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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
July 2009:
Recovery Act:
States' and Localities' Current and Planned Uses of Funds While Facing
Fiscal Stresses:
GAO-09-829:
GAO Highlights:
Highlights of GAO-09-831T a testimony before the Committee on Oversight
and Government Reform, House of Representatives.
Why GAO Did This Study:
This testimony is based on a GAO report being released today—the second
in response to a mandate under the American Recovery and Reinvestment
Act of 2009 (Recovery Act). The report addresses: (1) selected states’
and localities’ uses of Recovery Act funds, (2) the approaches taken by
the selected states and localities to ensure accountability for
Recovery Act funds, and (3) states’ plans to evaluate the impact of
Recovery Act funds. GAO’s work for the report is focused on 16 states
and certain localities in those jurisdictions as well as the District
of Columbia—representing about 65 percent of the U.S. population and
two-thirds of the intergovernmental federal assistance available. GAO
collected documents and interviewed state and local officials. GAO
analyzed federal agency guidance and spoke with Office of Management
and Budget (OMB) officials and with program officials at the Centers
for Medicare and Medicaid Services, and the Departments of Education,
Energy, Housing and Urban Development, Justice, Labor, and
Transportation.
What GAO Found:
Across the United States, as of June 19, 2009, Treasury had outlayed
about $29 billion of the estimated $49 billion in Recovery Act funds
projected for use in states and localities in fiscal year 2009. More
than 90 percent of the $29 billion in federal outlays has been provided
through the increased Medicaid Federal Medical Assistance Percentage
(FMAP) and the State Fiscal Stabilization Fund (SFSF) administered by
the Department of Education.
GAO’s work focused on nine federal programs that are estimated to
account for approximately 87 percent of federal Recovery Act outlays in
fiscal year 2009 for programs administered by states and localities.
The following figure shows the distribution by program of anticipated
federal Recovery Act spending in fiscal year 2009 for the nine programs
discussed in this report.
Figure: Programs in July Review, Estimated Federal Recovery Act Outlays
to States and Localities in Fiscal Year 2009 as a Share of Total:
[Refer to PDF for image]
Medicaid: 63%;
State Fiscal Stabilization Fund: 13%; Highways: 6%;
Other Selected programs: 5%:
* IDEA, Parts B and C, 1%;
* WIA Youth Programs, 1%;
* ESEA, Title i, Part A: 1%;
* Less than 1%:
- Byrne Grants;
- Weatherization Assistance Program;
- Public Housing Capital Fund;
Other programs not in study: 13%.
Source: GAO analysis of data from CBO and Federal Fund Information for
States.
[End of figure]
Increased Medicaid FMAP Funding:
All 16 states and the District have drawn down increased Medicaid FMAP
grant awards of just over $15 billion for October 1, 2008, through June
29, 2009, which amounted to almost 86 percent of funds available.
Medicaid enrollment increased for most of the selected states and the
District, and several states noted that the increased FMAP funds were
critical in their efforts to maintain coverage at current levels.
States and the District reported they are planning to use the increased
federal funds to cover their increased Medicaid caseload and to
maintain current benefits and eligibility levels. Due to the increased
federal share of Medicaid funding, most state officials also said they
would use freed-up state funds to help cope with fiscal stresses.
Highway Infrastructure Investment:
As of June 25, the Department of Transportation (DOT) had obligated
about $9.2 billion for almost 2,600 highway infrastructure and other
eligible projects in the 16 states and the District and had reimbursed
about $96.4 million. Across the nation, almost half of the obligations
have been for pavement improvement projects because they did not
require extensive environmental clearances, were quick to design,
obligate and bid on, could employ people quickly, and could be
completed within 3 years. Officials from most states considered project
readiness, including the 3-year completion requirement, when making
project selections and only later identified to what extent these
projects fulfilled the economically distressed area requirement. We
found substantial variation in how states identified economically
distressed areas and how they prioritized project selection for these
areas.
State Fiscal Stabilization Fund:
As of June 30, 2009, of the 16 states and the District, only Texas had
not submitted an SFSF application. Pennsylvania recently submitted an
application but had not yet received funding. The remaining 14 states
and the District have been awarded a total of about $17 billion in
initial funding from Education—of which about $4.3 billion has been
drawn down. School districts said they would use SFSF funds to maintain
current levels of education funding, particularly for retaining staff
and current education programs. They also told us that SFSF funds would
help offset state budget cuts.
Overall, states reported using Recovery Act funds to stabilize state
budgets and to cope with fiscal stresses. The funds helped them
maintain staffing for existing programs and minimize or avoid tax
increases as well as reductions in services.
Accountability:
States have implemented various internal control programs; however,
federal Single Audit guidance and reporting does not fully address
Recovery Act risk. The Single Audit reporting deadline is too late to
provide audit results in time for the audited entity to take action on
deficiencies noted in Recovery Act programs. Moreover, current guidance
does not achieve the level of accountability needed to effectively
respond to Recovery Act risks. Finally, state auditors need additional
flexibility and funding to undertake the added Single Audit
responsibilities under the Recovery Act.
Impact:
Direct recipients of Recovery Act funds, including states and
localities, are expected to report quarterly on a number of measures,
including the use of funds and estimates of the number of jobs created
and retained. The first of these reports is due in October 2009. OMB—in
consultation with a range of stakeholders—issued additional
implementing guidance for recipient reporting on June 22, 2009, that
clarifies some requirements and establishes a central reporting
framework.
In addition to employment-related reporting, OMB requires reporting on
the use of funds by recipients and nonfederal subrecipients receiving
Recovery Act funds. The tracking of funds is consistent with the
Federal Funding Accountability and Transparency Act (FFATA). Like the
Recovery Act, FFATA requires a publicly available Web site—[hyperlink,
http://www.USAspending.gov]—to report financial information about
entities awarded federal funds. Yet, significant questions have been
raised about the reliability of the data on www.USAspending.gov,
primarily because what is reported by the prime recipients is dependent
on the unknown data quality and reporting capabilities of
subrecipients.
GAO’s Recommendations:
Accountability and Transparency:
To leverage Single Audits as an effective oversight tool for Recovery
Act programs, the Director of OMB should:
* develop requirements for reporting on internal controls during 2009
before significant Recovery Act expenditures occur, as well as for
ongoing reporting after the initial report;
* provide more direct focus on Recovery Act programs through the Single
Audit to help ensure that smaller programs with high risk have audit
coverage in the area of internal controls and compliance;
* evaluate options for providing relief related to audit requirements
for low-risk programs to balance new audit responsibilities associated
with the Recovery Act; and;
* develop mechanisms to help fund the additional Single Audit costs and
efforts for auditing Recovery Act programs.
Matter for Congressional Consideration: Congress should consider a
mechanism to help fund the additional Single Audit costs and efforts
for auditing Recovery Act programs.
Reporting on Impact:
The Director of OMB should work with federal agencies to provide
recipients with examples of the application of OMB’s guidance on
recipient reporting of jobs created and retained. In addition, the
Director of OMB should work with agencies to clarify what new or
existing program performance measures are needed to assess the impact
of Recovery Act funding.
Communications and Guidance:
To strengthen the effort to track funds and their uses, the Director of
OMB should (1) ensure more direct communication with key state
officials, (2) provide a long range time line on issuing federal
guidance, (3) clarify what constitutes appropriate quality control and
reconciliation by prime recipients, and (4) specify who should best
provide formal certification and approval of the data reported.
The Secretary of Transportation should develop clear guidance on
identifying and giving priority to economically distressed areas that
are in accordance with the requirements of the Recovery Act and the
Public Works and Economic Development Act of 1965, as amended, and more
consistent procedures for the Federal Highway Administration to use in
reviewing and approving states’ criteria.
What GAO Recommends:
GAO makes recommendations and a matter for congressional consideration
discussed on the next page. The report draft was discussed with federal
and state officials who generally agreed with its contents. OMB
officials generally agreed with GAO’s recommendations to OMB; DOT
agreed to consider GAO’s recommendation.
View [hyperlink, http://www.gao.gov/products/GAO-09-829] or key
components. For state summaries, see [hyperlink,
http://www.gao.gov/products/GAO-09-830SP]. For more information,
contact J. Christopher Mihm at (202) 512-6806 or mihmj@gao.gov.
[End of section]
Contents:
Letter:
Background:
States and Localities Are Using Recovery Act Funds for Purposes of the
Act and to Help Address Fiscal Stresses:
States Have Implemented Various Internal Control Programs: However,
Single Audit Guidance and Reporting Does Not Adequately Address
Recovery Act Risk:
Efforts to Assess Impact of Recovery Act Spending:
Concluding Observations and Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Office of Management and Budget:
Appendix III: Localities:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Percentage Point Increases in FMAP from Original Fiscal Year
2009 to Third Quarter 2009 (estimated), for 16 States and the District:
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the
District as of June 29, 2009:
Table 3: Highway Apportionments and Obligations Nationwide and in
Selected States as of June 25, 2009:
Table 4: Nationwide Highway Obligations by Project Improvement Type as
of June 25, 2009:
Table 5: SFSF Recovery Act Allocations and Drawdowns for the 16 States
and the District of Columbia:
Table 6: Education Stabilization Funds Made Available to States and the
Division of Education Stabilization Funds between LEAs and IHEs:
Table 7: Data Source and Data Elements for the Four SFSF Education
Reform Assurances:
Table 8: Title I, Part A Recovery Act Allocations and Drawdowns for 16
States and the District of Columbia:
Table 9: IDEA, Parts B and C Recovery Act Allocations and Draw Downs
for the 16 States and the District of Columbia:
Table 10: Allocations of Recovery Act WIA Youth Funds for 13 States and
the District, as of June 30, 2009:
Table 11: Recovery Act Edward Byrne Memorial Justice Assistance Grant
Program's State Allocations and Pass-Through Percentages, Local
Allocations and Total Allocations for 16 States and the District:
Table 12: Allocation of Edward Byrne Memorial Justice Assistance Grants
for 16 States and the District for Fiscal Years 2007 and 2008, as well
as a Result of the Recovery Act:
Table 13: Planned Use of Recovery Act JAG Funds for 16 States and the
District:
Table 14: Recovery Act Edward Byrne Memorial Justice Assistance Grants
Awarded by the Bureau of Justice Assistance to Localities in 16 States
and the District:
Table 15: DOE's Allocation of the Recovery Act's Weatherization Funds
for 16 States and the District:
Table 16: DOE's Approval of State Plans and Second Allocation of the
Recovery Act's Weatherization Funds for 16 States and the District:
Table 17: States' Proposed Funding Plans for Using the Recovery Act's
Weatherization Funds:
Table 18: Number of Housing Units Expected to Be Weatherized Using
Recovery Act Funds:
Table 19: Single Audit Extensions for June 30, 2008, Fiscal Year End:
Table 20: Local School Districts and Postsecondary Institutions Visited
by GAO:
Table 21: Public Housing Authorities Visited by GAO:
Table 22: Location of Highway Projects visited by GAO:
Table 23: Summer Youth Programs Visited by GAO:
Table 24: Weatherization Programs Visited by GAO:
Figures:
Figure 1: Projected versus Actual Federal Outlays to States and
Localities under the Recovery Act:
Figure 2: Programs in July Review, Estimated Federal Recovery Act
Outlays to States and Localities in Fiscal Year 2009 as a Share of
Total:
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007
to May 2009, for 16 States and the District:
Figure 4: Percentage of Recovery Act Highway Funds Obligated as of June
25, 2009:
Figure 5: Planned Uses of Title I Recovery Act Funds in the School
Districts We Visited:
Figure 6: Officials in Districts We Visited Reported Receiving Guidance
in Many Forms:
Figure 7: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn Down Nationwide, as
of June 20, 2009:
Figure 8: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn Down by 47 Public
Housing Agencies Visited by GAO, as of June 20, 2009:
Figure 9: Unit That the Athens Housing Authority Plans to Renovate with
Recovery Act Funds:
Figure 10: Philadelphia, Pennsylvania, Plans to Rehabilitate Vacant
Units at Scattered Sites:
Figure 11: Siding in the process of completion using Rahway Housing
Authority's Recovery Act funds:
Figure 12: State and Local Government Current Receipts, Fiscal Year
2008:
Figure 13: Year-Over-Year Change in State and Local Government Current
Tax Receipts:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 8, 2009:
Report to Congressional Committees:
As federal funds provided by the American Recovery and Reinvestment Act
of 2009 (Recovery Act)[Footnote 1] flow into the U.S. economy, state
fiscal conditions continue to be stressed. Actual declines in sales,
personal income, and corporate income tax revenues influenced state
actions to begin to fill an estimated $230 billion in budget gaps for
fiscal years 2009 through 2011.[Footnote 2] The national unemployment
rate also increased to 9.5 percent in June 2009, and high unemployment
can place greater stress on state budgets as demand for services, such
as Medicaid, increases. Some economists have pointed to signs of
economic improvement, although associations representing state
officials have also reported that state fiscal conditions historically
lag behind any national economic recovery.
The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states' and localities' use of funds made
available under the act.[Footnote 3] This report, the second in
response to the act's mandate, addresses the following objectives: (1)
selected states' and localities' uses of Recovery Act funds, (2) the
approaches taken by the selected states and localities to ensure
accountability for Recovery Act funds, and (3) states' plans to
evaluate the impact of the Recovery Act funds they received.[Footnote
4] The report provides overall findings, makes recommendations, and
discusses the status of actions in response to the recommendations we
made in our April 2009 report. Individual summaries for the 16 selected
states and the District of Columbia (District) are accessible through
GAO's recovery page at [hyperlink, http://www.gao.gov/recovery]. In
addition, all of the summaries have been compiled into an electronic
supplement, GAO-09-830SP.
As reported in our April 2009 review, to address these objectives, we
selected a core group of 16 states and the District that we will follow
over the next few years.[Footnote 5] Our bimonthly reviews examine how
Recovery Act funds are being used and whether they are achieving the
stated purposes of the act. These purposes include:
* to preserve and create jobs and promote economic recovery;
* to assist those most impacted by the recession;
* to provide investments needed to increase economic efficiency by
spurring technological advances in science and health;
* to invest in transportation, environmental protection, and other
infrastructure that will provide long-term economic benefits; and:
* to stabilize state and local government budgets, in order to minimize
and avoid reductions in essential services and counterproductive state
and local tax increases.
The states selected for our bimonthly reviews contain about 65 percent
of the U.S. population and are estimated to receive collectively about
two-thirds of the intergovernmental federal assistance funds available
through the Recovery Act. We selected these states and the District on
the basis of federal outlay projections, percentage of the U.S.
population represented, unemployment rates and changes, and a mix of
states' poverty levels, geographic coverage, and representation of both
urban and rural areas. In addition, we visited a nonprobability sample
of about 178 local entities within the 16 selected states and the
District.[Footnote 6]
GAO's work for this report focused on nine federal programs primarily
because they have begun disbursing funds to states or have known or
potential risks.[Footnote 7] These risks can include existing programs
receiving significant amounts of Recovery Act funds or new programs. We
collected documents from and conducted semistructured interviews with
executive-level state and local officials and staff from state offices
including governors' offices, "recovery czars," state auditors, and
controllers. In addition, our work focused on federal, state, and local
agencies administering the selected programs receiving Recovery Act
funds. We analyzed guidance and interviewed officials from the federal
Office of Management and Budget (OMB). We also analyzed other federal
agency guidance on programs selected for this review and spoke with
relevant program officials at the Centers for Medicare and Medicaid
Services (CMS), the U.S. Departments of Education, Energy, Housing and
Urban Development, Justice, Labor, and Transportation. Where attributed
to state officials, we did not review state legal materials for this
report, but relied on state officials and other state sources for
description and interpretation of relevant state constitutions,
statutes, legislative proposals, and other state legal materials. The
information obtained from this review cannot be generalized to all
states and localities receiving Recovery Act funding. A detailed
description of our scope and methodology can be found in appendix I.
We conducted this performance audit from April 21, 2009, to July 2,
2009, 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 that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
Background:
Our analysis of initial estimates of Recovery Act spending provided by
the Congressional Budget Office (CBO) suggested that about $49 billion
would be outlayed to states and localities by the federal government in
fiscal year 2009, which runs through September 30. However, our
analysis of the latest information available on actual federal outlays
reported on [hyperlink, http://www.recovery.gov][Footnote 8] indicates
that in the 4 months since enactment, the federal Treasury has paid out
approximately $29 billion to states and localities, which is about 60
percent of payments estimated for fiscal year 2009. Although this
pattern may not continue for the remaining 3-1/2 months, at present
spending is slightly ahead of estimates. More than 90 percent of the
$29 billion in federal outlays has been provided through the increased
Federal Medical Assistance Percentage (FMAP) grant awards and the State
Fiscal Stabilization Fund administered by the Department of Education.
Figure 1 shows the original estimate of federal outlays to states and
localities under the Recovery Act compared with actual federal outlays
as reported by federal agencies on www.recovery.gov. The 16 states and
the District of Columbia covered by our review account for about two-
thirds of the Recovery Act funding available to states and localities.
According to the Office of Management and Budget (OMB), an estimated
$149 billion in Recovery Act funding will be obligated to states and
localities in fiscal year 2009.
Figure 1: Projected versus Actual Federal Outlays to States and
Localities under the Recovery Act:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2009;
Projected outlay: $48.9 billion;
Actual outlay: $28.8 billion (as of June 19, 2009).
Fiscal year: 2010;
Projected outlay: $107.7 billion.
Fiscal year: 2011;
Projected outlay: $63.4 billion.
Fiscal year: 2012;
Projected outlay: $23.3 billion.
Fiscal year: 2013;
Projected outlay: $14.4 billion.
Fiscal year: 2014;
Projected outlay: $9.1 billion.
Fiscal year: 2015;
Projected outlay: $5.7 billion.
Fiscal year: 2016;
Projected outlay: $2.5 billion.
Source: GAO analysis of CBO, Federal Funds Information for States, and
Recovery.gov data.
[End of figure]
Our work for this bimonthly report focused on nine federal programs,
selected primarily because they have begun disbursing funds to states
and include programs with significant amounts of Recovery Act funds,
programs receiving significant increases in funding, and new programs.
Recovery Act funding of some of these programs is intended for further
disbursement to localities. Together, these nine programs are estimated
to account for approximately 87 percent of federal Recovery Act outlays
to state and localities in fiscal year 2009. Figure 2 shows the
distribution by program of anticipated federal Recovery Act spending in
fiscal year 2009 to states and localities.
Figure 2: Programs in July Review, Estimated Federal Recovery Act
Outlays to States and Localities in Fiscal Year 2009 as a Share of
Total:
[Refer to PDF for image]
Medicaid: 63%;
State Fiscal Stabilization Fund: 13%;
Highways: 6%;
Other Selected programs: 5%:
* IDEA, Parts B and C, 1%;
* WIA Youth Programs, 1%;
* ESEA, Title i, Part A: 1%;
* Less than 1%:
- Byrne Grants;
- Weatherization Assistance Program;
- Public Housing Capital Fund;
Other programs not in study: 13%.
Source: GAO analysis of data from CBO and Federal Fund Information for
States.
[End of figure]
States and Localities Are Using Recovery Act Funds for Purposes of the
Act and to Help Address Fiscal Stresses:
Increased FMAP Has Helped States Finance Their Growing Medicaid
Programs, but Concerns Remain about Compliance with Recovery Act
Provisions:
Medicaid is a joint federal-state program that finances health care for
certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly. The
federal government matches state spending for Medicaid services
according to a formula based on each state's per capita income in
relation to the national average per capita income. The rate at which
states are reimbursed for Medicaid service expenditures is known as the
FMAP, which may range from 50 percent to no more than 83 percent. The
Recovery Act provides eligible states with an increased FMAP for 27
months between October 1, 2008, and December 31, 2010.[Footnote 9] On
February 25, 2009, CMS made increased FMAP grant awards to states, and
states may retroactively claim reimbursement for expenditures that
occurred prior to the effective date of the Recovery Act. Generally,
for fiscal year 2009 through the first quarter of fiscal year 2011, the
increased FMAP, which is calculated on a quarterly basis, provides for
(1) the maintenance of states' prior year FMAPs, (2) a general across-
the-board increase of 6.2 percentage points in states' FMAPs, and (3) a
further increase to the FMAPs for those states that have a qualifying
increase in unemployment rates. The increased FMAP available under the
Recovery Act is for state expenditures for Medicaid services. However,
the receipt of this increased FMAP may reduce the funds that states
would otherwise have to use for their Medicaid programs, and states
have reported using these available funds for a variety of purposes.
For the third quarter of fiscal year 2009, the increases in FMAP for
the 16 states and the District of Columbia compared with the original
fiscal year 2009 levels are estimated to range from 6.2 percentage
points in Iowa to 12.24 percentage points in Florida, with the FMAP
increase averaging almost 10 percentage points. When compared with the
first two quarters of fiscal year 2009, the FMAP in the third quarter
of fiscal year 2009 is estimated to have increased in 12 of the 16
states and the District.
Table 1: Percentage Point Increases in FMAP from Original Fiscal Year
2009 to Third Quarter 2009 (estimated), for 16 States and the District:
State: Arizona;
Original fiscal year 2009 FMAP[A]: 65.77;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 75.01;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.24.
State: California;
Original fiscal year 2009 FMAP[A]: 50.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 61.59;
Difference between original and adjusted FMAP, third quarter
(estimated): 11.59.
State: Colorado; Original fiscal year 2009 FMAP[A]: 50.00; Adjusted
fiscal year 2009 FMAP, third quarter (estimated): 60.19; Difference
between original and adjusted FMAP, third quarter (estimated): 10.19.
State: District of Columbia;
Original fiscal year 2009 FMAP[A]: 70.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 79.29;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.29.
State: Florida;
Original fiscal year 2009 FMAP[A]: 55.40;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 67.64;
Difference between original and adjusted FMAP, third quarter
(estimated): 12.24.
State: Georgia;
Original fiscal year 2009 FMAP[A]: 64.49;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 74.42;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.93.
State: Illinois;
Original fiscal year 2009 FMAP[A]: 50.32;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 61.88;
Difference between original and adjusted FMAP, third quarter
(estimated): 11.56.
State: Iowa;
Original fiscal year 2009 FMAP[A]: 62.62;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 68.82;
Difference between original and adjusted FMAP, third quarter
(estimated): 6.20.
State: Massachusetts;
Original fiscal year 2009 FMAP[A]: 50.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 60.19;
Difference between original and adjusted FMAP, third quarter
(estimated): 10.19.
State: Michigan;
Original fiscal year 2009 FMAP[A]: 60.27; Adjusted fiscal year 2009
FMAP, third quarter (estimated): 70.68; Difference between original and
adjusted FMAP, third quarter (estimated): 10.41.
State: Mississippi;
Original fiscal year 2009 FMAP[A]: 75.84;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 84.24;
Difference between original and adjusted FMAP, third quarter
(estimated): 8.40.
State: New York;
Original fiscal year 2009 FMAP[A]: 50.00;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 60.19;
Difference between original and adjusted FMAP, third quarter
(estimated): 10.19.
State: North Carolina;
Original fiscal year 2009 FMAP[A]: 64.60;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 74.51;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.91.
State: Ohio;
Original fiscal year 2009 FMAP[A]: 62.14;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 71.29;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.15.
State: Pennsylvania;
Original fiscal year 2009 FMAP[A]: 54.52;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 64.32;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.80.
State: Texas;
Original fiscal year 2009 FMAP[A]: 59.44;
Adjusted fiscal year 2009 FMAP, third quarter (estimated): 68.76;
Difference between original and adjusted FMAP, third quarter
(estimated): 9.32.
Source: GAO analysis of data from Federal Funds Information for States,
as of April 8, 2009.
[A] The original fiscal year 2009 FMAP data were published in the
Federal Register on November 28, 2007.
[End of table]
From October 2007 to May 2009, overall Medicaid enrollment in the 16
states and the District increased by 7 percent.[Footnote 10] In
addition, each of the states and the District experienced an enrollment
increase during this period, with the highest number of programs
experiencing an increase of 5 percent to 10 percent. However, the
percentage increase in enrollment varied widely ranging from just under
3 percent in California to nearly 20 percent in Colorado. (Figure 3.)
Figure 3: Percentage Increase in Medicaid Enrollment from October 2007
to May 2009, for 16 States and the District:
[Refer to PDF for image: vertical bar graph]
Overall Medicaid enrollment increased by 7%.
Quintile category: 0% to less than 5%:
California: 2.73%;
Massachusetts: 4.94%.
Quintile category: 5% to less than 10%:
New Jersey: 5.06%;
Texas: 5.13%;
Mississippi: 5.18%;
New York: 5.52%;
Pennsylvania: 5.84%;
Illinois: 5.93%;
District of Columbia: 6.75%;
Georgia: 7.94%;
Michigan: 8.72%.
Quintile category: 10% to less than 15%:
Ohio: 11.03%;
North Carolina: 11.21%.
Quintile category: 15% to less than 20%:
Iowa: 15.16%;
Arizona: 15.32%;
Florida: 17.96%;
Colorado: 19.76%.
Source: GAO analysis of state data.
Note: The percentage increase for each state is based on actual state
enrollment data for October 2007 to April 2009 and projected enrollment
data for May 2009, with the exception of New York, which provided
projected enrollment data for March, April and May 2009. Three states--
Florida, Georgia, and Mississippi--did not provide projected enrollment
data for May 2009.
[End of figure]
Overall enrollment growth was the most rapid in early 2009--generally
from January through April 2009--an enrollment trend that was mirrored
in several states and the District; however, variation existed. For
example, while Colorado and Mississippi experienced a nearly 5 percent
increase in Medicaid enrollment during this time, Medicaid enrollment
in Illinois remained relatively stable, growing at less than 1 percent.
Most of the increase in overall enrollment was attributable to
populations that are sensitive to economic downturns--primarily
children and families Nonetheless, enrollment growth in other
population groups, such as disabled individuals, also contributed to
enrollment growth.
With regard to the states' receipt of the increased FMAP, all 16 states
and the District had drawn down increased FMAP grant awards totaling
just over $15.0 billion for the period of October 1, 2008 through June
29, 2009 which amounted to 86 percent of funds available. [Footnote 11]
(See table 2.) In addition, except for the initial weeks that increased
FMAP funds were available, the weekly rate at which the sample states
and the District have drawn down these funds has remained relatively
constant.
Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the
District as of June 29, 2009 (Dollars in thousands):
State: Arizona;
FMAP grant awards[A]: $534,576;
Funds drawn: $512,550;
Percentage of funds drawn: 96.
State: California;
FMAP grant awards[A]: $3,330,010;
Funds drawn: $2,753,245;
Percentage of funds drawn: 83.
State: Colorado;
FMAP grant awards[A]: $240,777;
Funds drawn: $197,035;
Percentage of funds drawn: 82.
State: District of Columbia;
FMAP grant awards[A]: $98,339;
Funds drawn: $89,344;
Percentage of funds drawn: 91.
State: Florida;
FMAP grant awards[A]: $1,394,946;
Funds drawn: $1,263,179;
Percentage of funds drawn: 91.
State: Georgia;
FMAP grant awards[A]: $541,145;
Funds drawn: $497,893;
Percentage of funds drawn: 92.
State: Illinois;
FMAP grant awards[A]: $1,040,031;
Funds drawn: $867,909;
Percentage of funds drawn: 83.
State: Iowa;
FMAP grant awards[A]: $136,023;
Funds drawn: $126,815;
Percentage of funds drawn: 93.
State: Massachusetts;
FMAP grant awards[A]: $1,229,501;
Funds drawn: $833,031;
Percentage of funds drawn: 68.
State: Michigan;
FMAP grant awards[A]: $728,425;
Funds drawn: $715,843;
Percentage of funds drawn: 98.
State: Mississippi;
FMAP grant awards[A]: $232,014;
Funds drawn: $206,890;
Percentage of funds drawn: 89.
State: New Jersey;
FMAP grant awards[A]: $579,976;
Funds drawn: $579,976;
Percentage of funds drawn: 100.
State: New York;
FMAP grant awards[A]: $3,312,089;
Funds drawn: $2,643,136;
Percentage of funds drawn: 80.
State: North Carolina;
FMAP grant awards[A]: $710,243;
Funds drawn: $710,243;
Percentage of funds drawn: 100.
State: Ohio;
FMAP grant awards[A]: $832,391;
Funds drawn: $711,435;
Percentage of funds drawn: 85.
State: Pennsylvania;
FMAP grant awards[A]: $1,097,544;
Funds drawn: $957,094;
Percentage of funds drawn: 87.
State: Texas;
FMAP grant awards[A]: $1,444,026;
Funds drawn: $1,351,960;
Percentage of funds drawn: 94.
State: Total;
FMAP grant awards[A]: $17,482,055;
Funds drawn: $15,017,578;
Percentage of funds drawn: 86.
Source: GAO analysis of HHS data.
[A] The FMAP grant awards listed are for the first three quarters of
federal fiscal year 2009.
[End of table]
While the increased FMAP available under the Recovery Act is for state
expenditures for Medicaid services, the receipt of these funds may
reduce the state share for their Medicaid programs. As such, states
reported that they are using or are planning to use the funds that have
become freed up as a result of increased FMAP for a variety of
purposes. Most commonly, states reported that they are using or
planning to use freed-up funds to cover their increased Medicaid
caseload, to maintain current benefits and eligibility levels, and to
help finance their respective state budgets. Several states noted that
given the poor economic climate in their respective states, these funds
were critical in their efforts to maintain Medicaid coverage at current
levels. For example, officials from Georgia, Michigan, and Pennsylvania
reported that the increased FMAP funds have allowed their respective
states to maintain their Medicaid programs, which could have been
subject to cuts in eligibility or services without the increased funds.
Additionally, Medicaid officials in five states and the District
indicated that they used the funds made available as a result of the
increased FMAP to maintain program expansions or local health care
reform initiatives, which in some states would have otherwise been
vulnerable to program cuts. Lastly, all but Texas and the District
reported they are using or planning to use the freed-up funds to help
finance their state budgets. Five states--Arizona, California,
Colorado, North Carolina, and Ohio---reported using or planning to use
these funds solely for this purpose.
For states to qualify for the increased FMAP available under the
Recovery Act, they must meet a number of requirements, including the
following:
* States generally may not apply eligibility standards, methodologies,
or procedures that are more restrictive than those in effect under
their state Medicaid programs on July 1, 2008.[Footnote 12]
* States must comply with prompt payment requirements.[Footnote 13]
* States cannot deposit or credit amounts attributable (either directly
or indirectly) to certain elements of the increased FMAP into any
reserve or rainy-day fund of the state.[Footnote 14]
* States with political subdivisions--such as cities and counties--that
contribute to the nonfederal share of Medicaid spending cannot require
the subdivisions to pay a greater percentage of the nonfederal share
than would have been required on September 30, 2008.[Footnote 15]
Medicaid officials from many states and the District raised concerns
about their ability to meet these requirements and, thus, maintain
eligibility for the increased FMAP. While officials from several states
spoke positively about CMS's guidance related to FMAP requirements, at
least nine states and the District reported they wanted CMS to provide
additional guidance regarding (1) how they report daily compliance with
prompt pay requirements, (2) how they report monthly on increased FMAP
spending, and (3) whether certain programmatic changes would affect
their eligibility for funds. For example, Medicaid officials from
several states told us they were hesitant to implement minor
programmatic changes, such as changes to prior authorization
requirements, pregnancy verifications, or ongoing rate changes, out of
concern that doing so would jeopardize their eligibility for increased
FMAP. In addition, at least three states raised concerns that glitches
related to new or updated information systems used to generate provider
payments could affect their eligibility for these funds. Specifically,
Massachusetts Medicaid officials said they are implementing a new
provider payment system that will generate payments to some providers
on a monthly versus daily basis and would like guidance from CMS on the
availability of waivers for the prompt payment requirement. A CMS
official told us that the agency is in the process of finalizing its
guidance to states on reporting compliance with the prompt payment
requirement of the Recovery Act, but did not know when this guidance
would be publicly available. However, the official noted that, in the
near term, the agency intends to issue a new Fact Sheet, which will
include questions and answers on a variety of issues related to the
increased FMAP.
Due to the variability of state operations, funding processes, and
political structures, CMS has worked with states on a case-by-case
basis to discuss and resolve issues that arise. Specifically,
communications between CMS and several states indicate efforts to
clarify issues related to the contributions to the state share of
Medicaid spending by political subdivisions or to rainy-day funds. For
example, in a May 20, 2009, letter, CMS clarified that California would
not fail to meet the provision of the Recovery Act related to
contributions by political subdivisions if a county voluntarily used
its funds to make up for a decrease in the amount the state
appropriated for the Medicaid payment of wages of personal care service
providers. Similarly, Mississippi clarified with CMS its understanding
that it would not be permissible to deposit general fund savings
resulting from the increased FMAP into the rainy-day fund in state
fiscal year 2010 in order to use those funds in state fiscal year 2011.
[Footnote 16]
Regarding the tracking of the increased FMAP, most of the states and
the District use existing processes to track the receipt of the
increased FMAP separately from regular FMAP, and almost half of the
states reported using existing processes to reconcile these
expenditures. In addition, we reviewed the 2007 Single Audits[Footnote
17] for the states and the District and identified material weaknesses
related to Medicaid, including weaknesses related to provider
enrollment processes and subrecipient monitoring, for most of them.
[Footnote 18] The Single Audits indicated that many states and the
District planned or implemented actions to correct identified
weaknesses. According to CMS officials, CMS regional offices work with
states to address single audit findings related to Medicaid.
States Are Using Highway Infrastructure Funds Mainly For Pavement
Improvements and Are Generally Complying with Recovery Act
Requirements:
The Recovery Act provides funding to the states for restoration,
repair, and construction of highways and other activities allowed under
the Federal-Aid Highway Surface Transportation Program and for other
eligible surface transportation projects. The act requires that 30
percent of these funds be suballocated for projects in metropolitan and
other areas of the state. Highway funds are apportioned to the states
through federal-aid highway program mechanisms, and states must follow
the requirements of the existing program, which include ensuring the
project meets all environmental requirements associated with the
National Environmental Policy Act (NEPA), paying a prevailing wage in
accordance with federal Davis-Bacon requirements, complying with goals
to ensure disadvantaged businesses are not discriminated against in the
awarding of construction contracts, and using American-made iron and
steel in accordance with Buy America program requirements. However, the
maximum federal fund share of highway infrastructure investment
projects under the Recovery Act is 100 percent, while the federal share
under the existing federal-aid highway program is generally 80 percent.
In March 2009, $26.7 billion was apportioned to all 50 states and the
District of Columbia (District) for highway infrastructure and other
eligible projects. As of June 25, 2009, $15.9 billion of the funds had
been obligated[Footnote 19] for over 5,000 projects nationwide, and
$9.2 billion had been obligated for nearly 2,600 projects in the 16
states and the District that are the focus of our review.
Table 3: Highway Apportionments and Obligations Nationwide and in
Selected States as of June 25, 2009 (Dollars in millions):
State: Arizona;
Apportionment: $522;
Obligations[A]: Obligated amount: $262;
Obligations[A]: Percentage of apportionment obligated: 50.2.
State: California;
Apportionment: $2,570;
Obligations[A]: Obligated amount: $1,558;
Obligations[A]: Percentage of apportionment obligated: 60.6.
State: Colorado;
Apportionment: $404;
Obligations[A]: Obligated amount: $244;
Obligations[A]: Percentage of apportionment obligated: 60.4.
State: District of Columbia;
Apportionment: $124;
Obligations[A]: Obligated amount: $100;
Obligations[A]: Percentage of apportionment obligated: 81.0.
State: Florida;
Apportionment: $1,347;
Obligations[A]: Obligated amount: $1,049;
Obligations[A]: Percentage of apportionment obligated: 77.9.
State: Georgia;
Apportionment: $932;
Obligations[A]: Obligated amount: $449;
Obligations[A]: Percentage of apportionment obligated: 48.2.
State: Illinois;
Apportionment: $936;
Obligations[A]: Obligated amount: $671;
Obligations[A]: Percentage of apportionment obligated: 71.7.
State: Iowa;
Apportionment: $358;
Obligations[A]: Obligated amount: $319;
Obligations[A]: Percentage of apportionment obligated: 89.2.
State: Massachusetts;
Apportionment: $438;
Obligations[A]: Obligated amount: $174;
Obligations[A]: Percentage of apportionment obligated: 39.6.
State: Michigan;
Apportionment: $847;
Obligations[A]: Obligated amount: $421;
Obligations[A]: Percentage of apportionment obligated: 49.7.
State: Mississippi;
Apportionment: $355;
Obligations[A]: Obligated amount: $276;
Obligations[A]: Percentage of apportionment obligated: 77.9.
State: New Jersey;
Apportionment: $652;
Obligations[A]: Obligated amount: $410;
Obligations[A]: Percentage of apportionment obligated: 62.9.
State: New York;
Apportionment: $1,121;
Obligations[A]: Obligated amount: $589;
Obligations[A]: Percentage of apportionment obligated: 52.6.
State: North Carolina;
Apportionment: $736;
Obligations[A]: Obligated amount: $423;
Obligations[A]: Percentage of apportionment obligated: 57.6.
State: Ohio;
Apportionment: $936;
Obligations[A]: Obligated amount: $384;
Obligations[A]: Percentage of apportionment obligated: 41.1.
State: Pennsylvania;
Apportionment: $1,026;
Obligations[A]: Obligated amount: $729;
Obligations[A]: Percentage of apportionment obligated: 71.0.
State: Texas;
Apportionment: $2,250;
Obligations[A]: Obligated amount: $1,163;
Obligations[A]: Percentage of apportionment obligated: 51.7.
Selected states total;
Apportionment: $15,551;
Obligations[A]: Obligated amount: $9,222;
Obligations[A]: Percentage of apportionment obligated: 59.3.
U.S. total;
Apportionment: $26,660;
Obligations[A]: Obligated amount: $15,867;
Obligations[A]: Percentage of apportionment obligated: 59.5.
Source: GAO analysis of Federal Highway Administration data.
Note: As of June 25, 2009, all states have met the Recovery Act
requirement that 50 percent of apportioned funds be obligated within
120 days of apportionment (before June 30, 2009), as discussed later in
this report. However, this requirement applies only to funds
apportioned to the state and not to the 30 percent of funds required by
the Recovery Act to be suballocated, primarily based on population, for
metropolitan, regional, and local use or to funds transferred to FTA.
This table shows the percentage of all apportioned funds that have been
obligated, which is why some states show an obligation rate of less
than 50 percent.
[A] This does not include obligations associated with $61 million of
apportioned funds that were transferred from the Federal Highway
Administration (FHWA) to the Federal Transit Administration (FTA) for
transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. §
104(k)(1) to transfer funds made available for transit projects to FTA.
[End of table]
Almost half of Recovery Act highway obligations have been for pavement
improvements. Specifically, $7.8 billion of the $15.9 billion obligated
nationwide as of June 25, 2009, is being used for projects such as
reconstructing or rehabilitating deteriorated roads, including $3.6
billion for road resurfacing projects. Many state officials told us
they selected a large percentage of resurfacing and other pavement
improvement projects because they did not require extensive
environmental clearances, were quick to design, could be quickly
obligated and bid, could employ people quickly, and could be completed
within 3 years. For example, Michigan began a $22 million project on
Interstate 196 in Allegan County that involves resurfacing about seven
miles of road. Michigan Department of Transportation officials told us
they focused primarily on pavement improvements for Recovery Act
projects because they could be obligated quickly and could be under
construction quickly, thereby employing people this calendar year.
Since many of the environmental clearances had been completed, Michigan
could accelerate the construction of these projects when Recovery Act
funds became available. Table 4 shows obligations by the types of road
and bridge improvements being made.
Table 4: Nationwide Highway Obligations by Project Improvement Type as
of June 25, 2009 (Dollars in millions):
Pavement projects (percent of total obligations):
New construction: $994 (6.3%);
Pavement improvement: $7,765 (48.9%);
Pavement widening: $2,701 (17.0%).
Bridge projects:
New construction: $418 (2.6%);
Replacement: $708 (4.5%);
Improvement: $851 (5.4%).
Other[A]: $2,429 (15.3%).
Total[B]: $15,867 (100%).
Source: GAO analysis of Federal Highway Administration data.
[A] Includes safety projects such as improving safety at railroad grade
crossings, transportation enhancement projects such as pedestrian and
bicycle facilities, engineering, and right-of-way purchases.
[B] Totals may not add because of rounding.
[End of table]
As table 4 shows, in addition to pavement improvements, $2.7 billion,
or about 17 percent of Recovery Act funds nationally, has been
obligated for pavement-widening projects. These projects provide for
reconstructing and improving existing roads as well as increasing the
capacity of the road to accommodate traffic, which can reduce
congestion. In Florida, around 47 percent of Recovery Act funds were
obligated for widening projects that increase capacity, while about 9
percent was obligated for pavement improvements such as resurfacing.
As of June 25, 2009, around 10 percent of the funds apportioned
nationwide have been obligated for the replacement or improvement or
rehabilitation of bridges. Funding for bridge rehabilitation and
replacement has been a growing national concern since the I-35 bridge
collapse in Minnesota in 2007.[Footnote 20] Eleven of the states we
visited had less than 10 percent of their Recovery Act funds obligated
for bridge replacement and rehabilitation, while two states--New York
and Pennsylvania--and the District each had more than one-quarter of
their funds obligated for bridge replacement and rehabilitation. In the
District, about 36 percent of its obligations are for rehabilitating
bridges, including the District's largest Recovery Act project--a
bridge that has been identified as having potentially significant
safety concerns. Around 2.6 percent of apportioned funds have been
obligated for construction of new bridges.
As of June 25, 2009, $233 million had been reimbursed nationwide by the
Federal Highway Administration (FHWA) and $96.4 million had been
reimbursed to the 16 states and the District. States are just beginning
to get projects awarded so that contractors can begin work, and U.S.
Department of Transportation officials told us that although funding
has been obligated for more than 5,000 projects, it may be months
before states can request reimbursement. Once contractors mobilize and
begin work, states make payments to these contractors for completed
work, and may request reimbursement from FHWA. FHWA told us that once
funds are obligated for a project, it may take 2 or more months for a
state to bid and award the work to a contractor and have work begin.
According to FHWA, depending on the type of project, it can take days
or years from the date of obligation for those funds to be reimbursed.
