolution by the federal agencies
and therefore provides auditee management with early feedback to
assist in correction of the high-risk deficiencies in the most
expeditious manner.
OMB has decided to use the Single Audit process as the key
accountability tool because a significant portion of Recovery Act
expenditures are in the form of federal grants and awards. However,
the Single Audit Act and related OMB Circular No. A-133 did not
reflect the risks associated with the current environment where large
amounts of federal awards are being expended quickly through new,
greatly expanded, and existing programs. Since significant
disbursements of Recovery Act funding are planned for fiscal years
2010 and 2011, effective internal controls over the use of these funds
and early notification and correction of internal control weakness are
critical to help (1) ensure effective and efficient use of resources,
(2) comply with laws and regulations, (3) achieve accountability, and
(4) mitigate risks over Recovery Act programs. Thus, it is essential
that OMB continue its efforts for improving the use of Single Audits
to provide better safeguards over subsequent Recovery Act
disbursements. If OMB concludes that it is unable to take the
necessary steps under the current framework to adequately address
accountability for the Recovery Act programs and related risks and to
provide for more timely reporting, legislative changes may be
necessary.
States and Federal Agencies Continue to Implement and Modify Controls
to Mitigate Risk and Oversee Use of Recovery Act Funds:
Since the Recovery Act was enacted in February 2009, states and
federal agencies have taken and continue to take various actions to
oversee the use of Recovery Act funds and to address the quality of
data that states and other recipients maintain and report regarding
their use of funds. Among other actions, states have established or
modified existing internal controls and systems and provided guidance
to recipients of Recovery Act funds. State and federal oversight has
identified weaknesses and program issues and has made states and
federal agencies focus on those weaknesses and issues and plan
corrective actions.
Control over Recovery Act funds is critical to help ensure effective
and efficient use of resources and compliance with laws and
regulations. Further, controls are important to address the risks
inherent in implementing the Recovery Act's recipient reporting
requirements to help ensure the completeness, accuracy, and
reliability of the reported data. Although the specifics of states'
internal control processes varied depending on factors such as a
state's statutory requirements, organizational structure, and whether
the state took a centralized or decentralized approach to reporting,
the internal control processes were aimed at helping to ensure
accountability and transparency of Recovery Act funds.
In our previous reports on Recovery Act implementation, we found that
the 16 states and the District of Columbia were taking various
approaches to manage and mitigate risk. For example, officials in 8
states told us they would use existing systems of internal control
with some modifications, and all 16 states and the District took
steps, such as using unique codes in their accounting systems, to
identify and track the use of Recovery Act funds, as required. As the
states and the District gained more experience in implementing the act
during the past year, officials in 6 states told us they have more
recently taken actions to revise or update their controls and guidance
related to Recovery Act funds.
* California Department of Education officials told us they added data
quality checks in its system to ensure timely reporting and accuracy
and completeness of reported data.
* Illinois Department of Transportation officials told us they hired
three consultants to assist in the monitoring of subrecipients.
* Officials in two Mississippi state agencies responsible for
oversight--the Office of the State Auditor and the Department of
Finance and Administration's Office of Fiscal Policy--told us they
have contracted with accounting firms to review internal controls and
operations of programs receiving Recovery Act funds. The reviews are
to result in reports that could contain recommendations to improve or
strengthen internal controls.
* Massachusetts officials told us an accounting firm conducted a risk
assessment in late summer 2009 and found that prevention and detection
of fraud, waste, and abuse was an area needing attention. The
Comptroller's office asked state departments to update their internal
control procedures in response to the findings of the risk assessment.
* In Michigan, officials administering Workforce Investment Act
programs said they are strengthening controls over payroll
distribution processes for the Summer Youth Program in Detroit.
Officials from Michigan's Office of Internal Audit Services (OIAS)
told us that the office assigned two of its internal audit staff to
work full time on programs funded by the Recovery Act. In addition,
OIAS officials told us they selected programs for detailed review
based on an assessment of the control risks posed by the programs and
planned to conduct further reviews of the selected programs as
spending occurred.
* An official from Ohio's Office of Internal Audit (OIA) told us that
the office increased its internal audit staff from 9 to more than 25.
Also, in December 2009, OIA issued audit reports assessing the
adequacy and design of internal controls for six Recovery Act related
programs and has ongoing audit work to assess the design or
effectiveness of seven other Recovery Act related programs.
As shown in the following examples, federal offices of inspector
general (OIG) continue to provide oversight of Recovery Act funds,
including monitoring and reviewing aspects of state and federal
programs, and state and federal agencies are taking actions to address
issues found by the OIGs.
* The Department of Energy's OIG reported that it is reviewing and
evaluating internal control structures related to the weatherization
program at both the federal and state levels. In December 2009,
Energy's OIG reported that it identified significant internal control
deficiencies in Illinois's weatherization program, including problems
with on-site monitoring and inspection. The OIG also reported that
state and local officials took action to address the immediate
problems and that the department has developed corrective actions to
prevent future issues.
* As previously mentioned, in October 2009, the Department of
Education's OIG reported that it had identified issues with cash
management practices in five states. Specifically, the OIG identified
a number of instances where state educational agencies disbursed
Recovery Act funds without adequate information on whether local
educational agencies (LEA) were ready to spend the funds and did not
ensure that LEAs remitted interest earned on funds received in
advance. The OIG noted that Education had provided guidance in April
2009 that included cash management requirements and was providing
technical assistance related to cash management to state and local
agencies.
States and federal agencies are likely to continue to modify and
revise their controls and guidance as necessary to provide oversight
for Recovery Act funds and to help ensure the completeness and
accuracy of reported data. Further, as states and federal agencies
identify issues through their monitoring and oversight activities, it
is important that they address the issues. We will continue to review
states' and federal agencies' actions related to their oversight of
Recovery Act funds, including reviewing selected payments and
analyzing Single Audit reports for programs with identified internal
control weaknesses.
Fraud, Waste, and Abuse Allegations GAO Has Received That Are Related
to the Recovery Act:
As of December 30, 2009, we have received 179 allegations of Recovery
Act wrongdoing from the public. The allegations relate to a wide range
of federal spending, including rail work; renovation and repair of
public buildings; education programs and entities, such as Head Start,
public schools systems, and universities; tax credits and
weatherization for homes; job creation; and health benefits.
Specifically, they include alleged conflicts of interest,
misallocation of funds, and ineligible recipients receiving Recovery
Act money. As with all allegations received through FraudNet,[Footnote
110] we have carefully reviewed those related to Recovery Act funding
and pursued or referred those that warrant further attention.
Most of the 179 allegations have been closed: 117 were nonspecific or
lacked information about fraud, waste, or abuse; 32 were investigated
further and closed by us or an agency inspector general (IG) when no
violations were found. Of those allegations that are open and
currently under investigation, 13 are being handled by us and 17 by an
IG. We generally refer allegations to an IG when that office is
already pursuing the same or a similar complaint. We periodically
contact the IGs to determine the status of our referrals. Table 15
shows the status of the Recovery Act allegations we have received.
Table 15: Status of FraudNet Allegations:
Investigation: Closed because of nonspecific or unrelated information;
Percentage: 66.
Investigation: Closed after GAO or IG investigation;
Percentage: 18.
Investigation: Open with IGs;
Percentage: 9.
Investigation: Open with GAO;
Percentage: 7.
Source: GAO.
[End of table]
Investigations closed because of nonspecific or unrelated information.
Most of these cases were complaints about the allocation of funds, the
decisions and actions of local officials, and the location of such
infrastructure projects as rest stops or interchanges. These cases
were closed because they contained no specific information or were
unrelated to fraud, waste, or abuse of federal funds.
Investigations closed after GAO or IG investigation. These allegations
were specific enough to warrant an investigation by us or an IG but
could not be substantiated. For example, a church was claimed to be
shown erroneously on www.recovery.gov (Recovery.gov) as having
received Recovery Act funds. Our investigation found that the church
previously owned real estate that qualified for Section 8 housing
assistance payments but had sold the property. HUD was subsequently
notified and updated its records. Recovery.gov was also updated.
Open investigations with GAO. It is too early to determine whether
these investigations will result in substantiated claims of fraud,
waste, or abuse. However, at this point the allegations appear to be
credible, and we will determine the extent of any possible violations.
One investigation involves a large water project alleged to improperly
include Recovery Act funding. The allegation claims the project cannot
fulfill its intended purpose and will require additional funding and
infrastructure improvements before getting under way.
Open investigations with IGs. Similarly, results for these
investigations are not yet available. We are working closely with the
appropriate IGs to monitor the status of their investigations. In one
investigation, a laboratory operated for the Department of Energy
allegedly used Recovery Act funds to award a contract to an entity
that is claimed to be an "inverted domestic corporation"--that is,
incorporated in a foreign country or a subsidiary of a foreign
company. In another, a Head Start grantee is alleged to be planning
not to provide a cost-of-living adjustment to its staff despite
receiving Recovery Act funds designated for that purpose. Instead, the
claim suggests the money will be used for other initiatives related to
the grantee's Head Start program.
We will continue to evaluate all Recovery Act allegations received
through FraudNet and provide updates in future reports.
Recovery Accountability and Transparency Board Oversight of Federal
Contract Spending:
The Recovery Accountability and Transparency Board (the Board) has
launched a number of oversight initiatives on Recovery Act funds since
it began meeting in March 2009. These initiatives include the
establishment of a public Web site and the Recovery Board Fraud
Hotline. The Board's initiatives are being executed by the Board's
executive staff, as well as by the 29 inspectors general responsible
for Recovery Act oversight. The initiatives include reviewing federal
contracts and grants to help ensure they meet applicable standards,
follow OMB guidance, and satisfy applicable competition requirements;
the initiatives also are aimed at identifying risk areas for fraud,
waste, and abuse. The Board, with the help of the inspectors general,
is assessing the capacity of federal agency acquisition workforces to
determine if they have sufficient numbers of trained acquisition and
grants personnel to manage the Recovery Act workload. Because many of
the initiatives are in their early stages of implementation, it is too
soon to evaluate their success or shortcomings for providing sound
oversight.
Providing Information to and Access for the Public:
The Board is responsible for providing information about Recovery Act
spending via www.recovery.gov (Recovery.gov). This Web site was
created to provide accurate, user-friendly information to the public
related to spending on Recovery Act programs. Recovery.gov is the
official source of information related to the Recovery Act, and it
contains official data for use in public debate, assists in providing
fair and open access to Recovery Act opportunities, and promotes an
understanding of the local impact of Recovery Act funding.
On September 28, 2009, the Board established the Recovery Board Fraud
Hotline for the public to report potential cases of fraud, waste, and
abuse via telephone, facsimile, Recovery.gov, or postal mail. This
hotline service maintains a database of all reported incidents to
identify recurring issues, companies, or participants related to
potential cases.[Footnote 111] The Board reviews the complaints and
refers potential cases to the respective inspector general or agency
for further review. As of January 19, 2010, the Board had received 948
complaints and has referred 79 cases to various inspectors general.
[Footnote 112]
Monitoring Federal Recovery Act Contracts and Identifying Areas
Vulnerable to Risk:
The Board uses several approaches to monitor federal contracts,
including a manual review performed on the contract solicitations and
awards posted daily on the Federal Business Opportunities Web site
(FedBizOpps.gov) to ensure that Recovery Act-related Federal
Acquisition Regulation requirements are followed and to identify any
contracts that were awarded to contractors that might be in the
Excluded Parties List System.[Footnote 113] In addition, Board staff
review data on Recovery Act-funded contracts from the Federal
Procurement Data System-Next Generation to identify the reasons for
the noncompeted contracts.
The Board also established a Recovery Operations Center, which became
operational the last week of October 2009, and supports a three-tiered
system to identify potential risk areas related to Recovery Act
spending for oversight purposes. The first tier of the system uses
screening models to analyze volumes of data to isolate potential high-
risk recipients. The second tier uses a link-analysis tool to uncover
nonobvious relationships between entities. The third tier uses the
results of the first two tiers, along with historical risk factors and
present-day trends, to create risk-based resource management tools for
the oversight community. The results of these analyses are shared with
the inspectors general to provide information for (1) investigations
or audits of federal programs and recipients of Recovery Act funds and
(2) decisions related to expanding or helping focus oversight
resources. According to a Board representative, Board staff started
identifying high-risk areas at the end of 2009 and have provided
information to the inspectors general that is being used in active
investigations.
Oversight and Coordination of Inspectors General Efforts:
The Board's Recovery Funds Working Group, which includes
representatives from the 29 inspectors general, meets monthly to
discuss issues related to oversight of Recovery Act funds. The working
group representatives identify specific initiatives that the
inspectors general are expected to carry out to support the Board's
oversight of Recovery Act funds. In August 2009, for example, 28 of
the 29 inspectors general on the working group administered a survey
to their respective agencies to assess their overall workforce
capacity for handling the management and oversight of contracts and
grants being awarded with Recovery Act funds. The results of the
survey are expected to be issued by the end of April 2010.
The inspectors general also report monthly to the Board on the number
and status of Recovery Act-related audits and investigations they have
initiated. As of December 31, 2009, the inspectors general reported
they had 141 investigations and 457 audits, inspections, evaluations,
or reviews in process. They also reported they have issued 324 reports
on Recovery Act-related issues since the act was passed. The scope of
the inspectors general reports varied and ranged from compliance with
program requirements at individual states or localities within a given
program to assessments of internal controls across entire programs or
agencies. Many of the reports did not identify wrongdoing or
systematic weaknesses in management but did make recommendations to
improve the implementation and oversight of programs using Recovery
Act funds. For example, the Department of Energy Inspector General had
published 13 reports on Recovery.gov as of February 2010 that
addressed aspects of Recovery Act issues--one issued in December 2009
identified the department's efforts and challenges in implementing the
Recovery Act in selected program offices. The report contained a
number of recommendations aimed at addressing the department's
remaining challenges, including the need to revise financial
assistance guidelines to incorporate additional Recovery Act
requirements for monitoring and oversight and the need to perform
staffing reviews to determine the level of personnel needed to oversee
Recovery Act projects. As another example, the General Services
Administration Inspector General has published two reports since the
Recovery Act was passed.[Footnote 114] A September 2009 report
provided observations related to the use of project plans on the
Public Building Service's major construction and modernization
projects being funded under the Recovery Act. Additional information
about program-specific audit work of the inspectors general is located
in the program sections of this report.
Federal, State, and Local Audit Communities Have Been Coordinating
Audit Efforts:
Multiple audit organizations that span audit communities have taken
steps to enhance communication and coordination of audit efforts in
relation to Recovery Act Programs. The frequency of communication and
depth of information sharing across all levels of government have
strengthened the ability of the overall audit community to fulfill its
responsibilities in relation to accountability for Recovery Act funds.
Both the annual meeting of the National Intergovernmental Audit Forum
and quarterly Regional Intergovernmental Audit Forum meetings have
routinely included presentations concerning Recovery Act issues. These
forums, attended by key state and local auditors, representatives of
the inspectors general (IG) community, and others, including GAO
officials, have always been a setting for dialogue concerning
accountability issues. Since passage of the Recovery Act, these
meetings have provided an opportunity for us to update the audit
community concerning our Recovery Act work in selected states and the
District of Columbia (the District).
The depth and frequency of the discussion of Recovery Act issues among
members of the audit community have been enhanced by weekly and
monthly telephone conferences. The National Association of State
Auditors, Comptrollers and Treasurers (NASACT) has coordinated a
weekly teleconference to provide state associations with updates on
the status of OMB guidance on reporting requirements for Recovery Act
funds.[Footnote 115] Participants in this call include representatives
from OMB, the Board, GAO, the National Governors Association, the
National Association of State Budget Officers (NASBO), and state
stimulus czars, as well as NASACT. These teleconferences have afforded
the opportunity for information sharing and problem solving and have
involved over 40 people. For example, discussions of the full-time
equivalent (FTE) calculation for recipient reporting led to in part a
recommendation that has clarified the calculation. In addition to this
teleconference, NASACT, through its associate organization the
National State Auditors Association, convenes a monthly conference
call that includes OMB, the Board, GAO, inspectors general, and
representatives from the state and local audit communities. The
Association of Government Accountants and the Association of Local
Government Auditors have also been active participants in discussions
of Recovery Act auditing issues. In an effort to ensure information
sharing about allegations of fraud, we are also working with state and
local auditors to develop plans for routine sharing of information.
Oversight and Audit of Recovery Act Programs at the State and Local
Levels:
Across our 16 selected states, and in the District of Columbia, a wide
variety of entities are responsible for, and involved in, oversight
and audit of Recovery Act Programs. Each state is unique in its
configuration of oversight and audit agencies, yet some common
features span many jurisdictions. Cities and towns, housing and
transit authorities, and other units of government also differ widely
in capacity and structure for oversight and auditing activities.
Many states created new positions and/or task forces to specifically
manage and oversee Recovery Act programs. California, Colorado,
Georgia, Iowa, Massachusetts New Jersey, New York, Pennsylvania, and
Texas are among the states that are using this strategy as part of
their management and oversight efforts. Inspector general offices in
some of our selected states investigate cases of alleged fraud, waste,
or abuse.[Footnote 116] Internal auditors across state agencies, such
as state departments that manage transportation and education, are
engaged to various degrees in the oversight and auditing of Recovery
Act funds.
All selected states have multiple offices engaged to some extent in
the oversight and audit of Recovery Act programs. For example, in Ohio
the State Audit Committee, the Office of Budget and Management (OBM),
OBM's Office of Internal Audit (OIA), the Auditor of State (AOS), and
the state-appointed Deputy Inspector General all share responsibility
for oversight and auditing of Recovery Act programs. OIA has completed
six audit reports on programs through which the Recovery Act provided
funds for weatherization, foster care, job training, law enforcement,
addressing violence against women, and highways as well as on Recovery
Act central reporting. OIA found, for example, that the weatherization
and job training programs need additional identification and
documentation of key Recovery Act-related risks and mitigating
internal controls. In contrast, the OIA audit of the adequacy and
design of internal controls for the Highway Infrastructure Investment
Recovery Act Program had no findings.
