Recovery Act
Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds, an E-supplement to GAO-10-999 (Appendixes) Gao ID: GAO-10-1000SP September 20, 2010This supplementary report to GAO-10-999 provides individual state appendixes for 16 states and the District of Columbia for GAO's work on the seventh of its bimonthly reviews of the American Recovery and Reinvestment Act (Recovery Act).
GAO-10-1000SP, Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds (Appendixes)
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United States Government Accountability Office:
GAO:
Report to the Congress:
Recovery Act:
Opportunities to Improve Management and Strengthen Accountability over
States' and Localities' Uses of Funds (Appendixes):
GAO-10-1000SP:
Contents:
Appendix I: Arizona:
Appendix II: California:
Appendix III: Colorado:
Appendix IV: District of Columbia: Appendix V: Florida:
Appendix VI: Georgia:
Appendix VII: Illinois:
Appendix VIII: Iowa:
Appendix IX: Massachusetts:
Appendix X: Michigan:
Appendix XI: Mississippi:
Appendix XII: New Jersey:
Appendix XIII: New York:
Appendix XIV: North Carolina:
Appendix XV: Ohio:
Appendix XVI: Pennsylvania:
Appendix XVII: Texas:
Appendix XVIII: Program Descriptions:
[End of section]
Appendix I: Arizona:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
[Footnote 1] spending in Arizona. The full report covering all of
GAO's work in 16 states and the District of Columbia may be found at
[hyperlink, http://www.gao.gov/recovery].
What We Did:
We reviewed three specific program areas”the Weatherization Assistance
Program (WAP), Energy Efficiency and Conservation Block Grants
(EECBG), and public housing”funded under the Recovery Act. Our work
focused on the status of the program area's funding, how funds are
being used, methods used by program managers to monitor projects to
ensure proper use and safeguarding of Recovery Act funds, and various
issues that are specific to each program area. (For descriptions and
requirements of the programs we covered, see appendix XVIII of GAO-10-
1000SP.)
We selected these programs because they provided different views of
Recovery Act spending in Arizona. For example, the Recovery Act
provided a significant addition in WAP funding. We reviewed how this
increase in funding was being managed and identified challenges the
Arizona Department of Commerce (ADOC) faces in meeting spending
deadlines. Furthermore, it provided an opportunity to determine the
state and local procedures in place to ensure monitoring, tracking,
and measurement of weatherization program success.
The EECBG program afforded us an opportunity to assess how the state
is managing a program that had not received funding prior to the
Recovery Act. The program provides federal grants through the Recovery
Act to local governments, Indian tribes, states, and territories to
reduce energy use and fossil fuel emissions, and for improvements in
energy efficiency.
We revisited three public housing agencies”we previously reported on
these agencies in 2009 and 2010”that received Recovery Act funds
directly from the federal government to see firsthand the progress
these agencies were making in expending their funds. We also visited
the Department of Housing and Urban Development (HUD) Phoenix Field
Office to discuss its efforts to implement their second year
monitoring plan for Recovery Act funds.
Our work in Arizona also included monitoring the state's fiscal
situation, as well as the city of Phoenix's use of Recovery Act funds.
The city received nearly $400 million of Recovery Act monies and was
chosen for that reason. Also, because of the significant amount of
funding the Arizona Department of Education received, we followed up
on the actions it is taking to monitor the use of Recovery Act funds
and found that it is better prepared to monitor the funds. Further, to
gain an understanding of the state's experience in meeting Recovery
Act reporting requirements,[Footnote 2] we examined documents prepared
by and held discussions with the Governor's Office of Economic
Recovery (OER) and ADOC. Finally, we spoke with OER and Office of the
Auditor General officials that have oversight responsibilities for
Recovery Act funds. In assessing all of these programs, we spoke with
local and state officials responsible for the programs, reviewed
records, and visited locations where weatherization, energy
efficiency, and housing improvement activities were underway.
What We Found:
* Weatherization Assistance Program. ADOC was awarded $57 million to
weatherize an estimated 6,400 homes. The weatherization services being
performed consist of a wide variety of retrofitting measures, such as
improving heating and cooling systems, applying air sealing and
weather stripping, and improving insulation. Currently, because the
average cost to weatherize homes has been less than expected, ADOC
faces challenges in expending all of its weatherization funds by the
March 2012 deadline, and, if average costs remain the same, may be
able to weatherize about 1,200 more homes than originally planned.
ADOC is exceeding some U. S. Department of Energy (DOE) requirements
for monitoring the use of Recovery Act funds and estimates that
weatherization of homes in Arizona will result in up to $2.8 million
in annual energy savings.
* Energy Efficiency and Conservation Block Grants. The State Energy
Office received $9.5 million in EECBG funds and distributed the funds
to 64 cities, with populations less than 35,000, as well as the 5
smallest counties in Arizona. In addition, 32 larger communities
received $54.2 million and 21 tribal communities received $8.9 million
in direct funding from the DOE for energy efficient programs.
Recovery Act EECBG funds are being used in Arizona to finance a
variety of projects, such as energy assessments and the installation
of energy-saving devices and equipment. Other planned activities
include retrofitting energy efficient street lighting and installing
renewable energy technologies in or on government buildings.
* Public Housing Formula and Competitive Capital Funds. Arizona has 15
public housing agencies that have received about $12 million from the
Public Housing Capital fund. To date, the agencies are expending their
formula funds by the mandated deadlines. Arizona also received one
Capital Fund competitive grant, which the city of Phoenix housing
agency plans to combine with other funding to renovate 374 housing
units. This project has faced challenges stemming from a more complex
bidding process and historical preservation issues. These are
potential obstacles to the city's ability to meet the September 23,
2010, obligation deadline.
* Arizona's fiscal condition. Recovery Act funds helped Arizona to
balance its fiscal year 2011 budget by enabling the state to save the
equivalent amount of approximately $815 million from its general fund.
The state has enacted a budget for 2011 assuming the passage of two
ballot measures in the November general election. The state
legislature is awaiting the November election results before deciding
on possible contingency budget solutions.
* The City of Phoenix's use of Recovery Act funds. The largest city in
Arizona, Phoenix manages a diverse portfolio of Recovery Act funds to
mainly support short-term, one-time projects in infrastructure
development, energy conservation, public housing, and other areas.
Phoenix has been awarded $382 million, of which 62 percent was awarded
directly from federal agencies while the remaining 38 percent was
awarded to state agencies that in turn passed the funds to the city.
Officials said that Recovery Act funds have helped to fund jobs and
are expected to yield beneficial outcomes to the city, including
better infrastructure;
increased services to communities, such as Early Head Start;
and energy savings from energy grants.
* Accountability. The Arizona Auditor General released the fiscal year
2009 Single Audit[Footnote 3] with audit coverage of Recovery Act
expenditures from February 2009 when the Recovery Act was passed
through June 2009. Only 2 of the 28 significant internal control
findings that were related to federal funding awards were specific to
controls over Recovery Act funds-”one was a lack of maintaining
documentation and the other was not having current central contractor
registrations documentation prior to awarding grant money. Corrective
action plans for both are in place. The OER has begun implementing its
monitoring of subrecipients of Recovery Act funds, as well as
providing technical assistance to state agencies on procedures to
detect fraud, waste, and abuse.
Arizona is Weatherizing Homes, Showing Energy Savings, Creating Jobs,
and Monitoring Use of Recovery Act Funds:
The Recovery Act appropriated about $5 billion for WAP, which DOE is
distributing to each of the states, the District of Columbia, seven
territories, and Indian tribes, to be spent by March 31, 2012. This
program enables low-income families to reduce their utility bills by
making longterm, energy-efficiency improvements to their homes. This
includes, for example, installing insulation or modernizing heating or
air conditioning equipment. ADOC administers the WAP within the state
and has been awarded about $57 million in Recovery Act funds. The
department allocated about $49 million of the $57 million to 10 local
service providers, which includes approximately $42 million to
weatherize 6,414 homes and $7 million for administration, training and
technical assistance, audits, and liability insurance. ADOC retained
about $8 million for administration and initial ramp-up activities,
such as training center expansion, curricula development, staff
training, and equipment purchases. The local service providers
identify homes that are eligible[Footnote 4] to receive weatherization
work and employ in-house construction crews, hire contractors, or use
a combination of both approaches to make those improvements. ADOC
estimates that weatherizing approximately 6,400 homes will result in
as much as $2.8 million in overall energy savings annually. Table 1
shows the funding allocated to each of the 10 local service providers,
the projected number of homes to weatherize, the number and percent of
homes weatherized, the funds spent weatherizing homes, and the average
cost per home weatherized as of June 30, 2010.
Table 1: Funding Allocated to Local Service Providers, the Number and
Percent of Homes Weatherized, the Funds Spent Weatherizing Homes, and
Average Cost of Homes Weatherized as of June 30, 2010:
Local service provider: Maricopa County Human Services Department,
Community Service Division;
Funding allocation[A]: $11,911,987;
Projected number of homes to weatherize: 1,600;
Number of homes weatherized: 333;
Percent of homes completed: 21%;
Funds spent weatherizing homes: $1,654,835;
Average cost per home weatherized: $4,969.
Local service provider: Northern Arizona Council of Governments;
Funding allocation[A]: $7,500,359;
Projected number of homes to weatherize: 987;
Number of homes weatherized: 283;
Percent of homes completed: 29%;
Funds spent weatherizing homes: $1,290,062;
Average cost per home weatherized: $4,559.
Local service provider: City of Phoenix Neighborhood Services
Department;
Funding allocation[A]: $7,222,865;
Projected number of homes to weatherize: 951;
Number of homes weatherized: 430;
Percent of homes completed: 45%;
Funds spent weatherizing homes: $2,779,532;
Average cost per home weatherized: $6,464.
Local service provider: Western Arizona Council of Governments;
Funding allocation[A]: $5,911,442;
Projected number of homes to weatherize: 768;
Number of homes weatherized: 187;
Percent of homes completed: 24%;
Funds spent weatherizing homes: $1,122,302;
Average cost per home weatherized: $6,002.
Local service provider: Tucson Urban League, Inc.
Funding allocation[A]: $4,749,363;
Projected number of homes to weatherize: 612;
Number of homes weatherized: 107;
Percent of homes completed: 17%;
Funds spent weatherizing homes: $526,132;
Average cost per home weatherized: $4,917.
Local service provider: Southeastern Arizona Community Action Program;
Funding allocation[A]: $4,654,446;
Projected number of homes to weatherize: 597;
Number of homes weatherized: 304;
Percent of homes completed: 51%;
Funds spent weatherizing homes: $1,510,280;
Average cost per home weatherized: $4,968.
Local service provider: Community Action Human Resource Agency;
Funding allocation[A]: $2,269,618;
Projected number of homes to weatherize: 273;
Number of homes weatherized: 66;
Percent of homes completed: 24%;
Funds spent weatherizing homes: $234,145;
Average cost per home weatherized: $3,548.
Local service provider: Gila County Community Action Program;
Funding allocation[A]: $1,744,457;
Projected number of homes to weatherize: 202;
Number of homes weatherized: 61;
Percent of homes completed: 30%;
Funds spent weatherizing homes: $491,927;
Average cost per home weatherized: $8,064.
Local service provider: Pima County, Community Development and
Neighborhood Conservation Department;
Funding allocation[A]: $1,705,544;
Projected number of homes to weatherize: 197;
Number of homes weatherized: 42;
Percent of homes completed: 21%;
Funds spent weatherizing homes: $224,632;
Average cost per home weatherized: $5,348;
Local service provider: Mesa Community Action Network;
Funding allocation[A]: $1,750,512;
Projected number of homes to weatherize: 227;
Number of homes weatherized: 117;
Percent of homes completed: 52%;
Funds spent weatherizing homes: $871,344;
Average cost per home weatherized: $7,447.
Local service provider: Total;
Funding allocation[A]: $49,420,593;
Projected number of homes to weatherize: 6,414;
Number of homes weatherized: 1,930;
Percent of homes completed: 30%;
Funds spent weatherizing homes: $10,705,191;
Average cost per home weatherized: $5,547.
Source: GAO analysis of ADOC data.
[End of table]
This total includes about $41.6 million for program operations and
$4.9 million for training and technical assistance;
the remainder is for administration, audit, and liability insurance
that was allocated among the local service providers (numbers rounded).
Although $57 million was awarded to Arizona, DOE limited each state's
access to 50 percent of these funds-”or $28.5 million for Arizona”-
until 30 percent of the homes to be weatherized had been completed and
other requirements had been met.[Footnote 5] According to ADOC
officials, as of June 30, 2010, the state had weatherized 1,930 homes,
about 30 percent, which qualified it for obtaining the balance of its
funding award from DOE. On August 6, 2010, ADOC notified DOE that it
could access the remaining $28.5 million.
Although ADOC has qualified for the remainder of its funding
allocation, it still faces some challenges in weatherizing its
projected number of homes and expending weatherization funds by the
March 2012 deadline. A key factor that is affecting the weatherization
plan is the statewide average cost per home weatherized. Arizona
estimated expending a statewide average of about $6,500 per home in
Recovery Act weatherization funds, which is the maximum average amount
permitted by statute. However, statewide, local service providers are
spending an average of approximately $5,500”or about $1,000 less per
home”because (1) the extent of work required is less than estimated;
(2) some work is done with funds leveraged from other sources, such as
rebates from utility companies;
and (3) to a lesser extent, some contractors are able to buy smaller
items in bulk that translates to lower per unit costs. If local
service providers continue to achieve these savings, ADOC will
weatherize its 6,414 homes as planned with only about $36 million.
ADOC estimates that, if the average costs remain, it may be able to
weatherize an additional 1,218 homes with the remainder of the $42
million it allocated for weatherization program operations.
ADOC officials recognize that increasing the number of homes
weatherized can be a challenge for some local service providers. For
example, some providers (1) awarded contracts to firms who do not want
to add temporary staff to increase their existing workload and (2)
have difficulties finding additional contractors who are qualified and
willing to do the work. For example, Tucson Urban League officials
informed us that contractors were deterred from doing weatherization
work because they had to bear the cost of obtaining the training and
certification to do this work.[Footnote 6] The officials also believed
that there were not enough contractors available in the community that
could aid them in increasing their monthly rate of homes completed.
This poses a real challenge for the Tucson Urban League because its
average monthly rate has been about 12 homes per month from October
2009 through June 2010, and it would have to weatherize an average of
about 33 homes per month to expend all of its funds by the deadline.
ADOC officials said that they will closely monitor completion rates of
all of the local service providers and, if necessary, will reallocate
funds from those who are struggling to meet their goal to those who
are capable of meeting their goal and taking on additional work. The
officials said that ADOC will make these reallocation decisions in the
next 8 to 10 months.
Weatherization Efforts Expect to Achieve At Least $2.8 million in
Energy Savings and are Creating Jobs:
One of WAP's goals is to reduce energy consumption and utility bills
for low-income households. To measure the impact in Arizona, ADOC
calculates an estimated kilowatt hour (kWh) usage reduction and
utility cost savings resulting from the weatherization work performed
on homes. As of June 25, 2010, ADOC estimates that the WAP Recovery
Act weatherization services have resulted in a usage reduction of 2.4
million kWh and approximately $267,000 in savings for the residents of
the 1,930 homes that have been weatherized. ADOC estimates the
weatherization work on the original plan covering approximately 6,414
homes statewide will result in as much as $2.8 million in overall
energy savings annually.[Footnote 7] If Arizona is able to weatherize
the additional 1,200 homes, it estimates total energy savings to be
about $3.3 million. In addition to these estimates, ADOC will
calculate the actual energy and utility cost savings achieved for the
residents by comparing monthly utility bills for a 1-year period prior
to the weatherization work to an 18-month period after the work is
completed.
The weatherization services being performed consist of a wide variety
of retrofitting measures, such as improving heating and cooling
systems, applying air sealing and weather stripping, and improving
insulation. Local service providers determine which measures to
install in a home by diagnostic testing, visual inspection, and
practical considerations. Health and safety inspections are also
conducted to ensure that installing efficiency measures will not
jeopardize the occupants or their home.[Footnote 8] In part, federal
requirements limiting the amount of money that can be spent on
residences have helped to ensure that only the most cost-effective
measures are included in the upgrade of a particular home. The
residents in three homes we visited informed us that they experienced
balanced temperatures in their homes and improved effectiveness of
their heating and cooling systems. Some also reported that the
contractors had instructed them on steps they could take to reduce
their energy consumption, such as installing compact fluorescent light
bulbs and unplugging small appliances when not in use.
Arizona officials report that the WAP also has had a positive impact
on creating jobs in Arizona. The Recovery Act significantly increased
the funding and the number of homes being weatherized compared to the
DOE weatherization program prior to the Recovery Act. As a result, all
10 local service providers awarded contracts to firms to perform their
weatherization work in addition to their in-house crews, which some
agencies have also expanded. For example, one local service provider
awarded contracts to eight general contractors, and increased from two
in-house crews to six in order to meet the increased workload demand
resulting from the Recovery Act. According to ADOC officials, because
of the temporary nature of the Recovery Act funds, some contractors
have expressed a reluctance to submit bids for weatherization work
because they would need to hire additional staff and pay for training
and start-up costs if awarded contracts. ADOC said that they have been
working to educate contractors about other energy retrofit
opportunities”-such as other DOE-funded programs or Arizona's utility
company rebate program”-that they would be competitive for with
trained and certified staff.
State Agency Monitoring Actions Meet or Exceed DOE Requirements:
DOE requires state weatherization agencies”-ADOC in Arizona-”to (1)
visit each local service provider at least once a year to inspect the
local service provider's management of funds and the completion of
weatherized homes and to review records and client files, (2) inspect
at least 5 percent of the weatherized homes, and (3) ensure that each
local service provider inspects all of the completed homes they
weatherize. ADOC officials reported that they are meeting all and
exceeding some of the DOE requirements.
* Instead of once a year, ADOC officials said their monitors have been
visiting each of the 10 local service providers at least once a month.
ADOC officials said that they will conduct more frequent on-site
monitoring of local service providers who are struggling to achieve
their completion rates to determine what is causing the problem and to
assist them in addressing those challenges.
* ADOC has inspected approximately 8.5 percent of the weatherized
homes to date, which exceeds the DOE 5 percent requirement.[Footnote
9] These site visits are conducted at various stages of job completion”
at initial audit, during installation of the weatherization measures,
and after completion. Both ADOC and local service provider monitors
can use these on-site inspections to provide feedback to the
contractors on weatherization activities the monitors observed. For
example, we observed an ADOC monitor on a home visit informing the
contractor of a method that could be used in the future for installing
additional ductwork that would improve the air flow into the room and
the energy efficiency of the air conditioning system.
* ADOC officials said that their monitors address the DOE requirement
to ensure that each local service provider inspects all weatherized
homes by conducting desk audits on 100 percent of all weatherization
jobs using its Web-based audit tool. ADOC requires each local service
provider, at the end of each month, to enter information into its
database documenting that final inspections have been performed on
each home completed during that month. The ADOC monitors (1) review
all of this data to ensure that the local service providers have
documented whether final inspections have been performed and (2)
provide a monthly report to each local service provider showing the
results of these reviews. ADOC officials stated that these reviews, in
combination with the site visits and home inspections, provide ADOC
with assurances that local service providers are inspecting all of the
homes they complete.
Knowledge Sharing and Planning:
The 10 community service organizations that have historically provided
weatherization services in Arizona have a peer to peer information
exchange, which currently meets quarterly. The agencies discuss topics
such as workload demands;
requirements of the Recovery Act, such as Davis-Bacon and Buy American
issues;
and how they plan to meet weatherization targets. About 15 years ago,
this group developed the Southwest Building Science Training Center,
with which ADOC has partnered to train the number of weatherization
contractors and auditors required to meet the Recovery Act
weatherization goals for Arizona.
EECBGs Help Make it Possible For Arizona Communities to Undertake New
Energy-Saving Programs The EECBG program, funded for the first time by
the Recovery Act, funds programs that reduce fossil fuel emissions in
an environmentally sustainable manner, reduce the total energy use of
the eligible entities, and improve energy efficiency in
transportation, construction, and other sectors. Arizona grant
recipients received a total of $72.6 million in EECBG funds and many
of its cities and counties are using these funds to assess the energy
efficiency of public buildings, install energy-saving devices and
equipment, and partner with the private sector to leverage funds for
increased potential effectiveness.
Arizona cities, counties, and tribal communities received EECBG funds
in two ways: some received funds directly by formula from DOE and
others received funds through the ADOC's State Energy Office.
Specifically, 32 cities received $54.2 million directly from DOE for
energy efficiency programs, and 21 tribal communities received $8.9
million for this purpose. In addition, the State Energy Office
received $9.5 million from DOE, which it largely distributed to 64
cities with populations less than 35,000, as well as the 5 smallest
counties in Arizona, to help those localities reduce greenhouse gases
and promote energy efficiency in their jurisdictions.
The EECBG grant program requires that states pass through a minimum of
60 percent of the funds they receive to communities with smaller
populations that were not eligible for direct grants from DOE.
Officials from the State Energy Office said that it exceeded this
requirement and has passed more than 80 percent of its EECBG
allocation (more than $7.6 million) to 64 cities, as well as 5
counties in order to get as much money to the cities and counties for
energy efficiency improvements as possible. The State Energy Office is
using the remainder of the funds (about $2 million) for
administration, reporting, and technical assistance, including
providing services such as monitoring and reporting of projects,
providing program guidance, and encouraging networking to facilitate
smaller communities' receipt and use of funds and to take advantage of
additional funding sources.
EECBG Opens Doors to Additional Energy Project Funds:
Nonfederal financial assistance is sometimes made available for
improved energy-efficiency projects, but only after communities have
made some investment on their own. For example, the State Energy
Office officials said that the Arizona Public Service, the state's
largest utility company has, since 2006, offered its commercial and
governmental customers incentives which reimburse these customers for
up to 30 percent of the cost of implementing energy efficiency
programs. Localities apply for the utility company incentives in
advance of the project and are paid back over a number of years.
According to the State Energy Office, these incentives have, in the
past, largely gone unclaimed, in part because localities have not been
able to afford energy-efficiency projects.
The fact that EECBG provides funding for energy-efficiency projects
that would otherwise not be affordable for some communities also opens
the door to these potential funding sources. When the State Energy
Office distributed EECBG money to localities, the office was making
the localities aware of the incentives, encouraging them to apply, and
helping them to complete the applications. Because communities are
still ramping up their EECBG activities, there are currently no data
on the number and amount of incentives that have already been claimed.
However, according to State Energy Office staff, communities'
proposals for energy work submitted to the State Energy Office show
that about $1.9 million in additional incentives may be claimed.
EECBG Grants in Arizona Are Funding a Variety of New Energy Projects
Designed to Save Energy:
Under Arizona's EECBG program, localities are using funds to finance a
variety of projects such as energy assessments and the installation of
energy-saving devices and equipment. We visited two localities
receiving EECBG funds, the cities of Casa Grande and Phoenix. The city
of Casa Grande, which received about $164,000 in direct EECBG funding
from DOE, had completed the first of its EECBG projects, an energy
assessment, and was gearing up to complete the second project, the
installation of solar lights in three city parks, at the time of our
review. The energy assessment has provided the city with baseline data
on energy consumption, energy costs, and the type of energy consumed
in 30 of the city's buildings. The assessment suggested ways for the
city to save energy in each of the buildings (see figure 1), such as
replacing windows and aging air conditioning units, and the baseline
data allow the city to determine exactly how much energy savings can
be attained by implementing each of the energy-saving measures.
Figure 1: Example of Energy Savings Proposed by Casa Grande Energy
Assessment:
[Refer to PDF for image: illustration]
This figure is presented to show the types of energy saving projects
that the city of Casa Grande will invest in over the next few
years.The figure presents one page of the energy assessment the city
had completed using its EECBG funds. In addition to the project‘s
cost, the annual savings each measure will produce, as well as the
number of years it will take for the investment to pay for itself, is
presented.
Source: City of Casa Grande.
[End of figure]
Casa Grande officials said that they are planning on implementing the
energy-savings techniques outlined in the energy assessment. The EECBG
grant represents the first federal monies that Casa Grande has ever
received to do energy-efficiency work, and, according to city
officials, because of budget constraints, they could not have
implemented these programs without the Recovery Act funds. For
example, the solar lights Casa Grande will install in city parks will
provide increased safety, along with energy savings, according to city
officials. Because Casa Grande currently lacks the electrical
infrastructure to accommodate street lighting around the parks, adding
traditional lights to these areas would be cost prohibitive.
The city of Phoenix received $15.2 million in a direct EECBG formula
grant to be used for a variety of projects, including making municipal
buildings more energy efficient and funding the conversion of traffic
signals from traditional lights to more energy-efficient LED lights
(see table 2 for a complete list of Phoenix EECBG projects). Phoenix
officials said that one of the first projects Phoenix completed when
the city received its EECBG formula grant was an energy audit using a
tool provided by Environmental Protection Agency (EPA), which allowed
them to establish a baseline for the energy usage in city buildings.
Also, officials said that Phoenix used EECBG administrative funds to
pay for the time spent on setting up and tracking the results of the
EPA tool. This energy audit will be followed up by another audit
beginning in September 2010, which will be conducted by an energy
service company that will identify energy conservation measures and
implement energy-efficient retrofits. Officials said that the contract
for the energy audit will be finalized and work will begin in late
September 2010. The type of energy audit the city is contracting for,
called an investment grade audit, includes a contractor guarantee that
the city will realize a specific energy savings when the energy-
efficiency measures are implemented. If Phoenix does not realize the
promised energy savings after implementing the projects the contractor
recommends, the city will be able to recoup the difference between the
savings the contractor guaranteed and the actual savings.
Table 2: Description, Costs, and Time Frames of Phoenix Direct EECBG
Formula Grants:
Project: Energy Efficiency and Conservation Strategy;
Estimated cost: $24,000;
Date completed or planned to be completed: June 2009.
Project: Energy Audit;
Estimated cost: $191,500;
Date completed or planned to be completed: March, 2010 (benchmarking),
May-June 2012 (outreach).
Project: Municipal building energy efficiency and solar energy;
Estimated cost: $11,600,000;
Date completed or planned to be completed: June-July 2010.
Project: LED traffic signal conversions;
Estimated cost: $2,700,000;
Date completed or planned to be completed: November-December 2011.
Project: Traffic signal optimization program;
Estimated cost: $80,000;
Date completed or planned to be completed: May-June 2012.
Project: Phoenix energy rebate program;
Estimated cost: $700,000;
Date completed or planned to be completed: August 2012.
Project: Total;
Estimated cost: $15,295,500.
Source: GAO analysis of city of Phoenix documentation.
[End of table]
Monitoring Varies Among the Three Grant Recipients We Visited:
The State Energy Office has five staff members assigned to work on
ensuring the EECBG formula grants are monitored closely, according to
officials from that office. Three of those employees are each assigned
to a region of the state and travel to all cities and counties in the
region that received EECBG funds through the State Energy office to
provide assistance with localities' reporting requirements, as well as
to conduct on-site inspections of the EECBG projects. State Energy
Office officials have made preliminary visits to localities receiving
EECBG funds from the State Energy Office to determine planned EECBG
activities, but as of August 2010 projects were not far enough along
for monitors to determine compliance with EECBG guidelines.
For those localities receiving EECBG funding through the State Energy
Office, the office has created a database that includes all relevant
grant information about the localities' specific EECBG projects,
including the type of project, the amount of the grant, and reporting
information. This database allows the State Energy Office to monitor
all relevant grant information and is another device that the office
uses to track the grant dollars spent and to ensure that the Recovery
Act funds are being used in accordance with DOE's guidance. The EECBG
database also helps the State Energy Office prepare quarterly
recipient reports. Officials said that they use the database to gather
the appropriate reporting information, including monies spent and the
number of staff hours charged to each EECBG project to determine the
number of full-time equivalent employees that cities and counties
receiving EECBG funds through the State Energy Office are using on
localities' EECBG projects. State energy officials said that they have
not experienced any difficulties in reporting these data to the
federal government and do not anticipate any problems moving forward.
All EECBG grants require the localities that receive those grants to
initially pay for the projects and submit receipts to the State Energy
Office for reimbursement. As a result, the State Energy Office has no
trouble in tracking the funds for EECBG, according to officials from
that office.
When we first met with State Energy Office officials in June 2010,
they had not developed a monitoring plan for EECBG funds. Subsequent
to our visit, the office created a monitoring plan so those
responsible for overseeing those grants that pass through the office
would collect timely, consistent information on EECBG grant
expenditures. The plan calls for the collection of information about
contracts, including Davis-Bacon and Buy American provisions,
benchmarks of current energy usage, and the project's budget. Because
many of the projects are just underway, officials said that they have
not yet used the monitoring plan, but intend for the plan to provide
consistent assessment across all localities that receive pass-through
EECBG funding from the State Energy Office.
Casa Grande city officials have assigned a specific grant number to
their EECBG funds and said that they can track all expenses separately
through this number. They said that since their EECBG funds will only
be used for two projects, they do not see the need for a more formal
monitoring plan. The city has completed one round of recipient
reporting, and city officials told us that because of the system they
have in place”tracking all expenses and employees through the EECBG
grant”they have had no problems with reporting and are not
anticipating any problems in the future.
Phoenix officials are in the process of developing a written
monitoring plan and intend to base it on a risk-assessment evaluation
of their contracts and give priority to those they determine to be
high risk for financial loss. Phoenix has created a separate account
for each EECBG grant and each project has a separate project number or
a cost center where the expenditures are booked and tracked. The
project manager for each EECBG project can access information,
including individual invoices, at any time and determine how much of
each project's funding has been spent. In addition to financial
oversight, Phoenix city management reviews the progress and status of
all Recovery Act grants monthly. Because Phoenix had received Recovery
Act grants prior to their EECBG grant, they had experience in
recipient reporting. As a result, city officials said that they have
not experienced any difficulty in submitting their recipient reports
and are not anticipating having problems in the future.
Housing Agencies Are Meeting Formula Grant Expenditure Deadlines but
Arizona Faces Challenges in Obligating Competitive Grant Funds:
The Recovery Act provided the U.S. Department of Housing and Urban
Development (HUD) with $3 billion to allocate through the Public
Housing Capital Fund to public housing agencies following the same
formula for amounts made available in fiscal year 2008, prior to the
act. The Recovery Act formula funds were allocated to 3,134 public
housing agencies nationwide, which were to obligate all of their funds
by March 17, 2010. The Recovery Act also provided HUD with nearly $1
billion to award to public housing agencies based on a competition for
priority investments, including investments that leverage private
sector funding or financing for renovations and energy conservation
retrofitting.
Of the 25 public housing agencies in Arizona, 15 collectively received
$12.1 million in Public Housing Capital Fund formula grants under the
Recovery Act to improve the physical condition of their properties.
HUD awarded only one Capital Fund competitive grant in Arizona, which
was to the Phoenix Housing Department for $3.4 million under the
category of creating energy-efficient public housing units.
Housing Agencies Are Expending Their Formula Funds by the Mandated
Deadlines:
The Recovery Act required that housing agencies obligate 100 percent
of their formula grant funds within 1 year of when the funds became
available to them. According to officials in the HUD field office, all
Arizona housing agencies met the March 17, 2010, obligation deadline.
The Recovery Act also required that housing agencies expend 60 percent
of their formula grant funds within 2 years from when the funds became
available and expend 100 percent of their funds within 3 years. As of
August 7, 2010, 13 of the 15 agencies receiving funding had already
expended at least 60 percent of their Recovery Act formula grant funds”
more than 7 months before the March 17, 2011, deadline. Of the
remaining two housing agencies, one had expended 59 percent of its
Recovery Act funds and the other had expended 32 percent of its funds.
Further, 6 of the 13 agencies had expended 100 percent of their funds.
In total, agencies had expended nearly $8.7 million as of August 7,
2010.
During our review, we followed up on two housing authorities we had
previously visited”Flagstaff and South Tucson”to see firsthand the
progress these agencies were making in expending their funds. In
Flagstaff, officials have expended all Recovery Act formula funds and
completed their Recovery Act projects, which included window,
appliance, and furnace replacements. As of August 7, 2010, the housing
agency in South Tucson had expended 86 percent of its Recovery Act
funds for its contract to reroof all of the city's public housing
units and install three boilers in its two apartment buildings for
seniors and disabled individuals. The roofing project was completed in
August 2010, and housing agency officials estimated the new boilers
would be installed by September 2010 (see figure 2).
Figure 2: Reroofing Work in Progress on South Tucson Apartment
Building for Seniors:
[Refer to PDF for image: 2 photographs]
This figure contains two photographs of the Recovery Act-funded re-
roofing project for the South Tucson Housing Authority. The left-hand
photograph depicts work in progress on an apartment building for
seniors, Casa de Bernie Sedley; the right-hand picture shows the
completed project.
Source: South Tucson Housing Authority.
[End of figure]
The Phoenix Housing Agency Received a Competitive Grant and Faces
Challenges in Obligating its Funds:
Phoenix housing officials plan to combine their $3.4 million
competitive grant award with other funds to renovate 374 units at the
Marcos de Niza public housing site, which was built in the 1940s and
1950s. Total development costs for this project are estimated at $20.7
million, and Recovery Act funding will be used to cover predevelopment
costs and some construction costs for 281 of the units. Other funding
sources include bonds, low income housing tax credits, and other non-
Recovery Act formula capital funds. We first reported in December 2009
approximate total development costs of $24.7 million for this
project.[Footnote 10] A Phoenix official said that the initial
estimate was revised after the costs and scope of the project were
reduced due to changing financial market conditions. As of August 7,
2010, the housing agency had obligated approximately $1.4 million of
the Recovery Act funds and had expended $944,364.
Officials in the HUD field office said that the housing agency has
faced some challenges in meeting its September 23, 2010, obligation
deadline.[Footnote 11] According to a housing authority official, its
mixed financing approach and use of tax credits have created a more
complex contract bid process. Additionally, addressing historic
preservation issues has delayed the bid process and has resulted in
the city modifying some of its original plans for the project. For
example, the agency cannot apply insulation and stucco to the building
exteriors or add second floors to some units. As a result, housing
agency officials have had to develop alternative renovation plans.
Furthermore, the agency was still in the process of obtaining all HUD
approvals for the mixed-financing proposal, including applying
portions of the competitive grant funding to the project's
construction costs. Although challenging, city officials said that
they expected to meet the obligation deadline, but as of August 31,
2010, the officials in the HUD field office expressed concerns about
the city meeting all requirements with less than 1 month before the
deadline.
HUD Field Office Staff Are Meeting Recovery Act Monitoring
Requirements:
In May 2010, we reported that HUD was in the process of more clearly
defining their monitoring requirements for Recovery Act funds and that
until those requirements were defined, it was not clear that the
Arizona HUD field office would have the workforce capacity to carry
out the requirements.[Footnote 12] HUD has now fully defined its
Recovery Act monitoring requirements and the Arizona office is not
only certain it has the capacity, but it has already completed much of
the required monitoring. For example, the field office has already
completed its mandated review of the four formula grants for those
housing agencies that had not obligated at least 90 percent of their
Recovery Act formula funds as of February 26, 2010, and they reported
no deficiencies.
Arizona Is Better Prepared to Monitor Its Use of IDEA, Part B and
Title I, Part A Recovery Act Funds:
The Arizona Department of Education is responsible for monitoring the
use of federal funds it receives under the Individuals with
Disabilities Education Act (IDEA), as amended, Part B and the
Elementary and Secondary Education Act of 1965 (ESEA), as amended
Title I, Part A grants, including Recovery Act and non-Recovery Act
funds. The department has assigned monitoring responsibility to the
Exceptional Student Services (ESS) Unit for IDEA funds and to the
Title I Office for ESEA, which includes ESEA Title I, Part A funds.
The ESS Unit provides funding to support the Arizona Department of
Education's Audit Unit to perform fiscal monitoring of IDEA, Part B
funds. In May 2010, we reported that neither the Audit Unit nor the
Title I Office had begun monitoring local educational agencies' (LEA)
use of Recovery Act funds. In that report, we noted that the Audit
Unit and Title I Office were going to modify their guidelines or
monitoring protocols to incorporate Recovery Act requirements and
subsequently begin monitoring the use of Recovery Act funds.[Footnote
13]
Since our May 2010 report, the Audit Unit and the Title I Office have
made modifications to their monitoring processes to reflect Recovery
Act requirements. For example, in June 2010, the Audit Unit revised
its procedures for selecting LEAs to monitor. The revised procedures
reflect the need to monitor for the use of Recovery Act funds and
establish a process for selecting LEAs to monitor based on those that
receive the largest amount of funding, including Recovery Act funding,
as well as other factors including geographic, demographic, and high
risk factors, such as deficiencies noted in prior reports that have
not been corrected. Officials also have modified their fiscal
monitoring fieldwork program, which specifically addresses monitoring
for compliance with Recovery Act requirements. In addition, Audit Unit
officials said that they began monitoring of Recovery Act funds on
July 6, 2010.
We also inquired about how the Audit Unit will be discussing the LEAs'
use of Recovery Act funds in future audit reports. Officials informed
us that the reports will include a section that discusses the Recovery
Act, its requirements, and examples of the types of expenses that are
allowable. Furthermore, the audit reports will identify the amount of
Recovery Act funds the LEAS received for the time period audited and
describe the specific methods used to evaluate LEAs' compliance with
requirements.
Finally, the audit reports will include audit time frames, which are
critical for documenting the scope of work, in response to our
inquiries.
The Title I Office has developed a "completion report" that LEAs are
to use in reporting their use of Recovery Act funds. The report will
capture information on the amount of Recovery Act funds that (1) LEAs
have not distributed to schools and have set aside for their own uses,
such as administration, instructional programs, and professional
development and (2) private schools have used for professional
development or family involvement, and homeless student services. The
report also seeks information from LEAs and schools that have been
identified as needing improvement in professional development as to
whether they are eligible for waivers on spending funds for this
purpose and, if so, how the waived funds were spent.[Footnote 14]
Monitors plan to use the information contained in this report to
evaluate and verify the reported uses of the funds. Officials also
informed us that they are currently completing additions to their on-
line system that allow monitors to enter the results of their
monitoring efforts and to identify the findings resulting from their
review of Recovery Act audits. Title I officials said they would begin
their monitoring through on-site visits after October 1, 2010.
Arizona's 2011 Balanced Budget is Dependent Upon Recovery Act Funds
and State Ballot Measures, But Faces Challenges in the Future:
For fiscal year 2011, approximately $815 million of Recovery Act
related funds[Footnote 15] helped Arizona to balance its budget by
enabling the state to save the equivalent amount from its general
fund, according to the Arizona Joint Legislative Budget Committee.
This amount of funding is significantly less than the approximately
$1.4 billion in Recovery Act funds the state applied to its fiscal
year 2010 budget.
The balanced budget for fiscal year 2011 in Arizona also assumes the
passage of two ballot measures in the upcoming November general
election, which together would provide a total of approximately $469
million in new revenue for fiscal year 2011 and an estimated $80
million of on-going revenue in subsequent years. The first measure
would terminate the Arizona Early Childhood Development and Health
Board, transfer any remaining uncommitted fund monies”estimated to be
$325 million”to the general fund;
and redirect the dedicated ongoing tax revenues to the general fund.
The second measure would repeal the state's Land Conservation Fund and
transfer the remaining balance”estimated to be approximately $124
million”to the general fund. According to the Governor's office, there
is currently no contingency budget should the November ballot measures
not pass. The state legislature is awaiting the November election
results before deciding on possible contingency budget solutions.
For fiscal year 2012, Arizona faces budget challenges, particularly as
the Recovery Act funds phase out. Current economic forecasts project
gradual growth in Arizona's economy;
however, revenues are not expected to return to 2007 levels until
after 2014, as seen in figure 3. To fully address the shortfalls of
fiscal years 2008 through 2011, the state enacted some permanent
spending reductions, but revenue increases were mostly temporary, such
as using one-time fund transfers, acquiring debt, and implementing a 3-
year temporary sales tax increase. These solutions are projected to
narrow the structural gap through 2012. However, according to the
Arizona Joint Legislative Budget Committee and Governor's office
budget officials, the options for temporary revenue measures mostly
have been exhausted and, as a result, without resumed economic growth,
Arizona budgetary challenges would be significant.
Figure 3: Arizona General Fund Ongoing Revenues, with and without
Recovery Act Money, and Ongoing Expenditures:
Fiscal year: 2007;
Revenues: $9.6 billion;
Revenues without Recovery Act: $9.6 billion;
Expenditures: $9.5 billion.
Fiscal year: 2008;
Revenues: $8.8 billion;
Revenues without Recovery Act: $8.8 billion;
Expenditures: $10.4 billion.
Fiscal year: 2009;
Revenues: $7.64 billion;
Revenues without Recovery Act: $7 billion;
Expenditures: $10 billion.
Fiscal year: 2010;
Revenues: $7.6 billion;
Revenues without Recovery Act: $6.2 billion;
Expenditures: $9.7 billion.
Fiscal year: 2011;
Revenues: $8.69 billion;
Revenues without Recovery Act: $7.8 billion;
Expenditures: $9.5 billion.
Fiscal year: 2012;
Revenues: $8.4 billion;
Revenues without Recovery Act: $8.4 billion;
Expenditures: $9.6 billion.
Fiscal year: 2013;
Revenues: $8.8 billion;
Revenues without Recovery Act: $8.8 billion;
Expenditures: $10 billion.
Fiscal year: 2014;
Revenues: $8.1 billion;
Revenues without Recovery Act: $8.1 billion;
Expenditures: $10.1 billion.
Source: Arizona Joint Legislative Budget Committee Analysis and the
Arizona Governor's Office of Economic Recovery.
[End of figure]
Phoenix Aimed Its Recovery Act Funds at Short-Term Projects That
Create Jobs:
Phoenix, the largest city in the state (see figure 4), actively sought
and now manages a diverse portfolio of Recovery Act funds to mainly
support short-term, one-time projects in infrastructure development,
energy conservation, public housing, and other areas. It uses multiple
systems to track progress of Recovery Act funds, including a database
designed specifically for this purpose and monthly departmental
progress reports comparing goals to accomplishments.
Figure 4: Phoenix's Population and Unemployment Data:
[Refer to PDF for image: map and data]
Phoenix, Arizona:
Population: 1,601,587;
Unemployment rate: 10.3%.
Source: U.S. Census Bureau and U.S. Department of Labor, Bureau of
Labor Statistics, Local Area Unemployment Statistics data.
Notes: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revisions.
[End of figure]
Phoenix's Diverse Portfolio of Recovery Act Funds Primarily Support
One-Time Investments:
As of June 16, 2010, the city of Phoenix was awarded $382 million in
Recovery Act funds, most of which were directed toward specific
purposes and did not go toward discretionary spending. Formula grants
awarded to Phoenix support street pavement preservation, energy
efficiency and conservation, and homeless prevention while competitive
grants fund family housing, public transit, and water main
improvements, among others.[Footnote 16] Federal agencies provided
approximately $238 million, or 62 percent, directly, while the
remaining $144 million was awarded to state agencies that in turn
passed the funds onto the city. Figure 5 shows categories in which
Recovery Act Funds were awarded.
Figure 5: Recovery Act Funds Managed by Phoenix:
[Refer to PDF for image: pie-chart]
Transportation: $139,953,084 (37%);
Housing and social services: $108,469,098 (28%);
Water, environment, and energy: $72,013,197 (19%);
Economic development: $53,366,000 (14%);
Public safety: $8,118,568 (2%).
Source: GAO calculation of Phoenix data, as of June 16, 2010.
Note: Water, environment, and energy funds support public works and
water projects. Economic development refers to bonds that are used
toward public and private property improvements. Housing and social
services funds support worker training, housing upgrades, and
community services. Transportation funds support public transit,
aviation, and street preservation projects. Public safety funds
support fire, prosecution, and police operations. These funds are
described in further detail in appendix XVIII.
[End of figure]
Officials said that many projects supported by the funds are one-time
investments, such as energy retrofits, transportation upgrades, or
heating and cooling improvements in housing developments. For example,
Phoenix received a $4.3 million grant from the Federal Transit
Administration to make improvements to transit pads, benches, and
shelters at various bus stops throughout the city. Because most of the
funds are directed toward specific short-term projects such as these,
budget officials said they do not anticipate facing challenges of
trying to replace Recovery Act funding in order to complete or
maintain projects, at the end of the grant period.
Recovery Act Funds Have Helped Create Jobs in Phoenix and Are Expected
to Yield Beneficial Outcomes:
Phoenix officials say the city has already benefited from the Recovery
Act with new jobs through private sector contracts for housing and
transportation, increased services to communities through programs
such as Early Head Start, and energy savings and large-scale
conservation for Phoenix residents from energy grants.
The Public Housing Capital Fund has been used to fund roof, security
door, and flooring replacement along with interior painting in public
housing projects. These projects have resulted in new work for private
contractors, who in turn, hired or retained workers. City officials
expect the projects to ultimately increase safety and hygiene in
public housing. Similarly, all staff for the Early Head Start program
has been hired, all beneficiaries are enrolled, and the program is
actively underway, according to officials. Human Services Department
staff said that this program, which offers regular child developmental
assessments and increased information to parents, could ultimately
mitigate developmental delays in children. The city has used the EECBG
to develop an energy conservation strategy, conduct energy audits of
public buildings that help to identify potential energy efficiencies,
and install efficiency upgrades. The projects supported by these funds
are expected to result in energy savings and conservation in Phoenix.
Phoenix Uses Multiple Systems to Track and Report Progress of Recovery
Act Funds:
Phoenix uses multiple systems to track the progress of its departments
and the progress of programs supported by Recovery Act funds. These
systems include an interactive database to report and track Recovery
Act progress, the city manager's ongoing report on department
performance, and specific audits to check internal controls and
reporting consistency in Recovery Act programs.
Phoenix's Recovery Act Database Serves as a Management Tool:
To capture and monitor the status and progress of Recovery Act funds,
city management formed a Recovery Act Task Force, comprised of city
managers that meets monthly to discuss Recovery Act progress,
technical matters, and any issues that arise. They collaborate
electronically using a database created to capture departmental
information on Recovery Act funds. The database is used as a
management tool across city departments to capture and disseminate
information about the status of all Recovery Act grants actively
managed by the city, such as number of jobs, total expenditures, and
status notes or next steps. One longer-term benefit from these efforts
is that officials said the database will most likely be retained as a
means of electronic collaboration on federal grants in the future.
Phoenix Tracks Department Performance Monthly:
Phoenix uses a management tool to monitor performance of its 28
departments. Each month, the City Auditor publishes a City Manager's
Performance Report illustrating the year-to-date progress each
department has made toward its annual goals, including some Recovery
Act projects. Examples of Recovery Act-funded projects presented in
the report are included in table 3.
Table 3: Examples of data presented in the monthly City Manager's
Performance Report:
Department: Water;
Recovery Act funds awarded: Water Infrastructure Finance Authority of
Arizona loan;
Goal: Ensure good maintenance of water mains and reduce water waste;
Target: Water main breaks”-fewer than 360 per year;
Year to date[A] percent (as of June 2010): 216 leaks.
Department: Housing;
Recovery Act funds awarded: Public Housing Capital Fund;
Goal: Maximize federal stimulus funds to maintain public housing stock
and help communities affected by foreclosures;
Target: 100% of funds committed and 100% expended (utilized) by
stimulus fund deadlines;
Year to date[A] percent (as of June 2010): 61% committed; 33% expended.
Source: City of Phoenix, City Manager's Performance Report, June 2010.
[A] Year to date reflects fiscal year to date figures (July-June).
[End of table]
Funds Are Monitored by the Internal Audit Department: In May 2010, the
city audit department conducted an audit to determine if: (1)
departments had a process in place to track the Recovery Act funds;
(2) the federal funds and reporting data in the city's financial
system, Recovery Act database, and FederalReporting.gov are consistent;
and (3) jobs were calculated according to Office of Management and
Budget guidance. For the first review, officials reviewed internal
procedures of eight departments. No substantive discrepancies were
found.
The audit department is conducting a second audit to examine how
departments are complying with requirements and how subrecipients are
reporting their data, and to confirm any findings with external
auditors. Furthermore, Phoenix will undergo an annual Single Audit by
an external auditor and many Recovery Act funds will be examined in
the fiscal year 2010 audit. Previous audits have not resulted in
negative findings on the use of Recovery Act funds.
Quarterly Recovery Act Reporting:
The Recovery Act requires Phoenix, as a recipient of Recovery Act
funds, to file quarterly reports on the use of funds,[Footnote 17]
which are filed at FederalReporting.gov. When Phoenix is the primary
recipient for Recovery Act funds, the city files the reports centrally
through the City Manager's office. Departments are responsible for
setting up control procedures to account for Recovery Act spending and
department delegates enter data into the Recovery Act database. Where
the city is a recipient of pass-through funds from state agencies,
such as transportation Recovery Act funds, the city conducts recipient
reporting through the appropriate state agency, such as the Arizona
Department of Transportation.
Arizona's Auditor General and Others in the Accountability Community
Continue to Monitor and Audit Recovery Act Funds:
According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing Single Audit results, it
received Arizona's Single Audit reporting package for the year ending
June 30, 2009, on June 4, 2010. This is about 2 months after the
deadline specified by the Single Audit Act and almost a year after the
period the audit covered. This was the first Single Audit for Arizona
that includes Recovery Act programs and it included only 4 months of
Recovery Act expenditures. Approximately $834 million in Recovery Act
fund expenditures were included in this audit. The state expects to
receive approximately $2.8 billion in Recovery Act funds through 2011.
Arizona's Single Audit report for fiscal year 2009 identified 28
significant internal control deficiencies related to compliance with
federal program requirements, of which 9 were classified as material
weaknesses. Some of these material weaknesses and significant
deficiencies occurred in programs that included Recovery Act funds.
This Single Audit reported on internal controls over financial
reporting and compliance with pertinent laws and regulations. Only 2
of the 28 significant internal control findings related to federal
funding awards were specific to controls over Recovery Act funds. Most
were similar to prior-year findings and were generally for programs
that received federal funds other than Recovery Act funds. In its two
findings specifically related to Recovery Act funds, the Auditor
General reported that the Governor's Office indicated it had verified
that subrecipients of State Fiscal Stabilization Fund monies had not
been suspended or debarred from doing business with the federal
government before doing business with the subrecipient, as required by
federal regulations, but did not maintain documentation of the
verification. Additionally, they found that the Arizona Department of
Education failed to have current central contractor registrations on
file prior to awarding Recovery Act ESEA Title I grants to LEAs The
Governor's Office and the Arizona Department of Education have
corrective action plans to address these findings.
Auditor General officials said that because Recovery Act monies are
flowing through existing programs and existing state agencies'
processes, their current auditing process remains appropriate to
ensure the proper auditing of Recovery Act awards.
OER is Implementing its Monitoring of Recovery Act Funds:
Our May 2010 report noted that the OER planned to implement a risk-
based monitoring plan for the state and local recipients of State
Fiscal Stabilization Fund monies that expended more than $500,000 for
fiscal years 2009 and 2010, which included LEAs, community colleges,
universities, and 1 Teach for America contract. Since that report, OER
revised its monitoring plan and implemented a two-prong approach.
The first prong includes a desk review process to ensure that its
subrecipients have had a Single Audit, as required by the Office of
Management and Budget Circular No. A-133, Audits of States, Local
Governments, and Non-Profits requirements to have a Single Audit. The
OER's desk review monitoring plan covers the Single Audits for the
state's 11 community colleges and 3 universities. The OER reviews the
Single Audit results looking for questionable costs and findings and
issues a management decision regarding findings that are applicable to
the OER. As of July 30, 2010, the OER had reviewed 9 of the 11 Single
Audits for the community colleges. No findings were identified in
seven of the nine community colleges' Single Audits. Two community
colleges had findings but have corrective action plans to resolve the
findings. According to OER officials, their plan for monitoring LEAs
that received State Fiscal Stabilization Fund monies for kindergarten
through grade 12 continues to be developed and may be done in
conjunction with other monitoring conducted by the Arizona Department
of Education or may be done by OER based on a sample of LEAs.
The OER staff also visit the community colleges and universities as
part of their monitoring efforts. The on-site visits are to encourage
communications among the OER and its subrecipients and to verify that
the Recovery Act funds are being used in accordance with their grant
applications. As of July 30, 2010, the OER has conducted field visits
at 5 of the 11 community colleges and at all 3 universities, and no
issues were identified.
The second prong of the OER monitoring approach is to provide
technical assistance to state agencies on how to identify fraud,
waste, and abuse to agencies receiving Recovery Act funds. As of July
30, 2010, OER staff had met with 5 of 29 state agencies receiving
Recovery Act funds to discuss fraud, waste, and abuse prevention.
Using a guide, "A Resource to Combat Fraud, Waste and Abuse," OER
staff has met with state agencies to obtain an understanding of the
agencies' internal controls for its programs receiving Recovery Act
funds and to provide assistance.
State Comments on This Summary:
We provided the Governor of Arizona with a draft of this appendix on
August 13, 2010. The Director of the Office of Economic Recovery
responded for the Governor on August 19, 2010. Also, on August 17,
2010, we received technical comments from the State of Arizona Office
of the Auditor General. In general, the state agreed with our draft
and provided some clarifying information which we incorporated.
GAO Contacts:
Eileen Larence, (202) 512-6510 or larencee@gao.gov:
Thomas Brew, (206) 963-3371 or brewt@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Steven Calvo, Assistant
Director; Lisa Brownson, auditor-in-charge; Karyn Angulo; Rebecca
Bolnick; Roy Judy; Jeff Schmerling; and Radha Seshagiri made major
contributions to this report.
Appendix I Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Recipients of Recovery Act funds are required to report quarterly
on a number of measures, including the use of funds and estimates of
the number of jobs created and retained. Recovery Act, div. A, § 1512.
We refer to the reports required by section 1512 of the Recovery Act
as recipient reports.
[3] 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 the Office of Management and Budget (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
(revised June 27, 2003, and June 26, 2007).
[4] A household is eligible for weatherization services if it is at or
below 200 percent of the federal poverty level. Priority service is
given to the elderly, people with disabilities, families with
children, high residential energy users, and households with a high
energy burden.
[5] DOE requires that recipients complete weatherizing 30 percent of
the homes identified in their weatherization plans and meet other
requirements, namely, fulfilling the monitoring and inspection
protocols established in its weatherization plan; monitoring each of
its local agencies at least once each year to determine compliance
with administrative, fiscal, and state policies and guidelines;
ensuring that local quality controls are in place; inspecting at least
5 percent of completed units during the course of the respective year;
and submitting timely and accurate progress reports to DOE, and
monitoring reviews to confirm acceptable performance.
[6] As we previously reported, in Arizona, Building Performance
Institute (BPI) certification is recommended, but not required to be a
weatherization technician, monitor, or inspector. BPI certified
professionals diagnose, evaluate, and optimize the critical
performance factors of a building that can impact health, safety,
comfort, energy efficiency, and durability. GAO, Recovery Act: Funds
Continue to Provide Fiscal Relief to States and Localities, While
Accountability and Reporting Challenges Need to Be Fully Addressed
(Appendixes), GAO-09-1017SP (Washington, D.C.: Sept. 23, 2009).
[7] This estimate is based on an April 2010 Oak Ridge National
Laboratory study of average annual savings of $437 per home.
[8] For example, at one home we visited, the resident said that prior
to the weatherization work, the gas-powered furnace in the home did
not function properly and the occupants often experienced headaches,
dizziness, and nausea or vomiting during the winter. The health and
safety inspection revealed that the furnace had been leaking carbon
monoxide into the home, sickening the family. Sealing the home's air
leaks to increase energy efficiency would have trapped the carbon
monoxide in the home, putting the residents at increased risk. The
local service provider replaced the furnace with an energy efficient
and safe unit.
[9] As we previously reported in September 2009, the state has
established its own goal of inspecting at least 20 percent of
weatherized homes, and ADOC officials said they still plan to reach
that goal. According to these officials, they have not yet been able
to meet this 20 percent goal for several reasons. These reasons
include the slow start in using Recovery Act weatherization funds
because of the delay in receiving the Davis-Bacon wage determinations,
the need to hire and train the ADOC monitors, and the monitors' focus
on assisting the local service providers in ways to increase their
weatherization numbers.
[10] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-232SP] (Washington, D.C.: Dec. 10,
2009).
[11] The Recovery Act required the Phoenix housing agency to obligate
its funds within 1 year from the date, September 24, 2009, when the
competitive grant funds were made available.
[12] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[13] [hyperlink, http://www.gao.gov/products/GA0-10-605SP].
[14] Section 1116 of ESEA requires schools identified for improvement
to spend an amount equal to 10 percent of their ESEA Title I, Part A
allocation for each fiscal year that the school is in improvement
status for the purpose of providing high quality professional
development to the school's teachers and principal. In addition, LEAs
designated for improvement are required to spend 10 percent of their
total ESEA Title I, Part A, subpart 2 allocation for professional
development of instructional staff across the LEA. Waivers were made
available to LEAs to exclude the Recovery Act ESEA Title I amounts
when calculating school and LEA professional development set aside
amounts.
[15] Section 101 of Pub L. No. 111-226, enacted on August 10, 2010,
provides $10 billion for the new Education Jobs Fund to retain and
create education jobs nationwide. The fund will generally support
education jobs in the 2010-2011 school year and be distributed to
states by a formula based on population figures. States can distribute
their funding to school districts based on their own primary funding
formulas or districts' relative share of federal ESEA Title I funds.
[16] Details of these Recovery Act funds are described in appendix
XVIII.
[17] Recovery Act, div. A, § 1512.
[End of Appendix I]
Appendix II: California:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery
Act)[Footnote 1] spending in California. The full report covering all
of GAO's work in 16 states and the District of Columbia may be found
at [hyperlink, http://www.gao.gov/recovery].
What We Did:
This appendix is based on GAO's work in California and provides a
general overview of (1) California's uses of Recovery Act funds for
selected programs, (2) the steps California oversight entities are
taking to ensure accountability for Recovery Act funds, and (3) the
impacts that these funds have had on creating and retaining jobs.
During the course of our work, we reviewed selected programs to assess
how California recipients used funds. Table 1 provides a general
description of the programs included in our review. For more details
on these programs and their requirements, see appendix XVIII of GAO-10-
1000SP.
Table 1: Description of Selected Recovery Act Programs:
Recovery Act program: Edward Byrne Memorial Justice Assistance Grants
(JAG);
Selected Recovery Act program funding levels and program purposes:
* The Department of Justice awarded California a total of about $225
million in JAG Recovery Act funds;
* JAG is a federal grant program to state and local governments for
law enforcement and other criminal-justice activities, such as crime
prevention and domestic violence programs, corrections, drug
treatment, justice information-sharing initiatives, and victims'
services.
Recovery Act program: Energy Efficiency and Conservation Block Grant
(EECBG);
Selected Recovery Act program funding levels and program purposes:
* The Department of Energy (DOE) allocated California about $406
million in Recovery Act EECBG formula grants directly to the state and
local governments;
* EECBG formula grants are intended for the development and
implementation of projects to improve energy efficiency and reduce
energy use and fossil fuel emissions.
Recovery Act program: Elementary and Secondary Education Act of 1965
(ESEA) Title I, Part A;
Selected Recovery Act program funding levels and program purposes:
* The Department of Education (Education) allocated approximately $1.1
billion in Recovery Act funding to California to support ESEA Title I,
Part A, and has disbursed about $580.6 million of those funds as of
August 6, 2010;
* The purpose of the funds is to improve teaching and learning for at-
risk students and at schools with high concentrations of families
living in poverty.
Recovery Act program: Individuals with Disabilities Education Act
(IDEA), Part B;
Selected Recovery Act program funding levels and program purposes:
* Education allocated about $1.3 billion in Recovery Act funding to
California to support IDEA, Part B, and has disbursed about $621.5
million of those funds as of August 6, 2010;
* IDEA, Part B, provides funds to ensure that preschool and school-
aged children with disabilities have access to free and appropriate
public education through grants to states.
Recovery Act program: State Energy Program (SEP);
Selected Recovery Act program funding levels and program purposes:
* DOE distributed about
$226 million in Recovery Act SEP funds to California to be spent over
a 3-year period;
* SEP provides funds through formula grants to achieve national energy
goals, such as increasing energy efficiency and decreasing energy
costs.
Recovery Act program: Weatherization Assistance Program;
Selected Recovery Act program funding levels and program purposes:
* DOE allocated approximately $186 million in Recovery Act
weatherization funding to California to be spent over a 3-year period;
* This program enables low-income families to reduce their utility
bills by making long-term energy efficiency improvements to their
homes by, for example, installing insulation or modernizing heating or
air conditioning equipment.
Sources: GAO analysis of U.S. Departments of Education, Energy, and
Justice data.
[End of table]
To determine how California used Recovery Act funds under selected
programs, we met with officials from state agencies in charge of
administering program funds. We also met with recipients of Recovery
Act funds in three local jurisdictions--the City of Redding (Redding),
the City of San José (San José), and the County of Sacramento
(Sacramento)--to discuss their use of Energy Efficiency and
Conservation Block Grant (EECBG) funds. For the two programs
administered by Education--ESEA Title I, Part A, and IDEA, Part B--we
met with five local educational agencies (LEA)--Los Angeles Unified
School District, Moreno Valley Unified School District, Sacramento
City Unified School District, San Bernardino City Unified School
District, and Stockton Unified School District--to discuss their uses
of Recovery Act funds and the impact or expected impacts of these
funds. For the Weatherization Assistance Program, we selected four
service providers to discuss and observe their Recovery Act
weatherization programs: Community Action Partnership of Orange
County, Maravilla Foundation, Project GO, Inc., and Self Help Home
Improvement Project.
To assess the steps taken by California oversight entities to ensure
accountability for Recovery Act funds, we interviewed officials from
the California Recovery Task Force (Task Force), which was established
by the Governor in March 2009 and has overarching responsibility for
ensuring that the state's Recovery Act funds are spent efficiently and
effectively and are tracked and reported in a transparent manner. We
also met with California's Recovery Act Inspector General, the
California State Auditor, and selected local auditors to obtain
information or updates on their oversight and auditing activities. In
addition, we reviewed products, such as guidance memorandums, letters,
and reports, issued by these entities related to the Recovery Act.
To assess the effect Recovery Act funds have had on job creation and
retention, we reviewed the information California recipients reported
on www.recovery.gov (Recovery.gov). As required by the Recovery Act,
recipients of Recovery Act funds must report quarterly on several
measures, including estimates of the jobs created or retained using
Recovery Act funds. To collect this information, the Office of
Management and Budget (OMB) and the Recovery Accountability and
Transparency Board created a nationwide data-collection system to
obtain data from recipients, www.federalreporting.gov
(FederalReporting.gov), and another site for the public to view and
download recipient reports, Recovery.gov. In addition, we met with the
Task Force to obtain current information on the state's experience in
meeting Recovery Act reporting requirements and preparing the state's
report for the quarter ending June 30, 2010. We continued to follow up
with the California Department of Education (CDE) on issues we
previously reported on related to estimating and reporting jobs.
What We Found:
California recipients continue to use Recovery Act funds to create new
programs and expand services under existing programs that are expected
to provide long-term benefits. For example, localities we visited plan
to use EECBG funds, which is a program funded for the first time by
the Recovery Act, to help achieve energy efficiency goals, including
reduced energy use, and other long-term benefits. As part of this
program, Sacramento County spent about $531,000 in EECBG Recovery Act
funds on energy efficiency improvements to a county facility that is
expected to reduce operations and maintenance costs. Recovery Act
funds also expanded existing federal programs, such as the State
Energy Program (SEP), ESEA Title I, Part A, and IDEA, Part B. For
instance, California was allocated $226 million in SEP Recovery Act
funds, which is a significant increase from the state's fiscal year
2009 appropriation of $1.5 million. These funds allowed the state to
develop several new activities and expand services, including
allocating about $110 million of the $226 million to retrofit
municipal, commercial, and residential buildings. In prior reports, we
noted programs, such as the Weatherization Assistance Program and
Edward Byrne Memorial Justice Assistance Grants (JAG), which received
significant increases in funding through the Recovery Act, faced some
implementation challenges, but recently overcame hurdles and are on
track to meeting production and spending milestones. While Recovery
Act funds have helped expand programs and services, California
continues to face significant budgetary problems. State officials
reported that Recovery Act funds will have less of an impact this
fiscal year than they did last year because the state has largely
distributed its State Fiscal Stabilization Fund (SFSF) funds and other
one-time Recovery Act funds. As of August 19, 2010, California has not
yet adopted a budget for state fiscal year 2010-2011, which began on
July 1, and faces an estimated $19 billion budget gap.
Since the Recovery Act was enacted in February 2009, state and local
audit and oversight entities we met with have continued to take steps
to help ensure the accountability of Recovery Act funds. Our prior
reports discussed the oversight roles and activities of key state
entities, including the Task Force, the California Recovery Act
Inspector General, and State Auditor. Since our last report in May
2010, these entities regularly met with state departments and agencies
regarding Recovery Act funds, reviewed selected subrecipients to
ensure proper accounting for funds received, and issued reports
highlighting concerns about the management of Recovery Act funds. For
example, on June 9, 2010, the State Auditor provided an update on the
progress three state agencies made in responding to recommendations in
reports issued over the last year and noted areas where additional
work remained related to the management and oversight provided by
these entities for three Recovery Act programs--JAG, SEP, and
Weatherization Assistance Program. Local auditors we met with have
generally not begun to conduct Recovery Act-specific audits, with the
exception of the San José Auditors Office, which has issued two
Recovery Act reports to date. Some local auditors stated that they
plan to conduct Recovery Act-specific audits in the future, while
others stated that staffing resources limited their ability to conduct
additional audits at this time.
Overall, California recipients reported funding more than 83,000 full-
time equivalents (FTE) with Recovery Act funds during the last
recipient reporting cycle--the period covering April 1, 2010, to June
30, 2010--as reported on Recovery.gov on July 31, 2010. According to
the Task Force, there were numerous new grants awarded and more
Recovery Act funds expended during the fourth quarter reporting period
compared to the prior quarter. Task Force officials also noted that
this round of recipient reporting went more smoothly than prior
rounds. During the reporting period, the Task Force took steps to
ensure California recipients that do not directly report through the
state's centralized system were accurately reporting FTEs. For
instance, the Task Force contacted and provided guidance to recipients
that did not report in the previous quarter to help them improve
reporting in future quarters. CDE also took steps to address issues
raised in our prior reports, including recipient reporting concerns
about underreporting of vendor FTEs by its subrecipients and CDE's
process for reviewing data.
California Is Gaining Long-Term Benefits from Recovery Act Funds for
New and Expanding Programs, While Short-Term Budget Stabilization
Benefits Are Waning:
Local Governments Are Using Recovery Act Funds under a Newly Funded
Program to Help Achieve Energy Goals:
EECBG was funded for the first time by the Recovery Act and is
intended to help localities achieve a variety of energy efficiency
goals, such as reducing fossil fuel emissions and total energy use.
DOE allocated about $356 million directly to 334 eligible[Footnote 2]
localities in California based on their residential and commuter
populations. The state was also allocated approximately $49.6 million
in EECBG Recovery Act funds, which are administered by the California
Energy Commission (CEC) to largely be distributed to localities
ineligible for EECBG direct formula funds.[Footnote 3]
Officials from the three localities we met with that received direct
formula EECBG allocations--Redding, Sacramento, and San José--told us
that they plan to use EECBG funds to achieve long-term energy
efficiency goals, including reduced energy use and increased use of
renewable energy sources. For instance, San José plans to use EECBG
funds to help the city make progress towards its energy goals to
reduce the city's per capita energy use by 50 percent by 2022 and to
receive 100 percent of its electricity from renewable energy sources,
which are included in the city's 15-year plan for economic growth and
environmental sustainability. Table 2 shows how the three localities
we visited are planning to use these funds.
Table 2: EECBG Direct Recovery Act Funds Awarded and Expended, as of
July 29, 2010, to Selected Localities and Examples of Planned Used:
Locality: Redding;
Amount awarded (dollars): $892,700;
Amount expended (dollars): $892,700;
Examples of planned uses:
* Energy efficiency home retrofits, such as air sealing and Heating,
Ventilation, and Air Conditioning (HVAC) installation for low-income
residents.
Locality: Sacramento;
Amount awarded (dollars): $5.4 million;
Amount expended (dollars): $1.1 million;
Examples of planned uses:
* Energy efficiency upgrades and retrofits for county facilities such
as a park facility in an underserved community, a community center,
and a correctional facility;
* For county owned and leased facilities, establish a revolving loan
fund to finance (1) energy audits, which evaluate a building's energy
use and can help target energy leaks or inefficiencies, (2) energy
retrofits, and (3) retro-commissioning, a systematic process that
identifies low-cost operational and maintenance improvements in
existing buildings to optimize system performance;
* Development of green building policies and standards by an energy
task force which may serve as the basis for county ordinances;
* Development of phase two of the County Climate Action Plan, which
will present a prioritized list of recommended actions and a schedule
of costs for implementation to reduce green house gas emissions and
manage water and other resources;
* The design, purchase, and installation of a generator for the
Sacramento International Airport.
Locality: San José;
Amount awarded (dollars): $8.8 million;
Amount expended (dollars): $180,795;
Examples of planned uses:
* Energy efficiency retrofits to municipal buildings, which could
include replacing lighting, and installing cool roofs;
* Replace about 1,500 streetlights with more energy efficient Light
Emitting Diode (LED) lights;
* Solar projects for municipal buildings including associated design,
project engineering, building, solar assessments, and contracting for
development services.
Sources: GAO analysis of City of Redding, County of Sacramento, and
City of San José data.
[End of table]
In addition to helping them meet energy efficiency goals, local
government officials anticipate other benefits from EECBG Recovery Act
funds, such as increased comfort and safety for residents and reduced
operations and maintenance costs. For example, Redding plans to use
EECBG funds for an energy retrofit program in which 65 to 70 homes of
low-income residents will receive energy efficiency remediation
through retrofits, such as new heating, ventilation, and air
conditioning systems, which are expected to increase comfort as well
as improve safety by reducing carbon dioxide levels within homes.
According to San José officials, the city's EECBG projects are
estimated to provide the city $700,000 in energy savings each year.
During the first 2 years, the savings will be returned to the city's
energy fund to fund future energy projects, and in subsequent years,
savings will go to the city's general fund. In order to reduce the
county's energy use and maintenance costs, Sacramento plans to upgrade
and retrofit several county facilities--a park facility in an
underserved community, a community center, and a correctional
facility. For example, the cost savings from spending approximately
$531,000 in Recovery Act funds on energy efficiency improvements to a
county correctional facility are estimated to pay for the project's
Recovery Act portion within 5-years and result in future savings that
the county can use for operations or other cost saving measures. See
fig. 1 for more detail.
Figure 1: Energy and Cost Savings Associated with Sacramento County
Correctional Facility Project Partly Funded by Recovery Act EECBG
Funds:
[Refer to PDF for image: illustrated table]
Project: Replace 4,158 light fixtures with higher efficiency units;
Annual electric savings (kilowatt hours): 847,587;
Annual natural gas savings (therms): N/A;
Annual cost savings: $94,930.
Project: Install a more reliable, higher efficiency cooling system;
Annual electric savings (kilowatt hours): 62,503;
Annual natural gas savings (therms): N/A;
Annual cost savings: $5,698.
Project: Replace obsolete and broken building temperature control
system with a new digital, networked control system;
Annual electric savings (kilowatt hours): 85,773;
Annual natural gas savings (therms): 2,845;
Annual cost savings: $12,764.
Project: Total;
Annual electric savings (kilowatt hours): 995,863;
Annual natural gas savings (therms): 2,845;
Annual cost savings: $113,392.
Sources: County of Sacramento; and GAO.
[End of figure]
Recovery Act Funds Enabled California to Expand Existing Programs and
Services:
Although the Recovery Act provided first-time funding for some
programs, like EECBG, Recovery Act funding increased funding levels
for existing federal programs with annual appropriations, which
allowed California recipients to expand services and implement new
projects and activities. For instance, California was allocated $226
million in SEP funds through the Recovery Act, which is a significant
increase from the state's fiscal year 2009 appropriation of $1.5
million. DOE requires Recovery Act SEP funds to be spent over a 3-year
period and like EECBG funds these funds aim to achieve energy goals,
such as increasing energy efficiency and decreasing energy costs. CEC,
the state administering agency for SEP funds, expanded California's
program by funding several new activities, including establishing a
revolving loan program for energy efficiency retrofits to state
buildings, providing loans to businesses to develop energy efficient
products, and training for green jobs. CEC plans to use about half of
the state's SEP allocation, $110 million, to retrofit various types of
facilities including municipal, commercial, and residential buildings.
This effort is known as the Energy Efficiency Program or SEP 110 and
has three components targeting different markets. Table 3 provides
additional details about the three subprograms.
Table 3: Description of the Three Subprograms under California's SEP
110 Energy Efficiency Program:
Subprogram: Municipal and Commercial Building Targeted Measure
Retrofit ($50 million);
Description: The program aims to achieve significant energy savings
from targeted retrofit measures to the state's municipal and
commercial buildings with a focus on capitalizing on low-risk, high-
return efficiency opportunities that are readily available throughout
the state. Some examples of measures include occupancy controlled
lighting fixtures for parking lots; commercial kitchen ventilation;
and heating, ventilation, and air conditioning (HVAC) systems.
Subprogram: Municipal Financing ($30 million);
Description: The program will fund local governments to implement or
continue a program in which property owners provide grants for the
installation of energy efficiency or renewable energy generation
improvements. One financing option under this program allows property
owners to repay the assessments with their property taxes; however,
other financing approaches will be considered.
Subprogram: California Comprehensive Residential Building Retrofit
($30 million);
Description: The program will implement energy retrofits in existing
residential buildings by working with groups such as local
governments, utilities, affordable housing programs, and energy
experts to create and retain jobs. The program will focus on deploying
retrained construction workers, contractors, and youth entering the
job market, and will pursue bringing the advantages of energy
efficient housing to underserved, economically disadvantaged
populations.
Source: CEC.
[End of table]
CEC plans to use the remaining $116 million on the following programs
to help reduce long-term energy costs:
* Revolving loans for state building retrofits--CEC awarded $25
million to the Department of General Services to retrofit state
buildings.
* Green jobs workforce training--CEC used $20 million of the state's
SEP allocation to partner with the Employment Development Department
and Employment Training Panel to train workers for green job skills,
such as home energy rating, duct testing and sealing, and solar
technology installation and design.
* Low interest loans for energy conservation assistance--CEC
apportioned $25 million of its allocation to offer 1 percent loans to
25 local jurisdictions to invest in energy efficiency.
* Clean energy business finance loans--CEC plans to use about $31
million to fund a new loan program designed to promote clean energy
manufacturing and provide financial assistance to both existing and
start-up companies that make energy efficient products, such as photo
voltaics, energy efficient motors, and bio-methane facilities that
generate energy with methane.
* Program support and evaluation--CEC plans to use approximately $15
million to support the program administration, auditing, measurement,
and evaluation of SEP funds.[Footnote 4]
The Recovery Act also provided funds to existing federal education
programs that allowed California LEAs to expand programs and services
for students. Specifically, California was allocated approximately
$1.1 billion in Recovery Act ESEA Title I, Part A, and about $1.3
billion in Recovery Act IDEA, Part B, funds, which was in addition to
their regular fiscal year 2009-2010 allocations of $1.5 billion and
$1.1 billion respectively. We previously reported that California LEAs
planned to use Recovery Act funds to help retain jobs and improve
services. We visited five of California's largest LEAs that were
allocated a total of about $370.8 million in Recovery Act ESEA Title
I, Part A, and $189.7 million in Recovery Act IDEA, Part B, funding as
of June 11, 2010 and focused our discussions on how they used these
funds to expand programs and services. Table 4 shows the amounts
allocated to each of the five LEAs.
Table 4: Amount of Recovery Act ESEA Title I, Part A, and IDEA, Part
B, Funds Allocated to Selected LEAs as of June 11, 2010:
LEA: Los Angeles Unified School District;
ESEA Title I, Part A allocation: $323.7 million;
IDEA, Part B allocation: $152.1 million.
LEA: Moreno Valley Unified School District;
ESEA Title I, Part A allocation: $5.0 million;
IDEA, Part B allocation: $7.4 million.
LEA: Sacramento City Unified School District;
ESEA Title I, Part A allocation: $13.8 million;
IDEA, Part B allocation: $10.4 million.
LEA: San Bernardino City Unified School District;
ESEA Title I, Part A allocation: $16.8 million;
IDEA, Part B allocation: $11.6 million.
LEA: Stockton Unified School District;
ESEA Title I, Part A allocation: $11.5 million;
IDEA, Part B allocation: $8.2 million.
LEA: Total;
ESEA Title I, Part A allocation: $370.8 million;
IDEA, Part B allocation: $189.7 million.
Source: GAO analysis of information from the California Department of
Education (CDE).
[End of table]
While LEAs we visited spent Recovery Act ESEA Title I, Part A, and
IDEA, Part B, funds to help preserve jobs, they also plan to use funds
to increase capacity through technology purchases and professional
development for teachers and other staff that would have lasting
effects. Some of the goals and related expected uses of Recovery Act
spending identified by LEAs include:
Improve student achievement.
* Stockton Unified School District plans to spend about $433,000 in
Recovery Act ESEA Title I, Part A, funds to provide professional
development for its staff to support student achievement in the core
curriculum[Footnote 5] by hiring specialists to coach teachers in math
and English language acquisition.
* Moreno Valley Unified School District is spending about $500,000 in
Recovery Act ESEA Title I, Part A, funds to implement a math
curriculum called "Digital Math"--which includes the procurement of 70
SMART Boards™[Footnote 6] and training for teachers who will be using
this technology. The program is aimed at improving student achievement
in mathematics at the district's four middle schools that have been in
improvement status[Footnote 7] for over 5 years. The curriculum is
scheduled to be implemented in September 2010 and, according to Moreno
Valley Unified School District officials, will help improve students'
math achievement by increasing student engagement. Figure 2 shows a
teacher demonstrating the interactive feature of a SMART Board™.
Figure 2: SMART Board™ Demonstration at Moreno Valley Unified School
District:
[Refer to PDF for image: 2 photographs]
On the left is a photo of a teacher at her desk in a classroom with a
SMART BoardTM, which is an interactive white board that is connected
to a computer and has a projector, a wireless slate that the
instructor uses as the master control, and individual student response
devises. The technology projects visual images of computer programs,
such as math and science programs, on to a white board screen which
allows students to interact directly with the screen by using special
stylus pens, their fingers, or a computer keyboard.
On the right is a photo of the same teacher demonstrating the
interactive feature of the SMART BoardTM. The teacher is using a
special stylus pen to write out and solve a math problem generated by
a computer program on the white board screen.
Source: GAO.
[End of figure]
Expand teacher capacity with new skills and techniques.
* Los Angeles Unified School District is using about $4.1 million in
Recovery Act ESEA Title I, Part A, funds to support two major
professional development initiatives aimed at enhancing the district's
efforts toward data-driven instruction by providing teachers with the
skills to access student data and use it to improve both their
teaching proficiency and student achievement. These two initiatives
are (1) training for a student intervention program, which includes
coaching and problem solving that will help teachers provide
instruction (e.g., in reading, math, and language development) and
intervention that matches student needs;
and (2) training on the district's student performance data system to
help teachers better identify student and classroom needs.
* For the 2009-2010 school year, San Bernardino City Unified School
District used about $3.7 million for the salaries and benefits of 42
full-time teaching coaches--one at each school in the district--to
help teachers implement new learning strategies and improve their
classroom techniques. According to officials, schools with coaching
programs have fewer students in intervention programs--reflecting the
improvement in teachers' ability to serve student needs and promote
student achievement.
Better address needs of special education students.
* Los Angeles Unified School District plans to use approximately $1
million in Recovery Act IDEA, Part B, funds for four libraries, where
teachers, students, and parents can preview and try out assistive
technology[Footnote 8]--such as computer and speech generating devices
controlled by eye movement, lightweight, portable electronic keyboards
that can be integrated with whiteboards, and other classroom
technologies--before the district purchases it for them.[Footnote 9]
According to officials, these libraries could help save money over the
long run by averting expensive equipment purchases that ultimately do
not work for the students and help ensure students with disabilities
and special needs can be assisted to meet their academic, social, and
behavioral goals.
* Stockton Unified School District is using Recovery Act IDEA, Part B
funds to help address the needs of the growing number of autistic
students. The LEA has awarded a contract with a value of $12,000 for
an assessment to determine the district's training needs in serving
these students. According to officials, during the 2010-2011 school
year, they plan to develop a training plan based on this assessment
and to spend $50,000 for the associated training.
* One of the schools we visited in the San Bernardino City Unified
School District spent about $20,000 on a "sensory room," where
autistic students can take time out from their regular classroom to
calm down when they feel agitated, which was something officials told
us the school needed and wanted to purchase for a long time (fig. 3
shows items in the sensory room). According to officials, the sensory
room environment with bright colors has the ability to both stimulate
and calm the sensory system. Practitioners at the facility said that
the sensory stimulation students receive helps them be more attentive
when they return to the classroom.
Figure 3: Recovery Act IDEA, Part B Funds Used for a Sensory Room for
Special Needs Students at a School in the San Bernardino City Unified
School District:
[Refer to PDF for image: 2 photographs]
On the left is a photo of a ’sensory“ room for special education
students at one of the schools we visited. This room includes brightly
colored cones, balancing equipment, a trampoline, and other equipment
for sensory activities.
On the right is a close up photo of some of the special equipment in
the room. The equipment vary in shape and color, including a large
blue multi-purpose ball for play, coordination, and balance; a large
red tube on its side for students to crawl through; and a bright
multicolored foam wedge with steps and a slide.
Source: GAO.
[End of figure]
Reduce spending on costly outside services.
* Los Angeles Unified School District officials said they are focusing
Recovery Act IDEA, Part B, funding to build district capacity to
better accommodate students with special needs, which will result in
less spending on outside providers for those services. For example,
the district spent about $150,000 to train 6,000 paraprofessionals in
behavior management during the last week of June 2010 to improve their
long-term ability to help special education students with appropriate
classroom behavior and social skills, which will also help reduce the
district's reliance on outside professionals. Officials said the
paraprofessionals will be better able to assist teachers in
maintaining an effective teaching classroom environment that promotes
student achievement.
* Sacramento City Unified School District is spending about $394,000
in Recovery Act IDEA, Part B, funds to reform the district's approach
to special education needs using a model aimed at including special
education students in regular classrooms.[Footnote 10] District
leadership hopes to see an increase in the number of special education
students being supported in regular classrooms within 5 years. Through
this model and other training and intervention efforts funded by the
Recovery Act, the district plans to increase its capacity to provide
services to special needs students and decrease their use of outside
services.
In addition to these special education initiatives, all of the LEAs we
met with reported taking advantage of the flexible spending authority
under IDEA that allows them to reduce their local special education
funding and spend it on non-special education activities, such as
teacher and other salaries.[Footnote 11] For example, Los Angeles
Unified School District officials said they used over $67 million in
Recovery Act funds to support programs they would otherwise have had
to cut from their operating budget.
For school year 2010-2011, according to Education data, California is
projected to receive about $1.2 billion from the new Education Jobs
Fund. [Footnote 12] The Education Jobs Fund will generally support
education jobs in the 2010-2011 school year and be distributed to
states by a formula based on population figures. States can distribute
their funding to LEAs based on their own primary funding formulas or
districts' relative share of federal ESEA Title I funds.
Some Recovery Act Recipients Faced Initial Challenges That Affected
Spending Timelines, but Are Now on Track to Meet Milestones:
Our prior reports highlighted challenges faced by state recipients of
Recovery Act Weatherization Assistance Program and JAG funds, but both
programs have recently overcome hurdles and are on track to meet
production goals and spending milestones. California was allocated
approximately $186 million in Recovery Act funds to be spent over a 3-
year period for the Weatherization Assistance Program, which enables
low-income families to reduce their utility bills by making long-term,
energy efficiency improvements to their homes by, for example,
installing insulation or modernizing heating or air conditioning
equipment. By June 2009, DOE had provided 50 percent--about $93
million--of these funds to the California Department of Community
Services and Development (CSD), the state agency responsible for
administering the program.[Footnote 13] DOE limited California's and
other states' access to the remaining funds until each has met certain
performance milestones, including weatherizing 30 percent of all homes
estimated to be weatherized in the approved state plan.[Footnote 14]
In prior reports, we highlighted delays in this program, which could
affect California's ability to access the remaining 50 percent of
Recovery Act funds, including the fact that, in March 2010, CSD did
not yet have service providers in place for six areas of the state.
Additionally, as of March 31, 2010, CSD had weatherized 2,934 homes,
which was short of its target to weatherize 3,912 homes for the first
quarter. Recently, CSD made progress in these areas. Specifically, CSD
did the following:
* Secured service providers for all areas. As of June 30, 2010, CSD
awarded contracts to service providers for the remaining six areas and
has a total of 38 service providers in place covering all 58 counties
of the state. Service providers spent about $22 million on
weatherization services, as of June 30, 2010, with some providers
expending funds at a faster rate than others (see fig. 4).
Figure 4: Expenditure Rates for California's Weatherization Service
Providers, as of June 30, 2010:
[Refer to PDF for image: illustrated map]
Status of state weatherization funds: Total allocation: $185.8 million;
Amount received: $92.9 million;
Amount expended: $22.8 million[A];
Percent expended: 12.3%.
This figure depicts a county map of California showing the counties or
parts of counties serviced by 38 weatherization service providers,
which include local governments and nonprofit organizations. The map
also shows the percentage of weatherization Recovery Act funds each
service provider has spent of their respective allocations, as of June
30, 2010, displayed in three categories. The categories and results
are as follows: ten providers spent less than 12.5 percent of their
allocation, 14 spent 12.5 percent to less than 25 percent, and the
remaining 14 providers spent 25 percent or more. The top right corner
of the figure has a table summarizing the overall status of Recovery
Act Weatherization Assistance Program funds for the state: $185.8
million allocated, $92.9 million received, and $22.8 million spent or
12.3 percent of the total allocation.
Sources: GAO analysis;
Map Resources (county map).
Note: Service providers for the counties of Alpine, El Dorado, San
Francisco, San Mateo, and parts of Alameda and Los Angeles were
awarded contracts by CSD to begin weatherizing units on June 30, 2010.
[A] As of June 30, 2010, service providers expended about $21.8
million of the approximately $77 million that has been distributed to
them by CSD and CSD has spent about $1 million on oversight, training,
and other statewide activities.
[End of figure]
* Increased pace of weatherization to help meet production targets.
While CSD initially experienced delays weatherizing homes, it made
steady progress toward meeting DOE's performance milestone of
weatherizing 30 percent of the total number of units estimated to be
weatherized with Recovery Act funds by weatherizing 8,679 homes or
about 20 percent, as of June 30, 2010. DOE officials indicated that
its goals are for each recipient to have met this target by September
30, 2010. As a result, CSD set September 30, 2010, as the deadline for
the state to weatherize 15,145 homes, or 35 percent of the total goal
of 43,150 units, which exceeds DOE's minimum target of 12,945 units.
Figure 5 shows the monthly progression of units weatherized through
June 30, 2010.
Figure 5: California's Unit Production Progress Toward Meeting
Targets, as of June 30, 2010:
[Refer to PDF for image: combined vertical bar and line graph]
DOE 30% minimum target: 12,945 units.
Month: September 2009;
Actual units weatherized: 0.
Month: October 2009;
Actual units weatherized: 0.
Month: November 2009;
Actual units weatherized: 0.
Month: December 2009;
Actual units weatherized: 12.
Month: January 2010;
Actual units weatherized: 317.
Month: February 2010;
Actual units weatherized: 1,021.
Month: March 2010;
Actual units weatherized: 2,408;
CSD quarterly target: 3,912.
Month: April 2010;
Actual units weatherized: 3,963.
Month: May 2010;
Actual units weatherized: 6,218.
Month: June 2010;
Actual units weatherized: 8,677;
CSD quarterly target: 8,966.
Month: September 2010;
CSD quarterly target: 15,145.
Source: GAO analysis of DOE and CSD data.
[End of figure]
While CSD is on track to meet its September 2010 production target,
lower than expected per unit expenditures have affected CSD's rate of
spending and may necessitate an increase in its targets. As of June
30, 2010, the average cost to weatherize a unit was $2,750 or
approximately 21 percent lower than CSD's projected average of $3,500
per unit. [Footnote 15] According to the service providers we met
with, one factor that reduced the cost per unit was instances in which
test [Footnote 16] results showing that the unit already met minimum
ventilation standards precluded them from installing additional energy
conservation measures in a unit. The energy conservation measures
service providers can provide to eligible residents are prescribed in
CSD's state plan under the list of allowable cost-effective measures.
As of June 17, 2010, CSD officials recently updated the list of
measures, which should have been revised in 2006, and submitted it to
DOE for expedited approval.[Footnote 17] According to CSD officials,
once the list is approved, they expect per unit expenditures to
increase, because new measures were added to the list, which will
allow service providers to implement additional cost-effective
measures per unit. CSD officials plan to continue monitoring spending
rates and production levels, and stated that CSD will amend its
production targets, if necessary.
Our May 2010 report also noted that the California Emergency
Management Agency (Cal EMA), the state agency responsible for
administering JAG funds to localities, began awarding funds to
localities in February 2010 after spending 3 months defining program
strategies for 2 of 10 targeted funding areas: Intensive Probation
Supervision Program and Court Sanctioned Offender Drug Treatment
Program. These two activities accounted for $90 million of the $135.6
million allocated to the state to award to local jurisdictions. As of
June 30, 2010, Cal EMA awarded almost all of the $135.6 million
Recovery Act JAG funds to localities,[Footnote 18] and anticipates
that all funds will be expended well before the February 28, 2013,
deadline.
Although Recovery Act Funds Expanded Programs and Services, Budgetary
Problems Persist at the State and Local Levels:
Task Force officials reported that Recovery Act funds played an
important role in helping balance the state's fiscal year 2009-2010
budget, but there will be a lesser impact this fiscal year because the
state depleted its SFSF funds and other one-time Recovery Act funds.
As discussed in our prior reports, a portion of the state's Recovery
Act funds--over $8 billion--was used to help balance its fiscal year
2009-2010 budget, when the state faced a nearly $60 billion budget
gap. As of August 19, 2010, the state faces an estimated budget gap of
$19 billion and has not yet adopted a 2010-2011 budget for the fiscal
year that began on July 1, 2010.[Footnote 19] In May the Governor
proposed addressing the gap with a number of budget solutions,
including about $12 billion in spending reductions, such as reducing
funding for local mental health services by approximately 60 percent
and eliminating some programs. In June, the State Controller informed
the Governor and state legislative leaders that in the absence of a
state budget, the state will cease to make certain payments including
payments to local governments, vendors (for services provided on or
after July 1), and salaries of state elected officials and their
appointed staff. The State Controller's office also plans to issue
registered warrants, called IOUs, beginning in late August or
September, if the situation continues.[Footnote 20]
Officials we met with from two local governments--Redding and San
José--also reported that they continue to face budgetary problems. For
example, Redding officials anticipate budget and staff reductions, and
told us that over the last 3 years their general fund budget has been
reduced from $74 million to $60 million, a 20 percent decrease.
According to Redding officials, retail and property tax revenue
decreases are the primary reason for their general fund budget
reductions. In San José, officials reported that for fiscal year 2010-
2011, the city had a $118.5 million gap, its largest deficit ever.
According to San José officials, to close the gap, the city took
several actions, such as deferring the openings of new facilities such
as community centers, parks, and fire stations, cutting public
services, increasing fees and charges, and eliminating city positions.
San Jose eliminated 783 FTEs from the 2010-2011 budget, which
represents a 12 percent reduction from the city's 2009-2010 workforce
level of 6,623 FTEs.[Footnote 21] Figure 6 highlights selected
information about the local governments that we met with.
Figure 6: Information about Redding and San José:
[Refer PDF for image: map and data]
Redding:
Estimated population (July 1, 2009): 90,521;
Unemployment rate, June 2010: 13.4%;
Total Recovery Act funding awarded: $9.4 million;
Budget fiscal year 2010: $307 million;
Locality type: City.
San José:
Estimated population (July 1, 2009): 964,695;
Unemployment rate, June 2010: 12.5%;
Total Recovery Act funding awarded: $108.1 million;
Budget fiscal year 2010: $3 billion;
Locality type: City.
Sources: U.S. Census Bureau and U.S. Department of Labor (demographic
information); City of Redding and City of San José(funding
information); Map Resources (map); and GAO.
Notes: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revisions.
[End of figure]
Although these localities continue to face budgetary problems,
Recovery Act funds helped them fund infrastructure and other
improvement projects that will have lasting benefits. Redding
officials reported that the city was awarded about $9 million in
Recovery Act funds, and San José officials reported Recovery Act
awards totaling about $108 million for projects and services. In
general, officials from both localities noted that Recovery Act funds
were used to fund projects that had no previous funding identified.
For example, approximately $3 million in transportation Recovery Act
funds allowed Redding to pursue a highway interchange project--which
they were previously unable to obtain funding for--that will
facilitate future commercial and retail growth in the area. San José
plans to use $25 million in housing Recovery Act funds to purchase and
rehabilitate foreclosed and abandoned homes in targeted areas around
the city, and provide secondary financing for income-eligible
purchasers of foreclosed homes, among other activities. Table 5
describes selected projects that were funded by Redding and San José
using Recovery Act funds.
Table 5: Selected Projects Funded by Redding and San José Using
Recovery Act Funds:
Program Area: Aviation;
Redding: $0.7 million in Grants-in-Aid for Airports funds used for
improvements to extend the life of runway pavement and to re-paint
runway markings to be in compliance with new safety standards;
San José: $20.9 million in Electronic Baggage Screening funds for the
installation of a baggage screening system and about $5.2 million in
Grants-in-Aid for Airports funds for airport taxiway improvements.
Program Area: Highway;
Redding: $3.2 million in Recovery Act Federal-Aid Highway Surface
Transportation funds for the construction of a highway interchange, as
well as pavement preservation throughout the city;
San José: $15.4 million in Recovery Act Federal-Aid Highway Surface
Transportation funds to resurface 25 miles of arterial streets in the
city.
Program Area: Water;
Redding: $2.0 million from a Clean and Drinking Water State Revolving
Fund grant for the construction of a wastewater treatment center;
San José: $6.5 million in U.S. Bureau of Reclamation Title XVI funds
to support the construction of 15 miles of pipeline for recycled water.
Source: GAO analysis of information from the City of Redding and the
City of San José.
[End of table]
State and Local Entities Continue to Conduct Oversight Activities to
Help Ensure Appropriate Accountability for Recovery Act Funds:
State oversight entities in California continue their efforts to
ensure appropriate uses of Recovery Act funds. The Task Force and the
California Recovery Act Inspector General carry out their ongoing
oversight responsibilities by regularly meeting with state departments
and agencies receiving Recovery Act funds to ensure funds are
efficiently and effectively spent, among other activities. For
example, since our last report, the Task Force issued two more
Recovery Act Bulletins to provide instructions and guidelines to state
agencies receiving Recovery Act funds. Since May 2010, the California
Recovery Act Inspector General published five reviews of Recovery Act
funds received by four localities--subrecipients of funds administered
by three different state agencies for three different Recovery Act
programs--and one state department, the Department of Rehabilitation.
The four subrecipient reviews were aimed at determining if these
recipients properly accounted for and used Recovery Act funds in
accordance to federal laws and requirements. Three of the reviews
identified several issues, including inappropriate eligibility
determinations, incorrectly reported job calculations, and ineligible
expenditure charges, and the localities have taken steps to respond to
these findings. There were no issues identified in the other two
reviews.
As of August 18, 2010, the State Auditor's role in overseeing Recovery
Act funds has included testimony during five state and one federal
legislative committee hearings, issuance of the traditional Single
Audit[Footnote 22] report for state fiscal year 2008-2009, and
issuance of nine interim reports or letters communicating early
results of the Single Audit as part of an OMB project intended to help
achieve more timely communication of internal control deficiencies for
higher-risk Recovery Act programs so that corrective action can be
taken more quickly. The Single Audit report for the year ending June
30, 2009, was the first Single Audit for California that included
Recovery Act funds. The report identified 226 significant internal
control deficiencies related to compliance with federal program
requirements, of which 85 were classified as material weaknesses. Some
of these material weaknesses and significant deficiencies occurred in
programs that included Recovery Act funds.
Since our last report, the California State Auditor also followed up
on interim report recommendations made to three state agencies--Cal
EMA, CEC, and CSD--administering Recovery Act funds under the JAG,
SEP, and Weatherization Assistance Program, respectively.[Footnote 23]
Our prior reports noted the State Auditor's work in these areas, which
covered issues such as the pace of spending and program monitoring and
evaluation procedures. According to the State Auditor's June 9, 2010
update on these programs, all three agencies made progress in response
to the State Auditor's recommendations, but some issues remain. Table
6 provides a summary of selected State Auditor comments and results of
follow-up work on recommendations made to the three agencies. The
State Auditor plans to continue to monitor these agencies and issue
interim reports on their progress. Additionally, the State Auditor is
also reviewing the reliability of California's recipient reporting
data for selected programs.
Table 6: Selected California State Auditor Updates to Reviews of Three
Recovery Act Programs, as of June 9, 2010:
Recovery Act program: JAG;
Administering state agency: Cal EMA;
Selected State Auditor recommendations: Promptly execute subgrant
agreements to localities. Identify the workload associated with
monitoring subrecipients and the workload standards necessary to
determine the number of program staff needed;
Selected State Auditor comments and results of follow-up work: As of
May 24, 2010, Cal EMA executed 214 subgrant agreements totaling $118.9
million of the $135 million administered by the state. Cal EMA
provided the audit team three workload measurement tools; however,
none provided convincing evidence of the number of program staff
needed to administer the Recovery Act program.
Recovery Act program: SEP;
Administering state agency: CEC;
Selected State Auditor recommendations: Take the necessary steps to
implement a system of internal controls adequate to provide assurance
that Recovery Act funds will be used to meet the purposes of the
Recovery Act;
Selected State Auditor comments and results of follow-up work: CEC
awarded a contract valued at $4.1 million to provide performance
evaluation and reporting capabilities to assist CEC in meeting its
subrecipient monitoring and reporting responsibilities. While the
contract contains specific tasks, it does not assign timelines to the
tasks, without which CEC cannot be certain the benefits of the
contract will be available in time to provide meaningful monitoring,
evaluation, and verification of subrecipient performance.
Recovery Act program: Weatherization;
Administering state agency: CSD;
Selected State Auditor recommendations: Seek federal approval to amend
its state plan for implementing the program;
Selected State Auditor comments and results of follow-up work: CSD
amended its state plan to reduce the number of homes it intends to
weatherize. However, at the request of the Governor's Office DOE
performed an assessment of CSD in March 2010 and informed CSD that it
may need to weatherize 3,300 more homes if the average cost to
weatherize each home remains low.
Source: GAO analysis of information provided by the California State
Auditor.
[End of table]
With the exception of the San José Auditor, local auditors we met with
have not yet conducted Recovery Act-specific audits. While some
auditors told us that they planned to conduct Recovery Act-specific
audits in the future, others stated that staffing limitations hindered
their ability to conduct such audits on top of their normal workload.
However, we met with officials from the Office of the San José City
Auditor, which issued two Recovery Act reports to date. The first
report, issued on June 18, 2009, focused on San José's readiness to
receive Recovery Act funds and comply with Recovery Act requirements.
The next report issued on November 12, 2009, reviewed San José's
ability to comply with Recovery Act recipient reporting requirements
and included the following observations:
* The San José City Manager's Office was not regularly updating all
parts of the city's Recovery Act Web site to help ensure reporting
transparency.
* While corrections to Recovery Act reports were being performed in
accordance with federal guidance, the process for making corrections
was not consistent.
According to officials from the San José Auditor's office, the city
has taken actions to address the concerns raised in the report. In
addition, the San José Auditor's office has proposed a third Recovery
Act report to review the effect Recovery Act funds will have on local
taxpayers.
California Reported over 83,000 Jobs in the Fourth Reporting Cycle and
Continued to Make Improvements in the Reporting Process:
According to Recovery.gov, as of July 31, 2010, California recipients
reported funding 83,193 FTEs[Footnote 24] with Recovery Act funds
during the fourth quarter reporting period, which covers the period
April 1, 2010, to June 30, 2010.[Footnote 25] California recipients
were awarded numerous new Recovery Act grants and expended more
Recovery Act funds this quarter compared to last quarter, according to
the Task Force. Through the Task Force's centralized reporting system
for Recovery Act funds received through state agencies--the California
ARRA Accountability Tool (CAAT), 35 California state agencies reported
funding a total of about 57,807 FTEs during the fourth round of
recipient reporting, or about 70 percent of the total reported for
California. Other recipients that receive Recovery Act funds directly
from federal agencies report through the national database,
FederalReporting.gov. Figure 7 provides further details on the number
of FTEs reported for the fourth quarter of recipient reporting.
Figure 7: FTEs Reported by California Recipients of Recovery Act
Funding for the quarter ending June 30, 2010, as of July 31, 2010:
[Refer to PDF for image: pie-chart]
Employment Development Department: 2.3%; (1,923 FTEs);
Department of Transportation: 2.5%; (2,100);
Department of Community Services and Development: 2.8%; (2,360);
Other state agencies[A]: 4.5%; (3,764).
Other recipients[B]: 30.5%; (25,386)
Department of Education and Governor‘s Office of Planning and
Research[C]: 57.3%; (47,660).
Total FTEs reported: 83,193.
Source: Recovery.gov.
Notes: Totals may not add to 100 percent due to rounding.
[A] Other state agencies include the CEC, Cal EMA, and the California
Department of Public Health.
[B] Other recipients are those that received Recovery Act funding
directly from federal agencies, such as local governments, transit
agencies, and housing authorities.
[C] Estimates for the Department of Education and the Governor's
Office of Planning and Research were combined because the Office of
Planning and Research acts as the pass-through agency for education
funds under the SFSF.
[End of figure]
During the fourth round, Task Force officials took steps to ensure
California recipients that do not directly report through the CAAT
were accurately reporting FTEs and said that this round of recipient
reporting went more smoothly than prior rounds for those state
agencies that report directly through the CAAT. For example, the Task
Force requested a list of California recipients that did not report
the previous quarter. The Task Force sent these recipients letters to
inform them of their status and provided them with input to improve
reporting in future quarters. Additionally, the Task Force partnered
with CDE to host a webinar for CDE's subrecipients on calculating and
reporting FTEs on June 1, 2010, following the issuance of our May 2010
report in which we raised concerns about FTEs reported by CDE.
CDE also took steps to address recipient reporting concerns we raised
in prior reports. In prior reports we highlighted concerns about
underreporting of vendor FTEs by CDE subrecipients and the need for
CDE to review the FTE information for reasonableness. CDE responded to
these concerns by taking the following actions:
* In May 2010 CDE issued additional guidance to LEAs and other
subrecipients on jobs reporting for vendors. Several LEAs we
previously visited had believed that vendor FTEs were only reported
for contracts over a $25,000 threshold. The new guidance specifically
noted that FTEs must be reported for all direct[Footnote 26] vendor
jobs irrespective of the total contract amount and noted that FTEs are
to be reported as a separate data element.
* CDE spent more time reviewing the reports of the 10 largest LEAs
during the last reporting period by performing a reasonableness check
on all of their reports, as we recommended in our May 2010 report.
Overall, CDE officials were pleased with the recipient reporting
results for the quarter and did not experience any major problems. CDE
officials said that almost all of the LEAs that were required to
report responded. CDE followed up with the LEAs that did not report
and plans on updating its quarterly report at the end of the
correction period.
State Comments on This Summary:
We provided the Governor of California with a draft of this appendix
on August 16, 2010. Representatives from the Governor's office agreed
with our draft. We also provided various state agencies and local
officials with the opportunity to comment. In general, they agreed
with our draft and provided some clarifying and technical suggestions
that were incorporated as appropriate.
GAO Contact:
Linda Calbom, (206) 287-4809 or calboml@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Emily Eischen, Guillermo
Gonzalez, Richard Griswold, Delwen Jones, Susan Lawless, Gail Luna,
Heather MacLeod, Joshua Ormond, Emmy Rhine, Eddie Uyekawa, and Lacy
Vong made major contributions to this report.
Appendix II Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Funding for EECBG direct formula grants to eligible units of local
government--cities and counties--were allocated to cities with
populations of at least 35,000 or that are among the top 10 highest
populated cities of the state in which they are located;
and to counties with a population of over 200,000 or that are among
the 10 highest populated counties of the state in which they are
located.
[3] States must pass on at least 60 percent of its allocation to
localities ineligible for a direct formula grant. California intends
to award approximately 67 percent of its allocation to such entities
noncompetitively using a formula based on population and unemployment
rates among other factors.
[4] Under SEP, recipients may use any amount judged "reasonable and
prudent" by DOE when reviewing the state's plan of their awards for
general services and administration. For SEP Recovery Act activities,
states usually follow the limit that applies to their respective state
funds.
[5] ESEA defines core academic subjects as: English, reading/language
arts, mathematics, science, foreign languages, civics/government,
economics, arts, history, and geography.
[6] SMART Boards™ are interactive white boards that allow students to
engage directly with the screen by using special stylus pens, fingers
or a computer keyboard. In addition to the large white board screen,
which is touch sensitive and is connected to a computer, the
technology includes a wireless slate that the instructor uses as the
master control and individual student response system, which allow
students to answer from their desks as well as to vote on questions or
topics. The technology can also come with a wide variety of programs,
including programs for math and science.
[7] ESEA requires all states to implement statewide accountability
systems based on challenging state standards in reading, mathematics,
and science; annual testing for all students in grades three through
eight; and annual statewide progress objectives ensuring that all
groups of students reach proficiency by 2014. LEAs and schools that
fail to make Adequate Yearly Progress toward statewide proficiency
goals are subject to improvement and corrective action measures.
[8] Assistive technology is an item, piece of equipment, or system,
whether acquired commercially, modified, or customized, which is
commonly used to increase, maintain, or improve functional
capabilities of individuals with disabilities.
[9] According to Los Angeles Unified School District officials, the
district also created a library Web site that will contain links to
associated training materials as well as links to resources for
parents to use to help their children communicate, complete homework,
and access curriculum.
[10] This inclusion approach involves keeping special education
students in regular classrooms and bringing the support services to
the child, rather than the child to the support services.
[11] Generally, in any fiscal year in which an LEA's IDEA, Part B,
allocation exceeds the amount the LEA received in the previous year,
the LEA may reduce its local spending on disabled students by up to 50
percent of the amount of the increase, as long as the LEA (1) uses
those freed-up funds for activities authorized under the ESEA, (2)
meets the requirements under the act, and (3) can provide each child a
free and appropriate public education.
[12] Section 101 of Public Law 111-226, enacted on August 10, 2010,
provides $10 billion for the new Education Jobs Fund to retain and
create education jobs nationwide.
[13] California's $186 million Recovery Act weatherization allocation
represents a large increase in funding over California's annual
weatherization program appropriation, which was about $14 million for
fiscal year 2009. CSD retained about $16 million of the 50 percent
received (approximately $93 million) to support oversight, training,
and other state activities and distributed the remaining roughly $77
million to local weatherization service providers, including nonprofit
organizations and local governments.
[14] The other performance milestones recipients must meet to access
the remaining funds are (1) monitoring all service providers at least
once each year to determine compliance with administrative, fiscal,
and state policies and guidelines; (2) inspecting at least 5 percent
of completed units during the course of the respective year; (3)
fulfilling the monitoring and inspection protocols established in the
approved state plan; (4) ensuring that local quality controls are in
place; and (5) submitting timely and accurate progress reports to DOE
and confirmation of acceptable performance by recipients via DOE
monitoring reviews.
[15] California's projected average cost per unit is significantly
lower than the $6,500 maximum average allowable under the
Weatherization Assistance Program. CSD officials believe that the
maximum average was raised to $6,500 by the Recovery Act primarily to
meet the needs of states with more extreme climates than California
where more weatherization measures can be installed.
[16] CSD requires that blower door tests, which measure a unit's
building tightness, be performed on 100 percent of weatherized units
with an exception for multifamily properties. For multifamily
properties, it is recommended that the blower door test be performed
on a sample of units.
[17] CSD's current list of cost-effective weatherization measures
authorized for use by service providers to weatherize homes was last
approved by DOE in October 2001. The list is required to be
revalidated every 5 years.
[18] Of the $135.6 million allocated to the state, about $550,000
remains to be allocated. Cal EMA plans to retain those funds for state
operations.
[19] The California state government fiscal year is July 1 to June 30.
Included in the estimated $19 billion budget gap is a nearly $8
billion general fund deficit at the end of the 2009-2010 fiscal year.
[20] A registered warrant is a "promise to pay" with interest, that is
issued by the state when there is not enough cash to meet all of its
payment obligations. The State Controller's office issued $1.95
billion in registered warrants last fiscal year when the state failed
to pass a budget before the start of the state 2009-2010 fiscal year
on July 1, 2009.
[21] According to San José officials, the position eliminations
resulted in over 228 employee layoffs, with over 100 additional
employees having to accept lower level positions within the city to
help bridge the budget gap.
[22] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, (31 U.S.C. §§ 7501-7507) and provide a source
of information on internal control weaknesses, noncompliance with laws
and regulations, and the underlying causes and risks.
[23] California State Auditor, Bureau of State Audits, California
Emergency Management Agency: Despite Receiving $136 Million in
Recovery Act Funds in June 2009, It Only Recently Began Awarding These
Funds and Lacks Plans to Monitor Their Use, Letter Report 2009-119.4
(Sacramento, Calif.: May 4, 2010); California State Auditor, Bureau of
State Audits, California Energy Resources Conservation and Development
Commission: It Is Not Fully Prepared to Award and Monitor Millions in
Recovery Act Funds and Lacks Controls to Prevent Their Misuse, Letter
Report 2009-119.1 (Sacramento, Calif.: Dec. 1, 2009); California State
Auditor, Bureau of State Audits, Department of Community Services and
Development: Delays by Federal and State Agencies Have Stalled the
Weatherization Program and Improvements Are Needed to Properly
Administer Recovery Act Funds, Letter Report 2009-119.2 (Sacramento,
Calif.: Feb. 2, 2010).
[24] An FTE is a full-time equivalent, which is calculated as the
total hours worked divided by the number of hours in a full-time
schedule.
[25] Although the reporting deadline has passed, the nationwide data
system, FederalReporting.gov, was reopened for a period of correction--
for the fourth reporting cycle the period is from August 2 through
September 20, 2010.
[26] Under OMB guidance, prime recipients are required to generate
estimates of job impact by directly collecting specific data from
subrecipients and vendors on jobs resulting from a subaward. To the
maximum extent practicable, prime recipients are to collect
information from all subrecipients and vendors in order to generate
the most comprehensive and complete job impact numbers available. Job
estimates on vendors are to be limited to direct job impacts and not
include "indirect" or "induced" jobs. OMB, Updated Guidance on the
American Recovery and Reinvestment Act--Data Quality, Non-Reporting
Recipients, and Reporting of Job Estimates, § 5.7 (Dec. 18, 2009), at
19.
[End of Appendix II]
Appendix III: Colorado:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of Colorado's spending under the American Recovery and
Reinvestment Act of 2009 (Recovery Act).[Footnote 1] The full report
covering all of GAO's work in 16 states and the District of Columbia
may be found at [hyperlink, http://www.gao.gov/recovery].
What We Did:
Our work in Colorado included reviewing the state's use of Recovery
Act funds and its experience reporting Recovery Act expenditures and
results to federal agencies under Office of Management and Budget
(OMB) guidance. We continued our review of the State Fiscal
Stabilization Fund (SFSF) and added two new programs to our review--
the State Energy Program and the Energy Efficiency and Conservation
Block Grant (EECBG) program, both managed by the Department of Energy
(DOE). For descriptions and requirements of the programs we covered,
see appendix XVIII of GAO-10-1000SP. In addition to reviewing state
programs, interviewing state officials, and examining documents for
these programs, we continued our visits to local governments to better
understand their use of and controls over Recovery Act funds. All
regions of Colorado are experiencing economic stress. We chose to
visit two local governments that had received an EECBG grant on the
basis of each locality's size, location, and unemployment rate.
Specifically, we selected the City of Colorado Springs, the second
largest city in Colorado, which has an unemployment rate of 8.9
percent, higher than the state's average of 8.3 percent. We also
selected Weld County, a rural county in northern Colorado, which has
an unemployment rate of 9.6 percent. Furthermore, we asked state and
local accountability organizations about their efforts to audit and
review Recovery Act programs in the state.
During this round, we also followed up on contracts that we selected
and reviewed in previous rounds and spoke to officials about whether
there were cost or schedule changes and whether there were any
contractor performance issues.[Footnote 2] We selected 13 contracts on
the basis of the state programs we have reviewed and reported on
previously and the contract's dollar value. We interviewed contract
administrators for several state agencies, including the Colorado
Department of Transportation (CDOT), the Governor's Energy Office
(GEO), three water utilities that provide drinking water and
wastewater services, two transit authorities, and two housing
authorities.
In addition, we continued our efforts to understand state and local
entities' reporting on Recovery Act funds. Under the Recovery Act and
OMB's related guidance, recipients are required to report to
FederalReporting.gov on the number of full-time equivalent (FTE)
positions paid for with Recovery Act funds. We reviewed FTEs reported
by the Colorado Department of Education (CDE) for certain education
programs; the Colorado Water Resources and Power Development Authority
(Authority), the Colorado Department of Public Health and Environment
(CDPHE), and the Department of Local Affairs (DOLA) for Clean Water
and Drinking Water State Revolving Funds (SRF); the Governor's office
for SFSF funds; and GEO, Weld County, and Colorado Springs for the
energy programs.
What We Found:
State Fiscal Stabilization Fund. During fiscal year 2011, Colorado
plans to use $89.2 million--the remainder of the $621.9 million of
SFSF education stabilization funds allocated to it--to support higher
education. However, the level of support provided will be
significantly diminished, given the lessened amount of SFSF funds
remaining. Overall, the amount of state spending on higher education
will be reduced for the first time in 3 years. The state also has $6.2
million that remain unallocated of the $138.3 million of SFSF
government services funds it received. As of August 15, 2010, the
state had not determined how it will spend these remaining funds.
Since our last report, the state has continued to refine its plan for
monitoring the use of SFSF funds and plans to have its first round of
monitoring completed in mid-October 2010. It has also received
additional federal funding to improve its data systems to track key
SFSF data.
State Energy Program. Colorado received $49 million in State Energy
Program funds to spend in 3 years--a significant infusion that
increased the state's annual funding for that program, which totaled
only $1.5 million in 2009. GEO is using the funds to remove financing,
information, and access barriers to the deployment of energy
efficiency and renewable energy across the state and develop a
sustainable infrastructure to support the renewable and energy
efficiency industry in Colorado, which the Governor calls the "New
Energy Economy." More than a year after receiving its Recovery Act
award, Colorado had obligated more than 80 percent of its funds to pay
for various energy efficiency and renewable energy activities and had
spent nearly 20 percent of its funds, but had not yet reported energy
savings because these projects have only begun to be implemented. The
state has supplemented existing program controls to oversee the use of
these funds.
Energy Efficiency and Conservation Block Grant. In addition to State
Energy Program funds, DOE awarded almost $43 million in EECBG funds
directly to state and local governments, as well as Native American
tribes, in Colorado for them to develop and implement projects to
improve energy efficiency and reduce energy use and fossil fuel
emissions in their communities. The three recipients we reviewed--GEO,
Colorado Springs, and Weld County--varied in the amount of funds they
had obligated as of August 15, 2010, yet all expect to meet their
deadlines for obligating and spending funds. The state has modified
existing controls from other energy programs to provide internal
controls over EECBG funds, but local recipients reported startup
problems, such as interpreting a large amount of guidance from
multiple sources, that still need resolution with DOE. While it is too
early to know the long-term energy benefits of the program, GEO and
the local recipients have started to report jobs information.
Contracting. State and local entities in Colorado have awarded a
number of contracts under the Recovery Act for a variety of programs,
including transportation, housing, weatherization, and drinking water
and wastewater management. Of the 13 contracts we reviewed, which had
a total value of about $61.4 million, contract oversight officials
said that 7 have experienced a change in either cost or schedule. In
some instances, the contract changes were the result of savings from
lower than anticipated contract costs or the receipt of additional
Recovery Act funds. Two of these 7 contracts also experienced issues
with contractor performance. The remaining 6 contracts, according to
officials, did not have changes or performance issues.
State and local budgets. The state expects to use about $400 million
in Recovery Act funds--specifically the increased Federal Medical
Assistance Percentage (FMAP) and SFSF funds--to help offset continued
cuts to its fiscal year 2011 budget. However, these remaining funds
are significantly less than the $800 million in Recovery Act funds the
state applied to its budget in fiscal year 2010, which also included
funding for the state Department of Corrections. For the two local
governments we visited--Weld County and the City of Colorado Springs--
the Recovery Act funds they received did not help balance their
budgets, but will help them maintain some services and complete needed
projects. For example, although Colorado Springs cut $90 million from
its budgets beginning in fiscal year 2008, Recovery Act funds allowed
the city to maintain service on bus routes in 2010 that it otherwise
would have cut.
Recipient reporting. According to state officials, the state's central
reporting process worked smoothly during the fourth round of Recovery
Act reporting, covering April 1, 2010, through June 30, 2010, although
our work reviewing recipient reports indicates the need for a
corrections process. Colorado recipients, including agencies that
reported centrally and local entities that reported directly, reported
a total of about 17,790 FTEs funded by the Recovery Act for the fourth
reporting period.[Footnote 3] The state's FTEs increased by more than
7,530 over the previous period largely because of an influx of $205
million in SFSF phase II funding in April 2010. Because of a change to
reporting guidance and because funding was received late in the year,
the state did not report all FTEs associated with SFSF phase II funds
in the fourth period. As a result, the state will need to adjust FTEs
it reported in the January through March 2010 reporting period. In
addition, through our review of recipient reports, we found that data
quality is still a concern at some other state agencies and local
entities, also demonstrating the need for a corrections process.
Accountability. The Colorado audit community is continuing to conduct
reviews of Recovery Act projects and uses of funds, both as part of
larger reviews and as specific program audits. Specifically, Colorado
auditors have issued 13 audit reports and 2 non-audit services that
contained findings related to Recovery Act programs, an increase of 6
reports since we last reported in May 2010.[Footnote 4] The reports
include findings aimed at improving management of Recovery Act funds.
For example, independent auditors found that the City of Fort Collins
paid about $684,000 to two subrecipients under its federal transit
grants, which included a Recovery Act grant, without checking whether
or not the subrecipients had been suspended or debarred from
participation in federal programs. In response to the finding, the
city has established a process to check a federal database of excluded
parties before issuing any purchase orders for projects containing
federal funding.
State Draws Down Remaining State Fiscal Stabilization Fund Monies and
Is Moving Forward with Monitoring Plan and Data System:
During fiscal year 2011, Colorado plans to distribute the remainder of
its SFSF education stabilization funds to support higher education,
although the level of support provided will be significantly
diminished and overall spending on higher education will be reduced
for the first time in 3 years. The remaining $89.2 million of
education stabilization funds is only a fraction of the funds provided
in the last 2 fiscal years to the state's institutions of higher
education (IHE), which prompted the state to appropriate more general
fund support to higher education than the year before. In addition, as
of August 15, 2010, the state had allocated $1.6 million of government
services funds to two projects in fiscal year 2011 and had $6.2
million unallocated--the state had not determined how it will spend
these remaining funds. Since our last report, the state has continued
to refine its plan for monitoring the use of SFSF funds and plans to
have its first round of monitoring completed by mid-October 2010. The
state also received federal grant funding to develop a new data
collection and reporting system that will enable it to more
efficiently gather key education data required under the SFSF grant.
Colorado Plans to Use Most of the Remaining SFSF Funds for Higher
Education in Fiscal Year 2011:
The Recovery Act provided Colorado with a total allocation of $760.2
million in SFSF funds. Of this, $621.9 million was designated as
education stabilization funds and $138.3 million as government
services funds. As we have previously reported, Colorado is providing
all of the education stabilization funds to its IHEs and has used
nearly all of the government services funds for the state Department
of Corrections. [Footnote 5] The state originally planned to
distribute its education stabilization funds for higher education
evenly across fiscal years 2009 through 2011. However, because of
shortfalls in the state's fiscal year 2010 revenue projections, the
state shifted $61.3 million of SFSF funds for higher education
originally planned for 2011 to fiscal year 2010. In addition, the
state reallocated $170.0 million in SFSF funds originally slated for K-
12 to higher education for fiscal year 2010.[Footnote 6] As a result,
the state allocated $150.7 million of SFSF funds in fiscal year 2009
and $382.0 million in fiscal year 2010 to the IHEs, which, according
to officials, spent it largely on faculty costs. The balance of the
education stabilization funds remaining for use in fiscal year 2011 is
$89.2 million. For the period covering April 1, 2010, through June 30,
2010, IHEs reported more than 8,830 FTEs funded with SFSF funds.
One of the conditions of receiving SFSF funds is that the state is to
maintain its level of spending on education at least at the level of
fiscal year 2006 funding in each of fiscal years 2009 through 2011 or
receive a waiver of this maintenance-of-effort requirement.[Footnote
7] Because Colorado reduced state support for higher education in
fiscal year 2010 below fiscal year 2006 levels, it requested a waiver
for that year. According to state officials, as of August 15, 2010,
the state had not received final approval of the waiver from the U.S.
Department of Education (Education). State officials said that
Education is waiting to assess whether Colorado's actual revenues for
fiscal year 2010 match the estimated amounts in the waiver before
making a final determination. State officials said they believe the
actual revenues and expenditures will be close to the estimates in
part because the state's June 2010 revenue forecast did not represent
an improvement in expected revenue. The state plans to submit its
actual revenue data to Education after the September revenue forecast
is published. For fiscal year 2011, state officials said they are not
anticipating the need to file a waiver request because the state has
increased its contribution from the general fund to the $555.3 million
necessary to meet the maintenance-of-effort provision. However, the
final decision hinges on the state's ability to maintain this level of
IHE funding in the face of potential statewide budget balancing
efforts.
Although the state plans to provide more state funding to IHEs in
fiscal year 2011 than fiscal year 2010, the decline in SFSF funds in
2011 will contribute to an overall reduction of about $62 million in
state higher education funding (from about $706 million to $644
million), as compared to funding levels for the previous 2 fiscal
years. As shown in figure 1, this is the first reduction in the
state's higher education budget since the enactment of the Recovery
Act.
Figure 1: IHE Funding from SFSF and State General Fund for Fiscal
Years 2006 through 2012:
[Refer to PDF for image: stacked vertical bar graph]
State fiscal year: 2005/2006;
General Fund: $555 million;
SFSF: $0;
Total: $555 million.
State fiscal year: 2006/2007;
General Fund: $602 million;
SFSF: $0;
Total: $602 million.
State fiscal year: 2007/2008;
General Fund: $653 million;
SFSF: $0;
Total: $653 million.
State fiscal year: 2008/2009;
General Fund: $555 million;
SFSF: $151 million;
Total: $706 million.
State fiscal year: 2009/2010;
General Fund: $324 million;
SFSF: $382 million;
Total: $706 million.
State fiscal year: 2010-2011;
General Fund: $555 million;
SFSF: $89 million;
Total: $644 million.
State fiscal year: 2011-2012;
General Fund: $555 million;
SFSF: $0;
Total: $555 million.
Source: GAO analysis of state data.
Note: Dollars have not been adjusted for inflation.
[End of figure]
According to state officials, the IHEs were expected to budget
accordingly to accommodate the reduction in funds. Officials we spoke
with at the University of Colorado said since they have known about
this coming reduction for a few years, they have had sufficient time
to plan to reduce costs. For example, they are taking budget balancing
actions totaling $51 million over 2 years, including eliminating 148
filled positions and reducing operating costs. In addition, according
to state officials, Colorado enacted a law in June 2010 allowing the
IHEs to increase their annual tuition by up to 9 percent to help
compensate for reductions in state and federal funds.
Colorado allocated about 94 percent of the $138.3 million the state
received in SFSF government services funds for fiscal years 2009 and
2010. While the Department of Corrections was the largest recipient of
these funds in previous years, the loss of SFSF funds is not expected
to affect the department's budget for fiscal year 2011 because,
according to state officials, it has been funded for this fiscal year
from the state's general fund. For fiscal year 2011, the state
allocated $1.5 million to help hire teachers under the Teach for
America program, $120,000 for a Historical Society capital project,
and, as of August 15, 2010, had approximately $6.2 million
unallocated. According to a senior state budget official, the state
plans to spend these funds by September 2011.
In addition, the state has reserved $2.7 million of its government
services funds to cover costs associated with oversight and
administration of the Recovery Act. OMB guidance allowed states to
recover costs related to such central administrative activities to
manage Recovery Act programs and funds.[Footnote 8] As of July 13,
2010, the state had collected approximately $3.6 million of the total
$4.7 million calculated as its statewide indirect costs over 3 years,
an increase of $1.4 million in funds collected since we reported in
May 2010.[Footnote 9] According to state officials, they believe they
will successfully collect the remaining $1.1 million from Recovery Act
grants over the next 2 fiscal years, which may allow the state to use
these government services funds for other program needs through
September 2011.
State Is Making Progress on Its SFSF Monitoring Plan and Has Received
Funding for Improving Its Data System to Gather Key Education Data:
The Governor's office has made progress in developing the required
monitoring plan for SFSF funds. States receiving SFSF funds were
required as part of their application to comply with Education
regulations, including the requirement that they monitor grant and
subgrant supported activities.[Footnote 10] As we previously reported,
the office submitted its proposed plan to Education in March 2010.
Since that time, state officials explained they have consulted with
other states, gathering monitoring best practices to implement in
Colorado. The Governor's office is working with a local consulting
firm to perform initial sampling and planning, which will allow the
state to determine the scope and cost of the monitoring efforts. The
consulting firm will also aid the Governor's office in determining the
appropriate level of monitoring necessary for each subrecipient--this
will likely be based on a combination of dollars received as well as
an assessment of operational risk and past compliance. The monitoring
itself is expected to include desk and on-site reviews of recipients,
depending on the level of monitoring. Officials said that, at a
minimum, they plan on completing the reviews and corrective action
plans for all schools deemed medium-and high-risk by October 18, 2010,
the scheduled date of a review of the state's efforts by Education.
The state has also made progress toward another SFSF requirement, the
need to collect specific indicators and descriptors showing that the
state is making progress on education reforms in four areas. In our
May report, we noted that the state's ability to more efficiently
collect the indicators and descriptors hinged on the receipt of
additional federal funding. Since that report, CDE received a $17.4
million Recovery Act Statewide Longitudinal Data Systems grant from
Education. According to CDE officials, it will use most of the grant
to develop a new data collection system, which is designed to allow
more efficient collection of state data, including the SFSF indicators
and descriptors data. CDE plans to use a small portion of the grant to
cover most of the remaining funding needed to collect specific data on
two of the indicators and descriptors.
Colorado Plans to Use State Energy Program Funds to Further the
Development of Energy Efficiency and Renewable Energy across the State:
With Recovery Act funds provided for the State Energy Program, DOE
will disburse $3.1 billion to states to fund energy efficiency and
renewable energy activities such as expanding states' existing energy
efficiency programs and renewable energy projects. Colorado received
$49 million in State Energy Program funds to spend over 3 years--a
significant infusion that increased the state's annual funding for
that program, which received a total of $1.5 million in 2009. The
Governor's Energy Office is managing the use of these funds in the
state. GEO plans to use the funds to remove financing, information,
and access barriers to the deployment of energy efficiency and
renewable energy across the state and develop a sustainable
infrastructure to support the renewable energy and energy efficiency
industry in Colorado, which the Governor calls the "New Energy
Economy." States have 18 months from the date they receive their award
to obligate the full award amount and 36 months from the same date to
spend the full award amount. Further, states that receive Recovery Act
funding are required to report quarterly to FederalReporting.gov on
their use of funds and number of FTEs paid for with Recovery Act funds
and, in addition, either monthly or quarterly to DOE on a number of
items, including hours worked, expenditures, and certain performance
metrics such as energy saved.
Colorado Has Obligated Most of Its State Energy Program Recovery Act
Funds and Has Started to Spend Them in Key Program Areas:
GEO has allocated its State Energy Program Recovery Act funding to be
used in eight areas. More than a year after receiving its Recovery Act
award, Colorado has obligated more than 80 percent of its State Energy
Program funds to pay for various energy efficiency and renewable
energy activities, and has spent nearly 20 percent of these
funds.[Footnote 11] Figure 2 illustrates the amounts of funds GEO
allocated, obligated, and spent as of August 15, 2010, by area,
including: (1) capital investment grants and revolving loans; (2)
renewable energy development and expansion; (3) commercial building
programs; (4) residential programs; (5) information and outreach; (6)
administration; (7) utilities and transmission; and (8) greening
government.
Figure 2: GEO's State Energy Program Recovery Act Amounts Allocated,
Obligated, and Spent as of August 15, 2010 (Dollars in millions):
[Refer to PDF for image: vertical bar graph]
State energy program area: Grant and loans;
Allocated: $18.0 million;
Obligated: $17.0 million;
Spent: $0.7 million.
State energy program area: Renewable energy;
Allocated: $9.7 million;
Obligated: $7.4 million;
Spent: $3.0 million.
State energy program area: Commercial buildings;
Allocated: $6.0 million;
Obligated: $6.0 million;
Spent: $1.3 million.
State energy program area: Residential programs;
Allocated: $5.8 million;
Obligated: $4.6 million;
Spent: $1.5 million.
State energy program area: Information and outreach;
Allocated: $5.0 million;
Obligated: $3.5 million;
Spent: $1.6 million.
State energy program area: Administration;
Allocated: $2.9 million;
Obligated: $2.9 million;
Spent: $0.9 million.
State energy program area: Utilities and transmission;
Allocated: $1.2 million;
Obligated: $0.9 million;
Spent: $0.3 million.
State energy program area: Greening government;
Allocated: $0.7 million;
Obligated: $0.4 million;
Spent: $0.2 million.
Source: GAO analysis of GEO data.
[End of figure]
Since it received State Energy Program Recovery Act funding, GEO
officials have been planning to expand existing programs and
coordinating different energy incentives in the state. GEO's plans in
these eight areas include the following:
* GEO plans to use the largest piece of the State Energy Program
award--$18 million--to provide capital for businesses and consumers to
invest in energy efficiency and renewable energy projects. For
example, GEO plans to develop a revolving fund to provide banks low-
cost capital for loans for renewable energy and efficiency projects
such as on-site renewable energy systems and energy efficiency
retrofits.
* GEO will provide $9.7 million in incentives for investments in
solar, wind, and other renewable energy technologies for homes and
businesses. This funding will be used for several types of rebates,
including commercial investments in solar energy systems. Because the
state already has a significant utility-backed solar rebate program,
GEO officials said they focused their residential rebate program on
customers earning less than the national adjusted mean income.
* GEO plans to use $6 million to encourage energy efficiency in new
and existing commercial buildings. For example, GEO pre-approved 13
energy service companies to provide energy performance contracting,
which, according to officials, involves contracting for energy
retrofits that are then repaid through utility savings. GEO will also
provide help to state and local agencies that want to reduce their
energy and carbon emissions using energy performance contracts and
technical assistance, workshops, and trainings for construction of new
energy efficient public buildings.
* GEO plans to use $5.8 million of its State Energy Program funds to
improve the energy efficiency of new and existing homes. First, GEO
officials will work with counties to adopt and enforce energy codes
that increase the efficiency of new and existing homes. Second, GEO
officials will educate and work with cities, counties, utilities, and
home builders to build more efficient Energy Star-rated new homes.
[Footnote 12] Finally, GEO will expand its current "Insulate Colorado"
program for existing homes to provide duct sealing, furnace
replacement, air sealing, and lighting and appliance replacement.
* GEO's Information and Outreach program aims to spend $5 million on
providing simple and accurate information to the public through a
telephone hot line, direct outreach to consumers, and a Web site.
Under this set of activities, GEO is setting up a separate Web site to
facilitate its rebate efforts as well.
* GEO will use nearly $2.9 million to pay for administrative costs of
managing the program. DOE allows for a prudent and reasonable amount
of Recovery Act funds to be used for administrative costs.
* The state plans to use more than $1.2 million working with the
state's utilities and others to promote the goals of the Governor's
Climate Action Plan to reduce carbon dioxide emissions by 20 percent
from electric utilities, transportation, and industry sources. GEO
will work to align utility rate structures with the plan's objectives
to manage energy demand and increase use of renewable sources.
* Finally, GEO plans to use about $712,000 to help state agencies to
"green" government by reducing their use of petroleum products,
energy, paper, and water, among other things. Ways to do this include
energy performance contracting with energy service companies,
improving the fuel efficiency of state vehicles, and using
environmental purchasing policies.
State Has Supplemented Existing Controls over State Energy Program
Funds and Is Adding a Contractor to Measure and Verify Results:
According to GEO officials, GEO is using its already-existing controls
to oversee the use of its State Energy Program funds and, in some
cases, has created new controls specific to the requirements of the
Recovery Act. Specifically, officials told us GEO awards funds through
its existing contracting or grant processes, which involve a formal
announcement of the request for applications or proposals and multiple
levels of internal review before recipients are selected. Some of the
funding is awarded through contracts between GEO and vendors. While
these contracts are issued through the state's procurement process
using existing controls, according to officials, the controls have
been modified to incorporate the requirements of the act, including
Davis-Bacon and Buy American provisions. GEO plans to monitor the
monthly progress of its contracts after they are in place. This
monitoring work will be conducted by GEO staff who will contact
vendors directly. In addition, vendors will provide required
documentation for reporting purposes, including the number of hours
worked on Recovery Act activities and expenditures.
In addition, GEO has implemented two new controls over particular
aspects of its State Energy Program. First, because it was concerned
about the significant increase in the number of rebates it expected to
issue under the Recovery Act and the potential increase in fraudulent
claims, GEO instituted a new control over its rebate programs. The
state has 18 rebate programs, such as furnace rebates, residential
solar rebates, and commercial wind rebates, and multiple funding
sources in addition to Recovery Act funds. GEO selected a contractor
to manage the increased rebate volume and to verify that applicants
satisfy all rebate requirements before awarding the rebate checks. The
contractor, which GEO selected in part because of its proposed
internal controls, has developed certain controls over rebate claims,
such as the automatic calculation of rebate amounts based on program
rules and automatic identification of different state funding sources.
The contractor also provides GEO with online access to claims and
regular reports on issued rebate checks.
Second, GEO plans to use a contractor to measure and verify the
results of the different GEO programs being paid for with Recovery Act
funds, including the State Energy Program and other programs such as
appliance rebates and EECBG. Measurement and verification involves the
field verification of energy conservation measures and renewable
energy installations, and also involves quantifying energy savings
from these projects. GEO plans to use the information gathered to
report to DOE on specific performance metrics, such as energy saved.
In July 2010, GEO issued a request for proposals for these services
because, according to GEO officials, the significant increase in the
size of the programs makes oversight by GEO's program managers
insufficient. GEO expects the initial period of measurement and
verification to be completed by December 31, 2011, with an option to
extend the contract.
GEO Plans to Save Energy from State Energy Program Activities, but Has
Not Yet Reported Savings:
After its State Energy Program activities are implemented, GEO
officials stated they expect to save 366 billion British thermal units
(Btu) of energy annually and to have paid for about 470 jobs, but as
of June 30, 2010, the state had not reported energy savings achieved.
[Footnote 13] The state has been responsible for reporting this
metric, plus energy cost savings, jobs created and retained, and other
metrics such as obligations and outlays on a monthly and quarterly
basis to DOE using DOE's Performance and Accountability for Grants in
Energy system. However, DOE reduced reporting requirements for State
Energy Program grantees in August 2010, including limiting monthly
reporting to outlays. Obligations and the other performance and
accountability metrics will still be reported quarterly. As of June
30, 2010, GEO reported 19,812 hours worked but did not report energy
savings because, according to officials, it was too early for the
projects to produce savings.
In addition to this performance reporting to DOE, GEO has reported FTE
data quarterly to FederalReporting.gov, as required by OMB's Recovery
Act reporting guidance, since such reporting began. For the past three
quarters, GEO reported about 30 FTEs per quarter. The state has
implemented a process to report FTEs that involves program managers
gathering and reporting hours from the subrecipients and vendors and
reporting this to one key person who then performs the calculation to
convert hours to FTEs. This person works with the program managers to
gather their internally worked hours and convert these to FTEs as
well. According to GEO officials, reporting for the quarter ending
June 30, 2010, went smoothly.
Energy Efficiency and Conservation Block Grant Projects Are Underway
at the State and Local Levels:
In addition to providing funds for the State Energy Program, the
Recovery Act also appropriated $3.2 billion for DOE to fund, for the
first time, the EECBG program. While the program has objectives that
are similar to those of the State Energy Program--to reduce fossil
fuel emissions and energy use and improve energy efficiency--the
funding approach is different. With the EECBG program, DOE is
distributing EECBG funds to state and local governments, as well as
Native American tribes, for them to develop and implement projects to
improve energy efficiency and reduce energy use in their communities.
DOE is providing the majority of funds directly to two types of
recipients: (1) communities eligible to receive a direct EECBG formula
award--for example, cities with populations 35,000 or greater,
counties with populations greater than 200,000, or the 10 cities and
counties in a state with the highest population count--and (2) states,
with the requirement that at least 60 percent of the funds be
distributed to those communities that are not eligible to receive a
direct formula grant from DOE.[Footnote 14] In Colorado, DOE awarded
$9.6 million to the state through GEO and 32 grants worth $33 million
directly to eligible communities in the state, which included 20
cities, 10 counties, and 2 Native American tribes. We reviewed the
$9.6 million grant to GEO and two direct grants made to the City of
Colorado Springs and Weld County.
After Initial Groundwork, Most of GEO's Energy Efficiency and
Conservation Projects Have Begun:
As of August 2010, the state's EECBG grant had been awarded and almost
fully obligated, but as with the State Energy Program, the state had
just begun spending EECBG funds and had not yet reported energy
savings related to the EECBG activities. Under DOE's guidelines for
the EECBG funds, states were required to develop an energy strategy
designating the funds for particular program areas and, once the award
was approved, to obligate and spend the awarded funds in 18 months and
36 months, respectively. DOE approved GEO's strategy for using its
$9.6 million in EECBG funding and awarded the funds to the office on
September 30, 2009. As of August 15, 2010, GEO had obligated about
$8.1 million, or 84 percent, of the funds and spent about $1.6
million. GEO officials told us that GEO expects to have fully
obligated the funds before its March 2011 deadline. Figure 3 shows the
amounts GEO allocated, obligated, and spent as of August 15, 2010, for
each of GEO's energy efficiency and conservation program areas.
[Footnote 15]
Figure 3: GEO's EECBG Amounts Allocated, Obligated, and Spent as of
August 15, 2010:
[Refer to PDF for image: vertical bar graph]
DOE program activity: Energy efficiency retrofits;
Allocated: $5.1 million;
Obligated: $4.7 million;
Spent: $0.8 million.
DOE program activity: Community energy coordinators;
Allocated: $2.3 million;
Obligated: $2.2 million;
Spent: $0.6 million.
DOE program activity: Commercial building audits;
Allocated: $1.1 million;
Obligated: $0.3 million;
Spent: $0.02 million.
DOE program activity: Administration;
Allocated: $0.8 million;
Obligated: $0.8 million;
Spent: $0.22 million.
DOE program activity: Other projects and purchases;
Allocated: $0.34 million;
Obligated: $0.1 million;
Spent: $0.007 million.
Source: GAO analysis of GEO data.
[End of figure]
According to GEO officials, the office was given significant
flexibility within the DOE approved program areas to designate how to
spend its EECBG funds. As such, GEO plans to distribute $7.3 million,
or 75 percent, of its total award to those communities across the
state not eligible to receive a direct formula grant from DOE with the
overall goal of providing rural communities with access to new energy
and economic opportunities. GEO's planned uses of the EECBG funds are
primarily focused in the following program areas:
* Energy efficiency retrofits. The largest portion of GEO's EECBG
funding is $5.1 million slated for counties and local communities to
spend on energy efficiency retrofits of residential and public
buildings, including energy audits, and renewable energy rebates for
residences and businesses installing on-site renewable technologies
such as solar or wind. According to GEO, the renewable energy rebates
will be limited to consumers who have substituted a renewable energy
resource for a traditional energy source, such as propane, thereby
improving their building's energy efficiency. For example, GEO plans
to offer a $400 rebate for the purchase and installation of a biomass
burning stove that meets certain thermal efficiency requirements and
will offer rebates for various solar or wind projects as well. The
rebate program will be managed by the same contractor that is managing
the state's 18 rebate programs. Similar to its State Energy Program
funds, GEO has apportioned EECBG program funds across several
different rebate programs: energy audits, insulation and air sealing,
duct sealing, high efficiency furnaces and boilers, commercial solar
photovoltaic and thermal projects, and commercial wind projects. The
contractor then selects the correct funding source for claims that are
submitted, following GEO's program rules for each rebate. According to
state officials, the large increase in funds available for rebates can
be effectively applied because of the large number of people across
the state interested in rebates.
* Community Energy Coordinators. GEO plans to spend about $2.3 million
of EECBG funds on 18 Community Energy Coordinators who will work to
create economic growth and build local capacity for energy efficiency
and conservation measures throughout the state, specifically in those
communities that were not eligible to receive an EECBG grant directly
from DOE. According to GEO officials, GEO has invested a significant
amount of upfront work in establishing these community coordinator
positions. Among other responsibilities, the coordinators are to: (1)
develop an energy efficiency and conservation strategy for those
communities not eligible to receive a direct formula grant from DOE;
(2) deliver one clean energy training or outreach event each calendar
quarter; (3) work with local utility providers and GEO to develop
clean energy goals; (4) develop a plan to upgrade residential and
commercial building energy codes by February 2017; and (5) help to
develop plans to conserve materials and water in their communities. As
of August 2010, GEO had selected all 18 coordinators, who had begun
working with their communities on these activities.
