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Report to the Congress: 

United States Government Accountability Office: 
GAO: 

March 2010: 

Recovery Act: 

One Year Later, States' and Localities' Uses of Funds and 
Opportunities to Strengthen Accountability: 

GAO-10-437: 

GAO Highlights: 

Highlights of GAO-10-437, a report to the Congress. 

Why GAO Did This Study: 

This report responds to two ongoing GAO mandates under the American 
Recovery and Reinvestment Act of 2009 (Recovery Act). It is the fifth 
in a series of reports since passage of the Recovery Act on the uses 
of and accountability for Recovery Act funds in 16 selected states, 
certain localities in those jurisdictions, and the District of 
Columbia (District). These jurisdictions are estimated to receive 
about two-thirds of the intergovernmental assistance available through 
the Recovery Act. It is also the second report in which GAO is 
required to comment on the jobs created or retained as reported by 
recipients of Recovery Act funds. GAO collected and analyzed documents 
and interviewed state and local officials and other Recovery Act award 
recipients. GAO also analyzed federal agency guidance and spoke with 
officials at federal agencies overseeing Recovery Act programs. 

What GAO Found: 

As of February 12, 2010, $88.7 billion, or a little more than 30 
percent, of the approximately $282 billion of total Recovery Act funds 
for programs administered by states and localities had been paid out 
by the federal government. Of that amount, approximately $36 billion 
has been paid out since the start of federal fiscal year 2010. The 
following table shows the composition of Recovery Act funding by 
sector for fiscal years 2009-2011 and 2012-2019. 

Table: Composition of outlays in percent: 

Health: 
Actual, 2009: 60%; 
Actual, 2010: 39%; 
Estimated, 2011: 17%; 
Estimated, 20122-2019: 1%. 

Education and Training: 
Actual, 2009: 28%; 
Actual, 2010: 37%; 
Estimated, 2011: 46%; 
Estimated, 20122-2019: 8%. 

Transportation: 
Actual, 2009: 6%; 
Actual, 2010: 9%; 
Estimated, 2011: 14%; 
Estimated, 20122-2019: 40%. 

Income security: 
Actual, 2009: 3%; 
Actual, 2010: 7%; 
Estimated, 2011: 10%; 
Estimated, 20122-2019: 21%. 

Community development: 
Actual, 2009: 3%; 
Actual, 2010: 5%; 
Estimated, 2011: 7%; 
Estimated, 20122-2019: 13%. 

Energy & environment: 
Actual, 2009: 1%; 
Actual, 2010: 3%; 
Estimated, 2011: 7%; 
Estimated, 20122-2019: 17%. 

Total: 
Actual, 2009: 100%; 
Actual, 2010: 100%; 
Estimated, 2011: 100%; 
Estimated, 20122-2019: 100%. 

Total dollars in billions: 
Actual, 2009: $52.9; 
Actual, 2010: $103.7; 
Estimated, 2011: $63.4; 
Estimated, 20122-2019: $61.9. 

Source: GAO analysis of CBO, FFIS, and Recovery.gov data. 

Note: Percentages may not total due to rounding. 

[End of table] 

Increased Medicaid Funding: 

As of January 29, 2010, the 16 states and the District have drawn down 
about $30 billion in increased Federal Medical Assistance Percentage 
(FMAP) funds, representing nearly 100 percent of these states’ grant 
awards for federal fiscal year 2009 and about 57 percent for the first 
and second quarters of federal fiscal year 2010. Most states reported 
that, without the increased FMAP funds, they could not have continued 
to support the substantial Medicaid enrollment growth they have 
experienced, most of which was attributable to children. Most states 
reported that the increased FMAP funds were integral to maintaining 
current eligibility levels, benefits, and services and to avoiding 
further program reductions. As for the longer-term outlook for their 
Medicaid programs, the District and all but one of the selected states 
expressed concern about sustaining their programs after the increased 
FMAP funds are no longer available, beginning in January 2011. 

Highway Infrastructure Investment and Transit Funding: As of February 
16, 2010, the Federal Highway Administration (FHWA) had obligated 
$25.1 billion and the Federal Transit Administration (FTA) had 
obligated about $7.5 billion—combined about $32.6 billion (over 93 
percent) of the $35 billion that the Recovery Act provided for highway 
infrastructure projects and public transportation. Nationwide, 
Recovery Act funding has been obligated for over 11,000 eligible 
highway projects. However, some requirements, such as the Recovery Act’
s maintenance-of-effort requirement—-which is designed to prevent 
states from substituting federal funds for state funds—have proven 
challenging. Many states have yet to complete a maintenance-of-effort 
certification that DOT finds fully acceptable, and this, coupled with 
states’ fiscal challenges, raises questions as to whether this 
requirement will achieve its intended purpose. In addition, the 
Recovery Act does not require DOT to determine whether states have met 
this requirement until around 6 months after the provision’s covered 
time period expires. GAO recommends that DOT gather timely information 
and report preliminary information to Congress within 60 days of the 
certified period (Sept. 30, 2010) on whether states met required 
program expenditures, the reasons that any states did not meet these 
certified levels, and lessons learned from the process. DOT is 
considering GAO’s recommendation. 

Education: 

As of January 22, 2010, the 16 states and the District had drawn down, 
in total, about $13.3 billion (56 percent) from the State Fiscal 
Stabilization Fund (SFSF); $1.1 billion (17 percent) of Elementary and 
Secondary Education Act (ESEA) Title I, Part A funds; and $1.2 billion 
(17 percent) of Individuals with Disabilities Education Act (IDEA), 
Part B, Recovery Act funds available to them. Much of the Recovery Act 
education funds have been used to pay education staff, including 
teachers. In response to GAO’s recommendation that Education ensure 
states monitor subrecipients of SFSF funds, Education announced a plan 
for reviewing states’ SFSF subrecipient monitoring plans. GAO is 
continuing to work with Education to address our recommendation to 
enhance transparency by requiring states to include an explanation of 
changes to maintenance-of-effort levels in their SFSF application 
resubmissions. 

Other Selected Recovery Act Programs: 

Housing agencies are to obligate the $3 billion in Public Housing 
Capital Fund formula grant Recovery Act funds they received by March 
17, 2010. As of January 30, 2010, about 31 percent of these funds had 
not been obligated. Over 200 agencies reported obligating no funds. 
HUD has worked hard to implement the Recovery Act but has faced 
challenges in simultaneously carrying out public housing programs 
mandated by the Recovery Act, including designing and carrying out a 
$1 billion grant competition, while meeting its continuing 
responsibilities for the ongoing Public Housing Capital Fund program. 
As a result, HUD delayed obligating its fiscal year 2009 funds by 3 
months. HUD does not have a management plan to determine how to meet 
these competing demands. GAO recommends that HUD develop such a plan 
to determine the adequate level of staffing needed to administer its 
Recovery Act and regular capital funds and to determine the most 
effective use of the staff it currently has. While HUD disagrees with 
GAO's recommendation, GAO continues to believe HUD would benefit from 
developing such a plan. With regard to the Weatherization Assistance 
Program, as of December 31, 2009, the Department of Energy (DOE) had 
obligated about $4.73 billion to states for weatherization activities. 
On February 24, 2010, DOE reported that about 5 percent of the 
approximately 593,000 homes DOE originally planned to weatherize using 
Recovery Act funds had been weatherized as of December 31, 2009. State 
and local officials reported that weatherization activities had been 
slowed by concerns over compliance with the Davis-Bacon and National 
Historic Preservation Acts. The Recovery Act also included $1.2 
billion for Workforce Investment Act (WIA) youth activities, including 
summer employment. As of December 31, 2009, $765 million of WIA youth 
funds had been drawn down nationwide. Over 355,000 youths reportedly 
participated in Recovery Act WIA activities. 

Recipient Reporting: 

Progress was achieved in addressing some data quality and reporting 
issues identified in the first round; however data errors, reporting 
inconsistencies, and decisions by some recipients not to use the new 
job reporting guidance for this round compromise data quality and the 
ability to aggregate the data. For example in the education area, 
which was the largest category of jobs reported, GAO found that a 
number of states reported job numbers using the old methodology. 
Overall, while significant issues remain, the second round of 
reporting appears to have gone more smoothly as recipients have become 
more familiar with the reporting system and requirements. GAO expects 
that the simplified jobs reporting guidance and reporting system 
enhancements will ultimately result in improved data quality and 
reliability. GAO makes specific recommendations to Education, HUD, and 
OMB for improving reporting guidance. Education, HUD, and OMB 
generally agreed with the recommendations. 

Accountability: 

GAO has recommended that OMB adjust the Single Audit process to help 
mitigate the risks posed by Recovery Act funding. Although OMB has 
taken steps to implement our recommendations, these efforts do not yet 
fully address the significant risks over Recovery Act funds. OMB’s 
steps include a voluntary Single Audit Internal Control Project that 
encourages earlier reporting of deficiencies, so that corrective 
action can be taken. Auditors of states participating in the project 
submitted internal control reports to OMB by December 31, 2009. For 13 
of the 16 states, auditors reported over 70 internal control 
deficiencies that affected the states’ compliance with federal 
requirements for Recovery Act funds. These states also provided 
corrective action plans for the deficiencies. OMB plans to analyze the 
project’s results to identify improvements to the Single Audit process 
by the spring of 2010. 

What GAO Recommends: 

GAO updates the status of agencies’ efforts to implement GAO’s 23 
previous recommendations and makes 5 new recommendations to the Office 
of Management and Budget (OMB) and the Departments of Transportation 
(DOT), Housing and Urban Development (HUD), and Education. GAO 
continues to believe that Congress should consider changes related to 
the Single Audit process. Agency responses to new GAO recommendations 
are included on the following page. 

View [hyperlink, http://www.gao.gov/products/GAO-10-437] or key 
components. For more information, contact J. Christopher Mihm at (202) 
512-6806 or mihmj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Uses of Recovery Act Funds by States and Localities in the First Year: 

The Second Round of Recipient Reporting Showed That Improving Data 
Quality Is a Work in Progress: 

Oversight and Accountability Efforts in the First Year: 

Recovery Act Funds Alleviate Some Fiscal Pressures as State and Local 
Governments Respond to the Current Recession and Confront Long-Term 
Challenges: 

New, Implemented, and Open Recommendations; Matters for Congressional 
Consideration: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology:
States' and Localities' Uses of Recovery Act Funds:
Recipient Reporting:
Assessing Safeguards and Internal Controls:
Accountability:
State and Local Budget:
Data and Data Reliability: 

Appendix II: Comments from the Office of Management and Budget: 

Appendix III: Program Descriptions:
Medicaid Federal Medical Assistance Percentage:
Highway Infrastructure Investment Program:
Public Transportation Program:
Education:
Workforce Investment Act Youth Program:
Public Housing Capital Fund:
Weatherization Assistance Program:
Head Start/Early Head Start: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Composition of State and Local Recovery Act Funding, Fiscal 
Year 2009 Actual and Fiscal Years 2010 through 2012 Estimated: 

Table 2: Increase in State Share between Preliminary First Quarter 
Fiscal Year 2010 Increased FMAP and Fiscal Year 2011 Regular FMAP: 

Table 3: Percentage of Awarded Education Stabilization, ESEA Title I, 
and IDEA, Part B Recovery Act Funds Drawn Down by States as of January 
22, 2010: 

Table 4: DOE's Recovery Act Weatherization Assistance Program 
Obligations: 

Table 5: Selected States' Drawdowns of Recovery Act WIA Youth Funds 
and Drawdowns Nationwide as of December 31, 2009: 

Table 6: WIA Youth Served with Recovery Act Funds in Selected States 
and Nationwide, as of November 30, 2009: 

Table 7: Recovery Act-Funded WIA Youth Participation in Summer 
Employment in Selected States and Nationwide, as of November 30, 2009: 

Table 8: Work Readiness Attainment Rate for Youth in Summer Employment 
in Selected States and Nationwide, as of November 30, 2009: 

Table 9: Fourth Quarter, 2009--Count of Prime Recipient Reports by 
Presence or Absence of FTEs and Recovery Act Funds Received or 
Expended: 

Table 10: Project Status of Fourth Quarter, 2009 Prime Recipient 
Reports Marked As Final Report with Less Than 75 Percent of Funds 
Received or Expended: 

Table 11: FederalReporting.gov Edit Checks for January 2010 Recipient 
Reporting: 

Table 12: Fourth Quarter 2009 Prime Recipient Reports Reviews and 
Corrections: 

Table 13: Parameters HUD Established to Identify Significant Errors 
for the Capital Fund: 

Table 14: Number of Potential Significant Errors Identified by Field 
for the October 2009 and January 2010 Reporting Cycles: 

Table 15: Status of FraudNet Allegations: 

Figures: 

Figure 1: Estimated versus Actual Federal Outlays to States and 
Localities under the Recovery Act: 

Figure 2: Components of Fiscal Year 2009 FMAP Increases: 

Figure 3: Cumulative Increased FMAP Funds Drawn Down by the Sample 
States and the District by Month, February 2009 through January 2010: 

Figure 4: Cumulative Quarterly Medicaid Enrollment Growth in the 
Sample States and the District since October 2007: 

Figure 5: Cumulative Recovery Act Highway and Public Transportation 
Funding and Obligations Nationwide: 

Figure 6: Cumulative Recovery Act Highway and Public Transportation 
Funds Reimbursed by FHWA and FTA Nationwide: 

Figure 7: Nationwide Recovery Act Highway and Public Transportation 
Obligations by Project Type: 

Figure 8: Estimated Percentage of LEAs Nationally with Funding 
Decreases and Increases of 5 Percent or More for School Year 2009-
2010, by Source of Funding: 

Figure 9: Estimated Percentage of LEAs Expecting Decreases in the 
Number of Jobs, Even with Recovery Act SFSF Funds, by State: 

Figure 10: Estimated Percentage of LEAs Nationally Planning to Use 
More Than 25 Percent of Their Recovery Act Funds from the SFSF, ESEA 
Title I, and IDEA Programs for Professional Development, Technological 
Equipment, and Instructional Materials: 

Figure 11: Percentage of Public Housing Capital Fund Formula Grants 
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as 
of January 30, 2010: 

Figure 12: Housing Agencies' Obligations of Recovery Act Funds by 
Quartile as of January 30, 2010: 

Figure 13: National Drawdown Rates for Recovery Act Funds for the WIA 
Youth Program, as of December 31, 2009: 

Figure 14: The Potential Employment Effects of Recovery Act Funds: 

Figure 15: State and Local Model Operating Balance Measure, as a 
Percentage of Gross Domestic Product (GDP): 

Figure 16: State and Local Government Taxes, as a Percentage of GDP: 

Figure 17: State and Local Government Grants, as a Percentage of GDP: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

March 3, 2010: 

Report to the Congress: 

The American Recovery and Reinvestment Act of 2009 (Recovery Act) was 
enacted on February 17, 2009, in response to what is generally 
reported to be the most serious economic crisis since the Great 
Depression.[Footnote 1] The purposes of the Recovery Act include 
promoting economic recovery, making investments, and minimizing and 
avoiding reductions in state and local government services. 
Specifically, the stated purposes of the Recovery Act are to: 

* preserve and create jobs and promote economic recovery; 

* assist those most impacted by the recession; 

* provide investments needed to increase economic efficiency by 
spurring technological advances in science and health; 

* invest in transportation, environmental protection, and other 
infrastructure that will provide long-term economic benefits; and: 

* stabilize state and local government budgets in order to minimize 
and avoid reductions in essential services and counterproductive state 
and local tax increases. 

Initially estimated to cost $787 billion, the Recovery Act includes an 
estimated $580 billon of federal outlays, of which nearly half--or 
approximately $282 billion--will flow to states and localities 
affecting about 50 state formula and discretionary grants as well as 
about 15 entitlement and other countercyclical programs. The remaining 
Recovery Act funds are in the form of a wide variety of tax provisions 
assisting individuals, businesses, and state and local governments. 
These include, for example, the Making Work Pay tax credit, various 
energy-related incentives, and special bond financing provisions for 
state and local governments. On February 10, 2010, we issued a report 
reviewing various tax-related aspects of the Recovery Act.[Footnote 2] 
The volume of funds, the number of entities involved in their 
distribution, and short time frames all speak to the need for 
oversight to ensure transparency and accountability. Indeed, GAO has 
been given a number of roles related to oversight of these Recovery 
Act programs and has issued more than 39 Recovery Act products. See 
the Related GAO Products section for a list of these products. Federal 
agency inspectors general, state and local auditors, as well as the 
Recovery Accountability and Transparency Board (the board),[Footnote 
3] which was established by the Recovery Act, all play roles in 
oversight of Recovery Act spending. 

In response to a Recovery Act mandate, we have conducted bimonthly 
reviews of programs for which states and localities have received 
major funding.[Footnote 4] Specifically, in four previous reports, we 
have collected and reported data on programs receiving substantial 
Recovery Act funds during this first year of implementation in 16 
selected states, certain localities, and the District of Columbia, and 
made recommendations when changes could result in improvements. 
[Footnote 5] The selected jurisdictions for our in-depth reviews 
contain about 65 percent of the U.S. population and are estimated to 
receive collectively about two-thirds of the intergovernmental 
assistance available through the Recovery Act.[Footnote 6] 

This report, the fifth in response to the Recovery Act's mandate, 
updates and adds new information on the following: (1) selected states 
and localities use of Recovery Act funds for specific programs, (2) 
the approaches taken by selected states and localities to ensure 
accountability for Recovery Act funds, and (3) state activities to 
evaluate the impact of the Recovery Act funds they receive. The 
programs we selected for review were chosen primarily because they 
have begun disbursing funds to states or have known or potential 
risks. The risks can include existing programs receiving significant 
amounts of Recovery Act funds or new programs. In some cases we have 
also collected data from all states, and from a broader array of 
localities, to augment the in-depth reviews. This report focuses on 
the following programs: 

* Federal Medical Assistance Percentage (FMAP). 

* Federal-Aid Highway Surface Transportation and Transit Capital 
Assistance Programs. 

* State Fiscal Stabilization Fund (SFSF). 

* Title I, Part A of the Elementary and Secondary Act of 1965, as 
amended (ESEA). 

* Parts B and C of the Individuals with Disabilities Education Act, as 
amended (IDEA). 

* Public Housing Capital Fund. 

* Weatherization Assistance Program. 

* Workforce Investment Act of 1998 (WIA) Youth Program. 

The Recovery Act also requires that nonfederal recipients of Recovery 
Act funded grants, contracts, or loans submit quarterly reports on 
each project or activity, including information concerning the amount 
and use of funds and jobs created or retained.[Footnote 7] The first 
of these recipient reports was to cover the cumulative activity since 
the Recovery Act's passage through the quarter ending September 30, 
2009. The Recovery Act requires us to comment on the estimates of jobs 
created or retained after the recipients have reported. We issued our 
initial report related to recipient reporting, including 
recommendations for recipient report improvements, on November 19, 
2009.[Footnote 8] A second major focus of the current report is to 
provide updated information concerning recipient reporting in 
accordance with our mandate for quarterly reporting.[Footnote 9] 

This report also discusses state and local budget stabilization, 
federal requirements and guidance, and oversight, transparency, and 
accountability issues related to the Recovery Act and its 
implementation. It also provides information on the status of our 
prior recommendations related to the Recovery Act and includes 
additional new recommendations. 

We analyzed guidance and interviewed officials at the Office of 
Management and Budget (OMB). We also analyzed grant award amounts--as 
well as relevant regulations and federal agency guidance on programs 
selected for this review--and spoke with relevant program officials at 
the Departments of Education, Energy, Health and Human Services 
(Centers for Medicare and Medicaid Services), Housing and Urban 
Development, and Transportation. We also integrated information from 
our prior Recovery Act reports into this review where appropriate. 

Where statements about state law are attributed to state officials, we 
did not analyze state legal materials for this report but relied on 
state officials and other state sources for description and 
interpretation of relevant state constitutions, statutes, legislative 
proposals, and other state legal materials. The information obtained 
from this review cannot be generalized to all states and localities 
receiving Recovery Act funding. A detailed description of our scope 
and methodology can be found in appendix I. 

We conducted this performance audit from December 5, 2009, to March 3, 
2010, in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

The Congressional Budget Office (CBO) originally estimated that the 
Recovery Act's combined spending and tax provisions would cost $787 
billion through 2019, with more than 90 percent of the spending and 
tax reductions occurring before the end of fiscal year 2011. As of 
December 31, 2009, the Council of Economic Advisors (CEA) reported 
that approximately one-third of the $787 billion (or $263 billion) had 
been outlayed or provided to households and businesses in the form of 
tax reductions. In addition to that amount, CEA reported that another 
$150 billion had been obligated. 

On January 26, 2010, CBO updated its estimate of the cost of the 
Recovery Act. It now estimates that the Recovery Act will cost $75 
billion more than originally estimated--or a total of $862 billion 
from 2009 through 2019. It cited the following key reasons for the 
increase: 

* Unemployment compensation will be $21 billion more than originally 
estimated due to higher than anticipated unemployment. 

* Supplemental Nutrition Assistance Program is now expected to cost 
$34 billion more than originally estimated because the increased 
family benefit amount under the Recovery Act is now estimated to 
exceed the unadjusted benefit amount through 2019. 

* Participation in the Build America Bond program is significantly 
higher than originally estimated. More than $60 billion in new bonds 
have been issued since the program began in April, leading CBO to 
increase its projected cost of the program by $26 billion. 

With the intent of disbursing funds quickly to create and retain jobs 
and stabilize state and local budgets, major Recovery Act funding to 
states and localities is front-loaded into the first 3 years since the 
enactment. Nearly 80 percent of funding to states and localities is 
projected to be distributed within the first 3 years, with about 56 
percent in just the first 2 years. Peak projected outlays are in 
fiscal year 2010, with outlays that year projected to be more than 
twice the level of fiscal year 2009 outlays. Figure 1 shows the 
projected federal outlays to states and localities for fiscal years 
2009 through 2016, as well as actual outlays to date as reported by 
federal agencies on Recovery.gov. 

Figure 1: Estimated versus Actual Federal Outlays to States and 
Localities under the Recovery Act: 

[Refer to PDF for image: vertical bar graph] 

Federal fiscal year (Oct. 1 to Sept. 30): 2009; 
Original estimate: $48.9 billion; 
Actual as of February 12, 2010: $52.9 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2010; 
Original estimate: $107.7 billion; 
Actual as of February 12, 2010: $35.7 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2011; 
Original estimate: $63.4 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2012; 
Original estimate: $23.3 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2013; 
Original estimate: $14.4 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2014; 
Original estimate: $9.1 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2015; 
Original estimate: $5.7 billion. 

Federal fiscal year (Oct. 1 to Sept. 30): 2016; 
Original estimate: $2.5 billion. 

Source: GAO analysis of CBO, Federal Funds Information for States, and 
Recovery.gov data 

Note: Data reflect estimated and actual federal outlays for a select 
set of Recovery Act funded programs administered by states and 
localities. The Supplemental Nutrition Assistance Program (food 
stamps) and unemployment compensation payments are not included. 

[End of figure] 

As shown in table 1, actual federal outlays to states and localities 
under the Recovery Act were slightly above the projected level in 
fiscal year 2009. Across the United States, as of February 12, 2010, 
the Department of the Treasury has paid out $88.7 billion in Recovery 
Act funds for use in states and localities. Of that amount, 
approximately $36 billion has been paid out since the start of fiscal 
year 2010 on October 1, 2009. 

In addition to variation in outlays over the years, outlays also vary 
substantially by sector. As shown in table 1, outlays in health and 
education and training constituted 88 percent of total outlays to 
states and localities in fiscal year 2009. Outlays for transportation, 
income security, energy and the environment, and community development 
are all substantially smaller. However, by fiscal year 2012, 
investments in highways, transit, high-speed rail, and other 
transportation infrastructure will be the largest share of state and 
local Recovery Act funding, albeit of a substantially smaller total 
outlay. Taken together, transportation spending--along with 
investments in the community development, energy, and environmental 
areas--that is geared more toward creating long-run economic growth 
opportunities will represent approximately two-thirds of state and 
local Recovery Act funding after 2011. Thus, across the years, 
spending shifts from a primary focus on recovery to a primary focus on 
reinvestment. 

Table 1: Composition of State and Local Recovery Act Funding, Fiscal 
Year 2009 Actual and Fiscal Years 2010 through 2012 Estimated: 

Composition of outlays in percent: 

Health: 
Actual: 2009: 60%; 
Estimated: 2010: 39%; 
Estimated: 2011: 17%; 
Estimated: 2012-2019: 1%. 

Education and training: 
Actual: 2009: 28%; 
Estimated: 2010: 37%; 
Estimated: 2011: 46%; 
Estimated: 2012-2019: 8%. 

Transportation: 
Actual: 2009: 6%; 
Estimated: 2010: 9%; 
Estimated: 2011: 14%; 
Estimated: 2012-2019: 40%. 

Income security: 
Actual: 2009: 3%; 
Estimated: 2010: 7%; 
Estimated: 2011: 10%; 
Estimated: 2012-2019: 21%. 

Community development: 
Actual: 2009: 3%; 
Estimated: 2010: 5%; 
Estimated: 2011: 7%; 
Estimated: 2012-2019: 13%. 

Energy and environment: 
Actual: 2009: 1%; 
Estimated: 2010: 3%; 
Estimated: 2011: 7%; 
Estimated: 2012-2019: 17%. 

Total: 
Actual: 2009: 100%; 
Estimated: 2010: 100%; 
Estimated: 2011: 100%; 
Estimated: 2012-2019: 100%. 

Total dollars in billions: 
Actual: 2009: $52.9; 
Estimated: 2010: $103.7; 
Estimated: 2011: $63.4; 
Estimated: 2012-2019: $61.9. 

Source: GAO analysis of CBO, FFIS, and recovery.gov data. 

Note: Percentages may not total due to rounding. 

[End of table] 

There is also a major change in the amount of flexibility states will 
have concerning the use of funds. Health and education and training 
funds are the predominant sectors of funding in the first 2 years. 
Education and training funds allowed states some flexibility in how 
they chose to use the funds. States also experienced flexibility as to 
their use of state funds made available as a result of the increased 
FMAP. In later years, this flexibility will be reduced as funds are 
specifically designated by purpose. 

Uses of Recovery Act Funds by States and Localities in the First Year: 

Timely Access to Increased FMAP Funds Facilitated States' Efforts to 
Support Medicaid Enrollment Growth and Minimize Program Reductions, 
but States Remain Concerned about Longer-Term Program Sustainability: 

Medicaid is a joint federal-state program that finances health care 
for certain categories of low-income individuals, including children, 
families, persons with disabilities, and persons who are elderly. The 
federal government matches state spending for Medicaid services 
according to a formula based on each state's per capita income in 
relation to the national average per capita income. The rate at which 
states are reimbursed for Medicaid service expenditures is known as 
the Federal Medical Assistance Percentage (FMAP), which may range from 
50 percent to no more than 83 percent. The Recovery Act provides 
eligible states with an increased FMAP for 27 months from October 1, 
2008, to December 31, 2010.[Footnote 10] On February 25, 2009, the 
Centers for Medicare & Medicaid Services (CMS) made increased FMAP 
grant awards to states, and states may retroactively claim 
reimbursement for expenditures that occurred prior to the effective 
date of the Recovery Act. Generally, for fiscal year 2009 through the 
first quarter of fiscal year 2011, the increased FMAP, which is 
calculated on a quarterly basis, includes (1) a "hold harmless" 
provision, which maintains states' regular FMAP rates at the highest 
rate of any fiscal year from 2008 through 2011, (2) a general across-
the-board increase of 6.2 percentage points in states' FMAPs, and (3) 
a further increase to the FMAPs for those states that have a 
qualifying increase in unemployment rates. 

As a result, the increased FMAP available to the 16 states and the 
District of Columbia (the District) by the fourth quarter of fiscal 
year 2009 averaged over 10 percentage points higher than their regular 
2009 FMAP rates, with increases ranging from about 8 percentage points 
in Iowa to about 12 percentage points in Florida. For all states, the 
largest proportion of the increased FMAP was attributable to the 
across-the-board increase of 6.2 percentage points; however, 
qualifying increases in unemployment rates also contributed to the 
increase in each of the states. The "hold harmless" provision further 
contributed to the increased FMAP in 4 states in our review, albeit to 
a lesser extent. (See figure 2.) In the first quarter of fiscal year 
2010, qualifying increases in unemployment rates or increases in 
regular FMAP rates have contributed to further increases in FMAP rates 
for half of the sample states. 

Figure 2: Components of Fiscal Year 2009 FMAP Increases: 

[Refer to PDF for image: stacked vertical bar graph] 

State: Arizona; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 3.53%; 
Hold-harmless provision: 0.43%; 
Total: 10.16%. 

State: California; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 5.39%; 
Hold-harmless provision: 0; 
Total: 11.59%. 

State: Colorado; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 5.39%; 
Hold-harmless provision: 0; 
Total: 11.59%. 

State: District of Columbia; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 3.09%; 
Hold-harmless provision: 0; 
Total: 9.29%. 

State: Florida; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 4.61%; 
Hold-harmless provision: 1.43%; 
Total: 12.24%. 

State: Georgia; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 3.73%; 
Hold-harmless provision: 0; 
Total: 9.93%. 

State: Iowa; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 1.89%; 
Hold-harmless provision: 0; 
Total: 8.09%. 

State: Illinois; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 5.36%; 
Hold-harmless provision: 0; 
Total: 11.56%. 

State: Massachusetts; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 5.39%; 
Hold-harmless provision: 0; 
Total: 11.59%. 

State: Michigan; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 4.21%; 
Hold-harmless provision: 0; 
Total: 10.41%. 

State: Mississippi; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 1.75%; 
Hold-harmless provision: 0.45
Total: 8.40%. 

State: North Carolina; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 3.71%; 
Hold-harmless provision: 0; 
Total: 9.91%. 

State: New Jersey; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 5.39%; 
Hold-harmless provision: 0; 
Total: 11.59%. 

State: New York; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 5.39%; 
Hold-harmless provision: 0; 
Total: 11.59%. 

State: Ohio; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 4%; 
Hold-harmless provision: 0; 
Total: 10.20%. 

State: Pennsylvania; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 4.87%; 
Hold-harmless provision: 0; 
Total: 11.07%. 

State: Texas; 
Across-the-board increase: 6.2%; 
Qualifying increase in unemployment: 3.09%; 
Hold-harmless provision: 1.12
Total: 10.41%. 

Source: GAO analysis of HHS data. 

[End of figure] 

For states to qualify for the increased FMAP available under the 
Recovery Act, they must comply with a number of requirements, 
including the following: 

* States generally may not apply eligibility standards, methodologies, 
or procedures that are more restrictive than those in effect under 
their state Medicaid programs on July 1, 2008.[Footnote 11] 

* States must comply with prompt payment requirements.[Footnote 12] 

* States cannot deposit or credit amounts attributable (either 
directly or indirectly) to certain elements of the increased FMAP in 
any reserve or rainy-day fund of the state.[Footnote 13] 

* States with political subdivisions--such as cities and counties--
that contribute to the nonfederal share of Medicaid spending cannot 
require the subdivisions to pay a greater percentage of the nonfederal 
share than would have been required on September 30, 2008.[Footnote 14] 

In addition, CMS requires states to separately track and report on 
increased FMAP funds. 

Reliance on Existing Payment System to Distribute Increased FMAP Funds 
and CMS Efforts to Provide Guidance Facilitated States' Access to 
Available Funds: 

CMS distributed the increased FMAP funds to states through an existing 
payment management system, thereby providing states with timely access 
to the funds.[Footnote 15] Specifically, by March 27, 2009--30 days 
after the increased FMAP grant awards first became available--13 of 
the sample states and the District had drawn down nearly $5.7 billion, 
or just over one-half of the funds available at that time, and by 
April 30, 2009, all sample states and the District had drawn down 
increased FMAP funds.[Footnote 16] Through January 29, 2010, the 
sample states and the District have drawn down about $30 billion in 
increased FMAP funds and in the aggregate have done so at a fairly 
continuous pace. (See figure 3.) 

Figure 3: Cumulative Increased FMAP Funds Drawn Down by the Sample 
States and the District by Month, February 2009 through January 2010: 

[Refer to PDF for image: line graph] 

Month: February 2009; 
Funds drawn: $1.007 billion. 

Month: March 2009; 
Funds drawn: $7.936 billion. 

Month: April 2009; 
Funds drawn: $11.808 billion. 

Month: May 2009; 
Funds drawn: $12.538 billion. 

Month: June 2009; 
Funds drawn: $15.124 billion. 

Month: July 2009; 
Funds drawn: $17.241 billion. 

Month: August 2009; 
Funds drawn: $19.183 billion. 

Month: September 2009; 
Funds drawn: $21.283 billion. 

Month: October 2009; 
Funds drawn: $23.337 billion. 

Month: November 2009; 
Funds drawn: $25.836 billion. 

Month: December 2009; 
Funds drawn: $28.038 billion. 

Month: January 2010; 
Funds drawn: $29.988 billion. 

Source: GAO analysis of HHS Payment Management System data. 

Note: The amounts shown represent the funds that had been drawn down 
as of the end of each month. The funds were first available on 
February 25, 2009. 

[End of figure] 

The $30 billion in increased FMAP funds drawn by the sample states and 
the District through January 29, 2010, represents nearly 100 percent 
of these states' grant awards for fiscal year 2009,[Footnote 17] and 
about 57 percent of the grant awards for the first and second quarters 
of fiscal year 2010. Nationally, the 50 states, the District, and 
several of the largest U.S. insular areas combined have drawn down 
about $44 billion. 

In addition to distributing the increased FMAP funds through the 
existing Medicaid payment system, CMS provided guidance to states to 
facilitate their timely access to these funds. For example, CMS issued 
three State Medicaid Director letters that provided specific guidance 
on how to comply with certain Recovery Act requirements, including the 
prompt payment and maintenance of eligibility requirements.[Footnote 
18] CMS also issued fact sheets and written responses to states' 
frequently asked questions, and hosted conference calls for all states 
in February and March 2009 to discuss issues related to compliance 
with these requirements. Because of the variation in state operations, 
funding processes, and political structures, CMS frequently worked 
with states on an individual basis to resolve compliance questions. 
For example, CMS advised Arizona that it would have to reverse a 
change the state had made to the frequency with which it conducted 
eligibility determinations in order to qualify for the increased FMAP, 
[Footnote 19] and consulted with California on issues related to its 
compliance with the Recovery Act's requirement related to political 
subdivisions. Although most sample states and the District reported no 
delay in drawing down increased FMAP funds, 10 states indicated that 
it had been somewhat difficult or difficult to comply with the 
Recovery Act's eligibility requirements, and 12 reported making 
adjustments to their Medicaid programs in order to comply. 

Increased FMAP Funds Were Critical to States' Efforts to Support 
Increasing Medicaid Enrollment Growth and Minimize Program Reductions: 

Most states reported that without the increased FMAP funds, they could 
not have continued to support the substantial Medicaid enrollment 
growth they have experienced. Overall Medicaid enrollment in the 
sample states and the District increased by 11.3 percent between the 
beginning of fiscal year 2008 and the end of fiscal year 2009, with 
the majority of enrollment growth occurring in fiscal year 2009. (See 
figure 4.) Specifically, in fiscal year 2008, overall Medicaid 
enrollment among the 16 states and the District increased by 4 
percent, with increases in individual states ranging from 1.6 percent 
in New York to 12 percent in Ohio. By the end of fiscal year 2009, 
overall enrollment had further increased by 7.3 percent, with 
increases in individual states ranging from 4.6 percent in California 
to 15.4 percent in Arizona. For over two-thirds of the sample states 
and the District, the rate of enrollment growth in fiscal year 2009 
was double or nearly double the rate of growth in fiscal year 2008. 
Most of the enrollment growth in both fiscal years was attributable to 
children, a population group that is sensitive to economic downturns. 

Figure 4: Cumulative Quarterly Medicaid Enrollment Growth in the 
Sample States and the District since October 2007: 

[Refer to PDF for image: line graph] 

Month: October 2007; 
Percent increase: 0; 

Month: December 2008; 
Percent increase: 0.81%. 

Month: March 2008; 
Percent increase: 1.8%. 

Month: June 2008; 
Percent increase: 2.72%. 

Month: September 2008; 
Percent increase: 4%. 

Month: December 2008; 
Percent increase: 5.13%. 

Month: March 2009; 
Percent increase: 7.1%. 

Month: June 2009; 
Percent increase: 9.18%. 

Month: September 2009; 
Percent increase: 11.32%. 

Source: GAO analysis of state reported data. 

[End of figure] 

Given enrollment growth, most states reported that the increased FMAP 
funds were integral to their efforts to maintain current eligibility 
levels, benefits and services, and to avoid further program 
reductions. For example, Georgia reported using these funds to avoid 
reductions in eligibility and optional benefits, and Colorado reported 
using the funds to reduce planned cuts to provider payment rates. 
However, most states reported that the availability of the increased 
FMAP funds did not fully prevent the need for Medicaid program 
reductions. Nine states reported reducing or freezing provider rates, 
and 5 states reported reducing certain optional Medicaid benefits or 
services in fiscal years 2009 or 2010; for example, California 
reported cutting adult dental services. Given that the District and 
all but 2 states reported that the amount of increased FMAP funds was 
not fully sufficient to maintain their Medicaid programs in fiscal 
year 2010, such program reductions may become more common.[Footnote 
20] Looking ahead to fiscal year 2011, 5 states and the District 
reported they were considering eligibility reductions; 8 states and 
the District reported considering reductions to benefits and services; 
and 10 states and the District reported considering reductions to 
provider payment rates. 

While the increased FMAP funds are for Medicaid services only, the 
receipt of these funds may free up funds that states would otherwise 
have had to use for their Medicaid programs. Virtually all of the 
sample states and the District reported using the freed-up funds for 
multiple Medicaid purposes as well as for other purposes, such as 
financing general state budget needs. Only 2 states--North Carolina 
and Ohio--reported using freed-up funds exclusively to finance general 
state budget needs. 

States Reported Concerns about the Sustainability of Their Medicaid 
Programs once Increased FMAP Is No Longer Available: 

As for the longer-term outlook for their Medicaid programs, the 
District and all but 1 of the sample states expressed concern about 
sustaining their Medicaid programs beginning in January 2011, after 
the increased FMAP funds are no longer available. When asked about the 
factors driving their concerns, virtually all of the states and the 
District cited the increase in the state's share of Medicaid payments 
that will occur in January 2011 because of the end of the increased 
FMAP--an increase that will range from about 7.5 percentage points to 
about 12.2 percentage points (an average of 10.5 percentage points) 
compared with the first quarter 2010 increased FMAP. (See table 2.) 

Table 2: Increase in State Share between Preliminary First Quarter 
Fiscal Year 2010 Increased FMAP and Fiscal Year 2011 Regular FMAP: 

State: Arizona; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 75.93%; 
Fiscal year 2011 regular FMAP[B]: 65.85%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 10.08%. 

State: California; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%; 
Fiscal year 2011 regular FMAP[B]: 50.00%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%. 

State: Colorado; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%; 
Fiscal year 2011 regular FMAP[B]: 50.00%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%. 

State: District of Columbia; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 79.29%; 
Fiscal year 2011 regular FMAP[B]: 70.00%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 9.29%. 

State: Florida; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 67.64%; 
Fiscal year 2011 regular FMAP[B]: 55.45%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 12.19%. 

State: Georgia; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 74.96%; 
Fiscal year 2011 regular FMAP[B]: 65.33%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 9.63%. 

State: Illinois; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.88%; 
Fiscal year 2011 regular FMAP[B]: 50.20%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 11.68%. 

State: Iowa; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 72.55%; 
Fiscal year 2011 regular FMAP[B]: 62.63%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 9.92%. 

State: Massachusetts; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%; 
Fiscal year 2011 regular FMAP[B]: 50.00%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%. 

State: Michigan; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 73.27%; 
Fiscal year 2011 regular FMAP[B]: 65.79%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 7.48%. 

State: Mississippi; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 84.86%; 
Fiscal year 2011 regular FMAP[B]: 74.73%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 10.13%. 

State: New Jersey; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%; 
Fiscal year 2011 regular FMAP[B]: 50.00%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%. 

State: New York; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 61.59%; 
Fiscal year 2011 regular FMAP[B]: 50.00%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 11.59%. 

State: North Carolina; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 74.98%; 
Fiscal year 2011 regular FMAP[B]: 64.71%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 10.27%. 

State: Ohio; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 73.47%; 
Fiscal year 2011 regular FMAP[B]: 63.69%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 9.78%. 

State: Pennsylvania; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 65.85%; 
Fiscal year 2011 regular FMAP[B]: 55.64%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 10.21%. 

State: Texas; 
Preliminary fiscal year 2010 increased FMAP, first quarter[A]: 70.94%; 
Fiscal year 2011 regular FMAP[B]: 60.56%; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 10.38%. 

State: Average difference; 
Percentage point difference in state share between preliminary first 
quarter 2010 increased FMAP and 2011 regular FMAP: 10.5%3. 

Source: GAO analysis of HHS data. 

[A] The preliminary increased FMAP rates listed for the first quarter 
of federal fiscal year 2010 were provided by CMS on November 13, 2009. 

[B] The fiscal year 2011 FMAP rates were published in the Federal 
Register on November 27, 2009. 

[End of table] 

The size of the increase in state share does not necessarily reflect 
the difficulty that a state may have in absorbing these costs. 
Ultimately, the impact of states' increased share in Medicaid payments 
will vary depending on factors such as program enrollment and state 
fiscal circumstances. For example, according to Kaiser Family 
Foundation estimates, about 27 percent of New York's population was 
enrolled in Medicaid in 2006 compared with about 11 percent of New 
Jersey's population.[Footnote 21] Similarly, state fiscal 
circumstances also vary considerably among the 16 states and the 
District. The December 2009 unemployment rate, which is one indicator 
of fiscal circumstances, varied from 6.6 percent in Iowa to14.6 
percent in Michigan. As a result, the impact of the increased state 
share of Medicaid payments will vary on a state-by-state basis. 

Recovery Act Transportation Projects on Track to Meet Legislative Time 
Frames, but Other Requirements Presented Challenges: 

Recovery Act Transportation Projects on Track to Meet Legislative Time 
Frames: 

Using the existing federal surface transportation program structure, 
states and transit agencies were on track to meet the March 2010 
legislative deadline for obligating all Recovery Act highway and 
public transportation funds when we completed our work.[Footnote 22] 
The existing federal surface transportation structure has well-
established programs and processes that were understood by state 
departments of transportation, local transit agencies, and others. For 
example, Recovery Act highway funds were distributed under the rules 
governing the Federal-Aid Highway Program generally and its Surface 
Transportation Program in particular. State departments of 
transportation were well acquainted with the type of projects eligible 
for and the federal requirements associated with this funding. 
Similarly, public transportation funds were primarily distributed 
through well-established programs, with most of the funds distributed 
through the Transit Capital Assistance Program. Like state departments 
of transportation, project sponsors (typically transit agencies) are 
familiar with the grant application processes of these programs. 
Federal surface transportation programs are administered through 
established federal-state or federal-local partnerships, where each 
agency is aware of its specific roles and responsibilities. For 
example, the Federal Highway Administration (FHWA) has an office in 
every state and the District of Columbia to work with state 
transportation departments, and the Federal Transit Administration 
(FTA) has 10 regional offices that work with transit providers. 
Finally, there is a long-standing transportation planning process that 
states and metropolitan areas are required by law to follow for both 
short-range and long-range transportation planning.[Footnote 23] This 
transportation planning process is meant to foster better 
transportation investment decisions. 

Using existing programs and processes, state departments of 
transportation and local transit agencies were able to identify over 
11,000 highway projects and submit over 960 grant applications 
[Footnote 24] for transit funds, respectively, that could be quickly 
started and promote state and local transportation goals, with the 
following results: 

* The majority of the approximately $35 billion that the Recovery Act 
provided for highway infrastructure projects and public transportation 
has been obligated. As of February 16, 2010, FHWA has obligated $25.1 
billion of the $26.7 billion (around 95 percent)[Footnote 25] that was 
apportioned to all 50 states and the District of Columbia for over 
11,000 highway infrastructure and other eligible projects nationwide. 
In addition, FTA has obligated about $7.5 billion of the $8.4 billion 
(around 89 percent)[Footnote 26] that was appropriated to fund public 
transportation throughout the country by awarding over 740 grants 
nationwide.[Footnote 27] Figure 5 shows Recovery Act highway and 
transit funding and obligations nationwide. As provided for in the 
Recovery Act, 50 percent of apportioned highway funds were obligated 
before June 30, 2009, and 50 percent of Transit Capital Assistance 
Program and Fixed Guideway Infrastructure Investment program funds 
were obligated before September 1, 2009.[Footnote 28] 

Figure 5: Cumulative Recovery Act Highway and Public Transportation 
Funding and Obligations Nationwide: 

[Refer to PDF for image: vertical bar graph] 

Highway apportionment: $26.7 billion; 
Public transportation appropriation: $8.4 billion. 

Month: March 2009; 
Highway funding: $4.69 billion; 
Public transportation funding: $0.046 billion. 

Month: April 2009; 
Highway funding: $8.92 billion; 
Public transportation funding: $0.049 billion. 

Month: May 2009; 
Highway funding: $12.97 billion; 
Public transportation funding: $0.53 billion. 

Month: June 2009; 
Highway funding: $16.14 billion; 
Public transportation funding: $2.22 billion. 

Month: July 2009; 
Highway funding: $17.2 billion; 
Public transportation funding: $3.79 billion. 

Month: August 2009; 
Highway funding: $17.96 billion; 
Public transportation funding: $7.15 billion. 

Month: September 2009; 
Highway funding: $19.12 billion; 
Public transportation funding: $7.2 billion. 

Month: October 2009; 
Highway funding: $19.88 billion; 
Public transportation funding: $7.2 billion. 

Month: November 2009; 
Highway funding: $20.42 billion; 
Public transportation funding: $7.2 billion. 

Month: December 2009; 
Highway funding: $22.25 billion; 
Public transportation funding: $7.2 billion. 

Month: January 2010; 
Highway funding: $23.69 billion; 
Public transportation funding: $7.23 billion. 

Month: February 2010; 
Highway funding: $25.1 billion; 
Public transportation funding: $7.24 billion. 

Source: GAO analysis of FHWA and DOT data. 

Note: Public transportation obligation amounts include obligations 
associated with funds that were transferred from FHWA to FTA for 
public transportation projects. February 2010 data are as of February 
16, 2010. 

[End of figure] 

* Reimbursements continue to increase. After federal funds have been 
obligated, and once portions of the work have been completed, states 
and transit agencies may request reimbursement from FHWA and FTA. 
[Footnote 29] Therefore, reimbursements generally lag behind 
obligations since it takes time for a state or transit agency to bid, 
award, and start work on specific projects. As of February 16, 2010, 
FHWA has reimbursed $6.29 billion (25 percent) to states nationwide, 
and FTA has reimbursed $1.8 billion (24 percent) to states and transit 
agencies nationwide, with the amount of reimbursements almost doubling 
since September 2009 (see figure 6). Even though reimbursement rates 
for Recovery Act highway funds have been increasing nationwide, our 
analysis shows that wide differences exist across states, mainly 
because of the complexity of the types of projects that states 
undertook and the extent to which projects were administered by local 
governments. The reimbursement rate for Recovery Act funds for public 
transportation projects has also been increasing. Transit officials we 
interviewed noted that their agencies are reimbursed as work is 
completed. Therefore, while for some projects, such as the 
construction projects, agencies may request reimbursement quickly as 
the projects meet certain schedule milestones, for other projects, 
such as bus purchases, agencies may not request any reimbursements 
until the actual delivery dates, which could be years from now. 

Figure 6: Cumulative Recovery Act Highway and Public Transportation 
Funds Reimbursed by FHWA and FTA Nationwide: 

[Refer to PDF for image: vertical bar graph] 

Month: March 2009; 
Highway: $1.7 million; 
Public transportation: $0. 

Month: April 2009; 
Highway: $9.8 million; 
Public transportation: $0.01 million. 

Month: May 2009; 
Highway: $71.1 million; 
Public transportation: $56.8 million. 

Month: June 2009; 
Highway: $264.2 million; 
Public transportation: $196 million. 

Month: July 2009; 
Highway: $676.2 million; 
Public transportation: $498.1 million. 

