Recovery Act
Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds Gao ID: GAO-10-999 September 20, 2010This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest in a series of reports on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. This report also responds to GAO's mandate to comment on the jobs estimated in recipient reports. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and interviewed federal officials.
As of September 3, 2010, about $154.8 billion of the approximately $282 billion of total funds made available by the Recovery Act in 2009 for programs administered by states and localities had been paid out by the federal government. Of that amount, over 65 percent--$101.9 billion--had been paid out since the start of federal fiscal year 2010 on October 1, 2009. As of July 31, 2010, the 16 states and the District had drawn down $43.9 billion in increased FMAP funds. If current spending patterns continue, GAO estimates that these states and the District will draw down $56.2 billion by December 31, 2010--about 95 percent of their initial estimated allocation. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Congress recently passed legislation to extend the increased FMAP through June 2011, although at lower rates than provided by the Recovery Act. As of August 27, 2010, the District and states covered in GAO's review had drawn down 72 percent ($18.2 billion) of their awarded State Fiscal Stabilization Fund (SFSF) education stabilization funds; 46 percent ($3.0 billion) for Elementary and Secondary Education Act, Title I, Part A; and 45 percent ($3.4 billion) for Individuals with Disabilities Education Act, Part B. In the spring of 2010, GAO surveyed a nationally representative sample of local educational agencies (LEA) and found that job retention was the primary use of education Recovery Act funds in school year 2009-2010, with an estimated 87 percent of LEAs reporting that Recovery Act funds allowed them to retain or create jobs. Nationwide, the Federal Highway Administration (FHWA) obligated $25.6 billion in Recovery Act funds for over 12,300 highway projects, andreimbursed $11.1 billion as of August 2, 2010. The Federal Transit Administration obligated $8.76 billion of Recovery Act funds for about 1,055 grants, and reimbursed $3.6 billion as of August 5, 2010. Highway funds were used primarily for pavement improvement projects, and public transportation funds were used primarily for upgrading transit facilities and improving bus fleets. The EECBG program provides about $3.2 billion in grants to implement projects that improve energy efficiency; of this amount, approximately $2.8 billion has been allocated directly to recipients. As of August 2010, DOE has obligated about 99 percent of the $2.8 billion in direct formula grants to recipients, who have in turn, obligated about half to subrecipients. The majority of EECBG funds have been obligated for three purposes: energy efficiency retrofits to existing facilities, financial incentive programs, and buildings and facilities. As of August 7, 2010, housing agencies had obligated about 46 percent of the nearly $1 billion in Recovery Act Public Housing Capital Fund competitive grants allocated to them for projects such as installing energy-efficient heating and cooling systems in housing units. HUD officials anticipate that some housing agencies may not meet the September 2010 obligation deadline, resulting in those funds being recaptured. GAO believes HUD should continue to closely monitor agencies' progress in obligating remaining funds. As of July 31, 2010, HUD had outlayed about $733 million (32.6 percent) of TCAP funds and Treasury had outlayed about $1.4 billion (25.5 percent) of Section 1602 Program funds. GAO updates the status of agencies' efforts to implement GAO's 58 previous recommendations and makes 5 new recommendations to improve management and strengthen accountability to the Departments of Transportation (DOT), Housing and Urban Development (HUD), the Treasury, and the Office of Management and Budget (OMB).
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Stanley J. Czerwinski Team: Government Accountability Office: Strategic Issues Phone: (202) 512-6520GAO-10-999, Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
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Report to the Congress:
United States Government Accountability Office:
GAO:
September 2010:
Recovery Act:
Opportunities to Improve Management and Strengthen Accountability over
States' and Localities' Uses of Funds:
Recovery Act:
GAO-10-999:
GAO Highlights:
Highlights of GAO-10-999, a report to the Congress.
Why GAO Did This Study:
This report responds to two ongoing GAO mandates under the American
Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest
in a series of reports on the uses of and accountability for Recovery
Act funds in 16 selected states, certain localities in those
jurisdictions, and the District of Columbia (District). These
jurisdictions are estimated to receive about two-thirds of the
intergovernmental assistance available through the Recovery Act. This
report also responds to GAO‘s mandate to comment on the jobs estimated
in recipient reports. GAO collected and analyzed documents and
interviewed state and local officials and other Recovery Act award
recipients. GAO also analyzed federal agency guidance and interviewed
federal officials.
What GAO Found:
As of September 3, 2010, about $154.8 billion of the approximately
$282 billion of total funds made available by the Recovery Act in 2009
for programs administered by states and localities had been paid out
by the federal government. Of that amount, over 65 percent”$101.9
billion”had been paid out since the start of federal fiscal year 2010
on October 1, 2009.
Federal Medical Assistance Percentage (FMAP):
As of July 31, 2010, the 16 states and the District had drawn down
$43.9 billion in increased FMAP funds. If current spending patterns
continue, GAO estimates that these states and the District will draw
down $56.2 billion by December 31, 2010”about 95 percent of their
initial estimated allocation. Most states reported that, without the
increased FMAP funds, they could not have continued to support the
substantial Medicaid enrollment growth they have experienced, most of
which was attributable to children. Several states also reported that
the increased FMAP funds freed up states‘ funds which helped finance
other needs. States and the District remained concerned about the
sustainability of their programs without these funds, and most have
already reduced or frozen certain provider payment rates or imposed
new provider taxes. Congress recently passed legislation to extend the
increased FMAP through June 2011, although at lower rates than
provided by the Recovery Act. For future program adjustments, states
and the District will also need to consider the Patient Protection and
Affordable Care Act, which prohibits federal Medicaid reimbursement
through 2014 if they apply more restrictive eligibility standards,
methods, or procedures.
Education:
As of August 27, 2010, the District and states covered in GAO‘s review
had drawn down 72 percent ($18.2 billion) of their awarded State
Fiscal Stabilization Fund (SFSF) education stabilization funds; 46
percent ($3.0 billion) for Elementary and Secondary Education Act,
Title I, Part A; and 45 percent ($3.4 billion) for Individuals with
Disabilities Education Act, Part B. In the spring of 2010, GAO
surveyed a nationally representative sample of local educational
agencies (LEA) and found that job retention was the primary use of
education Recovery Act funds in school year 2009-2010, with an
estimated 87 percent of LEAs reporting that Recovery Act funds allowed
them to retain or create jobs. Even with Recovery Act funds, one-third
of LEAs reported experiencing budget cuts in school year 2009-2010 and
nearly 1 in 4 reported losing jobs overall. Because of their budget
situations, relatively few LEAs reported making significant progress
in advancing the four core education reform areas states are required
to address as a condition of receiving SFSF funding. In August 2010,
the Education Jobs Fund was created to provide $10 billion to retain
and create education jobs nationwide.
Highway Infrastructure Investment and Public Transportation Funding:
Nationwide, the Federal Highway Administration (FHWA) obligated $25.6
billion in Recovery Act funds for over 12,300 highway projects, and
reimbursed $11.1 billion as of August 2, 2010. The Federal Transit
Administration obligated $8.76 billion of Recovery Act funds for about
1,055 grants, and reimbursed $3.6 billion as of August 5, 2010.
Highway funds were used primarily for pavement improvement projects,
and public transportation funds were used primarily for upgrading
transit facilities and improving bus fleets. With emphasis placed on
the Recovery Act, many states were slower in obligating regular
federal-aid highway funds; FHWA expects all regular funds to be
obligated by the end of the fiscal year. Publicly available data
likely overstates the number and amount of contracts awarded. GAO
recommends that DOT improve the accuracy of these data. DOT has also
not corrected previous public information overstating the amount of
funds directed to economically distressed areas. GAO recommends that
DOT make revised information publicly available. DOT expects to be
able to report on Recovery Act outputs, but did not commit to
assessing whether transportation investments produced long-term
benefits as we recommended in May 2010. GAO believes that
understanding the impact of Recovery Act investments continues to be
important, plans to continue to monitor DOT‘s actions, and encourages
it to report on long-term benefits.
Energy Efficiency and Conservation Block Grant (EECBG), State Energy
Program (SEP), and Weatherization Assistance:
The EECBG program provides about $3.2 billion in grants to implement
projects that improve energy efficiency; of this amount, approximately
$2.8 billion has been allocated directly to recipients. As of August
2010, DOE has obligated about 99 percent of the $2.8 billion in direct
formula grants to recipients, who have in turn, obligated about half
to subrecipients. The majority of EECBG funds have been obligated for
three purposes: energy efficiency retrofits to existing facilities,
financial incentive programs, and buildings and facilities. The
Recovery Act also provided $3.1 billion to the SEP, which provides
funds through formula grants to achieve national energy goals such as
increasing energy efficiency and decreasing energy costs. SEP
recipients are obligating funds, monitoring, and reporting on project
outcomes. The Recovery Act also appropriated $5 billion for the
Weatherization Assistance Program. During 2009, DOE obligated about
$4.73 billion of the Recovery Act‘s weatherization funding, while
retaining about 5 percent of funds to cover the department‘s expenses.
According to DOE officials, as of June 30, 2010, about 166,000 homes
have been weatherized nationwide, or about 29 percent of the 570,000
homes currently planned for weatherization. In May 2010, GAO made
several recommendations to DOE, expressing concerns about whether
program requirements were being met. DOE generally agreed and has
begun to take steps in response to GAO‘s previous recommendations.
Public Housing Capital Fund, Tax Credit Assistance Program (TCAP), and
the Section 1602 Program:
As of August 7, 2010, housing agencies had obligated about 46 percent
of the nearly $1 billion in Recovery Act Public Housing Capital Fund
competitive grants allocated to them for projects such as installing
energy-efficient heating and cooling systems in housing units. HUD
officials anticipate that some housing agencies may not meet the
September 2010 obligation deadline, resulting in those funds being
recaptured. GAO believes HUD should continue to closely monitor
agencies‘ progress in obligating remaining funds. As of July 31, 2010,
HUD had outlayed about $733 million (32.6 percent) of TCAP funds and
Treasury had outlayed about $1.4 billion (25.5 percent) of Section
1602 Program funds. Some state Housing Finance Agencies (HFA) and
projects may face challenges meeting upcoming deadlines, including
that projects spend 30 percent of Section 1602 Program project costs
by December 2010. GAO recommends that Treasury provide guidance to
HFAs and plan to deal with the possibility that projects could miss
the spending deadline. Treasury said it will monitor project spending
and provide additional guidance, if needed. GAO also found that for
some TCAP projects, enhanced HUD oversight may be needed. GAO
recommends that HUD develop a plan that recognizes the level of
oversight others, including HFAs and investors, provide. HUD agrees
these projects need additional monitoring.
Accountability and Recipient Reporting:
OMB‘s Single Audit Internal Control Project highlighted areas where
significant improvements in the Single Audit process are needed. Most
federal awarding agencies did not exercise timely follow-up on action
plans to correct internal control deficiencies identified in the
project‘s reports. Since awarding agencies are to approve corrective
action plans, untimely follow-up could delay efforts to implement
corrective actions. In addition, the Single Audit process timeframes
are not conducive to the timely identification and correction of
internal control deficiencies. Further, OMB‘s Single Audit guidance
has not been timely, causing inefficiencies related to Single Audits.
GAO recommends that the Director of OMB take actions to strengthen the
Single Audit and federal follow-up as oversight mechanisms. OMB
concurred.
Many recipients reported greater ease in meeting their reporting
requirements. GAO‘s analysis of the data in Recovery.gov shows some
improvement, but data quality issues remain, such as the ability to
link reports across quarters to follow project progress. OMB, HUD, and
Education have implemented all of GAO‘s earlier recommendations on
recipient reporting, including those intended to improve subrecipient
reporting. GAO will continue to monitor efforts to improve the quality
of reporting.
What GAO Recommends:
GAO updates the status of agencies‘ efforts to implement GAO‘s 58
previous recommendations and makes 5 new recommendations to improve
management and strengthen accountability to the Departments of
Transportation (DOT), Housing and Urban Development (HUD), the
Treasury, and the Office of Management and Budget (OMB). Agency
responses to GAO‘s new recommendations, as well as to key
recommendations that remain open, are shown on the following page.
View [hyperlink, http://www.gao.gov/products/GAO-10-999] or key
components. For state summaries, see [hyperlink,
http://www.gao.gov/products/GAO-10-1000SP]. For more information,
contact J. Christopher Mihm at (202) 512-6806 or mihmj@gao.gov.
[End of section]
Contents:
Letter:
States' and Localities' Uses of Recovery Act Funds Continue:
Many Recipients Are Citing Greater Ease Meeting Recovery Act Reporting
Requirements, but Some Recipients Continue to Face Difficulties
Calculating Jobs:
Oversight and Accountability Efforts:
Observations on States' Use of Contracts and Contract Outcomes:
Local Governments' Use of Recovery Act Funds:
New and Open Recommendations; Matters for Congressional Consideration:
Appendix I: Objectives, Scope, and Methodology:
Objectives and Scope:
States' and Localities' Uses of Recovery Act Funds:
Federal Medical Assistance Percentage:
SFSF, ESEA Title I, and IDEA:
Federal-Aid Highway Surface Transportation Program:
Transit Capital Assistance Program:
State Energy Program, Energy Efficiency Conservation Block Grant, and
Weatherization Assistance Program:
Public Housing Capital Fund:
Tax Credit Assistance Program:
Head Start and Early Head Start:
Recipient Reporting:
Single Audit as an Accountability and Oversight Mechanism:
Recovery Accountability and Transparency Board Initiatives:
Observations on States' Use of Contracts and Contract Outcomes:
State and Local Accountability:
State and Local Budget:
Data and Data Reliability:
Appendix II: Implemented and Closed Recommendations:
Appendix III: Program Descriptions:
Appendix IV: Entities Visited by GAO in Selected States and the
District of Columbia:
Appendix V: GAO Contacts and Staff Acknowledgments:
Program Contributors:
Contributors to the Selected States and the District:
Related GAO Products:
Tables:
Table 1: GAO's September 2010 Recovery Act Coverage of States and
Localities:
Table 2: Regular and Preliminary Increased Fourth Quarter 2010 FMAP
Rates and Components of the Increase for 16 States and the District:
Table 3: Estimated Allocations and Funds Drawn Down for Recovery Act
Increased FMAP for 16 States and the District as of July 31, 2010:
Table 4: Number of States Implementing Payment Reductions or Freezes
to Sustain their Medicaid Programs, February 2009 to July 2010:
Table 5: Recent Fiscal Year State-Level K-12 Education Expenditure
Changes for the States in Our Review:
Table 6: Percentage of Awarded SFSF Education Stabilization, ESEA
Title I Part A, and IDEA Part B Recovery Act Funds Drawn Down by
Selected States as of August 27, 2010:
Table 7: Reimbursement of Recovery Act Funds as a Percentage of Funds
Obligated - Ranked by All Funds:
Table 8: Percentage of Unobligated Recovery Act Highway Funds:
Table 9: EECBG Activity Budgets as of July 28, 2010:
Table 10: DOE Requirements for Frequency of Monitoring:
Table 11: Number, Final Report Designation, and Project Status of
Prime Recipient Reports Not Appearing in Round Four:
Table 12: Number of Contracts Reported as Competed and Fixed Price, by
Program Area as of June 2010:
Table 13: Number of Contracts Officials Reported as Having Cost or
Schedule Changes, by Program Area as of June 2010:
Table 14: Selected Examples of Local Governments' Uses of Recovery Act
Funds:
Table 15: Education Entities Visited by GAO:
Table 16: Head Start Entities Visited by GAO:
Table 17: Transit Entities Visited by GAO:
Table 18: State Energy Program Entities Visited by GAO:
Table 19: Energy Efficiency Conservation Block Grant Entities Visited
by GAO:
Table 20: Weatherization Entities Visited by GAO:
Table 21: Housing Entities Visited by GAO:
Table 22: Tax Credit Assistance Program and Section 1602 Program
Entities Visited by GAO:
Table 23: Local Government Entities Visited by GAO:
Figures:
Figure 1: Estimated vs. Actual Federal Outlays to States and
Localities under the Recovery Act:
Figure 2: Number of States Implementing New or Increased Provider
Taxes, February 2009 through July 2010:
Figure 3: Estimated Percentage of LEAs with Funding-Level Changes in
School Year 2009-2010 and Anticipated Changes for School Year 2010-
2011, as reported in Spring 2010:
Figure 4: Estimated Percentage of LEAs with Sizeable Funding Changes
for School Year 2009-2010 and Expected Funding Changes for School Year
2010-2011, as reported in Spring 2010:
Figure 5: Likely Personnel Actions for the 2010-2011 School Year
Reported by LEAs Anticipating Funding Decreases, as Reported in Spring
2010:
Figure 6: Likely Nonpersonnel Actions for School Year 2010-2011
Reported by LEAs Expecting Funding Decreases, as Reported in Spring
2010:
Figure 7: Estimated Percentage of LEAs Nationally That Reported
Recovery Act Funding Allowed Job Creation or Retention Compared to the
Estimated Percentage of LEAs That Reported Losing Jobs Even with the
Additional Funding in School Year 2009-2010, as Reported in Spring 2010:
Figure 8: Estimated Percentage of LEAs Nationally That Used More Than
Half of SFSF, ESEA Title I, Part A; and IDEA Part B Recovery Act
Funding for Retaining Staff in School Year 2009-2010:
Figure 9: Estimated Percentage of LEAs Nationally That Retained and
Created Instructional and Noninstructional Jobs in School Year 2009-
2010:
Figure 10: Estimated Percentage of LEAs That Reported Spending
Recovery Act Funds to Hire New Staff in the 2009-2010 School Year, by
Percent of Recovery Act Funding and Program:
Figure 11: The Factors Affecting a Decrease in the Number of Jobs for
the 2009-2010 School Year to a Great or Very Great Degree:
Figure 12: Estimated Percentage of LEAs Nationally That Spent More
Than 25 Percent of Recovery Act Funds on Providing Professional
Development, Purchasing Instructional Materials, and Purchasing
Computer Technology in School Year 2009-2010:
Figure 13: Reported Changes in LEA Level of Service in School Year
2009-2010 Compared to Level of Service in 2008-2009 among LEAs
Receiving SFSF Funds, by Size of LEA:
Figure 14: Percentage of LEAs Reporting Significant or Modest Progress
toward Education Reform Goals in School Year 2009-2010 Made Possible
by Recovery Act Funds:
Figure 15: Percentage of LEAs Nationally Reporting ESEA Title I, Part
A Recovery Act Funds Have Expanded, Maintained, or Decreased Education
Reform Efforts in School Years 2009-2010 and 2010-2011, as Reported in
Spring 2010:
Figure 16: Percentage of LEAs Nationally with IDEA Part B Recovery Act
Funds That Reported Expanding, Maintaining, or Decreasing Reform
Efforts for Special Education Students in School Years 2009-2010 and
2010-2011, as Reported in Spring 2010:
Figure 17: Cumulative Recovery Act Highway and Public Transportation
Funds Reimbursed by FHWA and FTA Nationwide:
Figure 18: Nationwide Recovery Act Highway and Public Transportation
Obligations by Project Type:
Figure 19: Recovery Act Highway Funds Remaining to Be Obligated Since
March 2, 2010:
Figure 20: Deobligations in 16 States and the District from March 2,
2010, to June 7, 2010, by Deobligation Type:
Figure 21: Regular Federal Highway Formula Funds Nationwide Remaining
to Be Obligated at the End of the Third Quarter of Fiscal Year 2010:
Figure 22: Regular Federal Aid Highway Funds Reimbursed Nationwide at
End of the Third Quarter for Fiscal Years 2007 through 2010:
Figure 23: Nationwide Monthly Reimbursement of Federal Highway Formula
Funds for Fiscal Year 2010 and the Average for Fiscal Years 2007-009:
Figure 24: Percentage of Public Housing Capital Fund Competitive
Grants Allocated by HUD That Have Been Obligated and Drawn Down
Nationwide as of August 7, 2010:
Figure 25: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as
of August 7, 2010:
Figure 26: Before and After Photographs of the Alice Griffith Project
in San Francisco, California:
Figure 27: Public Housing Rehabilitation Using Recovery Act Capital
Fund Competitive Grant in Philadelphia, Pennsylvania:
Figure 28: HUD Outlays of TCAP Funds, as a Percentage of Total
Recovery Act Obligations as of April 30 and July 31, 2010:
Figure 29: Treasury Outlays of Section 1602 Program Funds as a
Percentage of Total Recovery Act Obligations as of April 30 and July
31, 2010:
Figure 30: HUD and Treasury Obligations and Outlays for TCAP and
Section 1602 Program for the 16 States and the District of Columbia as
of July 31, 2010, Compared to April 30, 2010:
Figure 31: Illustration of the Single Audit Reporting Time Frames for
Entities with a June 30, 2009, Fiscal Year-End:
Figure 32: Selected Local Governments Included in Our September 2010
Review:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
September 20, 2010:
Report to the Congress:
In the over 18 months since the American Recovery and Reinvestment Act
of 2009 (Recovery Act)[Footnote 1] was enacted in February 2009, the
Department of the Treasury has paid out approximately $154.8 billion
in Recovery Act funds for use in states and localities.[Footnote 2]
These funds have been used to support and preserve services in a wide
range of areas including health, education, transportation, and housing.
The Recovery Act's recurring mandate specifies several roles for GAO,
including conducting bimonthly reviews of how Recovery Act funds are
being used in selected states and whether they are achieving the
stated purposes of the act.[Footnote 3] Specifically, the stated
purposes of the Recovery Act are to:
* preserve and create jobs and promote economic recovery;
* assist those most impacted by the recession;
* provide investments needed to increase economic efficiency by
spurring technological advances in science and health;
* invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits; and:
* stabilize state and local government budgets in order to minimize
and avoid reductions in essential services and counterproductive state
and local tax increases.
In this report, the seventh in a series in response to the act's
mandate, we update and add new information on the following: (1)
selected states' and localities' uses of Recovery Act funds, (2) the
approaches taken by the selected states and localities to ensure
accountability for Recovery Act funds, and (3) states' plans to
evaluate the impact of the Recovery Act funds they receive. As in our
previous reports, we collected and reported data on programs receiving
substantial Recovery Act funds in 16 selected states, certain
localities, and the District of Columbia, and made recommendations
when changes could result in improvements.[Footnote 4] The selected
jurisdictions for our in-depth reviews contain about 65 percent of the
U.S. population and are estimated to receive collectively about two-
thirds of the intergovernmental assistance available through the
Recovery Act.[Footnote 5] For this report, we visited a nonprobability
sample of 167 entities within the 16 states and the District for our
program reviews. These entities represented a range of types of
governments and the program areas shown in table 1. The local
governments also varied by population sizes and economic conditions
(unemployment rates greater than or less than the state's overall
unemployment rate).
Table 1: GAO's September 2010 Recovery Act Coverage of States and
Localities:
Number of States Visited: 16[A].
Number of Local Governments Visited to Review Overall Use of Funds:
24.
Number of Entities Visited by Program Area:
Education: 19.
Transportation: 2.
State Energy Program: 9.
Energy Efficiency: 41.
Weatherization: 18.
Housing: 24.
Tax Credit Assistance Program: 21.
Head Start: 9.
Source: GAO analysis of states' and localities' use of Recovery Act
funds.
Notes: Entities include government officials and agencies,
transportation and transit authorities, school districts, charter
schools, housing authorities, public utilities, and nonprofit
organizations. Appendix IV provides a complete list of the entities
visited for this report.
[A] The District of Columbia is also included in GAO's bimonthly
reviews of the use of Recovery Act funds.
[End of table]
As in past reports, the programs we selected for review were chosen
primarily because they have begun disbursing funds to states or have
known or potential risks. The risks can include existing programs
receiving significant amounts of Recovery Act funds or new programs.
In some cases, we have also collected data from all states, and from
an array of localities, to augment the in-depth reviews. This report
focuses on the following programs:
* Federal Medical Assistance Percentage (FMAP);
* State Fiscal Stabilization Fund (SFSF);
* Title I, Part A of the Elementary and Secondary Act of 1965 as
amended (ESEA);
* Parts B and C of the Individuals with Disabilities Education Act, as
amended (IDEA);
* Federal-Aid Highway Surface Transportation and Transit Capital
Assistance Programs;
* State Energy Program (SEP);
* Energy Efficiency and Conservation Block Grant (EECBG) Program;
* Weatherization Assistance Program;
* Public Housing Capital Fund;
* Tax Credit Assistance Program (TCAP); and:
* 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).
The Recovery Act also requires us to comment on the estimates of jobs
created or retained reported by recipients.[Footnote 6] In this
report, we provide updated information concerning recipient reporting
in accordance with our mandate for quarterly reporting. The Recovery
Act requires that nonfederal recipients of Recovery Act funds,
including grants, contracts, and loans submit quarterly reports which
are to include a list of each project or activity for which Recovery
Act funds were expended or obligated and information concerning the
amount and use of funds and jobs created or retained by these projects
and activities, among other information. The latest of these recipient
reports covered the activity as of the Recovery Act's passage through
the quarter ending June 30, 2010.
In this report, we also discuss state and local budget use of Recovery
Act funds; federal requirements and guidance; and oversight,
transparency, and accountability issues related to the Recovery Act
and its implementation. The report provides overall findings,
discusses agency actions in response to the open recommendations we
made in our prior reports, and presents new recommendations. Our
oversight of programs funded by the Recovery Act has resulted in more
than 62 Recovery Act related products. See the GAO Related Products
section of this report for a list of these products.
Going forward to meet our reoccurring Recovery Act mandates, we will
continue to capitalize on the work we have done over the past 18
months in the selected states and the District. However, our focus
will shift from reporting on the uses of funds by the selected states
and the District for a group of programs funded by the Recovery Act to
providing enhanced analysis of the use of Recovery Act funds by states
and localities for a single program funded by the Recovery Act in each
bimonthly review. We will also shift our review of recipient reporting
to focus specifically on implementation within that Recovery Act
program. Given that, as of September 3, 2010, more than half--about
$154.8 billion of the approximately $282 billion--of total Recovery
Act funds for programs administered by states and localities had been
paid out by the federal government, evolving to this approach is
appropriate and will allow us to provide Congress and other decision
makers with more in-depth analyses of programs funded by the Recovery
Act and to be responsive to congressional interest in the impact and
outcomes of programs as Recovery Act implementation moves forward.
In conducting our work for this report, we analyzed guidance and
interviewed officials at the Office of Management and Budget. We also
analyzed grant awards--as well as relevant regulations and federal
agency guidance on programs selected for this review--and spoke with
relevant program officials at the U.S. Departments of Health and Human
Services (Centers for Medicare and Medicaid Services), Education,
Transportation, Energy, and Housing and Urban Development. In
addition, we spoke to entities that play roles in oversight of
Recovery Act spending, including federal agency inspectors general,
state and local auditors, as well as the Recovery Accountability and
Transparency Board (the Board), which was established by the Recovery
Act[Footnote 7]. We also integrated information from our prior
Recovery Act reports into this review where appropriate.
In addition, we continued our review of the use of Recovery Act funds
for the 16 selected states, the District, and selected localities. We
conducted interviews with state budget officials and reviewed proposed
and enacted budgets and revenue forecasts to update our understanding
of the use of Recovery Act funds in the 16 selected states and the
District. To update our understanding of local governments' use of
Recovery Act funds, we met with finance officials and city
administrators at the selected localities.
Where statements about state law are attributed to state officials, we
did not analyze state legal materials for this report but relied on
state officials and other state sources for description and
interpretation of relevant state constitutions, statutes, legislative
proposals, and other state legal materials. The information obtained
from this review cannot be generalized to all states and localities
receiving Recovery Act funding. A detailed description of our scope
and methodology can be found in appendix I.
We conducted this performance audit from May 27, 2010, to September
20, 2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
As shown in figure 1, actual federal outlays to states and localities
under the Recovery Act totaled approximately $154.8 billion through
September 3, 2010. Of that amount, more than 65 percent--$101.9
billion--has been paid out since the start of federal fiscal year 2010
on October 1, 2009.[Footnote 8] The figure also shows the estimated
federal outlays (in billions of dollars) to states and localities for
fiscal years 2009 through 2016.
Figure 1: Estimated vs. Actual Federal Outlays to States and
Localities under the Recovery Act:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2009;
Original estimate: $48.9 billion;
Actual as of September 3, 2010: $52.9 billion;
Fiscal year: 2010;
Original estimate: $107.7 billion;
Actual as of September 3, 2010: $97.6 billion;
Fiscal year: 2011;
Original estimate: $63.4 billion.
Fiscal year: 2012;
Original estimate: $23.3 billion.
Fiscal year: 2013;
Original estimate: $14.4 billion.
Fiscal year: 2014;
Original estimate: $9.1 billion.
Fiscal year: 2015;
Original estimate: $5.7 billion.
Fiscal year: 2016;
Original estimate: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data.
[End of figure]
States' and Localities' Uses of Recovery Act Funds Continue:
Increased FMAP Continues to Fund Medicaid Enrollment Growth, and
States Have Taken Steps to Sustain Their Programs:
Medicaid is a joint federal-state program that finances health care
for certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The rate at which
states are reimbursed for Medicaid service expenditures is known as
the Federal Medical Assistance Percentage (FMAP), which may range from
50 percent to no more than 83 percent. To obtain federal matching
funds for Medicaid, states file a quarterly financial report with the
Centers for Medicare and Medicaid Services (CMS) and draw down funds
through an existing payment management system used by the Department
of Health and Human Services (HHS).
The Recovery Act initially provided eligible states with an estimated
$87 billion through increased FMAP rates for 27 months from October 1,
2008, to December 31, 2010.[Footnote 9] 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.[Footnote 10] On February 25, 2009, CMS made increased
FMAP grant awards to states, and states may retroactively claim
reimbursement for expenditures that occurred prior to the effective
date of the Recovery Act. Generally, for fiscal year 2009 through the
third quarter of fiscal year 2011, the increased FMAP is calculated on
a quarterly basis and is comprised of three components: (1) a "hold
harmless" provision, which maintains states' regular FMAP rates at the
highest rate of any fiscal year from 2008 through 2011;[Footnote 11]
(2) a general across-the-board increase of 6.2 percentage points in
states' regular FMAPs through the first quarter of fiscal year 2011,
which will then be phased down until July 1, 2011;[Footnote 12] and
(3) a further increase in the FMAPs for those states that have a
qualifying increase in unemployment rates.
For states to qualify for the increased FMAP, they must pay the
state's share of Medicaid costs and comply with a number of
requirements, including the following:
* States generally may not apply eligibility standards, methodologies,
or procedures that are more restrictive than those that were in effect
under their state Medicaid programs on July 1, 2008;[Footnote 13]
* states must comply with prompt payment requirements;[Footnote 14],
[Footnote 15]
* states cannot deposit or credit amounts attributable (either
directly or indirectly) to certain elements of the increased FMAP in
any reserve or rainy-day fund of the state;[Footnote 16] and:
* states with political subdivisions--such as cities and counties--
that contribute to the nonfederal share of Medicaid spending cannot
require the subdivisions to pay a greater percentage of the nonfederal
share than would have been required on September 30, 2008.[Footnote 17]
In addition, CMS requires states to separately track and report on
increased FMAP funds. To help states comply with these requirements,
CMS provided the funds to states through a separate account in an
existing payment management system. CMS also provided guidance in the
form of State Medicaid Director letters and written responses to
frequently asked questions, and the agency continues to work with
states on an individual basis to resolve any compliance issues that
may arise.[Footnote 18]
Despite these restrictions, states are able to make certain
adjustments to their Medicaid programs without risking their
eligibility for increased FMAP funds. For example, the Recovery Act
does not prohibit states from reducing or eliminating optional
services, such as dental services, or reducing provider payment rates.
States also continue to have flexibility in how they finance the
nonfederal share of Medicaid payments, and may implement new financing
arrangements or alter existing ones--such as provider taxes,
intergovernmental transfers, and certified public expenditures--to
generate additional revenues to help finance the nonfederal share of
their Medicaid programs.
Increased FMAP Key to States' Continued Efforts to Support Medicaid
Enrollment Growth:
The FMAP rates in the 16 states and the District increased
substantially immediately following enactment of the Recovery Act, and
most states' rates continued to increase, albeit at a slower pace,
through the fourth quarter of federal fiscal year 2010.[Footnote 19]
During the fourth quarter of federal fiscal year 2010, the increased
FMAP averaged about 11 percentage points higher than the regular 2010
FMAP rates, with increases ranging from about 9 percentage points in
Iowa to nearly 13 percentage points in Florida. For all states and the
District, the largest proportion of the increased FMAP was the
component attributable to the across-the-board increase of 6.2
percentage points, followed by qualifying increases in unemployment
rates in each of the states.[Footnote 20] The "hold harmless"
component further contributed to the increased FMAP in five sample
states, although to a lesser extent. (See table 2.)
Table 2: Regular and Preliminary Increased Fourth Quarter 2010 FMAP
Rates and Components of the Increase for 16 States and the District:
State: Arizona;
Regular FMAP, fiscal year 2010[A]: 65.75;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 75.93;
Percentage point FMAP increase: 10.18;
Component and its percentage contribution to the FMAP increase[B]: 61;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 35;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 4.
State: California;
Regular FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Colorado;
Regular FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: District of Columbia;
Regular FMAP, fiscal year 2010[A]: 70.00;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 79.29;
Percentage point FMAP increase: 9.29;
Component and its percentage contribution to the FMAP increase[B]: 67;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 33;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Florida;
Regular FMAP, fiscal year 2010[A]: 54.98;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 67.64;
Percentage point FMAP increase: 12.66;
Component and its percentage contribution to the FMAP increase[B]: 49;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 36;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 15.
State: Georgia;
Regular FMAP, fiscal year 2010[A]: 65.10;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 74.96;
Percentage point FMAP increase: 9.86;
Component and its percentage contribution to the FMAP increase[B]: 63;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 37;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Illinois;
Regular FMAP, fiscal year 2010[A]: 50.17;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 61.88;
Percentage point FMAP increase: 11.71;
Component and its percentage contribution to the FMAP increase[B]: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 46;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 1.
State: Iowa;
Regular FMAP, fiscal year 2010[A]: 63.51;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 72.55;
Percentage point FMAP increase: 9.04;
Component and its percentage contribution to the FMAP increase[B]: 69;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 31;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Massachusetts;
Regular FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Michigan;
Regular FMAP, fiscal year 2010[A]: 63.19;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 73.27;
Percentage point FMAP increase: 10.08;
Component and its percentage contribution to the FMAP increase[B]: 62;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 38;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Mississippi;
Regular FMAP, fiscal year 2010[A]: 75.67;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 84.86;
Percentage point FMAP increase: 9.19;
Component and its percentage contribution to the FMAP increase[B]: 67;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 26;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 7.
State: New Jersey;
Regular FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: New York;
Regular FMAP, fiscal year 2010[A]: 50.00;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 61.59;
Percentage point FMAP increase: 11.59;
Component and its percentage contribution to the FMAP increase[B]: 53;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 47;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: North Carolina;
Regular FMAP, fiscal year 2010[A]: 65.13;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 74.98;
Percentage point FMAP increase: 9.85;
Component and its percentage contribution to the FMAP increase[B]: 63;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 37;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Ohio;
Regular FMAP, fiscal year 2010[A]: 63.42;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 73.47;
Percentage point FMAP increase: 10.05;
Component and its percentage contribution to the FMAP increase[B]: 62;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 38;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Pennsylvania;
Regular FMAP, fiscal year 2010[A]: 54.81;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 65.85;
Percentage point FMAP increase: 11.04;
Component and its percentage contribution to the FMAP increase[B]: 56;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 44;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 0.
State: Texas;
Regular FMAP, fiscal year 2010[A]: 58.73;
Preliminary increased FMAP, fiscal year 2010, fourth quarter[A]: 70.94;
Percentage point FMAP increase: 12.21;
Component and its percentage contribution to the FMAP increase[B]: 51;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 34;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 15.
State: Average;
Percentage point FMAP increase: 10.77;
Component and its percentage contribution to the FMAP increase[B]: 58;
Component and its percentage contribution to the FMAP increase[B]:
Unemployment increase: 39;
Component and its percentage contribution to the FMAP increase[B]:
Hold-harmless: 2.
Source: GAO analysis of HHS and data from Federal Funds Information
for States, an organization that tracks and reports on the fiscal
impact of federal budget and policy decisions on state budgets and
programs.
Note: Fiscal year refers to the federal fiscal year, which begins
October 1st and ends September 30th. HHS calculates preliminary FMAP
rates using Bureau of Labor Statistics unemployment estimates and
adjusts these FMAP rates once the final unemployment numbers become
available.
[A] The regular fiscal year 2010 FMAP rates were published in the
Federal Register on November 26, 2008. The fourth quarter fiscal year
2010 increased FMAP rates are preliminary and were published by
Federal Funds Information for States on May 25, 2010.
[B] Average percentage does not add to 100 percent due to rounding.
[End of table]
As of July 31, 2010, the 16 states and the District had drawn down
$43.9 billion in increased FMAP funds, which is 75 percent of the
total $58.9 billion in increased FMAP that we estimated would be
allocated to these states and the District through December 31,
2010.[Footnote 21] (See table 3.) If current spending patterns
continue, we estimate that the 16 states and the District will draw
down $56.2 billion by December 31, 2010--about 95 percent of the
initial estimated allocation. The national drawdown mirrors the
experiences of our sample states, with the 50 states and the District
having drawn down 74 percent of their estimated total allocation of
nearly $87 billion through the end of 2010.
Table 3: Estimated Allocations and Funds Drawn Down for Recovery Act
Increased FMAP for 16 States and the District as of July 31, 2010:
Dollars in thousands:
State: Arizona;
Increased FMAP estimated allocations to states through December 31,
2010: $2,031,000;
Total funds drawn down through July 31, 2010: $1,506,593;
Percentage of estimated allocations drawn down through July 31, 2010:
74.18%.
State: California;
Increased FMAP estimated allocations to states through December 31,
2010: $10,579,000;
Total funds drawn down through July 31, 2010: $7,780,020;
Percentage of estimated allocations drawn down through July 31, 2010:
73.54%.
State: Colorado;
Increased FMAP estimated allocations to states through December 31,
2010: $858,000;
Total funds drawn down through July 31, 2010: $665,349;
Percentage of estimated allocations drawn down through July 31, 2010:
77.55%.
State: District Of Columbia;
Increased FMAP estimated allocations to states through December 31,
2010: $316,000;
Total funds drawn down through July 31, 2010: $258,885;
Percentage of estimated allocations drawn down through July 31, 2010:
81.93%.
State: Florida;
Increased FMAP estimated allocations to states through December 31,
2010: $4,256,000;
Total funds drawn down through July 31, 2010: $3,503,359;
Percentage of estimated allocations drawn down through July 31, 2010:
82.32%.
State: Georgia;
Increased FMAP estimated allocations to states through December 31,
2010: $1,766,000;
Total funds drawn down through July 31, 2010: $1,253,713;
Percentage of estimated allocations drawn down through July 31, 2010:
70.99%.
State: Illinois;
Increased FMAP estimated allocations to states through December 31,
2010: $2,774,000;
Total funds drawn down through July 31, 2010: $2,386,470;
Percentage of estimated allocations drawn down through July 31, 2010:
86.03%.
State: Iowa;
Increased FMAP estimated allocations to states through December 31,
2010: $607,000;
Total funds drawn down through July 31, 2010: $415,160;
Percentage of estimated allocations drawn down through July 31, 2010:
68.40%.
State: Massachusetts;
Increased FMAP estimated allocations to states through December 31,
2010: $3,016,000;
Total funds drawn down through July 31, 2010: $2,337,215;
Percentage of estimated allocations drawn down through July 31, 2010:
77.49%.
State: Michigan;
Increased FMAP estimated allocations to states through December 31,
2010: $2,294,000;
Total funds drawn down through July 31, 2010: $1,905,868;
Percentage of estimated allocations drawn down through July 31, 2010:
83.08%.
State: Mississippi;
Increased FMAP estimated allocations to states through December 31,
2010: $861,000;
Total funds drawn down through July 31, 2010: $589,029;
Percentage of estimated allocations drawn down through July 31, 2010:
68.41%.
State: New Jersey;
Increased FMAP estimated allocations to states through December 31,
2010: $2,134,000;
Total funds drawn down through July 31, 2010: $1,653,401;
Percentage of estimated allocations drawn down through July 31, 2010:
77.48%.
State: New York;
Increased FMAP estimated allocations to states through December 31,
2010: $12,332,000;
Total funds drawn down through July 31, 2010: $8,204,506;
Percentage of estimated allocations drawn down through July 31, 2010:
66.53%.
State: North Carolina;
Increased FMAP estimated allocations to states through December 31,
2010: $2,406,000;
Total funds drawn down through July 31, 2010: $1,776,605;
Percentage of estimated allocations drawn down through July 31, 2010:
73.84%.
State: Ohio;
Increased FMAP estimated allocations to states through December 31,
2010: $3,097,000;
Total funds drawn down through July 31, 2010: $2,278,688;
Percentage of estimated allocations drawn down through July 31, 2010:
73.58%.
State: Pennsylvania;
Increased FMAP estimated allocations to states through December 31,
2010: $4,054,000;
Total funds drawn down through July 31, 2010: $2,955,713;
Percentage of estimated allocations drawn down through July 31, 2010:
72.91%.
State: Texas;
Increased FMAP estimated allocations to states through December 31,
2010: $5,533,000;
Total funds drawn down through July 31, 2010: $4,427,624;
Percentage of estimated allocations drawn down through July 31, 2010:
80.02%.
Sample total:
Increased FMAP estimated allocations to states through December 31,
2010: $58,914,000;
Total funds drawn down through July 31, 2010: $43,898,198;
Percentage of estimated allocations drawn down through July 31, 2010:
74.51%.
National total[A]:
Increased FMAP estimated allocations to states through December 31,
2010: $86,593,000;
Total funds drawn down through July 31, 2010: $64,071,729;
Percentage of estimated allocations drawn down through July 31, 2010:
73.99%.
Source: GAO analysis of HHS data.
[A] The national total includes the 50 states and the District of
Columbia.
[End of table]
While the increased FMAP funds are for Medicaid services only, the
receipt of these funds may free up funds that states would otherwise
have had to use for their Medicaid programs. Similar to their reported
uses in fiscal year 2009 and the first half of fiscal year 2010, the
16 states and the District most commonly reported using or planning to
use these freed-up funds to cover increased Medicaid caseloads,
maintain program eligibility levels, and to finance general budget
needs. As with our last survey, most states reported that increased
FMAP funding continues to be a major factor in their ability to cover
enrollment growth, which has continued to increase since our last
Recovery Act report. Between February 2010 and June 2010, overall
enrollment across the 16 states and the District grew by an average of
nearly 2 percent,[Footnote 22] with a cumulative increase of 18
percent since October 2007--a rate of increase that is significantly
higher than in years prior to the recession.[Footnote 23] The increase
in Medicaid enrollment continues to be attributable primarily to
children, a population that is sensitive to economic downturns.
However, the highest rate of increase during this period occurred
among the nondisabled, nonaged adult population--35 percent, compared
to an increase of nearly 19 percent for children.
In addition, 10 states and the District reported using freed up funds
to maintain benefits and services or to maintain payment rates for
practitioners or institutional providers. Six states reported using
these funds to meet prompt payment requirements, and five states and
the District reporting using the funds to help finance their State
Children's Health Insurance Program or other local public health
insurance programs. While most states continue to report using freed-
up funds for multiple purposes, North Carolina and Ohio again reported
that they use these funds exclusively to finance general budget needs.
Despite increases in program enrollment since October 2007, state
responses were mixed when asked about changes in the time it takes to
process new Medicaid applications. While six states reported an
increase in the time it takes to process new applications--most
commonly attributing this change to an increase in the volume of new
applications and staff cutbacks--nine states and the District reported
no change or a decrease in the processing time.[Footnote 24] Most
states and the District reported processing applications, on average,
within federally-required time frames.[Footnote 25]
States Have Taken Actions to Sustain Their Medicaid Programs; Further
Adjustments Will Depend on Federal Legislation:
When asked about the long-term outlook for their Medicaid programs,
the District and all but three of the 16 states reported a concern
about sustaining their Medicaid programs once increased FMAP funding
is no longer available. When asked about the factors driving their
concerns, most states and the District reported (1) the increased
share of the state's Medicaid payments in 2011; (2) the current
projection of the state's economy and tax revenues; and (3) the
current projected growth in the state's Medicaid enrollment for 2011.
Mississippi, Ohio, and Texas did not report concerns about their
Medicaid programs' sustainability once increased FMAP funds are no
longer available.[Footnote 26] Due to these concerns, most states
reported taking actions to adjust their Medicaid programs, including
reducing or freezing provider payment rates, implementing new or
increasing existing provider taxes, or reducing certain optional
benefits. Specifically, 12 states reported reducing or freezing
provider payment rates. When given a list of 13 types of providers,
these states reported implementing 55 payment rate reductions and 46
payment rate freezes, for a total 101 different rate actions taken
since February 2009; on average, these states reduced or froze payment
rates for 8 types of providers.[Footnote 27] States frequently reduced
or froze payment rates to nursing facilities, clinics, and home health
providers, among others. (See table 4.)
Table 4: Number of States Implementing Payment Reductions or Freezes
to Sustain their Medicaid Programs, February 2009 to July 2010:
Providers: Nursing facilities;
Number of states: Implementing payment reductions: 4;
Number of states: Implementing payment freezes: 6;
Number of states: Total: 10.
Providers: Clinics;
Number of states: Implementing payment reductions: 7;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 10.
Providers: Home health providers;
Number of states: Implementing payment reductions: 7;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 10.
Providers: Physicians;
Number of states: Implementing payment reductions: 6;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 9.
Providers: Inpatient hospitals;
Number of states: Implementing payment reductions: 4;
Number of states: Implementing payment freezes: 4;
Number of states: Total: 8.
Providers: Outpatient hospitals;
Number of states: Implementing payment reductions: 3;
Number of states: Implementing payment freezes: 4;
Number of states: Total: 7.
Providers: Dental providers;
Number of states: Implementing payment reductions: 5;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 8.
Providers: Rehabilitative and therapeutic service providers;
Number of states: Implementing payment reductions: 4;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 7.
Providers: Inpatient mental health service providers;
Number of states: Implementing payment reductions: 3;
Number of states: Implementing payment freezes: 4;
Number of states: Total: 7.
Providers: Intermediate care facilities for persons with mental
retardation;
Number of states: Implementing payment reductions: 2;
Number of states: Implementing payment freezes: 5;
Number of states: Total: 7.
Providers: Managed care plans;
Number of states: Implementing payment reductions: 4;
Number of states: Implementing payment freezes: 2;
Number of states: Total: 6.
Providers: Targeted case managers;
Number of states: Implementing payment reductions: 2;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 5.
Providers: Other providers[A];
Number of states: Implementing payment reductions: 4;
Number of states: Implementing payment freezes: 3;
Number of states: Total: 7.
Providers: Total Reductions or Freezes;
Number of states: Implementing payment reductions: 55;
Number of states: Implementing payment freezes: 46;
Number of states: Total: 101.
Source: GAO analysis of state-reported data.
[A] Other providers may include optometrists or providers of medical
transportation or durable medical equipment.
[End of table]
In addition, 10 states and the District reported implementing 28 new
or increased provider taxes.[Footnote 28] In contrast to states'
changes to provider payment rates, however, states' taxation efforts
were concentrated among a handful of provider types. Specifically, 21
of the 28 taxes were imposed on inpatient hospitals, nursing
facilities, and outpatient hospitals--providers for which most states
reported paying on a cost basis.[Footnote 29] (See figure 2.)
Figure 2: Number of States Implementing New or Increased Provider
Taxes, February 2009 through July 2010:
[Refer to PDF for image: horizontal bar graph]
Provider: Inpatient hospitals;
Implementing new provider tax: 8;
Increasing existing provider tax: 2.
Provider: Nursing facilities;
Implementing new provider tax: 1;
Increasing existing provider tax: 5.
Provider: Outpatient hospitals;
Implementing new provider tax: 4;
Increasing existing provider tax: 1.
Source: GAO analysis of state-reported data.
[End of figure]
In some cases, states reported implementing payment rate reductions
and new taxes on the same providers. For example, at least half of the
states that implemented new or increased taxes for inpatient
hospitals, nursing facilities, or outpatient hospitals also reduced or
froze payments to those same providers. In addition to changes to
payment rates and provider taxes, eight states reported making
reductions to optional benefits and services, most commonly reducing
or eliminating dental services for adults. Several states provided
estimates of savings or increased revenue generated by actions they
undertook. For example,
* California estimated savings of nearly $600 million from payment
rate freezes for long-term care providers and other rate reductions,
and the discontinuation of dental and certain other optional services;
* Michigan estimated savings of $152 million from an 8 percent
reduction in payment rates for all providers;
* Pennsylvania projected that a new hospital provider tax will
generate $498 million in new revenue for the state; and:
* New York estimated that increases in various provider taxes will
generate an additional $184 million annually.
States were less certain when asked about future program changes that
may be necessary to sustain their Medicaid programs after Recovery Act
funding ends, and their uncertainty was likely due to questions
surrounding a potential extension of the increased FMAP, as well as
Patient Protection and Affordable Care Act (PPACA) provisions. At the
time of our survey, the legislation amending the Recovery Act to
extend the increased FMAP had been proposed but not yet enacted, and
the PPACA had just recently been enacted. Despite states'
uncertainties, however, 12 states and the District reported on the
survey that their 2011 budgets had assumed a full extension of the
increased FMAP, and many of these states had not developed a
contingency plan in the event that such legislation was not enacted.
Nationally, 30 states assumed an extension of increased FMAP in their
2011 budgets.
Under the recent amendments to the Recovery Act, states' increased
FMAP rates will decrease by at least 3 percentage points beginning on
January 1, 2011, and continue to be phased down to their regular FMAP
rates by July 1, 2011. For states that had assumed a full extension of
the increased FMAP, the available federal funds will be less than
anticipated. The effect of these decreases in states' FMAP rates will
vary depending on each state's unique economic circumstances and the
size of their Medicaid population.
PPACA also includes several provisions that could affect states'
Medicaid programs, and 12 states and the District reported that PPACA
will be a major factor in their ability to make future changes to
their programs. For example, the maintenance-of-eligibility
requirement under PPACA precludes states from receiving federal
Medicaid funding if they apply eligibility standards, methods, or
procedures under their plan or waiver that are more restrictive than
those in effect on the date of PPACA's enactment until the date the
Secretary of HHS determines that a health insurance exchange
established by the state is fully operational, which must be no later
than January 1, 2014.[Footnote 30] PPACA also requires states to
expand Medicaid eligibility by 2014 to cover all persons under age 65
who are not already eligible under mandatory eligibility groups and
with incomes up to 133 percent of the federal poverty level, but
states have the option to expand eligibility immediately and to
receive federal funds for these individuals. While the District has
already been approved by CMS to expand eligibility to cover this group
prior to 2014, and two other states--California and Colorado--reported
that they are planning to do so, it remains to be seen how all the
states will respond to this option.[Footnote 31]
Local Educational Agencies Reported Using Recovery Act Funds for Job
Retention and One-Time, Nonrecurring Purchases, While Education
Continues Monitoring Efforts:
As Many LEAs Reported Facing Budget Cuts and Fiscal Pressures, Job
Retention Was the Primary Use of Recovery Act Education Funds:
Our review of states' use of Recovery Act funds covers three programs
administered by the U.S. Department of Education (Education)--the
State Fiscal Stabilization Fund (SFSF); Title I, Part A of the
Elementary and Secondary Education Act of 1965 (ESEA), as amended; and
the Individuals with Disabilities Education Act (IDEA), Part B, as
amended. As part of this review, we surveyed a nationally
representative sample of local educational agencies (LEA)--generally,
school districts--about their uses of Recovery Act funds for each of
these programs.[Footnote 32] We also met with program officials at the
U.S. Department of Education to discuss ongoing monitoring and
technical assistance efforts for Recovery Act funds provided through
ESEA Title I, IDEA, and SFSF. At the state level, we spoke with state
ESEA Title I officials in five states[Footnote 33] and the District of
Columbia, which had relatively low drawdown rates of ESEA Title I
Recovery Act funds. We also interviewed state officials in five
states[Footnote 34] and the District of Columbia about their
application for and implementation of the School Improvement Grant
program. Finally, we interviewed officials in eight LEAs located in
four states[Footnote 35] to understand how they were using their
Recovery Act funds.
Even with Recovery Act Funds, an Estimated One-Third of LEAs
Experienced Funding Cuts in School Year 2009-2010 and More Anticipated
Cuts in 2010-2011:
Education funding in the United States primarily comes from state and
local governments. Prior to the influx of Recovery Act funding for
education from the federal government, LEAs, on average, derived about
48 percent of their fiscal year 2008 funding from state funds, 44
percent from local funds, and 8 percent from federal funds.[Footnote
36] These percentages, however, likely shifted due to increased
federal funding through the Recovery Act and reductions in some state
budgets for education. While the federal role in financing public
education has historically been a limited one, the federal funds
appropriated under the Recovery Act provide a significant, but
temporary, increase in federal support for education to states and
localities, in part, to help them address budget shortfalls. According
to the Congressional Research Service, the Recovery Act provided
approximately $100 billion for discretionary education programs in
fiscal year 2009, which, when combined with regular appropriations for
discretionary education programs, represents about a 235 percent
increase in federal funding compared to fiscal year 2008.
Over the last 2 years--a time period when many states have dealt with
decreasing revenues as a result of the sustained economic downturn--a
number of states in our review experienced K-12 education cuts. (See
table 5 below for expenditure changes for states in fiscal years 2008
and 2009.) Nationwide, 34 states reported that they cut K-12 education
funding in fiscal year 2010, including 12 of the 16 states in our
review,[Footnote 37] according to the Fiscal Survey of States.
[Footnote 38] In some states, such as Arizona and Georgia, these
fiscal year 2010 cuts were in addition to expenditure cuts in fiscal
years 2009 or 2008. However, other states such as Colorado, Florida,
Massachusetts, and Michigan experienced cuts to education expenditures
in fiscal year 2009 but did not report cutting K-12 funding in 2010.
Looking forward to fiscal year 2011, cuts for K-12 education had been
proposed in 10 of the 16 states in our review,[Footnote 39] according
to data presented in the June 2010 Fiscal Survey of States report.
[Footnote 40] Given that nearly half of LEA funding, on average, is
provided by the states, the impact of state-level cuts to education
could significantly affect LEA budgets.
Table 5: Recent Fiscal Year State-Level K-12 Education Expenditure
Changes for the States in Our Review:
Dollars in millions.
Changes from fiscal year 2007 Compared to fiscal year 2008: [Empty].
State: Arizona;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: ($175);
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: (2.9%);
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($367);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(6.4%).
State: California;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $2,608;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 7.1%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($7,549);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(19.1%).
State: Colorado;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $837;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 13.0%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($406);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(5.6%).
State: Florida;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $25;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 0.2%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($1,280);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(12.1%).
State: Georgia;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $573;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 7.8%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($459);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(5.8%).
State: Illinois;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $818;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 11.1%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $724;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
8.8%.
State: Iowa;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $195;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 8.3%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $135;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
5.3%.
State: Massachusetts;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $366;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 7.4%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($238);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(4.5%).
State: Michigan;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: ($176);
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: (1.5%);
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: ($315);
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
(2.8%).
State: Mississippi;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $182;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 7.8%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $79;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
3.1%.
State: New Jersey;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $627;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 6.0%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $615;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
5.6%.
State: New York;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $1,839;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 9.7%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $1,668;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
8.0%.
State: North Carolina;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $581;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 7.7%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $141;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
1.7%.
State: Ohio;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $116;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 1.3%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $1,643;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
17.9%.
State: Pennsylvania;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $556;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 6.3%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $930;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
9.9%.
State: Texas;
Changes from fiscal year 2007 Compared to fiscal year 2008:
Expenditure changes: $3,886;
Changes from fiscal year 2007 Compared to fiscal year 2008: Percentage
change: 24.7%;
Changes from fiscal year 2008 to fiscal year 2009: Expenditure
changes: $1,709;
Changes from fiscal year 2008 to fiscal year 2009: Percentage change:
8.7%.
Source: National Association of State Budget Officers, State
Expenditure Report, fiscal year 2008 tables 7 and 9.
Notes: State expenditure changes to K-12 education include state
general fund and other state funds but do not include Recovery Act or
other federal funding or funding from bonds. Numbers in parenthesis
are negative. Comparable fiscal year 2010 data were not available at
the time of this report. Fiscal years 2007 and 2008 data reflect
actual expenditures, while fiscal year 2009 data reflect estimated
expenditures because actual expenditures were not available at the
time. Data were reported by states and were not compared to actual
budget figures.
[End of table]
The funding condition of LEAs across the country is mixed, and
districts expected it to worsen in the 2010-2011 school year, even
with Recovery Act funding--however, the new Education Jobs Fund
created in August 2010 will provide some additional funding. As shown
in figure 3, an estimated one-third of LEAs faced funding decreases in
the 2009-2010 school year, but according to our survey conducted in
March and April 2010, more than one-half of LEAs--56 percent--are
expecting to face funding decreases in the upcoming 2010-2011 school
year.[Footnote 41] LEA officials we spoke with in California and
Massachusetts expect funding declines in 2010-2011 which come on top
of cuts made in prior years, indicating that state-level cuts to
education have been the primary reason for their large funding
declines and continue to provide an uncertain landscape for school
funding in coming years. 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 42] 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 LEAs based on their own primary
funding formulas or LEAs' relative share of federal ESEA Title I funds.
However, while many LEAs reported worsening funding situations, the
overall funding levels of many other LEAs increased or remained the
same in the 2009-2010 school year; although before the new Education
Jobs Fund was created, a smaller proportion reported expecting funding
increases in 2010-2011. Specifically, around half of LEAs reported
that their overall funding level in the 2009-2010 school year had
increased compared to the previous year, and an estimated 12 percent
reported that their funding had remained the same. We contacted
several school officials who had reported on the survey that their
district's funding had increased for the 2009-2010 school year, for
the 2010-2011 school year, or during both years. These officials
offered a variety of explanations for such funding increases,
including increased enrollment numbers due to having added a grade
level, having won competitive grant awards, a rebound in state tuition
revenue, and having received state aid for a previously approved
capital project, including additions to a middle school and high school.
Figure 3: Estimated Percentage of LEAs with Funding-Level Changes in
School Year 2009-2010 and Anticipated Changes for School Year 2010-
2011, as reported in Spring 2010:
[Refer to PDF for image: 2 pie-charts]
2009-2010 school year:
Increase: 51%;
Decrease: 33%;
Remain the same: 12%;
Don't know: 4%.
2010-2011 school year:
Increase: 56%;
Decrease: 24%;
Remain the same: 14%;
Don't know: 6%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 6 percentage points or less.
[End of figure]
Moreover, before the creation of the Education Jobs Fund, of those
LEAs experiencing funding decreases, the percentage of LEAs that
anticipated funding cuts greater than 5 percent is notably higher for
the 2010-2011 school year than for the 2009-2010 school year.
Specifically, as shown in figure 4, an estimated 31 percent of LEAs
expected funding reductions greater than 5 percent in the 2010-2011
school year, compared to 18 percent of LEAs that experienced cuts of
this magnitude during the 2009-2010 school year. The percentage of
LEAs who anticipated funding cuts of 10 percent or higher is also
projected to increase somewhat, from 8 percent in the 2009-2010 school
year to 14 percent in the 2010-2011 school year. Officials in some of
the school districts we visited in June and July 2010--before the
creation of the Education Jobs Fund--noted that their funding
situation would likely be more dire in the 2011-2012 school year, when
Recovery Act funds are no longer available. For example, Boston Public
Schools in Massachusetts, which reported experiencing funding
decreases this year and the past 2 years, is already preparing for a
decreased budget in fiscal year 2012 and beginning to plan how to
address budget shortfalls. Additionally, fewer LEAs anticipate funding
increases of more than 5 percent for the 2010-2011 school year than
for the 2009-2010 school year. Specifically, as shown in figure 4,
only 5 percent of LEAs reported anticipating overall funding levels to
increase by more than 5 percent for the 2010-2011 school year compared
to 17 percent in the 2009-2010 school year.
Figure 4: Estimated Percentage of LEAs with Sizeable Funding Changes
for School Year 2009-2010 and Expected Funding Changes for School Year
2010-2011, as reported in Spring 2010:
[Refer to PDF for image: horizontal bar graph]
School year 2009-2010 reported:
Percentage of LEAs with decrease of 6-10 percent or more:
6-10%: 10;
More than 10%: 8.
Percentage of LEAs with increase of 6-10 percent or more:
6-10%: 9;
More than 10%: 8.
School year 2010-2011 expected:
Percentage of LEAs with decrease of 6-10 percent or more:
6-10%: 17;
More than 10%: 14.
Percentage of LEAs with increase of 6-10 percent or more:
6-10%: 3;
More than 10%: 2.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 5 percentage points or less.
[End of figure]
We also found statistically significant differences between the fiscal
situations of urban and rural LEAs and between LEAs of different
sizes. For example, significantly more urban LEAs than rural LEAs
experienced total funding increases of over 5 percent in the 2009-2010
school year. Specifically, an estimated 32 percent of urban LEAs
experienced total funding increases of over 5 percent in the 2009-2010
school year compared to an estimated 8 percent of rural LEAs. We did
not find a significant difference between urban and rural LEAs for the
2010-2011 school year, however. While urban LEAs generally fared
better than rural LEAs, we found that a larger percentage of the
largest LEAs reported expecting a budget decrease for the 2010-2011
school year when compared to all other LEAs.[Footnote 43]
Specifically, we found that 36 percent of the largest LEAs expected
funding to decrease by between 1 and 5 percent in the 2010-2011 school
year compared to 26 percent of all other LEAs.
To Address Expected Funding Decreases, in Spring 2010 Many LEAs
Reported Being Very Likely to Cut Teachers, Related Staff, and Other
Items:
Of the 56 percent of LEAs expecting funding decreases, many reported
being likely (somewhat or very) to take personnel actions such as
cutting positions or freezing pay. However, this information was
reported before the $10 billion Education Jobs Fund was created. Our
survey results also show that some LEAs also reported being likely to
furlough teachers. Specifically, an estimated 76 percent of LEAs that
expected funding decreases reported they were likely to cut
noninstructional positions and an estimated 70 percent reported they
were likely to cut instructional positions. (See figure 5.) For
example, when we met with officials in California's Mountain View-
Whisman School District in June 2010, before the Education Jobs Fund
had been created, they expected to cut 20 percent of their K-3
teaching staff in the upcoming school year in part due to projected
revenue decreases of between 6 to 10 percent. Given these planned
reductions in instructional staff, an estimated 70 percent of LEAs
reported being likely to increase class size in the coming school
year. For example, LEA officials in Mountain View-Whisman School
District, Elk Grove Unified School District in California, and Revere
Public Schools in Massachusetts said they were increasing class sizes
to deal with budget shortfalls. In addition to cutting positions, an
estimated 61 percent of LEAs expecting funding decreases are likely to
reduce professional development or teacher training. Approximately 55
percent of LEAs expecting funding decreases reported being likely to
freeze pay, and around one-third reported being likely to furlough
teachers. For example, officials at San Bernardino City Unified School
District and Elk Grove Unified School District in California told us
they had decided to furlough some employee groups for at least 9 days
in the 2010-2011 school year.