For example, the North Carolina Department of Transportation (as of
June 30, 2009) had advertised 65 contracts representing $335 million in
Recovery Act funding. Of the 65 contracts, 55, representing $309
million, had been awarded; of these contracts, 33, representing $200
million, are under way. North Carolina has been reimbursed about $4
million of Recovery Act funding for projects as of June 25, 2009.
Approximately 27 of the 65 projects, representing $70 million, are
anticipated to be complete by December 1, 2009.
According to state officials, because an increasing number of
contractors are looking for work, bids for Recovery Act contracts have
come in under estimates. State officials told us that bids for the
first Recovery Act contracts were ranging from around 5 percent to 30
percent below the estimated cost. For example in California, officials
reported they have had 8 to 10 bidders for each contract bid, compared
with 2 to 4 bids per contract prior to the economic downturn, and that
bids are generally coming in 30 percent below estimates. Arizona
officials told us that contractors are willing to bid for contracts
with little profit margin in order to cover overhead and put people to
work, while Mississippi officials told us that material costs had
decreased. Several state officials told us they expect this trend to
continue until the economy substantially improves and contractors begin
taking on enough other work.
Funds appropriated for highway infrastructure spending must be used as
required by the Recovery Act. States are required to do the following:
* Ensure that 50 percent of apportioned Recovery Act funds are
obligated within 120 days of apportionment (before June 30, 2009) and
that the remaining apportioned funds are obligated within 1 year. The
50 percent rule applies only to funds apportioned to the state and not
to the 30 percent of funds required by the Recovery Act to be
suballocated, primarily based on population, for metropolitan,
regional, and local use. The Secretary of Transportation is to withdraw
and redistribute to other states any amount that is not obligated
within these time frames.[Footnote 21]
* Give priority to projects that can be completed within 3 years and to
projects located in economically distressed areas (EDA). EDAs are
defined by the Public Works and Economic Development Act of 1965, as
amended.[Footnote 22] According to this act, to qualify as an EDA, an
area must meet one or more of three criteria related to income and
unemployment based on the most recent federal or state data.[Footnote
23]
* Certify that the state will maintain the level of spending for the
types of transportation projects funded by the Recovery Act that it
planned to spend the day the Recovery Act was enacted. As part of this
certification, the governor of each state is required to identify the
amount of funds the state plans to expend from state sources from
February 17, 2009, through September 30, 2010.[Footnote 24]
All states have met the first Recovery Act requirement that 50 percent
of their apportioned funds are obligated within 120 days. Of the $18.7
billion nationally that is subject to this provision, 69 percent was
obligated as of June 25, 2009. The percentage of funds obligated
nationwide and in each of the states included in our review is shown in
figure 4.
Figure 9: Percentage of Recovery Act Highway Funds Obligated as of June
25, 2009[A]:
[Refer to PDF for image: vertical bar graph]
Level states were required to reach before June 30, 2009: 50%.
State: Nationwide;
Percentage of funds obligated as on June 25, 2009: 69.5%.
State: District of Columbia;
Percentage of funds obligated as on June 25, 2009: 95.5%.
State: Florida;
Percentage of funds obligated as on June 25, 2009: 93.3%.
State: Illinois;
Percentage of funds obligated as on June 25, 2009: 91.3%.
State: Iowa;
Percentage of funds obligated as on June 25, 2009: 89.3%.
State: Mississippi;
Percentage of funds obligated as on June 25, 2009: 86.9%.
State: New Jersey;
Percentage of funds obligated as on June 25, 2009: 83%.
State: Colorado;
Percentage of funds obligated as on June 25, 2009: 74.5%.
State: Arizona;
Percentage of funds obligated as on June 25, 2009: 71.4%.
State: Pennsylvania;
Percentage of funds obligated as on June 25, 2009: 66.9%.
State: California;
Percentage of funds obligated as on June 25, 2009: 66.1%.
State: New York;
Percentage of funds obligated as on June 25, 2009: 62.6%.
State: Michigan;
Percentage of funds obligated as on June 25, 2009: 62.3%.
State: North Carolina;
Percentage of funds obligated as on June 25, 2009: 61%.
State: Texas;
Percentage of funds obligated as on June 25, 2009: 61%.
State: Massachusetts;
Percentage of funds obligated as on June 25, 2009: 59.1%.
State: Georgia;
Percentage of funds obligated as on June 25, 2009: 58.7%.
State: Ohio;
Percentage of funds obligated as on June 25, 2009: 51.7%.
Source: GAO analysis of Federal Highway Administration data.
[A] This figure does not include obligations that are not subject to
the 120-day redistribution requirement (including funds suballocated to
localities) and obligations associated with apportioned funds that were
transferred from FHWA to the Federal Transit Administration (FTA) for
transit projects. Generally, FHWA has authority pursuant to 23 U.S.C. §
104(k)(1) to transfer funds made available for transit projects to FTA.
[End of figure]
The second Recovery Act requirement is to give priority to projects
that can be completed within 3 years and to projects located in
economically distressed areas. Officials from almost all of the states
said they considered project readiness, including the 3-year completion
requirement, when making project selections, and, according to
officials from just fewer than half of the states, project readiness
was the single most important consideration for selecting projects.
Officials from most states reported they expect all or most projects
funded with Recovery Act funds to be completed within 3 years, with the
exception of some larger or more complex projects that may take longer
to complete. For example, Massachusetts chose to use Recovery Act funds
to construct a new highway interchange in Fall River. Although this
project will take longer than other projects to complete, Massachusetts
officials said they selected it because it was located in the state's
only EDA.
We found that due to the need to select projects and obligate funds
quickly, many states first selected projects based on other factors and
only later identified to what extent these projects fulfilled the EDA
requirement. According to the American Association of State Highway and
Transportation Officials, in December 2008, states had already
identified more than 5,000 "ready-to-go" projects as possible
selections for federal stimulus funding, 2 months prior to enactment of
the Recovery Act. Officials from several states also told us they had
selected projects prior to the enactment of the Recovery Act and that
they only gave consideration to EDAs after they received EDA guidance
from DOT. For instance, officials in New York said that in anticipation
of the Recovery Act being enacted the state initially selected projects
that were ready to go and were distributed throughout the state,
without regard to their location in EDAs. Since then, the state has
emphasized the need to identify and fund projects in EDAs, pushing such
projects to the "head of the line." Officials in Pennsylvania said they
selected projects before federal guidance was available and that after
reviewing project selections for compliance with the EDA requirement,
decided to make no changes because their choices provided the greatest
potential to provide jobs in an expeditious manner.
States also based project selection on priorities other than EDAs.
State officials we met with said they considered factors based on their
own state priorities, such as geographic distribution and a project's
potential for job creation or other economic benefits. The use of state
planning criteria or funding formulas to distribute federal and state
highway funds was one factor that we found affected states'
implementation of the Recovery Act's prioritization requirements.
According to officials in North Carolina, for instance, the state used
its statutory Equity Allocation Formula to determine how highway
infrastructure investment funds would be distributed. Similarly, in
Texas, state officials said they first selected highway preservation
projects by allocating a specific amount of funding to each of the
state's 25 districts, where projects were identified that addressed the
most pressing needs. Officials then gave priority for funding to those
projects that were in EDAs.
In commenting on a draft of this report, DOT agreed that states must
give priority to projects located in EDAs, but said that states must
balance all the Recovery Act project selection criteria when selecting
projects including giving preference to activities that can be started
and completed expeditiously, using funds in a manner that maximizes job
creation and economic benefit, and other factors. DOT stated that the
Recovery Act does not give EDA projects absolute primacy over projects
not located in EDAs. However we would note that the Recovery Act
contains both general directives, such as using funds in a manner that
maximizes job creation and economic benefit, and specific directives
which we believe must be seen as taking precedence. While we agree with
DOT that there is no absolute primacy of EDA projects in the sense that
they must always be started first, the specific directives in the act
that apply to highway infrastructure are that priority is to be given
to projects that can be completed in 3 years, and are located in EDAs.
We also found some instances of states developing their own eligibility
requirements using data or criteria not specified in the Public Works
and Economic Development Act, as amended. According to the act, the
Secretary of Commerce, not individual states, has the authority to
determine the eligibility of an area that does not meet the first two
criteria of the act. In each of these cases, FHWA approved the use of
the states' alternative criteria, but it is not clear on what authority
FHWA approved these criteria. For example:
* Arizona based the identification of EDAs on home foreclosure rates
and disadvantaged business enterprises--data not specified in the
Public Works Act. Arizona officials said they used alternative criteria
because the initial determination of economic distress based on the
act's criteria excluded three of Arizona's largest and most populous
counties, which also contain substantial areas that, according to state
officials, are clearly economically distressed and include all or
substantial portions of major Indian reservations and many towns and
cities hit especially hard by the economic downturn. The state of
Arizona, in consultation with FHWA, developed additional criteria that
resulted in these three counties being classified as economically
distressed.
* Illinois based EDA classification on increases in the number of
unemployed persons and the unemployment rate,[Footnote 25] whereas the
act bases this determination on how a county's unemployment rate
compares with the national average unemployment rate. According to
FHWA, Illinois opted to explore other means of measuring recent
economic distress because the initial determination of economic
distress based on the act's criteria was based on data not as current
as information available within the state and did not appear to
accurately reflect the recent economic downturn in the state. Using the
criteria established by the Public Works Act, 30 of the 102 counties in
Illinois were identified as not economically distressed. Illinois's use
of alternative criteria resulted in 21 counties being identified as
EDAs that would not have been so classified following the act's
criteria.[Footnote 26]
In commenting on a draft of this report, DOT stated that the basic
approach used in Arizona and Illinois is consistent with the Public
Works Act and its implementing regulations on EDAs because it makes use
of flexibilities provided by the Act to more accurately reflect
changing economic conditions. DOT recognizes that the Public Works Act
provides the definition of EDAs that states are to follow. DOT
believes, however, that it is appropriate to interpret the requirements
of the Public Works Act flexibly by applying the EDA special needs
criteria to areas that are experiencing unemployment or economic
adjustment problems. We recognize that states may want to reflect their
own particular circumstances in defining EDAs. However, the Public
Works Act states that to apply the definition to a special needs area,
the area must be one "that the Secretary of Commerce determines has
experienced or is about to experience a special need arising from
actual or threatened severe unemployment or economic adjustment
problems..." The result of DOT's interpretation would be to allow
states to prioritize projects based on criteria that are not mentioned
in the highway infrastructure investment portion of the Recovery or the
Public Works Acts without the involvement of the Secretary or
Department of Commerce. We plan to continue to monitor states'
implementation of the EDA requirements and interagency coordination at
the federal level in future reports.
Some states' circumstances served to largely ensure compliance with the
EDA requirement. For instance, all areas within the District of
Columbia, which the Recovery Act treats as a state, are a single EDA,
assuring that the selection of any project that can be completed within
3 years satisfies the statutory priority rules. Mississippi has 75 of
82 counties that qualify as EDAs, and Mississippi reported to FHWA that
87 percent of the funds obligated to date had been obligated for to
projects located in areas classified as economically distressed.
Likewise in Ohio, where 90 percent of all counties qualify as EDAs, a
substantial number of Recovery Act highway projects are located in
EDAs.
DOT and FHWA have yet to provide clear guidance regarding how states
are to implement the EDA requirement. In February 2009, FHWA published
replies to questions from state transportation departments on its
Recovery Act Web site stating that because states have the authority to
prioritize and select federal-aid projects, it did not intend to
develop or prescribe a uniform procedure for applying the Recovery
Act's priority rules. Nonetheless, FHWA provided a tool to help states
identify whether projects were located in EDAs. Further, in March 2009,
FHWA provided guidance to its division offices stating that FHWA would
support the use of "whatever current, defensible, and reliable
information is available to make the case that [a state] has made a
good faith effort to consider EDAs" and directed its division offices
to take appropriate action to ensure that the states gave adequate
consideration to EDAs. FHWA officials we spoke with said they discussed
the priority requirements with states and that the requirements were
taken into consideration when approving projects. They also stated that
whether a state has satisfied the EDA priority requirement will not be
finally determined until the funds apportioned to the state under the
Recovery Act are all obligated, which may not be completed until 2010.
According to FHWA the states have until then to address future
compliance with the EDA priority requirement. By 2010, however, it will
be too late to take corrective action. In each of the cases where a
state used its own criteria, state officials told us they did so with
the approval of the FHWA division office in that state. Without clearer
guidance to the states, it will be difficult to ensure that the act's
priority provision is applied consistently.
Finally, the states are required to certify that they will maintain the
level of state effort for programs covered by the Recovery Act. With
one exception, the states have completed these certifications, but they
face challenges. Maintaining a state's level of effort can be
particularly important in the highway program. We have found that the
preponderance of evidence suggests that increasing federal highway
funds influences states and localities to substitute federal funds for
funds they otherwise would have spent on highways. In 2004, we
estimated that during the 1983 through 2000 period, states used roughly
half of the increases in federal highway funds to substitute for
funding they would otherwise have spent from their own resources and
that the rate of substitution increased during the 1990s. The federal-
aid highway program creates the opportunity for substitution because
states typically spend substantially more than the amount required to
meet federal matching requirements.[Footnote 27] As a consequence, when
federal funding increases, states are able to reduce their own highway
spending and still obtain increased federal funds.[Footnote 28] As we
previously reported, substitution makes it difficult to target an
economic stimulus package so that it results in a dollar-for-dollar
increase in infrastructure investment.[Footnote 29]
Most states revised the initial certifications they submitted to DOT.
As we reported in April, many states submitted explanatory
certifications--such as stating that the certification was based on the
"best information available at the time"--or conditional
certifications, meaning that the certification was subject to
conditions or assumptions, future legislative action, future revenues,
or other conditions. The legal effect of such qualifications was being
examined by DOT when we completed our review. On April 22, 2009, the
Secretary of Transportation sent a letter to each of the nation's
governors and provided additional guidance, including that conditional
and explanatory certifications were not permitted, and gave states the
option of amending their certifications by May 22. Each of the 16
states and District selected for our review resubmitted their
certifications. According to DOT officials, the department has
concluded that the form of each certification is consistent with the
additional guidance, with the exception of Texas. Texas submitted an
amended certification on May 27, 2009, which contained qualifying
language explaining that the Governor could not certify any expenditure
of funds until the legislature passed an appropriation act. According
to DOT officials, as of June 25, 2009, the status of Texas' revised
certification remains unresolved. Texas officials told us the state
plans to submit a revised certification letter, removing the qualifying
language. For the remaining states, while DOT has concluded that the
form of the revised certifications is consistent with the additional
guidance, it is currently evaluating whether the states' method of
calculating the amounts they planned to expend for the covered programs
is in compliance with DOT guidance.
States face drastic fiscal challenges, and most states are estimating
that their fiscal year 2009 and 2010 revenue collections will be well
below estimates. In the face of these challenges, some states told us
that meeting the maintenance-of-effort requirements over time poses
significant challenges. For example, federal and state transportation
officials in Illinois told us that to meet its maintenance-of-effort
requirements in the face of lower-than-expected fuel tax receipts, the
state would have to use general fund or other revenues to cover any
shortfall in the level of effort stated in its certification.
Mississippi transportation officials are concerned about the
possibility of statewide, across-the-board spending cuts in 2010.
According to the Mississippi transportation department's budget
director, the agency will try to absorb any budget reductions in 2010
by reducing administrative expenses to maintain the state's level of
effort.
Other states have faced challenges calculating an appropriate level of
effort. For example, Georgia officials told us the state does not
routinely estimate future expenditures and had to develop an
alternative method for its revised certification using past
expenditures to extrapolate future expenditures. In Pennsylvania,
transportation officials told us that calculating the amounts for the
amended certification involved making estimates over three state fiscal
years and making assumptions about proposed budgets that are subject to
future legislative action.
As discussed earlier, states using Recovery Act funds must comply with
the requirements of the federal-aid highway program, including
environmental requirements, paying a prevailing wage in accordance with
federal Davis-Bacon requirements, complying with goals to ensure
disadvantaged business enterprises are not discriminated against in
awarding construction contracts, and using American-made iron and steel
in accordance with Buy America program requirements. We discussed the
impact these requirements were having on project costs and time frames
with officials in three states.[Footnote 30] Transportation officials
in Arizona, Mississippi, and New Jersey each reported that these
requirements were not causing increases in project costs and were not
delaying projects from moving forward. For example, New Jersey
officials stated that since these requirements apply to all highway
construction using federal highway funds, not solely to Recovery Act
funding, they were accustomed to complying with these requirements and
had a process in place for quickly documenting compliance. In addition,
these officials stated that to meet the Recovery Act's requirements to
spend the funds quickly, the state selected projects that had already
completed the environmental review process or that were relatively
simple projects that would have limited environmental impact.
State Fiscal Stabilization Fund:
The Recovery Act created a State Fiscal Stabilization Fund (SFSF) in
part to help state and local governments stabilize their budgets by
minimizing budgetary cuts in education and other essential government
services, such as public safety. Stabilization funds for education
distributed under the Recovery Act must be used to alleviate shortfalls
in state support for education to school districts and public
institutions of higher education (IHEs). The U.S. Department of
Education (Education), the federal agency charged with administration
and oversight of the SFSF, distributes the funds on a formula basis,
with 81.8 percent of each state's allocation designated for the
education stabilization fund for local educational agencies (LEA) and
public IHEs. The remaining 18.2 percent of each state's allocation is
designated for the government services fund for public safety and other
government services, which may include education. Consistent with the
purposes of the Recovery Act--which include, in addition to stabilizing
state and local budgets, promoting economic recovery and preserving and
creating jobs--the SFSF can be used by states to restore cuts to state
education spending. In return for SFSF funding, a state must make
several assurances, including that it will maintain state support for
education at least at fiscal year 2006 levels. In order to receive SFSF
funds, each state must also assure it will implement strategies to
advance education reform in four specific ways as described by
Education:
1. Increase teacher effectiveness and address inequities in the
distribution of highly qualified teachers;
2. Establish a pre-K-through-college data system to track student
progress and foster improvement;
3. Make progress toward rigorous college-and career-ready standards and
high-quality assessments that are valid and reliable for all students,
including students with limited English proficiency and students with
disabilities; and:
4. Provide targeted, intensive support and effective interventions to
turn around schools identified for corrective action or restructuring.
[Footnote 31]
Along with these education reform assurances, additional state
assurances must address federal requirements concerning accountability,
transparency, reporting, and compliance with certain federal laws and
regulations.
Beginning in March 2009, the Department of Education issued a series of
fact sheets, letters, and other guidance to states on the SFSF.
Specifically, a March fact sheet, the Secretary's April letter to
Governors, and program guidance issued in April and May mention that
the purposes of the SFSF include helping stabilize state and local
budgets, avoiding reductions in education and other essential services,
and ensuring LEAs and public IHEs have resources to "avert cuts and
retain teachers and professors." The documents also link educational
progress to economic recovery and growth and identify four principles
to guide the distribution and use of Recovery Act funds: (1) spend
funds quickly to retain and create jobs; (2) improve student
achievement through school improvement and reform; (3) ensure
transparency, public reporting, and accountability; and (4) invest one-
time Recovery Act funds thoughtfully to avoid unsustainable continuing
commitments after the funding expires, known as the "funding cliff."
After meeting assurances to maintain state support for education at
least at fiscal year 2006 levels, states are required to use the
education stabilization fund to restore state support to the greater of
fiscal year 2008 or 2009 levels for elementary and secondary education,
public IHEs, and, if applicable, early childhood education programs.
States must distribute these funds to school districts using the
primary state education formula but maintain discretion in how funds
are allocated to public IHEs. If, after restoring state support for
education, additional funds remain, the state must allocate those funds
to school districts according to the Elementary and Secondary Education
Act of 1965 (ESEA), Title I, Part A funding formula. On the other hand,
if a state's education stabilization fund allocation is insufficient to
restore state support for education, then a state must allocate funds
in proportion to the relative shortfall in state support to public
school districts and public IHEs. Education stabilization funds must be
allocated to school districts and public IHEs and cannot be retained at
the state level.
Once education stabilization funds are awarded to school districts and
public IHEs, they have considerable flexibility over how they use those
funds. School districts are allowed to use education stabilization
funds for any allowable purpose under ESEA, the Individuals with
Disabilities Education Act (IDEA), the Adult Education and Family
Literacy Act, or the Carl D. Perkins Career and Technical Education Act
of 2006 (Perkins Act), subject to some prohibitions on using funds for,
among other things, sports facilities and vehicles. In particular,
Education's guidance states that because allowable uses under the
Impact Aid provisions of ESEA are broad, school districts have
discretion to use education stabilization funds for a broad range of
things, such as salaries of teachers, administrators, and support staff
and purchases of textbooks, computers, and other equipment. The
Recovery Act allows public IHEs to use education stabilization funds in
such a way as to mitigate the need to raise tuition and fees, as well
as for the modernization, renovation, and repair of facilities, subject
to certain limitations. However, the Recovery Act prohibits public IHEs
from using education stabilization funds for such things as increasing
endowments; modernizing, renovating, or repairing sports facilities; or
maintaining equipment. Education's SFSF guidance expressly prohibits
states from placing restrictions on LEAs' use of education
stabilization funds, beyond those in the law, but allows states some
discretion in placing limits on how IHEs may use these funds.
The SFSF provides states and school districts with additional
flexibility, subject to certain conditions, to help them address fiscal
challenges. For example, the Secretary of Education is granted
authority to permit waivers of state maintenance-of-effort (MOE)
requirements if a state certified that state education spending will
not decrease as a percentage of total state revenues. Education issued
guidance on the MOE requirement, including the waiver provision, on May
1, 2009. Also, the Secretary may permit a state or school district to
treat education stabilization funds as nonfederal funds for the purpose
of meeting MOE requirements for any program administered by Education,
subject to certain conditions. Education, as of June 29, 2009, has not
provided specific guidance on the process for states and school
districts to apply for the Secretary's approval.
States have broad discretion over how the $8.8 billion in the SFSF
government services fund are used. The Recovery Act provides that these
funds must be used for public safety and other government services and
that these services may include assistance for education, as well as
modernization, renovation, and repairs of public schools or IHEs.
On April 1, 2009, Education made at least 67 percent of each state's
SFSF funds[Footnote 32] available, subject to the receipt of an
application containing state assurances, information on state levels of
support for education and estimates of restoration amounts, and
baseline data demonstrating state status on each of the four education
reform assurances. If a state could not certify that it would meet the
MOE requirement, Education required it to certify that it will meet
requirements for receiving a waiver--that is, that education spending
would not decrease relative to total state revenues. In determining
state level of support for elementary and secondary education,
Education required states to use their primary formula for distributing
funds to school districts but also allowed states some flexibility in
broadening this definition. For IHEs, states have some discretion in
how they establish the state level of support, with the provision that
they cannot include support for capital projects, research and
development, or amounts paid in tuition and fees by students. In order
to meet statutory requirements for states to establish their current
status regarding each of the four required programmatic assurances,
Education provided each state with the option of using baseline data
Education had identified or providing another source of baseline data.
Some of the data provided by Education was derived from self-reported
data submitted annually by the states to Education as part of their
Consolidated State Performance Reports (CSPR), but Education also
relied on data from third parties, including the Data Quality Campaign
(DQC), the National Center for Educational Achievement (NCEA), and
Achieve.[Footnote 33] Education has reviewed applications as they
arrive for completeness and has awarded states their funds once it
determined all assurances and required information had been submitted.
Education set the application deadline for July 1, 2009. On June 24,
2009, Education issued guidance to states informing them they must
amend their applications if there are changes to the reported levels of
state support that were used to determine maintenance of effort or to
calculate restoration amounts.
Most States We Visited Have Received SFSF Funds and Have Planned to
Allocate Most Education Stabilization Funds to LEAs.
As of June 30, 2009, of the 16 states and the District of Columbia
covered by our review, only Texas had not submitted an SFSF
application. Pennsylvania recently submitted an application but had not
yet received funding. The remaining 14 states and the District of
Columbia had submitted applications and Education had made available to
them a total of about $17 billion in initial funding. As of June 26,
2009, only 5 of these states had drawn down SFSF Recovery Act funds. In
total, about 25 percent of allocated funds had been drawn down by these
states. (See table 5.)[Footnote 34]
Table 5: SFSF Recovery Act Allocations and Drawdowns for the 16 States
and the District of Columbia:
State: Arizona;
Total state allocation: $1,016,955,172;
Phase I funds made available to states as of June 30, 2009:
$681,359,965;
Funds drawn down by states as of June 26, 2009: $0;
Percentage of available funds drawn down by states: 0.
State: California;
Total state allocation: $5,960,267,431;
Phase I funds made available to states as of June 30, 2009:
$3,993,379,179;
Funds drawn down by states as of June 26, 2009: $2,867,792,114;
Percentage of available funds drawn down by states: 71.
State: Colorado;
Total state allocation: $760,242,539;
Phase I funds made available to states as of June 30, 2009:
$509,362,501;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: District of Columbia;
Total state allocation: $89,377,071;
Phase I funds made available to states as of June 30, 2009:
$59,882,637;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Florida;
Total state allocation: $2,700,292,474;
Phase I funds made available to states as of June 30, 2009:
$1,809,195,958;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Georgia;
Total state allocation: $1,541,319,187;
Phase I funds made available to states as of June 30, 2009:
$1,032,683,856;
Funds drawn down by states as of June 26, 2009: $189,592,329;
Percentage of available funds drawn down by states: 18.
State: Illinois;
Total state allocation: $2,055,171,987;
Phase I funds made available to states as of June 30, 2009:
$1,376,965,231;
Funds drawn down by states as of June 26, 2009: $1,038,987,579;
Percentage of available funds drawn down by states: 75.
State: Iowa;
Total state allocation: $472,339,542;
Phase I funds made available to states as of June 30, 2009:
$316,467,493;
Funds drawn down by states as of June 26, 2009: $40,000,000;
Percentage of available funds drawn down by states: 13.
State: Massachusetts;
Total state allocation: $994,258,205;
Phase I funds made available to states as of June 30, 2009:
$666,152,997;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Michigan;
Total state allocation: $1,592,138,132;
Phase I funds made available to states as of June 30, 2009:
$1,066,732,549;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Mississippi;
Total state allocation: $479,300,666;
Phase I funds made available to states as of June 30, 2009:
$321,131,446;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: New Jersey;
Total state allocation: $1,330,483,831;
Phase I funds made available to states as of June 30, 2009:
$891,424,167;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: New York;
Total state allocation: $3,017,796,810;
Phase I funds made available to states as of June 30, 2009:
$2,021,923,863;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: North Carolina;
Total state allocation: $1,420,454,235;
Phase I funds made available to states as of June 30, 2009:
$1,011,164,552;
Funds drawn down by states as of June 26, 2009: $150,867,275;
Percentage of available funds drawn down by states: 16.
State: Ohio;
Total state allocation: $1,789,376,483;
Phase I funds made available to states as of June 30, 2009:
$1,198,882,243;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Pennsylvania;
Total state allocation: $1,905,620,952;
Phase I funds made available to states as of June 30, 2009: [Empty];
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Texas;
Total state allocation: $3,973,437,816;
Phase I funds made available to states as of June 30, 2009: [Empty];
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Total;
Total state allocation: $31,098,832,533;
Phase I funds made available to states as of June 30, 2009:
$16,956,708,637;
Funds drawn down by states as of June 26, 2009: $4,287,239,297;
Percentage of available funds drawn down by states: 25.
Source: U.S. Department of Education.
[End of table]
Three of these states--Florida, Massachusetts, and New Jersey--said
they would not meet the maintenance-of-effort requirements but would
meet the eligibility requirements for a waiver and that they would
apply for a waiver. Most of the states' applications show that they
plan to provide the majority of education stabilization funds to LEAs,
with the remainder of funds going to IHEs. Several states and the
District of Columbia estimated in their application that they would
have funds remaining beyond those that would be used to restore
education spending in fiscal years 2009 and 2010. These funds can be
used to restore education spending in fiscal year 2011, with any amount
left over to be distributed to LEAs. Table 6 shows the amount of SFSF
funds received by states and how the states indicate they will divide
education stabilization funds between LEAs and IHEs, based on the
states' SFSF applications.
Table 6: Education Stabilization Funds Made Available to States and the
Division of Education Stabilization Funds between LEAs and IHEs:
State: Arizona;
Education stabilization funds made available as of June 30, 2009:
$557,352,452;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 57;
IHEs: 43;
Remaining amount: 0.
State: California;
Education stabilization funds made available as of June 30, 2009:
3,266,584,168;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 75;
IHEs: 25;
Remaining amount: 0.
State: Colorado;
Education stabilization funds made available as of June 30, 2009:
416,658,526;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 24;
IHEs: 48;
Remaining amount: 27.
State: District of Columbia;
Education stabilization funds made available as of June 30, 2009:
48,983,997;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 24;
IHEs: 2;
Remaining amount: 74.
State: Florida;
Education stabilization funds made available as of June 30, 2009:
1,479,922,294;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 79;
IHEs: 21;
Remaining amount: 0.
State: Georgia;
Education stabilization funds made available as of June 30, 2009:
844,735,394;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 74;
IHEs: 26;
Remaining amount: 0.
State: Iowa;
Education stabilization funds made available as of June 30, 2009:
258,870,409;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 67;
IHEs: 27;
Remaining amount: 7.
State: Illinois;
Education stabilization funds made available as of June 30, 2009:
1,126,357,559;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 98;
IHEs: 2;
Remaining amount: 0.
State: Massachusetts;
Education stabilization funds made available as of June 30, 2009:
544,913,152;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 60;
IHEs: 26;
Remaining amount: 14.
State: Michigan;
Education stabilization funds made available as of June 30, 2009:
872,587,225;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 95;
IHEs: 5;
Remaining amount: 0.
State: Mississippi;
Education stabilization funds made available as of June 30, 2009:
262,685,523;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 38;
IHEs: 10;
Remaining amount: 52.
State: New Jersey;
Education stabilization funds made available as of June 30, 2009:
729,184,969;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 93;
IHEs: 7;
Remaining amount: 0.
State: New York;
Education stabilization funds made available as of June 30, 2009:
1,653,933,720;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 95;
IHEs: 3;
Remaining amount: 2.
State: North Carolina;
Education stabilization funds made available as of June 30, 2009:
778,494,148;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 62;
IHEs: 11;
Remaining amount: 27.
State: Ohio;
Education stabilization funds made available as of June 30, 2009:
980,685,675;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: 27;
IHEs: 21;
Remaining amount: 52.
State: Pennsylvania;
Education stabilization funds made available as of June 30, 2009: 0;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: [Empty];
IHEs: [Empty];
Remaining amount: [Empty].
State: Texas; Education stabilization funds made available as of June
30, 2009: 0;
Percentage of total available education stabilization funds between
LEAs and IHEs to restore state support for elementary and secondary
education and IHEs in 2009 and 2010:
LEAs: [Empty];
IHEs: [Empty];
Remaining amount: [Empty].
Source: GAO analysis of state applications for SFSF that were approved
by Education as of June 30, 2009.
[End of table]
States have flexibility in how they allocate education stabilization
funds among IHEs but, once they establish their state funding formula,
not in how they allocate the funds among LEAs. Florida and Mississippi
allocated funds among their IHEs, including universities and community
colleges, using formulas based on factors such as enrollment levels.
Other states allocated SFSF funds taking into consideration the budget
conditions of the IHEs. For example, Georgia allocated funds to
universities based on the degree to which each institution's budget had
been cut, and Illinois allocated funds among universities to provide
each university a share of SFSF funds proportionate to its share of
state support in fiscal year 2006. New York provided all SFSF funds
slated for IHEs to community colleges to avoid cutting community
college budgets. On the other hand, California planned to provide SFSF
funds to its state university systems and not to community colleges
because the universities had received significant budget cuts. However,
California may change this plan because budget cuts at community
colleges are now likely.
Regarding LEAs, most states planned to allocate funds based on states'
primary funding formulae. Many states are using a state formula based
on student enrollment weighted by characteristics of students and LEAs.
For example, Colorado's formula accounts for the number of students at
risk while the formula used by the District of Columbia allocates funds
to LEAs using weights for each student based on the relative cost of
educating students with specific characteristics. For example, an
official from Washington, D.C., Public Schools said a student who is an
English language learner may cost more to educate than a similar
student who is fluent in English.
States may use the government services portion of SFSF for education
but have discretion to use the funds for a variety of purposes.
Officials from Florida, Illinois, New Jersey, and New York reported
that their states plan to use some or most of their government services
funds for educational purposes. Other states are applying the funds to
public safety. For example, according to state officials, California is
using the government services fund for it corrections system, and
Georgia will use the funds for salaries of state troopers and staff of
forensic laboratories and state prisons.
Plans for SFSF Funds Usually Target Restoring Funding, and Many School
Districts Reported It Would Be Challenging to Use SFSF Funds for
Educational Reform:
Officials in many school districts told us that SFSF funds would help
offset state budget cuts and would be used to maintain current levels
of education funding. However, many school district officials also
reported that using SFSF funds for education reforms was challenging
given the other more pressing fiscal needs.
Although their plans are generally not finalized, officials in many
school districts we visited reported that their districts are preparing
to use SFSF funds to prevent teacher layoffs, hire new teachers, and
provide professional development programs. Most school districts will
use the funding to help retain jobs that would have been cut without
SFSF funding. For example, Miami Dade officials estimate that the
stabilization funds will help them save nearly two thousand teaching
positions. State and school district officials in eight states we
visited (California, Colorado, Florida, Georgia, Massachusetts,
Michigan, New York, and North Carolina) also reported that SFSF funding
will allow their state to retain positions, including teaching
positions that would have been eliminated without the funding. In the
Richmond County School System in Georgia, officials noted they plan to
retain positions that support its schools, such as teachers,
paraprofessionals, nurses, media specialists and guidance counselors.
Local officials in Mississippi reported that budget-related hiring
freezes had hindered their ability to hire new staff, but because of
SFSF funding, they now plan to hire. In addition, local officials in a
few states told us they plan to use the funding to support teachers.
For example, officials in Waterloo Community and Ottumwa Community
School Districts in Iowa as well as officials from Miami-Dade County in
Florida cited professional development as a potential use of funding to
support teachers.
Although school districts are preventing layoffs and continuing to
provide educational services with the SFSF funding, most did not
indicate they would use these funds to pursue educational reform.
School district officials cited a number of barriers, which include
budget shortfalls, lack of guidance from states, and insufficient
planning time. In addition to retaining and creating jobs, school
districts have considerable flexibility to use these resources over the
next 2 years to advance reforms that could have long-term impact.
However, a few school district officials reported that addressing
reform efforts was not in their capacity when faced with teacher
layoffs and deep budget cuts. In Flint, Michigan, officials reported
that SFSF funds will be used to cope with budget deficits rather than
to advance programs, such as early childhood education or repairing
public school facilities. According to the Superintendent of Flint
Community Schools, the infrastructure in Flint is deteriorating, and no
new school buildings have been built in over 30 years. Flint officials
said they would like to use SFSF funds for renovating buildings and
other programs, but the SFSF funds are needed to maintain current
education programs.
Officials in many school districts we visited reported having
inadequate guidance from their state on using SFSF funding, making
reform efforts more difficult to pursue. School district officials in
most states we visited reported they lacked adequate guidance from
their state to plan and report on the use of SFSF funding. Without
adequate guidance and time for planning, school district officials told
us that preparing for the funds was difficult. At the time of our
visits, several school districts were unaware of their funding amounts,
which, officials in two school districts said, created additional
challenges in planning for the 2009-2010 school year. One charter
school we visited in North Carolina reported that layoffs will be
required unless their state notifies them soon how much SFSF funding
they will receive. State officials in North Carolina, as well as in
several other states, told us they are waiting for the state
legislature to pass the state budget before finalizing SFSF funding
amounts for school districts.
IHEs Plan to Use SFSF Funds for Faculty Salaries and Other Purposes and
Expect the Funds to Save Jobs and Mitigate Tuition Increases:
Although many IHEs had not finalized plans for using SFSF funds, the
most common expected use for the funds at the IHEs we visited was to
pay salaries of IHE faculty and staff.[Footnote 35] Officials at most
of the IHEs we visited told us that, due to budget cuts, their
institutions would have faced difficult reductions in faculty and staff
if they were not receiving SFSF funds. In California and North
Carolina, according to the IHE officials, the states instructed their
IHEs to use the funds to cover IHE payroll expenses in certain months
in spring 2009. Other IHEs expected to use SFSF funds in the future to
pay salaries of certain employees during the year. For example,
according to an official at Hillsborough Community College in Florida,
to avoid using the nonrecurring SFSF money for recurring expenses, the
IHE expects to use the funds to pay salaries of about 400 nonpermanent
adjunct faculty members. Georgia Perimeter College plans to use its
SFSF funds to retain 51 full-time and 17 part-time positions in its
science department, and the University of Georgia plans to use the
funds to retain approximately 160 full-time positions in various
departments.
Several IHEs we visited are considering other uses for SFSF funds.
Officials at the Borough of Manhattan Community College in New York
City want to use some of their SFSF funds to buy energy saving light
bulbs and to make improvements in the college's very limited space such
as, by creating tutoring areas and study lounges. Northwest Mississippi
Community College wants to use some of the funds to increase e-learning
capacity to serve the institution's rapidly increasing number of
students. Several other IHEs plan to use some of the SFSF funds for
student financial aid. For example, Hudson Valley Community College
plans to use some SFSF funds to provide financial aid to 500 or more
low-income students who do not qualify for federal Pell Grants or New
York's Tuition Assistance Program.
Because many IHEs expect to use SFSF funds to pay salaries of current
employees that they likely would not have been able to pay without the
SFSF funds, IHEs officials said that SFSF funds will save jobs.
Officials at several IHEs noted that this will have a positive impact
on the educational environment such as, by preventing increases in
class size and enabling the institutions to offer the classes that
students need to graduate. In addition to preserving existing jobs,
some IHEs anticipate creating jobs with SFSF funds. For example, New
York IHEs we spoke with plan to use SFSF funds to hire additional staff
and faculty. The University of South Florida is considering using some
SFSF money to hire postdoctoral fellows to conduct scientific research,
and Florida A&M University plans to use the funds to hire students for
assistantships. Besides saving and creating jobs at IHEs, officials
noted that SFSF monies will have an indirect impact on jobs in the
community. For example, University of Mississippi officials noted that,
without the SFSF funds, the university probably would have shut down
ongoing capital projects building dormitories and upgrading campus
heating and cooling systems, and this would have had a negative impact
on construction and engineering jobs in the community. Jackson State
University officials said SFSF monies will help local contractors and
vendors who conduct business with the university because the funds will
enable the university to recover from severe budget cuts and resume
normal spending. IHE officials also noted that SFSF funds will
indirectly improve employment because some faculty being paid with the
funds will help unemployed workers develop new skills, including skills
in fields, such as health care, that have a high demand for trained
workers.
State and IHE officials also believe that SFSF funds are reducing the
size of tuition and fee increases. For example, Florida officials said
that the 8 percent tuition increase approved by the Florida Legislature
likely would have been much higher if the state had not received SFSF
funds. Officials estimated that without SFSF funds, the increase in
tuition necessary to compensate for decreases in state funding would
have been 21 percent for students at community colleges and 35 percent
for students at universities. A University of California official
stated that, if the university system had not received SFSF funds and
had to use fee increases to cover its budget shortfall, system-wide
fees would have increased by about 24 percent instead of the approved
9.3 percent increase.
Education Provided Preliminary Baseline Data to States to Ease the
Application Process but Plans to Implement a New Approach for the
Second Round of Applications:
U.S. Department of Education officials told us that to benchmark
states' current position on the four education reform assurances and to
ease the application process, they had provided base-line data for each
state and asked states to certify their acceptance of these data as
part of their application for SFSF funding, or provide alternate data.
In their applications to Education for SFSF funds, states were required
to provide assurances that they were committed to advancing education
reform in these four areas. The table below lists the four assurances
and the data elements and sources Education chose to set base-line
benchmarks for states. Education officials told us that these data,
while not perfect, were the best available. Officials also told us that
the data in the application package were preliminary, and that they
plan to develop a more complete set of performance measures under each
assurance for states to use or develop for the final SFSF application.
Table 7: Data Source and Data Elements for the Four SFSF Education
Reform Assurances:
Assurance: 1. Increasing Equity in Teacher Distribution;
Data source: States report these data annually on their Consolidated
State Performance Report (CSPR);
Data element: The number and percentage of core academic courses that
are taught by highly qualified teachers in high-poverty schools and low-
poverty schools (presented separately for elementary and high schools).
Assurance: 2. Improving Collection and Use of Data;
Data source:
* The Data Quality Campaign and National Center for Education
Achievement 2008 survey assessing the status of state educational data
systems;
* State officials, primarily K-12 state data managers, self-report on
the capabilities of their data systems;
Data element:
* The survey identifies 10 essential elements of a longitudinal data
system;
* Survey results indicate which states have achieved which elements
(e.g., 28 states reported being able to match student-level preschool-
12 data with higher education data.)
Assurance: 3. Standards and Assessments: 3-1. Enhancing the Quality of
Academic Assessments;
Data source:
1. State information chart, available at [hyperlink,
http://www.ed.gov.policy/elsec/guid/stateletters/ssc/xls];
2. State-specific letters the U.S. Department of Education sent to
state education agency officials in January and February 2009;
Data element:
1. This chart identifies whether a state's assessment systems are
"approved" or "pending" or not yet approved or pending for reading and
mathematics and for science, based on the results of Education's peer
review process;
2. These letters describe what states must do to satisfy assessment
requirements set forth in NCLB.
Assurance: 3. Standards and Assessments: 3.2 Inclusion of Children with
Disabilities and Limited English Proficient Student;
Data source: State information chart, available at [hyperlink,
http://www.ed.gov.policy/elsec/guid/stateletters/ssc/xls];
Data element:
1. This chart identifies whether a state's assessment systems are
"approved," "not approved" or "pending";
2. These letters describe the state's current status related to the
inclusion of children with disabilities and limited English proficient
students in state assessments, the validity and reliability of the
assessments for such children, and the provision of accommodations.
Assurance: 3. Standards and Assessments: 3.3 Improving State Academic
Content and Achievement Standards;
Data source: Achieve's 2009 report Closing the Expectations Gap, a
report based on a survey of state policymakers to assess states'
policies regarding standards and assessments;
Data element: The survey provides information on what states are
currently doing to align their standards, graduation requirements, and
assessments with college and career expectations.
