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entitled 'Trade Adjustment Assistance: Commerce Program Has Helped 
Manufacturing and Services Firms, but Measures, Data, and Funding 
Formula Could Improve' which was released on September 13, 2012. 

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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

September 2012: 

Trade Adjustment Assistance: 

Commerce Program Has Helped Manufacturing and Services Firms, but 
Measures, Data, and Funding Formula Could Improve: 

GAO-12-930: 

GAO Highlights: 

Highlights of GAO-12-930, a report to congressional committees. 

Why GAO Did This Study: 

Over the past decade, U.S. imports of goods and services have almost 
doubled, reaching $2.7 trillion in 2011. Although trade expansion can 
enhance economic welfare, many firms and workers experience 
difficulties adjusting to import competition. The TAA for Firms 
program assists trade-impacted, economically distressed U.S. firms in 
making adjustments that may enable them to remain competitive in the 
global economy. The Department of Commerce’s EDA administers the $15.8 
million program through 11 TAA Centers throughout the United States. 
In 2009, the Trade and Globalization Adjustment Assistance Act, as 
part of American Recovery and Reinvestment Act, amended the TAA for 
Firms program and mandated that GAO review its operation and 
effectiveness. GAO examined (1) the results of the legislative changes 
on program operations and participation, (2) the performance measures 
and data EDA uses to evaluate the program and what these tell us about 
the program’s effectiveness, and (3) how program funding is allocated 
and spent. 

GAO reviewed pertinent legislation, program documentation, and data; 
conducted an economic analysis and a survey of participant firms; and 
met with EDA officials, representatives of the 11 TAA Centers, and 
others. 

What GAO Found: 

Changes to the Trade Adjustment Assistance (TAA) for Firms program 
mandated by the Trade and Globalization Adjustment Assistance Act led 
to program improvements and increased participation, but participation 
declined when the legislative changes lapsed and the program faced 
funding uncertainty. The changes resulted in reduced time to certify 
firms, new performance reporting, and increased participation. For 
example, officials told GAO that creating a director position and 
other full-time positions for the program reduced time to certify 
firms. In fulfilling new reporting requirements, the Economic 
Development Administration (EDA) collected information on performance 
measures and issued three annual reports. Also, EDA certified 26 
services firms not previously eligible, as well as 32 additional firms 
based on more flexible certification requirements to demonstrate trade 
impacts. Although EDA increased the number of certified petitions and 
approved business recovery plans from fiscal years 2008 through 2010, 
the lapse in the legislative changes from February to October 2011 and 
uncertainty about program funding contributed to a decline in 
certified petitions and approved plans in fiscal year 2011. 

EDA’s performance measures and data collection for the TAA for Firms 
program provide limited information about the program’s outcomes, 
although GAO’s economic analysis found that participation in the 
program is statistically associated with an increase in firm sales. 
EDA collects data to report on 16 measures to gauge the program’s 
performance, such as the number of firms that inquired about the 
program and the number of petitions filed, but most of these measures 
do not assess program outcomes. EDA is exploring better ways to assess 
the effect of their efforts on firms. In addition, EDA does not 
systematically maintain data collected by the TAA Centers on the firms 
they assist, resulting in gaps in centralized data that EDA could use 
to evaluate the program and meet reporting requirements. However, GAO’
s analysis of data collected from the centers showed that the program 
was associated with increased sales and productivity for manufacturing 
firms, although some factors were more strongly correlated with 
improved performance than was participation in the TAA for Firms 
program. GAO’s survey of and interviews with firms participating in 
the program found that many firms reported satisfaction with the program
’s impacts. Notably, 73 percent reported that the program helped them 
with profitability; 71 percent that it helped them retain employees; 
and 57 percent that it helped them hire new employees. 

To allocate funding to the TAA Centers, EDA uses a formula of weighted 
factors, such as each center’s share of approved business recovery 
plans. However, the formula does not factor in differences in program 
need and costs in centers’ service regions, even though centers varied 
in their use of program funds. For example, the formula does not take 
into account potential need for the program based on its objective of 
assisting firms that have lost sales and employment due to import 
competition. The formula also does not take into account the 
considerable differences in the costs of operating the centers to 
assist firms. As a result, some centers had spent their entire 
allocation by the conclusion of the most recent grant period, while 
other centers had not. Although EDA de-obligates and reallocates any 
unspent funds, it uses its allocation funding formula to do so, thus 
perpetuating the deficiency of failing to consider variable needs and 
costs. 

What GAO Recommends: 

GAO recommends that Commerce establish more effective measures of 
program outcomes, improve its data collection, and allocate funds in a 
way that considers program needs and costs. Commerce concurred with 
GAO’s findings and recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-12-930]. To view an e-
supplement with more data see GAO-12-935SP. For more information, 
contact J. Alfredo Gomez at (202) 512-4101 or gomezj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

TGAAA Changes Led to Program Improvements and More Participation: 

EDA's Performance Measures and Data Collection Limit Its Ability to 
Gauge Program Effectiveness, but Our Analysis Shows Positive Impact: 

EDA's Allocation of Program Funds Falls Short of Meeting Key Standard 
for Funding Formulas: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Trade Adjustment Assistance for Firms and Other 
Department of Commerce Programs: 

Appendix III: Economic Analysis of the Effect of Trade Adjustment 
Assistance Policy on Firm Market Performance: 

Appendix IV: Data That EDA Uses for Its Funding Allocation Formula and 
Share of Funding by Center: 

Appendix V: Comments from the Department of Commerce: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: TGAAA Marked First Legislative Change to the TAA for Firms 
Program since 1986: 

Table 2: Few of EDA's 16 Performance Measures for TAA for Firms 
Program Are Outcome Measures; Most Are Output Measures: 

Table 3: TAA Centers' Backlogs of Approved, Unfunded Assistance from 
Cooperative Agreement Year 2008 to April 2012: 

Table 4: Overview of TAA for Firms and MEP Programs: 

Table 5: Summary of Data Used in TAAC Regression Analysis: 

Table 6: Semi-log Model Coefficients for TAA for Firms Regression 
Models: 

Table 7: Data Used for TAA for Firms Funding Allocation Formula and 
Each Center's Share of Funding Based on Each Factor, Cooperative 
Agreement Year 2011: 

Table 8: Funding Allocation to TAA Centers Based on EDA's Funding 
Formula, Cooperative Agreement Year 2011: 

Figures: 

Figure 1: TAA Centers Cover 11 Regions and Are Affiliated with Seven 
Universities and Four Nonprofit Organizations: 

Figure 2: TAA for Firms Process Requires Collaboration among Firms, 
TAA Centers, and EDA: 

Figure 3: TAA Centers Proposed a Variety of Projects in Firms' 
Business Recovery Plans, Fiscal Years 2009 through 2011: 

Figure 4: Petitions Certified and Business Recovery Plans Approved by 
EDA and the TAA Centers, Fiscal Years 2008 through 2011: 

Figure 5: TAA for Firms Program Clients Expressed Satisfaction with 
Program and Results: 

Figure 6: TAA for Firms Funding Formula Allocates Funding to TAA 
Centers Using Fixed and Variable Factors: 

Figure 7: TAA Centers' Costs Varied during Cooperative Agreement Years 
2008 through 2010: 

Figure 8: Proportion of Indirect Costs Tends to Be Higher for 
University-Affiliated TAA Centers, Cooperative Agreement Years 2008 
through 2010: 

Abbreviations: 

Commerce: Department of Commerce: 

EAA: Economic Adjustment Assistance: 

EDA: Economic Development Administration: 

FGLS: feasible generalized least squares: 

ITC: International Trade Commission: 

MEP: Manufacturing Extension Partnership: 

NAICS: North American Industry Classification System: 

NIST: National Institute of Standards and Technology: 

OMB: Office of Management and Budget: 

TAA: Trade Adjustment Assistance: 

TGAAA: Trade and Globalization Adjustment Assistance Act: 

View [hyperlink, http://www.gao.gov/products/GAO-12-935SP] Key 
Components: 

Trade Adjustment Assistance: Results of GAO's Survey of Participant 
Firms in the Trade Adjustment Assistance for Firms Program (GAO-12-
935SP), an e-supplement to GAO-12-930. 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

September 13, 2012: 

The Honorable Max Baucus:
Chairman:
The Honorable Orrin G. Hatch:
Ranking Member:
Committee on Finance:
United States Senate: 

The Honorable Dave Camp:
Chairman:
The Honorable Sander Levin:
Ranking Member:
Committee on Ways and Means:
House of Representatives: 

From 2001 to 2011, U.S. imports of goods and services grew sharply, 
almost doubling from about $1.4 trillion to about $2.7 trillion. 
During the same period, the United States entered into free trade 
agreements that liberalize trade with 14 partner countries. The World 
Trade Organization also admitted China, Vietnam, and 11 other members 
during this time. In 2012, bilateral free trade agreements with South 
Korea and Colombia went into effect. Further trade liberalization is 
being pursued, including a Transpacific Partnership among 11 nations 
in the Asia-Pacific region and North America regions. 

Although trade expansion can enhance the economic welfare of all trade 
partners, many firms and workers experience difficulties adjusting to 
import competition. Congress has responded to concerns about these 
difficulties with trade adjustment assistance (TAA) programs, 
including the TAA for Firms program administered by the Department of 
Commerce's (Commerce) Economic Development Administration (EDA). 
[Footnote 1] Established in 1962, the TAA for Firms program provides 
technical assistance to help trade-impacted, economically distressed 
firms make adjustments that may enable them to remain competitive in 
the global economy. In fiscal years 2009 through 2012, EDA received 
$15.8 million annually for the TAA for Firms program, an amount far 
smaller than the funding provided for other TAA programs. EDA uses its 
appropriation for the TAA for Firms program to fund 11 TAA Centers, 
which provide assistance to U.S. manufacturing, production, and 
service firms in all 50 states, the District of Columbia, and the 
Commonwealth of Puerto Rico. We last examined the TAA for Firms 
program in 2000.[Footnote 2] 

Congress authorized and amended the TAA for Firms program under the 
American Recovery and Reinvestment Act's Trade and Globalization 
Adjustment Assistance Act (TGAAA) of 2009 and mandated that we review 
the operation and effectiveness of these amendments by September 30, 
2012. In response, this report examines (1) the results of the 
legislative changes on program operations and participation, (2) the 
performance measures and data that EDA uses to evaluate the program 
and what these tell us about the program's effectiveness, and (3) how 
program funding is allocated and spent. 

To describe the results of the legislative changes on program 
operations and participation, we reviewed relevant program 
legislation, regulations, and agency documentation, including those 
outlining the operational and administrative changes to implement the 
program amendments in the TGAAA. We analyzed agency data on firms' 
program participation and interviewed EDA officials, including the 
Director of the TAA for Firms program, the Chief Counsel, and 
certifying officials, to determine the impact of the legislative 
changes on the program's operations. We conducted site visits or 
teleconferences with the 11 TAA Centers. During these visits, we 
interviewed staff, firm representatives, and consultants to learn 
about their procedures for conducting outreach and assisting firms and 
to learn about the results of the legislative changes on the program. 
We selected the eight site-visit locations to take into account 
geographic diversity and a mix of nonprofit and university-affiliated 
TAA Centers,[Footnote 3] as well as a range of industries, and number 
of submitted and approved petitions and business recovery plans. In 
addition, we collected and analyzed data from EDA and the 11 TAA 
Centers to determine the number of firms receiving assistance from 
fiscal years 2008 through 2011. We assessed the reliability of the 
data by checking for accuracy and completeness. We determined that the 
data were sufficiently reliable for the purposes of reporting numbers 
of submitted and approved petitions and business recovery plans. 

To determine the extent to which EDA's performance measures capture 
program effectiveness, we used criteria from our prior work. We also 
reviewed EDA guidance and conducted interviews with EDA officials to 
identify their data collection procedures and to learn how program 
data are used. We reviewed two prior studies of the effectiveness of 
the TAA for Firms program--our 2000 report and a report issued by the 
Urban Institute in 1998.[Footnote 4] To gauge the impact of the 
program, we collected data on a group of firms that completed at least 
one project in their business recovery plans during fiscal years 2009 
through 2011, as well as data on general economic indicators, and 
conducted a regression analysis with these data. Because the data we 
collected did not include any information about firms that did not 
participate in the program, this analysis allows us to make inferences 
from the regression estimates only for the firms that participated in 
the program during this time period. In addition, we conducted a 
survey of 163 firms to obtain their views about the quality of the 
assistance received and its impact. We received usable responses from 
117 of them, for a final response rate of 72 percent. We conducted an 
analysis of our survey results to identify potential sources of 
nonresponse bias by comparing respondents with nonrespondents on key 
characteristics. Our analysis did not identify any large differences 
between respondents and nonrespondents for these characteristics. As a 
result, we determined that the survey results for the 117 respondents 
were sufficiently reliable to present in our report. This report does 
not contain all of the results from the survey. The survey and a more 
complete tabulation of the results can be viewed online in an e-
supplement to this report at GAO-12-935SP. 

To examine how EDA allocates and spends program funding, we 
interviewed EDA officials and TAA Center staff, reviewed EDA and TAA 
Center program data and reports, and analyzed documentation of the 
funding formula and the allocation of program funding. We reviewed 
EDA's 2003 spending plan defining the factors included in the formula; 
using equity standards from social science research to evaluate and 
design funding allocation formulas,[Footnote 5] we assessed the 
program's current funding formula and the data used to measure each of 
the factors. We also analyzed EDA's spending plans for cooperative 
agreement years 2009 to 2011 to assess the measures used to allocate 
program funding to the TAA Centers during each of those cooperative 
agreement years.[Footnote 6] For a more complete discussion of our 
scope and methodology, see appendix 1. 

We conducted this performance audit from July 2011 to September 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Background: 

The purpose of the TAA for Firms program is to help trade-impacted, 
economically distressed U.S. manufacturing, production, and service 
firms make adjustments that may enable them to remain competitive in 
the global economy. The program delivers technical assistance to firms 
by developing business recovery plans and providing matching funds to 
implement the projects in the plans. EDA uses its appropriation for 
the TAA for Firms program to fund 11 TAA Centers, signing a 
cooperative agreement with each center. The centers provide assistance 
to U.S. manufacturing, production, and service firms in all 50 states, 
the District of Columbia, and the Commonwealth of Puerto Rico. Each 
TAA Center uses the funding that EDA allocates under the cooperative 
agreement to cover its administrative and operational costs and works 
directly with firms in its geographic region to provide assistance on 
a cost-share basis. None of the program funds go directly to firms; 
instead, funds go to third-party consultants to implement firms' 
projects. The centers cover geographic regions of varying size, 
composed of one to eight states. A TAA Center may be affiliated with a 
university, private firm, or nonprofit organization; however, as shown 
in figure 1, nonprofit organizations currently manage four centers, 
while the other seven centers are affiliated with universities. 

Figure 1: TAA Centers Cover 11 Regions and Are Affiliated with Seven 
Universities and Four Nonprofit Organizations: 

[Refer to PDF for image: illustrated U.S. map] 

TAA Center: New England, N. Billerica, Massachusetts; 
Affiliation: Nonprofit. 

TAA Center: New York, Binghampton; 
Affiliation: University. 

TAA Center: MidAtlantic, Washington, DC; 
Affiliation: Nonprofit. 

TAA Center: Southeastern, Atlanta, Georgia; 
Affiliation: University. 

TAA Center: Great Lakes, Ann Arbor, Michigan; 
Affiliation: University. 

TAA Center: Mid-America, Blue Springs, Missouri; 
Affiliation: University. 

TAA Center: Southwest, San Antonio; 
Affiliation: University. 

TAA Center: Rocky Mountain, Boulder, Colorado; 
Affiliation: University. 

TAA Center: Midwest, Chicago, Illinois; 
Affiliation: Nonprofit. 

TAA Center: Northwest, Seattle, Washington; 
Affiliation: Nonprofit. 

TAA Center: Western, Los Angeles, California; 
Affiliation: University. 

Source: GAO analysis of EDA data; Map Resources (map). 

[End of figure] 

Staff at the TAA Centers generally target their outreach to small and 
medium-sized firms in the manufacturing, agricultural, and service 
sectors.[Footnote 7] They use a variety of outreach methods to 
identify potential firms, including the following: 

* analyzing industry databases; 

* conducting cold calls and providing information via websites, e-
mail, and mail; 

* presenting at seminars and meetings hosted by banking consortia, 
business and trade associations, and members of Congress; 

* collaborating with state and local entities, including local 
departments of commerce and agriculture, economic and small business 
development centers, and chambers of commerce; 

* targeting firms with workers who qualify for the TAA for Workers 
program or firms involved with International Trade Commission 
antidumping lawsuits; and: 

* acting on referrals from program consultants and current and former 
clients. 

Once a firm connects with a TAA Center, staff may use various methods 
to determine whether firms are financially able to participate in the 
program. Some centers review preliminary financial documentation in an 
effort to help ensure that firms are eligible for assistance and 
committed to participating in the program. One center developed a 
series of eligibility questions on its website, so that firms can 
determine whether they are eligible for the program before applying 
for assistance. 

The TAA for Firms program process has three phases--petition for 
certification, recovery planning, and business recovery plan 
implementation--requiring collaboration among firms, TAA Centers, and 
EDA. Figure 2 presents a flowchart summary of the process. 

Figure 2: TAA for Firms Process Requires Collaboration among Firms, 
TAA Centers, and EDA: 

[Refer to PDF for image: process illustration] 

Petition for certification: 3-4 months: 

Firm and TAA Center: 
Firm submits documentation to demonstrate trade impact for petition. 
Center assists firm at no cost in preparing petition. 
Center submits petition to EDA. 

EDA has 40 days to review petition and either approve EDA or deny it. 
With approval, EDA certifies the firm as eligible for program.  

Recovery planning:  Up to 2 years: 

Firm and TAA Center: 
Firm has 2 years to develop and submit business recovery plan in 
conjunction with the Center. 
Center works closely with firm to develop customized plan that 
outlines technical assistance projects for the firm to undertake. 
Center submits business recovery to EDA. 
EDA EDA has 60 days to approve or deny the business recovery plan. 

Business recovery implementation plan: Up to 5 years: 

Firm and TAA Center: 
Firm has up to 5 years from date of approval to fully implement 
projects in business recovery plan, unless EDA grants an extension.     
Center and firm jointly identify consultants with expertise required 
to implement projects in plan. 

Center sends customer satisfaction survey to firm upon completion of 
business recovery plan and tracks firm's sales, employment, and 
productivity data for up to two years after completion of program. 