Month: August 2009; 
Highway: $1.437 billion; 
Public transportation: $781.8 million. 

Month: September 2009; 
Highway: $2.376 billion; 
Public transportation: $953.7 million. 

Month: October 2009; 
Highway: $3.661 billion; 
Public transportation: $1.179 billion. 

Month: November 2009; 
Highway: $4.627	
Public transportation: $1.350 billion. 

Month: December 2009; 
Highway: $5.603 billion; 
Public transportation: $1.577 billion. 

Month: January 2010; 
Highway: $6.039 billion; 
Public transportation: $1.753 billion. 

Month: February 2010; 
Highway: $6.291 billion; 
Public transportation: $1.784 billion. 

Source: GAO analysis of FHWA and DOT data. 

Note: February 2010 data are as of February 16, 2010. 

[End of figure] 

* States and transit agencies have used Recovery Act funding to meet 
transportation goals. While many officials noted that they selected 
projects that could be started quickly, states and transit agencies 
have used the considerable latitude they have under the existing 
federal surface transportation structure to address a variety of state 
and local goals. For example, Iowa officials stated that they used a 
significant portion of their Recovery Act funds for resurfacing 
projects, which will reduce the demand for these types of projects and 
free up federal and state funding for larger, more complex projects in 
the near future. Massachusetts officials told us that the focus of the 
state's projects for reconstructing and rehabilitating roads is to 
select projects that promote the state's broader long-term economic 
development goals. Pennsylvania used nearly a third of its Recovery 
Act funds for bridge improvement and replacement (compared with 10 
percent nationally), in part because a significant percentage of its 
bridges are structurally deficient. In addition, many transit agency 
officials told us that they decided to use Recovery Act funding for 
transit infrastructure construction projects and related activities--
ranging from large-scale projects, such as upgrading power 
substations, to a series of smaller projects, such as installing 
enhanced bus shelters--since they were high-priority projects that 
either improve safety or would otherwise not have been funded. The 
Metropolitan Transportation Authority in New York State, for example, 
funded a number of public transportation projects that had been 
postponed because of budget constraints. Figure 7 shows obligations by 
the types of highway and public transportation projects funded. 

Figure 7: Nationwide Recovery Act Highway and Public Transportation 
Obligations by Project Type: 

[Refer to PDF for image: two pie-charts] 

Highway obligations: 

Pavement improvement: reconstruction/rehabilitation ($6.0 billion): 
25%; 
Pavement improvement: resurface ($5.4 billion): 23%; 
Pavement widening ($3.5 billion): 15%; 
New road construction ($1.5 billion): 7%; 
Bridge replacement ($1.2 billion): 5%; 
Bridge improvement ($1.2 billion): 5%; 
New bridge construction ($626 million): 3%; 
Other ($4.2 billion): 18%. 

Public transportation obligations: 

Transit infrastructure construction ($3.7 billion): 50%; 
Bus purchases and rehabilitation ($2 billion): 26%; 
Other capital expense ($906 million): 12%; 
Preventive maintenance ($622 million): 8%; 
Rail car purchases and rehabilitation ($281 million): 4%; 
Operating expense ($6 million): Less then 1%. 

Source: GAO analysis of FHWA and FTA data. 

Notes: Highway percentages may not add to 100 because of rounding. 
"Other" includes safety projects, such as improving safety at railroad 
grade crossing, and transportation enhancement projects, such as 
pedestrian and bicycle facilities, engineering, and right-of-way 
purchases. 

Public transportation percentages may not add to 100 because of 
rounding. "Transit infrastructure construction" includes engineering 
and design, acquisition, construction, and rehabilitation and 
renovation activities. "Other capital expenses" includes leases, 
training, finance costs, mobility management project administration, 
and other capital programs. This amount does include Recovery Act 
funds that were transferred from FHWA to FTA. 

Highway data are as of February 1, 2010 and public transportation data 
are as of January 15, 2010. 

[End of figure] 

Recovery Act Requirements Have Presented Challenges to Transportation 
Agencies: 

While funding is apportioned under the rules governing the current 
federal surface transportation structure, the Recovery Act has 
additional requirements that limit the latitude and flexibility that 
states and transit agencies normally have under the existing programs. 
Three Recovery Act requirements in particular have presented some 
challenges to some states and transit agencies, which have required 
the U.S. Department of Transportation (DOT) and the Office of 
Management and Budget (OMB) to issue multiple sets of clarifying 
guidance over the course of the year since the passage of the Recovery 
Act. 

One Recovery Act requirement is to give priority to projects that can 
be completed within 3 years and are that are located in economically 
distressed areas.[Footnote 30] As we previously reported, there has 
been substantial variation in the extent to which states prioritized 
projects in economically distressed areas and how they identified 
these areas. For example, we found instances of states developing 
their own eligibility requirements for economically distressed areas 
using data or criteria not specified in the Public Works and Economic 
Development Act. State officials told us that they did so to respond 
to rapidly changing economic conditions and, according to DOT 
officials, several states found that the data specified in the Public 
Works and Economic Development Act failed to recognize areas that 
suffered severe economic disruption, in part due to the difficulty in 
obtaining current data. In response to our July 2009 recommendation, 
FHWA, in consultation with the Department of Commerce, issued guidance 
to the states in August 2009 on (1) identifying and giving priority to 
economically distressed areas and (2) criteria to identify "special 
need" economically distressed areas that do not meet the statutory 
criteria in the Public Works and Economic Development Act. Three 
states in our review-- Arizona, California, and Illinois--developed 
their own eligibility requirements or applied a special need criterion 
that would have increased the number of counties being designated as 
economically distressed in these states. California's use of the 
special need criteria resulted in an increase from 49 to all 58 
counties being designated as distressed. FHWA reviewed the 
documentation provided by the three states and determined that the 
types of data used by those states are not consistent with FHWA 
guidance. FHWA is working with those states to identify conforming 
special need criteria.[Footnote 31] As we previously reported, 
widespread designations of special need areas would give added 
preference to highway projects for Recovery Act funding; however, it 
would also make it more difficult to target Recovery Act highway 
funding to areas that have been the most severely affected by the 
economic downturn. 

Another Recovery Act requirement is for the governor of each state to 
certify that the state will maintain the level of spending for the 
types of transportation projects funded by the Recovery Act that it 
planned to spend the day the Recovery Act was enacted. As part of this 
certification, the governor of each state is required to identify the 
amount of funds the state plans to expend from state sources from 
February 17, 2009, through September 2010.[Footnote 32] However, the 
challenges that states have faced in submitting their certifications 
coupled with their fiscal challenges raise questions as to whether the 
maintenance-of-effort provision will achieve its intended purpose of 
preventing states from substituting federal funds for some of their 
planned spending on transportation programs. Maintenance-of-effort and 
similar provisions are important mechanisms for helping ensure that 
federal economic stimulus spending achieves its intended effect of 
providing countercyclical assistance and increasing overall spending 
and investment. This can be particularly important in the highway 
program, as we have found in previous work that increasing federal 
highway funds influences states and localities to substitute federal 
funds for funds they otherwise would have spent on highways.[Footnote 
33] Such substitution makes it difficult to target an economic 
assistance package that results in increased spending and investment. 

This requirement has proven challenging to implement. Although the 
Recovery Act gave the states 30 days after enactment of the act to 
provide their certifications, many states have yet to complete a 
maintenance-of-effort certification that DOT finds fully acceptable. 
[Footnote 34] For example, as we reported in July 2009, most states 
had to revise their initial certifications because DOT found that many 
states submitted explanatory or conditional certifications that were 
subject to certain assumptions, future legislative action, or other 
conditions. DOT informed the states that such explanatory or 
conditional certifications were not permitted by the Recovery Act. 
Subsequently, in assessing the states' certified amounts for 
reasonableness, DOT found inconsistencies and confusion among the 
states, including how states calculated their planned expenditures and 
how states treated funding related to in-kind contributions, bond 
proceeds, and aid to local governments. Given the inconsistencies and 
confusion, and in response to questions from the states, DOT has 
issued multiple guidance documents to the states and some states have 
submitted multiple revisions to their certifications. On February 9, 
2010, DOT requested that each state review its current certification 
and take any corrective action with regard to the state's calculation 
of the maintenance-of-effort amount on or before March 11, 2010. 
[Footnote 35] According to FHWA officials, they expect many states to 
submit revised certifications, including 12 of the 16 states and the 
District that we reviewed for our study. As a result, these states are 
now in the position of determining what they planned to spend over a 
year ago on transportation from February 17, 2009, through September 
30, 2010, and adjusting these planned expenditure levels to reflect 
various guidance from DOT but not for the economic and budgetary 
changes their states have experienced over the last year. According to 
DOT officials, DOT has not determined a date for finalizing its review 
of these certifications because department officials are uncertain 
what will be included in the certifications and whether they will 
comply with DOT guidance. 

Given the fiscal condition of many states, it is unclear whether 
states will be able to maintain the certified levels of effort. 
Although the state officials we spoke with are committed to trying to 
meet the maintenance-of-effort requirements, several told us that the 
current decline in state revenues, such as declines in state fuel tax 
and other sources used for state and state-funded local highway 
projects, as well as possible reductions in their departments' fiscal 
years 2010 or 2011 budgets, may make it more difficult for them to 
maintain their levels of transportation spending. For example, 
Mississippi and Ohio transportation officials stated that if their 
legislatures reduce their respective departments' budget for fiscal 
years 2010 or 2011, the departments may have difficulty maintaining 
certified spending levels. 

DOT officials told us they will continue to monitor the progress 
states are making to meet their maintenance-of-effort requirements and 
to collect and disseminate lessons learned from the process. However, 
the Recovery Act does not require DOT to make a determination as to 
whether states have met their required program expenditures until 
around 6 months after the maintenance-of-effort provision covered time 
period expires on September 30, 2010. Specifically, the act does not 
require states to report the amount of funds they planned to expend 
and the actual expenditures from state sources until February 2011, 
and DOT to assess the penalty for not meeting the requirement until 
August 2011. More timely information from the states on the progress 
they are making in meeting the maintenance-of-effort requirements 
could better inform policymakers' decisions on the usefulness and 
effectiveness of the maintenance-of-effort requirements and of 
imposing similar provisions in future legislation. 

State highway and transit officials have also had challenges in 
complying with the reporting requirements under Section 1201(c) and 
the Section 1512 recipient reporting requirements of the Recovery Act, 
which have necessitated multiple issuances of supplemental guidance 
from both DOT and OMB. Section 1201(c) is only required for recipients 
of Recovery Act transportation funds, while the Section 1512 recipient 
reporting requirement is required for recipients of any Recovery Act 
funds. While DOT and OMB have provided training and guidance, such as 
conducting webinars--three on the Section 1201(c) reporting process 
and four on the recipient reporting process--and issuing implementing 
guidance on recipient reporting, we found that there was confusion 
among states about a number of reporting requirements, including how 
to calculate the number of jobs created or sustained. For example, 
four transit agencies in Pennsylvania used different denominators to 
calculate the number of full-time equivalent (FTE) jobs they reported 
for their September 30, 2009, recipient report submissions. The 
conflicting requirements between Section 1201(c) and Section 1512, of 
direct and indirect jobs created or retained, posed challenges as to 
how transit agencies should report project contractors and 
subcontractors and what FTE methodology recipients should use for the 
first recipient reporting period. OMB issued guidance on December 18, 
2009, that simplified the FTE calculation and the period of 
performance for the recipient reporting requirement. In addition, on 
February 1, 2010, FTA issued guidance to transit agencies instructing 
them to use the same methodology for calculating jobs retained through 
vehicle purchases under Section 1201 as they had been using for the 
recipient reporting. This revised previous guidance that had 
instructed transit agencies to use different methodologies for vehicle 
purchases under Section 1201 and Section 1512. The Recovery Act 
requirements and supplemental guidance have created many challenges 
for state highway and transit program officials who were only 
accustomed to meeting normal reporting requirements. 

Another Recovery Act requirement is for states and transit agencies to 
ensure that all apportioned Recovery Act funds are obligated within 1 
year--the Secretary of Transportation is to withdraw and redistribute 
to eligible states any amount that is not obligated within this time 
frame. As of February 16, 2010, when we completed fieldwork, states 
and transit agencies were well on their way to meeting the 1-year 
deadline. Obligating funds in a timely manner is an important feature 
of the Recovery Act, as an economic stimulus package should, as we 
have reported, include projects that can be undertaken quickly enough 
to provide a timely stimulus to the economy.[Footnote 36] However, our 
prior reports have also identified challenges and issues associated 
with the 1-year deadline, in particular, for highways. These 
challenges and issues have required DOT, through FHWA, to exercise 
diligence as the deadline approached to ensure that Recovery Act funds 
were not only obligated in a timely manner, but also used to meet the 
goals of the act. Specifically, we have previously reported the 
following: 

* Obligations for projects in suballocated areas generally lagged 
behind obligations for statewide projects in many states and lagged 
considerably in a few states, but these obligations have been 
increasing. As of February 16, 2010, all states and suballocated areas 
appeared to be on track to meet the deadline. However, some states 
needed to obligate a significant amount of funds quickly as the 
deadline approached, and this posed some challenges for both states 
and FHWA. For example, according to a senior FHWA official, some 
states have minimal "shelf depth," that is, projects that are ready to 
be started and are eligible for Recovery Act funding. This requires 
states to either accelerate project planning or have those Recovery 
Act funds withdrawn. As the DOT Office of Inspector General has 
reported, FHWA faces oversight challenges when states accelerate 
project planning, as hastily amended plans could result in states or 
localities selecting imprudent projects or ones that do not meet 
Recovery Act goals.[Footnote 37] We will continue to monitor the 
states' and FHWA's actions leading up to the 1-year deadline for our 
subsequent Recovery Act bimonthly reports. 

* Many highway contracts were awarded for less than the original cost 
estimates. These "bid savings" allowed states to fund more projects 
with the Recovery Act funding than were initially anticipated. To use 
bid savings, a state may need to request that DOT deobligate the funds 
associated with the bid savings and then obligate the funds for a new 
project. In addition, any funds that were deobligated prior to the 
March 2, 2010, deadline must also have been obligated for a new 
project before March 2 to avoid being withdrawn for redistribution to 
other states. However, if funds are deobligated after the March 2, 
2010, deadline, those funds will be available for obligation to new 
projects until September 30, 2010. Thus, for known bid savings, it was 
important for DOT to carefully monitor and determine that states did 
not attempt to circumvent the 1-year requirement--which is intended to 
ensure that funds are put to use quickly. To that end, in December 
2009 and January 2010, FHWA provided guidance to its field offices 
reminding them that the FHWA regulations require that within 90 days 
of determining that the estimated federal share of project costs has 
decreased by $250,000 or more, states are required to request that 
FHWA deobligate these funds. FHWA's guidance also stated that above 
and beyond the 90-day rule, it was in the states' best interest to 
ensure that as much as possible was deobligated before the Recovery 
Act 1-year deadline, consistent with normal state processes for such 
activities. While states have been having FHWA deobligate Recovery Act 
funds regularly since the passage of the act, some states with known 
bid savings decided not to request that FHWA deobligate funds for 
projects for contracts awarded after mid-December 2009 because, 
according to these states, there was not sufficient time to deobligate 
funds and submit new projects for obligation before the March 2, 2010, 
deadline. We will continue to report on the status of contract bid 
savings and the deobligation of Recovery Act highway funds after the 
March deadline for our subsequent Recovery Act bimonthly reports and 
to monitor whether actions states took were consistent with state 
processes and FHWA guidance. 

* FHWA has the authority to transfer Recovery Act highway 
infrastructure funds to FTA for eligible transit projects.[Footnote 
38] In September and December 2009, we reported that FHWA had 
transferred approximately $290 million to FTA. As of February 1, 2010, 
this amount increased to $332 million, and, as of February 16, to $407 
million--an increase of $75 million in a 2-week period. DOT officials 
believe that Recovery Act funds transferred to FTA do not have to 
comply with either the highway or transit Recovery Act 1-year 
obligation deadline because other provisions of law govern how funds 
made available through transfers for projects or transportation 
planning are treated, but that transferred funds must meet the 
Recovery Act's requirement that all funds be fully obligated by the 
September 30, 2010. Thus, according to DOT's interpretation, a state 
that did not have 100 percent of its highway funds obligated as it 
approached the 1-year deadline could request a transfer of highway 
funds to FTA for an identified transit project after which it would 
have until September 2010 to have FTA obligate these funds. We will 
continue to monitor the status of transferred funds, including the 
amounts transferred and how these funds were used. 

While we will continue to monitor DOT's efforts other government 
entities are also planning audit activity related to Recovery Act 
funds. For example, DOT's Inspector General has completed an audit on 
DOT's implementation of the Recovery Act. The DOT Inspector General is 
also conducting several audits on other Recovery Act issues such as 
job creation and DOT oversight. In addition, eleven of our selected 
states and the District have completed, are conducting, or plan to 
conduct audit activities involving Recovery Act funded 
transportation/highway projects. 

Recommendation for Executive Action: 

The Secretary of Transportation should gather timely information on 
the progress states are making in meeting the maintenance-of-effort 
requirements and report preliminary information to Congress within 60 
days of the certified period (Sept. 30, 2010), on (1) whether states 
met required program expenditures as outlined in their maintenance-of- 
effort certifications, (2) the reasons that states did not meet these 
certified levels, if applicable, and (3) lessons learned from the 
process. 

Recovery Act Education Funds Have Been Used Primarily to Fund 
Education Staff and, to a Lesser Extent, Innovation and Reform: 

Even with the influx of Recovery Act funds, the budget condition of 
local educational agencies (LEA) across the country is mixed, with 
some still facing large budget cuts. The Recovery Act provided $53.6 
billion[Footnote 39] in appropriations for the State Fiscal 
Stabilization Fund (SFSF) to be administered by the U.S. Department of 
Education (Education), as well as additional funds for existing 
education programs, including Title I, Part A of the Elementary and 
Secondary Education Act of 1965 (ESEA), as amended, and parts B and C 
of the Individuals with Disabilities Education Act (IDEA), as amended. 
Education, in its guidance and communications to states and LEAs, has 
emphasized the opportunity for education funds under the Recovery Act 
to be used for innovation and reform. Most LEAs reported that they 
considered Education's stated goals to be important when planning for 
uses of Recovery Act funds, although in the context of decreasing 
state and local revenues, much of the Recovery Act education funds 
have been used to fund education staff positions, including teachers. 
Other uses include items that could help build long-term capacity and 
advance educational goals and reform while also avoiding recurring 
costs for LEAs. Education has worked closely with states and 
localities in helping them use Recovery Act funds, but the influx of 
funds has illustrated the need for Education to work with states to 
ensure that they have adequate cash management processes in place, as 
well as transparent means to establish that they are complying with 
maintenance-of-effort provisions. Education has also engaged in 
numerous efforts to facilitate reporting by states and LEAs on jobs 
created and retained by the Recovery Act, but state and local 
officials we spoke with raised some concerns about the quality of jobs 
data reported in October 2009. 

Even with Recovery Act Funds, LEAs' Budget Situations Vary: 

Even with the current infusion of Recovery Act funding for education 
programs, the budget condition of LEAs across the country is mixed, 
according to our national survey of LEAs. According to the 
Congressional Research Service, the Recovery Act provided 
approximately $100 billion for discretionary education programs--
elementary, secondary, and postsecondary--in fiscal year 2009, which, 
when combined with regular appropriations, represents about a 235 
percent increase in federal funding compared to fiscal year 2008. 
Based on our national survey results, we estimate that approximately 
the same amount of LEAs--17 percent--face decreases of 5 percent or 
more in total education funding--federal, state, and local--as face 
funding increases of 5 percent or more for the current school year. On 
the other hand, an estimated 57 percent of LEAs reported smaller or no 
funding changes for the current school year. Education funding in the 
United States primarily comes from state and local governments. Prior 
to the influx of Recovery Act funding for education from the federal 
government, LEAs, on average, derived about 48 percent of their fiscal 
year 2007 funding budget from state funds, 44 percent from local 
funds, and 9 percent from federal funds.[Footnote 40] Figure 8 shows 
the estimated percentage of LEAs nationally that are facing budget 
fluctuations of 5 percent or more by funding source--state, local, and 
federal. 

Figure 8: Estimated Percentage of LEAs Nationally with Funding 
Decreases and Increases of 5 Percent or More for School Year 2009-
2010, by Source of Funding: 

[Refer to PDF for image: horizontal bar graph] 

Source of funding: State; 
Percentage of LEAs with decrease of 5 percent or more: 41%; 
Percentage of LEAs with increase of 5 percent or more: 7%. 

Source of funding: Local; 
Percentage of LEAs with decrease of 5 percent or more: 17%; 
Percentage of LEAs with increase of 5 percent or more: 9%. 

Source of funding: Federal; 
Percentage of LEAs with decrease of 5 percent or more: 6%; 
Percentage of LEAs with increase of 5 percent or more: 50%. 

Source of funding: Total funding; 
Percentage of LEAs with decrease of 5 percent or more: 17%; 
Percentage of LEAs with increase of 5 percent or more: 17%. 

Source: GAO survey of LEAs. 

Notes: Percentage estimates for these nationwide estimates have 
margins of error, at the 95 percent confidence level, of plus or minus 
5 percentage points or less. 

[End of figure] 

The budgetary picture for LEAs ranges widely across states. According 
to our survey, we estimate that nearly 40 percent of LEAs in 
California, Georgia, and North Carolina face overall funding cuts of 5 
percent or more, while about 30 percent of LEAs in Texas, Mississippi, 
and New Jersey reported total education funding increases of 5 percent 
or more.[Footnote 41] 

States Varied in the Rate at Which They Have Drawn Down Recovery Act 
Funds for Education Programs: 

Rates of spending for education under the Recovery Act have varied: as 
of January 2010, 9 states had drawn down 75 percent or more of their 
awarded education stabilization funds, while 3 states and the District 
of Columbia had drawn down less than 25 percent of these funds. 
[Footnote 42] (See table 3.) Budget debates at the state level delayed 
the initial allocation and spending of education-related funds in some 
states. According to officials in 3 of the states we visited, the 
state budget process slowed the release of funds and the ability of 
local and state educational agencies to finalize their plans for using 
ESEA Title I Recovery Act funds. For example, in Pennsylvania, ESEA 
Title I and IDEA funds could not be expended until the legislature 
passed a stopgap budget in August 2009, according to state officials. 
Also, the rate of spending was affected by how quickly some states 
were able to obtain assurances and applications from their LEAs that 
the funds would be used in accordance with applicable provisions of 
the Recovery Act and other requirements. Nearly all of the 16 states 
and the District of Columbia required each LEA to submit an 
application, a budget, or a detailed plan as a condition for receiving 
Recovery Act funding, but the amount of time needed to complete these 
processes varied. According to a Pennsylvania official, in February 
2010, the state completed its review of LEAs' SFSF applications and 
was finalizing the documentation needed to provide the funds to LEAs, 
and most LEAs were expected to receive SFSF funds in March 2010. 

Table 3: Percentage of Awarded Education Stabilization, ESEA Title I, 
and IDEA, Part B Recovery Act Funds Drawn Down by States as of January 
22, 2010: 

Percentage of awarded Recovery Act funds drawn down: 

State: Arizona; 
Education stabilization funds: 90%; 
ESEA Title I: 18%; 
IDEA, Part B: 14%. 

State: California; 
Education stabilization funds: 90%; 
ESEA Title I: 41%; 
IDEA, Part B: 22%. 

State: Colorado; 
Education stabilization funds: 75%; 
ESEA Title I: 4%; 
IDEA, Part B: 6%. 

State: District of Columbia; 
Education stabilization funds: 0; 
ESEA Title I: 0; 
IDEA, Part B: 0. 

State: Florida; 
Education stabilization funds: 34%; 
ESEA Title I: 19%; 
IDEA, Part B: 24%. 

State: Georgia; 
Education stabilization funds: 89%; 
ESEA Title I: 10%; 
IDEA, Part B: 12%. 

State: Illinois; 
Education stabilization funds: 92%; 
ESEA Title I: 6%; 
IDEA, Part B: 22%. 

State: Iowa; 
Education stabilization funds: 82%; 
ESEA Title I: 32%; 
IDEA, Part B: 40%. 

State: Massachusetts; 
Education stabilization funds: 76%; 
ESEA Title I: 11%; 
IDEA, Part B: 17%. 

State: Michigan; 
Education stabilization funds: 85%; 
ESEA Title I: 14%; 
IDEA, Part B: 7%. 

State: Mississippi; 
Education stabilization funds: 49%; 
ESEA Title I: 8%; 
IDEA, Part B: 2%. 

State: New Jersey; 
Education stabilization funds: 92%; 
ESEA Title I: 1%; 
IDEA, Part B: 4%. 

State: New York; 
Education stabilization funds: 10%; 
ESEA Title I: 1%; 
IDEA, Part B: 6%. 

State: North Carolina; 
Education stabilization funds: 57%; 
ESEA Title I: 20%; 
IDEA, Part B: 26%. 

State: Ohio; 
Education stabilization funds: 41%; 
ESEA Title I: 16%; 
IDEA, Part B: 20%. 

State: Pennsylvania; 
Education stabilization funds: 0; 
ESEA Title I: 30%; 
IDEA, Part B: 25%. 

State: Texas; 
Education stabilization funds: 16%; 
ESEA Title I: 14%; 
IDEA, Part B: 15%. 

State: Total; 
Education stabilization funds: 58%; 
ESEA Title I: 17%; 
IDEA, Part B: 17%. 

Source: GAO analysis of U.S. Department of Education data. 

[End of table] 

With Many LEAs Facing Budget Cuts and Fiscal Pressures, Job Retention 
Is the Primary Planned Use of Recovery Act Education Funds: 

Our survey results indicate that job retention for education staff, 
including teachers, was the top planned use for Recovery Act funds for 
LEAs across the three federal education programs we reviewed. An 
estimated 63 percent of LEAs plan to use more than 50 percent of their 
Recovery Act SFSF funds to retain jobs, while an estimated 25 percent 
and 19 percent of LEAs said they planned to use over half of their 
Recovery Act funds on job retention under ESEA Title I, Part A and 
IDEA, Part B, respectively. In one example, education officials in the 
small, rural school district of Jasper-Troupsburg in upstate New York 
told us that they would use 95 percent of their Recovery Act funds to 
retain jobs. Because employee-related expenditures are the largest 
category of school expenditures--with salaries and benefits accounting 
for more than 80 percent of local school expenditures, according to 
Education's most recent estimates--it is understandable that LEAs 
would use much of their Recovery Act funds for staff salaries. Also, 
given the fiscal uncertainty and substantial budget shortfalls facing 
states, federal funds provided by the Recovery Act give LEAs 
additional support for the retention of teachers and other education 
staff. Overall, the nationwide impact of Recovery Act education funds 
on job retention may be significant because K-12 public school systems 
employ about 6.2 million staff, based on Education's estimates, and 
make up about 4 percent of the nation's workforce. 

However, an estimated 32 percent of LEAs nationally expected to lose 
jobs, even with SFSF funds, but the percentage of LEAs expecting to 
lose jobs varies by state. (See figure 9.) Among the states with 
higher percentages of LEAs expecting job losses even with SFSF funds 
were Georgia, Florida, North Carolina, and California.[Footnote 43] 
According to our analysis, in all of these states except for Florida, 
the proportion of LEAs that experienced decreases of 5 percent or more 
in total education funding from last year was larger than the national 
average of 17 percent. 

Figure 9: Estimated Percentage of LEAs Expecting Decreases in the 
Number of Jobs, Even with Recovery Act SFSF Funds, by State: 

[Refer to PDF for image: vertical bar graph] 

National average: 32%. 

State: Georgia; 
LEAs Expecting Decreases in the Number of Jobs: 64.6%. 

State: Florida; 
LEAs Expecting Decreases in the Number of Jobs: 55.51%. 

State: North Carolina; 
LEAs Expecting Decreases in the Number of Jobs: 54.36%. 

State: California; 
LEAs Expecting Decreases in the Number of Jobs: 49.52%. 

State: Michigan; 
LEAs Expecting Decreases in the Number of Jobs: 44.72%. 

State: Arizona; 
LEAs Expecting Decreases in the Number of Jobs: 34.2%. 

State: New York; 
LEAs Expecting Decreases in the Number of Jobs: 33.86%. 

State: Iowa; 
LEAs Expecting Decreases in the Number of Jobs: 31.49%. 

State: Massachusetts; 
LEAs Expecting Decreases in the Number of Jobs: 28.11%. 

State: Texas; 
LEAs Expecting Decreases in the Number of Jobs: 20.16%. 

State: Mississippi; 
LEAs Expecting Decreases in the Number of Jobs: 19.65%. 

State: Ohio; 
LEAs Expecting Decreases in the Number of Jobs: 12.53%. 

State: New Jersey; 
LEAs Expecting Decreases in the Number of Jobs: 12.46%. 

State: Illinois; 
LEAs Expecting Decreases in the Number of Jobs: 10.06%. 

State: Pennsylvania; 
LEAs Expecting Decreases in the Number of Jobs: 6.21%. 

Source: GAO survey of LEAs. 

Notes: Colorado was not included in our analysis of SFSF fund use 
because the state did not allocate these funds to LEAs. Given its 
ongoing fiscal support to LEAs, Colorado allocated its education 
stabilization funds to institutions of higher education. 

Percentage estimates for states have margins of error, at the 95 
percent confidence level, of plus or minus 12 percentage points or 
less (Arizona, Iowa, Mississippi, and Pennsylvania have a margin of 
error of 13 percent; New Jersey has a margin of error of 15 percent; 
and Massachusetts has a margin of error of 16 percent). The nationwide 
percentage estimates have a margin of error of plus or minus 5 
percentage points. 

[End of figure] 

In our survey, LEAs reported that they planned to spend some of their 
Recovery Act funds on items that could help build long-term capacity 
and advance educational goals and reform while also avoiding recurring 
costs for LEAs. In addition to helping stabilize budgets and retain 
and create jobs, Education's guidance released to states in April 2009 
noted that education funds under the Recovery Act "provide a unique 
opportunity to jump start school reform and improvement efforts," and 
suggested possible ways to use Recovery Act funds in several 
categories. We estimate that most LEAs--about 80 percent--gave great 
or very great importance to "improving results for students" in 
deciding how to use Recovery Act funds, while "increasing educators' 
long term capacity" was the next most cited. After job retention and 
creation, LEAs surveyed also reported several onetime expenditures, 
such as purchasing technological equipment, including new computers; 
providing professional development for instructional staff; and 
purchasing instructional materials, as among the highest uses of 
funds. Figure 10 shows the national estimated percentages of LEAs that 
reported planning to use more than a quarter of their Recovery Act 
funds for these three nonrecurring budgetary items across the three 
education programs. 

Figure 10: Estimated Percentage of LEAs Nationally Planning to Use 
More Than 25 Percent of Their Recovery Act Funds from the SFSF, ESEA 
Title I, and IDEA Programs for Professional Development, Technological 
Equipment, and Instructional Materials: 

[Refer to PDF for image: vertical bar graph] 

Recovery Act funding source: IDEA; 
Providing professional development for instructional staff: 12.73%; 
Purchasing technological equipment: 21.65%; 
Purchasing instructional materials: 11.4%. 

Recovery Act funding source: Title I: 
Providing professional development for instructional staff: 15.08%; 
Purchasing technological equipment: 18.36%; 
Purchasing instructional materials: 12.45%. 

Recovery Act funding source: SFSF: 
Providing professional development for instructional staff: 8.41%; 
Purchasing technological equipment: 8.88%; 
Purchasing instructional materials: 8.17%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for these nationwide estimates have margins 
of error, at the 95 percent confidence level, of plus or minus 5 
percentage points or less. 

[End of figure] 

Education Continues to Work with Some States to Address Cash 
Management Challenges: 

The substantial increase in federal education funds going to states 
because of the Recovery Act has increased the importance of having 
cash management systems in place to ensure that funds are spent timely 
once they are drawn down by states. However, several states did not 
initially have cash management systems in place for SFSF funds that 
could disburse funds to LEAs when they were needed and ensure the 
calculation and remittance of any interest due.[Footnote 44] For 
example, Illinois has distributed SFSF funds to LEAs in semimonthly 
payments, but according to state officials, the state did not have the 
ability to identify specific cash needs from LEAs prior to 
distributing these funds. Also, California drew down 80 percent of its 
available ESEA Title I, Part A Recovery Act funds in May 2009 and 
immediately distributed them to LEAs. According to Education 
officials, California Department of Education (CDE) officials said 
that the drawdown was in lieu of its normally scheduled drawdown of 
school year 2008-2009 ESEA Title I funds, and therefore the schools 
would be ready to use the funds quickly. However, in August, we 
contacted the 10 LEAs in California that had received the largest 
amounts of ESEA Title I, Part A Recovery Act funds and found that 7 
had not spent any of these funds and that all 10 reported large cash 
balances--ranging from $4.5 million to about $135 million--which 
raised issues about the state's compliance with applicable cash 
management requirements. In order to address its cash management 
issues, CDE has implemented a pilot project to test its Web-based cash 
management data collection system. CDE officials said they plan to 
expand the pilot to include regular and Recovery Act ESEA Title I and 
SFSF cash balances by October 2010.[Footnote 45] Illinois has also 
taken action to help ensure compliance with cash management 
requirements, and Education is providing these states, and others, 
with targeted technical assistance on cash management. Education's 
Office of Inspector General has also focused on cash management 
practices in its work and issued an alert memo on October, 21, 2009, 
which pointed out that states need to ensure that funds are 
distributed to LEAs when they are needed to pay program costs, and 
that states need to have controls in place to ensure that LEAs remit 
interest earned on Recovery Act fund balances at least quarterly. 
[Footnote 46] We will continue to monitor cash management issues 
related to Recovery Act education funds. 

Education Is Developing Plans to Monitor and Enforce State Compliance 
with Maintenance-of-Effort Requirements and Subrecipient Monitoring: 

The Recovery Act requires that each state make assurances that it 
would meet maintenance-of-effort (MOE) requirements for elementary and 
secondary (K-12) education and public institutions of higher education 
(IHE) as a condition of receiving SFSF funds. Education required 
governors in their phase I SFSF applications to provide assurances 
that their states will meet MOE requirements or that they will be able 
to comply with waiver provisions,[Footnote 47] and for phase II states 
are required to attest that they met MOE requirements in fiscal year 
2009. In order to meet SFSF MOE requirements, a state must maintain 
state support for K-12 education and IHEs at least at fiscal year 2006 
levels in fiscal years 2009, 2010, and 2011. 

After maintaining state support at no less than fiscal year 2006 
levels, states must first use education stabilization funds to restore 
state funding to the greater of fiscal year 2008 or 2009 levels for 
state support to K-12 school districts and IHEs in fiscal years 2009 
through 2011. Education disseminated several guidance documents to 
states in the spring and summer of 2009 to assist states in defining 
their MOE amounts. In determining, for MOE purposes, the state level 
of support for K-12 education in fiscal year 2006, Education guidance 
said states must include funding provided through their primary 
formulas for distributing funds to school districts. However, 
Education also allowed states some flexibility in choosing the basis 
they use to measure MOE, as well as in what they include or exclude in 
their MOE definition. Further, Education directed states to amend 
their SFSF applications to reflect any final budget changes and, in 
the amended applications, provide final assurance that they will meet 
MOE levels or apply for waivers. Specifically, according to Education 
guidance, a state must amend its SFSF application if there are changes 
to the reported levels of state support for education that were used 
to determine the MOE amount or to calculate the amounts needed to 
restore state support for education to the fiscal year 2008 or 2009 
level. Education officials said adjustments were made to fiscal year 
2006 MOE levels because, as state fiscal year 2009 budgets become 
final, states are attempting to develop equivalent information for 
both their fiscal year 2006 levels of support calculation and their 
calculations for fiscal year 2009. However, guidance from Education 
does not require states to include an explanation for changes made to 
MOE calculations in their resubmitted applications, reducing 
transparency in terms of what has changed from previously approved 
applications. Given that some states decreased their fiscal year 2006 
MOE funding levels by billions of dollars, an explanation of why this 
change was made would allow the public and policymakers alike the 
ability to better understand the action. We recommended in November 
2009 that the Secretary of Education take further action to enhance 
transparency by requiring states to include an explanation of changes 
to MOE levels in their SFSF application resubmissions.[Footnote 48] 
Education agreed with our recommendation, and we are continuing to 
work with Education to ensure that actions are taken to enhance 
transparency of state MOE changes. 

Education has informed states of the requirements for monitoring 
subrecipients' use of SFSF funds, but it is not clear that states have 
focused on this requirement. Education enumerated administrative 
requirements in the SFSF application and required governors to provide 
assurances that they would comply with the requirements. However, we 
previously reported in September 2009 that it was not clear that all 
states had begun to put in place subrecipient monitoring systems that 
comply with Education's requirements, which include a monitoring 
schedule, procedures, and processes to verify that corrective actions 
are implemented. We recommended that the Secretary of Education take 
further action, such as collecting and reviewing documentation of 
state monitoring plans, to ensure that states understand and fulfill 
their responsibility to monitor subrecipients of SFSF funds and 
consider providing training and technical assistance to states to help 
them develop and implement state monitoring plans for SFSF. Education 
developed a plan to monitor state implementation of the SFSF program 
that will include reviewing state processes and documents for 
monitoring subrecipients and making site visits to selected states. 
Education officials also said they are taking several steps both to 
monitor information they are receiving from states and to provide 
technical assistance to states. For example, according to Education 
officials, prior to approving SFSF awards, Education reviewed each 
state's application to ensure that the state complied with statutory 
requirements to receive the funds.[Footnote 49] 

Housing Agencies Have Continued to Make Progress on Obligating 
Recovery Act Funds, but Capacity Issues Have Presented Challenges to 
Both HUD and Some Housing Agencies: 

The Recovery Act requires the U.S. Department of Housing and Urban 
Development (HUD) to allocate $3 billion through the Public Housing 
Capital Fund to public housing agencies using the same formula for 
amounts made available in fiscal year 2008. HUD allocated Capital Fund 
formula dollars to public housing agencies shortly after passage of 
the Recovery Act and, after entering into agreements with more than 
3,100 public housing agencies, obligated these funds on March 18, 
2009.[Footnote 50] A HUD Inspector General report found that HUD had 
allocated the funds appropriately and met the requirements of the 
Recovery Act.[Footnote 51] As of January 30, 2010, 2,910 public 
housing agencies (93 percent of the housing agencies that entered into 
agreements with HUD for Recovery Act funds) had reported to HUD that 
they had obligated a total of $2.07 billion, or about 69 percent of 
the total Capital Fund formula funds HUD allocated to them (see figure 
11). According to HUD officials, housing agencies report obligations 
after they have entered into binding commitments to undertake specific 
projects. Housing agencies previously were required to report 
obligations at least once per month, but in December 2009 HUD 
officials requested that housing agencies report obligations as funds 
are obligated in order to provide HUD with up-to-date data to inform 
monitoring and outreach efforts. A majority of housing agencies that 
had obligated funds--2,514 of 2,910 housing agencies--had also drawn 
down funds in order to pay for project expenses already incurred. In 
total, as of January 30, 2010, public housing agencies had drawn down 
almost $653 million, or about 22 percent of the total HUD allocated to 
them. The Recovery Act requires 60 percent of the funds to be expended 
by March 2011 and 100 percent by March 2012. 

Figure 11: Percentage of Public Housing Capital Fund Formula Grants 
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide as 
of January 30, 2010: 

[Refer to PDF for image: 3 pie-charts] 

Funds obligated by HUD: 99.9%; $2,982,579,023; 
Funds obligated by public housing agencies: 69.5%; $2,073,764,791; 
Funds drawn down by public housing agencies: 21.9%; $653,217,419. 

Number of public housing agencies: 
Entering into agreements for funds: 3,122; 
Drawing down funds: 2,910; 
Obligating funds: 2,514. 

Source: GAO analysis of data from HUD's Electronic Line of Credit 
Control System. 

[End of figure] 

The Recovery Act requires that housing agencies obligate 100 percent 
of their funds within 1 year from when the funds became available, 
which means they have until March 17, 2010, to obligate 100 percent of 
their funds. As of January 30, 2010, 559 housing agencies (18 percent) 
had reported obligating 25 percent of their funds or less, including 
212 (7 percent) that had reported obligating none of their Recovery 
Act funds (see figure 12). However, about half of housing agencies had 
reported obligating 100 percent of their funds as of January 30, 2010, 
placing them ahead of the Recovery Act's 12-month deadline. An 
additional 522 housing agencies (17 percent) had reported obligating 
more than 75 percent of their funds as of January 30, 2010. 

Figure 12: Housing Agencies' Obligations of Recovery Act Funds by 
Quartile as of January 30, 2010: 

[Refer to PDF for image: vertical bar graph] 

Percent of fund obligated: 0-25%;
Percentage of housing agencies: 18%. 

Percent of fund obligated: 25.01-50%; 
Percentage of housing agencies: 6%. 

Percent of fund obligated: 50.01-75%; 
Percentage of housing agencies: 9%. 

Percent of fund obligated: 75.01-100%; 
Percentage of housing agencies: 67%. 

Source: GAO analysis of data from HUD's Electronic Line of Credit 
Control System. 

[End of figure] 

Public housing agencies may use Recovery Act funds for any eligible 
uses allowed under the regular Capital Fund program, except that no 
funds may be used for operations or rental assistance, and HUD 
regulations limit the amount of funds that can be used for 
administration and management improvements. We examined 83 projects at 
47 selected housing agencies in greater depth. Housing agency 
officials stated that 31 of these projects include roofing or gutter 
work, 23 include replacing windows or doors, 19 involve rehabilitating 
unit interiors, and 16 projects include replacing heating, cooling, or 
hot water systems. Other uses we encountered include renovating common 
areas, repairing sidewalks, repaving parking lots, and replacing 
security systems. Depending on the scope of the projects, multiple 
activities could be undertaken for a single project. 

The Recovery Act required housing agencies to give priority to 
projects already under way or in their 5-year plans, projects that can 
award contracts based on bids within 120 days, and projects that 
rehabilitate vacant rental units. Housing agencies generally selected 
projects that were in their 5-year plans. In addition, HUD required 
housing agencies that wanted to use Recovery Act funds on work items 
not already in an approved annual or 5-year plan to revise their plans 
to include the work items and resubmit the plans for HUD approval. 
Twenty-eight of the 47 housing agencies we selected said they were 
able to award at least one contract based on bids within 120 days of 
the funds becoming available. Most of the selected housing agencies 
reported having few vacant units. Some of their projects involved 
rehabilitating a few vacant units at one or more properties, while 
others focused on other priorities. For a few housing agencies we 
spoke with, however, vacant units were a major issue, and these 
housing agencies were more likely to include projects that 
rehabilitate vacant units in their plans for Recovery Act funds. In 
particular, 5 housing agencies--Newark Housing Authority in New 
Jersey, Philadelphia Housing Authority, San Francisco Housing 
Authority, Cuyahoga Metropolitan Housing Authority in Ohio, and 
Chicago Housing Authority--planned to use Recovery Act funds to 
rehabilitate a total of about 1,400 vacant units.[Footnote 52] 

The 47 selected housing agencies were able to address several 
priorities of the Recovery Act with some project selections. Across 
all their projects, 12 of the 47 selected housing agencies reported 
that they were able to address all three priorities by selecting 
projects from an approved 5-year plan, awarding at least one contract 
within 120 days, and rehabilitating 1 or more vacant units. Of the 83 
projects we examined in greater depth at the 47 selected housing 
agencies, housing agency officials said 9 projects addressed all three 
priorities, while 36 projects addressed two of the three priorities. 
The selected housing agencies were more likely to have projects for 
which they could award one or more contracts within 120 days than to 
have projects that rehabilitate vacant rental units. 

In addition to awarding Capital Fund formula dollars, HUD was also 
required under the Recovery Act to award nearly $1 billion to public 
housing agencies based on competition for priority investments, 
including investments that leverage private sector funding or 
financing for renovations and energy conservation retrofitting. HUD 
accepted applications from June 22 to August 18, 2009, and according 
to a HUD official, 746 housing agencies submitted 1,817 applications 
for these competitive grants. In September 2009, HUD awarded 396 
competitive grants in the amount of $995 million for the creation of 
energy-efficient communities, gap financing for projects stalled 
because of financing issues, public housing transformation, and 
improvements addressing the needs of the elderly or persons with 
disabilities. As of January 30, 2010, housing agencies had reported 
obligations totaling about $79 million for 128 grants. 

Some Housing Agencies Lacked Capacity to Apply for and Administer 
Recovery Act Grants: 

Capacity, especially with regard to staffing levels, was a substantial 
barrier to applying for competitive grants for a variety of housing 
agencies we visited, including at least three housing agencies that 
were awarded competitive grants.[Footnote 53] Some housing agency 
officials that we interviewed stated that timing constraints presented 
issues when applying. For example, officials from one agency had a 
contractor assist with the application because their staff did not 
have the capacity to complete it in time. These officials further 
stated that the timing for the competitive grant applications drained 
limited resources and caused delays in administering the formula grant 
funds. Also, the officials stated that the Recovery Act did not allow 
recipients to adequately strengthen their workforces to handle the 
additional workloads brought on by the act's funding. Similarly, 
officials from another housing agency stated that the agency lacked 
the time and staff to complete the water and energy consumption 
assessments to include in their competitive grant application. They 
instead used conservative water-and energy-saving estimates, which 
resulted in a lower application score and which they believe 
contributed to their agency not receiving any competitive grant 
funding. In addition, officials from one housing agency believed that 
larger housing agencies were able to put together better applications 
and were more likely to be awarded grants because they had 
professional staff in-house to put the applications together. Another 
housing official also felt that the process favored large housing 
agencies and preferred that HUD allocate the money using the same 
formula as other Recovery Act Capital Funds. Public housing industry 
officials correspondingly stated their desire for HUD to provide 
formula grants as opposed to competitive grants, since smaller members 
would be less likely to receive competitive grant funds than larger 
members. 

Similarly, at least six public housing agencies we visited did not 
apply for Recovery Act competitive grants because of insufficient time 
and resources to do so. For example, officials from four housing 
agencies we visited stated they did not apply because they did not 
have enough time or staff to pull together the information required 
before the deadline. Agency officials from one housing agency stated 
they did not apply because they were not sure that they had the 
capacity to administer the competitive grant within the time frames 
specified in the Recovery Act. Another housing agency did not apply 
for competitive grants because of resource constraints. Housing 
officials at the agency questioned whether it was worthwhile to apply 
for some projects. They stated that it did not make sense to expend 
resources satisfying the multiple requirements to apply for 
competitive grants for fairly small projects, such as window 
replacements. HUD officials stated that if housing agencies did not 
have the capacity to apply for the competitive grants, this might be 
an indicator that they do not have the capacity to administer another 
grant. HUD officials noted that they developed an electronic version 
of the competitive grant application to simplify the process for 
housing agencies and extended the deadline for initial application 
submissions to enable smaller housing authorities to have sufficient 
time to submit an application. 

Capacity issues also affected the ability of housing agencies to 
administer Recovery Act funds. According to recent reviews conducted 
by HUD's Office of Inspector General, some housing agencies had 
capacity deficiencies that limited their ability to effectively 
administer Recovery Act funds. For example, 1 housing agency that 
received approximately $114,000 in capital funds under the Recovery 
Act did not have the capacity to administer these funds in accordance 
with applicable rules and regulations. The HUD Inspector General noted 
that this housing agency had been rated as troubled for years, and 
despite intense technical assistance from HUD was unable to establish 
sound financial and operational management.[Footnote 54] In response 
to these findings, the housing agency has selected a management 
services agency to take over its management and has also entered into 
a memorandum of agreement with a local nonprofit agency to oversee its 
Recovery Act work. Another housing agency that received $4.9 million 
in Recovery Act funds had weaknesses that the HUD Inspector General 
noted could adversely affect its ability to administer these funds, 
including failure to adequately document monitoring of its Capital 
Fund activities as well as not maintaining complete contract files. 
[Footnote 55] In response to these findings, the housing agency took 
actions to monitor and verify work performed by its contractor and 
noted that it had taken steps to ensure that an independent cost 
estimate is performed on every project. 

