GAO-09-1016, Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed


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Report to the Subcommittee on Oversight of Government Management, the 
Federal Workforce, and the District of Columbia, Committee on Homeland 
Security and Governmental Affairs, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

September 2009: 

Report to Congressional Committees: 

Recovery Act: 

Funds Continue to Provide Fiscal Relief to States and Localities, While 
Accountability and Reporting Challenges Need to Be Fully Addressed

GAO-09-1016: 

GAO Highlights: 

Highlights of GAO-09-1016, a report to the Senate and House Committees 
on Appropriations, Senate Committee on Homeland Security and 
Governmental Affairs, and House Committee on Oversight and Government 
Reform. 

Why GAO Did This Study: 

This report, the third in response to a mandate under the American 
Recovery and Reinvestment Act of 2009 (Recovery Act), 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 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 (District)— 
representing about 65 percent of the U.S. population and two-thirds of 
the intergovernmental federal assistance available. Under the Recovery 
Act, GAO collected and analyzed documents and interviewed state and 
local officials. GAO also analyzed federal agency guidance and spoke 
with Office of Management and Budget (OMB) officials and with program 
officials at the federal agencies overseeing Recovery Act programs. 

What GAO Found: 

Across the United States, as of September 11, 2009, the Department of 
the Treasury had outlayed about $48 billion of the estimated $49 
billion in Recovery Act funds projected for use in states and 
localities in federal fiscal year 2009, as shown in the figure. More 
than three quarters of the 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. 

Figure: 

[Refer to PDF for image: vertical bar graph] 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2009; 
Original estimate: $48.9 billion; 
Actual as of September 11, 2009: $48 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2010; 
Original estimate: $107.7 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2011; 
Original estimate: $63.4 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2012; 
Original estimate: $23.3 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2013; 
Original estimate: $14.4 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2014; 
Original estimate: $9.1 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2015; 
Original estimate: $5.7 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2016; 
Original estimate: $2.5 billion. 

Source: GAO analysis of CBO, Federal Funds Information for States, and 
Recovery.gov data. 

[End of figure] 

Increased Medicaid FMAP Funding: 

All 16 states and the District have drawn down increased Medicaid FMAP 
grant awards of just over $20.3 billion for October 1, 2008, through 
September 15, 2009, which amounted to over 87 percent of funds 
available. All states and the District experienced Medicaid enrollment 
growth. 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. Most states also 
reported that they would use freed-up funds to finance general state 
budget needs. The increased FMAP continues to help states finance their 
growing Medicaid programs, but state and District officials expressed 
concern about the longer term sustainability of their Medicaid programs 
after the increased FMAP funds are no longer available, beginning in 
January 2011. 

Highway Infrastructure Investment and Transit Funding: 

A substantial portion of the approximately $35 billion the Recovery Act 
appropriated for highway infrastructure projects and public transit has 
been obligated nationwide and in the states and the District that are 
the focus of GAO’s review. As of September 1, the Department of 
Transportation (DOT) had obligated approximately $11 billion for almost 
3,800 highway infrastructure and other eligible projects in the 16 
states and the District and had reimbursed these 17 jurisdictions about 
$604 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, and could employ people quickly. For transit funds, GAO focused 
on the Transit Capital Assistance Program, which received $6.9 billion— 
or 82 percent—of the Recovery Act public transit funds. Recovery Act 
funds obligated under this program are primarily being used for 
upgrading transit facilities, improving bus fleets, and conducting 
preventive maintenance. Recipients of highway and transit Recovery Act 
funds, such as state departments of transportation and transit 
agencies, are subject to multiple reporting requirements. Although some 
guidance has been provided from OMB and DOT, state highway and transit 
officials expressed concerns and challenges about reporting 
requirements. GAO recommends that the Secretary of DOT continue to 
reach out to state transportation departments and transit agencies to 
identify common problems in accurately fulfilling reporting 
requirements and provide additional guidance, as appropriate. 

State Fiscal Stabilization Fund: 

As of September 15, 2009, the District and 15 of the 16 states covered 
by our review had received approval from Education for their initial 
SFSF funding applications. Pennsylvania had submitted an application to 
Education, but it had not yet been approved. As of August 28, 2009, 
Education had made $21 billion in SFSF grants for education available 
to the 15 states and the District—of which over $7.7 billion had been 
drawn down. GAO has previously reported that school districts said they 
would use SFSF funds to maintain current levels of education funding, 
particularly for retaining teachers and staff and current education 
programs. They also told GAO that SFSF funds would help offset state 
budget cuts. Education has not completed monitoring plans for SFSF, and 
it is not clear that states have begun to put in place subrecipient 
monitoring systems that comply with Education’s requirements. GAO 
recommends that Education take further action to ensure states 
understand and carry out their responsibility to monitor subrecipients 
of SFSF funds and consider providing training and technical assistance 
to states to help them develop state monitoring plans for SFSF. 

Other Recovery Act Programs: 

GAO makes recommendations in this report on other Recovery Act 
programs, as well. While many program officials, employers, and 
participants believe the Workforce Investment Act summer youth program 
activities have been successful, measuring actual outcomes has proven 
challenging and may reveal little about what the program achieved. GAO 
recommends that the Secretary of Labor provide additional guidance on 
how to measure work readiness—Labor’s indicator to gauge the effect of 
the summer youth activities. Also, to build on the important steps the 
Department of Housing and Urban Development (HUD) has already taken to 
monitor housing agencies’ use of Recovery Act funds, GAO recommends 
that the Secretary of HUD expand criteria for selecting housing 
agencies for onsite reviews to include housing agencies with open 
Single Audit findings that may affect the use of and reporting on 
Recovery Act funds. In addition, the Recovery Act appropriated $5 
billion over 3 years for the DOE Weatherization Assistance Program. 
However, most states have not begun to weatherize homes, partly because 
of concerns about prevailing wage rate requirements. Labor completed 
its determination of the wage rates on September 3, 2009. 

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. Moreover, current guidance does not achieve the level of 
accountability needed to effectively respond to risks. OMB is vetting a 
pilot program for early written communication of internal control 
deficiencies for Recovery Act programs that, if properly scoped to 
achieve sufficient coverage of Recovery Act programs, could address 
concerns about the timeliness of Single Audit reporting. Finally, state 
auditors need additional flexibility and funding to undertake the added 
Single Audit responsibilities under the Recovery Act. 

Impact: 

States and localities as nonfederal recipients of Recovery Act funds 
are required to report quarterly on a number of measures, including the 
use of funds and estimates of the number of jobs created and retained. 
This unprecedented level of detailed information to be reported by a 
large number of recipients into a new centralized reporting system 
raises possible risk for the quality and reliability of these data. The 
first of these reports is due in October 2009. 

GAO’s Crosscutting Recommendations: 

GAO reports on progress in addressing its prior recommendations that 
OMB provide: 

* clearer accountability for recipient financial data,
* program-specific examples of recipient reports, outreach to 
nonfederal recipients, and further guidance on program performance 
measures; and; 
* timely notification of funding provided within a state to key state 
officials and a master schedule for anticipated new or revised federal 
agency guidance. 

What GAO Recommends: 

GAO makes recommendations to federal agencies to address accountability 
and transparency issues. They are discussed on the next page and in the 
report. GAO also has recommendations to OMB (on pages 122 and 131-134) 
and a matter for congressional consideration (on page 123). The report 
draft was discussed with federal and state officials who generally 
agreed with its contents. 

View [hyperlink, http://www.gao.gov/products/GAO-09-1016] or key 
components. For state summaries, see GAO-09-1017SP. For more 
information, contact J. Christopher Mihm at (202) 512-6806 or 
mihmj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

States Continue Use of Recovery Act Funds While Preparing for First 
Required Report Cycle: 

A Growing Number of Housing Agencies Are Obligating and Beginning to 
Draw Down Recovery Act Formula Funds: 

DOE’s Weatherization Assistance Program: 

Most States Have Not Begun to Weatherize Homes Partly Because of Their 
Concerns about Prevailing Wage Rate Requirements: 

Local Agencies Generally Have Responsibility for Procuring 
Weatherization Materials: 

DOE Has Issued Guidance to Mitigate Risk in the Weatherization Program, 
and Some States Have Established Additional Measures: 

States Are Beginning to Monitor Recovery Act Weatherization Impacts, 
and Most Plan to Meet Reporting Requirements: 

Crosscutting Recommendations: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Labor: 

Appendix III: Local Entities Visited by GAO in Selected States and the 
District of Columbia: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Original and Increased Quarterly FMAPs for Fiscal Year 2009 
for 16 States and the District (Percentage Points): 

Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the 
District, as of September 15, 2009: 

Table 3: Recovery Act Highway Apportionments and Obligations Nationwide 
and in Selected States as of September 1, 2009: 

Table 4: Recovery Act Highway Reimbursements Nationwide and in Selected 
States as of September 1, 2009: 

Table 5: Recovery Act Highway Apportionments and Obligations for 
Suballocated Areas Nationwide and in Selected States as of September 1, 
2009: 

Table 6: Percentage of Recovery Act Transit Capital Assistance Program 
Funds Obligated Nationwide and Selected States and Urbanized Areas as 
Reported by FTA: 

Table 7: SFSF Education Stabilization Funds Made Available by the U.S. 
Department of Education and Funds Drawn Down by States: 

Table 8: State Drawdowns of Education Stabilization Funds Compared to 
Reported Expenditures by LEAs and IHEs in States We Reviewed That Could 
Provide the Information: 

Table 9: ESEA Title I, Part A Recovery Act Funds Made Available to and 
Drawn Down by States We Reviewed, and Funds Expended by LEAs in States 
That Could Provide the Information: 

Table 10: IDEA, Part B Recovery Act Funds Made Available to and Drawn 
Down by States We Reviewed, and Funds Expended by LEAs in States That 
Could Provide the Information: 

Table 11: Recovery Act-Funded WIA Youth Participation in Selected 
States, as of July 31, 2009: 

Table 12: Selected States’ Drawdowns as of August 31, 2009: 

Table 13: Comparison of the Average Percentage of Funds Obligated and 
Drawn Down among Housing Agencies Grouped by Size of Recovery Act 
Grant, as of September 5, 2009: 

Table 14: DOE’s Allocation of the Recovery Act’s Weatherization Funds 
for 16 States and the District of Columbia, as of August 31, 2009: 

Table 15: Use of Recovery Act Weatherization Funds by 14 States, as of 
August 31, 2009: 

Table 16: Prevailing Wage Rates for Weatherization Work: 

Table 17: Selected states and the District implemented tracking 
mechanism to identify the state’s prime recipients and subrecipients 
for reporting purposes, in accordance with OMB guidance Section 1512: 

Table 18: State Approaches to Recouping Recovery Act Administrative 
Costs: 

Table 19: Location of Highway Projects Visited by GAO: 

Table 20: Location of Transit Projects Visited by GAO: 

Table 21: Educational Institutions Visited by GAO (to Review Use of 
State Fiscal Stabilization Fund): 

Table 22: School Districts Visited by GAO (Local School Districts: 
Title I-LEA, IDEA): 

Table 23: Workforce Investment Act Youth Programs Visited by GAO: 

Table 24: Weatherization Programs Visited by GAO: 

Table 25: Localities Visited by GAO to Assess Other Recovery Act 
Programs and Issues: 

Figures: 

Figure 1: Estimated versus Actual Federal Outlays to States and 
Localities under the Recovery Act: 

Figure 2: Distribution of Federal Outlays to States and Localities by 
Function as of September 11, 2009: 

Figure 3: Percentage Increase in Medicaid Enrollment from October 2007 
to August 2009, for 16 States and the District: 

Figure 4: National Recovery Act Highway Obligations by Project 
Improvement Type as of September 1, 2009: 

Figure 5: Nationwide Transit Capital Assistance Program Recovery Act 
Obligations by Project Type as of September 1, 2009: 

Figure 6: National Draw Down Rates for Recovery Act Funds for the WIA 
Youth Program, as of August 31, 2009: 

Figure 7: Percentage of Public Housing Capital Fund Formula Grants 
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide, as 
of September 5, 2009: 

Figure 8: Percentage 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 September 5, 2009: 

Figure 9: Comparison of Troubled Housing Agencies and Nontroubled 
Housing Agencies’ Obligation and Drawdown Rates: 

Figure 10: Comparison of Obligation and Drawdown Rates for Nontroubled 
Agencies with No Audit Findings, Troubled Agencies, and Nontroubled 
Agencies with Audit Findings: 

[End of section] 

United States Government Accountability Office: Washington, DC 20548: 

September 23, 2009: 

Report to Congressional Committees: 

The Congressional Budget Office (CBO) has reported that various 
indicators suggest the recession is likely to end within the next few 
months; however, the budget outlook for the states continues to 
indicate signs of stress. The National Conference of State Legislatures 
reported that states are collectively facing $142.6 billion in budget 
gaps for fiscal year 2010 as they enacted their budgets. While the 
availability of increased Recovery Act funds will help, states will 
continue to be fiscally strained. In addition, states are building new 
or augmenting existing reporting systems to comply with the 
unprecedented and complex reporting requirements. The first reporting 
deadline for prime recipients is October 10, 2009. 

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. This report, the third in response to the act’ 
s mandate, addresses the following: (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. The report provides overall findings, makes 
recommendations, and discusses the status of actions in response to the 
recommendations we made in our earlier reports. 

As reported in our April and July 2009 reviews, to address these 
objectives, we selected a core group of 16 states and the District that 
we will follow over the next few years. Individual summaries for this 
core group are compiled into an electronic supplement, [hyperlink, 
http://www.gao.gov/products/GAO-09-1017SP], and are also accessible 
through GAO’s Recovery Act page at [hyperlink, 
http://www.gao.gov/recovery]. Our 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 168 local entities within the 16 states and the District. 

Our work for this report focused on nine federal programs primarily 
because they have begun disbursing funds to states or have known or 
potential risks. 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 leads, 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 Commerce, 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 July 3, to September 18, 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. As we reported in 
July, our analysis of actual federal outlays reported on [hyperlink, 
http://www.recovery.gov] suggests that Recovery Act spending is 
slightly ahead of the initial estimates. In fact, as of September 11, 
2009, the federal Treasury has paid out approximately $48 billion to 
states and localities, which is about 98 percent of payments estimated 
for fiscal year 2009. 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 [hyperlink, 
http://www.recovery.gov]. 

Figure 1: Estimated versus Actual Federal Outlays to States and 
Localities under the Recovery Act: 

[Refer to PDF for image: vertical bar graph] 

[Refer to PDF for image: vertical bar graph] 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2009; 
Original estimate: $48.9 billion; 
Actual as of September 11, 2009: $48 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2010; 
Original estimate: $107.7 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2011; 
Original estimate: $63.4 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2012; 
Original estimate: $23.3 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2013; 
Original estimate: $14.4 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2014; 
Original estimate: $9.1 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2015; 
Original estimate: $5.7 billion. 

Federal Fiscal Year (Oct. 1 - Sept. 30): 2016; 
Original estimate: $2.5 billion. 

Source: GAO analysis of CBO, Federal Funds Information for States, and 
Recovery.gov data. 

[End of figure] 

As of September 11, 2009, 84 percent of the $48 billion in federal 
outlays has been provided through two programs: the increased Federal 
Medical Assistance Percentage (FMAP) grant awards and the State Fiscal 
Stabilization Fund administered by the Department of Education. Highway 
spending accounts for an additional 4 percent. The distribution of 
total federal outlays to states and localities is shown in figure 2. 

Figure 2: Distribution of Federal Outlays to States and Localities by 
Function as of September 11, 2009: 

[Refer to PDF for image: pie-chart] 

Energy and environment: 0.5%; 
Income security: 2.7%; 
Community development: 2.7%; 
Transportation: 5.2%; 
Education and training: 26.7%; 
Health: 62.3%. 

Source: GAO analysis of data from CBO and Federal Funds Information for 
States. 

[End of figure] 

As recipients of Recovery Act funds and as partners with the federal 
government in achieving Recovery Act goals, states and local units of 
government are expected to invest Recovery Act funds with a high level 
of transparency and to be held accountable for results under the 
Recovery Act. Under the Recovery Act, direct recipients of the funds 
are expected to report quarterly on a number of measures, including the 
use of funds and an estimate of the number of jobs created or the 
number of jobs retained by projects and activities. These measures 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. The Office of Management and Budget (OMB) issued its implementing 
guidance for recipient reporting on June 22, 2009. 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. 

Among other things, the guidance clarified 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). The OMB guidance also provided additional instruction 
on calculating on a full-time-equivalent (FTE) basis the number of jobs 
created or retained by Recovery Act funding. 

The Recovery Act assigns us a range of responsibilities to help promote 
accountability and transparency. In addition to our bimonthly reviews, 
we are required to comment on the jobs created and retained as reported 
by recipients of Recovery Act funding. Section 1512 of the act requires 
each nonfederal entity that has received Recovery Act funds to report 
quarterly on the use of the funds, including jobs created and retained 
by projects and activities. To implement this requirement, which will 
be effective October 10, 2009, OMB is developing a central collection 
system. This first report will cover cumulative activity since the 
Recovery Act’s passage in February 2009. 

Recipients have 10 days after the end of each calendar quarter to 
report. OMB has laid out a reporting and quality review process that 
allows recipients and delegated subrecipients to prepare and enter 
their information 1 to 10 days following the end of the quarter. During 
days 11 through 21, prime recipients will be able to review the data to 
ensure that complete and accurate reporting information is provided 
prior to a federal agency review and comment period beginning on the 
22nd day. During days 22 to 29 following the end of the quarter, 
federal agencies will perform data quality reviews and will notify the 
recipients and delegated subrecipients of any data anomalies or 
questions. The original submitter must complete data corrections no 
later than the 29th day following the end of the quarter. Since this is 
a cumulative reporting process, additional corrections can take place 
on a quarterly basis. We are to comment on the jobs data no later than 
45 days after recipients have reported. We expect to issue our report 
no later than November 24, 2009.

States Continue Use of Recovery Act Funds While Preparing for First 
Required Report Cycle: 

Increased FMAP Continues to Help States Finance Their Growing Medicaid 
Programs, but States Expressed Concern about the Longer-Term 
Sustainability of Their Medicaid Programs: 

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 
Federal Medical Assistance Percentage (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 1] On February 25, 2009, the Centers for 
Medicare & Medicaid Services (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. 

Under the Recovery Act, the FMAP rates in the 16 states and the 
District were increased an average of 9.01 percentage points for the 
first two quarters of fiscal year 2009, with increases ranging from 6.2 
percentage points in Iowa to 12.24 percentage points in Florida. 
Further, qualifying increases in unemployment rates in the third and 
fourth quarters of fiscal year 2009 contributed to additional increases 
in FMAP rates in 14 states and the District. The FMAP rates for the 2 
remaining states—California and Florida—have not changed since the 
second quarter of fiscal year 2009. By the end of fiscal year 2009, 
FMAP rates in the sample states and the District will have increased an 
average of 10.57 percentage points when compared to the original fiscal 
year 2009 FMAP rates. 

Table 1: Original and Increased Quarterly FMAPs for Fiscal Year 2009 
for 16 States and the District (Percentage Points): 

State: Arizona; 
Original fiscal year 2009 FMAP[A]: 65.77; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 75.01; 
Increased fiscal year 2009 FMAP, third quarter[C]: 75.93; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 75.93; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 9.24; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 10.16. 

State: California; 
Original fiscal year 2009 FMAP[A]: 50.00; Increased fiscal year 2009 
FMAP, first and second quarters[B]: 61.59; Increased fiscal year 2009 
FMAP, third quarter[C]: 61.59; Increased fiscal year 2009 FMAP, fourth 
quarter[D]: 61.59; Difference between original 2009 FMAP and increased 
first and second quarter FMAPs: 11.59; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.59. 

State: Colorado; 
Original fiscal year 2009 FMAP[A]: 50.00; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78; 
Increased fiscal year 2009 FMAP, third quarter[C]: 61.59; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.78; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.59. 

State: District of Columbia; 
Original fiscal year 2009 FMAP[A]: 70.00; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 77.68; 
Increased fiscal year 2009 FMAP, third quarter[C]: 79.29; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 79.29; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 7.68; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 9.29. 

State: Florida; 
Original fiscal year 2009 FMAP[A]: 55.40; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 67.64; 
Increased fiscal year 2009 FMAP, third quarter[C]: 67.64; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 67.64; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 12.24; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 12.24. 

State: Georgia; 
Original fiscal year 2009 FMAP[A]: 64.49; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 73.44; 
Increased fiscal year 2009 FMAP, third quarter[C]: 74.42; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 74.42; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.95; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 9.93. 

State: Illinois; 
Original fiscal year 2009 FMAP[A]: 50.32; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 60.48; 
Increased fiscal year 2009 FMAP, third quarter[C]: 61.88; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.88; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 10.16; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.56. 

State: Iowa; 
Original fiscal year 2009 FMAP[A]: 62.62; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 68.82; 
Increased fiscal year 2009 FMAP, third quarter[C]: 68.82; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 70.71; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 6.20; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 8.09. 

State: Massachusetts; 
Original fiscal year 2009 FMAP[A]: 50.00; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78; 
Increased fiscal year 2009 FMAP, third quarter[C]: 60.19; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.78; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.59. 

State: Michigan; 
Original fiscal year 2009 FMAP[A]: 60.27; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 69.58; 
Increased fiscal year 2009 FMAP, third quarter[C]: 70.68; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 70.68; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 9.31; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 10.41. 

State: Mississippi; 
Original fiscal year 2009 FMAP[A]: 75.84; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 83.62; 
Increased fiscal year 2009 FMAP, third quarter[C]: 84.24; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 84.24; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 7.78; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 8.40. 