The Ohio Auditor of State is responsible for audit activities at
housing authorities and other grantees that receive funding directly
from the federal government rather than through the state.
Additionally, the Ohio Auditor of State is conducting the state's
Single Audit for fiscal year 2009, which will include some programs
that receive Recovery Act funds. The Deputy Inspector General holds a
position that was specifically created to monitor state agency
distribution of Recovery Act funds. Investigations of potential
criminal activities related to Recovery Act programs are handled by
the Ohio Office of Inspectors General. This office has completed two
investigations and has three ongoing. Both completed investigations
involved funds to be overseen by the Ohio EPA. In one case the funds
were found not to be Recovery Act funds, in the other case the IG
found no wrongful act had occurred.
In Georgia, oversight and auditing responsibilities rest with the
Office of Planning and Budget, State Accounting Office, State Auditor,
State Inspector General, and agencies' internal audit departments. For
example, the State Auditor included audits of Recovery Act programs
administered by the Georgia Department of Education, Georgia
Department of Human Services, Georgia Department of Labor, and Georgia
Department of Transportation (GDOT) in the 2009 Single Audit. The
Single Audits for fiscal years 2010 and 2011 are expected to include
audits of Recovery Act funding awarded to all 157 local education
agencies (LEA). The State Inspector General's office has responded to
complaints concerning Recovery Act programs. The State Inspector
General's office has received two complaints concerning Recovery Act
programs. One was a complaint about Recovery Act funds being used to
purchase road signs for GDOT projects funded by the Recovery Act; GDOT
has discontinued the practice of posting these signs. The Inspector
General's investigation of the second complaint, which involves issues
with funds received by the Georgia National Guard, has just begun.
Internal auditors for the Georgia Environmental Facilities Authority,
GDOT, and the Georgia Department of Human Services all plan to audit
Recovery Act programs.
In a few cases, the auditing of Recovery Act programs is melded into
the general audit of an overall program that includes Recovery Act
funds along with other funds. For example, an audit of spending for a
highway construction project may include a review of Recovery Act
funds as part of the audit of all funding for the project. In New
Jersey, for example, the Office of the State Auditor is or will be
surveying agencies about their internal controls for Recovery Act
funds as part of already planned audits; these include audits related
to community service block grants, bridge maintenance contracts,
regular school district audits, and clean water state revolving funds.
Many of our selected states, including Ohio and Georgia, discussed
above, are including some Recovery Act funding in their Single Audits.
Officials at the Arizona Auditor General's office told us that
Recovery Act-specific reviews will be part of the Single Audit work.
Illinois officials said that their Single Audit covers only the state
government and does not include component units. The programs to be
included in their Single Audit will be selected in part on the basis
of funding levels, and Recovery Act funds would be included in the
scope of the audit. However, Illinois officials stated that, following
the requirements set forth in OMB Circular A-133, the programs
included in the audit are selected based on factors such as amount of
funding; therefore, not all programs that received Recovery Act
funding will be included in the audit's scope. GAO has recommended to
OMB that it evaluate options for providing relief related to audit
requirements for low-risk programs to help balance the new audit
responsibilities associated with the Recovery Act. Seven out of our 16
selected states volunteered to participate in the OMB Single Audit
pilot project discussed in the Single Audit section of this report.
[Footnote 117]
Some Local Communities Have Also Initiated Recovery Act Audit
Activities:
A number of cities and counties have included auditing of Recovery Act
funds in their current audit plans. Austin, Texas, for example, has
specifically designated some resources for Recovery Act auditing.
Denver, Colorado, has completed two Recovery Act-specific nonaudit
services, known as Audit Alerts, and will issue an audit report later
in 2010; the city auditor in Atlanta, Georgia, will issue a Recovery
Act audit report within the next few months and is considering
additional work; and Jackson, Mississippi, is initiating an audit of
Recovery Act funds awarded to city agencies in the near future.
According to county officials, Maricopa County, Arizona, has multiple
levels of review to monitor Recovery Act programs. At the local level,
local governments plan to incorporate Recovery Act auditing into their
Single Audit reviews.
Officials in a number of communities, however, told us that they have
not initiated specific Recovery Act audit activities. This is
particularly the case with small communities in our sample. Officials
in these communities told us that in part, this is because they have
only recently received funds, or are anticipating that the amount of
funds they will receive is small. Plano, Texas, is a small community
that is not planning to audit Recovery Act programs for these reasons.
A few jurisdictions also indicated that they did not have the
resources to conduct audit work. The City of Macon and Tift County, in
Georgia, are examples of other local governments that are not planning
audit activities related to Recovery Act programs.
Other government entities are also planning audit activity related to
Recovery Act funds. For example, the New York Metropolitan
Transportation Authority Audit Services Department is planning to
include all 22 Recovery Act projects within its jurisdiction in its
2010 audit plans. Greater Glens Falls Transit's (New York State)
Single Audit for calendar years 2009 and 2010 will include Recovery
Act-funded projects.
Recovery Act Funds Alleviate Some Fiscal Pressures as State and Local
Governments Respond to the Current Recession and Confront Long-Term
Challenges:
Recovery Act funds began flowing as state and local governments faced
steep revenue declines in 2009. States' revenue declines have been
cushioned by the temporary infusion of Recovery Act funds. The results
from our March 2010 State and Local Fiscal Model Update provide
additional detail regarding these and other trends in state and local
fiscal conditions.[Footnote 118] The fiscal model update includes the
increased federal grant funding made available to state and local
governments through the Recovery Act. It also shows that the state and
local government sector is facing short-term declines in its operating
balance while also confronting long-term fiscal challenges, which have
been growing over time. Specifically, the model projects operating
deficits of about $39 billion for 2010 and $124 billion for 2011. The
cumulative 2-year projected operating deficit totals approximately
$163 billion. The operating deficit projections in our model reflect
the pressures facing the sector in the aggregate and provide a sense
of the magnitude of policy actions necessary for these governments to
balance their operating budgets.[Footnote 119] Reports from
associations representing state and local officials corroborate these
findings. The National Association of State Budget Officers' most
recent fiscal survey of the states noted that states will have faced
$256 billion in budget gaps between fiscal years 2009 and 2011 and an
average decline in state general fund spending of 5.4 percent for
fiscal year 2010--the largest margin ever shown through this survey.
The National Association of Counties reported that 56 percent of
counties responding to its survey reported starting their most recent
fiscal years with projected shortfalls. A National League of Cities'
(NLC) survey showed that 88 percent of city finance officers reported
that their cities were less able to meet fiscal needs in 2009 than in
the previous year, and the pessimism about the ability to meet city
fiscal needs is at its highest level in the history of NLC's 24-year
survey.
The updated simulations in our state and local fiscal model also show
that the sector continues to face growing long-term fiscal challenges
over time, which have been exacerbated by the current recession. Our
state and local sector fiscal model uses the operating balance as a
measure of fiscal balance for the sector for each year until 2060.
[Footnote 120] The operating balance is a measure of the sector's
ability to cover its current expenditures out of current receipts. As
illustrated in figure 15, the operating balance measure generally was
positive in the past except during and after recent recessions. This
suggests that in the aggregate the sector has been able to cover its
expenses with incoming receipts.
Figure 15: State and Local Model Operating Balance Measure, as a
Percentage of Gross Domestic Product (GDP):
[Refer to PDF for image: multiple line graph]
Positive balance indicates a surplus;
Negative balance indicates a deficit.
Year: 2000;
Operating Balance March 2010, Percentage of GDP: 0.1%.
Year: 2001;
Operating Balance March 2010, Percentage of GDP: -0.3%.
Year: 2002;
Operating Balance March 2010, Percentage of GDP: -0.7%.
Year: 2003;
Operating Balance March 2010, Percentage of GDP: -0.5%.
Year: 2004;
Operating Balance March 2010, Percentage of GDP: -0.3%.
Year: 2005;
Operating Balance March 2010, Percentage of GDP: 0.1%.
Year: 2006;
Operating Balance March 2010, Percentage of GDP: 0.3%.
Year: 2007;
Operating Balance March 2010, Percentage of GDP: 0.1%.
Begin magnifying near-term fiscal position:
Year: 2008;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.4%;
Operating Balance March 2010, Percentage of GDP: -0.4%.
Year: 2009;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.4%;
Operating Balance March 2010, Percentage of GDP: -0.2%.
Year: 2010;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.8%;
Operating Balance March 2010, Percentage of GDP: -0.3%.
Year: 2011;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.8%;
Operating Balance March 2010, Percentage of GDP: -0.8%.
Year: 2012;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.8%;
Operating Balance March 2010, Percentage of GDP: -0.8%.
Year: 2013;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.7%;
Operating Balance March 2010, Percentage of GDP: -0.7%.
End magnifying near-term fiscal position.
Year: 2014;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.6%;
Operating Balance March 2010, Percentage of GDP: -0.7%.
Year: 2015;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.6%;
Operating Balance March 2010, Percentage of GDP: -0.7%.
Year: 2016;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.6%;
Operating Balance March 2010, Percentage of GDP: -0.8%.
Year: 2017;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.7%;
Operating Balance March 2010, Percentage of GDP: -0.8%.
Year: 2018;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.8%;
Operating Balance March 2010, Percentage of GDP: -0.9%.
Year: 2019;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.9%;
Operating Balance March 2010, Percentage of GDP: -0.9%.
Year: 2020;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-0.9%;
Operating Balance March 2010, Percentage of GDP: -1.0%.
Year: 2021;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.0%;
Operating Balance March 2010, Percentage of GDP: -1.0%.
Year: 2022;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.0%;
Operating Balance March 2010, Percentage of GDP: -1.1%.
Year: 2023;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.1%;
Operating Balance March 2010, Percentage of GDP: -1.1%.
Year: 2024;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.2%;
Operating Balance March 2010, Percentage of GDP: -1.2%.
Year: 2025;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.2%;
Operating Balance March 2010, Percentage of GDP: -1.2%.
Year: 2026;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.3%;
Operating Balance March 2010, Percentage of GDP: -1.3%.
Year: 2027;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.4%;
Operating Balance March 2010, Percentage of GDP: -1.4%.
Year: 2028;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.5%;
Operating Balance March 2010, Percentage of GDP: -1.5%.
Year: 2029;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.6%;
Operating Balance March 2010, Percentage of GDP: -1.5%.
Year: 2030;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.7%;
Operating Balance March 2010, Percentage of GDP: -1.6%.
Year: 2031;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.8%;
Operating Balance March 2010, Percentage of GDP: -1.7%.
Year: 2032;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-1.9%;
Operating Balance March 2010, Percentage of GDP: -1.8%.
Year: 2033;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.0%;
Operating Balance March 2010, Percentage of GDP: -1.9%.
Year: 2034;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.1%;
Operating Balance March 2010, Percentage of GDP: -2.0%.
Year: 2035;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.2%;
Operating Balance March 2010, Percentage of GDP: -2.1%.
Year: 2036;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.3%;
Operating Balance March 2010, Percentage of GDP: -2.2%.
Year: 2037;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.4%;
Operating Balance March 2010, Percentage of GDP: -2.3%.
Year: 2038;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.5%;
Operating Balance March 2010, Percentage of GDP: -2.5%.
Year: 2039;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.6%;
Operating Balance March 2010, Percentage of GDP: -2.6%.
Year: 2040;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.7%;
Operating Balance March 2010, Percentage of GDP: -2.7%.
Year: 2041;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.8%;
Operating Balance March 2010, Percentage of GDP: -2.8%.
Year: 2042;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-2.9%;
Operating Balance March 2010, Percentage of GDP: -2.9%.
Year: 2043;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.0%;
Operating Balance March 2010, Percentage of GDP: -3.0%.
Year: 2044;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.1%;
Operating Balance March 2010, Percentage of GDP: -3.1%.
Year: 2045;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.2%;
Operating Balance March 2010, Percentage of GDP: -3.3%.
Year: 2046;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.3%;
Operating Balance March 2010, Percentage of GDP: -3.4%.
Year: 2047;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.4%;
Operating Balance March 2010, Percentage of GDP: -3.5%.
Year: 2048;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.5%;
Operating Balance March 2010, Percentage of GDP: -3.6%.
Year: 2049;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.6%;
Operating Balance March 2010, Percentage of GDP: -3.8%.
Year: 2050;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.8%;
Operating Balance March 2010, Percentage of GDP: -3.9%.
Year: 2051;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-3.9%;
Operating Balance March 2010, Percentage of GDP: -4.0%.
Year: 2052;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.0%;
Operating Balance March 2010, Percentage of GDP: -4.2%.
Year: 2053;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.1%;
Operating Balance March 2010, Percentage of GDP: -4.3%.
Year: 2054;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.2%;
Operating Balance March 2010, Percentage of GDP: -4.4%.
Year: 2055;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.3%;
Operating Balance March 2010, Percentage of GDP: -4.6%.
Year: 2056;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.4%;
Operating Balance March 2010, Percentage of GDP: -4.7%.
Year: 2057;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.6%;
Operating Balance March 2010, Percentage of GDP: -4.8%.
Year: 2058;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.7%;
Operating Balance March 2010, Percentage of GDP: -5.0%.
Year: 2059;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.8%;
Operating Balance March 2010, Percentage of GDP: -5.2%.
Year: 2060;
Operating Balance January 2009 Adjusted, Percentage of GDP:
-4.9%;
Operating Balance March 2010, Percentage of GDP: -5.3%.
Source: GAO simulations, updated March 2010 and January 2009 adjusted.
Notes: Historical data are from the Bureau of Economic Analysis's
National Income and Product Accounts from 1980 to 2008. Data in 2009
are GAO estimates aligned with published data where available. GAO
simulations are from 2010 to 2060, using many Congressional Budget
Office projections and assumptions, particularly for the next 10
years. Simulations are based on current policy.
[End of figure]
While our state and local model continues to illustrate the long-term
pressures facing the sector, recent economic fluctuations also
resulted in shifts in the model's short-term results. The temporary
growth in federal grant funding provided by the Recovery Act helped
offset the sector's tax receipt declines. As a percentage of GDP,
state and local personal income tax declines exceeded revenue shifts
from sales and property tax, as shown in figure 16. Total tax receipts
for the sector declined from about 9.25 percent of GDP in 2008 to 8.8
percent of GDP in 2009. We project a slight increase in total tax
receipts to 8.82 percent of GDP in 2010. Personal income tax receipts
declined from about 2.3 percent of GDP in 2008 to 1.9 percent of GDP
in 2009. We project a slight increase in total tax receipts in 2010.
Figure 16: State and Local Government Taxes, as a Percentage of GDP:
[Refer to PDF for image: multiple line graph]
Percentage of GDP:
Year: 2005;
Personal Income: 2.2%;
Sales Tax: 3.2%;
Property Tax: 2.7%.
Year: 2006;
Personal Income: 2.3%;
Sales Tax: 3.2%;
Property Tax: 2.8%.
Year: 2007;
Personal Income: 2.3%;
Sales Tax: 3.2%;
Property Tax: 2.8%.
Year: 2008;
Personal Income: 2.3%;
Sales Tax: 3.1%;
Property Tax: 2.8%.
Year: 2009;
Personal Income: 1.9%;
Sales Tax: 3.0%;
Property Tax: 3.0%.
Year: 2010;
Personal Income: 2.1%;
Sales Tax: 2.9%;
Property Tax: 2.8%.
Year: 2011;
Personal Income: 2.2%;
Sales Tax: 2.9%;
Property Tax: 2.8%.
Year: 2012;
Personal Income: 2.2%;
Sales Tax: 2.9%;
Property Tax: 2.8%.
Year: 2013;
Personal Income: 2.2%;
Sales Tax: 2.9%;
Property Tax: 2.8%.
Year: 2014;
Personal Income: 2.3%;
Sales Tax: 2.9%;
Property Tax: 2.9%.
Year: 2015;
Personal Income: 2.3%;
Sales Tax: 2.9%;
Property Tax: 2.9%.
Source: GAO simulations, updated March 2010.
Notes: Historical data are from the Bureau of Economic Analysis's
National Income and Product Accounts from 1980 to 2008. Data in 2009
are GAO estimates aligned with published data where available. GAO
simulations are from 2010 to 2060, using many Congressional Budget
Office projections and assumptions, particularly for the next 10
years. Simulations are based on current policy.
[End of figure]
The recent update of the model shows short-term declines in the fiscal
position of the sector, even after the inclusion of National Income
and Product Accounts data--which reflect Recovery Act grant funds
received by state and local governments for programs such as Medicaid,
highways, and education that are discussed in this report. Federal
Recovery Act grants to state and local governments did help offset
declines in state and local tax receipts between our January 2009 and
March 2010 simulations. Federal Medicaid and other grants grow as a
share of GDP through 2010 (see figure 17). Federal grants-in-aid
comprised the second largest source of receipts for the sector in
2008, providing about $392 billion, or about 20 percent of current
receipts for the sector.[Footnote 121] In 2009, this amount increased
to $477 billion as Recovery Act funds flowed to these governments
through intergovernmental grant programs.
Figure 17: State and Local Government Grants, as a Percentage of GDP:
[Refer to PDF for image: multiple line graph]
Percentage of GDP:
Year: 2005;
Medicaid Grants: 1.4%;
Other Grants: 1.4%.
Year: 2006;
Medicaid Grants: 1.3%;
Other Grants: 1.3%.
Year: 2007;
Medicaid Grants: 1.3%;
Other Grants: 1.3%.
Year: 2008;
Medicaid Grants: 1.4%;
Other Grants: 1.3%.
Year: 2009;
Medicaid Grants: 1.8%;
Other Grants: 1.5%.