HUD Has Taken Steps to Help Housing Agencies Obligate Recovery Act 
Funds: 

HUD has taken several steps to assist public housing agencies in 
obligating Recovery Act funds. HUD officials stated in recent months 
they have been emphasizing the formula grant 1-year deadline of March 
17, 2010, to housing agencies, and they pointed to notices, frequently 
asked questions, and Web seminars as evidence. In addition, they have 
stressed that the Recovery Act does not provide HUD with any way to 
grant exceptions or extensions. HUD will recapture any funds not 
obligated by the deadline and will reallocate those funds to other 
housing agencies. According to HUD officials, in November 2009 HUD 
field staff began to contact housing agencies that have not obligated 
any Recovery Act funds by phone, by e-mail, or in person in order to 
understand where these housing agencies are in the process of awarding 
contracts and obligating funds, and they continue to do so. They 
repeated the process for housing agencies below obligation levels of 
100 percent in early December. For housing agencies that continued to 
struggle to obligate their funds, HUD officials said they provide 
additional technical assistance, including answering procurement 
questions. HUD officials noted that the technical assistance required 
varies by the size of the housing agencies and the tenure of their 
staff. 

HUD has made progress in completing its remote and on-site reviews of 
housing agencies' administration of the Recovery Act for both 
nontroubled and troubled agencies, as determined under its Public 
Housing Assessment System.[Footnote 56] According to HUD officials, 
HUD had completed remote reviews of all 172 troubled housing agencies 
by December 2009, and as of February 3, 2010, had completed 2,891 out 
of 2,950 remote reviews of nontroubled housing agencies, which HUD 
planned to complete by January 15, 2010.[Footnote 57] HUD officials 
also noted that on-site reviews are in progress. As of February 3, 
2010, HUD field staff had completed all of the on-site reviews of 
troubled housing agencies. HUD had also completed 278 of 542 on-site 
reviews of nontroubled housing agencies, which were to be completed by 
February 15, 2010. According to HUD officials, these systematic 
reviews across the country have identified potential issues and led to 
better guidance to housing agencies on obligations and procurement 
policies, among other topics. For example, on December 11, 2009, HUD 
sent an e-mail to housing agencies clarifying the proper procedures 
for obligating and drawing down funds for administration of Recovery 
Act grants. HUD officials told us that they are developing additional 
guidance to be issued to housing agencies and field staff on topics 
including physical needs assessments and procurement issues. 

To determine what additional steps HUD should take to assist housing 
agencies in meeting the March 2010 deadline for obligating 100 percent 
of Recovery Act funds, HUD field staff prepared status reports in 
December 2009 for housing agencies that had obligated less than 50 
percent of their funds. As noted above, HUD has also decided to ask 
housing agencies to report obligations as funds are obligated--
agencies usually report monthly--so that HUD can have up-to-date 
information to determine ongoing outreach and monitoring efforts, and 
notified all housing agencies of this reporting change in early 
December. HUD officials told us they are also creating a database to 
collect project-level information from its field offices on 985 
formula grants, which will capture housing agency obligation and 
expenditure timeline projections and their backup plans for ensuring 
funds are obligated prior to the deadline.[Footnote 58] In addition, 
HUD officials noted that they sent a letter to all housing agencies 
below 100 percent obligations as of February 12, 2010, with contact 
information for the HUD field offices. As the March deadline 
approaches, HUD officials expect more housing agencies will achieve 
100 percent obligations, allowing HUD to better target its outreach 
efforts. 

HUD Administration of Recovery Act Funds Has Been Challenged by 
Capacity Issues and Would Benefit from a Management Plan: 

HUD has taken several steps in recent months to assist housing 
agencies with obligating funds prior to the March 2010 deadline. 
However, HUD's overall administration of Recovery Act funds as well as 
its existing Capital Fund program has been challenged over the past 
year by capacity issues that HUD has not addressed. As we reported in 
September 2009, the large response to HUD's Capital Fund Recovery 
Competition program created a slower than expected review process for 
HUD staff.[Footnote 59] While HUD dedicated 40 to 50 staff members to 
review these applications, a number of applications had lengthy 
narratives needing review. HUD was required to complete these reviews 
and obligate all funds by September 30, 2009. In part because of 
dedicating so many staff members to reviewing competitive grant 
applications, HUD did not obligate fiscal year 2009 funds for its 
existing Capital Fund program until September 2009, 3 months later 
than anticipated. HUD officials emphasized that they obligated these 
funds by the end of the fiscal year.[Footnote 60] According to public 
housing industry officials, while housing agencies understood that HUD 
was overwhelmed with Recovery Act issues, not having their regular 
capital funds when expected may have resulted in significant delays in 
capital expenditures. HUD staff then concentrated their efforts on the 
October 2009 recipient reporting period, when they were not only to 
help housing agencies comply with the reporting guidelines but also to 
conduct quality reviews of recipient-reported data. HUD officials told 
us that in November 2009, they were able to focus their efforts on 
trying to assist those housing agencies with low obligation rates in 
meeting the March 17, 2010, obligation deadline. Overall, HUD 
officials stated that their internal collaboration permitted it to 
distribute the workload and meet Recovery Act and ongoing program 
requirements. HUD also noted that it is now developing a second-year 
strategy for monitoring and overseeing housing agencies. 

HUD has not yet finalized how it will reallocate formula grant funds 
not obligated by the March 17, 2010, deadline. While HUD's goal is 
that agencies achieve 100 percent obligations, officials said that 
realistically some housing agencies probably will not obligate all of 
their funds in time. HUD officials said that part of the process of 
reaching out to housing agencies with low obligations is to identify 
which housing agencies do not expect to make the deadline so that HUD 
can begin planning for recapturing and reallocating the funds. HUD 
officials have drafted a memorandum for recapturing and reallocating 
unobligated formula grant funds. The memorandum includes an outline of 
how and when HUD proposes to notify housing agencies at risk of not 
meeting the obligation deadline about the recapture process, how HUD 
proposes to recapture funds, and how the recaptured funds will be 
redistributed. However, HUD officials told us that they cannot 
establish a deadline for redistributing these funds until they 
determine the amount of funds to be recaptured. Finalizing this 
memorandum quickly would position HUD to meet Recovery Act goals of 
managing and expending the funds quickly. 

HUD officials told us that given the additional responsibilities that 
would be associated with administering the Recovery Act funds, they 
conducted a personnel needs assessment in February 2009 but did not 
develop a management plan to determine how best to meet the competing 
demands of administering both the Recovery Act funds and the existing 
Capital Fund program. In its initial assessment, HUD determined that 
it would need to hire five staff members at the headquarters level to 
administer the new funds. As of December 2009, HUD had hired only 
three additional staff members and was in the process of hiring a 
fourth. HUD had canceled its solicitation for the fifth position, but 
as of December 2009 was working to reissue the solicitation. HUD 
officials also stated they had hired three additional staff members 
and were in the process of hiring a fourth to help with the existing 
capital funds program. At the Field Operations level, HUD hired two 
additional staff members to handle Recovery Act work. HUD officials 
noted that the agency has not developed a management plan that 
addresses all of its added responsibilities under the Recovery Act, 
although it did develop a spending plan for the approximately $20 
million it received to fund administration of the Recovery Act funds. 
HUD officials stated that it would be beneficial to determine the 
optimal level of resources needed to address all of the agency's added 
responsibilities under the Recovery Act. However, HUD has not done so 
because of the volume of daily work and near-term challenges 
associated with meeting Recovery Act deadlines. Instead of developing 
a formal plan for managing its resource needs, the agency has been 
addressing staffing needs for Recovery Act work by shifting resources 
between field offices and within headquarters on an as-needed basis 
rather than determining the most efficient use of its resources. A 
management plan would help HUD to identify not only any additional 
staffing needs but also how to most effectively use the resources it 
currently has.[Footnote 61] Without a plan, HUD cannot be assured that 
its staffing levels are sufficient not only to administer its existing 
Capital Fund program but also to continue its administration of 
Recovery Act funds, including monitoring of housing agency obligations 
and expenditures, as well as potentially recapturing and reallocating 
any funds not obligated by HUD's deadlines. 

HUD and Public Housing Agencies Faced Challenges with Recipient 
Reporting during the First Reporting Period: 

For the first quarterly reporting period, ending on September 30, 
2009, we found that a lack of system input controls in the 
FederalReporting.gov system made it difficult for HUD to locate and 
validate recipient data because some grantees had entered incorrect 
information.[Footnote 62] For example, HUD initially achieved a 
reporting rate of approximately 84 percent because of a substantial 
number of housing agencies incorrectly entering values into certain 
identification (ID) fields, such as the award ID number, the awarding 
agency, or the type of funding received. HUD officials said the system 
did not have validation measures in place to ensure the correct award 
ID numbers were entered. In addition, housing agencies could not edit 
the award ID number without submitting a new report. For example, one 
housing agency official told us HUD instructed him to file a second 
recipient report with the correct award number, which led to two 
reports for the same award being posted on the Recovery.gov Web site 
for the first reporting period. The housing agency official told us he 
cannot delete a recipient report once it is created.[Footnote 63] 
After an intensive review of all reports submitted with nonmatching 
award ID numbers and the Office of Management and Budget's (OMB) list 
of reports that could not be matched to a federal agency, HUD was able 
to determine a rate of reporting of approximately 96 percent. 
According to a HUD official, there were 152 Capital Fund formula and 
competitive grant awards for which a report was required but for which 
no report was found. HUD officials told us they sent warning e-mails 
on December 4, 2009, to the 152 nonreporting housing agencies 
reminding them to report in the second reporting period. 

In November 2009, OMB issued a memo requiring federal agencies to take 
steps to improve compliance with recipient reporting requirements in 
future reporting cycles. OMB requires agencies to identify and 
document any noncompliance, and continue to monitor recipients' 
reporting activity during the following reporting cycle. In cases 
where noncompliance appears to be fraudulent, OMB instructs the agency 
to refer the matter to the appropriate agency officials, such as the 
officer responsible for criminal investigation. HUD notes on its Web 
site that a housing agency's failure to report is a violation of the 
agreement it entered into with HUD in order to receive Recovery Act 
funds, which subjects the housing agency to further actions. HUD also 
developed a Recovery Act Non-Reporting Enforcement Plan in September 
2009 that states that all recipients who fail to report in 
FederalReporting.gov by the end of their first applicable reporting 
cycle will receive a warning letter from HUD program staff. If 
recipients fail to report a second time, HUD will initiate further 
enforcement actions, which can include formal or informal hearings, 
suspension of access to funds, or other actions. 

To address the issue of making corrections to recipient reports, in 
November 2009 HUD submitted recommendations to OMB that, among other 
things, allowed for (1) grantees to make corrections to the award 
number field after the initial reporting period or (2) the award 
number field to be validated against a list provided by the agency to 
OMB. Subsequently, OMB published guidance on December 18, 2009, that 
announced that starting with the data submitted for the current 
quarter, the FederalReporting.gov solution will be open for periods of 
continuous corrections of all data submitted. Furthermore, recipients 
will have the ability to make corrections up until the start of the 
next reporting period. The guidance also requires federal agencies to 
provide recipients with key award information such as the award 
number, funding agency code, and awarding agency code in a single 
source document by December 24, 2009. According to a HUD official, 
Office of Field Operations staff sent an e-mail for each grant on 
December 23 containing the data for the specified data fields, such as 
the award number, award amount, and award date, along with detailed 
instructions about reporting. The HUD official told us this 
information was sent again on January 13, 2010, to housing agencies 
that had not yet reported. 

According to HUD officials, public housing agencies encountered 
challenges related to registration and system access controls for the 
FederalReporting.gov system. For example, a housing agency official 
stated that she was initially unable to access the reporting system 
during the first round of recipient reporting because the personal 
identification number (PIN) was sent only to the housing agency's 
Executive Director, who could not be contacted. However, the housing 
agency official reported she was able to contact a support 
representative on October 10, at which point she received a temporary 
PIN and had no further problems submitting her report. The 
FederalReporting.gov system takes each recipient's point of contact 
information directly from the Central Contractor Registration (CCR), 
and if an organization changes its point-of-contact information, it 
takes 48 hours for FederalReporting.gov to receive the change and e- 
mail the Federal Reporting Personal Identification Number (FRPIN) and 
temporary password to the new point of contact. According to a HUD 
official, housing agencies are responsible for entering any changes in 
their contact information in the CCR system, but the housing agencies 
often do not update the system in time for access to be correctly 
transferred. HUD made an additional recommendation to OMB in November 
2009 requesting an alternative procedure for validating reports or 
obtaining an FRPIN. However, the procedure for obtaining an FRPIN and 
validating recipient reports for the second reporting cycle still 
relies on point-of-contact information contained in the CCR system. A 
HUD official told us that OMB allows for sufficient feedback from 
federal agencies, but not all of HUD's recommendations could be 
accommodated in time for the January recipient reporting cycle. 

As we reported in December 2009, during the first quarterly reporting 
period there was widespread misunderstanding by public housing 
agencies about OMB's methodology for calculating the number of jobs 
created or retained by the Recovery Act, in part because housing 
agencies are not familiar with reporting jobs information. In a few 
cases, we found that public housing agencies had reported the number 
of jobs created or retained into FederalReporting.gov without 
converting the number into full-time equivalents. In early September, 
HUD posted the OMB guidance from June 22, 2009, to its Web site and 
provided information by e-mail to housing agencies on registration for 
FederalReporting.gov, as well as links to Web seminars and training 
provided by OMB. HUD issued further guidance to public housing 
agencies by e-mail on September 25, 2009, approximately 2 weeks before 
the October 10, 2009, deadline for recipient reporting, providing 
templates and data dictionaries tailored to the Public Housing Capital 
Fund. HUD also posted a jobs calculator spreadsheet to its Web site, 
and HUD field staff directed housing agencies to this guidance when 
they asked specific questions about how to calculate jobs. HUD 
officials told us they did not have enough time to translate some of 
the terminology into concrete terms that would be clearer to housing 
agency officials, partly because of their continuing discussions with 
OMB on clarifying its guidance. According to a HUD official, HUD held 
a Web seminar in December 2009 on reporting jobs created as well as on 
reporting obligations. 

The revised guidance OMB published on December 18, 2009, required 
federal agencies to submit their guidance documents to OMB for review 
and clearance by December 22, 2009, and from time to time thereafter 
as required by OMB in order to promote consistency between OMB 
guidance and agency supplemental guidance. According to a HUD 
official, HUD submitted two documents to OMB pertaining to job 
guidance on December 28. The first document was a bullet point summary 
of the December 18 OMB guidance followed by some hypothetical job-
counting scenarios using HUD grantees. The HUD official told us OMB 
approved the use of this document and it is currently posted on HUD's 
Recovery Act Web site. HUD also provided its job-counting calculator 
spreadsheet to OMB according to the HUD official. The HUD official 
told us that OMB asked HUD not to use the calculator for the current 
reporting period because OMB wanted to have the opportunity to have 
several offices review the calculator before it is publicly released. 
As a result, the HUD official told us HUD did not distribute the jobs 
calculator spreadsheet to housing agencies. 

HUD Is Improving Registration for the Recovery Act Management and 
Performance System and Expanding the System to Measure Performance 
Outcomes: 

HUD developed the Recovery Act Management and Performance System 
(RAMPS) to meet the requirements for reporting on environmental 
assessments as outlined in Section 1609 of the Recovery Act.[Footnote 
64] HUD officials said that while public housing agencies have had to 
comply with the National Environmental Policy Act (NEPA) since it was 
enacted in 1970, reporting on environmental assessments is a new 
requirement for public housing agencies. A HUD official told us most 
of the challenges that housing agencies faced with RAMPS during the 
first quarterly reporting period were related to registration and 
accessing the system rather than entering data. For example, some 
housing agencies reported having difficulty gaining access to RAMPS. 
An official from a public housing industry association told us that 
HUD has since conducted outreach programs to housing agencies 
regarding accessing RAMPS, which the industry group's members found to 
be effective. According to a HUD official, to ensure that housing 
agencies do not face similar registration issues in the future, HUD 
has registered all users from other HUD systems for RAMPS, where 
previously it registered only one administrative staff member per 
housing agency. Also, HUD centralized the registration process through 
its Recovery Act Web site. According to a HUD official, this required 
HUD to construct an agencywide access system that previously did not 
exist. HUD is also cleaning up data in order to resolve registration 
issues that were caused by data matching errors. 

According to HUD guidance, HUD added a new core activities module to 
RAMPS to capture information at the project level on development, 
modernization, and energy efficiency work funded by the Recovery Act. 
Specifically, the core activities module of RAMPS collects information 
on units of affordable housing developed or modernized using Capital 
Fund Recovery Grant funds as well as data on energy efficiency 
improvements included in those units. A HUD official told us that HUD 
began collecting this information through RAMPS on December 29, 2009. 
A HUD official told us that in December 2009 HUD asked each housing 
agency to prepare a Recovery Act Performance Report as a temporary way 
of gathering this information. According to a HUD official, HUD 
populated RAMPS with the data collected through the Recovery Act 
Performance Reports, and housing agencies are updating the data in 
RAMPS during the current reporting cycle. The official told us he 
expects the data will be vastly improved both in RAMPS and in the 
recipient reports now that housing agencies have had experience with 
the systems and the data elements. 

Recommendation for Executive Action: 

To help HUD achieve Recovery Act objectives and address challenges 
with its continued administration of Recovery Act funds, we recommend 
that the Secretary of Housing and Urban Development develop a 
management plan to determine the adequate level of agency staff needed 
to administer both the Recovery Act funds and the existing Capital 
Fund program going forward, including identifying future resource 
needs and determining whether current resources could be better 
utilized to administer these funds. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to HUD for review and comment. In a 
response from HUD's Director, Office of Capital Improvements, HUD 
noted that the report documented its efforts under way and the status 
of implementation of the Recovery Act work to date but thought the 
report could more fully reflect actions and achievements. In response, 
we provided greater descriptions of HUD's efforts to assist agencies 
applying for competitive grants and HUD efforts to monitor agencies 
with low obligation rates. HUD also provided some technical comments 
that we incorporated, as appropriate. 

HUD did not concur with our recommendation to develop a management 
plan to determine the adequate level of staff needed to administer 
both the Recovery Act and the existing Capital fund program. HUD cited 
what it considered effective and efficient collaborative efforts to 
meet the requirements of the act. We continue to believe HUD would 
benefit from developing a management plan as it continues to address 
the Recovery Act challenges. In its comments, HUD notes that the 
competitive grant program has expanded the complexity of the program, 
and the increased focus on transparency and accountability has 
increased significantly its oversight and monitoring responsibilities. 
HUD has thus far relied on shifting resources to meet demands. 
However, we continue to believe that without a detailed management 
plan, HUD cannot be assured that its staffing levels are sufficient 
not only to administer its existing Capital Fund program but also to 
continue its administration of Recovery Act funds. 

Most States Are Just Beginning to Use DOE's Weatherization Assistance 
Program Recovery Act Funds to Weatherize Homes: 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program, which the Department of Energy (DOE) is 
distributing to each of the states, the District of Columbia 
(District), and seven territories and Indian tribes. During the past 
32 years, the program has helped more than 6.2 million low-income 
families by making such long-term energy-efficiency improvements to 
their homes as installing insulation; sealing leaks; and modernizing 
heating equipment, air circulation fans, and air conditioning 
equipment. These improvements enable families to reduce energy bills, 
allowing these households to spend their money on more pressing needs, 
according to DOE. The Recovery Act appropriation represents a 
significant increase for a program that has received about $225 
million per year in recent years. 

During 2009, DOE obligated about $4.73 billion of the Recovery Act's 
weatherization funding to the states, while retaining about 5 percent 
of funds to cover the department's expenses, such as those for 
training and technical assistance, and management and oversight for 
the expanded weatherization program. DOE first provided each state 
with the initial 10 percent of its Recovery Act funds, which could be 
used for start-up activities such as hiring and training staff, 
purchasing needed equipment, and performing energy audits of eligible 
homes, among other things.[Footnote 65] The District and the states in 
our review all received their initial 10 percent in March and April 
2009.[Footnote 66] DOE required each state to submit a weatherization 
plan outlining how it would use its Recovery Act weatherization funds 
before DOE provides states with the next 40 percent of their 
respective funds. These plans included the states' strategies for 
monitoring and measuring performance and the number of homes to be 
weatherized, among other things. By the time we issued our December 
Recovery Act report, DOE had approved the weatherization plans of all 
of the states, the District, and seven territories and Indian 
tribes.[Footnote 67] Each now has access to 50 percent of its funds, 
and DOE plans to provide access to the remaining funds once a state 
has completed weatherizing 30 percent of the homes identified in its 
state weatherization plan. Under Section 1603 of the Recovery Act, 
funds are available for obligation by DOE until September 30, 2010, 
and DOE has indicated that the states are to spend the funds by March 
31, 2012. 

Table 4: DOE's Recovery Act Weatherization Assistance Program 
Obligations: 

Funding recipients: 

States we reviewed: 

State: Arizona; 
Total obligations: $66,091,428. 

State: California; 
Total obligations: $185,811,061. 

State: Colorado; 
Total obligations: $79,531,213. 

State: District of Columbia; 
Total obligations: $8,089,022. 

State: Florida; 
Total obligations: $175,984,474. 

State: Georgia; 
Total obligations: $124,756,312. 

State: Illinois; 
Total obligations: $242,526,619. 

State: Iowa; 
Total obligations: $80,834,411. 

State: Massachusetts; 
Total obligations: $122,077,457. 

State: Michigan; 
Total obligations: $243,398,975. 

State: Mississippi; 
Total obligations: $49,421,193. 

State: New Jersey; 
Total obligations: $118,821,296. 

State: New York; 
Total obligations: $394,686,513. 

State: North Carolina; 
Total obligations: $131,954,536. 

State: Ohio; 
Total obligations: $266,781,409. 

State: Pennsylvania; 
Total obligations: $252,793,062. 

State: Texas; 
Total obligations: $326,975,732. 

Other states and territories: 

State/Territory: Alabama; 
Total obligations: $71,800,599. 

State/Territory: Alaska; 
Total obligations: $18,142,580. 

State/Territory: American Samoa; 
Total obligations: $719,511. 

State/Territory: Arkansas; 
Total obligations: $48,114,415. 

State/Territory: Connecticut; 
Total obligations: $64,310,502. 

State/Territory: Delaware; 
Total obligations: $13,733,668. 

State/Territory: Hawaii; 
Total obligations: $4,041,461. 

State/Territory: Guam; 
Total obligations: $1,119,297. 

State/Territory: Idaho; 
Total obligations: $30,341,929. 

State/Territory: Indiana; 
Total obligations: $131,847,383. 

State/Territory: Kansas; 
Total obligations: $56,441,771. 

State/Territory: Kentucky; 
Total obligations: $70,913,750. 

State/Territory: Louisiana; 
Total obligations: $50,657,478. 

State/Territory: Maine; 
Total obligations: $41,935,015. 

State/Territory: Maryland; 
Total obligations: $61,441,745. 

State/Territory: Minnesota; 
Total obligations: $131,937,411. 

State/Territory: Missouri; 
Total obligations: $128,148,027. 

State/Territory: Montana; 
Total obligations: $26,543,777. 

State/Territory: Nebraska; 
Total obligations: $41,644,458. 

State/Territory: Nevada; 
Total obligations: $37,281,937. 

State/Territory: New Hampshire; 
Total obligations: $23,218,594. 

State/Territory: New Mexico; 
Total obligations: $26,855,604. 

State/Territory: North Dakota; 
Total obligations: $25,266,330. 

State/Territory: Northern Mariana Islands; 
Total obligations: $795,206. 

State/Territory: Oklahoma; 
Total obligations: $60,903,196. 

State/Territory: Oregon; 
Total obligations: $38,512,236. 

State/Territory: Puerto Rico; 
Total obligations: $48,865,588. 

State/Territory: Rhode Island; 
Total obligations: $20,073,615. 

State/Territory: South Carolina; 
Total obligations: $58,892,771. 

State/Territory: South Dakota; 
Total obligations: $24,487,296. 

State/Territory: Tennessee; 
Total obligations: $99,112,101. 

State/Territory: Utah; 
Total obligations: $37,897,203. 

State/Territory: Vermont; 
Total obligations: $16,842,576. 

State/Territory: Virginia; 
Total obligations: $94,134,276. 

State/Territory: Virgin Islands; 
Total obligations: $1,415,429. 

State/Territory: Washington; 
Total obligations: $59,545,074. 

State/Territory: West Virginia; 
Total obligations: $37,583,874. 

State/Territory: Wisconsin; 
Total obligations: $141,502,133. 

State/Territory: Wyoming; 
Total obligations: $11,195,471. 

Total obligations: states and territories; 
Total obligations: $4,728,750,000. 

DOE departmental expenses, such as training and technical assistance, 
management and oversight, etc.: 
Total obligations: $271,250,000. 

Total obligations: $5,000,000,000. 

Source: GAO analysis of DOE information. 

[End of table] 

Although each state has access to half of its Recovery Act 
weatherization funds, the states have used only a small percentage of 
their available funds in 2009, mostly because state and local agencies 
needed time to develop the infrastructures required for managing the 
significant increase in weatherization funding and for ensuring 
compliance with Recovery Act requirements.[Footnote 68] According to 
DOE officials, many local weatherization agencies have been spending 
their DOE annual appropriation funds--which are not subject to some 
key Recovery Act requirements--to weatherize homes before using their 
Recovery Act funds. As of December 31, 2009, according to available 
DOE data, 47 states and 5 territories reported they had begun to use 
Recovery Act weatherization funds, while 3 states, the District of 
Columbia, and two Indian tribes reported they had not used any 
Recovery Act funds.[Footnote 69] The 52 states and territories also 
reported that, as of December 31, 2009, they had spent about $372 
million, or about 8 percent, of the $4.73 billion for weatherization 
activities. States and territories have separated their Recovery Act 
expenditures into various categories, including expenditures for 
program operations, administration, training and technical assistance, 
and other activities. According to DOE, variances among the states in 
the percentage of funds devoted to program operations reflect 
different levels of maturity in, for example, providing the 
infrastructure needed to manage the expanded weatherization program. 

Federal, State, and Local Governments Have Experienced Challenges 
Using Recovery Act Funds for Weatherization: 

During 2009, federal, state, and local governments planning to use 
Recovery Act funds to weatherize homes were challenged by concerns 
about ensuring that weatherization activities complied with various 
requirements. A significant challenge involved compliance with Davis- 
Bacon provisions, which were applied by the Recovery Act to the 
weatherization program for the first time in 2009.[Footnote 70] 
Specifically, weatherization contracts were delayed because state and 
local officials had concerns that wage rates for weatherization had 
not yet been determined by the Department of Labor (Labor). The Davis-
Bacon provisions of the Recovery Act require that all laborers and 
mechanics employed by contractors and subcontractors on Recovery Act-
funded projects be paid at least the prevailing wage, including fringe 
benefits, as determined by the Secretary of Labor. State and local 
officials also had concerns about whether local agencies could handle 
increased administrative tasks and had the proper infrastructure in 
place to administer the program requirements related to the Davis-
Bacon provisions. Finally, some state officials expressed concerns 
about compliance with the National Historic Preservation Act, 
specifically the increased number of homes that may fall under the 
protection of the act that require historic preservation reviews. 
[Footnote 71] 

Regarding the Davis-Bacon provisions, officials in about half of the 
states we reviewed had decided to wait to begin weatherizing homes 
until Labor had determined county-by-county prevailing wage rates for 
their state to ensure compliance with Davis-Bacon requirements. These 
officials explained that they wanted to avoid having to pay back wages 
to weatherization workers who started working before the prevailing 
wage rates were known.[Footnote 72] Arizona officials said all but one 
of its local service providers decided to wait to weatherize homes 
using Recovery Act funds until the prevailing wage rates were 
determined because they were concerned about the time required to 
reconcile differences in wage rates. Similarly, Iowa officials told us 
paying back wages would be especially burdensome to smaller 
contractors. California officials were also concerned about the 
prevailing wage rates, and they wrote DOE to inquire about the 
possibility of requesting an exemption from the Davis-Bacon 
requirements for weatherization workers hired through the state's 
federal, state, and local workforce development partnerships aimed at 
creating training and employment opportunities for youth and 
dislocated workers. California officials told us that the application 
of Davis-Bacon provisions could weaken or eliminate workforce 
development as a significant component of its weatherization program, 
stating that paying prevailing wages to the inexperienced, entry-level 
workers typically hired through these programs would not be 
appropriate.[Footnote 73] According to DOE officials, as a result of 
these concerns, some local agencies held off on spending their 
Recovery Act money, instead spending money obtained from DOE's annual 
appropriations--which are not subject to Davis-Bacon requirements. 
However, one of the states we reviewed, Ohio, started to use Recovery 
Act funds before wage rates were determined. While officials in about 
half of the states reviewed were concerned about prevailing wage rates 
prior to Labor's determination, officials in North Carolina and 
Mississippi were not concerned because they expected that the 
prevailing wage rates would be similar to the existing wages being 
paid to weatherization workers. 

On September 3, 2009, Labor completed its initial determination of 
wage rates for weatherization work conducted on residential housing 
units in each county of the 50 states and the District.[Footnote 74] 
However, state and local officials in several states expressed concern 
over the need to use different wage rates for weatherization 
activities in different types of buildings. Labor determined that the 
revised prevailing wage rates for weatherization workers were limited 
to multifamily residential buildings of four or fewer stories. 
However, Labor's commercial building construction wage rates (which 
apply to plumbers, carpenters, and other laborers) apply to 
multifamily residential buildings of five or more stories. As a 
result, local agencies conducting weatherization work on multifamily 
units in high-rise buildings must pay their workers wage rates that 
can be significantly higher than what local agencies pay 
weatherization workers for residential housing units. For example, in 
New York County (Manhattan), commercial prevailing wage rates were 
three times the rates for residential weatherization laborers. 
Representatives of two local agencies in New York told us that they 
intend to subcontract out all weatherization work conducted on 
buildings over four stories because they could not pay their workers 
vastly different wages based on the type of building involved. 
According to Ohio officials, some local agencies had delayed projects 
in larger multifamily buildings until they could better estimate 
project costs. Under 10 CFR §440.21(d), weatherization materials 
installed must be cost effective, resulting in energy cost savings 
over the lifetime of the measure. However, because of higher wage 
rates required for weatherization work done on building of five or 
more stories (high-rise buildings), materials installed on high-rise 
buildings may not have been able to meet the cost-effectiveness 
requirement established by regulation. In response to states' 
concerns, DOE's November 10, 2009, guidance allows the states to 
calculate the cost effectiveness over the lifetime of a project by 
using the new weatherization wage rates rather than the prevailing 
commercial wages for plumbers, carpenters, and other laborers working 
on high-rise buildings. 

Concerns about administrative burdens of the Davis-Bacon provisions 
also affected use of Recovery Act funds in several states. For 
example, several state agencies delayed disbursing Recovery Act funds 
to local agencies because of concerns about the impact of these 
administrative tasks on small contractors, citing that these 
contractors generally have fewer resources and less experience with 
accounting processes. Some state agency officials said they were not 
satisfied that local agencies had the proper administrative 
infrastructure in place to comply with Davis-Bacon requirements, 
including the requirement that contractors submit weekly certified 
payroll records to the contracting agency. For example, Pennsylvania 
officials told us that delays occurred because some local agencies had 
initially submitted management plans that had not included language 
describing how they would comply with the Davis-Bacon requirements. In 
California, where according to state officials local agencies must 
certify that they can comply with the Davis-Bacon requirements before 
these agencies are provided with Recovery Act funds to weatherize 
homes, only 2 of California's 35 local agencies that were awarded 
Recovery Act funds accepted these required amendments by the initial 
October 30, 2009, deadline. 

Many state and local agencies took time to hire additional staff or 
make infrastructure upgrades to better ensure compliance with 
administrative requirements. For example, Michigan officials told us 
their agency planned to add 22 staff members, including a Davis-Bacon 
analyst, and told us that federal administrative requirements, such as 
weekly certified payroll, required them to make technological upgrades 
in their weatherization division to ensure compliance with Recovery 
Act requirements. District of Columbia officials told us that their 
agency had not expended Recovery Act funds to weatherize homes because 
they have been developing the infrastructure to administer the program 
by, for example, hiring new staff. Local agencies in California, 
Michigan, New York, and Ohio had also hired new staff to process Davis-
Bacon paperwork. 

State officials noted that the National Historic Preservation Act may 
present another challenge that could slow the use of the Recovery 
Act's weatherization funds.[Footnote 75] Enacted in 1966, the National 
Historic Preservation Act requires federal agencies to, among other 
things, take into account the effect of any federal or federally 
assisted undertaking on historical properties included in a national 
register of historic sites, buildings, structures, and objects. 
Michigan state officials told us that, under the act, its State 
Historic Preservation Office is allowed to conduct a historic review 
of every home over 50 years of age if any work is to be conducted. 
They explained that, in Michigan, this could mean an estimated 90 
percent of the homes to be weatherized would need such a review, which 
could cause significant delays. However, in November 2009, Michigan 
state officials signed an agreement with the State Historic 
Preservation Office that is designed to expedite the review process. 
With this agreement in place, state officials said they are confident 
that the historic preservation requirements can be met without causing 
further delays. New York officials told us that several entire 
neighborhoods in their state fall under the protection of the act and 
noted that the State Historic Preservation Office may have to conduct 
a review before any residential units in such a neighborhood can be 
weatherized. State officials in Iowa expressed similar concerns. State 
officials in New York and Iowa have contacted their respective 
historic preservation offices to develop approaches for addressing the 
review process. 

DOE Has Issued Guidance to Mitigate Risk in the Weatherization 
Program, but Federal, State, and Local Agencies Face Challenges in 
Monitoring the Use of Recovery Act Weatherization Funds: 

DOE has issued guidance requiring recipients of Recovery Act 
weatherization funds to implement a number of internal controls to 
mitigate the risk of fraud, waste, and abuse.[Footnote 76] 
Specifically, DOE requires state weatherization agencies to conduct on-
site monitoring of all weatherization service providers to inspect the 
management of funds and the production of weatherized homes.[Footnote 
77] These monitoring visits consist of a financial review of the 
service provider's records pertaining to salaries, materials, 
equipment, and indirect costs; program reviews of the service 
provider's records, contracts, and client files; and a production 
review, consisting of the inspection of weatherized homes by the state 
agencies and by the service provider. DOE requires that each state 
agency inspect at least 5 percent of the weatherized units and each 
service provider inspect all of the completed units or units in the 
process of being weatherized. If an inspection reveals reporting 
inconsistencies, quality control issues, or other problems, the state 
agency is required to increase the number of units monitored and 
frequency of inspection. DOE is implementing an enhanced monitoring 
plan that would allow DOE's weatherization project officers to track 
each state's performance. As part of this enhanced monitoring, DOE 
submitted a deviation request to the Office of Management and Budget 
(OMB) to require the states to submit monthly, rather than quarterly, 
reports. OMB approved this request on December 1, 2009. As a result of 
the significant increase in program funding, many of the states are 
reporting a need to increase staff to implement internal controls. 

DOE is hiring staff to provide national oversight to the Recovery Act 
weatherization program. DOE officials told us that each state will be 
assigned a project officer who will review the state's fiscal and 
programmatic reports. Project officers will also be responsible for 
coordinating site visits to the state and local agencies responsible 
for weatherization, as well as visiting a sample of projects being 
weatherized with Recovery Act funds. 

DOE provides state agencies with the discretion to develop and 
implement these internal controls in accordance with each state's 
weatherization plan. One way that state officials can determine the 
effectiveness of a recipient's internal controls is through an 
assessment conducted as part of the Single Audit Act.[Footnote 78] 
These audits review the performance and management of nonfederal 
entities receiving $500,000 or more in federal awards. Some state 
weatherization programs, however, have been considered too small to be 
monitored during the state's Single Audit. Other risk mitigation 
strategies include annual reviews of independent auditors' reports, 
increased frequency of on-site monitoring of service providers and 
weatherized homes, fraud detection training, the requirement of 
monthly reports from service providers, and the use or proposed use of 
a Web-based reporting database. Some states, however, believe that 
current controls are sufficient, but they will need to hire additional 
staff to accommodate the increase in Recovery Act funding. 

While the states have spent relatively little of their total funds and 
we have reviewed weatherization activities in only a few locales, we 
have identified challenges for DOE and the states to address in order 
to ensure that Recovery Act funds are spent prudently and that the 
performance of local agencies is well-managed. For example, in Ohio we 
found during our site visits that grantees had inconsistent practices 
for reporting the number of homes weatherized and, in one case, a 
grantee used Recovery Act funds to weatherize the home of an 
ineligible applicant. Faced with these early implementation 
challenges, on November 20, 2009, Ohio officials issued new guidance 
to all state agencies regarding reporting requirements. The guidance 
indicated that state officials will begin administrative monitoring in 
December 2009 and fiscal monitoring in January 2010. Challenges in 
Pennsylvania include expanding the state's oversight capacity, 
training and certifying of weatherization workers, and implementing a 
statewide procurement system for weatherization materials purchased 
with Recovery Act funds. Among the challenges that California will be 
handling will be the monitoring of local agencies. For example, the 
state's Inspector General has identified one local agency designated 
as high risk because of questionable spending.[Footnote 79] 

Some state officials have also cited the substantial influx of new 
money as a reason to audit the spending of weatherization funds. For 
example, because of the large increase in weatherization funding 
received by Texas, the Internal Auditor of the Texas Department of 
Housing and Community Affairs is currently auditing the department's 
monitoring and oversight of the program. Also, in a few states, prior 
audits have identified deficiencies in weatherization programs. For 
example, Michigan's State Auditor General found that the Michigan 
Department of Human Services' internal controls over the 
weatherization program did not ensure compliance with federal laws and 
regulations regarding subrecipient monitoring during the 2-year period 
that ended on September 30, 2008. 

Local agencies also utilize risk assessments to prevent fraudulent or 
wasteful use of Recovery Act funds. For example, some local agencies 
reported that new contractors are subjected to a higher level of 
scrutiny than more experienced contractors. Local agency officials in 
New York, California, and Ohio told us a long history of 
weatherization service mitigates the risk that a contractor will 
improperly use funds. Furthermore, most local agencies have procedures 
in place to ensure they do not contract with service providers that 
have been placed on the "Excluded Parties List" due to a history of 
fraudulent business practices.[Footnote 80] Local agencies reported 
the most common procedure to evaluate a contractor's reputation was to 
check the contractor's name online against the "Excluded Parties 
List." Other local agencies require contractors to sign documentation 
stating that they have not been debarred or bankrupt. 

Reporting on the Impacts of Recovery Act Funds Is Still Limited: 

In March 2009, DOE issued guidance that directed the states to report 
on the number of housing units weatherized and the resulting impacts 
to energy savings and jobs created and retained at both the state and 
local agency level. However, reporting about impacts, especially 
energy savings, is still somewhat limited. On February 24, 2010, DOE 
reported that 30,252 homes have been weatherized with Recovery Act 
funds as of December 31, 2009. This represents about 5 percent of the 
approximately 593,000 total homes that DOE originally planned to 
weatherize using Recovery Act funds.[Footnote 81] In addition, 
available data shows that about 8,500 jobs have been created through 
the use of Recovery Act weatherization funds.[Footnote 82] But 
although many local officials have collected data about new hires, 
none could provide us with data on energy savings. Contributing to the 
lack of information about impacts is that most state and local 
agencies either are just beginning to use Recovery Act funds to 
weatherize homes or have not yet begun to do so. 

Some states told us they plan to use performance measures developed by 
DOE, while others have developed their own measures. For example, 
Florida officials told us they plan to measure energy savings by 
tracking kilowatts used before and after weatherization, primarily 
with information from utility companies. In addition, local agencies 
in some states either collect or plan to collect information about 
other aspects of program operations. For example, local agencies in 
both California and Michigan collect data about customer satisfaction. 
In addition, a local agency in California plans to report about 
obstacles, while an agency in New York will track and report the 
number of units on the waiting list. 

In regard to recipient reporting, officials in all eight states that 
we reviewed for the December Recovery Act report said they submitted 
these reports on schedule, although weatherization officials from 
Massachusetts and Ohio cited issues with the reporting requirements 
that existed prior to the changes that came about as a result of the 
December 18, 2009, guidance. In Massachusetts, state officials told us 
of confusion that had been associated with terminology related to new 
or retained jobs, and local officials said that the Massachusetts 
Recovery and Reinvestment Office requires additional information about 
demographics not required by OMB. Ohio officials told us that for 
reporting purposes, they had estimated the number of jobs that could 
potentially be created. The inconsistency between potential positions 
and actual hours worked resulted in an inaccurate reporting of jobs 
created. One of the local agencies we visited reported 36 jobs 
created, but officials acknowledged they had only filled 20 positions 
at the time of our visit. Another local agency reported 14 agency and 
8 contractor jobs created, but an official confirmed that only 6 
agency and 7 contractor positions had been filled. According to Ohio 
officials, the process followed by the local agencies that resulted in 
these inaccurate reports of jobs created has since been corrected in 
the second quarter recipient reports. 

WIA Youth Program Outcomes Show States Provided Many Youth with Summer 
Employment and Training Opportunities: 

The Recovery Act provides an additional $1.2 billion in funds for 
Workforce Investment Act (WIA) Youth Program activities, including 
summer employment.[Footnote 83] Administered by the Department of 
Labor (Labor), the WIA Youth Program is designed to provide low-income 
in-school and out-of-school youth 14 to 21 years old, who have 
additional barriers to success, with services that lead to educational 
achievement and successful employment, among other goals. The Recovery 
Act also extended eligibility through age 24 for youth receiving 
services funded by the act. While the Recovery Act does not require 
all funds to be used for summer employment, in the conference report 
accompanying the bill that became the Recovery Act,[Footnote 84] the 
conferees stated that they were particularly interested in states 
using these funds to create summer employment opportunities for youth. 
While summer employment is a required component of the WIA Youth 
Program, Labor issued guidance indicating that local areas have the 
flexibility to implement stand-alone summer youth employment 
activities with Recovery Act funds.[Footnote 85] Local areas may 
design summer employment opportunities to include any set of allowable 
WIA youth activities--such as tutoring and study skills training, 
occupational skills training, and supportive services--as long as it 
also includes a work experience component. 

Gearing up to provide or expand summer employment activities presented 
challenges for many state and local areas. Once the Recovery Act was 
passed, officials had a few months to get their summer youth 
employment activities up and running. Moreover, in implementing the 
year-round service requirements of the WIA Youth Program, many states 
and local areas had greatly reduced their summer youth employment 
programs and no longer offered a stand-alone summer program--or they 
had found funding sources other than WIA, such as state, local, or 
foundation funds, to cover it. Local areas without recent experience 
had to build the program from the ground up. 

States Have Drawn Down about Two-thirds of Funds: 

As of December 31, 2009, 66 percent of Recovery Act WIA youth funds 
($765 million) had been drawn down nationwide, according to Labor 
data--an increase of 32 percentage points from the 34 percent we 
reported as of August 31, 2009 (see figure 13). 

Figure 13: National Drawdown Rates for Recovery Act Funds for the WIA 
Youth Program, as of December 31, 2009: 

[Refer to PDF for image: line graph] 

Month: May; 
Percentage of fund spent: 1%. 

Month: June; 
Percentage of fund spent: 7%. 

Month: July; 
Percentage of fund spent: 19%. 

Month: August; 
Percentage of fund spent: 34%. 

Month: September; 
Percentage of fund spent: 47%. 

Month: October; 
Percentage of fund spent: 56%. 

Month: November; 
Percentage of fund spent: 61%. 

Month: December; 
Percentage of fund spent: 66%. 

Source: GAO analysis of Department of Labor data. 

[End of figure] 

Among the 16 states, the percentage drawn down ranged from 51 percent 
for Arizona to 82 percent for Mississippi (see table 5). 

Table 5: Selected States' Drawdowns of Recovery Act WIA Youth Funds 
and Drawdowns Nationwide as of December 31, 2009: 

State: Arizona; 
Allotment: $17.8 million; 
Amount drawn down: $9.1 million; 
Percentage drawn down: 51%. 

State: California; 
Allotment: $186.6 million; 
Amount drawn down: $99.9 million; 
Percentage drawn down: 54%. 

State: Colorado; 
Allotment: $11.9 million; 
Amount drawn down: $8.3 million; 
Percentage drawn down: 70%. 

State: Florida; 
Allotment: $42.9 million; 
Amount drawn down: $31.9 million; 
Percentage drawn down: 74%. 

State: Georgia; 
Allotment: $31.4 million; 
Amount drawn down: $23.1 million; 
Percentage drawn down: 74%. 

State: Illinois; 
Allotment: $62.2 million; 
Amount drawn down: $44.5 million; 
Percentage drawn down: 72%. 

State: Iowa; 
Allotment: $5.2 million; 
Amount drawn down: $3.9 million; 
Percentage drawn down: 75%. 

State: Massachusetts; 
Allotment: $24.8 million; 
Amount drawn down: $15.7 million; 
Percentage drawn down: 63%. 

State: Michigan; 
Allotment: $73.9 million; 
Amount drawn down: $51.4 million; 
Percentage drawn down: 70%. 

State: Mississippi; 
Allotment: $18.7 million; 
Amount drawn down: $15.3 million; 
Percentage drawn down: 82%. 

State: New Jersey; 
Allotment: $20.8 million; 
Amount drawn down: $12.4 million; 
Percentage drawn down: 60%. 

State: New York; 
Allotment: $71.5 million; 
Amount drawn down: $41.6 million; 
Percentage drawn down: 58%. 

State: North Carolina; 
Allotment: $25.0 million; 
Amount drawn down: $16.9 million; 
Percentage drawn down: 68%. 

State: Ohio; 
Allotment: $56.2 million; 
Amount drawn down: $40.0 million; 
Percentage drawn down: 71%. 

State: Pennsylvania; 
Allotment: $40.6 million; 
Amount drawn down: $21.5 million; 
Percentage drawn down: 53%. 

State: Texas; 
Allotment: $82.0 million; 
Amount drawn down: $62.0 million; 
Percentage drawn down: 76%. 

State: Nationwide; 
Allotment: $1,167.2; 
Amount drawn down: $765.0; 
Percentage drawn down: 66%. 

Source: GAO analysis of Department of Labor data. 

[End of table] 

Recovery Act-Funded WIA Youth Program Served over 355,000 Youths: 

Nationwide, as of November 30, 2009, 355,320 youths had participated 
in Recovery Act-funded WIA youth activities--a 20 percent increase 
from the 297,169 youth who had participated as of July 31, 2009. Sixty-
four percent of youth participants were 14 to 18 years old, making up 
the largest category of participants. Nine percent of youth were ages 
22 to 24, the new age category authorized under the Recovery Act. Of 
the youth served with Recovery Act funds, 36 percent were out-of-
school youth.[Footnote 86] Table 6 provides information on WIA youth 
served with Recovery Act funds nationwide and in our 16 study states. 

Table 6: WIA Youth Served with Recovery Act Funds in Selected States 
and Nationwide, as of November 30, 2009: 

State: Arizona; 
Number served[A]: 3,404; 
Percentage who were 14-18 years old: 75; 
Percentage who were 19-21 years old: 19; 
Percentage who were 22-24 years old: 6; 
Percentage who were out-of-school youth: 31. 

State: California; 
Number served[A]: 45,267; 
Percentage who were 14-18 years old: 68; 
Percentage who were 19-21 years old: 24; 
Percentage who were 22-24 years old: 8; 
Percentage who were out-of-school youth: 41. 

State: Colorado; 
Number served[A]: 3,328; 
Percentage who were 14-18 years old: 69; 
Percentage who were 19-21 years old: 24; 
Percentage who were 22-24 years old: 7; 
Percentage who were out-of-school youth: 40. 

State: Florida; 
Number served[A]: 14,548; 
Percentage who were 14-18 years old: 62; 
Percentage who were 19-21 years old: 27; 
Percentage who were 22-24 years old: 11; 
Percentage who were out-of-school youth: 39. 

State: Georgia; 
Number served[A]: 11,192; 
Percentage who were 14-18 years old: 72; 
Percentage who were 19-21 years old: 21; 
Percentage who were 22-24 years old: 7; 
Percentage who were out-of-school youth: 30. 

State: Illinois; 
Number served[A]: 17,868; 
Percentage who were 14-18 years old: 64; 
Percentage who were 19-21 years old: 26; 
Percentage who were 22-24 years old: 10; 
Percentage who were out-of-school youth: 46. 