State: New Jersey; 
Original fiscal year 2009 FMAP[A]: 50.00; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78; 
Increased fiscal year 2009 FMAP, third quarter[C]: 61.59; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.78; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.59. 

State: New York; 
Original fiscal year 2009 FMAP[A]: 50.00; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 58.78; 
Increased fiscal year 2009 FMAP, third quarter[C]: 60.19; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 61.59; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.78; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.59. 

State: North Carolina; 
Original fiscal year 2009 FMAP[A]: 64.60; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 73.55; 
Increased fiscal year 2009 FMAP, third quarter[C]: 74.51; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 74.51; 
Difference between original 2009 FMAP and increased 
first and second quarter FMAPs: 8.95; Difference between original 2009 
FMAP and increased fourth quarter 
FMAP[D]: 9.91. 

State: Ohio; 
Original fiscal year 2009 FMAP[A]: 62.14; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 70.25; 
Increased fiscal year 2009 FMAP, third quarter[C]: 72.34; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 72.34; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.11; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 10.20. 

State: Pennsylvania; 
Original fiscal year 2009 FMAP[A]: 54.52; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 63.05; 
Increased fiscal year 2009 FMAP, third quarter[C]: 64.32; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 65.59; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 8.53; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 11.07. 

State: Texas; 
Original fiscal year 2009 FMAP[A]: 59.44; 
Increased fiscal year 2009 FMAP, first and second quarters[B]: 68.76; 
Increased fiscal year 2009 FMAP, third quarter[C]: 68.76; 
Increased fiscal year 2009 FMAP, fourth quarter[D]: 69.85; 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 9.32; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 10.41. 

Average FMAP increase: 
Difference between original 2009 FMAP and increased first and second 
quarter FMAPs: 9.01; 
Difference between original 2009 FMAP and increased fourth quarter 
FMAP[D]: 10.57. 

Source: GAO analysis of HHS data. 

[A] The original fiscal year 2009 FMAP rates were published in the 
Federal Register on November 28, 2007. A correction for the North 
Carolina FMAP rate was published on December 7, 2007. 

[B] The increased fiscal year 2009 FMAP rates for the first and second 
quarters were published in the Federal Register on April 21, 2009. 

[C] The increased fiscal year 2009 FMAP rates for the third quarter 
were published in the Federal Register on August 4, 2009. In this 
notice, the Department of Health and Human Services (HHS) changed the 
methodology it uses to calculate the increased FMAP rates. 
Specifically, HHS calculates preliminary FMAP rates prior to the start 
of each quarter using Bureau of Labor Statistics preliminary 
unemployment estimates and adjusts these FMAP rates once the final 
unemployment numbers become available. 

[D] The increased FMAP rates listed for the fourth quarter were 
provided by CMS on September 16, 2009. 

[End of table] 

From October 2007 to August 2009, overall Medicaid enrollment in the 16 
states and the District increased by 10.4 percent,[Footnote 2] with 
nearly two-thirds of the increase attributable to the population group 
of children—a group that is sensitive to economic downturns. In 
addition, just over one quarter of the overall enrollment increase was 
attributable to the population group of adults who are nonaged, 
nonblind, or nondisabled. 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. 
The percentage increase in enrollment, however, varied widely, ranging 
from just under 3 percent in New Jersey to about 27 percent in Arizona. 
(See figure 3.) Comparing growth rates within this time period, 
enrollment grew most rapidly in early 2009, generally from January to 
April 2009. All states experienced an enrollment increase during this 
period, and growth was especially pronounced in five states that 
reported increases between 4 percent and 5 percent. Overall enrollment 
growth in recent months—from May to August 2009—was less rapid, though 
variation existed among states. For example, while enrollment in 
Illinois and Pennsylvania remained relatively stable, changing less 
than 1 percent from May to August 2009, Arizona experienced over 7 
percent growth in Medicaid enrollment during that time. 

Figure 3: Percentage Increase in Medicaid Enrollment from October 2007 
to August 2009, for 16 States and the District: 

[Refer to PDF for image: vertical bar graph] 

Quintile category: 0% to less than 5%: 

State: NJ; 
Percentage change: 2.75. 

State: MA; 
Percentage change: 4.13. 

Quintile category: 5% to less than 10%: 
	
State: CA; 
Percentage change: 5.56. 

State: PA; 
Percentage change: 6.12. 

State: MS; 
Percentage change: 6.96. 

State: NY; 
Percentage change: 8.28. 

State: GA; 
Percentage change: 8.36. 

State: TX; 
Percentage change: 8.49. 

State: DC; 
Percentage change: 9.1. 

State: IL; 
Percentage change: 9.29. 

Quintile category: 10% to less than 15%: 

State: MI; 
Percentage change: 10.59. 

State: NC; 
Percentage change: 13. 

Quintile category: 15% to less than 20%: 

State: IA; 
Percentage change: 17.25. 

Quintile category: 20% to less than 25%: 

State: CO; 
Percentage change: 21.54. 

State: OH; 
Percentage change: 23.01. 

State: FL; 
Percentage change: 23.24. 

Quintile category: 25% to less than 30%: 

State: AZ; 
Percentage change: 27.12. 

Source: GAO analysis of state data. 

Note: The percentage increase is based on state reported Medicaid 
enrollment data for October 2007 to August 2009. Five states—Colorado, 
Florida, Georgia, Massachusetts, and Mississippi—did not provide 
estimated Medicaid enrollment data for August 2009. In addition, two of 
these states—Massachusetts and Georgia—did not provide enrollment data 
for July 2009. 

[End of figure] 

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 $20.3 billion for October 1, 2008, through September 15, 
2009, which amounted to 87.37 percent of funds available. (See table 
2.) In addition, except for the initial weeks that increased FMAP funds 
were available, the weekly rate at which the 16 states and the District 
have drawn down these funds has remained relatively constant. 
Nationally, the 50 states, the District, and several of the largest 
U.S. insular areas combined have drawn down nearly $30 billion as of 
September 15, 2009, which represents 87.83 percent of the increased 
FMAP grants awarded for all four quarters of federal fiscal year 2009.

Table 2: FMAP Grant Awards and Funds Drawn Down, for 16 States and the 
District, as of September 15, 2009 (Dollars in thousands): 

State: Arizona; 
FMAP grant awards[A]: $796,917; 
Funds drawn: $731,511; 
Percentage of funds drawn: 91.79. 

State: California; 
FMAP grant awards[A]: $4,369,087; 
Funds drawn: $3,661,264; 
Percentage of funds drawn: 83.80. 

State: Colorado; 
FMAP grant awards[A]: $347,181; 
Funds drawn: $248,562; 
Percentage of funds drawn: 71.59. 

State: District of Columbia; 
FMAP grant awards[A]: $139,985; 
Funds drawn: $121,596; 
Percentage of funds drawn: 86.86. 

State: Florida; 
FMAP grant awards[A]: $1,861,572; 
Funds drawn: $1,697,990; 
Percentage of funds drawn: 91.21. 

State: Georgia; 
FMAP grant awards[A]: $706,961; 
Funds drawn: $659,852; 
Percentage of funds drawn: 93.34. 

State: Illinois; 
FMAP grant awards[A]: $1,323,337; 
Funds drawn: $1,160,455; 
Percentage of funds drawn: 87.69. 

State: Iowa; 
FMAP grant awards[A]: $197,601; 
Funds drawn: $162,266; 
Percentage of funds drawn: 82.12. 

State: Massachusetts; 
FMAP grant awards[A]: $1,173,742; 
Funds drawn: $1,161,009; 
Percentage of funds drawn: 98.92. 

State: Michigan; 
FMAP grant awards[A]: $1,007,280; 
Funds drawn: $933,982; 
Percentage of funds drawn: 92.72. 

State: Mississippi; 
FMAP grant awards[A]: $312,932; 
Funds drawn: $277,914; 
Percentage of funds drawn: 88.81. 

State: New Jersey; 
FMAP grant awards[A]: $858,931; 
Funds drawn: $798,119; 
Percentage of funds drawn: 92.92. 

State: New York; 
FMAP grant awards[A]: $4,478,505; 
Funds drawn: $3,820,719; 
Percentage of funds drawn: 85.31. 

State: North Carolina; 
FMAP grant awards[A]: $904,469; 
Funds drawn: $904,469; 
Percentage of funds drawn: 100.00. 

State: Ohio; 
FMAP grant awards[A]: $1,228,943; 
Funds drawn: $1,062,898; 
Percentage of funds drawn: 86.49. 

State: Pennsylvania; 
FMAP grant awards[A]: $1,569,221; 
Funds drawn: $1,058,644; 
Percentage of funds drawn: 67.46. 

State: Texas; 
FMAP grant awards[A]: $1,985,036; 
Funds drawn: $1,862,379; 
Percentage of funds drawn: 93.82. 

Sample total: 
FMAP grant awards[A]: $23,261,701; 
Funds drawn: $20,323,630; 
Percentage of funds drawn: 87.37. 

National total: 
FMAP grant awards[A]: $34,141,536; 
Funds drawn: $29,988,161; 
Percentage of funds drawn: 87.83. 

Source: GAO analysis of HHS data as of September 15, 2009. 

[A] The FMAP grant awards listed are for all four quarters of federal 
fiscal year 2009, through September 15, 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 have 
reduced the funds that states would otherwise have to use for their 
Medicaid programs, and states have reported using funds that have 
become freed up as the result of increased FMAP for a variety of 
purposes. Most commonly, states reported using these funds in fiscal 
year 2009 to cover increased Medicaid caseloads, maintain Medicaid 
eligibility, benefits and services, and finance general state budget 
needs. In addition, more than half of the states reported using these 
funds to maintain payment rates for practitioners and institutional 
providers, and five states reported using these funds to meet prompt 
pay requirements. Three states and the District also reported using 
these funds to help finance their State Children’s Health Insurance 
Program (CHIP) or other local or state public health insurance 
programs. Although virtually all the states and the District reported 
using these funds for multiple purposes, two states—North Carolina and 
Ohio—reported using the freed-up funds exclusively to finance general 
state budget needs—a decrease from the five states that reported doing 
so in our July 2009 report. When asked about their planned uses of 
these funds in fiscal year 2010, the states and the District provided 
similar responses. 

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 3]

* States must comply with prompt payment requirements.[Footnote 4]

* 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 5]

* 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 6] 

To comply with these requirements, 12 states reported making 
adjustments to their Medicaid programs, including rescinding prior 
program changes or canceling planned changes that conflicted with these 
requirements. For example, 10 states reported making changes to comply 
with the act’s prompt payment requirement, including modifying payment 
cycles, reporting processes, or information systems. In addition, 9 
states reported making changes to comply with the act’s requirement 
that states may not implement more restrictive eligibility standards, 
methodologies, or procedures. Most commonly, these states rescinded or 
canceled programmatic changes that conflicted with this requirement. 
For example, Arizona had to rescind a programmatic adjustment, which 
had changed the frequency of Medicaid eligibility determinations for 
certain individuals from 12 to 6 months, and Ohio did not proceed with 
a proposal to reduce slots in a waiver program—CMS or the state 
determined that these changes constituted a more restrictive 
eligibility standard. In addition, three states—Arizona, Illinois, and 
New York—made adjustments to meet the requirement related to the 
contributions of political subdivisions to the nonfederal share. For 
example, according to New York officials, the local share of the 
nonfederal share of Medicaid expenditures is based on a statutory 
formula that provides for a percentage increase each year, subject to 
an existing cap. New York reported that it reduced the local 
contribution to the nonfederal share to ensure that the percentage of 
the local share will remain at the September 30, 2008, level over the 
course of the recession adjustment period. Regarding the Recovery Act 
requirement that prohibits states from depositing or crediting amounts 
attributable to increased FMAP into any reserve or rainy-day fund, none 
of the states reported making adjustments related to this requirement. 

When asked about the difficulty of complying with these requirements, 
Medicaid officials from over half of the states reported that 
compliance had been “somewhat difficult” or “difficult,” and most 
commonly cited the act’s prompt payment requirement as the most 
problematic.[Footnote 7] In addition, several states cited the lack of 
timely agency guidance as a factor complicating their efforts to comply 
with Recovery Act requirements. To clarify the act’s requirements 
related to prompt payment, CMS issued a State Medicaid Director’s 
letter on July 30, 2009, that defined terms related to prompt payment 
and described the method states should use to calculate days during a 
quarter that they have met or not met the prompt payment requirement. 
CMS officials told us that, in developing the guidance, they sought 
comments from states and national organizations. In addition, CMS 
officials said that states will use existing electronic reporting 
processes to report on the extent to which they comply with this 
requirement and to adjust for prior period increased FMAP draw down 
amounts for days they were not in compliance.[Footnote 8] In addition, 
CMS published another State Medicaid Director’s letter on August 19, 
2009, that, among other things, specified programmatic changes that 
could affect states’ eligibility for the increased FMAP.[Footnote 9] 

When asked about whether the increased FMAP funds were sufficient to 
protect and maintain their Medicaid programs during the economic 
downturn, the 16 states and the District varied in their responses. 
Seven states and the District reported that the amount of increased 
FMAP funds they received in fiscal year 2009 was sufficient to maintain 
their Medicaid programs, including maintaining eligibility, services, 
and benefits. In contrast, two states—California and Massachusetts— 
reported that the amount of increased FMAP they received in fiscal year 
2009 was not sufficient for this purpose. For example, Massachusetts 
reported that even with the increased FMAP, increased caseload and 
utilization had led the state to reduce its Medicaid expenditures by 
freezing many provider rates at prior year levels. The remaining seven 
states reported that the funds were only somewhat sufficient to 
maintain their Medicaid programs during fiscal year 2009. In looking 
forward, fewer states characterized the amount of increased FMAP they 
expect to receive in fiscal year 2010 as sufficient to maintain their 
Medicaid programs compared to fiscal year 2009. Specifically, some 
states indicated that budget conditions in their state are projected to 
worsen in state fiscal year 2010 and that the increased FMAP would not 
be sufficient to close Medicaid budget shortfalls or avoid provider 
rate cuts or other expenditure containment measures. 

As for the longer-term outlook for their Medicaid programs, the 
District and all but one of the sample states reported concerns about 
the sustainability of their Medicaid programs after the increased FMAP 
funds are no longer available, beginning in January 2011. When asked 
about the nature of their concerns, states generally reported doubt 
that their economies and revenues would fully recover before the 
increased FMAP funding ended and noted that Medicaid enrollment is 
continuing to increase. As a result, states were unsure that they could 
maintain eligibility levels, benefits and services, or provider rates 
without the increased FMAP. Specifically, several states referred to 
the loss of increased FMAP funds as a “cliff” over which the state 
would fall when funding was no longer available or similarly described 
their concern that the change in the state’s share of funds would be 
substantial. For example, New Jersey estimated that it would need $550 
million in order to replace the increased FMAP funds in fiscal year 
2011. Most states and the District reported that they did not have 
definitive plans to address their concerns about sustaining their 
programs without the increased FMAP. Four states, however, reported 
considering various Medicaid program reductions, such as reductions in 
benefits and eligibility, once the increased FMAP funds are no longer 
available.

Over Half of All Highway and Transit Recovery Act Funding Has Been 
Obligated: 

A substantial portion of the approximately $35 billion the Recovery Act 
provided for highway infrastructure projects and public transportation 
has been obligated nationwide and in the 16 states and the District of 
Columbia (District) that are the focus of our review. For example, $18 
billion of Recovery Act highway funds had been obligated for almost 
7,000 projects nationwide, and $10.6 billion had been obligated for 
nearly 3,800 projects in each of the 16 states and the District, as of 
September 1, 2009.[Footnote 10] In addition, as of September 1, 2009, 
$5.95 billion of the Recovery Act Transit Capital Assistance Program 
funds had been obligated nationwide.[Footnote 11] The total 
distribution of project funds by improvement type among the 16 selected 
states and the District closely mirrors the national distribution, with 
pavement improvement projects accounting for almost half of the 
obligated funds. However, we found wide differences among selected 
states in how funds were used, federal reimbursement rates to states 
for payments made for completed work, and in the rate of obligation of 
highway funds required by the Recovery Act to be suballocated for 
metropolitan, regional, and local use. 

For Recovery Act transit funds, we focused our review on the Transit 
Capital Assistance Program, which received approximately 82 percent of 
Recovery Act transit funds, and eight selected states and the District. 
Nationwide, Recovery Act funds obligated under this program are 
primarily being used for improving bus fleets, upgrading transit 
facilities, and conducting preventive maintenance. The Recovery Act 
required that 50 percent of Transit Capital Assistance Program funds be 
obligated by September 1, 2009, and the Federal Transit Administration 
(FTA) has concluded that all states and urbanized areas met this 
requirement. Even though the Department of Transportation (DOT) and OMB 
have issued guidance for recipient reporting of job creation and 
retention, state highway and transit officials expressed some concern 
and challenges with meeting the act’s reporting requirements, including 
the calculation of direct jobs and full-time-employee equivalents from 
work hours. 

States Continuing to Dedicate Most Recovery Act Highway Funds for 
Pavement Projects, but Differences among States’ Approaches in Use of 
Funds Starting to Emerge: 

The Recovery Act provides funding to 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 Recovery Act requires 
that 30 percent of these funds be suballocated, primarily based on 
population, for metropolitan, regional, and local use. Highway funds 
are apportioned to states through federal-aid highway program 
mechanisms, and states must follow existing program requirements, 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 Act 
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. While the maximum federal fund share 
of highway infrastructure investment projects under the existing 
federal-aid highway program is generally 80 percent, under the Recovery 
Act, it is 100 percent. 

In March 2009, $26.7 billion was apportioned to all 50 states and the 
District for highway infrastructure and other eligible projects. As of 
September 1, 2009, $18 billion of the funds had been obligated for 
almost 7,000 projects nationwide, and $10.6 billion had been obligated 
for nearly 3,800 projects in the 16 states and the District. (See table 
3).

Table 3: Recovery Act Highway Apportionments and Obligations Nationwide 
and in Selected States as of September 1, 2009 (Dollars in millions): 

State: Arizona; 
Apportionment: $522; 
Obligations[A]: Obligated amount: $293; 
Obligations[A]: Percentage of apportionment obligated: 56. 

State: California; 
Apportionment: $2,570; 
Obligations[A]: Obligated amount: $1,978; 
Obligations[A]: Percentage of apportionment obligated: 77; 

State: Colorado; 
Apportionment: $404; 
Obligations[A]: Obligated amount: $290; 
Obligations[A]: Percentage of apportionment obligated: 72. 

State: District of Columbia; 
Apportionment: $124; 
Obligations[A]: Obligated amount: $116; 
Obligations[A]: Percentage of apportionment obligated: 94. 

State: Florida; 
Apportionment: $1,347; 
Obligations[A]: Obligated amount: $1,001; 
Obligations[A]: Percentage of apportionment obligated: 74. 

State: Georgia; 
Apportionment: $932; 
Obligations[A]: Obligated amount: $546; 
Obligations[A] Percentage of apportionment obligated: 59. 

State: Illinois; 
Apportionment: $936; 
Obligations[A]: Obligated amount: $736; 
Obligations[A]: Percentage of apportionment obligated: 79. 

State: Iowa; 
Apportionment: $358; 
Obligations[A]: Obligated amount: $319; 
Obligations[A]: Percentage of apportionment obligated: 89. 

State: Massachusetts; 
Apportionment: $438; 
Obligations[A]: Obligated amount: $203; 
Obligations[A]: Percentage of apportionment obligated: 46. 

State: Michigan; 
Apportionment: $847; 
Obligations[A]: Obligated amount: $575; 
Obligations[A]: Percentage of apportionment obligated: 68. 

State: Mississippi; 
Apportionment: $355; 
Obligations[A]: Obligated amount: $289; 
Obligations[A]: Percentage of apportionment obligated: 82. 

State: New Jersey; 
Apportionment: $652; 
Obligations[A]: Obligated amount: $473; 
Obligations[A]: Percentage of apportionment obligated: 73. 

State: New York; 
Apportionment: $1,121; 
Obligations[A]: Obligated amount: $783; 
Obligations[A]: Percentage of apportionment obligated: 70. 

State: North Carolina; 
Apportionment: $736; 
Obligations[A]: Obligated amount: $453; 
Obligations[A]: Percentage of apportionment obligated: 62. 

State: Ohio; 
Apportionment: $936; 
Obligations[A]: Obligated amount: $429; 
Obligations[A]: Percentage of apportionment obligated: 46. 

State: Pennsylvania; 
Apportionment: $1,026; 
Obligations[A]: Obligated amount: $875; 
Obligations[A]: Percentage of apportionment obligated: 85. 

State: Texas; 
Apportionment: $2,250; 
Obligations[A]: Obligated amount: $1,195; 
Obligations[A]: Percentage of apportionment obligated: 53. 

Selected states total: 
Apportionment: $15,551; 
Obligations[A]: Obligated amount: $10,554; 
Obligations[A]: Percentage of apportionment obligated: 68. 

U.S. total: 
Apportionment: $26,660; 
Obligations[A]: Obligated amount: $17,964; 
Obligations[A]: Percentage of apportionment obligated: 67. 

Source: GAO analysis of FHWA data. 

Notes: 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). 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. 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 $288 million of 
apportioned funds that were transferred from FHWA to FTA for transit 
projects in Arizona, California, Colorado, Florida, Georgia, Iowa, 
Massachusetts, New York, and North Carolina. 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, $8.7 billion of the $18 billion obligated 
nationwide as of September 1, 2009, is being used for projects such as 
reconstructing or rehabilitating deteriorated roads, including $4.1 
billion for road resurfacing projects. As we reported in July 2009, 
many state officials told us they selected a large percentage of 
resurfacing and other pavement improvement projects because those 
projects 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. Figure 4 shows 
obligations by the types of road and bridge improvements being made. 

