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Report to the Congress: 

United States Government Accountability Office: 
GAO: 

December 2009: 

Recovery Act: 

Status of States' and Localities' Use of Funds and Efforts to Ensure 
Accountability (Appendixes): 

GAO-10-232SP: 

Contents: 

Appendix I: Arizona: 

Appendix II: California: 

Appendix III: Colorado: 

Appendix IV: District of Columbia: 

Appendix V: Florida: 

Appendix VI: Georgia: 

Appendix VII: Illinois: 

Appendix VIII: Iowa: 

Appendix IX: Massachusetts: 

Appendix X: Michigan: 

Appendix XI: Mississippi: 

Appendix XII: New Jersey: 

Appendix XIII: New York: 

Appendix XIV: North Carolina: 

Appendix XV: Ohio: 

Appendix XVI: Pennsylvania: 

Appendix XVII: Texas: 

Appendix XVIII: Program Descriptions: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

[End of section] 

Appendix I: Arizona: 

Overview: 

This appendix summarizes GAO’s work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Arizona. The full report covering all of GAO’s work in 
16 states and the District of Columbia may be found at [hyperlink, 
http://www.gao.gov/recovery]. 

What We Did: 

We reviewed three specific program areas—Education, Highway 
Infrastructure, and Public Housing—funded under the Recovery Act. We 
selected these program areas primarily because they have received and 
are in the process of obligating Recovery Act funds. Our work focused 
on the status of the program area’s funding, how funds are being used, 
and issues that are specific to each program area. (For descriptions 
and requirements of the programs we covered see appendix XVIII of GAO-
10-232SP.) As part of our review, we surveyed a representative sample 
of local educational agencies (LEAs) from across the nation, including 
those in Arizona about their planned uses for Recovery Act funds for 
the State Fiscal Stabilization Fund (SFSF); Title I, Part A of the 
Elementary and Secondary Education Act of 1965 (ESEA), as amended; and 
Part B of the Individuals with Disabilities Education Act (IDEA), as 
amended. We also visited five LEAs and two community colleges. For 
highway infrastructure work, we spoke with the Arizona Department of 
Transportation (ADOT) and the Arizona Division of the Federal Highway 
Administration. We also spoke with representatives of two localities 
receiving Recovery Act funds. As part of our review, we revisited five 
public housing agencies that we reported on earlier in 2009. 

To gain an understanding of the state’s experience in meeting Recovery 
Act reporting requirements, we examined documents prepared by and held 
discussions with, the Governor’s Office of Economic Recovery and ADOT. 
Because Arizona is a centralized reporting state, each prime recipient 
of Recovery Act funds is required to report quarterly on a number of 
measures, including the use of funds and estimates of the number of 
jobs created and retained. The first quarterly reports were due and 
submitted in October 2009. 

Our work in Arizona involved monitoring the state’s fiscal situation 
and, for the first time, visiting two counties to review their use of 
Recovery Act funds. We chose to visit the counties of Maricopa and 
Yavapai because they were among the localities that have experienced 
consequences of the economic downturn. According to county officials, 
the counties are using the funds to provide critical, timely, and 
increased services to households hardest hit by the economic downturn. 

What We Found: 

* Education. Arizona has received approximately $529 million in 
Recovery Act funds as of November 13, 2009, for SFSF, ESEA Title I, 
Part A and IDEA Part B education programs. Arizona used SFSF funds to 
stabilize the state budget; the state distributed funds to kindergarten 
through 12th grade (K-12) LEAs by making a regular state aid payment, 
and the community colleges we visited used the money to restore 
services and to pay instructional salaries. The LEAs are using the 
Recovery Act ESEA Title I, Part A funds to hire new staff and offer 
additional educational programs. They also planned to use the Recovery 
Act IDEA, Part B funds to hire new staff, to support student needs, and 
as seed money for new educational initiatives. 

* Recipient reporting. Arizona used a centralized reporting system to 
report data for the state agencies that received Recovery Act funds 
through the state. Other recipients, such as counties and housing 
authorities that received Recovery Act funds directly from federal 
agencies, submitted their first quarterly recipient reports directly to 
[hyperlink, http://www.federalreporting.gov] (FederalReporting.gov). We 
found that the initial recipient reporting was timely with a few 
ultimately resolved challenges. 

* Arizona’s fiscal condition. The Recovery Act funds have been used in 
Arizona in place of, or to match state contributions for, state-funded 
services such as education. In addition, nonfederal funds freed up as a 
result of the Recovery Act have been used to cover certain Medicaid 
costs. However, despite $750 million in Recovery Act funds in fiscal 
year 2009 and $1.13 billion for fiscal year 2010, Arizona is facing an 
estimated $2 billion state budget shortfall in this fiscal year, 
according to Arizona Joint Legislative Budget Committee staff 
estimates. 

* Counties’ use of Recovery Act funds. Maricopa County reported 
receiving $55 million and Yavapai County received $1 million in 
Recovery Act funds directly from federal agencies. The counties are 
using the funds to expand healthcare and human services in response to 
demand resulting from the economic downturn and to enhance law 
enforcement by upgrading communication and security equipment. 

* Highway Infrastructure Investment. As of October 31, 2009, the U.S. 
Department of Transportation’s Federal Highway Administration has 
obligated $293 million of the $522 million of Recovery Act funds 
apportioned to Arizona. Thirty percent of all apportioned highway funds 
are required to be suballocated to metropolitan and local areas of the 
state under the Recovery Act, and of the $157 million in these 
suballocated funds, only $29 million, or about 18 percent, has been 
obligated. Nevertheless, local officials from two metropolitan planning 
organizations we spoke to and ADOT said that they expect Arizona to 
obligate 100 percent of its apportionment by the March 2010 deadline. 

* Public housing. Arizona has 15 public housing agencies that have 
received about $12 million from the Public Housing Capital Fund. As of 
November 14, 2009, the agencies used funds to complete several projects 
that have improved existing public housing sites, such as 
rehabilitating kitchens, installing new heating and cooling systems, 
and replacing rooftops. Arizona also received one Capital Fund 
competitive grant, which the city of Phoenix Housing plans to combine 
with other funding to renovate 374 housing units. 

Arizona Schools Are Facing Budget Reductions, but Recovery Act Funds 
Helped Prevent Potential Layoffs and Provided Seed Money for 
Educational Programs: 

Arizona has received approximately $529 million in Recovery Act funds 
as of November 13, 2009, for the three Recovery Act education programs 
GAO reviewed (see table 1). The approximately $12 million from Recovery 
Act IDEA, Part B and $17 million from Recovery Act ESEA Title I, Part A 
funds were in addition to the regular IDEA and ESEA Title I funds the 
state received. The state has also drawn down approximately $500 
million in SFSF funds. Due to state budget shortfalls, Arizona used the 
SFSF funds to maintain state education funding levels by making a state 
aid payment for elementary and secondary education (K-12) and freeing 
up state general funds for other needs. In addition, the state’s 
institutions of higher education used the SFSF monies as a 
reimbursement for fiscal year 2009 expenses. 

Table 1: Allocations, Draw Downs, and Expenditures for the Three 
Recovery Act Education Programs Reviewed in Arizona: 

Recovery Act program: SFSF education funds; 
Made available to Arizona[A]: $557,352,452; 
Drawn down by Arizona: $499,519,094; 
Expenditures by subrecipients[B]: $499,517,793. 

Recovery Act program: ESEA Title I, Part A; 
Made available to Arizona[A]: $195,087,321; 
Drawn down by Arizona: $17,002,033; 
Expenditures by subrecipients[B]: $13,460,217. 

Recovery Act program: IDEA Part B; 
Made available to Arizona[A]: $184,178,924; 
Drawn down by Arizona: $11,986,711; 
Expenditures by subrecipients[B]: $10,844,641. 

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

[A] Data as of November 6, 2009. 

[B] Data as of November 13, 2009. 

[End of table] 

Arizona used SFSF funds to stabilize the state budget and distributed 
funds to K-12 LEAs equal to one regular state education aid payment. We 
visited five LEAs for this report, and officials at the LEAs said they 
primarily used the SFSF funds to pay teachers and other district 
staff.[Footnote 1] One LEA also used some of its SFSF funds to pay for 
utilities at its elementary schools. 

Since our discussion of the impact of SFSF on Arizona’s universities in 
our September 2009 report, we also visited two community college 
districts.[Footnote 2] The officials at these community college 
districts stated that they used the SFSF funds as reimbursement for 
fiscal year 2009 instructional salaries, and have plans to use the 
resulting freed-up funds to stabilize their educational programs. Both 
community college districts reported reductions in state education aid 
over the past 2 years, and one expressed concerns regarding additional 
mid-year cuts expected to occur in fiscal year 2010. One community 
college district chose to keep the state funds freed-up by SFSF as a 
cash reserve to prevent having to reduce educational programs if the 
anticipated mid-year cuts occur. The other community college district 
planned to restore educational programs that had been reduced by budget 
cuts in fiscal year 2009. For example, the community college district 
would like to restore summer school course offerings, which had been 
reduced by 35 percent. Officials in neither community college district 
planned to use the funding to begin new educational programs out of 
concern that they would not be able to sustain new programs when the 
SFSF funding was no longer available. 

The LEA officials we interviewed said they are using the additional 
Recovery Act ESEA Title I, Part A funds to hire new staff and offer 
additional educational programs. For example, Arlington Elementary 
District is using its ESEA Title I, Part A money to fund a reading and 
writing specialist to improve students’ performance on the state 
standardized tests. Another LEA, Buckeye Elementary District, is using 
its ESEA Title I, Part A funds to purchase software for a longitudinal 
data system that it had been developing in collaboration with several 
other Arizona districts over the past 10 years to help bring students 
up to grade level or beyond. The LEA did not have the funding to 
purchase the necessary software and train its staff until the Recovery 
Act ESEA Title I, Part A funding was made available. 

The LEAs we visited planned to use the Recovery Act IDEA, Part B funds 
to hire new staff, to support student needs, and as seed money for new 
educational initiatives. For example, several LEAs planned to increase 
the number of specialty teachers, such as a reading specialist, thereby 
serving more students. Buckeye Elementary District plans to use its 
funding to implement a new educational initiative, called Response to 
Intervention. This program targets struggling students and provides 
them with instructional assistants who can address the students’ 
learning needs, thereby preventing them from needing more intensive 
special education services. The Recovery Act IDEA, Part B funds will 
also serve as seed money for this district to purchase software for the 
program and to hire six instructional assistants specializing in 
communication and emotional difficulties. 

In addition to visiting the Arizona LEAs, we surveyed a representative 
sample of LEAs—generally school districts— nationally and in Arizona 
about their planned uses of Recovery Act funds. Table 2 shows Arizona 
and national GAO survey results on the estimated percentages of LEAs 
that (1) plan to use more than 50 percent of their Recovery Act funds 
from three education programs to retain staff, (2) anticipate job 
losses even with SFSF monies, and (3) reported a total funding decrease 
of 5 percent or more since last school year. In Arizona, an estimated 
61 percent of LEAs said they planned to use more than 50 percent of 
their SFSF funds to retain staff. Because the SFSF funds were 
distributed to LEAs to restore a shortfall in state education aid, 
these funds did not represent increased funding levels for LEAs, and an 
estimated 34 percent of Arizona LEAs anticipated they would lose staff, 
even with SFSF funds. 

Table 2: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: IDEA funds; 
Estimated percentages of LEAs, Arizona: 29%; 
Estimated percentages of LEAs, Nation: 19%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: Title I funds; 
Estimated percentages of LEAs, Arizona: 23%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: SFSF funds; 
Estimated percentages of LEAs, Arizona: 61%; 
Estimated percentages of LEAs, Nation: 63%. 

Responses from GAO survey: Anticipated job losses, even with SFSF 
funds; 
Estimated percentages of LEAs, Arizona: 34%; 
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs, Arizona: 22%; 
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for Arizona have margins of error, at the 95 
percent confidence level, of plus or minus 13 percentage points or 
less. The nation-wide percentage estimates have a margin of error of 
plus or minus 5 percentage points. 

[End of table] 

Because in Arizona the SFSF monies did not increase overall K-12 
education funding levels but instead were used to make a regular state 
education funding payment, there was confusion among some of the LEAs 
we visited regarding the impact of SFSF on jobs retained. Without the 
state payment, some LEAs we visited said they would have had to reduce 
costs, which could have included reducing jobs. However, because the 
SFSF money was provided instead of state funding, some LEAs were not 
sure how to calculate the number of retained jobs for the Recovery Act’
s Section 1512 recipient reporting. A Governor’s Office of Economic 
Recovery (OER) official said they were concerned that this confusion 
among LEAs could lead to inconsistent jobs data reporting. Therefore, 
the OER did not delegate subrecipient reporting to the LEAs. Instead, 
the OER prepared the report and determined the number of jobs retained 
through SFSF funds using the actual SFSF expenditures and the average 
educational employees’ total compensation that included average salary 
and benefits. 

First Quarterly Recipient Reporting Completed and Met October Reporting 
Deadlines: 

Under the Recovery Act, all prime and subrecipients are to report 
quarterly, with the first report due on October 10, 2009. For the first 
quarterly recipient report, Arizona used a centralized reporting system 
to submit data for Arizona agencies that received Recovery Act funds 
through the state. Other recipients, such as counties and housing 
authorities, that received Recovery Act funds directly from federal 
agencies, submitted their first quarterly recipient reports directly to 
the respective federal agencies that provided those funds. Under both 
methods, data were submitted using FederalReporting.gov. Arizona and 
the other recipients that we spoke with—Yavapai County, Maricopa 
County, and five housing authorities[Footnote 3]—submitted their 
project-level data on time to meet the required October 10, 2009, 
deadline. The data were made available to the public at [hyperlink, 
http://www.recovery.gov] on October 31, 2009. 

Initial Recipient Reporting Was Timely with a Few Ultimately Resolved 
Challenges: 

As stated in our September report,[Footnote 4] Arizona planned to use a 
centralized reporting approach, known as Stimulus 360, for reporting 
the Recovery Act funds that the state received. Using this centralized 
approach, the OER compiled more than 400 Section 1512 reports from its 
18 prime recipients, including all of its state agencies and Arizona’s 
institutions of higher education. Close to half of the recipient 
reports that were submitted, according to OER officials, were for ADOT 
Recovery Act highway projects. According to OER officials, several 
challenges occurred initially while compiling the data for the 
submission deadline. These challenges included such issues as 
recipients not having the required DUNS numbers[Footnote 5] and lengthy 
wait-times for answers from the Office of Management and Budget (OMB) 
help site on technical questions. The OER team was able to overcome 
these issues and submitted its Section 1512 reporting data on time. 
Subsequent to the submission, the OER team continued to make 
corrections and identified data that did not conform to the expected 
data ranges during the time specified by OMB for corrections. OMB 
guidance set aside the period between the initial submission on October 
10, 2009, and October 21, 2009, as the period for prime recipients—in 
this case, the state agencies—to make corrections and revisions, and 
the period between October 22, 2009, and October 29, 2009, as the 
period for the respective federal agencies to make corrections and 
revisions. The OER received corrections and revisions from both the 
state and federal agencies. An OER official said that by working with 
both sources, the data, overall, were more accurate. According to these 
officials, one of the positive outcomes of the reporting process was 
that representatives of many different state agencies developed new and 
improved working relationships by collaborating to help ensure data 
reliability. 

OER officials reported data centrally for each state agency. For 
example, ADOT provided its data to the OER but was responsible for 
calculating the number of jobs retained or created for its Recovery Act 
highway funds. According to one of the contractors we met with, ADOT 
receives detailed information from its contractors on the number of 
employees working on Recovery Act projects, along with the payroll data 
ADOT uses to calculate the full-time equivalents reported to 
FederalReporting.gov. Additionally, ADOT itself had oversight staff on 
these Recovery Act projects who reported on the activities and the 
status of the contractors’ data. On the other hand, OER calculated the 
number of jobs retained or created for SFSF using data from the Arizona 
Department of Education’s data system. 

The two local governments—Maricopa County and Yavapai County—and the 
five housing authorities that we visited received Recovery Act funds 
directly from various federal agencies and did not participate in the 
state’s centralized recipient reporting. County officials submitted the 
counties’ relevant recipient reporting data directly to 
FederalReporting.gov. According to officials from both Maricopa and 
Yavapai counties, they had some initial challenges. For example, 
Maricopa county officials said that it was challenging to report data 
by the October 10, 2009, deadline because the accounting period ended 
only 10 days prior, on September 30, 2009. However, according to both 
counties’ officials, they overcame the challenges and were able to 
submit their report data on time. Officials from the five public 
housing authorities that we met with stated that they were prepared 
with the appropriate information to enter project and job data and did 
successfully submit data on time, but also encountered various access 
and data entry challenges. For example, two of the housing officials 
said that they had difficulty obtaining codes to access the reporting 
system, and one official stated that data were lost during 
transmission. These issues, however, were resolved. Most of the housing 
officials we visited with commented that the recipient reporting was 
not an easy process for the first reporting round, but believe that the 
next reporting round should be easier as a result of this first 
experience. 

Recovery Act Funds Providing Some Relief While Arizona Faces Ongoing 
Fiscal Challenges: 

Arizona has used Recovery Act funds in place of or to match state 
contributions for state-funded services such as education. In addition, 
nonfederal funds freed up as a result of the Recovery Act have been 
used to cover certain Medicaid costs. These offsets of general fund 
spending have allowed the state to reduce anticipated state budget 
shortfalls. However, despite $750 million in Recovery Act funds in 
fiscal year 2009 and $1.13 billion anticipated for fiscal year 2010, 
Arizona is facing a $2 billion state budget shortfall in fiscal year 
2010, according to Arizona Joint Legislative Budget Committee (JLBC) 
staff estimates. 

Facing these fiscal conditions, Recovery Act funding for fiscal year 
2010 provides Arizona with some relief and has prevented deeper state 
agency budget cuts. For example, as of November 20, 2009, the state 
used $320 million of Recovery Act SFSF monies rather than Arizona 
general fund monies to make a payment for K-12 education state aid. 
This kept the average daily balance for the state’s operating fund 
positive in September, according to the JLBC. Actions such as this 
temporarily ease the burdens placed on the state’s general fund and 
help Arizona to continue meeting the needs of its citizens. 

Yavapai and Maricopa Counties Use Recovery Act Funds to Expand 
Services, Especially to Low- and Moderate-Income Households Hit Hardest 
by the Economic Downturn: 

Given that Recovery Act funds now flow to localities, we visited two 
counties in Arizona—Yavapai County and Maricopa County—to review their 
use of these funds.[Footnote 6] Both counties have experienced 
consequences of the economic downturn. According to county officials, 
the two counties have used Recovery Act funds to provide critical, 
timely, and increased services to low- and moderate-income households 
hit hardest by the economic downturn. Recovery Act funds have also 
enhanced law enforcement operations in both counties. 

Yavapai County: 

Spanning more than 8,000 square miles in central Arizona, Yavapai 
County is a sparsely populated rural county with a population of 
215,503 and an unemployment rate of 9.5 percent.[Footnote 7] The county 
government is one of the largest employers in the area, with more than 
1,600 employees. As of November 18, 2009, Yavapai County was awarded 
three Recovery Act grants—two grants were awarded to the Yavapai 
Community Health Center (CHC) for health care and a third was awarded 
to the Sheriff’s Office for public safety (see table 3). 

Table 3: Recovery Act Grants Awarded to Yavapai County Government: 

Category: Health; 
Number of grants: 2; 
Award amounts: $839,326. 

Category: Public safety; 
Number of grants: 1; 
Award amounts: $173,853. 

Category: Total; 
Number of grants: 3; 
Award amounts: $1,013,179. 

Source: GAO presentation of Yavapai County government data. 

[End of table] 

According to county officials, Yavapai CHC has expanded dental care 
services from 2 to 4 days a week, with new staff funded by the $254,166 
Increased Demand for Services Grant;[Footnote 8] and the $585,160 
Capital Improvement Grant,[Footnote 9] along with funds from the county 
and CHC reserves, will be used to build a new health care facility. 

Yavapai County spent more than 50 percent of general fund expenditures 
in fiscal year 2009 on criminal justice. According to county officials, 
its Edward Byrne Memorial Justice Assistance Grant[Footnote 10] (JAG) 
will be used to enhance its law enforcement operations through 
upgrading communication and security equipment. 

Maricopa County: 

Located in south central Arizona, Maricopa County is the state’s most 
heavily populated county with a population of 3,954,598 and an 
unemployment rate of 8.5 percent.[Footnote 11] Phoenix is the county 
seat, and the county is also home to other metropolitan areas, such as 
Mesa, Scottsdale, and Tempe. The county spans more than 9,000 square 
miles. 

As of October 16, 2009, more than $55 million in Recovery Act funds 
have been awarded to Maricopa County across six categories, spanning 
human services, public safety, workforce training, transportation, 
energy and environment, and health care. Table 4 presents a summary of 
the awards. 

Table 4: Recovery Act Grants Awarded to Maricopa County Government: 

Category: Human services[A]; 
Number of grants: 7; 
Award amounts: $19,854,623. 

Category: Public safety; 
Number of grants: 11; 
Award amounts: $15,867,354. 

Category: Workforce training; 
Number of grants: 2; 
Award amounts: $7,874,563. 

Category: Transportation; 
Number of grants: 3; 
Award amounts: $7,219,193. 

Category: Energy and environment; 
Number of grants: 3; 
Award amounts: $3,567,800. 

Category: Health; 
Number of grants: 3; 
Award amounts: $1,006,250. 

Category: Total; 
Number of grants: 29; 
Award amounts: $55,389,783. 

Source: GAO presentation of Maricopa County Government data. 

[A] Human services includes Head Start/Early Head Start, Community 
Services Block Grant, Community Development Block Grant, Homeless 
Prevention Rapid Re-housing, and Weatherization. 

[End of table] 

Recovery Act funds allow the county to provide critical, timely, and 
increased services to low- and moderate-income households hardest hit 
by the economic downturn, according to county officials. In particular, 
county officials have observed an increase in demand for human services 
programs, such as education, as well as workforce training programs. 
According to county officials, Recovery Act funds have allowed the 
county to expand some services to residents, particularly in areas 
where demand has increased: 

* Recovery Act funds will support an increase in enrollment and create 
new teaching and other positions in Head Start and Early Head Start 
programs. Contract employees are being used to help administer programs 
that are funded through the Recovery Act for the duration of the grant. 

* With rising unemployment in the county, visits to the county’s 
workforce centers have increased significantly, according to county 
officials. Under the Workforce Investment Act, Recovery Act funds allow 
the county to expand services that support the entry or re-entry of 
dislocated adults into the job market and encourage young people to 
complete their education.[Footnote 12] 

Recovery Act funds also support law enforcement programs that 
previously were reliant on declining state resources. Maricopa County 
had $1.25 billion for public safety in its 2010 budget and received a 
total of $15.9 million in public safety grants in that period, $10.5 
million of which are JAG grants. Agencies and municipalities formed a 
partnership within Maricopa County to allocate the $10.5 million in JAG 
funds among the members and to coordinate the programs to fund, such as 
the following: 

* County agencies are using roughly 70 percent of the JAG funds to 
retain and hire personnel, including hiring a specialized prosecutor 
and retaining two juvenile probation officers that were on a reduction-
in-force list. 

* Municipalities within the county are using their more than $8 million 
in JAG funds for security and communications equipment to enhance areas 
such as surveillance, patrolling, information software, and community 
outreach. 

Both Counties—Yavapai and Maricopa—Are Preparing for the End of 
Recovery Act Funds: 

According to the county officials, both counties recognize that 
Recovery Act funds are temporary and are developing plans for the end 
of the grant period. Yavapai CHC believes that once the economy begins 
to recover, its new facility will have the resources necessary to serve 
the population’s needs. CHC officials also recognize that the Increased 
Demand for Services grant is temporary and intended to enable CHC to 
meet the surge in demand for patient services resulting from the 
increase in unemployment. Maricopa county officials said that all new 
positions funded by Recovery Act funds are contract positions for the 
duration of the grant and that the program activity will be monitored 
and assessed to determine if the program is worthy of non-stimulus 
funding in the future. 

In the case of JAG grants, Yavapai County’s plans for the funds are, 
generally, for one-time expenditures for the duration of the grant; 
therefore, the county would face limited, if any, problems when 
Recovery Act funds are no longer available. However, Maricopa County 
officials noted the potential for a “cliff effect” at the end of the 
grant period and hope that the economy will improve and that the 
programs can then be sustained—otherwise programs will have to be 
eliminated. 

Highway Funds in Arizona Continue to be Obligated, but Obligations for 
Local Area Projects Continue to Lag and Steps are Being Taken to Comply 
with Federal Guidance: 

The Federal Highway Administration (FHWA) apportioned $522 million in 
Recovery Act funds to Arizona, 30 percent of which is required to be 
suballocated to metropolitan and local areas. As of October 31, 2009, 
the federal government has obligated[Footnote 13] $293 million to 
Arizona, and reimbursed the state[Footnote 14] $56 million. 

Table 5: Arizona Recovery Act Federal Aid Highway Amounts as of October 
31, 2009 (in millions): 

Total apportionment = $522; 
Amount obligated = $293; 
Amount reimbursed = $56. 

Suballocated amount = $157; 
Amount obligated = $29; 
Amount reimbursed = $0.7. 

Source: GAO analysis of FHWA data. 

[End of table] 

Recovery Act highway funds were apportioned to Arizona, which was then 
required to suballocate 30 percent of those funds to metropolitan and 
local areas. As we stated in our September 2009 report, these local 
projects lagged behind statewide projects and only three contracts had 
been awarded with those suballocated dollars. This is because 
localities did not have “ready-to-go” projects, and were largely 
unfamiliar with federal highway requirements. Between September 1 and 
October 31, 2009, only one additional locality’s solicitation had been 
publicized. Overall, only $29 million of the $157 million suballocated 
to localities has been obligated. ADOT has instituted a December 2, 
2009, deadline for localities to submit their proposals for 
suballocated highway projects in localities and said that it would have 
a better idea of where those projects stand after that date. ADOT 
reported that if it finds that projects in localities are not able to 
be advertised for construction prior to the March 2010 deadline, 
[Footnote 15] ADOT would use Recovery Act funds on “ready-to-go” 
statewide highway projects in order to not lose any Recovery Act 
highway funding. Similarly, officials from two localities we visited 
said that if the projects intended for Recovery Act funds were in 
danger of not having funds obligated by the March 2010 deadline, they 
would use the funds on projects whose designs are complete but were not 
initially targeted for Recovery Act funds. The localities would also do 
this in order to not lose Recovery Act funding. We will follow-up on 
these matters in a future report. 

To meet Recovery Act reporting requirements, ADOT officials state that 
they included in all of ADOT’s contracts a mandate that contractors 
report on the number and types of jobs created or preserved through 
this work. Contractors we spoke to said that they reported on the jobs 
and pay of both laborers and office staff working on Recovery Act 
projects, and ADOT said that it converted the hours and pay reported to 
them into full time equivalent positions for recipient reporting to the 
Office of Management and Budget.[Footnote 16] 

Arizona is Taking Steps to Ensure Compliance with Updated Federal 
Guidance on Maintenance of Effort Requirements and Support to 
Economically-Distressed Areas: 

Arizona is working to comply with Recovery Act requirements on both 
maintaining state levels of transportation spending and giving priority 
to projects located in economically-distressed areas. First, as part of 
Section 1201 (a) of the Recovery Act, states are required to certify to 
the Secretary of Transportation that the state will maintain the level 
of state transportation spending that it had planned on the day the 
Recovery Act was passed. This is known as the maintenance-of-effort 
(MOE) requirement. Arizona has submitted two certifications that were 
reviewed by FHWA. However, on September 24, 2009, FHWA issued 
supplemental guidance on MOE, which clarified that states should 
include in their MOE-certified amounts the level of funding that the 
state provided to local governments or agencies for transportation 
projects; Arizona did not provide this information in its initial 
submission because the state was unaware that the state transportation 
funding to local governments were part of its MOE requirement. As a 
result, Arizona plans to recalculate and recertify its highway MOE 
amount, although the U.S. Department of Transportation (DOT) has not 
yet set a submission deadline for the revised MOE certification. 
According to a FHWA official in Arizona, this recertification most 
likely would not have an impact on ADOT meeting its MOE requirement. 

Second, under the Recovery Act, states are required to give priority to 
highway projects that can be completed within 3 years and that are 
located in economically-distressed areas. When the Recovery Act was 
enacted, ADOT based the identification of economically-distressed areas 
on home foreclosure rates and other factors—data not specified in the 
Public Works Act. We recommended that DOT develop criteria for states 
to identify “special need” areas that do not meet the statutory 
economically distressed criteria in the Public Works Act. In response 
to our recommendation, DOT, in consultation with the Department of 
Commerce, developed such criteria and issued guidance to the states in 
August 2009.[Footnote 17] Applying this revised guidance, the state’s 
calculation again concluded that all 15 counties in Arizona are 
economically distressed, so ADOT does not believe it will have to 
revise how it is distributing funding across the state. 

Arizona is Using Public Housing Funds to Rehabilitate Housing; However, 
Jobs Created are Expected to be Temporary: 

Arizona has 15 public housing agencies that received a total of 
$12,068,449 in Recovery Act Public Housing Capital Fund formula grants 
(see figure 1). As of November 14, 2009, 13 public housing agencies 
have obligated $5,819,738 and have drawn down $2,585,851 of the total. 
On average, housing agencies in Arizona are obligating funds at about 
the same rate as other housing agencies nationally. We visited the 
following five housing agencies to determine the progress of projects: 
the city of Glendale Community Housing Division, the city of Phoenix 
Housing Department, the Housing Authority of Maricopa County, the 
Housing and Community Development Department of the city of Tucson, and 
the Pinal County Housing Department. 

Figure 1: Percentage of Public Housing Capital Funds Allocated by HUD 
that Have Been Obligated and Drawn Down in Arizona, as of November 14, 
2009: 

[Refer to PDF for image: 3 pie-charts; 1 horizontal bra graph]

Funds obligated by HUD: 100%; $12,068,449; 
Funds obligated by public housing agencies: 48.2%; $5,819,738; 
Funds drawn down by public housing agencies: 21.4% $2,585,851. 

Number of public housing agencies: 
Entering into agreements for funds: 15; 
Obligating funds: 13; 
Drawing down funds: 13. 

Source: GAO analysis of HUD data. 

[End of figure] 

Housing Agencies Are Using Recovery Act Formula Capital Funds on 
Various Rehabilitation Projects and Are on Track to Meet Recovery Act 
Time Frames: 

The five housing agencies that we visited in Arizona received 
$8,840,880 in Capital Fund formula grants. Officials at each housing 
agency stated that they expect to meet the March 17, 2010, Recovery Act 
Capital Fund formula obligation deadline. As of November 14, 2009, 
these five housing agencies had obligated $3,675,832 and had drawn down 
$1,295,686 of the total award. The housing agencies we visited had 
completed 13 projects and had 22 projects underway that continue to 
follow their 5-year plans and most of the contracts were awarded within 
120 days of when the funding was made available.[Footnote 18] Some 
housing officials received contract bids for projects that were lower 
than cost estimates and were able to use the savings to reinvest in 
additional Recovery Act-funded projects. Housing officials believe that 
bids submitted below original estimated costs were caused by the 
current low levels of economic activity in the construction industry. 
Also, according to housing officials we met with, because all the 
projects were previously unfunded, the Recovery Act funds were used to 
supplement, not replace or supplant other funds, in accordance with the 
Recovery Act. 

One of the five public housing agencies—the city of Glendale Community 
Housing Division—expended all $319,325 of its allocated funds by 
completing the rehabilitation of 50 kitchens. The other four public 
housing agencies have completed at least one project. 

* The city of Phoenix has expended a total of $352,877 on several 
projects such as interior and exterior painting, sidewalk repairs, roof 
replacements, and completed a roof seal coating project on two public 
housing sites which is expected to maintain the integrity of the roof 
and promote energy efficiency. 

* Maricopa County installed new evaporative coolers, refrigerators, and 
stoves across several of its public housing sites at a cost of $45,141. 

* The city of Tucson completed the interior and exterior rehabilitation 
of a single-family home at a cost of $46,700, which improved the 
physical condition of the home and installed water and energy efficient 
appliances. 

* Pinal County completed two roof replacement projects at a cost of 
$132,403. 

The Short-Term Nature of Recovery Act-Funded Projects in These Five 
Locations Yield Only Temporary Relief from Unemployment: 

According to housing officials and one contractor we spoke with, the 
types of formula-funded projects completed or currently underway have 
only temporarily created jobs and, in some cases, individuals that were 
hired for project work have already been laid off or let go. For 
example, city of Glendale officials stated that five out of seven newly-
hired workers were laid off immediately after their 7-week kitchen 
rehabilitation project ended because no other work was available. In 
another example, a Pinal County housing official stated that an 
unemployed roofer worked on its first roofing project but once the 4-
week project was completed, he again became unemployed. Also, according 
to a painting company owner in Phoenix, she hired three unemployed 
painters but after the 5-week project ended, she laid them off because 
the work was temporary and new work was not available to sustain their 
employment. 

Arizona Received One Competitive Grant to Make Energy Efficient 
Upgrades: 

HUD awarded one Capital Fund competitive grant in Arizona to the city 
of Phoenix Housing Department for $3.4 million under the category for 
creating energy efficient public housing units. Of the five public 
housing agencies we met with, two stated they applied for the 
competitive grant, while the other three stated they did not apply 
because their priority was managing existing housing projects, they 
believed that their applications may not be as competitive, and they 
did not have enough time or staff available to complete the application 
within the required timeframe. The city of Glendale Community Housing 
Division submitted one application, which was not awarded, and the 
Phoenix Housing Department submitted three applications, one of which 
was awarded. Phoenix housing officials plan to combine their 
competitive grant award with other funding to renovate 374 units at the 
Marcos de Niza public housing site. According to the grant application, 
the total development cost is approximately $24.7 million and 
construction work is expected to begin in May 2010 and be completed by 
June 2011. Specifically, the project includes, among other things, 
converting evaporative cooling systems to geothermal-powered central 
heating and cooling systems, and installing water- and energy-
conserving fixtures and appliances in units. 

State Comments on This Summary: 

We provided the Governor of Arizona with a draft of this appendix on 
November 18, 2009. The Director of the Office of Economic Recovery 
responded for the Governor on November 20, 2009. The state agreed with 
our draft and provided some clarifying information which we 
incorporated. 

GAO Contacts: 

Eileen Larence, (202) 512-6510 or larencee@gao.gov: 
Thomas Brew, (206) 963-3371 or brewt@gao.gov: 

Staff Acknowledgments: 

In addition to the contacts named above, Steven Calvo, Assistant 
Director; Lisa Brownson, auditor-in-charge; Rebecca Bolnick; Aisha 
Cabrer; Steven Rabinowitz; Jeff Schmerling; Radha Seshagiri; James 
Solomon; and Ann Walker made major contributions to this report. 

[End of section] 

Footnotes: Appendix I: Arizona: 

[1] One LEA we visited was only eligible for $622 of SFSF funding, and 
so declined the funding. 

[2] Arizona’s Community College system is organized as districts. One 
district we visited has 6 campuses, while the other district is 
comprised of 10 individually accredited colleges. 

[3] City of Phoenix Housing Department, Pinal County Housing 
Department, City of Glendale Community Housing Division, City of Tucson 
Department of Housing and Community Development, and Housing Authority 
of Maricopa County. 

[4] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to 
States and Localities, While Accountability and Reporting Challenges 
Need to be Fully Addressed (Arizona), [hyperlink, 
http://www.gao.gov/products/GAO-09-1017SP] (Washington, D.C.: September 
2009). 

[5] A data universal numbering system (DUNS) is a number issued by Dun 
and Bradstreet that provides business information. 

[6] GAO’s examination of Recovery Act funds counties received includes 
only funds received by the local governments directly from federal 
agencies. 

[7] According to U.S. Census Bureau of Labor Statistics, population 
data are from July 1, 2008; and, unemployment rates are preliminary 
estimates for September 2009, have not been seasonally adjusted, and 
are shown as a percentage of the labor force. 

[8] The U.S. Department of Health and Human Services Increased Demand 
for Community Health Center Services grants support the expansion of 
services offered by Community Health Centers and allow them to serve 
more patients, as more Americans join the ranks of the uninsured. 

[9] The U.S. Department of Health and Human Services made Capital 
Improvement Program grants available to Community Health Centers to 
support their efforts to upgrade and expand their facilities and open 
their doors to more patients. 

[10] The JAG program within the Department of Justice’s Bureau of 
Justice Assistance provides federal grants to state and local 
governments for law enforcement and other criminal justice activities, 
such as crime prevention and domestic violence programs, corrections, 
treatment, justice information sharing initiatives, and victims’ 
services. JAG funds are allocated based on a statutory formula 
determined by population and violent crime statistics, in combination 
with a minimum allocation to ensure that each state and territory 
receives some funding. 

[11] According to U.S. Census and Bureau of Labor Statistics, 
population data are from July 1, 2008; and, unemployment rates are 
preliminary estimates for September 2009, have not been seasonally 
adjusted, and are shown as a percentage of the labor force. 

[12] Recovery Act, 123 Stat. 172-173. 

[13] 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. This does not include 
obligations associated with $1 million of apportioned funds that were 
transferred from FHWA to Federal Transit Administration (FTA) for 
transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. § 
104(k)(1) to transfer funds made available for transit projects to FTA. 

[14] States request reimbursement from FHWA as the state makes payments 
to contractors working on approved projects. 

[15] The Recovery Act mandates that all apportioned funds, including 
suballocated funds, need to be obligated before March 2, 2010, one year 
from apportionment or they will be subject to withdrawal by FHWA. 

[16] Recipients of Recovery Act funds are required to submit quarterly 
reports under Section 1512 of the act to the federal agencies 
apportioning those Recovery Act funds. 

[17] As we reported, 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. 

[18] The 5-year plan addresses the housing agencies’ mission and their 
overall plan and priority list of projects to achieve their mission 
goals. 

[End of Appendix I: Arizona] 

Appendix II: California: 

Overview: 

This appendix summarizes GAO’s work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in California. The full report covering all of GAO’s work 
in 16 states and the District of Columbia may be found at [hyperlink, 
http://www.gao.gov/recovery]. 

What We Did: 

GAO’s work in California included reviewing three specific programs 
funded under the Recovery Act—Highway Infrastructure Investment funds, 
Transit Capital Assistance Program, and Weatherization Assistance 
Program. These programs were selected primarily because they are in the 
process of obligating Recovery Act funds in California. Our work 
focused on the status of the programs’ funding, how funds are being 
used, and issues that are specific to each program. In addition to 
these programs, we updated information on three Recovery Act education 
programs with significant funds being disbursed—the State Fiscal 
Stabilization Fund (SFSF) and Recovery Act funds for Title I, Part A of 
the Elementary and Secondary Education Act of 1965 (ESEA), as amended, 
and Part B of the Individuals with Disabilities Education Act (IDEA), 
as amended. For descriptions and requirements of the programs we 
covered, see appendix XVIII of GAO-10-232SP. 

We also met with the California Recovery Act Task Force (Task Force) to 
understand the state’s experience in meeting Recovery Act reporting 
requirements and preparing the state’s quarterly report in October 
2009. In addition, we visited two California local governments to 
discuss the amount of Recovery Act funds each is receiving directly 
from federal agencies and to learn how those funds are being used. We 
chose to visit the city of Los Angeles and the county of Sacramento. We 
selected Los Angeles because it is Southern California’s most populous 
city, with an unemployment rate above the state’s average of 12.0 
percent. We selected the county of Sacramento because it is located in 
Northern California’s central valley, encompasses the State Capitol, 
and also has an unemployment rate above the state average. 

What We Found: 

* Highway Infrastructure Investment. As of October 31, 2009, the U.S. 
Department of Transportation (DOT) Federal Highway Administration 
(FHWA) has obligated $2.079 billion of the $2.570 billion apportioned 
to California in Recovery Act funds and $90 million had been reimbursed 
by FHWA. The majority of these projects involve pavement widening and 
improvement projects, but the state is also using highway 
infrastructure funds for numerous safety and transportation enhancement 
projects. California has awarded contracts for 364 projects worth 
$1.647 billion and advertised an additional 119 projects for bid. 
Overall, 90 percent of Recovery Act contracts are being awarded for 
less than the state engineer’s estimated costs and the California 
Department of Transportation (Caltrans) plans to request FHWA obligate 
excess funds for additional highway projects. While the pace of federal 
outlays for California highway projects continues to be slower than the 
national average, the amount reimbursed grew from $22 million in 
September to $90 million as of October 31, 2009, and officials expect 
it to increase in the near future as a number of large state highway 
projects are under way. 

* Transit Capital Assistance Program. As of November 5, 2009, DOT’s 
Federal Transit Administration (FTA) has obligated $916 million of the 
$1.002 billion in Transit Capital Assistance Program Recovery Act funds 
apportioned to California and urbanized areas in the state for transit 
projects. Transit agencies in California are using Transit Capital 
Assistance Program Recovery Act funds for preventive maintenance, 
vehicle purchases and rehabilitation, equipment replacement, and large 
capital projects. The transit agencies we visited, the San Francisco 
Municipal Transportation Agency (SFMTA) and the San Diego Association 
of Governments (SANDAG), are in the process of awarding contracts for 
Recovery Act funded projects and are using Transit Capital Assistance 
Program Recovery Act funds for a variety of capital projects, which 
otherwise might not have been funded until future fiscal years. 

* Selected education programs. As of October 31, 2009, California has 
distributed about $3.2 billion in Recovery Act funding to local 
education agencies (LEA), and special education local plan areas 
through three education programs. This includes SFSF education 
stabilization funds ($2.5 billion), ESEA Title I, Part A funds ($463 
million), and IDEA, Part B funds ($269 million). California LEAs are 
generally using Recovery Act funding to retain jobs for teachers, 
teacher aides, and other staff, as well as for training and purchasing 
instructional materials and equipment. However, as we have previously 
reported, Recovery Act funding was distributed to some LEAs prior to 
their being ready to spend it, and the concerns we raised in our 
previous reports about cash management, including the appropriate 
process for calculating interest on federal cash balances, have yet to 
be fully resolved. 

* Weatherization Assistance Program. California awarded almost $57 
million to 35 local service providers throughout the state for Recovery 
Act weatherization activities. The state has required service providers 
to adopt an amendment to their Recovery Act weatherization contracts to 
ensure that they comply with Recovery Act requirements before they are 
provided Recovery Act funds to weatherize homes. Most service providers 
did not adopt the amendment by the October 30 deadline, due to ongoing 
negotiations with the state regarding concerns about some amendment 
provisions. On October 30, the state announced it would issue a 
modified amendment within 30 days incorporating changes agreed upon by 
the state and service providers. As of November 10, no homes in 
California had been weatherized with Recovery Act funds. 

* Recipient reporting. Task Force officials believe that, using their 
centralized reporting system, they successfully reported jobs created 
or retained as a result of Recovery Act funds received through state 
agencies, but faced several challenges in doing so. One such challenge 
related to differing interpretations of federal guidance on jobs 
reporting, which resulted in variations in the number of jobs reported. 
On behalf of the Task Force, the state’s Chief Information Officer 
(CIO) was responsible for collecting the data from state agencies, 
validating it, and uploading the data to www.federalreporting.gov 
(FederalReporting.gov). 

* Localities’ use of Recovery Act funds. Los Angeles City and 
Sacramento County reported using Recovery Act funds to preserve the 
delivery of essential local government services. For example, Los 
Angeles has been awarded $178.6 million in Recovery Act grants and 
Sacramento $21.0 million that are funding airport improvement, 
anticrime programs, art agencies, community development projects, 
community policing, diesel emission reduction, energy efficiency 
projects, homelessness and foreclosure relief, port security, purchases 
of buses, and public housing rehabilitation. According to officials in 
both localities, activities funded with Recovery Act funds will not 
require ongoing financial support after the funds are spent. 

Over 80 Percent of Apportioned Highway Funds Have Been Obligated and 
California Has Awarded More than 300 Highway Contracts: 

The U.S. Department of Transportation’s (DOT) Federal Highway 
Administration (FHWA) apportioned about $2.570 billion in Recovery Act 
funds to California in March 2009. As of October 31, 2009, more than 80 
percent of these funds had been obligated ($2.079 billion)[Footnote 1] 
and $90 million had been reimbursed by FHWA. As of October 31, 2009, 
Caltrans awarded 364 contracts for state and local highway projects 
with a total value of $1.647 billion. Of these, 49 have been completed 
and 250 are under construction. Contracts have not yet been awarded for 
an additional 119 projects or proposals that are in the bid review 
process. As part of our review, we visited the site of a new road 
construction project intended to reduce congestion on State Route 905 
in San Diego County. Construction on the Recovery Act-funded portion of 
the project began in July 2009 and, according to Caltrans, the 
construction phases of the project are expected to be completed by 
summer 2012 (see figure 1). 

Figure 1: Construction of State Route 905 in San Diego County: 

[Refer to PDF for image: map and associated data] 

The map depicts Route 905, the Otay Mesa point of entry and the border 
of the U.S. and Mexico. Route 905 is further depicted in portions as 
follows: 
Funded through Recovery Act; 
Funded through other sources; 
Interchange (on/off ramp). 

Project: Construction of new road; 

Lead agency: Caltrans; 

Description: Construction of 3.4 miles (out of approximately 6.2 miles) 
of a new six-lane freeway, State Route 905, from Interstate 805 to the 
Otay Mesa Port of Entry at the U.S.-Mexico Border. The general purpose 
of the route is to reduce congestion; provide for the effective 
transportation of people, goods, and services; and improve the mobility 
of local, regional, interregional, and international traffic; 

Location: San Diego County, California; 

Recovery Act Funds: $78.3 million obligated to Caltrans for this phase 
of the project, approximately 13 percent of the total estimated cost 
for all phases; 

Status: Caltrans awarded a contract for this phase of the project on 
May 8, 2009 and construction began in July 2009. 

Source: Caltrans; Map Resources; GAO. 

[End of figure] 

Our analysis of contract bid data for state highway projects found that 
approximately 90 percent of Recovery Act bids on contracts issued as of 
October 31, 2009, have come in under state estimated costs.[Footnote 2] 
On average, these contracts have been awarded for approximately 26 
percent less than the state engineer’s estimated costs for the project. 
According to Caltrans officials, lower material costs and increased 
competition among contractors due to the weak economy in California are 
among the reasons bids are under the state engineer’s estimated costs. 
Caltrans plans to request that FHWA obligate funds made available as a 
result of savings from receiving bids lower than state estimated costs 
and use those funds for other projects, specifically projects from its 
State Highway Operations and Protection Program (SHOPP) and Highway 
Maintenance Program. As of November 1, 2009, FHWA deobligated 
approximately $108.5 million from state and local projects, which 
Caltrans plans to use to fund 16 additional state projects—13 SHOPP and 
3 Highway Maintenance Program projects—for which additional funding has 
been sought using deobligated Recovery Act funds. 

We discussed contracts for two Recovery Act-funded highway projects, 
including State Route 905 and a resurfacing project in Burlingame, with 
state and local officials (see table 1). According to Caltrans 
officials we spoke with about these contracts, California continues to 
use its existing contracting procedures to help ensure funds are used 
appropriately. As we reported in September, Caltrans officials stated 
that California has well-defined contract requirements for all highway 
projects, and Caltrans awards all highway contracts competitively to 
the lowest responsive and responsible bidder. Caltrans officials also 
stated that requirements specific to the Recovery Act, such as 
reporting requirements, were added to Recovery Act contracts. 

Table 1: Summary of Contract Information for Two Highway Projects 
Visited: 

State Route 905 project: 

* Construction of a 3.4-mile segment of a new six-lane freeway in San 
Diego County, California; 

* Estimated contract value: $57 million; 

* Fixed unit price contract awarded competitively; 6 bidders; 

* Estimated project duration: approximately 4 years or 990 days. 

Resurfacing of Airport Boulevard and Trousdale Drive in Burlingame, 
California: 

* Road resurfacing project; 

* Estimated contract value: $660,731; 

* Fixed unit price contract awarded competitively; 10 bidders; 

* Estimated project duration: August to September 2009; completed 
September 18. 

Source: GAO analysis of information provided by Caltrans and the City 
of Burlingame. 

[End of table] 

According to FHWA data, as of October 31, 2009, the rate of 
reimbursement for California highway projects, 4.3 percent ($90 
million) of the $2.079 billion obligated to California, is lower than 
the amount reimbursed nationwide, 18.4 percent ($3.661 billion) of the 
$19.88 billion obligated. However, federal reimbursements in California 
have increased since September 2009 from $22 million to $90 million, 
and Caltrans officials stated that more reimbursements are expected as 
a number of large state highway projects begin construction in the 
coming months. Caltrans officials attributed the lower reimbursement 
percentage to having a majority of its projects administered by local 
governments, which are often reimbursed more slowly than state-
administered projects.[Footnote 3] Thus far, most of the 
reimbursements, approximately 93 percent ($84.5 million) of the $90 
million, are for state projects. Caltrans officials noted that locally-
administered highway projects may take longer to reach the 
reimbursement phase than state projects due to additional steps 
required to approve local highway projects. For example, highway 
construction contracts administrated by local agencies call for a local 
review and local public notice period, which can add nearly 6 weeks to 
the process. In addition, Caltrans officials stated that localities 
with relatively small projects tend to seek reimbursement in one lump 
sum at the end of a project to minimize time and administrative cost, 
which can contribute to reimbursement rates not matching levels of 
ongoing construction. 

Caltrans has also been working to adhere to revised FHWA guidance for 
meeting Recovery Act requirements in two areas: (1) identification of 
economically distressed areas and (2) maintenance of effort. 

* Based on findings in our July 2009 Recovery Act report that state 
DOTs, including Caltrans, used variable methodologies to identify 
economically distressed areas, we recommended that DOT provide clear 
guidance. Caltrans revised its economically distressed area 
determination using guidance issued by FHWA in consultation with the 
Department of Commerce on August 24, 2009. According to the 
recalculation, all 58 counties in California are designated as 
economically distressed, which results in no change to how Caltrans 
funds and administers Recovery Act projects. 

* Under the Recovery Act, states are required to certify that they will 
maintain the level of spending planned on the day the Recovery Act was 
enacted. On September 24, 2009, FHWA issued supplemental guidance on 
maintenance of effort (MOE) requirements, which clarified that states 
should include in their MOE certified amounts the funding the state 
provides to local governments for transportation projects. Caltrans 
officials stated that they are working with FHWA on this issue and are 
prepared to submit a revised MOE certification when requested. Caltrans 
officials do not anticipate difficulty in meeting the MOE requirement 
even after adjusting the certification amount to include those funds. 

Transit Agencies in California Are in the Process of Awarding Transit 
Capital Assistance Program Recovery Act Contracts for a Variety of 
Projects: 

In March 2009, $1.002 billion in Transit Capital Assistance Program 
Recovery Act funds were apportioned to California and urbanized areas 
in the state for transit projects. As of November 5, 2009, $916 million 
had been obligated. Transit agencies in California are using Transit 
Capital Assistance Program Recovery Act funds for preventive 
maintenance, vehicle purchases and rehabilitation, equipment 
replacement, and large capital projects. 

The two transit agencies we visited—San Francisco Municipal 
Transportation Agency (SFMTA) and San Diego Association of Governments 
(SANDAG)—are using their Transit Capital Assistance Program Recovery 
Act funds for a variety of capital projects, which otherwise may not 
have been funded until future fiscal years. Officials at both SFMTA and 
SANDAG stated that project readiness and the relative need for projects 
within the region informed project selection. 

* SFMTA distributed its Transit Capital Assistance Program Recovery Act 
funds, approximately $72 million, for 13 projects, including preventive 
maintenance and equipment replacement. For example, SFMTA plans to 
spend $11 million in Transit Capital Assistance Program Recovery Act 
funds to replace fare collection equipment. SFMTA officials stated that 
the availability of Transit Capital Assistance Program Recovery Act 
funds allowed the agency to move forward on high-priority fleet 
maintenance projects that could not have been funded with their annual 
FTA apportionment. 

* SANDAG distributed approximately $70 million in Transit Capital 
Assistance Program Recovery Act funds among four large construction 
projects, including replacement of a segment of a railroad bridge and 
construction of a transit center (see table 2). SANDAG officials stated 
that the bridge replacement project would not have been funded for 
years without the help of Transit Capital Assistance Program Recovery 
Act funds. 

Table 2: Overview of SANDAG Transit Capital Assistance Program Recovery 
Act Projects: 

Project name: System contact wire; 
Project description: Investigate existing contact wire conditions on 
the South Line of the San Diego Trolley and replace worn out sections 
of contact wire from 12th and Imperial to San Ysidro; 
Transit Capital Assistance Program Recovery Act funds: $12,000,000; 
Total estimated project cost: $17,643,000; 
Percent of project funded with Transit Capital Assistance Program 
Recovery Act funds: 68%. 

Project name: Blue Line upgrade; 
Project description: Design and construction for trolley and trackway 
modifications, including stations to support new low-floor vehicle 
operations; 
Transit Capital Assistance Program Recovery Act funds: $44,560,000; 
Total estimated project cost: $114,695,000; 
Percent of project funded with Transit Capital Assistance Program 
Recovery Act funds: 39%. 