* Commercial building audits. GEO plans to spend about $1.1 million to
conduct the initial work necessary to improve the energy efficiency of
businesses such as those found in a community's "Main Street" area, or
businesses located in older buildings, through funding energy audits
of these buildings. GEO technical consultants will work with Community
Energy Coordinators, business district representatives, and other
partners to create a plan that identifies ways in which each business
can reduce energy consumption and business operating costs. The
business or building owner can then make more informed decisions about
retrofitting the building and potentially collaborate with other state
or local community development programs to obtain funding for the
retrofit.
* Administration and monitoring. GEO has dedicated about $834,000 for
project administration and monitoring. These funds will be used to pay
the salaries and expenses of the GEO officials who are administering
the program, process rebates, and pay a contractor GEO plans to hire
to verify work performed under the EECBG program.
* Direct purchases for select projects. GEO plans to spend the
remaining $340,000 of EECBG funds on a variety of projects to
diversify its portfolio of projects. Specifically, GEO is awarding
competitive grants for solar installations at municipal and county-
owned buildings, an on-site recycling project at a correctional
facility, and the purchase of high-efficiency street lights in those
communities not eligible to receive a formula grant from DOE.
GEO spent the early months after receiving its EECBG award developing
and coordinating local energy programs with state objectives.
According to officials, GEO decided to hold off on issuing any
requests for proposals because DOE guidance on National Environmental
Policy Act and National Historic Preservation Act requirements was in
flux during the initial months after DOE approved GEO's energy
efficiency and conservation plan. Meanwhile, GEO established the
Community Energy Coordinator positions and conducted a "listening
tour" throughout the state to gather information on what types of
EECBG projects would be most beneficial to localities. Using this
input, GEO selected a diverse set of activities within its program
areas.
GEO Has Modified Existing Controls from Other Programs to Oversee
EECBG Funds and Is Adding Procedures for Measuring and Verifying
Results:
To provide internal controls over EECBG funds, GEO modified controls
it uses for its existing programs. For example, according to GEO
officials, the office follows federal and state rules for reimbursing
subrecipients and vendors and has added a control requiring that three
people--the program manager, controller, and deputy director--review
every invoice before payment of EECBG funds is approved. Officials
further stated that they oversee all subrecipients through direct
communications, scheduled reviews, and monthly and final reports. For
example, GEO reviews monthly reports prepared by the subrecipients to
ensure that deliverables are on schedule and on budget. GEO also
conducts formal quarterly reviews of the Community Energy
Coordinators. During the review, the program manager and GEO's
regional representative meet with the coordinator to assess progress
and performance, including the coordinator's ability to meet
deadlines, level of engagement in the community, quality and
completeness of the energy efficiency and conservation strategy, and
level of energy efficiency and renewable energy projects implemented.
In addition, GEO engineers evaluate the reasonableness of costs
(hourly rates and hours worked) and deliverables that are shown in
reports prepared by the Community Energy Coordinators.
As with the State Energy Program, GEO is adding procedures to verify
work performed under the EECBG program. Specifically, GEO expects the
measurement and verification contractor will verify energy savings and
examine the physical energy efficiency and conservation work performed
under the EECBG award.
It Is Too Early to Know Long-Term Energy Benefits of EECBG but GEO Is
Starting to Report Jobs:
GEO estimated that it could save 770 billion Btu annually--assuming
identified efficiency improvements are implemented--and pay for about
100 jobs with EECBG funding, but as of August 2010, the state had not
reported savings and reported few jobs. Under DOE's reporting
requirements, EECBG award recipients, including states, are required
to report cost savings, energy saved, jobs created and retained, and
standard reporting metrics such as obligations and outlays.[Footnote
16] GEO officials told us that they plan to measure actual energy
savings that result from EECBG;
they relied on manufacturers' estimates of expected energy savings to
estimate long-term energy benefits for planning purposes. GEO plans to
track energy savings that will result from three project areas:
residential and commercial building audits, energy efficiency
retrofits, and lighting projects. GEO expects that the greatest energy
savings will result if changes are made to Main Street area businesses
as a result of the commercial building audits;
the improvements made could yield 645 billion of the 770 billion Btu
GEO estimated as potential annual savings.
Under OMB Recovery Act reporting guidance, GEO is required to report
FTEs paid for with Recovery Act EECBG funds. GEO reported about 12
FTEs paid for with EECBG funds for the April through June reporting
period. To calculate and report FTEs, as with the State Energy
Program, the program manager gathers and reports hours worked from
subrecipients and vendors and then sends the data to the GEO reporting
staff. This staff person converts the hours worked into FTEs. Also as
with the State Energy Program, reporting for the April through June
period went smoothly, according to GEO officials.
Localities Are Using EECBG Funds to Enhance Long-Term Programs and for
One-Time Projects:
The two localities we visited, Colorado Springs and Weld County, both
received direct EECBG formula grants from DOE that they are using to
invest in energy efficiency in their communities. Colorado Springs
received approximately $3.7 million from DOE, which it plans to use to
further its long-term goals for improving energy efficiency in the
city. The city already had an environmental sustainability coordinator
in place who was looking for energy efficiency opportunities.
According to city officials, the funds represent an opportunity to (1)
demonstrate that energy conservation projects are a good financial
investment, potentially impacting future city decisions, and (2)
develop an energy sustainability plan that will reduce energy use and
emissions and result in cost savings beyond the period of EECBG
funding. According to a Colorado Springs official, approximately 22
percent of its EECBG funds were obligated as of August 15, 2010, and
the city expects all funds to be obligated by its March 2011 deadline.
The following include some of the projects selected and their
anticipated benefits:
* Retrofitting municipal buildings, costing $1.9 million, to improve
energy efficiency. The city projects savings of $140,000 in annual
utility costs.
* Replacing city-owned streetlights with LED bulbs, costing about
$500,000, which will reduce energy use and costs, as well as
demonstrate to the local utility that LED streetlights are cost-
beneficial.
* Weatherization of affordable housing units, costing about $400,000,
including funding energy efficiency measures not paid for by existing
programs, such as replacing windows and exterior doors.
* Conducting energy audits and related retrofit work for small to mid-
size commercial, non-profit and educational customers, costing more
than $500,000, which has provided training opportunities for students
in energy-related fields through a collaborative effort with the local
utility, which supervised and trained the students.
Weld County, a rural county in northern Colorado, received more than
$616,000 in EECBG funds that it is largely using to pay for replacing
boilers, lighting, and heating, ventilation, and air conditioning
systems in several county buildings, including the administration
building and a jail complex. County officials expect the new equipment
to yield energy savings of 20 to 40 percent. Weld County will also
fund a new transportation software project for non-emergency transit
services for medical patients, which should produce more efficient
routes, thereby reducing energy consumption. According to Weld County
officials, all EECBG funds had been obligated as of June 30, 2010, and
officials expect to spend all the funds by the end of September 2010.
Two Colorado Localities Have Established Controls and Reporting
Processes, but Said DOE Guidance Is Overwhelming and Confusing:
The two localities that we visited have procedures intended to ensure
that EECBG funds are used for approved purposes, although they have
found some of the DOE guidance confusing and requirements challenging.
Colorado Springs has designated someone to manage each of its EECBG
activities, written an EECBG grant oversight and responsibilities
plan, and assigned each EECBG activity a separate account code. Weld
County is using its standard grant oversight procedures for its EECBG
award. A designated Weld County official does regular on-site visits
to ensure work is being completed prior to signing invoices for
payment by the controller. Both Colorado Springs and Weld County have
one person responsible for submitting all the required EECBG reports.
Colorado Springs plans to use a portion of its EECBG funds to hire a
half-time grants administrator to ensure quality control over the
EECBG monitoring and reporting requirements.
As they developed their plans for EECBG funds, these two localities
received a large amount of program guidance from DOE. Both localities
stated that the amount of communication from DOE has at times been
overwhelming and confusing and, as a result, they found it challenging
to understand and ensure compliance with all of the EECBG
requirements. For example, Weld County officials explained they have
limited resources for EECBG monitoring and reporting;
as a result, they have not been able to keep up with all the guidance
and emails and have sometimes missed information. The confusion and
misinterpretation have resulted in errors that have had to be
corrected.
* Based on Colorado Springs officials' understanding of a DOE funding
announcement, city officials thought that they should draw down the
city's entire $3.7 million award as of March 2010, even though federal
guidance requires that grant recipients draw down funds only as they
are needed. A Colorado Springs official attended training provided by
a private grants management training company in late April 2010 and
realized the mistake. The official then notified DOE and paid back
$3.1 million in mid-May 2010. Since then, DOE has begun providing
reports to its project officers to enable them to monitor the draw
down of funds.
* Weld County misunderstood how to calculate FTEs associated with its
EECBG award. County officials said that for the April through June
reporting period they planned to use a formula that projected FTEs
based on amount of expenditures rather than the actual hours worked,
in contrast to OMB and DOE guidance.[Footnote 17] According to
officials, they were not aware of these guidance documents and
acknowledged that any announcements they might have received
containing the new guidance were likely missed among the voluminous
correspondence they receive from multiple people within DOE. After we
provided the DOE and OMB guidance, county officials used hours worked
to calculate FTEs for the April through June reporting period,
reporting three FTEs for this period.
We found several other instances where the local entities found DOE's
guidance unclear and confusing:
* Budgets. Colorado Springs initially sought guidance from DOE on
allocating indirect costs among its EECBG funded activities. Based on
the information it received, the officials submitted a budget to DOE.
However, city officials were told to allocate indirect costs
differently by another DOE contact and, as a result, have had to
reallocate costs and revise these budget worksheets accordingly.
* Reporting time frames. The localities we visited had different
understandings of how long they are to continue providing DOE with
performance reports and did not find clear direction for this in DOE
guidance. Colorado Springs officials said they are to report for the
entire 3-year period of the award in order to have time to report on
energy savings. On the other hand, Weld County officials said that
they believed that reporting would stop once all funds were expended.
* Energy metrics. DOE expects its grantees to report on energy savings
and other metrics on a monthly or quarterly basis;
however, the localities we visited had different understandings of
what was required. Colorado Springs officials plan to measure and
calculate actual energy reductions after their projects are
implemented, but Weld County officials plan to report projected energy
savings and do not plan to collect data on energy savings for
reporting purposes beyond their projects' completion.
* Buy American guidance. Colorado Springs officials said that trying
to meet the Buy American requirements has delayed their LED lighting-
replacement project by at least four months and they are still not
sure if their four possible vendors are truly eligible. DOE issued
guidance in June 2010 directing recipients to verify that products
were manufactured or produced in the United States, but Colorado
Springs officials said they were unclear how to comply with this
additional requirement in a reasonable way. They asked DOE to provide
a list of eligible vendors but were told DOE did not have one. City
officials thought such a list would be important for the other
communities like itself that are purchasing this equipment with
Recovery Act funds. In a June 25, 2010, notice, DOE indicated that it
expected to get a list from the National Electrical Manufacturers
Association of domestic producers that can meet the Buy American
criteria; however, as of August 16, 2010, this information was not
available.[Footnote 18]
DOE program monitors for GEO, Weld County, and Colorado Springs agreed
that these issues have caused delays and misreported data but that DOE
has efforts underway to address some of these problems. According to
the officials, heavy workloads at the beginning of the program reduced
the time they spent on EECBG monitoring. Since March and April 2010,
DOE has reduced the workload of project officers and technical
monitors providing assistance and oversight to recipients, which the
DOE officials believe has improved their responsiveness. Further, to
deal with the amount of guidance and requirements being provided to
grantees, DOE has a proposed initiative, referred to as "One Voice,"
that is intended to improve the coordination of communication that
comes from various DOE offices. DOE is also working on developing
specific requirements for closing out the EECBG grants that should
clarify when recipients can stop reporting and a working group within
DOE plans to clarify the energy metrics reporting guidance.
Status of Contracts and Reasons for Cost, Schedule, and Performance
Changes:
State and local entities in Colorado have awarded a number of
contracts under the Recovery Act to support a variety of programs,
including transportation, housing, weatherization, and drinking water
and wastewater management. These entities are prime recipients of
awards under the Recovery Act and have chosen to use all or a portion
of their awards to contract out work to be performed. In 2009, we
selected 13 Recovery Act contracts to review, including 4 we reported
on in September 2009, considering the value of the contract and the
state program it helped support.[Footnote 19] Table 1 shows the 13
contracts--which have a combined estimated value of about $61.4
million--and any cost or schedule changes or contractor performance
issues.
Table 1: Changes in 13 Selected Contracts as of June 30, 2010:
Contracting agency: CDOT;
Purpose: Highway construction at C-470;
Original contract value: $25,850,411;
Cost change: [Empty];
Schedule change: [Check];
Contractor performance issue: [Empty].
Contracting agency: Summit County;
Purpose: Construction of fleet maintenance facility;
Original contract value: $8,398,741;
Cost change: [Check];
Schedule change: [Check];
Contractor performance issue: [Check].
Contracting agency: Town of Georgetown;
Purpose: Wastewater treatment facility improvements;
Original contract value: $5,116,786;
Cost change: [Empty];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: City of Manitou Springs;
Purpose: City water and sanitation system improvements;
Original contract value: $4,361,360;
Cost change: [Check];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: CDOT;
Purpose: Highway construction at Johnson Village North;
Original contract value: $4,197,756;
Cost change: [Empty];
Schedule change: [Check];
Contractor performance issue: [Check].
Contracting agency: Pagosa Area Water and Sanitation District;
Purpose: Construction of wastewater conveyance system;
Original contract value: $3,524,189;
Cost change: [Check];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: Town of Georgetown;
Purpose: Drinking water treatment facility improvements;
Original contract value: $3,008,000;
Cost change: [Empty];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: Governor's Energy Office;
Purpose: Weatherization assistance for 641 low-income residences in
Adams and Arapahoe counties;
Original contract value: $2,925,575;
Cost change: [Empty];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: City of Fort Collins;
Purpose: Purchase of transit buses;
Original contract value: $2,433,792;
Cost change: [Check];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: Governor's Energy Office;
Purpose: Weatherization assistance for 325 low-income residences in
western Colorado;
Original contract value: $1,271,920;
Cost change: [Empty];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: Denver Housing Authority;
Purpose: Renovation of 192-unit Westwood Homes;
Original contract value: $295,926;
Cost change: [Check];
Schedule change: [Check];
Contractor performance issue: [Empty].
Contracting agency: Holyoke Housing Authority;
Purpose: Replacement of hinged patio doors at Sunset View Apartments;
Original contract value: $27,409;
Cost change: [Empty];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: Denver Housing Authority;
Purpose: Purchase of energy saver gas water heaters for residential
properties;
Original contract value: $24,800;
Cost change: [Empty];
Schedule change: [Empty];
Contractor performance issue: [Empty].
Contracting agency: Total;
Purpose: [Empty];
Original contract value: $61,436,665;
Cost change: 5;
Schedule change: 4;
Contractor performance issue: 2.
Source: GAO analysis of contracting agencies' information.
[End of table]
Although work is still ongoing under most of the 13 contracts we
reviewed, oversight officials for 6 of these contracts reported that
as of June 30, 2010, there have been no cost or schedule changes or
any contractor work performance issues for their contracts. Oversight
officials reported that 7 of the 13 contracts have experienced changes
in their planned costs or schedules;
in some instances these changes were due to additional funds becoming
available for the project, allowing contracting officials to expand
the scope of work. Further, oversight officials reported that 2 of the
7 contracts experienced challenges related to contractor performance.
Changes in Contract Cost:
Officials responsible for five of the seven contracts that experienced
changes reported that, for various reasons, the original costs of the
contracts changed after the contracts were awarded. Table 2 shows the
cost changes for these five contracts.
Table 2: Recovery Act Contract Cost Changes as of June 30, 2010:
Contract: Denver Housing Authority--Westwood Homes;
Original contract value: $295,926;
Current contract value: $605,026;
Percent change: 104.5.
Contract: Pagosa Area Water and Sanitation District--wastewater system;
Original contract value: $3,524,189;
Current contract value: $3,874,189;
Percent change: 9.9.
Contract: Summit County--fleet maintenance facility;
Original contract value: $8,398,741;
Current contract value: $8,891,516[A];
Percent change: 5.9.
Contract: City of Manitou Springs--water and sanitation improvements;
Original contract value: $4,361,360;
Current contract value: $4,395,740[A];
Percent change: 0.8.
Contract: City of Fort Collins--purchase of transit buses;
Original contract value: $2,433,792;
Current contract value: $2,449,350[A];
Percent change: 0.6.
Source: GAO analysis of contracting agencies' information.
[A] According to oversight officials, these cost increases are being
covered with county or city funds and not Recovery Act funds.
[End of table]
In two of these cases, the Recovery Act award recipient either
received additional Recovery Act funds beyond its initial award or
decided to dedicate a larger portion of its original award to the
contract, thereby making more funding available to spend on the
contract. For example, a Denver Housing Authority official explained
that after its contract with an architectural and engineering design
firm was awarded, the housing authority learned that it had received,
through a Capital Fund Recovery Competition grant, an increase from $4
million to $11 million in Recovery Act funds for its Westwood Homes
project, which is renovating a 192-unit housing development. This
official explained that the additional funds allowed the housing
authority to expand the scope of its renovation work from a limited
rehabilitation of the 192 units to a full-scale rehabilitation,
incorporating energy efficiency measures. As a result, the cost of
technical services that the housing authority contracted for increased
from about $296,000 to about $605,000.
For the remaining three contracts, costs have come in higher than
expected, either due to requests for design changes after the
contracts were signed or due to unexpected circumstances. In the first
situation, the additional costs are being paid for by the awarding
entities and not with Recovery Act funds. For example, a Summit County
oversight official reported that the cost of its contract to construct
a new fleet maintenance facility had increased by almost $500,000,
from about $8.4 million to $8.9 million. The official explained that
the fleet manager and shop foreman requested changes in the locations
of an office, various electrical outlets, and an exterior air
connector for the buses. In addition, the fire inspector requested a
change in the position that sprinkler heads were mounted in a
building's ceiling and an increase in the height of a building's
heating duct work. The oversight official explained that Summit County
was using county funds set aside for work contingencies to cover the
contract cost increases. Similarly, a Fort Collins oversight official
reported that the cost of six 40-foot transit buses it was acquiring
with Recovery Act funds increased by about $16,000 to accommodate
design changes requested by the city. For example, for safety reasons,
the city requested a change in the type of brakes installed on the
buses (from S-cam brakes to four-wheel disc brakes). This official
clarified that the city would use local transportation funds, and not
Recovery Act funds, to pay for these changes.
In the second situation, costs have increased due to difficulties
associated with unanticipated project conditions. According to an
official for the City of Manitou Springs, the contract to improve the
city's water and sanitary system had, as of June 30, 2010, incurred
close to a 1 percent increase in contract costs. He said the
contractor is upgrading a system that is very old and no good records
existed at the time the contract was signed regarding its condition.
As a result, the contractor is frequently dealing with unanticipated
conditions in the field that require changes to the planned work. The
official stated that, if at contract completion total costs exceed the
nearly $4.4 million contract award amount, city officials will pay the
additional costs using city funds.
It should also be noted that while a Governor's Energy Office
oversight official on the two weatherization contracts stated that
these contracts did not experience a change in cost during the
contractor performance period (which ended June 30, 2010), GEO's final
reconciliation of the contracts determined that the contractors
weatherized more homes for less than originally budgeted. For example,
one weatherization contractor completed work on 650 instead of 641
residences for approximately $500,000 (about 17 percent) less than the
state cost estimate, while the other contractor completed work on 327
instead of 325 residences for approximately $100,000 (about 8 percent)
less than the state cost estimate. The oversight official explained
that these differences between actual costs and the original estimated
costs were a normal occurrence in the weatherization program and were
due to actual costs of construction work, including such items as
supplies and labor, coming in less than originally anticipated. The
official said that GEO will use the $600,000 in unspent funds from
these two contracts prior to March 2012 for further activities under
its Recovery Act weatherization award, as required by DOE.
Changes in Contract Schedule:
Officials responsible for four of the seven contracts that experienced
changes reported that the original work schedule changed after
contract award, also for a variety of reasons. Table 3 outlines the
extent of the schedule changes associated with these four contracts.
Table 3: Recovery Act Contract Schedule Changes as of June 30, 2010:
Contract: Denver Housing Authority--Westwood Homes;
Original planned completion date: September 5, 2009;
Current planned or actual completion date: March 30, 2012;
Schedule change: 2.5 years.
Contract: CDOT--C-470 project;
Original planned completion date: August 13, 2010;
Current planned or actual completion date: September 18, 2010;
Schedule change: 36 days.
Contract: CDOT--Johnson Village North project;
Original planned completion date: October 10, 2009;
Current planned or actual completion date: November 9, 2009;
Schedule change: 30 days.
Contract: Summit County--fleet maintenance facility;
Original planned completion date: July 26, 2010;
Current planned or actual completion date: August 18, 2010;
Schedule change: 24 days.
Source: GAO analysis of contracting agencies' information.
[End of table]
The lengths of the schedule changes ranged from a few weeks to roughly
2.5 years. According to officials, in two instances, the original
contract schedule was extended to account for spending additional
funds--these funds resulted from either receipt of additional Recovery
Act funds or savings generated from lower than anticipated contract
costs--that allowed for an expansion of the scope of work for both
projects. For example, Denver Housing Authority's decision to expand
the scope of its Westwood Homes project after receiving an additional
Recovery Act award also resulted in an extension of the project's
schedule by 2.5 years to accommodate the additional renovation work.
In another example, a CDOT contract oversight official reported that
the schedule for completing highway construction work at its Johnson
Village North project in Chaffee County was extended from 65 to 80
working days, which translated to about a 30-day extension.[Footnote
20] The official explained that additional funds became available from
contract costs being lower than anticipated because, for example, the
contractor did not earn incentive fees. As a result, some of these
funds were used to pave 4 more miles of highway than originally
planned and the work schedule was extended the additional 15 working
days to perform the work. In addition, some of the funds were used on
another project to pave 7 additional highway miles.
Moreover, schedule changes occurred at the remaining two projects
because of unanticipated issues encountered during construction. For
example, a CDOT official responsible for the C-470 highway
construction project reported that contract completion was extended by
36 days because of weather delays and additional engineering work
(including concrete, pipe drainage, sealant, and guardrail) required
of the contractor. The official explained that costs for this work
were paid under the contract. In another example, the Summit County
oversight official reported that the completion date of its fleet
maintenance facility contract was extended by 23 days in part because
of delays associated with the need to complete unanticipated
underground cabling work and manage groundwater pooling onsite.
Contractor Performance:
Officials for 2 of the 13 contracts we reviewed reported that during
inspections they identified issues with the contractors' performance
of work that adversely affected the projects' schedules. According to
officials, these performance issues extended the time needed for the
contractors to complete the work and the associated costs were borne
by the contractors. For example, a CDOT inspector determined that the
top mat of paving did not meet the required smoothness criteria at its
Johnson Village North project. The contracting official reported that
the main cause of the problem with the contractor's work performance
was the contractor's choice and operation of paving equipment, which
resulted in the pavement not meeting the smoothness criteria. CDOT
required the contractor to grind the rough areas of pavement
repeatedly until the road met the criteria, determined by further
inspection by CDOT. In a second example, a Summit County inspector
observing the construction of the county's fleet maintenance facility
identified substandard work by a subcontractor doing concrete work in
the facility's vehicle wash building. According to the county's
oversight official, the subcontractor prematurely poured concrete in a
specific location before the crew responsible for performing related
heating work had satisfactorily finished and the building inspector
had reviewed and approved the work. The official stated that the
inspector required the subcontractor to remove the concrete so that
the heating crew could complete all the necessary work and it could be
re-inspected for approval, causing a schedule delay of about 1 week.
The oversight official reported that the costs and schedule delay
associated with this subcontractor mistake were absorbed by the
contractor.
Recovery Act Funds Will Provide State Budget Relief for One More Year
and Additional Funds for Local Projects and Services:
The state expects to use about $400 million in Recovery Act funds for
higher education and Medicaid assistance to Colorado residents, which
will help offset cuts to its fiscal year 2011 budget. This remaining
funding is significantly less than the $800 million in Recovery Act
funds the state applied to its fiscal year 2010 budget, including $87
million used to fund the state Department of Corrections. Table 4
shows the Recovery Act funds that, according to a senior state budget
official, have provided a significant direct benefit to the state's
budget over 3 fiscal years. This official said that other Recovery Act
funds received by entities in the state also have had a positive, if
indirect, effect on the state's fiscal stability by meeting needs that
cannot be met with state funds and by creating jobs. For example, the
state continues to spend $265 million in Individuals with Disabilities
Education Act, as amended, (IDEA) Part B, and Elementary and Secondary
Education Act of 1965, as amended, (ESEA) Title I, Part A Recovery Act
funds to pay for teachers, curriculum, and other education needs at
the state's local educational agencies (LEA).
Table 4: Recovery Act Funds Directly Affecting Colorado State Budgets:
Fiscal year: 2009;
Increased FMAP: $215,721,373;
SFSF Education Stabilization Funds: $150,676,055;
SFSF Government Services Funds--Corrections[A]: $24,600,000;
Total: $390,997,428.
Fiscal year: 2010;
Increased FMAP: $331,409,119;
SFSF Education Stabilization Funds: $382,008,243;
SFSF Government Services Funds--Corrections[A]: $87,206,274;
Total: $800,623,636.
Fiscal year: 2011;
Increased FMAP: $311,551,463;
SFSF Education Stabilization Funds: $89,194,099;
SFSF Government Services Funds--Corrections[A]: 0;
Total: $400,745,562.
Fiscal year: Total;
Increased FMAP: $858,681,955;
SFSF Education Stabilization Funds: $621,878,397;
SFSF Government Services Funds--Corrections[A]: $111,806,274;
Total: $1,592,366,626.
Source: GAO analysis of Colorado Office of State Planning and
Budgeting data.
[A] Funds in this column represent SFSF government services funds that
were spent on the state Department of Corrections. According to a
state budget official, it was this portion of the SFSF government
services funds that had a direct impact on the state's budget.
Note: Dollars have not been adjusted for inflation.
[End of table]
As we have previously reported, state officials said Recovery Act
funds--specifically, SFSF funds and the increased FMAP--have had a
significant positive effect on the state's budget condition since the
Recovery Act was enacted.[Footnote 21] A senior state budget official
said that the funds will still provide significant benefits to the
state's budget condition in fiscal year 2011, despite the overall
decline in Recovery Act funding, because the funds will enable the
state to save the equivalent amount from its general fund for use in
other areas. With the passage of federal legislation in early August,
the state learned that it would receive an extension to its increased
FMAP for the remainder of fiscal year 2011, rather than those
additional funds ending in December 2010.[Footnote 22] However, the
amount of the extension was about $67 million less than the state had
projected in its fiscal year 2011 budget. The legislation, according
to state officials, is also estimated to provide about $156 million in
funding for certain K-12 jobs.[Footnote 23]
The state expects that a combination of this extension of increased
FMAP funds, higher than expected actual general fund revenues from
fiscal year 2010, and budget balancing measures presented in August
2010 will help it maintain its general fund reserve at slightly more
than 2 percent by the end of fiscal year 2011.[Footnote 24] The
state's June 2010 revenue forecast projected a reserve shortfall below
the 2 percent level by the end of fiscal year 2011, prompting the
Governor to submit a budget balancing plan on August 23, 2010.
[Footnote 25] The plan addressed both this projected shortfall as well
as the additional monies needed to compensate for the less-than-
budgeted FMAP extension amount. Specifically, the plan incorporated
$76.8 million more in general fund revenues for fiscal year 2010 than
had been forecasted and presented $59.6 million in specific budget
balancing measures, including $53.4 million in cash fund transfers and
$6.2 million in general fund reductions. These reductions included a
$4.9 million across-the-board reduction in personnel costs by delaying
hiring of some state positions and a $1.3 million cut to the
Department of Corrections. The Governor's next budget review will
follow the revenue forecasts to be released in late September 2010.
The state faces some potentially significant budget challenges in
fiscal year 2012 as the nearly $400 million in Recovery Act funds from
fiscal year 2011 are no longer available for the state budget. State
forecasts show slow growth for the Colorado economy for the next few
years. The June 2010 forecast reported fiscal year 2011 general
revenue increases of 10.9 percent over the previous year. According to
the Office of State Planning and Budgeting, this is qualified by the
fact that the increases are the result, in part, of specific
legislative actions such as the elimination of tax exemptions on sales
of cigarettes, candy, and soft drinks.
We visited two local governments--Weld County and the City of Colorado
Springs--to discuss the effects of Recovery Act funds on their
budgets. They differed in terms of their economic situations and in
the amount of Recovery Act funds they received, as shown in table 5.
Overall, the Recovery Act funds did not help balance local budgets
because the funds could not generally be used for operating costs, but
to varying degrees, will help the localities maintain services and
complete projects.[Footnote 26]
Table 5: The City of Colorado Springs and Weld County, Colorado:
City of Colorado Springs;
Population: 399,827;
Unemployment rate: 8.9%;
Total operating budget in 2010: $385.0 million;
Recovery Act funds reported: $63.0 million.
Weld County;
Population: 254,759;
Unemployment rate: 9.6%;
Total operating budget in 2010: $192.1 million;
Recovery Act funds reported: $5.1 million.
Source: GAO analysis of U.S. Census Bureau and U.S. Department of
Labor, Bureau of Labor Statistics (BLS), Local Area Unemployment
Statistics (LAUS) data and local governments' data.
Note: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates shown are a percentage of the
labor force. Estimates are subject to revision. The state's
unemployment rate is 8.3 percent.
[End of table]
Weld County. Recovery Act funds have not had a major impact on Weld
County's fiscal situation, but the funds have allowed the county to
implement one-time projects it had previously prioritized. Although
Weld County is projecting a slight increase in general fund revenues
in 2010 (from $77.0 million to $77.7 million), it is projecting
revenue reductions in 2011 and 2012. Specifically, compared to 2010,
the county is anticipating a decrease in property tax revenues of $20
million in 2011 and $14 million in 2012, primarily due to reductions
in oil and gas prices. The county plans to absorb these reductions by
cutting expenditures and spending portions of its general and total
fund reserves. The cuts will be distributed across the county's
general fund and other funds it uses to provide services to the county
(the general fund comprises about 40 percent of county's total
expenditures for 2010). For example, when preparing the 2010 budget,
county officials asked all departments to cut their budgets by 10
percent, resulting in $1.5 million in savings, and have asked
departments to cut another 2.5 percent in 2011. In addition, the
county is using its property tax revenue from 2010 to build up its
fund reserves in preparation for the upcoming revenue decreases--the
total fund reserve is projected to reach $50 million by the end of
2010, of which $5 million is the general fund reserve.
Weld County received $5.1 million in Recovery Act funds: $3.7 million
in formula grants and $1.4 million in competitive grants. The County
Board of Commissioners chose to pursue funding for programs and
projects that were already a priority for the county--they were not
interested in receiving funds that would create an expectation of
continued funding once Recovery Act funds were spent. As a result, the
county focused its Recovery Act funds on augmenting existing programs
and completing high priority projects. For example, the county is
using a $526,000 Health and Human Services Child Care and Development
Fund grant to provide child care assistance to additional eligible
families and approximately $696,000 in Workforce Investment Act of
1998 (WIA) funds for existing adult job-training programs. More
specifically, the WIA funds are providing occupational skills
training, placement assistance, and on-the-job training to unemployed
clients. According to county officials, the EECBG funds have also been
significant in that they are enabling the county to improve energy
efficiency in county buildings and are expected to provide budget
savings in the future. Finally, the county used its Federal Highway
Administration grant of about $431,000 to complete road construction
on County Road 74 and a $487,000 Community Services Block Grant
primarily to provide short-term rental assistance for low income and
unemployed citizens. According to a county official, without these
funds, Weld County would not have been able to provide these
additional social services and would have delayed several projects,
including the energy efficiency improvements and the road improvement
project.
Colorado Springs. Colorado Springs received $63.0 million in Recovery
Act funds, which, according to city officials, helped implement some
high-priority projects, maintain critical city services, and support
some community activities. Nonetheless, the Recovery Act funds did not
help make up for large funding losses in the city's operating budget.
According to officials, other than for transit services, the funds
could not be used for operating expenses. As such, Colorado Springs
faces a difficult economic and budget situation, having worked to
close a $90 million funding gap in its budgets since 2008. According
to city officials, continual budget cuts were necessary in part
because the city's revenues from sales and use taxes--which account
for approximately half of its general funds--have been declining.
Specifically, the city has reduced services, including eliminating
night and weekend bus operating hours, turning off street lights, and
leaving city parks unwatered, and has cut about 195 city positions.
According to Colorado Springs officials, Recovery Act funds enabled
the city to pay for key projects and to keep transit services that
would otherwise have been cut from the city's budget. Of its $63.0
million in Recovery Act funding, the city is using $43.8 million for
two key transportation projects. Table 6 shows the Recovery Act grants
Colorado Springs is using to fund these transportation efforts.
Table 6: Colorado Springs's Recovery Act Transportation Awards:
Project name: Woodmen Road Widening and Interchange;
Federal program/Grant name: Highway Infrastructure Investment Funds;
Funding: $35.0 million;
Description: Woodmen Road will be widened to six lanes and an overpass
will be built at the intersection of Academy Boulevard and Woodmen
Road;
Benefits: Traffic congestion mitigation, improved safety, economic
development.
Project name: Transit Operating and Capital Projects;
Federal program/Grant name: Federal Transit Administration;
Funding: $8.8 million;
Description: Provide bus service for 2010, 2011, and a portion of 2012;
fund a portion of the Americans with Disabilities Act paratransit
services for 2010; and fund building and vehicle preventative
maintenance for 2010; The grant will also fund some infrastructure
investments, including renovating the Downtown Bus Terminal;
Benefits: Cuts to additional hours of fixed-route service and
paratransit service avoided.
Source: City of Colorado Springs.
[End of table]
The city received $35.0 million in Recovery Act funds from CDOT, which
will allow it to complete the Woodmen Road Widening and Interchange
project, a high priority project in the area. This project has been on
the city's and the Pikes Peak Rural Transportation Authority's (PPRTA)
priority list for many years due to projected increases in traffic
volumes.[Footnote 27] However, according to a Colorado Springs
official, it has been difficult to fund this project because the city
has a limited amount of resources to use for an investment of this
size. With the receipt of Recovery Act funds to complete the project,
the city was able to return approximately $16.4 million to PPRTA,
which was originally slated to provide the majority of the funds for
the project, allowing PPRTA to complete four other high-priority
transportation projects--including road upgrades and bridge design--in
the area.
The city's $8.8 million award from the Federal Transit Administration
allowed it to keep its full offering of bus routes during 2010.
According to city officials, the city has already eliminated evening
and weekend bus service on these routes, and without these funds it
would have eliminated certain routes altogether. The transit funds
will allow the city to continue to maintain operation on all routes at
the reduced hours through 2011, with the exception of one express
route to Denver that will be eliminated. Colorado Springs officials
said they are working on a plan for maintaining bus service from 2012
forward, after the Recovery Act funds are expended.
According to city officials, the city's other Recovery Act awards also
provided some significant benefits. For example, its $3.7 million in
EECBG funding enabled the city to pursue its energy efficiency goals,
while four housing grants provided a combined $5.5 million to purchase
abandoned property and provide, on average, 3 months of rental
assistance to 179 households. The officials explained that without
these Recovery Act funds, the city would not have been able to provide
housing assistance to citizens facing foreclosure, improve public
safety services, or increase energy efficiency at public facilities.
State's Central Reporting Process Is Working Smoothly, Although Data
Quality Is Still a Concern and FTE Data from Past Quarters Will Need
to Be Corrected:
State officials said the state's central reporting process worked
smoothly during the fourth round of Recovery Act reporting, although
they expressed some concerns about the quality and accuracy of data
reported by local entities that do not report through the state's
central process.[Footnote 28] Colorado recipients, including state
agencies that reported centrally and other entities that reported
directly, reported about 17,790 FTEs funded by the Recovery Act for
the fourth reporting period, covering April 1, 2010, through June 30,
2010. These FTEs increased by more than 7,530 over the previous
quarter largely because of an influx of $205 million of SFSF phase II
funding in April 2010. With the additional SFSF funding, IHEs reported
about 8,830 FTEs during this round, an increase of 5,590 FTEs over the
previous quarter. However, to accommodate this late funding and
revised guidance, the state did not report a total of 1,110 FTEs
associated with some IHEs' phase II awards in the April through June
period. As a result, at such time that OMB issues instructions for
making corrections in closed quarters, the state will need to update
FTEs it reported for the January through March quarter to include
these 1,110 FTEs. In addition, through our review of recipient
reports, we found incorrect data reported by other state agencies and
local entities that also indicate the need for a corrections process
for previous quarters' reported data.
Despite Some Challenges, Central Reporting Process Was Completed
Successfully:
Colorado officials reported that the April through June round of
centralized reporting was more challenging than the last round, but
was completed successfully. According to reporting officials, the
primary challenge was the untimely submission of data by IHEs to the
state--the submissions were delayed largely because they were due at
the same time IHEs were closing out their fiscal years. However, the
officials stated that the 4-day extension to the reporting deadline by
the Recovery and Accountability Transparency Board--from July 10 to
July 14--was beneficial because it provided additional time to perform
data quality checks to identify necessary corrections, particularly
since one of the days leading up to the deadline was the July 4
holiday.
Going forward, state officials said they expect some modest challenges
for future reporting. First, they foresee problems with uploading data
during the next round of recipient reporting in October 2010 for those
recipients whose registration in the Central Contractor Registration
database will have expired. As we reported in May 2010, recipients and
subrecipients must maintain a current registration in the database--if
they do not, FederalReporting.gov will reject their submissions. We
also reported that state officials have proposed that the Recovery
Accountability and Transparency Board allow the original registrations
to be used throughout the life of the grant, preventing the
rejections. According to state officials, they have not received a
response. Second, Colorado will experience a change in state
leadership in January 2011 and state officials said they and others
are in the initial planning phase for this transition. While the
officials believe the central recipient reporting process has
stabilized and should transfer to the next administration with little
disruption, the inherent uncertainty of the political transition
process could pose a challenge.
Finally, state officials said that reporting by recipients who receive
grants directly from the federal government and do not report
centrally through the state will be challenging as these recipients
may not have the resources to navigate the changing guidance and
processes. For example, we found that one of these recipients--Weld
County--encountered problems when reporting its FTEs for the April
through June period. According to a senior county official, the county
was unable to obtain sufficient assistance from DOE, resulting in
county officials creating a duplicate award record in
FederalReporting.gov when they were trying to update an existing
record from the prior period. While the state Recovery Office has
offered assistance to non-state recipients, according to officials,
the offer largely resulted in confusion--most of the small percentage
of recipients who responded to the offer did not understand the
state's role in local reporting and in some cases thought they were
being informed they had received state funds in addition to Recovery
Act funds.
Quality of Reported Data Remains a Concern, While a Process Is Needed
to Correct FTEs from Closed Reporting Periods:
Several Colorado recipients will need to make corrections to FTEs
reported in previous quarters, which continues to raise questions
about the quality of some of the FTE data reported. For example, one
recipient needs to correct reported FTEs because of changed guidance
it received for calculating FTEs, while other recipients need to
correct FTEs because they misunderstood or misinterpreted federal
guidance and miscounted FTEs. According to OMB's December 18, 2009,
guidance, if recipients need to make corrections to their quarterly
FTE data for prior quarters, these recipients are expected to maintain
records containing this information until such time that OMB develops
a process to submit it to the federal government, which OMB has yet to
do.[Footnote 29]
For selected programs, we identified a number of instances in which
state and local entities will need to correct or update FTE data for
prior reporting periods that are currently closed to additional
changes. These instances raise questions about the quality of FTE data
for previous rounds published on Recovery.gov, as well as support the
need for a defined corrections process.
* SFSF Education Stabilization Funds. The infusion of SFSF phase II
funds late in the fiscal year resulted in Colorado IHEs using those
funds to pay for additional FTEs in fiscal year 2010. However, because
funding was received late in the year and changes were made in federal
guidance, about 1,110 FTEs have not been reported. Based on guidance
received from Education, the state had instructed IHEs in May 2010 to
report all FTEs funded by phase II monies in the April through June
reporting period, regardless of whether the FTEs were created or saved
in this period, to prevent undercounting FTEs.[Footnote 30] Even if
the IHEs did not have sufficient expenditures to absorb the infusion
of SFSF funds in the April through June quarter, the instructions
directed the IHEs to report all FTEs reimbursed by phase II funds in
that quarter. However, Education subsequently alerted the states on
July 8, 2010--6 days before the reporting deadline--they should not
report all FTEs paid for with phase II funds in the fourth reporting
period if an IHE's expenditures were less than the SFSF phase II
funding. The alert stated that the IHEs should instead retain records
of FTEs worked in previous quarters so this data can be corrected at
some point in the future. According to Education, this change resulted
from a Recovery Accountability and Transparency Board decision that
all FTEs should be reported in the quarter in which they were worked,
not the quarter in which funding was received. As a result, the state
attributed approximately 1,110 FTEs to the January through March
quarter, prompting the need to update its reported FTE figure for that
quarter as part of a future corrections process.
While this change in approach does not raise questions about the
quality of the state's fourth reporting period SFSF FTEs, it does
highlight the need for a corrections process for closed reporting
periods. According to state reporting officials, they agreed with
Education's initial assessment that the new approach may result in
underreporting of FTEs associated with phase II SFSF funds if OMB's
corrections process does not include all closed reporting periods.
Furthermore, a state official expressed concern that the new approach
may be less transparent if the public does not know to go back to
previous quarters on Recovery.gov to see corrected data.
* Clean Water and Drinking Water SRFs. Although OMB guidance requires
all FTEs paid for with Recovery Act funds to be reported, the
Authority, CDPHE, and DOLA--the three entities which jointly manage
the Recovery Act SRF programs in Colorado--have not reported any FTEs
associated with the management of the two SRF programs, likely
resulting in underreporting of FTEs in past quarters that will
subsequently need to be corrected. As allowed under the SRF program,
the state SRF agencies reserved a portion, in this case $2.6 million,
of their SRF Recovery Act awards as "administrative" set-asides to pay
for project management activities, including project oversight and
loan monitoring. Based on guidance from OMB and the U.S. Environmental
Protection Agency (EPA) and a conversation with regional EPA staff
that indicated the state was not required to report administrative
FTEs, state officials said they determined in mid-2009 that they were
not required to report FTEs associated with project management
activities paid for with the set-aside funds.
However, EPA officials said they then interpreted OMB's December 18,
2009, guidance as requiring SRF recipients to report these FTEs since
they were funded by Recovery Act monies. Although such an
interpretation represented a change in EPA's expectations of what
recipients would report, EPA officials said they did not formally or
systematically communicate this change to states, including Colorado,
because they deferred to the states' interpretations of OMB's
guidance. Yet, according to Colorado SRF officials, they did not
interpret OMB's December guidance in the same way as EPA; as a result,
the Authority, CDPHE, and DOLA have not calculated or reported their
SRF-related FTEs funded by set-aside monies. Based on those hours
reported as worked by CDPHE staff on the Clean Water and Drinking
Water SRF projects for the January through March period, we estimated
there would be at least 10 FTEs associated with CDPHE's efforts.
[Footnote 31] According to Authority staff, it has records of the
hours worked by CDPHE, DOLA, and its own staff that have been paid for
with the Recovery Act set-aside funds; as a result, it would be
relatively simple for the Authority to reconstruct the FTEs it would
need to report for all three agencies for the prior quarters.
Further, the Colorado SRF agencies missed the continuous corrections
period for the January through March 2010 reporting period, which
ended on June 14, 2010. As a result, they will need to add about 28
FTEs combined to their totals for Clean Water and Drinking Water SRFs
for that period. State officials explained that for the January
through March reporting period, their quarterly FTE numbers were not
final immediately after the quarter had ended, requiring them to
initially report forecasted numbers to FederalReporting.gov.[Footnote
32] They then had the opportunity to upload final numbers during the
continuous corrections period. However, according to these officials,
they believed that they had until the end of June 2010 to upload their
corrected FTEs. Although updated guidance was posted on
FederalReporting.gov and shared by EPA indicating the period ended two
weeks earlier, officials said they were not aware of the June 14
deadline.
* IDEA, Part B, and ESEA Title I, Part A. The Colorado Department of
Education will likely need to correct FTE data from its LEAs for
previous quarters. In our review of one LEA's FTE calculation for the
April through June period, we found that the LEA included FTEs for
both years of the grant rather than just 1 year, effectively double
counting FTEs worked in that quarter. In response to our review, CDE
reexamined the LEAs' FTE submissions for the April through June period
and revised the FTE figure it reported from about 1,410 to 1,350. In
addition, we found that three LEAs were providing CDE with monthly FTE
data rather than quarterly data as requested. Because an LEA's monthly
FTE data can vary, the use of the monthly figure instead of an average
of the 3 months of data can result in misreporting total FTEs. CDE
officials stated they plan to review LEAs' FTE submissions from
previous quarters, which may identify the need to correct calculations
of FTEs for those periods.
* Colorado Springs. Due to confusion and incorrect assistance provided
by DOE, the city reported FTEs associated with its EECBG award in the
April through June period inaccurately. Although Colorado Springs
reported about two FTEs for the January through March quarter, city
officials explained they did not include vendor hours in their
calculations and they did not check supporting documentation from each
reporting entity to verify hours worked. According to city officials,
they misinterpreted DOE's March 11, 2010, guidance until the City
Auditor informed them that they should have included vendor hours in
their FTE calculation. In addition, upon further review of the
supporting documentation, Colorado Springs officials identified
additional FTEs that had not been reported. According to these
officials, once they identified the problem, they contacted DOE to
report the error and make corrections and were told that these missed
FTEs should be included in their April through June FTE calculations.
According to OMB's December 2009 guidance, these missed FTEs should be
recorded by the city and retained until a corrections process is
established. However, based on the direction it received from DOE,
Colorado Springs reported about six FTEs for April through June, which
includes the two FTEs from vendor and other corrected hours worked
during the January through March quarter. This will likely prompt the
need in the future for the city to correct both the January through
March and April through June reporting periods. Although the FTE
impact is relatively minor, it raises a concern regarding guidance
being provided by DOE.
Colorado's Accountability Community Continues to Review Recovery Act
Programs:
The Colorado audit community is continuing to conduct reviews of
Recovery Act projects and uses of funds, both as part of larger
reviews and as specific program audits. Specifically, Colorado
auditors have issued 13 audit reports and 2 non-audit services, an
increase of 6 reports since we last reported in May 2010.[Footnote 33]
Some of these reports contained findings aimed at improving the
management of Recovery Act funds. In addition, ongoing audits include
a review of the state's weatherization program under the act by the
Office of the State Auditor, three reviews of CDOT Recovery Act
projects by the agency's audit division, and an assessment of the City
of Denver's Recovery Act processes and monitoring by the City Auditor.
These and other audit entities have additional reviews planned into
2011.
As we reported in May 2010, Colorado issued its Single Audit Report
for fiscal year 2009 in February 2010.[Footnote 34] According to data
from the Federal Audit Clearinghouse, which is responsible for
receiving and distributing Single Audit results, it received
Colorado's initial Single Audit reporting package for the year ending
June 30, 2009, on March 23, 2010, in advance of the state's deadline
of March 30, 2010.[Footnote 35] According to the State Auditor, the
Clearinghouse then requested additional information from the state,
which audit officials submitted on May 25, 2010. In addition, we
reported Colorado participated in OMB's Single Audit Internal Control
Project in 2009, whereby audit reports were to be presented to
management 3 months sooner than the 9-month time frame required by the
Single Audit Act and OMB Circular A-133. According to officials at the
Colorado State Auditor's office, OMB is continuing this project for
fiscal year 2010 single audits but Colorado has not determined whether
it will participate.
Since we reported in May, Colorado's State Auditor issued two reports
which contained findings relevant to the Recovery Act. The first
examined the state's compliance with federal reporting requirements
during the first round of recipient reporting, which covered the
February 2009 through September 2009 period.[Footnote 36] The State
Auditor's findings corroborated findings we reported in November 2009
with respect to the first round of recipient reporting--for example,
that the lack of reporting a standardized FTE meant jobs data could
not be aggregated or compared nationally or statewide.[Footnote 37]
The report did not make any recommendations and stated that the change
in methodology contained in OMB's December 18, 2009, guidance--from
identifying jobs created and retained to jobs funded and calculating
FTE using a standard formula--attempted to address these issues.
The second recently issued report from the State Auditor found the
laws, policies, and practices in place in Colorado do not promote the
long-term solvency of the state's Unemployment Insurance Trust Fund,
and that reform of the state's unemployment insurance financing system
is needed.[Footnote 38] Colorado's trust fund is used to pay regular
unemployment benefits, lasting up to 26 weeks, to eligible unemployed
claimants. Under the Recovery Act, Colorado received an additional
$127.5 million in 2009 to help make payments for these regular
benefits to claimants.[Footnote 39] However, because of a decrease in
the trust fund's primary source of revenues--payroll premiums--
combined with a more than doubling of benefit payments from the prior
year, the trust fund reserve became insolvent (the reserve is zero or
in deficit) in January 2010. This prompted Colorado to borrow about
$254 million from the federal government to pay its regular
unemployment insurance benefits, as of May 20, 2010. The report
recommended that the state Department of Labor and Employment, which
has responsibility for administering the program, perform a
comprehensive evaluation of the unemployment insurance financing
system, focused in part on raising the maximum annual wage amount on
which unemployment insurance premiums are charged and raising the
amount of the premiums themselves, and communicate the need to improve
the long-term solvency of the trust fund to Colorado decisionmakers
and employers. The agency agreed with all of the report's
recommendations.
Further, a CDOT audit of one of the agency's Recovery Act-funded
highway resurfacing projects found, among other things, the agency may
have violated state fiscal rules when it authorized and paid for
additional work that was outside of the scope of the original project
before it executed a change order.[Footnote 40] The audit report noted
that CDOT does not provide clear guidance on this matter.
Nevertheless, the report also noted that the additional work was
necessary, the prices appeared to be fair and reasonable, the
contractor performed the work as agreed, and the work was paid for at
the agreed-upon prices. In a separate communication related to the
audit report, the Audit Division suggested that CDOT stress the
importance of timely execution of change orders, clarify the
documentation requirements for change orders and price justifications,
and emphasize that the authority to review and approve change order
documentation rests with the Resident Engineer, subject to funding
approval by the Program Engineer. In response to the concerns raised
in the audit, CDOT has formed a task force to look at revisions to its
construction manual.
In addition to these state-level audits, two city audits found
compliance problems with federal grants. First, as part of the City of
Fort Collins's fiscal year 2009 Single Audit, independent auditors
found that the city paid about $684,000 to two subrecipients under its
Federal Transit Formula Grants, which included a Recovery Act grant,
without checking whether or not the subrecipients had been suspended
or debarred from participation in federal programs.[Footnote 41]
According to the audit report, the city is required by OMB to verify
this information before issuing procurement contracts of $25,000 or
more or making subawards of any amount. The report recommended that
the city ensure vendors and subrecipients that may receive federal
awards have not been suspended or debarred from participation in one
of two ways, either (1) have these entities sign certifications as to
their eligibility or (2) have the city check the federal Excluded
Parties List System before making any subawards. In response,
according to the audit report, the city has established a process that
includes checking the Excluded Parties List System before issuing any
purchase orders for projects containing federal funding.
Finally, the Denver City and County Auditor found several areas in
need of improvement related to reporting and managing Recovery Act
funding for the Airport Improvement Program at Denver International
Airport (DIA).[Footnote 42] The report identified some specific
weaknesses, including that DIA's written policies and procedures do
not contain the necessary steps to ensure that an effective review of
Recovery Act data is completed. This resulted in DIA reporting
incorrect data and failing to submit reimbursements to the Federal
Aviation Administration in a timely manner and in accordance with
applicable regulatory requirements. The report made a number of
recommendations to DIA to strengthen its management and reporting of
Recovery Act funds, which DIA agreed to implement by October 31, 2010.
Colorado's Comments on This Summary:
We provided officials in the Colorado Governor's Recovery Office,
Governor's Office of State Planning and Budgeting, Department of
Personnel and Administration, the Office of the State Controller, and
the Office of the State Auditor with a draft of this appendix for
comment. State officials agreed with this summary of Colorado's
recovery efforts to date. The officials provided technical comments,
which were incorporated into the appendix as appropriate.
GAO Contacts:
Robin M. Nazzaro, (202) 512-3841 or nazzaror@gao.gov:
Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Paul Begnaud, Kathy Hale, Kay
Harnish-Ladd, Susan Iott, Jennifer Leone, Tony Padilla, Leslie Kaas
Pollock, Kathleen Richardson, and Dawn Shorey made significant
contributions to this report.
[End of section]
Appendix III Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to
States and Localities, While Accountability and Reporting Challenges
Need to Be Fully Addressed (Colorado), [hyperlink,
http://www.gao.gov/products/GAO-09-1017SP] (Washington, D.C.: Sept.
23, 2009).
[3] FTE data are as of August 11, 2010, unless otherwise indicated.
[4] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Colorado), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[5] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability (Colorado), [hyperlink,
http://www.gao.gov/products/GAO-10-232SP] (Washington, D.C.: Dec. 10,
2009).
[6] The focus on using Recovery Act funds for higher education is a
result of the state's constitutional requirement to maintain its level
of funding for K-12 programs, according to officials. According to a
state legislative study, in 2000, Colorado voters approved a measure
to increase education spending in the state;
this amendment directed a portion of state tax revenues to the State
Education Fund through fiscal year 2011. The amendment requires an
annual increase in per-pupil funding and requires the state general
fund appropriation for state aid to schools to increase by 5 percent
per year, unless state personal income increased by less than 4.5
percent during the previous year.
[7] To receive a waiver from the maintenance-of-effort requirement, a
state has to show that its share of education spending as a percentage
of total state revenues is equal to or greater than that of the
previous year.
[8] OMB, Payments to State Grantees for Administrative Costs of
Recovery Act Activities, M-09-18 (Washington, D.C.: May 11, 2009).
[9] The state's supplemental statewide indirect cost allocation plan
estimated that the state would need $6.3 million over 3 years. This
includes $4.7 million in statewide indirect costs and $1.6 million to
pay for direct billed services such as audits by the Office of the
State Auditor.
[10] 34 C.F.R. § 80.40(a).
[11] We use the term allocated to mean that the state designated
funding to particular program areas; obligated to mean that the state
entered into a binding agreement or otherwise committed the funds; and
spent to mean that the state expended funds by making payments.
[12] To earn the Energy Star rating, a home must meet strict
guidelines for energy efficiency set by the U.S. Environmental
Protection Agency. These homes are at least 15 percent more energy
efficient than homes built to the 2004 International Residential Code
and include additional energy-saving features that typically make them
20 to 30 percent more efficient than standard homes.
[13] A Btu is the quantity of heat needed to increase the temperature
of 1 pound of water by 1 degree Fahrenheit.
[14] Of the total $3.2 billion, up to $456 million is to be awarded on
a competitive basis to grant applicants of any population size, while
the rest was distributed as formula grants.
[15] As with the State Energy Program, we use the term allocated to
refer to funds that the state designated to programs areas; obligated
to mean that the state entered into a binding agreement or otherwise
committed the funds; and spent to refer to funds that have been paid.
[16] As with the State Energy Program, DOE recently reduced reporting
requirements.
[17] OMB, Updated Guidance on the American Recovery and Reinvestment
Act-Data Quality, Non-Reporting Recipients, and Reporting of Job
Estimates, M-10-08 (Washington, D.C.: Dec. 18, 2009) and DOE,
Calculation of Job Creation Through DOE Recovery Act Funding, EECBG
Program Notice 10-08 (Washington, D.C.: Mar. 11, 2010).
[18] DOE, EERE Program Notice: Recovery Act Buy American Provisions
and Potentially Misleading Manufacturer Claims (Washington, D.C.: June
25, 2010).
[19] [hyperlink, http://www.gao.gov/products/GAO-09-1017SP].
[20] The contract schedule was based on working days--actual days on
which work occurred--minus holidays or days when poor weather
suspended construction activity, rather than calendar days.
[21] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[22] The Recovery Act initially provided eligible states with an
increased FMAP for 27 months from October 1, 2008, to December 31,
2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. On August 10, 2010, federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[23] Public Law 111-226 also provides $10 billion for the new
Education Jobs Fund to retain and create education jobs nationwide.
The Fund will generally support education jobs in the 2010-2011 school
year and be distributed to states by a formula based on population
figures. States can distribute their funding to school districts based
on their own primary funding formulas or districts' relative share of
federal ESEA Title I funds. See Pub. L. No. 111-226, § 101.
[24] A state budget official explained that, although the state is
required to maintain its general fund reserve at 4 percent of
appropriations for 2011, section § 24-75-201.5 of the Colorado Revised
Statutes allows the state to use half of this reserve if revenues come
in short of appropriations.
[25] This quarterly forecast is from the Office of State Planning and
Budgeting. The Colorado Legislative Council also prepares quarterly
forecasts.
[26] Although additional Recovery Act funds went to separate
jurisdictions within Weld County and the county in which Colorado
Springs is located, such as school districts and housing agencies,
these funds are not included in our review.
[27] PPRTA was established by voters in late 2004 and has the
authority to levy a 1-cent sales and use tax to be used to fund
specific capital projects, maintenance projects, and metro transit
improvements in unincorporated El Paso County, the Cities of Colorado
Springs and Manitou Springs, and the Town of Green Mountain Falls.
[28] As we have previously reported, the state of Colorado has chosen
to report its Recovery Act information centrally, meaning that the
state agencies submit their data through one central office. The
state's central reporting process does not include local governments,
authorities, or other direct recipients, including non-profit
organizations or private entities.
[29] OMB's December 2009 guidance established a continuous corrections
period, during which recipients are able to make corrections to
reported FTEs for the quarter most recently ended. According to a
subsequent update posted on FederalReporting.gov, recipients have
about 40 days after the data is published on Recovery.gov to make
corrections to that quarter only, after which the quarter is closed to
future corrections.
[30] We noted in our May 2010 report that if an IHE allocated its SFSF
phase II funding across its annual budget (assuming it did so with its
SFSF phase I funding), it would underreport those FTEs associated with
prior, closed quarters because FederalReporting.gov does not allow for
adjustments to previous quarterly reports once the continuous
corrections period has closed. See GAO, Recovery Act: States' and
Localities' Uses of Funds and Actions Needed to Address Implementation
Challenges and Bolster Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-604] (Washington, D.C.: May 26,
2010).
[31] This estimate does not include any hours worked by Authority or
DOLA staff for this period.
[32] CDPHE officials explained that, by the end of a quarter, they
have final FTEs for the first two months of that quarter but need to
report forecasted FTEs for the final month of the quarter in part
because of a delay in receiving certification of hours worked from
their subrecipients.
[33] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[34] This was the first Single Audit for Colorado that includes
Recovery Act programs. The audit identified 55 significant internal
control deficiencies related to compliance with Federal Program
requirements, of which 19 were classified as material weaknesses. Some
of these significant deficiencies occurred in programs that included
Recovery Act funds.
[35] The Single Audit Act requires that a nonfederal entity subject to
the act transmit its reporting package to a federal clearinghouse
designated by OMB no later than 9 months after the period audited.
[36] Office of the State Auditor, American Recovery and Reinvestment
Act of 2009, Section 1512 Reporting, Performance Audit (Denver,
Colorado: Mar. 19, 2010). Although the report is dated March 2010, it
was not released to the public until June 2010.
[37] 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).
[38] Office of the State Auditor, Evaluation of the Unemployment
Insurance Trust Fund, Department of Labor and Employment (Denver,
Colorado: June 23, 2010).
[39] At the time of the State Auditor's review, the federal government
and the state of Colorado also offered extended benefits to eligible
unemployed workers paid for with funds appropriated under the Recovery
Act.
[40] CDOT Memorandum, Audit of Construction Project Payments, Project
ES4 0141-020, State Highway 14 Resurfacing (SA 15511), Prime
Contractor: LaFarge North America dba LaFarge West, Audit Number A1-
1010 (Denver, Colorado: May 3, 2010).
[41] City of Fort Collins, Colorado, Compliance Report (Denver,
Colorado: Dec. 31, 2009).
[42] City and County of Denver's Office of the Auditor, Denver
International Airport, Airport Improvement Program, Performance Audit
(Denver, Colorado: Aug. 19, 2010).
[End of Appendix III]
Appendix IV: District of Columbia:
Overview:
The following summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act) spending in the District of Columbia (the District).[Footnote 1]
The full report on our work, which covers 16 states and the District,
is available at [hyperlink, http://www.gao.gov/recovery].
What We Did:
We reviewed the following programs funded under the Recovery Act--the
State Energy Program (SEP), the Energy Efficiency and Conservation
Block Grant Program (EECBG), the Weatherization Assistance Program
(WAP), and three education programs. We began work on SEP and EECBG
because services and projects were just getting underway for these
programs. We continued our work on WAP and three education programs to
update the status of these programs. For descriptions and requirements
of the programs covered in our review, see appendix XVIII of GAO-10-
1000SP. Our work focused on how the funds were being used and
monitored, how safeguards were being implemented, and issues that were
specific to each program. To gain an understanding of the District's
efforts to oversee and monitor the use of Recovery Act funds, we
talked to the District's Office of the Inspector General (DC OIG)
about its oversight role and audits related to Recovery Act funds. In
addition to our program-specific reviews, we also updated information
on the District's fiscal situation and how Recovery Act funds are
being used for budget stabilization, as well as the District's
experience in meeting Recovery Act reporting requirements.[Footnote 2]
What We Found:
State Energy Program and Energy Efficiency and Conservation Block
Grant Program. Under the Recovery Act, the U.S. Department of Energy
(DOE) awarded the District over $31 million in funding through SEP and
EECBG. The District Department of the Environment (DDOE) administers
both programs for the District. In April 2009, the District received
the initial award notice for approximately $22 million in Recovery Act
SEP funding, although the full funding award was not available to DDOE
until September 2009. Although approximately 2 percent ($366,513) of
funds have been expended as of June 30, 2010, DDOE officials expect
all non-personnel Recovery Act SEP funds to be obligated by September
30, 2010 and approximately 40 percent to be expended by that date.
DDOE plans to use the majority of SEP funds for energy efficiency
retrofits at various District government and public school buildings.
The EECBG program, funded for the first time by the Recovery Act, was
created to assist state, local, and tribal governments in implementing
strategies to reduce fossil fuel emissions, reduce total energy use,
and improve energy efficiency in the transportation, building, and
other appropriate sectors. In December 2009, the District was awarded
almost $9.6 million in Recovery Act funding for the EECBG program.
According to DDOE officials, the District has obligated nearly all of
the $9.6 million of EECBG funds as of June 25, 2010. However, less
than 0.5 percent has been expended, as of June 30, 2010--mainly for
expenditures on personnel costs, as projects did not begin until late
July 2010. The majority of EECBG funds have been obligated to District
facilities, such as libraries and recreation centers, to provide
energy improvements.
Weatherization Assistance Program. DOE allocated about $8 million in
Recovery Act weatherization funds to the District for a 3-year period.
DDOE--the agency responsible for administering the program for the
District--did not begin to spend its operational weatherization
funding until February 2010. However, as of July 30, 2010, DDOE
obligated all of its Recovery Act funding for weatherization and has
completed weatherization for 230 homes, according to DDOE officials.
These officials stated that the District will spend all its
weatherization funding by March 31, 2011. DDOE expects to exceed its
initial goal of weatherizing 785 homes using its Recovery Act funding,
but does not have an updated estimate at this time.
Education. The U.S. Department of Education allocated $143.6 million
in Recovery Act funds to the District from the State Fiscal
Stabilization Fund (SFSF);
for grants under the Individuals with Disabilities Education Act, as
amended (IDEA) Part B;
and for grants under Title I, Part A of the Elementary and Secondary
Education Act of 1965, as amended (ESEA). A large percentage of these
funds are being used to pay employee salaries. The Office of the State
Superintendent of Education (OSSE) continues to monitor the District's
local educational agencies (LEA)[Footnote 3] utilizing the monitoring
protocol it developed in March 2010, which includes conducting on-site
monitoring visits and desk reviews. As of June 2010, OSSE completed
its ESEA grant on-site monitoring visits for the 2009-2010 school
year, consisting of visits to 18 LEAs. Concurrently, OSSE visited 3
LEAs receiving IDEA Part B grant funds, and completed 19 desk reviews
of LEAs receiving Recovery Act funds--all of which OSSE officials
considered to be higher-risk subrecipients. According to OSSE, LEAs
generally complied with Recovery Act requirements, but some LEAs had
inconsistencies with specific record management practices. OSSE has
required these LEAs to improve their record management practices.
Accountability efforts. As of July 14, 2010, the DC OIG has initiated
one audit specifically related to the use of Recovery Act funds
involving construction contracts at the District Department of
Transportation that were awarded under the Recovery Act. This audit is
expected to be completed by spring 2011. Other planned Recovery Act
audits have not yet begun because of lack of resources. Additionally,
the District completed its fiscal year 2009 Single Audit report on
June 29, 2010. The 2009 audit--the first Single Audit for the District
that included Recovery Act programs--identified 5 significant
deficiencies and 17 material weaknesses related to controls over
programs that received Recovery Act funds, including the Medicare
program. However, a senior official from the Office of the Chief
Financial Officer (OCFO) noted that the deficiencies and weaknesses
were not a result of noncompliance with Recovery Act requirements.
The District's fiscal situation. Additional Recovery Act funds have
helped support certain District education, human services, and
technology programs. District officials told us that the District has
received over $56 million in Recovery Act funding since we last spoke
with them in April 2010 - about $36 million in noncompetitive grants
and about $20 million in competitive grants. According to the
District's Chief of Budget Execution, the infusion of Recovery Act
funds has helped mitigate the negative effects of the recession on the
District's budget by providing time to adjust for the decline in
revenues, which allowed the District to avoid making drastic cuts to
services and programs. Although the District continues to face fiscal
challenges, there are signs that the District's economy is starting to
recover. In June 2010, the District's Chief Financial Officer reported
that the revenue estimates for fiscal years 2010 through 2014 remain
unchanged from the estimate made in the previous quarter, noting that
there are indicators of economic recovery.
The District Is Beginning to Spend Recovery Act Funds on the State
Energy Program and the Energy Efficiency and Conservation Block Grant
Program:
Under the Recovery Act, DOE awarded the District over $31 million in
funding through SEP and EECBG. In the District, both programs are
administered by DDOE. To develop a proposed allocation of funding
among District agencies, DDOE and the Office of the City Administrator
(OCA) requested detailed energy efficiency project proposals from
various District government agencies that would deliver immediate
energy savings and create jobs, and could easily be implemented. DDOE
officials said that District agencies submitted requests for funding
(over $200 million) that far exceeded the available budget. DDOE
officials said the final allocation of funding agreed upon by DDOE and
OCA was based on two factors: (1) the agency's approximate share of
the District government's total building energy retrofit needs,
[Footnote 4] and (2) the desire to distribute Recovery Act funding
across the District portfolio to promote energy efficiency measures by
as many agencies as possible, and for the benefit of as many
constituencies as possible.
SEP provides funds through formula grants to achieve national energy
goals such as increasing energy efficiency and decreasing energy
costs. In April 2009, the District received the initial award notice
for approximately $22 million in Recovery Act SEP funding, although
the full funding award was not available to DDOE until September 2009.
According to a DDOE official, DDOE submitted its original application
(or state plan) to DOE in May 2009. The application described the
activities the District planned to implement; a description of how the
District intended to achieve 20-30 percent cost savings annually
through 2012; how the activities will help achieve this goal, along
with any preliminary progress toward achieving this goal; and a
monitoring plan for how the District will conduct oversight of project
implementation. The original application has been revised because of
changes in the proposed uses of funds, according to DDOE officials.
DDOE officials stated that, as of June 30, 2010, approximately 2
percent ($366,513) of the SEP funds have been expended. DDOE officials
explained that they have allocated funding to other District agencies
through memorandums of understanding for about 91 percent of Recovery
Act SEP funds. DDOE is working to ensure that all non-personnel
Recovery Act SEP funds are obligated under signed agreements with the
contractors or partners that will do the work by September 30, 2010
and approximately 40 percent to be expended by that date.[Footnote 5]
According to DDOE officials, the District has a portfolio of buildings
that need energy efficiency measures and retrofitting. To address this
need, DDOE officials stated that about 75 percent of Recovery Act SEP
funds will be allocated for building retrofits and about 25 percent
will be allocated for internal/direct service projects, such as
outreach and education, renewable grants, and energy efficiency
activities. For example, according to DDOE, almost $7.9 million of the
District's Recovery Act SEP funds will be used to retrofit eight
elementary and middle schools in the District. This project started on
June 23, 2010, and is expected to be completed by August 23, 2010.
DDOE officials said another $1.3 million of Recovery Act SEP funds
will be used for advertisements of energy conservation measures for
programs funded under SEP and specific outreach programs, among other
things.
The EECBG program, funded for the first time by the Recovery Act,
[Footnote 6] was created to assist state, local, and tribal
governments in implementing strategies to reduce fossil fuel
emissions, reduce total energy use, and improve energy efficiency in
the transportation, building, and other appropriate sectors. The
Recovery Act appropriated $3.2 billion for this program. In December
2009, the District was awarded almost $9.6 million in Recovery Act
funding by DOE for the EECBG program. EECBG funding will be used in
the District to (1) reduce energy consumption in government
facilities, (2) help District residents and businesses conserve energy
by implementing energy efficient practices, and (3) create "green
collar" jobs.
According to DDOE officials, the District had memorandums of
understanding and other agreements executed with other District
agencies and community-based organizations (CBOs) as of June 25, 2010
for $7 million and expected to have almost all of the $9.6 million of
EECBG funds under agreements by July 31, 2010. However, less than 0.5
percent has been expended, as of June 30, 2010--mainly for
expenditures on personnel costs, as projects did not begin until late
July 2010. DDOE officials stated that about 75 percent of EECBG funds
has been allocated to District facilities such as libraries,
firehouses, and recreation centers. For example, $1.5 million will be
used to provide energy efficiency improvements to 10 public libraries
in an effort to reduce their overall energy use. DDOE officials said
that this project began in July 2010 and is estimated to end by March
31, 2011. DDOE officials said the other 25 percent of EECBG funds is
allocated to worthwhile programs that had no longer been funded or new
programs that could not be funded in the absence of Recovery Act
funds. District officials said they had been unable to serve certain
target populations, such as the nonprofit and small business sectors,
and a portion of EECBG funds will be targeted to these populations.
For example, the District plans to use $500,000 of EECBG funds to
provide energy audits and retrofits to nonprofit CBOs in the District.
The estimated completion date for this project is April 30, 2011.
Monitoring of SEP and EECBG Programs is Just Beginning:
DDOE officials stated that because Recovery Act SEP and EECBG projects
have just begun in the District, as of July 1, 2010, DDOE had not yet
conducted any monitoring activities of these programs. However, DDOE
officials indicated that the District is committed to the proper
management and oversight of all Recovery Act SEP-and EECBG-funded
projects and has a number of procedures planned or in place to monitor
both programs. For example, the District has recently developed a
grants manual and sourcebook as a complement to the pre-existing
subrecipient monitoring manual for District agencies to implement as
part of their management of grant-funded programs. DDOE plans to adapt
this manual to address the specific monitoring requirements of the SEP
and EECBG programs. DDOE also noted that all District agencies
receiving SEP and EECBG funds must meet Recovery Act requirements and
ensure that standard protocols are being used, monitoring is
occurring, and reporting and projects are done on time. According to
DDOE officials, they are developing plans that describe how this
monitoring will occur in practice. For example, DDOE officials told us
that their monitoring will include monthly field visits to District
agencies receiving SEP and EECBG funds to check on the progress of SEP
and EECBG projects. In addition, DDOE officials stated that these
agencies would provide DDOE with monthly status updates on SEP and
EECBG projects, which would include a discussion of milestones and
timelines for each project.
For the SEP program, DDOE officials told us they will, at a minimum,
conduct routine monitoring visits to the two largest projects--the
energy retrofit projects at the eight District schools and the largest
District government building. DDOE officials also stated they will
monitor all projects using the Recovery Act monitoring checklist they
developed, which includes checking expenditures of funds awarded,
energy measures installed, and milestones met or missed by projects,
based on the District's state plan. DDOE officials stated that their
focus while monitoring will be to ensure that the work being done is
consistent with the agreed-upon scope of work. Further, DDOE officials
stated that their Recovery Act financial manager will conduct a
separate "desktop" financial monitoring of projects by verifying
expenditures through a shared financial database used by DDOE and the
other District agencies.
DDOE officials told us they will use a process for monitoring the
EECBG program very similar to what they use for the weatherization
program. For example, although DDOE has partnered with other District
agencies to complete SEP and EECBG projects, DDOE officials said they
will also make use of six of the seven CBOs doing weatherization under
the Weatherization Assistance Program for the District to implement
retrofit projects, including conducting postwork inspections for
completed projects. DDOE officials said they will conduct monthly
field visits to the CBOs to ensure that the invoices received from the
CBOs match up with the work ordered, as well as conducting postwork
inspections to ensure quality workmanship. In addition, DDOE will use
the same project tracking system set up for the weatherization
program. DDOE officials stated they plan to monitor all parties they
have contracts with as well as audit 10 percent of all projects for
administrative, programmatic, and financial compliance.
The District Will Use the Same Recipient Reporting Process for Both
Recovery Act Energy Programs:
DDOE is one of the prime recipients in the District and utilizes the
centralized recipient reporting system, which is discussed in further
detail later in this report.[Footnote 7] For recipient reporting
purposes, DDOE officials told us that only one SEP or EECBG program--
an SEP funded outreach program--had started during the reporting
period ending June 30, 2010, so both programs reported minimal program
costs expended and minimal full-time equivalents (FTE) for the latest
reporting period, consisting only of hours worked by DDOE's Recovery
Act administrative staff for SEP and EECBG. DDOE officials told us
that when more work on SEP and EECBG projects begins, they plan to
collect recipient reporting data from the subrecipients, including
certified payroll records to verify hours worked by contractors.
Additionally, DDOE officials told us that other District agencies
receiving SEP and EECBG funding will be responsible for submitting
recipient reporting data to the District for its respective projects.
However, officials indicated there have been issues in the past with
other agencies not reporting in a timely fashion on SEP projects. DDOE
officials told us they have developed Recovery Act training for other
District agencies and subrecipients, which should help ensure timely
reporting. According to DDOE officials, the recipient reporting data
collected will then be reviewed by the SEP or EECBG program officer
and Recovery Act grant managers for accuracy before the data are
submitted to the District and federal recipient reporting systems for
review and approval.[Footnote 8] However, DDOE officials told us they
needed additional staff to help with timely recipient reporting for
all of its Recovery Act grants, including SEP and EECBG, and planned
to hire a Recovery Act coordinator in August 2010.
The District Plans to Measure Project Impacts:
Because DDOE has just begun to implement projects with SEP and EECBG
funds, DDOE does not yet have outcome measures, such as energy savings
or job creation. As part of its quarterly reports to DOE, DDOE is
required to report measures such as energy saved and greenhouse gas
emission reductions. For completed SEP projects, officials stated that
DDOE will calculate energy savings and greenhouse gas emissions by
incorporating the building square footage, pre-and post-installation
utility bills, measures installed, and dollars spent. For EECBG
projects, officials told us the District will measure both kilowatt
and thermal savings generated from the installation of the various
energy efficiency measures. Most of the energy retrofit projects
require a pre-and post-audits that clearly identify the energy
upgrades needed and the projected energy savings from installing the
recommended energy efficiency measures.
Although the District Has Made Progress Performing Weatherization
Work, Oversight Challenges Remain:
The Weatherization Assistance Program is intended to weatherize homes,
save energy, and create jobs. Under the Recovery Act, the District
Department of the Environment (DDOE), the agency responsible for
administering the program for the District, was allocated about $8
million in Recovery Act funds by DOE.
After a Slow Start, the District Has Made Progress Expending Funding
and Weatherizing Homes:
DDOE did not begin to spend its operational weatherization funding
until February 2010. However, as of July 30, 2010, DDOE had obligated
all of its Recovery Act funding for weatherization and expended about
$3,774,000, according to DDOE officials. Seven community-based
organizations in the District manage weatherization projects and could
not start weatherizing homes until they received funding from DDOE. As
a result, CBOs did not begin to weatherize homes until March 2010,
making the District among the last recipients of Recovery Act
weatherization program funding to begin spending funds. According to a
senior DDOE official, DDOE was slow to expend funds because DDOE was
developing the infrastructure to administer the program. Recovery Act
funding has substantially increased the size of the weatherization
program in the District, from about $650,000 in 2008 to about $8
million in Recovery Act funds. To manage the program, DDOE has worked
to increase its staff, but there had been delays in this process.
However, as of June 30, 2010, DDOE had completed hiring six additional
staff to help oversee and manage the program.[Footnote 9] According to
DDOE officials, the District will spend all its weatherization funding
by March 31, 2011.[Footnote 10] With Recovery Act funding, CBOs have
completed weatherizing 230 homes in the District as of July 30, 2010.
DDOE expects to exceed its initial goal of weatherizing 785 homes
using its Recovery Act funding, but does not have an updated estimate
at this time.
District Efforts to Monitor Weatherization Program Have Just Begun:
DDOE and the CBOs have a number of procedures in place or planned to
monitor the weatherization program.
* Annual reviews of CBOs: DDOE officials informed us that, as of July
15, 2010, their program managers had just recently conducted
monitoring visits to all seven CBOs. The final reports from these
monitoring visits were not available for us to review in time for this
report, as the CBOs have 30 days to address any findings prior to
issuance of DDOE's final written report. However, DDOE reported to us
that there were no major findings. The final monitoring reports will
be forwarded to DOE and to the associated CBOs.
DOE requires that DDOE conduct such comprehensive monitoring of each
CBO at least annually. This monitoring must include a review of client
files and the CBO's records, as well as a status-of-work statement and
a comparison of the actual accomplishments with the goals and
objectives established for the period, the cost status, and schedule
status. The cost status must show the approved budget by the budget
periods and the actual costs incurred, and the schedule status should
list milestones, anticipated completion dates, and actual completion
dates. The annual review must also include results of the site
inspections referred to below.
* Site inspections: In its Recovery Act program guidance, DOE requires
state agencies, such as DDOE, to inspect at least 5 percent of all
completed weatherization work and recommends inspection of even more.
DDOE, in its grant agreement with the CBOs, had committed itself to
inspecting 10 percent of all work completed. According to DDOE
officials, DDOE's auditors had begun conducting site inspections for
the quality assurance of work completed by contractors.
In addition to DDOE's oversight of the program, all CBOs are required
to perform site inspections of 100 percent of completed weatherization
projects. One CBO performs weatherization work using its own crews and
has contracted with independent site inspectors to review their work,
to avoid a conflict of interest. These inspection reports are checked
by that CBO's program manager, according to officials from the CBO.
According to the CBOs we talked to, if they find cases of poor quality
or workmanship, CBOs will require contractors to fix the problem at no
additional cost to the CBO.
The District's System of Internal Controls for Weatherization Is in
Transition and Presents Challenges:
We conducted a customer file review of three of the seven CBOs to
understand how CBOs document their weatherization work and to
determine the extent to which DDOE uses its CBOs' files to track the
status of weatherization projects.[Footnote 11] We found that while
some of the customer files maintained by the CBOs were not complete,
much, but not all, of the missing documentation could be found in
DDOE's online software system used to manage weatherization projects.
We met with DDOE and received an in-person demonstration of the system
and how the agency uses its many features. We found that the system--
complete with price lists and automated change order approvals via
email--is a useful tool in managing weatherization projects, but has
not yet been fully implemented and does not contain all the data
necessary to track individual weatherization projects from start to
finish. As a result, at the time of our review neither the physical
customer files maintained by the CBOs nor the online weatherization
management system presented a complete record of weatherization
projects.[Footnote 12]
GAO File Review of CBOs Revealed Some Incomplete Physical Files:
For the purposes of this report, we contacted three of the seven CBOs
DDOE is using to perform weatherization work under the Recovery Act.
At each CBO we planned to randomly select 10 customer files of
completed weatherization jobs to review.[Footnote 13] Customer files
are retained by CBOs for payment purposes and consist of documentation
of work authorizations and progress of weatherization work, among
other things. We also consulted with CBO staff to clarify any
questions we had about the customer files we reviewed, and met with
DDOE officials to discuss their record-keeping policies. Our file
reviews at the CBOs were limited in scope and were not sufficient for
expressing an opinion on the effectiveness of CBO internal control or
compliance with Recovery Act requirements.
We found that DDOE officials were unable to cite clear guidance to
CBOs on what CBOs must at a minimum include in their weatherization
customer files. One CBO official told us that he maintains records
that he deems necessary for the files based on his experience with
managing weatherization projects. However, shortly before the
beginning of our file review, DDOE distributed a checklist of minimum
file contents to CBOs. This list includes (1) DDOE's energy audit
report, (2) a data client sheet (work order detail), (3) the CBO's
post inspection form, (4) a customer satisfaction form and (5) an
invoice for work completed.
We found that in some cases, the CBOs' files did not contain all the
documents required by DDOE's checklist. For instance:
* According to DDOE's checklist, copies of work orders and invoices
are to be included in the file. Officials told us that these
documents, along with copies of change orders, are intended to show
that the scope of work has been approved before the contractor or CBO
is paid for work completed. In our review, 12 of 23 files either
lacked copies of work orders or invoices, or the work invoices
exceeded work shown in the work orders without documented approval
from DDOE. Without a complete set of these documents, the physical
file does not record that the work that was paid for was also approved.
* Also, DOE requires recipients to perform an energy audit on every
home receiving weatherization assistance. According to DDOE's customer
file checklist, a copy of this audit must be included in each file.
The energy audit forms the basis of the scope of work and represents
DDOE's assessment of what weatherization work a unit requires.
Weatherization measures in the energy audit are listed in priority
order, with those measures with the greatest energy efficiency impact
listed first. In our review, 13 of 23 files either lacked copies of
the energy audit or the work listed in the work orders exceeded work
recommended in the energy audit without documented approval. Without a
complete set of these documents, the physical file does not indicate
that the scope of work addresses the unit's most critical energy
efficiency issues identified by the energy auditor.
* DOE requires CBOs to conduct a final quality inspection of 100
percent of all units before submitting an invoice to DDOE for
reimbursement. In addition, DDOE's checklist requires CBOs to collect
signed customer satisfaction forms as a final assurance that work was
performed professionally. In our review, 5 of 23 files did not contain
a final quality inspection form, and in an additional 5 cases, the
forms were neither signed nor dated. According to a DDOE official,
invoices associated with these files have been paid. Without a
completed quality inspection form, the physical file does not record
whether the CBOs were satisfied with the contractors' weatherization
work.
DDOE Uses an Online Reporting Tool to Track Progress and Expenditures,
but It Is Not Fully Implemented and Does Not Capture All Required
Documentation:
We found that much, but not all, of the documentation missing from CBO
customer files was found in DDOE's Hancock Energy Software
Weatherization Program (Hancock system). The Hancock system is a
private-sector online reporting tool for tracking and managing
Recovery Act funds, including budgeting and invoicing, administrative
costs, and job management, among other things.[Footnote 14]
After our file review, we met with DDOE officials and received a
demonstration of the capability of the Hancock system and their
application of it. Using the Hancock system, CBOs record project data,
allowing them and DDOE to track, for example, the number of jobs CBOs
have completed as well as those still in progress. The system is
designed to show estimated costs for each weatherization item or task
as well as estimates of the time it will take to complete the work.
Officials from CBOs said they used this feature to evaluate contractor
bids. DDOE officials stated that they use the Hancock system to
monitor each CBO's progress and perform daily checks of the data
entered. The following are examples of information contained in the
system:
* Client eligibility. The Hancock system maintains information
pertinent for WAP eligibility such as the household income, income
sources, size of household, and client eligibility letter. However,
DDOE WAP staff receive this information from another program within
DDOE that does not use the Hancock system.[Footnote 15] As a result,
client eligibility information must be entered into the Hancock system
manually. A DDOE WAP official we spoke with voiced a desire that
Hancock be widely adopted, because this manual data entry is
cumbersome and time-consuming.
* Work orders. From the energy audit, the Hancock system generates a
work order that lists weatherization measures for the CBO to complete.
The Hancock system lists the weatherization measures in order of
priority based on criteria such as effectiveness, health and safety,
and DOE requirements or guidance. The Hancock system also displays the
estimated cost for the line items on the work order. A DDOE official
told us that the estimated prices for material are based on retail
prices found at local home improvement stores and that, for example, a
window replacement is expected to cost about $300. DDOE increases this
cost estimate in the Hancock system to provide CBOs and contractors a
margin for profit.
However, a DDOE official told us that the Hancock system does not yet
contain estimated costs for all the weatherization work the CBOs and
contractors perform. For example, some energy audits have specified
gutter replacement as one of the necessary weatherization measures.
However, gutters had not been an approved use of weatherization funds
in prior years and therefore do not have an associated estimated cost.
Consequently, the Hancock system assigns an estimated price of $0.
When this happens, the Hancock system underestimates the true cost of
a weatherization job and there is a risk of that job exceeding the
$6,500 per unit threshold. DDOE is working on adding accurate cost
estimates for these tasks in the Hancock system.
* Project changes. DDOE and CBOs have found that while a contractor is
working on site, additional work may be identified as necessary in
order to appropriately weatherize a home. For example, in the course
of insulating a room per the energy audit, a contractor discovered
that the ceiling or roof must be mended as well.[Footnote 16] When a
CBO identifies that there is additional work to be completed, the CBO
will enter the request for additional work into the Hancock system.
This generates an e-mail automatically sent to an approving official
at DDOE who either approves or denies the request. Currently there is
only one official at DDOE who approves such project changes--the
program director. Typically, this official approves the request as
long as she considers it to be "reasonable" and under the $6,500 per
unit threshold. Because of time constraints and other
responsibilities, this official told us she does not closely review
each project change but largely relies on the CBOs' and contractors'
judgment that the work is necessary. This DDOE official told us that
because the Hancock system is Web-based, she can respond to these
change requests at any time, including while on vacation. DDOE is
currently training additional staff to approve requests for project
changes, according to this official.
* Invoices and payment. DDOE officials told us that CBOs can submit
invoices to DDOE through the Hancock system. A DDOE official reviews
the invoice for accuracy and compares it with the corresponding work
order and energy audit in the Hancock system. After approval, DDOE
pays the invoice. However, as of July 9, 2010, DDOE had not released
payment for any invoices submitted through the Hancock system for
weatherization work funded by the Recovery Act. The DDOE official who
reviewed Hancock-issued invoices received prior to July 9, 2010, told
us that the Hancock system had improperly calculated invoice totals,
but that the problem had since been fixed. The Hancock system was
incorrectly calculating the CBOs' administrative fees by adding $650,
or 10 percent of the maximum allowable average cost per home of
$6,500, instead of adding 10 percent of the actual cost incurred.
Also the Hancock system has been set up to raise a flag and identify
invoices related to homes that have incurred costs in excess of the
maximum allowable average cost per home of $6,500.[Footnote 17] A
senior DDOE official told us that units in the District incur
weatherization costs both above and below this amount, but that WAP
was still within the allowable limit.
* Energy savings. DDOE is trying to capture energy savings for each
weatherized unit in the Hancock system, but this is a work in
progress, and the savings currently cannot be determined for the
weatherization program as a whole. A senior DDOE official told us
until the weatherization online system is updated, DDOE will continue
to use the National Energy Audit Tool (NEAT) to determine energy
savings.
While the system contains a variety of information on weatherization
projects and fills in some of the gaps we identified in the physical
files maintained by the CBOs, the system does not contain a record of
all required documents. For example, the system does not maintain the
client satisfaction form that must be completed at the close of each
weatherization job. The Hancock system also does not include a record
of the post-installation inspection conducted by the CBO.
DDOE Is Using the District's Centralized Recipient Reporting System:
DDOE officials told us they use the same recipient reporting process
for all of its Recovery Act grants, including WAP. DDOE reported 13.42
FTEs were funded by WAP funds from April 1, 2010, to June 30, 2010.
[Footnote 18] DDOE is one of the District's prime recipients and
utilizes the centralized recipient reporting system, which is
discussed in further detail later in this report. CBOs submit
certified payroll records to DDOE on a weekly basis to support the
hours reported that were worked and funded by Recovery Act
weatherization funds by the CBOs' employees and contractors. According
to a DDOE official, weatherization program staff and the Recovery Act
grant manager review for accuracy the recipient reporting information
submitted by the CBOs before DDOE reports it to the District on a
monthly basis. The DDOE official told us that DDOE did not experience
problems collecting or reporting recipient reporting information for
weatherization for the period ended June 30, 2010.
The District's Local Educational Agencies Continued Using Recovery Act
Funds, and the Office of the State Superintendent of Education Began
Monitoring Fund Use:
The U.S. Department of Education has allocated $143.6 million in
Recovery Act funds to the District for three programs:
* $16.7 million in Individuals with Disabilities Education Act, as
amended (IDEA) Part B Recovery Act funds, which provides funding for
special education and related services for children with disabilities;
* $37.6 million in Title I, Part A of the Elementary and Secondary
Education Act of 1965, as amended (ESEA) Recovery Act funds, which
provides funding to help educate disadvantaged students;
* $89.3 million in funds from the State Fiscal Stabilization Fund
(SFSF), which was created under the Recovery Act in part to help state
and local governments stabilize their budgets by minimizing budgetary
cuts in education and other essential government services. Of the SFSF
funds, 81.8 percent are designated as education stabilization funds
and intended to support public elementary, secondary, and higher
education, and as applicable, early childhood education programs and
services. The remaining 18.2 percent of SFSF funds are designated as
government services funds, intended to provide additional resources to
support public safety and other government services, which may include
education.
Additionally, Public Law 111-226, enacted on August 10, 2010, provides
$10 billion for the new Education Jobs Fund to retain and create
education jobs nationwide.[Footnote 19] The Fund will generally
support education jobs in the 2010-2011 school year and be distributed
to states by a formula based on population figures. States can
distribute their funding to school districts based on their own
primary funding formulas or districts' relative share of federal ESEA
Title I funds.
The District LEAs Are Accessing Their Recovery Act Funds:
IDEA Part B. OSSE provides the LEAs with IDEA Part B Recovery Act
funds on a reimbursement basis, whereby the LEAs can obligate Recovery
Act funds, spend their state and local funds, and then request
reimbursement from OSSE for Recovery Act funds. OSSE reported that as
of July 23, 2010, out of the $16.7 million in Recovery Act funds
allocated to the District LEAs for IDEA Part B, about $2.2 million had
been requested for reimbursement by 32 charter school LEAs and OSSE
had made a total of over $1.2 million in payments to those charter
schools. OSSE also reported that as of August 16, 2010, the District
of Columbia Public Schools (DCPS) had submitted an IDEA Part B
Recovery Act reimbursement request for about $9.1 million out of its
allocation of approximately $12.9 million. According to OSSE
officials, DCPS has provided assurances that it is working closely
with its Office of the Chief Financial Officer to submit timely
reimbursement requests and has established a timeline for submitting
multiple requests for reimbursement before September 30, 2010.
ESEA Title I. OSSE also provides the ESEA Title I Recovery Act funds
to the LEAs on a reimbursement basis, whereby the LEAs can obligate
Recovery Act funds, spend their own state and local funds, then
request reimbursement from OSSE for Recovery Act funds. As of July 23,
2010, the charter school LEAs had requested reimbursement for about
$7.1 million and DCPS had requested $264,197 for a total of about $7.4
million requested for reimbursement by the District LEAs.[Footnote 20]
As of July 23, 2010, OSSE had made a total of about $3.5 million in
payments to 33 charter school LEAs and an additional $1.5 million was
approved with payment pending. According to OSSE officials, DCPS has
provided assurances that it is working closely with its Office of the
Chief Financial Officer to submit timely reimbursement requests and
has established a timeline for submitting multiple requests for
reimbursement before September 30, 2010. Officials at the two charter
school LEAs that we contacted, Center City Public Charter School and
Friendship Public Charter School, noted that while the flow of ESEA
Title I Recovery Act funds started late in the year, once it was
underway, the reimbursement process ran faster and smoother than it
had in the past.
State Fiscal Stabilization Fund. The District was allocated $73.1
million in Recovery Act SFSF education stabilization funds.[Footnote
21] The District was also allocated almost $16.3 million in SFSF
government services funds, $9.8 million (60 percent) of which it
designated for public schools, including public charter schools.
[Footnote 22] OSSE's Deputy Chief of Staff told us that the District
allocated the SFSF funds directly to LEAs using the District's Uniform
per Student Funding Formula (UPSFF) which, by law, is distributed in
quarterly payments to public charter schools and is incorporated into
DCPS's budget as DCPS is a District agency. As a result, charter
schools are not reimbursed for their SFSF spending. Rather, charter
schools spend their SFSF funds as UPSFF funds and report their
expenditures to OSSE, which reviews their expenditures to verify
appropriate use of the funds. OSSE disbursed the SFSF funds to the
charter school LEAs in two payments, one on January 14, 2010
(government services funds), and the other on April 15, 2010
(education stabilization funds). As of May 7, 2010, OSSE had completed
its payments of SFSF funds to the District charter school LEAs for a
total of more than $29 million. As of July 23, 2010, the charter
school LEAs had submitted expenditure reports for SFSF funds totaling
about $23 million out of the over $29 million that OSSE had disbursed.
However, SFSF funds are federal funds governed by the applicable cash
management rules.[Footnote 23] In general , these rules require
executive agencies implementing federal assistance programs and
states, including the District, participating in them to minimize the
time elapsing between the state's disbursement of federal funds to
subrecipients, such as LEAs, and the disbursement of those funds by
subrecipients.[Footnote 24] To address this issue, on June 18, 2010,
OSSE provided guidance to its LEAs about reporting their SFSF
expenditures to OSSE in order to comply with such federal rules.
Unlike the charter school LEAs, DCPS must access SFSF funds in the
same manner as it accesses other federal funds--by requesting
reimbursement for its expenditures through OSSE. As of August 18,
2010, according to the Deputy Chief of Staff, DCPS had requested
reimbursement and received approval for $40 million of its $52 million
SFSF allocation.
The Majority of LEAs Planned to Use Their IDEA Part B Recovery Act
Funds Primarily for Salaries and Contracted Services:
At the time of our analysis, 33 LEAs had submitted a Phase II
application and were approved by OSSE to receive reimbursement for
their allocated portion of the District's $16.7 million in IDEA Part B
Recovery Act funds.[Footnote 25] The District LEAs planned to spend
the largest portion of their IDEA Part B Recovery Act funds on
salaries (about 45 percent) and the second largest portion on
contractual services (about 35 percent).[Footnote 26] The third
largest portion of planned spending was designated for supplies and
materials (about 10 percent). About 3 percent of IDEA Part B Recovery
Act planned spending was designated for fringe benefits such as health
care or retirement accounts. The remaining portion of planned spending
was spread across the other budget categories.[Footnote 27]
Twenty-two of the 33 LEAs planned to use all or part of their IDEA
Part B Recovery Act funds for salaries. Specifically, 11 of the 22
LEAs designated 100 percent of their funds and 6 of the 22 LEAs
designated between 75 and 100 percent for that purpose. Six of the 22
LEAs that planned to use their funds for salaries also planned to use
up to 25 percent of their IDEA Part B Recovery Act funds to provide
fringe benefits.
Fourteen of the 33 LEAs planned to use all or part of their IDEA Part
B Recovery Act funds for contractual services.[Footnote 28] Seven of
those LEAs designated from 75 through 100 percent of their funds for
that purpose. According to DCPS's Phase III application, DCPS planned
to spend 37 percent of its IDEA Part B Recovery Act funds on salaries
and 63 percent on contractual services.[Footnote 29] This is similar
to DCPS's plan for ESEA Title I Recovery Act funds, of which DCPS
planned to spend about 70 percent on contracted professional services.
[Footnote 30]
Selected LEAs Used Recovery Act Funds to Implement Programs that Focus
on Students with Disabilities and on Reducing Negative Behaviors:
We met with three District LEAs--DCPS, Center City Public Charter
School,[Footnote 31] and Friendship Public Charter School[Footnote
32]--to discuss uses of Recovery Act funds that they consider to be
successful.[Footnote 33] We selected these LEAs based on factors such
as the amount of Recovery Act funds allocated, the amount of Recovery
Act funds expended, and to maintain continuity with our prior Recovery
Act reports.
IDEA Part B Recovery Act funds. DCPS officials described their
enhancements to the Special Education Data System (SEDS) as a success
that was made possible by IDEA Part B Recovery Act funds. SEDS is a
state-level data system that tracks students with disabilities and
services provided for them. A DCPS official observed that prior to the
infusion of IDEA Part B Recovery Act funds, SEDS did not provide all
the tools that DCPS desired for converting raw data into usable
information. The official told us that the improved SEDS program will
allow various DCPS staff to track a variety of data such as the
timeliness of ordering and conducting new assessments, achievement
levels, and areas for improvement.[Footnote 34] According to the
official, using the IDEA Part B Recovery Act funds to improve SEDS
functionality will strengthen DCPS's ability to provide special
education services to its students, and ultimately result in cost
savings. Without the Recovery Act funds, the improvements would have
taken a number of years to accomplish, according to DCPS officials.
Officials at Center City Public Charter School told us they used some
IDEA Part B Recovery Act funds to improve their program for students
with disabilities by hiring six inclusion specialists. According to
Center City documents, inclusion specialists are the primary educators
responsible for ensuring that students with Individualized Education
Programs (IEP) receive appropriate and consistent instruction and
services prescribed by their IEPs.[Footnote 35] The specialists worked
not only with students but also worked collaboratively with classroom
teachers and parents. According to Center City officials, by
increasing the number of inclusion specialists, the LEA would be able
to provide greater support for every Center City student. Center City
Officials said that without IDEA Part B Recovery Act funds, they would
not have been able to hire these six additional specialists. Officials
view this program as successful because the additional six specialists
enabled the LEA to ensure that its inclusion model exceeded IDEA
requirements for such models and fulfilled the goal of giving
additional support to all students as well as ensuring that students
with IEPs reached their IEP goals.
Officials from Friendship Public Charter School told us they used some
of their IDEA Part B Recovery Act funds to support a program to
benefit students with behavioral or academic challenges. Friendship
officials stated that the program, known as the Resource Intensive
Support for Education (RISE) program, provides a continuum of services
for students who are experiencing behavioral or academic challenges
beyond the scope of Friendship's education model, which aims to
educate all students in the general education classroom and provide
students with additional resources as needed. The RISE program's goal
is to help more students stay in general education rather than being
placed in a special school by giving students who need assistance
additional support on a temporary basis. According to program
officials, there are three RISE centers in the Friendship LEA
differentiated by grade level--pre-kindergarten through grade 4,
grades 5 through 8, and grades 9 through 12. RISE classes are small,
with a maximum of 12 students, one teacher, and one aide. The RISE
teachers are generally experienced teachers and offer students one-on-
one attention. Each RISE student has an individualized plan with a
timeline at the end of which the student returns to the home school or
moves to a more restricted environment. Officials told us that the
IDEA Part B Recovery Act funds allowed Friendship to hire more staff,
purchase more resource materials, and open all three centers in a
timely manner. According to Friendship officials, the RISE program for
the 2009-2010 school year produced positive outcomes for the students
who required more intensive academic and behavioral support.
Friendship officials reported that the students' overall behavior
improved, while discipline referrals were markedly reduced or
eliminated.
ESEA Title I. Using ESEA Title I funds, Center City was able to
convert part-time counselors to full-time employment, enabling the LEA
to place a full-time counselor on each Center City campus. LEA
officials reported that the counselors were instrumental in
identifying key student needs that distract from academic success. For
example, according to officials, data collected at one campus
demonstrated that the students needed support in managing emotions--
specifically anger. Bullying and peer pressure also were identified as
consistent challenges among students. This data collection was an
important first step that subsequently guided the development of a
program to work on these issues by highlighting areas of need that
could be addressed by classroom guidance and small-group counseling.
To address these challenges, staff at one Center City school began a
small program to emphasize and recognize positive interactions among
peers and increase the use of appropriate language during conflicts.
Center City officials noted that without Recovery Act funds, the LEA
would not have been able to afford full-time counselors at each campus.
Friendship officials described a behavior management program funded by
ESEA Title I Recovery Act funds as a success. According to officials,
the model they adopted is based on minimizing the time students spend
outside the classroom for discipline-related issues. The program
provides intensive training to help teachers keep the students in the
classroom by better managing discipline and redirecting negative or
unacceptable behaviors. For example, coaches observe and advise new
teachers to help them recognize disengaged students and redirect the
students before there are behavior issues. The program also involves
parents and administrators which, officials said, helps provide
consistency throughout the grades (pre-K through 12) and the six
charter schools. The program is evaluated by tracking how many
students are sent out of the classroom and how many suspensions there
are.[Footnote 36] This model of classroom discipline had been started
on a small scale in the previous year, but the ESEA Title I Recovery
Act funds made it possible to expand the program to cover grades Pre-K
through 12.
The Office of the State Superintendent of Education Continues to
Monitor LEAs Utilizing Both Its Monitoring Protocol and Quarterly
Review of Its LEAs' Recovery Act Data:
OSSE Continues to Monitor Its LEAs and Has Completed Reviews of the
Higher-Risk LEAs It Has Identified:
In May 2010, we reported that OSSE took steps to reform its processes
of monitoring its federal grants, including implementing new protocols
to monitor its subrecipients.[Footnote 37] OSSE developed and
implemented a monitoring protocol in March 2010 that included
conducting on-site monitoring visits and desk reviews for LEAs, with
expenditure testing conducted during both procedures. OSSE's on-site
monitoring protocols encompassed SFSF funds, ESEA grant awards,
including ESEA Title I Recovery Act funds, and IDEA Part B Recovery
Act funds.[Footnote 38] The on-site monitoring protocol involves
interviewing LEA officials and external stakeholders, including
parents, in addition to reviewing the LEA's policies and procedures
and conducting expenditure testing to verify appropriate use of funds.
Additionally, OSSE developed a desk review protocol to review Recovery
Act-related expenditures made by its subrecipients.[Footnote 39]
OSSE's Deputy Chief of Staff told us that as of June 21, 2010, OSSE
had completed its ESEA grant on-site monitoring visits for the 2009-
2010 school year, consisting of visits to 18 LEAs. Further, another
OSSE official told us that concurrently, OSSE visited 3 LEAs receiving
IDEA grant funds, and the Deputy Chief of Staff added that they
completed 19 desk reviews of LEAs receiving Recovery Act funds--all of
which OSSE officials considered to be higher-risk subrecipients.
[Footnote 40]
Following the on-site or desk review, OSSE's monitoring team compiles
summary reports for the subrecipients, which present findings
identified by OSSE during the monitoring review and recommended
corrective actions for resolving the findings. According to OSSE's
protocols, subrecipients with one or more findings must develop and
submit a corrective action plan that describes the subrecipient's
strategies and a timeline for resolving the findings.[Footnote 41]
OSSE officials told us that OSSE would consider all findings resolved
only after a subrecipient has provided evidence, such as documentation
of changed policies, that the corrective action plan has been
implemented.[Footnote 42] Then OSSE will issue a letter to the
subrecipient indicating the resolution of findings and document any
restrictions that have been lifted. According to OSSE officials, if a
subrecipient fails to implement its corrective action plan in a timely
manner, as determined by OSSE officials, OSSE may impose restrictions
on the subrecipient's future grant funds, including additional
required reporting to OSSE, additional on-site monitoring by OSSE,
mandatory technical assistance from OSSE, and withholding or
suspending grant funds.
We reviewed 3 ESEA grant on-site monitoring reports and 13 Recovery
Act desk review reports to understand OSSE's monitoring activities of
its LEAs.[Footnote 43] According to the 3 on-site monitoring reports
prepared by OSSE, the LEAs generally complied with Recovery Act
requirements, but 2 of the 3 LEAs had inconsistencies in keeping and
maintaining records for financial management and administrative
purposes--specifically, the 2 LEAs failed to maintain supporting
documentation for expenditures so that the documentation could be
easily located. OSSE's monitoring report states that supporting
documentation includes, but is not limited to, invoices, contracts,
canceled checks, and other documentation related to expenditures made
with federal grant funds. OSSE officials told us that a majority of
the supporting documentation that could not be located was not for
expenditures made with Recovery Act funds; and in examining
expenditures, the scope of OSSE's review did not require OSSE's team
to separately identify expenditures made with Recovery Act funding, as
the purpose was to review LEA's ESEA grants as a whole. OSSE's
monitoring team found that one LEA only provided supporting
documentation for only 16 of the 52 expenditures that OSSE requested
to review. OSSE required the LEA to provide all of the documents
requested during the on-site visit by July 2010, but the LEA provided
only half of the documents, according to an OSSE official. The OSSE
official stated that in response, OSSE is withholding subsequent
reimbursements to this LEA until the LEA complies with OSSE's request
and creates and implements a corrective action plan to resolve the
issue and prevent future occurrences.[Footnote 44] With respect to the
second LEA, OSSE found that the LEA could not provide the
documentation for a significant amount of expenditures. In response,
OSSE required that LEA submit corresponding invoices to support all
future reimbursement requests until the LEA creates and implements a
corrective action plan, approved by OSSE, such as revising its
procedures so that supporting documentation for its expenditures is
retained and easily located.
On the basis of our analysis of the 13 desk review reports that OSSE
had completed, we found that OSSE identified at least one finding for
all 13 LEAs it had reviewed, and two findings were identified for
nearly all of the LEAs. First, OSSE's desk reviews identified that 12
of the 13 LEAs did not demonstrate that their accounting records
accurately and separately tracked expenditures made with Recovery Act
funds. To address this finding, OSSE required, for example, that an
LEA submit evidence to OSSE that it is separately tracking Recovery
Act expenditures in its general ledger, by September 2010; otherwise,
OSSE may suspend all Recovery Act payments at that time. Second, OSSE
found that 12 of the 13 LEAs either did not submit a section of their
Recovery Act grant application on time or did not submit required
revisions in a timely fashion, for applicable grants. To address this
finding, in one instance OSSE required an LEA to develop a policy by
September 2010 that governs the preparation and approval of the LEA's
Recovery Act grant applications to enforce timely submission of the
LEA's applications to OSSE. OSSE officials explained that the number
of findings identified is due, in part, to the LEAs' lack of
experience with the monitoring process and Recovery Act requirements
because they had not been subjected to such a rigorous review in prior
years.[Footnote 45] However, OSSE officials told us that as OSSE
strengthens its federal grant oversight role, LEAs will learn the
process and should have fewer findings.
According to OSSE officials, they plan to continue their on-site
monitoring reviews after the Recovery Act funds are expended. OSSE
intends to visit all subrecipients receiving ESEA grants in 2-year
cycles and subrecipients receiving IDEA grants in 3-year cycles.
However, OSSE officials do not plan to continue the Recovery Act-
specific desk reviews after Recovery Act funds are expended, but said
they may modify the desk review protocol for oversight of other grant
funds.
OSSE Utilizes a Quarterly Review of Its Subrecipients' Recovery Act
Grant Information:
In addition to conducting on-site and desk reviews at LEAs, OSSE also
reviews the uses of Recovery Act funds through reimbursement
workbooks, which LEAs use to submit reimbursement requests to OSSE.
According to OSSE officials, while reviewing subrecipients'
reimbursement workbooks, they found that subrecipients were trying to
comply with Recovery Act requirements, as the workbooks were generally
free of egregious or deliberately inappropriate requests.[Footnote 46]
OSSE officials told us that the disallowable expenditures they
identified during their reimbursement workbook reviews were generally
for expenditures that did not align with an LEA's approved budget and
spending plan. For example, some LEAs requested reimbursement for a
specific category that exceeded the budgeted amount in that category.
In such cases, OSSE advised its LEAs to either resubmit the request
under a different budget category or readjust its budget to get
approval for the reimbursement within 3 business days in order to
receive payment. Additionally, an OSSE official noted that OSSE also
identified reimbursement requests that were not in compliance with the
Recovery Act. For example, according to the OSSE official, an LEA
submitted a request for reimbursement of ESEA Title I Recovery Act
funds for the cost of a field trip to an amusement park, which is not
allowable under the ESEA Title I program. Accordingly, OSSE denied
payment to the LEA. The official added that because of OSSE's review
process, some LEAs are now seeking approval for spending Recovery Act
funds before accruing the expenditure.
In addition to reviewing Recovery Act reimbursement requests, OSSE
officials told us they also use the reimbursement workbooks to collect
recipient reporting data. OSSE has been using the District's
centralized recipient reporting process to report to the federal
reporting Web site, which is discussed in further detail later in this
report. OSSE reported a total of 2,833.2 FTEs were funded by Recovery
Act SFSF, ESEA Title I, and IDEA Part B funds from April 1, 2010, to
June 30, 2010.[Footnote 47] OSSE collects recipient reporting data
from its subrecipients on a quarterly basis, according to OSSE
officials. OSSE officials told us that they implemented multiple
levels of review of the recipient reporting data, which included
verifying that the subrecipient's actual FTE calculation was
consistent with the subrecipient's requested reimbursement amount for
salaries. OSSE officials told us that they are working with
subrecipients to implement the recipient reporting process, but some
LEAs are still having difficulties in reporting. For example, we found
that an LEA misunderstood the recipient reporting requirements for its
Recovery Act IDEA funds in that it did not report the hours worked by
its contractors that were funded by IDEA grant as FTEs. OSSE's Deputy
Chief of Staff told us that OSSE is working with the LEA to provide
corrections and updates to the data during the continuous corrections
period prior to the next reporting period.[Footnote 48] OSSE also
identified 9 LEAs that had not submitted any expenditure data for
their SFSF funds as of July 13, 2010, even though LEAs received their
SFSF payments in January and April 2010.[Footnote 49] In response, an
OSSE official told us that OSSE followed up with each of the
identified LEAs, resulting in 4 of the 9 LEAs reporting expenditure
data for SFSF funds, as of August 9, 2010.
Recipient Reporting Provided the District the Opportunity to Develop
Plans for Future Districtwide Grant Oversight:
The District has consistently met the quarterly Recovery Act recipient
reporting deadlines, utilizing its centralized Web-based recipient
reporting system designed by the District, according to officials in
the Office of the City Administrator (OCA). An OCA official told us
that as of July 29, 2010, the District agencies reported 3,512 FTEs
funded by Recovery Act funds from April 1, 2010, to June 30, 2010.
[Footnote 50] As described in detail in our December 2009 report,
[Footnote 51] the District developed a Web-based system for reporting
mandated recipient reporting data. Per the District's process, with
the exception of OSSE, each District agency receiving Recovery Act
funds submits recipient reporting data to the District's recipient
reporting Web site (reporting.dc.gov) on a monthly basis.[Footnote 52]
Designated OCA officials--known as Recovery Act coordinators--are to
review each District agency's recipient reporting data for accuracy
and completeness before that agency can submit data to the federal
recipient reporting Web site. At the end of the reporting period, the
coordinators complete the review of each agency's recipient reporting
data and approve the data for submission to the federal reporting Web
site (federalreporting.gov), and the data are then published on the
federal Web site for tracking Recovery Act spending (Recovery.gov).
According to the Recovery Act coordinators, the District did not face
significant problems or issues with recipient reporting for the period
ended June 30, 2010. In fact, the coordinators added that the
recipient reporting process has gone more smoothly for the District
agencies and OCA after each successive reporting period, as agencies
became more experienced with the process. The coordinators noted that
they designed the centralized Web-based reporting system so they could
implement changes to the system as needed to comply with federal
reporting requirements or to assist District agencies in recipient
reporting. For example, when the federal reporting system was modified
to allow for continuous corrections by prime recipients, the Recovery
Act coordinators altered the District's system so that District
agencies could correct inaccurate or incorrect recipient reporting
data during the continuous corrections period. The coordinators told
us they made the change to the system--limiting agencies to access and
revise only inaccurate or incorrect recipient reporting data--because
the coordinators were concerned that agencies would accidentally
change accurate recipient reporting data that had been submitted. The
coordinators also noted that, on the basis of requests from District
agencies, the District's system can now produce summary reports of
recipient reporting data for individual Recovery Act grants, such as
SFSF funds, in the same format as displayed on Recovery.gov. This
allows District agencies to compare and more easily verify that the
data they submitted to the federal reporting Web site were correct.
Prior to the ability to create these reports, according to the
coordinators, the District agencies were comparing their submitted
recipient reporting data with summary reports produced by the
District's reporting system that were difficult to read and understand
because reports were displayed in programming language. The
coordinators added that they required District agencies to also submit
the new summary reports to OCA when submitting recipient reporting
data for review, to aid in the coordinators' review. Other than this
change in how data were verified by agencies and the District before
being submitted to federalreporting.gov, the coordinators stated that
the District's recipient reporting process was the same for the
reporting period ended June 30, 2010, as compared with the reporting
process for previous reporting periods.
According to the District's Recovery Act coordinators, the recipient
reporting experience has been helpful in a number of areas, most
notably in providing the District with the opportunity to reform its
grant management practices. Coordinators told us that because they
implemented a centralized reporting process--with OCA developing and
leading the process and reviewing and approving the District's
recipient reporting data--the District, through OCA, was able to
establish a new approach for federal grant oversight. Recovery Act
coordinators explained that prior to the Recovery Act, the District's
grant oversight was decentralized, and primarily grant management was
dependent upon individual District agencies. However, utilizing the
new approach, the coordinators told us that they plan to strengthen
the District's grant oversight by creating a new office to manage all
District grants under OCA. With the new office, Recovery Act
coordinators told us the District plans to strengthen oversight by
developing citywide grant management training, standardizing grant
management practices, and providing technical assistance to District
agencies, as needed. Recovery Act coordinators told us that additional
staff positions for the new office have already been budgeted for the
next fiscal year. Coordinators added that because District agencies
demonstrated the ability to report consistently due to the recipient
reporting mandate, they plan to continue to use the centralized Web-
based system to manage all federal grant funds awarded to the District
after Recovery Act funds are expended.
The District's Office of the Inspector General Has Initiated One Audit
of Recovery Act Funding:
The DC OIG is responsible for conducting audits, inspections, and
investigations of government programs and operations in the District,
including auditing the District's use of Recovery Act funds. In our
last report, issued in May 2010, we noted that DC OIG had initiated
one audit specifically related to the use of Recovery Act funds
involving construction contracts with the District Department of
Transportation that were awarded under the Recovery Act.[Footnote 53]
According to DC OIG, the purpose of this audit is to determine whether
the District Department of Transportation fulfilled the terms of its
certification under Section 1511 of the Recovery Act,[Footnote 54]
complied with District procurement regulations in awarding contracts,
and utilized effective controls. This audit is expected to be
completed by spring 2011. DC OIG plans to coordinate with GAO and U.S.
Department of Transportation officials to obtain general information
about the federal requirements for Recovery Act funds provided to the
District and the project certification process. As of July 14, 2010,
the District OIG has not initiated any additional Recovery Act audits.
A senior DC OIG official told us that other planned audits and
inspections of Recovery Act funds had not begun because of limited
resources within the agency.
The District's Single Audits Provide Oversight of Some Recovery Act
Funds:
According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing single audit results, it
received the District's single audit reporting package for the year
ending September 30, 2009, on June 29, 2010. The 2009 audit--the first
Single Audit for the District that included Recovery Act programs--
identified 5 significant deficiencies and 17 material weaknesses
related to controls over programs that received Recovery Act funds,
including FMAP.[Footnote 55] However, a senior official from the
Office of the Chief Financial Officer (OCFO) noted that the
deficiencies and weaknesses were not a result of noncompliance with
Recovery Act requirements. This official added that the District has a
single audit oversight committee--chaired by a staff member from the
OCFO with representatives from the Executive Office of the Mayor, City
Council, and the Office of the Inspector General--that oversees the
progress of the Single Audit to include follow-up and remediation of
past findings and timely completion of the audit.
Recovery Act Funds Have Helped Support Certain District Programs and
Balance Its Budget in Fiscal Year 2010, and There Are Signs the
District's Economy Is Improving:
Table 1: Characteristics of the District of Columbia:
Population: 599,657;
Unemployment rate: 10.5%;
Fiscal year 2011 proposed operating budget: $8.9 billion.
Sources: U.S. Census Bureau, U.S. Department of Labor, Bureau of Labor
Statistics (BLS), Local Area Unemployment Statistics (LAUS), District
of Columbia budget document.
Notes: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are a preliminary estimate for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revision.
[End of table]
Additional Recovery Act grants have helped support certain District
education, human services, and technology programs. District officials
told us that the District has received over $53 million in Recovery
Act funding since we last spoke with them in April 2010--about $36
million in non-competitive grants and about $20 million in competitive
grants. On April 2, 2010, OSSE was awarded $12 million to improve its
persistently lowest-achieving schools through the non-competitive
School Improvement Grant, administered by the U.S. Department of
Education. Additionally, on April 28, 2010, the District's Department
of Human Services qualified for and was awarded about $24 million from
the U.S. Department of Health and Human Services for the Temporary
Assistance for Needy Families Emergency Contingency Fund to support
the increased demand for assistance due to the economic downturn. Of
the $20 million awarded to the District in Recovery Act competitive
grants after March 2010, about $17 million was awarded to the
District's Office of the Chief Technology Officer, on June 28, 2010,
by the U.S. Department of Commerce for its Broadband Technology
Opportunities Program (BTOP) to support its Comprehensive Community
Infrastructure award. The District plans to provide direct Internet
connections to public areas in communities located predominately in
the District's economically distressed areas. An additional $1.6
million was awarded to the District through the same BTOP program on
July 2, 2010, focusing on providing public computer centers to the
District of Columbia Public Libraries. The remainder of the
competitive grant awards consists of over $600,000 awarded to the
District's Department of Employment Services by the U.S. Department of
Labor for its On-the-Job-Training Grant to assist in reemployment for
dislocated workers experiencing prolonged unemployment.
Although the District continues to face fiscal challenges, there are
signs the District's economy is starting to recover. In our May 2010
report, we noted that the Mayor's proposed fiscal year 2011 budget
identified a $523 million budget gap as a result of the decline in
revenues in fiscal year 2011, slow economic recovery, and the end of
Recovery Act funding. The Mayor's budget proposes to close the
projected $523 million budget shortfall for fiscal year 2011 through
maximizing efficiency in the District government, including such
strategies as the elimination of 385 positions through attrition,
retirement, and reductions in force;[Footnote 56] freezing automatic
pay increases for government employees; and renegotiating contracts
with the District's vendors. According to the District's Chief of
Budget Execution, the infusion of Recovery Act funds has helped
mitigate the negative effects of the recession on the District's
budget by providing time to adjust for the decline in revenues, which
allowed the District to avoid making drastic cuts to services and
programs.
In June 2010, the District's Chief Financial Officer (CFO) reported
that the revenue estimates for fiscal year 2010 through 2014 remain
unchanged from the estimate made in February 2010, noting that there
are indicators of economic recovery, although recovery will be a long,
slow process.[Footnote 57] For example, the District's real property
tax collections were better than expected, and withholding tax
collections remained strong, according to the CFO. On the other hand,
collections from the April individual tax filings performed below
expectations, according to the quarterly revenue estimate.
The District has prepared for the end of Recovery Act funding because
the District is required by law to prepare an annual balanced budget
and multiyear financial plan. As a result, District officials have
accounted for the future decrease in Recovery Act funds in planning
the budgets for fiscal years 2011 to 2014.
Comments from the District of Columbia:
We provided the Office of the Mayor of the District a draft of this
appendix on August 16, 2010. On August 18, 2010, the Recovery Act Co-
Coordinator within the Office of the City Administrator concurred with
the information in the appendix and provided technical suggestions
that were incorporated, as appropriate. In addition, we provided
relevant excerpts to officials of the District agencies and
organizations that we visited. They agreed with our draft and provided
some clarifying information, which we incorporated, as appropriate.
GAO Contact:
William O. Jenkins, Jr., (202) 512-8757 or jenkinswo@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Leyla Kazaz, Assistant
Director; Adam Hoffman, analyst-in-charge; Laurel Beedon; Labony
Chakraborty; Sunny Chang; Nagla'a El-Hodiri; Nicole Harris; and
Mattias Fenton made major contributions to this report.
[End of section]
Appendix IV Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Recipients of Recovery Act funds are required to report quarterly
on a number of measures, including the use of funds and estimates of
number of jobs created and retained. Recovery Act, div. A, § 1512. We
refer to the reports required by section 1512 of the Recovery Act as
recipient reports.
[3] The District has 58 LEAs, including 57 charter school LEAs and the
District of Columbia Public Schools (DCPS).
[4] A building that has been retrofitted is one that has been updated
with new or modified equipment or systems for the purpose, in this
case, of increasing energy savings.
[5] [5] According to DOE guidance, states are required to obligate all
of the Recovery Act SEP grant funds within 18 months. DOE guidance
further states that Recovery Act SEP grant funds should be obligated
by September 30, 2010 and spent by March 31, 2012 to meet
Congressional and Department goals.
[6] The EECBG program was authorized in Title V, Subtitle E of the
Energy Independence and Security Act, which was signed into law on
December 19, 2007.
[7] Prime recipients are nonfederal entities, such as District
agencies, that receive Recovery Act funding as federal awards in the
form of grants, loans, or cooperative agreements directly from the
federal government.
[8] In July 2009, the City Administrator directed District agencies to
assign one individual staff member as the grant manager for each
individual Recovery Act grant award an agency received. According to
the City Administrator, the grant manager is responsible for day-to-
day management of the grant, such as verifying that all recipient
reporting information for the grant is accurate and submitted within
deadlines.
[9] Since March 2010, DDOE has hired a program manager, an assistant
program manager, two energy auditors, and two energy program
specialists.
[10] This represents a delay from prior estimates. In May 2010, we
reported that DDOE officials anticipated expending all of its Recovery
Act funding by September 30, 2010. See GAO, Recovery Act: States' and
Localities' Uses of Funds and Actions Needed to Address Implementation
Challenges and Bolster Accountability (District of Columbia),
[hyperlink, http://www.gao.gov/products/GAO-10-605SP] (Washington,
D.C.: May 26, 2010).
[11] To capture a variety of approaches to performing weatherization
work, we selected these three CBOs on the basis of their use of
contractors as opposed to use of their own crews, whether they offer
training to these crews, and congressional interest. We determined
that the selection was appropriate for our design and objectives, and
that the selection would generate valid and reliable evidence to
support our work.
[12] DDOE reported that they conducted inspections of CBOs in early
July 2010--roughly 2 weeks after our review --and found that all CBOs
they reviewed had copies of all required documentation.
[13] Only one of the three CBOs we visited had more than 10 complete
customer files for us to choose from. Of the other two CBOs, one had 4
and another had 9 complete files; other customer files were on jobs
that were still in progress. In total we reviewed 23 completed
weatherization customer files.
[14] Other states also use the Hancock system.
[15] The eligibility of a client for WAP is based on the same criteria
the District uses for its Low Income Home Energy Assistance Program
(LIHEAP). Within DDOE, this program shares client eligibility data
with WAP.
[16] It is the CBO's responsibility to get DDOE's approval to proceed
with additional work. DDOE monitors that the average cost of all
Recovery Act jobs does not exceed the $6,500 federal maximum per home
average limit for weatherization.
[17] The Hancock system raises an alert when the invoice amount for
one home exceeds $7,150, or $6,500 plus the 10 percent administrative
fee.
[18] We obtained the FTE information from Recovery.gov on August 6,
2010.
[19] Pub. L. No. 111-226, § 101, 124 Stat. 2389. The legislation also
provided for an extension of increased Federal Medical Assistance
Percentage (FMAP) funding.
[20] The amount requested for reimbursement may not equal the amount
ultimately paid to the subrecipient (LEA) depending on the grant
manager's review of the submitted expenditures.
[21] Of the total $73.1 million in SFSF education stabilization funds
allocated to the District, the District allocated almost $1.3 million
to the University of the District of Columbia (UDC).
[22] The Metropolitan Police Department received $6.5 million (40
percent) of the District's SFSF government services funds.
[23] The Cash Management Improvement Act of 1990, as amended, requires
the Secretary of the Treasury, along with the states, including the
District, to establish equitable funds transfer procedures so that
federal financial assistance is paid to states in a timely manner and
funds are not withdrawn from Treasury earlier than they are needed by
the states for grant program purposes. The act requires that states
pay interest to the federal government if they draw down funds in
advance of need and requires the federal government to pay interest to
states if federal program agencies do not make program payments in a
timely manner. The Department of the Treasury promulgates regulations
to implement these requirements. 31 C.F.R. pt. 205. However, cash
management by subrecipients, such as LEAs, is subject to Department of
Education grant administration regulations, which may require
subrecipients to remit to the U.S. government interest earned on
excess balances. See 34 C.F.R. §§ 74.22, 80.21.
[24] For the Department of Education, see 34 C.F.R. § 80.21(b). The
specific requirements can vary depending on whether the program (1) is
listed in the Catalogue of Federal Domestic Assistance, (2) meets the
threshold for a major federal assistance program, and (3) is covered
by an agreement between the U.S. Treasury Department and the state,
among other circumstances.
[25] To receive Recovery Act funds, OSSE requires that LEAs submit an
application that describes how the funds will be used, and OSSE must
approve this application. The IDEA Part B Recovery Act application
process consists of three phases: phase I--LEAs make programmatic
assurances; phase II--LEAs submit spending plans and budgets based on
preliminary allocations; and phase III--LEAS submit revised spending
plans and budgets based on their final allocations. The 33 LEAs that
applied for and were approved to receive Recovery Act IDEA funds at
the time of our analysis--May 24, 2010--comprise 32 public charter
schools and DCPS. As of August 4, 2010, OSSE reported that an
additional 7 LEAs had applied for and received IDEA Part B Recovery
Act funds, for a total of 40. The additional 7 LEAs were not included
in our analysis. In addition to its 129 schools, DCPS also serves as
the LEA for IDEA purposes for16 public charter schools. According to
an OSSE official, 2 of those 16 LEAs will be closed as of the 2010-
2011 school year, and as a result, DCPS will be the IDEA LEA for 14
public charter schools for the 2010-2011 school year. In our last
report (GAO-10-695SP), we discussed the planned uses for ESEA Title I
Recovery Act funds and SFSF funds. We found that a significant portion
of LEAs planned to use these funds for salaries and benefits.
[26] To gather these data, we obtained from OSSE the IDEA Part B
Recovery Act fund applications with budget sheets for the 33 LEAs that
had submitted applications for those funds at the time of our
analysis. These budget sheets were approved by OSSE and identified the
LEAs' planned uses of these funds. We reformatted and analyzed the
planned uses and determined that the data were sufficiently reliable
for the purposes of this report. The totals do not add to 100 percent
because the four budget categories discussed are four out of the seven
total budget categories on the budget sheets and the percentages have
been rounded.
[27] Including salaries, contracts, supplies and materials, and fringe
benefits, there are seven budget spending categories in the OSSE-
created application that LEAs must complete to receive IDEA Recovery
Act funds. The other three categories are fixed costs (rent and
utilities), other services, and equipment. The categories for IDEA
budgets and direct costs are slightly different from the categories
used in the Recovery Act ESEA Title I and SFSF applications. The ESEA
Title I and SFSF applications put salaries and benefits together in
one budget category. The IDEA application puts salary and fringe
benefits into two separate budget categories. The totals do not add to
100 percent because the four budget categories discussed are four out
of the seven total budget categories on the budget sheets and the
percentages have been rounded.
[28] The budget category "contractual services" can include contracts
for direct instruction, administration, support services, operation
and maintenance, and student transportation. For the 33 LEAs that were
part of our analysis, "contractual services" were used primarily in
the program categories of direct instruction and support services.
[29] DCPS submitted its IDEA Part B Recovery Act Phase III application
on August 2, 2010, according to OSSE officials.
[30] Recovery Act ESEA Title I and SFSF fund recipient LEAs can be
separated into two distinct groups for analysis--the public charter
schools and DCPS. In contrast, for IDEA Recovery Act funds, DCPS is
the LEA for its own 129 schools and additionally serves as the LEA for
IDEA purposes for 16 of the public charter school LEAs. Thus, it is
not possible in this analysis of Recovery Act IDEA Part B funds to
separate all the public charter LEAs and their planned spending from
the DCPS LEA and its planned spending.
[31] Center City Public Charter School has six campuses.
[32] Friendship Public Charter School has six campuses.
[33] When asked to describe what they saw as successes, Center City
Public Charter School and Friendship Public Charter School chose to
describe the use of both ESEA Title I Recovery Act funds and IDEA Part
B Recovery Act funds. DCPS chose to describe successes using IDEA Part
B Recovery Act funds.
[34] The DCPS official also noted that SEDS provides information not
just across the individual schools but also across the whole LEA.
[35] An IEP is a written educational plan for a student with
disabilities. The purpose of an IEP is to provide for a child with
disabilities specialized or individualized assistance in school.
[36] According to Friendship officials, prior to the program,
Friendship's former discipline policy was based on rule enforcement
and was inconsistent both within the individual schools and across the
LEA. Additionally, a teacher's response to a discipline problem was
often sending a child out of the classroom, a response that meant
children were missing school time.
[37] Subrecipients consist of District LEAs and other District
organizations receiving federal funds through OSSE.
[38] The SFSF funds, ESEA grants, and IDEA Part B on-site monitoring
reviews utilize separate protocols.
[39] OSSE's desk review examines the uses of the following Recovery
Act funds, where applicable: IDEA Part B; McKinney-Vento; School
Improvement Grants; State Fiscal Stabilization Fund--education
stabilization funds and government services funds; ESEA Title I, Part
A; and Enhancing Education Through Technology.
[40] OSSE officials told us that the on-site monitoring schedule and
the desk-review schedule were determined by separate risk analyses.
Some of the LEAs that received on-site monitoring visits also received
desk reviews from March through June 2010. The on-site monitoring
schedule divided the LEAs into two categories--higher-risk and lower-
risk--with OSSE conducting visits to higher-risk LEAs in the 2009-2010
school year. OSSE has developed its ESEA grants on-site monitoring
schedule for the 2010-2011 school year. The desk-review schedule
divided the LEAs into three categories--high-risk, medium-risk, and
low-risk--with OSSE conducting reviews of LEAs in May 2010 and July
2010 and planning to conduct reviews in October 2010.
[41] As of July 23, 2010, an OSSE official told us they had received
corrective action plans from two LEAs.
[42] OSSE officials told us that they may conduct additional on-site
monitoring or desk reviews to verify plans have been sufficiently
implemented, as determined by OSSE staff.
[43] We reviewed the 3 on-site monitoring reports that were completed
as of July 2, 2010 and the 13 desk review reports that were completed
as of July 20, 2010. Our review of the monitoring reports is limited
to discussing the findings related to Recovery Act funding, because of
the scope of our work. Additionally, as of July 15, 2010, OSSE had not
finalized any on-site monitoring reports of subrecipients receiving
IDEA funds, and therefore there were no reports for us to review.
[44] OSSE provides subrecipients with certain Recovery Act funds on a
reimbursement basis, whereby subrecipients can obligate Recovery Act
funds, spend their own state and local funds, then request
reimbursement from OSSE for the expenditure amount. Before
subrecipients can access the funds, OSSE requires subrecipients to
submit an application that describes how the funds will be used in a
budget and spending plan and provide assurances that the uses comply
with the Recovery Act. According to OSSE officials, upon approval of
the application, subrecipients can submit requests for reimbursement,
using a Recovery Act reimbursement workbook developed by OSSE. OSSE
officials then review these workbooks quarterly, to verify the
requests align with the subrecipients' approved applications.
[45] OSSE was created in October 2007 to be the District's stand-alone
state educational agency. Prior to this, DCPS served as both the local
and state educational agency.
[46] The Recovery Act generally dictates that funds may not be used
for any casino or other gambling establishment, aquarium, zoo, golf
course or swimming pool, and also provides specific spending
limitations for certain grant programs. For example, the State Fiscal
Stabilization Fund provisions state that LEAs may not use SFSF funds
for payment of maintenance costs; stadiums or other facilities
primarily used for athletic contests for which admission is charged to
the general public; purchase or upgrades of vehicles; or improvement
of stand-alone facilities the purpose of which is not the education of
children, including central office administration or operations or
logistical support facilities.
[47] We obtained the FTE information from Recovery.gov on August 6,
2010.
[48] In January 2010, the Recovery Accountability and Transparency
Board modified the process for correcting data on the federal
reporting Web site by initiating a "continuous corrections" period,
where Recovery Act fund recipients could correct submitted data for
the immediately preceding reporting period, if necessary, after the
reporting period ended. Prior to January, data in the federal
reporting Web site, for a given reporting period, were locked and no
longer correctable once the reporting period ended and the information
was published on Recovery.gov.
[49] In July 2010, OSSE issued a memorandum to its subrecipients
reminding them to, among other things, submit quarterly SFSF
expenditure reports and identifying LEAs that have obligated all of
their SFSF funds and completed reporting of their SFSF expenditures,
as well as LEAs that have not submitted SFSF expenditure reports.
According to OSSE's Deputy Chief of Staff, LEAs have until September
30, 2012 to report all of their SFSF expenditures.
[50] In May 2010, our report on the Recovery Act stated that the
recipient reporting exercise is highlighting problems in obtaining
quality recipient-reported data because of the overall complexity of
funded programs and the nationwide scope. Although, updated guidance
and system enhancements have helped improve data and quality
reliability, FTE calculations continue to result in noncomparable data
across Recovery Act-funded programs and pose problems for some
recipients.
[51] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability (District of Columbia),
[hyperlink, http://www.gao.gov/products/GAO-10-232SP] (Washington,
D.C.: Dec. 10, 2009).
[52] According to OCA and OSSE officials, one District agency--OSSE--
does not submit recipient reporting data to the District's reporting
Web site on a monthly basis because OSSE collects and submits
recipient reporting data for its subrecipients on a quarterly basis,
imposing a deadline of 1 to 2 weeks prior to the end of each reporting
period to allow for data quality review and processing time. According
to OSSE officials, OSSE cannot require subrecipients to report their
recipient reporting data on a monthly basis, but highly recommends
that subrecipients do so.
[53] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[54] With respect to Recovery Act funds made available to state or
local governments for infrastructure projects, the governor, mayor, or
other chief executive, as appropriate, is required to certify that the
infrastructure investment has received the full review and vetting
required by law and that the chief executive accepts responsibility
that the infrastructure investment is an appropriate use of taxpayer
dollars. The certification is also to include a description of the
investment, the estimated total cost, and the amount of Recovery Act
funds to be used, among other requirements. Recovery Act, div. A. §
1511, 123 Stat. 287.
[55] The District's Single Audit for the year ended September 30, 2009
identified a total of 78 significant internal control deficiencies
related to compliance with Recovery Act and non-Recovery Act Federal
Program requirements, of which 66 were classified as material
weaknesses. A senior official from the Office of the Chief Financial
Officer told us that the number of findings identified in the fiscal
year 2009 Single Audit decreased by 32 percent, compared with the
number of findings identified in the prior year.
[56] According to the Mayor's proposal, the District has eliminated a
total of 2,016 District government positions during the last 2 years.
[57] The District's fiscal year begins on October 1 and ends on
September 30. Each February, the Office of the Chief Financial Officer
issues a revenue estimate that is used to develop the budget for the
next fiscal year. The estimate is revised as the new fiscal year
begins and subsequently at regular intervals.
[End of section]
Appendix V: Florida:
Overview:
The following summarizes GAO's work on the latest in a series of
bimonthly reviews of American Recovery and Reinvestment Act of 2009
(Recovery Act) spending in Florida.[Footnote 1] The full report on our
work in 16 states and the District of Columbia is available at
[hyperlink, www.gao.gov/recovery].
Florida has been deeply affected by the national economic recession
with high unemployment and home foreclosure rates. State officials
have taken steps to reduce expenditures and increase revenues and have
used Recovery Act funds to address short-term economic hardship.
Florida officials expect the state to receive about $21.7 billion in
Recovery Act funds over multiple years through formula and competitive
grants and contracts as well as benefits directly to individuals. Of
the $21.7 billion, approximately $10.75 billion is subject to special
reporting requirements that include an estimate of the number of jobs
created or retained by the project, with about $7.8 billion of that
amount coming through state agencies. The remaining $10.98 billion
goes directly to individuals (e.g., unemployment compensation,
increased food stamp assistance, and other programs) and is not
subject to the special reporting requirements.
What We Did:
Our work in Florida focused on specific programs funded under the
Recovery Act. For this review, we collected relevant data from June to
September 2010 on the use of specific funds, recipients' experiences
in reporting Recovery Act expenditures and results to state and
federal agencies, and steps to ensure accountability of the funds (see
table 1). Our review focused exclusively on these entities and
programs and our results cannot be generalized to Florida or
nationwide. For descriptions and requirements of the programs we
covered, see appendix XVIII of GAO-10-1000SP.
Table 1: Sites Selected for the Seventh Report, Rationale, and Work
Done:
Program: Weatherization Assistance Program;
Entities and sites selected: Florida Department of Community Affairs
(DCA);
Two subgrantees: Tampa Hillsborough Action Plan, and Miami-Dade
Community Action Agency. Selected subgrantees based on the dollar
value of weatherization funding allocated to the respective programs
and geographic dispersion. Methodology and information collected: DCA:
Discussed management controls in place. Subgrantees: Selected 28
weatherization client files: 13 randomly and 15 nongeneralizable cases
based on geographic dispersion within the subgrantees‘ service areas,
high dollar amount and whether the home was inspected by a contract
field monitor to review for documentation supporting compliance with
DCA requirements, such as income eligibility; however, we did not
independently verify clients‘ income. Weatherized homes: Visited 20
homes to determine whether the work paid for was completed and of
acceptable quality. A licensed engineer on our staff participated in
inspections of these homes to assess work quality.
Program: Tax Credit Assistance Program (TCAP) and Section 1602 Program;
Entities and sites selected: Florida Housing Finance Corporation
(FHFC);
Three projects receiving funding awards: Cypress Cove in Winter Haven;
Bonnet Shores in Lakeland; and Northwest Gardens 1 in Ft. Lauderdale.
Projects were selected based on source of funds. Methodology and
information collected: FHFC: Reviewed and collected relevant
documentation. Projects: Visited Cypress Cove and Bonnet Shores sites
to observe status of projects; interviewed FHFC, Cypress Cove, Bonnet
Shores, Northwest Gardens and Boston Capital officials with focus on
the increased risks and costs to FHFC for monitoring compliance, FHFC‘
s internal controls for ensuring compliance with federal requirements,
and changes in asset management responsibilities among project owners,
investors, and FHFC.
Program: Energy Efficiency and Conservation Block Grant;
Entities and sites selected: City of Jacksonville, City of Miami,
Miami-Dade County, and the City of Tampa were selected because, among
cities and counties receiving grants, they received the largest
allocations. Methodology and information collected: Interviewed
cognizant officials and collected relevant documentation.
Program: Early Head Start Expansion Grant;
Entities and sites selected: U.S. Department of Health and Human
Services (HHS) Office of Head Start (OHS);
Two grantees: Miami-Dade Community Action Agency and Children First,
Inc. in Sarasota. Grantees were selected based on the size of the
grant, geography, and previous audit findings. Methodology and
information collected: OHS Atlanta Regional Office: Interviewed
officials regarding oversight and grantee use of funds. Grantees:
Interviewed officials regarding their use of Recovery Act funds,
challenges in spending within the Recovery Act time frame, and
protocols for enrollment of eligible children.
Program: State and local budgets;
Entities and sites selected: State budget officials;
Selected Miami-Dade County because it received Energy Efficiency
Conservation Block Grants (EECBG). We conducted joint site visits to
the county for the use of Recovery Act funding in general, and its use
of EECBG specifically, to focus on a common program from a budget and
program perspective. Methodology and information collected:
Interviewed state officials on state‘s use and effect of Recovery Act
funds on the current fiscal year, 2010-2011, budget and strategies for
when these funds are no longer available and reviewed budget
documentation. Interviewed county officials on use and amount of
Recovery Act funds received, effect of these funds on the county‘s
budget, and strategies for addressing challenges when Recovery Act
funds are no longer available, and reviewed budget documents.
Program: Contracting;
Entities and sites selected: Selected a total of 12 highway,
education, and Workforce Investment Act (employment and training)
contracts that we had reviewed in previous audit cycles to gain an
understanding of the extent to which officials believed the contracts
were awarded competitively and chose pricing structures that reduce
the government‘s risk. Methodology and information collected: We
followed up on 12 contracts to determine whether contracts experienced
significant changes to cost, schedule, scope of work, and/or
experienced performance issues. We administered a questionnaire to the
project managers responsible for each contract and reviewed their
responses and supporting documentation, such as contracts, contractor
performance reports, and project management system reports. We also
reviewed the highway contracts with Florida Department of
Transportation (FDOT) officials and FDOT‘s Inspector General to obtain
further understanding of how the state manages contracts, including
changes to contract schedules.
Program: Transparency and accountability;
Entities and sites selected: Florida Auditor General; Florida Chief
Inspector General and Agency Inspectors General; Florida Recovery Czar
Methodology and information collected: Interviewed state officials on
audit work planned or completed. Reviewed accountability activities
reported by state officials and Inspectors General. Reviewed state
officials‘ websites to assess transparency of state‘s accountability
activities and information made publicly available. Participated in
the Inspector General‘s quarterly Recovery Act Oversight Partners
Meeting.
Program: Recipient reporting;
Entities and sites selected: Florida Recovery Czar; Florida Department
of Community Affairs; Florida Energy and Climate Commission; City of
Tampa; Tampa Hillsborough Action Plan; Pinellas County Urban League;
Methodology and information collected: Interviewed state officials on
the reporting of jobs created and retained. Interviewed a local agency
administering the Energy Efficiency and Conservation Block Grant and
two subrecipients of the Weatherization Assistance Program regarding
jobs calculations for recipient reporting for the quarter ended June
30, 2010 and reviewed documentation used to calculate the reported
number of jobs.
Source: GAO.
[End of table]
What We Found:
The following are highlights of our review.