Figure 5: Likely Personnel Actions for the 2010-2011 School Year
Reported by LEAs Anticipating Funding Decreases, as Reported in Spring
2010:
[Refer to PDF for image: stacked horizontal bar graph]
Personnel action: Cut noninstructional positions:
Very likely: 52;
Somewhat likely: 24;
Total: 76.
Personnel action: Cut instructional positions:
Very likely: 46;
Somewhat likely: 24;
Total: 70.
Personnel action: Reduce professional development/teacher training:
Very likely: 33;
Somewhat likely: 28;
Total: 61.
Personnel action: Pay freeze:
Very likely: 39;
Somewhat likely: 16;
Total: 55.
Personnel action: Furlough teachers:
Very likely: 19;
Somewhat likely: 17;
Total: 36.
Personnel action: Scale back benefits:
Very likely: 17;
Somewhat likely: 18;
Total: 35.
Personnel action: Pay cuts:
Very likely: 15;
Somewhat likely: 14;
Total: 29.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 8 percentage points or less.
[End of figure]
Similarly, many LEAs expecting funding decreases also reported being
likely (somewhat or very) to take nonpersonnel actions, such as
reducing instructional supplies and eliminating summer programs.
Specifically, an estimated 87 percent of LEAs expecting funding cuts
are likely to reduce instructional supplies or equipment, 73 percent
are likely to defer maintenance, 71 percent are likely to reduce
energy consumption, and 50 percent are likely to reduce custodial
services. (See figure 6.) For example, LEA officials in Elk Grove
Unified School District said they were very likely to reduce the
purchase of instructional supplies--or have already reduced them--and
noted that this may result in teachers and parents voluntarily
purchasing additional supplies for classrooms. In addition, LEA
officials in Kingston Community Schools, Plymouth Educational Center
in Michigan, Elk Grove Unified School District, and Boston Public
Schools told us they had been deferring maintenance and would continue
to defer it, though they would not defer any maintenance that would
compromise the safety of children. Examples of deferred maintenance
projects included painting rooms, replacing a roof, promptly fixing
air conditioners, and resurfacing parking lots. LEA officials in
Boston Public Schools and Elk Grove Unified School District said they
were very likely to reduce energy consumption through such efforts as
lowering the temperature in schools in winter months, offering
incentives to schools with lower energy consumption, and using more
energy-efficient light bulbs. Officials in Boston Public Schools, San
Bernardino City Unified School District, and Elk Grove Unified School
District said they had reduced custodial services in their schools and
some would likely further reduce them. Smaller proportions of schools
reported being likely to reduce transportation, shorten the school
year, or close or consolidate schools. A Boston Public Schools
official told us the district planned to reduce transportation costs
by creating smaller transportation zones, and also hopes to close and
consolidate up to 20 schools to reduce costs. In addition, we found
that significantly higher percentages of the largest LEAs reported
being likely to reduce transportation services. Specifically, 50
percent of large LEAs reported being likely to reduce transportation
services, compared to 35 percent of all other LEAs.
Figure 6: Likely Nonpersonnel Actions for School Year 2010-2011
Reported by LEAs Expecting Funding Decreases, as Reported in Spring
2010:
[Refer to PDF for image: stacked horizontal bar graph]
Nonpersonnel actions: Reduce instructional supplies/equipment;
Very likely: 54;
Somewhat likely: 33;
Total: 87.
Nonpersonnel actions: Defer maintenance;
Very likely: 40;
Somewhat likely: 33;
Total: 73.
Nonpersonnel actions: Reduce energy consumption;
Very likely: 37;
Somewhat likely: 34;
Total: 71.
Nonpersonnel actions: Eliminate summer/alternative school programs;
Very likely: 31;
Somewhat likely: 21;
Total: 52.
Nonpersonnel actions: Reduce custodial service;
Very likely: 32;
Somewhat likely: 18;
Total: 50.
Nonpersonnel actions: Delay or eliminate school construction;
Very likely: 25;
Somewhat likely: 12;
Total: 37.
Nonpersonnel actions: Reduce transportation services;
Very likely: 18;
Somewhat likely: 18;
Total: 36.
Nonpersonnel actions: Shorten school year[A];
Very likely: 10;
Somewhat likely: 3;
Total: 13.
Nonpersonnel actions: Close or consolidate schools;
Very likely: 7;
Somewhat likely: 6;
Total: 13.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 8 percentage points or less.
[A] In the case of shortening the school year, due to rounding, the
sum of the percentage of LEAs shown as very likely and somewhat likely
to take the action is 1 percentage point higher.
[End of figure]
Recovery Act Funds Allowed Most LEAs to Retain or Create Teaching
Positions and Related Jobs, though Some Still Lost Jobs in School Year
2009-2010:
Recovery Act funds for education allowed over three-quarters of LEAs
to retain or create teaching positions and related jobs during the
2009-2010 school year, though some LEAs still reported losing jobs
even with the additional federal funding. The use of the Recovery Act
funding for these purposes is consistent with one of the primary goals
of the Recovery Act, which is to save and create jobs in order to help
economic recovery. An estimated 87 percent of LEAs across the country
reported that Recovery Act funding allowed them to retain or create
jobs. Specifically, a higher percentage of LEAs reported retaining
staff positions--77 percent--than creating new staff positions --39
percent--for the 2009-2010 school year. In addition, a significantly
higher percentage of large LEAs reported that Recovery Act funding
allowed them to retain school staff, with nearly all--98 percent of
the largest LEAs in the country--reporting using Recovery Act funding
for retention.[Footnote 44] While most LEAs were able to retain or
create jobs with Recovery Act funding, some of these LEAs--nearly 1 in
4--still reported losing jobs overall in their LEA in the 2009-2010
school year. (See figure 7.)
Figure 7: Estimated Percentage of LEAs Nationally That Reported
Recovery Act Funding Allowed Job Creation or Retention Compared to the
Estimated Percentage of LEAs That Reported Losing Jobs Even with the
Additional Funding in School Year 2009-2010, as Reported in Spring 2010:
[Refer to PDF for image: vertical bar graph]
Job status: Allowed LEA to create or retain jobs: 87%;
Job status: Even with Recovery Act funding, jobs decreased: 23%.
Source: GAO‘s survey of LEAs.
Notes: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 5 percentage points or less. These
columns are not mutually exclusive: almost all LEAs with a net
decrease in jobs also retained jobs (92 percent).
[End of figure]
Retaining jobs was top use of Recovery Act funds for three education
programs: LEAs used large portions of their Recovery Act IDEA Part B;
ESEA Title I, Part A; and SFSF education stabilization funds toward
staff retention in the 2009-2010 school year. According to our survey,
nearly 70 percent of LEAs spent more than half to all of their
Recovery Act SFSF education stabilization funds to retain jobs for the
2009-2010 school year. (See figure 8.) Although a smaller percentage
of LEAs reported using half to all of their IDEA Part B and ESEA Title
I, Part A Recovery Act funding--25 percent and 27 percent,
respectively--for job retention, retaining staff was still the top use
cited by LEAs for IDEA Part B and ESEA Title I, Part A Recovery Act
funding. For example, LEA officials in Kingston Community School
District told us they had used all of their Recovery Act SFSF
education stabilization funds and ESEA Title I, Part A funds, and most
of their Recovery Act IDEA Part B, funds to retain staff.
Figure 8: Estimated Percentage of LEAs Nationally That Used More Than
Half of SFSF, ESEA Title I, Part A; and IDEA Part B Recovery Act
Funding for Retaining Staff in School Year 2009-2010:
[Refer to PDF for image: horizontal bar graph]
Funding Program: SFSF: 69%;
Funding Program: ESEA Title I Part A: 27%;
Funding Program: IDEA Part B: 25%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 6 percentage points or less.
[End of figure]
A number of factors may explain why such a large percentage of LEAs
spent a significant amount of their Recovery Act funding for job
retention. For example, a large portion of school expenditures are
employee-related costs--with salaries and benefits accounting for more
than 80 percent of local school expenditures, according to Education's
most recent data.[Footnote 45] Also, given the fiscal uncertainty and
substantial budget shortfalls facing states, federal funds authorized
by the Recovery Act have provided LEAs with additional flexibility to
pay for the retention of education staff. Overall, the impact of
Recovery Act education funds on job retention may be significant
because K-12 public school systems employ about 6.2 million staff,
based on Education's estimates, and make up about 4 percent of the
nation's workforce.[Footnote 46] In fact, through the reporting period
ending June 30, 2010, nearly two-thirds of full-time equivalent
positions reported on Recovery.gov have resulted from Recovery Act
education programs.
Based on our visits to states and LEAs, we were told that Recovery Act
SFSF funds, in particular, have provided additional resources and
flexibility allowing LEAs to retain staff. For example, one state
education official noted that LEAs have more flexibility in spending
SFSF funds for general education expenses because ESEA Title I, Part A
and IDEA Part B programs target special populations--disadvantaged
youth and students with disabilities, respectively. This official said
that because funding levels for general education programs in his
state have decreased while federal funding levels for ESEA Title I,
Part A and IDEA Part B programs have increased, LEAs have used SFSF
funds to shore up funding for general education and, in particular,
preserve jobs.
Instructional positions were more often retained and created than
noninstructional positions: Substantially more LEAs retained or
created positions for instructional staff compared to noninstructional
staff positions for the 2009-2010 school year. Instructional staff
typically includes classroom teachers and paraprofessionals and
noninstructional staff can include office support, janitorial staff,
and school security staff. Specifically, an estimated 74 percent of
LEAs nationally retained jobs for instructional staff, compared to 48
percent that retained them for noninstructional staff. Furthermore, 33
percent of LEAs reported creating new instructional staff positions
with Recovery Act funding compared to the 22 percent that created them
for noninstructional staff. (See figure 9). According to a number of
LEA officials we interviewed, LEAs often spent Recovery Act funding in
ways that would benefit students directly in the classroom, thereby
focusing on creating and retaining positions for instructional staff
before creating and retaining jobs for noninstructional staff, such as
administrative and auxiliary staff. For example, officials from the
Plymouth Educational Center said that in order to minimize the impact
on students, they have made or would consider making cuts to
administration, security guards, and paraprofessionals, and
instituting further pay cuts before letting go of teachers.
Figure 9: Estimated Percentage of LEAs Nationally That Retained and
Created Instructional and Noninstructional Jobs in School Year 2009-
2010:
[Refer to PDF for image: horizontal bar graph]
Funding allocation: Retained jobs for instruction staff: 74%;
Funding allocation: Retained jobs for noninstruction staff: 48%;
Funding allocation: Created jobs for instruction staff: 33%;
Funding allocation: Created jobs for noninstruction staff: 22%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 6 percentage points or less. These
categories are not mutually exclusive.
[End of figure]
Fewer LEAs Used Large Portions of Their Recovery Act Funding to Hire
Staff Than to Retain Staff, although Fund Use for Hiring Varied by
Program:
Although our survey results indicate that LEAs overall spent a
significant amount of their Recovery Act funding from all three
programs to retain jobs, LEAs also reported using Recovery Act funding
to hire new staff. As indicated in figure 10, the percentage of LEAs
that reported using Recovery Act funding to hire new staff varied
across the three programs. For example, 4 percent and 6 percent of
LEAs reported spending half or more of their Recovery Act IDEA Part B
and SFSF funding, respectively, to hire new staff, while 15 percent of
LEAs reported the same use for their Recovery Act ESEA Title I, Part A
funds. Overall, nearly three-quarters of LEAs did not use any of their
Recovery Act SFSF funding to hire new staff, concentrating instead on
using that funding for staff retention.
Figure 10: Estimated Percentage of LEAs That Reported Spending
Recovery Act Funds to Hire New Staff in the 2009-2010 School Year, by
Percent of Recovery Act Funding and Program:
[Refer to PDF for image: stacked vertical bar graph]
Funding program: IDEA Part B;
51 to 100%: 6%;
26 to 50%: 15%;
1 to 25%: 30%;
Zero percent: 45%.
Funding program: ESEA Title I Part A;
51 to 100%: 15%;
26 to 50%: 10%;
1 to 25%: 22%;
Zero percent: 50%.
Funding program: SFSF;
51 to 100%: 4%;
26 to 50%: 3%;
1 to 25%: 13%;
Zero percent: 74%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 7 percentage points or less.
[End of figure]
Nearly One in Four LEAs Reported Losing Jobs, Even with Recovery Act
Funding, Due to Decreasing Budgets and Other Factors:
Even with the additional Recovery Act funding provided to LEAs in
school year 2009-2010, nearly one-quarter of LEAs reported losing
jobs, primarily due to decreasing overall budgets. Without Recovery
Act funds, it is likely that the magnitude of job losses in these LEAs
would have been higher, given that nearly all of the LEAs experiencing
job loss overall also reported retaining jobs. Specifically, an
estimated 92 percent of LEAs where LEA officials indicated the number
of teachers had decreased also said that Recovery Act funds had
allowed them to retain jobs during the school year. Also, almost 30
percent of LEAs used Recovery Act funds to create new jobs during the
2009-2010 school year, even as their overall number of jobs decreased.
For example, according to a Boston Public Schools official, the number
of staff in the district had decreased in the 2009-2010 school year,
but the district also used Recovery Act funds for both retention and
job creation. For example, the district hired 16 new English as a
Second Language teachers and specialists with ESEA Title I, Part A
Recovery Act funds even as they let go of teachers during school
closures.
Decreasing overall budgets at the LEA level was the main reason that
LEAs reported losing jobs in School Year 2009-2010. Specifically, 67
percent of LEAs that lost jobs reported that their budget was a factor
to a great or very great degree. (See figure 11.) For example,
officials from Elk Grove Unified School District in California told us
they laid off about 500 staff at the end of the 2009-2010 school year
due to budgetary pressures, after exhausting their reserves and
spending Recovery Act funds. In addition to budgetary factors, LEAs
lost jobs because of staff attrition and declining enrollment,
although to a much lesser extent.
Figure 11: The Factors Affecting a Decrease in the Number of Jobs for
the 2009-2010 School Year to a Great or Very Great Degree:
[Refer to PDF for image: stacked vertical bar graph]
Affecting factor: Budget;
Great degree: 21%;
Very great degree: 46%;
Total: 67%.
Affecting factor: Declining enrollment;
Great degree: 6%;
Very great degree: 15%;
Total: 21%.
Affecting factor: Staff attrition;
Great degree: 5%;
Very great degree: 5%;
Total: 10%.
Affecting factor: Other;
Great degree: 0;
Very great degree: 3%;
Total: 3%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates for totals of very great and great degree
have margins of error, at the 95 percent confidence level, of plus or
minus 12 percentage points or less.
[End of figure]
Recovery Act Funds Were Used by LEAs to Purchase Items That Will Build
Capacity without Creating Recurring Costs:
In addition to retaining and hiring staff, LEAs spent Recovery Act
funds on items that could help build long-term capacity, while also
avoiding creating recurring costs for LEAs. Overall, LEAs reported
several one-time expenditures such as purchasing computer technology,
providing professional development for instructional staff, and
purchasing instructional materials as among some of the highest uses
of funds after job retention and creation.[Footnote 47] (See figure
12.)
Figure 12: Estimated Percentage of LEAs Nationally That Spent More
Than 25 Percent of Recovery Act Funds on Providing Professional
Development, Purchasing Instructional Materials, and Purchasing
Computer Technology in School Year 2009-2010:
[Refer to PDF for image: stacked vertical bar graph]
Funding program: ESEA Title I Part A;
Purchasing computer technology (example, hardware or software): 25%;
Purchasing instructional materials (not including computer software):
11%;
Providing professional development for instructional staff: 11%.
Funding program: IDEA Part B;
Purchasing computer technology (example, hardware or software): 22%;
Purchasing instructional materials (not including computer software):
8%;
Providing professional development for instructional staff: 10%.
Funding program: SFSF;
Purchasing computer technology (example, hardware or software): 12%;
Purchasing instructional materials (not including computer software):
5%;
Providing professional development for instructional staff: 1%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 6 percentage points or less.
[End of figure]
LEA officials reported making one-time purchases with Recovery Act
funds to enhance district capacity. For example, at Plymouth
Educational Center in Michigan, officials told us that Recovery Act
funds were used to enhance computer technology for both students and
teachers. Further, several LEA officials told us they had used IDEA
Part B Recovery Act funds to purchase professional development and
assistive technologies that would help build the district's capacity
to serve more students with disabilities. These officials told us that
they will be able to educate students with disabilities far more
affordably within the district than by paying external providers--a
benefit they anticipate will continue even after the Recovery Act
funds are spent. For example, in rural Michigan, officials told us
that IDEA Part B funding has allowed the Kingston Community Schools to
build capacity by partnering, along with other schools from the
surrounding area, with the University of Kansas to provide coaching
and training to teachers who can then provide services to more
students with disabilities. In addition, LEA officials in Boston,
Massachusetts, said they had used these funds to obtain equipment and
provide professional development so they could serve more students
with autism within the district.
A Majority of LEAs Maintained the Same Level of Service as the Prior
Year, but Some LEAs Reported Not Being Able to Maintain Service Levels:
Although more than half of all LEAs reported being able to provide
students with the same level of service in 2009-2010 as in 2008-2009,
a number of LEAs reported they had not been able to maintain the same
level of service at their LEA for the same time frame.[Footnote 48]
Specifically, an estimated 63 percent of LEAs nationally reported that
Recovery Act SFSF funds allowed them to maintain the same level of
service to students in their LEA in school year 2009-2010 as compared
to the previous school year. However, 40 percent of the largest LEAs
reported not being able to maintain the same level of service compared
to 16 percent of all other LEAs. (See figure 13.)
Figure 13: Reported Changes in LEA Level of Service in School Year
2009-2010 Compared to Level of Service in 2008-2009 among LEAs
Receiving SFSF Funds, by Size of LEA:
[Refer to PDF for image: vertical bar graph]
Reported change: Maintained;
Large LEAs: 55%;
All other LEAs: 64%.
Reported change: Raised;
Large LEAs: 5%;
All other LEAs: 20%.
Reported change: Unable to maintain;
Large LEAs: 40%;
All other LEAs: 10%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 7 percentage points or less.
[End of figure]
LEAs reported a range of areas in which there was a great or very
great reduction in the level of services, including instructional
materials and resources, staff development, and summer school
programs. For example, LEA officials from San Bernardino City Unified
School District told us they had applied cuts with the intent of
having the least impact on children in the classroom, and that these
cuts included delay of new textbook adoption, administrative
reductions, and reduced maintenance. Further, Boston Public Schools
and Revere Public Schools pointed to cuts in programming such as art
and music as examples in how their service levels had decreased.
A number of LEAs reported that Recovery Act SFSF funds allowed them to
raise their level of service in 2009-2010, with a lower percentage of
the largest LEAs reporting raising service levels compared to all
other LEAs. Based on our survey results for the 2009-2010 school year,
20 percent of all LEAs indicated that the additional Recovery Act SFSF
funding made it possible to raise the level of services provided to
students compared to what the LEA was able to provide in the prior
2008-2009 school year. A significantly lower percentage of the largest
LEAs in the country--5 percent--specified that the SFSF funding raised
service levels in their schools.
Relatively Few LEAs Report Making Significant Progress in Four Core
Education Reforms:
Some LEAs report making modest progress in education reform, but
relatively few report they are making significant progress in
advancing the four core education reform areas states are required to
address as a condition of receiving SFSF funding. For example, an
estimated 28 percent of LEAs reported making modest progress and just
13 percent of LEAs reported making significant progress in increasing
teacher effectiveness--the highest percentage among the four areas.
(See figure 14.) However, some of these goals, such as improving
standards and assessments, are more likely to be pursued at the state
level than at the local level, while others, such as supporting
struggling schools, may not apply to all districts. In order to
receive SFSF funding, states had to submit an application to Education
that required each state to provide several assurances, including that
it would implement strategies to advance four core areas of education
reform, as described by Education: (1) increase teacher effectiveness
and address inequities in the distribution of highly qualified
teachers; (2) establish a pre-K-through-college data system to track
student progress and foster improvement; (3) make progress toward
rigorous college-and career-ready standards and high-quality
assessments that are valid and reliable for all students, including
students with limited English proficiency and students with
disabilities; and (4) provide targeted, intensive support and
effective interventions to turn around schools identified for
corrective action or restructuring. Furthermore, in order to receive
the remainder of their SFSF allocations (Phase II), states had to
agree to collect and publicly report on more than 30 indicators and
descriptors related to the four core areas of education reform
described above. While states will be responsible for assuring
advancement of these reform areas, LEAs were generally given broad
discretion in how to spend the SFSF funds. It is not clear how LEA
progress in advancing these four reforms will affect states' progress
toward meeting their assurances. Education officials noted that they
were not surprised that fewer LEAs reported expanding reform efforts
in 2009-2010 given their budget situation. Figure 14 depicts the
extent to which LEAs reported making modest or significant progress in
each of the four reform areas.
Figure 14: Percentage of LEAs Reporting Significant or Modest Progress
toward Education Reform Goals in School Year 2009-2010 Made Possible
by Recovery Act Funds:
[Refer to PDF for image: stacked horizontal bar graph]
Education reform effort: Increase teacher effectiveness;
Significant progress: 13%;
Modest progress: 28%;
Total: 41%.
Make progress toward common standards;and assessments;
Significant progress: 9%;
Modest progress: 24%;
Total: 33%.
Turn around low performing schools;
Significant progress: 3%;
Modest progress: 18%;
Total: 21%.
Establish pre-K through college and career ready data systems;
Significant progress: 2%;
Modest progress: 7%;
Total: 9%.
Source: GAO‘s survey of LEAs.
Note: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 7 percentage points or less. These
categories are not mutually exclusive.
[End of figure]
Education Reform Efforts under ESEA Title I, Part A and IDEA Part B
Were Maintained or Expanded in the 2009-2010 School Year, but a Small
and Growing Number of LEAs Expect Declines in 2010-2011:
Almost all LEAs we surveyed stated that ESEA Title I, Part A and IDEA
Part B Recovery Act funds allowed their LEAs to either expand or
maintain education reform efforts in 2009-2010, but a small and
increasing percentage of LEAs expect to reduce reform efforts in 2010-
2011 than reduced such efforts in 2009-2010. In addition to retaining
and creating jobs, Education officials reported they intended the use
of Recovery Act funds to spur education reform in LEAs to improve
student achievement.[Footnote 49] Education provided guidance to
states and LEAs on ways to use the Recovery Act funds to stimulate
reform, as well as to retain jobs. Because LEAs are required to
obligate 85 percent of their Title I, Part A Recovery Act funding by
September 30, 2010, unless approved for a waiver, Title I, Part A
education reform efforts in districts without waivers could decrease
because fewer funds would be available in the upcoming school year.
ESEA Title I, Part A Recovery Act Funding Enhanced Education Reform
Efforts at Nearly Half of All LEAs and Helped Enhance or Maintain
Reform at Nearly All LEAs:
Most LEAs report that Recovery Act funding for ESEA Title I, Part A
allowed them to either expand or maintain education reforms for
disadvantaged students in both 2009-2010 and 2010-2011, but the
percentage of districts that expect to expand reform is lower for 2010-
2011 than for the 2009-2010. According to our survey results, an
estimated 48 percent of LEAs indicated that the additional ESEA Title
I, Part A Recovery Act funding they received allowed their LEA to
expand education reform efforts in 2009-2010. For example, officials
from one Michigan LEA told us they used the ESEA Title I, Part A
Recovery Act funding to enhance a tutoring program for all at-risk
students in math and language arts. Officials at another LEA told us
the ESEA Title I, Part A Recovery Act funding allowed them to enhance
their after-school tutoring program targeted at English language
learners. Moreover, an additional 48 percent of LEAs stated that the
funding allowed them to maintain reform efforts for ESEA Title I, Part
A programs. However, the percentage of districts anticipating ESEA
Title I, Part A funding that will allow their district to expand
reform efforts is lower for the 2010-2011 school year than for the
2009-2010 school year. (See figure 15) While an estimated 3 percent of
LEAs stated that even with the additional Recovery Act funding
provided under ESEA Title I, Part A, education reform efforts
decreased in the 2009-2010 school year, this percentage increased to
11 percent when we asked LEAs to look ahead to the 2010-2011 school
year. Title I, Part A reform efforts could potentially decrease in the
coming school year, in part because LEAs are required to obligate 85
percent of ESEA Title I, Part A Recovery Act funds by September 30,
2010, unless they receive a waiver.
Figure 15: Percentage of LEAs Nationally Reporting ESEA Title I, Part
A Recovery Act Funds Have Expanded, Maintained, or Decreased Education
Reform Efforts in School Years 2009-2010 and 2010-2011, as Reported in
Spring 2010:
[Refer to PDF for image: stacked horizontal bar graph]
Year: 2009-2010;
ESEA Title I Part A Recovery Act funds will allow LEA to expand
education reform efforts: 48%;
ESEA Title I Part A Recovery Act funds will allow LEA to maintain
ongoing education reform efforts: 48%;
Even with ESEA Title I Part A Recovery Act funds, reform efforts in
LEA will decrease: 3%;
Total: 99%.
Year: 2010-2011;
ESEA Title I Part A Recovery Act funds will allow LEA to expand
education reform efforts: 29%;
ESEA Title I Part A Recovery Act funds will allow LEA to maintain
ongoing education reform efforts: 56%;
Even with ESEA Title I Part A Recovery Act funds, reform efforts in
LEA will decrease: 11%;
Total: 96%.
Source: GAO‘s survey of LEAs.
Notes: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 7 percentage points or less.,This
figure does not display the percentage of LEAs that chose "Don't Know"
as a survey response, and therefore, the percentages do not total to
100 percent.
[End of figure]
IDEA Part B Recovery Act Funding Allowed Most LEAs to Either Expand or
Maintain Reform Efforts for Special Education Students:
Most LEAs report that Recovery Act funding for IDEA Part B allowed
them to either expand or maintain education reform efforts for special
education students in both 2009-2010 and 2010-2011, but the percentage
of districts that expect to expand reform is lower for 2010-2011 than
for the previous year. Specifically, in 2009-2010, we estimate that 43
percent of LEAs nationally expanded reform efforts for special
education students because of the additional IDEA Part B Recovery Act
funding in 2009-2010. (See figure 16). For example, an official in
Boston, Massachusetts, told us that the Boston Public Schools has used
some of its IDEA Part B Recovery Act funding to train teachers and
purchase equipment to enhance classroom services for autistic
students. In addition, 55 percent of LEAs noted that the Recovery Act
funding allowed them to maintain ongoing education reform efforts
targeted for special education students in the same year. For example,
in Michigan, one LEA official we interviewed stated that the LEA had
used Recovery Act funding to maintain intervention services for
special education students. Looking ahead to the 2010-2011 school
year, however, a lower percentage of districts--28 percent--expect to
expand reform.
Figure 16: Percentage of LEAs Nationally with IDEA Part B Recovery Act
Funds That Reported Expanding, Maintaining, or Decreasing Reform
Efforts for Special Education Students in School Years 2009-2010 and
2010-2011, as Reported in Spring 2010:
[Refer to PDF for image: stacked horizontal bar graph]
Year: 2009-2010;
IDEA Part B Recovery Act funds will allow LEA to expand education
reform efforts: 43%;
IDEA Part B Recovery Act funds will allow LEA to maintain ongoing
education reform efforts: 55%;
Even with IDEA Recovery Act funds, reform efforts in LEA will
decrease: 1%;
Total: 99%.
Year: 2010-2011;
IDEA Part B Recovery Act funds will allow LEA to expand education
reform efforts: 28%;
IDEA Part B Recovery Act funds will allow LEA to maintain ongoing
education reform efforts: 63%;
Even with IDEA Recovery Act funds, reform efforts in LEA will
decrease: 4%;
Total: 95%.
Source: GAO‘s survey of LEAs.
Notes: Percentage estimates have margins of error, at the 95 percent
confidence level, of plus or minus 7 percentage points or less.This
figure does not display the percentage of LEAs that chose "Don't Know"
as a survey response, and therefore, the percentages do not total to
100 percent.
[End of figure]
Given the Increase in IDEA Recovery Act Funding in 2009-2010, about 36
Percent of LEAs Exercised Flexibility to Decrease Local Spending on
Special Education, and Primarily Used Funds to Retain Staff:
In the 2009-2010 school year, among the 86 percent of LEAs that
reported receiving Recovery Act IDEA Part B funds, an estimated 36
percent reported taking advantage of the maintenance-of-effort (MOE)
flexibility under IDEA that allows them to reduce their local, or
state and local,[Footnote 50] spending on students with disabilities.
IDEA requires LEAs to budget at least the same total or per capita
amount of local funds for the education of children with disabilities
as the LEA spent in the most recent prior year for which information
is available. As provided for in IDEA, in any fiscal year in which an
LEA's federal IDEA Part B allocation exceeds the amount the LEA
received in the previous year, an eligible LEA[Footnote 51] may reduce
local spending on students with disabilities by up to 50 percent of
the amount of the increase, as long as the LEA uses those freed-up
funds for activities authorized under ESEA, which supports activities
for general education. Because Recovery Act funds for IDEA Part B
count as part of an LEA's overall federal IDEA allocation, in fiscal
year 2009, the total increase in IDEA Part B funding for LEAs was far
larger than the increases in previous years, which provided a greater
incentive for many LEAs to take advantage of the MOE flexibility in
the 2009-2010 school year. Of the 36 percent of LEAs exercising the
flexibility, an estimated 41 percent reported spending more than half
of the "freed-up" local funds on retaining staff. Other uses of the
freed-up funds included providing professional development for
instructional staff, purchasing computer technology, and hiring new
staff.
We also found an example of an LEA that planned to take advantage of
the MOE flexibility even though it was not eligible to do so. Based on
our review of budget documents and local officials' statements, the
Syracuse City School District (SCSD) had reduced their 2009-2010
spending by about $2.3 million.[Footnote 52] We determined, and local
officials subsequently agreed, that SCSD was not eligible for the MOE
reduction because it was not meeting performance indicators related to
graduation and drop-out 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. When we
notified LEA officials of its ineligibility during our visit in March
2010, they attributed their situation to miscommunication among staff
in the special education and finance offices and a misunderstanding of
the eligibility rules for reducing MOE. LEA officials informed us that
they would follow up on this issue and take steps to ensure they met
MOE requirements. SCSD subsequently provided documentation showing
that they were indeed meeting MOE requirements.
While the decision by LEAs to decrease their local spending can free
up funds to address other needs in the current school year, it could
also have implications for future local spending on special education.
Because LEAs are required to maintain their previous year's level of
local spending on special education and related services to continue
to receive IDEA Part B funds, LEAs taking advantage of the spending
flexibility will only be required to maintain these expenditures at
the reduced level in subsequent years. If LEAs that use the
flexibility to decrease their local spending do not voluntarily
increase their spending in future years, and federal IDEA Part B
allocations decrease--specifically by returning to levels comparable
to those before the Recovery Act--the total federal, state, and local
spending for the education of students with disabilities will decrease
compared to overall spending before the Recovery Act. However, while
LEAs may maintain the lower level of spending, because of the IDEA
requirement that children with disabilities receive a "free
appropriate public education," (FAPE) districts may not be able to
maintain services for students with disabilities at the lower levels
of spending. For example, in Elk Grove Unified School District
(California), which reduced local spending in 2009-2010, local
officials reported that they have plans to include in their budget for
2010-2011 an amount equal to or greater than their 2008-2009 spending
to ensure that services to students with disabilities are maintained.
Officials said they needed to do this in order to maintain services
for students with disabilities. In contrast, a charter school in
Michigan reported that it may not be able to restore funding to
previous years' levels, given decreases in state funding, but would
make sure it provided services for students with disabilities.
States Vary in the Rate at Which They Draw Down Recovery Act Funds for
Education Programs:
As of August 27, 2010, states covered by our review had drawn down 72
percent ($18.2 billion) of the awarded SFSF education stabilization
funds;[Footnote 53] 46 percent ($3.0 billion) of Recovery Act funds
for ESEA Title I, Part A; and 45 percent ($3.4 billion) of Recovery
Act funds for IDEA Part B. Some states had drawn down a much larger
portion of their funds than other states. (See table 6.) For example,
Arizona, Georgia, Illinois and New Jersey had drawn down all of their
SFSF education stabilization funds as of August 27, 2010, while
Florida, Mississippi, Pennsylvania, and Texas had drawn down less than
55 percent of these funds.
Table 6: Percentage of Awarded SFSF Education Stabilization, ESEA
Title I Part A, and IDEA Part B Recovery Act Funds Drawn Down by
Selected States as of August 27, 2010:
State: Arizona;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 100%;
ESEA Title I, Part A: 48%;
IDEA Part B: 45%.
State: California;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 87%;
ESEA Title I, Part A: 52%;
IDEA Part B: 49%.
State: Colorado;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 86%;
ESEA Title I, Part A: 34%;
IDEA Part B: 36%.
State: District of Columbia;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 82%;
ESEA Title I, Part A: 13%;
IDEA Part B: 10%.
State: Florida;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 50%;
ESEA Title I, Part A: 46%;
IDEA Part B: 50%.
State: Georgia;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 100%;
ESEA Title I, Part A: 38%;
IDEA Part B: 41%.
State: Illinois;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 100%;
ESEA Title I, Part A: 56%;
IDEA Part B: 52%.
State: Iowa;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 93%;
ESEA Title I, Part A: 95%;
IDEA Part B: 84%.
State: Massachusetts;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 87%;
ESEA Title I, Part A: 45%;
IDEA Part B: 46%.
State: Michigan;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 85%;
ESEA Title I, Part A: 40%;
IDEA Part B: 44%.
State: Mississippi;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 50%;
ESEA Title I, Part A: 41%;
IDEA Part B: 33%.
State: New Jersey;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 100%;
ESEA Title I, Part A: 34%;
IDEA Part B: 38%.
State: New York;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 56%;
ESEA Title I, Part A: 36%;
IDEA Part B: 31%.
State: North Carolina;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 56%;
ESEA Title I, Part A: 49%;
IDEA Part B: 52%.
State: Ohio;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 56%;
ESEA Title I, Part A: 42%;
IDEA Part B: 52%.
State: Pennsylvania;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 52%;
ESEA Title I, Part A: 58%;
IDEA Part B: 49%.
State: Texas;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 42%;
ESEA Title I, Part A: 47%;
IDEA Part B: 43%.
State: Total;
Percentage of awarded Recovery Act funds drawn down:
SFSF Education Stabilization Funds: 72%;
ESEA Title I, Part A: 46%;
IDEA Part B: 45%.
Source: U.S. Department of Education.
[End of table]
As noted in a previous report, drawdowns typically lag behind actual
expenditures. For example, state officials in New Jersey stated that
drawdown figures lag expenditures because funds are only drawn down
once districts submit for reimbursement. However, because LEAs are
required to obligate 85 percent of ESEA Title I Recovery Act funds by
September 30, 2010, a low drawdown rate could indicate either that a
large percentage of districts have sought and obtained or will seek
and obtain waivers from this requirement or are at risk of not meeting
this requirement. To help mitigate the effects of the funding cliff--
when Recovery Act funding is no longer available--Education officials
are encouraging districts to use carryover waivers to spread ESEA
Title I, Part A funds over 2 years. Specifically, in a webinar
Education officials hosted on June 15, 2010, Education officials
explained how districts could minimize the impact of the funding cliff
by strategically using carryover waivers. Also, officials in states we
contacted appeared to be following Education's suggested strategy to
encourage the use of carryover waivers. We spoke to state officials in
five states and the District of Columbia with relatively low drawdown
rates[Footnote 54] and some of these officials told us they were
encouraging districts to spread the funds over the 2-year period
rather than try to obligate 85 percent of the funds by September 30,
2010. For example, Massachusetts state officials told us they have
encouraged all districts receiving Recovery Act Title I funds to apply
for a carryover waiver to allow them the flexibility to use Recovery
Act funds throughout the two-year period. Similarly, officials in New
York state told us they had requested a blanket waiver for all
districts in the state, which was approved by Education.
Education Is Continuing to Provide Technical Assistance and Guidance
and Is Monitoring States' Use of Recovery Act Funds:
Education has completed 16 of the 18 on site-monitoring visits it
scheduled for the 2009-2010 monitoring cycle (including 11 states and
the District of Columbia that are in our review),[Footnote 55]
according to department officials. The most frequent monitoring
findings related to the Recovery Act had to do with districts failing
to follow fiscal and set-aside requirements, such as the requirements
to document time and effort of employees paid with Title I, Part A
funds and properly calculate how much funding was required to be set
aside for specific purposes, according to Education officials.
Regarding fiscal requirement findings, the most frequent findings
included districts' failure to (1) determine whether services provided
in schools receiving ESEA Title I, Part A funding were comparable to
those services provided to students in other district schools not
receiving ESEA Title I, Part A funding, (2) determine whether federal
funding had been used to "supplant" local or state funds by paying for
services that had previously been provided using local or state funds,
or (3) document that employees funded through multiple funding sources
were dedicating the appropriate proportion of their time and effort to
serving disadvantaged students. Regarding set-aside calculations,
Education officials said that they found that some districts had not
included Recovery Act funding in their calculations as required.
Education officials provided examples of corrective actions state
educational agencies and LEAs with fiscal or set-aside calculation
findings could take to resolve these issues. For example, calculations
for comparability or set-asides could be corrected to comply with
requirements.
For the 2010-2011 monitoring cycle, Education officials plan to
conduct on-site visits in 11 states, including 2 in our review,
[Footnote 56] and the Bureau of Indian Education. During each of these
12 monitoring visits, Education officials will assess state and local
implementation of the School Improvement Grant program in addition to
the implementation of regular and Recovery Act ESEA Title I, Part A
requirements. Department officials said that during the upcoming
monitoring cycle, they will continue to shift their monitoring focus
away from strict audits towards providing technical assistance.
Department officials also told us that they will develop state-
specific technical assistance for the states reviewed during the 2009-
2010 monitoring cycle to help them resolve identified challenges.
Education officials told us they continue to engage state and local
officials using a variety of technical assistance efforts. Such
efforts include issuing written guidance, hosting webinars, and giving
presentations at state ESEA Title I conferences to explain and discuss
federal guidance. Education officials also noted that they constantly
communicate with state and local officials over the telephone and
through email, and issue frequently asked questions to share their
answers to questions from state and local officials. Department
officials also noted that they have offered state-specific technical
assistance to state and local officials in several states,
particularly in states with new ESEA Title I leaders. Some of these
technical assistance efforts have been initiated as a direct result of
the Recovery Act, according to Education officials, who also said that
the increased technical assistance efforts have created a strain on
their resources and capacity.
Education Continues to Address Recovery Act Issues within Its Ongoing
IDEA Monitoring Efforts:
Regarding IDEA, in the fall of 2009, Education officials reported that
they pursued their regular targeted monitoring visits and technical
assistance, which covers 16 states or territories, and in response to
the Recovery Act, Education's Office of Special Education Programs
(OSEP) is also performing a desk review of all states.[Footnote 57]
According to Education officials, the department uses annual
performance report information and focused monitoring priorities to
determine in which states it will conduct monitoring visits. In the
course of its monitoring visits, the department verifies the
effectiveness of state systems for general supervision, data
collection, and fiscal management, as well as reviews state progress
toward the goals from its state performance plan. In conducting site
visits, OSEP reviews state records, makes visits to selected LEAs for
on-site examination of student records, and assesses state special
education systems. Following these visits, Education issues a report
on findings and, when noncompliance is found, requires states to
demonstrate correction of the noncompliance.
For fall 2010, Education is pursuing some additional monitoring and
providing additional support to states in implementing the Recovery
Act. Specifically, in addition to its annual monitoring visits, OSEP
is planning to visit up to 10 additional states this year. These
additional visits will be less intensive than the regular monitoring
visits, and will focus more on the Recovery Act than the annual
monitoring visits. Also in response to the Recovery Act, the
department has assigned four Recovery Act Facilitators, who work with
four teams that will provide support and guidance to states regarding
their Recovery Act monitoring efforts and the reporting of accurate
data for recipient reporting under the Recovery Act.
While they did not have any Recovery Act-specific findings in their
most recent monitoring visits, OSEP officials did report some areas on
which they will be focusing in their upcoming monitoring. OSEP
officials reported that one of the issues they have been focusing on
for several years is ensuring timely obligation and expenditure of
funds. After finding 10 years ago that states had failed to obligate a
total of $32.8 million in IDEA funds before the end of the 27-month
timeframe required under the law, the department began to track state-
level draw-downs, and now works to remind states that have balances
above a certain threshold when the deadlines for obligating funds are
approaching. OSEP officials reported that in subsequent years, after
they began tracking drawdowns, the expired unobligated funds have
declined to about $5.6 million. Also, OSEP officials reported that
some states were calculating their state-level MOE spending without
including spending on special education from sources outside of the
state educational agency. For example, if other state departments are
providing counseling or rehabilitation services, that spending must be
included. Finally, OSEP officials reported that while state education
agencies generally require LEAs to provide a budget for their intended
uses of IDEA funds, and require LEAs to attest that they are complying
with MOE requirements, states do not always perform monitoring later
to ensure that LEAs can document that they spent the funds according
to their budgets. In one example, in Iowa, we found equipment
purchases under IDEA larger than $5,000 for a single piece of
equipment that were not submitted to the state for approval as state
officials reported was required.[Footnote 58] In other examples, we
found that the Des Moines Public School District purchased equipment
for about $25,000, and the Marshalltown Community School District in
Iowa purchased $8,400 in communications equipment and software,
without seeking review and approval from the state prior to purchase,
as state officials said was required. As we completed our reviews, the
LEAs were making changes in their procedures to ensure state approval
of IDEA equipment purchases greater than $5,000.
Given State-Level Budget Situations, Education Has Approved Waivers
Allowing States to Decrease Their State Spending on Special Education:
Because of declines in state-level budgets, Education has approved
waiver applications from states to decrease their state-level spending
on special education. Under IDEA, the Secretary of Education may waive
state-level MOE requirements for equitable purposes due to
"exceptional or uncontrollable circumstances such as a natural
disaster or a precipitous and unforeseen decline in the financial
resources of the State." Education approved a state-level waiver for
one state in our review--Iowa[Footnote 59]--for 2009. Education
officials said that the waiver will only apply for 1 year, and, in
2010 Iowa must return its spending on special education to the 2009
level unless the state applies for and receives another waiver.
Education officials said that the department is considering each
application individually based on its own merits, and is reminding
states in its approval letters that they must provide services to
students with disabilities that would still meet the requirement under
the law that the state provide a free appropriate public education,
despite any cuts. In a June 2010 memorandum, Education said that it
was considering the impact of other sources of funding for special
education, including those from the Recovery Act, when making waiver
decisions.[Footnote 60] Education officials also told us that they
want to ensure that cuts to special education services are equitable
when compared to other budget cuts, and therefore they consider the
percentage decrease in spending on special education in relation to
that of other items in the states' budget, both education-related and
other items. Education's guidance also notes that states that receive
a waiver may be subject to additional monitoring, and Education
officials told us that each of the waiver-approved states will be
among the 16 states chosen for full monitoring visits described above
and subject to additional monitoring to make sure that free
appropriate public education was provided.
Education Has Begun to Monitor SFSF Grantees and Address Initial
Challenges Associated with Monitoring Noneducation State and Local
Agencies:
Education has begun to monitor SFSF grantees, and as of August 30,
2010 had conducted on-site monitoring of 1 state--New York--and
Washington, D.C. included in our review[Footnote 61] as well as desk
reviews of two states in our review[Footnote 62]--Georgia and North
Carolina. Education has not yet completed its monitoring reports to
states, but department officials told us that its findings were minor
and that it would work with states to address any findings. For
example, Education officials told us that some of the minor findings
included not providing timely certification documents, ensuring that
all jobs were reported on required recipient reports, or adhering to
monitoring schedules of subrecipients. Education has 10 more on-site
monitoring visits planned between September and November 2010 and 10
planned for 2011.
Education officials reported some challenges they experienced during
their initial monitoring visits because of the differing types of
subrecipients and the amount of documentation to review. Education's
Office of Elementary and Secondary Education (OESE) is charged with
administering and monitoring SFSF funds. While OESE is experienced
with monitoring LEAs, SFSF educational stabilization funds may also
flow to Institutions of Higher Education, which OESE has little or no
experience overseeing. Further, SFSF government services funds provide
funding to a broad range of state and local agencies that Education
does not normally monitor. For example, SFSF government services funds
subrecipients consist of a variety of noneducational entities
including state police forces, fire departments, corrections
departments, and healthcare facilities and hospitals. Since this is
the first SFSF monitoring effort, Education officials told us that it
will take time for Education's staff to become familiar with these
subrecipients and the types of documentation they provide. In
addition, Education officials reported that the amount of information
necessary to monitor SFSF funds was voluminous and required more time
than was expected, but they are continuing to work to improve the SFSF
monitoring process.
In September 2009, we reported that some states faced challenges in
developing monitoring plans for SFSF funds, and we recommended that
Education take action such as collecting and reviewing documentation
of state monitoring plans to ensure that states understand and fulfill
their responsibility to monitor subrecipients of SFSF funds. Education
acted on our recommendation and required states to submit SFSF
monitoring plans to Education by March 12, 2010. Education officials
told us they are reviewing the plans to ensure that states planned to
adequately monitor SFSF subrecipients.
Given State-Level Budget Situations, Education Has Approved SFSF
Waivers Allowing States to Decrease Their State Spending on Education:
The Secretary of Education has granted an SFSF MOE waiver to one state
in our review--New Jersey--allowing the state to reduce 2009 state
support for education below 2006 levels.[Footnote 63] The department
grants these waivers once a state certifies that state education
spending did not decrease as a percentage of total state revenues.
[Footnote 64] As we reported in May, the states we reviewed told us
they met SFSF MOE levels in fiscal year 2009 or obtained waivers.
Because of declines in state-level budgets, two states in our review--
Florida and New Jersey--requested a waiver from Education to decrease
their 2009 state-level spending on education.[Footnote 65] After these
states' 2009 state education funding figures were finalized, Education
officials told us they reviewed waiver applications to ensure that
state education funding in 2009 met the requirements for an SFSF
waiver. Education officials reported that New Jersey's and Rhode
Island's waivers have been approved and that they are currently
reviewing South Carolina's and Florida's waivers.
Education Announced Race to the Top Grants and SFSF Phase II Awards:
Education has announced that the District of Columbia and 11 states,
including Florida, Georgia, Massachusetts, New York, North Carolina,
and Ohio, will receive Race to the Top grants.[Footnote 66] This
program is a competitive grant fund created by the Recovery Act as
part of SFSF providing $4.35 billion in funding for statewide reform
efforts and to develop common academic assessments.[Footnote 67] In
addition, Education officials reported that almost all of the SFSF
Phase II funds have been awarded to most states.[Footnote 68] As such,
states now have access to their entire allotment of SFSF funds and all
SFSF funds must be obligated by September 30, 2011.
Education Released New Clarifying Guidance on Recipient Reporting:
As in previous reporting periods, FTE positions funded by Education
grants accounted for a large proportion of all reported FTEs.
Specifically, Education recipients reported around 450,000 FTEs, which
represent 60 percent of the nearly 750,000 FTEs reported for the
period ending June 30, 2010. To improve the consistency of FTE data
collected and reported, in May and March 2010 GAO made several
recommendations to Education, including that Education re-emphasize
the responsibility of sub-recipients to include hours worked by
vendors in their quarterly FTE calculations and that Education provide
clarifying guidance to recipients on how to best calculate FTEs for
education employees during quarters when school is not in session.
Education implemented our recommendations by issuing clarifying
guidance on August 26, 2010, that specifies how education sub-
recipients are to calculate FTEs for recipient reporting for Education-
specific situations, such as how to calculate FTEs for teachers not
working during the summer months who are considered full-time employees.
Though the Application Process Has Taken Longer Than Expected, States
and LEAs Are Preparing to Implement School Improvement Grants as Soon
as Applications Are Approved:
Setbacks in issuing final written guidance and resource constraints at
Education have slowed the application process for School Improvement
Grants (SIG)--competitive awards to help turn around the lowest
performing schools--according to department officials. According to
Education officials, one reason that the state application process
took longer than expected was that the department had to revise the
final requirements it initially released in December 2009. According
to Education officials, some language in the Consolidated
Appropriations Act, 2010 [Footnote 69] necessitated changes to these
requirements. Education officials released revised guidance in late
January 2010 and again in June 2010 with a few additional revisions.
[Footnote 70] While the changes to the guidance and other delays
created a challenge for some states, Education assisted states in
moving their applications forward by responding to questions in a
timely manner. In addition, Education extended the application
deadline set in the initial guidance document to allow time for the
department to offer technical assistance and for states to revise
their applications given the changed requirements.
In addition to the delay caused by issuing revised guidance,
department officials said that staffing constraints had limited the
department's ability to review state applications, which ranged from
200 to 400 pages in length, and to help state officials revise these
applications. They noted that, in some cases, states had to revise the
application, sometimes more than once, in order to comply with SIG
requirements. Because certain compliance issues related to more than
one part of the application (depending on how states put their
applications together), Education staff had to reread each application
in full after each resubmission to ensure compliance. Overseeing the
substantial influx of additional ESEA Title I funds provided through
the Recovery Act, including SIG funds, substantially increased staff
workload, particularly given that staffing levels did not increase,
said a senior Education official. While one staff member works full-
time to coordinate the SIG application process at the department, the
17 other staff who were assigned to work on SIG application reviews
assumed these responsibilities in addition to their other monitoring,
technical assistance, and programmatic duties, according to a senior
Education official.
State officials in some states[Footnote 71] and the District of
Columbia told us that they had encountered various challenges in
applying for and implementing the School Improvement Grants and that
timeframes have been tight. These states were at different stages in
the process of selecting LEAs to receive SIG funds, but were taking
various steps to address the tight timeframes and work through
challenges, and expected that districts would be ready to use the
grant funds in the 2010-2011 school year. For example, officials in
New York told us in late August that they had nearly completed their
review of districts' SIG applications. They also noted encountering
challenges in New York City, where school districts are not allowed to
replace principals or close schools--steps required by certain school
turnaround models--and having to work through two specific collective
bargaining issues. In contrast, New Jersey officials said they had
completed their review of district applications and selected 12
schools, representing 7 school districts to receive SIG funds, with
some districts receiving grants for multiple schools. To ease tight
time frames, Michigan officials told us that while awaiting approval
from Education, they had created an iterative application process for
districts, whereby districts were required to submit an initial
statement of intent in June, followed by a more detailed initial
application in mid-July. State education officials told us they
reviewed these initial drafts and gave local officials feedback before
the final applications were due. As of late July, Education had
approved SIG applications for 48 states and the District of Columbia,
including all 16 of the states and the District of Columbia in our
review.
Obligations for State Transportation Projects Are Nearly Complete, but
Spending from Other Federal Transportation Sources Has Slowed:
Use of Transportation Funds:
Nationwide, the Federal Highway Administration (FHWA) obligated $25.6
billion in Recovery Act funds for over 12,300 highway projects and
reimbursed $11.1 billion as of August 2, 2010. The Federal Transit
Administration (FTA) obligated $8.76 billion of Recovery Act funds for
about 1,055 grants and reimbursed $3.6 billion as of August 5,
2010.[Footnote 72] Figure 17 shows FHWA's and FTA's reimbursements
during the Recovery Act.
Figure 17: Cumulative Recovery Act Highway and Public Transportation
Funds Reimbursed by FHWA and FTA Nationwide:
[Refer to PDF for image: vertical bar graph]
Month: March 2009;
Highway: $1.7 million;
Public transportation: $0.
Month: April 2009;
Highway: $9.8 million;
Public transportation: $0.
Month: May 2009;
Highway: $71.1 million;
Public transportation: $56.7 million.
Month: June 2009;
Highway: $264.2 million;
Public transportation: $196.0 million.
Month: July 2009;
Highway: $676.2 million;
Public transportation: $498.1 million.
Month: August 2009;
Highway: $1.44 billion;
Public transportation: $789.2 million.
Month: September 2009;
Highway: $2.38 billion;
Public transportation: $958.2 million.
Month: October 2009;
Highway: $3.66 billion;
Public transportation: $1.19 billion.
Month: November 2009;
Highway: $4.63 billion;
Public transportation: $1.37 billion.
Month: December 2009;
Highway: $5.60 billion;
Public transportation: $1.61 billion.
Month: January 2010;
Highway: $6.03 billion;
Public transportation: $1.80 billion.
Month: February 2010;
Highway: $6.43 billion;
Public transportation: $2.00 billion.
Month: March 2010;
Highway: $6.99 billion;
Public transportation: $2.42 billion.
Month: April 2010;
Highway: $7.61 billion;
Public transportation: $2.75 billion.
Month: May 2010;
Highway: $8.56 billion;
Public transportation: $3.0 billion.
Month: June 2010;
Highway: $9.85 billion;
Public transportation: $3.28 billion.
Month: July 2010;
Highway: $11.12 billion;
Public transportation: $3.55 billion.
Source: GAO analysis of DOT data.
[End of figure]
Nationally, 44 percent of funds obligated for highway projects had
been reimbursed as of August 2, 2010. Reimbursement rates varied
widely among the 16 states and the District--between 23 percent and 77
percent. Illinois, Iowa, and Mississippi had the highest reimbursement
rates--each at 65 percent or more. Officials in all 3 states told us
that in selecting projects they emphasized projects that could be
completed quickly, and each undertook more pavement resurfacing
projects--which can be quickly initiated--than any of the other states
we reviewed. Five states had reimbursement rates below 30 percent--of
particular note, California, which received almost 1 out of every 10
Recovery Act highway dollars apportioned nationwide, had the second
lowest reimbursement rate among the 16 states and the District at 26
percent ($633 million). Officials from California noted that the state
had undertaken a number of large projects that had the potential to
offer long-term benefits but for which construction could not be
initiated quickly. For example, California used about $197 million in
Recovery Act funds to partially finance the Caldecott Tunnel
improvement project (total estimated cost of $420 million). California
awarded a contract in November 2009 and began construction of a new
tunnel on a congested stretch of highway between Oakland and Orinda in
February 2010, nearly 1 year after the Recovery Act was enacted.
California officials also attributed the state's lower reimbursement
rates to having a majority of its projects administered by local
governments, which are often reimbursed more slowly than state-
administered projects. According to California officials, as of June
30, 2010, about 62 percent or $1.5 billion of California's $2.5
billion are obligated for local government projects. California
officials stated that locally-administered highway projects take
longer to reach the reimbursement phase because of the additional
steps required to approve local highway projects and because
localities with relatively small projects tend to seek reimbursement
in one lump sum at the end of a project to minimize time and
administrative costs.
The effect of projects sponsored by local agencies on reimbursements
is not limited to California. Among all the 16 states and the
District, reimbursement of funds suballocated for metropolitan,
regional, and local use lagged behind state projects. Suballocated
funds can be administered through local transportation agencies such
as city or county agencies that can lack familiarity with federal
requirements. As we have previously reported, local agencies have had
challenges selecting projects that will meet these requirement and
suballocated funds have generally taken longer to obligate than
nonsuballocated funds.[Footnote 73] Data show this pattern extending
to reimbursements as well. New Jersey and Arizona had the lowest
reimbursement rates on suballocated projects, 10 and 18 percent,
respectively. Our past reports have noted that New Jersey and Arizona
were among the slowest states to select projects for funding in
suballocated areas.
Table 7 shows the total reimbursement rates in the 16 states and the
District, as well as the reimbursement rates for state and
suballocated projects.
Table 7: Reimbursement of Recovery Act Funds as a Percentage of Funds
Obligated - Ranked by All Funds:
State: District of Columbia;
All funds: 23%;
Suballocated funds: 29%;
State funds: 20%.
State: California;
All funds: 26%;
Suballocated funds: 25%;
State funds: 26%.
State: Georgia;
All funds: 27%;
Suballocated funds: 23%;
State funds: 29%.
State: Ohio;
All funds: 29%;
Suballocated funds: 35%;
State funds: 27%.
State: Massachusetts;
All funds: 29%;
Suballocated funds: 27%;
State funds: 30%.
State: Florida;
All funds: 31%;
Suballocated funds: 23%;
State funds: 34%.
State: Texas;
All funds: 35%;
Suballocated funds: 32%;
State funds: 36%.
State: New York;
All funds: 37%;
Suballocated funds: 37%;
State funds: 37%.
State: New Jersey;
All funds: 37%;
Suballocated funds: 10%;
State funds: 48%.
State: Selected states' average;
All funds: 39%;
Suballocated funds: 33%;
State funds: 41%.
State: Arizona;
All funds: 42%;
Suballocated funds: 18%;
State funds: 52%.
State: U.S. average;
All funds: 44%;
Suballocated funds: 37%;
State funds: 46%.
State: Pennsylvania;
All funds: 47%;
Suballocated funds: 47%;
State funds: 47%.
State: North Carolina;
All funds: 47%;
Suballocated funds: 42%;
State funds: 49%.
State: Colorado;
All funds: 52%;
Suballocated funds: 30%;
State funds: 61%.
State: Michigan;
All funds: 55%;
Suballocated funds: 53%;
State funds: 56%.
State: Illinois;
All funds: 65%;
Suballocated funds: 41%;
State funds: 76%.
State: Mississippi;
All funds: 69%;
Suballocated funds: 61%;
State funds: 72%.
State: Iowa;
All funds: 77%;
Suballocated funds: 79%;
State funds: 76%.
Source: GAO analysis of FHWA data.
Note: Of the total Recovery Act highway funds available to states, 30
percent is to be directed to suballocated areas and 70 percent is
available for use in any area of the state. Percentages based on
reimbursements from FHWA to states as of August 2, 2010.
[End of table]
Recovery Act highway obligations were used primarily for pavement
improvement projects, such as resurfacing, reconstruction, and
rehabilitation of existing roadways. Recovery Act public
transportation funds were used primarily for upgrading transit
facilities and improving bus fleets (see figure 18).
Figure 18: Nationwide Recovery Act Highway and Public Transportation
Obligations by Project Type:
[Refer to PDF for image: 2 pie-charts]
Highway obligations:
Pavement improvement: reconstruction/rehabilitation ($6.4 billion):
25%;
Pavement improvement: resurface ($5.7 billion): 22%;
Pavement widening ($4 billion): 16%;
New road construction ($1.6 billion): 6%;
Bridge replacement ($1.3 billion): 5%;
Bridge improvement ($1.2 billion): 5%;
New bridge construction ($713 million): 3%;
Other ($4.7 billion): 18%.
Public transportation obligations:
Transit infrastructure construction ($4.5 billion): 51%;
Bus purchases and rehabilitation ($2 billion): 23%;
Other capital expenses ($1 billion): 11%;
Preventive maintenance ($730 million): 8%;
Rail car purchases and rehabilitation ($324 million): 4%;
Operating expense ($185 million): 2%.
Source: GAO analysis of DOT data.
Notes: Highway and public transportation percentages may not add to
100 because of rounding.
[End of figure]
Public transportation obligations include Recovery Act funds that were
transferred from FHWA to FTA. The category "other" includes safety
projects, such as improving safety at railroad grade crossings,
engineering, right-of-way purchases, and transportation enhancement
projects, such as pedestrian and bicycle facilities. "Transit
infrastructure construction" includes engineering and design,
acquisition, construction, and rehabilitation and renovation
activities. "Other capital expenses" includes leases, training,
finance costs, mobility management project administration, and other
capital programs.
Highway data are as of August 2, 2010, and public transportation data
are as of August 3, 2010.
States Asked FHWA to Deobligate Funds after the 1-Year Deadline, but
Some Suballocated Areas Faced Challenges in Identifying Additional
Projects for Funding:
As we have previously reported, an economic stimulus package should
assure that projects are undertaken quickly to provide a timely
stimulus to the economy.[Footnote 74] The Recovery Act included
obligation deadlines to facilitate the timely use of funds, including
early March 2010 (1-year) deadlines to obligate Recovery Act highway
and transit funds. In our May 2010 report, we reported that the states
met these deadlines.
Since the March 2010 deadline for obligating Recovery Act highway
funds, states have asked FHWA to deobligate some funds and are
subsequently asking FHWA to obligate these funds to new projects. To
use states' full apportionments, those funds must be obligated again
by September 30, 2010, after which all unobligated highway funds will
no longer be available to the states. As of August 2, 2010, about $397
million, or 2.6 percent, of total Recovery Act highway funds remained
to be obligated in the 16 states and the District. Nationally, about
$565 million remained. These amounts have increased steadily since the
March 2010 deadline--for example, in the 1-month period between June
30, 2010, and August 2, 2010, the amount available for obligation
increased from about $509 million to $565 million (see figure 19).
Figure 19: Recovery Act Highway Funds Remaining to Be Obligated Since
March 2, 2010:
[Refer to PDF for image: multiple line graph]
Date: 3/2/2010;
Selected states: $0;
National total: $0.
Date: 4/5/2010;
Selected states: $98.2 million;
National total: $166.0 million.
Date: 5/3/2010;
Selected states: $171.1 million;
National total: $302.4 million.
Date: 6/30/2010;
Selected states: $342.2 million;
National total: $508.8 million.
Date: 8/2/2010;
Selected states: $396.6 million;
National total: $564.9 million.
Source: GAO analysis of FHWA data.
[End of figure]
Projects supported with suballocated funds generally had higher levels
of unobligated funds compared with projects using funds that are not
suballocated. As of August 2, 2010, $199 million of the $7.7 billion
available to suballocated areas nationwide remained to be obligated
before the September 30, 2010, deadline. Also, several of the states
we reviewed had unobligated suballocated funds that were roughly three
to five times larger than the national average (see table 8). FHWA
officials told us that the timely expenditure of funds on projects
administered by local public agencies remains an area of concern and
that the agency is closely monitoring these projects to ensure, on
behalf of the states, that all funds are obligated. These funds will
be withdrawn after September 30, 2010, if these funds are not obligated.
Table 8: Percentage of Unobligated Recovery Act Highway Funds:
State: Arizona;
Suballocated funds: 12.4%;
State funds: 5.6%;
All funds: 7.6%.
State: California;
Suballocated funds: 2.0%;
State funds: 3.0%;
All funds: 2.7%.
State: Colorado;
Suballocated funds: 0.0%;
State funds: 1.6%;
All funds: 1.2%.
State: District of Columbia;
Suballocated funds: 0.0%;
State funds: 12.8%;
All funds: 8.9%.
State: Florida;
Suballocated funds: 5.4%;
State funds: 3.6%;
All funds: 4.2%.
State: Georgia;
Suballocated funds: 9.0%;
State funds: 7.5%;
All funds: 7.9%.