Project name: Railroad trestle bridge replacement; 
Project description: Replace the north segment of a railroad trestle 
bridge in the Los Angeles to San Diego rail corridor that is used by 
Amtrak, Burlington Northern Santa Fe, and Metrolink trains; 
Transit Capital Assistance Program Recovery Act funds: $12,000,000; 
Total estimated project cost: $12,000,000; 
Percent of project funded with Transit Capital Assistance Program 
Recovery Act funds: 100%. 

Project name: San Luis Rey Transit Center; 
Project description: Construct a 12-bay transit center in suburban 
North San Diego County; 
Transit Capital Assistance Program Recovery Act funds: $1,500,000; 
Total estimated project cost: $2,700,000; 
Percent of project funded with Transit Capital Assistance Program 
Recovery Act funds: 56%. 

Project name: Total; 
Transit Capital Assistance Program Recovery Act funds: $70,060,000; 
Total estimated project cost: $147,038,000. 

Source: GAO analysis of SANDAG data. 

[End of table] 

The transit agencies we visited are in the process of awarding 
contracts for Recovery Act-funded projects. SFMTA officials stated that 
they plan to award contracts for all projects receiving Transit Capital 
Assistance Program Recovery Act funds by November 30, 2009, and SANDAG 
officials reported that one project had been advertised for bid and the 
other three projects would be advertised for bid in the coming months. 
Transit agency officials stated that they will use existing processes, 
including site inspections, to manage Recovery Act contracts. 

Recovery Act Education Funding Is Supporting Jobs and Programs, but 
Issues Surrounding Cash Management Practices Have Yet to Be Resolved: 

As of October 31, 2009, California had distributed approximately $3.2 
billion in Recovery Act funds to local educational agencies (LEA) and 
other K-12 state funded learning institutions through the three 
education programs included in our review— ESEA Title I, Part A; IDEA, 
Part B; and SFSF. LEAs in California report that they are using 
Recovery Act funding to retain jobs for teachers and other staff, to 
provide training, and to buy a variety of instructional materials and 
equipment. However, as previously reported, funds were distributed 
before some LEAs were ready to spend them, and the cash management 
issues we raised in previous reports, including the appropriate method 
for calculating interest on federal cash balances, have not been fully 
resolved. 

LEAs Plan to Use Recovery Act Funds to Help Retain Jobs and Improve 
Programs but Will Still Lose Staff Overall: 

We surveyed a representative sample of LEAs—-generally school 
districts—-nationally and in California about their planned uses of 
Recovery Act funds. Table 3 shows California and national survey 
results on the estimated percentages of LEAs that (1) plan to use more 
than 50 percent of their Recovery Act funds from three education 
programs to retain staff, (2) anticipate job losses even with SFSF 
monies, and (3) reported a total funding decrease of 5 percent or more 
since last school year. Notably, two-thirds of California LEAs reported 
a funding decrease of more than 5 percent versus 17 percent of LEAs 
nationwide. 

Table 3: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: IDEA funds; 
Estimated percentages of LEAs: California: 17%; 
Estimated percentages of LEAs: Nation: 19%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: Title I funds
Estimated percentages of LEAs: California: 29%; 
Estimated percentages of LEAs: Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: SFSF funds
Estimated percentages of LEAs: California: 52%; 
Estimated percentages of LEAs: Nation: 63%. 

Responses from GAO survey: Anticipated job losses, even with SFSF funds
Estimated percentages of LEAs: California: 50%; 
Estimated percentages of LEAs: Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2009-2009
Estimated percentages of LEAs: California: 67%; 
Estimated percentages of LEAs: Nation: 17%. 

Source: GAO survey of LEAs. 

Notes: Percentage estimates for California have margins of error, at 
the 95 percent confidence level, of plus or minus 11 percentage points 
or less. The nationwide percentage estimates have a margin of error of 
plus or minus 5 percentage points. 

[End of table] 

We visited two LEAs in California—the largest LEA in the state and a 
small charter school—to find out more detail about how they are 
spending Recovery Act funds (see table 4). Los Angeles Unified School 
District (LA Unified) serves over 600,000 students and has received 
about $530 million in Recovery Act funds for the three programs we 
examined. Alvina Elementary Charter School, in Fresno County, (also an 
LEA) serves about 200 students and has received about $88,000 in 
Recovery Act funds for the ESEA Title I, Part A and SFSF programs. 

Table 4: Planned Uses of Recovery Act Funds at the LEAs Reviewed by 
GAO: 

LEA: LA Unified; 
ESEA Title I, Part A: Individual school councils determine how funds 
are used and select from a district approved list that includes staff 
positions (such as teacher, teacher’s assistant, school nurse, and 
psychiatric social worker); parent training; instructional materials; 
and classroom equipment; 
IDEA, Part B: Funds are being used to: 
* reduce reliance on contracting by training on-site staff;
* train teachers to meet the instructional, social, emotional, and 
behavioral needs of students with disabilities integrated into the 
general education program; 
* provide special education leadership training for elementary and 
secondary site administrators; and; 
* train teachers in practices to improve outcomes for students 
identified with autism; 
SFSF: All funds are being used for salaries, including salaries for 
2,558 teachers and 210 administrative and other support positions. 

LEA: Alvina; 
ESEA Title I, Part A: Funds are being used to increase K-3 
instructional aide hours and to hire a new teacher and a new 
instructional aide, allowing Alvina to increase student enrollment; 
IDEA, Part B: No IDEA funds received; 
SFSF: Funds are being used for staff retention, hiring 
paraprofessionals, and buying math text books. 

Source: GAO analysis of information provided by LA Unified and Alvina. 

[End of table] 

Ongoing Cash Management Issues Have Yet to Be Fully Resolved: 

In our September 2009 report, we highlighted concerns related to ESEA 
Title I, Part A cash management practices of the California Department 
of Education (CDE) and LEAs, specifically related to early distribution 
of funds to LEAs and the calculation and remittance of interest on 
unspent cash balances.[Footnote 4] At that time, CDE was uncertain 
whether unspent ESEA Title I, Part A Recovery Act balances could be 
offset against unreimbursed expenses in LEAs’ non-Recovery Act ESEA 
Title I funding accounts for purposes of calculating the interest due 
on unspent federal funds. U.S. Department of Education (Education) 
officials had not yet made a formal determination on this approach at 
the time of our September report. In our recent discussions, Education 
officials told us that unreimbursed expenses for one federal fund can 
be offset against positive cash balances in another federal fund—
including, for example, regular ESEA Title I and Recovery Act ESEA 
Title I fund balances. Education officials told us they will finalize 
their decision on CDE’s proposed interest calculation procedures once 
they receive the proposal in writing from CDE. 

California Has Awarded Contracts to Local Service Providers, but 
Providers’ Concerns about Contract Amendments Have Delayed Home 
Weatherization: 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program, which the U.S. 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. This 
program enables low-income families to reduce their utility bills by 
making long-term energy efficiency improvements to their homes by, for 
example, installing insulation or modernizing heating or air 
conditioning equipment. On September 22, 2009, DOE obligated all the 
funds allocated to the states, but it has limited the states’ access to 
50 percent of these funds.[Footnote 5] DOE allocated about $186 million 
of Recovery Act funds for weatherization in California.[Footnote 6] By 
June 2009, DOE had provided 50 percent—about $93 million—of these funds 
to the California Department of Community Services and Development 
(CSD), the state agency responsible for administering the state’s 
weatherization program. Of this amount, CSD retained about $16 million 
to support oversight, training, and other state activities. CSD also 
awarded almost $57 million to 35 local service providers throughout the 
state[Footnote 7] for planning, purchasing equipment, hiring and 
training, and weatherizing homes.[Footnote 8] As of November 10, CSD 
and its service providers spent approximately $3 million of Recovery 
Act funds on weatherization-related activities. 

CSD requires service providers to adopt an amendment to their Recovery 
Act weatherization contracts to ensure that they comply with the 
Recovery Act, including certifying that they comply with the Davis-
Bacon Act, before providing Recovery Act funds to them to weatherize 
homes. Only two providers adopted the amendment by the initial October 
30 deadline. According to CSD, many providers did not adopt the 
amendment because they objected to some of its provisions, including 
those pertaining to compensation, cost controls, and performance 
requirements. As a result, CSD entered into negotiations with providers 
and, on October 30, announced it will release a modified amendment 
incorporating agreed upon changes within 30 days. CSD also announced 
steps that providers can take to accept the modified amendment in 
advance of its formal issuance and begin weatherizing homes sooner. As 
of November 10, nine providers had adopted the modified amendment in 
advance of the formal issuance, but no homes in California had yet been 
weatherized with Recovery Act funds.[Footnote 9] 

We selected 4 of the 35 service providers to discuss their Recovery Act 
weatherization programs[Footnote 10] (see table 5). Each of these 
providers received a substantial increase in weatherization funding 
through the Recovery Act and they vary in size and expected start dates 
for weatherizing homes. Officials from these providers initially 
expressed concerns about wage rates, payroll, cost controls, and other 
provisions of the CSD contract amendment. Subsequently, these officials 
told us that they anticipated their concerns would be addressed by the 
forthcoming modifications. 

Three of these providers adopted, or plan to adopt, the modified 
amendment in advance of the formal issuance—one provider met the 
October 30 deadline. Officials from the remaining provider stated that 
they will wait for the formal issuance. Officials from each of these 
providers stated, and CSD agreed, that they have processes and plans 
aimed at ensuring that funds are used for their intended purposes and 
in accordance with Recovery Act requirements. In addition, each has 
created new employment positions and has plans to hire additional 
employees in order to implement the Recovery Act weatherization 
program. 

Table 5: Overview of Selected Local Service Providers, as of November 
10, 2009: 

Service provider: Service area; 
Project GO, Inc.: Placer County; 
Community Action Partnership of Orange County: Orange County; 
Community Action Partnership of Riverside County: Riverside County; 
Pacific Asian Consortium in Employment: Parts of Los Angeles County. 

Service provider: Organization type; 
Project GO, Inc.: Nonprofit; 
Community Action Partnership of Orange County: Community action agency; 
Community Action Partnership of Riverside County: County government; 
Pacific Asian Consortium in Employment: Nonprofit. 

Service provider: Primary labor and supply source; 
Project GO, Inc.: In-house; 
Community Action Partnership of Orange County: In-house; 
Community Action Partnership of Riverside County: Subcontractors; 
Pacific Asian Consortium in Employment: In-house. 

Service provider: 2009 annually appropriated weatherization allocation; 
Project GO, Inc.: $87,851; 
Community Action Partnership of Orange County: $485,704; 
Community Action Partnership of Riverside County: $552,737; 
Pacific Asian Consortium in Employment: $568,413. 

Service provider: Recovery Act weatherization allocation; 
Project GO, Inc.: $998,278; 
Community Action Partnership of Orange County: $6,002,530; 
Community Action Partnership of Riverside County: $7,616,998; 
Pacific Asian Consortium in Employment: $7,034,492. 

Service provider: Recovery Act weatherization funds awarded; 
Project GO, Inc.: $498,516; 
Community Action Partnership of Orange County: $2,997,522; 
Community Action Partnership of Riverside County: $3,803,748; 
Pacific Asian Consortium in Employment: $3,512,859. 

Service provider: Recovery Act weatherization funds spent; 
Project GO, Inc.: $40,164; 
Community Action Partnership of Orange County: $110,241; 
Community Action Partnership of Riverside County: $450,428; 
Pacific Asian Consortium in Employment: $107,969. 

Service provider: Number of homes projected to be weatherized with 
Recovery Act funds
Project GO, Inc.: 360
Community Action Partnership of Orange County: 550
Community Action Partnership of Riverside County: 1,680
Pacific Asian Consortium in Employment: 1,700 

Service provider: Estimated date to begin weatherizing homes with 
Recovery Act funds; 
Project GO, Inc.: January 2010; 
Community Action Partnership of Orange County: Between January and 
March 2010; 
Community Action Partnership of Riverside County: November 2009; 
Pacific Asian Consortium in Employment: December 2009. 

Source: CSD; Project GO, Inc.; Community Action Partnership of Orange 
County; Community Action Partnership of Riverside County; and Pacific 
Asian Consortium in Employment. 

[End of table] 

Despite Challenges, California Officials Believe That They Successfully 
Met Recovery Act Reporting Requirements: 

California Recovery Act Task Force (Task Force) officials believe that, 
while facing some challenges, overall, they were successful in 
reporting jobs created or retained in California, as well as other 
information required under the Recovery Act. California established a 
centralized reporting system, the California ARRA Accountability Tool 
(CAAT), for Recovery Act funds received through state agencies. All 
state agencies receiving Recovery Act funds reported to the Task Force 
using the CAAT. The state’s Chief Information Officer (CIO), on behalf 
of the Task Force, was responsible for collecting the data from state 
agencies, validating it, and uploading the data to 
FederalReporting.gov. The Task Force performed a pretest by working 
with the technical team at FederalReporting.gov and then uploaded by 
award all data by the October 10 deadline. Data corrections were made 
to improve the accuracy of reports from October 11 through October 20. 

State officials cited several benefits of the centralized process, 
including establishing the CIO as the liaison between 
FederalReporting.gov and the state, which eliminated the need for each 
state agency to reconcile issues one at a time with 
FederalReporting.gov. It also allowed greater control of the process at 
the state level and helped state officials follow the flow and impact 
of Recovery Act funds in California. (Figure 2 provides a simplified 
example of how information flowed for two state-run highway projects 
that we selected.) However, local governments and other entities which 
directly received Recovery Act funds that bypassed the state reported 
those funds directly to FederalReporting.gov. Therefore, the Task Force 
had little or no visibility over these funds. 

Figure 2: Basic Flow of Recipient Reporting Information for Two State-
Run Highway Projects in California That GAO Selected: 

[Refer to PDF for image: illustration] 

Subcontractor reports to prime contractor:
* Number of employees, hours worked, and payroll information for 
existing employees and new hires; 

Prime contractor reports to Caltrans:
* Subcontractor information; 
* Employee, hour, and payroll information for prime contractor. 

Caltrans reports to state CIO: 
* Information from each prime contractor and subcontractor; 
* Employee, hour, and payroll information for Caltrans employees. 

State CIO uploads reports to federalreporting.gov: 
* Upload occurs within 10 days after the end of the reporting quarter. 

OMB reports information from federalreporting.gov: 
* Number of jobs created or retained and other information on Recovery
Act funds flowing through the state of California. 

Source: GAO analysis of information provided by contractors, Caltrans, 
CIO, and the Task Force. 

Note: Flow of recipient reporting information for locally-managed 
highway projects in California included additional steps. 

[End of figure] 

State officials said they faced some challenges, especially in 
collecting required information on Dun and Bradstreet Universal 
Numbering System (D-U-N-S®[Footnote 11]) numbers for recipients and 
subrecipients and overcoming changing reporting requirements from 
federal agencies. For example, in some cases, the Office of Management 
and Budget (OMB) did not have D-U-N-S numbers in its system, which 
prevented the state from uploading job information from recipients and 
subrecipients. The OMB reporting system not only rejected the 
subrecipients’ incorrect D-U-N-S numbers, but also all recipient data 
for that award, including correct D-U-N-S numbers, which numbered in 
the hundreds or thousands, without identifying the reason for the 
rejection. California officials also had to contend with federal 
agencies making last-minute changes to the reporting requirements 
including to the award amounts, award identification numbers, Central 
Contract Registration numbers, and Catalog of Federal Domestic 
Assistance numbers. 

Another challenge Task Force officials noted is that the number of jobs 
reported can vary depending on how federal job reporting guidance is 
applied, as was the case with California’s two university systems. For 
example, the California State University (CSU) system reported 26,156 
jobs paid with Recovery Act funds based on $268.5 million in SFSF 
grants awarded and disbursed over 2 months, while the University of 
California (UC) officials reported 8,356 jobs paid with Recovery Act 
funds based on $518.5 million in SFSF grants disbursed out of the 
$717.5 million awarded. A CSU official said that their estimate is 
based on paying 26,156 full-time equivalent positions for the 2 months, 
May and June 2009, in which the Recovery Act funds were received. A UC 
official said that in contrast, the UC based its estimate on paying the 
8,356 full-time equivalent positions for the full year, not just the 
months in which the funds were received, and by not counting tenured 
and other positions that would not have been cut otherwise. The CSU 
officials said that, on the advice of the CSU consultants, CSU followed 
Education guidance exactly as written without adjustments. The UC 
official said that UC adjusted its estimate to make it more realistic 
in reflecting the number of jobs retained. Task Force officials 
reviewed both estimates and told us that both are, in their opinion, 
within applicable federal agency guidance. 

Task Force officials stated that the reporting process would be 
improved if OMB provided a comprehensive list of awards within 
California, so that the Task Force can be sure that all awards were 
reported. However, Task Force officials told us OMB informed them that 
there was not a master list of Recovery Act awards that agencies have 
made to each state and to recipients within the state. Task Force 
officials also believed that a list of all state and local Recovery Act 
awards provided to California would help them better assess the impact 
of the Recovery Act in California. We previously recommended that OMB 
should develop an approach that provides dependable notification to 
states—where the state is not the primary recipient of funds but has a 
statewide interest in the information.[Footnote 12] 

Select California Localities Are Using Recovery Act Funds to Preserve 
Services: 

We met with officials in the city of Los Angeles (Los Angeles) and the 
county of Sacramento to discuss how Recovery Act funds are being used 
in these localities. (Figure 3 highlights information about the two 
local governments we reviewed.) Officials said that they face budget 
shortfalls this fiscal year due to declines in state funding for 
programs, property tax revenues, sales tax revenues, and other local 
tax revenues and fees. According to government officials in both 
localities, Recovery Act funds are helping to preserve the delivery of 
essential services and repair infrastructure, but have generally not 
helped stabilize their base budgets. 

Figure 3: Information about Los Angeles and Sacramento, and Recovery 
Act Funds: 

[Refer to PDF for image: illustration and associated data] 

Demographics: 

Estimated population (2008): 
Sacramento: 1,394,154; 
Los Angeles: 3,833,995. 

Unemployment rate (Sept. 2009): 
Sacramento: 12.2%; 
Los Angeles: 14.0%. 

Budget FY10: (change from FY09): 
Sacramento: $4.3 billion (-19.0%); 
Los Angeles: $7.0 billion (-1.0%). 

Locality type: 
Sacramento: County; 
Los Angeles: Metropolitan city. 

Recovery Act funding reported by Los Angeles and Sacramento
County: 

Sacramento: 
Awarded: $21.0 million (19.2%); 
Not awarded: $46.4 million (42.4%); 
Application pending: $42.0 million (38.4%); 
Total: $109.4 million. 

Los Angeles: 
Awarded: $178.6 million (18.1%;); 
Not awarded: $397.6 million (40.3%); 
Application pending: $410.1 million (41.6%); 
Total: $986.3 million. 

Sources: U.S. Census Bureau and U.S. Department of Labor (demographic 
information); Sacramento County and Los Angeles City(funding 
information); Map Resources (map); and GAO. 

Notes: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

Funding awards include both Recovery Act formula and competitive grants 
directly awarded to localities. Los Angeles data are as of November 9, 
2009. Sacramento data are as of November 10, 2009. 

[End of figure] 

As of November 9, 2009, Los Angeles officials reported the city had 
been awarded about $178.6 million in Recovery Act grants. This included 
about $135.2 million in formula grants to support anticrime programs, 
community development projects, energy-efficiency projects, 
homelessness and foreclosure relief, purchases of buses, and public 
housing rehabilitation.[Footnote 13] Additionally, the city reported it 
had been awarded $43.4 million in competitive grants to support airport 
improvement, art agencies, community policing, diesel emission 
reduction, port security, and public housing capital construction. 
Officials also reported that Los Angeles has applied for about $410 
million in additional Recovery Act grants for broadband and smart grid 
projects, a neighborhood stabilization program, strengthening 
communities affected by the economic downturn, training workers for 
careers in the energy sector, and transportation infrastructure. 

According to officials, Los Angeles is planning to use Recovery Act 
funds to enhance community services rather than to fund ongoing 
projects that require future financial support. 

* As of November 10, 2009, Sacramento County officials reported the 
county had been awarded about $21.0 million in Recovery Act formula 
grants. This includes about $20.8 million in Recovery Act formula 
grants to provide support for law enforcement programs such as gang 
suppression and prevention of Internet crimes against children, energy 
efficiency improvements, and airport security improvements.[Footnote 
14] The county also reported receiving a $259,000 Edward Byrne Memorial 
Competitive Grant to supervise sexual assault offenders on probation. 
The county has applied for an additional $42.0 million in competitive 
grants for highway and airport improvements and for crime 
investigations support, and plans to pursue additional competitive 
grants. County officials said they have not developed a formal exit 
strategy from Recovery Act funding but are using the funds on projects 
that will not require local financial support after the Recovery Act 
funds are spent. 

State Comments on This Summary: 

We provided the Governor of California with a draft of this appendix on 
November 17, 2009. 

In general, California state officials agreed with our draft and 
provided some clarifying information, which we incorporated. 

GAO Contacts: 

Linda Calbom, (206) 287-4809 or calboml@gao.gov. 
Randy Williamson, (206) 287-4860 or williamsonr@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Paul Aussendorf, Assistant 
Director; Joonho Choi; Guillermo Gonzalez; Chad Gorman; Richard 
Griswold; Don Hunts; Delwen Jones; Susan Lawless; Brooke Leary; Heather 
MacLeod; Joshua Ormond; Emmy Rhine; Eddie Uyekawa; and Lacy Vong made 
major contributions to this report. 

[End of section] 

Footnotes: Appendix II: California: 

[1] This does not include obligations associated with $27 million of 
apportioned funds that were transferred from FHWA to FTA for transit 
projects. Generally, FHWA has authority pursuant to 23 U.S.C. § 
104(k)(1) to transfer funds made available for transit projects to FTA. 

[2] Although we examined the data for obvious discrepancies, the data 
we collected are self-reported by individual states. Therefore, the 
data may not be complete and we consider the reliability of these data 
undetermined. 

[3] Of the $2.570 billion apportioned to California under the Recovery 
Act, $1.799 billion (70 percent) was allocated to state-level projects 
and another $771 million (30 percent) was suballocated to local 
projects. According to state sources, under a state law enacted in late 
March 2009, 62.5 percent of the $2.570 billion ($1.606 billion) will go 
to local governments for projects of their selection. 

[4] While our prior report focused on ESEA Title I, Part A funds, these 
cash management concerns extend to other Recovery Act funds drawn down 
by CDE, as reported by the U.S. Department of Education’s Office of 
Inspector General in its October 2009 Alert Memorandum–ED-OIG/L09J0007. 

[5] DOE currently plans to make the remaining funds available to the 
states once 30 percent of the housing units identified in the state 
plans are weatherized. 

[6] California also received about $14 million for its fiscal year 2009 
annually appropriated Weatherization Assistance Program. 

[7] CSD delivers weatherization services through a network of local 
service providers, including community action agencies, nonprofit 
organizations, and local governments. 

[8] CSD has not yet awarded the remaining funds—approximately $20 
million—to service providers for parts of Alameda County, parts of Los 
Angeles County, Santa Clara County, San Francisco County, and San Mateo 
County. For these areas, CSD is either seeking a new service provider 
or is withholding funds pending the completion of an investigation of 
the designated service provider. 

[9] CSD currently estimates that 50,330 homes will be weatherized with 
Recovery Act funds in California. However, as of November 10, 2009, 
California had not begun measuring the impact of its weatherization 
program because no homes in California had been weatherized with 
Recovery Act funds. 

[10] We selected these providers to capture a variety of service area 
characteristics, such as the amount of Recovery Act funds allocated; 
the number of clients served; climate zones; and a mix of rural, urban, 
and suburban areas. 

[11] According to Dun and Bradstreet, a D&B® D-U-N-S® number is a 
unique nine-digit sequence recognized as the universal standard for 
identifying and keeping track of over 100 million businesses worldwide. 

[12] 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). 

[13] Formula grants include: Community Development Block Grant ($19.2 
million), Edward Byrne Memorial Justice Assistance Grants ($30.5 
million), Emergency Shelter Grants ($29.4 million), Energy Efficiency 
and Conservation Block Grant ($250,000), Internet Crimes Against 
Children ($1.4 million), Public Housing Capital ($25.1 million), and 
Transportation Infrastructure ($8.0 million). 

[14] Formula grants include: Airport Security Grant ($11.3 million), 
Edward Byrne Memorial Justice Assistance Grants ($2.6 million), and 
Energy Efficiency and Conservation Block Grant ($5.4 million), Health 
Centers Increase Demand for Services ($546,318), Capital Improvement 
Program ($890,220), and Internet Crimes Against Children ($702,838). 

[End of Appendix II: California] 

Appendix III: Colorado: 

Overview: 

This appendix summarizes GAO’s work on the fourth of its bimonthly 
reviews of Colorado’s spending under the American Recovery and 
Reinvestment Act (Recovery Act) of 2009. The full report covering all 
of GAO’s work in 16 states and the District of Columbia may be found at 
[hyperlink, http://www.gao.gov/recovery]. 

What We Did: 

Our work in Colorado included reviewing the state’s use of Recovery Act 
funds and its experience reporting Recovery Act expenditures and 
results to federal agencies under Office of Management and Budget (OMB) 
guidance. We continued our review of several programs that we have been 
reviewing on an ongoing basis, in part because of the large amount of 
funds designated for these programs. These programs include the State 
Fiscal Stabilization Fund (SFSF); Individuals with Disabilities 
Education Act (IDEA), Part B; Elementary and Secondary Education Act 
(ESEA) of 1965, as amended, Title I, Part A; Highway Infrastructure 
Investment; Transit Capital Assistance; and the Public Housing Capital 
Fund. For descriptions and requirements of the programs we covered, see 
appendix XVIII of GAO-10-232SP. 

To understand the state’s experience reporting Recovery Act 
expenditures and results for the first quarterly report issued by the 
federal government on October 30, 2009, we examined documents prepared 
by state officials responsible for centrally gathering and reporting to 
federal agencies. We discussed these documents, and the experience of 
reporting, with several state and local agencies, including Colorado’s 
Departments of Education and Transportation, two transit agencies, and 
three housing agencies. In particular, we focused on understanding the 
agencies’ methods for identifying and verifying expenditures and 
counting jobs created and retained. 

Finally, for the first time, we visited local governments to better 
understand their use of Recovery Act funds. All regions of Colorado are 
experiencing economic stress. We chose to visit three local governments 
based on, in part, these localities’ size, location, Recovery Act 
funding, and unemployment rates. Specifically, we selected the City and 
County of Denver because it is the state’s largest city and has an 
unemployment rate above the state’s average, which is now 6.7 percent. 
We also selected two county governments: Adams County because its 
unemployment rate is higher than the state’s average and Garfield 
County because its rate is lower than the state’s average. 

What We Found: 

* State Fiscal Stabilization Fund. Since we reported in September 2009, 
the state has changed its plans for the more than $620 million of 
education stabilization funds allocated to the state.[Footnote 1] The 
state now plans to spend all its SFSF education stabilization funds on 
higher education and none on K-12 programs. The state plans to submit a 
revised application to the U.S. Department of Education to waive state 
spending requirements, called maintenance of effort, for education in 
fiscal year 2010. 

* Education programs. The pace of Colorado’s spending for the IDEA, 
Part B program and the ESEA Title I, Part A program has slowed since we 
reported in September 2009. State education officials said that their 
review of the ESEA Title I, Part A applications and IDEA, Part B 
applications has taken time and that spending depends on local 
educational agencies (LEA). The state has reviewed all applications and 
LEAs have begun seeking reimbursements for expenditures made in fiscal 
year 2010. 

* Highway Infrastructure Investment. As of October 31, 2009, the U.S. 
Department of Transportation (DOT) Federal Highway Administration 
(FHWA) has obligated $335 million of the $404 million of Recovery Act 
funds apportioned to Colorado for highway projects.[Footnote 2] Of the 
$335 million obligated, FHWA has reimbursed Colorado $61 million. At 
the same time, FHWA issued guidance requiring Colorado, as well as 
other states, to recalculate the amount of state funds used to certify 
that it would maintain state spending at a certain level in accordance 
with Recovery Act requirements. Colorado has devised a method to 
recalculate this maintenance-of-effort amount but has not yet made it 
final. 

* Transit Capital Assistance. As of November 1, 2009, DOT’s Federal 
Transit Administration (FTA) apportioned $103 million in Transit 
Capital Assistance funds to Colorado and urbanized areas located in the 
state and has obligated nearly all of these funds. Denver’s Regional 
Transportation District, Fort Collins’s Transfort, and the Colorado 
Department of Transportation’s (CDOT) rural transit program plan to use 
their share of transit funds to contract for numerous projects, 
including purchasing buses. 

* Public Housing Capital Fund. Colorado has 43 public housing agencies 
that have been allocated about $17.6 million from the Public Housing 
Capital Fund. The U.S. Department of Housing and Urban Development 
(HUD) awarded $7.9 million to the three housing agencies we reviewed 
and the housing agencies had obligated approximately $1.7 million as of 
November 14, 2009. Of the three housing agencies we reviewed, one has 
completed all projects using Recovery Act funds, one has projects 
underway, and one has yet to carry out any projects. 

* State and local use of Recovery Act funds. In addition to paying for 
specific programs such as transportation and education, Recovery Act 
funds are helping the state stabilize its fiscal year 2010 budget as it 
deals with declining revenues and two rounds of budget cuts.[Footnote 
3] Local governments are using Recovery Act funds to bolster programs 
that provide needed services but not to stabilize their budgets, as 
funds available to local entities cannot be used to pay for local 
entities’ general operating expenses. Denver reported they received 
awards totaling $55 million in Recovery Act funds, half of which were 
competitive grants and the other half of which were formula grants. 
[Footnote 4] Adams County reported awards of $9 million and Garfield 
County reported awards of $347,000. 

* Recipient reporting. Colorado officials, for the most part, viewed 
their experience with the first quarterly Recovery Act recipient report 
as successful but difficult. The state’s reporting efforts are a good 
first step. However, officials reported a number of technical problems 
uploading data to the official federal Web site and federal guidance 
changes that complicated their reporting experience. Our review of a 
small selection of reported items found some errors in calculating jobs 
associated with Recovery Act expenditures, suggesting that further 
review of the reporting results is needed. 

Colorado Will Use All SFSF Education Stabilization Funds for Higher 
Education and Will Submit a Revised Waiver for Maintenance-of-Effort 
Requirements in Fiscal Year 2010: 

Since we reported in September 2009, Colorado officials have decided to 
disburse all of the SFSF education stabilization funds allocated to the 
state to institutions of higher education (IHE). The Recovery Act 
created SFSF in part to help state and local governments stabilize 
their budgets by minimizing budgetary cuts in education and other 
essential government services. The state has been allocated a total of 
$760 million in SFSF funds, $622 million of which will be for education 
stabilization and $138 million of which will fund government services. 
In taking action to cut its fiscal year 2010 budget, the state cut 
almost $377 million from its contribution to higher education, which it 
has restored with SFSF education stabilization funds. As of November 
10, 2009, Colorado planned to disburse all its SFSF funds to IHEs: $150 
million in fiscal year 2009, $377 million in fiscal year 2010, and the 
remainder in fiscal year 2011. Although the state’s original plan for 
SFSF education stabilization funds allocated almost $170 million to K-
12 programs for fiscal years 2010 and 2011, these changes result in no 
SFSF funds being spent on K-12 education.[Footnote 5] 

The state plans to submit a revised SFSF application to the U.S. 
Department of Education requesting a waiver from maintenance-of-effort 
requirements for fiscal year 2010. The Recovery Act requires that 
states assure that they will maintain state education spending at least 
at the level of fiscal year 2006 spending, or receive a waiver from 
this requirement. To receive a waiver from this maintenance-of-effort 
requirement, a state has to show that its share of education spending 
as a percentage of total state revenues is equal to or greater than 
that of the previous year. As we reported in September 2009, the state 
requested a waiver of this maintenance-of-effort requirement for SFSF 
funds in fiscal year 2010 after an initial round of cuts to the higher 
education budget in August caused the state’s higher education spending 
to drop below fiscal year 2006 spending. 

According to Education officials, Colorado’s waiver request was not yet 
approved as of November 19, 2009, because the state’s spending and 
revenue figures for fiscal year 2010 were not yet final. According to 
state officials, Education officials said that if the numbers do not 
change, the waiver would be approved. State officials also said, 
however, that spending and revenue figures would not be considered 
final until August 2010, after the fiscal year ends on June 30. 
Further, state officials said the numbers required by the waiver are 
projected estimates that will likely change. In the meantime, the state 
has made additional cuts to its higher education budget and plans to 
submit a revised SFSF waiver request reflecting the latest spending 
levels. As of November 19, 2009, the state had not heard anything more 
from Education regarding the first waiver or submitted a revised 
waiver. 

Colorado LEAs Are Spending Recovery Act Funds Allocated for Education 
Programs Slowly, but Some Plan to Use Funds to Retain Staff: 

Colorado’s LEAs continue to spend Recovery Act education funds, 
although the pace of spending has slowed since we last reported. The 
Recovery Act provided supplemental funding for education programs 
authorized under IDEA, Part B, a major federal program that supports 
early intervention and special education for children and youth with 
disabilities, and under ESEA Title I, Part A, which provides funding to 
help educate disadvantaged youth. The state’s Department of Education 
has finished its reviews of LEAs’ applications for both programs but 
the process took additional time. In addition, the department has been 
meeting with LEAs to discuss specific IDEA, Part B authorities and 
reviewing ESEA Title I, Part A waiver applications. When they expend 
the funds, about 14 percent of Colorado’s LEAs plan to use more than 50 
percent of education funds to retain jobs. 

Colorado LEAs Are Spending Education Funds Slowly as State Reviews 
Applications and Establishes Guidance: 

Spending on education programs has slowed since we reported in 
September 2009. According to department officials, as of November 13, 
2009, Colorado LEAs had been reimbursed about $4.1 million or 3 percent 
of the state’s $154 million IDEA, Part B allocation and about $280,000 
or 0.25 percent of the state’s $111 million allocation for ESEA Title 
I, Part A. While these amounts have not changed since we last reported 
in September 2009, as of November 23, 2009, the state has obligated an 
additional $2.1 million for the IDEA, Part B program and $977,000 for 
the ESEA Title I, Part A program. Under ESEA Title I, LEAs must 
obligate at least 85 percent of ESEA Title I, Part A funds by September 
30, 2010, unless they receive a waiver, and must obligate all of their 
funds by September 30, 2011.[Footnote 6] States and LEAs must obligate 
all IDEA, Part B Recovery Act funds by September 30, 2011. 

Expenditures have not increased since we last reported because the 
Colorado Department of Education has been reviewing applications for 
the programs, and in addition, department officials said that 
expenditures depend on LEAs. Department officials said that the review 
of LEA applications for ESEA Title I, Part A and IDEA, Part B doubled 
their workload, but that the review is complete, although LEAs are 
permitted to revise the narrative and budget portions of the IDEA, Part 
B applications, requiring further review throughout the course of the 
year.[Footnote 7] Department officials said the reimbursement of 
Recovery Act funds depends on requests from LEAs and historically, LEAs 
often wait several months to accumulate expenses prior to requesting 
reimbursement. Officials said this delay may slow down the recording 
and reporting of expenditures. Colorado LEAs have begun requesting 
reimbursement for expenditures made in the state’s current fiscal year 
under both programs. 

Department officials said that, in addition to reviewing and approving 
IDEA, Part B and ESEA Title I, Part A applications, they have been 
establishing additional guidance for certain provisions of IDEA and 
reviewing and approving waiver applications related to ESEA Title I, 
Part A. In particular, state officials have been meeting with local 
officials to discuss how to manage the increase in IDEA funds under the 
Recovery Act, given existing authority under IDEA to decrease local 
expenditures. Specifically, under IDEA, Part B, eligible LEAs may 
decrease their local expenditures by up to half of the amount of the 
increase in their IDEA allocation, freeing up these funds for non-
special education expenditures.[Footnote 8] For example, by using the 
authority granted under IDEA, LEAs can direct Recovery Act funds to 
salaries and redirect local funds from salaries to other purposes, such 
as acquiring curriculum materials that are not specifically related to 
special education. Almost half of the state’s LEAs will be allowed to 
spend local funds more flexibly, according to state officials. Although 
the decision is made at the local level, and state officials did not 
know exactly how many will utilize the flexibility, state education 
officials said that all of the eligible LEAs in Colorado plan to use 
this authority. 

Department officials also said that they have been working with LEAs to 
apply for waivers of certain requirements under ESEA Title I, Part A 
that will provide the LEAs with flexibility in using those funds. The 
state received approval for the use of four waivers in August 2009, but 
now LEAs have to apply to the state to use these waivers. As of 
November 17, 2009, a number of LEAs have been granted waivers by the 
Colorado Department of Education as follows: 

* Thirty-three were granted approval for waivers of the requirement for 
LEAs to spend an amount equal to 20 percent of their fiscal year 2009 
ESEA Title I, Part A, Subpart 2 funds for public school choice-related 
transportation and supplemental educational services.[Footnote 9] 

* Twenty-six were granted approval for waivers of the requirement for 
LEAs identified for improvement to spend 10 percent of their fiscal 
year 2009 ESEA Title I, Part A, Subpart 2 funds on professional 
development. 

* Twenty-three were granted approval for waivers of professional 
development spending requirements for schools that are identified for 
improvement.[Footnote 10] (Like LEAs, schools in improvement are also 
required to spend 10 percent of their fiscal year 2009 ESEA Title I, 
Part A funds on professional development.) 

* Twenty-four were granted approval for waivers of the requirement that 
LEAs include some or all of the ESEA Title I, Part A Recovery Act funds 
in calculating the per-pupil amount for supplemental educational 
services. 

Colorado Department of Education officials said that LEAs that are 
granted waivers have more flexibility in ensuring the funds are used to 
support increased student achievement in the short term, as opposed to 
being set aside for specific uses and possibly left unused for an 
unspecified amount of time. Department officials said that they use a 
three-step process to review and approve LEA waiver requests, which 
includes (1) determining if all assurances and supporting evidence are 
provided; (2) reviewing data used by LEAs to identify needs for other 
uses of the funds, which includes looking for multiple data sources, 
such as assessments and evaluations; and (3) working with LEAs to 
improve the requests or sending approval letters. 

Colorado LEAs Plan to Use Education Funds to Retain Jobs: 
We surveyed a representative sample of LEAs—generally school districts—
nationally and in Colorado about their planned uses of Recovery Act 
funds. Table 1 shows Colorado and national GAO survey results on the 
estimated percentages of LEAs that (1) plan to use more than 50 percent 
of their Recovery Act funds from three Education programs to retain 
staff, (2) anticipate job losses even with SFSF funds, and (3) reported 
a total funding decrease of 5 percent or more since last school year. 
[Footnote 11] 

Table 1: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, IDEA funds; 
Estimated percentages of LEAs, Colorado: 14%; 
Estimated percentages of LEAs, Nation: 19%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, Title I funds; 
Estimated percentages of LEAs, Colorado: 15%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, SFSF funds; 
Estimated percentages of LEAs, Colorado: NA[A]; 
Estimated percentages of LEAs, Nation: 63%. 

Responses from GAO survey: Anticipate job losses, even with SFSF funds; 
Estimated percentages of LEAs, Colorado: NA[A]; 
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs, Colorado: 13%; 
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for Colorado have margins of error, at the 
95 percent confidence level, ranging from plus or minus 11 to 23 
percentage points. The nationwide percentage estimates have a margin of 
error of plus or minus 5 percentage points. 

[A] Colorado plans to use its full allocation of SFSF education 
stabilization funds for higher education, making the responses from 
LEAs regarding SFSF not applicable. 

[End of table] 

Colorado’s Highway Infrastructure Work Continues, Although the State 
Also Plans to Revise the Amount of State Spending Needed to Meet 
Recovery Act Requirements: 

Colorado’s highway work using Highway Infrastructure Investment funds 
continues. Of the $404 million apportioned to Colorado in March 2009, 
$18.6 million was transferred to FTA for transit projects, leaving $385 
million for highway projects in the state. As of October 31, 2009, FHWA 
had obligated almost $335 million of this amount and had reimbursed $61 
million to the state.[Footnote 12] As of the same date, CDOT planned 
100 projects, and FHWA had approved or committed funding for 79 of 
these projects. The number of planned projects has increased by eight 
since we reported in September 2009. Table 2 shows the status of the 
100 projects that CDOT has planned as of October 31, 2009. 

Table 2: Status of CDOT’s Use of Recovery Act Funds for Highway 
Infrastructure Projects: 

Planned: 100; 
Projects approved[A]: 79; 
Obligations (millions): $335; 
Awarded contracts: 68; 
Construction underway[B]: 55; 
Completed: 8; 
Savings (millions): $32.6. 

Source: GAO analysis of CDOT data. 

[A] CDOT also received $250,000 for a project FHWA approved to provide 
on-the-job training in highway construction to individuals from 
traditionally underutilized communities throughout northern Colorado. 

[B] For five of the awarded contracts, construction has not yet begun. 

[End of table] 

CDOT plans to complete the additional eight projects in areas across 
the state, including six projects in economically distressed areas of 
the state. In our last report, we noted that CDOT planned 36 projects 
in economically distressed areas, which are those areas experiencing 
relatively low income levels or relatively high unemployment rates, or 
experiencing a “special need” arising from actual or threatened severe 
unemployment or economic adjustment problems resulting from severe 
short-term or long-term changes in economic conditions.[Footnote 13] 
The additional projects in distressed areas include pavement 
improvement projects and construction of a pedestrian bridge. 

Five of the additional planned projects will be funded from savings 
accumulated by CDOT. Savings, in this case, represent the difference 
between the amount of Recovery Act funds CDOT allocated to spend on 
highway projects and the amount FHWA has obligated for these same 
projects, which takes into account funds that have been deobligated. As 
of October 31, 2009, Colorado had awarded 68 contracts, a number of 
which were awarded for less than the amount the state had allocated for 
these projects, representing savings totaling $32.6 million. CDOT 
officials told us that the difference is due, among other reasons, to 
larger numbers of contractors bidding on work in fiscal year 2009 than 
in fiscal year 2008, bringing down the average bid amount. CDOT has 
asked FHWA to deobligate funds on an ongoing basis. 

While CDOT continues to award contracts and carry out projects, it is 
also revising its calculation of state highway infrastructure funding 
needed to meet Recovery Act requirements. The Recovery Act requires 
states to certify that they will maintain state spending at a certain 
level, called maintenance of effort, to qualify for a planned 
redistribution of highway infrastructure funds that will occur after 
August 1, 2010, for fiscal year 2011. States that do not maintain 
spending will be prohibited from participating in the August 
redistribution of federal-aid highway and highway safety construction 
program obligational authority for fiscal year 2011. Colorado provided 
its certification to DOT on March 19, 2009. 

In response to new guidance from FHWA on maintenance-of-effort 
certifications, CDOT plans to revise its calculation to include 
revenues collected by the state but allocated directly to local 
entities. On September 24, 2009, FHWA issued guidance to states, 
including Colorado, to report state transportation funding allocated to 
local governments. In Colorado, these revenues are the local share—40 
percent—of funds received from a state gas tax that are to be used to 
improve public roads and highways in the state. CDOT originally 
calculated its maintenance of effort using the amount of state funds 
planned, as of February 17, 2009, to be expended through September 30, 
2010. According to CDOT officials, they did not include locally planned 
expenditures in this calculation because the agency has no direct 
knowledge of or control over how localities spend the portion allocated 
to them by the state. CDOT officials said that to revise the 
calculation, the agency plans to work with the State Treasury to 
identify the amount of tax funds transferred to local entities. CDOT 
has not yet resubmitted its certification with this new maintenance-of-
effort amount to DOT because it is waiting for DOT to give states final 
guidance. 

Although some state officials expressed concern that gas tax revenues 
could fall significantly, thus lowering the state’s planned spending, 
CDOT officials said they expect to meet the maintenance-of-effort 
amount. They said that CDOT has a long history of qualifying for and 
receiving redistribution funds through the annual process and that the 
state passed a new vehicle registration fee within the last year that 
is helping to make up for lower gas tax revenues in the state. 
According to CDOT officials, the agency could potentially receive $10 
million to $20 million of the redistributed funds. 

State Transit Agencies Continue to Use Recovery Act Funds for High-
Priority Projects, Including Bus Purchases: 

State transit agencies continue to use Recovery Act funds for a variety 
of high-priority Transit Capital Assistance projects. As of November 1, 
2009, nearly all of the $103 million apportioned to the state and 
urbanized areas for such projects had been obligated. We reviewed and 
discussed with officials projects at three of Colorado’s transit 
agencies, including Denver’s Regional Transportation District (RTD); 
Fort Collins’s transit agency, Transfort, which serves the city of Fort 
Collins in northeastern Colorado; and CDOT’s rural transit program. RTD 
officials said that they plan to use the agency’s $72 million in 
Recovery Act funds for projects such as expanding light rail service 
and buying buses. Transfort officials said that they plan to use $3.4 
million in Recovery Act funds for, among other projects, purchasing 
buses and improving bus corridors.[Footnote 14] And, as we reported in 
September 2009, CDOT is using its transit funds to build a bus 
maintenance facility and purchase buses in nonurbanized areas of state. 

Colorado’s transit agencies are using a portion of their Recovery Act 
funds to purchase buses primarily to replace an aging fleet. We 
reviewed and discussed with officials plans for bus purchases at two 
Colorado transit agencies, RTD and Transfort. According to agency 
officials, both agencies are purchasing replacement buses under the 
terms of existing contracts: RTD plans to use $3 million to purchase 
six 45-foot intercity buses and Transfort is using $2.4 million to 
purchase six 40-foot city buses. Transfort also provided $700,000 in 
Recovery Act funds to Loveland to buy two buses, including one to 
replace an older bus and another to provide new bus service between the 
cities of Longmont and Loveland. 

As we reported in September 2009, RTD and CDOT plan to use their 
existing internal controls and processes to manage and expend Recovery 
Act funds. Officials at Transfort also stated that they are using their 
existing internal controls and processes to manage and expend Recovery 
Act funds. However, FTA reviewed Transfort’s compliance with statutory 
and administrative requirements in 2009 and identified deficiencies in 
eight areas, including oversight of subrecipients. In particular, the 
review found that Transfort does not monitor its subrecipients to 
ensure that they comply with FTA requirements. Transfort is taking 
action to address this deficiency by having subrecipients sign 
supplemental agreements that make them responsible for seeking 
reimbursement directly from FTA and reporting directly to FTA on 
expenditures. 

In addition to their planned bus purchases, RTD and Fort Collins 
officials said they have awarded contracts for other projects. 
Specifically, RTD officials told us that they have awarded contracts to 
undertake safety improvements along a bus corridor, replace a roof on a 
maintenance facility, upgrade a computer system, enhance light rail 
service in several locations, and extend train platforms. Transfort 
officials told us that they plan to upgrade the agency’s fare 
collection system and have provided funds for other transit projects in 
the cities of Loveland and Berthoud. Finally, CDOT officials told us 
that they have awarded a contract to a rural transit agency in Summit 
County to seek a contractor to build the bus maintenance facility. 
Summit County in turn contracted with a private firm to build the 
facility (see figure 1 for a picture of the facility under 
construction). 

Figure 1: Summit County Bus Maintenance Facility under Construction: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

We reviewed and discussed with agency officials the contract for 
Transfort bus purchases and the Summit County contract to build the bus
maintenance facility. Contracting officials with the city of Fort 
Collins and Summit County provided us the following information about 
the contracts: 

* On April 27, 2009, the city of Fort Collins modified an existing 
contract with North American Bus Industries to supply six 40-foot city 
buses by March 31, 2010. The new buses, fueled by compressed natural 
gas, will reduce carbon emissions as they are replacing diesel buses. 
The estimated cost of the modification is $2.4 million, to be paid 
after inspection, on delivery. The original contract was awarded 
competitively in 2007 and is a fixed-price contract in that the price 
of each bus is $406,000. 

* On August 13, 2009, Summit County entered into an $8.4 million 
contract with AP Mountain States, LLC, to construct a new multiuse 
fleet maintenance facility by July 28, 2010, with a possible extension 
if needed due to variable weather conditions. This fixed-price contract 
was awarded competitively. 

Colorado Housing Agencies Continue to Make Progress on Recovery Act 
Projects: 

Colorado has 43 public housing agencies that have received Recovery Act 
formula grants. In total, these public housing agencies received almost 
$17.6 million in Public Housing Capital Fund formula grants. As of 
November 14, 2009, these public housing agencies had obligated almost 
$5.9 million and had drawn down approximately $2.8 million (see fig. 
2). On average, housing agencies in Colorado are obligating formula 
funds more slowly than housing agencies nationally. In addition to the 
Capital Fund formula grants, HUD awarded nine competitive grants to 
housing agencies in Colorado, including five to the Housing Authority 
of the City and County of Denver. We reviewed the following three 
housing agencies for this report: the Housing Authority of the City and 
County of Denver, Holyoke Housing Authority, and the Housing Authority 
of the Town of Kersey. We reviewed these three housing agencies because 
we visited them for our July 2009 report.[Footnote 15] 

Figure 2: Percentage of Public Housing Capital Funds Allocated by HUD 
that Have Been Obligated and Drawn Down in Colorado, as of November 14, 
2009: 

[Refer to PDF for image: 3 pie-charts and 1 horizontal bar graph] 

Funds obligated	by HUD: 96.4%; $16,949,529; 
Funds drawn down by public housing agencies: 33.4%; $5,887,381; 
Funds obligated by public housing agencies: 16.3%; $2,863,838. 

Number of public housing agencies: 
Entering into agreements for funds: 43; 
Obligating funds: 36; 
Drawing down funds: 24. 

Source: GAO analysis of HUD data. 

[End of figure] 

The three public housing agencies we visited in Colorado received 
Capital Fund formula grants totaling almost $7.9 million. HUD allocated 
approximately $7.8 million in formula capital funds to the Denver 
Housing Authority, $59,934 to the Holyoke Housing Authority, and 
$29,193 to the Kersey Housing Authority. As of November 14, 2009, the 
Denver Housing Authority had obligated about $1.7 million and drawn 
down about $795,000 in Recovery Act funds, the Holyoke Housing 
Authority had both obligated and drawn down its full allocation, and 
the Kersey Housing Authority had not obligated or drawn down any 
Recovery Act funds. Only one of the housing agencies we visited—Denver—
was awarded competitive grants; it received all five of the grants—
totaling $27 million—for which it applied. 

The Denver Housing Authority originally planned to complete five to 
eight projects with formula funds, but reprioritized this workload to 
include more projects when it found out that it had won the five 
competitive grants for which it applied. Three of the five projects 
funded with competitive grants had been scheduled as priorities to be 
completed with formula funds; the receipt of the competitive funds 
freed up formula funds to be used for other projects. Because of the 
competitive grant application process, Denver Housing Authority was 
flexible about which projects would be funded with formula grants until 
the agency found out which competitive awards it would receive. 
Officials said they plan to use the competitive grant funds to pay for 
activities such as renovation of public housing units, new construction 
of senior/disabled public housing units, and community center 
enhancements and site work. They plan to use formula grants to 
undertake rehabilitation and replacement of public housing units' water 
heaters, as well as deferred maintenance work on four housing projects. 

Because the Denver Housing Authority decided to use competitive funds 
for projects that had been scheduled for formula funds, the time frames 
for these newly converted competitive projects were revised while the 
time frames for new formula funded projects were accelerated. Despite 
the changes to time frames, housing officials do not anticipate any 
problems in meeting the March 17, 2010, deadline for obligating 100 
percent of formula funds. Officials said that they had begun planning 
work on selected projects in anticipation of receiving competitive 
funds. 

During our review of the three public housing agencies, we updated the 
status of projects we reported on in July 2009. At that time, the 
Denver Housing Authority planned to use $250,000 of formula funds to 
pay for replacing water heaters in 200 units with energy-efficient 
water heaters, and to complete exterior painting. The project was 
scheduled to begin in June 2009, and to be completed by December 2009. 
In the interim, Denver officials decided not to advertise and 
competitively award the contract for this project until September 2009 
because they were waiting for Buy American guidance which was issued on 
August 21, 2009. Consequently, the officials revised the project's 
schedule for completion to February 2010. To date, the water heaters 
have been ordered and the exterior painting, which was part of the 
initial scope of work, was dropped. 

The Housing Authorities of Holyoke and the Town of Kersey are small, 
rural housing authorities that have used or are planning to use 
Recovery Act funds for smaller-scale projects. For example, we reported 
in July 2009 that the Holyoke Housing Authority planned to use about 
$14,000 in Recovery Act funds to replace wooden patio fences at 30 
units with vinyl fences and attached solar lights. This project was 
completed on July 14, 2009. Holyoke Housing Authority officials told us 
that they have spent 100 percent of the agency's allocation, and as 
such, do not have an issue in meeting the March deadline. As we 
reported in July 2009, the Kersey Housing Authority planned to use some 
of its Recovery Act funds to replace older windows in 18 units with 
energy-efficient windows. The agency has not yet spent any Recovery Act 
funds because its directorship recently changed, delaying the start of 
projects. 

We reviewed three housing contracts, two managed by the Denver Housing 
Authority and one managed by the Holyoke Housing Authority. Housing 
agency officials provided the following information about the 
contracts: 

* On March 30, 2009, the Denver Housing Authority awarded a $295,926 
contract to PS Arch Incorporated to provide architectural and 
engineering design services for its Westwood Homes Project by December 
5, 2009. This contract was awarded competitively as an indefinite-
delivery, indefinite-quantity contract, and officials said it contained 
a fixed hourly labor rate. 