* Weatherization. As of June 30, 2010, Florida reported weatherizing
3,878 housing units, or about 20 percent of the 19,090 housing units
it expects to weatherize with Recovery Act funding, and spending $35
million, or 40 percent of the $88 million it has thus far been
allocated. Florida's Department of Community Affairs (DCA) has
instituted various management controls over the program, but our
review of two additional subgrantees identified similar control gaps
and compliance issues as those identified in our May 2010 report. For
example, weatherization work done was often not consistent with the
recommendations of home energy audits and no reasons were given for
the differences; in some instances, work was charged to the program
but not done or lacked quality; several potential health and safety
issues were not addressed; and contractors' prices were not being
compared to local market rates, as required by DCA. In addition, DCA's
contract field monitors did not identify these issues in their reviews
of the two subgrantees' completed cases we and they reviewed. DCA
officials have acknowledged these problems and have taken steps to
address the problems, including changing procedures and guidelines and
instructing contract field monitors to be more attentive to these
issues. The two subgrantees we reviewed also agreed to take corrective
actions.
* Tax Credit Assistance and Section 1602 Tax Credit Exchange. Although
Florida's Housing Finance Corporation (FHFC) and its project owners
appeared to be on track to meet the Department of Housing and Urban
Development's spending deadlines for TCAP, this did not appear to be
the case for Department of the Treasury's December 31, 2010 funding
and spending deadlines for the Section 1602 Program. For example, as
of July 30, 2010, 28 provisionally approved projects had not yet
received final funding awards under the Section 1602 Program. FHFC
generally expected these projects to receive final approval or close
by November 2010. In addition, several projects could face additional
risk because they did not have third-party investors who would also
typically monitor the projects to ensure compliance with program
requirements and protect their financial interests. FHFC has taken or
planned steps to address the risks associated with not meeting
Treasury's deadlines and the absence of third-party oversight. FHFC
reported significant job creation under these programs, but the
methodologies used for these estimates differed. TCAP is subject to
Recovery Act recipient reporting requirements but the Section 1602
Program is not.
* Energy Efficiency and Conservation Block Grants. As of July 15,
2010, of the municipalities we reviewed, only Jacksonville did not yet
have monitoring procedures in place to track EECBG funds. While each
city and county had met project requirements, such as environmental
review, they varied in their progress toward meeting Department of
Energy deadlines for obligating funds.
* Early Head Start Expansion Grants. Delays in OHS's award of the
grant and in grantee implementation of the program slowed the delivery
of services. For example, although Miami-Dade County Community Action
Agency anticipated serving all its Recovery Act-funded children by
January 1, 2010, it was not able to achieve full enrollment until
months later. Due to the delays, the Community Action Agency also
expects to have unspent funds at the end of fiscal year 2010, but they
hope to obtain approval to use the unspent funds in the second and
final year of the grant.
* State and local budgets. Florida's state budget for the current
fiscal year includes $2.6 billion in Recovery Act funds in addition to
about $270 million for increased federal match for Medicaid. However,
the state may be required to make budget reductions for its fiscal
year 2011-2012 when the flow of Recovery Act funding decreases
substantially. Officials in Miami-Dade County said that Recovery Act
funds are considered as nonrecurring revenue and have primarily been
used for infrastructure and capital projects and that budget gaps have
been closed with salary and service reductions and the use of reserve
funds; remaining reserves are now below the goal established in county
policy.
* Contracting. While most of the 12 Recovery Act-funded contracts we
reviewed had post-award changes, according to project managers, the
changes generally did not have significant effects on the projects'
outcomes or costs and were within acceptable levels.
* Transparency and accountability. The Office of Inspector General
(OIG) at each Florida agency receiving Recovery Act funds continues to
conduct oversight activities. For example, the Florida Department of
Transportation's (FDOT) OIG reported that it performed 493 reviews and
identified no findings that would jeopardize federal funding. The
State Auditor General's Office performs annual audits of federal award
expenditures, including the $1.8 billion identified as Recovery Act
funds in fiscal year 2008-2009. The Auditor General reported that its
audits of these expenditures in certain programs, such as Medicaid,
identified some internal control issues.
* Recipient reporting. Florida's Recovery Czar said that overall this
round of recipient reporting appeared to go smoothly as the process
has become routine. However, at the three recipients we visited we
identified some reporting omissions or errors in estimating job
creation or retention.
Our Work Found Some Compliance and Control Issues in Florida's
Weatherization Assistance Program but It Has Taken Steps to Address
Concerns:
The Weatherization Assistance Program is intended to weatherize homes
to save energy and improve health and safety, and to create jobs. As
of June 30, 2010, the Florida Department of Community Affairs (DCA)
had received $88 million (half of its total allocation) and reported
obligating about $65 million and expending about $35 million in
Recovery Act money for the program. It has funded 27 subgrantees to
deliver weatherization services throughout the state. DCA's goal is to
weatherize 13,812 single-family and 5,278 multifamily residences by
March 31, 2012, the date by which the U.S. Department of Energy (DOE)
has indicated all Recovery Act weatherization program funds are to be
spent by grantees. As figure 1 shows, after a slow start, program
weatherizations have steadily increased each month since September
2009. By June 30, 2010, a total of 3,878 single-family residences had
been weatherized or about 20 percent of the program's total goal of
19,090.[Footnote 2] Furthermore, DCA officials said Florida is on
track to weatherize 30 percent--about 5,700 homes--of its total
program goal by the end of September 2010. DCA officials said that on
May 10, 2010, DCA contracted with the University of Florida to conduct
a study of energy savings overall and by weatherization measure
installed utilizing consumption data obtained from clients' utility
bills. According to DCA, Florida saved or created about 215 jobs for
the quarter ending June 30, 2010, as a result of the weatherization
program.[Footnote 3]
Figure 1: Actual Single Family Homes Weatherized Compared to
Cumulative Monthly Goals for Florida's Weatherization Assistance
Program:
[Refer to PDF for image: vertical bar graph]
Month: September 2009;
Actual: 14;
Goal: 65.
Month: October 2009;
Actual: 91;
Goal: 353.
Month: November 2009;
Actual: 278;
Goal: 826.
Month: December 2009;
Actual: 546;
Goal: 1,258.
Month: January 2010;
Actual: 964;
Goal: 1,764.
Month: February 2010;
Actual: 1,433;
Goal: 2,283.
Month: March 2010;
Actual: 1,988;
Goal: 2,815.
Month: April 2010;
Actual: 2,593;
Goal: 3,352.
Month: May 2010;
Actual: 3,198;
Goal: 3,898.
Month: June 2010;
Actual: 3,878;
Goal: 4,448.
Source: DCA.
[End of figure]
As previously reported, DCA has instituted a variety of management
controls, including policies for determining and documenting (1)
client eligibility and priority for services, (2) completion of home
energy audits prior to weatherization work, and (3) acceptable
completion of weatherization work.[Footnote 4] DCA also reviews
subgrantee operations. As of June 30, 2010, DCA said it had completed
reviews of 22 subgrantees and inspected 101 homes for completed work.
Since November 2009, DCA has also contracted with field monitors to
verify subgrantees' data entry, review all client files, and inspect
50 percent of homes completed.[Footnote 5] As of June 30, 2010, DCA
reported that contract field monitors had reviewed all required
completed client files and had inspected 1,957 completed homes,
considerably more than the number of homes DOE requires to be
inspected.[Footnote 6]
Client Files We Reviewed and Homes We Visited Generally Met Program
Requirements, but We Found Some Compliance Issues and Control Gaps:
For our previous report issued in May 2010, we visited three
subgrantees. Although they generally met DCA's program requirements,
we found gaps in the state's controls, resulting in problems
undetected by state program personnel or noncompliance.[Footnote 7] In
this review of two additional subgrantees, we found similar issues;
however, DCA has taken several steps to put procedures in place aimed
at reducing the occurrence of these types of issues.
Client File Reviews and Home Inspections at Two Subgrantees Identified
Several Issues:
For this update, we reviewed 28 client files and inspected 20
completed homes at two DCA subgrantees. Officials at both subgrantees
attributed problems we identified to such reasons as staff errors or
omissions and said corrective actions would be or have been taken. DCA
has also taken steps to address these issues.
Client Eligibility:
All 13 client files we reviewed at one subgrantee contained the
required documentation for program eligibility. At the other
subgrantee, 7 of 15 cases had discrepancies: household income recorded
on the client application form did not match income amounts in
supporting documentation; documentation for disability was missing; or
both.[Footnote 8]
Home Energy Audits:
Based on the 28 client files we reviewed, subgrantees performed home
energy audits required by DCA. These audits, which are done before
work begins, are used to determine appropriate weatherization measures
as well as any needed health and safety improvements. However, in 26
of the 28 client files reviewed, we found one or more instances in
which work listed as completed was not consistent with audit
recommendations. For example, installation of a new hot water heater,
sliding glass door, or smart thermostat was either recommended in the
audit but not done, or done without recommendation. In six cases, a
test that is part of the energy audit done to determine if heating and
air conditioning ducts need to be sealed was not performed, or showed
air leakage higher than DCA's targeted maximum, with no explanation.
Subgrantees attributed the various audit discrepancies to such reasons
as staff errors, omissions or changes occurring after the audit
without documenting explanations for those changes. We also noted both
subgrantees did not always authorize weatherization work in the
priority order prescribed by DCA.[Footnote 9] DCA conducted monitoring
visits to these subgrantees prior to our review and noted similar
issues. DCA instructed both subgrantees to conduct home energy audits
and follow DCA's priority order as required.
Weatherization Work:
We found the work charged to the program was authorized, performed,
and appeared to be of acceptable quality in 14 of the 20 homes we
inspected. In all 20 cases, the clients said they were generally
satisfied. However, in 6 of the 20 homes some listed improvements were
either not completed or lacked quality.[Footnote 10] For example, at
one home we inspected, attic insulation was reported as done and
charged to the program but had not been installed. Subgrantee
officials said this problem occurred due to a contractor coordination
issue, and the insulation has since been installed. At another home, a
smart thermostat was on the work order and included in the contract
price but not installed. Subgrantee officials said this was due to a
misunderstanding and the issue would be resolved. None of the client
files we reviewed contained documentation of inspections while work
was in progress although both subgrantees said they performed such
inspections.[Footnote 11] They said they would document those
inspections in the future. In addition, at another home which we did
not inspect, our client file review noted that the subgrantee had
double charged DCA for certain costs. Subgrantee officials said a
supervisor and a crew chief unknowingly both made time sheets for the
same crew for the same day; they refunded the excess charge.
Health and Safety:
As required by DCA policy, home energy audits performed by the two
subgrantees we reviewed covered health and safety issues. However, we
found 9 instances in the 28 client files we reviewed in which the air
flow/ventilation rate in the homes was insufficient based on the
subgrantee's energy audit, possibly affecting indoor air quality, and
no remedial actions were taken or explanations provided in the client
files.[Footnote 12] In a few of these instances, the standard for
restricting air flow through a home to prevent the loss of too much
conditioned air (heated and air conditioned/dehumidified air)
conflicted with the standard for providing adequate ventilation for
good indoor air quality. Although both subgrantees said the issue was
discussed at a DCA meeting with subgrantees in May 2010, they told us
they were still unclear how to handle situations in which this
conflict exists. DCA said it has a procedure to address the situation.
At one subgrantee, we noted three cases in which window heating and
air conditioning units were installed without evidence in the client
file of a check for electrical system capacity, and in one case wiring
was exposed.[Footnote 13] At the other subgrantee, the energy audit
recommended venting a gas stove but the work was not done and
documentation regarding why was not included in the client file, as
required by DCA. Subgrantee officials told us costs of venting were
prohibitive and the homeowner did the work.
Fair and Reasonable Prices:
One of the subgrantees did most of the weatherization work itself, and
provided documentation showing it advertised and received multiple
bids for materials used by its in-house crews and some work performed
by contractors. The other subgrantee outsourced all weatherization
work and officials said they awarded contracts mostly through a sealed
bid process. It believed that the prices it received from contractors
were significantly below market rates. However, information made
available to us on the solicitation and receipt of multiple bids for
the 15 client files we reviewed was either absent, incomplete, or
unclear. Neither subgrantee provided documentation of price
comparisons with local market rates, as required by DCA. Both
subgrantees said they would perform and document price comparisons in
the future. In addition, officials at the second subgrantee said it
would develop clear procurement policies and procedures to address the
issues involving the bidding process. To address these issues
statewide, DCA has changed its procedures and guidelines manual, as
discussed below, including issuing new guidance on price comparisons
and bid information, and has its fiscal contractor review subgrantees'
procurement polices and procedures as part of its work scope. DCA also
said it was working with one of its subgrantees who has collected
comparable pricing data for Florida regions so the data can be shared
with other subgrantees.
Reviews by Contract Field Monitors:
DCA's contract field monitors had reviewed all 28 client files we
reviewed for this report, but the DCA reviews did not note any of the
problems we identified regarding client eligibility, home energy
audits, or possible duct system leakage.[Footnote 14] Field monitors
had also inspected two of the seven homes with issues that we
inspected, but did not note the workmanship issues we found.
DCA Has Taken Actions to Address Concerns and Non-compliance Issues:
DCA officials told us many of the concerns and non-compliance items we
noted in this and the prior round have been addressed by a state
monitor, issuance of notices to subgrantees and contract field
monitors or in conference calls with those monitors. In May 2010, DCA
met with its subgrantees and included the issues we identified among
the topics discussed. The Florida Solar Energy Center made a
presentation on how to address home ventilation issues in Florida.
On June 17, 2010, partly in response to our findings, DCA made changes
to its procedures and guidelines manual and energy audit form,
effective July 1, 2010.[Footnote 15] DCA's changes address the issues
we noted during our reviews. For example, its newly issued procedures
and guidelines and/or home energy audit form now requires (1)
documentation of disability if it is used in determining priority
points and documentation from a public entity with the name of the
applicant or household member and the Social Security number; (2)
justifications or data for addressing or not addressing each item to
be covered in the home energy audits, including venting gas stoves,
and for certain measures, the client's initials on the pre-work order
agreement form if the client refuses to accept the measure; (3) before
and after pictures for each measure to help document the need for and
performance of the work; (4) performance of an electrical load test if
a window air conditioning unit is to be installed and use of air flow
calculations to govern air sealing activities and the need for
additional ventilation for air quality; and (5) periodic (every 6
months) cost comparisons to local market rates for each allowable work
measure, justifications for excessive costs, and reference to a DOE
guide for establishing a bidding process that meets DCA's competition
requirements. The procedures and guidelines also clarified
requirements for testing duct system leakage. DCA also revised its
form for subgrantees to report completed work so it includes two
items--faucet aerators and smart thermostats--previously on the audit
form but not on the completed work form.
We believe that the actions DCA has taken are responsive to the issues
we noted during our review of its five subgrantees. Because our field
work was completed before DCA changes to procedures and the energy
audit form became effective, we were not in a position to assess their
implementation or the extent to which contract field monitors now
handle these issues differently. It will be important for DCA to work
closely with its subgrantees and contract field monitors to achieve
effective implementation and oversight.
Tax Credit Programs Have Spurred Creation of Housing and Jobs but Some
Projects Could Miss Treasury Funding Deadline:
The Recovery Act established two funding programs that provide capital
investments to Low-income Housing Tax Credit (LIHTC) projects: (1) the
Tax Credit Assistance Program (TCAP) administered by the U.S.
Department of Housing and Urban Development (HUD), and (2) the Grants
to States for Low-income Housing Projects in Lieu of Low-income
Housing Credits Program under section 1602 of division B of the
Recovery Act (Section 1602 Program) administered by the U.S.
Department of the Treasury (Treasury) to fill financing gaps in
planned LIHTC projects. Descriptions and requirements of the programs
are discussed in the program descriptions section of this report.
The Florida Housing Finance Corporation (FHFC) administers these as
well as other low income housing programs. FHFC received about $101
million in TCAP funds and about $580 million under the Section 1602
Program. As of July 30, 2010, FHFC made provisional or final awards
totaling about $659 million (about 97 percent) and disbursed about
$113 million (about 17 percent) under these two programs for
acquisition, new construction, or rehabilitation. Altogether, FHFC has
selected 82 multi-family housing projects involving 8,026 rental
housing units for TCAP and Section 1602 Program funds throughout
Florida.[Footnote 16] Of the 82 projects, 13 involve repayable loans
under TCAP; 56 involve grant awards under the Section 1602 Program;
and 13 have been awarded funding under both programs.
FHFC Appears on Track to Meet HUD Spending Deadlines but Some Projects
Could Fall Short of Meeting a Treasury Deadline:
FHFC projects appear on track to meet HUD's TCAP spending deadlines.
Under the Recovery Act, FHFC must disburse 75 percent of TCAP funds by
February 2011, and individual projects must spend all their TCAP funds
by February 2012. FHFC has awarded all TCAP funds and expects the
eight projects that had not yet closed (signed the legal and financial
documents to allow funds disbursement to begin) to do so in sufficient
time for it and its projects to meet HUD's spending deadlines. It
reported disbursing about $45.7 million, or about 45 percent of its
TCAP funds, as of July 30, 2010. Under the Recovery Act, all Section
1602 Program awards must be committed by December 2010, or the housing
finance agency (HFA) must return the unawarded funds to Treasury.
Treasury's deadline for HFAs to disburse all Section 1602 Program
funds is December 31, 2011. However, Treasury requires that individual
project owners spend 30 percent of their eligible project costs by
December 31, 2010 in order to continue receiving Section 1602 Program
funds in 2011.[Footnote 17] As of July 30, 2010, FHFC reported
disbursing about $66.6 million (about 11.5 percent) of its funds. FHFC
and several project owners might be challenged to meet Recovery Act's
Section 1602 Program spending deadlines.[Footnote 18]
Several Factors Could Negatively Affect FHFC's Section 1602 Program
Awards and Spending Deadlines:
As of August 2010, about $22.3 million of Section 1602 Program funds
were involved in litigation.[Footnote 19] FHFC expected to resolve
litigation for the majority of these funds in September 2010 but was
uncertain when the litigation involving the remainder of the funds
would be resolved. In addition, the number of projects in provisional
stages of approval could affect spending deadlines.[Footnote 20] For
example, as of July 30, 2010, 28 projects with provisional awards
ranging from $2.3 million to about $14.5 million had not received
final FHFC approval. FHFC generally expected these projects to receive
final approval or close by November 2010. It noted that if a problem
does arise, it would most likely involve projects having $5 million or
more in Section 1602 Program provisional funding, of which there were
13. Further, as of July 30, FHFC had not disbursed funds to 19
projects with final awards ranging from $1.8 million to $21.8 million;
one of the projects had closed, and FHFC generally expected the
remaining 18 to close between August and November 2010. In addition to
needing to complete the award process, projects could face delays in
closing or construction.[Footnote 21]
FHFC noted that these programs significantly expanded its workload and
given their nature and complexity, require a significant amount of
time and effort to implement. Nonetheless, FHFC said it has taken or
is taking steps to meet Section 1602 Program deadlines, including
increasing the number of Board meetings to expedite the review and
approval process and having a monthly assessment by its contract
monitors of projects' progress toward meeting the December 31
deadline. FHFC said that it is prepared to reduce the size of grant
awards to ease grantees' ability to spend all of their awarded funds
and may divide un-awarded funds available to it among ongoing projects
so that Treasury's deadlines can be met. FHFC said that project owners
may also take steps, such as buying materials early (to incur costs
earlier) or beginning construction before closing, although officials
noted this step increases the project owner's risk. Although these
steps should help, their ability to enable FHFC and all of its
projects to meet Treasury's deadlines is unclear.
Despite FHFC's Monitoring, Absence of Investors Could Create Risks:
According to FHFC officials, they oversee TCAP and the Section 1602
Program using FHFC's existing asset management program.[Footnote 22]
For much of its asset management activities, FHFC uses contractors and
says FHFC staff periodically performs tests of the contractors' work
for completeness, accuracy, and timeliness. FHFC also coordinates its
activities with project investors, who typically engage in similar
activities to protect their financial interests.[Footnote 23] However,
13 TCAP projects as well as 15 Section 1602 Program projects do not
have third-party investors.[Footnote 24] An FHFC official said that
both the appropriate up-front structuring of transactions and
monitoring are important to mitigate this risk. More specifically, he
said that FHFC imposed reserve and guarantee requirements on project
owners greater than those typically required by investors and
restricted the size of first mortgages. In addition, FHFC noted that
it implemented tighter market standards, including minimum market
occupancy rates; supplemented typical financial monitoring of each
project with the development of a new electronic data base that can
track and compare projects' financial performance based on many common
characteristics; and requires monthly project reports that are to
include such information as unit occupancy and rent structures.
Although these measures appear to provide additional assurance
relative to maintaining project financial viability over the
compliance period, it is unclear whether they will fully mitigate the
risks associated with the lack of project oversight by third-party
investors.
The three project owners and the investor representative we spoke with
about Florida projects gave FHFC high marks for its implementation and
management of these programs. Even though FHFC shifted some risk to
project owners through requiring guarantees and higher reserves, they
believed the project's benefits outweighed the risks. Further, they
noted that the projects would not have moved forward without this
funding and that an extension of the Section 1602 Program for 2010
would likely be necessary to fund new projects because the market for
tax credits has not fully recovered. FHFC officials concurred.
FHFC said using FHFC funds to administer and enforce the programs'
requirements adversely affects its ability to fund other programs.
FHFC said that federal restrictions prohibit it from collecting
administrative fees or using program funds to cover such costs as
those associated with program administration and recapturing funds
from projects that do not meet program requirements[Footnote 25]. FHFC
expects these costs to amount to about $6.3 million over the next 5
years.
TCAP and Section 1602 Appear to Have Had an Impact on Job Creation:
For the quarter ending June 30, 2010, FHFC reported significant job
creation: 266 jobs for TCAP; 2,402 for 16 projects awarded only
Section 1602 Program funds; and, 1,275 for 11 projects awarded funds
under both programs.[Footnote 26] However, job estimates for the two
programs are not comparable. TCAP is subject to Recovery Act recipient
reporting requirements but Section 1602 is not.[Footnote 27] Both
programs require use of a full-time equivalent approach to job
estimation. However, unlike the Office of Management and Budget's
instructions that apply to TCAP, FHFC specified that job estimates
under the Section 1602 Program should cover the entire project period
rather than just the most recent reporting quarter and that the count
should not be reduced to reflect parts of the project not funded under
the Section 1602 Program. [Footnote 28] Project owners we spoke with
said that the Recovery Act jobs reporting method results in an
understatement of TCAP's jobs impact because TCAP job estimates are to
reflect only those jobs that were or are to be funded by TCAP. They
argue that because projects funded under TCAP would not have moved
forward without TCAP funds, all the jobs associated with the projects
should be counted.
Most Recipients of Largest Energy Efficiency and Conservation Block
Grant Allocations Have Procedures in Place to Monitor Funds:
The State of Florida, 87 eligible counties and cities, and 2 tribal
governments received Energy Efficiency and Conservation Block Grant
direct formula grant allocations totaling $168,886,400.[Footnote 29]
The Department of Energy has made site visits to nine Florida cities
and counties receiving funds as of July 20, 2010. Florida direct
formula grantees, on average, had obligated 45 percent of their funds
as of July 13, 2010 and spent 5 percent, as of July 18, 2010.[Footnote
30]
We selected the one county and three cities with the largest direct
formula grant allocations: Miami-Dade County, and the cities of Miami,
Jacksonville, and Tampa. Combined, their allocations represent about
21 percent of the total going directly to Florida cities and counties.
We visited one project in Tampa.
The county and cities we reviewed vary in their progress toward
meeting Department of Energy deadlines for obligating funds. (See
table 2.)
Table 2: Percent of EECBG Funds Obligated and Spent by the County and
Cities We Reviewed as of August 19, 2010:
Municipality: Jacksonville;
Allocation: $12,523,700;
Percentage of EECBG funds: 55;
Percentage of EECBG funds: Spent[B]: 20.
Municipality: City of Miami;
Allocation: $7,891,500;
Percentage of EECBG funds: 25;
Percentage of EECBG funds: Spent[B]: 1.6.
Municipality: Tampa;
Allocation: $4,742,300;
Percentage of EECBG funds: 9;
Percentage of EECBG funds: Spent[B]: 0.
Municipality: Total;
Allocation: $3,712,100;
Percentage of EECBG funds: 39;
Percentage of EECBG funds: Spent[B]: 17.5.
Source: Department of Energy and Miami officials.
Note: The starting points to meet the deadlines for obligating and
spending funds were as follows: Jacksonville, April 2010; Miami,
October 2009; Miami-Dade, September 2009; and Tampa, October 2009.
[A] Obligation includes funds under contract and funds set aside for
internal costs.
[B] According to Department of Energy officials, these represent funds
the city or county drew down for an obligation; drawing down of funds
does not necessarily mean that the obligation has been liquidated.
[End of table]
As of July 15, 2010, officials for each locality, except Jacksonville,
reported having monitoring procedures in place. For example, Miami-
Dade County and the city of Miami officials said they will provide
oversight through routine site visits and/or meetings with project
managers, contractors and sub-recipients and through regularly
monitoring expenditures. Jacksonville officials said they were still
developing a process for tracking obligated funds;
that their current financial system could track such information, but
not produce reports; and that they did not anticipate having
subgrantee agreements or a checklist for monitoring sub-grantees until
fall. Nonetheless, officials said it was their intent to monitor
expenditures on a routine basis, to conduct site visits, and require
appropriate documentation from grantees. According to Department of
Energy project managers, Miami-Dade County and the cities of Miami,
Tampa, and Jacksonville have adequate systems in place to monitor
their grants. A Department of Energy monitoring review of Jacksonville
from June 16, 2010 noted that the city had procedures for personnel
and payroll, procurement and financial management and accounting that
specifically address the grant program. It also noted that the city
planned to create specific policies and procedures that address onsite
monitoring of grantees.
In each locality, officials said projects followed Department of
Energy guidance. Specifically, projects had met requirements for
historical preservation and environmental review. Each had a plan for
waste disposal, according to officials.
Each municipality has projects with potential to create jobs, but some
projects are expected to create jobs as a result of goods procured,
rather than through hiring workers for the project in question. Miami-
Dade County used over $1,000,000 to purchase computer equipment that
county workers installed. Likewise, Jacksonville plans to procure
recycling bins ($42,000), lighting and light controls (over $746,000)
installed by state employees and solar parking meters (over $187,000)
that may be installed by city workers.[Footnote 31] Tampa planned to
use over $2.5 million to purchase electrical lighting for municipal
garages and incandescent traffic signal lighting installed by city
workers.[Footnote 32] In contrast, the City of Miami will use its
grant funds to make city-owned buildings more energy efficient and
will contract out all work.
Officials in Tampa, the one site we visited to view a project,
reported positive outcomes resulting from grant-funded projects.
Specifically they reported jobs created. In addition, they provided
data showing the energy usage in two garages where lighting was
changed reduced energy consumption by over 40 percent. Officials said
they did not know how long the Department of Energy would expect them
to report energy savings from funded projects.
Early Head Start Grantees Experienced Delays in Funding and
Implementation of Recovery Act Expansion Funds in 2010:
Grantees in Florida received approximately $26.8 million in Recovery
Act Early Head Start (EHS) expansion grants for fiscal year 2010--the
first year of the 2-year grant--to serve additional children and
provide training and technical assistance to grantees.[Footnote 33] To
review the implementation of the grants, we visited the Miami-Dade
Community Action Agency (CAA), a county agency that administers social
programs including Early Head Start, and Children First, a nonprofit
organization that provides early childhood services in Sarasota
County. See table 3 for Recovery Act-funded activity at the grantees
we visited in Florida for Fiscal Year 2010.
Table 3: Recovery Act-Funded Early Head Start Activity at Selected
Grantees in Florida, for Fiscal Year 2010:
Grant amount:
Miami-Dade Community Action Agency: $1,716,860;
Children First, Sarasota: $1,451,694.
Children to be served by Recovery Act funding: Miami-Dade Community
Action Agency: 128 (including 40 home based);
Children First, Sarasota: 120 (all center based).
Date service began: January 2010;
Children First, Sarasota: January 2010.
Date grantee was fully enrolled:
Miami-Dade Community Action Agency: July 2010;
Children First, Sarasota: March 2010.
Projected unspent funds:
Miami-Dade Community Action Agency: $320,000;
Children First, Sarasota: $0.
Source: www.recovery.gov, Miami-Dade Community Action Agency, and
Children First.
[End of table]
Delays in the award of the EHS grants and in grantee implementation of
the program slowed the delivery of services. As GAO previously
reported, HHS's Office of Head Start (OHS) delayed the award of EHS
expansion grants.[Footnote 34] CAA and Children First did not receive
their grants from OHS until the end of November 2009--2 months after
the grants were scheduled to be awarded. Officials at CAA said that
the delay in funding was their greatest challenge to implementation.
Although CAA anticipated full enrollment of Recovery Act-funded
children by January 1, 2010--3 months after the expected award
notification from OHS--they were not able to achieve full enrollment
until July 14, 2010--more than 7 months after the award was actually
received. CAA officials explained that this extended implementation
period was caused by their inability to negotiate agreements to
deliver services with subgrantees until the grant was received, the
time associated with meeting county hiring requirements, and
renovations required by one subgrantee. Officials at Children First
said that they began planning for the expansion and negotiating with
partner organizations prior to receiving the grant and were able to
reach full enrollment by March 10, 2010.
One grantee we visited expects to have unspent funds at the end of
fiscal year 2010.[Footnote 35] CAA officials said they used the
Recovery Act funds to hire additional staff for home-based care and
new teachers. However, due to the delay in initiating services, CAA
officials said they expect to have approximately $320,000--more than
18 percent of their fiscal year 2010 grant--remaining at the end of
fiscal year 2010. CAA officials said they will request that OHS allow
them to use the unspent funds to purchase equipment and supplies as
well as to hire two additional staff in fiscal year 2011; however, OHS
has not yet determined the strategy for addressing unspent funds.
Children First officials said the organization used the EHS expansion
grant to hire new teachers and expand services by offering year-round
enrollment for some Recovery Act-funded children. Due to capacity
limitations in its own facilities, Children First partnered with other
agencies to provide services to more children. Children First
officials reported that they do not expect to have any funds remaining
at the end of fiscal year 2010.
Both grantees we visited hope to be able to identify funds to continue
to provide services to the additional children once the Recovery Act
funding ends in September 2011. CAA officials said they plan to shift
Recovery Act funded children into regularly funded Early Head Start
and Head Start spots when possible. Children First officials said they
are also seeking alternative funding from state, local, and private
sources. However, officials at both of the grantees acknowledge that
there may not be funding to continue services for some children
currently funded under the Recovery Act.
Florida State Budget Includes $2.6 Billion in Recovery Act Funding,
and State Officials Are Preparing for Decreased Flow of Recovery Act
Funds:
Florida's adopted budget--about $70 billion in total--for fiscal year
2010-2011 was approved by the governor in late May 2010. Florida
officials stated that about $2.6 billion in Recovery Act funding was
included for education, health and human services, transportation, and
general government operations. In addition to this amount, state
officials said that about $270 million was budgeted for the extension
of the increased Federal Medical Assistance Percentages (FMAP).
[Footnote 36] Officials stated that certain appropriations for
economic development, Everglades restoration, student aid, and health
care were contingent on Florida receiving the extended FMAP. Officials
said that because these appropriations were contingent on the state
receiving the increased FMAP funds, balancing the state's budget did
not rely on the increased funding.
According to state officials, Florida is preparing for when the flow
of Recovery Act funds substantially decreases beginning in the state's
fiscal year 2011-2012. Although budget officials have yet to determine
whether reductions will be necessary due to the state's improving
fiscal condition, the Office of Policy and Budget has instructed
agencies to submit reductions totaling at least 5 percent of their
appropriations that could be used to address a potential revenue
shortfall for fiscal year 2010-11. Further, agencies are required to
submit reductions totaling 15 percent of their recurring
appropriations that could be used to address a potential revenue
shortfall for fiscal year 2011-12.[Footnote 37] Officials said that
they may use the agencies' plans in combination with other measures to
make budget recommendations to close any potential budget gaps.
Miami-Dade County Considers Recovery Act Funding as Nonrecurring
Revenue While Fiscal Challenges Continue:
We also examined the use and effect of Recovery Act funds on a local
government's budget, Miami-Dade County.[Footnote 38] According to
county officials, the county received about $89.8 million over
multiple years in Recovery Act funds. Housing programs for low-to
moderate-income residents received the largest amount of Recovery Act
funding. Generally, county officials said Recovery Act funds are
treated as nonrecurring revenue and primarily used for infrastructure
and capital projects such as purchasing police equipment and computer
equipment.[Footnote 39] (See table 4). Overall, Recovery Act funds
received over multiple years contribute a small amount to the county's
total general fund operating budget of about $1.7 billion for the
current fiscal year, 2009-2010.
Table 4: Recovery Act Grants and Loans to Miami-Dade County, Fiscal
Years 2008-2011:
Program area: Housing;
Project or federal award: Public Housing Capital Fund Program for the
construction and renovation of public housing developments. Community
Development Block Grant Recovery to promote neighborhood stabilization
in low to moderate-income communities. Homeless Prevention and Rapid
Re-housing Program for homeless services. Total: $48.2 million over 3
years.
Program area: Energy efficiency;
Project or federal award: Energy Efficiency and Conservation Block
Grant used to demonstrate and evaluate the use of renewable
alternative energy technologies and Weatherization Assistance Program
used to improve energy efficiency for privately-owned residences.
Total: $15.6 million over 3 years.
Program area: Human services;
Project or federal award: Head Start and Early Head Start for
salaries, cost of living increases, and to expand child care services.
Community Services Block Grant to provide employment-related services
to low-income communities. Total: $11.1 million over 3 years.
Program area: Public safety;
Project or federal award: Edward Byrne Memorial Justice Assistance
Grant used for salaries, equipment purchases, and to address substance
abuse. Grant for system enhancement to automate reporting and expedite
the booking process. Total: $9.3 million over 3 years.
Program area: Environment;
Project or federal award: National Diesel Funding Assistance Program
used to purchase five hybrid diesel transit buses and programs to
reduce diesel fuel emissions. Drinking Water State Revolving Fund for
construction of water lines. Total: $5.2 million over 3 years
Program area: Arts, culture, and humanities;
Project or federal award: National Foundation on the Arts and
Humanities to sustain jobs in the arts community threatened by
declines in philanthropic support during the economic downturn. Total:
$300,000 over 1 year.
Program area: Total Recovery Act Funding;
Project or federal award: $89.8 million over multiple years
Source: GAO analysis of federal and state data.
Note: Amounts for each program area do not add up to total Recovery
Act funding due to rounding.
[End of table]
Although Recovery Act funds have not been used to balance the current
2009-2010 fiscal year budget, county officials explained that several
actions were taken to address a budget gap of about $426 million.
[Footnote 40] For example, county officials said the gap was closed by
salary and service reductions and using reserves--about $58 million--
from the Countywide Emergency Contingency Reserve. Remaining reserves
are currently below the goal established in county policy, according
to its officials, which requires a minimum reserve fund balance of 7
percent of the general fund operating budget by fiscal year 2012.
County officials stated that the minimum can be waived during times of
fiscal constraints by the Board of County Commissioners with the
County Manager's recommendation and the condition that a plan is in
place to replenish the funds over a period of 7 years.[Footnote 41]
Moreover, county officials said that further reductions to reserves
would jeopardize the county's bond rating.
While Most Contracts We Reviewed Had Post-award Changes, the
Modifications Generally Do Not Appear to Have Significantly Affected
Projects' Outcomes, Schedule, or Costs:
While most of the 12 Recovery Act-funded contracts we reviewed had
post-award changes, according to state and local project managers, the
changes generally did not have significant effects on the projects'
outcomes or costs and were within acceptable levels. As shown in table
5, 8 of 12 contracts experienced changes to the schedule, cost, and/or
scope of work from the original contracts. However, none of the
changes adversely impacted the delivery of services under the
contracts.
Table 5: Changes to Selected Recovery Act-Funded Contracts in Florida
as of July 26, 2010:
Description of project: Highways”contract T3066: road and bridge
reconstruction in Okaloosa County[A,C];
Original contract cost: $25.2 million;
Changes in cost: 1.87% change ($407,916 increase);
Changes to scheduled completion: 3% change (29 days added).
Description of project: Highways--contract E2N36: Road widening and
improvements in Nassau County[C];
Original contract cost: $26.2 million;
Changes in cost: No change;
Changes to scheduled completion: 3.7% change (26 days added).
Description of project: Highways”contract T2303: Highway and drainage
improvements in Union County[B];
Original contract cost: $454,745;
Changes in cost: 0.17% change ($809 decrease);
Changes to scheduled completion: 23 days ahead of allowable contract
time.
Description of projects: Highways--contract E2N34: Road
reconstruction, widening, and bike lanes in Duval County[C];
Original contract cost: $12.8 million;
Changes in cost: No change;
Changes to scheduled completion: 5.2% change (33 days added).
Description of project: Highways--contract E2N37: New road and bridge
construction in Clay County[C];
Original contract cost: $7.3 million;
Changes in cost: No change;
Changes to scheduled completion: 3.2% change (14 days added).
Description of project: Highways--contract E2N56: Road repaving in
Alachua County[B];
Original contract cost: $936,007;
Changes in cost: No change;
Changes to scheduled completion: 88 days ahead of allowable contract
time.
Description of project: Highways--contract APJ94: Drainage and road
improvements in Putnam County[A,B];
Original contract cost: $398,484;
Changes in cost: 1.2% change ($4,866 increase);
Changes to scheduled completion: 12.5% change (30 days added).
Description of project: Education--contract 10795C: 1-day writing
training for teachers in Hillsborough County;[B];
Original contract cost: $4,725;
Changes in cost: 20% change ($945 decrease);
Changes to scheduled completion: No change.
Description of project: Education--contract 10797C: 1-day teacher
training in Hillsborough County[B];
Original contract cost: $4,800;
Changes in cost: No change;
Changes to scheduled completion: No change.
Description of project: Education--contract K02479981: Teacher and
principal training in Miami-Dade County[C];
Original contract cost: $900,000;
Changes in cost: No change;
Changes to scheduled completion: No change.
Description of project: Education--contract R02475264: Extra academic
help, such as tutoring, for students with disabilities in Miami-Dade
County[B];
Original contract cost: $98,600;
Changes in cost: No change;
Changes to scheduled completion: No change.
Description of project: WIA Summer Youth--contract 525: Providing
appropriate classroom-type space and support for Employment and
Leadership teams, such as verifying daily attendance among trainees[B];
Original contract cost: $11,252;
Changes in cost: No change;
Changes to scheduled completion: No change.
Source: Analysis of information from contract project managers of
highway, education, and Workforce Investment Act projects funded by
the Recovery Act:
Notes: According to FDOT Office of Inspectors General (OIG) officials,
the OIG's Rapid Review Advisory and Consulting Group have been
monitoring numerous Recovery Act contracts, including T3066, E2N34,
and E2N36. According to these officials, the contracts are being
monitored and to date, none of the contracts exhibited the risk
characteristics that would trigger a more detailed review or audit.
[A] The scope of work changed.
[B] As of July 26, 2010, the contract has been completed.
[C] This contract remains ongoing as of June 15, 2010, so additional
days or costs, for example, could be added to the contract.
[End of table]
The days added to contract schedules for each of the five highway
projects accounted for less than a 20 percent change of the initial
estimated time, which is the performance measure set in agreement by
the Florida Department of Transportation (FDOT) and Federal Highway
Administration (FHWA) and according to state and local project
managers, did not increase the financial costs of the projects.
[Footnote 42] Two other highway contracts we reviewed were completed
ahead of schedule.[Footnote 43]
As reported by state and local project managers, costs increased for
two of the contracts while costs decreased for two others. The cost
increases--accounting for less than a 2 percent change from the
awarded contracts' costs--are within FDOT and FHWA performance
measures of less than a 10 percent cost increase. According to state
officials, costs increased due to changes in the scope of work. They
told us that the scope changes occurred because of conditions not
anticipated at the time of the contract award. For example, in one
case the county design engineer inadvertently omitted required
materials from the contract; this required subsequent adjustments that
increased the project cost. In both cases, project managers reported
that the modifications were beyond the control of the contractors. Two
other contracts we reviewed--involving an education training program
and a highway project--experienced price reductions. State and local
project managers reported that price reductions occurred because of
price adjustments, such as having fewer people than expected attending
training or the cost of paving material being less than estimated.
Florida Continues to Provide Oversight and Transparency to Recovery
Act Spending:
Florida's Office of the Chief Inspector General and the Auditor
General have the primary responsibility for the audit of the state's
use of Recovery Act funds. The Chief Inspector General monitors the
activities of the Offices of Inspectors General for Florida's various
state agencies who are responsible for conducting audits and
investigations within their respective agencies. The Auditor General
conducts the state's annual audit of federal awards expenditures and
other audits of Florida's governmental entities which serve to promote
accountability and stewardship within government operations.
Florida's inspectors general continue to conduct the types of
oversight and accountability activities we described in our previous
work.[Footnote 44] For this reporting period, several inspectors
general reported Recovery Act programs audits that were completed, in
process, or planned. For example, as of June 15, 2010, the Florida
Department of Transportation Office of Inspector General (FDOT OIG)
reported it had reviewed 493 Recovery Act funded transportation
projects and noted no findings that would jeopardize federal funding.
[Footnote 45] Additionally, FDOT OIG reported that it had initiated a
review of 20 Recovery Act funded construction projects with total
project amounts over $10 million. So far, construction files for 2
projects have been reviewed with no findings noted;
site visits and reviews are being scheduled. The Florida Department of
Law Enforcement reported it is completing reviews of 20 subrecipients'
efforts to document and report on the number of full-time equivalent
jobs created or retained by Recovery Act funds. The Department of
Community Affairs Inspector General reported it had finished fieldwork
for the implementation of the Weatherization Assistance Program and
was drafting its report. In addition, the Inspector General for the
Executive Office of the Governor reported plans to audit the subgrant
and contract award processes and the monitoring procedures of the
office administering the Energy Efficiency and Conservation Block
grant, in fiscal year 2010-2011.
The annual audit of federal award expenditures, conducted by the State
Auditor General's Office in accordance with the Single Audit Act, also
provides oversight for Recovery Act funds.[Footnote 46] For the state
fiscal year ending June 30, 2009, Florida expended $30.2 billion in
federal awards; of that amount $1.8 billion was identified as Recovery
Act funds. [Footnote 47] The Auditor General reported several
findings. [Footnote 48] For example, in the audit of the Medicaid
cluster of major programs, which expended $1.3 billion of Recovery Act
funds, the state was unable to document that certain individuals were
eligible for benefits and procedures were not sufficient to ensure all
health care providers receiving Medicaid payments had provider
agreements in effect.[Footnote 49] The state agencies acknowledged
these findings continued to exist, citing staff shortages and
increased workloads among the contributing factors; however, the
agencies plan to provide additional training and implement procedures
to address these findings. In planning for the Single Audit for fiscal
year 2010, the Auditor General estimated that 24 of the 35 major
programs will contain some Recovery Act expenditures due to increased
Recovery Act funds expended during fiscal year 2010.
Florida Recovery Czar Indicated that Recipient Reporting Process Went
Smoothly, but We Found that Some Reports Were Based on Incomplete Data:
The state Recovery Czar stated that overall, the fourth round of
recipient reporting went smoothly as the process has become routine;
however, during site visits to local agencies, we identified instances
in which contractors' hours were mistakenly omitted from
subrecipients' full-time equivalent (FTE) calculations.[Footnote 50]
The Recovery Act requires recipients to report an estimate of the
number of jobs created or retained by the project or activity no later
than 10 days after the end of each quarter so this information can be
used for reporting on Recovery.gov. The Recovery Czar acknowledged the
possibility of under reporting jobs data and plans to follow up at the
agency level. However, he emphasized that the jobs reported number is
a point in time number of jobs being paid with a portion of Recovery
Act funds rather than an overall measure of cumulative jobs being
created with Recovery Act funds. Further, he said that while some
agencies continue voicing concerns about obtaining jobs data in time
to report by the tight deadline, he believes that OMB's process for
continuous corrections of data for the most recent quarter will
address these concerns. To help identify data anomalies that may be
corrected, the Recovery Czar analyzes data from Recovery.gov after the
quarter's results are published and provides additional analysis of
the state's Recovery Act awards, expenditures and jobs on the Florida
Office of Economic Recovery Web site.[Footnote 51]
We visited three recipients and found that their jobs reports were
filed on time, were calculated correctly using the FTE formula, and
were supported by timesheets for the periods we tested; however, we
identified reporting omissions or errors at each location. The two
Weatherization Assistance Program subrecipients did not include hours
worked by their contractors weatherizing homes in the jobs data
submitted to the Florida Department of Community Affairs (DCA).
[Footnote 52] These subrecipients said they were unaware of the
requirement to report contractors' hours, but both agreed to work with
DCA to correct this omission. DCA officials said they would look into
the reporting from these two subrecipients, as well as others, and
clarify any questions of reporting requirements. Additionally, DCA's
Inspector General stated that its office will take steps to help
identify omissions when it makes site visits to selected
subrecipients.[Footnote 53] As a result of our work, the DCA Inspector
General reported that DCA program staff have taken steps to reiterate
to subrecipients the policy and approved method of reporting FTE
counts to DCA at the end of each quarter.
The prime Energy Efficiency Conservation Block Grant recipient had two
reporting issues. First, after recently centralizing staffing in the
grants accounting department, officials discovered that FTE jobs data
from its payroll records had not been reported in previous quarters.
To correct this omission, the recipient included the omitted hours in
its FTE calculation for the quarter ending June 30, 2010. Second, some
hours worked on Recovery Act projects will not be reported until the
following quarter. This occurs because the accounting systems that
produce documentation lag the reporting deadline and the recipient did
not want to calculate estimates.[Footnote 54] For example, for the
April, May, and June reporting period, one of the Recovery Act
projects instead reported data for March, April, and May.
State Comments on This Summary:
We provided the Special Advisor to the Governor of Florida, Office of
Economic Recovery (who is referred to in this appendix as the Recovery
Czar), with a draft of this appendix on August 17, 2010. The Recovery
Czar agreed with our draft.
GAO Contact:
Andrew Sherrill, (202) 512-7215 or sherrilla@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Michael Armes, Patrick di
Battista, Sabur Ibrahim, Kevin Kumanga, Frank Minore, Maria Morton,
Daniel Ramsey, Brenda Ross, Bernie Ungar, Margaret Weber, and James
Whitcomb made major contributions to this report. Art Merriam assisted
with quality assurance. Susan Aschoff contributed to writing this
report.
[End of section]
Appendix V Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] As of June 30, 2010, DCA had not yet approved weatherization of
multifamily residences, but it reported having received proposals.
[3] Our spot check of data reported by two subgrantees raised
questions about the completeness of jobs data being reported to DCA.
This issue is discussed further in the recipient reporting section of
this appendix.
[4] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2009).
[5] DOE requires grantees to inspect 5 percent of the homes
weatherized.
[6] DCA has also contracted for fiscal monitoring and technical
assistance to its subgrantees and training and technical assistance to
subgrantees on Davis-Bacon prevailing wage and reporting requirements.
As of June 30, 2010, DCA reported that its contractors performed
fiscal reviews at seven subgrantees and visited nine subgrantees for
Davis-Bacon reviews.
[7] We found instances in which (1) required documentation was missing
from client files; (2) work listed as completed was not consistent
with home energy audit recommendations; (3) listed improvements were
either not completed or lacked quality; (4) health and safety issues
were not addressed; (5) procurement practices were inconsistent with
DCA's requirements; and (6) file reviews and home inspections by DCA's
contract field monitors did not always detect problems with subgrantee
program or noncompliance; see [hyperlink,
http://www.gao.gov/products/GAO-10-605SP].
[8] We did not independently verify client income. According to the
subgrantee, the staff computational errors made in determining client
income did not affect client eligibility.
[9] Florida's 10 authorized weatherization measures, in descending
order of energy savings importance are: air sealing, attic and floor
insulation, dense-pack sidewall insulation, solar window screens,
smart thermostat, compact fluorescent lamps, seal/insulate ducts,
refrigerator replacement, heating and cooling systems, and water
heater repair or replacement.
[10] In one case involving loose weather-stripping, it is not clear
whether the problem existed at the time of installation or arose
subsequently.
[11] DCA's procedures and guidelines manual states subgrantees should
perform home inspections at least once while work is in progress for
such purposes as documenting lead-safe weatherization procedures and
to spot check compliance. However, except for photos of lead-safe
procedures, DCA's manual does not require such inspections be
documented.
[12] As noted in our May 2010 report (GAO-10-605SP), when the air
flow/ventilation rate for a home is found to be below the minimum
threshold, a case-by-case assessment should be made on how to address
the problem.
[13] The subgrantee said electrical system checks were done for two
cases, but the results were not in the client files.
[14] According to DCA, field monitors have not been required to
determine whether a test was done as part of the energy audit to
determine if heating and air conditioning ducts need to be sealed;
however, it will consider adding this to the list of review items.
[15] DCA said that briefings we provided on the results of the reviews
at the two subgrantees we most recently reviewed, along with our
previous work and information from others, were used to develop its
new guidance.
[16] This rental housing, to be located in both urban and rural areas,
is to serve mostly low income families, the elderly, farm workers and
commercial fishing workers.
[17] Project owners must spend 30 percent of the project's adjustable
basis for land and depreciable property by December 31, 2010. FHFC
requires that each project's accountant report this information to
FHFC along with the accountant's certification on compliance with the
spending requirement in January 2011.
[18] As of June 30, 2010, Treasury had not issued guidance on how its
December 31, 2010 deadline is to be enforced or monitored or whether a
time extension may be possible.
[19] According to FHFC, the litigation involves three projects for
which the owners disagreed with FHFC's decision to rescind provisional
awards based on an unfavorable credit underwriting review.
[20] FHFC said the review and approval process includes (1)
application review to determine whether all application requirements
have been met, (2) a provisional award; i.e., a preliminary commitment
of funds pending a credit underwriting review; (3) a credit
underwriting review and final award, which can take about 3-6 months;
and (4) closing, which involves execution of legal and financial
documents and triggers the beginning of FHFC's release of funding for
construction.
[21] Each of the three projects we reviewed, all in the early stages
of construction, reported experiencing delay in closing or
construction.
[22] This program includes various review and inspection steps and
required reporting to ensure that projects, both during and after
construction, continue to meet requirements and remain financially
viable, in good physical condition, and affordable to low income
tenants.
[23] This is particularly important because a project's failure to
comply with LIHTC requirements over a 15-year compliance period can
result in the investors losing their tax credits.
[24] These projects have both TCAP and Section 1602 Program funds.
Treasury does not require equity investments for Section 1602 Program
projects, but HUD requires such investments for TCAP projects.
However, HUD does not require a specific kind of investment or specify
a minimum investment amount. For these 13 TCAP projects, the owners
contributed $650 in investment equity to each project, but there were
no third-party investors.
[25] Under the conventional LIHTC program, HFAs are not liable for
recapturing funds if a project owner fails to comply with LIHTC
requirements. Rather, HFAs are to report noncompliance to IRS, which
then takes any further actions with respect to recapture.
[26] We did not confirm the reliability of these data.
[27] Section 1512 of the Recovery Act describes recipient reporting
requirements, including that of estimated jobs created and retained.
Section 1512 and the recipient reporting requirements apply only to
programs under division A of the Recovery Act, which includes TCAP.
The Section 1602 Program is under division B of the Recovery Act, and,
therefore, not subject to Section 1512 requirements. Except for
requiring the use of full-time equivalents, Treasury has not issued
detailed guidance specifying job estimation methodology under the
Section 1602Program.
[28] Thus, for TCAP projects, job estimates are to reflect only those
jobs that were or are to be funded by TCAP for the most recent
quarter; whereas for Section 1602 Program projects, job counts are to
reflect all jobs created or retained for the entire project period
regardless of funding sources.
[29] A city is eligible to receive a formula grant if it has a
population of at least 35,000 or if it is one of the 10 highest
populated cities in the state. Similarly, a county is eligible for a
formula grant if it has a population of at least 200,000 or if it is
one of the 10 highest populated counties of the state in which it is
located. Each state awarded a formula grant must pass on at least 60
percent of its allocation to cities and counties that are not eligible
for such formula grants.
[30] According to program Notice10-011 dated April 21, 2010, grantees,
the majority of whom received their grants by September 2009, must
obligate all funds within 18 months of receipt and spend them within
36 months. Funds "spent" are those drawn down for an obligation.
[31] In Jacksonville's grant application each of the above mentioned
projects is part of a larger project. The estimated job creation for
the larger projects is 69.
[32] In its grant application, Tampa estimated that the procurement of
lighting would create 8 jobs and result in the retention of 16.
[33] The Head Start program, administered by the Office of Head Start
(OHS) of the Administration for Children and Families within the
Department of Health and Human Services, provides a variety of
education, health, and social services to enhance physical, social,
emotional, and intellectual development of low-income infants,
toddlers, and pregnant women.
[34] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-604]
(Washington, D.C.: May 26, 2010).
[35] Unspent funds are the difference between a Head Start grantee's
total federal award for a budget year and the amount spent by the
grantee during that year.
[36] The Recovery Act initially provided eligible states with an
increased FMAP for 27 months from October 1, 2008, to December 31,
2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. On August 10, 2010 federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[37] Florida officials report that the state's fiscal condition is
improving based on revenues exceeding estimates in fiscal year 2009-
2010, and projected continued revenue growth of 5 to 6 percent in
fiscal year 2010-2011, which began July 1, 2010. As we previously
reported, increased revenue resulting from certain fees such as
driver's license, motor vehicle, and court fees led to a moderate
increase in the general revenue fund in fiscal year 2009-2010,
according to state officials. Moreover, officials said the state
exceeded its estimates for taxes on insurance premiums and corporate
income in fiscal year 2009-2010.
[38] Miami-Dade County is comprised of 35 municipalities and
unincorporated municipal service areas that do not fall within the
jurisdiction of a municipality.
[39] County Recovery Act funds referred to in this section include
only funds administered by the county government and not the full
scope of Recovery Act funds--including unemployment insurance,
Medicaid, highways, and transit--that benefit county residents. For
example, Recovery Act highway and transit funds being used in Miami-
Dade County total $123.5 million.
[40] The county's revenue has been directly impacted by decreased
property taxes resulting, in part, from the housing market decline.
[41] Strategies to begin replenishing reserves are being considered in
the fiscal year 2010-2011 budget development process, according to
county officials.
[42] According to FDOT officials, adding days to contract schedules
was mainly attributed to days off granted for inclement weather and
holidays. Their policy permits granting extensions of contract
schedules when work is delayed by factors not reasonably anticipated
or foreseeable at the time of bid, such as for inclement weather.
Additionally, FDOT officials said holidays are granted as they occur
during the course of a contract because it is more efficient than
estimating the number of holidays as part of the original contract and
because of the uncertainty of when a contractor will actually begin
the work. While FDOT tracks weather and holidays in the time added to
the original contract time, it does not count those added days against
their performance measures.
[43] In reviewing FDOT officials' responses and supporting
documentation for 3 of the 7 highway projects, we identified minor
discrepancies between the summary reports produced by an FDOT
procurement system and memorandums documenting FDOT granted days off
for inclement weather, holidays, and other events. FDOT officials said
the discrepancies were due to human error in data entry. FDOT
officials corrected the errors, and the overall impact of these
discrepancies appears minor. Officials from FDOT's Office of Inspector
General said that on occasion they have found similar types of
discrepancies related to data entry in their reviews of other
contracts and have brought these to management's attention for
resolution.
[44] GAO Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May
2010); 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
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 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 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.: April 23, 2009).
[45] FDOT reported working in conjunction with the Federal Highway
Administration to complete these reviews. The reviews were limited to
ensuring compliance with certain state and federal laws, rules and
regulations.
[46] The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-
7507), requires that states, local governments, and nonprofit
organizations expending more than $500,000 in federal awards in a year
to obtain an audit in accordance with the act and subject to
applicable requirements in OMB Circular No. A-133, Audits of States,
Local Governments and Non-profit Organizations (June 27, 2003 and June
26, 2007). The act sets a deadline for submitting the audit at 9
months from fiscal year end. According to data from the Federal Audit
Clearinghouse, which is responsible for receiving and distributing
Single Audit results, it received Florida's Single Audit reporting
package for the year ending June 30, 2009, on March 29, 2010 which was
within the 9 month deadline in accordance with the act.
[47] Of the 39 federal programs or clusters listed as major programs
in the Single Audit report, 12 were identified as expending Recovery
Act funds.
[48] The Auditor General reported numerous findings on internal
control over compliance of federal awards and questioned costs charged
to several programs in the Single Audit for the fiscal year ending
June 30, 2009. Within the findings, the Single Audit identified 73
significant internal control deficiencies related to compliance with
Federal Program requirements, of which 10 were classified as material
weaknesses. Of the 73 significant deficiencies which cover many
federal programs, 25 were identified in programs receiving Recovery
Act Funds. Of the 10 material weaknesses, an elevated level of a
significant deficiency, 8 were identified in programs receiving
Recovery Act funds. Some findings continue to exist from the prior
year pre-dating the receipt of Recovery Act funds. Some findings are
categorized as material weaknesses, an elevated level of a significant
deficiency, as explained in the Single Audit report. The Auditor
General follows up on prior audit findings to assess the status of
actions reported to be taken by the agencies to resolve the findings,
as required by OMB Circular No. A-133.
[49] Specifically, these two findings, FA 09-059 and FA 09-062, were
reported as material weaknesses and contributed to qualified opinions
on compliance for the related Medicaid Cluster compliance requirements.
[50] Florida has a centralized system into which all 17 state agencies
report; then the information is uploaded to the federal system via
Federal Reporting.gov.
[51] This additional analysis is located on [hyperlink,
http://www.flarecovery.com] under the "Documents" link.
[52] DCA, which administers the Weatherization Assistance Program, is
the prime recipient of this Recovery Act funded program, and is
responsible for collecting jobs data from its subrecipients. In
addition to omitting hours worked by contractors, we noted some
discrepancies between the data one of these subrecipients provided to
us and DCA;
DCA agreed to look into these differences and make and report
corrections, as appropriate.
[53] Currently, DCA's Office of Inspector General performs a review of
the agency's quarterly recipient reporting prior to submission to the
Recovery Czar by comparing, on a sample basis, data submitted by the
subrecipients to the data in DCA's report. However, the Inspector
General acknowledged this review would not identify omissions based on
the information on hand during that limited period of review. The
Inspector General stated that her staff will look into the issue of
omissions in subrecipients' reporting during site visits to a sample
of subrecipients for the Weatherization Assistance Program.
[54] At this recipient, its departments report payroll data to one of
two accounting systems. Jobs data reported on one system lags one full
month; jobs data reported on the second system lags for several days
at the end of a quarter depending on the timing of the end of the pay
period. The recipient stated that it wants to maintain an audit trail
based on the actual hours documented in the accounting systems at the
time the quarterly reports are prepared in order to demonstrate that
at the completion of the projects, it has accounted for all hours
charged to Recovery Act funded projects.
[End of Appendix V]
Appendix VI: Georgia:
Overview:
The following summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act)[Footnote 1] spending in Georgia. The full report on our work,
which covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery].
What We Did:
We reviewed the following programs funded under the Recovery Act--the
Early Head Start Program, the Energy Efficiency and Conservation Block
Grant Program, the Weatherization Assistance Program, the Tax Credit
Assistance Program, the Grants to States for Low-income Housing
Projects in Lieu of Low-income Housing Credits Program under section
1602 of division B of the Recovery Act (Section 1602 Program), and the
Public Housing Capital Fund. We began work on the Early Head Start
Program because significant funds had been obligated and on the Energy
Efficiency and Conservation Block Grant Program because it was funded
for the first time by the Recovery Act. We continued our work on the
Weatherization Assistance Program, the Tax Credit Assistance and
Section 1602 Programs, and the Public Housing Capital Fund to update
the status of these programs. For descriptions and requirements of the
programs covered in our review, see appendix XVIII of GAO-10-1000SP.
In addition, we focused on Georgia's efforts to ensure accountability
over funds and the use of Recovery Act funds by selected localities.
What We Found:
Following are highlights of our review.
* Early Head Start Program. Under the Recovery Act, the Office of Head
Start designated approximately $19 million for the expansion of the
Early Head Start program in Georgia. For example, the Clarke County
School District, which received an Early Head Start expansion grant of
about $2.2 million, used the funds in part to construct new classrooms
and hire additional staff, allowing it to serve 84 additional clients.
Enrichment Services Program, Inc. received an Early Head Start
expansion grant of about $1.5 million, which it used to make a down
payment on a new facility and hire new staff, among other things. The
funding allowed it to provide Early Head Start services for the first
time to 72 clients. The two grantees defined enrollment differently
than each other when reporting to the Office of Head Start, but had
similar processes in place to determine client eligibility.
* Energy Efficiency and Conservation Block Grant Program. The U.S.
Department of Energy (DOE) allocated a total of about $67.2 million in
formula grants to the State of Georgia--approximately $45.6 million
directly to 17 cities and 10 counties and about $21.6 million to the
state. The recipients we interviewed--the Georgia Environmental
Finance Authority (GEFA), Cobb County, the Columbus Consolidated
Government, and the City of Warner Robins--had just begun to spend
funds on projects such as a revolving loan fund for improvements to
commercial buildings, retrofits to government buildings, and
improvements to a wastewater treatment plant. All of the recipients we
interviewed were putting monitoring strategies and plans in place and
developing methodologies for measuring energy savings.
* Weatherization Assistance Program. DOE allocated about $125 million
in Recovery Act weatherization funding to Georgia for a 3-year period.
As of the end of June 2010, the 22 service providers in the state had
completed 3,017 (about 22 percent) of the 13,617 homes to be
weatherized with these funds by March 2012. GEFA and the three
providers we interviewed have taken steps to address issues with
prioritizing clients for service and awarding contracts that we
identified in our May 2010 report.[Footnote 2]
* Tax Credit Assistance and Section 1602 Programs. Georgia received
about $54.5 million in Tax Credit Assistance Program funds and
approximately $195.6 million in Section 1602 Program funds. As of July
31, 2010, the state had committed about $228 million (approximately 91
percent) under both programs for 39 projects, including the
construction of 52 units for persons over age 55 in Sandersville,
Georgia. The state expects to commit the remainder of its funds by the
end of September 2010. The state has processes in place to conduct
oversight of the projects during construction and is developing
processes designed to ensure their long-term viability after
completion.
* Public Housing Capital Fund. The U.S. Department of Housing and
Urban Development (HUD) allocated about $113 million in Recovery Act
formula funding to 184 public housing agencies in Georgia to improve
the physical condition of their properties. As of August 7, 2010,
these agencies had obligated all of their funds and drawn down about
$62 million (approximately 55.1 percent). The housing agencies we
visited in Athens, Atlanta, and Macon had made progress on projects
funded with formula grants. For example, the Athens Housing Authority
was close to completing the renovation of 25 scattered site housing
units. HUD also awarded about $14 million in Recovery Act competitive
funding to five public housing agencies in Georgia. HUD expects all
five agencies to meet the Recovery Act requirement to obligate their
funds within 1 year of the date they were made available.
* Accountability efforts. The State Auditor's fiscal year 2010 Single
Audit will include audits of Recovery Act programs. The internal audit
departments of several state agencies have plans to audit or are
already auditing Recovery Act funds. For example, GEFA conducts fiscal
audits that focus on the contractual, administrative, and accounting
aspects of the Weatherization Assistance Program. In addition, the
State Accounting Office is implementing an internal control initiative
to enhance accountability for Recovery Act funds. The initiative began
in June 2010 and provided internal control training to 28 state
agencies. These agencies will be required to certify that all
necessary controls are in place by the end of fiscal year 2011.
* Selected localities' use of Recovery Act funds. The Columbus
Consolidated Government and the Unified Government of Athens-Clarke
County had been awarded about $17.5 million and $13.3 million,
respectively, as of August 6, 2010. These localities received funds
for purposes such as improving energy efficiency and preventing
homelessness.
Grantees in Georgia Are Using Early Head Start Funds to Serve
Additional Children and Create Additional Infrastructure:
In Georgia, 12 organizations operated an Early Head Start program
prior to the Recovery Act.[Footnote 3] Eight of these organizations
and seven new organizations received a total of approximately $19
million in Recovery Act Early Head Start expansion grants to serve
approximately 1,300 new clients. As of July 16, 2010, these agencies
had drawn down about $7.4 million (39 percent).
Despite a Delayed Start, Georgia Grantees Have Begun Providing Early
Head Start Services:
We visited two grantees--Clarke County School District (CCSD) and
Enrichment Services Program, Inc. (ESP).[Footnote 4] CCSD had operated
an Early Head Start program prior to receiving its Recovery Act
funding. ESP had operated a Head Start Program but did not previously
have an Early Head Start program. Both grantees used the Recovery Act
funds to offer three different program options for their clients--
center-based services, home-based services, and a combination of the
two.[Footnote 5]
Clarke County School District:
CCSD was awarded about $2.2 million in Recovery Act Early Head Start
expansion grants (see fig. 1). As of July 16, 2010, CCSD had drawn
down about $1.2 million (55 percent). With this funding, CCSD plans to
serve 84 additional clients through three program options. It began to
serve these clients on March 1, 2010, and as of the end of June 2010,
had enrolled 78 clients. The district used about $1 million for an
addition to a new building that includes classrooms for Early Head
Start and program support areas for Early Head Start and Head Start.
In accordance with its grant application, CCSD plans to use the
remaining funds to hire additional staff, for professional
development, to improve playgrounds, and to purchase program and
instruction supplies.
Figure 1: Overview of Clarke County School District's Early Head Start
Expansion Grant:
[Refer to PDF for image: pie-chart and horizontal bar graph]
Budget categories and amount of expansion funds:
Facilities construction: $998,000;
Staffing: $530,000;
Contractual: $290,000;
Other: $209,000;
Supplies: $160,000;
Equipment: $25,000;
Travel: $3,000;
Total: $2.2 million.
Total clients enrolled as of June 2010:
Combination: 11;
Home-based: 35;
Center-based: 32;
Total: 78.
Source: Office of Head Start and Clarke County School District data.
[End of figure]
Because CCSD previously operated an Early Head Start program, it also
received about $43,000 in Recovery Act quality improvement funds.
[Footnote 6] CCSD plans to use some of these funds for playground
improvements. The remaining funds will be used for supplies and
professional development, among other things. Figure 2 shows the new
building that was partially constructed with Recovery Act funds and
one of the playgrounds to be improved.
Figure 2: Examples of Clarke County School District's Plans for Its
Early Head Start Funds:
[Refer to PDF for image: 2 photographs]
Figure 2 shows examples of Clarke County School District‘s plans for
its Early Head Start funds. On the left is a picture of a new building
partially constructed with Recovery Act funds. On the right is a
picture of a playground to be improved.
Source: GAO.
[End of figure]
CCSD experienced some delays in implementing its Recovery Act Early
Head Start expansion grant.[Footnote 7] According to CCSD officials,
they originally expected to receive their Financial Assistance Award
in September 2009.[Footnote 8] However, CCSD did not receive its award
until December 2009. Officials stated the delay affected the time line
for hiring and training staff, preparations for facilities and
playgrounds, purchasing of supplies, and completion of the addition to
the new building and subsequently delayed the opening date for some of
its center-based programming by about 4 months. Despite this delay,
officials said they were on target to expend their first year awards
by the end of fiscal year 2010.[Footnote 9] Once its Recovery Act
expansion funding expires at the end of September 2011, CCSD plans to
continue to provide expanded services to infants and toddlers by
applying for additional federal grants.[Footnote 10] If funding is
made available through the Office of Head Start for continuing the
Early Head Start expansion programming, then CCSD will apply to
continue Early Head Start services.
Enrichment Services Program:
ESP was awarded approximately $1.5 million in Recovery Act Early Head
Start expansion grants (see figure 3). As of July 16, 2010, ESP had
drawn down about $958,000 (64 percent). According to ESP officials,
the funds allowed the agency to start providing Early Head Start
services, which had been a goal for them and other entities in the
community. ESP began serving 72 clients through three program options
on April 15, 2010.
Figure 3: Overview of Enrichment Services Program's Early Head Start
Expansion Grant:
[Refer to PDF for image: pie-chart and horizontal bar graph]
Budget categories and amount of expansion funds:
Staffing: $488,000;
Supplies: $406,000;
Facilities construction: $278,000;
Other: $210,000;
Indirect costs: $65,000;
Contractual: $12,000;
Equipment: $48,000;
Total: $1.5 million.
Total clients enrolled as of June 2010:
Combination: 28;
Home-based: 8;
Center-based: 40;
Total: 72.
Source: Office of Head Start and Enrichment Services Program, Inc.
data.
[End of figure]
ESP used about $278,000 of its Recovery Act funding to make a down
payment on a facility and approximately $488,000 for personnel costs
(see figure 4). It intends to use the remaining funds to make minor
renovations to the facility and to purchase additional supplies, among
other things.
Figure 4: Facility that Enrichment Services Program Purchased with
Early Head Start Funds:
[Refer to PDF for image: 2 photographs]
Figure 4 shows the facility that Enrichment Services Program purchased
with Early Head Start funds. On the left is a picture of the exterior
of the newly purchased building. On the right is a picture of the
community room located inside the building.
Source: GAO.
[End of figure]
Similar to CCSD, ESP officials stated that the implementation of their
Early Head Start program was delayed. First, ESP did not receive its
award until December 2009. Second, ESP faced additional delays because
the agency had to make modifications to its proposed program. For
instance, ESP had to find an alternate location to hold some of its
Early Head Start classes because the originally proposed property was
found to be unacceptable because of health and safety concerns. As a
result, ESP postponed its original opening date by 2 months to May
2010. Despite this delay, officials expected to expend their first
year awards by the end of fiscal year 2010. ESP officials have
identified options to extend the services to infants and toddlers once
their Recovery Act funds are no longer available. They are presently
working on obtaining the required licensing for their newly purchased
facility to participate in Georgia's subsidized childcare program.
Grantees We Visited Differ in Their Definition of Enrollment but Have
Similar Processes in Place to Determine Client Eligibility:
The two grantees we visited define enrollment differently when
reporting to the Office of Head Start, but had similar processes in
place to determine client eligibility.
Enrollment:
For the Head Start and Early Head Start programs, enrollment is
defined by regulation as the official acceptance of a family by a
program and the completion of all procedures necessary for a child and
family to begin receiving services.[Footnote 11] The Office of Head
Start's guidance states that, for monthly enrollment reporting,
grantees should "report the total number of children and/or pregnant
women enrolled on the last operating day of the month. [They should]
report the total number of enrollees, not the number in attendance."
[Footnote 12] In our May 2010 report, we concluded that, due to this
guidance, the Office of Head Start lacks assurance that grantees
actually serve the numbers of children in each program they report
having enrolled, and for which they are receiving funds.[Footnote 13]
We noted that under the current regulatory definition of "enrollment,"
grantees--particularly those experiencing obstacles in start-up--could
reasonably report full enrollment, while some classrooms sat empty,
perhaps due to licensure or other delays.
The two Early Head Start grantees we visited were defining
"enrollment" differently than one another when reporting to the Office
of Head Start. While both grantees use similar processes to enroll
students, they consider the client to be "enrolled" at different
points during the process.[Footnote 14] CCSD officials stated they
consider a child enrolled on the day the required paperwork is
approved. For example, if a client completes the required paperwork on
June 1 but does not receive Early Head Start services until July 1,
CCSD reports the client as enrolled as of June 1. In contrast, ESP
told us it considers a client enrolled on the day the client begins to
receive services. Using the above example, ESP would report the same
client as enrolled as of July 1.
Client Eligibility:
Our review of 20 files and other documentation during site visits to
the two grantees found that all 20 files included a form to document
that the client's income eligibility was assessed.[Footnote 15] The
form required the grantee's staff to review documentation--such as tax
returns, pay stubs, written statements from employers, or
documentation showing receipt of public assistance--and record the
determination of eligibility. The Office of Head Start's guidance does
not require grantees to maintain documentation supporting their
eligibility determinations.[Footnote 16] Consistent with this
guidance, we did not find the original documentation used to assess
income eligibility in any of the files we reviewed. Both of the
grantees we visited indicated that if required to maintain
documentation, they could do so without the need for additional
resources. However, one noted that the immigrant population it serves
could have concerns about how the documents would be used if they were
retained.
Grantees Have Submitted Required Recipient Reports:
Both grantees we visited have submitted the quarterly recipient
reports required under the Recovery Act.[Footnote 17] These reports
include the amount of funds expended and the number of jobs funded by
Recovery Act awards. To determine the number of jobs funded, both
grantees told us they rely on payroll information from their
accounting systems. CCSD also relied on information from vendors to
calculate the full-time equivalents (FTE) associated with the addition
to the new building. Both grantees stated they have procedures in
place to review the data before it is submitted to
FederalReporting.gov, the system through which recipients report
information on the projects and activities funded by Recovery Act
awards. For example, at CCSD, a fiscal specialist prepares the
recipient report and sends it to the Early Head Start coordinator to
review before submission. At ESP, the Early Head Start coordinator
prepares the recipient report, and then the financial staff and
Executive Director review it prior to submission.
Recipients in Georgia Have Begun to Implement the Energy Efficiency
and Conservation Block Grant Program:
The Energy Efficiency and Conservation Block Grant (EECBG) Program,
funded for the first time by the Recovery Act, was established for the
purpose of assisting states and communities to develop and implement
projects to improve energy efficiency and reduce energy use and fossil
fuel emissions.[Footnote 18] The Recovery Act provides approximately
$3.2 billion for the program. DOE administers the program through
competitive and formula grants for local and state governments and
Indian tribes. Formula grants were awarded directly to states and
larger communities within each state.[Footnote 19]
EECBG Recipients Have Developed Plans to Use Their Funds, but Most
Projects Have Just Begun:
DOE allocated a total of about $67.2 million in formula grants to the
State of Georgia--approximately $45.6 million directly to 17 cities
and 10 counties and about $21.6 million to the state. We visited GEFA,
the state agency that administers the program, and three communities
that received formula grants directly from DOE--Cobb County, the
Columbus Consolidated Government, and the City of Warner Robins.
[Footnote 20]
GEFA:
GEFA was awarded about $21.6 million on September 14, 2009. As of July
30, 2010, the agency had been reimbursed by DOE for about $237,000.
GEFA plans to use the majority of its funds to implement the following
three programs:[Footnote 21]
* Competitive grants. $13.3 million to local governments for
activities such as energy-efficiency conservation and renewable energy
technology.[Footnote 22]
* On-bill financing. $5 million to three utility companies that plan
to administer a loan program to homeowners to make energy-efficiency
upgrades.
* Georgia Cities Revolving Loan Fund. $2 million for a revolving loan
fund to support energy-efficiency improvements in commercial buildings
located in downtowns of cities.
To select the competitive grant recipients, GEFA issued a request for
proposals from communities outlining projects in the eight eligible
activities upon which the agency had decided to focus, including
energy-efficiency retrofits, renewable energy technologies in
government buildings, and energy-efficiency conservation for building
and facilities.[Footnote 23] GEFA received 84 applications and
selected communities using a panel that scored and ranked each
application. The final award of 58 grants to 69 communities was
approved by the GEFA board. The following are examples of projects
that GEFA funded:
* The City of Brunswick was awarded $300,000 to implement energy-
efficiency retrofits for government and nonprofit buildings. The
city's proposed retrofits include higher-efficiency lighting,
efficiency improvements to heating and air conditioning systems, and
programmable thermostats.
* The City of Kingsland, as lead applicant for multiple local
governments, was awarded $500,000 to implement energy-efficiency
retrofits for local government and nonprofit buildings, among other
things.
Cobb County:
DOE awarded $5,288,500 in EECBG formula funds to Cobb County on
September 8, 2009. As of July 30, 2010, the county had been reimbursed
by DOE for about $385,000. Cobb County plans to use the majority of
its funds for three projects: $270,985 for consultant services to
assist with the development of an integrated energy conservation plan,
$4,713,500 for energy retrofits and system improvements at 20
government buildings, and $100,015 for energy software and
benchmarking.[Footnote 24] The county has made some progress on its
projects. According to officials, the county had used consultant
services to complete site audits, prioritize the retrofit site
selections, and develop performance bid specifications. Energy
retrofits and system improvements had been completed at three sites as
of July 31, 2010. In addition, the county plans to solicit bids for
the energy software by October 15, 2010, with software installation to
occur in the fourth quarter of 2010. The software will be used to
track and report historic and future energy use, energy cost, and
greenhouse gas emissions. Officials expect to fully expend all EECBG
funds by 2012, with the majority of work being fully completed by the
end of 2011.
Columbus Consolidated Government:
DOE awarded $1,844,800 in EECBG formula funds to Columbus on December
24, 2009. As of July 30, 2010, the consolidated government had not
been reimbursed by DOE for any spending. Columbus plans to use its
funds for the following four projects:
* $244,660 for traffic signal and street light upgrades,
* $1 million for traffic management technology equipment and
installation,
* $400,000 for weatherization assistance to homeowners, and:
* $200,140 for a public awareness campaign on air quality.
Officials explained that they selected these projects based on DOE's
guidance on eligible activities and to complement projects that
already were underway. As of August 9, 2010, preliminary work had
begun on all of the projects. For example, officials were preparing
the transportation projects for contract award by January 2011 and had
held a "kick off" meeting for the air quality project. Columbus also
had awarded a contract for the weatherization assistance project to a
community action agency already providing weatherization services with
Recovery Act funds under the Weatherization Assistance Program.
[Footnote 25]
City of Warner Robins:
DOE awarded $573,100 in EECBG formula funds to Warner Robins on
September 14, 2009. As of July 30, 2010, the city had been reimbursed
by DOE for about $247,000. Warner Robins plans to use its entire EECBG
grant to make energy-efficiency improvements to its wastewater
treatment plant that has been operating with inadequate and
malfunctioning equipment for a number of years.[Footnote 26] More
specifically, the city plans to procure new equipment for its
wastewater treatment plant. According to the project manager, some of
the equipment has been installed, and the city anticipates soliciting
bids for the remaining project work in October 2010. The project is
expected to be completed by March 2011.
Recipients Have Begun to Develop Monitoring Strategies for the EECBG
Program:
Recipients we interviewed had developed initial monitoring strategies
for their EECBG funds. GEFA was in the process of tailoring the
monitoring plan it has been using for other Recovery Act programs to
address the specific requirements of the EECBG program. GEFA officials
stated they planned to procure the services of a contractor to conduct
desk and field reviews and hire two additional fiscal
monitors.[Footnote 27] Similarly, officials at Cobb County explained
they were adapting their current oversight policy and procedures. For
example, while buildings were undergoing energy retrofits, officials
planned to follow their general procedures that include conducting
weekly to daily on-site visits. To help ensure compliance with the Buy
American provision of the Recovery Act, Cobb County developed
certifications for its contractors to complete that attest that
equipment and materials used complied with the Buy American standards.
Also, officials plan to conduct on-site or desk reviews of the
projects. Officials at Columbus and Warner Robins stated they had not
developed a specific monitoring plan for EECBG funds, but intended to
use their local government's standard contracting and accounting
oversight procedures. Additionally, Columbus's internal auditor plans
to review Recovery Act programs upon completion, and the city
maintains a dedicated team that provides oversight for all of the
city's Recovery Act programs through quarterly reports to the mayor
and city council.
Although initial monitoring plans were underway, some recipients we
interviewed requested additional or clearer guidance related to
monitoring and complying with EECBG requirements. For instance, GEFA
officials suggested that a monitoring checklist for subrecipients
would be helpful. Officials at Cobb County recommended that DOE
develop clearer guidance on the documentation needed to show
compliance with the Recovery Act's Buy American provision. Columbus
officials stated that some DOE requirements, such as those for
environmental reviews, were not necessarily aligned with similar
requirements for other programs. For instance, a transportation
project approved in its EECBG application would be required to follow
different procedures if the project was awarded through the Federal
Highway Administration.
Recipients Have Plans to Measure Project Impacts and Complete
Recipient Reports, but Methods for Measuring Impact Vary:
As part of quarterly reports to DOE, EECBG recipients are required to
report measures such as energy saved and greenhouse gas emission
reductions.[Footnote 28] However, some officials we interviewed noted
that methods for determining these measures can vary. For example,
officials from Columbus stated energy savings from upgrades to traffic
lights will be estimated by making assumptions on the amount of energy
used by the original lights compared to retrofitted traffic lights.
The Warner Robins project manager explained the city intends to report
project impacts on energy savings after the project is completed by
comparing past monthly utility bills for the water treatment plant to
new monthly utility bills. To measure the impact of energy retrofits,
Cobb County plans a mixed approach. According to officials, the county
will take field measurements of the performance of old equipment prior
to removal and replacement equipment and use energy models or
engineering estimates, including estimates provided by the county's
energy audit consultant. Cobb County also intends to use the new
energy software procured through the EECBG grant to benchmark and
track energy use, cost, and savings and revise calculations based on
observed energy usage for each facility. To help ensure consistency,
GEFA has provided guidance from DOE to its subrecipients detailing
instructions on estimating and reporting energy savings.
The three localities we visited provided the following anecdotal
information on the impact of EECBG funds:
* Cobb County officials anticipate their projects will reduce the
energy, cost, and greenhouse gas emissions at county facilities, and
will allow the county to sustain savings and continuously improve
efficiency.
* According to Columbus officials, expected benefits include
electricity efficiency gains from upgraded traffic signals and street
lights and reduced energy consumption through the air quality campaign
and traffic-management initiatives.
* According to Warner Robins' application, the city's wastewater
improvement project is expected to reduce the plant's energy
consumption by approximately 30 percent after it is fully completed.
In addition to reporting energy savings measures, EECBG recipients are
required under the Recovery Act to submit quarterly recipient reports.
These reports include financial information and the number of jobs
funded by Recovery Act awards. To help its subrecipients supply the
required information, GEFA offered training and developed a Web-based
tool. The training covered topics such as how to calculate FTEs for
reporting the number of jobs funded by Recovery Act awards. The Web
tool pre-populates fields for award and financial data to help ensure
accuracy and consistency. To determine the number of jobs funded, Cobb
County told us they rely on payroll information from their accounting
systems and certified payrolls from their contractors to calculate the
FTEs. The Warner Robins project manager said that the city reviews
invoices (with hours worked) provided by its contractor. Columbus had
not yet reported FTEs because projects were not underway.
GEFA, Cobb County, and Columbus officials told us they have procedures
in place to review the data before they are submitted to
FederalReporting.gov. For example, GEFA has developed procedures to
assess the accuracy of the information submitted by its subrecipients.
First, each subrecipient is required to certify its submission. Then,
GEFA reviews the information for reasonableness. If the information is
not found to be reasonable, GEFA officials contact the provider to
discuss the submission. At Cobb County, multiple staff and the
accounting department review the recipient report prepared by the
EECBG administrator before submission. At Columbus, the project
manager prepares the recipient report with assistance and review from
a grant accountant. The grant accountant submits the report to
FederalReporting.gov and the city's internal auditor for review. The
Warner Robins project manager explained that no review was conducted
on the information submitted in the report.
Georgia and Its Service Providers Have Made Improvements to the
Weatherization Assistance Program:
Under the Recovery Act, GEFA--the agency that administers the
Weatherization Assistance Program in Georgia--will receive
approximately $125 million to weatherize 13,617 homes by March 2012.
[Footnote 29] DOE approved Georgia's weatherization plan on June 26,
2009, for the period April 1, 2009, through March 31, 2012. GEFA
awarded contracts to 22 providers--community action agencies,
nonprofit agencies, or local governments--which were in place prior to
the Recovery Act. For our May 2010 report, we visited three providers--
the City of Albany (Albany), Economic Opportunity Authority for
Savannah-Chatham County Area, Inc. (EOA-Savannah), and Ninth District
Opportunity, Inc. (Ninth District), located in Gainesville.[Footnote
30] We followed up with each of these providers for this report.
Weatherization Production Has Increased Since Our Last Report:
As of the end of June 2010, 3,017 homes (about 22 percent) had been
weatherized, and about $26.3 million of the $99.7 million awarded to
providers (about 26 percent) had been drawn down.[Footnote 31] In June
2010, providers weatherized 514 units, below the monthly production
goal of 638 homes (see figure 5). Although the production of
weatherized homes has continued to increase since our May 2010 report,
Georgia has not met its production goals. GEFA noted that DOE had
increased the state's production goal by about 25 percent for April
through September 2010, which raised the target from 500 units to 638
units.
Figure 5: Homes Weatherized in Georgia, August 2009 through June 2010:
[Refer to PDF for image: vertical bar graph]
Date: August 2009;
Actual: 42.
Date: September 2009;
Actual: 99.
Date: October 2009;
Actual: 126.
Date: November 2009;
Actual: 165.
Date: December 2009;
Actual: 205;
Goal: 115.
Date: January 2010;
Actual: 219;
Goal: 231.
Date: February 2010;
Actual: 329;
Goal: 496.
Date: March 2010;
Actual: 387;
Goal: 508.
Date: April 2010;
Actual: 430;
Goal: 638.
Date: May 2010;
Actual: 501;
Goal: 638.
Date: June 2010;
Actual: 514;
Goal: 638.
Source: GEFA.
Note: GEFA did not set a goal during the early months of production
(August 2009 to November 2009).
[End of figure]
The progress that individual providers made continues to vary. Four
providers, including the three largest, had completed 14 percent or
less of their targeted number of homes as of the end of June 2010. The
highest rate was 35 percent. Table 1 shows the percentage of funds
drawn down and homes weatherized by all 22 service providers, as of
the end of June 2010.
Table 1: Percentage of Recovery Act Funds Drawn Down and Homes
Weatherized by Service Provider, as of the end of June 2010:
Service provider: Coastal Plain Area Economic Opportunity Authority,
Inc.;
Counties served: 10;
Total contract value: $4,886,875;
Percentage drawn down: 29%;
Homes to be weatherized: 590;
Homes weatherized through June: 206;
Percentage of homes weatherized: 35%.
Service provider: EOA for Savannah-Chatham County Area, Inc.;
Counties served: 1;
Total contract value: $2,743,978;
Percentage drawn down: 23%;
Homes to be weatherized: 371;
Homes weatherized through June: 120;
Percentage of homes weatherized: 32%.
Service provider: Southwest Georgia Community Action Council, Inc.;
Counties served: 14;
Total contract value: $5,469,280;
Percentage drawn down: 31%;
Homes to be weatherized: 753;
Homes weatherized through June: 242;
Percentage of homes weatherized: 32%.
Service provider: West Central Georgia Community Action Council, Inc.;
Counties served: 8;
Total contract value: $2,448,384;
Percentage drawn down: 36%;
Homes to be weatherized: 336;
Homes weatherized through June: 108;
Percentage of homes weatherized: 32%.
Service provider: Concerted Services, Inc.--Waycross;
Counties served: 8;
Total contract value: $3,455,919;
Percentage drawn down: 37%;
Homes to be weatherized: 478;
Homes weatherized through June: 149;
Percentage of homes weatherized: 31%.
Service provider: Tallatoona Community Action Partnership, Inc.;
Counties served: 6;
Total contract value: $4,103,205;
Percentage drawn down: 36%;
Homes to be weatherized: 563;
Homes weatherized through June: 177;
Percentage of homes weatherized: 31%.
Service provider: Concerted Services, Inc.--Reidsville;
Counties served: 9;
Total contract value: $4,163,318;
Percentage drawn down: 33%;
Homes to be weatherized: 574;
Homes weatherized through June: 165;
Percentage of homes weatherized: 29%.
Service provider: Coastal Georgia Area Community Action Authority,
Inc.;
Counties served: 6;
Total contract value: $3,384,006;
Percentage drawn down: 38%;
Homes to be weatherized: 468;
Homes weatherized through June: 130;
Percentage of homes weatherized: 28%.
Service provider: Partnership for Community Action, Inc.;
Counties served: 3;
Total contract value: $6,926,773;
Percentage drawn down: 23%;
Homes to be weatherized: 956;
Homes weatherized through June: 262;
Percentage of homes weatherized: 27%.
Service provider: City of Albany;
Counties served: 1;
Total contract value: $1,546,104;
Percentage drawn down: 28%;
Homes to be weatherized: 209;
Homes weatherized through June: 55;
Percentage of homes weatherized: 26%.
Service provider: Gwinnett County Board of Commissioners;
Counties served: 1;
Total contract value: $3,284,888;
Percentage drawn down: 18%;
Homes to be weatherized: 461;
Homes weatherized through June: 118;
Percentage of homes weatherized: 26%.
Service provider: Heart of Georgia Community Action Council, Inc.;
Counties served: 9;
Total contract value: $2,764,125;
Percentage drawn down: 33%;
Homes to be weatherized: 379;
Homes weatherized through June: 91;
Percentage of homes weatherized: 24%.
Service provider: North Georgia Community Action, Inc.;
Counties served: 10;
Total contract value: $5,471,460;
Percentage drawn down: 19%;
Homes to be weatherized: 752;
Homes weatherized through June: 184;
Percentage of homes weatherized: 24%.
Service provider: Overview, Inc.;
Counties served: 7;
Total contract value: $2,463,271;
Percentage drawn down: 33%;
Homes to be weatherized: 340;
Homes weatherized through June: 82;
Percentage of homes weatherized: 24%.
Service provider: Middle Georgia Community Action Agency, Inc.;
Counties served: 12;
Total contract value: $6,358,846;
Percentage drawn down: 35%;
Homes to be weatherized: 870;
Homes weatherized through June: 200;
Percentage of homes weatherized: 23%.
Service provider: Clayton County Community Action Authority, Inc.;
Counties served: 3;
Total contract value: $3,250,251;
Percentage drawn down: 18%;
Homes to be weatherized: 452;
Homes weatherized through June: 88;
Percentage of homes weatherized: 19%.
Service provider: Community Action for Improvement, Inc.;
Counties served: 6;
Total contract value: $4,138,220;
Percentage drawn down: 29%;
Homes to be weatherized: 569;
Homes weatherized through June: 108;
Percentage of homes weatherized: 19%.
Service provider: Area Committee to Improve Opportunities Now, Inc.;
Counties served: 10;
Total contract value: $5,010,500;
Percentage drawn down: 20%;
Homes to be weatherized: 687;
Homes weatherized through June: 125;
Percentage of homes weatherized: 18%.
Service provider: Southeast Energy Assistance;
Counties served: 1;
Total contract value: $8,196,838;
Percentage drawn down: 31%;
Homes to be weatherized: 1,112;
Homes weatherized through June: 157;
Percentage of homes weatherized: 14%.
Service provider: Enrichment Services Program, Inc.;
Counties served: 8;
Total contract value: $3,758,994;
Percentage drawn down: 21%;
Homes to be weatherized: 512;
Homes weatherized through June: 64;
Percentage of homes weatherized: 13%.
Service provider: Central Savannah River Area EOA, Inc.;
Counties served: 13;
Total contract value: $7,000,302;
Percentage drawn down: 18%;
Homes to be weatherized: 962;
Homes weatherized through June: 91;
Percentage of homes weatherized: 9%.
Service provider: Ninth District Opportunity, Inc.;
Counties served: 14;
Total contract value: $8,837,469;
Percentage drawn down: 14%;
Homes to be weatherized: 1,223;
Homes weatherized through June: 95;
Percentage of homes weatherized: 8%.
Service provider: Total;
Counties served: 160;
Total contract value: $99,663,006;
Percentage drawn down: 26%;
Homes to be weatherized: 13,617;
Homes weatherized through June: 3,017;
Percentage of homes weatherized: 22%.
Source: GAO analysis of GEFA data.
Note: Georgia has 159 counties. However, both Albany and Southwest
Georgia Community Action Council, Inc. serve portions of Dougherty
County.
[End of table]
According to GEFA officials, seven providers are on a list of
underperforming agencies because these providers have not met
production goals.[Footnote 32] These providers were issued warning
letters in which GEFA explained the steps it would consider taking if
production did not increase, such as (1) reducing the funding level to
the provider and providing unexpended dollars to another provider or
(2) reducing the funding to the subgrantee and providing the dollars
on a competitive basis to a qualified nonprofit to serve the defined
geographic territory.
GEFA and Selected Service Providers Have Taken Steps to Address Issues
We Previously Identified:
In our May 2010 report, we identified several issues related to the
Weatherization Assistance Program in Georgia.[Footnote 33] We reported
that oversight of the providers had been slow to start and some
monitoring positions remained vacant. In addition, we noted instances
in which the three providers we visited inconsistently followed DOE
and GEFA guidance for prioritizing clients for service, determining
client eligibility, prioritizing work, and awarding contracts. GEFA
and the three providers have taken steps to address these issues.
First, GEFA worked with the University of Georgia Cooperative
Extension (UGA), the entity it hired to perform monitoring, to ensure
that all of the providers had monitors assigned to them and to refine
their monitoring reports.[Footnote 34] According to GEFA officials,
each of the 22 providers had been assigned a desk and field monitor as
of July 2010. In some cases this was achieved by assigning multiple
agencies to one monitor. In addition, UGA officials started including
summary reports in the monthly monitoring report that (1) rated each
provider as very good, good, or unacceptable in 17 areas, such as file
documentation, subcontractor administration, and program and financial
reporting and (2) described any issues of significant concern.
According to GEFA officials, they review the monitoring reports
provided by UGA to identify any findings that need to be addressed by
the providers. If findings are identified, GEFA requests a corrective
action plan from the provider within 15 days.
Second, GEFA has implemented a Web-based reporting tool that helps
providers prioritize clients for service. The tool prioritizes
applicants based on characteristics such as age (households with
people under 12 or over 60), disability status, high energy use or
burden, and poverty. Third, GEFA offered procurement training for
providers in May 2010 after identifying the need for more education in
this area. The training covered topics such as requests for proposal,
solicitations and advertising, document retention, and reporting
requirements.
The three providers we visited also have taken steps to address issues
identified in our May 2010 report. For example,
* According to Albany officials, they have revised their contracts to
include language requiring compliance with Recovery Act provisions,
including Davis-Bacon Act prevailing wages.[Footnote 35] In addition,
Albany has amended its application review procedures to include a new
checklist for assessing income eligibility that requires the review of
additional income documentation, such as tax returns.[Footnote 36]
* EOA-Savannah officials told us that they are revising their process
for awarding contracts to install heating systems and perform
electrical work. Rather than continuing to rely on a group of
preferred vendors with which they had negotiated prices, they plan to
solicit bids from a larger group of contractors on an ongoing basis.
* To speed up the production process, Ninth District officials stated
they have revised the way they procure contractor services. Ninth
District now awards contracts to several general contractors and then
competes the work required on each home amongst those general
contractors. Since implementing this process in July 2010, Ninth
District officials have awarded contracts for 60 homes and plan to
increase the number of contracts in the coming months.
GEFA Has Conducted Training and Developed a Tool to Help Providers
Meet Recipient Reporting Requirements:
GEFA is responsible for submitting the quarterly recipient report for
the Weatherization Assistance Program that is required under the
Recovery Act. In this report, it includes financial information and
the number of jobs funded by Recovery Act awards. To help its 22
providers supply the required information, GEFA offered training and
developed a Web-based tool. The training covered topics such as how to
calculate FTEs for reporting the number of jobs funded by Recovery Act
awards. The electronic tool pre-populates fields with award and
financial data to help ensure accuracy and consistency. To determine
the number of jobs funded, the three providers we interviewed told us
they rely on payroll information from their accounting systems and
certified payrolls from their contractors to calculate the FTEs.
Ninth District and Albany have procedures in place to review the data
before they are submitted to GEFA;
however, EOA-Savannah does not. For example, according to Ninth
District officials, the Executive Director reviews the recipient
report prepared by the weatherization coordinator prior to submission
to GEFA. GEFA also has developed procedures to assess the accuracy of
the information submitted. First, each provider is required to certify
its submission. Then, GEFA reviews the information for reasonableness.
For the most recent reporting period (April 1 to June 30), GEFA
officials told us they contacted all 22 providers to discuss their
submissions, which resulted in some changes to providers' job
calculations.
Georgia Has Made Progress in Implementing Its Tax Credit Assistance
and Section 1602 Programs:
The Recovery Act established two funding programs that provide capital
investments in low-income housing tax credit projects: (1) the Tax
Credit Assistance Program (TCAP) administered by HUD and (2) the
Section 1602 Program administered by the U.S. Department of the
Treasury (Treasury).[Footnote 37] Before the credit market was
disrupted in 2008, the low-income housing tax credit program provided
substantial financing in the form of third-party investor equity for
affordable rental housing units. As the demand for tax credits
declined, so did the prices investors were willing to pay for them,
which created funding gaps in projects that had received tax credit
allocations in 2007 and 2008. TCAP and the Section 1602 Program were
designed to fill financing gaps in planned tax credit projects and
jump-start stalled projects.
Georgia Expects to Meet Spending Deadlines for TCAP and the Section
1602 Program:
Georgia received about $54.5 million in TCAP funds. As of July 31,
2010, the Georgia Department of Community Affairs (DCA)--which
administers the low-income housing tax credit program--had approved
TCAP funding for eight projects containing 1,140 units (including
1,046 tax credit units). For these eight projects, Georgia had
committed about $49.5 million (91 percent) and disbursed about $20.8
million (38 percent). Under the Recovery Act, state housing finance
agencies must disburse 75 percent of TCAP funds by February 2011, and
project owners must spend all of their TCAP funds by February 2012.
The housing finance agency must return any funds not expended by this
deadline to HUD. DCA plans to commit the remainder of its TCAP funds
by the end of September 2010 and expects to meet the deadline for
disbursing 75 percent of its TCAP funds.
Georgia also received about $195.6 million in Section 1602 Program
funds. As of July 31, 2010, DCA had approved Section 1602 Program
funding for 31 projects containing 2,086 units (including 1,847 tax
credit units). For these projects, Georgia had committed about $178.3
million (91 percent) and disbursed about $62.7 million (32 percent).
Under Section 1602 Program rules, all subawards must be made by
December 2010, or the housing finance agency must return the funds to
Treasury. Housing finance agencies can continue to disburse funds for
committed projects through December 31, 2011, provided that the
project owners spend at least 30 percent of eligible project costs by
December 31, 2010.[Footnote 38] Housing finance agencies must disburse
100 percent of Section 1602 Program funds by December 2011. DCA plans
to award the remainder of its Section 1602 Program funds by the end of
September 2010 and expects project owners to meet the 30 percent
spending deadline.
We reviewed documentation on or visited three TCAP projects and four
Section 1602 Program projects.[Footnote 39] Table 2 provides
information on the progress of each project. The owners of Baptist
Towers Apartments and Riverview Heights had spent 100 percent and 97
percent of their TCAP funds, respectively. The project owner at
Baptist Towers Apartments expected the renovations of the high-rise
for the elderly and disabled to be finished ahead of the planned
December 2010 completion date.[Footnote 40] The project owner at
Riverview Heights expected the renovation of the property to be
completed in October 2010. DCA officials explained that the closing on
TCAP funds for the second phase of Sustainable Fellwood had been
delayed several times due to factors such as the need to attract
additional investors. DCA and the project owner expect to meet the
February 2012 expenditure deadline.
Table 2: Status of Selected TCAP and Section 1602 Program Projects in
Georgia, as of July 31, 2010:
Project name: Baptist Towers Apartments, Atlanta;
Type of funding: TCAP;
Recovery Act funds committed: $1,850,000;
Percentage of Recovery Act funds disbursed: 100%;
Recovery Act funds as percentage of total project costs: 11%;
Number of housing units (tax credit units/total units): 268/300;
Project description: Urban; Rehabilitation; Housing for elderly;
Expected placed in service date: December 2010.
Project name: Riverview Heights (also known as Oconee Park), Dublin;
Type of funding: TCAP;
Recovery Act funds committed: $8,311,921;
Percentage of Recovery Act funds disbursed: 97;
Recovery Act funds as percentage of total project costs: 69%;
Number of housing units (tax credit units/total units): 115/116;
Project description: Rural; Rehabilitation; Housing for families;
Expected placed in service date: December 2010.
Project name: Sustainable Fellwood, Phase II, Savannah;
Type of funding: TCAP;
Recovery Act funds committed: $4,300,000;
Percentage of Recovery Act funds disbursed: 0;
Recovery Act funds as percentage of total project costs: 28;
Number of housing units (tax credit units/total units): 99/110;
Project description: Urban; New construction; Housing for families;
Expected placed in service date: December 2011.
Project name: Antigua Place, Moultrie;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $2,102,746;
Percentage of Recovery Act funds disbursed: 100%;
Recovery Act funds as percentage of total project costs: 39;
Number of housing units (tax credit units/total units): 36/40;
Project description: Rural; New construction; Housing for ages 55 and
older;
Expected placed in service date: December 2010.
Project name: Camellia Lane, Sandersville;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $8,348,674;
Percentage of Recovery Act funds disbursed: 68%;
Recovery Act funds as percentage of total project costs: 96;
Number of housing units (tax credit units/total units): 52/52;
Project description: Rural; New construction; Housing for ages 55 and
older;
Expected placed in service date: December 2010.
Project name: The Landing at Southlake, Albany;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $5,125,000;
Percentage of Recovery Act funds disbursed: 35%;
Recovery Act funds as percentage of total project costs: 98;
Number of housing units (tax credit units/total units): 36/40;
Project description: Urban; New construction; Housing for ages 55 and
older;
Expected placed in service date: December 2010.
Project name: Waterford Estates, Dublin;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $9,500,000;
Percentage of Recovery Act funds disbursed: 23%;
Recovery Act funds as percentage of total project costs: 93;
Number of housing units (tax credit units/total units): 50/56;
Project description: Rural; New construction; Housing for families;
Expected placed in service date: December 2010.
Source: DCA.
Note: The placed in service date for a new or existing building used
as residential rental property is the date on which the building is
certified as being suitable for occupancy in accordance with state or
local law.
[End of table]
According to DCA, the four Section 1602 Program projects we reviewed
were on target to meet the program's requirement that project owners
spend at least 30 percent of eligible project costs by December 31,
2010. For example, the Camellia Lane project owner had spent 68
percent of the Section 1602 Program funds and planned to complete the
project in November 2010. Since our initial visit in March 2010,
progress has been made in several areas, including the installation of
rooftop solar panels to power the exterior lights on the property and
construction of the community center (see fig. 6). This project also
will provide geothermal heating and cooling.
Figure 6: New Construction at Camellia Lane:
[Refer to PDF for image: 2 photographs]
Figure 6 shows pictures of new construction at Camellia Lane. The
picture on the left shows the exterior of a new two-story brick
apartment building with rooftop solar panels to power the exterior
lights on the property. The picture on the right shows the interior of
a new community center under construction. The picture shows a large
open activity room with a trey ceiling and large bay windows.
Source: GAO.
[End of figure]
Georgia Has Plans for Construction Oversight and Asset Management:
TCAP and the Section 1602 Program require a greater project oversight
role for state housing finance agencies than the standard low-income
housing tax credit program. Under the low-income housing tax credit
program, housing finance agencies are not required to monitor
construction on a monthly basis, but are required to report that
projects are completed and occupied in accordance with program
requirements and deadlines. With respect to long-term monitoring under
the program, housing finance agencies are required to review projects
at least annually to determine project owner compliance with tenant
qualifications and rent and income limits. Additionally, every 3
years, agencies must conduct on-site inspections of all buildings in
each project and inspect at least 20 percent of the tax credit units
and resident files associated with those units. However, under TCAP
and the Section 1602 Program, housing finance agencies must monitor
the disbursement and use of funds throughout the construction period.
Also, housing finance agencies are obligated to perform asset
management, which imposes ongoing responsibilities on the agencies for
the long-term viability of each project.[Footnote 41] Housing finance
agencies are responsible for returning TCAP and Section 1602 Program
funds to HUD and Treasury, respectively, if a project fails to comply
with low-income housing tax credit program requirements.[Footnote 42]
DCA has processes in place for oversight during the construction
period and has made plans for asset management over the 15-year tax
credit compliance period. For oversight during the construction
period, DCA has contractors that conduct monthly inspections of each
project. The resulting inspection reports include descriptions of any
funding requests and change orders, site observations, and comments on
the schedule. After the agency receives inspection reports, DCA staff
stated they compare expenditure rates to the percentage of
construction completed. DCA staff also review all costs included in
funding requests, and an on-site inspection is required before DCA
will process a funding request. DCA also requires each general
contractor to provide a cost certification prepared by a certified
public accountant at project completion.
Prior to TCAP and the Section 1602 Program, DCA had an asset
management department that managed a multifamily portfolio consisting
of 206 projects with investments and loans totaling about $247
million. To cover the costs of the new asset management requirements
under the Recovery Act, DCA charged a 3 percent asset management fee
for TCAP and Section 1602 Program projects. DCA issued new policy
guidelines to recipients of TCAP and Section 1602 Program awards that
detail the types of asset management activities that may be performed
at various stages of projects that receive TCAP or Section 1602
Program funds.[Footnote 43] For example, DCA plans to review marketing
plans, leasing procedures, and occupancy rates; review project
financial management for proper budgeting, accounting, and internal
controls; and conduct periodic long-term viability analyses such as
the project cash flow and market conditions. Moreover, DCA stated it
plans to modify one of its databases to assist in tracking asset
management and compliance information for TCAP and Section 1602
Program projects.
For projects without an investor, DCA will be responsible for
overseeing all asset management activities. Of the 39 projects in
Georgia, 24 (62 percent) do not have an investor or syndicator.
[Footnote 44] According to DCA officials, the participation of a
private investor adds an additional layer of oversight because
investors have an incentive to protect their capital investments by
performing asset management. DCA has not yet decided if it will
contract out some or all of its asset management functions, but plans
to make a final decision on its approach by the end of 2010. Although
officials stated that DCA has more asset management experience than
some state housing finance agencies, they may consider contracting out
some functions because so few of their Recovery Act projects have
investors.
The Low-Income Housing Tax Credit Market in Georgia Has Slowly Been
Recovering:
DCA officials noted that the low-income housing tax credit market in
Georgia has slowly been recovering. In one sign of improvement,
investors have been willing to pay more for the tax credits. According
to DCA and investors, the typical projects that currently are funded
are straightforward, located in urban areas, and provide housing for
families and seniors. DCA officials stated projects located in rural
areas remained difficult to finance and Section 1602 Program funds
still were needed for those types of projects. The two investors and
three project owners we interviewed stated there was a need to extend
the Section 1602 Program for at least 1 more year to help the low-
income housing tax credit market in these areas.
Georgia Has Submitted Required Reports on Jobs Funded:
DCA is required to report information on jobs funded with Recovery Act
awards to HUD and Treasury. DCA officials believe HUD and Treasury
provided adequate guidance to them on preparing the necessary reports,
but they did not believe current reporting systems adequately captured
the true economic benefits from Recovery Act funds. For TCAP projects,
housing finance agencies are required to report the nature of projects
and number of jobs funded via FederalReporting.gov. Recipients of
Section 1602 Program funds are not required to report jobs to
FederalReporting.gov.[Footnote 45] Treasury requires state housing
finance agencies to submit quarterly financial status reports and
performance reports and to report the number of construction and non-
construction jobs created and retained. To help its TCAP subrecipients
comply with recipient reporting requirements, DCA conducted training
and provided guidance. The guidance requires subrecipients to
calculate the hours worked on a monthly basis by entering data into
HUD's job calculator tool. Once subrecipients have submitted the data,
a DCA staff person reconciles the job data submitted by comparing it
with Davis-Bacon payroll reports compiled by project owners.
DCA officials believed that only a fraction of the jobs created and
retained with Recovery Act funds were captured. For example, $2
million in TCAP funds could enable an $8 million project to be
constructed that would not otherwise have been built, but only the
jobs directly related to the $2 million TCAP expenditure would be
reported. Moreover, one project owner stated the number of jobs he
reported on his TCAP project was significantly lower than what he
reported for his Section 1602 Program project, but the amount of work
being performed was the same.[Footnote 46]
Housing Agencies in Georgia Continue to Make Progress on Projects
Funded with Recovery Act Formula and Competitive Grants:
In Georgia, 184 public housing agencies received Public Housing
Capital Fund formula grants, and 5 public housing agencies received
Public Housing Capital Fund competitive grants. As of August 7, 2010,
agencies had expended about 55 percent of their formula grants. The
agencies that received competitive grants were expected to meet the
Recovery Act's September 2010 obligation deadline.
Housing Agencies in Georgia Have Spent Over Half of Their Formula
Grant Funds:
In Georgia, 184 public housing agencies received about $113 million in
Public Housing Capital Fund formula grants (see fig. 7). These grant
funds were provided to the agencies to improve the physical condition
of their properties. As of August 7, 2010, these agencies had
obligated 100 percent of their funds and drawn down about $62 million
(about 55.1 percent). Of the 184 agencies, 112 had drawn down 80
percent to 100 percent of their funds while 2 had not drawn down any
funds. We interviewed three: the Housing Authority of the City of
Athens (Athens Housing Authority), the Housing Authority of the City
of Atlanta (Atlanta Housing Authority), and the Housing Authority of
the City of Macon (Macon Housing Authority).[Footnote 47]
Figure 7: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Had Been Obligated and Drawn Down in Georgia, as
of August 7, 2010:
[Refer to PDF for image: 3 pie-charts; horizontal bar graph]
Funds obligated by HUD: $112,675,806 (100%);
Funds obligated by public housing agencies: $112,675,806 (100%);
Funds drawn down by public housing agencies: $62,047,869.
Number of public housing agencies:
Were allocated funds: 184;
Obligated 100% of funds: 184;
Have drawn down funds: 182.
Source: GAO analysis of data from HUD's Electronic Line of credit
Control System.
[End of figure]
Athens Housing Authority:
The Athens Housing Authority received about $2.6 million in Recovery
Act formula grant awards. As of August 7, 2010, the housing agency had
obligated all of its funds and drawn down approximately $2.1 million
(81 percent). The agency's largest Recovery Act project is a
comprehensive modernization of 25 scattered site housing units, which
includes asbestos and lead abatement and the installation of new
windows, doors, cabinets, appliances, water heaters, and heating and
air systems. Figure 8 shows a unit prior to renovation and
improvements made to another unit's heating and air systems and
kitchen. The housing agency expects this project to be completed in
September 2010. The agency also has designated Recovery Act funds to
replace the roofs on 40 units and the two elevators in a senior high
rise, among other things.
Figure 8: Athens Housing Authority's Renovation of Scattered Site
Units:
[Refer to PDF for image: 4 photographs]
Figure 8 shows before and after pictures of units renovated by the
Athens Housing Authority. On the top, there are pictures of a unit
prior to renovation that show the original single space heater and
outdated kitchen. The bottom pictures of a renovated unit show the new
heater and modernized kitchen, which includes new cabinets,
appliances, and countertops, among other things.
Source: GAO.
[End of figure]
Atlanta Housing Authority:
The Atlanta Housing Authority received about $26.6 million in Recovery
Act formula grant awards. As of August 7, 2010, the housing agency had
obligated all of its funds and drawn down approximately $4.1 million
(15 percent). The Atlanta Housing Authority plans to use about $20.6
million of its Recovery Act funds to rehabilitate 13 properties
containing a total of 1,953 units and the remaining $6 million to
demolish 4 properties. The agency originally planned to use about $19
million for rehabilitation and about $8 million for demolition.
However, when the procurement for the demolition came in almost $2
million under the estimated cost, additional funds were made available
for the rehabilitation of the 13 properties. The agency has completed
its original design plans for the 13 properties and expects to
complete its plans for spending the additional $2 million by October
30, 2010. The work will include renovations to common areas and
exterior and site improvements. Renovations are expected to be
completed on all the properties by August 2011.
Macon Housing Authority:
The Macon Housing Authority received about $4.8 million in Recovery
Act formula grant awards. As of August 7, 2010, the housing agency had
obligated all of its funds and drawn down approximately $2.3 million
(about 49 percent). The agency plans to use all of these funds to
complete a major rehabilitation of a 250-unit housing development
called Pendleton Homes. The planned work includes remodeling the
bathrooms and kitchens; replacing appliances, windows, doors, and
flooring; repainting; improving landscaping; and resurfacing parking
lots and streets (see figure 9). As of August 6, 2010, 81 units had
been completed and others were undergoing renovation.
Figure 9: Renovated Kitchen at Pendleton Homes:
[See PDF for image: photograph]
Figure 9 is a picture of a remodeled kitchen with new countertops,
cabinets, flooring, and paint at Pendleton Homes.
Source: GAO.
[End of figure]
HUD Expects Housing Agencies in Georgia to Meet the Obligation
Deadline for Competitive Grants, but the Macon Housing Authority Faces
Challenges:
In Georgia, five public housing agencies received about $14 million in
Public Housing Capital Fund competitive grants for the creation of
energy-efficient communities and improvements to address the needs of
the elderly or persons with disabilities.[Footnote 48] As of August 7,
2010, four of the five agencies had obligated about $1.1 million
(approximately 8 percent) and had drawn down $523,956 (about 4
percent).
The Recovery Act requires housing agencies to obligate 100 percent of
their Public Housing Capital Fund competitive grants within 1 year of
the date they received the grants, or by September 2010. To help
public housing agencies in Georgia meet this deadline, two HUD field
office staff in Atlanta are providing assistance through e-mails and
phone conversations. According to HUD field office staff, the five
public housing agencies that received competitive funds are not at
serious risk of missing the obligation deadline. However, officials
stated that the Macon Housing Authority faced some challenges in
meeting this deadline due to the complexity of the project and
multiple types of financing involved. The project requires the
approval of HUD headquarters, the state housing finance agency, and
others and is not expected to close until just prior to the September
2010 deadline.
We visited the Macon Housing Authority to determine the status of its
competitive grant. The agency will use the $8.6 million grant awarded
under the energy efficiency community category for substantial
rehabilitation of a 100-unit housing development. Agency plans include
wrapping the exterior of the buildings in a rigid insulation system
covered with siding; re-engineering the roof with a higher pitch to
allow for more insulation and more efficient duct work for heating and
air systems; and installing energy-efficient windows and heating and
air systems and water-conserving appliances and fixtures. Also, the
units will be reconfigured to reposition doors and windows to give the
appearance of single-family houses. The agency had planned to start
the work in April 2010 and complete it by December 2011. However,
officials told us the construction start date has been delayed due to
complications in getting the complex financing--which includes
competitive grant funds, bonds, and low-income housing tax credits--
approved. Officials stated that once the agency closes on the
financing in mid-September 2010, the project will be 100 percent
obligated. To date, the agency has hired architects and various
consultants, designed the project, selected the general contractor,
and received the first round of project bids. After the agency closes
on the financing, officials stated they will be prepared to
simultaneously issue a notice to proceed and sign the general
contractor's contract.
HUD Field Office Staff Have Conducted Monitoring of Recovery Act
Grants:
HUD field office staff in Atlanta have conducted oversight of Recovery
Act formula and competitive grants. For the formula funds, they
conducted 63 "quick look" reviews of public housing agencies that had
not obligated 90 percent of their funds as of February 26, 2010. They
wanted to ensure that funds obligated after that date, but before the
March 17, 2010, obligation deadline for formula grants, were for
eligible activities. According to HUD officials, these agencies all
met the obligation deadline for formula grants and accurately
completed contract activities per HUD and Recovery Act requirements.
For the competitive funds, staff told us they had conducted remote
reviews of obligations at four of the agencies. HUD headquarters staff
will perform the remote review of the Macon Housing Authority. HUD
field office officials stated that the additional oversight
requirements associated with the Recovery Act programs had not
affected their ability to meet their responsibilities for oversight,
monitoring, and technical assistance for regular capital fund
management. Similarly, the receipt of Recovery Act funds does not
appear to have affected the ability of housing agencies in Georgia to
obligate their regular capital funds. According to HUD officials, all
but one agency in Georgia met the June 12, 2010, obligation deadline
for 2008 regular capital funds. The Housing Authority of the City of
Savannah received a 1-year extension due to a loss of a major
financial commitment. HUD headquarters determined that this event was
beyond the control of the agency and granted the extension.
Housing Agencies Have Reported Jobs Funded with Recovery Act Grants:
The three public housing agencies we interviewed have submitted the
quarterly recipient reports required under the Recovery Act. To
determine the number of jobs funded, officials at the agencies told us
they rely on certified payrolls from their contractors to calculate
FTEs. All three agencies had procedures in place to review data prior
to submission. Atlanta Housing Authority officials explained that
three staff, including the chief operating officer, review the report
before submission to FederalReporting.gov. According to Macon Housing
Authority officials, the Director of Technical Services reviews the
information prior to submission. Athens Housing Authority officials
stated that the financial data are reviewed by two staff prior to
submission.
Georgia's Accountability Community Continues to Audit Recovery Act
Funding:
The State Auditor, the State Inspector General, and agencies' internal
audit departments continue to be responsible for auditing and
investigating Recovery Act funds. As we reported in May 2010, the
State Auditor's oversight of Recovery Act funds occurs primarily
through the Single Audit.[Footnote 49] The fiscal year 2009 Single
Audit was the first Single Audit for Georgia that included Recovery
Act programs.[Footnote 50] It identified 51 significant internal
control deficiencies related to compliance with federal program
requirements, of which 14 were classified as material weaknesses. Some
of these material weaknesses and significant deficiencies occurred in
programs that included Recovery Act funds. For the fiscal year 2010
Single Audit report, the State Auditor plans to include audits of
Recovery Act programs administered by GEFA and the Georgia Departments
of Community Affairs, Community Health, Corrections, Education, Human
Services, Juvenile Justice, Labor, and Transportation.
The State Inspector General continues to take a complaint-based
approach to investigating alleged misuse of Recovery Act funds.
Citizens can submit complaints directly to the Inspector General using
a form on its Web site. Since we last reported in May 2010, the office
has received two complaints--one that was resolved without a finding
of fraud, waste, abuse, or corruption and one that is still under
investigation. In addition, each state agency is required to notify
the Inspector General when a complaint is filed with the agency. For
example, GEFA has received five complaints about the weatherization
program, which involved issues such as potential fraud and hiring
practices. In response to one of the fraud complaints, GEFA required a
community action agency to return approximately $9,000 to the state
because the agency had been reimbursed for office furniture that was
not received. The State Inspector General reviewed these complaints
and GEFA's responses and was satisfied with the actions taken.
A number of state agencies including GEFA and the Georgia Departments
of Community Health, Education, Human Services, and Transportation
have internal audit departments that plan to audit or are already
auditing Recovery Act funds. For example, GEFA conducts fiscal audits
that focus on the contractual, administrative, and accounting aspects
of the Weatherization Assistance Program. As of August 6, 2010, GEFA
had issued fiscal monitoring reports that identified risk and control
weaknesses at two of its weatherization service providers. One report
included five recommendations related to procurement practices and
liability insurance, among other concerns. The second report included
four recommendations related to procurement and billing, among other
activities. Both providers agreed with the recommendations and planned
to make the suggested changes. In addition, the Department of
Community Health's internal audit department reviewed the agency's
first round of recipient reporting. The auditors identified
information that appeared to be missing or duplicated across programs
and required the agency to provide explanations.
The State Accounting Office (SAO) continues to monitor Recovery Act
funding. For example, it oversees Recovery Act recipient reporting by
providing state agencies with technical assistance, reviewing the data
each state agency submits, and collecting the data required for the
state's Recovery Act Web site. SAO holds periodic implementation team
meetings with agency officials responsible for recipient reporting to
disseminate guidance and discuss deadlines, processes, and other
issues related to the reports. Each quarter, SAO requires state
agencies to submit copies of their recipient reports so that the
office can review them for reasonableness and potential inaccuracies.
After the review period, SAO reconciles the data it received from
agencies against information posted on Recovery.gov and supplies the
data needed to populate the state's Recovery Act Web site. According
to SAO officials, state agencies generally are comfortable with the
reporting process and said that they experienced no challenges related
to the most recent reporting round.
In addition, SAO has launched an internal control initiative to
enhance accountability for Recovery Act funds that began in June 2010
and provided internal control training to 28 state agencies.[Footnote
51] According to SAO officials, many of these agencies were identified
as high-risk in the fiscal year 2009 Single Audit and have received
Recovery Act funds. After the training, each agency was required to
identify an internal control officer. In addition, each agency had to
complete an internal control self assessment tool, which covered
internal controls in place for six general areas, such as financial
reporting, revenue, and Recovery Act funds. Furthermore, SAO plans to
hold monthly group meetings with the internal control officers similar
to those held with the state officials responsible for recipient
reporting. The selected agencies also will be required to certify that
all necessary controls are in place and working by the end of fiscal
year 2011. According to SAO, it has identified two state agencies--the
Departments of Education and Human Services--to work with a consultant
on an in-depth risk-assessment initiative. SAO plans to leverage the
results of the initiative with other state agencies. SAO also plans to
work with the federal Recovery Accountability and Transparency Board
to conduct two regional training sessions--one specific to the
Department of Transportation and the other related to Medicaid.
Recovery Act Funds Have Helped Georgia Balance Its Budget and Enabled
Localities to Fund Needed Capital Projects:
Georgia has incorporated Recovery Act funding into its budget for
fiscal year 2011, but also has planned future budget reductions in
anticipation of the end of funding under the Recovery Act. Localities
we visited began receiving Recovery Act funds, and they had varying
budget situations.
Georgia Used Almost $2 Billion in Recovery Act Funds to Balance Its
Fiscal Year 2011 Budget:
Georgia's budget for fiscal year 2011 is $38.2 billion.[Footnote 52]
It includes approximately $1.9 billion in Recovery Act funds,
including about $749 million in increased Medicaid Federal Medical
Assistance Percentage (FMAP) grant awards.[Footnote 53] Georgia is
preparing for the cessation of Recovery Act funds by planning
additional budget reductions. The budget office has issued budget
instructions directing agencies to submit 6, 8, and 10 percent
reduction plans for fiscal year 2012. For the Georgia Department of
Education's primary elementary education funding formulas, the budget
reduction plans are 2 and 4 percent. Also, the state is projecting
moderate revenue growth. Revenue collections improved in June 2010 by
3.8 percent compared to June 2009, but overall revenue collections for
fiscal year 2010 were down 9.1 percent compared with fiscal year 2009.
Recovery Act Funds Have Helped Selected Localities in Georgia Fund
Additional Projects:
We visited two local governments--the Columbus Consolidated Government
(Columbus/Muscogee County) and the Unified Government of Athens-Clarke
County--to discuss their use of Recovery Act funds and fiscal
condition.[Footnote 54]
Columbus Consolidated Government:
According to consolidated government officials, Columbus had been
awarded about $17.5 million in Recovery Act funds as of August 6, 2010
(see figure 10).[Footnote 55] The largest award was a $3.4 million
transportation grant for a pedestrian bridge. The consolidated
government also was awarded funds under the Transit Capital Assistance
Program, Homelessness Prevention and Rapid Re-housing Program, and the
EECBG Program, among others. According to Columbus officials, the
Recovery Act funds have helped the capital fund budget to a great
extent by allowing the consolidated government to continue
implementing or accelerate projects that otherwise would have been
delayed. For example, the government's transit operator will be able
to replace seven buses that had met or exceeded their recommended
life. Columbus officials stated that most of the projects funded by
the Recovery Act were one-time projects and therefore it was not
necessary to develop a strategy for winding down their use of the
funds. Columbus plans to continue funding infrastructure projects
through its normal funding streams for transportation projects
(state/federal) and the Local Option Sales Tax.
Figure 10: Columbus Consolidated Government Profile and Recovery Act
Funds:
[Refer to PDF for image: map, pie-chart and associated data]
Demographics:
Estimated population (2009): 190,414;
Unemployment rate (June 2010): 9.7%;
FY11 budget: (change from FY10): $280 million (19.22%);
Locality type: Consolidated city/county.
Recovery Act funding reported by Columbus Consolidated Government:
Awarded: $17,538,138;
Application pending: $30,000,000;
Not awarded: $30,854,232;
Total: $78,392,370.
Sources: (Left) U.S. Census Bureau data;
U.S. Department of Labor, Bureau of Labor Statistics, Local Area
Unemployment Statistics; budget documents; and Art Explosion (map).
(Right) Columbus officials.
Note: The population is from the latest available estimate, July 1,
2009. The unemployment rate is a preliminary estimate for June 2010
and has not been seasonally adjusted. The rate is a percentage of the
labor force. Estimates are subject to revision. Percentages do not add
to 100 due to rounding.
[End of figure]
Columbus had a balanced fiscal year 2011 budget of about $280 million.
To balance its budget, Columbus officials delayed some projects,
capital items, and pay increases.
According to officials, Columbus formed a cross-departmental team--
comprised of a deputy city manager, the finance director, the internal
auditor, and the heads of the departments that received funding--that
provides regular oversight of Recovery Act funds. In addition, the
finance department reviews Recovery Act expenditures, and the city's
internal auditor plans to audit each Recovery Act program at its
conclusion. To date, the internal auditor has completed one report on
the Workforce Investment Act summer youth program. The auditor
reviewed selected employee records to ensure that the supporting
documentation was sufficient and selected reports sent to governing
agencies for accuracy and completeness. The auditor did not have any
findings or make any recommendations for the program.
Regarding the recipient reporting required by the Recovery Act,
Columbus officials stated that each department and program manager is
responsible for collecting and reporting the information. The cross-
departmental team meets to discuss the reporting process, and each
department provides a copy of the reports to the auditor and grant
accountant. At the conclusion of each project, the auditor reviews the
reports to ensure that they are accurate. Columbus officials stated
that they have had some challenges regarding how to count the jobs
resulting from the bus purchases.[Footnote 56]
Unified Government of Athens-Clarke County:
According to government officials, Athens-Clarke County had been
awarded about $13.3 million in Recovery Act funds as of August 6, 2010
(see figure 11).[Footnote 57] The largest award was a Clean Water
State Revolving Loan Fund Program loan from GEFA totaling $8 million.
[Footnote 58] Other funding came from programs such as the Edward
Byrne Memorial Justice Assistance Grant Program, the Homelessness
Prevention and Rapid Re-housing Program, and the EECBG Program. Athens-
Clarke County officials stated that most of the funding received
allowed them to fund some previously identified projects that had been
delayed due to a lack of funding. The officials also stated that in
identifying and applying for Recovery Act funds, they focused on
grants with limited ongoing funding requirements. Because the three
positions added using Recovery Act funds were temporary positions,
they did not anticipate any future fiscal challenges related to
Recovery Act funds being completely expended.
Figure 11: Unified Government of Athens-Clarke County Profile and
Recovery Act Funding:
[Refer to PDF for image: map, pie-chart and associated data]
Demographics:
Estimated population (2009): 116,342;
Unemployment rate (June 2010): 8.3%;
FY11 budget: (change from FY10): $174 million (-0.63%);
Locality type: Consolidated city/county.
Recovery Act funding reported by Athens-Clarke County: Awarded:
$13,309,705;
Application pending: $0;
Not awarded: $45,728,590;
Total: $59,038,395.
Sources: (Left) U.S. Census Bureau data;
U.S. Department of Labor, Bureau of Labor Statistics, Local Area
Unemployment Statistics;budget documents; and Art Explosion (map).
(Right) Athens-Clarke County officials.
Note: The population is from the latest available estimate, July 1,
2009. The unemployment rate is a preliminary estimate for June 2010
and has not been seasonally adjusted. The rate is a percentage of the
labor force. Estimates are subject to revision.
[End of figure]
Athens-Clarke County has a balanced total fiscal year 2011 budget of
approximately $174 million. To balance the budget, elected officials
increased property taxes, approved 2 furlough days, froze pay for the
second consecutive year, and increased the medical insurance
contributions by staff and retirees. According to officials, Athens-
Clarke County contracts with an external auditing firm, which reviews
the government's basic financial statements. As part of the required
annual financial audit, the auditing firm will review Recovery Act
funding activities. Athens-Clarke County also has an internal auditor
whose mission is to audit the fiscal affairs and operations of various
departments, but the auditor does not currently have plans to review
Recovery Act funding specifically.
Athens-Clarke County officials stated that each department that
received funds is responsible for the recipient reporting required by
the Recovery Act. The Assistant Manager reviews the reports prior to
submission to FederalReporting.gov or the prime recipient if Athens-
Clarke County is a subrecipient of funds. Officials verify that the
information is correctly reported;
however, they do not use the data for public reports or other internal
purposes.
Georgia's Comments on This Summary:
We provided the Governor of Georgia with a draft of this appendix on
August 16, 2010, and a representative from the Governor's office
responded on August 18, 2010. The official agreed with our draft,
stating that it accurately reflects the current status of the Recovery
Act program in Georgia.
GAO Contacts:
Alicia Puente Cackley, (202) 512-7022 or cackleya@gao.gov:
John H. Pendleton, (404) 679-1816 or pendletonj@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Paige Smith, Assistant
Director; Nadine Garrick Raidbard, analyst-in-charge; Waylon Catrett;
Chase Cook; Marc Molino; Daniel Newman; Barbara Roesmann; and David
Shoemaker made major contributions to this report.
[End of section]
Appendix VI Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Georgia), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[3] These organizations include school systems and community action
agencies.
[4] Clarke County School District is located in Athens, Georgia.
Enrichment Services Program, Inc. is located in Columbus, Georgia. We
selected these two grantees because they represented two of the types
of organizations that operate the program--school districts and
community action agencies. We also wanted to visit a grantee that had
operated an Early Head Start program previously (CCSD) and one that
had not (ESP), as well as grantees that received grants that were
larger than the median for Georgia.
[5] Center-based services refer to child development services that are
provided in a child care center. These services are full-or part-day
for 4 or 5 days a week. With home-based services, families receive
weekly home visits and bimonthly group socialization experiences. A
combination program incorporates center-and home-based services.
[6] Quality improvement funds are used for purposes such as facility
upgrades, improving compensation, and increasing the hours of
operation.
[7] In our May report, we stated that the Office of Head Start did not
meet its initial goal to award Early Head Start expansion grants by
the end of fiscal year 2009 due to several factors, contributing to a
low drawdown (spending) rate and shortened start-up periods for some
grantees. See GAO, States' and Localities' Uses of Funds and Actions
Needed to Address Implementation Challenges and Bolster
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-604]
(Washington, D.C.: May 26, 2010).
[8] The Office of Head Start regional offices allocate Early Head
Start expansion awards among budget categories through a Financial
Assistance Award document. Financial Assistance Awards are legally
binding and outline how grantees are expected to spend their funds.
The document states the terms and conditions of the grants, provides
each grantee a grant number and total award amount, and allocates the
funds to budget categories representing different program elements,
such as supplies.
[9] The Office of Head Start requires that grantees forfeit first-year
program funds they have not obligated by September 29, 2010, unless
grantees obtain Office of Head Start approval to carry over funds into
the next program year.
[10] CCSD officials rely on multiple grants from the U.S. Department
of Education to fund many of their current programs.
[11] 45 C.F.R. § 1305.2(b).
[12] Office of Head Start, "Enrollment Frequently Asked Questions"
(grantee guidance on enrollment reporting, last updated on April 22,
2010).
[13] [hyperlink, http://www.gao.gov/products/GAO-10-604].
[14] Both grantees require a client who has expressed interest in
participating in the Early Head Start program to complete an
application. If the client meets eligibility requirements, the client
is asked to complete the enrollment packet, which includes forms and
waivers. Upon completion and approval of the required paperwork, the
client can begin to receive services.
[15] We selected a simple random sample of Early Head Start clients
who were being served with Recovery Act funds.
[16] "Income Eligibility for Enrollment in Head Start and Early Head
Start Programs," memorandum from the Director of the Office of Head
Start, May 10, 2010.
[17] Recovery Act, div. A, § 1512(c), 123 Stat. at 287-88.
[18] EECBG's statutory authorization lists 14 eligible activities for
the EECBG program.
[19] The following communities were eligible for direct grants from
DOE: (1) cities with populations of at least 35,000 or which are one
of the 10 highest-populated cities of the state in which they are
located and (2) counties with a population of more than 200,000 or
which are one of the 10 highest-populated counties of the state in
which they are located.
[20] We selected the three localities we visited based on the amount
of their EECBG allocation. We also made the selection based on the
type of government (that is, city, county, or consolidated city and
county).
[21] GEFA plans to use the remainder of the funds ($1.3 million) for
the administration and oversight of the grant.
[22] DOE required states to award at least 60 percent of their
allocation to communities that did not meet the size requirements to
receive formula funds directly.
[23] Other eligible activities that GEFA was willing to fund included
the development of an Energy Efficiency and Conservation Strategy,
technical assistance, residential and commercial building energy
audits, financial incentive programs, and building codes and
inspections updates. GEFA decided to limit its awards to 8 of the 14
eligible activities for EECBG, based on a survey of communities and
its assessment of projects that would have the greatest return on
investment and a small amount of administrative burden, among other
things.
[24] Cobb County allocated the balance of its award ($204,000) for
grant administration.
[25] As we note later in this report, the community action agency
(ESP) had only weatherized 13 percent of its Weatherization Assistance
Program units as of the end of June 2010.
[26] The total expected cost of the project is $947,000.
[27] Field monitoring will include a review of building improvements
and post-retrofit audits, and a check that the project is following
scope. Desk monitoring will include a review of contracts, a review of
client files for all necessary documents, and a review of compliance
with the Buy American provision of the Recovery Act.
[28] Quarterly reports to DOE include jobs created or retained;
standard programmatic metrics, such as obligations, outlays, and
metrics associated with the activity undertaken; and other critical
metrics such as energy savings and energy cost savings.
[29] The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program, which DOE is distributing to each of the states,
the District of Columbia, and seven territories and Indian tribes, to
be spent by March 31, 2012. This program enables low-income families
to reduce their utility bills by making long-term energy-efficiency
improvements to their homes--for example, installing insulation or
modernizing heating or air conditioning equipment.
[30] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[31] GEFA will use the balance of the $125 million allocation for
monitoring, training, and technical assistance, among other things.
Drawing down is the process by which subrecipients request and receive
authorized federal funds for projects under the terms of the grant.
[32] The seven providers on the list are Central Savannah River Area
EOA, Inc.; Clayton County Community Action Authority, Inc.; Enrichment
Services Program, Inc.; Heart of Georgia Community Action Council,
Inc.; Middle Georgia Community Action Agency, Inc.; Ninth District
Opportunity, Inc.; and Southeast Energy Assistance.
[33] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[34] UGA's desk and field monitors are to conduct weekly visits to
each provider to review file documentation and inspect at least 10
percent of individual projects each month. The desk monitors will
review contracting documents, compliance with program requirements,
and file documentation. In addition, desk monitors will educate
clients on energy saving tips and customer behaviors and track the
results of those efforts. The field monitors will inspect 10 percent
of the homes weatherized each month for overall effectiveness,
workmanship, appearance, and compliance with installation standards.
[35] Historically, the Weatherization Assistance Program funded
through the regular appropriations process has not been subject to the
Davis-Bacon Act. However, the Recovery Act does require compliance
with Davis-Bacon provisions. Under section 1606, division A, of the
Recovery Act, all contractors and subcontractors performing work on
projects funded in whole or in part by Recovery Act funds must pay
their laborers and mechanics not less than the prevailing wage rates
and fringe benefits for corresponding classes of laborers and
mechanics employed on similar projects in the area. The Secretary of
Labor determines the prevailing wage rates and fringe benefits for
inclusion in covered contracts.
[36] In our May report, we noted that files we reviewed did not
include evidence that all of the required types of income were
considered during application. See [hyperlink,
http://www.gao.gov/products/GAO-10-605SP].
[37] State housing finance agencies award low-income housing tax
credits to owners of qualified rental properties who reserve all or a
portion of their units for occupancy by low-income tenants. Once
awarded tax credits, project owners sell them to investors to obtain
funding for their projects. Investors receive tax credits for 10 years
if the property continues to comply with program requirements.
[38] The project owner must have, by the close of 2010, spent at least
30 percent of his or her total adjusted basis in land and depreciable
property that is reasonably expected to be part of the low-income
housing project.
[39] We selected Riverview Heights and Baptist Towers Apartments
because they were TCAP projects that had been awarded by December 31,
2009. We selected Antigua Place because it was a Section 1602 Program
project with a tax-credit investor and The Landing at Southlake
because it was a Section 1602 Program project without an investor. We
selected Camellia Lane because it was a rural green project. In
addition, we selected Sustainable Fellwood because DCA suggested it as
an interesting example of an urban green project and Waterford Estates
because of its proximity to Riverview Heights. For this report, we
visited two of these projects, Riverview Heights and Camellia Lane.
[40] Other funding sources are being used to complete the remainder of
the renovations.
[41] A housing finance agency's asset management may include
monitoring current financial and physical aspects of project
operations. For example, a housing finance agency may analyze
operating budgets, cash flow trends, and reserve accounts, and
physically inspect projects. Asset management activities also include
examinations of long-term issues related to plans for addressing a
project's capital needs, changes in market conditions, and
recommendations and implementation of plans to correct troubled
projects. Housing finance agencies also need to ensure compliance with
tax credit requirements as part of asset management activities.
[42] In contrast, under the conventional low-income housing tax credit
program, housing finance agencies are not liable for recapturing funds
if a project owner fails to comply with program requirements. Rather,
their obligation is to report any noncompliance to the Internal
Revenue Service (IRS), and IRS takes any further actions with respect
to recapture. We reported previously on the risks and responsibilities
of recapture for housing finance agencies under TCAP and the Section
1602 Program. See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[43] The project stages include development and construction
activities, property management and operations, financial management,
and long-term viability assessment.
[44] While TCAP projects are required to have an investor, Section
1602 Program funds can be used to finance projects without investors.
Some project owners sell low-income housing tax credits to an investor
that will invest directly in the project while others use a
syndicator, which assembles a group of investors and pools funds that
are then invested in the project.
[45] Recipient reporting requirements apply only to division A of the
Recovery Act. TCAP is a division A program, while the Section 1602
Program is in division B of the act.
[46] As we noted earlier, TCAP projects are required to report
quarterly the number of jobs funded based on an FTE calculation. For
projects receiving Section 1602 Program funds, Treasury requires state
housing finance agencies to report only one time on jobs created and
retained. The number of jobs reported to Treasury need not be reduced
to reflect the parts of the project not funded under the Section 1602
Program.
[47] We interviewed these three housing agencies to update information
we reported in December 2009. See GAO, Recovery Act: Status of States'
and Localities' Use of Funds and Efforts to Ensure Accountability
(Georgia), [hyperlink, http://www.gao.gov/products/GAO-10-232SP]
(Washington, D.C.: Dec. 10, 2009).
[48] A total of six competitive grants were awarded. One housing
authority, the Housing Authority of the City of Savannah, received two
grants.
[49] [hyperlink, http://www.gao.gov/products/GAO-10-605SP]. Single
Audits are prepared to meet the requirements of the Single Audit Act,
as amended, (31 U.S.C. §§ 7501-7507) and provide a source of
information on internal control and compliance findings and the
underlying causes and risks. The Single Audit Act requires states,
local governments, and nonprofit organizations expending $500,000 or
more in federal awards in a year to obtain an audit in accordance with
the requirements in the act. A Single Audit consists of (1) an audit
and opinions on the fair presentation of the financial statements and
the Schedule of Expenditures of Federal Awards; (2) gaining an
understanding of and testing internal control over financial reporting
and the entity's compliance with laws, regulations, and contract or
grant provisions that have a direct and material effect on certain
federal programs (that is, the program requirements); and (3) an audit
and an opinion on compliance with applicable program requirements for
certain federal programs.
[50] According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing Single Audit results, it
received Georgia's Single Audit reporting package for the year ending
June 30, 2009, on June 24, 2010. This was almost 3 months after the
deadline specified by the Single Audit Act. The State Auditor
explained that they had initially submitted the Single Audit reporting
package to the clearinghouse on March 18, 2010, which was within the
deadline. However, due to a technical issue, the data collection form
(which is part of the reporting package) had to be revised and
resubmitted in June 2010.
[51] SAO also provided the training to several universities and
technical colleges.
[52] The Governor signed the fiscal year 2011 budget on June 4, 2010.
The state's fiscal year begins on July 1.
[53] 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). The
Recovery Act provides eligible states with an increased FMAP for 27
months from October 1, 2008, through December 31, 2010. Recovery Act,
div. B, title V, § 5001, Pub. L. No. 111-5, 123 Stat. at 496. On
August 10, 2010, federal legislation was enacted amending the Recovery
Act and providing for an extension of increased FMAP funding through
June 30, 2011, but at a lower level. See Pub. L. No. 111-226, § 201,
124 Stat. 2389 (Aug. 10, 2010).
[54] We chose these locations because they represented a mix of
population sizes and unemployment rates and were consolidated city/
county governments.
[55] The Recovery Act funds awarded are a combination of funds awarded
directly to the locality and funds passed through the state.
[56] In September 2009, we reported that a number of transit agencies
had expressed confusion about calculating the number of direct jobs
resulting from Recovery Act funding, especially when using Recovery
Act funds for purchasing equipment. See 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.: Sep. 23, 2009).
[57] The Recovery Act funds awarded are a combination of funds awarded
directly to the locality and funds passed through the state.
[58] Forty percent of the loan was a grant due to principal
forgiveness.
[End of Appendix VI]
Appendix VII: Illinois:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act) spending in Illinois.[Footnote 1] The full report covering all of
GAO's work in the 16 states and the District of Columbia may be found
at [hyperlink, http://www.gao.gov/recovery].
What We Did:
We conducted work on one of the programs in Illinois that was funded
under the Recovery Act--the Public Housing Capital Fund--to follow up
on issues that we had reported on in previous bimonthly reviews. For
this program, we conducted interviews and examined relevant program
documents. Additionally, we met with state-level auditors to determine
what steps they were taking to oversee state agencies' implementation
of the Recovery Act. We also met with officials from the Illinois
Governor's Office to discuss the state's ongoing role in reviewing the
quarterly recipient reports that state agencies receiving Recovery Act
funds must submit to federal agencies through the FederalReporting.gov
Web site.[Footnote 2] Finally, we monitored the state's fiscal
condition and spoke to officials from two rural communities--Chrisman
and the Village of Steward--to discuss their use of Recovery Act funds
and the effect of these funds on their budgets. (For descriptions and
requirements of the programs we covered, see appendix XVIII of GAO-10-
1000SP.)
