GSA Fleet
Information on the Effect of Donating Cars to YouthBuild USA and Potential Benefits to Rural Youthbuild Participants Gao ID: GAO-07-153 December 8, 2006To assist youth who live in high poverty rural areas obtain and retain jobs, YouthBuild USA, a national nonprofit organization, has proposed providing donated used cars to selected low-income youth in rural communities. YouthBuild USA's proposed program hinges on receiving donations of used cars from the federal government's General Services Administration (GSA). This report discusses (1) the effect of donating 1 to 5 percent of selected GSA used cars on GSA's fleet vehicle sales operations, (2) what studies have shown with respect to the benefits that car ownership or access may hold for low-income individuals, and (3) what studies of selected low income car ownership programs and experiences of these programs have shown with respect to the benefits of participant car ownership. In conducting this study, GAO examined auction data from GSA, reviewed academic studies on the benefits of car access in gaining employment, and interviewed officials of six existing low income car ownership programs.
If GSA annually donated 1 to 5 percent of the compact sedans available for auction from its Fleet program (112 to 559 cars), its annual sales revenue would be reduced by $600,000 to $3 million. To donate cars directly to YouthBuild USA, GSA would need new statutory authority to deviate from the existing process for disposing of surplus federal property. If it were given this authority, GSA would likely first seek appropriations to recover the loss in sales revenue from the donations but would also consider increasing its leasing rates for compact sedans. However, GSA would also require new legislative authority to increase its rates for this purpose because the current statute governing its Fleet program does not allow it to pass on these costs to the agencies that lease vehicles from it. The seven studies GAO reviewed consistently found that owning a car or having access to one increases the likelihood that low-income individuals (such as rural Youthbuild participants) find a job. One reason for this is that a car allows a person to search for a job over a wider geographic area. Differences between the populations in these studies and rural Youthbuild participants did not allow GAO to use this research to identify the degree to which participants in YouthBuild USA's proposed program would benefit from having a car. Six studies of low income car ownership programs and the experiences of those operating the programs indicated that participants got and retained jobs, earned higher wages, and spent more time with their families as a result of owning a car. However, it is difficult to project the results of these studies to rural Youthbuild participants because of limitations in the methodologies of the studies, differences between individuals served by the programs and YouthBuild USA, and differences in the designs of the existing programs and the YouthBuild USA proposal.
GAO-07-153, GSA Fleet: Information on the Effect of Donating Cars to YouthBuild USA and Potential Benefits to Rural Youthbuild Participants
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YouthBuild USA and Potential Benefits to Rural YouthBuild Participants'
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Report to the Ranking Minority Member, Subcommittee on Financial
Institutions and Consumer Credit, Committee on Financial Services,
House of Representatives:
December 2006:
GSA FLEET:
Information on the Effect of Donating Cars to YouthBuild USA and
Potential Benefits to Rural Youthbuild Participants:
GAO-07-153:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-153]
GAO Highlights:
Highlights of GAO-07-153, a report to the Ranking Minority Member,
Subcommittee on Financial Institutions and Consumer Credit, Committee
on Financial Services, House of Representatives:
Why GAO Did This Study:
To assist youth who live in high poverty rural areas obtain and retain
jobs, YouthBuild USA, a national nonprofit organization, has proposed
providing donated used cars to selected low-income youth in rural
communities. YouthBuild USA‘s proposed program hinges on receiving
donations of used cars from the federal government‘s General Services
Administration (GSA). This report discusses (1) the effect of donating
1 to 5 percent of selected GSA used cars on GSA‘s fleet vehicle sales
operations, (2) what studies have shown with respect to the benefits
that car ownership or access may hold for low-income individuals, and
(3) what studies of selected low income car ownership programs and
experiences of these programs have shown with respect to the benefits
of participant car ownership.
In conducting this study, GAO examined auction data from GSA, reviewed
academic studies on the benefits of car access in gaining employment,
and interviewed officials of six existing low income car ownership
programs.
What GAO Found:
If GSA annually donated 1 to 5 percent of the compact sedans available
for auction from its Fleet program (112 to 559 cars), its annual sales
revenue would be reduced by $600,000 to $3 million (see fig.) To donate
cars directly to YouthBuild USA, GSA would need new statutory authority
to deviate from the existing process for disposing of surplus federal
property. If it were given this authority, GSA would likely first seek
appropriations to recover the loss in sales revenue from the donations
but would also consider increasing its leasing rates for compact
sedans. However, GSA would also require new legislative authority to
increase its rates for this purpose because the current statute
governing its Fleet program does not allow it to pass on these costs to
the agencies that lease vehicles from it.
The seven studies GAO reviewed consistently found that owning a car or
having access to one increases the likelihood that low-income
individuals (such as rural Youthbuild participants) find a job. One
reason for this is that a car allows a person to search for a job over
a wider geographic area. Differences between the populations in these
studies and rural Youthbuild participants did not allow GAO to use this
research to identify the degree to which participants in YouthBuild
USA‘s proposed program would benefit from having a car.
Six studies of low income car ownership programs and the experiences of
those operating the programs indicated that participants got and
retained jobs, earned higher wages, and spent more time with their
families as a result of owning a car. However, it is difficult to
project the results of these studies to rural Youthbuild participants
because of limitations in the methodologies of the studies, differences
between individuals served by the programs and YouthBuild USA, and
differences in the designs of the existing programs and the YouthBuild
USA proposal.
[See PDF for image]
[End of image]
What GAO Recommends:
GAO is making no recommendations in this report.
GAO provided a draft of this report to GSA for its review and comment.
GSA stated that our report is accurate but expressed concerns with the
use of its Fleet vehicles for car donations.
[Hyperlink: http://www.gao.gov/cgi-bin/getrpt?GAO-07-153.]
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William B. Shear at (202)
512-8678 or shearw@gao.gov
[End of section]
Contents:
Letter:
Results in Brief:
Background:
GSA Fleet Would Face Reduced Revenues and Need Legislative Authority to
Donate Cars:
Available Research Suggests That Car Access Leads to Jobs and Other
Benefits:
LICO Programs Report Positive Results, but Limitations Restrict
Projecting Results to YouthBuild USA's Program:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Summary of Studies on the Effect of Car Access on
Employment:
Appendix III: Comments from the General Services Administration:
Appendix IV: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: GSA Leasing and Auction Process:
Figure 2: YouthBuild USA's Proposed Rural Initiative LICO Program:
Figure 3: Estimated Average Annual Reduction in Sales Revenue to GSA
Fleet from Donating Compact Sedans Normally Sold at Auction:
Abbreviations:
GSA: General Services Administration:
HUD: Department of Housing and Urban Development:
LICO:Low Income Car Ownership:
NEDLC:National Economic Development and Law Center:
TANF: Temporary Assistance to Needy Families:
December 8, 2006:
The Honorable Bernard Sanders:
Ranking Minority Member:
Subcommittee on Financial Institutions:
and Consumer Credit:
Committee on Financial Services:
House of Representatives:
Dear Mr. Sanders:
Youth between the ages of 16 and 24 who live in high poverty areas can
face significant obstacles to finding employment and receiving job
training, including low levels of academic achievement, limited work
experience, and a scarcity of jobs in their communities. In rural
communities, these youth may face the additional challenge of a lack of
transportation to get to available job opportunities because of scarce
public transportation and, according to job training and other social
service providers, having a car is often a necessity for obtaining and
keeping a good job. To address this challenge, YouthBuild USA, a
national nonprofit organization working to increase the number of youth
transitioning out of poverty, has proposed providing donated vehicles
to selected low-income youth in rural communities to travel to job
training sites and to work. YouthBuild USA's proposed Rural Initiative
Low Income Car Ownership (LICO) program hinges on receiving donations
of used cars from the federal government's General Services
Administration (GSA).