Source: GAO analysis of EDA documents. 

[End of figure] 

A firm seeking TAA program benefits must submit a petition to EDA to 
receive certification of its eligibility to participate in the 
program. TAA Center staff collect documentation from a firm to 
demonstrate in the petition each of the following: 

1. A significant number or proportion of the firm's workers have been 
or are threatened to be totally or partially separated. 

2. Total sales and/or production or sales and/or production of a 
product that represents at least 25 percent of the firm's total have 
decreased absolutely during the 12-month period preceding the most 
recent 12-month period; or total sales and/or production, or that of a 
product that represents at least 25 percent of the firm's total, have 
decreased during the most recent 12-month period compared with the 
preceding 12- , 24-, or 36-month period. 

3. Increases in imports of articles or services comparable to, or 
directly competitive with, the firm's articles or services contributed 
importantly to worker separations (or threat thereof) and the declines 
in sales or production. Firms must generally demonstrate that import 
impact has occurred, using a combination of import data or statements 
from their customers to certify that imports were a factor in the 
decreased purchase of the firm's products. 

Once EDA approves the petition and certifies the firm, the firm and 
TAA Center staff have 2 years to develop a business recovery plan and 
submit it to EDA for approval. Center staff work closely with the 
firm's management to identify the firm's strengths and weaknesses and 
develop a customized plan designed to stimulate its recovery and 
growth.[Footnote 8] EDA requires standard information in each business 
recovery plan, such as a description of the firm's competitive 
problems, prospects for recovery, and specific technical assistance 
projects. However the length, level of detail, and amount of 
information provided in the plans vary across the TAA Centers. EDA 
officials review and approve the plans on the basis of whether they 
meet regulatory requirements and supply the necessary supporting 
documents. 

After EDA approves a business recovery plan, the TAA Center funds 
projects within the plan,on a cost-share basis with the firm, subject 
to the availability of funds. The TAA for Firms program will provide 
up to $75,000 toward the projects, but firms are required to match 
federal funds.[Footnote 9] TAA funds can be used to provide technical 
assistance to firms but may not be used for capital expenditures such 
as physical plant improvement or machinery upgrades. In fiscal years 
2009 through 2011, TAA Centers proposed four types of projects in 
firms' business recovery plans (see figure 3).[Footnote 10] 

Figure 3: TAA Centers Proposed a Variety of Projects in Firms' 
Business Recovery Plans, Fiscal Years 2009 through 2011: 

[Refer to PDF for image: pie-chart] 

Marketing/Sales (Strategic market planning, sales planning and 
development, website updates): 34%; 
Production/Engineering (Production evaluation, lean manufacturing, and 
industry certification): 29%; 
Support systems (Information technology systems upgrades, new computer 
network installation, product identification software): 23%;   
Management/Financial (Management and leadership development, financial 
planning, cost accounting and pricing system): 14%. 

Source: EDA annual reports.  

[End of figure] 

To assist a firm in implementing the projects in its business recovery 
plan, TAA Center staff work with firm management to identify and 
competitively select third-party consultants with the specific 
expertise needed. In some instances, center staff said that they 
collaborate with consultants from Commerce's Manufacturing Extension 
Partnership program to implement projects in the TAA firms' business 
recovery plans. (Please see appendix II for a discussion of the 
similarities, differences, and interactions among the TAA for Firms, 
Manufacturing Extension Partnership, and other Commerce programs.) 

In addition to mandating that we report on the TAA for Firms program, 
the TGAAA mandated that we report on the other TAA programs.[Footnote 
11] In July 2012, we issued our report on the TAA for Farmers program. 
[Footnote 12] Our reports on the TAA for Workers and Communities 
programs are forthcoming. 

TGAAA Changes Led to Program Improvements and More Participation: 

The 2009 legislative changes to the TAA for Firms program resulted in 
reduced firm certification processing times, new performance 
reporting, and increased firm participation. However, EDA officials 
and TAA Center staff said that the lapse of these legislative changes 
from February 2011 to October 2011 and the uncertainty regarding 
program funding contributed to a decrease in firm participation in 
fiscal year 2011. 

Some TGAAA Changes Resulted in Reduced Firm Certification Processing 
Times, New Performance Reporting, and Increased Firm Participation: 

The TGAAA marked the first major change in the TAA for Firms program 
since 1986 (see table 1). The 2009 legislation included changes to the 
program, such as eligibility for service sector firms and more 
flexible certification requirements. However, TGAAA provided that the 
provisions that expanded eligibility would expire and that on January 
1, 2011 the TAA for Firms program be administered as if the expanded 
provisions had not been enacted. As authorization of the program was 
about to expire on January 1, 2011, Congress passed the Omnibus Trade 
Act of 2010 to extend the program through February 2012.[Footnote 13] 
However, this legislation did not reinstitute the TGAAA changes, which 
resulted in a lapse of the TGAAA changes from February 2011 until 
October 2011. In October 2011, the TAA Extension Act of 2011 
reinstituted many of the TGAAA's changes, including service sector 
firm eligibility and the more flexible certification requirements. 
[Footnote 14] 

Table 1: TGAAA Marked First Legislative Change to the TAA for Firms 
Program since 1986: 

Year enacted: 1962; 
Legislation: Trade Expansion Act of 1962; 
* Established TAA for Firms program; 
* Authorized direct financial assistance (loans/guarantees) and 
technical assistance to firms. 

Year enacted: 1975; 
Legislation: Trade Act of 1974; 
* Authorized current TAA for Firms program; 
* Outlined procedures, eligibility requirements, benefits terms and 
conditions, and administrative provisions of the program. 

Year enacted: 1986; 
Legislation: Consolidated Omnibus Budget Reconciliation Act of 1985; 
* Eliminated direct financial assistance (loans/guarantees) to firms; 
* Increased government participation in technical assistance; 
* Expanded criteria for firm certification. 

Year enacted: 2009; 
Legislation: Trade and Globalization Adjustment Assistance Act of 2009 
(TGAAA), part of the American Recovery and Reinvestment Act of 2009; 
* Required annual report to Congress; 
* Established service sector firm eligibility; 
* Established more flexible certification requirements; 
* Established 40-day certification requirement; 
* Increased authorized funding levels to $50 million; 
* Created Director of Adjustment Assistance for Firms position. 

Year enacted: 2010; 
Legislation: Omnibus Trade Act of 2010; 
* Extended program but allowed TGAAA changes to lapse from February 
2011 to October 2011; 
program operated according to pre-TGAAA program regulations during 
this time. 

Year enacted: 2011; 
Legislation: Trade Adjustment Assistance Extension Act of 2011; 
* Extended program until December 2013; 
* Reinstated TGAAA changes. 

Source: GAO analysis of TAA for Firms statutes. 

[End of table] 

Four changes mandated by the 2009 legislation contributed to 
improvements in program operations and increased participation: 

* Creation of director's and other full-time positions. The creation 
of a director's position and other full-time positions for the program 
resulted in reduced certification processing times for petitions. 
Prior to the 2009 legislation, the TAA for Firms program was 
administered by rotating staff members and interns. TAA Center staff 
said that this resulted in inconsistent review of petitions. Center 
staff reported that with the full-time professional staff now 
available, reviews are dependable. In addition, EDA stated in its 2011 
annual report that its staff reduced the average processing time for 
petitions to 21 days--a 48 percent reduction from fiscal year 2010 and 
a faster turnaround than the 40 days required by the TGAAA. 

* New annual reporting on performance measures. The TGAAA required EDA 
to gather information on performance measures and submit annual 
reports to Congress. EDA has submitted three annual reports to 
Congress on these performance measures as a result of the legislation. 

* Inclusion of service sector firms. According to our analysis of EDA 
data, the inclusion of service sector firms allowed EDA to certify 26 
firms not previously eligible for assistance in fiscal years 2009 
through 2011. Examples of service sector firms assisted by some TAA 
Centers include architectural engineering firms, telecommunications 
firms, and software development firms. 

* Expansion of the "look-back" period from 12 months to 12, 24, or 36 
months. Our analysis of EDA data shows that 32 additional firms 
participated in the program in fiscal years 2009 through 2011 as a 
result of the expanded the look-back period. Prior to the legislative 
changes, firms were allowed to compare sales and production data in 
the most recent 12 months only with data from the immediately 
preceding 12-month period. Staff at the TAA Centers told us that it 
was difficult to certify some firms with the 12-month look-back 
period, because that amount of time was often not adequate to 
demonstrate declines in sales and production. Center staff said that 
the expanded look-back period was particularly helpful during the 
recent recession, because it enabled more firms to demonstrate the 
requisite declines. 

Although these legislative changes generally improved the program and 
increased participation, TAA Center staff noted some challenges in 
assisting service sector firms. For example, some service sector firms 
had difficulty establishing import impact along with requisite 
declines in sales and production. Because service sector firms do not 
have industry-specific codes that allow TAA Center staff to analyze 
import data, EDA allowed the use of certification letters from firm 
customers to demonstrate import impact in lieu of import data. 
However, many of the firms' customers did not want to certify in 
writing that they were outsourcing services, according to center 
staff. As a result, staff said that some service sector firms could 
not provide sufficient evidence of import impact. In addition, some 
Center staff expressed concern that they did not have sufficient 
funding to serve both manufacturing and service sector firms. 

Participation Increased after TGAAA Changes but Declined after Changes 
Lapsed and Future of Program Became Uncertain: 

From fiscal year 2008 through fiscal year 2010, EDA certified and 
approved an increased number of petitions and business recovery plans 
(see figure 4). In addition, with a few exceptions, the TAA Centers 
generally submitted an increased number of petitions and business 
recovery plans during this period. According to center staff, the 
economic downturn contributed to the increase in firms applying for 
and receiving assistance from the TAA for Firms program from fiscal 
year 2008 through fiscal year 2010, because more firms could 
demonstrate a decline in sales and employment. Additionally, EDA 
officials and TAA Center staff stated that the 2009 legislative 
changes increased interest in, and demand for, the program by 
prospective firms. For example, EDA officials and TAA Center staff 
said the news of the increased funding authorization generated many 
inquiries from firms, and one TAA Center official noted that the large 
increase in authorized funding in the TGAAA led to the expectation 
that the program would be able to service a greater number of firms. 
EDA officials also stated that demand for the program increased 
because more firms were eligible under the expanded look-back period. 

Figure 4: Petitions Certified and Business Recovery Plans Approved by 
EDA and the TAA Centers, Fiscal Years 2008 through 2011: 

[Refer to PDF for image: 12 multiple line graphs] 

EDA Total Number of petitions and Plans: 

FY 2008: 
Petitions certified: 183; 
Business recovery plans approved: 143. 

FY2009: 
Petitions certified: 216; 
Business recovery plans approved: 171. 

FY2010: 
Petitions certified: 330; 
Business recovery plans approved: 264. 

FY2011: 
Petitions certified: 149; 
Business recovery plans approved: 183. 

Total FY 2008-FY2011: 
Petitions certified: 878; 
Business recovery plans approved: 761. 

TAA Centers Number of petitions and Plans: 

Great Lakes: 

FY 2008: 
Petitions certified: 23; 
Business recovery plans approved: 17. 

FY2009: 
Petitions certified: 23; 
Business recovery plans approved: 17. 

FY2010: 
Petitions certified: 19; 
Business recovery plans approved: 24. 

FY2011: 
Petitions certified: 7; 
Business recovery plans approved: 9. 

Mid-America: 

FY 2008: 
Petitions certified: 13; 
Business recovery plans approved: 8. 

FY2009: 
Petitions certified: 12; 
Business recovery plans approved: 8. 

FY2010: 
Petitions certified: 28; 
Business recovery plans approved: 25. 

FY2011: 
Petitions certified: 9; 
Business recovery plans approved: 11. 

MidAtlantic: 

FY 2008: 
Petitions certified: 21; 
Business recovery plans approved: 18. 

FY2009: 
Petitions certified: 38; 
Business recovery plans approved: 26. 

FY2010: 
Petitions certified: 40; 
Business recovery plans approved: 40. 

FY2011: 
Petitions certified: 22; 
Business recovery plans approved: 22. 

Midwest: 

FY 2008: 
Petitions certified: 21; 
Business recovery plans approved: 18. 

FY2009: 
Petitions certified: 38; 
Business recovery plans approved: 26. 

FY2010: 
Petitions certified: 40; 
Business recovery plans approved: 40. 

FY2011: 
Petitions certified: 22; 
Business recovery plans approved: 22. 

New England: 

FY 2008: 
Petitions certified: 20; 
Business recovery plans approved: 19. 

FY2009: 
Petitions certified: 47; 
Business recovery plans approved: 34. 

FY2010: 
Petitions certified: 56; 
Business recovery plans approved: 47. 

FY2011: 
Petitions certified: 19; 
Business recovery plans approved: 31. 

New York State: 

FY 2008: 
Petitions certified: 10; 
Business recovery plans approved: 8. 

FY2009: 
Petitions certified: 11; 
Business recovery plans approved: 9. 

FY2010: 
Petitions certified: 25; 
Business recovery plans approved: 14. 

FY2011: 
Petitions certified: 10; 
Business recovery plans approved: 9. 

Northwest: 

FY 2008: 
Petitions certified: 10; 
Business recovery plans approved: 9. 

FY2009: 
Petitions certified: 11; 
Business recovery plans approved: 12. 

FY2010: 
Petitions certified: 21; 
Business recovery plans approved: 20. 

FY2011: 
Petitions certified: 19; 
Business recovery plans approved: 17. 

Rocky Mountain: 

FY 2008: 
Petitions certified: 16; 
Business recovery plans approved: 12. 

FY2009: 
Petitions certified: 15; 
Business recovery plans approved: 18. 

FY2010: 
Petitions certified: 18; 
Business recovery plans approved: 17. 

FY2011: 
Petitions certified: 13; 
Business recovery plans approved: 12. 

Southeastern: 

FY 2008: 
Petitions certified: 15; 
Business recovery plans approved: 10. 

FY2009: 
Petitions certified: 16; 
Business recovery plans approved: 14. 

FY2010: 
Petitions certified: 30; 
Business recovery plans approved: 23. 

FY2011: 
Petitions certified: 4; 
Business recovery plans approved: 9. 

Southwest: 

FY 2008: 
Petitions certified: 21; 
Business recovery plans approved: 15. 

FY2009: 
Petitions certified: 17; 
Business recovery plans approved: 12. 

FY2010: 
Petitions certified: 23; 
Business recovery plans approved: 16. 

FY2011: 
Petitions certified: 15; 
Business recovery plans approved: 21. 

Western: 

FY 2008: 
Petitions certified: 9; 
Business recovery plans approved: 3. 

FY2009: 
Petitions certified: 9; 
Business recovery plans approved: 5. 

FY2010: 
Petitions certified: 12; 
Business recovery plans approved: 9. 

FY2011: 
Petitions certified: 8; 
Business recovery plans approved: 8. 

Source: GAO analysis od EDA data. 

[End of figure] 

In total, EDA certified 878 petitions and approved 761 business 
recovery plans for fiscal years 2008 through 2011. Because TAA Centers 
use a variety of methods prior to completing a petition to determine 
if a firm is financially able to participate in the program, center 
staff told us that EDA approved almost all of the finalized petitions 
they received. In addition, center staff said that EDA rarely rejected 
submitted business recovery plans, owing to the firms' in-depth 
diagnostics and detailed business recovery plans. 

Figure 4 also shows that EDA certified fewer petitions and approved 
fewer recovery plans in fiscal year 2011 than in fiscal year 2010. 
Certified petitions decreased from 330 in fiscal year 2010 to 149 in 
fiscal year 2011, and approved business recovery plans decreased from 
264 in fiscal year 2010 to 183 in fiscal year 2011. EDA officials and 
TAA Center staff attributed the decline to three factors: 

* Lapse of TGAAA changes. EDA officials and TAA Center staff reported 
that the lapse of the legislative changes from February to October 
2011 meant that service sector firms were no longer eligible to 
receive assistance. Center staff also said that the lapse in the TGAAA 
provisions disrupted the certification and approval process for 
several service sector firms and excluded them from participating. In 
addition, center staff stated that without the option to use the 
expanded look-back period, some petitioning firms that would have been 
eligible before the lapse could not show the requisite declines in 
sales or production during this time. 

* Program uncertainty. The President's fiscal year 2012 budget 
proposed to eliminate the TAA for Firms program. EDA reported that the 
uncertainty regarding the program's future funding caused the TAA 
Centers to focus on existing clients instead of identifying new firms. 
One center stated in its 2010 annual report that the possibility that 
the program might be canceled required the center to reserve 
sufficient funds to cover closeout costs rather than bring new firms 
into the program. Other center staff confirmed that uncertainty about 
the program affected outreach efforts and budgeting, because of 
concerns that the program would be eliminated. 

* Improvement in the economy. Some TAA Center staff said that fewer 
firms were eligible to participate in the program because the 
economy's improvement from fiscal year 2010 to fiscal year 2011 
prevented some firms from demonstrating a decrease in employment, 
sales, and production. 

EDA's Performance Measures and Data Collection Limit Its Ability to 
Gauge Program Effectiveness, but Our Analysis Shows Positive Impact: 

EDA collects data on 16 measures reported in its annual report to 
Congress and in Commerce's performance and accountability report, but 
we found that these performance measures, and EDA's use of them, do 
not adequately focus on program outcomes. In addition, EDA's lack of 
centralized, comprehensive, and reliable data on participating firms 
limits its ability to improve program management and program outcomes. 
However, we found the program may have had positive outcomes that are 
not captured in EDA's performance measures and data collection. Our 
data analysis showed that participation in the program was positively 
associated with an increase in sales, and our survey respondents 
reported satisfaction with the assistance they received from the 
program. 

Limitations in Performance Measures Hinder EDA's Ability to Determine 
Program Effectiveness: 

As TGAAA requires, EDA currently collects data on 14 performance 
measures to include in its annual report on the TAA for Firms program, 
as well as two measures to include in Commerce's annual performance 
and accountability report. However, we found that these measures are 
largely output measures rather than measures of program outcomes. We 
define performance measurement as the systematic ongoing monitoring 
and reporting of program accomplishments, particularly progress toward 
preestablished goals or standards.[Footnote 15] Performance measures 
may address: 

* inputs: program staffing and resources; 

* outputs: the type or level of program activities conducted or the 
direct products or services delivered by a program; or: 

* outcomes: the results of those products and services. 