What We Found:
* Public Housing Capital Fund. Six public housing agencies in Illinois
collectively received $83.7 million in Public Housing Capital Fund
competitive grant funds under the Recovery Act.[Footnote 3] As of
August 7, 2010, five of the recipient public housing agencies had
obligated $53.5 million of the $83.7 million and had drawn down a
cumulative total of $23.8 million, or 44.4 percent of the obligated
funds.[Footnote 4] Similarly, 99 public housing agencies in Illinois
collectively received $221.5 million in Public Housing Capital Fund
formula grants under the Recovery Act. As of August 7, 2010, the
recipient agencies had obligated all of the $221.5 million and drawn
down a cumulative total of $143.6 million, or 64.8 percent of the
obligated funds. For this report we visited the Chicago Housing
Authority (CHA), which continues to make progress on its Recovery Act
competitive and formula grant projects. For example, as of July 1,
2010, CHA had expended 52 percent of its Recovery Act formula funds
and completed work on 5 of 12 projects funded by the Recovery Act.
* Oversight Activities. Auditing responsibility within the state
passed from the Illinois Office of Internal Audit (IOIA) within the
Governor's Office to state agencies effective July 1, 2010.[Footnote
5] Officials said that IOIA staff will finish the 20 audits the office
planned or started prior to July 1. State officials expect that the
Office of Accountability, also within the Governor's Office, will
follow up on the implementation of IOIA audit recommendations as part
of its existing role assisting agencies in implementing corrective
action plans to address audit findings. In addition, the Office of the
Auditor General issued the fiscal year 2009 statewide Single Audit,
and the Inspectors General of the U.S. Departments of Education and
Energy are currently conducting audits of state programs that received
larger amounts of Recovery Act funds.[Footnote 6] We spoke to state
and federal auditors about these audits for this review.
* Recipient Reports. The Governor's Office requires state agencies to
submit employment and other data to the Illinois Federal Reporting
Test site for review and verification before they submit these data to
their respective federal agencies through the FederalReporting.gov Web
site. IOIA used to be responsible for reviewing these reports;
however, with the statutorily-mandated transfer of audit
responsibility to state agencies, and the corresponding dissolution of
IOIA, the Illinois Office of Accountability has taken responsibility
for reviewing and verifying most state agencies' reports.
* Illinois's Fiscal Condition. Representatives of the Governor's
Office emphasized the important role that Recovery Act funds have
played in aiding the state's fiscal situation over the previous 2
fiscal years. However, Illinois's fiscal year 2011 budget does not
include Recovery Act State Fiscal Stabilization Fund (SFSF) monies,
which provided more than $2 billion toward education in the state over
the past 2 fiscal years. The Governor's Office had planned to address
the phasing out of SFSF monies in fiscal year 2011 with a tax
increase, but the Illinois General Assembly did not pass such an
increase. Facing a balance of between $5 billion and $6 billion in
unpaid bills from prior fiscal years, the state passed legislation
that provides the governor with expanded authority to address the
budget deficit, according to state officials.[Footnote 7]
* Rural Communities' Use of Recovery Act Funds. Although the
communities we spoke to applied for and were awarded Recovery Act
funds, they ultimately delayed use of the funds. For example, an
official from the Village of Steward, Illinois, told us that the
village applied for $2.5 million in Recovery Act funding through the
U.S. Department of Agriculture's (USDA) Rural Development Water and
Waste Program to establish a sewer system, but had to put the project
on hold because residents were unwilling to pay costs associated with
the project.
Housing Agencies in Illinois Continue to Make Progress on Recovery Act
Projects as HUD Monitors Their Use of Funds:
As previously highlighted, six public housing agencies in Illinois
collectively received $83.7 million in Public Housing Capital Fund
competitive grant funds under the Recovery Act. HUD provided these
funds to the agencies to improve the physical condition of their
properties. As of August 7, 2010, five of the recipient public housing
agencies had obligated $53.5 million of the $83.7 million and had
drawn down a cumulative total of $23.8 million, or 44.4 percent, of
the obligated funds. Similarly, 99 public housing agencies in Illinois
collectively received $221.5 million in Public Housing Capital Fund
formula grants under the Recovery Act. HUD also provided these funds
to the agencies to improve the physical condition of their properties.
As of August 7, 2010, the recipient agencies had obligated all of the
$221.5 million and had drawn down a cumulative total of $143.6
million, or 64.8 percent, of the obligated funds.
The Chicago Housing Authority Continues to Make Progress on Recovery
Act Projects:
For this report we visited CHA to determine the status of both its
competitive and formula grants under the Recovery Act. HUD awarded CHA
a total of 27 competitive grants, 23 for energy-efficiency
improvements (which CHA used to replace boilers and hot water heaters
in several properties) and 4 for redevelopment (including the Ogden
North project, described below). As of July 1, 2010, CHA had obligated
approximately 38 percent of its total competitive grant funds. The
housing agency expects to obligate 100 percent of its competitive
grant funds by September 2010, as required under the Recovery Act. CHA
had expended 32 percent of its total competitive grant funds as of
July 1, 2010, including 50 percent or more of the funds for 20
projects. The housing agency expects to expend 60 percent of its
competitive grant funds by September 2011, as required under the
Recovery Act.
HUD awarded CHA a $9.9 million competitive grant for the redevelopment
of the housing agency's Ogden North property (see figure 1).[Footnote
8] CHA will use the grant in combination with other public and private
funds to develop 60 new replacement public housing units and 77 non-
public housing rental units, 123 for-sale homes, a community space,
and a management and maintenance facility. CHA initiated the project
in July 2010. As of July 1, 2010, CHA had obligated approximately 11
percent and expended approximately 5 percent of the grant funds,
primarily for predevelopment work (including legal and site
preparation work).
Figure 1: Site of CHA's Ogden North Development Project:
[Refer to PDF for image: 2 photographs]
This figure shows two pictures of the site of the Chicago Housing
Authority‘s Ogden North development project. Both photos, taken from
different angles, show the empty lot where construction started in
July 2010.
Source: GAO.
[End of figure]
As of July 1, 2010, CHA had expended 52 percent of its Recovery Act
formula funds and completed work on 5 of 12 Recovery Act funded
projects. For the two projects we reviewed as part of this and prior
bimonthly reports--Dearborn Homes and Kenmore Senior Apartments--CHA
had expended 33 percent of the $28.9 million and 34 percent of the
$16.8 million obligated to those projects, respectively. As of July 1,
2010, the Dearborn Homes project was 46 percent complete and on
schedule to be fully completed by November 2010 (see figure 2). Four
of the eight floors in the Kenmore Senior Apartments building were
past 50 percent complete as of July 1, 2010, and also on schedule to
be fully completed by November 2010.[Footnote 9]
Figure 2: Completed and In-progress Exterior Views of CHA's Dearborn
Homes Development:
[Refer to PDF for image: 2 photographs]
This figure shows two pictures of the exterior of the Chicago Housing
Authority‘s Dearborn Homes project. The photo on the left shows a
completed building in the background and a new playground in the
foreground. The photo on the left shows a building under renovation in
the background and construction equipment in the foreground.
Source: GAO.
[End of figure]
CHA reported a total of 271.95 full-time equivalent (FTE) positions
for its formula grants and 5.47 FTEs for its competitive grants for
the quarter ending June 30, 2010. With respect to the three projects
we reviewed, CHA reported 107.30 FTEs for Dearborn Homes, 38.09 FTEs
for Kenmore Senior Apartments, and 2.12 FTEs for Ogden North.[Footnote
10] On June 14, 2010, CHA reopened its waiting list for public housing
units after more than a decade, in part as a result of funding
available through the Recovery Act. Through a lottery process, CHA
will select 40,000 families for the waiting list and those families
will be placed in rental units as they become available.
Finally, as we reported in our May 2010 report, CHA officials said
that Recovery Act related activities had not had an effect on the
agency's ability to administer its regular Capital Fund
program.[Footnote 11] According to HUD data, CHA had obligated 100
percent of its 2008 regular capital funds by April 30, 2010, ahead of
the June 2010 deadline. As of the same date, CHA had obligated 21
percent of its 2009 regular capital funds. The deadline for obligating
100 percent of these funds is September 2011.
HUD Field Office Officials Cited Monitoring of Recovery Act Funds as
One of HUD's Top Priorities:
According to officials from HUD's Illinois State Office of Public
Housing, Recovery Act work is one of the agency's top priorities. In
describing the types of activities staff engage in to oversee Recovery
Act funds, field office officials told us that they had developed
tracking sheets for all the competitive and formula grants awarded to
housing agencies in the state. Field office officials contact each
housing agency on a weekly basis by means of telephone, e-mail, and,
when necessary, correspondence. The tracking sheets are updated and
reviewed regularly to ensure all housing agencies meet Recovery Act
deadlines, such as the September 2010 deadline for obligating
competitive grant funds. In addition, under HUD's Formula Grant
Monitoring Strategy, the field office was required to review the
obligations of housing agencies that had obligated less than 90
percent of their Recovery Act formula funds by February 26, 2010. As
of June 1, 2010, field office officials completed reviews of all nine
Illinois public housing agencies that had not met this obligation
goal. Although officials found no deficiencies, they said that their
reviews raised questions at some housing agencies. For example, field
office officials noted that it appeared that one housing agency had
not demonstrated compliance with the Buy American provision in its
original contract.[Footnote 12] According to these officials, when the
field office followed up on this finding, the housing agency was able
to provide documentation demonstrating compliance. At another housing
authority, field office officials questioned the award of seven
contracts to only one contractor. According to these officials, the
housing agency provided evidence showing that it had complied with
competitive bidding requirements for these contracts.[Footnote 13]
Officials stated that HUD did not deobligate or recapture any formula
grant funds due to deficiencies.
Field office officials told us that staff were assigned to Recovery
Act monitoring duties based on the relative workload of other projects
assigned at the time. The field office has not received additional
resources or staff to assist with Recovery Act monitoring. The risks
HUD considers in determining how resources are allocated to Recovery
Act monitoring have been based on identified management issues, audit
findings, or other concerns related to performance that were
identified through on-site and desk reviews. Field office officials
said that HUD headquarters has emphasized the importance of focusing
resources on overseeing housing agencies implementation of the
Recovery Act. Despite this focus, field office officials said that
Recovery Act responsibilities had not negatively affected their
ability to monitor and oversee the regular capital fund and other
programs. Officials told us that they had been able to successfully
assign or reassign duties among all field office staff to meet the
needs of the monitoring and reporting of Recovery Act grants.
Auditors Are Finalizing Audits on Recovery Act Funded Programs as
Illinois's Auditing Responsibilities Return to State Agencies:
According to state officials, recent legislation transferred auditing
responsibility within the state from IOIA to state agencies effective
July 1, 2010. The legislation gave the Illinois Department of Central
Management Services (CMS) within the Governor's Office audit
responsibility for those agencies that do not have an internal audit
function. However, state officials noted that it was not yet clear how
CMS would execute this responsibility, as it does not have authority
to audit state agencies without their consent. According to state
officials, only two agencies that received Recovery Act funds do not
have their own internal audit functions--the Illinois Arts Council and
the Illinois Criminal Justice Information Authority (ICJIA). The
Illinois Arts Council received a $361,600 Recovery Act grant through
the National Endowment for the Arts, while ICJIA was the recipient of
a $50.2 million Edward Byrne Memorial Justice Assistance Grant (JAG)
from the U.S. Department of Justice.[Footnote 14] State officials said
that the Office of Accountability will continue to review ICJIA's
quarterly recipient reports; however, it is unclear whether the agency
will request an audit of its Recovery Act JAG program from CMS.
[Footnote 15]
Officials from the Governor's Office said that despite the statutorily-
mandated transfer of audit responsibility to state agencies, IOIA is
scheduled to complete work on 20 planned or ongoing audits (16 in
state fiscal year 2010 and 4 in state fiscal year 2011). According to
state officials, the audited programs include two of the largest
Recovery Act funded programs in the state--the Unemployment Insurance
Program and the Highway Planning and Construction Program.[Footnote
16] Our review of completed IOIA audits as of July 1, 2010, showed
that they were generally designed to evaluate the adequacy of the
programs' internal accounting and administrative controls.[Footnote
17] Some of the audits we reviewed had findings related to Recovery
Act funds, including cash-management issues (for example, failure to
minimize the time between drawdowns of federal funds and expenditure
of those funds and to charge hours worked to the correct grant) and
recipient reporting issues (for example, incorrect calculation of jobs
funded with Recovery Act funds and lack of review of recipient
reports). The audits also found some instances of insufficient
internal controls for ensuring compliance with Recovery Act and other
federal program requirements. For example, one agency did not have
procedures in place to ensure that subrecipients separately record and
account for Recovery Act activities, and another agency did not have
processes in place to ensure the eligibility of program participants.
IOIA issued several recommendations based on its findings. State
officials expect that, as part of its existing role in assisting
agencies with corrective action plans to address audit findings, the
Office of Accountability will follow up these recommendations to
determine whether they have been implemented.[Footnote 18]
As we reported in our May 2010 report, the Illinois Office of the
Auditor General conducts an annual audit (the Single Audit) of the
state's financial statements and expenditures from federal awards,
including Recovery Act awards.[Footnote 19] According to data from the
Federal Audit Clearinghouse, which is responsible for receiving and
distributing Single Audit results, it received Illinois's Single Audit
reporting package for the year ending June 30, 2009, on August 12,
2010. This was over 4 months after the deadline specified by the
Single Audit Act and over a year after the period the audit covered.
The State Auditor General finalized this audit on July 28, 2010, and
this was the first Single Audit for Illinois that included Recovery
Act programs. It identified 92 significant internal control
deficiencies related to compliance with Federal Program requirements,
of which 50 were classified as material weaknesses. Two of these
material weaknesses and significant deficiencies were directly related
to agencies' use of Recovery Act funds. Specifically, state auditors
found that the Illinois Department of Children and Family Services
(DCFS) failed to separately identify and report Recovery Act
expenditures for its Foster Care and Adoption Assistance programs to
the Illinois Office of the Comptroller.[Footnote 20] According to the
report, DCFS agreed with the finding, and state audit officials said
that the agency provided the necessary corrections to the
Comptroller's Office. In addition, the Illinois Department of Commerce
and Economic Opportunity (DCEO) failed to communicate Recovery Act
information and requirements to subrecipients of Workforce Investment
Act of 1998 grants, which could potentially result in inadequate
administration of the funds and misreporting among subrecipients.
[Footnote 21] According to the report, DCEO agreed with the
recommendation and revised its procedures to include information on
Recovery Act disbursements and reporting requirements to subrecipients.
In addition to the state auditing activities, federal Inspectors
General are also reviewing the use of some Recovery Act funds in
Illinois. The audits include reviews of programs discussed in our
previous reports of April 2009, July 2009, September 2009, and May
2010, such as the $2.1 billion in SFSF monies administered by the
Illinois State Board of Education (ISBE), and the $242.5 million Home
Weatherization Assistance Program administered by DCEO.[Footnote 22]
An official from the Office of Inspector General within the U.S.
Department of Education stated that staff have conducted interviews
with officials from ISBE, the Illinois Board of Higher Education
(IBHE), the Illinois Community College Board (ICCB), the Governor's
Office, a university, and multiple local educational agencies (mostly
school districts). The audit work is expected to be completed in the
fall of 2010 and reporting dates are yet to be determined. The Office
of the Inspector General within the U.S. Department of Energy is also
currently determining the extent to which DCEO and one of its local
agencies are effectively and efficiently administering the
Weatherization Assistance Program in Illinois. This review is focusing
on the Illinois Community and Economic Development Association (CEDA),
the largest subrecipient of weatherization funds in Illinois (and one
of the largest local agencies nationwide). CEDA received $81 million
to weatherize an estimated 12,500 homes throughout the state. A report
is currently being drafted and is expected to be issued in the fall of
2010.
The Governor's Office Has Changed the Way It Monitors Recovery Act
Recipient Reports:
The Illinois Governor's Office has changed the way it monitors
Recovery Act recipient reports in light of the July 1, 2010, transfer
of audit responsibility to state agencies. As we described in our
December 2009 report, the Governor's Office has required state
agencies to submit employment and other data to the Illinois Federal
Reporting Test site for review and verification before they submit
these data to FederalReporting.gov.[Footnote 23] IOIA previously
monitored these reports, and in its absence the Illinois Office of
Accountability has assumed responsibility for reviewing and verifying
these reports.[Footnote 24] The Office of Accountability's review does
not include recipient reports from three agencies receiving some of
largest Recovery Act grants in the state: ISBE, the Illinois Housing
Development Agency, and the Illinois Department of Transportation.
[Footnote 25] State officials said that these agencies each had an
existing internal audit function with the necessary resources to
review the reports and noted that not requiring the Office of
Accountability to conduct a review would lighten its workload. They
also pointed out that the state's tight budget situation and the
dissolution of IOIA had resulted in significant reductions in the
Office of Accountability's staff.
State officials indicated that they had not identified any major
problems with the recipient reports they received from agencies for
the quarter ending June 30, 2010. They believed that the reporting
process was starting to "become routine," as federal reporting
guidelines stayed the same and agencies had been reporting Recovery
Act related data for several reporting periods.
According to State Officials, Recovery Act Funds Have Been Critically
Important to the State Budget:
Representatives of the Governor's Office emphasized the crucial role
that Recovery Act funds had played in helping the state through a
difficult financial situation during state fiscal years 2009 and 2010.
As we reported in our May 2010 report, the fiscal year 2011 budget
does not include Recovery Act SFSF monies, which provided over $2
billion toward education in fiscal years 2009 and 2010;
however, recent federal legislation made additional funds for
education available to the states.[Footnote 26] As a result, according
to the Governor's Office of Management and Budget, funding levels in
fiscal year 2011 for General State Aid, early childhood programs, and
special education will be maintained at fiscal year 2010 levels, and
overall funding for elementary and secondary education will increase
by an estimated $104 million. However, the fiscal year 2011 budget
reduces funds for higher education by $105 million from the prior
year, $85 million of which is accounted for by Recovery Act funds in
fiscal year 2010 that will not be available in 2011. Overall,
according to the Governor's Office, the state's fiscal year 2011
budget is $1.4 billion less than that of fiscal year 2010 and nearly
$3.0 billion less than that of fiscal year 2009.
The Governor's Office had planned to address the phasing out of SFSF
monies in fiscal year 2011 with a 1-year, $2.8 billion tax increase;
however, the Illinois General Assembly did not approve such an
increase. Facing a balance of between $5 billion and $6 billion in
unpaid bills from prior fiscal years, on July 1, 2010, the state
enacted legislation that, among other things, requires the State
Treasurer and State Comptroller, at the direction of the Governor, to
make transfers to the General Revenue Fund or the Common School Fund
on or after July 1, 2010, and through January 9, 2011, out of special
funds of the state, to the extent allowed by law.[Footnote 27] Such
transfers are expected to help the state manage cash flow deficits and
maintain liquidity in the General Revenue Fund and the Common School
Fund and are subject to certain restrictions. The same legislation
also establishes an entity, the Railsplitter Tobacco Settlement
Authority, which was authorized to purchase from the state the right
to future revenue from the 1998 tobacco settlement in exchange for the
net proceeds of bonds issued by the new entity.[Footnote 28] According
to the Governor's Office, these two measures are expected to provide
$2 billion that the state can use to address the backlog of unpaid
bills.
In addition to reviewing the state's fiscal year 2011 budget, we also
met with officials from two rural communities to discuss their use of
Recovery Act funds and the effect of these funds on their budgets.
Although the communities we spoke to applied for and were awarded
Recovery Act funds, they ultimately delayed use of the funds due to
local financing concerns. For example, an official from the Village of
Steward, Illinois, told us that the village applied for $2.5 million
in Recovery Act funding through the U.S. Department of Agriculture's
(USDA) Rural Development Water and Waste Program to establish a sewer
system for its residents.[Footnote 29] The official said that the
project would facilitate economic development in the area and that the
village has been trying to secure funding for the project for nearly
10 years. Although USDA awarded Recovery Act funds to the village--a
grant for 40 percent of the project's total cost and a loan for the
remaining 60 percent of the cost (to be repaid at 2 percent interest
over 48 years)--the official stated that the village has placed the
project on hold for a year, as residents have raised concerns about
the costs associated with financing the project. The official
estimated that each household would spend roughly $700 per year in the
near-term on sewer rates to repay this loan. The town of Chrisman,
Illinois, was also awarded a $1.25 million loan (to be repaid at 2.5
percent interest over 20 years) for a sewer project through USDA's
Rural Development Water and Waste Program, but the town also placed
the project on hold due to similar concerns. According to officials in
both localities, it is uncertain when and if these projects will be
completed.
State Comments on This Summary:
We provided the Office of the Governor of Illinois with a draft of
this appendix on August 18, 2010. The Director of Recovery Operations
and Reporting responded for the Governor on August 19, 2010. The
official provided technical suggestions that were incorporated, as
appropriate.
GAO Contact:
James Cosgrove, (202) 512-7029 or cosgrovej@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Paul Schmidt, Assistant
Director; Silvia Arbelaez-Ellis; Josh Bartzen; Dean Campbell; Cory
Marzullo; and Rosemary Torres Lerma made major contributions to this
report.
[End of section]
Appendix VII Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Under section 1512 of the Recovery Act, recipients of Recovery Act
funds must submit quarterly reports that include employment and other
data to the federal agencies through the FederalReporting.gov Web
site. These reports are due on the 10th day of the month following the
end of the reporting period and are available to the public on the
Recovery.gov Web site.
[3] The U.S. Department of Housing and Urban Development's (HUD)
Illinois State Office of Public Housing monitors all Illinois housing
agencies for compliance with Recovery Act requirements, including
obligation and expenditure deadlines.
[4] As of August 7, 2010, one housing agency had not obligated any of
its competitive grant funds.
[5] According to Illinois officials, Illinois Executive Order 2003-10,
Executive Order to Consolidate Facilities Management, Internal
Auditing and Staff Legal Functions, consolidated the state's internal
audit function under the Illinois Department of Central Management
Services within the Governor's Office. 27 Ill. Reg. 6401 (Apr. 11,
2003). State officials further explained that Illinois Public Act 096-
0795 mandated the return of the internal audit function to state
agencies and the dissolution of IOIA, as the function would again
reside at the agencies.
[6] Single Audits are prepared to meet the requirements of the Single
Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507) and provide a
source of information on internal control and compliance findings and
the underlying causes and risks. The Single Audit requires that
states, local governments, and nonprofit organizations expending more
than $500,000 in federal awards in a year obtain an audit in
accordance with the requirements set forth in the act. A Single Audit
consists of (1) an audit and opinions on the fair presentation of the
financial statements and the Schedule of Expenditures of Federal
Awards; (2) gaining an understanding of and testing internal control
over financial reporting and the entity's compliance with laws,
regulations, and contract or grant provisions that have a direct and
material effect on certain federal programs (i.e., the program
requirements); and (3) an audit and opinion on compliance with
applicable program requirements for certain federal programs. See also
Office of Management and Budget (OMB) Circular A-133 (revised June 27,
2003, and June 26, 2007).
[7] Ill. Pub. Act 096-0958, art. 1 (July 1, 2010).
[8] Our fourth bimonthly report also contains an overview of the Ogden
North project. See GAO, Recovery Act: Status of States' and
Localities' Uses of Funds and Efforts to Ensure Accountability
(Appendixes), GAO-10-232SP (Washington, D.C.: Dec. 10, 2009).
[9] Our fourth bimonthly report of December 2009 contains an overview
of the Dearborn Homes and Kenmore Senior Apartments projects. See GAO-
10-232SP.
[10] These data are as of June 30, 2010.
[11] See GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[12] Section 1605 of the Recovery Act required that "none of the funds
appropriated or otherwise made available by [the] Act may be used for
the construction, alteration, maintenance, or repair of a public
building or a public work unless all of the iron, steel, and
manufactured goods used in the project are produced in the United
States." Federal agencies may, under certain circumstances, waive the
Buy American requirement and the requirement is to be applied in a
manner consistent with the United States obligations under
international agreements. For more information, see HUD, PIH
Implementation Guidance for the Buy American Requirement of the
American Recovery and Reinvestment Act of 2009 including Process for
Applying for Exceptions, PIH-2009-31 (HA) (Washington, D.C., Aug. 21,
2009).
[13] Our May 2010 report includes a discussion of the difficulties
this housing authority faced in soliciting bids and awarding contracts
for Recovery Act funds. See [hyperlink,
http://www.gao.gov/products/GAO-10-605SP].
[14] The Illinois Arts Council used the Recovery Act grant to fund the
Illinois Arts Job Preservation Grant Program. According to state
officials, all the funds have been expended. The JAG Program provides
federal grants for state and local law enforcement and criminal
justice assistance.
[15] In April 2009, the Department of Justice's Office of the
Inspector General issued a report on the allocation of Recovery Act
JAG funds in Illinois. See Department of Justice, Office of the
Inspector General, Edward Byrne Memorial Justice Assistance Grant
Allocation of Recovery Act Funds to Local Municipalities in the State
of Illinois (Apr. 9, 2009).
[16] According to state documents, as of March 31, 2010, these
programs were expected to receive $3.8 billion and $934.3 million in
Recovery Act awards, respectively.
[17] We reviewed 12 of the 13 audits IOIA had completed as of July 1,
2010. We did not review 1 completed IOIA audit on the Women, Infants
and Children (WIC) Special Supplemental Nutrition Program-Contingency.
State officials indicated that the audit had no findings.
[18] According to state officials, the Office of Accountability is
also responsible for, among other things, obtaining clarifications to
federal guidance related to the Recovery Act; establishing
standardized policies and procedures for state agencies for tracking,
reporting on, and monitoring Recovery Act funds; and providing
technical assistance to state agencies on Recovery Act reporting
requirements to ensure accurate and timely reporting. The Governor's
Office expects to dissolve the Office of Accountability in February
2011.
[19] See [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[20] According to the 2009 Single Audit report, subrecipients of
Recovery Act awards must (1) maintain records that identify the source
and application of their awards and (2) provide identification of
Recovery Act awards in their Schedule of Expenditures of Federal
Awards (SEFA) and data collection forms. The Illinois Office of the
Comptroller compiles and reviews the financial forms required for the
SEFA before forwarding SEFA data to the Office of the Auditor General.
The Office of the Auditor General uses data from the SEFA in scoping
and conducting the state's Single Audit. See State of Illinois, Office
of the Auditor General, Single Audit Report For the Year Ended June
30, 2009 (July 28, 2010).
[21] According to the 2009 Single Audit report, recipients of Recovery
Act awards must (1) separately identify to each subrecipient, and
document at the time of the subaward and disbursement of funds, the
Federal Award Number, the Catalog of Federal Domestic Assistance
(CFDA) number, and the amount of Recovery Act funds; and (2) require
their subrecipients to provide similar identification on their SEFAs
and data-collection forms.
[22] For past reports discussing SFSF see GAO, Recovery Act: As
Initial Implementation Unfolds in States and Localities, Continued
Attention to Accountability Issues is Essential(Appendixes),
[hyperlink, http://www.gao.gov/products/GAO-09-580] (Washington, D.C.:
Apr. 23, 2009); GAO, Recovery Act: States' and Localities' Current and
Planned Uses of Funds While Facing Fiscal Stresses (Appendixes),
[hyperlink, http://www.gao.gov/products/GAO-09-830SP] (Washington,
D.C.: July 8, 2009); GAO, 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.: Sept. 23, 2009); and GAO-10-605SP. For past reports discussing
the Weatherization Assistance Program see [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] and [hyperlink,
http://www.gao.gov/products/GAO-10-605SP].
[23] Illinois is considered a decentralized reporting state because
state agencies, not the state, are responsible for uploading their
employment and other data into FederalReporting.gov. For a discussion
of the role the Governor's Office plays in reviewing state agencies'
recipient reports, see [hyperlink,
http://www.gao.gov/products/GAO-10-232SP].
[24] State officials said that they anticipate that the Office of
Accountability will be disbanded in February 2011.
[25] Each of these agencies provided the Governor's Office with the
following information for the quarter ending June 30, 2010: total
Recovery Act expenditures, total number of Recovery Act jobs reported,
and an explanation for any major changes in the number of jobs
reported from the previous reporting quarter. In our sixth bimonthly
report of May 2010, we discussed some of the challenges ISBE has faced
in ensuring the accuracy of its recipient reports. See GAO-10-605SP.
We did not assess the reports ISBE, the Illinois Housing Development
Agency, or the Illinois Department of Transportation submitted for the
quarter ending June 30, 2010.
[26] See [hyperlink, http://www.gao.gov/products/GAO-10-605SP] and
Pub. L. No. 111-226, § 101, 124 Stat. 2389 (Aug. 10, 2010). The
legislation also provided for an extension of increased Federal
Medical Assistance Percentage (FMAP) funding. As of August 13, 2010,
Illinois had drawn down its entire share of SFSF Education funds and
99.8 percent of its SFSF Government Services funds.
[27] 30 Ill. Comp. Stat. 105/5h.
[28] Ill. Pub. Act 096-0958, art. 3, §§ 3-1 to 3-16 (July 1, 2010). In
1998, 46 states, including Illinois, signed a Master Settlement
Agreement as part of a resolution of the states' case against four
major tobacco companies to recover smoking-related Medicaid expenses.
The agreement stipulated that the tobacco companies pay the states
settlement costs over a period of years. To raise revenues in the
immediate term, some states have "securitized" these payments, issuing
bonds backed by future payments owed to them under the agreement.
[29] Loans under USDA's Rural Development Water and Waste Program are
to be used for the purpose of developing water and waste disposal
(including solid waste disposal and storm drainage) systems in rural
areas and towns with a population not in excess of 10,000. The funds
are available to public entities such as municipalities, counties,
special-purpose districts, Indian tribes, and corporations not
operated for profit.
[End of Appendix VII]
Appendix VIII: Iowa:
Overview:
The following summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act) spending in Iowa.[Footnote 1] The full report covering all of
GAO's work in 16 states and the District of Columbia is available at
[hyperlink, http://www.gao.gov/recovery].
What We Did:
Our work in Iowa examined six programs receiving Recovery Act funds--
the State Energy Program (SEP), the Energy Efficiency and Conservation
Block Grant (EECBG) program, the Weatherization Assistance Program,
and three education programs: (1) Title I, Part A, of the Elementary
and Secondary Education Act of 1965 (ESEA), as amended;
(2) Individuals with Disabilities Education Act (IDEA), Part B, as
amended;
and (3) the State Fiscal Stabilization Fund (SFSF)--as well as state
and local efforts to stabilize their budgets, monitor the use of
Recovery Act funds, and report the number of jobs paid for by these
funds. We selected the SEP and EECBG programs because the Department
of Energy (DOE) has instructed the states to increase their efforts to
obligate and spend the Recovery Act funds for these programs. We
selected the weatherization program because community action agencies
in Iowa are weatherizing large numbers of homes. Finally, we selected
the three education programs because these continue to be the largest
source of Recovery Act funds in Iowa. For descriptions and
requirements of the programs we reviewed, see appendix XVIII of GAO-10-
1000SP.
To review the use of Recovery Act funds for the SEP and EECBG
programs, we examined documents and met with officials of the Iowa
Office of Energy Independence (OEI) in Des Moines, which is
responsible for administering both programs. For the SEP program, we
visited three grant recipients: the Des Moines Area Community College
at Ankeny, the Iowa Association of Municipal Utilities, and the Sun
Prairie/Vista Court Apartments. For the EECBG program, we visited two
local governments that DOE supported directly: Iowa City and Warren
County. For both SEP and EECBG, we discussed with officials how their
agencies were using Recovery Act funds to support national energy
goals, any concerns about complying with the Recovery Act's
requirements, whether internal controls and monitoring systems were in
place to ensure the effective and efficient use of funds, and the
extent to which program recipients collected data on energy savings
and job creation.
To review the weatherization program, we examined documents and met
with officials of Iowa's Division of Community Action Agencies (DCAA),
within the Department of Human Rights, which is responsible for
administering the weatherization program in Iowa. We also met with the
Executive Director of the Southern Iowa Economic Development
Association (SIEDA), a local community action agency responsible for
weatherizing homes in seven southern Iowa counties.
To review the use of Recovery Act funds for education, we met with
officials from the Iowa Department of Education and reviewed state
grant applications, financial records, and monitoring plans to
identify the state's policies and procedures for ensuring the
appropriate expenditure of Recovery Act funds. To obtain officials'
projections of the financial condition of Iowa schools in 2010 and
2011, we interviewed the Iowa Department of Education's Chief
Financial Officer and officials from six local school districts that
we had contacted for previous Recovery Act reports--Atlantic, Des
Moines, Maple Valley, Marshalltown, Ottumwa, and Waterloo. We also
visited the Des Moines Independent Community School District and the
Marshalltown Community School District to review districts' controls
over the expenditure of Recovery Act funds.[Footnote 2] At each
district we selected a judgmental sample of disbursements to review
the use of funds and documentation of expenditures.[Footnote 3] We
also discussed our findings with local and state officials.
To review state and local efforts to use Recovery Act funds and
stabilize their budgets, we analyzed state and local budget
information and met with state and municipal officials. We visited two
Iowa localities--Des Moines and Marshalltown--which we selected to
provide a mix of large and small communities and unemployment rates.
We selected Des Moines because it is the largest city in Iowa and has
an unemployment rate above the state's average--7.4 percent compared
with a state average of 6.6 percent--and Marshalltown because its
population is smaller compared with many other localities throughout
the state, and its unemployment rate is 7.5 percent, above the state's
average.
What We Found:
* State Energy Program (SEP). As of July 20, 2010, OEI had obligated
$34.3 million, or 84.6 percent, of $40.5 million in Recovery Act funds
for SEP. Specifically, OEI awarded $19.2 million in grants, which
recipients plan to match with an additional $48.5 million from other
sources. OEI also obligated $1.5 million to commission energy projects
and is establishing a $6.5 million loan fund to stimulate energy
efficiency improvements by Iowa businesses and a $1 million loan loss
reserve to enhance financing credit for private sector energy
efficiency projects. OEI has retained $6.1 million for administrative
expenses. OEI expects to obligate its remaining funds by September 30,
2010. OEI reimburses grant recipients for applicable costs only after
major milestones are achieved and recipients submit receipts and other
supporting documentation. To monitor the use of funds, OEI plans to
visit each grant recipient annually and will make more frequent visits
to recipients receiving the largest SEP awards and to those with
little or no prior experience with government accounting requirements.
* Energy Efficiency and Conservation Block Grants (EECBG) program.
Almost all (94 percent) of the $21.1 million in Recovery Act funds
allocated to recipients in Iowa for EECBG has been obligated. However,
only about 6 percent of the funds have been spent, in part because of
delays between when OEI received its portion of the funds and when it
awarded grants. According to OEI officials, the program was new and
officials waited for DOE to issue guidance on the program's federal
requirements. In addition, some grant recipients spent few funds
because they were developing plans, providing information to agencies
involved in ensuring compliance with federal and state requirements,
or waiting for decisions on requests for waivers from certain federal
requirements. The DOE project officer for the grant to OEI said that
he believes Iowa will meet the DOE goal to draw down 20 percent of
grant funds by September 30, 2010. As projects have begun, DOE and OEI
have implemented strategies for monitoring grant recipients' use of
funds. These strategies involve reviewing the information recipients
report and visiting grant recipient's projects. Moreover, grant funds
are paid only after recipients submit invoices and supporting
documentation to DOE or OEI for payment.
* Weatherization Assistance Program. In a July 13, 2010, letter to
DOE, DCAA certified that it had, among other things, completed
weatherizing 2,178 homes--30.3 percent of its target of 7,196 homes--
using Recovery Act funds. DCAA also certified that it had inspected at
least 5 percent of the homes weatherized by each of the 17 local
agencies that used Recovery Act funds. In response, DOE notified DCAA
on July 26, 2010, that the department had released the remaining 50
percent of Iowa's Recovery Act weatherization funds, or $40.4 million.
On August 17, 2010, DCAA notified SIEDA that it would release $1.7
million in Recovery Act funds effective August 23, 2010, for
weatherizing homes in seven southern Iowa counties. DCAA had delayed
making these funds available until SIEDA had corrected numerous
weaknesses in its oversight of weatherization contractors.
* Education. Between 2009 and 2011, Iowa will receive about $666
million in Recovery Act funds from the U.S. Department of Education
(Education) to support local school districts, institutions of higher
learning, and selected public safety and assistance programs. These
funds will be provided to the state through three Education programs:
Title I, Part A, of the ESEA; IDEA, Part B; and SFSF.[Footnote 4] As
of June 30, 2010, Iowa reported that local school districts,
institutions of higher learning and state government entities had
spent or distributed about $501 million in Recovery Act education
funds--more than 75 percent of the Recovery Act education funds
provided to the state. Iowa reported that these funds paid for more
than 7,800 education-related positions across the state in the final
quarter of the 2009-2010 school year (April 1 to June 30, 2010).
Although Recovery Act funding for education in Iowa will be much less
in the 2010-2011 school year, a state education official said that he
was optimistic about the financial outlook for most local school
districts in the state. Officials from six local districts stated that
they expected to balance their budgets by taking a number of actions,
including reducing staff, suspending new hiring, consolidating
schools, raising local taxes, and drawing upon their reserve funds,
including unspent Recovery Act funds received in school year 2009-2010.
Our review of expenditures at the Des Moines and Marshalltown school
districts showed that Recovery Act funds were used to pay educators'
salaries, purchase books to support curriculum, and purchase
specialized equipment to upgrade services to students with
disabilities. Our review of selected disbursements at these two local
school districts showed that Recovery Act funds were generally spent
and accounted for appropriately. However, we found and state officials
agreed that these districts did not fully comply with requirements to
obtain approval for IDEA equipment purchases of $5,000 or more.
* State and local governments' use of Recovery Act funds. According to
senior officials from the Iowa Department of Management, Recovery Act
funds have enabled the state to continue avoiding tax increases and
reduce the amount of funds drawn from the state's Cash Reserve Fund to
balance the fiscal year 2011 budget. Anticipating the end of Recovery
Act funds and other one-time sources of revenue, Iowa is implementing
several plans to improve the efficiency of state operations and
reorganize state agencies to reduce state expenditures. For example,
as of June 30, 2010, about 2,100 eligible state employees had applied
for retirement under the state's early retirement plan. Officials at
the two localities we visited--Des Moines and Marshalltown--said that
they have used Recovery Act funds for various programs, and that these
funds have helped to stabilize their budgets. However, they also said
that they plan to reduce expenditures or eliminate programs--such as
Marshalltown's lead abatement program--once Recovery Act funds are
depleted. Local officials also said that they encountered several
problems applying for and administering funds from some Recovery Act
competitive grants. These problems included finding staff to apply for
the grants and difficulties complying with some of the statutory
requirements, such as the Buy American and Davis-Bacon provisions.
* State monitoring and internal controls. Iowa's Office of the State
Auditor and the Iowa Accountability and Transparency Board continue to
monitor controls over Recovery Act funds. While the Office of the
State Auditor did not identify any material weaknesses in its fiscal
year 2009 Audit report,[Footnote 5] officials said that they
identified some problems with internal controls, such as inadequate
monitoring of subrecipients. In May 2010, the state provided training
on subrecipient monitoring to state and local agencies receiving
Recovery Act funds.
* State and local recipient reporting. Iowa created a centralized
database that it uses to calculate the number of jobs created based on
data provided by state and local agency officials. Through its
centralized database, Iowa reported that 9,696 jobs were funded by the
Recovery Act for the period April 1 to June 30, 2010, as of July 29,
2010. Iowa has also implemented internal controls to ensure the
accuracy of jobs data, such as requiring state and local agency
officials to certify that they reviewed and approved jobs data prior
to submission.
Iowa Has Obligated Most of Its State Energy Program Funds, but
Recipients Are Just Beginning to Spend Them:
DOE obligated $40.5 million in Recovery Act SEP funds to OEI for
energy efficiency and renewable energy projects. Subsequently, in an
April 2010 letter to the states, DOE set new interim milestones for
each state to obligate at least 80 percent of its Recovery Act SEP
funds by June 30, 2010, and spend at least 20 percent of its funds by
September 30, 2010.[Footnote 6] As shown in table 1, OEI had obligated
$34.3 million, or 84.6 percent, of its $40.5 million as of July 20,
2010, and according to DOE's Recovery Act Web site, OEI had spent $1
million as of July 30, 2010. To obligate its SEP funds, OEI awarded
$19.2 million in grants for the public sector (government and
university), technology demonstration, training and information, and
innovation projects. The largest SEP grant was $1.1 million to
Kirkwood Community College for three large wind turbines, while the
smallest grant was $1,800 to Whiting community schools for humidity
sensors to reduce heating and cooling costs. Grant recipients intend
to implement their projects by leveraging SEP funds with an additional
$48.5 million from other sources to increase the program impact on job
creation and energy savings. OEI also obligated SEP funds to
commission energy projects, create a loan fund to stimulate energy
efficiency improvements by Iowa businesses, and create a loan loss
reserve to enhance financing credit for residential and private sector
energy efficiency projects. OEI expects to obligate the remaining $6.2
million in SEP funds by September 30, 2010. Regarding SEP
expenditures, OEI officials told us that expenditure data can lag more
than a month from when costs are incurred because OEI reimburses
recipients only after major milestones are achieved and recipients
submit invoices and other supporting documentation.
Table 1: Iowa's Use of Recovery Act SEP Funds, as of July 20, 2010:
Category: Public sector[C];
Planned allocation: $21,161,000;
SEP funds obligated[A]: $15,528,807;
SEP project funding from other sources[B]: $37,923,100.
Category: Technology demonstration[D];
Planned allocation: $4,160,000;
SEP funds obligated[A]: $2,554,000;
SEP project funding from other sources[B]: $8,254,000.
Category: Training and information;
Planned allocation: $1,082,000;
SEP funds obligated[A]: $582,206;
SEP project funding from other sources[B]: $728,206.
Category: Innovation[E];
Planned allocation: $3,556,000;
SEP funds obligated[A]: $3,055,000;
SEP project funding from other sources[B]: $1,549,000.
Category: Private sector loans;
Planned allocation: $4,500,000;
SEP funds obligated[A]: $6,500,000;
SEP project funding from other sources[B]: 0.
Category: Nonprofit sector loans;
Planned allocation: $7,000;
SEP funds obligated[A]: 0;
SEP project funding from other sources[B]: 0.
Category: OEI administrative expenses[F];
Planned allocation: $6,080,000;
SEP funds obligated[A]: $6,081,000;
SEP project funding from other sources[B]: 0.
Category: Total;
Planned allocation: $40,546,000;
SEP funds obligated[A]: $34,301,013;
SEP project funding from other sources[B]: $48,454,306.
Source: Iowa Office of Energy Independence.
[A] DOE considers (1) loan program funds to be obligated because the
Iowa Finance Authority has agreed to underwrite the program and (2)
OEI administrative expenses to be obligated because the funding will
primarily be used to pay for salaries of additional staff hired to
implement the Recovery Act program. In some cases, funds obligated may
exceed planned allocations.
[B] Iowa requires that SEP grant recipients provide at least a one-to-
one matching of funds to increase the program impact on job creation
and energy savings.
[C] Public sector funding supports energy efficiency and renewable
energy projects for state buildings, cities, schools, community
colleges, and universities, and for Iowa's Building Energy Smart
program.
[D] Technology demonstration funding supports new energy efficiency
and renewable technologies for businesses, electric power utilities,
nonprofit organizations, and community colleges, among others.
[E] Includes $555,000 for grant awards as well as $1.5 million for
commissioning energy projects by verifying, among other things, that
the design and specifications meet original project intent and the
equipment purchased is as specified; $1 million for establishing a
loan loss reserve through the Iowa Finance Authority to leverage $20
million for a residential and private sector energy efficiency
financing program; and $500,000 for benchmarking through Iowa's Energy
Center.
[F] OEI's staff has grown from 4 to 34 to administer the Recovery
Act's SEP and EECBG programs, the SEP program that DOE funds through
its regular appropriation, and Iowa's energy programs.
[End of table]
OEI staff have focused on awarding Recovery Act SEP grant funds and
negotiating the terms and conditions for each SEP funding agreement to
ensure that recipients spend funds by DOE's April 2012 deadline.
[Footnote 7] Before SEP grant recipients can proceed with their
projects, they must certify to OEI that they have complied with the
National Environmental Policy Act (NEPA),[Footnote 8] the National
Historic Preservation Act, and the Recovery Act's Buy American and
Davis-Bacon provisions, among other requirements. Regarding NEPA
compliance, all but eight of the SEP grant projects are designed to
improve the energy efficiency of existing buildings and transportation
infrastructure or install small amounts of renewable energy generating
capacity, thereby minimizing their impact on the environment and
qualifying them for a categorical exclusion under NEPA. Of the eight
SEP projects requiring a detailed NEPA review, five have been reviewed
and approved by DOE and three are under review--of these, two projects
are for wind turbines and one is for a solar system installation. OEI
officials told us that DOE guidance has been useful for addressing
Davis-Bacon prevailing wage, Buy American, and historic preservation
requirements.
OEI has established several controls to ensure that SEP funds are
effectively and efficiently spent. For example, OEI requires that
grant recipients provide at least a one-to-one matching of SEP funds
with funds from other sources. Matching funds are an Iowa, rather than
a SEP, requirement that is designed to enhance project oversight
because the grant recipient is responsible for more than half of the
project's cost. In addition, OEI generally does not provide up-front
funding.[Footnote 9] Instead, OEI reimburses grant recipients for
applicable costs only after major milestones are achieved and
recipients submit receipts and other supporting documentation for
incurred costs.
OEI officials told us that they plan to visit each SEP project at
least once per year, projects that receive grants of $750,000 or more
at least two times per year, and projects that receive grants of $1
million or more at least four times per year. OEI also plans to give
priority to monitoring recipients with little or no prior experience
in complying with government accounting and reporting requirements.
Recipients are considered to be higher risk if their management
control systems have not been previously examined, as they have been
for grant recipients with established accounting procedures, and if
external audits of their financial systems have not been completed.
OEI requires most SEP grant recipients to complete their construction
activities by January 1, 2012, and all recipients to submit their
final reports by March 31, 2012.
Most Funds from Iowa's Energy Efficiency and Conservation Block Grants
Have Been Obligated but Little Has Been Spent:
DOE allocated a total of about $21.1 million in Recovery Act funds to
recipients in Iowa for EECBG. Of this total, DOE allocated about $11.5
million directly to the 13 largest cities and 10 largest counties in
the state according to a federal population formula; about $46,600 to
the Sac and Fox Tribe of the Mississippi in Iowa; and about $9.6
million to OEI.[Footnote 10] Following statutory requirements, DOE
required OEI, in turn, to make at least 60 percent of the $9.6 million
it received available to local governments not eligible for grants
directly from DOE because of their size. According to DOE, about 94
percent of the $21.1 million allocated to recipients in Iowa had been
obligated as of July 16, 2010. The remaining 6 percent of funds were
programmed for Cedar Rapids, Dubuque, and Scott County, which have not
received all of their DOE allocations. DOE officials told us that
grant recipients were allowed to obtain a portion of their allocation
to develop energy strategies and obtain the balance of funds after
resubmitting plans for specific projects.
The two localities we visited--Iowa City and Warren County--received
direct grants from DOE. With its direct grant of $692,300, Iowa City
is establishing (1) an energy office, (2) a public education campaign
to promote existing energy audit programs for residences and
businesses, (3) a municipal energy efficiency retrofit program to
reduce energy costs in municipal buildings, and (4) an energy
efficiency revolving loan fund for businesses to implement energy
efficiency upgrades in their buildings. With its direct grant of
$171,200, Warren County has upgraded the heating and cooling system at
a county nature center and plans to construct a wind turbine for the
center's electricity needs.
OEI grants to Iowa entities were generally made several months later
than the DOE direct formula grants. More specifically:
* OEI received its $9.6 million award in September 2009. The office
retained 10 percent, or about $960,000, for program administration, as
allowed under the program, and in March 2010 awarded over $8.2 million
in grants. About $5.8 million went to cities and counties that were
not large enough to be eligible for the direct grants from DOE. This
total met the requirement that at least 60 percent of grant funds
provided to state energy offices go to these smaller cities and
counties. Subsequent awards increased the total amount of OEI awards
to over $8.6 million to 76 recipients.
* While DOE used a population-based formula to determine the amounts
and recipients of the direct grants from DOE, it did not prescribe how
the state energy offices were to distribute their grant funds. OEI
decided to make the awards competitive and, in January 2010, requested
proposals for use of EECBG grant funds.[Footnote 11] According to OEI
officials, the office delayed announcing its request for proposals
until DOE provided guidance on federal requirements applicable to
EECBG funding and OEI could assess whether grant proposals
sufficiently addressed them. These requirements included those
governing labor (e.g., the Davis-Bacon provisions of the Recovery
Act); purchasing (e.g., the Buy American provisions of the Recovery
Act); the treatment of environmental resources (e.g., NEPA); and
historical sites (e.g., the National Historic Preservation Act). DOE
issued program guidance on NEPA and the Buy American provisions in
December 2009. The department issued program guidance on historic
preservation in February 2010 and continues to issue additional
program guidance.
OEI required that its EECBG grants be used cost-effectively, yielding
continuous benefits over time in terms of energy and emission
reductions, and that recipients provide matching funds equal to the
amount of the grant award. OEI also required that projects complete on
or before September 2012 in order to be eligible for funding. OEI
limited the types of projects eligible for funding, in part, to avoid
the need for extensive NEPA reviews, which could affect the start date
of projects. In this regard, OEI limited the size or output of certain
projects, such as wind turbines and ground source heat pumps. A
proposed project could exceed these limits if the applicant provided
additional information on how it would obtain NEPA approval and an
approval timeline.
OEI's EECBG grants are primarily being used to upgrade to energy-
efficient lighting or install energy-efficient heating, ventilating,
and air conditioning (HVAC) equipment or controls. The lighting
upgrades were for street lights; traffic lights; or lights in
buildings, parking lots, and garages. HVAC activities included
replacing HVAC systems, furnaces, boilers, or building ventilation or
control systems. Other local governments received grants from OEI to
develop and implement a community energy plan or to fund activities
such as adding insulation to buildings, installing energy-efficient
windows and doors, training staff in energy efficiency building codes,
and optimizing traffic flow.
The largest OEI grant was for $1 million to the county of Washington
community schools for insulation, a geothermal system, windows, and
lighting. The smallest OEI grant was for $3,405 to the city of Murray
for various energy efficiency measures such as replacing an existing
furnace with a more efficient one. The grants OEI made were generally
smaller than the DOE direct grants. For example, the allocations for
11, or 44 percent, of the 25 DOE direct grant recipients were for
$500,000 or more, while only 3 OEI recipients received awards in that
range. On the other hand, 41 of OEI's 76 recipients, or about 54
percent, received grants under $50,000, and only 1 DOE grant was about
that amount.
While almost all EECBG funds for Iowa have been obligated, spending
has been slow. Some grant recipients have taken time to further refine
their plans or, in the case of OEI, waited for additional DOE program
guidance before distributing grant funds to spend.
* DOE data showed that about $1.2 million, or about 6 percent, of
EECBG funds provided to recipients within Iowa had been spent as of
July 16, 2010. Of the 24 cities, counties, and Indian tribes allocated
funds directly from DOE, 12 had not spent any funds. In contrast, 2
counties had spent all of their award funds, and the county of Warren
had spent over half of its funds. OEI and its grant recipients had
spent less, slightly over $129,000, or about 1 percent of the funds
awarded to them. DOE officials told us that spending has been slower
than anticipated but that many EECBG grantees are beginning to
identify projects and complete plans for them. They said that the
results of energy audits and engineering studies have shown that many
grantees' original plans for energy projects are no longer feasible,
and replacement activities have been common.
* Now that OEI has received DOE guidance on how to comply with program
requirements, OEI officials said that projects are gearing up, with 5
of the 76 projects completed as of July 15, 2010. OEI officials said
that they believed that the majority of funds will be spent in fiscal
year 2011. The DOE project officer for the award told us that he
expects that Iowa will meet the DOE goal to draw down at least 20
percent of funds by September 30, 2010.
* The city and county we visited that received direct grants from DOE
had used a considerable portion of their grant funds. DOE reported
that, as of July 16, 2010, Iowa City had spent $280,000 of its
$692,300 grant. City officials told us that $250,000 of these
expenditures was a drawdown of funds for the revolving loan fund that
the city established to help finance local businesses' energy
efficiency activities. A city official said that the funds were moved
into a city account to be available for loans under the revolving
fund. As of late June 2010, no loans had been requested from the fund,
and project officials were considering whether they should lower the
minimum loan amount that could be obtained from the fund. The city had
also created a small energy office to continue to support the mission
to increase energy efficiency and reduce greenhouse gas emissions and
spent small amounts of funds on some of its other initiatives. For
example, city officials said that over $9,800 had been spent on
setting up and operating the energy office as of June 30, 2010, and
over $8,600 had been spent for software and energy audits to support
the municipal retrofit activity.
* The county of Warren had spent $116,849 of its $171,200 grant. At
the time of our visit, the county had installed a geothermal heating
and cooling system to replace a less energy-efficient system at a
local nature center and was waiting for a decision from DOE on its
request for a waiver of the Buy American provisions of the Recovery
Act. According to county officials, the waiver is being sought to use
Recovery Act funds to procure a wind turbine for the center project
from a Canadian manufacturer. County officials said that they received
three bids on the wind turbine: two from U.S. manufacturers and one
from the Canadian manufacturer. The officials stated that the Canadian
wind turbine is much more efficient and will be less costly to
maintain. They also said that an American firm will build the
supporting tower for the turbine.
DOE and OEI have similar approaches to monitoring their grants. Both
review reports submitted by grantees, which DOE refers to as desktop
reviews, and make site visits. Both award grants on a cost
reimbursable basis and review invoices (and supporting documentation)
submitted for payment. In March 2010, DOE issued a reference manual
for monitoring Recovery Act funding for EECBG, SEP, and
weatherization. The manual, which provides more detailed instructions
to implement DOE's monitoring plan for these programs, requires that
DOE personnel conduct both desktop and onsite monitoring of grantees,
with the frequency based on the dollar amount of the grants and
grantees' performance. According to the manual, desktop monitoring
requires DOE to constantly review details of project planning,
implementation, and outcome (such as overall energy efficiency
impacts) captured in DOE data management/evaluation systems through
regular reporting by grantees and DOE's project management teams. DOE
project officers are to review the report submissions to determine
progress toward goals and objectives, compare planned and actual
activities, and determine whether grantees are meeting benchmarks and
deliverables on schedule and within budget. According to DOE, the
purpose of its onsite visits is to formally evaluate progress and
identify issues concerning progress. Visits generally involve
interviews of grantee staff and a review of project documents, and may
include visits to work sites. DOE staff have begun to make site
visits. According to DOE officials, as of July 23, 2010, department
personnel visited five EECBG grantees, including Iowa City, between
May 24 and May 27, 2010.
* In November 2009, OEI set out its monitoring strategy for the EECBG
program, which applies only to the grants OEI awarded. The office does
not monitor the grants DOE provided directly. OEI's monitoring is
similar to DOE's--both use their reviews of grant recipients'
reporting as the primary device to monitor project activity and both
make onsite visits on a schedule based on the size of the award. OEI
also plans to give priority to monitoring grantees with little or no
prior experience in complying with government accounting and reporting
requirements because the office believes these recipients' management
control systems are uncertain and likely higher risk.
* OEI requires its grantees to report quarterly on progress and submit
other project data on use of the funds. These data include quarterly
status reports on funds received during the reporting period; the
amount of Recovery Act funds obligated or expended; a detailed list of
all projects or activities for which Recovery Act funds were expended
or obligated, including the name and description of the project or
activity; and an estimate of the number of jobs created or retained by
the project/activity.
According to OEI officials, the office plans to make at least one
onsite visit for each grant per year. For grants from $750,000 to $1
million, it plans to make site visits at least once every 6 months.
For recipients of grants of $1 million or more, OIE plans to visit at
least once every 3 months. If this schedule cannot be maintained for
all grants, OEI will, at a minimum, review the agreement, all reports,
submittals, and financial records on a grant, and contact the grantee
by e-mail or telephone. As of July 23, 2010, OEI had made 13 site
visits.
Under OEI's program, grant recipients incur project expenses and
submit invoices for applicable project costs that are supported by
receipts and related documentation for OEI's review. OEI staff are
responsible for comparing the billings with the terms of the grant
agreement and ensuring the charges and payments being made are within
the agreement terms. OEI makes payments to grantees on a quarterly
basis, which provides additional leverage to OEI to ensure that
grantees meet requirements for their quarterly reporting on projects.
According to OEI officials, the office can refuse to make these
payments or even suspend the availability of grant funds if grantees
do not comply with reporting or other requirements.
Iowa Has Access to All of Its Recovery Act Weatherization Funds and
Approved a Local Agency's Management Reforms:
In a July 13, 2010, letter to DOE, DCAA requested access to the
remaining 50 percent of its Recovery Act weatherization funds, or
$40.4 million, and certified that it had, among other things,
completed weatherizing 2,178 homes--30.3 percent of its target of
7,196 homes--using Recovery Act funds. DCAA also certified that it had
inspected at least 5 percent of the homes weatherized by each of the
17 local agencies that used Recovery Act funds. In response, DOE
notified DCAA on July 26, 2010, that the department had released the
remaining 50 percent of Iowa's allotted Recovery Act funds. As shown
in table 2, Iowa began using Recovery Act funds to weatherize homes in
August 2009 once the U.S. Department of Labor had determined
prevailing wage rates for weatherization workers. Since then, Iowa's
monthly total of completed weatherized homes grew to 546 in July 2010
as DCAA used funding from the Recovery Act, DOE's regular
weatherization appropriation, and the federal Low-Income Home Energy
Assistance Program. As of July 30, 2010, Iowa had spent $22.6 million
of its Recovery Act weatherization funds, according to DOE's Recovery
Act Web site.
Table 2: Number of Homes Weatherized in Iowa, by Funding Source,
August 2009 through July 2010:
Month: August 2009;
Homes weatherized using annual appropriated funds[A]: 264;
Homes weatherized using Recovery Act funds: 1;
Total: 265.
Month: September 2009;
Homes weatherized using annual appropriated funds[A]: 202;
Homes weatherized using Recovery Act funds: 6;
Total: 208.
Month: October 2009;
Homes weatherized using annual appropriated funds[A]: 184;
Homes weatherized using Recovery Act funds: 59;
Total: 243.
Month: November 2009;
Homes weatherized using annual appropriated funds[A]: 105;
Homes weatherized using Recovery Act funds: 147;
Total: 252.
Month: December 2009;
Homes weatherized using annual appropriated funds[A]: 73;
Homes weatherized using Recovery Act funds: 156;
Total: 229.
Month: January 2010;
Homes weatherized using annual appropriated funds[A]: 53;
Homes weatherized using Recovery Act funds: 231;
Total: 284.
Month: February 2010;
Homes weatherized using annual appropriated funds[A]: 40;
Homes weatherized using Recovery Act funds: 258;
Total: 298.
Month: March 2010;
Homes weatherized using annual appropriated funds[A]: 11;
Homes weatherized using Recovery Act funds: 318;
Total: 329.
Month: April 2010;
Homes weatherized using annual appropriated funds[A]: 23;
Homes weatherized using Recovery Act funds: 400;
Total: 423.
Month: May 2010;
Homes weatherized using annual appropriated funds[A]: 14;
Homes weatherized using Recovery Act funds: 361;
Total: 375.
Month: June 2010[B];
Homes weatherized using annual appropriated funds[A]: 8;
Homes weatherized using Recovery Act funds: 241;
Total: 249.
Month: July 2010[B];
Homes weatherized using annual appropriated funds[A]: 19;
Homes weatherized using Recovery Act funds: 527;
Total: 546.
Month: Total;
Homes weatherized using annual appropriated funds[A]: 996;
Homes weatherized using Recovery Act funds: 2,705;
Total: 3,701.
Source: Iowa Division of Community Action Agencies.
Note: Iowa considers weatherization to be complete only after the
local agency's inspector has conducted the final inspection and
approved the work.
[A] Includes DOE's regular Weatherization Assistance Program
appropriations and funding from the U.S. Department of Health and
Human Services' Low-Income Home Energy Assistance Program. According
to DCAA officials, Iowa has spent all of the $8.6 million made
available through DOE's fiscal year 2009 regular and supplemental
appropriations. DOE allocated about $3.9 million to Iowa for
weatherization activities from its regular fiscal year 2010
appropriation.
[B] The number of weatherized homes is underreported for June and over
reported for July because totals were reported early in June to meet
Recovery Act quarterly reporting deadlines, according to a DCAA
official.
[End of table]
As we reported in May 2010,[Footnote 12] DCAA had found numerous
management weaknesses in the oversight of weatherization contractors'
work by SIEDA, one of the state's local agencies that implement the
weatherization program. Although Recovery Act funds had not been used,
DCAA believed that the identified weaknesses were sufficiently serious
that it suspended Recovery Act funding to SIEDA in September 2009 and
required SIEDA to develop and implement an action plan to correct
them. In response, SIEDA fired its weatherization coordinator and
decertified its furnace and weatherization contractors. DCAA and SIEDA
officials told us that SIEDA has also (1) hired and trained several
new weatherization staff members, (2) revised its contracting
procedures, and (3) developed a new list of general and furnace
contractors to bid on weatherization work. On the basis of SIEDA's
test of its new procedures for overseeing contractors' performance,
DCAA notified SIEDA that it would release $1.7 million in Recovery Act
funds effective August 23, 2010, for weatherizing homes in seven
southern Iowa counties.
Recovery Act Education Funds in Iowa Primarily Fund Teachers'
Salaries, and Controls over Expenditures at Two Local Districts Are
Generally Working:
Between 2009 and 2011, Iowa will receive approximately $666 million in
Recovery Act funds through three Education programs. As of June 30,
2010, Iowa's local school districts, institutions of higher learning,
and other state government entities had expended about $501 million as
described below:
* ESEA Title I, Part A. As of June 30, 2010, Education had allocated
to the Iowa Department of Education an estimated $51.5 million in ESEA
Title I, Part A, funds under the Recovery Act to help school districts
educate disadvantaged youth. The Iowa Department of Education reported
that school districts had spent a total of about $16 million using
federal funding formulas that target funds on the basis of such
factors as schools with high concentrations of students from families
living in poverty. In addition, Education awarded Iowa an $18.7
million ESEA Title I School Improvement Grant. These funds are
intended to help improve student achievement in the nation's
persistently low-performing schools identified for improvement,
corrective action, or restructuring. As of June 30, 2010, Iowa had
disbursed only about $36,000 of these funds, primarily for expenses
associated with the review and approval of districts' applications for
grants. The Iowa Department of Education will begin disbursing program
funds to selected districts at the beginning of the 2010-2011 school
year.
* IDEA, Part B. As of June 30, 2010, Education had allocated to the
Iowa Department of Education an estimated $126.2 million in IDEA, Part
B, funds under the Recovery Act. IDEA, Part B, is the major federal
statute supporting the provisions of early intervention and special
education and related services for children and youth with
disabilities. The Iowa Department of Education reported that local
school districts and area education agencies[Footnote 13] had expended
about $101 million of these funds as of June 30, 2010.
* SFSF. Education allocated to Iowa a total of about $472 million in
SFSF funds: about $386 million in education stabilization funds--
generally financial aid to local school districts and institutions of
higher learning--and about $86 million in government services funds.
Of the $86 million in government services funds, Iowa used $63 million
for public assistance, public safety, and Medicaid programs. The
remaining $23 million will be used to support K-12 education in the
coming school year. As of June 30, 2010, Iowa reported that local
school districts, institutes of higher learning and state government
entities had spent or distributed about $384 million of the total $472
million in SFSF funds.
* Iowa officials told us that Recovery Act funds made up for statewide
funding shortfalls in education, which allowed local districts and the
states' universities to retain general and special education
instructors, make changes in course curriculum, or replace outdated
instructional equipment. This past school year--July 2009 through June
2010--Iowa officials estimated that the Recovery Act provided about 6
percent of the state's per pupil K-12 funding and about 14 percent of
the state's per pupil funding for institutions of higher learning.
According to information on Iowa's Recovery Act Web site, the Recovery
Act funded more than 7,800 educator and education-related
administrative positions across the state for the period April 1
through June 30, 2010. Recovery Act state aid funding for the 2010-
2011 school year will be about $48 million, down from $202 million in
2009-2010. However, according to a state education official, most
districts in the state should not face significant financial
difficulties in the year ahead. Officials at six local districts that
we contacted told us they planned to balance their budgets by taking a
number of different actions, including reducing staff, suspending new
hiring, consolidating schools, raising local taxes, and drawing upon
their reserve funds including unspent Recovery Act funds received in
school year 2009-2010.
* Public Law 111-226, enacted on August 10, 2010, provides $10 billion
for the new Education Jobs Fund to retain and create education jobs
nationwide.[Footnote 14] The Fund will generally support education
jobs in the 2010-2011 school year and be distributed to states using a
formula based on population figures. States can distribute their
funding to school districts based on their own primary funding
formulas or districts' relative share of federal ESEA Title I funds.
According to a state Education official, Iowa expects to receive about
$96 million from the Education Jobs Fund that will be distributed to
districts across the state based on weighted student counts per the
state's established aid formula.
Controls over Recovery Act Education Funds Are in Place, but Two
Districts We Visited Did Not Fully Comply:
To receive Recovery Act funds, Education required that states provide
assurances concerning accountability, transparency, reporting, and
compliance with certain federal laws and regulations. The Iowa
Department of Education had systems in place to monitor the state's
361 local school districts' compliance with federal requirements for
education programs prior to receiving Recovery Act funds. These
processes, including oversight and financial analyses at the state
level as well as required financial statement reporting by local
school districts, were extended to oversight of Recovery Act funds. In
addition, specifically for the Recovery Act, districts must report
quarterly on funds spent and related jobs information.
To assess whether controls were working as designed and verify that
funds were spent in accordance with Recovery Act guidelines, we
reviewed purchases and financial control activities at two
judgmentally selected school districts--the Des Moines Independent
Community School District, as of March 31, 2010, and Marshalltown
Community School District, as of April 30, 2010. Specifically, we
reviewed the use of funds and documentation of selected Recovery Act
expenditures for SFSF, ESEA Title I, and IDEA Part B. We found the
following at the time of our review:
* Both districts had controls, including written policies and
established review procedures, to ensure Recovery Act funds were
appropriately spent and expenditures were generally in accordance with
established guidelines and requirements. The Des Moines School
District had received $17.8 million in Recovery Act funds and used
those funds to retain general education, ESEA Title I, and special
education teachers; purchase materials to implement a new mathematics
learning series; and purchase specialized equipment to support
students with sight impairments. The Marshalltown School District had
received $2.8 million in Recovery Act funds and used those funds to
retain educators across the district, purchase materials to implement
a new literacy learning series, and upgrade district communication
systems and related services.
* District officials acknowledged that, in some instances, they did
not follow state or federal guidelines or made an erroneous accounting
entry, although the districts were taking corrective actions to
address these problems. Specifically, we identified equipment
purchases for the IDEA, Part B program larger than $5,000 that were
not submitted to the state for approval, that state officials agreed
was required by U.S. and Iowa Department of Education guidelines. The
Des Moines School District purchased a Gemini Braille machine and a
Braille notes machine for about $25,000 without seeking review and
approval from the state prior to purchase. Since April 2009, according
to state officials, Iowa state policy has required local school
districts to obtain prior approval from the state Department of
Education to purchase equipment exceeding $5,000.[Footnote 15]
Similarly, we found that the Marshalltown School District had not
requested approval to purchase communication equipment and software at
a cost of $8,400. In both cases, administrators at the local district
stated that they were unaware of the state requirement. As we
completed our reviews, the districts were making changes in their
procedures to ensure that they received state approval of IDEA
equipment purchases greater than $5,000. Furthermore, the state
Department of Education emphasized to area education agencies and
local districts the importance of obtaining state review of plans to
purchase equipment for the IDEA, Part B program valued at $5,000 or
more. We also found two instances in which products or services were
erroneously coded to the IDEA Part B program--one for a carbon
monoxide detector that should have been charged to IDEA, Part C, and
one for books that should have been charged to the ESEA Title I
programs. In both instances, the dollar amounts were small and the
districts initiated corrective action.
State and Local Officials Said They Benefited from Recovery Act Funds
but Will Need to Reduce or Eliminate Programs Once These Funds Are
Spent:
Senior Iowa Department of Management officials told us that Iowa will
benefit from the use of Recovery Act funds received in fiscal year
2011 because these funds will enable the state to avoid tax increases
and limit the amount of funds drawn from its Cash Reserve Fund to
balance the state's fiscal year 2011 budget. The state's fiscal year
2011 budget is based on a revenue estimate of approximately $5.44
billion. The Governor has signed the budget into law. During fiscal
year 2010--ending June 30, 2010--Iowa had collected approximately $5.5
billion in revenues for the state's General Fund. According to
officials from Iowa's Legislative Services Agency, fiscal year 2010
General Fund revenues were approximately $244 million above the
projections of Iowa's Revenue Estimating Conference.[Footnote 16]
These officials added that the state should end fiscal year 2010 with
excess revenue of approximately $350 million.[Footnote 17]
Senior Iowa Department of Management officials said that the Governor
implemented plans for improving the efficiency of state operations to
reduce state expenditures, in part to account for revenue shortfalls
following the disbursement of the remaining Recovery Act funds and
other one-time sources of revenue, such as state reserve funds.
According to a June 2010 report issued by the Iowa departments of
administrative services and management, the implementation of
efficiency measures approved by the Governor and General Assembly will
benefit Iowa taxpayers by $298.8 million.[Footnote 18] According to
senior Iowa Department of Management officials we spoke with, most of
the savings will be realized in fiscal year 2011. Furthermore, the
state implemented a State Employee Retirement Incentive Program
(SERIP) in February 2010.[Footnote 19] Senior Iowa Department of
Management officials said that, as of June 30, 2010, approximately
2,100 employees had participated in SERIP.
We visited the cities of Des Moines and Marshalltown to discuss local
governments' use of Recovery Act funds, including plans to adjust
their budgets once they use available Recovery Act funds. (Table 3
provides some demographic information on these two localities.) Local
government officials said that their cities and budgets benefited from
the use of Recovery Act funds for various programs but that they
planned to reduce expenditures or eliminate programs once Recovery Act
funds are expended. Additionally, some local government officials
indicated they faced difficulties when applying for and administering
funds for Recovery Act competitive grant programs, such as a limited
number of staff to apply for grants and difficulty in complying with
Buy American and Davis-Bacon provisions.
Table 3: Demographics of Localities Visited to Address Use of Recovery
Act Funds:
Local government: City of Des Moines;
Population[A]: 198,460;
Unemployment rate, June 2010 (percentage)[B]: 7.4%;
Operating budget[C]: $577,110,866.
Local government: City of Marshalltown;
Population[A]: 25,645;
Unemployment rate, June 2010 (percentage)[B]: 7.5%;
Operating budget[C]: $25,794,881.
Sources: GAO analyses of U.S. Census Bureau population data and U.S.
Department of Labor, Bureau of Labor Statistics, Local Area
Unemployment Statistics; City of Des Moines; and City of Marshalltown.
[A] Population data are from the latest available estimate, July 1,
2009.
[B] Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. The state of Iowa had a
nonseasonally adjusted unemployment rate of 6.6 percent during the
same period. Rates are a percentage of the labor force. Estimates are
subject to revisions.
[C] The time frame for the operating budgets of the localities we
interviewed is July 1, 2010, through June 30, 2011.
[End of table]
Des Moines:
As of May 31, 2010, Des Moines had been awarded approximately $18.6
million in Recovery Act funds from federal and state sources and
expended approximately $5.4 million for community development, public
housing, and transportation enhancement, among other things (see table
4). Since our May 2010 report on the Recovery Act,[Footnote 20] Des
Moines officials said the city had completed resurfacing projects on
two streets, including Fleur Drive, a major roadway in Des Moines, and
continues to use Recovery Act funds awarded by OEI.[Footnote 21] City
officials also noted that they received approval from DOE to use a
revolving loan fund program, funded by Recovery Act EECBG funds, to
purchase hybrid vehicles and charging stations for the city's vehicle
fleet. Des Moines officials said that Recovery Act funds will help
improve the city's budget and long-term fiscal stability by allowing
Des Moines to use Recovery Act funds for several infrastructure
projects, such as street repairs and extensions of pedestrian trails
that would have been funded through other sources of revenue.
Table 4: Select Sources of Recovery Act Funding to Des Moines:
Agency: Iowa Department of Transportation;
Program: Transportation Enhancement;
Use of funds: Constructing multipurpose trail extensions of a walkway
along the Des Moines River;
Amount awarded: $2,849,000;
Amount expended[A]: $845,926.
Agency: U.S. Department of Housing and Urban Development;
Program: Community Development Block Grant - Recovery;
Use of funds: Expanding neighborhood infrastructure rehabilitation
programs (e.g., street, curb, sidewalk repairs) and demolition
programs for neighborhood redevelopment;
Amount awarded: $1,152,886;
Amount expended[A]: $76,073.
Agency: U.S. Department of Housing and Urban Development;
Program: Recovery Act Public Housing Capital Fund;
Use of funds: Modernizing Southview Manor to serve elderly residents
eligible for public housing;
Amount awarded: $1,455,108;
Amount expended[A]: $1,309,598.
Agency: U.S. Department of Justice;
Program: COPS Hiring Recovery Program (CHRP);
Use of funds: Creating nine additional police officer positions for 3
years, with an additional year funded by Des Moines, to support
community policing efforts[B];
Amount awarded: $2,191,806;
Amount expended[A]: 0.
Agency: U.S. Department of Justice;
Program: Edward Byrne Memorial Justice Assistance Grant (JAG);
Use of funds: Improving forensic capabilities, upgrading technology,
and funding equipment to improve officer safety;
Amount awarded: $1,178,833[C];
Amount expended[A]: $542,684.
Source: City of Des Moines.
[A] Amount expended as of May 31, 2010.
[B] According to Des Moines officials, the city is expected to begin
expending funds for the COPS Hiring Recovery Program in 2010.
[C] Local governments in the Des Moines metropolitan area, including
Des Moines, the City of Altoona, and Polk County, received a joint
award of $1,502,161. Of that amount, Des Moines received $1,178,833.
[End of table]
Des Moines officials said that while the city applied for but was not
awarded funding from two Recovery Act competitive grants, it may apply
for other Recovery Act grants.[Footnote 22] City officials also said,
however, that the city has had difficulties finding staff who have
time to research and apply for Recovery Act grants and obtaining
funding for matching requirements required by some Recovery Act grants
programs.
Des Moines officials said that the city is continuing its partnership
with other localities in the Des Moines metropolitan area to
administer funds from the Edward Byrne Memorial Justice Assistance
Grant (JAG) program and EECBG. The city is considering using EECBG
funds to implement an energy assessment program, in coordination with
private firms and nonprofit entities, to improve energy conservation
or find alternative sources of electricity for use in Des Moines.
Once Des Moines uses all of its Recovery Act funds, city officials
said that they plan to reduce expenditures for programs receiving
these funds to levels established prior to the implementation of the
Recovery Act. Des Moines officials also said that they were looking
for other sources of revenue for the city's budget, such as increased
sewer and storm water fees; however, officials said that under Iowa
law, the city would need to obtain approval from the Iowa General
Assembly to obtain new taxing authority or expand its current
authority to tax properties.
Des Moines projected total revenues of about $639.2 million for fiscal
year 2010-2011, which is about a 12.9 percent decrease from total
revenues of about $733.6 million in fiscal year 2009-2010. In
response, city officials plan to decrease expenditures by reducing
citizen services, changing business and contracting practices, and
eliminating 58 full-time equivalent positions during fiscal year 2010-
2011.[Footnote 23]
Marshalltown:
As of June 3, 2010, Marshalltown had been awarded at least $3.52
million in Recovery Act funds from federal and state sources, and had
expended at least $1.11 million of this amount. Marshalltown officials
said that Recovery Act funds were used, in part, to resurface a
segment of Iowa Avenue, which is a major roadway in Marshalltown,
acquire a bus for Marshalltown Municipal Transit, and purchase new
radio equipment for law enforcement officials in Marshalltown and
surrounding Marshall County.
Furthermore, according to city officials, Marshalltown was awarded
about $2.6 million in grants from the Lead-Based Paint Hazard Control
Program to eliminate lead-based paint, replace leaded windows, and
repaint residences eligible for renovations through the program (see
table 5). Marshalltown officials noted that the city worked
extensively with partners from surrounding counties, educational
institutions, and other agencies to administer funds for this program.
[Footnote 24] City officials also reported that they coordinated with
Marshall County to purchase radios for law enforcement through the
Edward Byrne Memorial Justice Assistance Grant (JAG) program because
Marshalltown and Marshall County have an integrated system of
communications.
Table 5: Select Sources of Recovery Act Funding to Marshalltown:
Agency: Iowa Department of Transportation;
Program: Highway Infrastructure Investment Funds;
Use of funds: Resurfacing a segment of Iowa Avenue, a major roadway in
Marshalltown, to improve driving quality and safety;
Amount awarded: $449,377;
Amount expended[A]: $449,377.
Agency: Iowa Department of Transportation;
Program: Transit Capital Assistance Program;
Use of funds: Purchasing one 30-foot bus for Marshalltown Municipal
Transit in order to reduce the agency's maintenance costs for its bus
fleet;
Amount awarded: $328,666;
Amount expended[A]: 0.
Agency: U.S. Department of Housing and Urban Development;
Program: Lead-Based Paint Hazard Control Grant Program;
Use of funds: Eliminating lead-based paint, replacing leaded windows
and repainting residences, and housing citizens affected by
renovations in temporary quarters;
Amount awarded: $2,591,227[B];
Amount expended[A]: $614,070.
Agency: U.S. Department of Justice;
Program: Edward Byrne Memorial Justice Assistance Grant (JAG);
Use of funds: Purchasing portable radios for law enforcement purposes;
Amount awarded: $155,546[C];
Amount expended[A]: $49,872.
Sources: City of Marshalltown (as of May 31, 2010), Recovery.gov (as
of June 3, 2010).
[A] Amounts expended for the Highway Infrastructure Investment Funds,
Transit Capital Assistance Program, and Edward Byrne Memorial Justice
Assistance Grant (JAG) programs are updated as of May 31, 2010.
Amounts expended for the Lead-Based Hazard Control Grant Program are
updated as of June 3, 2010. All amounts rounded to the nearest dollar.
[B] Funds were shared among Marshalltown and other entities in Hardin,
Marshall, and Tama counties in Iowa.
[C] Funds were shared between Marshalltown and Marshall County to
purchase portable radios for law enforcement purposes.
[End of table]
Marshalltown officials said they encountered some difficulties in
applying for and administering Recovery Act competitive grants. For
instance, Marshalltown's efforts to renovate homes with Lead-Based
Paint Hazard Control funds were initially slowed by issues concerning
the Buy American and Davis-Bacon provisions, such as helping small
contractors meet Davis-Bacon requirements.
According to Marshalltown officials, the city projects total revenues
of about $32.7 million for fiscal year 2011, a 14.2 percent decrease
from total revenues of about $38.1 million in fiscal year 2010.
[Footnote 25] Marshalltown officials noted that the city has
experienced a decline in property values since 2009, leading to a
reduction in the growth of property tax revenues. Additionally, city
officials said that revenues from the city's local option sales tax
have slowed since 2008, and city employees' wages have increased in
recent years. Because the city does not have the authority to increase
property tax rates above current levels,[Footnote 26] it needed to
reduce expenditures in several areas. For instance, the city
eliminated its full-time city attorney position and delayed
expenditures for training and equipment. However, Marshalltown
officials also expect some positive economic growth from the recent
establishment and expansion of new business facilities within the
city, which could lead to job creation.
Owing to the current state of the economy, Marshalltown officials said
that they anticipate the city will not have enough resources to
maintain its lead abatement program following the depletion of
Recovery Act funds; as a result, the program would likely be shut
down. However, according to city officials, the depletion of such
funds should otherwise not have a significant impact on Marshalltown's
operating budget because they used most of the Recovery Act funds for
one-time capital expenditures, such as the planned purchase of a new
bus and portable radios for law enforcement. Marshalltown officials
added that the city's budget and long-term fiscal stability benefited
from the receipt of Recovery Act funds because the city was able to
implement various capital projects that otherwise would have been
delayed for several years.
Iowa's State Auditor and the Iowa Accountability and Transparency
Board Continue to Monitor Recovery Act Funds:
For fiscal year 2009, the State of Iowa issued a Comprehensive Annual
Financial Report dated December 18, 2009 and a Single Audit report
dated March 17, 2010. The Office of Auditor of State (Auditor's
office) issued a qualified audit opinion on the state of Iowa's
financial statements because the Auditor's office could not
sufficiently audit the State's General Fund and other governmental
activities due to a reduction in audit work caused by a significant
(34 percent) reduction in its fiscal year 2010 appropriation. In the
State's fiscal year 2009 Single Audit report, the Auditor's office did
not identify any material weaknesses. Approximately 11 percent of the
fiscal year 2010 budget reduction was restored for fiscal year 2011.
According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing single audit results, it
received Iowa's single audit reporting package for the year ending
June 30, 2009, on March 31, 2010. This was the first Single Audit for
Iowa that included Recovery Act programs, and it included only 4
months of Recovery Act expenditures. Iowa's Single Audit report for
fiscal year 2009 identified 58 significant internal control
deficiencies related to compliance with Federal Program requirements,
none of which were classified as material weaknesses. Some of these
significant deficiencies occurred in programs that included Recovery
Act funds.
* A state audit official told us that Iowa's single audit covered
almost all Recovery Act funds received in fiscal year 2009 and that
the office tested some recipient reports for fiscal year 2010.
Furthermore, this official told us that the audit found that some
departments receiving Recovery Act funds, such as the Department of
Education, lacked formal written policies for reviewing and approving
subrecipient reports. The official also found that although
subrecipient reports are reviewed for reasonableness, specific
procedures were not applied by the Department of Education to
determine whether the financial amounts and number of jobs reported
were supported by adequate documentation. The state auditor's office
recommended that the Department of Education implement written
policies and procedures to review section 1512 recipient reports
submitted by school districts to determine allowability and
completeness. In March 2010, the Iowa Department of Education
submitted a Recovery Act Funds Monitoring Plan to the U.S. Department
of Education.
* According to an Iowa Audit official, an embezzlement of funds at the
Clinton, Iowa, school district totaling approximately $500,000 was
discovered in March 2010 when an accounting supervisor was replaced.
According to state audit officials, Recovery Act funds were commingled
with other school district revenues. Although the Iowa Office of the
State Auditor and others investigated the misappropriation, they could
not determine if Recovery Act funds were misused because the
district's financial records were in poor condition.
* Iowa's Office of the State Auditor is preparing its fiscal year 2010
audit plan. It plans to audit almost all programs receiving Recovery
Act funds. According to a state audit official, the office has not yet
identified any significant fiscal year 2010 audit risks for Recovery
Act programs.
* Iowa's Accountability and Transparency Board surveyed 82 programs
and identified 6 high-priority programs--such as the Weatherization
Assistance Program and SFSF--that it expects may have some difficulty
in fully complying with the Recovery Act's accountability and
transparency requirements. These high-priority programs submitted
comprehensive accountability plans for the board's review by December
2009. The board plans to establish an ongoing audit process, assess
needs for additional oversight, and develop a method to confirm
Recovery Act information reported on the state's Web site. Despite
budget cuts and layoffs, the state is taking steps to achieve some of
these goals, including the use of targeted site visits and recipient
surveys.
* At the recommendation of State Audit and Department of Management
officials, the Iowa Department of Public Health held additional
training on subrecipient reporting for high-priority programs and
other Recovery Act programs on May 3, 2010.
Iowa Reported on Jobs Funded Using Recovery Act Funds:
We found that Iowa has established a centralized database and
validation and certification processes to help ensure the accuracy of
data, reported jobs, and other information related to the use of
Recovery Act funds to the federal government, as described below:
* Iowa reported to the federal government on Recovery Act funds that
the state received directly from federal agencies, including
information on Recovery Act expenditures and the number of jobs funded
by the Recovery Act. The Iowa Department of Management used a
centralized database that it created with the Iowa Department of
Administrative Services to report the state's Recovery Act information
to www.federalreporting.gov. Through its centralized database, Iowa
reported that 9,696 jobs were funded by the Recovery Act for the
period April 1 to June 30, 2010 as of July 29, 2010. However, some
local agencies, such as public housing and urban transit agencies,
which receive their funding directly from federal agencies and not
through the state, report Recovery Act information to
www.federalreporting.gov and not through the state's centralized
reporting database.
* Beginning with the quarter ending March 31, 2010, state officials
required departments to perform quarterly reconciliations of Recovery
Act revenues and expenditures reported to the federal government with
amounts reported to the state's centralized accounting system. These
reconciliations, when summarized across the state agencies, resulted
in increases to the state's reported Recovery Act revenues and
expenditures. Some state agencies, such as the Board of Regents, do
not report to the state's centralized accounting system and are not
included in this reconciliation process.
* For the July 2010 recipient reporting period, state officials said
that their centralized reporting process worked well. As of July 30,
2010, 100 percent of the prime recipient reports submitted by Iowa
were successfully validated by the Office of Management and Budget. A
state official noted one issue where a subrecipient improperly
reported on vendors;
however, the subrecipient plans to file a corrected report. Overall,
an Iowa state official noted, the system illustrates for the public
how Recovery Act funds are spent and could be used to report the use
of non-Recovery Act funds in the future. For example, the centralized
Recovery Act reporting system has been expanded to facilitate
reporting on Iowa's I-JOBS program, the state's infrastructure
investment initiative.
State Comments on This Summary:
We provided the Governor of Iowa with a draft of this appendix on
August 12, 2010. We also provided relevant excerpts to state and local
agencies that we visited. The Deputy Director of the Iowa Department
of Economic Development responded for the Governor on August 16, 2010,
and agreed with our findings. The Governor's office as well as state
and local agency officials also offered clarifying and technical
suggestions, which we have incorporated, as appropriate.
GAO Contact:
Lisa Shames, (202) 512-3841 or shamesl@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Richard Cheston, Thomas Cook,
Daniel Egan, Christine Kehr, Ronald Maxon, Mark Ryan, Raymond H.
Smith, Jr., and Carol Herrnstadt Shulman made key contributions to
this report.
[End of section]
Appendix VIII Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] We selected the Des Moines District because it is the largest K-12
school district in the state and receives the most federal Recovery
Act dollars. Marshalltown, a midsized district, was selected because
of financial control weaknesses identified in the district's 2008
Independent Auditor's Report.
[3] We judgmentally selected 40 Des Moines School District
disbursements for February 2009 through March 2010 and 20 Marshalltown
School District disbursements for February 2009 through April 2010.
Among other things, when selecting disbursements for review, we
considered large-dollar purchases; round number purchases such as
$20,000; payments to unusual payees, such as a local department store;
and large purchases broken into several smaller payments.
[4] The state received an additional $15 million to fund education
technology, IDEA Part C, school lunch equipment, homeless youth and a
teacher quality partnership project.
[5] The State Auditor issued the fiscal year 2009 Single Audit report
on March 31, 2010. Single Audits are prepared to meet the requirements
of the Single Audit Act, as amended, (31 U.S.C. §§ 7501-7507) and
provide a source of information on internal control and compliance
findings and the underlying causes and risks. The Single Audit Act
requires states, local governments, and nonprofit organizations
expending $500,000 or more in federal awards in a year to obtain an
audit in accordance with the requirements set forth in the act. A
Single Audit consists of (1) an audit and opinions on the fair
presentation of the financial statements and the Schedule of
Expenditures of Federal Awards; (2) gaining an understanding of and
testing internal controls over financial reporting and the entity's
compliance with laws, regulations, and contract or grant provisions
that have a direct and material effect on certain federal programs
(i.e., the program requirements); and (3) an audit and an opinion on
compliance with applicable program requirements for certain federal
programs.
[6] Recovery Act funds for loan programs are treated as obligated if
OEI and the Iowa Finance Authority expect to sign an agreement by
September 30, 2010, according to DOE's contracting officer for Iowa.
[7] DOE's funding opportunity announcement stated that Recovery Act
SEP grant funds are to be spent within 36 months after the grant's
award date--April 20, 2009, for Iowa.
[8] NEPA requires that federal agencies assess the environmental
impacts of proposed actions before making decisions. 42 U.S.C. §§ 4321-
4370f. Projects deemed to have no significant impact on the
environment because of their size, type of activity, and the agency's
experience with similar projects can qualify for categorical exclusion
determinations. Alternatively, if a project is expected to have a
significant environmental impact, DOE would prepare either an
environmental assessment or an environmental impact statement, which
generally takes a few months to more than a year to complete.
[9] OEI has provided up-front SEP funding only to the Iowa Department
of Administrative Services, which needed up-front capital to help with
cash flow for its multi-million dollar project to improve the energy
efficiency of several buildings in the state capitol complex.
[10] On August 4, 2010, DOE also awarded a competitive EECBG grant for
$1 million to the City of West Union, Iowa.
[11] In its January 2010 request for proposals, OEI stated that it was
making about $5.8 million (60 percent of its grant award) available
for local governments that were not eligible for direct grants from
DOE because of their smaller size. The remaining over $2.8 million was
to be available for all Iowa local governments and other entities such
as state agencies.
[12] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[13] Iowa's 10 regional area education agencies, which were
established by the Iowa Legislature in 1974 to provide equitable and
economical educational opportunities for Iowa's children, partner with
public and some private schools to provide education and instructional
support services.
[14] Pub. L. No. 111-226, § 101, 124 Stat. 2380 (Aug. 10, 2010). The
legislation also provided for an extension of increased Federal
Medical Assistance Percentage (FMAP) funding.
[15] Moreover, Department of Education guidance states that, in
general, local education agencies must obtain prior approval from the
state before using IDEA funds to purchase equipment with a unit cost
of $5,000 or more.
[16] Fiscal year 2010 receipts will continue to be deposited and final
net fiscal revenue growth will not be known until the end of September
2010.
[17] This figure, according to Iowa Legislative Service Agency
officials, does not include adjustments for any appropriation
reversions, or increases or decreases to unlimited appropriations.
[18] According to officials from Iowa's Legislative Services Agency,
the Governor implemented some plans for improving the efficiency of
state operations through Executive Order 20 (Dec. 16, 2009), and the
General Assembly passed additional efficiency improvements and plans
to reorganize state agencies, as detailed in Iowa Senate File 2088
(Feb. 1, 2010). For more information, see [hyperlink,
http://www.gao.gov/products/GAO-10-605SP].
[19] According to senior Iowa Department of Management officials,
SERIP is intended to reduce state personnel expenditures and help
reduce the state's unemployment, provide greater diversity in state
government, and expand employees' service capabilities.
[20] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[21] OEI awarded Des Moines funding from the EECBG program to expand
and update climate control systems in five city buildings, convert
streetlights to use light-emitting diode technology, and purchase and
install equipment at the Des Moines Metropolitan Wastewater
Reclamation Authority facility.
[22] According to Des Moines officials, the city applied for but was
not awarded (1) a Transit Investments for Greenhouse Gas and Energy
Reduction grant from the Department of Transportation and (2) a
Recovery Act Assistance to Firefighters Fire Station Construction
Grant from the Federal Emergency Management Agency.
[23] A full-time equivalent is the number of hours that represent what
a full-time employee would work over a given time period, such as a
year or a pay period.
[24] Marshalltown obtained and administered funding for the Lead-Based
Paint Hazard Control Program in coordination with Hardin, Marshall,
and Tama counties in Iowa. Additionally, Marshalltown coordinated with
Iowa Valley Continuing Education and Marshalltown Community College to
administer training, and signed an agreement with Primary Health Care
to test children potentially affected by lead poisoning. Marshalltown
also partnered with Friends of the Library and Habitat for Humanity to
use their properties to temporarily relocate families affected by
housing renovations.
[25] According to Marshalltown officials, the total revenues for
fiscal years 2010 and 2011 do not include transfers from other city
funds (e.g., capital improvement funds).
[26] According to Marshalltown officials, the property tax rate for
the city's general fund levy is $8.10 per $1,000 valuation.
[End of Appendix VIII}
Appendix IX: Massachusetts:
Overview:
This appendix summarizes GAO's work on its most recent review of
American Recovery and Reinvestment Act of 2009 (Recovery Act)[Footnote
1] spending in Massachusetts. The full report covering all of GAO's
work in 16 states and the District of Columbia may be found at
[hyperlink, http://www.gao.gov/recovery].
What We Did:
GAO's work in Massachusetts focused on (1) the commonwealth's use of
Recovery Act funds for selected programs, (2) the approaches taken by
Massachusetts agencies to ensure accountability for Recovery Act
funds, and (3) impacts of these funds. We reviewed several specific
programs funded under the Recovery Act in Massachusetts related to
education, highways, transit systems, and public housing. We selected
the programs we reviewed because all have significant funds awarded,
as discussed below. For descriptions and requirements of the programs
we covered, see appendix XVIII of GAO-10-1000SP.
In conducting our, we contacted state agencies and some localities
responsible for implementing the programs. We contacted the state
education office and the Springfield local educational agency. We
followed up on ongoing Recovery Act projects at the Massachusetts
Department of Transportation and Massachusetts Bay Transportation
Authority, which included a review of quality assurance procedures for
Recovery Act projects. We contacted the Boston Housing Authority,
which received Public Housing Capital Fund formula and competitive
grant awards.
We also continued to track the use of Recovery Act funds for state and
local fiscal stabilization and the oversight of funds. We contacted
state officials at the state's central management agency addressing
fiscal issues and handling of Recovery Act funds, as well as officials
at state oversight agencies. We also met with officials from the City
of Boston to discuss its use of Recovery Act funds, including funding
from the Energy Efficiency and Conservation Block Grant, and the
city's fiscal condition. Finally, we contacted oversight officials in
both Massachusetts and Boston to receive an update on their continuing
review and audit of various Recovery Act programs.
What We Found:
* Recovery Act education programs. Massachusetts has been awarded over
$1 billion in Recovery Act funds through three major education
programs, the largest of which is the State Fiscal Stabilization Fund
(SFSF) with an allocation of close to $994 million. These funds were
awarded, in part, to help state and local governments stabilize their
budgets by minimizing budgetary cuts in education and other essential
services. As of July 16, 2010, the commonwealth had drawn down 80
percent of its SFSF funds. Massachusetts has also made progress on its
SFSF oversight efforts by selecting a public accounting firm to
conduct SFSF supplemental reviews of 15 local educational agencies
(LEA).
* Highway infrastructure investment. Massachusetts has begun
construction on 78 of 84 Recovery Act highway projects for which
funding was obligated prior to the March 2, 2010, obligation deadline.
As of August 2, 2010, 9 of the 84 projects have completed
construction. Massachusetts continues to lag behind the national
average on its reimbursement rate. According to a state official,
approximately $30 million have been deobligated from highway contracts
as a result of contracts being awarded below state cost estimates. A
state official stated that they plan to have all deobligated funds
obligated to other projects by the September 30, 2010, deadline--
including one noteworthy project to rehabilitate River Road in
Tewksbury, which was washed out in the March 2010 flooding. State
officials report that some deobligated suballocated funds may be
obligated to other projects outside of their initially intended region.
* Transit Capital Assistance funds. Massachusetts and its urbanized
areas have expended $85.6 million of its initial Recovery Act Transit
Capital Assistance apportionment on several projects, including some
that are nearing completion. An additional $59.7 million was
transferred from the Federal Highway Administration, which included
$24.8 million that originated from funds that were initially
apportioned to suballocated regions in the state. These funds will go
back to suballocated regions for additional projects at regional
transit agencies, including a parking garage at the Wonderland Station
in Revere, emergency repairs on the Massachusetts Bay Transportation
Authority's (MBTA) Red Line subway, and vehicle and equipment
purchases and terminal improvements for the Cape Cod Regional Transit
Authority. At the request of the U.S. Department of Transportation,
Massachusetts will recalculate its planned transit expenditures to
include additional state funds allocated to MBTA which will help the
commonwealth meet the September 30, 2010, maintenance-of-effort
deadline for transit expenditures. Finally, our review of MBTA's
quality assurance procedures revealed that it uses a construction
management firm to perform daily oversight of several of its Recovery
Act-funded projects and MBTA has procedures in place to independently
verify the firm's performance.
* Public Housing Capital Fund. Public housing agencies in
Massachusetts received about $82 million in Public Housing Capital
Fund formula grants and about $73 million in Public Housing Capital
Fund competitive grants. All 68 housing agencies that received formula
grants obligated all of their grant funds by the required deadline of
March 17, 2010, and 63 housing agencies had drawn down a cumulative
total of about $41 million as of August 7, 2010. Of the seven housing
agencies that also received about $73 million in Public Housing
Capital Fund competitive grants, five agencies had drawn down a
cumulative total of $6 million as of August 7, 2010. The Boston
Housing Authority (BHA) received a $33.3 million formula grant and
over half of the $73 million in competitive grant funds (about $40
million) for Massachusetts. For example, BHA received about $22
million in competitive funds to begin rebuilding its Old Colony
development in South Boston as an energy-efficient and green
community. The U.S. Department of Housing and Urban Development (HUD)
regional office in Massachusetts has conducted quality reviews of
Public Housing Capital grant funds and is assisting public housing
agencies with meeting Recovery Act requirements.
* Massachusetts state government's and City of Boston's use of
Recovery Act funds. The Commonwealth of Massachusetts continues to
experience budget pressures, although state officials report that tax
revenue should trend higher during the current fiscal year. Recovery
Act funds continue to support the commonwealth's operating budget for
fiscal year 2011, but less than in the previous 2 fiscal years. Also,
officials report they are preparing for when Recovery Act funding will
no longer be available, mostly through a combination of spending
reductions and availability of state "rainy-day" funds. Boston
officials told us that while Recovery Act funds have strengthened the
city's economy and Boston has experienced some revenue growth in the
last year, the city's costs are increasing and layoffs are expected in
fiscal year 2011. City officials expressed concern for the fiscal
challenges ahead, and they are taking steps to try to mitigate the
impact of the loss of Recovery Act funds.
* Oversight and accountability efforts. The Massachusetts Office of
the State Auditor has several audits under way focused on programs
funded by the Recovery Act, including audits of various local housing
authorities, state and community colleges, regional transit
authorities, and the Massachusetts Department of Transportation. The
state Inspector General has concentrated its Recovery Act efforts on
prevention initiatives, as well as on monitoring, reviewing, and
investigating a variety of Recovery Act-funded programs. Officials
from Boston's City Auditor's office told us that their independent
auditor will conduct Boston's Single Audit for fiscal year 2010 (ended
June 30), which will include an audit of 10 of the city's Recovery Act-
funded projects.
* Recipient reporting. The Massachusetts Recovery and Reinvestment
Office (MRRO) has redesigned Massachusetts's Recovery Act Web site to
facilitate users' ability to track, as well as map, Recovery Act jobs
and dollars by ZIP code, town, county, and congressional district. The
redesigned Web site also includes a link to Recovery Act data reported
by nonstate entities, such as housing agencies and regional transit
agencies. The MRRO has begun to use Recovery Act data to monitor
spending across state agencies and provide increased oversight to
state agencies that have slower rates of Recovery Act spending and
obligation.
Massachusetts Has Used Recovery Act Funds to Stabilize Education and
Has Begun Audits of Local Educational Agencies as Part of Its
Oversight Plan:
Massachusetts has been awarded over $1 billion in Recovery Act funding
through three major education programs, the largest of which is the
State Fiscal Stabilization Fund (SFSF)[Footnote 2] with an allocation
of close to $994 million.[Footnote 3] These SFSF funds were awarded,
in part, to help state and local governments stabilize their budgets
by minimizing budgetary cuts in education and other essential
services.[Footnote 4] Massachusetts also received about $164 million
to be used to help educate disadvantaged youth under Title I, Part A
of the Elementary and Secondary Education Act of 1965, as amended
(ESEA) and about $291 million to be used to support special education
and related services under the Individuals with Disabilities Education
Act, as amended, (IDEA) Part B.[Footnote 5] As of July 16, 2010, the
commonwealth had drawn down 80 percent of its SFSF funds and about 40
percent of the other funds. See figure 1 for more information on
selected funds awarded to Massachusetts.
In addition, Public Law 111-226, enacted on August 10, 2010, provides
$10 billion for the new Education Jobs Fund to retain and create
education jobs nationwide.[Footnote 6] The fund will generally support
education jobs in the 2010 to 2011 school year and be distributed to
states by a formula based on population figures. States can distribute
their funding to school districts based on their own primary funding
formulas or districts' relative share of federal ESEA Title I funds.
Figure 1: Allocations and Drawdowns for the Three Recovery Act
Education Programs as of July 16, 2010:
[Refer to PDF for image: vertical bar graph]
Program: SFSF;
Awarded by Education: $994 million;
Drawn down by state: $795 million.
Program: IDEA Part B;
Awarded by Education: $290 million;
Drawn down by state: $122 million.
Program: ESEA Title I;
Awarded by Education: $164 million;
Drawn down by state: $61 million.
Source: GAO analysis of Education data.
[End of figure]
Massachusetts has made progress on its SFSF oversight efforts. Among
other things, the commonwealth has finalized plans to conduct SFSF
supplemental audits of select LEAs to verify reported expenditures,
identify ineligible expenses, and assess the consistency of reported
data.[Footnote 7] In July 2010, the state selected a public accounting
firm using $100,000 in SFSF-Government Services funds. Under the
supervision of the state education department's Internal Audit Unit,
the accounting firm is expected to conduct these reviews using agreed-
upon procedures during August and September 2010. In cases in which
the reviews discover ineligible uses of funds and reporting errors,
LEAs will be required to develop corrective action plans that may
include such things as substitution of eligible expenses for
ineligible ones and amendments to previously submitted reports.
The SEA provided the U.S. Department of Education (Education) with an
updated SFSF monitoring schedule in early July that reflected its
coordination with the Massachusetts Office of the Inspector General.
One significant change in the revised plan is that the supplemental
audits will focus on fiscal year 2010, not fiscal year 2009, SFSF
expenditures. A state official told us this change was made because
the Inspector General is currently conducting selected reviews of SFSF
fiscal year 2009 funds for many of the same LEAs that had initially
been selected for supplemental audits. Another change in the plan is
the specific LEAs selected for review. The final list includes the
recipients of the 10 largest recipients of SFSF funds in fiscal year
2010, while the original list included the 10 largest from fiscal year
2009. Another five LEAs were selected based on previous audit
findings, as planned.
As of August 9, 2010, Massachusetts reported that the SFSF education
stabilization funds supported 3,838 jobs, defined in terms of full-
time equivalents (FTE), during the recipient reporting period
(quarter) ending June 30, 2010.[Footnote 8] These SFSF-funded jobs
supported public elementary, secondary, and postsecondary education
and, as applicable, early childhood education programs and services.
These jobs have included administrators, teachers, paraprofessionals,
and staff members in school districts across Massachusetts, as well as
administrators, faculty members, and staff members at the state and
community colleges and the University of Massachusetts campuses.
While SEA officials we contacted told us they found the process of
reporting jobs to be manageable, MRRO, which is responsible for the
commonwealth's central reporting of jobs, found that the process was
complicated by changes to guidance regarding whether to report FTEs
not captured in previous quarters in the reporting period ending June
30, 2010. In April 2010, LEAs received $172 million of the second
phase of SFSF funds. Despite the midyear disbursement date, the funds
could be applied to salaries incurred anytime in fiscal year 2010.
Education officials initially instructed the state to report all FTEs
from these previous quarters in the current quarter. However, in early
July 2010, Education sent an e-mail to all states explaining that the
Recovery Accountability and Transparency Board had changed its
interpretation of OMB's December 18, 2009, guidance, and Education was
now instructing SEA officials that FTEs should only be reported in the
actual quarter they were worked. As a result, Massachusetts officials
reported only those FTEs worked in the April 1 to June 30, 2010,
recipient reporting quarter, and those FTEs that were reallocated to
cover expenses from previous quarters have not yet been reported.
Education's new guidance also indicated that OMB is developing a
process to make corrections to data reported in previous quarters, and
that it is through this process that recipients will report those FTEs
generated when funds were reallocated to cover salary expenses from
previous quarters. SEA officials told us that the data system used to
collect job information from LEAs was flexible enough for them to
provide data in compliance with the revised guidance.
Massachusetts Has Begun Construction on the Majority of Its Recovery
Act Highway Projects and Has Developed Projects for Deobligated Funds:
Work has begun on 78 of 84 of the Massachusetts Recovery Act highway
projects for which funding was obligated prior to the March 2, 2010,
deadline, according to data provided by the Massachusetts Department
of Transportation (MassDOT). As of August 2, 2010, 9 of the 84
projects have completed construction.[Footnote 9] The rate by which
the Federal Highway Administration (FHWA) has reimbursed Massachusetts
Recovery Act highway projects (an indicator of the portion of highway
work completed) has increased from 13 percent on May 3, 2010, to 29
percent on August 2, 2010, although it is still below the national
average of 44 percent (see table 1). According to FHWA officials, as a
result of the time-consuming work in planning these Recovery Act
projects, Massachusetts has been delayed in requesting obligation of
its annual highway apportionment (for non-Recovery Act projects) and
will make the majority of its requests for this fiscal year's
obligation in the fourth quarter. As of August 12, 2010, Massachusetts
had asked FHWA to obligate only 52 percent of these funds.[Footnote 10]
Table 1: Massachusetts Recovery Act Federal Aid Highway Amounts and
Projects as of August 2, 2010:
Total available apportionment: $438 million;
Amount transferred to Federal Transit Administration: $59.7 million;
Total amount reimbursed: $104 million;
Number of projects: 88;
Number of projects with construction complete: 9.
Source: GAO analysis of FHWA data.
[End of table]
According to the MassDOT Economic Stimulus Coordinator, Massachusetts
has had FHWA deobligate approximately $30 million in Recovery Act
highway funds, as a result of contracts being awarded below state cost
estimates. The MassDOT Economic Stimulus Coordinator said that they
plan to have FHWA obligate all of the deobligated Recovery Act funds
by September 30, 2010, to additional projects and they have developed
a list of eight highway projects they will recommend for funding. One
noteworthy project on this list is the River Road project in
Tewksbury. River Road was washed out as a result of the March 2010
flooding in Massachusetts. The MassDOT Economic Stimulus Coordinator
noted that the state and regional planning organization had previously
identified the drainage repair and road realignment for River Road as
a ready-to-go project on their transportation improvement plan.
However, there were no funds available. According to the MassDOT
Economic Stimulus Coordinator, the March floods made this project a
necessity, and the timing of available deobligated Recovery Act
highway funds made the project possible.
Some Suballocated Funds May Be Obligated Outside of Their Initially
Intended Region:
Massachusetts had approximately $131 million of its $438 million
Recovery Act highway apportionment dedicated to use in suballocated
regions.[Footnote 11] As a result of contract savings on the initial
round of highway projects in suballocated regions, as of August 2,
2010, Massachusetts has approximately $3.5 million in deobligated
funds to be applied to these regions. The MassDOT Economic Stimulus
Coordinator noted that they were initially uncertain about how to
apply deobligated funds in suballocated regions, but they subsequently
received instructions from FHWA. According to FHWA officials, funds
deobligated from a suballocated region should be used to fund
additional projects in a suballocated region that meets the same
population criteria as the region for which they were initially
intended.[Footnote 12]
A senior planning official at MassDOT said that the commonwealth may
need to move some of these deobligated funds between suballocated
regions. As of August 9, 2010, Massachusetts had two suballocated
regions with approximately $770,000 in deobligated suballocated
Recovery Act funds, although that is less than 1 percent of the
commonwealth's total suballocated apportionment. According to this
senior planning official, in order to maintain spending levels within
the initially intended suballocated region, they will try to obligate
these funds to projects through line-item modifications.[Footnote 13]
If this solution is not possible, the commonwealth would look to
transfer the deobligated suballocated funds to a Recovery Act project
in a suballocated region meeting the same population criteria.
According to FHWA officials, if the commonwealth cannot have all
deobligated funds obligated to projects within the suballocated
regions for which they were initially intended, FHWA will allow
flexibility to ensure the best utilization of deobligated Recovery Act
funds. However, FHWA officials expect the commonwealth to have all
deobligated funds obligated to projects within the suballocated
regions for which they were initially allocated.
Massachusetts Meets Multiple Reporting Requirements and Continues to
Develop Its Office for Performance Management and Innovation:
MassDOT continues to report its Recovery Act highway project recipient
reporting numbers through the centralized state reporting system to
Federalreporting.gov, as part of the Recovery Act's Section 1512
requirements. As of August 2, 2010, for the April through June 2010
round of reporting, the commonwealth reported 380 Recovery Act highway
FTEs. The MassDOT Economic Stimulus Coordinator said that, although
they are becoming more comfortable with the commonwealth's centralized
approach to the quarterly recipient reporting process, MassDOT has the
burden of duplicative Recovery Act reporting requirements--to the
Office of Management and Budget (OMB) and to FHWA's Recovery Act Data
System.[Footnote 14]
As we reported in the May 2010 bimonthly report, MassDOT continues to
make plans to develop an Office of Performance Management and
Innovation that will serve to establish program goals, measure program
performance, and report publicly on progress to improve the
effectiveness of transportation design and construction, service
delivery, and policy decision making. According to the MassDOT
Economic Stimulus Coordinator, at this point, there are no plans to
assess the broader economic impact of Recovery Act highway projects,
but through the Office of Performance Management and Innovation,
MassDOT plans to develop performance measures that will help the
agency interpret the economic impact of its capital investments and
operations activities, in general. FHWA continues to assist MassDOT
with developing its plans for the Office of Performance Management and
Innovation. FHWA division officials said that in July 2010 they hosted
a CEO Roundtable with MassDOT that included input from other states'
departments of transportation and focused on lessons learned related
to the use of performance management to manage their agencies.
While Some Transit Capital Assistance Projects Are Nearing Completion
Some Projects Funded with Money Transferred from Recovery Act Highway
Funds Are Just Getting Under Way:
Massachusetts and its urbanized areas have expended $85.6 million of
its initial Recovery Act Transit Capital Assistance apportionment on
several projects, including some projects, that are nearing
completion. [Footnote 15] According to the Federal Transit
Administratin (FTA) data, of the 16 projects funded with the initial
apportionment, 1 project has been completed, 6 projects are more than
50 percent complete, and 9 are less than 50 percent complete.[Footnote
16] As illustrated in figure 2, the largest portion of the initial
Transit Capital Assistance apportionment was obligated for transit
infrastructure construction and vehicle purchases and rehabilitation.
According to Recovery.gov, as of August 2, 2010, MBTA reported funding
370 FTEs attributed to Recovery Act funds during the most recent
quarter, ending June 30, 2010.
Figure 2: Massachusetts Transit Capital Assistance Program Recovery
Act Obligations by Project Type as of August 3, 2010A:
[Refer to PDF for image: pie-chart]
Transit infrastructure construction: ($119,638,642) 46%;
Vehicle purchase and rehabilitation: ($73,365,758) 28%;
Other capital expenses: ($38,853,443) 15%;
Operating assistance: ($25,930,815) 10%;
Preventive maintenance: ($1,519,511) 1%.
Source: GAO analysis of Federal Transit Administration data.
Note: "Transit infrastructure construction" includes engineering and
design, acquisition, construction, and rehabilitation and renovation
activities. "Other capital expenses" includes items such as leases,
training, finance costs, mobility management project administration,
and other capital projects.
[A] Data include projects funded with Massachusetts's initial Transit
Capital Assistance Program Recovery Act apportionment and do not
reflect projects funded with money subsequently transferred from FHWA.
[End of figure]
Several additional projects funded with money transferred from FHWA
are just beginning to get under way. As discussed in our previous
report, Massachusetts requested that FHWA transfer $59.7 million of
Massachusetts's federal-aid highway apportionment to FTA, enabling
transit agencies across Massachusetts to use Recovery Act funds for
their operating costs, as well as many of their planned capital
expenditures.[Footnote 17] According to an FTA official we spoke with,
all of the funds transferred from FHWA have been obligated as of
August 3, 2010, and according to FTA data we reviewed, 87 percent of
these transferred funds have been obligated for transit infrastructure
construction projects. For example, the Southeastern Regional Transit
Authority will use transferred funds they received to construct a new
terminal on a blighted inner city site in Fall River. This project was
delayed because the site was owned by a local utility company and
there were substantial environmental permitting challenges to resolve
before the land could be purchased for the new terminal. Currently,
the transit agency is operating services out of a trailer. In some
cases, these additional funds allowed transit agencies to avoid
cutting services. For example, additional funds received by the
Montachusett Area Regional Transit Authority will allow it to continue
operations on its urban "in-town" transportation service in the cities
of Fitchburg, Leominster, and Gardner, facilitating access to jobs,
training, education, and medical appointments for the citizens of
economically depressed areas of north-central Massachusetts.
Of the $59.7 million that was transferred from FHWA to FTA, $24.8
million originated from funds that were initially apportioned to
suballocated regions. According to MassDOT data we reviewed, these
funds were transferred for three transit projects within suballocated
regions and include $22.7 million for a parking garage at the
Wonderland Station in Revere, $1.7 million to fund emergency repairs
on the MBTA's Red Line subway, and $348,846 to fund additional vehicle
and equipment purchases and terminal improvements for the Cape Cod
Regional Transit Authority.
Massachusetts will recalculate its planned transit expenditures to
include additional state funds allocated to MBTA, which will make it
easier for the commonwealth to meet the maintenance-of-effort (MOE)
requirement for transit expenditures. As part of its review of state
MOE certifications, the U.S. Department of Transportation (USDOT)
discovered that MassDOT did not include a portion of the state sales
tax dedicated to MBTA in its calculation of planned state funding for
transit programs. According to a USDOT official, because this is a
dedicated revenue stream for the purpose of providing funding to
transit, MassDOT should have included this funding in its calculation
for the commonwealth's 1201(a) certified MOE amount for transit.
[Footnote 18] As a result of its review, USDOT recommended that the
commonwealth recertify its MOE to include state funds allocated to
MBTA in its transit expenditure calculation. According to the MassDOT
Economic Stimulus Coordinator, although this amount will increase the
commonwealth's overall spending requirement, the large amount of state
funds allocated to MBTA will enable the commonwealth to meet its MOE
expenditure requirement for transit spending by the September 30,
2010, deadline. According to a USDOT official, the commonwealth most
recently updated its transit expenditure report in February 2010, and
USDOT plans to ask states to update their expenditure information
again in the fall of 2010 in response to an earlier GAO recommendation
that USDOT gather timely information on the progress states are making
in meeting the MOE requirement.[Footnote 19]
MBTA Has Procedures to Independently Verify the Performance of
Construction Management Firms:
As we reported previously, MBTA is using a construction management/
project management (CM/PM) firm to supplement their internal project
management staffing resources in order to handle the influx of
Recovery Act funded projects.[Footnote 20] This CM/PM firm provides a
variety of project and construction management support services and is
largely responsible for the day-to-day oversight of several of MBTA's
Recovery Act projects. According to CM/PM firm officials we spoke with
and documentation from the firm we reviewed, the CM/PM firm is
responsible for daily on-site project monitoring and for preparing a
variety of oversight documents, including daily inspection reports,
weekly staffing reports, and weekly resident engineer status reports.
These reports capture the conditions, equipment usage, number of
workers, and status of work performed each day. With the exception of
the invoices submitted by the CM/PM firm, all quality assurance
documentation is available to MBTA project managers through the firm's
online media asset management system. According to MBTA officials,
this allows busy MBTA project managers to monitor project status on an
ongoing basis to ensure that expenditures are kept within contract
limits and project performance goals are met.
In addition to reviewing project documentation submitted by the CM/PM
firm, MBTA takes steps to independently verify the firm's performance
through on-site surveillance and invoicing procedures that ensure
compliance with contract specifications. In addition to the oversight
provided by the CM/PM firm, MBTA verifies the firm's performance by
staffing an MBTA supervisor and trade foremen to the job site each day
to provide daily supervision of the workforce and ensure that the
project timelines are met. According to our review of MBTA invoicing
procedures and an examination of invoice transactions related to one
of MBTA's Recovery Act projects, invoices submitted by the firm were
reviewed by multiple MBTA officials, including the project manager and
a contract administration auditor who reconciled expenses with
contract specifications.
Local Housing Agencies in Massachusetts Have Implemented Formula-
Funded Projects, and Some Have Begun Spending Competitive Grant Funds:
Public housing agencies in Massachusetts received about $82 million in
Public Housing Capital Fund formula grants and had expended about $41
million as of August 7, 2010. Additionally, seven public housing
agencies received about $73 million in Public Housing Capital Fund
competitive grants, six agencies had obligated $13 million of these
funds, and five agencies had expended $6 million as of August 7, 2010.
Local Housing Agencies Obligated All Formula Funds and Started
Spending to Improve Some Housing Developments:
Of the 253 public housing agencies in Massachusetts, 68 collectively
received $81.9 million in Public Housing Capital Fund formula grants
under the Recovery Act as of August 7, 2010. HUD provided these grants
directly to housing agencies to improve the physical condition of
their properties and for management improvements. As of August 7,
2010, the Massachusetts public housing agencies had obligated 100
percent of the $81.9 million. Additionally, 63 of these agencies had
drawn down or expended 50 percent of the obligated funds, as of August
7, 2010. According to Recovery Act requirements, public housing
agencies are required to expend 60 percent of obligated funds by March
17, 2011. HUD officials said that they are on track to meet this
deadline.
The Boston Housing Authority (BHA) received the largest Public Housing
Capital Fund formula grant allocation in Massachusetts for projects
involving such things as bathroom and plumbing replacements, boiler
replacements, roof replacements, and adding security to elevators and
lobbies. We contacted BHA regarding its Public Housing Capital Fund
formula grants for the Walnut Park Project and the Mary Ellen
McCormack Project, which have repair work currently in progress. BHA
officials told us they are on time and on budget for these projects.
The Walnut Park project involves repair work to the building, a 20-
story concrete structure built in 1971, and the estimated cost is
approximately $1 million. Agency officials are using contractors to do
repair work at the Walnut Park site. The work at the Mary Ellen
McCormack project has been ongoing since February 2009 and involves
completely modernizing the bathrooms of 152 units at an estimated cost
of $3,976,000. As of June 1, 2010, BHA has expended a total of
$208,828 on these two projects.
Some Public Housing Agencies in Massachusetts Have Begun Spending
Competitive Grant Funds:
HUD awarded 15 competitive grants to seven housing agencies in
Massachusetts. Housing agencies across the country could apply for
these funds to support specific priority investments in four
categories.[Footnote 21] As of August 7, 2010, six of these housing
agencies had obligated about $13 million of the $73 million awarded,
and five recipient agencies had drawn down a cumulative total of $6
million from the obligated funds. We selected BHA to visit because it
received both Public Housing Capital Fund formula grants and
competitive grants.
Although HUD expects all public housing agencies in Massachusetts to
meet the September 2010 deadline for obligating their competitive
grant funds, BHA told us that they experienced challenges related to
mixed financing, accelerated time frames, and complexity of the
permitting process relative to demolition and rebuilding of housing.
According to BHA officials, mixed financing requires additional work
because officials must not only identify supplemental sources of
funding for these projects, they must also find developers to plan the
site according to specific federal criteria. Furthermore, Recovery Act
funds must be obligated and spent in a very tight time frame, while
the housing agency is also conducting its other work. Additionally,
BHA officials noted that there are challenges associated with the
complexity of the permitting process. For example, they must get
approval for the demolition of the old buildings, which means they
must obtain a "land use" approval before they begin the demolition,
and additional permits to begin construction of the site.
Another challenge faced by some public housing agencies has been the
specific Recovery Act provision requiring them to use only American
iron, steel, and manufactured goods in certain construction and repair
projects. BHA officials told us that they had overcome the challenges
posed by the purchasing requirements of the Buy American provision by
requesting waivers. One BHA official we interviewed explained that
many appliances are made outside of the United States and there is
often a need to get a waiver for them. This issue is not a problem for
smaller projects because, under HUD policy, the Buy American
requirement is inapplicable where the size of the contract funded with
Recovery grant assistance is less than $100,000.[Footnote 22] With
respect to mixed-finance projects, the Buy American requirement does
not apply to a public housing agency that uses a private developer for
the project and merely serves as a lender of funds having no ownership
interest in the project.
Old Colony Competitive Grant Will Help Boston Housing Authority
Replace Distressed Housing with Energy-Efficient, Green Community:
BHA received $22,196,000 in Public Housing Capital Fund competitive
funds to begin rebuilding its Old Colony development to create an
energy-efficient and green community in South Boston. Built in 1940,
BHA describes the 845-unit development as the most physically
distressed site in its federal portfolio, with outdated structures and
inefficient systems that have an annual energy and water cost of over
$4,000 per unit. Ultimately, BHA proposes to redevelop the entire Old
Colony site, but this first phase will be funded as a stand-alone
initiative with Public Housing Capital Fund competitive funds along
with other public and private funds.[Footnote 23] The BHA has selected
the developer, completed the design, and begun the relocation of
current residents of the Old Colony housing units to be demolished,
according to its planned schedule. See figure 3 for graphics depicting
the current site and proposed site.
Figure 3: Images of the Old Colony Development (Current and Proposed):
[Refer to PDF for image: 2 photographs]
The figure on the right is presented to show the current state of the
Old Colony public housing development, part of which will be
demolished and replaced. The figure on the left is presented to show
the proposed housing developed that will constructed using Recovery
Act funds.
Source: Boston Housing Authority.
[End of figure]
Although the scope of this project has increased from its original 96-
unit proposal to 116 units, the budget and timeline have not changed
since the project was approved. However, BHA has negotiated certain
terms of the grant award with HUD in order to meet the grant award
requirements. For example, BHA obtained a waiver from HUD from certain
specific green energy criteria. BHA officials have said that they plan
to use alternatives that will be equally energy-efficient as those
listed in the Enterprise Green Criteria used in HUD's Notice of
Funding Availability. Additionally, because of the complexity of the
Old Colony project financing arrangements, BHA was concerned that they
may not be able to obligate the entire award amount by the September
2010 deadline. As a result, BHA sought to be allowed to use an
alternative obligation date, using the developer agreement date in
place of the financing closing date. HUD has agreed that, upon review
and approval of the developer agreement and financing documents, BHA
would be allowed to use the developer agreement date.
Massachusetts Has Identified Projected Near-Term and Long-Term Impact
of Recovery Act-Funded Projects:
BHA officials have stated that the Recovery Act has provided funds to
jump start capital, maintenance, and energy-efficiency upgrades across
BHA, as well as to improve services for elder residents. Additionally,
Recovery Act-funded initiatives have employed hundreds of people,
putting local companies to work doing heating and electrical upgrades,
repairs to buildings, and a wide range of capital improvements. To
determine the extent to which Recovery Act funds have helped the local
economy, the City of Boston has conducted an analysis of both near-
term and long-term economic impacts of Recovery Act-funded projects.
This analysis describes the near-term impact in terms of jobs created
and income generated by retained jobs, new expenditures, and
construction activities. In addition, the city has identified long-
term economic impacts of Recovery Act-funded projects. These are
considered sustainability benefits, and are measured over time in
terms of energy-cost savings, emissions reductions, water
preservation, travel-time savings, safety, and accelerated development
value for some of Boston's Recovery Act investments. Examples of these
sustainability benefits of BHA investments include modernization of
multifamily residential buildings, roof replacements, new hot water
heater systems, and new construction of energy-efficient, green
residential properties. According to the city's analysis, there is a
strong return on investment with an aggregate benefit-cost ratio of
9.2--meaning that benefits are 9.2 times larger than costs--over a
discounted payback period of 2 years. BHA officials continue to rely
on the current system for reporting hours to meet the Section 1512 job-
reporting requirements, with contractors reporting and certifying the
number of labor hours used in Recovery Act work.
HUD Has Conducted Reviews on Public Housing Formula Grants and
Assisted Public Housing Agencies in Meeting Recovery Act Requirements:
HUD officials in the Boston regional office have completed reviews on
housing agencies that had obligated less than 90 percent of their
formula grant funds as of February 26, 2010, and have begun the
process of reviewing obligations for competitive grants. Of the 16
formula grant reviews HUD conducted for Massachusetts public housing
agencies, officials identified four cases in which they found that
additional technical assistance would be needed. For example,
according to HUD's quality-review records, one public housing agency
could not provide documents to support that the refrigerator contract
was executed on or before the deadline of March 17, 2010. In another
example, HUD's quality-review records indicate that the public housing
agency awarded a contract without competition, and the public housing
agency must justify this to HUD or face recapture of funds.
Officials explained that smaller housing agencies need more assistance
because they sometimes lacked the capacity that the larger housing
agencies have. Larger housing agencies, such as those in Boston and
Cambridge, have financial experts, attorneys, and other specialized
staff that aid in the understanding of Recovery Act requirements. HUD
officials also told us that they have spent a lot of time working with
the smaller housing agencies to help them understand the Recovery Act
procurement requirements. As a result of these efforts, officials
expect that the next round of quality reviews will have fewer
procurement issues.
Massachusetts Redesigns Its Recovery Act Data Web Site and Begins to
Use Data for High-Level Management of State Agencies' Use of Recovery
Act Funds:
In May 2010, the Massachusetts Recovery and Reinvestment Office (MRRO)
redesigned the Massachusetts Recovery Web site to facilitate users'
ability to track jobs and Recovery Act dollars by ZIP code, town,
county, and congressional district for all Recovery Act projects
implemented through state agencies. The MRRO manages the Massachusetts
Recovery Web site, which serves as the primary communication and
reporting tool to ensure greater transparency for the commonwealth's
implementation of Recovery Act programs.[Footnote 24] The
Massachusetts Recovery Web site offers users the ability to view
Recovery Act jobs on a quarterly basis through the FTE numbers
calculated using OMB's FTE calculation and by headcount, or the total
number of individuals paid with Recovery Act funds. The MRRO has
chosen to provide both the headcount value as well as the FTE numbers
because headcount numbers indicate the number of individuals employed
with Recovery Act dollars.
Recovery Act jobs and dollars spent may also be viewed via the new Web
site's mapping feature. This feature allows users to view FTEs,
headcount, and awarded and expended amounts mapped by ZIP code, town,
county, or congressional district. As part of an effort to report on
the Recovery Act's total impact on the commonwealth, the Massachusetts
Recovery Web site has a link to Recovery.gov data for all Recovery Act
awards in Massachusetts.[Footnote 25] This includes data from state
and nonstate agencies. MRRO officials only have access to nonstate
entity data, such as housing agencies and most regional transit
agencies, through the Recovery.gov Web site. According to MRRO
officials, they plan to keep these data separate from state agency
data on the Massachusetts Recovery Web site, as they cannot guarantee
the quality of the nonstate entity data. MRRO officials noted that
further Web site changes may be coming after they conduct a usability
test based on how the media, public, and legislators use the site.
The MRRO Uses Recovery Act Expenditure Data as a Management Tool for
State Agencies:
The MRRO currently uses Recovery Act data to monitor spending across
state agencies and develops management priority lists based on weekly
spending, which the MRRO uses to track whether state agencies are
spending Recovery Act funds at an appropriate rate. According to the
MRRO Deputy Director, they established benchmarks, which are modified
over time for the rates at which they would like to see state agencies
spend Recovery Act funds. Using the benchmarks, they categorize state
agencies and provide increased oversight to those with slower spending
and obligations. Each week, the MRRO reviews the list and asks slow-
spending agencies to identify and explain why they fall into this
category.[Footnote 26] The MRRO Director and Deputy Director stated
that this level and frequency of monitoring and feedback are new
features for many state agencies. According to these MRRO officials,
some state agencies had an initial adjustment period to this quick
turnaround time for reporting data, receiving feedback, and then
offering follow-up progress on improving spending and obligation
rates. These MRRO officials stated that, based on the data-collection
efforts, state agencies now provide forecasts on their spending
related to Recovery Act projects. However, according to the MRRO
Director, Recovery Act data are not currently being used for long-
term, state-level management or economic development planning purposes.
Recovery Act Funding Continues to Help Support the Governments of
Massachusetts and Boston, Though Fiscal Challenges Remain:
The commonwealth continues to experience spending and revenue
pressures, although recent trends point to higher revenue figures for
the current fiscal year. Spending pressures continue from caseload
driven programs such as Medicaid and Transitional Aid to Families with
Dependent Children. Total revenue collections were slightly higher
than budgeted for the fiscal year that ended on June 30, 2010, but
projected revenue figures had been reduced since the start of the
fiscal year. According to a senior budget official, the commonwealth
expects tax revenue (which includes income, sales, and corporate
taxes) to trend higher during fiscal year 2011 based upon revenue
collections during the last several months of fiscal year 2010, as
well as expectations of economists that state officials consult. For
state fiscal year 2011, Recovery Act funding will again help support
the commonwealth's operating budget;
however, the amount used to support the budget is less than during
fiscal years 2009 and 2010. SFSF and increased Federal Medical
Assistance Percentage (FMAP) remain the largest sources of Recovery
Act funding to support the state budget (see figure 4).
Figure 4: Recovery Act Funds Used to Support State Budget, by State
Fiscal Years:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2009;
Increased FMAP: $870 million;
SFSF: $412 million;
Other Recovery Act funds supporting budget: $41 million.
Fiscal year: 2010 projected;
Increased FMAP: $1.328 billion;
SFSF: $486 million;
Other Recovery Act funds supporting budget: $83 million.
Fiscal year: 2011 projected;
Increased FMAP: $690 million;
SFSF: $96 million;
Other Recovery Act funds supporting budget: $23 million.
Source: GAO analysis of information provided by Massachusetts
officials.
Note: Dollar amounts shown under increased FMAP do not include funds
from the recent bill which extended some increased FMAP funding
through June 30, 2011.
[End of figure]
The commonwealth continues to prepare for when Recovery Act funding
will no longer be available through a combination of spending
reductions and availability of state "rainy-day" funds. According to a
senior budget official, the commonwealth will continue to hold down
spending during fiscal year 2011 by, for example, instituting an
agency cap on the number of FTE staff positions, having agencies
finalize their spending commitments earlier in the year, and more
closely scrutinizing transfers between budget accounts.[Footnote 27]
Also, for fiscal year 2011, unrestricted, general government local aid
was reduced by 4 percent. Furthermore, the final fiscal year 2011
budget included use of roughly $200 million of the state's rainy-day
fund.[Footnote 28] Officials estimate that the commonwealth will have
a balance of $556 million in its rainy day fund at the end of fiscal
year 2011 to contribute to closing a likely $1.3 billion gap as they
prepare for fiscal year 2012. A senior budget official noted that
Massachusetts is better prepared than most states for the end of
Recovery Act funding because of its healthy rainy-day fund balance.
Most Recovery Act funds expected to come to Massachusetts have already
been received. As of August 20, 2010, Recovery Act funding anticipated
to go to or through state government totals $6.0 billion, with $4.4
billion drawn down from the U.S. Treasury. According to a state
official, recent Recovery Act funding streams include a $15 million
grant for the state's education department for a statewide
longitudinal study of education performance, as well as funds for
Broadband use. Also, Massachusetts was awarded a grant for $250
million in the second phase of Education's "Race to the Top"
competitive grant program.
In addition to speaking to state officials, we again visited with
officials from the City of Boston to review its use of Recovery Act
funds (see table 2).[Footnote 29]
Table 2: Boston--Characteristics of City Government for Fiscal Year
2011:
Fiscal year: 2011;
Population: 645,169;
Unemployment rate (percentage): 9.0;
Operating budget: $2.33 billion;
FTE government employees: 17,549[A].
Sources: U.S. Census Bureau and U.S. Department of Labor, Bureau of
Labor Statistics (BLS), Local Area Unemployment Statistics (LAUS) data;
and Boston budget documents, fiscal year 2011.
Notes: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revisions.
[A] This is an estimate by Boston officials of full time equivalent
(FTE) positions, including externally funded FTE's, as of January 1,
2011. This estimate does not include grant-funded employees of the
Boston Public Health Commission.
[End of table]
Boston officials told us that they have used Recovery Act funds to
strengthen the city's economy, improve housing, expand youth
opportunities, and increase public safety and public health. As an
example, two additional Recovery Act grants received by Boston in
recent months include over $12 million in Recovery Act public health
funding directed toward initiatives for the prevention of obesity and
tobacco use.[Footnote 30] Though Recovery Act funds will not prevent
layoffs in fiscal year 2011 altogether, city officials stated that
these funds will allow Boston to avoid layoffs of critical employees
in both the school and police departments.
In the last 5 months, city officials have made very few grant
applications and their focus has been on implementing and managing
Recovery Act resources, one of which is the Energy Efficiency and
Conservation Block Grant (EECBG).[Footnote 31] According to Boston
officials, the strategy for implementing the city's $6.5 million EECBG
award focuses, in part, on providing residents and small businesses
with the financial resources needed to make homes and workplaces more
energy-efficient. In mid July 2010, as part of its EECBG initiative,
Boston officials told us they entered into a $1.8 million contract
with a vendor to perform weatherization work on existing residential
homes of residents with 60 to 120 percent of state median income.
[Footnote 32] Officials said they also contracted with various
utilities using $990,000 of Recovery Act funds to leverage existing
utility-sponsored energy-efficiency programs and that this will
provide participating small businesses with up to 30 percent of the
cost of selected energy-efficiency improvements. City officials'
stated goal of their EECBG initiative is to reduce Boston's greenhouse
gas emissions by 40,000 metric tons annually.
City officials reported that Boston experienced some growth in revenue
in the last fiscal year, and are expecting in fiscal year 2011 a 4.3
percent increase in property tax revenues, a 4.9 percent increase in
licenses and permits revenues, as well as a full year of additional
revenues from Boston's new Meals Tax and its increased Hotel Tax.
However, officials expressed concern for the fiscal challenges ahead.
State aid revenues have again dropped, with net state aid decreasing
by 9 percent for fiscal year 2011. In addition, Boston's costs are
increasing in fiscal year 2011--pensions and debt service will
increase 2.9 percent, while health insurance costs are increasing by
6.4 percent. Two percent of the fiscal year 2011 budget, $45 million,
comes from the city's reserves, and according to officials, this use
of reserves is not sustainable. Officials anticipate approximately 230
layoffs in fiscal year 2011 from a variety of city departments and the
Boston public schools. With the end of the Recovery Act funds, city
officials told us they foresee additional cuts in state aid and future
public school closings. Officials told us they are taking steps to try
to mitigate the impact of the loss of Recovery Act funds by
controlling hiring, taking advantage of natural employment attrition,
evaluating their city's available assets, and looking for ways to
consolidate city infrastructure. As an example, officials anticipate
they will consolidate some of the public schools in Boston that are
operating under capacity. City officials are also working on a plan to
adjust for the loss in fiscal year 2012 of approximately $20 million
in Recovery Act funding that currently supports school department
operations.
Oversight Officials Continue to Review and Audit a Variety of Recovery
Act Programs:
The Massachusetts Office of the State Auditor (OSA) has several audits
under way focused on programs funded by the Recovery Act, including
audits of various local housing authorities, state and community
colleges, regional transit authorities, and MassDOT. Recently
completed OSA audits of weatherization programs, block grants, and a
local housing authority that received Recovery Act funding did not
identify or report findings. The OSA audit of the WIA Youth Program
found that in three cases, the actual number of youths being reported
as participating in the program was overstated, that the calculation
of job numbers needed to be monitored more closely, and that
compliance with participation levels needed to be reviewed.[Footnote
33] In response to OSA's findings, the responsible state agency agreed
to implement OSA's suggested improvements regarding monitoring
controls. The OSA has completed a statewide Recovery Act expenditure
analysis and is using this analysis as part of its audit planning.
According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing Single Audit results, it
received Massachusetts's Single Audit reporting package for the year
ending June 30, 2009, on May 3, 2010. Although this was about a month
after the deadline specified by the Single Audit Act, the First Deputy
Auditor has stated that the commonwealth is on track to meet the 2010
audit's deadline. The 2009 audit--the first Single Audit for
Massachusetts that included Recovery Act programs--identified
significant deficiencies related to controls over programs that
received Recovery Act funds, including SFSF and Medicaid.[Footnote 34]
OSA, together with an independent auditor, has begun work on the
state's 2010 fiscal year Single Audit.
The Massachusetts Office of the Inspector General (OIG) has a broad
mandate to detect and prevent fraud, waste, and abuse in government
spending. It has concentrated its Recovery Act efforts on prevention
initiatives, as well as on monitoring, reviewing, and investigating
programs. While the OIG is prohibited from discussing the specifics of
its ongoing work, its general areas of Recovery Act project review
include the following:
* Reviews of procurement activity by MBTA, recipients of Edward Byrne
Memorial Justice Assistance Grant (JAG) funds, and recipients of
fiscal year 2009 SFSF funding.
* Fraud risk assessment reviews of the Weatherization Assistance
Program and the Lead Hazard and Neighborhood Stabilization Program.
* A compliance review of EECBG recipients and assistance to the state
Department of Energy Resources to develop EECBG oversight capacity.
* Investigations in coordination with two federal inspector general
offices regarding fraud complaints, as well as addressing complaints
relating to HUD, Department of Labor, and Department of Justice grants.
The OIG continues to provide procurement, fraud prevention, and risk
assessment training to state, municipal, and not-for-profit groups.
Also, the OIG, as well as the OSA, are members of Massachusetts's STOP
Fraud Task Force which coordinates the Recovery Act-related efforts of
many of the state's oversight authorities and develops fraud policy
for state agencies and state vendors.
Officials from Boston's City Auditor's office told us that they
awarded a contract to an independent auditor to conduct Boston's
Single Audit for fiscal year 2010. According to officials, the Single
Audit will include an audit of 10 of the city's Recovery Act-funded
projects. Officials stated that the independent auditor is also
developing a computerized worksheet in which Recovery Act fund
recipients will submit their reporting data in a standardized format
that will be centrally stored at the City Auditor's office. According
to city officials, this will make the managing of subrecipients and
the reporting process easier and more efficient. Officials plan to
offer training on this new worksheet and have it operational by the
September reporting period. This system will eventually centralize the
reporting of all of Boston's grants, not just those with Recovery Act
funding.
State Comments on This Summary:
We provided a draft of this appendix to the Governor of Massachusetts,
the Massachusetts OSA, and the Massachusetts OIG, and provided
excerpts of the draft to other entities including the City of Boston,
BHA, and MBTA. The Governor's office that oversees Recovery Act
implementation, in general, agreed with our draft report. State and
local officials provided clarifying and technical comments, which we
incorporated where appropriate.
GAO Contacts:
Stanley J. Czerwinski, (202) 512-6806 or czerwinskis@gao.gov:
Laurie E. Ekstrand, (202) 512-6806 or ekstrandl@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Carol L. Patey, Assistant
Director; Anna M. Kelley, analyst-in-charge; Anthony M. Bova; Nancy J.
Donovan; Kathleen M. Drennan; David J. Lin; Keith C. O'Brien; Kathryn
I. O'Dea; and Robert D. Yetvin made major contributions to this report.
[End of section]
Appendix IX Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] There are two types of SFSF funds--education stabilization funds
and government services funds.
[3] Massachusetts also received additional Recovery Act funding to
support a range of educational activities and services.
[4] The education stabilization funds were awarded in two phases.
[5] Moreover, state educational agencies (SEA) may reserve additional
administrative funds to help defray the costs of meeting the
additional data collection requirements under the Recovery Act for
ESEA Title I, Part A and the grants to states under IDEA Part B. For
ESEA Title I, Part A, the maximum additional amount an SEA may reserve
is 0.5 percent of the state's fiscal year 2009 Title I, Part A
Recovery Act allocation, or $1 million, whichever is less. Similarly,
for IDEA Part B grants to states, the maximum additional amount an SEA
may reserve is 0.1 percent of the state's fiscal year 2009 IDEA Part B
allocation, or $500,000, whichever is less. The additional amount a
state may reserve also depends on whether the SEA requests and
receives a waiver of certain requirements.
[6] Pub. L. No. 111-226, § 101, 124 Stat. 2389 (Aug. 10, 2010).
[7] In Massachusetts, the Executive Office of Education and the
Department of Elementary and Secondary Education work together to
coordinate oversight efforts.
[8] An FTE is a full-time equivalent, which is calculated as the total
hours worked divided by the number of hours in a full-time schedule.
[9] Projects may have completed the construction phase, but they may
not be financially closed out as a result of project close-out
paperwork. In addition, as of August 2, 2010, the state has 5 Recovery
Act highway projects that have completed construction except for minor
finishing touches.
[10] In federal fiscal year 2010, Massachusetts was apportioned $551
million in annual highway formula funds.
[11] The Recovery Act requires that 30 percent of these funds be
suballocated, primarily based on population, for metropolitan,
regional, and local use.
[12] According to FHWA officials, deobligated funds are only used in
regions meeting the specific criteria for the suballocated region.
[13] According to a MassDOT official, through line-item modifications
for projects funded with both statewide and suballocated Recovery Act
funds, total project costs may be shifted between the two sources of
funding by deobligating a portion of the statewide funds dedicated to
a project and increasing the suballocated funds dedicated to the same
project. This allows MassDOT to maintain Recovery Act spending levels
within the same suballocated region.
[14] Transportation funding recipients must also report certain
information to the Department of Transportation under section
1201(c)(1) of division A of the Recovery Act.
[15] The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through existing Federal Transit Administration
(FTA) grant programs, including the Transit Capital Assistance Program
and the Fixed Guideway Infrastructure Investment program. Under the
Transit Capital Assistance Program's urbanized area 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. Massachusetts's initial Recovery Act Transit Capital
Assistance apportionment of $290 million includes funds apportioned to
other states because some urbanized areas cross state boundaries. For
example, the Providence, RI-MA urbanized area includes the Rhode
Island Public Transit Authority and two transit agencies located in
southeastern Massachusetts--the Greater Attleboro Taunton Regional
Transit Authority and the Southeast Regional Transit Authority.
[16] In this instance, "projects" refers to several activities bundled
under a single application. FTA encourages transit agencies to combine
several projects into one application to expedite the approval process
and provide flexibility to grant recipients to move excess funds from
one project to another.
[17] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010), MA-11.
[18] Under section 1201(a) of the act, states were required to certify
that they will maintain the level of spending that they had planned to
expend between the date of enactment, February 17, 2009, and September
30, 2010.
[19] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-604]
(Washington, D.C.: May 26, 2010), 242.
[20] [hyperlink, http://www.gao.gov/products/GAO-10-605SP], MA-12.
[21] The four categories include: (1) improvements addressing the
needs of the elderly and/or persons with disabilities, (2) public
housing transformation, (3) gap financing for projects that are
stalled due to financing issues, and (4) creation of energy-efficient,
green communities.
