Recovery Act:

Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds

GAO-10-999: Published: Sep 20, 2010. Publicly Released: Sep 20, 2010.

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This report responds to two ongoing GAO mandates under the American Recovery and Reinvestment Act of 2009 (Recovery Act). It is the latest in a series of reports on the uses of and accountability for Recovery Act funds in 16 selected states, certain localities in those jurisdictions, and the District of Columbia (District). These jurisdictions are estimated to receive about two-thirds of the intergovernmental assistance available through the Recovery Act. This report also responds to GAO's mandate to comment on the jobs estimated in recipient reports. GAO collected and analyzed documents and interviewed state and local officials and other Recovery Act award recipients. GAO also analyzed federal agency guidance and interviewed federal officials.

As of September 3, 2010, about $154.8 billion of the approximately $282 billion of total funds made available by the Recovery Act in 2009 for programs administered by states and localities had been paid out by the federal government. Of that amount, over 65 percent--$101.9 billion--had been paid out since the start of federal fiscal year 2010 on October 1, 2009. As of July 31, 2010, the 16 states and the District had drawn down $43.9 billion in increased FMAP funds. If current spending patterns continue, GAO estimates that these states and the District will draw down $56.2 billion by December 31, 2010--about 95 percent of their initial estimated allocation. Most states reported that, without the increased FMAP funds, they could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children. Congress recently passed legislation to extend the increased FMAP through June 2011, although at lower rates than provided by the Recovery Act. As of August 27, 2010, the District and states covered in GAO's review had drawn down 72 percent ($18.2 billion) of their awarded State Fiscal Stabilization Fund (SFSF) education stabilization funds; 46 percent ($3.0 billion) for Elementary and Secondary Education Act, Title I, Part A; and 45 percent ($3.4 billion) for Individuals with Disabilities Education Act, Part B. In the spring of 2010, GAO surveyed a nationally representative sample of local educational agencies (LEA) and found that job retention was the primary use of education Recovery Act funds in school year 2009-2010, with an estimated 87 percent of LEAs reporting that Recovery Act funds allowed them to retain or create jobs. Nationwide, the Federal Highway Administration (FHWA) obligated $25.6 billion in Recovery Act funds for over 12,300 highway projects, andreimbursed $11.1 billion as of August 2, 2010. The Federal Transit Administration obligated $8.76 billion of Recovery Act funds for about 1,055 grants, and reimbursed $3.6 billion as of August 5, 2010. Highway funds were used primarily for pavement improvement projects, and public transportation funds were used primarily for upgrading transit facilities and improving bus fleets. The EECBG program provides about $3.2 billion in grants to implement projects that improve energy efficiency; of this amount, approximately $2.8 billion has been allocated directly to recipients. As of August 2010, DOE has obligated about 99 percent of the $2.8 billion in direct formula grants to recipients, who have in turn, obligated about half to subrecipients. The majority of EECBG funds have been obligated for three purposes: energy efficiency retrofits to existing facilities, financial incentive programs, and buildings and facilities. As of August 7, 2010, housing agencies had obligated about 46 percent of the nearly $1 billion in Recovery Act Public Housing Capital Fund competitive grants allocated to them for projects such as installing energy-efficient heating and cooling systems in housing units. HUD officials anticipate that some housing agencies may not meet the September 2010 obligation deadline, resulting in those funds being recaptured. GAO believes HUD should continue to closely monitor agencies' progress in obligating remaining funds. As of July 31, 2010, HUD had outlayed about $733 million (32.6 percent) of TCAP funds and Treasury had outlayed about $1.4 billion (25.5 percent) of Section 1602 Program funds. GAO updates the status of agencies' efforts to implement GAO's 58 previous recommendations and makes 5 new recommendations to improve management and strengthen accountability to the Departments of Transportation (DOT), Housing and Urban Development (HUD), the Treasury, and the Office of Management and Budget (OMB).

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In our reports mandated by the American Recovery and Reinvestment Act of 2009, we recommended that the Secretary of Transportation direct the Federal Highway Administration (FHWA) to develop improve the quality of data in the Recovery Act Data System, a database it uses to track highway construction projects funded by the Recovery Act, so that these data would accurately identify contract construction project milestones. In response to our recommendation, DOT implemented measures to improve the data in the Recovery Act Data System, including incorporating additional data checks and enhancing the system by taking steps to minimize redundant data fields and requiring monthly updates by funding recipients. In addition, DOT also issued guidance to improve the quality of data entered into the system. As a result, Congress and the public will have accurate information on the extent to which the goals of the Recovery Act are being met.