* On September 9, 2009, the Denver Housing Authority awarded a $24,800 
contract to Wholesale Specialties Incorporated to supply 64 40-gallon 
hot water heaters for its Columbine Homes Project by December 31, 2009. 
This fixed-price contract was awarded competitively. 

* On September 14, 2009, the Holyoke Housing Authority awarded a 
$27,409 contract to Whittaker Construction to replace hinged patio 
doors at its Sunset View Apartment Project. This fixed-price contract 
was awarded competitively. 

Recovery Act Funds Help Colorado Make Up for Additional Budget Cuts, 
While Local Governments Use Recovery Act Funds in Other Ways: 

As Colorado's revenues continue to decline, Recovery Act funds have 
helped stabilize the state's budget by making up for reductions in the 
state's general fund. As we reported in September 2009, Colorado had 
already planned to use more than $600 million in Recovery Act funds in 
fiscal year 2010.[Footnote 16] It now plans to use an additional $190 
million in SFSF funds to offset proposed cuts in budgets for higher 
education and corrections. We reported in September that Colorado's 
Governor had begun making $318 million in budget cuts and adjustments, 
including eliminating 300 full-time equivalent jobs, to the state's 
fiscal year 2010 general fund budget of $7.48 billion. After a new 
economic forecast released in September showed further declines 
expected in state revenues, the Governor announced a second set of 
actions, totaling $286 million, to balance the state's general fund 
budget. Colorado officials expect the state's budget to continue to be 
challenging in fiscal year 2011, as the flow of Recovery Act funds that 
have helped stabilize the budget stops and the financial requirements 
of Medicaid and other caseloads continue to increase. 

The three local governments we visited—Denver, Adams County, and 
Garfield County—each used Recovery Act funds to support local programs, 
although they differed significantly in terms of their economic 
situations and budgets as shown in table 3.[Footnote 17] As a result of 
these different conditions, local officials expressed different levels 
of interest in applying for Recovery Act funds. For example, officials 
with Denver's Recovery Act management team said that although Recovery 
Act funds cannot be used to backfill cuts in their general operating 
budget, they are actively seeking grants for social services and other 
programs that provide critical services during a recession. On the 
other hand, officials with Garfield County said that the county's 
reserve funds are healthy and while they have received funds from 
formula grants, they are not actively applying for competitive grants. 
Adams County officials indicated that they knew of opportunities for 
grants, but said they did not have people in positions to apply for or 
manage those grants. For example, the officials mentioned that they do 
not have someone in a position to research or apply for grants to 
expand broadband Internet coverage. This potential lack of capacity at 
the local level may signal an opportunity for state officials to offer 
assistance and leverage Recovery Act funds across several smaller 
entities. State officials said that they have had many outreach 
sessions and that they will continue to do so. 

Table 3: Information on Three Local Governments Visited by GAO: 

Locality: City and County of Denver; 
Population: 598,707; 
Unemployment rate[A]: 7.7%; 
Budget (millions): $2,100; 
Recovery Act funds reported (millions)[B]: $55.3. 

Locality: Adams County; 
Population: 430,836; 
Unemployment rate[A]: 8.1%; 
Budget (millions): $426.2; 
Recovery Act funds reported (millions)[B]: $9. 

Locality: Garfield County; 
Population: 55,426; 
Unemployment rate[A]: 5.8%; 
Budget (millions): $135.7; 
Recovery Act funds reported (millions)[B]: $0.35. 

Source: U.S. Census Bureau, U.S. Department of Labor, and local 
governments. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009, and have not been seasonally 
adjusted. Rates shown are a percentage of the labor force. Estimates 
are subject to subsequent revision. 

[A] The state's average unemployment rate is 6.7 percent. 

[B] We did not look at Recovery Act funds that went to separate 
jurisdictions within the counties, such as school districts and transit 
or housing agencies. 

[End of table] 

Denver: Denver officials said the city faces a difficult economic and 
budget situation and is actively applying for Recovery Act funds. The 
city had to close a $120 million funding gap in its fiscal year 2010 
budget created by declining revenues and increasing costs associated 
with law enforcement, fuel, and health insurance. As a result, the city 
is taking such actions as eliminating over 600 positions, of which 176 
are layoffs, and implementing program efficiencies. Although Denver 
reported $55.3 million in Recovery Act awards, according to city 
officials, these funds are having a limited effect on the city's 
general fund budget because the funds cannot be used for general 
operating expenses. City departments are actively applying for Recovery 
Act funds, however. According to officials, the funds support needed 
services, such as law enforcement and emergency food and shelter. As a 
result, Denver has dedicated resources to grant screening and 
applications and, according to officials, half of the city's Recovery 
Act funds have been competitively awarded based on proposals submitted 
by the city and half are formula grants. Table 4 shows the benefits 
beyond job creation that officials said have resulted from Recovery Act 
spending. 

Table 4: Examples of Recovery Act Programs and Benefits in Denver, 
Colorado: 

Program: Child Care Assistance; 
Funding: $5 million; 
Description: Provided child care subsidies for 874 children; 
Full-time equivalent jobs created or retained: 0; 
Benefits beyond jobs created or retained: Allowed parents to seek or 
retain jobs. 

Program: Airport Improvement Program (three projects); 
Funding: $11.5 million; 
Description: Denver International Airport runway repair and widening; 
Full-time equivalent jobs created or retained: 128 private jobs; 
Benefits beyond jobs created or retained: Will enable larger planes to 
use runway. 
			
Program: Workforce Investment Act—Youth program; 
Funding: $1.9 million; 
Description: Support summer youth employment and training; 
Full-time equivalent jobs created or retained: 280, of which 279 were 
in the private or nonprofit sector; 
Benefits beyond jobs created or retained: 716 youth enrolled and 
employed. 

Source: GAO analysis of Denver's Recovery Act management team data. 

[End of table] 

Adams County: Adams County, facing high unemployment and decreased tax 
revenues, plans to use $9 million in Recovery Act funds to provide 
social and other services during the current economic downturn. As of 
October 31, 2009, Adams County spent the majority of its Recovery Act 
funds (approximately 88 percent of $3.8 million) for workforce 
investment (including job training) and social services (including 
child care and food assistance). While declining revenues may cause 
county officials to reduce the county's general fund budget in fiscal 
year 2010 in an attempt to avoid layoffs, the county maintains a 
substantial general fund balance to help it through major economic 
downturns, according to officials. However, the county has made limited 
efforts to apply for competitive Recovery Act funds (almost 9 percent, 
or approximately $791,000, of Adams County's total awarded Recovery Act 
funds are competitive grants), applying for grants that individual 
departments identify and select if the grants fit within the 
department's existing strategic plan. County officials have not applied 
for more Recovery Act grants because, according to officials, the 
county does not have staff dedicated to identifying and applying for 
such grants. For example, officials said they would not compete for 
broadband funding because they do not have an existing county 
department that would determine eligibility, develop the application, 
and implement the program. 

Garfield County: Garfield County officials plan to use the Recovery Act 
funds they have been awarded for different programs, but county 
officials said that they are not actively applying for competitive 
Recovery Act funds. The county's economy and revenues, which depend on 
oil and gas production, have allowed it to maintain a large fund 
balance to deal with economic downturns. According to county officials, 
Garfield County tries to maintain at least 50 percent of the following 
year's expected expenditures in reserve. Although county officials 
expect these revenues to decline in fiscal years 2011 and 2012, they 
believe the fund balance will cover the loss in revenues. Through 
October 31, 2009, the county reported receiving $347,000 in Recovery 
Act funds, including a $227,500 Energy Efficiency and Conservation 
Block Grant.[Footnote 18] This block grant is intended to assist U.S. 
cities, counties, states, territories, and Indian tribes to develop, 
promote, implement, and manage energy efficiency and conservation 
projects and programs. The Garfield New Energy Communities Initiative, 
a regional collaborative group composed of representatives from state 
and local agencies, nonprofits, and clean energy businesses, will use 
this grant to build a residential and commercial energy efficiency 
program started under a state initiative. According to county 
officials, the remaining Recovery Act funds are for job training and 
law enforcement equipment. 

Officials in Colorado Deemed Their Initial Reporting Successful, 
Although They Expressed Concerns About Jobs Data and Guidance: 

State officials said they experienced difficulties in the overall 
process of reporting their use of Recovery Act funds but were able to 
successfully upload the state's data for the first quarterly Recovery 
Act report. OMB guidance describes how recipients and subrecipients of 
Recovery Act funds are to report on their use of those funds. 
Generally, prime recipients—nonfederal entities that receive Recovery 
Act funds from federal agencies—are to submit information to 
www.federalreporting.gov, an online portal managed by the Recovery 
Accountability and Transparency Board that collects Recovery Act 
information. Subrecipients—any nonfederal entity that is responsible 
for program requirements and spends federal funds awarded by a prime 
recipient—may be delegated reporting responsibility by a prime 
recipient. Colorado used its centralized reporting process, which we 
described in our September 2009 report, to gather data from state 
agency recipients and subrecipients and provide it to 
www.federalreporting.gov.[Footnote 19] This data was then made public 
on www.recovery.gov on October 30, 2009. 

State and Local Officials Declared Their Recipient Reporting Successful 
Despite Difficulties: 

Although they described the overall process of reporting to the federal 
Web site as frustrating, time-consuming, and burdensome, Colorado 
officials expressed satisfaction with the results of their centralized 
reporting process. As we previously reported, state officials believed 
a centralized process afforded the best opportunity to ensure that 
complete, reliable, and non-duplicative information was submitted for 
state agencies. Colorado's Office of Information Technology (01T) was 
the central point for collecting information from state agencies and 
uploading it to the federal Web site. To control data submissions and 
corrections, the state used OIT as the central point (with one Dun and 
Bradstreet (DUNS) number) to gather and submit data. OIT uploaded the 
information for over 400 grants on October 9 and 10, 2009, the original 
deadline for state submissions. The data consisted of 340 zipped files 
from state agencies and IHEs, and another 75 separate files from CDOT. 
Subsequently, Colorado submitted an additional 22 files raising the 
total to 437. 

Officials responsible for Colorado's centralized reporting experienced 
difficulties before, during, and after reporting, as described below. 
In certain cases, Colorado officials offered suggestions to remedy the 
difficulties. 

* The process for registering as an authorized user on 
www.federalreporting.gov was difficult, with no way of gaining 
assurance the steps in the process were completed. According to state 
officials, obtaining DUNS numbers was time-consuming and delayed the 
DUNS numbers being available for registration in the Central Contractor 
Registration system, an interim step necessary to use the federal Web 
site. 

* The federal Web site rejected numerous files that OIT uploaded but 
did not always identify the problem that caused the rejection. As a 
result, OIT had to review the files, look for issues that appeared 
problematic, make changes or corrections, and resubmit the data. Some 
problems that caused rejections were technical, pertaining to batch 
processing, and others were simple, such as words not being 
capitalized. Officials stated that more explicit feedback from the Web 
site would have been helpful to diagnose the problems more quickly. 

* OIT received late information on 23 grants because the grants were 
awarded in late September and the grant recipients had to collect and 
report information for them in October. State officials said they would 
like the federal government to establish a mid-month cut off date for 
awarding grants at the end of the quarterly reporting period to allow 
adequate processing time. 

* The Controller's office had to relinquish an internal control 
designed for state reporting because of federal policy changes that 
occurred. State officials originally planned to have state agencies 
view their data on www.recovery.gov on October 11, but the plan had to 
be changed when the Recovery Accountability and Transparency Board 
announced on September 14, 2009, that Web site data would not be 
available until October 30, 2009, the day following the end of the 
review period. State officials then planned to have agencies review 
their data on www.federalreporting.gov using the DUNS numbers 
associated with their awards. However, because this function was not 
available, the data was viewable by the state agencies only if the 
Controller's office provided them with OIT's DUNS number. In making the 
OIT DUNS number available to state agencies, the Controller 
relinquished one of his planned internal controls over reporting—
limited access to the state's data. The Controller provided the OIT 
DUNS number to all agencies and also downloaded the information from 
the www.federalreporting.gov Web site and provided it to all state 
agencies for their review. 

* During the federal review period (October 22 to 29), the state 
received numerous comments that were difficult to manage. The majority 
of federal comments received by the state related to reported full-time 
equivalent (FTE)[Footnote 20] numbers. Certain federal agencies 
questioned the reported FTEs using parameters they had developed for 
the review process to determine whether the numbers were in acceptable 
ranges. However, according to the Controller, it was unclear from the 
review comments what the parameters were based on, which made it 
difficult for his office to assist agency personnel in making any 
necessary changes. The state also received comments from federal 
agencies (1) demanding changes in expenditure amounts that the state 
could not support with its records; (2) presenting conflicting comments 
on the same grant; and (3) providing comments by phone and email rather 
than in the www.federalreporting.gov system. 

* According to the State Controller and other officials, the 
Departments of Education and Justice issued guidance on reporting that 
conflicts with the state's Recovery Act reporting guidance. If 
implemented, the directives would have degraded or eliminated certain 
of the state's internal controls over Recovery Act data. One of the 
core control elements of the Controller's centralized reporting process 
is the use of separate accounting codes and indicators to identify and 
track Recovery Act receipts, expenditures, and other data for reporting 
to federal agencies and for reporting on the state's financial 
statements.[Footnote 21] The federal agencies' directives, if followed, 
would have required the state to change the indicator used for state 
IHEs and justice agencies. This would have caused Recovery Act funds to 
be reported as expenditures rather than as transfers to other agencies, 
which would be incorrect for the purpose of the state's financial 
statements. As a result, the Controller's Office would have had to 
perform considerable manual reviews and reconciliations of the data to 
prevent gaps or duplications in the state's reporting records. 
According to the State Controller, this issue did not affect the 
October reporting cycle because the state asked to hold off on applying 
the directives in the first reporting cycle. As the directives are 
still in effect, however, the state would like to resolve the matter 
before the next reporting cycle. 

Officials with local entities also deemed the reporting process a 
success despite difficulties they faced in reporting. Local agencies 
are not included in the state's centralized reporting process, but we 
inquired about recipient reporting as part of our visits to two transit 
agencies and one county. Examples of their experiences included: 

* A transit official encountered problems when trying to upload 
subrecipient financial information to www.federalreporting.gov. He was 
instructed by help desk personnel to enter the total amount of the 
grant under one recipient, not for the subrecipients. 

* A county official said that she had problems with her password 
logging on to the system and did not receive a call back for several 
days from the help desk. She finally called the Colorado Governor's 
Office contact who connected her to the state's OMB liaison. 

Some State and Local Officials Expressed Concerns about Jobs Data and 
Guidance and Our Review Found Some Data Errors: 

Some state and local officials had the following concerns about jobs 
data and guidance provided on jobs reporting: 

* CDOT officials expressed concerns that the public would compare the 
FTE figures reported on www.recovery.gov and the number of jobs CDOT is 
reporting monthly to the House Committee on Transportation and 
Infrastructure and would not understand the wide discrepancies between 
the figures, which are calculated differently.[Footnote 22] They said 
that this will create a public relations challenge for their agency 
that could be minimized with further explanations of FTEs and jobs 
created or retained on the www.recovery.gov Web site. 

* Local transit officials expressed concern about conflicting FTA 
guidance on how to count jobs associated with the manufacturing of 
buses being purchased with Recovery Act funds. Specifically, FTA's 
guidance for the OMB Recovery Act report stated that jobs associated 
with manufacturing buses should be counted as direct jobs resulting 
from Recovery Act expenditures. On the other hand, FTA guidance for 
another report required of transportation agencies—called the 1201(c) 
report for the section in the Recovery Act that requires it—directs 
agencies not to count jobs associated with manufacturing buses. Local 
officials believe the guidance should be clarified to remove the 
conflict. 

* Colorado Department of Education officials stated that jobs-related 
guidance they received in September from the U.S. Department of 
Education was late and contradicted OMB guidance provided in June, 
particularly as it pertained to how LEAs should count jobs with 
contractors. Officials said that OMB's June reporting guidance 
indicated not to report these jobs, but guidance issued by Education in 
August and September directed that these jobs be counted. While the 
Colorado Department of Education issued reporting guidance on September 
16, 2009, directing that the jobs be counted, state education officials 
were concerned that LEAs did not have time to incorporate the new 
guidance into their reporting. Specifically, because the state reported 
centrally, LEA data were due to the Colorado Department of Education by 
September 25, 2009, to report to the Controller's Office by September 
29, 2009. 

While we did not conduct a full review of data reported by Colorado 
state agencies in October 2009, we reviewed jobs data for a selection 
of projects and found discrepancies. We reviewed jobs data for three 
highway construction projects with expenditures that represented over 
50 percent of Colorado's highway project expenditures of $17.5 million 
as of September 4, 2009. We found several discrepancies in the reported 
data. For two of the projects we examined, CDOT officials reviewed 
their file information and found that almost 1,400 work hours had been 
overlooked in the calculation of FTEs and would have to be corrected 
during the next reporting cycle. For the third project, CDOT officials 
stated that additional review was necessary because they could not 
explain hourly and payroll discrepancies between CDOT and FHWA data. 
They said any necessary corrections will be made as part of the next 
quarter's data submission. We also reviewed jobs information reported 
by RTD and Transfort for two transit projects and found that the jobs 
numbers were incorrect. RTD officials said that FTA instructed them to 
prorate the jobs based on the Recovery Act funds in the project. As a 
result, they revised the jobs number from 670 to 296 and resubmitted 
the data to www.federalreporting.gov. FTA also instructed Transfort to 
revise its jobs data so that the expenditures and the jobs numbers 
would match. According to a Transfort official, he misinterpreted FTA 
guidance when responding to the FTA instructions and reported 1.4 jobs 
when he should have reported no jobs. The jobs reported were estimated 
for the purchase of passenger vans from a dealer's inventory which is 
not in compliance with FTA guidance. 

Given the limited time frames to gather and report such a large amount 
of state and local data using a newly developed, centralized process, 
the state's efforts are a good first step. State officials described 
having to deal with last-minute changes in guidance that they believed 
could cause confusion and errors. We did not conduct a full review of 
the data to determine reliability and therefore cannot confirm the 
sources of the errors. However, the circumstances and the errors we 
encountered indicate the need for further review of the data. 

Colorado's Comments on This Summary: 

We provided officials in the Colorado Governor's Recovery Office, as 
well as other pertinent state officials, with a draft of this appendix 
for comment. State officials agreed with this summary of Colorado's 
recovery efforts to date. The officials provided technical comments, 
which were incorporated into the appendix as appropriate. 

GAO Contacts: 

Robin M. Nazzaro, (202) 512-3841 or nazzaror@gao.gov. 
Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Paul Begnaud, Steve Gaty, 
Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer Leone, Tony Padilla, 
Kathleen Richardson, Lesley Rinner, and Mary Welch made significant 
contributions to this report. 

[End of section] 

Footnotes: Appendix III: Colorado: 

[1] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to 
States and Localities, While Accountability and Reporting Challenges 
Need to Be Fully Addressed (Colorado), [hyperlink, 
http://www.gao.gov/products/GAO-09-1017SP] (Washington, D.C.: September 
23, 2009). 

[2] The apportioned funds include $18.6 million that was transferred 
from FHWA to the Federal Transit Administration (FTA) for transit 
projects in accordance with 23 U.S.C. § 104(k)(1). This leaves $385 
million for highway projects in the state. FTA reported that the $18.6 
million has been obligated 

[3] The state’s fiscal year runs from July to June and localities’ 
fiscal years run from January to December. 

[4] Two methods of distributing federal grant funds are by formula and 
through competition. Congress can direct that funds be apportioned 
among eligible recipients on the basis of a statutorily defined formula 
or it can authorize federal agencies to award funding competitively. 

[5] According to state budget documents, the state’s fiscal year 2010 
budget increases K-12 funding 5 percent from fiscal year 2009 spending. 
According to a Colorado state legislative study, in 2000, Colorado 
voters approved a measure to increase education spending in the state; 
this amendment directed a portion of state tax revenues to the State 
Education Fund through fiscal year 2011. The amendment requires an 
annual increase in per-pupil funding and requires the state general 
fund appropriation for state aid to schools to increase by 5 percent 
per year, unless state personal income increased by less than 4.5 
percent during the previous year. 

[6] Colorado has received a statewide waiver for all LEAs to carry over 
for obligation more than 15 percent of their total ESEA Title I, Part A 
funds, including their ESEA Title I, Part A Recovery Act funds, until 
September 30, 2011. 

[7] In Colorado, special education programs are organized into 61 
administrative units, which, according to Colorado officials, are 
considered LEAs for the purposes of IDEA. Colorado also has five state-
operated programs that are considered LEAs under IDEA, including two 
mental health institutes, two correction facilities, and one school for 
the deaf and blind. 

[8] To be eligible for the funding flexibility, an LEA must receive a 
determination of “Meets Requirements” by the state, which is 
established by meeting the measurable targets established in Colorado’s 
2005-2010 State Performance Plan. LEAs must spend the “freed-up” state 
and local funds on activities that are authorized under ESEA. 

[9] Schools that have missed academic achievement targets for 3 
consecutive years must offer students public school choice or 
supplemental education services, which are additional academic 
services, such as tutoring or remediation, designed to increase the 
academic achievement of students. 

[10] An LEA is identified for improvement if it has missed academic 
achievement targets for 2 consecutive years. 

[11] GAO’s survey asked LEAs about their use of SFSF funds. However, 
because Colorado plans to use its full allocation of SFSF education 
stabilization funds for higher education, the responses from LEAs 
regarding SFSF are not applicable. 

[12] Obligations refer to the federal government’s commitment to pay 
for the federal share of a project. An obligation occurs when the 
federal government signs a project agreement. States request 
reimbursement from FHWA as the state makes payments to contractors 
working on approved projects. 

[13] 42.U.S.C.§ 3161(a). 

[14] FTA apportioned Transit Capital Assistance funds to Fort Collins 
(the urbanized area). The funds were then made available for obligation 
by transit agencies in the urbanized area, which includes the cities of 
Fort Collins and Loveland. 

[15] For the July report, we selected three housing agencies throughout 
the state that received varying amounts of Recovery Act funds and were 
of varying sizes; the Housing Authority of the City and County of 
Denver is a large housing authority that received almost $7.8 million 
in Recovery Act funds, whereas the Housing Authorities of Holyoke and 
the Town of Kersey are very small housing authorities that each 
received well under $100,000 in Recovery Act funds. We also selected 
these housing agencies because one had already spent Recovery Act funds 
at the time of our first visit while the other two had not. 

[16] These funds include SFSF and the increased Federal Medical 
Assistance Percentage (FMAP) for Medicaid, which Colorado used to pay 
expenses related to its increased Medicaid caseload. According to state 
officials, the most direct sources of Recovery Act funds in alleviating 
the state's budget crisis are SFSF and the increased FMAP. 

[17] We did not look at Recovery Act funds that went to separate 
jurisdictions within the counties, such as school districts and transit 
or housing agencies. 

[18] Garfield County is not centrally tracking or reporting Recovery 
Act funds, but compiled this data upon our request. 

[19] State guidance instructed recipients not to delegate reporting 
responsibilities to subrecipients. 

[20] FTEs are calculated by dividing total hours worked in a period by 
the number of total hours in a full-time schedule. This is done to 
avoid overstating the number of less than full-time positions. 

[21] Colorado's centralized reporting process uses indicators to 
distinguish between reportable and non-reportable Recovery Act 
transactions. To record Recovery Act transactions, state agencies use 
an indicator to identify internal transfers of funds, which are not 
reported under the act, and external transfers of funds, which are 
reported under the act. Internal transfers generally occur among state 
agencies, including IHEs, and external transfers refer to funds 
provided to subrecipients, vendors, or state expenditures. 

[22] Jobs reported to the House Committee on Transportation and 
Infrastructure consist of worker counts and hours worked. 

[End of Appendix III: Colorado: 

Appendix IV: District of Columbia: 

Overview: 
The following summarizes GAO's work on the fourth of its bimonthly 	
reviews of the American Recovery and Reinvestment Act of 2009 (Recovery 
Act)[Footnote 1] spending in the District of Columbia (District). The 
full report on all of our work in 16 states and the District is 
available at [hyperlink, http://www.gao.gov/recovery]. 

What We Did: 

GAO's work in the District focused on specific programs funded under 
the Recovery Act, as well as general issues involving the effect of 
Recovery Act funds on the District's budget and the District's 
readiness to report on the use and effect of these funds by program. 
The programs we reviewed—three Recovery Act programs funded by the U.S. 
Department of Education (Education), and the Weatherization Assistance 
Program funded by the U.S. Department of Energy—were selected primarily 
because they include existing programs receiving significant amounts of 
Recovery Act funds or programs receiving significant increases in 
funding from the Recovery Act. We also updated information on the use 
of Highway Infrastructure Investment funds, and Public Housing Capital 
funds. In addition, we reviewed contracting procedures and selected and 
discussed with officials four contracts awarded with Recovery Act funds—
two for highway infrastructure projects, and two for public housing 
projects—to examine how District agencies were implementing the 
Recovery Act. Our work focused on the status of the program's funding, 
how the funds were being used, and issues that were specific to each 
program. We also reviewed the District's experience in meeting Recovery 
Act reporting requirements concerning jobs created and sustained. For 
descriptions and requirements of the programs we covered, see appendix 
XVIII of GAO-10-232SP. 

What We Found: 

* U.S. Department of Education (Education) State Fiscal Stabilization 
Fund: Education awarded the District about $65.3 million of the 
District's total State Fiscal Stabilization Fund (SFSF) allocation of 
about $89.3 million. As of November 6, 2009, the District had not 
distributed any of these funds to local educational agencies (LEA)
	
* Title I, Part A, of the Elementary and Secondary Education Act of 
1965 (ESEA), as amended: Education allocated about $37.6 million in 
Recovery Act funds to the District to be used to help improve teaching, 
learning, and academic achievement for disadvantaged students. As of 
November 6, 2009, the District had not yet drawn down any of its ESEA 
Title I Recovery Act funds. 

* Individuals with Disabilities Education Act (IDEA), Part B: Education 
allocated about $16.7 million to the District to be used to support 
special education and related services for children with disabilities. 
As of November 6, 2009, the District had not yet drawn down these 
funds. 

* Highway Infrastructure Investment Funds: The U.S. Department of 
Transportation's Federal Highway Administration (FHWA) apportioned $124 
million to the District in March 2009 for highway infrastructure and 
other eligible projects. As of October 31, 2009, $106 million had been 
obligated, and $3 million had been reimbursed by the federal 
government. The District Department of Transportation (DDOT) is using 
its apportioned funds for 13 "ready-to-go" projects to repave streets 
and interstates, rehabilitate bridges, improve and replace sidewalks 
and roadways, and expand the city's bike-share program. We selected two 
contracts to discuss in greater depth with the relevant agency 
contracting officials. One contract we reviewed was for the 
construction portion of the "Great Streets" project, which includes 
reconstruction and streetscape improvements of Pennsylvania Avenue, and 
the other for construction and demolition of the New York Avenue 
Bridge.[Footnote 2] 

* Public Housing Capital Fund: The U.S. Department of Housing and Urban 
Development (HUD) has allocated $27 million to the District of Columbia 
Housing Authority (DCHA). DCHA plans to use Recovery Act funds on 20 
projects to be performed at 13 different public housing developments. 
The projects include the rehabilitation of nearly 2,000 housing units 
and the installation of new energy-efficient projects at public housing 
facilities. We selected two contracts to discuss in greater depth with 
the relevant agency contracting officials. The first contract we 
reviewed was for window replacement at the Regency House public housing 
community, and the second contract we reviewed was for unit renovations 
at the Horizon House public housing community.[Footnote 3] 

* Weatherization Assistance Program: The U.S. Department of Energy 
(DOE) allocated about $8 million in Recovery Act weatherization funds 
to the District for a 3-year period. The District Department of the 
Environment (DDOE), which is responsible for administering the program 
for the District, has not yet obligated or spent the weatherization 
funds. According to DDOE officials, they have been developing the 
capacity and infrastructure to administer the program, such as hiring 
new staff and adding three new community-based organizations to manage 
the weatherization projects that are funded through the Recovery Act. 
DDOE plans to use the funds to weatherize and improve the energy 
efficiency of about 785 low-income families' homes and rental units. 

* Recipient reporting: The District met the October 10, 2009, quarterly 
Recovery Act recipient reporting deadline after modifying its approach 
when the federal reporting Web site did not have the capability to 
permit the District to submit data in a batch format. Officials within 
the Office of the City Administrator took steps to help ensure the 
quality and completeness of the recipient data, including reviewing the 
data for reasonableness and potential inaccuracies, before allowing 
District agencies to submit the reporting information. Overall, 
District officials told us that the reporting process went smoothly, 
and District agencies generally did not have issues with the report 
submission process or submission deadline. 

* The District's use of Recovery Act funds: While the infusion of 
Recovery Act funds have helped mitigate the negative effects of the 
recession on the District's budget, the District continues to face 
fiscal challenges. As a result of deteriorating economic conditions and 
a decrease in expected revenues, in June 2009 the District faced a 
projected budget shortfall of $150 million for fiscal year 2010. The 
District closed this budget shortfall using a combination of measures 
including Recovery Act funds, reduced spending by District agencies, 
and tax increases. 

The District Has Yet to Disburse Any Recovery Act Education Funds	
The U.S. Department of Education (Education) has allocated $143.6 
million in Recovery Act funds to the District for three programs: 

* State Fiscal Stabilization Fund (SFSF), which was created under the 
Recovery Act, in part to help state and local governments stabilize 
their budgets by minimizing budgetary cuts in education and other 
essential government services; 

* Title I, Part A, of the Elementary and Secondary Education Act of 
1965 (ESEA), as amended, which provides funding to help educate 
disadvantaged youth; and; 

* Part B of the Individuals with Disabilities Education Act (IDEA), as 
amended, which provides funding for special education and related 
services for children with disabilities.[Footnote 4] 

The District Has Not Distributed Any SFSF Funds: 

The District's Office of the State Superintendent of Education (OSSE) 
has not yet distributed SFSF funds to the District's 58 local 
educational agencies (LEA) OSSE officials told us that the SFSF funds 
had not been distributed because the District had amended its 
application and was waiting for Education to approve the amendment 
prior to distributing funds. As noted in our September 2009 report, the 
District's SFSF application was modified to allocate a larger 
percentage of SFSF funds to restore the District's fiscal year 2010 
funding for elementary and secondary education to the fiscal year 2008 
funding level. In addition, OSSE had not yet requested assurances from 
the LEAs that SFSF funds would be used in accordance with federal 
requirements. OSSE requires that LEAs submit such assurances before 
LEAs obligate federal funds, including SFSF funds. 

SFSF funds will be used to restore the District's primary elementary 
and secondary funding to the fiscal year 2008 level, and will be 
distributed across LEAs through the District's Uniform Per Student 
Funding Formula. Currently, LEAs receive District funds periodically 
throughout the year, and OSSE officials told us that LEAs will receive 
SFSF funds in a similar manner. In addition, OSSE officials told us 
that LEAs can use SFSF funds in the same manner that they use the 
District's funds—provided that the uses are for purposes specified in 
the Recovery Act LEAs do not report to OSSE on their use of the 
District's funds; however, OSSE will require LEAs to report on their 
use of SFSF funds through detailed workbooks delineating their 
expenditures. OSSE officials told us that they plan to monitor the 
LEAs' use of SFSF funds along with other Recovery Act funds, though 
officials noted that they are still developing guidance related to 
using and reporting the use of SFSF funds. 

In general, LEAs have broad discretion in how they can use SFSF funds. 
We contacted 3 of the District's 58 LEAs[Footnote 5] and found 2 of the 
3 LEAs had preliminary plans for using the SFSF funds. Officials at one 
LEA told us they plan to use the funds to cover the salaries and 
benefits of approximately 475 educators; and an official at the other 
LEA told us they plan to implement a character development and violence 
prevention program for students in prekindergarten through eighth 
grade, including purchasing program materials and providing staff 
development courses. The third LEA, a public charter school, did not as 
yet have specific plans for using SFSF funds. With regard to SFSF, 
officials at the 3 LEAs we contacted told us that they required 
additional guidance from OSSE on appropriate uses of the funds and 
reporting on the impact of the funds. 

The District Has Not Drawn Down Its ESEA Title I Recovery Act Funds: 

Education allocated about $37.6 million in ESEA Title I Recovery Act 
funds to the District; however, as of November 6, 2009, OSSE had not 
yet drawn down any of these funds. According to OSSE officials, they 
have not yet finished reviewing the LEAs' applications describing the 
planned uses of the ESEA Title I Recovery Act funds, which OSSE must 
approve	before any of these funds can be drawn down. OSSE officials 
told us it was necessary to provide the LEAs with more guidance on 
completing the application and on how best to use these federal funds. 
For example, OSSE officials told us that they were concerned that many 
of the LEAs had proposed using the ESEA Title I Recovery Act funds to 
pay salaries for positions that could extend after the Recovery Act 
funds expire. OSSE officials told us that while they could encourage 
the LEAs to use the funds differently, OSSE did not have the authority 
to deny applications solely because they proposed using funds for 
expenses that might continue after the Recovery Act funds expire. OSSE 
officials told us that they will monitor the use of ESEA Title I funds, 
including Recovery Act funds, beginning in December 2009 by visiting 
each LEA at least one time in the next 2 years, and more frequently if 
warranted. In addition, OSSE officials told us they plan to conduct 
document reviews, including proof of actual expenditures submitted by 
LEAs. 

The three LEAs we contacted plan to use ESEA Title I Recovery Act funds 
to improve student achievement. For example, two LEAs planned to use 
the funds to purchase new software to compile and disseminate student-
level data, such as test scores and other performance measures, 
allowing teachers to make informed data-driven decisions regarding 
student progress. The third LEA planned to use the funds for a variety 
of activities to improve student achievement, including expanding after-
school academic activities, Saturday classes, and programs to increase 
math and reading levels. All three LEAs also planned to use some of 
these funds to retain or hire a total of about 17 staff, including 
instructors, technology specialists, and other support staff, to 
improve student achievement. 

Officials from the three LEAs we contacted told us that guidance for 
ESEA Title I Recovery Act funds was generally adequate, although each 
requested additional guidance in specific areas, including reporting 
the impact of these funds and requesting waivers. Officials at all 
three LEAs described OSSE as responsive and helpful in terms of 
providing guidance. 

The District Has Not Drawn Down Its IDEA Part B Recovery Act Funds: 

The District was allocated $16.7 million in IDEA Part B Recovery Act 
funds; however, as of November 6, 2009, OSSE had not yet drawn down any 
of these funds.[Footnote 6] OSSE officials said that their distribution 
of IDEA applications was delayed because they had sought additional 
guidance from Education on how to characterize schools that had both 
preschool and elementary grades for grant eligibility. According to 
OSSE officials, they have not yet finished reviewing the LEAs' 
applications describing how they planned to use the IDEA Recovery Act 
funds, which OSSE must approve before these funds can be drawn down. 
OSSE officials told us that it was necessary to provide the LEAs with 
more guidance on completing applications to ensure that LEAs fully 
understood both their programmatic and fiscal obligations. OSSE 
officials told us that they also intend to monitor LEAs' use of IDEA 
funds, including Recovery Act funds, to ensure funds are spent 
appropriately, but they had yet to finalize the schedule and the 
protocols. 

Officials from the LEAs we contacted told us they planned to use IDEA 
Recovery Act funds for jobs, services, and materials. For example, uses 
of the IDEA Recovery Act funds include: 

* hiring instructional and support staff; 

* supporting a program for young children who could benefit from early
interventions, but had not been identified as having special needs; 

* supporting programs for struggling students with emotional 
disabilities; 

* purchasing materials for listening centers, which help students with 
disabilities improve their language development, including reading, 
speaking, and listening skills; 

* contracting certain resource services, such as physical and speech 
therapists; and; 

* improving data systems, which would help LEAs organize and track an 
array of information about students with special needs. 

The District Continues to Award Highway Contracts Using Existing 
Contracting Procedures to Ensure Proper Use of Funds: 

In March 2009, the District was apportioned $124 million in Recovery 
Act funds for highway infrastructure and other eligible projects. As of 
October 31, 2009, $106 million had been obligated, and $3 million had 
been reimbursed by the Federal Highway Administration (FHWA).[Footnote 
7] Figure 1 shows obligations by the types of road and bridge 
improvements being made. 

Figure 1: Highway Obligations for the District of Columbia by Project 
Improvement Type as of October 31, 2009: 

[Refer to PDF for image: pie-chart] 

Pavement projects total (37 percent, $39.7 million): 
Pavement improvement: reconstruction/rehabilitation ($31.6 million): 
30%; 
Pavement improvement: resurface ($5.2 million): 5%; 
Pavement widening ($3 million): 3%. 

Bridge projects total (29 percent, $31 million): 
Bridge improvement ($31 million): 29%. 

Other (33 percent, $35.3 million): 
Other ($35.3 million): 33%. 

Source: GAO analysis of Federal Highway Administration data. 

Note: Totals may not add due to rounding. "Other" includes safety 
projects, such as improving safety at railroad grade crossings, and 
transportation enhancement projects, such as pedestrian and bicycle 
facilities, engineering, and right-of-way purchases. 

[End of figure] 

Funds appropriated for highway infrastructure spending must be used as 
required by the Recovery Act. States are required to ensure that all 
apportioned Recovery Act funds—including suballocated funds—are 
obligated within 1 year. The Secretary of Transportation is to withdraw 
and redistribute to other states any amount that is not obligated 
within these time frames.[Footnote 8] As of November 6, 2009, DDOT has 
awarded contracts and issued task orders for 10 projects worth $84 
million and advertised an additional 3 projects worth $8.1 million for 
bid. According to DDOT officials, bids continue to come in lower than 
DDOT's original estimated costs due to the poor state of the economy, 
greater price competition among contractors, and falling prices for 
materials. DDOT typically requests that FHWA deobligate excess funds 
when bids for contracts come in lower than the original estimated 
costs. Being able to award contracts for less than original estimated 
costs has allowed DDOT to apply $9 million to other transportation 
projects in the District. DDOT has received FHWA's approval to use 
these funds for additional paving and sidewalk restoration work, and 
DDOT is identifying more "ready-to-go" projects should further funds 
become available. 

We selected two contracts for ongoing projects to discuss in greater 
depth with the relevant agency contracting officials. One contract we 
reviewed was for the construction portion of the "Great Streets" 
project, which includes reconstruction and streetscape improvements of 
Pennsylvania Avenue. The contract has an award value of $25.2 million 
and has a period of performance from October 15, 2009, to November 26, 
2010. According to the DDOT grant manager, the contract was competed 
and DDOT awarded the work using a fixed-price contract. Another 
contract we reviewed was for the construction and demolition of the New 
York Avenue Bridge, which is considered fracture-critical.[Footnote 9] 
Work on this project will include rebuilding the bridge deck to include 
a wider sidewalk and new lighting and installing new piers. The 
contract has an award value of $24.9 million and has a period of 
performance from October 31, 2009, to February 1, 2011. According to 
the DDOT grant manager, this work was also awarded competitively as a 
fixed-price contract. 

DDOT's Chief Contracting Officer stated that no changes have been made 
to the contracting or financial management processes specifically for 
Recovery Act contracts because DDOT officials deemed its existing 
processes suitable to track the use of funds. According to DDOT 
officials, the agency has standard procedures for oversight on all 
contracts. These procedures include having DDOT personnel or qualified 
consultants retained by DDOT, or both, perform regular inspections on 
each project, as well as monthly reports submitted by the contractor. 
In addition, DDOT personnel or qualified consultants are on-site on a 
daily basis checking on the project status and progress. They are 
responsible for generating a daily report that describes the number of 
tasks completed that day, workers present, and equipment used. 

The District Continues to Award Public Housing Contracts Using Existing 
Contracting Procedures to Ensure Proper Use of Funds: 

The U.S. Department of Housing and Urban Development (HUD) has 
allocated $27 million in Recovery Act funds to the District of Columbia 
Housing Authority (DCHA). As of November 14, 2009, DCHA had obligated 
about $12 million or about 44 percent of the $27 million it received in 
capital grant funds, and drawn down about $3 million from DCHA's 
Electronic Line of Credit Control System account with HUD. 

As of November 14, 2009, DCHA has awarded 20 job orders for projects to 
be performed at 13 different public housing developments. The projects 
include the rehabilitation of nearly 2,000 housing units, the 
installation of new energy-efficient equipment (such as solar-powered 
irrigation, energy-efficient windows, and boiler upgrades), and public 
space upgrades. 

DCHA continues to use its existing contracting management procedures to 
monitor and safeguard the use of Recovery Act funds. According to the 
DCHA Contracting Officer, no changes have been made to contracting or 
financial management processes specifically for Recovery Act contracts 
because DCHA believes its existing processes are suitable to monitor 
the use of the funds. In addition, according to DCHA officials, the 
agency has standard procedures for oversight on all contracts. These 
procedures include having DCHA contracting personnel perform regular 
inspections on each project and contractors filing weekly progress 
reports. 

We selected two contracts for ongoing projects to discuss in greater 
depth with the relevant agency contracting officials. One contract we 
reviewed was for window replacement at the Regency House public housing 
community. According to contract documentation and DCHA officials, the 
fixed-price job order was placed on August 10, 2009, for an amount not 
to exceed $750,000, for work including, but not limited to, removing 
all existing windows and frames, providing and installing new windows, 
installing new fiberglass panels over the existing panels, and 
providing and installing new vertical blinds for all windows (see 
figure 2). The period of performance for the job order is August 2009 
to February 2010. 

Figure 2: Window Replacement at the Regency Public Housing Community: 

[Refer to PDF for image: 2 photographs, before and after] 

Source: GAO. 

[End of figure] 

Another contract we reviewed was for unit renovations at the Horizon 
House public housing community. According to contract documentation and 
DCHA officials, the fixed-price job order was placed on August 17, 
2009, for an amount not to exceed $2,613,868, for work including, but 
not limited to, renovating kitchens and bathrooms, replacing flooring, 
upgrading lighting and electrical equipment, and installing 
audio/visual smoke detectors in each selected unit (see figure 3). The 
period of performance for the job order is August 2009 to May 2010. 

Figure 3: Kitchen Renovation at the Horizon House Public Housing 
Community: 

[Refer to PDF for image: 3 photographs, before, during, and after] 

Source: District of Columbia Housing Authority and GAO. 

[End of figure] 

DCHA stated that it involves residents in the oversight of the projects 
at their development throughout the life of the project. They are 
invited to all DCHA monthly board meetings to discuss their thoughts on 
the progress of the projects and quality of the contractor. DCHA also 
hires residents as project monitors to oversee the daily progress of 
the project and its effect on the quality of life for the residents in 
that community. 

The District Has Not Yet Expended Recovery Act Funds for the 
Weatherization Assistance Program: 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program, which the U.S. Department of Energy (DOE) is 
distributing to each of the states, the District, and seven territories 
and Indian tribes, to be spent over a 3-year period. This program 
enables low-income families to reduce their utility bills by making 
long-term energy-efficiency improvements to their homes by, for 
example, installing insulation or modernizing heating or air 
conditioning equipment. DOE allocated about $8 million in Recovery Act 
funds to the District for the weatherization program for a 3-year 
period.[Footnote 10] The District Department of the Environment (DDOE) 
is responsible for administering the program for the District. As of 
October 7, 2009, DDOE had received the final 50 percent of its total 
allocation of Recovery Act weatherization funding.[Footnote 11] DDOE 
plans to spend about $6.5 million to weatherize approximately 785 homes 
over 3 years. The remaining $1.5 million will be used for salaries and 
other administrative expenses, such as training and technical 
assistance. 

As of November 15, 2009, DDOE has not obligated or expended the 
weatherization funds. DDOE officials explained that weatherization 
funds have not yet been spent because they have been developing the 
infrastructure to administer the program. For example, DDOE is in the 
process of hiring six new staff members to oversee and manage the 
program. According to DDOE officials, they had hoped to hire these new 
staff members sooner, but there were delays in posting the job 
announcements. In addition, DDOE has added three new community-based 
organizations (CBO)-—for a total of seven—-to manage the weatherization 
projects that are funded through the Recovery Act. DDOE selected these 
three additional CBOs based on certain criteria, such as the CBOs' 
experience and performance in weatherization work, as well as their 
experience in assisting low-income persons. The CBOs are responsible 
for hiring and monitoring the local contractors that weatherize homes. 
According to DDOE officials, each CBO will receive about
$935,000 in Recovery Act funds for weatherization activities. On 
November 17, 2009, DDOE provided the CBOs and their contractors with 
training and information regarding the administration of the 
weatherization program, including the requirements associated with 
Recovery Act funding. Because Recovery Act weatherization funds have 
not yet been expended, the impact of these funds on job creation or 
energy savings cannot be measured at this time. 

DDOE and the CBOs have a number of internal control procedures in place 
or planned to monitor the weatherization program. To ensure quality 
weatherization work is being performed by the contractors, currently 
DDOE auditors randomly inspect 30 percent of the weatherized homes, 
which exceeds the DOE requirement of inspecting 10 percent of the 
homes. For the new CBOs, DDOE officials told us they anticipate 
inspecting between 60 and 70 percent of weatherized homes. DDOE 
officials also told us they intend to perform annual monitoring 
inspections at each of the CBOs, which involve file reviews of records 
and payments. In addition to DDOE's oversight of the program, the CBOs 
plan to monitor the performance of contractors by conducting spot 
checks or surprise visits to the work site, as well as performing 
postinstallation inspections on 100 percent of weatherization projects. 
According to officials from one CBO, they have multiple entities that 
conduct inspections of the weatherized homes, including a third-party 
audit agency and an internal quality assurance unit. Officials from one 
CBO we met with said that it will use its own employees for 
weatherization projects, and that each employee will be trained at an 
in-house weatherization training center. DDOE officials said they have 
not identified problems with the internal control processes for any of 
the CBOs. 

Officials from DDOE and CBOs expressed some concerns about Davis-Bacon 
Act requirements, citing the potential effect of wage and payroll 
requirements on their administrative costs. For example, DDOE officials 
stated that although Recovery Act wage rates are similar to the 
previous wage rates, understanding and ensuring compliance with the 
wage rate requirements would create more work for both DDOE and the 
CBOs. 

The District Was Able to Meet the Recipient Reporting Deadline, but Had 
to Modify Its Planned Approach: 

The District met the October 2009 quarterly Recovery Act recipient 
reporting deadline after modifying its approach when the federal 
reporting Web site did not have the capability to permit the District 
to submit data in a batch format. In our September report, we noted 
that the District planned to centrally report data for all District 
agencies receiving Recovery Act funds to address recipient reporting 
requirements, and had developed a centralized Web-based system to 
collect all required data. The intent of this Web site 
(reporting.dc.gov) was to allow officials in the District's Office of 
the City Administrator (OCA) to review the aggregate data for accuracy 
and completeness and to have OCA submit the data directly into the 
federal recipient reporting Web site. However, OCA officials modified 
their planned reporting approach when they learned—several months 
before the reporting deadline—that the federal reporting Web site did 
not have the capability to receive the District's preferred process of 
batch data submissions. Instead, District agencies individually 
submitted recipient reporting information to the federal reporting Web 
site. The files for individual agency submissions were generated by 
reporting.dc.gov based on the information entered into the District's 
reporting system. OCA officials told us that it would help simplify 
their reporting process if the federal reporting Web site could 
accommodate the District's batch data submission process—submitting one 
consolidated file for all District agencies—for future rounds of 
recipient reporting. 

Overall, the District's reporting process went smoothly, according to 
OCA officials. These officials stated that the trial run of the 
District's reporting Web site during September 2009 was a key factor in 
successfully submitting recipient reporting data by the October 10, 
2009, reporting deadline, because it allowed OCA officials and District 
agencies to address issues, revise data, and finalize reports before 
submitting data to the federal reporting Web site. To help ensure data 
quality, OCA officials performed a high-level review of the data for 
reasonableness and potential inaccuracies, and validated data before 
allowing District agencies to submit the reporting information. 
According to OCA officials, most of the errors found during their 
internal review and validation process were minor, such as the letter 
"0" recorded for the number zero, an agency misreporting a grant title, 
or an agency clarifying a job description reported. 

Figure 4: Flow of the District's Recipient Reporting Data: 

[Refer to PDF for image: illustration] 

Office of the City Administrator: 
Conducts quality review and validates data; 
		
District agencies: 
Review and input recipient reporting data; 

District reporting Web site: reporting.dc.gov; 

District agencies: 
District agencies download validated data; Submit validated data to: 

Federal reporting Web site: federalreporting.gov., which generates e-
mails indicating successful data submission; 

District agencies: 
Forward e-mails documenting successful data submission to: 

Office of the City Administrator: 	 

Source: GAO analysis based on information provided by the Office of the 
City Administrator. 

[End of figure] 

Although the District and its agencies generally did not have issues 
with the report submission process or submission deadline, some 
agencies encountered data errors in their submissions. For example, 
during the period set aside for the federal review of the data 
submitted (October 2130, 2009) the U.S. Department of Transportation 
notified the District Department of Transportation (DDOT) that DDOT 
reported an inaccurate jobs count. Specifically, DDOT had reported 
expenditures of $37,717 for an engineering project, but there were no 
associated job-creation data reported. A DDOT official responsible for 
reporting this information explained that the expenditures were used 
for in-house contract administration costs, which he thought were not 
subject to recipient reporting requirements. DDOT officials stated that 
the agency corrected the report once the discrepancy was brought to its 
attention. 

OCA officials were generally satisfied with the District's first 
quarter of reporting and are discussing possible improvements to their 
reporting process for future reports. For example, officials plan to 
add data fields to the District's reporting Web site to collect 
information that would be useful to the District, such as whether a 
Recovery Act grant was competitively awarded. In addition, officials 
stated they want to use the District's Recovery Act reporting Web site 
and reporting process as a system to collect and manage all of the 
District's federal grants. 

Recovery Act Funds Continue to Help the District Address Fiscal 
Challenges: 

While the infusion of Recovery Act funds have helped mitigate the 
negative effects of the recession on the District's budget, the 
District continues to face fiscal challenges. As we previously 
reported, in June 2009 the District's Chief Financial Officer 
identified a projected revenue shortfall of $150 million for fiscal 
year 2010, as a result of deteriorating economic conditions and a 
decrease in expected revenues.[Footnote 12] The District's amended 
fiscal year 2010 budget—sent to Congress for approval on September 23, 
2009—addressed the revenue shortfalls and balanced the District's 
budget. Specifically, the District addressed its $150 million budget 
shortfall through a combination of reduced spending by District 
agencies, using $36 million in Recovery Act State Fiscal Stabilization 
Fund (SFSF) funds in fiscal year 2010, using funds from the District's 
general fund, and generating revenue through tax increases.
According to the District's Chief of Budget Execution, overall, the 
District eliminated approximately 1,850 positions across the District's 
government—about 460 vacant positions and 1,390 filled positions 
eliminated through attrition, retirement, and reductions-in-force—to 
help balance the fiscal year 2010 budget. The official told us that 
originally the District planned on eliminating about 1,600 positions; 
however, the District eliminated an additional 250 positions after the 
$150 million revenue shortfall was identified. In addition to the 1,850 
positions eliminated, on October 2, 2009, the Chancellor of the 
District of Columbia Public Schools (DCPS) announced that DCPS laid off 
388 school employees, citing a funding shortfall in the District's 2010 
education budget for DCPS. The District's Chief of Budget Execution 
noted that without the Recovery Act funds, job cuts throughout District 
agencies would have been much larger. For example, SFSF funds stemmed 
the loss of jobs in DCPS, and without the availability of about $39 
million in SFSF funds for DCPS for fiscal year 2010 under the Recovery 
Act, the District may have had to cut additional positions from DCPS, 
according to the Chief of Budget Execution. 

In September 2009, the District's Chief Financial Officer reported that 
revenue estimates for fiscal year 2009 through fiscal year 2013 had not 
changed since the June 2009 quarterly revenue estimates. According to 
the Chief of Budget Execution, these revenue projections are contingent 
upon economic conditions staying relatively constant. However, this 
official noted that if economic conditions in the District worsen and 
revenue estimates decrease, the District may need to take further 
actions to close any projected budget shortfall. 

The District has developed a strategy to prepare for when Recovery Act 
funds are phased out because the District is required by law to prepare 
an annual balanced budget and multiyear plan. As a result, District 
officials have accounted for the future decrease in Recovery Act funds 
in planning budgets for fiscal years 2011 to 2013. In addition, the 
Chief of Budget Execution told us that all District agencies have been 
instructed to decrease their expenditures for fiscal year 2011 to 
facilitate balancing the District's budget. This official said that 
specific percentage reductions will be determined by District agencies 
on a case-by-case basis, with a maximum reduction of 10 percent. 

District Comments on This Summary: 

We provided the Office of the Mayor of the District, and the District 
agencies for the programs we examined, with a draft of this summary on 
November 18, 2009. On November 20 and 23, 2009, the Office of the Mayor 
and the District agencies provided technical comments, which we have 
incorporated where appropriate. 

GAO Contact: 
William 0. Jenkins, Jr., (202) 512-8757 or jenkinswo@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, John Hansen, Assistant 
Director; Adam Hoffman, analyst-in-charge; Laurel Beedon; Sunny Chang; 
Marisol Cruz; Nagla'a El-Hodiri; Mattias Fenton; LaToya King; and Linda 
Miller made major contributions to this report. 

[End of section] 

Footnotes: Appendix IV: District of Columbia: 

[1] Pub. L. No. 111-5, 123 Stat. 115 (2009). 

[2] We selected these contracts managed by DDOT for review because they 
were the largest dollar contracts that had been awarded as of October 
8, 2009. 