Year: 2010;
Medicaid Grants: 1.8%;
Other Grants: 1.8%.
Year: 2011;
Medicaid Grants: 1.7%;
Other Grants: 1.6%.
Year: 2012;
Medicaid Grants: 1.7%;
Other Grants: 1.3%.
Year: 2013;
Medicaid Grants: 1.6%;
Other Grants: 1.2%.
Year: 2014;
Medicaid Grants: 1.7%;
Other Grants: 1.1%.
Year: 2015;
Medicaid Grants: 1.7%;
Other Grants: 1.0%.
Source: GAO simulations, updated March 2010.
Notes: Historical data are from the Bureau of Economic Analysis's
National Income and Product Accounts from 1980 to 2008. Data in 2009
are GAO estimates aligned with published data where available. GAO
simulations are from 2010 to 2060, using many Congressional Budget
Office projections and assumptions, particularly for the next 10
years. Simulations are based on current policy.
[End of figure]
State and Local Officials' Use of Recovery Act Funds Helps Address
Budget Gaps:
State officials we contacted acknowledged the Recovery Act's
contributions to easing immediate fiscal pressures in the selected
states but remain wary of fiscal pressures likely to continue after
federal assistance ends. Local officials also cautioned that their
reduced tax receipts exceed the influx of Recovery Act funds.
Officials in all of our selected states indicated that they were able
to reduce or eliminate current and anticipated budget shortfalls
through a variety of budget actions, including the incorporation of
Recovery Act funds in their budgets for fiscal years 2009 and 2010.
The use of Recovery Act funds affected the size and scope of some
states' budgeting decisions, and many of the selected states reported
that they would have had to make further cuts to services and programs
had they not received Recovery Act funds.
State officials reported that their efforts to balance their budgets
while using Recovery Act funds focused on maintaining current services
rather than creating new programs or staff positions that could extend
their state's financial liabilities beyond the end date for Recovery
Act funds. Despite the infusion of Recovery Act funds into state
budgets, some state officials reported that the current fiscal
situation still required action to maintain balanced budgets. These
actions included staff layoffs, furloughs, program cuts, fee
increases, and scaling back of state rebates of local property taxes.
For example, in Georgia, for fiscal year 2009, officials amended the
state budget by reducing revenue estimates, using reserves, and
cutting program funding. In New Jersey, the largest cuts came from
scaling back state rebates of local property taxes and reducing
payments to the state's pension funds. To balance the fiscal year 2010
budget, North Carolina officials incorporated $1.4 billion of Recovery
Act funds, cut $2 billion from the budget, and included $1.4 billion
in tax and fee increases. In addition to these budget actions, some
states also reported accelerating their use of Recovery Act funds to
stabilize deteriorating budgets. In Massachusetts, state officials
said that accelerating their use of Recovery Act and state rainy-day
funds presented the most viable solution to balance their budget.
California's dire fiscal condition also prompted the state to
accelerate the initial use of its Recovery Act funds, along with the
use of a number of additional measures to reduce the state's fiscal
year 2008-2009 budget gap. More than half of the selected states also
tapped into their reserve funds in fiscal year 2009, fiscal year 2010,
or both.[Footnote 122]
Recovery Act Funds Flow to Local Governments and Cushion Some Fiscal
Challenges:
Most Recovery Act funds to local governments flow through existing
federal grant programs. The use of Recovery Act funds helped to fund
existing programs for some local governments for nonrecurring
projects, while some governments did not apply for grants that would
result in long-term financial obligations. In addition to Recovery Act
funds for which local governments were prime recipients, several local
government officials reported that additional Recovery Act funds were
received by other entities within their local jurisdictions.[Footnote
123] These entities included housing authorities, transit authorities,
nonprofit organizations, and school systems. Some local governments
reported experiencing challenges in applying for and administering
Recovery Act grants, including insufficient staff capacity, lack of
guidance, budget constraints, short application timetables, and
matching requirements. Local government officials reported that use of
Recovery Act funds helped to support local services, but recent
revenue declines still resulted in midcycle budget shortfalls.
Recovery funds plugged gaps in program funding, but budget challenges
continued despite the receipt of these funds.
Approaches to Developing Exit Strategies for the End of Recovery Act
Funding Reflect the Nature of Funding and Balanced Budget Requirements:
States' and localities' approaches to developing exit strategies for
continuing services after their use of temporary Recovery Act funds
ends reflect the balanced budget requirements in place for the
selected states, the District, and selected local governments included
in our work. State budget officials referred to the temporary nature
of the funds and the fiscal challenges that are expected to extend
beyond the timing of funds provided by the Recovery Act. Officials
discussed a desire to avoid what they referred to as the "cliff
effect" associated with the dates when Recovery Act funding ends for
various federal programs. Budget officials in some of the selected
states reported that they were preparing for the end of Recovery Act
funding by using funds for nonrecurring expenditures and hiring
personnel to fill limited-term positions to avoid creating long-term
liabilities. Some local officials also said that because Recovery Act
funds were generally used for one-time projects, which will not result
in long-term liabilities, they did not plan to develop exit
strategies. On the other hand, a number of local governments reported
that they were developing plans to sustain current Recovery Act
projects after Recovery Act funding ends. Other local governments
reported developing more general exit strategies consisting of
reductions in expenditures or possible increases in revenue to prepare
for the end of Recovery Act funding. Some local government officials
reported that their governments did not need exit strategies because
of the limited effect of the use of Recovery Act funds. However,
officials reported that they were still planning for the end of
specific grant periods.
New, Implemented, and Open Recommendations; Matters for Congressional
Consideration:
For this report, GAO both updates the status of agencies' efforts to
implement GAO's previous 23 recommendations and makes 5 new
recommendations to the Office of Management and Budget (OMB) and the
Departments of Transportation (DOT), Housing and Urban Development
(HUD), and Education to improve accountability for Recovery Act funds.
[Footnote 124] Lastly, we update the status of our Matters for
Congressional Consideration.
Department of Transportation:
New Recommendation:
The Secretary of Transportation should gather timely information on
the progress states are making in meeting the maintenance-of-effort
requirement and report preliminary information to Congress within 60
days of the certified period (Sept. 30, 2010), (1) on whether states
met required program expenditures as outlined in their maintenance-of-
effort certifications, (2) the reasons that states did not meet these
certified levels, if applicable, and (3) lessons learned from the
process.
Implemented Recommendation:
Recipients of highway and transit Recovery Act funds, such as state
departments of transportation and transit agencies, are subject to
multiple reporting requirements. Both the Department of Transportation
and OMB have issued implementation guidance for recipient reporting.
Despite these efforts, state and local highway and transit officials
expressed concerns and challenges with meeting the Recovery Act
reporting requirements. We recommended in our September 2009 report
that the Secretary of Transportation should continue the department's
outreach to state departments of transportation and transit agencies
to identify common problems in accurately fulfilling reporting
requirements and provide additional guidance, as appropriate.
Agency Actions:
In September 2009, in responding to our recommendation, DOT said that
it had conducted outreach, including providing technical assistance,
training, and guidance to recipients, and will continue to assess the
need to provide additional information. For example, in February 2010,
FTA continued three training webinars to provide technical assistance
in complying with reporting requirements under section 1201(c) of the
Recovery Act. In addition, on February 1, 2010, FTA issued guidance to
transit agencies instructing them to use the same methodology for
calculating jobs retained through vehicles purchased under section
1201 as they had been for the recipient reporting. This reversed
previous guidance that had instructed transit agencies to use a
different methodology for vehicle purchases under sections 1201 and
recipient reporting.
Implemented Recommendation:
The Department of Transportation and the Federal Highway
Administration (FHWA) have yet to provide clear guidance regarding how
states are to implement the Recovery Act requirement that economically
distressed areas (EDA) are to receive priority in the selection of
highway projects for funding. We found substantial variation both in
how states identified EDAs and how they prioritized project selection
for these areas. To ensure states meet Congress's direction to give
areas with the greatest need priority in project selection, we
recommended in our July 2009 report that the Secretary of
Transportation develop clear guidance on identifying and giving
priority to economically distressed areas that are in accordance with
the requirements of the Recovery Act and the Public Works and Economic
Development Act of 1965, as amended, and more consistent procedures
for the Federal Highway Administration to use in reviewing and
approving states' criteria.
Agency Actions:
In August 2009, in response to our recommendation, FHWA, in
consultation with the Department of Commerce, developed guidance that
addresses our recommendation. In particular, FHWA's August 2009
guidance defines "priority," directing states to give priority to
projects that are located in an economically distressed area and can
be completed within the 3-year time frame over other projects. In
addition, FHWA's guidance sets out criteria that states may use to
identify economically distressed areas based on "special need." The
criteria align closely with special need criteria used by the
Department of Commerce's Economic Development Administration in its
own grant programs, including factors such as actual or threatened
business closures (including job loss thresholds), military base
closures, and natural disasters or emergencies.
Department of Housing and Urban Development:
New Recommendation:
To help HUD achieve Recovery Act objectives and address challenges
with its continued administration of Recovery Act funds, we recommend
that the Secretary of Housing and Urban Development develop a
management plan to determine the adequate level of agency staff needed
to administer both the Recovery Act funds and the existing Capital
Fund program going forward, including identifying future resource
needs and determining whether current resources could be better
utilized to administer these funds.
New Recommendation:
We recommend that the Secretary of Housing and Urban Development
instruct housing agencies to discontinue use of the jobs calculator
provided by HUD in the first round of recipient reporting for
subsequent rounds of reporting to ensure the correct job calculation
is used.
Implemented Recommendation:
To enhance HUD's ability to prevent, detect, and correct noncompliance
with the use of Recovery Act funds, we recommended in September 2009
that the Secretary of the Department of Housing and Urban Development
expand the criteria for selecting housing agencies for on-site reviews
to include housing agencies with open Single Audit findings that may
affect the use of and reporting on Recovery Act funds.
Agency Actions:
In October 2009, HUD expanded its criteria for selecting housing
agencies for on-site reviews to include all housing agencies with open
2007 and 2008 Single Audit findings as of July 7, 2009, relevant to
the administration of Recovery Act funds. HUD has identified 27 such
housing agencies and planned to complete these on-site reviews by
February 15, 2010.
Department of Education:
New Recommendation:
To improve the consistency of FTE data collected and reported, we
recommend that the Secretary of the Department of Education
(Education) and the Director of the Office of Management and Budget
(OMB) provide clarifying guidance to recipients on how to best
calculate FTEs for education employees during quarters when school is
not in session.
Implemented Recommendation:
We recommended in September 2009 that the Secretary of Education take
further action such as collecting and reviewing documentation of state
monitoring plans to ensure that states understand and fulfill their
responsibility to monitor subrecipients of SFSF funds and consider
providing training and technical assistance to states to help them
develop and implement state monitoring plans for SFSF.
Agency Actions:
In February 2010, Education instructed states to submit to Education
for review their plans and protocols for monitoring subrecipients of
SFSF funds. Education also issued its plans and protocols for
monitoring state implementation of the SFSF program. The plan includes
on-site visits to about half the states and desk reviews of the other
states to be conducted over the next year.
Open Recommendation:
We recommended in November 2009 that the Secretary of Education take
further action to enhance transparency by requiring states to include
an explanation of changes to MOE levels in their State Fiscal
Stabilization Fund application resubmissions.[Footnote 125]
Agency Actions:
Education has not taken action on this recommendation, but GAO is
continuing to work with Education to ensure actions are taken to
enhance transparency of state maintenance-of-effort changes. In its
response to the recommendation, Education reported that it has always
required states seeking to amend the maintenance-of-effort information
in their SFSF applications to provide the basis for such amendments.
Once approved, the amended applications are posted to Education's Web
site. However, the approved and publicly available applications do not
always provide a complete explanation of the basis for the amendments.
For example in August 2009, California changed its maintenance-of-
effort level from an aggregate measure to a per-pupil basis.
California's resubmitted application did not state why the change to a
per-pupil basis was made.
Department of Labor:
Open Recommendation:
Our September 2009 bimonthly report identified a need for additional
federal guidance in two areas--measuring the work readiness of youth
and defining green jobs --and we made the following two
recommendations to the Secretary of Labor:
* To enhance the usefulness of data on work readiness outcomes,
provide additional guidance on how to measure work readiness of youth,
with a goal of improving the comparability and rigor of the measure.
* To better support state and local efforts to provide youth with
employment and training in green jobs, provide additional guidance
about the nature of these jobs and the strategies that could be used
to prepare youth for careers in green industries.
Agency Actions:
Labor agreed with both of our recommendations and has already begun to
take actions to implement them. With regard to the work readiness
measure for WIA Youth summer employment activities, Labor acknowledged
that a lack of comparability in the way work readiness gains were
measured across local areas has led to a less meaningful outcome
measure at the state and national level. Labor indicated that, through
its WIA Youth Recovery Act process evaluations and regional monitoring
visits, it will continue to assess the methodologies used to measure
work readiness and plans to further refine the work readiness
indicator and determine a more effective way to measure it. In the
event that a significant number of local areas have Recovery Act funds
available for summer employment in 2010, or if Labor receives funds
for future summer employment activities where the work readiness
measure is used to gauge effectiveness, Labor indicated that it will
issue further guidance that provides for reporting of more consistent
and meaningful data.
Regarding our recommendation on the green jobs, Labor indicated that
it recognizes the need to provide assistance to states and local areas
to help them prepare youth for careers in green industries and is
taking several steps to better understand and define green jobs.
First, Labor held two technical assistance forums in November and
December 2009 that focused on strategies for creating green
educational and career pathways. The forums offered training workshops
in areas such as identifying green industrial sectors and job
opportunities and appropriate work experiences to assist youth in
green career pathways. Second, Labor reported that the Bureau of Labor
Statistics is developing a definition for green industries and jobs to
ensure consistent surveying and counting of these jobs. Officials hope
this will inform state and local workforce development efforts to
identify and target green jobs and their training needs. Third, Labor
noted that it has supported an Occupational Information Network
project that resulted in research that can be used as a starting point
for identifying green industries and occupations and informing the
development of training and job placement programs. Labor also plans
to leverage the results of Recovery Act-funded competitive grants for
green job training to provide insights on delivering services to
youth, and others, along green career pathways. Additionally, Labor
officials told us that once these grants are under way, it intends to
gather and share examples of effective strategies and training models
through technical assistance efforts.
Executive Office of the President: Office of Management and Budget
(OMB):
New Recommendation:
OMB should work with the Recovery Accountability and Transparency
Board and federal agencies, building on lessons learned, to establish
a formal and feasible framework for review of recipient changes during
the continual update period and consider providing more time for
agencies to review and provide feedback to recipients before posting
updated reports on Recovery.gov.
Open Recommendation:
To leverage Single Audits as an effective oversight tool for Recovery
Act programs, we recommended from April to December 2009 that the
Director of OMB should:
(1) provide more direct focus on Recovery Act programs through the
Single Audit to help ensure that smaller programs with higher risk
have audit coverage in the area of internal controls and compliance;
(2) develop requirements for reporting on internal controls during
2009 before significant Recovery Act expenditures occur, as well as
for ongoing reporting after the initial report;
(3) evaluate options for providing relief related to audit
requirements for low-risk programs to balance new audit
responsibilities associated with the Recovery Act;
(4) develop mechanisms to help fund the additional Single Audit costs
and efforts for auditing Recovery Act programs; and:
(5) take steps to achieve sufficient participation and coverage in a
Single Audit program--the Single Audit Internal Control Project--that
provides for early written communication of internal control
deficiencies to achieve the objective of more timely accountability
over Recovery Act funds.
To reduce the impact of untimely Single Audit reporting, we further
recommended that the Director of OMB should:
(6) formally advise federal cognizant agencies to adopt a policy of no
longer approving extensions of the due dates of Single Audit reporting
package submissions beyond the 9-month deadline, and:
(7) widely communicate this revised policy to the state audit
community and others who have responsibility for conducting Single
Audits and submitting the Single Audit reporting package.
Agency Actions:
OMB has taken several steps in response to our recommendations. Its
efforts, however, are ongoing, and further actions are needed to fully
implement our recommendations to help mitigate risks related to
Recovery Act funds. We include a summary of OMB's efforts to implement
these recommendations from our bimonthly reviews.
To focus auditor risk assessments on Recovery Act-funded programs and
to provide guidance on internal control reviews for Recovery Act
programs, OMB worked within the framework defined by existing
mechanisms--Circular No. A-133 and the Circular No. A-133 Compliance
Supplement (Compliance Supplement).[Footnote 126] In this context, OMB
has made limited adjustments to its Single Audit guidance. OMB issued
the Compliance Supplement in May 2009, which focused risk assessments
on Recovery Act-funded programs. In August 2009, OMB issued the
Circular No. A-133 Compliance Supplement Addendum I, which provided
additional guidance for auditors and modified the Compliance
Supplement to, among other things, focus on new Recovery Act programs
and new program clusters.
In October 2009, OMB began a Single Audit Internal Control Project
(project), which is currently under way. One of the project's goals is
to encourage auditors to identify and communicate significant
deficiencies and material weaknesses in internal control over
compliance for selected major Recovery Act programs 3 months sooner
than the 9-month time frame currently required under statute.
According to OMB, the project remains on schedule for completion in
early spring 2010, when OMB plans to analyze the results to identify
the need for potential modifications to improve OMB guidance related
to Recovery Act-funded programs.
Although OMB noted the increased responsibilities falling on those
responsible for performing Single Audits, it has yet to issue
proposals or plans to address this issue. States that volunteered to
participate in the project were eligible for some relief in their
workloads because OMB modified the requirements under Circular No. A-
133 to reduce the number of low-risk programs for inclusion in the
Single Audits.
Implemented Recommendation:
States have been concerned about the burden imposed by new
requirements, increased accounting and management workloads, and
strains on information systems and staff capacity at a time when they
are under severe budgetary stress. We recommended in April 2009 that
the Director of OMB clarify what Recovery Act funds can be used to
support state efforts to ensure accountability and oversight,
especially in light of enhanced oversight and coordination
requirements.