Assurance: 4. Supporting Struggling Schools;
Data source: States report these data annually on their Consolidated
State Performance Report (CSPR);
Data element: The number and names of schools in corrective action and
restructuring for the 2008-2009 school year; These data are based on
assessments in the 2007-2008 school year.
Source: GAO analysis of SFSF applications and descriptions of Achieve
and Data Quality Campaigns Surveys.
[End of table]
While Education officials told us that the base-line data are
preliminary, staff working at Achieve and the Data Quality Campaign--
the two educational advocacy groups whose survey data are being used to
measure two of the assurances--told us that while they believed their
data set appropriate baselines, they did not believe measuring change
against these baselines would be the best accountability mechanism. One
staff member said that since many states were already poised to make
substantial progress in implementing improved data systems in the next
two years, it would not be appropriate to automatically attribute state
progress in implementing the elements of a longitudinal data system to
Recovery Act funds. Staff at the Data Quality Campaign said that they
have told Education that it was fine to use their survey as a baseline,
but that they were not comfortable with the survey becoming a primary
auditing tool; doing so could change the incentives for states to
respond to the survey. Moreover, staff at the Data Quality Campaign
believe the more appropriate way to monitor progress is to ask states
to publicly post information and analyses on a series of metrics,
because by posting such information states would be verifying the
capacity of their longitudinal data systems.
Education officials told us that in making phase II SFSF funding
available to states, Education will ask states to report on a series of
performance measures for each of the four major themes for reform,
which align with the education reform assurances. According to these
officials, the performance measures developed for the second and final
application will allow Education to fulfill three main purposes: (1) to
get a status report on states' progress in developing performance
measures, (2) to put plans in place to gather the relevant information
if performance measures are not available, and 3) to be able to track
how states are progressing over time with respect to education reform.
Education officials also said that they were aware of potential issues
regarding data quality and that they plan to conduct an initial staff
review and may later conduct an external review of the reliability of
data used for its performance measures.
Seven States We Visited Have Drawn Down Title I Recovery Act Funds and
Made Funds Available to Local Educational Agencies:
The Recovery Act provides $10 billion to help local educational
agencies educate disadvantaged youth by making additional funds
available beyond those regularly allocated through Title I, Part A of
the Elementary and Secondary Education Act (ESEA) of 1965.[Footnote 36]
The Recovery Act requires these additional funds to be distributed
through states to local educational agencies (LEAs) using existing
federal funding formulas, which target funds based on such factors as
high concentrations of students from families living in poverty. In
using the funds, local educational agencies are required to comply with
current statutory and regulatory requirements and must obligate 85
percent of these funds by September 30, 2010.[Footnote 37] The
Department of Education is advising LEAs to use the funds in ways that
will build the agencies' long-term capacity to serve disadvantaged
youth, such as through providing professional development to
teachers.[Footnote 38] The Department of Education made the first half
of states' Recovery Act Title I, Part A funding available on April 1,
2009, with the 16 states and the District in our review receiving more
than $3 billion of the $5 billion released to all of the states and
territories. The initial state allocations and amounts drawn down as of
June 26, 2009, are shown in table 8 below.
Table 8: Title I, Part A Recovery Act Allocations and Drawdowns for 16
States and the District of Columbia:
State: Arizona;
Total state allocation: $195,087,322;
Funds made available to states as of April 1, 2009: $97,543,661;
Funds drawn down by states as of June 26, 2009: $16,000;
Percentage of available funds drawn down by states: <1.
State: California;
Total state allocation: $1,124,920,474;
Funds made available to states as of April 1, 2009: $562,460,237;
Funds drawn down by states as of June 26, 2009: $450,284,592;
Percentage of available funds drawn down by states: 80.
State: Colorado;
Total state allocation: $111,135,922;
Funds made available to states as of April 1, 2009: $55,567,961;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: District of Columbia;
Total state allocation: $37,602,324;
Funds made available to states as of April 1, 2009: $18,801,162;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Florida;
Total state allocation: $490,575,352;
Funds made available to states as of April 1, 2009: $245,287,676;
Funds drawn down by states as of June 26, 2009: $247,713;
Percentage of available funds drawn down by states: <1.
State: Georgia;
Total state allocation: $351,008,292;
Funds made available to states as of April 1, 2009: $175,504,146;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Illinois;
Total state allocation: $420,263,562;
Funds made available to states as of April 1, 2009: $210,131,781;
Funds drawn down by states as of June 26, 2009: $120,476;
Percentage of available funds drawn down by states: <1.
State: Iowa;
Total state allocation: $51,497,022;
Funds made available to states as of April 1, 2009: $25,748,511;
Funds drawn down by states as of June 26, 2009: $8,111,953;
Percentage of available funds drawn down by states: 31.5.
State: Massachusetts;
Total state allocation: $163,680,278;
Funds made available to states as of April 1, 2009: $81,840,139;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Michigan;
Total state allocation: $389,902,874;
Funds made available to states as of April 1, 2009: $194,951,437;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Mississippi;
Total state allocation: $132,888,490;
Funds made available to states as of April 1, 2009: $66,444,245;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: New Jersey;
Total state allocation: $182,971,300;
Funds made available to states as of April 1, 2009: $91,485,650;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: New York;
Total state allocation: $907,152,150;
Funds made available to states as of April 1, 2009: $453,576,075;
Funds drawn down by states as of June 26, 2009: [Empty];
Percentage of available funds drawn down by states: 0.
State: North Carolina;
Total state allocation: $257,444,956;
Funds made available to states as of April 1, 2009: $128,722,478;
Funds drawn down by states as of June 26, 2009: $780,237;
Percentage of available funds drawn down by states: <1.
State: Ohio;
Total state allocation: $372,673,474;
Funds made available to states as of April 1, 2009: $186,336,737;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Pennsylvania;
Total state allocation: $400,603,678;
Funds made available to states as of April 1, 2009: $200,301,839;
Funds drawn down by states as of June 26, 2009: 0;
Percentage of available funds drawn down by states: 0.
State: Texas;
Total state allocation: $948,737,780;
Funds made available to states as of April 1, 2009: $474,368,890;
Funds drawn down by states as of June 26, 2009: $58,060;
Percentage of available funds drawn down by states: <1.
State: Total for 16 states and the District;
Total state allocation: $6,538,145,250;
Funds made available to states as of April 1, 2009: $3,269,072,625;
Funds drawn down by states as of June 26, 2009: $459,619,032;
Percentage of available funds drawn down by states: 14.
State: Total Nationwide;
Total state allocation: $10,000,000,000;
Funds made available to states as of April 1, 2009: $5,000,000,000;
Funds drawn down by states as of June 26, 2009: [Empty];
Percentage of available funds drawn down by states: [Empty].
Source: U.S. Department of Education data.
[End of table]
As shown in table 8, as of June 26, education officials in seven
states--Arizona, California, Florida, Illinois, Iowa, North Carolina,
and Texas--had drawn down a portion of their Title I Recovery Act
funds. As of June 26, Arizona had drawn down $16,000 in Title I
Recovery Act funds. California authorized the funds to be released to
LEAs on May 28, 2009 and has drawn down 80 percent of its available
funds. According to local officials, both of the LEAs we visited in
California received funds the week of June 1, 2009.
According to U.S. Department of Education officials, they monitor state
drawdowns of Recovery Act funds and will meet with state officials if
they notice anything unusual. As a result of California's large
drawdown, Education officials met with California state officials to
discuss their justification, especially given recent findings by the
department's Inspector General (IG) that the state lacked adequate
oversight over cash management practices of school districts.[Footnote
39] According to department officials, California officials informed
the department that the drawdown of Title I Recovery Act funds was in
lieu of its normally scheduled drawdown of school year 2008-2009 Title
I funds. As a result, officials told us the school districts were ready
to use these funds quickly as they would be used under approved plans
for the current school year. However, the department remains concerned
over the state's cash management system. Further, the California State
Auditor has cited continued concerns about the California Department of
Education's (CDE) internal controls in both the most recent statewide
Single Audit issued on May 27, 2009, and a Recovery Act funding review
issued on June 24, 2009. The Single Audit identified a number of
significant deficiencies or material weaknesses, including continued
problems with CDE ESEA Title I cash management--specifically, that CDE
routinely disburses Title I funds to districts without determining
whether the LEAs need program cash at the time of the disbursement.
According to California officials, the California Department of
Education has developed an improvement plan to address cash management
concerns. It involves LEAs reporting federal cash balances on a
quarterly basis using a Web-based reporting system. According to
Education officials, the first phase of this plan will be piloted
beginning this summer. CDE officials stated that the pilot project
includes cash management fiscal monitoring procedures to verify LEAs'
reported cash balances, ensure compliance with cash management
practices, and ensure that interest earned on federal dollars is
properly accounted for. Education officials told us that, given the
cash management concerns, they would work with the California State
Auditor and the Education Inspector General to develop a monitoring and
assistance plan to ensure that California properly followed cash
management requirements.
According to state education officials, Illinois allowed districts to
complete an application due May 29 to receive funds for summer
programming use and has started to draw down funds. State officials
told us that on June 2, Iowa made the first of six payments of Title I
Recovery funds available to LEAs. Florida allowed LEAs to begin
obligating and spending funds in late April or early May, according to
a state official. In North Carolina, a state official told us that
Recovery Act Title I funds have been available since May 4 for all LEAs
with a current Title I application on file and that as of June 19, 31
LEAs had submitted planning budgets to the state's Department of Public
Instruction and the budgets have been approved; these LEAs, in turn,
can now obligate and spend funds. As of June 26, Texas had drawn down
$58,060 in Title I Recovery Act funds.
State Application Procedures and Budget Deliberations Have Affected the
Release of Title I, Part A Recovery Act Funds:
Officials in Colorado and New Jersey were planning to release some
Title I Recovery Act funds to a small number of their districts in June
to allow them to fund summer programming and to release the rest of
their funds later in the summer. In the remaining states we visited,
funds will not be released to LEAs until July, August, or September.
[Footnote 40] Officials in the District of Columbia, Massachusetts,
Michigan, and New York said they expected to release funds to LEAs in
July.
Nearly all of the 16 states and the District of Columbia have required
(or will require) LEAs to submit an application, a budget, or a
detailed plan as a condition for receiving Recovery Act funding,
[Footnote 41] but the amount of time needed to complete these processes
has varied. For example, in Florida, the State Educational Agency made
available an online, abbreviated application to receive funds on April
9, 2009, according to a state official. The application asked LEAs to
describe how they planned to spend the funds, submit a budget, and make
assurances specific to Title I. The state sent award notices to LEAs
the last week of April and the first week of May 2009, allowing LEAs to
begin obligating and expending funds, according to a state official. In
contrast, when we spoke with Mississippi educational officials in early
June, the state was still in the process of developing a new
application for Title I Recovery Act funds. Mississippi planned to
release the application within several weeks, provide LEAs with
training and a handbook on the application, and hoped to release funds
to LEAs by August 2009. Similarly, New York plans to require school
districts to agree to a number of assurances regarding the use of the
Title I Recovery Act funds before funds are disbursed; however, the
application was in draft form as of June 17, 2009 according to a state
official.
Three of the states we visited (Colorado, Illinois, and New Jersey)
issued early applications inviting districts to apply to receive
Recovery Act funding for school year 2008-2009, such as to fund summer
school programs. Other states have tied the release of funds into their
annual application for regular Title I funding. For example, Georgia
added seven additional questions to its consolidated application and
expects to release funds on a rolling basis once LEA applications and
budgets have been approved.
According to officials in three of the states we visited, the state
budget process is slowing the release of funds and the ability of local
and state educational agencies to finalize their plans for using Title
I Recovery Act funds. For example, in Pennsylvania, funds have been
allocated and obligated but cannot be expended until the legislature
passes a budget, according to state officials. Similarly, in Ohio, a
state official told us that LEAs cannot yet spend their allocated funds
because state law requires the state legislature to pass a final budget
before federal funds are made available for use by state and local
agencies. Education officials in Chicago told us that because the
General Assembly had not yet finalized the state budget, they do not
know exactly how much state funding they will receive in fiscal year
2010 and have not been able to make final decisions as to how they will
spend Recovery Act Title I funds.
Many LEAs We Visited Plan to Use Title I Recovery Act Funds for
Professional Development to Build Capacity and Avoid the "Funding
Cliff" or to Fund High School Programs:
As shown in figure 5 below, local officials most frequently reported
planning to use their Title I Recovery Act funds for professional
development or to fund high school programs; officials in nearly half
of the districts we visited[Footnote 42] said they planned to use funds
for these purposes. Approximately one-third of these local officials
indicated that spending on professional development would allow them to
build their long-term capacity and avoid the "funding cliff."
Figure 5: Planned Uses of Title I Recovery Act Funds in the School
Districts We Visited:
[Refer to PDF for image: vertical bar graph]
Planned use: Professional development;
Number of districts: 20.
Planned use: High school;
Number of districts: 20.
Planned use: Pre-K;
Number of districts: 16.
Planned use: Technology or software licenses;
Number of districts: 11.
Planned use: New schools;
Number of districts: 10.
Planned use: Instructional material;
Number of districts: 10.
Planned use: Longer day or school year;
Number of districts: 8.
Planned use: Parent involvement;
Number of districts: 8.
Planned use: Summer program;
Number of districts: 7.
Planned use: Create or save jobs;
Number of districts: 7.
Planned use: Other;
Number of districts: 7.
Planned use: Hire counselors;
Number of districts: 6.
Planned use: Hire instructional coaches;
Number of districts: 4.
Planned use: Tutoring;
Number of districts: 2.
Planned use: Mentoring;
Number of districts: 2.
Planned use: Reading specialists or coaches;
Number of districts: 2.
Planned use: No planned uses specified in DCI writeup;
Number of districts: 2.
Source: GAO analysis of site visit interviews.
Note: Many local officials we spoke with mentioned more than one
planned use of funds.
[End of figure]
Nearly one-half of the districts we visited plan to use funds to serve
high school students, and nearly 40 percent plan to use funds to serve
preschool students--purposes that the Department of Education gave as
examples of uses that are allowable under Title I and consistent with
the goals of the Recovery Act. About one quarter of the districts
planned to fund schools that did not previously receive Title I
funding, purchase technology or software licenses, or purchase
instructional materials. About 20 percent planned to make the school
day or year longer, fund programs to increase parent involvement, or
create or save jobs.
State and Local Education Officials Express Interest in Securing
Flexibility, Such as through Waivers:
A common theme in our discussions with state education officials was
the desire to secure flexibility in using Title I Recovery Act funds.
For example, of the 16 states and the District in our review, officials
from 14 states expressed interest in at least one waiver. Specifically,
state officials in 8 states planned to apply for at least one waiver:
All of these officials planned to apply for the carryover waiver, and 3
also planned to apply for a maintenance-of-effort waiver. In addition,
officials in 6 other states we visited had not yet decided whether to
apply for a waiver, but all mentioned considering the carryover waiver
and 3 mentioned considering the maintenance-of-effort waiver. Officials
in the remaining 3 states did not plan to request a waiver. The most
common waivers mentioned were carryover waivers[Footnote 43] (14
states), maintenance-of-effort waivers (6 states),[Footnote 44] and
waivers for required spending for supplemental educational services or
school choice transportation (3 states).[Footnote 45]
Local education officials were similarly interested in securing
flexibility in the uses of Title I Recovery Act Funds. Of the local
officials we interviewed, more than 40 percent said they planned to
request at least one waiver and approximately one quarter said they did
not plan to request a waiver. The remaining officials were undecided at
the time of our interviews. The particular waivers most frequently
mentioned by local officials were carryover waivers, waivers of
requirements for supplemental educational services (SES) funding, and
maintenance-of-effort waivers. Nearly 40 percent of officials said they
would request a waiver on maintenance-of-effort, over half said they
would request a waiver for SES, and nearly 75 percent of these
officials said they would request a carryover waiver. Of those
officials planning to request a waiver for SES, officials in two school
districts mentioned they did not typically need all of the funds they
were required to set aside for supplemental services and wanted the
flexibility to spend the funds more quickly and on purposes that would
most benefit disadvantaged students.
State and Local Officials Do Not Want to Finalize Plans before
Receiving More Guidance:
On April 1, 2009, Education released policy guidance that included
principles, goals, and possible uses of funds. This guidance also
included information on allocations from Education to state educational
agencies and from states and the District of Columbia to their LEAs,
addressed fiscal issues such as the carryover limitation, and explained
the process for obtaining a waiver. Education officials told us they
hosted three conference calls with state Title I directors after
releasing the guidance to answer questions from state officials.
Education officials also told us they have made a number of
presentations around the country on using Recovery Act Title I funds
and have planned a meeting for state Title I directors for this July,
by which time they hope to have released additional written guidance on
waivers and allowable uses of Title I Recovery Act funds.
In addition to guidance from Education, LEAs report receiving various
forms of guidance from their state agencies on Title I Recovery Act
funding. Figure 6 shows the number of states we visited in which local
educational officials in at least one district we visited told us they
had received particular forms of guidance. In particular, local
education officials reported participating in webinars hosted by the
state educational agency (officials in eight states), participating in
meetings (officials in six states), receiving state-specific written
guidance (officials in seven states), obtaining information from the
state educational agency Web site (officials in six states), calling or
e-mailing state officials (officials in four states), participating in
training sessions provided by state officials (officials in two
states), and participating in conference calls with state officials
(officials in four states). In at least one LEA in nine of the states
we visited, local officials did not mention receiving any guidance from
the state.[Footnote 46]
Figure 6: Officials in Districts We Visited Reported Receiving Guidance
in Many Forms:
[Refer to PDF for image: vertical bar graph]
SEA guidance received: Webinars;
Number of states: 8.
SEA guidance received: Meetings;
Number of states: 6.
SEA guidance received: State specific written guidance;
Number of states: 7.
SEA guidance received: District did not report receiving state
guidance;
Number of states: 9.
SEA guidance received: State Web site;
Number of states: 6.
SEA guidance received: Informal calls or e-mails;
Number of states: 4.
SEA guidance received: Training sessions;
Number of states: 2.
SEA guidance received: Conference calls;
Number of states: 4.
SEA guidance received: Conferences;
Number of states: 3.
SEA guidance received: Workshops;
Number of states: 3.
SEA guidance received: Other;
Number of states: 4.
Source: GAO analysis of site visit interviews.
Note: Officials in many districts reported receiving more than one form
of guidance from their state educational agency.
[End of figure]
Officials in one state and one district said that local officials are
fearful of missteps with the funds. For example, officials in one LEA
said they wanted more specific guidance on how the Title I Recovery Act
funds can be spent in order to be sure they are doing things correctly.
Given these examples and the fact that nearly half of officials in
districts we visited reported wanting more guidance on allowable uses
of Title I funds that meet the priorities of the Recovery Act, it seems
likely that the lack of guidance may be slowing LEA's planning
processes.
When asked about guidance they would particularly like to receive,
state education officials most frequently said they wanted more
information regarding guidance on waivers (nine states), reporting
requirements (five states), and how to define jobs created or saved
(three states). Local officials most frequently said they wanted
guidance on reporting requirements and on allowable uses of Title I
funds that would be in accordance with the priorities of the Recovery
Act. They also reported wanting more guidance on waivers, flexibility
in spending, and the "supplement-supplant" provision.[Footnote 47]
U.S. Department of Education Has Allocated Half of Recovery Act IDEA
Funding, but States and Localities Have Drawn Down Few Funds, and Await
Guidance on Reporting and Other Issues:
The Recovery Act provided supplemental funding for programs authorized
by Parts B and C of the Individuals with Disabilities Education Act
(IDEA), the major federal statute that supports the provisions of early
intervention and special education and related services for infants,
toddlers, children, and youth with disabilities. Part B funds programs
that ensure preschool and school-aged children with disabilities have
access to a free and appropriate public education and Part C funds
programs that provide early intervention and related services for
infants and toddlers with disabilities--or at risk of developing a
disability--and their families. IDEA formula grants and Recovery Act
funds are allocated to states through 3 grants--Part B grants to states
(for school-age children), Part B preschool grants (section 619), and
Part C grants for infants and families. The U.S. Department of
Education made the first half of states' Recovery Act IDEA allocations
to state agencies on April 1, 2009. As of June 26, 2009, of the sixteen
states and District of Columbia that we visited, only seven states had
drawn down IDEA Recovery Act funds. In total, just over eight percent
of allocated funds had been drawn down in these states.[Footnote 48]
(See table 9.) Most states that we visited are requiring LEAs to submit
an application to receive the IDEA Part B Recovery Act funding.
[Footnote 49]
Table 9: IDEA, Parts B and C Recovery Act Allocations and Draw Downs
for the 16 States and the District of Columbia:
State: Arizona;
Total State Allocation: $194,166,881;
Funds made available to states as of April 1, 2009: $97,083,441;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: California;
Total State Allocation: $1,321,205,578;
Funds made available to states as of April 1, 2009: $660,602,789;
Funds drawn down by states as of June 26: $241,541,985;
Percentage of available funds drawn down by states: 37.
State: Colorado;
Total State Allocation: $160,962,162;
Funds made available to states as of April 1, 2009: $80,481,081;
Funds drawn down by states as of June 26: $50,066;
Percentage of available funds drawn down by states: <1.
State: DC;
Total State Allocation: $18,842,253;
Funds made available to states as of April 1, 2009: $9,421,127;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: Florida;
Total State Allocation: $670,040,593;
Funds made available to states as of April 1, 2009: $335,020,297;
Funds drawn down by states as of June 26: $38,138,170;
Percentage of available funds drawn down by states: 11.
State: Georgia;
Total State Allocation: $338,853,225;
Funds made available to states as of April 1, 2009: $169,426,613;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: Illinois;
Total State Allocation: $542,335,730;
Funds made available to states as of April 1, 2009: $271,167,865;
Funds drawn down by states as of June 26: $10,300,720;
Percentage of available funds drawn down by states: <4.
State: Iowa;
Total State Allocation: $130,107,550;
Funds made available to states as of April 1, 2009: $65,053,775;
Funds drawn down by states as of June 26: $25,866,684;
Percentage of available funds drawn down by states: 40.
State: Massachusetts;
Total State Allocation: $298,176,851;
Funds made available to states as of April 1, 2009: $149,088,426;
Funds drawn down by states as of June 26: $1,026,497;
Percentage of available funds drawn down by states: <1.
State: Michigan;
Total State Allocation: $426,350,589;
Funds made available to states as of April 1, 2009: $213,175,295;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: Mississippi;
Total State Allocation: $126,728,366;
Funds made available to states as of April 1, 2009: $63,364,183;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: New Jersey;
Total State Allocation: $383,296,050;
Funds made available to states as of April 1, 2009: $191,648,025;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: New York;
Total State Allocation: $817,897,473;
Funds made available to states as of April 1, 2009: $408,948,737;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: North Carolina;
Total State Allocation: $339,211,862;
Funds made available to states as of April 1, 2009: $169,605,931;
Funds drawn down by states as of June 26: $12,636,562;
Percentage of available funds drawn down by states: 7.
State: Ohio;
Total State Allocation: $465,505,019;
Funds made available to states as of April 1, 2009: $232,752,510;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: Pennsylvania;
Total State Allocation: $455,939,209;
Funds made available to states as of April 1, 2009: $227,969,605;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: Texas;
Total State Allocation: $1,009,383,291;
Funds made available to states as of April 1, 2009: $504,691,646;
Funds drawn down by states as of June 26: 0;
Percentage of available funds drawn down by states: 0.
State: Total;
Total State Allocation: $7,699,002,682;
Funds made available to states as of April 1, 2009: $3,849,501,341;
Funds drawn down by states as of June 26: $320,169,074;
Percentage of available funds drawn down by states: 8.3.
Source: Department of Education.
[End of table]
State and local officials report receiving general guidance from the
U.S. Department of Education (Education) but additional clarifications
are needed in key areas. In April 2009, Education released policy
guidance describing principles and goals of IDEA Recovery Act funds,
and written guidance with information on the timing of allocations of
funds to states, indirect costs, waivers, and authorized uses of IDEA
Recovery Act funds. According to Education officials, Education has
also provided assistance and guidance to states and school districts in
a variety of other ways, including conference calls with state agencies
administering Parts B and C, presentations at conferences, and webinars
on specific issues such as IDEA maintenance-of-effort requirements.
While Education officials provided guidance with examples of allowable
uses of Recovery Act IDEA funds on April 24, states and LEAs indicate
the need for further guidance in this area. For example, several states
and LEAs report needing clearer guidance on allowable uses, including
construction costs, and Education officials said they have heard
questions about allowable uses for buses for students with
disabilities. Education officials said that they are working on a more
detailed document on innovative strategies for increasing student
academic achievement and avoiding funding commitments that will be
unsustainable after the Recovery Act funding expires. Several states
reported offering various forms of guidance to LEAs, including holding
webinars, direct communication, and providing written guidance on
potential uses of Recovery Act IDEA funding.
At the time of our site visits neither Education nor the U.S. Office of
Management and Budget (OMB) had issued final guidance on Recovery Act
reporting.[Footnote 50] Many state officials told us that it will be
difficult to plan how they will report the impact of Recovery Act
funding until they receive further guidance from OMB or Education.
Education is planning to supplement the guidance OMB provides, to help
state agencies report the proper data. In particular, Education
officials noted that draft OMB guidance on recipient reporting would
require some additional Education guidance to clarify issues for
recipients of formula grants, such as the IDEA grants.
Various state and local officials had concerns about whether their LEAs
would be able to exercise the flexibility allowed under IDEA Part B's
maintenance-of-effort requirements. Generally, in any fiscal year that
an LEA's IDEA, Part B section 611 or grants to states allocation
exceeds the amount the LEA received in the previous year, the LEA may
reduce its local spending on disabled students by up to 50 percent of
the amount of the increase, as long as the LEA (1) uses those freed-up
funds for activities that could be supported under the Elementary and
Secondary Education Act of 1965, (2) meets the requirements of the
IDEA, including the performance targets in its state's performance
plan, and (3) can provide a free appropriate public education.
Pennsylvania officials said that this rule has been a source of
confusion for LEAs in their state, and state officials said they have
discussed it in great detail in webinars, conferences, and other
communication with LEAs. Education officials said that in developing
Education's guidelines, in addition to reviewing and interpreting the
statutes, they have met with state and local educational agencies and
interest groups who have raised concerns. Education officials told us
that some interest groups have asked them to reconsider the requirement
that LEAs meet requirements of the IDEA, including performance targets
in state performance plans in order to qualify for the MOE flexibility,
but agency officials believe this requirement was statutorily mandated.
Another concern involves LEAs that have been determined to have
significant disproportionality based on race and ethnicity,[Footnote
51] because these districts are required to set aside 15 percent of
their total IDEA, Part B funds, including Recovery Act IDEA, Part B
funds, for comprehensive early intervention services. This limits their
ability to exercise MOE flexibility. According to Education officials,
interest groups have asked Education to reconsider its interpretation
of this IDEA provision.
States and LEAs plan to spend IDEA Part B Recovery Act funding for a
variety of services and initiatives. Most LEAs planned to offer
professional development activities and several noted that such
activities could avoid unsustainable funding commitments after Recovery
Act funds expire. LEA officials in the District of Columbia and
Philadelphia said that their goal with their IDEA Part B Recovery Act
expenditures is to expand their districts' ability to serve more
students with disabilities, which would mean that the LEAs would
receive IDEA funds for serving students with disabilities who are
currently served by going to schools outside the LEAs. Other examples
of areas in which LEAs plan to spend Recovery Act funds include:
acquiring and improving the use of assistive technologies; improving
transitions for students with disabilities, from preschool to K-12, and
from school to jobs; and increasing capacity to collect and utilize
data.
States may use IDEA, Part C Recovery Act funds for any allowable
purpose under IDEA, Part C, including the direct provision of early
intervention services to infants and toddlers with disabilities and
their families, and implementing a statewide, comprehensive,
coordinated, multidisciplinary, interagency system to provide early
intervention services.[Footnote 52] At the time of our interview,
Illinois Department of Human Services officials said that the
department had already received and expended its initial allocation of
IDEA, Part C Recovery Act funds and that the funds had been used to
avert a 7 to 8 percent cut in its caseload. Pennsylvania officials plan
to spend most of the state's IDEA, Part C Recovery Act funds on basic
services, but they also plan to spend $1 million in IDEA, Part C
Recovery Act funds for an early childhood integrated data system. In
Arizona, officials told us that these services are provided by entities
that contract with the Arizona Department of Economic Security (DES).
DES officials maintain that these IDEA Part C Recovery Act funds will
be used to address funding shortfalls created by an increasing caseload
without a commensurate increase in base federal or state funding for
Part C services. In Colorado, state officials said that the IDEA Part C
Recovery Act funds would generally go to contracts with community
centered boards and some universities that provide professional and
paraprofessional development as well as technology and services.
States and Localities Are Using Recovery Act Funds in an Effort to
Provide Summer Employment Activities to Greater Numbers of Youth:
The Recovery Act provides an additional $1.2 billion in funds
nationwide for the Workforce Investment Act (WIA) Youth program to
facilitate the employment and training of youth. The WIA Youth program
is designed to provide low-income in-school and out-of-school youth age
14 to 21, who have additional barriers to success, with services that
lead to educational achievement and successful employment, among other
goals. The Recovery Act extended eligibility through age 24 for youth
receiving services funded by the act. In addition, the Recovery Act
provided that, of the WIA Youth performance measures, only the work
readiness measure is required to assess the effectiveness of summer-
only employment for youth served with Recovery Act funds. Within the
parameters set forth in federal agency guidance, local areas may
determine the methodology for measuring work readiness gains. The WIA
Youth program is administered by the Department of Labor (Labor), and
funds are distributed to states based on a statutory formula; states,
in turn, distribute at least 85 percent of the funds to local areas,
reserving up to 15 percent for statewide activities. The local areas,
through their local workforce investment boards, have flexibility to
decide how they will use these funds to provide required services.
In the conference report accompanying the bill that became the Recovery
Act,[Footnote 53] the conferees stated they were particularly
interested in states using these funds to create summer employment
opportunities for youth. While the WIA Youth program requires a summer
employment component to be included in its year-round program, Labor
has issued guidance indicating that local areas have the program design
flexibility to implement stand-alone summer youth employment activities
with Recovery Act funds.[Footnote 54] Local areas may design summer
employment opportunities to include any set of allowable WIA Youth
activities--such as tutoring and study skills training, occupational
skills training, and supportive services--as long as it also includes a
work experience component. Labor has also encouraged states and local
areas to develop work experiences that introduce youth to opportunities
in "green" educational and career pathways. Work experience may be
provided at public sector, private sector, or nonprofit work sites. The
work sites must meet safety guidelines, as well as federal and state
wage laws.[Footnote 55]
States Have Allocated Recovery Act WIA Youth Funds to Local Workforce
Areas:
For this report, we focused on the WIA Youth program in 13 of our 16
states (all except Arizona, Colorado, and Iowa)[Footnote 56] and the
District of Columbia (District). The 13 states and the District
received nearly two-thirds of the Recovery Act WIA Youth funds allotted
by Labor. In turn, the 13 states have allocated at least 85 percent of
these funds to their local workforce areas, as shown in table
10.[Footnote 57] As allowed, the 13 states generally reserved 15
percent of the Recovery Act WIA Youth funds for statewide uses,
although Florida and New Jersey instead allocated their entire
allotments to local workforce areas.
Table 10: Allocations of Recovery Act WIA Youth Funds for 13 States and
the District, as of June 30, 2009 (Dollars in millions):
State: California;
Allotment from Department of Labor: $186.6;
Amount state allocated to local areas: $158.6;
Percentage of allotment to local areas: 85.
State: District of Columbia;
Allotment from Department of Labor: $4.0;
Amount state allocated to local areas: Not applicable;
Percentage of allotment to local areas: Not applicable.
State: Florida;
Allotment from Department of Labor: $42.9;
Amount state allocated to local areas: $42.9;
Percentage of allotment to local areas: 100.
State: Georgia;
Allotment from Department of Labor: $31.4;
Amount state allocated to local areas: $26.7;
Percentage of allotment to local areas: 85.
State: Illinois;
Allotment from Department of Labor: $62.2;
Amount state allocated to local areas: $52.9;
Percentage of allotment to local areas: 85.
State: Massachusetts;
Allotment from Department of Labor: $24.8;
Amount state allocated to local areas: $21.1;
Percentage of allotment to local areas: 85.
State: Michigan;
Allotment from Department of Labor: $73.9;
Amount state allocated to local areas: $62.9;
Percentage of allotment to local areas: 85.
State: Mississippi;
Allotment from Department of Labor: $18.7;
Amount state allocated to local areas: $15.9;
Percentage of allotment to local areas: 85.
State: New Jersey;
Allotment from Department of Labor: 20.8;
Amount state allocated to local areas: 20.8;
Percentage of allotment to local areas: 100.
State: New York;
Allotment from Department of Labor: $71.5;
Amount state allocated to local areas: $60.8;
Percentage of allotment to local areas: 85.
State: North Carolina;
Allotment from Department of Labor: $25.1;
Amount state allocated to local areas: $21.3;
Percentage of allotment to local areas: 85.
State: Ohio;
Allotment from Department of Labor: $56.2;
Amount state allocated to local areas: $47.7;
Percentage of allotment to local areas: 85.
State: Pennsylvania[A];
Allotment from Department of Labor: $40.6;
Amount state allocated to local areas: $34.6;
Percentage of allotment to local areas: 85.
State: Texas;
Allotment from Department of Labor: $82.0;
Amount state allocated to local areas: $69.7;
Percentage of allotment to local areas: 85.
State: Total;
Allotment from Department of Labor: $740.7;
Amount state allocated to local areas: $635.9;
Percentage of allotment to local areas: [Empty].
Source: Department of Labor and state workforce agencies.
[A] In Pennsylvania, only 40 percent of the allocation is available for
the local areas to spend before July 1; Pennsylvania officials expect
the balance to be available on or after July 1, when they expect the
state to enact its budget.
[End of table]
As of June 25, 2009, about 6 percent of Recovery Act WIA Youth funds
had been drawn down nationwide, according to Department of Labor data.
Draw downs represent cash transactions: funds drawn down by states and
localities to pay their bills.[Footnote 58] Among the 13 states and the
District of Columbia, the percent drawn down generally ranged from zero
for the District to 10 percent for Ohio. However, one state--
Mississippi--had drawn down 39 percent of its funds. Draw downs do not
provide a complete picture of the extent to which states and localities
have used Recovery Act WIA Youth funds to provide services since
payment for services can occur after funds are obligated and services
are provided. The Department of Labor receives quarterly reports from
states on their WIA Youth expenditures for services that have been
provided, but there is a time lag before these data become available.
For example, states' reports for the quarter ending June 30 are due to
Labor 45 days after the end of the quarter, or August 15, and Labor
then reviews the data before releasing them.
States Plan to Use Funds to Provide More Youth with Summer Employment
Activities:
Consistent with congressional intent that a substantial portion of
these funds be used for summer youth employment activities, our states
generally plan to use these funds to increase the number of youth
served through summer activities. For example, Michigan anticipates
serving about 25,000 youth in the summer of 2009, compared with about
4,000 youth served with WIA funds in the summer of 2008. Illinois plans
to spend about $50 million of its $62 million Recovery Act Youth
allotment on youth employment activities in the summer of 2009 and has
set a target of serving about 15,000 youth through these activities.
Texas set a target of spending 60 percent of Recovery Act WIA Youth
funds allocated to local areas on summer employment activities and
serving about 14,400 youth in the summer of 2009 (compared with 918
youth actually served in the summer of 2008 with WIA funds). In
contrast to these states, the District plans to use its Recovery Act
WIA Youth funds on its year-round WIA Youth program. District officials
told us that, before receiving the Recovery Act funds, they had already
allocated $45 million for the district's locally funded 2009 summer
youth employment program, which they said is the second-largest summer
youth employment program in the nation, serving about 23,000 youth.
Several states, including Massachusetts, Ohio, Pennsylvania, and Texas,
have required their local workforce areas to spend from 50 percent to
70 percent of their Recovery Act WIA Youth funds by September or
October 2009. For example, Ohio requires local areas to spend at least
70 percent of these funds by October 31, 2009, and 90 percent of funds
by January 31, 2010, or risk having funds recaptured by the state.
Massachusetts requires local areas to spend at least 60 percent of
their funds by September 30, 2009.
Local Flexibility Is Evident in the Different Approaches Planned for
Providing Services to Youth This Summer:
States and local areas we visited varied in the approaches they planned
to use in providing summer youth employment activities.[Footnote 59]
While public sector work sites were frequently mentioned, so, too, were
private sector and nonprofit organizations. Across the spectrum of work
sites, work activities ranged widely. Local areas were varied in the
role that academic and occupational skills training is playing in the
summer activities and in the extent to which contracted providers will
administer the summer activities.
Type of work experience: Planned work sites for the Recovery Act-funded
summer youth activities varied widely across the local areas we visited
and included public sector, private sector, and nonprofit
organizations. Most local areas expected at least some public sector
jobs, and in some areas the majority of the work sites are expected to
be in the public sector. These sites often included local government
offices; public parks, recreation centers, and camps; and public
schools and community colleges, public libraries, and animal shelters.
Local areas in several states were planning to place youth in private
sector work sites, as well, including supermarkets, pharmacies, health
care institutions, and private learning centers. Officials in two local
areas we visited expected the majority of their work sites to be in the
private sector. In addition, at least one local area in nearly all of
the states we visited expects to make use of nonprofit work sites,
including community action agencies, boys and girls clubs, and the
YMCA. Across the different types of work sites, the specific work
activities planned for the youth ranged from clerical work, grounds
keeping, animal care, and kitchen support to customer service and
serving as camp counselors or radiology technicians' assistants.
Labor encouraged states to develop work experiences in "green" jobs,
and officials reported that green jobs were available in nearly all
local areas we visited. The jobs they cited included landscape
maintenance, recycling, and green construction, and an automotive fuel
technology project at a university, as well as jobs in energy
efficiency and weatherization. However, officials told us they were not
always clear what constituted a green job. For example, officials in
Pennsylvania's South Central local area questioned whether a youth
working in a plastics factory that makes parts for a windmill is
working in a "green" job. Labor has provided some discussion of green
jobs in its guidance letters to states on Recovery Act funds. For
example, Labor's March 18, 2009, guidance letter highlights areas
within the energy efficiency and renewable energy industries that will
receive large Recovery Act investments, such as energy-efficiency home
retrofitting and biofuel development, and also provides examples of
occupations that could be impacted by "green" technologies, including
power plant operators, electrical engineers, and roofers and
construction managers.[Footnote 60] Labor officials told us that their
reporting requirements for Recovery Act funds do not include any
tracking of green jobs.
Role of academic and occupational skills training: While not all local
areas had completed their plans for the summer activities at the time
of our review, in about half of the states at least some local areas
were planning to provide academic or occupational skills training along
with work experience. For example, Buffalo, New York, plans several
projects that will combine green jobs with academic training, as well
as weatherization and construction skills. In one such program, youth
will work to earn their General Equivalency Diplomas (GED) while also
learning "green" construction skills. Participants will earn $7.25 an
hour for their work experience and $3 an hour while working on their
GEDs. Another of Buffalo's projects will help youth who are at-risk of
dropping out of school by providing them with an opportunity to recover
the high school credits they need for graduation while also taking part
in work experience.
Even when local areas are focusing most of their efforts on work
experience, many are also planning to provide work readiness training
as part of an initial orientation to the summer activities, but the
nature of the work readiness training varied widely. In Mercer County,
New Jersey, for example, youth will be given a short workshop on
interviewing skills prior to a job fair. In addition to employment,
youth age 14 to 17 will receive 21 hours of job readiness training, and
those age 18 to 24 will receive 28 hours of job readiness training. In
another New Jersey example, youth in Camden County will receive 8 hours
of life skills training using a standard curriculum, followed by
financial literacy training based on curricula developed for youth by
the Federal Deposit Insurance Corporation. Other local areas we visited
also plan to provide financial literacy training as part of their
orientation. Ohio's Franklin and Montgomery Counties, for example, have
arranged for a local bank to help participating youth set up bank
accounts, into which their paychecks will be automatically deposited.
Youth will receive debit cards to access the account and will receive
basic financial counseling.
Administration of summer employment activities: Many local areas are
using contracted providers to operate key aspects of the WIA summer
youth employment activities, such as recruiting youth and work sites
and administering payroll. In some cases, officials report they have
been able to extend existing contracts with their WIA year-round
program service providers to cover the stand-alone summer employment
activities. In other cases, they have conducted new competitions, in
part, because they needed additional contractors to cover the expansion
of services. All thirteen of our states applied for and received a
waiver from Labor relating to procurement requirements for youth summer
employment providers. The waivers allow local areas to expand existing
competitively procured contracts or conduct an expedited, limited
competition to select service providers. Labor approved 10 of these
waivers in April or May 2009, and the other 3 in June 2009.
While using contracted providers to operate the program was more
common, in a few states at least some local areas were operating the
entire program in-house. In New Jersey, for example, the local areas we
visited are relying mostly on internal staff to carry out program
responsibilities; however, one area plans to use contracted providers
for some specific roles. In Ohio, two of the four local areas we
visited had decided to operate the program in-house. Officials in one
of the local areas in Ohio told us they made the decision for two
reasons--they wanted to be able to exercise greater control over the
program and they were seeking to avert staff layoffs due to funding
cuts in other programs.
States and Local Areas Experienced Multiple Challenges in Quickly
Implementing Summer Youth Employment Activities:
State and local officials reported challenges in implementing their
stand-alone summer youth employment activities that generally reflected
three key themes--tight time frames for implementing the program, lack
of staffing capacity to meet the expanding needs, and difficulty in
determining and documenting youth eligibility.
Tight time frames: Many state and local officials commented that the
biggest challenge in implementing the program was the limited time
frame they had for making the program operational. Once the Recovery
Act was passed, states and local areas had only about 4 months to get
their new summer youth employment activities up and running--a process
that officials told us would normally begin many months earlier. And
local areas often lacked recent experience in operating such a stand-
alone program. In implementing the year-round service requirements of
WIA (in which summer employment is a component rather than a stand-
alone program), many states and local areas had greatly reduced their
summer youth employment programs and no longer offered a stand-alone
summer program--or they had found other funding sources, such as state,
local, or foundation funds, to cover it. Unlike WIA, its predecessor,
the Job Training Partnership Act, required local areas to provide a
stand-alone summer youth employment program. The local areas we
reviewed represented a mix of experiences. Those without recent
experience had to build the program from the ground up. These areas had
to quickly confront many basic decisions--how to structure the program,
how to recruit work sites and participants, whether to use contracted
providers (and for what functions) or whether to administer the program
in house. Other areas, however, had well-developed summer youth
employment programs. These areas already had some of these basic
structures in place, but often still found it challenging to quickly
expand their existing programs.