State: Iowa; 
Number served[A]: 1,375; 
Percentage who were 14-18 years old: 52; 
Percentage who were 19-21 years old: 35; 
Percentage who were 22-24 years old: 14; 
Percentage who were out-of-school youth: 45. 

State: Massachusetts; 
Number served[A]: 6,917; 
Percentage who were 14-18 years old: 79; 
Percentage who were 19-21 years old: 16; 
Percentage who were 22-24 years old: 5; 
Percentage who were out-of-school youth: 25. 

State: Michigan; 
Number served[A]: 20,649; 
Percentage who were 14-18 years old: 68; 
Percentage who were 19-21 years old: 23; 
Percentage who were 22-24 years old: 9; 
Percentage who were out-of-school youth: 33. 

State: Mississippi; 
Number served[A]: 6,742; 
Percentage who were 14-18 years old: 62; 
Percentage who were 19-21 years old: 27; 
Percentage who were 22-24 years old: 10; 
Percentage who were out-of-school youth: 46. 

State: New Jersey; 
Number served[A]: 6,195; 
Percentage who were 14-18 years old: 62; 
Percentage who were 19-21 years old: 27; 
Percentage who were 22-24 years old: 10; 
Percentage who were out-of-school youth: 42. 

State: New York; 
Number served[A]: 25,323; 
Percentage who were 14-18 years old: 71; 
Percentage who were 19-21 years old: 21; 
Percentage who were 22-24 years old: 7; 
Percentage who were out-of-school youth: 27. 

State: North Carolina; 
Number served[A]: 6,436; 
Percentage who were 14-18 years old: 65; 
Percentage who were 19-21 years old: 25; 
Percentage who were 22-24 years old: 10; 
Percentage who were out-of-school youth: 42. 

State: Ohio; 
Number served[A]: 17,861; 
Percentage who were 14-18 years old: 56; 
Percentage who were 19-21 years old: 30; 
Percentage who were 22-24 years old: 13; 
Percentage who were out-of-school youth: 39. 

State: Pennsylvania; 
Number served[A]: 9,359; 
Percentage who were 14-18 years old: 68; 
Percentage who were 19-21 years old: 24; 
Percentage who were 22-24 years old: 7; 
Percentage who were out-of-school youth: 29. 

State: Texas; 
Number served[A]: 24,669; 
Percentage who were 14-18 years old: 67; 
Percentage who were 19-21 years old: 23; 
Percentage who were 22-24 years old: 9; 
Percentage who were out-of-school youth: 29. 

State: Total for 16 states; 
Number served[A]: 221,133; 
Percentage who were 14-18 years old: 67; 
Percentage who were 19-21 years old: 24; 
Percentage who were 22-24 years old: 9; 
Percentage who were out-of-school youth: 36. 

State: Nationwide; 
Number served[A]: 355,320; 
Percentage who were 14-18 years old: 64; 
Percentage who were 19-21 years old: 24; 
Percentage who were 22-24 years old: 9; 
Percentage who were out-of-school youth: 36. 

Source: Department of Labor data based on information reported by the 
states. 

Note: The sum of percentages for youth in the age categories of 14-18, 
19-21, and 22-24 in each of the states may not equal 100 percent due 
to rounding. According to Labor, nationwide totals do not equal 100 
percent due to data reporting issues in some of the other states and 
territories. 

[A] According to Labor, this represents the number of WIA youth served 
with Recovery Act funds, which includes those youth who participated 
in summer employment or other allowable WIA activities during the 
summer months. 

[End of table] 

Nationwide, of the youth who participated in Recovery Act-funded WIA 
youth activities, 313,821--88 percent--were placed in summer 
employment, according to Labor's data. Eighty-two percent of youth 
placed in summer employment completed their work experience, as shown 
in table 7.[Footnote 87] 

Table 7: Recovery Act-Funded WIA Youth Participation in Summer 
Employment in Selected States and Nationwide, as of November 30, 2009: 

State: Arizona; 
Number of youth placed in summer employment: 2,982; 
Percentage who completed their summer employment: 89. 

State: California; 
Number of youth placed in summer employment: 42,066; 
Percentage who completed their summer employment: 87. 

State: Colorado; 
Number of youth placed in summer employment: 3,138; 
Percentage who completed their summer employment: 80. 

State: Florida; 
Number of youth placed in summer employment: 13,652; 
Percentage who completed their summer employment: 92. 

State: Georgia; 
Number of youth placed in summer employment: 11,027; 
Percentage who completed their summer employment: 91. 

State: Illinois; 
Number of youth placed in summer employment: 16,626; 
Percentage who completed their summer employment: 81. 

State: Iowa; 
Number of youth placed in summer employment: 1,270; 
Percentage who completed their summer employment: 80. 

State: Massachusetts; 
Number of youth placed in summer employment: 6,795; 
Percentage who completed their summer employment: 92. 

State: Michigan[A]; 
Number of youth placed in summer employment: 18,364; 
Percentage who completed their summer employment: 68. 

State: Mississippi; 
Number of youth placed in summer employment: 6,543; 
Percentage who completed their summer employment: 75. 

State: New Jersey; 
Number of youth placed in summer employment: 5,888; 
Percentage who completed their summer employment: 32. 

State: New York; 
Number of youth placed in summer employment: 23,888; 
Percentage who completed their summer employment: 85. 

State: North Carolina; 
Number of youth placed in summer employment: 6,436; 
Percentage who completed their summer employment: 71. 

State: Ohio; 
Number of youth placed in summer employment: 10,481; 
Percentage who completed their summer employment: 85. 

State: Pennsylvania; 
Number of youth placed in summer employment: 9,238; 
Percentage who completed their summer employment: 74. 

State: Texas; 
Number of youth placed in summer employment: 21,851; 
Percentage who completed their summer employment: 87. 

State: Total for 16 states; 
Number of youth placed in summer employment: 200,245; 
Percentage who completed their summer employment: 82. 

State: Nationwide; 
Number of youth placed in summer employment: 313,821; 
Percentage who completed their summer employment: 82. 

Source: Department of Labor data based on information reported by the 
states. 

[A] Because of delayed reporting, Michigan's denominator for its 
summer employment completion rate does not include the full cohort of 
youth who were placed in employment and may be understated by about 
2,918 youth. Labor officials told us that some other states may have 
also underreported this data element, but to a much lesser extent. 

[End of table] 

Those youth participating in Recovery Act-funded WIA youth activities 
who were not placed in summer employment included younger in-school 
youth and older youth who were participating in other allowable WIA 
youth activities, within and outside of the summer months, such as 
career exploration, classroom training, employment preparation 
services, and academic improvement services, according to Labor. 

Three Quarters of Youth Participants Achieved a Work Readiness Skill 
Goal: 

The Recovery Act requires that only the work readiness measure, also 
referred to as the work readiness attainment rate, be used to assess 
the effects of the summer-only youth employment activities. This 
measure is defined as the percentage of participants in summer 
employment who attain a work readiness skill goal. A work readiness 
skill goal is defined as: 

"a measurable increase in work readiness skills including world-of-
work awareness, labor market knowledge, occupational information, 
values clarification and personal understanding, career planning and 
decision making, and job search techniques (resumes, interviews, 
applications, and follow-up letters). It may also encompass 
survival/daily living skills such as using the phone, telling time, 
shopping, renting an apartment, opening a bank account, and using 
public transportation. It may also include positive work habits, 
attitudes, and behaviors such as punctuality, regular attendance, 
presenting a neat appearance, getting along and working with others, 
exhibiting good conduct, following instructions and completing tasks, 
accepting constructive criticism from supervisors and co-workers, 
showing initiative and reliability, and assuming the responsibilities 
involved in maintaining a job. It entails developing motivation and 
adaptability, obtaining effective coping and problem-solving skills, 
and acquiring an improved self-image."[Footnote 88] 

Nationwide, the work readiness attainment rate was 75 percent. This is 
a good baseline that shows a high level of achievement but leaves room 
for growth, according to a Labor official. Among the 16 states, the 
work readiness attainment rates ranged from 22 percent in New Jersey 
to 91 percent in Georgia (see table 8). 

Table 8: Work Readiness Attainment Rate for Youth in Summer Employment 
in Selected States and Nationwide, as of November 30, 2009: 

State: Arizona; 
Work readiness attainment rate: 87%. 

State: California; 
Work readiness attainment rate: 74%. 

State: Colorado; 
Work readiness attainment rate: 79%. 

State: Florida; 
Work readiness attainment rate: 87%. 

State: Georgia; 
Work readiness attainment rate: 91%. 

State: Illinois; 
Work readiness attainment rate: 80%. 

State: Iowa; 
Work readiness attainment rate: 79%. 

State: Massachusetts; 
Work readiness attainment rate: 85%. 

State: Michigan; 
Work readiness attainment rate: 68%. 

State: Mississippi; 
Work readiness attainment rate: 72%. 

State: New Jersey; 
Work readiness attainment rate: 22%. 

State: New York; 
Work readiness attainment rate: 83%. 

State: North Carolina; 
Work readiness attainment rate: 62%. 

State: Ohio; 
Work readiness attainment rate: 89%. 

State: Pennsylvania; 
Work readiness attainment rate: 72%. 

State: Texas; 
Work readiness attainment rate: 83%. 

State: Nationwide; 
Work readiness attainment rate: 75%. 

Source: Department of Labor. 

[End of table] 

The Second Round of Recipient Reporting Showed That Improving Data 
Quality Is a Work in Progress: 

The Recovery Act mandates that we comment on the estimates of jobs 
created or retained as reported by recipients of Recovery Act funding. 
Our initial report on November 19, 2009[Footnote 89] covered the first 
period of recipient reports including activity since the Recovery 
Act's passage in February 2009 through the quarter ending September 
30, 2009. This section discusses our comments on the second round of 
recipient reports covering the period October 1, 2009, through 
December 31, 2009. 

The raw data from recipients of federal contracts, grants, and loans 
from the first round of recipient reporting contained many recipient 
mistakes. For the second submission of reports, because many first 
round recipients did not understand how to report correctly the number 
of jobs created or retained, OMB clarified its guidance and is working 
with federal agencies to improve the agencies' reviews of recipient 
data for mistakes and other problems. In addition, for this second 
round of reporting, the Board developed technical and content changes 
to try to help improve the quality of recipient data and streamline 
the reporting process. 

On January 30, 2010, the Board published the results of the second 
round of recipient reporting on Recovery.gov. According to the Web 
site, recipients submitted over 160,000 reports indicating that the 
Recovery Act funded nearly 600,000 jobs during the quarter ending 
December 31, 2009. As reported by the Board, the job calculations are 
based on the number of hours worked in a quarter and funded under the 
Recovery Act. The data also solely reflect the direct hours worked and 
funded by the Recovery Act and reported by recipients of grants, 
contracts, and loans. 

While significant issues remain, the second round of recipient 
reporting appears to have gone more smoothly as recipients have become 
more familiar with the reporting system and requirements. OMB and the 
Board's responsiveness to feedback and lessons learned during the 
first round led to new simplified jobs reporting guidance and system 
enhancements that we believe will ultimately improve data quality and 
reliability. This round of reporting represents somewhat of a 
transition as recipients worked to implement the new reporting 
guidance, but clearly progress was achieved in addressing some of the 
major data quality and reporting issues identified in the first round. 
As recipient reporting moves forward, we will continue to review the 
processes that federal agencies and recipients have in place to ensure 
the completeness and accuracy of data. 

Economic Methods and Recipient Reports Together Are Needed to Provide 
Insight into the Employment Effects of Fiscal Stimulus: 

Tracing the effects of the Recovery Act through the economy is a 
complicated task. Prospectively, before the act's passage or before 
funds are spent, the effects can only be projected using economic 
models that represent the behavior of governments, firms, and 
households. While funds are being spent, some effects can be observed 
but often relevant data on key relationships and indicators in the 
economy are available only with a lag, thereby complicating real-time 
assessments. When a full range of data on outcomes becomes available, 
economic analysts undertake retrospective analyses, where the findings 
are often used to guide future policy choices and to anticipate 
effects of similar future policies. Stimulus spending under the broad 
scope of the Recovery Act will reverberate at the national, regional, 
state, and local levels. Models of the national economy provide the 
most comprehensive view of policy effects, but they do not provide 
insight, except indirectly, about events at smaller geographical 
scales. The diversity and complexity of the components of the national 
economy are not fully captured by any set of existing economic models. 
Some perspective can be gained by contemporaneous close observation of 
the actions of governments, firms, and households, but a complete and 
accurate picture of the Recovery Act's impact will emerge only slowly. 
The information reported by recipients can provide such insight into 
the use and impact of Recovery Act funds in local communities and 
regions. 

The recipient reports are not estimates of the effects of the Recovery 
Act, although they do provide a real-time window on the aftermath of 
Recovery Act spending. Recipients are expected to report accurately on 
their use of funds; recipients are not required to say what they would 
have done without the benefit of the program. Neither the recipients 
nor analysts can identify with certainty the impact of the Recovery 
Act because of the inability to compare the observed outcome with the 
unobserved, counterfactual scenario (in which the stimulus does not 
take place). At the level of the national economy, models can be used 
to simulate the counterfactual. At smaller scales, comparable models 
of economic behavior either do not exist or cover only a very small 
portion of all the activity in the macroeconomy. 

In interpreting recipient reporting data, it is important to recognize 
that the recipient reporting requirement covers a defined subset of 
the Recovery Act's funding. The reporting requirements apply to 
nonfederal recipients of funding, including all entities receiving 
Recovery Act funds directly from the federal government, such as state 
and local governments, private companies, educational institutions, 
nonprofits, and other private organizations. OMB guidance, consistent 
with the statutory language in the Recovery Act, states that these 
reporting requirements apply to recipients who receive funding through 
the Recovery Act's discretionary appropriations, not recipients 
receiving funds through entitlement programs, such as Medicaid, or tax 
provisions. Recipient reporting also does not apply to individuals. In 
addition, the required reports cover only direct jobs created or 
retained as a result of Recovery Act funding; they do not include the 
employment impact on materials suppliers (indirect jobs) or on the 
local community (induced jobs). Figure 14 shows the division of total 
Recovery Act funds and their potential employment effects. 

Figure 14: The Potential Employment Effects of Recovery Act Funds: 

[Refer to PDF for image: illustration containing a pie-chart] 

The Recovery Act’s recipient reporting requirements cover only a 
defined subset of the Recovery Act’s funding. The Recovery Act 
provided $787 billion in spending and tax benefits of which $275 
billion is in the form of grants, contracts and loans. Only non-
federal recipients of grants, contracts, or loans are required to 
report. Furthermore, only the direct jobs created or retained by 
recipients of funds are reported. Indirect and induced jobs are not 
reported. Finally, the employment effects of the entitlement spending 
and tax benefits provided by the Recovery Act are not reflected in 
recipient reporting. 

Potential employment effects of Recovery Act funds: 

Contracts, grants, and loans: 
Induced; 
Indirect; 
Direct. 

Tax relief employment effect: 

Entitlements employment effect: 

Recipient reporting coverage: 
Contracts, grants,and loans: $275 billion; 
Entitlements: $224 billion; 
Tax relief: $288 billion; 
Total: $787 billion. 

Source: GAO. 

Note: The potential employment effects of the different types of 
Recovery Act funds are based on historical data and are reflected in 
the size of the circles. The amounts shown reflect the original cost 
estimate of the Recovery Act as reported on Recovery.gov. 

[End of figure] 

Recipients are to file reports for any quarter in which they receive 
Recovery Act funds directly from the federal government, and 
recipients are to submit reports no later than 10 days after the end 
of each calendar quarter in which they received Recovery Act funds. 
Each report is to include the total amount of Recovery Act funds 
received, the amount of funds expended or obligated to projects or 
activities, and a detailed list of those projects or activities. For 
each project or activity, the detailed list must include its name and 
a description of the project or activity, an evaluation of its 
completion status, and an estimate of the number of jobs created or 
the number of jobs retained by that project or activity. Certain 
additional information is also required for infrastructure investments 
made by state and local governments. 

Updated OMB Guidance and Board Procedures Changed Important Reporting 
Elements for Recipients: 

In response to suggestions made by recipients, agencies, our 
recommendations, and others, on December 18, 2009, OMB issued a 
memorandum for the heads of executive departments and agencies 
updating its guidance on the Recovery Act, data quality, nonreporting 
recipients, and reporting of job estimates, among other important 
reporting requirements.[Footnote 90] The updated guidance standardized 
the period of measurement of jobs created or retained as one quarter 
and removed the requirement that recipients must sum various data on 
hours worked across multiple quarters of data when calculating jobs 
estimates. OMB now defines FTEs as the total number of hours worked 
and funded by Recovery Act dollars within the reporting quarter 
divided by the quarterly hours in a full-time schedule. The guidance 
also removed the need for recipients to make a judgment on whether 
jobs were created or retained because of the Recovery Act and made 
more explicit that jobs created or retained are to be reported as 
hours worked and paid for with Recovery Act funds. The guidance 
further clarified that jobs are to be counted only if a recipient will 
eventually be reimbursed with Recovery Act funding and specified that 
jobs will be counted based on the proportion of Recovery Act funding 
provided for the job. In addition, the guidance provided a series of 
practical examples of how the simplified formula for jobs calculation 
should be applied. 

The updated guidance also provided federal agencies with a list of 
minimum actions that they must conduct regarding data quality reviews 
including a review of significant errors in high priority data fields 
and material omissions. Material omissions include not reporting on a 
received award, or data in a report that is not responsive to a 
specific data element. Federal agencies will be required to evaluate 
continuously recipient and subrecipient efforts to meet recipient 
reporting requirements, as well as the requirements of OMB 
implementing guidance and any relevant federal program regulations. 
The guidance requires that federal agencies inform OMB of recipients 
who are noncompliant because they did not report on their uses of 
funds and FTEs created or retained. 

Additionally, the Board modified its procedures to (1) permit 
continual correction by recipients of data in FederalReporting.gov 
beginning February 2, 2010, as well as continuous review by federal 
agencies; (2) implement updating of Recovery.gov at biweekly 
intervals, beginning February 10, 2010; and (3) outline new internal 
logic checks preventing errors such as misidentification of recipient 
congressional districts and entry of expenditure data indicating 
recipients expended more funds than they received. 

Fewer Reports Show FTEs with No Funds Either Received or Expended: 

In our previous review of the prior quarter's prime recipient reports, 
we examined the relationship between recipient reports showing the 
presence or absence of any FTE counts with the presence or absence of 
funding amounts shown in either or both data fields for amount of 
Recovery Act funds received and amount of Recovery Act funds expended. 
While there were more reports, in terms of both percentage and count, 
for reporting FTEs, there were fewer reports showing FTEs but no funds 
either received or expended. Fifty-six percent of the prime recipient 
reports, as compared to 44 percent from the previous quarter, showed 
an FTE value. Previously, we identified 3,978 prime recipient reports 
where FTEs were reported but no dollar amount was reported in the data 
fields for amount of Recovery Act funds received and amount of 
Recovery Act funds expended. These records constituted 16 percent of 
all the reports showing FTEs and accounted for about 9 percent of the 
total FTEs reported at that time. As shown in table 9, for the most 
recent quarter, we identified 2,059 such reports, which accounted for 
6 percent of all reports showing FTEs and about 1.4 percent of the 
total FTEs. Our follow up with a sample of cases found that while 
recipients made mistakes, some seemingly anomalous results were 
reasonable. For example, DOT funds highway and transportation programs 
on a reimbursement basis, so there is a time lag between the payment 
of workers by contractors and reimbursement by DOT made with Recovery 
Act dollars. We flagged four Mississippi transportation program 
recipient reports because the amounts expended in comparison to the 
FTEs seemed too high or too low. However, after we analyzed the data 
the Mississippi Department of Transportation used to calculate FTEs, 
we were able to verify that their calculations were correct. On the 
other hand, we flagged a round one Georgia Head Start recipient report 
because of the high number of FTEs reported. Officials did not know 
the number reported in round one was wrong until after they submitted 
the report. Although they believed the number seemed off, the 
officials reported submitting it based on the direction of an official 
representing the federal reporting hotline. The issue was not 
applicable to round two reporting, as Head Start had issued guidance 
after round one stating that recipients were not to include cost of 
living adjustments or quality improvement in the calculation of the 
jobs created or retained. 

In addition, OMB's December guidance stated that recipients may decide 
to begin hiring new employees as soon they are notified of the amount 
of their Recovery Act award, but before Recovery Act dollars are 
received or expended. In such a situation, where non-Recovery-Act 
dollars that are paying the wages of the new employees are used as an 
advance on the Recovery Act dollars awarded, recipients can 
appropriately report these jobs as created or retained. 

Table 9: Fourth Quarter, 2009--Count of Prime Recipient Reports by 
Presence or Absence of FTEs and Recovery Act Funds Received or 
Expended: 

Recovery Act funds: Received or expended funds reported[A]; 
Report with FTEs: 35,045; (94%); 
Reports without FTEs: 14,353; (50%). 

Recovery Act funds: No received or expended funds reported; 
Report with FTEs: 2,059; (6%); 
Reports without FTEs: 14,370; (50%). 

Recovery Act funds: Total; 
Report with FTEs: 37,104; (100%); 
Reports without FTEs: 28,723; (100%). 

Source: GAO analysis of prime recipient reports for 4th quarter, 2009 
from Recovery.gov as of January 30, 2010. 

[A] Prime recipient reports showing a nonzero dollar amount in either 
or both Recovery Act funds received or expended data fields. 

[End of table] 

In our previous report, we noted that 10 recipient reports accounted 
for close to 30 percent of the FTEs reported. In this second round of 
recipient reports, we noted 10 reports accounting for 25 percent of 
the FTEs. Those 10 reports described funding support for education-
sector related positions. 

Previously, 71 percent of those prime recipient reports that showed no 
FTEs also showed no dollar amount in the data fields for amount of 
Recovery Act funds received and amount expended. As shown in table 9 
above, reports showing no FTEs are equally split between those 
reporting and not reporting funds received or expended. The total 
cumulative value of funds reported in the expenditure field for 
recipient reports showing no FTEs but having received or expended 
funds was $3.2 billion. The switch to reporting FTEs on a quarterly 
basis while continuing to report Recovery Act funding on a cumulative 
basis will mean that such comparisons will become less meaningful over 
time and, therefore, must be made with care. For example, projects 
that are completed during a reporting quarter may show few or no FTEs 
but significant Recovery Act funding due to the cumulative funding 
reporting and the delay in receiving funds in cases where funds are 
used to reimburse expenses already incurred. 

Interpretation of the FTE Data: 

Several factors need to be taken into consideration when interpreting 
the FTE data from the recipient reports. First, in our November 
report, we noted that the concept of an FTE should allow for the 
aggregation of different types of jobs--part-time, full-time, or 
temporary--and should cover a standard period of performance. OMB's 
updated guidance on the FTE calculation accomplished this. However, 
our review of second round reporting indicates that some recipients, 
particularly in the education area, did not follow the new calculation 
and do not expect to do so until the third round of reporting. We 
previously cautioned against aggregation of first round FTE data, and 
it holds for this round of reporting as well. Because not all 
recipients used the new calculation, we are not able to compare FTEs 
across projects or add the FTEs together. As recipients follow the 
updated guidance on calculating FTEs, this may be possible. Even if 
all recipients had reported data consistent with the updated OMB 
guidance, however, there are important implications to consider when 
using an FTE number to analyze projects funded under the Recovery Act. 
For example, firms may choose to increase the hours of existing 
employees, which can certainly be said to increase employment but not 
necessarily be an additional job in the sense of adding a person to 
the payroll. FTE counts can also vary across projects that might 
otherwise look similar and therefore should be considered in the 
context of a specific project through its completion. In some cases, 
Recovery Act funds were used to fund capital investment for a project, 
not to fund direct hours. As part of its data quality checks, for 
example, FHWA asked recipients to explain the relationship between 
FTEs to the funds expended field relative to how large or small the 
relationship is compared to expected values. In many cases, the 
recipient noted that they used funds to initiate a project, which 
could include purchasing items such as material and moving equipment. 

Improved Data Quality Is a Work in Progress: 

We performed an initial, limited set of edit checks and basic analyses 
on the first quarter recipient report data that were posted and 
available for download from Recovery.gov on October 30, 2009. Based on 
that review work, we identified recipient report records that showed 
certain data values or patterns in the data that were either erroneous 
or suggested that some further review could be merited due to an 
unexpected or atypical data value or relationship between data values. 
As a means of assessing the extent to which instances of those data 
values or patterns continued to recur, we performed these analyses 
again as well as some new analyses on the second round of quarterly 
recipient reports covering the period October 1, 2009, through 
December 31, 2009 (the fourth calendar quarter of 2009), which we 
downloaded from Recovery.gov on January 30, 2010. For the most part, 
the number of records identified by our edit checks was relatively 
small compared to the 65,827 prime recipient report records downloaded 
from Recovery.gov. This number represents 8,841 more recipient reports 
than the previous quarter and represents about a 16 percent increase. 
About a third of this increase consists of reports covering highway 
projects. Large increases were also seen in reports from the Army 
Corps of Engineers and the Department of Energy. Reports from 
recipients of funding from Health and Human Services programs also 
showed a large increase. 

While we noted a reduction in certain types of errors, 
inconsistencies, or atypical patterns, others have persisted into the 
second quarter of reports. The occurrence of such errors or 
inconsistencies is indicative of inaccurate or incomplete data and 
raises concerns about the quality of information in other data fields 
that cannot be readily detected through various automated checks of 
the data. 

In our analyses of the data fields showing Recovery Act funds, we 
previously identified 132 recipient reports where the award amount was 
zero or less than $10, which suggests data entry errors or other 
mistakes. For this second round of quarterly reports, there were just 
31 such reports. Previously, we identified 133 records where the 
amount reported as received exceeded the reported award amount by more 
than $10. There were no such reports in the second round. It appears 
that edit checks are, for the most part, successfully addressing these 
issues. 

In our review of the first round of recipient reports, we noted that 
while the data fields for Treasury Account Symbol (TAS) codes and 
Catalog of Federal Domestic Assistance (CFDA) numbers showed no 
invalid values on recipient reports, the values on some reports were 
not congruent with their associated agency name fields and either the 
agency name or the code were likely to be erroneous.[Footnote 91] Both 
TAS and CFDA values are linked to specific agencies and their 
programs. In the first round of quarterly reports, we identified 454 
reports as having a mismatch on the CFDA number, that is the CFDA 
number shown on the report did not match the CFDA number associated 
with either the funding or awarding agency shown on the report. On TAS 
codes, we identified 595 reports where there was no TAS match 
including 76 instances where GAO was erroneously identified as either 
the funding or awarding agency. Our repeat of this analysis on the 
second round of quarterly reports showed a reduction in but not an 
elimination of the number of reports where a mismatch between the 
codes occurred. We identified 232 reports as having a mismatch on the 
CFDA number and 157 reports where there was no TAS match. In our TAS 
match, we found no instances where GAO was erroneously identified. 
Although the frequency of misalignment of TAS and CFDA values with 
their appropriate agency names has been reduced, this small set of 
reports where it continues calls into question the timeliness or 
efficacy of any edit checks that were implemented to address this 
issue. 

To assess the congruence between the summary values of selected data 
fields reported on Recovery.gov and the sums derived from those same 
data fields using the downloaded reports, we calculated the overall 
sum and sum by states for number of FTEs reported, award amount, and 
amount received. We found that the FTE values matched the total 
reported on Recovery.gov. The award amount and amount received data 
fields corresponded closely with the values shown for the summary data 
shown on Recovery.gov if the values in these data fields for all 
reports that appear in either or both rounds of quarterly reports are 
added together. However, there is some basis for concern that the 
values being aggregated in this way may include some double counting. 

The Board has noted that despite improvements in this round, they are 
experiencing difficulties cross-referencing reports from the first and 
second submission of reports because of inconsistencies in the way 
recipients entered award identifiers. For example, in some cases 
recipients used hyphens in their award key in round one but not in the 
second round. Based on a match we performed between first and second 
round reports on the basis of an award key data field,[Footnote 92] we 
identified a subset of reports that appeared in the first round of 
quarterly reports but not in the second round, a subset of reports 
that appeared in the second round for the first time, and a subset of 
reports that appeared in both rounds. When we further analyzed the 
13,506 reports that only appeared in the first round but not the 
second round, we found that 85 percent of them did not have the final 
report data field marked as showing that this first round report was 
to be the final report and that there would be no further quarterly 
reports.[Footnote 93] Sixty-eight percent indicated in the project 
status field that the project was either "Not Started" or "Less Than 
50% Completed." Forty-eight percent showed the date of award as being 
in the last half of the 2009 calendar year. In OMB's comments, the 
Controller noted that OMB conducted a line-by-line review of the 
13,506 reports that had been identified from round one that did not 
appear to have a matching report in round two. According to the 
Controller, preliminary indications are that "approximately 93 percent 
of the 13,000 reports were filed in the second round of reporting but, 
due to a technical issue, were not "matched" with the corresponding 
prior-quarter report …" Overall, OMB believes that the actual number 
of unmatched reports is fewer than 100 that should have had a 
corresponding report from the most recent reporting quarter but did 
not. 

In addition, we note that 5,422 of the 22,337 reports (24 percent) 
that appeared for the first time in the second round of recipient 
reports, showed an award date as occurring in the first half of the 
2009 calendar year. It seems unlikely that, for at least some of these 
5,422 reports, there would not have been first round quarterly reports 
submitted given the early award date. 

To the extent that these first-round-only reports and second-round-
only reports comprised records that should have been linked, summing 
the dollar amounts in the way noted above to obtain the overall totals 
will result in some double counting of the amounts reported. For 
example, for a first-round-only report and a second-round-only report 
that should have been linked but was not, the amount received value 
submitted in the first round, assuming it was a value greater than 
zero, will also constitute part of the cumulative amount received 
value shown in the unlinked second-round-only report. However, since 
each report was treated as a separate project, both amount received 
values were included in calculating the overall total with the amount 
reported for the first round being counted twice. Moreover, it appears 
that the downloadable records do not provide a way to track some 
projects' recipient reports from one quarter to the next. 

As part of our review of the second round of quarterly reports, we 
examined further the apparent consistency or coherence between the 
final report data field and other report data fields for all second 
round reports. For those reports indicating that they were final 
reports, we looked at the project status data field and whether the 
dollar amount shown for Recovery Act funds received or Recovery Act 
funds expended was close to the award amount. A total of 5,184 prime 
recipient reports, roughly 8 percent of all prime recipient reports, 
indicated that the current report was to be the final report. Although 
almost all of those reports showed a "Completed" project status, there 
were 279 reports where project status was either "Not Started" or 
"Less Than 50% Completed." For all recipient reports marked as final, 
we also conducted an analysis to identify those reports where the 
amount reported for both Recovery Act funds received or expended was 
less than 75 percent of the award amount or exceeded the award amount 
by 10 percent or more. We did not find any reports where both the 
amount shown as received or expended exceeded the award amount by 10 
percent or more. We identified 453 reports, about 9 percent of reports 
marked as final, where neither the value for amount received or 
expended was within 75 percent of the award amount. The project status 
for these 453 final reports showing less than 75 percent of funds 
received or expended is shown in table 10. 

Table 10: Project Status of Fourth Quarter, 2009 Prime Recipient 
Reports Marked As Final Report with Less Than 75 Percent of Funds 
Received or Expended: 

Project status: Not started; 
Number of reports: 90; 
Percentage: 20. 

Project status: Less than 50 percent completed; 
Number of reports: 98; 
Percentage: 22. 

Project status: More than 50 percent completed; 
Number of reports: 87; 
Percentage: 19. 

Project status: Completed; 
Number of reports: 178; 
Percentage: 39. 

Project status: Total; 
Number of reports: 453; 
Percentage: 100. 

Source: GAO analysis of prime recipient reports for fourth quarter 
2009 from Recovery.gov as of January 30, 2010. 

[End of table] 

The apparent incongruence between the reported project status and 
funding may warrant further examination or follow up with these 
reports if the designation of final report status is determined not to 
be in error and no further reports will be made. Identifying the 
reasons for the occurrence of recipient reports with the particular 
characteristics just described could help ensure that reports marked 
as final are complete and account fully for the expenditure of funds. 

A potential problem area we identified previously was the inconsistent 
provision of data on the number and total amount of small subawards of 
less than $25,000. There are data fields that collect information on 
small subawards, small subawards to individuals, and small subawards 
to vendors. We previously noted that there were 380 prime recipient 
report records where we observed the same values being reported in 
both small subawards and small subawards to individuals, and we 
established that there were many more records where these values were 
being reported separately. For this second round of quarterly reports, 
we found 485 reports showing this pattern of the same values being 
reported in both data fields. Similarly, we noted 152 reports in the 
previous quarter's reports where, in either the subawards or subawards 
to individuals data fields, the value for the number of subawards and 
the total dollar value of subawards were exactly the same and, as 
such, most likely erroneous. In this second round of reports, there 
were 141 such records. These reports are not likely to be conveying 
accurate information on the amount and dispersion of subawards. 

Overall, while most recipient report records were not identified as 
potential problems in our second round of edit checks and analyses, 
and some areas of concern and error appear to have been addressed, our 
results continue to indicate a need for further data quality efforts. 
Further improvements in those areas of concern we are able to identify 
could potentially yield a broader sense of assurance about the quality 
of information reported in data fields or relationships not as 
amenable to the type of edit checks and analyses we are able to 
perform. According to OMB's Controller, OMB recently transmitted a 
data file to the Board that reflects the analysis of the OMB-led 
review and is working with the Board to appropriately link reports and 
to make additional data corrections. We will request further 
information from OMB about this data file to understand how OMB and 
the Board are using it to address the report issues that we identified. 

State Officials Reported That OMB's Updated Guidance Improved the 
Round Two Recipient Reporting Process: 

In response to concerns raised by recipients including states and 
localities, issues identified by GAO, and lessons learned from the 
first round of reporting, OMB issued revised guidance on December 18, 
2009 for calculating FTEs and estimating jobs created or retained. 
OMB's responsiveness to incorporate feedback and issue new guidance a 
month after we issued our recommendations represents progress in 
moving toward more transparency and accountability for federal funds. 
However, with the compressed time frame, demands of the quarterly 
reporting schedule, and the national scale of the recipient reporting 
exercise, some state officials reported that the issuance of guidance 
approximately two weeks before recipients were to begin reporting 
presented challenges for them. For example, several Texas state 
agencies acknowledged that OMB's FTE calculation simplified the 
methodology for determining the jobs created or retained data element. 
A number of them commented, however, that receiving the updated 
guidance late in December strained their resources. Education state 
officials reported that the timing of the guidance was particularly 
challenging for them because its release coincided with the closing of 
schools and universities for the winter break. As a result, the 
calculation and reporting of FTE varied in the education area across 
and even within some states. These issues are discussed in detail 
later in this section. 

In the updated guidance, OMB advised recipients that they should 
implement the updated methodology to the greatest extent possible for 
the January reporting period. OMB alerted state representatives in 
teleconferences in November and early December that new guidance was 
forthcoming. State agencies' responses to the release of the updated 
guidance included actions such as disseminating their own updated 
guidance, hosting trainings, and participating in Webinars to address 
the challenges with the transition to the new guidance. Even with the 
outreach efforts by state agencies, some recipients, however, did not 
use the updated OMB guidance for the second reporting round. Other 
recipients were planning to use the continuous editing process to 
bring their reports into compliance. 

OMB's guidance is essential to recipients' understanding of the 
reporting requirements, which correlates directly with the quality of 
the data reported by states. State officials in many of our selected 
jurisdictions noted that the second round of recipient reporting was 
easier because of OMB's updated guidance on the FTE calculation or 
their familiarity with the reporting process. Under the old guidance, 
recipients reported being confused about counting a job created or 
retained even though they knew the number of hours that were paid for 
with Recovery Act funds. For example, officials in the Pennsylvania 
State Office of Accountability reported that during a national 
conference call of state reporting leads in December, many 
participants expressed their concern that neither federal agencies nor 
recipients of Recovery Act funds truly understood how the previous 
guidance worked and that the new instructions on job reporting were 
much easier to follow. Pennsylvania's Accountability Office noted that 
the changes in the guidance significantly reduced the number of pages 
of instructions for subrecipients and vendors. As another example, 
officials from the Ohio Office of Budget and Management said that the 
second round of reporting was a smoother process, recipients 
collaborated with their office, and they were more accustomed to the 
process. Likewise, Illinois state officials in the Department of 
Commerce and Economic Opportunity stated the determination of the 
denominator in the FTE calculation was much easier in the second round 
because it was less subjective and less time was needed to do the 
reporting due to prior experience. 

Although State Officials Reported Improvements in the Reporting 
Process, Some New Technical Glitches Surfaced: 

New edit checks were introduced for the second submission of recipient 
reports to prevent recipients from making certain errors, particularly 
those that received public attention in the first submission of 
reports. Table 11 shows the complete list of edits. On December 23, 
2009, the Board conducted a Webcast to educate recipients about 
reporting system changes for the second submission of recipient 
reports. The data entry system for recipients issued "soft error" 
messages to flag questionable data and allowed recipients to move 
forward with their answers or correct the fields before they submitted 
their record. The system issued "hard error" messages when the 
recipient entered certain inconsistent data, such as a ZIP code that 
conflicted with the congressional district entered for a project, or 
if the funds expended exceeded the funds awarded. Recipients would 
have to correct these fields before the system would accept their 
submissions. 

Table 11: FederalReporting.gov Edit Checks for January 2010 Recipient 
Reporting: 

Hard edit checks--entries not allowed; 
* Total Recovery Act Funds Received/Invoiced cannot be more than the 
Amount of Award; 
* If Project Status is "Fully Completed," Total Recovery Act 
Expenditures cannot be more than the Amount of Award or Total Recovery 
Act Funds Received/Invoiced; 
* If Project Status is "Fully Completed," Total Recovery Act 
Infrastructure Expenditures cannot be more than Amount of Award, Total 
Recovery Act Funds Received/Invoiced, or Total Recovery Act 
Expenditures; 
* Congressional District must match ZIP code+4. A valid congressional 
district must be entered; 
* ZIP code must match State; 
* Sub Award Amount must be greater than or equal to Sub Award 
Disbursed. 

Soft edit checks--provides alert only; 
* Amount of Award and Total Recovery Act Funds Received/Invoiced is 
$500,000 or more, but Number of Jobs created is less than 1; 
* Project Status is "Fully Completed," Total Recovery Act Funds 
Received/Invoiced, Total Recovery Act Expenditures, and Amount of 
Award equal, and Number of Jobs equals zero (0); 
* If Number of Jobs is greater than zero (0), then the Number of Jobs 
cannot equal Amount of Award, Total Recovery Act Funds Received/ 
Invoiced, Total Recovery Act Expenditures, or Total Recovery Act 
Infrastructure Expenditures; 
* Project Status cannot have a "Fully Completed" status where Total 
Recovery Act Funds Received/Invoiced equals zero (0); 
* Project Status cannot have a "Fully Completed" status where Total 
Recovery Act Expenditures equals zero (0) and Date of Award is greater 
than 30 days from the date of final submission; 
* Number of Jobs multiplied by $15,600 cannot exceed Amount of Award; 
* Amount received equals zero (0), jobs created/saved is more than 50; 
* Total Recovery Act Expenditures cannot be more than the Amount of 
Award or Total Recovery Act Funds Received/Invoiced; 
* Total Recovery Act Infrastructure Expenditures cannot be more than 
Amount of Award, Total Federal Amount ARRA Funds Received/Invoiced, or 
Total Federal Amount of ARRA Expenditures. 

Source: Recovery Accountability and Transparency Board. 

[End of table] 

A number of recipients reported difficulties with hard errors related 
to congressional districts and ZIP codes. According to the Board, 
FederalReporting.gov was programmed using the U.S. Postal Service's 
(USPS) database of ZIP codes and congressional districts. This 
database was chosen in part because it is used by Congress for 
constituent mailings. According to the Board, the USPS acknowledged 
that some districts' ZIP codes matches to the correct congressional 
district were still being corrected and resolved. Recipients who 
failed the congressional district edit check were using a variety of 
source data, not the USPS data which were provided on 
FederalReporting.gov and through the error messages, which specified 
both the recipient record and the congressional district (or range of 
districts) that corresponded to the ZIP code provided. To help ensure 
accountability, FederalReporting.gov confirms each recipient's 
business identification through a Dun & Bradstreet DUNS number and 
Central Contractor Registration (CCR).[Footnote 94] According to the 
Board, many recipients found that they had errors in the ZIP codes in 
their CCR registration. When recipients tried to enter their 
congressional districts, if they did not match the ZIP codes they had 
entered in CCR, they failed this edit check. Officials in 
Massachusetts reported that they received information from federal 
agencies, which led them to change some award numbers and DUNS numbers 
before submission, preventing error flags later on. According to these 
officials, the Department of Health and Human Services and the 
Department of Energy listed business identification information for 
each grant on their Web sites, a practice they would like to see other 
federal agencies adopt. 

Only recipients could edit their data submissions. However, federal 
agencies could attach correction flags when they were reviewing 
individual recipient reports. We interviewed a number of recipients 
whose first round data were incorrect. Some of these recipients did 
not report having a correction flag or any notification from their 
agency that they needed to review their data. One Head Start agency, 
with a recipient report that contained a high number of FTEs because 
of a misplaced decimal, posted a notice on its Web site but was told 
there was no way to correct the information posted in its recipient 
report. With the new features on FederalReporting.gov, recipients will 
be able to update their data for six weeks after the end of the 
reporting period. 

Department of Education Recipients Illustrate the Successes and 
Challenges of the Second Reporting Period: 

A number of state and local education officials we interviewed said 
that, with the exception of the timing of the release of the guidance, 
the recipient reporting process had been smoother during the second 
reporting period and that the new jobs guidance will ultimately 
simplify FTE calculations. Specifically, several state and local 
education officials said that data collection from subrecipients had 
been much easier in the second round of reporting. For example, an 
Iowa state official told us that during the first round of reporting 
the volume of calls for assistance from LEAs had been very high, but 
he had received far fewer calls during the second round. Regarding the 
new jobs calculation methodology, a number of state officials said 
that the new methodology, which directs recipients to calculate FTEs 
based on the hours worked and funded by the Recovery Act, is clearer 
than the previous formula.[Footnote 95] The new calculation does not 
require the subrecipient to make a subjective judgment about whether a 
job would have existed in the absence of Recovery Act funds, and a 
local official described the new methodology as more objective. These 
results are encouraging, because funding for education is a 
significant share of the Recovery Act with three programs--the State 
Fiscal Stabilization Fund, Title I, and IDEA--receiving nearly $80 
billion in new funding under the act and because approximately two 
thirds of the jobs reported by recipients during both reporting 
periods have been attributed to education funds, including funds for 
government services included in the State Fiscal Stabilization Fund 
administered by the Department of Education. 

While a number of education officials said the new guidance simplified 
the jobs calculations, they also said that the release of the guidance 
on December 18, 2009, was problematic, particularly because the 
release coincided with the closing of schools and universities for the 
holiday break. Specifically, the timing made it harder for state 
officials to communicate new expectations to districts and limited the 
amount of time available to gather revised data from LEAs and IHEs. 
Officials in several states told us that data collection from LEAs was 
already well under way when the new guidance was issued. For example, 
Pennsylvania allowed certain subrecipients that were scheduled to be 
closed during the holidays to submit reports by December 17, 2009, and 
then recertify the reports after the holidays if anything changed. 
This deadline was one day before OMB released the new guidance, and, 
therefore, Pennsylvania had to go back to certain subrecipients to ask 
for new information to follow the revised job guidance. Similarly, 
state officials in Iowa told us that by December 18, 2009, over 90 
percent of the Education subrecipient reports in their state had 
already been submitted to the state and verified by program staff. 
When schools reopened on January 4, 2010, state officials sent an e-
mail to all subrecipients explaining the new requirements and asking 
them to resubmit corrected data by January 8. Overall, state education 
officials in 9 of our 17 jurisdictions told us they had required LEAs 
to submit their data in December. In some of these states, officials 
asked LEA officials to resubmit new data to follow the newly released 
guidance. 

In addition to having to resubmit reports, the fact that a number of 
states required districts to submit data prior to the close of the 
reporting period could affect data or the comparability of data across 
states. Some, such as Iowa and New Jersey,[Footnote 96] asked LEAs to 
project figures through the end of the quarter. In contrast, officials 
in Massachusetts and the District of Columbia told subrecipients to 
report data from the start of the quarter until submission to the 
state or District (December 24 in Massachusetts and December 14 in the 
District), to retain information on the intervening period (between 
the cut-off date and December 31, 2009), and to include data on this 
period in the third round of recipient reports. Officials in 
California instructed LEAs that if good estimates were available for 
funds expended or obligated through the end of their reporting period, 
they should use them. However, if they did not estimate, but cut off 
at the end of the previous month, they should do so for both jobs 
created or retained and funds expended or obligated. Education 
officials in Georgia told us that they anticipate setting an early cut-
off date for the round three reports since the deadline coincides with 
spring break and the Easter holiday, and officials in Massachusetts 
said they hope to have the reporting deadline in Massachusetts be the 
last Friday of the month, at the end of the reporting cycle. 

Although they faced challenges, several states were able to obtain 
jobs data and report it following the updated OMB guidance. During a 
joint conference call on January 11, 2010, OMB and Education officials 
said prime recipients could use the corrections period in January to 
clarify and refine numbers in light of the timing of the guidance. 
Specifically, in Florida, Georgia, Iowa, Michigan, North Carolina, and 
Pennsylvania, the prime recipients told LEAs to submit information 
based on the updated OMB guidance or to resubmit such data if LEAs had 
already submitted data using the old guidance. Further, officials in 
Massachusetts[Footnote 97] and the District of Columbia told us they 
had been able to report following OMB's December 18 guidance using the 
information they had already collected from LEAs. Illinois officials 
told us they had incorporated corrections for some, but not all of 
Illinois' LEAs in January, and therefore submitted Education-related 
recipient reports that included FTE counts generated using both the 
new and old guidance. Specifically, Illinois asked the six districts 
with the largest Recovery Act allocations in the state to recalculate 
jobs data based on OMB's guidance in January and included these 
revised figures in the state's Education recipient report. 

Other states did not use OMB's updated guidance, but instead reported 
following the old guidance for at least some of their education 
program recipient reports. Officials in three of these states-- 
Arizona,[Footnote 98] California, and New Jersey--said they planned to 
have LEAs submit updated figures during the continual corrections 
period in February or March. However, officials in two other states-- 
Colorado[Footnote 99] and New York--said they did not plan on updating 
the numbers to reflect the new guidance, but plan on implementing the 
new guidance during the next reporting cycle. Officials in Arizona and 
Colorado told us they had followed the updated guidance for State 
Fiscal Stabilization Fund recipient reports. 

Despite the updated guidance, some state and local officials still 
have questions about how to calculate FTEs. A number of state and 
local officials, including officials from the Pennsylvania Department 
of Education, told us that they were unsure about how to calculate 
FTEs for teachers during the quarters spanning the summer months and 
that additional guidance would be useful. OMB's updated guidance 
allows districts to define the number of hours in a full-time schedule 
for a particular position (the number of hours in the denominator) to 
account for differences in work schedules, but does not offer an 
example of how to adjust this denominator in quarters when school is 
not in session or provide guidance as to how to apply the numerator, 
"hours worked and paid for with Recovery Act funds," to an education 
context. While teachers typically work 10 months out of the year, in 
some districts they are paid year round and are considered full-time 
employees. Local officials we spoke to varied in whether they expected 
to report FTEs for teachers during the summer months. For example, one 
official told us he was concerned that if he reported actual hours 
worked for teachers during the summer months he would not show any 
FTEs, even though there would be salary expenditures. In contrast, 
local officials in another district indicated that they would report 
FTEs during the summer months for teachers because teachers are paid 
12 months out of the year. 

State education officials reported implementing a number of strategies 
to improve the reliability of data and to validate jobs or expenditure 
data submitted by LEAs. For instance, Arizona, Georgia, Iowa, North 
Carolina and New Jersey indicated that they pre-populated a number of 
fields for LEAs, such as by inserting DUNS numbers or the amount of 
the grant award, which reduced the fields LEAs must complete. In 
addition, officials from Arizona, Iowa, and Georgia said that they 
compared data with information in their financial and budget planning 
systems. Iowa, Michigan, and New York state officials also said they 
compare an LEA's reported FTE calculation to the approved budget or 
application for that district to see if the reported figure is 
reasonable. Officials from Florida and Georgia said that they review 
reported numbers for anomalies, such as FTE numbers greater than zero 
with no related expenditures or expenditures greater than zero with no 
related FTEs. Finally, many officials told us they check the data for 
basic reasonableness. 