[22] U.S. Department of Housing and Urban Development, Office of
Public and Indian Housing, PIH Notice 2009-31.
[23] BHA proposes to obtain additional funding from other sources,
such as the Commonwealth of Massachusetts Affordable Housing Trust
Fund and Community Based Housing Fund, Low Income Housing Tax Credit
funds, and City of Boston funds.
[24] The MRRO was established as the commonwealth's office to collect
spending and jobs data for all Recovery Act projects managed through
state agencies. The MRRO also takes steps to ensure the completeness
and accuracy of data and project descriptions submitted by state
agencies and other prime recipients as part of the recipient reporting
process.
[25] Recovery.gov is the official Web site for Recovery Act funds.
[26] The benchmark for being categorized as slow-spending was less 15
percent of funds expended as of July 2010.
[27] According to a senior official, during fiscal year 2011 the
commonwealth plans to reduce the number of staff supported by the
operating budget by as many as 1,000 FTEs.
[28] This figure includes a rainy-day fund withdrawal of $106 million
and the omission of an annual deposit into the fund.
[29] The Recovery Act funds for Boston referred to in this section
cover funds which are administered by the city government and not the
full scope of Recovery Act funds that benefit Boston's residents, such
as unemployment insurance and Medicaid.
[30] These initiatives are the Communities Putting Prevention to Work
Obesity Prevention project and Communities Putting Prevention to Work
Tobacco Prevention & Control project. See appendix XVIII of GAO-10-
1000SP for more information on the Communities Putting Prevention to
Work initiative.
[31] The EECBG, which is administered by the Department of Energy,
provides Recovery Act funds through competitive and formula grants to
local and state governments for projects to improve energy-efficiency
and reduce energy use. For more information on the EECBG, see appendix
XVIII of GAO-10-1000SP.
[32] According to city officials, Boston's Weatherization Assistance
Program funds weatherization work targeted to residents with 0 to 60
percent median income.
[33] Massachusetts Office of the State Auditor, Review of Career
Center of Lowell, 2010-0003-3R1 (June 16, 2010);
Review of South Costal Career Centers, 2010-0003-3R2 (June 16, 2010);
and Review of Brockton Area Workforce Investment Board, 2010-0003-3R3
(June 16, 2010).
[34] Massachusetts 2009 Single Audit identified a total of 35
significant internal control deficiencies related to compliance with
Recovery Act and non-Recovery Act federal program requirements, of
which 7 were classified as material weaknesses.
[End of Appendix IX}
Appendix X: Michigan:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act)[Footnote 1] spending in Michigan. The full report covering all of
GAO's work in 16 states and the District of Columbia may be found at
[hyperlink, http://www.gao.gov/recovery].
What We Did:
Our work in Michigan focused on the Recovery Act-funded Energy
Efficiency and Conservation Block Grant (EECBG), how Michigan provided
accountability over Recovery Act funds, and how Recovery Act funds
affected Michigan's and a selected locality's fiscal conditions. We
reviewed selected recipient reports to the federal government, as well
as oversight and accountability practices at both the state and local
level. We selected program areas and activities based on a number of
risk factors, such as the receipt of significant amounts of Recovery
Act funds. We also reviewed the design of internal controls over
program areas and activities, as well as those put in place to gather
and report spending and jobs data for recipient reports to the federal
government. For descriptions and requirements of the programs we
covered, see appendix XVIII of GAO-10-1000SP.
We performed our work at state and local agencies responsible for
implementing, monitoring, and overseeing the programs. For our review
of EECBG, we spoke with officials from two local communities--the city
of Farmington Hills and Kent County--as well as officials from the
Michigan Department of Energy, Labor & Economic Growth (DELEG)--the
state agency which administers the program.
We continued to track the use and impact of Recovery Act funds on
state and local fiscal stabilization. We met with state budget
officials and local officials from the city of Farmington Hills to
assess their fiscal situations and the Recovery Act's impact on their
communities. To understand the state's Recovery Act oversight and
accountability efforts, we spoke with officials from the Economic
Recovery Office (ERO), Office of the Auditor General (OAG), Office of
Internal Audit Services (OIAS), and the Detroit Office of Auditor
General. We obtained the June 2010 reports of the OAG covering its
financial audits that included the provisions of the Single Audit Act
[Footnote 2] for seven Michigan departments and a component unit of
the state.[Footnote 3] Each of these audits covered the 2-year period
that ended September 30, 2009. We read and summarized the Single Audit
reports for the Michigan Department of Education (MDE) and the
Department of Community Health (DCH). We also reviewed the most recent
Single Audit reports for the local communities that we visited as well
as the most recent Single Audit report for the city of Detroit. To
address financial management and internal control challenges we
previously reported on in September 2009 (GAO-09-1017SP) and May 2010
(GAO-10-605SP), we followed up on actions taken and those planned by
MDE and Detroit Public Schools (DPS), and state and local agencies
with responsibility for the state's Workforce Investment Act of 1998
(WIA) Youth Employment Program.
Finally, to understand Michigan's experience in meeting the June 30,
2010, Recovery Act reporting deadline, we met with state and local
officials to discuss processes and procedures selected recipients have
in place to implement the Office of Management and Budget's (OMB)
guidance on job calculations. Additionally, we followed up on
recipient reporting issues related to the March 31, 2010, quarterly
recipient reports that we identified in our May 2010 report.
What We Found:
* Energy Efficiency and Conservation Block Grants. The U.S. Department
of Energy (DOE) awarded a total of $76.6 million in EECBG funds to
Michigan--74 percent ($57.0 million) directly to 68 communities and 26
percent ($19.6 million) to DELEG. In turn, DELEG awarded 89 percent
($17.4 million) of its allocation to 131 subgrantees through a
competitive grant process. Michigan and some local governments have
begun spending EECBG, with the state relying on existing mechanisms to
oversee spending. State officials told us that DELEG is not
responsible for and does not monitor the use of EECBG funds that
localities received directly from DOE. We spoke with officials from
two local communities that received EECBG funds directly from DOE, who
told us that they rely on existing internal controls and systems to
safeguard EECBG funds. DELEG directs most of its EECBG funds to
projects in communities across the state to spread program funds as
widely as possible and increase the visibility of these projects.
Direct grantees in Michigan are likewise using their grants for
projects that promote intergovernmental cooperation and public
awareness, along with energy conservation.
* Recipient reporting. Beginning with the quarter ending June 30,
2010, Michigan shifted from a centralized to a new decentralized
reporting process. For the first time, Michigan state agencies
submitted quarterly recipient reports directly to the federal
government rather than to the state's ERO, which had previously served
as a centralized reporting point transmitting reports to the federal
government. ERO officials told us that state agencies successfully
submitted their reports by the July 14, 2010 deadline, and did not
experience substantial challenges with compiling or reporting the
data. We met with a Farmington Hills official regarding the city's
recipient report for its EECBG grant. While Farmington Hills submitted
the recipient report by the deadline, the official told us he
experienced some challenges and, subsequent to our meeting, took steps
to resubmit the report to better reflect hours worked. Finally, we
followed up with state and other officials to identify actions taken
to address issues we previously identified regarding recipient
reporting. We found that recipients still varied in compliance with
guidance on reporting jobs due to varying interpretation of OMB's
guidance.
* Oversight and accountability efforts. Michigan's OAG and OIAS serve
key roles in safeguarding Recovery Act-funded programs. In June 2010,
OAG issued eight reports covering its financial audits that included
the provisions of the Single Audit Act for seven Michigan departments
and a component unit of the state. Each of these audits covered the 2-
year period that ended September 30, 2009, and collectively covered
entities that reported federal program expenses of approximately $20
billion, including $2 billion of Recovery Act funds. These are the
first state level Single Audits for Michigan that include Recovery Act
programs. The OAG issued "clean" or unqualified opinions on each of
the financial statements for each of the entities. The OAG also
reported significant deficiencies in internal controls over federal
program compliance matters for each of the entities audited -
including controls over Recovery Act and non Recovery Act federal
programs. OIAS officials told us that in fiscal year 2011 they intend
to prepare summaries of findings reported by accountability
professionals related to federal programs, including Recovery Act-
funded programs, which they anticipate will identify issues to
consider at a state-wide level, such as lessons learned from oversight
and monitoring of Recovery Act funds. Local accountability practices,
including single audits by independent public accountants, also help
provide oversight and monitoring of federal programs.
* Actions taken to address previously reported internal control
challenges. In July 2010 officials with MDE, DPS and DELEG as well as
ERO officials told us that some actions have been taken and that
others are underway to address the internal control challenges
described in our September 2009 and May 2010 reports. For example, MDE
officials told us that they continue to monitor Recovery Act funds
provided to DPS and, among other things, they are using an independent
public accounting firm to monitor payroll and non payroll expenditures
at DPS. According to OIAS officials, MDE plans to hire an auditor in
the near term and initiate a fiscal monitoring program. Officials from
DELEG--the state agency responsible for the WIA program--told us that
they are continuing to work with stakeholders to address the payroll
and eligibility challenges that we identified with the WIA summer
youth program in Detroit. DELEG officials also provided us with
documentation describing the Detroit Workforce Development
Department's (DWDD) plan for improved monitoring of future programs in
Detroit. The plan is under review, and DWDD officials told us they
developed and approved eligibility criteria for use in future youth
employment programs.
* States' and local governments' fiscal condition and use of Recovery
Act funds. Michigan continues to experience economic challenges as a
result of the decline in the automotive industry, which has lead to
budget pressures and declines in state revenues. Michigan has
addressed its fiscal year budget gaps since the beginning of the
Recovery Act through a combination of Recovery Act funds and cost-
cutting measures. As of June 30, 2010, slippage in revenue estimates
left the state with a projected General Fund shortfall of
approximately $200 million for the fiscal year ending September 30,
2010. Officials are seeking solutions to this shortfall while
simultaneously addressing a projected fiscal year 2011 budget gap of
$1.1 billion. On August 11, 2010, state budget officials told us that
based on recent federal action extending the increased Federal Medical
Assistance Percentage (FMAP), Michigan estimates it will receive
approximately $300 million.[Footnote 4] According to state budget
officials, as of July 16, 2010, expenses of Michigan state entities
totaled about $7.0 billion of the approximately $7.4 billion in
Recovery Act funds it has been awarded. State officials told us they
are aware of the upcoming "cliff effect" in fiscal year 2012, when
Recovery Act funds diminish, and are working to devise solutions to
address the potential budget shortfall. As we previously reported,
local governments we visited in Michigan are facing the pressure of
balancing budgets in the midst of declining revenues. Officials from
Farmington Hills told us their city is experiencing a similar
situation. They said that Recovery Act funds allowed the city to
undertake projects and purchase equipment it otherwise would not have
been able to, but that these funds have not had an impact on the
city's fiscal stability. Given that the city plans to spend all of its
Recovery Act funds on one-time projects or acquisitions, officials do
not foresee having to deal with a "cliff effect" once Recovery Act
funds are expended.
Energy Efficiency and Conservation Subgrants Were Awarded Promptly and
State and Local Governments Are Generally Relying on Existing
Mechanisms to Oversee Spending:
The Recovery Act appropriated $3.2 billion for the EECBG program--$2.8
billion to be allocated directly to states and eligible units of local
government by formula, and the remaining $0.4 billion to be awarded on
a competitive basis. Grantees may use EECBG funds for a variety of
activities to help reduce energy use and fossil fuel emissions and
improve energy efficiency in state and local jurisdictions. Grantees
are to obligate or commit all program funds within 18 months of the
date funds are awarded and expend them within 3 years of the award
date. In addition, states are to use at least 60 percent of their
grant funds to communities not eligible for direct grants from DOE and
no more than 10 percent of their grant funds for administrative
expenses.
DOE awarded a total of $76.6 million in EECBG program funds for grants
to Michigan, of which 74 percent ($57.0 million) was awarded directly
to 68 communities, and 26 percent ($19.6 million) to the state's DELEG
on September 14, 2009.[Footnote 5] Of the $19.6 million allocated to
the state, DELEG awarded 89 percent ($17.4 million) to 131
subgrantees, through a competitive grant process, and retained the
maximum 10 percent ($2.0 million) for state program administration.
DELEG awarded the remaining 1 percent ($0.2 million) to four nonprofit
agencies for technical assistance to local communities. As of June 30,
2010, DELEG officials told us the state had awarded all of the $17.4
million budgeted for subgrants to local communities.
Michigan grantees have begun to spend EECBG program funds. According
to DOE data, as of July 23, 2010, the state and its subgrantees had
spent approximately $0.6 million, about 3 percent of the $19.6 million
grant that the state received directly. According to DOE, Michigan's
remaining direct grantees had spent approximately $8.0 million through
July 23, 2010, or 14 percent of the total $57.0 million awarded
directly to them by DOE.
State Oversight Is Limited to Monitoring Subgrantees:
To provide accountability for EECBG program funds, DELEG generally
relies on existing processes and procedures. In addition, DELEG hired
a full-time staff member to monitor subgrantee progress and coordinate
the financial aspects of managing Michigan's EECBG grant. DELEG also
established an online reporting system that subgrantees must use to
submit detailed data on program expenditures and outcomes on a
quarterly basis. State officials told us that the online system is
designed to be similar to DOE's Performance and Accountability for
Grants in Energy (PAGE) system. DELEG posts guidance on DOE's
reporting requirements on its Web site to help subgrantees understand
how to report their expenditures and outcomes into DELEG's online
system. In addition, an EECBG grant administrator completed site
visits with four subgrantees during the period June 23 through June
25, 2010 that allowed the state to verify that these subgrantees were
tracking federal funds separately and were complying with Buy American
requirements.[Footnote 6]
State officials told us that DELEG is not responsible for and does not
monitor the use of EECBG funds that localities received directly from
DOE. The agency does keep track of how much DOE has awarded to these
localities although it may, if requested, provide support to
localities. For example, state officials told us that when one direct
grantee in the state encountered difficulties in meeting federal
historic preservation standards for a planned revitalization and
retrofitting project, DELEG officials worked with the county to
resolve the issues, and the project was approved.
EECBG Grants Are Being Used to Fund High-Visibility Projects across
the State:
DELEG's energy conservation strategy includes directing most of its
EECBG grants to projects in local communities across the state to
spread program funds as widely as possible and increase the visibility
of these projects. For example, DELEG officials told us that Michigan
targeted light-emitting diode (LED) lighting projects first to ensure
that there would be a visible pipeline of projects throughout the
state for which Michigan LED manufacturers could begin preparing bids.
The state also hired a consultant to provide assistance to localities
with the technical aspects of their LED project proposals. DELEG has
awarded a total of 10 subgrants for LED projects. DELEG officials told
us Michigan used a strategic approach for awarding its technical
assistance grants. Long before the Recovery Act was passed, Michigan
had divided the state into geographic regions and promoted the
development of expertise among various coalitions of energy
conservation groups to serve each of these regions. Officials told us
this helped encourage regional planning efforts and minimize the
number of overlapping projects, as well as virtually blanketing the
state with energy efficiency projects.
Direct grantees in Michigan are also using their grants to fund
projects that promote intergovernmental cooperation and public
awareness. For example, officials with the city of Farmington Hills
told us they are using their $791,300 EECBG grant to fund start-up
costs for a coalition of local governments for developing and
implementing long-term strategies to reduce energy consumption. In
addition, the city plans to develop a Web site to provide information
to its residents and businesses about energy efficiency efforts. They
are also using their grant to build additional energy saving measures
into its City Hall revitalization project (see figure 1). For example,
according to Farmington Hills officials, they are using grant funds to
install a solar hot water heater and a green roof--a roof that is
covered with vegetation--as part of its preplanned renovation of its
City Hall facility.
Figure 1: Example of an Energy Conservation Improvement Paid for with
Recovery Act EECBG Program Funds in Farmington Hills, MI:
[Refer to PDF for image: 2 photographs]
On the left is a photo of a light tube that is installed on the
exterior of Farmington Hills‘ City Hall roof. This light tube was
purchased using Recovery Act funds. On the right is a photo of a
restroom inside Farmington Hills‘ City Hall, which shows the lighting
provided from the light tube.
Source: City of Farmington Hills.
[End of figure]
Officials with Kent County told us they will use about half of the
county's total grant of $2,796,700 to fund two projects. One of the
projects takes advantage of the lower cost of buying materials in bulk
by coordinating the purchase of a large volume of more energy
efficient replacement glass for one of its county owned facilities in
the city of Grand Rapids. The other project involves installing a
geothermal heating and cooling system at the new county correctional
facility, which is currently under construction.
Local Communities We Spoke with Rely on Existing Controls to Safeguard
EECBG Funds:
We spoke with two local Michigan grantees--one county and one city--
that received EECBG funds directly from DOE, and officials from both
communities told us that they rely on existing internal controls and
systems to safeguard EECBG funds. For example, Kent County officials
told us that the county is the recipient of many federal grants,
including EECBG funds, and will rely upon existing internal controls
and systems, including established accounting and purchasing policies,
to safeguard these funds. Officials also told us that county policies
that govern areas such as accounting and purchasing are applicable to
these funds. In addition, the county has assembled an implementation
team that meets to consider EECBG progress, funding, and other issues,
as necessary.[Footnote 7] For example, the implementation team
communicates regularly about activities related to the EECBG grant,
such as soliciting bids for projects and compliance with the Buy
American and Davis-Bacon provisions of the Recovery Act.[Footnote 8]
Farmington Hills officials told us the city has not developed a
formal, written monitoring plan for the use of its EECBG funds.
Instead, the city relies on its existing internal controls, including
those for monitoring of grant funds. For example, officials told us
that Farmington Hills requires contractors to submit certified
payrolls each week, and the city's Finance Department reviews these
for compliance with Davis-Bacon wage-rate requirements. In addition,
the city's EECBG Program Manager said that it is standard practice to
require written letters from contractors verifying that final assembly
of items purchased with contract funds was completed in the United
States and that he reviews all proposed expenditures for compliance
with the Buy American provision of the Recovery Act before approving
the purchases. Officials told us that although it was a challenge at
first to fully understand all of the requirements for managing and
monitoring this grant, they are comfortable with the system that they
have in place to safeguard the use of EECBG funds.
Michigan Agencies Were Able to Submit Recipient Reports on Time:
The Recovery Act requires each recipient of Recovery Act funds to
report information quarterly to the federal government on each award,
including (1) the total amount of funds received, (2) the amount of
funds expended or obligated to projects or activities, and (3) the
estimated number of jobs created and retained by the projects and
activities.[Footnote 9] For this report, we met with state and local
officials to discuss selected recipients' processes and procedures to
implement OMB's guidance on full-time equivalent (FTE) job
calculations.[Footnote 10] We also reviewed steps recipients took to
assess the quality of the data they used in their most recent
recipient reports, which covered the period April 1, 2010, through
June 30, 2010. We found that Michigan state agencies were able to
submit their recipient reports on time. Additionally, we followed up
on recipient reporting issues related to the March 31, 2010, quarterly
recipient reports that we identified in our May 2010 report (GAO-10-
605SP).
State Agencies Had No Issues Switching to Decentralized Reporting
System:
Beginning with the quarter ending June 30, 2010, Michigan shifted from
a centralized to a decentralized reporting process, wherein state
agencies submitted recipient reports directly to the federal
government via federalreporting.gov rather than to the state's
Economic Recovery Office (ERO), which had previously served as a
centralized reporting point transmitting reports to the federal
government. ERO officials told us that because of upcoming changes to
the state's administration,[Footnote 11] they moved to a decentralized
process this quarter to give state agencies time to adjust to the new
process and seek ERO's assistance if necessary.
ERO officials told us that the decentralized reporting process for the
quarter ended June 30, 2010, went smoothly. They said that state
agencies encountered no serious issues in submitting their reports to
the federal government by the July 14, 2010, deadline.[Footnote 12]
The only issue state agencies experienced was that the large volumes
of traffic on the federalreporting.gov Web site led to significant
site slow-down and posed some accessibility challenges, particularly
during the last 48 hours before reports were due. According to ERO
officials, this caused one state agency--the Department of
Agriculture--to try unsuccessfully to submit its report by the
deadline; it submitted the report the next day.
ERO officials stated that the quality of the submitted state agency
data has improved over time. They told us the opportunity for making
corrections during the expanded open period for amendment has improved
data quality by allowing agencies to address issues that come to
light, even after the submission deadline.
To prepare for the transition to decentralized reporting, ERO
officials told us they trained state agencies on how to submit reports
directly to the federal government. For the June 30, 2010, reports,
and through the end of the 2010 calendar year, ERO officials told us
they will advise state agencies needing assistance, but will no longer
review state agencies' reports for reasonableness and completeness,
leaving this up to each agency.
One Community Experienced Challenges with Recipient Reporting:
In July 2010, we met with the Farmington Hills city official
responsible for completing and submitting the EECBG recipient reports.
Farmington Hills, a direct recipient of a DOE award, submitted the
recipient report to the federal government by the July 14, 2010,
deadline. The official told us he used DOE guidance to prepare the
recipient reports. He told us that he used one method to calculate
FTEs for DOE PAGE reporting[Footnote 13] and another for the federal
recipient reports, which has been difficult. For DOE reporting, he
aggregated and reported quarterly hours regardless of whether they had
been paid, but for federal recipient reports he aggregated and
reported quarterly hours only if they had been paid. We suggested he
seek clarification from DOE on how to aggregate and report quarterly
hours. Subsequent to our meeting, he told us he sought clarification
and took steps to resubmit the OMB recipient report to reflect hours
worked by staff and contractors during this quarter, regardless of
whether they had been paid. He said that using the same information
for both the OMB and DOE reports will be much simpler.
Some Recipients Still Varied in Compliance with OMB's Guidance on
Reporting Jobs:
We reported in May 2010 on selected recipients' steps to assess the
quality of the data used in their March 31, 2010, recipient reports.
We also reviewed supporting documents and met with state officials
from the ERO;
DELEG and DWDD;
MDE, DPS, and Michigan State University (MSU). We reported that the
report preparers we reviewed generally followed OMB guidance; however,
their interpretations of the guidance and processes varied and did not
consistently ensure that they reported complete and accurate
information to the federal government. [Footnote 14] In May 2010, ERO
officials told us that they would work with stakeholders to address
the issues we identified and in July 2010 we followed up on their
progress.
Officials from DWDD--one of 25 Michigan Works! Agencies (MWA)--told us
that the FTE information they provided to DELEG for its March 31,
2010, report to the federal government did not, as required, include
either staff, contractor or subcontractor hours.[Footnote 15] We
suggested that DELEG should ask ERO and federal officials what
information they needed to obtain from contractors and direct their
subrecipients as appropriate.
In July 2010, ERO officials told us that they had been working with
DELEG to address recipient reporting requirements. ERO officials also
told us that DELEG is expected to make an amendment to their June 30,
2010, recipient report during the open period for amendment ending
September 13, 2010, to include jobs worked by DWDD's contractor during
the previous quarter. ERO officials said that DELEG has a strategy in
place to make sure that DWDD staff hours worked are reported
appropriately in future recipient reports. ERO officials told us in
August 2010 that they will continue to work with DELEG on this issue.
MDE and DPS--For our May 2010 report, we noted that DPS officials told
us that their initial report to MDE for the quarter ending March 31,
2010, did not include staff jobs paid for with Recovery Act State
Fiscal Stabilization Fund (SFSF) education stabilization funds nor
contractor jobs paid for with Recovery Act funds. We determined that
DPS had submitted an amended March 31, 2010, report which included 430
staff jobs paid for with SFSF funds, but not, as required, jobs
created by contractors and subcontractors. ERO officials told us in
August 2010 that they will continue to work with MDE and DPS to ensure
that contractor and subcontractor jobs are included in future
recipient reports and that actions are taken to amend past reports.
MSU--MSU officials told us that through March 31, 2010, MSU had spent
$2.5 million of its $35.7 million awarded SFSF education stabilization
funds on scholarships, and reported zero jobs in the recipient report
for the quarter ending March 31, 2010. University officials told us
that approximately $30.1 million of these funds would be used to fund
MSU salaries and related benefits retroactive to October 1, 2009. They
told us they would seek guidance from Michigan's Department of
Management and Budget about how to report the jobs funded by the
Recovery Act and paid for in previous quarters. When we contacted
officials from the ERO and MSU in July 2010, ERO officials told us
that after we brought the matter to their attention in our May report,
[Footnote 16] they contacted MSU to provide guidance on how they
thought MSU should report FTEs funded by the Recovery Act in previous
quarters. ERO officials told us that they advised MSU officials to
compute and report jobs that had been funded retroactively with
Recovery Act funds in previous quarters. University officials told us
they also received guidance from MDE through the Michigan Department
of Technology, Management & Budget, and for the June 30, 2010, report,
MSU reported 312.02 FTEs.
State and Local Accountability Professionals Have Completed a Number
of Audits and Related Oversight Activities That Included Recovery Act
Funds and Monitoring and Oversight is Continuing:
Michigan's OAG and OIAS serve key roles in safeguarding Recovery Act-
funded programs. OAG is responsible for conducting financial,
performance, and Single Audits[Footnote 17]--under the Single Audit
Act--of Michigan's state agencies. The OIAS, Michigan's central
internal audit group, assists executive branch departments in
assessing risk and implementing, maintaining, and monitoring internal
controls, along with providing a variety of other assurance and
consulting activities. In addition, local city and county governments
in Michigan that we visited for this report--such as the city of
Farmington Hills and Kent County--and various local community
organizations that we visited for our earlier work in Michigan--
including Local Educational Agencies (LEA), Community Action Agencies,
and Public Housing Authorities--typically rely upon financial
statement audits that include single audit processes performed by
independent public accountants as a safeguard to provide oversight of
Recovery Act funds. Also, the Detroit Office of Auditor General
performs important oversight functions as does the independent public
accountant that performs Single Audits for the City of Detroit.
Office of Auditor General's Single Audits Provide Oversight Of
Michigan's Departments and Agencies:
OAG officials told us that they conduct separate Single Audits for
each of Michigan's departments and agencies every 2 years. Although
the scope of the audit for each state department and agency differs--
depending on the results of risk assessments--the auditor typically
conducts compliance work in areas such as Davis-Bacon Act provisions,
state cost matching or maintenance-of-effort requirements, allowable
costs, recipient reporting, and subrecipient monitoring.[Footnote 18]
In June 2010, OAG issued eight reports covering its financial audits
that included the provisions of the Single Audit Act for seven
Michigan departments and the Michigan Public Educational Facilities
Authority, a component unit of the state.[Footnote 19] These audits
were the first state level Single Audits for Michigan that included
Recovery Act programs. Each of these audits covered the 2-year period
that ended September 30, 2009, and collectively covered entities that
reported federal program expenses of approximately $20 billion--
including $2 billion of Recovery Act funds.[Footnote 20] The OAG
issued "clean" or unqualified opinions on each of the financial
statements for each of the entities. The OAG also reported significant
deficiencies in internal control over federal program compliance
matters for each of the entities audited.[Footnote 21] The OAG's
findings of internal control deficiencies at state agencies may have a
direct effect on Recovery Act funds even when the issue reported is
based on non Recovery Act funds. For example, the OAG single audit
report for DCH reported significant deficiencies for all 11 major
federal programs audited. This indicates that the controls DCH has in
place may not prevent or detect errors and ensure sufficient
accountability. OAG audits in future years will include the Recovery
Act and non-Recovery Act federal program activities of the other 9
Michigan departments for 2009 and later years.
To meet the accountability requirements of the Recovery Act, it is
important that Michigan officials promptly address the challenges
identified in the June 30, 2010, single audit reports covering the 2
years ended September 30, 2009. These single audit reports provide
information on internal controls and compliance issues that directly
affect some Recovery Act funds. As reported by the OAG, noncompliance
with federal requirements for Recovery Act funds could result in
sanctions and disallowances, or future reductions in Recovery Act
awards.
To further consider the issues reported by the OAG that may apply to
Recovery Act funds, we read and summarized the Single Audit reports
for MDE and DCH, the two largest departments that received Single
Audits. We also read the preliminary responses of agency management to
the audit findings that were contained in the June 30, 2010, audit
reports for MDE and DCH. The OAG stated that Michigan law requires
that the audited agency develop a formal response within 60 days after
release of the audit reports. Because these two audit reports are
dated June 30, 2010, no formal responses were available for us to
consider in this report.
Michigan Department of Education. For the 2 years ended September 30,
2009, the OAG single audit of MDE covered 18 federal programs--
including seven Recovery Act awards. During this period, MDE reported
expenses of approximately $3.7 billion in federal awards, including
$611 million in Recovery Act funds. The OAG reported significant
deficiencies in MDE's internal controls--including subrecipient
monitoring of Recovery Act funded programs--and stated that MDE's
internal controls did not ensure its compliance with certain federal
laws and regulations. Compliance issues were reported with respect to
special tests and provisions (such as the requirements for allocation
of special education funds to charter schools), eligibility
requirements, subrecipient monitoring, allowable costs and cost
principles, and maintenance-of-effort by the state. For example, OAG
reported that MDE's internal control did not ensure that subrecipients
met allowable costs and cost principles for ESEA Title I[Footnote 22]
grants to LEAs, stating, for example, that three contracts for
professional and information technology services totaling $11.1
million were not competitively bid, and neither MDE nor its
subrecipients could document how these expenditures were determined to
be reasonable. In their preliminary response to the June 30, 2010,
audit report, MDE officials agreed with 8, disagreed with 1, and
partially agreed with 8 of the OAG's 17 internal control findings and
compliance issues. MDE officials disagreed with the finding related to
documentation supporting professional and information technology
services expenditures and stated that they agreed with the underlying
intent of the recommendation--to improve MDE's internal control over
subrecipient monitoring--but disagreed with the questioned costs.
Department of Community Health. For the 2 years ended September 30,
2009, the OAG single audit of DCH covered 11 federal programs which
reported approximately $15.2 billion in federal awards--including
approximately $1 billion in Recovery Act awards. The OAG report
identified $489 million of known[Footnote 23] questioned costs and
$4.4 billion[Footnote 24] of known and likely[Footnote 25] questioned
costs. These amounts include questioned costs for Recovery Act funds
of $88 million of known and likely questioned costs related to prompt
pay requirements for the Medicaid program. [Footnote 26] The OAG noted
that DCH had developed, but had not officially implemented, a
reporting system that would enable it to monitor compliance with the
Recovery Act's prompt pay requirements. Further, the OAG recommended
that DCH improve its internal control over the Medicaid Cluster to
ensure compliance with federal laws and regulations on allowable costs
and cost principles.[Footnote 27] In their preliminary response to the
June 30, 2010 audit report, DCH officials stated that they agreed with
19, disagreed with 1, and partially agreed with 15 of OAG's 35
internal control findings and compliance issues. DCH officials
disagreed with the finding related to the Recovery Act prompt pay
requirements.
Michigan's Office of Internal Audit Services Provides Important
Oversight and Monitoring of Recovery Act Funds:
State agencies must complete a self-assessment evaluating their
internal controls and biennially issue a report on the status of their
internal control system. The self assessment must include a
description of any material internal control weaknesses and a
corrective action plan to address the weaknesses. OIAS reviews these
self assessments and issues an Internal Control Evaluation report on a
biennial basis. This report highlights best practices that departments
have employed that may be helpful to other departments and identifies
OIAS's planned actions to assist departments in making improvements to
internal controls. OIAS issued its most recent Internal Control
Evaluation report in November 2009, and it was based on evaluations of
internal controls by Michigan departments as of September 30, 2008.
OIAS officials told us that when Congress enacted the Recovery Act in
February 2009, they began designing an approach for monitoring
Recovery Act funds and that the office assigned 2 of its 45 internal
audit staff to work full-time on programs funded by the Recovery Act,
and plans to increase staffing as necessary. OIAS officials also told
us that they selected eight programs for detailed review based on an
assessment of the control risks posed by the programs, and that they
planned to conduct further reviews of the selected programs as
spending occurred.[Footnote 28]
Along with OAG and OIAS efforts to monitor Michigan's state agencies
through audits, reviews, and technical assistance, state agencies are
responsible for monitoring their subrecipients. For example, MDE is
responsible for monitoring LEAs, including DPS. An OIAS official told
us that they observed MDE staff monitoring of several LEAs in April
2010. They also told us that they plan to observe how the Michigan
Department of Human Services--the state agency that oversees the
Weatherization Assistance Program--conducts onsite reviews of the
local agencies that administer the program to assist in identifying
opportunities for improvements in monitoring processes and procedures.
Lastly, in July 2010, OIAS officials told us that in fiscal year 2011
they intend to prepare summaries of findings reported by Michigan's
accountability professionals related to federal programs, including
Recovery Act-funded programs, which they anticipate will identify
issues to consider at a state-wide level, including lessons learned
from oversight and monitoring of Recovery Act funds.
Local Accountability Efforts Also Provide Oversight and Monitoring of
Recovery Act funds:
Local accountability practices, including single audits by independent
public accountants, also help provide oversight and monitoring of
federal programs including Recovery Act funds. We discussed
accountability and oversight efforts with officials from two Michigan
localities: the City of Farmington Hills and Kent County. Officials
with both localities told us they rely upon the Single Audit process
as a safeguard to provide oversight over federal program activities,
including program funds provided by the Recovery Act.
The City of Farmington Hills and Kent County rely on the work of an
independent public accountant for financial auditing. In November
2009, Farmington Hills received its most recent Single Audit Report
for the year ending June 30, 2009. The Farmington Hills' auditor
provided an unqualified opinion on the city's financial statements for
the year ended June 30, 2009, and did not report any matters involving
compliance with governmental regulations, nor any deficiencies in
internal controls over major programs. In June 2010, the independent
public accountant for Kent County issued its Single Audit Report that
included an unqualified opinion on its financial statements for the
year ended December 31, 2009, and did not identify any weaknesses in
internal control that should be considered as material weaknesses nor
any instances of noncompliance with certain provisions of laws,
regulations, contracts and grant agreements.
In April 2010, officials in the Detroit Office of Auditor General told
us that their Recovery Act initiatives included an internal control
risk assessment and review of the control structure and the
preparedness of three city departments that received Recovery Act
funds: Detroit's Department of Human Services, the DWDD, and the
Detroit Police Department. In October 2009, the Detroit Office of
Auditor General recommended to the Detroit City Council that the city
strengthen its overall reporting process to comply with the
accountability and transparency requirements of the Recovery Act. The
auditor's report noted that conditions related to weaknesses in
reporting, bank reconciliations and other internal controls cited in
the city's single audits increased the financial control risks over
Recovery Act funds. In July 2010 these officials told us that they
have continued to monitor Recovery Act funding and plan to issue two
audit reports in September 2010 that cover the city's WIA Summer Youth
Employment Program and the Homelessness Prevention and Rapid Re-
Housing Program. These officials also stated that they have dedicated
two auditors to reviewing Recovery Act programs, with plans to audit
at least six different city departments by June 2011.
On May 28, 2010, Detroit's independent public accountant issued its
Single Audit report--covering the fiscal year ended June 30, 2009--
which included federal award expenditures of approximately $283
million, of which $3.5 million were Recovery Act funds. The report
identified approximately $14 million of questioned costs. Of the 14
major programs audited, 1 received an unqualified opinion on
compliance with government requirements, 11 received qualified
opinions, 1 received an adverse opinion, and 1 received a disclaimer
of opinion. The report noted significant deficiencies including
material weaknesses in internal controls over major federal programs
such as the Community Development Block Grant and the Workforce
Investment Act.
State and Local Officials Told Us They Are Addressing Internal Control
Challenges We Previously Reported:
To address financial management and internal control challenges we
previously reported on in September 2009 (GAO-09-1017SP) and May 2010
(GAO-10-605SP) we followed up on actions taken and those planned by
the MDE and DPS, and state and local agencies with responsibility for
the WIA Program.[Footnote 29] Over the course of our Recovery Act work
in Michigan during the period from March 2009 through August 2010, we
interacted with OIAS officials regarding internal control challenges
and opportunities we identified with activities and programs involving
Recovery Act funds. In December 2009, OIAS officials told us they
would take steps to address issues we reported on in September 2009,
such as oversight and monitoring challenges at MDE, including DPS, and
the payroll and eligibility challenges at DELEG and DWDD for the WIA
program.
In July 2010 officials with MDE, DPS and DELEG--the state agency
responsible for the WIA program--as well as ERO officials told us that
some actions have been taken and that others are underway to address
the internal control challenges described in our prior reports. For
example, MDE officials told us that they continue to monitor Recovery
Act funds provided to DPS and, among other things, they are using an
independent public accounting firm to monitor payroll and non payroll
expenditures at DPS. In June 2010, MDE officials conducted a site
visit at DPS that included MDE staff as well as representatives from
the OIAS. This monitoring included a review of over $35 million of
teacher salaries and benefit payments charged to Recovery Act SFSF.
During July 2010 meetings to discuss OIAS's ongoing oversight efforts
related to Recovery Act-funded programs, officials told us that, among
other things, they participated in several on-site visits at Michigan
schools and evaluated MDE's monitoring process over ESEA Title I
grants as part of their ongoing internal control oversight activities
involving MDE. They concluded that although MDE may have effective
program monitoring practices in place over LEAs, the agency has not
implemented strong fiscal monitoring practices. OIAS officials stated
that this may be because MDE relies on the schools' single audits as a
control to identify fiscal issues that may exist at the school level.
If there are findings in the school's single audit, MDE typically will
follow-up to determine how the issue can be addressed. According to
OIAS officials, MDE's Office of Field Services plans to hire an
auditor in the near term and initiate a fiscal monitoring program,
which OIAS plans to review. They plan to focus their own reviews on
schools with ESEA Title I findings reported in single audits and large
amounts of funding. OIAS officials also told us they plan to conduct
site visits independently, and to share the results of their reviews
with MDE. In response to our September 2009 report regarding control
challenges at DPS, OIAS officials have had several discussions with
officials in MDE's Field Services and Grants Office regarding ongoing
oversight at DPS. OIAS officials also noted that they contacted DPS
and will work directly with DPS officials to plan for and schedule an
August 2010 OIAS on-site review.
OIAS officials also told us that they are continuing to work with DWDD
and other stakeholders to address the payroll and eligibility
challenges that we identified with the WIA program in Detroit. During
a July 2010 follow-up visit, DELEG officials provided us with
documentation describing the DWDD plan for improved monitoring of
future programs. The plan--which, as of July 2010, is under review by
DWDD officials--includes revised monitoring forms as well as other
guidance. DWDD officials also told us they developed and approved
eligibility criteria for use in future youth employment programs.
OIAS officials noted that they met with the Director of the WIA
Monitoring Unit at DELEG to obtain an understanding of how the
program's expenditures are monitored and how they assure that
expenditures reported by each of the 25 Michigan Works! Agencies
(MWAs) are accurate.
Further, in May 2010, we reported on recipient reporting issues at
DELEG for the WIA program; MDE, DPS, and Michigan State University for
salaries that were retroactively paid with Recovery Act funds; and
with DPS for issues with non reporting of contractor and sub
contractor jobs.[Footnote 30] In the Recipient Reporting section of
this report we discuss our July and August 2010 follow up on these
issues. In addition, OIAS officials told us that their work in recent
months included consideration of recipient reporting issues at DELEG,
MDE, and DPS.
Although Economic and Budgetary Challenges Persist at the State and
Local Levels, Recovery Act Funds Have Provided Partial Relief:
Michigan continues to experience economic challenges as a result of
the decline in the automotive industry, which has lead to budget
pressures and declines in state revenues. Michigan has addressed its
fiscal year budget gaps since the beginning of the Recovery Act
through a combination of Recovery Act funds and cost cutting measures
to balance the state's budget. Over the 3 years ending September 30,
2011, Michigan expects to use $4.2 billion for budget stabilization,
including approximately $2.6 billion of state funds made available as
a result of the increased FMAP, and Recovery Act funds of $1.3 billion
in SFSF education stabilization funds, and $290 million in SFSF
government services funds.[Footnote 31] According to state budget
officials, as of July 16, 2010, expenses of Michigan state entities
totaled about $7.0 billion of the approximately $7.4 billion in
Recovery Act funds it has been awarded.[Footnote 32] Recovery Act
funding has been used for various programs including Medicaid,
education, workforce training, and transportation.
Additional Actions Needed to Address Budget Gaps:
As of June 30, 2010, slippage in revenue estimates leaves the state
with a projected General Fund shortfall of approximately $200 million
for the fiscal year ending September 30, 2010.[Footnote 33] Officials
are seeking solutions to this shortfall while addressing the projected
General Fund budget gap for fiscal year 2011.
According to state budget officials, Michigan has a balanced School
Aid Fund budget for fiscal year 2011.[Footnote 34] However, as of
August 10, 2010, Michigan did not have an approved General Fund budget
for fiscal year 2011. The Governor's originally proposed budget
estimated a shortfall of approximately $1.1 billion.[Footnote 35] To
partially address the projected shortfall, the Governor's proposed
budget assumed that Congress would extend the increased FMAP provided
by the Recovery Act--which was to end on December 31, 2010--to June
30, 2011. On August 11, 2010, state budget officials told us that
based on recent federal action extending the increased FMAP, Michigan
estimates it will receive approximately $300 million.
State officials explained that because state law requires the budget
to be balanced, the Governor advanced, as part of the fiscal year 2011
Executive budget, a number of options to address the estimated $1.1
billion budget gap. For example, the Governor proposed corrections
reforms to reduce prisoner population and allow for closure of up to
five prison facilities; and state employee benefit reforms, including
pension reforms.[Footnote 36] Additionally, state officials described
to us a law enacted in May 2010 reforming the Michigan Public School
Employees' Retirement System benefits under which, among other
changes, teachers will be required to contribute 3 percent of their
salary for retiree health care benefits.[Footnote 37] They explained
that this change does not affect the state's budget, as all Michigan
school teachers are local government employees, but will provide
savings to local governments. State officials estimate that this
savings in fiscal year 2011 will be $515 million, which officials
anticipate will enable the districts to retain staff. In addition,
state officials explained that the legislation included incentives for
early retirement of school teachers and through June 30, 2010, over
17,000 teachers statewide have retired.[Footnote 38] The
administration has proposed similar changes for state employee
pensions, estimating that these reforms will affect the state budget
by a reduction of expenses totaling approximately $98 million in
fiscal year 2011.[Footnote 39] The proposal for changes to the State
Employee Pension Plan also included incentives for early retirement.
Further, on August 25, 2010, state budget officials told us that based
on recent federal action Michigan will receive approximately $318.1
million from the federal government from the Education Jobs Funds.
Officials told us that at least ninety-eight percent of the award
($311.8 million) would be distributed to LEAs and up to $6.3 million
may be set aside for administration of the program.[Footnote 40]
Officials also told us that the method by which LEAs would receive the
funding has yet to be determined.
Michigan Continues to Face Significant Economic Challenges and
Officials Are Concerned about the "Cliff Effect" When Recovery Act
Funds Diminish:
Michigan continues to face significant economic challenges. State
officials told us that over the last decade Michigan has lost nearly
850,000 jobs; much of the job loss due to the changes that have
occurred throughout the auto industry, the mainstay of its economy.
Its unemployment rate of 13.1 percent as of June 2010, is one of the
highest in the nation.[Footnote 41] Projected state revenues for the
fiscal year ended September 30, 2011 of $17.9 billion are
approximately 14 percent below revenues of $20.9 billion for the year
ended September 30, 2008. State officials expressed continuing concern
about Michigan's long-term fiscal prospects. They told us they are
aware of the upcoming "cliff effect" in fiscal year 2012, when
Recovery Act funds diminish and they are working to devise solutions
to address the potential budget shortfall.
According to state officials Michigan took a number of cost-cutting
measures over the last several years. For example, during fiscal years
2009 and 2010, Michigan closed various state facilities, including
eleven correctional facilities and prison camps, a state psychiatric
hospital, and six juvenile facilities; mandated furlough days for
state employees; and increased the rate of contribution by state
employees for health insurance.
The Governor's proposed budget also indicates that the state may
forego up to $528 million in federal aid--largely for transportation--
due to an inability to provide required matching funds. State budget
officials told us that the legislature is considering ways to meet the
matching requirements, but as of August 10, 2010, no decisions have
been made.[Footnote 42]
Farmington Hills:
As we previously reported, local governments we visited in Michigan
are facing the pressure of balancing budgets in the midst of declining
revenues. Although Recovery Act funds have offered some temporary
assistance, local officials noted that these funds do not directly
alleviate local fiscal pressures. Our work for this report included
visiting the city of Farmington Hills to better understand these
pressures and the Recovery Act's impact on the community. Table 1
provides recent population and unemployment data.
Table 1: Background on Farmington Hills:
Population: 78,675;
Locality type: City;
Unemployment rate: 11.0%.
Source: U.S. Census Bureau and U.S. Department of Labor, Bureau of
Labor Statistics (BLS), Local Area Unemployment Statistics (LAUS) data.
Notes: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revisions.
[End of table]
Through July 31, 2010, Farmington Hills had been awarded a total of
$965,535 in Recovery Act funds through three grants. Farmington Hills
officials provided us with the following information on Recovery Act
spending through July 31, 2010.
* EECBG: The city had spent approximately $240,548 of its $791,300
award--roughly 30 percent--on items such as a solar hot water heater,
solar panels, and lighting improvements for a municipal building.
* Edward Byrne Memorial Justice Assistance Grant: The city had spent
approximately $47,000 of its $74,068 award--roughly 63 percent--on
purchasing new equipment, including police communication devices and a
digital video file storage and transfer device.
* Community Development Block Grant: The city had spent its entire
$100,169 award on rehabilitating 12 single-family, owner-occupied
homes for low-to-moderate-income families.
In addition to these grants, city officials told us that Farmington
Hills had also benefited from Recovery Act funds--totaling
approximately $2.7 million that are administered by the Michigan
Department of Transportation--for repairing, resurfacing, and
rehabilitating two roads in the city. City officials told us that as
of July 31, 2010, a total of approximately $1.4 million had been spent
on the road projects.
City officials said that Recovery Act funds had allowed the city to
undertake projects and purchase equipment it otherwise would not have
been able to, but that these funds have not had an impact on the
city's fiscal stability. Given that the city plans to spend nearly all
of its Recovery Act funds on one-time projects or acquisitions,
officials do not foresee having to deal with a "cliff effect" once
Recovery Act funds are expended.
City officials told us that Farmington Hills has continued to
experience significant fiscal pressure due to a steady decline in its
property tax and state shared revenue--its largest sources of income.
[Footnote 43] The City's fiscal year ends June 30, 2011, and its
general fund budget amounts to approximately $46.6 million, which
represents a decrease of 12 percent from its fiscal year 2010 general
fund budget of about $53 million. To address their fiscal situation,
city officials plan to aggressively apply for grants, continue to cut
expenditures, and tap into their reserves. The city also plans to
reduce the number of full-time staff by approximately 50--or 13
percent--during fiscal year 2011 through a combination of retirements,
not filling vacant positions, and layoffs.
State and Locality Comments on This Summary:
We provided the Governor of Michigan with a draft of this appendix,
and staff in the Michigan Economic Recovery Office reviewed the draft
appendix and responded on August 16, 2010. We also provided relevant
excerpts to officials from the localities we visited. They agreed with
our draft and provided clarifying or technical suggestions that were
incorporated, as appropriate.
GAO Contacts:
Susan Ragland, (202) 512-8486 or raglands@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Robert Owens, Assistant
Director; Ranya Elias, analyst-in-charge; Patrick Frey; Henry Malone;
Giao N. Nguyen; Laura Pacheco; Tejdev Sandhu; Regina Santucci; and Amy
Sweet made major contributions to this report.
[End of section]
Appendix X Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, (31 U.S.C. §§ 7501-7507) and provide a source
of information on internal control weaknesses, noncompliance with laws
and regulations, and the underlying causes and risk.
[3] The Michigan Public Educational Facilities Authority is a
separately audited component unit of the state.
[4] The Recovery Act initially provided eligible states with an
increased FMAP for 27 months from October 1, 2008, to December 31,
2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. On August 10, 2010 federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[5] The total allocation for Michigan includes $1.4 million to 12
direct grantees which are tribal governments.
[6] Section 1605 of the Recovery Act imposes a Buy American
requirement on Recovery Act funding, subject to certain exceptions.
Recovery Act, div. A, § 1605, 123 Stat. 303.
[7] The team includes representatives from the county's Departments of
Purchasing, Facilities Management, and Fiscal Services (for accounting
and budget issues), and the county Administrator's Office.
[8] The Recovery Act's Davis-Bacon provisions are located at section
1606 of the act. Recovery Act, div. A, § 1606, 123 Stat. 303.
[9] Recovery Act, div. A, title XV, § 1512(c).
[10] 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), among
other things, standardized the period of measurement of jobs created
or retained as one quarter.
[11] The state's administration will change with upcoming elections
because Michigan's governor is term limited.
[12] Generally, recipients are to submit reports to OMB's
federalreporting.gov 10 days after the quarter ends. OMB extended this
quarter's reporting period deadline to July 14, 2010.
[13] Recipients of EECBG funds are required to report quarterly to DOE
on three categories of activity and results metrics, including jobs
created or retained, using DOE's PAGE system.
[14] OMB's December 2009 guidance states that recipients are to
include jobs funded from subrecipients and vendors in their quarterly
reports to the maximum extent practicable. See OMB Memorandum, M-10-
08, December 18, 2009.
[15] Of the $11.4 million of Recovery Act funding allocated to the
Detroit Michigan Works! Agency, DWDD retained $8.3 million for youth
payroll and internal administration and used $3.1 million to contract
with a vendor that administered the summer youth employment program.
In total, DELEG allocated $62.9 million to the 25 Michigan Works!
Agencies for their Workforce Investment Act Summer Youth Programs.
[16] We noted in our May report that officials from ERO, the Michigan
Department of Technology, Management & Budget, and MDE should consider
what actions might be taken to ensure that jobs that are paid for with
Recovery Act SFSF education stabilization funds are being reported
consistently and on time.
[17] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, (31 U.S.C. §§ 7501-7507) and provide a source
of information on internal control and compliance findings and the
underlying causes and risks. The Single Audit Act requires that
states, local governments, and nonprofit organizations expending
$500,000 or more in federal awards in a year to obtain an audit in
accordance with the requirements set forth in the act. A Single Audit
consists of (1) an audit and opinions on the fair presentation of the
financial statements and the Schedule of Expenditures of Federal
Awards; (2) gaining an understanding of and testing internal control
over financial reporting and the entity's compliance with laws,
regulations, and contract or grant provisions that have a direct and
material effect on certain federal programs (i.e., the program
requirements); and (3) an audit and an opinion on compliance with
applicable program requirements for certain federal programs.
[18] The Recovery Act's wage rate provisions are located at section
1606 of division A of the act.
[19] The OAG issued Single Audit reports on June 30, 2010 for the
Departments of Community Health, Education, Military and Veterans
Affairs, Natural Resources, Environmental Quality, and State Police;
June 15, 2010 for the Department of Corrections; and May 21, 2010 for
the Michigan Public Educational Facilities Authority, a discreetly
presented component unit of the state. The Federal Audit
Clearinghouse, which is responsible for receiving and distributing
Single Audit results, received these audits by June 30, 2010.
[20] In comparison, Michigan's audited consolidated financial
statements for the two fiscal years ended September 30, 2009 report
total expenses of $88.3 billion.
[21] The OAG defined a significant deficiency in internal control over
federal program compliance as a control deficiency, or combination of
control deficiencies, that adversely affects the entity's ability to
administer a federal program such that there is more than a remote
likelihood that noncompliance with a type of compliance requirement of
a federal program that is more than inconsequential, will not be
prevented or detected.
[22] Title I, Part A of the Elementary and Secondary Education Act of
1965, as amended.
[23] The OAG defined known questioned costs as questioned costs that
are specifically identified by the auditor.
[24] The OAG reported that the $4.4 billion known and likely
questioned costs were based on documentation provided to them during
the audit; however, it is possible that DCH could obtain additional
documentation that would reduce the amount of questioned costs.
[25] The OAG defined likely questioned costs as the auditor's
estimate, based on the known questioned costs, of total questioned
costs.
[26] 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).
[27] According to the OAG, a cluster is a grouping of closely related
federal programs that have similar compliance requirements. The
programs within a cluster may be administered as separate programs,
but are treated as a single program for purposes of meeting the audit
requirements of OMB Circular, A-133, Audits of States, Local
Governments, and Non-Profit Organizations.
[28] The eight programs selected for review are the: (1) ESEA Title I
grants, (2) Individuals with Disabilities Education Act (IDEA), Part B
grants, (3) School Improvement Grants, (4) Clean Water/Drinking Water
Revolving Funds, (5) Weatherization Assistance Program, (6) Workforce
Investment Act of 1998, (7) State Energy Program, and (8) Byrne
Justice Assistance Grant.
[29] In September 2009 we reported that DELEG should work with the
Detroit WIA program to implement internal controls to address
weaknesses with the program's payroll preparation and distribution
process as well as program eligibility determinations. We also noted
that the Michigan Department of Education, in coordination with
Detroit Public Schools, will need to consider implementing procedures
to provide reasonable assurance that Recovery Act funds are reported
accurately and timely and used only for allowable purposes. GAO-09-
1017SP.
[30] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 2010).
[31] As previously reported, in fiscal year 2009, Michigan had
expended almost all of its government services funds (approximately
$288 million) for public safety programs, including the Michigan State
Police and Department of Corrections.
[32] According to State Budget Office officials, the amount of
Recovery Act funding awarded is defined as the amount appropriated by
the Michigan legislature as of July 16, 2010.
[33] At September 30, 2009, Michigan's audited financial statements
reflect a General Fund balance of $177.2 million and the School Aid
Fund had a fund balance of $251.1 million.
[34] In July 2010, Michigan enacted a state school aid budget
appropriations bill for fiscal year 2011, wherein the state
appropriated approximately $10.9 billion from the school aid fund and
approximately $184 million in Recovery Act funds to public schools and
other state educational programs.
[35] Officials from the state budget office told us that the $1.497
billion estimated shortfall is made up of a $1.1 billion shortfall in
the General Fund and a $0.4 billion shortfall in the School Aid Fund.
[36] On August 18, 2010, the Governor detailed her recommendations--
including a 3 percent administrative reduction (for fiscal year 2011)
in all state agency spending and other spending and revenue proposals--
to address the budget shortfalls for fiscal years 2010 and 2011.
[37] 2010 Mich. Pub. Acts 75.
[38] State officials told us that they had not estimated what, if any,
portion of the total retirees were a result of the early out
provisions of the legislation; they noted that for the most recent
fiscal year ended September 30, 2009, 6,000 teachers had retired.
[39] State officials told us that total savings in fiscal year 2011 as
a result of the Governor's proposed reforms to the Michigan's State
Employee Retirement System are estimated to total $253 million.
Estimated general fund savings to the state would amount to $98
million. State officials also estimate that the reforms will result in
reduced expenditures of $155 million, a portion of which is
reimbursable by the federal government, and as a result federal and
other state restricted revenues would in turn be reduced by $155
million.
[40] Section 101 of Public Law 111-226, enacted on August 10, 2010,
provides $10 billion for the new Education Jobs Fund to retain and
create education jobs nationwide. The Fund will generally support
education jobs in the 2010-2011 school year and be distributed to
states using a formula based on population figures. States can
distribute their funding to school districts based on their own
primary funding formulas or districts' relative share of federal ESEA
Title I funds.
[41] GAO analysis of U.S. Department of Labor, Bureau of Labor
Statistics (BLS) data. Unemployment rates are preliminary estimates
for June 2010 and have not been seasonally adjusted. Rates are a
percentage of the labor force. Estimates are subject to revisions.
[42] Officials told us that Michigan would need to provide an
additional $84 million in fiscal year 2011 to meet federal matching
requirements.
[43] Tax revenue--estimated to be approximately $26.9 million--and
state shared revenue--estimated to be about $5.5 million--represents
about 70 percent of the City's general fund estimated revenues for
fiscal year 2011.
[End of Appendix X]
Appendix XI: Mississippi:
Overview:
[End of section]
The following summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act (Recovery Act)
spending in Mississippi[Footnote 1]. The full report on all of our
work, which covers 16 states and the District of Columbia, is
available at http://www.gao.gov/recovery.
What We Did:
We obtained information on four programs funded under the Recovery
Act--Public Housing Capital Fund Formula Grants, Public Housing
Capital Fund Competitive Grants, the Tax Credit Assistance Program
(TCAP), and the Grants to States for Low-income Housing Projects in
Lieu of Low-income Housing Credits Program under Section 1602 of
division B of the Recovery Act (Section 1602 Program). Our work
focused primarily on the status of program funding and the use of
funds. As part of our review of public housing, we visited three
public housing authorities, located in Meridian, Gulfport, and
Picayune. Our work with TCAP and the Section 1602 Program included
visits to the Mississippi Home Corporation located in Jackson and two
housing projects, one in Pickens and the other in Pascagoula. For
descriptions and requirements of the covered programs, see appendix
XVIII of GAO-10-1000SP.
Our work in Mississippi also included meeting with Tupelo city
officials to determine the amount of Recovery Act funds the city had
received or will receive directly from federal agencies and to learn
how those funds are being used. We chose to visit Tupelo because its
unemployment rate was above the state's average and it is one of the
largest cities in Mississippi.
Finally, we updated information we previously reported on
Mississippi's fiscal condition and on the efforts that the state has
undertaken to ensure accountability of the Recovery Act funds that it
has received.
What We Found:
* Public housing. The Meridian Housing Authority (MHA) received an
$8.5 million Recovery Act Public Housing Capital Fund Competitive
Grant. MHA plans to use this grant to help renovate a 113-unit public
housing development. As of August 7, 2010, MHA had obligated $520,356
and drawn down $335,134 of the obligated funds. Also as of August 7,
the Mississippi Regional Housing Authority Number VIII (MRHA-8), which
is located in Gulfport, Mississippi, had received a $3,783,351
Recovery Act Public Housing Capital Fund Formula Grant and had
expended a total of $1,168,969. MRHA-8 is using the funds to remodel
the office space at one housing development, re-roof 73 housing
authority buildings, and conduct various renovations in 140 individual
housing units. The Picayune Housing Authority (PHA) received a total
of $697,630 in Recovery Act funds from the Public Housing Capital Fund
Formula Grant, and as of August 7, 2010, it had expended the full
amount. PHA used the funds to renovate the bathrooms and kitchens in
22 units, as well as to replace the heating, ventilation, and air
conditioning systems in another 92 units.
* TCAP and the Section 1602 Program The Recovery Act established two
funding programs that provide capital investments in Low-income
Housing Tax Credit (LIHTC) projects: (1) TCAP administered by the U.S.
Department of Housing and Urban Development (HUD) and (2) the Section
1602 Program administered by the U.S. Department of Treasury
(Treasury)[Footnote 2]. Before the credit market was disrupted in
2008, the LIHTC program provided substantial financing in the form of
third-party investor equity for affordable rental housing units
[Footnote 3]. As the demand for tax credits declined, so did the
prices investors were willing to pay for them, which created funding
gaps in projects that had received tax credit allocations in 2007 and
2008. TCAP and the Section 1602 Program were designed to fill
financing gaps in planned tax credit projects and jump-start stalled
projects.
HUD awarded the Mississippi Home Corporation (MHC) $21,881,803 in TCAP
Recovery Act funding, and Treasury awarded MHC $29,664,458 in Section
1602 Program funds. In turn, MHC awarded all TCAP and Section 1602
Program funds to 32 projects, with 15 receiving TCAP funds, 4
receiving Section 1602 Program funds, and 13 receiving a combination
of TCAP and Section 1602 Program funds. According to HUD data, as of
August 1, 2010, MHC had disbursed $4,606,010 or 21 percent of the
awarded TCAP funds. In addition, according to HUD data, as of July 31,
2010, MHC had not disbursed any Section 1602 Program funds.
MHC officials indicated that they are not concerned about disbursing
seventy-five percent of TCAP funds by the February 2011 deadline.
However, because of delays, MHC officials told us that project owners
receiving Section 1602 Program funds may not meet the requirement of
spending thirty percent of eligible project costs by the December 31,
2010 deadline. If a project owner fails to meet this deadline, then
MHC must stop disbursing any additional Section 1602 Program funds to
the project owner. MHC expects that it will not begin disbursing
Section 1602 Program funds to projects until mid-to late-August.
* Tupelo's use of Recovery Act funds. Tupelo received six Recovery Act
grants which totaled $6,355,279. According to city officials, funds
provided by the Recovery Act benefited the city. However, the
officials told us that the city did not apply for some funds that
would have helped the city meet its critical needs. Although officials
identified water and sewer line improvements as a critical city need,
Tupelo did not apply for Recovery Act funds for such improvements that
were available through the Mississippi Clean Water and Drinking Water
State Revolving Funds. According to a city official, the city chose
not to apply for the funds because the city did not have 1) shovel-
ready projects that met the objectives of the fund or 2) the resources
to devote to quickly developing a project.
* State fiscal condition. Mississippi continues to experience
significant fiscal challenges due to a decline in state revenues. Tax
revenue collections for fiscal year 2010 were $404 million, or 8.2
percent below expectations. The Governor stated that while preparing
the fiscal year 2011 budget was a difficult process because of
declining revenue, fiscal year 2012 will be even more challenging
because federal stimulus funding will have ended.
* Accountability. The Mississippi Office of the State Auditor (OSA)
and the Department of Finance and Administration (DFA) have contracted
with national accounting firms to monitor and oversee Recovery Act
funds. Through April 2010, BKD, the firm contracted by OSA, has tested
80 grants received by 34 grant recipients and reported a total of 101
instances where recipients did not comply with Recovery Act
requirements. The greatest lack of compliance was with quarterly
recipient reporting. KPMG, the firm contracted by DFA, is assessing
selected state agencies for their compliance with Recovery Act
provisions. As of June 30, 2010, KPMG had completed site visits at 12
state agencies and reviewed approximately 39 different grants.
Similarly to BKD, KPMG found compliance problems with recipient
reporting requirements.
Obligation of Mississippi's Sole Public Housing Competitive Grant
Begins as the State's Formula Grants Continue to Be Expended:
HUD awarded Recovery Act Public Housing Capital Fund competitive grant
dollars meant to improve the physical condition of housing authority
properties to only one of Mississippi's 52 public housing agencies--
MHA. MHA received approximately $8.5 million and as of August 7, 2010,
had obligated $520,356. Also as of August 7, MHA had drawn down
$335,134 of the obligated funds.
According to officials, MHA will use its Recovery Act competitive
grant to help renovate a 113-unit public housing development, known as
Frankberry Court. Each unit in this public housing development, which
was originally constructed in 1939, will receive a number of
improvements, including central heat and air conditioning units, new
energy efficient windows, entry doors, roofs, and vinyl siding, as
well as new baths and kitchens; energy star appliances; interior paint;
and tile or carpeted floors. The existing on-site clubhouse will also
be refurbished to accommodate tenant community services and a resident
business center. Figure 1 shows the Frankberry Court development as it
stands today, prior to renovation, as well as a newly built
"affordable housing" development in Meridian that was constructed by
the same developer and that serves as the model for the Frankberry
Court renovation.
Figure 1: Frankberry Court Development, Prior to Renovation, and Model
"Affordable Homes" in Meridian, Mississippi by the Same Developer:
[Refer to PDF for image: 4 photographs]
The two pictures on the left (top and bottom) show the exteriors of
the (1) individual housing units and (2) community center of a housing
development to be renovated using Recovery Act Public Housing
Competitive Grant funding. The two pictures on the right (top and
bottom) show the exteriors of the (1) individual housing units and (2)
community center of a recently renovated housing development, which
serves as the model community for the housing development featured on
the left. The photographs on the left reflect the necessity of the
Recovery Act-funded renovations in that the housing units and
community center appear cold and unwelcoming to those who may reside
there, whereas the photographs on the right reflect a modern, more
welcoming place to call home. For example, in the top, left photo, the
public housing building has graffiti to the left of the middle windows
on the first floor, whereas the public housing building, in the top,
right photo, has the aesthetics of an upscale apartment community. In
addition, the community center in the bottom, left picture is
surrounded by a chain link fence and there is no playground equipment
for children, whereas the community center in the bottom, right
picture, has a beautiful wooden fence and new playground equipment.
Source: GAO.
[End of figure]
MHA officials told us that the scope and estimated cost of the
Frankberry project has remained consistent since MHA filed its
Recovery Act competitive grant application. However, the timeline has
slipped due to a delay in financing. Because the Recovery Act requires
that housing agencies obligate competitive grant funds within one year
of the funds becoming available to them, MHA officials originally
hoped to complete this task by January 1, 2010, well in advance of
their September 23, 2010 deadline. Although MHA still plans to
obligate its funds in advance of the mandated deadline, it does not
plan to do so until September 9, 2010. The nearly $11.9 million
project will be partially financed through the sale of $5.5 million in
bonds and $2.8 million in tax credits. The proceeds from the bonds
will then provide a construction loan that MHA will eventually pay
using $4.9 million in Recovery Act funding and $648,910 in low-income
housing tax credit equity. As of August 4, 2010, MHA had a letter of
agreement from a bank to both purchase the bonds and provide the
construction loan and a letter from an equity fund agreeing to
purchase the low-income housing tax credits. Officials at the HUD
Mississippi Field Office stated that MHA might face some challenges
due to today's weak economy, especially since the equity fund is to
purchase tax credits in four installments based upon the progression
of the project.
MHA officials expect that they will meet the requirement to expend 60
percent of their Recovery Act funds within 2 years of the date that
the funds became available for obligation. The officials told us that
20 percent of their project funds will be automatically expended once
HUD provides final project approval in late August and Recovery Act
funds are transferred to an escrow account as collateral for the
project's bond issue. The remaining project funds will then be drawn
down monthly and invested as collateral for the bonds. Currently,
officials believe they will meet the 60 percent expenditure deadline
by April 2011, which is well in advance of their mandated September
23, 2011, deadline. Officials also added that they will continue to
assess their progress in obligating and expending Recovery Act funds
during weekly telephone conversations with their project staff and
with HUD representatives at the Mississippi Field Office.
Housing Authorities Expend Recovery Act Public Housing Capital Fund
Formula Grants for a Variety of Projects:
Collectively, HUD provided Mississippi's 52 public housing agencies
with approximately $32.4 million in Recovery Act Public Housing
Capital Fund formula grants. Similar to Public Housing Capital Fund
Competitive Grants, HUD provides formula grant funds to housing
authorities to improve the physical condition of their properties. As
of August 7, 2010, the recipient public housing agencies had not only
obligated the total $32.4 million, but had also drawn down a
cumulative total of about $23.7 million of the obligated funds.
We visited two housing authorities that received Recovery Act Public
Housing Capital Fund formula grants--MRHA-8 located in Gulfport,
Mississippi and PHA in Picayune, Mississippi--both of which we
previously visited and reported on in July and December 2009[Footnote
4]. Based on its 2008 formula, HUD allocated $3,783,351 in Recovery
Act funds to MRHA-8 and as of August 7, 2010, the housing authority
had expended a total of $1,168,969. The projects and their value are
shown in table 1. Officials told us that the remaining $453,450 of
Recovery Act funding has been obligated to help cover replacement
decking for the Dan Stepney re-roofing project, architectural and
engineering services, and administrative expenses. The administrative
expenses include salaries for three years for an assistant and an on-
site inspector, as well as the cost for three years of the authority's
telephone, fuel, training, travel, and insurance costs. HUD also
provided PHA with $697,630 in Recovery Act funds, which as of August
7, 2010, had been completely expended.
Table 1: Projects MRHA-8 Funded with Its Public Housing Capital
Formula Grant:
Housing development: H.C. Patterson;
Work funded by the Recovery Act: Office Remodel;
Contract award amount: $228,600.
Housing development: Pecan Circle;
Work funded by the Recovery Act: Re-roof 38 buildings and install
solar-powered attic fans;
Contract award amount: $305,000.
Housing development: Pecan Circle;
Work funded by the Recovery Act: Kitchen and Bath Renovation of 72
units;
Contract award amount: $1,135,516.
Housing development: Dan Stepney;
Work funded by the Recovery Act: Re-roof 35 buildings and install
solar-powered attic fans;
Contract award amount: $287,785.
Housing development: Dan Stepney;
Work funded by the Recovery Act: Miscellaneous Renovation of 68 units;
Contract award amount: $1,373,000.
Housing development: Total;
Contract award amount: $3,329,901.
Source: MRHA-8.
[End of table]
The renovation of the office and community common area at the H.C.
Patterson Housing Development in Poplarville, Mississippi is part of
the MRHA-890 HUD-approved five year plan. The renovation includes the
installation of a gas log fireplace, oak moldings, and oak built-in
shelving, as well as ceramic tile floors. Figure 2 shows the
improvements being financed with Recovery Act funds in comparison to
the interior of another development's office space that has yet to
undergo renovation.
Figure 2: Columbia, Mississippi's Dan Stepney Housing Development
Office, Prior to Renovation, and the Recovery Act-Financed Interior
Improvements at the Poplarville H.C. Patterson Housing Development
Office:
[Refer to PDF for image: 4 photographs]
The two pictures on the left (top and bottom) show the interior office
space of a housing development yet to undergo renovation, including
the (1) workspace of the public housing development staff and (2)
community common area for public housing resident use. The two
pictures on the right (top and bottom) show the interior office space
of a housing development renovated using Recovery Act Public Housing
Capital Formula Grant funding, including the (1) entry door and
flooring of the workspace for staff of the public housing development
and (2) community common area for public housing resident use. The
photographs on the left reflect a dated, unwelcoming staff office
space and resident common area, whereas the photographs on the right
reflect a modern, more welcoming environment. For example, in the top,
left photo, the staff offices are surrounded by cement block walls and
the flooring consists of old and dirty carpeting, whereas the staff
offices, in the top, right photo, has the aesthetics of an upscale
apartment community, including such features as a solid oak door and
ceramic tile floors. In addition, the resident common area in the
bottom, left picture has cement, stark white block walls and laminate
flooring, whereas the resident common area in the bottom, right
picture, has beautiful, solid oak shelving, warm and neutral paint, as
well as a gas log fireplace.
Source: GAO.
[End of figure]
Although MRHA-8 planned to complete the H.C. Patterson renovation by
April 2010, the contract administrator for this project told us that
MRHA-8 now plans to close the contract without all work being
completed. The contract administrator told us that the contractor not
only performed substandard work but also failed to complete some work
entirely. He also said that MRHA-8 officials plan to charge the
contractor an amount equal to the cost of having another contractor
repair the substandard work and complete the unfinished work, as well
as require the contractor to pay liquidated damages. According to the
contract administrator, MRHA-8 will then decide whether to use its own
staff to complete the project, hire another contractor to complete it,
or implement another remedy that is allowed under procurement rules.
MRHA-8 is also making miscellaneous renovations to all 68 units of its
Dan Stepney Housing Development in Columbia, Mississippi. These
renovations include the replacement of single pane windows with energy
efficient double pane windows; installation of solar-assisted hot
water heaters; new cabinets, energy efficient refrigerators, and
stoves in each unit's kitchen; and new bathtubs, water saving toilets,
vanities, mirrors, lights, fans, and receptacles in each unit's
bathroom. Figure 3 shows the windows at the Dan Stepney Housing
Development as they existed before renovation and the windows after
replacement.
Figure 3: Dan Stepney Housing Development's Window Replacement:
[Refer to PDF for image: 2 photographs]
The picture on the left shows the exterior of a public housing unit
where the single pane windows have yet to be replaced with new and
energy efficient double pane windows. However, the picture on the
right shows the exterior of a public housing unit, in the same
development, where the single pane windows have been replaced with new
and energy efficient double pane windows paid for with Recovery Act
Public Housing Capital Formula Grant funding. The photograph on the
left reflect dated windows that do not look as thick or secure as the
windows featured in the photograph to the right.
Source: GAO.
[End of figure]
As we previously reported, PHA officials used Recovery Act funds to
renovate bathrooms and kitchens in 22 units, as well as to replace the
heating, ventilation, and air conditioning (HVAC) systems in another
92 units[Footnote 5]. The interior and exterior components of these 92
new HVAC systems are shown in Figure 4.
Figure 4: New HVAC Systems Financed with a Public Housing Capital Fund
Formula Grant and Installed at a Picayune, Mississippi Housing
Development:
[Refer to PDF for image: 2 photographs]
The photograph on the left shows the interior component and the
picture on the right shows the exterior component of a public housing
unit‘s new heating, ventilation, and air conditioning system paid for
with Recovery Act Capital Formula Grant Funds. Prior to the
installation of these units, the residents of this particular public
housing development did not have air conditioning.
Source: GAO.
[End of figure]
Field Office Believes Recovery Act Funds Have Improved Monitoring
Efforts:
The HUD Mississippi field office Director told us that Recovery Act
funds have enabled HUD headquarters to provide her office with the
financial resources needed to conduct both remote and on-site reviews.
In particular, the field office conducted "quick look" reviews of five
Mississippi housing authorities that had obligated less than 90
percent of their Recovery Act formula funds as of February 26, 2010.
The field office found deficiencies at only one of the housing
authorities reviewed, the Brookhaven Housing Authority. Field office
officials told us that its policy committee considered Brookhaven's
use of funds for a security contract to be an improper use of funds.
In addition, the officials said that Brookhaven replaced existing
funding for the contract with Recovery Act funds, an action known as
supplanting, which the Recovery Act does not allow. At this time, HUD
plans to recapture $153,787.64 in funding.
The field office Director also explained that her office both assists
and provides guidance to housing authorities in their preparation of
recipient reports required by the Recovery Act. The director told us
that the field office reminds the housing authorities of upcoming
deadlines, keeps track of the housing authorities that have reported,
and provides support for technical problems. However, while the field
office will question officials at a public housing authority if the
officials observe discrepancies in the authorities' reported jobs
data, the field office does not review the integrity of the data as
all data quality reviews are conducted at HUD headquarters.
Housing Authorities Confirm Jobs Data in Different Ways:
We spoke with officials from two housing authorities about their
method of confirming the jobs data that they report. A PHA official
told us that she asks PHA's on-site modification coordinator to verify
the accuracy of the number of jobs that contractors report as created
and retained. The coordinator compares the employees on the
contractor's weekly time sheet with the information documented in the
coordinator's daily on-site reports. An MRHA-8 official explained that
he accepts the jobs data that his contractors certify and report to
him in writing. In addition, officials from MRHA-8's contracting
office verify this information by checking it against the contractor's
certified payroll.
TCAP and Section 1602 Program Provide Needed Project Financing but
Create Financial Burden for Mississippi Home Corporation:
The Recovery Act established two funding programs that provide capital
investments in LIHTC projects: (1) TCAP administered by HUD and (2)
the Section 1602 Program administered by Treasury[Footnote 6]. Before
the credit market was disrupted in 2008, the LIHTC program provided
substantial financing in the form of third-party investor equity for
affordable rental housing units. As the demand for tax credits
declined, so did the prices investors were willing to pay for them,
which created funding gaps in projects that had received tax credit
allocations in 2007 and 2008. TCAP and the Section 1602 Program were
designed to fill financing gaps in planned tax credit projects and
jump-start stalled projects.
Housing Finance Agencies and Project Owners Must Meet Disbursement and
Expenditure Guidelines:
Under the Recovery Act, housing finance agencies (HFAs) responsible
for administering TCAP projects must disburse 75 percent of the funds
that they receive by February 2011; project owners must expend the
TCAP funds that they receive by February 2012. The Recovery Act
requires that all Section 1602 Program awards be made by December
2010, or the HFA must return the unawarded funds to Treasury.
Treasury's deadline for HFAs to disburse all Section 1602 Program
funds is December 31, 2011. However, Treasury requires that individual
project owners spend 30 percent of their eligible project costs by
December 31, 2010 in order to continue receiving Section 1602 Program
funds in 2011[Footnote 7].
MHC Concerned that Projects Funded by the Section 1602 Program May
Have Difficulty Meeting Spending Deadline:
HUD awarded the MHC $21,881,803 in TCAP Recovery Act funds and
Treasury awarded MHC $29,664,458 in Section 1602 Program funds. In
turn, MHC awarded all TCAP and Section 1602 Program funds to 32
projects, with 15 receiving TCAP funds, 4 receiving Section 1602
Program funds, and 13 receiving a combination of TCAP and Section 1602
Program funds. According to HUD data, as of August 1, 2010, MHC had
disbursed $4,606,010 or 21 percent of the awarded TCAP funds. In
addition, according to HUD data, as of July 31, 2010, MHC had not
disbursed any Section 1602 Program funds.
MHC officials indicated that they are not concerned about disbursing
seventy-five percent of TCAP funds by the February 2011 deadline.
However, because of delays, MHC officials told us that project owners
receiving Section 1602 Program funds may not meet the requirement of
spending thirty percent of eligible project costs by the December 31,
2010 deadline. If a project owner fails to meet this deadline, then
MHC must stop disbursing any additional 1602 Program funds to the
project owner. MHC expects that it will not begin disbursing Section
1602 Program funds to projects until mid-to late-August. MHC noted
several reasons for this delay. First, MHC officials told us that
MHC's board delayed its request for Section 1602 Program funds to
Treasury until February 2010, while the board assessed program risks
related to Treasury's requirements for recapture of funds. This
included an assessment of the requirement that makes MHC responsible
for returning Section 1602 Program funds to Treasury if a project
owner fails to complete the project or meet LIHTC
requirements[Footnote 8]. Further, MHC explained that delays in the
approval of legal documents by investors and lenders prevented MHC
from disbursing funds to the projects and delayed most Section 1602
Program development loan closings until mid-to late August.
Additional TCAP and Section 1602 Program Responsibilities Create
Burden for MHC:
For the TCAP and Section 1602 Program, HUD and Treasury require state
Housing Finance Agencies (HFA) to exercise more management of projects
than the agencies exercise under the standard LIHTC program. Normally
IRS requires HFAs to review LIHTC projects at least annually to
determine project owner compliance with rent and income limits and
with tenant qualifications. Additionally, every three years the Agency
must conduct on-site inspections of all LIHTC buildings, which
includes inspecting at least 20 percent of the LIHTC units and the
resident files associated with those units. Under the TCAP and Section
1602 programs, however, HFAs are obligated to perform asset
management, which imposes ongoing responsibilities on the HFAs for the
long-term viability of each project. For example, an HFA's asset
management may include monitoring current financial and physical
aspects of project operations, such as conducting analyses or
approving operating budgets, developing cash flow trends, and
monitoring reserve accounts, as well as performing physical
inspections. Asset management activities will also examine long-term
issues related to plans for addressing a project's capital needs and
changes in market conditions, as well as recommending and implementing
plans to correct troubled projects. In addition, HFAs will ensure
compliance with LIHTC requirements as part of its asset management
activities. Further, HFAs are responsible for returning TCAP and
Section 1602 Program funds to HUD and Treasury, respectively, if a
project fails to comply with LIHTC requirements[Footnote 9].
MHC told us that they are taking a number of actions to meet the asset
management requirements of the TCAP and the Section 1602 Program.
Foremost, MHC requires program owners of all TCAP and Section 1602
Program funded projects to have investors. MHC is required to repay
funds to HUD and Treasury in accordance with their respective
guidelines if a project owner fails to meet LIHTC requirements during
the 15-year compliance period. MHC believes that its risk of repayment
is further reduced because investors often provide additional
oversight and monitoring to ensure that LIHTC requirements are met.
In addition to requiring the involvement of investors, MHC is hiring
additional staff, consultants and purchasing equipment, vehicles, and
storage space. MHC will hire additional employees to carry out asset
management tasks, and it is increasing its use of environmental
consultants and lawyers to handle the additional environmental and
legal reviews required by TCAP and the Section 1602 Program. MHC has
also modified existing software and purchased scanners to handle the
added paperwork generated by the programs. Last of all, MHC plans to
purchase additional vehicles so that it can increase the number of
site visits to projects and to purchase additional space to store
program documents.
MHC projects that these asset management activities will cost $500,000
in the first year and an additional $1,000,000 over the next 5 years.
However, MHC has not increased fees charged to project owners because
it believes that project owners are already burdened in a depressed
market, and adding fees would only serve to further hinder recovery of
the LIHTC market. However, MHC officials told us that it was necessary
to adjust the fiscal year 2010 and 2011 budgets because of increased
costs. For example MHC told us that it does not plan on funding any
Habitat for Humanity loans, which it has funded in the past.
Paying Prevailing Wage Rates May Create Burden for Project Owners:
According to MHC officials, project owners consider the Recovery Act's
requirement that laborers and mechanics working on TCAP projects be
paid prevailing wages to be burdensome. Some developers told us that
the prevailing wage standards can add to overall costs in certain
markets. For example, the project owner of one project that we visited
told us that the requirement to pay prevailing wages increased the
project's overall cost by 15 to 20 percent.
Low Income Housing Tax Credit Program in Mississippi Attracting Fewer
Investors and Projects Experience Financing Gaps:
According to MHC officials, investors look at every project in
Mississippi as rural and expect that project income will be very low
or non-existent. As a result, investors scrutinize the financials on
Mississippi projects. MHC officials said that in a market that is
still stabilizing, a state like Mississippi is slow to rebound and
investor interest is low.
Until the Recovery Act provided TCAP and Section 1602 Program funding,
project owners said many projects were stalled. To restart the
projects, project owners sought funds from several sources. Some
projects that we reviewed included financing provided by investors,
construction loans, the Section 1602 Program, TCAP, or both the
Section 1602 Program and TCAP. Often all funding sources had to be
pulled together simultaneously, because if one source of funding was
not in place, it was difficult to acquire other sources. In
particular, investors wanted the assurance that Section 1602 Program
funding provided, as well as the increased equity that the funds
brought to the project. For example, one project owner told us that
TCAP provided the gap financing to proceed with the project. He said
that without TCAP financing he would have been unable to complete the
project.
Another project's owner told us that the current market conditions
forced some syndicators out of business. The project owner said that
within the last 3 years, the original syndicator for this project
defaulted, which forced him to seek additional investors. He told us
that he would not have been able to attract additional investment
without the Section 1602 Program because investors want to be sure
before committing funds that the funding from all sources will be
sufficient to complete the project.
Recipient Reporting Requirements Apply Only to TCAP and Not Section
1602:
Section 1512 of the Recovery Act describes recipient reporting
requirements, including the requirement to estimate the number of jobs
created and retained; but the requirements apply only to programs
under division A of the Recovery Act, which includes TCAP. The Section
1602 Program is under division B of the Recovery Act, and, therefore,
not subject to section 1512 requirements. Section 1512 requires
recipients to file quarterly reports on the number of full-time
equivalent jobs created or retained by funds spent through programs
funded by division A of the Recovery Act during that quarter. Jobs are
to be counted in accordance with methodology provided by the Office of
Management and Budget (OMB).
In contrast, Treasury collects its own project information through
quarterly performance reports submitted to Treasury by HFAs. HFAs are
required to make only one report of jobs created or retained by
Section 1602 Program funds. HFAs submit estimated information on the
number of full-time equivalent jobs to be created or retained by the
entire project with the first quarterly report for each project. The
number of jobs reported to Treasury need not be reduced to reflect
parts of the project not funded under the Section 1602 program.
MHC officials told us that MHC is responsible for recipient reporting
for projects that receive TCAP funds. However, through June 2010, the
officials said that they had not disbursed any TCAP funds and,
therefore, had not reported that any jobs were created or retained
with TCAP funds. The officials also told us that they anticipate that
they will disburse TCAP funds during the next quarter and report jobs
for the first time in the September 2010 quarterly report. MHC
officials told us that they will rely on project owners to report
accurate jobs information, but they plan to cross check the number of
jobs reported with the payroll information that project owners must
provide to ensure prevailing wages are paid to laborers.
HUD issued general guidance on how to report the jobs for TCAP
projects that are partially funded with Recovery Act funds and MHC
provided the guidance to the project owners. In one instance, MHC also
contacted HUD for guidance on how to report jobs for projects that
were completed prior to receiving TCAP funds. In addition, a project
owner told us that MHC is to provide job reporting guidance when he
closes on his TCAP funding.
MHC is also responsible for reporting the jobs that are created and
retained when a project is financed with Section 1602 Program funds.
MHC said it had not disbursed any Section 1602 Program funds as of the
end of June 2010, and it had not reported that any jobs had been
created or retained. MHC officials told us that they expect to
disburse Section 1602 Program funds during the next quarter, and the
officials indicated that jobs reported will be based on data provided
by project owners. Although Treasury guidance requires that HFAs
report to Treasury on awards of Section 1602 Program funds made to
project owners, the guidance does not discuss how to compute full-time
equivalent positions for job reporting. MHC also said that it cannot
rely on OMB guidance regarding the calculation of full-time equivalent
positions because OMB guidance does not apply to Treasury's Section
1602 Program. Further, Treasury's guidance does not require HFAs to
prorate the number of jobs created or retained by a project when the
project is only partially funded by the Section 1602 Program.
Recovery Act Funds Benefit the City of Tupelo:
We visited the City of Tupelo to assess the impact of Recovery Act
funding on a local government. Tupelo is located in northeastern
Mississippi and is the seventh largest city in the state in terms of
population. According to a 2008 U.S. Census Bureau estimate, the
city's population was 35,270, which was a slight increase over the
2000 population estimate of 34,211. According to the last complete
census, about 70 percent of Tupelo's citizens are white and about 29
percent are African-American, with the remaining 1 percent made up of
various other races. The 2008 census data also showed that the city's
median household income was $39,528, which is lower than the U.S.
median household income of $52,175.
According to city officials, the city's leading industry is furniture
manufacturing. However, the recession prompted a number of
manufacturers to relocate operations overseas in order to save costs.
City officials told us that the local furniture industry is now
showing signs of improvement and a number of manufacturers that had
left may be returning to the area, causing officials to be optimistic
that the local economy will soon improve. Additionally, on June 17,
2010, Toyota announced plans to resume construction of a vehicle
manufacturing plant located near Tupelo whose construction had been
postponed due to economic conditions. The facility will employ
approximately 2,000 people and, according to city officials, will also
create more than 3,000 indirect jobs.
City officials told us that the city first began to feel the impact of
the recession in 2008. Between 2008 and 2009, as shown in table 2, the
unemployment rate rose and sales tax revenues, which are a major
source of the city's operating funds, dropped almost 6 percent.
Table 2: Tupelo Unemployment Rates and Tax Revenues:
Fiscal year: 2007;
Unemployment rate: 6.4;
Percentage change: Not applicable;
Sales tax revenues: $16,776,574;
Percentage of increase/(decrease) in revenues: Not applicable.
Fiscal year: 2008;
Unemployment rate: 7.4;
Percentage change: 1.0;
Sales tax revenues: $17,049,934;
Percentage of increase/(decrease) in revenues: 1.63.
Fiscal year: 2009;
Unemployment rate: 11.3;
Percentage change: 3.9;
Sales tax revenues: $16,089,272;
Percentage of increase/(decrease) in revenues: (5.63).
Fiscal year: 2010;
Unemployment rate: 12.3[A];
Percentage change: 1.0;
Sales tax revenues: $16,439,272[B];
Percentage of increase/(decrease) in revenues: 2.18.
Source: Department of Labor (unemployment data); City of Tupelo (sales
tax data).
[A] Preliminary.
[B] Projected.
[End of table]
However, despite the recession and its impact on the city's
manufacturing base, city officials have kept Tupelo's financial
condition stable. The city develops its budget on a "pay-as-you-go"
basis. That is, the city bases its expenditures on the revenues that
it expects to collect without drawing on the city's rainy day fund
unless absolutely necessary. City officials review revenues monthly,
and, if warranted, adjust revenue projections, which can precipitate
adjustments to the expenditure budget. One indication of the city's
financial strength is the high bond rating of Aa3 that Moody's
Investor Service has given Tupelo's General Obligation Bonds[Footnote
10].
Recovery Act Dollars Helped Tupelo Meet Some Needs:
Tupelo received six Recovery Act grants, which totaled $6,355,279. The
funding agencies for the grants were the U.S. Department of
Transportation (DOT), the U.S. Department of Justice (DOJ), the
Environmental Protection Agency (EPA), the U.S. Department of Energy
(DOE), and the U.S. Army Corps of Engineers. Table 3 presents the
Recovery Act grants that the City of Tupelo received from the various
federal agencies, the amount of each grant, and the specific purpose
for which each grant was used.
Table 3: City of Tupelo Recovery Act Award Summary:
Recipient Entity: City of Tupelo;
Funding agency: DOT;
Funding program: Highway Infrastructure Investment Grant;
Award amount: $1,227,688.00;
Use of funds: Construction of a new bridge.
Recipient Entity: City of Tupelo;
Funding agency: DOJ;
Funding program: Justice Assistance Grant;
Award amount: $91,005.00;
Use of funds: Purchase of law enforcement equipment.
Recipient Entity: City of Tupelo;
Funding agency: EPA;
Funding program: Clean Water State Revolving Fund;
Award amount: $503,875.00;
Use of funds: Construction of replacement sewer lines.
Recipient Entity: City of Tupelo;
Funding agency: DOE;
Funding program: Energy Efficiency and Conservation Block Grant;
Award amount: $146,000.00;
Use of funds: Retrofitting the lighting system at a local baseball
field with a higher efficiency system.
Recipient Entity: City of Tupelo;
Funding agency: DOE;
Funding program: Energy Efficiency and Conservation Block Grant;
Award amount: $35,200.00;
Use of funds: Replacement of the city's existing computer servers with
high-efficiency servers.
Recipient Entity: City of Tupelo;
Funding agency: U.S. Army Corps of Engineers;
Funding program: Civil Program Financing-Operation and Maintenance;
Award amount: $4,351,511.00;
Use of funds: Major drainage improvements.
Source: City of Tupelo.
[End of table]
Tupelo Did Not Apply for Some Available Recovery Act Funds:
Although the Recovery Act provided funds for needed projects, city
officials identified infrastructure improvements as their city's most
critical need. The officials told us water and sewer lines and
drainage lines need to be improved, work is needed on a number of city
roads and bridges, and the city has blighted areas that it wants to
improve where abandoned and structurally deteriorating buildings
attract criminal activity.
Although water and sewer line improvements were identified as a
critical city need, officials decided not to apply for Recovery Act
funds that were available for such improvements through the
Mississippi Clean Water and Drinking Water State Revolving Funds.
According to the City of Tupelo's grant administrator, the city chose
not to apply for the funds for two main reasons--(1) the city did not
have shovel-ready projects that met the objectives of the fund and (2)
it did not have the resources to quickly devote to developing a
project. At the time that the Mississippi Department of Environmental
Quality requested proposals for Recovery Act projects, the city's
Water & Light Department was in the process of finishing up a major
wastewater treatment project, carrying out day-to-day departmental
work, and completing some smaller special projects. In addition, the
department was devoting all available planning personnel to
negotiating, engineering, and acquiring easements on the Toyota water
and sewer project, which crossed city and county lines and required an
extraordinary amount of personnel. With all of these projects under
way, the city lacked the resources to quickly develop another project
in time to apply for the funding.
Energy Efficiency and Conservation Block Grant Improves City Park and
Computer System:
As part of our visit to Tupelo we looked at the execution of one grant
in particular. Tupelo received a Department of Energy Efficiency and
Conservation Block Grant (EECBG) that totaled $181,200. As shown in
table 3, the grant provided funding for two projects. The first
provided $146,000 for the city to retrofit field lighting at a public
sports field which is located in one of the city's most heavily used
parks. The new lighting system is expected to be highly efficient and
will reduce energy usage by removing halide lights and replacing them
with a photometric system which automatically adjusts the field lights
based on existing environmental light levels. The second grant
provided $35,200 for the city to replace its existing computer server
technology with high-efficiency virtual servers that reduce power
consumption while increasing server capacity. City officials report
that both projects are now complete and that 99.5 percent of the funds
provided by the grant were obligated and expended. Because the
lighting project was completed under budget, the city is returning the
remaining $959.75 to DOE.
City officials indicated that their Recovery Act reporting for the
EECBG was consistent with the guidance provided by OMB. Four people
from the city government provided routine oversight for each
disbursement of the EECBG grant money by reviewing each transaction.
Officials also stated they complied with Recovery Act provisions
applicable to EECBG, such as the requirement to pay laborers and
mechanics employed on Recovery Act projects the prevailing wage for
the area and the requirement to purchase iron and steel for Recovery
Act projects from American sources.
Concerns over Recovery Act Compliance Limit Applications for Funds:
City of Tupelo officials explained that the Recovery Act funding
created a dilemma for the city. Officials knew that the funds could
benefit the city, but felt the long-term cost could outweigh the short-
term benefit. For example, the Recovery Act requires that laborers and
mechanics employed by contractors and subcontractors on projects
funded by Recovery Act funds be paid prevailing wages[Footnote 11].
City officials felt this provision could create compliance hardships
that could lead to increased indirect costs, such as higher wages paid
to workers after the Recovery Act expires or the need to pay increased
wages for work performed on non-Recovery Act projects. Such increases
could raise the costs of local employers and the municipality. These
concerns made the city reluctant to apply for a number of associated
Recovery Act grants. Additionally, the city avoided becoming dependent
on Recovery Act funding by selecting infrastructure-related, "stand-
alone" projects with minimal or no ongoing costs that would obligate
long-term financial support above and beyond what the city could
adequately fund. For example, the city did not apply for DOJ grants
for Community Oriented Police Services, which would have allowed the
city to hire additional police officers, because it did not want the
financial burden of the requirement to retain those police officers
for at least one additional year after the Recovery Act grant expired.
Instead the city applied for Justice Assistance Grants which enabled
the city to purchase needed equipment.
Additionally, the city's grant administrator characterized the
administrative cost associated with Recovery Act grants as high. For
example, the city spent approximately $300,000 of a $2.5 million grant
it received for a bridge project on administrative costs, including
environmental studies needed because the project was near wetlands.
Furthermore, the grant administrator told us that it takes 2 weeks, or
about 80 hours, to complete the recipient report required by section
1512 of the Recovery Act each quarter, as well as the other reports
required by the grantor agencies.
Recovery Act Funds Helped Mississippi Address Decline in State
Revenues:
As shown in figure 5, from fiscal year 2008 through fiscal year 2011
the Mississippi state budget is projected to decline from $5,709
billion to $5,148 billion or more than $561 million. The primary
reason for the decrease is a decline in state revenues. However, as
figure 5 shows, the use of Recovery Act funds helped offset the
decline in state funding.
Figure 5: State Funding, Fiscal Years 2008 to 2011:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2008;
State funding: $5.700 billion;
Recovery Act funding: $0 million.
Fiscal year: 2009;
State funding: $5.567 billion;
Recovery Act funding: $201 million.
Fiscal year: 2010;
State funding: $4.985 billion;
Recovery Act funding: $554 million.
Fiscal year: 2011;
State funding: $5.148 billion;
Recovery Act funding: $428 million.
Source: Mississippi Department of Finance and Administration.
Note: Recovery Act funding includes State Fiscal Stabilization Fund
monies and Increased Federal Medical Assistance Percentage Funds.
[End of figure]
During fiscal year 2009 and fiscal year 2010 the state used more than
$201 million and $553 million in Recovery Act funds, respectively, to
help reduce the impact of declining state revenues. Likewise, the
state plans to use more than $428 million in Recovery Act funds to
offset revenue shortfalls in fiscal year 2011.
In addition to Recovery Act funds, Mississippi also used its rainy day
funds to reduce the impact of declining tax revenues[Footnote 12]. To
help close out and balance the fiscal year 2009 budget, the state
transferred almost $20 million of rainy day funds to the state general
fund. Similarly, the state transferred $65.2 million of rainy day
funds to the budget contingency fund to help cover a projected
shortfall in the fiscal year 2010 general fund budget[Footnote 13]. An
additional $80 million in rainy day funds was transferred to cover
projected shortfalls in the fiscal year 2011 budget, leaving about $80
million in rainy day funds for each of the fiscal years 2012 and 2013.
Mississippi Expects Budget Problems Will Increase without Recovery Act
Funds:
While Mississippi experienced serious budget problems in 2010, the
Governor expects future budget years will be even more difficult as
the infusion of Recovery Act funds comes to an end and state revenues
lag. As shown in figure 6, Mississippi incurred a revenue shortfall of
$404 million for fiscal year 2010, which is 8.2 percent less than
expected. Because state law requires a balanced budget, the Governor
reduced spending for general fund and nonexempt agencies five times
during fiscal year 2010 for a total of $466 million. However, because
revenue collections were not as bad as initially feared when these
budget cuts were imposed, initial projections are that the state is
starting fiscal year 2011 with a surplus of approximately $50 million.
Figure 6: Aggregate Revenue Shortfall for Fiscal Year 2010:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2008;
State funding: $5.700 billion;
Recovery Act funding: $0 million.
Fiscal year: 2009;
State funding: $5.567 billion;
Recovery Act funding: $201 million.
Fiscal year: 2010;
State funding: $4.985 billion;
Recovery Act funding: $554 million.
Fiscal year: 2011;
State funding: $5.148 billion;
Recovery Act funding: $428 million.
Source: Mississippi Department of Finance and Administration.
[End of figure]
According to the Governor, this surplus will be crucial in preparing
the fiscal year 2012 budget and spending for future years, which he
expects to be as financially difficult as fiscal years 2010 and 2009.
The Governor stated that while preparing the fiscal year 2011 budget
was a difficult process because of declining revenue, fiscal year 2012
will be even more challenging because federal stimulus funding will
end. The funds from the close of the current year can be used to help
balance the budget in the difficult years to come as Mississippi copes
with the budget cliff created as the infusion of Recovery Act funds
ends and as the state weathers the effects of the recession. According
to the National Governors Association, the most difficult budget years
for a state occur two years after the national recession is declared
over.
Mississippi Monitoring and Oversight Activities:
To ensure accountability and oversight over federal funds received by
Mississippi, the OSA conducts on an annual basis a "Single Audit" that
reports on internal controls over financial reporting and compliance
with pertinent laws and regulations. According to data from the
Federal Audit Clearinghouse, which is responsible for receiving and
distributing single audit results, it received Mississippi's single
audit reporting package for the year ending June 30, 2009, on March
30, 2010. This was the first Single Audit for Mississippi that
includes Recovery Act programs, and it included only 4 months of
Recovery Act expenditures. Mississippi's Single Audit report for
fiscal year 2009 identified 12 significant internal control
deficiencies related to compliance with Federal Program requirements,
of which 2 were classified as material weaknesses.
The two material weaknesses occurred in the Special Supplemental
Nutrition Program for Women, Infants, and Children (WIC) which is
administered by the Mississippi Department of Health (MDH) and
receives Recovery Act funding. OSA determined controls over a time
study that MDH uses to allocate salaries and fringe benefits to its
various programs, including the WIC program, were inadequate to ensure
that the amounts entered were accurate and reliable. OSA also
determined the MDH internal controls were not adequate to ensure that
only obligations occurring during the funding period of the WIC grant
are charged to the program.
In addition to normal oversight of federally funded programs,
Mississippi has undertaken several efforts to hold state recipients
accountable for the Recovery Act funds that they receive. National
accounting firms, under the auspices of the OSA and DFA, are carrying
out two of these efforts. OSA has contracted with the firm BKD to
conduct monitoring and oversight of Recovery Act funds. According to
state officials, BKD is expected to audit such entities as local
governments, not-for-profit organizations, community health centers,
and school districts. DFA has contracted with KPMG, to monitor the
internal controls of state agencies receiving Recovery Act funds.
BKD has submitted two reports to OSA that detail the results of their
monitoring efforts between January and April 2010. During this 4-month
period, BKD tested 80 grants received by 34 grant recipients and
reported a total of 101 instances where recipients did not comply with
Recovery Act requirements. In each instance, BKD gave recipients
specific recommendations for correcting existing errors in reporting
and other documentation, along with recommendations for revisions to
their internal control processes in order to improve future compliance.
The on-site monitoring visits found the greatest lack of compliance
with recipient reporting[Footnote 14]. Of the 101 compliance
requirement findings, 30 were related to recipient reporting. BKD
found that state agencies were not providing clear and consistent
guidance on the recipient reporting requirements to grant
subrecipients. According to BKD, agency guidance ranged from
sophisticated Web-based input mechanisms to very informal guidance
provided via e-mail. BKD reported that grant subrecipients expressed
frustration over the reporting process, but all grant recipients
appeared to be exerting their best efforts to provide accurate
reporting information. In addition, BKD reported that there was some
confusion on how to properly report the number of jobs created and/or
retained.
BKD monitors also found a number of problems related to other Recovery
Act requirements. For example, BKD reported that the majority of
entities visited were not aware that they should check to determine if
vendors were suspended or debarred from doing business with the
federal government. BKD also reported entities entered into contracts
that did not contain the appropriate Buy American language and/or
provide evidence that all required materials were compliant with the
Buy American provisions of the Recovery Act. Additionally, the
entities did not obtain the necessary waivers when the Buy American
provision was not satisfied.
DFA, with assistance from KPMG, began or completed 12 agency site
visits and reviewed approximately 39 different grants between February
8, 2010, and June 30, 2010. Examples of observations that KPMG
reported after site visits include the observations that documentation
supporting recipient reports was not always provided to agencies for
review and some agencies misunderstood recipient reporting
requirements. KPMG also reported other monitoring and compliance
issues, which included observing that an agency's documented policies
and procedures were not inclusive of Recovery Act specific processes
and that agencies did not verify that vendors were not suspended or
debarred from doing business with the federal government.
Mississippi Initiated Several Noteworthy Efforts to Comply with
Recovery Act Requirements:
Mississippi has initiated several efforts to improve the state's
response to the Recovery Act's transparency and accountability
requirements. Both OSA and DFA have provided training sessions for
prime recipients to explain how to respond to the act's requirements.
In addition, OSA regularly communicates Recovery Act information to
recipients through its Technical Assistance newsletter and has
established a task force of governmental and non-governmental experts
to assist recipients in complying with Recovery Act requirements.
These experts include attorneys, engineers, project managers,
educators, and accountants who are available to answer inquiries from
Recovery Act recipients at no cost to the recipients or to the state.
In addition to having KPMG monitor state agencies' compliance with
Recovery Act requirements, DFA has identified leading practices
utilized by agencies in meeting these requirements. For example, DFA
told us that one state agency contacted other states to share
knowledge and identify best practices for implementing federal
mandates and requirements, and another agency created a template for
subrecipients that allowed them to summarize key program data for use
in preparing their recipient reports.
State Comments on This Summary:
We provided the Governor of Mississippi with a draft of this appendix
on August 9, 2010. The General Counsel to the Governor, who serves as
the stimulus coordinator, responded for the Governor on August 17,
2010. The official provided technical suggestions that were
incorporated, as appropriate.
GAO Contacts:
John K. Needham, (202) 512-52274 or needhamjk1@gao.gov:
Norman J. Rabkin (202) 512-9723 or rabkinn@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Barbara Haynes, Assistant
Director, James Elgas, analyst-in-charge, Bill Allbritton; James Kim;
Gary Shepard; and Erin Stockdale made major contributions to this
report.
[End of section]
Appendix XI Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17,2009).
[2] State housing finance agencies allocate low-income housing tax
credits to owners of qualified rental properties who reserve all or a
portion of their units for occupancy for low income tenants. Once
awarded tax credits, owners attempt to sell them to investors to
obtain funding for their projects. Investors can then claim tax
credits for 10 years if the property continues to comply with program
requirements.
[3] Many affordable housing tax credit projects rely on LIHTCs
together with other forms of subsidies such as HOME Investment
Partnerships Program funds (HOME), Community Development Block Grant
(CDBG) funds, and state funds.
[4] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: May 26,
2010); and 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).
[5] 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].
[6] State housing finance agencies allocate low-income housing tax
credits to owners of qualified rental properties who reserve all or a
portion of their units for occupancy for low income tenants. Once
awarded tax credits, owners attempt to sell them to investors to
obtain funding for their projects. Investors can then claim tax
credits for 10 years if the property continues to comply with program
requirements.
[7] Project owners must spend 30 percent of the project's adjustable
basis for land and depreciable property by December 31, 2010.
[8] GAO reported previously on the risks and responsibilities of
recapture for HFAs under the TCAP and Section 1602 programs. See GAO,
States' and Localities Uses of Funds and Actions Needed to Address
Implementation Challenges and Bolster Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-604] (Washington, D.C.: May. 26,
2010).
[9] In contrast, under the conventional LIHTC program, HFAs are not
liable for recapturing funds if a project owner fails to comply with
LIHTC requirements. Rather, their obligation is to report any
noncompliance to the IRS, and the IRS takes any further actions with
respect to recapture. GAO reported previously on the risks and
responsibilities of recapture for HFAs under the TCAP and Section 1602
Program. See [hyperlink, http://www.gao.gov/products/GAO-10-604],
States' and Localities' Uses of Funds and Actions Needed to Address
Implementation Challenges and Bolster Accountability, (Washington,
D.C.: May. 26, 2010).
[10] A bond rating represents a credit risk evaluation and an Aa3
investment grade is indicative of bonds judged to be high quality by
all standards.
[11] The Recovery Act, requires all laborers and mechanics employed by
contractors and subcontractors on projects funded directly by or
assisted in whole or in part by and through the federal government
with Recovery Act funds be paid wages at rates that are not less than
those paid on local projects of a similar character as determined by
the Secretary of Labor. Recovery Act div. A,§ 1606, 123 Stat. 303.
[12] The Mississippi rainy day fund, normally called the Working Cash-
Stabilization Reserve Fund, is intended, among other uses, to cover
any projected deficits that may occur in the general fund at the end
of a fiscal year as a result of revenue shortfalls. Miss. Code § 27-
103-203.
[13] The Budget Contingency Fund was created in 2001 by the
legislature to identify nonrecurring funding--such as funds received
from a legal judgment--that the legislature could use in the budget
process. The sources of funds deposited in the budget contingency fund
can differ from special fund transfers to the general fund that are
identified as nonrecurring.
[14] Section 1512 of the Recovery Act requires that each recipient who
receives funds from a federal agency during a calendar quarter submit
a report to that agency for the quarter that includes, among other
information, the amount of funds received, the projects and activities
for which the funds were expended or obligated, the completion status
of each project or activity and estimates of the number of jobs
created and the number of jobs retained by the project or activity.
Recovery Act div. A § 1512, 123 Stat. 115, 287-288. We refer to the
reports required by section 1512 as recipient reports.
[End of Appendix XI]
Appendix XII: New Jersey:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act)[Footnote 1] spending in New Jersey. The full report covering all
of GAO's work in 16 states and the District of Columbia may be found
at [hyperlink, http://www.gao.gov/recovery].
What We Did:
We reviewed two specific programs funded through the Recovery Act: the
Energy Efficiency and Conservation Block Grant (EECBG) program and the
Public Housing Capital Fund. We selected the EECBG program because it
was a program newly funded by the Recovery Act and selected the Public
Housing Capital Fund to follow up on the status of projects reviewed
in prior reports. (For descriptions and requirements of the programs
we covered, see appendix XVIII of GAO-10-1000SP.) For both of these
programs, we reviewed documentation on program requirements and
interviewed federal, state, and local government officials, as
appropriate, about the use of funds, challenges in implementation, and
oversight and monitoring strategies. In particular, for the EECBG
program, we discussed these issues with officials of three localities
that were direct recipients of EECBG formula funds--the County of
Morris (Morris County), the City of Jersey City (Jersey City), and
Woodbridge Township. We selected these localities based on the level
of funding received, expenditures incurred, and type of local
government. We also conducted a site visit to the Newark Housing
Authority to follow up on the status of its Public Housing Capital
Fund competitive and formula grants reviewed in prior reports.
In addition to the two program-specific reviews, we also continued to
review state efforts to oversee and monitor the use of Recovery Act
funds through interviews with officials from the state's
accountability community, including the Office of the State Auditor
and the Office of the State Comptroller. We also interviewed state and
local budget officials about their use of Recovery Act funds, the
impact of these funds on state and local budgets, and strategies for
addressing the phasing out of Recovery Act funds. We selected one
locality, Jersey City, to gain a deeper understanding about the use
and impact of Recovery Act funds. This locality was selected based on
its population, unemployment rate, and level and type of Recovery Act
funds received. Finally, we reviewed information New Jersey recipients
reported on www.recovery.gov (Recovery.gov) and interviewed officials
from the Office of the Governor, as well as EECBG and housing
recipients about their recipient reporting experiences.
What We Found:
* EECBG. The U.S. Department of Energy (DOE) allocated $75.5 million
in EECBG formula funds to New Jersey. Approximately $14.4 million was
awarded to the New Jersey Board of Public Utilities (NJBPU), the state
regulatory authority responsible for administering the state's clean
energy programs, and $61.1 million was directly awarded to 65
municipalities and 10 counties in the state. NJBPU is allocating 71
percent of its funds, or $10.2 million, to provide energy rebates to
the 512 localities that did not qualify for EECBG formula funds. State
and local officials with whom we spoke stated that vague and changing
DOE guidance, as well as adhering to state and local requirements, has
contributed to delays in implementing EECBG projects and expending
funds. For example, according to Jersey City officials, two contracts
were awarded that later had to be terminated because the contractors
did not meet the city's required energy-efficiency standards. Although
the state and localities have processes in place to routinely monitor
and oversee EECBG funds, localities have not yet begun assessing the
impact of the EECBG funds.
* Public Housing Capital Fund. New Jersey public housing agencies
continue to make progress in implementing their Recovery Act Public
Housing Capital Fund projects. Of the 80 public housing agencies in
New Jersey, 7 collectively received a total of $27 million in Public
Housing Capital Fund competitive grants. Public housing agencies in
New Jersey are primarily using these funds for the creation of energy-
efficient, green communities. Public housing agencies are required to
obligate 100 percent of these funds by September 2010. As of August 7,
2010, $5 million, or 18 percent, of these funds had been obligated.
Public housing agencies are also required to expend 60 percent of
their Public Housing Capital Fund formula grants by March 17, 2011. As
of August 7, 2010, 80 public housing agencies had drawn down about 62
percent of the $104 million in funds received. To ensure that public
housing agencies continue to meet obligation and expenditure
deadlines, the U.S. Department of Housing and Urban Development (HUD)
field office is conducting outreach through regular e-mail and phone
communication, conducting remote reviews of all competitive grant
recipients, and more closely monitoring formula fund grant recipients
with low expenditure rates as deadlines approach.
* Accountability. The New Jersey Office of the State Auditor, Office
of the State Comptroller, and the New Jersey Recovery Accountability
Task Force continue to monitor the state's Recovery Act funds. For
example, the Office of the State Comptroller plans to audit program
compliance and internal controls governing the administration and
monitoring of both the fiscal and programmatic components of the EECBG
grant in four localities. New Jersey's Single Audit report for fiscal
year 2009 identified 45 significant internal control deficiencies
related to compliance with federal program requirements, of which 38
were material. Some of these deficiencies included Recovery Act funds.
* Budget. New Jersey has received approximately $5.8 billion in
Recovery Act funds as of July 21, 2010, and used these funds, in part,
to increase and restore the state's portion of education aid to local
educational agencies and to fill budget shortfalls. New Jersey enacted
a $29.4 billion budget for fiscal year 2011 after closing a $10.7
billion budget shortfall, primarily through the elimination or
reduction of projected growth and reductions to the base budget. For
example, the state deferred pension payments, cut funding from
property tax rebates, and eliminated the special municipal aid
program. Jersey City officials stated that the city has primarily used
its $14 million in Recovery Act funds for nonrecurring projects. For
example, the city used its Community Services Block Grant funds to
provide nutrition services to low-income residents, among other things.
* Recipient Reporting. New Jersey recipients reported funding over
22,000 full-time equivalents (FTE) with Recovery Act funds during the
fourth quarterly reporting period, which covers the period April 1,
2010, to June 30, 2010. According to the New Jersey Office of the
Governor, the recipient reporting process went smoothly for the fourth
reporting period. However, EECBG recipients we met with did not use
Office of Management and Budget (OMB) guidance to calculate FTEs. For
example, an official from one locality stated that FTEs were
calculated based on the total number of people that had been paid with
EECBG funds, without taking into consideration the number of hours
each employee had worked or prorating the FTEs based on the number of
hours attributed to the Recovery Act. As a result, the total number of
FTEs may have been overstated.
New Jersey Has Experienced Delays in Implementing EECBG Projects and
Expending Funds:
New Jersey received $75.5 million in EECBG formula funds from DOE to
develop, promote, implement, and manage energy-efficiency and
conservation projects and programs. Approximately $14.4 million was
awarded to NJBPU, the state regulatory authority responsible for
administering the state's clean energy programs, and $61.1 million was
directly awarded to 75 local government entities--65 municipalities
and 10 counties in the state.[Footnote 2] Twelve of the 75 localities
received grants over $1 million, accounting for a total of $35.7
million, or almost 60 percent of the grant funds allocated to
localities. State agencies are required to allocate at least 60
percent of their formula funds to make subgrants to local government
entities that were not eligible to receive formula funds directly from
DOE. NJBPU is allocating 71 percent of its formula allocation, or
$10.2 million, to provide up to $20,000 in energy rebates to 512 local
government entities to supplement local government costs of those
energy-efficiency improvements not already covered by existing state
incentive programs.[Footnote 3] The remaining 29 percent, or $4.2
million, will be allocated to the State's Office of Energy Savings to
implement energy conservation measures at a state developmental center
in New Lisbon.
The three localities in our review--Morris County, Jersey City, and
Woodbridge Township--collectively received about $7.5 million in
direct EECBG formula funds. These localities plan to undertake a
variety of activities with these funds. For example, Morris County
plans to undertake a greenhouse gas inventory of county government
buildings and vehicle operations for the purpose of reducing
greenhouse gas emissions by 10 percent by 2015. Morris County and
Jersey City both plan to use part of their grant funds to perform
energy audits of local government buildings, whereas Woodbridge
Township is using state funds to conduct energy audits and plans to
use part of its EECBG funds to pay for energy-efficient retrofits to
municipal buildings based on the results of the energy audits. Table 1
summarizes the activities the state and the three localities we met
with plan to undertake with their EECBG funds.
Table 1: New Jersey's and Localities' Planned EECBG Activities and
Funding Allocation:
New Jersey's planned EECBG activities and funding allocation:
NJBPU: Provide rebates to 512 eligible local governments to supplement
existing clean energy programs;
Amount: $10.2.
NJBPU;
Install energy conservation measures, including energy-efficient
lighting, sensors, chillers and insulation, at the state's 35-building
New Lisbon campus comprising 400,000 square feet of space;
Amount: $4.2[A].
New Jersey's planned EECBG activities and funding allocation: Total:
$14.4.
Localities' planned EECBG activities and funding allocation:
Morris County;
* Develop energy master plan;
* Undertake an energy benchmarking and greenhouse gas inventory of
county government buildings and vehicle operations;
* Conduct energy audits;
* Provide energy retrofits to county buildings;
* Upgrade lighting and building management systems;
* Provide energy training for county employees;
* Purchase hybrid vehicles for county vanpool;
* Develop a mass transit awareness campaign;
* Install smart vehicle routing system software for recycling routes;
* Develop and implement recycling marketing strategy;
Amount: $4.2.
Jersey City;
* Conduct energy audits of city buildings;
* Replenish revolving loan fund for small businesses to improve energy-
efficiency and conservation;
* Purchase solar trash cans;
* Install energy-efficient street lighting;
* Upgrade police communications center by developing a green roof to
assist in storm water management and the cooling of the building;
Amount: $2.3.
Woodbridge Township;
* Calculate carbon footprint and prepare a climate action plan[B];
* Provide energy-efficient retrofits to municipal buildings;
* Install energy-efficient street lighting[C];
Amount: $0.9.
New Jersey's planned EECBG activities and funding allocation:
Total: $7.5[D].
Sources: NJBPU, Morris County, Jersey City, and Woodbridge Township.
[A] NJBPU also plans to use $6 million in Recovery Act State Energy
Program funds for this project.
[B] The climate action plan included three potential initiatives for
reducing energy consumption: wind power, a buy local campaign, and
guidelines for green redevelopment, including initiatives to attract
green technology and service providers. The wind power study has since
been modified to a study of an energy cluster at the green technology
park.
[C] Woodbridge Township is no longer using EECBG funds for this
activity because the local utility company is installing energy-
efficient streetlights. The township plans to use the funds for the
energy retrofits.
[D] Total may not add up due to rounding.
[End of table]
NJBPU and Localities Have Experienced Delays in Implementing EECBG
Projects:
State officials with whom we spoke told us that vague and changing DOE
program guidance contributed to delays in implementing EECBG projects,
including the energy rebates project. For example, according to NJBPU
officials, the program guidance they received from DOE was, at times,
duplicative and unclear. At other times, DOE guidance was reversed
after the state had put in place procedures to implement the guidance.
For example, according to NJBPU, early DOE guidance on Davis-Bacon
provisions was reversed after the state had put in procedures to
implement the initial guidance. According to NJBPU officials, 14 of
the 512 eligible localities have applied for an energy rebate as of
August 31, 2010, and the state has not yet obligated any funds for its
energy conservation project. The DOE project officer responsible for
overseeing some of New Jersey's grant recipients agreed that DOE
guidance provided to recipients has been overwhelming and sufficient
guidance on the various reporting requirements was not provided to
recipients in a timely manner. As a result, recipients were not
comfortable moving forward with projects.
Local officials also stated that long DOE project approval processes,
as well as adhering to state and local requirements, led to delays in
implementing EECBG projects and expending funds. For example:
* A Morris County official stated that the county submitted its EECBG
application package to DOE in June 2009 and was awarded the EECBG
grant about a month later. However, the county did not receive final
approval from DOE on its planned EECBG activities until March 2010, at
which time county departments with approved activities were notified
to begin work on their projects. As of July 1, 2010, Morris County had
obligated $106,000 of its $4.2 million in EECBG funds, and two
construction projects for lighting upgrades were out for bid.
* According to Woodbridge Township officials, state requirements
contributed to delays in implementing EECBG projects. Specifically,
Woodbridge Township officials told us that state procurement
procedures delayed the energy retrofits project. The township plans to
use funds from one of the state's clean energy programs and EECBG
funds to complete energy retrofits at 10 of its municipal buildings.
Since the township was using state funds for the energy retrofits, it
had to first conduct energy audits at each of the buildings using a
state-approved firm. According to Woodbridge Township officials, the
state required the township to issue a request for proposal to each of
the state-approved firms and, once a firm was selected, have the
contract reviewed by NJBPU, as well as the state's contract reviewer.
Once the initial energy audit was completed, Woodbridge Township staff
identified errors in the audit, which required some aspects of the
audit to be redone by NJBPU. The township's energy audit was therefore
not completed until December 2009, at which time the township was able
to proceed with the state's retrofit program. However, the township
did not receive its EECBG award until June 2010, 6 months after it
anticipated receiving the grant. The township has expended about
$200,000 of its approximately $900,000 in EECBG funds, primarily for
planning purposes.
* Jersey City officials stated that local requirements have
contributed to delays of some EECBG projects. In particular, Jersey
City awarded two contracts for the police communications center
upgrades that later had to be terminated because the contractors did
not meet the energy-efficiency standards the city required, according
to officials. As of July 1, 2010, Jersey City had expended about
$800,000 of its EECBG funds, but expects to obligate all of its $2.3
million in funds by September 2010. Jersey City officials stated that
they have felt pressure from DOE to spend funds more quickly but
maintained that internal procedures and reviews are necessary to
ensure that grant funds are properly administered. According to the
DOE project officer, DOE has pressured recipients to spend funds more
quickly, which could result in grant recipients having to pay back
funds if contracts are awarded that are not in compliance with
Recovery Act requirements.[Footnote 4] According to an August 2010 DOE
Inspector General report, DOE has developed plans to obligate Recovery
Act funds, including EECBG funds, to meet federal statutory deadlines.
[Footnote 5] However, the report identified several challenges to
meeting the obligation deadlines, including the inability of
recipients to meet terms and conditions placed on awards to meet
federal statutory requirements, which could result in the cancellation
of awards or cause delays in spending. The Inspector General has also
previously reported that any effort to disburse massive additional
funding and to expeditiously initiate and complete projects increases
the risk of fraud, waste, and abuse.[Footnote 6]
Although NJBPU officials stated that changing and duplicative DOE
guidance led to delays in implementing EECBG projects, officials also
stated that DOE has amended program guidance in response to feedback
provided, has made extensive Web libraries and knowledge bases
available to states, and has hosted many Web-based seminars to help
states understand their EECBG program responsibilities. Officials from
all of the localities we met with also stated that they have been
satisfied with the level of support and communication provided by
their DOE project officer.
NJBPU and Localities Have Plans in Place to Routinely Monitor and
Oversee EECBG Funds:
Although the state and localities have not yet conducted any
monitoring of EECBG grant projects, officials of NJBPU and the
localities we met with all plan to conduct routine oversight and
monitoring of EECBG funds. For example, NJBPU is in the process of
developing standard operating procedures--including both quality
control and quality assurance checklists--that will be used as part of
its monitoring efforts, which will incorporate random contract file
reviews and project site inspections. In addition to the checklists,
the state also plans to track the energy rebate projects separately
from its clean energy programs using its existing Information
Management System (IMS). According to NJBPU officials, the IMS
addresses data quality verification through automated checks, checks
file formats for conformance and the inclusion of mandatory data, and
has built-in validation checks to flag outstanding items. The contract
manager for the state's clean energy program will conduct manual
reviews of the files, and the system administrator can generate
reports to identify anomalies. State officials told us that they do
not believe they will have any challenges or obstacles with regard to
management controls and monitoring of EECBG projects. Although the
rebates activity will likely be more vulnerable to management control
issues due to the potentially high volume of applications, officials
believe that the IMS is capable of handling the extra workload.
The localities we visited also have plans to conduct routine oversight
of EECBG grant funds, including collecting information to monitor
project expenditures and performing on-site reviews. For example,
Morris County plans to use a DOE data collection form to oversee
project expenditures to ensure the activities stay within planned
budgets and project objectives have been met. In addition, the county
plans to complete progress reports and review and approve invoices to
verify hours worked prior to releasing funds for each of its ten
planned EECBG activities. The Morris County Treasurer's Office has
also set up a separate account to track and conduct quarterly audits
of EECBG fund activities. Woodbridge Township plans to separately
track EECBG funds, revenues, and appropriations. Additionally,
Woodbridge Township officials told us that the person responsible for
fulfilling the purpose of the grant is directly responsible for
overseeing the expenses charged to the grant and for ensuring that
vendors are completing contracts on time, efficiently, and in
compliance with Davis-Bacon and Buy American provisions. Although
Jersey City has not yet developed a written monitoring plan for the
use of EECBG funds, all written guidance from DOE has been
disseminated to project managers and monitors in the field who will
perform routine oversight of EECBG expenditures and conduct on-site
reviews once the projects are under way. However, officials from
Jersey City stated they do not have processes in place to ensure
compliance with Davis-Bacon wage provisions.
NJBPU and Localities Have Not Yet Reported on Outcomes of EECBG
Projects:
Recipients of EECBG formula funds are required to report quarterly to
DOE through its Performance and Accountability for Grants Energy
(PAGE) system on jobs created and retained; programmatic measures,
such as program obligations and expenditures; and applicable critical
measures that will allow DOE to assess the impact of project
activities on energy savings, energy cost savings, renewable energy
generation, and emissions reductions. In addition, recipients of grant
funds greater than $2 million are required to report to DOE on a
monthly basis on a subset of the quarterly metrics described above.
State and local officials we met with submitted their required
quarterly and monthly reports to DOE and stated that they have
identified critical measures to assess the impact of their EECBG
projects. However, officials stated they have not yet begun to assess
the impact of EECBG funds because projects are just getting under way.
For example, officials from NJBPU stated that they have programmed
applicable DOE critical metrics in the IMS and plan to track and
measure project-related information on energy savings and carbon
dioxide emissions monthly and annually. The system can also perform
impact studies on the back end (i.e., a year later) to assess the
impact of the EECBG program on energy-efficiency and conservation.
Officials from Woodbridge Township stated that they plan to use the
climate action plan they are developing to measure, monitor, and
evaluate the township's energy goals. The plan is currently in draft
form and outcomes will be measured once projects are implemented.
Similarly, Morris County plans to use its benchmarking study to assess
emissions reductions and also expects to see reductions in utility
costs as a result of its energy retrofit projects. Jersey City also
plans to measure fossil fuel emissions on a monthly basis to assess
progress in reducing the city's carbon footprint. Although local
officials we visited identified measures to assess the outcomes of
their EECBG projects, an official from Morris County stated that it
was unclear where and how to report this information to DOE. The
official stated that updates would likely be provided through the
quarterly PAGE report. The official further stated that the number of
Web sites to which the county must report is overwhelming and
understanding the various reporting requirements would require one
full-time staff member.
New Jersey Public Housing Agencies Continue to Make Progress
Implementing Public Housing Capital Fund Projects:
Of the 80 public housing agencies in New Jersey, 7 collectively
received $27 million in Public Housing Capital Fund competitive grants
(competitive grants) under the Recovery Act. These grant funds were
provided to the agencies based on competition for priority
investments, including investments that leverage private sector
funding or financing for renovations and energy conservation
retrofitting. As of August 7, 2010, the recipient public housing
agencies had obligated about $5 million or 18 percent of the $27
million. Also, five of the recipient agencies had drawn down a
cumulative total of about $309,000 or 1 percent from the obligated
funds, as of August 7, 2010 (see figure 1).
Figure 1: Percentage of Public Housing Capital Fund Competitive Grants
Allocated by HUD that Have Been Obligated and Drawn Down in New
Jersey, as of August 7, 2010:
[Refer to PDF for image: 3 pie-charts, 2 horizontal bar graphs]
Funds obligated by HUD: $27,113,062 (100%);
Funds obligated by public housing agencies: $4,925,979 (18.2%);
Funds drawn down by public housing agencies: $403,408 (1.1%).
Number of grants:
Awarded by HUD: 11;
Obligated funds: 7;
Drawing down funds: 5.
Number of public housing agencies:
Awarded by HUD: 7;
Obligated funds: 6;
Drawing down funds: 5.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
Public Housing Agencies Received Competitive Grants Primarily to
Create Green Communities:
In September 2009, HUD awarded competitive grants to states in four
categories: (1) improvements addressing the needs of the elderly or
persons with disabilities, (2) public housing transformation, (3) gap
financing for projects that are stalled due to financing issues, and
(4) creation of energy-efficient communities, both for substantial
rehabilitation or new construction and for moderate rehabilitation. In
New Jersey, 9 of the 11 grants were awarded for creating energy-
efficient, green communities. For example, the Newark Housing
Authority (Newark) received the largest competitive grant of about $11
million for energy-efficient improvements.[Footnote 7] The Housing
Authority of the City of Camden received two grant awards for projects
in two separate categories, including one $10 million grant to finance
a project that was stalled due to financial issues and a $1 million
grant to address the needs of the elderly or persons with disabilities.
Newark is using the entirety of its $11 million competitive grant to
finance energy-efficient components, such as integrating water
conserving fixtures and efficient lighting, for the renovation of the
Baxter Park South community. According to the project's budget, the
first phase includes about $40 million in mixed financing from private
and public funds. The Newark official responsible for managing the
grant told us the first phase involves replacing the seven existing
buildings with two mid-rise four-story buildings and an adjacent
triangular green space. The official said that the complex will
include 90 rental housing units for both public and tax credit
eligible households, a leasing office, and commercial space. According
to the Newark official, there have been no modifications to the
project plan and the project is on schedule to be completed by the
fall of 2012. At the time of our interview on June 29, 2010, Newark
was demolishing the pre-existing buildings in preparation for
construction (see figure 2).
Figure 2: Demolition of Buildings at Baxter Park South:
[Refer to PDF for image: photograph]
This is a photograph taken by the Newark Housing Authority one of the
five buildings being demolished at the Baxter Park South project. The
five buildings will be replaced by the construction of two mid-rise
four-story buildings and a green space.
Source: Newark Housing Authority.
Note: Funds from the competitive grant were not used during the
demolition of buildings at Baxter Park South.
[End of figure]
Public Housing Agencies Are Working toward Meeting the September 2010
Obligation Deadlines for Competitive Grants:
Public housing agencies are required to have 100 percent of their
competitive grants obligated by September 2010.[Footnote 8] New
Jersey's public housing agencies had obligated about $5 million or 18
percent of the $27 million in competitive grants as of August 7, 2010.
Of the 11 grants awarded, 5 were 100 percent obligated, 4 grants had
no funds obligated, and 2 others were less than 10 percent obligated.
Despite the low obligation rates, officials from the HUD field office
told us that they anticipate all of the public housing agencies will
meet the September 2010 deadlines because most of the award amounts
were small and, therefore, manageable by public housing agency staff.
In addition, they said that because the projects selected were already
in public housing agencies' required 5-year capital plans, several
preliminary project planning steps had already occurred and the
projects were ready to proceed.
Although HUD field office officials told us that they anticipate all
of the public housing agencies will meet the September 2010 deadlines,
they told us that they are concerned that Newark has not yet secured
all the funding it needs for the construction of Baxter Park South,
which must occur before they can obligate the competitive grant for
the energy-efficient components. Specifically, Newark is relying on a
4 percent low-income housing tax credit to pay for about $10 million
of the $40 million cost for the first phase of the project. The 4
percent tax credit is contingent on the state selling tax-exempt
bonds, and according to HUD field office officials, the state's
financial situation has so far prevented the housing agency from
securing the tax credit. However, HUD officials said that they were
hopeful that the new state fiscal year would result in the tax credit
being available to Newark. The New Jersey Housing and Mortgage Finance
Agency sent the commitment letter for the tax exempt bonds, which will
carry the right to use the tax credits, to the developer of the Baxter
Park South project on August 5, 2010.[Footnote 9] A Newark official
told us that after they submit their final paperwork to HUD, which
they anticipate doing on or before September 18, 2010, HUD considers
the grant to be 100 percent obligated and the obligation deadline will
be met. As of August 7, 2010, $45,000, or less than 1 percent, of the
total grant had been obligated.
Public Housing Agencies Continue to Expend Public Housing Capital Fund
Formula Grants to Rehabilitate Housing Units:
New Jersey's 80 public housing agencies collectively received $104
million in Public Housing Capital Fund formula grants (formula grants)
under the Recovery Act. These grant funds were provided to the
agencies to improve the physical condition of their properties;
develop, finance, and modernize public housing developments; and
improve management. As we previously reported, all public housing
agencies met the 1-year obligation deadline to have 100 percent of
their formula grants obligated by March 17, 2010.[Footnote 10] Public
housing agencies are further required to expend at least 60 percent of
their formula funds by March 17, 2011. As of August 7, 2010, 80 of the
public housing agencies had drawn down a cumulative total of about $64
million, or 62 percent. Of the 80 public housing agencies, 62 had
already met the March 2011 requirement to have least 60 percent of
their formula funds expended and 28 of those housing agencies had
already expended all of their funds.
We previously reported that public housing agencies in New Jersey are
using their formula grants for a number of activities such as
rehabilitating units; repairing sidewalks and doors;
replacing aging exteriors, roofs, and boilers; and installing intercom
and fire alarm systems.[Footnote 11] For example, Newark planned to
use its $27 million formula grant for 14 projects, which included
rehabilitating 422 vacant housing units.[Footnote 12] Newark officials
provided us with an update of their formula grant projects.
Specifically, they told us that bids for contracts for the 14 projects
were lower than state cost estimates, which enabled them to increase
the amount of funding allotted to each project and rehabilitate an
additional 71 vacant housing units. Figure 3 shows an example of the
rehabilitation done at one of Newark's vacant housing units. Of the
$27 million in formula grants that Newark was awarded, it has expended
about $10 million, or 36 percent, of its funds. Newark officials said
they fully expect to meet the deadline to have 60 percent of their
funds expended by March 17, 2011.
Figure 3: Newark Housing Authority Rehabilitations with Recovery Act
Funds, Before and After:
[Refer to PDF for image: 4 photographs]
These are photographs taken by the Newark Housing Authority of the
renovation of a public housing unit located at their Betty Shabazz
project to depict renovations that are funded through the Recovery Act‘
s Public Housing Capital Formula grant funds. The picture at the upper
left is of the public housing unit‘s kitchen before the renovation and
the picture located in the upper right is of the same kitchen after
the renovation. The picture at the lower left side is of the public
housing unit‘s closet that contained the unit‘s hot water heater
system before the renovation and the picture at the lower right side
is a picture after the renovation of the same closet, showing the
installation of a new and energy-efficient hot water heater system.
Source: Newark Housing Authority.
Note: These photos illustrate rehabilitation of a kitchen and the hot
water heating system at a building managed by the Newark Housing
Authority.
[End of figure]
HUD Provides Assistance and Oversight to Public Housing Agencies to
Ensure They Meet All of Their Public Housing Capital Fund Deadlines:
HUD officials told us that they provide public housing agencies with
ongoing communication and assistance to ensure that public housing
agencies meet their deadlines to obligate and expend their Public
Housing Capital Fund grants. These officials told us that they provide
information and answer questions through e-mail and phone
conversations. For example, a Newark official told us that they
receive ongoing e-mail communication and on-site visits from the HUD
field office about both their competitive grant for the Baxter Park
South project and their formula grant projects.
Additionally, HUD field offices are required to monitor competitive
and formula grants based on guidance developed by HUD headquarters.
For competitive grant recipients, HUD field offices are required to
conduct remote reviews of all recipients by August 20, 2010, using a
checklist to review the grant status to highlight any deficiencies. As
of July 20, 2010, HUD field office officials told us they had
conducted 1 of the 11 grant reviews and they did not find any
deficiencies. They also said that they did not foresee any challenges
to meeting the deadline for completing the remaining grant reviews.
[Footnote 13] For formula grant recipients, HUD field offices were
required to conduct reviews of public housing agencies that had
obligated less than 90 percent of their funds as of March 1, 2010. HUD
field office officials provided us with the reviews their staff
conducted of the 19 public housing agencies that met this criterion.
The reviewers found each of the public housing agencies to be "on
track." A HUD official told us that all of the public housing agencies
reviewed subsequently met the March 17, 2010, obligation deadline. In
addition to the monitoring strategy for formula grants developed by
HUD headquarters, HUD field office officials told us they are closely
monitoring the public housing agencies that have expended 50 percent
or less of their formula grant funds and are conducting follow-up
phone calls with these agencies. As of July 20, 2010, a HUD field
office official said that there were 19 housing agencies that met this
criterion.
New Jersey's Accountability Community Continues to Monitor and Oversee
Recovery Act Funds:
The Office of the State Auditor, Office of the State Comptroller, and
the New Jersey Recovery Accountability Task Force continue to monitor
and oversee Recovery Act funds in New Jersey. As we previously
reported, the Office of the State Auditor issued its audit report on
eligibility issues related to the Weatherization Assistance Program in
March 2010.[Footnote 14] The office continues to audit other aspects
of the weatherization program, including the administration of
contracts and program expenditures, and may also include homes that
have received weatherization services in the scope of its review. The
Office of the State Auditor issued a report on the Trenton Board of
Education on July 13, 2010, which included a review of controls over
Recovery Act funds for the Wired for Learning program.[Footnote 15]
The audit found that controls were in place for this program. In
addition, the Office of the State Auditor issued a report on August 9,
2010, on the Division of Criminal Justice within the Department of Law
and Public Safety.[Footnote 16] The audit included the state's Edward
Byrne Memorial Justice Assistance Grant program funds provided under
the Recovery Act.[Footnote 17] The audit concluded that costs charged
to Recovery Act projects were allowable and separately accounted for
in the state's accounting system and that adequate controls are in
place to assure the effective cash management and accurate and timely
reporting of Recovery Act funds. Other programs and agencies that
received Recovery Act funds that are currently being audited by the
Office of the State Auditor include bridge maintenance contracts and
the cash management system at the Department of Human Services, which
includes the state's Federal Medical Assistance Percentage (FMAP)
funds. These audits are expected to conclude during the late summer
and early fall.[Footnote 18]
Since it issued its audit report on the administration and monitoring
of Workforce Investment Act of 1998 Youth Program Recovery Act funds
in April 2010, the Office of the State Comptroller has initiated
audits of Recovery Act EECBG and day care funds. The State Comptroller
had planned to audit program compliance and internal controls
governing the administration and monitoring of both the fiscal and
programmatic components of the EECBG grant in four localities that
received formula funds. However, the Office of the State Comptroller
suspended the audit in May 2010 for 4 to 6 months due to lack of
program expenditures and plans to restart the audit once additional
funds have been spent. The day care audit was initiated in July 2010
and will examine internal controls over eligibility, payments, and
health and safety. Finally, New Jersey's Recovery Accountability Task
Force, which has primary responsibility for oversight of the state's
Recovery Act funds, continues to hold monthly meetings to discuss
issues related to the oversight of Recovery Act funds. For example,
the task force uses the New Jersey Office of Management and Budget's
(NJOMB) weekly grant award report to discuss the status of Recovery
Act expenditures in the state and asks state agencies to discuss
reasons for low expenditure rates.
In addition to the audit activities of the State Auditor and State
Comptroller, New Jersey uses the state's Single Audit to ensure that
state agencies receiving federal funds are in compliance with the
federal requirements of those funds.[Footnote 19] The audit also
identifies internal control deficiencies that could impact state
agencies' compliance with federal laws, regulations, contracts, and
grants applicable to federal programs. According to data from the
Federal Audit Clearinghouse, which is responsible for receiving and
distributing Single Audit results, it received New Jersey's Single
Audit reporting package for the year ending June 30, 2009, on April
27, 2010. This was almost 1 month after the deadline specified by the
Single Audit Act and almost 10 months after the period the audit
covered. This was the first Single Audit for New Jersey that includes
Recovery Act programs and it identified 45 significant internal
control deficiencies over compliance, of which 38 were material
weaknesses.[Footnote 20] This is a decrease over the Single Audit
report for fiscal year 2008, which identified 48 significant internal
control deficiencies over compliance, of which 42 were material
weaknesses. Some of the internal control deficiencies identified in
the Single Audit report for fiscal year 2009 include Recovery Act
funds. For example, for the Weatherization Assistance Program, the
Single Audit report identified that the Department of Community
Affairs did not have adequate policies or controls in place to ensure
that its federal financial report is properly completed, supported by
adequate documentation, and reviewed by a supervisor prior to
submission. As a result, the state understated its unliquidated
obligations for this program for two consecutive quarters. In response
to this finding, the Department of Community Affairs stated that the
reconciliation process using the department's underlying financial
records was strengthened during fiscal years 2009 and 2010 and that
the weatherization program now has an accurate mechanism to ensure
that federal financial reports are prepared based on reconciled
totals. The department amended and resubmitted the erroneous financial
reports identified in the Single Audit report for fiscal year 2009 to
the U.S. Department of Health and Human Services.
New Jersey Used Recovery Act Funds to Fill Budget Shortfalls in Fiscal
Year 2010, but the State Faces Continued Fiscal Challenges in Fiscal
Year 2011:
New Jersey has received approximately $5.8 billion in Recovery Act
funding as of July 21, 2010. NJOMB officials noted that the largest
increases in Recovery Act funds since our May 2010 report have come
from increased FMAP and Temporary Assistance for Needy Families
Emergency funds. The state also received Recovery Act funding for
energy programs for the first time in June 2010. For example, New
Jersey received $8 million for the energy-efficient appliance rebate
program and $14 million for the EECBG program.
Recovery Act funds directly affected New Jersey's stability in fiscal
year 2010. For example, New Jersey included $1.2 billion in State
Fiscal Stabilization Funds (SFSF) monies in its 2010 budget, along
with about $1 billion in increased FMAP funds. New Jersey used the
SFSF funds to help restore and increase the state's portion of
education aid to local educational agencies and to fill budget
shortfalls. However, the state disbursed all of its SFSF funds in
fiscal year 2010. New Jersey enacted a $29.4 billion budget for fiscal
year 2011 on July 1, 2010, after closing a $10.7 billion shortfall.
The fiscal year 2011 appropriation is $626 million less than the
previous year. Income taxes account for the largest source of the
state's revenues, whereas aid to school districts accounts for over a
third of the state's expenditures. About $1 billion in increased FMAP
funds are included in the fiscal year 2011 budget, including Recovery
Act funds.[Footnote 21] Figure 4 illustrates the state's major revenue
sources and expenditures.
Figure 4: New Jersey's Major Revenue Sources and Expenditures, Fiscal
Year 2011 Budget:
[Refer to PDF for image: horizontal bar graph]
Major revenue sources:
Other[A]: $8.36 billion;
Recovery Act funding: $1.03 billion;
Corporate business tax: $2.15 billion;
Sales tax: $7.83 billion;
Income tax: $9.86 billion.
Major expenditures:
Aid to school districts[B]: $10.31 billion;
State departments: $3.4 billion;
Other aid and grants[C]: $3.221 billion;
Medicaid: $3.1 billion;
Higher education: $2.1 billion;
Rent, utilities, and employee benefits: $2.0 billion;
Debt payments: $1.9 billion;
Aid to cities and towns: $1.5 billion;
Hospital funding: $0.868 billion;
Judiciary: $0.656 billion;
Property tax rebates: $0.268 billion;
Legislature: $0.074 billion.
Source: New Jersey Fiscal Year 2011 Budget.
Note: Total major revenues do not equal $29.4 billion because there
was a drawdown of the opening fund balance of $200 million to cover
the shortfall of revenue versus spending. The opening fund balance is
estimated at $505 million and the closing estimate is $303 million.
[A] Includes gas, cigarette, real estate transfer, motor vehicle
registrations and licensing fees, casino taxes, and other fees.
[B] Includes debt payments on schools.
[C] Includes health, human services, economic development, arts,
transit, welfare, and other programs.
[End of figure]
New Jersey took a number of actions to close the budget shortfall
primarily by eliminating and reducing projected growth and reducing
the base budget. For example, the state deferred over $3 billion in
pension payments; cut $848 million in funding from property tax
rebates; and did not provide state funds for fiscal year 2011 in place
of the SFSF funding school districts received in 2010, meaning that
total aid to New Jersey's school districts will decrease by about $829
million. NJOMB officials stated that New Jersey school districts are
now feeling the effects of steep cuts in their budgets. The state also
eliminated the $334 million special municipal aid program, which
provided funds to municipalities with structural deficits, and
replaced it with a new transitional aid program. The transitional aid
program was funded at a lower level and will be provided to localities
using a competitive process. The criteria for this program have not
yet been established. Finally, the 2011 budget transferred funds from
a variety of programs to help close the budget gap. For example, the
budget transferred about $42.5 million out of the $453 million
budgeted for NJBPU's clean energy programs to pay for state utility
costs.