Staffing capacity: Across the local areas we visited, many officials
told us staff were challenged to address the needs of the growing
number of youth they needed to serve. In some cases, states had been
downsizing or did not have the flexibility to hire additional staff due
to hiring freezes and budget cuts. For example, Essex County, New
Jersey, operating with two full-time staff, said the inability to hire
additional staff posed challenges for recruiting youth and monitoring
the program. In the local areas we visited in Ohio, the expected
increases in enrollments were leaving local areas' staff stretched
thin. To address this challenge, some counties were reassigning
employees from other programs to work on WIA summer youth employment
activities. One county had arranged for additional staff to monitor the
summer program by using a temporary placement agency. Similarly,
Chicago officials said that, despite having had experience in
implementing a stand-alone summer program, they found implementing the
WIA summer youth employment activities challenging because, in order to
adequately ramp up their programs and prepare for implementation, they
had to borrow staff from other sections who do not typically work on
the WIA Youth program.
Determining and documenting youth eligibility: Several states and local
areas commented that it was challenging to determine youth applicants'
eligibility and to obtain supporting documentation, especially for the
increased number of youth they are planning to serve. New Jersey
officials told us that the youth targeted for the program generally
have difficulty providing the kinds of documents required in order to
prove WIA Youth program eligibility. For example, to determine that
youth meet the eligibility requirements, local officials in New Jersey
require documentation that includes public assistance identification
cards to support total household income, birth certificates for proof
of citizenship, Social Security numbers, and documentation of selective
service registration for males age 18 and over. Officials in a few
states also expressed concern that the income eligibility standards
were more restrictive than for other programs, particularly those
operated using state funds, and that the standards may be excluding a
significant number of youth who need the services. For example,
officials in Philadelphia reported that some of their youth applicants
whose parents had recently lost their jobs were not eligible for the
program because eligibility was based on income earned during the
period just prior to dislocation.
States Plan to Use Various Procedures to Monitor Local Areas' Summer
Youth Activities:
With regard to program oversight, all 13 of our states and the District
reported they had the capacity to track and report on Recovery Act
funded WIA Youth expenditures separately from those not funded by the
Recovery Act. The states also reported plans to use a variety of
procedures to monitor local areas' summer youth employment activities,
such as risk assessments, on-site monitoring, and periodic meetings
with local program directors. For example, Ohio state officials sent a
survey to the local workforce areas in May 2009 to help identify local
areas with greater risk due to factors such as critical timing issues,
larger program scope, or substantial changes from past programs, and
the state planned to initially focus its attention on these local
areas. Massachusetts state officials said they planned to conduct on-
site visits to each local workforce area at least twice during the
summer and that the state's monitoring efforts would include file
reviews of information pertaining to topics such as eligibility,
standard operating procedures, contracts, statements of work, and
subrecipient monitoring. Michigan state officials said they planned to
hold monthly meetings with all local program directors to encourage the
reporting of consistent information and that their on-site monitoring
would focus especially on private sector components of the program,
such as private sector worksites.
Department of Labor officials said that they have efforts underway to
understand the experiences of those operating summer youth activities
through regular interaction with state and local service providers,
monitoring, identifying any issues, and providing assistance to address
the issues. For example, they said that Labor's regional offices have
begun visiting local areas to monitor and gather information and will
be visiting about two areas in each of their states this summer.
Beginning the week of June 29, each of the six regional offices will
begin providing weekly narrative reports on the Recovery Act summer
youth employment activities from at least two local areas each week.
Measuring the Effects of the Summer Youth Activities Will Focus Largely
on Work Readiness Improvements:
To assess the effects of the summer youth employment activities, states
will be required to report a work readiness attainment rate--defined as
the percentage of participants in summer employment who attain a work
readiness skill goal. Under Department of Labor guidelines, states and
local areas are permitted to determine the specific assessment tools
and the methodology they use to determine improvements in work
readiness, but it must be measured at the beginning and completion of
the summer experience. Not all areas had finalized their plans for
assessing work readiness at the time of our visits but were considering
various pre-and post-test options. For example, officials in
Mississippi plan to do a written pre-and post-test but will also assess
youth at the midpoint through an interview with an employment adviser.
All three areas we visited in Florida plan to supplement the pre-and
post-tests with feedback from businesses and work site supervisors.
To monitor and report on progress made in implementing the program,
Labor has instituted new reporting requirements on youth participating
in Recovery Act-funded activities. Under WIA, states have been required
to report quarterly to Labor on aggregate counts of youth participants,
activities, and outcomes. However, since these reports are not
submitted in time for Labor to comply with Recovery Act requirements to
make information readily available to the public, states will be
required, beginning on July 15, to submit a supplemental monthly report
on youth. In this supplemental report, states will submit aggregate
counts of all Recovery Act youth participants, including the
characteristics of participants, the number of participants in summer
employment, services received, attainment of a work readiness skill,
and completion of summer youth employment.
In addition to Labor's reporting requirements, a few states were
developing plans for additional assessments of the program. Georgia
officials, for example, reported that they are considering tracking
whether youth return to school or obtain full-time employment after the
summer program is over. Similarly, officials in Illinois are currently
designing a tracking system that will allow them to assess the long-
term impacts of the program, including job placement and job retention
of participants.
Many Public Housing Agencies Have Obligated, but Few have Drawn Down,
Recovery Act Funds:
The Recovery Act requires the U.S. Department of Housing and Urban
Development (HUD) to allocate $3 billion through the Public Housing
Capital Fund to public housing agencies using the same formula for
amounts made available in fiscal year 2008. HUD allocated Capital Fund
formula dollars to public housing agencies shortly after passage of the
Recovery Act and, after entering into agreements with over 3,100 public
housing agencies, obligated these funds to public housing agencies on
March 18, 2009.[Footnote 61] Although HUD has allocated and obligated
almost $3 billion in formula capital grants to 3,123 public housing
agencies,[Footnote 62] and 1,483 agencies have begun obligating
relatively less, little funding has been drawn down by housing
agencies.[Footnote 63] Specifically, as of June 20, 2009, $466 million,
or 16 percent, of the funds allocated by HUD to the housing agencies
has actually been obligated by the housing agencies, and $32 million,
or 1.1 percent, has been drawn down (see figure 7).
Figure 7: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn Down Nationwide, as
of June 20, 2009:
[Refer to PDF for image: three pie-charts]
Funds obligated by HUD: 99.9% ($2,982 million);
Funds obligated by public housing agencies: 15.6% ($466 million);
Funds drawn down by public housing agencies: 1.1% ($32 million).
Number of public housing agencies:
Entering into agreements for funds: 3,123;
Obligating funds: 1,483;
Drawing down funds: 721.
Source: GAO analysis of HUD data.
[End of figure]
For this report, we visited 47 public housing agencies in the 16 states
and the District of Columbia, which had received formula grant awards
totaling $531 million. These housing agencies have identified projects
and are just beginning to obligate and draw down Recovery Act funds for
project expenses. As of June 20, 2009, these public housing agencies
had obligated almost $66 million, or about 12 percent of their $531
million allocation, and had drawn down $2.6 million, or 0.5 percent of
the $531 million. Thirty of the 47 agencies had obligated funds
(including 3 small agencies and 1 medium agency that had obligated 100
percent of their funds), indicating that contracts had been awarded and
signed and that work was beginning, of which 20 had drawn down funds
(see figure 8).
Figure 8: Percent of Public Housing Capital Fund Formula Grants
Allocated by HUD that Have Been Obligated and Drawn Down by 47 Public
Housing Agencies Visited by GAO, as of June 20, 2009:
[Refer to PDF for image: three pie-charts]
Funds obligated by HUD: 100% ($531,001,215);
Funds obligated by public housing agencies: 12.4% ($65,938,547);
Funds drawn down by public housing agencies: 0.5% ($2,556,708).
Number of public housing agencies:
Entering into agreements for funds: 47;
Obligating funds: 30;
Drawing down funds: 20.
Source: GAO analysis of HUD data.
[End of figure]
Several of the 17 public housing agencies we spoke to that had neither
obligated nor drawn down any funds stated that they had not done so
because they were awaiting approval from HUD on their plans for using
Recovery Act funds, or they were still soliciting bids and finalizing
contracts. Others were developing project plans or completing
environmental reviews. In addition, some public housing agency
officials stated that their status as a "troubled performer"--based on
HUD's Public Housing Assessment System (PHAS)[Footnote 64]--meant they
faced more oversight and monitoring from HUD, which was preventing them
from obligating the Recovery Act funds as quickly as they would like.
However, many of these 17 agencies expected to begin awarding
contracts, obligating funds, and working on projects by July 2009. This
timeline is in line with HUD headquarters officials' expectations that
activity involving obligating Recovery Act funds will increase
substantially during the next quarter (July to September 2009).
Planned Use of Recovery Act Funds by Housing Agencies:
For the 47 housing agencies that we visited, officials indicated that
they were planning to use their Recovery Act funds for various types of
activities, ranging from parking lot repaving to complete
rehabilitation of multi-unit structures. Among the most common Recovery
Act project types mentioned by public housing agency officials were
roof and window replacements; heating, ventilation, and air
conditioning (HVAC) system upgrades or replacements; and interior
rehabilitation work, such as kitchen or bathroom renovations and
flooring or carpet replacements. For example, Athens Housing Authority
in Georgia plans to replace water heaters and kitchen cabinets at 23
scattered sites (see figure 9). According to the public housing
agencies we visited, more than 15,000 units will be rehabilitated,
including more than 1,500 vacant units.
Figure 9: Unit That the Athens Housing Authority Plans to Renovate with
Recovery Act Funds:
[Refer to PDF for image: two photographs]
Single space heater to be replaced with central heat;
kitchen.
Source: GAO.
[End of figure]
Relatively small-scale projects were already underway or had been
completed, such as the 10 bathroom remodels and 105 window replacements
that Ferris Housing Authority in Texas had finished. In contrast, some
major projects requiring planning and design work had yet to begin. In
fact, some public housing agencies avoided large, complex projects
because they believed the projects would take too long. However, some
of the large public housing agencies are funding major activities, such
as demolishing a public housing structure, constructing new structures,
or completely renovating hundreds of units across many properties. For
example, Philadelphia Housing Authority plans to spend over $29 million
to rehabilitate 300 vacant units at various sites--one of which is
shown in figure 10--and another $14.6 million to completely reconfigure
a 71-unit mid-rise building into a 53-unit building with new community
spaces, elevators, and energy-efficient electrical and mechanical
systems. Cuyahoga Metropolitan Housing Authority in Ohio is using $12
million of Recovery Act funds to pay for part of a $65 million
redevelopment initiative that involves demolishing existing structures
and building new structures. HUD has informed housing agencies that
they may use the Recovery Act funds for demolition and construction of
new units, provided that they can meet the Act's obligation and
expenditure deadlines.
Figure 10: Philadelphia, Pennsylvania, Plans to Rehabilitate Vacant
Units at Scattered Sites:
[Refer to PDF for image: photograph]
Source: Philadelphia Housing Authority.
[End of figure]
Prioritization: The Recovery Act requires public housing agencies to
give priority to projects involving the rehabilitation of vacant units,
projects already underway or on the agency's latest 5-year plan, and
projects that could be awarded based on bids within 120 days of the
Recovery Act funds becoming available. Public housing agency officials
we spoke to generally prioritized projects that were on their 5-year
plan, that could be initiated quickly, and that were, in their
judgment, the most critical projects to be completed.
Only a few of the largest public housing agencies we visited stated
that they had relatively large numbers of vacant units they were going
to rehabilitate. More than 1,200 of the over 1,500 vacant units that
agencies we visited had slated for rehabilitation using Recovery Act
funds were identified by just five public housing agencies: Chicago
Housing Authority, Philadelphia Housing Authority, San Francisco
Housing Authority, Cuyahoga Metropolitan Housing Authority in Ohio, and
Newark Housing Authority. However, for some agencies facing relatively
few vacancies, rehabilitating vacant units was not the highest priority
in selecting projects. Instead, they focused on meeting other Recovery
Act priorities, such as selecting projects already underway or
selecting projects for which contracts could be awarded within 120
days.
An additional priority for public housing agencies in selecting
projects was finding ways to improve energy efficiency in their
buildings. Some are seeking to accomplish this by making exterior
improvements, such as replacing roofs, siding, or windows, while others
will be replacing appliances or HVAC equipment with more energy-
efficient models. For example, Rahway Housing Authority in New Jersey
is in the process of replacing siding on some of its buildings to
increase the energy efficiency (see figure 11). Another example of an
exterior improvement is from the District of Columbia Housing
Authority. Agency officials told us they used Recovery Act funds to
install solar panels on top of one of the residential buildings as part
of its effort to "green retrofit" all the housing units in the complex.
These panels will help heat water for the building.
Figure 11: Siding in the process of completion using Rahway Housing
Authority's Recovery Act funds:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
Barriers and Challenges: Public housing agency officials noted a few
barriers and challenges they had confronted or anticipated related to
Recovery Act funds and projects, but in most cases no single concern
was widely shared among the officials with whom we spoke. In a few
cases, public housing agencies mentioned that they had experienced
delays in accessing their funds in HUD's Electronic Line of Credit
Control System (ELOCCS) due to problems with or confusion about the
requirement to obtain a Data Universal Numbering System (DUNS) number
and to register in the Central Contractor Registration (CCR) system.
For example, two housing agencies had trouble registering because their
actual location (city or county) was different from the information
associated with the DUNS number in the system. However, once agencies
were properly registered, they did not anticipate any problems using
the system. According to HUD officials, registering in the CCR has been
a substantial problem nationwide, despite efforts by HUD to communicate
these requirements to public housing agencies. HUD officials estimated
that about 380 public housing agencies (out of approximately 3,100) had
not properly registered in CCR and were therefore unable to obligate or
draw down Recovery Act funds as of June 15, 2009. HUD officials are
working with these agencies to resolve the problems as quickly as
possible.
Another challenge raised by public housing agency officials and HUD
officials was the "Buy American" provision of the Recovery Act. Several
officials noted that depending on how this provision was interpreted,
it could pose a barrier to getting contracts in place and completing
projects. For example, HUD officials noted that agencies may have
difficulty in finding an adequate selection of goods and materials for
improving energy efficiency that meet the "Buy American" requirement
and are competitively priced. For other public housing agencies,
however, this provision was not a concern. For example, two agencies
stated they had revised their procurement policy to include "Buy
American" requirements, while another agency required its contractors
to certify the materials they use are American-made.
An additional potential challenge that some officials had identified
involved the requirements HUD had placed on agencies in order to use
Recovery Act funds for administration. HUD's guidance states that
public housing agencies may use 10 percent of their grant funds for
administration but that agencies can only draw down 10 percent of each
invoice submitted for administration. In addition, one public housing
agency official stated that he expected the documentation requirements
for drawing down these funds would require so much extra work that he
believed it would be better to use non-Recovery Act funds to cover all
administration expenses and devote his agency's entire Recovery Act
award to the identified projects. HUD officials stated that these
requirements were intended to provide public housing agencies with an
incentive to use Recovery Act funds immediately on projects that would
create jobs.
Troubled housing agencies may also experience delays in obligating and
expending Recovery Act funds. Some officials from public housing
agencies that HUD has identified as troubled performers in PHAS stated
that additional requirements placed on them by HUD had hindered these
agencies' ability to obligate and expend funds as quickly as they
believe necessary. At one public housing agency, officials stated that
they were designated as troubled because of the physical condition of
their housing units and that they were in need of the Recovery Act
funding to address these deficiencies. HUD has identified 172 housing
agencies as troubled under PHAS that will be subject to increased
monitoring for the Recovery Act. These 172 troubled housing agencies
have obligated and expended Recovery Act funds at a slower rate than
the overall group of housing agencies receiving Recovery Act funding.
Specifically, troubled performing public housing agencies were
allocated nearly $186 million of Recovery Act funding, and as of June
20, 2009, 61 (35.5 percent) of these housing agencies had obligated
$15.1 million (8 percent) and 22 (13 percent) of these housing agencies
had drawn down almost $926,000 (0.5 percent). Overall housing agencies
have obligated and expended funds at about double this rate.
One reason for these delays is the additional monitoring required by
HUD for housing agencies that are designated as troubled performers
under PHAS. HUD has informed these troubled public housing agencies
that for Recovery Act purposes they would receive increased monitoring
and placed them in either a high, medium, or low-risk category. Of
these 172 troubled housing agencies, 106 (61.6 percent) were considered
low-risk troubled, 53 (30.8 percent) were considered medium-risk
troubled, and the remaining 13 (7.6 percent) were considered high-risk
troubled. HUD has established and is implementing a strategy for
monitoring these troubled housing agencies that have received Recovery
Act funds. HUD stated to us that they have disseminated this strategy
to its field offices and it is currently being administered to the 172
troubled housing agencies. For example, according to HUD, all 172
troubled public housing agencies--regardless of risk category--have
been placed on a "zero threshold" status and therefore cannot draw down
Recovery Act funds without HUD Field Office approval. HUD stated to us
that the ability to place housing agencies on "zero threshold" has
always been available, and has been used for housing agencies that have
had problems obligating and expending their Capital Fund grants
appropriately. However, HUD has stated that housing agencies that are
troubled will be subject to additional monitoring and oversight as
deemed necessary to ensure proper uses of Recovery Act funds.[Footnote
65] Specifically, HUD Field Offices notified troubled housing agencies
that prior to obligation of Recovery Act funding, all award documents
(i.e., solicitations, contracts, or board resolutions, where
applicable) must be submitted to their respective Field Office for
review. Further, housing agencies that HUD considers to be high-risk
troubled are to be assigned to a HUD designated team that will provide
additional monitoring, oversight and technical assistance. HUD further
stated that the effect of any increased requirements on obligating
Recovery Act funds should be short-lived since Recovery Act funds must
be obligated within one year, and much of the funds should be obligated
in the next few months.
The officials with whom we spoke generally did not anticipate that they
would face internal challenges with meeting the accelerated obligation
and expenditure requirements under the Recovery Act. Several cited the
large backlogs of projects that were ready to begin in welcoming the
additional funds. In Ohio, Columbus Metropolitan Housing Authority
officials stated that they began preparing projects in December 2008 in
anticipation of the Recovery Act's passage. Two of the larger agencies,
Tampa Housing Authority and the District of Columbia Housing Authority,
stated that they had in place "job order contracting," which
establishes long-term contracts with several contractors for a variety
of routine construction projects, and they had found that this strategy
aided in their ability to award contracts quickly and begin projects.
Similarly, housing agency officials we interviewed generally did not
expect to encounter any challenges meeting the Davis-Bacon local
prevailing wage requirements because they were used to complying with
Davis-Bacon.
Most Agencies Expect Few Monitoring Problems, and HUD Systems Can
Monitor Controls And Safeguards Over Recovery Act Funds:
For public housing agencies, the responsibility for establishing and
maintaining internal controls rests with each housing agency and is
typically not part of the state's overall system of internal controls
that is discussed in other parts of the report. GAO visited 47 housing
agencies in the 16 states plus the District of Columbia to discuss what
internal controls were in place to track the appropriate use of
Recovery Act funds. The housing agencies stated that they did not
anticipate internal control problems as a result of receiving Recovery
Act funds because they would use their existing accounting systems to
track the use of these funds. They noted that they have experience with
tracking funding--including Capital Fund grants awarded prior to the
Recovery Act--and would simply add specific funding codes to their
system to track the use of the Recovery Act funds.
Many housing agencies are subject to the Single Audit requirements that
have been discussed in this report. Single Audits provide federal
agencies with information on the use of federal funds, internal control
deficiencies, and compliance with federal program requirements. In
addition, the HUD Inspector General (HUD OIG) conducts audits of
individual housing agencies. Although we did not systematically review
audit reports for those housing agencies we visited and they did not
anticipate problems with monitoring Recovery Act funds, it is important
to note that both single audits and HUD OIG's audits have identified
instances of internal control deficiencies and noncompliance with HUD
programs--including the Capital Fund grants provided prior to the
Recovery Act. In our June 2009 report, we reported that housing agency
audits do report findings of inappropriate use and mismanagement of
public housing funds, including problems with accounting,
documentation, and internal controls.[Footnote 66] That report
recommended that HUD better leverage the information in housing agency
audits to identify emerging issues, and evaluate its overall monitoring
and oversight processes. In addition to implementing its strategy for
monitoring troubled housing agencies, HUD stated to us that they are in
the process of developing a strategy to monitor non-troubled housing
agencies' use of Recovery Act funds.
Public Housing Agencies Are Taking Steps to Measure the Impact of
Recovery Act Funds:
Preserving existing jobs, stimulating job creation, and promoting
economic recovery are among the Recovery Act's key objectives. Public
housing agencies are taking steps to measure the extent to which
Recovery Act funds are achieving these objectives, though agencies are
waiting for guidance from HUD. As recipients of Recovery Act funds,
public housing agencies are expected to track and report on jobs
created and jobs retained through projects funded by the agency. Most
public housing agencies told us they plan to collect payroll data from
contractors, existing project management systems, or Davis-Bacon wage
reports to calculate the number of jobs created and retained. Some of
the public housing agencies told us they would include job-measurement
requirements in bid specifications, so that prospective contractors
would be aware that they would have to measure jobs if they won the
bid. Other agencies said they plan to employ agency employees or public
housing residents--whose jobs could be easily counted--on projects
funded by the Recovery Act. While some public housing agencies viewed
calculating jobs created or retained as straightforward, others
expressed concerns about the number of work hours defining jobs created
or retained. One agency reported that they had hired a third-party firm
to provide tracking and reporting services related to the Recovery Act.
The firm will provide analyses of construction-related items and
contractor payroll records to satisfy the requirement to report on jobs
created and retained with Recovery Act funding. Three public housing
agencies reported they have not yet made plans to track the effects of
Recovery Act funds.
Public housing agencies are also taking steps to report on another
Recovery Act objective--promoting energy conservation measures. Public
housing agencies are selecting projects that they expect will reduce
energy costs, support energy efficiency, and decrease usage of
electricity and water. For example, one public housing agency plans to
replace older appliances with newer, more energy-efficient models.
Another agency plans to replace all light bulbs with energy-efficient
bulbs. To measure the impact of these projects, several public housing
agencies plan to compare utility bills over time to assess the amount
of dollar savings realized. One public housing agency official told us
that she plans to read the electric meters in the public housing
development to determine the change in energy usage.
Public housing agencies also plan to track a number of other
performance measures. Many public housing agencies told us they
regularly track the budget control, timeliness, and quality of work of
projects they fund and that they plan to continue tracking these
measures with Recovery Act-funded projects. In addition, some public
housing agencies monitor the number of contracts they have with
minority-and women-owned businesses, and they expect to be able to use
Recovery Act-funded projects to continue to meet their goals of
contracting with such entities. Lastly, public housing agencies
anticipate that they may see improvement in other measures--such as
tenant satisfaction, occupancy rates, crime rates, and employment among
residents--as a result of the projects funded through Recovery Act
funds. For example, one public housing agency official hoped that a new
community center in one development will lead to less apartment
turnover, less maintenance expense, lower crime, more efficient use of
utilities, and more cooperation with residents.
Public housing agencies reported that they have not received guidance
from HUD on how to measure jobs created and retained. Most public
housing agency officials told us they would like guidance on how to
accomplish this objective. In the absence of centralized guidance,
public housing agencies are following individual strategies to track
and report on jobs. OMB's June 2009 guidance provided this centralized
guidance.[Footnote 67]
Quarterly reporting to HUD is another requirement of the Recovery Act.
A number of public housing agencies thought that meeting the quarterly
reporting requirement could be accomplished because they are already
reporting to HUD on a quarterly basis for other programs, such as HOPE
VI. Some agencies, however, told us they had neither heard of the
quarterly reporting requirement nor received guidance about what was to
be included. However, since OMB issued new guidance in June 2009, HUD
officials said they are finalizing work on designing and developing a
Recovery Act Management and Performance System for reporting jobs
created and other effects of the Recovery Act. OMB is also working on a
system it plans to have available by October 10, 2009. OMB's June 2009
guidance clarified the reporting requirements for recipients and sub-
recipients.
The Edward Byrne Memorial Justice Assistance Grant (JAG) Program:
The Edward Byrne Memorial Justice Assistance Grant (JAG) Program within
the Department of Justice's Bureau of Justice Assistance (BJA) provides
federal grants to state and local governments for law enforcement and
other criminal justice activities, such as corrections and domestic
violence programs.[Footnote 68] The JAG program was established in law
in 2006 to, among other things, provide state and local agencies with
the flexibility to prioritize and place justice funds where they are
most needed to prevent and control crime based on local needs and
conditions.[Footnote 69] JAG funds can be used to support a range of
activities in seven broad program areas, including law enforcement;
prosecution and courts; crime prevention and education; corrections;
drug treatment and enforcement; program planning, evaluation, and
technology improvement; and crime victim and witness programs. Within
these areas, JAG funds can be used for state and local initiatives,
training, personnel, equipment, supplies, contractual support,
research, and information systems for criminal justice.
The procedure for allocating JAG funds is based on a statutory formula
of population and violent crime statistics, in combination with a
minimum allocation to ensure that each state and territory receives
some funding.[Footnote 70] Using this formula, 60 percent of a state's
JAG allocation is awarded by BJA directly to the state, which must in
turn allocate a formula-based share of those funds--a variable pass-
through requirement--to local governments within the state.[Footnote
71] For Recovery Act JAG funds, the percentage share that states are
required to pass through to local governments varies across the 16
states and the District of Columbia (District) in our review, ranging
from 36.52 percent (Massachusetts) to 100 percent (District). Further,
states may use up to 10 percent of their state award to cover costs
associated with administering JAG funds. The remaining 40 percent of
funds is awarded directly by BJA to eligible units of local government
within the state.[Footnote 72] Although allocations for JAG funding are
determined by formula, state and local governments must apply to BJA to
receive JAG funding.
Table 11 shows BJA's Recovery Act JAG state allocations and variable
pass-through percentages for the 16 states and the District, as well as
BJA's Recovery Act JAG allocations to localities within the 16 states
and the District and total Recovery Act JAG allocations.
Table 11: Recovery Act Edward Byrne Memorial Justice Assistance Grant
Program's State Allocations and Pass-Through Percentages, Local
Allocations and Total Allocations for 16 States and the District:
State: Arizona;
Recovery Act JAG state allocation: $25,306,956;
Recovery Act JAG state variable pass through percentage: 61.86%;
Recovery Act JAG local allocation: $16,659,310;
Recovery Act total allocation: $41,966,266.
State: California;
Recovery Act JAG state allocation: $135,641,945;
Recovery Act JAG state variable pass through percentage: 67.34;
Recovery Act JAG local allocation: $89,712,677;
Recovery Act total allocation: $225,354,622.
State: Colorado;
Recovery Act JAG state allocation: $18,323,383;
Recovery Act JAG state variable pass through percentage: 59.56;
Recovery Act JAG local allocation: $11,534,788;
Recovery Act total allocation: $29,858,171.
State: District of Columbia;
Recovery Act JAG state allocation: $11,741,539;
Recovery Act JAG state variable pass through percentage: 100;
Recovery Act JAG local allocation: N/A[A];
Recovery Act total allocation: $11,741,539.
State: Florida;
Recovery Act JAG state allocation: $81,537,096;
Recovery Act JAG state variable pass through percentage: 64.85;
Recovery Act JAG local allocation: $53,582,326;
Recovery Act total allocation: $135,119,422.
State: Georgia;
Recovery Act JAG state allocation: $36,210,659;
Recovery Act JAG state variable pass through percentage: 59.56;
Recovery Act JAG local allocation: $22,835,094;
Recovery Act total allocation: $59,045,753.
State: Illinois;
Recovery Act JAG state allocation: $50,198,081;
Recovery Act JAG state variable pass through percentage: 65.51;
Recovery Act JAG local allocation: $33,465,389;
Recovery Act total allocation: $83,663,470.
State: Iowa;
Recovery Act JAG state allocation: $11,777,401;
Recovery Act JAG state variable pass through percentage: 48.19;
Recovery Act JAG local allocation: $6,925,317;
Recovery Act total allocation: $18,702,718.
State: Massachusetts;
Recovery Act JAG state allocation: $25,044,649;
Recovery Act JAG state variable pass through percentage: 36.52;
Recovery Act JAG local allocation: $15,749,229;
Recovery Act total allocation: $40,793,878.
State: Michigan;
Recovery Act JAG state allocation: $41,198,830;
Recovery Act JAG state variable pass through percentage: 57.83;
Recovery Act JAG local allocation: $25,807,514;
Recovery Act total allocation: $67,006,344.
State: Mississippi;
Recovery Act JAG state allocation: $11,199,389;
Recovery Act JAG state variable pass through percentage: 56.93;
Recovery Act JAG local allocation: $7,194,656;
Recovery Act total allocation: $18,394,045.
State: New Jersey;
Recovery Act JAG state allocation: $29,754,315;
Recovery Act JAG state variable pass through percentage: 59.23;
Recovery Act JAG local allocation: $17,994,820;
Recovery Act total allocation: $47,749,135.
State: New York;
Recovery Act JAG state allocation: $67,280,689;
Recovery Act JAG state variable pass through percentage: 65.16;
Recovery Act JAG local allocation: $43,311,580;
Recovery Act total allocation: $110,592,269.
State: North Carolina;
Recovery Act JAG state allocation: $34,491,558;
Recovery Act JAG state variable pass through percentage: 42.41;
Recovery Act JAG local allocation: $21,853,798;
Recovery Act total allocation: $56,345,356.
State: Ohio;
Recovery Act JAG state allocation: $38,048,939;
Recovery Act JAG state variable pass through percentage: 64.06;
Recovery Act JAG local allocation: $23,596,436;
Recovery Act total allocation: $61,645,375.
State: Pennsylvania;
Recovery Act JAG state allocation: $45,453,997;
Recovery Act JAG state variable pass through percentage: 56.04;
Recovery Act JAG local allocation: $26,918,846;
Recovery Act total allocation: $72,372,843.
State: Texas;
Recovery Act JAG state allocation: $90,295,773;
Recovery Act JAG state variable pass through percentage: 60.42;
Recovery Act JAG local allocation: $57,234,982;
Recovery Act total allocation: $147,530,755.
Source: Bureau of Justice Assistance data.
[A] For the District of Columbia, all JAG funds are awarded directly to
the District.
[End of table]
Federal funding for JAG has fluctuated significantly in recent years.
From fiscal years 2007 through 2008, federal JAG appropriations were
reduced by about 68 percent, from about $525 million to about $170
million. The Recovery Act provides $2 billion in JAG funds nationwide
for state and local governments (see table 12).
Table 12: Allocation of Edward Byrne Memorial Justice Assistance Grants
for 16 States and the District for Fiscal Years 2007 and 2008, as well
as a Result of the Recovery Act:
State: Arizona;
Fiscal year 2007: $9,138,401;
Fiscal year 2008: $3,079,906;
Recovery Act: $41,966,266.
State: California;
Fiscal year 2007: $52,556,190;
Fiscal year 2008: $17,115,576;
Recovery Act: $225,354,622.
State: Colorado;
Fiscal year 2007: $6,588,179;
Fiscal year 2008: $2,224,265;
Recovery Act: $29,858,171.
State: District of Columbia;
Fiscal year 2007: $2,647,465;
Fiscal year 2008: $872,084;
Recovery Act: $11,741,539.
State: Florida;
Fiscal year 2007: $30,272,528;
Fiscal year 2008: $10,054,495;
Recovery Act: $135,119,422.
State: Georgia;
Fiscal year 2007: $12,699,080;
Fiscal year 2008: $4,297,073;
Recovery Act: $59,045,753.
State: Illinois;
Fiscal year 2007: $19,302,761;
Fiscal year 2008: $6,326,515;
Recovery Act: $83,663,470.
State: Iowa;
Fiscal year 2007: $4,226,284;
Fiscal year 2008: $1,396,960;
Recovery Act: $18,702,718.
State: Massachusetts;
Fiscal year 2007: $9,476,365;
Fiscal year 2008: $3,093,460;
Recovery Act: $40,793,878.
State: Michigan;
Fiscal year 2007: $15,098,595;
Fiscal year 2008: $5,024,283;
Recovery Act: $67,006,344.
State: Mississippi;
Fiscal year 2007: $4,262,895;
Fiscal year 2008: $1,386,088;
Recovery Act: $18,394,045.
State: New Jersey;
Fiscal year 2007: $11,207,725;
Fiscal year 2008: $3,661,286;
Recovery Act: $47,749,135.
State: New York;
Fiscal year 2007: $25,894,653;
Fiscal year 2008: $8,415,640;
Recovery Act: $110,592,269.
State: North Carolina;
Fiscal year 2007: $12,293,577;
Fiscal year 2008: $4,126,580;
Recovery Act: $56,345,356.
State: Ohio;
Fiscal year 2007: $14,130,523;
Fiscal year 2008: $4,666,868;
Recovery Act: $61,645,375.
State: Pennsylvania;
Fiscal year 2007: $16,420,810;
Fiscal year 2008: $5,467,997;
Recovery Act: $72,372,843.
State: Texas;
Fiscal year 2007: $33,159,568;
Fiscal year 2008: $10,992,438;
Recovery Act: $147,530,755.
State: Total;
Fiscal year 2007: $279,375,599;
Fiscal year 2008: $92,201,514;
Recovery Act: $1,227,881,961.
Source: Bureau of Justice Assistance data.
[End of table]
Office of Justice Programs Has Plans to Oversee, Monitor, and Measure
Results Achieved by Recovery Act JAG Funds:
Using many of its existing grant award and oversight processes and
procedures, BJA and the Office of Justice Programs (OJP)--which
oversees BJA and establishes minimum standards for grant monitoring--
have reported plans and taken steps to oversee, measure, and monitor
Recovery Act JAG funds. For example, as part of BJA's review of
applications for JAG funding, BJA reviewed states' grant funding
history with OJP to identify any outstanding audit deficiencies, such
as delinquent financial and programmatic reports regarding OJP funding.
If any such deficiencies were identified, they were highlighted in the
states' award letter from BJA for Recovery Act JAG funding as special
conditions requiring resolution by the state. According to BJA, 4 of
the 16 states and the District in our review had at least one special
condition requiring resolution that prohibited them from obligating or
expending funds until the specific issues were resolved. As of June 30,
2009, 3 of these states and the District had resolved the issues and
had received written approval from BJA releasing the funds. OJP is
working with the remaining state to resolve the issues to release the
special conditions.
With respect to monitoring grants once they are awarded, OJP's plans
include, among others, taking steps to track Recovery Act funds and
assessing the performance of projects funded by these grants. For
example, OJP's financial system allows it to track grantees' use of
funds by program and project code, where project codes align with a
grantee's program areas. As of June 30, 2009, project codes have been
developed for the JAG program for Recovery Act funds. In addition, OJP
plans to conduct programmatic, administrative, and financial monitoring
of its Recovery Act grantees.[Footnote 73] This monitoring, among other
activities, includes ongoing reviews of grantee compliance with program
guidelines, as well as on-site monitoring of grantee performance. OJP
has reported plans to conduct on-site monitoring of no less than 30
percent of open, active Recovery Act grant funding. Further, the Office
of Audit, Assessment, and Management, within OJP, plans to collaborate
with BJA to update monitoring procedures.[Footnote 74] For example, the
office plans to develop guidance that focuses on monitoring Recovery
Act grants by July 31, 2009. In addition, this office plans to complete
quarterly reports on grantee data, such as reporting compliance with
requirements to submit performance measure data and how grantees are
obligating funds, to identify grantees not complying with reporting
requirements or program guidelines to enable timely follow-up with
grantees to correct such deficiencies. In addition to other available
courses, OJP plans to develop Web-accessible training for grantees,
which are to cover topics such as Recovery Act reporting requirements,
writing grant applications, and an orientation for new grantees. OJP
also reported that it facilitated training sessions in the spring of
2009 for its employees on topics such as grant fraud detection and how
to create grant award packages, and it has plans to facilitate training
on monitoring Recovery Act grantees during fiscal year 2009.
In addition to two performance measures on the number of jobs created
and preserved that are to be collected under the Recovery Act, BJA
requires JAG grantees to report on additional performance measures for
the specific activities that apply to the programs being funded through
the Recovery Act. As of June 30, 2009, OJP has updated JAG program
performance measures for grants awarded with Recovery Act funds. For
example, if JAG Recovery funds are used to support a drug treatment
program, the grantee would be required to report on the number of
participants who completed the program, among other measures. BJA
requires that these reports be submitted by grant recipients within 30
days after the end of each quarter. OJP has also developed an online
performance measurement tool for JAG grantees to use to report these
data, which it anticipates JAG fund recipients can begin to use to
report on updated measures in July 2009.
BJA Has Approved State-Level Recovery Act JAG Awards for the District
of Columbia and All States in Our Review, and Eight States Have
Obligated Funds:
As of June 30, 2009, all 16 states and the District in our review have
received their state award letter from BJA. Further, as of that date, 8
states reported having obligated a share of these funds:[Footnote 75]
* Arizona (about $23.1 million obligated, or about 91 percent of its
state award),
* Colorado (about $13,700 obligated, or about .08 percent of its state
award),
* Florida (about $8,300 obligated, or about .01 percent of its state
award),
* Illinois (about $12.4 million obligated, or about 25 percent of its
state award),
* Massachusetts (about $12.7 million obligated, or about 51 percent of
its state award),
* Michigan (about $41.2 million obligated, or 100 percent of its state
award),
* Mississippi (about $57,000 obligated, or about 0.5 percent of its
state award), and:
* Texas (about $4.6 million obligated, or about 5 percent of its state
award).
The remaining 8 states and the District reported that no state Recovery
Act JAG funds had yet been obligated.[Footnote 76]
According to officials from the states' administering agencies (SAA),
who are responsible for, among other things, administering and setting
priorities for the use of JAG funds for the state, they are in various
stages of finalizing how these funds will be used--primarily the
portion that is to be passed through to local entities, or
subrecipients.[Footnote 77] Specifically:
* Four states are early in the request for proposal (RFP) process for
local entities to apply for state pass-through funds. For example,
Mississippi and New Jersey are developing their RFPs, while
Pennsylvania and Illinois are beginning to collect proposals. New
Jersey officials stated they are in the process of developing RFPs for
local jurisdictions while Mississippi officials similarly stated they
plan to have a final RFP done in time to make awards by August 1, 2009.
Pennsylvania issued its RFP on June 18, 2009, and plans to collect
proposals from local entities until July 24, 2009, while Illinois
officials stated they plan to begin soliciting applications from local
law enforcement agencies in the first part of July 2009 and plan to
notify applicants of funding recommendations in early August 2009.
* Eight states--Colorado, Florida, Georgia, Iowa, Massachusetts, New
York, Ohio, and Texas--and the District of Columbia have received
applications or letters of intent submitted by local entities for pass-
through funding and are in the process of reviewing and in some cases
also approving them. For example, according to Colorado officials, the
state received 193 applications and is reviewing them for allowable
costs, budgets, and a description of how the funds are to help create
or retain jobs, among other items. Staff are also ranking the
applications in preparation for their presentation and scoring by the
state's JAG board in early July 2009. In Massachusetts, an official
noted the state is in different stages of reviewing and finalizing
agreements with state agencies that are to receive a share of JAG funds
and, for some funds, are awaiting final processing through the state
comptroller. In Ohio, officials stated they are performing compliance
reviews on the more than 500 applications received for JAG funding and
plan to notify subrecipients of their awards by July 31, 2009.
* Three states have selected potential projects for funding and are
awaiting final governing body approval. For example, according to state
officials in California, the Legislature must approve the planning
document for how JAG funds are to be used in the state in order for
funds to be allocated to local agencies, and this approval has not yet
occurred as of June 30, 2009. In North Carolina, the SAA has selected
85 eligible projects for JAG funding and is awaiting approval by the
governor to proceed with allocating those funds. Similarly, in
Michigan, an official stated that recommendations for grant awards have
been sent to the Governor's office for final approval and that
contracts are to have a July 1, 2009, start date.
* One state has finalized and approved a list of projects to receive
the state's JAG award. Specifically, Arizona has selected and approved
36 projects that are to receive state Recovery Act JAG funds, and
subrecipients are to have those funds available on July 1, 2009.
However, all 16 states and the District of Columbia have reported uses
for their state Recovery Act JAG awards that are consistent with their
states' priorities and allowable uses of those funds, as determined by
BJA. Table 13 shows planned uses of these funds for the 16 states and
the District.
Table 13: Planned Use of Recovery Act JAG Funds for 16 States and the
District:
State: Arizona;
Examples of planned use of JAG funding: To supplement current state law
enforcement and criminal justice efforts in areas such as drug
forensics, drug and gang prosecution, rural law enforcement, and
information sharing.
State: California;
Examples of planned use of JAG funding: To support local drug reduction
efforts and concentrate on the widespread apprehension, prosecution,
adjudication, detention, and rehabilitation of offenders by enabling
law enforcement agencies to create and retain between 275 and 300
positions over the next 4 years.
State: Colorado;
Examples of planned use of JAG funding: To support initiatives such as
the purchase of basic law enforcement equipment and supplies,
information sharing, the establishment of specialized courts addressing
substance abuse and mental health, and drug treatment and enforcement.
State: District of Columbia;
Examples of planned use of JAG funding: To support programs focused on
prisoners, criminal and juvenile justice research, and court diversion
services for at-risk youth.
State: Florida;
Examples of planned use of JAG funding: To expand existing drug court
programs, provide detention and treatment services for youth, purchase
radio equipment upgrades for the Department of Corrections, and to
develop a database that enables seaport security authorities to
determine if individuals meet Florida statutory requirements to enter
secure or restricted areas of the seaport.
State: Georgia;
Examples of planned use of JAG funding: To support positions at state
agencies with criminal justice missions and fund assistance for victims
of crime, among other things.