State education officials told us they had taken steps to try to 
ensure the completeness of their required recipient reports. For 
instance, officials in Pennsylvania said they had compared reports of 
recipients that had reported to the list of LEAs in the state who were 
required to report and followed up with districts that had not 
submitted reports. Officials in the District of Columbia told us that 
their data collection method creates an added incentive for LEAs to 
report--the data collection tool for the recipient reports is part of 
the LEA's process to request reimbursement. In contrast, an Iowa 
official reported that at least seven subrecipients had not reported 
data for this reporting period, and as a result, the official had 
entered zeros for these districts for jobs and expenditures. When we 
followed up with the districts, two districts told us they thought 
they had submitted the required information, three said they had 
submitted initial reports during December but had missed the request 
for updated data in January, and two districts, under the same 
superintendent, had not reported because the superintendent had 
difficulty accessing the system. Of these seven districts, two had not 
yet spent any funds. We followed up with the Iowa official and he said 
that he did not know why a report would not have been recorded if it 
had been submitted, that even districts that had not spent funds were 
required to submit reports, and that he did not plan to submit 
corrections on the data. 

Recommendation for Executive Action: 

To improve the consistency of FTE data collected and reported, we 
recommend that the Secretary of the Department of Education 
(Education) and the Director of the Office of Management and Budget 
(OMB) provide clarifying guidance to recipients on how to best 
calculate FTEs for education employees during quarters when school is 
not in session. 

OMB's Updated Guidance Emphasizes Federal Data Quality Checks on 
Recipient Reports: 

Recipient reporting data quality is integral as part of the effort to 
bring transparency and accountability to the Recovery Act funds. While 
recipients we contacted during the first round of recipient reporting 
appeared to have made good faith efforts to ensure complete and 
accurate reporting, our fieldwork and analysis of first round data 
indicated that there were a range of significant reporting and quality 
issues that needed to be addressed. Collecting information from such a 
large and varied number of entities in a compressed time frame, as 
required by the Recovery Act will continue to be a huge task, and 
developing systems to check the data submitted under these 
circumstances takes on increased importance. 

OMB's updated December 2009 guidance outlined steps to address the 
issue of federal agency data quality checks on recipient reported 
data. The guidance lays out ways in which agencies can help recipients 
report better data. OMB reinforces that agencies, at a minimum, are to 
establish data quality plans that articulate their review process to 
focus on significant reporting errors and material omissions and 
ensure complete, accurate, and timely reporting of all amounts funded 
by the Recovery Act. In addition, agencies are now advised to provide 
recipients with key award information, such as recipient name and 
award amount. The agencies also are instructed to have recipients 
examine their reports for logical inconsistencies, such as if a 
recipient indicates that the project is fully completed but the funds 
received are minimal compared to the award amount. 

Federal agencies' recipient reporting data quality review efforts 
continue to develop. In particular, from the federal agencies we 
reviewed, various processes were in place for outreach, identifying 
nonreporters, monitoring compliance, and identifying errors in 
reporting. The prime recipient report records include data on whether 
or not the federal agency reviewed the record during the data quality 
review time frames. In addition, the report includes a flag as to 
whether or not a correction was initiated. A correction could be 
initiated by either the prime recipient or the reviewing agency. In 
our review of the prior quarter reports, we examined the number and 
percentage of prime recipient records that were marked as having been 
reviewed by the federal agency. We repeated that analysis for the most 
current quarter--table 12 below shows the results. 

Table 12: Fourth Quarter 2009 Prime Recipient Reports Reviews and 
Corrections: 

Reviewed by agency: No; 
Correction: No; 
Percentage: 23; 
Number of prime recipient reports: 15,178. 

Reviewed by agency: No; 
Correction: Yes; 
Percentage: 11; 
Number of prime recipient reports: 7,464. 

Reviewed by agency: Yes; 
Correction: No; 
Percentage: 54; 
Number of prime recipient reports: 35,269. 

Reviewed by agency: Yes; 
Correction: Yes; 
Percentage: 12; 
Number of prime recipient reports: 7,916. 

Reviewed by agency: Total; 
Correction: [Empty]; 
Percentage: 100; 
Number of prime recipient reports: 65,827. 

Source: GAO analysis of prime recipient reports for fourth quarter 
2009 from Recovery.gov as of January 30, 2010. 

[End of table] 

Relative to the prior quarter, both the percent and number of prime 
reports marked as reviewed by agency were lower in the 2009 fourth 
quarter. In the prior quarter, 80 percent (45,825 records) of the 
prime recipient reports were marked as having been reviewed by the 
agency. As shown above in table 12, 66 percent (43,185 records) of the 
prime recipient reports were marked. 

Department of Education: 

Education's efforts to facilitate jobs reporting and data quality 
include coordinating with OMB, hosting conference calls, monitoring 
recipients, and conducting data quality reviews. Education provided 
guidance and technical assistance to states. As part of its guidance 
and technical assistance efforts, Education hosted three conference 
calls before and after the updated guidance was released to address 
reporting changes. 

Education developed a quality review plan that included processes for 
identifying errors through various cross-checking mechanisms. 
According to Education officials, one example of such a mechanism is a 
series of comparisons of second round data to data reported in the 
first quarter by using data elements such as number of jobs and job 
descriptions. Similarly, Education compares various data elements in 
recipient reports, such as award number and CFDA numbers, with 
information in its grant management system to identify incorrect data 
elements that could make it appear that a recipient had not submitted 
a report. Before the federal agency review period began, officials ran 
daily reports and compared these reports to first quarter reports to 
check data, such as project status. According to a program official, 
these reports were invaluable to the program offices because they made 
it easier for them to assist state officials in fixing errors before 
the actual corrections period. 

To aid in identifying nonreporters, Education has implemented, through 
a monitoring questionnaire sent to state officials for Title I and 
SFSF, compliance measures, which in some circumstances also allow 
Education officials to identify errors before the reporting deadline. 
For example, Education officials we interviewed noted a situation in 
Illinois where LEA reporting was lower than they expected. Illinois 
officials also told us that they had observed that the number of LEAs 
shown in the system was too low, that this error was due to an 
incomplete upload of their report, and that they had subsequently 
resubmitted the report. Finally, officials told us that the department 
plans to do a reasonableness check on subrecipient reports from the 
second quarter across programs. As part of this check, officials will 
observe whether the number of reports for each grant appear to be 
consistent with the number of LEAs they expect to see and will contact 
state officials to discuss inconsistencies that arise. 

Education officials said that the recipient reporting process has 
improved their knowledge of states' cash management practices and that 
this information will help them to monitor states and offer them 
targeted technical assistance. For example, a department official told 
us that as a result of the Recovery Act, program officials have 
learned in more detail how funds flow from SEAs to LEAs in each state, 
and that this information has been very important in helping program 
staff interpret the expenditure numbers they see on the recipient 
reports in their monitoring efforts. For instance, a state's reported 
expenditures might appear low because the state operates on a 
quarterly reimbursement basis and districts have been spending their 
own funds expecting reimbursement--without the knowledge of the 
state's cash management practices such numbers could be 
misinterpreted. This official told us that her specific program office 
will use this information to train program office staff in how to use 
this information in their monitoring efforts. The official added that 
the financial management information they have learned through the 
recipient reporting process adds another layer to the information 
gathered through broader, systems-based questions they have asked 
during IDEA monitoring visits over the last 5 years. Further, she 
believes that this more nuanced understanding of how state finances 
work will help department officials provide more tailored technical 
assistance to states. 

Department of Housing and Urban Development: 

In response to OMB's guidance, HUD has engaged in efforts to 
facilitate timely and accurate jobs reporting. HUD's efforts included 
outreach to recipients, developing processes for error detection, and 
identifying nonreporters. According to officials, HUD contacted 
recipients by e-mail with reminders to report and provided key 
information that should be included in certain data fields. In 
addition, HUD provided technical assistance to walk unfamiliar 
recipients through the reporting process. 

HUD also developed data quality review processes with cross-checking 
mechanisms to detect errors. For example, the Recovery Act Management 
and Performance System (RAMPS) compared data in four key fields from 
FederalReporting.gov against parameters HUD established to identify 
potential significant errors (see table 13).[Footnote 100] RAMPS also 
flagged duplicate entries, awards entered incorrectly as contracts, 
and reports entered with invalid award ID numbers. 

Table 13: Parameters HUD Established to Identify Significant Errors 
for the Capital Fund: 

Data field: Award amount; 
Parameter for determining significant error: Compared directly to 
Office of the Chief Financial Officer (OCFO) obligation, with a 0% 
variance allowed.[A] 

Data field: Total received; 
Parameter for determining significant error: Compared directly to OCFO 
disbursement, with a +/-10% variance allowed. 

Data field: Total spent; 
Parameter for determining significant error: May not exceed OCFO 
obligation. 

Data field: Jobs; Related to OCFO obligation. 
Parameter for determining significant error: The number of jobs may 
not exceed a +50% variance from the following: OCFO obligation/$205K. 

Source: HUD officials. 

[A] For the first round of recipient reports, this parameter allowed a 
+/-10 percent variance. 

[End of table] 

Moreover, for the second cycle HUD officials told us they further 
incorporated suggestions from OMB's guidance to agencies to improve 
the data quality review process. The department identified some 
material omissions by examining fields with narrative responses to 
determine whether they contained a minimum number of characters as an 
indicator of whether the responses adequately addressed requirements 
for those fields. HUD officials said that the most prevalent errors in 
reported data were in the number of jobs field. They said that 
confusion persists among public housing agency officials regarding how 
to calculate and count jobs, which is reflected in the number of 
potential errors identified by the data quality review process. HUD 
officials said they first followed up on the most egregious errors--
large overcounting or undercounting--that remained uncorrected after 
their initial review of the data before addressing other errors. Table 
14 identifies the number of potential significant errors identified by 
HUD in each field for Public Housing Capital Fund formula grants and 
competitive grants for each quarterly reporting cycle. 

Table 14: Number of Potential Significant Errors Identified by Field 
for the October 2009 and January 2010 Reporting Cycles: 

Data field: Award amount; 
Number of potential errors, October reporting cycle: 55; 
Number of potential errors, January reporting cycle: 28. 

Data field: Amount received; 
Number of potential errors, October reporting cycle: 639; 
Number of potential errors, January reporting cycle: 730. 

Data field: Total spent; 
Number of potential errors, October reporting cycle: 5; 
Number of potential errors, January reporting cycle: 1. 

Data field: Jobs; 
Number of potential errors, October reporting cycle: 1,437; 
Number of potential errors, January reporting cycle: 1,118. 

Data field: Total; 
Number of potential errors, October reporting cycle: 2,136; 
Number of potential errors, January reporting cycle: 1,877. 

Source: GAO analysis of HUD data. 

Note: A single report can have multiple significant errors identified. 

[End of table] 

HUD's data quality process proposal defines material omissions as any 
grantee that failed to report at all. HUD developed a Recovery Act Non-
Reporting Enforcement Plan in September 2009, which states that all 
recipients who fail to report in FederalReporting.gov by the end of 
their first applicable reporting cycle will receive a warning letter 
from HUD program staff. If recipients fail to report a second time, 
HUD will initiate further enforcement actions which can include formal 
or informal hearings, suspension of access to funds, or other actions. 
In the first recipient reporting cycle, HUD identified 152 Capital 
Fund formula and competitive grants for which a report was required 
but none was found, according to HUD officials. Officials told us HUD 
provided technical assistance to housing agencies on its nonreporter 
list, including walking them systematically through the reporting 
process. HUD officials told us they also sent reminder e-mails on 
December 4, 2009 to the 152 nonreporting housing agencies reminding 
them to report in the second reporting period and warning them that 
HUD may take additional action if they failed to report in the next 
reporting period. In the second reporting cycle, HUD identified 27 
grants for which a report was required but none was found, including 6 
grants for which no report was found for either cycle. HUD officials 
told us they followed up by phone with all housing agencies for which 
no report was found for either cycle. 

HUD officials questioned the accuracy and validity of the data 
submitted through recipient reports and said they were not yet 
comfortable relying on these data because of the level of confusion 
expressed by housing agency officials regarding jobs reporting and the 
large number of potential errors HUD identified in the "number of 
jobs" field. In addition, they said HUD already has most of the 
information collected through the recipient reports--jobs information 
and project status were two exceptions--and uses other systems for 
that information because HUD officials believe the data are more 
reliable than the recipient-reported data. Although HUD has received 
feedback from housing agencies that are confused or frustrated over 
the reporting process, it has not received substantive feedback from 
external stakeholders, such as OMB, the HUD IG, interest groups, or 
the media on recipient data for the Capital Fund grant program. 

For the first submission of recipient reports, we noted that public 
housing agencies experienced problems with the process of recipient 
reporting and the FTE calculation. These problems appeared to continue 
in round two. For example, officials at one Mississippi housing 
authority reported the same 6 jobs in round two that they reported in 
round one. We determined their calculations did not conform to the OMB 
guidance of December 18, and they did not recall receiving guidance 
from HUD or OMB on job calculations for round two. However, HUD 
officials told us HUD sent several e-mails to each grantee between 
December 23 and the end of the reporting period that included a link 
to HUD's explanation of the job count and the change in job count 
guidance from OMB. 

Officials from a Mississippi and a Pennsylvania housing authority 
reported using a jobs calculator produced by HUD to calculate the 
number of jobs they reported in the second round. HUD had posted a 
jobs calculator for the first round of recipient reporting, which was 
designed to calculate jobs cumulatively across reporting periods, but 
removed it prior to the second round of reporting after OMB changed 
the guidance for calculating jobs. According to a HUD official, their 
jobs calculator for the second round--which reflected the changes in 
OMB guidance for calculating jobs--was posted for about 1 week in 
December 2009 before OMB requested that it be taken down in order to 
review it further. After reviewing the HUD guidance to housing agency 
officials, it appears that HUD did not take steps to instruct housing 
agencies not to use the jobs calculator from the first round. As a 
result, housing agencies may have incorrectly used the jobs calculator 
from the first round to calculate the number of jobs for the second 
round. 

Recommendation for Executive Action: 

We recommend that the Secretary of Housing and Urban Development 
instruct housing agencies to discontinue use of the jobs calculator 
provided by HUD in the first round of recipient reporting for 
subsequent rounds of reporting to ensure the correct job calculation 
is used. 

Department of Transportation: 

DOT officials noted that the combination of information sharing among 
the operating administrations (OA),[Footnote 101] prior knowledge of 
reporting by the recipients, and the dissemination of training and 
guidance helped the department and recipients comply with reporting in 
the second submission of reports. DOT's OAs engaged in several efforts 
of outreach to assist in accurate recipient reporting. The OAs 
conducted Webinars and meetings, sent e-mails, and made telephone 
calls to brief and train their program recipients. According to 
officials, they wanted to ensure that, along with keeping recipients 
updated on requirement changes, first-time recipients would be 
successful in reporting. In addition, during the first reporting 
period, DOT learned that the OAs, working together as a group, allowed 
sharing of information and mediation of reporting challenges. 

To identify the nonreporters, the OAs compared the list of recipients 
with reports found in FederalReporting.gov. As a result, they 
identified 64 recipients that failed to report during the first 
reporting period. The OAs worked one-on-one with these recipients and 
received assurances from these nonreporters that they would comply 
with future reporting requirements. 

According to officials, DOT and its OAs took numerous steps to address 
the quality of the recipient reported data and identify errors. To 
address reporting, DOT modified contract terms and conditions to 
include recipient reporting requirements and warnings that were sent 
to recipients reminding them that reporting data is a condition of the 
Recovery Act funding. Further, officials reported that each OA has 
developed a written process to conduct data quality reviews. To 
understand the reasons for identified inaccuracies in reported data, 
DOT relied on direct contact and follow-up with its recipients. When 
asked how DOT planned to use the recipient reported data, officials 
said they did not have plans to use the information from recipient 
reports in future decision making. Instead, they planned to rely on 
other department data collection methods. 

DOT took steps to promote consistency between OMB definitions and the 
unique nature of FHWA programs. However, guidance provided by FHWA 
raised concerns with some state and local officials we interviewed. 
OMB encouraged federal agencies to provide supplementary reporting 
guidance to their recipients. To improve consistency in the guidance 
recipients receive, OMB requires agencies to clear any supplemental 
guidance through OMB. FHWA approached OMB to clarify the number 
recipients should report for total federal Recovery Act funds 
received. To meet the statutory requirement of reporting at the 
project or activity level, OMB and FHWA determined that recipients 
should report the amount awarded and the amount received as the same 
regardless of expenditures, since recipients report expenditures in a 
subsequent field. 

Some state officials stated that the supplementary guidance from FHWA 
raised definitional and transparency issues. We also found that the 
states we reviewed differed in the application of the guidance. In 
some cases, states did not report the same number in the amount 
awarded and amount received column. In one case, the state response 
was that funding values for all amounts were taken from the state 
accounting system and were consistent across all of the state 
recipient reports. A few other states made the changes to conform to 
the guidance, but expressed concerns about the definition of this 
field and the transparency of the reporting. FHWA and OMB officials 
are aware that some state officials have raised concerns with this 
guidance and are working with state officials to try to resolve this 
issue. However, as OMB clearly states in its guidance, although 
federal agencies are able to comment and suggest changes to the 
reports, prime recipients are ultimately responsible for the data 
reported into FederalReporting.gov. We will continue to monitor this 
matter. 

Department of Energy: 

DOE made several outreach efforts to their program recipients to 
ensure timely reporting. These efforts included e-mail reminders for 
registration and Webinars that provided guidance on reporting 
requirements. For the first round of reporting, DOE developed a 
quality assurance plan to ensure all prime recipients filed quarterly 
reports, while assisting in identifying errors in reports. The 
methodology for the quality assurance review included several phases 
and provided details on the role and responsibilities for DOE 
officials. 

According to DOE officials, the data quality assurance plan was also 
designed to emphasize the avoidance of material omissions and 
significant reporting errors. More specifically, as reported by the 
OIG and DOE officials, the plan outlined a qualitative comparison of 
recipient data obtained from FederalReporting.gov to agency data 
obtained from the department's financial and procurement systems. To 
aid in the comparative analysis, DOE established threshold deviations 
for the first round of recipient reporting. More specifically, the 
jobs creation or retention thresholds were originally established by 
the Political Economy Research Institute (PERI) at the University of 
Massachusetts-Amherst, acting as a consultant to DOE. According to DOE 
officials, PERI was able to create this list of expected job creation 
from the project operation plan provided by DOE and used them in their 
quality assurance analysis. DOE plans to adjust these thresholds based 
on the first and second round of recipient reporting. OIG officials 
noted that, based on their October review, DOE officials are 
instructing programs to use information from the quality assurance 
analysis when considering future funding and for management purposes. 

Department of Health and Human Services: 

To address data quality, HHS operating agencies engaged in various 
efforts of outreach, reporting error detection, and identifying 
nonreporters. HHS officials stated that they contacted recipients to 
determine the cause of errors, correct errors, and offer assistance. 
HHS was able to identify areas for improvement for the January 
reporting period through their series on lessons learned within the 
agency. Because of these efforts, HHS provided guidance to recipients 
on how to correct the key award information when using the copy 
forward feature in FederalReporting.gov during the January reporting 
period. Lastly, during the first reporting period, HHS developed a Web 
site, that provides recipients with award information needed to 
complete their reports, such as award amount, award ID, and date of 
award. Additionally, to aid with correcting errors, HHS reports that 
the Health Resources and Services Administration has sent e-mail 
notifications and initiated technical assistance calls emphasizing the 
importance of correcting fields with identified errors during the 
January reporting period. HHS reports that programs have been reaching 
out to recipients that made errors to determine the cause of those 
errors and to develop a strategy for correcting them. 

Nonreporters are tracked by HHS on a master list that includes 
recipients from their Operating Divisions. HHS relied on individual 
Operating Divisions to provide information on the number of recipients 
who did not report. According to HHS staff, these programs compared 
the list of reports that they expected to receive with the list of 
reports that they actually received in order to identify nonreporters. 
HHS reports that each HHS Operating Division, or agency, is 
responsible for contacting the recipient and providing technical 
assistance as needed. Each Operating Division contacted all recipients 
who did not report to identify the reasons for noncompliance. The HHS 
Office of Recovery Act Coordination compiled these reasons in a master 
spreadsheet and sent it to OMB. 

A number of press articles in November 2009 discussed concerns with 
the jobs reporting done by HHS Head Start grantees. During round two, 
we followed up with two Head Start grantees in Georgia, who reported 
that guidance from the Office of Head Start program after the last 
round of reporting improved their understanding of the recipient 
reporting process. While the grantees complied with OMB's new guidance 
for reporting FTEs, there were a few errors in the recipient report 
that one of the grantees initially submitted, resulting in revisions 
to the ZIP code, congressional district, and award number. 

Agency Officials Are Unclear about the Federal Agency Role during the 
Continual Review Period: 

Following the first round of recipient reporting, the Board made 
several major reporting changes that took effect in the second round. 
One of these changes allows recipients to correct reporting mistakes 
on a continual basis. This new process began on February 2 and will 
last until March 15 for the second submission of recipient reports. 
According to Recovery.gov, recipients can change or correct their 
reports multiple times during this extended review period. In 
conjunction with this, OMB's December 18 guidance instructed federal 
agencies to evaluate on a continuous basis recipient and subrecipient 
reports. This differs from the framework of the initial review of 
submissions during which agencies had 8 calendar days to review and 
comment on submissions. During the initial review period, the reports 
were locked and only the federal agency could unlock reports for 
recipients to make changes. In contrast, during the continual review 
period, recipients can make multiple changes up to midnight Monday the 
week the data are posted on Recovery.gov. Federal agencies have a one- 
day period to review the final submissions before the data are 
downloaded and posted on Recovery.gov. This shortened period for 
agency review of "final" reports may not allow for the same quality 
assurance as in the initial review period. The Board released the 
first updated data set on February 10 on Recovery.gov, and it 
anticipates that the updates will occur every other Wednesday, with 
the final update for the quarter ending December 31, 2009, occurring 
on March 17, 2010. 

Federal agency officials we spoke with are concerned about fulfilling 
OMB's directive to evaluate recipient data on a continuous basis. 
OMB's December 18 guidance states simply "federal agencies are 
required to make reasonable efforts to monitor such corrections…" For 
example, Education officials said that there is a need for more 
guidance on how the new review period will work. They added that 
developing monitoring plans or drafting policies and procedures is 
difficult until guidance has been issued. Education officials told us 
that during a conference call on February 3, 2010, OMB raised the 
topic of creating agency guidance for the continuous corrections 
process and that a number of Education officials had offered to help 
develop the guidance. Education officials later told us that this 
topic has been revisited during subsequent working group calls, and 
that agencies and OMB concluded that more experience with this new 
process was needed before meaningful guidance could be developed. HUD 
officials told us that the department does not have a plan in place to 
address the new period of continuous corrections and is waiting for 
guidance from OMB and potentially the Board on what the expectations 
are for federal agencies. HUD has had internal discussions regarding 
monitoring corrections, but officials were not sure what types of 
changes would be possible for a recipient to make during the second 
round of reporting. HUD officials expressed concern that the new 
continual corrections period for recipients may pose monitoring issues 
for both HUD and prime recipients. DOT officials expressed similar 
concern with the lack of formal guidance regarding the department's 
role in reviewing recipient data during the continual update phase. 
DOT continues to monitor the data submitted on a daily basis in 
anticipation of OMB or the Board implementing a formalized process. 
Officials also noted that keeping track of changes made by recipients 
could be challenging due to the staff effort required to monitor the 
changes and the fact that recipients can make multiple changes 
throughout the period. In addition, a senior DOE official in the 
department's Recovery Operations Group noted that without 
understanding the Board and OMB's expectations for federal agencies 
during the recipients' continual review period, agencies have had 
difficulty developing their monitoring efforts. According to the 
official, the continual edit capability now requires agencies to 
inquire daily on what has changed in order to monitor the recipient 
reports. DOE officials also expressed concern regarding the amount of 
staff time required to maintain this level of review on a daily basis 
for thousands of reports. 

A senior Board official explained that they designed the new process 
to address the concerns of state officials that under the old process, 
they had limited opportunities to correct erroneous data. Under the 
approach used in the first round of recipient reporting, recipients 
could only correct data prior to their public release on Recovery.gov; 
recipients were concerned that they could not address mistakes in the 
data until the next official reporting cycle. During the first round 
initial review period, only the federal agency could unlock reports 
for recipients to make changes. According to FederalReporting.gov, 
federal agencies under the new process are to identify errors in 
recipient reports and add comments addressing those errors through the 
entire continual review period. The senior Board official acknowledged 
that this change was not one that many federal agencies' officials 
agreed with because of the difficulty in tracking changes, but he 
stressed that the states--often the prime recipients--had the most 
accountability for the data, and that they needed more flexibility in 
correcting data. The official said that he expected that the Board, 
OMB, and federal agencies would discuss this issue at an upcoming 
"lessons learned" session covering the second round of recipient 
reporting and at weekly working group meetings that OMB has with 
federal agency recipient reporting teams. 

Recommendation for Executive Action: 

OMB should work with the Board and federal agencies, building on the 
lessons learned, to establish a formal and feasible framework for 
review of recipient changes during the continual update period and 
consider providing more time for agencies to review and provide 
feedback to recipients before posting updated reports on Recovery.gov. 

The Board Is Working with Federal Inspectors General to Establish a 
Multiphased Recipient Data Federal Agency Review Process: 

In light of the importance of the quality of the Recovery Act data, 
the Board is working with Federal Inspectors General to establish a 
multiphased federal agency review process to look at the quality of 
the data submitted by Recovery Act recipients. Over the coming months, 
the Board and the Federal Inspectors General plan to issue subsequent 
reports that look at the causes of inaccurate reporting, the 
effectiveness of the agency data quality review processes, and, in 
some cases, Federal Inspectors General will review the accuracy of 
specific recipient reports. 

The Board's Recovery Funds Working Group, which includes 
representatives from the 29 inspectors general, meets monthly to 
discuss issues related to oversight of Recovery Act funds. In 
addition, the Board's Working Group has taken steps to assess federal 
agencies' efforts to review the quality of recipient reported data. In 
December 2009, the 21 inspectors general reported that 17 federal 
agencies had processes to perform limited data-quality reviews for 
identifying material omissions or significant errors in the recipient 
reported information and to notify recipients of the need to make any 
changes, while 4 federal agencies--the Departments of Agriculture, 
Defense, and Homeland Security, and the Small Business Administration--
had weaknesses in their respective processes.[Footnote 102] 

Providing Information and Access to the Public: 

The Board is responsible for providing information about Recovery Act 
spending via Recovery.gov. This Web site promotes official data for 
use in public debate, assists in providing fair and open access to 
Recovery Act opportunities, and promotes an understanding of the local 
impact of Recovery Act funding. Data reported by recipients of 
Recovery Act funds through the nationwide data collection system at 
FederalReporting.gov are available to the public for viewing and 
downloading on Recovery.gov. 

To increase the public's access to data, OMB encouraged states to post 
information about the impact of Recovery Act funds on a state Recovery 
Act Web site. These Web sites vary in content between states. For 
example, Pennsylvania and Massachusetts presented information targeted 
at citizens, including analysis of local impacts of the Recovery Act, 
detailed explanations of FTE counts, ongoing project updates, 
instructions in applying for Recovery Act funds, and definitions of 
terms used to describe Recovery Act funding. Some states posted 
information targeted at recipients, with basic FTE calculations or 
links to reporting guidance. Many state Recovery Act Web sites also 
encourage reporting of fraud and abuse of Recovery Act funds. Eight 
states in our 17 jurisdictions--Arizona, California, Colorado, 
Illinois, New Jersey, North Carolina, Pennsylvania and Texas--included 
information about fraud reporting hotlines on their Recovery Web 
sites. Michigan and Iowa instead posted links to federal fraud 
reporting Web sites. 

Oversight and Accountability Efforts in the First Year: 

OMB Has Taken Steps toward Implementing GAO Recommendations for 
Improving the Single Audit Process for Recovery Act Programs, and 
Actions Are Ongoing: 

Since our first bimonthly report in April 2009, we have made 
recommendations to OMB for improving the accountability and oversight 
of Recovery Act funds. These recommendations were intended to help 
mitigate risks related to Recovery Act funds and to strengthen 
internal controls over the use of those funds through the Single Audit 
Act and OMB Circular No. A-133 for Single Audits.[Footnote 103] OMB 
has taken steps to implement our recommendations. However, these 
efforts do not yet fully address the significant risks related to 
Recovery Act funds. In October 2009, in response to our 
recommendations, OMB implemented a Single Audit Internal Control 
Project (project), which is under way. The project is a collaborative 
effort between the states receiving Recovery Act funds that 
volunteered to participate, their auditors, and the federal 
government. One of the project's goals is to achieve more timely 
communication of internal control deficiencies for higher-risk 
Recovery Act programs so that corrective action can be taken. The 
project required the auditors for each of the 16 volunteer states to 
issue interim reports on internal control of major Recovery Act 
programs as of November 30, 2009. These reports were to be presented 
to auditee management prior to December 31, 2009 (3 months sooner than 
the 9-month time frame required by OMB Circular No. A-133). Under the 
project, auditee management was to provide the report and a corrective 
action plan to the appropriate federal agency by January 31, 2010. 
When OMB completes the project, we plan to analyze the results and 
other actions that OMB has taken to more fully implement our 
recommendations to achieve improved and timelier oversight of Recovery 
Act funds. 

OMB Has Taken Steps to Implement GAO Recommendations: 

OMB has taken several steps in response to our recommendations. 
However, additional actions are needed to sufficiently address the 
risks leading to our recommendations. As we previously reported, 
Recovery Act funds engender unique risks that were not addressed in 
OMB Circular No. A-133. The most significant of these risks are 
associated with: 

* new programs that may not have the internal controls and accounting 
systems in place to help ensure that funds are distributed and used in 
accordance with program regulations and objectives, 

* Recovery Act funding increases for existing programs that may exceed 
the capacity of existing internal controls and accounting systems, 

* the more extensive accountability and transparency requirements for 
Recovery Act funds that require the implementation of new controls and 
procedures, and: 

* increased risks because of the need to spend funds quickly. 

To help mitigate risks relating to Recovery Act programs, in our 
April, July, and September 2009 reports, we recommended that OMB 
adjust the current Single Audit process to: 

* focus the risk assessment auditors use to select programs to test 
for compliance with 2009 federal program requirements on Recovery Act 
funding; 

* provide for review of the design of internal controls over programs 
to receive Recovery Act funding during 2009, before significant 
expenditures in 2010; and: 

* evaluate options for providing relief related to audit requirements 
for low-risk programs to help balance new audit responsibilities 
associated with the Recovery Act. 

Below is a summary of OMB's efforts to implement the recommendations 
from our bimonthly reviews. We will continue to report on these 
actions and subsequent OMB efforts, including the project's results. 

* To focus auditor risk assessments on Recovery Act-funded programs 
and to provide guidance on internal control reviews for Recovery Act 
programs, OMB worked within the framework defined by existing 
mechanisms--Circular No. A-133 and the Circular No. A-133 Compliance 
Supplement (Compliance Supplement).[Footnote 104] In this context, we 
reported in September 2009 that OMB had made limited adjustments to 
its Single Audit guidance. OMB issued the Compliance Supplement in May 
2009, which focused risk assessments on Recovery Act-funded programs. 
In August 2009, OMB issued the Circular No. A-133 Compliance 
Supplement Addendum I, which provided additional guidance for auditors 
and modified the Compliance Supplement to, among other things, focus 
on new Recovery Act programs and new program clusters. 

* We reported in April and July 2009 that the Single Audit reporting 
deadline is too late to provide audit results in time for the auditee 
to take action on deficiencies noted in Recovery Act programs prior to 
the expenditure of significant funds under those programs.[Footnote 
105] The timing problem was exacerbated by the extensions to the 9- 
month deadline that were routinely granted by the awarding agencies, 
consistent with OMB guidance. The Department of Health and Human 
Services, the cognizant agency[Footnote 106] for the 16 states 
participating in the project, adopted a policy of no longer approving 
requests for such extensions. OMB officials have stated that they plan 
to eliminate allowing extensions across all agencies and programs but 
have not yet issued any official guidance to this effect. In February 
2010, OMB officials stated that they plan to discuss this issue with 
federal agencies for governmentwide implementation. 

* In our September 2009 report, we reported that OMB noted the 
increased responsibilities falling on those responsible for performing 
Single Audits. OMB issued two separate memoranda that allowed state 
and local governments to more timely recover administrative costs 
(including oversight, reporting and audit costs) related to Recovery 
Act programs.[Footnote 107] 

* In addition, states that volunteered to participate in the project 
were eligible for some relief in their workloads because OMB modified 
the requirements under Circular No. A-133 to reduce the number of low- 
risk programs that must be included in the Single Audits. 

* In December 2009, we reported that OMB implemented the project to 
encourage timelier reporting by auditors to identify and communicate 
deficiencies in internal control and corrective action by the auditee. 
The project's scheduled completion is early spring 2010. While its 
coverage could be more comprehensive, OMB's analysis of the project's 
results could provide meaningful information for improving future use 
of the Single Audits for oversight of Recovery Act programs. 

OMB Has Made Progress in Implementing Its Single Audit Internal 
Control Project: 

OMB has made progress in implementing the project since we last 
reported in December 2009. One of the project's goals is to encourage 
auditors to identify and communicate significant deficiencies and 
material weaknesses in internal control over compliance for selected 
major Recovery Act programs 3 months sooner than the 9-month time 
frame currently required under statute. If effective, the project 
should allow auditee program management to expedite corrective action 
and help mitigate the risk of improper Recovery Act expenditures. In 
December 2009, we reported that OMB officials met their goals for the 
scope of the project, stating that overall they were satisfied with 
the range of populations and geographic diversity of the 16 states 
that volunteered for the project.[Footnote 108] The project's first 
interim milestone was scheduled for December 31, 2009. Under the 
project, the auditors were required to issue, in writing based on OMB 
Circular No. A-133, an early communication by that date of significant 
deficiencies and material weaknesses in internal control over 
compliance in effect for the period ended June 30, 2009, to auditee 
management. 

For the 16 states participating in the project, 12 auditors submitted 
the required reports, which identified significant deficiencies, 
material weaknesses, or both. In addition, an auditor for another 
state provided a report but did not indicate whether the findings were 
material weaknesses or significant deficiencies as required under the 
project's guidelines. Auditors for 2 other states reported that while 
they performed interim procedures as required, they did not identify 
any significant deficiencies or material weaknesses and therefore did 
not issue written reports. One state, with a fiscal year ending on 
August 31, 2009, had until March 1, 2010, to report. OMB granted the 
extension so that the auditor would have the same amount of time to 
complete their test work as the auditors for the other project 
participants. The project's second milestone required that auditee 
management provide the interim communication report and a corrective 
action plan to the cognizant federal agency by January 31, 2010. For 
10 of the 13 states that submitted the required internal control 
report, the corrective action plans were included in the interim 
communication report. In three instances, the plans were provided in a 
separate report. 

We reviewed the internal control reports provided to OMB by the 
auditors of the project's participants by December 31, 2009, and noted 
that auditors for 13 of the 16 states reporting deficiencies had 
identified over 70 instances where internal controls over compliance 
were insufficient to prevent or detect noncompliance with federal 
regulations over Recovery Act funding. Moreover, auditors for 5 states 
identified findings that were of a more serious nature and qualified 
as material weaknesses.[Footnote 109] In some instances, the state 
auditors had previously reported the same deficiencies, including a 
material weakness, but corrective action had not yet been taken or was 
insufficient to resolve these issues. 

Most of the deficiencies reported under the project varied by program 
and state, but there were several that were similar across a number of 
programs and states. Specifically, a number of auditors reported 
concerns with (1) the auditees' ability to reliably report under the 
financial reporting requirement on federal expenditures and awards of 
Recovery Act funds, (2) the lack of documentation to determine whether 
the federal expenditure was allowed based on federal requirements, and 
(3) the lack of documentation to support whether payments of Recovery 
Act funding were made to eligible recipients. For example, one auditor 
reported that some documents required to determine eligibility for 
child care subsidies were not in the case files, and the responsible 
state agency did not have assurance that only eligible households are 
receiving child care subsidies. For this finding, the state agreed in 
October 2009 to implement a corrective action plan with full 
implementation by November 2010 to help ensure that verification 
documents are completed and maintained regarding family eligibility 
for child care subsidies. The state agreed that a monthly audit on a 
random sample of files would be conducted and that reimbursement of 
questioned costs would be requested. 

An example of a material weakness reported by one auditor was that a 
state workforce commission paid about $21 million in Unemployment 
Insurance benefits to other states during fiscal year 2009 without 
recouping the cost of these claims from employers in the state. The 
auditor also reported that the workforce commission had not 
implemented procedures to determine if claimants filing in other 
states were working in the audited state at the time the claims were 
filed and during the duration of the claims. Effective internal 
controls did not exist to help ensure that the workforce commission 
notified employers of interstate claims and verified the work status 
of claimants to reduce the risk of payments on fraudulent claims. 

OMB said that it will determine the success of the project by 
evaluating whether: 

* there has been sufficient participation from the auditees, auditors, 
and federal agencies; 

* the early communication process provides auditee and federal program 
management with useful information regarding internal control 
deficiencies in the Recovery Act programs administered by the states, 
thus resulting in expedited correction of deficiencies and reduced 
risk to Recovery Act programs; and: 

* the process accelerates the audit resolution by the federal agencies 
and therefore provides auditee management with early feedback to 
assist in correction of the high-risk deficiencies in the most 
expeditious manner. 

OMB has decided to use the Single Audit process as the key 
accountability tool because a significant portion of Recovery Act 
expenditures are in the form of federal grants and awards. However, 
the Single Audit Act and related OMB Circular No. A-133 did not 
reflect the risks associated with the current environment where large 
amounts of federal awards are being expended quickly through new, 
greatly expanded, and existing programs. Since significant 
disbursements of Recovery Act funding are planned for fiscal years 
2010 and 2011, effective internal controls over the use of these funds 
and early notification and correction of internal control weakness are 
critical to help (1) ensure effective and efficient use of resources, 
(2) comply with laws and regulations, (3) achieve accountability, and 
(4) mitigate risks over Recovery Act programs. Thus, it is essential 
that OMB continue its efforts for improving the use of Single Audits 
to provide better safeguards over subsequent Recovery Act 
disbursements. If OMB concludes that it is unable to take the 
necessary steps under the current framework to adequately address 
accountability for the Recovery Act programs and related risks and to 
provide for more timely reporting, legislative changes may be 
necessary. 

States and Federal Agencies Continue to Implement and Modify Controls 
to Mitigate Risk and Oversee Use of Recovery Act Funds: 

Since the Recovery Act was enacted in February 2009, states and 
federal agencies have taken and continue to take various actions to 
oversee the use of Recovery Act funds and to address the quality of 
data that states and other recipients maintain and report regarding 
their use of funds. Among other actions, states have established or 
modified existing internal controls and systems and provided guidance 
to recipients of Recovery Act funds. State and federal oversight has 
identified weaknesses and program issues and has made states and 
federal agencies focus on those weaknesses and issues and plan 
corrective actions. 

Control over Recovery Act funds is critical to help ensure effective 
and efficient use of resources and compliance with laws and 
regulations. Further, controls are important to address the risks 
inherent in implementing the Recovery Act's recipient reporting 
requirements to help ensure the completeness, accuracy, and 
reliability of the reported data. Although the specifics of states' 
internal control processes varied depending on factors such as a 
state's statutory requirements, organizational structure, and whether 
the state took a centralized or decentralized approach to reporting, 
the internal control processes were aimed at helping to ensure 
accountability and transparency of Recovery Act funds. 

In our previous reports on Recovery Act implementation, we found that 
the 16 states and the District of Columbia were taking various 
approaches to manage and mitigate risk. For example, officials in 8 
states told us they would use existing systems of internal control 
with some modifications, and all 16 states and the District took 
steps, such as using unique codes in their accounting systems, to 
identify and track the use of Recovery Act funds, as required. As the 
states and the District gained more experience in implementing the act 
during the past year, officials in 6 states told us they have more 
recently taken actions to revise or update their controls and guidance 
related to Recovery Act funds. 

* California Department of Education officials told us they added data 
quality checks in its system to ensure timely reporting and accuracy 
and completeness of reported data. 

* Illinois Department of Transportation officials told us they hired 
three consultants to assist in the monitoring of subrecipients. 

* Officials in two Mississippi state agencies responsible for 
oversight--the Office of the State Auditor and the Department of 
Finance and Administration's Office of Fiscal Policy--told us they 
have contracted with accounting firms to review internal controls and 
operations of programs receiving Recovery Act funds. The reviews are 
to result in reports that could contain recommendations to improve or 
strengthen internal controls. 

* Massachusetts officials told us an accounting firm conducted a risk 
assessment in late summer 2009 and found that prevention and detection 
of fraud, waste, and abuse was an area needing attention. The 
Comptroller's office asked state departments to update their internal 
control procedures in response to the findings of the risk assessment. 

* In Michigan, officials administering Workforce Investment Act 
programs said they are strengthening controls over payroll 
distribution processes for the Summer Youth Program in Detroit. 
Officials from Michigan's Office of Internal Audit Services (OIAS) 
told us that the office assigned two of its internal audit staff to 
work full time on programs funded by the Recovery Act. In addition, 
OIAS officials told us they selected programs for detailed review 
based on an assessment of the control risks posed by the programs and 
planned to conduct further reviews of the selected programs as 
spending occurred. 

* An official from Ohio's Office of Internal Audit (OIA) told us that 
the office increased its internal audit staff from 9 to more than 25. 
Also, in December 2009, OIA issued audit reports assessing the 
adequacy and design of internal controls for six Recovery Act related 
programs and has ongoing audit work to assess the design or 
effectiveness of seven other Recovery Act related programs. 

As shown in the following examples, federal offices of inspector 
general (OIG) continue to provide oversight of Recovery Act funds, 
including monitoring and reviewing aspects of state and federal 
programs, and state and federal agencies are taking actions to address 
issues found by the OIGs. 

* The Department of Energy's OIG reported that it is reviewing and 
evaluating internal control structures related to the weatherization 
program at both the federal and state levels. In December 2009, 
Energy's OIG reported that it identified significant internal control 
deficiencies in Illinois's weatherization program, including problems 
with on-site monitoring and inspection. The OIG also reported that 
state and local officials took action to address the immediate 
problems and that the department has developed corrective actions to 
prevent future issues. 

* As previously mentioned, in October 2009, the Department of 
Education's OIG reported that it had identified issues with cash 
management practices in five states. Specifically, the OIG identified 
a number of instances where state educational agencies disbursed 
Recovery Act funds without adequate information on whether local 
educational agencies (LEA) were ready to spend the funds and did not 
ensure that LEAs remitted interest earned on funds received in 
advance. The OIG noted that Education had provided guidance in April 
2009 that included cash management requirements and was providing 
technical assistance related to cash management to state and local 
agencies. 

States and federal agencies are likely to continue to modify and 
revise their controls and guidance as necessary to provide oversight 
for Recovery Act funds and to help ensure the completeness and 
accuracy of reported data. Further, as states and federal agencies 
identify issues through their monitoring and oversight activities, it 
is important that they address the issues. We will continue to review 
states' and federal agencies' actions related to their oversight of 
Recovery Act funds, including reviewing selected payments and 
analyzing Single Audit reports for programs with identified internal 
control weaknesses. 

Fraud, Waste, and Abuse Allegations GAO Has Received That Are Related 
to the Recovery Act: 

As of December 30, 2009, we have received 179 allegations of Recovery 
Act wrongdoing from the public. The allegations relate to a wide range 
of federal spending, including rail work; renovation and repair of 
public buildings; education programs and entities, such as Head Start, 
public schools systems, and universities; tax credits and 
weatherization for homes; job creation; and health benefits. 
Specifically, they include alleged conflicts of interest, 
misallocation of funds, and ineligible recipients receiving Recovery 
Act money. As with all allegations received through FraudNet,[Footnote 
110] we have carefully reviewed those related to Recovery Act funding 
and pursued or referred those that warrant further attention. 

Most of the 179 allegations have been closed: 117 were nonspecific or 
lacked information about fraud, waste, or abuse; 32 were investigated 
further and closed by us or an agency inspector general (IG) when no 
violations were found. Of those allegations that are open and 
currently under investigation, 13 are being handled by us and 17 by an 
IG. We generally refer allegations to an IG when that office is 
already pursuing the same or a similar complaint. We periodically 
contact the IGs to determine the status of our referrals. Table 15 
shows the status of the Recovery Act allegations we have received. 

Table 15: Status of FraudNet Allegations: 

Investigation: Closed because of nonspecific or unrelated information; 
Percentage: 66. 

Investigation: Closed after GAO or IG investigation; 
Percentage: 18. 

Investigation: Open with IGs; 
Percentage: 9. 

Investigation: Open with GAO; 
Percentage: 7. 

Source: GAO. 

[End of table] 

Investigations closed because of nonspecific or unrelated information. 
Most of these cases were complaints about the allocation of funds, the 
decisions and actions of local officials, and the location of such 
infrastructure projects as rest stops or interchanges. These cases 
were closed because they contained no specific information or were 
unrelated to fraud, waste, or abuse of federal funds. 

Investigations closed after GAO or IG investigation. These allegations 
were specific enough to warrant an investigation by us or an IG but 
could not be substantiated. For example, a church was claimed to be 
shown erroneously on www.recovery.gov (Recovery.gov) as having 
received Recovery Act funds. Our investigation found that the church 
previously owned real estate that qualified for Section 8 housing 
assistance payments but had sold the property. HUD was subsequently 
notified and updated its records. Recovery.gov was also updated. 

Open investigations with GAO. It is too early to determine whether 
these investigations will result in substantiated claims of fraud, 
waste, or abuse. However, at this point the allegations appear to be 
credible, and we will determine the extent of any possible violations. 
One investigation involves a large water project alleged to improperly 
include Recovery Act funding. The allegation claims the project cannot 
fulfill its intended purpose and will require additional funding and 
infrastructure improvements before getting under way. 

Open investigations with IGs. Similarly, results for these 
investigations are not yet available. We are working closely with the 
appropriate IGs to monitor the status of their investigations. In one 
investigation, a laboratory operated for the Department of Energy 
allegedly used Recovery Act funds to award a contract to an entity 
that is claimed to be an "inverted domestic corporation"--that is, 
incorporated in a foreign country or a subsidiary of a foreign 
company. In another, a Head Start grantee is alleged to be planning 
not to provide a cost-of-living adjustment to its staff despite 
receiving Recovery Act funds designated for that purpose. Instead, the 
claim suggests the money will be used for other initiatives related to 
the grantee's Head Start program. 

We will continue to evaluate all Recovery Act allegations received 
through FraudNet and provide updates in future reports. 

Recovery Accountability and Transparency Board Oversight of Federal 
Contract Spending: 

The Recovery Accountability and Transparency Board (the Board) has 
launched a number of oversight initiatives on Recovery Act funds since 
it began meeting in March 2009. These initiatives include the 
establishment of a public Web site and the Recovery Board Fraud 
Hotline. The Board's initiatives are being executed by the Board's 
executive staff, as well as by the 29 inspectors general responsible 
for Recovery Act oversight. The initiatives include reviewing federal 
contracts and grants to help ensure they meet applicable standards, 
follow OMB guidance, and satisfy applicable competition requirements; 
the initiatives also are aimed at identifying risk areas for fraud, 
waste, and abuse. The Board, with the help of the inspectors general, 
is assessing the capacity of federal agency acquisition workforces to 
determine if they have sufficient numbers of trained acquisition and 
grants personnel to manage the Recovery Act workload. Because many of 
the initiatives are in their early stages of implementation, it is too 
soon to evaluate their success or shortcomings for providing sound 
oversight. 

Providing Information to and Access for the Public: 

The Board is responsible for providing information about Recovery Act 
spending via www.recovery.gov (Recovery.gov). This Web site was 
created to provide accurate, user-friendly information to the public 
related to spending on Recovery Act programs. Recovery.gov is the 
official source of information related to the Recovery Act, and it 
contains official data for use in public debate, assists in providing 
fair and open access to Recovery Act opportunities, and promotes an 
understanding of the local impact of Recovery Act funding. 