Outcome-oriented goals and performance measures assess the results of 
a program, compared with its intended purpose, and are important for 
ensuring accountability. We characterize most of EDA's performance 
measures as output measures, since they measure goods and services 
delivered by a program--for example, the number of firms certified as 
eligible for the program or the number of business plans approved by 
EDA. We characterize only three of the measures--measures 10, 15, and 
16--as outcome measures, as shown in table 2. 

Table 2: Few of EDA's 16 Performance Measures for TAA for Firms 
Program Are Outcome Measures; Most Are Output Measures: 

(1) The number of firms that inquired about the program. 

(2) The number of petitions filed. 

(3) The number of petitions certified/denied. 

(4) The average time for processing petitions. 

(5) The number of petitions filed and firms certified for each 
Congressional District in the United States. 

(6) The number of firms that received assistance in preparing their 
petitions. 

(7) The number of firms that received assistance developing business 
recovery plans (Adjustment Proposals). 

(8) The number of Adjustment Proposals approved and denied by the 
Secretary of Commerce. 

(9) Sales, employment, and productivity at each firm participating in 
the program at the time of certification. 

(10) Sales, employment, and productivity at each firm upon completion 
of the program and each year for the 2-year period following 
completion. 

(11) The financial assistance received by each firm participating in 
the program. 

(12) The financial contribution made by each firm participating in the 
program. 

(13) The types of technical assistance included in the Adjustment 
Proposals of firms participating in the program. 

(14) The number of firms leaving the program before completing the 
project or projects in their Adjustment Proposals and the reason the 
project was not completed. 

(15) Percentage of TAA Center clients taking action as a result of the 
assistance facilitated by the TAA Centers. 

(16) Percentage of those actions taken by TAA Center clients that 
achieved the expected results. 

Source: Department of Commerce. 

Notes: Shading designates output measures. Adjustment proposals refers 
to business recovery plans. 

[End of table] 

Outcome measure 10--sales, employment, and productivity of each firm 
on completion of the program and in each of the 2 years after 
completion--is closely tied to the program's intended purpose of 
helping firms adjust to international trade competition. However, in 
its 2011 Annual Report on the TAA for Firms program, the primary 
analysis that EDA offers for its data on performance measures notes 
how the program's participants fared relative to the nationwide 
average for all manufacturing firms. Specifically, employment for 
participating firms decreased less for TAA for Firms participants than 
for firms nationwide (a 1.9 percent decrease for program participants, 
compared with a 4.5 percent decrease nationwide, according to Bureau 
of Labor Statistics data). Likewise, productivity for TAA for Firms 
participants increased by less than 1 percent, whereas average 
productivity increased by 10 percent nationwide since 2009. However, 
comparing performance data for trade-impacted firms with data for the 
nationwide manufacturing industry is not sufficient for determining 
whether the program is effective in helping firms. TAA for Firms 
recipients are in distress, having already been certified as adversely 
impacted by international trade. These firms demonstrated lost sales 
and employees to qualify for the program and cannot be expected to 
perform at the same level as the national average, which includes 
firms not impacted by trade competition. Nevertheless, EDA has not 
attempted to isolate the impact of the program's assistance on firms 
from other influences. In November 2009, we reported that using 
program evaluation methods to rule out plausible alternative 
explanations for outcomes that may be influenced by a variety of 
external factors, such as changes in the economy, can help strengthen 
evaluations.[Footnote 16] In June 2010, EDA outlined plans for an 
objective evaluation of the effectiveness and efficiency of the 
program and individual TAA Centers. However, the evaluation was not 
implemented because of a lack of funding for it, according to the 
program's director. 

Several TAA Center officials noted that data from the performance 
measures do not adequately show the effect that the program has on its 
participants, and they further commented that they do not find these 
measures particularly useful for improving program management. For 
example, a representative from one TAA Center said that an important 
measure of success is firm survival, which determines the number of 
jobs that are saved or created, but firm survival is not measured in 
the annual performance metrics. A representative of another TAA Center 
noted that a weakness in measuring sales, employment and productivity 
2 years after program completion is that the nature of the business 
cycle is such that sales and production must increase to the point 
where orders cannot be filled before the firm believes it is justified 
in hiring new staff. As a result, there is a time lag between 
increased sales and production and increased employment that might not 
be reflected in the 2-year data. 

EDA acknowledges that the program's performance measures should be 
improved and has made improving the measures a goal and taken steps 
toward it. According to the director of the program, EDA has entered 
into a partnership with economists from the George Washington 
University and the University of North Carolina-Chapel Hill to improve 
the performance metrics for all EDA programs under the Government 
Performance and Results Act. Planned activities include the creation 
of a new logic model that will map out inputs, outputs, and outcomes 
for EDA's programs. The economists will also assist EDA in creating 
more expansive performance metrics for all programs, including TAA for 
Firms. EDA anticipates that this project will be completed by fall of 
2014. 

Lack of Centralized, Comprehensive, and Reliable Data Affects Program 
Management and Analysis: 

Although EDA and the TAA Centers independently collect data on 
participating firms and program operations that may be useful for 
evaluating the TAA for Firms program, gaps in centralized, 
comprehensive, and reliable program data limit EDA's ability to 
analyze program trends and inform decisions to improve results. 

The issues with EDA's data that we identified fall into four clear but 
interconnected categories: 

* Gaps in centralized data. According to EDA officials, the agency 
maintains a database of information from petitions, such as firm 
location, sales or production, employment, and the basis for 
eligibility. EDA staff also maintain a separate database of 
information from firms' approved business recovery plans, including 
the total dollar amount of assistance and types of projects approved. 
However, TAA Center staff do not have access to EDA's databases and 
maintain their own independent program data and information. We found 
that EDA does not maintain the necessary data, such as whether the 
firm is a public or private firm or a multiplant firm, to conduct a 
quantitative analysis of the effects of TAA for Firms assistance on 
participating firms, but that the TAA Centers collected the time-
series data required to perform an economic analysis. Although we were 
able to conduct an analysis of the program's impact on firms, doing so 
required us to compile more complete and comprehensive firm-level data 
that the centers had collected for other purposes. For example, in the 
absence of centralized program data, we utilized the firm-level data 
cited in the conference report on Commerce appropriations compiled by 
the centers for fiscal year 2012, including firms' current and prior 
sales and employment and the fiscal years in which firms completed 
projects in their approved business recovery plans.[Footnote 17] EDA 
officials commented that the program would benefit from having a 
complete data set on firms to respond to future data requests from 
stakeholders and analyze the effectiveness of the program; however, 
the data EDA currently has accessible are not sufficient for such an 
analysis. 

* EDA makes multiple data requests of TAA Centers. EDA frequently 
makes multiple requests to the TAA Centers for program data when 
preparing required reports, and center staff noted that they are often 
asked to provide or validate program data and information they have 
already reported, including the data for the program's annual reports. 
Staff at several centers that we visited stated that they were able to 
comply with repeated requests for data, but they cited concerns about 
the use of limited staff time to prepare reports of data they had 
previously reported. 

* Data requests require verification but can still result in 
inaccuracies. In addition, EDA relies on each of the TAA Centers to 
validate its data. However, when we compared EDA's data with data 
provided by the centers, we identified errors in EDA's data. For 
example, we found that EDA's certification data did not include 30 of 
the 32 firms that were certified on the basis of the expanded look-
back period in fiscal years 2009 to 2011. EDA officials also could not 
ensure the reliability of data on petition and business recovery plan 
approvals prior to fiscal year 2008, because EDA had not validated 
these data with each of the centers.[Footnote 18] 

* Lack of guidance results in dissimilar information across TAA 
Centers. EDA has not developed guidance on the format and types of 
program data that TAA Centers should collect, which has contributed to 
a lack of comparable data on program activities across the centers. 
Though TAA Centers have begun to track expenses by specific program 
activities--such as outreach, petition development, and business 
recovery plan development and implementation--EDA has not clarified 
how the centers are to record these activities, according to EDA 
officials. As a result, Commerce's Office of Inspector General 
reported that TAA Centers do not appear to be consistent in how each 
records and allocates costs among program activities.[Footnote 19] 
Many of the centers conduct customer satisfaction surveys, but each 
has its own set of questions and method of administering the survey. 
Without consistent information, EDA cannot monitor activities across 
TAA Centers or conduct a comparative program analysis. 

EDA officials noted that they had been working toward establishing a 
centralized database, accessible online, in which TAA Centers and EDA 
could enter and verify program information. According to officials, 
this effort is currently on hold pending Commerce's response to 
guidance from the Office of Management and Budget (OMB) on the 
establishment of shared information technology services for federal 
agencies.[Footnote 20] Further, EDA headquarters experienced a 
computer virus during our review, which demonstrated the value of the 
centers' systems for obtaining and reporting historical data.[Footnote 
21] However, without centralized comprehensive and accurate data on 
program operations, EDA is hindered in its ability to effectively 
evaluate the program, such as by determining the effects of program 
assistance on firms. 

Our Analysis Shows Participation in the TAA for Firms Program Is 
Statistically Associated with Increases in Firm Sales and Productivity: 

Given the weaknesses we found in EDA's performance measures and data 
collection, and because few other studies have examined the 
effectiveness of the program, we undertook further analysis to 
determine the impact of the TAA for Firms program.[Footnote 22] We 
found that participation in the program was associated with increased 
sales, although other factors, such as a firm having multiple plants, 
had a stronger effect on performance. We used a regression analysis to 
determine the sales performance of firms that participated in the TAA 
for Firms program from 1998 through 2011, both before and after 
program participation, while controlling for other variables, such as 
the size of the firms and conditions in the economy.[Footnote 23] By 
comparing firm sales before and after participation in the program, 
rather than comparing firms in the program with firms that did not 
receive assistance, we were able to examine whether participation in 
the TAA for Firms program was associated with positive outcomes for 
firms that actually received assistance under the program. 

We collected data from the TAA Centers on firms' sales and employment 
2 years prior to having a business recovery plan approved and 2 to 3 
years after, along with industry information.[Footnote 24] Our data 
included about 570 firms in more than 250 5-and 6-digit North American 
Industry Classification System (NAICS) industries[Footnote 25] that 
had experienced a decrease in either sales or employment owing to 
import penetration.[Footnote 26] About 85 percent of the firms in our 
analysis were small to medium sized. About one-third had fewer than 25 
employees, and about two-thirds had fewer than 50 employees; only 
about 5 percent had more than 300 employees. We also created overall 
industry and macroeconomic variables using Bureau of Labor Statistics 
and Census data, to isolate the effect of the program on firm sales 
while accounting for other factors in the general economy. We found 
that some firm-and market-related factors had a stronger and more 
significant effect on firm sales than did participation in the TAA for 
Firms program, such as whether the firm was a multiplant firm, and 
whether it was a publicly or privately held firm. With regard to the 
effect of program participation on sales, we determined the following: 

* There is a small positive and statistically significant relationship 
between program participation and sales. Overall, we estimate that the 
effect of participation in the program was an increase in firm sales, 
ranging from 5 to 6 percent on average, if all other factors are held 
constant. This translated into an average increase of about $280,000 
to $350,000. The effect was greater for the firms with 300 or fewer 
employees that accounted for 95 percent of the firms in our sample. 
Using productivity (firm sales divided by employment) as one outcome 
variable, we also found that the effect of the program on productivity 
was about a 4 percent increase. 

* As imports rose, sales declined for TAA for Firms clients. Our 
analysis shows that import penetration was highly statistically 
significant and most likely had a very negative effect on firm sales. 
According to our estimates, for every 1 percentage point increase in 
the industry import penetration ratio, sales of firms included in our 
analysis decreased by about 16 percent on average. Our analysis also 
shows that import penetration increased from an average of 34 percent 
in 2000 to 39 percent in 2011 for industries associated with the firms 
in our study. 

[Side bar: Among the industries in our study affected by import 
penetration were women's purses and leather goods manufacturing; 
electric component manufacturing; curtain and drapery mills; seafood 
canning; and other household textile products. End of side bar] 

* TAA for Firms participation combined with market growth increased 
firm performance. We found a statistically significant and positive 
effect of industry market growth on firm sales after firms 
participated in the program.[Footnote 27] Specifically, for firms 
participating in the program, the percentage change in firm sales 
increased as market growth increased. For firms in relatively high-
growth industries, such as certain types of metal manufacturing, 
plastic pipe manufacturing, and flooring industries, the combination 
of participation in the program and industry growth affected sales 
more positively, with such firms experiencing a 6 to 10 percent 
increase in sales. This result suggests that firms that participated 
in the TAA for Firms program during the 1998 through 2011 period were 
better able to take advantage of growth in their markets or to 
translate overall market growth into firm sales, compared to before 
participating in the program. For low-growth markets, the effect was 
not as positive. Specifically, firms selling products in the lowest-
growth (or negative-growth) markets--the bottom percentile of our 
sample's industry growth ranges--still experienced declines in sales 
ranging from -0.5 percent to -2.8 percent. Since our analysis captured 
marginal effects, this may simply mean that the negative factors 
weighing on the firm outweigh the positives, including the effects of 
program participation. 

TAA for Firms Clients Reported Satisfaction with Program and Its 
Outcomes: 

Our survey of TAA for Firms participants also showed that the program 
had a positive effect. We conducted a survey of 163 firms that had a 
recovery plan approved in fiscal year 2009 to obtain their views about 
their experience with the program; we received responses from 117 of 
the 163 firms, with a final response rate of 72 percent.[Footnote 28] 
The survey included questions about the TAA Center, the consultants 
who carried out the projects included in the business recovery plans, 
and the outcomes of the firm's participation in the program.[Footnote 
29] 

More than 90 percent of responding firms reported that they were 
either very or generally satisfied with the services they received 
from the TAA Center and the consultants who performed work for them 
(see figure 5). Over 80 percent reported that the program helped them 
to identify projects and business process improvements, and 62 percent 
said that the program helped them to identify management weaknesses. 

Figure 5: TAA for Firms Program Clients Expressed Satisfaction with 
Program and Results: 

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

Satisfaction: 

Satisfaction with Project Consultants: 
Very satisfied or helped a lot: 77%; 
Generally satisfied or helped a little: 19%; 
Cumulative: 96%. 

Satisfaction with Services Received from TAA Center: 
Very satisfied or helped a lot: 74%; 
Generally satisfied or helped a little: 18%; 
Cumulative: 92%. 

The program helped the firm to identify: 
 
Projects the firm could undertake to improve business: 
Very satisfied or helped a lot: 66%; 
Generally satisfied or helped a little: 23%; 
Cumulative: 89%. 

Potential business process improvements: 
Very satisfied or helped a lot: 51%; 
Generally satisfied or helped a little: 32%; 
Cumulative: 83%. 

Management weaknesses: 
Very satisfied or helped a lot: 23%; 
Generally satisfied or helped a little: 39%; 
Cumulative: 62%. 

Domestic competition: 
Very satisfied or helped a lot: 21%; 
Generally satisfied or helped a little: 35%; 
Cumulative: 56%. 

Import competition: 
Very satisfied or helped a lot: 28%; 
Generally satisfied or helped a little: 27%; 
Cumulative: 55%. 

The program helped the firm with: 

Marketing and sales: 
Very satisfied or helped a lot: 59%; 
Generally satisfied or helped a little: 25%; 
Cumulative: 84%. 

Staying in business: 
Very satisfied or helped a lot: 43%; 
Generally satisfied or helped a little: 39%; 
Cumulative: 82%. 

Profitability: 
Very satisfied or helped a lot: 36%; 
Generally satisfied or helped a little: 37%; 
Cumulative: 73%. 

Retaining employees: 
Very satisfied or helped a lot: 38%; 
Generally satisfied or helped a little: 33%; 
Cumulative: 71%. 

Management practices: 
Very satisfied or helped a lot: 25%; 
Generally satisfied or helped a little: 39%; 
Cumulative: 64%. 

Operational planning: 
Very satisfied or helped a lot: 33%; 
Generally satisfied or helped a little: 31%; 
Cumulative: 64%. 

Strategic planning: 
Very satisfied or helped a lot: 35%; 
Generally satisfied or helped a little: 27%; 
Cumulative: 62%. 

Developing new products: 
Very satisfied or helped a lot: 31%; 
Generally satisfied or helped a little: 28%; 
Cumulative: 59%. 

Manufacturing processes: 
Very satisfied or helped a lot: 48%;  
Generally satisfied or helped a little: 11%; 
Cumulative: 59%. 

Hiring new employees: 
Very satisfied or helped a lot: 24%; 
Generally satisfied or helped a little: 33%; 
Cumulative: 57%. 

Cost management: 
Very satisfied or helped a lot: 26%; 
Generally satisfied or helped a little: 29%; 
Cumulative: 55%. 

Export sales: 
Very satisfied or helped a lot: 9%; 
Generally satisfied or helped a little: 24%; 
Cumulative: 34[A]. 

Source: GAO. 

Note: The difference between the cumulative percentage and 100 percent 
represents the following responses: "didn't help," "as satisfied as 
dissatisfied," "generally dissatisfied," "very dissatisfied," "don't 
know," and "no response/not applicable." 

[A] Because of rounding, the percentages for export sales sum to a 
cumulative percentage of 34. 

[End of figure] 

In terms of outcomes, survey results indicate that responding firms 
believed the program was particularly helpful in improving marketing 
and sales (84 percent); helping them to stay in business (82 percent); 
helping to improve profitability (73 percent); helping them to retain 
employees (71 percent); and helping them to hire new employees (57 
percent). In narrative responses to our survey's open-ended questions, 
22 firm representatives said that the program helped their business to 
grow or improve. In addition, 30 respondents wrote positive comments 
about the TAA Centers' attentiveness to their needs and the ease of 
working with the centers. 

Only 34 percent of respondents wrote that the program helped their 
firm with export sales, although we heard in interviews with staff at 
several TAA Centers that they encourage small firms to increase 
exports. One survey respondent noted, "TAA Centers should undertake a 
program which would encourage small businesses to export. In my 
experience most small businesses do not export because they believe 
(incorrectly) that exporting is difficult." Our survey respondents 
also suggested that the program could be improved by increasing the 
availability of funding, and allowing funds to be used for capital 
improvements. (For the complete results of our survey, please see 
GAO's e-supplement, GAO-12-935SP) 

During the course of our work, representatives of firms and the TAA 
Centers identified the following specific ways that the program had 
helped firms. 

* In California, a metal parts manufacturer was certified in 2007 
because of increased competition from Taiwan and China. The firm faced 
a 15 percent decline in employment over a 2-year period before 
certification. The TAA Center helped improve the firm's manufacturing 
technology, enabling it to produce more high-end products, increase 
production efficiency, and lower costs. The Center also helped the 
firm to develop a marketing strategy and website upgrade to improve 
the firm's name recognition. This assistance helped the firm increase 
its sales by about 8 percent, and productivity has more than doubled. 
Over the past 2 years, the firm reported that it has hired two 
additional employees. 