Agency Actions:
On May 11, 2009, OMB released M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities, clarifying how state
grantees could recover administrative costs of Recovery Act activities.
Implemented Recommendation:
States and localities are expected to report quarterly on a number of
measures, including the use of funds and an estimate of the number of
jobs created and the number of jobs retained as required by section
1512 of the Recovery Act. We recommended in our July 2009 report that
to increase consistency in recipient reporting of jobs created and
retained, the Director of OMB should work with federal agencies to
have them provide program-specific examples of the application of
OMB's guidance on recipient reporting of jobs created and retained.
Agency Actions:
OMB has issued clarifications and frequently asked questions (FAQ) on
Recovery Act reporting requirements. During the first reporting
period, OMB also deployed regional federal employees to serve as
liaisons to state and local recipients in large population centers and
established a call center for entities that did not have an on-site
federal liaison. In addition, federal agencies issued additional
guidance that builds on the OMB June 22 recipient reporting guidance
for their specific programs. This guidance is in the form of FAQ, tip
sheets, and more traditional guidance that builds on what was provided
on June 22. Federal agencies have also taken steps to provide
additional education and training opportunities for state and local
program officials on recipient reporting, including web-based seminars.
Implemented Recommendation:
To foster timely and efficient communications, we recommended in April
2009 that the Director of OMB should continue to develop and implement
an approach that provides easily accessible, real-time notification to
(1) prime recipients in states and localities when funds are made
available for their use, and (2) states--where the state is not the
primary recipient of funds but has a statewide interest in this
information.
Agency Actions:
In response to our recommendation, OMB has made important progress in
notifying recipients when Recovery Act funds are available,
communicating the status of these funds at the federal level through
agency Weekly Financial Activity reports, and disseminating Recovery
Act guidance broadly while actively seeking public and stakeholder
input. OMB has taken the additional step of requiring federal agencies
to notify Recovery Act coordinators in states, the District of
Columbia, commonwealths, and territories within 48 hours of an award
to a grantee or contractor in their jurisdiction.
Implemented Recommendation:
Responsibility for reporting on jobs created and retained falls to
nonfederal recipients of Recovery Act funds. As such, states and
localities have a critical role in determining the degree to which
Recovery Act goals are achieved. Given questions raised by many state
and local officials about how best to determine both direct and
indirect jobs created and retained under the Recovery Act, we
recommended in April 2009 that the Director of OMB continue OMB's
efforts to identify appropriate methodologies that can be used to: (1)
assess jobs created and retained from projects funded by the Recovery
Act; (2) determine the impact of Recovery Act spending when job
creation is indirect; and (3) identify those types of programs,
projects, or activities that in the past have demonstrated substantial
job creation or are considered likely to do so in the future. We also
recommended that the Director of OMB consider whether the approaches
taken to estimate jobs created and retained in these cases can be
replicated or adapted to other programs.
Agency Actions:
On June 22, 2009, OMB issued additional implementation guidance on
recipient reporting of jobs created and retained, (OMB memoranda, M-09-
21, Implementing Guidance for the Reports on Use of Funds Pursuant to
the American Recovery and Reinvestment Act of 2009). This guidance is
responsive to much of what we recommended. The June 2009 guidance
provided detailed instructions on how to calculate and report jobs as
full-time equivalents (FTE). It also describes in detail the data
model and reporting system to be used for the required recipient
reporting on jobs. It clarifies that the prime recipient and not the
subrecipient is responsible for reporting information on jobs created
or retained. Federal agencies have issued guidance that expanded on
the OMB June 22 governmentwide recipient reporting guidance and
provided education and training opportunities for state and local
program officials. Agency-specific guidance includes FAQs and tip
sheets. Additionally, agencies are expected to provide examples of
recipient reports for their programs, which is also consistent with
what we recommended. In addition to the federal agency efforts, OMB
has issued FAQs on Recovery Act reporting requirements. The June 22
guidance and subsequent actions by OMB are responsive to much of what
we said in our recommendation.
Implemented Recommendation:
We have noted in prior reports that in order to achieve the delicate
balance between robust oversight and the smooth flow of funds to
Recovery Act programs, states may need timely reimbursement for these
activities. We recommended in September 2009 that to the extent that
the Director of OMB has the authority to consider mechanisms to
provide additional flexibilities to support state and local officials
charged with carrying out Recovery Act responsibilities, it is
important to expedite consideration of alternative administrative cost
reimbursement proposals.
Agency Actions:
In response to this recommendation, OMB issued a memorandum on October
13, 2009, to provide guidance to address states' questions regarding
specific exceptions to OMB Circular A-87, Cost Principles for State,
Local and Indian Tribal Governments. In the memorandum, OMB provided
clarifications for states regarding specific exceptions to OMB
Circular A-87 that are necessary in order for the states to perform
timely and adequate Recovery Act oversight, reporting, and auditing.
We believe the October 2009 OMB guidance provides the additional
clarification needed for states and localities to proceed with their
plans to recoup administrative costs.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommended in November 2009 that OMB clarify the definition and
standardize the period of measurement for the FTE data element in the
recipient reports.
Agency Actions:
After the first round of reporting by states on their use of Recovery
Act funds in October 2009, OMB updated the recipient reporting
guidance on December 18, 2009. According to the agency, this guidance
aligns with GAO's recommendation by requiring recipients to report job
estimates on a quarterly rather than a cumulative basis. As a result,
recipients will no longer be required to sum various data on hours
worked across multiple quarters of data when calculating job
estimates. The December guidance incorporated lessons learned from the
first round of recipient reporting and also addressed recommendations
we made in our November 2009 report on recipient reporting. According
to OMB, the December guidance is intended to help federal agencies
improve the quality of data reported under Section 1512 and simplifies
compliance by revising the definitions and calculations needed to
define and estimate the number of jobs saved.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we also
recommended in November 2009 that OMB consider being more explicit
that "jobs created or retained" are to be reported as hours worked and
paid for with Recovery Act funds.
Agency Actions:
In response to our recommendation, OMB issued guidance on December 18,
2009, that no longer requires recipients make a subjective judgment of
whether jobs were created or retained as a result of the Recovery Act.
Instead, recipients will more easily and objectively report on jobs
funded with Recovery Act dollars.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we also
recommended in our November 2009 report that OMB continue working with
federal agencies to provide or improve program-specific guidance to
assist recipients, especially as it applies to the full-time
equivalent calculation for individual programs.
Agency Actions:
In response to our recommendation, OMB issued guidance on December 18,
2009, that required federal agencies to submit their guidance
documents to OMB for review and clearance to ensure consistency
between federal agency guidance and the guidance released by OMB.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommended in November 2009 that OMB work with the Recovery
Accountability and Transparency Board and federal agencies to re-
examine review and quality assurance processes, procedures, and
requirements in light of experiences and identified issues with the
initial round of recipient reporting and consider whether additional
modifications need to be made and if additional guidance is warranted.
Agency Actions:
In response to our recommendation, on December 18, 2009, OMB issued
updated guidance on data quality, nonreporting recipients, and
reporting of job estimates. The agency stated that the updated
guidance incorporates lessons learned from the first reporting period
and further addresses GAO's recommendations. The guidance also
provides federal agencies with a standard methodology for effectively
implementing reviews of the quality of data submitted by recipients.
Matters for Congressional Consideration:
Matter:
To the extent that appropriate adjustments to the Single Audit process
are not accomplished under the current Single Audit structure,
Congress should consider amending the Single Audit Act or enacting new
legislation that provides for more timely internal control reporting,
as well as audit coverage for smaller Recovery Act programs with high
risk.
GAO continues to believe that Congress should consider changes related
to the Single Audit process.
Matter:
To the extent that additional coverage is needed to achieve
accountability over Recovery Act programs, Congress should consider
mechanisms to provide additional resources to support those charged
with carrying out the Single Audit Act and related audits.
GAO continues to believe that Congress should consider changes related
to the Single Audit process.
Agency Comments and Our Evaluation:
We provided a draft of sections of this report to the Director of the
Office of Management and Budget (OMB); the Secretaries of the
Departments of Education, Energy, Housing and Urban Development (HUD),
Labor, and Transportation; and officials from the Centers for Medicare
& Medicaid Services. OMB generally agreed with the recommendations in
the report and provided written comments, which we incorporated as
appropriate. OMB's letter is reproduced in appendix II. The
Departments of Education, Energy, Labor, and Transportation provided
technical comments, which we incorporated as appropriate. The
Department of Education agreed with our recommendation. HUD did not
concur with our recommendation, which is discussed in the Public
Housing Capital Fund section of this report. HUD also provided
technical comments on the recipient report section, which we
incorporated. The Department of Transportation is considering our
recommendation. Officials from the Centers for Medicare & Medicaid
Services did not provide any comments.
We are sending copies of this report to the Office of Management and
Budget; the Centers for Medicare & Medicaid Services; the Departments
of Education, Energy, Housing and Urban Development, Labor, and
Transportation; and the Recovery Accountability and Transparency
Board. The report is available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-5500. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IV.
Signed by:
Gene L. Dodaro:
Acting Comptroller General of the United States:
List of Addressees:
The Honorable Nancy Pelosi:
Speaker of the House of Representatives:
The Honorable Robert C. Byrd:
President Pro Tempore of the Senate:
The Honorable Harry Reid:
Majority Leader United States Senate:
The Honorable Mitch McConnell:
Republican Leader United States Senate:
The Honorable Steny Hoyer:
Majority Leader House of Representatives:
The Honorable John Boehner:
Republican Leader House of Representatives:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Dave Obey:
Chairman:
The Honorable Jerry Lewis:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell E. Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This appendix describes our objectives, scope, and methodology for
this review of the Recovery Act. A detailed description of the
criteria used to select the core group of 16 states and the District
of Columbia (District) and programs we reviewed is found in appendix I
of our April 2009 Recovery Act bimonthly report.[Footnote 127]
This report, the fifth in response to the Recovery Act's mandate,
updates and adds new information on the following: (1) selected
states' and localities' use of Recovery Act funds for specific
programs, (2) the approaches taken by selected states and localities
to ensure accountability for Recovery Act funds, and (3) state
activities to evaluate the impact of the Recovery Act funds they
receive. We selected programs for review primarily because they have
begun disbursing funds to states or because they have known or
potential risks. The risks can include existing programs receiving
significant amounts of Recovery Act funds or new programs. In some
cases, we have also collected data from all states, and from a broader
array of localities, to augment the in-depth reviews.
The act requires that nonfederal recipients of Recovery Act-funded
grants, contracts, or loans submit quarterly reports on each project
or activity including information concerning the amount and use of
funds and jobs created or retained.[Footnote 128] The first of these
recipient reports covered cumulative activity since the Recovery Act's
passage through the quarter ending September 30, 2009. The Recovery
Act requires us to comment on the estimates of jobs created or
retained after the recipients have reported. We issued our initial
report related to recipient reporting, including recommendations for
recipient report improvements, on November 19, 2009.[Footnote 129] A
second major focus of the current report is to provide updated
information concerning recipient reporting in accordance with our
mandate for quarterly reporting.[Footnote 130]
States' and Localities' Uses of Recovery Act Funds:
Using criteria described in our earlier bimonthly reports, we selected
the following streams of Recovery Act funding flowing to states and
localities for review during this report: increased Medicaid Federal
Medical Assistance Percentage (FMAP) grant awards; the Federal-Aid
Highway Surface Transportation Program; the Transit Capital Assistance
Program, the State Fiscal Stabilization Fund (SFSF); Title I, Part A
of the Elementary and Secondary Education Act of 1965, as amended
(ESEA); Parts B and C of the Individuals with Disabilities Education
Act (IDEA); the Public Housing Capital Fund; the Weatherization
Assistance Program; and the Workforce Investment Act of 1998 (WIA)
Youth Program. We also reviewed how Recovery Act funds are being used
by states and localities. In addition, we analyzed www.recovery.gov
data on federal spending.
Federal Medical Assistance Percentage:
For the increased FMAP grant awards, we obtained increased FMAP grant
and drawdown figures for each state in our sample and the District
from the Centers for Medicare & Medicaid Services (CMS). To examine
Medicaid enrollment, states' efforts to comply with the provisions of
the Recovery Act, and related information, we relied on interviews
with states and our 4 prior web-based surveys, which asked the 16
states and the District to provide information as well as to update
information they had previously provided to us. When necessary, we
interviewed Medicaid officials from certain states to clarify survey
responses. We also interviewed CMS officials regarding the agency's
oversight of increased FMAP grant awards and its guidance to states on
Recovery Act provisions. To assess the reliability of increased FMAP
drawdown figures, we interviewed CMS officials on how these data are
collected and reported. To establish the reliability of our Web-based
survey data, we pretested the survey with Medicaid officials in
several states and also conducted consistent follow-up with all sample
states to ensure a high response rate. Based on these steps, we
determined that the data provided by CMS and submitted by states were
sufficiently reliable for the purposes of our engagement.
Federal-Aid Highway Surface Transportation:
For highway infrastructure investment, we reviewed status reports and
guidance to the states and discussed these with the U.S. Department of
Transportation (DOT) and Federal Highway Administration (FHWA)
officials. We obtained data from FHWA on obligations and
reimbursements, and the numbers and types of projects funded with
Recovery Act highway infrastructure funds nationally. We also
interviewed DOT and FHWA officials on the status of the states'
maintenance of effort certifications and economically distressed area
designations. From state DOT officials, we obtained information on the
status of projects and contracts and the progress in meeting the 1-
year obligation deadline. We obtained data on some highway project
cost estimates and contract awards and analyzed these data to
determine the savings from awarding contracts for less than the
estimated costs and the estimated amounts to be deobligated. Finally,
we also interviewed state officials regarding the progress of project
and highway development in metropolitan areas.
Transit Capital Assistance Program:
For public transportation investment, we reviewed information on the
Federal Transit Administration's (FTA) Transit Capital Assistance
Program and examined the Fixed Guideway Infrastructure Investment
Program. We reviewed status reports and guidance to the states and
discussed these with FTA officials as well as the amount of Recovery
Act funds transferred from FHWA. To determine the current status of
public transportation funding, we obtained data from FTA on
obligations and reimbursements for Recovery Act grants nationally and
the numbers and types of grants funded. We interviewed and reviewed
information from transit agencies to include how projects were chosen,
how funds were used and how progress was reported and we compared that
to project schedules and milestones, when available. Finally, to
ensure the accountability of funds and address reporting requirements,
we interviewed FTA, state, and transit agency officials and reviewed
guidance these officials used to meet reporting requirements,
including reporting on project status, subcontracts, and estimated
jobs created.
SFSF, ESEA Title I, and IDEA:
To obtain national and selected state-level information on how
Recovery Act funds made available by the U.S. Department of Education
(Education) under SFSF, ESEA Title I, and IDEA are being used at the
local level, we designed and administered a Web-based survey of local
education agencies (LEA) in the 50 states and the District of
Columbia. We surveyed school district superintendents across the
country to learn if they have received or expect to receive Recovery
Act funding and how these funds are being used. We conducted our
survey from August to October 2009, with a 73 percent final weighted
response rate at the national level. We selected a stratified random
sample of 2,101 LEAs from the population of 16,028 LEAs included in
our sample frame of data obtained from the Common Core of Data (CCD)
in 2006 and 2007. In order to make estimates for each of the 16 states
and the District of Columbia, we stratified the sample based on those
specific states. With the exception of the District of Columbia, all
of our sample states had a response rate that exceeded 70 percent,
with final weighted response rates ranging from 71 percent for Iowa to
90 percent for Georgia.
We took steps to minimize nonsampling errors by pretesting the survey
instrument with officials from five LEAs in July and August 2009.
Because we surveyed a sample of LEAs, survey results are estimates of
a population of LEAs and thus are subject to sampling errors that are
associated with samples of this size and type. Our sample is only one
of a large number of samples that we might have drawn. As each sample
could have provided different estimates, we express our confidence in
the precision of our particular sample's results as a 95 percent
confidence interval (e.g., plus or minus 10 percentage points). We
excluded 14 of the sampled LEAs for various reasons--because they were
no longer operating in the 2009-2010 school year, were a duplicate
entry, or were not an LEA--and therefore were considered out of scope.
All estimates produced from the sample and presented in this report
are representative of the in-scope population and have margins of
error of plus or minus 5 percentage points or less for our overall
sample and 12 percentage points or less for our 16 state samples,
excluding the District, unless otherwise noted.
To understand how Education is implementing SFSF, ESEA Title I, and
IDEA under the Recovery Act and monitoring states' use of Recovery Act
funds, we reviewed relevant federal laws, regulations, guidance, and
communications to the states and interviewed Education officials. For
SFSF, ESEA Title I, and IDEA, we obtained data from Education on the
amount of funds made available to the 16 states and the District
covered by our review and the amount of funds these states have drawn
down from their accounts with Education. To obtain specific examples
of how LEAs are using Recovery Act funds, we visited LEAs in selected
states and interviewed LEA officials. To learn about issues related to
Recovery Act funds for education, we interviewed officials in the
District and state officials in each of the 16 states covered by our
review.
Public Housing Capital Fund:
For Public Housing, we obtained data from HUD's Electronic Line of
Credit Control System on the amount of Recovery Act funds that have
been obligated and drawn down by each housing agency in the country
that received public housing capital funds. To monitor progress on how
housing agencies are using these funds, we visited 47 housing agencies
in 16 states and the District of Columbia for our longitudinal study,
as well as 2 additional agencies.[Footnote 131] At the selected
agencies, we interviewed housing agency officials and conducted site
visits of Recovery Act projects. We also selected at least one Capital
Fund Recovery Competition grant in all but one of the 16 states and
the District and collected information on the housing agencies' use of
those funds. We also interviewed HUD officials to understand their
procedures for assisting and monitoring public housing agencies in
obligating Recovery Act funds and to understand HUD's capacity to
administer Recovery Act funds. In addition, we interviewed public
housing industry officials to understand the challenges that their
members faced in meeting the obligation deadline and reporting to
FederalReporting.gov.
