North Carolina – May 26, 2010

The content below was excerpted from the North Carolina Appendix (PDF, 45 pages) of GAO's most recent bimonthly review of the Recovery Act.[1]

What We Did

Our work in North Carolina included gathering information about eight programs funded under the Recovery Act-3 education programs, the Weatherization Assistance Program, the Transit Capital Assistance Fund, the Dislocated Worker program under the Workforce Investment Act (WIA), and the Clean Water and Drinking Water State Revolving Funds. We also reviewed the use of Recovery Act funds for budget stabilization at the state level and in four local communities, and reviewed the work of the accountability community in monitoring and reporting on Recovery Act funds. For descriptions and requirements of the programs we covered, see appendix XVIII of GAO-10-605SP.

For education, we reviewed North Carolina's monitoring plans for the expenditure of funds under the State Fiscal Stabilization Fund (SFSF), Title I 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, to ensure local educational agencies (LEA) are spending the funds in compliance with applicable laws and regulations. We also reviewed the state's fiscal monitoring activities and visited two local educational agencies--Winston-Salem/Forsyth County Schools and Avery County Schools-to review Recovery Act spending and how LEAs were ensuring appropriate use of the funds. Our review of LEAs included an examination of local compliance with state directives governing procurement with Recovery Act funds.

For the Weatherization Assistance Program in North Carolina, we visited the State Weatherization Office and three community action agencies that are executing the program (Four County Community Services, Laurinburg, N.C.; Martin County Community Action, Williamston, N.C.; and Watauga-Avery-Mitchell-and Yancey Counties (W.A.M.Y.) Community Action Agency, Boone, N.C.). We interviewed officials and reviewed guidance and other documents related to the Weatherization Assistance Program pertaining to monitoring, client eligibility, and program status. We also reviewed 10 client files from each of the three community action agencies to determine completeness of the files and inclusion of required documentation. We also accompanied weatherization staff as they performed initial audits, work in progress, and final inspection of nine homes.

For the transit program, we visited the North Carolina Department of Transportation and AppalCART, a local transportation agency, to follow up on their oversight of the construction of AppalCART's new transit facility.

For the Dislocated Workers program, we visited the North Carolina Department of Commerce to gather information about the state workforce development board's use of Recovery Act funds for the program. We also visited two local Workforce Development Boards, Lumber River and Charlotte-Mecklenburg, to review the use of funds at the local level.

We reviewed the Clean Water and Drinking Water State Revolving Funds (SRF) under the direction of the North Carolina Department of Environment and Natural Resources (DENR), which is distributing these funds; interviewed state officials; and reviewed documents. In addition we interviewed officials at the Charlotte-Muddy Creek/Campbell Creek Project for the Clean Water SRF and at the Perquimans County Winfall Treatment Plant Project for the Drinking Water SRF. The Clean Water project was in an urban area and a Green Reserve Requirement Program project. The Drinking Water project was in a rural community and serves a community in need of drinking water infrastructure improvements.

To learn more about use of Recovery Act funds to stabilize state and local budgets, we visited four local communities--Bladen County, the City of Durham, Halifax County, and the City of Jacksonville. We also interviewed state budget officials to gather information about the state's fiscal condition, including challenges to future economic recovery.

What We FoundBack to top


North Carolina conducts on-going fiscal monitoring of LEA expenditures under the three Recovery Act programs-SFSF, IDEA Part B, and ESEA Title I-through its existing processes of electronic systems checks, yearly desk audits, and selected on-site monitoring as well as some additional reviews incorporated specifically for SFSF. Although North Carolina has a range of monitoring processes in place, weaknesses in LEA monitoring efforts-allowing use of federal funds on potentially unallowable purchases and failure to follow some procurement regulations, for example-show the need for the state to enhance its monitoring efforts related to the use of Recovery Act funds. We also discussed with North Carolina officials their experiences with meeting education reform assurances for SFSF and implementing the Recovery Act School Improvement Grant (SIG) program. These officials reported that additional funding would help further enhance and expedite data collection efforts related to meeting the assurances and that limited time to disburse funds to LEAs is the primary challenge in implementing the SIG program in the state. Finally, we found that while North Carolina has processes in place to collect and review LEA and institution of higher education (IHE) recipient reporting data, more review by the state is necessary to ensure that the data local entities submit is accurate. For example, in the second round of recipient reporting, the state likely missed under-reporting by one IHE because the state does not collect and review IHEs' supporting documentation.


North Carolina weatherization officials have established several controls to ensure subgrantees' compliance with Recovery Act requirements, but face challenges meeting monitoring goals due to staffing levels. Subgrantees reported that slow allocation and reimbursement of funds by the state agency created challenges for them in executing the program.


We found that the North Carolina Department of Transportation and AppalCART, a local transit agency, are experiencing challenges in providing oversight for the first non-urban, Recovery Act-funded transit infrastructure project in the state; and the Recovery Act Buy American and prevailing wage requirements for that project had not been enforced or monitored.

Dislocated Workers

The North Carolina Division of Workforce Development distributed 60 percent of the nearly $44 million in Recovery Act funds it received for the WIA Dislocated Worker program. The state trained 38 percent more dislocated workers between July 1, 2009, and December 30, 2009, than in the corresponding period in the previous year. The local areas we visited-Lumber River and Charlotte/Mecklenburg had over a 300 percent increase in the number of dislocated workers who participated in training compared to the same period in the previous year. State officials told us Recovery Act funds are primarily being used for individual training accounts, which individuals use to purchase training.

Clean and Drinking Water State Revolving Funds

State officials told us they have met all the Recovery Act deadlines with minimal challenges including the February 17, 2010, deadline for projects to be under contract. In the Clean Water SRF Green Reserve Requirement Program, challenges included applicants failing to obtain needed easements prior to loan approval and the subsequent need to find other loan applicants.[2] In the Drinking Water Program, officials noted late or insufficient guidance from the Environmental Protection Agency (EPA) and the Department of Labor (Labor). The state set a maximum loan amount of $3 million per project when distributing Recovery Act funds in order to spread funding across a larger number of assistance recipients and established principal forgiveness to encourage participation.

State and Local Budget Stabilization

The localities we visited used Recovery Act funds to support a variety of initiatives. Although their budgets differed in terms of stability, officials in all four localities told us that the Recovery Act funds they received helped to start, continue, or speed up a variety of programs and projects in their jurisdictions. However, they also told us Recovery Act funds were not enough to affect their government's fiscal stability. Local officials told us they continue to face difficult budget decisions in the wake of declining property and sales tax revenues. State officials told us North Carolina continues to face significant budget challenges, but reported signs of improvement in revenues for the first quarter of 2010.

Full May ReportBack to top

Recovery Act: States' and Localities' Uses of Funds and Actions Needed to Address Implementation Challenges and Bolster Accountability
Recovery Act: States' and Localities' Uses of Funds and Actions Needed to Address Implementation Challenges and Bolster Accountability
  • [1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
  • [2] A project is defined in the Recovery Act as qualified for the green reserve requirement funding if it addresses green infrastructure, water or energy efficiency improvements or other environmentally innovative activities. The Recovery Act requires that a state set aside at least twenty percent of its grant for these types of projects.
GAO Contact
portrait of of Cornelia M. Ashby

Cornelia M. Ashby

Director, Education, Workforce, and Income Security

(202) 512-8403

portrait of of Paula M. Rascona

Paula M. Rascona

Director, Financial Management and Assurance

(202) 512-9508