* In North Carolina, a TAA Center assisted a manufacturer of sheet 
metal roofs and artisan works with financial consulting and a website 
upgrade. The company reportedly hired an additional three employees 
since it began working with the TAA Center and was able to employ more 
crews than it could previously. The owner said that his company might 
have had to lay off half its staff without the TAA Center's help. 

* In New York, a TAA Center helped a teak furniture manufacturer that 
sold its products through catalogues. The firm was impacted by 
competition from imports. The TAA Center encouraged the firm to 
rebrand itself in order to penetrate higher-end markets through a 
higher-quality catalogue and targeted advertising. As a result, the 
firm reportedly doubled sales and hired 16 new staff. 

* In Massachusetts, a TAA Center helped an environmental management 
firm that faced growing competition from international trade. The TAA 
Center provided $10,000 for an improved website, which, according to 
the president of the company, resulted in a 10 to 15 percent increase 
in sales in the first year. 

EDA's Allocation of Program Funds Falls Short of Meeting Key Standard 
for Funding Formulas: 

EDA allocated funding to the 11 TAA Centers for cooperative agreement 
years 2008 to 2011[Footnote 30] using a funding allocation formula 
that comprises a set of weighted factors; however, the formula does 
not take into account the potential number of firms in need of the 
program and differences in costs across the centers. According to 
beneficiary equity--a key standard for designing and evaluating 
funding formulas--funds should be distributed to regions according to 
the needs of their respective populations and should take into account 
the costs of providing program services, so that each service area can 
provide the same level of services to firms in need.[Footnote 31] 
However, TAA Centers varied considerably in their costs and use of the 
allocation they received. Though EDA deobligates and reallocates any 
unspent funds, it uses its allocation funding formula to do so, thus 
perpetuating the deficiency of failing to consider variable needs and 
costs in allocating its funds. 

EDA Uses Funding Formula to Allocate Program Funds to TAA Centers: 

The TAA for Firms authorizing legislation does not specify how EDA 
should allocate funding to the TAA Centers. In September 2003, EDA 
developed, in consultation with the centers, a funding allocation 
formula that it uses to allocate grant funds to each center. EDA 
intended that the funding allocation formula would develop consistency 
in the yearly allocation process and provide TAA Centers with 
sufficient funds to operate a productive program. EDA recognized that 
such consistency in funding allocations was necessary, in part because 
of the complexity of the program and the provision of the centers' 
professional business advice to assist in the firms' recovery planning 
and projects. EDA's funding formula divides two-thirds of allocated 
funding equally among the 11 centers according to base funding and two 
fixed factors: 

* Geographic size: The TAA Center's service region in square miles: 

* Number of firms: The service region's share of the nation's firms in 
the agricultural, mining, and manufacturing sectors: 

The funding formula divides the remaining one-third of allocated 
funding among the TAA Centers according to three variable factors: 

* Approved business recovery plans: The center's share of the total 
number of business recovery plans approved by EDA within the past 2 
fiscal years: 

* Employees in approved recovery plans: The center's share of the 
total number of employees in the business recovery plans approved in 
the last 2 fiscal years: 

* Firms achieving expected results: The center's share of the total 
number of firms that reported achieving anticipated outcomes from 
actions the firms took as a result of the program assistance they 
received during the past fiscal year[Footnote 32] 

Once it had determined the funding formula factors and measures for 
each, EDA weighted the factors to determine how it would distribute 
annual funding to the 11 TAA Centers. The pie chart in figure 6 shows 
how the funding formula weighs each of the different factors. The bar 
chart in figure 6 shows the resulting allocation to each center based 
on each of the factors for cooperative agreement year 2011. For a 
discussion of the data used to produce the allocation and of the 
resulting allocation, see appendix IV. 

The TAA for Firms funding formula places an emphasis on an equal 
distribution of program funding across the centers, as it allocates 
about two-thirds of program funding using base funding and relatively 
fixed factors (see figure 6). As a result, TAA Centers' share of total 
program funding has remained relatively equal and constant over 
cooperative agreement years. For example, during the cooperative 
agreement years 2008 to 2010, each center's portion of total funding 
ranged from 7.2 percent to 10.2 percent. Between the 3-year 
cooperative agreement period of 2008 to 2010 and the 1-year 
cooperative agreement period of 2011, the change in TAA Centers' share 
of total program funding ranged from 0.2 percent to 1.6 percent. 

Figure 6: TAA for Firms Funding Formula Allocates Funding to TAA 
Centers Using Fixed and Variable Factors: 

[Refer to PDF for image: 2 stacked horizontal bar graphs and 1 pie-
chart] 

Fixed factors: 

TAAC Region: New York State; 
Base funding: $841,000; 
Number of firms: $34,770; 
Geographic size: $2,050. 

TAAC Region: Western; 
Base funding: $841,000; 
Number of firms: $113,630; 
Geographic size: $16,810. 

TAAC Region: Southwest; 
Base funding: $841,000; 
Number of firms: $91,740; 
Geographic size: $16,280. 

TAAC Region: Mid-America; 
Base funding: $841,000; 
Number of firms: $32,530; 
Geographic size: $8,830. 

TAAC Region: Northwest; 
Base funding: $841,000; 
Number of firms: $52,270; 
Geographic size: $41,920. 

TAAC Region: Southeastern; 
Base funding: $841,000; 
Number of firms: $137,460; 
Geographic size: $16,240. 

TAAC Region: Great Lakes; 
Base funding: $841,000; 
Number of firms: $74,390; 
Geographic size: $5,810. 

TAAC Region: MidAtlantic; 
Base funding: $841,000; 
Number of firms: $74,010; 
Geographic size: $5,570. 

TAAC Region: Rocky Mountain; 
Base funding: $841,000; 
Number of firms: $41,550; 
Geographic size: $27,260. 

TAAC Region: New England; 
Base funding: $841,000; 
Number of firms: $37,080; 
Geographic size: $2,730. 

TAAC Region: Midwest; 
Base funding: $841,000; 
Number of firms: $81,560; 
Geographic size: $10,680. 

Variable factors: 

TAAC Region: New York State; 
Number of business recovery plans approved: $89,040; 
Number of employees in approved business recovery plans: $101,420; 
Number of firms that achieved expected results: $44,960. 

TAAC Region: Western; 
Number of business recovery plans approved: $50,370; 
Number of employees in approved business recovery plans: $49,520; 
Number of firms that achieved expected results: $69,940. 

TAAC Region: Southwest; 
Number of business recovery plans approved: $112,280; 
Number of employees in approved business recovery plans: $62,750; 
Number of firms that achieved expected results: $155,050. 

TAAC Region: Mid-America; 
Number of business recovery plans approved: $127,710; 
Number of employees in approved business recovery plans: $139,410; 
Number of firms that achieved expected results: $180,030. 

TAAC Region: Northwest; 
Number of business recovery plans approved: $123,98; 
Number of employees in approved business recovery plans: $116,69; 
Number of firms that achieved expected results: $185,020. 

TAAC Region: Southeastern; 
Number of business recovery plans approved: $143,310; 
Number of employees in approved business recovery plans: $110,410; 
Number of firms that achieved expected results: $120,080. 

TAAC Region: Great Lakes; 
Number of business recovery plans approved: $158,750; 
Number of employees in approved business recovery plans: $199,110; 
Number of firms that achieved expected results: $150,050. 

TAAC Region: MidAtlantic; 
Number of business recovery plans approved: $174,180; 
Number of employees in approved business recovery plans: $150,780; 
Number of firms that achieved expected results: $239,970. 

TAAC Region: Rocky Mountain; 
Number of business recovery plans approved: $139,410; 
Number of employees in approved business recovery plans: $229,130; 
Number of firms that achieved expected results: $244,970. 

TAAC Region: New England; 
Number of business recovery plans approved: $317,500; 
Number of employees in approved business recovery plans: $169,260; 
Number of firms that achieved expected results: $229,980. 

TAAC Region: Midwest; 
Number of business recovery plans approved: $259,490; 
Number of employees in approved business recovery plans: $367,360; 
Number of firms that achieved expected results: $229,980. 

Factor weights: 

Base funding: 60%; 
Number of firms: 5%; 
Geographic size: 1%; 
Number of business recovery plans approved: 11%; 
Number of employees in approved business recovery plans: 11%; 
Number of firms that achieved expected results: 12%. 

Source: GAO. 

Note: TAA Centers ordered according to size of funding allocation for 
cooperative agreement year 2011. 

[End of figure] 

EDA included the formula's three remaining factors to account for 
differences in TAA Centers' performance. 

* EDA included each center's share of the total number of firms that 
reported achieving anticipated outcomes from actions they took as a 
result of the assistance they received during the past fiscal year and 
the total number of business recovery plans approved within the past 2 
fiscal years. 

* To offset the potential of those factors to motivate centers to 
increase their individual funding levels by targeting a large number 
of very small firms, EDA also included as a final factor each center's 
share of the total number of employees in the business recovery plans 
approved in the past 2 fiscal years. 

Funding Allocation Formula Does Not Take into Account Differences in 
Program Need: 

EDA's TAA for Firms funding formula does not include a direct measure 
of the number of firms potentially in need of the program based on the 
program's key objective of providing technical assistance to firms 
that have lost sales and employment because of increased competition 
from imports. As a result, the formula falls short of a key criterion 
that we previously established for the evaluation of allocation 
formula approaches. Under the beneficiary equity standard, a funding 
allocation formula should include a factor that distributes funding to 
each service area according to the respective target population 
needing assistance so that each service area can provide the same 
level of services to the population in need. To meet this equity 
standard, the formula should use reliable and appropriate measures of 
need in each state or region.[Footnote 33] Consequently, TAA Centers 
that may have a greater number of distressed firms because of import 
competition potentially receive similar amounts of funding as centers 
serving a much smaller number of trade-impacted firms. For example, 
there are wide differences in the numbers of certified petitions and 
approved business recovery plans among the centers. In addition, staff 
at some centers stated that they undertake outreach efforts to 
identify firms. Staff at other centers stated that they identify 
client firms without conducting much outreach, and still others have 
so many current clients that they do not seek new ones. However, the 
program lacks information to determine whether it is achieving equity 
for trade-impacted firms across TAA Centers' service regions. 

Funding Allocation Formula Does Not Take into Account TAA Centers' 
Varying Costs: 

EDA's allocation of funding also does not take into account variations 
in TAA Centers' costs of providing firms assistance. To meet the 
beneficiary equity standard, a formula should account for differences 
in the cost of providing services in each region, so that each firm 
may receive the same level of assistance.[Footnote 34] The centers 
provide EDA with information on programmatic costs by cost 
categories.[Footnote 35] However, we found that TAA Centers' direct 
and indirect operating costs varied considerably during the 
cooperative agreement years 2008 to 2010 (see figure 7).[Footnote 36] 
For example, during that time period, centers' costs for personnel 
salaries and fringe benefits ranged from approximately $877,000 to 
$2.1 million,[Footnote 37] and centers' costs for travel and for 
equipment and supplies ranged from $52,000 to $260,000. 

Figure 7: TAA Centers' Costs Varied during Cooperative Agreement Years 
2008 through 2010: 

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

TAAC Region: Western; 
Consultants: $670,000; 
Personnel and fringe: $1,451,000; 
Indirect: $958,000; 
Equipment, supplies, and travel: $79,000. 

TAAC Region: Rocky Mountain; 
Consultants: $1,289,000; 
Personnel and fringe: $2,075,000; 
Indirect: $792,000; 
Equipment, supplies, and travel: $142,000. 

TAAC Region: Southwest; 
Consultants: $1,371,000; 
Personnel and fringe: $1,549,000; 
Indirect: $473,000; 
Equipment, supplies, and travel: $260,000. 

TAAC Region: New York State; 
Consultants: $1,459,000; 
Personnel and fringe: $1,047,000; 
Indirect: $444,000; 
Equipment, supplies, and travel: $52,000. 

TAAC Region: Southeastern; 
Consultants: $1,461,000; 
Personnel and fringe: $1,597,000; 
Indirect: $1,033,000; 
Equipment, supplies, and travel: $145,000. 

TAAC Region: Northwest; 
Consultants: $1,620,000; 
Personnel and fringe: $1,701,000; 
Indirect: $534,000; 
Equipment, supplies, and travel: $97,000. 

TAAC Region: Great Lakes; 
Consultants: $1,647,000; 
Personnel and fringe: $1,539,000; 
Indirect: $1,067,000; 
Equipment, supplies, and travel: $65,000. 

TAAC Region: Midwest; 
Consultants: $1,945,000; 
Personnel and fringe: $2,087,000; 
Indirect: $402,000; 
Equipment, supplies, and travel: $134,000. 

TAAC Region: Mid-America; 
Consultants: $2,168,000; 
Personnel and fringe: $1,113,000; 
Indirect: $631,000; 
Equipment, supplies, and travel: $114,000. 

TAAC Region: MidAtlantic; 
Consultants: $2,483,000; 
Personnel and fringe: $1,423,000; 
Indirect: $662,000; 
Equipment, supplies, and travel: $110,000. 

TAAC Region: New England; 
Consultants: $3,386,000; 
Personnel and fringe: $877,000; 
Indirect: $251,000; 
Equipment, supplies, and travel: $82,000. 

Source: GAO. 

Note: TAA Centers are shown in order of consultant costs. Consultant 
costs include funds to third-party consultants to provide technical 
assistance to eligible firms to implement projects in approved 
business recovery plans. Personnel and fringe costs include wages and 
salaries paid to employees of the centers and the cost of benefits 
paid to employees. Indirect costs include facilities and 
administrative costs and other costs that do not fit into any other 
categories, including rent and utilities, and other administrative 
costs. Equipment, supplies, and travel include costs of purchasing and 
leasing equipment; materials, such as paper, computers, and any 
materials needed to conduct training; and travel costs that are 
necessary for center personnel to carry out and manage program 
activities. 

[End of figure] 

In addition, indirect cost rates are set according to OMB guidelines 
and vary depending on whether the TAA Center is affiliated with a 
university or an independent nonprofit organization. 

* For university-affiliated centers, indirect costs tend to be higher 
than those of nonprofit-affiliated centers. The indirect costs for the 
university-affiliated centers ranged from 12.9 percent of total costs 
to 30.3 percent of total awarded funds, or about $473,000 to $958,000, 
for cooperative agreement years 2008 through 2010. 

* For nonprofit-affiliated centers, the indirect costs ranged from 5.5 
percent to 14.1 percent of total awarded funds, or about $251,000 to 
$662,000, for cooperative agreement years 2008 through 2010 (see 
figure 8). 

Figure 8: Proportion of Indirect Costs Tends to Be Higher for 
University-Affiliated TAA Centers, Cooperative Agreement Years 2008 
through 2010: 

[Refer to PDF for image: horizontal bar graph] 

TAA Center: Western (university affiliation); 
Indirect costs: 30.3%. 

TAA Center: Great Lakes (university affiliation); 
Indirect costs: 24.7%. 

TAA Center: Southeastern (university affiliation); 
Indirect costs: 24.4%. 

TAA Center: Rocky Mountain (university affiliation); 
Indirect costs: 18.4%. 

TAA Center: Mid-America (university affiliation); 
Indirect costs: 15.7%. 

TAA Center: New York State (university affiliation); 
Indirect costs: 14.8%. 

TAA Center: Mid-Atlantic (non-profit affiliation); 
Indirect costs: 14.1%. 

TAA Center: Northwest (non-profit affiliation); 
Indirect costs: 13.5%. 

TAA Center: Southwest (university affiliation); 
Indirect costs: 12.9%. 

TAA Center: Midwest (non-profit affiliation); 
Indirect costs: 8.8%. 

TAA Center: New England (non-profit affiliation); 
Indirect costs: 5.5%. 

Source: GAO analysis of EDA data. 

Note: TAA Centers are shown in order of the proportion of indirect 
costs to total awarded funds for cooperative agreement years 2008 
through 2010. Indirect costs, referred to as facilities and 
administrative costs for university-affiliated centers, include space 
rent, utilities, postage, and other administrative costs. 

[End of figure] 

The direct and indirect costs of operating the centers to provide 
assistance to firms affect the amount of program funding that centers 
have available for direct assistance to firms. During cooperative 
agreement years 2008 through 2010, the share of program funding for 
third-party consultants implementing projects in firms' approved 
business recovery plans varied widely across the centers, ranging from 
21.2 percent of total expenditures or $670,000 for the Western Center 
to 73.7 percent or $3.4 million for the New England Center. 

In part because of the variation in the direct and indirect costs of 
operating the centers to provide assistance to firms, marked 
differences exist in the centers' backlogs of approved but unfunded 
assistance to firms. The TAA for Firms program's total backlog of 
unfunded assistance approved from cooperative agreement year 2008 to 
April 2012 exceeds $24 million for a total of 796 firms, but this 
backlog ranged from $1 million for 27 firms assisted by the Western 
Center to $3.9 million for 133 firms assisted by the New England 
Center (see table 3). 

Table 3: TAA Centers' Backlogs of Approved, Unfunded Assistance from 
Cooperative Agreement Year 2008 to April 2012: 

TAA Center: New England; 
Total unfunded assistance in firms' approved business recovery plans: 
$3,897,125; 
Number of firms: 133. 

TAA Center: Midwest; 
Total unfunded assistance in firms' approved business recovery plans: 
$3,499,668; 
Number of firms: 112. 

TAA Center: Southwest; 
Total unfunded assistance in firms' approved business recovery plans: 
$2,712,390; 
Number of firms: 69. 

TAA Center: Great Lakes; 
Total unfunded assistance in firms' approved business recovery plans: 
$2,711,120; 
Number of firms: 67. 

TAA Center: MidAtlantic; 
Total unfunded assistance in firms' approved business recovery plans: 
$2,641,687; 
Number of firms: 109. 

TAA Center: Mid-America; 
Total unfunded assistance in firms' approved business recovery plans: 
$1,746,593; 
Number of firms: 53. 

TAA Center: Southeastern; 
Total unfunded assistance in firms' approved business recovery plans: 
$1,725,487; 
Number of firms: 59. 

TAA Center: Rocky Mountain; 
Total unfunded assistance in firms' approved business recovery plans: 
$1,722,737; 
Number of firms: 59. 

TAA Center: Northwest; 
Total unfunded assistance in firms' approved business recovery plans: 
$1,613,857; 
Number of firms: 62. 