State: Illinois;
Examples of planned use of JAG funding: To support areas including
programs that pursue violent and predatory criminals, efforts that
focus on prosecuting violent and predatory criminals and drug
offenders, juvenile and adult re-entry programs, programs that enhance
jail or correctional facility security and safety, and programs that
combat and disrupt criminal drug networks and provide substance abuse
treatment.
State: Iowa;
Examples of planned use of JAG funding: To support a broad range of
activities to prevent and control crime and improve the criminal
justice system, with an emphasis on violent crime, drug offenses and
serious offenders.
State: Massachusetts;
Examples of planned use of JAG funding: To supplement current state
public safety programs, retain jobs, and support core services.
Additional funds are to support local police departments adversely
affected by local budget conditions and a summer jobs program targeted
to at-risk youth.
State: Michigan;
Examples of planned use of JAG funding: To continue planned technology
enhancements, provide prescription drug abuse awareness programs, and
add courts focusing on crime areas, including domestic violence.
State: Mississippi;
Examples of planned use of JAG funding: To fund programs for juvenile
justice, as well as local drug treatment and enforcement through adult,
family, and juvenile drug courts, as well as crime laboratory
enhancements.
State: New Jersey;
Examples of planned use of JAG funding: To support the state in funding
new and existing programs for state and local law enforcement agencies
in enforcement (intelligence-led, data-driven policing), prevention
(decreasing youth involvement in crime), and re-entry of released
prisoners into communities (reducing recidivism).
State: New York;
Examples of planned use of JAG funding: To expand personnel and
services in connection with recent drug law reform legislation, as well
as to provide transitional jobs and permanent job placement services
for the formerly incarcerated.
State: North Carolina;
Examples of planned use of JAG funding: To support criminal justice
improvement and crime victims' services. Criminal justice improvement
funding priorities include overtime requests to ensure that departments
can maintain full coverage and requests for equipment, such as weapons,
uniforms, and communications devices; sexual assault and domestic
violence services; child abuse and neglect services; law enforcement,
prosecutors' office and court officials; underserved crime victims'
services; and supervised visitation centers.
State: Ohio;
Examples of planned use of JAG funding: To fund initiatives that
support the state's nine purpose areas: law enforcement, prevention and
education, corrections and community corrections, prosecution, court
and victims' services, research, evaluation, technology improvement,
and law enforcement programs.
State: Pennsylvania;
Examples of planned use of JAG funding: To fund initiatives such as
criminal records improvement, law enforcement, public awareness of
victim compensation and services, assistance with local criminal
justice strategic planning, gun violence reduction, mental health
initiatives, and training.
State: Texas;
Examples of planned use of JAG funding: To increase programs that
divert juveniles away from criminal activities and toward productive
lifestyles, reduce crime and enhance resources for prosecution of
offenders, and support solutions for restoring victims of crime,
reintegrating offenders into the community, and reducing the potential
for recidivism.
Sources: Bureau of Justice Assistance, states, and the District of
Columbia.
[End of table]
BJA Has Started to Make Recovery Act JAG Awards to Localities:
BJA is in the process of reviewing and processing applications from
local governments for Recovery Act JAG funding. The solicitation for
this funding was closed on June 17, 2009. As of June 30, 2009, BJA has
awarded about 44 percent of allocated funds to local governments within
the 16 states (see table 14).[Footnote 78] BJA officials stated they
intend to award all of these local JAG funds by September 30, 2009.
Table 14: Recovery Act Edward Byrne Memorial Justice Assistance Grants
Awarded by the Bureau of Justice Assistance to Localities in 16 States
and the District:
State: Arizona;
Recovery Act JAG local awards made[A]: $865,559;
Total Recovery Act JAG local allocation: $16,659,310;
Percentage awarded[A]: 5.2.
State: California;
Recovery Act JAG local awards made[A]: $29,324,123;
Total Recovery Act JAG local allocation: $89,712,677;
Percentage awarded[A]: 32.7.
State: Colorado;
Recovery Act JAG local awards made[A]: $8,474,100;
Total Recovery Act JAG local allocation: $11,534,788;
Percentage awarded[A]: 73.5.
State: District of Columbia[B];
Recovery Act JAG local awards made[A]: N/A;
Total Recovery Act JAG local allocation: N/A;
Percentage awarded[A]: N/A.
State: Florida;
Recovery Act JAG local awards made[A]: $8,813,275;
Total Recovery Act JAG local allocation: $53,582,326;
Percentage awarded[A]: 16.4.
State: Georgia;
Recovery Act JAG local awards made[A]: $15,445,135;
Total Recovery Act JAG local allocation: $22,835,094;
Percentage awarded[A]: 67.6.
State: Illinois;
Recovery Act JAG local awards made[A]: $29,986,076;
Total Recovery Act JAG local allocation: $33,465,389;
Percentage awarded[A]: 89.6.
State: Iowa;
Recovery Act JAG local awards made[A]: $3,347,457;
Total Recovery Act JAG local allocation: $6,925,317;
Percentage awarded[A]: 48.3.
State: Massachusetts;
Recovery Act JAG local awards made[A]: $6,877,332;
Total Recovery Act JAG local allocation: $15,749,229;
Percentage awarded[A]: 43.7.
State: Michigan;
Recovery Act JAG local awards made[A]: $18,246,124;
Total Recovery Act JAG local allocation: $25,807,514;
Percentage awarded[A]: 70.7.
State: Mississippi;
Recovery Act JAG local awards made[A]: $203,873;
Total Recovery Act JAG local allocation: $7,194,656;
Percentage awarded[A]: 2.8.
State: New Jersey;
Recovery Act JAG local awards made[A]: $979,950;
Total Recovery Act JAG local allocation: $17,994,820;
Percentage awarded[A]: 5.4.
State: New York;
Recovery Act JAG local awards made[A]: $39,621,699;
Total Recovery Act JAG local allocation: $43,311,580;
Percentage awarded[A]: 91.5.
State: North Carolina;
Recovery Act JAG local awards made[A]: $9,329,683;
Total Recovery Act JAG local allocation: $21,853,798;
Percentage awarded[A]: 42.7.
State: Ohio;
Recovery Act JAG local awards made[A]: $20,079,913;
Total Recovery Act JAG local allocation: $23,596,436;
Percentage awarded[A]: 85.1.
State: Pennsylvania;
Recovery Act JAG local awards made[A]: $412,080;
Total Recovery Act JAG local allocation: $26,918,846;
Percentage awarded[A]: 1.5.
State: Texas;
Recovery Act JAG local awards made[A]: $14,439,818;
Total Recovery Act JAG local allocation: $57,234,982;
Percentage awarded[A]: 25.2.
State: Total;
Recovery Act JAG local awards made[A]: $206,446,197;
Total Recovery Act JAG local allocation: $474,376,762;
Percentage awarded[A]: 43.5.
Source: GAO analysis of Bureau of Justice Assistance data.
[A] As of June 30, 2009.
[B] All JAG funds are awarded directly to the District of Columbia,
thus, no local funds are allocated.
[End of table]
State Administering Agencies Cited Challenges to Meeting Recovery Act
Reporting Requirements:
While Recovery Act JAG funds are calculated and administered using the
same rules and structure of the existing JAG program, the Recovery Act
introduces some new requirements for recipients. For example,
recipients are required to track performance measures on the number of
jobs created and preserved as a result of Recovery Act funds and must
report certain financial and programmatic information--such as the
amount of Recovery Act funds expended or obligated and an evaluation of
the project's completion status--to the Recovery Act central reporting
Web site 10 days after the end of each quarter.
Officials from several of the 17 state administering agencies we
visited noted concerns about subrecipients' ability to meet the act's
reporting requirements for determining the number of jobs created and
preserved, and the majority noted challenges to meeting the 10-day
deadline for submitting quarterly reports on Recovery Act data. For
example, state officials noted the need for additional guidance on how
to determine whether JAG funds are contributing to job creation or job
preservation. Specifically, officials in three states raised questions
about how, if at all, grantees were to measure jobs that may be
indirectly related to JAG fund expenditures. For example, if a grantee
purchased three new police cruisers, how might it determine how many
secondary jobs were retained or created at the car manufacturer. On
June 22, 2009, the Office of Management and Budget (OMB) issued
guidance on, among other things, how to report on job creation
performance measures, which included clarification that recipients
should not attempt to report on the employment impact on material
suppliers and central service providers (i.e., indirect jobs) that may
be related to Recovery Act supported activities.[Footnote 79]
Further, officials from the majority of states shared concerns over the
Recovery Act requirement that recipients submit reports within 10 days
of the end of each quarter. In previous years, JAG award recipients
were required to provide programmatic reports to BJA on an annual
basis--rather than on a quarterly basis, as required by the Recovery
Act. Specifically, state officials were concerned that subrecipients
would not be able to meet that deadline or that they may do so at the
risk of quality and accuracy of reporting. For example, officials in
North Carolina stated they were concerned about programs, specifically
first-time subrecipients from nonprofit and faith-based organizations,
not being prepared for compliance responsibilities, due to limitations
in the numbers and experience of staff that are to complete the
reports. Officials stated that many of the subrecipients' offices do
not have the resources to prepare detailed reporting documents.
Officials in Iowa expressed similar concerns about the 10-day reporting
requirement and noted that some potential recipients--small law
enforcement agencies with five or fewer officers or staff--may not
apply for Recovery Act funds if they believe the reporting requirements
are burdensome relative to the amount of JAG funds they might receive.
Alternatively, officials noted that some recipients may choose to apply
for funds and then spend them quickly because the reporting requirement
ends after the funds have been expended, reported on, and the grant
closed. Officials stated they are concerned about the accuracy of the
information the administering agencies are to receive if the data are
reported so quickly. For example, officials in Michigan noted that to
meet performance measurement reporting on time, subrecipients are to
submit reports within 5 days of the end of the quarter to allow time
for the state administering agency to prepare and submit these reports.
Officials in North Carolina noted that with an increased number of
localities receiving the awards compared with previous years,
compliance with tracking and consolidating reporting requirements is
expected to be more difficult. BJA officials stated they recognized
these concerns and agreed that states may face challenges should they
have hundreds of subrecipients for pass-through funds.
To help facilitate subrecipients in meeting the reporting requirements,
officials in many of the states and the District described plans to
prepare entities for reporting, such as conducting training,
implementing Web-based reporting, and clarifying the requirements with
potential subrecipients. For instance, officials in North Carolina
stated they plan to sponsor workshops to provide additional information
about the Recovery Act reporting requirements to potential
subrecipients. Officials in Illinois stated that while they had some
concerns about timely reporting, they plan to require subrecipients to
report on a monthly basis to the SAA, conduct training for
subrecipients, and transition to an electronic system to facilitate
tracking and reporting of funds.
The District of Columbia and States Reported Plans to Use Existing
Processes to Safeguard the Use of JAG Funds:
The District of Columbia and states in our review reported they plan to
use existing grants management processes to ensure that subrecipients
are using JAG funds in accordance with BJA and Recovery Act
requirements, as can be seen in the following examples:
* Arizona SAA officials reported that as an established process they
used a peer-reviewed, risk-based scoring matrix to select subrecipients
that considered, among other things, the applicant's most recent Single
Audit results, plans for evaluating the impact resulting from the use
of such funds, and funding history with the SAA including any past
compliance issues. Once grants are awarded, SAA officials stated that
they have a compliance team of six staff that are to perform ongoing
financial and programmatic compliance reviews to ensure that
subrecipients comply with grant guidance. For example, program
compliance staff are to review subrecipients' monthly and quarterly
financial reports and identify any areas of concern, such as if funds
are expended too slowly or too quickly, if there are questionable
expenses, or if monthly and quarterly reports do not agree. Financial
compliance staff are to also perform annual on-site visits that include
financial audits in addition to internal controls inspections of, among
other things, the accounting system and key financial documentation.
Officials estimated that the workload is likely to double as a result
of receiving additional funds through the Recovery Act and plan to use
some of the state's administrative JAG funds to hire additional staff
to help manage the heightened Recovery Act requirements and increased
number of subrecipients.
* District of Columbia SAA officials reported that they have
established programmatic and financial procedures for separately
tracking and reporting on all federal grant funding programs. The SAA
requires subrecipients to provide detailed, separate monthly or
quarterly financial reports on their federal funding that includes
supporting documentation on all expenses. These financial reports and
reimbursement requests are tracked separately by the SAA in a grants
management database as well as through the District's financial system;
additionally, the Office of the Chief Financial Officer is responsible
for completing separate financial reports on each federal grant and for
drawing down funds in line with grant expenditures.
* New Jersey SAA officials reported that they plan to monitor the use
of JAG funds in several ways. First, the SAA plans to track
expenditures through a separate code in its accounting system for
Recovery Act funds, as required by the state and federal government.
Second, the SAA plans to educate subrecipients on how to comply with
funding rules by holding postaward conferences with subrecipients prior
to the receipt of funds. Subsequently, subrecipients are to be required
to submit monthly financial and programmatic reports to the SAA.
Internally, the SAA plans to use existing program and fiscal analysts
to track spending and compliance with financial and programmatic
requirements. Officials said that they are exploring ways to increase
the number of staff monitoring subrecipients, but because New Jersey is
under a hiring freeze, any increase in staff to conduct this monitoring
would likely come as a result of reassignments from other agencies or
offices. Finally, SAA officials noted that an audit by the Office of
the State Auditor should provide another layer of review regarding the
use of JAG Recovery Act funds.
* Texas SAA officials report that they plan to monitor performance and
financial aspects of awarded funds to ensure that funds are used for
authorized purposes. Also, the SAA, in coordination with the Office of
the Governor's Financial Services Division, plans to able to account
for, track, and report on federal funds resulting from the Recovery Act
separately from other fund sources. According to the SAA officials,
this will allow each award to be directly tied to accounting codes to
give the Governor's office the ability to account for, track, and
report separately on these funds. Texas also contracts with the Public
Policy Research Institute at Texas A&M University to maintain a Web-
based data collection system that can retrieve and analyze program
performance data, and the state plans to continue to do so to support
Recovery Act reporting requirements.
DOE's Weatherization Assistance Program:
The Recovery Act appropriated $5 billion over a 3-year period for the
Weatherization Assistance Program, which the U.S. Department of Energy
(DOE) administers through each of the states, the District of Columbia
(District), and seven territories and Indian tribes. According to DOE,
during the past 32 years, the program has assisted more than 6.2
million low-income families to reduce their utility bills by making
long-term energy-efficiency improvements to homes. For example, by
installing insulation, sealing leaks around doors and windows, or
modernizing heating equipment, the weatherization program allows these
households to spend their money on more pressing family needs. The
Recovery Act appropriation represents a significant increase for a
program that has received about $225 million per year in recent years.
DOE Has Provided the States with Initial Funds, but Most States Report
Using Little if Any of the These Funds:
In response to the Recovery Act, DOE announced on March 12, 2009, that
the 50 states, the District, and seven U.S. territories and Indian
tribes are eligible to receive weatherization formula grants.[Footnote
80] Each of the 16 states and the District in our review submitted an
initial grant application. As shown in table 15, DOE then provided each
with an initial 10 percent of its formula funds with the stipulation
that the funds could be used only for such start-up activities as
preparing a state weatherization plan, hiring and training staff, and
purchasing needed equipment but could not be used for the production of
weatherized homes. Subsequently, on June 9, 2009, DOE lifted this
prohibition for local agencies that have previously provided services
and are included in a state's plan, in response to states' concern that
their local agencies were ready to begin weatherization activities but
lacked funding.
Table 15: DOE's Allocation of the Recovery Act's Weatherization Funds
for 16 States and the District:
State: Arizona;
Total allocation: $57,023,278[A];
Initial allocation: $5,702,328;
Date received: April 10, 2009.
State: California;
Total allocation: $185,811,061;
Initial allocation: $18,581,106;
Date received: April 10, 2009.
State: Colorado;
Total allocation: $79,531,213;
Initial allocation: $7,953,121;
Date received: April 1, 2009.
State: District of Columbia;
Total allocation: $8,089,022;
Initial allocation: $808,902;
Date received: March 30, 2009.
State: Florida;
Total allocation: $175,984,474;
Initial allocation: $17,598,447;
Date received: April 10, 2009.
State: Georgia;
Total allocation: $124,756,312;
Initial allocation: $12,475,631;
Date received: April 20, 2009.
State: Illinois;
Total allocation: $242,526,619;
Initial allocation: $24,252,662;
Date received: April 1, 2009.
State: Iowa;
Total allocation: $80,834,411;
Initial allocation: $8,083,441;
Date received: March 27, 2009.
State: Massachusetts;
Total allocation: $122,077,457;
Initial allocation: $12,207,746;
Date received: April 3, 2009.
State: Michigan;
Total allocation: $243,398,975;
Initial allocation: $24,339,898;
Date received: March 27, 2009.
State: Mississippi;
Total allocation: $49,421,193;
Initial allocation: $4,942,119;
Date received: April 3, 2009.
State: New Jersey;
Total allocation: $118,821,296;
Initial allocation: $11,882,130;
Date received: April 7, 2009.
State: New York;
Total allocation: $394,686,513;
Initial allocation: $39,468,651;
Date received: April 13, 2009.
State: North Carolina;
Total allocation: $131,954,536;
Initial allocation: $13,195,454;
Date received: April 1, 2009.
State: Ohio;
Total allocation: $266,781,409;
Initial allocation: $26,678,141;
Date received: March 27, 2009.
State: Pennsylvania;
Total allocation: $252,793,062;
Initial allocation: $25,279,306;
Date received: March 27, 2009.
State: Texas;
Total allocation: $326,975,732;
Initial allocation: $32,697,573;
Date received: April 10, 2009.
Source: DOE.
Notes: DOE allocated the Recovery Act's weatherization funds among the
eligible states, territories, and Indian tribes using (1) a fixed, base
allocation and (2) a formula allocation for the remaining funds that is
based on each state's low-income households, climate conditions, and
expenditures by low-income households on residential energy.
[A] DOE allocated an additional $6 million to the Navajo Indian tribal
areas in Arizona.
[End of table]
Most of the states reported that they have used little if any of the
initial 10 percent allocation of Recovery Act funds.[Footnote 81] In
fact, some state weatherization agencies have not received any of their
DOE allocation because the funds are being held at the state level. For
example, Georgia has not spent the 10 percent allocation because the
action plan required by the governor is still under review. In
Pennsylvania, the funds must be appropriated through the state budget
process, and the budget has not yet been approved. Other states decided
not to use the funds until July 1, 2009 for a variety of reasons.
Illinois waited until July 1 to begin spending the weatherization funds
because of DOE's initial guidance that funds could not be used for
weatherization production activities. Massachusetts did not spend any
of the initial allocation until the beginning of the state's fiscal
year on July 1. Furthermore, as of June 30, 2009, Florida reports
obligating $113,000 of its $17.6 million initial allocation for start-
up activities, such as hiring and training staff.
DOE Is Reviewing State Plans and Providing the Next 40 Percent of
Weatherization Funds:
All of the states in our review submitted state weatherization plans to
DOE by May 12, 2009. State officials told us that DOE's funding
announcement and e-mail messages had provided them with the guidance
needed to complete their weatherization plans, which outline the
states' plans for using the weatherization funds and for monitoring and
measuring performance, among other things. DOE's goal is to approve 80
percent of all state weatherization plans by the end of July 2009. DOE
is providing the next 40 percent of weatherization funds to a state
once the weatherization plan is approved. DOE plans to release the
final 50 percent of the funding to each state based on the department's
progress reviews examining each state's performance in spending its
first 50 percent of the funds and the state's compliance with the
Recovery Act's reporting and other requirements.
As shown in table 16, as of June 30, 2009, DOE had approved the state
weatherization plans for Arizona, California, Florida, Georgia,
Illinois, Mississippi, New York, North Carolina, Ohio, and the
District, enabling them to receive the next 40 percent of their funds.
[Footnote 82] Most states expect DOE approval of their plans by mid-
July. However, the timing of DOE's approval could be an issue for some
states. For example, Colorado officials in the Governor's Energy Office
expressed concern about the timing of DOE's approval because their plan
is designed to begin on July 1, the beginning of the state's fiscal
year. DOE's June 9 revised guidance provided the states with some
additional flexibility for using the initial 10 percent of funds. DOE's
continued communication with the states on the timing of the approval
of state plans will be important in minimizing possible disruptions of
states' efforts to implement their weatherization programs.
Table 16: DOE's Approval of State Plans and Second Allocation of the
Recovery Act's Weatherization Funds for 16 States and the District:
State: Arizona;
Date state plan was submitted (2009): April 28;
Date state plan was approved (2009): June 8;
Second allocation of funds: $22,809,311.
State: California;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): June 18;
Second allocation of funds: 74,324,424.
State: Colorado;
Date state plan was submitted (2009): May 8;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
State: District of Columbia;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): June 18;
Second allocation of funds: 3,235,609.
State: Florida;
Date state plan was submitted (2009): May 11;
Date state plan was approved (2009): June 18;
Second allocation of funds: 70,393,790.
State: Georgia;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): June 26;
Second allocation of funds: 49,,902,525.
State: Illinois;
Date state plan was submitted (2009): May 1;
Date state plan was approved (2009): June 26;
Second allocation of funds: 97,010,648.
State: Iowa;
Date state plan was submitted (2009): May 11;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
State: Massachusetts;
Date state plan was submitted (2009): May 11;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
State: Michigan;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
State: Mississippi;
Date state plan was submitted (2009): May 11;
Date state plan was approved (2009): June 8;
Second allocation of funds: 19,768,477.
State: New Jersey;
Date state plan was submitted (2009): May 11;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
State: New York;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): June 26;
Second allocation of funds: 157,874,605.
State: North Carolina;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): June 18;
Second allocation of funds: 52,781,814.
State: Ohio;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): June 18;
Second allocation of funds: 106,712,564.
State: Pennsylvania;
Date state plan was submitted (2009): May 12;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
State: Texas;
Date state plan was submitted (2009): May 6;
Date state plan was approved (2009): [A];
Second allocation of funds: [A].
Source: DOE.
[A] DOE has not yet approved the state's weatherization plan.
[End of table]
In addition, officials in nine of the states in our review expressed
concern that the Recovery Act requires that weatherization contractors
and subcontractors pay their laborers and mechanics at the locally
prevailing wage rates, as determined by the U.S. Secretary of Labor.
Because prior DOE weatherization funding did not have this requirement,
questions have been raised about how the requirement should be
implemented. For example, it creates the possibility that workers could
be paid at different wage rates for the same work, depending on the
source of funds. Pennsylvania officials noted that local community
action agencies may have difficulty tracking the number of hours worked
by employees who perform tasks at both prevailing and nonprevailing
wage rates. We will continue to monitor the implementation of this
requirement.
States' Proposed Plans for Using Weatherization Funds Vary:
As shown in table 17, each of the states in our review has provided its
plans for using its Recovery Act weatherization allocation by breaking
expenditures into program operations, administration, training and
technical assistance, and other activities. All of the states propose
to spend at least 50 percent of their allocation on program operations,
ranging from 53 percent in California to 90 percent in Massachusetts.
According to DOE, variances among the states in the percentage of funds
devoted to program operations reflect different levels of maturity in,
for example, providing the infrastructure needed to achieve the
administration's overall goal of weatherizing 1 million houses per
year.
Table 17: States' Proposed Funding Plans for Using the Recovery Act's
Weatherization Funds:
State: Arizona;
Total allocation: $57,023,278;
Program operations: $41,251,602;
Administration[A]: $5,702,328;
Training and technical assistance[B]: $10,003,042;
Other[C]: $66,306.
State: California;
Total allocation: $185,811,061;
Program operations: $98,215,497;
Administration[A]: $18,581,106;
Training and technical assistance[B]: $32,515,292;
Other[C]: $36,499,166.
State: Colorado;
Total allocation: $79,531,213;
Program operations: $58,103,432;
Administration[A]: $6,445,791;
Training and technical assistance[B]: $4,916,481;
Other[C]: $10,065,509.
State: District of Columbia;
Total allocation: $8,089,022;
Program operations: $5,098,516;
Administration[A]: $808,902;
Training and technical assistance[B]: $1,454,968;
Other[C]: $726,636.
State: Florida;
Total allocation: $175,984,474;
Program operations: $124,008,695;
Administration[A]: $17,598,448;
Training and technical assistance[B]: $29,917,361;
Other[C]: $4,379,970.
State: Georgia;
Total allocation: $124,756,312;
Program operations: $88,509,632;
Administration[A]: $10,291,150;
Training and technical assistance[B]: $21,844,809;
Other[C]: $4,110,721.
State: Illinois;
Total allocation: $242,526,619;
Program operations: $174,946,540;
Administration[A]: $24,252,660;
Training and technical assistance[B]: $42,427,419;
Other[C]: $900,000.
State: Iowa;
Total allocation: $80,834,411;
Program operations: $46,865,882;
Administration[A]: $8,083,441;
Training and technical assistance[B]: $11,168,618;
Other[C]: $14,716,470.
State: Massachusetts;
Total allocation: $122,077,457;
Program operations: $110,019,000;
Administration[A]: $9,073,981;
Training and technical assistance[B]: $2,517,906;
Other[C]: $466,570.
State: Michigan;
Total allocation: $243,398,975;
Program operations: $195,159,247;
Administration[A]: $17,305,253;
Training and technical assistance[B]: $11,129,275;
Other[C]: $19,805,200.
State: Mississippi;
Total allocation: $49,421,193;
Program operations: $33,579,102;
Administration[A]: $4,471,060;
Training and technical assistance[B]: $8,678,559;
Other[C]: $2,692,472.
State: New Jersey;
Total allocation: $118,821,296;
Program operations: $89,354,321;
Administration[A]: $10,806,268;
Training and technical assistance[B]: $9,308,242;
Other[C]: $9,352,465.
State: New York;
Total allocation: $394,686,513;
Program operations: $247,560,920;
Administration[A]: $39,468,652;
Training and technical assistance[B]: $69,020,266;
Other[C]: $38,636,675.
State: North Carolina;
Total allocation: $131,954,536;
Program operations: $108,851,700;
Administration[A]: 0;
Training and technical assistance[B]: $23,102,836;
Other[C]: 0.
State: Ohio;
Total allocation: $266,781,409;
Program operations: $209,167,751;
Administration[A]: $21,280,186;
Training and technical assistance[B]: $7,737,330;
Other[C]: $28,596,142.
State: Pennsylvania;
Total allocation: $252,793,062;
Program operations: $192,936,342;
Administration[A]: $21,729,647;
Training and technical assistance[B]: $20,000,000;
Other[C]: $18,127,073.
State: Texas;
Total allocation: $326,975,732;
Program operations: $218,701,202;
Administration[A]: $30,833,844;
Training and technical assistance[B]: $21,253,423;
Other[C]: $56,187,263.
Source: State weatherization plans.
Notes: This table is based on the DOE funding announcement's activity
categories. Some states categorized these amounts in their state
weatherization plans differently than the way they are presented in
this table because of variances in how their categories were defined.
[A] Administrative expenses cannot exceed 10 percent of a state's
allocation.
[B] Training and technical assistance expenses cannot exceed 20 percent
of a state's allocation.
[C] Includes vehicles, equipment, health and safety, liability
insurance, and financial audits, among other things.
[End of table]
State Weatherization Plans Focus on Units Weatherized as a Measure of
Impact:
DOE's funding announcement directs the states to report on the number
of housing units weatherized, the resulting energy savings, and the
number of jobs created. Table 18 shows the number of housing units that
states expect to weatherize using Recovery Act funds, according to
states' weatherization plans. While many of the weatherization plans
estimate expected energy savings, they do not use a consistent unit of
measurement or time frame. Few of the states' weatherization plans
present an estimate of the expected jobs created. DOE officials told us
that OMB will issue additional guidance to the states regarding a
consistent methodology for making this calculation.
Table 18: Number of Housing Units Expected to Be Weatherized Using
Recovery Act Funds:
State: Arizona;
Housing units expected to be weatherized: 6,409.
State: California;
Housing units expected to be weatherized: 50,330.
State: Colorado;
Housing units expected to be weatherized: 16,280.
State: District of Columbia;
Housing units expected to be weatherized: 784.
State: Florida;
Housing units expected to be weatherized: 19,000.
State: Georgia;
Housing units expected to be weatherized: 13,617.
State: Iowa;
Housing units expected to be weatherized: 7,196.
State: Illinois;
Housing units expected to be weatherized: 27,181.
State: Massachusetts;
Housing units expected to be weatherized: 16,926.
State: Michigan;
Housing units expected to be weatherized: 32,000.
State: Mississippi;
Housing units expected to be weatherized: 5,467.
State: New Jersey;
Housing units expected to be weatherized: 13,381.
State: New York;
Housing units expected to be weatherized: 45,000.
State: North Carolina;
Housing units expected to be weatherized: 23,500.
State: Ohio;
Housing units expected to be weatherized: 32,179.
State: Pennsylvania;
Housing units expected to be weatherized: 29,700.
State: Texas;
Housing units expected to be weatherized: 33,740.
Sources: State weatherization plans and, for Michigan and North
Carolina, interviews with state officials.
[End of table]
Recovery Act Funding Helped States Address Budget Challenges:
The Office of Management and Budget estimates that, in addition to the
existing federal grants to states and territories, federal obligations
of Recovery Act funds for states and territories will be about $149
billion in federal fiscal year 2009. Federal grants represented the
second-largest share of funding for state and local governments in 2008
(about 20 percent or $388 billion). As shown in figure 12, state and
local tax receipts constituted the largest share of funding for state
and local governments in 2008 (about 68 percent or $1.3 trillion).
Figure 12: State and Local Government Current Receipts, Fiscal Year
2008 (Dollars in billions):
[Refer to PDF for image: pie-chart]
Taxes: 68% ($1,318.6):
* Sales: 33% ($436.3);
* Property: 31% ($404.6);
* Personal income: 25% ($333.4);
* Other taxes: 7% ($96.7);
* Corporate income: 4% ($47.6);
Federal grant-in-aid: 20% ($388.3);
Other receipts: 12% ($228.3).
Source: GAO analysis of Bureau of Economic Analysis data.
Note: Other receipts include contributions for government social
insurance, income receipts on assets such as interest receipts or
rents, transfer receipts from businesses and persons, and surpluses
from government enterprises.
[End of figure]
State revenue continued to decline and states used Recovery Act funding
to reduce some of their planned budget cuts and tax increases to close
current and anticipated budget shortfalls for fiscal years 2009 and
2010.[Footnote 83] Of the 16 states and the District, 15 estimate
fiscal year 2009 general fund revenue collections will be less than in
the previous fiscal year.[Footnote 84] For example, in Georgia, the
state's net revenue collections for May 2009 were 14.4 percent less
than they were in May 2008, representing a decrease of approximately
$212 million in total tax and other collections. On May 28, 2009, the
lower-than-expected revenue projections led the Governor to instruct
the Office of Planning and Budget to reduce available funds by 25
percent for the month of June (the last month of fiscal year 2009). In
Michigan, fiscal year 2008-2009 revenue collections are estimated to be
$1.9 billion--or 20.6 percent--less than fiscal year 2007-2008
collections, putting current revenue estimates below 1971 levels, when
adjusted for inflation. The 2 remaining states --Iowa and North
Carolina--had revenues that were lower than projected. As shown in
figure 13, data from the Bureau of Economic Analysis (BEA) also
indicate that the rate of state and local revenue growth has generally
declined since the second quarter of 2005, and the rate of growth has
been negative in the fourth quarter of 2008 and the first quarter of
2009.[Footnote 85]
Figure 13: Year-Over-Year Change in State and Local Government Current
Tax Receipts:
[Refer to PDF for image: line graph]
Year: 2001, Q1;
Percentage change: 4.4.
Year: 2001, Q2;
Percentage change: 4.4.
Year: 2001, Q3;
Percentage change: 0.5.
Year: 2001, Q4;
Percentage change: 0.8.
Year: 2002, Q1;
Percentage change: -1.
Year: 2002, Q2;
Percentage change: -2.3.
Year: 2002, Q3;
Percentage change: 4.5.
Year: 2002, Q4;
Percentage change: 4.7.
Year: 2003, Q1;
Percentage change: 4.3.
Year: 2003, Q2;
Percentage change: 4.4.
Year: 2003, Q3;
Percentage change: 5.8.
Year: 2003, Q4;
Percentage change: 7.2.
Year: 2004, Q1;
Percentage change: 8.6.
Year: 2004, Q2;
Percentage change: 9.2.
Year: 2004, Q3;
Percentage change: 7.4.
Year: 2004, Q4;
Percentage change: 8.3.
Year: 2005, Q1;
Percentage change: 9.8.
Year: 2005, Q2;
Percentage change: 10.5.
Year: 2005, Q3;
Percentage change: 9.4.
Year: 2005, Q4;
Percentage change: 8.6.
Year: 2006, Q1;
Percentage change: 7.9.
Year: 2006, Q2;
Percentage change: 8.
Year: 2006, Q3;
Percentage change: 6.6.
Year: 2006, Q4;
Percentage change: 5.1.
Year: 2007, Q1;
Percentage change: 5.3.
Year: 2007, Q2;
Percentage change: 5.2.
Year: 2007, Q3;
Percentage change: 4.9.
Year: 2007, Q4;
Percentage change: 4.6.
Year: 2008, Q1;
Percentage change: 2.4.
Year: 2008, Q2;
Percentage change: 2.4.
Year: 2008, Q3;
Percentage change: 1.9.
Year: 2008, Q4;
Percentage change: -2.3.
Year: 2000, Q1;
Percentage change: -4.3.
Source: GAO analysis of BEA data.
[End of figure]
Officials in most of the selected states and the District expect these
revenue trends to contribute to budget gaps (estimated revenues less
than estimated disbursements) anticipated for future fiscal years. All
of the 16 states and the District forecasted budget gaps in state
fiscal year 2009-2010 before budget actions were taken. New York's
enacted budget for fiscal year 2009-2010 closed what state officials
described as the largest budget gap ever faced by the state. The
combined New York current services budget gaps totaled $2.2 billion in
fiscal year 2008-2009 and $17.9 billion in 2009-2010 before the state
instituted corrective budget actions and received Recovery Act funding.
In California, the governor projects a $24.3 billion budget gap in
fiscal years 2008-2009 and 2009-2010, created in large part by lower
revenue estimates.[Footnote 86] Florida, which recently passed a $66.5
billion budget for the state's 2009-2010 fiscal year, faced what
officials estimated as a $4.8 billion gap in general funds before
corrective budget actions were taken.
States Combined Use of Recovery Act Funds with Budget Actions to
Maintain Balance and Close Budget Gaps:
Consistent with one of the purposes of the act, states' use of Recovery
Act funds to stabilize their budgets helped them minimize and avoid
reductions in services as well as tax increases. States took a number
of actions to balance their budgets in fiscal year 2009-2010, including
staff layoffs, furloughs, and program cuts. The use of Recovery Act
funds affected the size and scope of some states' budgeting decisions,
and many of the selected states reported they would have had to make
further cuts to services and programs without the receipt of Recovery
Act funds. For example, California, Colorado, Georgia, Illinois,
Massachusetts, Michigan, New York, and Pennsylvania budget officials
all stated that current or future budget cuts would have been deeper
without the receipt of Recovery Act funds.
Recovery Act funds helped cushion the impact of states' planned budget
actions but officials also cautioned that current revenue estimates
indicate that additional state actions will be needed to balance future-
year budgets. Future actions to stabilize state budgets will require
continued awareness of the maintenance-of-effort (MOE) requirements for
some federal programs funded by the Recovery Act. For example,
Massachusetts officials expressed concerns regarding MOE requirements
attached to federal programs, including those funded through the
Recovery Act, as future across-the-board spending reductions could pose
challenges for maintaining spending levels in these programs. State
officials said that MOE requirements that require maintaining spending
levels based upon prior-year fixed dollar amounts will pose more of a
challenge than upholding spending levels based upon a percentage of
program spending relative to total state budget expenditures.
States' current uses of Recovery Act funds helped fund and maintain
staffing for existing programs. In Arizona, state budget officials said
that Recovery Act funding enabled the state to, among other things,
reduce the number of furloughs and layoffs, avoid some service
reductions, maintain the level of state employee benefit levels, and
prevent some contract delays and reductions that otherwise would have
occurred. Similarly, officials in Mississippi plan to use Recovery Act
funds to help Mississippi stabilize its budget and support local
governments, particularly school districts. For example, officials at
the two local education agencies and three institutions of higher
education we visited told us that they plan to use Recovery Act funds
to avoid layoffs and hire new staff. Officials in the District told us
that because they knew the Recovery Act funds were coming while they
were developing the fiscal year 2010 budget, they did not have to
create a budget scenario in which additional actions, such as
furloughs, were necessary to fill the anticipated revenue gap.
Similarly, Colorado officials also knew early on that Recovery Act
funds were coming--particularly the increased federal share of
Medicaid--thereby making state funds that would have been used to pay
the state share of Medicaid available for avoiding certain budget
actions including additional furloughs. In New Jersey, although budget
officials anticipated receiving Recovery Act funds before the state
finalized its 2010 budget, this did not preclude the state from
including personnel actions such as furloughs and wage freezes to aid
in closing the projected budget gap. In Iowa, for the fiscal year 2009
budget, Recovery Act funding allowed state agencies to avoid program
cuts as well as mandatory layoffs and furloughs.
In addition to these budget actions, some states also reported
accelerating their use of Recovery Act funds to stabilize deteriorating
budgets. For example, in Georgia, lower-than-expected revenue numbers
caused the state to use more Recovery Act funds in state fiscal year
2009 than it had anticipated using. In Massachusetts, state officials
said that accelerating their use of Recovery Act and state rainy-day
funds was the most viable solution to balance their budget.
Massachusetts officials reported that the state had hoped to leave a
sizable amount of its State Fiscal Stabilization Fund (SFSF) allocation
available for 2011 but changed its planned approach because of its
deteriorating fiscal condition. Using more of these funds in the 2008-
2009 state fiscal year may make it more difficult for the state to
balance its budget after Recovery Act funds are no longer available.
California's dire fiscal condition prompted the state to accelerate the
use of its Recovery Act funds, along with the use of a number of
additional measures to reduce the state's 2008-2009 budget gap.
Many states, such as Colorado, Florida, Georgia, Iowa, New Jersey, and
North Carolina, also reported tapping into their reserve or rainy-day
funds in order to balance their budgets. In most cases, the receipt of
Recovery Act funds did not prevent the selected states from tapping
into their reserve funds, but a few states reported that without the
receipt of Recovery Act funds, withdrawals from reserve funds would
have been greater.[Footnote 87] Officials from Georgia stated that
although they have already used reserve funds to balance their fiscal
year 2009 and 2010 budgets, they may use additional reserve funds if,
at the end of fiscal year 2009, revenues are lower than the most recent
projections. In contrast, New York officials stated they were able to
avoid tapping into the state's reserve funds due to the funds made
available as a result of the increased Medicaid FMAP funds provided by
the Recovery Act.
Approaches to Developing Exit Strategies for End of Recovery Act
Funding Influenced by Nature of State Budget Processes:
States' approaches to developing exit strategies for the use of
Recovery Act funds reflect the balanced-budget requirements in place
for all of our selected states and the District. Budget officials
referred to the temporary nature of the funds and fiscal challenges
expected to extend beyond the timing of funds provided by the Recovery
Act. Officials discussed a desire to avoid what they referred to as the
"cliff effect" associated with the dates when Recovery Act funding ends
for various federal programs.
Budget officials in some of the selected states are preparing for the
end of Recovery Act funding by using funds for nonrecurring
expenditures and hiring limited-term positions to avoid creating long-
term liabilities. Representatives of the Texas Governor's office also
told us that their office has advised state agencies that much of the
funding is temporary. The Texas Legislature provided similar guidance
in the conference committee report for the appropriations bill
directing state agencies to "give priority to expenditures that do not
recur beyond the 2010-2011 biennium."[Footnote 88] In Ohio, budget
officials remain focused on budgeting for the coming biennia (2010-
2011), but key legislators have queried state officials during budget
deliberations about their plans for the next biennia (2012-2013), when
federal Recovery Act funding is no longer available.
A few states reported that although they are developing preliminary
plans for the phasing out of Recovery Act funds, further planning has
been delayed until revenue and expenditure projections are finalized.
For example, while Georgia's Governor has encouraged state agencies to
spend funds judiciously and take into consideration that the funding is
temporary, the state is still in the process of developing a strategy
for winding down its use of Recovery Act funds. In part, such a
strategy is dependent on revenue and expenditure projections, which
will be updated as part of the fiscal year 2011 budget planning
process. In addition, risk mitigation plans currently being developed
by state agencies may impact the state's exit strategy.
Some states are in the process of developing exit strategies aligned
with planning for broader fiscal challenges. In North Carolina, the
state's recovery office hired a temporary staff person to look at some
of the factors that may have caused the state's economic slowdown, as
well as to help plan for an exit strategy after Recovery Act funds end.
Officials in Illinois also said that they plan to convene a working
group to assess state agencies' level of preparedness for the end of
Recovery Act funding. They have issued guidance to state agencies
regarding the use of the funds and have directed agencies to submit
hiring plans containing provisions that mitigate the risk of layoffs,
such as hiring temporary employees and contractors.
States Have Implemented Various Internal Control Programs: However,
Single Audit Guidance and Reporting Does Not Adequately Address
Recovery Act Risk:
Given that Recovery Act funds are to be distributed quickly, effective
internal controls over use of funds are critical to help ensure
effective and efficient use of resources, compliance with laws and
regulations, and in achieving accountability over Recovery Act
programs. Internal controls include management and program policies,
procedures, and guidance that help ensure effective and efficient use
of resources; compliance with laws and regulations; prevention and
detection of fraud, waste, and abuse; and the reliability of financial
reporting. Management is responsible for the design and implementation
of internal controls and the states in our review have a range of
approaches for implementing their internal controls.
Some states have internal control requirements in their state statutes,
while others have undertaken internal control programs as management
initiatives. In our sample, seven states--California, Colorado,
Florida, Michigan, Mississippi, New York, and North Carolina-
-noted they have statutory requirements for internal control programs
and activities. The other nine states--Arizona, Georgia, Illinois,
Iowa, Massachusetts, New Jersey, Ohio, Pennsylvania, and Texas--noted
they have undertaken various internal control programs. In addition,
the District of Columbia has taken limited actions related to its
internal control program. An effective internal control program helps
in managing change to cope with shifting environments and evolving
demands and priorities, as the Recovery Act entails. Internal controls
need to be continually assessed and evaluated by management as programs
change and entities strive to improve operational processes.