[3] We selected one contract managed by DCHA because it was for a new 
and higher dollar value project in a housing complex GAO visited for a 
prior Recovery Act report, and the other because it was the largest 
dollar contract awarded as of October 19, 2009. 

[4] GAO surveyed a representative sample of local educational agencies 
(LEA) nationally and in the District about their use of Recovery Act 
funds for three education programs: SFSF, ESEA Title I, and IDEA Part 
B. The response rate for the LEAs in the District was too low for GAO 
to generalize the results of the survey to the District. Accordingly, 
the District's survey responses are not discussed in this appendix. 

[5] The three LEAs included the District of Columbia Public Schools 
(DCPS)—the District's largest LEA representing about 65 percent of 
District students—and two public charter schools that each constitute 
their own LEA. To determine which LEAs to contact, we selected the two 
largest LEAs in the District and one LEA that included all grade levels 
and used DCPS as its LEA for IDEA. 

[6] As we reported in September 2009, Education planned to withhold 
$500,000 in IDEA funding from OSSE because of past incidents of grant 
mismanagement. As of November 3, 2009, OSSE officials told us that they 
were in the process of negotiating a settlement on this matter with 
Education that they hoped would resolve the issue, and also had a 
scheduled hearing to present their appeal. 

[7] States request reimbursement from FHWA as the state makes payments 
to contractors working on approved projects. 

[8] Pub. L. No. 111-5, 123 Stat. 115, 209 (Feb. 17, 2009). 

[9] Fracture-critical bridges are bridges that contain elements whose 
failure would be expected to result in the collapse of the bridge. 

[10] On September 22, 2009, DOE obligated all the funds allocated to 
the states and the District, but it has limited the states' and the 
Districts' access to 50 percent of these funds. DOE currently plans to 
make the remaining funds available to the states and the District once 
30 percent of the housing units identified in the state plans are 
weatherized. 

[11] DDOE was provided 10 percent of Recovery Act funding on March 30, 
2009, and an additional 40 percent on June 18, 2009. 

[12] The District's fiscal year begins on October 1 and ends on 
September 30. Each February the Office of the Chief Financial Officer 
issues a revenue estimate that is used to develop the budget for the 
next fiscal year. The estimate is revised as the new fiscal year begins 
and at regular intervals afterward. 

[End of Appendix IV: District of Columbia] 

Appendix V: Florida: 

Overview: 

This appendix summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Florida.[Footnote 1] The full report on our work in 16 
states and the District of Columbia is available at [hyperlink, 
http://www.gao.gov/recovery]. 

What We Did: 

Our work in Florida focused on specific programs funded under the 
Recovery Act: the Highway Infrastructure Investment Program; the State 
Fiscal Stabilization Fund (SFSF); Title I, Part A of the Elementary and 
Secondary Education Act of 1965 (ESEA), as amended; and the Individuals 
with Disabilities Education Act (IDEA), as amended. We looked at the 
status of program funding, how funds are being used, and other issues 
specific to each program. 

For our review of highway investment, we selected two Florida 
Department of Transportation (FDOT) districts—one in northeast Florida 
(District 2) and another in central Florida (District 5)—to understand 
the pace of contract awards for local highway projects. We selected 
these districts because they varied in terms of having projects 
administered mainly either by FDOT or local agencies. To gain an 
understanding of the state's experience in meeting Recovery Act 
recipient reporting requirements, we examined documents prepared by, 
and held discussions with, officials in FDOT, the Florida Office of 
Economic Recovery, and the office of Florida's Chief Inspector General. 
We specifically focused our work on FDOT's methodology for collecting 
data on job creation and retention, and on FDOT's experience in 
preparing the first quarterly report due to federalreporting.gov and 
submitted by October 10, 2009. We also examined recipient reporting, 
use of Recovery Act funds in local government budget stabilization in 
southwest Florida, and contract management practices. We visited one 
city, Fort Myers (population 65,394), and one county, Lee (population 
593,136), to determine the amount of Recovery Act funds each is 
receiving and how those funds are being used. We selected these local 
governments because they have high unemployment and foreclosure rates 
relative to the state average. In September 2009, unemployment in Fort 
Myers and Lee County was 12.1 percent and 13.9 percent, respectively—
higher than Florida's average rate of 11.2 percent and the United 
States' rate of 9.8 percent for that period.[Footnote 2] 

To review education programs, we gathered information on Florida's plan 
to monitor the use of SFSF allocations by local educational agencies 
(LEAs) and to seek waivers on ESEA Title I, Part A funds, which are 
made available for programs for disadvantaged students. In addition, we 
briefed state officials and obtained their comments on the results of 
GAO's nationwide survey of LEAs and on the Florida results 
specifically. We also talked to the Inspectors General of several 
Florida agencies about their oversight role for Recovery Act funds. For 
descriptions and requirements of the programs we covered, see appendix 
XVIII of GAO-10-232SP. 

What We Found: 

* Highway Infrastructure Investment. The pace of awarding contracts is 
generally lower in FDOT districts with large numbers of projects 
suballocated for metropolitan and local use in conjunction with 
projects administered by local agencies rather than by the state, 
according to FDOT officials. FDOT officials said projects managed by 
local agencies may face delays because additional time is required to 
educate local agencies on federal requirements and for project 
coordination and required reviews and approvals by FDOT. In addition, 
statewide, FDOT has identified excess funds of about $202 million as 
the result of construction contracts awarded for less than the official 
project estimate, according to FDOT officials. The excess funds can be 
used to fund other highway projects. FDOT officials said they plan to 
seek Federal Highway Administration (FHWA) approval for obligating the 
funds by December 31, 2009. 

* Contract management and oversight. According to FDOT officials, FDOT 
uses its standard procedures and processes to award and manage Recovery 
Act-funded highway construction projects. FDOT's Inspector General said 
the office's recent audits related to contract management and 
oversight, such as single source[Footnote 3] and limited competition 
contracts,[Footnote 4] incentive payment analysis, and contract 
estimating, have not identified weaknesses that would affect FDOT's 
ability to award and manage contracts. 

* Recipient reporting. According to state officials, Florida state 
agencies experienced no significant issues collecting and reporting 
recipient information for the first required quarterly report due 
October 10, 2009. At FDOT—the one agency at which we examined reporting 
in greater detail—officials said there were no significant problems. 
Florida has a centralized system into which all 17 pertinent state 
agencies report Recovery Act data. The state developed and tested the 
system well in advance of reporting deadlines. Agencies took steps to 
validate data, such as recipient name, address, number of 
subrecipients/vendors, and Recovery Act funds received and expended. 
However, for one agency we looked at, FDOT, subrecipients and vendors 
were not required to submit verification of their job data, but were 
advised to maintain documentation, according to FDOT officials. For two 
subrecipients we visited, both kept documentation of tabulated hours 
and wages associated with Recovery Act projects for regular employees, 
but only one did so for management employees. The Florida state 
Recovery Czar expressed concerns that the federal Office of Management 
and Budget (OMB) methodology for calculating jobs created and retained 
will underestimate the numbers, and that guidance provided to state 
agencies by various federal agencies may differ with that of OMB. 

* Local governments' use of Recovery Act funds. Officials from Lee 
County and, to a lesser extent, the City of Fort Myers, said they 
anticipate using available Recovery Act funds primarily to expand 
existing services or fund new initiatives on a nonrecurring basis. 
Recovery Act funding contributed only a small amount to the county's 
and city's budgets. As of November 18, 2009, the county had been 
awarded $16.3 million and the city $4.5 million for use over multiple 
years, a small amount of a single fiscal year (2010) operating budget 
of about $1 billion county and $241 million city. Lee County and Fort 
Myers have largely used their own financial reserves rather than 
Recovery Act funds to stabilize their annual budgets because, according 
to local officials, the type of funding available to fill budget gaps 
does not meet their greatest needs and certain grants require local 
governments to use their own funds when the grant period expires. 

* Education funding and monitoring. Florida LEAs largely used Recovery 
Act funding to retain teachers and staff. An estimated 86 percent of 
Florida LEAs are planning to use over half of their SFSF funding to 
retain staff compared with an estimated 63 percent of LEAs nationally. 
A senior Florida official reported that the state successfully 
implemented a three-part monitoring plan for the largest portion of 
Recovery Act education funding, the SFSF; however, officials said the 
monitoring requirements doubled staff workload. State education 
officials also said they applied for ESEA Title I, Part A waivers to 
provide more flexibility for LEAs on how they spend Recovery Act funds 
to improve education. 

* Florida Inspector General oversight. The Inspectors General (IG) 
community in Florida continues to play a prominent role in providing 
oversight for Recovery Act expenditures and reporting, and guidance. 
The community has targeted specific areas of emphasis for different 
groups of IGs, including fraud deterrence and data quality. 

Volume of Projects and Local Administration May Affect Pace of Local 
Highway Contract Awards; Overall, Officials Plan to Use Excess Funds 
from Contracts Coming in Under Estimate: 

As we reported in September 2009, $1.35 billion in Recovery Act funds 
were apportioned to Florida for highway infrastructure and other 
eligible projects. Of this amount, $404 million—or 30 percent—was 
suballocated for metropolitan and local use while approximately $943 
million remained available for use in any area of the state (statewide 
projects). As of October 31, 2009, 77 percent (or about $1 billion) has 
been obligated for highway projects. Specifically, $707.3 million has 
been obligated for statewide projects and $12.7 million has been 
reimbursed by FHWA.[Footnote 5] The remaining $330.9 million has been 
obligated for local projects; $4.5 million has been reimbursed by FHWA. 
Compared to the national average of 18.4 percent, the overall rate of 
reimbursement in Florida (1.7 percent) is among the lowest in the 
nation.[Footnote 6] The state has until March 2, 2010 to obligate all 
apportioned highway funds. 

Project Volume and Administration May Affect Pace of Contract Awards: 

The $330.9 million obligated for projects in metropolitan and local 
areas in Florida represents 82 percent of the $404 million suballocated 
for this purpose. Also, the number of contracts awarded using Recovery 
Act funds obligated for this purpose has increased since September 1, 
2009. As of October 28, 2009, 149 of 395 planned projects were awarded 
construction contracts compared to 5 contracts when we last reported in 
September, according to officials. 

According to FDOT officials, the award of contracts is generally lower 
in FDOT districts with large numbers of local projects in conjunction 
with projects administered by local agencies.[Footnote 7] The state had 
the option of administering Recovery Act projects with funds 
suballocated for metropolitan and local use or giving that authority to 
local qualified agencies, such as towns, cities, and counties, through 
the local agency program (LAP) according to these officials. 

To better understand the pace of contract awards for local projects, we 
reviewed two FDOT districts, which varied in their approach to 
administering projects: District 2 in northeast Florida and District 5 
in central Florida (see table 1). 

Table 1: Number of Suballocated Projects and Type of Administration for 
Districts 2 and 5: 

District 2: 
Number of projects: 40; 
Percent administered by locality: 40%; 
Percent administered by FDOT: 60%. 

District 5: 
Number of projects: 81; 
Percent administered by locality: 99%; 
Percent administered by FDOT: 1%. 

Source: FDOT data. 

Note: According to FDOT, the total amount obligated by the FHWA for the 
40 projects in District 2 is $39,165,034 and $77,884,817 for the 81 
projects in District 5. 

[End of table] 

The relationship between volume of contracts, administering party, and 
pace of contracting in these two districts reflects the pattern 
observed by FDOT officials in Florida overall. As of October 27, 2009, 
District 2 had awarded about 78 percent of its Recovery Act-funded 
contracts and District 5 had awarded about 15 percent (see table 2). 

Table 2: Status of Construction Contracts for Local Highway Projects in 
FDOT Districts 2 and 5 as of October 27, 2009: 

FDOT District: District 2; 
Administering party: Local: 
Total number of projects: 16; 
Construction contracts awarded: 8; 

FDOT District: District 2; 
Administering party: State: 
Total number of projects: 24; 
Construction contracts awarded: 23; 

Total awarded: 31 (78%). 

Status of work performance: 

FDOT District: District 2; 
Administering party: Local: 
Completed: 0; 
Begun but not completed: 7; 
Not begun: 1. 

FDOT District: District 2; 
Administering party: State: 
Completed: 3; 
Begun but not completed: 7; 
Not begun: 13. 

Status of planned contracts: 

FDOT District: District 2; 
Administering party: Local: 
Construction contracts out for bid: 4; 
Construction contract solicitation waiting on bids: 4. 

FDOT District: District 2; 
Administering party: State: 
Construction contracts out for bid: 1; 
Construction contract solicitation waiting on bids: 0. 

FDOT District: District 5; 
Administering party: Local: 
Total number of projects: 80; 
Construction contracts awarded: 12; 

FDOT District: District 5; 
Administering party: State: 
Total number of projects: 1; 
Construction contracts awarded: 0; 

Total awarded: 12 (15%). 

Status of work performance: 

FDOT District: District 5; 
Administering party: Local: 
Completed: 0; 
Begun but not completed: 0; 
Not begun: 12. 

FDOT District: District 5; 
Administering party: State: 
Completed: 0; 
Begun but not completed: 0; 
Not begun: 0. 

Status of planned contracts: 

FDOT District: District 5; 
Administering party: Local: 
Construction contracts out for bid: 33; 
Construction contract solicitation waiting on bids: 35. 

FDOT District: District 5; 
Administering party: State: 
Construction contracts out for bid: 1; 
Construction contract solicitation waiting on bids: 0. 

Source: GAO analysis of FDOT data through October 27, 2009. 

Note: According to FDOT officials, multiple contracts may be associated 
with a project; however, each project in District 2 and 5 has only one 
contract associated with it. 

[End of table] 

Other districts with high numbers of locally administered projects as 
in District 5 are experiencing delays in awarding contracts, according 
to FDOT officials.[Footnote 8[ FDOT officials offered the following 
reasons for why locally administered projects take more time to award 
contracts: (1) when local agencies administer a project, the agencies 
must coordinate with FDOT and obtain state-level reviews and approval; 
(2) some local agencies may have little experience with federally 
funded projects; and (3) Recovery Act funding comes with multiple 
requirements, and some localities are more prepared than others to meet 
the requirements and manage a local project because they have previous 
experience with federally funded projects. FDOT certifies a local 
agency to administer a project—designing Recovery Act-funded projects, 
advertising bid solicitations, and administering contract awards—when 
the agency can demonstrate it has sufficient staff and resources to 
meet all applicable state and federal requirements, according to the 
FDOT LAP manual. According to an official in District 2, local agencies 
with previous LAP experience were utilized to administer local 
projects. In District 5, the approach was to distribute Recovery Act 
funds throughout the district, according to officials. Some FDOT 
officials said the time involved in the certification process may 
affect the pace of projects. For example, in District 5, nine 
localities were certified for the first time and several others had to 
be re-certified, according to officials. Each district has been working 
with local agencies, providing training and workshops on LAP 
certification and federal requirements, according to FDOT officials. 
Officials at local agencies we spoke with said the FDOT guidance and 
technical assistance were useful. 

Florida Plans to Request FHWA to Obligate Excess Funds Resulting from 
Contracts Being Awarded for Less than Project Estimates	FDOT has 
identified excess funds of about $202 million as the result of 
construction contracts being awarded for less than the official project 
estimate, which could be used to fund other highway projects, according 
to FDOT officials. Overall, as of October 28, 2009, FDOT awarded a 
total of 194 highway construction contracts with a total value of $676 
million, which was 32 percent less than project estimates. FDOT 
officials stated that FHWA has been asked to deobligate $2 million of 
that amount and obligate it for five new local projects meeting 
Recovery Act criteria. For the remaining $200 million, an FDOT official 
said FDOT is seeking state and federal approval to deobligate and then 
obligate the funding for 12 new state projects. Moreover, 11 of the 12 
projects will be obligated by November 30, 2009, and the remaining 
project by December 31, 2009, according to the same official. 

Florida Uses Existing Procedures and Processes for Awarding and 
Managing Recovery Act-Funded Highway Projects: 

FDOT uses its existing standard procedures and processes to award and 
manage Recovery Act-funded highway construction projects. Specifically, 
FDOT officials said that FDOT has processes for requiring that 
contracts be linked to Recovery Act objectives, using prequalified 
contractors and awarding fixed-price contracts on a competitive basis. 
[Footnote 9] State officials said: 

* projects were selected with transportation partners at the local 
level, including cities, counties, and metropolitan planning 
organizations with Recovery Act objectives in mind, and that these 
objectives were communicated to prospective bidders; 

* prospective bidders were prequalified based on factors such as 
experience, performance records, and debarment or suspension by FHWA, 
State of Florida, or FDOT from receiving contract awards; and; 

* some projects were awarded to the lowest technically responsive 
prequalified bidder and some were awarded based on an adjusted score 
method, although the winning bid may not necessarily have been the 
lowest bid, according to FDOT officials.[Footnote 10] 

Figure 1 shows the multiple highway construction management positions 
and functions that are assigned to oversee and ensure project quality 
and performance. 

Figure 1: Oversight of Florida's Highway Construction Contracts: 

[Refer to PDF for image: illustration] 

Federal Highway Administration: Review and approve project plans, 
specifications and cost estimates on jobs with Federal Aid Full 
Oversight. 

Resident Construction Engineer (FDOT Personnel): Administers FDOT 
construction contracts in assigned region. 

Construction Project Administrator/Manager (PA) (FDOT Personnel): 
Ensures Prime Contractor meets materials and workmanship requirements 
and manages payment of the Prime Contractor*; 
*Some jobs contract with a Consultant Construction, Engineering and 
Inspection (CEI) Project Administrator to oversee the prime contractor. 

Design Engineer	(FDOT Personnel): Helps PA resolve design issues. 

Materials Testing Project Manager (FDOT Personnel): Oversees and pays 
verification testing consultants. 

District Compliance Office (FDOT Personnel): Monitors project for 
violations of workplace law. 
	
Consultant CEI Project Administrator: Ensures Prime Contractor meets 
materials and workmanship requirements, manages payment of the Prime 
Contractor, and coordinates with key FDOT personnel. 

Prime Contractor: Completes awarded contract in substantial compliance 
with all plans, specifications, and other contract documents. 

Quality Control Testing Laboratory: Provides quality control sampling
and testing. 

Construction Sub-contractor: Performs construction work under contract
with prime contractor. 

Source: FDOT. 

Note: FDOT officials said that FHWA full oversight contracts receive 
the same level of FDOT scrutiny and oversight as other projects 
performed by FDOT staff, but the FHWA Division Office personnel will 
review and approve project designs; approve plans, specifications, and 
estimates; concur on award selection; approve contracts; and conduct 
project inspections. 

[End of figure] 

FDOT's Inspector General said that his office's recent audits related 
to contract management, such as single source and limited competition 
contracts, incentive payment analysis, and contract estimating, have 
not identified weaknesses that would affect FDOT's ability to award and 
manage contracts. 

Florida Met Recipient Reporting Deadlines without Significant Problems, 
but Expressed Concerns about Federal Methodologies Understating Jobs 
Created and Retained: 

According to Florida officials there were no significant issues 
collecting and reporting the information required under section 1512 of 
the Recovery Act[Footnote 11] by the October 10, 2009 reporting 
deadline, although it required great effort and diligence.[Footnote 12] 
Florida has a centralized system into which all 17 state agencies 
report, then the information is uploaded to the federal system, 
FederalReporting.gov. Florida developed and tested its centralized 
system well in advance of the reporting deadline. In addition, to 
ensure the accuracy and completeness of the data, state officials 
developed a checklist for use by the state agencies. 

Agencies took a range of steps to review data quality.[Footnote 13] 
According to state officials, most of the validation for such data as 
recipient name, address, and DUNS number[Footnote 14] was done using 
source material, for example, original grant agreements or Internet 
sources. Most of the 17 agencies were able to perform 100 percent 
validation of recipient names and addresses. For verifying jobs created 
and retained as reported by subrecipients, the methodologies used by 
the agencies' inspectors general covered a broad spectrum, from tracing 
the information reported back to source documents, to performing 
reasonableness checks of the reported numbers, to simply tracing the 
numbers from subrecipients' reports to the state's centralized 
reporting system. In addition to the reviews conducted by the agencies, 
content experts from the Governor's Office of Policy and Budget (OPB) 
reviewed agencies' submissions to the state, according to Florida's 
Recovery Czar. The choices made at both the agencies and OPB about how 
to conduct reviews were based on the number of staff and amount of time 
available in relation to the amount of data required to be reported. 
Florida's Chief Inspector General released a report providing a 
synopsis of steps taken by agencies to help ensure data quality. In 
addition, the Recovery Czar's office, along with the state's IG 
community, plans to meet to discuss lessons learned from the first 
round of reporting, officials said. 

To better understand how reporting worked we focused on FDOT, which has 
a large volume of Recovery Act awards, according to Florida officials. 
[Footnote 15] FDOT has reporting requirements under both sections 1512 
(recipient reporting) and 1201(c) of the Recovery Act.[Footnote 16] 
According to Florida officials, although the state had a system in 
place for section 1201(c) reporting, officials decided to develop two 
additional systems for recipient reporting. One system was created to 
assist state agencies in reporting information to the Florida state 
Recovery Czar, and a second system to allow subrecipients and vendors 
to enter total number of employees, employee hours, and payroll for 
Recovery Act-funded FDOT projects.[Footnote 17] FDOT officials said 
they provided training and guidance to subrecipients, and conducted 
town hall meetings on reporting requirements and processes. 
Subrecipients we spoke with told us the employment reporting system was 
user-friendly and they did not experience any significant challenges 
with collecting and reporting required Recovery Act information. 

FDOT officials said they took steps to ensure the quality of data in 
recipient reports, such as comparing data to previously submitted 
information to find anomalies, omissions, or variances. However, 
according to FDOT, subrecipients and vendors were not required to 
submit verification of their job data. Instead, according to FDOT 
officials, they advised subrecipients and vendors to maintain 
documentation in the event that auditors or other officials asked to 
view job data, but said they did not specify the nature of the 
documentation to be maintained. We found the extent of such 
documentation varied for the two subrecipients we visited. For example, 
both subrecipients kept documentation of tabulated hours and wages 
associated with Recovery Act projects for regular employees, but only 
one did so for management employees.[Footnote 18] 

Although Florida met recipient reporting deadlines, the Florida state 
Recovery Czar expressed concerns that OMB's methodology for using full-
time equivalents (FIT) to calculate jobs created or retained will 
understate the actual number of jobs created.[Footnote 19] In addition, 
the Florida state Recovery Czar told us that individual federal 
agencies distributed guidance with their own interpretation of OMB's 
calculation of jobs created or retained to their Florida counterparts 
and believes state agencies may have used different variations of the 
calculation to report jobs.[Footnote 20] Furthermore, the Florida state 
Recovery Czar raised concerns that the federal recovery Web site will 
make it appear as if the majority of Recovery Act funds coming to 
Florida is being allocated to projects in Tallahassee because there is 
no mechanism for recognizing their dispersal through Tallahassee. The 
Florida state Recovery Czar said the federal Recovery Accountability 
and Transparency Board is aware of this concern. 

Lee County and Fort Myers Are Primarily Using Available Recovery Act 
Funding for Nonrecurring Expenses: 
Officials from Lee County and, to a lesser extent, the City of Fort 
Myers, said they anticipate using available Recovery Act funds 
primarily to expand existing services or fund new initiatives on a 
nonrecurring basis. Recovery Act funding contributed only a small 
amount to the county's and city's overall budgets: As of November 18, 
2009, the county had been awarded $16.3 million and the city $4.5 
million in Recovery Act funds for use over multiple years, a fraction 
of even a single fiscal year (2010) operating budget of about $1 
billion county and $241 million city. (See table 3.) 

Table 3: Recovery Act Funding Reported by Lee County and Fort Myers 
Government Officials: 

Program area: Highways[A]; 
Lee County project or federal award: Five road improvement projects, 
including turn lanes and paved shoulders; Total: $2.5 million in fiscal 
year 2010; 
Fort Myers project or federal award: Two road improvement projects to 
install culverts; Total: $0.8 million in fiscal year 2010[B]. 

Program area: Human services and housing; 
Lee County project or federal award: Community Development Block Grant 
($0.6 million), Homeless Prevention ($0.9 million), Community Service 
Block Grant ($0.5 million); Total: $2 million over 3 years; 
Fort Myers project or federal award: Community Development Block Grant; 
Total: $0.2 million over 3.6 years. 

Program area: Transit; 
Lee County project or federal award: Buses and bus shelters; Total: 
$7.5 million over 3 to 5 years; 	
Fort Myers project or federal award: Not applicable. 

Program area: Energy efficiency; 
Lee County project or federal award: Energy Efficiency and Conservation 
Block Grant, including a biodiesel plant; ($3 million over 3 years); 
Weatherization Assistance ($1.3 million); Total: $4.3 million over 3 
years; 
Fort Myers project or federal award: Energy Efficiency and Conservation 
Block Grant, including installation of a solar power generator, among 
other projects; Total: $0.75 million. 

Program area: Public safety; 
Lee County project or federal award: Not applicable; 
Fort Myers project or federal award: Community Oriented Policing 
Services (COPS) Hiring Recovery Program grant providing salaries for 9 
officers over 3 years ($2.3 million); and Justice Assistance Grant 
(JAG) funding ($0.4 million)—added staff, overtime pay, and equipment 
for a total of $2.7 million over 4 years. 

Program area: Total Recovery Act funding; 
Lee County project or federal award: $16.3 million over multiple years; 
Fort Myers project or federal award: $4.5 million over multiple years. 

Source: Lee County and Fort Myers governments. 

[A] As required by the Recovery Act, the state of Florida suballocated 
transportation funds for local use. The local projects cited in the 
table are being administered by the county and city, according to FDOT 
officials. 

[B] Although Fort Myers was awarded $800,000 for local highway 
projects, city officials said that contracts for the projects are being 
awarded for less than the estimated costs and, as a result, excess 
funding will be applied to projects that may not be within the city. 

[End of table] 

In general, these Recovery Act funds were awarded to the city and 
county between April and August 2009. However, county officials said 
they have not received the majority of these funds, which will be 
reimbursed upon service delivery or project completion; city officials 
said they have not expended most funds. Fort Myers, which has some 
older substandard housing in low-income neighborhoods, reported using 
about $8,000 of an approximately $200,000 Community Development Block 
Grant awarded under the Recovery Act to install solar water heaters and 
energy-efficient windows in owner-occupied buildings. 

Officials of Lee County and Fort Myers reported largely using their own 
financial reserves rather than Recovery Act funds to stabilize annual 
budgets because the type of funding available is limited and certain 
grants require local funds when the grant period expires (see table 4). 
[Footnote 21] The city is using Community Oriented Policing Services 
(COPS) Hiring Recovery Program (CHRP) funding to avoid the layoff of 
six police officers, according to city officials. This use of funds 
accounts for about 2 percent of the city's police budget in fiscal year 
2010. 

Table 4: Actions Taken to Close Lee County and Fort Myers General Fund 
Shortfalls in Fiscal Year 2010 (Dollars in millions): 
		
Budget actions:	Recovery Act funds; 
Lee County: Amount: $0; 
Lee County: Percent of total budget actions: 0; 
Fort Myers: Amount: $0.58; 
Fort Myers: Percent of total budget actions: 2.5%. 

Budget actions:	Budget cuts; 
Lee County: Amount: $10; 
Lee County: Percent of total budget actions: 13%; 
Fort Myers: Amount: $8.7; 
Fort Myers: Percent of total budget actions: 43%. 

Budget actions:	Deferring expenses; 
Lee County: Amount: $9.5; 
Lee County: Percent of total budget actions: 12%; 
Fort Myers: Amount: $0; 
Fort Myers: Percent of total budget actions: 0. 

Budget actions:	Funds shifted; 
Lee County: Amount: $0; 
Lee County: Percent of total budget actions: 0; 
Fort Myers: Amount: $1.0; 
Fort Myers: Percent of total budget actions: 5%. 

Budget actions:	Reserves used; 
Lee County: Amount: $60.3; 
Lee County: Percent of total budget actions: 76%; 
Fort Myers: Amount: $8.8; 
Fort Myers: Percent of total budget actions: 44%. 

Budget actions:	Tax increases; 
Lee County: Amount: $0; 
Lee County: Percent of total budget actions: 0; 
Fort Myers: Amount: $1.2; 
Fort Myers: Percent of total budget actions: 6%. 

Budget actions:	Total[A]; 	
Lee County: Amount: $79.8; 
Lee County: Percent of total budget actions: 100%; 
Fort Myers: Amount: $20.2; 
Fort Myers: Percent of total budget actions: 100%. 

Source: Lee County and Fort Myers governments. 

[A] A city official said the city used Recovery Act funds to address a 
budget gap in the General Fund. The official explained that the city 
classified the grant under its Special Revenue Fund, but the grant 
funds were for expenses usually paid for out of the General Fund. 

[B] Totals may not add due to rounding. 

[End of table] 

In the fiscal year 2010 budget, Fort Myers officials said the city 
exhausted its available reserves. Lee County officials anticipate 
having sufficient reserves for the next 2 to 3 fiscal years. According 
to officials we interviewed at the Florida League of Cities and the 
Florida Association of Counties, if additional revenue is unavailable 
and reserves can no longer be tapped, the county and city will face 
major cuts to programs and services. 

County and city officials cited various reasons for not applying for 
competitive grants or using other available Recovery Act grants more 
widely to address budget shortfalls. County officials said they did not 
want to use Recovery Act funds that might require county funds for 
programs in the future. For example, even though public safety is one 
of its largest expenditures, Lee County officials said they did not 
apply for a COPS CHRP grant, which could have funded 21 officers over 3 
years, because a requirement to maintain those positions with state 
and/or local funds for a fourth year would cost their taxpayers about 
$2 million. Fort Myers officials said available Recovery Act money 
generally funds programs that are not part of the city budget, such as 
education and health programs, rather than key city responsibilities, 
such as replacing aging water and sewer systems and other 
infrastructure.[Footnote 22] Of the Recovery Act funding available for 
infrastructure—primarily transportation—Fort Myers officials said that 
$0.8 million went to the city because state highway projects are a 
priority for Recovery Act funds, with 30 percent of highway funds 
suballocated for metropolitan and local use. 

School Districts Primarily Used Recovery Act Funds to Retain Teachers 
and Staff, and the State Implemented Systems to Track Funds, and Sought 
Spending Flexibility: 

Florida LEAs largely used Recovery Act funds to retain teachers and 
staff, and the State Department of Education developed systems to track 
how funds are spent as well as sought a federal waiver to provide 
greater flexibility in how some funds are allocated. We surveyed a 
representative sample of LEAs—generally school districts—nationally and 
in Florida about their plans for Recovery Act funds. An estimated 86 
percent of Florida LEAs are planning to use over half of their SFSF 
funding to retain staff compared with an estimated 63 percent of LEAs 
nationally, according to our survey (see table 5). A senior Florida 
official said the higher percentage may reflect, in part, the collapse 
of the Florida housing market: 50 percent of Florida's LEAs' operating 
funds come from local property taxes and property values have fallen 
significantly. The official also said that LEAs have greater discretion 
with SFSF funds than with ESEA Title I, Part A or IDEA funds, which 
target programs for disadvantaged youth and children with disabilities, 
respectively. 

Despite Recovery Act SFSF funds, an estimated 56 percent of Florida 
LEAs reported that their schools will lose staff compared to an 
estimated 32 percent of LEAs nationwide. A Florida official attributed 
staff reductions at least partially to an overall decline in student 
enrollment, requiring fewer teachers in the 2009-2010 school year. The 
official added that Recovery Act funding has been critical to 
supporting existing teachers, given significant declines in state and 
local revenues. 

Table 5: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, IDEA funds; 
Estimated percentages of LEAs, Florida: 86%; 
Estimated percentages of LEAs, Nation: 63%. 
	
Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, Title I funds; 
Estimated percentages of LEAs, Florida: 34%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, SFSF funds; 
Estimated percentages of LEAs, Florida: 34%; 
Estimated percentages of LEAs, Nation: 19%. 

Responses from GAO survey: Anticipate job losses, even with SFSF funds; 
Estimated percentages of LEAs, Florida: 56%; 
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs, Florida: 11%; 
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for Florida have margins of error, at the 95 
percent confidence level, of plus or minus 15 percentage points or 
less. The nation-wide percentage estimates have a margin of error of 
plus or minus 5 percentage points. 

[End of table] 

A senior Florida official also reported the state's successful 
implementation of a three-part monitoring plan for SFSF, the largest 
portion of the state's Recovery Act education funding. (See figure 2.) 
However, the official said the monitoring requirements doubled staff 
workloads with no increases in resources. The official said staff has 
been particularly challenged to meet the Recovery Act's section 1512 
quarterly recipient reporting requirements with respect to SFSF, but 
has applied the monitoring plan as written. State education officials 
have identified several issues with the first quarterly report 
submitted by LEAs on expenditures and jobs retained or created due to 
the federal government by October 10, 2009. Florida officials told us 
the U.S. Department of Education guidance on converting jobs retained 
or created to FTEs, as required, was not issued until September 2009, 
shortly before the quarterly report was due, and LEAs did not have 
sufficient time to absorb the subtleties of it.[Footnote 23] As a 
result, the officials told us the state Education Inspector General's 
office 23OMBegun a survey of selected LEAs to identify issues so 
technical assistance can be developed for the next quarterly report. In 
addition, when state education staff reconciled LEAs' monthly 
expenditure reports with their first quarterly reports they found some 
discrepancies in a small number, and state education staff are in the 
process of contacting those LEAs to identify the cause of those 
divergences. 

Figure 2: Selected Key Steps from Florida's SFSF Subrecipient 
Monitoring Plan: 

[Refer to PDF for image: illustration] 

Application: 

All applications are reviewed by both program and grants management 
staff for adherence to program and fiscal requirements. 

Applications and award notices are managed through an electronic grants 
management system which sends daily updates to the Cash Advance and 
Reporting of Disbursement System (CARDS). 

School districts make initial cash requests through CARDS and report 
monthly expenditures for the prior month for each award. 

On-Going Monitoring: 

Quarterly reports of expenditures and jobs retained or created are 
assembled using data from the on-line application and reporting system. 
Program staff review report elements using a "reasonableness" standard. 
Any potential compliance issues are referred to Administrative 
Services, where a monitoring team reviews the issues and determines the 
appropriate action. 

Continuous cash draw downs and monthly expenditure reports are 
monitored by staff who perform comparative analyses of specific data 
points to look for problems. 

Fund Reconciliation: 

Sub-recipients will be required to submit final expenditure reports 
once SFSF use period expires. Those reports are reconciled with cash 
draw down and expenditure data in the CARDS system. 

Final expenditure reports are reviewed by designated staff looking for 
any expenditures which may be unallowable under the SFSF program. 

Source: GAO analysis of Florida Department of Education monitoring 
plan. 

[End of figure] 

State education officials told us they applied for authority to grant 
ESEA Title I, Part A waivers to LEAs for more flexibility in spending 
Recovery Act funds to improve education through innovative strategies. 
[Footnote 24] For example, a waiver of the inclusion of Recovery Act 
funds in the calculation of the requirement to spend an amount equal to 
20 percent of ESEA Title I, Part A funds would allow LEAs to free up 
those funds to address specific student needs identified through data 
analysis, according to state education officials. Florida officials 
told us they completed their online waiver application form for LEAs at 
the end of October 2009. Some of the requested waivers have been 
approved by the U.S. Department of Education, and LEAs are submitting 
applications to the state for those waivers. The state's remaining 
waiver requests are under consideration by the U.S. Department of 
Education. 

Florida Inspectors General Community Is Coordinating Oversight 
Activities: 

Florida's Inspectors General (IG) community continues to play a 
prominent role in providing oversight of Florida's Recovery Act funds. 
The Florida IG community has chosen to coordinate across all state 
agencies and communicate regularly. To that end, they formed five 
committees to work on Recovery Act issues. (See figure 3.) 

Figure 3: Steps Reported by IG Community to Provide Statewide 
Oversight: 

[Refer to PDF for image: illustration] 

Inspectors General oversight of Recovery Act funds: 

Fraud/deterrence/training: 
* Coordinated training of approximately 1,000 auditors, investigators 
and procurement professionals on identifying potential fraud; 
* Trained 70 staff from OIG community on advanced investigative 
techniques; 
* Issued alert recommending OIG-state agency procurement staff 
coordination regarding prohibition on contracting with convicted 
vendors; 
* Issued alert requiring OIGs to submit details of investigations into 
Recovery Act contracts fraud; 
* Transmitted letter advising Florida CPA's of their significance in 
single audits of entities receiving Recovery Act funds. 

Special issues: 
* Engaged Chief Financial Officer staff regarding Recovery Act 
oversight administrative costs and other topics; 
* Working to verify the capacity of the states financial management 
reporting system; 
* Working to encourage an assessment of adequacy of staffing levels for 
certified procurement and project management professionals; 
* Meeting to discuss lessons learned. 

Risk readiness: 
* Agencies determined which programs would receive funds and which were 
most at-risk for fraud waste or abuse; 
* For identified programs, IGs are reviewing risk-mitigation 
strategies. 

Data quality: 
* Established protocols and check sheet for reviewing data quality; 
* Provided Instruction and technical assistance on ensuring data 
quality; 
* Discussed data quality reviews with agencies where needs were 
atypical; 
* Reviewed agency data, both static and variable, prior to submission 
to federal system (in some cases, going back to source documents). 

Reporting: 
* Helped prepare agencies to comply with Recovery Act reporting 
requirements; 
* Put together a library of federal guidance; 
* Completed Analysis of OIG Capacity (e.g, staffing and succession). 

Source: GAO analysis of Inspectors General documents. 

[End of figure] 

State Comments on This Summary: 

We provided the Special Advisor to Governor Charlie Crist, Florida 
Office of Economic Recovery, with a draft of this appendix on November 
18, 2009. The Florida official concurred with the information in the 
appendix and provided technical suggestions that were incorporated, as 
appropriate. In addition, we provided relevant excerpts to officials of 
the state agencies as well as the city and county we visited. They 
agreed with our draft and provided some clarifying information, which 
we incorporated, as appropriate. 

GAO Contacts: 

Andrew Sherrill, (202) 512-7252 or sherrilla@gao.gov. 
Zina Merritt, (202) 512-5257 or merrittz@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Patrick di Battista, Lisa 
Galvan Trevino, Sabur Ibrahim, Kevin Kumanga, Frank Minore, Brenda 
Ross, Margaret Weber, and James Whitcomb made major contributions to 
this report. Susan Aschoff assisted with writing, and Barbara Steel-
Lowney assisted with quality assurance. 

[End of section] 

Footnotes: Appendix V: Florida: 

[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

[2] U.S. Census Bureau and U.S. Department of Labor. Population data 
are from July 1, 2008. Unemployment rates are preliminary estimates for 
September 2009 and have not been seasonally adjusted. Rates are a 
percentage of the labor force. Estimates are subject to revision. 

[3] According to FDOT's Office of Inspector General, single source 
contracts occur when a contract can only be satisfied with commodities 
or services from one vendor and there are no known able competitors. 

[4] According to FDOT's Office of Inspector General, limited 
competition contracts are contracts for construction projects that 
receive only one bid. 

[5] This figure does not include obligations associated with $0.7 
million of apportioned funds that were transferred from FHWA to the 
Federal Transit Administration (FTA) for transit projects. Generally, 
FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds 
made available for transit projects to FTA. 

[6] As we reported in September 2009, Florida is using Recovery Act 
funds for more complex projects, such as constructing new roads and 
bridges and adding lanes to existing highways that require more time 
before bids can be requested and contracts can be awarded, according to 
Florida officials. 

[7] According to the FDOT local agency program manual, a local agency 
is defined as a governmental body related to transportation that is 
responsible for planning, design, right-of-way acquisition, and 
construction. 

[8] According to FDOT officials, within each district, projects are 
distributed to localities based, in part, on population. District 5 has 
almost twice as many residents as District 2. 

[9] According to FDOT officials, fixed-price contracting is FDOT's 
standard contracting method and all construction workers on federally 
funded projects must be compensated according to prevailing wage rates 
determined by the United States Department of Labor. 

[10] Under FDOT's guidelines, adjusted score means the contract award 
is based on the lowest adjusted score, which is determined by dividing 
the price proposal by the technical proposal score. 

[11] The Recovery Act contains multiple reporting requirements. We 
refer to the reports required by section 1512 as recipient reports. 

[12] According to the Florida state Recovery Czar, the majority of 
Recovery Act funds received by Florida fall under division B of the 
Recovery Act and, thus, are not subject to section 1512 reporting 
requirements. Division B includes tax provisions, unemployment 
compensation, and certain other provisions. 

[13] Inspectors general and others involved in the data quality reviews 
attended training and technical advisory meetings to explore in detail 
data quality issues prior to uploading the data into the Federal 
Recovery system, according to Florida's Chief Inspector General. 

[14] An identifier assigned applications and proposals for federal 
money. 

[15] According to the FDOT Office of Inspector General, FDOT IG has 
been given responsibility by the state for Recovery Act recipient 
reporting. According to the Florida state Recovery Czar, content 
experts from the Governor's Office of Policy and Budget were assigned 
to each Recovery Act award and no award was uploaded to 
FederalReporting.gov without sign-off by the OPB reviewer. 

[16] For section 1201(c),the first periodic report was due no later 
than 90 days after the date of enactment of the act, with updated 
reports due no later than 180 days, 1 year, 2 years, and 3 years after 
enactment. Section 1201(c) requires periodic reports, which include 
information on the pace at which funds are spent and the status of FDOT 
projects. 

[17] According to Florida officials, the first system was developed by 
the Florida Office of Economic Recovery and titled "FlaReporting 
System" and the second system was developed by FDOT titled "FDOT ARRA 
Employment Reporting System" for employment reporting. Although FDOT 
utilized the FHWA Recovery Act Data System for 1201(c) reporting, it 
did not utilize it for 1512 reporting. 

[18] At the second subrecipient, of the eight employees associated with 
Recovery Act projects, four were management employees. Although 
documentation such as time sheets was available for regular employee 
hours and wages, no supporting documentation was kept for management 
employees. 

[19] For example, if a full-time job was created in mid-September—
meaning that it existed for only 2 weeks of the reporting period—
federal instructions require taking those 80 hours and dividing by 520 
hours, or the entire quarter. This calculation equals 0.15 of an FTE, 
even though one full-time job was created. 

[20] According to the Florida state Recovery Czar, some agencies 
indicated the hours in the denominator should reflect hours from the 
date of the award, some from the beginning of the quarter, and some 
from the start of the project. 

[21] Lee County and Fort Myers are experiencing gaps remaining between 
revenues and expenditures. County officials explained that their budget 
gaps are a result of declining revenue sources, such as a 24 percent 
decline in property taxes in fiscal year 2010. In fiscal years 2008 
through 2010 the city reported increasing property taxes to offset 
expenditure pressures that include pension and benefit obligations for 
city employees, revenue losses from falling property values, and 
declining funds from state revenue-sharing programs. 

[22] The city's largest expenses involve infrastructure—such as water 
and sewer projects funded through its Utility Fund—as well as public 
safety, which is funded through the General Fund. The county's largest 
expenses are for public safety, such as the sheriffs office, funded 
through the General Fund. 

[23] OMB issued reporting guidance on June 22, 2009; however, the U.S. 
Department of Education guidance contained additional clarifications on 
how to calculate and report jobs created or retained. For example, 
Education specifically addressed how a recipient should calculate the 
full-time equivalent for a teacher on a contract less than 12 months. 

[24] The Department of Education accepts applications from state 
educational agencies to apply, on behalf of their LEAs, for waivers of 
one or more "set-aside" requirements that are affected by the 
availability of ESEA Title I, Part A Recovery Act funds. For example, 
LEAs are obligated to spend an amount equal to at least 20 percent of 
their ESEA Title I, Part A, Subpart 2 allocation on transportation for 
public school choice and supplemental educational services (SES). These 
services include tutoring, remediation and other supplemental academic 
enrichment services designed to increase the academic achievement of 
students. LEAs must offer students in schools that have missed academic 
targets for two consecutive years an opportunity to transfer to a high-
performing school in the district (public school choice) and in 
addition, must offer SES students from schools that have missed 
academic targets for three consecutive years. 

[End of Appendix V: Florida: 

Appendix VI: Georgia: 

Overview: 

The following summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Georgia.[Footnote 1] The full report on all of our 
work, which covers 16 states and the District of Columbia, is available 
at [hyperlink, http://www.gao.gov/recovery]. 

What We Did: 

Our work in Georgia focused on the Public Housing Capital Fund because
projects funded with the formula funds were under way and the 
competitive funds had just been awarded. In addition to this program, 
we updated information on Highway Infrastructure Investment funds and 
three Recovery Act education programs—the State Fiscal Stabilization 
Fund; Title I, Part A, of the Elementary and Secondary Education Act of 
1965 (ESEA), as amended; and the Individuals with Disabilities 
Education Act (IDEA), Parts B and C—because significant Recovery Act 
funds had been obligated. For descriptions and requirements of the 
programs covered in our review, see appendix XVIII of GAO-10-232SP. We 
also focused on the state's initial reporting on the jobs created and 
retained with Recovery Act funds and the use of Recovery Act funds in 
selected localities. 

What We Found: 

Following are highlights of our review. 

* Public Housing Capital Fund. The U.S. Department of Housing and 
http://www.gao.gov/recovery allocated about $113 million in Recovery 
Act funding to 184 public housing agencies in Georgia. As of November 
14, 2009, 124 of these agencies had obligated $55.8 million, and 100 
agencies had drawn down $8.4 million. We visited public housing 
agencies in Athens, Atlanta, and Macon. With its formula funds, the 
Athens Housing Authority has completed a roofing project and begun work 
on modernizing 23 scattered sites. The Atlanta Housing Authority 
recently reassessed its design plans for 13 rehabilitation projects to 
be funded with formula awards and plans to begin work on them in the 
spring of 2010. The Macon Housing Authority plans to use $8.6 million 
in competitive grant funds to make a 100-unit housing development more 
energy efficient. 

* Highway Infrastructure Investment funds. The U.S. Department of 
Transportation's Federal Highway Administration (FHWA) apportioned $932 
million in Recovery Act funds to Georgia. As of October 31, 2009, the 
federal government had obligated $703 million to Georgia,[Footnote 2] 
and $43 million had been reimbursed by the federal government. 

* Education. Our survey of local educational agencies (LEA) in Georgia 
showed that they plan to use Recovery Act funds to retain staff, but 
most LEAs still expect to lose staff overall. 

* Recipient reporting. Georgia used a decentralized approach to meet 
Recovery Act reporting requirements—that is, 18 state agencies reported 
directly into the federal government's reporting Web site. The State 
Accounting Office monitored the reporting process and identified some 
discrepancies, such as jobs associated with zero expenditures, that 
needed to be corrected. Although there were last minute changes to 
federal guidance that required data to be resubmitted, the State 
Accounting Office was generally satisfied with how the state completed 
the first round of reporting. 

* Selected localities' use of Recovery Act funds. The city of Atlanta, 
city of Macon, and Tift County had been awarded Recovery Act funding of 
$78 million, $4.5 million, and $378,000, respectively, as of November 
12, 2009. For instance, Atlanta and Macon each received funds to hire 
additional police officers. Tift County received an award to hire 
additional staff in the District Attorney's office. 

Housing Agencies Continue to Make Progress on Projects Funded with 
Recovery Act Formula Grants: 

In Georgia, 184 public housing agencies received about $113 million in 
Public Housing Capital Fund formula grants (see fig. 1). Recovery Act 
requirements specify that public housing agencies must obligate funds 
within 1 year of the date they are made available to public housing 
agencies. Agencies are to give priority to projects that (1) can award 
contracts based on bids within 120 days from the date the funds are 
made available, (2) rehabilitate vacant units, or (3) are already under 
way or included in required 5-year Capital Fund plans. As of November 
14, 2009, 124 of the public housing agencies in Georgia had obligated 
$55.8 million and 100 agencies had drawn down $8.4 million. On average, 
public housing agencies in Georgia are obligating funds at about the 
same rate as housing agencies nationally. We visited three housing 
agencies for this report: the Housing Authority of the City of Athens 
(Athens Housing Authority), the Housing Authority of the City of 
Atlanta (Atlanta Housing Authority), and the Housing Authority of the 
City of Macon (Macon Housing Authority).[Footnote 3] 

Figure 1: Percentage of Public Housing Capital Fund Formula Grants 
Allocated by HUD That Had Been Obligated and Drawn Down in Georgia, as 
of November 14, 2009: 

[Refer to PDF for image: 3 pie-charts; 1 horizontal bar graph] 

Funds obligated by HUD: 100%; $112,675,806; 
Funds obligated by HUD by public housing agencies: 49.6%; $55,845,802; 
Funds drawn down by public housing agencies: 7.5%; $8,402,602. 

Number of public housing agencies: 
Entering into agreements for funds: 184; 
Obligating funds: 124; 
Drawing down funds: 100. 

Source: GAO analysis of HUD data. 

[End of figure] 

Athens Housing Authority: 

The Athens Housing Authority received about $2.6 million in Recovery 
Act formula grant awards. As of November 14, 2009, the housing agency 
had obligated about $1.6 million and drawn down approximately $226,000. 
It plans to use the majority of its Recovery Act funds to complete 
three projects.[Footnote 4] The agency awarded the contracts for the 
first two projects—replacing the roofs on 40 units and the 
comprehensive modernization of 23 scattered site housing units—within 
120 days of the date the funds were released for use. The roofing 
project was completed at a cost of about $42,000. The $1.3 million 
modernization of scattered sites will include asbestos and lead 
abatement and the installation of new windows, doors, cabinets, 
appliances, water heaters, and heating and air systems. This work has 
begun and is scheduled to be completed by May 2010. The agency also 
plans to replace two elevators at a senior high-rise; the agency's 
estimated cost for this third project has increased from $330,000 to 
$400,000 because the agency decided to upgrade to more energy-efficient 
equipment, rather than refurbish the old elevators. The housing agency 
expects bids by December 15, 2009, work to begin by January 2010, and 
the project to be completed by September 2010. None of the units 
affected by these renovations were vacant because the agency's units 
are typically at least 98 percent occupied, with the few vacancies 
being attributable to turnover. Agency officials stated that while only 
the scattered site project was in the agency's 5-year plan prior to the 
Recovery Act, all three projects were in an updated plan approved in 
May 2009. Athens Housing Authority officials were confident that they 
could meet the Recovery Act requirement to obligate 100 percent of 
funds by March 17, 2010. 

Atlanta Housing Authority: 

The Atlanta Housing Authority received about $26.6 million in Recovery 
Act formula grant awards. As of November 14, 2009, the agency had 
obligated about $26.5 million and drawn down about $730,000. It plans 
to use about $19 million of its Recovery Act funds to rehabilitate 13 
properties containing a total of 1,953 units and the remaining $8 
million to demolish 4 properties. The housing agency recently 
reassessed its design plans for the 13 properties to ensure that it 
maximized the use of the funds. The work will include energy 
conservation measures, renovations to common areas, and exterior and 
site improvements. The agency plans to begin this work in the spring of 
2010. Because the agency has very few vacancies, only three of the 
units to be rehabilitated are vacant. All of the planned projects were 
in the Atlanta Housing Authority's fiscal year 2010 annual plan, which 
was completed in April 2009.[Footnote 5] The Atlanta Housing Authority 
has obligated the majority of its funds through amended contracts with 
the private management companies that manage the properties. According 
to Atlanta Housing Authority officials, the remaining funds will be 
obligated by March 17, 2010. 

Macon Housing Authority: 

The Macon Housing Authority received about $4.8 million in Recovery Act 
formula grant awards. As of November 14, 2009, the agency had obligated 
about $150,000 and drawn down about $77,000. The agency plans to use 
all of these funds to complete a major rehabilitation of a 250-unit 
housing development. The planned work includes replacing the baths, 
kitchens, appliances, windows, doors, and flooring; painting; 
landscaping; and resurfacing parking lots and streets. The agency 
awarded a contract for approximately $4.5 million on October 14, 2009, 
and work will begin in December 2009. None of the units to be 
rehabilitated were vacant, and the project was in the agency's 5-year 
plan prior to the Recovery Act. According to Macon Housing Authority 
officials, all of their funds will be obligated by March 17, 2010. 

Some Housing Agencies Also Received Competitive Recovery Act Grants: 

In addition to the Public Housing Capital Fund formula grants, HUD 
awarded six competitive grants to housing agencies in Georgia, 
including one to the Macon Housing Authority. The Macon Housing 
Authority will use its $8.6 million grant awarded under the Energy 
Efficient, Green Community category for substantial rehabilitation of a 
100-unit housing development. Agency plans include wrapping the 
exterior of the buildings in a ridged insulation system covered with 
siding; re-engineering the roof with a higher pitch to allow for more 
insulation and more efficient duct work for heating and air systems; 
and installing energy-efficient windows and heating and air systems and 
water-conserving appliances and fixtures. Also, the units will be 
reconfigured to reposition doors and windows to give the appearance of 
single-family houses. The agency plans to start the work in April 2010 
and complete it by December 2011. 

The Athens and Atlanta Housing Authorities chose not to apply for 
competitive grants. According to Athens Housing Authority officials, 
they did not apply because they were concerned about their ability to 
meet the deadlines for obligating and expending funds. Atlanta Housing 
Authority officials stated that they chose not to apply because there 
were too many restrictions on the use of the funds. For example, only 
certain funds could be used to meet the leveraging requirement, and 
funds could only be used for demolition if a replacement project was 
identified. 