On September 28, 2009, the Board established the Recovery Board Fraud 
Hotline for the public to report potential cases of fraud, waste, and 
abuse via telephone, facsimile, Recovery.gov, or postal mail. This 
hotline service maintains a database of all reported incidents to 
identify recurring issues, companies, or participants related to 
potential cases.[Footnote 111] The Board reviews the complaints and 
refers potential cases to the respective inspector general or agency 
for further review. As of January 19, 2010, the Board had received 948 
complaints and has referred 79 cases to various inspectors general. 
[Footnote 112] 

Monitoring Federal Recovery Act Contracts and Identifying Areas 
Vulnerable to Risk: 

The Board uses several approaches to monitor federal contracts, 
including a manual review performed on the contract solicitations and 
awards posted daily on the Federal Business Opportunities Web site 
(FedBizOpps.gov) to ensure that Recovery Act-related Federal 
Acquisition Regulation requirements are followed and to identify any 
contracts that were awarded to contractors that might be in the 
Excluded Parties List System.[Footnote 113] In addition, Board staff 
review data on Recovery Act-funded contracts from the Federal 
Procurement Data System-Next Generation to identify the reasons for 
the noncompeted contracts. 

The Board also established a Recovery Operations Center, which became 
operational the last week of October 2009, and supports a three-tiered 
system to identify potential risk areas related to Recovery Act 
spending for oversight purposes. The first tier of the system uses 
screening models to analyze volumes of data to isolate potential high- 
risk recipients. The second tier uses a link-analysis tool to uncover 
nonobvious relationships between entities. The third tier uses the 
results of the first two tiers, along with historical risk factors and 
present-day trends, to create risk-based resource management tools for 
the oversight community. The results of these analyses are shared with 
the inspectors general to provide information for (1) investigations 
or audits of federal programs and recipients of Recovery Act funds and 
(2) decisions related to expanding or helping focus oversight 
resources. According to a Board representative, Board staff started 
identifying high-risk areas at the end of 2009 and have provided 
information to the inspectors general that is being used in active 
investigations. 

Oversight and Coordination of Inspectors General Efforts: 

The Board's Recovery Funds Working Group, which includes 
representatives from the 29 inspectors general, meets monthly to 
discuss issues related to oversight of Recovery Act funds. The working 
group representatives identify specific initiatives that the 
inspectors general are expected to carry out to support the Board's 
oversight of Recovery Act funds. In August 2009, for example, 28 of 
the 29 inspectors general on the working group administered a survey 
to their respective agencies to assess their overall workforce 
capacity for handling the management and oversight of contracts and 
grants being awarded with Recovery Act funds. The results of the 
survey are expected to be issued by the end of April 2010. 

The inspectors general also report monthly to the Board on the number 
and status of Recovery Act-related audits and investigations they have 
initiated. As of December 31, 2009, the inspectors general reported 
they had 141 investigations and 457 audits, inspections, evaluations, 
or reviews in process. They also reported they have issued 324 reports 
on Recovery Act-related issues since the act was passed. The scope of 
the inspectors general reports varied and ranged from compliance with 
program requirements at individual states or localities within a given 
program to assessments of internal controls across entire programs or 
agencies. Many of the reports did not identify wrongdoing or 
systematic weaknesses in management but did make recommendations to 
improve the implementation and oversight of programs using Recovery 
Act funds. For example, the Department of Energy Inspector General had 
published 13 reports on Recovery.gov as of February 2010 that 
addressed aspects of Recovery Act issues--one issued in December 2009 
identified the department's efforts and challenges in implementing the 
Recovery Act in selected program offices. The report contained a 
number of recommendations aimed at addressing the department's 
remaining challenges, including the need to revise financial 
assistance guidelines to incorporate additional Recovery Act 
requirements for monitoring and oversight and the need to perform 
staffing reviews to determine the level of personnel needed to oversee 
Recovery Act projects. As another example, the General Services 
Administration Inspector General has published two reports since the 
Recovery Act was passed.[Footnote 114] A September 2009 report 
provided observations related to the use of project plans on the 
Public Building Service's major construction and modernization 
projects being funded under the Recovery Act. Additional information 
about program-specific audit work of the inspectors general is located 
in the program sections of this report. 

Federal, State, and Local Audit Communities Have Been Coordinating 
Audit Efforts: 

Multiple audit organizations that span audit communities have taken 
steps to enhance communication and coordination of audit efforts in 
relation to Recovery Act Programs. The frequency of communication and 
depth of information sharing across all levels of government have 
strengthened the ability of the overall audit community to fulfill its 
responsibilities in relation to accountability for Recovery Act funds. 

Both the annual meeting of the National Intergovernmental Audit Forum 
and quarterly Regional Intergovernmental Audit Forum meetings have 
routinely included presentations concerning Recovery Act issues. These 
forums, attended by key state and local auditors, representatives of 
the inspectors general (IG) community, and others, including GAO 
officials, have always been a setting for dialogue concerning 
accountability issues. Since passage of the Recovery Act, these 
meetings have provided an opportunity for us to update the audit 
community concerning our Recovery Act work in selected states and the 
District of Columbia (the District). 

The depth and frequency of the discussion of Recovery Act issues among 
members of the audit community have been enhanced by weekly and 
monthly telephone conferences. The National Association of State 
Auditors, Comptrollers and Treasurers (NASACT) has coordinated a 
weekly teleconference to provide state associations with updates on 
the status of OMB guidance on reporting requirements for Recovery Act 
funds.[Footnote 115] Participants in this call include representatives 
from OMB, the Board, GAO, the National Governors Association, the 
National Association of State Budget Officers (NASBO), and state 
stimulus czars, as well as NASACT. These teleconferences have afforded 
the opportunity for information sharing and problem solving and have 
involved over 40 people. For example, discussions of the full-time 
equivalent (FTE) calculation for recipient reporting led to in part a 
recommendation that has clarified the calculation. In addition to this 
teleconference, NASACT, through its associate organization the 
National State Auditors Association, convenes a monthly conference 
call that includes OMB, the Board, GAO, inspectors general, and 
representatives from the state and local audit communities. The 
Association of Government Accountants and the Association of Local 
Government Auditors have also been active participants in discussions 
of Recovery Act auditing issues. In an effort to ensure information 
sharing about allegations of fraud, we are also working with state and 
local auditors to develop plans for routine sharing of information. 

Oversight and Audit of Recovery Act Programs at the State and Local 
Levels: 

Across our 16 selected states, and in the District of Columbia, a wide 
variety of entities are responsible for, and involved in, oversight 
and audit of Recovery Act Programs. Each state is unique in its 
configuration of oversight and audit agencies, yet some common 
features span many jurisdictions. Cities and towns, housing and 
transit authorities, and other units of government also differ widely 
in capacity and structure for oversight and auditing activities. 

Many states created new positions and/or task forces to specifically 
manage and oversee Recovery Act programs. California, Colorado, 
Georgia, Iowa, Massachusetts New Jersey, New York, Pennsylvania, and 
Texas are among the states that are using this strategy as part of 
their management and oversight efforts. Inspector general offices in 
some of our selected states investigate cases of alleged fraud, waste, 
or abuse.[Footnote 116] Internal auditors across state agencies, such 
as state departments that manage transportation and education, are 
engaged to various degrees in the oversight and auditing of Recovery 
Act funds. 

All selected states have multiple offices engaged to some extent in 
the oversight and audit of Recovery Act programs. For example, in Ohio 
the State Audit Committee, the Office of Budget and Management (OBM), 
OBM's Office of Internal Audit (OIA), the Auditor of State (AOS), and 
the state-appointed Deputy Inspector General all share responsibility 
for oversight and auditing of Recovery Act programs. OIA has completed 
six audit reports on programs through which the Recovery Act provided 
funds for weatherization, foster care, job training, law enforcement, 
addressing violence against women, and highways as well as on Recovery 
Act central reporting. OIA found, for example, that the weatherization 
and job training programs need additional identification and 
documentation of key Recovery Act-related risks and mitigating 
internal controls. In contrast, the OIA audit of the adequacy and 
design of internal controls for the Highway Infrastructure Investment 
Recovery Act Program had no findings. 

The Ohio Auditor of State is responsible for audit activities at 
housing authorities and other grantees that receive funding directly 
from the federal government rather than through the state. 
Additionally, the Ohio Auditor of State is conducting the state's 
Single Audit for fiscal year 2009, which will include some programs 
that receive Recovery Act funds. The Deputy Inspector General holds a 
position that was specifically created to monitor state agency 
distribution of Recovery Act funds. Investigations of potential 
criminal activities related to Recovery Act programs are handled by 
the Ohio Office of Inspectors General. This office has completed two 
investigations and has three ongoing. Both completed investigations 
involved funds to be overseen by the Ohio EPA. In one case the funds 
were found not to be Recovery Act funds, in the other case the IG 
found no wrongful act had occurred. 

In Georgia, oversight and auditing responsibilities rest with the 
Office of Planning and Budget, State Accounting Office, State Auditor, 
State Inspector General, and agencies' internal audit departments. For 
example, the State Auditor included audits of Recovery Act programs 
administered by the Georgia Department of Education, Georgia 
Department of Human Services, Georgia Department of Labor, and Georgia 
Department of Transportation (GDOT) in the 2009 Single Audit. The 
Single Audits for fiscal years 2010 and 2011 are expected to include 
audits of Recovery Act funding awarded to all 157 local education 
agencies (LEA). The State Inspector General's office has responded to 
complaints concerning Recovery Act programs. The State Inspector 
General's office has received two complaints concerning Recovery Act 
programs. One was a complaint about Recovery Act funds being used to 
purchase road signs for GDOT projects funded by the Recovery Act; GDOT 
has discontinued the practice of posting these signs. The Inspector 
General's investigation of the second complaint, which involves issues 
with funds received by the Georgia National Guard, has just begun. 
Internal auditors for the Georgia Environmental Facilities Authority, 
GDOT, and the Georgia Department of Human Services all plan to audit 
Recovery Act programs. 

In a few cases, the auditing of Recovery Act programs is melded into 
the general audit of an overall program that includes Recovery Act 
funds along with other funds. For example, an audit of spending for a 
highway construction project may include a review of Recovery Act 
funds as part of the audit of all funding for the project. In New 
Jersey, for example, the Office of the State Auditor is or will be 
surveying agencies about their internal controls for Recovery Act 
funds as part of already planned audits; these include audits related 
to community service block grants, bridge maintenance contracts, 
regular school district audits, and clean water state revolving funds. 

Many of our selected states, including Ohio and Georgia, discussed 
above, are including some Recovery Act funding in their Single Audits. 
Officials at the Arizona Auditor General's office told us that 
Recovery Act-specific reviews will be part of the Single Audit work. 
Illinois officials said that their Single Audit covers only the state 
government and does not include component units. The programs to be 
included in their Single Audit will be selected in part on the basis 
of funding levels, and Recovery Act funds would be included in the 
scope of the audit. However, Illinois officials stated that, following 
the requirements set forth in OMB Circular A-133, the programs 
included in the audit are selected based on factors such as amount of 
funding; therefore, not all programs that received Recovery Act 
funding will be included in the audit's scope. GAO has recommended to 
OMB that it evaluate options for providing relief related to audit 
requirements for low-risk programs to help balance the new audit 
responsibilities associated with the Recovery Act. Seven out of our 16 
selected states volunteered to participate in the OMB Single Audit 
pilot project discussed in the Single Audit section of this report. 
[Footnote 117] 

Some Local Communities Have Also Initiated Recovery Act Audit 
Activities: 

A number of cities and counties have included auditing of Recovery Act 
funds in their current audit plans. Austin, Texas, for example, has 
specifically designated some resources for Recovery Act auditing. 
Denver, Colorado, has completed two Recovery Act-specific nonaudit 
services, known as Audit Alerts, and will issue an audit report later 
in 2010; the city auditor in Atlanta, Georgia, will issue a Recovery 
Act audit report within the next few months and is considering 
additional work; and Jackson, Mississippi, is initiating an audit of 
Recovery Act funds awarded to city agencies in the near future. 
According to county officials, Maricopa County, Arizona, has multiple 
levels of review to monitor Recovery Act programs. At the local level, 
local governments plan to incorporate Recovery Act auditing into their 
Single Audit reviews. 

Officials in a number of communities, however, told us that they have 
not initiated specific Recovery Act audit activities. This is 
particularly the case with small communities in our sample. Officials 
in these communities told us that in part, this is because they have 
only recently received funds, or are anticipating that the amount of 
funds they will receive is small. Plano, Texas, is a small community 
that is not planning to audit Recovery Act programs for these reasons. 
A few jurisdictions also indicated that they did not have the 
resources to conduct audit work. The City of Macon and Tift County, in 
Georgia, are examples of other local governments that are not planning 
audit activities related to Recovery Act programs. 

Other government entities are also planning audit activity related to 
Recovery Act funds. For example, the New York Metropolitan 
Transportation Authority Audit Services Department is planning to 
include all 22 Recovery Act projects within its jurisdiction in its 
2010 audit plans. Greater Glens Falls Transit's (New York State) 
Single Audit for calendar years 2009 and 2010 will include Recovery 
Act-funded projects. 

Recovery Act Funds Alleviate Some Fiscal Pressures as State and Local 
Governments Respond to the Current Recession and Confront Long-Term 
Challenges: 

Recovery Act funds began flowing as state and local governments faced 
steep revenue declines in 2009. States' revenue declines have been 
cushioned by the temporary infusion of Recovery Act funds. The results 
from our March 2010 State and Local Fiscal Model Update provide 
additional detail regarding these and other trends in state and local 
fiscal conditions.[Footnote 118] The fiscal model update includes the 
increased federal grant funding made available to state and local 
governments through the Recovery Act. It also shows that the state and 
local government sector is facing short-term declines in its operating 
balance while also confronting long-term fiscal challenges, which have 
been growing over time. Specifically, the model projects operating 
deficits of about $39 billion for 2010 and $124 billion for 2011. The 
cumulative 2-year projected operating deficit totals approximately 
$163 billion. The operating deficit projections in our model reflect 
the pressures facing the sector in the aggregate and provide a sense 
of the magnitude of policy actions necessary for these governments to 
balance their operating budgets.[Footnote 119] Reports from 
associations representing state and local officials corroborate these 
findings. The National Association of State Budget Officers' most 
recent fiscal survey of the states noted that states will have faced 
$256 billion in budget gaps between fiscal years 2009 and 2011 and an 
average decline in state general fund spending of 5.4 percent for 
fiscal year 2010--the largest margin ever shown through this survey. 
The National Association of Counties reported that 56 percent of 
counties responding to its survey reported starting their most recent 
fiscal years with projected shortfalls. A National League of Cities' 
(NLC) survey showed that 88 percent of city finance officers reported 
that their cities were less able to meet fiscal needs in 2009 than in 
the previous year, and the pessimism about the ability to meet city 
fiscal needs is at its highest level in the history of NLC's 24-year 
survey. 

The updated simulations in our state and local fiscal model also show 
that the sector continues to face growing long-term fiscal challenges 
over time, which have been exacerbated by the current recession. Our 
state and local sector fiscal model uses the operating balance as a 
measure of fiscal balance for the sector for each year until 2060. 
[Footnote 120] The operating balance is a measure of the sector's 
ability to cover its current expenditures out of current receipts. As 
illustrated in figure 15, the operating balance measure generally was 
positive in the past except during and after recent recessions. This 
suggests that in the aggregate the sector has been able to cover its 
expenses with incoming receipts. 

Figure 15: State and Local Model Operating Balance Measure, as a 
Percentage of Gross Domestic Product (GDP): 

[Refer to PDF for image: multiple line graph] 

Positive balance indicates a surplus; 
Negative balance indicates a deficit. 

Year: 2000; 
Operating Balance March 2010, Percentage of GDP: 0.1%. 

Year: 2001; 
Operating Balance March 2010, Percentage of GDP: -0.3%. 

Year: 2002; 
Operating Balance March 2010, Percentage of GDP: -0.7%. 

Year: 2003; 
Operating Balance March 2010, Percentage of GDP: -0.5%. 

Year: 2004; 
Operating Balance March 2010, Percentage of GDP: -0.3%. 

Year: 2005; 
Operating Balance March 2010, Percentage of GDP: 0.1%. 

Year: 2006; 
Operating Balance March 2010, Percentage of GDP: 0.3%. 

Year: 2007; 
Operating Balance March 2010, Percentage of GDP: 0.1%. 

Begin magnifying near-term fiscal position: 

Year: 2008; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.4%; 
Operating Balance March 2010, Percentage of GDP: -0.4%. 

Year: 2009; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.4%; 
Operating Balance March 2010, Percentage of GDP: -0.2%. 

Year: 2010; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.8%; 
Operating Balance March 2010, Percentage of GDP: -0.3%. 

Year: 2011; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.8%; 
Operating Balance March 2010, Percentage of GDP: -0.8%. 

Year: 2012; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.8%; 
Operating Balance March 2010, Percentage of GDP: -0.8%. 

Year: 2013; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.7%; 
Operating Balance March 2010, Percentage of GDP: -0.7%. 

End magnifying near-term fiscal position. 

Year: 2014; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.6%; 
Operating Balance March 2010, Percentage of GDP: -0.7%. 

Year: 2015; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.6%; 
Operating Balance March 2010, Percentage of GDP: -0.7%. 

Year: 2016; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.6%; 
Operating Balance March 2010, Percentage of GDP: -0.8%. 

Year: 2017; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.7%; 
Operating Balance March 2010, Percentage of GDP: -0.8%. 

Year: 2018; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.8%; 
Operating Balance March 2010, Percentage of GDP: -0.9%. 

Year: 2019; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.9%; 
Operating Balance March 2010, Percentage of GDP: -0.9%. 

Year: 2020; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-0.9%; 
Operating Balance March 2010, Percentage of GDP: -1.0%. 

Year: 2021; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.0%; 
Operating Balance March 2010, Percentage of GDP: -1.0%. 

Year: 2022; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.0%; 
Operating Balance March 2010, Percentage of GDP: -1.1%. 

Year: 2023; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.1%; 
Operating Balance March 2010, Percentage of GDP: -1.1%. 

Year: 2024; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.2%; 
Operating Balance March 2010, Percentage of GDP: -1.2%. 

Year: 2025; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.2%; 
Operating Balance March 2010, Percentage of GDP: -1.2%. 

Year: 2026; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.3%; 
Operating Balance March 2010, Percentage of GDP: -1.3%. 

Year: 2027; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.4%; 
Operating Balance March 2010, Percentage of GDP: -1.4%. 

Year: 2028; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.5%; 
Operating Balance March 2010, Percentage of GDP: -1.5%. 

Year: 2029; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.6%; 
Operating Balance March 2010, Percentage of GDP: -1.5%. 

Year: 2030; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.7%; 
Operating Balance March 2010, Percentage of GDP: -1.6%. 

Year: 2031; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.8%; 
Operating Balance March 2010, Percentage of GDP: -1.7%. 

Year: 2032; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-1.9%; 
Operating Balance March 2010, Percentage of GDP: -1.8%. 

Year: 2033; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.0%; 
Operating Balance March 2010, Percentage of GDP: -1.9%. 

Year: 2034; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.1%; 
Operating Balance March 2010, Percentage of GDP: -2.0%. 

Year: 2035; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.2%; 
Operating Balance March 2010, Percentage of GDP: -2.1%. 

Year: 2036; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.3%; 
Operating Balance March 2010, Percentage of GDP: -2.2%. 

Year: 2037; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.4%; 
Operating Balance March 2010, Percentage of GDP: -2.3%. 

Year: 2038; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.5%; 
Operating Balance March 2010, Percentage of GDP: -2.5%. 

Year: 2039; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.6%; 
Operating Balance March 2010, Percentage of GDP: -2.6%. 

Year: 2040; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.7%; 
Operating Balance March 2010, Percentage of GDP: -2.7%. 

Year: 2041; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.8%; 
Operating Balance March 2010, Percentage of GDP: -2.8%. 

Year: 2042; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-2.9%; 
Operating Balance March 2010, Percentage of GDP: -2.9%. 

Year: 2043; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.0%; 
Operating Balance March 2010, Percentage of GDP: -3.0%. 

Year: 2044; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.1%; 
Operating Balance March 2010, Percentage of GDP: -3.1%. 

Year: 2045; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.2%; 
Operating Balance March 2010, Percentage of GDP: -3.3%. 

Year: 2046; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.3%; 
Operating Balance March 2010, Percentage of GDP: -3.4%. 

Year: 2047; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.4%; 
Operating Balance March 2010, Percentage of GDP: -3.5%. 

Year: 2048; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.5%; 
Operating Balance March 2010, Percentage of GDP: -3.6%. 

Year: 2049; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.6%; 
Operating Balance March 2010, Percentage of GDP: -3.8%. 

Year: 2050; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.8%; 
Operating Balance March 2010, Percentage of GDP: -3.9%. 

Year: 2051; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-3.9%; 
Operating Balance March 2010, Percentage of GDP: -4.0%. 

Year: 2052; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.0%; 
Operating Balance March 2010, Percentage of GDP: -4.2%. 

Year: 2053; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.1%; 
Operating Balance March 2010, Percentage of GDP: -4.3%. 

Year: 2054; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.2%; 
Operating Balance March 2010, Percentage of GDP: -4.4%. 

Year: 2055; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.3%; 
Operating Balance March 2010, Percentage of GDP: -4.6%. 

Year: 2056; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.4%; 
Operating Balance March 2010, Percentage of GDP: -4.7%. 

Year: 2057; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.6%; 
Operating Balance March 2010, Percentage of GDP: -4.8%. 

Year: 2058; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.7%; 
Operating Balance March 2010, Percentage of GDP: -5.0%. 

Year: 2059; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.8%; 
Operating Balance March 2010, Percentage of GDP: -5.2%. 

Year: 2060; 
Operating Balance January 2009 Adjusted, Percentage of GDP: 
-4.9%; 
Operating Balance March 2010, Percentage of GDP: -5.3%. 

Source: GAO simulations, updated March 2010 and January 2009 adjusted. 

Notes: Historical data are from the Bureau of Economic Analysis's 
National Income and Product Accounts from 1980 to 2008. Data in 2009 
are GAO estimates aligned with published data where available. GAO 
simulations are from 2010 to 2060, using many Congressional Budget 
Office projections and assumptions, particularly for the next 10 
years. Simulations are based on current policy. 

[End of figure] 

While our state and local model continues to illustrate the long-term 
pressures facing the sector, recent economic fluctuations also 
resulted in shifts in the model's short-term results. The temporary 
growth in federal grant funding provided by the Recovery Act helped 
offset the sector's tax receipt declines. As a percentage of GDP, 
state and local personal income tax declines exceeded revenue shifts 
from sales and property tax, as shown in figure 16. Total tax receipts 
for the sector declined from about 9.25 percent of GDP in 2008 to 8.8 
percent of GDP in 2009. We project a slight increase in total tax 
receipts to 8.82 percent of GDP in 2010. Personal income tax receipts 
declined from about 2.3 percent of GDP in 2008 to 1.9 percent of GDP 
in 2009. We project a slight increase in total tax receipts in 2010. 

Figure 16: State and Local Government Taxes, as a Percentage of GDP: 

[Refer to PDF for image: multiple line graph] 

Percentage of GDP: 

Year: 2005; 
Personal Income: 2.2%; 
Sales Tax: 3.2%; 
Property Tax: 2.7%. 

Year: 2006; 
Personal Income: 2.3%; 
Sales Tax: 3.2%; 
Property Tax: 2.8%. 

Year: 2007; 
Personal Income: 2.3%; 
Sales Tax: 3.2%; 
Property Tax: 2.8%. 

Year: 2008; 
Personal Income: 2.3%; 
Sales Tax: 3.1%; 
Property Tax: 2.8%. 

Year: 2009; 
Personal Income: 1.9%; 
Sales Tax: 3.0%; 
Property Tax: 3.0%. 

Year: 2010; 
Personal Income: 2.1%; 
Sales Tax: 2.9%; 
Property Tax: 2.8%. 

Year: 2011; 
Personal Income: 2.2%; 
Sales Tax: 2.9%; 
Property Tax: 2.8%. 

Year: 2012; 
Personal Income: 2.2%; 
Sales Tax: 2.9%; 
Property Tax: 2.8%. 

Year: 2013; 
Personal Income: 2.2%; 
Sales Tax: 2.9%; 
Property Tax: 2.8%. 

Year: 2014; 
Personal Income: 2.3%; 
Sales Tax: 2.9%; 
Property Tax: 2.9%. 

Year: 2015; 
Personal Income: 2.3%; 
Sales Tax: 2.9%; 
Property Tax: 2.9%. 

Source: GAO simulations, updated March 2010. 

Notes: Historical data are from the Bureau of Economic Analysis's 
National Income and Product Accounts from 1980 to 2008. Data in 2009 
are GAO estimates aligned with published data where available. GAO 
simulations are from 2010 to 2060, using many Congressional Budget 
Office projections and assumptions, particularly for the next 10 
years. Simulations are based on current policy. 

[End of figure] 

The recent update of the model shows short-term declines in the fiscal 
position of the sector, even after the inclusion of National Income 
and Product Accounts data--which reflect Recovery Act grant funds 
received by state and local governments for programs such as Medicaid, 
highways, and education that are discussed in this report. Federal 
Recovery Act grants to state and local governments did help offset 
declines in state and local tax receipts between our January 2009 and 
March 2010 simulations. Federal Medicaid and other grants grow as a 
share of GDP through 2010 (see figure 17). Federal grants-in-aid 
comprised the second largest source of receipts for the sector in 
2008, providing about $392 billion, or about 20 percent of current 
receipts for the sector.[Footnote 121] In 2009, this amount increased 
to $477 billion as Recovery Act funds flowed to these governments 
through intergovernmental grant programs. 

Figure 17: State and Local Government Grants, as a Percentage of GDP: 

[Refer to PDF for image: multiple line graph] 

Percentage of GDP: 

Year: 2005; 
Medicaid Grants: 1.4%; 
Other Grants: 1.4%. 

Year: 2006; 
Medicaid Grants: 1.3%; 
Other Grants: 1.3%. 

Year: 2007; 
Medicaid Grants: 1.3%; 
Other Grants: 1.3%. 

Year: 2008; 
Medicaid Grants: 1.4%; 
Other Grants: 1.3%. 

Year: 2009; 
Medicaid Grants: 1.8%; 
Other Grants: 1.5%. 

Year: 2010; 
Medicaid Grants: 1.8%; 
Other Grants: 1.8%. 

Year: 2011; 
Medicaid Grants: 1.7%; 
Other Grants: 1.6%. 

Year: 2012; 
Medicaid Grants: 1.7%; 
Other Grants: 1.3%. 

Year: 2013; 
Medicaid Grants: 1.6%; 
Other Grants: 1.2%. 

Year: 2014; 
Medicaid Grants: 1.7%; 
Other Grants: 1.1%. 

Year: 2015; 
Medicaid Grants: 1.7%; 
Other Grants: 1.0%. 

Source: GAO simulations, updated March 2010. 

Notes: Historical data are from the Bureau of Economic Analysis's 
National Income and Product Accounts from 1980 to 2008. Data in 2009 
are GAO estimates aligned with published data where available. GAO 
simulations are from 2010 to 2060, using many Congressional Budget 
Office projections and assumptions, particularly for the next 10 
years. Simulations are based on current policy. 

[End of figure] 

State and Local Officials' Use of Recovery Act Funds Helps Address 
Budget Gaps: 

State officials we contacted acknowledged the Recovery Act's 
contributions to easing immediate fiscal pressures in the selected 
states but remain wary of fiscal pressures likely to continue after 
federal assistance ends. Local officials also cautioned that their 
reduced tax receipts exceed the influx of Recovery Act funds. 
Officials in all of our selected states indicated that they were able 
to reduce or eliminate current and anticipated budget shortfalls 
through a variety of budget actions, including the incorporation of 
Recovery Act funds in their budgets for fiscal years 2009 and 2010. 
The use of Recovery Act funds affected the size and scope of some 
states' budgeting decisions, and many of the selected states reported 
that they would have had to make further cuts to services and programs 
had they not received Recovery Act funds. 

State officials reported that their efforts to balance their budgets 
while using Recovery Act funds focused on maintaining current services 
rather than creating new programs or staff positions that could extend 
their state's financial liabilities beyond the end date for Recovery 
Act funds. Despite the infusion of Recovery Act funds into state 
budgets, some state officials reported that the current fiscal 
situation still required action to maintain balanced budgets. These 
actions included staff layoffs, furloughs, program cuts, fee 
increases, and scaling back of state rebates of local property taxes. 
For example, in Georgia, for fiscal year 2009, officials amended the 
state budget by reducing revenue estimates, using reserves, and 
cutting program funding. In New Jersey, the largest cuts came from 
scaling back state rebates of local property taxes and reducing 
payments to the state's pension funds. To balance the fiscal year 2010 
budget, North Carolina officials incorporated $1.4 billion of Recovery 
Act funds, cut $2 billion from the budget, and included $1.4 billion 
in tax and fee increases. In addition to these budget actions, some 
states also reported accelerating their use of Recovery Act funds to 
stabilize deteriorating budgets. In Massachusetts, state officials 
said that accelerating their use of Recovery Act and state rainy-day 
funds presented the most viable solution to balance their budget. 
California's dire fiscal condition also prompted the state to 
accelerate the initial use of its Recovery Act funds, along with the 
use of a number of additional measures to reduce the state's fiscal 
year 2008-2009 budget gap. More than half of the selected states also 
tapped into their reserve funds in fiscal year 2009, fiscal year 2010, 
or both.[Footnote 122] 

Recovery Act Funds Flow to Local Governments and Cushion Some Fiscal 
Challenges: 

Most Recovery Act funds to local governments flow through existing 
federal grant programs. The use of Recovery Act funds helped to fund 
existing programs for some local governments for nonrecurring 
projects, while some governments did not apply for grants that would 
result in long-term financial obligations. In addition to Recovery Act 
funds for which local governments were prime recipients, several local 
government officials reported that additional Recovery Act funds were 
received by other entities within their local jurisdictions.[Footnote 
123] These entities included housing authorities, transit authorities, 
nonprofit organizations, and school systems. Some local governments 
reported experiencing challenges in applying for and administering 
Recovery Act grants, including insufficient staff capacity, lack of 
guidance, budget constraints, short application timetables, and 
matching requirements. Local government officials reported that use of 
Recovery Act funds helped to support local services, but recent 
revenue declines still resulted in midcycle budget shortfalls. 
Recovery funds plugged gaps in program funding, but budget challenges 
continued despite the receipt of these funds. 

Approaches to Developing Exit Strategies for the End of Recovery Act 
Funding Reflect the Nature of Funding and Balanced Budget Requirements: 

States' and localities' approaches to developing exit strategies for 
continuing services after their use of temporary Recovery Act funds 
ends reflect the balanced budget requirements in place for the 
selected states, the District, and selected local governments included 
in our work. State budget officials referred to the temporary nature 
of the funds and the fiscal challenges that are expected to extend 
beyond the timing of funds provided by the Recovery Act. Officials 
discussed a desire to avoid what they referred to as the "cliff 
effect" associated with the dates when Recovery Act funding ends for 
various federal programs. Budget officials in some of the selected 
states reported that they were preparing for the end of Recovery Act 
funding by using funds for nonrecurring expenditures and hiring 
personnel to fill limited-term positions to avoid creating long-term 
liabilities. Some local officials also said that because Recovery Act 
funds were generally used for one-time projects, which will not result 
in long-term liabilities, they did not plan to develop exit 
strategies. On the other hand, a number of local governments reported 
that they were developing plans to sustain current Recovery Act 
projects after Recovery Act funding ends. Other local governments 
reported developing more general exit strategies consisting of 
reductions in expenditures or possible increases in revenue to prepare 
for the end of Recovery Act funding. Some local government officials 
reported that their governments did not need exit strategies because 
of the limited effect of the use of Recovery Act funds. However, 
officials reported that they were still planning for the end of 
specific grant periods. 

New, Implemented, and Open Recommendations; Matters for Congressional 
Consideration: 

For this report, GAO both updates the status of agencies' efforts to 
implement GAO's previous 23 recommendations and makes 5 new 
recommendations to the Office of Management and Budget (OMB) and the 
Departments of Transportation (DOT), Housing and Urban Development 
(HUD), and Education to improve accountability for Recovery Act funds. 
[Footnote 124] Lastly, we update the status of our Matters for 
Congressional Consideration. 

Department of Transportation: 

New Recommendation: 

The Secretary of Transportation should gather timely information on 
the progress states are making in meeting the maintenance-of-effort 
requirement and report preliminary information to Congress within 60 
days of the certified period (Sept. 30, 2010), (1) on whether states 
met required program expenditures as outlined in their maintenance-of-
effort certifications, (2) the reasons that states did not meet these 
certified levels, if applicable, and (3) lessons learned from the 
process. 

Implemented Recommendation: 

Recipients of highway and transit Recovery Act funds, such as state 
departments of transportation and transit agencies, are subject to 
multiple reporting requirements. Both the Department of Transportation 
and OMB have issued implementation guidance for recipient reporting. 
Despite these efforts, state and local highway and transit officials 
expressed concerns and challenges with meeting the Recovery Act 
reporting requirements. We recommended in our September 2009 report 
that the Secretary of Transportation should continue the department's 
outreach to state departments of transportation and transit agencies 
to identify common problems in accurately fulfilling reporting 
requirements and provide additional guidance, as appropriate. 

Agency Actions: 

In September 2009, in responding to our recommendation, DOT said that 
it had conducted outreach, including providing technical assistance, 
training, and guidance to recipients, and will continue to assess the 
need to provide additional information. For example, in February 2010, 
FTA continued three training webinars to provide technical assistance 
in complying with reporting requirements under section 1201(c) of the 
Recovery Act. In addition, on February 1, 2010, FTA issued guidance to 
transit agencies instructing them to use the same methodology for 
calculating jobs retained through vehicles purchased under section 
1201 as they had been for the recipient reporting. This reversed 
previous guidance that had instructed transit agencies to use a 
different methodology for vehicle purchases under sections 1201 and 
recipient reporting. 

Implemented Recommendation: 

The Department of Transportation and the Federal Highway 
Administration (FHWA) have yet to provide clear guidance regarding how 
states are to implement the Recovery Act requirement that economically 
distressed areas (EDA) are to receive priority in the selection of 
highway projects for funding. We found substantial variation both in 
how states identified EDAs and how they prioritized project selection 
for these areas. To ensure states meet Congress's direction to give 
areas with the greatest need priority in project selection, we 
recommended in our July 2009 report that the Secretary of 
Transportation develop clear guidance on identifying and giving 
priority to economically distressed areas that are in accordance with 
the requirements of the Recovery Act and the Public Works and Economic 
Development Act of 1965, as amended, and more consistent procedures 
for the Federal Highway Administration to use in reviewing and 
approving states' criteria. 

Agency Actions: 

In August 2009, in response to our recommendation, FHWA, in 
consultation with the Department of Commerce, developed guidance that 
addresses our recommendation. In particular, FHWA's August 2009 
guidance defines "priority," directing states to give priority to 
projects that are located in an economically distressed area and can 
be completed within the 3-year time frame over other projects. In 
addition, FHWA's guidance sets out criteria that states may use to 
identify economically distressed areas based on "special need." The 
criteria align closely with special need criteria used by the 
Department of Commerce's Economic Development Administration in its 
own grant programs, including factors such as actual or threatened 
business closures (including job loss thresholds), military base 
closures, and natural disasters or emergencies. 

Department of Housing and Urban Development: 

New Recommendation: 

To help HUD achieve Recovery Act objectives and address challenges 
with its continued administration of Recovery Act funds, we recommend 
that the Secretary of Housing and Urban Development develop a 
management plan to determine the adequate level of agency staff needed 
to administer both the Recovery Act funds and the existing Capital 
Fund program going forward, including identifying future resource 
needs and determining whether current resources could be better 
utilized to administer these funds. 

New Recommendation: 

We recommend that the Secretary of Housing and Urban Development 
instruct housing agencies to discontinue use of the jobs calculator 
provided by HUD in the first round of recipient reporting for 
subsequent rounds of reporting to ensure the correct job calculation 
is used. 

Implemented Recommendation: 

To enhance HUD's ability to prevent, detect, and correct noncompliance 
with the use of Recovery Act funds, we recommended in September 2009 
that the Secretary of the Department of Housing and Urban Development 
expand the criteria for selecting housing agencies for on-site reviews 
to include housing agencies with open Single Audit findings that may 
affect the use of and reporting on Recovery Act funds. 

Agency Actions: 

In October 2009, HUD expanded its criteria for selecting housing 
agencies for on-site reviews to include all housing agencies with open 
2007 and 2008 Single Audit findings as of July 7, 2009, relevant to 
the administration of Recovery Act funds. HUD has identified 27 such 
housing agencies and planned to complete these on-site reviews by 
February 15, 2010. 

Department of Education: 

New Recommendation: 

To improve the consistency of FTE data collected and reported, we 
recommend that the Secretary of the Department of Education 
(Education) and the Director of the Office of Management and Budget 
(OMB) provide clarifying guidance to recipients on how to best 
calculate FTEs for education employees during quarters when school is 
not in session. 

Implemented Recommendation: 

We recommended in September 2009 that the Secretary of Education take 
further action such as collecting and reviewing documentation of state 
monitoring plans to ensure that states understand and fulfill their 
responsibility to monitor subrecipients of SFSF funds and consider 
providing training and technical assistance to states to help them 
develop and implement state monitoring plans for SFSF. 

Agency Actions: 

In February 2010, Education instructed states to submit to Education 
for review their plans and protocols for monitoring subrecipients of 
SFSF funds. Education also issued its plans and protocols for 
monitoring state implementation of the SFSF program. The plan includes 
on-site visits to about half the states and desk reviews of the other 
states to be conducted over the next year. 

Open Recommendation: 

We recommended in November 2009 that the Secretary of Education take 
further action to enhance transparency by requiring states to include 
an explanation of changes to MOE levels in their State Fiscal 
Stabilization Fund application resubmissions.[Footnote 125] 

Agency Actions: 

Education has not taken action on this recommendation, but GAO is 
continuing to work with Education to ensure actions are taken to 
enhance transparency of state maintenance-of-effort changes. In its 
response to the recommendation, Education reported that it has always 
required states seeking to amend the maintenance-of-effort information 
in their SFSF applications to provide the basis for such amendments. 
Once approved, the amended applications are posted to Education's Web 
site. However, the approved and publicly available applications do not 
always provide a complete explanation of the basis for the amendments. 
For example in August 2009, California changed its maintenance-of- 
effort level from an aggregate measure to a per-pupil basis. 
California's resubmitted application did not state why the change to a 
per-pupil basis was made. 

Department of Labor: 

Open Recommendation: 

Our September 2009 bimonthly report identified a need for additional 
federal guidance in two areas--measuring the work readiness of youth 
and defining green jobs --and we made the following two 
recommendations to the Secretary of Labor: 

* To enhance the usefulness of data on work readiness outcomes, 
provide additional guidance on how to measure work readiness of youth, 
with a goal of improving the comparability and rigor of the measure. 

* To better support state and local efforts to provide youth with 
employment and training in green jobs, provide additional guidance 
about the nature of these jobs and the strategies that could be used 
to prepare youth for careers in green industries. 

Agency Actions: 

Labor agreed with both of our recommendations and has already begun to 
take actions to implement them. With regard to the work readiness 
measure for WIA Youth summer employment activities, Labor acknowledged 
that a lack of comparability in the way work readiness gains were 
measured across local areas has led to a less meaningful outcome 
measure at the state and national level. Labor indicated that, through 
its WIA Youth Recovery Act process evaluations and regional monitoring 
visits, it will continue to assess the methodologies used to measure 
work readiness and plans to further refine the work readiness 
indicator and determine a more effective way to measure it. In the 
event that a significant number of local areas have Recovery Act funds 
available for summer employment in 2010, or if Labor receives funds 
for future summer employment activities where the work readiness 
measure is used to gauge effectiveness, Labor indicated that it will 
issue further guidance that provides for reporting of more consistent 
and meaningful data. 

Regarding our recommendation on the green jobs, Labor indicated that 
it recognizes the need to provide assistance to states and local areas 
to help them prepare youth for careers in green industries and is 
taking several steps to better understand and define green jobs. 
First, Labor held two technical assistance forums in November and 
December 2009 that focused on strategies for creating green 
educational and career pathways. The forums offered training workshops 
in areas such as identifying green industrial sectors and job 
opportunities and appropriate work experiences to assist youth in 
green career pathways. Second, Labor reported that the Bureau of Labor 
Statistics is developing a definition for green industries and jobs to 
ensure consistent surveying and counting of these jobs. Officials hope 
this will inform state and local workforce development efforts to 
identify and target green jobs and their training needs. Third, Labor 
noted that it has supported an Occupational Information Network 
project that resulted in research that can be used as a starting point 
for identifying green industries and occupations and informing the 
development of training and job placement programs. Labor also plans 
to leverage the results of Recovery Act-funded competitive grants for 
green job training to provide insights on delivering services to 
youth, and others, along green career pathways. Additionally, Labor 
officials told us that once these grants are under way, it intends to 
gather and share examples of effective strategies and training models 
through technical assistance efforts. 

Executive Office of the President: Office of Management and Budget 
(OMB): 

New Recommendation: 

OMB should work with the Recovery Accountability and Transparency 
Board and federal agencies, building on lessons learned, to establish 
a formal and feasible framework for review of recipient changes during 
the continual update period and consider providing more time for 
agencies to review and provide feedback to recipients before posting 
updated reports on Recovery.gov. 

Open Recommendation: 

To leverage Single Audits as an effective oversight tool for Recovery 
Act programs, we recommended from April to December 2009 that the 
Director of OMB should: 

(1) provide more direct focus on Recovery Act programs through the 
Single Audit to help ensure that smaller programs with higher risk 
have audit coverage in the area of internal controls and compliance; 

(2) develop requirements for reporting on internal controls during 
2009 before significant Recovery Act expenditures occur, as well as 
for ongoing reporting after the initial report; 

(3) evaluate options for providing relief related to audit 
requirements for low-risk programs to balance new audit 
responsibilities associated with the Recovery Act; 

(4) develop mechanisms to help fund the additional Single Audit costs 
and efforts for auditing Recovery Act programs; and: 

(5) take steps to achieve sufficient participation and coverage in a 
Single Audit program--the Single Audit Internal Control Project--that 
provides for early written communication of internal control 
deficiencies to achieve the objective of more timely accountability 
over Recovery Act funds. 

To reduce the impact of untimely Single Audit reporting, we further 
recommended that the Director of OMB should: 

(6) formally advise federal cognizant agencies to adopt a policy of no 
longer approving extensions of the due dates of Single Audit reporting 
package submissions beyond the 9-month deadline, and: 

(7) widely communicate this revised policy to the state audit 
community and others who have responsibility for conducting Single 
Audits and submitting the Single Audit reporting package. 

Agency Actions: 

OMB has taken several steps in response to our recommendations. Its 
efforts, however, are ongoing, and further actions are needed to fully 
implement our recommendations to help mitigate risks related to 
Recovery Act funds. We include a summary of OMB's efforts to implement 
these recommendations from our bimonthly reviews. 

To focus auditor risk assessments on Recovery Act-funded programs and 
to provide guidance on internal control reviews for Recovery Act 
programs, OMB worked within the framework defined by existing 
mechanisms--Circular No. A-133 and the Circular No. A-133 Compliance 
Supplement (Compliance Supplement).[Footnote 126] In this context, OMB 
has made limited adjustments to its Single Audit guidance. OMB issued 
the Compliance Supplement in May 2009, which focused risk assessments 
on Recovery Act-funded programs. In August 2009, OMB issued the 
Circular No. A-133 Compliance Supplement Addendum I, which provided 
additional guidance for auditors and modified the Compliance 
Supplement to, among other things, focus on new Recovery Act programs 
and new program clusters. 

In October 2009, OMB began a Single Audit Internal Control Project 
(project), which is currently under way. One of the project's goals is 
to encourage auditors to identify and communicate significant 
deficiencies and material weaknesses in internal control over 
compliance for selected major Recovery Act programs 3 months sooner 
than the 9-month time frame currently required under statute. 
According to OMB, the project remains on schedule for completion in 
early spring 2010, when OMB plans to analyze the results to identify 
the need for potential modifications to improve OMB guidance related 
to Recovery Act-funded programs. 

Although OMB noted the increased responsibilities falling on those 
responsible for performing Single Audits, it has yet to issue 
proposals or plans to address this issue. States that volunteered to 
participate in the project were eligible for some relief in their 
workloads because OMB modified the requirements under Circular No. A-
133 to reduce the number of low-risk programs for inclusion in the 
Single Audits. 

Implemented Recommendation: 

States have been concerned about the burden imposed by new 
requirements, increased accounting and management workloads, and 
strains on information systems and staff capacity at a time when they 
are under severe budgetary stress. We recommended in April 2009 that 
the Director of OMB clarify what Recovery Act funds can be used to 
support state efforts to ensure accountability and oversight, 
especially in light of enhanced oversight and coordination 
requirements. 

Agency Actions: 

On May 11, 2009, OMB released M-09-18, Payments to State Grantees for 
Administrative Costs of Recovery Act Activities, clarifying how state 
grantees could recover administrative costs of Recovery Act activities. 

Implemented Recommendation: 

States and localities are expected to report quarterly on a number of 
measures, including the use of funds and an estimate of the number of 
jobs created and the number of jobs retained as required by section 
1512 of the Recovery Act. We recommended in our July 2009 report that 
to increase consistency in recipient reporting of jobs created and 
retained, the Director of OMB should work with federal agencies to 
have them provide program-specific examples of the application of 
OMB's guidance on recipient reporting of jobs created and retained. 

Agency Actions: 

OMB has issued clarifications and frequently asked questions (FAQ) on 
Recovery Act reporting requirements. During the first reporting 
period, OMB also deployed regional federal employees to serve as 
liaisons to state and local recipients in large population centers and 
established a call center for entities that did not have an on-site 
federal liaison. In addition, federal agencies issued additional 
guidance that builds on the OMB June 22 recipient reporting guidance 
for their specific programs. This guidance is in the form of FAQ, tip 
sheets, and more traditional guidance that builds on what was provided 
on June 22. Federal agencies have also taken steps to provide 
additional education and training opportunities for state and local 
program officials on recipient reporting, including web-based seminars. 

Implemented Recommendation: 

To foster timely and efficient communications, we recommended in April 
2009 that the Director of OMB should continue to develop and implement 
an approach that provides easily accessible, real-time notification to 
(1) prime recipients in states and localities when funds are made 
available for their use, and (2) states--where the state is not the 
primary recipient of funds but has a statewide interest in this 
information. 

Agency Actions: 

In response to our recommendation, OMB has made important progress in 
notifying recipients when Recovery Act funds are available, 
communicating the status of these funds at the federal level through 
agency Weekly Financial Activity reports, and disseminating Recovery 
Act guidance broadly while actively seeking public and stakeholder 
input. OMB has taken the additional step of requiring federal agencies 
to notify Recovery Act coordinators in states, the District of 
Columbia, commonwealths, and territories within 48 hours of an award 
to a grantee or contractor in their jurisdiction. 

Implemented Recommendation: 

Responsibility for reporting on jobs created and retained falls to 
nonfederal recipients of Recovery Act funds. As such, states and 
localities have a critical role in determining the degree to which 
Recovery Act goals are achieved. Given questions raised by many state 
and local officials about how best to determine both direct and 
indirect jobs created and retained under the Recovery Act, we 
recommended in April 2009 that the Director of OMB continue OMB's 
efforts to identify appropriate methodologies that can be used to: (1) 
assess jobs created and retained from projects funded by the Recovery 
Act; (2) determine the impact of Recovery Act spending when job 
creation is indirect; and (3) identify those types of programs, 
projects, or activities that in the past have demonstrated substantial 
job creation or are considered likely to do so in the future. We also 
recommended that the Director of OMB consider whether the approaches 
taken to estimate jobs created and retained in these cases can be 
replicated or adapted to other programs. 