Risk assessment and monitoring are key elements of internal controls,
and the states and the District in our review have undertaken a variety
of actions in the area of risk assessment. Risk assessment involves
performing comprehensive reviews and analyses of program operations to
determine if internal and external risks exist and to evaluate the
nature and extent of risks identified. Approaches to risk analysis can
vary across organizations because of differences in missions and the
methodologies used to qualitatively and quantitatively assign risk
levels. Monitoring activities include the systemic process of reviewing
the effectiveness of the operation of the internal control system.
These activities are conducted by management, oversight entities, and
internal and external auditors. Monitoring enables stakeholders to
determine whether the internal control system continues to operate
effectively over time. It also improves the organization's overall
effectiveness and efficiency by providing timely evidence of changes
that have occurred, or might need to occur, in the way the internal
control system addresses evolving or changing risks. Monitoring also
provides information and feedback to the risk assessment process.
In California, the Office of State Audits and Evaluations (OSAE) has
primary responsibility for reviewing whether state agencies receiving
Recovery Act funds have established adequate systems of internal
control to maintain accountability over those funds. According to state
officials, OSAE is using two primary approaches to assessing internal
controls at agencies receiving Recovery Act funds--Financial Integrity
and State Manager's Accountability Act of 1983 (FISMA) reviews (an
existing internal control assessment tool) and readiness reviews (a new
internal control assessment tool).[Footnote 89] Both the FISMA reviews
and the readiness reviews rely primarily on information that is self-
certified by agency officials. FISMA requires each state agency to
maintain effective systems of internal accounting and administrative
control, to evaluate the effectiveness of these controls on an ongoing
basis, and to biennially review and prepare a report on the adequacy of
the agency's systems of internal accounting and administrative control.
The state of Colorado enacted the State Department Financial
Responsibility and Accountability Act in 1988, which requires each
principal department of the state's executive department to institute
and maintain systems of internal accounting and administrative control--
including an effective process of internal review and for making
adjustments for changing conditions.[Footnote 90] The act also requires
the head of each principal department to annually state in writing
whether the department's systems of internal accounting and control
either do or do not fully comply with the act's requirements.[Footnote
91] While the Controller's office ensures that these statements are
filed every year, historically, the Controller has not had the
resources to ensure that proper internal controls are in place. The
Controller's office is developing an internal control toolkit that will
provide state departments with information on internal control systems
and checklists to formalize and improve their existing processes and
identify potential weaknesses. In addition, the Controller's office is
in the process of filling its internal auditor position, which has been
vacant for over 2 years. According to the Controller, the auditor will
work with state departments to promote and monitor internal controls,
as well as monitor proper tracking and reporting of Recovery Act funds.
Florida law also places the responsibility for internal controls on
state agencies. A Florida statute requires the agencies to establish
and maintain management systems and controls that promote and encourage
compliance; economic, efficient, and effective operations; reliability
of records and reports; and safeguarding of assets.[Footnote 92]
However, while Florida law requires state agencies to have such
internal controls, the state oversight agencies are preparing for the
infusion of Recovery Act funds into the state. Annually, the Florida
Department of Financial Services' obtains representation letters from
agency heads stating that they are responsible for establishing and
maintaining effective controls over financial reporting and preventing
and detecting fraud for all funds administered by their agency.
Department of Financial Services' officials stated that, this year,
they will ask the agency heads to also to sign a separate
representation letter for Recovery Act funds that says internal
controls are in place for Recovery Act funds and that these funds will
be tracked separately from other funds.
New York State also enacted into law internal control requirements. The
law requires, among other things, that each agency establish and
maintain a system of internal controls and a review program, designate
an internal control officer, and periodically evaluate the need for an
internal audit function in each agency.[Footnote 93] In addition, to
fulfill the requirements of the New York State Government
Accountability, Audit and Internal Control Act (New York Internal
Control Act), the Office of the State Comptroller is responsible for
developing the Standards for Internal Control in New York State
Government.[Footnote 94] The Internal Control Act requires that the
State Division of the Budget (DOB) periodically (1) issue a list of
agencies covered by the act, and (2) issue a list of agencies required
to have an internal audit function. Beyond these two statutory
requirements, DOB has also taken administrative steps to facilitate and
support the goals of the Internal Control Act through the issuance of
additional guidance and the annual internal control certification
requirement. Based on DOB's Governmental Internal Control and Internal
Audit Requirements manual,[Footnote 95] the system of internal control
should be developed using the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) conceptual framework and should
incorporate COSO's five basic components of internal control.[Footnote
96]
North Carolina has enacted the State Governmental Accountability and
Internal Control Act, requiring the Office of the State Controller to
establish statewide internal control standards.[Footnote 97] The Office
of the State Controller is implementing a statewide internal control
program called EAGLE (Enhancing Accountability in Government through
Leadership and Education). The purpose was not only to establish
adequate internal control, but also to increase fiscal accountability
within state government. North Carolina is using a phased approached to
implement the EAGLE program. In Phase I, state agencies and state
universities are required to perform an annual assessment of internal
control over financial reporting. This risk assessment is seen as a
benefit to the agencies as it identifies risks and compensating
controls that reduce the possibility of material misstatements of
financial reports and misappropriation of assets, as well as
opportunities to increase efficiency and control effectiveness in
business processes and operations. In January 2008, the State
Controller requested each agency to appoint an Internal Control Officer
to lead the agency's risk assessment team and monitor the agency's
compliance with EAGLE requirements. Phase II of the program will be
"efficiency of operations" and Phase III will be "compliance with laws
and regulations."
In accordance with Mississippi's statutory requirement to maintain
continuous internal audit over the activities of each state agency,
Mississippi has implemented a program of internal control.[Footnote 98]
First, Mississippi has required each state agency to certify in writing
that it has conducted an evaluation of internal controls and that the
findings of the evaluation provide reasonable assurance that the assets
of the agency have been preserved, duties have been segregated by
function, and transactions are executed in accordance with laws of the
state of Mississippi. As part of maintaining appropriate controls, the
Department of Finance and Administration directed all state agency
executive and finance directors to:
* conduct a comprehensive review of their agency's internal control
structure to determine if it is functioning properly and in accordance
with the agency's internal control plan;
* determine whether the internal control structure has been updated to
address operational or procedural changes made during the period under
review to processes, program areas, or functions;
* identify internal control weaknesses;
* initiate actions to ensure that control weaknesses discovered during
the period under review, and in prior periods, have been adequately
addressed; and:
* give immediate attention to all internal control related findings and
recommendations reported by auditors during the year.
Second, in addition to the certification required of all state
agencies, the Department of Finance and Administration is requiring
another certification of agencies receiving Recovery Act funds.
Agencies must certify that they accept responsibility for spending the
funds as responsibly and effectively as possible while maintaining the
appropriate controls and reporting mechanisms to ensure accountability
and transparency in compliance with the Recovery Act. The
certifications also include an agency's guarantee that program risks
are, or will be, identified and that the agency has, or will, implement
internal controls sufficient to mitigate the risk of waste, fraud, and
abuse. Finally, the Department of Finance and Administration
established an internal control unit that is reviewing agency letters
of certification and expects to weigh all agencies internal control
assessments, as well as the findings and corrective action plans noted
by the State Auditor in the 2007 and 2008 Mississippi Single Audit
Report, to decide which agencies receiving Recovery Act funds should
initially be the focus of the unit's monitoring activities.
Although not based on a statutory requirement, Georgia is taking steps
to monitor and safeguard Recovery Act funds at the state and program
level. Georgia has established a Recovery Act Accountability and
Transparency Support Team comprising representatives from the Office of
Planning and Budget, State Accounting Office, and Department of
Administrative Services (the department responsible for procurement).
In May 2009, the Georgia Office of Planning and Budget issued a risk
management handbook to all state agencies. Its purpose is to provide a
process that allows agencies to identify potential Recovery Act risk
areas and develop risk mitigation strategies for each individual
funding source. The State Accounting Office developed the agency self-
assessment questionnaire that accompanied the risk management handbook.
This survey included questions about compiling Recovery Act data for
reporting purposes, the specific contracting requirements in the
Recovery Act that are not current agency practices, and agency internal
controls. The State Accounting Office plans to use the results to
target its audit efforts.
Ohio has made strides in refining its internal control process to
accommodate the Recovery Act funds. The state Office of Budget and
Management issued guidance on risk assessment in March 2009
highlighting the significance of risk mitigation strategies that all
state agencies should have in place to ensure management controls are
operating effectively to identify and prevent wasteful spending and
minimize waste, fraud, and abuse. The new Office of Internal Audit is
working with state agencies to develop and evaluate these risk
assessments. Based on these agency risk assessments, the Office of
Internal Audit is developing an oversight strategy that it will present
to the Audit Committee on June 30, 2009.
Although the District of Columbia (District) government and agencies
have internal controls, the controls are not consolidated into a
citywide internal control program, and past reports have identified
numerous weaknesses in the District's internal controls. The District's
Office of Inspector General (OIG) has issued reports that identified
weaknesses in the District's internal controls and made several
recommendations to improve internal controls. One report recommends
that the Chief Financial Officer (CFO), in conjunction with the City
Administrator, issue citywide guidance requiring managers to establish,
assess, correct, and report on internal controls and that these
requirements should be reflected in personnel performance
plans.[Footnote 99] In addition, the fiscal year 2007 Single Audit
report for the District of Columbia identified 89 material weaknesses
in internal controls over both financial reporting and compliance with
requirements applicable to major federal programs. The Single Audit
report identified material weaknesses in compliance with requirements
applicable to major federal programs, including Medicaid's FMAP, ESEA
Title I Education grants, and Workforce Investment Act programs, all of
which are receiving Recovery Act funds. The findings were significant
enough to result in a qualified opinion for that section of the report.
In September 2008, the Office of the Chief Financial Officer (OCFO)
contracted with an independent accounting firm to identify areas with
internal control problems and deficiencies in the office. The review
may help direct OCFO in developing an internal control program. The
assessments will not be available until the end of 2009. When the firm
has completed its OCFO assessment, it will expand its review to
District agencies.
Challenges Exist in Tracking Recovery Act Funds:
States and localities receiving Recovery Act funds directly from
federal agencies are responsible for tracking and reporting on those
Recovery Act funds.[Footnote 100] An effective internal control program
is critical to preparing reliable financial statements and other
financial reports. OMB has issued guidance to the states and localities
that provides for separate identification "tagging" of Recovery Act
funds, so that specific reports can be created and transactions can be
specifically identified as Recovery Act funds.[Footnote 101] The flow
of federal funds to the states varies by programs. As we have
previously reported, the grant programs generally have different
objectives and strategies that are reflected in their application,
selection, monitoring, and reporting processes. Multiple federal
entities are involved in grants administration; the grantor agencies
have varied grants management processes; the grantee groups are
diverse; and grants themselves vary substantially in their types,
purposes, and administrative requirements.[Footnote 102] The federal
grant system is highly fragmented.[Footnote 103]
Several states and the District of Columbia have created unique codes
for their financial systems in order to tag the Recovery Act funds.
District of Columbia's Office of Finance and Treasury (OFT) has
established a bank account exclusively for depositing Recovery Act
funds. Most states plan to use their current financial system to track
and report on Recovery Act funds, but various challenges exist. For
instance, since the state of Arizona is decentralized, the recording
and tracking responsibility lies with the state agencies that have
different accounting systems. The state agencies will need to
periodically transfer accounting data from the agencies' systems to the
state's system. Georgia is segregating funds through a set of Recovery
Act fund sources in the state's financial accounting system. Georgia's
State Accounting Office issued guidance on Recovery Act accounting that
states those state agencies such as the Georgia Department of Labor
that do not use the state's financial accounting system must ensure
that the data are maintained in accordance with all Recovery Act
financial reporting requirements.
California's Recovery Task Force (Task Force), which has overarching
responsibility for ensuring that California's Recovery Act funds are
spent efficiently and effectively, intends to use its existing internal
control and oversight structure, with some enhancements, to maintain
accountability for Recovery Act funds. State agencies, housing
agencies, and other local Recovery Act funding recipients we
interviewed all told us that using separate accounting codes within
their existing accounting systems will enable them to effectively track
Recovery Act funds. However, officials told us that accumulating this
information at the statewide level will be difficult using existing
mechanisms. The state, which is currently relying on lengthy manually
updated spreadsheets, is awaiting additional federal OMB guidance to
design and implement a new system to effectively track and report
statewide Recovery Act funds. Most state and local program officials
told us they will apply existing controls and oversight processes that
they currently apply to other program funds to oversee Recovery Act
funds.
Officials from the Texas State Comptroller's Office repeated their
concern in May 2009 that the federal government was not identifying
Recovery Act funds separately from other federal funds disbursed to the
state. Absent this identification, the Comptroller relies on state
agencies to distinguish between the two types of federal funds. Texas
officials cited federal fund transfers to the Texas Workforce
Commission and the Texas Health and Human Services Commission as
examples of this fund identification problem. Absent separate coding
from the U.S. Department of the Treasury, the Texas officials said the
state relies on the state agencies to inform the State Comptroller's
office on what portion of federal funds are Recovery Act funds. The
Texas officials commented that it would be helpful if the federal
government put in place the coding structure to identify Recovery Act
funds separately from other federal funds--as they believe the Recovery
Act requires--before Recovery Act funds are disbursed to Texas. State
agency officials told us they do not share the Comptroller's concern
because they are able to distinguish between their normal federal funds
and Recovery Act funds when initiating fund transfers.
The District of Columbia has also experienced a challenge. District of
Columbia's Office of Finance and Treasury (OFT) has established a bank
account exclusively for depositing Recovery Act funds. Agencies are
notified by OFT when Recovery Act funds are received in the bank
account. All Recovery Act revenue received will be tracked by OFT in a
separate database. When Recovery Act funds are ready to be distributed
from federal agencies to District agencies, Recovery Act grant funding
notifications are sent directly to the District agencies. When an
agency receives a grant funding notification, it is the agency's
responsibility to report the receipt to the Office of Budget and
Planning (OBP). OBP provides weekly reports of grant funding
notifications that are reconciled by the agencies. OBP stated there is
a disparity of grant information caused by the process and is working
on a solution.
Mississippi is undergoing changes to most of the state's central
accounting and reporting systems. The Department of Finance and
Administration (DFA) is making changes to the Statewide Automated
Accounting System (SAAS), which tracks purchasing, accounts payables,
revenues, and accounts receivable and includes Mississippi's general
ledger. The use of reporting categories does not allow DFA to currently
tie individual obligations or expenditures to the contract for which
they were incurred. However, DFA is in the process of making
modifications to the state central accounting system that will allow
the system to do so. Once completed, these changes will provide greater
transparency of Recovery Act fund usage. For example, the changes will
allow the public to view online Recovery Act contracts and expenditures
for specific contracts. In addition, the changes will add further
system controls, such as the ability to deny the obligation of funds
until state agencies have posted the contract that supports the
obligation.
Single Audit Guidance and Reporting Does Not Adequately Address
Recovery Act Risks:
In addition to being an important accountability mechanism, the results
of audits can provide valuable information for management's risk
assessment and monitoring processes. The Single Audit report, prepared
to meet the requirements of the Single Audit Act,[Footnote 104] as
amended (Single Audit Act), is a source of information on internal
control and compliance findings and the underlying causes and risks.
The report is prepared in accordance with OMB's implementing guidance
in OMB Circular No. A-133, Audits of States, Local Governments, and Non-
Profit Organizations,[Footnote 105] which provides guidance to auditors
on selecting federal programs for audit and the related internal
control and compliance audit procedures to be performed. A Single Audit
report includes the auditor's schedule of findings and questioned
costs, internal control and compliance deficiencies, and the auditee's
corrective action plans and a summary of prior audit findings that
includes planned and completed corrective actions. The Single Audit Act
requires that a nonfederal entity subject to the act transmit its
reporting package to a federal clearinghouse designated by OMB 9 months
after the end of the period audited.
In our April 2009 report, we reported that the guidance and criteria in
OMB Circular No. A-133 do not adequately address the substantial added
risks posed by the new Recovery Act funding. Such risks may result from
(1) new government programs, (2) the sudden increase in funds or
programs that are new to the recipient entity, and (3) the expectation
that some programs and projects will be delivered faster so as to
inject funds into the economy. With some adjustment, the Single Audit
could be an effective oversight tool for Recovery Act programs,
addressing risks associated with all three of these factors.
Our April report included recommendations that OMB adjust the current
audit process to:
* focus the risk assessment auditors use to select programs to test for
compliance with 2009 federal program requirements on Recovery Act
funding;
* provide for review of the design of internal controls during 2009
over programs to receive Recovery Act funding, before significant
expenditures in 2010; and:
* evaluate options for providing relief related to audit requirements
for low-risk programs to balance new audit responsibilities associated
with the Recovery Act.
Since April, OMB has taken several steps in response to our
recommendations. However, those actions do not sufficiently address the
risks leading to our recommendations. In OMB's view, it is limited in
its options to address our concerns due to specific requirements set
forth in the Single Audit Act. The Single Audit Act charges OMB with,
among other things, prescribing the risk-based criteria auditors use to
select federal programs to include for Single Audit compliance and
internal controls testing. To focus auditor risk assessments on
Recovery Act-funded programs and to provide guidance on internal
control reviews for Recovery Act programs, OMB is working within the
framework defined by existing mechanisms--Circular No. A-133 and the
Compliance Supplement. In this context, OMB has made limited
adjustments to its Single Audit guidance and is planning to issue
additional guidance. Following is the status of OMB's actions related
to our April recommendations.
Focusing Auditors' Program Risk Assessments on Programs with Recovery
Act Funding:
In our April report, we recommended that OMB focus the risk assessment
auditors use to select programs to test for compliance with 2009
federal program requirements on Recovery Act funding. On May 26, OMB
made available the 2009 edition of the Circular A-133 Compliance
Supplement. The new Compliance Supplement includes the following, which
is intended to focus auditor risk assessment on Recovery Act funding:
* A requirement that auditors specifically ask auditees about and be
alert to expenditure of funds provided by the Recovery Act.
* An appendix that highlights some areas of the Recovery Act impacting
single audits. The appendix adds a requirement that large programs and
program clusters with Recovery Act funding cannot be assessed as low
risk for the purposes of program selection without clear documentation
of the reasons that the expenditures of Recovery Act awards are low
risk for the program. The appendix also states that recipients are to
separately identify expenditures for Recovery Act programs on the
Schedule of Expenditures of Federal Awards. It also notes that
compliance requirements unique to Recovery Act-funded programs are not
included in the Compliance Supplement and advises auditors to review
award documents, check the OMB Web site for addenda to the supplement,
and use the existing Compliance Supplement framework as guidance to
identify material Recovery Act compliance requirements.
OMB has not yet identified program groupings critical to auditors'
selection of programs to be audited for compliance with program
requirements. As we reported in April 2009, the current approach
prescribed by OMB Circular No. A-133 relies heavily on the amount of
federal expenditures in a program during a fiscal year and whether
findings were reported in the previous period to determine whether
detailed compliance testing is required for that year. In some cases,
OMB requires that auditors group closely related programs that share
common compliance requirements and consider them as one program when
selecting programs for testing. OMB specifically identifies these
groups of programs, called "clusters," in the Compliance Supplement.
OMB has noted that many of the Recovery Act awards will share common
compliance requirements with existing programs and that the Compliance
Supplement cluster list will be updated to include Recovery Act
programs. OMB is currently considering ways to cluster programs for
Single Audit selection in ways that would make it more likely that
Recovery Act programs would be selected and, therefore, be subjected to
internal control and compliance testing, but the dollar formulas would
not change under this plan. This approach may not provide sufficient
assurance that smaller, but nonetheless significant, Recovery Act-
funded programs would be selected for audit. OMB plans to issue the new
cluster information by mid-July 2009.
In addition, the 2009 Compliance Supplement to OMB's Circular No. A-133
does not yet provide specific auditor guidance for new programs funded
by the Recovery Act or for new compliance requirements specific to
Recovery Act funding within existing programs, that may be selected as
major programs for audit. For instance, there is currently no program-
specific audit guidance included in the Compliance Supplement on the
new State Fiscal Stabilization Fund programs, significant programs
administered by the Department of Education to support education and
other government services, with federal funds already flowing to the
states. OMB acknowledges that additional guidance is called for and is
in the process of drafting such guidance. OMB plans to issue an
addendum to the Compliance Supplement that would address some Recovery
Act-related compliance requirements by mid-July 2009.
Early Review of the Design of Internal Controls over Recovery Act-
Funded Programs before Significant Expenditures in 2010:
In our April 2009 report, we recommended that OMB adjust the current
Single Audit process to provide for review of the design of internal
controls during 2009 over programs to receive Recovery Act funding,
before significant expenditures in 2010.
To provide additional focus on internal control reviews, OMB has
drafted guidance that indicates the importance of such reviews and
encourages auditors to communicate weaknesses to management early in
the audit process but does not add requirements for auditors to take
these steps. Because OMB is choosing to address this recommendation
through the existing audit framework, it has not changed the reporting
time frames and therefore does not address our concern that internal
controls over Recovery Act programs should be reviewed before
significant funding is expended. OMB plans to finalize and issue the
guidance by mid-July 2009. In addition, the guidance to be provided by
OMB will be limited to those programs selected by the auditor as "major
programs" under the current approach for selecting programs for audit,
which may not adequately consider Recovery Act program risks. Finally,
if this internal control work is done within the current Single Audit
framework and reporting timelines, the auditor evaluation of internal
control and related reporting will occur too late--after significant
levels of federal expenditures have already occurred.
Providing Relief Related to Low-Risk Programs to Balance Expected
Increased Workload:
In our April 2009 report, we recommended that the Director of OMB
evaluate options for providing relief related to audit requirements for
low-risk programs to balance new audit responsibilities associated with
the Recovery Act. While OMB has noted the increased responsibilities
falling on those responsible for performing Single Audits, to date it
has not issued any proposals and does not have plans to address this
recommendation.
A recent survey conducted by the staff of the National State Auditors
Association (NSAA) [Footnote 106] highlighted the need for relief to
overburdened state audit organizations. Survey participants were asked
whether they were experiencing cuts in staffing and to comment on the
effects of these cuts on their ability to perform effective audits.
Thirty-two state audit organizations that indicated in an earlier
survey that their responsibilities included Single Audit had responded
to the survey as of June 24. Of the 32 respondents, 17 indicated that
staff had been cut by 5 percent or more. Eight respondents are
anticipating that staff will be required to take unpaid leave in fiscal
year 2010.
OMB officials told us they are considering reducing auditor workload by
decreasing the number of risk assessments of smaller federal programs.
Auditors conduct these risk assessments as part of the planning process
to identify which federal programs will be subject to detailed internal
control and compliance testing. GAO believes that this step in itself
will not provide sufficient relief to balance the additional audit
requirements for Recovery Act programs.
OMB officials have expressed reluctance to revise OMB Circular No. A-
133 or to propose revisions to the Single Audit Act to provide auditor
relief or to provide additional flexibility to allow auditors to have
more control over the selection of programs tested for internal control
and compliance. They stated that to do so would take considerable time
and could not be accomplished in time to have adequate coverage of
Recovery Act funds. In addition, federal inspectors general have
expressed concern about reducing audit coverage of existing programs.
However, without action now, audit coverage of Recovery Act programs
will not be sufficient to address Recovery Act risks, and the audit
reporting that does occur will be after significant Recovery Act funds
have already been expended.
Congress is currently considering a bill, H.R. 2182, that could provide
some financial relief to auditors lacking the staff capacity necessary
to handle the increased audit responsibilities associated with the
Recovery Act.[Footnote 107] H.R. 2182 would amend the Recovery Act to
provide for enhanced state and local oversight of activities conducted
pursuant to the Recovery Act. As passed by the House, H.R. 2182 would
allow state and local governments to set aside 0.5 percent of Recovery
Act funds, in addition to funds already allocated to administrative
expenditures, to conduct planning and oversight to prevent and detect
waste, fraud, and abuse.
Single Audit Reporting Will Not Facilitate Timely Reporting of Recovery
Program Findings and Risks:
The Single Audit reporting deadline is too late to provide audit
results in time for the audited entity to take action on deficiencies
noted in Recovery Act programs. The Single Audit Act requires that
recipients submit their Single Audit reports to the federal government
no later than 9 months after the end of the period being
audited.[Footnote 108] As a result an audited entity may not receive
feedback needed to correct an identified internal control or compliance
weakness until the latter part of the subsequent fiscal year. For
example, states that have a fiscal year end of June 30 have a reporting
deadline of March 31, which leaves program management only 3 months to
take corrective action on any audit findings before the end of the
subsequent fiscal year. For Recovery Act programs, significant
expenditure of funds could occur during the period prior to the audit
report being issued.
The timing problem is exacerbated by the extensions to the 9-month
deadline that are routinely granted by the awarding agencies,
consistent with OMB guidance. For example, 13 of the 17 states in our
review have a June 30 fiscal year end. We found that 7 of these 13
states requested and received extensions for their March 31, 2009,
submission requirement of their fiscal year 2008 reporting
package.[Footnote 109] Three of the requests for extensions were from
auditors, and the remaining requests were from the audited entities.
Table 19 below lists the seven states, the extension date requested,
and the reason for the extension.
Table 19: Single Audit Extensions for June 30, 2008, Fiscal Year End:
State: Arizona;
Extension date requested: June 30, 2009;
Total number of months between year-end and audit reporting: 12;
Extension reason per Health and Human Services Inspector General: Delay
in completion of Comprehensive Annual Financial Report (CAFR).
State: California;
Extension date requested: June 30, 2009;
Total number of months between year-end and audit reporting: 12;
Extension reason per Health and Human Services Inspector General: The
state has not yet completed its GAAP-basis financial statements and
does not anticipate completing them in time for the auditor to finish
the audit work by the reporting deadline.
State: Illinois;
Extension date requested: June 30, 2009;
Total number of months between year-end and audit reporting: 12;
Extension reason per Health and Human Services Inspector General: (1)
The status of completing the audit process, (2) the first year of
several parties participating electronically in filing the reporting
package with the Federal Audit Clearinghouse, and (3) the state is not
anticipating the release of its fiscal year 2008 CAFR until March 31,
2009, which is the Single Audit report due date.
State: Mississippi;
Extension date requested: April 30, 2009;
Total number of months between year-end and audit reporting: 10;
Extension reason per Health and Human Services Inspector General: (1)
Dealing with the current economic recovery emphasis which is requiring
additional work on management of the various agencies included in the
Single Audit report and (2) allowing the needed time for agencies to
respond to audit findings as well as the Summary Schedule of Prior
Audit Findings.
State: New Jersey;
Extension date requested: August 31, 2009;
Total number of months between year-end and audit reporting: 14;
Extension reason per Health and Human Services Inspector General: The
extension is needed because of a delay experienced in processing the
necessary contract extension with the audit firm.
State: Ohio;
Extension date requested: December 31, 2009;
Total number of months between year-end and audit reporting: 18;
Extension reason per Health and Human Services Inspector General: The
programming required for creation of the CAFR financial statements and
the late issuance of agencies and component units separately issued
reports has delayed the state's fiscal year 2008 financial statements
preparation.
State: Pennsylvania;
Extension date requested: June 30, 2009;
Total number of months between year-end and audit reporting: 12;
Extension reason per Health and Human Services Inspector General: (1)
Delay in the issuance of the commonwealth's CAFR, (2) implementation of
several new auditing standards and (3) changes in audit documentation
and additional testing of systems changes in various federal programs.
Source: GAO analysis of Health and Human Services information.
[End of table]
The Health and Human Services Office of Inspector General (HHS OIG) is
the cognizant agency for most of the states, including all of the
states selected for our review under the Recovery Act. According to an
HHS OIG official, states contact HHS requesting and providing a reason
for an extension of their report submission; the HHS IG has had a
practice of routinely granting the requested extensions. The HHS OIG
noted that the IG has no means to enforce compliance with the reporting
time frames. The program office of the federal agency issuing the
federal awards, not the cognizant IG, has the authority at the federal
level to impose sanctions when the state or local government has not
complied with the audit requirement.[Footnote 110] According to an HHS
OIG official, beginning in May 2009, the HHS IG adopted a policy of no
longer approving requests for extensions of the due dates for Single
Audit reporting package submissions. OMB officials have stated they
plan to eliminate allowing extensions of the reporting package but have
not issued any official guidance or memorandums to the agencies, OIGs,
or federal award recipients.
In order to realize the Single Audit's full potential as an effective
Recovery Act oversight tool, OMB needs to take additional action to
focus auditors' efforts on areas that can provide the most efficient,
and most timely, results. OMB has taken some first steps, and has plans
to issue additional guidance. As federal funding of Recovery Act
programs accelerates in the next few months, we are particularly
concerned that the Single Audit process may not provide the timely
accountability and focus needed to assist recipients in making
necessary adjustments to internal controls, so that they achieve
sufficient strength and capacity to provide assurances that the money
is being spent as effectively as possible to meet program objectives.
Legislative changes may be necessary to make certain changes to the
Single Audit requirements to address the new risks brought on by
Recovery Act funding if OMB concludes that it is unable to take the
necessary steps under the current framework to adequately address
accountability for the Recovery Act programs and related risks and to
provide for more timely reporting, especially in the area of internal
controls. Given that the scope of Single Audit workloads will increase,
consideration should be given to determining what funds can be used to
support Single Audit efforts related to Recovery Act programs,
including whether legislative changes are needed to specifically direct
resources to cover incremental audit costs related to Recovery Act
programs.
Efforts to Assess Impact of Recovery Act Spending:
Under the Recovery Act, direct recipients of Recovery Act funds,
including states and localities, are expected to report quarterly on a
number of measures, including the use of funds and an estimate of the
number of jobs created and the number of jobs retained. The jobs
created and jobs retained are part of the "recipient reports" required
under section 1512(c) of the Recovery Act and will be submitted by
recipients starting in October 2009. In addition to this statutory
requirement to report on jobs, the Office of Management and Budget
(OMB) has directed federal agencies to collect other performance
information from entities that receive funding. To the extent possible,
OMB's guidance also requires agencies to instruct recipients to collect
and report performance information that is consistent with the agency's
program performance measures.[Footnote 111] This is intended to allow
an assessment of what OMB describes as the marginal performance impact
of Recovery Act requirements.
In general, states are adapting information systems, issuing guidance,
and beginning to collect data on jobs created and jobs retained, but
questions remain about how to count jobs and measure performance under
Recovery Act-funded programs. For example, many state education
officials told us it has been difficult to plan how they will report
the impact of Recovery Act funding until they receive further guidance
from OMB or the Department of Education. Education is planning to
supplement the guidance OMB provided to help state agencies report the
proper data. In particular, Education officials noted that draft OMB
guidance on recipient reporting would require some additional Education
guidance to clarify issues for recipients of formula grants, such as
the IDEA grants. OMB's latest guidance on recipient reporting addresses
some of these concerns.
OMB's June 22, 2009, Guidance Provides More Detail on the Recipient
Reporting Process, Clarifies Some Requirements, and Establishes a
Central Reporting Framework:
In response to requests for more guidance on the recipient reporting
process and required data, OMB, after soliciting responses from an
array of stakeholders, issued additional implementing guidance for
recipient reporting on June 22, 2009.[Footnote 112] As discussed in our
April 2009 report and echoed in this report, state and local officials
had questions and concerns about the recipient reporting requirements
contained in the Recovery Act. For example, officials had expressed
some confusion about how to count less than full-time jobs and indirect
jobs. Over the last several months OMB met regularly with state and
local officials, federal agencies, and others to gather input on the
reporting requirements and implementation guidance. OMB also worked
with the Recovery Accountability and Transparency Board to design a
nationwide data collection system that will reduce information
reporting burdens on recipients by simplifying reporting instructions
and providing a user-friendly mechanism for submitting required data;
OMB will be testing this system in July. This latest guidance attempts
to address these concerns through additional details and clarification
of previous guidance.
Guidance on Job Creation and Job Retention:
In its June 22 guidance, OMB endeavors to (1) dispel some of the
confusion related to reporting on jobs created and retained versus the
macroeconomic impact of the Recovery Act, (2) clarify which recipients
of Recovery Act funds are required to report under the act, and (3)
provide additional detail on how to calculate jobs created and
retained. The new guidance articulates once again that under the
Recovery Act, there are two distinct types of job reports. First, the
Council of Economic Advisers (CEA), in consultation with OMB and the
Department of the Treasury, is required to submit quarterly reports to
Congress that detail the impact of programs funded through the Recovery
Act on employment, economic growth, and other key economic indicators.
In order to fulfill this mandate, CEA has developed macroeconomic
methodologies to estimate employment effects for both the national and
state levels. These macro-level employment estimates will attempt to
capture the full employment impact of the Recovery Act. OMB and federal
agencies will coordinate with CEA on these quarterly reports and other
questions regarding macro-level jobs estimates.
The second type of job report is part of the "recipient reports"
required under section 1512 of the Recovery Act. Specifically, section
1512(c)(3)(D) requires recipients of Recovery Act funds to report an
estimate of the direct jobs created or retained by the Recovery Act
project or activity. These reporting requirements apply only to
nonfederal recipients of funding, including all entities receiving
Recovery Act funds directly from the federal government such as state
and local governments, private companies, educational institutions,
nonprofits, and other private organizations. However, the recipient
reporting requirement only covers a defined subset of the Recovery
Act's funding. OMB's guidance, consistent with the statutory language
in the Recovery Act, states that these reporting requirements apply to
recipients who receive funding through discretionary appropriations,
not recipients receiving funds through entitlement programs, such as
Medicaid, or tax programs. Recipient reporting also does not apply to
individuals.[Footnote 113] These reports are to provide information on
direct job creation and retention, and OMB expects they will be useful
in the overall estimation and evaluation of the employment effects of
the Recovery Act, such as the employment reporting undertaken by CEA.
The OMB guidance also clarifies that recipients of Recovery Act funds
are required to report only on jobs directly created or retained by
Recovery Act-funded projects, activities, and contracts. Recipients are
not expected to report on the employment impact on materials suppliers
("indirect" jobs) or on the local community ("induced" jobs). According
to OMB, recipients are to report only direct jobs because they may not
have sufficient insight or consistent methodologies for reporting
indirect or induced jobs. OMB notes this broader view of the overall
employment impact of the Recovery Act will be covered in the estimates
generated by CEA using a macro-economic approach. According to CEA, it
will consider the direct jobs created and retained reported by
recipients to supplement its analysis.[Footnote 114]
The new OMB guidance also provides additional instruction on how to
estimate the number of jobs created and retained by Recovery Act
funding. The guidance explains that the number of jobs created or
retained should be expressed as "full-time equivalents" (FTE), which is
calculated as total hours worked in jobs funded by the Recovery Act
divided by the number of hours in a full-time schedule, as defined by
the recipient. This calculation is designed to increase consistency in
reported data by converting part-time and temporary jobs into FTE-jobs.
By doing so, it seeks to avoid overstating the number of jobs that
could occur through other methods or reporting of part-time, partial-
time, or nonpermanent jobs.
The new guidance restates from earlier guidance the definitions of jobs
created and jobs retained. According to OMB guidance, a job created is
a new position created and filled or an existing unfilled position that
is filled as a result of the Recovery Act; a job retained is an
existing position that would have been eliminated were it not for
Recovery Act funding. A job cannot be counted as both created and
retained, and only compensated employment in the United States should
be counted.
OMB's guidance for reporting on job creation aims to shed light on the
immediate uses of Recovery Act funding; however, reports from
recipients of Recovery Act funds must be interpreted with care. For
example, accurate, consistent reports will only reflect a portion of
the likely impact of the Recovery Act on national employment, since
Recovery Act resources are also made available directly through tax
cuts and benefit payments.
Recipient Data Reporting Model:
Some of the questions and concerns raised by state and local officials
about the recipient reporting requirements centered on the reporting
logistics and information technology requirements. For example,
California and District of Columbia officials said they were awaiting
final guidance on the data standards before finalizing their reporting
approaches. Officials from several states said they modified, or are
assessing whether they can modify, existing reporting systems for
Recovery Act reporting. The new OMB guidance should answer many of
these questions as it describes in detail the reporting model to be
used for recipient reporting. The information reported by all prime
recipients (and subrecipients to which the prime recipient has
delegated reporting responsibility)[Footnote 115] will be submitted
through [hyperlink, http://www.federalreporting.gov], an online Web
portal designed to collect all Recovery Act recipient reports. All
recipient reports will be made available on [hyperlink,
http://www.recovery.gov] and, as appropriate, on individual federal
agency recovery Web sites.
The guidance also provides documentation of the data model for
recipient reporting that includes a reporting template, a data
dictionary, and an Extensible Markup Language (XML) schema for
electronic data submissions.[Footnote 116] The reporting template is a
simple spreadsheet table that enables manual data entry and collection
of recipient reporting information in a familiar spreadsheet format.
The data dictionary describes the data elements specifically required
for recipient reporting under the Recovery Act.
Our initial assessment of the technical specifications and framework of
the recipient reporting model suggests that this is a reasonable
approach. The pilot testing scheduled for July will provide additional
information about potential technical and reporting challenges. It is
likely that there will be challenges associated with data quality,
including timeliness and completeness of submissions as well as the
technical ability of some recipients to develop solutions (including
processes and procedures) for capturing, tracking, and submitting the
required data on a consistent basis. We will continue to monitor and
assess OMB's recipient reporting model and July pilot test.
OMB Requires Agencies to Measure Program Performance beyond Jobs
Created and Retained:
OMB guidance described recipient reporting requirements under the
Recovery Act's section 1512 as the minimum that must be collected,
leaving it to federal agencies to determine additional information that
would be required for oversight of individual programs. OMB has
instructed federal agencies to develop formal documented plans for how
Recovery Act funds will be used and managed that are consistent with
sound program management principles.[Footnote 117] According to the
guidance, agencies must describe how they are coordinating broad
Recovery Act efforts toward successful implementation and monitoring of
performance and results in a comprehensive "agency plan." Officials
from some states indicated they would use existing program indicators
and, in some cases, build on these indicators to measure performance.
Officials also expressed a desire for additional guidance from federal
agencies on what performance measures to use.
As instructed by OMB, each Recovery Act federal agency plan must
describe the program's Recovery Act objectives and relationships with
corresponding goals and objectives through ongoing agency programs and
activities. OMB states that expected public benefits should demonstrate
cost-effectiveness and be clearly stated in concise, clear, and plain
language targeted to an audience with no in-depth knowledge of the
program. Furthermore, OMB guidance states that, to the extent possible,
Recovery Act goals should be expressed in the same terms as programs'
goals in federal departmental strategic plans,[Footnote 118] and
agencies should instruct recipients to collect and report performance
information to the extent possible as part of their quarterly
submissions. The objective is to use existing measures to allow the
public to see the marginal performance impact of Recovery Act
investments. Some state program officials have said that they do plan
to use existing program performance measures. For example, public
housing agencies told us they regularly track the budget control,
timeliness, and quality of work of projects they fund and that they
plan to continue using these measures with Recovery Act-funded
projects. Some other performance measures public housing agencies
typically track include tenant satisfaction, occupancy rates, crime
rates, and employment among residents.
Some states are issuing guidance and modifying their information
systems to capture and report on jobs created and retained, but many
state and local officials expressed concern about the lack of clear
guidance on what other program or impact measures are required for
evaluating the impact of Recovery Act funding. Some federal agencies
have issued such additional guidance, but others have not. For example,
the Department of Transportation (DOT) through the Federal Highway
Administration (FHWA) has provided guidance specifying the data to be
reported when complying with the requirements in section 1201(c) of
division A of the Recovery Act, which stipulates, among other
requirements, that each highway infrastructure grant recipient submit
periodic reports on the use of the funds. For example, California state
transportation officials said that contractors will be required to
report on the number of workers and payroll amounts on a monthly basis
to the California Department of Transportation. The state office will
then provide the data to the FHWA California division office, which
will provide it to FHWA headquarters. DOT said that grantees will not
be expected to estimate employment data other than the direct on-site
jobs and noted that the reporting to FHWA is in addition to the
recipient reporting to OMB. DOT economists in coordination with CEA
plan to compute the number of indirect jobs and induced jobs using
direct on-site job data provided by the state transportation
departments.
OMB guidance also states that federal agencies must have a process in
place for senior managers to regularly review the progress and
performance of major programs. To achieve this objective, OMB has
encouraged federal agencies to leverage their existing Senior
Management Councils[Footnote 119] to oversee Recovery Act performance.
OMB states that the councils should review Recovery Act reporting and
performance across each agency; establish and oversee development and
implementation of agency guidance to identify and mitigate risk; and
ensure the correction of weaknesses relating to the Recovery Act.
According to OMB, the councils should analyze findings and results from
quarterly or monthly performance reviews, coordinated by the agency's
Performance Improvement Officer, to help determine the highest-risk
program areas and ensure corrective actions are implemented.
OMB's Recipient Reporting Implementing Guidance Addresses Some
Concerns, but Additional Instruction on Reporting May Be Needed:
OMB's new guidance on the implementation of recipient reporting should
be helpful in addressing answers to many of the questions and concerns
raised by state and local program officials. However, a number of the
issues were covered in previous guidance, and some concerns remain. For
example, the counting of part-time employment was covered to some
extent in previous guidance but continued to be mentioned by officials
in some states. Overall, state and local officials were clearly aware
of the requirements to report on jobs created and jobs retained, but
questions persist on how to do this. For example, public housing
agencies reported they have not received guidance from HUD on how to
measure jobs created and retained or other performance measures. Most
public housing agency officials told us they would like guidance on how
to accomplish these objectives. Similarly, Education officials noted
that draft OMB guidance on recipient reporting would require some
additional Education guidance to clarify issues for recipients of
formula grants, such as special education IDEA grants.
In sum, federal agencies may need to do a better job of communicating
the OMB guidance in a timely manner to their state counterparts and, as
appropriate, issue clarifying guidance on required performance
measurement. In particular, while any additional guidance for
recipients must be in accordance with OMB guidance, OMB could work with
federal agencies to provide program-specific examples about how to
count jobs created and jobs retained. This would be especially helpful
for programs that have not previously tracked and reported such
metrics, such as with public housing and special education grants.
Other channels to educate state and local program officials on the
reporting requirements could be considered, including Web-or telephone-
based information sessions or other forums.