State: Illinois;
Suballocated funds: 1.4%;
State funds: 0.6%;
All funds: 0.9%.
State: Iowa;
Suballocated funds: 0.2%;
State funds: 0.9%;
All funds: 0.7%.
State: Massachusetts;
Suballocated funds: 3.2%;
State funds: 7.3%;
All funds: 6.2%.
State: Michigan;
Suballocated funds: 1.2%;
State funds: 0.9%;
All funds: 1.0%.
State: Mississippi;
Suballocated funds: 1.2%;
State funds: 0.0%;
All funds: 0.4%.
State: New Jersey;
Suballocated funds: 1.6%;
State funds: 0.4%;
All funds: 0.8%.
State: New York;
Suballocated funds: 0.3%;
State funds: 0.5%;
All funds: 0.5%.
State: North Carolina;
Suballocated funds: 8.9%;
State funds: 1.8%;
All funds: 3.9%.
State: Ohio;
Suballocated funds: 1.2%;
State funds: 4.3%;
All funds: 3.4%.
State: Pennsylvania;
Suballocated funds: 0.0%;
State funds: 0.3%;
All funds: 0.2%.
State: Texas;
Suballocated funds: 0.9%;
State funds: 1.5%;
All funds: 1.3%.
State: Selected states' average;
Suballocated funds: 2.8%;
State funds: 2.5%;
All funds: 2.6%.
State: U.S. average;
Suballocated funds: 2.6%;
State funds: 2.0%;
All funds: 2.2%.
Source: GAO analysis of FHWA data.
Note: Of the total Recovery Act highway funds available to states, 30
percent is to be directed to suballocated areas and 70 percent is
available for use in any area of the state. Percentages based on
obligation of funds by FHWA as of August 2, 2010.
[End of table]
State officials identified several reasons projects might have been
delayed in suballocated areas. Officials from the Arizona Department
of Transportation, in which 12.4 percent of suballocated funds were
unobligated, said that many suballocated areas did not have projects
ready for federal-aid funding in part because of limited staff and
other resources to move projects through approvals and prepare
documentation in a manner consistent with federal requirements.
Officials from North Carolina, in which 8.9 percent of suballocated
funding was deobligated, told us that local agencies using
suballocated funding faced challenges completing environmental
documents, acquiring rights-of-way, and finalizing bid documents. As a
result, many projects local agencies considered to be "ready-to-go"
did not meet various federal standards, and agencies had to find other
projects, which created delays.
Among the states we reviewed, most of the funds that the states asked
FHWA to deobligate were from contract award savings. From March 2,
2010, to June 7, 2010, the 16 states and the District that we are
reviewing requested FHWA to deobligate almost $457 million. About 85
percent of those funds were deobligated due to contracts continuing to
be awarded below state cost estimates (see figure 20).
Figure 20: Deobligations in 16 States and the District from March 2,
2010, to June 7, 2010, by Deobligation Type:
[Refer to PDF for image: pie-chart]
Contract award savings: 85%;
Cost under run: 7%;
Project withdrawn: 4%;
Change in scope of work: 2%;
Other 2%.
Source: GAO analysis of FHWA data.
Note: "Other" includes obligation reductions due to costs that were
found not to be eligible for federal-aid reimbursement, revised
estimates for projects, and corrections of data errors.
[End of figure]
Withdrawn projects accounted for only about $17 million, or 4 percent,
of deobligations from March 2 to June 7, 2010, less than 1 percent of
the total $15.2 billion available to the 16 states and the District
for highways. Two projects using suballocated funds in California
accounted for about $9.7 million of the $17 million in withdrawn
projects. In both cases, the project was withdrawn and later
established as a new project. California officials told us they
withdrew one $1.8 million project because local officials wanted to
expand the scope of the project. Another $7.9 million project was
withdrawn because it had an incorrect right-of-way certification.
Officials told us that the state subsequently resubmitted the project
and funding was obligated after correcting the certification.
Contract Data from FHWA's Recovery Act Data System Continues to Be
Inaccurate:
In May 2010, we reported that while progress has been made in awarding
Recovery Act contracts and initiating work, the accuracy of contract
data in FHWA's Recovery Act Data System (RADS) is of concern. Among
other information, the Recovery Act requires the U.S. Department of
Transportation (DOT) to report to Congress on the number of projects
for which contracts have been awarded, for which work has begun, and
for which work had been completed, and the amount of federal funds
associated with these contracts.[Footnote 75] DOT established RADS
because it had not previously collected and reported such information
for the regular federal highway formula program. DOT relies on states
to enter data into RADS and uses automated data checks and rules, as
well as periodic reviews by FHWA Division office officials located in
every state, to improve the accuracy of state-reported data.
We continued to find problems with the accuracy of RADS contract data.
[Footnote 76] For example, more than 3,100 contracts were shown as
having been awarded on the same date the funds were obligated. We also
found that about 1,400 contracts were reported as awarded before FHWA
obligated the funds. Because contracts are normally awarded several
weeks or months after funds are obligated by FHWA, the numbers and
amounts of contracts awarded and work begun is likely overstated.
Because FHWA does not have accurate data from states in RADS, it is
not able to use RADS to meet the Recovery Act reporting requirements
for contracts.
FHWA officials acknowledged that they cannot use data from RADS to
provide information on contract award amounts. Officials said they
instead use data from FHWA's financial management system to meet the
Recovery Act reporting requirements for contracts because this system
receives more checks for data accuracy. However, using FHWA's
financial management system can also overstate the amount of funds
under contract. FHWA reports data at the project level, not at the
contract level; this is important because one project can include
several contracts. When reporting at the project level, FHWA reports
the entire project as being under contract once one contract is
awarded, even if several more remain to be awarded. FHWA provided
project-level data in its report to Congress dated May 7,
2010,[Footnote 77] but these data were labeled in the report as
contract data. As noted above, the Recovery Act requires DOT to report
not only the number of projects, but also the total amount of federal
funds associated with contracts that have been awarded, work has
begun, and work is completed.
FHWA has taken some steps to improve data accuracy in RADS, but
officials said that there was no date for when they would implement
changes. These officials said they have assembled a state advisory
group to look at the challenges that exist in RADS and make
recommendations on improvements. FHWA officials said they have not had
sufficient resources to incorporate additional data checks into the
software that would check for errors. Such checks could ensure that
milestones are sequentially entered, thereby improving the accuracy of
these data.
Many States Requested That FHWA Transfer Funds to FTA for Public
Transportation Projects and Many States and Transit Agencies Elected
to Use Some Funds for Operating Expenses, Although Data on Operating
Expenses Is Limited:
As we reported in our prior Recovery Act work, states have the option
to request that FHWA transfer Recovery Act highway funds to FTA for
use in public transportation programs, just as they do in the regular
Federal Aid Highway Program.[Footnote 78] While most states transfer
some funds each year to address transit priorities, data from Recovery
Act funds indicated that 21 states requested FHWA transfer some
Recovery Act funds to the states' public transportation program. Many
states transferred funds shortly after Recovery Act funds became
available in February 2009. For example, Caltrans transferred almost
$2 million in July 2009. Caltrans officials told us that their state
has a robust transfer program because of the state's extensive public
transportation system and the system's many needs. Caltrans'
subrecipients used this funding for two large projects identified in
the state's transportation improvement plan but for which sufficient
funding had not been available. Specifically, one subrecipient is
purchasing two buses for a rural transit agency, and the second is
constructing a new intermodal transit hub that will serve the north
Lake Tahoe area. Caltrans officials said that the Recovery Act funding
was sufficient to complete these programs.
According to FTA data, many state departments of transportation (DOT)
and transit agencies[Footnote 79] also used a portion of Recovery Act
funds for public transportation operating expenses. In June 2009,
Congress gave urbanized areas and states the authority to use a
maximum of up to 10 percent of certain Recovery Act transit funds for
operating expenses.[Footnote 80] Data provided by FTA indicated that,
nationwide, urbanized areas and states used about $190 million, or
about 2 percent of Recovery Act funding for public transportation,
toward operating expenses as of August 25, 2010. FTA officials told us
that urbanized areas and states determine how much Recovery Act funds
they spend on operating expenses. According to FTA data, 169 grantees
throughout the U.S. chose to use a portion of public transportation
funds for operating expenses. This represented approximately 25
percent of total Recovery Act public transportation grantees. These
169 grantees ranged from major urban transit agencies in San Francisco
and St. Louis to transit agencies in smaller cities such as
Charlottesville, Virginia, and Pocatello, Idaho. In addition, 18
states used a portion of their Recovery Act funding to pay for
operating expenses for rural public transportation.
FTA provided us data on the dollar amounts that urbanized areas and
states obligated for operating expenses, but noted that they did not
begin to track at a national level the percent of funds each state or
urbanized area was using for operating expenses until August 2010. FTA
officials also said that they rely on FTA's regional offices--as part
of the grant approval and review process--to ensure that urbanized
areas and states plan to spend no more than the 10 percent threshold.
However, they are considering instituting a control in its electronic
grants management system so that staff could not award a grant if an
urbanized area or state was over the 10 percent threshold. FTA
officials also noted that there is no reporting requirement to make
publicly available the percent of funds that urbanized areas and
states are using for operating expenses but that they are considering
placing summary information on the use of Recovery Act transit funds
for operating expenses on the FTA Web site.
We spoke with several states and transit agencies about whether they
used Recovery Act funds for operating expenses. For example, officials
from Michigan's Department of Transportation, after asking nonurban
transit agencies for input, found that funding for operating expenses
was a priority. According to Michigan Department of Transportation
officials, the majority of nonurban transit systems in Michigan are
demand response--meaning that passengers are picked up and dropped off
where they want to go within a defined service area--and officials
told us that expenses for these services have been increasing
annually. As a result, officials said the state used the maximum 10
percent of Recovery Act transit funds for this purpose.
Officials from Caltrans told us that they used 1.1 percent of their
Recovery Act funds for the operating expenses of their paratransit
program.[Footnote 81] They added that these expenses were already
allowable as capital expenses under both the Recovery Act as
originally enacted and the regular federal transit programs. Caltrans
officials told us that if they had the option to use transit funds for
public transportation operating expenses when the Recovery Act was
first enacted, they would have used the full 10 percent. However,
because California had already identified and requested that funds be
obligated for capital projects prior to when the option to use these
funds for operating expenses became available, they chose to adhere to
their initial plan rather than risk that the funds be deobligated and
applied for another purpose.
Transit officials from Illinois and New Jersey said their states chose
not to use Recovery Act funds for operating expenses. Illinois DOT
officials told us they decided early in the process to devote all
Recovery Act funds to capital projects, so that the use of these funds
was evident to the public. Illinois also chose to use state funds to
cover all administrative expenses related to managing Recovery Act
funds both to ensure maximum impact on capital projects and minimize
paperwork needed to clear administrative charges for payments. New
Jersey Transit officials told us they used Recovery Act funds for
preventive maintenance--such as bus mechanical maintenance--which they
said was considered a capital expense but did not produce new
infrastructure. Officials noted that this reduced pressure on the
transit agency's budget, which freed up state funds for operating
expenses.
As we reported in May 2010, a portion of the highway money that was
transferred was not obligated by the Recovery Act's March 2010 1-year
obligation deadline for highways and transit. We noted that the U.S.
Department of Transportation (DOT) did not treat these funds as
subject to the Recovery Act obligation deadline for either FHWA or FTA
because it concluded that once Recovery Act highway funds were
transferred to FTA, they were subject to the provisions of the law
that apply generally to the transfer of highway funds to FTA. At the
time, we expressed no opinion on DOT's determination but stated that
we were exploring this issue further.[Footnote 82] On further review,
we have no objection to DOT's interpretation of the applicability of
the Recovery Act's 1-year obligation deadlines.[Footnote 83]
Impact of Transportation Funds:
Obligation and Reimbursement of Regular FHWA Formula Funds Slowed
during the Recovery Act, Raising Questions about Whether Recovery Act
Funds Had the Full Economic Stimulative Effect Intended:
While states have been working to have FHWA obligate funds for
constructing Recovery Act projects, we found that, compared with
previous years, many states were slower in obligating and expending
regular federal highway formula funds. FHWA officials stated that with
the emphasis placed on the economic benefits to be gained, the
obligation of Recovery Act funds and meeting the act's statutory
deadlines have taken priority. States are facing drastic fiscal
conditions, and FHWA officials noted economic and budget difficulties
in many states have led to staffing shortages. FHWA officials also
suggested that uncertainty about future program funding levels may
have slowed spending because a long-term reauthorization of federal
programs has not yet been enacted.
Nationally, as of June 30, 2010 (the end of the third quarter of the
fiscal year), states had $19.7 billion remaining to be obligated, 63
percent more funds than they did at the same time for the 3 previous
years[Footnote 84] (see figure 21).
Figure 21: Regular Federal Highway Formula Funds Nationwide Remaining
to Be Obligated at the End of the Third Quarter of Fiscal Year 2010:
[Refer to PDF for image: line graph]
Fiscal year: 2007;
Funds remaining to be obligated: $10.5 billion.
Fiscal year: 2008;
Funds remaining to be obligated: $11.9 billion.
Fiscal year: 2009;
Funds remaining to be obligated: $13.8 billion.
Fiscal year: 2010;
Funds remaining to be obligated: $19.7 billion.
Source: GAO analysis of FHWA data.
[End of figure]
In addition, while funding available to states for highways has
increased in each of the last 3 fiscal years, we found that as of July
31, 2010, the reimbursement of regular federal highway formula program
funds were lower compared with the reimbursement at the same point in
the 3 previous fiscal years (see figure 22).
Figure 22: Regular Federal Aid Highway Funds Reimbursed Nationwide at
End of the Third Quarter for Fiscal Years 2007 through 2010:
[Refer to PDF for image: line graph]
Fiscal year: 2007;
Funds reimbursed: $22.6 billion.
Fiscal year: 2008;
Funds reimbursed: $23.7 billion.
Fiscal year: 2009;
Funds reimbursed: $24.7 billion.
Fiscal year: 2010;
Funds reimbursed: $19.4 billion.
Source: GAO analysis of FHWA data.
[End of figure]
As Figure 23 shows, this trend was also true on a monthly average
basis. Specifically, the reimbursement of regular federal highway
formula funds for the first 10 months of fiscal year 2010 has been
almost 18 percent (or about $4.3 billion) less than the average
reimbursement in the previous 3 fiscal years.
Figure 23: Nationwide Monthly Reimbursement of Federal Highway Formula
Funds for Fiscal Year 2010 and the Average for Fiscal Years 2007-009:
[Refer to PDF for image: multiple line graph]
Month: October;
Average regular highway funds 2007-2009: $3.15 billion;
Regular highway funds 2010: $2.95 billion.
Month: November;
Average regular highway funds 2007-2009: $2.52 billion;
Regular highway funds 2010: $1.85 billion.
Month: December;
Average regular highway funds 2007-2009: $2.30 billion;
Regular highway funds 2010: $2.09 billion.
Month: January;
Average regular highway funds 2007-2009: $1.75 billion;
Regular highway funds 2010: $1.34 billion.
Month: February;
Average regular highway funds 2007-2009: $1.64 billion;
Regular highway funds 2010: $1.33 billion.
Month: March;
Average regular highway funds 2007-2009: $1.86 billion;
Regular highway funds 2010: $1.38 billion.
Month: April;
Average regular highway funds 2007-2009: $1.92 billion;
Regular highway funds 2010: $1.42 billion.
Month: May;
Average regular highway funds 2007-2009: $2.51 billion;
Regular highway funds 2010: $1.88 billion.
Month: June;
Average regular highway funds 2007-2009: $2.89 billion;
Regular highway funds 2010: $2.39 billion.
Month: July;
Average regular highway funds 2007-2009: $3.15 billion;
Regular highway funds 2010: $2.75 billion.
Month: August;
Average regular highway funds 2007-2009: $3.15 billion.
Month: September;
Average regular highway funds 2007-2009: $2.88 billion.
Source: GAO analysis of FHWA data.
[End of figure]
In the last 3 months of fiscal year 2010, state highway agencies not
only have to request FHWA obligate over $500 million in remaining
Recovery Act funds, but also $19.7 billion of regular federal highway
formula funds. The amount of unobligated regular federal highway
formula funds varied among states. For example, Illinois had none as
of June 30, 2010, while Utah had $178.4 million--almost 6 times as
much compared with its average balance of unobligated funds over the 3
previous years. Nationally, we found 16 states with over twice the
amount of unobligated funds, while 5 states had fewer unobligated
funds than in the past. Some state officials told us they had not been
obligating regular federal highway formula funds as quickly because
they had been focusing on meeting the Recovery Act obligation
deadlines and did not have the resources to do both.[Footnote 85]
Because states did not spend regular federal highway formula funds at
the same pace as in previous years, while also spending Recovery Act
funds, the full economic benefits of Recovery Act funds are likely to
be delayed. Specifically, if states had awarded contracts and begun
expending those regular federal highway formula funds at the same rate
as in previous years and in conjunction with spending Recovery Act
funds, states would have experienced an earlier stimulus effect.
[Footnote 86] Funding being obligated now for projects will need up to
several months to award contracts and initiate construction, and the
effect on the economy comes when construction is initiated and workers
are employed.
FHWA officials said they expect all regular program funds to be
obligated by the end of the fiscal year. To ensure that all authorized
funds are obligated nationally each year, FHWA redistributes
obligation authority from states that are not able to obligate their
funds to other states that are. Despite projects being obligated at a
slower rate than in previous years, in August 2010, when we completed
our review, the 16 states and the District all reported to FHWA that
they would fully obligate fiscal year 2010 highway formula funds. We
will continue to monitor the relationship of obligations and
reimbursements in both the regular federal highway formula program and
Recovery Act in future reviews.
DOT Is Developing Plans to Assess the Impact of the Recovery Act but
Has Not Committed to Assessing Long-Term Benefits:
The goals of the Recovery Act were not only to promote economic
recovery and to preserve and create jobs but also to make investments
in transportation and other infrastructure that would provide long-
term economic benefits. However, the Recovery Act did not include
requirements that DOT or states measure the impact of funding on
highway and transit projects to assess whether these projects
ultimately produced long-term benefits. In our May 2010 report, we
noted that, although DOT developed performance plans to measure the
impact of Recovery Act transportation programs, these plans generally
did not contain an extensive discussion of specific goals and measures
needed to assess the impact of Recovery Act projects. As we have
reported, it is important for organizations to measure performance to
understand the progress they are making toward their goals.[Footnote
87] In our May 2010 report, we noted several efforts DOT initiated to
strengthen its capacity to assess the impact of Recovery Act funds.
For example, DOT is exploring opportunities to link databases that
stored information about road smoothness and congestion, bridge
structural sufficiency, and transit performance with financial data.
Our May report recommended that DOT assess the results of Recovery Act
transportation investments and determine whether these investments
produced long-term benefits. We further recommended that, in the near
term, DOT determine the types of data and performance measures needed
to conduct such an assessment and, as appropriate, identify specific
authority DOT may need to collect and report on these measures. In its
response, DOT noted that it expected to be able to report on Recovery
Act outputs, such as the miles of road paved, bridges repaired, and
transit vehicles purchased, but not on outcomes, such as reductions in
travel time, nor did it commit to assessing whether transportation
investments produced long-term benefits. DOT further explained that
limitations in its data systems, coupled with the magnitude of
Recovery Act funds relative to the overall annual federal investment
in transportation, would make assessing the benefits of Recovery Act
funds difficult. DOT indicated that, with these limitations in mind,
it is examining its existing data availability and, as necessary,
would seek additional data collection authority from Congress if it
became apparent that such authority were needed. While we are
encouraged that DOT plans to take some steps to assess its data needs,
it has not committed to assessing the long-term benefits of Recovery
Act investments in transportation infrastructure. We are therefore
keeping our recommendation on this matter open.
DOT Plans to Report on State Progress in Meeting Maintenance-of-Effort
Provisions:
As we have previously reported, timely information on the progress
states are making in meeting the Recovery Act maintenance-of-effort
provisions could better inform policymakers' decisions on the
usefulness and effectiveness of the maintenance-of-effort requirements
and of including similar provisions in future legislation. The
Recovery Act required governors to certify that their states will
maintain the level of spending for the types of transportation
projects funded by the Recovery Act that it planned to spend the day
the Recovery Act was enacted. As part of this certification, the
governor of each state was required to identify the amount of state
funds planned to be spent from February 17, 2009, through September
30, 2010.[Footnote 88] Timely information is also important to
assessing the impact of Recovery Act funding and whether it achieves
its intended effects of providing countercyclical assistance and
increasing overall spending.
Our earlier reports have noted that DOT does not have current
information on the progress states are making toward meeting their
certified amounts. This is because the Recovery Act does not require
states to report final expenditures until February 2011. As a result,
DOT will not make a determination as to whether states have met their
required program expenditures until some 6 months after the
maintenance-of-effort provision time period expires on September 30,
2010. We have also reported that the challenges to implementing a
maintenance-of-effort provision have been tremendous--as of mid-August
2010, for example, DOT had not yet fully accepted the certifications
of three states.[Footnote 89] As we have reported, these
implementation challenges, coupled with the fiscal challenges states
have faced, raise questions as to whether the maintenance-of-effort
provision will achieve its intended purpose of preventing states from
substituting federal funds for some of their planned spending on
transportation programs. That said, DOT and FHWA have invested a
significant amount of time and work to ensure consistency across
states on how compliance with the act is certified and reported. As a
result, DOT is in an advantageous position to understand lessons
learned--what worked, what did not, and what could be improved in the
future.
Our March 2010 report recommended that DOT gather timely information
on the progress states are making in meeting the maintenance-of-effort
requirements.[Footnote 90] Specifically, we recommended that DOT
gather these data and report preliminary information to Congress
within 60 days of the maintenance-of-effort period on (1) whether
states met required program expenditures as outlined in their
maintenance-of-effort certifications; (2) the reasons that states did
not meet these certified levels, if applicable; and (3) lessons
learned from the process. In response, DOT officials stated that DOT
will encourage states to report preliminary data for the certified
period ending September 30, 2010, and deliver a preliminary report to
Congress within 60 days of the certified period. DOT officials said
they have developed a timeline for obtaining information to produce
this report and will issue guidance by October 1, 2010, requesting
that states update actual aggregate expenditure data and provide the
data to DOT by November 15, 2010. DOT officials said they will use
this information to develop the report to Congress, and it will submit
the report no later than November 30, 2010.
Publicly Available Information Continues to Overstate the Extent to
Which Recovery Act Funds Were Directed to Economically Distressed Areas:
Our previous reports have identified challenges DOT faced in
implementing the Recovery Act requirement that states give priority to
projects located in economically distressed areas.[Footnote 91] In
July 2009, we reported substantial variation in the extent to which
states prioritized projects in economically distressed areas and how
they identified these areas. Many states based their project
selections on other factors and only later identified whether these
projects were in economically distressed areas. We also found
instances of states developing their own eligibility requirements for
economically distressed areas using data or criteria not specified in
the Public Works and Economic Development Act of 1965, as amended. In
response to our recommendation, FHWA, in consultation with the
Department of Commerce, issued guidance to the states in August 2009
that defined "priority," and directed states to give priority to
projects that were located in an economically distressed area and
could be completed within the 3-year time frame over other projects.
In addition, FHWA's guidance set out criteria for states to use to
identify economically distressed areas based on "special need."
Three states--Arizona, California, and Illinois--developed their own
eligibility requirements or applied a special-need criterion that
overstated the number of counties, and thus the amount of funds,
directed to economically distressed areas. For example, California
designated all counties as economically distressed, and we identified
219 projects with an estimated cost of $1.1 billion coded as being in
economically distressed areas that should not have been so coded. In
early February 2010, FHWA determined the documentation these states
provided to justify these additional designations was not consistent
with FHWA guidance.[Footnote 92] In May 2010, we recommended that FHWA
advise these states to correct the designations, and in July 2010,
FHWA instructed its division offices to advise the states to revise
their designations and to report these projects as being in
noneconomically distressed areas.
In December 2009, DOT testified to the House Committee on
Transportation and Infrastructure that 57 percent of projects were in
economically distressed areas--including 99 percent and 100 percent of
Recovery Act highway funding in California and Arizona, respectively.
However, as we noted above, these data had not yet been corrected by
DOT and therefore overstated the amount of funding, and this testimony
is DOT's only public accounting of how states implemented this
provision of the Recovery Act. Because FHWA's July guidance did not
direct states other than Arizona, California, and Illinois to correct
existing entries, we reviewed RADS data on projects in economically
distressed areas. We found about 2,300 projects that did not appear to
meet FHWA's guidance for classifying projects in economically
distressed areas and thus appeared to contain errors that would result
in an overstating of the funds directed to these areas. For instance,
over 2,100 of these entries did not include an explanation justifying
the designation of an area as economically distressed. In response to
this information, DOT officials told us that they manually compared
these entries with maps designating distressed area and other data
sources. When we completed our review, FHWA officials said they were
able to verify that most of these data were accurate; however, they
did not provide documentation of the analysis to us. DOT stated it
does not intend to correct this information because the Recovery Act
does not contain a specific requirement that DOT report on the extent
to which distressed areas prioritized and directed funds to
economically distressed areas. However, without accurate publicly
available information, it is difficult to determine the extent to
which Recovery Act funds were directed to areas most severely impacted
by the recession or to know the extent to which states prioritized
these areas in selecting projects for funding.
Although Recovery Act Provisions Do Not All Contain Reporting
Requirements, Additional Reporting Would Help Decision Makers and the
Public Better Understand If Its Goals Were Met:
The Recovery Act included a number of requirements and provisions
designed to support the Act's goals of promoting economic recovery,
creating jobs, and, in the case of transportation funds, making
investments that contribute to long-term economic benefits. Although
the Act included some reporting requirements to accompany these
provisions, it did not specify such requirements in all cases. Noting
the large amount of federal transportation funding provided in the
Recovery Act, we have previously made recommendations that DOT take
additional steps to go beyond the specific reporting requirements in
the Act, and that DOT develop plans to assess the long-term benefits
of Recovery Act funds on the transportation system. We have also made
recommendations that DOT improve and correct the data it is collecting
to better facilitate a public accounting of the use and impact of
these funds. For instance, we have recommended that DOT report on the
extent to which states met maintenance-of-effort requirements 60 days
after the end of the certification period.
In his March 2009 memorandum to the heads of executive departments and
agencies, the President emphasized the need for providing public
transparency and accountability of these expenditures. We are making
two new recommendations to DOT because of the value such information
can offer policy decision makers and the public to better understand
whether the use of Recovery Act funds met intended goals. We plan to
continue to monitor these issues in our future work.
Recommendations:
To ensure that Congress and the public have accurate information on
the extent to which the goals of the Recovery Act are being met, we
recommend that the Secretary of Transportation direct FHWA to take the
following two actions:
* Develop additional rules and data checks in the Recovery Act Data
System, so that these data will accurately identify contract
milestones such as award dates and amounts, and provide guidance to
states to revise existing contract data.
* Make publicly available--within 60 days after the September 30,
2010, obligation deadline--an accurate accounting and analysis of the
extent to which states directed funds to economically distressed
areas, including corrections to the data initially provided to
Congress in December 2009.
DOE and Grant Recipients Are Working to Overcome Challenges in
Spending, Monitoring, and Reporting Outcomes for New EECBG Program:
The Energy Efficiency and Conservation Block Grant program (EECBG) is
administered by the Office of Energy Efficiency and Renewable Energy
within the Department of Energy (DOE). It was authorized in the Energy
Independence and Security Act (EISA) of 2007[Footnote 93] and funded
for the first time by the Recovery Act. The EECBG program provides
about $3.2 billion in grants to develop, promote, implement, and
manage projects to improve energy efficiency and reduce energy use and
fossil fuel emissions in local communities. Of this amount,
approximately $2.8 billion has been allocated through formula grants
to about 2,150 state, local, and tribal governments (recipients) as of
August 23, 2010.[Footnote 94] Funding is allocated to state recipients
based on their population and total energy consumption; to city and
county recipients based on their resident and commuter populations;
and to Native American tribes based on population and climatic
conditions. Eligible applicants for formula EECBG grants include the
50 states; the District of Columbia (the District); five U.S.
territories; cities or city equivalents, such as towns or villages
with populations of at least 35,000; counties with populations of at
least 200,000; and federally recognized Native American tribes. Each
state-level recipient must use at least 60 percent of its allocation
to provide subgrants to local government units that are not eligible
for direct formula grants. In addition to these formula grants, the
Recovery Act also includes approximately $400 million in EECBG funding
to be awarded on a competitive basis. Competitive grants are designed
to stimulate activities that can fundamentally and permanently
transform energy markets and sustain themselves beyond the grant
period. Our review focuses on the direct formula grants.
DOE Has Obligated Most Funds to Grant Recipients, Who Have Obligated
about Half to Subrecipients; Overall Spending Rates Are at 11 Percent:
The Recovery Act requires that DOE obligate $2.8 billion in formula
EECBG funds by September 30, 2010. DOE has obligated most of the EECBG
funds to recipients and has plans to obligate the remainder by the
September 30 deadline. As of September 13, 2010, DOE has obligated to
recipients more than 99 percent of this amount--$2.77 billion. Nearly
all of the approximately 2,150 recipients nationwide--approximately
1,700 cities and counties, 56 states and territories, and 392 tribal
communities--have received EECBG funding, with about 68 percent
(approximately $1.9 billion) going to cities and counties, 28 percent
(approximately $767 million) to states, territories, and the District,
and 2 percent (approximately $55 million) to Native American tribes.
[Footnote 95] Steps are being taken to ensure that the remaining funds
will be obligated to recipients by the September 30 deadline, and the
DOE Inspector General has recently reported[Footnote 96] that there is
nothing to indicate that DOE's plan to obligate the remaining Recovery
Act funding by September 30 will not be effective.
DOE announced the opportunity for interested applicants to submit
applications for EECBG formula funding on March 26, 2009. As part of
the application process, interested states and local units of
government were required to submit an Energy Efficiency and
Conservation Strategy (EECS) that described their strategy for
achieving the goals of the program. DOE reviewed recipients' EECS and
had 120 days to approve or disapprove EECS strategies. DOE officials
report that as of July 2010, most recipients have had their EECS plans
approved and are now moving from the application to the execution
phase. Also, as of July 2010, DOE officials report that EECBG grant
recipients have obligated to subrecipients about half ($1.3 billion)
of the $2.8 billion awarded to recipients through formula grants.
While most recipients are moving to implement projects, recipients
awarded larger grant amounts have obligated about twice as much as
recipients awarded smaller grant amounts.[Footnote 97] As of July
2010, the 291 recipients receiving EECBG grants above $2 million have
obligated to subrecipients about half (approximately $1.1 billion) of
the $1.9 billion awarded to them by DOE through formula grants. The
remaining 1,860 or so smaller communities (communities with grants
less than $2 million) have obligated only about one-quarter of their
EECBG awards (approximately $0.2 billion) of the approximately $0.9
billion awarded to them by DOE through formula grants. To facilitate
increased obligations, DOE has encouraged recipients to meet targets
of obligating 90 percent or more of their funds by June 25, 2010.
Regarding spending, DOE reports that as of August 2010, about 18
months since the passage of the Recovery Act, recipients have spent
about 11 percent (approximately $311 million) of the $2.8 billion
authorized for formula funding for the program. Consistent with this,
many recipients we visited had spent less than 8 percent of the amount
awarded. While many recipients have spent only a small part of their
funding, DOE is taking steps to accelerate spending. For example, DOE
has encouraged recipients to meet a spending target of 20 percent by
September 30, 2010. DOE officials believe this has had a positive
impact on spending rates. In particular, DOE officials note that many
recipients receiving less than $250,000 met DOE's target of spending
20 percent as of June 30, 2010--3 months ahead of schedule. DOE
officials also note that while spending rates are at 11 percent, much
more of the funding is obligated and projects are in the process of
being selected and started. They note that the actual costing of the
funds for projects is one of the last steps in the process.
EECBG Funds Are to Be Used for a Variety of Energy-Efficient Projects;
the Majority of Funds Are Slated for Energy-Efficiency Retrofits,
Financial Incentive Programs, and Revolving Loan Funds:
DOE placed restrictions on the selection of projects in line with EISA
and the activities that funds are to be used for. DOE required that
projects be selected from the 14 eligible activities identified in
EISA. As of July 28, 2010, as shown in table 9, more than 60 percent
of EECBG funds have been obligated for three purposes: energy-
efficiency retrofits (35.3 percent), such as replacement of heating
and cooling systems in fire stations and libraries in the District;
[Footnote 98] financial incentive programs, such as the rebate program
in New Jersey that pays for energy-efficiency retrofits not already
covered by existing incentives (15.6 percent); and building and
facilities (11.1 percent), such as a geothermal system at a new
corrections facility. In many of the communities we visited, energy-
efficiency improvements were made to public buildings, but the types
of projects selected for implementation in public buildings and
facilities varied considerably. For example, projects included
improvements to a waste treatment plant, occupancy sensor lighting at
public schools, solar trash compactors to reduce the frequency of
trash pickup, solar parking meters, and replacement of personal
computer workstations with more energy-efficient virtual desktops that
reduce both power consumption and environmental waste.
Table 9: EECBG Activity Budgets as of July 28, 2010:
Activity: Energy-efficiency and conservation strategy;
Proposed budget: $171,912,214;
Percentage of total grant allocation: 6.1%.
Activity: Technical consultant services;
Proposed budget: $165,885,751;
Percentage of total grant allocation: 2.4%.
Activity: Residential and commercial buildings and audits;
Proposed budget: $163,927,754;
Percentage of total grant allocation: 2.3%.
Activity: Financial incentive program;
Proposed budget: $1424,609,187;
Percentage of total grant allocation: 15.2%.
Activity: Energy-efficiency retrofits;
Proposed budget: $1958,917,290;
Percentage of total grant allocation: 34.2%.
Activity: Buildings and facilities;
Proposed budget: $1300,729,561;
Percentage of total grant allocation: 10.7%.
Activity: Transportation;
Proposed budget: $1105,925,582;
Percentage of total grant allocation: 3.8%.
Activity: Codes and inspections;
Proposed budget: $119,292,035;
Percentage of total grant allocation: 0.7%.
Activity: Energy distribution;
Proposed budget: $140,516,778;
Percentage of total grant allocation: 1.4%.
Activity: Material conservation program;
Proposed budget: $130,114,903;
Percentage of total grant allocation: 1.1%.
Activity: Reduction/capture of methane/greenhouse gases;
Proposed budget: $127,091,837;
Percentage of total grant allocation: 1.0%.
Activity: Lighting;
Proposed budget: $1168,743,145;
Percentage of total grant allocation: 6.0%.
Activity: On-site renewable technology;
Proposed budget: $1156,970,165;
Percentage of total grant allocation: 5.6%.
Activity: Other;
Proposed budget: $1157,000,296;
Percentage of total grant allocation: 5.6%.
Activity: Additional funds yet to be categorized by recipients;
Proposed budget: $122,343,300;
Percentage of total grant allocation: 0.8%.
Activity: Competitive grant and administrative costs;
Proposed budget: $186,020,202;
Percentage of total grant allocation: 3.1%.
Activity: Total grant allocation;
Proposed budget: $2,800,000,000;
Percentage of total grant allocation: 100%[A].
Source: GAO analysis of DOE data.
[A] Percentages may not add due to rounding.
[End of table]
While not required, grant recipients were also encouraged to implement
programs and projects that leveraged other public or private
resources, enhanced workforce development, persisted beyond the
funding period, and promoted energy market transformation, such as
revolving loans and energy savings performance contracting.[Footnote
99] Recipients that we visited indicated that their selection of
projects was also based on a variety of additional criteria,
including: communities' determination of energy savings; job creation;
availability of staff and other resources; the extent to which
communities could benefit after Recovery Act funds run out; the ease
with which projects could be easily implemented; the potential for
return on savings; and populations to be served. For example, the
District chose to focus on target populations that they had been
unable to serve, such as nonprofits and small businesses. Kent County,
Michigan also considered the availability of county staff to complete
the project. Several recipients have selected projects that leverage
other state energy efficiency programs. For example, in Arizona, EECBG
funds were used to take advantage of a program that encourages
commercial and government customers to implement energy efficiency
projects for which a public utility will pay up to 30 percent of the
cost. In addition, a few of the recipients we visited had developed a
revolving loan fund to provide low-interest loans for energy-efficient
improvements in businesses and commercial buildings and facilities.
Unclear Guidance Has Hampered Project Implementation; DOE Is Taking
Steps to Provide Greater Assistance:
While many recipients we visited reported that technical assistance,
especially that provided by DOE project officers, was helpful, timely,
and sufficient, some recipients and DOE project officers we
interviewed reported that project implementation guidance, especially
early in the process, was unclear and overwhelming and that such
guidance has contributed to the delay of project implementation. In
particular, several recipients we visited indicated that DOE guidance
regarding timeline requirements, drawing down funds, and Buy American
requirements was at times unclear, duplicative, and ever-changing. DOE
is working to provide greater assistance to recipients that DOE
officials believe will increase responsiveness and clarify guidance.
In particular, DOE is adding staff in order to reduce the workload of
project officers and monitors to give them more time to assist
recipients. DOE also recently issued guidance that reduces reporting
requirements, reduces workloads, and streamlines communication with
recipients.
Regarding timeline requirements, grant recipients reported that DOE's
guidance on the timeline for obligating, spending, and drawing down
EECBG funds has been confusing. For example, DOE's Funding Opportunity
Announcement, as well as its Program Notice 10-011 for the EECBG
program, states that EECBG recipients are to obligate all funds within
18 months of the effective date of their award and expend all funds
within 36 months of the effective date of their award.[Footnote 100]
Most recipients had been awarded funding in the fall of 2009, and
several of the recipients we visited believed they were on track to
obligate funds within 18 months of the effective date of their award
(by the spring of 2011).[Footnote 101] However, in April 2010, DOE set
internal milestones designed to help recipients ensure that they are
on track to meeting their obligation and expenditure deadlines.
Specifically, DOE requested that recipients have 90 percent of their
funds under contract and obligated by June 25, 2010, and to spend a
minimum of 20 percent of their funds by September 30, 2010. While DOE
reports that some recipients found the guidance useful and that the
new guidance was helpful in getting many recipients to obligate funds
quickly, several recipients we visited said they were confused by this
new guidance. These recipients expressed concern that because of the
milestones, they had to obligate funds sooner than expected--instead
of having 18 months to obligate funds, they had to have funds
obligated in half the time--approximately 9 months after funds had
been awarded. In addition, National Association of State Energy
Officials (NASEO) representatives said that DOE had not made clear to
recipients that the revised timelines were "milestones" and not
deadlines and that several recipients had the impression that funds
could be taken away if recipients did not meet the revised spending
targets.
Regarding requirements on drawing down funds, while DOE reports that
many recipients found information on drawing down funds helpful, a few
recipients we visited were confused about when they needed to draw
down funds to their accounts.[Footnote 102] These recipients believed
that based on DOE guidance, they should draw down their entire award
soon after it was awarded. For example, Colorado Springs, Colorado,
officials reported that they drew down the entire $3.7 million award
as of March 2010 based on their understanding of the Funding
Opportunity Announcement, even though they were not yet ready to spend
it. In April, a Colorado Springs official realized the mistake, and
the city paid back $3.1 million in mid-May 2010. However, in Jackson
County, Michigan, local officials also mistakenly drew down their
award and told us that when they tried to return the money, DOE
required them to make interest payments on the amount. DOE issued
guidance on June 23, 2010, in response to recipient questions on
drawing down funds.
Regarding Buy American requirements, recipients report that guidance
on the Buy American requirement was difficult to understand and ever-
changing. The Buy American requirement of the act generally requires
that grant recipients use iron, steel, and manufactured goods produced
in the United States on all Recovery Act-funded projects. However,
some recipients found that it was unclear how to comply with the Buy
American requirements in a reasonable way and that the guidance was
lacking or difficult to understand. For example, Colorado Springs
officials said that DOE did not have a list of eligible vendors and
that trying to ensure compliance with the Buy American requirement
delayed their light emitting diode (LED) street lighting-replacement
projects by at least 4 months.[Footnote 103] For Berks County,
Pennsylvania, officials, it was difficult to determine the source of
some components of a product and therefore whether the product could
be used. NASEO representatives said that DOE's guidance did not
provide sufficient detail to enable officials to determine the types
of brands or goods they could purchase and that recipients did not
have the expertise to trace the supply chain of manufactured goods to
determine origin. In recent months, DOE has made numerous attempts to
help recipients understand Buy American requirements, including
guidance e-mailed to all recipients in May, a webinar in June, and
subsequent notice to recipients regarding the guidance. DOE officials
did note that they were concerned about providing lists of vendors
because that might be viewed as an endorsement of particular vendors
at the potential exclusion of other eligible vendors. DOE officials
said that DOE cannot recommend specific products, in part, due to the
large number of eligible products and because of the potential ethical
and liability concerns associated with a federal agency recommending
specific manufacturers.
While many recipients have not had problems understanding program
requirements and have successfully navigated requirements through
training and technical assistance provided by project officers, DOE is
working to give project officers the tools to better assist recipients
in navigating DOE guidance. In particular, since March and April 2010,
DOE has added staff in order to reduce the workload of project
officers and monitors, which DOE officials believe has increased its
responsiveness to recipients in clarifying guidance. In addition, as
of July 2010, DOE is providing project officers with the Automated
Standard Application for Payment (ASAP) reports, so that they can
monitor the drawdown of funds. DOE has also recently standardized e-
mail distribution lists and provided more frequent communication to
recipients.
DOE and States Are Beginning to Monitor Grants, as Many Localities
Rely on Existing Controls:
DOE monitors grant recipients primarily through its project officers
and monitors. DOE project officers and monitors work directly with
recipients to provide guidance and evaluate performance. They also
gather and analyze information about project planning, implementation,
and outcomes to help ensure data quality and to ensure that statutory
requirements are met. There are three levels of review: desktop, on-
site, and work-site reviews. During desktop monitoring, monitors
examine recipients' reports to assess progress and determine
compliance with federal rules and regulations, goals, and objectives
of the grants and the reporting and tracking of resources expended by
the recipient and its subrecipients. During on-site monitoring,
monitors review deficiencies identified through routine monitoring and
how the recipient is resolving the outstanding quality and operational
issues. On-site monitoring may also include interviews with
contractors to determine whether follow-up protocols were conducted
and deficiencies were corrected. During work-site monitoring, monitors
review the project, facility, or building being completed. One of the
project officers' key functions is to conduct both on-site and desktop
monitoring. DOE monitoring is conducted at minimum frequencies (see
table 10), depending on the funding received by the recipient, and can
be increased if project officers have sufficient cause, resources,
time, and approval of management. In these reviews, project officers
evaluate both financial and project status by evaluating financial
records, activities, budgets, and spending plans to ensure sufficient
progress is being made against planned activities. The monitoring
questions were updated on July 30, 2010, downsizing the number of
questions asked from over 100 to about 30 questions in on-site reviews
and about 6 multi-part questions in quarterly reviews. Now, the
desktop monitoring quarterly checklist consists of financial questions
such as "For each activity, does the expenditure match, within reason,
the amount of work completed?" and programmatic questions such as "For
each activity, is the grantee on track to meet performance goals?" DOE
is also developing guidance that includes best practices for how
states should monitor their subrecipients.
Table 10: DOE Requirements for Frequency of Monitoring:
Type of monitoring: Desktop reviews;
Localities receiving greater than $2 million: Monthly;
Localities receiving $1 million to $2 million: Quarterly;
Localities receiving $250,000 to $1 million: Quarterly;
Localities receiving less than $250,000: Quarterly.
Type of monitoring: On-site reviews;
Localities receiving greater than $2 million: 1-2 per year;
Localities receiving $1 million to $2 million: 1 in the life of the
grant;
Localities receiving $250,000 to $1 million: 1 in the life of the
grant for 25% of the grants;
Localities receiving less than $250,000: 1 in the life of the grant
for 10% of the grants.
Type of monitoring: Work-site reviews;
Localities receiving greater than $2 million: As needed;
Localities receiving $1 million to $2 million: As needed;
Localities receiving $250,000 to $1 million: As needed;
Localities receiving less than $250,000: As needed.
Source: DOE.
[End of table]
As of July 28, 2010, DOE has conducted 3,985 desktop reviews of the
EECBG program, and about 170 on-site reviews. Through its monitoring,
DOE has found that smaller recipients have been more likely to fail to
complete quarterly programmatic and financial reporting to DOE. While
97 percent of larger recipients (recipients with grants greater than
$2 million) have completed required quarterly reports due April 30,
only 79 percent of recipients receiving less than $250,000 completed
quarterly reports.
While DOE monitors its grant recipients (as well as conducts work-site
reviews of subrecipients as needed), grant recipients[Footnote 104]
are expected to monitor their subrecipients.[Footnote 105] While DOE
does not expect grant recipients to have a formal monitoring plan, DOE
does require that state recipients "develop a sub-granting process—
that prevents fraudulent spending"[Footnote 106] DOE is also
developing guidance that includes best practices for how states should
monitor their subrecipients. Several of the states we visited do have
a formal plan in place for monitoring their subrecipients. A few of
the states we visited have begun monitoring their subrecipients. For
example, Colorado reviews monthly reports prepared by subrecipients,
Michigan project managers review detailed expenditure and employment
data submitted by subrecipients on a quarterly basis, and
Massachusetts is beginning to monitor subrecipients through regular
interactions with subrecipients.
DOE also expects localities to have a system for monitoring to ensure
that subrecipients comply with EECBG requirements. However, for
localities that received direct funding, and as we also found in our
May 2010 report on DOE's Weatherization Assistance Program, DOE
provides localities with discretion in developing and implementing
internal controls, and as a result, several localities we visited did
not have a formal monitoring plan in place for monitoring
subrecipients or work performed.[Footnote 107] Many of the localities
we visited have developed a system for monitoring, which may include
monitoring procedures such as evaluation of the reasonableness of
costs, monitoring of building improvements and post-improvement
audits, checking payroll for compliance with Davis-Bacon requirements,
checking the validity of expenses, and announced and unannounced site
visits. However, despite guidance on how to report jobs, it is unclear
if all localities' systems for monitoring include measures to ensure
the reliability of reported data. For example, in one locality, an
official reported that there were no data quality steps to ensure the
reliability of the total job count. Another recipient said that it
requested greater clarification on what was expected from DOE
regarding internal controls but did not get more than a general answer
about providing good accountability for the use of funds.
Recipients Face Challenges as They Begin to Report Outcomes While DOE
Works to Provide Guidance:
EECBG recipients are required to report on outcomes quarterly to DOE
on three categories of activity and results metrics. The categories
are jobs created or retained; standard programmatic metrics, such as
obligations, outlays, and metrics associated with the EECBG activity
undertaken;[Footnote 108] and other critical metrics, such as energy
savings and energy cost savings. Recipients report to DOE through its
Performance and Accountability for Grants in Energy system (PAGE). In
addition, recipients of grants greater than $2 million must report to
DOE monthly on funds spent and funds obligated, amount of relevant
activity completed, and additional information as required per
activity. Several recipients we visited were reporting programmatic
metrics such as obligations, expenditures, and jobs created. In
addition, several recipients we visited were just beginning to
implement projects. However, DOE officials have told us that they are
not required to report until the completion of their projects. As a
result, several recipients do not yet have data to report for critical
outcome metrics such as energy savings and emissions reductions.
Some recipients we visited experienced challenges reporting outcomes
using these metrics. For example, in one locality, officials said that
they planned to estimate jobs because they do not have hourly
contracts. Similarly, in another locality, officials were not aware of
how to calculate full-time equivalents (FTE) per OMB guidance. In
addition, because they experienced challenges in measuring impact
metrics, recipients in Georgia have a variety of methods for
calculating a metric value. For example, officials from Columbus,
Georgia, stated that 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 improved traffic lights. A Warner
Robins, Georgia, official explained the city intends to report project
impacts by comparing past monthly utility bills for the water
treatment plant to new monthly utility bills. To measure the impact of
energy efficiency improvements, Cobb County, Georgia, 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 as well as 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, Georgia has
provided guidance from DOE to its subrecipients detailing instructions
on estimating and reporting energy savings.
In addition, some recipients experienced challenges in the process for
reporting metrics, especially due to DOE's reporting system, PAGE. DOE
provides resources to assist recipients in navigating the PAGE
reporting system on a Web site and offers assistance to recipients via
a helpdesk. However, several recipients described the reporting
process as overwhelming or frustrating and that reporting was time
consuming and required extensive resources. One DOE project official
said he would like to see the reporting process streamlined because it
is too complicated for recipients. An official from one EECBG locality
in California said that if he had known about the extent of the
reporting burden, he may not have applied for the grant. In
particular, some recipients said the PAGE reporting system was not
user-friendly, and others were confused about what to input into the
PAGE system. Similarly, one DOE project officer said that it seems
that every time recipients log in, there is a new structure or a new
report that is required to be filled out. Other grant recipients said
that using OMB's federalreporting.gov and DOE's PAGE system is
difficult because the systems ask for information to be reported in
different ways. In addition, some officials have reported challenges
in understanding for how many quarters they are required to report
some metrics, especially energy saved once a project has been
implemented.
Adding to recipients' frustration about the reporting process has been
the volume of contact from various DOE offices about reporting
requirements or changes in reporting requirements. For example, one
DOE project officer that we spoke with said that grant recipients have
expressed frustration at having received so much e-mail about guidance
or changes to guidance received from different DOE offices. In
addition, in Redding, California, officials initially expressed
frustration that questions about reporting guidance required calls to
several DOE staff to find the right person to answer their questions.
Kent County, Michigan, officials said that reporting has been
challenging because of the multiple guidance released and because
DOE's PAGE system was not user-friendly.
DOE is beginning to take steps to deal with the amount of guidance and
requirements being provided to recipients. DOE plans to issue guidance
in August 2010 to assist recipients in navigating the PAGE system, how
to correctly categorize metrics and how to interpret and understand
financial reporting requirements. In addition, DOE expects to issue
formal guidance for the reporting period ending August 30, 2010, in
which DOE will no longer require recipients with formula awards
greater than $2 million to report obligations and performance metrics
on a monthly basis. In addition, all recipients will no longer report
hours worked through nonfederal funds or outlays of nonfederal funds
on a quarterly basis. DOE estimates that these changes will increase
administrative reporting efficiency by approximately 40 percent across
the program. In addition, in June 2010, DOE began an effort called
"One Voice" that is intended to improve and streamline communication
with recipients. This effort will entail the circulation of a weekly
newsletter with announcements regarding guidance, training, and events
and will also include an effort to streamline communication via e-
mail. DOE is also working on developing specific requirements for
closing out EECBG grants that should clarify when recipients can stop
reporting, and a working group within DOE plans to clarify the energy
metrics reporting guidance.
Recipients of State Energy Program Funds Are Beginning to Obligate
Funds, Monitor, and Report on Project Outcomes:
The Recovery Act appropriated $3.1 billion to the State Energy Program
(SEP), which is to be administered by the Department of Energy (DOE)
and spent over a 3-year period by the states, U.S. territories, and
the District of Columbia (the District) for 56 recipients.[Footnote
109] The SEP provides funds through formula grants to achieve national
energy goals such as increasing energy efficiency and decreasing
energy costs. Created in 1996, the SEP has typically received less
than $50 million per year. As such, the Recovery Act provided a
substantial increase in funding for this program.
Recipients Are Making Progress Obligating Recovery Act Funds:
Recipients are making progress obligating SEP funds, according to
August 30, 2010, data from DOE. As of August 30, 27 states,
territories, and the District of Columbia reported obligating at least
80 percent of their funds, meeting a departmental goal, with another
24 states and territories reporting obligating between 50 percent and
80 percent of their funds. Some states and territories continued to
lag in obligating funds--5 states and territories reported obligating
less than 50 percent of their funds.
Currently, a limited amount of national data is available on planned
or actual state spending trends. DOE officials noted that they would
not have final aggregate national spending data until the funds are
fully obligated by recipients in late 2010. Until that time, funding
may still shift among spending categories. The data provide
information on different spending categories that have been
recommended by DOE to recipients. The most recent data available in
August 2010 indicated that the funds were directed to the following:
* buildings (50 percent)--programs such as school and government
improvements, energy-efficiency building code adoption and training,
and revolving loan programs.
* electric power and renewable energy (30 percent)--examples include
wind turbine deployment, ground source heat pumps, and solar generation.
* industry (8 percent)--programs such as those for energy audits,
waste reduction management, water conservation, and manufacturing
energy efficiencies.
* policy, planning, and energy security (4 percent), which includes
programs such as developing state energy strategic plans, energy
policy development, and legislative initiatives.
* transportation (4 percent), which includes programs related to mass
transit use, bike to work, telecommuting, and street light replacement.
* energy education (3 percent)--specific programs include those such
as curricula development and K-12 education, training workshops, and
technical and college course development.[Footnote 110]
* Recipients Are Targeting Recovery Act Funds on a Variety of
Different Projects:
Nationally, as of August 25, 2010, approximately 75 percent ($2.31
billion) of funds have been obligated by recipients and 10.8 percent
($332 million) have been spent, out of the total $3.07 billion in SEP
funds available for grants. Individually, state recipients have
reported targeting funds to meet Recovery Act goals such as creating
or retaining jobs while also generating-long term benefits such as
energy and cost savings. Recipients have prioritized their spending
priorities differently:
* California allocated the largest portion of its $226 million in
total funds--$110 million--to improve various types of facilities,
including residential, municipal, and commercial buildings.
* New York allocated the largest portion of its $123 million in funds--
$74 million--for energy conservation projects: energy efficiency,
renewable energy, and clean fleets.
* Pennsylvania targeted the largest share of its $99.7 million in
funds--$22.8 million--to help leverage private investments from wind
energy developers and manufacturers to develop projects through a
state wind initiative.
Recipients Are Uncertain of DOE Funding Milestones and Deadlines:
Though recipients are making progress meeting DOE funding goals, state
energy officials noted uncertainty with meeting changing DOE
obligation timetables. For example, in the initial funding
announcement sent by DOE on April 24, 2009, DOE stated that funds must
be obligated by recipients within 18 months of the award of the grant
or face potential cancellation by DOE and spent within 36 months.
However, the same guidance also indicates that 100 percent of funds
must be obligated by September 30, 2010, to meet departmental and
congressional goals. State energy officials noted that DOE later
provided an updated correspondence on April 21, 2010, informing states
that they were encouraged to obligate 80 percent of their funds by
June 30, 2010, and spend 20 percent by September 30, 2010. DOE
officials stated that the June 30 date was meant to help keep states
on track to meet the September 30 goal. In many cases, however, states
interpreted these dates as new deadlines and were concerned that they
would lose access to funds partly because they had experienced
pressure from both the administration and the department to meet these
new funding milestones. DOE officials stated that they would be unable
to deobligate the funds from states if the funding milestones were not
met but also stated that they did not know whether funds could be
reappropriated if states are unable to obligate those funds by
September 30, 2010, as policy guidance has not been provided by the
administration and Congress. We have previously reported that DOE has
provided unclear funding deadlines for the Recovery Act weatherization
program, creating confusion among state recipients trying to meet DOE
Recovery Act deadlines.[Footnote 111]
Lack of Guidance and Other Obstacles Hampered Obligating and Spending
Funds:
State energy officials told us that delays by DOE in providing
guidance hampered early obligating and spending on Recovery Act
projects. For example, both Iowa and New York state energy officials
noted that they waited for DOE to provide guidance before moving
forward on projects. Additionally, other state energy officials we
spoke with through the National Association of State Energy Officials
(NASEO) stated that while DOE guidance has significantly improved, it
was not always timely or complete for issues such as the Recovery
Act's Buy American and Davis-Bacon requirements. For example,
similarly to the problems noted by EECBG funding recipients, several
state energy officials said that while DOE provided broad guidance for
meeting Buy American requirements, this guidance did not provide
sufficient detail that would enable officials to determine the types
of brands or types of goods they could or could not purchase. DOE
officials stated that DOE is not capable of recommending specific
products requested by recipients partly because of the large number of
products requested. Further, DOE officials stated that there were
potential ethical and liability concerns associated with a federal
agency recommending specific manufacturers.
While the state officials stated that they did ask DOE for further
advice, the response was not always timely. As an example, several
state energy officials described one Recovery Act project that was
held up several weeks in order to determine if energy-efficient lights
purchased for the project met Buy American requirements. States
further encountered challenges with meeting National Environmental
Policy Act (NEPA) and National Historic Preservation Act policies. DOE
officials acknowledged that NEPA requirements had added significant
time to the process but stated that progress had been made through the
use of categorical exclusions for projects.[Footnote 112] As of August
23, 2010, 87 percent ($2.65 billion) of all SEP Recovery Act-funded
projects have been granted categorical exclusions, and 75 percent
($2.31 billion) of funds have been obligated to subrecipients for
specific activities. Pennsylvania officials noted that National
Historic Preservation Act requirements had slowed some projects but
that the situation has improved through an agreement set up between
DOE and the state historic preservation offices. While DOE officials
have acknowledged they initially lacked the infrastructure necessary
for rapid implementation of a SEP, they noted that DOE has made
significant improvements in the level of guidance provided to
recipients. For example, DOE has developed a Web site to provide
information and guidance for recipients to comply with the Buy
American requirements.[Footnote 113] DOE officials further stated that
in addition to their guidance, states can also contact their DOE
project officer for assistance on meeting Recovery Act and program
requirements and deadlines. Overall, state energy officials spoke
positively about their project officers, though DOE has only recently
filled many of these positions.
Several state energy officials also noted that other obstacles such as
the lack of energy management staff has made it more difficult to
administer SEP projects. Specifically, District officials stated it
was difficult to hire highly qualified people because potential staff
did not want to leave a current permanent position for a temporary
Recovery Act position that might only last 2 years. Similarly, Iowa
officials noted that their efforts were hindered by the loss of two
key staff in 2010 and that they did not want to hire staff for a
limited duration. Additionally, California's state auditor reported in
December 2009 that the state was not prepared to administer Recovery
Act funds for the SEP and listed insufficient staffing as one cause
for the lack of preparedness. The report also indicated that the lack
of preparedness raised the potential for misuse of Recovery Act funds.
[Footnote 114] California officials stated that following the state
auditor's report, they have since taken actions to address inadequate
staffing through the hiring of additional contractors.
Tracking of Recovery Act Spending for SEP Can Take Place Significantly
after the Funds Have Been Obligated:
Both state recipients and DOE reported that the final reporting of
spending of state energy funds can take place significantly after the
funds have been obligated and work has begun. For example, District
officials told us that school improvements were scheduled for late
June, but the funds would not be reported as spent until significantly
later because the contractor would not be paid until the work was
completed. District officials also noted there would also be an
additional delay in reporting the final outlay because the work was
being conducted though a sister agency. Pennsylvania officials also
reported delays between the time work was performed and the final
spending was reported. State officials told us that they reimburse SEP
subrecipients on a cost reimbursement system, after work is completed
and invoices and proof of payment have been submitted, reviewed, and
approved. District and Pennsylvania officials both said that
reimbursing costs only after work is completed helps to ensure that
the funds are spent appropriately. DOE officials stated that they have
tried to increase the speed at which invoices have been paid to better
demonstrate the timely use of Recovery Act funds. For example, through
program guidance, DOE has encouraged states to pay contractors after
specific work milestones have been achieved rather than after the
project has been completed.
DOE Is Beginning to Monitor Recovery Act Recipient Spending:
DOE officials stated that they are currently on track to meet their
monitoring goals. The SEP Recovery Act Monitoring Plan developed by
DOE calls for each recipient to be visited twice a year. DOE officials
stated that the plan provides guidance for various classes of enhanced
monitoring and visitation, but leaves it to the discretion of the DOE
field office to plan these trips. DOE state project officers give
priority, on a case by case basis, to recipients facing special
challenges. The frequency of monitoring may be increased if prior
monitoring reports uncovered significant deficiencies in how a
recipient is administering and managing its program. Visits to
recipients with low obligation or expenditure rates are focused on
providing technical assistance to help increase the rates. Overall,
DOE officials stated that on-site monitoring will increase as payments
grow larger.
DOE also conducts on-site monitoring visits at the subrecipient--local
agency--level. DOE's target is to conduct on-site monitoring of about
10 percent of all subrecipients nationwide. However, if the risks to
the particular state are higher, then the state would be given closer
attention by DOE staff for potential assistance. While DOE does
conduct some on-site monitoring of subrecipients, the officials
clarified that the main monitoring relationship is between the state
recipient, the state energy official, and the DOE project officer. DOE
officials stated that they view state recipient monitoring as DOE's
main responsibility.
DOE reported that it is on track to meet its monitoring goals:
* As of late June 2010, DOE staffed a total of 29 project officers to
56 recipients, exceeding its goals of one officer per two recipients.
Though meeting their goal, DOE officials noted that 12 of these
officers had been hired in the past 6 weeks.
* By the end of September 2010, DOE anticipates that all 56 recipients
will have received the first of their required annual site visits,
with the second follow-up site visit to be performed by the end of the
calendar year. In addition to on-site monitoring of the states,
project officers are also required to visit between 5 percent and 10
percent of all subrecipients each year.
* To date, DOE has not determined any projects that are "at variance,"
indicating a high risk for funding misuse.
DOE officials noted that the primary monitoring challenge facing
project officers and state recipients during desktop and on-site
visits is gathering the quantity of information and other process
indicators needed for compliance certification by the project officer.
DOE officials stated that assistance from the field offices, the
technical assistance provider network, and best practices from the
state's own NASEO peer organization are helping to address this
situation to assist states in developing effective documentation in a
timely manner.
Recipient Monitoring Practices Vary, and Some Recipients Are Just
Starting Recovery Act Projects:
Planned state recipient monitoring practices vary, and some recipients
are just beginning their monitoring activities because they are just
starting projects. For example, District officials plan to monitor
projects via video and desk monitoring but noted that they have not
yet started monitoring in the field. Planned monitoring will focus on
ensuring that the work being done is consistent with the agreed-upon
scope of work. Additionally, District officials have developed
monitoring procedures that will include monitoring checklists of
programmatic and financial questions, desktop monitoring, and
financial monitoring by the District SEP/Recovery Act financial
Officer. Pennsylvania has also developed monitoring procedures;
project advisers from state regional offices are assigned to each SEP
project and, using an inspection form, conduct initial and final
inspections of projects and are encouraged to perform other
inspections as needed. Project advisers also communicate on a weekly
basis with SEP recipients and update project status in the agency's
reporting system.
Some state recipients in our review are also using independent
contractors to aid in grant monitoring at varying levels. For example,
Colorado, California, and New York all reported hiring outside
contractors to supplement their monitoring activities. Colorado hired
an outside firm to manage its rebate program for appliances, energy-
efficient measures, and renewable-energy systems, citing a need for
expertise to handle the large growth in the program due to the
addition of Recovery Act funds. Additionally, Colorado also recently
issued a Request for Proposal for measurement and verification
activities for its grant funds. Due to the significant increase in the
size of Colorado energy programs, Colorado officials determined that
oversight by state program managers alone is no longer sufficient.