    Recommendation: To ensure that Congress and the public have accurate information on the extent to which the goals of the Recovery Act are being met, the Secretary of Transportation should direct FHWA to develop additional rules and data checks in the Recovery Act Data System, so that these data will accurately identify contract milestones such as award dates and amounts, and provide guidance to states to revise existing contract data.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: In our reports mandated by the American Recovery and Reinvestment Act of 2009, we identified inaccuracies in data the Federal Highway Administration (FHWA) provided to Congress in December 2009 on the extent to which states directed funds to economically distressed areas and recommended that the Secretary of Transportation direct FHWA to make publicly available an accurate accounting and analysis. The Recovery Act included a number of requirements and provisions designed to support the Act's goals of promoting economic recovery, including a requirement that states give priority to transportation projects in economically distressed areas. In response to our recommendation, FHWA completed a comprehensive review of projects in economically distressed areas, and it posted on its website an accounting of the extent to which states directed Recovery Act transportation funds to projects located in economically distressed areas. By doing so, FHWA provided Congress and the public an accurate accounting of the use of Recovery Act funds and a basis for understanding whether the act's requirements of providing assistance to economically distressed areas were met.

    Recommendation: To ensure that Congress and the public have accurate information on the extent to which the goals of the Recovery Act are being met, the Secretary of Transportation should direct FHWA to make publicly available--within 60 days after the September 30, 2010, obligation deadline--an accurate accounting and analysis of the extent to which states directed funds to economically distressed areas, including corrections to the data initially provided to Congress in December 2009.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: In March 2012, HUD took steps to address this recommendation. Specifically, HUD staff developed a risk-based plan for monitoring TCAP projects with little third-party investment. To develop this risk-based plan, HUD requested that housing finance agencies (HFA) report certain data about their projects to HUD, including the dollar value of Low Income Housing Tax Credit (LIHTC) equity and funds provided by public and private sources. According to HUD, HFAs report this data after the units are completed. As part of its plan, HUD states that it will review these data on completed projects on a quarterly basis and review these data to identify TCAP projects that have less than $10,000 in LIHTC investment and no other federal funds. For grantees with projects meeting these criteria according to HUD, two HFAs had such projects as of March 2012. HUD will review the HFA's monitoring plans and contact them to discuss specific oversight and safeguards to ensure that their projects maintain their compliance with Section 42 of the Internal Revenue Code and TCAP requirements. HUD's plan states that it also will require the grantees to submit any documentation or plans of continued oversight of these projects. As additional TCAP projects become complete in the coming years, consistently executing this specialized monitoring approach will be important for HUD.

    Recommendation: Because the absence of third-party investors reduces the amount of overall scrutiny TCAP projects would receive and Department of Housing and Urban Development (HUD) is currently not aware of how many projects lacked third-party investors, HUD should develop a risk-based plan for its role in overseeing TCAP projects that recognizes the level of oversight provided by others.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: Treasury officials told us that after they provided additional guidance, every state HFA and the respective property owners complied with the 30 percent spending rule by the end of calendar year 2010. We concluded that Treasury and the state HFAs have addressed the intent of this recommendation.

    Recommendation: Treasury should expeditiously provide HFAs with guidance on monitoring project spending and develop plans for dealing with the possibility that projects could miss the spending deadline and face further project interruptions.

    Agency Affected: Department of the Treasury

  5. Status: Open

    Comments: 1) Regarding the need for agencies to provide timely management decisions, in December 2013, OMB released the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The guidance addressed part one of our recommendation by stating that the Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the Federal Audit Clearinghouse. In addition, the auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon reciept of the audit report. 2) With regard to issuing Single Audit Guidance in a timely manner, and specifically the OMB Circular A-133 Compliance Supplement, generally OMB officials plan and coordinate with the respective federal officials involved in drafting and in developing the OMB Circular A-133 Compliance Supplement starting in the late summer and early fall time frames of the year preceding the planned issuance of this guidance. Since we last reported in May 2012 on the status of OMB's efforts to issue the Compliance Supplement, for a number of reasons, the agency has not issued the Compliance Supplement in a timely manner so that auditors can effectively plan their work. Specifically, for fiscal years 2012, 2013, and 2014, OMB issued the guidance in August 2012, July 2013, and in May 2014, respectively. While the agency has issued the guidance earlier in each of the subsequent years noted, in part two of our recommendation we state our view that the guidance should be issued by the end of March each year so the auditors can effectively plan their work.

    Recommendation: To strengthen the Single Audit and federal follow up as oversight accountability mechanisms, the Director of OMB should (1) shorten the timeframes required for issuing management decisions by federal awarding agencies to grant recipients, and (2) issue the OMB Circular No. A-133 Compliance Supplement no later than March 31 of each year.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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