Recovery Act Funds Allowed Jersey City to Meet Immediate Needs and Pay
for One-Time Projects, but the City Faces Fiscal Challenges in Fiscal
Year 2011:
Jersey City is New Jersey's second largest city with an estimated
population of 242,503 residents and an unemployment rate of 11.5
percent, which is above the statewide level of 9.5 percent.[Footnote
22] As of June 30, 2010, Jersey City officials stated that the city
received about $14 million in Recovery Act formula funds for a variety
of nonrecurring projects.[Footnote 23] These projects include an
emergency shelter, homelessness prevention, and energy-efficiency
programs. Table 2 summarizes the Recovery Act grants the city
received. In addition to the projects listed below, the city plans to
apply for and partner with the New Jersey City University and the
Jersey City Economic Redevelopment Corporation for a competitive green
job grant, to train youth, adults, and dislocated workers in green
industries and related occupations such as hybrid/electric auto
technicians, weatherization specialists, wind and energy auditors, and
solar panel installers.
Table 2: Amount and Types of Recovery Act Grants Awarded to Jersey
City:
Jersey City projects: Department of Housing and Urban Development--
emergency shelter grants and homelessness prevention;
Recovery Act funds: $2,676,991.
Jersey City projects: Department of Energy, EECBG--various energy
projects, including energy upgrades to municipal buildings and street
light improvements;
Recovery Act funds: $2,329,500.
Jersey City projects: Department of Housing and Urban Development--
neighborhood stabilization;
Recovery Act funds: $2,153,431.
Jersey City projects: Department of Justice, Edward Byrne Memorial
Justice Assistance Grant--police overtime;
Recovery Act funds: $1,834,580.
Jersey City projects: Department of Housing and Urban Development,
Community Development Block Grant--site improvements to housing
projects, ADA compliance, sidewalk replacement, and vacant property
demolition;
Recovery Act funds: $1,749,827.
Jersey City projects: Department of Labor, Workforce Investment Act--
training for adults and dislocated workers and youth activity programs;
Recovery Act funds: $1,743,716.
Jersey City projects: Department of Health and Human Services,
Community Services Block Grant--provide employment, financial
education, housing, health care, and nutrition services;
Recovery Act funds: $1,596,740.
Jersey City projects: Total Recovery Act funds;
Recovery Act funds: $14,084,785.
Sources: Jersey City and Recovery.gov.
Note: Recovery Act fund total does not include $7.8 million directly
allocated to the Jersey City Housing Authority and $4.5 million in
highway funds suballocated from the New Jersey Department of
Transportation.
[End of table]
While the Recovery Act funds did not affect the city's budget, the
funds allowed the city to meet immediate needs and complete priority
projects. For example, the city used the Edward Byrne Memorial Justice
Assistance Grant to pay for police overtime costs, while the Community
Services Block Grant funds were used to provide employment, financial
education, housing, health care, and nutrition services to low-income
residents. The EECBG funds will allow the city to make energy-
efficient upgrades to municipal buildings and street and traffic
lights, among other things. In addition, the Community Development
Block Grant (CDBG) was used to begin four projects to (1) improve
sites for a 63-unit mixed-income rental housing project; (2) install
curb cuts for Americans with Disabilities Act compliance citywide; (3)
replace sidewalks in low-and moderate-income areas throughout the
city; and (4) demolish vacant properties to create mixed-income or low-
to moderate-income housing.[Footnote 24] When the Recovery Act funds
are phased out, officials stated that only this block grant program
will continue.
Jersey City officials said that the poor economy and the fiscal
condition of the state have adversely impacted the city's budget and
finances. For example, because the state budget eliminated the special
municipal aid program and cut funding to the state's Consolidated
Municipal Property Tax Relief Aid (CMPTRA) program, Jersey City
officials stated that the city will face major reductions in
funding.[Footnote 25] Jersey City received $14 million in special
municipal aid from the state in fiscal year 2010, and in fiscal year
2011, the city is anticipating zero dollars. Officials also anticipate
further reductions in CMPTRA, which was recently reduced by $13.5
million. As a result of cuts in state funding, as well as revenues
being lower than projected, the city faces an $80 million shortfall in
fiscal year 2011. However, according to officials, the city is
required by statute to have a balanced budget. To address the
projected shortfall, Jersey City officials told us they laid off 300
seasonal and provisional employees in February 2010 out of the city's
approximately 2,000 staff, which saved about $2 million. In addition,
with the exception of police and firefighters, city employees took 12
unpaid furlough days between December 2009 and June 2010. The city
also plans to lay off permanent employees in fiscal year 2011 and have
12 unpaid furlough days to address a portion of the 2011 budget
shortfall. Although the city's 2010 fiscal year ended on June 30,
2010, the city council adopted a temporary budget of $168.1 million
for fiscal year 2011 until the budget is introduced and approved,
allocating $106.6 million for operating expenses and $61.5 million for
debt service. Jersey City officials stated that the city is restricted
by statute from allocating more than 26.25 percent of its $476 million
fiscal year 2010 budgetary appropriations for the 2011 temporary
budget.[Footnote 26] Officials stated that an estimate for the fiscal
year 2011 budget has not yet been determined and the final fiscal year
2011 budget will not be adopted until next year.
New Jersey Reported Over 22,000 Jobs for the Fourth Recipient Report,
but EECBG Recipients We Met With Did Not Use OMB Guidance to Calculate
and Report FTEs:
According to Recovery.gov, as of July 30, 2010, New Jersey recipients
reported funding 22,885 FTEs with Recovery Act funds during the fourth
quarterly reporting period, which covers the period April 1, 2010, to
June 30, 2010. The New Jersey Department of Education reported the
largest number of FTEs, accounting for 77 percent of the total FTEs
reported. According to the Governor's Policy Advisor on the Recovery
Act, recipient reporting in the fourth quarterly reporting period went
very smoothly, with all state agencies reporting on time. The official
stated that the biggest challenge reported by state agencies was
ensuring that the data entered into Federalreporting.gov was captured
by the reporting deadline. According to the official, many agencies
wait until the deadline to report their data, which causes a backlog
in Federalreporting.gov.
OMB guidance requires recipients to calculate FTEs by adding up the
total number of hours worked in the quarter using Recovery Act funds
and dividing it by the total number of hours in a full-time schedule
for that quarter.[Footnote 27] However, the local EECBG recipients we
met with--Morris County, Jersey City, and Woodbridge Township--did not
use OMB guidance to calculate FTEs. For example, an official from one
locality told us that four FTEs were reported for the quarter based on
the total number of people that had been paid with EECBG funds for the
quarter without taking into consideration the number of hours each
employee had worked or prorating the FTEs according to the number of
hours attributed to the Recovery Act. As a result, the total number of
FTEs reported may have been overstated. Officials from another
locality we met with stated that they used an estimate developed by
the Council on Economic Advisors to determine the total FTEs worked
for the quarter. Specifically, officials calculated FTEs using the
assumption that for every $92,000 in direct federal spending, one job
is created for 1 year. The FTEs were attributed to three consultants
that had been working on the project part time. According to the
consultants, they are not paid on an hourly basis and, therefore,
chose to use the spending estimate to calculate FTEs. DOE also
requires EECBG recipients to report FTE information through the PAGE
quarterly report, using the same formula to calculate FTEs as defined
in OMB guidance. In addition, recipients are required to report on the
number of jobs attributed to nonfederal funding sources. Given that
EECBG recipients did not use OMB guidance to calculate FTEs reported
on Recovery.gov, it is likely that recipients also did not use DOE
guidance to calculate and report FTEs in PAGE.
EECBG recipients we met with stated that while they were aware of the
OMB guidance, they did not use the guidance to calculate FTEs because
the FTEs reported to date are mostly for consulting services.
Officials from the localities stated that once projects are under way
and contracts are awarded, they will use the OMB guidance to calculate
and report FTEs. Officials from two of the localities stated that they
have not yet determined how they will verify the accuracy of the jobs
information submitted, but stated that they would likely review
certified payrolls. An official from the third locality stated that
there are currently no quality review steps in place to ensure the
accuracy of the jobs data reported.
Lastly, the Newark Housing Authority reported 16 FTEs for its formula
grant in the fourth quarter recipient reporting period, down from the
20 FTEs reported in the January to March 2010 reporting period,
according to Recovery.gov. A senior housing official attributed the
decrease to challenges in obtaining city permits in a timely manner
and a state-imposed wage increase for unskilled labor. The official
stated that the housing agency applied for a waiver from the wage
increase, which it did not receive. According to the official, the
wage increase will have a significant impact on moving forward with
public housing projects because fewer people can be hired at the
higher wage. A Newark housing official also told us that no jobs will
be reported for the competitive grant until the agency meets its
financial closing, at which time construction can begin. To verify the
accuracy of the jobs information provided to them by contractors,
officials stated they collect payrolls and conduct random spot-
checking at job sites to ensure they are correct. Officials stated
that recipient reporting has become easier each round and they have
not experienced any issues during this most recent round.
State Comments on This Summary:
We provided the Governor of New Jersey with a draft of this appendix
on August 9, 2010. On behalf of and in concert with the Governor's
Deputy Chief of Staff, who serves as co-chair for the Governor's
Recovery Accountability Task Force, the Governor's Policy Advisor for
Recovery Act matters responded for the Governor on August 12, 2010.
The official provided technical comments that were incorporated, as
appropriate.
GAO Contacts:
David Wise, (202) 512-2834 or wised@gao.gov:
Gene Aloise, (202) 512-6870 or aloisee@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Diana Glod, Assistant
Director; Nancy Lueke, analyst-in-charge;
Kisha Clark;
Anne Doré;
Alexander Lawrence Jr.;
and Tarunkant Mithani made major contributions to this report.
[End of section]
Appendix XII Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] DOE established weighted formulas for allocating grants to states,
units of local government, and Indian tribes and used population data
and other criteria, such as energy consumption, to allocate funds
under the formulas.
[3] New Jersey's Clean Energy Program provides financial incentives
through various programs for residential, commercial, and municipal
customers to promote increased energy efficiency and the use of
renewable sources of energy. Localities applying for energy rebates
can use the EECBG funds to cover portions of the costs not covered by
NJBPU's Direct Install, Pay for Performance, or SmartStart Buildings
programs.
[4] Recipients of EECBG formula funds must obligate the funds within
18 months of receiving the EECBG award and expend the funds within 36
months of receiving the award.
[5] U.S. Department of Energy, Office of Inspector General, Office of
Audit Services, Special Report: Review of the Department of Energy's
Plan for Obligating Remaining Recovery Act Contract and Grant Funding,
OAS-RA-10-15 (Aug. 4, 2010).
[6] U.S. Department of Energy, Office of Inspector General, Office of
Audit Services, Special Report: Selected Department of Energy Program
Efforts to Implement the American Recovery and Reinvestment Act, OAS-
RA-10-03 (Dec. 7, 2009).
[7] In addition to Newark, five public housing agencies received eight
competitive grants for creating energy-efficient communities. These
public housing agencies included the Elizabeth Housing Authority, the
Jersey City Housing Authority, the Bayonne Housing Authority, the
Vineland Housing Authority, and the Brick Housing Authority.
[8] The actual obligation deadlines vary during September 2010
depending on the category for which the competitive grant was awarded.
Competitive grants for public housing transformation must be obligated
by September 8, 2010. Competitive grants for energy-efficient, green
communities involving substantial rehabilitation or new construction
must be obligated by September 22, 2010. Competitive grants for gap
financing and for moderate green rehabilitation must be obligated by
September 23, 2010, and competitive grants used for addressing the
needs of the elderly must be obligated by September 27, 2010.
[9] The New Jersey Housing and Mortgage Finance Agency is responsible
for the administration of the federal low-income housing tax credit on
behalf of the U.S. Internal Revenue Service. Investors purchase these
tax credits and the revenue from the sale raises equity for New
Jersey's affordable housing market. There are two tax credits
available to public housing agencies. One is a 9 percent tax credit,
which is administered on a competitive basis; the other is a 4 percent
tax credit, which is administered on a noncompetitive basis, and is
awarded to projects automatically if they meet certain eligibility
requirements.
[10] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[11] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[12] [hyperlink, http://www.gao.gov/products/GAO-09-830SP].
[13] According to a senior HUD official, all of the remote reviews
were completed by August 20, 2010.
[14] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[15] New Jersey Office of Legislative Services, Office of the State
Auditor, Trenton Board of Education, July 1, 2007 to February 28, 2010
(Trenton, N.J., 2010).
[16] New Jersey Office of Legislative Services, Office of the State
Auditor, Department of Law and Public Safety, Division of Criminal
Justice and Office of the State Medical Examiner, July 1, 2007 to
April 30, 2010 (Trenton, N.J., 2010).
[17] A total of $34.6 million in Recovery Act grants were awarded to
the Division of Criminal Justice in fiscal year 2009, of which $29.8
million were awarded for the Edward Byrne Memorial Justice Assistance
Grant program.
[18] In addition to these ongoing audits, the Office of the State
Auditor also initiated audits at the New Jersey Department of
Agriculture, which is using Recovery Act funds to purchase school
equipment; South Woods State Prison, which received Recovery Act
public safety funds; and of the New Jersey Department of Education's
formula for allocating funds to school districts.
[19] 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 (revised June
27, 2003 and June 26, 2007). 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.
[20] KPMG, State of New Jersey Single Audit Report, Year Ended June
30, 2009, Independent Auditors' Report on Schedule of Expenditures of
Federal Awards (Princeton, N.J., Apr. 16, 2010). The Single Audit did
not include an opinion on the state's compliance with the requirements
of its Medicaid programs, including Recovery Act programs, because the
auditors did not have sufficient documentation supporting the
compliance of the state regarding activities allowed or unallowed,
allowable costs/cost principles, and eligibility.
[21] The Recovery Act initially provided eligible states with an
increased FMAP for 27 months from October 1, 2008, to December 31,
2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. On August 10, 2010, federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124, Stat. 2389 (Aug. 10, 2010).
[22] Population data are from the latest available U.S. Census Bureau
estimate as of July 1, 2009. Unemployment rates are preliminary
estimates from the U.S. Department of Labor, Bureau of Labor
Statistics, Local Area Unemployment Statistics for June 2010 and have
not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revisions.
[23] The Recovery Act fund total does not include $7.8 million
directly allocated to the Jersey City Housing Authority and $4.5
million in highway funds suballocated from the New Jersey Department
of Transportation.
[24] The HUD Office of the Inspector General issued an audit report of
Jersey City's CDBG funds received under the Recovery Act in February
2010. The audit found that the city generally had adequate controls
and staff capacity to administer its CDBG funds, but needed to
strengthen its controls to ensure that it would be able to effectively
administer the funds and comply with applicable requirements. The city
generally disagreed with the findings.
[25] CMPTRA is a formula grant program through which the state
annually provides localities with funds to help offset property tax
losses.
[26] N.J. Stat. Ann. § 40A:4-19.
[27] OMB Memorandum, Updated Guidance on the American Recovery and
Reinvestment Act - Data Quality, Non-Reporting Recipients, and
Reporting Job Estimates, M-10-08 (Dec. 18, 2009).
[End of Appendix XII]
Appendix XIII: New York:
Overview:
This appendix summarizes GAO's work on the seventh bimonthly review of
American Recovery and Reinvestment Act of 2009 (Recovery Act)[Footnote
1] spending in New York. The full report on all of GAO's work in 16
states and the District of Columbia may be found at [hyperlink,
http://www.gao.gov/recovery/].
What We Did:
We reviewed six programs funded by the Recovery Act--three education
programs and three energy programs. The three education programs we
reviewed were (1) the State Fiscal Stabilization Fund (SFSF); (2)
Title I, Part A of the Elementary and Secondary Education Act of 1965,
as amended (ESEA); and (3) the Individuals with Disabilities Education
Act, as amended (IDEA), Part B. All three of these programs are
administered by the U.S. Department of Education (Education). The
three energy programs we reviewed were the State Energy Program (SEP),
the Energy Efficiency and Conservation Block Grant (EECBG), and the
Weatherization Assistance Program (Weatherization). All three of these
programs are administered by the U.S. Department of Energy (DOE).
These programs were selected primarily because they are receiving
significant amounts of Recovery Act funds, recently began disbursing
funds to states, or both. We focused on how funds were being used, how
safeguards were being implemented, and how results were being
assessed. For descriptions and requirements of the programs we
covered, see appendix XVIII of GAO-10-1000SP.
Our work in New York also included understanding the state's fiscal
condition, visiting one locality--the Town of Brookhaven--to gain
insight into its use of Recovery Act funds, and obtaining an update on
the fiscal condition of one of the localities we visited for our
December 2009 report--Steuben County.[Footnote 2] We chose the local
governments in order to visit a range of communities based on locality
type, population size, and unemployment rates. Specifically, we
visited the Town of Brookhaven because it is a suburban town and its
unemployment rate is below the state's rate.[Footnote 3] We followed
up with Steuben County because it is a rural county with an
unemployment rate above the state's rate. Finally, we reviewed the
work being done by the accountability community to oversee the use of
Recovery Act funds.
What We Found:
Funds from the programs we reviewed have helped New York prevent
reductions in education and health care funding and improve the energy
efficiency of public buildings and private residences. Recovery Act
funds are also stimulating infrastructure development and expanding
existing programs. The following summarizes findings for the areas we
examined.
* Education programs. Education allocated $4.98 billion in SFSF, ESEA
Title I, Part A, and IDEA, Part B funds to New York, of which the
state has made $3.9 billion available to local educational agencies
(LEA). As of July 16, 2010, New York had drawn down about 48 percent
of available funds. In examining the efforts of the Syracuse City
School District (SCSD) and the New York State Education Department
(NYSED) to safeguard this funding, we found that SCSD reduced its
local spending on IDEA, Part B for the 2009-2010 school year despite
being ineligible to do so. After we alerted SCSD officials to this
maintenance-of-effort (MOE) issue, SCSD restored its local spending to
the correct level. We also found that SCSD generally followed its
procurement procedures in a sample of Recovery Act transactions. In
addition, NYSED is continuing its monitoring of 30 high-risk LEAs.
* SEP. On July 2, 2009, DOE approved New York's plan for SEP and
allocated it $123.1 million in Recovery Act funds. The New York State
Energy and Research Development Authority (NYSERDA)--the agency that
administers SEP in New York--also elected to use $2.5 million from
EECBG to augment one of its SEP programs.[Footnote 4] As of June 30,
2010, NYSERDA had obligated $109.2 million of its total allocation and
had expended $3.2 million to fund SEP activities under the Recovery
Act. NYSERDA is distributing most of these funds to subrecipients in
the state to pay for energy efficiency and renewable energy projects
ranging from the retrofitting of street lights with more energy-
efficient bulbs to the installation of solar photovoltaic systems in
homes and businesses. NYSERDA is generally using its established
procedures to track and monitor these projects with an increased
emphasis on reporting and impact evaluation requirements.
* EECBG. New York was allocated over $175 million in formula-based
Recovery Act EECBG funds. Some of the allocations went directly to
local recipients, while those for smaller recipients went through the
state. In New York, the funds for smaller recipients went through
NYSERDA. We examined how NYSERDA and two direct-recipient localities--
Orange County and the Town of Brookhaven--planned to use their EECBG
funds, as well as their monitoring and reporting efforts. NYSERDA,
Orange County, and the Town of Brookhaven received about $30 million,
about $3.5 million, and about $4 million, respectively. As of June 15,
2010, NYSERDA reported that it had obligated 100 percent of its funds.
As of June 30, 2010, Orange County reported that it had obligated
about $19,000 (about 0.5 percent of its funds), and the Town of
Brookhaven reported that it had obligated about $49,000 (about 1.2
percent of its funds). However, we found that both of these recipients
initially underreported their obligations by over $500,000 combined
but later corrected their reports. The recipients plan to use the
funds for a variety of projects to improve the energy efficiency of
public buildings and private homes and plan to evaluate program
outcomes by tracking energy-savings metrics over time.
* Weatherization. DOE allocated $394.7 million in Recovery Act funds
to New York in March 2009 for Weatherization. In New York, these funds
are administered by the Division of Housing and Community Renewal
(DHCR). Through June 30, 2010, New York had weatherized almost 4,000
units--nearly three times the number it reported as of March 31, 2010,
and about 8.5 percent of its goal of 45,000 units. DHCR officials said
they believe this increase was the result of more multifamily projects
working their way through the production process. These officials also
believe similar jumps in production numbers will occur in future
reporting periods because work on over 14,100 units was currently
under way and energy audits--which are required before weatherization
can begin--of over 19,200 additional units had been completed. Once
work on these over 33,300 units is finished, New York will have
completed about 82.7 percent of the units needed to meet its goal.
DHCR officials believe the state will meet its goal by March 31, 2012.
* Accountability. The Stimulus Oversight Panel and Office of the State
Comptroller (OSC) continue to actively monitor Recovery Act funds.
[Footnote 5] Since our May report, the New York State Inspector
General (NYSIG) has completed a review of the Recovery Act Clean Water
and Drinking Water State Revolving Funds (SRF). It has also continued
to investigate complaints received through the Stimulus Complaint
intakes. According to a NYSIG official, NYSIG has received
approximately 25 allegations of waste, fraud, or abuse related to
Recovery Act funds, predominately in the area of Weatherization. NYSIG
expects to report on a number of substantiated claims in September.
OSC's Local Government and School Accountability Division has
completed its audits of transportation procurement procedures in 51
municipalities, with no significant findings, and has begun looking at
how transportation claims are audited and paid for by local
governments. OSC's Division of State Government Accountability has
begun an audit of the Metropolitan Transportation Authority (MTA) that
will examine, among other items, the systems and controls in place to
ensure that Recovery Act funds are used for the proper purpose and to
monitor waste, fraud, and abuse.
* State and localities' use of Recovery Act funds. According to state
budget officials, the receipt of Recovery Act funds has greatly
affected the state's fiscal stability as it has prevented cuts in
education and health care funding and helped the state address budget
gaps over 3 fiscal years. The localities we visited plan to or are
using Recovery Act funds for financing Medicaid, energy programs, and
community development, among other things.
New York Has Drawn Down Recovery Act Education Funds at an Increased
Rate; NYSED's Monitoring of High-Risk LEAs Did Not Identify a MOE
Compliance Issue:
For this report, we examined the efforts of SCSD and NYSED to ensure
appropriate use of the funding for three Recovery Act education
programs--SFSF; ESEA Title I, Part A;
and IDEA, Part B--the largest Recovery Act-funded education programs
in New York. As the fifth largest LEA in New York, SCSD has about
21,000 students in 33 schools. It has a total operating budget of
approximately $425 million and employs more than 4,000 staff. We chose
to review SCSD because of its size, large Recovery Act award, and
multiple findings by independent auditors in past reports regarding
its use of federal funds and internal controls.[Footnote 6] SCSD
officials estimated that the district was allocated approximately
$34.4 million in SFSF, ESEA Title I, and IDEA, Part B Recovery Act
funds. The school district planned to use these funds over 2 years
with about 61 percent of these funds planned for use in the 2009-2010
school year and about 39 percent in the 2010-2011 school year. The
district planned to use approximately 96 percent of the $34.4 million
for salaries. SCSD officials said that as of June 30, 2010,
approximately 284 full-time equivalents (FTE) have been retained using
Recovery Act funds. Overall, NYSED officials reported that Recovery
Act education funds saved or created approximately 30,000 FTEs
throughout the state in the quarterly reporting round that ended June
30, 2010.
In 3 Months, New York Almost Doubled Its Draw Down Rate of Recovery
Act SFSF; ESEA Title I, Part A; and IDEA, Part B Funds, although Its
Average Rate Still Lags behind that of Other States in Our Study:
Education allocated $4.98 billion to NYSED for the three Recovery Act
education programs we reviewed. Of this funding, NYSED has made
approximately $3.9 billion available to LEAs, and as of July 16, 2010,
New York had drawn down about $1.9 billion, or about 48 percent of the
total amount, up from 27 percent of the total amount as of April 16,
2010. However, the state continues to draw down these funds more
slowly than other states because of administrative delays, as
previously reported.[Footnote 7] As of July 16, 2010, New York's 48
percent draw down rate was lower than the average rate of 64 percent
among the 16 states and the District of Columbia included in our
review.
SCSD Reduced Its Local Spending on Special Education, despite Being
Ineligible to Do So, but Subsequently Corrected Its Error:
IDEA requires that an LEA maintain local funding for special education
at the previous year's level, referred to as MOE, except under certain
circumstances. To be eligible to reduce its IDEA funding, an LEA must
meet the requirements of IDEA, including meeting certain performance
indicators defined by the state educational agency.[Footnote 8] (See
figure 1 for an illustration of this concept).
Figure 1: Hypothetical Example of an Eligible LEA Reducing Its MOE by
the Maximum Allowable Amount:
[Refer to PDF for image: vertical bar graph]
Year: 2008;
Federal IDEA allocation: $20 million;
Local IDEA allocation: $1 million;
Total: $21 million.
Year: 2009;
Federal IDEA allocation: $19.5 million; Local allocation decreased by
$500,000 (50 percent of $1 million federal allocation increase);
Local IDEA allocation: $2 million; Federal allocation increased by $1
million;
Total: 21.5 million.
Source: GAO analysis.
[End of figure]
SCSD officials told us in March 2010 that they reduced the district's
local spending on special education in the 2009-2010 school year.
However, we determined, and SCSD officials subsequently agreed, that
SCSD was not eligible for the MOE reduction in the 2009-2010 school
year because it was not meeting performance indicators related to
graduation and dropout rates among disabled students and it had a
significantly high percentage of students with disabilities being
suspended for more than 10 days, among other indicators. After we
notified SCSD officials that the district was ineligible to reduce its
MOE, SCSD restored its local IDEA spending to meet MOE requirements.
In March 2010, GAO also notified NYSED of the issue, and as a result,
NYSED's IDEA program office asked the SCSD officials to return the
funds to SCSD's special education budget. NYSED officials said that
SCSD should have known of its ineligibility, because the NYSED
officials had corresponded multiple times with SCSD on the subject.
[Footnote 9]
NYSED monitors MOE by requiring an LEA's annual application for IDEA
funds to include the local funding amount of special education for the
previous 2 years and an estimate of the local spending on special
education for the application year. The application requires each
district to certify that its MOE requirements are met or to provide an
explanation for why it is eligible to reduce its MOE. Because of a
reporting error on the SCSD 2009-2010 application, NYSED was unaware
that the LEA reduced its MOE. In June 2009, SCSD submitted an
application to NYSED for federal IDEA funds that we found to contain
incorrect information through our review of local budget documents.
While SCSD's application to NYSED for IDEA funds reported an increase
of $125,793 in local spending from the 2008-2009 through 2009-2010
school years, it had actually reduced its local spending by about $2.3
million.[Footnote 10] When we notified SCSD officials during our visit
in March 2010 of the error and SCSD's ineligibility to reduce its MOE
by approximately $2.3 million, they attributed the error to
miscommunication among staff in the special education and finance
offices and a misunderstanding of the eligibility rules for reducing
MOE.
NYSED officials said that if GAO had not discovered the error, it
would have likely been discovered in the annual Single Audit that
occurs after the award year ends.[Footnote 11] If the error had not
been detected until then, NYSED officials said it is possible that
they then would have had to take steps to recover the funds or
withhold them from SCSD's next federal IDEA allocation and
redistribute them to other recipients. We have previously reported
that the reduction of MOE by LEAs in all states could affect future
spending on special education because, when an LEA is allowed to
reduce local MOE in one year, it lowers the level of local spending
that the LEA must maintain in subsequent years for the special
education population.[Footnote 12]
SCSD Generally Followed Its Procedures for Purchasing Goods and
Services with Recovery Act Funds:
During our site visit, to assess the extent to which SCSD followed its
procedures, we reviewed a nonstatistical sample of 26 expenditures of
Recovery Act funds for goods, services, and salaries under the SFSF;
ESEA Title I, Part A;
and IDEA, Part B programs and interviewed finance and program
officials regarding use of Recovery Act education funds, procurement
procedures, and inventory controls. As of December 22, 2009, SCSD had
expended approximately $4.8 million in Recovery Act funds for these
three programs.[Footnote 13] We reviewed a selective sample of
transactions, which totaled $122,733. Forty-three percent of this
amount represented salary expenses. Our review of these transactions
found that SCSD officials had generally followed its procedures for
review and approval of these expenditures.
NYSED Continues Recovery Act Monitoring of 30 LEAs:
NYSED's Office of Audit Services continues to perform site visits to
high-risk LEAs, with a goal of visiting 30 of 68 LEAs that it
identified as high risk, as we reported in May 2010.[Footnote 14] The
objectives of the audits include reviewing the use of Recovery Act
funds, determining whether a reasonable internal control system
exists, and checking for compliance with specific federal requirements
over the use of federal funds. As of July 30, 2010, NYSED has
published reports on 4 more LEAs selected for site visits, bringing
the total to 8.[Footnote 15] NYSED published a report on SCSD in June
2010, but did not review SCSD's MOE compliance. NYSED officials told
us that the major findings among the LEAs as of June 16, 2010, were as
follows:
* Unique accounting codes for Recovery Act funds were needed to ensure
accountability.
* Time and effort certifications were incomplete.[Footnote 16]
* LEAs were typically unaware of federal cash management regulations
and lacked a process for ensuring compliance with them.
* LEA quarterly reporting under Recovery Act section 1512 had been
relatively accurate with some minor discrepancies.
To respond to the federal cash management findings, NYSED has held
presentations for six groups of LEA officials across the state to
educate them on developing processes for complying with the
requirements.
New York's Recovery Act SEP Is Funding Energy Efficiency and Renewable
Energy Projects:
The Recovery Act appropriated $3.1 billion to SEP to be administered
by DOE and spent over a 3-year period by the states, U.S. territories,
and the District of Columbia. SEP provides funds through formula
grants to achieve national energy goals such as increasing energy
efficiency and decreasing energy costs. Created in 1996, SEP has
typically received under $50 million per year. As such, the Recovery
Act provided a substantial increase in funding for this program.
Upon DOE's approval of New York's plan for SEP on July 2, 2009, New
York was allocated $123.1 million in Recovery Act SEP funds. NYSERDA--
the agency that administers SEP in New York--also elected to use $2.5
million from EECBG to augment one of its SEP programs. Through June
30, 2010, NYSERDA has obligated $109.2 million of its total allocation
and has expended $3.2 million to fund SEP activities under the
Recovery Act. NYSERDA officials were confident that NYSERDA would meet
DOE's deadline for obligating these Recovery Act funds, which is
January 2, 2011 (18 months from the day the State Plan was approved).
NYSERDA chose to use the Recovery Act SEP funding to develop four new
programs instead of expanding funding for established programs.
Officials felt this strategy would minimize the budgetary impact on
their existing programs once Recovery Act funding is expended. The
four Recovery Act SEP-funded programs in New York are described in
table 1.
Table 1: NYSERDA Recovery Act SEP Programs:
Energy Efficiency Program: Provides funding to promote energy
efficiency among municipalities, schools, hospitals, public colleges
and universities, and non-profit organizations;
Amount allocated: $82.6 million.
Renewable Energy Program: Provides financial support to encourage the
development of alternative renewable energy sources within the state,
such as solar photovoltaic, solar thermal, wind, and biomass systems;
Amount allocated: $31.0 million.
Clean Fleet Program: Provides financial support to accelerate the
introduction of light, medium, and heavy-duty alternative fuel
vehicles and other advanced vehicle technologies into local community
fleets;
Amount allocated: $4.6 million.
New York Energy Codes Program: Provides technical assistance to local
code officials to achieve a high level of compliance with the Energy
Conservation Construction Code of New York. NYSERDA's goal is to have
the state reach 90 percent compliance with this code within 10 years.
NYSERDA is coordinating this effort with the New York Department of
State, which has administrative oversight of building codes in New
York;
Amount allocated: $4.8 million[A].
Total;
Amount allocated: $123.1 million[B].
Sources: NYSERDA officials and documentation.
[A] In addition to the $4.8 million in Recovery Act SEP funds
allocated to the New York Energy Codes Program, NYSERDA also allocated
$2.5 million in Recovery Act EECBG funds to augment the services
provided through this program.
[B] The totals for each program include administrative costs. In
total, NYSERDA allocated $3,788,751 (3.07 percent) for Recovery Act
SEP administrative costs. Numbers in table do not add to total because
of rounding.
[End of table]
NYSERDA issued program opportunity notices (PON) and a series of
requests for proposals (RFP) to implement its Recovery Act SEP
programs. First, NYSERDA issued a PON to fund energy conservation
studies. According to officials, through this PON, NYSERDA awarded $5
million to fund 216 energy conservation studies, many of which formed
the basis for proposals submitted in response to subsequent RFPs
issued by NYSERDA to select projects to fund using Recovery Act SEP
funds.
We spoke to NYSERDA officials, who shared the following information
about the awarding of Recovery Act SEP funds. NYSERDA elected to award
the implementation funding for the Energy Efficiency, Renewable
Energy, and Clean Fleet programs through one RFP but in several
evaluation and funding "rounds" rather than all at once. The first
round closed on August 24, 2009, and awarded $24.9 million to 87
projects. Another $40.1 million was awarded to 118 projects selected
in Round 2, which closed on November 27, 2009. The third round for
funding requests closed on April 7, 2010, and awarded 44 projects $9
million. To ensure that the funds were distributed statewide, NYSERDA
divided the state into seven regions and separately evaluated and
awarded funding requests from each region. NYSERDA issued another PON
for a separate component of the Renewable Energy Program and selected
five contractors that were awarded $10 million to install solar
photovoltaic systems in homes and businesses throughout the state.
Other Renewable Energy Program funding will be provided to the Long
Island Power Authority to help finance infrastructure improvements
needed to facilitate the purchase of electricity produced from solar
energy and incorporate it into the power grid. The New York Energy
Codes Program funds were awarded through two RFPs, with five awards
made in total.
Officials further explained the following details. With the exception
of the funding for the Long Island Power Authority under the Renewable
Energy Program, the grants and contracts were awarded through a
competitive evaluation process. A panel that included both outside
experts and NYSERDA staff reviewed, evaluated, and ranked each
application. Then, a multidisciplinary, NYSERDA-staffed committee
reviewed the rankings and made a recommendation on which projects to
fund to NYSERDA's senior management. Once funds are awarded, NYSERDA
enters into a contract with each subrecipient.
NYSERDA Plans to Use Established Procedures to Track and Monitor SEP
Funds with an Increased Emphasis on Evaluating and Reporting Impact:
NYSERDA officials did not anticipate any special problems with
tracking and monitoring Recovery Act funds. The officials told us that
they are using existing procedures and internal controls to oversee
Recovery Act funds. For example, the staff who manage the contracts
are separate from those who approve payments under the contracts, and
NYSERDA conducts site visits on a regular basis to monitor each
project. In addition, NYSERDA has hired an independent firm to assist
it in managing, overseeing, and monitoring its Recovery Act programs
and to aid in recipient reporting.
NYSERDA plans to measure predicted energy savings from these projects.
For example, its initial estimate of annual energy savings resulting
from the $74 million awarded to date under the Energy Efficiency,
Renewable Energy, and Clean Fleet Programs is $18.7 million. It plans
to use measures such as energy saved and the resultant energy cost
savings, the capacity of renewable energy installed, and the reduction
of greenhouse gas emissions to evaluate the projects. According to
officials, each contract requires subrecipients to comply with
NYSERDA's methodology for evaluating the impact of individual
projects. NYSERDA is paying for the cost of the evaluation process
using Recovery Act funds and will be responsible for its
implementation and oversight.
NYSERDA is also participating in DOE's national evaluation of the
Recovery Act SEP. DOE has issued a best practices guide to evaluate
the program, and NYSERDA is following this guide as well as its normal
processes.
SEP Reporting and Accountability Activities Are under Way:
For the reporting period ending June 30, 2010, NYSERDA reported that
Recovery Act SEP funds had funded 46.5 FTEs. NYSERDA officials said
that they established a procedure to manage the reporting process and
did not feel that the Recovery Act reporting requirements presented
any problems. An internal audit by NYSERDA determined that the
authority had good internal controls in place to provide oversight to
the reporting process.
The Recovery Act programs will be included in both NYSERDA's annual
financial audit and in the state's Single Audit. An official with
NYSERDA's Internal Audit division indicated that he does not have any
specific plans to audit Recovery Act SEP funds at this time. He may
conduct a review in the future, however, depending on the results of
his annual risk assessment. Currently, he is conducting an audit of a
program that is being funded with Recovery Act funds that are not part
of SEP--NYSERDA's Energy Efficient Appliance Rebate Program.[Footnote
17]
Recipients Plan to Use Recovery Act EECBG Funds to Improve the Energy
Efficiency of Public and Private Buildings in New York; Reporting
Challenges Exist:
EECBG, which was funded for the first time by the Recovery Act,
[Footnote 18] provides funds through competitive and formula grants to
cities, counties, states, territories, and Indian tribes to develop
and implement projects to improve energy efficiency and reduce energy
use and fossil fuel emissions in their communities. The Recovery Act
provided $3.2 billion for EECBG. Of that total, approximately $2.7
billion was awarded on a formula basis and up to $454 million will be
awarded on a competitive basis. Our Recovery Act EECBG work in New
York focused on the formula-driven funds.
As of August 20, 2010, New York had been allocated over $175 million
in formula-based Recovery Act EECBG funds. Some of the allocations
went directly to local recipients, while those for smaller recipients
went through the state. In New York, the funds for smaller recipients
went through NYSERDA. We examined how NYSERDA and two direct-recipient
localities--Orange County and the Town of Brookhaven--planned to use
their EECBG funds, as well as their monitoring and reporting efforts.
We selected Orange County and the Town of Brookhaven because, at the
time we made our selection, they were the county and municipality
(other than New York City) that received the most funds and had
already begun to outlay funds. We did not select New York City because
another oversight entity is conducting work there.
A Lack of Understanding of the Term "Obligate" Led Two Localities to
Initially Underreport the Amount of Funds Obligated, but They Later
Corrected Their Reports:
Of the over $175 million in Recovery Act EECBG funds allocated to New
York as of August 20, 2010, the three entities we visited received
over $37 million (about 21 percent) of these funds. NYSERDA was
awarded almost $30 million, while the Town of Brookhaven was awarded
over $4 million and Orange County was awarded over $3.5 million.
DOE required grantees to obligate all funds within 18 months of the
effective date of the award and encouraged grantees to have at least
90 percent of their funds under contract and obligated by June 25,
2010.[Footnote 19] NYSERDA was the only entity we examined that met
the June 25, 2010, goal. As of June 15, 2010, NYSERDA reported that it
had obligated 100 percent of its funds. As of June 30, 2010, Orange
County reported that it had obligated $18,813.76 (about 0.5 percent of
its funds), and the Town of Brookhaven reported that it had obligated
$48,999.59 (about 1.2 percent of its funds). However, we found that
these two localities initially underreported their obligations by over
$500,000 combined. For example, in our meeting with Orange County, an
official said that $200,000 had been obligated for its energy audits
contract, but in its second quarter 2010 report to DOE, the county
initially only reported that $18,813.76 of its Recovery Act EECBG
funds had been obligated. The Town of Brookhaven had a similar issue.
In Brookhaven, an official reported that the town had entered into a
contract for the Parks Administration building (for which $383,878 in
Recovery Act EECBG funds has been allocated), but in its second
quarter 2010 report to DOE, the town initially only reported that
$48,999.59 of its Recovery Act EECBG funds had been obligated. When we
raised this issue with officials from both the county and the town, we
were told that the officials had misunderstood the definition of
"obligate" thinking that the term applied to funds that had already
been expended but not also those that were under contract. An official
from each entity told us that they subsequently corrected and
resubmitted their reports to DOE.
Recipients Plan to Use Most Recovery Act EECBG Funds to Improve the
Energy Efficiency of Public Buildings and Private Residences:
NYSERDA is using the majority--about 81 percent--of its Recovery Act
EECBG funds for a competitive grant program for small municipalities
(i.e., those that did not receive direct funding) to perform
activities similar to those that were funded under the EECBG program
for large municipalities. NYSERDA's Recovery Act EECBG projects are
described in table 2.
Table 2: NYSERDA Recovery Act EECBG Projects:
Project description: Project Implementation Funding for Small
Municipalities: Allocated funds for a competitive grant program for
small municipalities in New York. The eligible activities for funding
under this grant program mirror those of EECBG direct funding for
large municipalities;
Amount allocated: $24,069,789.
Project description: Advanced Code Compliance: Added to SEP to assist
municipalities with meeting advanced energy code compliance;
Amount allocated: $2,500,000.
Project description: Evaluation and Implementation Contractors:
Allocated for evaluation and implementation contractors;
Amount allocated: $2,274,918.
Project description: Administrative costs;
Amount allocated: $915,893.
Project description: Total;
Amount allocated: $29,760,600.
Source: NYSERDA officials.
[End of table]
Orange County is using its funds for building energy audits and
retrofits of public buildings and for a financial incentive program
for municipalities and school districts in the county. These efforts
are described in table 3.
Table 3: Orange County Recovery Act EECBG Projects:
Project description: Performance Audit: Allocated for energy audits of
10 county buildings and facilities. The audits will be used to develop
a list of projects for each site that could be undertaken to improve
the energy efficiency of those sites. The selection of these sites was
based, primarily, on those facilities with the largest utility bills
with some exceptions. For example, the waste treatment plant was not
included;
Amount allocated: $200,000.
Project description: Building Retrofit: Allocated for undertaking
various improvements recommended in the energy audits of the 10 sites
conducted under the performance audit project. Specific improvements
will be selected based on feasibility and payback in terms of energy
savings;
Amount allocated: $2,717,399.
Project description: Municipal Incentives Financing: Allocated for a
competitive grant program for local governments and school districts
in the county to fund various activities, such as energy audits,
feasibility studies, Property Assessed Clean Energy (PACE) programs,
and training. These funds cannot be used for capital improvements or
projects;
Amount allocated: $430,000.
Project description: Administrative costs;
Amount allocated: 169,301.
Project description: Total;
Amount allocated: $3,516,700.
Source: Orange County officials.
[End of table]
The Town of Brookhaven is using its funds for at least one public
building and two financial incentive programs for residents--one
called Green Homes for energy audits and retrofits to private homes
and one called Go Solar for solar photovoltaic or solar thermal (hot
water) generation panels on private homes. Both programs have a
revolving loan component that requires the homeowner to contribute
about 30 percent of the project's cost. For the Green Homes project,
this loan is to be paid through an interest-free benefit assessment
applied to the homeowner's tax bill. The town's projects are described
in table 4.
Table 4: Town of Brookhaven Recovery Act EECBG Projects:
Project description: New Parks Administration Building: Allocated for
energy efficiency features in the new Parks Administration building
that the town plans to start building in fall 2010;
Amount allocated: $383,878.
Project description: Old Town Hall: Allocated for an energy efficiency
rehabilitation of the old Town Hall. However, that project is on hold
at least until next year and may be canceled. If that happens, the
town would reallocate the funds among the other three projects;
Amount allocated: $479,822.
Project description: Go Solar: Allocated for the installation of solar
panels on 50 to 100 single family homes. To select participants, the
town conducted a lottery in which it drew names for about 150 homes.
The town has assigned the first 34 homes to contractors, which are
analyzing the homes for favorable solar applications. The town
requires each home to have an energy audit (at the homeowner's
expense) and some level of energy efficiency before it can qualify for
solar installation. If the energy audit does not show that the home
has the required level of efficiency, the homeowner can choose to stay
in the program by bringing the home into compliance at his/her own
cost. There is a $50,000 cap per household for this program;
Amount allocated: $1,535,220.
Project description: Green Homes: Allocated for energy audits of and
retrofits to 250 to 300 single family homes. The participants were
selected on a first come, first served basis. The town received about
335 applications overall, and 256 of these were postmarked on the
first available date. The town Ethics Commissioner and an independent
auditing firm selected the participants from these applicants.
Contractors will perform energy audits and retrofits. There is a
$10,000 cap per household for this program;
Amount allocated: $1,535,220.
Project description: Administrative costs;
Amount allocated: $207,060.
Project description: Total;
Amount allocated: $4,141,200.
Source: Town of Brookhaven officials.
[End of table]
None of the Recipients Reviewed Reported Internal Controls Challenges
regarding Recovery Act EECBG Funds, but One Recipient May Have a
Conflict of Interest Issue regarding Management and Oversight of Its
Recovery Act EECBG Funds.
None of the three recipients we reviewed reported challenges regarding
their internal controls and processes to monitor the use of Recovery
Act EECBG funds. However, we found that in the Town of Brookhaven,
there may be a conflict of interest issue regarding management and
oversight of its EECBG funds. The town's Senior Auditor initially
managed the programs funded by Recovery Act EECBG funds and now
advises the staff managing these programs. In addition, he is
responsible for reporting to DOE and OMB and oversees the creation and
gathering of information for these reports. Professional standards for
internal auditors that have been set forth by the Institute of
Internal Auditors (IIA) state that "internal auditors must have an
impartial, unbiased attitude and avoid any conflict of interest."
[Footnote 20]A practice advisory to the IIA's standards states that
"internal auditors are not to accept responsibility for non-audit
functions or duties that are subject to periodic internal audit
assessments. If they have this responsibility, then they are not
functioning as internal auditors."[Footnote 21] In addition, the
practice advisory states that "when the internal audit activity, chief
audit executive (CAE), or individual internal auditor is responsible
for, or management is considering assigning, an operational
responsibility that the internal audit activity might audit, the
internal auditor's independence and objectivity may be impaired." As
we have previously reported, having responsibility for both managing
and auditing an activity creates an inherent conflict of interest that
potentially weakens the integrity of the organization's oversight.
[Footnote 22]
When we raised this issue with the Town of Brookhaven, an official
said that the town considers the activities performed by the Senior
Auditor to be consistent with the functioning of its Finance
Department and the requirements of the programs. The official also
stated that the town and the professionals in the Finance Department
are aware of the need for proper internal controls and have
established levels of approval and review that assure such controls.
The official said that, if the town did an internal audit of any
Recovery Act programs, the town's Supervisor, Board, Audit Committee,
or Commissioner of Finance would have to initiate the audit and the
Senior Auditor would have to recuse himself from participating in the
audit.
Recipients Plan to Monitor Program Outcome Metrics, but Do Not Have
Plans to Undertake Program Audits of Recovery Act EECBG Activities:
All three of the recipients we reviewed have plans to monitor the
outcomes of the projects funded with Recovery Act EECBG funds.
According to officials, for NYSERDA's Project Implementation Funding
for Small Municipalities, a standard component of the contract
requires subrecipients to comply with NYSERDA's methodology for
evaluating the impact of individual projects. NYSERDA's Energy
Analysis department will also conduct an additional third-party
independent evaluation of its metrics.
Orange County plans to track outcome metrics related to national
energy goals, such as reducing fossil fuel emissions, throughout the
payback period of the projects. It is using a contractor to develop
the process for monitoring the metrics.
The Town of Brookhaven is collecting information that would allow for
longer-term monitoring of the impact of its Green Homes and Go Solar
Programs on energy savings and emissions of four greenhouse gases.
Both programs will employ baseline and exit audits of participants'
homes, in conjunction with audits of their electric, natural gas, and
oil bills, to verify projected outcomes. Each homeowner participating
in the program has agreed to provide utility bills for 1 year prior to
and 5 years after the project, which the town will use to monitor
changes in homes' energy efficiency, environmental impact, and
expected payback cycles. The town emphasized, though, that it may not
have the resources needed to conduct the longer-term monitoring itself
and is seeking to partner with a local university to conduct the
analysis.
NYSERDA's Internal Audit department may conduct a program audit of
NYSERDA's Recovery Act EECBG activities. Neither Orange County nor
Brookhaven planned to undertake program audits of their Recovery Act
EECBG activities, but the use of funds may be audited through their
annual financial audits or federal Single Audits.
Although the Recipients Reported Excellent Working Relationships with
Their DOE Project Officers, Two Recipients Had Difficulties in
Implementing Reporting Guidance:
EECBG recipients must submit quarterly reports on jobs, expenditures,
and a variety of other programmatic information through
www.federalreporting.gov and DOE's PAGE system. In addition,
recipients of grants greater than $2 million must report to DOE on a
subset of key metrics on a monthly basis.
Each of the entities we reviewed praised DOE's collaboration and was
generally positive about DOE's guidance, yet our review revealed that
officials in both Orange County and the Town of Brookhaven did not
fully understand some of the guidance. For example, as previously
detailed, it appears that both Orange County and Brookhaven did not
report obligations in accordance with the guidance. In addition,
Orange County underreported the number of jobs created or retained
because it did not report all FTEs funded with Recovery Act funds as
required by OMB. Under OMB's December 18, 2009, guidance, recipients
should report all jobs funded with Recovery Act funds; recipients are
not required to make subjective judgments on whether jobs were created
or retained as a result of the Recovery Act.[Footnote 23] Although a
county official reported that a contractor is conducting work under a
Recovery Act contract, the county initially did not report any FTEs in
its most recent quarterly report to OMB. The official said that she
did not think the contractor had any documented jobs created or saved
and sought clarification from DOE on how to report the FTEs. DOE
instructed the county to report based on all of the hours worked by
the contractor and its subcontractors that are paid with Recovery Act
funds. The county will correct its report.
New York's Use of Recovery Act Weatherization Funds Has Increased
Significantly since March 2010:
The Recovery Act appropriated $5 billion for Weatherization, which DOE
is distributing to each of the states, the District of Columbia, and
seven territories and Indian tribes, to be spent by March 31, 2012.
This program enables low-income families to reduce their utility bills
by making long-term energy-efficient improvements to their homes by,
for example, installing insulation or modernizing heating or air
conditioning equipment.
According to OSC data, through June 30, 2010, just over 12 months
after DOE approved New York's weatherization assistance plan, DHCR had
obligated $259.3 million of its total allocation of $394.7 million in
Recovery Act Weatherization funds. At that time, OSC also reported
that DHCR had disbursed $87.3 million to fund weatherization
activities under the Recovery Act. Actual production numbers reported
by DHCR as of June 30, 2010, showed a sharp increase from those
reported as of March 31, 2010, as shown in table 5.
Table 5: Comparison of Production Numbers in the New York State
Weatherization Program from March 31, 2010 through June 30, 2010:
Units weatherized;
Production as of March 31, 2010: 1,309;
Production as of June 30, 2010: 3,843;
Percentage increase: 193.6%;
Percentage of goal: 8.5%.
Units with work in progress;
Production as of March 31, 2010: 10,546;
Production as of June 30, 2010: 14,134;
Percentage increase: 34.0%;
Percentage of goal: [Empty].
Units with completed energy audits;
Production as of March 31, 2010: 14,008;
Production as of June 30, 2010: 19,232;
Percentage increase: 37.3%;
Percentage of goal: [Empty].
Total;
Production as of March 31, 2010: 25,863;
Production as of June 30, 2010: 37,209.
Sources: DHCR officials and documentation.
[End of table]
DHCR officials stated that they believe the increases shown in table 5
are partly a result of multifamily projects working their way through
the production process. Multifamily projects, which account for over
half of the estimated number of units to be weatherized in New York
using Recovery Act funds, take longer to get under way and complete
than single family homes for a variety of reasons. These include more
complicated energy audits and, in many cases, the requirement for
owner participation in the cost of the project, which must be
negotiated before work can begin. Further, according to state
officials, units in a multifamily project cannot be counted as
completed until all work on each unit is finished and the project has
been inspected and accepted by the local weatherization agency. DHCR
officials believe similar jumps in production numbers will occur in
future reporting periods. Once the 33,366 units in progress or with
completed energy audits are completed, New York will have completed
82.7 percent of the units needed to meet its goal of weatherizing
45,000 units using Recovery Act funds. DHCR officials were confident
that New York would meet its goal by March 31, 2012.
Weatherization in New York Has Been Closely Monitored by Outside
Agencies:
The use of Recovery Act funds in Weatherization continues to be
reviewed by independent auditors. For example, in June 2010, DOE
issued a report on its monitoring of the program in New York and
reported no findings. Meanwhile, NYSIG has conducted reviews related
to the Recovery Act Weatherization program. It has also investigated
complaints received through the Stimulus Complaint intakes--some of
which, according to a NYSIG official, relate to allegations of
collusion at the local agency level of the Recovery Act Weatherization
program. NYSIG expects to report on a number of substantiated claims
in September 2010. In addition, New York's Single Audit for this year
will include Weatherization. Because of the high level of oversight of
the Recovery Act Weatherization program by outside agencies, DHCR's
own internal audit efforts have been directed toward other programs
within the agency that have received Recovery Act funds. For example,
DHCR has initiated a compliance review of the use of Recovery Act
funds in the Tax Credit Assistance Program.
DHCR Reported that the Most Recent Recipient Reporting Process Went
Smoothly:
For the reporting period ending June 30, 2010, DHCR reported that
Recovery Act Weatherization funds had created 765 FTEs. DHCR officials
said that the reporting process went fairly smoothly, since this was
the first quarter in which DOE, OMB, or both had not significantly
changed the rules for producing the reports. DHCR conducted an
internal audit of the recipient reporting process that determined that
adequate internal controls were in place to provide oversight of the
reporting process.
New York's Accountability Community Has Completed a Number of Recovery
Act Audits; NYSIG Expects to Report on Substantiated Recovery Act
Complaints in September 2010:
In New York, the Stimulus Oversight Panel,[Footnote 24] Economic
Recovery and Reinvestment Cabinet (headed by the Governor's office),
and OSC are primarily responsible for statewide oversight of Recovery
Act funds.[Footnote 25] In addition, an estimated 90 percent to 95
percent of the state's Recovery Act funding will be part of the
state's Single Audit. To date, these oversight entities have completed
audits of a number of Recovery Act programs and reviewed crosscutting
Recovery Act issues, such as civil rights compliance and recipient
reporting.[Footnote 26] Since we last reported in May 2010,[Footnote
27] the Stimulus Oversight Panel and OSC have continued to actively
monitor Recovery Act activities.
The Stimulus Oversight Panel has continued to hold biweekly meetings
with the state agencies that received Recovery Act funds. Through June
2010, a NYSIG official reported that 14 of the 22 agencies that
received funds had appeared before the panel. The individual panel
members are also undertaking activities in their areas of expertise.
For example, the Medicaid Inspector General has planned several
reviews and NYSIG has conducted reviews related to Weatherization and
the Clean Water and Drinking Water SRFs. Related to the SRFs,
according to a NYSIG official, NYSIG has visited six Recovery Act
funded projects throughout the state and found the SRFs to be well
managed by Environmental Facilities Corporation (EFC). NYSIG also
found that responsibility rests with the locality, not the relevant
state agencies, to oversee the entire bidding process and, because few
rural localities have encountered such large-scale water projects,
they may be more susceptible to waste, fraud, and abuse. According to
a NYSIG official, NYSIG has worked with EFC to promote greater
oversight of the local projects, particularly in the bidding process,
and has provided anti-fraud awareness training and materials. NYSIG
has also continued to investigate complaints received through the
Stimulus Complaint intakes. According to a NYSIG official, NYSIG has
received approximately 25 allegations of waste, fraud, or abuse
related to Recovery Act funds, and although a good number have proven
unsubstantiated, NYSIG expects to report on a number of substantiated
claims in September.
Since our last report in May 2010, OSC's Division of Local Government
and School Accountability has completed its audits of procurement
procedures for Recovery Act-related highway projects. In total, OSC
completed five audits of transportation procurements that covered 51
municipalities. OSC did not have any significant findings from those
audits. OSC is now in the process of looking at how transportation
claims are audited and paid for by local governments. OSC issued its
first report on this, which covered 10 municipalities in the capital
region (around Albany), in August 2010 and found that each local
government had systems in place and followed adequate claims
processing procedures. In addition, with limited exceptions, OSC found
that Recovery Act payments were made according to contract and project
bid specifications, and related expenditures were reasonable,
accurate, and supported. OSC is planning to conduct another audit of
this type of 8 to10 units of local government probably in western New
York (either Buffalo or Rochester). OSC plans to start this audit in
late summer.
OSCís Division of State Government Accountability is undertaking an
audit of one of the two agencies it has deemed most at riskóthe MTA.
This audit will examine the:
According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing Single Audit results, it
received New York's Single Audit reporting package for the year ending
March 31, 2009, on December 23, 2009. This was the first Single Audit
for New York that includes Recovery Act programs and it identified 39
significant internal control deficiencies related to compliance with
federal program requirements, of which 32 were classified as material
weaknesses. As we reported in May, some of these material weaknesses
and significant deficiencies occurred in programs that included
Recovery Act funds.
Recovery Act Funds Have Allowed Localities to Address Infrastructure
Needs and Pursue Energy Efficiency Opportunities; However, the State
and Its Localities Continue to Face Budget Pressures:
Recovery Act funds have helped New York stabilize state finances to a
great extent and have prevented reductions in education and health
care funding, according to state budget officials. New York State used
about $10.6 billion in Recovery Act SFSF funds and funds made
available as a result of the increased Medicaid FMAP to address budget
gaps across 3 fiscal years.[Footnote 28],[Footnote 29] Budget
officials confirmed that the state's fiscal challenges remain the same
as those identified in our May report. State officials forecast a $8
billion budget gap for fiscal year 2011-2012 and report that the state
will address the phasing out of Recovery Act funds this fall when next
year's budget is developed.
We visited the Town of Brookhaven and followed up with Steuben County
to add to our understanding of New York's localities' use of Recovery
Act funds, current fiscal conditions, and preparation for phasing out
of Recovery Act funds.[Footnote 30] (See table 6 for locality
background information.)
Table 6: Background on Selected Local Governments:
Local government: Town of Brookhaven;
Population: 490,416;
Type of local government: Town;
Unemployment rate: 6.9%;
Fiscal year 2010 operating budget: $151.2 million.
Local government: Steuben County;
Population: 96,552;
Type of local government: County;
Unemployment rate: 9.0%;
Fiscal year 2010 operating budget: $183.3 million.
Sources: U.S. Census Bureau and U.S. Department of Labor, Bureau of
Labor Statistics, Local Area Unemployment Statistics data. Operating
budget detail obtained from the Town of Brookhaven 2010 Adopted Budget
and Steuben County's 2010 Adopted Budget Summary.
Notes: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revisions.
[End of table]
Town of Brookhaven:
The Town of Brookhaven has received a total of $9.9 million in
Recovery Act funds. It has also been allocated $46.5 million in
Recovery Zone Bonds ($18.6 million for Recovery Zone Economic
Development Bonds and $27.9 million for Recovery Zone Facility Bonds).
[Footnote 31] The town expects to use $5.2 million of the Recovery Act
funds to construct a new energy-efficient wastewater treatment plant.
It also received $4.1 million in EECBG funds and $609,000 in Community
Development Block Grant funds that it is using for rehabilitation of
homes and construction of curbs and sidewalks.[Footnote 32] In
addition, there are 10 proposed projects to be financed by Recovery
Zone Economic Development Bonds; the four largest proposed projects
are a building purchase for $4.2 million; sewer lines for $3.5 million;
and two different sidewalk projects for $1.6 million and $1.2 million,
respectively. Brookhaven officials stated that as of July 21, 2010,
additional projects financed by the $2.1 million in Recovery Zone
Economic Development Bonds remain under consideration. Officials
reported that the issuance of Recovery Zone Facility Bonds is
controlled by the town's Industrial Development Agency and that agency
is currently reviewing funding proposals.
Brookhaven officials reported that the town applied to the Recovery
Act Retrofit Ramp-Up program as part of a consortium with the
Community Development Corporation of Long Island and seven other
communities. Officials stated that although the $20 million
application was denied, the consortium may receive funds from NYSERDA
to fund a portion of this program. Finally, town officials noted that
there are currently no Recovery Act grant awards awaiting decision and
one official stated that all of the town's Recovery Act grants were
received through formula, not competitive, grants.
The town's revenues have decreased during the economic downturn
because of reductions in mortgage tax revenues, landfill fees, and non-
property tax revenues. An official reported that, similar to other
localities, Brookhaven is under budgetary pressure. To deal with the
downturn and anticipated impact of state budget actions, town
officials reported that Brookhaven applied $13 million of reserves
toward its fiscal year 2010 budget and implemented austerity measures
to stabilize expenditures.[Footnote 33] The town plans to use
approximately 5 percent of the EECBG funds to cover program
administrative expenses and believes any future administrative costs
will depend on continued reporting requirements. Because only a small
portion of these funds is being used for administrative costs,
officials said that Recovery Act funds have minimally affected the
town's fiscal stability.
Steuben County:
Since our December 2009 report,[Footnote 34] Steuben County has
received a total of two Recovery Act competitive grants and received
additional Recovery Act funds for several programs in its fiscal year
2010 operating budget.[Footnote 35] The additional Recovery Act
funding received since our December 2009 report includes $76,726 for a
state energy program grant; $4.2 million in Medicaid;
and $53,034 for foster care, food stamps, and adoption. Medicaid and
highway infrastructure investment continue to be the county's largest
amount of Recovery Act funds awarded. As of July 14, 2010, the county
had received about $8 million in Recovery Act funds. Steuben County
officials reported applying six times for five competitive grants--one
grant had two application rounds. Of these, the county was awarded two
grants, denied three, and awaits the disposition of another.
Steuben County, along with five other counties in the region,
partnered with the Southern Tier East and Southern Tier Central
Planning Development Boards to develop a proposal for the Broadband
Technology Opportunities Program funded by the Recovery Act. This
application, currently awaiting decision, requested approximately $24
million in funds and will benefit organizations such as hospitals,
public safety entities (e.g., police and fire stations), school
districts, colleges, and municipal organizations. County officials
stated that the six counties will contribute $6 million in matching
funds. Steuben County committed $1.2 million in matching funds for the
130 miles of fiber that will be installed in the county. In addition,
a county official confirmed that the development boards secured a
partnership with Corning, Inc., to supply slightly over $1 million in
fiber optic cabling.
Steuben County officials reported that Recovery Act funds have
moderately affected the county's fiscal stability. However, officials
added that with slight declines in sales tax receipts, potentially
severe cuts pending from the state, and an increase in retirement
costs, the county's fiscal situation could decline. Furthermore, with
the increased Medicaid funds expiring, the county will need to fill
approximately a $2.9 million gap annually starting in fiscal year
2011. County officials are developing a plan to address the phasing
out of Recovery Act funds. Part of this plan will include a staff
reduction of 6 to 11 percent, a tax increase, and use of reserve
funds. Officials stated that they hope to ease any staff reductions
through retirement incentives and increase efficiencies through the
consolidation of services.
State Comments on This Summary:
We provided the Governor of New York with a draft of this appendix on
August 18, 2010. A representative from the Governor's office responded
on August 23, 2010. We also provided various state agencies and local
officials with the opportunity to comment. In general, they agreed
with our draft and provided some clarifying and technical suggestions
that were incorporated as appropriate.
GAO Contacts:
Susan Fleming, (202) 512-4431 or flemings@gao.gov:
Dave Maurer, (202) 512-9627 or maurerd@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Ronald Stouffer, Assistant
Director; Tiffany Mostert, analyst-in-charge; Colin Fallon;
Christopher Farrell; Kendall Helm; Sarah McGrath; Joshua Ormond;
Summer Pachman; Frank Putallaz; and Kimberly Young made major
contributions to this report.
[End of section]
Appendix XIII Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-232SP] (Washington, D.C.: December
2009).
[3] The U.S. Department of Labor's Bureau of Labor Statistics reported
an 8.2 percent unemployment rate for New York State for June 2010.
This rate is preliminary and has not been seasonally adjusted.
[4] NYSERDA is a public benefit corporation created in 1975. Its goal
is to help New York meet its energy goals by reducing energy
consumption, promoting the use of renewable energy sources, and
protecting the environment. Currently, NYSERDA is primarily funded by
state rate payers through a systems benefit charge.
[5] In July 2009, the Governor created a Stimulus Oversight Panel
chaired by the New York State Inspector General (NYSIG) with the state
Division of Human Rights Commissioner, Metropolitan Transportation
Authority (MTA) Inspector General (IG), and Medicaid IG as members.
The panel meets on a biweekly basis to examine the use of Recovery Act
funds by each of the 22 New York State agencies designated to receive
them, to develop coordination with other state and federal law
enforcement partners responsible for the oversight of Recovery Act
funds, to discuss the progress of investigations whose allegations
were received through the Stimulus Complaint intakes, and to initiate
proactive reviews when deemed necessary. State program departments and
agencies also have internal audit departments that review Recovery Act
funds, and localities and transit or housing authorities play a role
in managing some Recovery Act funds that do not pass through state
offices.
[6] The Office of the New York State Comptroller reported on a number
of internal control problems in November 2009 in Syracuse City School
District, Internal Controls Over Selected Financial Operations. In
addition, in 2010, NYSED determined the LEA to be one of its high-risk
LEAs based on a number of indicators related to fiscal condition,
timeliness of reporting, and results of external audits. The SCSD
Single Audit for school year 2008-2009 found deficiencies in the
controls over purchasing and accounting related to some federal grant
funds, among other things. SCSD has taken multiple actions to address
these findings, including the recent purchase of a new accounting
software system.
[7] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 2010).
[8] IDEA allows an LEA that has received an increase in federal funds
to reduce its local MOE by 50 percent of the amount of the increase,
as long as it spends the amount saved on activities authorized under
ESEA. In addition, an LEA is eligible to reduce its MOE if the
reduction is attributable to certain circumstances, such as a decrease
in the enrollment of students with disabilities.
[9] On May 15, 2009, prior to SCSD's submission of its IDEA
application on June 22, 2009, NYSED issued a letter to SCSD detailing
the potential IDEA award allocation for the 2009-2010 school year. In
bold and underlined text, it described that SCSD was not eligible for
a reduction in its MOE. The IDEA application itself also explains
eligibility for MOE reduction. In addition, on June 29, 2009, NYSED
issued another letter to SCSD explaining its status on state
performance plan performance indicators and the resulting consequences.
[10] GAO did not attempt to verify the accuracy of the data source
used to calculate the local spending on special education. Previous
audits, as mentioned above, found internal control flaws in the SCSD
financial accounting system, including a lack of controls over
revenues, accounts receivable, and accounts payable.
[11] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, (31 U.S.C. §§ 7501-7507) and provide a source
of information on internal control and compliance findings and the
underlying causes and risks. The Single Audit Act requires states,
local governments, and nonprofit organizations expending $500,000 or
more in federal awards in a year to obtain an audit in accordance with
the requirements set forth in the act. A Single Audit consists of (1)
an audit and opinions on the fair presentation of the financial
statements and the Schedule of Expenditures of Federal Awards; (2)
gaining an understanding of and testing internal control over
financial reporting and the entity's compliance with laws,
regulations, and contract or grant provisions that have a direct and
material effect on certain federal programs (i.e., the program
requirements); and (3) an audit and an opinion on compliance with
applicable program requirements for certain federal programs. The
Office of Management and Budget (OMB) Circular A-133 compliance
supplement requires auditors to review compliance with matching, level
of effort, and earmarking for IDEA, Part B programs.
[12] [hyperlink, http://www.gao.gov/products/GAO-10-232SP].
[13] We reviewed Recovery Act expenditures up to December 22, 2009,
because that was the cutoff for the latest request for reimbursement
by SCSD to NYSED. The objective of this was to compare the total of
Recovery Act SFSF; ESEA Title I, Part A; and IDEA, Part B
disbursements provided by SCSD to the total of reimbursements the
district requested from NYSED to ensure that we had a complete list of
transactions from which to draw a sample.
[14] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[15] NYSED's Office of Audit Services has published these reports on
its Web site at
http://www.oms.nysed.gov/oas/Audit_Report/SchoolDistricts/SchoolDistrict
s.html. The school districts reviewed include Saratoga Springs City,
Saranac Central, Malone Central, Hamburg Central, Eden Central,
Brentwood Union Free, Syracuse City, and Connetquot Central.
[16] OMB Circular A-87 (codified at 2 C.F.R. Part 225) establishes
principles and standards for state and local governments in
determining allowable costs for federal awards, including grants, and
requires grantees to support salaries and wages charged to grant funds
by payrolls, time and effort certifications, or other supporting
documentation.
[17] Under the Recovery Act, NYSERDA was allocated $18.7 million to
provide cash rebates to New York residents who purchase high-
efficiency appliances.
[18] The EECBG program was authorized in Title V, Subtitle E, of the
Energy Independence and Security Act that was signed into law on
December 19, 2007.
[19] According to DOE guidance, "obligation" in this context means the
binding commitment of Recovery Act funds by the recipient to other
entities for the execution of projects. This figure is inclusive of
funds already spent (i.e. outlays) and commitments outstanding but not
invoiced or otherwise liquidated.
[20] IIA, International Standards for the Professional Practice of
Internal Auditing, 1120, Individual Objectivity. IIA defines conflict
of interest as "any relationship that is, or appears to be, not in the
best interest of the organization."
[21] IIA Practice Advisory 1130.A2-1, Internal Audit's Responsibility
for Other (Non-audit) Functions.
[22] GAO, 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 2009).
[23] OMB, Memorandum M-10-08, Updated Guidance on the American
Recovery and Reinvestment Act--Data Quality, Non Reporting Recipients,
and Reporting of Job Estimates (Washington, D.C., Dec. 18, 2009).
[24] The NYSIG, the state Division of Human Rights Commissioner, MTA
IG, and Medicaid IG constitute the Stimulus Oversight Panel.
[25] OSC is responsible for tracking and monitoring the progress of
Recovery Act funding and ensuring that the funding meets established
internal controls. OSC also must review and approve all contracts over
$50,000; OSC does not have pre-approval authority over contracts
awarded by local governments.
[26] The following programs have been audited: Weatherization
Assistance Program, Community Services Block Grants, Highway
Infrastructure Investment Program, Unemployment Insurance, Workforce
Investment Act of 1998 (WIA) Adult Program, WIA Youth Activities, WIA
Dislocated Workers, and Medical Assistance Program (Medicaid).
[27] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[28] New York State operates on an April 1 through March 31 fiscal
year.
[29] The Recovery Act initially provided eligible states with an
increased FMAP for 27 months from October 1, 2008, to December 31,
2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. On August 10, 2010, federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[30] The Town of Brookhaven and Steuben County are not responsible for
the operations of their school districts. The Town of Brookhaven is
also not responsible for administering its Medicaid Program, which is
managed by Suffolk County.
[31] Recovery Zone Economic Development Bonds are a type of direct
payment Build America Bond (BAB) created under the Recovery Act and
administered by the Internal Revenue Service. Direct payment BABs
allow issuers the option of receiving a federal payment instead of
allowing a federal tax exemption on the interest payments.
[32] For more information on the Town of Brookhaven's EECBG funding,
see the EECBG section of this appendix.
[33] The Town of Brookhaven operates on a January 1 to December 31
fiscal year.
[34] [hyperlink, http://www.gao.gov/products/GAO-10-232SP].
[35] Steuben County operates on a January 1 to December 31 fiscal year.
[End of Appendix XIII]
Appendix XIV: North Carolina:
Overview:
The following summarizes GAO's work for the seventh of its bimonthly
reviews of the American Recovery and Reinvestment Act of 2009
(Recovery Act)[Footnote 1] spending in North Carolina. The full report
covering all of our work in 16 states and the District of Columbia is
available at [hyperlink, http: http://www.gao.gov/recovery].
What We Did:
Our work in North Carolina focused on gathering information about 2
programs funded under the Recovery Act--the Early Head Start Program
and the Public Housing Capital Fund. We also reviewed the use of
Recovery Act funds for budget stabilization in one local community and
at the state level, and monitoring and reporting within the
accountability community. For descriptions and requirements of the
programs we covered, see appendix XVIII of GAO-10-1000SP.
* For the Early Head Start program, we visited two grantees--Guilford
Child Development (GCD) and Johnston-Lee-Harnett Community Action,
Incorporated (JLHCA). We selected GCD, which is expanding an existing
Early Head Start program, because it received the largest amount of
Early Head Start Recovery Act funds in North Carolina and the largest
amount of Recovery Act funds for the renovation or construction of
facilities. We selected JLHCA because it was using Early Head Start
Recovery funds to implement a new Early Head Start program. During our
visits, we spoke with senior program and fiscal officials about how
they were spending their Early Head Start Recovery Act funds. We also
reviewed a selection of each program's Early Head Start files to
assess how the grantees documented enrollment, eligibility, and
certain required health screenings.
* For the Public Housing Capital Fund we visited two public housing
agencies--Charlotte Housing Authority (CHA) and Beaufort Housing
Authority (BHA)--to determine how funds were being used. We selected
CHA because it received the largest capital grant allocation. We
selected BHA because it received one of the smallest grant allocations
in North Carolina. We interviewed the housing officials and performed
testing of expenditures and examined accounting records and external
audit documentation. Additionally, we interviewed Department of
Housing and Urban Development (HUD) officials in Greensboro, North
Carolina, regarding their oversight of Recovery Act funds and their
procedures for assisting and monitoring public housing agencies in
administering these funds.
* We interviewed state budget officials in North Carolina's Office of
State Budget and Management (OSBM) to gather information about the
state's use of Recovery Act funds and fiscal condition, including
challenges to future economic recovery. We selected the City of
Wilmington for a local budget review in order to assess the impact
Recovery Act funds are having at the local government level. Located
in the southeastern section of the state, Wilmington is one of the
largest cities in North Carolina and its unemployment rate is below
the state's average. We asked both state and local officials to
discuss: (1) the amount of Recovery Act funds its entity is expected
to receive, (2) how the funds are being used and their potential
impacts, and (3) whether the officials have plans for when Recovery
Act funds are no longer available.
* To obtain an update on the monitoring of Recovery Act funds by North
Carolina's accountability community since our last report, we
interviewed senior administrators with the North Carolina Office of
the State Auditor (OSA), Office of Economic Recovery and Investment
(OERI), and OSBM's Office of Internal Audit (OIA).
What We Found:
* Early Head Start. Nineteen Early Head Start grantees in North
Carolina received about $24.2 million in Early Head Start Recovery Act
expansion funds for the first year of a 2-year grant period. Overall,
while both grantees are spending their Recovery Act funds, we found
that they were at risk of not spending their entire first-year grants
by the end of fiscal year 2010, as required. GCD's senior officials
reported that they would have an estimated $336,882 of unspent funds
this year due to delays with construction and hiring. Senior officials
for JLHCA reported that a delay in receiving the grant award would
leave them with about $75,000 to $100,000 of unspent personnel funds.
Officials representing both grantees reported that they will request
that OHS approve a carryover of the unspent funds into fiscal year
2011. Despite the delays, GCD and JLHCA officials reported having
created jobs with their Early Head Start Recovery Act funds for the
reporting period April 1, 2010, to June 30, 2010.
* Public Housing Capital Fund. We found internal control weaknesses
related to procurement practices using Recovery Act funds at both PHAs
we visited. We also found that one of the two PHAs we visited did not
maintain proper documentation of its use of Recovery Act funds.
Specifically, at CHA we found that officials did not follow their
procedures for reconciling and approving monthly purchase card
transactions, including documenting reviews of statements by approving
officials and providing training to card holders. We also found that
BHA did not maintain proper documentation of its use of Recovery Act
funds. Although BHA received a Recovery Act public housing capital
fund formula grant of approximately $201,000, we were unable to
determine how those funds were used. BHA officials did not provide a
general ledger or properly track the use of Recovery Act funds. In our
review of the documentation supporting the external audit, we found
significant departures from auditing standards. In addition, we found
that the BHA board's oversight practices did not meet its own
standards.
* State and local budget stabilization. As state officials begin to
work on the 2011-2013 biannual budget, state budget officials project
nearly a $3 billion budget shortfall that will likely have to be dealt
with through budget cuts or revenue enhancements. Wilmington officials
told us that $8.1 million in Recovery Act grants it received provided
much needed extra funding for some city projects and services, but did
not affect many other departments that had budget reductions.
Wilmington officials raised property taxes and used the city's fund
balance to balance its budget.
* Accountability. We learned that in addition to Single Audits, North
Carolina's oversight entities--OSA, OERI and OIA--conduct a range of
work to ensure recipients' compliance with applicable laws and
regulations. For example, since our May 2010 report, OSA completed a
review related to the North Carolina Department of Environment and
Natural Resource's compliance with Davis-Bacon provisions of the
Recovery Act. OERI officials reported working with state agencies to
implement their corrective action plans in response to OSA findings in
reports issued in 2010 as well as monitoring compliance among the
state's recipients and subrecipients of Recovery Act funds with
Recovery Act and OERI requirements related to procurement. Finally,
since our May 2010 report, OIA issued a report on several state
agencies' compliance with state and federal regulations applicable to
the Recovery Act State Fiscal Stabilization Fund (SFSF) and issued
risk assessments of Recovery Act programs in three agencies.
North Carolina Grantees are Spending Early Head Start Recovery Act
Expansion Funds, but Also Report Spending and Implementation Delays:
The Office of Head Start (OHS), a part of the U.S. Department of
Health and Human Services' (HHS) Administration for Children and
Families awarded 19 Early Head Start grantees in North Carolina about
$24.2 million in Early Head Start expansion funds provided under the
Recovery Act for the first year of a 2-year grant period.[Footnote 2]
For the second year of funding, OHS has committed an estimated $19.4
million in Recovery Act funds to North Carolina's 19 grantees
receiving Recovery Act funds.[Footnote 3] The Recovery Act
appropriated these funds for the costs to expand the number of
families served by Early Head Start. The allowable expenditures
include salaries for new staff, renovation and construction of
facilities, and training and technical assistance for new and existing
Early Head Start staff. For the 2-year period, Recovery Act funds are
to support Early Head Start services for up to 1,556 infants,
toddlers, and pregnant women in the state.
In June 2010, we visited two grantees--Guilford Child Development
(GCD) and Johnston-Lee-Harnett Community Action, Incorporated (JLHCA)--
to review Early Head Start Recovery Act spending. At both programs, we
spoke with senior program and fiscal officials responsible for the
implementation of the Early Head Start expansion activities. We also
reviewed each program's Early Head Start files to assess how the
grantees documented enrollment, eligibility, and certain required
health screenings.[Footnote 4] We selected GCD, which is expanding an
existing Early Head Start program, because it received the largest
amount of Early Head Start Recovery Act funds in North Carolina and
the largest amount of Recovery Act funds for the renovation or
construction of facilities. We selected JLHCA because it was using
Early Head Start Recovery Act funds to implement a new Early Head
Start program.
Overall, officials representing both grantees told us that they were
spending their first-year Recovery Act funds to expand Early Head
Start services through the renovation or construction of new
facilities, hiring staff, and training the newly hired staff. However,
at the time of our visits, neither grantee anticipated spending their
entire first year Early Head Start Recovery Act grant award by the end
of fiscal year 2010, as required by OHS. Both grantees also identified
other challenges in implementing their Early Head Start programs
funded under the Recovery Act programs. Finally, both grantees
reported having created jobs for the April 1 through June 30, 2010,
recipient reporting period.
Construction Challenges Delay Guilford Child Development's
Implementation of Center-Based Program:
GCD received about $3.2 million in Early Head Start Recovery Act funds
for its first year. HHS designated these funds for GCD to provide
services to an additional 104 infants, toddlers, and pregnant women in
Guilford County, which includes the cities of High Point and
Greensboro.[Footnote 5] GCD officials told us they used these funds to
renovate one child care center, build another child care center, and
provide professional development training and salaries for staff, and
for other purposes. At the time of our visit, GCD officials reported
that work was incomplete for both centers. The Bristol center,
designated for 32 children in the Greensboro area, should open by
September 2010, according to GCD officials. Construction of the
Arlington center should serve 48 children, also in the Greensboro
area. Program officials told us that the Arlington Center has faced
significant delays and is not scheduled to open until September 2011.
GCD officials attributed some of the delays in the Arlington center to
problems in securing the original sites identified in the spending
proposal submitted to OHS and the process for receiving approvals for
the change in facility location from OHS.[Footnote 6] Regional OHS
officials confirmed that the delay for the Arlington center was due to
GCD's challenges in securing sites and attributed the delay in the OHS
approval process to having to wait for GCD's contractors to provide
documentation needed by OHS to complete the review and grant approval.
GCD officials also reported to us that while waiting for the two
Recovery Act-funded centers to open, they implemented a temporary home-
based program for children receiving services[Footnote 7]. They also
told us they have delayed hiring staff for the Arlington center.
According to these officials, the lower costs associated with the home-
based program and unspent personnel and benefits funds primarily due
to the construction delays may leave $336,882 of unspent funds at the
end of fiscal year 2010.[Footnote 8] These officials told us that they
are seeking approval from OHS to use these unspent funds to cover
additional construction costs on the Bristol center and "green"
improvements, such as solar panels and energy efficient windows, to
both the Bristol and Arlington centers. Alternatively, GCD officials
said that if they do not receive approval to reallocate the funds so
that they can spend all of the fiscal year 2010 funds, they will
request approval from OHS to carry over the funds into fiscal year
2011. In July 2010, regional OHS officials told us that staff in OHS's
headquarters would make decisions about procedures for carryover
requests related to the Recovery Act funds but that such procedures
had not yet been determined.
GCD officials reported that the temporary home-based program for
infants and toddlers is new for their organization, and while they
have operated other home-based programs, implementation of the new
program has presented some challenges. These senior program and fiscal
officials said they anticipated using the home-based option for the
Bristol center for 5 months, instead of the estimated 7 months, until
the center opens in September 2010. As previously mentioned, the
Arlington center is not scheduled to open until the end of the grant
period--September 2011. As a result, any children waiting to use the
Arlington center will spend the entire Recovery Act grant period
receiving home-based services rather than the intended center-based
services.[Footnote 9] GCD officials said the primary challenge they
faced in using the home-based program for such a length of time is
that families in the communities it serves are not interested in home-
based child care services. These officials attributed the lack of
interest to the requirement that parents be present in the home for
weekly visits, which is difficult for working families. As a result,
GCD officials told us, some families have opted to remain on a waiting
list until the centers open, but other families have dropped out of
the program.
GCD also faced challenges developing timely policies and procedures
for the home-based program and consistently including documentation
related to enrollment and health screenings in its files. GCD
officials told us that their organization's governing board did not
approve formal policies and procedures on such issues as documenting
or determining attendance for its home-based program until June 2010,
several months after the program had been operating. Prior to the
formalization of these policies, GCD said its staff used different
methods for documenting attendance during the weekly home visits.
Further, while we observed that all of the files we reviewed had
verification, with two staff signatures, of income eligibility, the
inclusion of clear documentation in the files to show date of
enrollment and some of the required health screenings was inconsistent
among the files we reviewed[Footnote 10]. For example, we did not see
clear documentation noting enrollment dates (with which to compare to
the monthly enrollment data) in any of the files we reviewed. Rather,
GCD officials said that the date a family completed an enrollment
packet comprised of selected health and parental agreement documents
[Footnote 11] and the inclusion of these documents in three colored
folders represented enrollment.[Footnote 12] However, given the range
of documents needed to establish an enrollment date, we did not
attempt to assess the completeness of the files or whether or not an
enrollment date could be determined. In 7 of the 23 files we reviewed,
we did not see documentation of at least one of the three required
health screenings within the 45-day time period. We also observed
inconsistencies in the inclusion of documents related specifically to
home visits, such as a home visitation agreement, in the files we
reviewed.[Footnote 13] GCD officials said that some home visitors
retain the home visitation agreements in their offices while others
include the forms in the child's file. GCD officials acknowledged the
inconsistencies in the inclusion of documents in the files and told us
that while they had met the requirements, they had already begun to
implement more consistent administrative practices for documentation
related to their home-based program.
Johnston-Lee-Harnett Community Action, Incorporated Reports Challenges
in Implementation of New Early Head Start Program:
JLHCA received about $1.5 million in Early Head Start Recovery Act
funds for its first year of funding. HHS designated these funds for
JLHCA to create a new Early Head Start program that would serve 80
infants, toddlers, and pregnant women in Johnston, Lee, and Harnett
counties.[Footnote 14] According to officials, JLHCA used these funds
to lease and renovate three day care centers,[Footnote 15] for staff
professional development such as curriculum and skills training, and
for salaries and resource materials. JLHCA did not receive Recovery
Act funds specifically for construction and renovation of facilities.
[Footnote 16] Therefore, JLHCA officials told us that they were using
$443,200 from their Recovery Act start-up budget to renovate one
center in each of the three counties the organization serves, an
allowable use of the funds. At the time of our visit, JLHCA had been
delivering Early Head Start services in Johnston County since April
2010 and in Lee County since May 2010. It was awaiting the completion
of roof repairs and kitchen renovations in a center in Harnett County,
which opened in August 2010. Regional OHS officials with knowledge of
JLHCA's implementation progress attributed delays in Harnett County to
JLHCA having had limited experience with providing services in the
county. At the time of our visit, JLHCA was not yet providing Early
Head Start services to children in Harnett County and officials
attributed the delay to the slow process for obtaining facility
permits, and receiving their grant award later than expected. JLHCA
officials said that while they had expected to receive notification of
their grant in October 2009, the organization did not receive grant
award notification from OHS until the end of December 2009.
Additionally, while their budget included salaries for staff from
December to February, the officials did not begin hiring staff for all
centers until March 2010. These officials reported that, due to the
delay in the grant award, an estimated $75,000 to $100,000 in
personnel, benefits, and indirect costs for the 3-month period could
go unspent by the end of the fiscal year. JLHCA officials told us that
they were seeking approval from OHS to transfer these funds from their
operating account into their supplies account so that they could use
the funds for such items as diapers and formula or to make
improvements to the playground areas of the Recovery Act-funded
centers. JLHCA officials reported that they will also apply for OHS
approval to carry over the funds into fiscal year 2011.
In addition to the delays in receipt of the grant award and opening of
one of its facilities, JLHCA officials also reported challenges in
recruiting pregnant women for their Early Head Start program and
expressed concerns over sustaining the program once Recovery Act funds
end. JLHCA officials told us that while there is a waiting list for
children, the organization has been slow in meeting its funded slots
for pregnant women due to a lack of familiarity with and interest in
the program among this population. As a result, at the time of our
interview JLHCA had recruited 8 pregnant women for its funded 20 slots
for this portion of its Early Head Start Recovery Act program.
Although JLHCA is spending 29 percent of its first year grant on the
lease and renovation of the three facilities, we found that JLHCA did
not have a plan in place for sustaining its Early Head Start program
once Recovery Act funds end in 2011. JLHCA officials said that without
additional Recovery Act funds or local or state funding they would
have to close the three Early Head Start programs. While officials
reported to us several alternatives for retaining the facilities--such
as using the facilities for Head Start or for-profit child care
centers--they did not provide alternatives for maintaining the
services for infants and toddlers created with Recovery Act funds.
Our file review did not reveal any deficiencies in how JLHCA documents
enrollment, income eligibility, and the three required health
screenings we reviewed.
Grantees Report Job Creation with Early Head Start Recovery Act Funds:
GCD and JLHCA senior program and fiscal officials reported having
funded jobs with their first year Early Head Start Recovery Act funds.
GCD officials said that for the April 1, 2010, to June 30, 2010,
reporting cycle, they reported 9.86 new full-time equivalents. These
positions include 7 teachers, a center director, a nurse home visitor,
and a family advocate. GCD also reported 1.5 full-time equivalents for
construction on its Bristol center. JLHCA officials said that they
reported 5 new full-time equivalents. They told us that these
positions include 1 center director, 3 teachers, 1 family service
worker, and 1 custodian.[Footnote 17] GCD and JLHCA officials also
said that they did not experience any problems with the recipient
reporting process.
Internal Control and Oversight Weaknesses Increase Risk of
Mismanagement of Recovery Act Public Housing Funds:
North Carolina's 99 public housing agencies (PHA) received
approximately $83.4 million from the Recovery Act public housing
capital formula grant--the federal government provides these funds
directly to local PHAs. HUD oversight of these programs is carried out
by its field offices. We visited 2 PHAs in North Carolina--Beaufort
Housing Authority (BHA) and Charlotte Housing Authority (CHA) ---to
determine how they were planning to use these funds. At each PHA, we
interviewed officials about procurement practices with respect to
Recovery Act funds and performed expenditure testing. The testing
included a review of accounting records and the sufficiency of
supporting documentation, including invoices. We also attempted to
review the appropriateness of the expenditures at BHA based on the
grant agreements and applicable laws and regulations. We selected CHA
because it received the largest Recovery Act capital fund grant
allocation--about $7.5 million--in North Carolina and BHA because it
received one of the smallest allocations--about $201,000. We also
interviewed HUD officials about their procedures for assisting and
monitoring PHAs management and use of the funds. As of August 2010,
BHA had drawn down its entire award. As of August 7, 2010 CHA had
obligated its entire $7.5 million award.[Footnote 18]
Housing authority officials at both PHAs told us they planned to use
Recovery Act funds for a variety of housing rehabilitation projects
and security enhancements. During our initial visit in October 2009 to
CHA, officials told us they planned to use Recovery Act funds to
rehabilitate 609 units by replacing 522 water heaters and appliances
and improve security by installing site-security poles and Internet
cameras at 22 sites. During our October 2009 visit, BHA officials told
us they rehabilitated 4 units and a community center with the Recovery
Act funds they were allocated.
We found internal control weaknesses related to procurement practices
using Recovery Act funds at both of the PHAs we visited. We also found
that one of the two PHAs we visited did not maintain proper
documentation of its use of Recovery Act funds. In addition, the HUD
Office of Inspector General (OIG) has found that a third PHA in North
Carolina failed to comply with procurement and financial management
requirements in its administration of Recovery Act funds. As a result,
the HUD OIG concluded the third PHA could not provide assurance that
it properly awarded more than $2.4 million for contracts or that it
had the capacity to administer funds in accordance with the grant and
Recovery Act requirements.
Charlotte Housing Authority Internal Controls Could Be Strengthened to
Prevent Abuse:
CHA procurement office officials told us they had designed strong
internal controls to prevent and detect fraud, waste, and abuse from
occurring in the PHA's credit card program. However, we identified
internal control weaknesses that left Recovery Act and other federal
funds vulnerable to fraud, waste, and abuse.
According to CHA officials, CHA has put in place several requirements
to ensure proper use of purchase cards by CHA employees. For example,
CHA officials said that each month cardholders are responsible for
reconciling their monthly purchase card statement with a purchase
order that should have been approved prior to the purchases being
made. Cardholders must also ensure individual transactions are charged
to the applicable grant account, according to CHA officials.
Cardholders are required to submit their reconciled statement with all
supporting documentation to the purchase card administrator office for
approval. CHA cardholders are also required to meet in person with a
procurement official for a review of the purchase card statement and
supporting documentation. During this review, each transaction on the
statement is to be matched to original receipts and an item-by-item
match is made with an approved purchase order, according to CHA
officials. CHA officials also reported that CHA's policies and
procedures state that it is the responsibility of the approving
official to review the transactions of those purchase card holders who
directly report to them and report irregularities to the procurement
office.
However, during our review of the purchase card documentation, we did
not find any evidence that transactions had been reviewed by approving
officials, and therefore could not verify that the reviews had been
conducted. CHA's Acting Chief Operating Officer agreed that there is a
need for approving officials to document their review of purchase card
transactions. In addition, one of the purchase card administrators
told us all cardholders and approving officials are required to take a
purchase card training course before they receive a purchase card.
However, one purchase card holder stated she had not received purchase
card training and no one told her what she could or could not buy with
the card.
Beaufort Housing Authority Officials Provided False Information to GAO
Auditors:
BHA received a Recovery Act public housing capital fund formula grant
of approximately $201,000. We interviewed BHA senior officials and
staff and examined BHA bank records to determine how the PHA used
Recovery Act funds. However, because BHA officials did not provide a
general ledger or properly track the use of Recovery Act funds, we
were unable to determine how those funds were used. BHA officials also
failed to provide us sufficient documentation related to the 4 housing
units and one community center they claimed were rehabilitated with
Recovery Act funds. Additionally, BHA officials provided documents to
us during our review that we later learned were false. As a result, we
have serious concerns about the possibility that Recovery Act funds
were misused and have referred this matter to the HUD OIG.
When we met with BHA officials, we were told that approximately
$191,000 of the grant funds had been paid to one contractor to perform
renovation work on four housing units and a community center. We were
also told the contract for this work was awarded after a competition
in which BHA officials solicited bids from several contractors. As
support for these assertions, BHA officials provided us with
solicitations purportedly sent by BHA to seven contractors. However,
upon further inquiry we learned that the solicitations were
fictitious: we learned they were never sent out but were created for
the purpose of misleading GAO auditors into believing that they were
evidence of a competition.
The bank records of BHA also contain information that raises serious
concerns about misuse of Recovery Act funds. For example, on two
occasions after Recovery Act funds were deposited into the BHA
account, the Executive Director of BHA prepared and signed several
checks made payable to her, which appear to be diversions of BHA funds
for personal use. We are working with the HUD OIG to assist in a full
investigation of this matter.[Footnote 19]
Insufficient Oversight May Have Contributed to Weak Control
Environment:
BHA's annual external audit, its Board of Commissioners, and HUD are
the key components of the oversight structure for BHA's fiscal
management. However, in our review of the documentation supporting the
external audit we found significant departures from auditing
standards. We also found that the board's oversight practices did not
meet its own standards. For its part, HUD field office conducted on-
site reviews of BHA in 2006, 2007, 2009, and 2010. Some of those
reviews identified deficiencies in management.
Departures from Professional Standards Identified in Review of
External Audits:
Due to the significant internal control weaknesses we identified in
BHA's disbursement of and procurement processes over Recovery Act
funds discussed above, we reviewed the audit reports and supporting
documentation for BHA's fiscal year 2006, 2007, and 2008 financial
statement audits. During those years, BHA received federal funds and
two of the auditor reports identified internal control issues similar
to the issues we identified in our review of Recovery Act funds. Our
review of the prior years' audit reports and supporting audit
documentation identified substantive issues in the quality of the
audit documentation and the extent to which the documentation
satisfactorily complied with applicable audit standards.[Footnote 20]
These departures from auditing standards significantly weakened the
ability of BHA's Board of Commissioners, and ultimately HUD, to ensure
that the BHA maintained an effective control environment to reduce the
risk of fraud, waste, or abuse over the expenditure of federal funds,
including Recovery Act funds. We identified six areas of concern, that
in our opinion, BHA's external auditor departed from generally
accepted government auditing standards (GAGAS)[Footnote 21] and
standards promulgated by the American Institute of Certified Public
Accountants (AICPA)[Footnote 22]:
* Insufficient Evidence to Support Closing of Prior Year Findings:
* Insufficient Evidence to Support Adequate Consideration of Fraud:
* Insufficient Audit Documentation:
* Lack of Supervisory Review:
* Inadequate Analytical Procedures:
* Insufficient Disbursement Testing to Support Auditor's Conclusions:
The fiscal year 2006, 2007, and 2008 BHA financial statement audits
were performed by the same auditor. On August 18, 2010, we formally
transmitted the results of our review of the work of BHA's external
auditor to the North Carolina State Auditor for consideration of
further action. We discuss the six areas in which we identified
concerns in greater detail below.
* Insufficient Evidence to Support Closing of Prior Year Findings. We
found that all of the fiscal year 2006 findings were reported as
closed without explanation in BHA's 2007 audit report. Based upon our
subsequent review of the auditor's fiscal year 2007 audit
documentation, we concluded that there was insufficient evidence to
support the closing of the fiscal year 2006 audit findings in several
instances.[Footnote 23] For example, we found insufficient evidence in
the fiscal year 2007 audit documentation to support the closing of the
fiscal year 2006 audit finding related to the violation of procurement
policy. According to BHA officials, contracts over $100,000 should be
performed by a sealed bid process. In his fiscal year 2006 audit
report, the auditor stated that he found no evidence that this sealed
bid process was followed for a capital fund improvement contract.
However, the auditor reported this finding as closed in the fiscal
year 2007 audit report, based on management's response that "the
Authority realizes the significance of following the provisions of the
procurement policy and is committed to doing so in the future" and the
auditor's conclusion that there were no contracts over $100,000 in
fiscal year 2007. No evidence was in the audit documentation to
support the auditor's conclusion.
Further, we question the closing of another finding related to the
incomplete and inaccurate tenant file documentation without sufficient
evidence. Tenant file documentation for public housing should include
income verification, apartment inspection, rent calculation, security
deposit information, a signed lease, and certain forms required by
HUD. The auditor, in the fiscal year 2006 audit report, recommended
that BHA should (1) make certain personnel responsible for the tenant
files receive adequate training, (2) hire a specialist to review all
the tenant files to make appropriate corrections, and (3) develop a
system to ensure accurate information for the future. Our review of
the fiscal year 2007 audit documentation found the recommendation was
closed because BHA hired a new employee who would be responsible for
tenant files. However, BHA had not trained or scheduled training or
hired a specialist to perform on-site file reviews and training.
Notably, in the fiscal year 2008 audit report, inadequate tenant
documentation was again identified as a finding with the
recommendation that management ensure those responsible for tenant
applications be adequately trained. The auditor, in the fiscal year
2008 audit report, further recommended that BHA contract with a
consultant or other public housing authority to provide initial
training.
* Insufficient Evidence to Support Adequate Consideration of Fraud. We
found insufficient evidence to support adequate consideration of fraud
in the audit. During our May 2009 visit, the BHA Executive Director at
that time told us that she was hired to replace the former BHA
Executive Director, who had resigned and was subsequently charged in
July 2006 with embezzlement of BHA property.[Footnote 24] The AICPA
Statements on Auditing Standards, AU Section 316, Consideration of
Fraud in a Financial Statement Audit, require the auditor to obtain
information needed to identify risks of material misstatement due to
fraud by: (1) inquiring of management and others within the entity
about the risks of fraud; (2) considering the results of the
analytical procedures performed in planning the audit; (3) considering
fraud risk factors; and (4) considering certain other information.
Among other things, the auditor should inquire whether management has
knowledge of any fraud or suspected fraud affecting the entity and the
monitoring of programs and controls which have been established to
mitigate specific fraud risks the entity has identified, or that
otherwise help to prevent, deter, and detect fraud. Auditing standards
also require auditors to perform audit procedures in response to
identified risks of material misstatements due to fraud, and the
auditor's responses to address identified risks of material
misstatement due to fraud may include changing the nature, timing, and
extent of audit procedures. Further, the auditor is required to
document a description of the auditor's responses to those identified
risks. In addition, the auditor should also design audit procedures to
further address the risk of management override of controls and then
document the results of the procedures that were performed.
The audit documentation prepared by BHA's external auditor during the
fiscal year 2008 audit showed he interviewed the BHA Executive
Director at that time about fraud. His interview notes stated she was
unaware of any instances of fraud and everything was in order because
it all ultimately comes to her. The auditor's documentation also
reported that the then BHA Executive Director said everyone was aware
of the embezzlement by the previous Executive Director. The audit
documentation indicated the auditor interviewed another employee, the
then assistant to the Executive Director.[Footnote 25] The interview
notes stated that the then assistant was not aware of any instances of
fraud and did not suspect any fraud. According to his fraud risk
inquiries form, which lists the names of these two individuals he
interviewed about fraud, there is no evidence that the auditor
interviewed the Board of Commissioners about the risks of fraud and
whether they had an active role in the oversight of BHA's assessment
of the risks of fraud and the programs and controls established to
mitigate those risks. Further, this documentation did not contain any
identified fraud risks associated with his discussions. In our
opinion, due to the auditor's knowledge of the past embezzlement at
the BHA, his professional skepticism as an auditor should have been
heightened to, at a minimum, perform procedures to address the risk of
management's override of controls.
* Insufficient Audit Documentation. In general, the audit
documentation was not sufficient to enable an experienced auditor,
having no previous connection to the audit, to understand the work
performed, the audit evidence obtained, and the conclusions reached.
Under AICPA standards and GAGAS paragraph 4.19,[Footnote 26] auditors
must prepare audit documentation in connection with each audit in
sufficient detail to provide a clear understanding of the work
performed (including the nature, timing, extent, and results of audit
procedures performed), the audit evidence obtained and its source, and
the conclusions reached. Furthermore, the AICPA Statement on Auditing
Standards, AU Section 339.18, states that auditors should record who
performed the audit procedures and when such work was completed.
In addition to the lack of supervisory review, discussed below, most
of the audit documentation that we reviewed for the audits of both
fiscal year 2007 and fiscal year 2008 was missing at least one of the
following key elements of an audit document: the preparer of the
document, the date the work was performed, or the conclusion reached.
Further, none of the audit documentation that we reviewed indicated
the auditor's purpose in preparing the document, and few documents
indicated the source of the work, making it difficult to determine why
the work was performed or the origin of the audit evidence. Without
this documentation, the nature, timing, extent, and results of audit
procedures performed cannot be determined, as required by GAGAS.
* Lack of Supervisory Review. In the audit documentation that we
reviewed for audits of both fiscal year 2007 and 2008, there was no
evidence of supervisory review. According to GAGAS paragraph 4.20,
[Footnote 27] auditors should document, before the audit report is
issued, evidence of supervisory review of the work performed that
supports findings, conclusions, and recommendations contained in the
audit report. The external auditor did not document his justification
or rationalization for this departure from GAGAS, nor did he document
how the alternative audit procedure he performed was sufficient to
achieve the intent of a supervisory review of the audit documentation.
* Inadequate Analytical Procedures. The external auditor employed
inadequate analytical procedures for the fiscal year 2008 audit.
According to AICPA standards, AU section 329, the objective of
analytical procedures, used in the overall review stage of the audit,
is to assist the auditor in assessing the conclusions reached and in
the evaluation of the overall financial statement presentation. This
review includes considering any unusual or unexpected balances that
were not previously identified. Results of an overall review may
indicate that additional evidence may be needed. However, the audit
documentation we reviewed did not include any record of management's
response to the unusual or unexpected balances or an assessment of the
adequacy of such a response. Further, the audit documentation did not
include an assessment that additional evidence was needed or
additional audit procedures were considered.
The external auditor issued a concluding letter, dated June 10, 2009,
regarding the audit of the BHA fiscal year 2008 financial statements
addressed to the BHA Board of Commissioners. In this letter, he stated
that when comparing the fiscal year ended September 30, 2008, actual
expenditures to those in the approved budget, there was an unfavorable
variance of $35,561 (that is, actual expenditures exceeded the
budgeted expenditures by $35,561). According to the audit
documentation, this was a significant variance with respect to the
magnitude of BHA's budgeted expenditures. Furthermore, the auditor
noted that he found significant unfavorable variances in the expense
categories of administration, ordinary maintenance, and general
expense. However, the audit documentation we reviewed did not include
any record of management's response to the unusual or unexpected
balances or an assessment of the adequacy of such a response. Further,
the audit documentation did not include an assessment that more
evidence was needed or additional audit procedures were considered.
* Insufficient Disbursement Testing to Support Auditor's Conclusions.
During our review of the internal control testing of disbursements
performed as part of the fiscal year 2008 audit, we found insufficient
support for conclusions reached by the external auditor on vendor
payment testing which consisted of 2 payroll and 25 non-payroll
transactions. The external auditor's testing document indicated that
there were no exceptions; and the external auditor, therefore,
concluded that vendor payments appeared proper and consistent with the
processes established by BHA.
The external auditor did not note any exceptions when tracing the
vendor payment sample items to the checks. However, according to BHA's
policy, two signatures are required on all checks, and the Executive
Director was the only person signing checks. The external auditor told
us he did not verify signatures on checks because most banks do not
return checks or copies of checks with monthly bank statements.
Instead, he told us that he relies on the banks for performing that
control. We informed the external auditor that this was not the case
at BHA where checks were returned with monthly bank statements. We
also identified another audit document that showed the external
auditor reviewed bank reconciliations and specifically noted his
concern that the Executive Director was not only performing all of the
steps in the disbursement process, but she was also performing bank
reconciliations. One of the payroll disbursements the external auditor
tested was a paycheck signed only by the Executive Director and issued
to the Executive Director; which we believe should have elevated the
auditor's concern regarding potential irregularities. There was no
record in the audit documentation that indicated that the auditor
modified his approach for these circumstances.
Further, in a fiscal year 2008 internal control test to determine that
the amounts paid employees were in agreement with the approved budget,
the external auditor documented his conclusion that employees were
being paid appropriately in accordance with the approved budget.
However, his test showed that the Executive Director's actual salary
payments were $2,645 more than the annual budget for her salary and
the maintenance employee's actual salary payments were $1,200 more
than the annual budget for his salary. In the audit documentation that
we reviewed, the external auditor noted these discrepancies and stated
that due to the insignificant amounts and the possibility of an extra
pay period in the year, he chose not to further pursue these
discrepancies.
BHA's Former Board Failed to Ensure Its Financial Policies were
Implemented, but the New Board Has Taken Steps to Improve Its
Oversight:
BHA's former board did not properly oversee and manage the affairs of
BHA to ensure compliance with the board's own policies concerning
financial management. For example, the board failed to enforce its own
resolution requiring 2 signatures on all non-payroll checks, making it
easier for the Executive Director to make improper purchases and
payments. All of the BHA board members in place during the time the
alleged embezzlement took place have resigned and been replaced.
Members of BHA's new board with whom we spoke told us they are taking
actions to enhance the board's oversight activities. For example, the
new board has revised BHA's by-laws, designed and implemented
additional internal controls, and produced a new employee handbook
with an emphasis on a proper code of conduct for housing authority
employees. The new board has also approved internal control
enhancements to tenant accounts receivable, bank reconciliations,
credit card statement review and approval processes, travel
reimbursement, and check and bank drafts approvals. Our review of 2010
board minutes found the current board appears to be routinely
conducting fiduciary oversight as part of its regular board meetings.
While these actions can help safeguard BHA's use of federal funds, the
board faces ongoing challenges including recruiting and hiring a well
qualified executive director. Because of BHA's poor financial
condition, the interim executive director told us that he has agreed
to stay in the position without compensation until a new director can
be hired.[Footnote 28] The Board Chairman told us that the former
executive director was bonded for $50,000 and, pending an indictment
or conviction, the board will receive the proceeds by this fall, which
will enable it to hire a new executive director.
HUD Received Additional Funds to Monitor Recovery Act Funds; On-Site
Reviews Conducted at BHA in Successive Years:
HUD's Greensboro field office is responsible for oversight and
monitoring of North Carolina's PHAs to ensure that federal funds are
being used for their intended purpose. HUD's field office officials
told us their office focuses its monitoring activities on about 15
high risk PHAs in North Carolina identified by the annual risk
analysis. They also told us the office does not have sufficient
resources, including staff, to conduct on-site monitoring of all PHAs
in North Carolina. However, HUD field office officials told us the
office received additional travel funds for oversight and monitoring
of Recovery Act public housing funds. The field office director told
us his office conducted remote reviews of all Recovery Act funds and
visits to 21 public housing agencies receiving Recovery Act funds.
[Footnote 29] He also stated that while his office received additional
travel funds for monitoring and oversight during the early days of the
Recovery Act, the Greensboro office has requested still more funds for
monitoring and oversight of Recovery Act funds. HUD officials reported
that they conducted one on-site review of BHA in 2006, one on-site
review and one remote review in 2007, and an asset management on-site
review in 2009. According to these same officials, they also have
conducted an on-site review at BHA in 2010.
North Carolina Continues to Rely on Recovery Act Funding in the Face
of Budget Challenges, But Sees Signs of Economic Recovery:
As of August 24, 2010, North Carolina had received $6.9 billion in
Recovery Act funding. State budget officials said that the Recovery
Act funds directly affected North Carolina's fiscal stability. In
addition to uses of the funds we detailed in previous reports, the
state will use $13 million from the Recovery Act's Workforce
Initiative grant towards its JobsNOW 12 in 6 Program, which allows the
Community College System to create at least 12 occupational training
opportunities for state residents that can be completed in 6 months or
less. The state's Workforce Development Boards will also use $56
million from the Recovery Act's Workforce Initiative grant to set up
programs across the state to provide job training support for adults,
disadvantaged youth, and dislocated workers. The officials also told
us the state will spend $24 million from the State Veterans Home
Construction Grant Program toward the construction of two Veteran
nursing homes in the state.
On June 30, the North Carolina General Assembly passed and the state's
governor signed the 2011 fiscal year budget; the first time in 7 years
that the state has passed its budget on time. Overall, the newly
enacted budget reduces state spending by 3.3 percent more than the
legislature projected last year when it approved a 2 year budget for
the 2009-2011 budget period.[Footnote 30]While state officials tell us
there are signs the state is working its way out of its economic
downturn, state officials still took steps to constrain costs. For
example, under the 2011 budget, state employees will not receive a
raise for the second consecutive year.
State budget officials also told us the enacted budget assumed that
approximately $519 million in Federal Medical Assistance Percentages
(FMAP) funds will be available, but the state will receive less than
officials anticipated when they developed the state's budget.
Specifically, in June, the Governor requested that the state
legislature prepare a contingency budget in the event the increased
FMAP was not continued. The suggested adjustments to address the end
of the increased Recovery Act FMAP funds are outlined in Table 1.
However, in August 2010, Congress passed and the President signed a 6
month extension of increased FMAP funding for states[Footnote 31].
According to the budget officials, the state will receive an estimated
$320.3 million in FMAP funds. A senior budget official said the only
adjustment the state has made, as of September 1, is that the state
will not hold retirement contributions but will have them sent to the
state agencies' retirement systems. The state's budget director noted
that given the current level of economic uncertainty and knowing North
Carolina faces continued budget challenges in fiscal year 2011-2012,
the state budget office is still requiring all agencies to establish
an internal one percent Management Flexibility Reduction budget
reserve as outlined in a July 2010 statewide memorandum.
Table 1: Suggested Budgetary Adjustments to Address Potential Loss of
Increased FMAP Funds, in priority order:
Suggested budgetary adjustments: Transfer from the disaster relief
reserve[A]; $30 million.
Suggested budgetary adjustments: Transfer for unclaimed lottery prize
money and excess receipts[B]; $35 million.
Suggested budgetary adjustments: Use of interest from all other
funds[C]; $50 million.
Suggested budgetary adjustments: Use of balance in general fund
availability[D]; $23 million.
Suggested budgetary adjustments: Reduction of Medicaid provider
rates[E]; $27 million.
Suggested budgetary adjustments: Use of Funds from the savings reserve
funds[F]; $38 million.
Suggested budgetary adjustments: Reduction in retirement system
contribution[G]; $139 million.
Suggested budgetary adjustments: One percent (1%) management
flexibility reduction[H]; $178 million.
Suggested budgetary adjustments: Total; $519 million.
Source: GAO analysis of data provided by NC state budget officials.
Note: Total does not add due to rounding.
[A] The Disaster Relief Reserve is a budgetary reserve established by
the North Carolina General Assembly to provide necessary and
appropriate relief and assistance from the effects of natural
disasters.
[B] The unclaimed lottery prizes are unclaimed prize revenues that
would otherwise have been used by the Education Lottery Commission to
enhance lottery prizes. Excess lottery receipts are lottery revenues
collected in June 2010 that would otherwise have been transferred into
the Education Lottery Fund to support specified Education programs.
[C] Interest from all other funds is interest earned from all non-
General Fund governmental and proprietary funds.
[D] Balance of General Fund availability is the 2010--2011 available
General Fund revenue that remains unappropriated by the 2010 NC
General Assembly.
[E] The Secretary of the NC Department of Health and Human Services
shall reduce reimbursement rates paid to service providers in the
Medicaid program (with certain exceptions as specified by the NC
General Assembly).
[F] The Savings Reserve Fund of the "Rainy Day Fund" is a statutory
reserve fund to address unanticipated events and circumstances in case
of emergencies. Although this fund has been used to address the recent
economic downturn, there is a balance remaining in this Fund.
[G] The state retirement system employer contribution rate (%of
covered salaries) was reduced from 10.51% to 9.15% for the 2010-2011
fiscal year.
[H] A one percent annualized flexibility reduction is authorized as
cuts made at the discretion of the agency head with the understanding
that the agencies are encouraged to implement all administrative and
other operating deficiencies, including the reduction of vacant
positions which do not affect public safety or staffing ratios at
State institutions, prior to the dismissal of employees.
[End of table]
Although North Carolina continued to experience significant fiscal
challenges during the fiscal year ended June 30, 2010, senior budget
officials told us the state avoided tapping into its "rainy day"
funds. These officials also told us they are seeing gradual increases
in property tax revenues. As state budget officials begin work on the
state's 2011-2013 bi-annual budget, they have projected a $3 billion
budget shortfall that will likely have to be addressed through further
budget cuts or revenue enhancements.
Recovery Act Funds Benefited Wilmington, but Did Not Prevent Budget
Cuts to Some Programs and Services:
Wilmington officials reported they received Recovery Act awards
totaling over $8.1 million for public safety, human services, energy,
and transportation programs and activities. Wilmington applied for and
received nearly $2.3 million, or 28 percent, of its Recovery Act funds
through the competitive grants process. Various federal agencies
awarded the remaining funds through their formula grants process.
Located in southeastern coastal North Carolina, Wilmington is the
state's eighth largest city with an estimated 101,350 residents, an
increase of approximately 33 percent since 2000. Wilmington's total
operating budget for fiscal year 2011 is about $140 million and its
June 2010 unemployment rate was 8.6 percent, which is below the
statewide level of 10.1 percent.
According to Wilmington officials, the combination of the city's
commitment to maintain core, critical public safety services, the
required increases in expenditures, and the projected reductions in
revenue necessitated a 0.0375 cents per $100 valuation in its property
tax, effective July 1, 2010, in order to balance its budget. Further,
in addition to initiating some cutbacks in programs and services, the
city also used about $320,000 of its fund balance to help balance its
budget. Wilmington officials chose not to initiate layoffs but froze
all hiring, including not staffing 60 vacant positions. According to
Wilmington officials, the hiring freeze was still in effect in June
2010 and future hiring will be done on a case-by-case basis.
Wilmington officials told us that the Recovery Act funds relieved some
budgetary reductions and most likely helped avert layoffs. However,
the officials noted that the additional administrative,
accountability, and reporting responsibilities required by the
Recovery Act significantly stretched staff capacity.
Wilmington Used Recovery Funds to Support a Variety of New and
Existing Priorities:
The City of Wilmington received competitive and formula grants to help
fund various priorities. For example, the COPS Hiring Recovery Program
[Footnote 32] enabled the city to hire 13 police officers who focus on
community policing activities. Since receipt of these funds, 10 of the
13 officers have completed their necessary field training and are now
serving in communities across Wilmington. Using additional Community
Development Block Grant[Footnote 33] funding under the Recovery Act,
Wilmington officials committed funds to renovate a former jail for use
as transitional housing for homeless ex-offenders re-entering the
community. The project is scheduled to start construction in September
2010. The city plans to use its $1.2 million Energy Efficiency and
Conservation Block Grant[Footnote 34] from the U.S. Department of
Energy (DOE) to develop and carry out various strategic energy studies
with the goal of identifying feasible and cost effective improvement
measures. Wilmington successfully competed for additional Recovery Act
funds through DOE's Local Energy Assurance Planning grant (LEAP)
[Footnote 35] and will receive $200,000 to hire a Sustainability
Manager for the city. Along with managing the city's energy assurance
activities, the Sustainability Manager will complete a comprehensive
planning exercise to sustain a permanent capacity for emergency energy
planning. The Sustainability Manager will also lead the city's energy
demand reduction efforts by seeking a number of innovations to
minimize the city's dependence on oil. In addition, under the Edward
Byrne Memorial Justice Assistance Grant (JAG) program[Footnote 36] the
city entered into a partnership with the New Hanover County Sheriffs
Department and used the funds to obtain needed public safety resources
and equipment such as law enforcement vehicles, crime lab supplies,
and tasers. City officials also plan to use nearly half of its $8.1
million Recovery Act funding on a bike and pedestrian trail called the
Cross City Trail. The asphalt trail will be a 20-mile off-road, multi-
use path linking key city resources and providing access to shopping,
recreational, cultural, and educational destinations. The officials
noted that the Cross City Trail supports their initiatives to provide
alternative modes of transportation and continue to become a more
environmentally sustainable community. According to city officials,
the $4 million funding from the Recovery Act will enable the city to
have the trail 75 percent complete by 2011 versus the anticipated
completion date of 2030.
City Officials Developed Plans for End of Recovery Act Funding:
According to city officials, Wilmington will use the majority of its
Recovery Act funds for one-time capital and construction related
expenditures. The officials told us that each program or category of
Recovery Act funding received by the city requires specific plans for
the eventual elimination of available Recovery Act funding. The
officials said that the plans clearly reflect program managers'
understanding that all Recovery Act funded programs and services are
temporary or "nonrecurring" expenditures. For example, Wilmington's
Police Department hired 13 officers under the COPS Hiring Recovery
Program. The department plans to assimilate the newly hired officers
onto the force as openings occur through attrition. The officials also
told us that the Cross-City Trail will be maintained by the city
through general funds.
Reporting and Accountability: North Carolina Recovery Act
Accountability Community:
North Carolina has several entities that provide oversight to ensure
the state's recipients are held accountable for the Recovery Act funds
they receive. These entities include the Office of the State Auditor
(OSA), Office of Economic Recovery and Investment (OERI), the Office
of Internal Audit (OIA), within the North Carolina Office of State
Budget and Management (OSBM), as well as local government oversight
authorities. As we reported in our May 2010 report, the state's
primary tool for ensuring accountability and oversight of federal
funds is the "Single Audit," which reports on internal controls over
financial reporting and compliance with pertinent laws and
regulations, as well as compliance with requirements applicable to
each major federal program and internal controls over compliance in
accordance with OMB circular A-133. In addition to the Single Audit,
North Carolina's oversight entities conduct a range of work related to
ensuring recipients' compliance with applicable laws and regulations.
For this report, we interviewed senior administrators with OSA, OERI,
and OIA to obtain updates on their work, since our last report, in
monitoring the use of Recovery Act funds around the state.
Office of the State Auditor:
We previously reported that in addition to its work in conducting the
Single Audit, OSA performs interim agency-specific internal control
and compliance audits for agencies receiving Recovery Act funds. The
state auditor's office told us that its single audit reports have
consistently reported findings related to subrecipient monitoring by
state agencies. OSA's recent interim agency audits have also included
findings related to subrecipient reporting. For example, as of July
2010 OSA completed an audit of the North Carolina Department of
Environment and Natural Resources (DENR) and found that the department
did not consistently perform effective monitoring procedures to ensure
that subrecipients of Recovery funds were in compliance with
requirements of the Davis-Bacon Act.[Footnote 37] OSA also conducted
an interim review of the North Carolina Department of Crime Control
and Public Safety's internal controls over two programs--Edward Byrne
Memorial Justice Assistance Program and the National Guard Military
Construction program--receiving Recovery Act funds.[Footnote 38] OSA
found deficiencies in the state's subrecipient monitoring of the
Edward Byrne Memorial Justice Assistance Program. Specifically, grant
managers did not maintain complete records of monitoring visits and
the checklists used as a monitoring tool did not address all federal
compliance requirements.
OSA officials reported that in addition to reviews of specific
agencies they are also beginning to review the efficiency of statewide
systems, particularly those used for purchasing and contracting, which
may also impact Recovery Act programs. For example, the OSA is
reviewing contract monitoring policies and procedures to improve the
efficiency and effectiveness of the state's contracting process and to
ensure proper oversight of state contracts. Due in part to a series of
contract audits conducted by OSA, the North Carolina General Assembly
recently enacted legislation to improve oversight of state contracts.
Office of Economic Recovery and Investment:
As we have previously reported, OERI was set up by the state to help
agencies track, monitor, and report on Recovery Act funds. In May
2010, we reported that OERI officials told us that the implementation
of a new software system that was intended to integrate North
Carolina's various state agency systems containing Recovery Act
funding information into an overall statewide system had experienced
delays. This system was supposed to start operating by December 2009;
instead OeRION, an acronym for Office of Economic Recovery and
Investment Oversight for North Carolina, was implemented in June 2010.
As of May 2010, $146,004 of Recovery Act funds had been used for
licensing and short term staffing to develop the application. An OERI
official reported to us that although the OeRION system went "live" in
June 2010, the office would not be able to track the weekly status of
the state's Recovery Act funds, as anticipated.[Footnote 39] Rather,
this official reported, OeRION will be primarily used for maintenance
of OERI's record of all Recovery Act awards in the state and any
corresponding reports.
In addition to tracking the use of funds, an OERI official reported to
us that the office is also working with state agencies in developing
and implementing their corrective action plans to resolve OSA findings
related to Recovery Act funds. For example, OERI issued a report to
the Office of the Governor outlining steps the North Carolina
Department of Health and Human Services (NCHHS) would make in
addressing findings in a January 2010 report, written by OSA, related
to providing timely information to subrecipients, cash management
procedures, and subrecipient monitoring.[Footnote 40] OERI officials
reported that the office has conducted similar efforts regarding OSA
findings in January 2010 reports on the Department of Commerce, which
administers the Workforce Investment Act of 1998 (WIA) and State
Energy Programs and DENR, which administers the Clean Water State
Revolving Fund and Drinking Water State Revolving Fund Recovery Act
programs. OERI officials also reported that the office will continue
to meet with the agencies with OSA findings on their Recovery Act
programs to monitor the impact of the changes made through the
corrective action plans.
As we reported in our May 2010 report, OERI issued a directive for all
recipients and subrecipients regarding the use of Recovery Act funds
for procurements of goods and services.[Footnote 41] In April 2010,
OERI issued another management directive directing North Carolina's
state agencies to ensure compliance with Recovery Act procurement
requirements and OERI's May 2009 directives. Based on our discussion
with officials, this management directive required state agencies to
design an audit program for Recovery Act projects and contracts that
includes regularly scheduled on-site visits and desk reviews. OERI's
directive also required an initial report on April 30, 2010, of state
agencies' plans, and a report every 30 days thereafter certifying that
subrecipients used a competitive process for Recovery Act purchases or
reported if an exception was used along with a statement of
justification.[Footnote 42] OERI also scheduled several technical
assistance seminars around the state to provide guidance on complying
with its directives. Since our May 2010 report, a senior OERI official
reported to us that the office has continued to conduct technical
assistance sessions around the state as well as make presentations for
administrators of Recovery Act funds during state conferences. In
addition, OERI provides a range of resources such as webinars and
checklists on its website to help agencies comply with Recovery Act
requirements and its directives related to procurement. This official
also reported that state agencies are submitting the required monthly
reports regarding progress in ensuring compliance and, as a result,
OERI has seen a more planned approach among the state's agencies in
this area.
Office of Internal Audit:
OIA provides internal audit services for eight of North Carolina's
state agencies.[Footnote 43] In addition, OIA is using some of the
Recovery Act funds allocated to OSBM to provide additional monitoring
assistance to North Carolina agencies. In September 2009, OIA received
$1.2 million from the Recovery Act State Fiscal Stabilization Fund
(SFSF) for the purposes of monitoring. These monitoring efforts
include funds to hire four additional auditors to cover the workload
associated with the risk assessments, compliance reviews, and
assessments of sub-recipient monitoring plans for Recovery Act funds.
In addition, the North Carolina State Energy Office provided funds for
one auditor through a memorandum of agreement.
Since our last report, OIA has issued one compliance review and three
risk assessments related to Recovery Act funds. In June 2010, the
office issued its findings related to its compliance review of
agencies' use of the SFSF funds.[Footnote 44] OIA found that one local
educational agency (LEA) and one charter school were out of compliance
with OERI's management directives for procurement. In addition, the
office recommended that OSBM and the two agencies overseeing the
state's institutes of higher education ensure that information on the
Recovery Act whistleblower protections and U.S. Office of Management
and Budget (OMB) guidance on referrals to inspectors general are
properly communicated to the relevant parties.[Footnote 45] As of July
2010, OIA had issued agency-specific risk assessments for Recovery Act
programs administered by the Department of Public Instruction (DPI),
DENR, and NCHHS. The risk assessments are a part of OIA's effort to
identify those Recovery Act programs that may require more attention
from OIA auditors.[Footnote 46] Based on discussions with relevant
program and audit staff and prior audit findings, OIA assessed risks
for 7 DPI programs, 11 DENR programs, and 35 NCHHS programs receiving
Recovery Act funds.
Although OIA has continued to conduct audits and risk assessments of
Recovery Act programs, OIA's Assistant State Budget Officer stated
that there have been challenges to the office's ability to carryout
its auditing responsibilities since our last report. Specifically, OIA
officials told us, the office has lost 2 of the 5 auditors it hired to
assist with its planned monitoring. Three agencies--NCHHS, DPI, and
DENR--were each assigned one of 5 newly hired auditors. The fourth
auditor was responsible for conducting audits of the remaining State
agencies receiving Recovery Act funds. The fifth auditor, hired to
perform audits on the State Energy Program and Weatherization
Assistance Program, resigned in March 2010, as we reported in our May
2010 report. An OIA official said that the auditor that was assigned
to DPI resigned 2 months after being hired. OIA transferred the
auditor assigned to DENR to the Department of Commerce. These changes
left OIA with 3 auditors to conduct its monitoring work. An OIA
official reported that the office permanently lost the auditing
position it acquired through an agreement with the North Carolina
State Energy Office because administrators decided to use the funds
for that position in a different manner. This OIA official said that
the office is in the process of hiring an auditor for DPI, using
Recovery Act funds, and will use two positions funded by the North
Carolina Department of Administration to monitor state agencies'
compliance with procurement rules and regulations.
Office of Auditor General's Single Audits Provide Oversight of Some
Recovery Act Funds:
According to data from the Federal Audit Clearinghouse, which is
responsible for receiving and distributing single audit results, it
received North Carolina's Single Audit reporting package for the year
ending June 30, 2009, on March 30, 2010. This was the first Single
Audit for North Carolina that includes Recovery Act programs, and it
included only 4 months of Recovery Act expenditures. North Carolina's
Single Audit report for fiscal year 2009 identified 160 significant
internal control deficiencies related to compliance with federal
program requirements, of which 36 were classified as material
weaknesses. Some of these material weaknesses and significant
deficiencies occurred in programs that included Recovery Act funds.
Agency Comments on This Summary:
We provided a draft of all materials related to Head Start and Early
Head Start to OHS and HHS for comment, but they did not provide
comments in time for us to consider them in the report. We also
verified factual information with the local Head Start expansion
programs we visited. In addition, we provided a draft copy of this
appendix to the North Carolina Office of Economic Recovery and
Investment, the North Carolina State Auditor's Office, the North
Carolina Office of State Budget and Management, and other relevant
state offices for review and comment. We also provided excerpts of the
draft to other entities covered in this appendix for review and
comment. Officials of the Office of Economic Recovery and Investment,
State Auditor's Office, and the Office of Internal Audit within the
Office of State Budget and Management provided clarifying and
technical comments which we incorporated into the report as
appropriate. In addition, several other entities provided clarifying
and technical comments, which we have also incorporated as appropriate.
GAO Contacts:
Cornelia M. Ashby, (202) 512-8403 or AshbyC@gao.gov:
Paula M. Rascona, (202) 512-9816, or RasconaP@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Laura Acosta, Sandra Baxter,
Sarah Jane Brady, Bonnie Derby, Bryon Gordon, Sara S. Kelly, Tahra
Nichols, Anthony Patterson, Connie Sawyer, and Sandra Silzer made
major contributions to this report.
[End of section]
Appendix XIV Footnotes:
[1] Pub. L. No 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Recovery Act, 123 Stat.178-79 (2009). For grantees in North
Carolina, the first year of their Early Head Start expansion grant
awards generally began on December 1, 2010, and ends on September 29,
2010. The second year of funding begins on September 30, 2010, and
ends September 29, 2011.
[3] This amount represents an estimate since an OHS review of first-
year spending and future needs may modify the second-year funding
amounts for individual grantees.
[4] We randomly chose our sample from files on all children the
grantees reported were enrolled in the Early Head Start program funded
under the Recovery Act in the month of April 2010. For GCD, we
reviewed 23 of 80 files. For JLHCA, we reviewed 10 of 31 files. For
documentation of health screenings, we limited our review to
documentation of sensory (vision and hearing), motor, and
developmental screenings.
[5] Of these 104 slots, 80 are for infants and toddlers and 24 are for
pregnant women participating in GCD's nurse partnership program.
[6] According to a GCD official, the organization's attempts to
acquire two facilities prior to selecting the Arlington center failed.
These officials told us that a local school board with approval
authority over the first center GCD sought to purchase voted against
selling the facility and concerns over the terms of a lease
contributed to the failure of acquiring the second facility.
[7] Providing services through a home-based program is an approved
service delivery method for the Early Head Start program. 45 C.F.R. §
1306.33. According to an OHS tip sheet about Early Head Start, the
home-based service delivery method involves Early Head Start staff
visiting a family's home every week to support child development and
to nurture the parent-child relationship. Twice a month, the program
offers opportunities for parents and children to come together as a
group for additional learning, discussion, and social activity.
[8] At the time of our review in June 2010, the estimated amount of
unspent funds was $344,142 which included salary costs for a nurse for
the component of GCD's program for pregnant women. GCD officials said
that they were recruiting pregnant women but could not start the
program until they hired a nurse. These officials reported challenges
in meeting the salary demands of experienced nurses in the area. In
July 2010, a GCD official reported having hired a nurse and said that
the nurse would begin providing services in August 2010. A GCD
official said that the costs associated with hiring this nurse would
reduce the amount of unspent funds they reported at the time of our
visit by about $7,320.
[9] Regional OHS officials told us that OHS approved of GCD's use of
the home-based option for the Recovery Act program because, in part,
the grantee has had experience in providing home-based services.
[10] Grantees must maintain on file documentation that children
enrolled received health screening for developmental, sensory, and
behavioral concerns within 45 days of entering the program and that
income eligibility was verified. 45 C.F.R. §1304.20(b)(1)
and1305.4(e). OHS also requires grantees to submit enrollment reports
on a monthly basis, and auditors compare on-site enrollment data with
these reports during program audits.
[11] GCD officials reported that the inclusion of the following
documents constituted enrollment: arrival and departure agreements;
attendance agreement; health history (filled out by parents);
nutrition assessment; Sudden Infant Death Syndrome (SIDS) policy and
oral health certification; Child & Adult Care Food Program (CACFP)
form; screening consent and records; and signed notice of privacy
practices.
[12] Enrollment is defined by regulation as official acceptance of a
family by a program and completion of all procedures necessary for a
child and family to begin receiving services. 45 C.F.R.§1305.2(b). GCD
officials said that enrollment is, in part, designated by three
colored folders that contain documents related to income eligibility
(a red folder), required health screenings (a yellow folder), and
education-related information (a blue folder), which are all necessary
for enrollment. They told us that children who were terminated from
the program do not have all three folders in their file.
[13] Grantees are required to offer parents opportunities to develop
and implement individualized family partnership agreements that
describe family goals, responsibilities, timetables and strategies for
achieving these goals as well as progress in achieving them. 45
C.F.R.§1304.40(a)(2). In home-based program options, this agreement
must include the above information as well as the specific roles of
parents in home visits and group socialization activities. The GCD
home visitation agreement we reviewed included such topics as
attendance, frequency of home visits, procedures for absences, and
participation in social activities.
[14] According to JLHCA officials, 60 of the 80 slots are reserved for
infants and toddlers and 20 of the slots are reserved for pregnant
women.
[15] JLHCA officials also said that they purchased a facility in Lee
County using their non-federal funds. They are using funds from their
Recovery Act start-up budget to lease the facilities used for Early
Head Start services in Johnston and Harnett counties.
[16] OHS provided some grantees, such as Guilford Child Development,
with Recovery Act funds specifically for the purpose of construction
of facilities in addition to their start-up funds.
[17] A JLHCA official reported that, in total, the organization has
funded 18 jobs since receiving Early Head Start Recovery Act funds.
[18] An obligation is a definite commitment that creates a legal
liability of the government for the payment of goods and services
ordered or received, or a legal duty on the part of the United States
that could mature into a legal liability by virtue of actions on the
part of the other party beyond the control of the United States.
Payment may be made immediately or in the future. Drawdowns occur
after a grant award has been made and the recipient requests the
transfer of funds to a grantee's account for its immediate cash
program needs.
[19] The Executive Director was subsequently dismissed by the BHA
board. On January 2010 she was charged in Carteret County District
Court of the State of North Carolina with embezzlement of BHA funds
and corporate malfeasance. The case is currently pending.
[20] The fiscal year 2006, 2007, and 2008 BHA financial statement
audits were all performed by the same auditor.
[21] Generally accepted government auditing standards are issued by
the Comptroller General of the United States and are published in a
guide, commonly referred to as the "Yellow Book." The citation for
this guide is GAO, Government Auditing Standards, [hyperlink,
http://www.gao.gov/products/GAO-07-731G] (Washington, D.C.: July 2007).
[22] As a Certified Public Accountant, the auditor must comply with
AICPA standards.
[23] GAGAS paragraph 4.09 states that auditors should evaluate whether
the audit entity has taken appropriate corrective action to address
findings and recommendations from previous engagements that could have
a material effect on the financial statements.
[24] The former Executive Director pled guilty on May 6, 2008, to one
count of employee larceny and 16 counts of embezzlement.
[25] This employee later became the Manager of Administration.
[26] [hyperlink, http://www.gao.gov/products/GAO-07-731G].
[27] [hyperlink, http://www.gao.gov/products/GAO-07-731G].
[28] The interim executive director is a board member and he is not
interested in the permanent executive director position.
[29] Remote reviews include examination of contracts when 25 percent
of grants have been drawn down, procurement policies and amendments,
grant initiations, annual financial statements, and work items
included in the 5 year plan.
[30] North Carolina's legislature operates on a bi-annual budgeting
calendar. At the conclusion of the first year of funding for the two-
year period, legislators review and revise planned spending for the
upcoming year of the budget cycle.
[31] The Recovery Act initially provided eligible states with an
increased FMAP for 27 months from October 1, 2008, to December 31,
2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. On August 10, 2010 federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[32] The COPS Hiring Recovery Program (CHRP) is a competitive grant
program designed to address the full-time sworn officer needs of
state, local, and tribal law enforcement agencies nationwide. CHRP
provides funding directly to law enforcement agencies to hire new
and/or rehire career law enforcement officers in an effort to create
and preserve jobs and to increase their community policing capacity
and crime prevention efforts.
[33] The Community Development Block Grant (CDBG) program enables
local governments to undertake a wide range of activities intended to
create suitable living environments, provide decent affordable housing
and create economic opportunities, primarily for persons of low and
moderate income.
[34] The Recovery Act's Energy Efficiency and Conservation Block Grant
(EECBG) Program seeks to deploy the cheapest, cleanest, and most
reliable energy technologies across the country. It is intended to
assist U.S. cities, counties, states, territories, and Indian tribes
to develop, promote, implement, and manage energy efficiency and
conservation projects and programs designed to, among other efforts,
reduce fossil fuel emissions and improve energy efficiency in the
transportation, building, and other appropriate sectors.
[35] LEAP aims to facilitate recovery from disruptions to the energy
supply and enhance reliability and quicker repairs following power
outages. This initiative also aims to create jobs at the local level
and allow cities to have well-developed, standardized energy assurance
and resiliency plans that they can rely on during energy emergencies
and supply disruptions. City governments will address energy supply
disruptions risks and vulnerabilities in their plans to lessen the
devastating impact that such incidents have on their economy and the
health and safety of citizens.
[36] The JAG program, administered by the Bureau of Justice Assistance
(BJA), is the leading source of federal justice funding to state and
local jurisdictions. The JAG program provides states, tribes, and
local governments with funding to support a range of program areas,
including law enforcement, prosecution and court, prevention and
education, corrections, community corrections, drug treatment and
enforcement, planning, evaluation, and technology improvement, and
crime victim and witness initiatives.
[37] OSA's review included an audit of three local governments. In the
city of Conover, OSA found no instances of noncompliance or other
matters that are required to be reported under Government Auditing
Standards. In Pitt County, OSA found that the county did not collect
certified payrolls from all subcontractors, as required by the Davis-
Bacon provision of the Recovery Act, nor did they verify the job
classification and pay rate of an interviewed employee. Finally, in
the town of Kure Beach, OSA found that the town did not conduct
interviews of employees from each contract and subcontract performed
or collect certified payrolls from all subcontractors as required by
the Davis-Bacon provision of the Recovery Act.
[38] State of North Carolina Office of the State Auditor. Department
of Crime Control and Public Safety: Results of Audit Procedures
Applied to the Design of Internal Control over Compliance for Selected
Programs Awarded American Recovery and Reinvestment Funds for the
Years ended June 30, 2009 and June 30, 2010 (North Carolina: Office of
the State Auditor), 4.
[39] As we reported in our May 2010 report, this weekly report is
known as the Weekly Funding and Disbursement Report and it is prepared
using the weekly reports of state agencies.
[40] This report included 12 programs receiving Recovery Act funds,
including Medicaid and Community Services Block Grant.
[41] OERI Management Directives 3 and 3(b) (May 2009 and January 2010)
"Contract Provisions for the Procurement of Goods, Services, and
Construction Projects Including Design Services and Internal
Procurement Directives."
[42] OERI Management Directive 8, "ARRA Compliance and Competition
Management" (April 2010).
[43] These agencies are, the Department of Administration; (2) North
Carolina Department of Commerce (NCDOC); (3) OSA; (4) Department of
Labor; (5) Community Colleges Central Office; (6) OSBM; (7) Governor's
Office; and (8) Wildlife Resource Commission. According to OIA's
Assistant State Budget Officer/Audit Director, other state agencies
have their own Internal Audit office.
[44] According to OIA's report, the purpose of the audit was to
determine if the agency's SFSF transactions (both fiscal and
performance) comply with applicable state and federal laws, rules, and
regulations in the areas of (1) funding expenditures (2) cash
management, and (3) data quality and performance reporting. The report
covered the time period of May 2009 through January 2010 for the North
Carolina Department of Public Instruction and May 2009 through
December 2009 for all other agencies.
[45] State of North Carolina Office of Internal Audit. Memorandum:
ARRA-State Fiscal Stabilization Fund Compliance (North Carolina:
Office of the Internal Audit), 1. For the whistleblower protections in
the Recovery Act, see Recovery Act, div. A, §1553.
[46] According to an OSBM official, OIA conducted a prior risk
assessment to determine in which agencies its auditors would be placed.
[End of Appendix XIV]
Appendix XV: Ohio:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009[Footnote 1]
(Recovery Act) spending in Ohio. The full report on all of our work,
which covers 16 states and the District of Columbia, is available at
[hyperlink, http://www.gao.gov/recovery].
What We Did:
To continue our ongoing analysis of the use of the Recovery Act funds
in Ohio, we updated information on the U.S. Department of
Transportation's Highway Infrastructure Investment Program and the
U.S. Department of Energy's Home Weatherization Assistance Program. We
also continued our review of two programs that provide capital
investments in low income housing tax credit projects--the Tax Credit
Assistance Program administered by the U.S. Department of Housing and
Urban Development (HUD) and the Section 1602 Tax Credit Exchange
Program administered by the U.S. Department of the Treasury, that we
previously reviewed in our May 2010 report. We also collected
information on one program that we have not covered in the past, the
Early Head Start Program, administered by the U.S. Department of
Health and Human Services (HHS). For descriptions and requirements of
the programs we covered, see appendix XVIII of GAO-10-1000SP.
We continued to gather information about the state's economic
condition and met with officials from one local government --the City
of Cincinnati --that we had visited for our December 2009 report. We
also contacted officials from oversight entities in Ohio responsible
for monitoring Recovery Act funds to discuss their most recent,
ongoing, and planned audit results; as well as Ohio's participation in
the Office of Management and Budget's (OMB) Single Audit pilot program.
What We Found:
Following are highlights of our review:
* Early Head Start Program. The Recovery Act provided funding for the
expansion of Early Head Start programs that afford comprehensive early
childhood development services to low-income children from birth to 3
years old. The Office of Head Start awarded approximately $22.7
million in Recovery Act funds to grantees in the state of Ohio to
provide services to an additional 2,158 children. We visited three
program grantees to see how the Recovery Act funds are being used and
found that some grantees have encountered challenges, such as
obtaining facility space, recruiting income-eligible families into the
program, and concerns with service delivery, as they get their
programs up and running.
* Low Income Housing Tax Credit programs. Ohio received about $83.5
million in Tax Credit Assistance Program funds and approximately
$118.1 million in Section 1602 Tax Credit Exchange Program funds. As
of July 26, 2010, the state had committed all but $1.6 million of the
funding from the two programs. OHFA has disbursed $39.5 million (about
20 percent) for 80 projects to support the construction of nearly
4,000 tax credit units. The state plans to commit the remainder of its
funds during August 2010 and expects to meet the Recovery Act
deadlines for disbursement of the funds during the next 2 years.
* State and local government use of Recovery Act funds. In Ohio, the
state and City of Cincinnati continue to feel the effects of the
economic downturn and reduced revenues. Ohio has received about $7.9
billion in Recovery Act funds as of August 1, 2010, but the state
still faces budget challenges as state tax revenues remain
significantly below fiscal year 2008 levels. We visited the City of
Cincinnati again and found they continue to use Recovery Act funds to
provide additional services and save jobs, but will need to address a
$50.4 million structural budget deficit during the next fiscal year.
Recent Recovery Act awards will allow the city to build and
rehabilitate rental housing, invest in energy-efficiency initiatives,
improve services, and save nursing jobs.
* Accountability. There are a number of state entities identified as
having responsibility for monitoring Recovery Act-funded projects in
Ohio, namely the State Audit Committee, the Office of Internal Audit,
the Auditor of State, and the state-appointed Deputy Inspector General
for Recovery Act funds. As previously reported, these entities work in
conjunction with one another to monitor Recovery Act-funded projects.
In addition, Ohio participated in OMB's Single Audit pilot program and
according to state officials will be participating in the next phase
of the pilot program.
* Highway Infrastructure Investment Program. As of August 24, 2010,
the Ohio Department of Transportation (ODOT) had awarded contracts
worth an estimated $930 million for 385 out of 426 Recovery Act funded
projects. As previously reported, Ohio continues to award contracts an
average of 10 percent below original cost estimates and as a result,
has been able to fund 89 more projects than originally planned. ODOT
officials also said the state anticipates meeting the Recovery Act's
maintenance-of-effort requirement to maintain the level of spending
for the types of transportation projects funded by the Recovery Act
that it had planned to spend the day the Recovery Act was enacted.