California officials set aside $6 million of its $226 million grant to
hire contractors to provide, among other things, monitoring,
verification, and audit support.
Though still in their early stages of oversight, some state energy
officials have noted monitoring challenges. For example, Arizona
officials noted that some rural grant recipients were more challenging
to monitor due to their remote location. Additionally, Colorado
officials told us that detecting fraud in rebate programs is difficult
and that while the contractor administering the program has procedures
in place to detect fraudulent rebate claims, it is not possible to
ensure that 100 percent of the claims will be legitimate. Colorado
officials further noted that there was not a clear standard for how to
monitor certain programs such as rebate programs. DOE officials have
acknowledged that grant programs such as revolving loan programs can
require special skill sets to monitor and reported that they are
taking steps to provide recipients with technical resources by early
September 2010.
DOE and Recipients Have Reported Challenges in Meeting Recovery Act
Outcome Reporting Requirements:
DOE officials stated that recipients have experienced challenges with
meeting Recovery Act reporting requirements. Similar to EECBG, DOE
requires monthly and quarterly reporting by SEP recipients to DOE. DOE
officials stated that many state recipients have as many as 17
different Recovery Act programs and must coordinate with many
different state agencies to fulfill their reporting requirements. In
turn, state agencies must also coordinate with local agencies. The
officials said that they faced the problem of balancing state and DOE
needs with collecting information; asking states to collect too much
information would be overly burdensome, while collecting insufficient
information would not allow states or DOE to track long-term outcomes.
To help decrease the administrative burden of reporting, DOE decreased
both its monthly and quarterly reporting requirements effective for
the August 30, 2010, reporting deadline. The changes will decrease the
amount of job, performance, and funding information reporting required
and will help states focus on expending Recovery Act funds.
Both DOE and state energy officials have noted that reporting on
outcome measures has been limited because SEP Recovery Act projects
are in their early stages. For example, DOE officials stated that SEP
recipients first had to report quarterly beginning in January 2010 but
that the early reports by recipients did not include many critical
metrics, such as total energy saved and dollars savings. DOE officials
further stated that because outcomes such as total energy cost savings
take time to achieve, and because the state energy offices were still
in the initiation phases earlier in 2010, there are few outcomes to
report. State officials have also noted that outcome data are
currently limited due to the early stage of SEP Recovery Act projects.
For example, District energy officials noted that they won't have data
on calculating energy savings until projects are complete.
Specifically, the District plans to report on energy savings and
greenhouse gas emissions by calculating the building square footage,
pre-and post-installation utility bills, as well as the energy-savings
measures installed and the dollars spent. On-site monitoring will be
an important part of the verification process.
State energy officials have indicated difficulties with reporting
information into DOE's primary reporting system, PAGE. For example,
Iowa noted that PAGE was not compatible with their existing grant
management system or other federal reporting systems, which meant that
data had to be input twice. DOE's Inspector General also described
significant issues with PAGE in a recent report.[Footnote 115] Along
with other concerns, the report indicated that DOE officials "did not
seek input from grant recipients--the system's external users--related
to the design of PAGE due to the limited time before the system had to
be operational." To assist states with reporting, a NASEO official
stated that DOE has asked NASEO to work with each recipient to
complete the submissions through PAGE. Additionally, DOE officials
stated that the contractor that developed PAGE is providing additional
assistance and feedback to the recipients on data entry issues.
DOE's 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
(District), all five territories, and two Indian tribes. According to
DOE, during the past 33 years, weatherization has helped more than 6.4
million low-income families by making long-term energy-efficiency
improvements to their homes such as installing insulation; sealing
leaks; and modernizing heating equipment, air circulation fans, and
air conditioning equipment. These improvements enable families to
reduce energy bills, allowing them to spend their money on more
pressing needs. The Recovery Act appropriation represents a
significant increase for a program that has received about $225
million per year in recent years.
During 2009, DOE obligated about $4.73 billion of the Recovery Act's
weatherization funding to the states, territories, and tribes, while
retaining about 5 percent of funds to cover the department's expenses.
Initially, DOE provided each recipient with the first 10 percent of
its allocated funds, which could be used for start-up activities such
as hiring and training staff, purchasing needed equipment, and
performing energy audits of homes, among other things.[Footnote 116]
Before recipients could receive the next 40 percent of their funds,
DOE required each to submit a weatherization plan outlining how it
would use its Recovery Act weatherization funds. These plans
identified the number of homes to be weatherized and included
strategies for monitoring and measuring performance. By the end of
2009, DOE had approved the weatherization plans of all 58 recipients
and had provided all recipients with half of their weatherization
funds under the Recovery Act.[Footnote 117] According to DOE
officials, as of June 30, 2010, about 166,000 homes have been
weatherized nationwide, or about 29 percent of the approximately
570,000 homes currently planned for weatherization. To release the
remaining 50 percent of funds, 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. Recovery Act funds are available for
obligation by DOE until September 30, 2010, and DOE has indicated that
the recipients are to spend their Recovery Act weatherization funds by
March 31, 2012.
Recipients' Access to Recovery Act Funding for Weatherization Varies
Due to Uneven Progress in Meeting DOE's Requirements:
Recipients' ability to access all of their Recovery Act weatherization
funding by meeting DOE's requirements varies considerably. DOE records
indicate that as of June 30, 2010, 29 states had weatherized at least
30 percent of their total planned units. As of August 2010, DOE
reported it had released the remaining 50 percent of funds to 22
states that had met the other requirements.[Footnote 118] Of the 7
states and the District in our review for the Recovery Act
weatherization program, two states, Iowa and Arizona, have been
granted access to their remaining 50 percent.[Footnote 119] In Iowa,
DOE released about $40.4 million after the state reported its
completion of weatherizing 2,179 homes--more than 30 percent of its
target of 7,196 homes. Similarly, in Arizona, officials reported the
state had weatherized 1,930 homes, about 30 percent of its 6,414 total
estimated homes, and gained access to the remaining $28.5 million.
Additionally, other states, such as California and Florida, are close
to meeting their 30 percent production targets. Despite a delayed
start in spending Recovery Act funds, California reported weatherizing
8,679 homes out of its total estimated production target of 43,150
units as of June 30, 2010. Similarly, Florida officials reported a
total of 3,878 single-family residences had been weatherized, or about
20 percent of the total 19,090.[Footnote 120] Furthermore, both
California and Florida officials report they are on track to
weatherize 30 percent of their total estimated units by September 30,
2010.
Some recipients that we found to be behind schedule in our May 2010
report, such as the District and Georgia, have since increased their
weatherization of units; however, these recipients still have not met
production goals requested by DOE.[Footnote 121] For example, as of
March 31, 2010, we found service providers in the District and Georgia
had weatherized about 14 percent and 11 percent of homes identified in
their state weatherization plans, respectively. By the end of June
2010, although both recipients' production targets were still below
DOE's approved goal of 30 percent, the District and Georgia reported
they have increased their production to about 25 percent and about 22
percent, respectively.
Some Recipients Still Face Challenges with Implementing Internal
Controls to Ensure Program Compliance:
Some recipients are still challenged with establishing controls to
ensure compliance with weatherization program and Recovery Act
requirements. DOE has issued guidance requiring recipients of Recovery
Act weatherization funds to implement a number of internal controls to
mitigate the risk of fraud, waste, and abuse. In our May 2010 report,
we recommended that DOE should develop best practices for key internal
controls that should be present at the local weatherization agency
level to ensure compliance with key program requirements.[Footnote
122] DOE provides recipients with the discretion to develop and
implement these internal controls in accordance with each state's
weatherization plan. Local agencies use various methods to prevent
fraudulent or wasteful use of Recovery Act funds, such as conducting
risk assessments.
Since our last report, we have identified challenges in the
implementation of internal controls for some local weatherization
agencies. For example, in the District, we conducted client file
reviews and found that while some weatherization project data were not
present in the physical files, much, but not all, of this data was in
an online software system used to manage weatherization projects.
While the online system appeared to be a useful tool in managing
weatherization projects, it has not yet been fully implemented and
does not contain all of the data necessary to track individual
weatherization projects from start to finish. As a result, at the time
of our review, neither the physical files nor the online
weatherization management system presented a complete record of
weatherization projects. District officials reported that they
conducted inspections of local weatherization agencies in early July
2010--roughly 2 weeks after our review--and found that all agencies
they reviewed had copies of all required documentation in the physical
files. Additionally, District officials reported they are continuing
to fully implement the online reporting system and address issues
associated with incomplete data. In Florida, the state agency
responsible for administering the program had instituted various
management controls over the program, but our review of two local
weatherization agencies revealed internal control gaps and compliance
issues similar to those identified in our May 2010 report.[Footnote
123] 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 the state
weatherization agency. State 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 local
weatherization agencies we reviewed also agreed to take corrective
actions.
Most States We Reviewed Have Varying Levels of Monitoring Procedures:
Most of the states we reviewed have oversight procedures in place to
monitor local agencies; however, the level of monitoring varies
considerably. DOE requires state weatherization agencies to conduct on-
site monitoring of all weatherization service providers to inspect the
management of funds and the production of weatherized homes at least
once a year. These monitoring visits consist of a financial review of
the service provider's records pertaining to salaries, materials,
equipment, and indirect costs; program reviews of the service
provider's records, contracts, and client files; and a production
review, consisting of the inspection of weatherized homes by the state
agencies and by the service provider. In our May 2010 report, we
recommended that DOE set time frames for development and
implementation of state monitoring programs; DOE generally agreed with
this recommendation and indicated it will take steps to address this
issue.
We found in the states we reviewed that levels of monitoring varied
considerably. Some state monitoring plans are fully implemented. For
example, in Arizona, state officials reported program monitors conduct
file reviews of all completed units each month using a statewide
database. Also, program monitors visit each of the 10 service
providers at least once a month, exceeding DOE's requirement of yearly
visits to local service providers. Iowa officials reported inspecting
at least 5 percent of the weatherized homes for each local agency and
providing monitoring at 15 of 18 local agencies.
In contrast, monitoring procedures in other states have either just
been fully implemented or are still facing challenges. We identified
some issues in our May 2010 report related to weatherization
monitoring in Georgia. Some monitoring positions remained vacant, and
oversight of the providers had been slow to start.[Footnote 124]
However, state officials at the agency responsible for the
weatherization assistance program have since taken steps to address
these issues. Specifically, they told us that their contractor had
filled all monitoring positions, and all 22 of its providers have
received monitoring visits. Additionally, Pennsylvania officials are
still facing challenges. For example, state officials reported
weatherization program monitors are not in compliance with some
Recovery Act monitoring procedures, and they are not getting about
half of their monitoring reports back to the agencies within 30 days
of the site visit. DOE reported the need for Pennsylvania's department
responsible for administering the program to improve the financial
management system to better track actual costs for each unit
weatherized on a service provider basis. State officials reported they
are working on corrective actions to address these concerns by August
2010.
Finally, some recipients, such as California and the District, were
delayed in spending Recovery Act weatherization funds and have just
begun to implement monitoring efforts. For example, in California,
program officials recently began on-site monitoring of Recovery Act
activity in June 2010, and by July 31, they visited seven of the 38
service providers. Additionally, program officials also conduct
quarterly performance visits as needed for providers with production
deficiencies, monthly Recovery Act expenditure and performance
analyses, fiscal monitoring, on-site monitoring of whistleblower
complaints and high-risk agencies, and Davis-Bacon on-site reviews to
ensure employees are paid appropriately and paperwork is in
compliance. Similarly, District officials reported a number of
monitoring procedures are in place, such as annual monitoring reviews
of local weatherization agencies and site inspections of at least 10
percent of weatherized units. District officials told us that, as of
July 15, 2010, their program managers had conducted monitoring visits
of all seven local weatherization agencies, and program auditors had
begun conducting site inspections for the quality assurance of work
completed by contractors.
Some States Are Measuring Long-Term Energy Savings Resulting from the
Recovery Act Weatherization Funds, While Others Are Still in
Development:
With respect to energy cost savings, some states are actively
measuring energy savings, while others are beginning to develop
methods to do so. As with EECBG and SEP, weatherization recipients are
required to report on different program metrics, both monthly and
quarterly. A long-term goal of the weatherization program is to
increase energy efficiency through cost-effective weatherization work,
and DOE relies on its recipients to ensure compliance with this cost-
effectiveness requirement. For example, in Arizona, the agency
responsible for administering the weatherization program calculates
the estimated kilowatt hour usage reduction and utility costs savings
resulting from weatherization work performed on homes. As of June
2010, officials estimated that Recovery Act weatherization services
have resulted in approximately $267,000 in savings for the residents
in the 1,930 homes weatherized. Florida officials reported contracting
with the University of Florida to conduct a study of overall energy
savings utilizing consumption data obtained from clients' utility
bills. Alternatively, District officials are still developing a
methodology to capture energy savings for weatherized homes. In July
2010, Georgia officials stated it had begun using a Web-based
reporting tool to track real-time information on energy savings. In
addition, program monitors will track and compare energy costs after
weatherization work has been completed for 3, 6, and 12 months. While
California estimated annual energy savings of about $1.5 million
resulting from Recovery Act funds, state officials currently do not
anticipate attempting to calculate actual energy savings and noted
that they would like more guidance from DOE on its effort to study
energy savings.
DOE Generally Agreed with the Recommendations Issued in Our May 2010
Report and Has Taken Some Steps toward Implementation:
In our May 2010 report, we provided eight recommendations and raised
concerns about whether program requirements were being met.[Footnote
125] DOE generally agreed with all of our recommendations and has
begun to take several steps in response. For example, DOE reported
that it has drafted national workload standards to address our
concerns regarding training, certification, and accreditation. DOE
plans to issue these standards to recipients in October 2010. DOE is
still in the process of considering our recommendations and will
provide additional information on how they plan to fully implement our
recommendations at a later date.
Housing Agencies Have Been Using Recovery Act Funds for a Variety of
Projects, and HUD's Initial Monitoring Efforts Have Identified
Problems with Obligations for Some Projects:
Competitive Grants for Public Housing Capital Fund Have Supported a
Variety of Projects:
The Recovery Act requires the U.S. Department of Housing and Urban
Development (HUD) to distribute 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 396 competitive grants in the amount of $995 million to
212 public housing agencies. (Subsequently, three housing agencies
returned competitive grants totaling approximately $14 million to
HUD). The Recovery Act required housing agencies that received
competitive grants to obligate 100 percent of their competitive grant
funds within 1 year of the date when competitive funds became
available to agencies for obligation, which means they have until
September 2010 to obligate 100 percent of their funds.[Footnote 126]
As of August 7, 2010, 179 housing agencies reported obligations
totaling about $460.1 million for 340 grants. This reflects about 46.3
percent of the total Public Housing Capital Fund competitive funds
allocated to them (see figure 24). In addition, there were 57 grants
(14 percent) located at 39 housing agencies for which no competitive
funds had been obligated. Further, another 102 grants (26 percent) had
less than 20 percent of their funds obligated. As the September 2010
obligation deadline approaches, HUD officials said they are working to
ensure that housing agencies meet the deadline, but expect that some
housing agencies may not. HUD will recapture any funds not obligated
by the deadline and return them to the Department of the Treasury. One
hundred forty-four housing agencies had also drawn down funds to pay
for project expenses already incurred. As of August 7, 2010, these 144
public housing agencies had drawn down about $93.5 million, or about
9.4 percent of the total allocated to them. The Recovery Act required
housing agencies to expend 60 percent of obligated funds within 2
years and expend 100 percent of Recovery Act funds within 3 years of
the initial date when funds were provided to agencies for obligation.
Figure 24: Percentage of Public Housing Capital Fund Competitive
Grants Allocated by HUD That Have Been Obligated and Drawn Down
Nationwide as of August 7, 2010:
[Refer to PDF for image: 3 pie-charts, 2 bar graphs]
Funds obligated by HUD: $981,101,426: 98.6%;
Funds drawn down by public housing agencies: $460,166,803: 46.2%;
Funds obligated by public housing agencies: $93,491,682: 9.4%.
Number of grants:
Awarded by HUD: 396;
Obligating funds: 340;
Drawing down funds: 255.
Number of public housing agencies:
Awarded by HUD: 212;
Obligating funds: 179;
Drawing down funds: 144.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
More specifically, housing agencies have been using their competitive
grants for the creation of energy-efficient communities, gap financing
for projects stalled because of financing issues, public housing
transformation, and improvements addressing the needs of the elderly
or persons with disabilities:
* For the creation of energy-efficient communities, HUD awarded 36
grants totaling $299.7 million for substantial rehabilitation or new
construction and 226 grants totaling $305.8 million for moderate
rehabilitation. For example, in New Jersey funds are to be used to
incorporate green features in two new buildings with public housing
units. Some of the energy-efficient features of the project include
water conserving fixtures, Energy Star lighting packages in all
interior units, and Energy Star or high-efficiency commercial grade
fixtures in all common areas, as well as daylight sensors or timers on
all outdoor lighting. In Massachusetts, funds are to be used to reduce
the annual energy and water costs of more than $4,000 per unit in a
physically distressed site. The project will redevelop a portion of
the site into innovative, high-efficiency affordable housing for
current residents with the new construction of 96 affordable rental
units and a community center.
* For gap financing for projects that were stalled due to financing
issues, HUD awarded 38 grants totaling $198.8 million.[Footnote 127]
For example, in Pennsylvania, $10 million in funds are to be used to
construct 50 units of a 101-unit development that will be a mixture of
walk-up and duplex apartments and three-scattered site buildings
replacing a high-rise building demolished in 2008.
* For public housing transformation, HUD awarded 15 grants totaling
$95.9 million to revitalize distressed or obsolete public housing
projects. For example, in Illinois, funds are to be used on a
multiphase, mixed-finance project that will build public housing,
rental, and for-sale apartments and houses on housing agency land and
vacant city lots.
* For improvements addressing the needs of the elderly or persons with
disabilities, HUD awarded 81 grants totaling $94.8 million. For
example, in Texas, funds are to be used to complete work on common
areas to make them accessible and ADA-compliant, upgrade and improve
space used for supportive services, and add energy-efficient lighting,
heating, ventilating, and air conditioning in properties housing the
elderly. In California, funds are to be used to provide upgrades to
nine dwelling units for accessibility improvements for the elderly and
disabled, as well as improvements to common spaces used for supportive
services targeted to those residents.
As discussed above, HUD officials expect that some housing agencies
may not meet the September 2010 competitive grant obligation deadline.
They noted that among all the competitive grant projects nationwide,
the 75 grants supported by mixed-financing have been at greatest risk
of missing the obligation deadline. HUD's Office of Urban
Revitalization has assigned a grant manager to each of the mixed-
finance competitive grant projects to track and monitor their
progress. Officials with 5 of the 10 housing agencies we visited that
had received competitive grants told us they were experiencing
challenges related to mixed-financing of their projects, but they
still anticipated meeting the deadline. Because funding for these
projects comes from multiple sources, if one financing party is not
able to finalize its part of the contract by the obligation deadline,
the housing agency will not be able to close on the contract. As a
result, the housing agency would not be able to obligate its
competitive grant funds on time and the funds would be recaptured. For
example, one housing agency 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 its project. The 4 percent tax credit was
contingent on the state selling tax-exempt bonds, and according to HUD
field office officials, the state's difficulty doing so had prevented
the housing agency from securing the tax credit. State officials told
us they notified the project developer on August 5, 2010, that the tax-
exempt bonds, which will generate the tax credits, had been approved,
which would allow the housing agency to submit its final paperwork to
HUD by September 18, 2010.
Additionally, HUD field staff have taken several steps to assist
public housing agencies in obligating Recovery Act competitive grant
funds by the September 2010 deadline. HUD field officials told us that
they have been communicating regularly with housing agencies via e-
mail and telephone to address their questions, provide technical
assistance, and monitor their progress. For example, field staff in
one field office in Texas use weekly conference calls to communicate
with all of the housing agencies in their jurisdiction and answer
their questions about obligation-related issues for competitive
grants. The officials also told us they have dedicated three staff to
work with the five public housing agencies under their jurisdiction
that received 14 competitive grants. HUD field staff in Illinois have
contacted each competitive grant recipient in their region on a weekly
basis and use an internal tracking sheet to monitor progress. HUD
officials in Massachusetts have provided additional oversight to
smaller housing agencies to help them better understand federal
procurement policies. Based in part on these efforts, HUD field staff
believed that housing agencies in Massachusetts would meet the
September 2010 obligation deadline.
As we note in our May 2010 Recovery Act report, HUD plans to
redistribute $17.16 million of competitive and formula grant funds
that were rejected or returned by housing agencies by awarding a new
set of competitive grants.[Footnote 128] HUD plans to redistribute
these funds to qualified housing agencies that previously applied for
competitive grants but did not receive them because HUD had obligated
all of the nearly $1 billion allocated to the program. Given HUD's
emphasis on green, energy-efficient housing, HUD will limit the
redistribution of funds to those applications for energy retrofit
projects. Prior to funding any of the remaining applications, HUD
planned to verify that potential recipients still would be able to
complete the work outlined in their original applications and that
they currently are in compliance with Recovery Act requirements. Of
the 23 public housing agencies that HUD has contacted and verified
their eligibility to receive additional competitive grant funds, 22
agencies accepted the additional funds. According to HUD officials,
they may be able to redistribute these funds by the end of fiscal year
2010. According to HUD officials, once the housing agencies receive
the redistributed funds, housing agencies must obligate 100 percent of
the funds within 1 year, expend 60 percent within 2 years, and expend
100 percent within 3 years.
Public Housing Capital Fund Formula Grants Have Also Supported a
Variety of Projects:
The Recovery Act required HUD to allocate $3 billion through the
Public Housing Capital Fund to public housing agencies using the same
formula for amounts made available in fiscal year 2008. HUD allocated
Capital Fund formula dollars to 3,134 public housing agencies shortly
after passage of the Recovery Act and, after entering into agreements
with housing agencies, obligated these funds on March 18, 2009. As we
previously reported, all housing agencies met the March 17, 2010,
obligation deadline for formula grants by either obligating all of
their funds or rejecting or returning a portion of the funds.[Footnote
129] The Recovery Act also required that public housing agencies
expend 60 percent of their formula funds within 2 years from when the
funds became available and expend 100 percent of their formula grant
funds within 3 years from when the funds became available. Housing
agencies have been making progress in drawing down funds in accordance
with these deadlines. According to HUD data, as of August 7, 2010,
3,075 housing agencies had drawn down funds totaling more than $1.6
billion from HUD, or about 55 percent of the total allocated to the
housing agencies, to pay for project expenses already incurred (see
figure 25).
Figure 25: Percentage of Public Housing Capital Fund Formula Grants
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as
of August 7, 2010:
[Refer to PDF for image: 3 pie-charts, 2 bar graphs]
Funds obligated by HUD: $2,981,562,859: 99.9%;
Funds drawn down by public housing agencies: $2,981,562,859: 99.9%;
Funds obligated by public housing agencies: $1,626,703,607: 54.5%.
Number of public housing agencies:
Were allocated funds: 3,134;
Have drawn down funds: 3,109;
Obligated 100% of funds: 3,075.
Source: GAO analysis of data from HUD's Electronic Line of Credit
Control System.
[End of figure]
Public housing agency officials said they have been using these funds
to support a variety of improvement projects at public housing sites,
including performing roofing and gutter work, replacing windows and
doors, rehabilitating unit interiors, and replacing heating, cooling,
and hot water systems. For example, a housing agency in California
used formula funds to rehabilitate vacant units at two sites quickly
to make them available for lease to prospective low-income tenants.
Work at both sites included repairing damaged walls, ceilings, and
floors; removing old plumbing fixtures; replacing tile and appliances;
and painting the interiors of units (see figure 26).
Figure 26: Before and After Photographs of the Alice Griffith Project
in San Francisco, California:
[Refer to PDF for image: 2 photographs]
Sink prior to rehabilitation;
Sink after rehabilitation.
Source: San Francisco Housing Authority.
[End of figure]
In Pennsylvania, a housing agency is using formula funds to
rehabilitate 23 row houses on the last remaining blighted block
adjacent to a large redevelopment the housing agency had already
completed. Combined with the previous redevelopment, once this project
is complete, there will be more than 700 total units in an approximate
four square block area. Work on the last block of the development
began in March 2010 (see figure 27). According to housing agency
officials, this redevelopment project not only has provided additional
public housing units, but also has increased property values for row
homes in the area from $40,000 or $50,000 to asking prices of up to
$125,000.
Figure 27: Public Housing Rehabilitation Using Recovery Act Capital
Fund Competitive Grant in Philadelphia, Pennsylvania:
[Refer to PDF for image: 2 photographs]
Public housing units under rehabilitation;
Public housing units previously rehabilitated.
Source: GAO.
[End of figure]
Results of HUD's Initial Second Year of Monitoring Efforts Have
Identified Few Problems with Housing Agencies' Obligations of Funds:
HUD has employed multiple monitoring efforts for Recovery Act funds
and has found that only a few housing agencies had deficiencies
relating to their obligations. For the second year of implementation,
HUD's strategy for monitoring Recovery Act formula and competitive
grant funds includes a combination of remote and on-site reviews of
housing agencies' administration of Recovery Act requirements, the
same approach it used for monitoring housing agencies during the first
year of the Recovery Act. Specifically for the formula grant funds,
HUD developed a four-tier monitoring approach that includes:
* quick-look reviews of all Recovery Act formula grant obligation
documents generated from February 26, 2010, to March 17, 2010, by 543
housing agencies that had obligated less than 90 percent of formula
grant funds as of February 26, 2010. HUD completed the quick-look
reviews in July 2010;[Footnote 130]
* on-site and remote reviews. Housing agencies currently designated as
troubled will have a minimum of one on-site review. Housing agencies
that are nontroubled may be subject to additional remote or on-site
reviews depending upon factors including having open audit findings,
failing to expend funds in prior years, and having procurement-related
deficiencies such as not revising procurement policies to reflect
Recovery Act requirements. HUD anticipates that about 25 percent of
grant recipients will be subject to these reviews, which the agency
plans to complete by February 2011;
* quality assurance and quality control reviews by HUD's Office of
Field Operations, which HUD plans to conduct between December 2010 and
March 2011; and:
* independent reviews (performed by an outside contractor) of housing
agencies that HUD identified as being the top 100 to 125 funded
agencies with the largest formula grant award amount. The independent
reviews are to be completed by June 2011.
According to HUD officials, as a result of its quick-look reviews of
543 housing agencies, HUD staff identified 26 housing agencies that
were potentially deficient in meeting HUD requirements for obligating
formula grant funds and required further review. For example, some
housing agencies signed contracts to obligate funds after the March
17, 2010, deadline. HUD staff also determined that some housing
agencies obligated funds for products and services that were not
approved for Recovery Act use, such as paying the local police
department to provide security services. In addition, HUD staff
identified 24 housing agencies with minor deficiencies that did not
warrant further review. Finally, there were 22 housing agencies that
did not submit final documentation requested by HUD staff for the
quick-look reviews. HUD plans to conduct on-site reviews of those
housing agencies if they do not submit the requested documentation.
HUD created a panel comprised of officials from its Office of Field
Operations, Office of Capital Improvements, and Office of General
Counsel to examine in greater detail those 26 housing agencies with
potential deficiencies identified via the quick-look reviews, as well
as potential deficiencies identified by other means. Of the 26 housing
agencies, the panel determined that deficiencies at 8 housing agencies
were significant and necessitated a recapture of funds. As of August
27, 2010, the panel reviews identified approximately $1 million in
Recovery Act funds that necessitated recapture. HUD is in the process
of recapturing these funds and will return them to the Department of
the Treasury. HUD plans to continue conducting panel reviews and will
recapture Recovery Act funds from any housing agency found to have
deficiencies.
HUD adopted a similar multi-review approach for its second-year
monitoring of Recovery Act competitive grant funds. HUD has been
conducting remote reviews of all 393 competitive grants and had
planned to complete them by August 20, 2010. As of August 23, 2010,
HUD field staff reported having completed 371 remote reviews of
competitive grants. HUD officials are in the process of analyzing the
results of these reviews. While HUD officials have not completed their
reviews, as of August 27, 2010, the agency may recapture approximately
$12 million in competitive grant funds based on remote review findings
and other means. For example, after reviewing one project's proposed
building site, HUD staff found that the project would be located in an
industrial space next to a railroad track with little access to
roadways, raising both transportation and environmental concerns. HUD
also plans to conduct quality assurance and quality control reviews
for a random sample of 20 to 25 percent of the remote reviews, which
HUD plans to complete by September 2010. In October and November 2010,
HUD also plans to review obligations made by housing agencies that had
not fully obligated their grant funds within 2 weeks of the September
2010 deadline. Finally, from January to March 17, 2011, HUD plans to
conduct on-site reviews of all eight housing agencies that received
competitive grant funds and were designated as troubled as of
September 30, 2009. Given that less than half of the competitive grant
funds have been obligated to date, we believe that it is important for
HUD to continue to closely monitor progress in meeting the obligation
deadline. In addition, because HUD identified some deficiencies among
those housing agencies that obligated their formula grant funds near
the deadline, we believe it will be important for HUD also to review
those competitive grant obligations made by housing agencies just
prior to the deadline.
As part of its second-year strategy, HUD developed a management plan
for the administration of Recovery Act funds, including the need for
an additional 11 FTEs to carry out Recovery Act responsibilities. This
was in response to our March 2010 recommendation that HUD develop such
a plan to address its resource needs for both the Recovery Act funds
and the existing Capital Fund program.[Footnote 131] Similarly, HUD's
Office of Public and Indian Housing also agreed to develop a
management plan addressing the activities and resources needed to
administer its existing Capital Fund program. In July 2010, HUD
provided us with its management plan for the Public Housing Capital
Fund program. The plan summarized the key activities HUD undertakes to
monitor and facilitate the use of these funds by program area,
including rule and policy development, planning, program awards,
program management, technical assistance, and reporting. The plan also
included the specific activities, tasks, and resources used for each
of these existing program areas, identifying approximately 91 existing
FTEs in its headquarters and field offices to support these
activities. According to HUD's management plan, HUD's current staffing
level is sufficient to manage its existing Capital Fund program, but
the agency could more efficiently utilize its current resources. As a
result, HUD plans to realign current staff to focus on its core
missions, including Recovery Act responsibilities.
HUD's management plan for its existing Capital Fund program states
that HUD currently has the staff and resources required to effectively
implement its core programs. However, officials in two HUD field
offices we visited stated that they revised their oversight strategies
for their regular programs to accommodate Recovery Act work. For
example, officials in one HUD field office told us that most of the
field office's resources have been devoted to the Recovery Act and, as
a result, staff have done less on-site monitoring of non-Recovery Act
grant recipients. However, the officials noted that their staff still
have been conducting remote monitoring of all recipients, although
staff have not conducted any asset management reviews of grant
recipients this year.[Footnote 132] At another HUD field office, an
official told us that since the Recovery Act was passed, Recovery Act
work has been a top priority for HUD nationwide. He noted that other
housing work, especially conducting on-site reviews, has been deferred
to meet Recovery Act requirements. According to HUD headquarters
officials, as a consequence of field office monitoring of Recovery Act
requirements, field staff conducted reviews (on-site or remote) of
every housing agency in the country, something they would not have
accomplished in the course of their routine monitoring activities. HUD
officials also stated that field staff were able to strengthen housing
agency officials' knowledge of contract administration and forge
stronger relationships with a greater number of housing agencies as a
result of their Recovery Act oversight.
HUD Has Taken Additional Action to Improve Quality of Recipient
Reported Data:
HUD officials told us they have been using the same quality review
procedures for the fourth recipient reporting period as they did for
the third reporting period. However, HUD also issued additional
guidance to recipients to help them more accurately report job-related
data. Although HUD does not play a direct role in compiling the
recipient data, officials noted they continued to support recipients'
report preparation by providing technical assistance, including
issuing guidance, conducting conference calls, manning a call center,
and transmitting regular e-mail correspondence. Officials also told us
that their data quality reviews of recipient reports continued to
include automated data checks to flag values in specific fields that
were incorrect or that fell outside of parameters that HUD had defined
as reasonable and to generate comments notifying housing agencies of
the potential errors. HUD officials told us that they also have been
using the same processes from the third reporting period for checking
for and addressing errors in job-count totals for the fourth reporting
period. The officials noted that their on-time reporting rate for the
fourth reporting period was high and their error rate continues to
decline with each reporting cycle. We are in the process of assessing
the transparency of information reported in Recovery.gov for three HUD
Recovery Act programs, including formula grants awarded through the
Public Housing Capital Fund program.
As we reported in May 2010, officials with two housing agencies
reported using an out-of-date version of HUD's jobs-counting
calculator for the third round reporting period. To ensure that
housing agencies use the correct jobs calculation, we recommended that
HUD clearly emphasize to housing agencies that they discontinue use of
the outdated jobs calculator provided by HUD in the first round of
recipient reporting. In response to our recommendation, HUD sent an e-
mail to housing agencies on June 30, 2010, that explicitly instructed
them not to use the outdated jobs-counting calculator, as it was not
correctly computing the FTE calculation per updated OMB guidance. This
e-mail also included a link to HUD's new online jobs-counting
calculator and instructed housing agencies to use this calculator for
the July, and all future, reporting periods.
OMB's December 2009 guidance states that to the maximum extent
practicable, job information should be collected from all
subrecipients and vendors in order to generate the most comprehensive
and complete job impact numbers available. As we reported in May 2010,
for the third reporting period, at least one housing agency did not
report job information for subcontractors even when the subcontractors
were providing essential goods and services for Recovery Act-funded
projects. We recommended that HUD issue guidance to housing agencies
that explains when the prime recipient should report FTEs attributable
to subcontractors. In response to our recommendation, HUD notified
housing agencies in a June 30, 2010, e-mail that it had developed
additional guidance for housing agencies to use when determining
whether prime recipients should report FTEs for subcontractors and
provided a link to the guidance on its Web site. The guidance noted
that housing agencies should include Recovery Act-funded hours that
contractors and subcontractors worked as part of their FTE calculation.
HUD and Treasury Continue Making Progress Outlaying TCAP and Section
1602 Program Funds, but Opportunities Exist to Improve Plans for
Oversight and Meeting Challenging Project Spending Deadlines:
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) the
Grants to States for Low-Income Housing Projects in Lieu of Low-Income
Housing Credits Program under Section 1602 of the Recovery Act
(Section 1602 Program) administered by the Department of the Treasury
(Treasury).[Footnote 133] 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 134] As the demand for tax credits declined, so did the
prices third-party 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
jumpstart stalled projects.
For TCAP, the Recovery Act requires HUD to obligate $2.25 billion to
52 housing finance agencies (HFA) for gap financing of LIHTC projects
that included some LIHTCs.[Footnote 135] HFAs had to give priority to
projects that were "shovel ready" and expected to be completed by
February 2012. HFAs and project owners face three milestones for
committing and disbursing TCAP funds.[Footnote 136]
* HFAs had to commit 75 percent of their TCAP awards by February 16,
2010. According to HUD officials, all HFAs met the February 16, 2010,
deadline except for South Carolina because it did not have enough
affordable housing projects that needed TCAP assistance.
* The Recovery Act requires that HFAs disburse 75 percent of the TCAP
awards by February 16, 2011.
* The Recovery Act requires that project owners spend all of their
TCAP funds by February 2012.
As of the end of July 2010, HUD had outlayed 32.6 percent (about $733
million) of the TCAP funds, up from 16.5 percent as of April 30, 2010,
that we reported in May (see figure 28).
Figure 28: HUD Outlays of TCAP Funds, as a Percentage of Total
Recovery Act Obligations as of April 30 and July 31, 2010:
[Refer to PDF for image: 2 pie-charts]
April 30, 2010: $2.25 billion;
HUD Outlays of TCAP Funds: $371 million; 16.5%.
July 31, 2010: $2.25 billion;
HUD Outlays of TCAP Funds: $733 million; 32.6%.
Source: GAO analysis of HUD data.
[End of figure]
Although HUD originally made obligations of $2.25 billion to HFAs, HUD
officials told us that they have taken back TCAP funds from HFAs that
either did not commit 75 percent of funds by February 2010, did not
have enough demand for the funds, or both. South Carolina--which did
not meet the February deadline and did not have enough demand--
returned $13 million of its original $25.4 million TCAP allocation.
Alabama, which did meet the deadline, returned $3 million of its
original $32 million allocation because it did not have enough demand
for TCAP funds and would not be able to use all the funds. (We further
discuss why some HFAs were challenged to meet deadlines for TCAP and
the Section 1602 Program later in this section.) HUD officials told us
that they plan to reallocate the $16 million through a competitive
process and develop criteria to be issued in a HUD notice this fall.
HUD officials said they expect only HFAs that have demonstrated
program progress to be eligible for consideration since the existing
TCAP deadlines for disbursing 75 percent of funds by February 2011
still would apply. HUD officials told us that they heard informally
from about 20 HFAs interested in receiving additional TCAP funds.
For the Section 1602 Program, Treasury had obligated $5.5 billion and
outlayed about 25.5 percent ($1.4 billion) as of July 31, 2010, up
from the 13.6 percent outlayed as of April 30, 2010 (see figure 29).
Figure 29: Treasury Outlays of Section 1602 Program Funds as a
Percentage of Total Recovery Act Obligations as of April 30 and July
31, 2010:
[Refer to PDF for image: 2 pie-charts]
April 30, 2010: $5.5 billion;
Treasury Outlays of Section 1602 Program Funds: $742 million; 13.5%.
July 31, 2010: $5.5 billion;
Treasury Outlays of Section 1602 Program Funds: $1.4 billion; 25.5%.
Source: GAO analysis of Treasury data.
[End of figure]
Unlike HUD, Treasury has not taken back any funds because the first
deadline for the HFAs to disburse funds is December 31, 2010.
Specifically, 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.[Footnote 137] HFAs must disburse all Section
1602 Program funds by December 2011, or the funds the HFAs have not
disbursed must be returned to Treasury. Originally, Treasury's
guidance required that HFAs had to make all Section 1602 Program
disbursements by December 31, 2010, or return the undisbursed funds to
Treasury, but Treasury extended the disbursement deadline to December
31, 2011.
In the six previous Recovery Act reports, we have collected and
reported data on programs receiving substantial Recovery Act funds in
16 selected states and the District of Columbia. These 16 states and
the District of Columbia together have about 65 percent of the U.S.
population and will receive an estimated two-thirds of the TCAP funds
and about 60 percent of the Section 1602 Program funds. Figure 30
lists the TCAP and Section 1602 Program obligations and outlays for
the 16 states and the District of Columbia as of July 31, 2010.
Figure 30: HUD and Treasury Obligations and Outlays for TCAP and
Section 1602 Program for the 16 States and the District of Columbia as
of July 31, 2010, Compared to April 30, 2010:
[Refer to PDF for image: illustrated table]
State: Arizona;
TCAP:
July 31, 2010 Obligations: $32.3 million;
July 31, 2010 Outlays: $25.0 million;
July 31, 2010 Percentage: 77.5%;
April 30, 2010 Percentage: 41.7%;
Section 1602 Program:
July 31, 2010 Obligations: $36.5 million;
July 31, 2010 Outlays: $6.0 million;
July 31, 2010 Percentage: 16.0%;
April 30, 2010 Percentage: 0.0%.
State: California;
TCAP:
July 31, 2010 Obligations: $325.9 million;
July 31, 2010 Outlays: $53.5 million;
July 31, 2010 Percentage: 16.4%;
April 30, 2010 Percentage: 7.8%;
Section 1602 Program:
July 31, 2010 Obligations: $478.1 million;
July 31, 2010 Outlays: $120.3 million;
July 31, 2010 Percentage: 25.2%;
April 30, 2010 Percentage: 8.9%.
State: Colorado;
TCAP:
July 31, 2010 Obligations: $27.3 million;
July 31, 2010 Outlays: $11.5 million;
July 31, 2010 Percentage: 42.0%;
April 30, 2010 Percentage: 26.5%;
Section 1602 Program:
July 31, 2010 Obligations: $17.8 million;
July 31, 2010 Outlays: $6.8 million;
July 31, 2010 Percentage: 38.2%;
April 30, 2010 Percentage: 31.5%.
State: Washington, D.C.
TCAP:
July 31, 2010 Obligations: $11.6 million;
July 31, 2010 Outlays: $7.9 million;
July 31, 2010 Percentage: 67.9%;
April 30, 2010 Percentage: 49.3%;
Section 1602 Program:
July 31, 2010 Obligations: $33.8 million;
July 31, 2010 Outlays: $4.5 million;
July 31, 2010 Percentage: 13.3%;
April 30, 2010 Percentage: 0.7%.
State: Florida;
TCAP:
July 31, 2010 Obligations: $101.1 million;
July 31, 2010 Outlays: $46.1 million;
July 31, 2010 Percentage: 45.6%;
April 30, 2010 Percentage: 16.5%;
Section 1602 Program:
July 31, 2010 Obligations: $580.4 million;
July 31, 2010 Outlays: $61.8 million;
July 31, 2010 Percentage: 10.7%;
April 30, 2010 Percentage: 3.9%.
State: Georgia;
TCAP:
July 31, 2010 Obligations: $54.5 million;
July 31, 2010 Outlays: $20.8 million;
July 31, 2010 Percentage: 38.2%;
April 30, 2010 Percentage: 24.4%;
Section 1602 Program:
July 31, 2010 Obligations: $195.6 million;
July 31, 2010 Outlays: $62.7 million;
July 31, 2010 Percentage: 32.1%;
April 30, 2010 Percentage: 14.1%.
State: Illinois;
TCAP:
July 31, 2010 Obligations: $94.7 million;
July 31, 2010 Outlays: $43.6 million;
July 31, 2010 Percentage: 46.1%;
April 30, 2010 Percentage: 24.2%;
Section 1602 Program:
July 31, 2010 Obligations: $264.5 million;
July 31, 2010 Outlays: $29.5 million;
July 31, 2010 Percentage: 11.2%;
April 30, 2010 Percentage: 6.4%.
State: Iowa;
TCAP:
July 31, 2010 Obligations: $19.0 million;
July 31, 2010 Outlays: $11.5 million;
July 31, 2010 Percentage: 60.8%;
April 30, 2010 Percentage: 23.9%;
Section 1602 Program:
July 31, 2010 Obligations: $72.8 million;
July 31, 2010 Outlays: $42.3 million;
July 31, 2010 Percentage: 58.1%;
April 30, 2010 Percentage: 46.6%.
State: Massachusetts;
TCAP:
July 31, 2010 Obligations: $59.6 million;
July 31, 2010 Outlays: $22.8 million;
July 31, 2010 Percentage: 38.3%;
April 30, 2010 Percentage: 17.1%;
Section 1602 Program:
July 31, 2010 Obligations: $110.3 million;
July 31, 2010 Outlays: $33.3 million;
July 31, 2010 Percentage: 30.2%;
April 30, 2010 Percentage: 3.8%.
State: Michigan;
TCAP:
July 31, 2010 Obligations: $64.0 million;
July 31, 2010 Outlays: $19.8 million;
July 31, 2010 Percentage: 31.0%;
April 30, 2010 Percentage: 14.4%;
Section 1602 Program:
July 31, 2010 Obligations: $285.9 million;
July 31, 2010 Outlays: $29.6 million;
July 31, 2010 Percentage: 10.4%;
April 30, 2010 Percentage: 4.3%.
State: Mississippi;
TCAP:
July 31, 2010 Obligations: $21.9 million;
July 31, 2010 Outlays: $4.6 million;
July 31, 2010 Percentage: 21.0%;
April 30, 2010 Percentage: 0.0%;
Section 1602 Program:
July 31, 2010 Obligations: $29.7 million;
July 31, 2010 Outlays: $0.0 million;
July 31, 2010 Percentage: 0.0%;
April 30, 2010 Percentage: 0.0%.
State: New Jersey;
TCAP:
July 31, 2010 Obligations: $61.2 million;
July 31, 2010 Outlays: $14.3 million;
July 31, 2010 Percentage: 23.4%;
April 30, 2010 Percentage: 5.9%;
Section 1602 Program:
July 31, 2010 Obligations: $123.5 million;
July 31, 2010 Outlays: $41.5 million;
July 31, 2010 Percentage: 33.6%;
April 30, 2010 Percentage: 23.9%.
State: New York;
TCAP:
July 31, 2010 Obligations: $252.7 million;
July 31, 2010 Outlays: $101.7 million;
July 31, 2010 Percentage: 40.3%;
April 30, 2010 Percentage: 25.2%;
Section 1602 Program:
July 31, 2010 Obligations: $0.0 million;
July 31, 2010 Outlays: $0.0 million;
July 31, 2010 Percentage: 0.0%;
April 30, 2010 Percentage: 0.0%.
State: North Carolina;
TCAP:
July 31, 2010 Obligations: $52.2 million;
July 31, 2010 Outlays: $4.6 million;
July 31, 2010 Percentage: 8.9%;
April 30, 2010 Percentage: 5.8%;
Section 1602 Program:
July 31, 2010 Obligations: $95.0 million;
July 31, 2010 Outlays: $66.4 million;
July 31, 2010 Percentage: 69.9%;
April 30, 2010 Percentage: 51.4%.
State: Ohio;
TCAP:
July 31, 2010 Obligations: $83.5 million;
July 31, 2010 Outlays: $15.6 million;
July 31, 2010 Percentage: 18.6%;
April 30, 2010 Percentage: 6.6%;
Section 1602 Program:
July 31, 2010 Obligations: $118.1 million;
July 31, 2010 Outlays: $23.9 million;
July 31, 2010 Percentage: 20.3%;
April 30, 2010 Percentage: 16.5%.
State: Pennsylvania;
TCAP:
July 31, 2010 Obligations: $95.1 million;
July 31, 2010 Outlays: $43.4 million;
July 31, 2010 Percentage: 45.6%;
April 30, 2010 Percentage: 18.7%;
Section 1602 Program:
July 31, 2010 Obligations: $229.9 million;
July 31, 2010 Outlays: $117.6 million;
July 31, 2010 Percentage: 51.2%;
April 30, 2010 Percentage: 33.0%.
State: Texas;
TCAP:
July 31, 2010 Obligations: $148.4 million;
July 31, 2010 Outlays: $17.0 million;
July 31, 2010 Percentage: 11.4%;
April 30, 2010 Percentage: 3.1%;
Section 1602 Program:
July 31, 2010 Obligations: $594.1 million;
July 31, 2010 Outlays: $71.1 million;
July 31, 2010 Percentage: 12.0%;
April 30, 2010 Percentage: 2.6%.
State: Total;
TCAP:
July 31, 2010 Obligations: $1.505 billion;
July 31, 2010 Outlays: $463.7 million;
July 31, 2010 Percentage: 30.8%;
April 30, 2010 Percentage: 15.1%;
Section 1602 Program:
July 31, 2010 Obligations: $3.27 billion;
July 31, 2010 Outlays: $717.4 million;
July 31, 2010 Percentage: 22.0%;
April 30, 2010 Percentage: 10.9%.
2010Source: GAO analysis of HUD and Treasury data.
[End of figure]
According to HUD and Treasury data, nearly all the HFAs have made
progress in disbursing TCAP and Section 1602 Program funds to project
owners. Figure 30 shows HUD outlays to HFAs in the 16 selected states
and the District of Columbia. Because HFAs must disburse their TCAP
and Section 1602 Program funds to project owners within 3 days, these
figures would closely track disbursements. As shown in figure 30,
Arizona, Iowa, and the District of Columbia have drawn down more than
50 percent of their TCAP funds, and Iowa, North Carolina, and
Pennsylvania have drawn down more than 50 percent of their Section
1602 Program funds as of July 31, 2010. When we reported in May, North
Carolina was the only state out of the 16 selected states and the
District of Columbia to have drawn down more than 50 percent of its
funds from one of the programs.
However, the level of outlays, and therefore HFA spending, continues
to vary considerably across the states. We previously reported that
the difference in spending across the 16 states and the District of
Columbia depended on when the HFA requested Section 1602 Program
funds, the level of construction activity, and the HFA's
implementation timeline.[Footnote 138] For example, Treasury officials
told us that while 40 HFAs had requested funds by September 2009, the
Mississippi Home Corporation (MHC) requested funds for the first time
in February 2010. According to Treasury officials, Treasury outlayed
funds to MHC for the first time on August 12, 2010. MHC officials told
us that they expect to close on most of their projects in August and
September 2010, which is when MHC will sign agreements with project
owners that will meet HFA requirements to begin disbursing funds.
TCAP and the Section 1602 Program Have Had a Strong Impact on the
LIHTC Market:
HFA officials, project owners, and third-party investors that we
interviewed generally agreed that TCAP and the Section 1602 Program
provided funds to many stalled LIHTC projects and enabled them to move
forward.[Footnote 139] For example, some owners of stalled projects
said that their projects could not have continued without TCAP and
Section 1602 Program funds. TCAP and Section 1602 Program funds also
made some rural projects and special needs population projects--such
as farm worker housing, housing for formerly homeless, and housing for
the disabled--more feasible and attractive to third-party investors.
Officials from one HFA we interviewed told us that investors
scrutinize the financial outlook for rural projects because they
expect that the income for these projects will be tight or non-
existent. HFAs, project owners, and investors also told us that in a
difficult market, investors are less likely to risk investments in
these types of projects. We interviewed nine HFAs that awarded
financing to 385 projects--154 (40 percent) were rural and 37 (10
percent) were special needs population projects--which may not have
moved forward without the assistance of the TCAP and Section 1602
Program.
LIHTC projects that received TCAP and Section 1602 Program funds
typically had less investor equity than LIHTC projects had prior to
the economic downturn. The decrease in investor equity varied for each
project and by state. The nine HFAs that we interviewed reported that
equity in LIHTC projects prior to the economic downturn generally
ranged from 50 to 80 percent of the total financing for a project. In
contrast, for projects receiving TCAP and Section 1602 Program funds
from the nine HFAs that we interviewed, investor equity represents on
average 43 percent of a project's overall financing. For LIHTC
projects receiving TCAP and Section 1602 Program funds, the decrease
in investor equity has been offset by the increase in federal funds.
Some HFA officials, project owners, and third-party investors that we
interviewed currently believe that demand for LIHTCs is re-emerging
since the credit markets were severely disrupted in 2008. However,
some of them said that third-party investor demand still was not at a
level where most projects were feasible. Investor demand and tax
credit prices have been picking up in some states and regions more
than others. According to some investors with whom we spoke, investor
demand and tax credit prices tended to be higher on the coasts than in
the middle of the country. Investors also preferred certain types of
projects, such as those that were larger, located in urban areas, and
catered to seniors. Projects that were smaller, located in rural
areas, and targeted special needs populations more often lacked third-
party investors.
Since the economic downturn, the composition of third-party investors
also has changed. First, Fannie Mae and Freddie Mac, which according
to an investor, had bought the largest share of tax credits (40
percent in 2006) and were the primary third-party investors in special
population projects, exited the marketplace. Second, according to
another investor, the low tax credit prices have resulted in higher
yields that in turn have attracted "yield-driven" investors, including
insurance companies, large corporations, and individuals. Banks, which
had invested in the tax credit markets primarily because of Community
Reinvestment Act requirements, have continued to do so.[Footnote 140]
However, if tax credit prices continue to rise, yields will decrease,
which may cause "yield-driven" investors to exit the market.
Because the LIHTC market is still rebounding and some states continue
to face challenges attracting investors, the majority of HFAs that we
interviewed support temporarily extending the Section 1602 Program. If
the Section 1602 Program were not extended, some project owners
anticipated scaling back development activities and being more
selective about which projects they develop. Some HFAs and project
owners who supported the extension of the Section 1602 Program believe
the funds would be most useful if used to fill financing gaps, to fund
rural and special needs population projects, and to provide grants or
funds to nonprofits that are developing projects that target such needs.
Some HFAs and Projects May Face Challenges in Meeting HUD and Treasury
Deadlines for Using Funds:
Some HFAs and projects may face challenges in meeting TCAP and Section
1602 Program deadlines for reasons ranging from increased workload to
the time needed to assemble financing to construction delays. Some
HFAs reported that the addition of TCAP and Section 1602 Program
transactions this year has increased their workloads significantly.
One HFA reported that it typically closed from 18 to 22 projects
annually, but this year would close 60 projects. Two other HFAs
reported that they typically closed from 8 to 15 projects annually,
but expected to close 50 and 85 projects this year, respectively.
Most HFAs Likely Will Meet TCAP Deadlines, but Those That Have Delayed
Disbursing TCAP Funds May Face Challenges:
For TCAP, the potential challenges HFAs face appear to be related to
how they structured the timing of the TCAP disbursements. According to
HUD officials, it is difficult to determine which states may have
difficulty meeting TCAP spending deadlines because states took
different approaches to awarding funds. A few HFAs may be at a
disadvantage in terms of meeting 2011 and 2012 deadlines because they
chose to award TCAP funds late in the development process to ensure
that commitments from other financing sources are in place and the
projects will be successfully completed. As a result, these HFAs have
disbursed a small percentage of their TCAP funds to date. The HFA
officials we interviewed in nine states did not believe the TCAP
disbursement deadline was a challenge for their projects.
Treasury Plans for Ensuring That Section 1602 Program Projects Meet
Spending Deadlines Remain Unclear:
According to some HFA officials, some project owners may face
challenges meeting the 30 percent spending deadline (December 31,
2010) for Section 1602 Program projects, due to reasons that affected
some projects allocated Section 1602 Program or TCAP funds, ranging
from the timing needed to assemble or disburse funding by HFAs,
litigation, and routine construction delays. According to HFA
officials with whom we spoke, some projects needed to wait for FHA
mortgage insurance approval or approval from other sources of
subsidies before receiving final HFA approval. Officials from one HFA
with whom we spoke said that while all their Section 1602 Program
projects were shovel-ready, getting all parties educated and
comfortable about the requirements of the new program took time. Some
projects had been stalled for months, and it took time to "ramp up"
all parties engaged in the projects. In addition, some projects
encountered delays during the construction process due to weather or
other issues typical of development projects such as waiting for
construction permits from local agencies. Other projects were delayed
due to legal issues unrelated to the Section 1602 Program. For
example, Florida Housing Finance Corporation officials told us that as
of August 2010, about $22.3 million in Section 1602 Program funds were
allocated to projects involved in litigation.[Footnote 141]
Furthermore, in HFAs that delayed the decision to participate in the
Section 1602 Program or that had a slow start to launching the Section
1602 Program projects have collectively had less time to spend
eligible funds than in other states where funds were awarded earlier.
For example, the MHC did not request Section 1602 Program funds from
Treasury until February 2010.[Footnote 142] MHC told us that it is
concerned that each of its 17 projects receiving Section 1602 Program
funds may not meet the 30 percent spending deadline. One HFA said that
a typical LIHTC project would take about 15 months from applying for
funds to closing the project and commencing construction. Our review
of projects in nine states shows that these HFAs had not yet awarded
Section 1602 Program funds to 75 projects as of June 30, 2010.
Further, as of June 30, 2010, about 39 percent of Section 1602 Program
projects (98 of 252 projects) that have been awarded funds in these
nine states have not yet closed, which is the first step to being able
to draw funds from entities that provide financing.
Treasury initially required HFAs to return all Section 1602 Program
funds not disbursed by December 31, 2010. In a regulation of August
31, 2009, Treasury extended the deadline for disbursing Section 1602
Program funds by 1 year, provided project owners met the 30 percent
spending requirement. Treasury had determined that completion of
projects by December 31, 2010, was too restrictive and would preclude
funding of otherwise eligible projects. Treasury officials told us
that the new 30 percent requirement was put in place to assure that
project owners were making some progress by the original (December 31,
2010) deadline date.
Missing the deadline for the 30 percent spending requirement could
have significant implications for the viability of Section 1602
Program projects. If project owners failed to meet this spending
deadline, they would not be eligible to receive any additional Section
1602 Program funds. If prevented from receiving the rest of their
Section 1602 Program award, project owners might not be able to find
replacement financing and committed financing sources might withdraw
their funds. If projects could not secure replacement financing
quickly, they would be unlikely to be completed in accordance with
Section 1602 Program and LIHTC requirements and would be stalled
again. Under such a scenario, the HFA would be responsible for
recapturing any Section 1602 Program funds that were disbursed to the
project prior to the 30 percent spending deadline.
Treasury officials told us that they plan to enforce the deadline
requirement, and would provide written guidance to HFAs that will
describe the kind and format of information to be reported to Treasury
to document whether projects have met the spending deadline. Treasury
officials told us that they do not plan to collect this information
until after the deadline has passed. Without a plan in place for
handling projects that do not meet the Section 1602 Program deadline,
Treasury risks further project interruptions, including the possible
loss of any job creation associated with projects that must be
discontinued if alternate financing cannot be found.
TCAP and the Section 1602 Program Impose More Oversight
Responsibilities on HFAs Than the LIHTC Program Alone, and HFAs Have
Developed Approaches for Such Oversight:
TCAP and the Section 1602 Program require HFAs to assume a greater
project oversight role than in the standard LIHTC program. Under the
LIHTC program, HFAs need not monitor construction disbursements, but
must report that projects are completed and occupied in accordance
with LIHTC requirements and deadlines. For long-term monitoring under
the LIHTC program, third-party investors in the project perform long-
term asset management, and HFAs perform limited compliance reviews.
[Footnote 143]
* HFAs must 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.
However, under TCAP and the Section 1602 Program, HFAs must monitor
the disbursement and use of funds throughout the construction period.
HFAs also must perform long-term asset management, which imposes
ongoing responsibilities on the HFAs for the viability of each project.
* An HFA's asset management activities may include monitoring current
financial and physical aspects of project operations. For example, an
HFA may perform analyses or approvals of operating budgets, cash flow
trends, and reserve accounts and conduct physical inspections more
frequently than every 3 years.
* Asset management activities also examine 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.
* HFAs also ensure compliance with LIHTC requirements as part of their
asset-management activities.
Moreover, 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 144]
Given the increase in responsibilities and risks to HFAs, HFAs have
developed approaches for oversight during the construction period as
well as long-term asset management over the 15-year tax credit
compliance period. These approaches are designed to monitor the
physical and financial health of projects and compliance with LIHTC
affordability restrictions.
In response to an open-ended question in our survey asking about what
changes in oversight activities HFAs planned to put in place to assure
compliance with the TCAP and Section 1602 Program, 37 HFAs said they
would make some changes in oversight activities, 11 said they would
make no changes in oversight activities, and 6 said they were not sure
what changes they would make or they did not answer the question.
[Footnote 145] Changes in activities varied across HFAs. For example,
of the 37 HFAs that said they would make some changes, 13 HFAs noted
that they would make changes to their disbursement process to more
closely track the use of TCAP and Section 1602 Program funds, 9 HFAs
said they would increase overall monitoring of projects or reporting
required by project owners, and 7 HFAs planned to implement or
increase the frequency of site visits or inspections. Eleven HFAs said
they would not change their oversight activities, but 6 of those 11
HFAs noted that they would rely on their experience in and established
procedures for monitoring their lending programs or disbursement of
other federal funds.
HFAs Have Increased Oversight during Construction Phase of TCAP and
Section 1602 Program Projects:
HFAs have been providing greater oversight during the construction
period for projects that receive TCAP and Section 1602 Program funds.
This oversight includes monitoring disbursements of the program funds,
overseeing the construction process, and ensuring compliance by TCAP
projects with federal cross-cutting requirements such as Davis-Bacon
wage requirements and the National Environmental Policy Act of 1969
(NEPA).[Footnote 146] For example, HFAs must review payrolls for all
TCAP projects to ensure that project owners and contractors are paying
prevailing wages to individuals employed in the construction of the
projects. HFAs also had to ensure that all TCAP projects complied with
the NEPA environmental review process prior to receiving any TCAP
funds. However, according to HUD officials, up to one-third of HFAs
lacked prior experience in overseeing compliance with these federal
cross-cutting requirements.
Under TCAP and the Section 1602 Program, HFAs have been disbursing a
greater volume of funds than in the past and, as a result, have taken
additional steps to limit risk and increase monitoring. For example,
one HFA we interviewed expected to disburse the same amount of funds
in 1 month as it previously disbursed annually. For standard LIHTC
projects, HFAs only allocate tax credits and do not disburse funds.
HFAs assume greater risk by disbursing TCAP and Section 1602 Program
funds because they are responsible for repaying funds to HUD and
Treasury, respectively, in the event of noncompliance. The nine HFAs
we interviewed are supporting an average of 23 to 62 percent of the
total development costs of projects through awards of TCAP or Section
1602 Program funds. Prior to the Recovery Act, three of these HFAs
typically did not provide loans or grants to LIHTC projects, but now
they are providing an average of 23 to 47 percent of total project
financing through TCAP and Section 1602 Program project awards. The
remaining six HFAs typically funded up to about 33 percent of the
total project financing for some LIHTC projects through other loan
programs prior to the Recovery Act. HFAs have mitigated risks by
broadening the scope of guarantees and by requiring project owners to
certify the accuracy of the information provided.
Approaches to overseeing the construction process varied across HFAs,
although most HFAs we interviewed planned to apply their existing
construction oversight framework to oversee TCAP and Section 1602
Program projects. These activities include site inspections of varying
frequency. For example, some HFAs we interviewed planned to conduct
monthly site inspections, while two HFAs said that construction
superintendents would visit project sites twice per month or more
frequently if needed. Site inspections help confirm whether work
performed on a project is carried out as planned and approved by the
HFA. One HFA also told us that it planned to facilitate communication
among project owners, investors, and other lenders by sharing
information or holding more frequent meetings with these stakeholders.
HFAs and project owners told us that meeting Davis-Bacon wage
reporting and NEPA environmental review requirements for TCAP projects
required time and resources, and it was easier for HFAs with prior
experience to meet the requirements. We previously reported that HFAs
viewed Davis-Bacon and NEPA requirements as a challenge and followed
up with HFAs and project owners on ways that they have been meeting
the requirements. To comply with Davis-Bacon wage requirements, some
HFAs developed new processes for data collection and planned to apply
additional scrutiny to data received from project owners or more
frequent reporting, and other HFAs developed training for project
owners. To comply with NEPA requirements, some HFAs and project owners
drew upon their experience administering HOME funds, which also
require NEPA compliance.[Footnote 147] Project owners said that in
some cases they allocated additional resources to projects to complete
environmental reviews ahead of project closings.
In Response to New Asset Management Responsibilities, HFAs Have
Increased Long-Term Monitoring and Put in Place Stricter Requirements
for Project Owners:
In response to the new asset management responsibilities HFAs have
accepted under TCAP and the Section 1602 Program, all HFAs we
interviewed reported that they had strengthened their procedures for
long-term monitoring to meet the program requirements, mitigate risks,
and help ensure projects' long-term physical and financial viability.
Approaches to long-term asset management varied depending on an HFA's
resources, workload, and asset management experience. However, all
nine of the HFAs we interviewed have implemented some oversight
changes, such as increasing the number of inspection visits over the
15-year tax credit compliance period and the frequency of reporting,
as well as enhancing financial monitoring of projects receiving TCAP
and Section 1602 Program funds when compared with standard LIHTC
projects.