Weatherization Assistance Program:
For the Weatherization Assistance Program, we reviewed relevant
regulations and federal guidance and interviewed Department of Energy
officials who administer the program at the federal level. In
addition, for this report, we collected information from selected
states and the District of Columbia on their weatherization programs.
We conducted semistructured interviews of officials in the states'
agencies that administer the weatherization program and with local
service providers responsible for weatherization production. These
interviews covered updates on the use of funds, the implementation of
the Recovery Act's Davis-Bacon provisions, accountability measures,
and impacts of the Recovery Act Weatherization program. We also
conducted site visits to interview local providers of weatherization
and to witness weatherization production. We continued to collect data
about each state's total allocation for weatherization under the
Recovery Act, as well as the allocation already provided to the states
and the expenditures-to-date.
Workforce Investment Act of 1998 Youth Program:
We analyzed national data that we received from the Department of
Labor (Labor) on the extent to which Recovery Act WIA youth funds have
been drawn down, the characteristics of youth that participated in
Recovery Act-funded WIA youth activities, and program participation
and outcomes. We did not assess the reliability of Labor's data.
However, we interviewed Labor officials about the limitations of its
data and determined that the data were sufficient for our purposes. We
also reviewed the statement of executive action that Labor provided us
in response to the recommendations we made in our September 2009
bimonthly report.
Recipient Reporting:
The recipient reporting section of this report responds to the
Recovery Act's mandate that we comment on the estimates of jobs
created and retained by direct recipients of Recovery Act funds. For
our review of the second submission of recipient reports, we built on
findings from our first review of the reports. We performed edit
checks and basic analyses on the second submission of recipient report
data that became publicly available at Recovery.gov on January 30,
2010. We calculated the overall sum, as well as sum by states, for the
number of full-time equivalents (FTE) reported, award amount, and
amount received and found that they corresponded closely with the
values shown for these data on Recovery.gov. We also reviewed the
Office of Management and Budget's (OMB) updated December 2009 guidance
on recipient reporting to determine the extent of changes and
clarifications for the second submission of recipient reports. We had
discussions about the updated guidance and recipient reporting changes
with representatives from OMB and the Recovery Accountability and
Transparency Board (Board). In addition, we examined reports from
federal inspectors general on Recovery Act data quality reviews and
interviewed federal agency officials who have responsibility for
ensuring a reasonable degree of quality across their program's
recipient reports.
From the second submission of recipient reports, we reviewed reports
for transportation, transit, and education programs, as we did for the
first submission of reports. In addition to those areas, we also
reviewed selected recipient reports for Department of Energy,
Department of Health and Human Services, and Department of Housing and
Urban Development programs. These areas of focus cover a wide range of
recipients, types of funding, and diverse activities. Our teams in the
16 states and the District interviewed both recipients that filed
reports in October 2009 and new recipients of Recovery Act funding. In
total, our teams reviewed approximately 250 reports and interviewed
the recipients responsible for those reports. Each team made a
nonstatistical selection of approximately 12 recipient reports from
our program areas to review and interviewed recipients regarding OMB's
guidance and processes for the first and second rounds of reporting,
or in some cases, only the second round of reporting. We visited the
16 selected states and the District of Columbia during late January
and early February 2010 and discussed with recipients the numbers used
in the FTE calculation and investigated the application of the new FTE
calculation. We gathered and examined issues raised by recipients in
these jurisdictions regarding reporting and data quality and
interviewed recipients on their experiences using the
FederalReporting.gov Web site. We also interviewed state officials
regarding state plans for managing, tracking, and reporting on
Recovery Act funds and activities.
Assessing Safeguards and Internal Controls:
To determine how states, federal agencies, and OMB are overseeing the
use of Recovery Act funds and the quality of data states and other
recipients maintain and report regarding their use of funds, we relied
on our previous work, and we followed up with cognizant state
officials to learn of any changes they have made to their internal
controls or guidance since we last reported. We also reviewed federal
agency inspector general reports and OMB's updated guidance related to
recipient reporting. To perform audit work relating to Single Audits,
we discussed with OMB their efforts toward implementing our
recommendations related to Single Audits that we reported in prior
Recovery Act reports. We examined relevant documentation that
supported those efforts. We reviewed internal control reports dated
December 31, 2009, that were prepared by the auditors of the states
participating in OMB's Single Audit Internal Control Project. We also
reviewed the corrective action plans to resolve internal control
deficiencies that were dated January 31, 2010. The management of the
states participating in the project provided these plans to the
cognizant federal agencies as required by the project's guidelines.
Accountability:
To assess actions taken by the state and local audit community to
monitor the use of Recovery Act funds, we have interviewed state and
local auditors and state inspectors general about their ongoing and
planned audit activities. We have also reviewed state and local audit
reports. In addition, in an effort to update the audit community
concerning our Recovery Act work and participate in information
sharing about Recovery Act issues, we are working with state and local
auditors and their associations to facilitate routine telephone
conference calls to discuss Recovery Act issues with a broad community
of interested parties. The conference call participants include the
Association of Government Accountants; the Association of Local
Government Auditors; the National Association of State Auditors,
Comptrollers, and Treasurers; OMB; the Recovery Accountability and
Transparency Board; federal inspectors general; the National Governors
Association; the National State Budget Officers Association; and state
stimulus czars. In an effort to ensure information sharing about
allegations of fraud, we are also working with state and local
auditors to develop plans for routine sharing of information.
To determine the actions taken by the Board, we met with
representatives of the Board to discuss the initiatives they have
taken to monitor the number and types of contracts issued by federal
agencies for the Recovery Act and their plans to assess the extent to
which laws and regulations are being complied with or circumvented. We
reviewed available documentation related to the Board's initiatives.
State and Local Budget:
The state and local budget section of this report focuses on two
areas: first, our long-term fiscal simulations (or model) for the
state and local government sector; and, second, our continued review
of the use of Recovery Act funds by the 16 selected states and the
District.
For the long-term fiscal simulations we use the U.S. Bureau of
Economic Analysis's National Income and Product Accounts (NIPA) as the
primary data source. Our model projects the level of receipts and
expenditures for the sector until 2060 based on current and historical
spending and revenue patterns. We assume the current set of policies
in place across federal, state, and local governments remains
constant. This update incorporates NIPA data including increased
federal grant funding made available to the sector through the
Recovery Act. The model simulates the long-term fiscal outlook for the
state and local sector as a whole and, while the model incorporates
the Congressional Budget Office's (CBO) economic projections,
adjustments are made to capture the budgetary effects of short-term
cyclical swings in the economy. Because the model covers the sector in
the aggregate, the fiscal outcomes for individual states and
localities cannot be captured. This product is part of a body of work
on the long-term fiscal challenge. Related products can be found at
[hyperlink, http://www.gao.gov/special.pubs/longterm].
For our continued review of the use of Recovery Act funds for the 16
states and the District, we conducted interviews with state budget and
legislative officials to determine how states are using Recovery Act
funds to avoid reductions in essential services, using "rainy day"
funds, closing budget gaps, and developing exit strategies to plan for
the end of Recovery Act funding. To gain an understanding of local
governments' use of Recovery Act funds, we met with the chief
executives, recovery coordinators, auditors, and finance officials at
the selected local governments.
To select local governments for our review, we identified localities
representing a range of types of governments (cities and counties),
population sizes, and economic conditions (unemployment rates greater
than or less than each state's average). We balanced these selection
criteria with logistical considerations including other scheduled
Recovery Act work, local contacts established during prior reviews,
and the geographic proximity of the local government entities. We
reported the latest unemployment rates and population counts that were
available in the December report.
Due to the small sample size and judgmental nature of the selection,
our findings are not generalizable to all local governments. The list
of local governments selected in each state is found in appendix III
of our December report.[Footnote 132]
Data and Data Reliability:
We collected funding data from www.recovery.gov and federal agencies
administering Recovery Act programs for the purpose of providing
background information. We used funding data from www.recovery.gov--
which is overseen by the Board--because it is the official source for
Recovery Act spending. Based on our limited examination of this
information thus far, we consider these data sufficiently reliable
with attribution to official sources for the purposes of providing
background information on Recovery Act funding for this report.
[Footnote 133] Our sample of states, localities, and entities has been
purposefully selected and the results of our reviews are not
generalizable to any population of states, localities, or entities.
We conducted this performance audit from December 5, 2009, to March 3,
2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Office of Management and Budget:
Executive Office Of The President:
Office Of Management And Budget:
The Controller:
Washington, D.C. 20503:
March 1, 2010:
Mr. Gene L. Dodaro:
Acting Comptroller General:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Acting Comptroller General Dodaro:
Thank you for sharing a draft Government Accountability Office (GAO)
report entitled, Recovery Act: One Year Later, States' and Localities'
Uses of Funds and Opportunities to Strengthen Accountability
("Draft Report"). Over the past year, your insights and
recommendations have yielded important enhancements to the
implementation of the Recovery Act.
The Office of Management and Budget (OMB) appreciates GAO's
recognition of the progress we have made in addressing each GAO
recommendation. Specifically, we are pleased that GAO acknowledges the
numerous improvements in the recipient reporting process, data
quality, and the Single Audit. In addition, we generally agree with
the latest set of recommendations included in the Draft Report.
However, there are several findings in the Draft Report regarding
recipient-reported data that warrant additional emphasis and
clarification.
In the fourth quarter of 2009, more than 98 percent of Recovery Act
recipients successfully submitted required reports. This represents a
76 percent reduction in non-filers from the previous quarter and is
due, in large part, to efforts Federal agencies have undertaken since
then to eliminate cases of non-filing. While we are pleased with the
increased compliance, we share GAO's concerns about the remaining
recipients who are failing to uphold their legal obligation to report
on Recovery Act funds they were awarded. No rate of non-compliance is
acceptable. That is why OMB is requiring Federal agencies to actively
address each and every case of non-compliance. We have also directed
agencies to look at imposing penalties on non-filers, where
appropriate. A list of non-compliant filers has been provided to the
Recovery Accountability and Transparency Board (Recovery Board) and is
available publicly at [hyperlink,
http://www.recovery.gov/Transparency/RecipientlteportedData/PagesiErrors
andOmissions.aspx].
OMB and the Vice President's Office have been working aggressively
with the Recovery Board to address concerns regarding initial
estimates from the Recovery Board, who flagged about 13,000 reports
filed in the first round of reporting as not have a matching report in
the second round. However, preliminary indications from an OMB-led
line-by-line review of these 13,000 reports show that:
* Approximately 93 percent of the 13,000 reports were filed in the
second round of reporting but, due to a technical issue, were not
"matched" with the corresponding prior-quarter report;
* Most of the remaining reports of the 13,000 flagged by the Recovery
Board were either new reports and therefore did not have a link to any
prior quarter report, reports that recipients entered into the system
twice in the same quarter, reports that did have a clear match with a
prior quarter report, reports where work was completed and no follow-
up report was required, or reports that have unique complexities that
are still being investigated; and;
* Only fewer than 0.5 percent of the 13,000 reports were ultimately
identified as "missing," meaning they were reports from the first
round of reporting that should have had a corresponding report for the
most recent reporting quarter but did not.
Hence, while the current draft report may lead readers to believe that
there were 13,000 reports filed in the quarter ending September 30,
2009 that did not have follow-up reports in the subsequent quarter, we
believe that the actual number is fewer than 100. And, overall, we
believe that there were only approximately 1,000 non-compliant filers
in total for the latest quarter.
We recently transmitted a data file to the Recovery Board that
reflects the analysis described above and are working with it to
appropriately link reports and to make additional data corrections.
Given the unprecedented nature of this reporting effort and in an
effort to match every report in future rounds of recipient reporting,
OMB and federal agencies will continue to work with the Recovery Board
to examine this data for inconsistencies or errors to ensure that the
information being reported to the American people is as accurate and
reliable as possible.
In our continuing discussions with agencies, we are implementing
lessons learned and best practices, as OMB is preparing to gather
supplemental information from the agencies and implement new
procedures that will reduce both non-compliance in the next quarter
and mis-matched reports from quarter to quarter in the future. Again,
we appreciate GAO's constructive observations about the Recovery Act's
Implementation.
We have set a high bar for success in providing the unprecedented
levels of transparency and accountability that the President promised
when he signed the Recovery Act, and, with the help of Congress, the
Recovery Board, GAO, Federal agencies, funding recipients, and the
American people, we will continue to deliver on that promise. We look
forward to continuing to work with you to implement the Recovery Act
quickly and effectively.
Thank you for your commitment to the success of the Recovery Act.
Sincerely,
Signed by:
Danny Werfel:
Controller, Office of Management and Budget:
[End of section]
Appendix III: Program Descriptions:
Following are descriptions of selected grant programs discussed in
this report.
Medicaid Federal Medical Assistance Percentage:
Medicaid is a joint federal-state program that finances health care
for certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The Centers for
Medicare & Medicaid Services, within the Department of Health and
Human Services, approves state Medicaid plans, and the amount of
federal assistance states receive for Medicaid service expenditures is
known as the Federal Medical Assistance Percentage (FMAP). The
Recovery Act's temporary increase in FMAP funding will provide states
with approximately $87 billion in assistance.
Highway Infrastructure Investment Program:
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal Highway Administration's Federal-Aid Highway Surface
Transportation Program and for other eligible surface transportation
projects. The Recovery Act requires that 30 percent of these funds be
suballocated, primarily based on population, for metropolitan,
regional, and local use. Highway funds are apportioned to states
through federal-aid highway program mechanisms, and states must follow
existing program requirements. While the maximum federal fund share of
highway infrastructure investment projects under the existing federal-
aid highway program is generally 80 percent, under the Recovery Act,
it is 100 percent.
Funds apportioned for highway infrastructure spending must be used in
accordance with Recovery Act requirements. States should ensure that
all apportioned Recovery Act funds--including suballocated funds--are
obligated[Footnote 134] within 1 year. The Secretary of Transportation
is to withdraw and redistribute to eligible states any amount that is
not obligated within that time frame.[Footnote 135] Additionally, the
governor of each state must certify that the state will maintain its
level of spending for the types of transportation projects funded by
the Recovery Act it planned to spend the day the Recovery Act was
enacted. As part of this certification, the governor of each state 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 136]
Public Transportation Program:
The Recovery Act appropriated $8.4 billion to fund public
transportation throughout the country through existing Federal Transit
Administration (FTA) grant programs, including the Transit Capital
Assistance Program, and the Fixed Guideway Infrastructure Investment
program. Under the Transit Capital Assistance Program's formula grant
program, Recovery Act funds were apportioned to large and medium
urbanized areas--which in some cases include a metropolitan area that
spans multiple states--throughout the country according to existing
program formulas. Recovery Act funds were also apportioned to states
for small urbanized areas and nonurbanized areas under the Transit
Capital Assistance Program's formula grant programs using the
program's existing formula. Transit Capital Assistance Program funds
may be used for such activities as vehicle replacements, facilities
renovation or construction, preventive maintenance, and paratransit
services. Recovery Act funds from the Fixed Guideway Infrastructure
Investment program[Footnote 137] were apportioned by formula directly
to qualifying urbanized areas, and funds may be used for any capital
projects to maintain, modernize, or improve fixed guideway systems.
[Footnote 138] As they work through the state and regional
transportation planning process, designated recipients of the
apportioned funds--typically public transit agencies and metropolitan
planning organizations (MPO)--develop a list of transit projects that
project sponsors (typically transit agencies) submit to FTA for
approval.[Footnote 139]
Funds appropriated for the Transit Capital Assistance Program and the
Fixed Guideway Infrastructure Investment program must be used in
accordance with Recovery Act requirements. States should ensure that
all apportioned Recovery Act funds are obligated[Footnote 140] within
1 year. The Secretary of Transportation is to withdraw and
redistribute to each state or urbanized area any amount that is not
obligated within that time frame.[Footnote 141] Additionally,
governors must certify that the state will maintain the level of state
spending for the types of transportation projects funded by the
Recovery Act it planned to spend the day the Recovery Act was enacted.
As part of this certification, the governor of each state 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
142]
Education:
State Fiscal Stabilization Fund:
The State Fiscal Stabilization Fund (SFSF) included approximately
$48.6 billion to award to states by formula and up to $5 billion to
award to states as competitive grants. The Recovery Act created the
SFSF in part to help state and local governments stabilize their
budgets by minimizing budgetary cuts in education and other essential
government services, such as public safety. Stabilization funds for
education distributed under the Recovery Act must first be used to
alleviate shortfalls in state support for education to local
educational agencies (LEA) and public institutions of higher education
(IHE). States must use 81.8 percent of their SFSF formula grant funds
to support education (these funds are referred to as education
stabilization funds) and must use the remaining 18.2 percent for
public safety and other government services, which may include
education (these funds are referred to as government services funds).
For the initial award of SFSF formula grant funds, Education awarded
at least 67 percent of the total amount allocated to each state,
[Footnote 143] but states had to submit an application to Education to
receive the funds. The application required each state to provide
several assurances, including that the state will meet maintenance-of-
effort requirements (or will be able to comply with the relevant
waiver provisions) and that it will implement strategies to advance
four core areas of education reform, as described by Education: (1)
increase teacher effectiveness and address inequities in the
distribution of highly qualified teachers; (2) establish a pre-K-
through-college data system to track student progress and foster
improvement; (3) make progress toward rigorous college-and career-
ready standards and high-quality assessments that are valid and
reliable for all students, including students with limited English
proficiency and students with disabilities; and (4) provide targeted,
intensive support and effective interventions to turn around schools
identified for corrective action or restructuring.[Footnote 144] In
addition, states were required to make assurances concerning
accountability, transparency, reporting, and compliance with certain
federal laws and regulations. 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 LEAs and public IHEs.