TAA Center: New York State; 
Total unfunded assistance in firms' approved business recovery plans: 
$1,193,907; 
Number of firms: 46. 

TAA Center: Western; 
Total unfunded assistance in firms' approved business recovery plans: 
$1,058,218; 
Number of firms: 27. 

TAA Center: Total; 
Total unfunded assistance in firms' approved business recovery plans: 
$24,522,787; 
Number of firms: 796. 

Source: GAO presentation of EDA data. 

Note: TAA Centers shown in order of unfunded assistance. 

[End of table] 

EDA's approach to allocating funding resulted in differences in the 
centers' use of the allocations they received. Five centers spent 
their entire funding allocation by the conclusion of the 3-year 
cooperative agreement period 2008 through 2010, while six centers did 
not. The total proportion of unspent funds among the six centers 
ranged from 1.3 percent to 9.8 percent. In addition, some centers that 
spent their full allocation had a backlog of unfunded assistance for 
projects approved since fiscal year 2008, totaling more than $3.4 
million as of April 2012. At the same time, some centers that had 
unspent funds had smaller backlogs totaling less than $1.2 
million.[Footnote 38] Although EDA deobligates any unspent funds and 
reallocates these funds for the following cooperative agreement 
period, it uses its allocation funding formula to do so, thus 
perpetuating the deficiency of not including centers' variable needs 
and costs in allocating funds among them. 

To meet the beneficiary equity standard, a funding allocation formula 
should use reliable and appropriate measures of the cost of providing 
services in each region. Because EDA's funding formula does not take 
into account variations in TAA Centers' costs of providing assistance 
to firms, EDA cannot ensure that trade-impacted firms in different 
service areas receive the same opportunities for assistance through 
the centers. The available evidence we analyzed suggests wide 
variation in the number of firms that the centers are able to assist 
and the amount of funding that they may provide to implement approved 
business recovery plans, raising questions about whether limited 
program funding is being used effectively. 

EDA Is Undertaking Efforts to Revise Its Funding Allocation Formula: 

EDA officials have begun discussions with TAA Center staff to revise 
the program's funding allocation formula. In February 2012, EDA 
convened a conference of center directors that included a discussion 
of potential changes to the formula. According to EDA officials, these 
discussions are still in the early stages and there have been no 
specific proposals of the factors and weights that might be included 
in a revised formula. The director of the TAA for Firms program stated 
that EDA's current effort to improve performance measures for all of 
its programs may identify measures that could be used in a revised 
funding formula. Although EDA officials stated that they recognize the 
importance of including a factor in the formula that would account for 
potential program need, they have not identified data that would 
enable them to measure and account for differences in the numbers of 
trade-impacted firms across the centers' service regions. The agency 
is considering using Commerce's Census Bureau databases to explore the 
possible use of available data in a revised funding allocation 
formula. It is unlikely that any new formula would be finalized before 
July 2014, according to EDA officials. 

Directors at two TAA Centers we visited stated that they have 
undertaken efforts to reduce their centers' operational costs in an 
effort to provide additional funding to implement firms' projects. One 
center director noted that the center's management initiated cost-
reduction efforts, even though EDA's funding formula does not provide 
incentives to reduce such costs. Several center directors further 
noted that, since the centers' operational costs are relatively fixed, 
any reduction in costs results in an increased amount and proportion 
of funding to assist firms. The data we analyzed support this 
inference. For example, although funding for the program remained at 
$15.8 million in fiscal years 2009 and 2010, the centers helped 114 
more firms petition for certification and gained EDA approval for 93 
more business recovery plans in fiscal year 2010 than in fiscal year 
2009. In addition, for cooperative agreement years 2009 and 2010, the 
centers increased the total portion of awarded funding for consultants 
by about 12 percent while reducing costs in other categories. 

In revising EDA's funding allocation formula, the agency and the TAA 
Centers will likely need to consider how to strike a balance among 
several key factors--need, costs of providing services, and available 
resources. Revising EDA's funding formula presents challenges and 
risks, which will require flexibility in implementing any allocation 
under a new formula. For example, center directors stated that a 
revised formula should be carefully designed to avoid unintended 
incentives and should encourage centers to reduce indirect costs and 
maximize the funding available to assist firms. In addition, because 
revising the formula will likely result in decreased funding for some 
centers and increased funding for others, any change to the funding 
formula should include a transition period so that funding recipients 
have time to adjust, as our prior work has shown.[Footnote 39] An 
abrupt reduction in funding levels could disrupt a center's ability to 
provide assistance to firms. Flexibility in transitioning to a new 
funding formula would allow centers greater predictability and 
stability to develop long-range plans and meet their current 
commitments. 

Conclusions: 

The United States has arguably gained much from its engagement in the 
global economy and its active pursuit of trade liberalization. 
Lowering trade barriers such as tariffs offers benefits to consumers 
and creates new opportunities for American exporters abroad. Yet these 
long-term, widely disbursed gains are also accompanied by adjustment 
costs borne directly and in a more concentrated manner by import-
competing firms and their workers. Over the past decade, the pace of 
trade liberalization has been vigorous, as has been the growth in U.S. 
imports. Although funding for Commerce's TAA for Firms program, at 
less than $16 million, is small relative to the $1.3 trillion rise in 
imports over the past decade, our economic analysis and survey results 
show that the program has delivered positive results for participating 
manufacturing and services firms. We found that these firms receive 
individual attention from TAA Center professionals located in their 
regions, practical help in developing business recovery plans, and 
federal matching funds to pursue projects designed to address 
competitive weaknesses and capitalize on strengths. Many participating 
firms that were negatively impacted by trade have recorded gains in 
sales and productivity since starting the program. Our analysis of 
more than 500 firms' financial data and other firm and economic 
factors shows that this sales growth is positively associated with 
participation in the TAA for Firms program. 

The changes to the TAA for Firms program that Congress enacted in the 
TGAAA in 2009 gave EDA and TAA Center officials more flexibility in 
certifying firms, strengthened professional management of the program, 
and improved transparency regarding the program's performance. 
However, enhanced accountability can be accomplished only through 
better measures of how the program is helping firms adjust to import 
competition. EDA collects performance data, but few of its performance 
measures are outcome oriented. EDA also has several interrelated 
weaknesses in its collection of data that make needed reporting 
burdensome and unreliable at times. Better and more readily 
retrievable data would give EDA and Congress a more comprehensive and 
complete picture of program activities and enable more meaningful and 
ongoing analysis of impact. Given its small budget relative to the 
demonstrated need for trade adjustment assistance--as suggested by the 
substantial backlog of approved but unfunded projects--EDA can do more 
to ensure that its allocations reflect firms' and regions' varied 
needs for assistance and TAA Centers' varied costs in providing this 
assistance. EDA can also encourage more efficient program 
administration by making the cost of services a criterion in its 
funding formula and by incentivizing TAA Centers' cost-containment 
efforts, so that more funds are available to serve firms. EDA has 
recognized many of these weaknesses and has made initial efforts to 
address them. Given the current pursuit of further trade 
liberalization, following through with these improvements to the TAA 
for Firms program is essential to ensure that the program uses its 
budget in the most efficient manner possible. 

Recommendations for Executive Action: 

We recommend that the Secretary of Commerce take the following three 
actions: 

1. To ensure that the performance measures used to evaluate the TAA 
for Firms program demonstrate program results and to help ensure that 
EDA can comprehensively evaluate the effectiveness of the program, 

* broaden the program's evaluation approach, for instance, by 
developing additional quantifiable outcome-oriented performance goals 
and measures for key program areas and conducting further analysis of 
the data to isolate the impact of the TAA for Firms program from other 
influences, such as economic trends. 

2. To improve the data available to manage and evaluate the TAA for 
Firms program, 

* develop a data system to consistently collect, maintain, and analyze 
sufficiently reliable and up-to-date data on program operations and 
participant firms. 

3. To ensure that EDA's allocation of funding to TAA Centers reflects 
varied program needs and costs, 

* revise the program's funding formula by reevaluating the factors and 
weights it uses to allocate funding under its cooperative agreements, 
and include measures of need, such as the number of import-impacted 
firms in each center's service region and the center's costs in 
providing assistance to firms. 

Agency Comments: 

We provided a draft of this report to the Department of Commerce for 
comment. We received written comments from Commerce, which are 
reprinted in appendix V. Commerce concurred with our findings and 
recommendations and provided additional information and observations 
on implementing our recommendations. For example, Commerce stated that 
EDA intends to focus on developing improved performance measurement 
and accountability. In addition, Commerce noted that EDA intends to 
take steps to improve its data collection and examine the funding 
allocation formula used to distribute program funds to the TAA Centers 
in collaboration with the centers and Congressional stakeholders. 
Commerce expects to complete these efforts by 2014. 

We also received technical comments from Commerce, which we 
incorporated as appropriate. 

We are sending copies of this report to the appropriate congressional 
committees, the Department of Commerce, and other interested parties. 
In addition, the report is available at no charge on the GAO website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-4101 or gomezj@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made key contributions to 
this report are listed in appendix VI. 

Signed by: 

J. Alfredo Gomez: 
Acting Director: 
International Affairs and Trade: 

[End of section] 

Appendix I: Scope and Methodology: 

The Trade and Globalization Adjustment Assistance Act of 2009 (TGAAA), 
part of the American Recovery and Reinvestment Act of 2009, mandated 
that we report on the operation and effectiveness of the Trade 
Adjustment Assistance (TAA) for Firms program. We examined (1) the 
results of the legislative changes on program operations and 
participation, (2) the performance measures and data that EDA uses to 
evaluate the program and what these tell us about the program's 
effectiveness, and (3) how program funding is allocated and spent. 

To determine the results of the legislative changes on the program's 
operations, we reviewed relevant program legislation and regulations 
as well as agency documentation and data on the number and type of 
firms participating in the TAA for Firms program. We reviewed program 
regulations and agency guidance outlining the operational and 
administrative changes to implement the amendments under the TGAAA. We 
collected from the Department of Commerce's (Commerce) Economic 
Development Administration (EDA) and the 11 TAA Centers' data on 
certifications and approved adjustment plans from fiscal years 2008 to 
2011. We analyzed these data and the data reported in the TAA for 
Firms annual reports for fiscal years 2009 through 2011 to determine 
the types of services firms received and how the legislative changes 
impacted program participation.[Footnote 40] We assessed the 
reliability of the data by checking for accuracy and completeness. We 
determined that the data were sufficiently reliable for the purposes 
of reporting the number of submitted and approved petitions and 
approved business recovery plans. We interviewed EDA officials, 
including the TAA for Firms program Director, Chief Counsel, and 
certifying officials, to determine the effects of the legislative 
changes on the program. We also conducted a site visit or 
teleconference with each of the 11 TAA Centers, interviewing staff, 
representatives of participant firms, and consultants to understand 
procedures for identifying and assisting eligible trade-impacted firms 
and to obtain their opinions and observations on the legislative 
changes' effects on the program. 

We conducted site visits to eight TAA Centers--in Ann Arbor, Michigan; 
Atlanta, Georgia; Blue Bell, Pennsylvania; Boulder, Colorado; Chicago, 
Illinois; Los Angeles, California; North Billerica, Massachusetts; and 
Seattle, Washington. We conducted teleconferences with the remaining 
three centers--in Binghamton, New York; Blue Springs, Missouri; and 
San Antonio, Texas. We selected our site visit locations to achieve 
geographic diversity and a mix of nonprofit and university-affiliated 
centers, as well as a range of industries, numbers of submitted and 
approved petitions, and numbers of business recovery plans. To 
determine how the TAA for Firms program relates to other economic 
development programs that assist manufacturers, including Commerce's 
Manufacturing and Extension Partnership (MEP) program, we interviewed 
TAA Center staff, MEP consultants, and officials at Commerce 
headquarters. We also reviewed documentation of program objectives, 
eligibility requirements, and services provided. 

We assessed EDA's performance measures and data for the program. We 
analyzed the two performance measures reported for the TAA for Firms 
program in the agency's performance and accountability reports as well 
as the 14 measures specified by TGAAA and included in the TAA for 
Firms annual reports. Using criteria from prior GAO work, we assessed 
the extent to which the program's performance measures reflect the 
characteristics of effective performance measures.[Footnote 41] We 
reviewed other reports about the program: one conducted by the Urban 
Institute in November 1998[Footnote 42] and our prior report on the 
program.[Footnote 43] To examine how program data are collected and 
used to manage the program, we interviewed EDA officials and TAA 
Center staff and reviewed EDA and TAA Center program data and reports. 
We interviewed EDA officials responsible for collecting and reporting 
program data, as well as TAA Center staff, to determine the procedures 
for collecting, validating, and reporting data on program operations. 
We also reviewed data and documents, including quarterly and annual 
reports from EDA and the centers, to understand the types of program 
data collected and the purposes for which the data are used. 

To estimate the impact that the TAA for Firms program assistance has 
had on firm performance, we collected data on a group of participant 
firms with business recovery plans approved in fiscal years 2009 
through 2011 and data on general economic indicators, and we conducted 
a regression analysis with these data to assess the effects of the 
assistance on this group of participating firms, controlling for firm, 
industry, and economywide factors. From each of the 11 TAA Centers, we 
obtained financial data on firms that had an approved business 
recovery plan and had completed at least one project in their approved 
recovery plan in fiscal years 2009, 2010, and 2011. We assessed the 
reliability of the data we received from the centers by testing the 
data for obvious errors and completeness. In addition, we interviewed 
and received written responses from staff at the centers who had 
knowledge of the data, to obtain information on the procedures for 
collecting and verifying the data reported. The centers drew their 
responses to our data collection instrument primarily from the 
petition and business recovery plan approval data they collect from 
firms. In doing so, they used the data that they had previously 
compiled for a conference report on Commerce appropriations for fiscal 
year 2012. This helped ensure the accuracy, completeness, and 
consistency of the data. We found the data sufficiently reliable for 
the purposes of our analysis. For our dependent variable or outcome 
variable, we used data on yearly firm sales during this period as a 
proxy for firm performance. We combined these data with data on 
industry-wide and firm-specific variables that determine performance, 
such as firm-specific financial data, growth rates, firm size, age, 
and other qualitative firm and industry indicators. To control for 
factors in the general economy, we incorporated macroeconomic 
variables in our analysis, including the Census Bureau's regional 
unemployment rates and a yearly time trend. In addition, to estimate 
the effects of trade on firm performance, we calculated and 
incorporated an international trade variable--the import penetration 
ratio for each firm's industry. Our regression model determined 
whether participation in the TAA for Firms program had a statistically 
significant effect on firm performance after the firm received 
assistance under the program. Because the data we collected did not 
include any information about firms that did not participate in the 
program, this analysis allows us to make inferences from the 
regression estimates only for the firms that participated in the 
program during this time period. We present more complete information 
about the data and methodology of the analysis in appendix III. 

To report the views of certified firms on program operations and on 
the quality and impact of program services, we interviewed firm 
representatives and consultants during our site visits to TAA Centers. 
We also conducted a survey of firms that had a business recovery plan 
approved by the Trade Adjustment Assistance for Firms program in 
fiscal year 2009. We selected this population to ensure that those 
surveyed had received assistance from one of the TAA Centers and had 
some experience with implementing a recovery plan. Our research at the 
beginning of our review indicated that it would be feasible to survey 
these firms within our time frame and achieve an acceptable response 
rate. We conducted formal pretests with representatives of three firms 
and considered comments from EDA officials to ensure that our 
questions were appropriate and could be understood by respondents. Our 
survey covered the following topics:how the firms learned of the 
program, the types of assistance the firms received from the TAA 
Centers, the level of the firms' satisfaction with the assistance, and 
the impact of the assistance on the firms. We administered our survey 
between March 2012 and April 2012. We surveyed the 163 firms for which 
we obtained contact information, of the 171 firms that had a business 
recovery plan approved in fiscal year 2009. We received responses from 
117 of the 163 firms, with a final response rate of 72 percent. 
However, because we did not randomly select the firms we surveyed, the 
survey results do not permit us to draw conclusions about all firms 
participating in the TAA for Firms program. We conducted an analysis 
of our survey results to identify potential sources of nonresponse 
bias by comparing respondents to nonrespondents on three key 
characteristics: total sales, number of employees, and total amount of 
technical assistance approved. This analysis did not indicate any 
large differences between respondents and nonrespondents for these 
three characteristics, and we determined that the survey results for 
the 117 respondents were sufficiently reliable to present in our 
report. The survey and a more complete tabulation of the results can 
be viewed online at GAO-12-935SP. 

To examine the funding formula EDA uses to allocate program funds and 
to examine how funds were spent, we reviewed EDA's 2003 spending plan, 
which defines the factors included in the formula as well as the data 
used to measure each of the factors. In addition, we analyzed EDA's 
available spending plans covering cooperative agreement years 2009 
through 2011 to assess the measures used to allocate program funding 
to the TAA Centers during each of those cooperative agreement years. 
We used equity standards from social science research for evaluating 
and designing funding allocation formulas to assess the TAA for Firms 
formula.[Footnote 44] To determine the amount of funding allocated to 
each of the 11 centers, as well as the centers' direct and indirect 
costs, we analyzed EDA's budget data for cooperative agreement years 
2008 through 2011. We also analyzed centers' data on the amount of 
approved, unfunded assistance for cooperative agreement years from 
fiscal year 2008 to April 2012, and the number of firms affected. We 
reviewed published work of the Commerce Office of Inspector General's 
assessment of the administrative costs of the centers.[Footnote 45] 

We conducted this performance audit from July 2011 to September 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe the 
evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Trade Adjustment Assistance for Firms and Other 
Department of Commerce Programs: 

TAA for Firms and Manufacturing Extension Partnership Program: 

The MEP program, like the TAA for Firms program, is a Commerce-
administered program aimed at helping manufacturers. The MEP program 
was established in 1988 and is administered by Commerce's National 
Institute of Standards and Technology (NIST) to enhance productivity 
and technological performance and to strengthen the global 
competitiveness of small and medium-sized U.S. manufacturers, helping 
them create and retain jobs. Under this program, NIST has established 
relationships with 60 nonfederal organizations, called MEP centers, 
located throughout the United States and Puerto Rico. NIST enters into 
annual cooperative agreements with each of the 60 MEP centers, whereby 
NIST provides federal funding to the centers subject to the MEP 
centers' providing matching funds from state and local entities and 
meeting performance measures. These centers provide services to small 
and medium-sized manufacturers to help them develop new customers, 
expand into new markets, and create new products. MEP centers focus on 
helping manufacturers in five key areas--technology acceleration, 
supplier development, sustainability, workforce, and continuous 
improvement.[Footnote 46] Specifically, MEP centers enter into 
contracts with firms to deliver technical assistance to improve their 
manufacturing processes and productivity, expand capacity, adopt new 
technologies, utilize best management practices, and accelerate 
company growth. Table 1 provides a comparative overview of the TAA for 
Firms and MEP programs. 