Of the nine HFAs we interviewed, four HFAs said that instead of
inspecting projects every 3 years as required by the LIHTC program,
they will inspect projects annually or more often. Seven HFAs said
that they will require reports from project owners on a monthly,
quarterly, or as-requested basis that may include information such as
project income statements. Five of the nine HFAs we interviewed have
the ability to approve and remove the project's management agent and
general partner of the project owner if the project is in
noncompliance with LIHTC requirements or the terms of the HFA's
agreement with the project owner. Two HFAs said that they have new
software systems in place to manage asset management activities, and
four said they plan to provide additional training for staff to manage
the monitoring and reporting for TCAP and Section 1602 Program
projects. HFAs said that they have also strengthened financial
requirements for project owners. All nine HFAs require annual
financial audits or reports. Other changes HFAs have made include
requiring or performing capital needs assessments to determine the
condition and expected life of the physical infrastructure,
calculating replacement costs, and assessing whether a project's
replacement reserve will be adequate to meet the expected capital
needs of a project. Some HFAs also require project owners to provide
guaranties that the project owner will ensure compliance with program
requirements or the project owner will be personally liable to repay
TCAP and Section 1602 Program funds to the HFA. Some HFAs also have
strengthened requirements for financial reserves or changed how and
when the reserves can be accessed to ensure that there is a source of
funds to draw upon in the event the project encounters operating
difficulties. Some project owners with whom we spoke said that HFAs
have been careful in structuring requirements to protect the HFAs'
interests and that in some cases the HFAs' requirements and plans for
monitoring were stricter than those typically required by third-party
investors.
Nearly all HFAs we interviewed noted that a third-party investor
provides additional oversight and monitoring or financial interest in
a project. TCAP requires tax credits to remain in transactions, and
project owners typically sell the tax credits to third-party
investors. Therefore, most TCAP projects have some level of private
investment and oversight. In contrast, the Section 1602 Program allows
HFAs to exchange all of the tax credits awarded to a project in return
for Section 1602 Program funds. As a result, many Section 1602 Program
projects do not have third-party investor oversight. However, some
HFAs have required third-party investor participation in all or the
majority of their Section 1602 Program projects, and they plan to work
in coordination with investors on asset management activities. Based
on information from our survey, 32 HFAs expected to have a total of
485 projects without third-party investors out of a total of 825
projects expected to be financed with Section 1602 Program funds.
[Footnote 148] In our survey, about half of the HFAs planned to
outsource asset management functions for TCAP and the Section 1602
Program. Based on our interviews with nine HFAs, we found that HFAs
with past asset management experience and HFAs with a smaller volume
of projects often chose to conduct their own asset management
activities over the 15-year compliance period. In contrast, HFAs with
little asset management experience or many projects requiring
oversight often chose to hire a third-party contractor to perform
asset management activities. However, one HFA in each of these
categories chose to work in coordination with individual investors on
asset management activities rather than relying solely on its own
asset management efforts or the work of outsourced asset managers.
Five of the nine HFAs we interviewed are conducting their own asset
management activities because they have significant experience
managing loan portfolios or because the number of projects is
manageable. One HFA we interviewed has 35 years of asset management
experience, and two have 20 years of asset management experience. One
of these HFAs also conducts asset management for HUD's performance-
based contract administration program and has won awards for its asset
management systems. Six HFAs we interviewed said they have or are
developing policies, procedures, or "watch lists" to assess project
performance and identify projects that may be in need of additional
monitoring.
One of the two HFAs we interviewed planning to outsource asset
management activities has contracted with a national syndicator to
provide asset management for its projects without private investment.
[Footnote 149] The syndicator has said that it will provide the same
asset management services to the HFA as it would provide to investors
in its LIHTC investment funds. The HFA has a staff person that is
receiving an asset management certification and will work closely with
the syndicator to ensure that asset management functions are performed
in accordance with the syndicator's scope of work. The syndicator's
scope of work covers both the leasing and asset management phases and
includes activities such as providing quarterly project performance
reports that rate the risk of the project based on market conditions
and project owner capacity, conducting annual property inspections,
and performing annual long-term financial analysis. The syndicator
said that it helped the HFA structure a more comprehensive scope of
work because it felt that the asset management activities started too
late to ensure project success.
HFAs noted a range of challenges associated with asset management. One
HFA we interviewed said that explaining the HFA's new asset management
role to developers has been a challenge because the HFA does not
usually act as a lender or party with long-term interests in the
projects. Rather, the agency's primary role is that of tax credit
allocation with compliance monitoring as required by IRS. HFAs also
noted the cost of asset management as a challenge. A few HFAs are
charging low or no fees for asset management because of the stress the
fee puts on the project budgets. Other HFAs have estimated a fee based
on market research and costs associated with their current operations,
but they are not sure the fee will be sufficient to cover costs. Most
HFAs we interviewed estimated that their initial asset management
costs would be highest during the first years implementing TCAP and
the Section 1602 Program, including the initial construction
monitoring period. For example, one HFA estimated that 20 - 30 percent
of its asset management costs would be incurred within the first 2
years of overseeing TCAP and Section 1602 Program projects. However,
some HFAs and investors noted future challenges as projects age. They
said that between the fifth to twelfth year of a project's life,
projects may begin to show signs of physical and financial stress due
to capital replacement needs, diminishing reserves, or resident
turnover. One investor said that HFAs may not have the financial
resources to support troubled projects in the same way as an investor
would.
HUD Strategy for Monitoring TCAP Does Not Fully Consider Project Risks:
HUD officials told us that the agency has been relying on existing
monitoring systems to determine whether funds have been spent properly
or to track projects that have not been complying with the terms and
conditions of TCAP agreements. The monitoring systems consist of HUD
Office of Inspector General (OIG) audits (thus far ongoing in three
states), HUD Office of Fair Housing and Equal Opportunity (OFHEO)
reviews in 10 states, HOME reviews done by HUD field offices when
projects include both TCAP and HOME funds, and HFA reviews. HUD
officials told us that they can rely on existing Office of Community
Planning and Development (CPD) field staff to carry out HUD's
monitoring and also would plan to look for patterns of problems
identified by the OIG, OFHEO, CPD staff, or HFAs during oversight and
review activities. HUD officials noted that the agency's emphasis so
far has been on the obligation, outlay, and tracking of funds to the
HFAs and their disbursement to project owners.
As well as HFAs, HUD officials also expect that third-party investors
will monitor TCAP projects for compliance in the same way that these
stakeholders have been responsible for monitoring LIHTC projects. TCAP
requires tax credits to remain in transactions, and project owners
typically sell the tax credits to third-party investors. However, we
found that in some cases projects included a limited amount of LIHTCs
and project owners chose not to sell these credits to a third-party,
thereby limiting or precluding third-party oversight of these
projects. In traditional LIHTC projects, third-party investors play an
important role in ensuring compliance with tax credit program
requirements because they risk losing their ability to claim the tax
credits if the project is not in compliance with these requirements.
Some HFAs told us that they will coordinate with and rely on reviews
and audits that investors and private construction lenders perform to
satisfy the HFAs' asset management obligations under TCAP.[Footnote
150] In cases when an HFA is coordinating with a third-party investor,
the investor may provide early warning information that would be
useful to the HFA if the HFA had to act quickly to assist the project
or ensure compliance with TCAP requirements. But, some TCAP projects
received a nominal amount of tax credits, and project owners chose not
to sell the tax credits. These projects lack the additional oversight
provided by third-party investors. In these cases, HFAs may be the
sole monitor, other than HUD, ensuring that funds are spent properly
and that the project owners comply with TCAP terms and conditions.
HUD officials acknowledged that in the absence of a significant third-
party investment, the amount of overall scrutiny a TCAP project would
receive is reduced; however, HUD officials told us that at this point
in time they were not aware of how many projects either had nominal
LIHTC awards or lacked third-party investors. Our limited review
showed that some TCAP projects in Florida received a nominal amount of
tax credits and lacked third-party investors that otherwise would
provide an added layer of oversight for compliance with TCAP
requirements. Specifically, we found that 13 of 25 projects (52
percent) that were allocated TCAP funds in Florida had received a
nominal amount of LIHTCs. The Florida Housing Finance Corporation
(FHFC) explained that it had awarded $100 in LIHTCs to each of these
projects and that the project owners made $650 equity investments to
the projects in return for the tax credit awards instead of selling
the tax credits to a third-party investor.[Footnote 151] FHFC plans to
institute oversight activities for all of its TCAP and Section 1602
Program projects.[Footnote 152] Nonetheless, HUD has not required HFAs
to enhance their oversight or take other actions to account for the
absence or limited involvement of third-party investors. Without the
oversight provided by third-party investors and with the limited
monitoring planned by HUD, these TCAP projects may constitute a higher
risk to HUD and to the HFAs that they will become troubled or fall out
of compliance with LIHTC requirements.
In addition, although HUD's monitoring strategy relies partly on
monitoring by third-party investors and HOME program reviews, HUD
officials told us that they will not know how many TCAP projects have
third-party investors or how many also have HOME funds until projects
are completed and HFAs submit final reports on the projects.
Therefore, HUD cannot currently determine the number of projects that
are being monitored by others. Additionally, HUD does not currently
know how many TCAP projects will be covered through HOME reviews.
According to HUD officials, once projects are complete and all project
information has been reported to HUD, it plans to use that information
to tailor a monitoring plan to these projects. It will be important
for HUD's TCAP monitoring strategy to recognize the differences in
risk for projects without third-party investor oversight and those
with investor oversight as well as those projects not covered by HOME
reviews.
As discussed above, HUD officials said they have been focused on
getting Recovery Act funds to HFAs. Since beginning TCAP, HUD has
drawn upon limited staff resources in headquarters to administer and
track the spending of TCAP funds--its Office of Affordable Housing
Programs administers TCAP, and four existing headquarters staff from
the HOME program work on TCAP (three part-time and one full-time). HUD
officials noted that the Recovery Act does not set aside
administrative resources to HUD to either implement the TCAP program,
which was performed by existing HOME program staff, or to monitoring
HFAs for compliance. In comparison, the Recovery Act provided
additional resources for monitoring under the Neighborhood
Stabilization Program, which HUD's CPD also performs.
Without a plan for identifying projects without third-party investor
oversight and ensuring sufficient oversight when investors are absent,
HUD will face constraints in ensuring that TCAP projects remain in
compliance with program requirements, some of which apply for 15 years
or more. Furthermore, without knowing whether projects involve third-
party investors, HUD cannot focus its limited monitoring resources on
the projects with the least oversight by others.
Treasury Developed a Risk-Based System for Monitoring HFAs:
Unlike HUD, which relies on existing program oversight resources,
Treasury has developed a system to conduct compliance reviews to
ensure that the HFAs are following the terms and conditions of the
Section 1602 Program agreement, and are providing oversight over the
project owners receiving the awards. Treasury officials told us that
their Office of Fiscal Assistant Secretary received $3 million to
administer the Section 1602 Program and the Section 1603 Renewable
Energy Program from the total funds appropriated to Treasury for
administrative expenses under the Recovery Act. According to Treasury
officials, they have designed a risk-based system in which they plan
to conduct compliance monitoring on-site for 23 HFAs and remote
monitoring for the remainder of the HFAs by the end of calendar year
2010. Whether monitoring is conducted on-site or remotely depends on
factors such as identified risks and the size of the grant. The review
generally consists of an interview, followed by a review of program
files, a review of a sample of project files, a review of financial
management information, and a cross-check to the records held at
Treasury. After the review is completed, if there are any findings,
staff request a corrective action or action plan, depending on the
nature and severity of the noncompliance. According to Treasury
officials, if staff recommend a corrective action or action plan,
Treasury will follow up to ensure that the HFA takes the necessary
corrective action. If the agency fails to take the corrective action,
Treasury will take steps to bring the HFA into compliance and, if
necessary, recapture funds.
As of August 2010, Treasury officials told us that they had completed
nine compliance monitoring reviews and have been conducting six
additional HFA reviews. Treasury officials said that the kinds of
issues they found in their reviews relate to failure to properly
document files, lack of a policy to handle fraud by project owners,
and, in one case, unresponsiveness to Treasury's request for
documentation. Treasury officials told us that these issues were often
resolved during the compliance review, but that some issues required
additional follow-up with the HFAs. In the case of the unresponsive
HFA, Treasury officials said they have put a hold on the HFA's Section
1602 Program funds until they are sure the HFA has provided all
materials required to satisfy Treasury's requests.
TCAP Reporting Requirements Have Been More Complex Than Section 1602
Program Requirements:
Recovery Act recipient reporting requirements are different and more
complex for TCAP than for the Section 1602 Program. More specifically,
the Recovery Act describes recipient reporting requirements, including
that of estimated jobs created and retained.
The Recovery Act 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 recipient reporting requirements.
As Recovery Act-funded recipients, HFAs must file quarterly reports
through FederalReporting.gov on a number of data elements, including
the number of full-time equivalent jobs funded by TCAP funds during
that quarter. Jobs must be counted in accordance with methodology
provided by OMB. OMB guidance limits the number of jobs reported to
the actual use of the funds in each quarter. In cases of construction
funding based on a mix of financing sources, HFAs can count the jobs
created or retained based on the proportion of TCAP funds. In addition
to reporting through FederalReporting.gov, HFAs report information on
TCAP projects through two HUD systems. HFAs use HUD's Integrated
Disbursement and Information System to report on the selection of TCAP
projects by HFAs as well as disbursement of TCAP funds. HFAs also use
the Recovery Act Management and Performance System to report on
project compliance with environmental reviews.
Although not subject to recipient reporting, Treasury chose to collect
project information through quarterly performance reports submitted by
HFAs on an Excel spreadsheet. HFAs need only make one report of all
jobs created or retained by Section 1602 Program funds for each
project. HFAs submit estimated information on the number of FTE 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. Except for requiring the use of
FTEs, Treasury has not issued detailed guidance specifying job
estimation methodology under the Section 1602 Program.
Job counts between the programs and across HFAs are not comparable.
About two-thirds of the HFAs in our survey said that they will conduct
a review of the information being provided by the project owners, but
others said that they relied on signed statements from the project
owners attesting to the accuracy of the jobs estimates. Furthermore,
because of the differences in job reporting methodology for TCAP and
the Section 1602 Program, job counts reported for the programs varied
widely. We previously reported that some HFAs were concerned about
underreporting jobs that TCAP funds created because of OMB's
requirement that they count only jobs directly funded by TCAP.
[Footnote 153] They said that because projects funded under TCAP would
not have moved forward without TCAP funds, all the jobs associated
with the projects should be counted. For example, $2 million in TCAP
funds could enable an $8 million project to be constructed that
otherwise would not have been built, but only the jobs directly
related to the $2 million TCAP expenditure would be reported.
Conclusions:
Although constrained by limited resources or time, HUD and Treasury
developed two new programs, TCAP and the Section 1602 Program,
respectively, that are designed to provide capital investment to LIHTC
projects hit hard by the economic crisis. TCAP and the Section 1602
Program have had a strong impact on the LIHTC market. However, our
review identified two areas of concern: one that relates to HUD's
identification of higher-risk TCAP projects and another that relates
to challenges that some project owners may face in meeting a December
2010 deadline for spending funds in Treasury's Section 1602 Program.
Under TCAP, HFAs have increased responsibilities for asset management
and monitoring compliance of project owners with the terms and
conditions of the program. However, some projects with a nominal
amount of tax credits may lack the benefit of oversight by third-party
investors. Nonetheless, HUD has not identified projects that lack this
additional level of oversight and thus may be at higher risk of
noncompliance with TCAP and LIHTC requirements. Although HUD relies in
part on HFAs to provide oversight, HUD does not know the extent to
which the HFAs will provide additional oversight for projects that
lack third-party investors. HUD is relying on existing monitoring
systems and resources, but has not fully identified those projects
that may be subject to review under its existing system (such as TCAP
projects that also have HOME funds) or developed additional guidance
or oversight of TCAP projects where there is little or no third-party
oversight. HUD could take a more active role in monitoring TCAP
projects--first by identifying those projects that may present a
higher risk of noncompliance, and second by identifying those projects
that also have HOME funds. HUD could also more effectively use limited
oversight resources by using a risk-based approach that considers
whether a TCAP project has third-party investors and whether HFAs are
providing enhanced oversight. Likewise, by gathering information about
the number of the projects that have TCAP and HOME funding, HUD could
more effectively plan reviews and deploy staff. Without a more
rigorous approach to oversight, HUD will be limited in its efforts to
ensure that TCAP projects meet program requirements and continue to
provide a source of affordable housing.
Treasury's regulations require project owners to spend 30 percent of
eligible project costs by December 31, 2010, to continue receiving
additional Section 1602 Program funds in 2011. However, some of the
HFAs and project owners expressed concerns about meeting the 30
percent requirement because of unexpected delays stemming from the
time needed to assemble funding, litigation, or construction or
permitting issues. For instance, as of June 30, 2010, about 39 percent
of Section 1602 Program projects that we reviewed have yet to close,
leaving little time to meet the spending deadline. Projects that do
not meet the deadline would not be eligible to receive any additional
Section 1602 Program funds. In response, other sources of funding
might withdraw from the projects, and project owners would face
difficulty finding replacement financing. Thus, the 30 percent
spending requirement might stop projects already under way--an
unintended irony for a program designed to jumpstart stalled projects.
Should there be a significant number of such projects, Treasury will
be challenged in ensuring that the program achieves its intended
goals. Specifically, although Treasury has been developing guidance
for how HFAs should monitor project spending, it has yet to develop
contingency plans in the event that significant numbers of projects
stall again.
Recommendations for Executive Action:
Because the absence of third-party investors reduces the amount of
overall scrutiny TCAP projects would receive and HUD is currently not
aware of how many projects lack third-party investors, HUD should
develop a risk-based plan for its role in overseeing TCAP projects
that recognizes the level of oversight provided by others.
Treasury should expeditiously provide HFAs with guidance on monitoring
project spending and develop plans for dealing with the possibility
that projects could miss the spending deadline and face further
project interruptions.
Agency Comments and Our Evaluation:
We provided a draft of this report to HUD for review and comment. HUD
responded by saying it will identify projects that are not funded by
HOME funds and projects that have a nominal tax credit award. HUD said
it will make these identifications after projects are complete and
develop a monitoring plan tailored to these projects. It will be
important to ensure that HUD's approach includes a risk-based plan. We
revised our section to recognize actions that HUD proposed in their
response. HUD also provided technical comments that we incorporated as
appropriate.
We provided a draft of this report to Treasury for review and comment.
Treasury responded by saying that it has taken a number of steps to
ensure HFAs and project owners have a complete understanding of the 30
percent deadline and are prepared to comply with that requirement.
Further, Treasury said it plans to continue monitoring the impact of
the 30 percent spending deadline on the program and to provide
additional guidance necessary to address unforeseen or unexpected
circumstances. In our review of nine HFAs, we found that about 39
percent of the projects awarded funds in those nine states had not yet
closed, which is the first step to being able to draw funds from
entities that provide financing. Treasury's development of timely
guidance may be particularly important because the December 31
deadline for spending 30 percent of program funding is quickly
approaching. Treasury also provided technical comments that we
incorporated as appropriate.
Many Recipients Are Citing Greater Ease Meeting Recovery Act Reporting
Requirements, but Some Recipients Continue to Face Difficulties
Calculating Jobs:
According to Recovery.gov, as of August 24, 2010, recipients reported
on close to 200,000 awards indicating that the Recovery Act funded
approximately 750,000 jobs during the quarter beginning April 1, 2010,
and ending June 30, 2010.[Footnote 154] As reported by the Recovery
Accountability and Transparency Board (the Board), the job
calculations are based on the number of hours worked in a quarter and
funded under the Recovery Act and expressed in FTEs.[Footnote 155]
Officials from many states reported that the recipient reporting
process was, by this fourth round, becoming routine. Given that no new
reporting guidance was issued by OMB during the quarter and that a
time extension was again granted by the Board, recipients indicated
they had few problems reporting.[Footnote 156] The FTE calculations,
however, continue to be difficult for some recipients as evidenced by
our field work in selected jurisdictions covering two energy programs.
Fourth Round Data Indicate Progress in Linking of Recipient Reports,
Which Can Facilitate Tracking Across Quarters:
We reviewed 74,249 prime recipient report records from Recovery.gov
for this fourth round. This was 3,592 more than submitted in the
previous quarter and represents about a 5 percent increase from round
three. For our analyses, in addition to the round four recipient
report data, we also used the round one, round two, and round three
data as posted on Recovery.gov as of July 30, 2010.
We examined recipient reports to identify the extent to which progress
was being made in addressing several key limitations we had found in
our prior reports, including:
* the inability to link reports for the same project across quarters;
* reporting errors;
* unusual values, such as award amounts of zero, or relationships
between values requiring further review because they are unexpected; or:
* flaws in the data logic and consistency, such as reports marked
final that show a significant portion of the award amount not spent.
* Linking Reports for the Same Projects across Quarters:
Our analysis showed better linkage of reports across quarters, but we
still found instances where it appears reporting on projects was
discontinued and may indicate possible issues with linking. The
ability to link reports across quarters is critical to tracking
project funding and FTEs that are key indicators of project results.
For example, if two consecutive quarterly reports on the same project
are not linked, they become identified as two separate records, having
an impact on the cumulative funding calculation and the ability to
associate FTEs reported in the separate quarters with one another.
Similarly, mislinked reports would result in funding and FTEs from two
different projects being incorrectly associated with one another. For
the data in Recovery.gov, the award key data field is used to track
recipient reports across quarters.[Footnote 157]
In our previous report, we performed a series of matching operations
between the three rounds of prime recipient reports using the award
key data field. We extended these matches to the current fourth round
of prime recipient reports to continue reviewing the tracking of
reports from one quarter to the next and to identify potential
mismatches of reports. We identified 1,111 fourth round prime
recipient reports--1.3 percent of the fourth round prime recipient
reports--that reflected a break in reporting (e.g., recipient reports
that appeared in rounds one and four but not rounds two and three or,
similarly, appeared in rounds two and four but not round three, etc.).
Even though the number of prime recipient reports has increased for
this fourth round, this is a smaller number of reports showing a break
in reporting than we observed in the previous quarter. In our previous
match across three rounds of reports, we identified 1,358 prime
recipient reports that appeared in rounds one and three but not round
two.
We performed another analysis using the final report and project
status indicator fields that also suggested some concerns with missing
linkages or potential errors in one of the reporting fields. As
before, we identified recipient reports that only appeared in prior
rounds, but not in round four. For prime recipients whose last report
appeared in one of the prior three rounds, we examined the final
report status and the project status fields, as those would presumably
be the last reports from these projects. As shown in table 11, of the
total 14,542 prime recipients that did not report in round four,
overall, 34 percent of their last prior round reports were not marked
as final and 27 percent showed project status as being less than 50
percent complete or not started. These data suggest that, among other
reasons, the projects may not have been completed, or they should have
been linked to a report in a subsequent quarter, or that recipients
were locked out of the reporting system.
The percentage not marked as final is less than we observed in our
previous analysis. However, the number of recipient reports from round
three that did not appear in round four, with no indication that the
round three report was final or that it was not close to completion,
is quite similar to the number of discrepancies found in our last
report. Based on these results showing projects that were not marked
as final and indicating that they were in the earlier stages of
implementation, it seems reasonable to expect that a fourth round
quarterly report should have been filed, but the necessary linkage has
not been made. Alternatively, these fields may not show the correct
status.
Table 11: Number, Final Report Designation, and Project Status of
Prime Recipient Reports Not Appearing in Round Four:
Prime recipient reports last reported in: Round 1;
Number of reports: 2,671;
Percent not marked as final report: 50%;
Percent project status is "not started" or "less than 50 percent
complete": 43%.
Prime recipient reports last reported in: Round 2;
Number of reports: 5,983;
Percent not marked as final report: 30%;
Percent project status is "not started" or "less than 50 percent
complete": 23%.
Prime recipient reports last reported in: Round 3;
Number of reports: 5,888;
Percent not marked as final report: 30%;
Percent project status is "not started" or "less than 50 percent
complete": 23%.
Prime recipient reports last reported in: Total;
Number of reports: 14,542;
Percent not marked as final report: 34%;
Percent project status is "not started" or "less than 50 percent
complete": 27%.
Source: GAO analysis of Recovery.gov data as of July 30, 2010.
[End of table]
During the most recent reporting quarter, recipients were able to
reorganize unlinked or mislinked reports between rounds three and
four. This may have facilitated the reduction in the proportion of
reports that did not appear in round four, but that were not marked as
a final report.[Footnote 158]
Reporting Errors:
In addition to our examination of report linking across quarters, we
continued our monitoring of errors or potential problems by repeating
many of the analyses and edit checks reported in our earlier reports
using the fourth reporting period data. The results of such analyses
can help improve the accuracy and completeness of the Recovery.gov
data and inform planning for analyses of recipient reports over time.
In general, the overall results were similar to what we observed in
the previous round.
For example, we identified a mismatch of 128 reports for Treasury
Account Symbol (TAS) codes and 115 for Catalog of Federal Domestic
Assistance (CFDA) numbers.[Footnote 159] This is a small increase from
the previous round, where 117 reports for TAS codes and 112 reports
for CFDA number were mismatched to the agency name fields. We also
checked the data fields on the number and total amount of small
subawards of less than $25,000 and identified 443 reports where the
amount reported in both small subawards and small subawards to
individuals were the same. This may be an indicator of improper keying
of data or inaccurate placement of award data in a data field, both of
which negatively affect data accuracy. The 443 reports is a small
increase from the 436 reports identified in the previous round.
However, the number of reports where the same value was entered for
the number of subawards and the total dollar value of subawards was
reduced, from 110 in round three to 101 in round four.
Unusual or Atypical Data Values:
Unusual or atypical data values alert the analyst to potential
inaccuracies. We checked unusual or atypical data values by
identifying reports where the award amount was zero or less than $10.
We know that it is highly improbable that grants were awarded in these
small amounts. Finding numbers like these suggests improper keying of
data or a misinterpretation of the guidance for FederalReporting.gov,
both of which negatively affect data quality. We determined that the
number of reports where this occurred was reduced to 37 reports in
this round out of the 74,249 prime recipient report records, down from
74 reports in round three.
Flaws in Data Logic and Consistency:
Data logic and consistency inform the analyst about whether the data
are believable, given program guidelines and objectives. To assess
consistency in the range between award amount and amounts reported as
received or expended, we repeated our analyses of reports marked as
final to identify possible over or underspending or misreporting by
identifying final reports where the amount received or expended by the
recipient was less than 75 percent of the award amount or exceeded the
award amount by 10 percent or more. If the final report status is
correct, this check can help agencies identify where award funds were
not being spent, which may indicate project implementation problems.
If more funds were spent than were awarded, it may indicate problems
with project financial accounts or controls. Similar to round three, 3
percent of the round four reports marked as final showed an amount
received or expended that was not within 75 percent of the award
amount, and no reports exceeded the award amount by 10 percent or more.
Many State Officials Cited Increased Ease Compiling and Reporting
Recipient Data:
Many state officials noted that the reporting process is starting to
become routine. They highlighted the fact that guidance remained
stable for this round of reporting and that the early decision to
extend the reporting deadline from July 10 to July 14 contributed to
the success of the reporting process. For example, officials in
California stated that the fourth round of recipient reporting went a
lot smoother than prior rounds; further, the extension of the deadline
to July 14 allowed many of the state agencies to obtain more complete
data through the end of the month of June and report this to
FederalReporting.gov. Similarly, officials in Colorado reported that
the deadline extension to July 14 allowed for three additional working
days for recipients to review their submissions and make necessary
corrections, which they felt improved the data quality. Officials in
the District of Columbia reported that in general there are no
difficulties in the District's recipient reporting process and the
process has become smoother with each subsequent reporting period,
while officials in Illinois stated that with the reporting guidance
remaining the same, their agencies are becoming familiar with the
reporting process. Officials in Georgia noted that they did not hear
negative feedback from the state agencies regarding the recipient
reporting process or the FederalReporting.gov Web site during this
round.
A Few States Are Preparing for Changes in Leadership:
A number of the states we reviewed are anticipating leadership changes
in the upcoming gubernatorial elections. In preparation, a few states
noted that they are planning or are undertaking changes in procedures
to ensure continuity during a transition. For example, Michigan
Economic Recovery Office officials told us that because of anticipated
changes to the state's administration, they moved to a decentralized
process during this round of reporting to allow time for state
agencies to adjust to reporting. Michigan state agencies submitted
quarterly recipient reports directly to the federal government via
FederalReporting.gov rather than to the state's Economic Recovery
Office, which had previously served as a centralized reporting point.
The officials told us that the decentralized reporting process for the
quarter ending June 30, 2010, went as smoothly as they had
anticipated, and the quality of the data submitted by state agencies
to FederalReporting.gov has improved over time. The governor's office
in Colorado is in the initial planning phase of transitioning to a new
administration. Colorado state officials commented that the recipient
reporting process has become a stable activity that should be able to
move into a new administration with relatively little disruption.
Officials in Georgia did not have any real concerns regarding a
transition in administration, as the state now has recipient reporting
systems and processes in place. California officials stated that steps
have already been taken to ensure continuity in recipient reporting
for the duration of the Recovery Act, while New Jersey officials noted
that there were not many challenges related to recipient reporting
amid a transition to a new administration in their state.
States Focus Their Recovery Act Web Sites on Providing Information to
the Public and Continue to Enhance Web Site Features:
Many states noted that their Web sites were designed to provide
information about Recovery Act programs, funding, and eligibility to
the people of their states. For example, officials in California
commented that the state Web site was designed for use by the average
Californian to keep citizens informed about the Recovery Act's impact
in California. Officials in Arizona noted that their Web site was
designed to provide transparency to the public on how stimulus funds
are being spent in the state. Several state Web sites were also used
to provide potential applicants information on how to obtain grants,
assistance, and contracts. For example, officials in the District of
Columbia noted that their Web site provides information about Recovery
Act funding received by the city and is a resource for people and
organizations who are seeking opportunities to apply for grant
funding, assistance, and potential contracts involving Recovery Act
funds.
A number of state officials reported that they are continuing to add
content to their Web sites. For example, Ohio's Recovery Act Web site
recently added an interactive searchable map of funds awarded by
location and enhanced information on the use of funds that are not
covered by recipient reporting requirements. Officials in Texas said
that enhancements in the past year have included new tracking reports
to follow dollars, an interactive county map, and disbursement
information. As another example, the Massachusetts Recovery and
Reinvestment Office recently created a new Recovery Act Web site using
an outside firm to help develop the most important features. An
official from that office felt that the Recovery Act data collection
and reporting effort will positively affect state government by
improving policy and management discussions through the use of data.
Most DOE EECBG and Weatherization Program Recipients We Interviewed
Followed OMB's FTE Calculation Guidance, and DOE's Recovery
Operations' Data Quality Efforts Continue to Develop:
EECBG Program:
The EECBG program is administered within DOE and was funded for the
first time with the passage of the Recovery Act. Because over 2,300
state, local, and tribal governments are eligible for direct formula
EECBG grants and the grants are also awarded on a competitive basis,
the program has many different types and sizes of recipients. For
example, each state-level recipient must use at least 60 percent of
its allocation to provide subgrants to local government units that are
not eligible for direct grants, making the state the prime recipient
while the local government unit is a subrecipient. Larger local
government units receive grants directly from DOE, making them prime
recipients.[Footnote 160] For the fourth round of reporting, 2,116
prime recipients of the program reported, as of July 30, 2010, that
they created or retained about 2,265 FTEs funded by the Recovery Act.
We interviewed 13 EECBG state-level and 19 local government recipients
from our 17 selected jurisdictions about their FTE calculations for
the fourth round of reporting. Given that the EECBG program is new,
some of them had not yet reported. For example, District of Columbia
officials from the District's Department of the Environment told us
that their work under the EECBG program had not started in time for
them to report for the period that ended on June 30, 2010. California
Energy Commission officials noted that they had only a few EECBG
recipients for the last reporting round, but there were 50 or 60
recipients for this fourth round. Another recipient commented that
reporting was fairly easy now because they were only reporting
internal data they controlled, as compared to contractor data, but the
official anticipated more complexity as the program expands.
Officials from all of the state-level government units we interviewed
that had FTEs to report said they followed OMB's December 18, 2009,
guidance on FTE calculations. Specifically, they collected the number
of hours worked that were funded by the Recovery Act and divided that
total by the number of hours in a full-time work schedule, with
defined processes in place to collect the EECBG recipient reported
data. For example, Arizona Department of Commerce officials said that
their office is responsible for reporting EECBG recipient data to the
state's Office of Economic Recovery centralized reporting team. The
Office of Economic Recovery works closely with the Arizona Department
of Commerce to ensure that the reporting data are accurate.
Additionally, Arizona officials said there is a review and approval
process in place to check that the hours reported by the program's
subrecipients are accurate. Officials in the Colorado state energy
office noted that it has been easier collecting hours worked from
EECBG subrecipients because DOE requires reporting the hours worked
and the same data is used to convert hours to FTEs for OMB reporting.
However, officials from a few other states said that generating the
most comprehensive and complete job numbers available from
subrecipients is still a challenge. The same challenge surfaced in
education and housing programs that we previously reviewed.[Footnote
161]
A few local government EECBG recipients we interviewed used methods
other than the OMB guidance to estimate their number of FTEs, possibly
resulting in over or undercounting. For example, while DOE guidance
explicitly states that the job-year estimate issued by the Council of
Economic Advisers for job creation potential is not appropriate in
determining direct jobs created or retained and should not be used for
reporting to either OMB or DOE, a New Jersey recipient informed us
that she planned to use this number to estimate her township's FTEs.
We informed the recipient that this was incorrect. In New York, a
county official said that an EECBG contractor was conducting work
under a Recovery Act contract, but the county did not report any FTEs
in its most recent quarterly report because the official did not think
the contractor had any documented jobs created or saved. Related to
the problem with complete FTE numbers, several EECBG recipients
reported confusion about including data from subrecipients on jobs,
which OMB guidance states should be included. For example, officials
from a county in California stated they received conflicting
information about including jobs from subrecipients and vendors in
their recipient reports. The officials said that the conflicting
information emanated from different levels within DOE and between
DOE's and OMB's guidance. The county officials believed they did not
get a clear answer from DOE as to the difference between subrecipients
and vendors. Deciding that it was better to over report jobs than to
under report jobs, they included subrecipient and vendor hours that
could be project-related in their recipient reports.
Based on the recipients we interviewed, there was some evidence that
larger EECBG direct grant recipients seemed to conduct more thorough
recipient reporting data quality reviews than smaller direct grant
recipients, possibly due to their enhanced administrative capacity.
For example, a large EECBG grant recipient in Georgia reported that it
improves data accuracy by prepopulating reports for subrecipients so
they only need to include job numbers and vendor disbursements. In
some instances, it also compares the subrecipient data to other
documents, such as invoices and Davis-Bacon reports. However,
according to a city official in Georgia, for their small grant, no
specific data quality reviews are conducted other than a city official
reviewing the hours worked. Colorado state officials said that
communities that received under $2 million in direct formula grants
have more difficulty administering EECBG grants and meeting the
reporting requirements because they have limited staff resources. As
an example, they mentioned a Colorado city, which received
approximately $1 million in its EECBG grant. Because of limited
resources, the city has the person who administers its housing
programs also administer the EECBG grant. The Colorado state officials
believed that in the case of smaller communities, it would work better
if the state administered the EECBG grants and could report for the
locality.
According to DOE officials, their EECBG program project officers have
as minimum responsibilities making sure the recipients that need to
report are reporting, reviewing the quality of the recipient reporting
data submitted, and ensuring that recipients correct the data if the
project officers detect errors. DOE monitors grant recipients
primarily through its project officers, and project officers work
directly with recipients to provide guidance and evaluate performance.
Project officers also gather and analyze information about project
planning and implementation and outcomes to help ensure data quality
and to ensure that statutory requirements are met. DOE stated that it
has updated the checklist that project officers use to monitor
recipients, and it is also developing guidance that includes best
practices on how states should monitor their subrecipients. Such
increased attention to monitoring recipients, including the quality of
their data, could likely reduce the errors made by recipients.
Weatherization Assistance Program:
During the fourth round of recipient reporting, 58 prime recipients of
DOE's Weatherization Assistance Program submitted their quarterly data
to FederalReporting.gov, and as of July 30, 2010, reported
approximately 12,980 FTEs funded by the Recovery Act. We interviewed 8
state-level and 17 local weatherization assistance recipients from our
17 selected jurisdictions about their FTE calculations for the fourth
round of reporting. As with the EECBG grants, we found that most of
the weatherization assistance recipients we interviewed followed OMB's
December 18, 2009, guidance regarding FTE calculations. A few
recipients, however, did not estimate the number of FTEs correctly for
this round of reporting, resulting in under or over counting. For
example, in one case, subrecipients in Florida did not include the
hours worked by contractors who performed weatherization work at
individual homes, which they attributed to a lack of awareness of the
requirement to report the hours. In California, a local weatherization
assistance provider also expressed confusion regarding reporting
subcontractor hours. In Pennsylvania, a state official indicated some
weatherization subrecipients experienced difficulties, at least in
their initial reports, in submitting FTE information through a new Web-
based reporting system that collects and calculates FTE information
from the subrecipients. The Pennsylvania weatherization recipients
report hours through this system to the Department of Community and
Economic Development, but the system does not currently provide a
method for subrecipients to certify the accuracy of what they report.
A few states had processes in place to help ensure weatherization
assistance recipient reporting accuracy. For example, a District of
Columbia official said the weatherization program staff and Recovery
Act grant managers review submitted recipient reporting data from
community-based organizations on a monthly basis before it is reported
into the District's centralized reporting system. A New York official
reported reviewing data submitted by a sample of subrecipients and
comparing jobs data to contract and payment information in the program
base, while in Georgia, the state weatherization program officials
reviewed each provider's submission and called each provider to
discuss their numbers. This process resulted in some changes to vendor
information and the number of jobs created or retained.
DOE's Recipient Reporting Data Quality Review:
According to DOE officials, during the quarter ending June 30, 2010,
3,988 DOE recipients submitted reports, an increase of about 7 percent
from the quarter ending March 31, 2010, and an increase of about 28
percent from the 2009 year-end reporting period. DOE stated that only
eight recipients are considered nonreporters for this quarter, the
majority of whom belong to a group with consistent challenges in
reporting.
According to a senior DOE official in the department's Recovery
Operations Group, the department's data quality review process for
fourth round recipient reports was enhanced by several factors. The
DOE official noted that access to FederalReporting.gov during the
reporting period helped DOE identify recipients who had not yet filed
and helped assist those who had unsuccessfully filed, entered the
wrong awarding agency code, or confused the reporting required by OMB
with DOE's system. In addition, he said that communicating the
extended time frame for reporting before the reporting period actually
began alleviated last-minute confusion or frustration on the part of
recipients or reviewers, causing fewer recipients to wait until the
last minute to file. Also, the official commented that the July 14 to
July 20, 2010, late submission period, during which recipients were
still allowed to file, allowed recipients experiencing access issues
to FederalReporting.gov to submit reports. During this time period,
DOE staff was also able to identify and assist with issues such as
Central Contractor Registration numbers and getting new passwords for
the last approximately 100 recipients filing reports. The DOE official
noted that while the continuous correction provision has added to the
workload of the DOE team, the period allows them greater time to
review more recipient reported data than previously, identify
potential errors, and work with agency reviewers and recipients to
improve data quality.
The senior official listed a number of frustrations DOE encountered
during the fourth round of reporting, most of which are in areas where
they felt FederalReporting.gov is technologically limited. For
example, according to the official, FederalReporting.gov lacks some
basic logic tests for matching award numbers, with most of the
mismatches resulting from prefix differences. The lack of this
matching capability creates extra work for the DOE staff, but the
Board declined to run separate matching routines for each agency.
In an April 2010 audit report of DOE's efforts to ensure the accuracy
and transparency of reported Recovery Act results, the DOE Inspector
General's (IG) office found that the department had taken a number of
actions designed to do so and made two recommendations, which DOE had
already started to address.[Footnote 162] For example, recipient
reported data elements are compared to information maintained in the
department's financial systems. The IG recommended that DOE adjust the
quality assurance process to include adding comparisons of other data
elements, and a senior DOE official reported that for this round of
reporting, the department has added several data elements to the
original four that were reviewed centrally by the headquarters
Recovery Operations Group. Now reviewers compare recipient reports in
FederalReporting.gov against DOE systems to identify recipient
information that falls outside expected results in seven different
areas. According to DOE, these areas are key project markers being
tracked by the public, the administration, Congress, and within the
department to determine if the high-level goals of stimulating the
economy and creating jobs outlined in the Recovery Act are being met.
The DOE official said that increased attention has been placed on data
quality within DOE systems as a result of this review process, which
has created new communication channels and processes to identify
issues and correct them. In line with the other IG recommendation, DOE
developed a training program for officials responsible for reviewing
recipient data submissions that includes detailed steps and procedures
for officials to follow when reviewing recipient quarterly data for
significant reporting errors and material omissions.
The Inspector General Community Has a Series of Efforts Aimed at
Increasing Recipient Reported Data Quality:
The IG community is also performing data quality audits of federal
agencies' data quality review efforts for their recipient reports. In
June, an IG-led Board review of the effectiveness of the agencies'
data quality review processes was completed.[Footnote 163] To identify
material omissions and significant errors that were not identified by
the reviewed agencies for the quarter ending December 31, 2009, the
IGs performed reviews of the recipient reported data on
FederalReporting.gov and attempted to compare that data with the data
available in the agency-owned systems. In general, the IGs found that
the agency systems were legacy systems that had been developed,
designed, and implemented prior to the Recovery Act. As a result, data
elements were not always consistent and at times were nonexistent,
making matching the data difficult if not impossible. The final report
provided three recommendations to the Board to pursue discussions with
the appropriate government entities regarding improving the
effectiveness of agency data quality reviews. These recommendations
included establishing a uniform and consistent governmentwide award
numbering system; making mandatory the suggested data logic checks
identified in OMB guidance; and issuing guidance to better define
material omissions and significant errors. Although consensus was not
reached among the IGs regarding the award numbering system, there was
general consensus regarding the logic checks and guidance
recommendations. The next effort aimed at recipient reported data
quality includes a Board review focusing on key data reporting
elements and the factors contributing to errors in the recipient
reports.
Intergovernmental Interaction Is a Critical Component of Recovery Act
Operations and Will Likely Have Implications beyond the Act:
The new procedures and tools developed to implement the Recovery Act
are reshaping intergovernmental interactions and ways that governments
collect, maintain, and report information. For example, the federal
government built a huge data warehouse, FederalReporting.gov, which is
populated by thousands of governments and other Recovery Act fund
recipients, to ensure that the public receives as much information as
possible on the implementation of the Recovery Act. Because such a
wide variety of information is required and since some elements are
being reported for the first time, OMB used a variety of methods to
train federal agencies and recipients of Recovery Act funding on how
to comply with their reporting responsibilities. OMB and federal
agencies provided several types of clarifying information to
recipients, as well as opportunities to interact and ask questions or
receive help with the reporting process. These included weekly phone
calls between OMB and groups representing the state budget and
comptrollers offices, weekly calls between state reporting leads,
webinars, a call center, and e-mail outreach. In addition, the Board
recently reported that, along with the IG community, they have
provided more than 2,000 training and outreach sessions to federal,
state, and local government employees and to private sector
individuals involved in Recovery Act implementation.
According to many of the state officials we interviewed, the Recovery
Act's reporting requirements also promoted more interaction between
state and federal agencies, state agencies, and within departments of
these state agencies. For example, Ohio officials stated that the
governor's stimulus office had established contacts with OMB,
administration officials, and other federal agency contacts through
work on Recovery Act implementation and monitoring. Officials from
Illinois noted that recipient reporting was one of the few efforts
that brought their otherwise very independent state agencies together.
Colorado state officials reported that the program and accounting
staffs within each state agency are working together closely to help
ensure the accuracy and quality of the Recovery Act data. A few state
officials, however, commented that although communication with federal
agencies and other entities has increased due to the recipient
reporting requirements, the communication is aimed primarily at
dispelling confusion and is not necessarily positive. For example,
Texas state officials commented that the one change that has been
prompted by recipient reporting is the significant effort required to
communicate reporting requirements to subrecipients and to collect,
review, and submit the data.
Officials from a number of states expressed hopes that the increase in
intergovernmental interactions resulting from the Recovery Act
reporting requirements will continue after the act's reporting
requirements expire. For example, District of Columbia Recovery Act
coordinators schedule a weekly teleconference for all District
agencies receiving Recovery Act funds to provide status updates and
have discussions relating to the Recovery Act. They intend to continue
scheduling the meetings after the Recovery Act funds are expended in
order to maintain communication on other grant-related topics.
Michigan officials reported that state agencies are working with each
other in a way they have not before. They said the Recovery Act has
facilitated collaboration, citing that the act removed some barriers
to interaction between state agencies because the timeline for
complying with Recovery Act requirements has been so short that
agencies must work together to meet requirements, which has yielded
many positive effects. Michigan officials noted that they hope the
changes will be long-standing. As another example, a representative
from a state association described Recovery Act-related problem
solving between the audit and technology communities. These
interactions included discussions where there was a flow of
information at the policy, technological, and political levels that
they would like to see continued.
A recent report issued by the National Association of State Budget
Officers echoed the responses from many of the state officials we
interviewed.[Footnote 164] The report noted that during the months
before recipient reporting began in October 2009 and in the months
since, the Recovery Act helped to foster movement toward a more open
and communicative atmosphere between both the federal government and
states, as well as between individual states, while also providing
important lessons currently being used in the implementation of the
Federal Funding Accountability and Transparency Act of 2006 and the
recent health care legislation. The report maintained that states have
noted that increased transparency on government spending is a worthy
goal which they support, as long as the federal government maintains a
level of communication that allows for the effective and efficient
implementation of any accountability requirements.
Oversight and Accountability Efforts:
Actions Are Needed to Improve Single Audit and Federal Follow-up as
Oversight Accountability Mechanisms:
OMB has indicated that Single Audits play a key role in the
achievement of its accountability objectives over Recovery Act funds,
which include helping to ensure whether Recovery Act funds are used
for authorized purposes and that risks of fraud, waste, error, and
abuse are mitigated. A Single Audit includes the auditor's schedule of
findings and questioned costs, internal control and compliance
deficiencies, and the auditee's corrective action plans along with a
summary of prior audit findings that includes planned and completed
corrective actions. We identified significant concerns with the Single
Audit process that (1) diminish the effectiveness of the Single Audit
as an oversight accountability mechanism and (2) could allow risks
associated with Recovery Act funds to persist. The Single Audit Act
[Footnote 165] and related OMB Circular No. A-133 Audits of States,
Local Governments, and Non-Profit Organizations[Footnote 166] do not
adequately address the risks associated with the current environment
in which billions of dollars in federal awards are being expended
quickly through new and existing programs associated with the Recovery
Act. In our prior bimonthly reports, we made several recommendations
to improve OMB's oversight of Recovery Act-funded programs through the
use of Single Audits. OMB has implemented some, but not all, of our
recommendations.[Footnote 167]
OMB's Single Audit Internal Control Project (project) highlighted
areas where significant improvements in the Single Audit process are
needed. OMB encouraged auditors from states that volunteered to
participate in the project to communicate internal control
deficiencies[Footnote 168] over compliance for selected Recovery Act
programs earlier than required under statute. The project has been a
collaborative effort between volunteer states receiving Recovery Act
funds, their auditors, and the federal government. One of the
project's goals was to achieve more timely communication of internal
control deficiencies for higher-risk Recovery Act programs so that
corrective action can be taken more quickly. GAO assessed the results
of the project and found that it met several of its objectives and
that the project was helpful in identifying critical areas where
further OMB actions are needed to improve the Single Audit process
over Recovery Act funding. The project also required that auditee
management provide, 2 months earlier than required under statute,
plans for correcting internal control deficiencies to the cognizant
agency for audit for immediate distribution to the appropriate federal
awarding agency. The federal agency was then to have provided its
concerns relating to management's plan of corrective actions in a
written decision. We found, however, that (1) most federal awarding
agencies did not issue their management decisions about the corrective
actions within the project's required time frames, (2) the current
reporting time frames for the Single Audit process are not conducive
to the timely identification and correction of internal control
deficiencies, and (3) OMB's Single Audit guidance is not timely--
specifically for 2010 audits, as well as guidance for a subsequent
project. In our May 2010 bimonthly report, we recommended that OMB
issue its Single Audit guidance, including guidance for future
projects, in a timely manner so that auditors can efficiently plan
their audit work, and OMB concurred with our recommendation. According
to several state auditors who participated in the project, OMB's
issuance of its guidance in an untimely manner adversely impacts the
auditors' ability to plan and conduct their Single Audits. They added
that untimely project guidance would also hinder their ability to
participate in future OMB projects intended to provide earlier
communication and correction of internal control deficiencies
identified in Recovery Act programs.
We recommend that the Director of OMB strengthen the Single Audit and
federal follow-up as oversight accountability mechanisms by (1)
shortening the timeframes required for issuing management decisions by
federal awarding agencies to grant recipients and (2) issuing the OMB
Circular No. A-133 Compliance Supplement no later than March 31 of
each year.
Single Audits as an Oversight Accountability Mechanism for Recovery
Act Programs:
OMB has indicated that Single Audits would serve as important
oversight accountability mechanism for Recovery Act programs, which
have considerable risks. The most significant of these risks are
associated with:
* new programs that may not have the internal controls and accounting
systems in place to help ensure that funds are distributed and used in
accordance with program regulations and objectives,
* Recovery Act funding increases for existing programs that may exceed
the capacity of existing internal controls and accounting systems,
* the more extensive accountability and transparency requirements for
Recovery Act funds that require the implementation of new controls and
procedures, and:
* increased risks because of the need to spend funds quickly.
We reported in our previous bimonthly reports that we were concerned
that, as federal funding of Recovery Act programs accelerates, the
Single Audit process may not provide the timely accountability and
focus needed to assist recipients in making necessary adjustments to
internal controls to provide assurances that the money is being spent
as effectively as possible to meet program objectives. We also
reported that the Single Audit reporting deadline is too late to
provide audit results in time for the audited entity to take action on
internal control deficiencies noted in Recovery Act programs.
In those prior reports, we made several recommendations to OMB for
improving the Single Audit Process to address the increased risks by
helping ensure that Recovery Act funds are not used for unauthorized
purposes and that risks of fraud, waste, error, and abuse are
mitigated. OMB has implemented some, but not all, of these
recommendations. In response to one of our recommendations, in October
2009 OMB implemented a project to encourage earlier reporting and
timely correction of internal control deficiencies identified in
Single Audits that included Recovery Act programs. OMB's guidance for
the project stated that this earlier communication of internal control
deficiencies over compliance would allow participating auditees to
correct internal control deficiencies related to Recovery Act funds in
a timely manner, thereby reducing potential future unallowable costs.
We assessed the results of the project and found that the project met
its original objectives of (1) achieving more than 10 volunteer states
participating in the project, (2) having the participating auditors
issue interim internal control reports for the selected programs at
least 3 months earlier, and (3) having auditee management issue
corrective action plans to resolve internal control deficiencies at
least 2 months earlier than required by OMB Circular No. A-133. The
project also increased the level of awareness by the auditors of some
of the risks associated with Recovery Act funds and, in some cases,
increased the communication and interaction between the auditors,
program officials, and the cognizant agency for audit concerning
internal control deficiencies related to Recovery Act funds. For
example, many of the auditors who responded to our survey stated that
the project increased awareness of internal control deficiencies and
focused attention on the need for federal agencies to be more involved
in pursuing corrective actions to develop more timely corrective
action plans for internal control deficiencies related to programs
receiving Recovery Act funding.
The project also called for federal awarding agencies to actively work
with auditees to resolve high-risk findings in the most expeditious
manner. One of the project's goals was to achieve more timely
communication of internal control deficiencies for higher-risk
Recovery Act programs so that corrective action could be taken more
quickly. The implementation of corrective actions of internal control
deficiencies will help to ensure that Recovery Act funds are used as
intended.
Most Federal Awarding Agencies Did Not Provide Their Management
Decisions within the Prescribed Time Frames:
The project's guidelines called for the federal awarding agencies to
complete two steps by April 30, 2010: (1) perform a risk assessment of
the internal control deficiency and identify those with the greatest
risk to Recovery Act funding, and (2) identify corrective actions
taken or planned by the auditee. OMB guidance called for this
information to be included in a management decision that the federal
agency was to have issued to the auditee's management, the auditor,
and the cognizant agency for audit. As of April 30, 2010, most federal
awarding agencies had not provided their management decisions on the
states' corrective action plans as required under the project's
guidelines. Several of the state auditors and state program officials
we surveyed emphasized the need for more timely communication from the
federal awarding agencies, which is important for state agencies to
gain a clear understanding of needed corrective actions. It is also
important for auditors so that they can monitor progress towards
addressing Single Audit results. OMB Circular No. A-133 requires
management decisions to be issued by federal awarding agencies within
6 months of receipt of the audit report. However, the project's
guidelines required the federal awarding agencies to issue a
management decision as promptly as possible and not later than 90 days
after the date that the corrective action plan was received by the
cognizant agency for audit.
The internal control reports for the project identified internal
control deficiencies in at least 24 Recovery Act programs awarded by
seven federal agencies by December 31, 2009.[Footnote 169] Moreover,
under the project's guidelines, most corrective action plans were
completed by January 31, 2010, 2 months earlier than the time frames
under OMB Circular No. A-133 and were concurrently provided to the
federal awarding agencies. Despite the federal awarding agencies
having the internal control reports and corrective action plans in
January 2010,[Footnote 170] only three of the seven federal awarding
agencies had submitted some of the relevant management decisions on
corrective actions by May 14, 2010. We asked OMB officials to provide
us with an update of the number of management decisions that had been
submitted by the federal awarding agencies through August 5, 2010. OMB
provided a summarized list of the total number of management decisions
by agency where the auditee and the federal agency had agreed on
action to be taken to address the report findings but had not traced
these totals to the detailed documentation to verify the summary
information.
It is important to note that an awarding agency's issuance of a
management decision does not mean that internal control deficiencies
have been corrected; rather, the management decision reflects the
agency's approval of the auditee's proposed corrective action.
Although some corrective actions can be implemented quickly, others
can take months or years to implement. The issuance of timely
management decisions by federal agencies is important because it can
affect the timeliness of the auditees' implementation of corrective
actions to address internal control deficiencies concerning Recovery
Act programs. For example, according to an HHS Office of Inspector
General official, auditees sometimes wait until they receive a
management decision before taking corrective action on internal
control deficiencies.[Footnote 171] On March 22, 2010, OMB issued
memorandum M-10-14, Updated Guidance on the American Recovery and
Reinvestment Act, which among other things, instructs federal agencies
to take immediate action as appropriate to review and act on Single
Audit findings. However, as indicated by the project's results,
further efforts by OMB are needed to help ensure that federal agencies
provide their management decisions on the corrective action plans in a
timely manner.
Time Frames of the Single Audit Process Do Not Facilitate the Timely
Identification and Correction of Audit Findings in Recovery Act
Programs:
Under the current time frames for identifying and correcting audit
findings provided by the Single Audit Act and OMB Circular No. A-133,
it could take years to correct significant deficiencies and material
weaknesses that expose Recovery Act funds to misuse or fraud. For
example, in accordance with current requirements, a material weakness
that has been identified by the auditor for an entity that has a June
30, 2009, fiscal year-end is to be reported in the Single Audit report
to be issued by March 31, 2010, along with the auditee's corrective
action plan. The federal awarding agency would have 6 months or until
September 30, 2010, from receipt of the Single Audit report to
communicate a written management decision to the auditee.[Footnote
172] As a result, it may take 15 months or more since the end of the
fiscal year in which the audit finding was initially identified before
any work is begun. Auditee's management reports their progress in
taking corrective action in the schedule of prior audit findings where
the status of the finding is reported as either corrected (closed) or
not (open). The auditor then reviews this schedule and it is included
in the next Single Audit reporting package. If the awarding agency
delayed issuing a management decision to the auditee, it is possible
that corrective action on the finding was also delayed, and, as a
result, the finding may have remained open. In addition, several state
auditors have expressed frustration regarding Single Audit findings
that remain open years after they were initially identified, without
the auditee or the federal awarding agency taking action. The lack of
attention to ensuring prompt corrective action impairs the federal
government's ability to ensure that unallowable costs have been repaid
or that internal control deficiencies have been corrected. Shortening
the timeframes required for issuing management decisions by federal
agencies and monitoring the auditee's implementation of timely
corrective actions by the federal agency will help to ensure that
appropriate audit follow-up and resolution are achieved.
Figure 31 illustrates an example of the Single Audit reporting time
frames.
Figure 31: Illustration of the Single Audit Reporting Time Frames for
Entities with a June 30, 2009, Fiscal Year-End:
[Refer to PDF for image: illustration]
February 17, 2009: Recovery Act enacted.
Finding occurs[A].
June 30, 2009: Fiscal year end.
Auditor reports finding as a significant deficiency or a material
weakness.
March 31, 2010 (9 months): Single audit reporting package due[B].
Awarding federal agency decides if proposed corrective actions are
acceptable.
June 30, 2010: Fiscal year end.
September 30, 2010 (15 months): Federal awarding agencies management
decisions due[C].
Auditee management may (or may not) take corrective actions. Auditor
reviews management's corrective actions. The status of finding (i.e.
closed or open) is reported in the next Single Audit report.
March 31, 2011 (21 months): Single audit reporting package due.
If finding remains open, cycle repeats; auditee management may or may
not take corrective action, and auditor reviews status to be reported
in next Single Audit report.
June 30, 2011: Fiscal year end.
[A] Finding occurs: A finding can be a questioned cost, matter of
noncompliance, or an internal control deficiency that exists in an
entity's internal control. In accordance with OMB Circular No. A-133,
an auditor reports the findings in the schedule of findings and
questioned costs. The auditor identifies significant deficiencies and
material weaknesses.
[B] Single Audit report with corrective action plan: Single Audit
reporting package includes audited financial statements, reports on
internal controls, corrective action plan to address each finding
identified in the in the auditor's reports, and other schedules
according to OMB Circular No. A-133 guidance.
[C] Management Decision: A written evaluation by the federal awarding
agency of the corrective action plan proposed by the auditee to
address the findings related to programs administered by that federal
agency. The management decision can give concurrence with the
auditee's proposed corrective actions or provide other guidance to
address the finding.
Source: GAO.
[End of figure]
As we reported in prior Recovery Act reports, the problem that the
Single Audit reports are not due until 9 months after the fiscal year-
end was exacerbated by the extensions to the deadline to file Single
Audit reports. The federal awarding agencies, consistent with OMB
guidance, had routinely granted such extensions. In February 2010,
HHS, the cognizant agency for audit, adopted a policy of no longer
approving requests for such extensions. Further, in March 2010, OMB
issued a memorandum, in response to our recommendation, that directed
federal agencies to not grant any requests made to extend the Single
Audit reporting deadlines for fiscal years 2009 through 2011. Despite
this guidance, we found that the Federal Audit Clearinghouse (FAC) did
not receive Single Audit reporting packages for fiscal year ending
2009 from 5 of the 16 selected states and the District of Columbia
within the 9-month time frame provided by statute.[Footnote 173]
Single Audit reporting packages include a schedule of internal control
deficiencies and the auditee's plans for correcting them. Thus, when
submissions of reporting packages are late, the auditees' efforts to
correct internal control deficiencies may be delayed. According to OMB
guidance, late submissions of the Single Audit to FAC in either of the
2 prior fiscal years would prevent the auditor from attaining low-risk
auditee status, which could likely result in an increase in the scope
of audit coverage to address the additional risk for the subsequent
year's audit of the auditee. While the focus of our bi-monthly reports
has been on Recovery Act funds, in general, the Single Audit pertains
to federal expenditures awarded from the Recovery Act as well as from
other federal sources; thus, internal control deficiencies identified
in a program expending Recovery Act funds would generally affect all
other sources of federal funds for that program as well.
As of August 5, 2010, five of the states participating in the project
did not submit their completed fiscal year 2009 Single Audit reports
to FAC by the March 31 due date; one of these states had not yet
submitted its fiscal year 2009 Single Audit Report as of August 24,
2010.[Footnote 174] While these states were able to meet the project's
reporting deadline, they were not able to meet the deadline to submit
the state's Single Audit reporting package.
Single Audit Guidance Continues to Be Issued in an Untimely Manner:
We identified other concerns through our review of the project that
point to the need for OMB to issue all Single Audit guidance in a more
timely manner. Specifically, 12 of the 14 participating state auditors
who responded to our survey stated that guidance for any future OMB
projects should be more timely. In addition, more than half of the
auditors who responded to our survey indicated that they had concerns
with timeliness issues relating to the release of OMB's 2009 Circular
No. A-133 Compliance Supplement. OMB issued the Compliance Supplement
in two stages, the initial one in May 2009 and an addendum in August
2009. This guidance was issued after the Single Audits for entities
with a June 30, 2009, fiscal year-end were already under way. Most of
the participating auditors told us that they needed the information as
early as February 2009, or at least by April 2009, to effectively plan
their work. Some of these state auditors stated that the OMB guidance
was issued too late, causing inefficiencies and disruptions in the
planning of audit procedures.
OMB officials told us that they planned to issue the 2010 Compliance
Supplement in late May 2010. In our May 2010 bi-monthly report, we
recommended that OMB issue its Single Audit guidance, including
guidance for future projects, in a timely manner so that auditors can
efficiently plan their audit work. OMB concurred with our
recommendation. However, OMB issued the 2010 Compliance Supplement on
July 29, 2010--again after the audit planning and work for Single
Audits for entities with a June 30, 2010, fiscal year end was already
under way. OMB officials stated that the delay in issuing the 2010
Compliance Supplement was primarily due to the additional attention
needed to include more Recovery Act programs in the Compliance
Supplement and information regarding the audit procedures for
reviewing Recovery Act reporting requirements. OMB had provided the
American Institute of Certified Public Accountants (AICPA)
Governmental Audit Quality Center and the National Association of
State Auditors, Comptrollers and Treasurers (NASACT) with draft Single
Audit guidance in May 2010. AICPA and NASACT posted the draft to its
Web sites for auditors to use for planning their work. However, some
auditors we spoke with stated that because the guidance was not in a
final form, it still impacted their ability to efficiently plan and
conduct their work.
We also reported that OMB initiated the first project in October 2009
well after most of the audit work had been underway, resulting in some
of the project's benefits not being realized. The project's guidance
called for the auditors to complete their internal control work as of
November 30, 2009, and to report internal control deficiencies by
December 31, 2009. The project's guidelines included incentives to
provide the participating auditors with some relief in their workload
to encourage them to participate in the project. Under the project's
guidelines, auditors were not required to perform risk assessments of
smaller federal programs that they would otherwise need to complete.