Figure 4: National Recovery Act Highway Obligations by Project 
Improvement Type as of September 1, 2009: 

[Refer to PDF for image: pie-chart] 

Pavement projects total (71 percent, $12.78 billion): 
Pavement 
improvement ($8.71 billion), 48%; 
Pavement widening ($2.95 billion), 16%; 
New road construction ($1.12 billion), 6%. 

Bridge projects total (12 percent, $2.19 billion): 
Bridge improvement ($977 million), 5%; 
Bridge replacement ($821 million), 5%; 
New bridge construction ($393 million), 2%. 

Other (17 percent, $3 billion): 
Other ($3 billion), 17%. 

Source: GAO analysis of FHWA data. 

Note: Totals may not add due to rounding. “Other” includes safety 
projects, such as improving safety at railroad grade crossings, and 
transportation enhancement projects, such as pedestrian and bicycle 
facilities, engineering, and right-of-way purchases. 

[End of figure] 

In addition to pavement improvement, other projects that have 
significant funds obligated include pavement widening, with $3 billion 
obligated, and bridge replacement and improvements, with $1.8 billion 
obligated. The total distribution of project funds by improvement type 
among the 16 states and the District closely mirrors the distribution 
nationally—however, wide differences in how funds were used exist among 
states. For example, 40 percent of Florida’s funds have been obligated 
for pavement widening projects (compared with 16 percent nationally) 
and 21 percent for construction of new roads and bridges (compared with 
8 percent nationally), while 17 percent of funds have been obligated 
for pavement improvements (compared with 48 percent nationally). In 
Ohio, 37 percent of funds have been obligated for new road and bridge 
construction. In contrast, roughly 85 percent of funds in both Iowa and 
Massachusetts have been obligated for pavement improvements. While the 
states we visited for our July 2009 report had selected pavement 
improvement projects because they could be quickly implemented, during 
our recent interviews we found states are beginning to select projects 
entailing more complexity. For example, Massachusetts has begun 
selecting more complicated construction and reconstruction projects, 
including a new $36 million pedestrian bridge project. 

As of September 1, 2009, $1.4 billion had been reimbursed nationwide by 
the Federal Highway Administration (FHWA), including $604 million 
reimbursed to the 16 states and the District.[Footnote 12] These 
amounts represent 8 percent of the $18 billion obligated nationwide and 
6 percent of the $10.6 billion obligated in the 16 states and the 
District. DOT officials told us that although funding has been 
obligated for almost 7,000 projects, it may be months before states 
request reimbursement from FHWA. In particular, 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. 
Once the contract is awarded and contractors mobilize and begin work, 
states make payments to these contractors for completed work; states 
may request reimbursement from FHWA. FHWA, through the U.S. Treasury, 
is required to pay the state promptly after the state pays out of its 
own funds for project-related purposes. The funds reimbursed to the 
states as of September 1, 2009, increased over 500 percent in about 2 
months. As we reported in July 2009, FHWA had reimbursed $233 million 
nationwide, including $96.4 million to the 16 states and the District 
as of June 25, 2009. FHWA officials told us the increased level of 
reimbursements was expected as the number of contracts awarded and 
projects currently under construction continue to increase. Table 4 
shows the level of reimbursements nationwide and in the 16 states and 
the District. 

Table 4: Recovery Act Highway Reimbursements Nationwide and in Selected 
States as of September 1, 2009 (Dollars in millions): 

State: District of Columbia; 
Reimbursement: <$1; 
Percentage of obligations reimbursed: <1; 
Percentage of apportionment reimbursed: <1. 

State: Florida; 
Reimbursement: <$1; 
Percentage of obligations reimbursed: <1; 
Percentage of apportionment reimbursed: <1. 

State: California; 
Reimbursement: $22; 
Percentage of obligations reimbursed: 1; 
Percentage of apportionment reimbursed: 1. 

State: New Jersey; 
Reimbursement: $4; 
Percentage of obligations reimbursed: 1; 
Percentage of apportionment reimbursed: 1. 

State: Georgia; 
Reimbursement: $10; 
Percentage of obligations reimbursed: 2; 
Percentage of apportionment reimbursed: 1. 

State: Massachusetts; 
Reimbursement: $5; 
Percentage of obligations reimbursed: 2; 
Percentage of apportionment reimbursed: 1. 

State: New York; 
Reimbursement: $23; 
Percentage of obligations reimbursed: 3; 
Percentage of apportionment reimbursed: 2. 

State: Ohio; 
Reimbursement: $17; 
Percentage of obligations reimbursed: 4; 
Percentage of apportionment reimbursed: 2. 

State: Texas; 
Reimbursement: $47; 
Percentage of obligations reimbursed: 4; 
Percentage of apportionment reimbursed: 2. 

State: Arizona; 
Reimbursement: $18; 
Percentage of obligations reimbursed: 6; 
Percentage of apportionment reimbursed: 3. 

State: Colorado; 
Reimbursement: $16; 
Percentage of obligations reimbursed: 6; 
Percentage of apportionment reimbursed: 4. 

State: Pennsylvania; 
Reimbursement: $51; 
Percentage of obligations reimbursed: 6; 
Percentage of apportionment reimbursed: 5. 

State: Michigan; 
Reimbursement: $41; 
Percentage of obligations reimbursed: 7; 
Percentage of apportionment reimbursed: 5. 

State: Mississippi; 
Reimbursement: $21; 
Percentage of obligations reimbursed: 7; 
Percentage of apportionment reimbursed: 6. 

State: North Carolina; 
Reimbursement: $38; 
Percentage of obligations reimbursed: 8; 
Percentage of apportionment reimbursed: 5. 

State: Illinois; 
Reimbursement: $200; 
Percentage of obligations reimbursed: 27; 
Percentage of apportionment reimbursed: 21. 

State: Iowa; 
Reimbursement: $91; 
Percentage of obligations reimbursed: 28; 
Percentage of apportionment reimbursed: 25. 

Selected states total: 
Reimbursement: $604; 
Percentage of obligations reimbursed: 6; 
Percentage of apportionment reimbursed: 4. 

U.S. total: 
Reimbursement: $1,437; 
Percentage of obligations reimbursed: 8; 
Percentage of apportionment reimbursed: 5. 

Source: GAO analysis of FHWA data. 

Note: This does not include reimbursements associated with $288 million 
of apportioned funds that were transferred from FHWA to 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] 

As table 4 shows, wide differences exist in reimbursements across 
states. Among the 16 states and the District, 2 states—Illinois and 
Iowa—accounted for nearly half of all reimbursements, while 8 states 
and the District had reimbursements totaling 5 percent or less of 
obligations, including 4 states with 1 percent or less. In 
Massachusetts, which had 2 percent of obligations reimbursed, inclement 
weather delayed the start of construction on some projects, limiting 
the extent to which contractors were incurring costs, according to a 
Massachusetts highway official. We will continue to monitor the rate of 
reimbursements among the states in our future reviews. 

According to state officials, because an increasing number of 
contractors are looking for work, bids for Recovery Act contracts have 
come in under estimates. For example, the bids for the two highway 
contracts we reviewed in Gwinnett County, Georgia, were 30 percent to 
35 percent lower than the county’s original estimates. Similarly, the 
awarded bid on the Belleview Avenue project in Colorado, which we 
reviewed in our July 2009, report, was 30 percent below Colorado 
Department of Transportation’s (CDOT) estimate, partially due to a 
downward trend in asphalt prices. These lower than anticipated bids are 
allowing states to redirect Recovery Act funds to other projects, 
including projects in economically distressed areas. This is consistent 
with a July 2009 letter from the Secretary of Transportation to the 
state governors encouraging them to use the “bid savings” for projects 
in distressed areas. Examples of bid savings from the 16 states and the 
District of Columbia include the following. 

* According to the Arizona Department of Transportation (ADOT), the 
state had advertised 51 highway projects as of August 30, 2009. The 
lower than anticipated bids on these projects have resulted in bid 
savings of $60 million. ADOT is moving forward to use these savings on 
additional projects.

* CDOT officials reported that bids for 32 of the 41 awarded Recovery 
Act projects had come in lower than the engineers’ estimates. As a 
result, Colorado had a total bid savings of over $39 million as of 
August 2009. CDOT plans to fund additional projects with bid savings, 
including projects in areas of the state that are economically 
distressed.

* According to Pennsylvania Department of Transportation data, as of 
August 31, 2009, of 245 bids received, the total costs came in 12 
percent (or about $104 million) less than original state estimates.

Recovery Act highway funding is apportioned under the same rules 
governing the federal-aid highway program generally and its Surface 
Transportation Program in particular, and states have wide latitude and 
flexibility in which projects to select for federal funding. However 
the Recovery Act tempers that latitude with requirements that do not 
exist in the regular program, including the following requirements: 

* 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 13]

* Give priority to projects that can be completed within 3 years and to 
projects located in economically distressed areas. These areas are 
defined by the Public Works and Economic Development Act of 1965, as 
amended.[Footnote 14] According to the act, to qualify as economically 
distressed, an area must have (1) a per capita income that is 80 
percent or less than the national average or (2) 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. 
[Footnote 15] For areas that do not meet one of these two criteria, the 
Secretary of Commerce has the authority to determine that an area has 
experienced or is about to experience a “special need” arising from 
actual or threatened severe unemployment or economic adjustment 
problems.

* 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 16]

As we reported in July 2009, all states had met the first Recovery Act 
requirement that 50 percent of their apportioned funds were obligated 
within 120 days. As of September 1, 2009, 75 percent of funds covered 
by this requirement had been obligated. However, fewer funds have been 
obligated among those funds not covered by this requirement—those 
required by the Recovery Act to be suballocated for metropolitan, 
regional, and local use. As of September 1, 2009, 51 percent of those 
funds had been obligated nationwide. In addition, we found variations 
in the rate of obligations for the suballocated areas among the 16 
states and the District of Columbia, ranging from 19 percent in New 
Jersey to 97 percent in Pennsylvania. (See table 5.) 

Table 5: Recovery Act Highway Apportionments and Obligations for 
Suballocated Areas Nationwide and in Selected States as of September 1, 
2009 (Dollars in millions): 

State: Arizona; 
Suballocated 30 percent portion of apportionment: $157; 
Obligated amount in suballocated area: $34; 
Percentage of suballocated apportionment obligated: 22. 

State: California; 
Suballocated 30 percent portion of apportionment: $771; 
Obligated amount in suballocated area: $563; 
Percentage of suballocated apportionment obligated: 73. 

State: Colorado; 
Suballocated 30 percent portion of apportionment: $121; 
Obligated amount in suballocated area: $72; 
Percentage of suballocated apportionment obligated: 60. 

State: District of Columbia; 
Suballocated 30 percent portion of apportionment: $37; 
Obligated amount in suballocated area: $32; 
Percentage of suballocated apportionment obligated: 85. 

State: Florida; 
Suballocated 30 percent portion of apportionment: $404; 
Obligated amount in suballocated area: $270; 
Percentage of suballocated apportionment obligated: 67. 

State: Georgia; 
Suballocated 30 percent portion of apportionment: $279; 
Obligated amount in suballocated area: $126; 
Percentage of suballocated apportionment obligated: 45. 

State: Illinois; 
Suballocated 30 percent portion of apportionment: $281; 
Obligated amount in suballocated area: $119; 
Percentage of suballocated apportionment obligated: 42. 

State: Iowa; 
Suballocated 30 percent portion of apportionment: $107; 
Obligated amount in suballocated area: $91; 
Percentage of suballocated apportionment obligated: 85. 

State: Massachusetts; 
Suballocated 30 percent portion of apportionment: $131; 
Obligated amount in suballocated area: $31; 
Percentage of suballocated apportionment obligated: 24. 

State: Michigan; 
Suballocated 30 percent portion of apportionment: $254; 
Obligated amount in suballocated area: $109; 
Percentage of suballocated apportionment obligated: 43. 

State: Mississippi; 
Suballocated 30 percent portion of apportionment: $106; 
Obligated amount in suballocated area: $51; 
Percentage of suballocated apportionment obligated: 48. 

State: New Jersey; 
Suballocated 30 percent portion of apportionment: $196; 
Obligated amount in suballocated area: $37; 
Percentage of suballocated apportionment obligated: 19. 

State: New York; 
Suballocated 30 percent portion of apportionment: $336; 
Obligated amount in suballocated area: $166; 
Percentage of suballocated apportionment obligated: 50. 

State: North Carolina; 
Suballocated 30 percent portion of apportionment: $221; 
Obligated amount in suballocated area: $117; 
Percentage of suballocated apportionment obligated: 53. 

State: Ohio; 
Suballocated 30 percent portion of apportionment: $281; 
Obligated amount in suballocated area: $130; 
Percentage of suballocated apportionment obligated: 46. 

State: Pennsylvania; 
Suballocated 30 percent portion of apportionment: $308; 
Obligated amount in suballocated area: $300; 
Percentage of suballocated apportionment obligated: 97. 

State: Texas; 
Suballocated 30 percent portion of apportionment: $675; 
Obligated amount in suballocated area: $197; 
Percentage of suballocated apportionment obligated: 29. 

Selected states total: 
Suballocated 30 percent portion of apportionment: $4,665; 
Obligated amount in suballocated area: $2,445; 
Percentage of suballocated apportionment obligated: 52. 

U.S. total: 
Suballocated 30 percent portion of apportionment: $7,998 
Obligated amount in suballocated area: $4,042 
Percentage of suballocated apportionment obligated: 51 

Source: GAO analysis of FHWA data. 

[End of table] 

Officials in three states with the lowest levels of obligations in 
suballocated areas told us that the low obligation rates were primarily 
due to the initial shortage of “ready-to-go” projects eligible for 
federal funding.[Footnote 17] Officials from these states attributed 
the lack of ready-to-go projects to a variety of factors, including the 
following: 

* Officials in Arizona and New Jersey cited the lack of familiarity 
with federal requirements for the federal-aid highway program as a 
major factor in the delay in identifying ready-to-go projects. In 
particular, Arizona Department of Transportation officials told us that 
suballocated funding is being used for projects that will be 
administered by local governments and that, in prior years, many of 
these types of projects were funded using state funds. As such, these 
local governments did not have to meet federal-aid eligibility and 
procedural requirements in prior years, and delays in identifying 
ready- to-go projects resulted when these governments had to both 
develop projects that are eligible for federal funding and to acclimate 
themselves with unfamiliar federal procedural requirements. Similarly, 
New Jersey officials cited unfamiliarity with these same federal 
requirements as a cause for delay in identifying ready-to-go projects 
in suballocated areas. For example, officials stated that local staff 
working on many of the projects needed time to navigate federal 
requirements such as the National Environmental Policy Act (NEPA), 
which involves the environmental review process. As noted earlier, 
states are required to maintain the level of state spending for highway 
projects during the period of the Recovery Act. According to FHWA 
officials, Arizona and New Jersey may use Recovery Act funds for 
activities that were previously state funded, provided that state funds 
are used for other transportation projects and that the state’s overall 
level of effort is not decreased.

* Officials in Massachusetts said that increased staff workload from 
the additional projects resulting from both the Recovery Act and the 
state’s new $3 billion program to reduce the growing backlog of 
structurally deficient bridges contributed to the state’s low 
obligation percentage. Furthermore, based on the advice of FHWA’s 
division office, Massachusetts focused on having funds obligated for 
the state portion of the apportioned funds before focusing on the 
suballocated funds to ensure that it met the 50 percent obligation 
requirement by June 30, 2009. Massachusetts met this requirement, with 
59 percent of the state portion of the Recovery Act highway funds 
obligated as of June 25, 2009.

Officials in each of the three states told us that they have taken 
action to increase obligations in suballocated areas and that they 
expect to meet 1-year March 2010 deadline for obligating all highway 
funds apportioned to the states; however, state and local officials in 
Arizona also said that meeting the deadline could pose significant 
challenges. 

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. As we reported in July 2009, while 
officials from almost all of the states we reviewed said that they 
considered project readiness, including the 3-year completion 
requirement, when making project selections, there was substantial 
variation in the extent to which states prioritized projects in 
economically distressed areas and how they identified these areas. Many 
states based their project selections on other factors and only later 
identified whether these projects were in economically distressed 
areas. We also reported that DOT and FHWA had not provided clear 
guidance—while the guidance emphasized the importance of giving 
priority to these areas, it did not define what giving priority meant 
and, thus, did not ensure that the act’s priority provisions would be 
consistently applied. We also found instances of states developing 
their own eligibility requirements for economically distressed areas 
using data or criteria not specified in the Public Works and Economic 
Development Act. For example, one state identified these areas based in 
part on home foreclosure rates—data not specified in the Public Works 
Act. In each of the cases we identified, the states informed us that 
FHWA approved the state’s use of alternative criteria. However, FHWA 
did not consult with or seek the approval of the Department of 
Commerce, and it was not clear under what authority FHWA approved these 
criteria. As a result we recommended that the Secretary of 
Transportation, in consultation with the Secretary of Commerce, develop 
(1) clear guidance on identifying and giving priority to economically 
distressed areas and (2) more consistent procedures for FHWA to use in 
reviewing and approving states’ criteria for designating distressed 
areas. 

In response to our recommendation, FHWA, in consultation with the 
Department of Commerce, developed guidance that addresses our 
recommendation. In particular, FHWA’s August 2009 guidance defines “
priority,” directing states to give priority to projects that are 
located in an economically distressed area and can be completed within 
the 3-year time frame over other projects. In addition, FHWA’s guidance 
sets out criteria that states may use to identify economically 
distressed areas based on “special need.” The criteria align closely 
with special need criteria used by the Department of Commerce’s 
Economic Development Administration (EDA) in its own grant programs, 
including factors such as actual or threatened business closures 
(including job loss thresholds), military base closures, and natural 
disasters or emergencies. According to EDA officials, while the agency 
traditionally approves special need designations on a case-by-case 
basis for its own grant program, it does not have the resources to do 
so for the purpose of Recovery Act highway funding.[Footnote 18] 
Rather, the designation of economically distressed areas based on the 
special need criteria for Recovery Act highway funding will be “self- 
executing” by the states, meaning that the states will apply the 
criteria laid out in the guidance to identify these areas. In its 
guidance, FHWA directed the states to maintain information as to how 
they identified, vetted, examined, and selected projects located in 
economically distressed areas and to provide FHWA’s division offices 
with documentation that demonstrates satisfaction of the special need 
criteria. We plan to continue to monitor FHWA’s and the states’ 
implementation of the economically distressed area requirement, 
including the states’ application of the special need criteria, in our 
future reviews. 

The third Recovery Act requirement is for states to certify that they 
will maintain the level of state effort for programs covered by the 
Recovery Act. Most states revised the initial certifications they 
submitted to DOT. As we reported in April 2009, many states initially 
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. 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 the 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. 

While DOT has concluded that the form of the revised certifications is 
consistent with the additional guidance, it is continuing to review 
whether the amounts the states reported they planned to expend for 
covered programs are reasonable and if the methods of calculating these 
amounts were consistent with DOT guidance. According to DOT officials, 
FHWA’s division offices have completed an initial assessment of the 
states’ certifications. FHWA did not provide these reports for our 
review as it was reviewing them and obtaining the necessary 
clarifications when we completed our review. FHWA officials noted that 
reviewing states’ certifications is challenging because differences in 
state laws affect how states collect and distribute transportation 
funds, precluding a uniform approach to calculating effort across 
states. Further complicating this review is the fact that many states 
changed the amounts they plan to expend for covered programs from their 
first to their second submission. Our analysis shows that, among the 16 
states and the District, the amounts increased an average of 6.4 
percent and ranged among states from a 76 percent decrease to a 258 
percent increase. 

As we have reported, 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. FHWA told us it 
plans to complete its review in September 2009 and, based on this 
review, plans to issue additional guidance to the states on the methods 
for calculating level of effort amounts at that time. Once this occurs, 
FHWA said it plans to monitor states’ compliance with their 
certifications but does not plan to require the states to take 
corrective action should the states’ efforts fall short of the 
certified amounts. The only consequence of a state not being able to 
maintain the level of effort certified is that that state will be 
prohibited from benefiting from the redistribution of federal-aid 
highway obligations that will occur after August 1 for fiscal year 
2011.[Footnote 19] According to the DOT Deputy Assistant Secretary for 
Transportation Policy, the department recognizes the potential that 
many states will not be able to maintain the level of effort specified 
in their certifications given the continuing decline in their fiscal 
conditions. The Recovery Act does not provide any waivers or exemptions 
for the states—for changes in economic condition, for example—from the 
maintenance-of-effort provision. 