Recovery Act Funds Apportioned to Georgia Continue to Be Obligated by 
FHWA for Federal-Aid Highway Projects: 

As we reported in September 2009, $932 million was apportioned to 
Georgia in March 2009 for highway infrastructure and other eligible 
projects.[Footnote 6] As of October 31, 2009, $703 million had been 
obligated.[Footnote 7] As of the same date, $43 million had been 
reimbursed by FHWA.[Footnote 8] Almost 72 percent of Recovery Act 
highway obligations for Georgia have been for pavement projects. 
Specifically, $505 million of the $703 million obligated as of October 
31, 2009, has been for resurfacing, pavement reconstruction and 
rehabilitation, pavement widening, and new road construction projects. 
[Footnote 9] Another $61 million was obligated for bridge projects. 
State officials told us they selected projects based on various 
factors, including eligibility requirements, whether the project was 
"ready to go," and the geographic dispersion across the state. Figure 2 
shows obligations by the types of road and bridge improvements being 
made. 

Figure 2: Highway Obligations for Georgia by Project Improvement Type, 
as of October 31, 2009: 

[Refer to PDF for image: pie-chart] 

Pavement projects total (72 percent, $504.6 million): 
Pavement improvement: resurface ($185.4 million): 26%; 
Pavement widening ($125.2 million): 18%; 
Pavement improvement: reconstruction/rehabilitation ($99.1 million): 
14%; 
New road construction ($94.9 million): 13%; 

Bridge projects total (9 percent, $61.3 million): 
Bridge replacement ($61.3 million): 9%; 

Other (20 percent, $137.5 million): 
Other ($137.5 million): 20%. 

Source: GAO analysis of Federal Highway Administration data. 

Note: Percentages may not add due to rounding. "Other" includes safety 
projects, such as improving safety at railroad grade crossings, and 
transportation enhancement projects, such as pedestrian and bicycle 
facilities, engineering, and right-of-way purchases. 

[End of figure] 

As of November 12, 2009, the Georgia Department of Transportation 
(GDOT) had awarded 131 contracts with a total value of $434 million. 
[Footnote 10] According to state officials, bids for contracts continue 
to come in below the state's estimated costs. For example, 96 percent 
of the contracts awarded were below GDOT's estimated cost, and the 
savings from awarding contracts for less than the estimated costs 
ranged from about 3 percent to 68 percent.[Footnote 11] Officials 
explained that bids have been coming in lower than expected costs due 
to current economic conditions. GDOT will request that FHWA obligate 
the project savings on a monthly basis to other projects. In 
anticipation of continued savings, the department has identified 
additional projects and developed contingency plans for further 
obligation of Recovery Act funds. 

Georgia School Districts Plan to Use Recovery Act Funds to Retain 
Staff, but Most Districts Expect to Lose Staff Overall:	 

Our review covers three education programs receiving Recovery Act 
funds: (1) the Individuals with Disabilities Education Act (IDEA), as 
amended, Parts B and C, which supports early intervention, special 
education, and related services for infants, toddlers, children, and 
youth with disabilities; (2) Title I, Part A of the Elementary and 
Secondary Education Act of 1965 (ESEA), as amended, which provides 
financial assistance to help educate disadvantaged youth; and (3) the 
State Fiscal Stabilization Fund (SFSF), which was created under the 
Recovery Act, in part, to help state and local governments stabilize 
their budgets by minimizing budgetary cuts in education and other 
essential government services. We surveyed a representative sample of 
local educational agencies (LEA)—generally school districts—nationally 
and in Georgia about their planned uses of Recovery Act funds.[Footnote 
12] Table 1 shows Georgia's and national survey results on the 
estimated percentages of LEAs that plan to use more than 50 percent of 
their Recovery Act funds under these three education programs to retain 
staff. It also shows the estimated percentages of LEAs that anticipate 
job losses even with SFSF funds and that reported a total funding 
decrease of 5 percent or more since the last school year. In each case, 
the percentage for Georgia is higher than the national percentage. 

Table 1: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: IDEA funds; 
Estimated percentages of LEAs, Georgia: 36%; 
Estimated percentages of LEAs, Nation: 19%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: Title I funds; 
Estimated percentages of LEAs, Georgia: 38%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: SFSF funds; 
Estimated percentages of LEAs, Georgia: 92%; 
Estimated percentages of LEAs, Nation: 63%. 

Responses from GAO survey: Anticipated job losses, even with SFSF 
funds; 
Estimated percentages of LEAs, Georgia: 65%; 
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs, Georgia: 39%; 
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for Georgia have margins of error, at the 95 
percent confidence level, of plus or minus 8 percentage points or less. 
The nationwide percentage estimates have a margin of error of plus or 
minus 5 percentage points. 

[End of table] 

Despite a Few Last-Minute Changes to Federal Guidance, Georgia Met Its 
Reporting Requirements: 

To meet Recovery Act reporting requirements, Georgia used a 
decentralized approach—that is, the 18 state agencies that were awarded 
Recovery Act funds reported directly into the federal government's 
reporting Web site. Prior to the October 10 submission deadline, 
Georgia's State Accounting Office (SAO) provided training and held 
meetings to help state agencies prepare. During the period designated 
for review of initial submissions (Oct. 11-21, 2009), SAO reviewed the 
data that each state agency submitted for reasonableness and potential 
inaccuracies. Its review identified the following issues: 

* In some cases, there was no apparent connection between the number of 
jobs created and retained and the amount of Recovery Act funds spent. 
For example, one state agency reported that jobs were created or 
retained but did not report that any funds were expended. SAO officials 
stated that it was an error and the agency revised the report once the 
issue was brought to its attention. 

* In some instances, the average cost of a job seemed unreasonable. In 
these cases, SAO asked the state agency to review its data and revise 
them, if necessary. 

* In some cases, subrecipients reported to a state agency the number of 
jobs created or retained with Recovery Act funds as of September 30, 
2009, as required. However, because the state agency had not reimbursed 
the subrecipients for their expenditures as of September 30, 2009, the 
agency could not report jobs created or retained as the money had not 
been expended at the state level. 

Although most state agencies did not have issues with the report 
submission process and meeting the submission deadline, some state 
agencies experienced last-minute challenges. For example, on October 9, 
2009, the U.S. Department of Education issued additional guidance to 
institutions of higher education with instructions for calculating the 
number of jobs created or retained using Federal Work-Study Program 
funds.[Footnote 13] However, according to SAO officials, 11 
institutions of higher education in Georgia already had submitted their 
reports and were required to submit revisions. In another case, FHWA 
asked GDOT to resubmit its data in late October 2009. According to GDOT 
officials, FHWA identified information to be updated in the data fields 
"Total Federal Award" and "Total Federal Recovery Act Funds 
Received/Invoiced" during the period set aside for federal review of 
the data submitted (Oct. 21-29, 2009). FHWA wanted the Total Federal 
Award amount to include all federal funds used in the project, 
including non-Recovery Act funds. It also wanted the Total Federal 
Recovery Act Funds Received/Invoiced field to match information 
captured in its financial management system on the total Recovery Act 
award to Georgia, while GDOT had reported the amount of Recovery Act 
funds that had been reimbursed to it by FHWA. GDOT officials stated 
they were hesitant to make these changes because they thought the 
request conflicted with U.S. Office of Management and Budget (OMB) 
Recovery Act reporting guidance and following FHWA guidance would 
overstate the amount of funding actually received or invoiced in the 
state. The agency sought clarification from FHWA and approval from OMB 
on this issue. Although GDOT officials told us that they did not 
believe their first submission was incorrect or that their concerns 
were fully addressed by OMB or FHWA, they elected to amend their 169 
highway project reports on October 27, 2009, per FHWA's guidance. 

Despite these challenges, SAO generally was satisfied with the state's 
first quarter of reporting. However, it identified some areas that 
could be improved. For example, SAO officials stated that some state 
agencies could benefit from a more in-depth review of the data prior to 
submission. 

Therefore, SAO plans to develop a tool for agencies to use to review 
data prior to submission. In addition, SAO plans to develop additional 
training for state agencies on Recovery Act reporting. 

Selected Localities in Georgia Have Begun to Receive Recovery Act 
Funds, but They Still Have Budget Challenges: 

We visited three local governments in Georgia—the city of Atlanta, the 
city of Macon, and Tift County—to discuss their fiscal condition and 
use of Recovery Act funds.[Footnote 14] The state of Georgia 
provides16Otherl direct financial support to local governments—an 
estimated 4 percent of their budgets, according to a 2008 National 
League of Cities report—and does not have revenue sharing agreements 
with them.[Footnote 15] 

Atlanta, Georgia: 

According to city officials, Atlanta had applied for approximately $530 
million in Recovery Act funding as of November 12, 2009 (see fig. 3). 
Of that amount, about $298 million is for a grant from the U.S. 
Department of Transportation for a streetcar system.[Footnote 16] City 
officials told us they had been awarded about $78 million, including 
$34 million for security and terminal improvements at the Atlanta 
airport and $14.7 million to hire additional police officers through 
the COPS Hiring Recovery Program and the Edward Byrne Memorial Justice 
Assistance Grant Program ($11.2 million and $3.5 million, 
respectively). 

Figure 3: City of Atlanta Profile and Status of Formula and Competitive 
Recovery Act Funding: 

[Refer to PDF for image: map of Georgia indicating Atlanta and 
associated data] 

Demographics: 

Estimated population (2008): 537,958; 
Unemployment rate (Sept. 2009):	11.4%; 
FY10 budget (change from FY09):	$541.0 million (-5.2%); 
Locality type: Large city. 

Recovery Act funding reported by city of Atlanta: 

Transportation: 
Awarded: $45.6 million; 
Pending: $298.3 million. 

Public safety: 
Awarded: $14.7 million; 
Pending: $68.3 million. 

Energy and environment: 
Awarded: $7.1 million; 
Pending: $26.7 million; 
Not awarded: $3.4 million. 

Housing and homelessness: 
Awarded: $5.7 million; 
Pending: $57.9 million; 
Not awarded: 3.0 million. 

Other: 
Awarded: $4.9 million; 
Pending: 0.3 million. 

Sources: (Demographics) U.S. Census Bureau, U.S. Department of Labor, 
and Art Explosion. (Recovery Act funding) City of Atlanta officials. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. Funds "awarded" represents grants awarded to the 
city of Atlanta by federal and state agencies and includes some funds 
in excess of the original amount for which the city applied, due to a 
redistribution of funds. Funds "not awarded" are grants for which the 
city applied but did not receive. 

[End of figure] 

While the Recovery Act has provided additional funding for Atlanta, 
city officials stated that the funds, with the exception of those for 
police officers, have not had an impact on the city's operating budget. 
Atlanta had to take a number of actions to balance its fiscal year 2009 
budget and close a $74 million budget gap. For example, the city 
furloughed staff (including public safety officials), eliminated 
approximately 300 positions, implemented a hiring freeze, and closed 20 
recreation centers. For the fiscal year 2010 budget, officials told us 
the city raised the property tax rate to address a projected $56 
million budget gap. Given the minimal impact on operating funds, the 
city has not developed a strategy for winding down its use of Recovery 
Act funds. 

Macon, Georgia:	 

According to city officials, Macon had applied for $15.6 million in
Recovery Act funds, of which the city had received $4.5 million as of
November 12, 2009 (see figure 4)[Footnote 17] Its largest award was 
$1.7 million in COPS Hiring Recovery Program funds to hire 14 
additional police officers. Given the minimal impact on operating 
funds, officials explained that the city has not developed a strategy 
for winding down its use of Recovery Act funds. 

Figure 4: City of Macon Profile and Status of Formula and Competitive 
Recovery Act Funding: 

[Refer to PDF for image: map of Georgia indicating Macon and associated 
data] 

Demographics: 

Estimated population (2008): 92,775; 
Unemployment rate (Sept. 2009):	11.7%; 
FY10 budget (change from FY09):	$69.5 million (-1.2%); 
Locality type: Midsized city. 

Recovery Act funding reported by city of Macon: 

Not awarded: $454,639; 2.9%; 
Awarded: $4,494,722; 28.8%; 
Application pending: $10,680,538; 68.3%; 
Total: $15,629,899. 

Sources: (Demographics) U.S. Census Bureau, U.S. Department of Labor, 
and Art Explosion. (Recovery Act funding) City of Macon officials. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. Funds "awarded" represents grants awarded directly 
to the city of Macon by federal agencies. Funds "not awarded" are 
grants for which the city applied but did not receive. 

[End of figure] 

Macon had a balanced fiscal year 2010 budget of approximately $69.5 
million, $860,000 less than its fiscal year 2009 budget. To balance its 
budget, Macon increased the health care contribution of all city 
employees and retirees, used more than $2 million in targeted sales tax 
funds to cover the city's fiscal year 2010 lease payments, and did not 
fund 45 authorized positions. 

Tift County, Georgia: 

According to county officials, Tift County had received approximately 
$378,000 in Recovery Act funds through three grant awards as of 
November 12, 2009 (see fig. 5). The majority of the funds ($325,000) 
were for two positions in the District Attorney's office. About $40,000 
will be combined with an award to the city of Tifton to purchase a 
backup emergency radio tower and generator, and the remaining $13,000 
went to the Sheriffs Office. County officials stated they expect that 
some of these awards will have a positive impact on the county's budget 
because they freed up funds for other uses. Once the Recovery Act funds 
have been depleted, officials plan to maintain the positions at the 
District Attorney's office by charging fees for services. Tift County 
applied for a COPS Hiring Recovery Program grant to hire additional 
police officers but did not receive this award. 

Figure 5: Tift County Profile and Status of Formula and Competitive 
Recovery Act Funding: 

[Refer to PDF for image: map of Georgia indicating Tift County and 
associated data] 

Demographics: 

Estimated population (2008): 42,434; 
Unemployment rate (Sept. 2009):	10.6%; 
FY10 budget (change from FY09):	$30.2 million (-1.4%); 
Locality type: Rural county. 

Recovery Act funding reported by city of Tift County: 

Awarded: $377,967; 38%; 
Not awarded: $614,888; 62%; 
Total: $992,855. 

Sources: (Demographics) U.S. Census Bureau, U.S. Department of Labor, 
and Art Explosion. (Recovery Act funding) Tift County officials. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. Funds "awarded" represents grants awarded directly 
to Tift County by federal agencies. Funds "not awarded" are grants for 
which county applied but did not receive. 

[End of figure] 

Tift County had a balanced fiscal year 2010 budget of approximately $30 
million, about $420,000 less than its fiscal year 2009 budget. For 
fiscal year 2010, the county cut the total budget by 1.4 percent. The 
restrained budget did not include funds to purchase capital items, fill 
vacancies, or hire new employees (with the exception of the public 
safety department). 

Georgia's Comments on This Summary: 

We provided the Governor of Georgia with a draft of this appendix on 
November 19, 2009, and a representative from the Governor's office 
responded on November 20, 2009. The official agreed with our draft, 
stating that it accurately reflects the current status of the Recovery 
Act program in Georgia. 

GAO Contacts: 

Alicia Puente Cackley, (202) 512-7022 or cackleya@gao.gov. 
John Pendleton, (404) 679-1816 or pendletonj@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Paige Smith, Assistant 
Director; Nadine Garrick, analyst-in-charge; Waylon Catrett; Chase 
Cook; Marc Molino; Daniel Newman; Barbara Roesmann; David Shoemaker; 
and Robyn Trotter made major contributions to this report. 

[End of section] 

Footnotes: Appendix VI: Georgia: 

[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

[2] This does not include obligations associated with $25 million of 
apportioned funds that were transferred from FHWA to the Federal 
Transit Administration for transit projects. 

[3] We visited the Athens and Atlanta Housing Authorities to update 
information we reported in July 2009. See GAO, Recovery Act: States' 
and Localities' Current and Planned Uses of Funds While Facing Fiscal 
Stresses (Georgia), [hyperlink, 
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 8, 
2009). We visited the Macon Housing Authority because it had been 
awarded competitive as well as formula grant funds.	 

[4] The remaining funds will be spent on renovations such as new 
kitchen countertops and new windows. 

[5] As a Moving to Work agency, the Atlanta Housing Authority is 
required to submit a Moving to Work annual plan to HUD in lieu of the 5-
year plan and annual plan traditionally required by section 5A of the 
U.S. Housing Act of 1937, as amended. Moving to Work is a demonstration 
program established by Congress and administered by HUD, giving 
participating public housing agencies the flexibility to design and 
test various approaches to facilitating and providing quality 
affordable housing opportunities in their localities. 

[6] GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to 
States and Localities, While Accountability and Reporting Challenges 
Need to Be Fully Addressed (Georgia), [hyperlink, 
http://www.gao.gov/products/GAO-09-1017SP] (Washington, D.C.: Sept. 23, 
2009). 

[7] This does not include obligations associated with $25 million of 
apportioned funds that were transferred from FHWA to the Federal 
Transit Administration (FTA) for transit projects. Generally, FHWA has 
authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made 
available for transit projects to FTA. 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. 

[8] States request reimbursement from FHWA as the state makes payments 
to contractors working on approved projects. 

[9] About $185 million (or 26 percent) of the $703 million that had 
been obligated as of October 31, 2009, was for resurfacing. 

[10] This amount represents only those contracts awarded by GDOT. Some 
localities within Georgia also may have awarded contracts with Recovery 
Act funds. 

[11] We excluded five contracts awarded with other federal funds as 
well as Recovery Act funds from these analyses. 

[12] We sent the survey to 101 LEAs in Georgia, and 90 percent 
responded. 

[13] The Federal Work-Study Program provides funds that are earned 
through part-time employment to assist students in financing the costs 
of postsecondary education. 

[14] We chose these locations because they represented a mix of cities 
and counties, population sizes, unemployment rates, and amount of 
Recovery Act funds received. 

[15] Christopher Hoene and Michael A. Pagano, Cities & State Fiscal 
Structure, a research report prepared for the National League of Cities 
(2008). 

[16] Other funds for which Atlanta has applied include funds to improve 
broadband technology and renovate fire stations. 

[17] The $15.6 million for which Macon had applied includes outstanding 
applications for $5 million to purchase and redevelop foreclosed and 
abandoned homes and $3.8 million to help individuals transition out of 
poverty. 

[End of Appendix VI: Georgia: 

Appendix VII: Illinois: 

Overview: 
This appendix summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Illinois. The full report covering all of GAO's work 
in the 16 states and the District of Columbia may be found at 
[hyperlink, http://www.gao.gov/recovery]. 

What We Did: 
We conducted work on four specific programs funded under the Recovery 
Act—Highway Infrastructure Investment, Transit Capital Assistance, 
Fixed Guideway Infrastructure Investment, and the Public Housing 
Capital Fund. For descriptions and requirements of the programs we 
included in our review, see appendix XVIII of GAO-10-232SP. We selected 
the four programs primarily to follow up on issues we reported on in 
previous bimonthly reviews. Our work focused on the status of the 
programs' funding, how funds are being used, and other issues that were 
specific to each program. As part of our review, we visited agencies in 
Arlington Heights, Chicago, Springfield, and Ottawa. 

To gain an understanding of the state's experience in meeting the 
Recovery Act reporting requirements, we held discussions with the 
Office of the Governor. Although Illinois is a decentralized reporting 
state—meaning each prime recipient of Recovery Act funds is required to 
report quarterly to federalreporting.gov on a number of measures, 
including the use of funds and estimates of the number of jobs created 
and retained—the state plays a role in reviewing the data state 
agencies plan to report to federalreporting.gov. The first quarterly 
reports were due in October 2009. 

Finally, our work in Illinois included monitoring the state's fiscal 
situation and visiting three cities—Chicago, Joliet, and Springfield—to 
determine the amount of Recovery Act funds each received and learn how 
those funds were spent. We selected Chicago because it is the largest 
city in Illinois; Joliet because it had an unemployment rate above the 
state average; and Springfield because it had an unemployment rate 
below the state average. 

What We Found: 

* Highway Infrastructure Investment Funds. The U.S. Department of 
Transportation's Federal Highway Administration (FHWA) apportioned 
$935.6 million in Recovery Act funds to Illinois. As of October 31, 
2009, the federal government had obligated $772.2 million to Illinois 
and $313 million had been reimbursed by the federal government. Because 
the Illinois Department of Transportation (DOT) was able to award 
contracts for less than the estimated cost of some projects, FHWA has 
deobligated $105.5 million and Illinois DOT has requested that these 
funds be obligated toward other highway projects. The state also 
revised both its definition of economically distressed areas and its 
maintenance-of-effort calculation based on new federal guidance. 

* Transit Capital Assistance and Fixed Guideway Infrastructure 
Investment. The Federal Transit Administration apportioned $375.5 
million in Transit Capital Assistance and $95.5 million in Fixed 
Guideway Infrastructure Investment funds to Illinois and urbanized 
areas within the state for transit projects. Transit agencies under 
northeastern Illinois's Regional Transportation Authority were 
allocated $414.2 million for transit projects, including $318.7 million 
from the Transit Capital Assistance program and $95.5 million from the 
Fixed Guideway Infrastructure Investment program. As of October 1, 
2009, the three transit agencies that make up the Regional 
Transportation Authority had initiated most of the transit projects 
they planned to fund with Recovery Act dollars. 

* Public Housing Capital Fund. Illinois has 99 public housing agencies 
that have received Recovery Act formula grants. In total, these public 
housing agencies have received $221.5 million in Public Housing Capital 
Fund formula grants. As of November 14, 2009, 89 of these public 
housing agencies have obligated $41.8 million and 76 have drawn down 
$16.4 million. In addition to the Capital Fund formula grants, HUD 
awarded 32 competitive grants to housing agencies in Illinois. Both the 
Chicago Housing Authority and the Housing Authority for LaSalle County—-
the two housing agencies we visited for this and previous reports—-
continued to make progress on Recovery Act projects. 

* Recipient reporting. The Illinois Office of the Governor requires 
state agencies to submit employment and other data to the Illinois 
Federal Reporting Test site for review and verification before they 
submit their data to federalreporting.gov in order to help ensure that 
information reported were correct. Most of the errors the state 
identified during its review of agencies' data were relatively minor. 

* Illinois's fiscal condition. Recovery Act funds continued to assist 
the state primarily in funding its education, infrastructure, and 
Medicaid programs and will allow the state to provide an additional 
$2.4 billion in assistance this fiscal year. The state plans to reduce
spending and will seek new revenue sources in anticipation of an end to 
Recovery Act assistance after fiscal year 2010. 

* Cities' use of Recovery Act funds. Chicago, Joliet, and Springfield 
have all received Recovery Act grants directly from multiple federal 
agencies. Chicago received a total of $1 billion, Joliet received a 
total of $3.8 million, and Springfield received a total of $5.3 
million. The cities generally used the Recovery Act grants to create or 
expand a variety of programs and services that would otherwise have 
remained unfunded, such as energy efficiency upgrades. 

Illinois's Highway Contracts Awarded for Less than Cost Estimates and 
the State Has Revised the Number of Economically Distressed Counties 
and Maintenance-of-Effort Estimate: 

As we reported in September 2009, $935.6 million was apportioned to 
Illinois in March 2009 for highway infrastructure and other eligible 
projects.[Footnote 1] As of October 31, 2009, $772.2 million had been 
obligated, resulting in 518 highway projects (see table 1). As of 
October 31, 2009, $313 million had been reimbursed by FHWA. 

Table 1: Illinois's Highway Funds Allocated, Obligated, and Unobligated 
as of October 31, 2009: 

70 percent for use on state highways: 
Allocated: $654,914,893; 
Obligated: $617,883,081; 
Unobligated: $37,031,812. 

30 percent of apportioned funds suballocated for metropolitan, 
regional, and local use: 
Allocated: $280,677,811; 
Obligated: $154,345,074; 
Unobligated: $126,332,737. 

Total: 
Allocated: $935,592,704; 
Obligated: $772,228,155; 
Unobligated: $163,364,549. 

Source: GAO analysis of FHWA data. 

[End of table] 

Illinois Department of Transportation Continues to Award Contracts for 
Highway Projects for Less than the Estimated Cost: 

Illinois DOT officials told us that project bids have been about 15 
percent less than initial cost estimates on average. According to 
Illinois DOT officials, because the agency was able to award contracts 
for less than the estimated cost of some projects, FHWA has deobligated 
$105.5 million and Illinois DOT has requested that these funds be 
obligated toward other highway projects Illinois DOT officials 
attribute the lower bids to multiple bids being submitted per project 
and contractors' willingness to price their bids competitively. 

Illinois Has Revised Its Determination of Economically Distressed Areas 
to Include 18 Additional Counties: 

FHWA issued new guidance in August 2009 for states to designate 
"special need" areas in order to meet the statutory definition of 
economically distressed areas. As we reported in September, Illinois 
had developed its own criteria based on applicable federal law and 
guidance for designating such areas as economically distressed, a key 
component for prioritizi2GAO-09-1017SPjects for funding under the 
Recovery Act.[Footnote 2] Based on the supplemental guidance issued by 
FHWA, Illinois DOT revised its analysis of counties that meet the 
definition of economically distressed areas.[Footnote 3] As part of its 
new analysis, Illinois DOT determined that 92 of 102 counties in the 
state qualified as economically distressed areas-18 more than were 
identified in March 2009.[Footnote 4] Of the 518 Recovery Act 
proj4Officialsois has started to date, about 96 percent (496) are 
located in economically distressed counties. The total estimated cost 
for the 496 projects is $724 million, or about 93 percent of total 
Illinois funds FHWA has obligated to date. 

Illinois to Revise and Recertify Maintenance-of-Effort Estimate: 

The state of Illinois is revising its highway infrastructure investment 
maintenance-of-effort certification and will submit it to the U.S. 
Department of Transportation once the department establishes a 
submittal deadline.[Footnote 5] On September 24, 2009, FHWA issued 
supplemental guidance on the maintenance-of-effort requirement, which 
clarified that states should include in their certified amounts the 
funding they provide to local governments for transportation projects. 
Based on the supplemental guidance, Illinois recalculated its highway 
infrastructure investment maintenance-of-effort amount, which increased 
from $814 million to $1.7 billion. 

Recovery Act Transit Funds Benefited Metropolitan Chicago: 

The Federal Transit Administration apportioned $375.5 million in 
Transit Capital Assistance funds and $95.5 million in Fixed Guideway 
Infrastructure Investment funds to Illinois and urbanized areas within 
the state for transit projects.[Footnote 6] Approximately $414.2 
million was allocated to transit agencies under northeastern Illinois's 
Regional Transportation Authority, including $318.7 million from the 
Transit Capital Assistance program and $95.5 million from the Fixed 
Guideway Infrastructure Investment program.[Footnote 7] As of October 
1, 2009, the three transit agencies that comprise the Regional 
Transportation Authority—the Chicago Transit Authority, Metra (a 
regional commuter rail system), and Pace (a suburban bus system)—had 
initiated most of the transit projects they planned to fund with 
Recovery Act dollars (see figure 1). The Chicago Transit Authority and 
Pace used Recovery Act funds to, among other things, purchase buses. 
[Footnote 8] Metra used Recovery Act funds to, for example, repair 
locomotives and rehabilitate stations. 

Figure 1: Status of Transit Projects in the Chicago Metropolitan Area, 
as of October 1, 2009: 

[Refer to PDF for image: illustrated table] 
									
Transit agency: Chicago Transit Authority; 
Program: Transit Capital Assistance; 
Number of projects using Recovery Act funds, completed: 1; 
Number of projects using Recovery Act funds, started: 5; 
Dollars obligated (in millions): $191.3. 

Transit agency: Chicago Transit Authority; 
Program: Fixed Guideway; 
Number of projects using Recovery Act funds, completed: 2; 
Number of projects using Recovery Act funds, started: 4; 
Dollars obligated (in millions): $48.9. 

Transit agency: Metra; 
Program: Transit Capital Assistance; 
Number of projects using Recovery Act funds, started: 10; 
Number of projects using Recovery Act funds: 11; 
Dollars obligated (in millions): $94.2. 

Transit agency: Metra; 
Program: Fixed Guideway; 
Number of projects using Recovery Act funds, started: 2; 
Number of projects using Recovery Act funds: 5;
Dollars obligated (in millions): $46.6. 

Transit agency: Pace	
Program: Transit Capital Assistance; 
Number of projects using Recovery Act funds, started: 3; 
Dollars obligated (in millions): $33.1. 
			
Source: GAO analysis of Chicago Transit Authority, Metra, and Pace 
data. 

[End of figure] 

Chicago Transit Authority and Pace officials said that they did not 
experience any major difficulties reporting employment data to 
federalreporting.gov during the October 2009 reporting cycle.[Footnote 
9] However, both agencies expressed some reservation about the quality 
of the employment information they had gathered from bus manufacturers. 
Officials from both agencies said that the manufacturers provided them 
with data on the hours worked per project, but that they could not 
verify the accuracy of those data. 

Illinois Public	Housing Agencies We Visited Continue to Make Progress 
on Recovery Act Projects: 

Illinois has 99 public housing agencies that have received Recovery Act 
formula grants. In total, these public housing agencies have received 
$221.5 million in Public Housing Capital Fund formula grants (see fig. 
2). As of November 14, 2009, 89 of these public housing agencies have 
obligated $41.8 million and 76 have drawn down $16.4 million. On 
average, housing agencies in Illinois are obligating funds slower than 
housing agencies nationally. We visited the following two housing 
agencies for this report: the Chicago Housing Authority and the Housing 
Authority for LaSalle County. 
	
Figure 2: Percent of Public Housing Capital Fund Formula Grants 
Allocated by HUD That Have Been Obligated and Drawn Down by Public 
Housing Agencies in Illinois, as of November 14, 2009: 

Refer to PDF for image: 3 pie-charts; 1 horizontal bar graph] 

Funds obligated by HUD: 100%; $221,498,521; 
Funds obligated by public housing agencies: 18.9%; $41,755,151; 
Funds drawn down by public housing agencies: 7.4%; $16,426,807. 

Number of public housing agencies: 
Entering into agreements for funds: 99; 
Obligating funds: 89; 
Drawing down funds: 76. 

Source: GAO analysis of HUD data. 

[End of figure] 

Both the Chicago Housing Authority and the Housing Authority for 
LaSalle County have made progress on the Recovery Act projects they 
identified for our July 2009 report.[Footnote 10] However, Chicago 
Housing Authority officials reported that they had to replace 3 of the 
12 projects on their original list because they began prior to HUD's 
Recovery Act project eligibility date.[Footnote 11] Nevertheless, the 
Chicago Housing Authority expects to meet the March 17, 2010, deadline 
for obligating all of its allocated funds. The Housing Authority for 
LaSalle County did not change its planned Recovery Act projects and, 
like the Chicago Housing Authority, expects to meet the March 17, 2010, 
deadline. As of June 18, 2009 (120 days after the date Recovery Act 
funds were made available to housing agencies), the Chicago Housing 
Authority had awarded contracts totaling approximately 13 percent of 
its Recovery Act funds.[Footnote 12] The Housing Authority of LaSalle 
County had awarded contracts totaling just over 50 percent of its 
allocated funds. 

Recovery Act Projects Will Result in Rehabilitated Units for Seniors 
and Families: 

Figure 3 describes some of the projects the Chicago Housing Authority 
and the Housing Authority for LaSalle County funded with Recovery Act 
monies. 

Figure 3: Descriptions of Selected Public Housing Projects Funded with 
Recovery Act Monies: 

[Refer to PDF for image: 3 photographs and associated information] 

Dearborn Homes: 
The Chicago Housing Authority estimates that the fourth phase of its 
Dearborn Homes rehabilitation project, which will involve the 
comprehensive rehabilitation and modernization of 172 public housing 
units, will cost $32.3 million. The housing agency has reserved $28.2 
million in Recovery Act funds for this project. The approximately $4 
million gap in funding will be covered with non-Recovery Act capital 
funds.[A] To date, the housing agency has not obligated any money to 
the project, which is expected to begin in January 2010 and be 
completed in November 2010. 

Kenmore Senior Apartments: 
At the Kenmore Senior Apartments, the Chicago Housing Authority is 
demolishing and rehabilitating the interiors of 132 units. The 
completed building will include 100 expanded, renovated units for 
seniors. The housing agency has obligated $987,348 to the demolition 
project and has expended $717,630. The housing agency has obligated 
$16.9 million to the rehabilitation project ($16.4 million in Recovery 
Act funds and $419,626 in non-Recovery Act capital funds and Low-Income 
Housing Tax Credit equity).[B] Work on the project began in May 2009 
and is expected to be completed in January 2011. 

Philip J. Mueller House: 
At the Philip J. Mueller House, the Housing Authority for LaSalle 
County is replacing a retaining wall. To date, the housing agency has 
obligated $262,496 to the project and has expended all of those funds. 
Work on the project began in June 2009 and is complete. 

Source: GAO analysis of Chicago Housing Authority and Housing Authority 
for LaSalle County information. 

[A] HUD's Capital Fund program provides annual formula grants to 
housing agencies for development, financing, modernization, and 
management improvements. 

[B] The Low-Income Housing Tax Credit program was designed to provide 
the private market with an incentive to invest in affordable rental 
housing. The tax credits are awarded to developers of qualified 
projects. Developers then sell these credits to investors to raise 
capital (or equity) for their projects, which reduces the debt that the 
developer would otherwise have to borrow. Because the debt is lower, a 
tax credit property can in turn offer lower, more affordable rents.
In addition, at the Ravlin Congregate Center, the housing agency is 
updating kitchens and bathrooms in 84 senior apartments and updating 
common areas. The housing agency has obligated $658,626 to the project 
and has expended $570,225. Work began in August 2009 and is expected to 
be completed in December 2009.[Footnote 13] 

[End of figure] 

Illinois Housing Agencies We Spoke to Faced Challenges Associated with 
the Buy American Provision: 

Both the Chicago Housing Authority and the Housing Authority for 
LaSalle County reported challenges in meeting the requirements of, and 
monitoring contractors' compliance with, the Buy American provision in 
the Recovery Act.[Footnote 14] For example, the Chicago Housing 
Authority is using Recovery Act funds to update the security camera 
systems throughout its housing portfolio. Housing agency officials said 
that the new cameras must be compatible with the agency's own security 
monitoring systems, as well as with those of the Chicago Police 
Department; however, they also said that the cameras that meet their 
specifications are not made in the United States. The housing agency is 
working with HUD to resolve the issue. Similarly, officials from the 
Housing Authority for LaSalle County said that despite including 
requirements to comply with the Buy American provision in its 
contracts, they have identified at least one project in which non-
American materials were used. In this case, the housing agency required 
the contractor to redo the work with American-made products. 

Illinois Housing Agencies We Spoke to Reported Employment Data, but One 
Did Not Apply Reporting Guidance: 

Chicago Housing Authority officials said that they did not experience 
any major difficulties reporting employment data to 
federalreporting.gov during the October 2009 reporting cycle. The 
housing agency also partnered with the City of Chicago to train 
contractors and other vendors on how to collect and report employment 
data to the housing agency. Housing Authority for LaSalle County 
officials said that they reported the number of people, by trade, who 
worked on Recovery Act-related projects, rather than applying the full-
time equivalents calculation outlined by the Office of Management and 
Budget (OMB) in its reporting guidance.[Footnote 15] Subsequent to 
October 10, 2009, HUD directed the housing authority to revise its 
employment data using the OMB calculation. 

Chicago Housing Authority Competitive Grants to Begin Soon: 

In addition to the Capital Fund formula grants, HUD awarded 32 
competitive grants to housing agencies in Illinois, including 27 to the 
Chicago Housing Authority. One of these grants is for the redevelopment 
of the housing agency's Ogden North project. The $9.9 million grant 
will be used in combination with other public and private financing to 
develop 60 new replacement public housing units and 77 non-public 
housing rental units, 123 for-sale homes, a community space, and a 
management and maintenance facility. The project is scheduled to begin 
in July 2010 and be completed in January 2012. 

Illinois's Quality Review Process Helped Reduce Reporting Errors among 
State Agencies, but Some Local Entities Faced Reporting Challenges: 

The Illinois Office of the Governor requires state agencies to submit 
employment and other data to the Illinois Federal Reporting Test site 
for review and verification before they submit their data to 
federalreporting.gov.[Footnote 16] The Illinois Office of Internal 
Audit is responsible for reviewing and verifying these data submissions 
against baseline data the state collected from the agencies in 
September 2009.[Footnote 17] Once the Office of Internal Audit has 
verified, and the state's Recovery Act Executive Committee has approved 
agencies' data submissions, agencies upload their data onto 
federalreporting.gov. Local governments, such as the City of Chicago, 
and local entities, such as the Chicago Transit Authority and the 
Chicago Housing Authority, receive certain Recovery Act funds directly 
from the federal agencies. These direct recipients of funds do not 
submit their data to the state for review. Instead, these local 
governments and entities are responsible for assuring the quality and 
timeliness of their reports. 

Illinois's Quality Review Process Helped Identify and Reduce Reporting 
Errors among State Agencies: 

Illinois required state agencies to submit information to the Illinois 
Federal Reporting Test Site for review and verification before 
submitting their data to federalreporting.gov. Most of the errors the 
state identified during its review of agencies' data were relatively 
minor. For example, the state found instances in which agencies had 
entered incorrect activity codes, ZIP codes, and activity descriptions. 
State officials said that after state agencies reported their data to 
federalreporting.gov, a few had to address questions from, or make 
small changes at the request of, their respective federal agencies, but 
for the most part, these questions and corrections were easily 
addressed. 

Subsequent to the October 10, 2009, reporting date, state officials 
told us that the Illinois State Board of Education had received and 
reported incorrect employment data from a number of local education 
agencies (LEAs)—generally school districts. For example, some LEAs 
double-counted the number of positions created and retained with 
Recovery Act funds, attributing the positions to both State Fiscal 
Stabilization Fund education stabilization funds—which were distributed 
and expended in state fiscal year 2009—and State Fiscal Stabilization 
Fund government services funds—which were distributed and expended in 
state fiscal year 2010.[Footnote 18] Other LEAs reported zero 
positions. According to state officials, in these cases, LEAs received 
Recovery Act funds before finalizing staff lay offs and were unsure 
whether those jobs should count as jobs retained because of Recovery 
Act funds. State officials said that they had identified some of these 
errors through the review process, but were not aware of the full 
extent of the problem until after October 10, 2009. According to state 
officials, the Governor's Office and the Illinois State Board of 
Education have discussed these reporting issues with the U.S. 
Department of Education. They said that the Department of Education 
plans to issue additional reporting guidance before the January 2010 
reporting cycle. 

State officials said that they plan to continue reviewing agencies' 
data submissions during future reporting cycles. As it did with state 
agencies that reported during the October 2009 reporting cycle, the 
state plans to collect baseline data from, and conduct upload tests 
with, newly reporting state agencies prior to the January 2010 
reporting cycle. In addition, state officials said that they hope to 
build automated edit checks into the Illinois Federal Reporting Test 
site to speed the state's review of agencies' data and further reduce 
reporting errors. Finally, state officials said that the Governor 
recently created an independent Office of Accountability to work with 
state agencies to ensure the correct reporting of data to 
federalreporting.gov. 

Some Local Entities We Spoke to Faced Reporting Challenges: 

We spoke to several local governments and entities, including three 
local governments, two transit agencies, and two public housing 
agencies and all told us that they had reported their employment data 
to federalreporting.gov by the October 10, 2009, deadline. However, as 
discussed in more detail earlier in this report, some faced challenges 
in verifying and reporting employment data. For example, the Chicago 
Transit Authority and Pace, the two local transit agencies with which 
we spoke, said that while the manufacturers that were fulfilling their 
bus orders sent them detailed data on the actual hours their employees 
worked, they could not verify the accuracy of the data they received. 
The Housing Authority of LaSalle County told us that it reported the 
number of people, by trade, who worked on Recovery Act-related 
projects. The housing agency did not apply the full-time equivalents 
calculation outlined by OMB in its reporting guidance.[Footnote 19] 
Subsequent to October 10, 2009, HUD directed the housing authority to 
revise its employment data using the OMB calculation. 

Recovery Act Funds Aid Illinois's State Budget and Help Local 
Governments Create and Expand Programs:	 

The Director of the Illinois OMB said that Recovery Act funds continued 
to assist the state in funding its education, infrastructure, and 
Medicaid programs. Recovery Act funds—including $1 billion from the 
State Fiscal Stabilization Fund and $1.4 billion made available as a 
result of increased federal assistance to Medicaid—are expected to 
allow the state to provide an additional $2.4 billion in services this 
fiscal year. The state plans to reduce spending and seek new revenue 
sources—including tax increases and video gaining terminals—in 
anticipation of an end to Recovery Act assistance after fiscal year 
2010. The Illinois OMB will present a formal strategy for continuing 
state operations without Recovery Act funds to the Governor in the 
spring of 2010.	 

Local Governments Create and Expand Programs with Recovery Act Funds: 

We visited three cities in Illinois-—the Chicago, Joliet, and 
Springfield—-to review their use of Recovery Act funds. Table 2 
provides recent demographic information for these cities. 

Table 2: Demographic Data for the Cities of Chicago, Joliet, and 
Springfield, Illinois: 

Local government: City of Chicago; 
Population: 2,853,114; 
Locality type: City; 
Unemployment rate: 11.3%. 

Local government: City of Joliet; 
Population: 146,125; 
Locality type: City; 
Unemployment rate: 12.2%. 

Local government: City of Springfield; 
Population: 117,352; 
Locality type: City; 
Unemployment rate: 8.2%. 

Source: U.S. Census Bureau and U.S. Department of Labor. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

The cities generally used the Recovery Act grants to create or expand a 
variety of programs and services that in many cases would otherwise 
have remained unfunded. City officials noted that they generally did 
not use Recovery Act grants for programs or personnel costs that would 
result in additional city funding for long-term obligations.
City of Chicago. City of Chicago officials reported the city received 
31 Recovery Act grants as of October 22, 2009, totaling over $1 
billion. City officials included funds that were not awarded directly 
to the city in this $1 billion total, including $240.2 million in 
grants awarded to the Chicago Transit Authority, a $143.9 million grant 
awarded to the Chicago Housing Authority, and $293.6 million in State 
Fiscal Stabilization Fund monies for Chicago Public Schools. [Footnote 
20] Table 3 describes the six largest Recovery Act grants awarded 
directly to the City of Chicago. In addition to these grants, city 
officials said that they have applied for three additional grants 
totaling $107 million.[Footnote 21] 

Table 3: Largest Direct Sources of Recovery Act Funding for the City of 
Chicago: 

Agency: U.S. Department of Housing and Urban Development; 
Grant: Homelessness Prevention and Rapid Re-Housing Program; 
Examples of uses of funds: Homelessness prevention; 
Amount: $34.4 million. 

Agency: U.S. Department of Justice; 
Grant: Edward Byrne Memorial Justice Assistance Grant; 
Examples of uses of funds: Overtime pay for police officers; new police 
cars; 
Amount: $28.7 million. 

Agency: U.S. Department of Energy; 
Grant: Energy Efficiency and Conservation Block Grant; 
Examples of uses of funds: Energy efficiency upgrades in city buildings 
and facilities, including new boiler units and solar panels; 
Amount: $27.6 million. 

Agency: U.S. Department of Housing and Urban Development; 
Grant: Community Development Block Grant; 
Examples of uses of funds: Foreclosure prevention; homebuyer 
counseling; housing rehabilitation; job training for formerly 
incarcerated individuals; 
Amount: $22.5 million. 

Agency: U.S. Department of Justice; 
Grant: COPS Hiring Recovery Program; 
Examples of uses of funds: To hire 50 police officers; 
Amount: $13.3 million. 

Agency: Federal Aviation Administration; 
Grant: Airport Improvement Program; 
Examples of uses of funds: Replace airport runway; 
Amount: $12.3 million. 

Source: City of Chicago. 

Note: An agreement between the City of Chicago and Cook County reserved 
$7.2 million of the Edward Byrne Memorial Justice Assistance Grant for 
Cook County. 

[End of table] 

City of Joliet. City of Joliet officials said that the city had been 
awarded $3.8 million in Recovery Act funds as of October 27, 2009. This 
total included a $2.0 million grant for roadway resurfacing through the 
Illinois Department of Transportation that was not awarded directly to 
the city. In addition to those funds, the Joliet Housing Authority 
received $2.5 million from the U.S. Department of Housing and Urban 
Development.[Footnote 22] Table 4 lists the $1.9 million in grants 
awarded directly to the city. As of November 13, 2009, the city awaited 
decisions on its applications for a $55 million Transportation 
Investment Generating Economic Recovery (TIGER) grant for a new 
transportation center through the U.S. Department of Transportation and 
a $1.3 million Energy Efficiency and Conservation Block Grant through 
the U.S. Department of Energy. 

Table 4: Direct Sources of Recovery Act Funding for the City of Joliet: 

Agency: U.S. Department of Homeland Security; 
Grant: Assistance to Firefighters Fire Station Construction Grant; 
Examples of uses of funds: Construction of a fire station; 
Amount: $1.2 million. 

Agency: U.S. Department of Justice; 
Grant: Edward Byrne Memorial Justice Assistance Grant; 
Examples of uses of funds: To purchase law enforcement equipment, 
including cameras; 
Amount: $459,820. 

Agency: U.S. Department of Housing and Urban Development; 
Grant: Community Development Block Grant; 
Examples of uses of funds: Road reconstruction; down payment assistance 
for home buyers; 
Amount: $249,000. 

Source: City of Joliet. 

Note: An agreement between the City of Joliet and Will County reserved 
$229,910 of the Edward Byrne Memorial Justice Assistance Grant for Will 
County. 

[End of table] 

City of Springfield. City of Springfield officials said that the city 
had been awarded $5.3 million in Recovery Act funds. This total 
included a $2.4 million grant for road work through the Illinois 
Department of Transportation that was not awarded directly to the city. 
The Springfield Housing Authority received $2.0 million from the U.S. 
Department of Housing and Urban Development and $8.6 million in State 
Fiscal Stabilization Fund monies went to the Springfield School 
District. The $2.9 million awarded directly to Springfield is 
summarized in table 5. As of November 12, 2009, the city did not have 
any additional direct grants pending. 

Table 5: Direct Sources of Recovery Act Funding for the City of 
Springfield: 

Agency: U.S. Department of Justice; 
Grant: Edward Byrne Memorial Justice Assistance Grant; 
Examples of uses of funds: To purchase law enforcement equipment, 
including cameras; 
Amount: $1.7 million. 

Agency: U.S. Department of Energy; 
Grant: Energy Efficiency and Conservation Block Grant; 
Examples of uses of funds: Rebates for energy efficient appliances; 
Amount: $1.2 million. 

Agency: U.S. Department of Housing and Urban Development; 
Grant: Homelessness Prevention and Rapid Re-Housing Program; 
Examples of uses of funds: Homelessness assistance; 
Amount: $517,000. 

Agency: U.S. Department of Housing and Urban Development; 
Grant: Community Development Block Grant; 
Examples of uses of funds: Repaving streets and sidewalks; 
Amount: $337,000. 

Source: City of Springfield. 

Note: An agreement between the City of Springfield and Sangamon County 
reserved $481,129 of the Edward Byrne Memorial Justice Assistance Grant 
for Sangamon County to retain police officers. 

[End of table] 

State Comments on This Summary:	 

We provided the Office of the Governor of Illinois with a draft of this 
appendix on November 18, 2009. The Deputy Chief of Staff responded for 
the Governor on November 19, 2009. In general, the state concurred with 
our statements and observations. The official also provided us with 
technical comments that we incorporated, as appropriate. 

GAO Contacts: 

Leslie Aronovitz, (312) 220-7712 or aronovitzl@gao.gov. 
Cynthia Bascetta, (202) 512-7114 or bascettac@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Paul Schmidt, Assistant 
Director; Dean Campbell; Robert Ciszewski; Gail Marnik; Cory Marzullo; 
Roberta Rickey; and Rosemary Torres Lerma made major contributions to 
this report. 

[End of section] 

Footnotes: Appendix VII: Illinois: 

[1] See GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to 
States and Localities, While Accountability and Reporting Challenges 
Need to Be Fully Addressed (Appendixes), [hyperlink, 
http://www.gao.gov/products/GAO-09-1017SP] (Washington, D.C.: September 
2009). 

[2] [hyperlink, http://www.gao.gov/products/GA0-09-1017SP]. 

[3] FHWA Supplemental Guidance on the Determination of Economically 
Distressed Areas under the Recovery Act (August 24, 2009). This 
guidance included criteria for designating counties as economically 
distressed based on special need, which took into consideration factors 
such as actual or threatened business closures, business restructuring, 
military base closures, and natural disasters or emergencies. 

[4] 0fficials from the FHWA Illinois Division Office reviewed the 
rationale the Illinois DOT used to identify economically distressed 
counties. 

[5] The Recovery Act requires that the state certify that it will 
maintain the level of spending for the types of transportation projects 
funded by the Recovery Act that it had planned to spend the day the 
Recovery Act was enacted. Recovery Act, div. A, title XII, § 1201(a). 

[6] The Transit Capital Assistance Program provides capital assistance 
for transit projects in urban and non-urban areas. The Fixed Guideway 
Infrastructure Investment Program provides capital assistance for the 
modernization of existing fixed guideway systems, such as heavy rail, 
commuter rail, and light rail. The jurisdictions of some urbanized 
areas within the state cross into at least one other state. These 
urbanized areas are reflected in each of the states in which they are 
located. Therefore, some urbanized areas are included in multiple state 
totals. 

[7] As of November 5, 2009, the Federal Transit Administration had 
obligated $362.1 million (96 percent) of the Transit Capital Assistance 
funds—including $318.6 million to the transit agencies under the 
Regional Transportation Authority—and all of the Fixed Guideway 
Infrastructure Investment funds. 

[8] We reviewed two contracts the Chicago Transit Authority and Pace 
used to procure buses. According to Chicago Transit Authority 
officials, the agency used an option on an existing Washington 
Metropolitan Area Transit Authority contract to procure 58 60-foot 
articulated hybrid buses for $48.9 million. Chicago Transit Authority 
officials said that the existing contract was awarded competitively to 
the best value bidder, was fixed price, and in accordance with existing 
contracting procedures. Officials confirmed that the manufacturer had 
delivered all of the buses as of September 11, 2009. According to Pace 
officials, they issued a $16.6 million change order to an existing 5-
year contract to purchase an additional 58 30-foot buses. Pace 
officials said that the original contract was awarded competitively to 
the lowest bidder and in accordance with the existing contracting 
procedures. They also stated that the unit price per bus was the same 
as the original contract price. Officials said they expect the 
manufacturer to begin production in February 2010 for delivery later 
that year. 

[9] Under § 1512 of the Recovery Act, direct recipients of Recovery Act 
funds are expected to report quarterly to federal agencies (through the 
federalreporting.gov Web site) on a number of measures, including the 
use of funds and the number of jobs created and retained. 

[10] See GAO, Recovery Act: States' and Localities' Current and Planned 
Uses of Funds While Facing Fiscal Stresses (Appendixes), [hyperlink, 
http://www.gao.gov/products/GAO-09-830SP] (Washington, D.C.: July 
2009). 

[11] See HUD, Information and Procedures for Processing American 
Recovery and Reinvestment Act Capital Fund Formula Grants, PIH-2009-12 
(HA) (Washington, D.C.: March 18, 2009). The housing agency replaced 
two of the ineligible projects with the next two "shovel ready" 
projects and with HUD's approval, deferred approximately $28 million in 
Recovery Act funds it had allocated to the third phase of the Dearborn 
Homes redevelopment to a later phase. 

[12] Under the Recovery Act, public housing agencies are to give 
priority to projects that can award contracts based on bids within 120 
days from the date the funds are made available, as well as projects 
that rehabilitate units, or those already underway or included in the 
required 5-year capital fund plans. 

[13] We reviewed a $651,345 contract for the renovation of the kitchens 
and bathrooms the housing agency awarded for this project. Housing 
agency officials said that the contract was awarded competitively to 
the lowest bidder and was fixed price. They also said that they 
followed HUD contracting guidance in awarding the contract, as they do 
for all contracts. 

[14] Section 1605 of the Recovery Act requires that "none of the funds 
appropriated or otherwise made available by [the] Act may be used for a 
project for the construction, alteration, maintenance, or repair of a 
public building or a public work unless all of the iron, steel, and 
manufactured goods used in the project are produced in the United 
States." Federal agencies may, under certain circumstances, waive the 
Buy American requirement and the requirement is to be applied in a 
manner consistent with the United States obligations under 
international agreements. For more information, see HUD, PIH 
Implementation Guidance for the Buy American Requirement of the 
American Recovery and Reinvestment Act of 2009 including Process for 
Applying Exceptions, PIH-2009-31 (HA) (Washington, D.C.: August 21, 
2009). 

[15] See OMB, Implementing Guidance for the Reports on Use of Funds 
Pursuant to the American Recovery and Reinvestment Act of 2009, M-09-21 
(Washington, D.C.: June 22, 2009). 

[16] Illinois is considered a decentralized reporting state because 
state agencies, not the state, are responsible for uploading their 
employment and other data into federalreporting.gov. 

[17] According to state officials, state agencies uploaded baseline 
data from their award notices and grant agreements to the Illinois 
Federal Reporting Test site in September 2009. The state's review of 
agencies' data submissions includes verifying DUNS numbers, 
expenditures, and receipts. The state also performs a "reasonableness 
check" of agencies' employment data by comparing it to federally 
established employment reporting guidelines. When the state identified 
errors or discrepancies, it required the agencies to make appropriate 
corrections. 

[18] The State Fiscal Stabilization Fund is a one-time appropriation 
that the U.S. Department of Education awards to governors to, among 
other things, help stabilize state and local budgets. States must use 
education stabilization funds to restore state support for education 
and government services funds for public safety and other government 
services, which may include education. 