However, since most of the auditors had already completed the risk
assessments by the time the project had started, most of the
participating auditors stated that they did not experience any audit
relief.
OMB has stated that it plans to have a second phase of the Single
Audit Internal Control Project for fiscal year 2010. However, as of
August 5, 2010, OMB had not yet defined the parameters of the project
and issued guidance for potential volunteer participants. OMB has not
provided detailed guidance that would explain incentives for
volunteering to participate in the project, types of entities that
will be permitted to participate, the scope of the project (including
the specific programs that participants could select from), the number
of participants it is seeking, or the time frames for beginning and
ending the project.
We continue to report concerns about the Single Audit process because
it does not provide a means for the timely identification and
correction of internal control deficiencies or other findings relating
to Recovery Act programs. This limits the effectiveness of the Single
Audit process as an oversight accountability mechanism and exposes
Recovery Act funds to increased risk of misuse or fraud. We recommend
that the Director of OMB strengthen the Single Audit and federal
follow-up as oversight accountability mechanisms by (1) shortening the
timeframes required for issuing management decisions by federal
awarding agencies to grant recipients, and (2) issuing the OMB
Circular No. A-133 Compliance Supplement no later than March 31 of
each year.
Fraud, Waste, and Abuse Allegations GAO Has Received That Are Related
to the Recovery Act:
As of August 11, 2010, we have received 224 allegations of Recovery
Act wrongdoing from the public. We have closed 137 of these cases
because the allegations were nonspecific or lacked information about
fraud, waste, or abuse. Another 44 were investigated further and
closed by us or the appropriate agency inspector general (IG) when no
violations were found. Of allegations that are open, 16 are being
handled by us and 27 by an IG. We generally refer allegations to an IG
when that office is already pursuing the same or a similar complaint.
We periodically contact the IGs to determine the status of our
referrals. We will continue to evaluate all Recovery Act allegations
received through FraudNet and provide updates in future reports.
Recovery Accountability and Transparency Board Initiatives:
The Recovery Accountability and Transparency Board (the Board)
continues to take steps to identify and report on potential areas for
risk to fraud, waste, and mismanagement of Recovery Act funds. The
Board recently published its third report in its series of reviews
regarding recipient reporting data quality. In addition, the Board
continues to augment its various initiatives for detecting potential
instances of risk in Recovery Act contracting and turn over
information regarding such instances to the appropriate inspectors
general for further review. The Board also continues to organize
coordinated reviews performed by its inspectors general working group
aimed at further assessments of the management and oversight of
Recovery Act spending. The Board is also planning to expand on some of
its initiatives to strengthen future oversight as implementation of
the Recovery Act continues.
Board Reports Focus on Data Quality:
In June 2010, the Board reported on the third of three phases of its
inspectors general working group's review of actions taken by agencies
to improve the quality of data that recipients of Recovery Act funds
are providing for posting to the public Web site.[Footnote 175]
Working in conjunction with the Board, six inspectors general reported
that their agencies had issued policies and general procedures that
follow OMB's guidance; however, the implementation of their respective
guidance differed significantly among the agencies and their subunits.
[Footnote 176] We discuss the results of the inspectors general work
in more detail under the recipient reporting section of this report.
Current Board Initiatives:
The Board continues to use a variety of initiatives to monitor
Recovery Act spending in an effort to identify potential areas at risk
for fraud, waste, and abuse. The Board's current oversight initiatives
include the following:
* maintaining a Fraud Hotline, which receives complaints of potential
fraud, waste, and abuse from the public, and referring potential cases
to the respective inspector general for further review.
* performing data analyses on publicly available information about
Recovery Act recipients. The Board continues to modify its analytical
efforts to provide insights on potential risk areas for the oversight
community. The Board increased its staff, added more software, and
obtained new public data sources to provide for additional analyses.
As of July 31, 2010, the Board had received 2,398 Fraud Hotline
complaints.[Footnote 177] As a result of these complaints as well as
the Board's data analyses, the Board had referred 184 leads to various
inspectors general as of July 31, 2010. Over half of these leads
involved the potential misappropriation of funds or nonperformance of
services.
Board Coordination and Monitoring of Inspectors General Initiatives:
The Board continues to coordinate audits carried out by the inspectors
general working group and monitor the independent efforts of the
inspectors general related to the Recovery Act. The inspectors general
working group has one audit under way reviewing the accuracy of
selected fields of recipient reporting data. In addition, the working
group is beginning a review of potential fraud indicators for grants
programs in September 2010.
The Board continues to review monthly reports submitted by the
inspectors general on the number and status of Recovery Act-related
audits and investigations each has initiated. As of July 31, 2010, the
inspectors general received 3,806 complaints related to the Recovery
Act and reported that they have 424 active investigations; 141
investigations closed without action; and 474 audits, inspections,
evaluations, or reviews in process. The inspectors general also
reported they have completed 689 work products on Recovery Act-related
issues since the act was passed--534 of which are published on
Recovery.gov and 155 of which are not publicly available since they
contain proprietary or sensitive information.[Footnote 178] In
addition, the inspectors general, in conjunction with the Board,
reported that they have conducted 2,231 training and outreach sessions
related to Recovery Act issues.
Impact of the Board and Inspectors General Efforts:
According to Board representatives, an outcome of the Board and its
work has been to shift the focus of the inspectors general community
to the prevention of fraud, rather than just the identification and
correction of it. As discussed earlier, the Board's data analysis
capabilities provides the inspectors general with leads regarding
potential risks associated with Recovery Act funds and recipients. In
addition, over half of the training sessions provided have been
focused on preventing fraudulent use of Recovery Act funds. According
to Board representatives, the Board's work has also resulted in
changes in the data to provide for better visibility over the use of
federal funds. For example, a data field was added in FedBizOpps for
recording a company's DUNS number;[Footnote 179] a DUNS number is an
important data element in tracking companies' transactions with the
government, and including this information is expected to enhance data
matching capabilities.
Board Plans for the Future:
Board representatives explained that the Board and its predictive
analysis capabilities are considered a template for changing how the
government does business. In the short-term, the Board would like to
develop predictive analysis tools for federal agencies' use, such as a
list of databases to search and steps to be taken to identify risks.
In addition, the Board is considering plans for the transition of its
analytic capabilities elsewhere in the federal government when the
Board's authorization expires at the end of fiscal year 2013.
Recovery Independent Advisory Panel:
In February 2009, the Recovery Act provided for a Recovery Independent
Advisory Panel to make recommendations to the Board on ways to prevent
fraud, waste, and abuse relating to Recovery Act funds.[Footnote 180]
Four members of the Advisory Panel were appointed by the President in
March 2010. At its first public meeting in Cambridge, Massachusetts,
in August 2010, state and City of Boston officials presented
information and addressed the panel's questions about their actions to
prevent fraud, waste, and abuse. In addition, they discussed the
content and structure of the state Recovery Act Web site, as well as
continuity among state and local Web sites with the federal
government's Recovery.gov Web site. The panel also held a closed
session to discuss techniques to investigate fraud. Currently, the
panel plans to hold a series of public meetings across the United
States, and has tentatively planned its next public meeting for
November 2010.
Audit Activities Involving Recovery Act Funds Continue at the State
and Local Levels:
State and local oversight and audit entities across the 16 selected
states and the District continue to actively audit Recovery Act funds.
As mentioned in our May 2010 report, many of these audits are
conducted through the state Single Audit process--an accountability
mechanism for overseeing federal funds at the state and local levels.
These audits spanned many programs and primarily focused on programs
that have been assessed as having higher risk of noncompliance with
federal program requirements, such as weatherization, transportation,
and Medicaid. However, according to officials from several of our
selected states and the District, budget and staffing constraints have
limited the number of Recovery Act audit reviews they could perform.
Audit report findings have covered various areas including financial
management and compliance laws or regulations. In some cases, the
audits of Recovery Act funds identified and reported audit findings
that were subsequently addressed by audited entities. In other cases,
audits of Recovery Act funds did not identify or report findings.
Examples of audit findings relating to financial management practices
identified in audits of Recovery Act funds include the following:
* In California, the State Auditor found that cash management
practices were not in compliance with federal rules in the state's
Weatherization Assistance Program.
* The Illinois Office of Internal Audit reported on the failure of
state agencies to minimize the time between drawdowns of federal funds
and expenditure of those funds and failure to charge hours worked to
the proper federal grant at one agency.
* In Iowa, auditors found that a local school district possibly
commingled Recovery Act funds with other school district revenue,
which led to the replacement of the district's accounting supervisor.
* In New Jersey, an audit of the Weatherization Assistance Program
found inadequate policies and controls in place to ensure that federal
financial reporting was properly completed, supported by adequate
documentation, and reviewed by a supervisor prior to submission.
* In Ohio, the Auditor of the State identified deficiencies related to
unallowable expenditures and inadequate cash management in some
programs funded through the Recovery Act.
Examples of audit findings relating to program compliance with laws
and regulations that were identified in various audits of Recovery Act
funds include the following:
* In Arizona, Single Audits 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 but
have developed a corrective action plan to correct these findings.
* In Colorado, a local government audit revealed that some Federal
Transit Formula Grant funds had been spent without a check on whether
the vendor had been suspended or debarred from participating in
federal programs.
* In Florida, state auditors found that the program officials were
unable to document that certain individuals were eligible for Medicaid
benefits as required by law, and that their procedures did not ensure
that all health care providers receiving Medicaid payments had
provider agreements in effect.
* In Massachusetts, the state auditors found that the actual number of
youths being reported as participating in the state's WIA summer jobs
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.
* In Michigan, the Single Audit of the Medicaid program found that the
Michigan Department of Community Health did not fully monitor its
Medicaid payments to ensure that such claims are paid promptly.
Failure to comply with the "prompt pay" requirements could result in
Michigan not being eligible to receive increased FMAP for certain
claims.
* In Mississippi, auditors found many instances of noncompliance with
recipient reporting requirements. In these cases, state agencies were
not providing clear and consistent guidance to subrecipients.
* In North Carolina, the state auditor's office found that a state
department did not consistently perform effective monitoring to ensure
that subrecipients of Recovery Act funds were in compliance with Davis-
Bacon wage-rate requirements.
* In Texas, the Single Audit for fiscal year 2009 identified program
weaknesses in determining eligibility in Medicaid, Temporary
Assistance for Needy Families, and the Supplementary Nutrition
Assistance Program.
In addition to audits of Recovery Act funds, several states took steps
to strengthen their accountability efforts to help to ensure
appropriate uses of Recovery Act funds by implementing new work groups
or entities to help manage and oversee Recovery Act-funded programs.
In addition, these new entities have helped state and local
governments address the new requirements associated with Recovery Act
funding, coordinate efforts among the accountability community, and
inform the public. Other activities performed by these entities
included maintaining a Recovery Act Web site, providing technical
assistance, tracking the use of funds, issuing advisories, conducting
training on internal controls, and providing assistance with recipient
reporting. Examples of such activities are as follows:
* In California, the Recovery Task Force meets regularly with state
agencies receiving Recovery Act funds, maintains a Recovery Act Web
site as a central repository of information, and has issued more than
30 Recovery Act bulletins providing instructions and guidelines to
state agencies. Also, the Recovery Act Inspector General published an
advisory which included steps to ensure that contractors perform in
accordance with contract terms and to reduce the potential of fraud.
* In Georgia, the State Accounting Office 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 181] More specifically, these agencies completed a
self-assessment tool covering internal controls in areas such as
financial reporting, revenue, and Recovery Act funds.
* In Massachusetts, the City of Boston contracted auditor is
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.
* In New Jersey, the Recovery Accountability Task force is responsible
for monitoring the distribution of Recovery Act funds in the state and
promoting the effective and efficient use of those funds. The task
force discusses issues related to the oversight of Recovery Act funds
and receives updates from state agencies to ensure funds are dispersed
with the goals of the Recovery Act in mind.
* In New York, the Governor created a Stimulus Oversight Panel which
meets biweekly to examine the use of Recovery Act funds by each of the
22 state agencies designated to receive them. In addition to other
responsibilities, individual panel members also conduct reviews and
audits in their areas of expertise.
* In North Carolina, the Office of Economic Recovery and Investment
(OERI) tracks, monitors, and reports on Recovery Act funds and works
with state agencies on corrective action plans to help resolve
Recovery Act-related findings. OERI also conducted several technical
assistance seminars around the state and provides resources such as
webinars and checklists on its Web site to help agencies comply with
Recovery Act requirements.
* In Pennsylvania, the Governor appointed the Chief Accountability
Officer to help oversee reporting and transparency for Recovery Act
activities of state agencies. For the quarter ending June 30, 2010,
the office filed 371 recipient reports on behalf of state agencies and
posted them to the state's Recovery Act Web site.
* In Texas, the Governor's Stimulus Working Group, which includes
representatives from state agencies receiving significant amounts of
Recovery Act funding, is a vehicle for sharing information. This group
has been used to inform state agencies about recipient reporting
requirements, help focus auditing and monitoring efforts, and address
program concerns.
Observations on States' Use of Contracts and Contract Outcomes:
During our Recovery Act reviews, we tracked and observed 208 contracts
awarded by state and local governments. While this is a small number
of contracts, our observations indicate that state and local
governments receiving Recovery Act funds reported that they are
generally using competition and fixed-price contracts, and are not
facing major issues with cost, schedule, or contractor performance.
State and Local Recovery Act Contracts Generally Are Reported to Use
Competition and Fixed-Price Arrangements:
Between July 2009 and March 2010, we selected and subsequently
analyzed contracts from a variety of programs and held discussions
with state and local officials to gain an understanding of the extent
to which they believe contracts were awarded competitively and used
pricing structures, particularly fixed-price contracts, which reduced
the government's financial risk.[Footnote 182] The use of competition
is generally considered a fundamental tenant of public procurement. In
addition, fixed-price contracting generally places the maximum amount
of risk on the contractor because the government pays a fixed price
even if actual costs of the product or service exceed the contract
price. Of the 208 contracts we reviewed, 86 percent were reported by
state and local officials as being competed and 79 percent were
reported as fixed-price contracts.[Footnote 183] Further, in five
states all of the contracts we reviewed were reported as being
competed, and in four states all of the contracts we reviewed were
reported as being fixed-price contracts. Almost all contracts for
highway projects were reported as competed, and all public housing
contracts as fixed-price. Table 12 shows the number of contracts
reported by officials as being competed and awarded with fixed prices
in the various programs we are monitoring across the selected states.
Table 12: Number of Contracts Reported as Competed and Fixed Price, by
Program Area as of June 2010:
Program area: Public Housing Authority officials;
Total contracts reviewed: 55;
Contracts reported as competed: 52;
Contracts reported as fixed-price: 55.
Program area: Highway programs--state level;
Total contracts reviewed: 52;
Contracts reported as competed: 51;
Contracts reported as fixed-price: 35.
Program area: Weatherization;
Total contracts reviewed: 27;
Contracts reported as competed: 17;
Contracts reported as fixed-price: 21.
Program area: Workforce Investment Act Youth Program--local level;
Total contracts reviewed: 19;
Contracts reported as competed: 14;
Contracts reported as fixed-price: 7.
Program area: Highway Programs--local project;
Total contracts reviewed: 16;
Contracts reported as competed: 16;
Contracts reported as fixed-price: 12.
Program area: Title I, Part A of the Elementary and Secondary
Education Act of 1965--local level;
Total contracts reviewed: 15;
Contracts reported as competed: 6;
Contracts reported as fixed-price: 14.
Program area: Transit programs;
Total contracts reviewed: 12;
Contracts reported as competed: 11;
Contracts reported as fixed-price: 10.
Program area: Other;
Total contracts reviewed: 12;
Contracts reported as competed: 11;
Contracts reported as fixed-price: 11.
Program area: Total;
Total contracts reviewed: 208;
Contracts reported as competed: 178;
Contracts reported as fixed-price: 165.
Source: GAO analysis of data reported by state and local officials.
[End of table]
State and local officials cited various reasons why some contracts
were awarded noncompetitively. For instance, officials reported that,
for several contracts, the contractors provided a unique service and
were the only source available. In another instance, officials said
that the state was granted a waiver of some competition requirements
in order to, in part, expedite the delivery of goods and services.
Officials also gave various reasons why some contracts were not
awarded as fixed-price contracts. For instance, officials reported
that, for many contracts, fixed-price contracts were not used because
use of another contract type was the agency's standard practice for a
particular type of project. In other cases, officials stated that
other contract types enabled the program to award a contract and begin
performance faster than a fixed-price contract would.
As part of our overall body of work on the Recovery Act, in July 2010
we reported on the level of insight and oversight regarding the use of
noncompetitive Recovery Act contracts in 5 of the 16 states covered in
our bimonthly reviews: California, Colorado, Florida, New York, and
Texas.[Footnote 184] We found that the five states varied on the type
and amount of data routinely collected on noncompetitive Recovery Act
contracts and that the states do not routinely provide state-level
oversight of contracts awarded at the local level, where a portion of
Recovery Act contracting occurs.[Footnote 185] According to state
officials, they were generally following the contracting policies and
practices for awarding and overseeing contracts that were in place
prior to passage of the Recovery Act. Officials from the selected
states' audit organizations said that if they were to address Recovery
Act contracting issues, it could be done through the annual Single
Audit or other reviews of programs that involve Recovery Act funds.
Majority of State and Local Recovery Act Contracts Are Reported to Be
on Cost and Schedule and Performing Satisfactorily:
Between March and June 2010, we followed up with state and local
officials to understand whether the contracts we had selected were
achieving the key acquisition outcomes of delivering on cost, on
schedule, and with satisfactory performance. State and local officials
reported that most of the Recovery Act contracts we reviewed are
meeting these goals. According to state and local officials, of the
208 contracts we reviewed, 51 percent had no change to overall
contract cost, 12 percent had decreased costs, and 1 percent had
changes to cost and prices but remained within the contracts' total
cost permitted. Approximately one-third of the contracts reported cost
increases. In addition, officials reported that 52 percent of
contracts had no change to schedule and 11 percent delivered early.
The remaining 36 percent of contracts reported schedule delays. Thirty-
six percent--or 74 contracts--had no changes to either cost or
schedule.[Footnote 186] Table 13 shows the number of contracts
reported by officials as having cost or schedule changes by the
various programs we are monitoring across the selected states.
Table 13: Number of Contracts Officials Reported as Having Cost or
Schedule Changes, by Program Area as of June 2010:
Program area: Public Housing Authority;
Total contracts reviewed: 55;
Contracts reporting no cost or schedule changes: 12;
Contracts reporting increased costs: 23;
Contracts reporting decreased costs: 4;
Contracts reporting schedule delay: 27;
Contracts reporting early delivery: 3.
Program area: Highway programs--state level;
Total contracts reviewed: 52;
Contracts reporting no cost or schedule changes: 7;
Contracts reporting increased costs: 20;
Contracts reporting decreased costs: 13;
Contracts reporting schedule delay: 23;
Contracts reporting early delivery: 15.
Program area: Weatherization;
Total contracts reviewed: 27;
Contracts reporting no cost or schedule changes: 18;
Contracts reporting increased costs: 4;
Contracts reporting decreased costs: 0;
Contracts reporting schedule delay: 7;
Contracts reporting early delivery: 0.
Program area: Workforce Investment Act Youth Program--local level;
Total contracts reviewed: 19;
Contracts reporting no cost or schedule changes: 9;
Contracts reporting increased costs: 3;
Contracts reporting decreased costs: 4;
Contracts reporting schedule delay: 6;
Contracts reporting early delivery: 1.
Program area: Highway programs--local project;
Total contracts reviewed: 16;
Contracts reporting no cost or schedule changes: 4;
Contracts reporting increased costs: 10;
Contracts reporting decreased costs: 1;
Contracts reporting schedule delay: 5;
Contracts reporting early delivery: 1.
Program area: Title I, Part A of the Elementary and Secondary
Education Act of 1965--local level;
Total contracts reviewed: 15;
Contracts reporting no cost or schedule changes: 13;
Contracts reporting increased costs: 0;
Contracts reporting decreased costs: 1;
Contracts reporting schedule delay: 0;
Contracts reporting early delivery: 1.
Program area: Transit programs;
Total contracts reviewed: 12;
Contracts reporting no cost or schedule changes: 5;
Contracts reporting increased costs: 7;
Contracts reporting decreased costs: 0;
Contracts reporting schedule delay: 4;
Contracts reporting early delivery: 1.
Program area: Other;
Total contracts reviewed: 12;
Contracts reporting no cost or schedule changes: 6;
Contracts reporting increased costs: 3;
Contracts reporting decreased costs: 1;
Contracts reporting schedule delay: 3;
Contracts reporting early delivery: 0.
Program area: Total;
Total contracts reviewed: 208;
Contracts reporting no cost or schedule changes: 74;
Contracts reporting increased costs: 70;
Contracts reporting decreased costs: 24;
Contracts reporting schedule delay: 75;
Contracts reporting early delivery: 22.
Source: GAO analysis of data reported by state and local officials.
Note: Some contracts fell into more than one category, so figures do
not total across each program.
[End of table]
For three-quarters of the 70 contracts where price increased, state
and local officials attributed these increases to conditions that were
not anticipated at the time of contract award. For example, officials
reported that total costs increased by over $300,000 for one public
housing project because materials containing asbestos were found on
boilers, which had to be taken apart to remove asbestos before they
could be demolished, and several boilers intended to be repaired or
reused needed to be replaced instead. The most common factors state
and local officials pointed to for schedule delays were circumstances
beyond the control of the contractor and conditions not anticipated at
the time of contract award. For instance, in several cases, officials
noted that severe weather caused schedule delays.
According to state and local officials, 91 percent of the contracts we
reviewed had no contractor work performance issues that adversely
impacted the work being performed or deliverables being provided. Only
14 of 208 contracts we reviewed reported that there had been issues
with contractor performance.[Footnote 187] Of those, seven were
highway construction projects at the state and local level and three
of the contracts were for public housing projects. While the nature of
these issues varied, in most cases officials reported that the
contractor was able to satisfactorily continue or complete the
project. In some of these cases, the contractor was assessed fees to
compensate for the contractor's performance issues. Officials reported
only two instances where the contractor ceased to perform the
remaining work, which will now be performed by another contractor or
the agency's staff.
Local Governments' Use of Recovery Act Funds:
For this report, we continue our focus on the use of Recovery Act
funds at the local government level while updating our review of
states' uses of Recovery Act funds in proposed and enacted budgets. As
shown in figure 32, we visited 24 local governments in our 16 selected
states and the District to collect information regarding their use of
Recovery Act funds. Similar to the approach taken for our May 2010
report,[Footnote 188] we identified localities representing a range of
types of governments (cities and counties), population sizes, and
economic conditions (unemployment rates greater and less than the
state's overall unemployment rate). We balanced these criteria with
other considerations, including other scheduled Recovery Act work,
local contacts established during prior reviews, and the geographic
proximity of the local government entities. Officials from the 24
local governments we interviewed ranged in population from 258 in
Steward, Illinois, to approximately 2.5 million in Miami-Dade County,
Florida. Unemployment rates in our selected localities ranged from 6.7
percent in Round Rock, Texas, to 13.4 percent in Redding, California.
[Footnote 189]
Figure 32: Selected Local Governments Included in Our September 2010
Review:
[Refer to PDF for image: map of the U.S.]
Austin, Texas;
Berks County, Pennsylvania;
Boston, Massachusetts;
Brookhaven, New York;
Chrisman, Illinois;
Cincinnati, Ohio;
Colorado Springs, Colorado;
Columbus Consolidated Government, Georgia;
Des Moines, Iowa;
Farmington Hills, Michigan;
Jersey City, New Jersey;
Marshalltown, Iowa;
Miami-Dade County, Florida;
Philadelphia, Pennsylvania;
Redding, California;
Round Rock, Texas;
San Jose, California;
Steuben County, New York;
Steward, Illinois;
The Unified Government of Athens-Clarke County, Georgia;
Tupelo, Mississippi;
Weld County, Colorado;
Wilmington, North Carolina.
Sources: U.S. Census Bureau, U.S. Department of Labor, Bureau of Labor
Statistics, and Local Area Unemployment Statistics (data); MapInfo
(map).
[End of figure]
Local Governments Continue to Use Recovery Act Funds to Initiate One-
Time Projects, Provide Services, and Support Staff, While Fiscal
Challenges Persist:
Local officials reported their governments' continued use of Recovery
Act funds in a range of program areas such as public safety (Community
Oriented Policing Services (COPS) and Edward Byrne Memorial Justice
Assistance Grants (JAG)), energy (EECBG), housing (Homelessness
Prevention and Rapid Re-housing Program (HPRP) and Community
Development Block Grant (CDBG)), and transportation and transit. Other
Recovery Act funds received by the selected localities include grants
for lead mitigation, wastewater treatment, and airport improvement.
Some examples of the uses of Recovery Act funds appear in table 14.
Table 14: Selected Examples of Local Governments' Uses of Recovery Act
Funds:
Recovery Act grant: Grants-in-Aid for Airports;
Local government receiving funds: Phoenix, AZ;
Examples of local use of funds: The Phoenix Aviation Department
obligated approximately $10.4 million in Grants-in-Aid for Airports
funds to construct Taxiway C at the Phoenix Sky Harbor Airport to
improve traffic flow.
Recovery Act grant: Lead-Based Paint Hazard Control Program;
Local government receiving funds: Marshalltown, IA;
Examples of local use of funds: The City of Marshalltown was awarded
approximately $2.6 million to fund lead-mitigation efforts, including
eliminating lead-based paint, repainting affected homes, replacing
leaded windows, and housing citizens affected by renovations in
temporary quarters.
Recovery Act grant: Highway Infrastructure Investment grant;
Local government receiving funds: Wilmington, NC;
Examples of local use of funds: Wilmington received a $4 million
highway surface transportation grant to construct a multiuse trail
linking key city resources and providing access to shopping,
recreational, cultural, and educational destinations. The grant is
expected to allow the city to complete 75 percent of the trail by
2011. The city had previously estimated completion by 2030 without
federal funding.
Recovery Act grant: Retrofit Ramp-Up;
Local government receiving funds: Austin, TX;
Examples of local use of funds: The City of Austin was awarded $10
million for use of the Retrofit Ramp-Up program (part of the EECBG
program) which may provide alternative financing options for property
owners to make energy-efficiency improvements to their property, such
as installing solar panels and roof water heating mechanisms.
Alternative financing options include new financing mechanisms,
interest rate buy-downs, and on-bill repayment. Austin city officials
said they are coordinating with the City of San Antonio, which also
received competitive EECBG funds.
Source: GAO analysis of local governments' reported use of funds.
[End of table]
Several local government officials said that Recovery Act funds were
used for projects including purchase of law enforcement and transit
equipment and investment in public works and infrastructure projects
such as road and sewer improvements. For example, Redding, California,
officials said Federal Transit Administration Recovery Act funds
helped the Redding Area Bus Authority (RABA) accelerate the purchase
of three new buses and nine new paratranist vans, thus allowing RABA
to avoid implementing service cuts and fare increases. Officials in
Farmington Hills, Michigan, reported using Recovery Act funds from the
JAG program to purchase a range of public safety equipment, such as
radio equipment, digital camcorders, undercover transmitters, and a
Digital Eyewitness Media Manager Server System that otherwise would
not have been purchased. Officials in Athens-Clarke County, Georgia,
reported using Recovery Act funds from the Clean Water State Revolving
Fund program to help construct four sewer inceptors. Columbus,
Georgia, officials said they were using Recovery Act funds to enhance
the implementation of transportation projects including the
construction of a bike/pedestrian trail and streetscape improvements.
The use of Recovery Act funds also helped several local governments
continue to provide local services. Philadelphia, Pennsylvania,
officials said that the use of Recovery Act funds from the COPS Hiring
Recovery Program (CHRP) grant helped support community policing and
crime prevention efforts by allowing the city to hire 50 additional
police officers. Similarly, officials in Colorado Springs, Colorado,
reported using Recovery Act funds from the JAG program to fund the
salaries of community service officers. Officials in Austin, Texas,
reported using Recovery Act funds from the Edward Byrne Memorial
Justice Assistance Grant program to fund 12 new emergency dispatchers.
With regard to local services provided, officials in Weld County,
Colorado, and Boston, Massachusetts, reported using Recovery Act funds
from the Congregate Nutrition Services program to provide meal
deliveries to low-income senior citizens. Officials in Berks County,
Pennsylvania, said the county would not have been able to provide rent
and utility assistance to persons at risk of becoming homeless without
Recovery Act funds from the HPRP grant.
In most localities we visited, government officials reported working
in partnership with other local entities, such as nonprofit
organizations, the private sector, transit authorities, and other
local jurisdictions to apply for or administer Recovery Act funds. For
example, officials in Round Rock, Texas, said the city partnered with
the Capital Area Metropolitan Planning Organization to apply for a
Transit Capital Assistance Recovery Act grant. The application was
successful with Round Rock receiving $2 million to construct a transit
facility consisting of bus lanes, a transit pavilion, bicycle racks,
and more than 100 parking spaces. Officials in Marshalltown, Iowa,
reported that the city worked extensively with partners from
surrounding counties, educational institutions, and other agencies to
administer funds for the Lead-Based Paint Hazard Control Program. In
Miami-Dade County, Florida, the local officials said the county
partnered with private commercial farmers to administer Recovery Act
funds from the National Clean Diesel Assistance Program. This program
provided $2 million to farmers to purchase approximately 300 more
efficient diesel motors used in portable and fixed irrigation equipment.
Most local governments we contacted for this review reported
experiencing fiscal challenges due to revenue declines or reductions
in state aid. In Jersey City, New Jersey, officials said the city
faces an $80 million budget deficit and an estimated $27.5 million
reduction in state aid for fiscal year 2011. Officials in Steuben
County, New York, reported a decline in all categories of revenue
receipts and state funding cuts of $858,000. Officials also noted that
delays in state reimbursements have resulted in substantial use of
county reserves. Officials in Miami-Dade County, Florida, said a
decrease in property and sales tax revenue combined with a reduction
in state funding contributed to a $426 million budget gap for 2010.
Officials in San José and Redding, California, also cited budget gaps
for the current fiscal year and reductions in revenue from property
taxes and other sources as examples of their governments' fiscal
challenges. In Colorado Springs, Colorado, officials said their fiscal
condition has slightly improved due to an unanticipated 4 percent
increase in 2010 sales tax revenue over actual 2009 revenue. Despite
this increase, Colorado Springs is not planning to expand services in
2010. Officials from the city of Austin reported an increase in sales
tax revenue and declines in other revenue sources, such as fees and
charges for commercial and residential development. Specifically,
Austin, Texas, officials reported a 3.2 percent sales tax revenue
increase and anticipate using this revenue to help address the city's
budget gap of between $11 million and $28 million.
Officials in several localities reported that they are developing
plans to continue funding Recovery Act programs using local government
funds or by pursuing other funds after Recovery Act funding ends. For
example, Cincinnati, Ohio, officials said the city hopes to continue
funding the 50 police officers hired under the 3-year CHRP grant by
using city revenues to cover expenditures after 2012. Officials in
Wilmington, North Carolina, reported that the city intends to replace
JAG funding for law enforcement equipment and services with general
funds and other grant funds. San José, California, officials said the
city plans to pursue other grant opportunities in order to continue
funding city infrastructure projects currently benefiting from the use
of Recovery Act funds. In contrast, officials in a number of
localities said that because Recovery Act funds were primarily used
for one-time projects they do not need to develop a specific plan to
prepare for the end of Recovery Act funding. For example, officials in
Farmington Hills, Michigan, reported that the city used Recovery Act
funds for one-time expenditures, such as equipment purchases and
energy-efficiency upgrades, and therefore does not need to develop an
exit strategy. Similarly, in Tupelo, Mississippi, officials said the
city used Recovery Act funds for infrastructure-related, "stand-alone"
projects requiring minimal or no long-term financial support and
specifically avoided applying for a CHRP grant because of the
requirement to retain officers hired under the grant after Recovery
Act funding ends. A few local governments reported that they plan to
end Recovery Act-funded projects or reduce staff or funding for these
programs after Recovery Act funding ends.
States' Use of Recovery Act Funds for Programs and Services Continues
to Prevent Deeper Budget Cuts:
Recovery Act funds continued to help states maintain services in areas
such as education, health care, and transportation. A few states
reported that they recently received additional Recovery Act funding
in other areas. For example, New Jersey received $8 million for an
energy rebate program and $14 million for energy-efficiency programs.
Michigan received $30 million in Recovery Act funds to provide energy-
efficiency retrofits for residential, commercial, industrial, and
public buildings. Many of our selected states, as well as the
District, reported that the Recovery Act continues to have a positive
effect on their fiscal stability. As an example, Arizona state
officials told us that Recovery Act funds helped their state through
the worst part of the recession by preventing deeper cuts in social
programs, and giving officials breathing room to figure out what
fiscal steps to take in the long term. Officials in Ohio credit the
over $7.9 billion in Recovery Act funds they have received as of
August 1, 2010, with helping to protect jobs and continue services in
their state. Officials in Illinois and the District said that they
would be in more dire fiscal condition without SFSF and the increased
FMAP funds from the Recovery Act. In Iowa, Recovery Act funds received
in fiscal year 2011 helped officials balance their fiscal year 2011
budget while avoiding tax increases and reducing the amount by which
officials needed to draw down the state's reserve fund. Recovery Act
funds also reduced the need in Massachusetts to use more of the
state's authorized fiscal year 2010 rainy-day reserve funds to balance
the budget, according to state officials. City officials told us that
Recovery Act funds helped the District maintain a balanced budget for
fiscal year 2011 without tapping into the city's rainy-day fund.
Several states and the District contacted for this review reported
that they incorporated measures to prepare for the end of Recovery Act
funding in their fiscal year 2011 budget or in budgets in prior
cycles.[Footnote 190] For example, in Mississippi officials told us
the legislature sharply reduced spending to offset reductions in
Recovery Act funding. According to city officials, the District's
fiscal year 2010 budget, as well as the mayor's proposed fiscal year
2011 budget, reflects the reduction in revenues that will result from
the reduction in Recovery Act funds in fiscal year 2011. Officials in
some states reported they were planning for the end of Recovery Act
funding. For example, Florida officials told us they were in the early
stages of developing their fiscal year 2012 budget which will include
a plan to address the phasing out of Recovery Act funds. According to
Michigan officials, they have made some structural changes such as
reforms to the public school employees' retirement plan and are
working to devise solutions for when the Recovery Act funds run out in
fiscal year 2012. In Georgia, officials said they are preparing for
the cessation of Recovery Act funds by planning additional budget
reductions. They also are projecting moderate revenue growth. New York
officials told us that they will address the phasing out of Recovery
Act funds this fall when they develop the budget for the next fiscal
year.
State officials reported mixed assessments of changes to their states'
fiscal conditions since we contacted them for our May 2010 report.
Officials in several states noted that they continue to face difficult
budget challenges. Several states told us that their fiscal condition
has generally remained the same since our May report. Some states have
seen signs that their fiscal condition is shifting and showing signs
of improvement. For example, state officials reported that tax revenue
collections in Massachusetts during the last 2 months of fiscal year
2010 were above revenue estimates by $191 million and $149 million
respectively, and the commonwealth ended fiscal year 2010 with tax
collections above budget estimates. State officials in Pennsylvania
also reported that revenues were $58 million ahead of estimates in
June--the first month since December 2007 that revenues exceeded
estimates. Arizona officials also told us that their April and May
revenues were much better than they had projected, however, they noted
that the trend did not continue in June and July. In another example,
Michigan officials told us that in June 2010, total wage and salary
employment was up 23,400 jobs compared to June 2009. This was the
first year-over-year increase in total wage and salary employment in
Michigan since March 2005. These signs of improvement, in contrast to
revenue declines, are consistent with national trends reported in the
June 2010 Fiscal Survey of States issued by the National Governors
Association and the National Association of State Budget Officers.
[Footnote 191] According to the Fiscal Survey, states are projecting a
slight rise of 3.9 percent in tax collections for fiscal year 2011
recommended budgets relative to fiscal year 2010 estimates. However,
states estimate that their 2010 tax revenues will represent an almost
12 percent decline in states' sales, personal income, and corporate
income tax collections since fiscal year 2008, the last fiscal year in
which states were not significantly affected by the national
recession. The Fiscal Survey attributes reduced state sales, personal
income, and corporate income tax collections to the lack of economic
expansion and job losses.
New and Open Recommendations; Matters for Congressional Consideration:
For this report, GAO both updates the status of agencies' efforts to
implement GAO's 25 open recommendations and makes 5 new
recommendations to the Departments of Transportation (DOT), Housing
and Urban Development (HUD), Labor, Energy (DOE), Health and Human
Services, and Treasury, and to the Environmental Protection Agency
(EPA), and to the Office of Management and Budget (OMB).[Footnote 192]
Agency responses to our new recommendations are included in the
program sections of this report. Lastly, we update the status of our
Matters for Congressional Consideration.
Department of Transportation:
New Recommendations:
To ensure that Congress and the public have accurate information on
the extent to which the goals of the Recovery Act are being met, we
recommend that the Secretary of Transportation direct FHWA to take the
following two actions:
* Develop additional rules and data checks in the Recovery Act Data
System, so that these data will accurately identify contract
milestones such as award dates and amounts, and provide guidance to
states to revise existing contract data.
* Make publicly available--within 60 days after the September 30,
2010, obligation deadline--an accurate accounting and analysis of the
extent to which states directed funds to economically distressed
areas, including corrections to the data initially provided to
Congress in December 2009.
Open Recommendations:
To better understand the impact of Recovery Act investments in
transportation, we believe that the Secretary of Transportation should
ensure that the results of these projects are assessed and a
determination made about whether these investments produced long-term
benefits. Specifically, in the near term, we recommend the Secretary
direct FHWA and FTA to determine the types of data and performance
measures they would need to assess the impact of the Recovery Act and
the specific authority they may need to collect data and report on
these measures.
Agency Actions:
In its response, DOT noted that it expected to be able to report on
Recovery Act outputs, such as the miles of road paved, bridges
repaired, and transit vehicles purchased, but not on outcomes, such as
reductions in travel time, nor did it commit to assessing whether
transportation investments produced long-term benefits. DOT further
explained that limitations in its data systems, coupled with the
magnitude of Recovery Act funds relative to overall annual federal
investment in transportation, would make assessing the benefits of
Recovery Act funds difficult. DOT indicated that, with these
limitations in mind, it is examining its existing data availability
and, as necessary, would seek additional data collection authority
from Congress if it became apparent that such authority were needed.
While we are encouraged that DOT plans to take some steps to assess
its data needs, it has not committed to assessing the long-term
benefits of Recovery Act investments in transportation infrastructure.
We are therefore keeping our recommendation on this matter open.
Open Recommendation:
The Secretary of Transportation should gather timely information on
the progress they are making in meeting the maintenance-of-effort
requirement and to report preliminary information to Congress within
60 days of the certified period (September 30, 2010), (1) on whether
states met required program expenditures as outlined in their
maintenance-of-effort certifications, (2) the reasons that states did
not meet these certified levels, if applicable, and (3) lessons
learned from the process.
Agency Actions:
DOT concurred in part with our March 2010 recommendation that it
gather and report more timely information on the progress states are
making in meeting the maintenance-of-effort requirements. Because more
timely information could better inform policymakers' decisions on the
usefulness and effectiveness of the maintenance-of-effort requirements
and is important to assessing the impact of Recovery Act funding in
achieving its intended effect of increasing overall spending, we are
leaving this recommendation open and plan to continue to monitor DOT's
actions.
In its August 2010 response, DOT officials stated that DOT will
encourage states to report preliminary data for the certified period
ending September 30, 2010, and deliver a preliminary report to
Congress within 60 days of the certified period. DOT officials said
they have developed a timeline for obtaining information to produce
this report and will issue guidance by October 1, 2010, requesting
that states update actual aggregate expenditure data and provide the
data to DOT by November 15, 2010. DOT officials said they will use
this information to develop the report to Congress, and it will submit
the report no later than November 30, 2010.
Department of Housing and Urban Development:
New Recommendation:
Because the absence of third-party investors reduces the amount of
overall scrutiny TCAP projects would receive and HUD is currently not
aware of how many projects lacked third-party investors, HUD should
develop a risk-based plan for its role in overseeing TCAP projects
that recognizes the level of oversight provided by others.
Department of Labor:
Open Recommendations:
To enhance Labor's ability to manage its Recovery Act and regular WIA
formula grants and to build on its efforts to improve the accuracy and
consistency of financial reporting, we recommend that the Secretary of
Labor take the following actions:
* To determine the extent and nature of reporting inconsistencies
across the states and better target technical assistance, conduct a
one-time assessment of financial reports that examines whether each
state's reported data on obligations meet Labor's requirements.
* To enhance state accountability and to facilitate their progress in
making reporting improvements, routinely review states' reporting on
obligations during regular state comprehensive reviews.
Agency Actions:
Labor agreed with both of our recommendations and has begun to take
some actions to implement them. To determine the extent of reporting
inconsistencies, Labor plans to conduct an assessment of state
financial reports to determine if the data reported is accurate and
reflects Labor's guidance on reporting of obligations and
expenditures. After the assessment, Labor plans to provide technical
assistance to states that need further instruction and guidance. To
enhance states' accountability and facilitate their progress in making
improvements in reporting, Labor has instructed all its regional
offices to begin routinely reviewing state's reporting on obligations
during state comprehensive reviews. In addition, Labor plans to issue
guidance on the definitions of key financial terms such as
obligations, provide online training to ensure that the terms are
accurately and consistently applied, and conduct workshops on
financial and administrative management.
Open Recommendation:
Our September 2009 bimonthly report identified a need for additional
federal guidance in two areas--measuring the work readiness of youth
and defining green jobs --and we made the following two
recommendations to the Secretary of Labor:
* To enhance the usefulness of data on work readiness outcomes,
provide additional guidance on how to measure work readiness of youth,
with a goal of improving the comparability and rigor of the measure.
* To better support state and local efforts to provide youth with
employment and training in green jobs, provide additional guidance
about the nature of these jobs and the strategies that could be used
to prepare youth for careers in green industries.
Agency Actions:
Labor agreed with both of our recommendations and has begun to take
some actions to implement them. With regard to the work readiness
measure for WIA Youth summer employment activities, Labor issued
guidance on May 13, 2010 for the WIA Youth Program that builds on the
experiences and lessons learned during implementation of Recovery Act-
funded youth activities in 2009. Labor broadly identified some
additional requirements for measuring work readiness of youth that it
plans to address in future guidance. This includes having the employer
observe and assess workplace performance and determine what worksite
skills are necessary to be successful in the workplace.
Regarding our recommendation on the green jobs, Labor told us that the
Bureau of Labor Statistics published a Federal Register Notice on
March 16, 2010 for comment on a proposed definition for measuring
green jobs, which includes an approach for identifying environmental
industries and counting associated jobs. Labor officials hope this
will inform state and local workforce development efforts to identify
and target green jobs and their training needs. In addition, Labor is
using the Recovery Act-funded green jobs training grants to document
lessons learned on designing and providing green jobs training.
Department of Energy:
Open Recommendations:
Given the concerns we have raised about whether program requirements
are being met, we recommend that DOE, in conjunction with both state
and local weatherization agencies, develop and clarify weatherization
program guidance that:
* establishes best practices for how income eligibility should be
determined and documented and issues specific guidance that does not
allow the self-certification of income by applicants to be the sole
method of documenting income eligibility.
* clarifies the specific methodology for calculating the average cost
per home weatherized to ensure that the maximum average cost limit is
applied as intended.
* accelerates current DOE efforts to develop national standards for
weatherization training, certification, and accreditation, which is
currently expected to take 2 years to complete.
* develops a best practice guide for key internal controls that should
be present at the local weatherization agency level to ensure
compliance with key program requirements.
* sets time frames for development and implementation of state
monitoring programs.
* revisits the various methodologies used in determining the
weatherization work that should be performed based on the
consideration of cost-effectiveness and develops standard
methodologies that ensure that priority is given to the most cost-
effective weatherization work. To validate any methodologies created,
this effort should include the development of standards for accurately
measuring the long-term energy savings resulting from weatherization
work conducted.
* considers and addresses how the weatherization program guidance is
impacted by the introduction of increased amounts of multifamily units.
In addition, given that state and local agencies have felt pressure to
meet a large increase in production targets while effectively meeting
program requirements and have experienced some confusion over
production targets, funding obligations, and associated consequences
for not meeting production and funding goals, we recommend that DOE
clarify its production targets, funding deadlines, and associated
consequences while providing a balanced emphasis on the importance of
meeting program requirements.
Agency Actions:
In our May 2010 report, we provided eight recommendations and raised
concerns about whether program requirements were being met. DOE
generally agreed with all of our recommendations and has begun to take
several steps in response. For example, DOE reported that it has
drafted national workload standards to address our concerns regarding
training, certification, and accreditation. DOE plans to issue these
standards to recipients in October 2010. DOE is still in the process
of considering our recommendations and will provide additional
information on how they plan to fully implement our recommendations at
a later date.
Environmental Protection Agency:
Open Recommendation:
We recommend that the EPA Administrator work with the states to
implement specific oversight procedures to monitor and ensure
subrecipients' compliance with the provisions of the Recovery Act-
funded Clean Water and Drinking Water SRF program.
Agency Actions:
In response to our recommendation, EPA provided additional guidance to
the states regarding their oversight responsibilities, with an
emphasis on enhancing site specific monitoring and inspections.
Specifically, in June 2010, the agency developed and issued an
oversight plan outline for Recovery Act projects that provides
guidance on the frequency, content, and documentation related to
regional reviews of state Recovery Act programs and regional and state
reviews of specific Recovery Act projects. For example, EPA's guidance
states that regions and states should be reviewing the items included
on the EPA "State ARRA Inspection Checklist" or use a state equivalent
that covers the same topics. The plan also describes EPA headquarters
role in ongoing Recovery Act oversight and plans for additional
webcasts. EPA also reiterated that contractors are available to
provide training and to assist with file reviews and site inspections.
Department of Health and Human Services: Office of Head Start:
Our May 2010 bimonthly report identified the need for improved
management information on regional offices and grantees' decisions and
activities to consistently oversee the rapid expansion and program
performance of Head Start and Early Head Start under the Recovery Act.
We made three recommendations to the Director of the Office of Head
Start (OHS), part of the Department of Health and Human Services'
Administration for Children and Families. In May, HHS disagreed with
our conclusion that a lack of management information limits its
ability to consistently oversee the rapid expansion of Head Start and
Early Head Start under the Recovery Act. 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 this report.
Open Recommendation:
To provide grantees with appropriate guidelines on their use of Head
Start and Early Head Start grant funds, and enable OHS to monitor the
use of these funds, the Director of OHS should direct regional office
staff to stop allocating all grant funds to the "other" budget
category, and immediately revise all financial assistance awards
(FAAs) in which all funds were allocated to the "other" category.
Open Recommendation:
To facilitate understanding of whether regional decisions regarding
waivers of the program's matching requirement are consistent with
Recovery Act grantees' needs across regions, the Director of OHS
should regularly review waivers of the nonfederal matching requirement
and associated justifications.
Open Recommendation:
To oversee the extent to which grantees are meeting the program goal
of providing services to children and families and to better track the
initiation of services under the Recovery Act, the Director of OHS
should collect data on the extent to which children and pregnant women
actually receive services from Head Start and Early Head Start grantees.
Department of Treasury:
New Recommendation:
Treasury should expeditiously provide HFAs with guidance on monitoring
project spending and develop plans for dealing with the possibility
that projects could miss the spending deadline and face further
project interruptions.
Executive Office of the President: Office of Management and Budget
(OMB):
New Recommendation:
To strengthen the Single Audit and federal follow up as oversight
accountability mechanisms, we recommend that the Director of OMB (1)
shorten the timeframes required for issuing management decisions by
federal awarding agencies to grant recipients, and (2) issue the OMB
Circular No. A-133 Compliance Supplement no later than March 31 of
each year.
Open Recommendation:
To leverage Single Audits as an effective oversight tool for Recovery
Act programs, in our prior bimonthly reports, we recommended that the
Director of OMB should:
1. provide more direct focus on Recovery Act programs through the
Single Audit to help ensure that smaller programs with higher risk
have audit coverage in the area of internal controls and compliance;
2. take additional efforts to provide more timely reporting on
internal controls for Recovery Act programs for 2010 and beyond; and:
3. evaluate options for providing relief related to audit requirements
for low-risk programs to balance new audit responsibilities associated
with the Recovery Act.
4. issue Single Audit guidance in a timely manner so that auditors can
efficiently plan their audit work; and:
5. explore alternatives to help ensure that federal awarding agencies
provide their management decisions on the corrective action plans in a
timely manner.
Agency Actions:
OMB has taken several steps in response to our recommendations. Its
efforts, however, are ongoing, and further actions are needed to fully
implement our recommendations to help mitigate risks related to
Recovery Act funds. We include a summary of OMB's efforts to implement
these recommendations.
To focus auditor risk assessments on Recovery Act-funded programs and
to provide guidance on internal control reviews for Recovery Act
programs, OMB worked within the framework defined by existing
mechanisms--Circular No. A-133 and the Circular No. A-133 Compliance
Supplement (Compliance Supplement).[Footnote 193] In this context, OMB
has made limited adjustments to its Single Audit guidance. OMB issued
the Compliance Supplement in May 2009, which focused risk assessments
on Recovery Act-funded programs. In August 2009, OMB issued the
Circular No. A-133 Compliance Supplement Addendum I, which provided
additional guidance for auditors and modified the Compliance
Supplement to, among other things, focus on new Recovery Act programs
and new program clusters.
In October 2009, OMB began a Single Audit Internal Control Project
(project), which is nearing its completion as of May 14, 2010. One of
the project's goals is to encourage auditors to identify and
communicate significant deficiencies and material weaknesses in
internal control over compliance for selected major Recovery Act
programs 3 months sooner than the 9-month time frame currently
required under OMB Circular No. A-133. OMB plans to analyze the
results to identify the need for potential modifications to improve
OMB guidance related to Single Audits.
Although OMB noted the increased responsibilities falling on those
responsible for performing Single Audits, it has yet to issue
proposals or plans to address this issue. States that volunteered to
participate in the project were eligible for some relief in their
workloads because OMB modified the requirements under Circular No. A-
133 to reduce the number of low-risk programs for inclusion in the
Single Audits.
Open Recommendation:
To provide more direct focus on Recovery Act programs through the
Single Audit with regard to smaller programs with higher risk, OMB
provided guidance in the 2009 OMB Circular No. A-133 Compliance
Supplement that required auditors to consider all federal programs
with expenditures of Recovery Act awards to be considered higher risk
programs when performing the standard risk-based tests for selection
of programs to be audited. OMB also issued clarifying information on
determining risk for programs with Recovery Act expenditures. However,
since most of the funding for Recovery Act programs will be expended
in 2010 and beyond, we remain concerned that some smaller programs
with higher risk would not likely receive adequate audit coverage. One
approach for OMB to consider in helping to ensure that smaller
programs with higher risk have audit coverage is to explore various
options to provide auditors with the flexibility needed to select
programs that are considered high risk, even though the federal
expenditures for a smaller program may be less than the expenditure
threshold provided under the Single Audit Act.
With regard to taking additional efforts to provide more timely
reporting on internal controls for Recovery Act programs for 2010 and
beyond, OMB has not yet put into place measures to achieve earlier
communication of the reporting of internal control deficiencies for
fiscal years 2010 and beyond--years where considerable amounts of
Recovery Act funds will be expended. OMB officials have stated in
August 2010, that they plan to initiate a subsequent Single Audit
Internal Control Project for fiscal year 2010. Similar to the 2009
project, one of the project's goals will be to encourage more timely
identification and earlier communication of internal control
deficiencies in selected programs expending Recovery Act funding.
OMB designed its Single Audit Internal Control Project to grant some
relief to the auditors for the states that volunteered to encourage
participation in the project. Specifically, participating auditors
were not required to perform risk assessments of smaller federal
programs. OMB had also modified the requirements under Circular No. A-
133 to reduce the number of low-risk programs that must be included in
some project participants' Single Audits. Although the project which
began in October 2009, was designed to provide the auditors some
relief in their workload, many auditors had already completed their
risk assessment for audits with fiscal years ending June 30, 2009. As
a result, the auditors did not experience the audit relief intended by
the project.
With regard to issuing Single Audit Guidance in a timely manner, we
reported in May 2010 that OMB officials told us that they had planned
to issue the Compliance Supplement in late May 2010. However, OMB did
not issue the Compliance Supplement until July 29, 2010. Several of
the auditors that we surveyed stated that they needed the information
as early as February, or at least by April, to effectively plan their
work. OMB officials stated that the delay in issuing the 2010
compliance supplement was primarily due to the additional attention
needed to include more Recovery Act programs in the Compliance
Supplement and information regarding the audit procedures for
reviewing Recovery Act reporting requirements. In May 2010, OMB
provided the American Institute of Certified Public Accountants
(AICPA) Governmental Audit Quality Center and the National Association
of State Auditors, Comptrollers and Treasurers (NASACT) with draft
Single Audit guidance in May 2010. AICPA and NASACT posted the draft
to its Web sites for auditors to use for planning their work. However,
some auditors we spoke with stated that because the guidance was not
in a final form, it still impacted their ability to efficiently plan
and conduct their work. In addition, OMB has stated that it plans to
have a second phase of the Single Audit Internal Control Project for
fiscal year 2010. However, as of August 5, 2010, OMB had not yet
defined the parameters of the project and issued guidance for
potential volunteer participants. OMB also has not provided detailed
guidance that would explain incentives for volunteering to participate
in the project, types of entities that will be permitted to
participate, the scope of the project (including the specific programs
that participants could select from), the number of participants it is
seeking, or the timeframes for beginning and ending the project.
OMB officials have stated that they have discussed alternatives for
helping to ensure that federal awarding agencies provide their
management decisions on the corrective action plans in a timely manner
but have yet to decide on the course of action that they will pursue
to implement this recommendation.
Open Recommendation:
As we noted in our July 2009 report, reporting on Recovery Act
performance results is broader than the employment-related reporting
required by the act. We continue to recommend that the Director of
OMB--perhaps through the Senior Management Councils--clarify what
other program performance measures recipients are expected to report
on to demonstrate the impact of Recovery Act funding.
Matters for Congressional Consideration:
Matter:
To the extent that appropriate adjustments to the Single Audit process
are not accomplished under the current Single Audit structure,
Congress should consider amending the Single Audit Act or enacting new
legislation that provides for more timely internal control reporting,
as well as audit coverage for smaller Recovery Act programs with high
risk.
GAO continues to believe that Congress should consider changes related
to the Single Audit process.
Matter:
To the extent that additional coverage is needed to achieve
accountability over Recovery Act programs, Congress should consider
mechanisms to provide additional resources to support those charged
with carrying out the Single Audit Act and related audits.
GAO continues to believe that Congress should consider changes related
to the Single Audit process.
Matter:
To provide housing finance agencies (HFA) with greater tools for
enforcing program compliance, in the event the Section 1602 Program is
extended for another year, Congress may want to consider directing
Treasury to permit HFAs the flexibility to disburse Section 1602
Program funds as interest-bearing loans that allow for repayment.
GAO continues to believe that Congress should consider directing
Treasury to permit HFAs the flexibility to disburse Section 1602
Program funds as interest-bearing loans that allow for repayment.
We are sending copies of this report to the Office of Management and
Budget and the Departments of Health and Human Services (Centers for
Medicare and Medicaid Services), Education, Transportation, Energy,
and Housing and Urban Development. In addition, we are sending
sections of the report to officials in the 16 states and the District
and the 24 local governments covered in our review. The report is
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-5500. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix V.
Signed by:
Gene L. Dodaro:
Acting Comptroller General of the United States:
List of Addressees:
The Honorable Nancy Pelosi:
Speaker of the House of Representatives:
The Honorable Daniel K. Inouye:
President Pro Tempore of the Senate:
The Honorable Harry Reid:
Majority Leader:
United States Senate:
The Honorable Mitch McConnell:
Republican Leader:
United States Senate:
The Honorable Steny Hoyer:
Majority Leader:
House of Representatives:
The Honorable John Boehner:
Republican Leader:
House of Representatives:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Dave Obey:
Chairman:
The Honorable Jerry Lewis:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell E. Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This appendix describes our objectives, scope, and methodology for
this seventh of our bimonthly reviews on the American Recovery and
Reinvestment Act of 2009 (Recovery Act). A detailed description of the
criteria used to select the core group of 16 states and the District
of Columbia (District) and programs we reviewed is found in appendix I
of our April 2009 Recovery Act bimonthly report.[Footnote 194]
Objectives and Scope:
The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states' and localities' use of funds
made available under the act. As a result, our objectives for this
report were to assess (1) selected states' and localities' uses of and
planning for Recovery Act funds, (2) the approaches taken by the
selected states and localities to ensure accountability for Recovery
Act funds, and (3) state activities to evaluate the impact of the
Recovery Act funds they have received to date. We selected programs
for review primarily because they have begun disbursing funds to
states or because they have known or potential risks. The risks can
include existing programs receiving significant amounts of Recovery
Act funds or new programs. In some cases, we have also collected data
from all states and from a broader array of localities to augment the
in-depth reviews.
Our teams visited the 16 selected states, the District, and a
nonprobability sample of entities (e.g., state and local governments,
local educational agencies, public housing authorities) during the
period from May 2010 through September 2010. As with our previous
Recovery Act reports, our teams met with a variety of state and local
officials from executive-level and program offices. During the
discussions with state and local officials, teams used a series of
program review and semistructured interview guides that addressed
state plans for management, tracking, and reporting of Recovery Act
funds and activities. We also reviewed state statutes, legislative
proposals, and other state legal materials for this report. Where
attributed, we relied on state officials and other state sources for
descriptions and interpretation of state legal materials. Appendix IV
details the states and localities visited by GAO. Criteria used to
select localities within our selected states follows below.
The act requires that nonfederal recipients of Recovery Act-funded
grants, contracts, or loans submit quarterly reports on each project
or activity including information concerning the amount and use of
funds and jobs created or retained.[Footnote 195] The first of these
recipient reports covered cumulative activity since the Recovery Act's
passage through the quarter ending September 30, 2009. The Recovery
Act requires us to comment on the estimates of jobs created or
retained after the recipients have reported. We issued our initial
report related to recipient reporting, including recommendations for
recipient report improvements, on November 19, 2009.[Footnote 196] A
second major focus of the current report is to provide updated
information concerning recipient reporting in accordance with our
mandate for quarterly reporting.[Footnote 197]
States' and Localities' Uses of Recovery Act Funds:
Using criteria described in our earlier bimonthly reports, we selected
the following streams of Recovery Act funding flowing to states and
localities for review during this report: Medicaid Federal Medical
Assistance Percentage (FMAP) grant awards; the State Fiscal
Stabilization Fund (SFSF); Title I, Part A of the Elementary and
Secondary Education Act of 1965 (ESEA); Parts B and C of the
Individuals with Disabilities Education Act (IDEA); the Federal-Aid
Highway Surface Transportation and Transit Capital Assistance
programs; the State Energy Program (SEP); the Energy Efficiency and
Conservation Block Grant program (EECBG); the Weatherization
Assistance Program; the Public Housing Capital Fund; the Tax Credit
Assistance Program (TCAP); and Grants to States for Low-Income Housing
Projects in Lieu of Low-Income Housing Credits Program under Section
1602 of the Recovery Act (Section 1602 Program). We also reviewed how
Recovery Act funds are being used by states and localities. In
addition, we analyzed www.Recovery.gov data on federal spending.
Federal Medical Assistance Percentage:
To examine Medicaid enrollment, states' efforts to comply with the
provisions of the Recovery Act, states' uses of the grant awards, and
other related information, we conducted a Web-based survey, asking the
16 states and the District to provide new information, as well as to
update information they had previously provided to us. To establish
the reliability of our Web-based survey data, we pretested the survey
with Medicaid officials in two states and also conducted follow-up
with sample states as needed. For the increased FMAP grant awards, we
obtained increased FMAP grant and draw down figures for each state in
our sample and the District from the Centers for Medicare & Medicaid
Services (CMS). We discussed with CMS issues related to the agency's
oversight of increased FMAP grant awards and its guidance to states on
Recovery Act provisions. To assess the reliability of increased FMAP
draw down figures, we previously interviewed CMS officials on how
these data are collected and reported. Based on these steps, we
determined that the data provided by CMS and submitted by states were
sufficiently reliable for the purposes of our engagement.
SFSF, ESEA Title I, and IDEA:
To obtain national level information on how Recovery Act funds made
available by the U.S. Department of Education under SFSF, ESEA Title
I, and IDEA were used at the local level, we designed and administered
a Web-based survey of local education agencies (LEAs) in the 50 states
and the District of Columbia. We surveyed school district
superintendents across the country to learn how Recovery Act funding
was used and what impact these funds had on school districts. We
conducted our survey between March and April 2010, with a 78 percent
final weighted response rate. We selected a stratified[Footnote 198]
random sample of 575 LEAs from the population of 16,065 LEAs included
in our sample frame of data obtained from Education's Common Core of
Data (CCD) in 2007-08.
We took steps to minimize nonsampling errors by pretesting the survey
instrument with officials in 5 LEAs in January and February 2010.
Because we surveyed a sample of LEAs, survey results are estimates of
a population of LEAs and thus are subject to sampling errors that are
associated with samples of this size and type. Our sample is only one
of a large number of samples that we might have drawn. As each sample
could have provided different estimates, we express our confidence in
the precision of our particular sample's results as a 95 percent
confidence interval (e.g., plus or minus 10 percentage points). We
excluded 16 of the sampled LEAs for various reasons - because they
were no longer operating in the 2009-10 school year, were a duplicate
entry, or were not an LEA--and therefore were considered out of scope.
All estimates produced from the sample and presented in this report
are representative of the in-scope population and have margins of
error of plus or minus 7 percentage points or less for our sample,
unless otherwise noted.
To obtain specific examples of how LEAs are using Recovery Act funds,
we selected LEAs in each of the following states: California,
Massachusetts and Michigan to visit and interview LEA officials. We
selected these states from among the 16 states and the District of
Columbia in our review based on geographic diversity and varying state
budget situations for K-12 education.
Within the selected states, we identified a mix of local districts
that would represent urban, rural, and suburban districts, LEAs among
the 100 largest LEAs as well as districts that were not as large, and
local districts with different budget situations. We also obtained
selected additional information from LEA officials in New York. In
addition to interviewing local officials, we interviewed selected
state officials. Specifically, we interviewed ESEA Title I officials
in states with relatively low Recovery Act Title I drawdown rates to
assess to what extent state officials in these states are monitoring
LEA obligations and also discussed implementation of School
Improvement Grants. We also interviewed officials at the U.S.