When distributing these funds to LEAs, states must use their primary
education funding formula, but they can determine how to allocate
funds to public IHEs. In general, LEAs have broad discretion in how
they can use education stabilization funds, but states have some
ability to direct IHEs in how to use these funds. Applications for
SFSF Phase II funds were due to Education by January 11, 2010.
According to the Phase II application, in order to receive the
remainder of their SFSF allocation, states must agree to collect and
publicly report on more than 30 indicators and descriptors related to
the four core areas of education reform described above. Additionally,
states generally must, among other things, provide confirmation that
they maintained support for education in 2009 at least at the level of
such support in fiscal year 2006 and reaffirm or provide updated
information that they will maintain state support in 2010 and 2011.
ESEA Title I, Part A:
The Recovery Act provides $10 billion to help LEAs educate
disadvantaged youth by making additional funds available beyond those
regularly allocated through Title I, Part A of the Elementary and
Secondary Education Act of 1965,[Footnote 145] as amended. Title I
funding is administered by the Office of Elementary and Secondary
Education within the Department of Education. 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 applicable statutory and regulatory requirements and must
obligate 85 percent of the funds by September 30, 2010.[Footnote 146]
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, Parts B and C:
The Recovery Act provided supplemental funding for Parts B and C of
the Individuals with Disabilities Education Act (IDEA), as amended--
the major federal statute that supports early intervention and special
education and related services for children, and youth with
disabilities. Part B provides funds to ensure that preschool and
school-aged children with disabilities have access to a free and
appropriate public education and is divided into two separate grant
programs--Part B grants to states (for school-age children) and Part B
preschool grants. Part C funds programs that provide early
intervention and related services for infants and toddlers with
disabilities--or at risk of developing a disability--and their
families.
Workforce Investment Act Youth Program:
The Recovery Act provides an additional $1.2 billion in funds for
Workforce Investment Act (WIA) Youth Program activities, including
summer employment.[Footnote 147] 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. The Recovery
Act also extended eligibility through age 24 for youth receiving
services funded by the act. 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 148] the
conferees stated they were particularly interested in states using
these funds to create summer employment opportunities for youth. While
summer employment is a required component of the WIA Youth Program,
Labor issued guidance indicating that local areas have the flexibility
to implement stand-alone summer youth employment activities with
Recovery Act funds. 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.
Public Housing Capital Fund:
The Public Housing Capital Fund provides formula-based grant funds
directly to public housing agencies to improve the physical condition
of their properties; to develop, finance, and modernize public housing
developments; and to improve management. Under the Recovery Act, the
Office of Public and Indian Housing within the U.S. Department of
Housing and Urban Development (HUD) allocated nearly $3 billion
through the Public Housing Capital Fund to public housing agencies
using the same formula for amounts made available in fiscal year 2008
and obligated these funds to housing agencies in March 2009.
HUD was also required to award nearly $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding or financing for
renovations and energy conservation retrofitting. In September 2009,
HUD awarded competitive grants for the creation of energy-efficient
communities, gap financing for projects stalled due to financing
issues, public housing transformation, and improvements addressing the
needs of the elderly or persons with disabilities.
Weatherization Assistance Program:
The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program--which the Department of Energy (DOE) is
distributing to each of the states, the District of Columbia, and
seven territories and Indian tribes--to be spent over a 3-year period.
The program, administered by the Office of Energy Efficiency and
Renewable Energy within DOE, enables low-income families to reduce
their utility bills by making long-term energy-efficiency improvements
to their homes by, for example, installing insulation, sealing leaks,
and modernizing heating equipment, air circulation fans, and air-
conditioning equipment. Over the past 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. DOE has approved the weatherization
plans of the 16 states and the District of Columbia that are in our
review and has provided at least half of the funds to those areas.
Head Start/Early Head Start:
The Head Start program, administered by the Office of Head Start of
the Administration for Children and Families within the Department of
Health and Human Services, provides comprehensive early childhood
development services to low-income children, including educational,
health, nutritional, social, and other services, intended to promote
the school readiness of low-income children. Federal Head Start funds
are provided directly to local grantees, rather than through states.
The Recovery Act provided an additional $2.1 billion in funding for
Head Start, including $1.1 billion directed for the expansion of Early
Head Start programs. The Early Head Start program provides services to
low-income families designed to promote the development of very young
children, as well as to enable their parents to fulfill their parental
duties and move toward self-sufficiency.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
J. Christopher Mihm, Managing Director for Strategic Issues, (202) 512-
6806 or mihmj@gao.gov:
For issues related to WIA, SFSF, and other education programs: Barbara
D. Bovbjerg, Managing Director of Education, Workforce, and Income
Security, (202) 512-7215 or bovbjergb@gao.gov:
For issues related to Medicaid programs: Dr. Marjorie Kanof, Managing
Director of Health Care, (202) 512-7114 or kanofm@gao.gov:
For issues related to highways, transit, and other transportation
programs: Katherine A. Siggerud, Managing Director of Physical
Infrastructure, (202) 512-2834 or siggerudk@gao.gov:
For issues related to energy and weatherization: Patricia Dalton,
Managing Director of Natural Resources and Environment, (202) 512-3841
or daltonp@gao.gov:
For issues related to public housing: Richard J. Hillman, Managing
Director of Financial Markets and Community Investment, (202) 512-8678
or hillmanr@gao.gov:
For issues related to internal controls and Single Audits: Jeanette
Franzel, Managing Director of Financial Management and Assurance,
(202) 512-9471 or franzelj@gao.gov:
For issues related to contracting and procurement: Paul Francis,
Managing Director of Acquisition and Sourcing Management, (202) 512-
4841 or francisp@gao.gov:
For issues related to fraud, waste, and abuse: Gregory D. Kutz,
Managing Director of Forensic Audits and Special Investigations, (202)
512-9505 or kutzg@gao.gov:
Staff Acknowledgments:
The following staff contributed to this report: Stanley Czerwinski,
Denise Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas
James, James McTigue, and Michelle Sager, (Assistant Directors);
Sandra Beattie (Analyst-in-Charge); and Marie Penny Ahearn, Judith
Ambrose, Peter Anderson, Thomas Beall, James Bennett, Noah Bleicher,
Jessica Botsford, Anthony Bova, Lauren Calhoun, Richard Cambosos,
Ralph Campbell Jr., Virginia Chanley, Tina Cheng, Robert Cramer,
Michael Derr, Helen Desaulniers, Ruth "Eli" DeVan, David Dornisch,
Kevin Dooley, Abe Dymond, Laurie Ekstrand, James Fuquay, Alice
Feldesman, Doreen Feldman, Alexander Galuten, Ellen Grady, Chelsa
Gurkin, Anita Hamilton, Geoffrey Hamilton, Tracy Harris, Bert Japikse,
Karen Keegan, John Krump, Jon Kruskar, Hannah Laufe, Jean K. Lee,
Teague Lyons, Stephanie May, Sarah M. McGrath, Jean McSween, Donna
Miller, Kevin Milne, Sheila McCoy, John McGrail, Marc Molino, Mimi
Nguyen, Jungjin Park, Ken Patton, Anthony Pordes, Brenda Rabinowitz,
Carl Ramirez, James Rebbe, Beverly Ross, Aubrey Ruge, Sidney Schwartz,
John Smale Jr., Kathryn Smith, Andrew J. Stephens, Alyssa Weir,
Crystal Wesco, and Kimberly Young.
Program Contributors:
The names of GAO staff contributing to information contained in the
sections on the selected program are as follows:
Education--SFSF, IDEA, Title I:
Jaime Allentuck, Cornelia M. Ashby, James L. Ashley, Sandra Baxter,
Edward Bodine, Jessica Botsford, Karen A. Brown, Amy Buck, Alexander
Galuten, Bryon Gordon, Sonya Harmeyer, Susan Lawless, Ying Long,
Sheila McCoy, Jean McSween, Elizabeth Morrison, Mimi Nguyen, Karen V.
O'Conor, Kathy Peyman, Jason Palmer, James M. Rebbe, Michelle
Verbrugge, Charles Willson and Jill Yost.
Medicaid:
Susan Anthony, Emily Beller, Ted Burik, Julianne Flowers, Martha
Kelly, and Carolyn Yocom.
Public housing:
Don Brown, Don Kiggins, May Lee, John McGrail, Marc Molino, Deena
Richart, Paul Schmidt, Jennifer Schwartz, Mathew Scire, and Marie Webb.
Recipient reporting:
Darreisha Bates, Sue Irving, Yvonne Jones, Judith Kordahl, Hayley
Landes, James McTigue, Patricia Norris and Jon Stehle.
Internal Controls/Single Audit:
Phyllis Anderson, Andrew Grimaldi, Eric Holbrook, Kim McGatlin, Diane
Morris, Susan Ragland, Sandra Silzer, and Doris Yanger.
State and local budget:
Sandra Beattie, Anthony Bova, Stanley J. Czerwinski, Jungjin Park, and
Michelle Sager.
Transportation/highway and transit programs:
Aisha Cabrer, A. Nicole Clowers, Steve Cohen, Dean Gudicello, Delwen
Jones, Les Locke, Tim Schindler, and Raymond Sendejas.
Weatherization:
Jessica Bryant-Bertail, Ric Cheston, Mark Gaffigan, Kim Gianopoulos,
Kris Massey, Stuart Ryba, and Jason Trentacoste.
WIA Youth Program:
Dianne Blank, Raun Lazier, and Andrew Sherrill.
Contributors to the Selected States and the District:
Arizona:
Karyn Angulo, Rebecca Bolnick, Tom Brew, Lisa Brownson, Aisha Cabrer,
Steven Calvo, Eileen Larence, Radha Seshagiri, and Jeff Schmerling.
California:
Linda Calbom, Joonho Choi, Guillermo Gonzalez, Chad Gorman, Richard
Griswold, Susan Lawless, Gail Luna, Heather MacLeod, Emmy Rhine, Eddie
Uyekawa, Lacy Vong, and Randy Williamson.
Colorado:
Paul Begnaud, Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer
Leone, Brian Lepore, Tony Padilla, Leslie Pollock, Kathleen
Richardson, Dawn Shorey, and Mary Welch.
District of Columbia:
Laurel Beedon, Sunny Chang, Nagla'a El-Hodiri, Mattias Fenton, John
Hansen, Adam Hoffman, William O. Jenkins, Jr., and Linda Miller.
Florida:
Patrick di Battista, Lisa Galvan-Trevino, Sabur Ibrahim, Kevin
Kumanga, Frank Minore, Brenda Ross, Andy Sherrill, Bernard Ungar,
Margaret Weber, and James Whitcomb.
Georgia:
Alicia Puente Cackley, Waylon Catrett, Chase Cook, Nadine Garrick
Raidbard, Daniel Newman, John H. Pendleton, Paige Smith, David
Shoemaker, and Robyn Trotter.
Illinois:
Silvia Arbelaez-Ellis, Dean Campbell, Debra Draper, Gail Marnik, Cory
Marzullo, Paul Schmidt, Roberta Rickey, and Rosemary Torres Lerma.
Iowa:
Tom Cook, Dan Egan, Christine Frye, Marietta Mayfield, Ronald Maxon,
Mark Ryan, Lisa Shames, and Ben Shouse.
Massachusetts:
Stanley J. Czerwinski, Laurie Ekstrand, Nancy J. Donovan, Kathleen M.
Drennan, Lorin Obler, Keith C. O'Brien, Kathryn O'Dea, Carol Patey,
and Robert Yetvin.
Michigan:
Ranya Elias, Kevin Finnerty, Patrick Frey, Henry Malone, Giao N.
Nguyen, Robert Owens, Susan Ragland, and Amy Sweet.
Mississippi:
James Elgas, Barbara Haynes, John K. Needham, Norman J. Rabkin, Anna
Russell, Gary Shepard, Erin Stockdale, and Ryan Stott.
New Jersey:
Gene Aloise, Kisha Clark, Diana Glod, Alexander Lawrence Jr., Nancy
Lueke, Tarunkant Mithani, Tahra Nichols, Nitin Rao, and David Wise.
New York:
John H. Davis, Christopher Farrell, Susan Fleming, Emily Larson, Dave
Maurer, Tiffany Mostert, Summer Pachman, Frank Putallaz, Ronald
Stouffer, and Yee Wong.
North Carolina:
Cornelia Ashby, Sandra Baxter, Bonnie Derby, Terrell Dorn, Steve Fox,
Bryon Gordon, Fred Harrison, Charlene Johnson, Leslie Locke, Anthony
Patterson, and Paula Rascona.
Ohio:
Debra Cottrell, Matthew Drerup, Laura Jezewski, Bill J. Keller,
Sanford Reigle, George A. Scott, Brian Smith, David C. Trimble,
Lindsay Welter, and Doris Yanger.
Pennsylvania:
Eleanor Cambridge, Mark Gaffigan, John Healey, Phillip Herr, Shirin
Hormozi, Richard Jorgenson, Richard Mayfield, James Noel, Jodi M.
Prosser, Andrea E. Richardson, and MaryLynn Sergent.
Texas:
Fred Berry, Danny Burton, James Cooksey, K. Eric Essig, Erinn
Flanagan, Ken Howard, Michael O'Neill, Gloria Proa, Bob Robinson, and
Lorelei St. James.
[End of section]
Related GAO Products:
State and Local Governments' Fiscal Outlook March 2010 Update.
[hyperlink, http://www.gao.gov/products/GAO-10-358]. Washington, D.C.:
March 2, 2010.
Recovery Act: Project Selection and Starts Are Influenced by Certain
Federal Requirements and Other Factors. [hyperlink,
http://www.gao.gov/products/GAO-10-383]. Washington, D.C.: February
10, 2010.
Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting
and Enforcement Improvements Are Needed. [hyperlink,
http://www.gao.gov/products/GAO-10-349]. Washington, D.C.: February
10, 2010.
Status of the Small Business Administration's Implementation of
Administrative Provisions in the American Recovery and Reinvestment
Act of 2009. [hyperlink, http://www.gao.gov/products/GAO-10-298R].
Washington, D.C.: January 19, 2010.
Recovery Act: States' Use of Highway and Transit Funds and Efforts to
Meet the Act's Requirements. [hyperlink,
http://www.gao.gov/products/GAO-10-312T]. Washington, D.C.: December
10, 2009.
Recovery Act: Status of States' and Localities' Use of Funds and
Efforts to Ensure Accountability. [hyperlink,
http://www.gao.gov/products/GAO-10-231]. Washington, D.C.: December
10, 2009.
Recovery Act: Status of States' and Localities' Use of Funds and
Efforts to Ensure Accountability (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-10-232SP]. Washington, D.C.: December
10, 2009.
Recovery Act: Planned Efforts and Challenges in Evaluating Compliance
with Maintenance of Effort and Similar Provisions. [hyperlink,
http://www.gao.gov/products/GAO-10-247]. Washington, D.C.: November
30, 2009.
Recovery Act: Contract Oversight Activities of the Recovery
Accountability and Transparency Board and Observations on Contract
Spending in Selected States. [hyperlink,
http://www.gao.gov/products/GAO-10-216R]. Washington, D.C.: November
30, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into
Use of Recovery Act Funding, but Data Quality and Reporting Issues
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-223].
Washington, D.C.: November 19, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into
Use of Recovery Act Funding, but Data Quality and Reporting Issues
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-224T].
Washington, D.C.: November 19, 2009.
Recovery Act: Agencies Are Addressing Broadband Program Challenges,
but Actions Are Needed to Improve Implementation. [hyperlink,
http://www.gao.gov/products/GAO-10-80]. Washington, D.C.: November 16,
2009.
Recovery Act: Preliminary Observations on the Implementation of
Broadband Programs. [hyperlink,
http://www.gao.gov/products/GAO-10-192T]. Washington, D.C.: October
27, 2009.
First-Time Homebuyer Tax Credit: Taxpayers' Use of the Credit and
Implementation and Compliance Challenges. [hyperlink,
http://www.gao.gov/products/GAO-10-166T]. Washington, D.C.: October
22, 2009.
High Speed Passenger Rail: Developing Viable High Speed Rail Projects
under the Recovery Act and Beyond. [hyperlink,
http://www.gao.gov/products/GAO-10-162T]. Washington, D.C.: October
14, 2009.
Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer
Service and Enforcement for the 2010 Filing Season. [hyperlink,
http://www.gao.gov/products/GAO-09-1026]. Washington, D.C.: September
23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and
Localities, While Accountability and Reporting Challenges Need to Be
Fully Addressed. [hyperlink, http://www.gao.gov/products/GAO-09-1016].
Washington, D.C.: September 23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and
Localities, While Accountability and Reporting Challenges Need to Be
Fully Addressed (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-09-1017SP]. Washington, D.C.:
September 23, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-908T]. Washington, D.C.: September
10, 2009.
Recovery Act: States' Use of Highway Infrastructure Funds and
Compliance with the Act's Requirements. [hyperlink,
http://www.gao.gov/products/GAO-09-926T]. Washington, D.C.: July 31,
2009.
Unemployment Insurance Measures Included in the American Recovery and
Reinvestment Act of 2009, as of July 2009. [hyperlink,
http://www.gao.gov/products/GAO-09-942R]. Washington, D.C.: July 27,
2009.
Grants Management: Grants.gov Has Systematic Weaknesses That Require
Attention. [hyperlink, http://www.gao.gov/products/GAO-09-589].
Washington, D.C.: July 15, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-829]. Washington, D.C.: July 8,
2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-831T]. Washington, D.C.: July 8,
2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-09-830SP]. Washington, D.C.: July 8,
2009.
Recovery Act: The Department of Transportation Followed Key Federal
Requirements in Developing Selection Criteria for Its Supplemental
Discretionary Grants Program. [hyperlink,
http://www.gao.gov/products/GAO-09-785R]. Washington, D.C.: June 30,
2009.