[19] See OMB, Implementing Guidance, M-09-21. 

[20] The Recovery Act funds for transportation, housing, and education 
programs mentioned in this appendix were awarded directly to the 
agencies responsible for administering these programs, not to the city. 

[21] Pending grants include $105.9 million from the National 
Telecommunications and Information Administration's Broadband 
Technologies Opportunity program, $1.1 million from the U.S. Department 
of Agriculture Forest Service's Wildland Fire Management program, and 
$97,038 from the U.S. Department of Justice's Services, Training, 
Officers, Prosecutors (STOP) Violence Against Women Formula Grant 
program. 

[22] LEAs serving the city also received State Fiscal Stabilization 
Fund monies; however, city officials said that the exact amount the 
city received was difficult to determine because the LEAs serving 
Joliet also serve other cities. 

[End of Appendix VII: Illinois: 

Appendix VIII: Iowa: 

Overview: 

The following summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act)[Footnote 1] spending in Iowa. The full report covering all of 
GAO's work in 16 states and the District of Columbia is available at 
[hyperlink, http://www.gao.gov/recovery]. 

What We Did: 

Our work in Iowa examined specific programs and funds under the 
Recovery Act—the Highway Infrastructure Investment Program, Transit 
Capital Assistance Program, Weatherization Assistance Program, Public 
Housing Capital Fund, and education programs. We selected these 
programs because they are among the programs receiving the greatest 
amount of Recovery Act funds in Iowa and have recently begun to 
obligate or are already using significant amounts of Recovery Act 
funds. For descriptions and requirements of the programs we covered, 
see appendix XVIII of GAO-10-232SP. To review the transportation 
programs, we visited four transit authorities: the Des Moines Area 
Regional Transit Authority; the Ames Transit Agency; the Mid-Iowa 
Development Association and Dodger Area Transit in Fort Dodge; and the 
Southwest Iowa Transit Agency in Atlantic, Iowa. We selected these to 
provide a mix of large urban, small urban, and nonurban transit 
authorities. To review the weatherization program, we revisited the 
Polk County Public Works Department in Des Moines, an urban local 
action agency, as well as Mid-Iowa Community Action in Marshalltown, a 
rural local action agency. We revisited four public housing agencies 
that we reported on in our July 2009 report: the Des Moines Municipal 
Housing Agency, the Evansdale Municipal Housing Authority, the North 
Iowa Regional Housing Authority and the Ottumwa Housing Authority. 
Finally, we surveyed a representative sample of local educational 
agencies (LEA) nationally and in Iowa about their planned uses of 
Recovery Act funds. We also examined the state's actions to stabilize 
its budget, monitor controls over the use of Recovery Act funds, and 
report the number of jobs created and retained as a result of these 
funds. We analyzed state and local budget information, including state 
revenue estimates, and met with state and municipal officials. We 
visited three Iowa localities—Cedar Rapids, Des Moines, and Newton—to 
determine the amount of Recovery Act funds each is receiving from 
federal agencies and how those funds are being used. We selected Cedar 
Rapids because it is the second largest city in Iowa and was already 
managing federal funds to recover from significant flooding that 
occurred in 2008. We selected Des Moines because it is the largest city 
in Iowa and has been awarded at least $16.5 million in Recovery Act 
funds for various projects. We selected Newton because its unemployment 
rate is above the state's average-8.1 versus a state average of 6.3—and 
because of the recent loss of a major area employer. As part of our 
review of Iowa's reporting on the number of jobs created and retained 
under the Recovery Act, we met with highway contractors as well as 
county and district engineers in Cass and Polk counties and from the 
cities of Atlantic, Jefferson, and Fort Dodge. 

What We Found: 

* Highway Infrastructure Investment. The U.S. Department of 
Transportation's Federal Highway Administration (FHWA) apportioned $358 
million in Recovery Act funds to Iowa. As of October 31, 2009, the 
federal government had obligated $334 million to Iowa; and $165 million 
had been reimbursed by the federal government for work submitted for 
payment by highway contractors.[Footnote 2] About 84 percent of 
Recovery Act highway obligations for Iowa have been for pavement 
improvement projects. Iowa's October 2009 report to 
www.federalreporting.gov on the number of jobs created or retained 
shows that Recovery Act funds have contributed to the equivalent of 
more than 1,200 full-time highway infrastructure jobs in Iowa. In 
addition, Iowa transportation officials estimate that the Recovery Act 
has helped complete repairs on more than 250 lane-miles of road in the 
state. 

* Transit Capital Assistance Program. The U.S. Department of 
Transportation's Federal Transit Administration (FTA) apportioned $36.5 
million in Recovery Act funds to Iowa and urbanized areas located in 
the state. As of November 5, 2009, FTA had obligated $35.2 million. 
About 90 percent of Iowa's Recovery Act Transit Capital Assistance 
Program funds are being used to replace and expand aging bus fleets and 
to rehabilitate or improve transit facilities. Transit agencies we 
visited—Des Moines Area Regional Transit Authority; Ames Transit 
Agency; Mid-Iowa Development Association and Dodger Area Transit in 
Fort Dodge; and the Southwest Iowa Transit Agency in Atlantic, Iowa—are 
using Transit Capital Assistance Recovery Act funds primarily to 
replace buses that have been in their fleets for 10 years or longer. In 
total, the state and urbanized areas in Iowa reported 12 jobs created 
or retained as a result of Transit Capital Assistance program 
expenditures. 

* Weatherization Assistance Program. Iowa has obligated most of the 
$40.4 million received in Recovery Act funds to the local agencies that 
carry out the weatherization work. Seventeen of 18 agencies are using 
these funds to complete weatherization work, such as insulating walls 
and attics and reducing air infiltration in homes. Actual work on homes 
did not, however, start until September 2009; therefore, only 71 homes 
had been weatherized, as of October 31, 2009. 

* Public Housing Capital Fund formula grants and competitive grants. 
Iowa's 48 public housing agencies received approximately $7.6 million 
in Public Housing Capital Fund formula grants. As of November 14, 2009, 
Iowa's public housing agencies had obligated about $6.1 million and had 
drawn down about $3 million in Capital Fund formula grants. On average, 
Iowa public housing agencies are obligating funds faster than public 
housing agencies nationally. Only one public housing agency in Iowa was 
awarded competitive grant funds—the Ottumwa Housing Authority—which was 
awarded two competitive grants totaling about $178,000 to improve 
energy efficiency at two sites. 

* Education. Based on a survey of a representative sample of LEAs in 
Iowa about their planned use of Recovery Act funds, we estimated that 
about one-third of Iowa LEAs plan to use more than 50 percent of 
Individuals with Disabilities Education Act (IDEA) funds to retain 
staff and about two-thirds of LEAs plan to use more than 50 percent of 
State Fiscal Stabilization Fund (SFSF) funds to retain staff. However, 
about one-third of Iowa LEAs anticipate job losses, even with SFSF 
funds. 

* State and Local Government use of Recovery Act funds. The receipt of 
Recovery Act funds enabled Iowa to mitigate the effects of a recent 
budget cut to state agencies. Due to projected declines in fiscal year 
2010 revenues, Iowa's governor recently implemented a 10 percent across-
the-board budget reduction for the fiscal year, which will result in 
government furloughs and layoffs. However, according to state 
officials, the receipt of Recovery Act funds has enabled Iowa to 
maintain education services, and avoid additional state government 
layoffs. The three localities we visited—Cedar Rapids, Des Moines, and 
Newton—said that they have benefited from the receipt and use of 
Recovery Act funds. However, officials from these three localities also 
said that they faced significant challenges in applying for and
implementing Recovery Act programs due to continuing budgetary and 
staffing constraints. 

* State monitoring and internal controls. Iowa's State Auditor and the 
Iowa Accountability and Transparency Board continue to monitor controls 
over Recovery Act funds. The Office of the State Auditor's audit plan 
includes consideration of the increased risk associated with state 
agencies and localities receiving Recovery Act funding. The Iowa 
Accountability and Transparency Board (Board) identified six high-
priority programs that it expects will have some difficulty in fully 
complying with the accountability and transparency requirements in the 
Recovery Act. The Board has required that these high-priority programs 
submit a comprehensive accountability plan. 

* State Reporting under Section 1512. In accordance with section 1512 
of the Recovery Act,[Footnote 3] Iowa submitted a detailed report to 
the federal government that included information on the number of jobs 
created and retained by the implementation of the Recovery Act. Based 
on data provided by state and local agency officials, Iowa created a 
centralized database and used it to calculate the number of jobs 
created or retained for programs funded through the state. Iowa has 
implemented internal controls, such as requiring agency and local 
officials to certify their review and approval of information prior to 
submission, to help ensure the accuracy of the data reported to the 
state. Iowa officials told us that a relatively small amount of data 
were improperly submitted based on the number of awards that required 
resubmission. 

Over 90 Percent of Iowa Recovery Act Highway Infrastructure Funds Have 
Been Obligated: 

The Iowa Department of Transportation has acted quickly to obligate its 
Recovery Act Highway funds for highway infrastructure improvements. 
Specifically: 

* As we reported in September 2009, $358 million was apportioned to 
Iowa in March 2009 for highway infrastructure improvements.[Footnote 4] 
As of October 31, 2009, $334 million (93 percent) had been obligated 
and $165 million had been reimbursed to Iowa by FHWA for work submitted 
for payment by highway contractors. 

* Iowa's October 2009 report to the Office of Management and Budget 
(OMB) on the number of jobs created or retained shows that Recovery Act 
funds have contributed to the equivalent of more than 1,200 full-time 
highway infrastructure jobs in Iowa. In addition, transportation 
officials estimate that the Recovery Act has helped complete repairs on 
more than 250 lane-miles of road in the state.[Footnote 5] 

* About 84 percent of Recovery Act highway obligations for Iowa ($282 
million of the $334 million obligated) have been for pavement 
improvement projects—$197 million for pavement resurfacing and $85 
million for pavement reconstruction and rehabilitation. Additionally, 
$21 million is being used for bridge replacements. Iowa officials told 
us that focusing on pavement projects allowed them to advance a 
significant number of needed 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. Figure 1 shows 
obligations by the types of road and bridge improvements being made. 

Figure 1: Highway Obligations for Iowa by Project Improvement Type as 
of October 31, 2009: 

[Refer to PDF for image: pie-chart] 

Pavement projects total (89 percent, $298.9 million): 
Pavement improvement: resurface ($196.5 million): 59%; 
Pavement improvement: reconstruction/rehabilitation ($85.3 million): 
25%; 
New road construction ($14.4 million): 4%; 
Pavement widening ($2.8 million): 1%. 

Bridge projects total (6 percent, $21.4 million): 
Bridge replacement ($20.6 million): 6%; 
Bridge improvement ($660,000): Less than 1%; 
New bridge construction ($135,000): Less than 1%. 

Other (4 percent, $14 million): 
Other ($14 million): 4%. 

Source: GAO analysis of Federal Highway Administration data. 

Note: Totals may not add due to rounding. "Other" includes safety 
projects, such as improving safety at railroad grade crossings, and 
transportation enhancement projects, such as pedestrian and bicycle 
facilities, engineering, and right-of-way purchases. 

[End of figure] 

* To ensure highway funds are utilized in accordance with the Recovery 
Act, the Iowa Department of Transportation has detailed, documented 
procedures for the administration and inspection of work performed by 
contractors including written contracting procedures, contractor 
qualification standards, and material and construction specifications 
and guidelines. The state and local governments also employ 
construction and material inspectors and technicians, and
construction engineers to review, measure, and accept work performed by 
contractors. 

* In October, the Iowa Department of Transportation submitted its first 
Section 1512 report and the department continues to report project, 
financial, and employment information to FHWA. This reporting is 
required by the Recovery Act to provide greater accountability and 
transparency and includes, among other things, monthly reporting of 
contracts awarded, projects in process, employees working, and employee 
hours worked. In addition, the department reports this
information to the U.S. House of Representatives Committee on 
Transportation and Infrastructure on a monthly basis. 

* Iowa has also initiated an $830 million state-funded program—named I-
JOBS—to invest in its infrastructure. A key component of this program 
is $115 million for transportation projects across the state, including 
$50 million for bridge safety, $45 million for city streets and 
secondary roads, and the remainder for enhancing public transit and 
recreational trails. As of October 31, 2009, 55 bridge safety projects 
had been approved for I-JOBS funding in fiscal years 2010 and 2011, and 
$160,000 had been approved for Ames Transit Agency facilities. 

Iowa Is Using Recovery Act Transit Capital Assistance Grant Funds 
Primarily to Modernize Its Bus Fleet: 

Iowa is using Recovery Act transit funds to replace 160 buses and add 
20 new buses to its transit fleet. Specifically: 

* In March 2009, $36.5 million in Recovery Act Transit Capital 
Assistance funds were apportioned to Iowa and urbanized areas located 
in the state for transit projects. Of this amount, $15.2 million was 
for nonurbanized areas,[Footnote 6] $10.7 million for smaller urbanized 
areas, and $10.6 million for urbanized areas with a population of 
200,000 or more.[Footnote 7] As of November 5, 2009, FTA had obligated 
$35.2 million for Iowa transit capital assistance and reimbursed Iowa 
about $4 million for transit expenditures. 

* About 90 percent of Iowa's Recovery Act Transit Capital Assistance 
Program funds are being used to replace and expand aging bus fleets and 
rehabilitate or improve transit facilities. Specifically, $24 million 
is being used to replace 160 buses of various sizes, many of which are 
10 years old or older. Another $5.6 million is being used to expand bus 
fleets in areas of growth around the state. In all cases, these 
purchases were included in the region's transportation improvement plan 
and could be started quickly. Iowa transportation officials said they 
believe that the purchase of new buses will reduce maintenance costs 
across the state and, in some cases, could improve fuel efficiency. 

* The Recovery Act provides that Transit Capital Assistance Program 
funds may be used for activities such as vehicle replacements, 
facilities renovation or construction, and preventive maintenance. 
Additionally, up to 10 percent of funds apportioned to urbanized or 
nonurbanized areas may be used for operating expenses. 

* Transit agencies we visited—Des Moines Area Regional Transit 
Authority; Ames Transit Agency; Mid-Iowa Development Association and 
Dodger Area Transit in Fort Dodge; and the Southwest Iowa Transit 
Agency in Atlantic, Iowa—are using Recovery Act Transit Capital 
Assistance Program funds primarily to replace high-mileage buses that 
have been in their bus fleets for 10 years or longer. Three of the four 
agencies were also renovating or expanding facilities. Officials from 
all four agencies we met with reported that Recovery Act funds allowed 
them to fund projects that would likely not have been funded this 
fiscal year because demand exceeded resources. 

* The Des Moines Transit Authority plans to use about $3 million to 
improve information available to customers by adding new "automated 
vehicle location" technology for its bus fleet. This technology will 
allow transit riders to use their cell phones and similar technology to 
check the status of their bus. It also plans to use 10 percent of its 
funds—about $788,800—to fund operations. This proposal, currently 
awaiting FTA approval, would provide Recovery Act funds to pay for 
staff, facilities, and fuel. 

* Officials for the transit agencies we visited said that they are 
using existing processes and procedures to monitor Recovery Act funds, 
such as a detailed inspection of all new vehicles received before 
payment is authorized and an engineering inspection of all completed 
facilities work such as building renovations and pavement repair. The 
state transit assistant director said that he and his staff have been 
regularly monitoring the status of local transit agency procurements to 
ensure that all procurement actions are completed in a timely manner. 

* Reporting the number of jobs created or retained as required by 
section 1512 was calculated and submitted to OMB by the Iowa Department 
of Transportation, through the Iowa Department of Management, for 
smaller urbanized and nonurban areas. Larger urbanized areas, such as 
Des Moines, reported directly to the federal government. The state 
provided information on jobs associated with renovated facilities as 
well as some new bus purchases. Des Moines' transit authority reported 
only on facilities-related work. In total, the state of Iowa and 
urbanized areas reported 12 jobs created or retained as a result of 
Transit Capital Assistance program expenditures. In calculating the 
number of jobs created or retained, Iowa transit officials relied upon 
bus manufacturers to provide hours worked associated with basic bus 
production. Additional hours identified with local bus customizing were 
calculated by the local transit authorities based on input from local 
contractors. 

Iowa Has Obligated a Majority of Weatherization Funds Received, but 
Only a Few Homes Have Been Weatherized: 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program, which the U.S. 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. This 
program enables low-income families to reduce their utility bills by 
making longterm energy efficiency improvements to their homes by, for 
example, installing insulation or modernizing heating or air 
conditioning equipment. On September 22, 2009, DOE allocated all of 
these funds to the states, but it has limited the states' access to 50 
percent of these funds.[Footnote 8] As of October 31, 2009, DOE had 
obligated $80.8 million to Iowa but limited the amount of funds 
available to one-half of this amount, or $40.4 million. The Iowa 
Division of Community Action Agencies (DCAA) has obligated most of 
these funds, or $38.5 million, to 18 local agencies that carry out the 
weatherization work. Seventeen of the local agencies are currently 
using these funds to weatherize homes; funding to one agency is on hold 
until DCAA corrective actions are implemented by the agency.[Footnote 
9] Because DCAA decided not to spend Recovery Act funds on 
weatherization work until the Department of Labor (Labor) provided the 
prevailing wage rates for weatherization workers in Iowa, 
weatherization work did not start until September 2009. Therefore, only 
71 homes had been weatherized at a total cost of $395,151, as of 
October 31, 2009. To date, most of the Recovery Act funds spent in Iowa 
were used to provide training and technical assistance, and to purchase 
equipment for the local agencies' use in weatherizing homes (see table 
1 for more details on funding). Nevertheless, DCAA officials are 
confident that Iowa will be able to spend all of the Recovery Act funds 
obligated by DOE within the program time frames and will successfully 
weatherize the number of homes originally planned. 

Table 1: Iowa's Use of Recovery Act Weatherization Assistance Program 
Funds, as of October 31, 2009: 

Funds obligated by DOE: $80.8 million; 
Funds available to Iowa: $40.4 million; 
Funds obligated by Iowa: $38.5 million; 
Funds spent by Iowa: $3.1 million; 
Number of homes Iowa plans to weatherize with Recovery Act funds: 
7,200 

Source: GAO analysis of Iowa DCAA data. 

[End of table] 

* DCAA officials said they continue to be concerned about issues 
regarding compliance with the Davis-Bacon Act. Their concerns focus 
primarily on how to respond in situations where specific work is 
completed on a weatherization project, but Labor has not determined a 
specific wage rate covering the work. For example, electricians and 
plumbers are sometimes needed for the weatherization work, but Labor 
has not set wage rates for these workers. 

* DCAA's oversight of its weatherization program includes a combination 
of desk reviews of detailed reports on program spending and activities, 
on-site fiscal and program monitoring at each local agency, and annual 
reviews of independent auditors' reports on each local agency. In 
addition, DCAA requires local agencies to perform a final inspection of 
all homes completed by their contractors to ensure that weatherization 
work meets state standards. DOE, in turn, requires DCAA to inspect 5 
percent of the homes weatherized by each local agency. Where Recovery 
Act funds were used, however, DCAA staff said that they plan to inspect 
7 to 9 percent of homes weatherized. 

* DCAA officials told us they are using existing program measures to 
track weatherization program effectiveness. For example, each year DCAA 
engages a private consultant to assess program costs and results and 
the assessments are provided to DOE. The most recent assessment, 
completed June 1, 2009, found first-year client fuel savings averaged 
$388, compared with $394 per dwelling the previous year. DCAA expects 
to use this same program measure to help demonstrate energy savings 
from Recovery Act Funds. 

* DCAA reported the number of hours worked by state and local 
weatherization staff and contractor personnel that were directly funded 
using Recovery Act funds. These hours, along with other pertinent 
information, were reported to the Iowa Department of Management which, 
in turn, determined the number of jobs created or retained and reported 
this information to OMB. 

* We visited two of the local agencies—Polk County Public Works and Mid-
Iowa Community Action, Inc. (MICA)—that are currently using Recovery 
Act funding to weatherize homes. Officials at both local agencies told 
us that since the establishment of prevailing wages required by the 
Davis-Bacon Act, they have begun spending Recovery Act funds to 
weatherize homes. 

* Polk County officials told us that they rely on private contractors 
to complete all weatherization work. As of October 31, 2009, Polk 
County had spent $15,750 to weatherize 2 homes. MICA, on the other 
hand, uses its own crew-based staff to complete all work. MICA 
officials said they are considering using some weatherization 
contractors in the future. As of October 31, 2009, MICA had spent 
$41,005 to weatherize 9 homes. 

Iowa Public Housing Agencies Continue to Make Progress on Recovery Act 
Projects, but Reporting on Jobs Was Inconsistent: 

Iowa housing agencies are using Recovery Act funds to improve and 
modernize public housing. Specifically: 

* In Iowa, 48 public housing agencies have received Recovery Act 
formula grant funds. In total, these public housing agencies received 
approximately $7.6 million in Public Housing Capital Fund formula 
grants (see fig. 2). As of November 14, 2009, 44 public housing 
agencies had obligated about $6.1 million, and 35 had drawn down about 
$3 million. On average, according to Department of Housing and Urban 
Development (HUD) data, public housing agencies in Iowa are obligating 
funds faster than public housing agencies nationally. 

Figure 2: Percentage of Public Housing Capital Funds Allocated by HUD 
That Have Been Obligated and Drawn Down in Iowa, as of November 14, 
2009: 

[Refer to PDF for image: 3 pie-charts; 1 horizontal bar graph] 

Funds obligated by HUD: 100%; $7,615,337; 
Funds obligated	by public housing agencies: 80.1%; $6,101,978; 
Funds drawn down by public housing agencies: 39.9%; $3,039,955. 

Number of public housing agencies: 
Entering into agreements for funds: 48; 
Obligating funds: 44; 
Drawing down funds: 35. 

Source: GAO analysis of HUD data. 

[End of figure] 

* The four public housing agencies that we visited—the Des Moines 
Municipal Housing Agency, the Evansdale Municipal Housing Authority, 
the North Iowa Regional Housing Authority, and the Ottumwa Housing 
Authority—have obligated almost all of their Recovery Act formula grant 
funds and have begun or completed most projects (see table 2). 
Specifically, as of November 14, 2009, the four housing agencies have 
obligated over 99 percent and expended about 25 percent of their 
formula grant funds, and agency officials told us that they will meet 
the obligation and expenditure deadlines outlined in the Recovery Act. 
Officials at these housing agencies identified 19 projects that have 
been or will be funded using Recovery Act funds, from relatively simple 
tasks, such as repairing concrete walkways, to more comprehensive work, 
such as a renovation of a building and its individual units. 

Table 2: Use of Recovery Act Formula Grant Funds at Selected Iowa 
Public Housing Agencies, as of November 14, 2009: 

Public housing agency: Des Moines Municipal Housing Agency; 
Funds awarded: $1,455,108; 
Funds obligated: $1,455,108; 
Funds expended: $323,758; 
Project status at time of GAO visit: one project currently underway 

Public housing agency: Evansdale Municipal Housing Authority; 
Funds awarded: $77,364; 
Funds obligated: $77,364; 
Funds expended: $50,677; 
Project status at time of GAO visit: two projects completed; three 
projects yet to begin. 

Public housing agency: North Iowa Regional Housing Authority; 
Funds awarded: $209,780; 
Funds obligated: $209,780; 
Funds expended: $209,741; 
Project status at time of GAO visit: five projects completed. 

Public housing agency: Ottumwa Housing Authority; 
Funds awarded: $601,765; 
Funds obligated: $596,858; 
Funds expended: 0[A]; 
Project status at time of GAO visit: six projects completed; two 
projects currently underway. 

Public housing agency: Total; 
Funds awarded: $2,344,017; 
Funds obligated: $2,339,110; 
Funds expended: $584,176. 

Source: GAO analysis of HUD and public housing agency data. 

[A] According to an Ottumwa Housing Authority official, the agency 
experienced technical problems with its Internet service that prevented 
it from accurately reporting its Recovery Act formula grant 
expenditures to HUD. According to the official, the Ottumwa Housing 
Authority had expended about $242,535 as of November 14, 2009. 

[End of table] 

* In general, housing agencies that we visited have not changed their 
plans for using Recovery Act formula grant funds since our July 8, 2009 
report. These housing agencies also did not report any significant 
concerns about compliance with the Davis-Bacon Act or the Buy American 
provision[Footnote 10] of the Recovery Act. More specifically, at the 
time of our visit, housing agency officials reported the following: 
- Thirteen of 19 projects were complete, 3 were under way, and 3 had 
not yet begun.
- All 19 projects were on the public housing agencies' 5-year plans.
- Twenty-four contracts had been awarded, 17 of which were awarded 
competitively within 120 days of when the housing agencies received the 
funds.
- The Des Moines Municipal Housing Authority was rehabilitating 18 
vacant units. No other housing agencies that we visited were 
rehabilitating vacant units. 

* We visited seven sites with projects funded using Recovery Act 
formula grant funds in Iowa. Construction was under way or complete at 
all projects that we visited. For example, the Ottumwa Public Housing 
Authority is replacing the roof on a high-rise, 97-unit public housing 
facility. We observed that work was under way at the time of our visit 
in October 2009. As of October 21, 2009, officials at the Ottumwa 
Housing Authority told us they had obligated $61,150 for this project, 
but had not yet expended any funds (see figure 3). 

Figure 3: Roof Repairs to an Iowa Public Housing Facility, before Work 
Began and Work in Progress: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. 

[End of figure] 

* We selected and discussed with officials one contract for each of the 
four housing agencies we visited. Officials told us that all four were 
competitively bid. One contract received only one bid, which officials 
attributed to the rural location of the housing authority and the 
limited number of qualified contractors in the area. 

* Officials reported few problems using www.federalreporting.gov or the 
Recovery Act Management and Performance System. However, at least one 
housing agency official complained that the additional reporting 
requirements were burdensome for smaller housing agencies such as his 
(he works alone with just one part-time assistant.) 

* Reporting on the number of jobs created or retained was inconsistent 
across the four housing agencies we visited. Officials at two housing 
agencies did not report any jobs created or retained because officials 
said that they did not believe they had collected sufficient data to
report results. One official told us that she received HUD's guidance 
on counting jobs after Recovery Act contracts were complete, making it 
difficult to collect the necessary data, although contractors told her 
some jobs were retained or created. Officials at the other two housing 
agencies we visited used different methods to estimate the number of 
jobs created or retained: one housing agency official said he counted 
the number of workers on each project, based on his understanding of 
guidance from HUD officials, while an official from a second housing 
agency used Davis-Bacon payroll data. As previously discussed, Iowa's 
housing agencies do not submit their quarterly reports to the Iowa 
Department of Management for review, rather they report directly 
through www.federalreporting.gov or, as we found at one housing 
authority, officials provided data to the city finance office which, in 
turn, reported to the Web site. 

Public Housing Projects Funded with Competitive Grants to Begin Soon: 

One housing agency in Iowa plans to use Capital Fund Recovery Act 
competitive grants to fund energy efficiency improvements at public 
housing facilities. 

* In addition to Capital Fund formula grants described above, HUD 
awarded two competitive grants to public housing agencies in Iowa. Both 
grants were awarded to the Ottumwa Housing Authority for creating 
energy-efficient communities. On September 23, 2009, HUD notified the 
Ottumwa Housing Authority that it was awarded the following competitive 
grants:
- $100,000 to install energy-efficient refrigerators and washing 
machines in individual units in high-rise public housing facilities, and
- $78,300 to install energy-efficient refrigerators and lighting in 
individual units at family facilities. 

The Ottumwa Housing Authority plans to solicit bids to award
contracts for both projects in November 2009 and install the new 
appliances before the end of the year. 

* Two other public housing agencies that we visited applied for 
competitive grants: the North Iowa Regional Housing Authority and the 
Des Moines Municipal Housing Agency. An official from the North Iowa 
Regional Housing Authority said that she was very dissatisfied with the 
competitive grant process because, as a small agency that is 
responsible for an area exceeding 4,000 square miles, she does not 
believe her application received the same level of consideration as 
other larger public housing agencies. While Ottumwa Housing
Authority officials were somewhat satisfied with the application 
process, they also said the process required a lot of data. 

Iowa Is Using Recovery Act Education Funds to Save Jobs: 

We surveyed a representative sample of LEAs—generally school districts—
nationally and in Iowa about their planned uses of Recovery Act funds. 
Table 3 shows Iowa and national GAO survey results on the estimated 
percentages of LEAs that (1) plan to use more than 50 percent of their 
Recovery Act funds from three education programs to retain staff, (2) 
anticipate job losses even with SFSF monies, and (3) reported a total 
funding decrease of 5 percent or more since last school year. 

Table 3: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: IDEA funds; 	
Estimated percentages of LEAs, Iowa: 32%; 	
Estimated percentages of LEAs, Nation: 19%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: Title I funds[A]; 
Estimated percentages of LEAs, Iowa: 46%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: SFSF funds; 
Estimated percentages of LEAs, Iowa: 68%; 	
Estimated percentages of LEAs, Nation: 63%. 

Responses from GAO survey: Anticipate job losses, even with SFSF funds; 
Estimated percentages of LEAs, Iowa: 31%; 	
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs, Iowa: 10%; 
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO survey of LEAs. 

Notes: Percentage estimates for Iowa have margins of error, at the 95 
percent confidence level, of plus or minus 13 percentage points or 
less. The nationwide percentage estimates have a margin of error of 
plus or minus 5 percentage points. 

[A] Title I, Part A, of the Elementary and Secondary Education Act of 
1965. 

[End of table] 

Iowa Continues to Use Recovery Act Funds to Mitigate Effects of Budget 
Cuts, but Recovery Act Implementation Strained Local Budgets and 
Personnel: 

Iowa ended fiscal year 2009 with a balanced budget,[Footnote 11] in 
part by using $45.3 million from the state's Economic Emergency Fund 
which, state officials explained, is allowed under state law. However, 
senior officials from the Iowa Department of Management said that on 
October 8, 2009, in response to reduced revenue estimates for fiscal 
year 2010,[Footnote 12] the Governor issued an executive order 
requiring a 10 percent cut to state fiscal year 2010 general fund 
expenditures for all departments and entities receiving such funds from 
the state.[Footnote 13] This cut is expected to result in the 
elimination of positions at state agencies,[Footnote 14] and the 
implementation of furloughs for over 3,200 state employees. According 
to a senior official from the Iowa Department of Management, the 
receipt of Recovery Act funds can continue to enable Iowa to mitigate 
the effects of the 10 percent cut by maintaining state and local 
education services and reducing the number of layoffs in state agencies 
and local school districts. The official stated that without Recovery 
Act funds, Iowa would have had to cut additional programs, services, 
and staff. This official also said that the across-the-board reduction 
should have a minimal, if any, effect on implementation of Recovery Act 
programs. However, the Iowa State Auditor said that reductions in staff 
can negatively affect the application of internal controls over 
Recovery Act expenditures, potentially making Recovery Act-funded 
programs more vulnerable to fraud, waste, and abuse. 

* We visited three localities in Iowa to determine the extent to which 
local governments used Recovery Act funds (see table 4). Similar to 
Iowa's state government, local municipal governments have benefited 
from the use of Recovery Act funds under various programs, but 
implementation has strained municipal operational budgets and personnel 
resources. 

Table 4: Localities in Iowa Visited to Address Use of Recovery Act 
Funds: 

Locality: Cedar Rapids; 
Population: 128,056; 
Locality type: City; 
Unemployment rate: 6.6%. 

Locality: Des Moines; 
Population: 197,052; 
Locality type: City; 
Unemployment rate: 7.3%. 

Locality: Newton; 
Population: 15,042; 
Locality type: City; 
Unemployment rate: 8.1%. 

Source: U.S. Census Bureau and U.S. Department of Labor. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

* To administer Recovery Act-funded programs, local governments in Iowa 
need to find other financial resources, such as local tax revenue, 
according to a senior official from the Iowa Department of Management. 
They pointed out that local governments in Iowa are mostly funded by 
local sources of revenues,[Footnote 15] and that the state does not 
share a significant amount of revenue with local governments, nor does 
it provide funding to local governments to address administrative costs 
for Recovery Act-funded programs.[Footnote 16] 

* These localities have benefited from the receipt and use of Recovery 
Act funds, but faced budget and staffing constraints in implementing 
Recovery Act-funded programs. For instance, officials from Des Moines 
said the city used about $1.2 million to improve neighborhood 
infrastructure such as streets and sidewalks, and about $1.8 million to 
fund homelessness prevention and rapid rehousing efforts.[Footnote 17] 
Des Moines officials noted that the availability of Recovery Act funds 
from federal and state sources enabled community development officials 
to assist more citizens than in previous years; however, the city has 
been affected by reduced revenue collection and higher administrative 
costs to implement Recovery Act programs. Due to reduced availability 
of staff and financial resources, Des Moines officials said they faced 
significant challenges adhering to requirements for Recovery Act-funded 
programs. For instance, city officials struggled to finish design 
applications needed to apply for funding for a new fire station from 
the Recovery Act Assistance to Firefighters Fire Station Construction 
Grant program. 

* Similarly, officials from Newton said that Recovery Act funds 
obtained through state agencies allowed the city to construct capital 
projects that would not have otherwise been funded. For example, the 
city received about $620,000 in grants through the state's highway 
infrastructure program for street overlay projects and $660,000 in 
loans and grants for an aeration basin replacement project to improve 
Newton's wastewater facilities.[Footnote 18] However, city officials 
needed to use funds from their operating budget, as well as from 
Recovery Act funds, to complete Recovery Act projects under their 
jurisdiction. Cedar Rapids also received Recovery Act funds from 
federal and state sources for several programs, including about 
$1,487,000 for transit capital assistance and about $537,000 for 
homelessness prevention efforts.[Footnote 19] Cedar Rapids has applied 
for Recovery Act competitive grants but city officials said that they 
have limited staffing available to administer the grants program. 

Iowa's State Auditor and Iowa Accountability and Transparency Board 
Provide Oversight of Recovery Act Funds: 

Iowa's State Auditor and Accountability and Transparency Board continue 
to monitor controls over Recovery Act Funds. Specifically: 

* The Office of the State Auditor recently completed its 2009 audit 
plan. According to state officials, the audit plan reflects the 
increased risk associated with the receipt of Recovery Act funds by 
agencies and localities, as well as agency risk assessments submitted 
by agency auditors. For example, state audit officials told us that 
audits are in process at Iowa's Department of Human Services, 
Department of Transportation, and the Workforce Development Agency 
because these agencies are receiving the bulk of Recovery Act funds. 

* Recently, Iowa reduced the State Auditor's appropriation by 10 
percent, which followed the 30 percent reduction to the State Auditor's 
appropriation implemented at the beginning of fiscal year 2010. These 
reductions are not expected to affect the State Auditor's ability to 
oversee Recovery Act funds, state audit officials said, because of the 
auditor's ability to bill state agencies directly for work associated 
with auditing federal funds. However, as a result of these reductions, 
the Office of the State Auditor may not be able to perform sufficient 
audit work at certain state agencies to issue an unqualified opinion on 
the state of Iowa comprehensive annual financial report, according to 
officials from the office. 

* The Iowa Accountability and Transparency Board's Internal Control 
Evaluation Team surveyed 82 programs and identified 6 high-priority 
programs—such as the Weatherization Assistance Program and the 
education stabilization portion of the SFSF program—that it expects 
will have some difficulty in fully complying with the accountability 
and transparency requirements in the Recovery Act. The board has 
required that these high-priority programs submit comprehensive 
accountability plans for the board's review of Recovery Act activities. 
These plans are due by November 16, 2009. 

* The U.S. Department of Justice and the DOE Office of the Inspector 
General provided training on federal procurement guidelines and fraud 
prevention on October 27, 2009. This training was mandatory for staff 
involved in programs identified as a high-priority by the board. 

* Senior officials from the Iowa Department of Management said that 
they plan to create a more detailed "dashboard" of Recovery Act data on 
Iowa's Economic Recovery Web site. Additionally, senior officials from 
the department want to create a Web-based system that allows users to 
pull up the number of jobs created or retained, by job classification 
code, from the use of Recovery Act funds in Iowa. 

Iowa Reported on Jobs Created, Retained, and Other Information:	 

Iowa's centralized database and validation and certification processes 
helped to ensure the accuracy of data, reported jobs, and other 
information related to the use of Recovery Act funds to the federal 
government, as follows: 

* On October 10, 2009 the state of Iowa submitted a detailed report to 
the federal government that included Recovery Act expenditures and the 
number of jobs created and jobs retained by the act. 

* The Iowa Department of Management used a centralized database to 
report Iowa's Recovery Act information—funds received and expended, and 
performance measures, such as jobs created and retained—to federal 
entities. The state's centralized database calculated the number of 
jobs created or retained based upon data provided by state agency and 
locality officials, such as hours worked. State officials told us that 
they used a centralized database to help ensure the accuracy and 
consistency of the information reported. However, localities, such as 
public housing authorities and urbanized transit agencies—which receive 
their funding from federal agencies—report Recovery Act information to 
OMB, not through the state's centralized reporting database. 

* The centralized database used to report Recovery Act information was 
created by the Iowa Recovery Act implementation executive working 
group. This executive working group was created in March 2009 to 
provide a coordinated process for (1) reporting on Recovery Act funds 
available to Iowa through various federal grants and (2) tracking the 
federal requirements and deadlines associated with those grants. A 
larger implementation working group—made up of representatives from 24 
state agencies—is led by the executive working group and assisted by 
groups focused on implementation topics such as budget and tracking, 
intergovernmental coordination, and communication. 

* Iowa officials told us that they developed internal controls to help 
ensure that the data submitted to federal entities are accurate. 
Specifically, Iowa inserted validation processes in the database to 
help identify and correct inaccurate data as it was entered. Officials 
told us that these validation processes generally worked and identified 
inaccuracies in the data. In addition, state agency and locality 
officials were required to certify their review and approval of their 
agency's information prior to submission to the state's centralized 
database and OMB. These certifications are intended to help ensure 
ownership and accuracy of the information. 

* According to Iowa officials, the number of errors reported in the 
grant awards data was relatively small. Specifically, information on 29 
of the 2,137 individual Recovery Act awards reported to OMB had to be 
removed from the original submission due to coding errors. In addition, 
the state's internal controls helped officials identify and correct 
duplicate subrecipient report submissions. To improve the process, 
state officials plan to provide additional training to agencies and 
localities that had problems with reporting required Recovery Act data. 
As a result, Iowa officials said they believe that the majority of
the problems identified in their initial quarterly report to OMB will 
be corrected before they are required to report in the next quarter. 

State Comments on This Summary: 

We provided the Governor of Iowa with a draft of this appendix on 
November 17, 2009. The Director, Iowa Office of State-Federal 
Relations, and the Director for Performance Results, Department of 
Management, responded for the Governor on November 19, 2009. Officials 
agreed with our findings. The officials also offered technical 
suggestions, which we have incorporated, as appropriate. 

GAO Contact: 

Lisa Shames, (202) 512-3841 or shamesl@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Thomas Cook, Assistant 
Director; Christine Frye, analyst-in-charge; James Cooksey; Daniel 
Egan; Ronald Maxon; Marietta Mayfield; Mark Ryan; and Ben Shouse made 
key contributions to this report. 

[End of section] 

Footnotes: Appendix VIII: Iowa: 

[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009). 

[2] States request reimbursement from FHWA as they make payments to 
contractors working on approved projects. 

[3] Recovery Act, div. A, title XII, § 1512. 

[4] This does not include obligations of $539,424 associated with 
"Transfers to FTA" of apportioned funds that were transferred from FHWA 
to FTA for transit projects. Generally, FHWA has authority pursuant to 
23 U.S.C. § 104(k) (1) to transfer funds made available for transit 
projects to FTA. 

[5] A lane-mile is one lane of road for one mile. Two-hundred fifty 
lane-miles equal 62.5 miles of 4-lane highway or 125 miles of 2-lane 
highway. 

[6] $539,424 was transferred from FHWA to FTA to fund additional 
transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. § 
104(k) (1) to transfer funds made available for transit projects to 
FTA. 

[7] 0f the $10.6 million total for the urbanized areas, $7.9 million is 
apportioned to Des Moines, $1.5 million to Davenport, and $540,000 to 
Bettendorf. 

[8] DOE currently plans to make the remaining funds available to the 
states once 30 percent of the housing units identified in the state 
plans are weatherized. 

[9] During routine program monitoring of homes weatherized by the 
Southern Iowa Economic Development Agency, DCAA staff said that they 
found numerous weaknesses in the agency's oversight of the contractors' 
work. As a result, DCAA found that the work completed on numerous homes 
did not meet the required state standards and needed to be redone. 
While Recovery Act funds were not used on these homes, DCAA believed 
that the program weaknesses were serious so that it suspended Recovery 
Act funding to the agency on September 24, 2009. Before this funding 
can be restored, DCAA is requiring that the local agency implement 
specific corrective actions, such as requiring the local agency to 
engage an independent audit firm to review all DCAA findings and report 
to DCAA. According to DCAA officials, the full extent of the problems 
at this agency is not yet known because the local agency is still 
inspecting all homes weatherized since April 1, 2009. However, DCAA 
officials said that the local agency has implemented some of the 
required corrective actions and they expect that the agency can resume 
receiving Recovery Act weatherization funding sometime in the future. 

[10] The Buy American provision of the Recovery Act prohibits, with 
certain exceptions, the use of Recovery Act funds "for the 
construction, alteration, maintenance, or repair of a public building 
or work unless all of the iron, steel, and manufactured goods used in 
the project are produced in the United States." Federal agencies may, 
under certain circumstances, waive the Buy American requirement and the 
requirement is to be applied in a manner consistent with United States 
obligations under internal agreements. Recovery Act, div. A, § 1605. 

[11] Iowa's fiscal year begins July 1 and ends June 30. 

[12] 0n October 7, 2009, the Iowa Revenue Estimating Conference lowered 
the fiscal year 2010 revenue estimate, previously set in March 2009, 
from about $5.853 billion to about $5.438 billion, about a $414.9 
million reduction. 

[13] Executive Order 19, 32 Admin. Bull. 1139. As a result of the 
fiscal year 2010 across-the-board cuts, the total reduction in General 
Fund expenditures for executive branch departments and entities is 
$564.4 million. Additionally, the legislative and judicial branches 
announced reductions to their fiscal year 2010 budgets of $3.3 million 
and $11.4 million, respectively. The fiscal year 2010 budgets for all 
three branches of government in Iowa was reduced by a total of $579.1 
million. 

[14] State agencies plan to implement reductions-in-force for at least 
180 positions, while leaving at least 230 positions vacant. 

[15] Local sources of revenue include taxes on residential and 
commercial properties, as well as sales taxes levied by localities in 
Iowa. 

[16] Senior officials from the Iowa Department of Management said that 
Iowa did not plan to take advantage of federal allowances to recoup 
administrative costs related to Recovery Act activities because the 
General Assembly has already appropriated and prescribed the use of 
Recovery Act funds for fiscal years 2009 and 2010. 

[17] Funding for these initiatives would originate from the Recovery 
Act Community Development Block Grant and Homelessness Prevention and 
Rapid Re-Housing Program, respectively. 

[18] According to a Newton city official, funding for the street 
overlay projects originated from the Iowa Department of Transportation 
while funding for the aeration basin replacement project originated 
from the Iowa Finance Authority's State Revolving Fund. The Iowa 
Department of Transportation and the Iowa Finance Authority both 
received Recovery Act funds.	 

[19] The Iowa Department of Transportation and the Homelessness 
Prevention and Rapid Re-Housing Program would fund these initiatives. 

[End of Appendix VIII: Iowa] 

Appendix IX: Massachusetts: 

Overview: 

This appendix summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Massachusetts. The full report covering all of GAO's 
work in 16 states and the District of Columbia may be found at 
[hyperlink, http://www.gao.gov/recovery]. 

What We Did: 

GAO's work in Massachusetts for this reporting period focused on three 
specific programs funded under the Recovery Act—Highway Infrastructure 
Investment, Public Housing Capital Fund (formula and competitive 
grants), and the Weatherization Assistance Program. We selected these 
programs because all three have significant funds being obligated at 
this point. The highway program in Massachusetts has a major obligation 
deadline approaching in March 2010 and was behind other states in 
getting these funds obligated and reimbursements for projects 
previously obligated. Competitive grants for the housing program were 
recently awarded, and the formula grant projects are under way. Lastly, 
the Massachusetts weatherization program has begun spending its 
Recovery Act funds following a delay while the U.S. Department of Labor 
set weatherization wage rates. Our work focused on the status of the 
programs' funding, how funds are being used based on issues specific to 
each program (including procedures for procurement of goods and 
services), and how results were being reported and assessed. As part of 
our review of public housing, we revisited two agencies, the Boston and 
Revere public housing agencies, that we reported on earlier in 2009. We 
also visited two recipients of weatherization funds—community action 
agencies in Chelsea and Gloucester. In addition, we are including 
updated funding information and results of our national survey on three 
Recovery Act education programs with significant funds being disbursed. 
For descriptions and requirements of the programs we covered, see 
appendix XVIII of GAO-10-232SP. 

To gain an understanding of the state's experience in meeting Recovery 
Act reporting requirements, we examined documents prepared by, and held 
discussions with, the Massachusetts Department of Transportation 
(MassDOT) and its predecessor, the Massachusetts Executive Office of 
Transportation (EOT) and met with two highway general contractors. 
[Footnote 1] In Massachusetts, state agencies that are prime recipients 
of Recovery Act funds report through the commonwealth on a number of 
measures, including the use of funds and estimates of the number of 
jobs created and retained. The first quarterly reports were due in 
October 2009. We focused our work on MassDOT's methodology for 
collecting data, particularly job creation and sustainment data, and on 
MassDOT's experience in preparing the October report. 

Finally, we continued to track the use of Recovery Act funds on state 
fiscal stabilization, and also visited two Massachusetts cities to 
determine the Recovery Act funds each is receiving from federal 
agencies and how those funds are being used as they deal with their 
difficult fiscal situations. We chose to visit the cities of Boston and 
Springfield, the largest and third-largest cities in population in 
Massachusetts, respectively. Both are receiving Recovery Act funds 
under several programs. They have unemployment rates of 9.2 percent and 
12.8 percent, respectively, thus providing an example of cities with 
unemployment rates above and below the commonwealth's unemployment rate 
of 9.3 percent. 

What We Found: 

* Highway Infrastructure Investment. As of October 31, 2009, the U.S. 
Department of Transportation (DOT) Federal Highway Administration 
(FHWA) has obligated $253 million of the $438 million of Recovery Act 
funds apportioned to Massachusetts. Although still behind other states, 
the commonwealth has made progress in having funds obligated for 
highway projects, including those in metropolitan areas. Upcoming 
projects for which Massachusetts will seek approval will strike a 
balance between projects that can be obligated quickly and projects 
that support the state's long-term economic development plans. Bids for 
highway projects continue to come in below state cost estimates, as 
competition continues among contractors for these projects. According 
to FHWA officials, Massachusetts has been meeting its maintenance of 
effort spending goals, but the commonwealth will need to recertify to 
higher spending levels because of errors in their original calculation 
and additional guidance that state highway aid to local governments 
must be included. 

* Public Housing Capital Fund. Public housing agencies in Massachusetts 
were allocated about $82 million in Public Housing Capital Fund formula 
grants under the Recovery Act. As of November 14, 2009, they had 
obligated about $31 million of these funds and drawn down about $12 
million. These funds flow directly to the public housing agencies. The 
two public housing agencies we visited—Boston and Revere—both said they 
are using their formula funds primarily to accelerate capital 
improvement projects that were already on their long-term plans. The 
Boston Housing Authority has faced some challenges to awarding 
contracts and starting construction work quickly, but has taken steps 
to meet the March 2010 deadline for obligating all formula funds. The 
Revere Housing Authority expects the construction work on its one 
formula project to be completed by the end of December 2009. In 
addition, Boston received about $40 million in competitive grant funds 
for specific purposes, while Revere did not apply for any competitive 
grants. 

* Weatherization Assistance Program. Massachusetts was allocated $122.1 
million in Recovery Act Weatherization Assistance Program funds in 
March 2009 for improving the energy efficiency of low-income families' 
homes.[Footnote 2] As of November 17, 2009, the commonwealth reported 
overall Recovery Act weatherization expenditures of $16.4 million 
primarily for advance payments to subgrantees and estimated the 
completion of over 500 units with Recovery Act funding, with an 
additional 1,100 units in process. The commonwealth opted to use these 
funds once the U.S. Department of Labor set prevailing wage rates for 
Massachusetts weatherization workers. To handle the increased funds, 
local community action agencies that implement the weatherization 
program identified potential new contractors. Those new to 
weatherization receive special training and agencies report doing more 
oversight and inspections of these contractors' work. 

* Updated funding information on education programs. Massachusetts has 
been awarded Recovery Act education funds through three major programs. 
The commonwealth has been awarded $726 million in State Fiscal 
Stabilization Fund money, designed in part to help state and local 
governments stabilize their budgets by minimizing budgetary cuts in 
education and other essential government services. As of November 6, 
2009, the commonwealth has drawn down about $423 million. Actual and 
planned recipients include local educational agencies (LEA) (which have 
expended $412 million), institutions of higher education (ME), fire 
departments, and the state police. Massachusetts was also awarded $164 
million in Recovery Act funds through Title I, Part A of the Elementary 
and Secondary Education Act of 1965 (ESEA), as amended, which helps 
educate disadvantaged youth, and as of November 6, 2009, the 
commonwealth had drawn down almost $7 million. In addition, under Part 
B of the Individuals with Disabilities Education Act (IDEA), as 
amended, which supports special education services, the commonwealth 
has been awarded $291 million. As of November 6, 2009, the commonwealth 
had drawn down almost $20 million in IDEA, Part B Recovery Act funds 
for LEAs In addition, we found that LEAs in Massachusetts are generally 
not planning to use more than half of their Recovery Act funds for 
staff retention, and that the commonwealth's current plans for 
monitoring LEAs' use of State Fiscal Stabilization Fund monies include 
an up-front review of LEAs' funding applications and the Single Audit. 

* Recipient reporting. Massachusetts developed a centralized system to 
collect award-level data from prime recipients that supplements data 
from the commonwealth's financial management system with employment 
data collected by state agencies from their vendors and subrecipients. 
The commonwealth took steps to ensure the quality of recipient reports 
that included the centralized calculation of full-time equivalent 
positions (FTE) based on hours worked and the requirement that each 
prime recipient validate data before submission to [hyperlink, 
http://www.federalreporting.gov] (FederalReporting.gov). While some 
nonstate entities we visited were largely successful with quarterly 
report submission, other entities we visited that did not report 
through the commonwealth's centralized data system faced challenges. 

* Cities' use of Recovery Act funds. Boston and Springfield have 
received Recovery Act funds directly from federal agencies and 
indirectly through state government. The cities' plans for the funds 
include using education and public safety dollars to help retain jobs 
in schools and police departments. 

Massachusetts Makes Further Progress in Having Highway Funds Obligated 
but May Face Challenges with Additional Maintenance of Effort 
Requirements: 

Massachusetts has recently made progress in having more funds obligated 
for federal aid highway projects, including those in metropolitan areas 
(see table 1).[Footnote 3] States are required to suballocate 30 
percent of their apportionment to metropolitan and other areas of the 
state, and as of October 31, 2009, 46 projects in Massachusetts have 
been approved overall, with 14 in suballocated areas. According to the 
Economic Stimulus Coordinator at the Massachusetts Executive Office of 
Transportation (EOT), the upcoming round of projects for which 
Massachusetts will seek approval will strike a balance between projects 
that can be obligated quickly to create jobs immediately and more 
complex projects that will yield additional jobs over the long-term and 
are part of the commonwealth's economic development plans. 

Table 1: Massachusetts Recovery Act Federal Aid Highway Amounts as of 
October 31, 2009: 

Category: Funds suballocated to metropolitan areas (30 percent); 
Total: $131 million; 
Amount obligated[A]: $41 million; 
Amount reimbursed: $0 million;. 

Category: Funds for state-wide use (70 percent); 
Total: $307 million; 
Amount obligated[A]: $211 million; 
Amount reimbursed: $20 million. 

Category: Total Massachusetts apportionment; 
Total: $438 million; 
Amount obligated[A]: $253 million; 
Amount reimbursed: $20 million. 

Source: GAO analysis of FHWA data. 

Notes: Amounts may not add up to totals due to rounding. 

This does not include obligations associated with $12.8 million of 
apportioned funds that were transferred from FHWA to the Federal 
Transit Administration (FTA) for transit projects. Generally, FHWA has 
authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made 
available for transit projects to FTA. 

[End of table] 

Massachusetts has increased its reimbursement rate from 2.4 percent on 
September 1, 2009, to 8.1 percent on October 31, 2009, for all Recovery 
Act highway projects. However, compared to the national average of 18.4 
percent, the commonwealth has a low reimbursement rate for these 
projects. The EOT Economic Stimulus Coordinator and the Federal Highway 
Administration (FHWA) Region I Director of Project Delivery identified 
several reasons for a low reimbursement rate on Recovery Act projects. 
These include (1) lag time between when the contractor submits his 
certified payroll and other contract expenses and their actual 
reimbursement, (2) the time needed for the Massachusetts Highway 
Department (MassHighway) to review and approve contractor expenses, and 
(3) the longer time required for design and permitting for more 
complicated and expensive projects.[Footnote 4] The FHWA Region I 
Director of Project Delivery stated that it can take up to 2 months 
from when a contractor performs highway work and completes the 
appropriate paperwork until it receives payment from the commonwealth 
and the commonwealth seeks reimbursement from FHWA. Additionally, 
highway contractors said that the frequent rain in May and June 
contributed to slower progress on paving projects, which made up a 
large portion of Massachusetts's initial round of projects. 