* Home Weatherization Assistance Program. In our December 2009 report,
we reviewed three grantees and raised a number of concerns about how
Recovery Act funds were being used to weatherize homes and concluded
that real-time monitoring and early assessments of grantees'
activities could help ensure program success. In response, the Ohio
Department of Development (ODOD) hired additional staff and developed
a monitoring program designed to ensure that its grantees were in
compliance with program requirements set forth in the state plan. ODOD
officials said that the reviews completed as part of this monitoring
program helped keep the state's program on track and ensure its
grantees adhered to the program requirements.
* State Fiscal Stabilization Fund. In our May 2010 report, we
identified weaknesses in how the Ohio Board of Regents (BOR) monitored
State Fiscal Stabilization Fund (SFSF) monies allocated to
institutions of higher education (IHE). In response to our findings,
BOR submitted an amended monitoring plan to the U.S. Department of
Education. The revised monitoring plan requires IHEs to identify
quarterly and cumulative SFSF receipts and expenditures and attest
that their institution used SFSF funds only for allowable educational
and general expenditures. According to the plan, if BOR discovers any
indications of noncompliance, it will follow up with additional
reviews, which may include site visits to the IHEs.
Despite Some Challenges, Early Head Start Grantees Are Beginning to
Provide Services Funded by the Recovery Act:
The Early Head Start program, administered by the Office of Head Start
(OHS), part of the Administration for Children and Families within
HHS, provides comprehensive early childhood development services to
low-income children from birth to 3 years old, including educational,
health, nutritional, social, and other services, intended to promote
the school readiness of low-income children. Services can be provided
either through center-based care or through home-based care, or a
combination of both. In home-based care, children and families receive
weekly visits from a home visitor. Home visits are required to last a
minimum of 90 minutes, and home visitors must complete a minimum of 48
visits a year.[Footnote 2] In addition, pregnant women are eligible to
receive Early Head Start services.
The Recovery Act provided an additional $2.1 billion in funding for
Head Start, including almost $1.2 billion for the expansion of Early
Head Start programs.[Footnote 3] Federal Head Start funds are provided
directly to local grantees, rather than through states. OHS awarded
$22,722,446 in Recovery Act funds to grantees in Ohio, to provide
services to an additional 2,158 children.
To see how Recovery Act funds are being used to support Early Head
Start expansion efforts in Ohio, we visited three grantees in the
state. We selected these grantees, in part, based on the size of the
grant award, whether the grantee planned to use grant funds to
purchase or renovate facilities for Early Head Start expansion, and
whether the grantee served a rural or urban population. Table 1
provides details on Early Head Start grantees included in our review.
Table 1: Grantees Included in Our Review:
Grantee: Miami Valley Child Development Centers, Inc.;
Funds designated for expansion (dollars): $5,644,519;
Facility purchase or renovation: n/a;
Population served: Urban and rural;
Number of children served: 286.
Grantee: Child Development Council of Franklin County;
Funds designated for expansion (dollars): $2,230,342;
Facility purchase or renovation: Purchase and major renovation;
Population served: Urban;
Number of children served: 60.
Grantee: Pickaway County Community Action Organization, Inc.;
Funds designated for expansion (dollars): $1,537,378;
Facility purchase or renovation: Minor renovation;
Population served: Rural;
Number of children served: 72.
Source: GAO analysis of Office of Head Start and Ohio Department of
Development data.
Note: n/a = not applicable.
[End of table]
Although grantees were awarded expansion funds for 2 years, the amount
awarded differs in each program year. In the first program year, OHS
awarded funds to grantees for start-up costs, operations, and training
and technical assistance (T/TA). Because funds were not made available
to grantees until late November or December 2009, OHS adjusted the
amount of funds awarded to grantees for operations to account for a
shortened program year.[Footnote 4] In the second program year, the
grantees will receive funds for operations and T/TA only. The
operating funds will cover the entire 12-month period. Table 2 shows
the amount of funding awarded, by category, in each program year for
the grantees included in our review.
Table 2: Funding Details for Grantees in Review:
Grantee: Miami Valley Child Development Centers, Inc.;
Start-up funding: $119,409;
First-year training and technical assistance (T/TA) funding: $174,336;
First-year operations funding: $2,333,677;
Second-year training and technical assistance (T/TA) funding[Shaded
area]: $143,671;
Second-year operations funding[Shaded area]: $2,873,426;
Total Recovery Act funding awarded: $5,644,519.
Grantee: Child Development Council of Franklin County;
Start-up funding: $593,000;
First-year training and technical assistance (T/TA) funding: $36,674;
First-year operations funding: $666,945;
Second-year training and technical assistance (T/TA) funding[Shaded
area]: $44,463;
Second-year operations funding[Shaded area]: $889,260;
Total Recovery Act funding awarded: $2,230,342.
Grantee: Pickaway County Community Action Organization, Inc.;
Start-up funding: $143,454;
First-year training and technical assistance (T/TA) funding: $53,037;
First-year operations funding: $520,733;
Second-year training and technical assistance (T/TA) funding[Shaded
area]: $39,055;
Second-year operations funding[Shaded area]: $781,099;
Total Recovery Act funding awarded: $1,537,378. Source: GAO
presentation of OHS data.
Note: The shaded area represents funds that have not yet been awarded
and are subject to OHS review.
[End of table]
Grantees We Visited Are Reaching Full Enrollment but Providing Certain
Services Remains a Challenge:
All three grantees we visited have reached full enrollment. However,
they did not document, in some cases, that certain services had been
delivered. To determine whether certain Early Head Start services are
being provided to children enrolled in the program, we reviewed a
random sample[Footnote 5] of files at each grantee, interviewed Early
Head Start staff at each grantee, visited center-based facilities, and
interviewed staff who conduct home visits. During our review, we
checked to see if all necessary enrollment forms were included in the
file as well as reviewed attendance records of children in center-
based care and home visitors' logs for children in home-based care. We
also reviewed the files to see if children are receiving medical and
dental screenings, as required by Head Start regulation[Footnote 6]s.
In addition, we reviewed the policies for ensuring families met Early
Head Start income-eligibility requirements and verified, during our
file reviews, that income documentation had been reviewed.
In almost all cases--69 of 71 files we reviewed--we found that the
files contained the necessary paperwork to document whether children
were enrolled in Early Head Start. At the time of our file review, all
71 children had entered the program, defined as either being in
attendance at a center (for the center-based option) or having
received the first visit from a home visitor (for the home-based
option). However, we found that the files did not always document that
children had received their required hearing, vision, developmental,
and motor screenings. We found that screenings exceeded the 45-day
time frame in 29 of the files we reviewed.[Footnote 7] In addition, we
found that of the 32 files of children who had entered Early Head
Start at least 90 days prior to our review, 8 were missing the
required documentation to show that the child was up-to-date on a
schedule of primary and preventative care. Officials at two grantees
we visited told us that staff are required to monitor whether children
have received the required screenings and track the number of days
that have passed from enrollment so that they do not exceed the
required time frames.
Almost all of the files we reviewed contained the appropriate income-
eligibility documentation; however, verifying income eligibility
remains a challenge. Specifically, grantee officials said they lacked
guidance from OHS on how, or whether, to confirm eligibility when a
family declares no income. We found that in 9 of the 71 files we
reviewed, the family declared no income for the previous 12 months.
Grantee officials and some of the home visitors said they have to rely
on the families to provide documentation for all their income. One
home visitor told us that she has encountered situations where
families are initially reluctant to provide income information.
Home visitors from all three grantees described other challenges they
face in providing services to children enrolled in home-based care.
For example, home visitors attributed difficulty in completing home
visits to parents' appointment cancellations. One home visitor told us
that some parents canceled appointments because visits weren't
convenient to their schedule. Another home visitor told us that
cancellations occur because the family is involved with other programs
that have a home visit component and are feeling overwhelmed by the
number of home visits they are receiving. Similarly, home visitors
told us that attendance at socialization activities is low, despite
numerous attempts to increase attendance.[Footnote 8] Lastly, grantee
officials told us that they face difficulties in getting oral exams
completed for the children. Grantee officials told us that many
physicians will not do an oral screening as part of a child's physical
and that some dentists will refuse to see an infant because they do
not yet have teeth.
Grantees We Visited Encountered Some Challenges at Startup That Will
Require Continued Monitoring:
The three grantees we visited encountered some challenges getting
their expansion programs started. Before they could begin serving
children, one of the grantees needed to procure and renovate
facilities for classrooms or administrative offices and another
struggled to recruit income-eligible families to participate in the
program. In addition, one grantee has identified problems with one of
the contractors that provide its home-based services that raise
concerns about the delivery of services.
At one grantee, officials have encountered challenges obtaining
facility space for the expansion of its Early Head Start program.
Although this grantee had planned to provide center-based care, it
could not provide those services until it purchased and renovated a
new facility and renovated existing facilities. As a result of delays
in providing OHS with the certification required to approve the
purchase of this building, grantee officials did not have access to
facilities on the planned schedule. Grantee officials spent the month
of May (6 months after their grant was approved), enrolling children
in a home-based program and began providing those services on June 1,
2010. Grantee officials said they will move those children to center-
based care as soon as their new facility is ready.
At another grantee, officials told us that recruiting income-eligible
families for home-based services had been a challenge. Although
officials told us its community assessment identified a need for Early
Head Start in their service area, staff with this grantee said that
recruitment had been a challenge. Specifically, staff told us that in
addition to recruiting at other social service agencies in the
community, they had to spend time at grocery stores, thrift stores,
and laundry facilities recruiting eligible families for the program.
In one case, one of the children enrolled in the program is the
daughter of a home visitor. In addition, this grantee has also
enrolled the maximum number of over-income families, in order to reach
full enrollment.[Footnote 9]
Moreover, in order to fill potential vacancies, Head Start grantees
are required to maintain a waiting list.[Footnote 10] However, the
Early Head Start Director at this grantee told us that its waiting
list did not actually reflect children waiting to receive center-based
Early Head Start services. Of the five families on its waiting list,
as of June 22, 2010, three had been enrolled but left the program.
This official told us that the families had not been in contact with
the grantee, but if they were to come back for services they would be
already on the waiting list.
Finally, in order to get its program started as quickly as possible,
one grantee awarded contracts to three different organizations in its
service area to operate its home-based program. The three
organizations had experience providing services for a state-funded
home visit program--the Help Me Grow program. Grantee officials told
us that in addition to allowing them to get their program up and
running quickly, awarding contracts for these services with these
organizations helped to preserve services to children and preserve
jobs in the community as the state had planned budget cuts. However,
the grantee has identified problems with its contactor-based home
visit program.
Grantee officials told us they recently had to develop an action plan
for service improvement with one of the contractors after they found
that the contractor was not ensuring that home visitors were
documenting health screenings. Grantee officials told us that some
home visitors from this contractor were struggling with how to be an
Early Head Start home visitor. For example, officials told us that
some home visitors have had a hard time adjusting to how to document
the services provided during the home visit. Home visitors agreed that
they had trouble filling out the paperwork, telling us that although
their prior experience with the Help Me Grow program provided them
with the ability to connect with families during home visits, they
were unsure how to comply with the paperwork requirements of Early
Head Start, even after receiving training from the grantee. Moreover,
at this contractor, some children are being identified as dual
enrolled in both Early Head Start and Help Me Grow programs. Officials
noted that some children must be dual-enrolled, but an official from
this grantee acknowledge that this dual enrollment could make it
difficult to determine which program is paying for which services.
Home visitors from this contractor stated that when providing services
for these children, they are unable to distinguish if they are meeting
the requirements for Early Head Start or Help Me Grow. Officials from
this grantee told us that they have not had similar concerns with
services being provided by the other two contractors, and attribute
this to the contractors no longer being involved with the Help Me Grow
program. Officials told us that home visitors at the other contractors
could focus on being only Early Head Start home visitors. Grantee
officials told us they were in negotiations for the contracts spanning
the next program year to require a separation of services to ensure
that a true Early Head Start model is being implemented.
Grantees We Visited Face Challenges in Meeting Obligation Deadline:
OHS officials told us that grantees will forfeit first-year program
funds they have not obligated by September 29, 2010, unless grantees
obtain OHS approval to carry over funds into the next program year.
Officials at the three grantees we visited told us that they will face
challenges meeting this deadline. At two of the grantees, officials
told us that they do not expect to obligate 100 percent of funds by
September 29 although one grantee noted that they plan to have less
than 3 percent of the allocated funding remaining at the end of fiscal
year 2010. Officials at the other grantee told us that although they
anticipate meeting this deadline, some of the funds it obligates will
not be spent until the next grant year. OHS has not yet decided if
grantees will be able to apply for a waiver to carry-over funds from
the first program year into the second-program year. Figure 1 shows
the amount of first year funds each grantee has left to expend as of
July 31, 2010.
Figure 1: Amount of Funds Expended, as of July 31, 2010, by Grantee:
[Refer to PDF for image: vertical bar graph]
Grantee: Miami Valley Child Development Centers, Inc.
Amount to expend: $$1,076,413;
Expended to date: $1,551,009.
Grantee: Pickaway County Community Action Organization, Inc.
Amount to expend: $176,849;
Expended to date: $540,375.
Grantee: Child Development Council of Franklin County;
Amount to expend: $829,731;
Expended to date: $403,888.
Source: GAO presentation of grantee data.
[End of figure]
Officials at two of the grantees said that delays in receiving the
grant awards from OHS resulted in challenges in obligating their first-
year funds. OHS regional office officials told us that OHS anticipated
making funding decisions in the fall of 2009 but those decisions were
not made until December. Even though the awards were adjusted to
account for a 10-month program year, grantee officials said they would
have liked more time to plan for spending first-year program funds.
Officials with one grantee said they would purchase more-expensive
playground equipment so that all its funds are obligated before the
deadline. This grantee also expressed concerns that it might not
obligate all its T/TA funds by September 29, 2010. Specifically,
officials told us that they planned to obligate $16,000 for eight
persons to attend an Early Head Start conference in October 2010.
However, they were told by OHS regional office staff that they could
not do so unless the conference's registration deadline was before
September 29, 2010. Because the registration deadline was after
September 29, they would have to use second-year T/TA funds to pay the
October 2010 conference fees.
Grantees We Visited Acknowledge Errors in Recipient Reporting but Plan
to Issue Corrections:
Officials from all three grantees expressed some concerns with the
recipient-reporting process but said they could reach out to program
staff in OHS' regional office for assistance. A common concern voiced
by officials was that the guidance was initially confusing and they
had trouble determining what data to put into the federal reporting
system. For example, none of the grantees reported hours worked by
contractors that were funded with Recovery Act funds and were not
aware that they needed to do so. In response to our questions, grantee
officials contacted their regional program representatives and
confirmed they needed to do so. Grantee officials told us that they
would make corrections to their first-quarter of calendar year 2010
recipient report to include those hours worked by contract employees
and would include those hours in future recipient reports.
Ohio Has Allocated and Drawn Down Recovery Act-Provided Funds for a
Variety of Affordable Housing Projects:
The Recovery Act established two funding programs that provide capital
investments in Low-income Housing Tax Credit (LIHTC) projects: (1) the
Tax Credit Assistance Program (TCAP) administered by HUD and (2) the
Section 1602 Tax Credit Exchange Program (Section 1602 Program)
administered by the U.S. Department of Treasury (Treasury).[Footnote
11] Before the credit market was disrupted in 2008, the LIHTC program
provided substantial financing in the form of third-party equity (tax
credit equity) for affordable rental housing units (tax credit unit).
[Footnote 12] As the demand for tax credits declined, so did the
prices private investors were willing to pay for them, which created
funding gaps in projects that had received tax credit allocations in
2007 and 2008. TCAP and the Section 1602 Program were designed to fill
financing gaps in planned LIHTC projects and jump-start stalled
projects. Ohio was allocated approximately $201.6 million for these
two programs with the Ohio Housing Finance Agency (OHFA) responsible
for administering the funding.
OHFA Has Committed Nearly All TCAP and Section 1602 Program Funds and
Expects to Meet HUD and Treasury Disbursement Deadlines:
According to information provided by OHFA, as of July 26, 2010, the
agency has committed all its available TCAP funding (approximately
$83.5 million) and $116.6 million (out of $118.1 million available) in
Section 1602 Program funds to support the construction of 80 LIHTC
projects. An OHFA official said they will commit the remaining $1.5
million in Section 1602 Program funding to one additional project
during August 2010. These projects are expected to produce nearly
4,000 tax credit units that will benefit seniors, families, and
special-needs populations. Ohio officials provided documentation
showing that as of July 2010, construction had begun on 45 of the
projects, and owners for 31 of the projects have begun drawing down
Recovery Act funding. According to data from HUD and Treasury, as of
July 31, 2010, OHFA had disbursed $15.6 million in TCAP funds and
$23.9 million in Section 1602 Program funds to these projects. While
less than half of the projects have begun drawing down funds and more
than 25 have not begun construction, OHFA officials stated that they
believe all projects where they awarded Recovery Act funds will meet
the TCAP and Section 1602 Program deadlines for committing and
spending this funding.[Footnote 13]
We interviewed officials from OHFA and the Ohio Capital Corporation
for Housing (OCCH), a leading syndicator of LIHTC projects in Ohio.
[Footnote 14] We reviewed documentation on five projects that are
being provided TCAP and Section 1602 Program funding by OHFA, met with
officials from three of the projects,[Footnote 15] and conducted site
visits at these three project locations as well. See table 3 for
information on each of these projects and figure 2 for pictures of the
three project locations visited. The project owners of the three
projects that we visited have various amounts of LIHTC program
experience and as a group reported completing more than 60 different
LIHTC projects during the past 20 years.
Table 3: Selected TCAP and Section 1602 Program Projects in Ohio:
Project name, location: Mount Vernon Senior Village, Mt Vernon, Ohio;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $3,046,522;
Percentage of Recovery Act funds disbursed: 3%;
Recovery Act funds as percent of total project costs: 76%;
Number of housing units (tax credit units/total units): 28/28;
Project description: Rural, new construction, housing for seniors;
Expected placed in service date[A]: July 2011[B].
Project name, location: Heart of Ohio Homes, Centerburg, Ohio;
Type of funding: TCAP, Section 1602 Program;
Recovery Act funds committed: 2,000,000 $1,567,928;
Percentage of Recovery Act funds disbursed: 34%;
Recovery Act funds as percent of total project costs: 71%;
Number of housing units (tax credit units/total units): 25/25;
Project description: Rural, new construction, housing for families;
Expected placed in service date[A]: December 2010.
Project name, location: East End Twin Towers Crossing Dayton, Ohio;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $2,688,178;
Percentage of Recovery Act funds disbursed: 100%;
Recovery Act funds as percent of total project costs: 31%;
Number of housing units (tax credit units/total units): 40/40;
Project description: Urban, new construction, housing for families;
Expected placed in service date[A]: June 2010.
Project name, location: Honeybrook Greene Utica, Ohio;
Type of funding: TCAP;
Recovery Act funds committed: $1,449,170;
Percentage of Recovery Act funds disbursed: 68%;
Recovery Act funds as percent of total project costs: 19%;
Number of housing units (tax credit units/total units): 36/36;
Project description: Rural, new construction, housing for families;
Expected placed in service date[A]: December 2010.
Project name, location: Barnett Plaza, Columbus, Ohio;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $927,792;
Percentage of Recovery Act funds disbursed: 46%;
Recovery Act funds as percent of total project costs: 14%;
Number of housing units (tax credit units/total units): 50/50;
Project description: Urban, rehabilitation, housing for seniors;
Expected placed in service date[A]: December 2010.
Source: GAO analysis of OHFA data.
[A] The placed in service date for a new or existing building used as
residential rental property is the date on which the building is
certified as being suitable for occupancy in accordance with state or
local law.
[B] An official with the project owner for Mount Vernon Senior Village
stated that the project will be placed in service during February
2011, a few months earlier than the estimate provided by OHFA.
[End of table]
A diverse mix of TCAP and Section 1602 Program funding was used to
fill financing gaps on the projects we reviewed, with the funding
representing 14 to 76 percent of the financing for these five
projects. For example, the TCAP funding committed to Heart of Ohio
Homes is being used as an interest free bridge loan that will be
repaid by the private investor in 2017. This structure improves the
private investor's return on investment and made it more willing to
invest in the project. OHFA used this type of TCAP loan structure on
31 projects to keep private investor participation in those projects.
They expect more than $68 million in TCAP funds to be repaid by equity
investors, which then becomes program income that can be used to
support LIHTC housing in the future.[Footnote 16] Four of the projects
we reviewed had private investor financing in the development but the
fifth, Mt Vernon Senior Village, was unable to sell any tax credits to
generate this type of financing. It is one of only seven projects
without private investor participation being funded by OHFA.
Figure 2: Construction of Various Affordable Housing Projects with
TCAP and Section 1602 Program Funding:
[Refer to PDF for image: 3 photographs]
Figure 2 shows pictures of the three Recovery Act-funded affordable
housing projects where GAO staff conducted site visits in the state of
Ohio for this report. The top left picture shows a single-family
housing unit at the Heart of Ohio Homes project. The top right picture
shows several single-family housing units at the East End Twin Towers
Crossing project. The bottom left picture shows sanitary and storm
water structures under construction at the Mount Vernon Senior Village
project.
Source: GAO; Oberer Residential Construction, and Buckeye Community
Hope Foundation (clockwise from upper left corner).
[End of figure]
OHFA Assumes New Responsibilities under TCAP and Section 1602 Program:
The project oversight role required of state housing finance agencies
(HFA) under the Recovery Act-funded TCAP and Section 1602 Program is
greater than under the standard LIHTC program.[Footnote 17]
Specifically, under the Recovery Act programs HFAs must monitor the
disbursement and use of funds throughout the construction period.
Also, HFAs must perform long-term asset-management activities to
ensure the long-term viability of the projects, including (1)
monitoring current financial and physical aspects of project
operations, (2) approving a project's operating budget, (3) analyzing
cash-flow trends and reserve accounts, and (4) conducting physical
inspections. Asset-management activities also include examining long-
term issues related to plans for addressing a project's capital needs,
changes in market conditions, and the recommendation and
implementation of plans to correct troubled projects. HFAs are also
responsible for returning TCAP and Section 1602 Program funds to HUD
and Treasury, respectively, if a project fails to comply with LIHTC
requirements.[Footnote 18]
With respect to construction oversight, OHFA staff conduct one or more
site visits to conventional LIHTC projects during the construction
phase, but they plan to increase construction monitoring of the TCAP
and Section 1602 Program-funded projects to ensure projects meet
Recovery Act deadlines. OHFA officials said that OHFA is developing
specific policies on construction site inspections and they plan to
leverage the construction oversight and project reporting that is done
by other interested parties.
With respect to asset-management, OHFA officials said that the agency
has not previously engaged in asset management under the conventional
LIHTC program. However, we found that OHFA structured its
administration of the TCAP and Section 1602 Program to address
oversight concerns. First, OHFA maintained private investor
participation in the majority of its Recovery Act-funded TCAP and
Section 1602 Program projects. Of the 80 projects to which OHFA
awarded Recovery Act funds, 74 projects include private investments.
OHFA officials emphasized that private investors have an incentive to
protect their investments by performing asset management services
which complement the compliance monitoring that OHFA is required to
provide. Second, OHFA officials said that their agency has experience
working with LIHTC projects where they must consider the project's
financial feasibility, and a number of OHFA staff have a background in
asset management. Moreover, before the Recovery Act was even enacted,
OHFA officials said they had been planning to increase the reporting
requirements for conventional LIHTC program to better predict the
performance of such projects.
While OHFA obtained private investor participation in 74 of the 80
projects where they have committed Recovery Act funds, they awarded a
contract to Ohio Capital Corporation for Housing (OCCH), a leading
syndicator of LIHTC projects in Ohio, to oversee the asset management
of the other seven projects. While OCCH and OHFA have worked with each
other in the past on the conventional LIHTC program, OCCH officials
said they plan to treat OHFA as they would any other investor for whom
they provide asset-management services.
Ohio LIHTC Market Is Stabilizing but Uncertainties Remain:
We discussed investor involvement and financing trends in Ohio for
LIHTCs available under the LIHTC program with officials from OHFA,
several project owners, and OCCH--the syndicator for many of the
Recovery Act-funded affordable housing projects in the state of Ohio.
Officials from OHFA and OCCH stated that prior to the TCAP and Section
1602 Program, tax credit equity accounted for about 50 percent or more
of the project financing and that mortgage debt represented an
important source of financing as well. In comparison, documentation
provided by OHFA showed and comments made by OCCH support that tax
credit equity dropped only slightly for the 74 Recovery Act projects
with private investor participation and now represents about 45
percent of the financing on these projects. OHFA officials noted and a
GAO analysis of OHFA provided information showed that their use of
Section 1602 Program funds as gap financing, especially in combination
with TCAP funds made projects attractive to private investors and
enabled project owners to maintain a considerable amount of tax credit
equity in the Recovery Act funded projects. For example, OHFA
committed Section 1602 Program funds as gap financing to 64 projects
that maintained tax credit equity and used it in combination with TCAP
funds on about half of these projects. However, OHFA and OCCH
officials told us that there is little to no mortgage debt in most of
the Recovery Act--funded projects, which has been replaced to a large
extent by TCAP and Section 1602 Program funds and soft debt in the
form of HOME funds[Footnote 19] and other grant funding sources.
OHFA and some project officials we met with expressed an interest in
seeing an extension of the Section 1602 Program. For example, OHFA
officials said that an extension of the Section 1602 Program would
help the LIHTC market in Ohio because it would provide gap funding for
projects. Officials from two of the projects we visited also said that
extending the program would be helpful in case tax credit prices are
too low in future years and leave project financing gaps that need to
be filled. One project owner said they would likely participate in the
Section 1602 Program again. Another project owner added that the
program could serve as a reserve account from year to year to fill
financing gaps when LIHTC prices fall below 80 cents on the dollar.
OHFA and Project Owners Undertake Recovery Act Recipient-Reporting
Activities:
Recovery Act recipient-reporting requirements for TCAP and the Section
1602 Program are different. For TCAP, state HFA must collect
information from subrecipients and use OMB's FederalReporting.gov Web
site to report on the nature of projects and numbers of jobs funded by
the Recovery Act on a quarterly basis for each quarter that the HFA
receives Recovery Act funds directly from the federal government. In
contrast, the Recovery Act does not require recipients of Section 1602
Program funds to report information to the FederalReporting.gov Web
site.[Footnote 20] Instead, Treasury requires HFAs to submit quarterly
performance reports--including job estimates--for all projects that
are awarded funding during the quarter. Specifically, HFAs are
required to make only one report at the start of each project on the
number of FTE jobs to be created or retained by the entire project.
The TCAP job count is based on OMB guidance that calculates hours
worked to arrive at the number of full-time equivalent jobs (FTE)
funded by the Recovery Act. In contrast, the Section 1602 Program job
count is an estimate of FTEs created or retained. Except for requiring
the use of FTEs, Treasury has not issued detailed guidance specifying
job estimation methodology under the Section 1602 Program. Therefore,
these two estimates cannot be used to compare job creation between the
programs.
For TCAP, OHFA said it made changes to its quarterly jobs reporting
tool used to collect information from its subrecipients to incorporate
the changes from OMB's December 2009 guidance.[Footnote 21] In
addition, based on OMB guidance, OHFA said it prorates the number of
FTEs reported by its subrecipients based on the percentage of TCAP
funds being used as a share of total project cost. OHFA officials said
they do not conduct a systematic review of the information being
provided by their subrecipients--the project owners; instead OHFA
relies on signed statements from the project owners attesting to the
accuracy of the jobs estimates. For the quarter ended June, 30, 2010,
OHFA reported that approximately 186 FTEs were funded by TCAP in
Ohio.[Footnote 22] Similarly, for the Section 1602 Program, OHFA
officials said they receive a onetime estimate from project owners of
all jobs being created or retained that is used in the report they
submit to Treasury. As of July 30, they have reported on all but two
projects where Section 1602 Program funds are being committed with
none of the job estimates prorated for the amount of Recovery Act
funding involved as is being done for the quarterly recipient-
reporting on the TCAP funding. Since the start of the program OHFA
officials said they reported 4,883.3 jobs to Treasury that projects
funded by the Section 1602 Program in Ohio have or will create or
retain.
We discussed the recipient-reporting requirements for TCAP and the
Section 1602 Program with officials associated with the three projects
including the project owners--or subrecipients. One of the project
owners received both TCAP and Section 1602 Program funds and has
completed the recipient-reporting required under both programs. For
TCAP recipient-reporting, staff from this project owner said they
complete OHFA's quarterly jobs reporting tool using an estimate of the
hours worked provided by the general contractor for both general
contractor and subcontractor employees who are working on the project.
Project owner staff also said that they perform a review of these jobs
estimate figures against costs being charged to the project to ensure
their accuracy. In contrast, the other two project owners received
only Section 1602 Program funding and officials with these two
projects reported completing the jobs estimate required at the start
of the project. Officials with both projects said that the jobs
estimate they provided identified the total number of employees who
are expected to be working on the project and not the actual
employment effect directly attributable to the Recovery Act funding.
Recovery Act Funds Continue to Provide Some Needed Support to Ohio and
City of Cincinnati:
In Ohio, the state and City of Cincinnati continue to feel the effects
of the economic downturn and reduced revenues, and Recovery Act funds
are providing some needed support. As of August 1, 2010, Ohio has
received about $7.9 billion in Recovery Act funds. As we have
previously reported, Ohio's 2010-2011 biennial budget, passed in July
2009, appropriated about $7.6 billion in Recovery Act funds for use by
state agencies. The state closed out its fiscal year 2010 (July 1,
2009-June 30, 2010) having spent almost $3.4 billion in Recovery Act
funds, which represented about 13 percent of its $25.5 billion in
general fund disbursements.[Footnote 23] According to a senior state
budget official, the state expects to spend about $3.4 billion in
Recovery Act funds in fiscal year 2011, including about $550 million
originally appropriated for fiscal year 2010.[Footnote 24]
Ohio's 2010-2011 biennial budget assumes a significant reduction in
revenues, and the state's monthly financial reports indicate that
revenue collections were lower than estimated for fiscal year 2010.
Despite lower than forecast revenue projections, Ohio controlled
spending to keep its budget balanced for fiscal year 2010. In fiscal
year 2011, state officials expect general fund tax revenues to
increase slightly from fiscal year 2010 levels, but still be
significantly below fiscal year 2008 levels. The state does not expect
to make any revisions to the budget for the remainder of the biennium.
We visited the City of Cincinnati again and found it continues to face
fiscal challenges as well. According to city officials, while Recovery
Act funds have helped the city save jobs and provide additional
services, Cincinnati will need to address a structural budget
deficit[Footnote 25] of $50.4 million next year. Table 4 highlights
Cincinnati's population and unemployment rate.
Figure 3: Map of Ohio:
[Refer PDF for image: map indicating the location of Cincinnati]
Source: Art Explosion.
[End of figure]
Table 4: Demographics for Cincinnati, Ohio:
Population: 333,013;
Locality type: City;
Unemployment rate: 10.6%.
Source: U.S. Census Bureau and U.S. Department of Labor, Bureau of
Labor Statistics (BLS).
Notes: The BLS data are from Local Area Unemployment Statistics
(LAUS). Population data are from the latest available estimate, July
1, 2009. Unemployment rates are preliminary estimates for June 2010
and have not been seasonally adjusted. Rates are a percentage of the
labor force. Estimates are subject to revisions.
[End of table]
Cincinnati Is Using Recovery Act Funds to Provide Additional Services
and Save Jobs:
As of July 8, 2010, the City of Cincinnati has been awarded over $44
million in Recovery Act grants and continues to use these funds to
provide additional services and save jobs in public safety, community
development and social services, and infrastructure and equipment.
Since we last reported on Cincinnati in December 2009,[Footnote 26]
the city received $10.2 million in Recovery Act awards, which it will
use to build and rehabilitate rental housing, invest in energy-
efficiency initiatives, improve services, and save nursing jobs. See
table 5 for more information on Recovery Act funding received by the
City of Cincinnati since December 1, 2009.
Table 5: Sources of Recovery Act Funding Awarded to Cincinnati City
Government since December 2009:
Area for funding: Community development;
Source of funding: Neighborhood Stabilization Program 2 (NSP2);
Amount approved (dollars): $8,139,879.
Area for funding: Infrastructure;
Source of funding: State Energy Program;
Amount approved (dollars): $1,480,020.
Area for funding: Social services;
Source of funding: Health Resources and Services Administration (HRSA)
Capital Improvement Program;
Amount approved (dollars): $303,975.
Area for funding: Social services;
Source of funding: HRSA Increased Demand for Services;
Amount approved (dollars): $180,993.
Area for funding: Equipment;
Source of funding: Clean Cities Program;
Amount approved (dollars): $122,000.
Source: Hamilton County, Ohio; Recovery.gov; and City of Cincinnati
officials.
[End of table]
Below is a discussion of Cincinnati's Recovery Act funds received to
date.
* Public safety: Cincinnati continues to use its $13.6 million COPS
Hiring Recovery Program (CHRP) grant, as we reported in December 2009,
to save the jobs of 50 police officers. The CHRP grant will allow the
city to retain these jobs through fiscal year 2012. City officials
told us they hope that the city will have enough revenue to continue
to keep the officers employed by the time the CHRP funding runs out.
* Community development and social services: As we reported in
December 2009, Cincinnati received $8.8 million in community
development and social services funding from Community Development
Block Grant-Recovery Act Funds (CDBG-R) and Homelessness Prevention
and Rapid Re-Housing Program (HPRP) grants. Over $700,000 of the CDBG-
R funding was used to prevent the elimination of a private lot
abatement initiative and nine other human service initiatives, such as
drug addiction treatment and homelessness prevention. All of these
initiatives have been completed or almost completed except for the
private lot abatement, for which the contract was finalized in June
2010. Cincinnati is using the remaining $8.1 million in CDBG-R and
HPRP funding for eight new initiatives and administration. In February
2010, the city was awarded $8.1 million in NSP2 funds as part of a
coalition with Hamilton County, the Cincinnati Metropolitan Housing
Authority, and a nonprofit housing developer. Cincinnati officials
told us they will use funding to acquire foreclosed, abandoned, and
vacant property and either build or rehabilitate existing rental
housing. In addition, the two recent HRSA grants totaling about
$485,000 will enable the city to build capacity for keeping electronic
records at a city-run health center and retain the jobs of two nurses.
* Infrastructure and equipment: According to Cincinnati officials, the
city has used part of its $3.5 million Energy Efficiency and
Conservation Block Grant (EECBG) funding to complete energy-efficiency
upgrades at two fire stations and to perform energy audits at 88 city
buildings. Cincinnati also reported that it has begun environmental
assessments on two hike and bike trail projects with EECBG funds and
worked on both transportation projects with $4.5 million in highway
funds. These transportation projects include a multiuse hike and bike
trail along the north bank of the Ohio River and replacing and
expanding a computerized traffic control system. In addition,
Cincinnati will use two recent grants from the U.S. Department of
Energy to install solar panels on the roofs of city buildings and to
purchase hybrid and propane-fueled vehicles for use by the city.
City of Cincinnati Continues to Face Fiscal Challenges:
The City of Cincinnati continues to feel the effects of the economic
downturn and reduced revenues. To balance its budget of $359.4 million
for its fiscal year 2010 (January 1, 2010-December 31, 2010), the city
took several actions that included laying off and furloughing
employees, cutting services, drawing down funds from onetime revenue
sources, and making onetime spending cuts. Cincinnati officials said
they will have to address a $50.4 million structural budget deficit in
fiscal year 2011. While Recovery Act funds helped offset $2.8 million
in expenditures in the current year, other onetime revenue sources and
spending cuts made in fiscal year 2010 will no longer be available. In
addition, the costs of health care for city employees, fuel, and other
budget items are projected to increase. Because the city projects
revenues will continue at about fiscal year 2010 levels, Cincinnati is
considering multiple options to reduce expenditures in its 2011-2012
biennial budget (January 1, 2011-December 31, 2012), including salary
freezes, program eliminations, and program reductions. For example,
funding for police and fire departments represent about 65 percent of
city expenditures; city officials said that cuts in those two
departments will be necessary to address its structural deficit.
Cincinnati Is Experiencing Some Challenges with Recipient Reporting:
In the second quarter of 2010 (April-June 2010) Cincinnati reported
about 100 FTEs funded by the Recovery Act;[Footnote 27] however,
officials experienced some reporting challenges. Specifically,
officials told us a nonprofit partner organization performing energy-
efficiency audits under the city's EECBG grant reported administrative
hours that were classified as program hours by the city causing a
reallocation of administrative dollars between the city and the
partner. A senior city official said Cincinnati is working with the
partner to resolve the issue.[Footnote 28] In addition, officials told
us they were previously confused on the proper way to implement job
reporting changes outlined in OMB's December 2009 guidance. However, a
senior Cincinnati official said these issues were resolved by the next
reporting quarter. Cincinnati plans to use an audit checklist,
beginning in fall 2010, to spot check timesheets and other backup
records in order to verify jobs data. Officials said they will
initially target higher-risk Recovery Act grants for the audits, but
eventually plan to cover all grants.
Ohio's Audit Community Continues to Coordinate Recovery Act Oversight
Activities:
There are a number of oversight entities in Ohio with responsibility
for monitoring Recovery Act funded projects, namely the (1) State
Audit Committee;[Footnote 29] (2) Office of Budget and Management
(OBM), Office of Internal Audit (OIA); (3) Auditor of State (AOS); and
(4) the state-appointed Deputy Inspector General for Recovery Act
funds in the Office of Inspector General (OIG). As previously
reported, these entities work in conjunction with one another to
monitor Recovery Act funded projects.[Footnote 30] For example, OBM's
OIA plans its audit work in collaboration with the Auditor of State to
avoid duplication of effort and to maximize Ohio's audit coverage. In
addition, Ohio's oversight entities meet every other month to exchange
information and discuss Recovery Act-related issues. We contacted
officials from these audit entities to discuss their most recent,
ongoing, and planned audits. The State Audit Committee meets quarterly
and released on June 15, 2010, the results of its last three audits
for its fiscal year 2010. The OIA recently presented to the State
Audit Committee its fiscal year 2011[Footnote 31] audit plan, which
will focus on some Recovery Act programs not previously reviewed. Ohio
participated in phase I of OMB's Single Audit pilot program and
according to state officials will be participating in the next phase
of the pilot program.[Footnote 32]
Ohio Accountability Entities Conducted Numerous Reviews and Identified
Some Weaknesses in Recovery Act-Funded Programs:
The OIA is responsible for conducting internal audits of state
agencies. In state fiscal year 2010, the OIA completed 15 audits
related to Recovery Act programs and found weaknesses in several areas
including fund management, review of expenditures, vendor and
subrecipient monitoring, and validation of Recovery Act reporting
data. According to the OIA, it made a decision not to examine four
Recovery Act programs (Prevention and Wellness Immunization Fund,
Health Information Technology, Department of Administrative Services
II Broadband, and Aquaculture) due to limited funding or expenditures.
Since we last reported in May 2010, 8 of the 12 comments from prior
OIA audits have been addressed and closed. The OIA is anticipating
that the remaining open comments concerning the Clean Water and
Drinking Water State Revolving Funds Program and the Help Me Grow
Program will be addressed by August, 2010. The OIA plans to devote
fewer audit hours to Recovery Act programs in fiscal year 2011 due to
increased audit coverage by the Auditor of State and an increased
focus on monitoring prior audit comments. The OIA is currently
scheduling its 2011 audits, which will focus on some Recovery Act
programs not previously reviewed, such as Homelessness Prevention,
Child Care, State Unemployment Insurance, and the State Energy Phase
II program, and following up on remediation of previously issued
reports.
The Auditor of State is responsible for conducting audits of state and
local agencies. According to data from the Federal Audit
Clearinghouse, which is responsible for receiving and distributing
Single Audit results, it received Ohio's Single Audit reporting
package for the year ending June 30, 2009, on June 28, 2010.[Footnote
33] This was almost 3 months after the deadline specified by the
Single Audit Act and almost a year after the period the audit covered.
[Footnote 34] This was the first Single Audit for Ohio that includes
Recovery Act programs and it identified 25 significant internal
control deficiencies related to compliance with federal program
requirements, of which 3 were classified as material weaknesses. Some
of these significant deficiencies occurred in programs that included
Recovery Act funds. Specifically, the AOS reviewed 13 of the 19
programs for which Ohio receives Recovery Act funding and found
deficiencies in 8 of the programs.[Footnote 35] Some deficiencies that
were identified included unallowable expenditures, inadequate cash
management, and reporting. While there were questioned costs of over
$4 million, Auditor of State officials stated that they did not
separate Recovery Act funds in their review. The Auditor of State said
that many of these findings were repeat findings due to ongoing
internal control weaknesses that dated back to fiscal year 2004 or
earlier. The granting federal agency is responsible for resolution of
the audit findings and works with the grantee to implement and follow
up on corrective actions. The Auditor of State is anticipating the
release of Ohio's fiscal year 2010 State Single Audit by March 31,
2011. While the preliminary selection of programs for the 2010 audit
will be completed in early August, the final selection will occur when
the Schedule of Expenditures and Federal Awards is received in
October. Auditor of State officials said that SFSF funds will be
audited because of the high funding level.
Ohio also participated in phase I of the OMB Single Audit Internal
Control Project. Ohio's Auditor of State reported findings for two
Recovery Act-funded programs that it examined. The findings for the
Unemployment Insurance funding were partially corrected with the
remainder of the corrections to be completed later this summer. The
findings for the highway planning and construction funding were
corrected as of February 2010. Ohio will participate in phase 2 of the
Single Audit Internal Control Pilot. On August 30, 2010, the AOS
finalized its selection of programs to be tested under the Pilot. The
four programs selected include: 1) Unemployment Insurance, 2) Highway
Planning and Construction Cluster, 3) Title I-Local Education, and 4)
Department of Education's Special Education Cluster.
During 2010 the Auditor of State for local governments began
conducting their audits of local entities with fiscal-year ends
December 31, 2009, and June 30, 2010.[Footnote 36] This work to date
includes the review of 21 different Recovery Act programs. AOS is
responsible for reviewing 146 local entities receiving Recovery Act
funds in Ohio and has completed and released audit reports for 27 of
these local entities as of August 19, 2010. These completed AOS audits
did not report any findings for the Recovery Act-funded programs
included in these reviews. AOS expects to complete and release the
remaining 119 audits of local entities during calendar years 2010 and
2011.[Footnote 37]
The Office of Inspector General (OIG), responsible for investigations
of potential criminal activity, recently issued a report involving a
complaint of the misuse or waste of Recovery Act funds by the Ohio
Department of Natural Resources (ODNR). Although the OIG did not find
any misuse or waste of funds, it found that ODNR did not dispose of
used equipment in a safe manner, and recommended that ODNR take
corrective measures to ensure public safety. There are four ongoing
investigations involving Recovery Act funds, two of which are expected
to be completed by September 2010. We previously reported[Footnote 38]
that Ohio Environmental Protection Agency (EPA) may not have met the
Buy American requirements and recommended that Ohio EPA consult with
the U.S. Environmental Protection Agency to review and make a
compliance determination. In June 2010, the U.S. EPA determined that
there was no violation of the Buy American requirements.
Highway Infrastructure Investment:
By March, 2010, the U.S. Department of Transportation's Federal
Highway Administration (FHWA) obligated Ohio's full apportionment of
$936 million in Recovery Act funds to the state for highway
infrastructure and other eligible projects. As of August 24, 2010, the
Ohio Department of Transportation (ODOT) had awarded contracts worth
an estimated $930 million for 385 out of 426 FHWA funded projects. As
previously reported, Ohio continues to receive bids averaging 10
percent below the state cost estimates and as a result, has been able
to fund 89 more projects than originally planned. As of August 2010,
ODOT had $28 million in deobligated funds and has until the end of
September 2010[Footnote 39] to obligate those funds to new projects.
According to ODOT officials, the agency plans to adjust its funding
mix to also include non-Recovery Act funds (about 10 percent) for new
projects and plans to deobligate this funding portion of the projects
if the contract awards come in under the state estimates. [Footnote 40]
Ohio Anticipates Meeting the Maintenance of Efforts Requirement:
According to ODOT, Ohio expects to meet the Recovery Act's maintenance-
of-effort (MOE) requirement. The Recovery Act's MOE requires the state
to maintain the level of spending for the types of transportation
projects funded by the Recovery Act that it had planned to spend the
day the Recovery Act was enacted. We reported in our May 2010 report
that ODOT had concerns about meeting the MOE requirement due to the
decline in major sources of state transportation revenue. We also
reported a decline in forecasted transit and aviation expenditures.
However, ODOT officials recently reported that revenue sources have
stabilized and expenditures have generally kept pace. According to
ODOT officials, transit expenditures will likely meet the forecasted
level but aviation expenditures are currently at about $200,000 less
than the forecasted amount. ODOT officials reported that they are
working with Ohio's Office of Aviation to process expenses in time to
meet the MOE requirement. States that are unable to meet the MOE
obligation will be prohibited from benefiting from the redistribution
of obligation authority that will occur after August 1 for fiscal year
2011.[Footnote 41] For the past 3 years, Ohio has received over $40
million annually in redistribution.
Monitoring Plan for Home Weatherization Program Has Been Implemented:
In December 2009, we reported that due to the rapid expansion of Ohio
Home Weatherization Assistance Program under the Recovery Act, the
program was at heightened risk for waste, fraud, and abuse. When we
reviewed production files at three grantees we raised a number of
concerns ranging from use of Recovery Act funds to weatherize the home
of an ineligible recipient to use of Recovery Act funds on homes that
were weatherized before the program began. We concluded that real-time
monitoring and early assessments of grantees' activities could aid in
avoiding those types of problems and help ensure program success. In
response, the Ohio Department of Development (ODOD) developed a
monitoring program designed to ensure that its grantees were in
compliance with program requirements set forth in the state plan. ODOD
also hired three new staff to augment those already on line to conduct
reviews of its grantees. As of June 30, 2010, ODOD officials said they
had conducted reviews at all 34 grantees and a number of delegate
agencies. These officials said that the reviews were helpful in
ensuring that the state's program stayed on track and its grantees
adhered to the program requirements. For example, in a summary
analysis of visits through June 11, 2010, ODOD reports that many of
the grantees had charged the Recovery Act grant for production begun
before the program began. ODOD officials said that they were able to
reverse the charges, freeing up Recovery Act funds to weatherize more
homes. As of July 31, 2010, ODOD reports that it has inspected 5.7
percent of the homes weatherized in the state (14,077 homes completed)
and reviewed the administrative files for 5.2 percent of its
production.
Ohio Revised SFSF Monitoring Plan to Improve Oversight of Funds:
In May 2010, we identified weaknesses in how the Ohio Board of Regents
(BOR) monitored SFSF funds allocated to institutions of higher
education (IHE). Although Ohio developed a plan for monitoring SFSF
funds, quarterly reports submitted by IHEs to BOR during the first and
second reporting periods (February through December 2009) did not
break out the receipt and use of SFSF funds. This made it difficult
for BOR to determine how SFSF funds were spent during those quarters,
and therefore, whether the funds were used for allowable expenditures.
Moreover, a senior state official told us that there was no mechanism
to validate the expenditure information submitted by IHEs. In
addition, when we reviewed the Auditor of State's Web site in April
2010, we found that the Ohio State University, the largest SFSF
recipient in Ohio, was not reporting receipt of SFSF funds to the
site, as directed by Ohio's monitoring plan. Ohio State University
finance officials told us that they would report the required
information and when we reviewed the Auditor of State's Web site on
August 9, 2010, we found the Ohio State University had reported
receipt and use of SFSF funds. In addition, in response to our
findings, BOR submitted its amended monitoring plan of SFSF funds
allocated to IHEs to the U.S. Department of Education on May 28, 2010.
The revised monitoring plan requires IHEs to include in their
quarterly financial statements a detailed subsection that identifies
cumulative SFSF revenues and expenditures. The revised plan also
requires IHEs' fiscal officers to submit a form attesting that their
institution used SFSF funds only for allowable educational and general
expenditures. According to a senior BOR official, these changes were
made for the third reporting period and going forward. If BOR
discovers any indications of noncompliance from these quarterly
statements, it will follow up with additional reviews, which may
include site visits to the IHEs, as outlined in the revised plan.
Comments on This Summary:
We provided the Governor of Ohio with a draft of this appendix on
August 17, 2010, and representatives of the Governor's office
responded on August 19, 2010. In general, the state agreed with our
draft and provided some clarifying information which we incorporated.
We also provided the City of Cincinnati with a statement of facts on
August 17, 2010, and city officials responded on August 18, 2010, with
technical comments which we incorporated as appropriate.
In addition, we provided a draft of all materials related to Head
Start and Early Head Start to OHS and HHS for comment on August 20,
2010, but they did not provide comments in time for us to consider
them in the report. We also met with officials from the HHS Office of
Head Start, Region V on August 13, 2010, to discuss our findings
regarding expansion of the Early Head Start program at selected
grantees in Ohio.
GAO Contacts:
George A. Scott, (202) 512-7215 or scottg@gao.gov:
David C. Trimble, (202) 512-9338 or trimbled@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Bill J. Keller, Assistant
Director; Tranchau Nguyen, Assistant Director; Matthew Drerup, analyst-
in-charge; Debra Cottrell; Jeffrey G. Miller; Brian Smith; and Myra
Watts-Butler made major contributions to this report.
[End of section]
Appendix XV Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115. (Feb. 17, 2009).
[2] 45 C.F.R. § 1306.33(a)(1). The regulation specifies a minimum of
32 home visits based on a part-year Head Start program. Because Early
Head Start is a 12-month program, the number of home visits should
increase accordingly to a minimum of 48 visits.
[3] Recovery Act, div. A, title XIII, 123 Stat. 178.
[4] The first program year goes from December 1, 2009, to September
29, 2010. The second program year goes from September 30, 2010, to
September 29, 2011.
[5] Our sample included children enrolled in center-based care and
home-based care.
[6] 45 C.F.R. § 1304.20(a)(ii). Grantees are required to document that
children are up-to-date on a schedule of preventative and primary
health care within 90 days of entry into the Early Head Start program.
Moreover, grantees are required to ensure that within 45 days of
entry, children have received hearing, vision, developmental, and
motor screenings. Finally, grantees are required to obtain follow-up
treatment for children with known dental problems.
[7] Fifty-nine of the 71 children had entered the program at least 45
days prior to our review.
[8] As part of home-based care, grantees are required to provide two
socialization activities per month. 45 C.F.R. § 1306(a)(2).
[9] No more than 10 percent of children enrolled by a Head Start
grantee may be from over-income families. 45 C.F.R. § 1305.4(b)(1) and
(2).
[10] 45 C.F.R. § 1305.6(d).
[11] State housing finance agencies award low-income housing tax
credits to owners of qualified rental properties who reserve all or a
portion of their units for occupancy for low-income tenants. Once
awarded tax credits, project owners sell them to investors to obtain
funding for their projects. Investors receive tax credits for 10 years
if the property continues to comply with program requirements.
[12] Many affordable-housing tax credit projects rely on LIHTCs
together with other forms of subsidies like HOME Investment
Partnerships Program funds (HOME), Community Development Block Grant
(CDBG), and state funds.
[13] Under TCAP, housing finance authorities (HFA) must disburse 75
percent of the funds by February 2011, and project owners must spend
all remaining TCAP funds by February 2012. Any funding not disbursed
or spent by the respective deadlines must be returned to HUD. Under
Section 1602 Program rules, HFAs must commit the funding to projects
by December 2010 and can continue to disburse funds to awarded
projects through December 31, 2011, provided that the project owners
spend at least 30 percent of the eligible project costs by December
31, 2010. HFAs must disburse all Section 1602 Program funds by
December 2011, or the funds the HFAs have not disbursed must be
returned to Treasury.
[14] Project owners sell LIHTC to private investors to generate tax
credit equity to finance their LIHTC projects. Some project owners
sell the LIHTCs to an investor that will invest directly in the LIHTC
project while others use a syndicator, which assembles a group of
investors and pools funds that are then invested in the LIHTC project.
We met with OCCH officials, the syndicator for two of the projects we
selected for our review where there was private investor
participation--Heart of Ohio Homes and East End Twin Towers Crossing.
[15] We met with project owners for the Mount Vernon Senior Village,
Heart of Ohio Homes, and East End Twin Towers Crossing affordable
housing projects. We selected Mount Vernon Senior Housing because it
was a Section 1602 Program funded project with no private investor
participation. We selected Heart of Ohio Homes because it was a rural
project that was receiving both TCAP and Section 1602 Program funding.
We selected East End Twin Towers Crossing because it was an urban
project that was a Section 1602 Program funded project with private
investor participation.
[16] Pursuant to 24 CFR 85.25(h), HUD has established requirements for
the disposition of program income earned after the TCAP grant is
closed.
[17] Under the LIHTC program, HFAs are required to review LIHTC
projects at least annually to determine project owner compliance with
tenant qualifications and rent and income limits. Additionally, the
HFA must conduct on-site inspections at least once every three years
of all buildings in each LIHTC project and inspect at least 20 percent
of the LIHTC units and resident files associated with those units.
[18] In contrast, under the conventional LIHTC program, HFAs are not
liable for recapturing funds if a project owner fails to comply with
LIHTC requirements. Rather, their obligation is to report any
noncompliance to the IRS, and the IRS takes any further actions with
respect to recapture. GAO reported previously on the risks and
responsibilities of recapture for HFAs under the TCAP and Section 1602
programs. See GAO, States' and Localities Uses of Funds and Actions
Needed to Address Implementation Challenges and Bolster
Accountability, GAO-10-604 (Washington, D.C.: May 26, 2010).
[19] The HOME program managed by HUD provides formula grants to states
and localities that communities use--often in partnership with local
nonprofit groups--to fund a wide range of activities that build, buy,
and/or rehabilitate affordable housing for rent or homeownership or
provide direct rental assistance to low-income people.
[20] Section 1512 of the Recovery Act describes recipient-reporting
requirements, including that of estimated jobs created and retained.
Section 1512 and the recipient-reporting requirements apply only to
programs under division A of the Recovery Act, which includes TCAP.
The Section 1602 Program is under division B of the Recovery Act, and
therefore, not subject to section 1512 requirements.
[21] 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).
[22] GAO extracted this FTE estimate from Recovery.gov on August 9,
2010.
[23] Ohio spent about $807 million in Recovery Act funds in fiscal
year 2009 (July 1, 2008-June 30, 2009).
[24] This state official also told us the state may expend less than
the $7.6 billion in Recovery Act funds it appropriated for 2010-2011
because some programs, including Medicaid, have experienced less
growth than projected.
[25] According to the City of Cincinnati, a structural budget deficit
occurs when operating expenditures are projected to grow at a faster
rate than revenues.
[26] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability (Ohio), [hyperlink,
http://www.gao.gov/products/GAO-10-232SP] (Washington, D.C.: December
2009).
[27] FTE data was drawn from the City of Cincinnati's Recovery Act web
site on August 10, 2010.
[28] Also, when we reviewed the city's initial recipient reporting
submission for EECBG for the second reporting quarter of 2010, we
found an inconsistency in the narrative regarding the number of jobs
funded. Specifically, two breakouts of jobs created and retained
within the narrative did not match each other. A senior Cincinnati
official said the city plans to correct the inconsistency in its third
quarter 2010 reporting.
[29] Ohio's State Audit Committee assists the Governor and Director of
the Office of Budget and Management (OBM) in fulfilling their
oversight responsibilities in several areas including audit processes,
and compliance with laws, rules and regulations.
[30] GAO, Recovery Act: States' and Localities' Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C. May 26,
2010).
[31] The State of Ohio's fiscal year runs from July 1 to June 30 of
the next calendar year.
[32] OMB implemented a Single Audit Internal Control Project (project)
in October 2009. One of the goals of the project is to help achieve
more timely communication of internal control deficiencies for higher-
risk Recovery Act programs so that corrective action can be taken. The
project is a collaborative effort between the states receiving
Recovery Act funds that volunteered to participate, their auditors,
and the federal government. Under the project's guidelines, audit
reports were to be presented to management 3 months sooner than the 9-
month time frame required by the Single Audit Act and OMB Circular No.
A-133 for Single Audits.
[33] The State Single Audit includes the review of programs that have
received monies from Recovery and non-Recovery Act funding, and a
combination of the two.
[34] As reported in May 2010, the Auditor of State's office said they
were not able to meet the original reporting date of March 31, 2010,
due to not receiving fiscal year 2009 financial statements from
management until February 1, 2010.
[35] Recovery Act programs with audit deficiencies are: (1) Food Stamp
Cluster, (2) Unemployment Insurance, (3) WIA Cluster, (4) Highway
Planning & Construction Cluster, (5) Child Support, (6) Foster Care,
(7) Adoption Assistance, and (8) Medicaid Cluster.
[36] Local government entities in Ohio generally have a December 31
fiscal-year end while school districts in Ohio generally have a June
30 fiscal year end, with a few exceptions.
[37] AOS estimates that independent public accounting (IPA) firms will
be conducting 179 audits of other local entities in Ohio. As of Aug
19, 2010, AOS expects that only 54 of these IPA audits are likely to
include the review of Recovery Act-funded programs.
[38] [hyperlink, http://www.gao.gov/products/GAO-10-605SP].
[39] Per memorandum from the U.S. Department of Transportation's FHWA,
dated July 1, 2010, the last day ODOT can obligate funds is September
27, 2010.
[40] 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.
[41] As required by statute, FHWA annually adjusts the states'
limitations on obligations for federal-aid highway programs.
[End of Appendix XV]
Appendix XVI: Pennsylvania:
Overview:
This appendix summarizes GAO's work on the seventh of its bimonthly
reviews of the American Recovery and Reinvestment Act of 2009
(Recovery Act)[Footnote 1] spending in Pennsylvania. The full report
covering all of GAO's work in 16 states and the District of Columbia
may be found at [hyperlink, http://www.gao.gov/recovery].
What We Did:
Our work in Pennsylvania focused on selected programs funded under the
Recovery Act, as shown in table 1. These programs were selected
primarily because they received significant amounts of Recovery Act
funds. We collected relevant documentation and interviewed program
officials to review the status of the program's funding, how funds are
being used and monitored, and expected outcomes. For descriptions and
requirements of the programs covered in our review, see appendix XVIII
of GAO-10-1000SP.
Table 1: Programs Reviewed:
Program: State Energy Program (SEP); Rationale for selection: The
Recovery Act SEP funding in Pennsylvania was a nearly 100 times
increase from the state's allocation of $1.1 million in recent years.
The state program has been identified as high risk by the Pennsylvania
Bureau of Audits.
Program: Energy Efficiency and Conservation Block Grants; Rationale
for selection: This new grant, funded for the first time by the
Recovery Act, provided a total of $106.6 million to Pennsylvania. The
Department of Energy encouraged recipients to obligate 90 percent of
the funds by June 2010 and to spend at least 20 percent by September
2010.
Program: Weatherization Assistance Program; Rationale for selection:
To provide updated information on Pennsylvania's progress toward
spending and production goals, and its progress in training and
certifying all weatherization workers working on Recovery Act projects
ahead of the state's self-imposed July 1, 2010 deadline.
Program: Low-Income Housing Tax Credit Assistance programs; Rationale
for selection: Continued monitoring Tax Credit Assistance Program
(TCAP) and Grants to States for Low-income Housing Projects in Lieu of
Low-income Housing Credits Program under division B Section 1602 of
the Recovery Act.
Program: Public Housing Capital Fund; Rationale for selection: Provide
updated information on (1) Public Housing Capital Fund formula grants
which had a deadline for obligating all funds by March 2010, and (2)
Public Housing Capital Fund competitive grants.
Source: GAO.
[End of table]
We continued to track the state's fiscal condition and also visited
two local governments--the County of Berks as well as the City of
Philadelphia--to discuss the amount of Recovery Act funds each expects
to receive and how those funds will be used. We also contacted state
and local auditors about oversight and auditing of Recovery Act
spending in Pennsylvania.
State Energy Program. The Department of Energy (DOE) awarded $99.7
million to Pennsylvania in State Energy Program (SEP) funds. The state
plans to fund alternative and renewable energy projects--including
solar, geothermal, and wind projects--and commercial retrofit loans
and to expand existing geothermal loans and solar rebate programs. As
of August 15, 2010, Pennsylvania has obligated about $72.9 million and
expects to obligate the remaining funds by September 2010; about $24.4
million has been expended. Based on preliminary estimates,
Pennsylvania expects that these projects, loans, and rebates, in
aggregate, will generate enough energy to power 9,200 homes each year
and will also reduce carbon dioxide emissions by the equivalent of
taking more than 500,000 cars off the road for one year.
Energy Efficiency and Conservation Block Grant. DOE awarded
Pennsylvania and its cities and counties about $106.6 million in
Recovery Act Energy Efficiency and Conservation Block Grant (EECBG)
funds. Specifically, DOE awarded $23.6 million directly to the state,
most of which was competitively awarded to local governments and
nonprofits, and $83.0 million directly to 43 local governments across
Pennsylvania. Recipients are using funds to increase energy efficiency
through projects including improvements to building heating and
cooling systems as well as lighting. For example, the County of Berks
is using its $2.97 million grant to upgrade a boiler to run on natural
gas and repair steam pipes. Philadelphia is using its $14.1 million
award for onetime projects, such as converting to 85,000 energy-
efficient traffic signals, and establishing a new revolving loan fund
for commercial building retrofits.
Weatherization Assistance Program. Pennsylvania is in line to receive
$252.8 million in Recovery Act weatherization funds and has expended
$86.3 million as of August 15, 2010. Local weatherization agencies
have weatherized 10,287 homes--about 72 percent of the state's target
to weatherize 14,355 homes by September 30, 2010, and about 35 percent
of its overall target to weatherize 29,700 homes by March 31, 2012.
Although Pennsylvania chose to set a deadline to train and certify all
weatherization workers working on Recovery Act projects by July 1, the
state is working to identify weatherization workers not yet trained
and certified. Pennsylvania is not yet eligible to access its final 50
percent of Recovery Act funding and is working to meet the DOE
monitoring and quality control requirements.
Low-Income Housing Tax Credit Assistance Programs. Pennsylvania
received $95.1 million in Tax Credit Assistance Program (TCAP) funds
and $229.9 million in Grants to States for Low-income Housing Projects
in Lieu of Low-income Housing Credits Program under Section 1602 of
division B of the Recovery Act (Section 1602 Program). As of August
18, 2010, Pennsylvania had committed about $85.0 million (89 percent)
in TCAP funds and $214.5 million (93 percent) in Section 1602 Program
funds to 60 projects, including a project building 12 duplexes for low-
income families in Northumberland. According to Department of Housing
and Urban Development (HUD) data, Pennsylvania had disbursed about
$43.4 million in TCAP funds as of August 1, 2010. According to
Department of the Treasury (Treasury) data, Pennsylvania had disbursed
$117.6 million in Section 1602 Program funds as of July 31, 2010.
Public housing. In Pennsylvania, 82 public housing authorities
received $212.2 million in Public Housing Capital Fund formula grants.
As of August 7, 2010, all authorities have obligated all funds and in
aggregate have drawn down a total of $126 million. Fourteen
authorities received $55.2 million in Public Housing Capital Fund
competitive grants under the Recovery Act and, as of August 7, 2010,
these authorities have obligated about $50.7 million, and 12
authorities have drawn down a total of $3.4 million. At two
authorities we visited, Harrisburg is using its competitive grant to
renovate existing housing featuring new energy-efficiency
improvements, and Philadelphia is using its competitive grants to
build 194 handicapped-accessible units and a new mixed-use development.
State fiscal condition and use of Recovery Act funds. The governor of
Pennsylvania signed a $28 billion state general fund budget for fiscal
year 2010-2011 on July 6, 2010. The budget is an increase of about
$200 million over the 2009-2010 budget. It includes over $1.9 billion
in Recovery Act funding including State Fiscal Stabilization Fund
(SFSF) funds and Federal Medical Assistance Percentage (FMAP) funds.
State accountability. According to state budget and accounting
officials, Pennsylvania has taken actions to require state agencies to
report quarterly on their corrective action plans to resolve prior
year Single Audit[Footnote 2] findings and to improve subrecipient
monitoring. Pennsylvania's Single Audit Report for the fiscal year
ended June 30, 2009 was jointly issued by the Auditor General and an
independent public accounting firm and received by the Federal Audit
Clearinghouse on June 30, 2010, 3 months after the due date required
by statute. The report had 7 material weakness findings specifically
related to the approximately $1.47 billion in Recovery Act
expenditures in the fiscal year ended June 30, 2009. Auditor General
officials expect that an increased number of Recovery Act awards and
related guidance will increase their workload for the Single Audit for
fiscal year ended June 30, 2010. The Bureau of Audits, an internal
audit bureau in the state budget office, is targeting audits of
Recovery Act programs considered high risk in Pennsylvania, including
weatherization and the SEP, and has issued four Recovery Act audit
reports to date. In addition, the Pennsylvania Accountability Office
posts Recovery Act outcome measures to the State's Recovery Act Web
site as they are made available.
Local uses of Recovery Act funds. The County of Berks and the City of
Philadelphia received Recovery Act funds totaling $5.6 million and
$252.1 million, respectively. As of June 30, 2010, Berks has expended
about 47 percent of its funds to support onetime projects, such as
extending a road in an industrial park, as well as new services to
prevent homelessness. As of August 23, 2010, Philadelphia has expended
about 11 percent of funds awarded to support activities and programs,
many of which, according to officials, will likely end after Recovery
Act funds are expended.
Pennsylvania Has Obligated Three-Quarters of Recovery Act State Energy
Program Funding to Support Renewable and Other Energy Projects:
The State Energy Program (SEP) provides funds through formula grants
to states to achieve national energy goals such as increasing
efficiency and decreasing costs. The Recovery Act appropriated $3.1
billion to the SEP to be administered by DOE and spent over a 3-year
period by the states, U.S. territories, and the District of Columbia.
The Pennsylvania Department of Environmental Protection (DEP)
administers the $99.7 million in SEP Recovery Act funds provided to
the state. The SEP Recovery Act grant represents a significant
increase from the $1.1 million that DEP received annually for its base
SEP program for the 2009 and 2010 program years.
Pennsylvania plans to use its Recovery Act SEP funds to fund new
alternative and renewable energy projects--including solar,
geothermal, wind, and biogas projects--and plans to set up new loan
funds for approximately 29 commercial retrofit loans as well as buy
down the interest rates on at least 950 residential geothermal loans
and provide some training for geothermal contractors (see table 2).
About $3 million will be retained by the state to cover administrative
costs. As of August 15, 2010, Pennsylvania has obligated about $72.9
million (73 percent) of SEP funds, and about $24.4 million (24
percent) has been expended. DOE has set a goal that all SEP funds be
obligated by September 30, 2010, and requires that they be expended
within 36 months of the award date.[Footnote 3] DEP expects to meet
these deadlines.
Table 2: Planned SEP Projects in Pennsylvania as of August 13, 2010:
Project type: Green Energy Works!--Approximately $56.8 million for the
deployment of green energy projects: Wind;
Total awarded: $22.8 million[A];
Number of projects: 3;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 291,477 megawatt hours per year generation.
Project type: Green Energy Works!--Approximately $56.8 million for the
deployment of green energy projects: Solar 1: competitive grants for
solar deployment projects;
Total awarded: $6.6 million[A];
Number of projects: 7;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 5,678 megawatt hours per year generation.
Project type: Green Energy Works!--Approximately $56.8 million for the
deployment of green energy projects: Solar 2: PA Solar manufacturing
sole source grant;
Total awarded: $5.0 million[A];
Number of projects: 1;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: The funds will be used to purchase equipment to
manufacture thin-film solar panels in Pennsylvania. It is expected
that the total annual production capacity of the solar modules
produced will be 200 megawatts each year.
Project type: Green Energy Works!--Approximately $56.8 million for the
deployment of green energy projects: Solar 3: PA Sunshine Rebate
Program;
Total awarded: $7.9 million[A] (planned);
Number of projects: N/A;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: The funds will expand an existing fund to provide
residential rebates and training on building code provisions
applicable to solar installations.
Project type: Green Energy Works!--Approximately $56.8 million for the
deployment of green energy projects: Biogas;
Total awarded: $3.8 million[A];
Number of projects: 7;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 14,418 megawatt hours per year generation.
Project type: Green Energy Works!--Approximately $56.8 million for the
deployment of green energy projects: Combined Heat & Power;
Total awarded: $10.7 million[A];
Number of projects: 8;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 84,004 megawatt hours per year generation; 2,628 megawatt
hours per year saved.
Project type: Sustainable Business Recovery--Approximately $14.9
million[C] awarded for a Pennsylvania Energy Development Authority
(PEDA) program to provide grants to alternative energy generation and
energy conservation projects for businesses, non-profit corporations,
and colleges and universities.
Project type: PEDA--Sustainable Business Recovery; Total awarded:
$14.9 million[A];
Number of projects: 12 awarded[D];
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 53,153 megawatt hours per year generation; 583 megawatt
hours per year saved.
Project type: PEDA-Mined project grants--Approximately $3.8 million
planned for competitive grants to fund innovative advanced energy
projects that could not be funded within the state's fiscal year 2008-
2009 budget. Projects include onsite energy conservation and
production for five subrecipients, including a hospital and a food
services distribution center.
Project type: PEDA-Mined;
Total awarded: $3.8 million[A];
Number of projects: 5;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 18,299 megawatt hours per year generation; 4,651 megawatt
hours per year saved.
Project type: Energy Harvest Mined project grants--Approximately $4.3
million planned for competitive grants to fund innovative advanced
onsite energy deployment projects that could not be funded within the
state's fiscal year 2008-2009 budget.
Project type: Energy Harvest;
Total awarded: $4.3 million[A];
Number of projects: 10;
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 4,636 megawatt hours per year generation; 3,175 megawatt
hours per year saved.
Project type: Green Development Loan Program--About $12 million to
capitalize a new statewide Green Development revolving loan fund for
business and commercial building energy efficiency retrofits,
equipment replacement, or development, implementation, and
installation of onsite renewable energy technology. The fund will be
managed by a competitively selected manager.
Project type: Green Development Loan Fund; Total awarded: $12
million[A];
Number of projects: (29 planned);
Selected expected outcomes of projects supported with Recovery Act
funding[B]: 5,130 megawatt hours per year saved.
Project type: Pennsylvania Geothermal Fund--About $5.0 million to buy
down interest rates on two Keystone Home Energy Loan Program (HELP)
loan products. The program will also provide geothermal contractor
training.
Project type: Geothermal Fund;
Total awarded: $5.0 million[A] (planned);
Number of projects: (At least 950 planned);
Selected expected outcomes of projects supported with Recovery Act
funding[B]:The program will provide International Ground Source Heat
Pump Association accreditation for geothermal designers, installers,
and inspectors to train geothermal contractors.
Project type: Administrative--DEP will retain about $3.0 million for
administrative costs, including seven funded employees.
Source: GAO analysis of DEP data.
[A] Due to rounding, the total awarded does not sum to the total $99.7
million received by Pennsylvania.
[B] The expected outcomes for the projects reflect both Recovery Act
funds as well as matching funds leveraged by the subrecipients.
[C] PEDA offered an additional $11 million in state funding for this
program.
[D] As of September 1, 2010, DEP announced eight additional awards
totaling $5 million for PEDA-Sustainable Business Recovery projects.
[End of table]
DEP selected projects based on criteria including project readiness to
proceed, cost effectiveness, and environmental benefits.[Footnote 4]
DOE encouraged states to leverage Recovery Act funds with matching
contributions, and DEP officials expect SEP subrecipients to provide
approximately $778 million in leveraged funds. Based on its
preliminary analysis, DEP estimated that the planned SEP projects,
loans, and rebates, in aggregate, will generate enough energy to power
approximately 9,200 homes each year and will also reduce carbon
dioxide emissions by the equivalent of taking more than 500,000 cars
off the road for one year.[Footnote 5] Although DEP's preliminary
estimates of energy production and environmental benefits were
approximations, DEP officials said that its estimates will improve as
DEP awards its Recovery Act SEP funds and collects project-specific
information from subrecipients. We visited a 1-megawatt photovoltaic
solar energy project at the Carlisle School District--a project funded
by $1 million in Recovery Act SEP funds and approximately $4.8 million
in leveraged funds. When completed, the school district expects the
solar project to generate enough power to meet 15 percent of its
energy needs--an estimated savings of approximately $150,000 each
year--and reduce carbon dioxide emissions by the equivalent of taking
approximately 178 cars off the road per year.
According to DEP and DOE officials we interviewed, the review process
required under the National Environmental Policy Act (NEPA)[Footnote
6] has been among the biggest challenges faced by SEP projects in
Pennsylvania. DEP officials also said that the historic preservation
review requirements slowed down some SEP projects. Before DEP issues a
notice to proceed, SEP projects must obtain relevant local building
permits, historical preservation approval, and NEPA clearance to
demonstrate that environmental impacts of the project have been
considered. According to DEP officials, the NEPA review process at DOE
slowed down DEP's granting of notices to proceed, in part because DOE
had many more SEP projects to review and projects were larger than SEP
projects under the base SEP program, with potentially greater
environmental impacts to consider. DEP officials also said that they
are working with Pennsylvania's State Historic Preservation Office
(SHPO) to streamline the historic review and approval process for SEP
projects. In response to an August 2009 memo from DOE that encouraged
review process improvements, the Pennsylvania SHPO has developed a
screening approach to determine which projects need the greatest
review.
DEP Has Increased Its Oversight of SEP Projects Under The Recovery Act:
DEP officials have said that the increased oversight expectations for
the Recovery Act spurred DEP to improve its monitoring of
subrecipients.[Footnote 7] DEP assigned project advisors to monitor
each project and developed a Recovery Act reporting and tracking
system with information on project outcomes, costs, milestones,
deadlines, expenditures, and inspection dates.[Footnote 8] By tracking
project milestones, project advisors can identify projects
experiencing challenges and work to address the challenges. Project
advisors are to conduct on-site project inspections at the beginning
and end of every project as well as on an interim basis, maintain
regular communication with subrecipients, and enter weekly project
status updates into DEP's Recovery Act tracking and reporting system.
As of August 23, 2010, DEP project advisors had completed initial
inspections for over 80 percent of the SEP energy projects already
awarded. For the projects under the Green Energy Works program,
advisors use a checklist to verify that work has been completed in
accordance with the grant agreement and that state and local permits
are in place, and to record job activity observed on-site. DEP
officials told us that DEP plans to continue using the new monitoring
tools for future programs.
DEP Reports on Project Outcomes, Including Environmental Benefits:
DEP reports performance measures for the SEP program, including
outcomes, to DOE and the Pennsylvania Accountability Office. DEP
reports monthly and quarterly to DOE on activity and results metrics,
including jobs created and retained, programmatic metrics such as
outlays and obligations, and impact metrics, such as energy savings.
The state's performance measures also track investments in projects
leveraged by Recovery Act funds. DEP will also report on future
benefits resulting from the projects, including reduction in carbon
dioxide emissions, energy savings, and renewable energy generation.
According to the quarterly recipient report on www.recovery.gov,
Pennsylvania reported that the Recovery Act SEP funded approximately
22 full-time-equivalent jobs during the quarter ending June 30, 2010.
[Footnote 9] According to DEP officials, the expected full-time-
equivalent jobs would be larger when considering the jobs created with
leveraged funds in addition to the Recovery Act SEP funds.
Energy Efficiency and Conservation Block Grants Are Funding Projects
across Pennsylvania, but More than One-Fourth of Local Recipients Had
Not Yet Spent Funds:
The Energy Efficiency and Conservation Block Grant program (EECBG),
administered by DOE, is funded for the first time by the Recovery Act.
[Footnote 10] DOE awarded a total of $106.6 million in EECBG Recovery
Act funds in Pennsylvania--about $23.6 million to DEP, most of which
was competitively awarded to local governments and nonprofits, and
about $83.0 million in direct formula grants to 43 local governments.
EECBG direct formula grants range from $147,000 for the Township of
Cheltenham to $14.1 million for the City of Philadelphia. DOE
encouraged recipients to obligate 90 percent or more of funds by June
25, 2010, and spend at least 20 percent by September 30, 2010, 50
percent by June 30, 2011, and 90 percent by June 30, 2012.
DEP is using most of its $23.6 million EECBG award to administer and
pay for a onetime grant program--Conservation Works!--which provides
funds to local governments[Footnote 11] and nonprofit agencies in
Pennsylvania. DEP awarded funds to projects that could be started
within 6 months of the award date and completed within 18 months. It
also required applicants to demonstrate that the projects could
support energy-efficiency improvements of at least 25 percent in a
cost-effective manner.[Footnote 12] DEP received 500 applications from
July 17, 2009, through August 14, 2009, and announced its EECBG grant
awards on November 17, 2009. DEP announced 102 EECBG awards--up to
$250,000 for individual subrecipients, and $500,000 for coalitions--
for local government and nonprofit subrecipients. These subrecipients
are to contribute matching funds of $17.9 million. As of August 15,
2010, DEP has obligated all its EECBG funds.[Footnote 13] In addition,
$10.6 million (45 percent) has been spent.
According to DEP officials, the most common types of EECBG
subrecipient projects include street and traffic light replacement;
heating, ventilating and air-conditioning projects; and building
retrofits. For example, Thaddeus Stevens College of Technology in
Lancaster received $250,000 to replace or upgrade over 3,700 lighting
fixtures in 12 campus buildings and expects to save $71,000 per year
from reduced energy consumption.[Footnote 14] DEP officials expect the
EECBG program to save, over project lifetimes, about $57 million in
energy costs and about $21 million in natural gas costs because of
reduced consumption. In addition, DEP estimates that the projects will
reduce carbon dioxide emissions by 450,000 tons, which DEP compares to
taking 75,000 passenger cars off the road for one year.
DOE also awarded $83 million in EECBG direct formula grants to 43
local governments throughout Pennsylvania.[Footnote 15] As of August
13, 2010, local recipients, in aggregate, have spent about $7.5
million, or 9 percent of available funds. As shown in table 3, three
local recipients have spent their entire awards, and 12 local
recipients--more than one-fourth--have not spent any funds, as of
August 13, 2010.
Table 3: Expenditures of EECBG Direct Formula Local Recipients in
Pennsylvania as of August 13, 2010:
Percentage of award spent: 100 percent;
Number of local recipients: 3.
Percentage of award spent: 80 to 99 percent;
Number of local recipients: 0.
Percentage of award spent: 60 to 79 percent;
Number of local recipients: 1.
Percentage of award spent: 40 to 59 percent;
Number of local recipients: 2.
Percentage of award spent: 20 to 39 percent;
Number of local recipients: 3.
Percentage of award spent: 0.1 to 19 percent;
Number of local recipients: 22.
Percentage of award spent: 0 percent;
Number of local recipients: 12.
Percentage of award spent: Total;
Number of local recipients: 43.
Source: GAO analysis of DOE data.
Note: This table covers only local governments receiving EECBG funds
directly from DOE and does not include the DEP state award.
[End of table]
We visited two recipients of EECBG direct formula awards: Berks County
and the City of Philadelphia.[Footnote 16] Berks County is using its
EECBG award for a onetime project to renovate and convert an oil
boiler to also run on natural gas and repair leaky steam pipes at a
county-owned facility. According to DOE data, Berks County received
its $2.97 million award on December 23, 2009, and has spent more than
half as of July 23, 2010, and the county anticipates that the project
will be completed in the fall of 2010. According to a county official,
Berks County was able to move quickly on its EECBG grant because the
county had worked with a contractor in early 2009 to develop an energy-
efficiency capital improvement plan.[Footnote 17]
Philadelphia is using its EECBG direct formula grant to (1) fund
onetime projects, (2) set up programs to finance energy improvements
by businesses, and (3) support initiatives to enhance the city's
existing sustainability program (see table 4).[Footnote 18] According
to DOE data, Philadelphia received its $14.1 million award on
September 29, 2009, and as of August 13, 2010, has spent approximately
$1.7 million (12 percent). Officials said that because the city relied
on its existing Greenworks plan,[Footnote 19] which laid out planned
energy-efficiency and other projects, it was able to move forward once
it received its EECBG award. Philadelphia used EECBG funds to hire
additional staff for the city Office of Sustainability to help with
Greenworks initiatives, and, once the Recovery Act funds end,
continued funding of those positions will depend on the city's fiscal
outlook.
Table 4: City of Philadelphia Projects Funded by EECBG Direct Formula
Grant:
Onetime projects:
Project: LED Traffic Signal Replacement.[A] Replacement of 85,000
traffic signals with more energy-efficient light-emitting diode (LED)
signals. Expected to be completed in fall 2011;
Budget: $3.1 million;
Expenditures as of June 30, 2010: $216,624.
Project: Solar trash-compacting trash cans and recycling units.
Procure and install 260 solar trash-compacting waste bins and 115 on-
street recycling units. Expected to be completed in September 2010;
Budget: $973,000;
Expenditures as of June 30, 2010: $170,176.
Project: Radio Frequency Identification (RFID) Readers for Recycling
Program. Procure equipment to track participation in a city recycling
program. Completed in June 2010;
Budget: $708,400;
Expenditures as of June 30, 2010: $708,400.
Project: Philadelphia Water Department Solar Installation. Development
of a 250 kilowatt solar power installation for a water pollution
control plant. Expected to be completed in October 2010;
Budget: $850,000;
Expenditures as of June 30, 2010: $0.
Project: Bicycle Racks. Conversion of 1,600 parking meters to bicycle
racks and installation of 1,000 additional racks. Expected to be
completed in June 2011;
Budget: $375,000;
Expenditures as of June 30, 2010: $0.
Finance programs for businesses:
Project: Greenworks Loan Fund.[B] City partnership with a private
lender to offer low-interest rate loans for commercial and industrial
energy-efficiency improvements. As of June 10, 2010, Philadelphia
approved one loan for $1.6 million, had six loans totaling about $4.5
million in underwriting, and another worth $1 million on hold awaiting
information on energy performance. All loans expected to be issued by
summer 2012;
Budget: $4.8 million;
Expenditures as of June 30, 2010: $80,863.
Project: Energy Efficiency Retrofit Grants for Small Businesses and
Commercialization of Technologies. Equipment rebates to small
companies and nonprofits for energy efficiency building retrofits.
Expected to be provided by winter 2011;
Budget: $1.0 million;
Expenditures as of June 30, 2010: $0.
Initiatives enhancing city sustainability program:
Project: Municipal Building Energy Efficiency Retrofits. Funding
energy audits and retrofits to improve energy efficiency of city
buildings. Expected to be completed in fall 2011;
Budget: $1.0 million;
Expenditures as of June 30, 2010: $0.
Project: Development of the city's Energy Management Capacity. Fund
staff of an energy management office. Expected to be completed in 2012;
Budget: $508,115;
Expenditures as of June 30, 2010: $60,574.
Project: Building Code Development and Compliance. Fund a Green
Building Program Manager and train staff in issues associated with
green buildings. Expected to be completed in 2012;
Budget: $300,000;
Expenditures as of June 30, 2010: $44,881.
Project: Target Energy Budget Support and Training. Fund an Energy
Conservation Coordinator, establish a utility bill management
database, and develop an employee outreach and education campaign.
Expected to be completed in July 2012;
Budget: $292,000;
Expenditures as of June 30, 2010: $5,411.
Project: Greenworks Monitoring and Reporting. Development of a project
management and reporting database, a comprehensive annual plan, and a
staff position to support implementation. Expected to be completed in
July 2012;
Budget: $250,700;
Expenditures as of June 30, 2010: $29,968.
Project: Total;
Budget: $14.1 million;
Expenditures as of June 30, 2010: $1.3 million.
Source: GAO analysis of City of Philadelphia data.
[A] Philadelphia had previously installed red LEDs for traffic signals
in 1998. The Recovery Act funds are being used to replace the yellow
and green LEDs. In addition, the old red LEDs are being replaced
simultaneously using non-Recovery Act funds.
[B] Philadelphia used $2.8 million, the maximum amount permitted by
statute, to establish a revolving loan fund and provided an additional
grant of $1.7 million to the lender to provide greater initial
capitalization. Philadelphia will be using half of its $25 million
EECBG competitive award to increase the funds available under the
Greenworks Loan Fund.
[End of table]
Both local governments expect their projects to provide financial,
environmental, and other benefits. Berks County expects its project to
reduce energy consumption and carbon dioxide emissions by 5,800
megawatt-hours and 4,900 metric tons per year, respectively. These
reductions are expected to save approximately $430,000 per year.
Philadelphia estimates the LED traffic signals will save approximately
$1 million per year, and its RFID-based recycling program will
increase the percentage of waste diverted to recycling by 5 percent to
10 percent. In addition, the city expects all loan projects to reduce
energy consumption by at least 25 percent, compared with prior levels
used by the same building or comparable buildings.
At the state and local level, certain EECBG projects did not obligate
and spend funds on schedule. According to DEP officials, the NEPA
review process at DOE affected the start date for ten EECBG projects,
primarily geothermal heating and cooling, but did not affect most
other EECBG projects which had received categorical exclusions under
NEPA from DOE.[Footnote 20] As with SEP, DEP is working with the SHPO
to help streamline SHPO's project historic review and approval of
EECBG projects. In addition, projects involving LED lighting,
including Philadelphia's traffic signal replacement, did not fully
proceed until DOE provided a Buy American categorical waiver for light
components as there were not enough American suppliers of the lights.
[Footnote 21]Philadelphia also required time to solicit and evaluate
applications, and select recipients for its loan fund and energy-
efficiency retrofit grants.
DEP and Local Governments Monitor EECBG Project Funds, Report on
Performance, and Plan to Report on Outcomes:
DEP monitors its EECBG Recovery Act funds in much the same way as
described above for the SEP funds. DEP project advisors perform
initial, interim, and final inspections, communicate regularly with
subrecipients, work with subrecipients to address existing or
potential project challenges, and track project progress against
milestones and expenditures using DEP's Recovery Act tracking and
reporting system. At the local level, Philadelphia, for its loan and
grant programs, plans onsite inspections for all subrecipients of
loans over $100,000 and 10 percent to 20 percent of grant
subrecipients after projects are finished. Berks County monitors its
EECBG grant using a monitoring strategy that includes reviewing all
contractor invoices, tracking funds, and conducting biweekly site
visits and weekly meetings with the contractor.
DEP as well as the two direct formula recipients we interviewed
measure the performance of their EECBG projects and have plans to
measure the outcomes and report data to DOE and other sources. DEP
reports quarterly to DOE on three categories of activity and results
metrics,[Footnote 22] and reports monthly on funds obligated, funds
spent, and amount of relevant activity completed for its 102 projects.
Philadelphia and Berks County also report information on project
outputs to DOE. For example, Philadelphia reports on measures
including the number of loans provided under the loan fund and the
number of LED signals installed; Berks County will report on the
number of linear feet of steam piping renovated. DEP requires its
EECBG subrecipients to provide monthly reports on project status and
will require a final report on measurable energy and environmental
benefits. Many of the environmental benefits cannot be realized until
the project is complete, so these outcomes cannot be measured at this
point. DEP requires subrecipients to register their energy consumption
data with Energy Star's Portfolio Manager Program and submit a follow-
up status report 1 year after each project's completion date to
document energy savings. Berks County's contractor plans to measure
annual energy savings and carbon dioxide emissions avoided resulting
from the new boiler system. Philadelphia requires loan recipients to
provide information on energy usage that it will analyze 1 year after
each project is completed. However, city officials acknowledged that
for some of its EECBG projects, including the bicycle parking,
identifying and measuring outcomes will be more difficult.
DEP is using the same job-reporting procedures for its EECBG projects
as it is using for Recovery Act SEP projects. According to quarterly
recipient reports on www.recovery.gov, Pennsylvania reported that the
Recovery Act EECBG funded approximately 26 full-time-equivalent jobs
during the quarter ending June 30, 2010, an increase from
approximately 8 full-time-equivalent jobs reported for the quarter
ending March 31, 2010.[Footnote 23] Both Philadelphia and Berks County
collected and reported job data and cited no major challenges in doing
so. For their quarterly recipient reporting, officials from both local
governments gathered work hours from the Davis-Bacon-Certified
payrolls submitted by contractors, hours reported from contractors not
covered by Davis-Bacon requirements, and internal payroll systems for
their own employees' time. For its loan program, Philadelphia plans to
have its loan fund administrator collect the work hours from the
subrecipients. In EECBG recipient reports for the quarter ending June
30, 2010, Philadelphia reported approximately 8 full-time-equivalent
jobs funded, and Berks County reported approximately 6 full-time-
equivalent jobs.[Footnote 24]
Pennsylvania Is Making Progress on Weatherization Production Targets
but Is Not Yet Eligible to Access Its Final 50 Percent of Funds:
The Pennsylvania Department of Community and Economic Development
(DCED)--the agency that administers the state's Weatherization
Assistance Program--is in line to receive $252.8 million in Recovery
Act funds to be spent by March 31, 2012. DCED will retain up to $8.3
million for program management and oversight and will spend up to $20
million for worker training. As of August 15, 2010, Pennsylvania has
expended $86.3 million, and, according to DCED, as of August 13, 2010,
the 43 local weatherization agencies have weatherized 10,287 homes--
about 72 percent of the state's target to weatherize 14,355 homes by
September 30, 2010, and about 35 percent of its target to weatherize
29,700 homes by March 31, 2012. According to quarterly recipient
reports on www.recovery.gov, Pennsylvania reported that the Recovery
Act Weatherization Assistance Program funded about 710 full-time-
equivalent jobs during the quarter ending June 30, 2010--an increase
from the approximately 484 full-time-equivalent jobs reported for the
quarter ending March 31, 2010.[Footnote 25]
DCED and the Pennsylvania Department of Labor and Industry (L&I) have
not met the state's self-imposed deadline to have all weatherization
workers working on Recovery Act projects trained and certified or on a
path to certification by July 1, 2010. Although not required by DOE,
Pennsylvania has required certification of its weatherization workers
and has decided to use part of its Recovery Act funds to train and
certify all weatherization installers, crew chiefs, and auditors to
perform weatherization work. In May 2010, we reported that without a
method of ensuring compliance with the certification requirement,
Pennsylvania's training goals may not be achieved.[Footnote 26] On May
26, 2010, DCED issued a directive to weatherization subrecipients to
remind them of their responsibility for ensuring that all direct-hire
employees and subcontractors are either certified or registered for
courses required for certification by June 30, 2010.
Starting July 1, 2010, DCED implemented desk audit and on-site
monitoring procedures to help enforce the state's weatherization
worker certification requirements. DCED has been comparing Davis-Bacon
certified payrolls to L&I certification lists to cross-check worker
certification. As of August 17, 2010, 22 agencies' payrolls have been
audited revealing 230 uncertified workers. According to DCED, these
worker names have been forwarded to L&I, which is to advise them of
the training and certification requirement and instruct them on both
the certification and course scheduling procedures. Desk audits of the
remaining 21 agencies' files are to continue. DCED officials told us
that all monitors were trained to review training certification
compliance issues and were provided with a list of uncertified
employee names for their on-site monitoring reviews. Since July 1,
2010, according to DCED officials, monitors have completed 12 agency
site visits at which certification was specifically reviewed. Two
agencies were cited for noncompliance with training requirements with
three uncertified auditors at one agency and 55 uncertified
subcontractors at the other. DCED forwarded the lists of uncertified
workers to L&I for follow-up.
Concurrently, L&I continues to review the applications of existing
weatherization workers seeking certification as well as to track those
workers completing coursework to obtain certification. According to
state officials, as of July 31, 2010, 1,215 existing workers submitted
applications for certification based on their training, experience, or
both. Because individual workers may request multiple levels of
certification (installer, crew chief, or auditor), the 1,215
applicants requested 1,635 certifications. The application review
committee has reviewed the applications and certified 260 requests;
applicants for 434 requests will be required to pass a proficiency
test or complete an accelerated training program; and applicants for
941 requests were recommended to complete full coursework. Of those
recommended to complete coursework, as of August 2, 2010, 579 have
enrolled in required coursework, 542 of the 579 have completed
coursework, and 513 of those who have completed coursework have been
certified.
Pennsylvania is not currently eligible under DOE requirements to
access its final 50 percent of Recovery Act funding.[Footnote 27]
According to DCED, as of July 23, 2010, Pennsylvania weatherization
agencies had met DOE's Recovery Act production milestone to weatherize
30 percent of the total homes the state plans to weatherize. However,
Pennsylvania is ineligible to receive its final Recovery Act
weatherization funding until DCED addresses financial and
administrative concerns identified in DOE's monitoring of
Pennsylvania's program; specifically:
* DCED needs to resolve past Single Audit report findings related to
noncompliance with federal regulations, potential unallowable costs,
and material internal control deficiencies at both the state and
subrecipient levels. Although DCED has implemented corrective actions
to address some prior year deficiencies, DOE is concerned that more
needs to be done.[Footnote 28]
* DOE found that DCED monitors are not in compliance with DOE's
monitoring procedures and has required DCED to submit a corrective
action plan that demonstrates how DCED monitors will better document
their monitoring efforts at each weatherization agency and track their
recommendations to resolution.
* According to DOE, DCED needs to improve its financial management
system so that it can track actual costs for each unit weatherized or
on a per dwelling or a per subrecipient basis.
* The DOE Project Officer also identified concerns with the quality of
work done at some of the local weatherization agencies. For example,
some agencies visited by DOE did not complete moisture assessments as
part of the initial audit, did not appear to follow the DOE-approved
Priority List of measures, did not appear to practice lead safe
weatherization, and may require further training in conducting blower
door tests. In one case, DOE found little coordination among two local
weatherization agencies that serve the same geographic area.
As of August 23, 2010, DCED was working on corrective actions to
address the issues raised by DOE.
Pennsylvania Has Disbursed Nearly Half of Its TCAP Funds and More than
Half of Its Section 1602 Program Funds, but Faces Increased Oversight
Workload for the Low-Income Housing Tax Credit Assistance Programs:
The Recovery Act established two funding programs that provide capital
investments to Low-Income Housing Tax Credit (LIHTC) projects: (1) the
Tax Credit Assistance Program (TCAP) administered by HUD and (2)
Grants to States for Low-income Housing Projects in Lieu of Low-income
Housing Credits Program under section 1602 of division B of the
Recovery Act (Section 1602 Program) administered by the U.S.
Department of the Treasury (Treasury).[Footnote 29] Before the credit
market was disrupted in 2008, the LIHTC program provided substantial
financing in the form of third-party investor equity for affordable
rental housing units.[Footnote 30] As the demand for tax credits
declined, so did the prices investors were willing to pay for them,
creating funding gaps in projects that had received tax credit
allocations in 2007 and 2008. TCAP and the Section 1602 Program were
designed to fill financing gaps in planned tax credits projects and
jump-start stalled projects.
Pennsylvania received $95.1 million in TCAP funds and $229.9 million
in Section 1602 Program funds through the Recovery Act. As of August
18, 2010, Pennsylvania had committed about $85.0 million (89 percent)
in TCAP funds and $214.5 million (93 percent) in Section 1602 Program
funds to 60 projects. According to HUD data, Pennsylvania had
disbursed about $43.4 million (46 percent) in TCAP funds as of August
1, 2010. According to Treasury data, Pennsylvania had disbursed $117.6
million (51 percent) in Section 1602 Program funds as of July 31, 2010.
The Pennsylvania Housing Finance Agency (PHFA) administers the LIHTC
program in the state and committed TCAP and Section 1602 Program funds
to 60 projects containing 3,087 units (including 3,002 tax credit
units).[Footnote 31] PHFA officials said they selected projects with
the intention of funding the highest number of viable projects
possible while distributing funds equitably across the state.[Footnote
32] PHFA officials also said they generally used Section 1602 Program
funds to fund selected projects without investors and used TCAP funds
to fill financing gaps on projects with investors. With Recovery Act
financing available, TCAP and Section 1602 Program projects received
about 75 percent of financing through funds disbursed by PHFA. In the
past, PHFA said it would provide about 15 percent to 30 percent of
financing for LIHTC, with the remaining financing coming from tax
credit equity (about 60 percent) or other loans (about 10 percent to
25 percent). PHFA officials said they expect to commit the remainder
of TCAP and Section 1602 Program funds by September 1, 2010. PHFA
officials told us they are concerned that one Section 1602 Program
project may not meet Treasury's December 2010 spending deadline.
[Footnote 33]
We revisited two TCAP projects we reported on in May 2010, and also
visited two other TCAP projects as well as one Section 1602 Program
project that did not have an investor (see table 5). We interviewed
project owners for all five projects and investors for the TCAP
projects we visited. According to PHFA officials and project owners,
Recovery Act funds helped four out of five projects we visited move
forward when owners faced difficulties financing projects, and
construction is under way on all five projects as shown in figure 1.
[Footnote 34]
Table 5: Selected TCAP and Section 1602 Program Projects in
Pennsylvania:
Project name, location: Hopewell Courtyard,[A] Stewartstown;
Type of funding: TCAP;
Recovery Act funds committed: $5,594,162;
Percentage of Recovery Act funds disbursed: 69;
Recovery Act funds as a total percentage of total project costs: 34;
Number of housing units (tax credit units/total units: 96/96;
Project description: Rural, new construction, senior aged 55 or older;
Expected place in service date: December 2010.
Project name, location: Greystone Apartments, City of Allentown;
Type of funding: TCAP;
Recovery Act funds committed: $1,332,138;
Percentage of Recovery Act funds disbursed: 26;
Recovery Act funds as a total percentage of total project costs: 23;
Number of housing units (tax credit units/total units: 24/24;
Project description: Urban, rehabilitation, family;
Expected place in service date: March 2011.
Project name, location: Presser Senior Apartments,[B] City of
Philadelphia;
Type of funding: TCAP;
Recovery Act funds committed: $2,259,189;
Percentage of Recovery Act funds disbursed: 100;
Recovery Act funds as a total percentage of total project costs: 16;
Number of housing units (tax credit units/total units: 45/45;
Project description: Urban, rehabilitation, senior aged 62 or older;
Expected place in service date: January 2011.
Project name, location: Mantua Square, Phase II,[C] Philadelphia;
Type of funding: TCAP;
Recovery Act funds committed: $2,000,000;
Percentage of Recovery Act funds disbursed: 0;
Recovery Act funds as a total percentage of total project costs: 12;
Number of housing units (tax credit units/total units: 51/51;
Project description: Urban, new construction, family;
Expected place in service date: March 2011.
Project name, location: Cannery Point, Northumberland;
Type of funding: Section 1602 Program;
Recovery Act funds committed: $3,590,825;
Percentage of Recovery Act funds disbursed: 74;
Recovery Act funds as a total percentage of total project costs: 65;
Number of housing units (tax credit units/total units: 24/24;
Project description: Rural, new construction, family;
Expected place in service date: June 2011.
Source: GAO analysis of PHFA data.
[A] We used the original project name shown on PHFA documentation; the
project is now known as Westminster Place at Stewartstown.
[B] Presser Senior Apartments received $2 million (about 14.4 percent
of total development costs) in a Recovery Act Community Development
Block Grant (CDBG-R) through the City of Philadelphia. This project
also has federal historic preservation tax credits.
[C] Mantua Square, a Philadelphia Housing Authority (PHA) development,
received a TCAP allocation from PHFA for Phase II. Phases I and II
also received a $10 million Public Housing Capital Fund Competitive
Grant. PHA officials said they expect both Phase I and Phase II to be
completed by March 2011.
[End of table]
Figure 1: Selected TCAP and Section 1602 Program Projects in
Pennsylvania:
[Refer to PDF for image: 9 photographs and accompanying data]
Project: Hopewell Courtyard;
Description: Hopewell Courtyard is a rehabilitation of an old factory
and construction of two new buildings to create 96 units of senior
housing in Stewartstown, Pennsylvania. Project owners said that the
first units in the rehabilitated factory will be ready for occupancy
by September 2010 and will incorporate many green building features,
such as geothermal heating.
Project: Greystone Apartments;
Description: Greystone Apartments is a rehabilitation to improve the
safety and energy efficiency of 24 existing units in three late 1800s-
era buildings in Allentown, Pennsylvania. New sprinklers and metal
stairs to replace the old fire escapes will be installed as well as a
new heating and air conditioning system to reduce energy costs and
improve safety. During the construction, families living in two
buildings were relocated and will return when work is complete. Then
families in the third building will be relocated while the
construction is completed.
Project: Presser Senior Apartments; Description: Presser Senior
Apartments is a rehabilitation of a historic former retirement home to
build 45 units of senior housing in Philadelphia, Pennsylvania, while
preserving historic features of the structure. Built in 1914, the
property has been vacant since 2002 and became blighted. The project
also has a Recovery Act Community Development Block Grant award from
the city as well as federal historic tax credits.
Project: Mantua Square;
Description: Mantua Square is a new 101 unit development by the
Philadelphia Housing Authority that encompasses more than one square
city block and combines residential space with some commercial rental
space. For Phase II with 51 units, Philadelphia Housing Authority
received a TCAP award from PHFA and will use the award to incorporate
green features including solar panels into the overall development.
PHA also received a Recovery Act public housing competitive grant for
Phases I and II of the project, discussed below in the public housing
section of this appendix. As shown in the photos, roofs are on Phase I
buildings and foundation work was underway for Phase II.
Project: Cannery Point;
Description: Cannery Point is a new development consisting of 12
duplexes for low income families in Northumberland, Pennsylvania.
Project owners said that the first units will be ready for occupancy
about October 2010, while construction on the remaining units
continues.
Source: GAO.
[End of figure]
PHFA officials and project owners we interviewed that applied for 2010
LIHTC funds said that extending the Section 1602 Program through 2010
would help stabilize the LIHTC market. Some developers said projects
in rural areas may have trouble obtaining financing without an
extension of the Section 1602 Program in 2010. Investors we
interviewed said that their geographic preferences in LIHTC
investments generally followed their need to find Community
Reinvestment Act (CRA) opportunities.[Footnote 35] However, some
project owners we interviewed expressed concerns that allowing the
program to continue too long beyond 2010 could hamper the market by
crowding out private investors.
PHFA Plans to Use an Established Framework to Oversee Construction and
Asset Management and Reported Job Measures for the TCAP and Section
1602 Program Projects:
The project oversight role required of state housing finance agencies
(HFA) under the TCAP and Section 1602 Program is greater than under
the standard LIHTC program.[Footnote 36] Under the TCAP and the
Section 1602 program, HFAs are obligated to perform both construction
oversight and asset management, which imposes ongoing responsibilities
for the long-term viability of each project. HFAs need to ensure
compliance with LIHTC requirements as part of their construction
oversight and asset management activities and must return TCAP and
Section 1602 Program funds to HUD and Treasury, respectively, if a
project fails to comply with LIHTC requirements.[Footnote 37]
PHFA officials said their agency plans to use the same established
framework for construction oversight and asset management that it uses
to manage its other loan programs.[Footnote 38] As part of its
construction oversight, PHFA officials said the agency conducts
periodic inspections of sites during construction to monitor progress
and observe challenges that may affect schedules or cost.[Footnote 39]
For TCAP and Section 1602 Program funds, PHFA reviews all project
construction invoices to ensure payments are being made in accordance
with program guidance. PHFA officials told us they have been
monitoring construction for projects underway and also said they will
add projects to their asset management schedule as they are completed.
As part of its asset management activities, PHFA officials said they
plan to perform annual physical inspections for TCAP projects similar
to those on PHFA's oversight schedule for other loans. For the Section
1602 Program, PHFA plans to perform physical inspections every 3 years
similar to those on the schedule for regular LIHTC projects. For
projects without an investor--29 of the 60 in Pennsylvania--PHFA said
the agency will be responsible for overseeing all asset management
activities. According to PFHA, the asset management plan for TCAP and
Section 1602 Program projects focuses on managing risks to the agency.
From PHFA's perspective, TCAP projects pose a greater risk because of
potential full repayment obligations to HUD in the event projects do
not comply with program requirements during the occupancy period.
[Footnote 40] In addition, officials said the TCAP loans have been
underwritten for repayment and will require loan servicing and
monitoring. PHFA views the recapture risk for Section 1602 Program
projects as similar to the recapture risk for a regular LIHTC project.
According to officials, PHFA's asset management plan for both TCAP and
Section 1602 properties will involve ongoing fiscal and physical
reviews of properties for both program compliance and to establish
early warning programs for any management weaknesses or operational
deficiencies.
Although spreading Recovery Act funding across a larger number of
projects allowed Pennsylvania to fund more low-income housing units,
PHFA has a larger number of projects to monitor during construction as
well as an increased workload for the entire 15-year LIHTC compliance
period for which TCAP and Section 1602 Program projects will require
asset management activities. Officials estimated that the increased
workload will cost the agency 20 percent to 30 percent more in annual
operating costs. To help cover some of these oversight costs, PHFA is
collecting a monthly $500 fee per project for construction monitoring
and a onetime asset management fee of $800 per unit from project
developers. PHFA officials said that agency staff are stretched to
meet current demands, but that the agency has sufficient staff to
conduct oversight activities, in part because every year some projects
will age out of their compliance periods.[Footnote 41]
Reporting requirements for the TCAP and the Section 1602 Program
differ and HUD requires TCAP recipients to report project data to
three different reporting systems, including through
Federalreporting.gov to satisfy the recipient reporting requirements
under section 1512 of division A of the Recovery Act. Section 1512
describes the recipient reporting requirements, which include
estimation of full-time-equivalent jobs created and retained. Section
1512 applies only to programs under division A of the Recovery Act,
which includes TCAP. The Section 1602 Program is under division B of
the Recovery Act and therefore not subject to section 1512
requirements.
To satisfy quarterly Recovery Act recipient reporting requirements for
TCAP projects, PHFA officials collected jobs information from TCAP
project owners, reporting approximately 103 full-time-equivalent-jobs
funded for the quarter ending June 30, 2010; for the quarter ending
March 31, 2010, PHFA reported approximately 60 full-time-equivalent
jobs funded by TCAP.[Footnote 42] On the basis of OMB guidance,
officials said the number of jobs funded for TCAP projects was
prorated according to the percentage of TCAP financing on each
project. PHFA officials said they calculated the percentage of TCAP
financing used on each project and provided it to project owners to
complete the HUD calculator.[Footnote 43]
In contrast, Treasury collects its own project information through
quarterly performance reports submitted by HFAs. HFAs are required to
make only one report of the number of jobs funded by the Section 1602
Program. HFAs submit estimated information on the number of full-time-
equivalent jobs to be funded by the entire project with the first
quarterly report for each project. The number of jobs reported to
Treasury need not be reduced to reflect parts of the project not
funded under the Section 1602 Program. Except for requiring the use of
full-time-job equivalents, Treasury has not issued detailed guidance
specifying job estimation methodology under the Section 1602 Program.
PHFA collected job information for the Section 1602 Program by
requiring project owners receiving Section 1602 Program funds to
submit an estimate of the jobs the projects would fund with their
program application. Officials said they did not plan to submit
updated estimates or reports.
TCAP projects with other Recovery Act grants covered by section 1512
recipient reporting requirements must submit jobs information for each
grant. For example, Presser Senior Apartments submitted the number of
prorated jobs to PHFA to account for jobs funded by the TCAP program
and to the City of Philadelphia to account for jobs funded by a
Recovery Act Community Development Block Grant. In contrast, projects
with both TCAP and Section 1602 Program funds are to submit data to
PHFA quarterly for the TCAP-funded jobs only.
Public Housing Authorities Met the Deadline for Obligating Public
Housing Funds and Are Expending Funds:
In Pennsylvania, 82 public housing authorities collectively received
$212.2 million in Public Housing Capital Fund formula grants under the
Recovery Act. These grant funds were provided to the authorities to
improve the physical condition of their properties. As of August 7,
2010, these authorities have obligated all funds, and the 82 in
aggregate have drawn down a total of $126 million.
Fourteen public housing authorities in Pennsylvania received a total
of $55.2 million in 21 different Public Housing Capital Fund
competitive grants under the Recovery Act. As shown in table 6, these
grant funds were provided to the authorities in four grant categories
to improve the physical condition of their properties. As of August 7,
2010, these authorities have obligated about $50.7 million, and 12
authorities have drawn down a total of $3.4 million (see fig. 2).
Officials with the HUD field office in Philadelphia said that they do
not consider any of the housing authorities in their jurisdiction to
be at risk for not meeting the Recovery Act's September 2010 deadline
for obligating competitive grant funds.
Table 6: Public Housing Capital Fund Competitive Grants Awarded in
Pennsylvania:
Category: Improvements Addressing the Needs of the Elderly and/or
Persons with Disabilities;
Number of recipients: 6;
Number of grant awards: 10;
Total awarded: $15,537,789.
Category: Gap Financing for Projects that are Stalled Due to Financing
Issues;
Number of recipients: 2;
Number of grant awards: 2;
Total awarded: $12,064,258.
Category: Creation of Energy Efficient, Green Communities: Option 1,
Substantial Rehabilitation or New Construction;
Number of recipients: 1;
Number of grant awards: 1;
Total awarded: $13,915,000.
Category: Creation of Energy Efficient, Green Communities: Option 2,
Moderate Rehabilitation;
Number of recipients: 8;
Number of grant awards: 8;
Total awarded: $13,645,772.
Source: GAO analysis of HUD data.
Note: Because some housing authorities received multiple awards, the
number of recipients does not add to 14.
[End of table]
Figure 2: Percentage of Public Housing Capital Fund Competitive Grants
Allocated by HUD That Had Been Obligated and Drawn Down in
Pennsylvania, as of August 7, 2010:
[Refer to PDF for image: 3 pie-charts; 2 horizontal bar graphs]
Funds obligated by HUD: $55,162,819 (100%);
Funds obligated by public housing agencies: $50,735,108 (92.0%);
Funds drawn down by public housing agencies: $3,372,442 (6.1%).
Number of grants:
Awarded by HUD: 21;
Obligating funds: 21;
Drawing down funds: 13.
Number of public housing agencies:
Awarded by HUD: 14;
Obligating funds: 14;
Drawing down funds: 12.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
We revisited two public housing authorities in Pennsylvania--
Harrisburg Housing Authority (HHA) and Philadelphia Housing Authority
(PHA). HHA is using 54 percent of its $4.4 million formula grant to
rehabilitate the interiors and add porch facades to two 1940s-era
buildings at the William Howard Day Homes development (see figure
3).[Footnote 44] As of August 7, 2010, HHA has disbursed about $2.9
million, or about 66 percent, of its grant, and expects to complete
work by the end of 2010. HHA is rehabilitating 54 units in two
additional buildings at William Howard Day Homes with a $3.4 million
Energy Efficient Green Communities Option 2 competitive grant. This
work includes energy efficiency and other environmental features,
including installation of (1) energy-efficient windows, appliances,
and lighting fixtures and (2) low-flow faucets and toilets. HHA
expects these efforts to reduce energy and water consumption by 28.6
percent and 33.5 percent annually, respectively, compared with this
property's consumption prior to renovation. HHA plans to measure
future energy and water usage and compare against usage in prior years
to determine savings. As of August 7, 2010, HHA obligated all its
competitive grant funds and expended about $295,000, or about 9
percent.
Figure 3: Progress of Formula Grant Work at William Howard Day Homes:
[Refer to PDF for image: 2 photographs]
The picture on the left shows the HHA William Howard Day Homes site in
June 2009. The picture on the right shows the status of work in June
2010, including the construction of new porches for each unit. In
addition, HHA is using its competitive grant to rehabilitate two
additional buildings at the development.
Source: GAO.
[End of figure]
PHA is using about $90.6 million in awarded formula grants for 6
projects, including rehabilitating 340 units of scattered site
properties, constructing 25 new 4-unit scattered site buildings,
[Footnote 45] and, at 27 different properties, upgrading electrical,
heating, and mechanical systems in order to reduce energy consumption.
[Footnote 46] As of August 7, 2010, PHA has expended about $40.8
million, or about 45 percent, of its formula grant. PHA also received
six competitive grants totaling about $36 million. PHA is using four
of these grants, totaling about $12 million, to construct 194
handicapped-accessible housing units; a $13.9 million grant to
construct 100 new housing units at Paschall Village; and a $10 million
gap financing grant to help build its 101-unit Mantua Square
development (see figure 4).[Footnote 47] Other funding sources for
Mantua Square are funding energy-efficiency and green features that
are part of a larger effort by PHA to incorporate green practices into
its housing portfolio.[Footnote 48] According to PHA, as of August 13,
2010, 28 percent of Mantua Square was completed, and work will be
completed in March 2011. As of August 7, 2010, PHA has obligated all
its competitive grants and has not disbursed any funds.
Figure 4: Progress of Work on Mantua Square:
[Refer to PDF for image: 2 photographs]
(Left) PHA‘s Mantua Square will occupy more than a full city block and
feature a mix of residential and commercial space. Phase I buildings
along one street are in various stages of framing. (Right) Buildings
in the background are Phase I of the project. The foundations in the
foreground are part of Phase II.
Source: GAO.
[End of figure]
Both housing authorities we visited are subject to oversight by the
HUD Philadelphia field office. Oversight activities of the office,
including remote monitoring of authorities' projects,[Footnote 49]
have resulted in actions at other authorities in Pennsylvania. In one
case, HUD expects to recapture about $588,000 in Recovery Act funds
from one public housing authority that had not executed a contract by
the March 2010 obligation deadline. In another case, the HUD office
required another authority to submit additional documentation to HUD
for review after the office determined that the housing authority
lacked thorough documentation on its competitive procurement process
for its Recovery Act funds. In addition, in response to concerns about
appropriate use of taxpayer dollars, HUD's Office of Public and Indian
Housing initiated an audit of the Philadelphia Housing Authority on
August 26, 2010, with a preliminary report to be due within 60 days.
Both HHA and PHA collected and reported data to OMB on jobs funded
with their Recovery Act grants. In past reporting periods, HHA has
experienced difficulties with reporting accurate job information. In
its May 2010 audit report, the HUD Office of the Inspector General
recommended that HUD require HHA to develop and implement internal
control procedures to ensure accurate reporting of job creation
data.[Footnote 50] According to an HHA official, HHA has taken action
to address errors identified by us and the inspector general by
auditing the workpapers of selected contractors, requiring contractors
to certify submitted data, and adhering to OMB's guidance and job-
reporting template. As a result, on the basis of our analysis of the
data we received, we determined that HHA used the correct methods and
calculator in preparing its recipient reports for the quarter ending
June 30, 2010. According to HHA, for the quarter ending June 30, 2010,
HHA funded approximately 22 full-time-equivalent jobs with its formula
grant and approximately 1 full-time-equivalent job with its
competitive grant.[Footnote 51] PHA also used OMB's template to
calculate full-time-equivalent jobs based on contractor data that were
verified by PHA staff. According to recipient reports on
www.recovery.gov, for the quarter ending June 30, 2010, PHA reported
approximately 156 full-time-equivalent jobs funded with its formula
grant.[Footnote 52] In the recipient reports for its 6 competitive
grants, PHA did not report any full-time-equivalent jobs during the
quarter ending June 30, 2010.[Footnote 53] According to PHA officials,
however, PHA funded approximately 16 full-time-equivalent jobs in the
quarter that it was unable to report since funds were not
disbursed.[Footnote 54]
Pennsylvania Is Using Recovery Act Funds to Stabilize Its Enacted
Fiscal Year 2010-2011 State Budget, but Continues to Face Fiscal
Challenges:
For fiscal year 2009-2010, Pennsylvania used $921 million in State
Fiscal Stabilization Fund (SFSF) monies as well as state funds freed
up as a result of the almost $1.78 billion in increased Federal
Medical Assistance Percentage (FMAP) funds to help stabilize its $27.8
billion general fund budget.[Footnote 55] After exhausting its rainy-
day fund, Pennsylvania ended its 2009-2010 fiscal year with a $1.18
billion revenue shortfall due to lower than expected revenues.
[Footnote 56] On July 6, 2010, Pennsylvania's Governor signed a $28
billion general fund budget for fiscal year 2010-2011 with an increase
of about $200 million over the fiscal year 2009-2010 budget. The 2010-
2011 budget does not include any tax increases, and general fund
revenues are estimated to fall 3.4 percent from their level in fiscal
year 2009-2010. The enacted budget includes over $1.9 billion in
Recovery Act funds, including $921 million in SFSF funds, about $655
million of which supports basic education spending, which received an
increase of $250 million, or 4.5 percent, over fiscal year 2009-2010,
and about $1 billion in increased FMAP funds.
In addition to receiving about $4.6 billion in Recovery Act funds used
to stabilize the state budget in fiscal years 2009-2010 and 2010-2011,
Pennsylvania state agencies have received other Recovery Act funds
from federal agencies--including awards discussed in this appendix.
For example, Pennsylvania received just over $1 billion for highway
and bridge projects and is using these funds to repave roads and
repair structurally deficient bridges. Pennsylvania currently expects
that state agencies will receive a total of $13.5 billion in Recovery
Act funds, including the SFSF and FMAP funds already described.
According to Pennsylvania, as of August 15, 2010, not including the
SFSF and FMAP funds, about $6.8 billion in Recovery Act funds have
been obligated and almost $5.5 billion have been expended.[Footnote 57]
Pennsylvania faces the end of Recovery Act funds in fiscal year 2011-
2012, and as we reported in May 2010, the Governor had proposed
creating a stimulus transition reserve fund to help the next
administration and legislature deal with fiscal challenges that remain
as the economy recovers.[Footnote 58] For example, Pennsylvania faces
a sharp increase in pension costs beginning in fiscal year 2012-2013.
[Footnote 59] Although the enacted budget did not include the stimulus
transition reserve fund or new revenue measures, the budget
legislation does state that it is the intention of the majority
leadership in the Pennsylvania House and Senate to enact legislation
by October 1, 2010, that raises revenue from the extraction of natural
gas, to be divided among the state, counties, and municipalities, and
environmental initiatives, to be effective no later than January 1,
2011. Also, in response to state transportation funding shortfalls,
the Pennsylvania General Assembly has begun special legislative
sessions to consider options for statewide transportation funding,
including roads, bridges, and public transit.
Pennsylvania's State Audit Agencies Continue Recovery Act Oversight,
but the 2009 Single Audit Report Identified Material Weaknesses:
According to state budget and accounting officials, Pennsylvania has
taken actions to resolve past Single Audit findings and improve
subrecipient monitoring with the aim to prevent future findings.
Pennsylvania has added staff to a work unit in the Bureau of Audits
(BOA), an internal audit bureau within the Office of the Budget, to
review subrecipient Single Audit reports and forward those with
findings to the state agencies for more timely resolution. In
addition, the state Comptroller Operations Bureau of Quality Assurance
(BQA) has worked closely with state agencies developing subrecipient
monitoring plans to provide additional guidance and oversight on the
agencies' monitoring plans. Beginning in October 2009, Pennsylvania
has required state agencies to report quarterly on the status of their
corrective action plans to resolve prior year Single Audit findings.
According to state officials, because Pennsylvania did not implement
this process until after the 2009 Single Audit period, the effect of
the new quarterly corrective action monitoring process will not be
realized until the completion of the 2010 Single Audit. For example,
of the 53 findings in the 2008 Single Audit, Pennsylvania has resolved
4 findings[Footnote 60] and has submitted corrective action plans for
the other 49 to relevant federal agencies.
According to the state Auditor General, the Single Audit is that
office's primary tool for oversight of Recovery Act and other federal
funds. Pennsylvania's Single Audit report for the fiscal year ending
June 30, 2009 was jointly issued by the Auditor General and an
independent public accounting firm and received by the Federal Audit
Clearinghouse on June 30, 2010. This was 3 months after the statutory
March 31, 2010 due date.[Footnote 61] This was the first Single Audit
for Pennsylvania that included Recovery Act programs, and the audit
identified 54 significant internal control deficiencies related to
compliance with federal program requirements, of which 42 were
classified as material weaknesses.[Footnote 62] Many of these material
weakness findings, including inadequate monitoring of subrecipients by
state agencies and noncompliance with federal regulations and state
laws, were repeats from past Single Audits. Some of these material
weaknesses and significant deficiencies occurred in programs that
included Recovery Act funds. Specifically, 7 of these findings,
including subrecipient monitoring and noncompliance with laws and
regulations,[Footnote 63] were related to the $1.47 billion in
Recovery Act funds spent in Pennsylvania in the fiscal year ending
June 30, 2009.[Footnote 64]
Auditor General and state budget officials acknowledged that
Pennsylvania will face challenges in meeting the March 2011 deadline
for the 2010 Single Audit. The increased number of Recovery Act awards
and related guidance, in turn, will increase the Single Audit workload
for the Auditor General. According to Auditor General officials,
additional audit work with no corresponding increase in audit
personnel may influence the effectiveness of Auditor General oversight
of Recovery Act spending. Pennsylvania officials said that their audit
preparations would be facilitated if the federal government released
its guidance earlier.[Footnote 65]
In addition to the Single Audit, state audit organizations continue to
provide oversight of Recovery Act spending in Pennsylvania. Auditor
General officials said that their office has completed, but not yet
released, an audit of Pennsylvania Department of Transportation
(PennDOT) Recovery Act procurement. BOA has issued four audits of
Recovery Act spending in Pennsylvania (see table 7). BOA has also
begun other reviews of programs receiving Recovery Act funds,
targeting work on programs it considers to be high risk in
Pennsylvania. These reviews include SEP, focused on allowable
activities, procurement, and reporting, and the state's weatherization
assistance program. State officials anticipate that BOA audits of
state agencies will help identify and resolve potential findings prior
to the Single Audit.
Table 7: Bureau of Audit Reports on Recovery Act Spending in
Pennsylvania:
Recovery Act audited program: Highway Infrastructure;
Agreement 4203 PA75 Juniata River Bridge;
Administering agency: PennDOT;
Results: Issued on January 6, 2010 with no adverse findings.
Recovery Act audited program: Highway Infrastructure;
Agreement 82385 Rt 235 Resurfacing;
Administering agency: PennDOT;
Results: Issued in April 2010 and found that contractors did not
always pay minimum prevailing wage rates. The audit recommended that
PennDOT should ensure that existing controls for reviewing certified
payrolls are followed to make sure that prevailing wage rates are
paid. PennDOT agreed with the finding and reinforced use of a project
office manual and included wage check requirements as part of the
employee performance rating process beginning in 2010.
Recovery Act audited program: Workforce Investment Act of 1998 (WIA)
Youth Program;
Administering agency: Philadelphia Workforce Development Corporation;
Results: Issued in March 2010 with no findings.
Recovery Act audited program: WIA Adult, Dislocated Worker, and Youth
Programs;
Administering agency: Luzerne/Schuylkill Workforce Investment Board;
Results: Issued in July 2010 with findings concerning participant
eligibility and compliance with rules and regulations and resulted in
the awardee agreeing to return over $37,000 to Pennsylvania. The
repayment has not been received, and state agency follow-up is due to
Bureau of Audits in early September.
Source: GAO analysis of Pennsylvania Bureau of Audits completed audits.
[End of table]
Finally, the Governor appointed Pennsylvania's Chief Accountability
Officer in March 2009 to help oversee reporting and transparency for
Recovery Act activities of state agencies. For the quarter ending June
30, 2010, Pennsylvania filed 371 recipient reports on behalf of state
agencies and posted them to the state's Recovery Act Web site.
[Footnote 66] According to the state Accountability Office,
Pennsylvania reported funding about 16,420 full-time-equivalent jobs
with Recovery Act funds in the quarter ending June 30, 2010.[Footnote
67]
In addition to job measures, Pennsylvania Accountability Office
officials said that Recovery Act outcome measures are posted monthly
or quarterly to Pennsylvania's Recovery Act Web site as they are made
available. Some measures, such as the number of housing units
weatherized to date, are tracked and reported as work is completed.
Other measures, such as the numbers of new low-income housing units,
will be reported as projects are completed. For longer-term measures,
such as the annual reduction in greenhouse gas emissions and
alternative renewable energy generated through EECBG, Accountability
Office officials said that outcome data will not be available until
the projects are complete.
According to Pennsylvania officials, isolating the effects of Recovery
Act spending when it is combined with other spending can be difficult.
For Recovery Act projects with multiple sources of funding--such as
the EECBG and SEP projects with matching private investment as well as
TCAP housing projects--Pennsylvania reports only the share of full-
time-equivalent jobs funded by the Recovery Act in its quarterly
recipient reports. However, other performance measures, such as energy
savings, will reflect total project outcomes, cannot easily be
prorated, and thus will not show outcomes solely related to Recovery
Act spending. Officials also cautioned that measuring longer-term
outcomes attributable solely to Recovery Act education programs will
be difficult. For example, Pennsylvania is tracking the number of
economically disadvantaged students served by the Recovery Act funds
awarded for Title I, Part A of the Elementary and Secondary Education
Act of 1965, as amended and, beginning in the fall 2010, plans to
report on the percentage of economically disadvantaged students
scoring at grade level or above on state achievement tests. However,
because multiple factors influence test scoring, Pennsylvania will not
be able to determine the percentage change solely attributable to
Recovery Act spending.
Local Governments Use Recovery Act Funds for Onetime Projects and
Services:
To learn more about the effect of Recovery Act funds on local
governments, we visited the County of Berks and the City of
Philadelphia.[Footnote 68] Figure 5 provides demographic information
for these localities. Berks County is a medium-sized urban area
encompassing the city of Reading, while Philadelphia is Pennsylvania's
largest city. Both locations have unemployment rates higher than the
state's average of 9.2 percent. According to local officials, both
localities plan to use the Recovery Act funds for a variety of
projects and service expansions which would have remained unfunded.
Figure 5: Demographics for Two Local Governments Visited in
Pennsylvania:
[Refer to PDF for image: map and accompanying data]
Map indicated the location of Berks County and Philadelphia within
Pennsylvania.
Philadelphia:
Estimated population (2008)[A]: 1,547,297;
Unemployment rate (March 2010): 11.9%;
2010 General Fund Budget: $3.85 billion;
Locality type: city.
Berks County:
Estimated population (2008)[A]: 407,125;
Unemployment rate (March 2010): 9.8%;
2010 General Fund Budget: $448.9 million;
Locality type: county.
Source: GAO analysis of U.S. Census Bureau, U.S. Department of Labor,
Bureau of Labor Statistics, Local Area Unemployment Statistics data,
city of Philadelphia and Berks county; and Map Resources (map).
[End of figure]
Berks County. Berks County has received about $5.6 million in Recovery
Act funds and, as of June 30, 2010, has expended about 47 percent of
the funds awarded, as shown in table 8. Berks County has used or is
using Recovery Act funds to support onetime projects that were already
planned and approved by the county but had not been funded, such as
upgrading a computer tracking system to monitor homeless clients, and
extending a street through an industrial park. According to a county
official, the street project has improved accessibility and encouraged
a new bottled water business to open, creating 32 local jobs. In
addition, the county has used funds to support new programs to prevent
homelessness. As of June 30, 2010, more than 275 persons have received
assistance under the county's Homelessness Prevention and Rapid
Rehousing grant. A county official notes that unless other funding is
obtained, these services will likely be significantly reduced or
discontinued when the Recovery Act funding ends. The official also
said that while the county's budget situation has declined since 2007,
the fiscal year 2010 budget totaling $449 million[Footnote 69]
included an $8.3 million surplus. Future budgets, however, may face
decreased revenue collections that may require the county to make
reductions.
Table 8: Sources of Recovery Act Funding to Berks County as of June
30, 2010:
Agency: U.S. Department of Housing and Urban Development;
Grant: Homelessness Prevention and Rapid Rehousing (HPRP);
Description: Prevent homelessness and rapidly rehouse homeless
individuals focusing on prisoners released from the county jail and
mental health clients;
Award: $1,427,174[A];
Percent Expended: 22%.
Agency: U.S. Department of Housing and Urban Development;
Grant: Community Development Block Grant-Recovery;
Description: Supplement construction of a learning center adjacent to
an emergency homeless shelter and extend street in industrial park and
provide highway access;
Award: $725,297;
Percent Expended: 83%.
Agency: U.S. Department of Energy;
Grant: Energy Efficiency and Conservation Block Grant[B];
Description: Upgrades to boilers and replacement of leaking steam
pipes in county buildings;
Award: $2,973,200;
Percent Expended: 55%.
Agency: Pennsylvania Commission on Crime and Delinquency[C];
Grant: Edward Byrne Memorial Justice Assistance Grant (JAG);
Description: Expand and enhance services of Treatment Court and
provide assistance to victims of juvenile offenders;
Award: $504,800;
Percent Expended: 20%.
Agency: Total Recovery Act funds to Berks County;
Award: $5,630,471;
Percent Expended: 47%.
Source: GAO analysis of data from Berks County and the Pennsylvania
Commission on Crime and Delinquency.
[A] Berks County received HPRP funding directly from the federal
government as well as funds passed through the state.
[B] Berks County's use of EECBG funds is discussed separately in this
report.
[C] The Pennsylvania Commission on Crime and Delinquency received
funding directly from the Department of Justice and redirected it to
state agencies and localities.
[End of table]
Berks County monitors and oversees grants from the federal government
through project manager site visits and requires the subrecipients to
provide monthly status reports. In addition, the county reports jobs
data to the federal government, and according to a county official,
has not experienced any challenges in doing so. The Berks County
Controller's Office reviews Recovery Act project invoices but has not
conducted specific audits of Recovery Act projects. The Berks County
Controller's Office expects to issue its 2009 Single Audit report by
the due date of September 30, 2010.[Footnote 70]
Philadelphia. The City of Philadelphia has received $252.1 million in
Recovery Act funds, and has expended about 11 percent, as of August
23, 2010 (see table 9).[Footnote 71] City officials acknowledged the
slow start of Recovery Act spending in Philadelphia and pointed out
that $110 million was awarded this year and the large transportation
infrastructure projects, such as street paving, could not start until
summer 2010. According to city officials, all grants received as of
June 30, 2010, have received spending authority from the City Council,
and expenditures are expected to accelerate in the next 6 months.
[Footnote 72] Officials said that most of the funded services and
projects will end or be reduced once Recovery Act funding ends.
Table 9: Examples of Recovery Act Funding to the City of Philadelphia
by Grant Category as of August 23, 2010:
Economic development:
Agency: U.S. Department of Housing and Urban Development;
Select grants by category: Community Development Block Grant[A]--to
develop neighborhood businesses, affordable housing, and the city's
cultural economy;
Award (Dollars in millions): $14.0;
Percentage expended: 32%.
Agency: U.S. Department of Housing and Urban Development;
Select grants by category: Neighborhood Stabilization Program II--to
rejuvenate neighborhoods[B];
Award (Dollars in millions): $44.0;
Percentage expended: 0.
Energy:
Agency: U.S. Department of Energy;
Select grants by category: Energy Efficiency and Conservation Block
Grant (EECBG)[C]--to replace LED traffic signals, retrofit city
buildings, and provide loans for energy efficiency projects;
Award (Dollars in millions): $14.1;
Percentage expended: 19%.
Agency: U.S. Department of Energy;
Select grants by category: Energy Retrofit Ramp Up Grant--EECBG
competitive grant to fund energy efficiency activities[B];
Award (Dollars in millions): $25.0;
Percentage expended: 0.
Health and social services:
Agency: U.S. Department of Health and Human Services;
Select grants by category: Community Service Block Grant (CSBG)--To
help move low-income Philadelphians toward self-sufficiency through
job training and literacy improvement programs;
Award (Dollars in millions): $8.3;
Percentage expended: 33$.
Agency: U.S. Department of Housing and Urban Development;
Select grants by category: Homelessness Prevention and Rapid
Rehousing--federal and state grants to prevent homelessness through
programs such as rental and utility assistance;
Award (Dollars in millions): $24.3;
Percentage expended: 21%.
Public safety:
Agency: U.S. Department of Justice;
Select grants by category: COPS Hiring Recovery Program (CHRP)--to
hire 50 police officers;
Award (Dollars in millions): $10.9;
Percentage expended: 9%.
Agency: U.S. Department of Justice;
Select grants by category: Edward Byrne Memorial Justice Assistance
Grant (JAG)--to retain 52 jobs in the Philadelphia municipal court,
provide crime-fighting resources such as Tasers and collapsible batons
to the police department, and provide crime prevention and reentry
services;
Award (Dollars in millions): $13.5;
Percentage expended: 39.
Agency: Transportation and infrastructure.
Agency: Department of Homeland Security;
Select grants by category: Transportation Security Administration
Inline Baggage Screening--to build two new baggage-screening systems
at Philadelphia International Airport;
Award (Dollars in millions): $26.6;
Percentage expended: 6%.
Agency: Other awards;
Select grants by category: Includes road repaving, airport runway
rehabilitation, and water and sewer replacement;
Award (Dollars in millions): $71.3;
Percentage expended: 8%.
Agency: Total for Recovery Act funding for Philadelphia;
Award (Dollars in millions): $252.1;
Percentage expended: 11%.
Source: GAO analysis of data from City of Philadelphia:
Notes: The table highlights some of the largest grants received by the
City of Philadelphia. The city provides a complete list of Recovery
Act grants on its Website http://www.phila.gov/recovery.
[A] One of Philadelphia's CDBG-R affordable housing projects--Presser
Senior Apartments--also received TCAP funds and is discussed earlier
in this report.
[B] Grant awarded in 2010.
[C] Philadelphia's use of the EECBG formula grant funds is discussed
separately in this report.
[End of table]
On the basis of GAO observations about potential risks in monitoring
the city's various grants, Philadelphia officials now use the city's
accounting system to track key grant deadlines to ensure funds are not
forfeited because of missed timeframes. For example, Philadelphia has
been tracking its Community Services Block Grant and, according to a
Recovery Act office official, the city expects to meet the grant's
September 30, 2010 deadline to complete services. For the COPS Hiring
Recovery Program grant, the city faces a requirement that the police
department maintain force strength for at least 1 year beyond the
grant terms or return the funds. Given the recent cancellation of two
police academy classes, city officials are closely monitoring police
staffing to ensure compliance.
Although Recovery Act funds allowed the city to fund onetime projects
and provide additional services that it would not have been able to do
otherwise, city officials said these funds had little effect on
Philadelphia's fiscal condition because of the stipulations on their
use. Philadelphia used JAG funds to avoid disbanding the city
community courts, but in general, Recovery Act funding is specifically
targeted for select projects or services and cannot be used for other
funding gaps or needs identified by the city. To address a budget
shortfall in Philadelphia's $3.85 billion fiscal year 2011 budget due
to declining revenues, the city, among other actions, has reduced its
prison and police budgets and has reduced service at selected
firehouses on a rotating basis, but was unable to use Recovery Act
funds to offset these reductions.[Footnote 73]
Philadelphia's Recovery Act efforts are coordinated through the city's
Recovery Office. In August 2010, the Recovery Office published its
first quarterly update on Recovery Act funds received.[Footnote 74]
Also in August, the city's Inspector General and the Chief Integrity
Officer issued a compliance and control program guide[Footnote 75] and
a risk assessment checklist to help identify and manage risks
associated with Recovery Act projects. According to city Recovery
officials, the risk assessments have been completed by the city
agencies and will help target oversight attention to the highest risk
projects. In addition, the city Controller's office reviews
transactions to ensure compliance with grant guidelines and conducts
the City's Single Audit review. Officials said the 2009 report was not
issued by the March 31, 2010 deadline because of limited staff.
[Footnote 76] According to city officials, the Controller's office has
contracted with a private accounting firm to help prepare the report.
Officials expect the accounting firm to provide its report to the
Controller's office by September 30, 2010, and the Controller's office
will issue the Single Audit report shortly thereafter.
Pennsylvania Comments on This Summary:
We provided the Governor of Pennsylvania with a draft of this appendix
on August 18, 2010. The Chief Implementation Officer responded for the
Governor on August 23, 2010, generally agreed with the draft and
provided technical comments that we incorporated where appropriate. We
also provided the Auditor General's staff with portions of the draft
that addressed the Auditor General's past work and plans related to
Single Audit review of Recovery Act funding. They provided technical
comments that we incorporated as appropriate. We also provided
portions of the draft to the City of Philadelphia and the County of
Berks and incorporated their technical comments as appropriate.
GAO Contacts:
Phillip Herr, (202) 512-2834 or herrp@gao.gov:
Mark Gaffigan, (202) 512-3168 or gaffiganm@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, MaryLynn Sergent, Assistant
Director; Matthew Rosenberg, analyst-in-charge; Eleanor Cambridge;
John Healey; Richard Mayfield; Jodi M. Prosser; and Stephen Ulrich
made major contributions to this report.
[End of section]
Appendix XVI Footnotes:
[1] Pub L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, (31 U.S.C. § 7501–7507) and provide a source of
information on internal control and compliance findings and the
underlying causes and risks. The Single Audit Act requires states,
local governments, and nonprofit organizations expending $500,000 or
more in federal awards in a year to obtain an audit in accordance with
the requirements set forth in the act. A Single Audit consists of (1)
an audit and opinions on the fair presentation of the financial
statements and the Schedule of Expenditures of Federal Awards; (2)
gaining an understanding of and testing internal control over
financial reporting and the entity‘s compliance with laws,
regulations, and contract or grant provisions that have a direct and
material effect on certain federal programs (i.e., the program
requirements); and (3) an audit and an opinion on compliance with
applicable program requirements for certain federal programs.
[3] DEP was awarded its SEP Recovery Act funds on May 13, 2009.
[4] DEP based its cost-effectiveness analysis on the cost per unit of
energy generated. Projects that generate more energy per dollar were
more likely to be funded.
[5] According to DEP, this estimate is based on a conversion factor
that assumes that an average home in Pennsylvania uses approximately
10,000 kilowatt hours of electricity annually.
[6] 42 U.S.C. §§ 4321–4370h.
[7] In addition, DEP is subject to DOE monitoring of the SEP program
in Pennsylvania. DOE activities include site visits by DOE project
officers.
[8] SEP projects must progress through a series of milestones
throughout the duration of the project, marked by project start date,
design, requests for proposals, contract award, installation, and
completion.
[9] As of August 11, 2010.
[10] The EECBG program was authorized in Title V, Subtitle E of the
Energy Independence and Security Act, which was signed into law on
December 19, 2007.
[11] As required by 42 U.S.C. § 17155(c)(1)(A), at least 60 percent of
the EECBG state award is reserved for units of local government that
are not eligible for EECBG direct formula grants from DOE.
[12] While renewable energy projects were eligible if they would
generate energy to replace at least 25 percent of the building or
entity‘s energy use, few renewable energy projects were selected
because of their high costs.
[13] While DEP obligated about $22.2 million to projects, the
remaining funds”-about $1.3 million-”were approved for administrative
purposes.
[14] Thaddeus Stevens College of Technology provided an additional
$64,244 in matching funds to support this project.
[15] DOE made the first 41 awards between July 24, 2009 and December
31, 2009; the last two awards were on June 24, 2010, and August 4,
2010.
[16] We selected a mix of one city and one county. Philadelphia and
Berks each had spent more EECBG funds than other recipients in the
state.
[17] The county had identified 22 energy-efficiency projects, and the
EECBG grant allowed it to fund the additional boiler and steam pipe
work sooner than it otherwise would.
[18] Philadelphia also received a $25 million award under the
competitive EECBG program.
[19] City of Philadelphia, Mayor‘s Office of Sustainability,
Greenworks Philadelphia (Philadelphia, Pa., 2009) and City of
Philadelphia, Mayor‘s Office of Sustainability, Greenworks
Philadelphia 2010 Progress Report (Philadelphia, Pa., 2010).
[20] Categorical exclusions cover categories of activities that an
agency has determined to have no significant effect on the
environment. Barring extraordinary circumstances, these activities do
not require a detailed environmental review.
[21] DEP encouraged its EECBG subrecipients to buy American-made
products even when they are not required to and provided grantees with
information on Pennsylvania suppliers, where applicable.
[22] The categories are hours worked; standard programmatic metrics,
such as obligations, outlays, and metrics associated with the activity
undertaken; and other critical metrics such as energy savings and
energy costs savings.
[23] As of August 11, 2010.
[24] As of August 5, 2010.
[25] As of August 11, 2010.
[26] GAO, Recovery Act: States‘ and Localities‘ Uses of Funds and
Actions Needed to Address Implementation Challenges and Bolster
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-604]
(Washington D.C.: May 26, 2010).
[27] DOE plans to provide access to the remaining funds to recipients,
including Pennsylvania, once they have completed weatherizing 30
percent of the homes identified in their weatherization plans and meet
other requirements. Other requirements include the recipient
fulfilling the monitoring and inspection protocols established in its
weatherization plan; monitoring its local agencies at least once each
year to determine compliance with administrative, fiscal, and state
policies and guidelines; ensuring that local quality controls are in
place; inspecting at least 5 percent of completed units during the
course of the respective year; and submitting timely and accurate
progress reports to DOE, and monitoring reviews confirm acceptable
performance.
[28] Findings include noncompliance and internal control deficiencies
in DCED‘s program monitoring of weatherization subrecipients,
including inconsistent state guidelines in calculating client income
to determine eligibility, a lack of written policies and procedures
for subrecipients to effectively administer their programs, and
computer control weaknesses in the Hancock Energy Software (HES)
system consisting of lack of documentation of change controls and
weaknesses in system security. Commonwealth of Pennsylvania, Single
Audit Report for the Fiscal Year Ended June 30, 2009, (Harrisburg,
Pa.: June 30, 2010).
[29] State housing finance agencies award low-income housing tax
credits to owners of qualified rental properties who reserve all or a
portion of their units for occupancy for low-income tenants. Once
awarded tax credits, owners attempt to sell them to investors to
obtain funding for their projects. Investors can then claim tax
credits for 10 years if the property continues to comply with program
requirements.
[30] Many affordable housing tax credit projects rely on LIHTCs
together with other forms of subsidies such as HOME Investment
Partnerships Program funds (HOME), Community Development Block Grant
(CDBG) funds, and state funds.
[31] Of the 60 TCAP and Section 1602 projects in the state, 25 only
received TCAP funds and 31 only received Section 1602 funds. Four
projects received both TCAP and 1602 funds. Projects may contain units
not financed through the TCAP or Section 1602 programs.
[32] The Internal Revenue Code requires states to develop a qualified
allocation plan (QAP) for allocating tax credits that explains the
basis upon which the state housing finance agencies distributes their
LIHTC allocations. States use the QAP to establish preferences and set-
asides within their tax credit competitions to target credits toward
specific regions (such as rural areas) or types of people (such as the
elderly). PHFA uses its qualified allocation plan to ensure that tax
credits are spread across the state rather than clustered only in the
larger cities such as Philadelphia or Pittsburgh.