GSA purchases new vehicles and then leases them to federal agencies
through its Fleet program. Each year, GSA sells at auction
approximately 40,000 of these vehicles, most of which are 3 to 4 years
old. The proceeds from these auctions help fund purchases of new
vehicles for the Fleet program. Under its proposed LICO program,
YouthBuild USA is seeking donations of 1 to 5 percent of the vehicles
GSA auctions off annually, which it would then provide to participants
in selected rural Youthbuild programs. Because GSA's Fleet program is
currently self-sustaining and YouthBuild USA does not yet have
experience operating a LICO program, you asked us to report on the
implications of YouthBuild USA's proposal. Specifically, this report
(1) assesses the effect of donating 1 to 5 percent of selected GSA used
cars on GSA's fleet vehicle sales operations, (2) describes what
studies have shown with respect to the benefits that car ownership or
access may hold for low-income individuals, and (3) describes what
studies of selected LICO programs and experiences of these programs
have shown with respect to the benefits of participant car ownership.
To assess the effect on GSA's fleet vehicle sales operations from
donating vehicles, we focused our analysis on GSA compact sedans to
determine the average opportunity cost--the reduction in revenue for
each compact sedan GSA would donate--and the total reduction in sales
revenue GSA would face by donating 1 to 5 percent of its used compact
sedans (112 to 559 cars) to YouthBuild USA's proposed Rural Initiative
LICO program. To describe the results studies have shown with respect
to benefits of car access (that is, owning a car or having access to
one), we identified and reviewed academic studies that had been subject
to a peer review and spoke with experts. To describe what some LICO
programs have shown with respect to the benefits of participant car
ownership, we identified six LICO programs that had been the subjects
of external reviews of their programs' outcomes. We also met with
officials from these LICO programs to learn about how their programs
operated and how they reported outcomes. Appendix I provides additional
details on our objectives, scope, and methodology. We conducted our
work from May 2006 to November 2006 in San Francisco, California, and
Washington, D.C., in accordance with generally accepted government
auditing standards.
Results in Brief:
GSA's annual sales revenue would be reduced by an estimated $600,000 to
$3 million by donating 1 to 5 percent of the compact sedans from its
Fleet program (112 to 559 cars) to YouthBuild USA each year. GSA
receives no direct appropriations to operate the Fleet and sustains the
program through the fees it charges to federal agencies for leasing
vehicles and the proceeds from selling its used vehicles. GSA currently
does not donate vehicles from its Fleet program. For GSA Fleet to
donate cars directly to YouthBuild USA, GSA would need new statutory
authority because such direct donations would deviate from the existing
process for disposing of surplus federal property. To recover the
reduction in revenues it would face from donating vehicles to
YouthBuild USA, GSA officials indicated that the agency would seek
appropriations and consider increasing the leasing rates it charges the
federal agencies that lease vehicles from it. However, GSA would need
additional statutory authority to increase its leasing rates to recover
the costs of a donation program because presently its rates may only
reflect the costs of operating and replacing its fleet. GSA officials
also indicated they would consider keeping vehicles longer than the 3
to 5 years they currently do, which would result in an older fleet with
higher maintenance costs.
Taken as a whole, available studies consistently reported that car
access increases the likelihood that individuals with low incomes (such
as rural Youthbuild participants) obtained jobs. The research lists
several reasons as to why having access to a car leads to better
chances of finding a job, such as the possibility that a car allows an
individual to search for a job over a wider geographic area.
Differences between the individuals who were part of these studies and
rural Youthbuild participants did not allow us to use the studies'
results to identify the degree to which participants in YouthBuild
USA's proposed LICO program would benefit from having a car. For
example, the individuals in four of the studies analyzed were mainly
urban welfare recipients who tended to be older, more educated, and
more likely to be employed than the average participant in YouthBuild
USA's proposed LICO program.
Similar to the studies on car access generally, six studies of LICO
programs and the experiences of officials of these programs indicate
that participants reaped benefits from owning a car, such as getting
and retaining jobs, earning higher wages, and spending more time with
their families. However, the studies themselves also had methodological
constraints (such as low response rates in surveys of participants)
that make it difficult to project from their results. For example, a
study of one program reported that 75 percent of respondents said that
they got a job that paid higher wages, and 55 percent reported
obtaining better quality day care for their children as a result of
securing a car through the program. The officials operating this LICO
program noted that participants found jobs (and kept them longer) and
improved their quality of life. However, researchers obtained responses
from 38 percent of participants in the program, which is too low of a
response rate to apply the results to all of the program's
participants. LICO program officials also noted that their programs'
designs were different than the YouthBuild USA proposal, which could
also limit the applicability of the studies' outcomes. For example,
most LICO programs we reviewed require participants to obtain a loan to
purchase the car, while YouthBuild USA proposes to give cars to
participants for a one-time fee of $450. LICO program officials believe
that the loan aspect of their programs requires participants to devote
more resources and effort toward obtaining a car and, as a consequence,
participants become more invested in achieving the goals of the
programs. LICO program officials also noted that their programs
provided participants additional support, such as financial literacy
training and arrangements for covering car repair costs, that is not
available under YouthBuild's proposed LICO program.
We make no recommendations in this report. We provided a draft of this
report to GSA for its review and comment. GSA found the report to be
accurate as it pertained to the description of the GSA Fleet program
but expressed concerns with the potential use of its Fleet for a car
donation program.
Background:
GSA purchases about 35,000 to 40,000 vehicles annually for its Fleet
program and manages an inventory of almost 200,000 vehicles, including
sedans, passenger vans, trucks (light, medium, and heavy), buses,
ambulances, alternative fuel vehicles, and limited special purpose
vehicles. GSA then leases these vehicles to 75 participating federal
agencies[Footnote 1] in the United States, Europe, and Puerto
Rico.[Footnote 2] As part of its leasing arrangement with these
agencies, GSA provides maintenance, repairs, fuel, and management of
accident claims and gets reimbursed for these costs by the
participating agencies.[Footnote 3] As part of a regular replacement
schedule, GSA sells older vehicles in its fleet. The agency uses a
nationwide network of commercial auction firms to dispose of and sell
about 35,000 to 40,000 of its used vehicles annually. Federal agencies
may dispose of property, such as GSA's vehicles, only in the manner
authorized by statute. Specifically, GSA auctions vehicles from the
Fleet program under the "exchange/sale" authority contained in the
Federal Property and Administrative Services Act (Federal Property
Act).[Footnote 4] Under this authority, an executive agency may acquire
personal property by exchanging or selling similar items and applying
the exchange allowance or proceeds of sale, in whole or in part
payment, for the property acquired.[Footnote 5] GSA uses the sales
proceeds from these auctions to help purchase new vehicles.[Footnote 6]
Figure 1 illustrates GSA's process for leasing and subsequently
auctioning vehicles.
Figure 1: GSA Leasing and Auction Process:
[See PDF for image]
Source: GAO: Art Explosion (images):
[End of figure]
Welfare reform experts contend that transportation is an important
element in assisting former welfare recipients with finding
employment.[Footnote 7] However, they also contend that public
transportation is not always convenient or accessible and, for some
families receiving assistance, driving is the best option. To address
this issue, several communities started LICO programs as highly
individualized initiatives designed to meet local transportation needs.
In 2002, the National Economic Development and Law Center documented at
least 60 LICO programs across the country serving welfare recipients
and the working poor by helping with the high costs associated with car
ownership, including maintenance, repairs, and insurance.[Footnote 8]
Typically, these programs rely on older cars received through donations
from individuals. They employ a number of strategies that include
making affordable and reliable used vehicles directly available to
customers or providing low-cost loans to enable individuals to buy
vehicles. Today, there are over 160 documented programs across the
country serving the car ownership needs of low-income individuals.
YouthBuild USA, which to date has not operated its own LICO program,
has proposed a Rural Initiative LICO program that would rely on 3-to 4-
year-old vehicles donated by GSA to provide affordable and reliable
transportation for rural youth. YouthBuild USA is a national nonprofit
organization that provides staff training and technical assistance to
the nationwide network of almost 200 local Youthbuild
programs.[Footnote 9] The local programs serve youth between the ages
of 16 and 24 and focus primarily on providing training in the building
trades. YouthBuild USA is proposing to obtain donated vehicles directly
from GSA Fleet and provide these vehicles to eligible youth so that
they can continue in the job training program or have reliable
transportation to work sites or college after they have graduated from
the program. Under the proposal, YouthBuild USA will identify eligible
rural Youthbuild programs and youth at these sites who would benefit
from a donated vehicle. The program would have several requirements for
participants, including possession of a valid driver's license,
eligibility for insurance, good attendance in the Youthbuild program,
and successful completion of a 6-week car ownership course. According
to program officials, YouthBuild USA would hold the title of the car
for 3 years, during which the participant would have to demonstrate a
good track record for preventative maintenance in order to fully own
the vehicle. Rural Youthbuild sites participating in the program would
have to demonstrate financial stability and the capacity to administer
and provide project oversight on the local level. Figure 2 presents a
diagram of the proposed YouthBuild USA Rural Initiative LICO program.