Bid Amounts for Advertised Highway Projects Have Been Coming in Below 
MassHighway Cost Estimates: 

Data obtained from MassHighway on bids received for advertised highway 
projects indicate that bids continue to come in under their cost 
estimates. In our review of all Recovery Act highway project bid 
amounts, 28 out of 35 projects came in below MassHighway cost 
estimates, and on average, these projects came in at 13 percent below 
the state cost estimates.Footnotes 5, 6] According to the EOT Economic 
Stimulus Coordinator, there continues to be significant competition 
among contractors for these projects. The FHWA Region I Division 
Administrator and highway contractors said that contractors are 
reducing their profit margins to keep people working. Massachusetts 
will request to have the excess project funds deobligated and to 
obligate the savings to other Recovery Act highway projects. According 
to the FHWA Region I Financial Manager, by early October, they had 
deobligated approximately $10 million in Massachusetts Recovery Act 
highway funds. According to the EOT Economic Stimulus Coordinator, the 
deobligated funds have already been used to cover contingencies, such 
as when bids come in over the state cost estimates, or they may be 
obligated to other Recovery Act projects in fiscal year 2010. 

Massachusetts Faces Additional Challenges with Maintenance of Effort 
Requirements: 

Massachusetts will need to recertify to include approximately $150 
million more in spending than originally calculated to satisfy its 
maintenance of effort (MOE) requirement.[Footnote 7] The FHWA Region I 
Financial Manager stated that an FHWA analysis of Massachusetts's 
initial MOE calculation and additional guidance requiring states to 
include highway aid to localities in their MOE necessitates that the 
commonwealth commit to higher spending levels. State officials told us 
they plan to meet the MOE requirements. According to the EOT Economic 
Stimulus Coordinator and the FHWA Region I Director of Program 
Development, on average, Massachusetts has been on track for meeting 
its MOE spending goals. 

Local Housing Agencies Are Starting to Implement Formula Funded 
Projects, and Some Have Been Awarded Competitive Grants: 

Sixty-eight of the 253 public housing agencies in Massachusetts have 
been allocated Public Housing Capital Fund formula grants, which are 
provided directly to housing agencies by the Department of Housing and 
Urban Development (HUD) and are intended to improve the physical 
condition of and modernize housing units, as well as improve 
management. In total, these agencies have been awarded $81,886,976 in 
formula grant funds. As of November 14, 2009, 52 of these public 
housing agencies have obligated $30,600,977, and 32 have drawn down 
$12,231,507 (see figure 1). On average, housing agencies in 
Massachusetts are obligating funds slower than housing agencies 
nationally. 
	
Figure 1: Percentage of Public Housing Capital Funds Allocated by HUD 
That Have Been Obligated and Drawn Down in Massachusetts as of November 
14, 2009: 

[REfer to PDF for image: 3 pie-charts; 1 horizontal bar graph] 

Funds obligated by HUD: 100%; $81,886,976; 
Funds obligated	by public housing agencies: 37.4%; $30,600,977; 
Funds drawn down by public housing agencies: 14.9%; $12,231,507. 
	
Number of public housing agencies: 
Entering into agreements for funds: 68; 
Obligating funds: 52; 
Drawing down funds: 32. 

Source: GAO analysis of HUD data. 

[End of figure] 

The Boston and Revere housing agencies we visited are using their 
formula funds primarily to speed up the completion of previously 
planned capital improvement projects. The Boston Housing Authority 
received $33,329,733 in formula funds, and the Revere Housing Authority 
received $324,072. Ten of Boston's 14 planned formula-funded projects 
and Revere's 1 formula-funded project were already on their 5-year 
plans. The Boston Housing Authority originally planned to use its 
formula funds for 15 projects; it has dropped one project in part 
because the need will be addressed through a Recovery Act competitive 
grant. These 14 projects include, for example, bathroom renovations and 
wall and foundation repairs. Revere is using its funds for a window 
replacement project at one housing development. Both agencies said 
their projects most likely will not involve the rehabilitation of 
vacant housing units. 

Both agencies said they are on track to meet the March 17, 2010, 
deadline for obligating 100 percent of their formula funds, but the 
Boston Housing Authority has experienced more challenges in awarding 
contracts and getting projects started quickly. Boston awarded design 
contracts for two of its projects within 120 days of receiving formula 
funds. As of October 20, 2009, it had put just over half of its 
contracts for formula projects out to solicit bids, and expected to put 
the remaining contracts out to solicit bids by December 1, 2009. Boston 
officials cited the time required to design improvements in existing 
buildings, the requirements of the competitive bidding process, and the 
city of Boston permitting process as factors that affect how quickly 
contracts can be put in place. But Boston officials said they are 
making special efforts to meet the obligation deadline. For example, 
the Boston Housing Authority has tried to speed up the contracting 
process by no longer allowing successful bidders to negotiate contract 
terms after they have been selected to receive the contract; this 
procedural change will be continued after all Recovery Act funds have 
been exhausted. The Boston Housing Authority also hired additional 
staff to manage its formula-funded projects. The Revere Housing 
Authority, meanwhile, has made faster progress on its one formula grant 
project. It started the actual work on its project in October and 
expects the work to be completed by the end of December 2009. Revere 
officials said they were able to get work started quickly because 
environmental regulations are less extensive in a smaller city and 
their window replacement project is relatively straightforward. 

Competitive Grants Have Presented New Opportunities for Some Local 
Housing Agencies: 

In addition to the Capital Fund formula grants, HUD awarded 15 
competitive grants to housing agencies in Massachusetts. Housing 
agencies across the country could apply for these funds to support 
specific priority investments in four categories. The housing agencies 
we visited had different experiences with the competitive grant 
application process. The Boston Housing Authority applied for seven 
competitive grants (worth $60,211,241 total) and was awarded four 
grants (worth $40,211,241 total). Boston officials reported that the 
availability of competitive grants for specific purposes spurred them 
to plan projects they otherwise would not have undertaken. For example, 
Boston received $22,196,000 to reconstruct part of an older development 
as a model energy-efficient community. It received $4,062,717 to create 
a comprehensive services center for frail elderly individuals. Boston 
officials found the competitive application process more streamlined 
than other HUD funding competitions, because it required less narrative 
and allowed applicants to self-certify that they met certain 
requirements rather than submit extensive documentation. 

The Revere Housing Authority, on the other hand, did not apply for any 
competitive grants, although Revere officials considered applying for a 
grant. Officials said the application process was cumbersome, and that, 
with their limited staff, they could not complete the application by 
HUD's deadline. Revere officials said they would still be interested in 
seeking any additional competitive grant funds that become available, 
in order to take advantage of a Recovery Act provision allowing local 
housing agencies to use Recovery Act funds for improvements to state-
funded housing units and then continue to support these units with 
regular federal capital and operating funds in the future. 
Massachusetts has encouraged local housing agencies to take advantage 
of this provision.[Footnote 8] 

Recovery Act Has Required Some Changes in Contracting Procedures: 

Local housing agencies in Massachusetts typically award Capital Fund 
contracts according to state procurement law, but HUD requires them to 
follow federal procurement policies when awarding contracts funded 
exclusively by the Recovery Act.[Footnote 9] Officials at the Boston 
Housing Authority stated they have modified their contracts for 
projects funded by the Recovery Act. For these projects, Boston 
officials have eliminated an extra step that they say is required by 
Massachusetts but not by federal procurement policy—obtaining sub-bids 
for specific categories of the project before obtaining bids from the 
general contractor that manages the whole project. 

For this report we reviewed two specific contracts that were supported 
in part by Recovery Act funds. We reviewed a contract awarded by the 
Boston Housing Authority for design of bathroom renovations at one 
housing development, which was modified to add $328,000 in Recovery Act 
funds for the design of renovations to additional units. The contract 
was modified on June 23, 2009. According to housing authority 
officials, the contract amendment does not specify a deadline for 
completion of the Recovery Act-supported work, but requires each 
successive phase of the work to be completed within a certain number of 
days after the Boston Housing Authority has approved the contractor to 
move on to that phase. Housing authority officials also said that 
although a deadline is not explicitly included in the contract, the 
contract requires the contractor to complete the work within the time 
frame specified in the Recovery Act. We also reviewed a contract in the 
amount of $421,400 awarded by the Revere Housing Authority for window 
replacement work at one housing development. This contract was awarded 
on August 20, 2009, and is expected to be completed by December 31, 
2009. 

Boston and Revere officials largely followed similar procedures in 
awarding these contracts. We noted, and Boston officials confirmed, 
that the Boston Housing Authority awarded its contract competitively, 
used a fixed-price contract, and obtained self-certifications from 
bidders that they are not on the state's debarment list. Revere Housing 
Authority officials also told us they awarded their contract 
competitively, used a fixed-price contract, and checked to make sure 
the bidders were not on the state debarment list. Boston and Revere 
officials said they have procedures for monitoring their contractors' 
work. Boston officials said a project manager reviews the reports and 
design submissions provided by the contractor during each phase of the 
project, and if necessary, makes comments that the contractor must 
address. Revere officials said their contractor is monitored regularly 
by an on-site Clerk of the Works and by the architecture firm that 
designed the window replacement work. 

Massachusetts Accelerates Funding for Weatherization: 

In March 2009, the U.S. Department of Energy (DOE) allocated 
Massachusetts $122.1 million in Recovery Act funds for its 
Weatherization Assistance Program to improve the energy efficiency of 
low-income families' homes. However, because the U.S. Department of 
Labor had not yet established a Davis-Bacon prevailing wage for 
weatherization workers for Massachusetts, the commonwealth opted to use 
funding from other sources, including its regular (non-Recovery Act) 
funding under the program for weatherization work and for training of 
new contractors until the wage rate was set.[Footnote 10] The process 
of contracting for the weatherization of individual housing units using 
Recovery Act money then began on September 1, 2009. In Massachusetts, 
11 community action agencies (CAA) and one nonprofit housing agency 
function as subgrantees for DOE weatherization funding; they do not do 
weatherization with their own staff but rather utilize private sector 
contractors.[Footnote 11] In describing attempts to accelerate 
weatherization spending, state officials said they advised Recovery Act 
subgrantees to consider using a standard contract developed by CAPLAW, 
a Boston-based national organization that provides technical assistance 
to CAM. State officials estimated that subgrantees saved a month in 
time by using this contract because it simplified the task of contract 
development. 

Training and Quality Control Practices Focus on Requirements of New 
Contractors: 

In order to handle a dramatic increase in weatherization funding, the 
number of contractors statewide increased from 55 to 77. The two CAM we 
visited, Action, Inc. in Gloucester and CAPIC, Inc. in Chelsea, both 
described efforts to actively recruit more contractors. They 
acknowledged, however, that some new contractors do not have experience 
in weatherizing homes, which requires knowledge of various technologies 
and materials. To assure accountability for work done by companies new 
to weatherization, officials described initiatives to provide 
additional training and engage in quality control efforts. 
Massachusetts recommends that new contractors attend courses such as a 
weatherization "boot camp" funded by gas and electric utility companies 
and designed for new weatherization contractors, as well as attend 
training on installation of cellulose materials. Massachusetts 
officials also described various quality control practices. At least 50 
percent of work is inspected while in progress and 100 percent at 
completion by energy auditors working for CAM in the weatherization 
network.[Footnote 12] We observed energy auditors demonstrating the use 
of specialized equipment, an infrared sensor, to ensure that a 
contractor was meeting quality standards. Contractors are paid only 
when work is completed and judged to have met such standards. CAA 
officials told us that they do more oversight and inspections of work 
by less experienced contractors. Technical assistance and advice is 
also provided by a weatherization consultant, paid for by utility 
companies. State energy officials reported their plans to inspect 10-25 
percent of all finished work and that they are hiring two new staff to 
strengthen program and fiscal monitoring. Several other oversight 
entities are also reviewing or plan to review Massachusetts Recovery 
Act weatherization spending, including the state Inspector General and 
the Office of the State Auditor. 

Of the $122.1 million allocated by DOE, Massachusetts has obligated $92 
million to be spent over three fiscal years. As of November 17, 2009, 
the commonwealth reported overall Recovery Act expenditures of $16.4 
million primarily for advance payments to subgrantees and estimated the 
completion of over 500 units with Recovery Act funding with an 
additional 1,100 units in process.[Footnote 13] Because utility 
companies in Massachusetts also support weatherization activities, 
officials told us that the Recovery Act funding allowed additional 
leveraging of funding. For example, an official at CAPIC, Inc. told us 
they could combine support from utilities with Recovery Act funds to 
both insulate a home and replace an inefficient furnace. Contractors 
also described the benefits of funding in terms of helping them 
diversify their business in a difficult economic climate. One 
contractor we spoke with had specialized in high-end renovations but 
noted that with new Recovery Act funding for weatherization, he has 
decided to establish weatherization as an ongoing activity at his 
company. 

Recovery Act Education Funds Continue to Help Address State Funding 
Shortfalls, and Massachusetts Will Use the Single Audit to Monitor SFSF 
Spending: 

Massachusetts has been awarded Recovery Act education funds through 
three major programs: 

* State Fiscal Stabilization Fund (SFSF), which is designed in part to 
help state and local governments stabilize their budgets by minimizing 
budgetary cuts in education and other essential government services; 

* Title I, Part A of the Elementary and Secondary Education Act of 1965 
(ESEA), as amended, which helps educate disadvantaged youth; and; 

* Parts B and C of the Individuals with Disabilities Education Act 
(IDEA), as amended, which supports special education and related 
services. 

SFSF. The commonwealth has been awarded $726 million in SFSF funds, out 
of its total allotment of $994 million. This award includes $545 
million in education stabilization funds (Phase I of the commonwealth's 
education stabilization funds) and $181 million in government services 
funds (all of the commonwealth's government services funds). As of 
November 6, 2009, the commonwealth has drawn down about $423 million of 
its SFSF funds. 

Also as of November 6, 2009, LEAs have expended $412 million, including 
$322 million in education stabilization funds and $90 million in 
government services funds, and IHEs have expended $14 million in 
education stabilization funds.[Footnote 14] Of the remaining Phase I 
education stabilization funds, the commonwealth plans to distribute 
almost all to IHEs. Of the remaining government services funds, the 
commonwealth plans to distribute about $20 million to fire departments 
and $3 million to the state police to replace staff or maintain 
staffing levels. The commonwealth expects to be awarded its remaining 
$268 million in Phase II education stabilization funds in 2010. When 
Massachusetts is awarded these funds, it plans to distribute more than 
half to LEAs through its primary funding formula, primarily to address 
a shortfall in local education funding. It also anticipates 
distributing a substantial portion to IHEs, to make up for fiscal year 
2010 budget cuts and restore the IHEs to their fiscal year 2009 funding 
levels. 

ESEA, Title I. The commonwealth has been awarded $164 million through 
Title I, Part A of ESEA. The commonwealth required LEAs that were 
allocated funds through this program to submit applications to and have 
them approved by the commonwealth prior to receiving these funds, as it 
does with all sub-grants of federal funds. As of November 23, 2009, 
about 82 percent of the state's LEAs that were allocated ESEA Title I 
Recovery Act funds had submitted and had approved by state officials 
their program applications. As of November 6, 2009, the commonwealth 
had drawn down almost $7 million in ESEA Title I Recovery Act funds for 
these LEAs 

IDEA. The commonwealth has been awarded $291 million in IDEA, Part B 
funds. The commonwealth also requires LEAs to submit applications 
before receiving these funds. As of November 23, 2009, about 88 percent 
of the LEAs that were allocated IDEA, Part B funds had submitted and 
had approved by state officials their program applications. As of 
November 6, 2009, the commonwealth had drawn down almost $20 million in 
IDEA, Part B Recovery Act funds for these LEAs. 

Massachusetts LEAs Generally Plan to Use Some Recovery Act Funds to 
Retain Jobs: 

Looking more specifically at how LEAs in Massachusetts are using their 
Recovery Act funds, we found that they generally plan to use less than 
half of these funds for job retention. From August to October of 2009 
we surveyed a representative sample of LEAs nationally and in 
Massachusetts about their planned uses of Recovery Act funds. Based on 
our survey, for example, we estimate that 37 percent of LEAs in 
Massachusetts plan to use more than half of their SFSF funds to retain 
staff (see table 2). State officials told us that LEAs in Massachusetts 
have historically had a disincentive to use federal grant funds for 
payroll costs because of some additional costs associated with using 
federal grants—as opposed to LEAs' own funds—for payroll costs. 
According to the state educational agency, in June 2009 the 
commonwealth enacted legislation exempting SFSF funds—but not Recovery 
Act Title I or IDEA funds—from these additional costs. State officials 
said this change came too late to affect LEAs' fiscal year 2009 SFSF 
spending. They said they are now starting to receive LEAs'
plans for using Phase II SFSF funds, and expect that a higher 
proportion of these Phase II SFSF funds will be used for payroll costs. 
Based on our survey, we also estimate that a minority of LEAs in the 
commonwealth expect job losses or experienced a funding cut of 5 
percent or more since the prior school year. 

Table 2: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, IDEA funds: 
Estimated percentages of LEAs in Massachusetts: 8%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, Title I funds; 
Estimated percentages of LEAs in Massachusetts: 10%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, SFSF funds; 
Estimated percentages of LEAs in Massachusetts: 37%. 

Responses from GAO survey: Anticipate job losses, even with SFSF funds; 
Estimated percentages of LEAs in Massachusetts: 28%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs in Massachusetts: 12%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for Massachusetts have margins of error, at 
the 95 percent confidence level, of plus or minus 16 percentage points 
or less. 

[End of table] 

Massachusetts Plans to Rely Primarily on the Single Audit to Monitor 
LEAs' SFSF Spending, and Currently Lacks Plan for Ongoing Monitoring: 

The Massachusetts Executive Office of Education (EOE) plans to use the 
Single Audit[Footnote 15] to monitor SFSF expenditures, along with some 
additional steps, but it currently lacks a plan for ongoing monitoring 
of the funds throughout the year. EOE officials told us that given the 
wide range of allowable uses of the SFSF funds, the Single Audit 
process generally will be sufficient to monitor these funds. They said 
they are taking some additional steps to supplement the Single Audit. 
The commonwealth reviews LEAs' SFSF applications to determine if they 
plan to use the funds for allowable purposes. It has issued guidance to 
LEAs that reminds them of uses that are prohibited by the Recovery Act, 
and encourages them to be especially cautious in using the funds for 
certain purposes—such as construction and repairs—that are associated 
with more extensive regulations and therefore more susceptible to 
misuse. The commonwealth has also modified the annual financial report 
that LEAs must submit to the commonwealth, to request a detailed 
breakdown of how LEAs have actually spent their SFSF funds, and will 
compare these end-of-year reports to the LEAs' planned uses of the 
funds. The U.S. Dept. of Education (Education) has issued guidance 
directing states to have a comprehensive plan for monitoring LEAs' use 
of SFSF funds, and Education officials said that relying exclusively on 
the Single Audit is not sufficient. Massachusetts officials told us 
they believe their approach is comprehensive and satisfies the federal 
requirement. However, while their approach includes up-front actions to 
guide LEAs' use of funds and postexpenditure actions to ensure funds 
were used properly, it does not currently include any ongoing 
monitoring of LEAs' expenditures during the fiscal year. The 
Massachusetts Recovery and Reinvestment Office conducted a training 
session for all state agencies in November 2009 on strategies for 
monitoring waste, fraud, and abuse in Recovery Act programs; EOE 
officials participated in this training but have not yet developed a 
plan for using these strategies to monitor SFSF spending. 

Without ongoing monitoring, Massachusetts lacks the opportunity to 
correct any potential misuses of the funds before the end of the fiscal 
year. 

Massachusetts Used Centralized Reporting for State Agencies, but Some 
Nonstate Entities Faced Challenges Reporting Directly to
FederalReporting. gov: 

Massachusetts developed a centralized system to collect award-level 
data from prime recipients as required under section 1512 of the 
Recovery Act.[Footnote 16] The Massachusetts Recovery and Reinvestment 
Office (MRRO) developed the Stimulus Reporting database, which 
supplements data from the commonwealth's financial management system—
MMARS—with employment data collected by state agencies from their 
vendors and subrecipients. MMARS data include many of the award-level 
data elements required, such as award expenditures and vendor 
information. However, MRRO requested that state agencies submit data 
not included in the MMARS system separately, primarily jobs numbers and 
some narrative elements. MRRO was able to generate state employee job 
information centrally from the commonwealth's payroll system, but state 
agencies had to collect jobs numbers directly from vendors and 
subrecipients. Some state agencies were able to provide this 
information through their certified payroll systems or other systems 
established for Recovery Act reporting, but the majority relied on 
reporting templates provided by MRRO. EOT used its civil rights 
reporting system to provide employment data for the state Stimulus 
Reporting database. EOT officials, as well as contractors working on 
Recovery Act funded projects, told us that the ability to use this 
system for Recovery Act reporting required little additional effort and 
helped ensure the quality of the data submitted because data could be 
uploaded directly. Other agencies completed templates provided by MRRO 
to submit employment data. For example, Massachusetts's Department of 
Housing and Community Development used these templates to collect data 
from local community action agencies administering weatherization 
grants. 

Massachusetts Implemented Steps to Ensure the Quality of Recipient 
Reports: 

Massachusetts took several steps to ensure the completeness and 
accuracy of data submitted by state agencies and other prime 
recipients. MRRO issued instructions to all state agencies on the U.S. 
Office of Management and Budget's prescribed method for calculating FTE 
positions. However, MRRO approved EOE's use of an alternative method 
for estimating the jobs retained as a result of SFSF funds distributed 
to LEAs at the end of the state fiscal year 2009.[Footnote 17] The 
commonwealth also issued detailed guidance that included instructions 
for validating data and a checklist for ensuring the quality of data 
submitted to FederalReporting.gov. Individual agencies also took steps 
to ensure the integrity of data they collected from subrecipients. EOT 
compared data that contractors submitted with their certified payroll 
records, while the Massachusetts's Department of Housing and Community 
Development used a consultant to oversee the data collection process. 

State Officials Had Some Concerns about the Reporting Process: 

State officials raised concerns that reporting FTEs may understate the 
impact of federal stimulus spending on employment. MRRO officials noted 
that the way FTEs are calculated does not show the full number of 
workers involved with Recovery Act projects. For instance, according to 
the EOT Economic Stimulus Coordinator, the commonwealth reported 139 
FTEs for transportation projects for the quarter ending September 30, 
2009, but this number is made up of 1,362 individuals who worked on 
such projects. State officials also noted that some technical features 
of FederalReporting.gov made the process cumbersome, particularly data 
validation and error processing. MRRO officials told us that they 
compiled a list of these technical difficulties that they provided to 
the Recovery Accountability and Transparency Board. Despite these 
technical challenges, state officials noted that the statewide 
reporting process was largely successful. They credited several 
features of the federal reporting system, including the batch 
processing capability and the technical staffs responsiveness. 

Nonstate Entities Successfully Submitted Reports, but Some Faced 
Challenges: 

Some prime recipients that did not submit reports through the 
commonwealth's central reporting platform successfully submitted data 
directly to FederalReporting.gov, but other entities that reported 
directly to FederalReporting.gov faced challenges. The city of Boston 
used its human resource management system to generate data for its 
quarterly report. Despite minor difficulties locating federal reporting 
numbers, the city was able to compile data and submit its quarterly 
report without much difficulty. Similarly, the Boston Housing 
Authority, another agency that submitted reports directly to 
FederalReporting.gov, reported that they relied on HUD guidance and 
reporting templates to compile data from vendors working on 14 Recovery 
Act projects. However, other entities had difficulties submitting 
reports directly to FederalReporting.gov. Revere Housing Authority 
officials told us that they had difficulty locating guidance and thus 
did not report jobs created for an architectural firm providing design 
services for a Recovery Act window replacement project. In addition, 
the Springfield Police Department reported problems obtaining agency 
codes and other data required to complete their report, and the 
Springfield Office of Housing encountered technical challenges 
submitting their report through FederalReporting.gov. 

Recovery Act Funds Help Two Selected Localities' Budgets: 

We visited the cities of Boston and Springfield (see table 3) to review 
their use of Recovery Act funds, as discussed below.[Footnote 18] 

Table 3: Characteristics of Selected Local Governments: 

Locality name: Boston; 
Population: 609,023; 
Locality type: City; 
Unemployment rate: 9.2%; 
Fiscal year 2010 operating budget: $2.39 billion; 
FTE employees: 16,500. 

Locality name: Springfield; 
Population: 150,640; 
Locality type: City; 
Unemployment rate: 12.8%; 
Fiscal year 2010 operating budget: $529 million; 
FTE employees: 5,125. 

Sources: U.S. Census Bureau, U.S. Department of Labor, and Boston and 
Springfield budget documents. 

Notes: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

City of Boston: 

Recovery Act funds have saved jobs in education and public safety. 
According to Boston city officials, Recovery Act funds for city schools 
($23.3 million in SFSF, $20.8 million in ESEA Title I, and $10.3 
million in IDEA) will be used to retain 200 FTEs. In public safety, the 
competitive COPS Hiring Recovery Program (CHRP) grant ($11.8 million 
over 3 years) will fund 50 police officer positions, and the Edward 
Byrne Memorial Justice Assistance Grant (JAG) Program ($3.9 million for 
1 year) will pay for 50 police officers. 

State aid reductions lead revenue losses in Boston. Prior to producing 
a balanced budget for fiscal year 2010, city officials noted that 
reductions in state aid were responsible for a significant portion 
($94.8 million reduction from the previous year's levels) of the city's 
$213 million budget gap during fiscal year 2010 budget development. 
Other revenue losses contributing to the difficult budget environment 
include city licenses and permits, excise taxes, and interest income 
($21.8 million reduction). On the other hand, property tax receipts, 
the city's largest source of funds, are expected to increase by $60.4 
million during fiscal year 2010. According to city finance officials, 
in general, property taxes may increase by 2.5 percent per year as long 
as total receipts fall under a specified limit. 

Preparing for end of Recovery Act funds. City finance officials said 
that although Recovery Act funds have been very helpful in closing the 
fiscal year 2010 budget gap, these funds comprised only about 1 percent 
of city revenues. To prepare for future fiscal years, city officials 
said they are containing spending growth through fiscal controls 
including layoffs, position elimination, and concessions from unions. 
In addition, for fiscal year 2010, the city plans to moderate its 
pension fund payment schedule and use reserve funds to supplement 
declining revenue. Potential cost pressures include personnel expenses 
such as wage increases related to collective bargaining agreements and 
rising employee health insurance costs. In addition, payments to 
support employee pensions are likely to continue to rise. 

City of Springfield: 

Recovery Act funds have saved jobs in education and public safety. 
According to Springfield officials, Recovery Act funds ($14.9 million 
in SFSF, $8.6 million in ESEA Title I, and $4.4 million in IDEA funds) 
will be used to help retain 451 FTEs for city schools. In public 
safety, city officials reported they did not apply for a CHRP grant, 
since it provides funding for 3 years and Recovery Act funding would 
end just as new officers became proficient. In addition, CHRP grants 
require that recipients retain their funded officer positions for at 
least an additional 12 months using state or local funds and sustaining 
these jobs was viewed as unaffordable at the time the grant was 
offered. The city, however, later applied for an Edward Byrne Memorial 
Justice Assistance Grant (competitive) to hire 10 police officers. 
These positions were believed to be affordable, since training costs 
will be minimal (newly trained officers were available because a nearby 
city had paid to train them but could not afford to hire them), and 
will eventually replace officers who retire or leave the workforce. 

Recovery Act funds cushioned reductions in state aid. State aid to 
Springfield (60 percent of the city's revenue base) has been reduced 
over fiscal years 2009 and 2010, although officials acknowledged that 
reductions likely would have been more severe had the commonwealth not 
received Recovery Act funds aimed at state budget stabilization, such 
as increased Federal Medical Assistance Percentage funds and SFSF. 
Officials noted that Recovery Act funds helped to cushion state aid 
reductions but, nevertheless, comprise a small portion of total city 
revenues. Property tax collections (31 percent of city revenues) have 
not declined due to rate adjustments that offset lower property values 
and some growth in the city's tax base. 

Preparing for end of Recovery Act funds. Given constraints in obtaining 
additional revenue, city officials reported focusing on cost-cutting 
strategies to prepare for the absence of Recovery Act funds. Strategies 
include examining procurement costs, controlling hiring (e.g., 
carefully reviewing any new hires), and re-examining business practices 
(e.g., outsourcing transportation services). Potential spending 
pressures include pay increases in new collective bargaining agreements 
for teachers, increased funding for the city's large special education 
population, and employee pension costs. 

State Comments on This Summary: 

We provided a draft of this appendix to the Governor of Massachusetts, 
the Massachusetts State Auditor's Office, the Massachusetts Office of 
the Inspector General, the Chair of the Massachusetts House Committee 
on Federal Stimulus Oversight, and the Chair of the Massachusetts 
Senate Committee on Post Audit and Oversight, and provided excerpts of 
the draft to other entities including cities and housing agencies we 
visited. The Governor's Office, in general, agreed with our draft 
report. The Governor's Office and other officials provided clarifying 
and technical comments, which we incorporated as appropriate. 

GAO Contacts: 

Stanley J. Czerwinski, (202) 512-6806 or czerwinskis@gao.gov.
Laurie E. Ekstrand, (202) 512-6806 or ekstrandl@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Carol L. Patey, Assistant
Director; Lorin M. Obler, analyst-in-charge; Nancy J. Donovan; Kathleen 
M. Drennan; Keith C. O'Brien; Salvatore F. Sorbello Jr.; and Robert D. 
Yetvin made major contributions to this report. 

[End of section] 

Footnotes: Appendix IX: Massachusetts: 

[1] As of November 1, 2009, Massachusetts reorganized its 
transportation agencies and authorities into a new Massachusetts 
Department of Transportation (MassDOT). 

[2] 0n September 22, 2009, the U.S. Department of Energy obligated all 
the funds allocated to the states, but it has limited the states' 
access to 50 percent of these funds. 

[3] 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 approves a project and a project agreement 
is executed. 

[4] MassHighway, formerly overseen by Massachusetts EOT, is now part of 
the Massachusetts Department of Transportation. 

[5] MassHighway has advertised 46 projects, but as of October 31, 2009, 
only 35 have had bid openings. 

[6] The data provided included projects that had been awarded contracts 
and projects where contracts had not yet been awarded. Our analysis 
included projects that had engineers' estimates and the contract award 
amount. Therefore, only projects that had positive values for the 
estimate and award amounts were included in our analysis. Although we 
examined the data for obvious discrepancies, the data we collected are 
self-reported by individual states. Therefore, the data may not be 
complete and we consider the reliability of these data undetermined. 
Because of this, we are only reporting ranges, percentages, and other 
description statistics. 

[7] States were required to certify that they will maintain the level 
of spending that they had planned on February 17, 2009. 

[8] The federal government subsidizes the operating and capital 
improvement costs of public housing units throughout the nation. 
Massachusetts and some other states also use some state funds to 
subsidize public housing units. The majority of the units managed by 
the Revere Housing Authority, in fact, are subsidized by state funds. 
However, the Massachusetts State Auditor has reported that the 
operating subsidies provided by the state have not been sufficient to 
maintain in good condition the state-aided units in Massachusetts. 

[9] However, according to guidance developed by the Massachusetts 
Office of the Inspector General and the Massachusetts Office of the 
Attorney General, based on discussions with HUD's Boston Field Office, 
public housing agencies may use their own state and local procurement 
laws and regulations if their use is not contrary to the purposes of 
the Recovery Act, one of which is to expedite or facilitate the use of 
Public Housing Capital Funds. 

[10] According to state officials, the rates established for 
Massachusetts counties, and provided to them in August 2009, are 
consistent with what has generally been paid for this work. 

[11] Private sector contractors are generally chosen from a 
precertified list established every 2 years. CAAs have also recruited 
new contractors to handle the increase in weatherization funding due to 
the Recovery Act and screen them by criteria such as quality of prior 
work. Depending on the needs of each home, the cost of weatherization 
varies; a standard price list for materials and weatherization 
activities is established statewide and used by each contractor. 

[12] State energy officials report having trained and certified 35 new 
energy auditors statewide with certification of others expected. 

[13] Other activities listed in the state plan include weatherization 
of state public housing and establishment of a training institute; 
however, these initiatives are planned to begin in 2010. 

[14] Actual expenditures by LEAs may be higher than the amount drawn 
down by the state. In Massachusetts, according to state officials, the 
state draws down funds according to its agreement with the U.S. 
Department of the Treasury, and it is not unusual for drawdowns to lag 
behind expenditures. 

[15] Single Audits are prepared to meet the requirements of the Single 
Audit Act, as amended, and provide a source of information on internal 
control and compliance findings and the underlying causes and risks. 
The Single Audit Act requires states, local governments, and nonprofit 
organizations expending $500,000 or more in federal awards in a year to 
obtain an audit in accordance with the requirements set forth in the 
act. A Single Audit consists of (1) an audit and opinions on the fair 
presentation of the financial statements and the Schedule of 
Expenditures of Federal Awards; (2) gaining an understanding of and 
testing internal control over financial reporting and the entity's 
compliance with laws, regulations, and contract or grant provisions 
that have a direct and material effect on certain federal programs 
(i.e., the program requirements); and (3) an audit and an opinion on 
compliance with applicable program requirements for certain federal 
programs. 

[16] Data required under section 1512 of the Recovery Act include the 
total amount of recovery funds received, and expended or obligated, a 
detailed list of all projects or activities, an estimate of the number 
of jobs created and retained by the projects and activities, and 
certain detailed information on any subcontracts or subgrants awarded 
by the recipient. 

[17] Because the fiscal year 2009 Recovery Act SFSF grants were 
primarily recorded as general revenues for each school district, EOE 
officials were unable to distinguish funds used to retain specific 
employees. Instead, EOE asked school districts to provide a line-byline 
accounting of their non-salary expenditures during that time period. 
They then divided the remainder by each school district's average 
teacher salary to derive an estimated number of jobs retained. 

[18] City Recovery Act funds referred to in this section cover funds 
which are administered by city government and not the full scope of 
Recovery Act funds that benefit city residents such as unemployment 
insurance and Medicaid. This section features sources of Recovery Act 
funds which substitute for declines in city operating revenues. Other 
city-administered Recovery Act funds provide expanded services and 
include funds for community development, homelessness, and energy 
efficiency. 

[End of Appendix IX: Massachusetts] 

Appendix X: Michigan: 

Overview: 

This appendix summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Michigan. The full report covering all of GAO's work 
in 16 states and the District of Columbia may be found at [hyperlink, 
http://www.gao.govirecovery]. 

What We Did: 

We reviewed three program areas funded under the Recovery Act: Highway 
Infrastructure Investment, the Weatherization Assistance Program, and 
Education. We selected these program areas because they had a number of 
risk factors, including the receipt of significant amounts of Recovery 
Act funds or a substantial increase in funding from previous years' 
levels. These programs also provided an opportunity for us to consider 
the design of internal controls over program activities. Our work 
focused on the status of the program areas' funding, how funds are 
being used, safeguards and controls, and issues specific to each 
program. Our review of the Highway Infrastructure Investment program 
included a site visit to the largest Recovery Act-funded highway 
project in the state. As part of our review of the Weatherization 
Assistance Program, we visited two local agencies that had begun 
weatherization work—one in Jackson and another in Pontiac. 
Additionally, for Education, we surveyed a nationally representative 
sample of local educational agencies (LEA) to obtain information about 
their use of Recovery Act funds for three education programs. For 
descriptions and requirements of the programs we covered, see appendix 
XVIII of GAO-10-232SP. 

To gain an understanding of the state's experience in meeting Recovery 
Act reporting requirements, we discussed the reporting process with 
officials at Michigan's Economic Recovery Office (ERO), Michigan's 
Department of Transportation (MDOT), the state's Department of Human 
Services (DHS), two transportation vendors, and two local agencies that 
conduct weatherization work. 

We also monitored the state's fiscal situation and visited three 
Michigan localities to assess the economic challenges they faced and 
the Recovery Act's impact on these communities. We met with state 
budget officials and visited the cities of Flint and Royal Oak, as well 
as Allegan County, where we met with city and county officials. We 
selected these communities because they represented rural, urban, and 
suburban areas with a variety of unemployment rates and population 
sizes. 

What We Found: 

* Highway Infrastructure Investment Funds. The U.S. Department of 
Transportation's Federal Highway Administration (FHWA) apportioned $847 
million in Recovery Act funds to Michigan. As of October 31, 2009, the 
federal government had obligated $707 million to Michigan—most of which 
was for highway pavement improvement projects—and reimbursed $142 
million. Michigan has adapted its existing internal controls to oversee 
and monitor Recovery Act-funded projects. State officials told us 
contracts generally have been awarded for less than the original 
official estimates, and that excess funds are being used to fund 
additional projects. 

* Weatherization Assistance Program. The U.S. Department of Energy 
(DOE) obligated $243.4 million to Michigan for weatherization 
activities under the Recovery Act but it has limited the state's access 
to 50 percent of these funds. As of September 30, 2009, DHS had 
obligated $198.7 million to 32 local agencies with the goal of 
weatherizing approximately 33,000 units by March 31, 2012. DHS 
officials told us program expenditures and reimbursements to local 
agencies totaled $5.3 million through September 30, 2009. Michigan 
officials told us they use existing internal controls to oversee and 
monitor the weatherization program and have increased the number of 
monitors and other oversight staff to address the increased volume for 
this program. Officials from the two local agencies we visited told us 
they are also using existing safeguards and plan to increase the scope 
of their oversight activities for weatherization projects. DHS 
officials told us Michigan's Recovery Act-funded weatherization work 
was delayed until the prevailing wage rates required under the Davis-
Bacon Act[Footnote 1] were established by the U.S. Department of Labor 
for weatherization work. According to state officials, as of October 
29, 2009, 9 of Michigan's 32 local agencies had begun conducting 
weatherization work, and they estimated that 287 units had been 
weatherized as of October 31, 2009. 

* Education. The U.S. Department of Education (Education) allocated 
$1.592 billion in State Fiscal Stabilization Fund (SFSF) monies to 
Michigan, of which $1.302 billion are education stabilization funds and 
$290 billion are government services funds. In addition, Michigan was 
allocated $390 million for Title I, Part A of the Elementary and 
Secondary Education Act of 1965 (ESEA), as amended, and $414 million 
for Parts B and C of the Individuals with Disabilities Education Act 
(IDEA), as amended. An estimated 87 percent of Michigan's 97 LEAs that 
responded to the survey reported that they planned to use more than 
half of their SFSF allocation to retain staff; however, an estimated 45 
percent of Michigan LEAs told us they anticipated job losses even with 
the SFSF allocation. 

* Recipient reporting. State officials told us that the state met the 
October 10, 2009, deadline for reporting information to the federal 
government on the use of Recovery Act funds and on jobs created and 
retained through September 30, 2009. State officials and vendors said 
they experienced some challenges in preparing and submitting Recovery 
Act reports but did not identify any significant problems. State 
officials told us they used a centralized reporting process wherein 
each state agency receiving Recovery Act funds is required to report 
quarterly to the ERO on a number of measures—including the use of funds 
and estimates of the number of jobs created and retained—and in turn 
the ERO submits this information to the federal government. 

* State and local government's fiscal condition and use of Recovery Act 
funds. Michigan continues to experience rising unemployment and 
declining tax revenues, and its fiscal year 2010 budget addresses 
projected shortfalls with a mix of spending cuts and Recovery Act 
funds. State officials expressed grave concern about the state's long-
term budget outlook, when the shortfalls are expected to continue and 
little or no Recovery Act funds will be available. According to local 
government officials, Recovery Act funds awarded through the Community 
Oriented Policing Services (COPS) Hiring Recovery Program and the 
Energy Efficiency Conservation Block Grant (EECBG) will be used to 
restore police officer positions and to increase the efficiency of city 
buildings. Local officials told us Recovery Act-funded programs are 
having minimal or no effect on local budgets. Local officials also told 
us they have experienced some challenges, such as identifying federal 
grant programs appropriate for their localities. 

Michigan Is Using Recovery Act Funds for Many Highway Projects: 

As we reported in September 2009, FHWA apportioned $847 million to 
Michigan in March 2009 for highway infrastructure and other eligible 
projects. As of October 31, 2009, Michigan had obligated $707 million--
83 percent of the funds[Footnote 2]-—and $142 million had been 
reimbursed by the federal government.[Footnote 3] 

The Majority of Funds Obligated in Michigan Are for Highway Pavement 
Projects: 

As of October 31, 2009, about $430 million of the $707 million of 
Recovery Act highway funds obligated-61 percent—were used for pavement 
improvement projects such as resurfacing and rehabilitating roads. As 
we reported in September 2009, MDOT selected mostly pavement projects 
because the primary focus of Michigan's capital improvement plan for 
highways has been maintaining existing roads and bridges, and improving 
pavement conditions. An additional 19 percent of Michigan's obligated 
Recovery Act highway funds were for pavement widening, including the 
largest Recovery Act-funded project in the state. 

As of October 31, 2009, Michigan had awarded 222 contracts for highway 
projects, work had begun on 172 contracts, and 15 contracts had been 
completed. MDOT officials told us contracts for Recovery Act projects 
have been awarded for less than the amounts officially estimated when 
the funds were obligated, due in part to increased competition among 
contractors. The officials said that they qualified about 130 new 
contractors for MDOT work from January to October 2009—and attributed 
this increased interest to decreased work in the private sector. MDOT 
officials also told us that as of October 19, 2009, they had identified 
an estimated $106 million of excess funds from the lower bids. They 
said they requested that FHWA deobligate these funds in order to fund 
additional projects and, as of October 19, 2009, FHWA had obligated 
funds for 19 additional highway projects totaling $33 million. 

Michigan Uses Its Existing Contracting Procedures and Internal Controls 
to Award and Oversee Recovery Act Contracts: 

MDOT is using its existing procedures and internal controls to award 
and oversee highway contracts using Recovery Act funds. We reviewed two 
contracts for locally administered pavement improvement projects. 
According to MDOT officials, these two contracts were awarded 
competitively to prequalified contractors using its existing 
contracting procedures that, among other things, require contractors to 
be prequalified by MDOT before bidding on any contracts. MDOT also 
checks to determine that the contractors have not been suspended or 
debarred.[Footnote 4] Consistent with internal controls in place prior 
to receiving Recovery Act funds, MDOT assigned contract oversight 
personnel to these projects. In addition, MDOT officials told us they 
adapted their existing procedures to monitor these contracts once the 
projects had begun. 

The first contract we reviewed—a fixed-price $55.7 million pavement-
widening project on M-59 in an economically distressed area near 
Detroit—is the largest Recovery Act-funded highway project in Michigan. 
MDOT awarded this contract in July 2009 and officials told us the work 
began in August 2009 and is scheduled to be completed by September 
2012. An MDOT official told us that, as of November 3, 2009, this 
project was about 20 percent complete and most of the work will be 
completed by December 2010. Figure 1 shows the work that was underway 
on M-59 at the time of our visit. The second contract we reviewed was a 
fixed-price $621,392 pavement improvement project on 1-94 in an 
economically distressed area outside Ann Arbor. MDOT awarded this 
contract in August 2009 and, according to the officials, it was 
completed November 2, 2009. 

Figure 1: Recovery Act-Funded Pavement-Widening Project on M-59 near 
Detroit: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

MDOT officials told us their oversight procedures for monitoring these 
projects include steps for monitoring contractor performance, safety, 
and quality. Further, MDOT monitors the projects over time for 
adherence to the contract schedule and the original contract budget. 
Additionally, officials told us they hold biweekly meetings with 
contractors to discuss construction progress and all issues involving 
quality. 

Weatherization Work Has Begun, but Few Projects Have Been Completed: 

The Recovery Act appropriated $5 billion for the Weatherization 
Assistance Program, which DOE is distributing to each of the states, 
the District of Columbia, and seven territories and Indian tribes, to 
be spent over a 3-year period. This program enables low income families 
to reduce their utility bills by making long-term energy efficiency 
improvements to their homes by, for example, installing insulation or 
modernizing heating or air conditioning equipment. 

DOE obligated $243.4 million in Recovery Act funds to Michigan for its 
Weatherization Assistance Program, but it has limited the state's 
access to 50 percent of these funds until 30 percent of the housing 
units in the state's plan have been weatherized, at which time it plans 
to make the remaining funds available. As of September 30, 2009, DHS, 
the state agency responsible for administering the state's 
Weatherization Assistance Program, had obligated $198.7 million to its 
network of 32 local agencies. The majority of agencies (27) use 
contractors to perform the work, while a handful use their own staff or 
a combination of their staff and contractor personnel. DHS officials 
told us that, as of October 29, 2009, 9 of its 32 agencies had begun 
conducting weatherization work. DHS officials told us program 
expenditures and reimbursements to local agencies totaled $5.3 million 
through September 30, 2009. DHS estimated that its local agencies had 
weatherized 287 units as of October 31, 2009. 

Michigan's Weatherization Work Was Delayed Until Prevailing Wage Rates 
Were Established Under the Davis-Bacon Act: 

DHS officials told us Michigan's Recovery Act-funded weatherization 
work was delayed due to a requirement to establish prevailing wage 
rates for this work under the Davis-Bacon Act. In prior years, the 
Weatherization Assistance Program funded through annual appropriations 
was not subject to the requirements of the Davis-Bacon Act, but the 
Recovery Act required it to be applied to all programs. State and local 
officials stated that local agencies did not solicit contractors for 
weatherization work under the Recovery Act until they received these 
wage rates, which were established by the U.S. Department of Labor on 
August 14, 2009. 

Officials at DHS and the two local agencies we visited told us 
preparatory actions taken by Michigan's agencies positioned them to 
quickly begin weatherization work once the wage rates were established. 
These actions included determining the eligibility of applicants, 
conducting pre-inspections of homes, and hiring new staff.[Footnote 5] 
DHS officials also told us that, despite the delayed start of the 
weatherization work, they expect to meet their statewide goal of 
weatherizing 33,410 units by March 31, 2012. 

Concerns about Compliance with the National Historic Preservation Act 
Have Been Resolved: 

In August 2009, DOE notified DHS officials that a review under the 
National Historic Preservation Act[Footnote 6] was required of 
properties that would be weatherized under the Recovery Act-funded 
Weatherization Assistance Program. DHS officials initially told us that 
an estimated 90 percent of the homes to be weatherized would need such 
a review, which could cause a significant delay in the state's 
weatherization work. 

DHS and the State Historic Preservation Office executed an interagency 
agreement on November 18, 2009, that details the process for conducting 
these reviews, including the conditions under which such reviews are 
required and, to the extent permissible under applicable laws and 
regulations, allowing the process to be expedited. With this agreement 
in place, state officials said they are confident that the historic 
preservation requirements can be met without causing further delays. 

Some Weatherization Work Has Been Completed: 

We visited two agencies and four homes where weatherization work was 
either in progress or had been completed. At one agency, 17 units had 
been weatherized and work at 67 units was in progress. At the other 
agency, work was in progress on 35 units, and no units had been 
completed. Table 1 summarizes the weatherization work at the two 
agencies we visited. 

Table 1: Weatherization Activities at Two Michigan Agencies: 

Recovery Act allocation: 
Agency:	Community Action Agency of Jackson, Lenawee, Hillsdale; 
$5,767,356; 
Agency:	Oakland Livingston Human Services Agency: $11,688,604. 

Amount received: 
Agency:	Community Action Agency of Jackson, Lenawee, Hillsdale; 
$1,041,318[A]; 
Agency:	Oakland Livingston Human Services Agency: $1,267,813[B]. 

Units to be weatherized:	
Agency:	Community Action Agency of Jackson, Lenawee, Hillsdale:	824; 
Agency:	Oakland Livingston Human Services Agency: 1,681. 

Approved applications: 
Agency:	Community Action Agency of Jackson, Lenawee, Hillsdale:	472[A];	
Agency:	Oakland Livingston Human Services Agency: 632[C]. 

Units completed: 
Agency:	Community Action Agency of Jackson, Lenawee, Hillsdale:	17[A]; 
Agency:	Oakland Livingston Human Services Agency: 0[C]. 

Source: DHS; Community Action Agency of Jackson, Lenawee, Hillsdale; 
and Oaldand Livingston Human Services Agency. 

[A] As of October 15, 2009. 

[B] As of September 30, 2009. 

[C] As of October 21, 2009. 

[End of table] 

Figures 2 and 3 show weatherization work in progress at the Community 
Action Agency of Jackson, Lenawee, and Hillsdale and at the Oakland 
Livingston Human Services Agency, respectively. 

Figure 2: Contractors Installing Side Wall Insulation in Jackson, 
Michigan Under the Recovery Act-Funded Weatherization Assistance 
Program: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Figure 3: Contractor Installing Foundation Insulation in Hazel Park, 
Michigan Under the Recovery Act-Funded Weatherization Assistance 
Program: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

DHS and Local Agencies Are Implementing Monitoring Procedures for 
Oversight of Recovery Act Funds: 

DHS officials told us they have monitored local weatherization 
agencies' use of Weatherization Assistance Program funds since 2005, 
including reviewing their fiscal procedures and internal controls. In 
addition, an independent public accountant conducts an annual financial 
audit of each agency. 

To assist in monitoring the use of Recovery Act funds, DHS officials 
told us they planned to add 22 additional staff. In October 2009, they 
said they had hired 15 staff, including 11 weatherization technical 
monitors, 2 fiscal monitors, and 2 weatherization technical 
supervisors. They also said they planned to hire a reports analyst, a 
contract administrator, a program monitor, an additional fiscal 
monitor, a Davis-Bacon Act analyst, and two historical preservation 
review analysts. The technical staff will monitor 5 to 10 percent of 
all weatherization projects. In addition, the DHS Office of Inspector 
General hired two staff to conduct weatherization audits. 

DHS officials told us they had developed a monitoring plan for the 32 
local agencies, which includes desk reviews by state agency staff to 
cover such things as the contractor selection process, compliance with 
Davis-Bacon Act requirements, and Recovery Act reporting. The plan also 
includes visits to work sites by DHS weatherization technical monitors. 
Agency officials at the two locations we visited told us their internal 
controls include using separate accounting codes to track Recovery Act 
funds and contracting for annual independent external audits. In 
addition, officials at one agency told us that they recently hired a 
business operations coordinator and contracted with a Davis-Bacon Act 
compliance specialist. Officials from both agencies described measures 
they plan to use to ensure that quality goods and services are provided 
with Recovery Act funds, including conducting pre- and post-inspections 
of projects, customer surveys, contractor evaluations, and requiring 
satisfactory post-inspections to be completed prior to paying 
contractor invoices. 

Local Agencies Are Using Existing Procedures to Select and Monitor 
Recovery Act Contractors: 

Officials at the two agencies we visited told us they had pre-
established procedures for selecting and monitoring contractors. 
According to these officials, the criteria used to select contractors 
included consideration of prior weatherization experience. We reviewed 
two weatherization contracts at each of the two agencies. In each case, 
agency officials told us they used their existing contracting 
procedures but added specific language to the contracts related to 
Recovery Act and Davis-Bacon Act requirements. Officials also told us 
that the contracts were awarded competitively and included detailed 
price schedules covering labor and material for each weatherization 
task, such as installing insulation and weather-stripping. 

Most LEAs Plan to Use Recovery Act Funds to Retain Jobs: 

Education allocated $1.592 billion in SFSF funds to Michigan—of which 
$1.302 billion was education stabilization funds and $290 million was 
government services funds. In addition, Education allocated $390 
million for ESEA Title I, as amended; and $414 million for IDEA, as 
amended. As previously reported, Michigan Department of Education 
officials told us that: 

* LEAs plan to use most of the SFSF funds allocated thus far for 
teacher salaries; 

* State officials have encouraged LEAs to use their ESEA Title I 
Recovery Act funds for programs such as professional development for 
teachers and professional staff and for supplemental reading programs; 

* LEAs intend to use the IDEA Part B grants to, among other things, 
retain special education teachers, acquire new technologies, enhance 
professional development for teachers, and provide additional bus 
transportation services to students with disabilities; and; 

* LEAs intend to use the IDEA Part C grants for early intervention 
services. 

Table 2 shows the amounts of Recovery Act funding for these three 
education programs available to Michigan as of November 6, 2009. 

Table 2: Education-Related Recovery Act Funds Awarded to Michigan as of 
November 6, 2009: 

SFSF: 
Total grants awarded: $872.6 million; 
Grants drawn down: $615.8 million; 
Percentage of grant funds drawn down: 71. 

ESEA Title I: 
Total grants awarded: $389.9 million; 
Grants drawn down: $4.7 million; 
Percentage of grant funds drawn down: 1. 

IDEA[A]: 
Total grants awarded: $414.0 million; 
Grants drawn down: $9.6 million; 
Percentage of grant funds drawn down: 2. 

Source: Education. 

[A] Includes both Part B and Part C funds. 

[End of table] 

We surveyed a representative sample of LEAs—generally school districts—
nationally and in Michigan about their planned uses of Recovery Act 
funds.[Footnote 7] Table 3 shows Michigan and national GAO survey 
results on the estimated percentages of LEAs that (1) plan to use more 
than 50 percent of their Recovery Act funds from the three Education 
programs to retain staff, (2) anticipate job losses even with SFSF 
funds, and (3) reported a total funding decrease of 5 percent or more 
since last school year. 