Agency Actions: 

On June 22, 2009, OMB issued additional implementation guidance on 
recipient reporting of jobs created and retained, (OMB memoranda, M-09-
21, Implementing Guidance for the Reports on Use of Funds Pursuant to 
the American Recovery and Reinvestment Act of 2009). This guidance is 
responsive to much of what we recommended. The June 2009 guidance 
provided detailed instructions on how to calculate and report jobs as 
full-time equivalents (FTE). It also describes in detail the data 
model and reporting system to be used for the required recipient 
reporting on jobs. It clarifies that the prime recipient and not the 
subrecipient is responsible for reporting information on jobs created 
or retained. Federal agencies have issued guidance that expanded on 
the OMB June 22 governmentwide recipient reporting guidance and 
provided education and training opportunities for state and local 
program officials. Agency-specific guidance includes FAQs and tip 
sheets. Additionally, agencies are expected to provide examples of 
recipient reports for their programs, which is also consistent with 
what we recommended. In addition to the federal agency efforts, OMB 
has issued FAQs on Recovery Act reporting requirements. The June 22 
guidance and subsequent actions by OMB are responsive to much of what 
we said in our recommendation. 

Implemented Recommendation: 

We have noted in prior reports that in order to achieve the delicate 
balance between robust oversight and the smooth flow of funds to 
Recovery Act programs, states may need timely reimbursement for these 
activities. We recommended in September 2009 that to the extent that 
the Director of OMB has the authority to consider mechanisms to 
provide additional flexibilities to support state and local officials 
charged with carrying out Recovery Act responsibilities, it is 
important to expedite consideration of alternative administrative cost 
reimbursement proposals. 

Agency Actions: 

In response to this recommendation, OMB issued a memorandum on October 
13, 2009, to provide guidance to address states' questions regarding 
specific exceptions to OMB Circular A-87, Cost Principles for State, 
Local and Indian Tribal Governments. In the memorandum, OMB provided 
clarifications for states regarding specific exceptions to OMB 
Circular A-87 that are necessary in order for the states to perform 
timely and adequate Recovery Act oversight, reporting, and auditing. 
We believe the October 2009 OMB guidance provides the additional 
clarification needed for states and localities to proceed with their 
plans to recoup administrative costs. 

Implemented Recommendation: 

To improve the consistency of FTE data collected and reported, we 
recommended in November 2009 that OMB clarify the definition and 
standardize the period of measurement for the FTE data element in the 
recipient reports. 

Agency Actions: 

After the first round of reporting by states on their use of Recovery 
Act funds in October 2009, OMB updated the recipient reporting 
guidance on December 18, 2009. According to the agency, this guidance 
aligns with GAO's recommendation by requiring recipients to report job 
estimates on a quarterly rather than a cumulative basis. As a result, 
recipients will no longer be required to sum various data on hours 
worked across multiple quarters of data when calculating job 
estimates. The December guidance incorporated lessons learned from the 
first round of recipient reporting and also addressed recommendations 
we made in our November 2009 report on recipient reporting. According 
to OMB, the December guidance is intended to help federal agencies 
improve the quality of data reported under Section 1512 and simplifies 
compliance by revising the definitions and calculations needed to 
define and estimate the number of jobs saved. 

Implemented Recommendation: 

To improve the consistency of FTE data collected and reported, we also 
recommended in November 2009 that OMB consider being more explicit 
that "jobs created or retained" are to be reported as hours worked and 
paid for with Recovery Act funds. 

Agency Actions: 

In response to our recommendation, OMB issued guidance on December 18, 
2009, that no longer requires recipients make a subjective judgment of 
whether jobs were created or retained as a result of the Recovery Act. 
Instead, recipients will more easily and objectively report on jobs 
funded with Recovery Act dollars. 

Implemented Recommendation: 

To improve the consistency of FTE data collected and reported, we also 
recommended in our November 2009 report that OMB continue working with 
federal agencies to provide or improve program-specific guidance to 
assist recipients, especially as it applies to the full-time 
equivalent calculation for individual programs. 

Agency Actions: 

In response to our recommendation, OMB issued guidance on December 18, 
2009, that required federal agencies to submit their guidance 
documents to OMB for review and clearance to ensure consistency 
between federal agency guidance and the guidance released by OMB. 

Implemented Recommendation: 

To improve the consistency of FTE data collected and reported, we 
recommended in November 2009 that OMB work with the Recovery 
Accountability and Transparency Board and federal agencies to re- 
examine review and quality assurance processes, procedures, and 
requirements in light of experiences and identified issues with the 
initial round of recipient reporting and consider whether additional 
modifications need to be made and if additional guidance is warranted. 

Agency Actions: 

In response to our recommendation, on December 18, 2009, OMB issued 
updated guidance on data quality, nonreporting recipients, and 
reporting of job estimates. The agency stated that the updated 
guidance incorporates lessons learned from the first reporting period 
and further addresses GAO's recommendations. The guidance also 
provides federal agencies with a standard methodology for effectively 
implementing reviews of the quality of data submitted by recipients. 

Matters for Congressional Consideration: 

Matter: 

To the extent that appropriate adjustments to the Single Audit process 
are not accomplished under the current Single Audit structure, 
Congress should consider amending the Single Audit Act or enacting new 
legislation that provides for more timely internal control reporting, 
as well as audit coverage for smaller Recovery Act programs with high 
risk. 

GAO continues to believe that Congress should consider changes related 
to the Single Audit process. 

Matter: 

To the extent that additional coverage is needed to achieve 
accountability over Recovery Act programs, Congress should consider 
mechanisms to provide additional resources to support those charged 
with carrying out the Single Audit Act and related audits. 

GAO continues to believe that Congress should consider changes related 
to the Single Audit process. 

Agency Comments and Our Evaluation: 

We provided a draft of sections of this report to the Director of the 
Office of Management and Budget (OMB); the Secretaries of the 
Departments of Education, Energy, Housing and Urban Development (HUD), 
Labor, and Transportation; and officials from the Centers for Medicare 
& Medicaid Services. OMB generally agreed with the recommendations in 
the report and provided written comments, which we incorporated as 
appropriate. OMB's letter is reproduced in appendix II. The 
Departments of Education, Energy, Labor, and Transportation provided 
technical comments, which we incorporated as appropriate. The 
Department of Education agreed with our recommendation. HUD did not 
concur with our recommendation, which is discussed in the Public 
Housing Capital Fund section of this report. HUD also provided 
technical comments on the recipient report section, which we 
incorporated. The Department of Transportation is considering our 
recommendation. Officials from the Centers for Medicare & Medicaid 
Services did not provide any comments. 

We are sending copies of this report to the Office of Management and 
Budget; the Centers for Medicare & Medicaid Services; the Departments 
of Education, Energy, Housing and Urban Development, Labor, and 
Transportation; and the Recovery Accountability and Transparency 
Board. The report is available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-5500. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made major contributions to this 
report are listed in appendix IV. 

Signed by: 

Gene L. Dodaro: 
Acting Comptroller General of the United States: 

List of Addressees: 

The Honorable Nancy Pelosi: 
Speaker of the House of Representatives: 

The Honorable Robert C. Byrd: 
President Pro Tempore of the Senate: 

The Honorable Harry Reid: 
Majority Leader United States Senate: 

The Honorable Mitch McConnell: 
Republican Leader United States Senate: 

The Honorable Steny Hoyer: 
Majority Leader House of Representatives: 

The Honorable John Boehner: 
Republican Leader House of Representatives: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Vice Chairman: 
Committee on Appropriations: 
United States Senate: 

The Honorable Dave Obey: 
Chairman: 
The Honorable Jerry Lewis: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives: 

The Honorable Joseph I. Lieberman: 
Chairman: 
The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Edolphus Towns: 
Chairman: 
The Honorable Darrell E. Issa: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This appendix describes our objectives, scope, and methodology for 
this review of the Recovery Act. A detailed description of the 
criteria used to select the core group of 16 states and the District 
of Columbia (District) and programs we reviewed is found in appendix I 
of our April 2009 Recovery Act bimonthly report.[Footnote 127] 

This report, the fifth in response to the Recovery Act's mandate, 
updates and adds new information on the following: (1) selected 
states' and localities' use of Recovery Act funds for specific 
programs, (2) the approaches taken by selected states and localities 
to ensure accountability for Recovery Act funds, and (3) state 
activities to evaluate the impact of the Recovery Act funds they 
receive. We selected programs for review primarily because they have 
begun disbursing funds to states or because they have known or 
potential risks. The risks can include existing programs receiving 
significant amounts of Recovery Act funds or new programs. In some 
cases, we have also collected data from all states, and from a broader 
array of localities, to augment the in-depth reviews. 

The act requires that nonfederal recipients of Recovery Act-funded 
grants, contracts, or loans submit quarterly reports on each project 
or activity including information concerning the amount and use of 
funds and jobs created or retained.[Footnote 128] The first of these 
recipient reports covered cumulative activity since the Recovery Act's 
passage through the quarter ending September 30, 2009. The Recovery 
Act requires us to comment on the estimates of jobs created or 
retained after the recipients have reported. We issued our initial 
report related to recipient reporting, including recommendations for 
recipient report improvements, on November 19, 2009.[Footnote 129] A 
second major focus of the current report is to provide updated 
information concerning recipient reporting in accordance with our 
mandate for quarterly reporting.[Footnote 130] 

States' and Localities' Uses of Recovery Act Funds: 

Using criteria described in our earlier bimonthly reports, we selected 
the following streams of Recovery Act funding flowing to states and 
localities for review during this report: increased Medicaid Federal 
Medical Assistance Percentage (FMAP) grant awards; the Federal-Aid 
Highway Surface Transportation Program; the Transit Capital Assistance 
Program, the State Fiscal Stabilization Fund (SFSF); Title I, Part A 
of the Elementary and Secondary Education Act of 1965, as amended 
(ESEA); Parts B and C of the Individuals with Disabilities Education 
Act (IDEA); the Public Housing Capital Fund; the Weatherization 
Assistance Program; and the Workforce Investment Act of 1998 (WIA) 
Youth Program. We also reviewed how Recovery Act funds are being used 
by states and localities. In addition, we analyzed www.recovery.gov 
data on federal spending. 

Federal Medical Assistance Percentage: 

For the increased FMAP grant awards, we obtained increased FMAP grant 
and drawdown figures for each state in our sample and the District 
from the Centers for Medicare & Medicaid Services (CMS). To examine 
Medicaid enrollment, states' efforts to comply with the provisions of 
the Recovery Act, and related information, we relied on interviews 
with states and our 4 prior web-based surveys, which asked the 16 
states and the District to provide information as well as to update 
information they had previously provided to us. When necessary, we 
interviewed Medicaid officials from certain states to clarify survey 
responses. We also interviewed CMS officials regarding the agency's 
oversight of increased FMAP grant awards and its guidance to states on 
Recovery Act provisions. To assess the reliability of increased FMAP 
drawdown figures, we interviewed CMS officials on how these data are 
collected and reported. To establish the reliability of our Web-based 
survey data, we pretested the survey with Medicaid officials in 
several states and also conducted consistent follow-up with all sample 
states to ensure a high response rate. Based on these steps, we 
determined that the data provided by CMS and submitted by states were 
sufficiently reliable for the purposes of our engagement. 

Federal-Aid Highway Surface Transportation: 

For highway infrastructure investment, we reviewed status reports and 
guidance to the states and discussed these with the U.S. Department of 
Transportation (DOT) and Federal Highway Administration (FHWA) 
officials. We obtained data from FHWA on obligations and 
reimbursements, and the numbers and types of projects funded with 
Recovery Act highway infrastructure funds nationally. We also 
interviewed DOT and FHWA officials on the status of the states' 
maintenance of effort certifications and economically distressed area 
designations. From state DOT officials, we obtained information on the 
status of projects and contracts and the progress in meeting the 1-
year obligation deadline. We obtained data on some highway project 
cost estimates and contract awards and analyzed these data to 
determine the savings from awarding contracts for less than the 
estimated costs and the estimated amounts to be deobligated. Finally, 
we also interviewed state officials regarding the progress of project 
and highway development in metropolitan areas. 

Transit Capital Assistance Program: 

For public transportation investment, we reviewed information on the 
Federal Transit Administration's (FTA) Transit Capital Assistance 
Program and examined the Fixed Guideway Infrastructure Investment 
Program. We reviewed status reports and guidance to the states and 
discussed these with FTA officials as well as the amount of Recovery 
Act funds transferred from FHWA. To determine the current status of 
public transportation funding, we obtained data from FTA on 
obligations and reimbursements for Recovery Act grants nationally and 
the numbers and types of grants funded. We interviewed and reviewed 
information from transit agencies to include how projects were chosen, 
how funds were used and how progress was reported and we compared that 
to project schedules and milestones, when available. Finally, to 
ensure the accountability of funds and address reporting requirements, 
we interviewed FTA, state, and transit agency officials and reviewed 
guidance these officials used to meet reporting requirements, 
including reporting on project status, subcontracts, and estimated 
jobs created. 

SFSF, ESEA Title I, and IDEA: 

To obtain national and selected state-level information on how 
Recovery Act funds made available by the U.S. Department of Education 
(Education) under SFSF, ESEA Title I, and IDEA are being used at the 
local level, we designed and administered a Web-based survey of local 
education agencies (LEA) in the 50 states and the District of 
Columbia. We surveyed school district superintendents across the 
country to learn if they have received or expect to receive Recovery 
Act funding and how these funds are being used. We conducted our 
survey from August to October 2009, with a 73 percent final weighted 
response rate at the national level. We selected a stratified random 
sample of 2,101 LEAs from the population of 16,028 LEAs included in 
our sample frame of data obtained from the Common Core of Data (CCD) 
in 2006 and 2007. In order to make estimates for each of the 16 states 
and the District of Columbia, we stratified the sample based on those 
specific states. With the exception of the District of Columbia, all 
of our sample states had a response rate that exceeded 70 percent, 
with final weighted response rates ranging from 71 percent for Iowa to 
90 percent for Georgia. 

We took steps to minimize nonsampling errors by pretesting the survey 
instrument with officials from five LEAs in July and August 2009. 
Because we surveyed a sample of LEAs, survey results are estimates of 
a population of LEAs and thus are subject to sampling errors that are 
associated with samples of this size and type. Our sample is only one 
of a large number of samples that we might have drawn. As each sample 
could have provided different estimates, we express our confidence in 
the precision of our particular sample's results as a 95 percent 
confidence interval (e.g., plus or minus 10 percentage points). We 
excluded 14 of the sampled LEAs for various reasons--because they were 
no longer operating in the 2009-2010 school year, were a duplicate 
entry, or were not an LEA--and therefore were considered out of scope. 
All estimates produced from the sample and presented in this report 
are representative of the in-scope population and have margins of 
error of plus or minus 5 percentage points or less for our overall 
sample and 12 percentage points or less for our 16 state samples, 
excluding the District, unless otherwise noted. 

To understand how Education is implementing SFSF, ESEA Title I, and 
IDEA under the Recovery Act and monitoring states' use of Recovery Act 
funds, we reviewed relevant federal laws, regulations, guidance, and 
communications to the states and interviewed Education officials. For 
SFSF, ESEA Title I, and IDEA, we obtained data from Education on the 
amount of funds made available to the 16 states and the District 
covered by our review and the amount of funds these states have drawn 
down from their accounts with Education. To obtain specific examples 
of how LEAs are using Recovery Act funds, we visited LEAs in selected 
states and interviewed LEA officials. To learn about issues related to 
Recovery Act funds for education, we interviewed officials in the 
District and state officials in each of the 16 states covered by our 
review. 

Public Housing Capital Fund: 

For Public Housing, we obtained data from HUD's Electronic Line of 
Credit Control System on the amount of Recovery Act funds that have 
been obligated and drawn down by each housing agency in the country 
that received public housing capital funds. To monitor progress on how 
housing agencies are using these funds, we visited 47 housing agencies 
in 16 states and the District of Columbia for our longitudinal study, 
as well as 2 additional agencies.[Footnote 131] At the selected 
agencies, we interviewed housing agency officials and conducted site 
visits of Recovery Act projects. We also selected at least one Capital 
Fund Recovery Competition grant in all but one of the 16 states and 
the District and collected information on the housing agencies' use of 
those funds. We also interviewed HUD officials to understand their 
procedures for assisting and monitoring public housing agencies in 
obligating Recovery Act funds and to understand HUD's capacity to 
administer Recovery Act funds. In addition, we interviewed public 
housing industry officials to understand the challenges that their 
members faced in meeting the obligation deadline and reporting to 
FederalReporting.gov. 

Weatherization Assistance Program: 

For the Weatherization Assistance Program, we reviewed relevant 
regulations and federal guidance and interviewed Department of Energy 
officials who administer the program at the federal level. In 
addition, for this report, we collected information from selected 
states and the District of Columbia on their weatherization programs. 
We conducted semistructured interviews of officials in the states' 
agencies that administer the weatherization program and with local 
service providers responsible for weatherization production. These 
interviews covered updates on the use of funds, the implementation of 
the Recovery Act's Davis-Bacon provisions, accountability measures, 
and impacts of the Recovery Act Weatherization program. We also 
conducted site visits to interview local providers of weatherization 
and to witness weatherization production. We continued to collect data 
about each state's total allocation for weatherization under the 
Recovery Act, as well as the allocation already provided to the states 
and the expenditures-to-date. 

Workforce Investment Act of 1998 Youth Program: 

We analyzed national data that we received from the Department of 
Labor (Labor) on the extent to which Recovery Act WIA youth funds have 
been drawn down, the characteristics of youth that participated in 
Recovery Act-funded WIA youth activities, and program participation 
and outcomes. We did not assess the reliability of Labor's data. 
However, we interviewed Labor officials about the limitations of its 
data and determined that the data were sufficient for our purposes. We 
also reviewed the statement of executive action that Labor provided us 
in response to the recommendations we made in our September 2009 
bimonthly report. 

Recipient Reporting: 

The recipient reporting section of this report responds to the 
Recovery Act's mandate that we comment on the estimates of jobs 
created and retained by direct recipients of Recovery Act funds. For 
our review of the second submission of recipient reports, we built on 
findings from our first review of the reports. We performed edit 
checks and basic analyses on the second submission of recipient report 
data that became publicly available at Recovery.gov on January 30, 
2010. We calculated the overall sum, as well as sum by states, for the 
number of full-time equivalents (FTE) reported, award amount, and 
amount received and found that they corresponded closely with the 
values shown for these data on Recovery.gov. We also reviewed the 
Office of Management and Budget's (OMB) updated December 2009 guidance 
on recipient reporting to determine the extent of changes and 
clarifications for the second submission of recipient reports. We had 
discussions about the updated guidance and recipient reporting changes 
with representatives from OMB and the Recovery Accountability and 
Transparency Board (Board). In addition, we examined reports from 
federal inspectors general on Recovery Act data quality reviews and 
interviewed federal agency officials who have responsibility for 
ensuring a reasonable degree of quality across their program's 
recipient reports. 

From the second submission of recipient reports, we reviewed reports 
for transportation, transit, and education programs, as we did for the 
first submission of reports. In addition to those areas, we also 
reviewed selected recipient reports for Department of Energy, 
Department of Health and Human Services, and Department of Housing and 
Urban Development programs. These areas of focus cover a wide range of 
recipients, types of funding, and diverse activities. Our teams in the 
16 states and the District interviewed both recipients that filed 
reports in October 2009 and new recipients of Recovery Act funding. In 
total, our teams reviewed approximately 250 reports and interviewed 
the recipients responsible for those reports. Each team made a 
nonstatistical selection of approximately 12 recipient reports from 
our program areas to review and interviewed recipients regarding OMB's 
guidance and processes for the first and second rounds of reporting, 
or in some cases, only the second round of reporting. We visited the 
16 selected states and the District of Columbia during late January 
and early February 2010 and discussed with recipients the numbers used 
in the FTE calculation and investigated the application of the new FTE 
calculation. We gathered and examined issues raised by recipients in 
these jurisdictions regarding reporting and data quality and 
interviewed recipients on their experiences using the 
FederalReporting.gov Web site. We also interviewed state officials 
regarding state plans for managing, tracking, and reporting on 
Recovery Act funds and activities. 

Assessing Safeguards and Internal Controls: 

To determine how states, federal agencies, and OMB are overseeing the 
use of Recovery Act funds and the quality of data states and other 
recipients maintain and report regarding their use of funds, we relied 
on our previous work, and we followed up with cognizant state 
officials to learn of any changes they have made to their internal 
controls or guidance since we last reported. We also reviewed federal 
agency inspector general reports and OMB's updated guidance related to 
recipient reporting. To perform audit work relating to Single Audits, 
we discussed with OMB their efforts toward implementing our 
recommendations related to Single Audits that we reported in prior 
Recovery Act reports. We examined relevant documentation that 
supported those efforts. We reviewed internal control reports dated 
December 31, 2009, that were prepared by the auditors of the states 
participating in OMB's Single Audit Internal Control Project. We also 
reviewed the corrective action plans to resolve internal control 
deficiencies that were dated January 31, 2010. The management of the 
states participating in the project provided these plans to the 
cognizant federal agencies as required by the project's guidelines. 

Accountability: 

To assess actions taken by the state and local audit community to 
monitor the use of Recovery Act funds, we have interviewed state and 
local auditors and state inspectors general about their ongoing and 
planned audit activities. We have also reviewed state and local audit 
reports. In addition, in an effort to update the audit community 
concerning our Recovery Act work and participate in information 
sharing about Recovery Act issues, we are working with state and local 
auditors and their associations to facilitate routine telephone 
conference calls to discuss Recovery Act issues with a broad community 
of interested parties. The conference call participants include the 
Association of Government Accountants; the Association of Local 
Government Auditors; the National Association of State Auditors, 
Comptrollers, and Treasurers; OMB; the Recovery Accountability and 
Transparency Board; federal inspectors general; the National Governors 
Association; the National State Budget Officers Association; and state 
stimulus czars. In an effort to ensure information sharing about 
allegations of fraud, we are also working with state and local 
auditors to develop plans for routine sharing of information. 

To determine the actions taken by the Board, we met with 
representatives of the Board to discuss the initiatives they have 
taken to monitor the number and types of contracts issued by federal 
agencies for the Recovery Act and their plans to assess the extent to 
which laws and regulations are being complied with or circumvented. We 
reviewed available documentation related to the Board's initiatives. 

State and Local Budget: 

The state and local budget section of this report focuses on two 
areas: first, our long-term fiscal simulations (or model) for the 
state and local government sector; and, second, our continued review 
of the use of Recovery Act funds by the 16 selected states and the 
District. 

For the long-term fiscal simulations we use the U.S. Bureau of 
Economic Analysis's National Income and Product Accounts (NIPA) as the 
primary data source. Our model projects the level of receipts and 
expenditures for the sector until 2060 based on current and historical 
spending and revenue patterns. We assume the current set of policies 
in place across federal, state, and local governments remains 
constant. This update incorporates NIPA data including increased 
federal grant funding made available to the sector through the 
Recovery Act. The model simulates the long-term fiscal outlook for the 
state and local sector as a whole and, while the model incorporates 
the Congressional Budget Office's (CBO) economic projections, 
adjustments are made to capture the budgetary effects of short-term 
cyclical swings in the economy. Because the model covers the sector in 
the aggregate, the fiscal outcomes for individual states and 
localities cannot be captured. This product is part of a body of work 
on the long-term fiscal challenge. Related products can be found at 
[hyperlink, http://www.gao.gov/special.pubs/longterm]. 

For our continued review of the use of Recovery Act funds for the 16 
states and the District, we conducted interviews with state budget and 
legislative officials to determine how states are using Recovery Act 
funds to avoid reductions in essential services, using "rainy day" 
funds, closing budget gaps, and developing exit strategies to plan for 
the end of Recovery Act funding. To gain an understanding of local 
governments' use of Recovery Act funds, we met with the chief 
executives, recovery coordinators, auditors, and finance officials at 
the selected local governments. 

To select local governments for our review, we identified localities 
representing a range of types of governments (cities and counties), 
population sizes, and economic conditions (unemployment rates greater 
than or less than each state's average). We balanced these selection 
criteria with logistical considerations including other scheduled 
Recovery Act work, local contacts established during prior reviews, 
and the geographic proximity of the local government entities. We 
reported the latest unemployment rates and population counts that were 
available in the December report. 

Due to the small sample size and judgmental nature of the selection, 
our findings are not generalizable to all local governments. The list 
of local governments selected in each state is found in appendix III 
of our December report.[Footnote 132] 

Data and Data Reliability: 

We collected funding data from www.recovery.gov and federal agencies 
administering Recovery Act programs for the purpose of providing 
background information. We used funding data from www.recovery.gov-- 
which is overseen by the Board--because it is the official source for 
Recovery Act spending. Based on our limited examination of this 
information thus far, we consider these data sufficiently reliable 
with attribution to official sources for the purposes of providing 
background information on Recovery Act funding for this report. 
[Footnote 133] Our sample of states, localities, and entities has been 
purposefully selected and the results of our reviews are not 
generalizable to any population of states, localities, or entities. 

We conducted this performance audit from December 5, 2009, to March 3, 
2010, in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Office of Management and Budget: 

Executive Office Of The President: 
Office Of Management And Budget: 
The Controller: 
Washington, D.C. 20503: 

March 1, 2010: 

Mr. Gene L. Dodaro: 
Acting Comptroller General: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Acting Comptroller General Dodaro: 

Thank you for sharing a draft Government Accountability Office (GAO) 
report entitled, Recovery Act: One Year Later, States' and Localities' 
Uses of Funds and Opportunities to Strengthen Accountability
("Draft Report"). Over the past year, your insights and 
recommendations have yielded important enhancements to the 
implementation of the Recovery Act. 

The Office of Management and Budget (OMB) appreciates GAO's 
recognition of the progress we have made in addressing each GAO 
recommendation. Specifically, we are pleased that GAO acknowledges the 
numerous improvements in the recipient reporting process, data 
quality, and the Single Audit. In addition, we generally agree with 
the latest set of recommendations included in the Draft Report. 
However, there are several findings in the Draft Report regarding 
recipient-reported data that warrant additional emphasis and 
clarification. 

In the fourth quarter of 2009, more than 98 percent of Recovery Act 
recipients successfully submitted required reports. This represents a 
76 percent reduction in non-filers from the previous quarter and is 
due, in large part, to efforts Federal agencies have undertaken since 
then to eliminate cases of non-filing. While we are pleased with the 
increased compliance, we share GAO's concerns about the remaining 
recipients who are failing to uphold their legal obligation to report 
on Recovery Act funds they were awarded. No rate of non-compliance is 
acceptable. That is why OMB is requiring Federal agencies to actively 
address each and every case of non-compliance. We have also directed 
agencies to look at imposing penalties on non-filers, where 
appropriate. A list of non-compliant filers has been provided to the 
Recovery Accountability and Transparency Board (Recovery Board) and is 
available publicly at [hyperlink, 
http://www.recovery.gov/Transparency/RecipientlteportedData/PagesiErrors
andOmissions.aspx]. 

OMB and the Vice President's Office have been working aggressively 
with the Recovery Board to address concerns regarding initial 
estimates from the Recovery Board, who flagged about 13,000 reports
filed in the first round of reporting as not have a matching report in 
the second round. However, preliminary indications from an OMB-led 
line-by-line review of these 13,000 reports show that: 

* Approximately 93 percent of the 13,000 reports were filed in the 
second round of reporting but, due to a technical issue, were not 
"matched" with the corresponding prior-quarter report; 

* Most of the remaining reports of the 13,000 flagged by the Recovery 
Board were either new reports and therefore did not have a link to any 
prior quarter report, reports that recipients entered into the system 
twice in the same quarter, reports that did have a clear match with a 
prior quarter report, reports where work was completed and no follow-
up report was required, or reports that have unique complexities that 
are still being investigated; and; 

* Only fewer than 0.5 percent of the 13,000 reports were ultimately 
identified as "missing," meaning they were reports from the first 
round of reporting that should have had a corresponding report for the 
most recent reporting quarter but did not. 

Hence, while the current draft report may lead readers to believe that 
there were 13,000 reports filed in the quarter ending September 30, 
2009 that did not have follow-up reports in the subsequent quarter, we 
believe that the actual number is fewer than 100. And, overall, we 
believe that there were only approximately 1,000 non-compliant filers 
in total for the latest quarter. 

We recently transmitted a data file to the Recovery Board that 
reflects the analysis described above and are working with it to 
appropriately link reports and to make additional data corrections. 
Given the unprecedented nature of this reporting effort and in an 
effort to match every report in future rounds of recipient reporting, 
OMB and federal agencies will continue to work with the Recovery Board 
to examine this data for inconsistencies or errors to ensure that the 
information being reported to the American people is as accurate and 
reliable as possible. 

In our continuing discussions with agencies, we are implementing 
lessons learned and best practices, as OMB is preparing to gather 
supplemental information from the agencies and implement new 
procedures that will reduce both non-compliance in the next quarter 
and mis-matched reports from quarter to quarter in the future. Again, 
we appreciate GAO's constructive observations about the Recovery Act's 
Implementation. 

We have set a high bar for success in providing the unprecedented 
levels of transparency and accountability that the President promised 
when he signed the Recovery Act, and, with the help of Congress, the 
Recovery Board, GAO, Federal agencies, funding recipients, and the 
American people, we will continue to deliver on that promise. We look 
forward to continuing to work with you to implement the Recovery Act 
quickly and effectively. 

Thank you for your commitment to the success of the Recovery Act. 

Sincerely, 

Signed by: 

Danny Werfel: 
Controller, Office of Management and Budget: 

[End of section] 

Appendix III: Program Descriptions: 

Following are descriptions of selected grant programs discussed in 
this report. 

Medicaid Federal Medical Assistance Percentage: 

Medicaid is a joint federal-state program that finances health care 
for certain categories of low-income individuals, including children, 
families, persons with disabilities, and persons who are elderly. The 
federal government matches state spending for Medicaid services 
according to a formula based on each state's per capita income in 
relation to the national average per capita income. The Centers for 
Medicare & Medicaid Services, within the Department of Health and 
Human Services, approves state Medicaid plans, and the amount of 
federal assistance states receive for Medicaid service expenditures is 
known as the Federal Medical Assistance Percentage (FMAP). The 
Recovery Act's temporary increase in FMAP funding will provide states 
with approximately $87 billion in assistance. 

Highway Infrastructure Investment Program: 

The Recovery Act provides funding to states for restoration, repair, 
and construction of highways and other activities allowed under the 
Federal Highway Administration's Federal-Aid Highway Surface 
Transportation Program and for other eligible surface transportation 
projects. The Recovery Act requires that 30 percent of these funds be 
suballocated, primarily based on population, for metropolitan, 
regional, and local use. Highway funds are apportioned to states 
through federal-aid highway program mechanisms, and states must follow 
existing program requirements. While the maximum federal fund share of 
highway infrastructure investment projects under the existing federal- 
aid highway program is generally 80 percent, under the Recovery Act, 
it is 100 percent. 

Funds apportioned for highway infrastructure spending must be used in 
accordance with Recovery Act requirements. States should ensure that 
all apportioned Recovery Act funds--including suballocated funds--are 
obligated[Footnote 134] within 1 year. The Secretary of Transportation 
is to withdraw and redistribute to eligible states any amount that is 
not obligated within that time frame.[Footnote 135] Additionally, the 
governor of each state must certify that the state will maintain its 
level of spending for the types of transportation projects funded by 
the Recovery Act it planned to spend the day the Recovery Act was 
enacted. As part of this certification, the governor of each state is 
required to identify the amount of funds the state plans to expend 
from state sources from February 17, 2009, through September 30, 2010. 
[Footnote 136] 

Public Transportation Program: 

The Recovery Act appropriated $8.4 billion to fund public 
transportation throughout the country through existing Federal Transit 
Administration (FTA) grant programs, including the Transit Capital 
Assistance Program, and the Fixed Guideway Infrastructure Investment 
program. Under the Transit Capital Assistance Program's formula grant 
program, Recovery Act funds were apportioned to large and medium 
urbanized areas--which in some cases include a metropolitan area that 
spans multiple states--throughout the country according to existing 
program formulas. Recovery Act funds were also apportioned to states 
for small urbanized areas and nonurbanized areas under the Transit 
Capital Assistance Program's formula grant programs using the 
program's existing formula. Transit Capital Assistance Program funds 
may be used for such activities as vehicle replacements, facilities 
renovation or construction, preventive maintenance, and paratransit 
services. Recovery Act funds from the Fixed Guideway Infrastructure 
Investment program[Footnote 137] were apportioned by formula directly 
to qualifying urbanized areas, and funds may be used for any capital 
projects to maintain, modernize, or improve fixed guideway systems. 
[Footnote 138] As they work through the state and regional 
transportation planning process, designated recipients of the 
apportioned funds--typically public transit agencies and metropolitan 
planning organizations (MPO)--develop a list of transit projects that 
project sponsors (typically transit agencies) submit to FTA for 
approval.[Footnote 139] 

Funds appropriated for the Transit Capital Assistance Program and the 
Fixed Guideway Infrastructure Investment program must be used in 
accordance with Recovery Act requirements. States should ensure that 
all apportioned Recovery Act funds are obligated[Footnote 140] within 
1 year. The Secretary of Transportation is to withdraw and 
redistribute to each state or urbanized area any amount that is not 
obligated within that time frame.[Footnote 141] Additionally, 
governors must certify that the state will maintain the level of state 
spending for the types of transportation projects funded by the 
Recovery Act it planned to spend the day the Recovery Act was enacted. 
As part of this certification, the governor of each state is required 
to identify the amount of funds the state plans to expend from state 
sources from February 17, 2009, through September 30, 2010.[Footnote 
142] 

Education: 

State Fiscal Stabilization Fund: 

The State Fiscal Stabilization Fund (SFSF) included approximately 
$48.6 billion to award to states by formula and up to $5 billion to 
award to states as competitive grants. The Recovery Act created the 
SFSF in part to help state and local governments stabilize their 
budgets by minimizing budgetary cuts in education and other essential 
government services, such as public safety. Stabilization funds for 
education distributed under the Recovery Act must first be used to 
alleviate shortfalls in state support for education to local 
educational agencies (LEA) and public institutions of higher education 
(IHE). States must use 81.8 percent of their SFSF formula grant funds 
to support education (these funds are referred to as education 
stabilization funds) and must use the remaining 18.2 percent for 
public safety and other government services, which may include 
education (these funds are referred to as government services funds). 
For the initial award of SFSF formula grant funds, Education awarded 
at least 67 percent of the total amount allocated to each state, 
[Footnote 143] but states had to submit an application to Education to 
receive the funds. The application required each state to provide 
several assurances, including that the state will meet maintenance-of-
effort requirements (or will be able to comply with the relevant 
waiver provisions) and that it will implement strategies to advance 
four core areas of education reform, as described by Education: (1) 
increase teacher effectiveness and address inequities in the 
distribution of highly qualified teachers; (2) establish a pre-K- 
through-college data system to track student progress and foster 
improvement; (3) make progress toward rigorous college-and career-
ready standards and high-quality assessments that are valid and 
reliable for all students, including students with limited English 
proficiency and students with disabilities; and (4) provide targeted, 
intensive support and effective interventions to turn around schools 
identified for corrective action or restructuring.[Footnote 144] In 
addition, states were required to make assurances concerning 
accountability, transparency, reporting, and compliance with certain 
federal laws and regulations. After maintaining state support for 
education at fiscal year 2006 levels, states must use education 
stabilization funds to restore state funding to the greater of fiscal 
year 2008 or 2009 levels for state support to LEAs and public IHEs. 
When distributing these funds to LEAs, states must use their primary 
education funding formula, but they can determine how to allocate 
funds to public IHEs. In general, LEAs have broad discretion in how 
they can use education stabilization funds, but states have some 
ability to direct IHEs in how to use these funds. Applications for 
SFSF Phase II funds were due to Education by January 11, 2010. 
According to the Phase II application, in order to receive the 
remainder of their SFSF allocation, states must agree to collect and 
publicly report on more than 30 indicators and descriptors related to 
the four core areas of education reform described above. Additionally, 
states generally must, among other things, provide confirmation that 
they maintained support for education in 2009 at least at the level of 
such support in fiscal year 2006 and reaffirm or provide updated 
information that they will maintain state support in 2010 and 2011. 

ESEA Title I, Part A: 

The Recovery Act provides $10 billion to help LEAs educate 
disadvantaged youth by making additional funds available beyond those 
regularly allocated through Title I, Part A of the Elementary and 
Secondary Education Act of 1965,[Footnote 145] as amended. Title I 
funding is administered by the Office of Elementary and Secondary 
Education within the Department of Education. The Recovery Act 
requires these additional funds to be distributed through states to 
LEAs using existing federal funding formulas, which target funds based 
on such factors as high concentrations of students from families 
living in poverty. In using the funds, LEAs are required to comply 
with applicable statutory and regulatory requirements and must 
obligate 85 percent of the funds by September 30, 2010.[Footnote 146] 
Education is advising LEAs to use the funds in ways that will build 
the agencies' long-term capacity to serve disadvantaged youth, such as 
through providing professional development to teachers. 

IDEA, Parts B and C: 

The Recovery Act provided supplemental funding for Parts B and C of 
the Individuals with Disabilities Education Act (IDEA), as amended--
the major federal statute that supports early intervention and special 
education and related services for children, and youth with 
disabilities. Part B provides funds to ensure that preschool and 
school-aged children with disabilities have access to a free and 
appropriate public education and is divided into two separate grant 
programs--Part B grants to states (for school-age children) and Part B 
preschool grants. Part C funds programs that provide early 
intervention and related services for infants and toddlers with 
disabilities--or at risk of developing a disability--and their 
families. 

Workforce Investment Act Youth Program: 

The Recovery Act provides an additional $1.2 billion in funds for 
Workforce Investment Act (WIA) Youth Program activities, including 
summer employment.[Footnote 147] Administered by the Department of 
Labor (Labor), the WIA Youth Program is designed to provide low-income 
in-school and out-of-school youth 14 to 21 years old, who have 
additional barriers to success, with services that lead to educational 
achievement and successful employment, among other goals. The Recovery 
Act also extended eligibility through age 24 for youth receiving 
services funded by the act. While the Recovery Act does not require 
all funds to be used for summer employment, in the conference report 
accompanying the bill that became the Recovery Act,[Footnote 148] the 
conferees stated they were particularly interested in states using 
these funds to create summer employment opportunities for youth. While 
summer employment is a required component of the WIA Youth Program, 
Labor issued guidance indicating that local areas have the flexibility 
to implement stand-alone summer youth employment activities with 
Recovery Act funds. Local areas may design summer employment 
opportunities to include any set of allowable WIA youth activities-- 
such as tutoring and study skills training, occupational skills 
training, and supportive services--as long as it also includes a work 
experience component. 

Public Housing Capital Fund: 

The Public Housing Capital Fund provides formula-based grant funds 
directly to public housing agencies to improve the physical condition 
of their properties; to develop, finance, and modernize public housing 
developments; and to improve management. Under the Recovery Act, the 
Office of Public and Indian Housing within the U.S. Department of 
Housing and Urban Development (HUD) allocated nearly $3 billion 
through the Public Housing Capital Fund to public housing agencies 
using the same formula for amounts made available in fiscal year 2008 
and obligated these funds to housing agencies in March 2009. 

HUD was also required to award nearly $1 billion to public housing 
agencies based on competition for priority investments, including 
investments that leverage private sector funding or financing for 
renovations and energy conservation retrofitting. In September 2009, 
HUD awarded competitive grants for the creation of energy-efficient 
communities, gap financing for projects stalled due to financing 
issues, public housing transformation, and improvements addressing the 
needs of the elderly or persons with disabilities. 

Weatherization Assistance Program: 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program--which the Department of Energy (DOE) is 
distributing to each of the states, the District of Columbia, and 
seven territories and Indian tribes--to be spent over a 3-year period. 
The program, administered by the Office of Energy Efficiency and 
Renewable Energy within DOE, enables low-income families to reduce 
their utility bills by making long-term energy-efficiency improvements 
to their homes by, for example, installing insulation, sealing leaks, 
and modernizing heating equipment, air circulation fans, and air-
conditioning equipment. Over the past 32 years, the Weatherization 
Assistance Program has assisted more than 6.2 million low-income 
families. By reducing the energy bills of low-income families, the 
program allows these households to spend their money on other needs, 
according to DOE. The Recovery Act appropriation represents a 
significant increase for a program that has received about $225 
million per year in recent years. DOE has approved the weatherization 
plans of the 16 states and the District of Columbia that are in our 
review and has provided at least half of the funds to those areas. 

Head Start/Early Head Start: 

The Head Start program, administered by the Office of Head Start of 
the Administration for Children and Families within the Department of 
Health and Human Services, provides comprehensive early childhood 
development services to low-income children, including educational, 
health, nutritional, social, and other services, intended to promote 
the school readiness of low-income children. Federal Head Start funds 
are provided directly to local grantees, rather than through states. 
The Recovery Act provided an additional $2.1 billion in funding for 
Head Start, including $1.1 billion directed for the expansion of Early 
Head Start programs. The Early Head Start program provides services to 
low-income families designed to promote the development of very young 
children, as well as to enable their parents to fulfill their parental 
duties and move toward self-sufficiency. 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

J. Christopher Mihm, Managing Director for Strategic Issues, (202) 512-
6806 or mihmj@gao.gov: 

For issues related to WIA, SFSF, and other education programs: Barbara 
D. Bovbjerg, Managing Director of Education, Workforce, and Income 
Security, (202) 512-7215 or bovbjergb@gao.gov: 

For issues related to Medicaid programs: Dr. Marjorie Kanof, Managing 
Director of Health Care, (202) 512-7114 or kanofm@gao.gov: 

For issues related to highways, transit, and other transportation 
programs: Katherine A. Siggerud, Managing Director of Physical 
Infrastructure, (202) 512-2834 or siggerudk@gao.gov: 

For issues related to energy and weatherization: Patricia Dalton, 
Managing Director of Natural Resources and Environment, (202) 512-3841 
or daltonp@gao.gov: 

For issues related to public housing: Richard J. Hillman, Managing 
Director of Financial Markets and Community Investment, (202) 512-8678 
or hillmanr@gao.gov: 

For issues related to internal controls and Single Audits: Jeanette 
Franzel, Managing Director of Financial Management and Assurance, 
(202) 512-9471 or franzelj@gao.gov: 

For issues related to contracting and procurement: Paul Francis, 
Managing Director of Acquisition and Sourcing Management, (202) 512- 
4841 or francisp@gao.gov: 

For issues related to fraud, waste, and abuse: Gregory D. Kutz, 
Managing Director of Forensic Audits and Special Investigations, (202) 
512-9505 or kutzg@gao.gov: 

Staff Acknowledgments: 

The following staff contributed to this report: Stanley Czerwinski, 
Denise Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas 
James, James McTigue, and Michelle Sager, (Assistant Directors); 
Sandra Beattie (Analyst-in-Charge); and Marie Penny Ahearn, Judith 
Ambrose, Peter Anderson, Thomas Beall, James Bennett, Noah Bleicher, 
Jessica Botsford, Anthony Bova, Lauren Calhoun, Richard Cambosos, 
Ralph Campbell Jr., Virginia Chanley, Tina Cheng, Robert Cramer, 
Michael Derr, Helen Desaulniers, Ruth "Eli" DeVan, David Dornisch, 
Kevin Dooley, Abe Dymond, Laurie Ekstrand, James Fuquay, Alice 
Feldesman, Doreen Feldman, Alexander Galuten, Ellen Grady, Chelsa 
Gurkin, Anita Hamilton, Geoffrey Hamilton, Tracy Harris, Bert Japikse, 
Karen Keegan, John Krump, Jon Kruskar, Hannah Laufe, Jean K. Lee, 
Teague Lyons, Stephanie May, Sarah M. McGrath, Jean McSween, Donna 
Miller, Kevin Milne, Sheila McCoy, John McGrail, Marc Molino, Mimi 
Nguyen, Jungjin Park, Ken Patton, Anthony Pordes, Brenda Rabinowitz, 
Carl Ramirez, James Rebbe, Beverly Ross, Aubrey Ruge, Sidney Schwartz, 
John Smale Jr., Kathryn Smith, Andrew J. Stephens, Alyssa Weir, 
Crystal Wesco, and Kimberly Young. 

Program Contributors: 

The names of GAO staff contributing to information contained in the 
sections on the selected program are as follows: 

Education--SFSF, IDEA, Title I: 
Jaime Allentuck, Cornelia M. Ashby, James L. Ashley, Sandra Baxter, 
Edward Bodine, Jessica Botsford, Karen A. Brown, Amy Buck, Alexander 
Galuten, Bryon Gordon, Sonya Harmeyer, Susan Lawless, Ying Long, 
Sheila McCoy, Jean McSween, Elizabeth Morrison, Mimi Nguyen, Karen V. 
O'Conor, Kathy Peyman, Jason Palmer, James M. Rebbe, Michelle 
Verbrugge, Charles Willson and Jill Yost. 

Medicaid: 
Susan Anthony, Emily Beller, Ted Burik, Julianne Flowers, Martha 
Kelly, and Carolyn Yocom. 

Public housing: 
Don Brown, Don Kiggins, May Lee, John McGrail, Marc Molino, Deena 
Richart, Paul Schmidt, Jennifer Schwartz, Mathew Scire, and Marie Webb. 

Recipient reporting: 
Darreisha Bates, Sue Irving, Yvonne Jones, Judith Kordahl, Hayley 
Landes, James McTigue, Patricia Norris and Jon Stehle. 

Internal Controls/Single Audit: 
Phyllis Anderson, Andrew Grimaldi, Eric Holbrook, Kim McGatlin, Diane 
Morris, Susan Ragland, Sandra Silzer, and Doris Yanger. 

State and local budget: 
Sandra Beattie, Anthony Bova, Stanley J. Czerwinski, Jungjin Park, and 
Michelle Sager. 

Transportation/highway and transit programs: 
Aisha Cabrer, A. Nicole Clowers, Steve Cohen, Dean Gudicello, Delwen 
Jones, Les Locke, Tim Schindler, and Raymond Sendejas. 

Weatherization: 
Jessica Bryant-Bertail, Ric Cheston, Mark Gaffigan, Kim Gianopoulos, 
Kris Massey, Stuart Ryba, and Jason Trentacoste. 

WIA Youth Program: 
Dianne Blank, Raun Lazier, and Andrew Sherrill. 

Contributors to the Selected States and the District: 

Arizona: 
Karyn Angulo, Rebecca Bolnick, Tom Brew, Lisa Brownson, Aisha Cabrer, 
Steven Calvo, Eileen Larence, Radha Seshagiri, and Jeff Schmerling. 

California: 
Linda Calbom, Joonho Choi, Guillermo Gonzalez, Chad Gorman, Richard 
Griswold, Susan Lawless, Gail Luna, Heather MacLeod, Emmy Rhine, Eddie 
Uyekawa, Lacy Vong, and Randy Williamson. 

Colorado: 
Paul Begnaud, Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer 
Leone, Brian Lepore, Tony Padilla, Leslie Pollock, Kathleen 
Richardson, Dawn Shorey, and Mary Welch. 

District of Columbia: 
Laurel Beedon, Sunny Chang, Nagla'a El-Hodiri, Mattias Fenton, John 
Hansen, Adam Hoffman, William O. Jenkins, Jr., and Linda Miller. 

Florida: 
Patrick di Battista, Lisa Galvan-Trevino, Sabur Ibrahim, Kevin 
Kumanga, Frank Minore, Brenda Ross, Andy Sherrill, Bernard Ungar, 
Margaret Weber, and James Whitcomb. 

Georgia: 
Alicia Puente Cackley, Waylon Catrett, Chase Cook, Nadine Garrick 
Raidbard, Daniel Newman, John H. Pendleton, Paige Smith, David 
Shoemaker, and Robyn Trotter. 

Illinois: 
Silvia Arbelaez-Ellis, Dean Campbell, Debra Draper, Gail Marnik, Cory 
Marzullo, Paul Schmidt, Roberta Rickey, and Rosemary Torres Lerma. 

Iowa: 
Tom Cook, Dan Egan, Christine Frye, Marietta Mayfield, Ronald Maxon, 
Mark Ryan, Lisa Shames, and Ben Shouse. 

Massachusetts: 
Stanley J. Czerwinski, Laurie Ekstrand, Nancy J. Donovan, Kathleen M. 
Drennan, Lorin Obler, Keith C. O'Brien, Kathryn O'Dea, Carol Patey, 
and Robert Yetvin. 