Concluding Observations and Recommendations:
Since enactment of the Recovery Act[Footnote 120] in February 2009, OMB
has issued three sets of guidance--on February 18, April 3 and, most
recently, June 22, 2009[Footnote 121] --to announce spending and
performance reporting requirements to assist prime recipients and
subrecipients of federal Recovery Act funds to comply with these
requirements. OMB has reached out to Congress, federal, state, and
local government officials, grant and contract recipients, and the
accountability community to get a broad perspective on what is needed
to meet the high expectations set by Congress and the administration.
Further, according to OMB's June guidance, OMB has worked with the
Recovery Accountability and Transparency Board to deploy a nationwide
data collection system at [hyperlink, http://www.federalreporting.gov].
As work proceeds on the implementation of the Recovery Act, OMB and the
cognizant federal agencies have opportunities to build on the early
efforts by continuing to address several important issues.
These issues can be placed broadly into three categories, which have
been revised from our last report to better reflect evolving events
since April: (1) accountability and transparency requirements, (2)
reporting on impact, (3) communications and guidance.[Footnote 122]
Accountability and Transparency Requirements:
Recipients of Recovery Act funding face a number of implementation
challenges in this area. The act includes new programs and significant
increases in funds out of normal cycles and processes. There is an
expectation that many programs and projects will be delivered faster so
as to inject funds into the economy, and the administration has
indicated its intent to assure transparency and accountability over the
use of Recovery Act funds. Issues regarding the Single Audit process
and administrative support and oversight are important.
Single Audit: The Single Audit process needs adjustments to provide
appropriate risk-based focus and the necessary level of accountability
over Recovery Act programs in a timely manner.
In our April 2009 report, we reported that the guidance and criteria in
OMB Circular No. A-133 do not adequately address the substantial added
risks posed by the new Recovery Act funding. Such risks may result from
(1) new government programs, (2) the sudden increase in funds or
programs that are new to the recipient entity, and (3) the expectation
that some programs and projects will be delivered faster so as to
inject funds into the economy. With some adjustment, the Single Audit
could be an effective oversight tool for Recovery Act programs because
it can address risks associated with all three of these factors.
April report recommendations: Our April report included recommendations
that OMB adjust the current audit process to focus the risk assessment
auditors use to select programs to test for compliance with 2009
federal program requirements on Recovery Act funding; provide for
review of the design of internal controls during 2009 over programs to
receive Recovery Act funding, before significant expenditures in 2010;
and evaluate options for providing relief related to audit requirements
for low-risk programs to balance new audit responsibilities associated
with the Recovery Act.
Status of April report recommendations: OMB has taken some actions and
has other planned actions to help focus the program selection risk
assessment on Recovery Act programs and to provide guidance on
auditors' reviews of internal controls for those programs. However, we
remain concerned that OMB's planned actions would not achieve the level
of accountability needed to effectively respond to Recovery Act risks
and does not provide for timely reporting on internal controls for
Recovery Act programs. Therefore, we are re-emphasizing our previous
recommendations in this area.
To help auditors with single audit responsibilities meet the increased
demands imposed on them by Recovery Act funding, we recommend that the
Director of OMB take the following four actions:
* Develop requirements for reporting on internal controls during 2009
before significant Recovery Act expenditures occur as well as ongoing
reporting after the initial report.
* Provide more focus on Recovery Act programs through the Single Audit
to help ensure that smaller programs with high risk have audit coverage
in the area of internal controls and compliance.
* Evaluate options for providing relief related to audit requirements
for low-risk programs to balance new audit responsibilities associated
with the Recovery Act.
* To the extent that options for auditor relief are not provided,
develop mechanisms to help fund the additional Single Audit costs and
efforts for auditing Recovery Act programs.
Administrative Support and Oversight: States have been concerned about
the burden imposed by new requirements, increased accounting and
management workloads, and strains on information systems and staff
capacity at a time when they are under severe budgetary stress.
April report recommendation: In our April report, we recommended that
the Director of OMB clarify what Recovery Act funds can be used to
support state efforts to ensure accountability and oversight,
especially in light of enhanced oversight and coordination
requirements.
Status of April report recommendation: On May 11, 2009, OMB released a
memorandum[Footnote 123] clarifying how state grantees could recover
administrative costs of Recovery Act activities.
Matter for Congressional Consideration:
Because a significant portion of Recovery Act expenditures will be in
the form of federal grants and awards, the Single Audit process could
be used as a key accountability tool over these funds. However, the
Single Audit Act, enacted in 1984 and most recently amended in 1996,
did not contemplate the risks associated with the current environment
where large amounts of federal awards are being expended quickly
through new programs, greatly expanded programs, and existing programs.
The current Single Audit process is largely driven by the amount of
federal funds expended by a recipient in order to determine which
federal programs are subject to compliance and internal control
testing. Not only does this model potentially miss smaller programs
with high risk, but it also relies on audit reporting 9 months after
the end of a grantee's fiscal year--far too late to pre-emptively
correct deficiencies and weaknesses before significant expenditures of
federal funds. Congress is considering a legislative proposal in this
area and could address the following issues:
* To the extent that appropriate adjustments to the Single Audit
process are not accomplished under the current Single Audit structure,
Congress should consider amending the Single Audit Act or enacting new
legislation that provides for more timely internal control reporting,
as well as audit coverage for smaller Recovery Act programs with high
risk.
* To the extent that additional audit coverage is needed to achieve
accountability over Recovery Act programs, Congress should consider
mechanisms to provide additional resources to support those charged
with carrying out the Single Audit Act and related audits.
Reporting on Impact:
Under the Recovery Act, responsibility for reporting on jobs created
and retained falls to nonfederal recipients of Recovery Act funds. As
such, states and localities have a critical role in identifying the
degree to which Recovery Act goals are achieved.
Performance reporting is broader than the jobs reporting required under
section 1512 of the Recovery Act. OMB guidance requires that agencies
collect and report performance information consistent with the agency's
program performance measures. As described earlier in this report, some
agencies have imposed additional performance measures on projects or
activities funded through the Recovery Act.
April report recommendation: In our April report, we recommended that
given questions raised by many state and local officials about how best
to determine both direct and indirect jobs created and retained under
the Recovery Act, the Director of OMB should continue OMB's efforts to
identify appropriate methodologies that can be used to (1) assess jobs
created and retained from projects funded by the Recovery Act; (2)
determine the impact of Recovery Act spending when job creation is
indirect; (3) identify those types of programs, projects, or activities
that in the past have demonstrated substantial job creation or are
considered likely to do so in the future and consider whether the
approaches taken to estimate jobs created and jobs retained in these
cases can be replicated or adapted to other programs.
Status of April report recommendation: OMB has been meeting on a
regular basis with state and local officials, federal agencies, and
others to gather input on reporting requirements and implementation
guidance and has worked with the Recovery Accountability and
Transparency Board on a nationwide data collection system. On June 22,
OMB issued additional implementation guidance on recipient reporting of
jobs created and retained. This guidance is responsive to much of what
we said in our April report. It states that there are two different
types of jobs reports under the Recovery Act and clarifies that
recipient reports are to cover only direct jobs created or retained.
"Indirect" jobs (employment impact on suppliers) and "induced" jobs
(employment impact on communities) will be covered in Council of
Economic Advisers (CEA) quarterly reports on employment, economic
growth, and other key economic indicators. Consistent with the
statutory language of the act, OMB's guidance states that these
recipient reporting requirements apply to recipients who receive
funding through discretionary appropriations, not to those receiving
funds through either entitlement or tax programs. These reporting
requirements also do not apply to individuals. It clarifies that the
prime recipient and not the subrecipient is responsible for reporting
section 1512 information on jobs created or retained to the federal
government. The June 2009 guidance also provides detailed instructions
on how to calculate and report jobs as full-time equivalents (FTE). It
also describes in detail the data model and reporting system to be used
for the required recipient reporting on jobs.
The guidance provided for reporting job creation aims to shed light on
the immediate uses of Recovery Act funding and is reasonable in that
context. It will be important, however, to interpret the recipient
reports with care. As noted in the guidance, these reports are only one
of the two distinct types of reports seeking to describe the jobs
impact of the Recovery Act. CEA's quarterly reports will cover the
impact on employment, economic growth, and other key economic
indicators. Further, the recipient reports will not reflect the impact
of resources made available through tax provisions or entitlement
programs.[Footnote 124]
Recipients are required to report no later than 10 days after the end
of the calendar quarter. The first of these reports is due on October
10, 2009. After prime recipients and federal agencies perform data
quality checks, detailed recipient reports are to be made available to
the public no later than 30 days after the end of the quarter. Initial
summary statistics will be available on [hyperlink,
http://www.recovery.gov]. The guidance explicitly does not mandate a
specific methodology for conducting quality reviews. Rather, federal
agencies are directed to coordinate the application of definitions of
material omission and significant reporting error to "ensure
consistency" in the conduct of data quality reviews. Although
recipients and federal agency reviewers are required to perform data
quality checks, none are required to certify or approve data for
publication. It is unclear how any issues identified under data quality
reviews would be resolved and how frequently data quality problems
would have been identified in the reviews. GAO will continue to monitor
this data quality and recipient reporting requirements.
Our recommendations: To increase consistency in recipient reporting or
jobs created and retained, the Director of OMB should work with federal
agencies to have them provide program-specific examples of the
application of OMB's guidance on recipient reporting of jobs created
and retained. This would be especially helpful for programs that have
not previously tracked and reported such metrics.
Because performance reporting is broader than the jobs reporting
required by section 1512, the Director of OMB should also work with
federal agencies--perhaps through the Senior Management Councils--to
clarify what new or existing program performance measures--in addition
to jobs created and retained--that recipients should collect and report
in order to demonstrate the impact of Recovery Act funding.
In addition to providing these additional types of program-specific
examples of guidance, the Director of OMB should work with federal
agencies to use other channels to educate state and local program
officials on reporting requirements, such as Web-or telephone-based
information sessions or other forums.
Communications and Guidance:
Financial funding and program guidance: State officials expressed
concerns regarding communication on the release of Recovery Act funds
and their inability to determine when to expect federal agency program
guidance. Once funds are released there is no easily accessible, real-
time procedure for ensuring that appropriate officials in states and
localities are notified. Because half of the estimated spending
programs in the Recovery Act will be administered by nonfederal
entities, states wish to be notified when funds are made available to
them for their use as well as when funding is received by other
recipients within their state that are not state agencies.
OMB does not have a master timeline for issuing federal agency
guidance. OMB's preferred approach is to issue guidance incrementally.
This approach potentially produces a more timely response and allows
for mid-course corrections; however, this approach also creates
uncertainty among state and local recipients responsible for
implementing programs. We continue to believe that OMB can strike a
better balance between developing timely and responsive guidance and
providing a long range time line that gives some structure to state and
localities' planning efforts. We appreciate that the timeline will
almost certainty be modified over time as new issues emerge that
require additional guidance and clarification.
April report recommendation: In our April report, we recommended that
to foster timely and efficient communications, the Director of OMB
should develop an approach that provides dependable notification to (1)
prime recipients in states and localities when funds are made available
for their use, (2) states--where the state is not the primary recipient
of funds but has a statewide interest in this information--and (3) all
nonfederal recipients on planned releases of federal agency guidance
and, if known, whether additional guidance or modifications are
recommended.
Status of April recommendation: OMB has made important progress in the
type and level of information provided in its reports on Recovery.gov.
Nonetheless, OMB has additional opportunities to more fully address the
recommendations we made in April. By providing a standard format across
disparate programs, OMB has improved its Funding Notification reports,
making it easier for the public to track when funds become available.
Agencies update their Funding Notification reports for each program
individually whenever they make funds available. Both reports are
available on [hyperlink, http://www.recovery.gov]. OMB has taken the
additional step of disaggregating financial information, i.e., federal
obligations and outlays by Recovery Act programs and by state in its
Weekly Financial Activity Report.
Our recommendation: The Director of OMB should continue to develop and
implement an approach that provides easily accessible, real-time
notification to (1) prime recipients in states and localities when
funds are made available for their use, and (2) states--where the state
is not the primary recipient of funds but has a statewide interest in
this information. In addition, OMB should provide a long range time
line for the release of federal guidance for the benefit of nonfederal
recipients responsible for implementing Recovery Act programs.
Recipient financial tracking and reporting guidance: In addition to
employment related reporting, OMB's guidance calls for the tracking of
funds by the prime recipient, recipient vendors, and subrecipients
receiving payments. OMB's guidance also allows that a "prime recipients
may delegate certain reporting requirements to subrecipients." Either
the prime or sub-recipient must report the D-U-N-S number (or an
acceptable alternative) for any vendor or sub-recipient receiving
payments greater than $25 thousand. In addition, the prime recipient
must report what was purchased and the amount, and a total number and
amount for sub-awards of less than $25 thousand. By reporting the DUNS
number, OMB guidance provides a way to identify subrecipients by
project, but this alone does not ensure data quality.
The approach to tracking funds is generally consistent with the Federal
Funding Accountability and Transparency Act (FFATA). Like the Recovery
Act, the FFATA requires a publicly available Web site--[hyperlink,
http://www.USAspending.gov]--to report financial information about
entities awarded federal funds. Yet, significant questions have been
raised about the reliability of the data on USAspending.gov, primarily
because what is reported by the prime recipients is dependent on the
unknown data quality and reporting capabilities of their subrecipients.
For example, earlier this year, more than 2 years after passage of
FFATA, the Congressional Research Service (CRS) questioned the
reliability of the data on USAspending.gov. We share CRS's concerns
associated with USAspending.gov, including incomplete, inaccurate, and
other data quality problems. More broadly, these concerns also pertain
to recipient financial reporting in accordance with the Recovery Act
and its federal reporting vehicle, [hyperlink,
http://www.FederalReporting.gov], currently under development.
Our recommendation: To strengthen the effort to track the use of funds,
the Director of OMB should (1) clarify what constitutes appropriate
quality control and reconciliation by prime recipients, especially for
subrecipient data, and (2) specify who should best provide formal
certification and approval of the data reported.
Agency-specific guidance: DOT and FHWA have yet to provide clear
guidance regarding how states are to implement the Recovery Act
requirement that economically distressed areas (EDA) are to receive
priority in the selection of highway projects for funding. We found
substantial variation both in how states identified areas in economic
distress and how they prioritized project selection for these areas. As
a result, it is not clear whether areas most in need are receiving
priority in the selection of highway infrastructure projects, as
Congress intended. While it is true that states have discretion in
selecting and prioritizing projects, it is also important that this
goal of the Recovery Act be met.
Our recommendation: To ensure states meet Congress's direction to give
areas with the greatest need priority in project selection, the
Secretary of Transportation should develop clear guidance on
identifying and giving priority to economically distressed areas that
are in accordance with the requirements of the Recovery Act and the
Public Works and Economic Development Act of 1965, as amended, and more
consistent procedures for the Federal Highway Administration to use in
reviewing and approving states' criteria.
Agency Comments and Our Evaluation:
We received comments on a draft of this report from the Office of
Management and Budget (OMB) and the U.S. Department of Transportation
(DOT) on our report recommendations.
Office of Management and Budget:
OMB concurs with the overall objectives of GAO's recommendations made
to OMB in this report. OMB offered clarifications regarding the area of
Single Audit and did not concur with some of GAO's conclusions related
to communications. What follows summarizes OMB's comments and our
responses.
Single Audit Act:
OMB agreed with the overall objectives of GAO's recommendations and
offered clarifications regarding the areas of Single Audit. OMB also
noted it believes that the new requirements for more rigorous internal
control reviews will yield important short-term benefits and the steps
taken by state and local recipients to immediately initiate controls
will withstand increased scrutiny later in the process.
OMB commented that it has already taken and is planning actions to
focus program selection risk assessment on Recovery Act programs and to
increase the rigor of state/local internal controls on Recovery Act
activities. However, our report points out that OMB has not yet
completed critical guidance in these areas. Unless OMB plans to change
the risk assessment process conducted for federal programs under
Circular A-133, smaller, but significantly risky programs under the
Recovery Act may not receive adequate attention and scrutiny under the
Single Audit process.
OMB acknowledged that acceleration of internal control reviews could
cause more work for state auditors, for which OMB and Congress should
explore potential options for relief. This is consistent with the
recommendations we make in this report. OMB also noted that our draft
report did not offer a specific recommendation for achieving
acceleration of internal control reporting. Because there are various
ways to achieve the objective of early reporting on internal controls,
we initially chose not to prescribe a specific method; however, such
accelerated reporting could be achieved in various ways. For instance,
OMB could require specific internal control certifications from federal
award recipients meeting certain criteria as of a specified date, such
as December 31, 2009, before significant Recovery Act expenditures
occur. Those certifications could then be reviewed by the auditor as
part of the regular single audit process. Alternatively, or in
addition, OMB could require that the internal control portion of the
single audit be completed early, with a report submitted 60 days after
the recipient's year end. We look forward to continuing our dialog with
OMB on various options available to achieve the objective of early
reporting on internal controls. We will also continue to review OMB's
guidance in the area of single audits as such guidance is being
developed.
Communications:
OMB has made important progress relative to some communications. In
particular, we agree with OMB's statements that it requires agencies to
post guidance and funding information to agency Recovery Act websites,
disseminates guidance broadly, and seeks out and responds to
stakeholder input. In addition, OMB is planning a series of interactive
forums to offer training and information to Recovery Act recipients on
the process and mechanics of recipient reporting and they could also
serve as a vehicle for additional communication. Moving forward and
building on the progress it has made, OMB can take the following
additional steps related to funding notification and guidance.
First, OMB should require direct notification to key state officials
when funds become available within a state. OMB has improved Funding
Notification reports by providing a standard format across disparate
programs, making it easier for the public to track when funds become
available. However, it does not provide an easily accessible, real-time
notification of when funds are available. OMB recognized the shared
responsibilities of federal agencies and states in its April 3, 2009
guidance when it noted that federal agencies should expect states to
assign a responsible office to oversee data collection to ensure
quality, completeness, and timeliness of data submissions for recipient
reporting. In return, states have expressed a need to know when funds
flow into the state regardless of which level of government or
governmental entity within the state receives the funding so that they
can meet the accountability objectives of the Recovery Act. We continue
to recommend more direct notification to (1) prime recipients in states
and localities when funds are made available for their use, and (2)
states-where the state is not the primary recipient of funds but has a
statewide interest in this information.
Second, OMB should provide a long range time line for the release of
federal guidance. In an attempt to be responsive to emerging issues and
questions from the recipient community, OMB's preferred approach is to
issue guidance incrementally. This approach potentially produces a more
timely response and allows for mid-course corrections; however, this
approach also creates uncertainty among state and local recipients.
State and local officials expressed concerns that this incremental
approach hinders their efforts to plan and administer Recovery Act
programs. As a result, we continue to believe OMB can strike a better
balance between developing timely and responsive guidance and providing
some degree of a longer range time line so that states and localities
can better anticipate which programs will be affected and when new
guidance is likely to be issued. OMB's consideration of a master
schedule and its acknowledgement of the extraordinary proliferation of
program guidance in response to Recovery Act requirements seem to
support a more structured approach. We appreciate that a longer range
time line would need to be flexible so that OMB could also continue to
issue guidance and clarifications in a timely manner as new issues and
questions emerge.
OMB also offered suggestions for several technical clarifications which
we have made when appropriate.
U.S. Department of Transportation:
DOT generally agreed to consider the recommendation that it develop
clear guidance on identifying and giving priority to economically
distressed areas and more consistent procedures for reviewing and
approving states' criteria. As discussed in the highways section of
this report, in commenting on a draft of this report, DOT agreed that
states must give priority to projects located in economically
distressed areas (EDAs), but said that states must balance all the
Recovery Act project selection criteria when selecting projects
including giving preference to activities that can be started and
completed expeditiously, using funds in a manner that maximizes job
creation and economic benefit, and other factors. While we agree with
DOT that there is no absolute primacy of EDA projects in the sense that
they must always be started first, the specific directives in the act
that apply to highway infrastructure are that priority is to be given
to projects that can be completed in 3 years, and are located in EDAs.
DOT also stated that the basic approach used by selected states to
apply alternative criteria is consistent with the Public Works and
Economic Development Act and its implementing regulations on EDAs
because it makes use of flexibilities provided by the Public Works Act
to more accurately reflect changing economic conditions. However the
result of DOT's interpretation would be to allow states to prioritize
projects based on criteria that are not mentioned in the highway
infrastructure investment portion of the Recovery or the Public Works
Acts without the involvement of the Secretary or Department of
Commerce. We plan to continue to monitor states' implementation of the
EDA requirements and interagency coordination at the federal level in
future reports.
We are sending copies of this report to the Office of Management and
Budget and the Department of Transportation, as well as sections of the
report to officials of the 16 states and the District covered in our
review. The report will also be available at no charge on the GAO Web
site at [hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-5500. 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 major contributions to this
report are listed in appendix IV.
Signed by:
Gene L. Dodaro:
Acting Comptroller General of the United States:
List of Committees:
The Honorable Nancy Pelosi:
Speaker of the House of Representatives:
The Honorable Robert C. Byrd:
President Pro Tempore of the Senate:
The Honorable Harry Reid:
Majority Leader:
United States Senate:
The Honorable Mitch McConnell:
Republican Leader:
United States Senate:
The Honorable Steny Hoyer:
Majority Leader:
House of Representatives:
The Honorable John Boehner:
Minority Leader:
House of Representatives:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Dave Obey:
Chairman:
The Honorable Jerry Lewis:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell E. Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This appendix describes our objectives, scope, and methodology (OSM)
for this second report on our bimonthly reviews on the Recovery Act. A
detailed description of the criteria used to select the core group of
16 states and the District of Columbia (District) and programs we
reviewed is found in appendix I of our April 2009 Recovery Act
bimonthly report.[Footnote 125]
Objectives and Scope:
The Recovery Act specifies several roles for GAO, including conducting
bimonthly reviews of selected states' and localities' use of funds made
available under the act. As a result, our objectives for this report
were to assess (1) selected states' and localities' uses of and
planning for Recovery Act funds, (2) the approaches taken by the
selected states and localities to ensure accountability for Recovery
Act funds, and (3) states' plans to evaluate the impact of the Recovery
Act funds they have received to date.
Our teams visited the 16 selected states, the District, and a non-
probability sample of 178 localities during May and June 2009.[Footnote
126] As described in our previous Recovery Act report's OSM, our teams
met again with a variety of state and local officials from executive-
level and program offices. During discussions with state and local
officials, teams used a series of program review and semistructured
interview guides that addressed state plans for management, tracking,
and reporting of Recovery Act funds and activities. We also reviewed
state constitutions, statutes, legislative proposals, and other state
legal materials for this report. Where attributed, we relied on state
officials and other state sources for description and interpretation of
state legal materials. Appendix II details the states and localities
visited by GAO. Criteria used to select localities within our selected
states follow.
States' and Localities' Uses of Recovery Act Funds:
Using criteria described in our last bimonthly report, we selected the
following streams of Recovery Act funding flowing to states and
localities for review during this report: increased Medicaid Federal
Medical Assistance Percentage (FMAP) grant awards; the Federal-Aid
Highway Surface Transportation Program; the State Fiscal Stabilization
Fund (SFSF); Title I, Part A of the Elementary and Secondary Education
Act of 1965 (ESEA); Parts B and C of the Individuals with Disabilities
Education Act (IDEA); the Workforce Investment Act (WIA) Youth program;
the Public Housing Capital Fund; Edward Byrne Memorial Justice
Assistance Grant (JAG) Program, and the Weatherization Assistance
Program. Together, these nine programs are estimated to account for
approximately 87 percent of federal Recovery Act outlays to states and
localities in fiscal year 2009. We also reviewed how Recovery Act funds
are being used by states to stabilize their budgets. In addition, we
analyzed www.recovery.gov data on federal spending.
Medicaid Federal Medical Assistance Percentage:
For the FMAP grant awards, we again relied on our web-based inquiry,
asking the 16 states and the District to update information they had
previously provided to us on enrollment, expenditures, and changes to
their Medicaid programs and to report their plans to use state funds
made available as a result of the increased FMAP. We also reviewed
states' Single Audit results for 2007 and, where available, for 2008,
to identify material weaknesses related to the Medicaid programs in the
16 states and the District. In interviews with Medicaid officials from
all the sample states and the District, we obtained additional
information regarding states' efforts to comply with the provisions of
the Recovery Act, as well as states' responses to material weaknesses
identified in their Single Audits. We spoke with individuals from the
Centers for Medicare & Medicaid Services (CMS) regarding their
oversight and guidance to states, their FMAP grant awards, and funds
drawn down by states.
Federal-Aid Highway Surface Transportation Program:
For highway infrastructure investment, we reviewed status reports and
guidance to the states and discussed these with the U.S. Department of
Transportation (DOT) and Federal Highway Administration (FHWA)
officials. We obtained data from FHWA on obligations and reimbursements
for the Recovery Act's highway infrastructure funds nationally and for
each of our selected states. We selected two projects in every state
that were furthest along--for example, projects under construction or
out for bid. In selecting projects, we attempted to select a mix of
projects, including projects that were in and outside of economically
distressed areas; projects administered by the state and locally
administered projects; projects in urban and rural areas; and projects
requiring various amounts of funding--both large and small. To obtain
information on the impact certain requirements associated with highway
funding were having on states, we selected three states--New Jersey,
Arizona, and Mississippi--because we did not include these states in
the scope of our previous report on this issue and because they have
varying environmental planning and labor environments.[Footnote 127]
For example, according to the Council on Environmental Quality, New
Jersey has a state environmental planning law similar to the National
Environmental Policy Act (NEPA), while Arizona and Mississippi do not,
and, according to the Bureau of Labor Statistics, in 2008, union
membership in New Jersey was 18.3 percent, while 8.8 percent of Arizona
and 5.3 percent of Mississippi workers were union members.
SFSF, ESEA Title I, and IDEA:
To understand how the U.S. Department of Education is implementing the
SFSF, ESEA Title I, and IDEA under the Recovery Act, we reviewed
relevant laws, guidance, and communications to the states and
interviewed Education officials. Our review of related documents and
interviews with federal agency officials focused on determining and
clarifying how states, school districts, and public institutions of
higher education would be expected to implement various provisions of
the SFSF. Also, to understand the baseline data being used to
demonstrate states' status related to the assurances states must make
about education reform in their SFSF applications, we interviewed
Education officials about the data being used and officials at
organizations such as Achieve and the Data Quality Campaign, which
develop and assess the data.
We visited at least two school districts in each state covered by our
review to learn the districts' plans for Recovery Act funds received
for SFSF, ESEA Title I, and IDEA. For our visits to school districts,
in each state, we selected from school districts that were among the
top 10 recipients of Recovery Act funds for the ESEA Title I program
and, when possible, included school districts with a high number of
schools in improvement and school districts in locales other than large
cities. For our visits to public institutions of higher education
(IHE), we visited IHEs in Ohio and North Carolina and the six states--
California, Florida, Georgia, Illinois, Mississippi, and New York--that
had received approval of their applications for State Fiscal
Stabilization Funds from Education by the time of our initial site
visits in May 2009. For each state, we selected among the largest, in
terms of enrollment, public IHEs in the state that would be receiving
SFSF funds, including universities and community colleges. In 3 states,
we also visited some public historically black colleges and
universities.
WIA Youth Program:
We reviewed the Recovery Act-funded WIA Youth program in 13 of our 16
states (all except Arizona, Colorado, and Iowa)[Footnote 128] and the
District. We focused on state and local efforts to provide summer youth
employment activities. To learn about the status of implementation, the
use and oversight of funds, and the challenges faced, we interviewed
workforce development officials in all 13 states and at least two local
areas in each state--for a total of 34 local areas--and the District.
We also reviewed relevant documents obtained from state and local
officials. In addition, we obtained and analyzed data from the
Department of Labor on the amount of Recovery Act WIA Youth funds
allotted to, and drawn down by states, and reviewed Labor's guidance to
states and local areas on Recovery Act funds.
Public Housing Capital Fund:
For Public Housing, we obtained data from HUD's Electronic Line of
Credit and Control System on the amount of Recovery Act funds that have
been obligated and/or drawn down by each housing agency in the country,
as of June 20, 2009. To determine how housing agencies were using or
planning to use these funds, we selected a sample of 47 agencies in our
sample of 16 states and the District. At the selected agencies we
interviewed housing agency officials and conducted site visits of
ongoing or planned Recovery Act projects. GAO selected these locations
to obtain a mix of large, medium, and small housing agencies, housing
agencies designated as troubled performers by HUD, those to which HUD
allocated significant amounts of Recovery Act funding, and housing
agencies that had drawn down funds at the time of our selection. We
also interviewed HUD Headquarters officials in the District to
understand their procedures for monitoring housing agency use of
Recovery Act Funds.
JAG Program:
For our review of the JAG program, we reviewed relevant laws, federal
guidance, and states' grant applications and award letters; interviewed
officials with the Department of Justice's Office of Justice Programs
and Bureau of Justice Assistance; and interviewed officials from state
administering agencies that oversee the JAG program in their state. We
spoke with and reviewed documentation from Department of Justice
officials on the agency's coordination with, guidance to, and oversight
of grant recipients. We interviewed state officials and reviewed
relevant state documentation to determine and clarify states' plans for
using JAG funds awarded to the state and their progress in using and
overseeing those funds. We did not review JAG grants awarded directly
to local governments in this report because the Bureau of Justice
Assistance's (BJA) solicitation for local governments closed on June
17; therefore, not all of these funds have been awarded.
Weatherization Assistance Program:
For the Weatherization Assistance Program, we reviewed relevant laws,
regulations, and federal guidance and interviewed Department of Energy
officials who administer the program at the federal level. We also
coordinated activities with officials from the department's Office of
Inspector General. In addition, we conducted semistructured interviews
with officials in the states' energy agencies that administer the
weatherization program. We collected data about each state's total
allocation for weatherization through the Recovery Act, as well as the
initial allocation already sent to the states. We asked DOE officials
about their timetable for reviewing state energy plans and when they
would provide the next allocation to the states. Finally, we reviewed
the state weatherization plans to determine how each state intends to
allocate their funds and the outcomes they expect.
State Budget Stabilization:
To better understand how states and the District are using Recovery Act
funds to stabilize government budgets, we reviewed enacted and proposed
state budgets and revenue estimates for state fiscal years 2008-2009
and 2009-2010. In addition, we reviewed reports and analysis regarding
state fiscal conditions. We interviewed state budget officials to
determine how states are using Recovery Act funds to avoid reductions
in essential services or tax increases and developing exit strategies
to plan for the end of Recovery Act funding. We also consulted with
researchers and associations representing state officials to better
understand states' current fiscal conditions.
Assessing States' and Localities' Safeguards and Internal Controls:
To determine how states and localities are tracking the receipt of and
use of Recovery Act funds, the state and District teams asked cognizant
officials to describe the accounting systems and conventions being used
to execute transactions and to monitor and report on Recovery Act
expenditures. To determine the current internal control structure in
states and the District, we asked cognizant officials to describe and
provide relevant documentation about their current internal control
program, including risk assessment and monitoring. In addition, to
assist in the planning of the audit work, we provided the state and
District teams, as well as certain program teams, with available fiscal
year 2008 Single Audit summary information. Single Audit information
was obtained from the Federal Audit Clearinghouse (FAC) Single Audit
data collection forms and the Single Audit reports. We discussed with
relevant OMB officials the Single Audit reports and guidance. We also
analyzed how OMB was addressing the recommendations related to the
Single Audit in the April 2009 Recovery Act report. We also asked
auditors to address how they were monitoring and overseeing the
Recovery Act.
Efforts to Assess Impact of Recovery Act Spending:
To understand the reporting requirements on the impact of the Recovery
Act, we reviewed the guidance issued by OMB on February 18, April 3,
and June 22, 2009, as well as selective federal agency guidance related
to grants and to states and localities. We also interviewed selected
state, District, and local officials to understand their views of
agency and OMB guidance for reporting on implementation of the Recovery
Act, as well as about their plans to provide assessment data required
by Section 1512.
Data and Data Reliability:
We collected funding data from www.recovery.gov and federal agencies
administering Recovery Act programs for the purpose of providing
background information. We used funding data from www.recovery.gov --
which is overseen by the Recovery Accountability and Transparency
Board--because it is the official source for Recovery Act spending. We
collected data on states' and localities' plans, uses, and tracking of
Recovery Act funds during interviews and follow-up meetings with state
and local officials. In addition, we used data collected from state and
local officials to report the amount of Recovery Act funding received
by states and localities thus far. Based on a preliminary and limited
examination of this information, we consider these data sufficiently
reliable with attribution to official sources for the purposes of
providing background information on Recovery Act funding for this
report. Our sample of selected states and localities is not a random
selection and therefore cannot be generalized to the total population
of state and local governments.
We conducted this performance audit from April 21, 2009, to July 2,
2009, 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 that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Office of Management and Budget:
Executive Office Of The President:
Office Of Management And Budget:
Office Of Federal Financial Management:
Washington, D.C. 20503:
June 30, 2009:
Mr. J, Chris Mihm:
Managing Director, Strategic Issues:
United States Government Accountability Office:
Washington, DC 20548:
Dear Mr. Mihm:
Thank you for the opportunity to review the Government Accountability
Office (GAO) draft report entitled, States' and Localities' Current and
Planned Uses of Funds While Pacing fiscal Stresses, (GAO-09-829). We
appreciate the critical role that GAO plays in reviewing Recovery Act
implementation, and believe your ongoing analysis and input is helping
to facilitate the accountability and transparency objectives of the
Act.
Your note of June 26, 2009, transmitting the above referenced draft
report requested OMB staff comments by the next business day. To meet
this request, we have clone our best to complete an initial review.
Based on this review, OMB concurs with the overall objectives of GAO's
recommendations in the report. However, we offer the following
clarifications for your consideration in the areas of Single Audit and
communications.
Single Audit As your draft report notes, OMB has already taken, and is
planning, actions to focus program selection risk assessment on
Recovery Act programs and to increase the rigor of state/local internal
controls on recovery activities. GAO further recommends that OMB
establish new requirements that result in auditor assessment of
internal controls "before significant Recovery Act expenditures occur."
Although GAO offers no specific recommendation for achieving
acceleration of internal control audit activities, GAO does recognize
that such a requirement wit] impose administrative burdens on the state
auditor community for which OMB and Congress should explore potential
options for relief OMB concurs that acceleration of internal control
reviews will add administrative burden to state auditors, Of note, OMB
believes such changes in audit procedures will also impact the
resources of state and local programs working to address other
administrative challenges associated with Recovery Act implementation.
OMB believes that the new requirements for more rigorous internal
control reviews that arc being put in place will yield important short-
tern benefits as state and local recipients take steps to immediately
initiate controls that will withstand increased audit scrutiny later in
the process. With these clarifications noted, OMB concurs with GAO's
recommendation to pursue alternatives for accelerating audit
activities.
Communications. OMB does not concur with GAO's conclusion that OMB has
not responded to recommendations related to communications. OMB has
taken numerous steps to advance effective communication of the
availability of program-specific guidance and funding. Specifically,
OMB guidance requires Federal agencies to post all program specific
guidance on agency recovery websites, disseminate such guidance to a
broad range of external stakeholders, respond promptly to stakeholder
input, and engage (as appropriate) with stakeholders (luring the
development of such guidance. OMB has explored the possibility of
developing a master schedule of program-specific guidance. however, we
have discovered that the proliferation of program guidance is more
often driven by emerging issues and questions from the recipient
community. We believe a schedule would imply a stringency in the timing
for the release a f agency guidance and technical assistance that we do
not believe is consistent with a preferred approach e f a continuous
flow of guidance from agencies in response to ongoing feedback and
queries From stakeholders.
With respect to communication on funding, OMB guidance contains
rigorous reporting requirements for agencies to post communications on
agency recovery websites on available funding for recipients.
Furthermore, websites such as Grants.gov and FedBizopps.gov provide
special views of recovery-funded opportunities. GAO indicates that "the
current structure of [agency recovery reporting] does not provide a
mechanism for state and local governments raid their citizens to
readily view the total extent of Recovery Act funds flowing through
governmental and non-governmental entities in each state." OMB requests
farther clarification from GAO on the nature and type of communication
that would effectively supplement current information on recovery
funding, which currently include detailed and frequent reports on:
* recovery award availability (which where knowable, is disaggregated by
location);
* obligations and outlays by programs and state;
* obligations by recipient as reported on USAspending.gov;
* required information that primary recipients will report beginning in
October that will track funds provided to sub-recipients and vendors.
Of note, OMB is working with the Recovery Board to run a series of
interactive forums in late July with recipients all over the country to
offer training and information on Recovery Act reporting requirements.
These forums are part of a larger, coordinated outreach and
communication plan to ensure a consistent flow of information between
the Federal government and all relevant stakeholders on Recovery Act
implementation efforts.
Over the next several days, we will complete a more thorough review of
the draft report and will further consult on the contents of the report
with Federal agencies and the Recovery Act Accountability and
Transparency Board.
OMB looks forward to working with GAO to further the accountability and
transparency objectives of the Act and to define the best path forward
on GAO's specific recommendations to OMB. Again, we appreciate the
opportunity to comment on the draft report, including additional
technical suggestions that will provide in the near inure.
If you have any questions, please feel free to contact me at 202-395-
3993.
Sincerely,
Signed by:
Daniel Werfel:
Deputy Controller:
[End of section]
Appendix III: Localities:
Table 20: Local School Districts and Postsecondary Institutions Visited
by GAO:
State: Arizona;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Phoenix Elementary School District No.1;
Phoenix Union High School District No. 210;
Mesa Unified School District No. 4;
Tucson Unified School District No. 1;
Imagine Charter Elementary at Desert West Inc.;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: California;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Los Angeles Unified School District;
San Bernardino City Unified School District;
Postsecondary Institutions: State Fiscal Stabilization Fund:
California State University;
University of California.
State: Colorado;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Denver County School District 1;
Jefferson County School District R-1;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: District of Columbia;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
District of Columbia Public Schools;
Friendship Public Charter School;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: Florida;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Hillsborough County Local Education Agency;
Miami-Dade County Public Schools;
Postsecondary Institutions: State Fiscal Stabilization Fund:
University of South Florida;
Hillsborough Community College;
Florida A&M University.
State: Georgia;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Atlanta Public Schools;
Richmond County School System;
Postsecondary Institutions: State Fiscal Stabilization Fund:
University of Georgia;
Georgia Perimeter College.
State: Illinois;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Chicago Public Schools;
Waukegan Public School District 60;
Postsecondary Institutions: State Fiscal Stabilization Fund:
University of Illinois;
College of DuPage.
State: Iowa;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Des Moines Independent Community School District;
Ottumwa Community School District;
Waterloo Community School District;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: Massachusetts;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Boston Public Schools;
Lawrence Public Schools;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: Michigan;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Detroit Public Schools;
Lansing Public School District;
Grand Rapids Public Schools;
Flint Community Schools;
School District of the City of Saginaw;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: Mississippi;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Holmes County School District;
Jackson Public School District;
Postsecondary Institutions: State Fiscal Stabilization Fund:
University of Mississippi;
Jackson State University;
Northwest Mississippi Community College.
State: New Jersey;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Newark Public Schools;
Camden City Public Schools;
Trenton Public Schools;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: New York;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
New York City Department of Education;
Rochester City School District;
Postsecondary Institutions: State Fiscal Stabilization Fund:
State University of New York/Hudson Valley Community College;
City University of New York/Borough of Manhattan Community College.
State: North Carolina;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Charlotte-Mecklenburg School District;
Robeson School District;
Sugar Creek Charter School;
The Roger Bacon Academy;
Postsecondary Institutions: State Fiscal Stabilization Fund:
Cape Fear Community College;
University of North Carolina-Charlotte;
Fayetteville State University.
State: Ohio;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Cleveland Municipal School District;
Youngstown City School District;
Postsecondary Institutions: State Fiscal Stabilization Fund:
Cuyahoga Community College;
University of Akron.
State: Pennsylvania;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Philadelphia School District;
Harrisburg School District;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
State: Texas;
Local school districts: Title I-LEA, IDEA, State Fiscal Stabilization
Fund:
Houston Independent School District;
Fort Worth Independent School District;
Postsecondary Institutions: State Fiscal Stabilization Fund: [Empty].
Source: GAO.
[End of table]
Table 21: Public Housing Authorities Visited by GAO:
State: Arizona;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
City of Phoenix Housing Department;
Housing Authority of Maricopa County;
City of Glendale Community Housing Division;
Pinal County Housing Authority;
Housing and Community Development Department of the City of Tucson.
State: California;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Area Housing Authority of the County of Ventura;
Sacramento Housing and Redevelopment Agency;
San Francisco Housing Authority.
State: Colorado;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Housing Authority of the City and County of Denver;
Holyoke Housing Authority;
Housing Authority of the Town of Kersey.
State: District of Columbia;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
District of Columbia Housing Authority.
State: Florida;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Venice Housing Authority;
Tallahassee Housing Authority;
Tampa Housing Authority.
State: Georgia;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Atlanta Housing Authority;
Athens Housing Authority.
State: Illinois;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Chicago Housing Authority;
Housing Authority for LaSalle County.
State: Iowa;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Des Moines Municipal Housing Agency;
Evansdale Municipal Housing Authority;
North Iowa Regional Housing Authority;
Ottumwa Housing Authority.
State: Massachusetts;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Revere Housing Authority;
Boston Housing Authority.
State: Michigan;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Detroit Housing Commission;
Lansing Housing Commission;
Flint Housing Commission.
State: Mississippi;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Mississippi Regional Housing Authority No. VIII (Gulfport);
Picayune Housing Authority.
State: New Jersey;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Newark Housing Authority;
Trenton Housing Authority;
Housing Authority of Plainfield;
Rahway Housing Authority.
State: New York;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Binghamton Public Housing Authority;
Glen Cove Public Housing Authority;
Buffalo Municipal Housing Authority.
State: North Carolina;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Housing Authority of the City of Charlotte;
Beaufort Public Housing Authority.
State: Ohio;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Columbus Metropolitan Housing Authority;
Cuyahoga Metropolitan Housing Authority;
London Metropolitan Housing Authority.
State: Pennsylvania;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
Harrisburg Housing Authority;
Philadelphia Housing Authority.
State: Texas;
Public Housing Authority: Public Housing Capital Fund Formula Grants:
San Antonio Housing Authority;
Ferris Housing Authority.
Source: GAO.
[End of table]
Table 22: Location of Highway Projects visited by GAO:
State: California;
Highway project location:
City of Seaside (Monterey County);
Solano County.