FTA Reports That Majority of Transit Funds Have Been Obligated, with 
Most Funding Being Used for Bus Fleets, Transit Facilities, and 
Preventive Maintenance: 

The Recovery Act appropriated $8.4 billion to fund public transit 
throughout the country through three existing FTA grant programs, 
including the Transit Capital Assistance Program.[Footnote 20] FTA 
reported that the majority of the public transit funds—$6.9 billion (82 
percent)—was apportioned for the Transit Capital Assistance Program, 
with $6 billion designated for the urbanized area formula grant program 
and $766 million designated for the nonurbanized area formula grant 
program.[Footnote 21] Under the urbanized area formula grant program, 
$5.4 billion in Recovery Act funds were apportioned to large and 
medium-size urbanized areas (areas with populations of at least 
200,000) and $572 million for small urbanized areas (areas with 
populations between 50,000 and 199,999) across the country.[Footnote 
22] Transit Capital Assistance Program funds may be used for such 
activities as vehicle replacements, facilities renovation or 
construction, preventive maintenance, and paratransit services. Up to 
10 percent of apportioned Recovery Act funds may also be used for 
operating expenses.[Footnote 23] Under the Recovery Act, the maximum 
federal fund share for projects under the Transit Capital Assistance 
Program is 100 percent.[Footnote 24] 

Working through the state and regional transportation planning process, 
designated recipients of the apportioned funds—typically public transit 
agencies and metropolitan planning organizations (MPO)—develop a list 
of transit projects that project sponsors (typically transit agencies) 
submit to FTA for Recovery Act funding.[Footnote 25] FTA reviews the 
project sponsors’ grant applications to ensure that projects meet 
eligibility requirements and then obligates Recovery Act funds by 
approving the grant application. Project sponsors must follow the 
requirements of the existing programs, which include ensuring the 
projects funded meet all regulations and guidance pertaining to the 
Americans with Disabilities Act (ADA), pay a prevailing wage in 
accordance with federal Davis-Bacon Act requirements, and comply with 
goals to ensure disadvantaged businesses are not discriminated against 
in the awarding of contracts. 

In March 2009, $6.9 billion was apportioned to states and urbanized 
areas in all 50 states, the District of Columbia (District), and four 
territories for transit projects and eligible transit expenses under 
the Transit Capital Assistance Program. As of September 1, 2009, $5.95 
billion of the funds had been obligated nationwide. 

Similar to Recovery Act funds for highway infrastructure, funds 
appropriated through the Transit Capital Assistance Program must be 
used in accordance with Recovery Act requirements, including the 
following: 

* Fifty percent of Recovery Act funds apportioned to urbanized areas or 
states were to be obligated within 180 days of apportionment (before 
Sept. 1, 2009) and the remaining apportioned funds are to be obligated 
within 1 year. The Secretary of Transportation is to withdraw and 
redistribute to other urbanized areas or states any amount that is not 
obligated within these time frames.[Footnote 26] 

* State governors must certify that the state will maintain the level 
of state spending for the types of transportation projects, including 
transit 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 27] This requirement applies only 
to state funding for transportation projects. The Department of 
Transportation will treat this maintenance-of-effort requirement 
through one consolidated certification from the governor, which must 
identify state funding for all transportation projects.

With regard to the first requirement, FTA reviewed the amount of 
funding obligated and concluded that the 50 percent requirement was met 
in all medium-size and large urbanized areas. FTA also determined that 
the 50 percent obligation requirement for nonurbanized areas had been 
met by each state. FTA did not, however, determine obligation rates for 
each of the 349 small urbanized areas—that is, for areas with 
populations of less then 200,000 but at least 50,000 people. Instead, 
it treated funding for small urbanized areas as apportioned to the 
governors of those states or territories within which the small 
urbanized areas were located. Using this statewide obligation rate, it 
determined that at least 50 percent of the total funding apportioned 
for small urbanized areas was obligated.[Footnote 28] See table 6. 

Table 6: Percentage of Recovery Act Transit Capital Assistance Program 
Funds Obligated Nationwide and Selected States and Urbanized Areas as 
Reported by FTA (Dollars in millions): 

Large urbanized (populations over 1 million): 

Los Angeles-Long Beach-Santa Ana: 
State: CA; 
Apportionment: $388.5; 
Obligation: Obligated amount: $385.1; 
Obligation: Percentage of apportionment obligated: 99. 

Riverside-San Bernardino: 
State: CA; 
Apportionment: $36.4; 
Obligation: Obligated amount: $35.5; 
Obligation: Percentage of apportionment obligated: 98. 

Sacramento: 
State: CA; 
Apportionment: $30.1; 
Obligation: Obligated amount: $29.6; 
Obligation: Percentage of apportionment obligated: 98. 

San Diego: 
State: CA; 
Apportionment: $80.8; 
Obligation: Obligated amount: $80.8; 
Obligation: Percentage of apportionment obligated: 100. 

San Francisco-Oakland: 
State: CA; 
Apportionment: $173.7; 
Obligation: Obligated amount: $120.3; 
Obligation: Percentage of apportionment obligated: 69. 

San Jose: 
State: CA; 
Apportionment: $55.2; 
Obligation: Obligated amount: $55.2; 
Obligation: Percentage of apportionment obligated: 100. 

Denver-Aurora: 
State: CO; 
Apportionment: $66.6; 
Obligation: Obligated amount: $66.6; 
Obligation: Percentage of apportionment obligated: 100. 

Washington, D.C.: 
State: DC-MD-VA; 
Apportionment: $214.6; 
Obligation: Obligated amount: $213.0; 
Obligation: Percentage of apportionment obligated: 99. 

Atlanta: 
State: GA; 
Apportionment: $87.7; 
Obligation: Obligated amount: $75.5; 
Obligation: Percentage of apportionment obligated: 86. 

Chicago: 
State: IL-IN; 
Apportionment: $327.6; 
Obligation: Obligated amount: $325.6; 
Obligation: Percentage of apportionment obligated: 99. 

Boston: 
State: MA-NH-RI; 
Apportionment: $199.8; 
Obligation: Obligated amount: $131.7; 
Obligation: Percentage of apportionment obligated: 66. 

St. Louis: 
State: IL-MO; 
Apportionment: $47.2; 
Obligation: Obligated amount: $47.2; 
Obligation: Percentage of apportionment obligated: 100. 

New York-Newark: 
State: NY-NJ-CT; 
Apportionment: $1,181.7; 
Obligation: Obligated amount: $999.2; 
Obligation: Percentage of apportionment obligated: 85. 

Philadelphia: 
State: PA-NJ-DE-MD; 
Apportionment: $188.5; 
Obligation: Obligated amount: $157.5; 
Obligation: Percentage of apportionment obligated: 84. 

Pittsburgh: 
State: PA; 
Apportionment: $49.3; 
Obligation: Obligated amount: $48.9; 
Obligation: Percentage of apportionment obligated: 99. 

Providence: 
State: MA-RI; 
Apportionment: $46.9; 
Obligation: Obligated amount: $32.7; 
Obligation: Percentage of apportionment obligated: 70. 

Medium-size urbanized (populations between 200,000 and 999,999): 

Antioch: 
State: CA; 
Apportionment: $8.6; 
Obligation: Obligated amount: $5.8; 
Obligation: Percentage of apportionment obligated: 68. 

Bakersfield: 
State: CA; 
Apportionment: $8.1; 
Obligation: Obligated amount: $8.1; 
Obligation: Percentage of apportionment obligated: 100. 

Concord: 
State: CA; 
Apportionment: $28.2;
Obligation: Obligated amount: $14.4; 
Obligation: Percentage of apportionment obligated: 51. 

Fresno: 
State: CA; 
Apportionment: $12.1; 
Obligation: Obligated amount: $10.9; 
Obligation: Percentage of apportionment obligated: 90. 

Indio-Cathedral City-Palm Springs: State: CA; 
Apportionment: $4.7; 
Obligation: Obligated amount: $4.7; 
Obligation: Percentage of apportionment obligated: 100. 

Lancaster-Palmdale: 
State: CA; 
Apportionment: $9.8; 
Obligation: Obligated amount: $9.8; 
Obligation: Percentage of apportionment obligated: 100. 

Mission Viejo: 
State: CA; 
Apportionment: $13.4; 
Obligation: Obligated amount: $13.4; 
Obligation: Percentage of apportionment obligated: 100. 

Modesto: 
State: CA; 
Apportionment: $5.6; 
Obligation: Obligated amount: $5.6; 
Obligation: Percentage of apportionment obligated: 99. 

Oxnard: 
State: CA; 
Apportionment: $10.2; 
Obligation: Obligated amount: $5.8; 
Obligation: Percentage of apportionment obligated: 57. 

Santa Rosa: 
State: CA; 
Apportionment: $6.2; 
Obligation: Obligated amount: $6.2; 
Obligation: Percentage of apportionment obligated: 100. 

Stockton: 
State: CA; 
Apportionment: $10.0; 
Obligation: Obligated amount: $10.0; 
Obligation: Percentage of apportionment obligated: 100. 

Temecula-Murrieta: 
State: CA; 
Apportionment: $4.1; 
Obligation: Obligated amount: $4.1; 
Obligation: Percentage of apportionment obligated: 100. 

Thousand Oaks: 
State: CA; 
Apportionment: $4.0; 
Obligation: Obligated amount: $2.0; 
Obligation: Percentage of apportionment obligated: 51. 

Victorville-Hesperia-Apple Valley: State: CA; 
Apportionment: $3.4; 
Obligation: Obligated amount: $3.4; 
Obligation: Percentage of apportionment obligated: 100. 

Colorado Springs: 
State: CO; 
Apportionment: $8.8; 
Obligation: Obligated amount: $4.6; 
Obligation: Percentage of apportionment obligated: 52. 

Fort Collins: 
State: CO; 
Apportionment: $3.4; 
Obligation: Obligated amount: $3.4; 
Obligation: Percentage of apportionment obligated: 100. 

Bridgeport-Stamford: 
State: CT-NY; 
Apportionment: $35.3; 
Obligation: Obligated amount: $33.9; 
Obligation: Percentage of apportionment obligated: 96. 

Augusta-Richmond County: 
State: GA-SC; 
Apportionment: $3.3; 
Obligation: Obligated amount: $3.3; 
Obligation: Percentage of apportionment obligated: 100. 

Columbus: 
State: GA-AL; 
Apportionment: $3.0; 
Obligation: Obligated amount: $3.0; 
Obligation: Percentage of apportionment obligated: 100. 

Savannah: 
State: GA; 
Apportionment: $4.5; 
Obligation: Obligated amount: $4.0; 
Obligation: Percentage of apportionment obligated: 90. 

Davenport: 
State: IA-IL; 
Apportionment: $5.2; 
Obligation: Obligated amount: $5.2; 
Obligation: Percentage of apportionment obligated: 100. 

Peoria: 
State: IL; 
Apportionment: $4.2; 
Obligation: Obligated amount: $4.2; 
Obligation: Percentage of apportionment obligated: 100. 

Rockford: 
State: IL; 
Apportionment: $3.7; 
Obligation: Obligated amount: $3.7; 
Obligation: Percentage of apportionment obligated: 100. 

Round Lake Beach-McHenry-Grayslake: 
State: IL; 
Apportionment: $5.5; 
Obligation: Obligated amount: $5.4; 
Obligation: Percentage of apportionment obligated: 98. 

Barnstable Town: 
State: MA; 
Apportionment: $7.6; 
Obligation: Obligated amount: $7.6; 
Obligation: Percentage of apportionment obligated: 100. 

Springfield: 
State: MA-CT; 
Apportionment: $17.9; 
Obligation: Obligated amount: $17.9; 
Obligation: Percentage of apportionment obligated: 100. 

Worcester: 
State: MA-CT; 
Apportionment: $12.4; 
Obligation: Obligated amount: $12.4; 
Obligation: Percentage of apportionment obligated: 100. 

Atlantic City: 
State: NJ; 
Apportionment: $14.4; 
Obligation: Obligated amount: $7.2; 
Obligation: Percentage of apportionment obligated: 50. 

Trenton: 
State: NJ; 
Apportionment: $15.5; 
Obligation: Obligated amount: $7.7; 
Obligation: Percentage of apportionment obligated: 50. 

Albany: 
State: NY; 
Apportionment: $14.7; 
Obligation: Obligated amount: $14.7; 
Obligation: Percentage of apportionment obligated: 100. 

Buffalo: 
State: NY; 
Apportionment: $24.4; 
Obligation: Obligated amount: $24.4; 
Obligation: Percentage of apportionment obligated: 100. 

Poughkeepsie-Newburgh: 
State: NY; 
Apportionment: $23.4; 
Obligation: Obligated amount: $20.3; 
Obligation: Percentage of apportionment obligated: 87. 

Rochester: 
State: NY; 
Apportionment: $15.8; 
Obligation: Obligated amount: $9.4; 
Obligation: Percentage of apportionment obligated: 60. 

Syracuse: 
State: NY; 
Apportionment: $10.3; 
Obligation: Obligated amount: $10.3; 
Obligation: Percentage of apportionment obligated: 100. 

Youngstown: 
State: OH-PA; 
Apportionment: $4.7; 
Obligation: Obligated amount: $4.7; 
Obligation: Percentage of apportionment obligated: 100. 

Allentown-Bethlehem: 
State: PA-NJ; 
Apportionment: $10.5; 
Obligation: Obligated amount: $8.8; 
Obligation: Percentage of apportionment obligated: 84. 

Harrisburg: 
State: PA; 
Apportionment: $7.0; 
Obligation: Obligated amount: $5.0; 
Obligation: Percentage of apportionment obligated: 71. 

Lancaster: 
State: PA; 
Apportionment: $9.8; 
Obligation: Obligated amount: $9.8; 
Obligation: Percentage of apportionment obligated: 100. 

Reading: 
State: PA; 
Apportionment: $4.3; 
Obligation: Obligated amount: $4.3; 
Obligation: Percentage of apportionment obligated: 100. 

Scranton: 
State: PA; 
Apportionment: $5.7; 
Obligation: Obligated amount: $5.7; 
Obligation: Percentage of apportionment obligated: 100. 

Chattanooga: 
State: TN-GA; 
Apportionment: $4.7; 
Obligation: Obligated amount: $4.7; 
Obligation: Percentage of apportionment obligated: 100. 

Small urbanized (populations between 50,000 and 199,999): 

State: California; 
Apportionment: $75.3; 
Obligation: Obligated amount: $66.0; 
Obligation: Percentage of apportionment obligated: 88. 

State: Colorado; 
Apportionment: $11.4; 
Obligation: Obligated amount: $11.4; 
Obligation: Percentage of apportionment obligated: 100. 

State: Georgia; 
Apportionment: $12.3; 
Obligation: Obligated amount: $9.1; 
Obligation: Percentage of apportionment obligated: 74. 

State: Illinois; 
Apportionment: $13.2; 
Obligation: Obligated amount: $10.4; 
Obligation: Percentage of apportionment obligated: 79. 

State: Massachusetts; 
Apportionment: $9.2; 
Obligation: Obligated amount: $7.9; 
Obligation: Percentage of apportionment obligated: 86. 

State: New Jersey; 
Apportionment: $6.3; 
Obligation: Obligated amount: $3.5; 
Obligation: Percentage of apportionment obligated: 56. 

State: New York; 
Apportionment: $13.7; 
Obligation: Obligated amount: $12.6; 
Obligation: Percentage of apportionment obligated: 93. 

State: Pennsylvania; 
Apportionment: $17.6; 
Obligation: Obligated amount: $12.9; 
Obligation: Percentage of apportionment obligated: 73. 

Nonurbanized (populations under 50,000): 

State: California; 
Apportionment: $34.0; 
Obligation: Obligated amount: $34.0; 
Obligation: Percentage of apportionment obligated: 100. 

State: Colorado; 
Apportionment: $12.5; 
Obligation: Obligated amount: $10.3; 
Obligation: Percentage of apportionment obligated: 83. 

State: Georgia; 
Apportionment: $25.6; 
Obligation: Obligated amount: $20.8; 
Obligation: Percentage of apportionment obligated: 81. 

State: Illinois; 
Apportionment: $21.2; 
Obligation: Obligated amount: $11.5; 
Obligation: Percentage of apportionment obligated: 54. 

State: Massachusetts; 
Apportionment: $5.2; 
Obligation: Obligated amount: $3.7; 
Obligation: Percentage of apportionment obligated: 70. 

State: New Jersey; 
Apportionment: $4.8; 
Obligation: Obligated amount: $4.8; 
Obligation: Percentage of apportionment obligated: 100. 

State: New York; 
Apportionment: $26.3; 
Obligation: Obligated amount: $20.4; 
Obligation: Percentage of apportionment obligated: 78. 

State: Pennsylvania; 
Apportionment: $30.2; 
Obligation: Obligated amount: $30.2; 
Obligation: Percentage of apportionment obligated: 100. 

Selected urbanized and nonurbanized areas total: 
Apportionment: $3,901.8; 
Obligation: Obligated amount: $3,423.7; 
Obligation: Percentage of apportionment obligated: 88. 

U.S. total: 
Apportionment: $6,734; 
Obligation: Obligated amount: $5,950; 
Obligation: Percentage of apportionment obligated: 88. 

Source: GAO analysis of FTA data. 

Notes: Some urbanized areas may cross two or more state borders. 

U.S. total includes 50 states, the District, and U.S. territories. 

[End of table] 

Almost 87 percent of Recovery Act Transit Capital Assistance Program 
obligations are being used for upgrading transit facilities, improving 
bus fleets, and conducting preventive maintenance. Many transit agency 
officials told us they decided to use Recovery Act funding for these 
types of projects since they are high-priority projects that support 
their agencies’ short-and long-term goals, can be started quickly, 
improve safety, or would otherwise not have been funded. Specifically, 
$2.8 billion, or 47 percent, of Recovery Act funds obligated nationally 
have been for transit infrastructure construction projects and related 
activities, which range from large-scale projects, such as upgrading 
power substations, to a series of smaller projects, such as installing 
improved audio systems for the hearing impaired. The Metropolitan 
Atlanta Rapid Transit Authority, for example, used Recovery Act funds 
to comprehensively upgrade and replace the fire protection system at 
its transit facilities. In New York, the Metropolitan Transportation 
Authority funded the installation of new locker and rest facilities for 
transit agency personnel and the rehabilitation of bus buildings. In 
addition, $1.8 billion, or 31 percent, is being used for improvements 
to local transit agencies’ bus fleets, including purchasing new buses 
and renovating older buses. For example, with Recovery Act funds, the 
Pioneer Valley Transit Authority in Massachusetts is purchasing 29 new 
buses to replace its aging fleet, and the Los Angeles County 
Metropolitan Transportation Authority in California, according to 
agency officials, is ordering 140 compressed natural gas buses. Other 
transit agencies reported using Recovery Act funds for other types of 
bus fleet improvements, such as replacing fare boxes and installing 
bicycle racks on buses. Finally, $515 million, or 9 percent, has been 
obligated for preventive maintenance, which is considered a capital 
project by FTA, and $738 million for other capital expenses such as 
leases, training, and finance costs. 

Figure 5: Nationwide Transit Capital Assistance Program Recovery Act 
Obligations by Project Type as of September 1, 2009: 

[Refer to PDF for image: pie-chart] 

Transit infrastructure construction: $2.8 billion; 47%; 
Bus purchases and rehabilitation: $1.8 billion; 31%; 
Other capital expenses: $738 million; 12%; 
Preventative maintenance: $515 million; 9%; 
Rail car purchases and rehabilitation: $97 million; 2%; 
Operating expense: $4.7 million; less than 1%. 

Source: GAO analysis of Federal Transit Administration data. 

Note: Percentages may not add to 100 due to rounding. “Transit 
infrastructure construction” includes engineering and design, 
acquisition, construction, and rehabilitation and renovation 
activities. “Other capital expenses” includes items such as leases, 
training, finance costs, mobility management project administration and 
other capital programs. 

[End of figure] 

As previously noted, all states have submitted maintenance-of-effort 
certifications to DOT, certifying that the state will maintain the 
level of state spending that it planned to spend the day the Recovery 
Act was enacted for all transportation projects, including transit 
projects, funded by the Recovery Act. DOT has concluded that the form 
of each certification is consistent with the additional guidance. 
Unlike federal highway infrastructure programs, which are administered 
through a federal-state partnership, federal transit programs are 
generally administered through a federal-local partnership, although 
rural programs are administered at the state level. Therefore, in some 
states, officials believe that the maintenance-of-effort requirement 
can be more easily met for transit projects due to the fact that the 
state does not provide any transit funding, making the requirement 
irrelevant, or the state transit funding has decreased over the years. 
For example, in Colorado, officials for the Regional Transit District 
stated that since their agency did not receive any transit funding from 
the state annually, officials believed that the maintenance-of-effort 
requirement did not apply. In addition, Illinois Department of 
Transportation officials stated that while the state attempts to 
provide funding for transit operating expenses for some rural areas, it 
has not been able to provide consistent funding for transit capital 
projects. 

State Highway and Transit Officials Express Concerns and Confusion 
about Reporting Requirements Recipients of highway and transit Recovery 
Act funds, such as state DOTs and transit agencies, are subject to 
multiple reporting requirements. First, under section 1201(c) of the 
Recovery Act, recipients of transportation funds must submit periodic 
reports on the amount of federal funds appropriated, allocated, 
obligated, and reimbursed; the number of projects put out to bid, 
awarded, or work has begun or completed; project status; and the number 
of direct and indirect jobs created or sustained, among other things. 
[Footnote 29] DOT is required to collect and compile this information 
for Congress, and it issued its first report to Congress in May 2009. 
DOT is working to develop a model that will be used to estimate 
indirect jobs created and sustained rather than have individual 
recipients develop these estimates. DOT, through FTA, conducted a 
training session consisting of three webinars to provide information on 
the 1201(c) reporting requirements, such as who should submit these 
reports and what information is required. FTA is planning on conducting 
another three webinars and providing additional guidance before the end 
of September 2009. Second, under section 1512, recipients of Recovery 
Act funds, including but not limited to transportation funds, are to 
report quarterly on a number of measures, such as the use of funds and 
the number of jobs created or retained. OMB has issued implementing 
guidance for recipient reporting. For example, on June 22, 2009, OMB 
issued guidance to dispel some confusion related to reporting on jobs 
created and retained by providing, among other information, additional 
detail on how to calculate the relevant numbers. 