Figure 2: YouthBuild USA's Proposed Rural Initiative LICO Program:
[See PDF for image]
Source: GAO; YouthBuild USA (logo); Art Explosion (images)
[End of figure]
GSA Fleet Would Face Reduced Revenues and Need Legislative Authority to
Donate Cars:
If GSA were required to donate 1 to 5 percent of its compact sedans to
YouthBuild USA (112 to 559 cars), its annual sales revenue would be
reduced by an estimated $600,000 to $3 million. GSA Fleet, which
manages the agency's program, receives no direct appropriations and
depends on the sale of these vehicles to sustain its operations. GSA
does not currently donate Fleet vehicles. Furthermore, it would need
new statutory authority to be able to donate them directly to
YouthBuild USA because this would deviate from the existing process for
disposing of excess federal property. If GSA were required to donate
cars directly to YouthBuild USA, it would seek an appropriation to
recover the reduction in revenues this would cause and consider
increasing its leasing rates to federal agencies. However, GSA would
need additional new statutory authority to allow it to increase its
leasing rates for the purpose of recovering costs associated with
donating cars.
GSA Faces Reductions in Revenues from Donating Cars It Would Normally
Auction:
GSA would face reduced sales revenues of an estimated $600,000 to $3
million per year if it donated 1 to 5 percent of its used compact
sedans from its Fleet program (112 to 559 cars) to YouthBuild USA's
proposed Rural Initiative LICO program rather than sell these cars
through selected auction houses around the country. From fiscal year
2002 through fiscal year 2006 (as of August 2006), GSA, on average,
auctioned 11,171 compact sedans each year, with a mean sales price of
$5,511. GSA officials indicated that they base their decision to sell
their used cars on a combination of factors intended to maximize their
revenues. For example, they look at the expected sales proceeds of the
vehicle based on its age and mileage to determine at what point they
will get the maximum value for selling their used cars. They currently
use the following age and mileage guidelines for selling their used
cars:
* 3 years old and 36,000 or more miles, or:
* 4 years old and any miles, or:
* any age and 60,000 or more miles.
In addition, GSA tracks the resale market to determine the high and low
points of the market to help decide when to sell and what types of
vehicles to sell. Finally, they look at events that could affect the
used car market. For example, Hurricane Katrina increased the demand
for used vehicles in parts of the country that were not affected by the
hurricane.
If GSA donated to YouthBuild USA 1 percent of the compact sedans it
normally sells at auctions, this would be about 112 cars with a total
reduction in estimated sales revenues of about $600,000. If GSA donated
5 percent of the compact sedans it normally auctions, this would be
about 559 cars with a total reduction in estimated sales revenues of
about $3 million. Figure 3 shows the range of reduction in sales
revenue from GSA donating 1 to 5 percent of its compact sedans to
YouthBuild USA (112 to 559 cars).
Figure 3: Estimated Average Annual Reduction in Sales Revenue to GSA
Fleet from Donating Compact Sedans Normally Sold at Auction:
[See PDF for image]
Source: GAO analysis of GSA data:
[End of figure]
GSA Fleet, which manages the agency's program, does not receive direct
appropriations from Congress; therefore, GSA officials indicated that
GSA Fleet would need to replace the reduction in sales revenues from
donating cars in order to continue to sustain its operations.
Currently, to support its Fleet operations, GSA relies on the proceeds
of its auction of used vehicles and the income it receives from the
rates it charges agencies that lease vehicles from it. According to GSA
officials, in setting its leasing rates, it is allowed to include an
increment to these rates to cover inflation on its current inventory of
vehicles, as well as to cover the estimated replacement cost of these
vehicles to meet the demand of agencies that lease from the Fleet
program. This increment is known as replacement cost pricing. GSA
officials indicated that a revolving fund sustains the Fleet program,
with the revenues it receives from auctioning and from leasing
vehicles, offsetting the expenditures for operating the entire fleet of
vehicles.
GSA Would Need Statutory Authority to Donate Vehicles Directly to
YouthBuild USA:
In order for GSA to donate cars from its Fleet program directly to
YouthBuild USA, it would need new statutory authority to deviate from
the existing process for disposing of surplus federal
property.[Footnote 10] GSA Fleet does not participate in this process.
Specifically, under the process for disposing of surplus federal
property, federal agencies must determine if any property under their
control is excess, or no longer needed, within the agency. If this is
the case, they must then report this to GSA, which first determines if
any other federal agency needs the property. If no other agency needs
it, GSA declares the property to be "surplus" and can dispose of it in
a number of ways, such as by selling it or destroying it. GSA also has
authority to donate this property but may not do so directly to
specific private organizations, such as YouthBuild USA. Instead, it
must donate the property through state agencies, which, in turn, donate
it to public agencies or certain nonprofit educational or public health
institutions or organizations.
According to GSA officials, if they were given the statutory authority
explicitly allowing them to donate vehicles from their Fleet program to
YouthBuild USA, they would likely first seek appropriations to the
General Supply Fund to make up for the reductions in revenues
associated with donating the vehicles.[Footnote 11] In addition, they
would consider increasing the rates they charge federal agencies to
lease vehicles, in order to recover this reduction in revenues.
However, GSA currently lacks authority to pass on the costs of
donations to its client agencies. Specifically, the Federal Property
Act specifies how GSA is to set prices to recover the costs of
operating the fleet. The pricing formula (through which GSA sets its
leasing rates) specifies that prices should cover the costs of
operating the fleet and may include an increment for the cost of
replacing fleet vehicles and related equipment.[Footnote 12] Because
the costs associated with donations of fleet vehicles would not be
costs of operating or replacing the fleet and related equipment,
statutory authority would be needed in order to increase the rates GSA
charges its client agencies to recover the costs of donating cars to
YouthBuild USA.
GSA officials indicated there are different ways they might consider
raising leasing rates if given authority to do so but also expressed
concerns about the effect such an increase might ultimately have on the
viability of the Fleet program. For example, GSA could raise its rates
only for those agencies that lease compact sedans; this would result in
a 1 percent increase in order to recover the reduction of $600,000 in
sales revenue. To recover the reductions from donating 5 percent of its
compact sedans ($3 million in sales revenue), GSA might raise its
leasing rates by about 5 percent. Another option GSA could pursue would
be to raise its rates across all agencies that lease vehicles from it,
regardless of car type. In this case, all agencies that lease vehicles
from GSA Fleet (not just those leasing compact sedans) would subsidize
the vehicle donations.
GSA officials indicated that if the agency raised its rates too high,
this could affect the economic viability of the Fleet program. Nothing
requires federal agencies to lease vehicles from GSA; they can lease
from private companies if they choose to do so. GSA officials told us
that the agency is currently less expensive than the private sector in
terms of leasing rates. GSA officials indicated that, while raising the
rate GSA charges to lease vehicles in order to recover the reduced
sales revenue from donating 1 to 5 percent of its compact sedans to
YouthBuild USA would probably not cause the federal agencies to stop
leasing from GSA, the officials are more concerned that donating
vehicles would inspire other nonprofit organizations to seek donations
from GSA Fleet. According to GSA officials, they have received such
requests in the past. If GSA were required to donate a greater
percentage of its Fleet vehicles to nonprofit organizations, then GSA's
leasing rates could eventually become higher than its competitors in
the private sector and eventually drive GSA out of the leasing business.
Another option GSA officials cited does not require a legislative
change. Specifically, GSA officials indicated that it could decrease
the amount of funds it uses to buy new cars each year. Because GSA
would have less sales revenue due to donating some of the cars it
normally would sell, GSA would have less funds to buy new cars.
