Iowa – September 20, 2010
What We Did
Our work in Iowa examined six programs receiving Recovery Act funds-the State Energy Program (SEP), the Energy Efficiency and Conservation Block Grant (EECBG) program, the Weatherization Assistance Program, and three education programs: (1) Title I, Part A, of the Elementary and Secondary Education Act of 1965 (ESEA), as amended; (2) Individuals with Disabilities Education Act (IDEA), Part B, as amended; and (3) the State Fiscal Stabilization Fund (SFSF)-as well as state and local efforts to stabilize their budgets, monitor the use of Recovery Act funds, and report the number of jobs paid for by these funds. We selected the SEP and EECBG programs because the Department of Energy (DOE) has instructed the states to increase their efforts to obligate and spend the Recovery Act funds for these programs. We selected the weatherization program because community action agencies in Iowa are weatherizing large numbers of homes. Finally, we selected the three education programs because these continue to be the largest source of Recovery Act funds in Iowa. For descriptions and requirements of the programs we reviewed, see appendix XVIII of GAO-10-1000SP.
To review the use of Recovery Act funds for the SEP and EECBG programs, we examined documents and met with officials of the Iowa Office of Energy Independence (OEI) in Des Moines, which is responsible for administering both programs. For the SEP program, we visited three grant recipients: the Des Moines Area Community College at Ankeny, the Iowa Association of Municipal Utilities, and the Sun Prairie/Vista Court Apartments. For the EECBG program, we visited two local governments that DOE supported directly: Iowa City and Warren County. For both SEP and EECBG, we discussed with officials how their agencies were using Recovery Act funds to support national energy goals, any concerns about complying with the Recovery Act's requirements, whether internal controls and monitoring systems were in place to ensure the effective and efficient use of funds, and the extent to which program recipients collected data on energy savings and job creation.
To review the weatherization program, we examined documents and met with officials of Iowai's Division of Community Action Agencies (DCAA), within the Department of Human Rights, which is responsible for administering the weatherization program in Iowa. We also met with the Executive Director of the Southern Iowa Economic Development Association (SIEDA), a local community action agency responsible for weatherizing homes in seven southern Iowa counties.
To review the use of Recovery Act funds for education, we met with officials from the Iowa Department of Education and reviewed state grant applications, financial records, and monitoring plans to identify the state's policies and procedures for ensuring the appropriate expenditure of Recovery Act funds. To obtain officials' projections of the financial condition of Iowa schools in 2010 and 2011, we interviewed the Iowa Department of Education's Chief Financial Officer and officials from six local school districts that we had contacted for previous Recovery Act reports-Atlantic, Des Moines, Maple Valley, Marshalltown, Ottumwa, and Waterloo. We also visited the Des Moines Independent Community School District and the Marshalltown Community School District to review districts' controls over the expenditure of Recovery Act funds. At each district we selected a judgmental sample of disbursements to review the use of funds and documentation of expenditures. We also discussed our findings with local and state officials.
To review state and local efforts to use Recovery Act funds and stabilize their budgets, we analyzed state and local budget information and met with state and municipal officials. We visited two Iowa localities-Des Moines and Marshalltown-which we selected to provide a mix of large and small communities and unemployment rates. We selected Des Moines because it is the largest city in Iowa and has an unemployment rate above the state's average-7.4 percent compared with a state average of 6.6 percent-and Marshalltown because its population is smaller compared with many other localities throughout the state, and its unemployment rate is 7.5 percent, above the state's average.
What We FoundBack to top
State Energy Program (SEP)
As of July 20, 2010, OEI had obligated $34.3 million, or 84.6 percent, of $40.5 million in Recovery Act funds for SEP. Specifically, OEI awarded $19.2 million in grants, which recipients plan to match with an additional $48.5 million from other sources. OEI also obligated $1.5 million to commission energy projects and is establishing a $6.5 million loan fund to stimulate energy efficiency improvements by Iowa businesses and a $1 million loan loss reserve to enhance financing credit for private sector energy efficiency projects. OEI has retained $6.1 million for administrative expenses. OEI expects to obligate its remaining funds by September 30, 2010. OEI reimburses grant recipients for applicable costs only after major milestones are achieved and recipients submit receipts and other supporting documentation. To monitor the use of funds, OEI plans to visit each grant recipient annually and will make more frequent visits to recipients receiving the largest SEP awards and to those with little or no prior experience with government accounting requirements.
Energy Efficiency and Conservation Block Grants (EECBG) program
Almost all (94 percent) of the $21.1 million in Recovery Act funds allocated to recipients in Iowa for EECBG has been obligated. However, only about 6 percent of the funds have been spent, in part because of delays between when OEI received its portion of the funds and when it awarded grants. According to OEI officials, the program was new and officials waited for DOE to issue guidance on the program's federal requirements. In addition, some grant recipients spent few funds because they were developing plans, providing information to agencies involved in ensuring compliance with federal and state requirements, or waiting for decisions on requests for waivers from certain federal requirements. The DOE project officer for the grant to OEI said that he believes Iowa will meet the DOE goal to draw down 20 percent of grant funds by September 30, 2010. As projects have begun, DOE and OEI have implemented strategies for monitoring grant recipients' use of funds. These strategies involve reviewing the information recipients report and visiting grant recipient's projects. Moreover, grant funds are paid only after recipients submit invoices and supporting documentation to DOE or OEI for payment.