Despite the OMB and DOT guidance, both highway and transit officials 
expressed concerns and challenges with meeting the recipient reporting 
requirements. While both highway and transit officials raised concerns, 
transit officials tended to raise more specific concerns than their 
highway counterparts. This may reflect differing experiences collecting 
this type of information. FTA officials noted that recipients of 
transit grants have not had to collect similar information in the past. 
Conversely, while FHWA does not routinely require state DOTs to provide 
information on jobs created or sustained for highway projects, it has 
collected such information in the past. The specific concerns raised by 
transit officials include the following: 

* Calculation of direct jobs: A number of agencies expressed confusion 
about calculating the number of direct jobs resulting from Recovery Act 
funding, especially with regard to using Recovery Act funds for 
purchasing equipment. For example, officials from the New York 
Department of Transportation and Greater Glens Fall Transit Agency, 
located in upstate New York, had questions concerning how to calculate 
direct jobs created from the purchase of buses made with Recovery Act 
funding versus how to count jobs created from Recovery Act-funded 
construction projects. Officials in Georgia noted that while FTA 
guidance on its reporting requirements indicated that transit providers 
did not need to report jobs associated with the vehicle replacements 
because they were indirect jobs, OMB’s guidance did not indicate that 
jobs associated with vehicle replacements were indirect jobs. Transit 
agencies in Massachusetts reported similar concerns.

* Contractors and subcontractors: Another issue that caused confusion 
at a number of transit agencies we visited involved how transit 
agencies were required to report project contractors and 
subcontractors. During our review, we found that there were significant 
differences in how transit agencies were counting contractors. For 
example, in California, officials at the Orange County Transportation 
Authority stated that they only plan to include direct hours worked by 
contractors in their jobs estimates. By contrast, officials from 
California’s San Joaquin Regional Transit District plan to include in 
their direct job estimates all hours of contractors working on Recovery 
Act-funded projects by basing job estimates on specific hours and pay 
data pulled from the internal payroll systems and certified payroll 
documents completed by contractors and subcontractors. There was also 
some confusion in how to count subcontractors. For example, some 
officials from transit agencies in Pennsylvania explained that language 
in the OMB guidance seemed to them to require that “subrecipients” 
submit the names and salaries of the five highest paid executives in 
their organization but was unclear whether this referred to Recovery 
Act project subrecipients or subcontractors. However, officials 
subsequently told us that they had resolved their questions. 

* Calculating the number of full–time-employee equivalents (FTE) from 
work hours: Finally, one transit agency highlighted that they had 
concerns about the process for calculating the number of FTEs based on 
the number of hours worked on a project. In New York, Metropolitan 
Transit Authority officials said they will need to take the job title, 
figure out the “normal” hours worked in a year, and divide the number 
of these hours by four to figure out the hours worked in that 
reportable quarter.

Agency actions on identifying recipient reporting challenges and 
providing additional guidance: Recipients of highway and transit 
Recovery Act funds, such as state DOTs and transit agencies, are 
subject to multiple reporting requirements. Both DOT and OMB have 
issued implementation guidance for recipient reporting. For example, 
DOT, through FHWA and FTA, has provided training and guidance to 
recipients. Despite these efforts, highway and transit officials 
expressed concerns and challenges with meeting these reporting 
requirements. While both highway and transit officials raised concerns, 
transit officials tended to raise more specific concerns than their 
highway counterparts, which may reflect differing experiences 
collecting this type of information. 

Recommendation: The Secretary of Transportation should continue the 
Department’s outreach to state DOTs and transit agencies to identify 
common problems in accurately fulfilling reporting requirements and 
provide additional guidance, as appropriate. 

Agency comments and our evaluation: We provided DOT with a draft of the 
transportation section of this report for its review and comment. With 
regard to our recommendation, DOT noted that it has conducted outreach, 
including providing training and guidance, to recipients and will 
continue to assess the need to provide additional information. We 
revised the draft report and recommendation to reflect DOT's ongoing 
and planned outreach efforts. DOT also provided technical comments on 
the draft report, which we incorporated as appropriate.

States Have Begun to Draw Down Recovery Act Funds for Education 
Programs: 

Our review of states’ use of Recovery Act funds covers three programs 
administered by the U.S. Department of Education (Education)—State 
Fiscal Stabilization Fund (SFSF); Elementary and Secondary Education 
Act (ESEA) Title I, Part A; and the Individuals with Disabilities 
Education Act (IDEA), Parts B and C.

* State Fiscal Stabilization Fund. The State Fiscal Stabilization Fund 
(SFSF) included approximately $48.6 billion to award to governors by 
formula and another $5 billion to award to states or school districts 
as competitive grants. The Recovery Act created the 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 (IHE). States must allocate 81.8 percent of their SFSF 
formula grant funds to support education (these funds are referred to 
as education stabilization funds) and must use the remaining 18.2 
percent for public safety and other government services, which may 
include education (these funds are referred to as government services 
funds). For the initial award of SFSF formula grant funds, Education 
made available at least 67 percent of the total amount allocated to 
each state,[Footnote 30] but states had to submit an application to 
Education to receive the funds. The application required each state to 
provide several assurances, including that the state will meet 
maintenance-of-effort requirements (or will be able to comply with 
waiver provisions) and that it will implement strategies to advance 
four core areas of education reform 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] In 
addition, states were required to make assurances concerning 
accountability, transparency, reporting, and compliance with certain 
federal laws and regulations. After maintaining state support for 
education at fiscal year 2006 levels, states must use education 
stabilization funds to restore state funding to the greater of fiscal 
year 2008 or 2009 levels for state support to school districts or 
public IHEs. When distributing these funds to school districts, states 
must use their primary education funding formula, but they can 
determine how to allocate funds to public IHEs. In general, school 
districts maintain broad discretion in how they can use education 
stabilization funds, but states have some ability to direct IHEs in how 
to use these funds.

* ESEA Title I. The Recovery Act provides $10 billion to help local 
educational agencies (LEA) 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. The Recovery Act requires these additional funds to be 
distributed through states to 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, LEAs are required to comply with current statutory and 
regulatory requirements and must obligate 85 percent of the funds by 
September 30, 2010.[Footnote 32] 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. Education made the first half of states’ Recovery Act ESEA 
Title I, Part A funding available on April 1, 2009, and announced on 
September 4, 2009, that it had made the second half available.

* IDEA. 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 is divided into two separate grants—Part B grants to 
states (for school-age children) and Part B preschool grants (section 
619). 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. Education made the first 
half of states’ Recovery Act IDEA funding available to state agencies 
on April 1, 2009, and announced on September 4, 2009, that it had made 
the second half available.

Most States Have Begun Drawing Down Recovery Act Funds for Education 
Programs, but Expenditures Sometimes Differ from Amounts Drawn Down by 
States As of September 18, 2009, Pennsylvania was the only state 
covered by our review that had not received approval from Education for 
its initial SFSF application. For the other 15 states and the District 
of Columbia in our review, Education approved their initial 
applications and made available a total of about $16 billion in initial 
education stabilization funds. As of August 28, 2009, all but 4 of 
these had drawn down some of these funds. In total, about 36 percent of 
the funds initially made available had been drawn down by these states, 
as shown in table 7.[Footnote 33] 

Table 7: SFSF Education Stabilization Funds Made Available by the U.S. 
Department of Education and Funds Drawn Down by States: 

State: Arizona; 
Total state allocation for education stabilization funds: $831,869,331; 
Phase I education stabilization funds made available as of August 28, 
2009: $557,352,452; 
Funds drawn down by states as of August 28, 2009: $154,138,300; 
Percentage of available funds drawn down: 28. 

State: California;
Total state allocation for education stabilization funds: 
$4,875,498,758;
Phase I education stabilization funds made available as of August 28, 
2009: $3,266,584,168; 
Funds drawn down by states as of August 28, 2009: $3,020,198,909; 
Percentage of available funds drawn down: 92. 

State: Colorado;
Total state allocation for education stabilization funds: $621,878,397; 
Phase I education stabilization funds made available as of August 28, 
2009: $416,658,526; 
Funds drawn down by states as of August 28, 2009: $154,811,775; 
Percentage of available funds drawn down: 37. 

State: District of Columbia;
Total state allocation for education stabilization funds: $73,110,443; 
Phase I education stabilization funds made available as of August 28, 
2009: $48,983,997; 
Funds drawn down by states as of August 28, 2009: $0; Percentage of 
available funds drawn down: 0. 

State: Florida;
Total state allocation for education stabilization funds: 
$2,208,839,245;
Phase I education stabilization funds made available as of August 28, 
2009: $1,479,922,294; 
Funds drawn down by states as of August 28, 2009: $8,438,521; 
Percentage of available funds drawn down: 1. 

State: Georgia;
Total state allocation for education stabilization funds: 
$1,260,799,096;
Phase I education stabilization funds made available as of August 28, 
2009: $844,735,394; 
Funds drawn down by states as of August 28, 2009: $238,773,562; 
Percentage of available funds drawn down: 28. 

State: Illinois;
Total state allocation for education stabilization funds: 
$1,681,130,685; 
Phase I education stabilization funds made available as of August 28, 
2009: $1,126,357,559; 
Funds drawn down by states as of August 28, 2009: $1,038,987,579; 
Percentage of available funds drawn down: 92. 

State: Iowa;
Total state allocation for education stabilization funds: $386,373,745; 
Phase I education stabilization funds made available as of August 28, 
2009: $258,870,409; 
Funds drawn down by states as of August 28, 2009: $57,230,002; 
Percentage of available funds drawn down: 22. 

State: Massachusetts;
Total state allocation for education stabilization funds: $813,303,212; 
Phase I education stabilization funds made available as of August 28, 
2009: $544,913,152; 
Funds drawn down by states as of August 28, 2009: $322,002,904; 
Percentage of available funds drawn down: 59. 

State: Michigan;
Total state allocation for education stabilization funds: 
$1,302,368,993;
Phase I education stabilization funds made available as of August 28, 
2009: $872,587,225; 
Funds drawn down by states as of August 28, 2009: $573,635,420; 
Percentage of available funds drawn down: 66. 

State: Mississippi;
Total state allocation for education stabilization funds: $392,067,945; 
Phase I education stabilization funds made available as of August 28, 
2009: $262,685,523; 
Funds drawn down by states as of August 28, 2009: $0; Percentage of 
available funds drawn down: 0. 

State: New Jersey;
Total state allocation for education stabilization funds: 
$1,088,335,775;
Phase I education stabilization funds made available as of August 28, 
2009: $729,184,969; 
Funds drawn down by states as of August 28, 2009: $0; Percentage of 
available funds drawn down: 0. 

State: New York;
Total state allocation for education stabilization funds: 
$2,468,557,791;
Phase I education stabilization funds made available as of August 28, 
2009: $1,653,933,720; 
Funds drawn down by states as of August 28, 2009: $49,900,000; 
Percentage of available funds drawn down: 3. 

State: North Carolina;
Total state allocation for education stabilization funds: 
$1,161,931,564;
Phase I education stabilization funds made available as of August 28, 
2009: $778,494,148; 
Funds drawn down by states as of August 28, 2009: $136,095,123; 
Percentage of available funds drawn down: 17. 

State: Ohio;
Total state allocation for education stabilization funds: 
$1,463,709,963;
Phase I education stabilization funds made available as of August 28, 
2009: $980,685,675; 
Funds drawn down by states as of August 28, 2009: $61,096,405; 
Percentage of available funds drawn down: 6. 

State: Pennsylvania;
Total state allocation for education stabilization funds: $0; Phase I 
education stabilization funds made available as of August 28, 2009: $0; 
Funds drawn down by states as of August 28, 2009: $0; Percentage of 
available funds drawn down: [Empty].  

State: Texas;
Total state allocation for education stabilization funds: 
$3,250,272,133;
Phase I education stabilization funds made available as of August 28, 
2009: $2,177,682,329; 
Funds drawn down by states as of August 28, 2009: $0; Percentage of 
available funds drawn down: 0. 

Total:
Total state allocation for education stabilization funds: 
$23,880,047,075;
Phase I education stabilization funds made available as of August 28, 
2009: $15,999,631,540; 
Funds drawn down by states as of August 28, 2009: $5,815,308,499; 
Percentage of available funds drawn down: 36. 

Source: U.S. Department of Education. 

[End of table] 

Education did not approve Pennsylvania’s initial SFSF application 
because the application did not include data for some public 
institutions of higher education in the calculations for the state’s 
maintenance-of-effort for education funding and amounts needed to 
restore education funding to prior year levels. Education officials 
said they asked Pennsylvania to revise the application to include data 
for those institutions, but as of September 18, Pennsylvania had not 
submitted a revised application to Education. 

Because states have been finalizing and revising their budgets since 
submitting their initial SFSF applications, some will need to amend 
their SFSF applications to reflect the new budget figures for state 
support for education. According to Education guidance, a state must 
amend its SFSF application if there are changes to the reported levels 
of state support for education that were used to determine maintenance- 
of-effort or to calculate the amounts needed to restore state support 
for education to prior year levels. For example, California has amended 
its SFSF application to change its calculations of state support for 
education. Mississippi submitted its initial SFSF application before 
passing its fiscal year 2010 budget and plans to amend it to include 
the enacted budget information. The District of Columbia plans to amend 
its application to increase the amount needed to restore the District’s 
support for elementary and secondary education to the fiscal year 2008 
funding level. Due to recent budget cuts to higher education for fiscal 
year 2010, Colorado amended its SFSF application to reduce the amount 
reported as state support for higher education and requested a waiver 
from the maintenance-of-effort requirements for SFSF for fiscal year 
2010. 

Of the 15 states and the District of Columbia covered by our review to 
which Education has made SFSF funds available, 12 states had drawn down 
education stabilization funds as of August 28, 2009. Of these 12 
states, 9 were able to provide expenditure data from their LEAs for 
this report, as shown in table 8. Also, of the six states that had made 
education stabilization funds available to their IHEs and from which we 
attempted to collect education stabilization expenditure data for IHEs— 
Arizona, Colorado, Illinois, Iowa, North Carolina, and Ohio—five were 
able to report expenditures. When expenditures by LEAs and IHEs are 
substantially less than the amounts drawndown by the state, such as in 
Illinois, the state may be experiencing problems with its cash 
management. Illinois has distributed SFSF funds to LEAs in semi-monthly 
payments, but according to state officials, the state does not have the 
ability to identify specific cash needs from LEAs prior to distributing 
these funds. Table 8 shows the amounts of SFSF education stabilization 
funds drawn down by states, the reported expenditures by LEAs in those 
states that could provide this information, and the reported 
expenditures by IHEs in the 5 states that provided the information. 

Table 8: State Drawdowns of Education Stabilization Funds Compared to 
Reported Expenditures by LEAs and IHEs in States We Reviewed That Could 
Provide the Information (Dollars in millions): 

State: Arizona;
Funds drawn down as of August 28, 2009: $154.1; 
Expenditures by LEAs: $0;
Expenditures by IHEs[A]: $154.1. 

State: California; 
Funds drawn down as of August 28, 2009: $3,020.2; 
Expenditures by LEAs: [B];
Expenditures by IHEs[A]: [Empty]. 

State: Colorado;
Funds drawn down as of August 28, 2009: $154.8; 
Expenditures by LEAs: $0;
Expenditures by IHEs[A]: $154.8. 

State: District of Columbia;
Funds drawn down as of August 28, 2009: $0; 
Expenditures by LEAs: $0; 
Expenditures by IHEs[A]: [Empty]. 

State: Florida;
Funds drawn down as of August 28, 2009: $8.4; 
Expenditures by LEAs: $7.2;
Expenditures by IHEs[A]: [Empty]. 

State: Georgia;
Funds drawn down as of August 28, 2009: $238.8; 
Expenditures by LEAs: $157.9;
Expenditures by IHEs[A]: [Empty]. 

State: Illinois;
Funds drawn down as of August 28, 2009: $1,039.0; 
Expenditures by LEAs: $165.6;
Expenditures by IHEs[A]: $0. 

State: Iowa;
Funds drawn down as of August 28, 2009: $57.2; 
Expenditures by LEAs: [B];
Expenditures by IHEs[A]: [B]. 

State: Massachusetts;
Funds drawn down as of August 28, 2009: $322.0; 
Expenditures by LEAs: [B];
Expenditures by IHEs[A]: [Empty]. 

State: Michigan;
Funds drawn down as of August 28, 2009: $573.6; 
Expenditures by LEAs: $0;
Expenditures by IHEs[A]: [Empty]. 

State: Mississippi;
Funds drawn down as of August 28, 2009: $0; 
Expenditures by LEAs: $0; 
Expenditures by IHEs[A]: [Empty]. 

State: New Jersey;
Funds drawn down as of August 28, 2009: $0; 
Expenditures by LEAs: [B];
Expenditures by IHEs[A]: [Empty]. 

State: New York;
Funds drawn down as of August 28, 2009: $49.9; 
Expenditures by LEAs: $0;
Expenditures by IHEs[A]: [Empty]. 

State: North Carolina;
Funds drawn down as of August 28, 2009: $136.1; 
Expenditures by LEAs: $14.3;
Expenditures by IHEs[A]: $127.0. 

State: Ohio;
Funds drawn down as of August 28, 2009: $61.1; 
Expenditures by LEAs: $54.6;
Expenditures by IHEs[A]: $56.3. 

State: Pennsylvania[C]; 
Funds drawn down as of August 28, 2009: $0; 
Expenditures by LEAs: $0;
Expenditures by IHEs[A]: [Empty]. 

State: Texas;
Funds drawn down as of August 28, 2009: $0; 
Expenditures by LEAs: $0;
Expenditures by IHEs[A]: [Empty]. 

Sources: U.S. Department of Education and state educational agencies. 

Notes: Expenditures shown in the table are as of the following dates: 
June 30, 2009—Georgia; August 31, 2009—Colorado (LEAs), Florida, New 
York, North Carolina (LEAs) and Texas; September 1, 2009-Michigan; 
September 2, 2009-Colorado (IHEs), Illinois (LEAs); September 4, 2009- 
Mississippi; September 11, 2009-District of Columbia; September 15, 
2009-Ohio; September 16, 2009-Illinois (IHEs) and Arizona; September 
18, 2009—North Carolina (IHEs). 

[A] GAO attempted to collect expenditure data for IHEs from six states— 
Arizona, Colorado, Illinois, Iowa, North Carolina, and Ohio. 

[B] State could not provide data on expenditures by LEA or IHEs for the 
time period covered by our report. 

[C] Pennsylvania’s application for SFSF funds is pending; therefore, 
Pennsylvania has not received SFSF funds from Education. 

[End of table] 

As of August 28, 2009, 11 of the states we reviewed had drawn down 
Title I, Part A Recovery Act funds, and reported LEA expenditures from 
the states were generally higher than the amounts drawn down. In total, 
these 11 states have drawn down 15 percent of the first half of Title I 
Recovery Act funds, which Education made available to the states on 
April 1, 2009.[Footnote 34] For eight states, reported expenditure 
figures for LEAs were larger than the amounts drawn down. 
Massachusetts, as an example, reported that LEAs have spent over $2 
million in Title I funding, but the state had only drawn down $1.5 
million as of August 28, 2009. This is because in Massachusetts, 
according to state officials, the state draws down funds according to 
its agreement with the U.S. Department of Treasury, and it is not 
unusual for drawdowns to lag behind expenditures. 

However, three states were unable to report LEA expenditure information 
for the period covered by this report, including California, which 
accounts for the vast majority of ESEA Title I, Part A Recovery Act 
funds drawn down to date. As we reported in July, according to 
Education officials, California officials informed the department that 
the drawdown of Title I Recovery Act funds was in lieu of the state’s 
normally scheduled drawdown of school year 2008-2009 Title I funds. 
However, in California, we found that, as of August 7, 2009, 7 of the 
10 California LEAs receiving the largest Title I allocations had not 
spent any Title I, Part A Recovery Act funds and, therefore, had cash 
balances. Further, California officials told us that they had conducted 
an informal survey of 180 LEAs in July 2009 to determine whether LEAs 
were maintaining regular ESEA Title I cash balances, and nearly all of 
the 64 LEAs responding reported unreimbursed expenses—having spent more 
regular ESEA Title I funds than they received. The officials told us 
they determined that these unreimbursed expenses would largely offset 
the ESEA Title I Recovery Act fund cash balances for the majority of 
these LEAs, and they believe that the calculation of interest due to 
the federal government on the Recovery Act balances would incorporate 
this offset. Therefore, they did not view the Title I Recovery Act 
balances as a problem. We discussed this issue with Education 
officials, but they have yet to make a final determination of whether 
such unreimbursed expenses can be offset against Title I Recovery Act 
balances for the purpose of calculating interest due to the federal 
government. Table 9 shows Title I, Part A Recovery Act drawdowns and 
expenditures. 

Table 9: ESEA Title I, Part A Recovery Act Funds Made Available to and 
Drawn Down by States We Reviewed, and Funds Expended by LEAs in States 
That Could Provide the Information (Dollars in millions): 

State: Arizona; 
Title I Recovery Act funds made available as of August 28, 2009: $97.5; 
Funds drawn down as of August 28, 2009: $1.1; 
Percentage of available funds drawn down: 1.1; 
Expenditures by LEAs: $3; 
Drawdowns minus expenditures (negative totals in parentheses): $(1.9). 

State: California;
Title I Recovery Act funds made available as of August 28, 2009: 
$562.5; 
Funds drawn down as of August 28, 2009: $450.3; 
Percentage of available funds drawn down: 80.1; 
Expenditures by LEAs: [A]; 
Drawdowns minus expenditures (negative totals in parentheses): [Empty]. 