According to GSA officials, to compensate for the purchase of fewer new
cars, GSA would keep its cars in the Fleet program longer than the
current 3-to 5-year time period. Furthermore, because these cars would
be older than GSA's current fleet, they would require more maintenance,
which would result in higher maintenance costs. Due to the prospective
nature of a donation program, GSA officials indicated that they did not
have sufficient information to give a precise estimate of the increased
maintenance costs GSA would incur. Finally, GSA officials indicated
that keeping cars longer might mean more downtime for some of these
cars, which might also result in a reduction of revenues from leasing.
Available Research Suggests That Car Access Leads to Jobs and Other
Benefits:
Taken as a whole, the seven studies we reviewed consistently indicated
that owning a car or having access to one increases the likelihood that
low-income individuals (such as rural Youthbuild participants) get a
job (see app. II for more information on each of the studies we
reviewed).[Footnote 13] According to recent research, this is because a
car likely allows a person to search for a job over a wider geographic
area and to work during hours when public transit is not available.
While each of the studies had some methodological limitations, they all
produced fairly consistent results on the effects of car access on
employment and hours worked. Differences between the populations in
these studies and rural Youthbuild participants did not allow us to use
the studies' results to identify the degree to which participants in
YouthBuild USA's LICO program would benefit from having a car.
Studies Reported Employment Benefits from Car Access:
Taken as a whole, the seven studies we examined consistently indicated
that owning a car or having access to one increased the likelihood that
someone would get a job. For example, a 2005 study surveyed about 2,000
urban and rural welfare recipients in Tennessee starting in January
2001.[Footnote 14] Researchers interviewed the same people every 6
months and asked questions about car access and employment. The study
indicated that individuals with access to a car increased their chance
of finding a job and leaving welfare by about 59 percent. Another study
obtained data from a survey of a random sample of Alameda County,
California, residents who received welfare benefits in fiscal years
1992 to 1993.[Footnote 15] Researchers surveyed these same individuals
again in fiscal years 1994 and 1995 and reported that private
automobiles were more effective than increased public transit in moving
participants from welfare to work. Another study estimated that owning
a car increased the likelihood of being employed by about 20
percent.[Footnote 16]
Three of the seven studies reported that car access led to more work
hours (the other four studies did not address this issue). For example,
one study examined the effects of car access on weekly hours worked and
estimated that access to a car increased the number of hours worked by
nearly 9 hours per week.[Footnote 17] Two other studies, focusing on
car ownership, estimated increases of 5 to 11 hours per week in the
number of hours those they studied worked.[Footnote 18]
The literature gives several explanations for these results. For
example, a car likely allows a person to search for a job over a wider
geographic area, expanding the number of employment opportunities and
the chances he or she will find a job. Also, a car likely allows a
person to work hours that are not traditionally supported by public
transit, increasing not only the hours he or she can work, but the job
openings that may be considered.[Footnote 19]
Studies Could Not Be Used to Estimate How Much Youthbuild Participants
Would Benefit from Having a Car:
Because there are several major differences between the individuals
that the researchers studied and those in the rural Youthbuild
population, we could not extrapolate from this research to identify the
degree to which the rural YouthBuild USA population would benefit from
having a car. For example, the studies generally reviewed welfare
recipients who tended to be older and better educated than the rural
Youthbuild population. Research has shown that older, more educated
individuals are more likely to find employment (with or without a car)
than younger and less educated individuals.
In addition, four of the studies we reviewed were based on data from
mainly urban populations, while two others used national data without
controlling for urban/rural locations. Controlling for differences such
as urban and rural populations would be necessary to extrapolate from
these studies for the Youthbuild population because of various
differences between the two groups. For example, we have reported in
the past that rural residents generally have fewer public
transportation options and live in less densely populated areas than
urban residents, making them more dependent on car access or
ownership.[Footnote 20] Consequently, the effect of car access in rural
areas may be more difficult to discern and different than in urban
areas because rural residents have fewer transportation options from
which to choose. Also, rural unemployment rates are higher on average
than urban areas; as a result, the effect of increasing car access on
new employment may be substantially different than in urban areas.
Consequently, the research that did not distinguish rural and urban
populations did not allow us to gauge whether the rural YouthBuild USA
population would experience greater, equal, or lesser benefits than the
studies reported.
LICO Programs Report Positive Results, but Limitations Restrict
Projecting Results to YouthBuild USA's Program:
Six studies of LICO programs, as well as the managers of these
programs, reported that participants were able to get a job or retain
their current jobs, received higher wages, and spent more time with
their families as a result of getting a car through the LICO programs.
However, determining the extent that Youthbuild participants would
benefit from such a program is not possible because of limitations in
the methodologies of these studies, differences between individuals
served by these programs compared with YouthBuild USA, and differences
in the designs of the existing programs and the YouthBuild USA
proposal. For example, most of the studies had low response rates from
the participants, which prevented us from projecting their results to
all participants. In addition, in terms of program design, the LICO
programs studied are largely loan programs that provide additional
tools to aid participants, such as financial literacy training, whereas
YouthBuild USA proposes to donate cars and does not envision additional
support services. As a result, managers of the existing LICO programs
believed their participants' outcomes may be different than YouthBuild
USA's because the loan commitment, the financial literacy training, and
the low-risk profile of their participants altogether increase the
likelihood of success.
Studies and Experiences of Six LICO Programs Report Positive Results
for Participants:
Six LICO programs that had been subject to an external formal
evaluation study and officials of these programs reported that
participants found jobs, retained their current ones, or increased
their income as a result of obtaining a car through the program. For
example, one of the studies reported that 60 percent of the
participants found a job after getting the car, and another study
reported that 97 percent of the participants surveyed attributed their
ability to find a job or retain their current one to the car they
obtained through the program. With respect to increasing participant
income, all six of the studies reported gains in earnings, and four of
the six studies reported that from 72 to 80 percent of the LICO program
participants secured or reported receiving higher wages. These studies
reported that participants believed that their increased wages were
attributable to the vehicle they received from the LICO program.
Another study reported that the participants experienced annual average
income increases from nearly $5,500 to $7,900 after getting a car.
Additionally, officials of the LICO programs told us their participants
reported that having a dependable and affordable car helped them find
or retain their jobs, helped them receive higher wages and work more
hours, or find better jobs.
The LICO program studies and the LICO officials reported that the
program participants benefited from an improved quality of life as a
result of obtaining a car through the LICO programs. According to the
studies, participants reported that having a car enabled them to
improve their education and training, find better quality day care for
their children, and spend more time with their families. One official
of a LICO program added that participants stated that having a car was
a life transforming event, increasing their financial stability and
allowing them to obtain better housing or become homeowners. Other LICO
program officials stated that participants reported that the car had a
positive effect on their self-esteem or gave them hope for the future.
LICO program studies and officials stated that their participants
reported that the car they got through the program allowed them to shop
at discount centers rather than nearby more expensive convenience
stores.
Limitations in Studies Do Not Allow for Outcomes to Be Projected to
YouthBuild USA's Proposed LICO Program:
Limitations in the methodologies in the six studies, such as low survey
response rates, restrict applying their employment outcomes to the
entire populations of the LICO programs studied or to participants in
YouthBuild USA's proposed LICO program. For example, three studies
reported positive outcomes for participants, but these outcomes were
based on low response rates from LICO program participants.[Footnote
21] Specifically, these studies reported the following:
* A study of one LICO program that helps its participants obtain low-
interest loans to purchase a used car reported that, among the
participants surveyed, 75 percent said that they found a job that paid
higher wages, and 55 percent reported obtaining better quality day care
for their children as a result of obtaining a car through the program.
Officials of this LICO program noted that participants found jobs (and
kept them longer) and improved their quality of life as a result of
obtaining a car from the LICO program. However, while the study of this
program attempted to contact the 90 participants, it only received
responses from 34 participants (38 percent). This raises the
possibility that the 56 nonrespondents, nearly two-thirds of those in
the program, may have had different experiences from the 34 who
responded.
* Another study of a LICO program that relied on data on participants'
earnings and employment reported that 63 percent retained their jobs
for 12 months after obtaining a car loan. However, data were not
available for all participants for the time periods of interest to the
researchers, and the study had to rely on samples of the 511 for whom
data were available. For example, there were only data on 131 program
participants that went back a full year before their loans were issued,
which raises the possibility that those for whom data was not available
had different outcomes from those for whom data was available.