High Speed Passenger Rail: Effectively Using Recovery Act Funds for
High Speed Rail Projects. [hyperlink,
http://www.gao.gov/products/GAO-09-786T]. Washington, D.C.: June 23,
2009.
Recovery Act: GAO's Efforts to Work with the Accountability Community
to Help Ensure Effective and Efficient Oversight. [hyperlink,
http://www.gao.gov/products/GAO-09-672T]. Washington, D.C.: May 5,
2009.
Recovery Act: Consistent Policies Needed to Ensure Equal Consideration
of Grant Applications. [hyperlink,
http://www.gao.gov/products/GAO-09-590R]. Washington, D.C.: April 29,
2009.
Recovery Act: Initial Results on States' Use of and Accountability for
Transportation Funds. [hyperlink,
http://www.gao.gov/products/GAO-09-597T]. Washington, D.C.: April 29,
2009.
Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential.
[hyperlink, http://www.gao.gov/products/GAO-09-580]. Washington, D.C.:
April 23, 2009.
Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential.
[hyperlink, http://www.gao.gov/products/GAO-09-631T]. Washington,
D.C.: April 23, 2009.
Small Business Administration's Implementation of Administrative
Provisions in the American Recovery and Reinvesment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-507R]. Washington, D.C.: April 16,
2009.
American Recovery and Reinvestment Act: GAO's Role in Helping to
Ensure Accountability and Transparency for Science Funding.
[hyperlink, http://www.gao.gov/products/GAO-09-515T]. Washington,
D.C.: March 19, 2009.
American Recovery and Reinvestment Act: GAO's Role in Helping to
Ensure Accountability and Transparency. [hyperlink,
http://www.gao.gov/products/GAO-09-453T]. Washington, D.C.: March 5,
2009.
Estimated Adjusted Medicaid Funding Allocations Related to the
Proposed American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-371R]. Washington, D.C.: February
5, 2009.
Estimated Temporary Medicaid Funding Allocations Related to Section
5001 of the American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-364R]. Washington, D.C.: February
4, 2009.
[End of section]
Footnotes:
[1] Pub. L. 111-5, 123 Stat. (Feb. 17, 2009).
[2] GAO, Recovery Act: IRS Quickly Implemented Tax Provisions, but
Reporting and Enforcement Improvements Are Needed, [hyperlink,
http://www.gao.gov/products/GAO-10-349] (Washington, D.C.: Feb. 10,
2010).
[3] The Recovery Act established the Board to coordinate and conduct
oversight of covered funds to prevent fraud, waste, and abuse. The
Board is composed of a chairperson and 12 inspectors general. To carry
out its oversight mission, the Board employs 47 staff, of whom 19 are
detailed from agencies throughout the federal government. In addition,
the Board established three committees drawn from the 12 inspectors
general on the Board. Recovery Act, div. A, §§ 1521-1525, 123 Stat.
289-93.
[4] Recovery Act, div. A, title IX, §901.
[5] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009); Recovery Act: Funds Continue to Provide Fiscal Relief to States
and Localities, While Accountability and Reporting Challenges Need to
Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: States' and Localities' Current and Planned Uses
of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-829] (Washington, D.C.: July 8,
2009); and Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009).
[6] Selected states are Arizona, California, Colorado, Florida,
Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New
Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas. We
also visited the District of Columbia.
[7] Recovery Act, div. A, § 1512, 123 Stat. 287-288. We will refer to
the quarterly reports required by section 1512 as recipient reports.
[8] GAO, Recovery Act: Recipient Reported Jobs Data Provide Some
Insight into Use of Recovery Act Funding, but Data Quality and
Reporting Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009).
[9] The Recovery Act requires recipients of funding under the Act to
report quarterly on the use of these funds including jobs created or
retained with Recovery Act funding. The first recipient reports filed
in October 2009 cover activity from February 2009 through September
30, 2009. The second quarterly recipient report was filed in January
2010 and cover activity through December 31, 2009.
[10] Recovery Act, div. B, title V, § 5001. The Department of Health
and Human Services (HHS) Office of Inspector General found that HHS's
Office of the Assistant Secretary of Planning and Evaluation and CMS
correctly calculated the increased FMAP in accordance with applicable
provisions of the Recovery Act. See HHS Office of the Inspector
General, "Review of the Calculations of Temporary Increases in Federal
Medical Assistance Percentages Under the American Recovery and
Reinvestment Act," (A-09-09-00075), and "Review of the Calculation of
Additional Medicaid Funding Awarded Under the American Recovery and
Reinvestment Act," (A-09-09-00080).
[11] In order to qualify for the increased FMAP, states generally may
not apply eligibility standards, methodologies, or procedures that are
more restrictive than those in effect under their state Medicaid plans
or waivers on July 1, 2008. See Recovery Act, div. B, title V,
§5001(f)(1)(A).
[12] Under the Recovery Act, states are not eligible to receive the
increased FMAP for certain claims for days during any period in which
that state has failed to meet the prompt payment requirement under the
Medicaid statute as applied to those claims. See Recovery Act, div. B,
title V, §5001(f)(2). Prompt payment requires states to pay 90 percent
of clean claims from health care practitioners and certain other
providers within 30 days of receipt and 99 percent of these claims
within 90 days of receipt. See 42 U.S.C. §1396a(a)(37)(A).
[13] A state is not eligible for certain elements of increased FMAP if
any amounts attributable directly or indirectly to them are deposited
in or credited to a state reserve or rainy-day fund. Recovery Act,
div. B, title V, §5001(f)(3).
[14] In some states, political subdivisions--such as cities and
counties--may be required to help finance the state's share of
Medicaid spending. Under the Recovery Act, a state that has such
financing arrangements is not eligible for certain elements of the
increased FMAP if it requires subdivisions to pay during a quarter of
the recession adjustment period a greater percentage of the nonfederal
share than the percentage that would have otherwise been required
under the state plan on September 30, 2008. See Recovery Act, div. B.,
title V, § 5001(g)(2). The recession adjustment period is the period
beginning October 1, 2008, and ending December 31, 2010.
[15] CMS provided the increased FMAP funds to states through a
separate account in the payment management system, allowing the funds
to be tracked separately from regular FMAP funds as required by the
act.
[16] Nationwide, all but 5 states had begun to draw down increased
FMAP funds by this date.
[17] States can continue to draw from their increased FMAP grant
awards for third and fourth quarter fiscal year 2009 expenditures
until CMS finalizes the grant awards for these quarters, a process the
agency has not yet completed. As part of the normal Medicaid grant
award process, CMS reconciles states' quarterly estimated and actual
Medicaid expenditures and finalizes the quarterly grants once the
reconciliation is complete.
[18] As of January 29, 2010, these State Medicaid Director Letters
were available on the CMS Web site. See [hyperlink,
http://www.cms.hhs.gov/SMDL/SMD/list.asp?sortByDID=1a&submit=Go&filterTy
pe=none&filterByDID=-99&sortOrder=ascending&intNumPerPage=10].
[19] Arizona initially drew down increased FMAP funds in March 2009,
but was advised by CMS that it was not eligible for the funds because
it had changed the frequency of certain Medicaid eligibility
determinations from 12 to 6 months. CMS determined that this change
constituted a more restrictive eligibility standard. Therefore,
Arizona did not actually claim these drawn down funds, or resume
drawing down additional funds, until the state legislature had
reversed the change.
[20] The amount of these funds was more often viewed as sufficient for
fiscal year 2009. Specifically, 7 states and the District reported
that the amount of increased FMAP funds was sufficient to maintain
their Medicaid programs and provide fiscal relief to the state in
fiscal year 2009, whereas 2 states reported that the funds were
sufficient for these purposes in fiscal year 2010.
[21] "Medicaid Enrollment as Percent of Total Population, 2006." The
Kaiser Family Foundation, statehealthfacts.org.
[22] The Secretary of Transportation is to withdraw and redistribute
to eligible states any amount that is not obligated within this time
frame.
[23] Transportation improvement programs (TIP), based on the long-
range (20-year) transportation plan, are required for each
metropolitan urbanized area with a population of more than 50,000 and
should be designed to achieve an area's transportation goals using
spending, operating, management, and financial tools. State
transportation improvement programs (STIP) are similar to TIPs in that
they identify 4 years of transportation project priorities and must be
fiscally constrained. STIPs must be approved by both FHWA and FTA.
[24] Number of grant applications and number of grants awarded are as
of February 11, 2010.
[25] As of February 16, 2010, $406.7 million and $25.7 million of the
$26.7 billion apportioned for highways was transferred from FHWA to
FTA and DOT's Maritime Administration for transit and other projects,
respectively, leaving $26.2 billion available for highways.
Information on amount and the percent of funds obligated does not
include obligations associated with these transferred funds.
Specifically, the 95 percent represents the $25.1 billion obligated as
of February 16, 2010 of the $26.2 billion that remained available for
highway projects.
[26] This amount includes nearly $283 million that had been obligated
as of February 16, 2010 from the total funds that were transferred
from FHWA to FTA, but this funding is not included in the Recovery Act
public transportation appropriations of $8.4 billion.
[27] Recovery Act funding for public transportation was distributed
through three existing FTA formula grant programs, the Transit Capital
Assistance Program, the Fixed Guideway Infrastructure Investment
program, and the Capital Investment Grant program, and one
discretionary grant program, the New Starts program. An FTA grant may
be limited to one specific project or include multiple individual
projects.
[28] DOT has interpreted the term obligation of funds to mean the
federal government's commitment to pay for the federal share of the
project. This commitment occurs at the time the federal government
signs a project agreement (highways) or grant agreement (public
transportation).
[29] States and transit agencies make payments to contractors for
completed work, and FHWA or FTA, through the U.S. Department of the
Treasury, pays the state or transit agency after it pays out of its
own funds for project-related purposes. All reimbursements under
public transportation programs funded through the Recovery Act must be
completed by September 30, 2015, except those for administration,
management, and oversight purposes.
[30] Economically distressed areas are defined by the Public Works and
Economic Development Act of 1965, as amended. To qualify as an
economically distressed area, an area must (1) have a per capita
income of 80 percent or less of the national average; (2) have an
unemployment rate that is, for the most recent 24-month period for
which data are available, at least 1 percent greater than the national
average unemployment rate; or (3) be an area that the Secretary of
Commerce determines has experienced or is about to experience a
"special need" arising from actual or threatened severe unemployment
or economic adjustment problems resulting from severe short-or long-
term changes in economic conditions. In response to our
recommendation, FHWA, in consultation with the Department of Commerce,
issued guidance on August 24, 2009, that provided criteria for states
to use for designating special need areas for the purpose of Recovery
Act funding. The criteria align closely with special need criteria
used by the Department of Commerce's Economic Development
Administration in its own grant programs, including factors such as
actual or threatened business closures (including job loss
thresholds), military base closures, and natural disasters or
emergencies. FHWA issued "questions and answers" on November 12, 2009,
to further address implementation questions.
[31] Each state used FHWA's special need criterion that relates to
severe job dislocation resulting from actual or threatened business
closure or restructuring. These states have been notified of FHWA's
determination and advised that in order to be consistent with the FHWA
guidance, the states must have data that show a connection between
demonstrated severe job losses and actual, identified firm closures
and restructurings. FHWA continues to work with the states wishing to
use the special need provision of the Public Works Act and will review
any additional data submissions from the states for consistency with
the statute and FHWA guidance. We will continue to monitor this issue
in our subsequent Recovery Act bimonthly reports.
[32] A state that does not meet its level of effort will be prohibited
from participating in the redistribution of federal-aid highway
obligation authority scheduled to occur in August 2011.
[33] GAO, Federal-Aid Highways: Trends, Effect on State Spending, and
Options for Future Program Design, [hyperlink,
http://www.gao.gov/products/GAO-04-802] (Washington, D.C.: Aug. 31,
2004). We have found that the preponderance of evidence suggests that
increasing federal highway funds influences states and localities to
substitute federal funds for funds they otherwise would have spent on
highways. In 2004 we estimated that during the 1983 through 2000
period, states used roughly half of the increases in federal highway
funds to substitute for funding they would otherwise have spent from
their own resources, and that the rate of substitution increased
during the 1990s. The federal-aid highway program creates the
opportunity for substitution because states typically spend
substantially more than the amount required to meet federal matching
requirements. As a consequence, when federal funding increases, states
are able to reduce their own highway spending and still obtain
increased federal funds.
[34] Recovery Act, div. A, title XII, § 1201(a).
[35] According to its February 2010 guidance, DOT determined that the
Recovery Act requires states to maintain their level of effort for
each individual covered program (e.g., highways, transit) rather than
maintaining a total level of effort for all covered programs.
[36] GAO, Physical Infrastructure: Challenges and Investment Options
for the Nation's Infrastructure, [hyperlink,
http://www.gao.gov/products/GAO-08-763T] (Washington, D.C.: May 8,
2008).
[37] Department of Transportation, Office of Inspector General, DOT's
Implementation of the American Recovery and Reinvestment Act:
Continued Management Attention Is Needed to Address Oversight
Vulnerabilities, MH-2010-024 (Washington, D.C., Nov. 30, 2009).
[38] Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1)
to transfer funds made available for transit projects to FTA. For FHWA
to transfer Recovery Act highway funds to FTA, a metropolitan planning
organization must request the transfer and have a specific transit
project identified that will receive the funds. Once the transfer
request has been made, but before funds are officially transferred,
FTA will include the transit project receiving the funds in its grant
management system and will report that it is a pending project. The
funds are officially transferred from FHWA to FTA when the U.S.
Treasury executes the transfer.
[39] While $53.6 billion was appropriated for the State Fiscal
Stabilization Fund in its entirety, $5 billion of these funds are
reserved for specific competitive grants, leaving approximately $48.6
billion for the U.S. Department of Education to allocate among the
states as State Fiscal Stabilization Fund formula grants.
[40] The percentages do not add to 100 percent due to rounding. L.
Zhou, Revenues and Expenditures for Public Elementary and Secondary
Education: School Year 2006-07 (Fiscal Year 2007) (NCES 2009 337)
(Washington D.C.: National Center for Education Statistics, U.S.
Department of Education), [hyperlink,
http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2009337] (accessed
Nov. 16. 2009).
[41] For more details on how the budget situations of LEAs varied
across states, see GAO, Recovery Act: Status of States' and
Localities' Use of Funds and Efforts to Ensure Accountability,
[hyperlink, http://www.gao.gov/products/GAO-10-231] (Washington, D.C.:
Dec. 10, 2009).
[42] The District of Columbia had not drawn down Recovery Act funds as
of January 22, 2010. District of Columbia officials told us that they
were making an effort to strengthen accountability systems for federal
education funds prior to drawing down funds. In addition, officials
told us that many LEAs had carryover funds from prior years that had
not been spent. In the District, LEAs are reimbursed for approved uses
of federal funds, and LEAs may have obligated some Recovery Act funds
but have not yet been reimbursed by the District.
[43] A Florida official attributed staff reductions at Florida LEAs at
least partially to an overall decline in student enrollment, requiring
fewer teachers in the 2009-2010 school year.
[44] Education's cash management rules require LEAs to promptly remit
interest earned on cash advances for any amounts exceeding $100, and
to do so at least quarterly.
[45] Additionally, in January, 2010, CDE issued guidance to LEAs
underscoring the requirement to remit interest earned on federal cash
balances at least quarterly and including detailed methodology on how
the interest should be calculated.
[46] U.S. Department of Education, "State Educational Agencies'
Implementation of Federal Cash Management Requirements under the
American Recovery and Reinvestment Act, Alert Memorandum," ED-OIG/
L09J0007 (Washington, D.C., Oct. 21, 2009).
[47] For a state to be eligible to receive a waiver, the percentage of
total state revenues used to support education cannot decrease from
the previous year. Waivers are granted based on a state's total level
of support for education as a percentage of state revenue, while MOE
levels are based on a selected measure of state spending for education.
[48] For more details on the MOE requirements, see GAO, Recovery Act:
Planned Efforts and Challenges in Evaluating Compliance with
Maintenance of Effort and Similar Provisions, [hyperlink,
http://www.gao.gov/products/GAO-10-247] (Washington, D.C.: Nov. 30,
2009).
[49] For more details on subrecipient monitoring, see the recipient
reporting section of this report, and GAO, Recovery Act: Funds
Continue to Provide Fiscal Relief to States and Localities, While
Accountability and Reporting Challenges Need to Be Fully Addressed,
[hyperlink, http://www.gao.gov/products/GAO-09-1016] (Washington,
D.C.: Sept. 23, 2009).
[50] HUD allocated Capital Fund formula dollars from the Recovery Act
to 3,134 public housing agencies, but obligated funds to 3,122 housing
agencies. According to HUD officials, 12 housing agencies chose not to
accept Recovery Act funding or no longer had eligible public housing
projects that could utilize the funds.
[51] HUD Office of Inspector General, Review of American Recovery and
Reinvestment Act Formula Allocations, 2009-FO-0006 (Washington, D.C.:
September 25, 2009).
[52] Newark Housing Authority in New Jersey planned to rehabilitate
493 vacant units, Philadelphia Housing Authority planned to
rehabilitate 410 vacant units, San Francisco Housing Authority planned
to rehabilitate 171 vacant units, Cuyahoga Metropolitan Housing
Authority in Ohio planned to rehabilitate 161 vacant units, and
Chicago Housing Authority planned to rehabilitate 142 vacant units.
[53] We visited 28 housing agencies that applied for competitive
grants, including 18 that received competitive grant awards.
[54] HUD Office of Inspector General, The Housing Authority of the
City of Eloy Lacked Capacity to Administer Its Recovery Act Capital
Fund Grant Without Outside Assistance, 2009-LA-1021 (Sept. 25, 2009).