State: Colorado;
Title I Recovery Act funds made available as of August 28, 2009: $55.6; 
Funds drawn down as of August 28, 2009: $0.3; 
Percentage of available funds drawn down: 0.5; 
Expenditures by LEAs: $0.3; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: District of Columbia;
Title I Recovery Act funds made available as of August 28, 2009: $18.8; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: Florida;
Title I Recovery Act funds made available as of August 28, 2009: 
$245.3; 
Funds drawn down as of August 28, 2009: $18.1; 
Percentage of available funds drawn down: 7.4; 
Expenditures by LEAs: $18.6; 
Drawdowns minus expenditures (negative totals in parentheses): $(0.5). 

State: Georgia;
Title I Recovery Act funds made available as of August 28, 2009: 
$175.5; 
Funds drawn down as of August 28, 2009: $0.4; 
Percentage of available funds drawn down: 0.2; 
Expenditures by LEAs: $3.6; 
Drawdowns minus expenditures (negative totals in parentheses): $(3.2). 

State: Illinois;
Title I Recovery Act funds made available as of August 28, 2009: 
$210.1; 
Funds drawn down as of August 28, 2009: $0.4; 
Percentage of available funds drawn down: 0.2; 
Expenditures by LEAs: $0.4; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: Iowa;
Title I Recovery Act funds made available as of August 28, 2009: $25.7; 
Funds drawn down as of August 28, 2009: $8.1; 
Percentage of available funds drawn down: 31.5; 
Expenditures by LEAs: [A]; 
Drawdowns minus expenditures (negative totals in parentheses): [Empty]. 

State: Massachusetts;
Title I Recovery Act funds made available as of August 28, 2009: $81.8; 
Funds drawn down as of August 28, 2009: $1.5; 
Percentage of available funds drawn down: 1.8; 
Expenditures by LEAs: $2.2; 
Drawdowns minus expenditures (negative totals in parentheses): $(0.7). 

State: Michigan;
Title I Recovery Act funds made available as of August 28, 2009: 
$195.0; Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0;
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: Mississippi;
Title I Recovery Act funds made available as of August 28, 2009: $66.4; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0;
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: New Jersey;
Title I Recovery Act funds made available as of August 28, 2009: $91.5; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: [A]; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: New York;
Title I Recovery Act funds made available as of August 28, 2009: 
$453.6; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0;
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: North Carolina;
Title I Recovery Act funds made available as of August 28, 2009: 
$128.7; 
Funds drawn down as of August 28, 2009: $6.2; 
Percentage of available funds drawn down: 4.8; 
Expenditures by LEAs: $9.6;
Drawdowns minus expenditures (negative totals in parentheses): $(3.4). 

State: Ohio;
Title I Recovery Act funds made available as of August 28, 2009: 
$186.3; 
Funds drawn down as of August 28, 2009: $0.5; 
Percentage of available funds drawn down: 0.3; 
Expenditures by LEAs: $2.8; 
Drawdowns minus expenditures (negative totals in parentheses): $(2.3). 

State: Pennsylvania;
Title I Recovery Act funds made available as of August 28, 2009: 
$200.3; Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $23.0; 
Drawdowns minus expenditures (negative totals in parentheses): $(23.0). 

State: Texas;
Title I Recovery Act funds made available as of August 28, 2009: 
$474.4; 
Funds drawn down as of August 28, 2009: $2.4; 
Percentage of available funds drawn down: 0.5; 
Expenditures by LEAs: $2.8; 
Drawdowns minus expenditures (negative totals in parentheses): $(0.4). 

Total: 
Title I Recovery Act funds made available as of August 28, 2009: 
$3,269.0; 
Funds drawn down as of August 28, 2009: $489.3; 
Percentage of available funds drawn down: 15.0; 
Expenditures by LEAs: $66.3. 

Sources: U.S. Department of Education and state educational agencies. 

Notes: Expenditures are as of the following dates: August 31, 2009- 
Florida, North Carolina, and Texas; September 1, 2009-Colorado, 
Michigan, New Jersey, and New York; September 2, 2009-Georgia and 
Illinois; September 3, 2009-Pennsylvania; September 4, 2009- 
Massachusetts; September 8, 2009-Mississippi; September 9, 2009- 
Arizona; September 11, 2009-District of Columbia; and September 15, 
2009-Ohio.

[A] State could not provide data on expenditures by LEAs for the time 
period covered by our report. 

[End of table] 

As of August 28, 12 of the states we reviewed had drawn down IDEA, Part 
B Recovery Act funds, and reported expenditures from the states were 
generally higher than the amounts drawn down. In total, these 12 states 
have drawn down about 10 percent of the first half of IDEA, Part B 
Recovery Act funds, which Education made available to the states on 
April 1, 2009.[Footnote 35] For eight states, reported expenditure 
figures for LEAs were larger than the amounts drawn down. Table 10 
shows the total IDEA, Part B Recovery Act funds drawn down by states as 
of August 28, 2009, and expenditures by LEAs for states that were able 
to report that information. 

Table 10: IDEA, Part B Recovery Act Funds Made Available to and Drawn 
Down by States We Reviewed, and Funds Expended by LEAs in States That 
Could Provide the Information (Dollars in millions): 

State: Arizona;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$92.1; 
Funds drawn down as of August 28, 2009: $0.1; 
Percentage of available funds drawn down: 0.1; 
Expenditures by LEAs: $1.8; 
Drawdowns minus expenditures (negative totals in parentheses): $(1.7). 

State: California;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$634.0; 
Funds drawn down as of August 28, 2009: $269.0; 
Percentage of available funds drawn down: 42.4; 
Expenditures by LEAs: [A]; 
Drawdowns minus expenditures (negative totals in parentheses): [Empty]. 

State: Colorado;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$77.0; 
Funds drawn down as of August 28, 2009: $4.0; 
Percentage of available funds drawn down: 5.2; 
Expenditures by LEAs: $4.1;
Drawdowns minus expenditures (negative totals in parentheses): $(0.1). 

State: District of Columbia;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$8.4; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0;
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: Florida;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$323.5; 
Funds drawn down as of August 28, 2009: $39.4; 
Percentage of available funds drawn down: 12.2; 
Expenditures by LEAs: $42.7;
Drawdowns minus expenditures (negative totals in parentheses): $(3.3). 

State: Georgia;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$162.1; 
Funds drawn down as of August 28, 2009: $0.2; 
Percentage of available funds drawn down: 0.1; 
Expenditures by LEAs: $0.5; 
Drawdowns minus expenditures (negative totals in parentheses): $(0.3). 

State: Illinois;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$262.4; 
Funds drawn down as of August 28, 2009: $1.5; 
Percentage of available funds drawn down: 0.6; 
Expenditures by LEAs: $1.2; 
Drawdowns minus expenditures (negative totals in parentheses): $0.3. 

State: Iowa;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$63.1; 
Funds drawn down as of August 28, 2009: $25.2; 
Percentage of available funds drawn down: 39.9; 
Expenditures by LEAs: [A]; 
Drawdowns minus expenditures (negative totals in parentheses): [Empty]. 

State: Massachusetts;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$145.4; 
Funds drawn down as of August 28, 2009: $6.2; 
Percentage of available funds drawn down: 4.3; 
Expenditures by LEAs: $9.4[B]; 
Drawdowns minus expenditures (negative totals in parentheses): $(3.2). 

State: Michigan;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$207.0; 
Funds drawn down as of August 28, 2009: $5.4; 
Percentage of available funds drawn down: 2.6; 
Expenditures by LEAs: $0; 
Drawdowns minus expenditures (negative totals in parentheses): $5.4. 

State: Mississippi;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$61.2; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: New Jersey;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$186.2; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: [A]; 
Drawdowns minus expenditures (negative totals in parentheses): [Empty]. 

State: New York;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$397.1; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: North Carolina;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$163.2; 
Funds drawn down as of August 28, 2009: $21.8; 
Percentage of available funds drawn down: 13.4; 
Expenditures by LEAs: $26.8; 
Drawdowns minus expenditures (negative totals in parentheses): $(5.0). 

State: Ohio;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$225.5; 
Funds drawn down as of August 28, 2009: $0.7; 
Percentage of available funds drawn down: 0.3; 
Expenditures by LEAs: $4.0; 
Drawdowns minus expenditures (negative totals in parentheses): $(3.3). 

State: Pennsylvania;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$220.8; 
Funds drawn down as of August 28, 2009: $0; 
Percentage of available funds drawn down: 0; 
Expenditures by LEAs: $0; 
Drawdowns minus expenditures (negative totals in parentheses): $0. 

State: Texas;
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$485.0; 
Funds drawn down as of August 28, 2009: $2.2; Percentage of available 
funds drawn down: 0.5; Expenditures by LEAs: $3.6; 
Drawdowns minus expenditures (negative totals in parentheses): $(1.4). 

Total: 
IDEA, Part B Recovery Act funds made available as of August 28, 2009: 
$3,714.0; 
Funds drawn down as of August 28, 2009: $375.7; 
Percentage of available funds drawn down: 10.1; 
Expenditures by LEAs: $94.1. 

Sources: U.S. Department of Education and state educational agencies. 

Notes: Expenditures are as of the following dates: August 31, 2009- 
Florida and Texas; September 1, 2009-Colorado, New Jersey, and New 
York; September 2, 2009-Georgia and Michigan; September 3, 2009- 
Illinois and Pennsylvania; September 4, 2009-Massachusetts; September 
9, 2009-Arizona; September 11, 2009-District of Columbia; and September 
15, 2009-Ohio. 

[A] State could not provide data on expenditures by LEAs for the time 
period covered by our report. 

[B] Massachusetts expenditures do not include IDEA Part B Preschool 
Grants. 

[End of table] 

Education Continues to Issue Guidance, Has Increased Technical 
Assistance, and Has Modified Some Monitoring Procedures to Address 
Recovery Act Issues but Has Not Completed Monitoring Plans for SFSF 
Funds: 

Education Has Issued Additional Recovery Act Guidance and Proposed 
Guidance: 

Over the summer of 2009, Education issued and proposed guidance on a 
wide range of Recovery Act provisions and is in the process of 
finalizing the proposed guidance after reviewing public comments. The 
department issued proposed guidance on the application process for the 
remaining SFSF education stabilization funds as well as for the Race to 
the Top funds. The department has also issued proposed guidance on 
administrative costs and guidance on Title I waivers; allowable uses of 
Title I, Part A and IDEA, Parts B and C funds; the use of SFSF 
education stabilization funds to meet IDEA maintenance-of-effort 
requirements; and recipient reporting. 

Remaining SFSF education stabilization funds. On July 29, 2009, 
Education issued proposed requirements, definitions, and approval 
criteria pertinent to application for the remaining SFSF education 
stabilization funds that Education will release to states in fiscal 
year 2010. To obtain the remaining funds, Education proposed that 
states will have to submit applications that include a number of 
specific information requirements, including indicators. Education 
would require states to provide data that would show the extent to 
which they are implementing educational reforms in each of the four 
core areas. For example, with respect to increasing teacher 
effectiveness and addressing inequities in the distribution of highly 
qualified teachers, states would be required to provide (1) a 
description of teacher performance evaluation systems used in the 
states’ LEAs, (2) data on the distribution of performance ratings or 
levels in the LEAs, and (3) a statement about whether performance 
ratings or levels are available to the public by school for each LEA. 
Some of the indicators included in the proposal relate to data states 
already collect and report to Education, and for these indicators, 
states will not need to provide additional data but would have to 
confirm the data and make it publicly available. In addition to the 
information requirements, the proposal includes a requirement that each 
state submit a plan describing the state’s ability to collect and make 
the data easily available to the public. The proposal was open for 
comments through August 28, 2009, and Education anticipates issuing 
final guidance in the fall of 2009 after it has reviewed the public 
comments. 

Race to the Top funds. On July 29, 2009, Education issued proposed 
requirements and selection criteria for the competitive Race to the Top 
(RTT) grant program, and announced that $4.35 billion would be awarded 
to states.[Footnote 36] According to Education, the program is designed 
to encourage and reward states that are creating conditions for 
educational reform, achieving significant improvement in student 
outcomes, and implementing ambitious plans related to the four core 
reform areas. Education plans to award RTT grants in two phases—phase 1 
will be for states that are already prepared to apply, and phase 2 will 
be for states that need more time to plan their reform efforts. Under 
Education’s proposal, to be eligible to apply for an RTT grant, a state 
must have an approved SFSF application and must not have any legal, 
statutory, or regulatory barriers to linking data on student 
achievement or student growth to teachers for the purpose of teacher 
and principal evaluations. Education also proposed that states describe 
in their applications how the additional RTT funds would be used to 
implement policies and practices related to the four educational reform 
areas. According to the proposal, states will be judged according to 19 
selection criteria that fall into two categories: 

(1) state reform conditions criteria—used to assess a state’s past 
progress and its success in creating conditions for reform in specific 
areas related to the four educational reform areas; and; 

(2) reform plan criteria—used to assess a state’s plans for future 
efforts in the four educational reform areas. 

In addition, the proposal includes a competitive preference for state 
applications that address certain issues related to science, 
technology, engineering, and mathematics. The proposal was open for 
comments through August 28, 2009, and over 1,100 individuals and 
organizations submitted comments. Education anticipates issuing final 
guidance in the fall of 2009 or winter of 2010 prior to making RTT 
Phase 1 applications available. 

Administrative costs. The Secretary of Education recently proposed 
[Footnote 37] to allow states to reserve more Title I, Part A and IDEA, 
Part B[Footnote 38] funds for administrative costs incurred in meeting 
Recovery Act data collection requirements, including costs related to 
administering, monitoring, and reporting on the use of these 
funds.[Footnote 39] In its announcement of the proposed change, the 
department noted that, while the Recovery Act imposed new requirements 
on states under Title I, Part A and IDEA, Part B, the statutory limits 
on the amount of funds states may reserve for administering these 
programs were set before the Recovery Act was passed. Based on the 
proposal, the 16 states and the District of Columbia covered by our 
review would be able to use between $14 million and $20 million in 
total to help defray the costs of administering Title I, Part A and 
IDEA, Parts B Recovery Act funds.[Footnote 40] The 30-day comment 
period closed on September 16, 2009. Education officials expect the 
proposal will take effect by the end of calendar year 2009. 

ESEA Title I waivers. In July, the department issued guidance on Title 
I, Part A waivers, including waivers related to Recovery Act funds. 
This guidance clarified and expanded the department’s Recovery Act fact 
sheet and guidance issued in April 2009. In addition, although 
individual LEAs can still apply for waivers directly from the 
department, the July 2009 guidance encouraged states to apply for 
waivers on behalf of their LEAs, which could in turn apply for waivers 
from the SEA.[Footnote 41] For example, states could apply for the 
authority to grant LEAs’ requests for waivers of the carryover 
limitation[Footnote 42] more than once every 3 years or to exclude 
Recovery Act funds in calculating the amount of funds LEAs must reserve 
for various required activities. To receive the flexibility afforded by 
waivers, LEAs must provide assurances and information to the SEA as 
part of the application process. For example, Education’s waiver 
guidance specifies that LEA applications must identify how the funds 
freed up by the waiver will be used and that LEAs must provide data to 
show that such activities are needed. In addition, LEA applications 
must make the case that the effectiveness of strategies proposed is 
evidence based. As of September 17, 2009, 13 of the states we reviewed 
and the District of Columbia have applied for at least one Title I, 
Part A waiver (Arizona, California, Colorado, the District of Columbia, 
Florida, Georgia, Illinois, Iowa, Massachusetts, Michigan, New Jersey, 
North Carolina, Ohio, and Pennsylvania). Of these, the Secretary had 
approved Title I Recovery Act related waiver applications from 9 
states: Arizona, Colorado, Georgia, Illinois, Iowa, Massachusetts, 
North Carolina, Ohio, and Pennsylvania. 

Allowable uses of Title I, Part A and IDEA, Parts B and C funds. On 
September 2, 2009, Education released guidance on allowable uses of 
Title I, Part A Recovery Act funds. In our July 2009 report, we noted 
that local officials we interviewed frequently mentioned wanting more 
guidance on this issue. The guidance provides answers to a number of 
specific usage questions and presents allowable uses that LEAs could 
consider to advance particular types of educational reform. Examples of 
specific usage issues addressed in the guidance include when it would 
be appropriate for LEAs to reserve Title I, Part A Recovery Act funds 
to meet district priorities rather than distributing funds directly to 
schools, what should happen to equipment purchased with these funds in 
the future if the school no longer operates a Title I program, and to 
what extent these funds can be used to hire or retain various types of 
staff. To help LEAs and schools plan how to use Title I funds, the 
guidance identifies educational strategies that could be used to help 
in (1) adopting rigorous standards and assessments, (2) establishing 
data systems and using data for improvement, (3) increasing teacher and 
school leader effectiveness and the equitable distribution of effective 
teachers and school leaders, (4) turning around the lowest achieving 
Title I Schools, and (5) improving results for students in Title I 
schools. 

Education also released guidance on allowable uses of IDEA, Parts B and 
C Recovery Act funds. While the IDEA, Part B guidance recognizes that 
many LEAs may need to use a large portion of Recovery Act funds to 
support teacher salaries or other critical short-term needs, it also 
suggests how LEAs can also use these funds to support activities that 
increase the capacity of LEAs and schools to improve results for 
students with disabilities, including under certain circumstances using 
some IDEA, Part B funds to implement schoolwide activities that support 
students with and without disabilities. The IDEA, Part C guidance 
includes five questions[Footnote 43] decision makers should consider in 
determining how to use Part C Recovery Act funds and provides examples 
of potential uses to improve outcomes for infants and toddlers with 
disabilities and their families. 

Using SFSF funds to meet maintenance-of-effort requirements. Education 
released revised guidance on treating SFSF education stabilization and 
government services funds as nonfederal funds for purposes of meeting 
the IDEA, Part B maintenance-of-effort requirement on July 1, 2009. 
Once treated as nonfederal funds, these funds can (in certain 
circumstances) be used toward the IDEA, Part B state-level maintenance- 
of-effort requirement. This guidance indicates that, with prior 
approval from Education, a state may use SFSF education stabilization 
funds toward meeting the IDEA, Part B maintenance-of-effort 
requirement, if those funds are used to replace state support for 
special education provided through primary funding formulas. SFSF 
government services funds can also be used, with prior approval, toward 
the IDEA, Part B maintenance-of-effort requirement, as long as those 
funds are used for the education of children with disabilities. 
Similarly, an LEA may use SFSF funds toward the IDEA, Part B local- 
level maintenance-of-effort requirement. To do so, the LEA must use the 
funds for the education of children with disabilities, and it cannot 
include SFSF funds that the state is using toward meeting the state- 
level maintenance-of-effort requirement. Officials from Education’s 
Office of Elementary and Secondary Education said they were working on 
developing similar guidance for treating SFSF funds as nonfederal funds 
for purposes of meeting Title I, Part A maintenance-of-effort 
requirements. 

Recipient reporting. Education, in September, 2009, released two sets 
of guidance on recipient reporting: Clarifying Guidance on Section 1512 
Quarterly Reporting and Clarifying Guidance on Reporting on Jobs 
Creation Estimates by Recipients. The guidance on estimating jobs 
creation covers a range of issues, including specifics on how to 
convert hours worked into an estimate of a full-time-equivalent job and 
the requirements for collecting information from vendors on jobs 
created. Also, the guidance specifies that prime recipients, to the 
maximum extent practicable, should collect information from all 
subrecipients and vendors in order to generate the most comprehensive 
and complete job impact numbers possible. However, in limited 
circumstances and with prior approval from Education and OMB, a prime 
recipient can use an approved statistical methodology to generate 
estimates of job impact, thereby collecting data from a smaller subset 
of subrecipients or vendors. The guidance states that a statistical 
methodology should only be used in those cases in which a comprehensive 
collection of jobs data from all subrecipients and vendors is overly 
costly or burdensome. 

Prior to the issuance of its guidance, the department had provided a 
variety of other assistance to prime recipients and subrecipients on 
recipient reporting. For example, Education conducted webinars for 
state and LEA officials to help them understand different technical 
requirements related to the Recovery Act. To assist its recipients in 
meeting Recovery Act reporting requirements, Education developed tip 
sheets on how to complete the data elements in the quarterly reports 
for education programs. For example, on August 28, 2009, the Office of 
Special Education Programs (OSEP) released a Reporting Tip Sheet for 
its programs, which includes reporting information for IDEA Part B 
Grants to States, Preschool Grants and Part C Early Intervention 
programs. The tip sheet provides guidance for each data element on 
which recipients and subrecipients are to report. OSEP officials said 
that they conducted a conference call for state staff responsible for 
Part B and Part C Recovery Act recipient reporting to walk through the 
tip sheet and respond to questions. 

Education Is Providing Intensive Technical Assistance to Six States 
Identified as “High Risk” to Help Them Implement Good Practices in 
Using Recovery Act Funds: 

To target technical assistance resources to the states where such help 
could have the greatest impact, the department used a risk-based 
approach to identify “high risk” states and territories to receive 
intensive technical assistance. Five of the six states or territories 
identified as high risk are part of our review: California, the 
District of Columbia, Illinois, Michigan, and Texas.[Footnote 44] 
Department officials weighed a number of factors when assessing risk, 
such as the number of monitoring or audit findings in the state and the 
level of turnover in education leadership within the state. The 
department’s process for identifying these six states included Title I 
and IDEA program risk analyses. 

Education officials from several offices that share an interest in 
providing coordinated assistance are working together to contribute 
both programmatic and financial expertise to these high-risk states. 
For example, Education officials have been scheduling monthly calls 
with each of these states to help them identify and implement good 
practices in managing and using Recovery Act funds, according to an 
Education official. These “open forum” calls help state officials get 
their questions answered directly by experts in the department and help 
department officials respond to state-specific concerns and challenges 
in implementing the Recovery Act. In the future, this intensive 
technical assistance could include on-site visits to these six high 
risk states and to their LEAs, for example, to help state officials 
implement school improvement requirements, according to an Education 
official. 