[33] Under the Recovery Act, all subawards must be made by December
2010, or the housing finance agency must return the funds to Treasury.
HFAs can continue to disburse funds for committed projects through
December 31, 2011, provided that the project owners spend or incur at
least 30 percent of eligible project costs by December 31, 2010. The
project owner must have, by the close of 2010, paid at least 30
percent of the project owner‘s total adjusted basis in land and
depreciable property that is reasonably expected to be part of the low-
income housing project. Under TCAP, HFAs must disburse 75 percent of
their TCAP awards by February 2011. Project owners must spend all of
their TCAP funds by February 2012.
[34] The fifth project is Philadelphia Housing Authority‘s Mantua
Square. A housing official said the project would have been built
without Recovery Act funds but would not have included energy
efficiency and green elements that the official said will save money
over the life of the project.
[35] The Community Reinvestment Act is intended to encourage
institutions that accept deposits”such as banks”to help meet the
credit needs of the communities in which they operate. See 12 U.S.C.
§§ 2901 et seq and 12 C.F.R parts 25, 228, 345, and 563e. The CRA
requires that each insured depository institution‘s record in helping
meet the credit needs of its entire community be evaluated
periodically. That record is taken into account in considering an
institution‘s application for deposit facilities, including mergers
and acquisitions. Investing in LIHTC projects allows banks to earn
positive consideration toward their regulatory ratings under the CRA.
Investors said banks‘ CRA needs tended to be greater in metropolitan
areas.
[36] Under the LIHTC program, HFAs are required to review LIHTC
projects at least annually to determine project owner compliance with
tenant qualifications and rent and income limits. Additionally, every
3 years the HFAs must conduct on-site inspections of all buildings in
each LIHTC project and inspect at least 20 percent of the LIHTC units
and resident files associated with those units.
[37] In contrast, under the conventional LIHTC program, HFAs are not
liable for recapturing funds if a project owner fails to comply with
LIHTC requirements. Rather, their obligation is to report any
noncompliance to the Internal Revenue Service (IRS), and the IRS takes
any further actions with respect to recapture. GAO reported previously
on the risks and responsibilities of recapture for HFAs under the TCAP
and the Section 1602 Program. See [hyperlink,
http://www.gao.gov/products/GAO-10-604], States‘ and Localities Uses
of Funds and Actions Needed to Address Implementation Challenges and
Bolster Accountability (Washington, D.C.: May 26, 2010).
[38] PHFA also oversees the state PennHOMES program, which combines
resources from PHFA Agency Unrestricted Reserves and the federal HOME
program funding passed through the Pennsylvania Department of
Community and Economic Development.
[39] Project owners must comply with Davis-Bacon wage rules and the
National Environmental Protection Act (NEPA). Davis-Bacon and NEPA
requirements do not apply to Treasury‘s Section 1602 Program.
[40] A PHFA official said the agency is still waiting for HUD
clarification on the requirements for repayment obligations as of
August 16, 2010.
[41] According to PHFA officials, the agency performs asset management
activities for 589 properties, including TCAP and Section 1602 Program-
financed properties.
[42] As of August 12, 2010.
[43] HUD provided an updated calculator for determining the number of
jobs created or retained. PHFA officials said the new HUD calculator
was helpful, and easy to use, and prorated jobs accurately.
[44] HHA is using the balance of its award to upgrade kitchens in a
senior high-rise property and on other projects. For more information
on these projects, see GAO: Recovery Act: States' and Localities'
Current and Planned Uses of Funds While Facing Fiscal Stresses, GAO-09-
830SP (Washington, D.C.: July, 2009).
[45] PHA is piloting a new construction method for the authority in
building some units of the 25 buildings that contain a total of 100
units. Units will be constructed of structural insulated panels to
increase energy efficiency in the units.
[46] PHA is using an information technology system that will remotely
monitor the electrical, heating, and mechanical systems at 27 sites
and notify PHA officials if units are consuming more utilities than
expected, triggering a maintenance visit from PHA.
[47] Phase II of the project is partially funded with a $2 million
Recovery Act TCAP award that was discussed earlier in this report.
[48] For example, this project includes solar panels. PHA expects that
the panels and other energy-efficiency measures will provide annual
electricity savings of about $42,000 and pay for themselves in 12
years.
[49] In remote monitoring, HUD officials said they use a checklist to
review a housing authority's project files to confirm current
obligations and expenditures and project schedules against estimated
completion dates.
[50] HUD Office of the Inspector General, Audit Report, 2010-PH-1009
(May 13, 2010).
[51] As of August 5, 2010.
[52] As of August 5, 2010.
[53] As of August 5, 2010.
[54] Although PHA reported zero jobs funded in the quarter, PHA
provided information about work underway and job counts not yet funded
in the report narrative.
[55] The use of Recovery Act funds must comply with specific program
requirements but also, in some cases, enables states to free up state
funds to address their projected budget shortfalls. The increased FMAP
available under the Recovery Act is for state expenditures for
Medicaid services. However, the receipt of this increased FMAP may
reduce the funds that a state would otherwise have to use for its
Medicaid programs. As we previously reported, Pennsylvania plans to
use the funds made available as a result of the increased FMAP to
cover the state's increased Medicaid caseload, ensure that prompt
payment requirements are met, maintain current populations and
benefits, and help finance general budget needs, among other purposes.
[56] However, because of a positive general fund balance carried from
fiscal year 2008-2009 together with spending cuts during the year as
well as other budgetary measures, a general fund deficit of $294
million as of June 30, 2010, was carried over to the current fiscal
year.
[57] This total includes about $2.5 billion in Emergency Unemployment
Compensation.
[58] The proposed fund was to be financed through a package of tax
measures--including lowering the state sales tax from 6 percent to 4
percent and eliminating 74 exemptions, enacting a natural gas
extraction tax, and other revenue raisers--with revenues reserved for
use after June 30, 2011.
[59] In fiscal year 2012-2013, Pennsylvania projects a sharp increase
in the state's employer contributions to the State Employees'
Retirement System and the Public School Employees' Retirement System.
The state's combined contributions that year are projected to be $2.8
billion.
[60] Single Audit findings are resolved once a letter is provided by
the relevant federal agency indicating resolution.
[61] Auditor General officials previously told us that the audit was
late because the state budget impasse in 2009 delayed the year-end
closeout. Pennsylvania's Office of the Budget did not request an
extension to the March deadline on behalf of Pennsylvania because
officials were told that the federal government would not grant an
extension.
[62] A material weakness is a significant deficiency, or a combination
of significant deficiencies, that results in more than a remote
likelihood that (1) material misstatement of the financial statements
will not be prevented or detected by the entity's internal control or
(2) material noncompliance with a type of compliance requirement of a
federal program will not be prevented or detected.
[63] For the Recovery Act Child Care and Development Block Grant, the
Auditor General criticized Pennsylvania for failing to spend any funds
between the April 2009 award date and the June 30 fiscal year end,
despite an existing waiting list for child care services. Pennsylvania
officials disagreed with this finding because the grant deadlines are
to obligate funds by September 30, 2010, and expend funds by September
30, 2011. According to state budget officials, Pennsylvania did not
have state appropriation authority to spend the federal award until
August 2009.
[64] The only Recovery Act programs with substantial expenditures in
fiscal year 2008-2009 were the Medicaid (Federal Medical Assistance
Percentage (FMAP)) and Unemployment Insurance programs.
[65] The Single Audit guidance for 2009 was issued in May 2009 and the
2010 guidance was issued on July 29, 2010.
[66] See [hyperlink, http://www.recovery.pa.gov].
[67] Pennsylvania Stimulus Accountability Office, Citizen's Update:
Quarterly Progress Report (Harrisburg, Pa., July 15, 2010).
[68] Our examination of Recovery Act funds included only funds that
have been or will be received by the specific entities we visited. In
the localities we visited, local school districts, workforce
investment boards, transportation agencies, and public housing
authorities also have or will be receiving Recovery Act funds.
[69] Berks County's fiscal year 2010 budget total of $449 million does
not include capital projects.
[70] Berks County's fiscal year 2009 ended December 31, 2009.
[71] According to the city recovery office, quasi-city governmental
and partner agencies--such as the local workforce investment board and
local weatherization agency--also received $67.2 million.
[72] A $6.3 million Broadband II award received on July 1, 2010, was
awaiting approval by the City Council as of August 27, 2010.
[73] The city's fiscal year is July 1 to June 30.
[74] City of Philadelphia, Stimulus at Work in Philadelphia: The
Mayor's Quarterly Update on the Recovery Act to the Citizens of
Philadelphia (August 2010).
[75] The Recovery Act in Philadelphia, ARRA Compliance and Control
Guide Phases I-V (August 2010) is available at [hyperlink,
http://www.phila.gov/recovery].
[76] Philadelphia's 2008 Single Audit report was issued in October
2009.
[End of Appendix XVI]
Appendix XVII: Texas:
Overview:
The following summarizes GAO's work on the seventh of its bimonthly
reviews of American Recovery and Reinvestment Act of 2009 (Recovery
Act)[Footnote 1] spending in Texas. The full report covering all of
our work encompassing 16 states and the District of Columbia is
available at [hyperlink, www.gao.gov/recovery].
What We Did:
We reviewed the use of Recovery Act funds in Texas for public housing
projects and for energy efficiency and conservation block grant
projects. For descriptions and requirements of the programs we
covered, see appendix XVIII of GAO-10-1000SP. For these programs, we
focused on how funds were being used, how safeguards were being
implemented to ensure funds are used appropriately, and how results
were being assessed:
* The public housing program was selected to provide a continuing or
updated assessment of Public Housing Capital Fund competitive and
formula grants awarded under the Recovery Act--an assessment covering
the status of obligations and expenditures by public housing agencies,
oversight assistance and monitoring provided by the U.S. Department of
Housing and Urban Development (HUD), and the overall impacts of the
funds. We contacted two HUD offices in Texas--the Fort Worth Regional
Office and the San Antonio Field Office--to determine the types and
extent of assistance they provided to help public housing agencies
meet Recovery Act deadlines and review the offices' plans for
monitoring public housing agencies' compliance with requirements for
using grant funds. We obtained updated information on three ongoing
projects that we began covering in our previous work and reports--one
project funded by a competitive grant awarded under the Recovery Act
and two projects funded by formula grants awarded under the act. The
three projects are managed by the San Antonio Housing Authority
(SAHA), which received relatively large amounts of both Capital Fund
competitive grant funds and formula grant funds directly from HUD.
[Footnote 2] At SAHA, we reviewed project-related documentation,
including funding obligation and expenditure data, and made on-site
observations of progress on the three projects.[Footnote 3] Also, we
interviewed SAHA's Executive Director, the Chief Financial Officer,
the Director of Procurement, and other responsible officials. Further,
in contacting HUD and SAHA officials, we obtained perspectives on the
various impacts of Recovery Act funds.
* We selected the Energy Efficiency and Conservation Block Grant
(EECBG) program, which is administered by the U.S. Department of
Energy (DOE), because we had not previously reviewed it and because
over $200 million was awarded to entities within Texas.[Footnote 4]
The purposes of the EECBG program include assisting eligible
communities to implement strategies to reduce fossil fuel emissions
and improve energy efficiency. In Texas, we selected four recipients
of EECBG funding to review--the State Energy Conservation Office
(SECO) and three cities (Austin, Bryan, and Round Rock) that received
direct awards from DOE.[Footnote 5] In visiting each of the four
recipients, we reviewed available documentation and interviewed
officials to determine the process for selecting projects, the amounts
of funds obligated and spent, oversight methods for monitoring use of
funds, and plans for measuring energy savings resulting from EECBG
projects.
Further, in Texas, we obtained state and local government perspectives
on overall use and impact of Recovery Act funds. Specifically, at the
state level, we obtained perspectives from the Office of the Governor,
staff of the Legislative Budget Board,[Footnote 6] and the State
Comptroller's Office; at the local level, we contacted city management
officials in Austin and Round Rock.[Footnote 7] Also, we reviewed
efforts by state and local government to promote accountability for
use of Recovery Act funds. We focused in particular on efforts by the
Office of the Governor; the State Auditor's Office; and city auditor
offices or other responsible officials in Austin, Bryan, Dallas,
Houston, and Round Rock.[Footnote 8]
What We Found:
* Public housing. All of the 10 public housing agencies in Texas that
received Public Housing Capital Fund competitive grants ($21.5 million
total) are on track to meet the September 2010 deadline for obligating
all funds, according to HUD officials.[Footnote 9] To help ensure that
this occurs, the two HUD field offices we contacted in Texas noted
plans for providing continued assistance to public housing agencies.
Officials at the HUD San Antonio Field Office stated, for instance,
that they sponsor weekly telephone conferences--with invited
participation from all of the 88 public housing agencies in the
office's jurisdiction--to collaborate and discuss new developments.
Also, to help ensure compliance with requirements for using Recovery
Act funds, the HUD field offices we contacted in Texas are
implementing the monitoring strategy promulgated by HUD headquarters--
a strategy that includes various types of reviews of public housing
agencies. Regarding overall impacts or benefits of these funds, HUD
field office officials cited improvements in public housing agencies'
Public Housing Capital Fund grant management and enhanced partnering
relationships with the housing agencies. SAHA officials stated that
Recovery Act grants are enabling capital improvements benefiting
residents of a significant portion (42 percent) of the agency's total
public housing inventory of 6,273 units. Also, for the most recent
quarter (April to June 2010), SAHA reported that about 61 jobs (full-
time equivalents) were funded with Recovery Act dollars.[Footnote 10]
* Energy efficiency and conservation block grants. For the EECBG
program, Texas received approximately $208.9 million, which consists
of $163.3 million awarded by DOE directly to cities, counties, and
tribal communities in the state and $45.6 million awarded to SECO. The
four recipients we reviewed in Texas (three cities and SECO) have
taken steps to choose projects. As of late summer 2010, three of the
recipients each reported that more than 80 percent of their respective
funding was obligated for EECBG project expenses, but none of the four
recipients reported having spent more than 6 percent of their funds.
The four EECBG recipients are implementing processes to monitor the
use of Recovery Act funds through methods such as conducting on-site
inspections and verifying that materials meet specifications. Also, in
accordance with DOE guidance, the four recipients reported that they
have plans to measure energy savings resulting from EECBG projects.
Further, for the most recent quarter (April to June 2010), the four
recipients collectively reported that about eight jobs (full-time
equivalents) were funded with Recovery Act dollars.
* Use and impact of funds. Recovery Act funds continue to support a
range of programs in Texas. As of August 1, 2010, Texas state entities
had spent a majority--approximately $12.2 billion or about 62 percent--
of the awarded $19.8 billion Recovery Act funds, according to the
State Comptroller's Office. The Governor's staff noted Texas has
achieved a balanced budget and Recovery Act funds were not used to
estimate the revenue available to support the budget. Staff from key
legislative offices noted that the Recovery Act increased federal
funds available to support state programs. In preparing for the end of
Recovery Act funding, state officials continue to emphasize the
Governor's and the state legislature's guidance to avoid using
Recovery Act funds for ongoing expenses. At the local government
level, city officials we contacted in Austin and Round Rock commented
that Recovery Act funds have had a limited overall budgetary impact
but have been helpful in furthering specific efforts.
* Promoting accountability. Texas state entities, particularly the
State Auditor's Office, the Governor's Office, and the State
Comptroller's Office, continue efforts to help ensure that Recovery
Act funds are used appropriately. These efforts include conducting
audits and tightening controls to help ensure only eligible recipients
receive Recovery Act payments. Also, local government audit offices or
other responsible officials in the five cities we contacted--Austin,
Bryan, Dallas, Houston, and Round Rock--have similar efforts underway
or planned. Further, in July 2010, after completing a Recovery Act-
related performance audit of the Workforce Investment Act of 1998, the
State Auditor's Office reported that the two local workforce
development boards it reviewed did not calculate the number of jobs
funded with Recovery Act dollars consistent with guidance provided by
the Texas Workforce Commission. Going forward, the report noted that
the Texas Workforce Commission and the two local boards generally
concurred with recommendations for improving accuracy in calculating
and reporting the number of applicable jobs.
Public Housing in Texas: Status of Recovery Act Funds, HUD's Oversight
Assistance and Monitoring Efforts, and Impacts of the Funds:
Public housing support under the Recovery Act consists of separate
competitive and formula grants awarded directly from HUD to public
housing agencies. Regarding competitive grant funds, none of the 10
public housing agencies in Texas that received Capital Fund
competitive grants are at risk of missing the September 2010 deadline
for obligating all of the funds, according to HUD officials in the
state. As noted in our previous report, all recipient grantees met
their March 2010 deadline for obligating all formula grant funds. HUD
officials reported ongoing oversight efforts to assist public housing
agencies meet deadlines for obligating and expending Recovery Act
funds and to monitor the agencies for compliance with requirements for
using the funds. Among the overall impacts or benefits of these funds,
the HUD officials cited enhanced partnering relationships with public
housing agencies, and SAHA officials cited capital improvements
benefiting residents of 42 percent of the agency's 6,273 public
housing units. Also, for the most recent quarter (April to June 2010),
SAHA reported that about 61 jobs (full-time equivalents) were funded
with Recovery Act dollars.
Statewide Status of Competitive Grant Funds and Use in One Housing
Project:
Of the 415 public housing agencies in Texas, 10 collectively received
22 Public Housing Capital Fund competitive grants under the Recovery
Act, totaling $21.5 million. These grant funds were provided to the
agencies to improve the physical condition of their properties. As of
August 7, 2010, 9 of the 10 recipient public housing agencies
collectively had obligated $5 million (23 percent) of the $21.5
million. Also, 6 of the recipient agencies had drawn down a cumulative
total of $1.3 million from the obligated funds, as of August 7, 2010.
Of the 10 recipient public housing agencies, 5 are under the
jurisdiction of the HUD Fort Worth Regional Office, and 5 are under
the HUD San Antonio Field Office. According to officials in both HUD
offices, none of the 10 public housing agencies are at risk of missing
the September 2010 deadline for obligating 100 percent of competitive
grant funds.[Footnote 11]
We visited the San Antonio Housing Authority (SAHA) in June 2010. SAHA
received the largest number of competitive grants in Texas (9 of the
22 total) and the second highest dollar amount. SAHA officials stated
that the agency expects to meet the obligation deadline. The officials
said that SAHA recently revised its procurement and award procedures
to ensure it would meet operational goals, such as those related to
providing employment opportunities for low-income individuals. This
change, according to the officials, led to longer procurement cycles,
which necessitated that SAHA project managers and procurement
personnel give increased attention and focus to planning efforts. In
addition, SAHA officials said that they recently restructured their
construction services department to better focus, plan, collaborate,
and execute current and future projects.
In San Antonio, we observed progress at a competitive grant-funded
project ($265,528) managed by SAHA--upgrades to the Villa Hermosa
Apartments. Converted to public housing in 1971, the five-story
property has 66 units for elderly and/or disabled persons. SAHA
officials said that the property previously was a detention center.
The existing common and community space is to be evaluated,
redesigned, and upgraded to enhance accessibility and efficiency of
use for residents and create an environment that encourages
socialization among the residents. Areas to be enhanced include the
first floor assembly space, kitchen, laundry rooms, and special use
space (e.g., space for service providers and confidential
discussions). At the time of our June 2010 visit, the architectural
and engineering design work (which began in March 2010) was nearing
completion. The schedule going forward, according to SAHA officials,
was to award a construction contract by August 31, 2010--a date
enabling SAHA to meet the September 2010 deadline for obligating the
competitive grant funds. Further, the officials noted that the
scheduled date for completing the upgrades is March 31, 2011, which is
earlier than the September 2011 deadline for expending 60 percent of
competitive grant obligations and the September 2012 date for
expending 100 percent of the obligations.
Statewide Status of Formula Grant Funds and Use in Selected Housing
Projects:
Of the 415 public housing agencies in Texas, 351 collectively received
$119.8 million in Public Housing Capital Fund formula grants under the
Recovery Act to improve the physical condition of their properties.
The recipient agencies met the March 2010 deadline for obligating all
of the funds. Also, 346 of the recipient agencies had drawn down a
cumulative total of $84.5 million from the obligated funds, as of
August 7, 2010.
We visited San Antonio in June 2010 to observe the status of two
ongoing formula grant-funded projects managed by SAHA. One of the
formula grant-funded projects is intended to improve housing for
elderly residents (Lewis Chatham Apartments) and the other to improve
housing for families (Highview Apartments).[Footnote 12] Built in
1973, the Lewis Chatham Apartments is a four-story property with 119
units for elderly and/or disabled persons. The property was vacated in
December 2009 to facilitate abatement of environmental items
(asbestos). In March 2010, after completion of abatement work, the
general contractor began reconstruction of the apartments. Among other
improvements, the rehabilitation of the property includes replacing
kitchen and bathroom cabinets and fixtures, installing energy-
efficient lighting, upgrading heating and air-conditioning systems,
and replacing the roof. Rehabilitation of these apartments is SAHA's
most expensive Recovery Act project, accounting for approximately $6.4
million of the total Public Housing Capital Fund formula grant ($14.6
million) awarded to SAHA. During our June 2010 visit, we observed
ongoing interior work--involving, for example, installation of
electrical wiring and plumbing and preparation for adding sheetrock to
the interior walls--and ongoing exterior work to replace roofing.
According to SAHA officials, the scheduled date for completing the
project is December 31, 2010--which is earlier than the March 2011
deadline for expending 60 percent of formula grant obligations and the
March 2012 deadline for expending 100 percent of the obligations.
Built in 1977, the Highview Apartments is a one-story property with 68
duplex units for families. Formula grant funds were allocated to
develop three playground areas ($291,850) and replace roofing on all
housing units and the administrative office building ($665,394) at the
Highview Apartments.[Footnote 13] In May 2010, work to develop the
playground areas was completed, including installation of a soft-fall
product to enhance safety for children and reduce annual maintenance
costs. During our June 2010 visit, we observed the newly completed
playground areas. Also, we observed that roofing replacement work was
ongoing. SAHA officials said the project is on track to meet the
targeted completion date of September 23, 2010, which is earlier than
the 2011 and 2012 deadline dates for expending 60 percent and 100
percent, respectively, of formula grant obligations.
HUD Field Offices in Texas Are Using Various Oversight Efforts to
Assist and Monitor Public Housing Agencies:
HUD Fort Worth Regional Office and San Antonio Field Office officials
cited various types of ongoing assistance to help ensure that public
housing agencies stay on track in meeting deadlines for obligating and
expending Recovery Act funds. As a key part of assistance efforts,
both offices noted the particular usefulness of weekly telephone calls
and e-mail messages to the public housing agencies. HUD San Antonio
Field Office officials stated, for instance, that they sponsor weekly
telephone conferences--with invited participation from all of the 88
public housing agencies in the office's jurisdiction. Also, in some
cases, the officials said that they initiate conference calls with a
housing agency's board of commissioners to provide impetus for meeting
deadlines. SAHA officials reported that the local HUD office's
assistance efforts were helpful. SAHA officials noted, for example,
that the periodic telephone conferences sponsored by the HUD office
were excellent opportunities for collaborating and exchanging
information.
To help ensure that public housing agencies comply with Recovery Act
requirements for housing grant funds, the HUD field offices we
contacted in Texas are also implementing the monitoring strategy
promulgated by HUD headquarters--the Recovery Act monitoring strategy
for year 2 (March 18, 2010 to March 17, 2011). The strategy covers
both competitive and formula grants and calls for field offices to
conduct various types of reviews. Under HUD's monitoring strategy,
each of the 22 competitive grants awarded to public housing agencies
in Texas was to be reviewed by August 20, 2010. The HUD Fort Worth
Regional Office is responsible for reviewing 8 of the competitive
grants, and the HUD San Antonio Field Office is responsible for
reviewing the other 14.[Footnote 14] The Fort Worth Regional Office
completed its reviews during July 2010. The HUD San Antonio Field
Office completed the required reviews on August 12, 2010. HUD
headquarters developed a standardized monitoring checklist for use in
completing the reviews--a checklist based on requirements in the
Recovery Act and HUD notices and program regulations.
For formula grants, under HUD's monitoring strategy, each public
housing agency that was less than 90 percent obligated as of February
26, 2010, was to be reviewed by June 2010. According to HUD, 25 public
housing agencies in Texas met the criterion for these "quick look"
reviews. The HUD Fort Worth Regional Office was responsible for
reviewing 21 of the agencies, and the HUD San Antonio Field Office was
responsible for reviewing 4 agencies. The San Antonio Field Office
reported that each of the 4 agencies it reviewed was on track. After
conducting initial reviews in May and June 2010 and applicable follow-
up reviews in June, July, and August 2010, the Fort Worth Regional
Office reported that 16 of the 21 agencies it reviewed were on track,
whereas the other 5 had not provided required documentation. In August
2010, Fort Worth Regional Office officials told us that efforts to
obtain the required documentation were continuing. The officials also
commented that, to date, there were no deficiencies requiring HUD to
deobligate or recapture funds from any of the public housing agencies.
In reference to the overall assessment for each of the 25 public
housing agencies, we analyzed the standardized quick look checklists
completed by HUD staff who conducted the respective assessment. We
found that each quick look checklist reflected a record of supervisory
review.
HUD Fort Worth Regional Office and San Antonio Field Office officials
acknowledged that Recovery Act responsibilities presented capacity
challenges to their respective office in having to manage these
responsibilities concurrently with maintaining oversight of the
regular Capital Fund and other HUD programs. However, the officials
noted that their offices met these challenges by setting priorities
and adjusting resource allocations to meet changing circumstances. For
example, HUD Fort Worth officials explained that select teams are
usually responsible for specific housing programs, such as the regular
Capital Fund program, but that all housing staff were assigned some
responsibility for Recovery Act activities. Both offices reported that
all of the public housing agencies under their respective jurisdiction
met the June 2010 deadline for obligating fiscal year 2008 regular
Capital Fund grants.
Various Impacts Attributed to Recovery Act Funding for Public Housing:
HUD and public housing agency officials cited a variety of impacts
resulting from Recovery Act funding. Attributed impacts ranged from
energy-efficiency enhancements and other property upgrades benefiting
numerous residents to improvements in the ability of both HUD and
housing agencies to manage Public Housing Capital Fund grants.
HUD Fort Worth Regional Office officials anticipate that an impact of
Recovery Act funding will be a reduction in energy consumption. The
officials elaborated that public housing agencies have been able to,
for example, purchase energy efficient appliances; install new cooling
systems, windows, and doors; and replace roofs. As such, the officials
anticipate that the cost of utilities will decrease significantly.
HUD San Antonio Field Office officials commented that a significant
aspect of Recovery Act funding is the size of the grant amounts, which
are approximately 1.5 times the Capital Fund amounts usually received
by public housing agencies on an annual basis. In providing further
perspective, the officials noted that public housing agencies still
received a regular Capital Fund grant in 2009--in addition to Recovery
Act funding--and, collectively, these amounts constituted about 2.5
times the normal Capital Fund allocation for 2009. Thus, the officials
characterized the Recovery Act grants as a "major infusion of funds"
that provided "a welcome relief" for public housing agencies to
address growing needs associated with the gradual obsolescence of
properties, among other factors.
SAHA officials expressed a similar perspective. The officials said
that Recovery Act funding enabled SAHA to immediately address some
deferred maintenance needs that otherwise might not have been
addressed for years. Thus, according to SAHA officials, a significant
result expected is an improved quality of life for hundreds of public
housing residents. Specifically, the officials explained that SAHA is
using nearly $20 million in Recovery Act funding to make capital
improvements at 37 of the agency's 70 public housing properties--
improvements that will benefit residents of the 2,634 units at the 37
properties.[Footnote 15] For example, the officials noted that
improvements to properties serving the elderly and/or persons with
disabilities include upgrading elevator, security, and fire alarm
systems; installing energy-efficient heating, ventilating, and air
conditioning systems; and modernizing common areas to encourage
socialization among residents.
More broadly, officials at the HUD San Antonio Field Office--which
oversees 88 public housing agencies (including SAHA)--said Recovery
Act funding is being used to renovate 188 of the 223 public housing
properties that are under the office's jurisdiction. The officials
noted that capital improvements at the 188 properties will benefit
residents of 16,568 units, which constitute 76 percent of the 21,659
total units under the office's jurisdiction.
Another impact of Recovery Act funding cited by HUD San Antonio Field
Office officials is improvement in the ability of both HUD and housing
agencies to manage Public Housing Capital Fund grants. The officials
explained, for example, that Recovery Act implementation necessitated
cross-training of HUD staff, which makes the staff more effective and
provides the office with more flexibility in future work assignments.
Also, the officials noted that Recovery Act implementation,
particularly oversight assistance and monitoring responsibilities,
created many new opportunities for HUD field office staff to interact
with public housing agencies. The officials elaborated that these
interactions have included individual telephone calls, weekly
conference calls, frequent e-mail bulletins, and training sessions.
Further, in implementing the Recovery Act, the officials noted that
the field office has conducted reviews (either a remote review or an
on-site review) of all 88 public housing agencies under its
jurisdiction--whereas, previously, some of the agencies had not been
reviewed in years.
The numerous interactions and reviews stemming from Recovery Act
implementation, according to HUD San Antonio Field Office officials,
have resulted in better-performing public housing agencies.
Consequently, the HUD officials said that potential risks associated
with administering the Public Housing Capital Fund Program in the
future probably have been significantly reduced. In sum, while
acknowledging some negative aspects of Recovery Act implementation--
such as additional strains on workloads and complaints about reporting
mandates--the HUD officials' overall observations were positive.
Number of Jobs Reported by SAHA as Funded with Recovery Act Dollars:
The Recovery Act and related Office of Management and Budget guidance
require recipients of Recovery Act funds to periodically report an
estimated number of jobs funded with Recovery Act dollars. As
mentioned previously, HUD awarded SAHA a Public Housing Capital Fund
formula grant ($14.6 million) and nine Public Housing Capital Fund
competitive grants (totaling $5.3 million) under the Recovery Act.
Regarding the number of jobs funded with Recovery Act dollars for the
most recent quarter (April to June 2010), SAHA reported (to
FederalReporting.gov) about 55 full-time equivalents (FTE) for the
formula grant and about 6 FTEs for the competitive grants.[Footnote
16] For the prior quarter (January to March 2010), SAHA reported about
29 FTEs for its formula grant--and no FTEs for its competitive grants
because contract awards were not made until late March 2010, according
to SAHA officials.[Footnote 17] For both quarters, a SAHA procurement
official stated that more than 90 percent of the jobs reported as
funded by Recovery Act dollars were contractor employees working on
modernization improvements at SAHA properties. The official explained
that the other Recovery Act-funded jobs reported were SAHA employees,
such as project managers and inspectors.
SAHA officials said they used OMB and HUD guidance to determine how to
calculate FTEs and that this methodology remained the same since the
October to December 2009 reporting period. To help ensure accuracy in
job reporting, the SAHA officials noted that the agency requires its
contractors to use a standardized template for submitting hours worked
on Recovery Act projects each quarter. Regarding FTEs reported for
SAHA employees, a SAHA official stated that agency reporting is based
on actual hours worked as recorded on timesheets.
Selected Entities in Texas Are Taking Steps to Implement Energy
Efficiency and Conservation Block Grant Projects, but Much Additional
Work Remains:
As a result of the Recovery Act, Texas received approximately $208.9
million in EECBG direct formula funding, which consists of $163.3
million awarded by the U.S. Department of Energy (DOE) directly to
cities, counties, and tribal communities in the state and $45.6
million awarded to the State Energy Conservation Office (SECO). The
purposes of the EECBG program are to assist eligible communities in
creating and implementing strategies to reduce fossil fuel emissions
and total energy use and to improve energy efficiency in the building,
transportation, and other appropriate sectors. In Texas, we selected
four recipients of EECBG funding to review--three cities that received
direct awards from DOE, plus the state agency (SECO) that plans to
allocate the majority of its funding to cities and counties in Texas
ineligible for direct grants from DOE (see table 1).[Footnote 18]
Table 1: Recovery Act EECBG Funding and Types and Number of Projects
by Four Recipients in Texas:
EECBG recipient: City of Austin;
Grant amount and percentage obligated and spent: Amount: $7,492,700;
Grant amount and percentage obligated and spent: Obligated[A]: 81%;
Grant amount and percentage obligated and spent: Spent[A]: 2%;
Types of project:
Energy efficiency retrofits;
Number of projects funded: 2.
Lighting;
Number of projects funded: 2.
Buildings and facilities;
Number of projects funded: 1.
Onsite renewable technology;
Number of projects funded: 1.
EECBG recipient: City of Bryan;
Grant amount and percentage obligated and spent: Amount: $695,100;
Grant amount and percentage obligated and spent: Obligated[A]: 100%;
Grant amount and percentage obligated and spent: Spent[A]: 3%;
Types of project:
Energy efficiency retrofits;
Number of projects funded: 1.
EECBG recipient: City of Round Rock;
Grant amount and percentage obligated and spent: Amount: $955,400;
Grant amount and percentage obligated and spent: Obligated[A]: 15%;
Grant amount and percentage obligated and spent: Spent[A]: 6%;
Types of project:
Energy efficiency retrofits;
Number of projects funded: 3.
Types of project: Lighting;
Number of projects funded: 1.
Types of project: Onsite renewable technology;
Number of projects funded: 1.
Types of project: Technical consultant services;
Number of projects funded: 1.
EECBG recipient: State Energy Conservation Office (SECO);
Grant amount and percentage obligated and spent: Amount: $45,638,100;
Grant amount and percentage obligated and spent: Obligated[A]: 89%;
Grant amount and percentage obligated and spent: Spent[A]: 2%;
Types of project:
Building audit and/or retrofit;
Number of projects funded: 962.
Types of project: Renewable energy;
Number of projects funded: 58.
Types of project: Traffic signals and/or street lights;
Number of projects funded: 41.
Sources: U.S. Department of Energy, City of Austin, City of Bryan,
City of Round Rock, and State Energy Conservation Office.
[A] City of Austin percentages are as of July 31, 2010; City of Bryan
percentages are as of August 11, 2010; City of Round Rock percentages
are as of August 10, 2010; and SECO percentages are as of August 19,
2010.
[End of table]
Grant Recipients Completed the Project Selection Process; Three of the
Four Recipients Obligated Most of Their Grant Funds, but Spending Is
Just Beginning:
The four EECBG recipients we reviewed selected projects to fund based,
for example, on estimated energy savings. Three of the recipients each
reported obligating more than 80 percent of their respective grant
funds as of late summer 2010, but none of the four recipients reported
spending more than 6 percent of their funds (see table 1). Under DOE
guidance, EECBG recipients have 18 months from the effective date of
the grant award to obligate the funds and 36 months to spend funds.
Austin Energy, which oversees the City of Austin's $7.5 million in
EECBG funding, reported that the city's EECBG funding is allocated to
six separate projects.[Footnote 19] The projects include an energy
efficiency retrofit of a building that houses first responders, two
lighting retrofits at city hall and parking and other facilities,
installation of programmable thermostats with two-way communication at
multiple city facilities, weatherization and duct sealing at fire and
emergency medical service stations and park facilities, and the
installation of biogas generation equipment[Footnote 20] at the
Hornsby Bend Biosolids Management Plant. Austin Energy officials said
they did not document specific criteria for grading and selecting
potential projects but generally chose projects that were ready to
proceed to construction and would provide long-term value in terms of
energy efficiency. As of July 31, 2010, Austin Energy reported that 81
percent of its EECBG funding was obligated and approximately 2 percent
of total EECBG funds had been spent.
Engineering officials in Bryan reported that the city's $695,100 in
EECBG funding is allocated toward an energy efficiency building
retrofit. The building, which formerly housed the police department,
is to be retrofitted with new energy efficiency windows; new roof; new
heating, ventilation, and air conditioning (HVAC) system; low-flow
toilets and showerheads; and energy efficient lighting. City of Bryan
officials said they considered another project, traffic signal
replacements, but selected the building retrofit because the building
would be used for at least another 20 to 30 years and they believed
this maximized the use of funds and provided a long-term solution for
the building. As of August 11, 2010, Bryan officials reported that 100
percent of EECBG funding was obligated and approximately 3 percent of
total EECBG funds had been spent.
The City of Round Rock, which received $955,400 in EECBG funding,
plans to use the grant for multiple projects--lighting and HVAC
retrofits at various city facilities, such as the library, water
treatment plant, and fire stations; solar panel installation on the
city hall parking garage; and the services of an energy management
consultant to develop the city's strategy for spending the EECBG
funding.[Footnote 21] Round Rock officials reported that they worked
with the energy management consultant to prioritize and select
potential projects based on estimated annual energy savings and total
investment costs. As of August 10, 2010, Round Rock officials reported
that about 15 percent of EECBG funding was obligated and approximately
6 percent of total EECBG funds had been spent.
SECO, which received $45.6 million in EECBG funding from DOE, plans to
allocate the majority of the funding to subrecipients--that is, cities
and counties in Texas ineligible for direct grants from DOE.[Footnote
22] SECO officials said their approach was to spread funding out to
smaller communities to foster awareness of energy efficiency,
greenhouse gas reduction, and sustainability in those communities.
SECO said that 1,061 cities and counties in Texas would receive EECBG
funding, with an average grant of $39,000. As of August 19, 2010, SECO
reported that about 89 percent of its $45.6 million EECBG funding was
obligated, mainly through contracts with local entities.[Footnote 23]
Also, SECO reported that about 2 percent of the EECBG funds had been
spent as of August 19, 2010.
EECBG Recipients Developed Plans to Monitor the Use of Recovery Act
Funding:
As part of their overall EECBG program implementation strategy,
recipients described the methods they plan to use for monitoring
Recovery Act funding. For example, the cities of Austin and Bryan both
reported that site inspections by the respective city's EECBG project
managers would be conducted to monitor construction. The City of
Bryan's EECBG monitoring strategy document states that site
inspections are to be performed by the city to ensure that submitted
and installed materials and components are the same and do not
indicate points of origin other than what is required contractually
and in accordance with Buy American requirements. Round Rock officials
also reported plans to inspect and verify materials, comparing the
description and model number from the contract with the actual
equipment installed.
SECO officials said that the very large number of subrecipients
receiving EECBG funding from SECO--1,061 cities and counties
throughout Texas--present management and monitoring challenges. The
officials reported that SECO plans to select a contractor to monitor
the subrecipients receiving the EECBG funding through site visits
and/or desk reviews of the subrecipient entities.[Footnote 24] The
SECO officials added that some of these entities may not have received
any federal awards previously, which could create an increased need
for on-site visits and more frequent communication from SECO.
EECBG Recipients Plan to Measure Energy Savings:
According to DOE guidance, EECBG recipients are required to report
quarterly to DOE on several categories of activity and results
metrics. Included in these categories are critical metrics, such as
energy savings and associated cost savings. The guidance notes that
DOE prefers that recipients utilize their own methodology for
determining and reporting critical metrics--although DOE has developed
a tool to help recipients estimate metrics if using their own
methodology proves difficult. The DOE tool, a benefits calculator, is
designed to provide high-level estimates of energy savings and
resulting energy emissions reductions. The benefits calculator
requires multiple inputs, such as the zip code where the project is
implemented and whether the project sector is commercial or
residential. DOE indicated that the outputs from the benefits
calculator should be used for reporting to DOE only if site-specific
estimates are not available.
The four EECBG recipients we visited said they plan to use a variety
of approaches to measure energy savings resulting from their EECBG
projects. For example, Austin Energy officials reported that they plan
to measure energy savings by using the company's database that tracks
utility costs and usage. This information enables them to measure
actual cost and energy savings as a result of the EECBG activities by
comparing energy use information for periods before and after project
completion. Also, the officials said they plan to normalize the
savings to account for differences in weather and occupancy.
Bryan officials said after they chose the building retrofit project
and in advance of the renovations, they conducted an energy audit of
the building by looking at historic utility bills. The officials also
plan to monitor energy consumption after construction completion to
obtain data on energy savings. The officials noted, however, they were
concerned that pre-and postconstruction energy audits would not
accurately reflect actual energy savings because the use of the
building is changing.
According to Round Rock officials, they plan to work with their energy
management consultant to establish a baseline estimate of energy used
before and after installation of HVAC, lighting, and other retrofits
and also plan to analyze utility bills to identify energy and cost
savings. Round Rock officials were familiar with the DOE benefits
calculator; however, they noted that in some instances the DOE
benefits calculator provided a different, reduced amount of energy
savings than their energy savings estimates. For example, Round Rock
reported obtaining estimates from both the local electricity provider
and the DOE calculator for one of Round Rock's energy efficiency
retrofit projects to consolidate computer servers. According to
officials, the local electricity provider's estimates for energy
savings were higher than DOE's estimates. Round Rock officials noted
that they plan to contact DOE for guidance on which analysis of energy
savings should be reported.
According to SECO officials, their office created a SECO Stimulus
Recipient Reporting Tool for use by EECBG subrecipients. The tool
contains DOE metrics based on each EECBG activity and metrics
developed by SECO to track awards. Subrecipients are required to
report to SECO monthly. According to SECO officials, several
subrecipients performed energy audits before beginning EECBG
activities. The officials added that if subrecipients report energy
savings that are not consistent with energy audits or seem excessive,
a site visit may be triggered to verify outcomes.
Selected EECBG Recipients Reported Few Jobs Created or Saved:
For each of the four EECBG recipients that we visited (three cities
and SECO), we reviewed the number of jobs reported as created or saved
with Recovery Act dollars. Only two of these recipients (the City of
Round Rock and SECO) reported jobs for the most recent quarter (April
to June 2010). Round Rock officials reported less than one FTE, and
SECO officials reported approximately eight FTEs.[Footnote 25] Bryan
officials said they reported no FTEs because the city awarded its
contract on June 8, 2010, and the contractor did not begin work until
July 6, 2010. Both Austin and Bryan officials said they anticipate
FTEs will be reported for the next quarter.
In general, the four EECBG recipients reported using (or plans for
using) similar methods for calculating FTEs and ensuring the
reliability of FTE data reported. That is, the four recipients either
used or plan to use OMB guidance (dated December 18, 2009) to
calculate FTEs, and no recipient officials said they experienced or
anticipate experiencing issues with collecting, calculating, or
reporting FTEs. Recipient officials said they plan to take steps to
ensure the reliability of FTEs reported, such as reviewing certified
payrolls to confirm total hours worked, checking invoices submitted by
vendors, and verifying internal payroll records when an FTE is
directly employed by the recipient.
Use and Impact of Recovery Act Funds by State of Texas and Local
Governments:
As of August 1, 2010, Texas state entities reported spending
approximately $12.2 billion of the approximately $19.8 billion in
awarded Recovery Act funds.[Footnote 26] At the local government
level, city officials in Austin and Round Rock reported that while
Recovery Act funds have been helpful in furthering specific efforts,
such as energy efficiency and rehabilitation of homes, the funds have
had a limited overall impact on their ability to address ongoing
fiscal challenges.
State of Texas Continues to Use Recovery Act Funds:
According to the State Comptroller's Office, approximately $19.8
billion in Recovery Act funds have been awarded to Texas state
entities, as of August 1, 2010. This amount represents an increase of
approximately $2.3 billion from the $17.5 billion total presented in
our previous report.[Footnote 27] The $2.3 billion increase in
Recovery Act funding is concentrated in Texas's Medicaid program. The
State Comptroller's Office reported that Recovery Act funding for the
Medicaid program in Texas increased approximately 40 percent from $3.5
billion in March 2010 to slightly more than $5 billion by August 2010.
The State Comptroller's Office classifies Recovery Act funding into 10
categories.[Footnote 28] As figure 1 indicates, four categories--
Health and Human Services, Education, Transportation, and Labor--
account for 86 percent of Recovery Act funding awarded to Texas state
entities.
Figure 1: Recovery Act Funding Awarded to Texas State Entities by
Category (as of Aug. 1, 2010):
[Refer to PDF for image: pie-chart]
Total: $19.8 billion.
Health and human services: $5.7 billion (29%);
Education: $5.2 billion (26%);
Labor: $3.8 billion (19%);
Transportation: $2.3 billion (12%);
Other: $2.7 billion (14%):
- Energy: $324 million (2%);
- Environment: $395 million (2%);
- Public safety: $418 million (2%);
- Research: $316 million (2%);
- Housing and community development: $1.1 billion (6%);
- Other: $97 million (0%).
Source: State Comptroller‘s Office.
Note: The detailed funding amounts do not add to total due to rounding.
[End of figure]
As of August 1, 2010, according to the State Comptroller's Office,
Texas state entities had spent a majority--approximately $12.2 billion
or about 62 percent--of their awarded $19.8 billion Recovery Act
funds.[Footnote 29] This spend-out percentage is an increase from the
48 percent as of March 28, 2010, reported by the State Comptroller's
Office. Similarly, the broader perspective in table 2 shows that spend-
out rates of Recovery Act funds in Texas increased from March to
August 2010 for many major programs.
Table 2: Spend-Out Percentages of Recovery Act Funds in Selected
Programs, as of March and August 2010:
Program: Highway Infrastructure Investment Program;
Spend-out percentages as of:[A]:
March 28, 2010: 20%;
August 1, 2010: 34%.
Program: State Fiscal Stabilization Fund Education Stabilization Funds;
Spend-out percentages as of:[A]:
March 28, 2010: 31%;
August 1, 2010: 59%.
Program: Housing Tax Credit Exchange Program;
Spend-out percentages as of:[A]:
March 28, 2010: 1%;
August 1, 2010: 12%.
Program: Clean Water and Drinking Water State Revolving Funds;
Spend-out percentages as of:[A]:
March 28, 2010: Less than 1%;
August 1, 2010: 24%.
Program: Weatherization Assistance Program;
Spend-out percentages as of:[A]:
March 28, 2010: 5%;
August 1, 2010: 16%.
Program: Energy Efficiency and Conservation Block Grant (EECBG);
Spend-out percentages as of:[A]:
March 28, 2010: Less than 1%;
August 1, 2010: 2%.
Program: State Energy Program;
Spend-out percentages as of:[A]:
March 28, 2010: Less than 1%;
August 1, 2010: Less than 1%.
Program: Edward Byrne Memorial Justice Assistance grants (JAG);
Spend-out percentages as of:[A]:
March 28, 2010: 7%;
August 1, 2010: 41%.
Source: State Comptroller's Office.
Note: For our May 2010 report (GAO-10-605SP), we selected nine
programs that accounted for approximately three-quarters of Recovery
Act funding awarded to Texas state entities. Table 2 provides updated
information on seven of these nine programs as well as the Energy
Efficiency and Conservation Block Grant (EECBG) awarded to Texas state
entities. We added information about EECBG because this program is
assessed in this report. We did not report updated information on two
programs, Medicaid and Unemployment Insurance. The Governor's Office
staff described these two programs as entitlement programs, noting
that entitlement program funds increase or decrease with demand.
[A] The spend-out percentage indicates the portion of awarded Recovery
Act funding that has been spent.
[End of table]
Key Texas officials provided various perspectives regarding the impact
Recovery Act funding may have had on the state's 2010-2011 biennial
budget. Texas is midway through its current 2-year budget cycle
(formally called the 2010-2011 biennium), which began in September
2009 and runs through August 2011. As discussed in our July 2009
report[Footnote 30]and our September 2009 report,[Footnote 31] staff
from the state's Legislative Budget Board (LBB)--as well as staff
representing various offices in the Texas legislature--commented that
Recovery Act funding helped to support programs in the state.[Footnote
32] One direct impact is that state entities received increased
federal funds. Regarding education, for example, LBB staff estimated
that the Recovery Act's State Fiscal Stabilization Fund provided Texas
with increased federal funds of more than $3.5 billion for textbooks,
public schools, and higher education. Also, under the Recovery Act,
the state legislature anticipated that the federal government would
reimburse Texas for 68.3 percent of the state's expenditures for
Medicaid services for the 2010 federal fiscal year.[Footnote 33]
However, the actual reimbursement rate proved to be higher, at 70.9
percent, which resulted in additional funding for the Medicaid program
in Texas, according to Texas officials.[Footnote 34]
As an overview perspective, the LBB Director commented that Recovery
Act funds helped the Texas legislature balance the 2010-2011 budget
within available revenue. The director explained that, in January
2009, the Texas legislature was considering a general appropriations
bill (for the 2010-2011 biennium) wherein general revenue spending
would have exceeded the amount of revenue the State Comptroller
estimated was available.[Footnote 35]According to the director,
passage of the Recovery Act in February 2009 allowed Texas to use
Recovery Act funds to cover certain costs that otherwise would have
been covered by general revenue. A similar perspective is presented in
a July 2009 report by the research organization for the Texas House of
Representatives. Specifically, in reference to the general
appropriations bill for 2010-2011, the research organization reported
that $6.4 billion in Recovery Act funds were "substituted for state
general revenue funds."[Footnote 36]Also, the Texas legislature's May
2009 conference committee report on the state's general appropriations
act for the 2010-2011 biennium makes references to these Recovery Act
funds.[Footnote 37] Moreover, an analysis presented in March 2010 by
LBB staff to the Texas legislature's House Committee on Ways and Means
and the House Committee on Appropriations indicated that Recovery Act
funds replaced more than $6 billion in general revenue in the state's
2010-2011 budget.[Footnote 38] In sum, the LBB analysis and other
documentation indicated that the availability of Recovery Act funding
allowed Texas to cover certain costs with Recovery Act funds in place
of the state's general revenue--and, thus, enabled Texas to balance
its budget at a higher level than would have been possible otherwise.
When discussing the Recovery Act's impact on the state's budget, the
Governor's staff said that Recovery Act funds did not affect Texas's
efforts to balance its budget in reference to the state's
constitutional requirement, although the staff said that the funds
could be viewed as helping the state to balance the budget at a higher
level. The Governor's staff emphasized that the Texas constitution
requires a balanced budget. In this regard, the staff pointed out that
Texas has achieved a balanced budget for the 2010-2011 biennium, and
the staff particularly noted the State Comptroller has certified that
sufficient funding exists to support the budget for the 2010-2011
biennium. Consequently, the Governor's staff concluded that the
balanced budget requirement was met irrespective of the Recovery Act.
[Footnote 39]
In preparing for the end of Recovery Act funding, Texas officials
continue to emphasize the Governor's and the state legislature's
guidance to avoid using Recovery Act funds for ongoing expenses. In a
2009 proclamation, the Governor stated that "state agencies and
organizations receiving [Recovery Act] funds should not expect them to
be renewed by the state in the next biennium."[Footnote 40] Similarly,
the state legislature's conference committee report on the general
appropriations act specified that any state employee position funded
by the Recovery Act should be eliminated once the agency exhausts
Recovery Act funds for the position.[Footnote 41] We asked state
officials about budget assessments their offices may have done
analyzing the end of Recovery Act funding. As referenced above, in
March 2010, LBB staff prepared a budget and revenue outlook for the
2012-2013 biennium for the Texas legislature's House Committee on Ways
and Means and the House Committee on Appropriations. The analysis
indicated Texas could face a $10 billion shortfall for the 2012-2013
biennium. Also, the LBB staff noted that approximately $6 billion of
the estimated shortfall can be attributed to the end of Recovery Act
funding. The staff explained, for example, that Recovery Act funds
reduced the amount of general revenue needed in the current biennium
(2010-2011) to support certain programs, particularly education and
Medicaid.
In commenting on a draft of this appendix, the Governor's staff
emphasized that under Texas's constitution the State Comptroller's
Office has the sole responsibility for preparing the official revenue
estimate, which is used to certify the biennial budget. The Governor's
staff pointed out that the State Comptroller's revenue estimate for
the 2012-2013 biennium is anticipated to be submitted some time in
January 2011, and the state legislature's passage of an appropriations
bill for the biennium is expected in spring 2011. Thus, because the
State Comptroller's Office has yet to submit a revenue estimate for
the 2012-2013 biennium and the legislature has not passed an
appropriations bill, the Governor's staff characterized the LBB
lookout as speculative and misleading. Further, the Governor's staff
emphasized that Texas has a history--long predating the Recovery Act--
of setting priorities and cutting spending to achieve a balanced
budget. We reviewed statistics comparing spending and revenue in Texas
with other states. For example, according to U.S. Census Bureau
statistics, Texas's per capita state government spending is the lowest
among all 50 states; and, consequently, state tax revenue is a lower
share of personal income in Texas than in most other states.
Texas is taking various actions to address potential fiscal
challenges. In January 2010, the Governor, the Lieutenant Governor,
and the Speaker of the House of Representatives requested state
agencies identify savings for the remainder of the 2010-2011 biennium.
[Footnote 42] More recently, in preparing for the next biennium, the
Speaker of the Texas House of Representatives created (by proclamation
on January 12, 2010) the House Select Committee on Fiscal Stability.
The Select Committee is charged with assessing the state's ability to
meet its current and future budget obligations and determining whether
the past and anticipated budget shortfalls are due primarily to the
current economic recession or a more systemic problem. The
proclamation directs the Select Committee to file a report no later
than December 1, 2010.
In recent months, several indicators point to an improving fiscal
outlook for Texas. For instance, LBB staff said that sales tax
collections have been increasing in recent months. Specifically, the
staff noted that for 3 consecutive months (April through June 2010),
the State Comptroller's Office reported that state sales tax
collections exceeded the amounts collected in 2009 for this 3-month
period.[Footnote 43] Also, the Federal Reserve Bank of Dallas recently
reported the likelihood that "the Texas economy should pick up steam
in 2010 and beyond."[Footnote 44] The bank's assessment noted
improving home sales; increased demand for energy; and increases in
the state's exports, especially to Canada and Mexico. Further, Texas
continues to have access to a sizable reserve fund.[Footnote 45] Oil
and gas production taxes continue to be an important source of revenue
for this rainy day fund. The State Comptroller's Office reported in an
August 2009 presentation to the Texas House Select Committee on
Federal Economic Stabilization Funding that the current fund balance
was $6.7 billion. Texas officials noted that Texas has not used its
reserve fund in the 2010-2011 biennium.[Footnote 46] Instead, the
State Comptroller's Office anticipates transferring additional money
into the rainy day fund, resulting in a fund balance forecast to be
$8.156 billion at the end of the 2010-2011 biennium.
Texas Local Governments' Use of Recovery Act Funds:
We assessed the use of Recovery Act funding for two local governments
in Texas, the cities of Austin and Round Rock. We had previously
reported on the City of Austin's use of Recovery Act funds for our May
2010 report (GAO-10-605SP). Table 3 provides information about the two
localities and identifies their five largest Recovery Act awards.
Officials in both cities we visited cited various positive effects
that Recovery Act funds are expected to have on their communities.
Austin officials noted that many of the projects funded through the
Recovery Act, such as Community Development Block Grant funding for
the construction of several buildings for nonprofits, would not have
occurred without Recovery Act funding. Officials in Round Rock
discussed the Energy Efficiency and Conservation Block Grant (EECBG)
the city received from the U.S. Department of Energy. They said the
grant will be used for energy efficiency retrofits to replace older
and less efficient equipment, resulting in reduced maintenance and
utilities costs. In addition, since our May 2010 report, the City of
Austin reported that it was awarded a competitive EECBG from the
Department of Energy. Austin city officials said they are coordinating
with the City of San Antonio, which also received competitive EECBG
funds, and plan to use the funding for a retrofit ramp-up program,
which may include financing mechanisms for energy efficiency home
improvements.
Table 3: Use of Recovery Act Funds by Two City Governments in Texas:
Locality information: Austin;
Locality type; City;
Population; 786,382;
Unemployment rate; 6.9%;
Operating budget; $614.9 million;
Total Recovery Act funding awarded; $81.7 million;
Five largest Recovery Act awards:
* Clean Water State Revolving Fund--$31.8 million;
* Energy Efficiency and Conservation Block Grant--competitive grant--
$10 million;
* Energy Efficiency and Conservation Block Grant--formula grant--$7.5
million;
* Communities Putting Prevention to Work--$7.5 million;
* Weatherization Assistance Program--$5.8 million.
Locality information: Round Rock;
Locality type; City;
Population; 105,412;
Unemployment rate; 6.7%;
Operating budget; $84.0 million;
Total Recovery Act funding awarded; $3.5 million;
Five largest Recovery Act awards:
* Transit Capital Assistance Grant--$2.0 million;
* Energy Efficiency and Conservation Block Grant--formula grant--
$955,400;
* Edward Byrne Memorial Justice Assistance Grant[A]--$384,587;
* Community Development Block Grant--$108,742;
* Edward Byrne Memorial Justice Assistance Grant[A]--$54,825.
Sources: U.S. Census Bureau, U. S. Department of Labor, City of
Austin, and City of Round Rock.
Note: Population data are from the latest available estimate, July 1,
2009. Unemployment rates are preliminary estimates for June 2010 and
have not been seasonally adjusted. Rates are a percentage of the labor
force. Estimates are subject to revision.
[A] Round Rock received two Recovery Act Edward Byrne Memorial Justice
Assistance Grants. Specifically, the first grant for $384,587
represents a subgrant passed from the Texas Governor's Criminal
Justice Division and the second grant for $54,825 is an allocation
received directly from the U.S. Department of Justice, Bureau of
Justice Assistance.
[End of table]
Consistent with perspectives presented in our May 2010 report,
officials in the two cities commented that Recovery Act funds have had
a limited overall budgetary impact but have been helpful in furthering
specific efforts. Austin officials told us they did not use Recovery
Act funds to help balance the city budget. Similarly, Round Rock
officials reported Recovery Act funds have had "a nominal effect" on
the city's fiscal stability, noting that while energy efficiency
retrofits may reduce utility costs, the city faces increased
maintenance costs for a new transit facility funded by a Recovery Act
grant.[Footnote 47] Officials in the two cities explained that they
are using Recovery Act funds for capital projects, equipment
purchases, and one-time programs. Austin officials estimated that 98
percent of Recovery Act funds are being used for one-time programs or
efforts.[Footnote 48] Round Rock officials identified rehabilitation
of homes (for low-to moderate-income families) funded by a Community
Development Block Grant as an example of a one-time cost.
Consequently, officials in both cities said they anticipate no
significant impacts when Recovery Act funds are phased out.
The two cities continue to take other actions to address fiscal
challenges they are facing. For Austin's next fiscal year, which
begins October 1, 2010, city officials reported that the city is
facing a projected budget gap of approximately $11 million to $28
million. To put this in perspective, Austin's annual operating budget
for fiscal year 2009-2010 was a little more than $600 million;
consequently, the projected budget gap is approximately 2 to 5 percent
of the city's annual operating budget. Austin officials noted that
city employees have received no pay increases since December 2008, and
the city is "scrubbing" department budgets for cost savings.
Similarly, according to Round Rock officials, the operating budget of
each department of the city's government was reduced 3 percent for the
current fiscal year compared to the previous year's budget.[Footnote
49] In addition, Round Rock officials noted that city employees were
given time off instead of pay increases for the current fiscal year.
Going forward, Round Rock officials identified the city's heavy
reliance on sales tax revenue and the city's rapid population growth
as two challenges. Sales tax revenue represents nearly half of Round
Rock's general fund revenue. Round Rock officials noted sales tax
revenue tends to be a less stable revenue source than property taxes.
The U.S. Census Bureau has identified Round Rock as one of the
nation's fastest growing cities, which puts substantial demands on
city services and infrastructure. Looking ahead for Austin, city
officials noted sales tax revenues have increased but commented that
this increase largely has been offset by declines in other revenue,
such as fees and charges for residential and commercial development.
State and Local Government Efforts in Ensuring Accountability of
Recovery Act Funds in Texas:
Texas state entities, particularly the State Auditor's Office (SAO),
the Governor's Office, and the State Comptroller's Office, continue
efforts to help ensure that Recovery Act funds are used appropriately.
These efforts include conducting audits and tightening controls to
help ensure only eligible recipients receive Recovery Act payments.
Also, local government audit offices or other responsible officials in
the five cities we contacted--Austin, Bryan, Dallas, Houston, and
Round Rock--have similar efforts underway or planned. Many of the
oversight activities we described in our May 2010 report continue, so
we focused on providing updated information on these activities.
State Auditor's Office Continues to Further Accountability Efforts
through Performance Audits and the Single Audit; the Governor's Office
and the State Comptroller's Office Continue to Have Important Roles:
In July 2010, SAO completed a Recovery Act-related performance audit
report--based on a review of jobs and expenditure reporting for
programs under the Workforce Investment Act of 1998 (WIA).[Footnote
50] SAO found that the two local workforce development boards it
reviewed had incorrectly calculated the number of jobs created and
retained with Recovery Act funds. For example, SAO found that the
Capital Area Workforce Development Board significantly overreported
the number of jobs (full-time equivalents) by more than 400 percent
for February through September 2009.[Footnote 51] SAO reported that
the Texas Workforce Commission had provided timely and adequate
guidance to the local boards on how to calculate the number of jobs
created and retained using Recovery Act funds. However, SAO noted that
the boards did not consistently follow the guidance and also noted
that the Texas Workforce Commission's documented monitoring procedures
did not include steps for validating the completeness and accuracy of
the boards' self-reported information. To ensure accurate calculation
and reporting of the number of jobs created and retained, SAO
recommended that the Texas Workforce Commission document its processes
for reviewing, collecting, and reporting these data and that the local
boards continue to monitor applicable guidance. SAO reported that the
Texas Workforce Commission and the two local boards generally
concurred with the findings and recommendations.[Footnote 52]
SAO has begun preliminary work for the next Single Audit report that
will assess Texas's financial statements for fiscal year 2010, which
ends August 31, 2010.[Footnote 53] Single Audit is intended, among
other objectives, to test compliance with program requirements for
certain federal programs as well as ensure a fair presentation of
financial statements. SAO officials expect that various Recovery Act
programs will be selected for review. Recovery Act programs will
likely receive heightened attention because, according to SAO
officials, the majority of Texas's Recovery Act funding was
appropriated for use during the state's 2010 and 2011 fiscal years.
The Single Audit for the previous year, 2009, did assess programs
receiving Recovery Act funding, but an SAO official indicated that
more programs would be assessed for fiscal year 2010, as state
entities use Recovery Act funds.
Our May 2010 report (GAO-10-605SP) noted that Texas completed the
Single Audit for the previous year (Texas's 2009 fiscal year) in less
time than the requisite 9 months, thereby providing early warnings of
deficiencies in internal controls.[Footnote 54] For example, the
Single Audit for Texas's 2009 fiscal year identified a weakness in
determining eligibility for three programs--Medicaid, Temporary
Assistance for Needy Families, and the Supplemental Nutrition
Assistance Program.[Footnote 55] Under the Recovery Act, Texas has
been awarded more than $5 billion for Medicaid, more than $200 million
for Temporary Assistance for Needy Families, and more than $27 million
for the Supplemental Nutrition Assistance Program, according to August
1, 2010, data from the State Comptroller's Office. Officials from the
U.S. Department of Health and Human Services' Office of Inspector
General reviewed Texas's Single Audit report for the 2009 fiscal year
and made a number of recommendations to Texas officials for tightening
eligibility procedures and monitoring subrecipients.
Providing oversight to ensure that corrective actions are taken is an
important aspect of the Single Audit process. For example, in May
2010, the Texas Health and Human Services Commission finalized a
corrective action plan, with provisions that include improving its
existing computer systems for determining eligibility for Medicaid and
the other entitlement programs and providing appropriate instruction
for staff in reviewing documents. The State Auditor's Office noted
that the Single Audit report for fiscal year 2010 will assess the
corrective actions taken to address the previous year's findings.
[Footnote 56] Also, the Governor's Office staff said that their office
is emphasizing the importance of timely resolution of issues
identified in the Single Audit for the 2009 fiscal year. The staff
noted that, in May 2010, the Governor's Office sent the U.S.
Department of Health and Human Services--which is the designated
cognizant federal agency for Texas's Single Audit--a formal
communication explaining how state agencies plan to address the
various findings and recommendations resulting from the 2009 Single
Audit.
Further, Governor's Office staff told us that Texas is attempting to
serve as an example of accountability and transparency in its
administration of Recovery Act funds. The staff noted that the
Governor's Stimulus Working Group--which includes representatives from
state agencies receiving significant amounts of Recovery Act funding--
continues to be a useful mechanism for sharing information to help
ensure accountability and transparency.[Footnote 57] The staff noted,
for example, that the Stimulus Working Group has been used to
distribute information to state agencies about Recovery Act recipient
reporting requirements, help focus audit and monitoring efforts, and
address program concerns if necessary.
As a portal for providing transparency of Recovery Act funds in Texas,
the state's official Recovery Act Web site
(http://window.state.tx.us/recovery/) is maintained by the State
Comptroller's Office.[Footnote 58] Since establishing the Web site in
2009, the State Comptroller's Office has made various enhancements.
For instance, the State Comptroller's Office instituted a process for
state agencies and institutions of higher education to report all
awards using Recovery Act funds on a weekly basis--for the purpose of
making the data publicly available on the state's Web site. Also,
state officials noted that the Web site now has an interactive map,
allowing county-by-county displays of Recovery Act funds and
activities.[Footnote 59]
Local Government Audit Offices or Other Officials Also Have a
Significant Accountability Role:
The city auditor offices or other responsible officials we contacted
in Austin, Bryan, Dallas, Houston, and Round Rock reported having
Recovery Act-related accountability efforts underway or planned. The
Austin city auditor, after being appointed in December 2009, initiated
an assessment of the office to determine areas for improvement, among
other objectives. The resulting March 2010 assessment report noted
that federal stimulus funding received by the city "presents
additional risks related to spending oversight and reporting
requirements which can be expected to continue in the current and
subsequent years."[Footnote 60] Regarding planned action, the
assessment report stated that these risks would be specifically
considered when developing audit plans for fiscal year 2011 and
subsequent years.
City officials in Bryan and Round Rock noted that the Single Audit of
their respective city includes an assessment of federal grants. We
reviewed the Single Audit report of the City of Bryan for the year
ended September 30, 2009. The independent auditor reported no material
weaknesses and no significant deficiencies regarding internal controls
over major programs that received federal awards, which included a
grant program (Community Development Block Grant) funded by the
Recovery Act.[Footnote 61]
Since passage of the Recovery Act, the Dallas city auditor has taken a
number of steps to promote accountability, as noted in our May 2010
report. Initially, for example, the city auditor conducted a risk
assessment of the city's internal control systems relevant to ensuring
compliance with Recovery Act requirements.[Footnote 62] Also, the city
auditor initiated efforts to monitor Recovery Act funding received by
the city; assess the city's compliance with requirements; and issue
periodic audit reports, such as the one issued in April 2010.[Footnote
63] More recently, in August 2010, the city auditor issued another
audit report, which again noted that no allegations of fraud, waste,
and abuse regarding Recovery Act funds had been identified or
received.[Footnote 64] However, in reference to the Recovery Act-
funded Weatherization Assistance Program[Footnote 65]--operated
locally by both the City of Dallas and the County of Dallas--the audit
report stated that the city avoided potentially unallowable costs of
up to $481,000. The audit report explained that the city auditor's
office used computerized audit techniques to identify 74 duplicate
applications--69 duplicate applications between the city's database
and the county's database and 5 duplicate applications within the
city's database. The audit report further noted that management took
immediate action to eliminate the 74 duplicate applications and that
management also agreed with a recommendation to continuously monitor
for potential duplication by collaborating with Dallas County.
In late June 2010, the Houston city auditor told us that field work
had been completed for the risk assessment that was ongoing at the
time of our May 2010 report.[Footnote 66] The city auditor said that a
risk assessment report is to be issued in September 2010. Also, the
Houston city auditor mentioned that one of his office's goals is to
begin issuing quarterly reports assessing the Recovery Act, starting
on September 30, 2010. Further, the Houston city auditor noted that
his office's Web site has a link for reporting fraud but no
allegations had been reported as of August 2010.[Footnote 67]
Texas's Comments on This Summary:
We provided the Governor of Texas with a draft of this appendix on
August 9, 2010. A senior official (the Director of Financial
Accountability) in the Office of the Governor responded on August 11,
2010. The senior official characterized as speculative several
passages of text--regarding Texas's budget and the impact of Recovery
Act funds--and suggested that the passages be eliminated from the
appendix. In particular, the senior official objected to the inclusion
in the appendix of budget and revenue estimates for the upcoming 2012-
2013 biennium prepared by LBB staff. The senior official commented
that the estimates may be several months old and are based on a series
of assumptions that may prove to be inaccurate. Also, the senior
official noted that the State Comptroller's Office, which is the state
entity legally responsible for determining the official state revenue
amount, has not yet published an estimate.
In addressing these comments, we added information where appropriate
in the appendix to reflect the Office of the Governor's perspectives.
Also, as appropriate in this appendix, we incorporated the senior
official's suggestions for technical clarifications. However, because
the Texas legislature has an important role in establishing the
state's budget, we retained relevant estimates prepared by LBB staff
for the 2012-2013 biennium; and, to provide enhanced transparency, we
included a hyperlink to the LBB staff's supporting analysis. Further,
we provided additional or clarifying context regarding other publicly
available reports produced by or for the Texas legislature, especially
the Texas legislature's conference committee report and the Texas
House Research Organization's report on 2010-2011 appropriations.
On August 9, 2010, we also provided of copy of a draft of this
appendix to the State Auditor's Office and a copy of applicable
sections of a draft of this appendix to the Director, Legislative
Budget Board. A senior official in the State Auditor's Office
responded on August 12, 2010. The senior official generally agreed
with the information presented and provided a suggestion for a
technical clarification, which we incorporated. The Legislative Budget
Board Director responded on August 11, 2010. The director reiterated
that Recovery Act funds helped the Texas legislature balance the 2010-
2011 budget within available revenue. The director also provided
technical clarifications, which we incorporated where appropriate.
Further, on August 9, 2010, we provided of copy of applicable sections
of a draft of this appendix to the HUD Fort Worth Regional Office, the
HUD San Antonio Field Office, the San Antonio Housing Authority, the
City of Austin, the City of Bryan, the City of Dallas, the City of
Houston, and the City of Round Rock. Responding officials generally
agreed with the information presented and, if applicable, provided
technical suggestions that we incorporated where appropriate.[Footnote
68]
GAO Contacts:
Lorelei St. James, (214) 777-5719 or stjames@gao.gov:
Carol Anderson-Guthrie, (214) 777-5700 or andersonguthriec@gao.gov:
Staff Acknowledgments:
In addition to the contacts named above, Fredrick Berry, Danny Burton,
K. Eric Essig, Erinn Flanagan, Michael O'Neill, Gloria Proa, and Bob
Robinson made major contributions to this report.
[End of section]
Appendix XVII Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Of the hundreds of public housing agencies in Texas, SAHA received
the second highest amount ($5.3 million) of Public Housing Capital
Fund competitive grants awarded under the Recovery Act, and SAHA
received the highest amount ($14.6 million) of Public Housing Capital
Fund formula grants awarded under the act.
[3] The SAHA project funded by the competitive grant involves
improvements to the Villa Hermosa Apartments, which has 66 units for
the elderly and/or disabled community. The two SAHA projects funded by
formula grants involve improvements to, respectively (1) the Lewis
Chatham Apartments, which has 119 units for the elderly and/or
disabled community and (2) the Highview Apartments, which has 68 units
for families.
[4] The EECBG program was authorized by Title V, Subtitle E, of the
Energy Independence and Security Act, which was signed into law on
December 19, 2007. However, the program was not funded until passage
of the Recovery Act in 2009.
[5] We selected Austin, Bryan, and Round Rock for various reasons.
Austin is Texas's capital and the headquarters location for state
agencies. As such, in conducting Recovery Act work, our review team
routinely visited Austin. Also, Austin received $7.5 million in EECBG
funding. Bryan and Round Rock--which received $695,000 and $955,000 in
EECBG funding, respectively--are geographically located near or
relatively close to Austin. Moreover, these three cities include a
large metropolitan area (Austin) and a less populous city (Bryan),
both which had not outlaid any EECBG funding at the time of our
selections (as of May 14, 2010), and a medium sized suburb (Round
Rock) that had outlaid a portion of its EECBG funding.
[6] According to state officials, the Legislative Budget Board is a
permanent joint committee of the Texas legislature that develops
budget and policy recommendations for legislative appropriations for
all agencies of state government, as well as completes fiscal analyses
for proposed legislation. The Lieutenant Governor and the Speaker of
the House of Representatives serve as co-chairs of the board. Other
members include the chairs of the House Appropriations Committee and
Senate Finance Committee. See [hyperlink, http://www.lbb.state.tx.us].
[7] We selected Austin and Round Rock because our staff was also
reviewing the use of EECBG funds by these cities.
[8] Accountability efforts by audit offices in three of these cities
(Austin, Dallas, and Houston) are discussed in our May 2010 report
(GAO-10-605SP), and we again contacted officials in these cities to
obtain updated information. As noted in our May 2010 report, these
cities were awarded large amounts of Recovery Act funding and are
located in different geographic areas of Texas, while collectively
accounting for approximately 17 percent of the state's total
population. We selected the other two cities (Bryan and Round Rock)
because our staff was also reviewing the use of EECBG funds by these
cities. See GAO, Recovery Act: States' and Localities' Uses of Funds
and Actions Needed to Address Implementation Challenges and Bolster
Accountability (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-10-605SP] (Washington, D.C.: May 26,
2010).
[9] As noted in our May 2010 report (GAO-10-605SP), the 351 public
housing agencies in Texas that received Public Housing Capital Fund
formula grants ($119.8 million total) under the Recovery Act met the
March 2010 deadline for obligating all the funds.
[10] Job calculations are based on the number of hours worked in a
quarter and funded under the Recovery Act and are expressed in full-
time equivalents, calculated as the total hours worked divided by the
number of hours in a full-time schedule. Recipient reports cover only
direct jobs paid from Recovery Act funding and do not include the
employment impact on material suppliers (indirect jobs) or on the
local community (induced jobs).
[11] In August 2010, HUD San Antonio Field Office officials informed
us that one recipient agency (Georgetown Housing Authority) will be
returning its competitive grant ($419,430) because it recently had
some staff turnover and other competing priorities and no longer had
sufficient matching funds to complete the work originally planned
under the grant. The officials explained that the lack of matching
funds stems from a recent audit that will require the Georgetown
Housing Authority to use non-federal funds to reimburse HUD programs
for ineligible expenses that were previously charged to the programs.
See HUD Regional Inspector General for Audit (Fort Worth Region,
6AGA), The Georgetown Housing Authority Used $195,855 for Ineligible
and Unsupported Expenditures, Audit Report Number 2010-FW-1004 (Fort
Worth, Tex.: June 2, 2010), which reported that Georgetown's financial
records were inaccurate, a condition attributable to a lack of
financial and disbursement controls and an absence of formal written
policies and procedures.
[12] In addition to our visit to these two project sites in June 2010,
we earlier visited the Lewis Chatham project site in March 2010,
October 2009, and May 2009, and the Highview project site in March
2010 and May 2009.
[13] The formula grants funds to develop playground areas ($291,850)
will be used for developing three playground areas at the Highview
Apartments and playground areas at two other apartment complexes
(Mission Park and Riverside). Also, the formula grant funds to replace
roofing ($665,394) will be used for roofing work at the Highview
Apartments and roofing work at three other SAHA apartment complexes
(Olive Park, Village East, and Wheatley Courts).
[14] HUD San Antonio Field Office officials informed us in August 2010
that one recipient agency (Georgetown Housing Authority) will be
returning its competitive grant to HUD.
[15] According to SAHA officials, the 2,634 units benefiting from
Recovery Act funding constitute 42 percent of the agency's total
public housing inventory of 6,273 units.
[16] FTEs as of August 10, 2010. In January 2010, the Recovery
Accountability and Transparency Board modified the process for
correcting data in FederalReporting.gov by initiating a "continuous
corrections" period. With a continuous corrections period, recipients
can correct reported data for the immediately preceding quarter after
that reporting quarter has ended and after the data are published on
FederalReporting.gov. Since the continuous corrections process began,
the Board has been refreshing the data on Recovery.gov approximately
every 2 weeks to reflect these corrections.
[17] FTEs as of August 10, 2010.
[18] Cities are ineligible for direct EECBG funding from DOE if the
city population is less than 35,000 and if it is not one of the 10
highest populated cities in the state. Counties are ineligible for
direct EECBG funding from DOE if the county population is less than
200,000 and if it is not one of the 10 highest populated counties in
the state.
[19] According to its Web site, Austin Energy (owned by the City of
Austin) is the nation's ninth largest community-owned electric utility
and serves approximately 388,000 customers within the City of Austin,
Travis County, and a small portion of Williamson County.
[20] Biogas generation equipment captures methane gas, a byproduct of
the sludge treatment process, and uses it as a renewable energy source
that ultimately will be used to generate electricity.
[21] A unit of local government may not use more than 20 percent of
its EECBG funding or $250,000, whichever is greater, for the provision
of subgrants to nongovernmental organizations for the purpose of
assisting in the implementation of the energy efficiency and
conservation strategy of the applicant.
[22] As noted previously, cities and counties with populations below
the specified threshold are ineligible for direct EECBG funding from
DOE. However, SECO plans to allocate much of its $45.6 million in
EECBG funding to support projects in each of 1,061 of these less
populous communities. Also, SECO plans to retain a portion of the
$45.6 million in EECBG funding to pay for administrative costs. States
may not use more than 10 percent of awarded EECBG funds for
administrative expenses.
[23] SECO officials noted that calculation of the 89 percent
obligation figure includes administrative funds retained by SECO.
[24] On September 1, 2010, SECO officials informed us that a
contractor had been selected and that SECO expected to have a contract
executed and the firm on board by mid-to late September.
[25] FTEs as of August 10, 2010.
[26] The term "state entities" refers to state agencies and public
institutions of higher education.
[27] Our May 2010 report (GAO-10-605SP) presented Recovery Act funding
data as of March 28, 2010, for Texas.
[28] The funding categories are based on the Catalogue of Federal
Domestic Assistance, a governmentwide compendium of federal programs,
projects, services, and activities that provide assistance or benefits
to the American public.
[29] The State Comptroller's Office considers funds to be spent when
they have been expended or transferred to another state agency and
calculates the amount on a cash basis.
[30] GAO, Recovery Act: States' and Localities' Current and Planned
Uses of Funds While Facing Fiscal Stresses (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8,
2009).
[31] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to
States and Localities, While Accountability and Reporting Challenges
Need to Be Addressed (Appendixes), [hyperlink,
http://www.gao.gov/products/GAO-09-1017SP] (Washington, D.C.: Sept.
23, 2009).
[32] For our previous reports, we interviewed staff representing
various offices in the Texas legislature--the Speaker of the House of
Representatives, the Lieutenant Governor, the House Select Committee
on Federal Economic Stabilization Funding, and the Senate Finance
Committee.
[33] Texas Legislature, Conference Committee Report for S.B. No. 1
General Appropriations Bill, 81st Leg. Sess. (Austin, Tex.: May 26,
2009), at XII-20.
[34] The federal government matches state expenditures for Medicaid
services based on a formula known as the federal medical assistance
percentage (FMAP). The Recovery Act initially provided eligible states
with an increased FMAP for 27 months from October 1, 2008, to December
31, 2010. Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5,
123 Stat. at 496. On August 10, 2010, federal legislation was enacted
amending the Recovery Act and providing for an extension of increased
FMAP funding through June 30, 2011, but at a lower level. See Pub. L.
No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[35] The State Comptroller is responsible for providing the state
legislature with a revenue estimate to ensure general-purpose spending
does not exceed anticipated funds available for general-purpose
spending.
[36] Texas House of Representatives, House Research Organization,
Texas Budget Highlights: Fiscal 2010-2011, State Finance Report No. 81-
4 (Austin, Tex.: July 13, 2009). The House Research Organization is an
independent administrative department of the Texas House of
Representatives and is governed by a steering committee of 15 House
members elected by the House membership to set policy for the
organization, approve its budget, and ensure that its reports are
objective.
[37] Texas Legislature, Conference Committee Report for S.B. No. 1
General Appropriations Bill, 81st Leg. Sess. (Austin,Tex.: May 26,
2009), at XII-1, XII-2, XII-3, XII-4, and XII-14.
[38] Although entitled "Budget/Revenue Outlook for 2012-2013
Biennium," the analytical presentation also includes general revenue
data for the 2010-2011 biennium and is publicly available at
[hyperlink,
http://www.lbb.state.tx.us/Notice/BudgetRevenue_Outlook_2012-
13_0310.pdf].
[39] In commenting on a draft of this appendix, a senior official
representing the Office of the Governor explained that at the time the
Recovery Act was passed in February 2009, the Texas legislature was in
the process of adopting the state's 2010-2011 biennial budget, which
subsequently was signed into law in June 2009. The senior official
commented that because the Recovery Act was passed in the middle of
the state's budget-adoption process, it is not possible to say with
any certainty how the state's general revenue would have been
appropriated in the absence of the Recovery Act. Also, the senior
official commented that Recovery Act funds represent only a small
portion of Texas's $182 billion biennial budget.
[40] Proclamation by the Governor of the State of Texas Concerning the
General Appropriations Act (June 19, 2009).
[41] Texas Legislature, Conference Committee Report for S.B. No. 1
General Appropriations Bill, 81st Leg. Sess. (Austin, Tex.: May 26,
2009), at XII-9, § 8.
[42] The specific request was to identify savings totaling 5 percent
of the general revenue and general revenue-dedicated appropriations
for the 2010-2011 biennium.
[43] The reported data represent state sales tax net collections
deposited to general revenue.
[44] Federal Reserve Bank of Dallas, "Texas Economy Shakes Off Rough
Ride in 2009," in Southwest Economy (First Quarter 2010), at page 3.
[45] The state's economic stabilization fund is commonly referred to
as the "rainy day fund." According to the State Comptroller's Office,
the state is required to transfer into the rainy day fund one-half of
any surplus general revenue in the biennium budget and 75 percent of
any oil and natural gas production taxes exceeding 1987 levels.
[46] According to Texas officials, appropriating funds from the rainy
day fund would require a super majority vote in the state legislature.
[47] Round Rock is using a Federal Transit Capital Assistance Grant to
fund a transit facility to connect downtown Round Rock to a bus
network in north Austin.
[48] Austin officials explained an exception is that the city is using
an Edward Byrne Memorial Competitive Grant to fund a dozen 911
dispatchers for 2 years. The officials noted that, after 2 years, the
city plans to evaluate this funding against other needs.
[49] Round Rock's current fiscal year runs from October 1, 2009,
through September 30, 2010.
[50] Texas State Auditor's Office, American Recovery and Reinvestment
Act Funds for Selected Programs at the Texas Workforce Commission, SAO
Report No. 10-037 (Austin, Tex.: July 2010). The scope of the audit
included reviewing and analyzing data (covering February through
December 2009) at the Texas Workforce Commission, two local boards
(the Capital Area Workforce Development Board and the Lower Rio Grande
Valley Workforce Development Board), and the local boards' contractors.
[51] Specifically, whereas the board reported 691 jobs created and
retained, the SAO auditors calculated approximately 129 jobs. The
auditors did note improvement by both of the local boards. in
calculating the number of jobs for the subsequent quarter (October
through December 2009).
[52] One of the local boards, while acknowledging concurrence with
SAO's recommendation, commented that the jobs-reporting guidance--
initiated from the federal level to the state level and then to the
local level--was subject to continuous change and was inconsistent,
which creates problems that have been recognized as a national issue.
[53] Single Audits are prepared to meet the requirements of the Single
Audit Act, as amended, and provide a source of information on internal
control and compliance findings and the underlying causes and risks.
The Single Audit Act requires states, local governments, and nonprofit
organizations expending $500,000 or more in federal awards in a year
to obtain an audit in accordance with the requirements set forth in
the act. A Single Audit consists of (1) an audit and opinions on the
fair presentation of the financial statements and the Schedule of
Expenditures of Federal Awards; (2) gaining an understanding of and
testing internal control over financial reporting and the entity's
compliance with laws, regulations, and contract or grant provisions
that have a direct and material effect on certain federal programs
(i.e., the program requirements); and (3) an audit and an opinion on
compliance with applicable program requirements for certain federal
programs.
[54] The Federal Audit Clearinghouse received Texas's report on March
26, 2010. The clearinghouse operates on behalf of the Office of
Management and Budget to disseminate audit information to federal
agencies and the public. The Single Audit requires grantees to submit
a financial reporting package, including the financial statements and
the Single Audit report, to the clearinghouse no later than 9 months
after the end of the grantee's fiscal year under audit. An SAO
official indicated that Texas routinely completes its Single Audit
report in this time frame. The official explained that Single Audit
work in Texas is done concurrently with completing the state's
financial statements, which must be completed within 6 months of the
end of the fiscal year.
[55] State Auditor's Office, State of Texas Federal Portion of the
Statewide Single Audit for the Fiscal Year Ended August 31, 2009, SAO
Report No. 10-339 (Austin, Tex.: March 2010).
[56] Overall, Texas's Single Audit report for the 2009 fiscal year
identified 132 significant internal control deficiencies related to
compliance with federal program requirements, and 18 of these were
classified as material weaknesses. Of the overall findings, 14 of the
132 significant internal control deficiencies involved programs that
received Recovery Act funds, and 3 of these were classified as
material weaknesses. As reported, the 3 material weaknesses involved
the following: (1) for certain benefit programs, the Texas Health and
Human Services Commission had some incomplete files and some errors in
calculating benefits, resulting in questioned costs of $118,033; (2)
regarding development of a management information system application,
the Texas Education Agency did not have adequate controls regarding,
for example, access and separation of duties; and (3) for subrecipient
agreements tested, the Texas Department of Transportation did not
include the federal award number on applicable documentation, and the
department did not consistently conduct annual compliance reviews and
other periodic monitoring, resulting in questioned costs of $10,840.
The Single Audit report noted that the respective state agencies had
taken corrective actions or had such actions underway or planned.
Regarding the first of the three material weaknesses listed above, the
Office of the Governor informed us in August 2010 that although the
figure of $118,033 was the amount questioned in SAO's report, the
Texas Health and Human Services Commission had determined since
issuance of the report that only $1,363 was incorrectly paid to
clients.
[57] Our first bimonthly report noted that after the Recovery Act
passed, the Office of the Governor began hosting regularly scheduled
meetings (twice weekly) of a Stimulus Working Group to help ensure
statewide communication of the need for accountability and
transparency regarding Recovery Act funds. See GAO, Recovery Act: As
Initial Implementation Unfolds in States and Localities, Continued
Attention to Accountability Issues Is Essential, GAO-09-580
(Washington, D.C.: April 23, 2009).
[58] The common or popular name of the Web site is "A Texas Eye on the
Dollars." The portal provides links to the Web sites of applicable
state agencies in Texas and a link to the national Web site
(www.recovery.gov). Another portal that provides additional
accountability and transparency for Recovery Act funds flowing to the
state is www.txstimulus.com. This Web site is maintained by the Texas
legislature's House Select Committee on Federal Economic
Stabilization, which was established in February 2009 by proclamation
of the Texas legislature's Speaker of the House.
[59] The previous absence of county-mapping data was critically noted
in a 2009 report issued by a national policy resource center. See Good
Jobs First, Show Us the Stimulus: An Evaluation of State Government
Recovery Act Websites (Washington, D.C.: July 2009). The report is
available online at [hyperlink,
http://www.goodjobsfirst.org/stimulusweb.cfm].
[60] Office of the City Auditor, City of Austin, Initial Assessment of
the Office of the City Auditor (Austin, Tex.: March 23, 2010).
[61] Weaver and Tidwell, L.L.P., City of Bryan, Texas, Single Audit
Report, September 30, 2009 (Houston, Tex: March 2, 2010).
[62] Dallas City Auditor, Risk Assessment of City of Dallas
Implementation of the American Recovery and Reinvestment Act, Report
No. A10-004 (Dallas, Tex.: Oct. 9, 2009).
[63] Dallas City Auditor, Audit of American Recovery and Reinvestment
Act of 2009: January 1, 2010 to March 31, 2010, Report No. A10-012
(Dallas, Tex.: April 23, 2010). Of particular importance, the audit
report noted that no "allegations for fraud, waste, and abuse" have
been received by the city auditor's office.
[64] Dallas City Auditor, Audit of American Recovery and Reinvestment
Act of 2009: April 1, 2010 to June 30, 2010, Report No. A10-018
(Dallas, Tex.: August 13, 2010).
[65] Implementation of the Recovery Act-funded Weatherization
Assistance Program in Texas is discussed in detail in our May 2010
report (GAO-10-605SP).
[66] [hyperlink, http://www.gao.gov/products/GAO-10-605SP] (May 2010).
Our report noted that the city was conducting an enterprise risk
assessment to comprehensively identify risks that the city's various
departments face in ensuring accountability for Recovery Act funds.
[67] The Houston city auditor heads the Audit Division within the
Office of the City Controller. [hyperlink,
http://houstontx/controller/audit/index.html].
[68] With one exception (HUD Fort Worth Regional Office), all of the
entities provided a response.
[End of Appendix XVII]
Appendix XVIII: Program Descriptions:
Airport Improvement Program:
Within the Department of Transportation, the Federal Aviation
Administration's Airport Improvement Program provides formula and
discretionary grants for the planning and development of public-use
airports. The Recovery Act provides $1.1 billion for discretionary
Grant-in-Aid for Airports under this program with priority given to
projects that can be completed within 2 years. The Recovery Act
requires that the funds must supplement, not supplant, planned
expenditures from airport-generated revenues or from other state and
local sources for airport development activities.
Assistance to Rural Law Enforcement to Combat Crime and Drugs Program:
The Recovery Act Assistance to Rural Law Enforcement to Combat Crime
and Drugs Program is administered by the Bureau of Justice Assistance
(BJA), a component of the Office of Justice Programs, Department of
Justice. The purpose of this program is to help rural states and rural
areas prevent and combat crime, especially drug-related crime, and
provides for national support efforts, including training and
technical assistance programs strategically targeted to address rural
needs. The Recovery Act provides $125 million for this program, and
BJA has made 212 awards.
Brownfields Program:
The Recovery Act provides $100 million to the Brownfields Program,
administered by the Office of Solid Waste and Emergency Response
within the Environmental Protection Agency, for cleanup,
revitalization, and sustainable reuse of contaminated properties. The
funds will be awarded to eligible entities through job training,
assessment, revolving loan fund, and cleanup grants.
Broadband Technology Opportunities Program:
The Broadband Technology Opportunities Program (BTOP), funded by the
Recovery Act and administered by the Department of Commerce's National
Telecommunications and Information Administration provides grants to
increase broadband infrastructure in unserved and underserved areas of
the country. BTOP grants fund projects for new or improved internet
facilities in schools, libraries, hospitals, and public safety
facilities, projects to establish or upgrade public computer
facilities that provide broadband access to the general public or
vulnerable populations, and projects that increase broadband internet
usage among populations where broadband technology has been
underutilized. Projects may include training and outreach activities
that will increase broadband activities in people's everyday lives.
Build America Bonds:
Build America Bonds (BAB) administered by the Internal Revenue Service
within the Department of the Treasury are taxable government bonds
created by the Recovery Act that can be issued with federal subsidies
for a portion of the borrowing costs delivered either through
nonrefundable tax credits provided to holders of the bonds (tax credit
BAB) or as refundable tax credits paid to state and local governmental
issuers of the bonds (direct payment BAB). Direct payment BABs are a
new type of bond that provide state and local government issuers with
a direct subsidy payment equal to 35 percent of the bond interest they
pay. Tax credit BABs provide investors with a nonrefundable tax credit
of 35 percent of the net bond interest payments (excluding the
credit), which represents a federal subsidy to the state or local
governmental issuer equal to approximately 25 percent of the total
return to the investor. State and local governments may issue an
unlimited number of BABs through December 31, 2010, and all BAB
proceeds must be used for capital expenditures.
Capital Improvement Program:
The Department of Health and Human Services' Health Resources and
Services Administration has allocated $862.5 million in Recovery Act
funds for Capital Improvement Program grants to health centers to
support the construction, repair, and renovation of more than 1,500
health center sites nationwide, including purchasing health
information technology and expanding the use of electronic health
records.
Child Care and Development Block Grants:
Administered by the Administration for Children and Families within
the Department of Health and Human Services, Child Care and
Development Block Grants, one of the funding streams comprising the
Child Care and Development Fund, are provided to states, according to
a formula, to assist low-income families in obtaining child care, so
that parents can work or participate in education or training
activities. The Recovery Act provides $1.9 billion in supplemental
funding for these grants.
Clean Cities Program:
The Department of Energy's Clean Cities program, administered by the
Office of Energy Efficiency and Renewable Energy, is a government-
industry partnership that works to reduce America's petroleum
consumption in the transportation sector. The Department of Energy is
providing nearly $300 million in Recovery Act funds for projects under
the Clean Cities program, which provide a range of energy-efficient
and advanced vehicle technologies, such as hybrids, electric vehicles,
plug-in electric hybrids, hydraulic hybrids, and compressed natural
gas vehicles, helping reduce petroleum consumption across the United
States. The program also supports refueling infrastructure for various
alternative fuel vehicles, as well as public education and training
initiatives, to further the program's goal of reducing the national
demand for petroleum.
Clean and Drinking Water State Revolving Funds:
The Recovery Act appropriated $4 billion for the Clean Water State
Revolving Fund (SRF) programs and $2 billion for the Drinking Water
SRF programs. These amounts are a significant increase compared to
federal funds awarded as annual appropriations to the SRF programs in
recent years. From fiscal years 2000 through 2009, annual
appropriations averaged about $1.1 billion for the Clean Water SRF
program and about $833 million for the Drinking Water SRF program. The
Environmental Protection Agency (EPA) distributed the Recovery Act
funds to the 50 states, the District of Columbia, and Puerto Rico to
make loans and grants to subrecipients--local governments and other
entities awarded Recovery Act funds--for eligible wastewater and
drinking water infrastructure projects and "nonpoint source" pollution
projects intended to protect or improve water quality by, for example,
controlling runoff from city streets and agricultural areas.[Footnote
1] The Clean Water and Drinking Water SRF programs, established in
1987 and 1996 respectively, provide states and local communities
independent and permanent sources of subsidized financial assistance,
such as low or no-interest loans, for projects that protect or improve
water quality and that are needed to comply with federal drinking
water regulations and protect public health.
In addition to providing increased funds, the Recovery Act included
specific requirements for states beyond those that are part of base
Clean Water and Drinking Water SRF programs. For example, states were
required to have all Recovery Act funds awarded to projects under
contract within 1-year of enactment--which was February 17, 2010
[Footnote 2]--and EPA was directed to reallocate any funds not under
contract by that date.[Footnote 3]
Further, states were required to use at least 50 percent of Recovery
Act funds to provide assistance in the form of principal forgiveness,
negative interest loans, or grants.[Footnote 4] States were also
required to use at least 20 percent of funds as a "green reserve" to
provide assistance for green infrastructure projects, water or energy
efficiency improvements, or other environmentally innovative
activities.
Communities Putting Prevention to Work:
The Recovery Act provides $650 million to carry out evidence-based
clinical and community-based prevention and wellness strategies
authorized by the Public Health Service Act that deliver specific,
measurable health outcomes that address chronic disease rates. In
response to the act, the Department of Health and Human Services
launched the Communities Putting Prevention to work initiative on
September 17, 2009. The goals of the initiative, which is to be
administered by the Centers for Disease Control and Prevention, are to
increase levels of physical activity, improve nutrition, decrease
obesity rates, and decrease smoking prevalence, teen smoking
initiation, and exposure to second-hand smoke through an emphasis on
policy and environmental change at both the state and local levels. Of
the $650 million appropriated for this initiative, approximately $450
million will support community approaches to chronic disease
prevention and control; $120 million will support the efforts of
states and territories to promote wellness, prevent chronic disease,
and increase tobacco cessation; $32.5 million is allocated for state
chronic disease self-management programs; and $40 million is allocated
to establish a National Prevention Media Initiative and a National
Organizations Initiative to encourage the development of prevention
and wellness messages and advertisements.
Community Development Block Grants:
The Community Development Block Grant (CDBG) program, administered by
the Office of Community Planning and Development within the Department
of Housing and Urban Development, enables state and local governments
to undertake a wide range of activities intended to create suitable
living environments, provide affordable housing, and create economic
opportunities, primarily for persons of low and moderate income. Most
local governments use this investment to rehabilitate affordable
housing and improve key public facilities. The Recovery Act includes
$1 billion for the CDBG.
Community Services Block Grants:
Community Services Block Grants (CSBG), administered by the
Administration for Children and Families within the Department of
Health and Human Services, provide federal funds to states,
territories, and tribes for distribution to local agencies to support
a wide range of community-based activities to reduce poverty. The
Recovery Act appropriated $1 billion for CSBG.
Community Oriented Policing Services Hiring Recovery Program:
The Recovery Act provided $1 billion through the Department of
Justice's (DOJ) Community Oriented Policing Service's (COPS) Hiring
Recovery Program (CHRP) for competitive grant funding to law
enforcement agencies to create and preserve jobs and to increase
community policing capacity and crime-prevention efforts. CHRP grants
provide 100 percent funding for 3 years to cover approved entry-level
salaries and benefits for newly-hired, full-time sworn officers,
including those who were hired to fill positions previously unfunded,
as well as rehired officers who had been laid off. CHRP funds can also
be used in the same manner to retain officers who were scheduled to be
laid off as a result of local budget cuts. There is no local funding
match requirement for CHRP. When the grant term expires after 3 years,
grantees must retain all sworn officer positions awarded under the
CHRP grant for at least 1 additional year.
The DOJ COPS office selected local law enforcement agencies to receive
funding based on fiscal health factors--such as changes in budgets for
law enforcement, poverty, unemployment, and foreclosure rates--and
reported crime and planned community policing activities. DOJ awards
50 percent of CHRP funds to local law enforcement agencies with
populations greater than 150,000 and awards the remaining 50 percent
to local law enforcement agencies with populations of less than
150,000. Awards were capped at no more than 5 percent of the applicant
agency's actual sworn force strength (up to a maximum of 50 officers)
and a minimum of $5 million was allocated to each state or eligible
territory.
Diesel Emission Reduction Act Grants:
The program objective of the Diesel Emission Reduction Act Grants,
administered by the Office of Air and Radiation in conjunction with
the Office of Grants and Debarment, within the U.S. Environmental
Protection Agency (EPA), is to reduce diesel emissions. EPA will award
grants to address the emissions of in-use diesel engines by promoting
a variety of cost-effective emission reduction strategies, including
switching to cleaner fuels, retrofitting, repowering or replacing
eligible vehicles and equipment, and idle reduction strategies. The
Recovery Act appropriated $300 million for the Diesel Emission
Reduction Act Grants. In addition, the funds appropriated through the
Recovery Act for the program are not subject to the State Grant and
Loan Program Matching Incentive provisions of the Energy Policy Act of
2005.
Education:
Elementary and Secondary Education Act of 1965, Title I, Part A:
The Recovery Act provides $10 billion to help local educational
agencies (LEA) educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act of 1965 (ESEA), as amended.
[Footnote 5] These additional funds are distributed through states to
LEAs using existing federal funding formulas, which target funds based
on such factors as high concentrations of students from families
living in poverty. In using the funds, LEAs are required to comply
with applicable statutory and regulatory requirements and must
obligate 85 percent of the funds by September 30, 2010.[Footnote 6]
The Department of Education is advising LEAs to use the funds in ways
that will build the agencies' long-term capacity to serve
disadvantaged youth, such as through providing professional
development to teachers. The Recovery Act also appropriated $3 billion
for ESEA Title I School Improvement Grants (SIG), which provides funds
to states for use in ESEA Title I schools identified for improvement
[Footnote 7] in order to substantially raise the achievement of their
students.[Footnote 8] These funds are awarded by formula to states,
which will then make competitive grants to LEAs. State applications
for the $3 billion in Recovery Act SIG funding, as well as an
additional $546 million in regular fiscal year 2009 SIG funding, were
due to the Department of Education on February 28, 2010. SIG
regulatory requirements effective in February 2010,[Footnote 9]
prioritize the use of SIG funds in each state's persistently lowest-
achieving Title I schools.[Footnote 10]
To receive funds, states must identify their persistently lowest-
achieving schools, and an LEA that wishes to receive SIG funds must
submit an application to its state educational agency (SEA)
identifying which schools it commits to serve and how it will use
school improvement funds to implement one of four school intervention
models: (1) turnaround model, which includes replacing the principal
and rehiring no more than 50 percent of the school's staff; (2)
restart model, in which an LEA converts the school or closes and
reopens it as a charter school or under an education management
organization; (3) school closure, in which an LEA closes the school
and enrolls the students who attended the school in other, higher-
achieving schools in the LEA; or (4) the transformation model, which
addresses four specific areas intended to improve schools.
Individuals with Disabilities Education Act, Parts B and C:
The Recovery Act provided supplemental funding for programs authorized
by Part B and C of the Individuals with Disabilities Education Act
(IDEA) as amended, the major federal statute that supports early
intervention and special education and related services for children
and youth with disabilities. Part B funds programs that ensure
preschool and school-age children with disabilities access to a free
and appropriate public education and is divided into two separate
grants--Part B grants to states (for school-age children) and Part B
preschool grants. 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.
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 LEAs and public
institutions of higher education (IHE). States must use 81.8 percent
of their SFSF formula grant funds to support education (these funds
are referred to as education stabilization funds) and must use the
remaining 18.2 percent for public safety and other government
services, which may include education (these funds are referred to as
government services funds). The SFSF funds are being provided to
states in two phases. Phase 1 funds--at least 67 percent of education
stabilization funds and all government services funds--were provided
to each state after the Department of Education (Education) approved
the state's Phase 1 application for funds. Phase 2 funds are being
awarded to states as Education approves each state's Phase 2
application. The Phase 1 application required each state to provide
several assurances, including that the state will meet maintenance-of-
effort requirements (or will be able to comply with the relevant
waiver provisions); will meet requirements for accountability,
transparency, reporting, and compliance with certain federal laws and
regulations; and that it will implement strategies to advance four
core areas of education reform.[Footnote 11] The Phase 2 application
requires each state to explain the information the state makes
available to the public related to the four core areas of education
reform or provide plans for making information related to the
education reforms publicly available no later than September 30, 2011.
States must use education stabilization funds to restore state funding
to the greater of fiscal year 2008 or 2009 levels for state support to
LEAs and public IHEs. When distributing these funds to LEAs, states
must use their primary education funding formula, but they can
determine how to allocate funds to public IHEs. In general, LEAs
maintain broad discretion in how they can use education stabilization
funds, but states have some ability to direct IHEs in how to use these
funds.
Edward Byrne Memorial Justice Assistance Grant Program:
The Recovery Act provided $2 billion through the Department of
Justice's (DOJ) Edward Byrne Memorial Justice Assistance Grant (JAG)
Program for grants to state and local governments for law enforcement
and criminal justice activities. JAG funds can be used to support a
range of activities in seven broad program areas: (1) law enforcement;
(2) prosecution and courts; (3) crime prevention and education; (4)
corrections; (5) drug treatment and enforcement; (6) program planning,
evaluation, and technology improvement; and (7) crime victim and
witness programs. Within these areas, JAG funds can be used for state
and local initiatives, training, personnel, equipment, supplies,
contractual support, research, and information systems for criminal
justice.
Although each state is guaranteed a minimum allocation of JAG funding,
states and localities therein must apply to DOJ's Bureau of Justice
Assistance (BJA) to receive their grant awards. BJA applies a
statutory formula based on population and violent crime statistics to
determine annual funding levels. After applying the formula, BJA
distributes each state's allocation in two ways:
* BJA awards 60 percent directly to the state, and the state must in
turn allocate a formula-based share of these funds--considered a
"variable pass-through," to its local governments; and:
* BJA awards the remaining 40 percent directly to eligible units of
local government within the state.
Electronic Baggage Screening Program:
Administered by the Transportation Security Administration (TSA) of
the Department of Homeland Security, the Electronic Baggage Screening
Program provides funding to strengthen screening of checked baggage in
airports. The Recovery Act provided approximately $1 billion to invest
in the procurement and installation of checked baggage explosives
detection systems and checkpoint explosives detection equipment.
According to TSA, it has allocated over $700 million to its Electronic
Baggage Screening Program for purposes that include facility
modifications; equipment purchase and installation; and programmatic,
maintenance, and technological support.
Emergency Food and Shelter Program:
The Emergency Food and Shelter Program (EFSP), which is administered
by the Federal Emergency Management Agency (FEMA) within the
Department of Homeland Security, was authorized in July 1987 by the
Stewart B. McKinney Homeless Assistance Act to provide food, shelter,
and supportive services to the homeless.[Footnote 12] The program is
governed by a National Board composed of a representative from FEMA
and six statutorily designated national nonprofit organizations.
[Footnote 13] Since its first appropriation in fiscal year 1983, EFSP
has awarded over $3.4 billion in federal aid to more than 12,000 local
private, nonprofit and government human service entities in more than
2,500 communities nationwide.
Energy Efficiency and Conservation Block Grants:
The Energy Efficiency and Conservation Block Grants (EECBG),
administered by the Office of Energy Efficiency and Renewable Energy
within the Department of Energy, provides funds through competitive
and formula grants to units of local and state government and Indian
tribes to develop and implement projects to improve energy efficiency
and reduce energy use and fossil fuel emissions in their communities.
The Recovery Act includes $3.2 billion for the EECBG. Of that total,
$400 million is to be awarded on a competitive basis to grant
applicants.
Green Capacity Building Grants:
Under the Recovery Act, the Green Capacity Building Grants program,
administered by the Employment and Training Administration within the
Department of Labor, provides funds to build the green training
capacity of current Department of Labor (Labor) grantees. Grants will
help individuals in targeted groups acquire the skills needed to enter
and advance in green industries and occupations by building the
capacity of active Labor-funded training programs. Grantees are
required to give priority to targeted groups, including workers
impacted by national energy and environmental policy, individuals in
need of updated training related to energy-efficiency and renewable
energy industries, veterans, unemployed individuals, and individuals
with criminal records.
Health Information Technology Extension Program:
The Department of Health and Human Services' Health Information
Technology Extension Program, administered by the Office of the
National Coordinator for Health Information Technology, allocated $643
million to establish 60 Health Information Technology Regional
Extension Centers (REC) and $50 million to establish a national Health
Information Technology Research Center (HITRC). The first cycle of
awards, announced February 12, 2010, provided $375 million to create
32 RECs, while the second cycle of awards, announced April 6, 2010,
provided $267 million to establish 28 RECs. RECs offer technical
assistance, guidance, and information on best practices for the use of
Electronic Health Records (EHR) to health care providers. The HITRC
supports RECs' efforts by collecting information on best practices
from a wide variety of sources across the country and by acting as a
virtual community for RECs to collaborate with one another and with
relevant stakeholders to identify and share best practices for the use
of EHRs. The goal of the RECs and HITRC is to enable nationwide health
information exchange through the adoption and meaningful use of secure
EHRs.
Head Start/Early Head Start:
The Head Start program, administered by the Office of Head Start of
the Administration for Children and Families within the Department of
Health and Human Services, provides comprehensive early childhood
development services to low-income children, including educational,
health, nutritional, social, and other services, intended to promote
the school readiness of low-income children. Federal Head Start funds
are provided directly to local grantees, rather than through states.
The Recovery Act provided an additional $2.1 billion in funding for
Head Start and Early Head Start programs. The Early Head Start program
provides family-centered services to low-income families with very
young children designed to promote the development of the children,
and to enable their parents to fulfill their roles as parents and to
move toward self-sufficiency.
High-Speed Intercity Passenger Rail Program:
The High-Speed Intercity Passenger Rail Program (HSIPR) is
administered by the Federal Railroad Administration, within the
Department of Transportation (DOT). The purpose of the HSIPR Program
is to build an efficient, high-speed passenger rail network connecting
major population centers 100 to 600 miles apart. In the near-term, the
program will aid in economic recovery efforts and lay the foundation
for this high-speed passenger rail network through targeted
investments in existing intercity passenger rail infrastructure,
equipment, and intermodal connections. In addition to the $8 billion
provided in the Recovery Act, the HSIPR Program also included
approximately $92 million in fiscal year 2009 and remaining fiscal
year 2008 funds appropriated under the existing State Grant Program
(formally titled, Capital Assistance to States--Intercity Passenger
Rail Service). The fiscal year 2010 DOT appropriation included $2.5
billion for high speed rail and intercity passenger rail projects.
Homelessness Prevention and Rapid Re-Housing Program:
The Homelessness Prevention and Rapid Re-Housing Program, administered
by the Office of Community Planning and Development within the
Department of Housing and Urban Development, awards formula grants to
states and localities to prevent homelessness and procure shelter for
those who have become homeless. Funding for this program is being
distributed based on the formula used for the Emergency Shelter Grants
program. According to the Recovery Act, program funds should be used
for short-term or medium-term rental assistance; housing relocation
and stabilization services, including housing search, mediation or
outreach to property owners, credit repair, security or utility
deposits, utility payments, and rental assistance for management; or
appropriate activities for homeless prevention and rapid re-housing of
persons who have become homeless. The Recovery Act includes $1.5
billion for this program.
Highway Infrastructure Investment Program:
The Recovery Act provides funding to states for restoration, repair,
and construction of highways and other activities allowed under the
Federal Highway Administration's Federal-Aid Highway Surface
Transportation Program and for other eligible surface transportation
projects. The Recovery Act requires that 30 percent of these funds be
suballocated, primarily based on population, for metropolitan,
regional, and local use. Highway funds are apportioned to states
through federal-aid highway program mechanisms, and states must follow
existing program requirements. While the maximum federal fund share of
highway infrastructure investment projects under the existing federal-
aid highway program is generally 80 percent, under the Recovery Act,
it is 100 percent.
Funds appropriated for highway infrastructure spending must be used in
accordance with Recovery Act requirements. States were given a 1-year
deadline (March 2, 2010) to ensure that all apportioned Recovery Act
funds--including suballocated funds--were obligated.[Footnote 14] The
Secretary of Transportation was to withdraw and redistribute to
eligible states any amount that was not obligated by that time.
[Footnote 15] Additionally, the governor of each state was required to
certify that the state would maintain its level of spending for the
types of transportation projects funded by the Recovery Act it planned
to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state was required to identify the
amount of funds the state planned to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 16]
On March 2, 2009, the Federal Highway Administration apportioned
$799.8 million in Recovery Act funds to states for its Transportation
Enhancement program. States may use program funds for qualifying
surface transportation activities, such as constructing or
rehabilitating off-road shared use paths for bicycles and pedestrians;
conducting landscaping and other beautification projects along
highways, streets, and waterfronts; and rehabilitating and operating
historic transportation facilities such as historic railroad depots.
[Footnote 17] The Recovery Act requires that 3 percent of Highway
Infrastructure Investment funds provided to states must be used for
Transportation Enhancement activities. Additionally, states may decide
to use additional Recovery Act Transportation Enhancement funds,
beyond the 3 percent requirement, for qualifying activities such as
those mentioned above. States determine the share of federal funds
used for qualifying Transportation Enhancement projects up to 100
percent of the projects' costs.
Increased Demand for Services:
The Department of Health and Human Services' Health Resources and
Services Administration (HRSA) has allocated Recovery Act funds for
Increased Demand for Services (IDS) grants to health centers to
increase health center staffing, extend hours of operations, and
expand existing services. The Recovery Act provided $500 million for
health center operations. HRSA has allocated $343 million for IDS
grants to health centers.[Footnote 18]
Internet Crimes Against Children Initiatives:
Internet Crimes Against Children Initiatives (ICAC), administered by
the Department of Justice, Office of Justice Programs' Office of
Juvenile Justice and Delinquency Prevention, seeks to maintain and
expand state and regional ICAC task forces to address technology-
facilitated child exploitation. This program provides funding to
states and localities for salaries and employment costs of law
enforcement officers, prosecutors, forensic analysts, and other
related professionals. The Recovery Act appropriated $50 million for
ICAC.
Lead-Based Paint Hazard Control Grants and Lead Hazard Reduction
Demonstration Grant Program:
The Recovery Act provided approximately $78 million to the Lead-Based
Paint Hazard Control Grant Program through the Department of Housing
and Urban Development to assist states and localities in undertaking
programs to identify and control lead-based paint hazards in eligible
privately owned housing for rental or owner-occupants. Funds will be
used to perform lead-based paint inspections, soil and paint-chip
testing, risk assessments, and other activities that are in support of
lead hazard abatement work. An additional $2.6 million was provided
for the Lead Hazard Reduction Demonstration Grant Program which will
assist urban areas with the greatest lead paint abatement needs to
identify and control lead-based paint hazards in eligible privately
owned single-family housing units and multifamily buildings occupied
by low-income families.
Local Energy Assurance Planning Initiative:
The Recovery Act provided funding to support Local Energy Assurance
Planning (LEAP) Initiatives to help communities prepare for energy
emergencies and disruptions. The Department of Energy will award funds
to cities and towns to develop or expand local energy assurance plans
that will improve electricity reliability and energy security in their
communities. LEAP aims to facilitate recovery from disruptions to the
energy supply and enhance reliability and quicker repairs following
energy supply disruptions.
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 and Medicaid Services, within the Department of Health and
Human Services, approves state Medicaid plans, and the amount of
federal assistance states receive for Medicaid service expenditures is
determined by the Federal Medical Assistance Percentage (FMAP). The
Recovery Act's temporary increase in FMAP funding will provide all 50
states and the District with approximately $87 billion in assistance.
Federal legislation was recently enacted amending the Recovery Act to
provide for an extension of increased FMAP funding through June 30,
2011, but at a lower level.
National Clean Diesel Funding Assistance Projects:
The Recovery Act provided $156 million in new funding to the National
Clean Diesel Funding Assistance Program to support the implementation
of verified and certified diesel emission reduction technologies. The
competitive grant program funded projects that would achieve
significant reductions in diesel emissions, especially from fleets
operating in areas designated as having poor air quality. This is one
of the Recovery Act-funded National Clean Diesel Campaign programs
which have the goal to accelerate emission reductions from older
diesel engines to provide air quality benefits and improve public
health.
National Endowment for the Arts Recovery Act Grants:
The Recovery Act provides $50 million to be distributed in direct
grants by the National Endowment for the Arts to fund arts projects
and activities that preserve jobs in the nonprofit arts sector
threatened by declines in philanthropic and other support during the
current economic downturn.
Neighborhood Stabilization Program 2:
The Neighborhood Stabilization Program (NSP), administered by the
Office of Community Planning and Development within the Department of
Housing and Urban Development, provides assistance for the
redevelopment of abandoned and foreclosed homes and residential
properties in order that such properties may be returned to productive
use or made available for redevelopment purposes. The $2 billion in
NSP2 funds appropriated in the Recovery Act are competitively awarded
to states, local governments, and nonprofit organizations.[Footnote
19] NSP is considered to be a component of the Community Development
Block Grant (CDBG) program and basic CDBG requirements govern NSP.
Port Security Grant Program:
The Port Security Grant Program (PSGP) provides grant funding to port
areas for the protection of critical port infrastructure from
terrorism. The Recovery Act provides $150 million in stimulus funding
for the PSGP administered by the Federal Emergency Management Agency
(FEMA), an agency of the Department of Homeland Security. PSGP funds
are primarily intended to assist ports in enhancing maritime domain
awareness, enhancing risk management capabilities to prevent, detect,
respond to, and recover from attacks involving improvised explosive
devices, weapons of mass destruction and other nonconventional
weapons, as well as training and exercises and Transportation Worker
Identification Credential implementation. Ports compete for funds and
priority is given to cost-effective projects that can be executed
expeditiously and have a significant and near-term impact on risk
mitigation.
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 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.
Public Transportation Program:
The Recovery Act appropriated $8.4 billion to fund public transit
throughout the country through existing Federal Transit Administration
(FTA) grant programs, including the Transit Capital Assistance
Program, and the Fixed Guideway Infrastructure Investment Program.
Under the Transit Capital Assistance Program's formula grant program,
Recovery Act funds were apportioned to large and medium urbanized
areas--which in some cases include a metropolitan area that spans
multiple states--throughout the country according to existing program
formulas. Recovery Act funds were also apportioned to states for small
urbanized areas and nonurbanized areas under the Transit Capital
Assistance Program's formula grant programs using the program's
existing formula. Transit Capital Assistance Program funds may be used
for such activities as vehicle replacements, facilities renovation or
construction, preventive maintenance, and paratransit services.
Recovery Act funds from the Fixed Guideway Infrastructure Investment
Program[Footnote 20] 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 21] 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--develop a list of transit projects that
project sponsors (typically transit agencies) submit to FTA for
approval.[Footnote 22]
Funds appropriated for the Transit Capital Assistance Program and the
Fixed Guideway Infrastructure Investment Program must be used in
accordance with Recovery Act requirements. States were given a 1-year
deadline (March 5, 2010) to ensure that all apportioned Recovery Act
funds were obligated.[Footnote 23] The Secretary of Transportation was
to withdraw and redistribute to each state or urbanized area any
amount that was not obligated within these time frames.[Footnote 24]
Additionally, the governor of each state was required to certify that
the state would maintain its level of spending for the types of
transportation projects funded by the Recovery Act it planned to spend
the day the Recovery Act was enacted. As part of this certification,
the governor of each state was required to identify the amount of
funds the state planned to expend from state sources from February 17,
2009, through September 30, 2010.[Footnote 25]
The Transit Investments for Greenhouse Gas and Energy Reduction
(TIGGER) Grant program, administered by FTA within the Department of
Transportation, is a discretionary program to support transit capital
projects that result in greenhouse gas reductions or reduced energy
use. The Recovery Act provides $100 million for the TIGGER program,
and each submitted proposal must request a minimum of $2 million.
Race to the Top Fund:
The Recovery Act includes up to $5 billion for the Race to the Top
Fund, administered by the Office of Elementary and Secondary Education
within the Department of Education (Education). According to
Education, awards in Race to the Top will go to states that are
leading the way with ambitious yet achievable plans for implementing
coherent, compelling, and comprehensive educational reform. Through
Race to the Top, Education asks states to advance reforms in four
specific areas: adopting standards and assessments that prepare
students to succeed in college and the workplace and to compete in the
global economy; building data systems that measure student growth and
success, and inform teachers and principals about how they can improve
instruction; recruiting, developing, rewarding, and retaining
effective teachers and principals, especially where they are needed
most; and turning around our lowest-achieving schools.
Recovery Act Assistance to Firefighters Fire Station Construction
Grants:
The Recovery Act Assistance to Firefighters Fire Station Construction
Grants, also known as fire grants or the FIRE Act grant program, is
administered by the Department of Homeland Security, Federal Emergency
Management Agency, Assistance to Firefighters Program Office. The
program provides federal grants directly to fire departments on a
competitive basis to build or modify existing nonfederal fire stations
in order for departments to enhance their response capability and
protect the communities they serve from fire and fire-related hazards.
The Recovery Act includes $210 million for this program and provides
that no grant shall exceed $15 million.
Recovery Act Impact on Child Support Incentives:
The Child Support Enforcement (CSE) Program (Title IV-D of the Social
Security Act) is a joint federal-state program administered by the
Administration for Children and Families (ACF), within the Department
of Health and Human Services. The program provides federal matching
funds to states to carry out their child support enforcement programs,
which enhance the well-being of children by, among other things,
establishing paternity, establishing child support orders, and
collecting child support. Furthermore, ACF makes additional incentive
payments to states based in part on their child support enforcement
programs meeting certain performance goals. States must reinvest their
incentive fund payments into the CSE program or an activity to improve
the CSE program; however, incentive funds reinvested in the CSE
program are not eligible for federal matching funds. Funds for the
federal matching payments and incentive payments are appropriated
annually, and the Recovery Act does not appropriate funds for either
of them. However, the Recovery Act temporarily provides for incentive
payments expended by states for child support enforcement to count as
state funds eligible for the federal match. This change is effective
October 1, 2008, through September 30, 2010.
Recovery Zone Bonds:
Recovery Zone Bonds are administered by the Internal Revenue Service
within the Department of the Treasury and come in two types: Recovery
Zone Economic Development Bonds (RZEDB) and Recovery Zone Facility
Bonds. RZEDB are a type of direct payment Build America Bond (BAB),
created under the Recovery Act. Direct payment BABs allow issuers the
option of receiving a federal payment instead of allowing a federal
tax exemption on the interest payments. RZEDBs provide a 45 percent
credit instead of a 35 percent credit like other types of BABs and
must meet certain requirements. RZEDBs are targeted to economically
distressed areas meeting certain criteria and are to be used for
qualified forms of economic development. Recovery Zone Facility Bonds
are exempt facility bonds which may be used to finance certain
designated recovery zone property. The Recovery Act authorized up to
$10 billion for RZEDBs and up to $15 billion for Recovery Zone
Facility Bonds to be allocated to states, the District of Columbia,
and territories, based to the their employment declines in 2008.
Renewable and Distributed Systems Integration:
The Renewable and Distributed Systems Integration (RDSI) program,
administered by the Office of Electricity Delivery and Energy
Reliability within the Department of Energy (DOE), focuses on
integrating renewable and distributed energy technologies into the
electric distribution and transmission system. In April 2008, DOE
announced plans to invest up to $50 million over 5 years (fiscal years
2008 to 2012) in nine projects aimed at demonstrating the use of RDSI
technologies to reduce peak load electricity demand by at least 15
percent at distribution feeders--the power lines delivering
electricity to consumers. The program goal is to reduce peak load
electricity demand by 20 percent at distribution feeders by 2015.
Retrofit Ramp-Up Program:
The Recovery Act's Retrofit Ramp-Up program will provide funding to
projects to "ramp-up" energy efficiency building retrofits. The
program will target community-scale retrofit projects that make
significant, long-term impacts on energy use and can serve as national
role models for energy-efficiency efforts. These programs should
result in retrofits that lead to significant efficiency improvements
to a large number of buildings in communities or neighborhoods. The
retrofits must reduce the total monthly operating costs of the
buildings including any repayments of loans. The Retrofit Ramp-Up
projects are the competitive portion of DOE's Energy Efficiency and
Conservation Block Grant Program and are part of the Recovery Act
investment in clean energy and energy efficiency.
Senior Community Service Employment Program:
The Senior Community Service Employment Program (SCSEP), administered
by the Employment and Training Administration within the Department of
Labor, is a community service and work-based training program which
serves low-income persons who are 55 years or older and have poor
employment prospects by placing them in part-time community service
positions and by assisting them to transition to unsubsidized
employment. The Recovery Act provides $120 million for SCSEP.
Senior Nutrition Programs:
The Recovery Act provides $100 million to the Senior Nutrition
Programs, administered by the Administration on Aging (AoA) within the
Department of Health and Human Services. AoA distributed funds to 56
States and Territories and 246 tribes and Native Hawaiian
organizations to fund three programs at senior centers and other
community sites. The Recovery act awarded $65 million for congregate
nutrition services provided at senior centers and other community
sites, $32 million for home-delivered nutrition services delivered to
elders at home, and $3 million for Native American nutrition programs.
The Congregate Nutrition Services and Home-delivered Nutrition
Services programs specifically targets vulnerable seniors, such as low-
income minorities and those residing in rural areas, and aims to help
elderly individuals avoid hospitalization and nursing home placement
by maintaining their health through meals. The Nutrition Services for
Native Americans provides congregate and home-delivered meals and
related nutrition services to American Indian, Alaskan Native, and
Native Hawaiian elders.
Services*Training*Officers*Prosecutors Violence Against Women Formula
Grants Program:
Under the Services*Training*Officers*Prosecutors (STOP) Violence
Against Women Formula Grants Program, the Office on Violence Against
Women within the Department of Justice, has awarded over $139 million
in Recovery Act funds to promote a coordinated, multidisciplinary
approach to enhance services and advocacy to victims, improve the
criminal justice system's response, and promote effective law
enforcement, prosecution, and judicial strategies to address domestic
violence, dating violence, sexual assault, and stalking.
Smart Grid Investment Grant Program:
Under the Recovery Act, states will receive $3.4 billion to deploy and
integrate advanced digital technology to modernize the electric
delivery network through the Smart Grid Investment Grant Program,
administered by the Office of Electricity Delivery and Energy
Reliability within the Department of Energy. The program funds a broad
range of projects aimed at applying smart grid technologies to
existing electric system equipment, consumer products and appliances,
meters, electric distribution and transmission systems, and homes,
offices, and industrial facilities.
Staffing for Adequate Fire and Emergency Response:
The Staffing for Adequate Fire and Emergency Response (SAFER) grants
program, administered by the Federal Emergency Management Agency
within the Department of Homeland Security, was created to provide
funding directly to volunteer, combination, and career fire
departments[Footnote 26] to help them increase staffing and enhance
their emergency deployment capabilities. The goal of SAFER is to
ensure departments have an adequate number of trained, frontline
active firefighters capable of safely responding to and protecting
their communities from fire and fire-related hazards. SAFER provides 2-
year grants to fire departments to pay the salaries of newly hired
firefighters or to rehire recently laid-off firefighters. Fire
departments using SAFER funding to hire new fire fighters commit to
retaining the SAFER-funded firefighters for 1 full year after the 2-
year grant has been expended. The retention commitment does not extend
to previously laid-off firefighters who have been rehired. In
addition, volunteer and combination firefighter departments are
eligible to apply for SAFER funding to pay for activities related to
the recruitment and retention of volunteer firefighters.[Footnote 27]
State Broadband Data and Development Program:
The Recovery Act appropriated $7.2 billion to extend access to
broadband throughout the United States. Of the $7.2 billion, $4.7
billion was appropriated to the Department of Commerce's National
Telecommunications and Information Administration (NTIA) and $2.5
billion to the Department of Agriculture's Rural Utilities Service. Of
the $4.7 billion, up to $350 million was available pursuant to the
Broadband Data Improvement Act (BDIA) for the purpose of developing
and maintaining a nationwide map featuring the availability of
broadband service. BDIA directs the Secretary of Commerce to establish
the State Broadband Data and Development Grant Program and to award
grants to eligible entities to develop and implement statewide
initiatives to identify and track the adoption and availability of
broadband services within each state. To accomplish the joint purposes
of the Recovery Act and BDIA, NTIA has developed the State Broadband
Data and Development projects that collect comprehensive and accurate
state-level broadband mapping data, develop state-level broadband
maps, aid in the development and maintenance of a national broadband
map, and fund statewide initiatives directed at broadband planning.
State Energy Program:
Under the Recovery Act, states will receive $3.1 billion for energy
projects through the State Energy Program (SEP), administered by the
Office of Energy Efficiency and Renewable Energy within the Department
of Energy (DOE). States should prioritize the grants toward funding
energy-efficiency and renewable energy programs, including expanding
existing energy-efficiency programs, renewable energy projects, and
joint activities between states. The SEP's 20 percent cost match is
not required for grants made with Recovery Act funds. DOE estimates
that SEP funding will have an annual costs savings of $256 million.
State Health Information Exchange Cooperative Agreement Program:
Under the Department of Health and Human Services' State Health
Information Exchange (HIE) Cooperative Agreement Program, $564 million
has been allocated to support states' efforts to develop the capacity
among health care providers and hospitals in their jurisdiction to
exchange health information across health care systems through the
meaningful use of Electronic Health Records (EHR). The meaningful use
of EHRs aims to improve the quality and efficiency of patient care. In
order to ensure secure and effective use of HIE technology within and
across state borders, grant recipients are expected to use their
authority and resources to implement HIE privacy and security
requirements, coordinate with Medicaid and state public health
programs in using HIE technology, and enable interoperability through
the creation of state-level directories and technical services and the
removal of barriers. The state HIE program uses a cooperative
agreement, or partnership between the grant recipient and the federal
government, to administer the awards (when the federal government has
a substantial stake in the outcomes or operation of the program). The
state HIE cooperative agreements are 4-year agreements and recipients
will be required to match grant awards beginning in the second year of
the award, 2011.
Statewide Longitudinal Data Systems:
The Statewide Longitudinal Data Systems grant program, administered by
the Department of Education's Institute of Education Sciences, awards
competitive grants to state educational agencies for the design,
development, and implementation of statewide longitudinal data
systems. These systems are intended to enhance the ability of states
to efficiently and accurately manage, analyze, and use education data,
including individual student records, while protecting student
privacy. The first grants were awarded to 14 states in November 2005;
12 states and the District of Columbia were awarded grants in 2007,
and 27 states were awarded grants in 2009. The Recovery Act
appropriated $250 million for this program.
Supplemental Nutrition Assistance Program (formerly the Food Stamp
Program):
The Supplemental Nutrition Assistance Program (SNAP), administered by
the Food and Nutrition Service within the Department of Agriculture,
serves more than 35 million people nationwide each month. SNAP's goal,
in part, is to help raise the level of nutrition and alleviate the
hunger of low-income households. The Recovery Act provides for a
monthly increase in benefits for the program's recipients. The
increases in benefits under the Recovery Act are estimated to total
$20 billion over the next 5 years.
Tax Credit Assistance Program (TCAP) and Section 1602 Program:
The Tax Credit Assistance Program administered by the Department of
Housing and Urban Development (HUD) provides gap financing to be used
by state Housing Finance Agencies (HFA) in the form of grants or loans
for capital investment in low-income housing tax credits (LIHTC)
projects through a formula-based allocation to HFAs.
HUD obligated $2.25 billion in TCAP funds to HFAs. The HFAs were to
award the funds competitively according to their qualified allocation
plans, which explain selection criteria and application requirements
for housing tax credits (as determined by the states and in accordance
with Section 42 of the Internal Revenue Code). Projects that were
awarded low-income housing tax credits in fiscal years 2007, 2008, or
2009 were eligible for TCAP funding, but HFAs had to give priority to
projects that were "shovel-ready" and expected to be completed by
February 2012. Also, TCAP projects had to include some low-income tax
credits and equity investment. HFAs must commit 75 percent of their
TCAP awards by February 2010 and disburse 75 percent by February 2011.
Project owners must spend all of their TCAP funds by February 2012.
HUD can recapture TCAP funds from any HFA whose projects do not comply
with TCAP requirements. In these cases, HFAs are responsible for
recapturing funds from project owners. Furthermore, because TCAP funds
are federal financial assistance, they are subject to certain federal
requirements, such as Davis-Bacon and the National Environmental
Policy Act (NEPA). These acts, respectively, require that projects
receiving federal funds pay prevailing wages and meet federal
environmental requirements.
The Section 1602 Program allows HFAs to exchange returned and unused
tax credits for a payment from Treasury at the rate of 85 cents for
every tax credit dollar. HFAs can exchange up to 100 percent of unused
2008 credits and 40 percent of their 2009 allocation. HFAs may award
Section 1602 Program funds to finance the construction or acquisition
and rehabilitation of qualified low-income buildings in accordance
with the HFA's Qualified Allocation Plan, which establishes criteria
for selecting LIHTC projects. Section 1602 Program funds may be
committed to project owners that have not sold their LIHTC allocation
to private investors, as long as the project owner has made good faith
efforts to find an investor. However, some HFAs have required Section
1602 Program projects to include some tax credit equity from private
investors. Section 1602 Program funds are subject to the same
requirements as the standard LIHTC program, and like TCAP funds, may
be recaptured if a project does not comply with the requirements. HFAs
may submit applications to Treasury for Section 1602 Program funds
through 2010. The last day for HFAs to commit funds to project owners
is December 31, 2010, but they can continue to disburse funds for
committed projects through December 31, 2011, provided that the
project owners paid or incurred at least 30 percent of eligible
project costs by the end of 2010. Congress appropriated 'such sums as
may be necessary' for the operation of the Section 1602 Program. The
Joint Committee on Taxation originally estimated the budget impact of
this program at $3 billion. As of the end of April 2010, however,
Treasury had obligated more than $5 billion to HFAs in Section 1602
Program funds. Section 1602 Program funds are not considered by
Treasury to be federal financial assistance and, therefore, the
Section 1602 Program is not subject to many of the requirements placed
on TCAP.
Title IV-E Adoption Assistance and Foster Care Programs:
Administered by the Administration for Children and Families within
the Department of Health and Human Services, the Foster Care Program
helps states to provide safe and stable out-of-home care for children
until the children are safely returned home, placed permanently with
adoptive families, or placed in other planned arrangements for
permanency. The Adoption Assistance Program provides funds to states
to facilitate the timely placement of children, whose special needs or
circumstances would otherwise make placement difficult, with adoptive
families. Federal Title IV-E funds are paid to reimburse states for
their maintenance payments using the states' respective Federal
Medical Assistance Percentage (FMAP) rates.[Footnote 28] The Recovery
Act temporarily increased the FMAP rate effective October 1, 2008,
through December 31, 2010, resulting in an estimated additional $806
million that will be provided to states for the Adoption Assistance
and Foster Care Programs.
Transportation Investment Generating Economic Recovery Discretionary
Grants:
Administered by the Department of Transportation's Office of the
Secretary, the Recovery Act provides $1.5 billion in competitive
grants, generally between $20 million and $300 million, to state and
local governments and transit agencies. These grants are for capital
investments in surface transportation infrastructure projects that
will have a significant impact on the nation, a metropolitan area, or
a region. Projects eligible for funding provided under this program
include, but are not limited to, highway or bridge projects, public
transportation projects, passenger and freight rail transportation
projects, and port infrastructure investments.
Water and Waste Disposal Loan and Grant Program:
The Water and Environmental Programs administered by the Department of
Agriculture's Rural Development, provides loans, grants, and loan
guarantees for drinking water, sanitary sewer, solid waste, and storm
drainage facilities in rural areas and cities and towns of 10,000 or
less. The Recovery Act provided nearly $3.3 billion in Rural Water and
Waste Disposal funding for these programs. Loans, grants and loan
guarantees to rural water and waste systems will be used to construct,
improve, rehabilitate, or expand existing water and waste disposal
systems to areas initially excluded because service was not
economically feasible.
Water Quality Management Planning Grants:
The Environmental Protection Agency (EPA) awarded $39.3 million in
Recovery Act funding for Water Quality Management Planning Grants to
assist states in water quality management planning. Funds are used to
determine the nature and extent of point and nonpoint source water
pollution and to develop water quality management plans. Funded
activities also include green infrastructure planning and integrated
water resources planning. The fund is administered by the Office of
Water, EPA.
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 by March 31, 2012.
The program, administered by the Office of Energy Efficiency and
Renewable Energy within DOE, enables low-income families to reduce
their utility bills by making long-term energy-efficiency improvements
to their homes by, for example, installing insulation; sealing leaks;
and modernizing heating equipment, air circulation fans, and air
conditioning equipment. Over the past 33 years, the Weatherization
Assistance Program has assisted more than 6.2 million low-income
families. By reducing the energy bills of low-income families, the
program allows these households to spend their money on other needs,
according to DOE. The Recovery Act appropriation represents a
significant increase for a program that has received about $225
million per year in recent years. DOE has approved the weatherization
plans of the 16 states and the District of Columbia that are in our
review and has provided at least half of the funds to those areas.
Wildland Fire Management Program:
The Department of Agriculture's Forest Service administers the
Wildland Fire Management Program funding for projects on federal,
state, and private land. The goals of these projects include ecosystem
restoration, research, and rehabilitation; forest health and invasive
species protection; and hazardous fuels reduction. The Recovery Act
provided $500 million for the Wildland Fire Management program.
Workforce Investment Act of 1998 Title I-B Grants:
The Workforce Investment Act of 1998 (WIA) Youth, Adult, and
Dislocated Worker Programs, administered by the Employment and
Training Administration within the Department of Labor (Labor),
provide job training and related services to unemployed and
underemployed individuals. The Recovery Act provides an additional
$2.95 billion in funding for Youth, Adult, and Dislocated Worker
employment and training activities under Title I-B of WIA. These funds
are allotted to states, which in turn allocate funds to local entities
pursuant to formulas set out in WIA. The adult program provides
training and related services to individuals ages 18 and older, the
youth program provides training and related services to low-income
youth ages 14 to 21, and dislocated worker funds provide training and
related services to individuals who have been laid off or notified
that they will be laid off.[Footnote 29]
Recovery Act funds can be used for all activities allowed under WIA,
including core services, such as job search and placement assistance;
intensive services, such as skill assessment and career counseling;
and training services, including occupational skills training, on-the-
job training, registered apprenticeship, and customized training. For
the youth program, Labor encouraged states and local areas to use as
much of these funds as possible to expand summer youth employment
opportunities. In addition, Labor advised states that training for
adults and dislocated workers should be a significant focus for
Recovery Act funds, and encouraged states to establish policies to
make supportive services and needs-related payments available for
individuals who need these services to participate in job training. To
facilitate increased training for high-demand occupations, the
Recovery Act expanded the methods for providing training under WIA and
allowed local workforce boards to directly enter into contracts with
institutions of higher education and other training providers, if the
local board determines that it would facilitate the training of
multiple individuals and the contract does not limit customer choice.
Appendix XVIII Footnotes:
[1] EPA allocated Recovery Act Clean Water SRF capitalization grants
to states based on a statutory formula. The agency allocated Recovery
Act Drinking Water SRF capitalization grants to states based on the
2003 Drinking Water Infrastructure Needs Survey. EPA allocates Clean
Water and Drinking Water SRF funds to the District of Columbia and
U.S. territories as direct grants for the same purposes.
[2] In this report we use the word "project" to mean an assistance
agreement, i.e. a loan or grant agreement made by the state SRF
program to a subrecipient for the purpose of a Recovery Act project.
[3] The Recovery Act requires states to have all funds awarded to
projects "under contract or construction" by the 1-year deadline. EPA
interprets this as requiring states to have all projects under
contract in an amount equal to the full value of the Recovery Act
assistance agreement by the deadline, regardless of whether
construction has begun, according to a September 2009 memorandum.
Thus, in this report, we use "under contract" when referring to this
requirement. Further, according to EPA's March 2, 2009, memorandum,
the agency will deobligate any Recovery Act SRF funds that a state
does not have awarded to projects under contract by the 1-year
deadline and reallocate them to other states.
[4] Under the base Drinking Water SRF, Congress has authorized states
to use an amount equal to up to 30 percent of their capitalization
grant to provide additional subsidies to communities that meet state-
defined criteria for being "disadvantaged." There is no such statutory
authorization for the Clean Water SRF program.
[5] 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.
[6] 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.
[7] Under ESEA, schools in improvement have failed to meet adequate
yearly progress for at least 2 consecutive years.
[8] School Improvement Grants are authorized under Section 1003(g) of
ESEA.
[9] Final requirements for SIG were published in Dec. 2009 (74 Fed.
Reg. 65618 (Dec. 10, 2009)), and were amended by interim final
requirements published in Jan. 2010 (75 Fed. Reg. 3375 (Jan. 21,
2010)).
[10] To identify the persistently lowest-achieving schools in the
state, a state educational agency must take into account both the
performance of all students in a school on the state's assessments in
reading/language arts and mathematics combined and the lack of
progress by all students on those assessments over a number of years.
[11] The four core areas of education reform, as described by
Education, are: (1) increase teacher effectiveness and address
inequities in the distribution of highly qualified teachers; (2)
establish a pre-K-through-college data system to track student
progress and foster improvement; (3) make progress toward rigorous
college-and career-ready standards and high-quality assessments that
are valid and reliable for all students, including students with
limited English proficiency and students with disabilities; and (4)
provide targeted, intensive support and effective interventions to
turn around schools identified for corrective action or restructuring.
[12] Pub. L. No. 100-77, 101 Stat. 482 (July 22, 1987).
[13] Under the Act, the members of the EFSP National Board are to be
the Director of the Federal Emergency Management Agency (Chair) and
six members appointed by the Director from individuals nominated by
the following organizations: American Red Cross, Catholic Charities
USA, National Council of Churches of Christ in the USA, The Salvation
Army, The Council of Jewish Federations, Inc. (now known as The Jewish
Federations of North America), and the United Way of America (now
known as United Way Worldwide).
[14] For the Highway Infrastructure Investment program, DOT has
interpreted the term "obligation of funds" to mean the federal
government's commitment to pay for the federal share of the project.
This commitment occurs at the time the federal government signs a
project agreement.
[15] Recovery Act, div. A, title XII, 123 Stat. 206.
[16] Recovery Act, div. A, title XII, § 1201(a).
[17] The full list of qualifying Transportation Enhancement activities
is defined in 23 U.S.C. § 101(a)(35).
[18] The Recovery Act provided $2 billion to HRSA for grants to health
centers. Of this total, $1.5 billion is for the construction and
renovation of health centers and the acquisition of Health Information
Technology systems, and the remaining $500 million is for operating
grants to health centers. Of the $500 million for health center
operations, HRSA has allocated $157 million for New Access Point
grants to support health centers' new service delivery sites, and $343
million for IDS grants.
[19] NSP, a term that references the NSP funds authorized under
Division B, Title III of the Housing and Economic Recovery Act of
2008, provides grants to all states and selected local governments on
a formula basis. Under NSP, the Department of Housing and Urban
Development allocated $3.92 billion on a formula basis to states,
territories, and selected local governments. The term "NSP2"
references the NSP funds authorized under the Recovery Act on a
competitive basis.
[20] 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.
[21] 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 1
mile in length.
[22] Metropolitan planning organizations (MPO) 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.
[23] For the Transit Capital Assistance Program and Fixed Guideway
Infrastructure Investment Program, the 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.
[24] Recovery Act, div. A, title XII,123 Stat. 210.
[25] Recovery Act, div. A, title XII, § 1201(a).
[26] Per FEMA's definition, a "volunteer fire department is composed
entirely of members who do not receive compensation other than a
length of service retirement program (LSOP) and insurance. A career
department is one in which all members are compensated for their
services. A combination department has at least one volunteer, with
the balance being career members, or one career member with the
balance being volunteers. Also, if a volunteer fire department
provides stipends to their members or provides pay-on-call for their
members, the department is considered to be combination."
[27] Volunteer fire departments are eligible to apply for both Hiring
and Recruitment and Retention grants. Combination fire departments are
eligible to apply for both Hiring/Rehiring of Firefighters and
Recruitment and Retention of volunteer firefighters SAFER grants.
Career fire departments are only eligible to apply for SAFER Hiring/
Rehiring of firefighters grants.
[28] See the Medicaid Federal Medical Assistance Percentage (FMAP)
description in this appendix.
[29] In general, a dislocated worker is an individual who has been
terminated or laid off, or who has received a notice of termination or
layoff, from employment; was self-employed but is unemployed as a
result of general economic conditions in the community in which the
individual resides or because of natural disasters; or is a displaced
homemaker who is no longer supported by another family member. In
addition, the Recovery Act provides that youth up to age 24 may be
served with Recovery Act funds.
[End of Appendix XVIII]
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