Department of Education (Education) and reviewed relevant laws,
guidance, and communications to the states. Further, we obtained
information from Education's website about the amount of funds these
states have drawn down from their accounts with Education. We also
reviewed data on state level funding changes from the National
Association of State Budget Officers (NASBO). To assess the
reliability of the NASBO data, we (1) reviewed existing documentation
related to the data sources and (2) interviewed knowledgeable agency
officials about the data. We determined that the data are sufficiently
reliable for the purposes of this report.
Federal-Aid Highway Surface Transportation Program:
For highway infrastructure investment, we reviewed status reports and
guidance to the states and discussed these with the U.S. Department of
Transportation and Federal Highway Administration (FHWA) officials. We
obtained funding data for each of the 16 states and the District in
our review. We also reviewed data related to contracts and
economically distressed areas--submitted by states--in the FHWA
Recovery Act Data System (RADS) for completeness and compliance with
FHWA guidance. We also interviewed or obtained information from state
department of transportation officials in Arizona, California,
Florida, Illinois, Massachusetts, Mississippi, North Carolina,
Pennsylvania, and Texas. Specifically, we discussed rates of
deobligations in suballocated and nonsuballocated areas, accuracy of
contract data entered into RADS, and rates of spending from regular
FHWA highway program during the period of the Recovery Act.
Transit Capital Assistance Program:
For public transit investment, we reviewed status reports and guidance
to the states and transit agencies and discussed these with U.S.
Department of Transportation and Federal Transit Administration (FTA)
officials as part of our review of the Transit Capital Assistance
Program and Fixed Guideway Infrastructure Investment program. We
obtained funding data on the amounts of funding transferred from FHWA
to FTA and funding levels used for transit operating expenses for each
of our urbanized and nonurbanized areas. We also interviewed FTA
officials about operating expense data. Finally we interviewed or
obtained information from state and transit agency officials in
California, Illinois, Massachusetts, Michigan, New Jersey, and Texas
regarding these issues.
State Energy Program, Energy Efficiency Conservation Block Grant, and
Weatherization Assistance Program:
For the State Energy Program (SEP), the Energy Efficiency and
Conservation Block Grant program (EECBG), and Weatherization
Assistance Program, we reviewed relevant regulations and federal
guidance and interviewed Department of Energy officials who administer
the programs at the federal level. Specifically, for the SEP and the
EECBG programs, we collected information from 6 and 12 of our selected
states and the District, respectively.[Footnote 199] Also, we
conducted semistructured interviews of officials in state and local
agencies that administer the programs and with local subrecipients who
received Recovery Act funds. These interviews covered the respective
state's and locality's usage of funds, internal controls, and
reporting procedures. We also collected data on the number and types
of projects funded with Recovery Act money for the SEP and EECBG
programs. In addition, for this report, we collected updated
information from seven of our selected states and the District on
their weatherization programs.[Footnote 200] We conducted
semistructured interviews of officials in the states' agencies that
administer the weatherization program and with local service providers
responsible for weatherization production. We interviewed officials at
local service providers in the District and the seven states, and
reviewed local agencies' client case files for homes weatherized with
Recovery Act funds. We also conducted site visits to interview local
providers of weatherization and to observe weatherization activities.
For all three programs, we collected data about each state's total
allocation under the Recovery Act, as well as the allocation already
provided to the states and the obligations and expenditures-to-date.
Public Housing Capital Fund:
For public housing, we obtained data from HUD's Electronic Line of
Credit Control System on the amount of Recovery Act funds that have
been obligated and expended by each housing agency in the country that
received Public Housing Capital Funds. To monitor progress on how
housing agencies are using these funds, we visited 12 housing agencies
in nine states.[Footnote 201] For each state, we selected at least 1
public housing agency from a list of 47 housing agencies visited for
previous Recovery Act reports to update the status of their grant
projects. At the selected housing agencies, we interviewed housing
agency officials and conducted site visits of Recovery Act projects.
We also interviewed officials of the U.S. Department of Housing and
Urban Development (HUD) to follow up on HUD's efforts in monitoring
public housing agency obligations and uses of Recovery Act funds and
to understand HUD's capacity to administer Recovery Act funds.
Further, we interviewed HUD officials to understand their procedures
for reviewing data that housing agencies reported to
FederalReporting.gov.
Tax Credit Assistance Program:
To further assess state implementation of the Tax Credit Assistance
Program (TCAP) and Section 1602 program, we asked managers of state
housing finance agencies in all 50 states, the District, Puerto Rico,
Guam, and the U.S. Virgin Islands to complete a Web survey. Our
questionnaire asked about the status of program delivery, program
design, safeguards and controls, expected results, and challenges to
implementation. We designed and tested the self-administered
questionnaire in consultation with experts, representatives of housing
finance stakeholders, and state agency managers. Survey data
collection took place in November and early December of 2009. We
received usable responses from all 54 agencies.
While all state agencies returned questionnaires, and thus our data is
not subject to sampling or overall questionnaire nonresponse error,
the practical difficulties of conducting any survey may introduce
other errors in our findings. We took steps to minimize errors of
measurement, question-specific nonresponse, and data processing. In
addition to the questionnaire development activities listed above, and
pretesting the questionnaire with four state agency officials before
the survey, GAO analysts also recontacted selected respondents to
follow up on answers that were missing or that required clarification.
In addition, GAO analysts resolved respondent difficulties in
answering our questions during the survey. Before the survey, we also
contacted each agency to determine whether our originally identified
respondent was the most appropriate and knowledgeable person to answer
our questions, and made changes to our contact list as necessary.
Finally, analysis programs and other data analyses were independently
verified.
Head Start and Early Head Start:
Owing to the focus on Early Head Start expansion under the Recovery
Act, we visited nine Early Head Start expansion grantees in four
states: Florida, Georgia, North Carolina, and Ohio. Due to time and
resource considerations, we chose these states based on GAO staff
expertise in Head Start. For each state, all but one Early Head Start
grantee selected had received a grant above the median for all
Recovery Act expansion funds awarded in each state in order to focus
our limited resources on relatively sizable grants. We also included
four grantees that had been awarded expansion funds for constructing
or renovating facilities. The grantees we visited included grantees
that had not previously provided an Early Head Start program but that
had provided Head Start, as well as experienced Early Head Start
grantees. For each selected grantee, we reviewed federal assistance
award information, enrollment data, proposals for the use of Quality
Improvement funds, and facilities under construction or renovation. We
conducted structured interviews with grantee officials covering
updates on the use of Recovery Act funds, challenges to spending funds
within Office of Head Start (OHS) deadlines, OHS monitoring of
grantees, and grantees' interpretation of enrollment and attendance
requirements. We also reviewed files on-site at each grantee on
enrollment, income eligibility, and health screening. The grantees we
visited were purposefully chosen and are not a representative sample
of all expansion grantees. The information gathered from these site
visits is not generalizable to the population of Early Head Start
expansion grantees.
Recipient Reporting:
The recipient reporting section of this report responds to the
Recovery Act's mandate that we comment on the estimates of jobs
created or retained by direct recipients of Recovery Act funds. For
our review of the fourth submission of recipient reports, covering the
period from April 1, 2010, through June 30, 2010, we built on findings
from our three prior reviews of the reports, covering the period from
February 2009 through March 30, 2010. We performed edit checks and
basic analyses on the fourth submission of recipient report data that
became publicly available at Recovery.gov on July 30, 2010. We
interviewed federal agency officials from the Department of Energy,
who have responsibility for ensuring a reasonable degree of quality
across their programs' recipient reports. We also interviewed
representatives from a variety of state associations, such as the
National Association of State Auditors, Comptrollers, and Treasurers
and the National Association of State Budget Officers, to obtain their
views on whether the process of recipient reporting has had an effect
on intergovernmental interactions.
From the fourth submission of recipient reports, we reviewed reports
for two energy programs, EECBG and the Weatherization Assistance
Program, to determine whether they had used Office of Management and
Budget (OMB) guidance for calculating their full-time equivalents
(FTE) funded by the Recovery Act. We interviewed 13 EECBG state-level
and 19 local government recipients from our 17 selected jurisdictions
about their FTE calculations for the fourth round of reporting. We
also interviewed 8 state-level weatherization assistance recipients
and 17 local government weatherization assistance subrecipients from
our 17 selected jurisdictions about their FTE calculations. In some
instances, we reviewed supporting documentation with quarterly FTE
reports, and assessed the validity of those calculations in complying
with OMB guidance. Due to the limited number of recipients reviewed
and the judgmental nature of the selection, GAO's FTE findings are not
generalizable beyond the programs examined. In addition, state teams
also interviewed government officials from our 16 selected states and
the District to discuss issues that arose in the fourth reporting
period statewide, specifically related to any difficulties they
encountered during the fourth round of reporting, development of their
state Web sites, and their views on whether the recipient reporting
requirements have affected intergovernmental interactions. We also
asked these officials about ongoing state plans for managing,
tracking, and reporting on Recovery Act funding and activities and
solicited feedback from state officials regarding how states are using
data generated from the recipient reporting effort and ways the
recipient reporting process could be improved.
Single Audit as an Accountability and Oversight Mechanism:
To perform our audit work, we interviewed federal officials, state
auditors, and officials from the cognizant agency for audit from the
Department of Health and Human Services (HHS). We examined documents
related to Single Audits, including the 2010 OMB Circular No. A-133
Audits of States, Local Governments, and Non-Profit Organizations
Compliance Supplement,[Footnote 202] OMB's and HHS's evaluations of
the OMB Single Audit Internal Control project, and related federal
agency management decisions. We reviewed Federal Audit Clearinghouse
documents, such as selected Single Audit reports. We also conducted a
survey of the state auditors and state program and finance officials
that participated in the OMB Internal Control Single Audit Project. We
analyzed and summarized the responses to our survey.[Footnote 203] We
conducted our surveys in March 2010 and interviewed several state
auditors, officials from the Department of Health and Human Services,
which is the cognizant agency for audit, and officials from awarding
federal agencies whose programs were selected for audit under the
project. We also participated in an OMB-led discussion of the
project's participants to obtain their views on the project.
Recovery Accountability and Transparency Board Initiatives:
To determine the status and results of oversight activities of the
Recovery Accountability and Transparency Board (the Board), we met
with representatives of the Board to discuss the initiatives they have
taken to coordinate and monitor the efforts of the inspectors' general
oversight activities as well as the Board's initiatives to prevent and
detect fraud, waste, and abuse of Recovery funds. We reviewed
available documentation related to the Board's efforts.
Observations on States' Use of Contracts and Contract Outcomes:
To provide observations on selected states' use of competitive
procedures and fixed prices in awarding contracts for Recovery Act
funds, between July 2009 and March 2010, we met with state and local
officials to discuss the contract award process for a sample of 208
contracts in 16 states and the District. Between March and June 2010,
we met again with the officials responsible for these same contracts
to discuss the extent to which there had been cost or schedule changes
or contractor performance issues. The contracts we reviewed with state
officials were selected based on a combination of several factors to
obtain a mix of various programs and dollar values that varied among
the states. Our methodology for selecting these contracts does not
allow for reported information to be generalized.
State and Local Accountability:
To assess actions taken by the state and local audit community to
monitor the use of Recovery Act funds, we have interviewed selected
state and local auditors and state inspectors general about their
ongoing and planned audit activities. We have also reviewed state and
local audit reports. We have also spoken to some of the Recovery Act
oversight entities created in many of the selected states such as New
Jersey's Recovery Accountability Task Force and the Recovery Task
Force in California. In addition, in an effort to update the audit
community concerning our Recovery Act work and participate in
information sharing about Recovery Act issues, we are working with
state and local auditors and their associations to facilitate routine
telephone conference calls to discuss Recovery Act issues with a broad
community of interested parties. The conference call participants
include the Association of Government Accountants; the Association of
Local Government Auditors; the National Association of State Auditors,
Comptrollers, and Treasurers; OMB; the Board; federal inspectors
general; the National Governors Association; and the National
Association of State Budget Officers. In an effort to ensure
information sharing about allegations of fraud, we are also working
with state and local auditors to develop plans for routine sharing of
information.
State and Local Budget:
We continued our review of the use of Recovery Act funds for the 16
selected states, the District, and selected localities. We conducted
interviews with state budget officials and reviewed proposed and
enacted budgets and revenue forecasts to update our understanding of
the use of Recovery Act funds in the 16 selected states and the
District. To update our understanding of local governments' use of
Recovery Act funds, we met with finance officials and city
administrators at the selected local governments.
The topics covered in our meetings included what Recovery Act funds
the states and localities received, how they used the funds, and their
exit strategy to prepare for the phasing out of Recovery Act funding.
In the course of our discussions with officials we explored the extent
to which the receipt of Recovery Act funds has stabilized state and
local government budgets. We also reviewed reports and analyses
regarding the fiscal conditions of states and localities.
The selected states and the District for our review contain about 65
percent of the U.S. population and are estimated to receive
collectively about two-thirds of the intergovernmental grant funds
available through the Recovery Act. To select local governments for
our review, we identified localities representing a range of
jurisdictions (cities and counties) and variations in population sizes
and economic conditions (unemployment rates greater than or less than
the state's overall unemployment rate). In making our selections, we
also considered proximity to our other scheduled Recovery Act work and
local contacts established during prior reviews. The GAO teams visited
a total of 24 local governments in our 16 selected states that ranged
in population from approximately 258 in Steward, Illinois, to
approximately 2.5 million in Miami-Dade County, Florida. Unemployment
rates in our selected localities ranged from 6.7 percent in Round
Rock, Texas, to 13.4 percent in Redding, California.[Footnote 204] Due
to the small number of jurisdictions visited and judgmental nature of
their selection, GAO's findings are not generalizable to all local
governments.
The list of local governments selected in each state is found in
appendix IV.
Data and Data Reliability:
We collected funding data from www.Recovery.gov and federal agencies
administering Recovery Act programs for the purpose of providing
background information. We used funding data from www.Recovery.gov--
which is overseen by the Board--because it is the official source for
Recovery Act spending. Except as may be noted with regard to specific
analyses appearing in other sections of this report and based on our
examination of this information thus far, we consider these data
sufficiently reliable with attribution to official sources for the
purposes of providing background information on Recovery Act funding
for this report. Our sample of states, localities, and entities has
been purposefully selected and the results of our reviews are not
generalizable to any population of states, localities, or entities.
We conducted this performance audit from May 27, 2010, to September
20, 2010, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Implemented and Closed Recommendations:
The following are 31 GAO recommendations that Departments of
Transportation (DOT), Housing and Urban Development (HUD), Education,
Treasury, and the Office of Management and Budget (OMB) have
implemented since we began conducting bimonthly reviews in April 2009.
[Footnote 205] We have also closed 2 recommendations.
Department of Transportation:
Implemented Recommendation:
To ensure that the public has accurate information regarding
economically distressed areas, we also recommend that the Secretary of
Transportation direct FHWA to issue guidance to the states advising
them to update information in the Recovery Act Data System to reflect
current DOT decisions concerning the special-need criteria. Projects
in areas currently lacking documentation showing that the areas meet
the criteria to be designated as economically distressed should be
reported as a project in a noneconomically distressed area.
Agency Actions:
In July 2010, FHWA directed Arizona, California, and Illinois to
revise their designations and to report these projects as being in
noneconomically distressed areas. FHWA also directed all states to
ensure that future Recovery Act Data System entries be coded as
economically distressed only if FHWA division and headquarters offices
had approved the designation.
Implemented Recommendation:
Recipients of highway and transit Recovery Act funds, such as state
departments of transportation and transit agencies, are subject to
multiple reporting requirements. Both DOT and OMB have issued
implementation guidance for recipient reporting. Despite these
efforts, state and local highway and transit officials expressed
concerns and challenges with meeting the Recovery Act reporting
requirements. We recommended in our September 2009 report that the
Secretary of Transportation should continue the department's outreach
to state departments of transportation and transit agencies to
identify common problems in accurately fulfilling reporting
requirements and provide additional guidance, as appropriate.
Agency Actions:
In September 2009, in responding to our recommendation, DOT said that
it had conducted outreach, including providing technical assistance,
training, and guidance to recipients, and will continue to assess the
need to provide additional information. For example, in February 2010,
FTA continued three training webinars to provide technical assistance
in complying with reporting requirements under section 1201(c) of the
Recovery Act. In addition, on February 1, 2010, FTA issued guidance to
transit agencies instructing them to use the same methodology for
calculating jobs retained through vehicles purchased under section
1201 as they had been for the recipient reporting. This reversed
previous guidance that had instructed transit agencies to use a
different methodology for vehicle purchases under sections 1201 and
recipient reporting.
Implemented Recommendation:
DOT and FHWA have yet to provide clear guidance regarding how states
are to implement the Recovery Act requirement that economically
distressed areas (EDA) are to receive priority in the selection of
highway projects for funding. We found substantial variation both in
how states identified EDAs and how they prioritized project selection
for these areas. To ensure states meet Congress's direction to give
areas with the greatest need priority in project selection, we
recommended in our July 2009 report that the Secretary of
Transportation develop clear guidance on identifying and giving
priority to EDAs that are in accordance with the requirements of the
Recovery Act and the Public Works and Economic Development Act of
1965, as amended, and more consistent procedures for FHWA to use in
reviewing and approving states' criteria.
Agency Actions:
In August 2009, in response to our recommendation, FHWA, in
consultation with the Department of Commerce, developed guidance that
addresses our recommendation. In particular, FHWA's August 2009
guidance defines "priority," directing states to give priority to
projects that are located in an economically distressed area and can
be completed within the 3-year time frame over other projects. In
addition, FHWA's guidance sets out criteria that states may use to
identify economically distressed areas based on "special need." The
criteria align closely with special need criteria used by the
Department of Commerce's Economic Development Administration in its
own grant programs, including factors such as actual or threatened
business closures (including job loss thresholds), military base
closures, and natural disasters or emergencies.
Department of Housing and Urban Development:
Implemented Recommendation:
To ensure housing agencies use the correct job calculation, we
recommend that the Secretary of Housing and Urban Development clearly
emphasize to housing agencies that they discontinue use of the
outdated jobs calculator provided by HUD in the first round of
recipient reporting.
Agency Actions:
In response to our recommendation, HUD sent an e-mail to housing
agencies on June 30, 2010, that explicitly instructed them not to use
the outdated jobs-counting calculator, as it was not correctly
computing the FTE calculation per updated OMB guidance. This e-mail
also included a link to HUD's new online jobs-counting calculator and
instructed housing agencies to use this calculator for the July and
all future reporting periods.
Implemented Recommendation:
To help clarify the recipient reporting responsibilities of housing
agencies and to improve the consistency and completeness of jobs data
reported by housing agencies, we recommend that the Secretary of
Housing and Urban Development issue guidance that explains when FTEs
attributable to subcontractors should be reported by the prime
recipient.
Agency Actions:
In response to our recommendation, HUD notified housing agencies in a
June 30, 2010, e-mail that it had developed additional guidance for
housing agencies to use when determining whether prime recipients
should report FTEs for subcontractors and provided a link to the
guidance on its Web site. The guidance noted that housing agencies
should include Recovery Act-funded hours that contractors and
subcontractors worked as part of their FTE calculation.
Implemented Recommendation:
To help HUD achieve Recovery Act objectives and address challenges
with its continued administration of Recovery Act funds, we recommend
that the Secretary of Housing and Urban Development develop a
management plan to determine the adequate level of agency staff needed
to administer both the Recovery Act funds and the existing Capital
Fund program going forward, including identifying future resource
needs and determining whether current resources could be better
utilized to administer these funds.
Agency Actions:
In response to our recommendation, HUD developed a management plan for
administration of Recovery Act funds, including the need for an
additional 11 FTEs to carry out Recovery Act responsibilities. In July
2010, HUD also provided us with its management plan for the Public
Housing Capital Fund program. The plan summarized the key activities
HUD undertakes to monitor and facilitate the use of these funds by
program area, including rule and policy development, planning, program
awards, program management, technical assistance, and reporting. The
plan also included the specific activities, tasks, and resources used
for each of these existing program areas, identifying approximately 91
existing FTEs in its headquarters and field offices to support these
activities. According to HUD's management plan, HUD's current staffing
level is sufficient to manage its existing Capital Fund program, but
the agency could more efficiently utilize its current resources. As a
result, HUD plans to realign current staff to focus on its core
missions including Recovery Act responsibilities.
Implemented Recommendation:
We recommended on March 3, 2010 that the Secretary of Housing and
Urban Development instruct housing agencies to discontinue use of the
jobs calculator provided by HUD in the first round of recipient
reporting for subsequent rounds of reporting to ensure the correct job
calculation is used.
Agency Actions:
In a March 26, 2010, e-mail to housing agencies, HUD included
instructions to discontinue use of the jobs calculator originally
posted on the HUD Recovery Act Web site in October 2009. HUD
reiterated these instructions in a subsequent e-mail it sent to
housing agencies on March 31, 2010.
Implemented Recommendation:
To enhance HUD's ability to prevent, detect, and correct noncompliance
with the use of Recovery Act funds, we recommended in September 2009
that the Secretary of Housing and Urban Development expand the
criteria for selecting housing agencies for on-site reviews to include
housing agencies with open Single Audit findings that may affect the
use of and reporting on Recovery Act funds.
Agency Actions:
In October 2009, HUD expanded its criteria for selecting housing
agencies for on-site reviews to include all housing agencies with open
2007 and 2008 Single Audit findings as of July 7, 2009, relevant to
the administration of Recovery Act funds. HUD has identified 27 such
housing agencies and planned to complete these on-site reviews by
February 15, 2010.
Department of Education:
Implemented Recommendation:
To ensure that FTEs are properly accounted for over time, we recommend
that the Secretary of Education clarify how LEAs and IHEs should
report FTEs when additional Recovery Act funds are received in a
school year and are reallocated to cover costs incurred in previous
quarters, particularly when the definite term methodology is used.
Agency Actions:
In response to our recommendation, Education issued clarifying
guidance on August 26, 2010, that addressed how FTEs should be
reported when funds are expended in one quarter to cover costs
incurred in previous quarters.
Implemented Recommendation:
To ensure that subrecipients do not underreport vendor FTEs directly
paid with Recovery Act funds, we recommend that the Secretary of
Education re-emphasize the responsibility of subrecipients to include
hours worked by vendors in their quarterly FTE calculations to the
maximum extent practicable.
Agency Actions:
In response to our recommendation, Education issued clarifying
guidance on August 26, 2010, that re-emphasized the responsibility of
subrecipients to include hours worked by vendors in their quarterly
FTE calculations.
Implemented Recommendation:
To improve consistency in how FTEs generated using the definite term
are calculated, we recommend that the Secretary of Education and the
Director of OMB clarify whether IHE and LEA officials using this
methodology should include the cost of benefits in their calculations.
Agency Actions:
In response to our recommendation, Education issued clarifying
guidance on August 26, 2010, that addressed whether benefits should be
included in the calculation of jobs under the OMB guidance released
December 18, 2009.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommend that the Secretary of Education and the Director of OMB
provide clarifying guidance to recipients on how to best calculate
FTEs for education employees during quarters when school is not in
session.
Agency Actions:
In response to our recommendation, Education issued clarifying
guidance on August 26, 2010, that explained that the length of a full-
time contract (i.e., 10 or 12 months) should not affect FTE
calculations.
Implemented Recommendation:
We recommended in September 2009 that the Secretary of Education take
further action such as collecting and reviewing documentation of state
monitoring plans to ensure that states understand and fulfill their
responsibility to monitor subrecipients of SFSF funds and consider
providing training and technical assistance to states to help them
develop and implement state monitoring plans for SFSF.
Agency Actions:
In February 2010, Education instructed states to submit to Education
for review their plans and protocols for monitoring subrecipients of
SFSF funds. Education also issued its plans and protocols for
monitoring state implementation of the SFSF program. The plan includes
on-site visits to about half the states and desk reviews of the other
states to be conducted over the next year.
Implemented Recommendation:
We recommended in November 2009 that the Secretary of Education take
further action to enhance transparency by requiring states to include
an explanation of changes to maintenance-of-effort levels in their
SFSF funding application resubmissions.[Footnote 206]
Agency Actions:
Education notified states that, if states made changes to their
maintenance-of-effort data in their State Fiscal Stabilization Fund
applications, they must provide a brief explanation of the reason the
data changed.
Department of the Treasury:
Implemented Recommendation:
In order to increase the likelihood that state Housing Finance
Agencies (HFA) will comply with Treasury's requirements for
recapturing funds, the Secretary of the Treasury should define what it
considers appropriate actions by HFAs to recapture funds in order to
avoid liability when they are unable to collect funds from project
owners that do not comply.
Agency Actions:
Treasury agreed with our recommendation and in response to our
recommendation, Treasury provided additional guidance to state HFAs to
clarify what constitutes appropriate actions by HFAs to recapture
funds in order to avoid liability in the event of project owner
noncompliance. Specifically, in August 2010, the agency developed and
issued a Recapture Guidance for Recovery Act projects that receive
Section 1602 Program funds that defines a recapture event, specifies
the amount of funds owed in the event of recapture, describes an HFA's
obligation and responsibilities in avoiding project owner
noncompliance, sets forth the kinds of recapture actions an HFA may
take in the event of noncompliance, and directs HFAs on how to report
noncompliance.
Executive Office of the President: Office of Management and Budget
(OMB):
Implemented Recommendation:
We were concerned that since the scope of Single Audit workloads due
to Recovery Act programs being subject to Single Audits will increase,
consideration should be given to determining what funds can be used to
support Single Audit efforts related to Recovery Act programs,
including whether legislative changes are needed to specifically
direct resources to cover incremental audit costs related to Recovery
Act programs. We recommended that the Director of OMB develop
mechanisms to help fund the additional Single Audit costs and efforts
for auditing Recovery Act programs.
Agency Actions:
OMB addressed our recommendation by issuing guidance[Footnote 207] to
executive departments and agencies to help states with various
approaches to recover administrative costs associated with the wide
range of activities to comply with the Recovery Act. Administrative
costs include, but are not limited to, oversight and audit costs and
the costs of performing additional Single Audits. OMB issued the
guidance to clarify actions (within the existing legal framework for
identifying allowable reimbursable costs) that states could take to
recover administrative costs in a more timely manner. In addition to
our recommendation to OMB, as we previously noted in our bimonthly
reports, it is our view that, to the extent that additional audit
coverage is needed to achieve accountability over Recovery Act
programs, Congress should consider mechanisms to provide additional
resources to support those charged with carrying out the Single Audit
Act and related audits.
Implemented Recommendation:
We reported in July 2009 that OMB was encouraging communication of
weaknesses to management early in the audit process, but did not add
requirements for auditors to take these steps. This step did not
address our concern that internal controls over Recovery Act programs
should be reviewed before significant funding is expended. Under the
current Single Audit framework and reporting timelines, the auditor
evaluation of internal control and related reporting will occur too
late--after significant levels of federal expenditures have already
occurred. As a result of our recommendation, OMB implemented a Single
Audit Internal Control Project under which a limited number of
voluntarily participating auditors performing the Single Audits for
states would communicate in writing internal control deficiencies
noted in the single audit within 6 months of the 2009 fiscal year-end,
rather than the 9 months required by the Single Audit Act. We
recommended that the Director of OMB take steps to achieve sufficient
participation and coverage in OMB's Single Audit Internal Control
Project that provides for early written communication of internal
control deficiencies to achieve the objective of more timely
accountability over Recovery Act funds.
Agency Actions:
OMB implemented its Single Audit Internal Control Project in October
2009. The project called for a minimum of 10 participants. OMB
solicited the 50 states, the District of Columbia, Puerto Rico, and
Guam, from which 16 states volunteered to participate.[Footnote 208]
The volunteer states were diverse in geographic characteristics and
population and included states that use auditors within state
government as well as external auditors to conduct Single Audits. In
addition, the volunteer states included California and Texas, which
are among the top three states with the highest levels of Recovery Act
obligations from the federal government. Each state selected at least
two Recovery Act programs from a list of 11 high-risk Recovery Act
programs for internal control testing. OMB designed the project to be
voluntary and OMB officials stated that, overall, they were satisfied
with the population and geographic diversity among the states that
volunteered. Although the project's coverage could be more
comprehensive to provide greater assurance over Recovery Act funding,
the results of the project could provide meaningful insight for making
improvements to the Single Audit process.
Implemented Recommendation:
The Single Audit Act requires that recipients submit their financial
reporting packages, including the Single Audit report, to the federal
government no later than 9 months after the end of the period being
audited. As a result, an audited entity may not receive feedback
needed to correct an identified internal control or compliance
weakness until the latter part of the subsequent fiscal year. The
timing problem is exacerbated by the extensions to the 9-month
deadline that are routinely granted by the awarding agencies,
consistent with OMB guidance. We made two recommendations in this
area. First, we recommended that the Director of OMB formally advise
federal cognizant agencies to adopt a policy of no longer approving
extensions of the due dates of Single Audit reporting package
submissions beyond the 9-month deadline. Second, we also recommended
that the Director of OMB widely communicate this revised policy to the
state audit community and others who have responsibility for
conducting Single Audits and submitting the Single Audit reporting
package.
Agency Actions:
On March 22, 2010, OMB addressed these two recommendations by issuing
memorandum M-10-14, Updated Guidance on the American Recovery and
Reinvestment Act. This guidance directed federal agencies to not grant
any requests made to extend the Single Audit reporting deadlines for
fiscal years 2009 to 2011. OMB further stated that to meet the
criteria for a low-risk auditee in the current year, the auditee must
have submitted the prior 2 years' audit reports by the required due
dates. OMB communicated this revised policy though the OMB Web site,
the American Institute of Certified Public Accountants, and the
National Association of State Auditors, Comptrollers, and Treasurers.
Implemented Recommendation:
OMB should work with the Recovery Accountability and Transparency
Board (the Board) and federal agencies, building on lessons learned,
to establish a formal and feasible framework for review of recipient
changes during the continual update period and consider providing more
time for agencies to review and provide feedback to recipients before
posting updated reports on Recovery.gov.
Agency Actions:
In our March 3, 2010 report, we recommended that OMB work with the
Board and federal agencies to establish a formal and feasible
framework for review of recipient changes during the new continuous
review period and consider providing more time for federal agencies to
review and provide feedback to recipients before posting updated
reports on Recovery.gov. On March 22, 2010, OMB issued updated
guidance which highlighted the steps federal agencies must take to
review data quality of recipient reports during the continuous review
period. The guidance specified that federal agencies must, at a
minimum, conduct a final review of the data upon the close of the
continuous corrections period. In addition, now the Recovery Board
reflects corrected data on Recovery.gov approximately every 2 weeks,
allowing federal agencies time to review and provide feedback in the
interim period.
Implemented Recommendation:
States have been concerned about the burden imposed by new
requirements, increased accounting and management workloads, and
strains on information systems and staff capacity at a time when they
are under severe budgetary stress. We recommended in April 2009 that
the Director of OMB clarify what Recovery Act funds can be used to
support state efforts to ensure accountability and oversight,
especially in light of enhanced oversight and coordination requirements.
Agency Actions:
On May 11, 2009, OMB released M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities, clarifying how state
grantees could recover administrative costs of Recovery Act activities.
Implemented Recommendation:
States and localities are expected to report quarterly on a number of
measures, including the use of funds and an estimate of the number of
jobs created and the number of jobs retained as required by Section
1512 of the Recovery Act. We recommended in our July 2009 report that
to increase consistency in recipient reporting of jobs created and
retained, the Director of OMB should work with federal agencies to
have them provide program-specific examples of the application of
OMB's guidance on recipient reporting of jobs created and retained.
Agency Actions:
OMB has issued clarifications and frequently asked questions (FAQ) on
Recovery Act reporting requirements. During the first reporting
period, OMB also deployed regional federal employees to serve as
liaisons to state and local recipients in large population centers and
established a call center for entities that did not have an on-site
federal liaison. In addition, federal agencies issued additional
guidance that builds on the OMB June 22 recipient reporting guidance
for their specific programs. This guidance is in the form of FAQs, tip
sheets, and more traditional guidance that builds on what was provided
on June 22, 2009. Federal agencies have also taken steps to provide
additional education and training opportunities for state and local
program officials on recipient reporting, including Web-based seminars.
Implemented Recommendation:
To foster timely and efficient communications, we recommended in April
2009 that the Director of OMB should continue to develop and implement
an approach that provides easily accessible, real-time notification to
(1) prime recipients in states and localities when funds are made
available for their use and (2) states--where the state is not the
primary recipient of funds but has a statewide interest in this
information.
Agency Actions:
In response to our recommendation, OMB has made important progress in
notifying recipients when Recovery Act funds are available,
communicating the status of these funds at the federal level through
agency Weekly Financial Activity reports, and disseminating Recovery
Act guidance broadly while actively seeking public and stakeholder
input. OMB has taken the additional step of requiring federal agencies
to notify Recovery Act coordinators in states, the District of
Columbia, commonwealths, and territories within 48 hours of an award
to a grantee or contractor in their jurisdiction.
Implemented Recommendation:
Responsibility for reporting on jobs created and retained falls to
nonfederal recipients of Recovery Act funds. As such, states and
localities have a critical role in determining the degree to which
Recovery Act goals are achieved. Given questions raised by many state
and local officials about how best to determine both direct and
indirect jobs created and retained under the Recovery Act, we
recommended in April 2009 that the Director of OMB continue OMB's
efforts to identify appropriate methodologies that can be used to (1)
assess jobs created and retained from projects funded by the Recovery
Act; (2) determine the impact of Recovery Act spending when job
creation is indirect; and (3) identify those types of programs,
projects, or activities that in the past have demonstrated substantial
job creation or are considered likely to do so in the future. We also
recommended that the Director of OMB consider whether the approaches
taken to estimate jobs created and retained in these cases can be
replicated or adapted to other programs.
Agency Actions:
On June 22, 2009, OMB issued additional implementation guidance on
recipient reporting of jobs created and retained, (OMB memoranda M-09-
21, Implementing Guidance for the Reports on Use of Funds Pursuant to
the American Recovery and Reinvestment Act of 2009). This guidance is
responsive to much of what we recommended. The June 2009 guidance
provided detailed instructions on how to calculate and report jobs as
FTEs. It also describes in detail the data model and reporting system
to be used for the required recipient reporting on jobs. It clarifies
that the prime recipient and not the subrecipient is responsible for
reporting information on jobs created or retained. Federal agencies
have issued guidance that expanded on the OMB June 22 governmentwide
recipient reporting guidance and provided education and training
opportunities for state and local program officials. Agency-specific
guidance includes FAQs and tip sheets. Additionally, agencies are
expected to provide examples of recipient reports for their programs,
which is also consistent with what we recommended. In addition to the
federal agency efforts, OMB has issued FAQs on Recovery Act reporting
requirements. The June 22 guidance and subsequent actions by OMB are
responsive to much of what we said in our recommendation.
Implemented Recommendation:
We have noted in prior reports that in order to achieve the delicate
balance between robust oversight and the smooth flow of funds to
Recovery Act programs, states may need timely reimbursement for these
activities. We recommended in September 2009 that to the extent that
the Director of OMB has the authority to consider mechanisms to
provide additional flexibilities to support state and local officials
charged with carrying out Recovery Act responsibilities, it is
important to expedite consideration of alternative administrative cost
reimbursement proposals.
Agency Actions:
In response to this recommendation, OMB issued a memorandum on October
13, 2009, to provide guidance to address states' questions regarding
specific exceptions to OMB Circular A-87, Cost Principles for State,
Local and Indian Tribal Governments. In the memorandum, OMB provided
clarifications for states regarding specific exceptions to OMB
Circular A-87 that are necessary in order for the states to perform
timely and adequate Recovery Act oversight, reporting, and auditing.
We believe the October 2009 OMB guidance provides the additional
clarification needed for states and localities to proceed with their
plans to recoup administrative costs.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommended in November 2009 that OMB clarify the definition and
standardize the period of measurement for the FTE data element in the
recipient reports.
Agency Actions:
After the first round of reporting by states on their use of Recovery
Act funds in October 2009, OMB updated the recipient reporting
guidance on December 18, 2009. According to the agency, this guidance
aligns with GAO's recommendation by requiring recipients to report job
estimates on a quarterly rather than a cumulative basis. As a result,
recipients will no longer be required to sum various data on hours
worked across multiple quarters of data when calculating job
estimates. The December guidance incorporated lessons learned from the
first round of recipient reporting and also addressed recommendations
we made in our November 2009 report on recipient reporting.[Footnote
209] According to OMB, the December guidance is intended to help
federal agencies improve the quality of data reported under Section
1512 and simplifies compliance by revising the definitions and
calculations needed to define and estimate the number of jobs saved.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we also
recommended in November 2009 that OMB consider being more explicit
that "jobs created or retained" are to be reported as hours worked and
paid for with Recovery Act funds.
Agency Actions:
In response to our recommendation, OMB issued guidance on December 18,
2009, that no longer requires recipients make a subjective judgment of
whether jobs were created or retained as a result of the Recovery Act.
Instead, recipients will more easily and objectively report on jobs
funded with Recovery Act dollars.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we also
recommended in our November 2009 report that OMB continue working with
federal agencies to provide or improve program-specific guidance to
assist recipients, especially as it applies to the full-time
equivalent calculation for individual programs.
Agency Actions:
In response to our recommendation, OMB issued guidance on December 18,
2009, that required federal agencies to submit their guidance
documents to OMB for review and clearance to ensure consistency
between federal agency guidance and the guidance released by OMB.
Implemented Recommendation:
To improve the consistency of FTE data collected and reported, we
recommended in November 2009 that OMB work with the Recovery
Accountability and Transparency Board and federal agencies to re-
examine review and quality assurance processes, procedures, and
requirements in light of experiences and identified issues with the
initial round of recipient reporting and consider whether additional
modifications need to be made and if additional guidance is warranted.
Agency Actions:
In response to our recommendation, on December 18, 2009, OMB issued
updated guidance on data quality, nonreporting recipients, and
reporting of job estimates. The agency stated that the updated
guidance incorporates lessons learned from the first reporting period
and further addresses GAO's recommendations. The guidance also
provides federal agencies with a standard methodology for effectively
implementing reviews of the quality of data submitted by recipients.
Implemented Recommendation:
In our July 2009 report we recommended that to strengthen the effort
to track the use of funds, the Director of OMB should (1) clarify what
constitutes appropriate quality control and reconciliation by prime
recipients, especially for subrecipient data, and (2) specify who
should best provide formal certification and approval of the data
reported.
Agency Actions:
Although OMB clarified that the prime recipient is responsible for
FederalReporting.gov data in its June 22 guidance, no statement of
assurance or certification will be required of prime recipients on the
quality of subrecipient data. Moreover, federal agencies are expected
to perform data quality checks, but they are not required to certify
or approve data for publication. We continue to believe that there
needs to be clearer accountability for the data submitted and during
the subsequent federal review process. OMB agreed with the
recommendation in concept but questioned the cost/benefit of data
certification given the tight reporting time frames for recipients and
federal agency reviewers. OMB staff stated that grant recipients are
already expected to comply with data requirements appropriate to the
terms and conditions of a grant. Furthermore, OMB will be monitoring
the results of the quarterly recipient reports for data quality issues
and would want to determine whether these issues are persistent
problems before concluding that certification is needed.
Through issuance of additional guidance and clarification we are now
satisfied OMB has implemented this recommendation.
Implemented Recommendation:
In consultation with the Recovery Accountability and Transparency
Board and states, the Director of OMB should evaluate current
information and data collection requirements to determine whether
sufficient, reliable, and timely information is being collected before
adding further data collection requirements. As part of this
evaluation, OMB should consider the cost and burden of additional
reporting on states and localities against expected benefits.
Agency Actions:
OMB has taken steps to ensure data quality through issuance of
additional guidance. OMB has also worked with the states to minimize
to the extent possible the new reporting burdens under the Recovery Act.
Closed Recommendation:
We recommended in our April report the addition of a master schedule
for anticipated, new, or revised federal Recovery Act program guidance
and a more structured, centralized approach to making this information
available, such as what is provided at Recovery.gov on recipient
reporting.
Agency Actions:
This recommendation is closed because it is no longer applicable.
Closed Recommendation:
In addition to providing additional types of program-specific examples
of guidance, the Director of OMB should work with federal agencies to
use other channels to educate state and local program officials on
reporting requirements, such as Web-or telephone-based information
sessions or other forums.
Agency Actions:
In addition to the federal agency efforts, OMB has issued FAQs on
Recovery Act reporting requirements. The June 22 guidance and
subsequent actions by OMB are responsive to much of what we said in
our April 2009 report. OMB deployed regional federal employees to
serve as liaisons to state and local recipients in large population
centers. The objective was to provide on-site assistance and, as
necessary, direct questions to appropriate federal officials in
Washington, D.C. OMB established a call center for entities that do
not have an on-site federal liaison. These actions by OMB, together
with an overall increase in state and local program officials'
knowledge of reporting requirements, have made this recommendation
inapplicable.
[End of section]
Appendix III: 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
210] 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 211]--and EPA was directed to reallocate any funds not under
contract by that date.[Footnote 212]
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 213] 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 214] 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 215]
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 216] in order to substantially raise the achievement of
their students.[Footnote 217] 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 218]
prioritize the use of SIG funds in each state's persistently lowest-
achieving Title I schools.[Footnote 219]
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 220] 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 221] The program is
governed by a National Board composed of a representative from FEMA
and six statutorily designated national nonprofit
organizations.[Footnote 222] 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 223] The
Secretary of Transportation was to withdraw and redistribute to
eligible states any amount that was not obligated by that time.
[Footnote 224] 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 225]
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 226] 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 227]
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
228] 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 229] 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 230] 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 231]
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 232] 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 233]
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 234]
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 235] 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.:
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. 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.
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.:
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.
[End of section]
Appendix IV: Entities Visited by GAO in Selected States and the
District of Columbia:
Table 15: Education Entities Visited by GAO:
States and the District of Columbia: California;
City/county: Elk Grove;
Entity: Elk Grove Unified School District.
City/county: Mountain View;
Entity: Mountain View-Whisman School District.
City/county: Moreno Valley;
Entity: Moreno Valley Unified School District.
City/county: San Bernardino;
Entity: San Bernardino City Unified School District.
City/county: Los Angeles;
Entity: Los Angeles Unified School District.
City/county: Stockton;
Entity: Stockton Unified School District.
City/county: Sacramento;
Entity: Sacramento City Unified School District.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: District of Columbia Public Schools.
City/county: Washington;
Entity: Center City Public Charter School.
City/county: Washington;
Entity: Friendship Public Charter School.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: Des Moines Independent Community School District.
City/county: Marshalltown;
Entity: Marshalltown Community School District.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Boston Public Schools.
City/county: Boston;
Entity: Massachusetts Dept. of Elementary and Secondary Education.
City/county: Revere;
Entity: Revere Public Schools.
States and the District of Columbia: Michigan;
City/county: Detroit;
Entity: Detroit Public Schools.
City/county: Detroit;
Entity: Plymouth Educational Center.
City/county: Kingston;
Entity: Kingston Community School District.
States and the District of Columbia: New York;
City/county: Syracuse;
Entity: Syracuse City School District.
Source: GAO.
Note: Total education entities visited by GAO is 19.
[End of table]
Table 16: Head Start Entities Visited by GAO:
States and the District of Columbia: Georgia;
City/county: Athens;
Entity: Clarke County School District.
City/county: Columbus;
Entity: Enrichment Services Program, Inc.
States and the District of Columbia: Florida;
City/county: Miami;
Entity: Miami-Dade County Community Action Agency.
City/county: Sarasota;
Entity: Children First, Inc.
States and the District of Columbia: North Carolina;
City/county: Greensboro;
Entity: Guilford Child Development.
City/county: Smithfield;
Entity: Johnston-Lee-Harnett Community Action Agency, Inc.
States and the District of Columbia: Ohio;
City/county: Columbus;
Entity: Child Development Council of Franklin County.
City/county: Dayton;
Entity: Miami Valley Child Development Centers.
City/county: Circleville/Pickaway County;
Entity: Pickaway County Community Action Organization.
[End of table]
Note: Total head start entities visited by GAO is 9.
Source: GAO.
Table 17: Transit Entities Visited by GAO:
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Massachusetts Bay Transportation Authority.
States and the District of Columbia: Michigan;
City/county: Lansing;
Entity: Michigan Department of Transportation.
[End of table]
Note: Total transit entities visited by GAO is 2.
Source: GAO.
Table 18: State Energy Program Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Phoenix;
Entity: Energy Office, Arizona Department of Commerce.
States and the District of Columbia: California;
City/county: Sacramento;
Entity: California Energy Commission.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: District Department of the Environment.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: Iowa Office of Energy Independence.
City/county: West Des Moines;
Entity: Sun Prairie/Vista Court Apartments.
City/county: Ankeny;
Entity: Iowa Association of Municipal Utilities.
States and the District of Columbia: New York;
City/county: Albany;
Entity: New York State Energy Research and Development Authority
(NYSERDA).
States and the District of Columbia: Pennsylvania;
City/county: Carlisle;
Entity: Carlisle Area School District.
City/county: Harrisburg;
Entity: Department of Environmental Protection.
[End of table]
Note: Total State Energy Program entities visited by GAO is 9.
Source: GAO.
Table 19: Energy Efficiency Conservation Block Grant Entities Visited
by GAO:
States and the District of Columbia: Arizona;
City/county: Phoenix;
Entity: City of Phoenix.
City/county: Phoenix;
Entity: Energy Office, Arizona Department of Commerce.
City/county: Casa Grande;
Entity: City of Casa Grande.
States and the District of Columbia: California;
City/county: Sacramento County;
Entity: Sacramento County.
City/county: Redding;
Entity: City of Redding.
City/county: San Jose;
Entity: City of San Jose.
States and the District of Columbia: Colorado;
City/county: Colorado Springs;
Entity: City of Colorado Springs.
City/county: Weld County;
Entity: Weld County.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: District Department of the Environment.
States and the District of Columbia: Florida;
City/county: Tampa;
Entity: City of Tampa.
City/county: Jacksonville;
Entity: City of Jacksonville.
City/county: Miami;
Entity: City of Miami.
City/county: Miami-Dade County;
Entity: Miami-Dade County.
States and the District of Columbia: Georgia;
City/county: Columbus/Muscogee County;
Entity: Columbus Consolidated Government.
City/county: Cobb County;
Entity: Cobb County.
City/county: Warner Robins;
Entity: City of Warner Robins.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: Iowa Office of Energy Independence.
City/county: Iowa city;
Entity: City of Iowa City.
City/county: Warren County;
Entity: County of Warren.
City/county: Ankeny;
Entity: Des Moines Area Community College in Ankeny, Iowa.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: City of Boston.
City/county: Everett;
Entity: City of Everett.
States and the District of Columbia: Michigan;
City/county: City of Farmington Hills;
Entity: Suburb.
City/county: Kent County;
Entity: Kent County.
City/county: Lansing;
Entity: Michigan Department of Energy, Labor & Economic Growth, Bureau
of Energy Systems.
States and the District of Columbia: Mississippi;
City/county: Tupelo;
Entity: City of Tupelo.
States and the District of Columbia: New Jersey;
City/county: Newark;
Entity: State of New Jersey Board of Public Utilities.
City/county: Morris County;
Entity: County of Morris.
City/county: Jersey City;
Entity: City of Jersey city.
City/county: Woodbridge Township;
Entity: Woodbridge Township.
States and the District of Columbia: New York;
City/county: Albany;
Entity: New York State Energy Research and Development.
City/county: Orange County;
Entity: Orange County.
City/county: Town of Brookhaven;
Entity: Town of Brookhaven.
States and the District of Columbia: Pennsylvania;
City/county: Lancaster;
Entity: Thaddeus Stevens College of Technology.
City/county: Philadelphia;
Entity: City of Philadelphia.
City/county: Berks County;
Entity: County of Berks.
City/county: Harrisburg;
Entity: Department of Environmental Protection.
States and the District of Columbia: Texas;
City/county: Austin;
Entity: City of Austin.
City/county: Round Rock;
Entity: Round Rock.
City/county: Bryan;
Entity: City of Bryan.
City/county: Austin;
Entity: State Energy Conservation Office (SECO).
Source: GAO.
Note: Total Energy Efficiency Conservation Block Grant entities
visited by GAO is 41.
[End of table]
Table 20: Weatherization Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Phoenix;
Entity: Arizona Department of Commerce.
City/county: Apache, Coconino, Navajo, and Yavapai Counties;
Entity: Northern Arizona Council of Governments.
City/county: Tucson and South Tucson;
Entity: Tucson Urban League.
States and the District of Columbia: California;
City/county: Roseville;
Entity: Project GO, Inc.
City/county: Santa Fe Springs;
Entity: Maravilla Foundation.
City/county: Fountain Valley;
Entity: Community Action Partnership of Orange County.
City/county: Redding;
Entity: Self Help Home Improvement Project.
City/county: Sacramento;
Entity: California Department of Community Services and Development.
States and the District of Columbia: District of Columbia;
City/county: Washington;
Entity: District Department of the Environment.
City/county: Washington;
Entity: United Planning Organization.
City/county: Washington;
Entity: African Heritage Dancers and Drummers.
City/county: Washington;
Entity: Prosperity Media Enterprise.
States and the District of Columbia: Florida;
City/county: Miami-Dade;
Entity: Miami-Dade County Community Action Agency.
City/county: Tampa/Hillsborough;
Entity: Tampa-Hillsborough Action Plan.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: Division of Community Action Agencies, Iowa Department of
Human Rights.
City/county: Des Moines;
Entity: Polk County Public Works Department.
City/county: Ottumwa;
Entity: Southern Iowa Economic Development Association.
States and the District of Columbia: Pennsylvania;
City/county: York County;
Entity: York County Planning Commission.
Source: GAO.
Note: Total weatherization entities visited by GAO is 18.
[End of table]
Table 21: Housing Entities Visited by GAO:
States and the District of Columbia: Arizona;
City/county: Flagstaff;
Entity: Housing Authority of the City of Flagstaff.
City/county: Phoenix;
Entity: City of Phoenix Housing Department.
City/county: South Tucson;
Entity: South Tucson Housing Authority.
City/county: Phoenix;
Entity: Department of Housing and Urban Development Phoenix Field
Office.
States and the District of Columbia: California;
City/county: San Francisco;
Entity: San Francisco Housing Authority.
City/county: San Francisco;
Entity: U.S. Department of Housing and Urban Development, San
Francisco Regional Office.
States and the District of Columbia: Georgia;
City/county: Athens;
Entity: Housing Authority of the City of Athens.
City/county: Macon;
Entity: Housing Authority of the City of Macon.
City/county: Atlanta;
Entity: Housing Authority of the City of Atlanta.
States and the District of Columbia: Illinois;
City/county: Chicago;
Entity: Chicago Housing Authority.
City/county: Chicago;
Entity: U.S. Department of Housing and Urban Development, Chicago
Regional Office.
States and the District of Columbia: Iowa;
City/county: Des Moines;
Entity: City of Des Moines Municipal Housing Agency.
States and the District of Columbia: Massachusetts;
City/county: Boston;
Entity: Boston Housing Authority;
U.S. Department of Housing and Urban Development, Boston Regional
Office.
States and the District of Columbia: Mississippi;
City/county: Picayune;
Entity: Picayune Housing Authority.
City/county: Gulfport;
Entity: Mississippi Regional Housing Authority No. VIII.
City/county: Meridian;
Entity: Meridian Housing Authority.
City/county: Jackson;
Entity: U.S. Department of Housing and Urban Development, Jackson
Field Office.
States and the District of Columbia: New Jersey;
City/county: Newark;
Entity: Newark Housing Authority.
States and the District of Columbia: Pennsylvania;
City/county: Philadelphia;
Entity: Philadelphia Housing Authority.
City/county: Harrisburg;
Entity: Harrisburg Housing Authority.
City/county: Philadelphia;
Entity: Department of Housing and Urban Development Philadelphia Office.
States and the District of Columbia: Texas;
City/county: San Antonio;
Entity: San Antonio Housing Authority.
City/county: San Antonio;
Entity: U.S. Department of Housing and Urban Development, San Antonio
Field Office, Region VI, Office of Public Housing.
City/county: Fort Worth;
Entity: U.S. Department of Housing and Urban Development, Fort Worth
Regional Office, Region VI, Office of Public Housing.
Source: GAO.
Note: Total housing entities visited by GAO is 24.
[End of table]
Table 22: Tax Credit Assistance Program and Section 1602 Program
Entities Visited by GAO:
States and the District of Columbia: Florida;
City/county: Winter Haven;
Entity: Cypress Cove.
City/county: Lakeland;
Entity: Bonnett Shores.
States and the District of Columbia: Georgia;
City/county: Dublin;
Entity: Riverview Heights.
City/county: Sandersville;
Entity: Camellia Lane L.P.
States and the District of Columbia: Mississippi;
City/county: Jackson;
Entity: Mississippi Home Corporation.
City/county: Pickens;
Entity: Caffey Apartments.
City/county: Pascagoula;
Entity: Bayside Village.
States and the District of Columbia: Ohio;
City/county: Coshocton;
Entity: Kno-Ho-Co Ashland Community Action Commission.
City/county: Dayton;
Entity: Oberer Residential Construction.
City/county: Columbus;
Entity: Buckeye Community Hope Foundation.
City/county: Columbus;
Entity: Ohio Capital Corporation for Housing (OCCH).
City/county: Columbus;
Entity: Ohio Housing Finance Agency.
City/county: Knox County;
Entity: Heart of Ohio Homes.
City/county: Knox County;
Entity: Mount Vernon Senior Village.
City/county: Montgomery County;
Entity: East End Twin Towers Crossing.
States and the District of Columbia: Pennsylvania;
City/county: Stewartstown;
Entity: Hopewell Courtyard.
City/county: City of Allentown;
Entity: Greystone Apartments.
City/county: Northumberland;
Entity: Cannery Point.
City/county: Philadelphia;
Entity: Presser Senior Apartments.
City/county: Philadelphia;
Entity: Mantua Square.
City/county: Harrisburg;
Entity: Pennsylvania Housing Finance Agency.
Source: GAO.
Note: Total Tax Credit Assistance Program and Section 1602 Program
entities visited by GAO is 21.
[End of table]
Table 23: Local Government Entities Visited by GAO:
States: Arizona;
Local government: Phoenix;
Type of local government: City;
Population: 1,601,587;
Unemployment Rate: 10.3.
States: California;
Local government: Redding;
Type of local government: City;
Population: 90,521;
Unemployment Rate: 13.4.
States: California;
Local government: San Jose;
Type of local government: City;
Population: 964,695;
Unemployment Rate: 12.5.
States: Colorado;
Local government: Colorado Springs;
Type of local government: City;
Population: 399,827;
Unemployment Rate: 8.9.
States: Colorado;
Local government: Weld;
Type of local government: County;
Population: 254,759;
Unemployment Rate: 9.6.
States: Florida;
Local government: Miami-Dade;
Type of local government: County;
Population: 2,500,625;
Unemployment Rate: 12.8.
States: Georgia;
Local government: Columbus Consolidated Government;
Type of local government: Consolidated city/county;
Population: 190,414;
Unemployment Rate: 9.7.
States: Georgia;
Local government: The Unified Government of Athens-Clarke County;
Type of local government: Consolidated city/county;
Population: 116,342;
Unemployment Rate: 8.3.
States: Illinois;
Local government: Chrisman;
Type of local government: City;
Population: 1,219;
Unemployment Rate: 10.5.
States: Illinois;
Local government: Steward;
Type of local government: Village;
Population: 258;
Unemployment Rate: 11.1.
States: Iowa;
Local government: Des Moines;
Type of local government: City;
Population: 198,460;
Unemployment Rate: 7.4.
States: Iowa;
Local government: Marshalltown;
Type of local government: City;
Population: 25,645;
Unemployment Rate: 7.5.
States: Massachusetts;
Local government: Boston;
Type of local government: City;
Population: 645,169;
Unemployment Rate: 9.0.
States: Michigan;
Local government: Farmington Hills;
Type of local government: City;
Population: 78,675;
Unemployment Rate: 11.0.
States: Mississippi;
Local government: Tupelo;
Type of local government: City;
Population: 36,336;
Unemployment Rate: 12.3.
States: New Jersey;
Local government: Jersey City;
Type of local government: City;
Population: 242,503;
Unemployment Rate: 11.5.
States: New York;
Local government: Brookhaven;
Type of local government: Town;
Population: 490,416;
Unemployment Rate: 6.9.
States: New York;
Local government: Steuben;
Type of local government: County;
Population: 96,552;
Unemployment Rate: 9.0.
States: North Carolina;
Local government: Wilmington;
Type of local government: City;
Population: 101,350;
Unemployment Rate: 8.6.
States: Ohio;
Local government: Cincinnati;
Type of local government: City;
Population: 333,013;
Unemployment Rate: 10.6.
States: Pennsylvania;
Local government: Berks;
Type of local government: County;
Population: 407,125;
Unemployment Rate: 9.8.
States: Pennsylvania;
Local government: Philadelphia;
Type of local government: City;
Population: 1,547,297;
Unemployment Rate: 11.9.
States: Texas;
Local government: Austin;
Type of local government: City;
Population: 786,382;
Unemployment Rate: 6.9.
States: Texas;
Local government: Round Rock;
Type of local government: City;
Population: 105,412;
Unemployment Rate: 6.7.
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.
Total local government entities visited by GAO is 24.
Total entities visited is 167.
[End of table]
[End of section]
Appendix V: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
J. Christopher Mihm, Managing Director for Strategic Issues, (202) 512-
6806 or mihmj@gao.gov:
For issues related to SFSF and other education programs: Barbara D.
Bovbjerg, Managing Director of Education, Workforce, and Income
Security, (202) 512-7215 or bovbjergb@gao.gov:
For issues related to Medicaid programs: Dr. Marjorie Kanof, Managing
Director of Health Care, (202) 512-7114 or kanofm@gao.gov:
For issues related to highways, transit, and other transportation
programs: Katherine A. Siggerud, Managing Director of Physical
Infrastructure, (202) 512-2834 or siggerudk@gao.gov:
For issues related to State Energy Program (SEP), Energy Efficiency
and Conservation Block Grant (EECBG), and weatherization: Patricia
Dalton, Managing Director of Natural Resources and Environment, (202)
512-3841 or daltonp@gao.gov:
For issues related to public housing, Tax Credit Assistance Program
(TCAP), and Section 1602 Program: Richard J. Hillman, Managing
Director of Financial Markets and Community Investment, (202) 512-9073
or hillmanr@gao.gov:
For issues related to internal controls and Single Audits: Jeanette
Franzel, Managing Director of Financial Management and Assurance,
(202) 512-2600 or franzelj@gao.gov:
For issues related to contracting and procurement: Paul Francis,
Managing Director of Acquisition and Sourcing Management, (202) 512-
4841 or francisp@gao.gov:
For issues related to fraud, waste, and abuse: Gregory D. Kutz,
Managing Director of Forensic Audits and Special Investigations, (202)
512-6722 or kutzg@gao.gov:
Staff Acknowledgments:
The following staff contributed to this report: Stanley Czerwinski,
Denise Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas
James, and Michelle Sager, (Assistant Directors); Sandra Beattie
(Analyst-in-Charge); and Marie Ahearn, David Alexander, Judith
Ambrose, Peter Anderson, Thomas Beall, Noah Bleicher, Jessica
Botsford, Anthony Bova, Richard Cambosos, Ralph Campbell Jr., Virginia
Chanley, Tina Cheng, Andrew Ching, Marcus Corbin, Robert Cramer, Fran
Davison, Michael Derr, Helen Desaulniers, Ruth "Eli" DeVan, Alexandra
Dew, David Dornisch, Kevin Dooley, Abe Dymond, Holly Dye, Janet
Eackloff, Lorraine Ettaro, James Fuquay, Alice Feldesman, Alexander
Galuten, Ellen Grady, Anita Hamilton, Geoffrey Hamilton, Tracy Harris,
Kristine Hassinger, Lauren Heft, David Hooper, Bert Japikse, Mitchell
Karpman, Karen Keegan, John Krump, Jon Kucskar, Hannah Laufe, Jean K.
Lee, Natalie Maddox, Stephanie May, Sarah M. McGrath, John Mc Grail,
Jean McSween, Donna Miller, Kevin Milne, Marc Molino, Mimi Nguyen, Ken
Patton, Anthony Pordes, Brenda Rabinowitz, Carl Ramirez, James Rebbe,
Beverly Ross, Sylvia Schatz, Sidney Schwartz, Don Springman, Andrew J.
Stephens, Esther Toledo, Alyssa Weir, Crystal Wesco, Craig Winslow,
Elizabeth Wood, William T. Woods, and Kimberly Young.
Program Contributors:
Federal Medical Assistance Percentage (FMAP):
Susan Anthony, Laura Brogan, Ted Burik, Julianne Flowers, Martha
Kelly, Zachary Levinson, and Carolyn Yocom.
Education--SFSF, ESEA Title I, and IDEA:
Jaime Allentuck, James Ashley, Cornelia M. Ashby, Edward Bodine,
Jessica Botsford, Amy Buck, Karen Febey, Alex Galuten, Mark Glickman,
Bryon Gordon, Sonya Harmeyer, Ying Long, Jean McSween, Elizabeth
Morrison, Luann Moy, Karen O'Conor, Mimi Nguyen, Kathy Peyman, James
M. Rebbe, Crystal Robinson, Scott Spicer, Michelle Verbrugge, Charles
Willson, and Sarah Wood.
Federal-Aid Highway Surface Transportation and Transit Capital
Assistance Programs:
Aisha Cabrer, Steve Cohen, Philip Herr, Joah Iannotta, Les Locke, Lisa
Shibata, Raymond Sendejas, and David Wise.
State Energy Program (SEP) and Energy Efficiency Conservation Block
Grant (EECBG):
Nicholas Weeks, Kristen Massey, Jessica Bryant-Bertail, Mark Gaffigan,
Kim Gianopoulos, and Stuart Ryba.
Public Housing Capital Fund:
Rebecca Rose, Aimee Elivert, May Lee, John McGrail, Marc Molino, Deena
Richart, Paul Schmidt, Barb Roesmann, and Mathew Scire.
Tax Credit Assistance Program (TCAP) and Section 1602 Program:
Jennifer Alpha, Heather Chartier, Swetha Doraiswamy, Andrew Finkel,
John McGrail, Marc Molino, Roberto Piñero, Carl Ramirez, Barbara
Roesmann, and Mathew Scire.
Weatherization:
Jessica Bryant-Bertail, Mark Gaffigan, Kim Gianopoulos, Stuart Ryba,
and Jason Trentacoste, and Stephanie Gaines.
Recipient reporting:
Yvonne Jones, Judith Kordahl, Carol Patey, Patricia Norris, Steve
Punto, and Jon Stehle.
Safeguarding/Single Audit:
Phyllis Anderson, Marcia Buchanan, Eric Holbrook, Jason Kelly, Maria
Morton, Laura Pacheco, Susan Ragland, Sandra Silzer, and Glenn Slocum.
State and local budget:
Sandra Beattie, Anthony Bova, Stanley J. Czerwinski, Michelle Sager,
and Esther Toledo.