Education Has Updated ESEA Title I and IDEA Monitoring Plans to Cover 
Recovery Act Funds and Is Monitoring State Drawdowns of Federal Funds: 

ESEA Title I monitoring and technical assistance. To respond to the 
substantial increase in federal funding it oversees as a result of the 
Recovery Act, the office responsible for overseeing Title I has adapted 
how it monitors states and provides technical assistance. One of the 
most significant changes has been moving to a risk-based approach to 
determine which states to visit for on-site reviews. Specifically, the 
office used a risk-based assessment to identify the 18 states that will 
receive monitoring visits during the 2009-2010 monitoring cycle. States 
were selected using such factors as the number of previous monitoring 
findings, state coordinator turnover, and size of the Title I 
allocation. All six of the states identified as high risk department- 
wide will receive on-site monitoring during the fiscal year 2010 
monitoring cycle, as will an additional 12 states that are considered 
high risk from a Title I perspective.[Footnote 45] 

Title I officials have also responded to the Recovery Act by changing 
the monitoring cycle from 3 years to 2 years to coincide with the 
availability of Recovery Act funds and adding a substantial number of 
questions related to the Recovery Act to the standardized questions 
they ask state and LEA officials during monitoring visits. In 
monitoring the use of Recovery Act funds, Education is also monitoring 
the rate at which Recovery Act funds are drawn down and spent, how 
Recovery Act funds are being used, and how reporting requirements are 
being met. 

Title I Education officials are also planning to use the results of 
their risk assessment to target technical assistance efforts. 
Specifically, in addition to working with other Education offices to 
provide coordinated intensive technical assistance to the six high risk 
states, Title I officials plan to provide customized assistance to 
Title I Directors in the 12 states they identified as also being high 
risk from a Title I perspective, six of which are in our review: 
Colorado, Florida, Massachusetts, New Jersey, New York, and North 
Carolina. This assistance may include scheduling calls to answer 
specific questions or to help address outstanding compliance issues, 
according to an Education official. In addition, Education officials 
may plan technical assistance meetings for these 12 states in school 
year 2009-2010 on topics such as uses of Title I, Part A Recovery Act 
funds and upcoming 2009-2010 monitoring, according to an Education 
official. The goals of these meetings would be to improve these states’ 
readiness for their 2009-2010 monitoring visit and to increase the 
capacity of states to support Title I schools and LEAs. 

IDEA monitoring and data collection efforts. Regarding IDEA, Education 
will pursue its regular targeted monitoring visits and technical 
assistance in 16 states or territories,[Footnote 46] and, in response 
to the Recovery Act, Education’s Office of Special Education Programs 
(OSEP) will also perform a desk review of all states over the next 6 to 
8 months. According to Education officials, the department uses annual 
performance report information and focused monitoring priorities to 
determine in which states it will conduct monitoring visits.[Footnote 
47] In the course of its monitoring visits, the department verifies the 
effectiveness of state systems for general supervision, data collection 
and fiscal management, as well as reviews state progress toward the 
goals from its state performance plan. This year, the department will 
also focus on various elements from the Recovery Act, including 
reporting requirements. According to OSEP officials, certain 
requirements that have always been in place under IDEA have heightened 
importance given the larger appropriations under the Recovery Act, 
including requirements for IDEA funds used for construction or 
equipment costing more than $5,000—expenditures that might be more 
common than in past years given the larger appropriations under the 
Recovery Act. In conducting site visits, Education reviews state 
records, makes visits to selected LEAs for on-site examination of 
student records, and assesses state special education systems. 
Following these visits, Education issues a report on findings and, when 
noncompliance is found, requires states to demonstrate correction of 
the non-compliance. OSEP officials said the content of the desk review 
is still in development, but that it would focus as much on technical 
assistance for states as it would on reviewing states. Also, OSEP plans 
to provide guidance to SEAs regarding their Recovery Act monitoring 
efforts and the reporting of accurate data for recipient reporting 
under the Recovery Act. OSEP officials said the office will also choose 
states for targeted technical assistance based on the results of their 
upcoming Recovery Act desk reviews. 

Education also plans to collect more information than it has in the 
past from states regarding whether LEAs are exercising flexibility in 
spending their IDEA allocations, in an attempt to better understand how 
LEAs are adjusting their use of funds with the increased funds they 
have received. Specifically, Education is planning to collect 
information on the number of LEAs that are taking advantage of the 
flexibility to decrease their local IDEA, Part B expenditures by up to 
50 percent of the amount of the increase in their overall IDEA, Part B 
allocation.[Footnote 48] These “freed up” funds must be spent on 
activities allowable under the ESEA. This is of potential concern in 
future years because LEAs are required to maintain their previous year’ 
s level of local spending on special education and related services to 
continue to receive IDEA funds, and by reallocating local funds out of 
IDEA programs, they will lower the level of local spending the LEA must 
maintain in subsequent years. Education is also collecting information 
on the number of school districts that are setting aside funds for 
Coordinated Early Intervening Services (CEIS).[Footnote 49] Education 
officials expect to have this information collected in 2011. As part of 
its monitoring and desk reviews, OSEP will review whether states are 
ensuring that only eligible LEAs are taking advantage of the 
maintenance-of-effort flexibility and that states are collecting 
information on LEAs that are setting aside funds for CEIS. 

Monitoring of state drawdowns and cash management. Education is 
monitoring states’ drawdowns of Recovery Act funds and has identified 
issues with cash management in some states. To help ensure that states 
are complying with federal cash management requirements, including that 
states only draw down federal funds to meet the timing needs of a 
particular program, Education monitors states’ drawdowns of Recovery 
Act funds.[Footnote 50] Whenever a state requests a large drawdown of 
funds, Education officials told us they contact the state before 
approving the release of the funds to learn why it is drawing down the 
funds and whether it can document that it has an immediate need for the 
funds. The department’s monitoring of cash management drew officials’ 
attention to a substantial drawdown request of SFSF funds in Arizona 
that Education ultimately denied. Arizona planned to use the funds to 
backfill a $250 million reduction in general fund appropriations for 
LEAs in fiscal year 2009. However, when Arizona tried to draw down the 
SFSF funds for this purpose, Education denied the drawdown. According 
to Education officials, Arizona’s plans for the funds would have 
violated Recovery Act requirements because Arizona had not required 
LEAs to submit applications for the funds and LEAs would not have been 
aware that the funds they had used in fiscal year 2009 were Recovery 
Act funds, and, therefore, LEAs would not have been able to properly 
account for the funds in accordance with Recovery Act requirements. 

The substantial increase in federal education funds going to states due 
to the Recovery Act has increased the importance of cash management 
issues in some states, including Illinois and California. Specifically, 
Illinois has distributed SFSF funds to LEAs in semi-monthly payments, 
but according to state officials, the state does not have the ability 
to identify specific cash needs from LEAs prior to distributing these 
funds. However, disbursements of federal funds by states to LEAs when 
they are not prepared to spend them may result in state or LEA interest 
liability and reflect an inefficient use of federal cash. To track this 
issue, Illinois is completing reports designed to identify excess cash 
balances maintained by LEAs, and according to state officials, LEAs are 
considered to be maintaining excess cash balances when they do not 
expend the funds they receive within the established time frame. Cash 
management by Illinois and its LEAs is an issue we intend to continue 
addressing in future reports. California drew down 80 percent of its 
available Title I, Part A Recovery Act funds in May 2009 and 
immediately distributed them to LEAs. According to Education officials, 
California Department of Education officials said that the drawdown was 
in lieu of its normally scheduled drawdown of school year 2008-2009 
Title I funds, and therefore the schools would be ready to use the 
funds quickly. However, in August, we contacted the 10 LEAs in 
California that had received the largest amounts of Title I, Part A 
Recovery Act funds and found that 7 had not spent any of these funds 
and that all 10 reported large cash balances—ranging from $4.5 million 
to about $135 million. The California Department of Education is taking 
action to improve its overall cash management, including a pilot 
program to monitor LEA cash balances. Education is providing these 
states, and others, with targeted technical assistance on cash 
management, and Education’s Office of Inspector General (OIG) is 
focusing on cash management practices in its work.[Footnote 51] 

Education Is Developing Plans to Monitor Recipients of SFSF Funds, and 
Some States Face Challenges Establishing Monitoring Procedures for SFSF 
Funds: 

Because SFSF is a new program established under the Recovery Act, 
Education has yet to finalize monitoring plans and processes. Education 
officials said they are developing an approach to monitor SFSF funds, 
which they anticipate will be completed around the time the department 
releases the final SFSF guidance in the fall of 2009. In the interim, 
Education officials said they are taking several steps to monitor 
information they are receiving from states as well as to provide 
technical assistance to states. For example, according to Education 
officials, prior to approving SFSF awards, Education screened each 
state’s application to ensure the state complied with statutory 
requirements to receive the funds. Now that almost all of the states 
have been approved for funding, Education officials reported that they 
have provided written guidance and conducted webinars to improve 
states’ and LEAs’ awareness of the appropriate uses of SFSF funds and 
related reporting requirements. Further, Education officials said they 
are monitoring fund drawdowns and following up with states on any press 
reports about questionable uses of SFSF funds. Education officials also 
plan to review information reported by states on SFSF funds in their 
required quarterly Recovery Act reports. 

Regarding requirements for states to monitor subrecipients’ use of SFSF 
funds, Education initially made states aware of this requirement by 
enumerating administrative requirements in the SFSF application and 
requiring governors to provide assurances that they will comply with 
the requirements. To re-emphasize this requirement, Education recently 
sent an e-mail to states to remind them of their responsibility to 
thoroughly and effectively monitor subrecipients under SFSF to ensure 
compliance with applicable federal requirements. The e-mail specified 
that to comply with these requirements, each state must have a 
comprehensive monitoring plan for SFSF supported activities and that 
the monitoring plan should address areas such as the following: 

* a monitoring schedule,

* monitoring policies and procedures,

* data collection instruments (e.g., interview guides and review 
checklists),

* monitoring reports and feedback to subrecipients, and, 

* processes to verify that required corrective actions are implemented.

However, it is not clear that states have focused on this requirement 
and begun to put in place subrecipient monitoring systems that comply 
with Education’s requirements. For example, before Education sent the 
e-mail regarding SFSF monitoring, education officials in North 
Carolina said they had not developed specific monitoring plans for SFSF 
funds and they planned to rely on existing procedures for monitoring 
LEAs’ uses of Title I, Part A and IDEA, Parts B and C funds. After 
receiving the e-mail, state officials told us they are now developing 
monitoring plans specifically for SFSF funds. 

Furthermore, some states face challenges in developing monitoring plans 
for SFSF funds because of their existing problems in monitoring 
subrecipients of other education funds. In particular, Education’s OIG 
has identified subrecipient monitoring of education funds as an area of 
concern, and state auditors have cited problems with subrecipient 
monitoring. In its reports on education program fiscal issues,[Footnote 
52] the OIG stated that inadequate monitoring by the SEA was one of the 
most common internal control weaknesses. As an example of state 
subrecipient challenges, New Jersey’s 2008 Single Audit found material 
weaknesses in the SEA’s auditing of IDEA, Part B, including no evidence 
of state monitoring of LEAs’ use of federal funds.[Footnote 53] 
Further, Arizona’s 2008 Single Audit found that the SEA did not comply 
with the subrecipient monitoring requirements of ESEA Title I and IDEA 
because it did not obtain Single Audit reports within 9 months of the 
subrecipients’ fiscal year-end, did not retain documents to support 
that the SEA tried to ensure audit requirements were met, and it did 
not issue management decisions within 6 months after receipt of 
subrecipient Single Audit reports. 

Additionally, states may face a number of other challenges in 
establishing subrecipient monitoring programs for SFSF funds. Because 
the SFSF program is new, state officials will need to develop new 
procedures and reallocate or hire new staff and train them to conduct 
monitoring. Also, SFSF funds may be administered by governors’ offices 
rather than through state agencies with more experience directly 
monitoring programs. Another potential challenge to developing an 
effective monitoring program is that the Recovery Act does not 
designate SFSF funds that may be set aside specifically for 
administration, which would include monitoring responsibilities. While 
states could choose to use SFSF government services funds for this 
purpose, doing so would leave the states with less funds to use for 
public safety, education, and other purposes. Finally, some states 
could be challenged in setting up an effective monitoring program due 
to budget shortfalls that could limit their ability to maintain 
adequate staff to handle the increased monitoring workload, for SFSF 
funds as well as other Recovery Act funds. 

Recommendation to the Secretary of Education: 

We recommend that the Secretary of Education take further action such 
as collecting and reviewing documentation of state monitoring plans to 
ensure that states understand and fulfill their responsibility to 
monitor subrecipients of SFSF funds and consider providing training and 
technical assistance to states to help them develop and implement state 
monitoring plans for SFSF. 

Agency Comments: 

We provided Education a draft of this report section for review and 
comment. The department did not provide formal written comments, but it 
did provide technical comments, which we incorporated in this section 
when appropriate.

States Used Recovery Act WIA Youth Funds to Create Summer Youth 
Employment and Training Opportunities: 

The Recovery Act provides an additional $1.2 billion in funds for 
Workforce Investment Act (WIA) Youth Program activities, including 
summer employment. Administered by the Department of Labor (Labor), the 
WIA Youth Program is designed to provide low-income in-school and out- 
of-school youth 14 to 21 years old, who have additional barriers to 
success, with services that lead to educational achievement and 
successful employment, among other goals. Funds for the program are 
distributed to states based on a statutory formula; states, in turn, 
distribute at least 85 percent of the funds to local areas, reserving 
as much as 15 percent for statewide activities. The local areas, 
through their local workforce investment boards, have the flexibility 
to decide how they will use the funds to provide required services. 

While the Recovery Act does not require all funds to be used for summer 
employment, in the conference report accompanying the bill that became 
the Recovery Act,[Footnote 54] 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 
flexibility to implement stand-alone summer youth employment activities 
with Recovery Act funds.[Footnote 55] 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. 

A key goal of a summer employment program, according to Labor’s 
guidance, is to provide participants with the opportunity to (1) 
experience the rigors, demands, rewards, and sanctions associated with 
holding a job; (2) learn work readiness skills on the job; and (3) 
acquire measurable communication, interpersonal, decision-making, and 
learning skills. Labor has 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 56] Labor’s guidance requires that each state and local area 
conduct regular oversight and monitoring of the program to determine 
compliance with programmatic, accountability, and transparency 
provisions of the Recovery Act and Labor’s guidance. Each state’s plan 
must discuss specific provisions for conducting its monitoring and 
oversight requirements. 

The Recovery Act made several changes to the WIA Youth Program when 
youth are served using these funds. It extended eligibility through age 
24 for youth receiving services funded by the act, and it made changes 
to the performance measures, requiring that only the measurement of 
work readiness gains will be required to assess the effectiveness of 
summer-only employment for youth served with Recovery Act funds. Labor’ 
s guidance allows states and local areas to determine the methodology 
for measuring work readiness gains within certain parameters. States 
are required to report to Labor monthly on the number of youth 
participating and on the services provided, including the work 
readiness attainment rate and the summer employment completion rate. 
States must also meet quarterly performance and financial reporting 
requirements. 

For this report, we focused on Recovery Act-funded WIA summer youth 
employment activities in 10 of our 16 states.[Footnote 57] We did not 
review the District of Columbia because officials told us they were not 
using Recovery Act funds for their summer youth employment program. The 
10 states in our review represent nearly 60 percent of the $1.2 billion 
in Recovery Act WIA youth funds allotted by Labor. We supplemented our 
work in the 10 states by analyzing national data on the characteristics 
of youth participating in Recovery Act-funded WIA youth activities and 
the extent to which funds have been drawn down. 

States Were Generally Successful in Serving Increased Numbers of Youth 
in Summer Activities: 

As we noted in our July 2009 bimonthly report, the 10 states we 
reviewed generally planned to use Recovery Act funds to increase the 
number of youth served through summer activities. The July report also 
indicated that the limited time frame that states and local areas had 
to implement a stand-alone summer program presented challenges to 
officials. Once the Recovery Act was passed, officials 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. Moreover, local areas often lacked recent experience in 
operating such a stand-alone program. Prior to receiving the Recovery 
Act funds, 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 funding sources other than WIA, such as 
state, local, or foundation funds, to cover it. Local areas 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. Some other areas, however, had maintained well- 
developed summer youth employment programs. These areas already had 
some of these basic structures in place but still found it daunting to 
quickly expand their existing programs. 

Most States That Set Targets for Number of Youth to Be Served Have Met 
or Exceeded Them: 

In July 2009, we reported that states expected large increases in the 
number of youth they served. These increases have generally 
materialized. Eight of the 10 states in our current review set targets, 
totaling more than 120,000, for the number of youth they expected to 
serve this summer, according to our survey.[Footnote 58] Five of the 
states—Georgia, Massachusetts, New York, Pennsylvania, and Texas— 
reported they had met or exceeded their targets by mid-August. Three 
other states—Florida, Illinois, and Michigan—said they had not yet met 
their targets but expected to. For example, Florida set a target to 
serve 16,000 youths this summer, but officials could not report that 
they had met it due to late reporting by some local areas. 

Nationwide, as of July 31, 2009, almost 300,000 youths were 
participating in Recovery Act-funded WIA youth activities; more than 
three-fourths were placed in summer employment, according to Labor’s 
data. In our 10 states, over 150,000 youths were served, with just 
under three-fourths placed in summer employment as of July 31, 2009. 
Youth 14 to 18 years old comprised the largest category of 
participants, ranging from 63 percent in Florida to 80 percent in 
Massachusetts. From 4 percent to 10 percent of participants were age 22 
to 24, the new age category authorized under the Recovery Act. The 
proportion of out-of-school youth, a special focus of the WIA Youth 
Program, ranged from 24 percent to 45 percent in our 10 states. 
Nationwide, about 36 percent of the youth served with Recovery Act 
funds were out of school, compared with just over 42 percent in the 
most recent data for the regular WIA Youth Program (see table 11). 

Table 11: Recovery Act-Funded WIA Youth Participation in Selected 
States, as of July 31, 2009: 

State: California;
Number served: 33,789;
Percentage placed in summer employment: 42; 
Percentage out of school: 38;
Percentage, 22-24 years old: 7;
Percentage, 14-18 years old: 69. 

State: Florida;
Number served: 11,902;
Percentage placed in summer employment: 64; 
Percentage out of school: 45;
Percentage, 22-24 years old: 10;
Percentage, 14-18 years old: 63. 

State: Georgia;
Number served: 9,873;
Percentage placed in summer employment: 100; 
Percentage out of school: 24;
Percentage, 22-24 years old: 5;
Percentage, 14-18 years old: 77. 

State: Illinois;
Number served: 15,078;
Percentage placed in summer employment: 62; 
Percentage out of school: 43;
Percentage, 22-24 years old: 10;
Percentage, 14-18 years old: 66. 

State: Massachusetts;
Number served: 5,640;
Percentage placed in summer employment: 93; 
Percentage out of school: 43;
Percentage, 22-24 years old: 4;
Percentage, 14-18 years old: 80. 

State: Michigan;
Number served: 13,705;
Percentage placed in summer employment: 89; 
Percentage out of school: 35;
Percentage, 22-24 years old: 9;
Percentage, 14-18 years old: 66. 

State: New York;
Number served: 21,375;
Percentage placed in summer employment: 89; 
Percentage out of school: 27;
Percentage, 22-24 years old: 7;
Percentage, 14-18 years old: 71. 

State: Ohio;
Number served: 12,530;
Percentage placed in summer employment: 69; 
Percentage out of school: 28;
Percentage, 22-24 years old: 8;
Percentage, 14-18 years old: 72. 

State: Pennsylvania;
Number served: 5,102;
Percentage placed in summer employment: 96; 
Percentage out of school: 34;
Percentage, 22-24 years old: 7;
Percentage, 14-18 years old: 69. 

State: Texas;
Number served: 21,602;
Percentage placed in summer employment: 91; 
Percentage out of school: 25;
Percentage, 22-24 years old: 7;
Percentage, 14-18 years old: 74. 

Total for 10 states:
Number served: 150,596;
Percentage placed in summer employment: 73; 
Percentage out of school: 34;
Percentage, 22-24 years old: 8;
Percentage, 14-18 years old: 70. 

Nationwide:
Number served: 297,169;
Percentage placed in summer employment: 76; 
Percentage out of school: 36;
Percentage, 22-24 years old: 7;
Percentage, 14-18 years old: 71. 

Source: Department of Labor data based on information reported by the 
states. 

[End of table] 

States’ Draw Down Rates Have Been Increasing As of August 31, 2009, 
about 34 percent of Recovery Act WIA youth funds ($397 million) had 
been drawn down nationwide, according to Department of Labor data—an 
increase of 28 percentage points from the 6 percent we reported in 
July.59 Across our 10 states, drawdowns have been steadily increasing 
since June. (See figure 6.) 

Figure 6: National Draw Down Rates for Recovery Act Funds for the WIA 
Youth Program, as of August 31, 2009: 

[Refer to PDF for image: line graph] 

Month: May; 
Percentage of funds spent: 1%. 

Month: June; 
Percentage of funds spent: 7%; 

Month: July; 
Percentage of funds spent: 19%; 

Month: August; 
Percentage of funds spent: 34%. 

Source: GAO analysis of Department of Labor data. 

[End of figure] 

Among the 10 states, the percentage drawn down ranged from 20 percent 
for California to 51 percent for Georgia and Texas (see table 12). 