[55] HUD Office of Inspector General, The East St. Louis Housing
Authority Had Weaknesses That Could Affect Its Capacity to Administer
Its Recovery Act Funding, 2009-KC-1801 (Sept. 18, 2009).
[56] HUD developed the Public Housing Assessment System to evaluate
the overall condition of housing agencies and to measure performance
in major operational areas of the public housing program. These
include financial condition, management operations, and physical
condition of the housing agencies' public housing programs. Housing
agencies that are deficient in one or more of these areas are
designated as troubled performers by HUD and are statutorily subject
to increased monitoring.
[57] According to HUD officials, HUD staff have completed
approximately 50 additional remote reviews, but these reports had not
yet been uploaded to HUD's tracking system and therefore are not
reflected in these figures.
[58] HUD officials noted that these 985 grants accounted for 90
percent of the funds awarded.
[59] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to
States and Localities, While Accountability and Reporting Challenges
Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009).
[60] In comparison, HUD obligated its fiscal year 2008 capital funds
in June 2008.
[61] 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).
[62] The FederalReporting.gov system was created and managed by OMB
and the Recovery Accountability and Transparency Board for all
Recovery Act recipients to report on the nature of projects undertaken
with Recovery Act funds and on job creation estimates.
[63] According to HUD officials, recipients have been able to
deactivate reports in FederalReporting.gov for both reporting cycles.
However, once the October 2009 reports were published on the
Recovery.gov Web site, recipients were no longer able to deactivate
those recipient reports in FederalReporting.gov or cause the reports
to be taken down. In contrast, for the current reporting cycle
Recovery.gov will be refreshed every 2 weeks beginning February 10,
2010, permitting regular updates from FederalReporting.gov, including
the removal of deactivated reports, due to the newly instituted
continuous corrections period. Despite this change, recipients remain
unable to deactivate or modify reports in FederalReporting.gov from
the October 2009 recipient reporting period that were already
published in Recovery.gov.
[64] Section 1609 of the Recovery Act requires that adequate resources
be devoted to ensuring that applicable environmental reviews under the
National Environmental Policy Act (NEPA) are completed expeditiously
and that the shortest existing applicable process under NEPA shall be
used.
[65] See GAO, Recovery Act: States' and Localities' Current and
Planned Uses of Funds While Facing Fiscal Stress, [hyperlink,
http://www.gao.gov/products/GAO-09-829] (Washington D.C.: July 8,
2009).
[66] Our discussion on weatherization is primarily limited to the 16
states and the District of Columbia that are the focus of this report.
[67] See GAO, Recovery Act: Status of States' and Localities' Use of
Funds and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington D.C.: Dec. 10,
2009).
[68] See [hyperlink, http://www.gao.gov/products/GAO-10-231].
[69] The quarter ending December 31, 2009, is the most recent quarter
for which the states are required to report data under the Recovery
Act. DOE officials noted that the states and territories also have
access to annually appropriated funds for weatherization activities.
[70] The Davis Bacon Act is codified at 40 U.S.C. § 3141 et seq. The
Recovery Act's Davis-Bacon provisions are located at section 1606 of
the act.
[71] Pub. L. No. 89-665, 80 Stat. 915 (codified as amended at 16
U.S.C. § 470 et seq.).
[72] 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.
[73] According to Labor officials and guidance provided on its Web
site, individuals who meet Labor's definition of apprentices and
trainees may be paid a percentage of the journeyman rate on the wage
determination. To do so, however, these individuals must be
participating in a program that has been registered with Labor or with
a State Apprenticeship Agency recognized by Labor.
[74] The wage rates were revised in December 2009.
[75] DOE officials told us in January 2010 that they were in the
process of developing an agreement with the Advisory Council on
Historic Preservation and the National Conference of State Historic
Preservation Officers to create a manageable framework for
streamlining DOE's compliance with the requirements of the National
Historic Preservation Act.
[76] See, for example, DOE, "Weatherization Program Notice 09-1B"
(Mar. 12, 2009).
[77] Service providers weatherize homes; local agencies manage service
providers but are sometimes qualified to provide weatherization
services themselves.
[78] 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 at least a certain amount per year in
federal awards--currently set at $500,000 by OMB--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 and when federal laws, regulations, or grant agreements do not
require a financial statement audit of the entity, the entity may
elect to have an audit of that program.
[79] A November 3, 2009, press release issued by the State of
California Office of the Inspector General noted serious problems with
the Economic Opportunity Council of San Francisco, including financial
management deficiencies.
[80] The General Services Administration maintains the Excluded
Parties List System, which identifies parties excluded from receiving
federal contracts, certain subcontracts, and certain other assistance
and benefits. In GAO-09-174, Excluded Parties List System: Suspended
and Debarred Businesses and Individuals Improperly Receive Federal
Funds, we recommended that the General Services Administration take
actions to strengthen controls over the system.
[81] DOE collects data reported by states and territories on the
number of homes weatherized and on state and territory expenditures of
funds on a quarterly basis. The data reported by states as of a
certain date (such as for the quarter ending December 31, 2009) can
change as states finalize figures for homes weatherized and funds
spent. For example, in January, 2010, DOE reported that about 9,100
homes had been weatherized as of December 31, 2009. DOE originally
planned to weatherize about 593,000 homes with Recovery Act funding by
March 31, 2012. A DOE report issued on February 24, 2010, indicated
that 30,252 homes had been weatherized nationwide as of December 31,
2009.
[82] According to the guidance issued by OMB on December 18, 2009, the
estimate of the number of jobs created or retained by the Recovery Act
should now be expressed as full-time equivalents (FTE).
[83] For purposes of the Recovery Act funds, the period of "summer" is
from May 1 through September 30.
[84] H.R. Rep. No. 111-16, at 448 (2009).
[85] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[86] Under WIA, local areas must ensure that a minimum of 30 percent
of funds, including Recovery Act funds, are used for serving out-of-
school youth.
[87] The summer employment completion rate represents the percentage
of youth who completed their summer work experience without dropping
out prior to the scheduled end date of the work experience.
[88] Department of Labor, Attachment B-Training and Employment
Guidance Letter No. 17-05 (Feb. 17, 2006).
[89] [hyperlink, http://www.gao.gov/products/GAO-10-223].
[90] OMB Memorandum, M-10-08, Updated Guidance on the American
Recovery and Reinvestment Act - Data Quality, Non-Reporting
Recipients, and Reporting of Job Estimates (Dec. 18, 2009).
[91] The TAS codes identify the Recovery Act funding program source.
The two left most characters of each TAS code form a data element,
which is identical with the two-digit numerical code used in the
federal budgetary process to identify major federal organizations. The
CFDA is a governmentwide compendium of federal programs, projects,
services, and activities that provide assistance or benefits. It
contains assistance programs administered by departments. Each program
is assigned a unique number where the first two digits represent the
funding agency.
[92] An award key is a derived field that identifies an award. This
field is derived using a distinct combination of the following
component fields: Award_type, Prime_DUNS, Award_id and Order_number.
Board representatives indicated that while the same award_key value
for a specific project could be assigned from one quarter to the next,
it could not be presumed that this would always be the case.
[93] The final report key shows the status as a final report. It
indicates that this is the final report and there will be no further
quarterly reports.
[94] A DUNS number is a unique nine-digit sequence recognized as the
universal standard for identifying and keeping track of 100 million
businesses worldwide. The Central Contractor Registration (CCR) system
is a secure, single repository of vendor data used governmentwide.
[95] Last quarter LEAs were generally required to calculate a baseline
number of hours worked, which was a hypothetical number of hours that
would have been worked in the absence of Recovery Act funds. LEA
officials were to use this baseline number to determine the number of
hours created or retained and to subsequently derive the number of
FTEs for job estimates.
[96] New Jersey officials told us they plan to submit finalized
figures during the continual correction period.
[97] Massachusetts' reported data also reflect the updated guidance
shift to the quarterly reporting of jobs data even though the LEAs had
reported cumulative data on FTEs funded by the Recovery Act. The
Massachusetts Department of Education subtracted out FTEs reported in
the first quarter to compute a quarterly figure.
[98] Officials at the Arizona Department of Education told us they did
not follow OMB's December 18 guidance for the IDEA Part B and ESEA,
Title I recipient reports, but planned to ask LEAs to submit
corrections during February or March. Officials at the Governor's
Office of Economic Recovery in Arizona, the prime recipient for SFSF,
told us they had followed the December 18 guidance for SFSF recipient
reports.
[99] Colorado Department of Education officials determined, due to the
lateness of the December 18 guidance, it was not possible to perform
another statewide collection of FTE data prior to the submission
deadlines. Department officials said they are following the December
guidance for the third reporting round and believe the new guidance
will increase the consistency of state data. Colorado is directing its
SFSF funds to institutions of higher education and not LEAs. The SFSF
recipient reports were prepared using OMB's December 18th guidance.
[100] HUD's data quality process proposal defines a significant error
in the fields award amount, total received, total spent, and jobs as
any entry that varies from a HUD comparison source value taken from
corresponding HUD Office of Chief Financial Officer award records for
obligations and disbursements.
[101] The department's operating administrations overseeing the
implementation of the Recovery Act include the Federal Aviation
Administration, Federal Highway Administration, Federal Railroad
Administration, Federal Transit Administration, and Maritime
Administration.
[102] U.S. Department of Health and Human Services, Office of
Inspector General, Summary of Inspectors General Reports on Federal
Agencies' Data-quality Review Processes, No. A-09-10-01002 (November
2009).
[103] OMB 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.
[104] The Compliance Supplement is issued annually to guide auditors
on what program requirements should be tested for programs audited as
part of the Single Audit.
[105] Single Audit Act requires that recipients submit their financial
reporting packages, including the Single Audit report, to the federal
government no later than 9 months after the end of the period being
audited. As a result, an audited entity may not receive feedback
needed to correct an identified internal control or compliance
weakness until the latter part of the subsequent fiscal year.
[106] Each award recipient expending more than $50 million is assigned
a cognizant agency for audit. Generally, the cognizant agency for
audit is the federal awarding agency that provides the predominant
amount of direct funding to a recipient unless OMB assigns this
responsibility to another agency. Some of the responsibilities of the
cognizant agency include performing quality control reviews,
considering auditee requests for extensions, and coordinating a
management decision for audit findings that affect federal programs of
more than one agency.
[107] OMB, Payments to State Grantees for Administrative Costs of
Recovery Act Activities, M-09-18 (Washington, D.C.: May 11, 2009), and
OMB, Payments to State Grantees for their Administrative Costs for
Recovery Act Funding - Alternative Allocation Methodologies, M-10-03
(Washington, D.C.: Oct. 13, 2009).
[108] The following 16 states volunteered to participate in the
Project: Alaska, California, Colorado, Florida, Georgia, Louisiana,
Maine, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Dakota,
Tennessee, Texas, and Virginia.
[109] A material weakness is a significant deficiency or combination
of significant deficiencies, which results in more than a remote
likelihood that a material misstatement of the subject matter will not
be prevented or detected.
[110] FraudNet is a hotline GAO created in 1979 to solicit help from
the public in combating fraud, waste, abuse, mismanagement, and
criminal activities occurring in federal programs. We have
specifically urged private citizens, government workers, contractors,
and others to use FraudNet to report concerns about Recovery Act
spending. FraudNet is primarily an Internet-based operation that
provides a secure means for individuals to confidentially communicate
such concerns.
[111] According to Board staff, the government-managed hotline was set
up using a previously established cooperative agreement between the
Department of Justice and Louisiana State University.
[112] According to the Board staff, the majority of the complaints
received via the fraud hotline did not contain any actionable
information; for example, some complaints contained a generalized
comment on the Recovery Act rather than any specific allegation of
wrongdoing. The Board refers those that are actionable to the
appropriate inspector general when there is a specific allegation of
wrongdoing or multiple factors indicate a possible area of risk.
[113] The Excluded Parties List System, which is maintained by the
General Services Administration, is a database listing the parties
suspended, proposed for debarment, debarred, declared ineligible, or
excluded or disqualified from government contracting.
[114] The General Services Administration Inspector General has issued
38 reports on Recovery Act-related issues as of December 2009;
however, 36 of the 38 reports were not published on Recovery.gov
because they contain proprietary information.
[115] The National Association of State Auditors, Comptrollers and
Treasurers is an organization of state auditors, comptrollers, and
treasurers in the 50 states, the District of Columbia, and U.S.
territories who deal with the financial management of state government.
[116] In the District of Columbia, the Inspector General conducts
program audits as well as investigating allegations of waste, fraud,
and abuse.
[117] The following 16 states volunteered to participate in the
project--Alaska, California, Colorado, Florida, Georgia, Louisiana,
Maine, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Dakota,
Tennessee, Texas, and Virginia.
[118] See GAO, State and Local Governments' Fiscal Outlook March 2010
Update, [hyperlink, http://www.gao.gov/products/GAO-10-358]
(Washington, D.C.: Mar. 2, 2010). This and related products can be
found at [hyperlink,
http://gao.gov/special.pubs/longterm/longterm.html]. Our update of the
state and local model uses data from the National Income and Product
Accounts of the Bureau of Economic Analysis as the primary data source
for projections of the level of receipts and expenditures for the
sector until 2060, based on current and historical spending and
revenue patterns. We assume that the current set of policies in place
across federal, state, and local governments remains constant. Actual
amounts will reflect policy actions taken by state and local
governments to balance their budgets. Years are calendar years.
[119] Because the model covers the sector in the aggregate, the fiscal
outcomes for individual states and localities cannot be captured.
[120] The explicit definition of our operating balance measure is all
receipts, excluding funds used for long-term investments, minus
current expenditures. To develop this measure, we subtract funds used
to finance longer-term projects--such as investments in buildings and
roads--from receipts since these funds would not be available to cover
current expenses.
[121] The sector's current tax receipts, including income, sales, and
property tax, totaled $1.3 billion, or about 68 percent of the
sector's receipts in 2008.
[122] All of the selected states and the District have at least one
rainy-day or reserve fund.
[123] For our December 2009 Recovery Act report, we expanded our focus
on the use of Recovery Act funds to include 44 local governments.
[124] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009); Recovery Act: States' and
Localities' Current and Planned Uses of Funds While Facing Fiscal
Stresses, [hyperlink, http://www.gao.gov/products/GAO-09-829]
(Washington, D.C.: July 8, 2009); Recovery Act: Funds Continue to
Provide Fiscal Relief to States and Localities, While Accountability
and Reporting Challenges Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009); Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009).
[125] For more details on the maintenance-of-effort requirements, see
GAO, Recovery Act: Planned Efforts and Challenges in Evaluating
Compliance with Maintenance of Effort and Similar Provisions,
[hyperlink, http://www.gao.gov/products/GAO-10-247] (Washington, D.C.:
Nov. 30, 2009).
[126] The Compliance Supplement is issued annually to guide auditors
on what program requirements should be tested for programs audited as
part of the Single Audit.
[127] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009).
[128] Recovery Act, div. A, §1512, 123. We will refer to the quarterly
reports required by section 1512 as recipient reports.
[129] GAO, Recovery Act: Recipient Reported Jobs Data Provide Insights
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009).
[130] The Recovery Act requires recipients of funding from federal
agencies to report quarterly on jobs created or retained with Recovery
Act funding. The first recipient reports filed in October 2009 cover
activity from February through September 30, 2009. This bimonthly
report incorporates second quarterly recipient report covering
activity through December 31, 2009.
[131] The states we visited are Arizona, California, Colorado,
District of Columbia, Florida, Georgia, Illinois, Iowa, Massachusetts,
Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, and Texas.
[132] GAO, Recovery Act: Status of State's and Localities' Use of
Funds and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009).
[133] See GAO, Recovery Act: Recipient Reported Jobs Data Provided
Some Insight into Use of Recovery Act Funding, but Data Quality and
Reporting Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009), for an assessment of recipient report data.
[134] For the Highway Infrastructure Investment program, the U.S.
Department of Transportation has interpreted the term "obligation of
funds" to mean the federal government's commitment to pay for the
federal share of the project. This commitment occurs at the time the
federal government signs a project agreement.
[135] Recovery Act, div. A, title XII, 123 Stat. 206.
[136] Recovery Act, div. A, title XII, § 1201(a).
[137] Fixed guideway systems use and occupy a separate right-of-way
for the exclusive use of public transportation services. They include
fixed rail, exclusive lanes for buses and other high-occupancy
vehicles, and other systems.
[138] Generally, to qualify for funding under the applicable formula
grant program, an urbanized area must have a fixed guideway system
that has been in operation for at least 7 years and is more than one
mile in length.
[139] Metropolitan planning organizations are federally mandated
regional organizations, representing local governments and working in
coordination with state departments of transportation, that are
responsible for comprehensive transportation planning and programming
in urbanized areas. MPOs facilitate decision making on regional
transportation issues, including major capital investment projects and
priorities. To be eligible for Recovery Act funding, projects must be
included in the region's Transportation Improvement and State
Transportation Improvement Programs.
[140] For the Transit Capital Assistance Program and Fixed Guideway
Infrastructure Investment program, the U.S. Department of
Transportation has interpreted the term "obligation of funds" to mean
the federal government's commitment to pay for the federal share of
the project. This commitment occurs at the time the federal government
signs a grant agreement.
[141] Recovery Act, div. A, title XII, 123 Stat. 210.
[142] Recovery Act, div. A, title XII, § 1201(a).
[143] Beginning on July 1, 2009, Education awarded the remaining
government services funds to states with approved applications.
[144] Schools identified for corrective action have missed academic
targets for 4 consecutive years, and schools implementing
restructuring have missed academic targets for 6 consecutive years.
[145] For the purposes of this report, "Title I" refers to Title I,
Part A of the Elementary and Secondary Education Act of 1965 (ESEA),
as amended.
[146] 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.
[147] For purposes of the Recovery Act funds, the period of "summer"
is from May 1 through September 30.
[148] H.R. Rep. No. 111-16, at 448 (2009).
[149] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[End of section]
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