Contributors to the Selected States and the District:
The names of GAO staff contributing to the selected states and the
District are as follows:
Arizona:
Karyn Angulo, Rebecca Bolnick, Tom Brew, Lisa Brownson, Steven Calvo,
Eileen Larence, Roy Judy, Radha Seshagiri, and Jeff Schmerling.
California:
Linda Calbom, Emily Eischen, Guillermo Gonzalez, Richard Griswold,
Susan Lawless, Gail Luna, Heather MacLeod, Emmy Rhine, Eddie Uyekawa,
and Lacy Vong.
Colorado:
Paul Begnaud, Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer
Leone, Brian Lepore, Robin Nazzaro, Tony Padilla, Leslie Pollock,
Kathleen Richardson, and Dawn Shorey.
District of Columbia:
Laurel Beedon, Labony Chakraborty, Sunny Chang, Nagla'a El-Hodiri,
Mattias Fenton, Nicole Harris, Adam Hoffman, William O. Jenkins, Jr.,
and Leyla Kazaz.
Florida:
Michael Armes, Susan Aschoff, Patrick di Battista, Sabur Ibrahim,
Kevin Kumanga, Frank Minore, Maria Morton, Daniel Ramsey, Brenda Ross,
Andy Sherrill, Bernard Ungar, Margaret Weber, and James Whitcomb.
Georgia:
Alicia Puente Cackley, Waylon Catrett, Chase Cook, Marc Molino, Daniel
Newman, John H. Pendleton, Nadine Garrick Raidbard, Barbara Roesmann,
Paige Smith, and David Shoemaker.
Illinois:
Silvia Arbelaez-Ellis, Josh Bartzen, Dean Campbell, James Cosgrove,
Cory Marzullo, Paul Schmidt, Roberta Rickey, and Rosemary Torres Lerma.
Iowa:
Richard Cheston, Thomas Cook, Daniel Egan, Christine Kehr, Ronald
Maxon, Mark Ryan, Raymond Smith, Jr., Lisa Shames, and Carol
Herrnstadt Shulman.
Massachusetts:
Stanley J. Czerwinski, Laurie Ekstrand, Anthony Bova, Nancy J.
Donovan, Kathleen M. Drennan, Anna M. Kelley, David Lin, Keith C.
O'Brien, Kathryn O'Dea, Carol Patey, and Robert Yetvin.
Michigan:
Ranya Elias, Patrick Frey, Henry Malone, Giao N. Nguyen, Robert Owens,
Laura Pacheco, Susan Ragland, Tejdev Sandhu, Regina Santucci, and Amy
Sweet.
Mississippi:
James Elgas, Barbara Haynes, John K. Needham, Norman J. Rabkin,
William C. Allbritton, James Kim, Gary Shepard, and Erin Stockdale.
New Jersey:
Gene Aloise, Kisha Clark, Anne Doré, Diana Glod, Alexander Lawrence
Jr., Nancy Lueke, Tarunkant Mithani, and David Wise.
New York:
Christopher Farrell, Susan Fleming, Kendall Helm, Dave Maurer, Tiffany
Mostert, Summer Pachman, Frank Putallaz, and Ronald Stouffer.
North Carolina:
Laura G. Acosta, Cornelia M. Ashby, Sandra Baxter, Sarah Jane Brady,
Bonnie Derby, Bryon Gordon, Sara S. Kelly, Tahra Nichols, Anthony
Patterson, Paula Rascona, and Connie W. Sawyer.
Ohio:
Debra Cottrell, Matthew Drerup, Bill J. Keller, Jeffrey G. Miller,
Tranchau Nguyen, George A. Scott, Brian Smith, David C. Trimble, and
Myra Watts-Butler.
Pennsylvania:
Eleanor Cambridge, Mark Gaffigan, John Healey, Phillip Herr, Richard
Mayfield, Jodi M. Prosser, Matthew Rosenberg, MaryLynn Sergent, and
Stephen Ulrich.
Texas:
Fredrick D. Berry, Danny Burton, K. Eric Essig, Erinn Flanagan,
Michael O'Neill, Gloria Proa, Bob Robinson, and Lorelei St. James.
[End of table]
[End of section]
Related GAO Products:
Recovery Act: Further Opportunities Exist to Strengthen Oversight of
Broadband Stimulus Programs. [hyperlink,
http://www.gao.gov/products/GAO-10-823]. Washington, D.C.: August 4,
2010.
Recovery Act: States Could Provide More Information on Education
Programs to Enhance the Public's Understanding of Fund Use.
[hyperlink, http://www.gao.gov/products/GAO-10-807]. Washington, D.C.:
July 30, 2010.
Recovery Act: Most DOE Cleanup Projects Appear to Be Meeting Cost and
Schedule Targets, but Assessing Impact of Spending Remains a
Challenge. [hyperlink, http://www.gao.gov/products/GAO-10-784].
Washington, D.C.: July 29, 2010.
Recovery Act: Contracting Approaches and Oversight Used by Selected
Federal Agencies and States. [hyperlink,
http://www.gao.gov/products/GAO-10-809]. Washington, D.C.: July 15,
2010.
GAO Review of LEA Controls over and Uses of Recovery Act Education
Funds (Avery County Schools). [hyperlink,
http://www.gao.gov/products/GAO-10-746R]. Washington, D.C.: July 9,
2010.
GAO Review of LEA Controls over and Uses of Recovery Act Education
Funds (Winston-Salem/Forsyth County Schools). [hyperlink,
http://www.gao.gov/products/GAO-10-747R]. Washington, D.C.: July 9,
2010.
Independent Oversight of Recovery Act Funding for Mississippi's
Weatherization Assistance Program. [hyperlink,
http://www.gao.gov/products/GAO-10-796R]. Washington, D.C.: June 30,
2010.
High Speed Rail: Learning From Service Start-ups, Prospects for
Increased Industry Investment, and Federal Oversight Plans.
[hyperlink, http://www.gao.gov/products/GAO-10-625]. Washington, D.C.:
June 17, 2010.
Federal Energy Management: GSA's Recovery Act Program Is on Track, but
Opportunities Exist to Improve Transparency, Performance Criteria, and
Risk Management. [hyperlink, http://www.gao.gov/products/GAO-10-630].
Washington, D.C.: June 16, 2010.
GAO Proactive Testing of ARRA Tax Credits for COBRA Premium Payments.
[hyperlink, http://www.gao.gov/products/GAO-10-804R]. Washington,
D.C.: June 14, 2010.
Temporary Assistance for Needy Families: Implications of Recent
Legislative and Economic Changes for State Programs and Work
Participation Rates. [hyperlink,
http://www.gao.gov/products/GAO-10-525]. Washington, D.C.: May 28, 2010.
Recovery Act: Increasing the Public's Understanding of What Funds Are
Being Spent on and What Outcomes Are Expected. [hyperlink,
http://www.gao.gov/products/GAO-10-581]. Washington, D.C.: May 27, 2010.
Recovery Act: Clean Water Projects Are Underway, but Procedures May
Not Be in Place to Ensure Adequate Oversight. [hyperlink,
http://www.gao.gov/products/GAO-10-761T]. Washington, D.C.: May 26,
2010.
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.
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.
Head Start: Undercover Testing Finds Fraud and Abuse at Selected Head
Start Centers. [hyperlink, http://www.gao.gov/products/GAO-10-733T].
Washington, D.C.: May 18, 2010.
Health Coverage Tax Credit: Participation and Administrative Costs.
[hyperlink, http://www.gao.gov/products/GAO-10-521R]. Washington,
D.C.: April 30, 2010.
2010 Census: Plans for Census Coverage Measurement Are on Track, but
Additional Steps Will Improve Its Usefulness. [hyperlink,
http://www.gao.gov/products/GAO-10-324]. Washington, D.C.: April 23,
2010.
Energy Star Program: Covert Testing Shows the Energy Star Program
Certification Process Is Vulnerable to Fraud and Abuse. [hyperlink,
http://www.gao.gov/products/GAO-10-470]. Washington, D.C.: March 5,
2010.
Recovery Act: California's Use of Funds and Efforts to Ensure
Accountability. [hyperlink, http://www.gao.gov/products/GAO-10-467T].
Washington, D.C.: March 5, 2010.
Recovery Act: Factors Affecting the Department of Energy's Program
Implementation. [hyperlink, http://www.gao.gov/products/GAO-10-497T].
Washington, D.C.: March 4, 2010.
Recovery Act: One Year Later, States' and Localities' Uses of Funds
and Opportunities to Strengthen Accountability. [hyperlink,
http://www.gao.gov/products/GAO-10-437]. Washington, D.C.: March 3,
2010.
State and Local Governments' Fiscal Outlook March 2010 Update.
[hyperlink, http://www.gao.gov/products/GAO-10-358]. Washington, D.C.:
March 2, 2010.
Recovery Act: Officials' Views Vary on Impacts of Davis-Bacon Act
Prevailing Wage Provision. [hyperlink,
http://www.gao.gov/products/GAO-10-421]. Washington, D.C.: February
24, 2010.
Electronic Personal Health Information Exchange: Health Care Entities'
Reported Disclosure Practices and Effects on Quality of Care.
[hyperlink, http://www.gao.gov/products/GAO-10-361]. Washington, D.C.:
February 17, 2010.
Recovery Act: Project Selection and Starts Are Influenced by Certain
Federal Requirements and Other Factors. [hyperlink,
http://www.gao.gov/products/GAO-10-383]. Washington, D.C.: February
10, 2010:
Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting
and Enforcement Improvements Are Needed. [hyperlink,
http://www.gao.gov/products/GAO-10-349]. Washington, D.C.: February
10, 2010.
Status of the Small Business Administration's Implementation of
Administrative Provisions in the American Recovery and Reinvestment
Act of 2009. [hyperlink, http://www.gao.gov/products/GAO-10-298R].
Washington, D.C.: January 19, 2010.
Recovery Act: States' Use of Highway and Transit Funds and Efforts to
Meet the Act's Requirements. [hyperlink,
http://www.gao.gov/products/GAO-10-312T]. Washington, D.C.: December
10, 2009.
Recovery Act: Status of States' and Localities' Use of Funds and
Efforts to Ensure Accountability. [hyperlink,
http://www.gao.gov/products/GAO-10-231]. Washington, D.C.: December
10, 2009.
Recovery Act: Status of States' and Localities' Use of Funds and
Efforts to Ensure Accountability (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-10-232SP]. Washington, D.C.: December
10, 2009.
Recovery Act: Planned Efforts and Challenges in Evaluating Compliance
with Maintenance of Effort and Similar Provisions. [hyperlink,
http://www.gao.gov/products/GAO-10-247]. Washington, D.C.: November
30, 2009.
Recovery Act: Contract Oversight Activities of the Recovery
Accountability and Transparency Board and Observations on Contract
Spending in Selected States. [hyperlink,
http://www.gao.gov/products/GAO-10-216R]. Washington, D.C.: November
30, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into
Use of Recovery Act Funding, but Data Quality and Reporting Issues
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-223].
Washington, D.C.: November 19, 2009.
Recovery Act: Recipient Reported Jobs Data Provide Some Insight into
Use of Recovery Act Funding, but Data Quality and Reporting Issues
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-224T].
Washington, D.C.: November 19, 2009.
Recovery Act: Agencies Are Addressing Broadband Program Challenges,
but Actions Are Needed to Improve Implementation. [hyperlink,
http://www.gao.gov/products/GAO-10-80]. Washington, D.C.: November 16,
2009.
Recovery Act: Preliminary Observations on the Implementation of
Broadband Programs. [hyperlink,
http://www.gao.gov/products/GAO-10-192T]. Washington, D.C.: October
27, 2009.
First-Time Homebuyer Tax Credit: Taxpayers' Use of the Credit and
Implementation and Compliance Challenges. [hyperlink,
http://www.gao.gov/products/GAO-10-166T]. Washington, D.C.: October
22, 2009.
Federal Energy Management: Agencies Are Taking Steps to Meet High-
Performance Federal Building Requirements, but Face Challenges.
[hyperlink, http://www.gao.gov/products/GAO-10-22]. Washington, D.C.:
October 30, 2009.
High Speed Passenger Rail: Developing Viable High Speed Rail Projects
under the Recovery Act and Beyond. [hyperlink,
http://www.gao.gov/products/GAO-10-162T]. Washington, D.C.: October
14, 2009.
Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer
Service and Enforcement for the 2010 Filing Season. [hyperlink,
http://www.gao.gov/products/GAO-09-1026]. Washington, D.C.: September
23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and
Localities, While Accountability and Reporting Challenges Need to Be
Fully Addressed. [hyperlink, http://www.gao.gov/products/GAO-09-1016].
Washington, D.C.: September 23, 2009.
Recovery Act: Funds Continue to Provide Fiscal Relief to States and
Localities, While Accountability and Reporting Challenges Need to Be
Fully Addressed (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-09-1017SP]. Washington, D.C.:
September 23, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-908T]. Washington, D.C.: September
10, 2009.
Recovery Act: States' Use of Highway Infrastructure Funds and
Compliance with the Act's Requirements. [hyperlink,
http://www.gao.gov/products/GAO-09-926T]. Washington, D.C.: July 31,
2009.
Unemployment Insurance Measures Included in the American Recovery and
Reinvestment Act of 2009, as of July 2009. [hyperlink,
http://www.gao.gov/products/GAO-09-942R]. Washington, D.C.: July 27,
2009.
Grants Management: Grants.gov Has Systematic Weaknesses That Require
Attention. [hyperlink, http://www.gao.gov/products/GAO-09-589].
Washington, D.C.: July 15, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-829]. Washington, D.C.: July 8, 2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses. [hyperlink,
http://www.gao.gov/products/GAO-09-831T]. Washington, D.C.: July 8,
2009.
Recovery Act: States' and Localities' Current and Planned Uses of
Funds While Facing Fiscal Stresses (Appendixes). [hyperlink,
http://www.gao.gov/products/GAO-09-830SP]. Washington, D.C.: July 8,
2009.
Recovery Act: The Department of Transportation Followed Key Federal
Requirements in Developing Selection Criteria for Its Supplemental
Discretionary Grants Program. [hyperlink,
http://www.gao.gov/products/GAO-09-785R]. Washington, D.C.: June 30,
2009.
High Speed Passenger Rail: Effectively Using Recovery Act Funds for
High Speed Rail Projects. [hyperlink,
http://www.gao.gov/products/GAO-09-786T]. Washington, D.C.: June 23,
2009.
Recovery Act: GAO's Efforts to Work with the Accountability Community
to Help Ensure Effective and Efficient Oversight. [hyperlink,
http://www.gao.gov/products/GAO-09-672T]. Washington, D.C.: May 5, 2009.
Recovery Act: Consistent Policies Needed to Ensure Equal Consideration
of Grant Applications. [hyperlink,
http://www.gao.gov/products/GAO-09-590R]. Washington, D.C.: April 29,
2009.
Recovery Act: Initial Results on States' Use of and Accountability for
Transportation Funds. [hyperlink,
http://www.gao.gov/products/GAO-09-597T]. Washington, D.C.: April 29,
2009.
Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential.
[hyperlink, http://www.gao.gov/products/GAO-09-580]. Washington, D.C.:
April 23, 2009.
Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential.
[hyperlink, http://www.gao.gov/products/GAO-09-631T]. Washington,
D.C.: April 23, 2009.
Small Business Administration's Implementation of Administrative
Provisions in the American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-507R]. Washington, D.C.: April 16,
2009.
American Recovery and Reinvestment Act: GAO's Role in Helping to
Ensure Accountability and Transparency for Science Funding.
[hyperlink, http://www.gao.gov/products/GAO-09-515T]. Washington,
D.C.: March 19, 2009.
American Recovery and Reinvestment Act: GAO's Role in Helping to
Ensure Accountability and Transparency. [hyperlink,
http://www.gao.gov/products/GAO-09-453T]. Washington, D.C.: March 5,
2009.
Estimated Adjusted Medicaid Funding Allocations Related to the
Proposed American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-371R]. Washington, D.C.: February
5, 2009.
Estimated Temporary Medicaid Funding Allocations Related to Section
5001 of the American Recovery and Reinvestment Act. [hyperlink,
http://www.gao.gov/products/GAO-09-364R]. Washington, D.C.: February
4, 2009.
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] Approximate amount paid out as of September 3, 2010.
[3] Recovery Act, div. A, title IX, § 901, 123 Stat. 191.
[4] 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); Recovery Act: One Year Later,
States' and Localities' Uses of Funds and Opportunities to Strengthen
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-437]
(Washington, D.C. Mar. 3, 2010); Recovery Act: Status of States' and
Localities' Use of Funds and Efforts to Ensure Accountability,
[hyperlink, http://www.gao.gov/products/GAO-10-231] (Washington, D.C.:
Dec. 10, 2009); Recovery Act: Funds Continue to Provide Fiscal Relief
to States and Localities, While Accountability and Reporting
Challenges Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: States' and Localities' Current and Planned Uses
of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-829] (Washington, D.C.: July 8,
2009); and Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009).
[5] The selected states are Arizona, California, Colorado, Florida,
Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New
Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas. We
also visited the District of Columbia.
[6] Recovery Act, div. A, § 1512(e), 123 Stat. 288. We will refer to
the quarterly reports required by section 1512 as recipient reports.
[7] The Recovery Act established the Board to coordinate and conduct
oversight of covered funds to prevent fraud, waste, and abuse. The
Board is composed of a chairperson and 12 inspectors general. In
addition, the Board established three committees drawn from the 12
inspectors general on the board. Recovery Act, div. A, §§ 1521-1525,
123 Stat. 289-293.
[8] The federal fiscal year runs from October 1 through September 30
of the next calendar year.
[9] Recovery Act, div. B, title V, § 5001, Pub. L. No. 111-5, 123
Stat. at 496. CMS made increased FMAP funds available to states on
February 25, 2009, and states could retroactively claim reimbursement
for expenditures that occurred as of October 1, 2008.
[10] See Pub. L. No. 111-226, § 201, 124 Stat. 2389 (Aug. 10, 2010).
[11] For purposes of this report, the term "regular FMAP" refers to
the FMAP as defined in section 1905(b) of the Social Security Act. The
term "increased FMAP" refers to the temporary FMAP calculated based on
provisions of § 5001 of the Recovery Act, as amended.
[12] Under the amendment to the Recovery Act, states will receive a
general across-the-board increase of 3.2 percentage points in their
regular FMAPs for the second quarter of federal fiscal year 2011 and a
1.2 percentage point increase in their regular FMAP rates for the
third quarter of federal fiscal year 2011. See Pub. L. No. 111-226, §
201, 124 Stat. 2389 (2010). States will continue to be eligible for an
unemployment adjustment to their FMAP rates.
[13] See Recovery Act, div. B, title V, §5001(f)(1)(A).
[14] 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). A clean
claim is a claim that has no defect or impropriety (including any lack
of any required substantiating documentation) or particular
circumstance requiring special treatment that prevents timely payment
from being made on the claim. See Social Security Act section 1816.
[15] States may obtain a waiver from the act's prompt payment
requirements if the Secretary of HHS determines that there are exigent
circumstances, including natural disasters, which would prevent a
state from the timely processing of claims or compliance with
reporting requirements A CMS official told us that Maine, Maryland,
Massachusetts, North Dakota, and Pennsylvania had received approval
for a waiver from the act's prompt payment requirement, and that three
states--Idaho, Michigan, and Wisconsin--have requested waivers that
are under review.
[16] A state is not eligible for certain elements of increased FMAP if
any amounts attributable directly or indirectly to them are deposited
in or credited to a state reserve or rainy-day fund. Recovery Act,
div. B, title V, §5001(f)(3).
[17] In some states, political subdivisions--such as cities and
counties--may be required to help finance the state's share of
Medicaid spending. Under the Recovery Act, a state that has such
financing arrangements is not eligible for certain elements of the
increased FMAP if it requires subdivisions to pay during a quarter of
the recession adjustment period a greater percentage of the nonfederal
share than the percentage that would have otherwise been required
under the state plan on September 30, 2008. See Recovery Act, div. B,
title V, § 5001(g)(2). The recession adjustment period is the period
beginning October 1, 2008, and ending June 30, 2011.
[18] For example, CMS's Web site includes State Medicaid Director
letters related to the availability or use of increased FMAP funds.
See [hyperlink
http://www.cms.hhs.gov/SMDL/SMD/list.asp?sortByDID=1a&submit=Go&filterTy
pe=none&filterByDID=-99&sortOrder=ascending&intNumPerPage=10].
[19] Immediately following the enactment of the Recovery Act, FMAP
rates for the 16 states and the District increased, on average, 9.23
percentage points over their regular 2009 rates. Increased FMAP rates
continued to increase through fourth quarter fiscal year 2010--except
for California and Florida, whose FMAPs did not increase above their
initial first quarter 2009 rates.
[20] Prior to the fourth quarter of fiscal year 2010, the District and
all states but Iowa had received the maximum unemployment increase
possible. Under the Recovery Act, once a state qualifies for an
unemployment increase, the increase is maintained through December 31,
2010. Beginning January 1, 2011, states that experience a sufficient
decrease in their unemployment rates could have their increased FMAP
rates reduced and HHS is required to provide such states with a 60-day
notice of a pending reduction.
[21] See GAO, Estimated Temporary Medicaid Funding Allocations Related
to Section 5001 of the American Recovery and Reinvestment Act, GAO-09-
364R (Washington, D.C.: Feb. 4, 2009). The Recovery Act provided
states and the District with an estimated $87 billion in increased
FMAP funds for Medicaid from February 2009 through December 2010. Our
estimate was based on funds drawn down by states as of June 30, 2010.
[22] Since October 2007, enrollment growth varied considerably across
the 16 states and the District, ranging from 6 percent in Texas to 35
percent in Colorado. Much of Texas's reported enrollment growth
occurred between March and June 2010. Prior to March, the state
reported flat enrollment from October 2007 through February 2010. Note
that the percentages are based on state-reported monthly enrollment
data, some of which are preliminary and subject to change.
[23] For example, the Kaiser Family Foundation estimated that national
Medicaid enrollment increased by about 1 percent from December 2004
through June 2007. See The Kaiser Commission on Medicaid and the
Uninsured, The Henry J. Kaiser Family Foundation, Medicaid Enrollment
in the 50 States June 2008 Data Update (Washington, D.C., September
2009).
[24] One state reported it did not know if there had been a change in
its application processing time since October 2007. We defined
application processing time as the number of days between the date a
new application is received and a final eligibility determination is
made. States reporting a decrease in processing time most frequently
attributed the decrease to streamlined processing procedures, such as
use of electronic applications or the automation of citizenship
documentation.
[25] CMS generally requires states to process new applications within
45 days from the date of application, or 90 days for individuals
applying on the basis of disability.
[26] Mississippi previously reported concerns about the sustainability
of its program once increased FMAP funds were no longer available;
however, a Medicaid official said that more recently, the state
decided to use state sources to fully fund the program through 2011.
The official added that how the state will fund the Medicaid program
in 2012 is not yet known.
[27] The Kaiser Family Foundation recently reported that several
Medicaid Directors have expressed concern over the impact that
multiple payment cuts to providers may have had on access to services.
See The Henry J. Kaiser Family Foundation, State Medicaid Agencies
Prepare for Health Care Reform While Continuing to Face Challenges
from the Recession (Washington, D.C., August 2010).
[28] States reported imposing 15 new provider taxes and increasing 13
existing provider taxes.
[29] States may receive federal matching funds for provider taxes only
if such taxes are broad-based, uniformly imposed, and do not result in
any taxpayers being held harmless (i.e., receiving state funds to
reduce the net payment to the state to below the amount of the tax).
[30] Pub. L. No. 111-148, § 2001(b)(2), 124 Stat. 118, 275. This
requirement will continue to apply to children until October 1, 2019.
Beginning on January 1, 2011, this provision may have limited
applicability if a state certifies to the Secretary that it has a
budget deficit or projects to have a budget deficit in the following
fiscal year. Pub. L. No. 111-148, § 2001(b)(2). According to CMS, the
agency is currently developing guidance on various PPACA provisions.
[31] Connecticut has also obtained approval from CMS to expand
eligibility to shift eligible low-income adults from an existing state
health care program into Medicaid. Six sample states and the District
reported that they currently provide coverage to some adults above 133
percent of the federal poverty level through their Medicaid, State
Children's Health Insurance Plan, or other state program.
[32] We conducted our survey between March and April 2010, with a 78
percent final weighted response rate at the national level. The
results of our sample have a 95 percent confidence interval, with a
margin of error of plus or minus 7 percentage points or less, unless
otherwise noted. Our survey was conducted prior to the enactment of
Pub.L. No. 111-226, which provides $10 billion for the new Education
Jobs Fund. As a result, some of the information contained in this
report, specifically information related to LEAs' projections for the
2010-2011 school year, does not reflect this additional federal funding.
[33] The five states were Colorado, Massachusetts, Michigan, New
Jersey, and New York.
[34] The five states were Colorado, Massachusetts, Michigan, New
Jersey, and New York.
[35] The four states were California, Massachusetts, Michigan, and New
York.
[36] Zhou, L. (2010). Revenues and Expenditures for Public Elementary
and Secondary Education: School Year 2007-08 (Fiscal Year 2008) (NCES
2010-326), report for the National Center for Education Statistics,
U.S. Department of Education (Washington D.C., 2010), [hyperlink,
http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2010326] (accessed
November 16, 2009).
[37] These states are Arizona, California, Georgia, Iowa, Illinois,
Massachusetts, Mississippi, New Jersey, New York, North Carolina,
Pennsylvania, and Texas. The fiscal survey of states does not present
these data on the District of Columbia.
[38] The number of states reporting K-12 state-level funding cuts to
education funding in fiscal year 2010 is based on self-reported data
collected by the National Association of State Budget Officers in the
spring of 2010. The Fiscal Survey of States, "Table 1-A. Fiscal 2010
Program Area Cuts" (page 4), published by the National Governors
Association and the National Association of State Budget Officers
(June 2010).
[39] These states are Arizona, California, Colorado, Georgia,
Illinois, Michigan, Mississippi, New Jersey, New York, and North
Carolina.
[40] The Fiscal Survey of States, June 2010, "Table 1-B.Proposed
Fiscal 2011 Program Area Cuts" (page 6).
[41] Our survey was conducted from March to April 2010, prior to the
new $10 billion Education Jobs Fund established in August 2010.
[42] Pub. L. No. 111-226, § 101.
[43] For our survey, we included a separate strata of the 100 largest
LEAs as defined by the number of students. We received a final
weighted response rate of 84 percent for this strata.
[44] This difference from the national average is statistically
significant.
[45] U.S. Department of Education, The Condition of Education 2010
(June 2010), page 278.
[46] The national estimate of 6.2 million education staff is based on
2007-08 school year data and is taken from Education's 2009 Digest of
Education Statistics, (p.56). The 4 percent of the workforce estimate
is GAO's calculation based on Education's 6.2 million staff estimate
and employment projections by the U.S. Bureau of Labor Statistics.
[47] For Recovery Act SFSF funds, a slightly higher percentage of LEAs
reported using the funds to provide transportation (1.8 percent) and
school construction/renovation (3.7 percent) than professional
development.
[48] Our survey asked superintendents' opinions of how Recovery Act
SFSF funding affected their LEA's ability to maintain, raise, or
decrease their level of service in the 2009-2010 school year.
Superintendents and other LEA officials we spoke with explained that
"level of service" includes the instructional program provided to
students through teaching staff, curriculum, and instructional
materials; the noninstructional services provided in school districts
such as administrative and janitorial services; and the safety and
security of schools.
[49] In April 2009, Education released guidance that asked LEA
officials to consider whether their proposed use of Recovery Act funds
would (1) improve results for students, including students in poverty,
students with disabilities, and English language learners; (2)
increase educators' long-term capacity to improve results for
students; (3) advance state, district, or school improvement plans and
the reform goals encompassed in the Recovery Act; (4) avoid recurring
costs that states, school systems, and schools are unprepared to
assume when this funding ends; and (5) include approaches to measure
and track implementation and results. See American Recovery and
Reinvestment Act of 2009: Using ARRA Funds to Drive School Reform and
Improvement: U.S. Department of Education: Washington D.C.: April 24,
2009.
[50] Hereafter in this section, "local" will refer to "local, or state
and local" funds.
[51] To be eligible to exercise this flexibility, the LEA must meet
the requirements of IDEA, Part B, including meeting targets in its
state's performance plan. In 2009, almost all of the states in our
sample had an increase in the number of LEAs that met requirements--
and were therefore eligible--compared to the prior year. For more
information, see GAO, Recovery Act: Status of States' and Localities'
Use of Funds and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009).
[52] SCSD's application to the state for IDEA funds actually reported
an increase in funding for the 2009-2010 school year of $125,793.
However, this increase was reported in error.
[53] This amount includes both Phase I and Phase II SFSF education
stabilization funds.
[54] These states are Colorado, Massachusetts, Michigan, New Jersey,
and New York.
[55] These states are Arizona, California, Colorado, Florida,
Illinois, Massachusetts, Michigan, North Carolina, New Jersey, New
York, and Texas.
[56] Mississippi and Pennsylvania are scheduled to be monitored in the
2010-2011 monitoring cycle.
[57] OSEP officials indicated that the desk review's content would
include questions based on the Department of Education Inspector
General's recent findings. See U.S. Department of Education, Office of
Inspector General, Final Management Information Report, ED-OIG/
X05J0019 (Washington, D.C., June 4, 2010).
[58] According to guidance issued by Education, in general, to be able
to use IDEA funds to purchase equipment, LEAs need to obtain the prior
approval of the state. For purposes of this prior approval
requirement, "equipment" is defined to mean an article of
nonexpendable, tangible personal property having a useful life of more
than a year and an acquisition cost which equals or exceeds the lesser
of the capitalization level established by the governmental unit for
financial statement purposes, or $5,000. See, U.S. Department of
Education, Office of Special Education and Rehabilitative Services,
Guidance on Funds for Part B of the Individuals with Disabilities
Education Act Made Available Under The American Recovery and
Reinvestment Act of 2009 (Washington, D.C., April 2009).
[59] West Virginia's waiver application was also approved. In
addition, Kansas received a partial approval. The state requested to
decrease spending on special education by $60 million, but Education
approved a decrease of $44 million. There is no official appeals
process, according to OSEP officials, although Kansas has reapplied,
asking for a decrease of $58 million. In addition, Education is
currently considering a waiver application for South Carolina.
[60] U.S. Department Of Education, Office Of Special Education And
Rehabilitation Services, Process And Criteria Used To Evaluate A
Request By States To Waive Maintenance Of Effort (MOE) Requirements
Under Part B Of The Individuals With Disabilities Education Act (IDEA)
(Washington, D.C., June 2010).
[61] Education has also conducted site visits in three states not
included in our review--Maryland, South Carolina and Tennessee.
[62] Education has also conducted desk reviews of three states not
included in our review--Alaska, Delaware, and North Dakota.
[63] Rhode Island was also granted a waiver for 2009 MOE requirements
but was not included in our review.
[64] See Pub.L. No. 111-5, § 14012 (2009).
[65] Rhode Island and South Carolina have also requested a waiver from
Education to decrease their 2009 state-level spending on education.
[66] Education officials reported that as of August 20, 2010,
Tennessee and Delaware have received their Race to the Top grants.
Hawaii, Maryland and Rhode Island are the other states that will also
receive these grants.
[67] According to Education officials, $4 billion will be provided for
statewide reform efforts and $350 million for state consortia to
develop common academic assessments. From the time grantees receive
their awards, they will have 4 years to spend the grant funds.
[68] Oklahoma's and Puerto Rico's Phase II applications have yet to be
approved. Education officials reported they are working with these
states and the outlying areas to ensure their plans for using Phase II
SFSF funds adhere to applicable requirements.
[69] Pub. L. No. 111-117 (2009).
[70] U.S. Department of Education, Office of Elementary and Secondary
Education, Final Requirements for School Improvement Grants, As
Amended (Washington, D.C., Jan. 28, 2010); and Guidance on School
Improvement Grants Under Section 103 (g) of the Elementary and
Secondary Education Act of 1965 (Washington, D.C., June 29, 2010).
[71] These states are Massachusetts and New York.
[72] Funds are obligated when DOT issues project or grant agreements.
Apportioned funds are obligated when DOT issues project or grant
agreements to recipients, a process that is typically followed by
contractor selection, contract award, and performance. As expenses are
incurred, recipients may request and be reimbursed for their expenses
following program eligibility guidelines.
[73] 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).
[74] GAO, Physical Infrastructure: Challenges and Investment Options
for the Nation's Infrastructure, [hyperlink,
http://www.gao.gov/products/GAO-08-763T] (Washington, D.C.: May 8,
2008).
[75] Recovery Act, div. A, title XII, § 1201(c).
[76] We reviewed data in RADS as of June 18, 2010, for all 50 states
and the District.
[77] DOT Secretary of Transportation, Section 1201(c) One-Year Report,
(Washington, D.C.: May 7, 2010).
[78] Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1)
to transfer funds made available for transit projects to FTA.
[79] Located in Urbanized Areas; these areas may cross state lines.
[80] Supplemental Appropriations Act, 2009, Pub. L. No. 111-32, § 1202
(June 24, 2009).
[81] Caltrans' paratransit program is a curb-to-curb shared ride
service for the disabled who are unable to use fixed bus or rail routes.
[82] 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.
[83] As DOT pointed out, section 104(k) requires that funds
transferred under that authority are to be administered in accordance
with the provisions of chapter 53 of title 49, United States Code,
which does not include a withdrawal and redistribution procedure. 23
U.S.C. § 104(k)(1); 49 U.S.C. § 5334(i)(1). When specific and general
statutes appear to conflict and a general provision is "broad enough
to include the subject to which the specific provision relates, the
specific provision should be regarded as an exception to the general
provision so that both may be given effect, the general applying only
where the specific provision is inapplicable." B-255979, Oct. 30,
1995, quoting B-163375, Sept. 2, 1971. Section 104(k) specifically
prescribes the disposition of funds transferred under authority of the
section--namely, that funds transferred under section 104(k) are to be
administered under chapter 53 of title 49. As such, the Recovery Act's
1-year obligation deadline for FHWA's Highway Infrastructure
Investment appropriation does not apply.
Furthermore, because the transferred funds were not originally
appropriated to FTA's Transit Capital Assistance or Fixed Guideway
Infrastructure Investment Programs, and they were not merged with
those funds upon transfer to FTA, they are not subject to FTA's
distribution formula for transit capital assistance and fixed guideway
infrastructure and, therefore, are not subject to the 1-year
obligation deadline applicable to FTA's Recovery Act appropriations.
Instead, the funds were transferred after identification of specific
ready-to-work projects.
[84] The average of funds remaining to be obligated on June 30 for
federal fiscal years 2007, 2008, and 2009 was $12.1 billion.
[85] For this report, GAO interviewed officials in California,
Florida, Illinois, Massachusetts, Mississippi, North Carolina, and
Texas regarding expenditures of their regular federal-aid highway
program funds.
[86] The Highway Infrastructure Investment, Transit Capital Assistance
and the Fixed Guideway Infrastructure Investment Programs are formula
grant programs, which apportion funds to states or their subdivisions
by law. Apportioned funds are obligated when DOT issues project or
grant agreements to recipients, a process that is typically followed
by contractor selection, contract award, and performance. As expenses
are incurred, recipients may request and be reimbursed for their
expenses following program eligibility guidelines.
[87] GAO, Executive Guide: Effectively Implementing the Government
Performance and Results Act, [hyperlink,
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June
1996).
[88] Recovery Act, div. A, title XII, § 1201(a). A state that does not
meet its level of effort will be prohibited from participating in the
redistribution of federal-aid highway obligation authority, scheduled
to occur in August 2011.
[89] DOT officials indicated that Massachusetts and Minnesota agreed
to correct errors in the amount identified for the states' transit
programs, and the states agreed to provide this information to DOT by
early September 2010. DOT was in discussion with Connecticut to
determine whether there were errors to correct in the certification,
and officials said this issue would also be resolved by early September.
[90] GAO, Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C.: Mar. 3,
2010).
[91] Specifically, the Recovery Act requires states to give priority
to projects that can be completed within 3 years and to projects
located in economically distressed areas. Economically distressed
areas are defined by the Public Works and Economic Development Act of
1965, as amended. To qualify as an economically distressed area, an
area must (1) have a per capita income of 80 percent or less of the
national average; (2) have an unemployment rate that is, for the most
recent 24-month period for which data are available, at least 1
percent greater than the national average unemployment rate; or (3) be
an area that the Secretary of Commerce determines has experienced or
is about to experience a "special need" arising from actual or
threatened severe unemployment or economic adjustment problems
resulting from severe short-or long-term changes in economic
conditions.
[92] Each state used FHWA's special-need criterion that relates to
severe job dislocation resulting from actual or threatened business
closure or restructuring. These states were advised that in order to
be consistent with the FHWA guidance, the states must have data that
show a connection between demonstrated severe job losses and actual,
identified firm closures and restructurings.
[93] The Energy Independence and Security Act (EISA) of 2007 was
signed into law on December 19, 2007. Pub.L. No. 110-140, 121 Stat.
1667.
[94] While about 2,350 recipients were authorized to receive EECBG
formula funding, only about 2,150 EECBG formula grants were awarded to
recipients. This is because about 100 Native American tribes
consolidated their funds and were awarded EECBG funds as one group and
because, as of July 1, 2010, 64 potential recipients (amounting to
about $6.4 million) returned funds or didn't apply for grant funds.
The remaining 36 recipients have not yet been allocated grant funds by
DOE.
[95] Approximately 2 percent of the formula funding is for competitive
grants to cities, counties, and tribes not eligible for direct formula
funding.
[96] DOE, 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).
[97] GAO defines larger grant amounts as amounts greater than $2
million.
[98] To retrofit is to install new or modified parts or equipment not
available or considered necessary at the time of manufacture in
something previously manufactured or constructed or to adapt to a new
purpose or need.
[99] In addition, local recipients may use up to 20 percent of their
funds, or $250,000, whichever is greater, to establish a Revolving
Loan Fund.
[100] DOE, Funding Opportunity Announcement DE-FOA-0000013 for the
Energy Efficiency and Conservation Block Grant Program - Formula
Grants (Mar. 26, 2009). Also in DOE, Energy Efficiency and
Conservation Block Grant Program Notice 10-011 (Apr. 21, 2010).
[101] DOE defines the effective date of the award as the date that the
DOE contracting officer signed the award document.
[102] Drawing down is the process in which recipients request and
receive authorized federal funds for projects under the terms of the
grant.
[103] 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 yet available.
[104] Grant recipients may include states, cities, counties, and
Native American tribes.
[105] Subrecipients: For states, this term defines nonentitled (to
direct federal funding) cities and counties, and for cities and
counties, the term typically defines subcontractors and vendors.
[106] In addition, DOE officials told us that DOE is developing
guidance that includes best practices on how states should monitor
their subrecipients.
[107] 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).
[108] Standard programmatic metrics are categorized by EECBG activity.
For example, a recipient undertaking a building retrofit must report
on five metrics--outlay of Recovery Act funding, outlay of non-
Recovery Act funding, obligations, number of buildings retrofitted (by
sector), and square footage of buildings retrofitted (by sector).
[109] Along with the states, and the District, the U.S. territories
American Samoa, Guam, Northern Marianas, Puerto Rico, and the Virgin
Islands also received funds.
[110] Totals do not sum to 100 percent due to rounding.
[111] [hyperlink, http://www.gao.gov/products/GAO-10-604].
[112] Categorical exclusions are provided to types (or classes) of
actions that normally do not have the potential to cause significant
environmental impacts and, thus, are categorically excluded from the
need to prepare an environmental assessment or environmental impact
statement.
[113] See [hyperlink,
http://www1.eere.energy.gov/recovery/buy_american_provision.html].
[114] 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).
[115] U.S. Department of Energy, Office of Inspector General,
Management Controls over the Development and Implementation of the
Office of Energy Efficiency and Renewable Energy's Performance and
Accountability for Grants in Energy System, OAS-RA-10-14 (July 22,
2010).
[116] During an energy audit, auditors visually inspect the building
shell and mechanical systems; conduct diagnostic, health, and safety
tests; and record the location, condition, and dimensions of walls,
ceilings, floors, windows, doors, and mechanical systems. According to
DOE, before work is conducted, auditors should use this information to
select cost-effective measures that would make the unit more energy-
efficient and prepare work orders to ensure that appropriate measures
are installed. After weatherization work is completed, another energy
audit and final inspection should be conducted.
[117] June 30, 2010, is the most recent quarter for which the states
are required to report data under the Recovery Act. The 58 recipients
include all of the states, the District, all five territories, and two
Indian tribes.
[118] Based on June production totals, DOE released the remaining 50
percent of funds to 19 states: Arizona, Colorado, Idaho, Illinois,
Indiana, Iowa, Maine, Minnesota, Mississippi, Montana, New Hampshire,
New Mexico, Nevada, Ohio, Oregon, Tennessee, Vermont, Washington, and
Wisconsin. Based on July production totals, DOE released the remaining
50 percent of funds to the following three states: Kentucky, North
Dakota, and Wyoming.
[119] Our discussion on weatherization is limited to the following 7
states and the District of Columbia that are the focus of this report:
Arizona, California, Florida, Georgia, Iowa, New York, and
Pennsylvania.
[120] As of June 30, 2010, the agency responsible for administering
the Recovery Act weatherization program had not yet approved
weatherization of multifamily residences, but it reported having
received proposals.
[121] See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[122] See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[123] See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[124] See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[125] See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[126] HUD awarded the competitive grants to housing agencies at
varying dates in the month of September 2009. As a result, the 1-year
deadlines for obligating these funds vary by category of competitive
grant. The deadlines include September 8, 2010, September 22, 2010,
September 23, 2010, and September 27, 2010.
[127] Gap financing is the process of providing funding to housing
agencies for projects that are ready to proceed but are stalled due to
the inability of the housing agency to obtain anticipated private
funding for the projects.
[128] According to HUD officials, funds that are recaptured from
housing agencies after passage of the Dodd-Frank Act will have to be
returned to the Department of the Treasury (because of congressional
concerns about debt reduction, the Dodd-Frank Act required unobligated
Recovery Act funds to be returned to the Treasury). However, because
the initial $17.16 million in returned formula and competitive grant
funds was returned to HUD before passage of the act, HUD is still able
to redistribute them to other housing agencies.
[129] According to HUD officials, 21 housing agencies refused to
accept or returned to HUD approximately $3.26 million in Recovery Act
formula grant funds.
[130] HUD was concerned that housing agencies may not have followed
proper procedures or may have directed funds to ineligible uses in the
rush to meet the March 17, 2010, formula grant obligation deadline.
HUD officials decided to review the obligation documents of those
housing agencies that obligated the majority of their funds just prior
to the deadline. These quick-look reviews were conducted by HUD field
staff using a checklist that included questions such as whether
necessary approvals were in place for work items and whether
obligations correspond to work items in the housing agency's approved
annual plan.
[131] GAO, Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C.: Mar. 3,
2010).
[132] Asset management reviews examine how the asset is being managed
in areas including whether the housing agencies are renting to the
types of tenants specified by the terms of HUD funding, or whether the
asset is being maintained in accordance with HUD safety standards.
[133] State housing finance agencies award LIHTCs to owners of
qualified rental properties who reserve all or a portion of their
units for occupancy for low-income tenants. Once awarded LIHTCs,
project owners typically attempt to obtain funding for their projects
by attracting third-party investors that contribute equity to the
projects. These investors can then claim the tax credits for 10 years
if the property continues to comply with program requirements. This
arrangement of providing LIHTCs in return for an equity investment is
generally referred to as "selling" the tax credits. 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. For purposes of this report we refer to direct investors and
syndicators generally as "third-party investors"or "investors."
[134] Because many of the affordable housing tax credit projects
generate small amounts of cash flow from rental income, they rely on
LIHTC together with other forms of subsidies like the HOME Investment
Partnerships Program, Community Development Block Grants, and state
funds to develop, rehabilitate, and adequately maintain projects.
[135] HUD obligated funds to the 50 states, the District of Columbia,
and Puerto Rico. The Recovery Act directed HUD to distribute TCAP
funds in accordance with the fiscal year 2008 HOME Investment
Partnerships Program (HOME) formula allocations to state participating
jurisdictions, thereby limiting the funds to states as defined by the
HOME requirements (HOME formula). Guam and the U.S. Virgin Islands are
defined as "insular areas" under HOME, rather than as "states," and
therefore, did not receive TCAP funds.
[136] This report uses the terms obligation and outlays when
discussing funds that HUD and Treasury provide to HFAs. By obligation,
we mean that the respective federal agencies have entered into
agreements with HFAs for a specified amount of funds. By outlays, we
mean that the federal agencies have released funds to an HFA. We use
the terms commitments and disbursements to discuss funds provided by
HFAs to projects. By commitments, we mean the HFA has entered into an
agreement to provide funds to a project owner. By disbursement, we
mean that the HFAs have released funds to project owners.
[137] Project owners must have, by the close of 2010, spent at least
30 percent of their total adjusted basis on land and depreciable
property that is reasonably expected to be part of the low-income
housing project.
[138] Unlike TCAP, the Section 1602 Program permits rolling
applications through December 31, 2010.
[139] We interviewed a cross-section of HFAs and conducted site visits
to selected projects that had received either TCAP or Section 1602
Program funds, and interviewed project owners and third-party
investors involved with these selected projects. The Georgia, Ohio,
Pennsylvania, Florida, and Mississippi appendixes in the e-supplement
of this report provide information on our site visits (GAO-10-1000SP).
We also conducted telephone interviews with the HFAs in Colorado,
Iowa, Michigan, and Montana.
[140] The Community Reinvestment Act (CRA) is intended to encourage
institutions that accept deposits, such as banks, to help meet the
credit needs of the communities in which they operate. CRA requires
regulators to evaluate periodically each insured depository
institution's record in helping meet the credit needs of its entire
community. 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 CRA.
[141] According to the Florida Housing Finance Corporation, the
litigation involves three projects for which the owners disagreed with
the HFA's decision to rescind provisional awards based on an
unfavorable credit underwriting review.
[142] MHC's board delayed its request for Section 1602 Program funds
to Treasury until February 2010 while it assessed program risks
related to Treasury's requirements for recapture of funds. MHC is
responsible for returning Section 1602 Program funds to Treasury if a
project owner fails to complete the project or meet LIHTC
requirements. GAO reported previously on the risks and
responsibilities of recapture for HFAs under TCAP and the Section 1602
Program. 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).
[143] Asset management includes many activities that relate to
monitoring and planning for the long-term financial and physical
health and viability of a project. Some examples of asset management
are discussed in this section.
[144] 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 TCAP and the Section 1602
Program. See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[145] We conducted a Web-based survey in November 2009 of all 54 HFAs
that received TCAP and Section 1602 Program funds as of that date. All
HFAs responded. For a copy of the survey and the compiled HFA
responses, see [hyperlink, http://www.gao.gov/products/GAO-10-1023SP].
[146] The Recovery Act expressly applies section 288 of the HOME
statute, which requires the state to assume responsibility for
environmental review under NEPA and related federal environmental
authorities and regulations at 24 C.F.R. Part 58 "Environmental Review
Procedures for Entities Assuming HUD Environmental Responsibilities."
In addition, under section 1606 of Division A of the Recovery Act,
contractors and subcontractors hired with Recovery Act funds are
required to pay prevailing wages to laborers and mechanics in
compliance with the Davis-Bacon Act.
[147] HOME, administered 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,
or rehabilitate affordable housing for rent or homeownership or
provide direct rental assistance to low-income people.
[148] These data do not include projects financed with a combination
of Section 1602 Program funds and TCAP funds.
[149] This HFA told us that it did not have asset management
experience and chose to outsource asset management on projects that
did not have investor participation (6 projects) and coordinate with
investors on projects that have investor participation (74 projects).
The other HFA we interviewed that has hired an outside asset manager
has a large volume of projects (89 projects) and will use the outside
services to supplement its own financial monitoring of projects. Two
HFAs we interviewed have required investor participation in all
transactions, and they said they will coordinate with investors to
ensure asset management is performed on all projects.
[150] Some HFAs are coordinating with and relying on reviews and
audits that investors and private construction lenders perform in
order to satisfy the HFAs' asset management obligations under the
Section 1602 Program as well.
[151] FHFC officials said they set $650 as the required equity
investment for these projects by using the average market price for
LIHTCs in Florida at the time of the TCAP award, which was 65 cents
per dollar of tax credits. Because LIHTCs are claimed over a ten-year
period, the total equity investment for $100 of tax credits priced at
65 cents is $650.
[152] See the Florida appendix in the e-supplement of this report for
a description of FHFC's activities [hyperlink,
http://www.gao.gov/products/GAO-10-1000SP].
[153] See [hyperlink, http://www.gao.gov/products/GAO-10-604].
[154] Under the continuous corrections period, recipients were able to
modify this round of submissions from August 3, 2010, through
September 20, 2010. The final update of this round of recipient
reported data should occur on September 22, 2010.
[155] Under the Recovery Act, recipients are to file reports for any
quarter in which they receive Recovery Act funds directly from the
federal government. Reporting requirements apply to nonfederal
recipients of funding, including entities such as state and local
governments, educational institutions, nonprofits, and other private
organizations. These requirements apply to recipients who receive
funding through the Recovery Act's discretionary appropriations, not
recipients receiving funds through entitlement programs, such as
Medicaid, or tax provisions. Certain other exceptions apply, such as
for individuals. Recovery Act, div. A, § 1512, 123 Stat. at 287-288.
[156] Under the Recovery Act, recipients are required to submit
reports no later than 10 days after the end of each calendar quarter.
The Board extended the reporting deadline by several days for all four
rounds of reporting.
[157] An award key is a derived field that identifies an award. This
field is derived using a distinct combination of the following
component fields: Award_type, Prime_DUNS, Award_id and Order_number.
[158] This function was provided to recipients at FederalReporting.gov
in order to achieve more accurate tracking and analyses of reports
across quarters. The function, however, did not allow users to link
current reports submitted in round four to ones submitted in round one
or round two. Since there is no information on the downloadable
recipient reports about the use of this function by recipients, we are
unable to assess the extent to which this function was applied.
[159] Both TAS and CFDA values are linked to specific agencies and
their programs. The TAS codes identify the Recovery Act funding
program source. The two leftmost characters of each TAS code form a
data element, which is identical with the two-digit numerical code
used in the federal budgetary process to identify major federal
organizations. The CFDA is a governmentwide compendium of federal
programs, projects, services, and activities that provide assistance
or benefits. It contains assistance programs administered by
departments. Each program is assigned a unique number where the first
two digits represent the funding agency.
[160] Prime recipients are nonfederal entities that receive Recovery
Act funding as federal awards in the form of grants, loans, or
cooperative agreements directly from the federal government.
Subrecipients are nonfederal entities that are awarded Recovery Act
funding through a legal instrument from the prime recipient.
[161] [hyperlink, http://www.gao.gov/products/GAO-10-604], pp. 195-211.
[162] U.S. Department of Energy, Office of Inspector General, Office
of Audit Services, Accounting and Reporting for the American Recovery
and Reinvestment Act by the Department of Energy's Funding Recipients,
OAS-RA-10-06 (Washington, D.C., Apr. 1, 2010).
[163] U.S. Department of Agriculture, Office of Inspector General,
American Recovery and Reinvestment Act--Review of the Effectiveness of
Department/Agency Data Quality Review Processes (Washington, D.C.,
June 25, 2010).
[164] National Association of State Budget Officers, Intergovernmental
Communication and the Recovery Act (Washington, D.C., July 28, 2010).
[165] Congress passed the Single Audit Act, as amended, 31 U.S.C. ch.
75, to promote, among other things, sound financial management,
including effective internal controls, with respect to federal awards
administered by nonfederal entities. The Single Audit Act requires
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
Single Audit Act requires that recipients submit their financial
reporting packages, including the Single Audit report, to the federal
government's audit clearinghouse no later than 9 months after the end
of the period being audited. As a result, an audited entity may not
receive feedback needed to correct an identified internal control
deficiency over compliance until the latter part of the subsequent
fiscal year.
[166] This circular is issued pursuant to the Single Audit Act and
sets forth standards for obtaining consistency and uniformity among
federal agencies for the audit of states, local governments, and
nonprofit organizations expending federal awards.
[167] See 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) for a status of OMB's implementation
of GAO's recommendations.
[168] Internal control deficiencies refer to significant deficiencies
and material weaknesses as defined by generally accepted auditing
standards issued by the American Institute of Certified Public
Accountants and Government Auditing Standards, issued by the
Government Accountability Office. A material weakness is a significant
deficiency or combination of significant deficiencies that result in
more than a remote likelihood that a material misstatement of the
subject matter will not be prevented. Auditors report internal control
deficiencies over compliance requirements applicable to the major
programs in accordance with OMB Circular No. A-133.
[169] One of the states that participated in the project has a fiscal
year that ends on August 31 rather than on June 30. Therefore, OMB
gave this state until March 1, 2010, to report on its fiscal year 2009
internal control deficiencies. OMB made this change so that the
state's auditors would have the same amount of time to complete their
test work as the other project participants did. All of the other
states that participated fiscal year ended on June 30, 2009, and OMB
required them to report by December 31, 2009.
[170] The project's second milestone required that auditee management
provide the interim communication report and a corrective action plan
to the cognizant federal agency by January 31, 2010. For 10 of the 13
states that submitted the required internal control report, the
corrective action plans were included in the interim communication
report. In three instances, the plans were provided in a separate
report.
[171] HHS, the cognizant agency for audit, has designated the HHS
Office of the Inspector General to perform certain responsibilities
relating to Single Audits.
[172] According to OMB Circular No. A-133, Audits of States, Local
Governments, and Non-Profit Organizations, (June 27, 2003 and June 26,
2007) section .400 (c) (5) and section .405 (a) - (e), the federal
agency is responsible for issuing a management decision on audit
findings within 6 months after receipt of the audit report. Additional
OMB guidance to federal agencies focused specifically on audit follow
up is found in OMB Circular No. A-50, Audit Follow-up (September 29,
1982).
[173] The five states are Arizona, Illinois, New Jersey, Ohio, and
Pennsylvania. Although the FAC received initial Single Audit reporting
packages from Colorado, Georgia, and Massachusetts by the March 31 due
date, the FAC received subsequent information, which completed the
reporting requirements from these states, after the March 31 due date.
[174] According to OMB data, as of August 5, 2010, five of the 16
states that participated in the OMB Single Audit Internal Control
Project (Colorado, Georgia, Ohio, South Dakota, and Tennessee) did not
file their completed Single Audit reporting package by the March 31,
2010, due date. Although FAC received the initial Single Audit
reporting packages from Colorado and Georgia by the March 31 due date,
FAC received subsequent information which completed the reporting
requirements from these states after the March 31 due date. As of
August 24, 2010, the FAC had not yet received Tennessee's reporting
package for the fiscal year 2009 Single Audit.
[175] Recovery Accountability and Transparency Board, American
Recovery and Reinvestment Act--Review of the Effectiveness of
Department/Agency Data Quality Review Processes (Washington, D.C.,
June 25, 2010).
[176] The six inspectors general participating in the review were the
Department of Housing and Urban Development, the Department of
Defense, the General Services Administration, the Environmental
Protection Agency, the National Science Foundation, and the Department
of Agriculture.
[177] According to the Board staff, the majority of the complaints
received via the fraud hotline did not contain any actionable
information; for example, some complaints contained a generalized
comment on the Recovery Act rather than any specific allegation of
wrongdoing. The Board refers those that are actionable to the
appropriate inspector general when there is a specific allegation of
wrongdoing or multiple factors indicate a possible area of risk.
[178] According to a Board official, 63 of the 534 inspectors general
products published on Recovery.gov are interim reports published to
raise important issues with agency management in an expedited manner.
[179] The DUNS--Data Universal Numbering System--number is a unique 9-
digit identification number provided by Dun and Bradstreet, Inc., for
each physical location of a business or organization. The DUNS number
is a unique identifier for an organization and is used to identify
which business or organization is submitting reporting information to
the government for federal contracts.
[180] Recovery Act, div. A §§ 1541-1546, 123 Stat. at 295-296.
[181] The State Accounting Office also provided the training to
several universities and technical colleges.
[182] The states and the District of Columbia have varying definitions
and procedures relating to competition and contract types. Therefore,
we relied on state and local officials to verify whether a particular
contract was awarded competitively and considered to be fixed-price
under state or local contracting definitions and procedures.
[183] In some instances, state officials further identified these
contracts as having fixed-unit pricing arrangements, where, according
to state officials, unit prices for contract items are fixed, but
total quantities of items may vary, if needed. Some officials
characterized this type of arrangement as fixed-price, while others
reported that it was other-than-fixed-price. As such, contracts with
fixed-unit pricing arrangements are included in both the fixed-price
and other-than-fixed-price totals identified in this section of the
report.
[184] See GAO, Recovery Act: Contracting Approaches and Oversight Used
by Selected Federal Agencies and States, [hyperlink,
http://www.gao.gov/products/GAO-10-809] (Washington, D.C.: July 15,
2010).
[185] For the purposes of the report, we considered state-level
oversight as centralized state government offices with purview over
more than one state agency or department. This included each
governor's office and state controller offices.
[186] We were unable to determine whether overall costs had increased,
decreased, or remained the same for four contracts. In addition, we
were unable to determine whether the schedule had increased,
decreased, or remained the same for three contracts.
[187] For three contracts, officials did not provide any response
regarding contractor performance issues, and for two contracts
officials responded that they "don't know."
[188] 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).
[189] See appendix IV for a complete list of population and
unemployment rates for the selected local governments.
[190] Not all jurisdictions have the same fiscal year. Most of the
states we visited have fiscal years beginning July 1, with the
following exceptions: New York's fiscal year begins on April 1; the
fiscal year for Texas begins on September 1; and the fiscal year for
the District of Columbia and Michigan begins on October 1.
[191] National Governors Association and the National Association of
State Budget Officers, The Fiscal Survey of States (Washington, D.C.,
June 2010). The survey is based on survey responses from all 50
states' governors' budget offices collected from March through May 2010.
[192] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009); Recovery Act: States' and
Localities' Current and Planned Uses of Funds While Facing Fiscal
Stresses, [hyperlink, http://www.gao.gov/products/GAO-09-829]
(Washington, D.C.: July 8, 2009); Recovery Act: Funds Continue to
Provide Fiscal Relief to States and Localities, While Accountability
and Reporting Challenges Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009); Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009); Recovery Act: One Year Later, States' and Localities' Uses of
Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C. Mar. 3,
2010); and 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).
[193] The Compliance Supplement is issued annually to guide auditors
on what program requirements should be tested for programs audited as
part of the Single Audit.
[194] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009).
[195] Recovery Act, div. A, §1512, 123. We will refer to the quarterly
reports required by Section 1512 as recipient reports.
[196] GAO, Recovery Act: Recipient Reported Jobs Data Provide Insights
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009).
[197] The Recovery Act requires recipients of funding from federal
agencies to report quarterly on jobs created or retained with Recovery
Act funding. The first recipient reports filed in October 2009 cover
activity from February through September 30, 2009. This bimonthly
report incorporates recipient reports covering activity through June
30, 2010.
[198] We stratified the population into strata based on size and urban
status. Regarding size, we identified the 100 largest LEAs in the
country. The 33 geographic districts comprising the New York City
Public Schools were treated as one school district and that one
district was placed in the 100 largest LEAs stratum.
[199] For SEP, the six states we collected information from are:
Arizona, California, Colorado, Iowa, New York, and Pennsylvania. For
EECBG, the 12 states we collected information from are: Arizona,
California, Colorado, Florida, Georgia, Iowa, Massachusetts, Michigan,
New Jersey, New York, Pennsylvania, and Texas.
[200] The nine states we collected information from are: Arizona,
California, Florida, Georgia, Iowa, New York, Ohio, Pennsylvania, and
Texas.
[201] The states we visited are Arizona, California, Georgia,
Illinois, Massachusetts, Mississippi, New Jersey, Pennsylvania, and
Texas.
[202] The 2010 OMB Circular No. A-133 Audits of States, Local
Governments, and Non-Profit Organizations Compliance Supplement was
issued on July 29, 2010.
[203] For additional information about our survey and our analysis of
responses, see 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).
[204] See appendix IV, for a complete list of population and
unemployment rates for the selected local governments.
[205] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009); Recovery Act: States' and
Localities' Current and Planned Uses of Funds While Facing Fiscal
Stresses, [hyperlink, http://www.gao.gov/products/GAO-09-829]
(Washington, D.C.: July 8, 2009); Recovery Act: Funds Continue to
Provide Fiscal Relief to States and Localities, While Accountability
and Reporting Challenges Need to Be Fully Addressed, [hyperlink,
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23,
2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight
into Use of Recovery Act Funding, but Data Quality and Reporting
Issues Need Attention, [hyperlink,
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19,
2009); Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10,
2009); and Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-437] (Washington, D.C. Mar. 3,
2010); Recovery Act: 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).
[206] For more details on the maintenance-of-effort requirements, see
GAO, Recovery Act: Planned Efforts and Challenges in Evaluating
Compliance with Maintenance of Effort and Similar Provisions,
[hyperlink, http://www.gao.gov/products/GAO-10-247] (Washington, D.C.:
Nov. 30, 2009).
[207] OMB, Payments to State Grantees for Administrative Costs of
Recovery Act Activities, M-09-18 (Washington, D.C., May 11, 2009), and
OMB, Payments to State Grantees for their Administrative Costs for
Recovery Act Funding - Alternative Allocation Methodologies, M-10-03
(Washington, D.C., Oct. 13, 2009).
[208] The following 16 states elected to participate: Alaska,
California, Colorado, Florida, Georgia, Louisiana, Maine, Missouri,
Nevada, North Carolina, Ohio, Oklahoma, South Dakota, Tennessee,
Texas, and Virginia.
[209] [hyperlink, http://www.gao.gov/products/GAO-10-223].
[210] 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.
[211] 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.
[212] 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.
[213] 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.
[214] 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.
[215] 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.
[216] Under ESEA, schools in improvement have failed to meet adequate
yearly progress for at least 2 consecutive years.
[217] School Improvement Grants are authorized under Section 1003(g)
of ESEA.
[218] 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)).
[219] 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.
[220] 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.
[221] Pub. L. No. 100-77, 101 Stat. 482 (July 22, 1987).
[222] 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).
[223] 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.
[224] Recovery Act, div. A, title XII, 123 Stat. 206.
[225] Recovery Act, div. A, title XII, § 1201(a).
[226] The full list of qualifying Transportation Enhancement
activities is defined in 23 U.S.C. § 101(a)(35).
[227] 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.
[228] 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.
[229] 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.
[230] 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.
[231] 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.
[232] 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.
[233] Recovery Act, div. A, title XII,123 Stat. 210.
[234] Recovery Act, div. A, title XII, § 1201(a).
[235] 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."
[236] 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.
[237] See the Medicaid Federal Medical Assistance Percentage (FMAP)
description in this appendix.
[238] 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 section]
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