Michigan: 
Ranya Elias, Kevin Finnerty, Patrick Frey, Henry Malone, Giao N. 
Nguyen, Robert Owens, Susan Ragland, and Amy Sweet. 

Mississippi: 
James Elgas, Barbara Haynes, John K. Needham, Norman J. Rabkin, Anna 
Russell, Gary Shepard, Erin Stockdale, and Ryan Stott. 

New Jersey: 
Gene Aloise, Kisha Clark, Diana Glod, Alexander Lawrence Jr., Nancy 
Lueke, Tarunkant Mithani, Tahra Nichols, Nitin Rao, and David Wise. 

New York: 
John H. Davis, Christopher Farrell, Susan Fleming, Emily Larson, Dave 
Maurer, Tiffany Mostert, Summer Pachman, Frank Putallaz, Ronald 
Stouffer, and Yee Wong. 

North Carolina: 
Cornelia Ashby, Sandra Baxter, Bonnie Derby, Terrell Dorn, Steve Fox, 
Bryon Gordon, Fred Harrison, Charlene Johnson, Leslie Locke, Anthony 
Patterson, and Paula Rascona. 

Ohio: 
Debra Cottrell, Matthew Drerup, Laura Jezewski, Bill J. Keller, 
Sanford Reigle, George A. Scott, Brian Smith, David C. Trimble, 
Lindsay Welter, and Doris Yanger. 

Pennsylvania: 
Eleanor Cambridge, Mark Gaffigan, John Healey, Phillip Herr, Shirin 
Hormozi, Richard Jorgenson, Richard Mayfield, James Noel, Jodi M. 
Prosser, Andrea E. Richardson, and MaryLynn Sergent. 

Texas: 
Fred Berry, Danny Burton, James Cooksey, K. Eric Essig, Erinn 
Flanagan, Ken Howard, Michael O'Neill, Gloria Proa, Bob Robinson, and 
Lorelei St. James. 

[End of section] 

Related GAO Products: 

State and Local Governments' Fiscal Outlook March 2010 Update. 
[hyperlink, http://www.gao.gov/products/GAO-10-358]. Washington, D.C.: 
March 2, 2010. 

Recovery Act: Project Selection and Starts Are Influenced by Certain 
Federal Requirements and Other Factors. [hyperlink, 
http://www.gao.gov/products/GAO-10-383]. Washington, D.C.: February 
10, 2010. 

Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting 
and Enforcement Improvements Are Needed. [hyperlink, 
http://www.gao.gov/products/GAO-10-349]. Washington, D.C.: February 
10, 2010. 

Status of the Small Business Administration's Implementation of 
Administrative Provisions in the American Recovery and Reinvestment 
Act of 2009. [hyperlink, http://www.gao.gov/products/GAO-10-298R]. 
Washington, D.C.: January 19, 2010. 

Recovery Act: States' Use of Highway and Transit Funds and Efforts to 
Meet the Act's Requirements. [hyperlink, 
http://www.gao.gov/products/GAO-10-312T]. Washington, D.C.: December 
10, 2009. 

Recovery Act: Status of States' and Localities' Use of Funds and 
Efforts to Ensure Accountability. [hyperlink, 
http://www.gao.gov/products/GAO-10-231]. Washington, D.C.: December 
10, 2009. 

Recovery Act: Status of States' and Localities' Use of Funds and 
Efforts to Ensure Accountability (Appendixes). [hyperlink, 
http://www.gao.gov/products/GAO-10-232SP]. Washington, D.C.: December 
10, 2009. 

Recovery Act: Planned Efforts and Challenges in Evaluating Compliance 
with Maintenance of Effort and Similar Provisions. [hyperlink, 
http://www.gao.gov/products/GAO-10-247]. Washington, D.C.: November 
30, 2009. 

Recovery Act: Contract Oversight Activities of the Recovery 
Accountability and Transparency Board and Observations on Contract 
Spending in Selected States. [hyperlink, 
http://www.gao.gov/products/GAO-10-216R]. Washington, D.C.: November 
30, 2009. 

Recovery Act: Recipient Reported Jobs Data Provide Some Insight into 
Use of Recovery Act Funding, but Data Quality and Reporting Issues 
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-223]. 
Washington, D.C.: November 19, 2009. 

Recovery Act: Recipient Reported Jobs Data Provide Some Insight into 
Use of Recovery Act Funding, but Data Quality and Reporting Issues 
Need Attention. [hyperlink, http://www.gao.gov/products/GAO-10-224T]. 
Washington, D.C.: November 19, 2009. 

Recovery Act: Agencies Are Addressing Broadband Program Challenges, 
but Actions Are Needed to Improve Implementation. [hyperlink, 
http://www.gao.gov/products/GAO-10-80]. Washington, D.C.: November 16, 
2009. 

Recovery Act: Preliminary Observations on the Implementation of 
Broadband Programs. [hyperlink, 
http://www.gao.gov/products/GAO-10-192T]. Washington, D.C.: October 
27, 2009. 

First-Time Homebuyer Tax Credit: Taxpayers' Use of the Credit and 
Implementation and Compliance Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-10-166T]. Washington, D.C.: October 
22, 2009. 

High Speed Passenger Rail: Developing Viable High Speed Rail Projects 
under the Recovery Act and Beyond. [hyperlink, 
http://www.gao.gov/products/GAO-10-162T]. Washington, D.C.: October 
14, 2009. 

Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer 
Service and Enforcement for the 2010 Filing Season. [hyperlink, 
http://www.gao.gov/products/GAO-09-1026]. Washington, D.C.: September 
23, 2009. 

Recovery Act: Funds Continue to Provide Fiscal Relief to States and 
Localities, While Accountability and Reporting Challenges Need to Be 
Fully Addressed. [hyperlink, http://www.gao.gov/products/GAO-09-1016]. 
Washington, D.C.: September 23, 2009. 

Recovery Act: Funds Continue to Provide Fiscal Relief to States and 
Localities, While Accountability and Reporting Challenges Need to Be 
Fully Addressed (Appendixes). [hyperlink, 
http://www.gao.gov/products/GAO-09-1017SP]. Washington, D.C.: 
September 23, 2009. 

Recovery Act: States' and Localities' Current and Planned Uses of 
Funds While Facing Fiscal Stresses. [hyperlink, 
http://www.gao.gov/products/GAO-09-908T]. Washington, D.C.: September 
10, 2009. 

Recovery Act: States' Use of Highway Infrastructure Funds and 
Compliance with the Act's Requirements. [hyperlink, 
http://www.gao.gov/products/GAO-09-926T]. Washington, D.C.: July 31, 
2009. 

Unemployment Insurance Measures Included in the American Recovery and 
Reinvestment Act of 2009, as of July 2009. [hyperlink, 
http://www.gao.gov/products/GAO-09-942R]. Washington, D.C.: July 27, 
2009. 

Grants Management: Grants.gov Has Systematic Weaknesses That Require 
Attention. [hyperlink, http://www.gao.gov/products/GAO-09-589]. 
Washington, D.C.: July 15, 2009. 

Recovery Act: States' and Localities' Current and Planned Uses of 
Funds While Facing Fiscal Stresses. [hyperlink, 
http://www.gao.gov/products/GAO-09-829]. Washington, D.C.: July 8, 
2009. 

Recovery Act: States' and Localities' Current and Planned Uses of 
Funds While Facing Fiscal Stresses. [hyperlink, 
http://www.gao.gov/products/GAO-09-831T]. Washington, D.C.: July 8, 
2009. 

Recovery Act: States' and Localities' Current and Planned Uses of 
Funds While Facing Fiscal Stresses (Appendixes). [hyperlink, 
http://www.gao.gov/products/GAO-09-830SP]. Washington, D.C.: July 8, 
2009. 

Recovery Act: The Department of Transportation Followed Key Federal 
Requirements in Developing Selection Criteria for Its Supplemental 
Discretionary Grants Program. [hyperlink, 
http://www.gao.gov/products/GAO-09-785R]. Washington, D.C.: June 30, 
2009. 

High Speed Passenger Rail: Effectively Using Recovery Act Funds for 
High Speed Rail Projects. [hyperlink, 
http://www.gao.gov/products/GAO-09-786T]. Washington, D.C.: June 23, 
2009. 

Recovery Act: GAO's Efforts to Work with the Accountability Community 
to Help Ensure Effective and Efficient Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-09-672T]. Washington, D.C.: May 5, 
2009. 

Recovery Act: Consistent Policies Needed to Ensure Equal Consideration 
of Grant Applications. [hyperlink, 
http://www.gao.gov/products/GAO-09-590R]. Washington, D.C.: April 29, 
2009. 

Recovery Act: Initial Results on States' Use of and Accountability for 
Transportation Funds. [hyperlink, 
http://www.gao.gov/products/GAO-09-597T]. Washington, D.C.: April 29, 
2009. 

Recovery Act: As Initial Implementation Unfolds in States and 
Localities, Continued Attention to Accountability Issues Is Essential. 
[hyperlink, http://www.gao.gov/products/GAO-09-580]. Washington, D.C.: 
April 23, 2009. 

Recovery Act: As Initial Implementation Unfolds in States and 
Localities, Continued Attention to Accountability Issues Is Essential. 
[hyperlink, http://www.gao.gov/products/GAO-09-631T]. Washington, 
D.C.: April 23, 2009. 

Small Business Administration's Implementation of Administrative 
Provisions in the American Recovery and Reinvesment Act. [hyperlink, 
http://www.gao.gov/products/GAO-09-507R]. Washington, D.C.: April 16, 
2009. 

American Recovery and Reinvestment Act: GAO's Role in Helping to 
Ensure Accountability and Transparency for Science Funding. 
[hyperlink, http://www.gao.gov/products/GAO-09-515T]. Washington, 
D.C.: March 19, 2009. 

American Recovery and Reinvestment Act: GAO's Role in Helping to 
Ensure Accountability and Transparency. [hyperlink, 
http://www.gao.gov/products/GAO-09-453T]. Washington, D.C.: March 5, 
2009. 

Estimated Adjusted Medicaid Funding Allocations Related to the 
Proposed American Recovery and Reinvestment Act. [hyperlink, 
http://www.gao.gov/products/GAO-09-371R]. Washington, D.C.: February 
5, 2009. 

Estimated Temporary Medicaid Funding Allocations Related to Section 
5001 of the American Recovery and Reinvestment Act. [hyperlink, 
http://www.gao.gov/products/GAO-09-364R]. Washington, D.C.: February 
4, 2009. 

[End of section] 

Footnotes: 

[1] Pub. L. 111-5, 123 Stat. (Feb. 17, 2009). 

[2] GAO, Recovery Act: IRS Quickly Implemented Tax Provisions, but 
Reporting and Enforcement Improvements Are Needed, [hyperlink, 
http://www.gao.gov/products/GAO-10-349] (Washington, D.C.: Feb. 10, 
2010). 

[3] The Recovery Act established the Board to coordinate and conduct 
oversight of covered funds to prevent fraud, waste, and abuse. The 
Board is composed of a chairperson and 12 inspectors general. To carry 
out its oversight mission, the Board employs 47 staff, of whom 19 are 
detailed from agencies throughout the federal government. In addition, 
the Board established three committees drawn from the 12 inspectors 
general on the Board. Recovery Act, div. A, §§ 1521-1525, 123 Stat. 
289-93. 

[4] Recovery Act, div. A, title IX, §901. 

[5] GAO, Recovery Act: Status of States' and Localities' Use of Funds 
and Efforts to Ensure Accountability, [hyperlink, 
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10, 
2009); Recovery Act: Funds Continue to Provide Fiscal Relief to States 
and Localities, While Accountability and Reporting Challenges Need to 
Be Fully Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23, 
2009); Recovery Act: States' and Localities' Current and Planned Uses 
of Funds While Facing Fiscal Stresses, [hyperlink, 
http://www.gao.gov/products/GAO-09-829] (Washington, D.C.: July 8, 
2009); and Recovery Act: As Initial Implementation Unfolds in States 
and Localities, Continued Attention to Accountability Issues Is 
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580] 
(Washington, D.C.: Apr. 23, 2009). 

[6] Selected states are Arizona, California, Colorado, Florida, 
Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New 
Jersey, New York, North Carolina, Ohio, Pennsylvania, and Texas. We 
also visited the District of Columbia. 

[7] Recovery Act, div. A, § 1512, 123 Stat. 287-288. We will refer to 
the quarterly reports required by section 1512 as recipient reports. 

[8] GAO, Recovery Act: Recipient Reported Jobs Data Provide Some 
Insight into Use of Recovery Act Funding, but Data Quality and 
Reporting Issues Need Attention, [hyperlink, 
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19, 
2009). 

[9] The Recovery Act requires recipients of funding under the Act to 
report quarterly on the use of these funds including jobs created or 
retained with Recovery Act funding. The first recipient reports filed 
in October 2009 cover activity from February 2009 through September 
30, 2009. The second quarterly recipient report was filed in January 
2010 and cover activity through December 31, 2009. 

[10] Recovery Act, div. B, title V, § 5001. The Department of Health 
and Human Services (HHS) Office of Inspector General found that HHS's 
Office of the Assistant Secretary of Planning and Evaluation and CMS 
correctly calculated the increased FMAP in accordance with applicable 
provisions of the Recovery Act. See HHS Office of the Inspector 
General, "Review of the Calculations of Temporary Increases in Federal 
Medical Assistance Percentages Under the American Recovery and 
Reinvestment Act," (A-09-09-00075), and "Review of the Calculation of 
Additional Medicaid Funding Awarded Under the American Recovery and 
Reinvestment Act," (A-09-09-00080). 

[11] In order to qualify for the increased FMAP, states generally may 
not apply eligibility standards, methodologies, or procedures that are 
more restrictive than those in effect under their state Medicaid plans 
or waivers on July 1, 2008. See Recovery Act, div. B, title V, 
§5001(f)(1)(A). 

[12] Under the Recovery Act, states are not eligible to receive the 
increased FMAP for certain claims for days during any period in which 
that state has failed to meet the prompt payment requirement under the 
Medicaid statute as applied to those claims. See Recovery Act, div. B, 
title V, §5001(f)(2). Prompt payment requires states to pay 90 percent 
of clean claims from health care practitioners and certain other 
providers within 30 days of receipt and 99 percent of these claims 
within 90 days of receipt. See 42 U.S.C. §1396a(a)(37)(A). 

[13] A state is not eligible for certain elements of increased FMAP if 
any amounts attributable directly or indirectly to them are deposited 
in or credited to a state reserve or rainy-day fund. Recovery Act, 
div. B, title V, §5001(f)(3). 

[14] In some states, political subdivisions--such as cities and 
counties--may be required to help finance the state's share of 
Medicaid spending. Under the Recovery Act, a state that has such 
financing arrangements is not eligible for certain elements of the 
increased FMAP if it requires subdivisions to pay during a quarter of 
the recession adjustment period a greater percentage of the nonfederal 
share than the percentage that would have otherwise been required 
under the state plan on September 30, 2008. See Recovery Act, div. B., 
title V, § 5001(g)(2). The recession adjustment period is the period 
beginning October 1, 2008, and ending December 31, 2010. 

[15] CMS provided the increased FMAP funds to states through a 
separate account in the payment management system, allowing the funds 
to be tracked separately from regular FMAP funds as required by the 
act. 

[16] Nationwide, all but 5 states had begun to draw down increased 
FMAP funds by this date. 

[17] States can continue to draw from their increased FMAP grant 
awards for third and fourth quarter fiscal year 2009 expenditures 
until CMS finalizes the grant awards for these quarters, a process the 
agency has not yet completed. As part of the normal Medicaid grant 
award process, CMS reconciles states' quarterly estimated and actual 
Medicaid expenditures and finalizes the quarterly grants once the 
reconciliation is complete. 

[18] As of January 29, 2010, these State Medicaid Director Letters 
were available on the CMS Web site. See [hyperlink, 
http://www.cms.hhs.gov/SMDL/SMD/list.asp?sortByDID=1a&submit=Go&filterTy
pe=none&filterByDID=-99&sortOrder=ascending&intNumPerPage=10]. 

[19] Arizona initially drew down increased FMAP funds in March 2009, 
but was advised by CMS that it was not eligible for the funds because 
it had changed the frequency of certain Medicaid eligibility 
determinations from 12 to 6 months. CMS determined that this change 
constituted a more restrictive eligibility standard. Therefore, 
Arizona did not actually claim these drawn down funds, or resume 
drawing down additional funds, until the state legislature had 
reversed the change. 

[20] The amount of these funds was more often viewed as sufficient for 
fiscal year 2009. Specifically, 7 states and the District reported 
that the amount of increased FMAP funds was sufficient to maintain 
their Medicaid programs and provide fiscal relief to the state in 
fiscal year 2009, whereas 2 states reported that the funds were 
sufficient for these purposes in fiscal year 2010. 

[21] "Medicaid Enrollment as Percent of Total Population, 2006." The 
Kaiser Family Foundation, statehealthfacts.org. 

[22] The Secretary of Transportation is to withdraw and redistribute 
to eligible states any amount that is not obligated within this time 
frame. 

[23] Transportation improvement programs (TIP), based on the long-
range (20-year) transportation plan, are required for each 
metropolitan urbanized area with a population of more than 50,000 and 
should be designed to achieve an area's transportation goals using 
spending, operating, management, and financial tools. State 
transportation improvement programs (STIP) are similar to TIPs in that 
they identify 4 years of transportation project priorities and must be 
fiscally constrained. STIPs must be approved by both FHWA and FTA. 

[24] Number of grant applications and number of grants awarded are as 
of February 11, 2010. 

[25] As of February 16, 2010, $406.7 million and $25.7 million of the 
$26.7 billion apportioned for highways was transferred from FHWA to 
FTA and DOT's Maritime Administration for transit and other projects, 
respectively, leaving $26.2 billion available for highways. 
Information on amount and the percent of funds obligated does not 
include obligations associated with these transferred funds. 
Specifically, the 95 percent represents the $25.1 billion obligated as 
of February 16, 2010 of the $26.2 billion that remained available for 
highway projects. 

[26] This amount includes nearly $283 million that had been obligated 
as of February 16, 2010 from the total funds that were transferred 
from FHWA to FTA, but this funding is not included in the Recovery Act 
public transportation appropriations of $8.4 billion. 

[27] Recovery Act funding for public transportation was distributed 
through three existing FTA formula grant programs, the Transit Capital 
Assistance Program, the Fixed Guideway Infrastructure Investment 
program, and the Capital Investment Grant program, and one 
discretionary grant program, the New Starts program. An FTA grant may 
be limited to one specific project or include multiple individual 
projects. 

[28] DOT has interpreted the term obligation of funds to mean the 
federal government's commitment to pay for the federal share of the 
project. This commitment occurs at the time the federal government 
signs a project agreement (highways) or grant agreement (public 
transportation). 

[29] States and transit agencies make payments to contractors for 
completed work, and FHWA or FTA, through the U.S. Department of the 
Treasury, pays the state or transit agency after it pays out of its 
own funds for project-related purposes. All reimbursements under 
public transportation programs funded through the Recovery Act must be 
completed by September 30, 2015, except those for administration, 
management, and oversight purposes. 

[30] Economically distressed areas are defined by the Public Works and 
Economic Development Act of 1965, as amended. To qualify as an 
economically distressed area, an area must (1) have a per capita 
income of 80 percent or less of the national average; (2) have an 
unemployment rate that is, for the most recent 24-month period for 
which data are available, at least 1 percent greater than the national 
average unemployment rate; or (3) be an area that the Secretary of 
Commerce determines has experienced or is about to experience a 
"special need" arising from actual or threatened severe unemployment 
or economic adjustment problems resulting from severe short-or long-
term changes in economic conditions. In response to our 
recommendation, FHWA, in consultation with the Department of Commerce, 
issued guidance on August 24, 2009, that provided criteria for states 
to use for designating special need areas for the purpose of Recovery 
Act funding. The criteria align closely with special need criteria 
used by the Department of Commerce's Economic Development 
Administration in its own grant programs, including factors such as 
actual or threatened business closures (including job loss 
thresholds), military base closures, and natural disasters or 
emergencies. FHWA issued "questions and answers" on November 12, 2009, 
to further address implementation questions. 

[31] Each state used FHWA's special need criterion that relates to 
severe job dislocation resulting from actual or threatened business 
closure or restructuring. These states have been notified of FHWA's 
determination and advised that in order to be consistent with the FHWA 
guidance, the states must have data that show a connection between 
demonstrated severe job losses and actual, identified firm closures 
and restructurings. FHWA continues to work with the states wishing to 
use the special need provision of the Public Works Act and will review 
any additional data submissions from the states for consistency with 
the statute and FHWA guidance. We will continue to monitor this issue 
in our subsequent Recovery Act bimonthly reports. 

[32] A state that does not meet its level of effort will be prohibited 
from participating in the redistribution of federal-aid highway 
obligation authority scheduled to occur in August 2011. 

[33] GAO, Federal-Aid Highways: Trends, Effect on State Spending, and 
Options for Future Program Design, [hyperlink, 
http://www.gao.gov/products/GAO-04-802] (Washington, D.C.: Aug. 31, 
2004). We have found that the preponderance of evidence suggests that 
increasing federal highway funds influences states and localities to 
substitute federal funds for funds they otherwise would have spent on 
highways. In 2004 we estimated that during the 1983 through 2000 
period, states used roughly half of the increases in federal highway 
funds to substitute for funding they would otherwise have spent from 
their own resources, and that the rate of substitution increased 
during the 1990s. The federal-aid highway program creates the 
opportunity for substitution because states typically spend 
substantially more than the amount required to meet federal matching 
requirements. As a consequence, when federal funding increases, states 
are able to reduce their own highway spending and still obtain 
increased federal funds. 

[34] Recovery Act, div. A, title XII, § 1201(a). 

[35] According to its February 2010 guidance, DOT determined that the 
Recovery Act requires states to maintain their level of effort for 
each individual covered program (e.g., highways, transit) rather than 
maintaining a total level of effort for all covered programs. 

[36] GAO, Physical Infrastructure: Challenges and Investment Options 
for the Nation's Infrastructure, [hyperlink, 
http://www.gao.gov/products/GAO-08-763T] (Washington, D.C.: May 8, 
2008). 

[37] Department of Transportation, Office of Inspector General, DOT's 
Implementation of the American Recovery and Reinvestment Act: 
Continued Management Attention Is Needed to Address Oversight 
Vulnerabilities, MH-2010-024 (Washington, D.C., Nov. 30, 2009). 

[38] Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) 
to transfer funds made available for transit projects to FTA. For FHWA 
to transfer Recovery Act highway funds to FTA, a metropolitan planning 
organization must request the transfer and have a specific transit 
project identified that will receive the funds. Once the transfer 
request has been made, but before funds are officially transferred, 
FTA will include the transit project receiving the funds in its grant 
management system and will report that it is a pending project. The 
funds are officially transferred from FHWA to FTA when the U.S. 
Treasury executes the transfer. 

[39] While $53.6 billion was appropriated for the State Fiscal 
Stabilization Fund in its entirety, $5 billion of these funds are 
reserved for specific competitive grants, leaving approximately $48.6 
billion for the U.S. Department of Education to allocate among the 
states as State Fiscal Stabilization Fund formula grants. 

[40] The percentages do not add to 100 percent due to rounding. L. 
Zhou, Revenues and Expenditures for Public Elementary and Secondary 
Education: School Year 2006-07 (Fiscal Year 2007) (NCES 2009 337) 
(Washington D.C.: National Center for Education Statistics, U.S. 
Department of Education), [hyperlink, 
http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2009337] (accessed 
Nov. 16. 2009). 

[41] For more details on how the budget situations of LEAs varied 
across states, see GAO, Recovery Act: Status of States' and 
Localities' Use of Funds and Efforts to Ensure Accountability, 
[hyperlink, http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: 
Dec. 10, 2009). 

[42] The District of Columbia had not drawn down Recovery Act funds as 
of January 22, 2010. District of Columbia officials told us that they 
were making an effort to strengthen accountability systems for federal 
education funds prior to drawing down funds. In addition, officials 
told us that many LEAs had carryover funds from prior years that had 
not been spent. In the District, LEAs are reimbursed for approved uses 
of federal funds, and LEAs may have obligated some Recovery Act funds 
but have not yet been reimbursed by the District. 

[43] A Florida official attributed staff reductions at Florida LEAs at 
least partially to an overall decline in student enrollment, requiring 
fewer teachers in the 2009-2010 school year. 

[44] Education's cash management rules require LEAs to promptly remit 
interest earned on cash advances for any amounts exceeding $100, and 
to do so at least quarterly. 

[45] Additionally, in January, 2010, CDE issued guidance to LEAs 
underscoring the requirement to remit interest earned on federal cash 
balances at least quarterly and including detailed methodology on how 
the interest should be calculated. 

[46] U.S. Department of Education, "State Educational Agencies' 
Implementation of Federal Cash Management Requirements under the 
American Recovery and Reinvestment Act, Alert Memorandum," ED-OIG/ 
L09J0007 (Washington, D.C., Oct. 21, 2009). 

[47] For a state to be eligible to receive a waiver, the percentage of 
total state revenues used to support education cannot decrease from 
the previous year. Waivers are granted based on a state's total level 
of support for education as a percentage of state revenue, while MOE 
levels are based on a selected measure of state spending for education. 

[48] For more details on the MOE requirements, see GAO, Recovery Act: 
Planned Efforts and Challenges in Evaluating Compliance with 
Maintenance of Effort and Similar Provisions, [hyperlink, 
http://www.gao.gov/products/GAO-10-247] (Washington, D.C.: Nov. 30, 
2009). 

[49] For more details on subrecipient monitoring, see the recipient 
reporting section of this report, and GAO, Recovery Act: Funds 
Continue to Provide Fiscal Relief to States and Localities, While 
Accountability and Reporting Challenges Need to Be Fully Addressed, 
[hyperlink, http://www.gao.gov/products/GAO-09-1016] (Washington, 
D.C.: Sept. 23, 2009). 

[50] HUD allocated Capital Fund formula dollars from the Recovery Act 
to 3,134 public housing agencies, but obligated funds to 3,122 housing 
agencies. According to HUD officials, 12 housing agencies chose not to 
accept Recovery Act funding or no longer had eligible public housing 
projects that could utilize the funds. 

[51] HUD Office of Inspector General, Review of American Recovery and 
Reinvestment Act Formula Allocations, 2009-FO-0006 (Washington, D.C.: 
September 25, 2009). 

[52] Newark Housing Authority in New Jersey planned to rehabilitate 
493 vacant units, Philadelphia Housing Authority planned to 
rehabilitate 410 vacant units, San Francisco Housing Authority planned 
to rehabilitate 171 vacant units, Cuyahoga Metropolitan Housing 
Authority in Ohio planned to rehabilitate 161 vacant units, and 
Chicago Housing Authority planned to rehabilitate 142 vacant units. 

[53] We visited 28 housing agencies that applied for competitive 
grants, including 18 that received competitive grant awards. 

[54] HUD Office of Inspector General, The Housing Authority of the 
City of Eloy Lacked Capacity to Administer Its Recovery Act Capital 
Fund Grant Without Outside Assistance, 2009-LA-1021 (Sept. 25, 2009). 

[55] HUD Office of Inspector General, The East St. Louis Housing 
Authority Had Weaknesses That Could Affect Its Capacity to Administer 
Its Recovery Act Funding, 2009-KC-1801 (Sept. 18, 2009). 

[56] HUD developed the Public Housing Assessment System to evaluate 
the overall condition of housing agencies and to measure performance 
in major operational areas of the public housing program. These 
include financial condition, management operations, and physical 
condition of the housing agencies' public housing programs. Housing 
agencies that are deficient in one or more of these areas are 
designated as troubled performers by HUD and are statutorily subject 
to increased monitoring. 

[57] According to HUD officials, HUD staff have completed 
approximately 50 additional remote reviews, but these reports had not 
yet been uploaded to HUD's tracking system and therefore are not 
reflected in these figures. 

[58] HUD officials noted that these 985 grants accounted for 90 
percent of the funds awarded. 

[59] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to 
States and Localities, While Accountability and Reporting Challenges 
Need to Be Fully Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23, 
2009). 

[60] In comparison, HUD obligated its fiscal year 2008 capital funds 
in June 2008. 

[61] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[62] The FederalReporting.gov system was created and managed by OMB 
and the Recovery Accountability and Transparency Board for all 
Recovery Act recipients to report on the nature of projects undertaken 
with Recovery Act funds and on job creation estimates. 

[63] According to HUD officials, recipients have been able to 
deactivate reports in FederalReporting.gov for both reporting cycles. 
However, once the October 2009 reports were published on the 
Recovery.gov Web site, recipients were no longer able to deactivate 
those recipient reports in FederalReporting.gov or cause the reports 
to be taken down. In contrast, for the current reporting cycle 
Recovery.gov will be refreshed every 2 weeks beginning February 10, 
2010, permitting regular updates from FederalReporting.gov, including 
the removal of deactivated reports, due to the newly instituted 
continuous corrections period. Despite this change, recipients remain 
unable to deactivate or modify reports in FederalReporting.gov from 
the October 2009 recipient reporting period that were already 
published in Recovery.gov. 

[64] Section 1609 of the Recovery Act requires that adequate resources 
be devoted to ensuring that applicable environmental reviews under the 
National Environmental Policy Act (NEPA) are completed expeditiously 
and that the shortest existing applicable process under NEPA shall be 
used. 

[65] See GAO, Recovery Act: States' and Localities' Current and 
Planned Uses of Funds While Facing Fiscal Stress, [hyperlink, 
http://www.gao.gov/products/GAO-09-829] (Washington D.C.: July 8, 
2009). 

[66] Our discussion on weatherization is primarily limited to the 16 
states and the District of Columbia that are the focus of this report. 

[67] See GAO, Recovery Act: Status of States' and Localities' Use of 
Funds and Efforts to Ensure Accountability, [hyperlink, 
http://www.gao.gov/products/GAO-10-231] (Washington D.C.: Dec. 10, 
2009). 

[68] See [hyperlink, http://www.gao.gov/products/GAO-10-231]. 

[69] The quarter ending December 31, 2009, is the most recent quarter 
for which the states are required to report data under the Recovery 
Act. DOE officials noted that the states and territories also have 
access to annually appropriated funds for weatherization activities. 

[70] The Davis Bacon Act is codified at 40 U.S.C. § 3141 et seq. The 
Recovery Act's Davis-Bacon provisions are located at section 1606 of 
the act. 

[71] Pub. L. No. 89-665, 80 Stat. 915 (codified as amended at 16 
U.S.C. § 470 et seq.). 

[72] In July 2009, DOE and Labor issued a joint memorandum to 
Weatherization Assistance Program grantees authorizing them to begin 
weatherizing homes using Recovery Act funds, provided they pay 
construction workers at least Labor's wage rates for residential 
construction, or an appropriate alternative category, and compensate 
workers for any differences if Labor establishes a higher local 
prevailing wage rate for weatherization activities. 

[73] According to Labor officials and guidance provided on its Web 
site, individuals who meet Labor's definition of apprentices and 
trainees may be paid a percentage of the journeyman rate on the wage 
determination. To do so, however, these individuals must be 
participating in a program that has been registered with Labor or with 
a State Apprenticeship Agency recognized by Labor. 

[74] The wage rates were revised in December 2009. 

[75] DOE officials told us in January 2010 that they were in the 
process of developing an agreement with the Advisory Council on 
Historic Preservation and the National Conference of State Historic 
Preservation Officers to create a manageable framework for 
streamlining DOE's compliance with the requirements of the National 
Historic Preservation Act. 

[76] See, for example, DOE, "Weatherization Program Notice 09-1B" 
(Mar. 12, 2009). 

[77] Service providers weatherize homes; local agencies manage service 
providers but are sometimes qualified to provide weatherization 
services themselves. 

[78] The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-
7507), requires that each state, local government, or nonprofit 
organization that expends at least a certain amount per year in 
federal awards--currently set at $500,000 by OMB--must have a Single 
Audit conducted for that year subject to applicable requirements, 
which are generally set out in OMB Circular No. A-133, Audits of 
States, Local Governments and Non-profit Organizations (June 27, 
2003). If an entity expends federal awards under only one federal 
program and when federal laws, regulations, or grant agreements do not 
require a financial statement audit of the entity, the entity may 
elect to have an audit of that program. 

[79] A November 3, 2009, press release issued by the State of 
California Office of the Inspector General noted serious problems with 
the Economic Opportunity Council of San Francisco, including financial 
management deficiencies. 

[80] The General Services Administration maintains the Excluded 
Parties List System, which identifies parties excluded from receiving 
federal contracts, certain subcontracts, and certain other assistance 
and benefits. In GAO-09-174, Excluded Parties List System: Suspended 
and Debarred Businesses and Individuals Improperly Receive Federal 
Funds, we recommended that the General Services Administration take 
actions to strengthen controls over the system. 

[81] DOE collects data reported by states and territories on the 
number of homes weatherized and on state and territory expenditures of 
funds on a quarterly basis. The data reported by states as of a 
certain date (such as for the quarter ending December 31, 2009) can 
change as states finalize figures for homes weatherized and funds 
spent. For example, in January, 2010, DOE reported that about 9,100 
homes had been weatherized as of December 31, 2009. DOE originally 
planned to weatherize about 593,000 homes with Recovery Act funding by 
March 31, 2012. A DOE report issued on February 24, 2010, indicated 
that 30,252 homes had been weatherized nationwide as of December 31, 
2009. 

[82] According to the guidance issued by OMB on December 18, 2009, the 
estimate of the number of jobs created or retained by the Recovery Act 
should now be expressed as full-time equivalents (FTE). 

[83] For purposes of the Recovery Act funds, the period of "summer" is 
from May 1 through September 30. 

[84] H.R. Rep. No. 111-16, at 448 (2009). 

[85] Department of Labor, Training and Employment Guidance Letter No. 
14-08 (Mar. 18, 2009). 

[86] Under WIA, local areas must ensure that a minimum of 30 percent 
of funds, including Recovery Act funds, are used for serving out-of-
school youth. 

[87] The summer employment completion rate represents the percentage 
of youth who completed their summer work experience without dropping 
out prior to the scheduled end date of the work experience. 

[88] Department of Labor, Attachment B-Training and Employment 
Guidance Letter No. 17-05 (Feb. 17, 2006). 

[89] [hyperlink, http://www.gao.gov/products/GAO-10-223]. 

[90] OMB Memorandum, M-10-08, Updated Guidance on the American 
Recovery and Reinvestment Act - Data Quality, Non-Reporting 
Recipients, and Reporting of Job Estimates (Dec. 18, 2009). 

[91] The TAS codes identify the Recovery Act funding program source. 
The two left most characters of each TAS code form a data element, 
which is identical with the two-digit numerical code used in the 
federal budgetary process to identify major federal organizations. The 
CFDA is a governmentwide compendium of federal programs, projects, 
services, and activities that provide assistance or benefits. It 
contains assistance programs administered by departments. Each program 
is assigned a unique number where the first two digits represent the 
funding agency. 

[92] An award key is a derived field that identifies an award. This 
field is derived using a distinct combination of the following 
component fields: Award_type, Prime_DUNS, Award_id and Order_number. 
Board representatives indicated that while the same award_key value 
for a specific project could be assigned from one quarter to the next, 
it could not be presumed that this would always be the case. 

[93] The final report key shows the status as a final report. It 
indicates that this is the final report and there will be no further 
quarterly reports. 

[94] A DUNS number is a unique nine-digit sequence recognized as the 
universal standard for identifying and keeping track of 100 million 
businesses worldwide. The Central Contractor Registration (CCR) system 
is a secure, single repository of vendor data used governmentwide. 

[95] Last quarter LEAs were generally required to calculate a baseline 
number of hours worked, which was a hypothetical number of hours that 
would have been worked in the absence of Recovery Act funds. LEA 
officials were to use this baseline number to determine the number of 
hours created or retained and to subsequently derive the number of 
FTEs for job estimates. 

[96] New Jersey officials told us they plan to submit finalized 
figures during the continual correction period. 

[97] Massachusetts' reported data also reflect the updated guidance 
shift to the quarterly reporting of jobs data even though the LEAs had 
reported cumulative data on FTEs funded by the Recovery Act. The 
Massachusetts Department of Education subtracted out FTEs reported in 
the first quarter to compute a quarterly figure. 

[98] Officials at the Arizona Department of Education told us they did 
not follow OMB's December 18 guidance for the IDEA Part B and ESEA, 
Title I recipient reports, but planned to ask LEAs to submit 
corrections during February or March. Officials at the Governor's 
Office of Economic Recovery in Arizona, the prime recipient for SFSF, 
told us they had followed the December 18 guidance for SFSF recipient 
reports. 

[99] Colorado Department of Education officials determined, due to the 
lateness of the December 18 guidance, it was not possible to perform 
another statewide collection of FTE data prior to the submission 
deadlines. Department officials said they are following the December 
guidance for the third reporting round and believe the new guidance 
will increase the consistency of state data. Colorado is directing its 
SFSF funds to institutions of higher education and not LEAs. The SFSF 
recipient reports were prepared using OMB's December 18th guidance. 

[100] HUD's data quality process proposal defines a significant error 
in the fields award amount, total received, total spent, and jobs as 
any entry that varies from a HUD comparison source value taken from 
corresponding HUD Office of Chief Financial Officer award records for 
obligations and disbursements. 

[101] The department's operating administrations overseeing the 
implementation of the Recovery Act include the Federal Aviation 
Administration, Federal Highway Administration, Federal Railroad 
Administration, Federal Transit Administration, and Maritime 
Administration. 

[102] U.S. Department of Health and Human Services, Office of 
Inspector General, Summary of Inspectors General Reports on Federal 
Agencies' Data-quality Review Processes, No. A-09-10-01002 (November 
2009). 

[103] OMB Circular No. A-133 sets out implementing guidelines for the 
Single Audit and defines roles and responsibilities related to the 
implementation of the Single Audit Act, including detailed 
instructions to auditors on how to determine which federal programs 
are to be audited for compliance with program requirements in a 
particular year at a given grantee. 

[104] The Compliance Supplement is issued annually to guide auditors 
on what program requirements should be tested for programs audited as 
part of the Single Audit. 

[105] Single Audit Act requires that recipients submit their financial 
reporting packages, including the Single Audit report, to the federal 
government no later than 9 months after the end of the period being 
audited. As a result, an audited entity may not receive feedback 
needed to correct an identified internal control or compliance 
weakness until the latter part of the subsequent fiscal year. 

[106] Each award recipient expending more than $50 million is assigned 
a cognizant agency for audit. Generally, the cognizant agency for 
audit is the federal awarding agency that provides the predominant 
amount of direct funding to a recipient unless OMB assigns this 
responsibility to another agency. Some of the responsibilities of the 
cognizant agency include performing quality control reviews, 
considering auditee requests for extensions, and coordinating a 
management decision for audit findings that affect federal programs of 
more than one agency. 

[107] OMB, Payments to State Grantees for Administrative Costs of 
Recovery Act Activities, M-09-18 (Washington, D.C.: May 11, 2009), and 
OMB, Payments to State Grantees for their Administrative Costs for 
Recovery Act Funding - Alternative Allocation Methodologies, M-10-03 
(Washington, D.C.: Oct. 13, 2009). 

[108] The following 16 states volunteered to participate in the 
Project: Alaska, California, Colorado, Florida, Georgia, Louisiana, 
Maine, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Dakota, 
Tennessee, Texas, and Virginia. 

[109] A material weakness is a significant deficiency or combination 
of significant deficiencies, which results in more than a remote 
likelihood that a material misstatement of the subject matter will not 
be prevented or detected. 

[110] FraudNet is a hotline GAO created in 1979 to solicit help from 
the public in combating fraud, waste, abuse, mismanagement, and 
criminal activities occurring in federal programs. We have 
specifically urged private citizens, government workers, contractors, 
and others to use FraudNet to report concerns about Recovery Act 
spending. FraudNet is primarily an Internet-based operation that 
provides a secure means for individuals to confidentially communicate 
such concerns. 

[111] According to Board staff, the government-managed hotline was set 
up using a previously established cooperative agreement between the 
Department of Justice and Louisiana State University. 

[112] According to the Board staff, the majority of the complaints 
received via the fraud hotline did not contain any actionable 
information; for example, some complaints contained a generalized 
comment on the Recovery Act rather than any specific allegation of 
wrongdoing. The Board refers those that are actionable to the 
appropriate inspector general when there is a specific allegation of 
wrongdoing or multiple factors indicate a possible area of risk. 

[113] The Excluded Parties List System, which is maintained by the 
General Services Administration, is a database listing the parties 
suspended, proposed for debarment, debarred, declared ineligible, or 
excluded or disqualified from government contracting. 

[114] The General Services Administration Inspector General has issued 
38 reports on Recovery Act-related issues as of December 2009; 
however, 36 of the 38 reports were not published on Recovery.gov 
because they contain proprietary information. 

[115] The National Association of State Auditors, Comptrollers and 
Treasurers is an organization of state auditors, comptrollers, and 
treasurers in the 50 states, the District of Columbia, and U.S. 
territories who deal with the financial management of state government. 

[116] In the District of Columbia, the Inspector General conducts 
program audits as well as investigating allegations of waste, fraud, 
and abuse. 

[117] The following 16 states volunteered to participate in the 
project--Alaska, California, Colorado, Florida, Georgia, Louisiana, 
Maine, Missouri, Nevada, North Carolina, Ohio, Oklahoma, South Dakota, 
Tennessee, Texas, and Virginia. 

[118] See GAO, State and Local Governments' Fiscal Outlook March 2010 
Update, [hyperlink, http://www.gao.gov/products/GAO-10-358] 
(Washington, D.C.: Mar. 2, 2010). This and related products can be 
found at [hyperlink, 
http://gao.gov/special.pubs/longterm/longterm.html]. Our update of the 
state and local model uses data from the National Income and Product 
Accounts of the Bureau of Economic Analysis as the primary data source 
for projections of the level of receipts and expenditures for the 
sector until 2060, based on current and historical spending and 
revenue patterns. We assume that the current set of policies in place 
across federal, state, and local governments remains constant. Actual 
amounts will reflect policy actions taken by state and local 
governments to balance their budgets. Years are calendar years. 

[119] Because the model covers the sector in the aggregate, the fiscal 
outcomes for individual states and localities cannot be captured. 

[120] The explicit definition of our operating balance measure is all 
receipts, excluding funds used for long-term investments, minus 
current expenditures. To develop this measure, we subtract funds used 
to finance longer-term projects--such as investments in buildings and 
roads--from receipts since these funds would not be available to cover 
current expenses. 

[121] The sector's current tax receipts, including income, sales, and 
property tax, totaled $1.3 billion, or about 68 percent of the 
sector's receipts in 2008. 

[122] All of the selected states and the District have at least one 
rainy-day or reserve fund. 

[123] For our December 2009 Recovery Act report, we expanded our focus 
on the use of Recovery Act funds to include 44 local governments. 

[124] GAO, Recovery Act: As Initial Implementation Unfolds in States 
and Localities, Continued Attention to Accountability Issues Is 
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580] 
(Washington, D.C.: Apr. 23, 2009); Recovery Act: States' and 
Localities' Current and Planned Uses of Funds While Facing Fiscal 
Stresses, [hyperlink, http://www.gao.gov/products/GAO-09-829] 
(Washington, D.C.: July 8, 2009); Recovery Act: Funds Continue to 
Provide Fiscal Relief to States and Localities, While Accountability 
and Reporting Challenges Need to Be Fully Addressed, [hyperlink, 
http://www.gao.gov/products/GAO-09-1016] (Washington, D.C.: Sept. 23, 
2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight 
into Use of Recovery Act Funding, but Data Quality and Reporting 
Issues Need Attention, [hyperlink, 
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19, 
2009); Recovery Act: Status of States' and Localities' Use of Funds 
and Efforts to Ensure Accountability, [hyperlink, 
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10, 
2009). 

[125] For more details on the maintenance-of-effort requirements, see 
GAO, Recovery Act: Planned Efforts and Challenges in Evaluating 
Compliance with Maintenance of Effort and Similar Provisions, 
[hyperlink, http://www.gao.gov/products/GAO-10-247] (Washington, D.C.: 
Nov. 30, 2009). 

[126] The Compliance Supplement is issued annually to guide auditors 
on what program requirements should be tested for programs audited as 
part of the Single Audit. 

[127] GAO, Recovery Act: As Initial Implementation Unfolds in States 
and Localities, Continued Attention to Accountability Issues Is 
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580] 
(Washington, D.C.: Apr. 23, 2009). 

[128] Recovery Act, div. A, §1512, 123. We will refer to the quarterly 
reports required by section 1512 as recipient reports. 

[129] GAO, Recovery Act: Recipient Reported Jobs Data Provide Insights 
into Use of Recovery Act Funding, but Data Quality and Reporting 
Issues Need Attention, [hyperlink, 
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19, 
2009). 

[130] The Recovery Act requires recipients of funding from federal 
agencies to report quarterly on jobs created or retained with Recovery 
Act funding. The first recipient reports filed in October 2009 cover 
activity from February through September 30, 2009. This bimonthly 
report incorporates second quarterly recipient report covering 
activity through December 31, 2009. 

[131] The states we visited are Arizona, California, Colorado, 
District of Columbia, Florida, Georgia, Illinois, Iowa, Massachusetts, 
Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, 
Pennsylvania, and Texas. 

[132] GAO, Recovery Act: Status of State's and Localities' Use of 
Funds and Efforts to Ensure Accountability, [hyperlink, 
http://www.gao.gov/products/GAO-10-231] (Washington, D.C.: Dec. 10, 
2009). 

[133] See GAO, Recovery Act: Recipient Reported Jobs Data Provided 
Some Insight into Use of Recovery Act Funding, but Data Quality and 
Reporting Issues Need Attention, [hyperlink, 
http://www.gao.gov/products/GAO-10-223] (Washington, D.C.: Nov. 19, 
2009), for an assessment of recipient report data. 

[134] For the Highway Infrastructure Investment program, the U.S. 
Department of Transportation has interpreted the term "obligation of 
funds" to mean the federal government's commitment to pay for the 
federal share of the project. This commitment occurs at the time the 
federal government signs a project agreement. 

[135] Recovery Act, div. A, title XII, 123 Stat. 206. 

[136] Recovery Act, div. A, title XII, § 1201(a). 

[137] Fixed guideway systems use and occupy a separate right-of-way 
for the exclusive use of public transportation services. They include 
fixed rail, exclusive lanes for buses and other high-occupancy 
vehicles, and other systems. 

[138] Generally, to qualify for funding under the applicable formula 
grant program, an urbanized area must have a fixed guideway system 
that has been in operation for at least 7 years and is more than one 
mile in length. 

[139] Metropolitan planning organizations are federally mandated 
regional organizations, representing local governments and working in 
coordination with state departments of transportation, that are 
responsible for comprehensive transportation planning and programming 
in urbanized areas. MPOs facilitate decision making on regional 
transportation issues, including major capital investment projects and 
priorities. To be eligible for Recovery Act funding, projects must be 
included in the region's Transportation Improvement and State 
Transportation Improvement Programs. 

[140] For the Transit Capital Assistance Program and Fixed Guideway 
Infrastructure Investment program, the U.S. Department of 
Transportation has interpreted the term "obligation of funds" to mean 
the federal government's commitment to pay for the federal share of 
the project. This commitment occurs at the time the federal government 
signs a grant agreement. 

[141] Recovery Act, div. A, title XII, 123 Stat. 210. 

[142] Recovery Act, div. A, title XII, § 1201(a). 

[143] Beginning on July 1, 2009, Education awarded the remaining 
government services funds to states with approved applications. 

[144] Schools identified for corrective action have missed academic 
targets for 4 consecutive years, and schools implementing 
restructuring have missed academic targets for 6 consecutive years. 

[145] For the purposes of this report, "Title I" refers to Title I, 
Part A of the Elementary and Secondary Education Act of 1965 (ESEA), 
as amended. 

[146] LEAs must obligate at least 85 percent of their Recovery Act 
ESEA Title I, Part A funds by September 30, 2010, unless granted a 
waiver, and must obligate all of their funds by September 30, 2011. 
This will be referred to as a carryover limitation. 

[147] For purposes of the Recovery Act funds, the period of "summer" 
is from May 1 through September 30. 

[148] H.R. Rep. No. 111-16, at 448 (2009). 

[149] Department of Labor, Training and Employment Guidance Letter No. 
14-08 (Mar. 18, 2009). 

[End of section] 

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