* Another study of a LICO loan program reported that 339 out of 353
participants surveyed experienced an improved quality of life in that
they were able to spend more time with their families. However, these
353 respondents were drawn from a pool of 2,200 that the study authors
created because they anticipated very high nonresponse rates, which
raises the possibility that the participants surveyed experienced very
different outcomes from those that were not surveyed.
Differences in Design and Participants the Programs Serve Also Limit
Application of Study Results to YouthBuild USA's Proposed Program:
Officials of the LICO programs studied also told us that differences in
program design and population served to restrict the extent to which
their outcomes could be applied to YouthBuild USA's proposed LICO
program. One of the major differences between the design of the LICO
programs studied and YouthBuild USA's proposal is that most LICO
programs we consulted require participants to obtain a loan to purchase
the car, while YouthBuild USA proposes to give cars to participants for
a one-time fee of $450. Four of these six programs require participants
to obtain a low-interest loan to purchase a car, while YouthBuild USA
proposes donating cars to participants. The other two programs obtain
used cars, repair them (if necessary), and then sell them to the
participants at the cost of repairs or at a very low cost. One of these
two programs may also assist the participants in obtaining a
loan,[Footnote 22] and the other requires the participants to make
payments for the purchase of the car. In order to qualify for the
loans, the programs require participants to have adequate income to
support car payments and meet creditworthiness standards. Once they
obtain the car, participants must make the loan payments for the term
of the loan. Because of these requirements, as well as participants'
greater reliance on their own resources, officials of these LICO
programs told us that they believe that their participants have greater
incentives toward ensuring that they realize the benefits of car
ownership than do individuals who receive a donated vehicle.
Additionally, they believe that their participants become more invested
in getting jobs and achieving other results that are consistent with
the programs' goals than would participants in a car donation program
such as what YouthBuild USA proposes.
These LICO programs provide additional support to their participants,
such as financial literacy training and car repair assistance, which
might also limit the application of the studies' results because
YouthBuild USA's proposal does not presently envision providing such
services. Officials of these LICO programs stated that, before allowing
participants to obtain a loan, it was important for them to understand
how to budget their money and deal with credit responsibly. They
indicated that the financial literacy training and subsequent
counseling was an essential component of their programs and tied to the
success of participants fulfilling their obligations on their loans, as
well as getting or keeping their jobs.
Furthermore, most of the LICO programs implemented various arrangements
for costs of repairs as part of their programs. For example, two
programs developed plans to enable participants to cover the costs of
minor repairs by establishing accounts to which participants make small
monthly deposits, which they later may use for repair costs. Also, one
of these programs required participants to contribute a one-time fee of
$250 to a pool that could later be used to cover the costs of major
repairs above $700. Additionally, an official of one LICO program told
us that it addressed the issue of budgeting for repair costs by
securing favorable rates in advance at specific auto shops and
requiring participants to go to these specific vendors for repairs.
Finally, similar to the studies we reviewed related to car access in
general, the differences between the populations served by these LICO
programs and those YouthBuild USA proposes to serve also might limit
the extent to which the outcomes of these LICO programs could be
applied to YouthBuild USA's proposal. Our reviews of the participants'
profiles of the LICO programs studied found that more than half of the
participants were single women in their mid-20s to 30s, with children,
and with some education beyond high school. In contrast, participants
in YouthBuild USA's LICO program would primarily be men between the
ages of 16 and 24 who would have not completed high school upon
entering the Youthbuild program. Officials of the LICO programs
believed that the demographics of a LICO program can influence the
programs' outcomes. For example, these officials indicated that
participants who have responsibilities, such as those with children,
are more likely to have a lower risk profile and be motivated toward
getting a job and reaching other goals consistent with those of the
LICO programs.
Agency Comments and Our Evaluation:
We provided GSA a draft of this report for its review and comment. In a
letter from the Assistant Commissioner for the Office of Vehicle
Acquisition and Leasing Services (see app. III), GSA described our
report as accurate as it pertains to our description of the GSA Fleet
program. GSA expressed concerns with the potential use of its Fleet for
a car donation program--namely, that the revenue lost would require
direct appropriations from the Congress or cost increases to its
customer agencies in the form of higher lease rates, potentially
affecting the viability of the GSA Fleet program. Additionally, GSA
stated a concern that creating a donation program to YouthBuild USA
could lead other organizations to seek donated vehicles as well.
GSA also stated that the report does not clearly address the question
as to why YouthBuild USA should receive donated GSA vehicles over other
worthy charitable organizations. In our review, we focused on the
effect of donating 1 to 5 percent of selected GSA cars on GSA's fleet
vehicle sales operations and the potential benefits to rural Youthbuild
participants from such donations. We did not, however, evaluate the
merits of providing vehicles to other charitable organizations.
GSA officials also provided a number of technical clarifications to our
report, which we have incorporated, as appropriate.
We are sending copies of this report to the Chairman of the
Subcommittee on Financial Institutions and Consumer Credit of the House
Committee on Financial Services and other interested congressional
committees. We also are sending copies to the Administrator of GSA. We
also will make copies available to others upon request. In addition,
the report will be available at no charge on the GAO Web site at h
[Hyperlink, http://www.gao.gov.]
If you or your staff have any questions regarding this report, please
contact me at (202) 512-8678 or s [Hyperlink, shearw@gao.gov]
[Hyperlink, shearw@gao.gov] hearw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
the report are listed in appendix IV.
Sincerely yours,
[Signed by]
William B. Shear:
Director, Financial Markets:
and Community Investment:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of this report were to (1) assess the effect of donating
1 to 5 percent of selected General Services Administration (GSA) used
cars on GSA's fleet vehicle sales operations, (2) describe what studies
have shown with respect to the benefits that car ownership or access
may hold for low-income individuals, and (3) describe what studies of
selected Low Income Car Ownership (LICO) programs and experiences of
these programs have shown with respect to the benefits of participant
car ownership.
To assess the effect on GSA's fleet vehicle sales operations from
donating vehicles, we obtained data from GSA on the total number of
compact sedans its Fleet program sold and the average sales proceeds
for these vehicles for fiscal years 2001 through 2005 and for 2006 (up
to August 2006). We focused our analysis on GSA compact sedans sales
because this is the type of vehicle YouthBuild USA officials told us
that they would primarily need for their proposed Rural Initiative LICO
program. We used GSA's data from fiscal years 2002 through 2006 to
calculate the average opportunity cost--the reduction in revenue for
each compact sedan GSA would donate--and the total reduction in sales
revenue GSA would face by donating 1 to 5 percent of its compact
sedans.[Footnote 23] To determine how much GSA might increase the rate
it charges federal agencies that lease compact sedans from it (in order
to recover the reduction in sales revenues from donating 1 to 5 percent
of its compact sedans), we obtained data from GSA on the number of
compact sedans it currently leases and revenues it receives from
leasing these vehicles. This data allowed us to calculate the amount
(percentages) GSA would need to increase the rate it charges federal
agencies to make up the reduction in sales revenues from donating 1 to
5 percent of its compact sedans. We obtained written descriptions on
GSA's computer systems and procedures for ensuring that the agency has
verified Fleet transactions. In addition, the agency provided us with a
written description of how GSA Fleet handles any discrepancies found in
the data in its system. Based on this information, we determined that
the data that GSA provided to us were sufficiently reliable for the
purposes of this report. In addition, we obtained information on the
options the agency might pursue to make up for the reduction in
revenues from interviews with GSA officials. To determine the legal
issues that would be involved in a car donation program, we reviewed
the legislation that establishes GSA's authority to operate the Fleet
program and for it to set prices to recover its program costs. We also
reviewed the legislation that established the General Supply Fund and
the purposes for which the fund can be used and discussed these and
related legal issues with officials from GSA's General Counsel.
To describe what studies have shown with respect to the benefits that
car ownership or access may hold for low-income individuals, we
conducted a literature search of relevant studies, reviewed a list of
studies from the Web site of the National Economic Development and Law
Center (NEDLC), and interviewed two individuals who had conducted
research on this issue. Based on these efforts, we identified a large
body of research on car access and employment. We limited our review to
seven studies that used more sophisticated economic models that
distinguished between car access and several other factors that could
affect the likelihood that an individual found a job, such as
education, age, and gender.[Footnote 24] Our review of these seven
studies included an analysis of study methodologies, the individuals
that were studied, study results with respect to car access and
employment, and study limitations. In order to address the issue of the
extent to which the results of these studies could be applied to
YouthBuild USA's proposed LICO program, we compared the individuals
reviewed in these studies with rural Youthbuild participants. For a
more detailed summary of our review of these seven studies, see
appendix II.