State: Colorado;
Highway project location:
Denver Chaffee County.
State: Florida;
Highway project location:
Hillsborough County;
Citrus County;
Hernando County;
Pasco County.
State: Georgia;
Highway project location:
Gwinnett County;
Henry County.
State: Illinois;
Highway project location:
Cook County (1 project);
Grundy County (1 project).
State: Iowa;
Highway project location:
Mason City to Floyd County Line;
Decatur County Line north to US 34 in Clarke County (southbound lane).
State: Massachusetts;
Highway project location:
Adams County Swansea County.
State: Michigan;
Highway project location:
Allegan County Flint County.
State: Mississippi;
Highway project location:
Laurel (Jones County);
Meridian (Lauderdale County).
State: New York;
Highway project location:
Albany County;
Herkimer County.
State: North Carolina;
Highway project location:
Hertford County;
Johnston County;
Forsyth County;
Stokes County.
State: Ohio;
Highway project location:
Cuyahoga County;
Hancock County.
State: Pennsylvania;
Highway project location:
Bedford County;
Chester County.
State: Texas;
Highway project location:
Dallas County;
Tarrant County;
Uvalde County.
Source: GAO.
[End of table]
Table 23: Summer Youth Programs Visited by GAO:
State: California;
Summer youth programs: Workforce Investment Act:
City and County of San Francisco Office of Economic and Workforce
Development;
City of Los Angeles-Workforce Investment Board and Community
Development Department.
State: Florida;
Summer youth programs: Workforce Investment Act:
Tampa Bay Workforce Alliance;
Broward County Workforce One;
South Florida Workforce.
State: Georgia;
Summer youth programs: Workforce Investment Act:
Atlanta Regional Workforce Board;
Richmond-Burke Job Training Authority, Inc.
State: Illinois;
Summer youth programs: Workforce Investment Act:
Chicago Workforce Investment Board;
Grundy Livingston Kankakee Workforce Investment Board.
State: Massachusetts;
Summer youth programs: Workforce Investment Act:
Merrimack Valley Workforce Investment Board;
Central Massachusetts Regional Employment Board.
State: Michigan;
Summer youth programs: Workforce Investment Act:
Detroit Workforce Development Department;
Capital Area Michigan Works.
State: Mississippi;
Summer youth programs: Workforce Investment Act:
Delta Workforce Investment Area;
Mississippi Partnership Workforce Investment Area;
Southcentral Mississippi Works Workforce Investment Area;
Twin Districts Workforce Investment Area.
State: New Jersey;
Summer youth programs: Workforce Investment Act:
Camden County Workforce Investment Board;
Essex County Workforce Investment Board;
Mercer County Workforce Investment Board;
Newark Workforce Investment Board.
State: New York;
Summer youth programs: Workforce Investment Act:
Buffalo and Erie Country Workforce Investment Board, Inc.
New York City Workforce Investment Board;
Herkimer-Madison-Oneida Workforce Investment Board.
State: North Carolina;
Summer youth programs: Workforce Investment Act:
Charlotte-Mecklenburg Workforce Development Board;
Cape Fear Workforce Development Board.
State: Ohio;
Summer youth programs: Workforce Investment Act:
Central Ohio Workforce Investment Corporation;
Licking County Job and Family Services;
Licking/Knox Goodwill Industries Inc.
Montgomery County Department of Job and Family Services;
Union County Job and Family Services.
State: Pennsylvania;
Summer youth programs: Workforce Investment Act:
South Central Pennsylvania Workforce Investment Board-Harrisburg;
Philadelphia Workforce Investment Board.
State: Texas;
Summer youth programs: Workforce Investment Act:
Gulf Coast Workforce Development Board;
North Central Workforce Development Board.
Source: GAO.
[End of table]
Table 24: Weatherization Programs Visited by GAO:
State: North Carolina;
Weatherization:
Resources for Seniors (Raleigh);
New Hanover County Community Action.
Source: GAO.
[End of table]
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
[End of section]
GAO Contacts:
J. Chris Mihm, Managing Director for Strategic Issues, (202) 512-6806
or mihmj@gao.gov:
For issues related to WIA, SFSF, and other education programs: Cynthia
M. Fagnoni, Managing Director of Education, Workforce, and Income
Security, (202) 512-7215 or fagnonic@gao.gov:
For issues related to Medicaid and FMAP programs: Dr. Marjorie Kanof,
Managing Director of Health Care, (202) 512-7114 or kanofm@gao.gov:
For issues related to highways and other transportation programs:
Katherine A. Siggerud, Managing Director of Physical Infrastructure,
(202) 512-2834 or siggerudk@gao.gov:
For issues related to energy and weatherization: Patricia Dalton,
Managing Director of Natural Resources and Environment, (202) 512-3841
or daltonp@gao.gov:
For issues related to the Edward Byrne Memorial Justice Assistance
Grant Program: Cathleen A. Berrick, Managing Director of Homeland
Security and Justice, (202)-512-3404 or berrickc@gao.gov:
For issues related to public housing: Richard J. Hillman, Managing
Director of Financial Markets and Community Investment, (202) 512-9073
or hillmanr@gao.gov:
For issues related to internal controls and Single Audits: Jeanette M.
Franzel, Managing Director of Financial Management and Assurance, (202)
512-9471 or franzelj@gao.gov:
For issues related to contracting and procurement: Paul L. Francis,
Managing Director of Acquisition Sourcing Management, (202) 512-2811 or
francisp@gao.gov:
Staff Acknowledgments:
The following staff contributed to this report: Stanley Czerwinski,
Denise Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas
James, James McTigue, and Michelle Sager, (Assistant Directors); and
Allison Abrams, David Alexander, Judith Ambrose, Peter Anderson, Lydia
Araya, Thomas Beall, Sandra Beattie, Jessica Botsford, Karen Burke,
Richard Cambosos, Ralph Campbell Jr., Virginia Chanley, Tina Cheng,
Marcus Corbin, Sarah Cornetto, Robert Cramer, Michael Derr, Helen
Desaulniers, Kevin Dooley, Holly Dye, Abe Dymond, Doreen Feldman, Alice
Feldesman, Michele Fejfar, Shannon Finnegan, Alexander Galuten, Ellen
Grady, Victoria Green, Brandon Haller, Anita Hamilton, Geoffrey
Hamilton, Jackie Hamilton, Tracy Harris, Barbara Hills, David Hooper,
Bert Japikse, Stuart Kaufman, Karen Keegan, Nancy Kingsbury, Judith
Kordahl, Hannah Laufe, Armetha Liles, John McGrail, Sarah McGrath, Jean
McSween, Donna Miller, Kevin Milne, Marc Molino, Susan Offutt, Sarah
Prendergast, Brenda Rabinowitz, Carl Ramirez, James Rebbe, Audrey Ruge,
Sidney Schwartz, Jena Sinkfield, John Smale Jr., Michael Springer,
George Stalcup, Jonathan Stehle, Andrew J. Stephens, Gloria Sutton,
Barbara Timmerman, Crystal Wesco, Michelle Woods, and Kimberly Young.
[End of section]
Program Contributors:
The names of GAO staff contributing to information contained in the
sections on the selected program are as follows:
* Edward Byrne Memorial Justice Assistance Grant Program:
Mary Catherine Hult, Eileen Larence, and Margaret Vo.
* Education--SFSF, IDEA, Title I:
Cornelia Ashby, Sandra Baxter, Amy Buck, Bryon Gordon, Sonya Harmeyer,
Susan Lawless, Beth Morrison, Kathy Peyman, Michelle Verbrugge, and
Charlie Willson.
* Medicaid:
Susan T. Anthony, Ted Burik, Julianne Flowers, JoAnn Martinez, Vic
Miller, and Carolyn Yocom.
* Public Housing:
Don Brown, Nina Horowitz, May Lee, John Lord, Paul Schmidt, and Matt
Scire.
* Safeguarding/Single Audit:
Devin Barnas, Marcia Buchanan, James Healy, Eric Holbrook, Kim
McGatlin, Susan Ragland, and Doris Yanger.
* State Budget Stabilization:
Sandra Beattie, Stanley Czerwinski, Shannon Finnegan, Sarah
Prendergast, Michelle Sager, and Michelle Woods.
* Transportation/highway programs:
Steve Cohen, Heather Halliwell, Greg Hanna, and Les Locke.
* Weatherization:
Ric Cheston, Mark Gaffigan, Stuart Ryba and Jason Trentacoste.
* WIA Youth Program:
Dianne Blank, Laura Heald, and Andy Sherrill.
[End of section]
Contributors to the Selected States and the District Appendixes:
The names of GAO staff contributing to the selected states and the
District appendixes are as follows:
Arizona:
Lisa Brownson, Aisha Cabrer, Steve Calvo, Charles Jeszeck, Eileen
Larence, Alberto Leff, Jeff Schmerling, Margaret Vo, and Ann Walker.
California:
Paul Aussendorf, Linda Calbom, Joonho Choi, Michelle Everett, Chad
Gorman, Richard Griswold, Bonnie Hall, Don Hunts, Delwen Jones, Al
Larpenteur, Susan Lawless, Brooke Leary Heather MacLeod, Jeff
Schmerling, Eddie Uyekawa, and Randy Williamson.
Colorado:
Paul Begnaud, Steve Gaty, Kathy Hale, Susan Iott, Jennifer Leone, Brian
Lepore, Robin Nazarro, Tony Padilla, Ellen Phelps Ranen, Lesley Rinner,
and Mary Welch.
District of Columbia:
Shawn Arbogast, Sunny Chang, Marisol Cruz, Nagla'a El-Hodiri, James
Healy, John Hansen, William O. Jenkins, Jr., Linda Miller, Justin
Monroe, Ellen Phelps Ranen, Melissa Schermerhorn, Maria Strudwick, and
Carolyn Yocom.
Florida:
Fannie Bivins, Susan Compton, Patrick Dibattista, Carmen Harris, Anna
Kelly, Kevin Kumanga, Zina Merritt, Jennifer McDonald, Frank Minore,
Vernette Shaw, Andy Sherrill, Cherie' Starck, and Robyn Trotter.
Georgia:
Alicia Puente Cackley, Steve Carter, Emily Chalmers, Chase Cook,
Stephanie Gaines, Nadine Garrick, Erica Harrison, Marc Molino, Daniel
Newman, Terri Rivera Russell, Paige Smith, David Shoemaker, and Robyn
Trotter.
Illinois:
Leslie Aronovitz, Cynthia Bascetta, Rick Calhoon, Dean Campbell,
Katherine Iritani, Dave Lehrer, Rosemary Torres Lerma, Tarek
Mahmassani, Lisa Reynolds, Paul Schmidt.
Iowa:
Tom Cook, James Cooksey, Dan Egan, Christine Frye, Belva Martin,
Marietta Mayfield, Ronald Maxon, Mark Ryan, Lisa Shames and Carol
Herrnstadt Shulman.
Massachusetts:
Stanley Czerwinski, Ramona L. Burton, Nancy J. Donovan, Kathleen M.
Drennan, Denise de Bellerive Hunter, Carol Patey, Salvatore F. Sorbello
Jr., and Robert Yetvin.
Michigan:
Manuel Buentello, Leland Cogliani, Jeff Isaacs, Henry Malone, Revae
Moran, Robert Owens, Anthony Patterson, Susan Ragland, and Mark Ward.
Mississippi:
David Adams, Marshall Hamlett, Barbara Haynes, John K. Needham, Mike
O'Neill, Norman J. Rabkin, Kathleen Peyman, Carrie Rogers, and Erin
Stockdale.
New Jersey:
Gene Aloise, Tahra Nichols, Diana Glod, Greg Hanna, Joah Iannotta,
Kieran McCarthy, Tarunkant Mithani, Vincent Morello, Nitin Rao, Raymond
Sendejas, Cheri Truett, David Wise, and Nancy Zearfoss.
New York:
Peter Anderson, Jeremiah Donoghue, Colin Fallon, Susan Fleming, Dave
Maurer, Summer Pachman, Frank Puttallaz, Jeremy Rothberger, Barbara
Shields, Ronald Stouffer, and Cheri Truett.
North Carolina:
Cornelia Ashby, Carleen Bennett, Bonnie Derby, Terrell Dorn, Bryon
Gordon, Leslie Locke, Stephanie Moriarty, Anthony Patterson, and Scott
Spicer.
Ohio:
Matthew Drerup, Cynthia M. Fagnoni, Laura Jezewski, Bill J. Keller,
Sanford Reigle, David C. Trimble, Myra Watts-Butler, Lindsay Welter;
Charles Wilson, and Doris Yanger.
Pennsylvania:
Mark Gaffigan, Phil Herr, Richard Jorgenson, Richard Mayfield, Andrea
E. Richardson, MaryLynn Sergent, George A. Taylor, Jr., Laurie F.
Thurber, and Lindsay Welter.
Texas:
Anthony Adesina, Carol Anderson-Guthrie, Fred Berry, Ron Berteotti,
Camille Chaires, Sharhonda Deloach, Wendy Dye, K. Eric Essig, Michael
O'Neill, Daniel Silva, and Lorelei St. James.
[End of table]
[End of section]
Footnotes:
[1] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[2] The estimated budget gaps are reported by associations representing
state officials. See The National Governors Association and the
National Association of State Budget Officers, The Fiscal Survey of
States (Washington, D.C., June 2009).
[3] Recovery Act, div. A, title IX, §901.
[4] GAO, Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential,
[hyperlink, http://www.gao.gov/products/GAO-09-580] (Washington, D.C.:
Apr. 23, 2009).
[5] The states we are following as part of our analysis are Arizona,
California, Colorado, Florida, Georgia, Illinois, Iowa, Massachusetts,
Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, and Texas.
[6] This total includes two entities in the District of Columbia that
received direct federal funding that was not passed through the
District government.
[7] For this report, GAO reviewed states' and localities' use of
Recovery Act funds for (1) the Medicaid Federal Medical Assistance
Percentage (FMAP), (2) the State Fiscal Stabilization Fund (SFSF), (3)
the Federal-Aid Highway Surface Transportation Program, (4) the Public
Housing Capital Fund, (5) Title I, Part A of the Elementary and
Secondary Education Act of 1965 (ESEA); (6) Parts B and C of the
Individuals with Disabilities Education Act (IDEA); (7) the
Weatherization Assistance Program; (8) the Edward Byrne Memorial
Justice Assistance Grant (JAG) Program; and (9) the Workforce
Investment Act (WIA) Youth Program.
[8] The Web site [hyperlink, http://www.recovery.gov] is mandated by
the Recovery Act to foster greater accountability and transparency in
the use of the act's funds. The Web site is required to include plans
from federal agencies; information on federal awards of formula grants
and awards of competitive grants; and information on federal
allocations for mandatory and other entitlement programs by state,
county, or other appropriate geographical unit. The Web site is
maintained by the Recovery Accountability and Transparency Board.
[9] Recovery Act, div. B, title V, § 5001.
[10] The percentage increase is based on actual state enrollment data
for October 2007 to April 2009 and projected enrollment data for May
2009, with the exception of New York, which provided projected
enrollment data for March, April and May 2009. Three states--Florida,
Georgia, and Mississippi--did not provide projected enrollment data for
May 2009. We estimated enrollment for these states for May 2009 to
determine the total change in enrollment for October 2007 to May 2009.
[11] Colorado was the only state in GAO's sample of states that had not
drawn down increased FMAP funds as of GAO's first report in April 2009.
However, the state completed its first draw down of funds on April 30,
2009.
[12] In order to qualify for the increased FMAP, states generally may
not apply eligibility standards, methodologies, or procedures that are
more restrictive than those in effect under their state Medicaid plans
or waivers on July 1, 2008. See Recovery Act, div. B, title V,
§5001(f)(1)(A).
[13] Under the Recovery Act, states are not eligible to receive the
increased FMAP for certain claims for days during any period in which
that state has failed to meet the prompt payment requirement under the
Medicaid statute as applied to those claims. See Recovery Act, div. B,
title V, §5001(f)(2). Prompt payment requires states to pay 90 percent
of clean claims from health care practitioners and certain other
providers within 30 days of receipt and 99 percent of these claims
within 90 days of receipt. See 42 U.S.C. §1396a(a)(37)(A).
[14] See Recovery Act, div. B, title V, §5001(f)(3).
[15] In some states, political subdivisions--such as cities and
counties--may be required to help finance the state's share of Medicaid
spending. Under the Recovery Act, a state that has such financing
arrangements is not eligible for certain elements of the increased FMAP
if it requires subdivisions to pay during a quarter of the recession
adjustment period a greater percentage of the nonfederal share than the
percentage that would have otherwise been required under the state plan
on September 30, 2008. See Recovery Act, div. B., title V, §
5001(g)(2). The recession adjustment period is the period beginning
October 1, 2008, and ending December 31, 2010.
[16] A state is not eligible for certain elements of increased FMAP if
any amounts attributable directly or indirectly to them are deposited
or credited into a state reserve or rainy day fund. Recovery Act, div.
B, title V, §5001(f)(3).
[17] Our review focused on the 2007 Single Audits because it is the
most recent year for which single audits were completed for all our
states and the District. However, as of June 10, 2009, 2008 Single
Audits were available for eight states. For more information about the
material weaknesses identified in the Single Audits for 2007 and 2008,
refer to the individual state appendixes.
[18] The Single Audit Act of 1984, as amended (31 U.S.C. ch. 75),
requires that each state, local government, or nonprofit organization
that expends $500,000 or more a year in federal awards must have a
Single Audit conducted for that year subject to applicable
requirements, which are generally set out in Office of Management and
Budget Circular No. A-133, Audits of States, Local Governments and Non-
Profit Organizations (June 27, 2003). If an entity expends federal
awards under only one federal program, the entity may elect to have an
audit of that program.
[19] The U.S. Department of Transportation has interpreted the term
obligation of funds to mean the federal government's contractual
commitment to pay for the federal share of the project. This commitment
occurs at the time the federal government signs a project agreement.
[20] GAO, Highway Bridge Program: Clearer Goals and Performance
Measures Needed for a More Focused and Sustainable Program, [hyperlink,
http://www.gao.gov/products/GAO-08-1043] (Washington, D.C.: Sept. 10,
2008).
[21] Recovery Act, div. A, title XII, 123 Stat. 115, 206.
[22] Id.
[23] According to these criteria, to qualify as an EDA, the area must
(1) have a per capita income of 80 percent or less of the national
average; (2) have an unemployment rate that is, for the most recent 24-
month period for which data are available, at least 1 percent greater
than the national average unemployment rate; or (3) be an area the
Secretary of Commerce determines has experienced or is about to
experience a special need arising from actual or threatened severe
unemployment or economic adjustment problems resulting from severe
short-term or long-term changes in economic conditions (42 U.S.C. §
3161(a)). Eligibility must be supported using the most recent federal
data available or, in the absence of recent federal data, by the most
recent data available through the government of the state in which the
area is located. Federal data that may be used include data reported by
the Bureau of Economic Analysis, the Bureau of Labor Statistics, the
Census Bureau, the Bureau of Indian Affairs, or any other federal
source determined by the Secretary of Commerce to be appropriate (42
U.S.C. § 3161(c)).
[24] Recovery Act, div. A, title XII, § 1201.
[25] The state based its EDA classification on (1) whether the 2008
year-end unemployment rate was at or above the statewide average, (2)
whether the change in the unemployment rate between 2007 and 2008 was
at or above the statewide average, or (3) whether the number of
unemployed persons for 2008 had grown by 500 or more.
[26] Illinois's criteria resulted in 21 counties being classified as
EDAs that were not so classified by FHWA and 8 counties not being
classified as EDAs that were so classified by FHWA, for a net
difference of 13 counties. The map tool that FHWA developed to help
states identify which projects are located in EDAs is based on the
criteria in the Public Works Act.
[27] The federal share under the existing federal-aid highway program
is generally 80 percent and the matching requirement for states is
usually 20 percent. In 2004, we reported that in 2002, states and
localities contributed 54 percent of the nation's capital investment in
highways, while the federal government contributed 46 percent (in 2001
dollars).
[28] GAO, Federal-Aid Highways: Trends, Effect on State Spending, and
Options for Future Program Design, [hyperlink,
http://www.gao.gov/products/GAO-04-802] (Washington, D.C.: Aug. 31,
2004).
[29] GAO, Physical Infrastructure: Challenges and Investment Options
for the Nation's Infrastructure, [hyperlink,
http://www.gao.gov/products/GAO-08-763T] (Washington, D.C.: May 8,
2008).
[30] We reported on the impact of federal requirements in December 2008
(see [hyperlink, http://www.gao.gov/products/GAO-09-36]). We selected
these three states because we did not include these states in the scope
of our previous report and because these states have varying
environmental planning and labor environments. For example, New Jersey
has a state environmental planning law, while the other states do not,
and, according to the Bureau of Labor Statistics, in 2008, union
membership in New Jersey was 18.3 percent, while 8.8 percent of Arizona
and 5.3 percent of Mississippi workers were union members.
[31] Schools identified for corrective action have missed academic
targets for 4 consecutive years and schools implementing restructuring
have missed academic targets for 6 consecutive years.
[32] This was phase I funding. A state will receive the remaining
allotment of its SFSF allocation in phase II after Education approves
the state's comprehensive plan for making progress with respect to the
four education reform assurances. Education anticipates that phase II
funds will be awarded by September 30, 2009.
[33] DQC is a national collaborative effort involving more than 50
organizations working to encourage and support state policymakers to
improve the availability and use of high-quality education data to
improve student achievement. NCEA, a nonprofit organization owned by
ACT Inc.--a company that develops and markets assessments--focuses on
raising student achievement based on a higher college and career
readiness standards. Achieve, created in 1996 by the nation's governors
and corporate leaders, is an independent, bipartisan, nonprofit
education reform organization focused on raising academic standards and
graduation requirements, improving assessments, and strengthening
accountability.
[34] GAO visited at least two LEAs per state and in the District of
Columbia that were among the top ten LEAs in the state, or the District
of Columbia, in terms of Title I appropriations, and that had schools
in improvement status.
[35] During our review, we met with IHEs and state officials
responsible for IHE oversight in 8 states--California, Florida,
Georgia, Illinois, Mississippi, New York, North Carolina, and Ohio. Of
the 16 states covered by our review, 6 had received approval from
Education for phase I SFSF funding as of May 8, 2009.
[36] The Recovery Act also makes $3 billion in school improvement funds
available under Title I.
[37] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver,
and must grant all of their funds by September 30, 2011--provisions
referred to as carryover limitations.
[38] Education provided examples of allowable uses such as teacher
training, using longitudinal data systems to improve achievement, and
providing high-quality online courseware in mathematics and science for
secondary school students.
[39] U.S. Department of Education, Final Audit Report ED-OIG/A09H0020,
California Department of Education Advances of Federal Funding to Local
Educational Areas (Washington, D.C., March 2009). The department's IG
noted, among other findings, that California does not have an adequate
system in place to ensure that LEAs comply with the federal cash
management rules requiring LEAs to remit on a timely basis interest
earned on cash advances for any amounts exceeding $100. The IG
estimated that statewide, LEAs earned about $11 million in interest on
Title I cash balances and found that most LEAs the IG reviewed did not
calculate and remit their interest earnings.
[40] Georgia did not set a specific application deadline, but once
applications are approved, LEAs will be asked to submit their budgets
for fiscal year 2010 and cannot draw down their allocated funds until
their budgets have been approved.
[41] California granted initial funding eligibility to all LEAs that
had elected to receive Title I, Part A funds in school year 2008-2009
and asked LEAs to finalize their eligibility by applying for Title I
funds in school year 2009-2010.
[42] GAO visited at least 2 LEAs in each of the 16 States and the
District of Columbia. We selected LEAs based on the size of their Title
I allocations and the number of schools in improvement in the district.
The above analysis is based on 42 LEAs we visited.
[43] LEAs must obligate at least 85 percent of their Recovery Act ESEA
Title I, Part A funds by September 30, 2010, unless granted a waiver,
and all of their funds by September 30, 2011.
[44] Generally, States are required to demonstrate "maintenance of
effort" by showing that either their combined fiscal effort per student
or the aggregate expenditures within the state with respect to the
provision of free public education for the preceding fiscal year were
not less than 90 percent of such combined fiscal effort or aggregate
expenditures for the second preceding fiscal year.
[45] Under ESEA Title I, supplemental educational services must be
available to students in schools that have not met state targets for
increasing student achievement (adequate yearly progress) for 3 or more
years. Districts with schools in improvement are required to provide an
amount no less than 20 percent of their Title I, Part A allocations for
supplemental educational services and public school transportation. The
term supplemental educational services means tutoring and other
supplemental academic enrichment services that are in addition to
instruction provided during the school day, are specifically designed
to increase the academic achievement of eligible students as measured
by the state's assessment system, and enable these children to attain
proficiency in meeting state academic achievement standards.
[46] This does not necessarily mean that no guidance was received. The
official could have known about state guidance and not mentioned it in
our interview or not been aware of guidance that had been provided.
[47] LEAs must use federal funds to supplement state and local funds
and cannot use federal funds to supplant state or local spending.
[48] States were not required to submit an application to Education in
order to receive the initial Recovery Act funding for IDEA Parts B and
C, funding that represents 50 percent of the total IDEA funding
provided in the Recovery Act for each jurisdiction. States will receive
the remaining 50 percent by September 30, 2009, after submitting
information to Education addressing how they will meet Recovery Act
accountability and reporting requirements.
[49] For the IDEA Part B Recovery Act funds, for each state covered by
our review, GAO visited at least two LEAs that were among the top ten
LEAs in the state in terms of Title I appropriations and that had
schools in improvement status. In the District of Columbia, GAO visited
the District of Columbia Public Schools and a charter school company.
[50] In response to requests for more guidance on the recipient
reporting process and required data, OMB issued additional implementing
guidance for recipient reporting on June 22, 2009.
[51] States are required to collect and examine data to determine if
LEAs have significant disproportionality based on race and ethnicity in
the identification of children as children with disabilities, the
placement in particular education settings of such children, and the
incidence, duration, and type of disciplinary actions.
[52] IDEA, Part C provides funds to each state lead agency designated
by the governor. The state lead agency can be a state educational
agency, but it can also be another state agency. For example, in
Colorado and Illinois, the Part C lead agency is the state's Department
of Human Services, and in Ohio, the Part C lead agency is the state
Department of Health.
[53] H.R. Rep. No. 111-16, at 448 (2009).
[54] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009).
[55] Current federal wage law specifies a minimum wage of $6.55 per
hour until July 24, 2009, when it becomes $7.25 per hour. Where federal
and state law have different minimum wage rates, the higher standard
applies.
[56] We did not include these three states in our review due to
workload considerations.
[57] In Pennsylvania, only 40 percent of the allocation is available
for the local areas to spend before July 1; Pennsylvania officials
expect the balance to be available on or after July 1, when they expect
the state to enact its budget.
[58] These are cash draw downs from the Department of Health and Human
Services' Payment Management System. Under the procedures for using
these funds, funds are to be drawn down no more than 3 days in advance
of paying bills.
[59] We visited from two to four local workforce areas in each of our
states.
[60] Department of Labor, Training and Employment Guidance Letter No.
14-08 (Mar. 18, 2009). This guidance also makes reference to the $750
million in separate Recovery Act funds made available to Labor to award
competitive grants for training and placing workers in the energy
efficiency, renewable energy, and other industries and indicates that
about $500 million of this funding will be used for activities that
prepare individuals for careers in industries as defined in the Green
Jobs Act of 2007.
[61] HUD is also required to award $1 billion to public housing
agencies based on competition for priority investments, including
investments that leverage private sector funding/financing for
renovations and energy conservation retrofit investments. HUD expects
to begin awarding competitive bids in July or August 2009.
[62] HUD allocated Capital Fund formula dollars from the Recovery Act
to 11 additional public housing agencies, but these housing agencies
chose not to accept Recovery Act funding, no longer had eligible public
housing projects that could utilize the funds, or had not yet entered
into an agreement with HUD for the funds. As a result, these funds have
not been obligated by HUD.
[63] When housing agencies sign contracts for Capital Fund projects,
they report obligations of these funds in HUD's Electronic Line of
Credit and Control System (ELOCCS). As invoices are submitted for
actual work done, these funds are drawn from ELOCCS and expended in
payment of invoices.
[64] HUD developed PHAS to evaluate the overall condition of housing
agencies and to measure performance in major operational areas of the
public housing program. These include financial condition, management
operations, and physical condition of the housing agencies' public
housing programs. Housing agencies that are deficient in one or more of
these areas are designated as troubled performers by HUD and are
statutorily subject to increased monitoring.
[65] The Recovery Act provided HUD the authority to decide whether to
provide troubled housing agencies Recovery Act funds. Although HUD
determined that troubled housing agencies have a need for Recovery Act
funding, it acknowledged that troubled housing agencies would require
increased monitoring and oversight in order to meet the Recovery Act
requirements.
[66] GAO, Public Housing: HUD's Oversight of Housing Agencies Should
Focus More on Inappropriate Use of Program Funds, [hyperlink,
http://www.gao.gov/products/GAO-09-33] (Washington, D.C.: Jun. 11,
2009).
[67] After soliciting responses from a broad array of stakeholders, OMB
issued additional implementing guidance for recipient reporting on June
22, 2009. See, OMB Memorandum, M-09-21, Implementing Guidance for the
Reports on Use of Funds Pursuant to the American Recovery and
Reinvestment Act of 2009.
[68] State awards are provided to all states, the District of Columbia,
Guam, American Samoa, the Commonwealth of Puerto Rico, the Virgin
Islands, and the Northern Mariana Islands.
[69] As part of the Violence Against Women and Department of Justice
Reauthorization Act of 2005 (Pub. L. No. 109-162, 119 Stat. 2960
(2006)), the JAG program was established by, in general, blending the
previous Byrne Grant and Local Law Enforcement Block Grant programs.
[70] DOJ's Bureau of Justice Statistics calculates a minimum base
allocation for each state and territory, which, based on the statutory
JAG formula, can be enhanced by (1) the state's share of the national
population and (2) the state's share of the country's Part 1 violent
crime statistics. Part 1 violent crime statistics are computed as a 3-
year average using figures published in the FBI's annual Crime in the
United States and include murder, nonnegligent manslaughter, forcible
rape, robbery, and aggravated assault.
[71] This amount is calculated by the Census Bureau for the Bureau of
Justice Statistics and is based on each state's criminal justice
expenditures.
[72] For JAG program purposes, a unit of local government is a town,
township, village, parish, city, county, or other general purpose
political subdivision of a state; any law enforcement district or
judicial enforcement district that is established under applicable
state law and has authority to, in a manner independent of other state
entities, establish a budget and impose taxes; or a federally
recognized Indian tribe or Alaskan Native organization that performs
law enforcement functions as determined by the Secretary of the
Interior. For the JAG Recovery program, local governments were not
eligible for direct awards from BJA if they did not submit at least 3
years of crime data to the FBI for the most recent 10-year period (1998-
2007) or if their level of crime did not meet a certain threshold to be
eligible.
[73] During programmatic monitoring, grant managers are to assess the
performance of grant programs by addressing the content and substance
of a program. Administrative monitoring addresses compliance with grant
terms and grantee reporting and documentation requirements, and
financial monitoring reviews expenditures compared to an approved
budget.
[74] The Office of Audit, Assessment, and Management serves as the
central source for grant management policy and procedures and oversees
the programmatic monitoring activities within OJP. In addition, this
office ensures financial grant compliance and auditing of OJP's
internal controls to prevent waste, fraud, and abuse; and conducts
programmatic assessments of Department of Justice grant programs.
[75] Texas officials provided information on state Recovery Act JAG
funds obligated as of June 25, 2009. Colorado and Massachusetts
officials provided information on state Recovery Act JAG funds
obligated as of June 26, 2009.
[76] Georgia officials provided information on state Recovery Act JAG
funds obligated as of June 25, 2009.
[77] State administering agencies are also responsible for coordinating
JAG funds among state and local initiatives, monitoring subrecipients'
compliance with JAG requirements, and submitting financial and
programmatic reports to BJA.
[78] For the District of Columbia, all JAG funds are awarded directly
to the District.
[79] See, OMB Memorandum, M-09-21, Implementing Guidance for the
Reports on Use of Funds Pursuant to the American Recovery and
Reinvestment Act of 2009.
[80] Our discussion on weatherization is primarily limited to the 16
states and the District of Columbia that are the focus of this report.
[81] States also have the fiscal year 2009 appropriation and prior year
balances available.
[82] DOE has also approved state weatherization plans for Delaware,
Kansas, Maryland, Montana, Nebraska, Nevada, North Dakota, Oregon,
South Carolina, South Dakota, Utah, and West Virginia.
[83] According to the National Association of State Budget Officers
(NASBO), most states have balanced-budget requirements for general
funds, which may include requirements such as (1) requiring governors
to submit a balanced budget, (2) mandating that their legislatures pass
a balanced budget, (3) directing governors to sign a balanced budget,
or (4) requiring governors to execute a balanced budget. According to
NASBO, all of the states we visited have balanced-budget requirements.
(In its report, NASBO did not provide information on the District of
Columbia's balanced budget requirements.) See NASBO, Budget Processes
in the States (Washington, D.C.: Summer 2008).
[84] Michigan--along with the District of Columbia--has a fiscal year
that begins October 1. New York's fiscal year begins April 1, and the
fiscal year for Texas begins on September 1. All other states we
visited have fiscal years beginning July 1.
[85] Recent reports provide additional details regarding revenue
declines beyond our selected states. For example, see The National
Governors Association and the National Association of State Budget
Officers, The Fiscal Survey of States (Washington, D.C., June 2009);
National Conference of State Legislatures, Budget Update: April 2009
(Washington, D.C., April 2009); Lucy Dadayan and Donald J. Boyd, The
Nelson A. Rockefeller Institute of Government, April is the Cruelest
Month: Personal Income Tax Revenues Portend Deepening Trouble for Many
States (Albany, N.Y., June 18, 2009).
[86] This projected shortfall is after the California Governor and
Legislature addressed a $42 billion budget gap in February 2009 in the
general fund. As of June 30, the California Legislature had not passed
legislation for the Governor to sign that would resolve the state's
budget deficit. The May 2009 budget revision indicates that revenues
and transfers in fiscal years 2008-2009 and 2009-2010 total
approximately $178 billion.
[87] According to NASBO, the selected states have varying legal
requirements regarding contributions to and withdrawals from various
types of reserve funds.
[88] Texas Legislature, Conference Committee Report for S.B. No. 1
General Appropriations Bill, Special Provisions for American Recovery
and Reinvestment Act, section 7.
[89] West's Ann. Cal. Gov't Code Sec. 13400 et seq.
[90] Colo. Rev. Stat. § 24-17-102 (2008).
[91] Colo. Rev. Stat. § 24-17-103 (2008).
[92] Fla. Stat. § 215.86.
[93] N.Y. Exec. § 950-953.
[94] Standards for Internal Control in New York State Government,
revised October 2007.
[95] Budget Policy and Reporting Manual, Governmental Internal Control
and Internal Audit Requirements, B-350.
[96] The five basic components of internal controls are control
environment, risk assessment, control activities, information and
communication, and monitoring.
[97] N.C.G. St. Ann. ch. 143D.
[98] Miss. Code Ann. sec. 7-7-3(6).
[99] District of Columbia, Audit of the Department of Parks and
Recreation's Oversight of Capital Projects, OIG No. 06-1-08HA (May
2008).
[100] Recovery Act, div. A, title XV, § 1512.
[101] OMB memoranda, M-09-10, Initial Implementing Guidance for the
American Recovery and Reinvestment Act of 2009 (Feb. 18, 2009); and M-
09-15, Updated Implementing Guidance for the American Recovery and
Reinvestment Act of 2009 (Apr. 3, 2009).
[102] GAO, Grants Management: Additional Actions Needed to Streamline
and Simplify Process, [hyperlink,
http://www.gao.gov/products/GAO-05-335] (Washington, D.C.: Apr. 18,
2005).
[103] GAO, Federal Assistance: Grant System Continues to Be Highly
Fragmented, [hyperlink, http://www.gao.gov/products/GAO-03-718T]
(Washington, D.C.: Apr. 29, 2003).
[104] The Single Audit Act requires states, local governments, and
nonprofit organizations expending more than $500,000 in federal awards
in a year to obtain an audit in accordance with requirements set forth
in the act. A Single Audit consists of (1) an audit and opinions on the
fair presentation of the financial statements and the Schedule of
Expenditures of Federal Awards; (2) gaining an understanding of and
testing internal control over financial reporting and the entity's
compliance with laws, regulations, and contract or grant provisions
that have a direct and material effect on certain federal programs
(i.e., the program requirements); and (3) an audit and an opinion on
compliance with applicable program requirements for certain federal
programs.
[105] The auditor identifies the applicable federal programs, including
"major programs," based on risk criteria, including minimum dollar
thresholds, set out in the Single Audit Act and OMB Circular No. A-133.
Guidance on identifying compliance requirements for most large federal
programs is set out in the Compliance Supplement to OMB Circular No. A-
133. OMB has 14 requirements that generally are to be tested for each
major federal program to opine on compliance and report on significant
deficiencies in internal control over compliance with each applicable
compliance requirement.
[106] NSAA's mission is to unite state auditors by encouraging and
providing opportunities for the free exchange of information and ideas
between auditors on the state, federal, and local levels.
[107] H.R. 2182, 11th Cong. (2009). H.R. 2182 passed in the House of
Representatives on May 19, 2009, but, as of June 29, 2009, had not
passed the Senate.
[108] Single Audit Act Section 7502(b)(2). The guidance provides that
under certain conditions, Single Audit auditees may be audited
biennially instead of annually. For entities that are audited
biennially, it is longer before internal control and compliance
weaknesses are identified and remediate.
[109] Department of Health and Human Services is the cognizant agency
for the 16 states and District of Columbia that are included in our
review. According to OMB Circular No. A-133 §.400(a)(2), if an entity
needs an extension for submission of their Single Audit report, the
cognizant agency must consider auditee requests for extension to the
report submission due date.
[110] OMB Circular No. A-133 provides that federal agencies can use
sanctions, including withholding a percentage of federal awards until
the audit is completed satisfactorily, withholding or disallowing
federal costs, suspending federal awards until an audit is conducted,
or terminating the federal award.
[111] OMB Memorandum M-09-15, Updated Implementing Guidance for the
American Recovery and Reinvestment Act of 2009 (Apr. 3, 2009). This
guidance supplements, amends, and clarifies the initial guidance issued
by OMB on February 18, 2009.
[112] See, OMB memoranda, M-09-21, Implementing Guidance for the
Reports on Use of Funds Pursuant to the American Recovery and
Reinvestment Act of 2009 (June 22, 2009).
[113] Recovery Act, div. A, title XV, § 1512(b)(1)(A).
[114] Executive Office of the President, Council of Economic Advisers,
Estimates of Job Creation From the American Recovery and Reinvestment
Act of 2009 (May 2009).
[115] Subrecipients are nonfederal entities awarded Recovery Act
funding through a legal instrument from the prime recipient to support
the performance of any portion of the substantive project or program
for which the prime recipient received the Recovery Act funding.
[116] XML is a language to describe structured data.
[117] OMB Memorandum M-09-15, Updated Implementing Guidance for the
American Recovery and Reinvestment Act of 2009 (Apr. 3, 2009).
[118] Such plans are required by the Government Performance and Results
Act of 1993. 5 U.S.C. § 306.
[119] According to OMB guidance, rather than establishing a new
council, agencies are encouraged to leverage their existing Senior
Management Councils to oversee Recovery Act performance across the
agency, including risk management. The Senior Management Council should
be composed of the Chief Financial Officer, Senior Procurement
Executive, Chief Human Capital Officer, Chief Information Officer,
Performance Improvement Officer, and managers of programmatic offices.
The agency's Senior Accountable Official should also participate and
assume a leadership role. Agencies should also consider having their
Office of General Counsel and Office of Inspector General serve in
advisory roles on the Senior Management Council.
[120] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[121] OMB Memorandum M-09-15, Updated Implementing Guidance for the
American Recovery and Reinvestment Act of 2009 (Apr. 3, 2009). This
guidance supplements, amends, and clarifies the initial guidance issued
by OMB on February 18, 2009. OMB memorandum, M-09-21, Implementing
Guidance for the Reports on Use of Funds Pursuant to the American
Recovery and Reinvestment Act of 2009 (June 22, 2009).
[122] The three categories identified in GAO's April report are (1)
accountability and transparency requirements, (2) administrative
support and oversight, and (3) communications. For additional details,
see GAO, Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential,
[hyperlink, http://www.gao.gov/products/GAO-09-580] (Washington, D.C.:
Apr. 23, 2009).
[123] OMB memorandum, M-09-18, Payments to State Grantees for
Administrative Costs of Recovery Act Activities (May 11, 2009).
[124] Consistent with GAO's past work showing that tax expenditures
receive less scrutiny than outlay programs (e.g., GAO, Government
Performance and Accountability: Tax Expenditures Represent a
Substantial Federal Commitment and Need to Be Reexamined, [hyperlink,
http://www.gao.gov/products/GAO-05-690] (Washington, D.C.: Sept. 23,
2005), we have begun work to determine the level of transparency and
oversight that will be provided for the Recovery Act tax provisions.
Administration officials are formulating plans for what information
will be collected, analyzed, and reported for the tax provisions. See
also: GAO, American Recovery and Reinvestment Act: GAO's Role in
Helping to Ensure Accountability and Transparency, [hyperlink,
http://www.gao.gov/products/GAO-09-453T] (Washington, D.C.: Mar. 5.
2009).
[125] GAO, Recovery Act: As Initial Implementation Unfolds in States
and Localities, Continued Attention to Accountability Issues Is
Essential, [hyperlink, http://www.gao.gov/products/GAO-09-580]
(Washington, D.C.: Apr. 23, 2009).
[126] States selected for our longitudinal analysis are Arizona,
California, Colorado, Florida, Georgia, Illinois, Iowa, Massachusetts,
Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, and Texas.
[127] GAO, Federal-Aid Highways: Federal Requirements for Highways May
Influence Funding Decisions and Create Challenges, but Benefits and
Costs Are Not Tracked, [hyperlink,
http://www.gao.gov/products/GAO-09-36] (Washington, D.C.: Dec. 12,
2008).
[128] We did not include these three states in our review due to
workload considerations.
[End of section]
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