Table 4: Overview of TAA for Firms and MEP Programs: 

Target population; 
TAA for Firms: Small-and medium-sized firms in manufacturing, 
production, and service sectors; economically distressed and trade 
impacted; 
MEP: Small-and medium-sized firms in manufacturing sector, including 
firms that want to grow and distinguish themselves in the marketplace. 

Goals and objectives; 
TAA for Firms: Help economically distressed U.S. businesses develop 
strategies to compete in the global economy; Help U.S. manufacturers 
increase profitability and retain employees while competing with 
imported products; 
MEP: Enhance productivity and technological performance and strengthen 
the global competitiveness of small-and medium-sized U.S-based 
manufacturing firms. 

Eligibility; 
TAA for Firms: A firm must demonstrate trade impact on employment, 
sales, and production through a certification process; 
MEP: All firms classified as a manufacturer under industry-specific 
codes; once those requirements are satisfied, the firm can be assisted 
immediately. 

Mode of assistance and services; 
TAA for Firms: Firms pay up to 25 percent of the cost of developing a 
business recovery plan; 
Firms participate in cost-sharing for technical assistance. EDA may 
fund up to 75 percent of the total cost for proposals up to $30,000 or 
50 percent for proposals over $30,000 and up to $75,000; Third-party 
consultants implement approved projects. Firm can only receive a total 
of $75,000 in matched funding; 
MEP: Firms receive assistance free of charge with a firm assessment 
and a project implementation plan; Firms participate in cost-sharing 
for technical assistance. MEP typically provides 33 percent of the 
cost of the projects, while the state government, local partners, and 
the firms cover the remaining 67 percent, with the average proposal 
ranging from $30,000 to $50,000; MEP staff implement approved 
projects, although third-party consultants may be used if necessary; 
firm can participate in program multiple times with no funding limit. 

Source: GAO analysis of program documents and discussions with program 
officials. 

[End of table] 

As shown in table 4, trade-impacted firms can qualify for either 
program, although the eligibility requirements for each program 
differ. For example, the TAA for Firms program requires applicants to 
complete a certification process that demonstrates trade impact on the 
firm's employment, sales, and production. In contrast, the MEP program 
does not require applicant firms to go through a certification 
process. Firms must only demonstrate they are a manufacturer under 
industry-specific codes, according to MEP officials. Officials from 
the TAA for Firms program said that in some instances, trade-impacted 
firms may choose to participate in the MEP program rather than the TAA 
for Firms program because they can receive faster assistance. In 
addition, officials confirmed that participant firms in the TAA for 
Firms program have subsequently participated in the MEP program for 
additional services, and vice versa. However, officials from both 
programs did not have data to determine the extent to which this has 
occurred. 

Although trade-impacted firms can qualify for both programs, and some 
trade-impacted firms have received assistance from both programs, TAA 
for Firms and MEP program officials said that the programs are more 
complementary than duplicative in nature. For example, the programs 
collaborate at the state, regional, and national levels to provide 
services to manufacturing firms. At the state and regional levels, MEP 
consultants often bid on and win contracts to implement projects in 
the TAA participant firms' business recovery plans, according to TAA 
Center and MEP staff. Staff from both programs also said that MEP 
consultants sometimes refer firms to the TAA for Firms program and 
that TAA for Firms officials sometimes refer firms to the MEP program. 
At the national level, EDA officials informally consult with MEP 
officials at NIST on best practices and opportunities for 
collaboration. For example, EDA staff said that they have spoken at 
MEP conferences to educate consultants about the TAA for Firms program. 

TAA for Firms and Commerce's Economic Adjustment Assistance Program: 

In addition to administering the TAA for Firms program, EDA 
administers the Economic Adjustment Assistance (EAA) program through 
six regional offices. The EAA program's purpose is to help 
economically distressed communities by supporting a wide range of 
construction and other assistance using flexible tools to address 
pressing economic recovery issues. TAA Center officials said they had 
little interaction with EAA officials or the EDA regional offices 
because the EAA program assists communities rather than firms. 

[End of section] 

Appendix III: Economic Analysis of the Effect of Trade Adjustment 
Assistance Policy on Firm Market Performance: 

We examined the impact of the TAA for Firms program on participant 
firms' performance and effectiveness using statistical analysis. For 
this analysis, we obtained a sample of financial data on firms from 
the 11 TAA Centers that had an approved business recovery plan and 
were certified from 1998 through 2010. We used regression analysis to 
assess whether there was a statistically significant relationship 
between firm performance and participation in the TAA for Firms 
program, controlling for other firm-specific, industry-specific, 
macroeconomic, and trade factors. Using firm sales and firm 
productivity as proxies for firm performance, we found a positive and 
statistically significant relationship between participation in the 
TAA for Firms program and the performance of the firms in our sample. 
Using different model specifications, we estimated that the firms 
participating in the TAA for Firms program experienced yearly 
increases in sales of 5 to 6 percent, all else held constant. Our 
results also suggest that participation in the TAA for Firms program 
was associated with increased firm productivity, measured by the ratio 
of yearly sales to employment, of about 4 percent per year, all else 
held constant. Moreover, we observed higher performance when 
participating firms were in growing markets, which may suggest that 
participation allowed them to leverage the market expansion. 

Policy Evaluation Methodology: 

The aim of our analysis was to evaluate the policy impact of the TAA 
for Firms on firms participating in the program. Typically, we do not 
observe the counterfactual state--how firms that participated would 
have performed had they not participated--and we do not observe 
outcomes associated with a control group of firms that did not 
participate. A control group would require identifying a group of 
firms that is as much like the firms in our sample as possible but did 
not participate in the program. However, selecting a group that was 
affected by import penetration similarly to the actual participant 
group would be quite difficult. Moreover, using a control group has 
weaknesses. For example, macroeconomic and other trends could affect 
the two sets of firms differently. 

Given these data challenges, we measured the average effect of TAA for 
Firms participation on the firms in our sample. We made inferences 
from our regression estimates only for this sample. While this 
approach allowed us to focus on the firms that actually participated, 
it cannot determine whether these firms might have improved in the 
absence of the program. It is possible that participating firms have 
some unobservable or unmeasured characteristic--such as superior 
management--relative to firms that did not participate. In such 
circumstances, participation in the program might be incidental to 
improved performance. 

Discussion of Empirical Model, Data, and Variables: 

Overall, our data set included 579 firms, or panels, and 2,711 
observations. We used a panel of cross-sectional, time-series data 
that included values for variables across a number of years for a 
group of firms. To obtain data on performance of the various firms in 
the program, we sent a data collection instrument to TAA Centers, 
requesting data on firms that had completed at least one project in 
their business recovery plan in 2009, 2010, or 2011. Our data 
collection instrument requested data on sales and employment 2 years 
prior to entry into the program, in the certification year, and 2 to 3 
years after entry into the program as well as other quantitative and 
qualitative data for each firm. The panel of data had unequal time 
periods, as firms in our sample entered and exited the program at 
different times. For example, two firms that completed a project in 
2009 might have entered into the program in different years. In 
addition, the data were nonsequential in time and included gaps. For 
instance, EDA did not collect data on sales and employment for every 
year and explained that some of the data could not be obtained or was 
missing.[Footnote 47] Although some regression methods can accommodate 
unbalanced panels, others cannot, and this placed certain constraints 
on our regression methods. The time periods of the panels for each 
firm averaged 4 years, with a minimum of 2 years and a maximum of 6 
years. 

For each firm in each year, we specified the empirical model as: 

Log (Sales) = â0 + â1 Emp + â2 Emp2 + â3 Age + â4 Age2 + â4 Growth + 
â5 Growth_lg1 + â6 TAAF Policy + â7 PolGrwth + â8 Nmulti + â9 Nprodmkt 
+ â10 Ngeomkt + â11Npubpriv + â12 TPR + â13 Unemp + â14 Year + å: 

Where, â0 is the constant term, the other betas are the variable 
coefficients, and å is the error term. For each year t, we define the 
dependent variables as: 

Log (Sales) = yearly logarithm of firm sales: 

Log (Prod) = yearly logarithm of productivity defined as firm sales 
divided by firm employment: 

And, we define the independent or control variables as: 

Emp = yearly employment for firm (proxy for size of firm): 

Emp2 = yearly employment squared for firm: 

Age = age of firm: 

Age2 = age squared of firm: 

Growth = yearly growth in industry value of shipments for each 
industry: 

Growth_lg1 = yearly growth in industry value of shipments, lagged one 
year: 

TAAF Policy = trade adjustment assistance indicator = 0 before 
certification and 1 thereafter: 

PolGrwth = interactive variable: TAAF Policy * growth: 

Nmulti = indicator variable for multiplant firm; 1 if multiplant firm, 
0 otherwise: 

Nprodmkt = categorical variable indicating which level of the product 
market the firm sells to such as raw, intermediate, and final/consumer: 

Ngeomkt = categorical variable indicating which geographic market the 
firm sells to, such as local, regional, domestic, international, or 
some combination of these markets: 

Npubpriv = indicator variable for whether the firm is public or 
private; public = 1, private = 0: 

TPR = industry-level import penetration ratio for each 5 and 6-digit 
NAICS code: 

Unemp = yearly regional unemployment rate (BLS Census Region): 

Year = year trend variable (1998 through 2011): 

A summary of the panel data showing the variables used, including the 
means, standard deviations, minimums and maximums, is shown in table 5. 

Table 5: Summary of Data Used in TAAC Regression Analysis: 

Panel definition variables: 

Variable: Firmid; 
Observations: 2711; 
Mean: [Empty]; 
Standard deviation: [Empty]; 
Minimum: 1; 
Maximum: 579. 

Variable: Year; 
Observations: 2711; 
Mean: 2007; 
Standard deviation: [Empty]; 
Minimum: 1998; 
Maximum: 2011. 

Dependent or outcome variables: 

Variable: Sales ($); 
Observations: 2711; 
Mean: $17,500,000; 
Standard deviation: $46,700,000; 
Minimum: $5,936; 
Maximum: $530,000,000. 

Variable: Lsales; 
Observations: 2711; 
Mean: 15.57; 
Standard deviation: 1.45; 
Minimum: 8.69; 
Maximum: 20.09. 

Variable: Lprod; 
Observations: 2621; 
Mean: 11.78; 
Standard deviation: 0.59; 
Minimum: 8.27; 
Maximum: 15.05. 

Independent or control variables: 

Variable: TAAF Policy; 
Observations: 2711; 
Mean: 0.4644; 
Standard deviation: 0.4988; 
Minimum: 0; 
Maximum: 1. 

Variable: Age; 
Observations: 2697; 
Mean: 44.2; 
Standard deviation: 28.12; 
Minimum: 4; 
Maximum: 210. 

Variable: Age2; 
Observations: 2697; 
Mean: 2744.03; 
Standard deviation: 3905.23; 
Minimum: 16; 
Maximum: 44100. 

Variable: Emp; 
Observations: 2621; 
Mean: 93; 
Standard deviation: 169; 
Minimum: 1; 
Maximum: 1918. 

Variable: Emp2; 
Observations: 2621; 
Mean: 37038.16; 
Standard deviation: 203128.1; 
Minimum: 1; 
Maximum: 3678724. 

Variable: Growth; 
Observations: 2710; 
Mean: -0.0057; 
Standard deviation: 0.1482; 
Minimum: -1.0152; 
Maximum: 0.7462. 

Variable: Growth_lg1; 
Observations: 2682; 
Mean: 0.0024; 
Standard deviation: 0.1387; 
Minimum: -0.7301; 
Maximum: 0.6891. 

Variable: Polgrwth; 
Observations: 2710; 
Mean: 0.0078; 
Standard deviation: 0.1038; 
Minimum: -1.0152; 
Maximum: 0.74616. 

Variable: Nmulti; 
Observations: 2711; 
Mean: 0.1741; 
Standard deviation: 0.3793; 
Minimum: 0; 
Maximum: 1. 

Variable: Npubpriv; 
Observations: 2711; 
Mean: 0.0491; 
Standard deviation: 0.216; 
Minimum: 0; 
Maximum: 1. 

Variable: Nprodmkt; 
Observations: 2711; 
Mean: 2.5308; 
Standard deviation: 0.6108; 
Minimum: 1; 
Maximum: 4. 

Variable: Ngeomkt; 
Observations: 2701; 
Mean: 3.8775; 
Standard deviation: 1.149; 
Minimum: 1; 
Maximum: 6. 

Variable: TPR; 
Observations: 2200; 
Mean: 0.3574; 
Standard deviation: 0.3007; 
Minimum: 0.0022; 
Maximum: 2.6886. 

Variable: NAICS; 
Observations: 2711; 
Mean: [Empty]; 
Standard deviation: [Empty]; 
Minimum: 31311; 
Maximum: 339999. 

Macroeconomic control variables: 

Variable: Unemp; 
Observations: 2711; 
Mean: 7.13; 
Standard deviation: 2.04; 
Minimum: 3.61; 
Maximum: 11.03. 

Variable: Year; 
Observations: 2711; 
Mean: 2007; 
Standard deviation: 2.72; 
Minimum: 1998; 
Maximum: 2011. 

Source: GAO analysis of data from Commerce, Bureau of Labor 
Statistics, U.S. Census Bureau, Annual Survey of Manufacturers, and 
U.S. International Trade Commission's Tariff and Trade Data Web, 1997-
2011. 

[End of table] 

For our main dependent variable, we used the natural log of firm sales 
to proxy firm performance. We transformed the sales variable into 
natural logarithms, because the distribution of firm sales was highly 
skewed to smaller sales amounts. When transformed into natural 
logarithms, the sales data exhibited more of a normal distribution, 
making it more useful for regression analysis and reducing the effects 
of outliers. 

Our policy variable is represented in the model as an indicator 
variable denoted by 0 prior to a firm's certification by a TAA Center 
and 1 after certification. Using this variable, we tested whether the 
policy variable going from 0 to 1 brought about a statistically 
significant increase in the log of sales over time for these firms. 
When a firm changes from nonparticipation to participation, sales 
would change by some percent. We also created an interactive term--
polgrwth--which is the policy variable times the growth variable. This 
allows detection of whether changes in market growth over the period, 
in combination with the TAA for Firms policy, had a further effect on 
firm sales. 

For our independent variables, we used firm-specific financial and 
qualitative variables, which we transformed into indicator variables. 
Our firm-specific variables included employment and firm age. In the 
data collection instrument we sent to TAA Centers, we asked for 
qualitative data such as reach of the geographic market, level of the 
product market, whether the firm was public or private, and whether it 
was part of a multiplant firm. These variables represent market 
structure characteristics such as size, product differentiation, and 
economies of scale of the firm. 

We also created variables that were market-or industry-specific, such 
as growth and lagged growth. For this, we used Census of 
Manufacturing, Annual Survey of Manufactures value of shipments data 
on a yearly basis from 1998 to 2010, at the five-and six-digit North 
American Industry Classification System (NAICS) level.[Footnote 48] 
Since 2011 data were not yet available, we forecast this variable 
using regression techniques and calculated the growth rates using 
natural log differences divided by the change in year. Also, because 
changes in firm performance could result from prior year demand or 
market growth, we included a variable for lagged market growth. 

We also created an international trade variable at the six-digit NAICS 
industry level for import penetration, using International Trade 
Commission (ITC) import and export data from its online Tariff and 
Trade Data Web and the Census Annual Survey of Manufacturers' value of 
shipments data. We calculated this variable as follows: Imports / 
(Value of Shipments + Imports - Exports). This ratio measures imports 
as a proportion of apparent domestic consumption and is often used in 
the trade literature as a proxy for import penetration. We found that 
trade data were missing in the ITC database for some of the unique 
NAICS industries represented in our firm sample from the TAA Centers. 
Specifically, although there are about 579 firms in our sample 
overall, when matched with the trade data the sample size reduces to 
about 472 firms. Including this variable yields a smaller data set and 
somewhat different regression results. 

Results of Our Analysis: 

Table 6 below presents the regression analysis results, for three 
model specifications, with: 

1) the dependent variable as the log of firm sales; 

2) the dependent variable as the log of firm sales including the 
import penetration variable; and: 

3) the dependent variable as the log of productivity (sales divided by 
employment). 

The table also shows the regression coefficients and Z-value of the 
three regression equations. We estimated the model specifications 
using the feasible generalized least squares (FGLS) estimator because 
of autocorrelation or correlation in the error terms over time in the 
data.[Footnote 49] FGLS estimators are appropriate when one or more of 
the assumptions of homoskedasticity and noncorrelation of regression 
errors fails. 

Model 1, which uses log of sales as the dependent or outcome variable, 
without the import penetration ratio, used 2,572 observations and 572 
panels in the regression. Model 2, which included the import 
penetration ratio explanatory variable, reduced the sample to 2,086 
observations and 466 panels or firms.[Footnote 50] Model 3 included 
productivity as the outcome variable, defined as the log of firm sales 
divided by firm employment, along with the other control and 
macroeconomic variables in the other two specifications; it contained 
the full sample of observations. The coefficients and Z values for the 
TAA for Firms policy variable are consistent across the 3 model 
specifications. In addition, the Wald Chi-squared test for model 
significance showed that all model specifications were statistically 
significant overall. 

Table 6: Semi-log Model Coefficients for TAA for Firms Regression 
Models: 

Firm age; 
(1): Log sales: 0.0192*** (8.81); 
(2): Log sales: 0.0166*** (6.86); 
(3): Log productivity (sales/employment): -0.00162 (-1.06). 

Firm age2; 
(1): Log sales: -0.000118*** (-6.88); 
(2): Log sales: -0.0000932*** (-4.78); 
(3): Log productivity (sales/employment): 0.0000132 (1.05). 

Employment; 
(1): Log sales: 0.00852*** (41.15); 
(2): Log sales: 0.00864*** (35.33); 
(3): Log productivity (sales/employment): [Empty]. 

Employment2; 
(1): Log sales: -0.00000393*** (-30.06); 
(2): Log sales: -0.00000394*** (-26.81); 
(3): Log productivity (sales/employment): [Empty]. 

TAAF policy; 
(1): Log sales: 0.0464** (3.07); 
(2): Log sales: 0.0573** (3.27); 
(3): Log productivity (sales/employment): 0.0354* (2.46). 