Weatherization Assistance Program
In a July 13, 2010, letter to DOE, DCAA certified that it had, among other things, completed weatherizing 2,178 homes-30.3 percent of its target of 7,196 homesi-using Recovery Act funds. DCAA also certified that it had inspected at least 5 percent of the homes weatherized by each of the 17 local agencies that used Recovery Act funds. In response, DOE notified DCAA on July 26, 2010, that the department had released the remaining 50 percent of Iowa's Recovery Act weatherization funds, or $40.4 million. On August 17, 2010, DCAA notified SIEDA that it would release $1.7 million in Recovery Act funds effective August 23, 2010, for weatherizing homes in seven southern Iowa counties. DCAA had delayed making these funds available until SIEDA had corrected numerous weaknesses in its oversight of weatherization contractors.
Between 2009 and 2011, Iowa will receive about $666 million in Recovery Act funds from the U.S. Department of Education (Education) to support local school districts, institutions of higher learning, and selected public safety and assistance programs. These funds will be provided to the state through three Education programs: Title I, Part A, of the ESEA; IDEA, Part B; and SFSF. As of June 30, 2010, Iowa reported that local school districts, institutions of higher learning and state government entities had spent or distributed about $501 million in Recovery Act education funds-more than 75 percent of the Recovery Act education funds provided to the tate. Iowa reported that these funds paid for more than 7,800 education-related positions across the state in the final quarter of the 2009-2010 school year (April 1 to June 30, 2010). Although Recovery Act funding for education in Iowa will be much less in the 2010-2011 school year, a state education official said that he was optimistic about the financial outlook for most local school districts in the state. Officials from six local districts stated that they expected to balance their budgets by taking a number of actions, including reducing staff, suspending new hiring, consolidating schools, raising local taxes, and drawing upon their reserve funds, including unspent Recovery Act funds received in school year 2009-2010.
Our review of expenditures at the Des Moines and Marshalltown school districts showed that Recovery Act funds were used to pay educators' salaries, purchase books to support curriculum, and purchase specialized equipment to upgrade services to students with disabilities. Our review of selected disbursements at these two local school districts showed that Recovery Act funds were generally spent and accounted for appropriately. However, we found and state officials agreed that these districts did not fully comply with requirements to obtain approval for IDEA equipment purchases of $5,000 or more.
State and local governments' use of Recovery Act funds
According to senior officials from the Iowa Department of Management, Recovery Act funds have enabled the state to continue avoiding tax increases and reduce the amount of funds drawn from the state's Cash Reserve Fund to balance the fiscal year 2011 budget. Anticipating the end of Recovery Act funds and other one-time sources of revenue, Iowa is implementing several plans to improve the efficiency of state operations and reorganize state agencies to reduce state expenditures. For example, as of June 30, 2010, about 2,100 eligible state employees had applied for retirement under the state's early retirement plan. Officials at the two localities we visited-Des Moines and Marshalltown-said that they have used Recovery Act funds for various programs, and that these funds have helped to stabilize their budgets. However, they also said that they plan to reduce expenditures or eliminate programs-such as Marshalltown's lead abatement programi-once Recovery Act funds are depleted. Local officials also said that they encountered several problems applying for and administering funds from some Recovery Act competitive grants. These problems included finding staff to apply for the grants and difficulties complying with some of the statutory requirements, such as the Buy American and Davis-Bacon provisions.
State monitoring and internal controls
Iowa's Office of the State Auditor and the Iowa Accountability and Transparency Board continue to monitor controls over Recovery Act funds. While the Office of the State Auditor did not identify any material weaknesses in its fiscal year 2009 Audit report, officials said that they identified some problems with internal controls, such as inadequate monitoring of subrecipients. In May 2010, the state provided training on subrecipient monitoring to state and local agencies receiving Recovery Act funds.
State and local recipient reporting
Iowa created a centralized database that it uses to calculate the number of jobs created based on data provided by state and local agency officials. Through its centralized database, Iowa reported that 9,696 jobs were funded by the Recovery Act for the period April 1 to June 30, 2010, as of July 29, 2010. Iowa has also implemented internal controls to ensure the accuracy of jobs data, such as requiring state and local agency officials to certify that they reviewed and approved jobs data prior to submission.
Full September ReportBack to top
- Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 284 pages) Accessible Text
- Recovery Act: Opportunities to Improve Management and Strengthen Accountability over States' and Localities' Uses of Funds
- Summary (HTML) Full Report (PDF, 575 pages) Accessible Text
-  Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
-  We selected the Des Moines District because it is the largest K-12 school district in the state and receives the most federal Recovery Act dollars. Marshalltown, a midsized district, was selected because of financial control weaknesses identified in the district's 2008 Independent Auditor's Report.
-  We judgmentally selected 40 Des Moines School District disbursements for February 2009 through March 2010 and 20 Marshalltown School District disbursements for February 2009 through April 2010. Among other things, when selecting disbursements for review, we considered large-dollar purchases; round number purchases such as $20,000; payments to unusual payees, such as a local department store; and large purchases broken into several smaller payments.
-  The state received an additional $15 million to fund education technology, IDEA Part C, school lunch equipment, homeless youth and a teacher quality partnership project.
-  The State Auditor issued the fiscal year 2009 Single Audit report on March 31, 2010. Single Audits are prepared to meet the requirements of the Single Audit Act, as amended, (31 U.S.C. §§ 7501-7507) 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 controls 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.