To determine what studies of selected LICO programs have shown with
respect to the benefits of participants' car ownership, we spoke with
experts in the field of LICO programs about the nature and extent of
existing studies of LICO programs. These experts identified several
LICO programs that had been subject to an independent evaluation of
their outcomes. Additionally, to identify other LICO programs that had
been subject to an independent evaluation and were located in rural
areas, we reviewed about 140 LICO programs listed on the NEDLC Internet
Web site[Footnote 25] and contacted those LICO programs on the NEDLC
listing that appeared to be located in rural and mixed rural-urban
areas.[Footnote 26] From our discussions with the experts and contacts
with the LICO programs, we identified and selected the following six
LICO programs that had been subject to an independent evaluation:
* Good Wheels, Augusta, Maine:
* Good News Garage, Burlington, Vermont:
* West CAP JumpStart, Glenwood City, Wisconsin:
* New Leaf Services, Inc., Decatur, Georgia[Footnote 27]
* Ways to Work, Inc., Milwaukee, Wisconsin:
* Working Wheels, Seattle, Washington:
Three of these programs were located in rural areas, two in urban
areas, and one in a mixed rural-urban area. Four of the six LICO
programs were loan programs, one was a car-donation and car-sales
program, and the other was a car sales program. We obtained and
analyzed copies of the studies for the six LICO programs in order to
identify the reported outcomes and potential limitations with these
studies. Where possible, we reviewed information from the LICO program
Web sites to obtain information on how these programs operate, what
types of individuals they serve, and how many cars they provide to
their participants. We also interviewed LICO program officials about
their studies to gain a better understanding of the reported outcomes
and limitations with the studies. During these interviews, we also
obtained more background information about the LICO programs' designs,
populations served, and challenges the officials faced in running these
LICO programs. We also obtained the views of LICO program officials on
the extent to which they believe their programs' reported outcomes
could be applied to participants in YouthBuild USA's proposed LICO
program.
We conducted our work from May 2006 to November 2006 in San Francisco,
California, and Washington, D.C., in accordance with generally accepted
government auditing standards.
[This page is intentionally left blank]
[End of section]
Appendix II: Summary of Studies on the Effect of Car Access on
Employment:
Author/title: Gurley, Tami and Donald Bruce. "The Effects of Car Access
on Employment Outcomes for Welfare Recipients." Journal of Urban
Economics 58: 250-272 (2005); Purpose and scope: To assess how car
access affects employment outcomes (e.g., employment, weekly hours
worked, and hourly wages). Urban and rural welfare recipients, as of
January 2001, from Tennessee; Data: Researchers from the state of
Tennessee and the University of Tennessee surveyed a random sample of
welfare recipients (as of January 2001) in two waves. During the first
wave, they sampled 1,935 welfare recipients, and during the fourth wave
they sampled 1,919 of these individuals. The researchers achieved a
response rate of over 70 percent. The first wave respondents had the
following characteristics: they were, on average, 29 years old; had a
high school education; and had, on average, 2.28 children under 18
living in household. In addition, 34 percent lived in rural counties,
and 10 percent were married. Principal findings: Car access generally
increases the probability of welfare recipients getting a job, working
more hours, getting a higher paying job, and leaving welfare;
Limitations: Car access was measured by whether anyone in the household
had a car, which could somewhat overstate a person's ability to use the
car for work. There may be some bias in the results because the study
was based on surveys done over two time periods, and some of the
welfare recipients who were part of the initial survey did not
participate in the second survey. Data only from one state--Tennessee--
which could have different demographics and welfare systems than other
states; Empirical method(s) used: The researchers used multinomial
logits[Footnote 28] and "Heckman selection" regressions[Footnote 29]
for employment and program participation models. Selection models were
used to estimate the effect of car access on hours and wages. Panel
data were used to mitigate simultaneity concerns--that is, the
possibility that car access and employment outcomes might be determined
at the same time and depend on each other. The study accounted for
differences between urban and rural welfare recipients and areas.
Author/title: Raphael, Steven and Lorien Rice. "Car Ownership,
Employment, and Earnings." Journal of Urban Economics 52: 109-130
(2002); Purpose and scope: To assess whether the positive relationship
of car ownership on employment outcomes (e.g., employment, weekly hours
worked, and hourly wages) observed in past research are causal--that
is, whether owning a car was the reason for the positive employment
benefits. Nationally representative sample of the U.S. population from
ages 16 to 65 with no work-preventing disabilities; Data: Data on
employment, car ownership, and basic demographics were from the 1992
and 1993 "Surveys of Income and Program Participation," Wave 4, which
is a U.S. Bureau of the Census survey. Authors restricted sample to
civilians 16-65 years of age with no work-preventing disabilities. The
wage sample was restricted to those with complete information. As a
proxy for car ownership, data on state gasoline taxes were obtained
from the American Petroleum Institute and data on state-level auto
insurance premiums were obtained from the National Association of
Insurance Commissioners. The study was based on a maximum sample size
of 47,244. The respondents had the following characteristics: 52
percent were female; they were, on average, 36 years old; 55 percent
were married; and they averaged more than a high school education.
Principal findings: Owning a car increases the likelihood that someone
finds a job and works more hours. However, owning a car leads to lower
wages. Researchers found similar results for individuals with access to
a car; Limitations: The study only observed the employment outcomes for
those individuals who work, which could introduce some bias because the
characteristics of those who work could be different from that of those
who do not. The study was based on a national sample but did not
control for individuals in urban and rural areas. This could partially
explain the negative wage results. The researchers used data from the
early 1990s, prior to when welfare reform was implemented, which has
stricter requirements for participants to find a job than under the old
welfare system. Thus, the effect of owning a car on current welfare
participants may be greater because they have stricter requirements
(and greater incentives) to find a job; Empirical method(s) used: The
researchers used a two-stage least squares model[Footnote 30] to
estimate car ownership in the first stage and employment outcomes
estimated in the second stage.
Author/title: Blumenburg, Evelyn. "On the Way to Work: Welfare
Participants and Barriers to Employment." Economic Development
Quarterly 16 (4): 314-325 (2002); Purpose and scope: To assess the
effects of employment barriers, including transportation, on the
employment levels of welfare participants. Welfare recipients, as of
1996, from California; Data: Data are from a 1996 job-readiness survey
of California welfare participants conducted by the California
Department of Social Services in May, June, and July 1996. The sample
size of 1,319 represents a 68 percent response rate (total sample of
1,622). The respondents had the following characteristics: 80 percent
were female; 50 percent had less than a high school diploma; 27 percent
relied on public transportation, and 48 percent had two or more young
children. Principal findings: Reliance on public transportation (rather
than car access[Footnote 32] ) is one of the barriers welfare
recipients face in finding a job. In addition, the more barriers
present in the lives of welfare participants, the harder it is to find
a job; Limitations: The study did not control for factors such as age,
which is a factor in whether someone is employed. The study did not
attempt to address the potential simultaneity of employment and car
decisions. That is, the possibility that the car and employment
decisions might be made at the same time. As in the prior study
(Raphael and Rice), researchers used data from the early 1990s prior to
welfare reform. Data only from one state--California--which could have
different demographics and welfare systems than other states; Empirical
method(s) used: The researcher used a logit model[Footnote 33] to
assess the probability of employment, controlling for barriers to
employment, such as transportation and child care. A transportation
barrier to employment was defined as typically traveling by public
transit.
Author/title: Cervero, Robert, Onésimo Sandoval, and John Landis.
"Transportation as a Stimulus of Welfare-to-Work-Private Versus Public
Mobility." Journal of Planning Education and Research 22: 50-63 (2002);
Purpose and scope: To assess the relative importance of private and
public transportation in obtaining employment. Alameda County,
California, residents who received welfare benefits in fiscal years
1992 and 1993; Data: Data are from a survey of a random sample of
Alameda County, California, residents who received welfare benefits in
fiscal years 1992 and 1993. Survey data were compiled again for the
same individuals in 1994-95. The study had 466 respondents with
complete information (response rates not reported based on initial
random sample). Respondents' characteristics included: 99 percent were
women; they were 36 years old, on average; 48 percent were married; the
average highest grade completed was 9.5; 54 percent spoke English; and,
they had an average of 2.6 children younger than age 20 living at home.