Market growth; 
(1): Log sales: -0.0294 (-0.48); 
(2): Log sales: -0.0318 (-0.45); 
(3): Log productivity (sales/employment): 0.00747 (0.13). 

Market growth lagged 1 year; 
(1): Log sales: 0.220*** (4.74); 
(2): Log sales: 0.197*** (3.66); 
(3): Log productivity (sales/employment): 0.183*** (4.15). 

Policy*Growth; 
(1): Log sales: 0.172* (2.37); 
(2): Log sales: 0.129 (1.54); 
(3): Log productivity (sales/employment): 0.0355 (0.50). 

Multiplant firm; 
(1): Log sales: 0.632*** (14.51); 
(2): Log sales: 0.670*** (13.94); 
(3): Log productivity (sales/employment): 0.399*** (11.90). 

Level of product market; 
(1): Log sales: -0.157*** (-5.51); 
(2): Log sales: -0.138*** (-4.46); 
(3): Log productivity (sales/employment): -0.114*** (-5.49). 

Size of market; 
(1): Log sales: 0.0809*** (5.17); 
(2): Log sales: 0.0707*** (3.96); 
(3): Log productivity (sales/employment): 0.0457*** (4.13). 

Public/private; 
(1): Log sales: 0.215** (2.82); 
(2): Log sales: 0.486*** (4.10); 
(3): Log productivity (sales/employment): 0.310*** (4.67). 

Unemployment rate; 
(1): Log sales: -0.0226*** (-3.70); 
(2): Log sales: 
-0.0211** (-3.01); 
(3): Log productivity (sales/employment): -0.00300 (-0.53). 

Year; 
(1): Log sales: 0.0299*** (5.51); 
(2): Log sales: 0.0314*** (5.04); 
(3): Log productivity (sales/employment): 0.0294*** (6.13). 

Import penetration ratio; 
(1): Log sales: [Empty]; 
(2): Log sales: -0.170** (-2.88); 
(3): Log productivity (sales/employment): [Empty]. 

Constant; 
(1): Log sales: -45.51*** (-4.19); 
(2): Log sales: -48.60*** (-3.89); 
(3): Log productivity (sales/employment): -47.25*** (-4.92). 

N; 
(1): Log sales: 2572; 
(2): Log sales: 2086; 
(3): Log productivity (sales/employment): 2572. 

Wald Chi2; 
(1): Log sales: 5592; 
(2): Log sales: 3169; 
(3): Log productivity (sales/employment): 375. 

Z statistics in parentheses: 

* p < 0.05, ** p < 0.01, *** p < 0.001: 

Source: GAO analysis of firm data from Commerce and industry data from 
the Bureau of Labor Statistics, the U.S. Census Department, Annual 
Survey of Manufacturers, and the U.S. International Trade Commission. 

Note: Semilog model coefficients are shown in the row with each 
variable, with the z-values in parentheses. Coefficients that are 
statistically significant at the 0.05, 0.01, and 0.001 percent are 
noted by *, **, and ***, respectively. 

[End of table] 

The TAA for Firms policy indicator variable, which is 0 prior to 
participation in the TAA for Firms program and 1 thereafter, is 
positively and significantly related to log of firm sales in our model 
specifications at the 1 and 5 percent levels. This implies an average 
of a 5 percent to 6 percent increase in sales when the firm 
participates in the program, with all else constant. However, these 
model coefficients are relatively small (0.046 to 0.057 for the sales 
models) in comparison with other variables such as the multiplant firm 
variable, the public/private ownership of the firm, and the lagged 
growth variable. Further, the TAA for Firms policy variable is also 
positively related and statistically significant at the 5 percent 
level in our productivity specification. This result translates into 
about a 4 percent increase in the level of productivity, on average, 
for participation in the program for firms in our sample, all else 
remaining constant. The interactive variable--growth--with the TAA for 
Firms policy variable is also positively and significantly related to 
the log of firm sales in Model 1. The model suggests that 
participation in the TAA for Firms program had an effect on sales that 
was greater in industries that were experiencing growth than in those 
that were not. As Mueller and Rogers point out, there is more room for 
expansion by fringe firms in the market when there is greater growth 
in market demand.[Footnote 51] 

Model 2, which included the import penetration variable as well as the 
same control variables, produced similar results. The trade 
penetration variable was negatively related to firm sales, as 
expected, and statistically significant at the 1 percent level. When 
this result is retransformed back into the marginal effects on sales, 
we estimate that this translates into about a 16 percent decrease in 
sales, on average, for every 1 percentage point increase in the 
industry import penetration ratio, all else equal. 

Limitations of Our Analysis: 

We checked for overall multicollinearity using the Variance Inflation 
Factor analysis and found no overall problems in our model. However, 
we note that the use of the TAA for Firms policy variable and the year 
trend variable in the models was collinear at the 0.49 percent level. 
With the exclusion of one or the other of these two variables, the 
coefficient and statistical significance of the remaining variable 
became much higher. Since one of the variables, employment, could be 
endogenous in our specifications, we also estimated our regressions 
with and without this variable to see whether this changed the 
estimates. We found no major changes in our estimates or significance 
levels. 

[End of section] 

Appendix IV: Data That EDA Uses for Its Funding Allocation Formula and 
Share of Funding by Center: 

The Economic Development Administration's (EDA) funding allocation 
formula includes five factors to allocate funding to each of the 11 
TAA Centers, in addition to base funding divided equally across all of 
the centers. Table 7 shows the data that EDA used to measure each of 
these five factors to allocate $15.4 million among the centers for the 
1-year 2011 cooperative agreement period. The table shows for each 
factor the data by center as well as each center's share of the total. 
For example, the Great Lakes Center accounted for 3.8 percent of 
geographic size, 9.7 percent of the total number of firms, 11.7 
percent of the total number of employees in the program's approved 
business recovery plans, and 8.1 percent of the total number of firms 
that achieved expected results. Table 8 shows the resulting allocation 
to each of the centers for cooperative agreement year 2011. 

Table 7: Data Used for TAA for Firms Funding Allocation Formula and 
Each Center's Share of Funding Based on Each Factor, Cooperative 
Agreement Year 2011: 

TAA Center: Great Lakes; Geographic size (square miles): 133,619 
(3.8%); 
Number of firms in manufacturing, mining and agriculture sectors: 
46,563 (9.7%); 
Number of approved business recovery plans (FY2009-2010): 41 (11.7%); 
Number of employees in approved business recovery plans (FY2009-2010): 
4,622 (11.7%); 
Number of firms that achieved expected results: 30 (8.1%). 

TAA Center: Mid-America; 
Geographic size (square miles): 202,769 (5.7%); 
Number of firms in manufacturing, mining and agriculture sectors: 
20,331 (4.2%); 
Number of approved business recovery plans (FY2009-2010): 33 (7.5%); 
Number of employees in approved business recovery plans (FY2009-2010): 
3,233 (8.2%); 
Number of firms that achieved expected results: 36 (9.7%). 

TAA Center: MidAtlantic; 
Geographic size (square miles): 127,695 (3.6%); 
Number of firms in manufacturing, mining and agriculture sectors: 
46,314 (9.6%); 
Number of approved business recovery plans (FY2009-2010): 45 (10.2%); 
Number of employees in approved business recovery plans (FY2009-2010): 
3,500 (8.9%); 
Number of firms that achieved expected results: 48 (13.0%). 

TAA Center: Midwest; 
Geographic size (square miles): 245,400 (6.9%); 
Number of firms in manufacturing, mining and agriculture sectors: 
51,026 (10.6%); 
Number of approved business recovery plans (FY2009-2010): 67 (15.3%); 
Number of employees in approved business recovery plans (FY2009-2010): 
8,525 (21.7%); 
Number of firms that achieved expected results: 46 (12.4%). 

TAA Center: New England; 
Geographic size (square miles): 62,809 (1.8%); 
Number of firms in manufacturing, mining and agriculture sectors: 
23,181 (4.8%); 
Number of approved business recovery plans (FY2009-2010): 82 (18.7%); 
Number of employees in approved business recovery plans (FY2009-2010): 
3,926 (10.0%); 
Number of firms that achieved expected results: 46 (12.4%). 

TAA Center: New York State; 
Geographic size (square miles): 47,214 (1.3%); 
Number of firms in manufacturing, mining and agriculture sectors: 
21,761 (4.5%); 
Number of approved business recovery plans (FY2009-2010): 23 (5.3%); 
Number of employees in approved business recovery plans (FY2009-2010): 
2,355 (6.0%); 
Number of firms that achieved expected results: 9 (2.4%). 

TAA Center: Northwest; 
Geographic size (square miles): 962,792 (27.2%); 
Number of firms in manufacturing, mining and agriculture sectors: 
32,723 (6.8%); 
Number of approved business recovery plans (FY2009-2010): 32 (7.3%); 
Number of employees in approved business recovery plans (FY2009-2010): 
2,707 (6.9%); 
Number of firms that achieved expected results: 37 (10.0%). 

TAA Center: Rocky Mountain; 
Geographic size (square miles): 626,050 (17.7%); 
Number of firms in manufacturing, mining and agriculture sectors: 
25,974 (5.4%); 
Number of approved business recovery plans (FY2009-2010): 36 (8.2%); 
Number of employees in approved business recovery plans (FY2009-2010): 
5,317 (13.5%); 
Number of firms that achieved expected results: 49 (13.2%). 

TAA Center: Southeastern; 
Geographic size (square miles): 372,685 (10.5%); 
Number of firms in manufacturing, mining and agriculture sectors: 
86,003 (17.8%); 
Number of approved business recovery plans (FY2009-2010): 37 (8.5%); 
Number of employees in approved business recovery plans (FY2009-2010): 
2,562 (6.5%); 
Number of firms that achieved expected results: 24 (6.5%). 

TAA Center: Southwest; 
Geographic size (square miles): 374,026 (10.6%); 
Number of firms in manufacturing, mining and agriculture sectors: 
57,377 (11.9%); 
Number of approved business recovery plans (FY2009-2010): 29 (6.6%); 
Number of employees in approved business recovery plans (FY2009-2010): 
1,458 (3.7%); 
Number of firms that achieved expected results: 31 (8.4%). 

TAA Center: Western; 
Geographic size (square miles): 385,843 (10.9%); 
Number of firms in manufacturing, mining and agriculture sectors: 
71,072 (14.7%); 
Number of approved business recovery plans (FY2009-2010): 13 (3.0%); 
Number of employees in approved business recovery plans (FY2009-2010): 
1,148 (2.9%); 
Number of firms that achieved expected results: 14 (3.8%). 

TAA Center: Total; 
Geographic size (square miles): 3,540,902(100%); 
Number of firms in manufacturing, mining and agriculture sectors: 
482,325 (100%); 
Number of approved business recovery plans (FY2009-2010): 438 (100%); 
Number of employees in approved business recovery plans (FY2009-2010): 
39,353 (100%); 
Number of firms that achieved expected results: 370 (100%). 

Source: GAO presentation of Commerce data. 

[End of table] 

Table 8: Funding Allocation to TAA Centers Based on EDA's Funding 
Formula, Cooperative Agreement Year 2011: 

TAA Center: Great Lakes; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $74,000; 
Funding based on geographic size (square miles): $6,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $159,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $199,000; 
Funding based on number of firms that achieved expected results: $150; 
Total allocation: $1,429,000. 

TAA Center: Mid-America; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $33,000; 
Funding based on geographic size (square miles): $9,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $128,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $139,000; 
Funding based on number of firms that achieved expected results: $180; 
Total allocation: $1,330,000. 

TAA Center: MidAtlantic; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $74,000; 
Funding based on geographic size (square miles): $6,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $174,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $151,000; 
Funding based on number of firms that achieved expected results: $240; 
Total allocation: $1,486,000. 

TAA Center: Midwest; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $82,000; 
Funding based on geographic size (square miles): $11,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $259,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $367,000; 
Funding based on number of firms that achieved expected results: $230; 
Total allocation: $1,790,000. 

TAA Center: New England; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $37,000; 
Funding based on geographic size (square miles): $3,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $317,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $169,000; 
Funding based on number of firms that achieved expected results: $230; 
Total allocation: $1,598,000. 

TAA Center: New York State; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $35,000; 
Funding based on geographic size (square miles): $2,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $89,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $101,000; 
Funding based on number of firms that achieved expected results: $45; 
Total allocation: $1,113,000. 

TAA Center: Northwest; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $52,000; 
Funding based on geographic size (square miles): $42,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $124,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $117,000; 
Funding based on number of firms that achieved expected results: $185; 
Total allocation: $1,361,000. 

TAA Center: Rocky Mountain; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $42,000; 
Funding based on geographic size (square miles): $27,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $139,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $229,000; 
Funding based on number of firms that achieved expected results: $245; 
Total allocation: $1,523,000. 

TAA Center: Southeastern; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $137,000; 
Funding based on geographic size (square miles): $16,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $143,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $110,000; 
Funding based on number of firms that achieved expected results: $120; 
Total allocation: $1,368,000. 

TAA Center: Southwest; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $92,000; 
Funding based on geographic size (square miles): $16,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $112,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $63,000; 
Funding based on number of firms that achieved expected results: $155; 
Total allocation: $1,279,000. 

TAA Center: Western; 
Base funding: $841,000; 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $114,000; 
Funding based on geographic size (square miles): $17,000; 
Funding based on number of approved business recovery plans (FY2009-
2010): $50,000; 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $50,000; 
Funding based on number of firms that achieved expected results: $70; 
Total allocation: $1,141,000. 

TAA Center: Total; 
Base funding: $9,251,000 (60%); 
Funding based on number of firms in manufacturing, mining and 
agriculture industries: $771,000 (5%); 
Funding based on geographic size (square miles): $154,000 (1%); 
Funding based on number of approved business recovery plans (FY2009-
2010): $1,696,000 (11%); 
Funding based on number of employees in approved business recovery 
plans (FY2009-2010): $1,696,000 (11%); 
Funding based on number of firms that achieved expected results: 
$1,850 (12%); 
Total allocation: $15,418,000 (100%). 

Source: GAO presentation of Commerce data. 

Note: Because of rounding, columns may not sum exactly to totals shown. 

[End of table] 

[End of section] 

Appendix V: Comments from the Department of Commerce: 

United States Department of Commerce: 
The Secretary of Commerce: 
Washington D.C. 20230: 

September 7, 2012: 

Mr. J. Alfredo Gomez: 
Acting Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Gomez: 

The Department of Commerce appreciates the opportunity to review and 
comment on the U.S. Government Accountability Office (GAO) draft 
report entitled, Trade Adjustment Assistance: Commerce Program has 
Helped Manufacturing and Services Firms, but Measures, Data, and 
Funding Formula Could Improve (GA0-12-930). Our comments are enclosed. 

Thank you for your work on this report. If you have any questions, 
please contact Jim Stowers, Acting Assistant Secretary for Legislative 
and Intergovernmental Affairs, at (202) 482-3663. 

Sincerely, 

Signed by: 

Rebecca M. Blank: 
Acting Secretary of Commerce: 

Enclosure: 

[End of section] 

Department of Commerce: 
Economic Development Administration: 

Comments on Draft GAO Report Entitled: Trade Adjustment Assistance: 
Commerce Program Has Helped Mannfacturing and Services Firms, but 
Measures, Data, and Funding Formula Could Improve (GAO-12-930): 

The U.S. Department of Commerce provides the following comments: 

The Department of Commerce (DOC), through its bureau, the Economic 
Development Administration (EDA), manages the Trade Adjustment 
Assistance for Firms (TAAF) program. 

DOC is committed to implementing the program effectively to help firms 
throughout the United States adjust to import competition. Overall, we 
concur with the strongly positive findings of the report, which 
contain a great deal of evidence demonstrating the effectiveness of 
the TAAF program. As part of this study, 117 of 163 firms responded to 
GAO's survey on the firms' experience with the TAAF program. As noted 
in the report, nearly all of the responding firms reported they were 
generally or very satisfied with the program. Manufacturing firms, 
specifically, reported that the program was associated with increased 
sales and productivity. Notably, an impressive 73 percent of the firms 
reported that the program helped them with profitability, 71 percent 
said it helped them retain employees, and 57 percent reported that the 
program helped them hire new employees. 

In addition to recognizing the positive findings of the report, we 
think it is important to address and highlight EDA's efforts in the 
areas of program performance, performance measures, data collection, 
and the allocation formula to the Trade Adjustment Assistance Centers 
(TAACs) that are the intermediary organizations that provide 
assistance to eligible firms. 

EDA created the TAAF Program Division (TAAFD) in late 2009, in 
accordance with section 1864 of the Trade and Globalization Adjustment 
Assistance Act (TGAAA) of 2009, which was included as subtitle I 
(letter "1") of title I of Division B of the American Recovery and
Reinvestment Act of 2009 (Pub. L. 111-5, 123 Stat. 115, at 398). 
Section 1864 of the TGAAA amended the Trade Act of 1974 to add revised 
section 255 (19 U.S.C. § 2345), which makes certain funds available 
for program administration, and of such funds, directs the Secretary of
Commerce to "make available to the Economic Development Administration 
such sums as may be necessary to establish the position of Director of 
Trade Adjustment Assistance for Firms and such other full-time 
positions as may be appropriate to administer the provisions of this 
chapter." The TAAF annual report is submitted in accordance with 
Section 1866 of the TGAAA (19 U.S.C. § 2345a), which directs the 
Secretary of Commerce to submit to Congress an annual report on the 
TAAF program that contains a specific set of performance-related data 
prescribed by Congress. 

Upon the creation of the TAAFD in late 2009, a two-year strategic plan 
was developed to address the challenges the program was facing in 
terms of operational efficiency and customer service. The following 
accomplishments have been realized (in the course of implementing the 
TAAFD strategic plan over the past two years):  

* The average turnaround time for EDA approval of petitions has 
decreased from 89 days to 36 days, while the average turnaround time 
for Adjustment Proposals (APs) has decreased from 20 days to 16 days. 
This was achieved despite significant increases in the number of 
petitions and APs submitted to EDA for approval. For example, in FY 
2010, EDA certified 53% more petitions than in 2009 (114 more 
petitions in 2010 than in 2009) and approved 54% more APs (93 more APs 
in 2010 than in 2009). In total, EDA certified 479 petitions and 
approved 448 APs in FYs 2010 and 2011. 

* 100% of EDA grants to TAACs have been distributed on time (prior to 
the extension of the grant), and all payments to TAACs have been 
disbursed on time (within the acceptable timeframes set forth in DOC 
guidelines). 