Table 3: Selected Results from GAO Survey of LEAs: 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: IDEA funds; 
Estimated percentages of LEAs, Michigan: 37%; 
Estimated percentages of LEAs, Nation: 19%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: ESEA Title I funds; 
Estimated percentages of LEAs, Michigan: 23%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff: SFSF funds; 
Estimated percentages of LEAs, Michigan: 87%; 
Estimated percentages of LEAs, Nation: 63%. 

Responses from GAO survey: Anticipate job losses in school year 2009-
2010, even with SFSF funds; 
Estimated percentages of LEAs, Michigan: 45%; 
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more	since school year 2008-2009; 
Estimated percentages of LEAs, Michigan: 13%; 	
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO survey of LEAs. 

Note: Percentage estimates for Michigan have margins of error, at the 
95 percent confidence level, of plus or minus 11 percentage points or 
less. The nationwide percentage estimates have a margin of error of 
plus or minus 5 percentage points. 

[End of table] 

State and Local Governments Experienced Some Challenges, but Were Able 
to Meet the Recovery Act Reporting Requirements: 

The Recovery Act requires each recipient of Recovery Act funds to 
report information quarterly to the federal government on each award, 
including: (1) the total amount of Recovery Act funds received, (2) the 
amount of funds expended or obligated, and (3) the estimated number of 
jobs created and retained.[Footnote 8] The first reporting deadline was 
October 10, 2009 for all activity through September 30, 2009, with 
quarterly reports due 10 days after the end of each subsequent quarter. 

According to state officials, all state agencies that are required to 
report on Recovery Act funds used a centralized reporting process to 
submit reports to the ERO, which then submitted this information to the 
federal government. ERO officials told us a key internal control 
procedure was the requirement that state agency officials review the 
information in agency reports and attest to its accuracy and 
completeness. In addition, the ERO reviewed the reported information 
for reasonableness and, as necessary, coordinated with state agency 
officials on any issues identified during these reviews, such as 
incomplete data. ERO officials said Michigan met the October 10, 2009, 
deadline, and that they plan to use the same centralized reporting 
process for the reports due in January 2010.
	
We discussed the reporting process with officials at two state agencies-
MDOT and DHS—as well as staff at two MDOT vendors and officials at two 
local agencies that conduct weatherization work. They described some 
challenges in obtaining the necessary information and in preparing and 
submitting Recovery Act information to the state, but they did not 
identify significant problems. For example, one vendor told us that 
because the end of September fell in the middle of a pay period, 
complete payroll information through September 30, 2009, was not 
provided to the state agency by the deadline on October 2, 2009. We 
discussed this issue with an MDOT official who told us they instructed 
vendors whose last pay period extended into October to submit the last 
pay period information in their next report.[Footnote 9] Therefore, the 
full information for the split pay period would be included in the 
January 2010 report covering payrolls for the period from October 1, 
2009, to December 31, 2009. 

Non-state entities such as local governments, universities, and 
community colleges that received Recovery Act funds directly from 
federal agencies submitted their reports to the federal government 
rather than through the state's centralized system. Non-state entities 
that received Recovery Act funds through a state agency submitted their 
reports to the cognizant state agency. For example, localities 
receiving transportation funds submitted reports to MDOT, and 
localities receiving Recovery Act funds directly from federal agencies 
reported to FederalReporting.gov. Officials at local governments we 
visited told us they did not encounter any significant problems in 
meeting the reporting deadline of October 10, 2009. 

ERO officials told us between 1,000 and 1,100 non-state entities in 
Michigan received Recovery Act funds directly from the federal 
government. They said the state does not have responsibility for 
oversight of these Recovery Act funds, and is not notified when these 
entities submit reports. The ERO officials also said that, although 
there is a public perception that the state is ultimately responsible 
for tracking all Recovery Act funds provided to Michigan, the state 
does not have access to the reports that non-state entities submit 
prior to their release to the general public. Therefore, although 
Michigan accesses available information and monitors this funding, they 
cannot track the funds in the same way they can track federal funds 
provided directly to the state. 

Recovery Act Funds Provide Assistance to the State and Localities, but 
Governments Continue to Face Significant Economic Challenges: 

The state enacted its fiscal year 2010 budget on October 30, 2009, and 
addressed its projected $2.7 billion deficit through both spending cuts 
and the use of Recovery Act funds to free up other state revenues. 
[Footnote 10] Since our July report, Michigan has continued to 
experience rising unemployment and declining tax revenues. In September 
2009, Michigan's unemployment rate was 15.3 percent, compared to 8.9 
percent a year ago. State officials reported that, in recent months, 
the state's tax revenues have continued to fall short of previously 
reduced projections. 

According to state officials, in comparison to the fiscal year 2009 
budget, the state's spending cuts for fiscal year 2010 include an 8 
percent cut in provider reimbursement rates for Medicaid services, 10 
percent cuts to state agencies' budgets, an 11 percent cut in state 
revenue sharing funds provided to local governments, and an estimated 
$292-per-pupil funding cut from the State School Aid Fund.[Footnote 11] 
State officials projected that these cuts, as well as the $1.423 
billion in Recovery Act funding, should allow the state to complete 
fiscal year 2010 with a balanced budget. However, they expressed 
serious concerns about the state's long term budget outlook, when 
little or no Recovery Act funds will be available. Michigan is 
projecting a $1.1 billion shortfall in fiscal year 2011—even after 
including over $200 million in Recovery Act funds—and a projected 
shortfall of over $1.5 billion in fiscal year 2012. 

Michigan's local governments are also facing the pressure of balancing 
budgets with declining revenues, and have voiced concerns to the 
federal government that the Recovery Act does not directly alleviate 
local fiscal pressures. We visited three localities to better 
understand these pressures and the Recovery Act's impact in these 
communities. Table 4 provides recent population and unemployment data 
for these localities. 

Table 4: Population and Unemployment Data for Local Governments 
Visited: 

Locality: Flint; 
Population: 112,900; 
Type: City; 
Unemployment rate: 26.3%. 

Locality: Royal Oak; 
Population: 57,110; 
Type: City; 
Unemployment rate: 9.9%. 

Locality: Allegan County; 
Population: 112,975; 
Type: County; 
Unemployment rate: 13.2%. 

Source: U.S. Census Bureau and U.S. Department of Labor. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

City of Flint: 

City officials told us Flint was awarded $4.5 million in Recovery Act-
funded grants; however, as of October 15, 2009, none of these funds had 
been received. For example, Flint applied for funds through the COPS 
Hiring Recovery Program to restore 40 of the 100 police officers it had 
laid off, and was awarded funding to restore 8 positions. While these 
additional officers may help increase Flint's public safety, officials 
told us the city will incur additional costs because the grant requires 
the city to retain the positions for at least 12 months beyond the 
grant-funded period using state and/or local funds. Also, because the 
grant provides salaries at the entry level, the city must make up the 
difference between the amount of the grant and the amount the city pays 
rehired officers. City officials told us the Recovery Act has not 
significantly impacted Flint's budget. They said they are experiencing 
continuing declines in collected tax revenues, and estimated that state 
revenue sharing funds—the city's largest single source of revenue—will 
decrease by $2.7 million in fiscal year 2010.[Footnote 12] 

City of Royal Oak: 

City officials told us Royal Oak was awarded over $1.4 million in 
Recovery Act funds and, although none of these Recovery Act grants will 
provide direct assistance in stabilizing the city's budget, they plan 
to use some of these funds on projects that will achieve long-term cost 
savings. For example, funds from EECBG will be used to improve the 
efficiency of city buildings and reduce the city's energy expenses. 
City officials also said they had some difficulty obtaining information 
about competitive grants and determining whether grants were 
appropriate for the needs of the city due to the length and complexity 
of the grant applications. However, they said administering and 
reporting on Recovery Act grants did not present significant challenges 
for Royal Oak. City officials told us that, overall, the Recovery Act 
is not expected to have a significant impact on Royal Oak's budget. The 
officials expressed concerns about declining property tax revenues and 
cuts to state revenue sharing but said they believed the city is 
fiscally well-positioned due, in part, to its elimination of about 25 
percent of city employees over the last 5 years through attrition and 
retirement. 

Allegan County: 

Although county officials stated that the county has not directly 
received any Recovery Act funds, its Transportation Department was 
allocated a $1.6 million Recovery Act grant through MDOT to construct a 
new facility and the County Road Commission was allocated over $1.4 
million of Recovery Act funds through MDOT to resurface county roads. 
The officials also told us the requirements and goals of many Recovery 
Act programs do not fit the needs of a rural county such as Allegan. 
For example, applicants for a grant from the U.S. Department of 
Transportation's Transit Investments for Greenhouse Gas and Energy 
Reduction program must apply for at least $2 million, an amount that 
will make it difficult for Allegan County to put together a competitive 
application. In addition, they told us they were disappointed they have 
not received Recovery Act assistance to meet what they have identified 
as the county's most critical needs, including law enforcement and 
improved court facilities. The officials also told us they expect the 
Recovery Act to improve some county facilities and roads but not to 
significantly affect the county's budget in the long term. They said 
that, due to zero growth in property tax revenues and a decrease in 
revenues from sources such as court fees, property transaction fees, 
and state revenue sharing funds, the county is projecting a $2 million 
budget shortfall for fiscal year 2010. 

State Comments on This Summary: 

We provided the Governor of Michigan with a draft of this appendix on 
November 18, 2009, and staff in the Governor's office and the ERO 
reviewed the draft and responded on November 19, 2009. We also provided 
relevant excerpts to officials from the localities we visited. 
Officials agreed with our draft and provided clarifying or technical 
suggestions that were incorporated, as appropriate. 

GAO Contacts: 

Susan Ragland, (202) 512-8486 or raglands@gao.gov. 
Revae Moran, (202) 512-3863 or moranr@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Robert Owens, Assistant
Director; Ranya Elias, analyst-in-charge; Manuel Buentello; Kevin 
Finnerty; Patrick Frey; Henry Malone; Giao N. Nguyen; and Amy Sweet 
made major contributions to this report. 

[End of section] 

Footnotes: Appendix X: Michigan: 

[1] 40 U.S.C. §§ 3141-3148. 

[2] 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. 

[3] States request reimbursement from FHWA on an ongoing basis as the 
state makes payments to contractors working on approved projects. 

[4] According to state officials, MDOT can debar a contractor if (1) 
the contractor has been debarred by the federal government and is on 
the debarment list posted on a federal Web site maintained by the 
General Services Administration [hyperlink, https://www.epls.gov] that 
lists contractors excluded from receiving federal contracts and certain 
subcontracts, or (2) the contractor has serious performance issues, 
such as felony convictions, work performance and safety issues, or 
contract violations. 

[5] Other actions included conducting energy audits, purchasing 
materials and equipment, establishing new accounts for Recovery Act 
funds, and providing training to inspectors and other staff. 

[6] Pub. L. No. 89-665, 80 Stat. 915 (Jan. 10, 1966) (codified as 
amended at 16 U.S.C. §§ 470 et seq.). 

[7] 0f the 134 LEAs surveyed in Michigan, 97 responded. 

[8] Recovery Act, div. A, title XV, § 1512(c). 

[9] MDOT officials also told us vendors could choose to split the 
information for the last pay period of the year ended September 30, 
2009, and report payroll information for September 2009 in their 
reports for that year and include payroll information for October 2009 
in the report for the next quarter. 

[10] The projected shortfall, per the state's May 2009 Consensus 
Revenue Estimate, is for both the state's General Fund and School Aid 
Fund. 

[11] State officials explained that, of the $292 per-pupil budget cut, 
$165 is a result of the state's approved fiscal year 2010 budget. After 
the budget was approved, Michigan's Treasurer estimated additional 
shortfalls in school aid tax revenue of $212 million, or $127 per 
pupil. On November 19, 2009, officials told us that, under state law, 
this shortfall required an additional reduction in state aid payments 
of $127 per pupil. 

[12] Additionally, Flint is in the first year of a state-approved plan 
to eliminate a $10 million deficit. Under this plan, the city must 
adopt budgets that provide sufficient revenue to eliminate this deficit 
within 5 years. 

[End of Appendix X: Michigan] 

Appendix XI: Mississippi: 

Overview: 

This appendix summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in Mississippi.[Footnote 1] The full report covering all 
of GAO's work in 16 states and the District of Columbia may be found at 
[hyperlink, http://www.gao.gov/recovery]. 

What We Did: 

We reviewed two programs funded under the Recovery Act—the Highway 
Infrastructure Investment Program and Public Housing. We selected these 
programs to follow up on projects we reported on in our earlier 
reports. Our work focused on the status of program funding, the 
programs' use of funds, and other issues. As part of our review of 
public housing, we revisited two housing agencies, one in Picayune and 
another in Gulfport. For descriptions and requirements of the programs 
covered in our review, see appendix XVIII of GAO-10-232SP. 
	
To gain an understanding of the state's experience in meeting Recovery 
Act reporting requirements, we examined documents prepared by, and held 
discussions with, the Mississippi Department of Transportation (MDOT). 
As a prime recipient[Footnote 2] of Recovery Act funds, MDOT is 
required to report quarterly on a number of measures, including the use 
of funds and estimates of the number of jobs created and retained. The 
first quarterly reports were due in October 2009. We focused our work 
on MDOT's methodology for collecting data, particularly job creation 
and retention data, and on MDOT's experience in preparing the October 
report.	 

Our work in Mississippi also included meeting with officials of three 
Mississippi cities to determine the amount of Recovery Act funds each 
has received, or will receive, directly from federal agencies and to 
learn how those funds are being used. We chose to visit the cities of 
Jackson, Meridian, and Vicksburg. We selected Jackson because its 
unemployment rate was below the state's average, and it is one of the 
larger cities in Mississippi. We selected Meridian and Vicksburg 
because both are smaller cities with unemployment rates higher than the 
state's average. 

What We Found: 

* Highway Infrastructure Investment. As of October 31, 2009, the U.S. 
Department of Transportation's (DOT) Federal Highway Administration 
(FHWA) has obligated $301 million and reimbursed to Mississippi $69 
million of the $355 million of Recovery Act funds apportioned to the 
state. The state is using most of the obligated funds for interstate 
and state road projects that MDOT plans and administers and secondary 
road and bridge projects that the Mississippi Office of State-Aid Road 
Construction oversees. In commenting on MDOT's selection of state-wide 
Recovery Act projects, MDOT's Executive Director said that the Recovery 
Act's requirement that priority be given to projects projected for 
completion within 3 years limited Mississippi's ability to fund 
projects that would have produced lasting economic impacts. Finally, we 
found that FHWA has obligated little of the estimated $45 million that 
MDOT has set aside for projects planned by local public agencies 
(counties and cities), largely because these entities have been slow to 
plan Recovery Act projects. However, the State Local Public Agency 
(LPA) Engineer believes that the counties and cities will have these 
projects ready for obligation before March 2, 2010, the date on which 
unobligated program funds are subject to withdrawal and redistribution 
in accordance with the Recovery Act. 

* Public Housing Capital Fund. Mississippi has 52 public housing 
agencies that have received about $32.4 million from the Public Housing 
Capital fund. The Picayune Housing Authority used Recovery Act funding 
for two projects, one completed in August 2009 that renovated 22 units 
and another that began September 24, 2009, which will renovate 92 
units. The Mississippi Regional Housing Authority-VIII (MRHA-8) in 
Gulfport planned to use funds for 5 projects. MRHA-8 has one project 
under way, has awarded contracts for two others, and expects to award a 
contract for a fourth project in December. The housing agency dropped 
one of its five planned projects when it found that a lengthy 
environmental assessment was required before the project could move 
forward. In addition, bids for other projects are coming in at less 
cost than estimated. MRHA-8 is planning to undertake additional 
projects with remaining Recovery Act funds. 

* Recipient reporting. MDOT uses FHWA's Recovery Act Data System (RADS) 
to collect data required for its quarterly report. This includes 
information such as project descriptions, project completion status, 
and project cost. MDOT also requires suballocants, subrecipients, and 
vendors to submit monthly payroll reports, which RADS uses to compute 
the number of jobs created and retained. However, we found that some 
work carried out in support of Recovery Act projects is not reported. 
Additionally, MDOT, its suballocants, and its vendors are not
taking steps to verify the accuracy of payroll reports that are the 
basis for RADS' computation of jobs created and retained. 

* Cities' use of Recovery Act funds. Jackson, Meridian, and Vicksburg 
have all received or will be receiving Recovery Act funds directly from 
one or more federal agencies. Jackson has received or will be receiving 
a total of $6.83 million; Meridian, $1.02 million; and Vicksburg, 
$773,000. The cities' plans for the funds include constructing and 
repairing facilities, purchasing police vehicles, acquiring other 
public safety equipment, and providing training that will enable low-
income, older individuals to re-enter the workforce. 

Mississippi Focuses on the Obligation of Local Recovery Act Highway 
Projects: 

Two Mississippi agencies—MDOT and the Office of State Aid Road 
Construction (OSARC)—administer Recovery Act funding for transportation 
projects. MDOT is responsible for operating and maintaining 
Mississippi's interstate and state road projects, as well as overseeing 
all road construction projects that fall under the jurisdiction of any 
of the state's local public agencies (LPA).[Footnote 3] OSARC assists 
Mississippi's 82 counties in the construction and maintenance of 
bridges and secondary, nonstate roads. As explained by state officials, 
these agencies differ in that the Governor appoints the State Aid 
Engineer, while an elected commission, independent of the Governor, 
controls MDOT. In addition, because the U.S. Department of 
Transportation recognizes only one state agency, all federal funds flow 
through MDOT. 

MDOT and OSARC Continue to Award Contracts for Less Than Estimated: 

FHWA apportioned $355 million in Recovery Act funds to Mississippi in 
March 2009 for highway infrastructure and other eligible projects. 
Table 1 shows the dollar amounts both MDOT and OSARC are responsible 
for administering, as well as the amount FHWA had obligated as of 
October 31, 2009, for projects for which each agency is responsible. 
The total number of MDOT and OSARC projects with contracts awarded, 
completed, or underway is also included. 
	
Table 1: Status of MDOT and OSARC Recovery Act Projects as of October 
31: 
			
Status of Recovery Act projects: Apportioned; 
MDOT: $342.1 million; 
OSARC: $12.5 million; 
Total: $354.6 million. 

Status of Recovery Act projects: Obligated; 
MDOT: $289.6 million; 
OSARC: $11.4 million; 
Total: $301.0 million (85%). 

Status of Recovery Act projects: Reimbursed; 
MDOT: [Empty]; 
OSARC: [Empty]; 
Total: $69.0 million (23%). 

Total projects: Contracts awarded; 
MDOT: 57; 
OSARC: 13; 
Total: 70. 

Total projects: Construction started; 
MDOT: 45; 
OSARC: 11; 
Total: 56 (80%). 

Total projects: Completed; 
MDOT: 10; 
OSARC: 2; 
Total: 12 (17%). 

Source: FHWA. 

[End of table] 

Both MDOT and OSARC continue to award Recovery Act contracts for less 
than the state cost estimates. Through October 31, FHWA informed us 
that MDOT and OSARC have awarded contracts for a total average of 11.4 
percent and 10.9 percent less than estimated, respectively. 
Additionally, OSARC has been able to fund three extra projects using 
$1.6 million in excess funding. 

According to MDOT's Budget Director, MDOT and OSARC committed to expend 
a combined total of $331.1 million in state funding for the period 
February 17, 2009, through September 30, 2010. As of October 31, FHWA-
Mississippi Division officials stated that the two agencies have 
together expended $264.2 million, which is nearly 80 percent of their 
total commitment. 

Local Public Agencies Are Slow in Planning Recovery Act Projects: 

About $45 million of the $342.1 million in Recovery Act funds that MDOT 
administers is set aside for approximately 85 LPA city projects. 
Although the Recovery Act requires that these funds be obligated within 
1 year of apportionment or be subject to withdrawal and redistribution, 
MDOT originally chose to implement an internal deadline of September 3, 
2009. MDOT established this deadline to encourage the LPAs to take 
action in advance of the final March 2, 2010, deadline, thereby 
reducing the risk that the state will lose Recovery Act funding. 
However, on September 9, only one LPA city project for $2.7 million had 
been obligated. As a result, the LPA engineer informed us that MDOT 
extended its deadline to November 2, 2009; at which time, each LPA must 
submit its Recovery Act projects' Plans, Specifications, and Estimate 
Assembly (PS&E).[Footnote 4] If each LPA meets this deadline, MDOT will 
be able to send the paperwork to FHWA for approval no later than 
November 16, 2009. 

On November 2, the six district offices had received PS&E assemblies 
for approximately 74 percent of the LPA city Recovery Act projects. The 
LPA engineer reiterated that all of the funding for the state's LPA 
projects will be obligated by March 1, 2010. He explained that if an 
LPA has not forwarded its PS&E documentation by December 16, MDOT 
officials will proactively assist as needed to correct errors and 
prepare plans so that the documentation can be approved, the funds 
obligated, and the projects advertised. 

Requirements May Have Limited Opportunities for Long-Term 
Infrastructure Improvements and Economic Development: 

The Recovery Act placed funding priority on transportation projects 
that states could begin quickly and complete within 3 years of the 
act's enactment. When MDOT and OSARC chose projects to fund using 
Recovery Act dollars, both emphasized projects that were "ready-to-go, 
[Footnote 5] which ensured an expedited obligation process and the 
likelihood that each project would be completed within 3 years. While 
the Executive Director of MDOT and the State Aid Engineer stated that 
they are seeing immediate positive impacts from Recovery Act-funded 
projects, both officials believe that placing priority on "ready-to-go" 
projects may have limited opportunities for long-term infrastructure 
improvements and economic development. 

The MDOT Executive Director explained that the majority of MDOT's 
Recovery Act projects were pavement improvements, including resurfacing 
and rehabilitation. Although he acknowledged that such projects improve 
infrastructure and increase safety, the Executive Director identified a 
few projects that he felt would have likely had a more lasting impact 
on Mississippi's infrastructure and economic development. For example, 
the Executive Director would have finished upgrading the remaining 
portions of U.S. 78 to interstate standards. While this project was not 
"ready-to-go" and required an additional $80 million in funding, the 
upgrades would have enabled U.S. 78, which connects Memphis to 
Birmingham through northern Mississippi, to become Interstate 22. An 
interstate road, according to the Executive Director, would not only 
have better serviced a new Toyota plant being built in Tupelo, but it 
also may have attracted new business to the state. 

The State Aid Engineer reiterated what we were told by MDOT's Executive 
Director. Although he also recognized the need for each Recovery Act 
project and gave examples of those having an impact on the state, such 
as an industrial park access road, the State Aid Engineer named 
additional projects that he believed may have had a greater impact on 
the state's infrastructure. For instance, the State Aid Engineer 
mentioned a $10 million bridge reconstruction project connecting the 
cities of Gulfport and Biloxi. If this project had received Recovery 
Act dollars, the bridge would have served as a major hurricane 
evacuation route. 

Public Housing Improvements Are Under Way: 

HUD has provided Mississippi's 52 public housing agencies with about 
$32.4 million in Recovery Act funds distributed as Public Housing 
Capital Grant awards. As of October 24, 2009, these 52 public housing 
agencies had awarded contracts for about $12.9 million and expended 
approximately $3.3 million. 

Visited Housing	Authorities Have Awarded Contracts for Most	
Projects: 

We revisited two of Mississippi's public housing authorities that we 
reported on in July 2009—the Housing Authority of Picayune, 
Mississippi, and Mississippi Regional Housing Authority No. VIII (MRHA-
8), located in Gulfport, Mississippi. The Recovery Act projects 
initiated by each of these housing authorities and the status of the 
projects are shown in tables 2 and 3. 
	
Table 2: Picayune Housing Authority's Recovery Act Projects: 

Location of units to be renovated: George Weems and Yes Mae L. Williams 
Developments; 
Was the	project part of the authority's 5-year plan? Yes; 
Contract award date: March 10, 2009 (change order to ongoing contract); 
Estimated contract completion date: August 18, 2009	(actual	
completion date of project); 
Estimated cost of renovations: $433,763 (actual cost for completed 
project); 
Number of housing units to be renovated: 22; 
Renovations: Kitchens, bathrooms, plumbing, entrance doors, flooring, 
painting, and water heaters. 
				
Location of units to be renovated: Pines Public Housing Development; 
Was the	project part of the authority's 5-year plan? Yes; 
Contract award date: September 24, 2009; 
Estimated contract completion date: March 23, 2010; 
Estimated cost of renovations: $280,000 ($263,867 funded by Recovery 
Act funds); 
Number of housing units to be renovated: 92	
Renovations: Heating, ventilation, air conditioning. 

Source: GAO analysis of Picayune Housing Authority data. 

[End of table] 

Table 3: MRHA-8 Implemented and Planned Recovery Act Projects: 

Development to be Renovated: H.C. Patterson; 
In 5-year plan? No; 
Contract award date: June 16, 2009; 
Estimated contract completion date: February 22, 2009; 
Estimated cost of renovations: $228,600; 
Number of housing units or buildings to be renovated: 1 building; 
Renovations: Renovations. 

Development to be Renovated: Dan Stepney[A]; 
In 5-year plan? Yes; 
Contract award date: October 26, 2009; 
Estimated contract completion date: February 23, 2010; 
Estimated cost of renovations: $287,785; 
Number of housing units or buildings to be renovated: 35 buildings; 
Renovations: Reroof. 

Development to be Renovated: Pecan Circle[A]; 	
In 5-year plan? Yes; 
Contract award date: October, 2009; 
Estimated contract completion date: April 2010; 
Estimated cost of renovations: $305,000; 
Number of housing units or buildings to be renovated: 38 buildings; 
Renovations: Reroof and upgrade siding. 

Development to be Renovated: Dan Stepney; 
In 5-year plan? Yes; 
Contract award date: Expected in December 2009; 
Estimated contract completion date: Expected December 2010; 
Estimated cost of renovations: Estimated to be $1.2 to $1.5 million; 
Number of housing units or buildings to be renovated: 35 buildings; 
Renovations: Interior. 

Source: GAO analysis of MRHA-8 data. 

[A] The contracts for exterior renovations at the Dan Stepney and Pecan 
Circle developments were scheduled to begin in August, but were delayed 
due to a required environmental review. 

[End of table] 

As of October 24, 2009, MRHA-8 had awarded contracts for $1,048,737 of 
the $3,783,351 received from HUD under the Recovery Act. This housing 
authority has not awarded contracts for as much of its funding as 
originally planned because contract bids received have been 
substantially less than the estimated project costs. In addition, MRHA-
8 was unable to initiate a fifth project because the project was in a 
flood plain and would have required a lengthy 8-step environmental 
assessment. However, MRHA-8 officials indicated that more of the funds 
will be used when contracts are awarded for interior renovation of 
units at the Dan Stepney and Pecan Circle complexes, which are expected 
to cost about $1.2 million each. Officials also said the roofing 
projects may experience cost growth because there is uncertainty about 
the condition of the roofs that are to be repaired. Finally, officials 
told us that they may reconstruct MRHA-8 office space at the Pecan 
Circle complex to fully use all of the grant funds. 

Picayune and MRHA-8 Will Not Receive Competitive Grants: 

HUD awarded $8.5 million in competitive grants to housing agencies in 
Mississippi.[Footnote 6] However, neither the Picayune Housing Agency 
nor MRHA-8 will receive any of these funds. Picayune officials did not 
apply for these grants because they did not believe they had sufficient 
time to get the professional help needed to complete the application. 
MRHA-8 officials told us that they applied for a competitive grant but 
were not successful. 

Housing Agencies Provide Information on Job Counts: 

Officials for both housing agencies told us that they were unsure how 
to calculate the number of new and retained employees that resulted 
from Recovery Act projects. Instead, the officials said that they 
relied on contractors to provide the numbers that their staff entered 
into the Recovery Act reporting system, FederalReporting.gov. The 
housing authorities did not provide any guidance to contractors as to 
how jobs created and retained should be reported. In addition, both 
housing agencies found the reporting system difficult to understand. 
Picayune officials did not seek any assistance from HUD or the Office 
of Management and Budget (OMB). MRHA-8 officials sought assistance by 
phone from OMB, but had difficulty getting through. In addition, MRHA-8 
officials told us that FederalReporting.gov logged them off while they 
were inputting data, causing them to lose all data added to that point. 
To avoid this happening again, an MRHA-8 official saved information as 
a draft, but was unable to locate the draft in the reporting system 
after saving it. 	 

MDOT Experiences Minor Challenges As State Implements Decentralized 
Recovery Act Reporting: 

Each prime recipient of Recovery Act funds is responsible for 
collecting project-level data to address section 1512 Recovery Act 
reporting requirements and for entering this data into 
FederalReporting.gov. The Recovery Act requires prime recipients of 
Recovery Act funds to report quarterly on these projects, and the first 
of these recipient reports was due in October 2009. Among other 
information, the reports are to describe the project, including its 
cost and completion status, as well as the number of jobs that the 
project created and retained. To learn more about a prime recipient's 
methodology for collecting these data and its experience with 
submitting its first quarterly report, we reviewed one Mississippi 
agency--MDOT. 

FHWA-Mississippi Division officials told us that on October 10, 2009, 
MDOT submitted its first quarterly report, which included the agency's 
own project data and data collected from another state agency—the 
Office of State Aid Road Construction, to which MDOT suballocates 
Recovery Act funds. In this first quarterly report, MDOT also included 
information on 5 of the approximately 85 projects being planned by 
local public agencies (LPA), which are subrecipients of MDOT Recovery 
Act funds. 

MDOT Uses FHWA Database to Develop Quarterly Reports: 

The U.S. Department of Transportation's FHWA uses a two-part system to 
collect and analyze data required to be submitted under the Recovery 
Act. This two-part system is made up of FHWA's computerized database, 
known as the Recovery Act Data System (RADS), and hard copy reporting 
forms. RADS compiles a range of Recovery Act project information, 
including each project's name, description, purpose, and rationale, as 
well as the project's estimated cost and ultimate contract award 
amount. Additionally, RADS provides the dates of major project 
milestones, such as contract advertisement, award, and completion. 
According to MDOT officials, the department also requires suballocants, 
subrecipients, and vendors to submit completed hard copies of FHWA Form 
1589 every month. This form documents the total number of employees, 
hours worked, and payroll dollars for the month being reported. MDOT 
then enters this data into RADS, which produces an electronic file that 
contains all required reporting elements for every obligated Recovery 
Act project. Once each electronic file is complete, MDOT uploads all 
files directly into FederalReporting.gov. 

Officials Experience Only Minor Reporting Problems: 

MDOT experienced some minor challenges in submitting its first 
quarterly report. For example, officials mentioned that RADS requires 
the entry of multiple elements, all of which are not used for section 
1512 reporting. This presented an additional challenge for the MDOT 
official responsible for entering project data into RADS because it 
increased the volume of entries during an already time-constrained 
reporting process. Additionally, this same official told us he had 
difficulty obtaining the DUNS numbers for some of the subrecipients and 
vendors and chose to work with the Mississippi Division of the FHWA to 
locate these numbers. 

Job Count Numbers Were not Verified: 

Under section 1512 of the Recovery Act, all prime recipients are 
required to report and estimate the number of jobs created and retained 
by activities and projects. However, we determined that MDOT officials 
responsible for section 1512 reporting did not verify or obtain 
supporting documentation to validate the form 1589 reports that contain 
jobs data for each Recovery Act Project. Instead, MDOT officials 
explained to us that they conducted "spot checks" of the forms to 
identify material omissions and significant reporting errors. For 
example, officials completed simple calculations to verify that the 
reported pay was above minimum wage. Additionally, even though MDOT's 
deputy executive director and chief engineer, as well as one district 
engineer, told us that project engineers are expected to use their 
expertise and day-to-day project site observations to review each form 
1589, three project engineers informed us that this expectation was not 
adequately communicated. As a result, one engineer told us that he only 
ensured that there were no unfilled blanks on the form, and another 
explained to us that he had been informed that MDOT Contract 
Administration would ultimately be responsible for reviewing the forms. 
Finally, two of the three engineers said that they were never verbally 
instructed as to how they should validate the forms, and they did not 
receive any written guidance on this subject. 

We also found that although RADS guidance stipulates that monthly 
reports by subrecipients and vendors should include all employees that 
devote time to a particular Recovery Act contract, one vendor was not 
doing so because certain administrative and corporate positions are not 
included in the certified payroll. However, another vendor was 
including employees in these types of positions even though there was 
no documentation to validate that the employees had devoted a specific 
amount of time to that particular project. 

Visited Local Governments Explain Their Use of Recovery Act Funds: 

To learn more about the impact of Recovery Act funds on local 
governments, GAO visited three localities in Mississippi: the cities of 
Jackson, Meridian, and Vicksburg.[Footnote 7] 

Jackson, Mississippi: 
Population: 173,861: 
Unemployment rate: 8.6 percent (state rate: 8.8 percent): 

Table 4: Selected Sources of Recovery Act Funds as Reported by Jackson 
City Officials: 

Program: Transit; 
Purpose: Transit Capital Assistance Program; 
Amount: $3.4 million. 

Program: Public safety; 
Purpose: Edward Byrne Memorial Justice Assistance Grant (JAG); 
Amount: $1.6 million. 

Program: Community Development; 
Purpose: Homelessness Prevention and Rapid Re-housing; 
Amount: $1.0 million. 

Program: Community Development; 
Purpose: Community Development Block Grant Program; 
Amount: $674,000. 

Program: Community Development; 
Purpose: Senior Community Service Employment Program; 
Amount: $157,000. 

Source: Jackson city officials. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

In Jackson, we found the following: 

Construction of local transit hub. Jackson will use Recovery Act funds 
to construct an administrative and maintenance facility for the city's 
local transit system. The facility will provide maintenance space for 
the city's buses. 

Training for senior citizens. The city expects to provide training for 
low-income older individuals that will enable these individuals to re-
enter the workforce. 

Maintenance and equipment upgrades. City officials noted that they plan 
to use JAG funds to repair the roofs of both the local crime lab and 
the training academy. The city will also use the funds to purchase new 
equipment such as police cruisers, crime lab devices, speech 
translators, speed-detection lasers, and new computers, as well as 
equipment for the city's Mobile Crime Scene Unit, Bomb Squad, and 
Narcotics Division. 

Preparing for end of Recovery Act funds. City officials noted that they 
have not used Recovery Act funds in ways that would create long-term 
fiscal responsibilities for the city. Recovery Act funds are being used 
for construction and infrastructure rather than on programs that will 
cost the city money to maintain in coming years. An official also noted 
that the process of applying for Recovery Act grants and fulfilling the 
requirements of those grants has brought together various local, state, 
and federal government entities and that Jackson city officials will 
use those connections in the future to help them obtain more external 
funding. 

Meridian, Mississippi: 
Population: 38,232: 
Unemployment rate: 12.2 percent (state rate: 8.8 percent): 

Table 5: Selected Sources of Recovery Act Funds as Reported by Meridian 
City Officials: 

Program: Public safety; 
Purpose: COPS Hiring Recovery Program; 
Amount: $582,000. 

Program: Public safety; 
Purpose: Edward Byrne Memorial Justice Assistance Grant (JAG) Program; 
Amount: $257,000. 

Program: Energy; 
Purpose: Energy Efficiency and Conservation Block Grant Program; 
Amount: $182,000. 

Source: Meridian city officials. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

In Meridian, we found the following: 

Public safety. City officials stated that Meridian has used or will use 
Recovery Act funds to purchase police vehicles, upgrade the 
department's security camera system, and provide funding for a Direct 
Action Response Team. The city has also been granted funds to hire as 
many as five police officers for 3 years. 

Energy efficiency. City officials noted that Recovery Act funding is 
being used to purchase more energy-efficient materials to be used in 
the restoration of Meridian's City Hall. 

Preparing for end of Recovery Act funds. A city official stated that 
most of the city's projected Recovery Act funds are for equipment, 
infrastructure repair, or improvements, which will only require the 
expenditure of maintenance funds in the future. The same official 
stated that, as required, the city will use local government funding to 
continue the employment of the police officers hired with Recovery Act 
funds. 

Vicksburg, Mississippi: 
Population: 24,974: 
Unemployment rate: 14.5 percent (state rate: 8.8 percent): 

Table 6: Selected Sources of Recovery Act Funds as Reported by 
Vicksburg City Officials: 

Program: Public safety; 
Purpose: COPS Hiring Recovery Program; 
Amount: $508,000. 

Program: Public safety; 
Purpose: Edward Byrne Memorial Justice Assistance Grant Program; 
Amount: $266,000. 

Source: Vicksburg city officials. 

Note: Population data are from July 1, 2008. Unemployment rates are 
preliminary estimates for September 2009 and have not been seasonally 
adjusted. Rates are a percentage of the labor force. Estimates are 
subject to revision. 

[End of table] 

In Vicksburg, we found the following: 

Public safety. Vicksburg city officials stated that the city is 
planning to use Recovery Act funds to purchase crowd-control barricades 
to be used for city events. The city is also planning to purchase 
communications equipment and generators for a mobile precinct that will 
be used for local events and during emergency situations. The city has 
also been granted Recovery Act funds that would allow the city to hire 
as many as four police officers for 3 years. 

Preparing for end of Recovery Act funds. City officials stated that the 
city will use local government funding, as required, to continue the 
employment of the police officers hired with Recovery Act funds. They 
also noted the city will continue to seek other sources of funding from 
both federal and state agencies. 

State Comments on This Summary: 

We provided the Governor of Mississippi with a statement of facts on 
thrabkinn@gao.gov on November 2, 2009. The General Counsel to the 
Governor, who serves as the stimulus coordinator, responded for the 
Governor on November 19, 2009. The official provided technical 
suggestions that were incorporated, as appropriate. 

GAO Contacts: 

John K Needham, (202) 512-5274 or needhamjkl@gao.gov. 
Norman J. Rabkin, (202) 512-9723 or rabldnn@gao.gov. 

Staff Acknowledgments: 

In addition to the contacts named above, Barbara Haynes, Assistant 
Director, James Elgas, analyst-in-charge; Anna Russell; Gary Shepard; 
Erin Stockdale; and Ryan Stott made major contributions to this report. 

[End of section] 

Footnotes: Appendix XI: Mississippi: 

[1] Pub. L. No. 111-5, 123 Stat.115. (Feb. 17, 2009). 

[2] M defined by OMB, prime recipients are non-Federal entities that 
receive Recovery Act funding as Federal awards in the form of grants, 
loans, or cooperative agreements directly from the Federal Government. 

[3] LPAs are local government entities, usually a city or county 
government, eligible to participate in the federal transportation 
program. 

[4] Submittal and authorization of the PS&E Assembly is the final stage 
of project development. The PS&E Assembly included the plans, 
proposals, bid sheets, specifications, and the LPA's professional 
construction estimate. 

[5] MDOT officials describe projects as "ready-to-go" if the department 
has acquired right-of-way, received all environmental clearances, and 
developed the project plan. 

[6] HUD was 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 elderly or persons with disabilities. 

[7] Our examination of Recovery Act funds includes those which have 
been or will be received directly from federal agencies by the local 
jurisdictions. 

[End of Appendix XI: Mississippi] 

Appendix XII: New Jersey: 

Overview: 

This appendix summarizes GAO's work on the fourth of its bimonthly 
reviews of American Recovery and Reinvestment Act of 2009 (Recovery 
Act) spending in New Jersey. The full report covering all of GAO's work 
in 16 states and the District of Columbia may be found at [hyperlink, 
http://www.gao.gov/recovery]. 

What We Did: 

We reviewed three specific programs funded under the Recovery Act: 
State Fiscal Stabilization Fund (SFSF), Highway Infrastructure 
Investment program, and Public Housing. We selected these programs for 
different reasons. New Jersey began disbursing its allocation of SFSF 
funds in September 2009. The highway program in New Jersey has an 
obligation deadline approaching in March 2010 and is behind other 
states in its obligation of funds suballocated for regional, 
metropolitan, and local use. The housing program recently awarded 
competitive grants and projects using the Recovery Act formula grant 
funds are under way. Our work focused on the status of each program's 
funding, how funds are being used, and issues that are specific to each 
program. For descriptions and requirements of the programs we covered, 
see appendix XVIII of GAO-10-232SP. As part of our review of public 
housing, we also revisited four housing agencies—Newark, Plainfield, 
Rahway, and Trenton—that we reported on earlier in 2009.[Footnote 1] We 
also reported on selected survey results for Title I, Part A of the 
Elementary and Secondary Education Act (ESEA), as amended and Part B of 
the Individuals with Disabilities Education Act (IDEA). 

To gain an understanding of the state's experience in meeting Recovery 
Act reporting requirements, we met with state officials with each of 
the programs we reviewed. Because New Jersey is a decentralized 
reporting state, each agency serves as the prime recipient.[Footnote 2] 
Prime recipients of Recovery Act funds are required to report quarterly 
on a number of measures, including estimates of the number of jobs 
created and retained. The first quarterly reports were due in October 
2009. 

Finally, our work in New Jersey included visiting two localities to 
determine the amount of Recovery Act funds each has or will be 
receiving from the state or directly from federal agencies and to learn 
how those funds are being used. We chose to visit the city of Newark 
and Cumberland County. Both localities have unemployment rates that are 
higher than the state average of 9.6 percent as of September 2009. We 
selected Newark because it is New Jersey's largest city, urban, and 
located in the northern part of the state. We selected Cumberland 
County because it is sparsely populated, a mix of urban and rural 
areas, and located in the southern part of the state. 

* State Fiscal Stabilization Fund (SFSF). As of November 13, 2009, New 
Jersey had drawn down 45 percent of its total allocation of SFSF monies 
(education stabilization funds). Most of New Jersey's local educational 
agencies (LEAs) will spend over half of their SFSF funds on staff 
retention. 

* Highway Infrastructure Investment. The U.S. Department of 
Transportation's Federal Highway Administration (FHWA) apportioned $652 
million in Recovery Acts funds to New Jersey. As of October 31, 2009, 
about $492 million had been obligated and $71 million had been 
reimbursed by FHWA. The overall obligation rate for New Jersey 
continues to be high, but the state has been slow to request that FHWA 
obligate about $196 million of suballocated funds to New Jersey for 
projects planned by local agencies. 

* Public Housing Capital Fund. New Jersey's 80 public housing agencies 
are spending about the same as the national average. Under the act, 
public housing authorities are to prioritize projects for which the 
authority can award contracts within 120 days from when funds were made 
available, however, officials in all four agencies we visited said that 
they were unable to award contracts within this timeframe. Officials 
cited such reasons as delays in obtaining work permits and meeting 
requirements for HUD's approval of all obligations and expenditures. 

* Localities use of Recovery Act funds. As of October 2009, the city of 
Newark, reported receiving, will be receiving, or being allocated, 
approximately $120 million, which it plans to use for numerous onetime 
projects, such as road repaving. Cumberland County reported receiving 
about $4.8 million that it is using to support nonrecurring projects 
and existing programs, such as road repaving and employment programs 
for adults and youth, respectively. 

New Jersey Continues to Plan For and Spend Recovery Act Education 
Funds: 

As of November 13, 2009, New Jersey had drawn down $325 million in SFSF 
funds (45 percent of its total allocation of education stabilization 
funds) and had drawn down about $1.6 million of IDEA, Part B and 
$207,850 ESEA Title I, Part A funds.[Footnote 3] For this report, we 
reviewed New Jersey's LEAs' use of Recovery Act education funds and the 
New Jersey Department of Education's (NJED) plan for management of SFSF 
funds and experience with recipient reporting. 

Most of New Jersey's LEAs will use SFSF funds to retain staff. We 
surveyed a representative sample of LEAs—generally school districts—
nationally and in New Jersey about their planned uses of Recovery Act 
funds. Table 1 shows New Jersey and national GAO survey results on the 
estimated percentages of LEAs that (1) plan to use more than 50 percent 
of their Recovery Act funds from three education programs to retain 
staff, (2) anticipate job losses even with State Fiscal Stabilization 
Fund monies, and (3) reported a total funding decrease of 5 percent or 
more since last school year. The GAO survey indicated that an estimated 
79 percent of New Jersey LEAs plan to use over half of their SFSF funds 
to retain staff, compared to the national estimate of 63 percent, but a 
smaller percentage of New Jersey LEAs plans to use over half of their 
ESEA Title I or IDEA funds to retain staff when compared to national 
estimates. Our survey also indicated that compared to national 
estimates, fewer of New Jersey's LEAs anticipated job losses and 
decreases in funding of 5 percent or more. 

Table 1: Selected Results from GAO Survey of LEAs: 
		
Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, IDEA funds; 
Estimated percentages of LEAs, New Jersey: 3%; 
Estimated percentages of LEAs, Nation: 19%. 
	
Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, Title I funds; 
Estimated percentages of LEAs, New Jersey: 10%; 
Estimated percentages of LEAs, Nation: 25%. 

Responses from GAO survey: Plan to use more than 50 percent of Recovery 
Act funds to retain staff, SFSF funds; 
Estimated percentages of LEAs, New Jersey: 79%; 
Estimated percentages of LEAs, Nation: 63%. 

Responses from GAO survey: Anticipate job losses, even with SFSF funds; 
Estimated percentages of LEAs, New Jersey: 12%; 
Estimated percentages of LEAs, Nation: 32%. 

Responses from GAO survey: Reported total funding decrease of 5 percent 
or more since school year 2008-2009; 
Estimated percentages of LEAs, New Jersey: 2%; 
Estimated percentages of LEAs, Nation: 17%. 

Source: GAO. 

Note: Percentage estimates for New Jersey have margins of error, at the 
95 percent confidence level, of plus or minus 16 percentage points or 
less. The nationwide percentage estimates have a margin of error of 
plus or minus 5 percentage points. 

[End of table] 

NJED has process for monitoring management of SFSF funds. As we 
reported in our September 2009 report,[Footnote 4] NJED allocated $1 
billion of SFSF education stabilization funds and $39 million of SFSF 
government services funds to help cover and increase the state's 
portion of education funding for the 2009-2010 school year. NJED 
disburses SFSF payments semimonthly, on the 15th and 30th of each 
month. The department issued the first payments to LEAs on September 15 
and 30, 2009. SFSF funds are federal funds governed by applicable 
federal cash management rules.[Footnote 5] Additionally, Education 
directs states to monitor LEAs' management of SFSF funds. 

According to state officials, NJED's cash management process requires 
LEAs to issue quarterly reports on actual expenditures of the SFSF 
funds to determine cash needs for the next quarter. If NJED determines 
through its review of quarterly reports that an LEA spent at least 90 
percent of SFSF payments, NJED will continue to send scheduled 
payments. If an LEA spends more than the total of the payments issued 
in a quarter, NJED increases the amount of the semimonthly payments. 
[Footnote 6] On the other hand, if an LEA spends less than 90 percent 
of the payments issued in a quarter, NJED withholds semimonthly 
payments until the LEA's expenditures exceed 90 percent. NJED officials 
told us that they reviewed the first quarterly reports in October 2009 
for the 390 LEAs receiving SFSF funds.[Footnote 7] As a result, 145 
LEAs received larger semimonthly payments, and payments for 21 LEAs 
were withheld.[Footnote 8] According to guidance issued by NJED to 
LEAs, LEAs are directed to remit any interest accrued, of more than 
$100, on unspent SFSF funds to Education at least quarterly. However, 
NJED officials reported that they do not anticipate that LEAs will earn 
interest on SFSF funds because most LEAs will use the funds to pay 
salaries each month. One NJED official reported that, as of November 
2009, no interest had been remitted to the federal government because 
the 21 LEAs had not earned interest on the funds because either the 
funds were in a non-interest bearing account or the LEAs had not 
accrued more than $100 in interest. 

In addition to reviewing quarterly reports, NJED officials said that 
they will review LEAs' SFSF expenditures, including matching payments 
to expenditures and checking for any earned interest, as part of the 
department's on-site monitoring of how LEAs use Recovery Act funds, 
which began in October 2009.[Footnote 9] We expect to examine NJED and 
LEA cash management in future reports. 

State officials reported few problems with recipient reporting for 
education funds. New Jersey officials reported few problems in 
complying with Recovery Act recipient reporting requirements. However, 
according to NJED officials, some LEAs had difficulty counting the 
number of jobs created and estimating those retained. NJED followed-up 
with LEAs that, based on its internal checks, reported what seemed to 
be an unreasonable number of jobs given the funding allocation and 
found that some LEAs reported hours instead of the number of full-time 
equivalent jobs. Of the 616 school LEAs in the state, NJED officials 
said that about 20 LEAs had problems with providing an accurate count 
of jobs created. NJED officials told us that they corrected the problem 
for many of these LEAs prior to submitting a report to OMB. 

New Jersey Department of Transportation's Local Project Obligation Rate 
is Low, but its Overall Obligation Rate is High: 

As we reported in September 2009, $652 million was apportioned to New 
Jersey in March 2009 for highway infrastructure and other eligible 
projects. As of October 31, 2009, about $492 million had been obligated 
and $71 million had been reimbursed by FHWA. Almost 59 percent of 
Recovery Act highway funds obligated for New Jersey projects are being 
used for pavement improvements. Specifically, $288.5 million of the 
approximately $492 million obligated in New Jersey as of October 31, 
2009, is being used for projects such as pavement improvements, 
including $52 million for pavement resurfacing and $237 million for 
pavement reconstruction and rehabilitation. Many state officials told 
us they selected pavement improvement projects because these projects 
were already in their pipeline, were identified infrastructure needs, 
could advance sooner than planned because funding was available, and 
had met federal planning requirements. In addition to these pavement 
improving projects, the New Jersey Department of Transportation (NJDOT) 
plans to apply Recovery Act funds to other critical infrastructure 
needs on the state highways system including 23 structurally deficient 
bridges, 40 bridge decks needing rehabilitation, and 5 priority 
drainage projects. Figure 1 shows obligations by the types of road and 
bridge improvements being made. 

Figure 1: Highway Obligations for New Jersey by Project Improvement 
Type as of October 31, 2009: 

[Refer to PDF for image: pie-chart] 

Pavement projects total (59 percent, $288.5 million): 
Pavement improvement: reconstruction/rehabilitation ($236.9 million): 
48%; 
Pavement improvement: resurface ($51.6 million): 10%; 

Bridge projects total (19 percent, $93.5 million): 
Bridge replacement ($70.8 million): 14%; 
Bridge improvement ($22.7 million): 5%; 

Other (22 percent, $110.5 million): 
Other ($110.5 million): 22%. 

Source: GAO analysis of Federal Highway Administration data. 

Note: Totals may not add due to rounding. "Other" includes safety 
projects, such as improving safety at railroad grade crossings, and 
transportation enhancement projects, such as pedestrian and bicycle 
facilities, engineering, and right-of-way purchases. 

[End of figure] 

Since bids for contracts are coming in lower than the estimated costs, 
state plans to use excess funds for additional highway projects. NJDOT 
officials noted that bids for contracts are coming in on average 15 
percent lower than the state's estimated costs, primarily due to the 
competitive environment amongst bidders. In turn, NJDOT expects to have 
FHWA deobligate excess funds from FHWA approved projects where a 
contract has been awarded for an amount lower than the FHWA obligated 
amount. NJDOT expects about $30 million in funds associated with 
savings from these bids. This has allowed NJDOT to submit four new 
projects for approval that were not in their original project 
submission. According to NJDOT officials, the four projects are pending 
final approval. 

Local areas continue to identify projects and state seeks federal 
obligation for these projects at a slow rate. As required under the 
Recovery Act, about $196 million was suballocated in New Jersey, 
primarily based on population, for metropolitan, regional, and local 
use. NJDOT provided most of the suballocated funding to the three
Metropolitan Planning Organizations (MPO) covering the state so that 
eligible county and local projects could receive Recovery Act funds. 
According to NJDOT, it was important to provide the opportunity for 
Recovery Act funds to have the greatest impact on transportation 
projects across the state and not just projects in the state highway 
system. As of October 30, 2009, the MPOs in New Jersey had identified 
about 90 highway infrastructure projects estimated to cost 
approximately $164 million.[Footnote 10] NJDOT officials anticipate 
that FHWA has obligated funding for 32 of these projects costing 
approximately $63.6 million. Many of the projects consist of road 
resurfacing and adding guard rails Compared to New Jersey's overall 
obligation rate, the state has been slow in having FHWA obligate its 
suballocation for projects planned by local agencies. Our analysis of 
FHWA data as of October 31, 2009 showed that the local obligation rate 
is about 34 percent compared to the state's overall rate of about 93 
percent. 

For the remaining 58 projects, NJDOT continues to work closely with 
MPOs and local government representatives, holding biweekly meetings to 
resolve outstanding issues such as planning and environmental 
clearances. The state has established an internal November 30, 2009, 
deadline to complete final submission plans. NJDOT officials are hoping 
that all their projects are able to meet this deadline; however, if 
this does not happen, the MPOs may reallocate funds to other local or 
NJDOT projects that will enable New Jersey to reach 100 percent 
obligation by March 1, 2010. However, even if their internal deadline 
is met, officials stated that it will be spring before the bulk of the 
work begins on the local projects. Additionally, state officials 
concede that project spending and related reimbursements will be slow 
over the winter season due to the seasonal nature of some of the work. 

Reimbursements remain low but NJDOT expects the pace to increase. 
According to NJDOT officials, the reimbursements for its projects had 
increased from $4 million dollars as of September 1, 2009, to 
approximately $10 million on September 23, 2009. As of October 31, 
2009, it was $71 million. Officials told us they expect to see state 
highway reimbursements increase significantly in the near future, as 
all the original projects