Principal findings: Car ownership and educational attainment
significantly increased the probability that the individual moved from
welfare to work. Public transportation (compared with car access) did
not have a significant effect on helping individuals move from welfare
to work; Limitations: The study was based on a small number of
individuals (66) who found employment. The study further separated
individuals into employed on welfare, and employed off welfare
categories; thus, the sample sizes in the most relevant categories were
quite small. As in the prior two studies, researchers used data from
the early 1990s prior to welfare reform. Data only from one state--
California--which could have different demographics and welfare systems
than other states; Empirical method(s) used: The researchers used a
multinomial logit model[Footnote 34] to predict the probability that
someone found a job and left welfare as a function of car ownership,
transit service quality, regional job accessibility by different
transportation modes, human-capital factors, and various control
variables, such as age and education.
Author/title: Ong, Paul. "Work and Car Ownership Among Welfare
Recipients." Social Work Research 2 (4) : 255-262 (1996); Purpose and
scope: To assess the role of car ownership in facilitating employment.
Recipients of public assistance in urban California; Data: The data are
from a survey sponsored by California's Department of Social Services.
A total of 2,214 interviews were completed, but only 1,112 met the
criteria of healthy, adult aged, female-headed households (White,
Latino, or African-American), that were receiving welfare at the time
of the study. Information on car ownership is based on the following
question: "Do you own a reliable car?" Over a quarter (27 percent) of
the sample responded positively to; this question. Principal findings:
the probability of finding a job and working more hours was higher for
those individuals with a car. There was no effect on wages after
controlling for demographic variables such as age and education.
Both age and education had positive effects on employment outcomes;
Limitations: The survey was administered under the Aid to Families with
Dependent Children program, which did not have as many employment
incentives as the current Temporary Assistance for Needy Families
program. Selection models were not used for hour and wage regressions
to account for the fact that these outcomes are only observed for those
gaining employment. The study did not address the potential
simultaneity of employment and car decisions. That is, the car and
employment decisions might be made at the same time. Data only from one
state--California--which could have different demographics and welfare
systems than other states; Empirical method(s) used: The researcher
used a multinomial logit model[Footnote 35] to assess the effect of
employment and welfare participation, based on car ownership and other
variables.
Author/title: Raphael, Steven and Michael Stoll. "Can Boosting Minority
Car-Ownership Rates Narrow Inter-Racial Employment Gaps?" Brookings-
Wharton Papers on Urban Affairs 99-145 (2001); Purpose and scope: To
assess whether boosting minority car-ownership rates would narrow inter-
racial employment rate differentials. The analysis first addresses
whether car effects are greater for more segregated groups and then
addresses whether these differences are more pronounced in more
decentralized locations. Nationally representative sample of the U.S.
population from ages 16 to 65 with no work-preventing disabilities;
Data: The data to address whether the car effect differs by race or
ethnicity are from 1992 and 1993 "Surveys of Income and Program
Participation," Wave 4, which is a U.S. Bureau of the Census survey.
Authors restricted sample to civilians 16-65 years of age, with no work-
preventing disabilities. Data for 242 U.S. Primary Metropolitan
Statistical Areas were from the 1990 5 percent Public Use Microdata
Sample. This data was used to address whether the car effects are
greater in more decentralized areas. Principal findings: Owning a car
has a positive effect on employment. The effects of car ownership on
unemployment are largest when individuals are more isolated from job
opportunities; Limitations: The study did not control for urban and
rural areas. As in some of the prior studies, this one used data from
the early 1990s prior to welfare reform and did not attempt to address
the potential simultaneity of employment and car decisions. Households
with four or more cars were eliminated from the sample because
ownership was not observable for the fourth or more car. This
represents 6 percent of the observations, and it is likely that these
households are disproportionately rural; Empirical method(s) used: The
researchers used a linear probability model[Footnote 36] to test
whether car ownership accounted for the observed differences in
employment between races and ethnicities.
Author/title: Holzer, Harry, Keith Ihlandfedlt, and David Sjoquist.
"Work, Search, and Travel Among White and Black Youth." Journal of
Urban Economics, 35: 320-345 (1994); Purpose and scope: To assess the
effects of the use of a car on employment, periods of unemployment, and
wages. Black and White youth; Data: The data are from the National
Longitudinal Survey Youth Cohort for 1981 and 1982 and the 1980 census
of population. Principal findings: Use of own car reduced periods of
unemployment by about 11 percent. Use of own car raised wages by about
12 percent; Limitations: As in some of the prior studies, this research
did not address simultaneity concerns. The authors assumed that the
unobserved factors that influence travel cost, unemployment, and wages
are not related. A selection model (that would account for the fact
that wages are only observed for those who are employed) was not used
to estimate wages; Empirical method(s) used: Regression equations were
used to examine the determinants of travel costs and the effects of
travel costs on job search, commute distance, the duration of
unemployment spells, and wages.
[End of table]
Source: GAO:
[End of section]
Appendix III: Comments from the General Services Administration:
[See PDF for image]
[End of image]
GSA Federal Acquisition Service:
Nov 28 2006:
Mr. William B. Shear:
Director, Financial Markets and: Community Investments:
U.S. Government Accountability Office: 441 G Street N.W.
Washington, DC 20548:
Dear Mr. Shear,
The General Services Administration (GSA) thanks you for the
opportunity to respond to the U. S. Government Accountability Office
(GAO) draft report entitled "GSA Fleet: Information on the Effect of
Donating Cars to YouthBuild USA and Potential Benefits to Rural
Youthbuild Participants" (GAO-07-153). While we found the report to be
accurate as it pertains to the GSA Fleet program, we do not concur with
the report results.
GSA Fleet is a non-mandatory source of leased vehicles and must offer
cost-effective services to minimize Government spending. Revenue lost
due to vehicle donations would have to be made up through direct
appropriations from Congress or the cost would have to be passed on to
our customer agencies in the form of higher lease rates. Not only would
other Federal agencies be forced to_ bear the cost of the donation
program, but the viability of the GSA Fleet program would be at risk.
In addition, the report does not clearly address the question as to why
Youthbuild USA should receive donated GSA vehicles over other worthy
charitable organizations. Furthermore, we are very concerned that the
donation of even a few vehicles to one organization will lead other
organizations to seek donated vehicles as well. The report does not
adequately address this possibility, and it does not address the
impacts of this at all.
We believe that the proper way to fund a vehicle donation program is
through direct appropriations where the true costs are clearly known
and visible to all.
Sincerely,
[Signed by]
Barney L. Brasseux:
Assistant Commissioner for:
Office of Vehicle Acquisition and Leasing Services:
U.S. General Services Administration:
2200 Crystal Drive:
Arlington,VA 20408-0003:
www. gsa.gov:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
William B. Shear, (202) 512-8678, or shearw@gao.gov:
Staff Acknowledgments: In addition to the individual named above, Bill
MacBlane, Assistant Director; Harold J. Brumm Jr; Martin H. De
Alteriis; Tami Gurley; Marc M. Molino; Elizabeth A. Olivarez; José R.
Peña; Diana Pietrowiak; David M. Pittman; Paul G. Thompson; and James
D. Vitarello made key contributions to this report.
(250294):
[End of section]
FOOTNOTES
[1] GSA refers to these agencies as "participating" because they are
not required to lease vehicles from GSA but choose to do so (rather
than, for example, leasing from the private sector).
[2] GSA's current authority to operate its Fleet program is specified
under the Federal Property Act, 40 U.S.C. § 602. Under this act, GSA
has broad authority to establish, maintain, and operate (including
servicing and storage) a fleet of motor vehicles for executive agencies
to use for the transportation of property and passengers.
[3] The Federal Property Act specifies how GSA is to set prices to
recover the costs of operating the fleet. GSA is to set prices "for
furnishing motor vehicles and related services . . . to recover, as far
as practicable, all costs of carrying out" the administration of the
fleet program. GSA also may include an increment for estimated
replacement costs of motor vehicles and related equipment and supplies.