* To help improve relationships between EDA and the TAACs, as well as 
among the TAACs themselves, EDA convened several meetings between TAAC 
staff, EDA/TAAFD, and program stakeholders, including: 

- A TAAF Program Best Practices Conference in March 2010 with TAAC 
Directors. The conference focused on developing a set of best 
practices in the area of submission of petitions for certification and 
APs to EDA, with the goal of increasing the quality of submissions to 
EDA and thereby increasing program efficiency and operations. 

- An informational briefing and roundtable discussion with 
Congressional stakeholders in July 2010, in which TAAC Directors and 
two of their clients provided briefings on the TAAF program to Senate 
Finance and House Appropriations Committee staff. 

- A meeting between EDA and TAAC Directors and staff in September 
2011, that developed outreach strategies to increase program 
visibility and participation by firms in states with relatively low 
participation in the program and to strengthen partnerships with other 
Federal programs, such as the Manufacturing Extension Partnership 
program administered by DOC's National Institute of Standards and 
Technology. This meeting also served as a program introduction to key 
members of GAO as they began their evaluation of TAAF program 
effectiveness. 

- A Performance Measurement Strategic Planning Meeting in February 
2012, to explore improving TAAF program performance metrics. This 
meeting also served as an opportunity for EDA to engage the TAAC 
Directors in discussions of how improved performance metrics can be 
used to inform and potentially change the allocation formula to the 
TAACs. 

The accomplishments and improvements outlined above have been realized 
during a period of much uncertainty for the program in terms of both 
authorization and appropriations. In December 2010, as the 
authorization for the TAAF program was set to expire, Congress passed 
the Omnibus Trade Act of 2010 (Pub. L. No. 111-344). The Act extended 
authorization of the TAAF program through February 2012, but allowed 
certain expanded provisions authorized under the TGAAA, specifically 
covering eligibility for service sector firms and expanded eligibility 
"look-back periods," (the period of time, looking backward, that a 
firm can use to demonstrate import impact on their business) to expire 
on February 12, 2011. The TAAF program continued to operate at the FY 
2011 appropriation level of $15.8 million under a full year continuing 
resolution. 
The expiration of certain TGAAA provisions did, however, limit the 
number of firms entering the program, as TAACs were unable to assist 
service sector firms using the extended "look-back periods" to certify 
firms, Meanwhile, with proposed elimination of TAAF funding within the
President's FY 2012 Budget Request to Congress, the program faced 
uncertainty in appropriations as well. With an uncertain future, most 
TAACs focused on servicing existing clients as opposed to outreach and 
recruitment of new firms. 

On October 21, 2011, the President signed into law the Trade 
Adjustment Assistance Extension Act of 2011 (Pub. L. No. 112-40), 
which authorizes the TAAF program through December 31, 2013. 
Additionally, the TAAF program received an appropriation of $15.8 
million in FY 2012, and was included in the President's FY 2013 Budget 
Request to Congress. 

With these developments, combined with the improvements to the program 
outlined above, EDA intends to focus on developing an improved 
performance measurement and accountability process over the next two 
years. These efforts will also assist EDA as we examine the allocation 
formula to the TAACs in order to shift the focus to awarding funds 
based on program performance outputs. EDA kicked off this effort at 
the February 2012 Performance Measurement Strategic Planning Meeting 
with TAACs as described above. 

EDA is currently implementing a performance measurement improvement 
process, which began in late 2011 and consists of two phases: planning 
and development, and implementation. The one-year planning and 
development stage is expected to be completed by October 2012. The 
first phase includes the following activities: researching and 
identifying improved metrics and indicators, testing the metrics and 
indicators across the full portfolio of EDA investments, and 
developing a work plan for implementing measures that are adopted. To 
assist with this effort, EDA has partnered with the University of 
North Carolina and George Washington University to develop draft 
performance measures utilizing state-of-the-an performance measurement 
and program evaluation techniques. 

The subsequent implementation phase will include the following 
activities' obtaining OMB approval of data collection forms, 
developing a database to store collected data, updating programmatic 
guidance and regulations, and examining the allocation formula used to 
distribute program funds to the TAACs in collaboration with both TAACs 
and Congressional stakeholders. The entire process is expected to be 
completed by the fall of 2014. The end result will be more effective 
program management for all of EDA's programs, including the TAAF 
program. 

The Department of Commerce looks forward to continuing our work to 
help achieve Congress's objectives for the TAAF program. 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

J. Alfredo Gomez, (202) 512-4101 or gomezj@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Kim Frankena (Assistant 
Director), Christina Bruff, David Dayton, Leah DeWolf, David Dornisch, 
Barbara El Osta, Etana Finkler, Bradley Hunt, Ernie Jackson, Erin 
Preston, Kelly Rubin, and Andrew Stavisky made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] The three other TAA programs focus on workers, farmers, and 
communities. 

[2] See GAO, Trade Adjustment Assistance: Impact of Federal Assistance 
to Firms Is Unclear, [hyperlink, 
http://www.gao.gov/products/GAO-01-12] (Washington, D.C.; Dec. 15, 
2000). In this report, we noted that the impact of the program was 
inconclusive because EDA did not monitor and track program outcomes of 
program recipients. We recommended that Commerce establish more 
effective measures of program outcomes and apply these measures to 
evaluate the effectiveness of the program. Commerce agreed with our 
findings and recommendations. In response, Commerce established new 
measures and performance targets in fiscal year 2002 and has reported 
the results in its annual performance plans. 

[3] A TAA Center may be affiliated with a university, private firm, or 
nonprofit organization; however, nonprofit organizations and 
universities currently manage all of the centers. 

[4] See [hyperlink, http://www.gao.gov/products/GAO-01-12] and Urban 
Institute, Evaluation of Trade Adjustment Assistance Program, 
(Washington, D.C.: November 1998). 

[5] We outline these equity standards in our prior work. See GAO, 
Vocational Rehabilitation Funding Formula: Options for Improving 
Equity in State Grants and Considerations for Performance Incentives, 
[hyperlink, http://www.gao.gov/products/GAO-09-798] (Washington, D.C.: 
Sept. 30, 2009). 

[6] EDA enters into a cooperative agreement with each TAA Center, 
generally for a 3-year period. Because each year covered by a 
cooperative agreement begins on July 1 and ends on June 30 and does 
not correspond to the federal fiscal year of October 1 to September 
30, we refer to the years covered by a cooperative agreement as 
cooperative agreement years rather than fiscal years. 

[7] Small and medium-sized firms are firms with fewer than 500 
employees, according to the U.S. International Trade Commission. 

[8] The firm pays up to 25 percent of the cost of developing the plan, 
while the program pays up to 75 percent. 

[9] A firm that requests $30,000 or less in total assistance to 
implement an approved business plan must pay at least 25 percent of 
the cost of the assistance. Firms that request more than $30,000 in 
total assistance, up to $75,000, must pay 50 percent of the total cost. 

[10] EDA did not provide a breakdown of services for fiscal year 2008, 
because it was not required to report this information until fiscal 
year 2009. 

[11] The TAA for Firms program is one of four trade adjustment 
assistance programs; the other three provide assistance for workers, 
farmers, and communities impacted by international trade. Under the 
TAA for Workers program, the Department of Labor provides services and 
benefits, such as training and reemployment services and income 
support, to eligible manufacturing and other workers. Under a TAA 
program to assist trade-impacted communities, the Department of Labor 
awards grants to institutions of higher education for developing or 
improving education and career training programs for persons eligible 
for the TAA for Workers program, and the Department of Commerce 
awarded strategic planning and implementation grants to trade-impacted 
communities. The Department of Agriculture administers a TAA program 
that provides help to individual farmers and fishermen to become more 
competitive in producing their current commodity or transitioning to a 
different commodity. 

[12] See GAO, Trade Adjustment Assistance: USDA Has Enhanced Technical 
Assistance for Farmers and Fishermen, but Steps Are Needed to Better 
Evaluate Program Effectiveness, [hyperlink, 
http://www.gao.gov/products/GAO-12-731] (Washington, D.C.: July 12, 
2012). 

[13] P.L. 111-344. 

[14] P.L. 112-40. 

[15] GAO, Designing Evaluations, 2012 Revision, [hyperlink, 
http://www.gao.gov/products/GAO-12-208G] (Washington, D.C.: Jan. 31, 
2012). 

[16] GAO, Program Evaluation: A Variety of Rigorous Methods Can Help 
Identify Effective Interventions, [hyperlink, 
http://www.gao.gov/products/GAO-10-30] (Washington, D.C.: Nov. 23, 
2009). 

[17] The conference report required EDA to report on the number and 
location of firms assisted between fiscal years 2009 and 2011, the 
results of this investment, and the value each TAA Center added to the 
process. 

[18] EDA found the petition and business recovery plan data collected 
in 2007 to be unreliable for reporting purposes because EDA's database 
systems were created between 2007 and 2008 and these data were entered 
into the system without sufficient oversight. However, we found EDA's 
data on certifications and business recovery plan approvals for fiscal 
years 2008 to 2011 to be sufficiently reliable for reporting purposes. 

[19] Department of Commerce, Office of Inspector General, Letters to 
Congress Regarding Review of Administrative Costs of Trade Adjustment 
Assistance Centers (Washington, D.C.: May 11, 2012). 

[20] Issued in May 2012, OMB's Federal Information Technology Shared 
Services Strategy provides federal agencies with policy guidance on 
the range of information technology services. The strategy requires 
agencies to use a shared approach to information technology services 
delivery. 

[21] In January 2012, EDA's computer network experienced a computer 
virus attack. EDA disabled its computer network, including its e-mail 
and Internet access, to investigate the origin and nature of the 
attack. As a result, according to EDA officials, program data that EDA 
had previously collected were no longer available, because the data 
had been corrupted and the agency had removed its computer equipment 
to avoid transmitting the virus. 

[22] A 1998 Urban Institute study commissioned by EDA found 
statistically significant improvements in sales, employment, and 
survivability for firms receiving Trade Adjustment Assistance compared 
with firms that were certified as eligible but did not receive 
implementation assistance. We reviewed the TAA for Firms program in 
2000 and recommended that Commerce establish more effective program 
measures and use the new measures as criteria to evaluate the 
program's effectiveness. See [hyperlink, 
http://www.gao.gov/products/GAO-01-12]. 

[23] We conducted the same analysis using employment as the dependent 
variable, but the TAA for Firms policy variable, as well as a number 
of firm, market, and macroeconomic control variables were not 
significant. 

[24] The 11 TAA Centers provided data on firm sales, employment, and 
productivity, as well as other firm-specific data on items such as 
age, industry codes, and qualitative data. These firms were mostly in 
manufacturing industries. Please see appendix III for more information 
about the population of firms in our study. 

[25] NAICS is a two-through six-digit hierarchical classification 
system, offering five levels of detail. Each digit in the code is part 
of a series of progressively narrower categories, and the more digits 
in the code signify greater classification detail. 

[26] Import penetration is defined as the ratio of imports to apparent 
domestic consumption, which shows the share of the U.S. market for the 
particular product served by imports. Apparent domestic consumption is 
derived by subtracting net exports (exports minus imports) from U.S. 
industry sales or shipments. 

[27] For market growth, we used yearly value of shipments data from 
the Census Annual Survey of Manufacturers for 1997 through 2010. For 
2011, we estimated a projected value of shipments. We then estimated 
market growth rates for each industry (as determined by the six-digit 
North American Industry Classification System) associated with each 
firm by taking the natural log differences of the value of shipments 
divided by the change in year. Log growth rates are often used in 
economic modeling and empirical analyses. 

[28] We conducted an analysis of our survey results to identify 
potential sources of nonresponse bias by comparing respondents with 
nonrespondents on three key characteristics: total sales, number of 
employees, and the total amount of technical assistance approved. Our 
analysis did not find any large differences between respondents and 
nonrespondents for these three characteristics, and we determined that 
the survey results for the 117 respondents were sufficiently reliable 
to present in our report. 

[29] [hyperlink, http://www.gao.gov/products/GAO-12-935SP]. 

[30] Cooperative agreement years run from July 1 to June 30. 

[31] See [hyperlink, http://www.gao.gov/products/GAO-09-798]. 

[32] This factor is measured by the percentage of a TAA Center's 
clients who reported satisfaction with the assistance received, and 
assistance being demonstrated by the center's payment to a third-party 
consultant helping the firm implement a project. 

[33] See [hyperlink, http://www.gao.gov/products/GAO-09-798]. 

[34] See [hyperlink, http://www.gao.gov/products/GAO-09-798]. 

[35] TAA Centers' programmatic costs include personnel salaries and 
fringe benefits; travel costs, equipment, and supply costs; and 
indirect and other costs not allocated to specific projects, such as 
rent and utilities, as well as the federal share of funding for 
technical assistance provided to firms by third-party consultants. 

[36] In May 2012, the Department of Commerce Office of Inspector 
General (OIG) reported that EDA does not require the TAA Centers to 
provide a complete breakdown of all expenses by activity, and 
therefore EDA does not know the true total cost of centers' program 
activities, including administrative expenses. However, according to 
cost data that the Commerce OIG obtained for cooperative agreement 
years 2007 to 2010 from the New England, New York State, and Western 
Centers, these centers spent, on average, 82 percent of total program 
costs on activities to assist firms, with the remaining 18 percent 
spent on administrative activities. The Commerce OIG did not find the 
administrative costs of these centers to be unreasonable. See 
Department of Commerce, Office of Inspector General, Letters to 
Congress Regarding Review of Administrative Costs of Trade Adjustment 
Assistance Centers, (Washington, D.C.: May 11, 2012). 

[37] EDA reported for fiscal years 2009 to 2011 (Oct. 1, 2008, to 
Sept. 30, 2011) each TAA Center's personnel costs spent on preparing 
petitions and developing and implementing business recovery plans 
cited in a conference report on Commerce appropriations for fiscal 
year 2012. According to EDA's estimates, in fiscal years 2009 through 
2011, the centers spent an average of approximately $891,000 to assist 
firms in preparing petitions and developing and implementing business 
recovery plans. These costs ranged from $318,000 to $1.6 million 
across the centers. 

[38] EDA officials stated that they recognize that TAA Centers vary in 
the portion of allocated funding they use and in their backlogs of 
approved but unfunded assistance; however, EDA has not established 
specific guidance on how centers should use their allocated funds and 
the amount of unfunded backlog Centers should carry. According to 
these officials, EDA does not distribute centers' unspent funds to 
other centers that have spent their full allocation and have greater 
amounts of approved but unfunded assistance, because of concerns about 
creating incentives for centers to increase their funding backlogs. 

[39] See [hyperlink, http://www.gao.gov/products/GAO-09-798]. 

[40] To assess the reliability of the TAA for Firms program data that 
EDA reports, we interviewed EDA officials who manage the data 
collection and reviewed documentation of the steps taken to collect 
the data, the quality checks performed, and other internal controls in 
place to ensure data reliability. In addition, we performed our own 
data reliability tests. We determined that the data are sufficiently 
reliable for the purposes of reporting trends in firm petitions, 
certifications, and business recovery plan approvals. 

[41] GAO, Designing Evaluations: 2012 Revision, [hyperlink, 
http://www.gao.gov/products/GAO-12-208G], (Washington, D.C.: 

Jan. 2012). 

[42] Urban Institute, Evaluation of Trade Adjustment Assistance 
Program, (Washington, D.C.: Nov. 1998). 

[43] See [hyperlink, http://www.gao.gov/products/GAO-01-12]. 

[44] We outline these standards in our prior work. See GAO, Vocational 
Rehabilitation Funding Formula: Options for Improving Equity in State 
Grants and Considerations for Performance Incentives, [hyperlink, 
http://www.gao.gov/products/GAO-09-798] (Washington, D.C.: Sept. 30, 
2009); Great Lakes: EPA and States Have Made Progress In Implementing 
the BEACH Act, but Additional Actions Could Improve Public Health 
Protection, [hyperlink, http://www.gao.gov/products/GAO-07-591] 
(Washington, D.C.: May 1, 2007). 

[45] Department of Commerce, Office of Inspector General, Letters to 
Congress Regarding Review of Administrative Costs of Trade Adjustment 
Assistance Centers (Washington, D.C.: May 11, 2012). 

[46] Examples of MEP-supported projects include management and staff 
training, policy and procedure development, new product development, 
and plant certifications. 

[47] This is reportedly a common pattern in collection of data on 
countries, states, or firms and is more the norm than the exception. 
For example, data for some time periods in panels cannot be collected 
because of lack of resources or funding. See Baltagi, Badi H., 
Economic Analysis of Panel Data, 2nd ed. (West Sussex, England: John 
Wiley & Sons, Ltd., 2003). 

[48] According to "Frequently Asked Questions" on the NAICS website at 
[hyperlink, http://www.census.gov/eos/www/naics/faqs/faqs] in answer 
to the question, "What is the NAICS structure and how many digits are 
in a NAICS code?" The NAICS is a two-through six-digit hierarchical 
classification system, offering five levels of detail. Each digit in 
the code is part of a series of progressively narrower categories, and 
the more digits in the code signify greater classification detail. The 
first two digits designate the economic sector, the third digit 
designates the subsector, the fourth digit designates the industry 
group, the fifth digit designates the NAICS industry, and the sixth 
digit designates the national industry. The five-digit NAICS code is 
the level at which there is comparability in code and definitions for 
most of the NAICS sectors across the three countries participating in 
NAICS (the United States, Canada, and Mexico). The six-digit level 
allows for the United States, Canada, and Mexico each to have country-
specific detail. A complete and valid NAICS code contains six digits. 

[49] We used the FGLS model, xtgls in Stata, a panel data regression 
technique that can correct for serial correlation. We tested for the 
presence of autocorrelation using the xtserial command in Stata and 
found that we could not reject the presence of serial correlation in 
the data. Also, in this type of model, the autocorrelation coefficient 
may be different across panels, since the dependent variables are 
likely to be autocorrelated within a panel or firm. Therefore, this 
estimator allowed us to specify a model that corrected for panel-
specific autocorrelation. The FGLS model structure can also 
accommodate unbalanced panel data with missing observations as we have 
in our sample of data and other non-time-varying variables of 
interest. Use of the technique improved model fit, and our primary 
variables of interest, including the TAA for Firms policy variable, 
were significant and had the expected signs. 

[50] This specification included the 486 missing observations, owing 
to the fact that about 15 percent of our NAICS industries were missing 
from the ITC trade data for our unique firm IDs NAICS industries when 
we created this variable. 

[51] Mueller, Willard F. and Richard T. Rogers, "Changes in Market 
Concentration of Manufacturing Industries, 1947-1977," University of 
Wisconsin, Madison, and the U.S. Department of Agriculture, March 1983. 

[End of section] 

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