[4] 40 U.S.C. § 503.
[5] If a federal agency's personal property is not disposed of under
the exchange/sale authority, then the agency may dispose of the
property only in accordance with other statutory requirements. The
general process for disposing of personal property is set forth in the
Federal Property Act. Under the act, federal agencies may dispose of
personal property only if (a) the property is not required to meet an
agency's needs or responsibilities ("excess property") and (b) GSA
determines the property is not required to meet the needs or
responsibilities of all federal agencies (i.e., "surplus property").
See 40 U.S.C. §§ 102, 541-549. Surplus property may be donated, but
only to state agencies pursuant to requirements in the act. 40 U.S.C. §
549.
[6] GSA has another internal organization, Property Management, which
operates the Federal Surplus Personal Property Donation Program.
According to GSA officials, because GSA Fleet's program is self-
sustaining and needs to auction its used cars to remain so, it does not
participate in this program. Under the surplus donation program,
certain nonfederal organizations, including selected nonprofit
educational and public health organizations, can obtain property from
the federal government, through state agencies, including vehicles that
GSA and many other federal agencies no longer need. The vehicles that
are donated as part of this program tend to be older than Fleet's usual
3 to 4 years.
[7] The 1996 welfare reform law, the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 Pub. L. No. 104-193 (1996),
established the Temporary Assistance to Needy Families (TANF) block
grant program, which, among other things, requires aid recipients to
participate in work or work-related programs.
[8] According to the National Economic Development and Law Center, it
facilitates and supports legal services and private lawyers to provide
legal assistance to the hundreds of organizations working at the local
level on community and economic development projects.
[9] Congress authorized the Youthbuild as the "Hope for Youth" program
on October 28, 1992, under the Housing and Community Development Act of
1992. The Department of Housing and Urban Development (HUD) manages the
federal Youthbuild program and awards funds as competitive grants to
nonprofit organizations to assist economically disadvantaged youth
between the ages of 16 to 24 to learn housing construction job skills
and to complete their high school education. One of the purposes of the
federal Youthbuild program is to "enable economically disadvantaged
young adults to obtain the education and employment skills necessary to
achieve self sufficiency." According to HUD officials, if a vehicle
donation program were properly managed and had appropriate controls in
place, providing a donated vehicle to these youth would likely be
consistent with the purposes of the Housing and Community Development
Act of 1992.
[10] The process for disposing of surplus federal property is set forth
in the Federal Property and Administrative Services Act of 1949. See 40
U.S.C. §§ 541-549.
[11] GSA's Fleet program is financed through GSA's revolving General
Supply Fund. The General Supply Fund is an intergovernmental revolving
fund used to finance the acquisition of goods and services for federal
agencies. It is managed by GSA's Federal Supply Service. The General
Services Administration Modernization Act, Pub. L. No. 109-313,
abolishes the General Supply Fund and the Information Technology Fund.
Effective December 5, 2006, capital assets and balances remaining in
the two funds are to be transferred to the new Acquisition Services
Fund. The legislation also provides for a new Federal Acquisition
Service to carry out functions related to the new Acquisition Services
Fund.
[12] 40 U.S.C. § 605(b).
[13] We identified a large body of work on car access and employment
that had produced similar results as our seven studies. We narrowed our
scope to the seven we reviewed because these studies used more
sophisticated statistical modeling techniques to control for the
effects of other factors that could affect the likelihood that an
individual found a job, such as education, age, and gender. We excluded
studies that were based largely on anecdotes, quantitative research
that did not control for other explanatory factors, and summaries of
existing research. See appendix II for a more detailed summary of the
studies we considered.
[14] Gurley and Bruce, "The Effects of Car Access on Employment
Outcomes for Welfare Recipients," Journal of Urban Economics 58: 250-
272 (2005).
[15] Cervero et al., "Transportation As a Stimulus of Welfare-to-Work-
Private Versus Public Mobility," Journal of Planning Education and
Research 22: 50-63 (2002).
[16] Raphael and Rice, "Car Ownership, Employment and Earnings,"
Journal of Urban Economics 52: 109-130 (2002).
[17] Gurley and Bruce, 250-272.
[18] Ong, Paul, "Work and Car Ownership Among Welfare Recipients,"
Social Work Research 2 (4): 255-262 (1996) and Raphael and Rice, 109-
130.
[19] Each of the seven studies we reviewed had methodological
limitations. However, collectively the studies have used varying
methodologies to address each of these limitations, leading to our
assessment that, taken as a whole, they indicate specific benefits from
car access. For more details on the limitations, see appendix II.
[20] GAO, Welfare Reform: Rural TANF Programs Have Developed Many
Strategies to Address Rural Challenges, GAO-04-921 (Washington, D.C.:
Sept. 10, 2004). This report found that many rural TANF recipients
cannot afford to own or operate a reliable private vehicle, and public
transportation is often not available.
[21] Low response rates in surveys may lead to estimates that cannot be
projected if survey respondents have different characteristics than
nonrespondents on the variables being studied. No one figure is an
acceptable minimum response rate for all surveys, but rates below 70-80
percent are normally considered problematic. See GAO Applied Research
and Methods Guidance: Sample Size Estimates for Attribute Sampling and
also Calculating and Reporting Response Rates and Addressing
Nonresponse Issues, December 10, 2003.
[22] One of the LICO programs that obtains, repairs, and sells cars to
participants at low cost also donates cars to recipients of public
assistance and receives a small fee from the state for doing so.
[23] We decided not to use the data from fiscal year 2001 because the
number of compact sedans sold that year was smaller than the average
number of compact sedans sold from fiscal years 2002 through 2006 (up
to August 2006).
[24] Subsequent to the publication of one of the studies, one of its
authors became a GAO employee. She participated in our review of the
other car access studies but not in the review of, or any analysis of,
our report on her research ("The Effects of Car Access on Employment
Outcomes for Welfare Recipients," Journal of Urban Economics 58: 250-
272 (2005). Rather, a GAO Economist and Senior Methodologist reviewed
this study independently and developed the information we present on
it. We chose to retain this study in our review because, according to
experts in LICO programs and car access research, its results are
current and relevant to addressing our objectives.
[25] See http://www.nedlc.org/.
[26] Among the 172 LICO programs listed on the NEDLC Web site, we
excluded 32 Individual Development Account LICO programs because these
programs were substantially dissimilar to YouthBuild USA's proposed
LICO program and the loan and car ownership programs listed on the
NEDLC Web site. Individual Development Account programs assist
participants in establishing accounts for the purpose of purchasing
cars.
[27] New Leaf Services, Inc., no longer operates as a LICO program.
[28] Logit analysis is a regression technique used to address outcomes
where there are two possible categories, such as employed or not
employed. The multinomial logit is an extension of the logit method to
cases where there are more than two outcomes.
[29] "Heckman selection" models are a regression technique used to
address concerns about obtaining biased estimates in cases where an
outcome is not observed unless a given event occurs. For example, hours
and wages are not observed unless someone is employed. Therefore,
nonworkers given greater access to jobs may not have the same outcome
as someone who is already employed.
[30] The two-stage least squares model is a regression technique used
to address concerns about simultaneity bias. For example, the concern
that car access may result from having a job rather than the job
resulting from car access.
[31] Although "car access" is not specifically mentioned in this study,
the public transportation "barrier" would be removed by "car access."
[32] Logit analysis is a regression technique used to address outcomes
where there are two possible categories, such as employed or not
employed. The multinomial logit is an extension of the logit method to
cases where there are more than two outcomes.
[33] Logit analysis is a regression technique used to address outcomes
where there are two possible categories, such as employed or not
employed. The multinomial logit is an extension of the logit method to
cases where there are more than two outcomes.
[34] Logit analysis is a regression technique used to address outcomes
where there are two possible categories, such as employed or not
employed. The multinomial logit is an extension of the logit method to
cases where there are more than two outcomes.
[35] A linear probability model is a regression technique that is used
to estimate the probability that someone is in one of two categories--
for example, employed or not employed. This approach is less desirable
for categorical outcomes than logit analysis because the latter has
more desirable statistical characteristics that increase the precision
of regression estimates.
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