Table 12: Selected States’ Drawdowns as of August 31, 2009 (Dollars in 
millions): 

State: California;
Allotment: $186.6;
Amount drawn down: $38.0;
Percentage drawn down: 20. 

State: Florida;
Allotment: $42.9;
Amount drawn down: $21.2;
Percentage drawn down: 50. 

State: Georgia;
Allotment: $31.4;
Amount drawn down: $16.0;
Percentage drawn down: 51. 

State: Illinois;
Allotment: $62.2;
Amount drawn down: $23.5;
Percentage drawn down: 38. 

State: Massachusetts;
Allotment: $24.8;
Amount drawn down: $8.3;
Percentage drawn down: 33. 

State: Michigan;
Allotment: $73.9;
Amount drawn down: $20.2;
Percentage drawn down: 27. 

State: New York;
Allotment: $71.5;
Amount drawn down: $17.0;
Percentage drawn down: 24. 

State: Ohio;
Allotment: $56.2;
Amount drawn down: $15.8;
Percentage drawn down: 28. 

State: Pennsylvania;
Allotment: $40.6;
Amount drawn down: $9.4;
Percentage drawn down: 23. 

State: Texas;
Allotment: $82.0;
Amount drawn down: $41.6;
Percentage drawn down: 51. 

Nationwide: 
Allotment: $1,167.2;
Amount drawn down: $397.1;
Percentage drawn down: 34. 

Source: GAO analysis of Department of Labor data. 

[End of table] 

Local Areas Used Their Flexibility to Offer a Variety of Summer Youth 
Employment Activities: 

Local areas we visited provided WIA youth participants with a range of 
summer work activities in the public, private, and nonprofit sectors. 
Some local areas offered academic and occupational skills training.

Type of Work Experience: 

Across the public, private, and nonprofit work sites, the specific work 
activities that youth were assigned ranged from clerical work and 
custodial work to animal care, customer service, and serving as camp 
counselors or legislative aides. 

Public sector work sites included local government offices; public 
parks, recreation centers, and camps; public schools and community 
colleges; public libraries; and animal shelters. 

* In Weatherford, Texas, for example, a youth who wanted to become a 
veterinarian was able to gain firsthand experience when she was 
assigned to work at a city animal shelter. Her responsibilities 
included working with veterinarians, taking care of animals, cleaning 
kennels, and completing intake paperwork. Private-sector work sites 
included hospitals and retail stores. 

* In Dayton, Ohio, for example, a local university student and aspiring 
entrepreneur was placed in a small retail store to shadow a small 
business owner and learn the various skills needed to operate the 
store, including customer service, stock duties, product placement, and 
data entry.

Nonprofit work sites included museums and community action agencies. 

* In Chicago, for example, the Museum of Science and Industry enrolled 
youth as peer educators who facilitated children’s science activities 
at various sites across the city, such as at libraries and schools.

Role of Academic and Occupational Skills Training: 

Some youth also received academic and occupational skills training as 
part of their summer activities. Academic training linked summer 
employment and academic learning for out-of-school youth and in-school 
youth. For example: 

* Philadelphia: All youth participants in Philadelphia were required to 
complete an academic project that would be evaluated by certified 
teachers and eligible for academic credit.

* Oneida County, New York: Out-of-school youth were allowed to enroll 
in a General Education Diploma training course for 3 hours a day 
outside of their work hours and get paid for 2 of the 3 hours.

Occupational training provided youth with exposure to various career 
fields. For example: 

* Hillsborough County, Florida: Youth ages 17 to 19 participated in a 
4-week Employment and Leadership Exploration program. The instruction 
covered business ethics and business simulation models. The youth 
worked in teams and applied the skills learned to create a simulated 
online magazine of their choice. Participants also completed a skills 
assessment and participated in one on-site visit to an employer.

* Atlanta, Georgia: About 100 youth participated in a summer learning 
program where they attended classes and workshops to study drama, video 
production, and other visual arts. These youth worked with industry 
professionals in these areas and were expected to complete a project 
related to their area of study. For example, the youth in the drama 
program were responsible for developing and producing a play that was 
held at the end of the summer program. They also attended occupational 
workshops and participated in basic life and career skills training.

* Columbus, Ohio: Over 200 youth ages 14 to 17 participated in an 
information technology program aimed at developing computer skills, 
exploring career pathways, and accessing college and financial aid 
information.

Local Areas Used Different Methods to Distribute Youth Payroll: 

The local areas we visited used different approaches to pay their 
youth—direct deposit, prepaid debit cards, or paper checks. For 
example, in both Columbus and Dayton, Ohio, youth received their pay 
through direct deposit into a bank account established for the youth at 
the beginning of the program. Some youth in Broward County, Florida, 
also received their pay by way of direct deposit or prepaid debit card. 
Some local areas, however, distributed paper checks. 

The paycheck distribution process in one local area did not go 
smoothly—Detroit youth encountered multiple challenges in getting 
their paychecks. We observed payroll distribution on three occasions. 
Initially, the payroll distribution site had long lines, and the 
process for obtaining the checks was unclear. According to the summer 
work activities contractor, many youth did not know where to go to get 
their paychecks or with whom to speak to resolve issues. In subsequent 
observations, we saw that some problems persisted. For example, we 
observed youth waiting in lines for up to 4 hours while standing in the 
rain to receive their paychecks. Local area officials confirmed that 
wait times were, on average, 3 to 4 hours. Further, on several 
occasions, local police were called to assist with crowd control. At 
the time of our site visit, officials told us they were working to 
correct these problems. 

Local Areas Continued to Face Challenges in Implementing Their Recovery 
Act-Funded WIA Summer Youth Employment Activities: 

Local area officials continued to report challenges in some areas as 
they implemented their summer youth activities. In July, we reported 
that state and local areas faced challenges in three areas: tight time 
frames, a lack of staff capacity to meet the expanded needs, and 
difficulty in determining and documenting youth eligibility. In our 
current review, we continued to find challenges in determining and 
documenting youth eligibility. In addition, we found that some local 
areas faced initial challenges in recruiting sufficient numbers of 
youths. 

Determining and Documenting Youth Eligibility: 

As the summer activities got under way, officials still found it 
challenging to determine youth applicants’ eligibility.[Footnote 60] In 
seven states, officials mentioned that it was challenging for youth and 
their parents to provide the proper eligibility documentation in a 
timely manner. These local officials often said that youth had to come 
back to the office multiple times to provide the documentation needed 
to be eligible to participate.[Footnote 61] Officials also mentioned 
that it was especially challenging to determine the eligibility of 
older youth (18 to 24 years old). Based on their experiences, officials 
in one local area said that older youth who are not employed or in 
school often do not have documentation to prove their eligibility for 
the program, such as a birth certificate or Social Security card, or 
proof of household income or citizenship. Two states reported they had 
identified issues with verifying eligibility during their monitoring 
efforts and in each case took corrective action. Illinois officials 
found some local areas were not always correctly verifying 
participants’ eligibility, and in California, officials found missing 
documentation in some participants’ case files. Labor is aware of the 
issues related to eligibility and is conducting an ongoing evaluation 
of the WIA youth program that includes a focus on the eligibility 
determination process. Labor contracted with Mathematica Policy 
Research Inc. to perform this evaluation. The evaluation included site 
visits to 20 local areas between mid-July and early August 2009. An 
interim report is due in January 2010 and a final report in 2011. 

Recruiting Youth: 

Across the local areas we visited, some officials reported that they 
initially found it challenging to recruit sufficient numbers of 
eligible older youth. Local area officials addressed this challenge in 
several ways. Many local areas used various forms of advertisement— 
radio, television, and flyers—to inform youth about the summer 
programs. Some local areas also used a rolling admissions process, so 
that youth could have more time to apply for the program. A few local 
areas raised the hourly wage they offered to youth, which attracted 
many additional applicants. For example, when Broward County, Florida, 
officials increased the wage from $7.21 to $9 per hour, they received 
more than 3,000 applications. But the county was forced to reduce the 
number of participants from 900 to 724 to compensate for the increased 
wages. Officials in Columbus, Ohio, also reported a similar experience 
when they increased their wages. Moreover, wages in a local area in 
Georgia were set up to $14 an hour in some cases to bring them on par 
with unsubsidized employees at the work site who had the same job 
description. 

Limited Guidance from Labor Contributed to Mixed Local Efforts in 
Developing Green Work Experiences: 

Although Labor encouraged states to develop work experiences in green 
jobs and provided some guidance, officials in several states told us 
they were not always clear what constituted a green job or how to 
incorporate it into the summer program. Labor provided some discussion 
of green jobs in its March 18, 2009, guidance to states on Recovery Act 
funds. The guidance highlights areas within the energy efficiency and 
renewable energy industries that will receive large Recovery Act 
investments, such as energy-efficient home retrofitting and biofuel 
development, and also provides examples of occupations that could be 
impacted by green technologies, including power plant operators, 
roofers, and construction managers. Labor officials told us that their 
reporting requirements for Recovery Act funds do not require states to 
provide information on green jobs. 

Officials in several of the states we reviewed told us that the lack of 
clarity in the definition of a green job made it difficult to 
incorporate green jobs into the summer activities. Some local areas 
decided not to include green jobs in their summer program at all, while 
others took steps to define and identify green jobs. However, their 
definitions varied. For example, local area definitions of green jobs 
included the following: 

* jobs that improved the health of the planet,

* jobs that help with conservation, recycling, or preserving our 
environment, and, 

* jobs that build awareness and understanding of the natural 
environment and encourage careers in environmental sciences and 
industry.

The methods for defining green jobs also varied. For example, some 
local areas identified the jobs by allowing employers to self-report 
whether their jobs were green. Georgia provided its local areas with 
guidance on how to define green jobs, including summarizing Labor’s 
guidance and listing examples of green jobs. In Michigan, officials in 
Detroit told us they had developed a task force to define and identify 
green jobs and planned to place 600 youth in green jobs. In Lansing, 
Michigan, officials reported they had difficulty identifying 
significant numbers of green jobs suitable for youths, although they 
created some green jobs for youths in the Lansing Board of Water and 
Light and the School of Agriculture at Michigan State University. 

We also found a wide variation in youths’ experiences in jobs that were 
classified as green. In some cases, youth were working toward green 
educational or career pathways. For example: 

* In Harrisburg, Pennsylvania, a work site included tours of recycling 
facilities, discussed how to make homes more energy efficient, and 
exposed youth to “green” careers, such as electricity consumption 
auditors.

* Participants at a Philadelphia work site tested the permeability of 
soil samples that were provided to them from the site of a major oil 
spill in Alaska.

* In Georgia, one workforce board worked with a local technical college 
to develop a 4-week water management camp for youth. This camp combined 
work experience and classroom activities in bioscience and 
environmental science to help youth develop marketable skills 
applicable to the water quality management industry.

* In Savannah, Georgia, a nonprofit organization developed a computer 
recycling program for at-risk youth to learn how to refurbish computers 
that would have ended up in land fills.

However, in other cases, it is unclear whether youth working in jobs 
the local area classified as green were actually working toward “green” 
educational or career pathways. For example: 

* In Columbus, Ohio, two youth were assigned to an automotive research 
facility whose projects include researching and designing alternative 
fuel vehicles. Although they were exposed to green technology, their 
actual tasks involved clearing brush and painting a fence.

* In Georgia, an organic food company was considered a green employer, 
however, at least one of the youth was performing clerical duties. 

* In Burke County, Georgia, some youth were working at the forestry 
commission performing clerical and office work. Labor officials told us 
they are aware of the difficulties and confusion that some states and 
local areas have experienced with respect to providing youth with green 
work experiences. 

Labor officials said they expect that their Recovery Act Competitive 
Grants for Green Jobs Training Initiative will generate substantial 
information on best practices for training workers for green jobs. 
Through this initiative, Labor plans to award green training funds for 
projects that prepare workers for careers in energy efficiency and 
renewable energy sectors as described in the Green Jobs Act of 2007. 
Labor officials added that Labor’s ongoing evaluation of the WIA Youth 
Program should shed further light on state and local areas’ experiences 
in developing green jobs for youth. 

States’ Monitoring Efforts Built on Existing Structures but Required 
Additional Resources: 

The 10 states we reviewed generally reported that they are relying on 
existing WIA monitoring structures to oversee the use of Recovery Act 
funds for WIA summer youth activities. State-level monitoring of WIA 
summer youth programs varied by state, but nearly all state monitoring 
included financial auditing, site visits, and file reviews, and some 
also included interviews with work site supervisors and/or program 
participants. A number of states targeted their monitoring efforts 
using risk-based approaches. For example, California reported using 
assessments to focus monitoring on work sites considered high risk, 
based on factors such as geographic location, type of work being 
conducted, and the age of the participants. Some states, such as 
Georgia, have taken a multistage approach to monitoring, with the first 
stage involving preprogram assessment and a second stage involving 
program review and financial auditing. 

To conduct their monitoring efforts, states and local areas have often 
found it necessary to add staff in order to meet the steep demands of 
monitoring the expanded summer youth activities. For example, officials 
in Oneida County, New York, reported that they temporarily hired 4 
employees to manage their summer youth monitoring efforts. In some 
cases, efforts to bring on new staff fell short. In Detroit, Michigan, 
for example, where all summer youth employment activities were 
contracted to an outside organization, city and contractor officials 
reported that they initially planned to hire 50 work site monitors, but 
as of September 9, 2009, had 21 work site monitors on staff. Similarly, 
Michigan state officials’ plan to hire additional staff had not yet 
materialized at the time of our visit because they had been unable to 
obtain permission to do so. As of mid-August, Michigan had not 
conducted any oversight reviews of the WIA summer youth employment 
activities. 

Labor Has Taken a Wide Range of Actions to Support Implementation of 
Summer Employment Activities for Youth: 

Labor has provided support for state and local efforts through actions 
such as issuing guidance, monitoring implementation, providing 
technical assistance, and conducting a program evaluation. For example, 
Labor announced its initial plans for implementing Recovery Act 
programs on March 4, 2009, about 2 weeks after the act was passed. From 
March to May 2009, Labor announced states’ allotments, as well as 
issued comprehensive implementation guidance and guidance on 
performance reporting. Its guidance on recipient reporting was issued 
in August 2009. 

In the spring of 2009, as states were planning their summer youth 
employment activities, Labor administered a checklist to gauge each 
state’s readiness for implementing these activities and to help 
officials target technical assistance. The checklist covered a broad 
range of topics, including the states’ plans for training staff and for 
monitoring summer youth employment activities. In addition, Labor held 
conferences in each of its regions to provide a forum for discussing 
experiences and issues in implementing Recovery Act-funded programs, 
including WIA summer youth activities. 

Starting at the end of June, Labor’s regional offices began conducting 
local site visits in each of their states to monitor and gather 
information on WIA Youth Program experiences. Labor has also hired a 
contractor to provide technical assistance to states and local areas. 
According to Labor officials, the contractor will be holding technical 
assistance conferences in late fall 2009 to discuss serving older out- 
of-school youth and green jobs in preparation for implementing services 
with the remaining Recovery Act funds. Further, as mentioned, Labor has 
contracted with Mathematica to conduct an evaluation of the WIA Youth 
Program to better understand the issues and challenges. 

Broad Flexibility for States and Localities to Measure Gains in Work 
Readiness of Youth May Limit Usefulness of Data: 

While many program officials, employers, and participants we spoke with 
believe the summer youth activities have been successful, measuring 
actual outcomes has proven challenging and may reveal little about what 
the summer activities achieved. The Recovery Act requires that only the 
work readiness measure be used to assess the effects of the summer-only 
youth employment activities. This measure is defined as the percentage 
of participants in summer employment who attain a work readiness skill 
goal. Under Labor’s 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. In implementing 
the requirements of the Recovery Act, Labor officials told us they had 
little time to develop a standardized approach. Moreover, because some 
local areas already had work readiness assessments in place, Labor 
officials were concerned that requiring a new approach would place 
additional stress on a workforce system already stretched thin. 

In our review of the 10 states, we found that the methodologies used to 
measure work readiness varied widely, calling into question the 
comparability and the usefulness of the indicator when rolled up at the 
national level. Of the 10 states, only Illinois established a single 
approach to be used statewide in measuring work readiness gains. The 
approaches used in the other 9 states varied from local area to local 
area and sometimes from contractor to contractor. For example, in 
Philadelphia, all work sites administered the same work readiness 
assessment tool—one that focuses on skills such as oral and written 
communication, leadership, and teamwork. But in Pennsylvania’s South 
Central workforce area, the decision about how to conduct the pre- and 
post-assessment was left to the individual contractors. In Columbus, 
Ohio, officials were using a comprehensive work readiness assessment 
tool that included questions in such dimensions as collaboration in the 
workplace, problem solving, and characteristics of good leadership. In 
addition, youth were required to do an extensive self-evaluation in 
these and other dimensions. Dayton, Ohio, youth, on the other hand, 
were given a 20-question true-false survey that included questions such 
as “I understand the importance of demonstrating a positive attitude in 
the workplace.” The North Central Texas Workforce Board was using a 
variety of methods to identify work readiness, but did not use pre- and 
post-tests at all. Youth must work the hours agreed upon during program 
registration, obtain a positive evaluation from their supervisor, and 
complete a work readiness workshop that addresses effective 
communication and other employability skills. 

Labor officials told us that they are aware of the range of work 
readiness tools being used and the issues with measuring work readiness 
and that they view this as an area that could be improved. As part of 
Mathematica’s evaluation of the summer youth activities, Labor has 
asked researchers to focus on gathering lessons learned related to 
measuring work readiness. 

Other Efforts May Shed Additional Light on Program Outcomes and 
Characteristics: 

Seven of our 10 states reported they plan to track long-term outcomes, 
such as job placement and employment retention, for at least some of 
the youth they served this summer, largely through the tracking systems 
they use for the WIA year-round program. For example, Pennsylvania 
plans to study the outcomes and employment activities of the older 
youth (22 to 24 years old). Officials also plan to review placements 
offered to all participants in the summer program to determine whether 
certain placements—for example, private sector versus public sector 
work sites—provided better employment activities than others. 
Pennsylvania officials also said they plan to develop and use an 
evaluation tool to help officials identify best practices in their 
summer youth employment activities. These best practices will be 
highlighted at an annual forum of Pennsylvania’s local workforce 
officials and stakeholders. 

Beyond these evaluation efforts, states must meet additional reporting 
requirements under the Recovery Act that may help policymakers at all 
levels gauge the impact of the summer employment activities. 

* Recipients of Recovery Act funding are required to submit detailed 
information on the use of the funds every quarter, beginning with the 
quarter ending September 30, 2009, including information on jobs 
created and retained. According to Labor’s August 14, 2009, guidance, 
Recovery Act-funded employment and training programs are not intended 
to have a significant job creation component. The guidance specified 
that recipients should only report job creation/retention numbers for 
those individuals who are hired or retained to execute program 
activities, and whose salaries are paid with Recovery Act funds. 
However, on September 21, 2009, Labor issued additional guidance that 
clarified the reporting requirements associated with the summer youth 
employment activities. Labor stated that, consistent with OMB guidance, 
summer youth employment activities and employment activities occurring 
outside the summer months funded with the Recovery Act WIA Youth funds 
are to be included in the job creation estimates.[Footnote 62] 

* To gauge the progress states and local areas are making in 
implementing Recovery Act-funded activities, Labor has instituted new 
monthly reporting requirements and is posting information from these 
reports on its Web site. In the new report, states must provide 
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.

Agency-Specific Guidance on Green Jobs and Training Outcomes for Youth 
Employment: 

State and local officials charged with implementing the WIA summer 
youth employment activities reported difficulties in responding to the 
Recovery Act’s focus on green industries without a clear standard for 
what constitutes a green job. Despite a significant increase in funding 
under the Recovery Act, flexibilities given to states and local areas 
in how they measure work readiness—the sole indicator to gauge the 
effect of the summer work activities—provide little understanding of 
what the program actually achieved. U.S. Department of Labor officials 
acknowledge that these are areas for improvement and cite their 
competitive grants for green job training and ongoing evaluation of the 
summer youth employment activities as important steps. 

Recommendations: 

We recommend that the Secretary of Labor take the following two 
actions: 

* To better support state and local efforts to provide youth with 
employment and training in green jobs, provide additional guidance 
about the nature of these jobs and the strategies that could be used to 
prepare youth for careers in green industries.

* To enhance the usefulness of data on work readiness outcomes, provide 
additional guidance on how to measure work readiness of youth, with a 
goal of improving the comparability and rigor of the measure.

Agency Comments: 

We provided Labor a draft of this report section for review. The 
department provided written comments, which are reprinted in appendix 
II. Labor agreed with our recommendations to provide additional 
guidance in two areas: defining green jobs and measuring work 
readiness. With regard to green jobs, Labor indicated that it 
recognizes the need to provide assistance to states and local areas to 
help them prepare youth for careers in green industries, and it 
highlighted several steps it is taking to better understand and define 
green jobs. First, it noted that its Bureau of Labor Statistics is 
developing a definition for green sectors and green jobs that officials 
hope will inform state and local workforce development efforts to 
identify and target green jobs and their training needs. Labor also 
noted that it is planning to hold technical assistance forums in late 
2009 that will focus on ways to prepare youth for careers in green 
industries, and it cited its plans to leverage the results of the 
Recovery Act-funded competitive grants for green job training to 
provide insights on delivering services to youth, and others, along 
green career pathways.

Regarding our recommendation on the work readiness measure for WIA 
youth summer employment activities, Labor acknowledged that the lack of 
comparability in the way work readiness gains were measured has led to 
a less meaningful outcome measure at the state and national level. 
Labor indicated that it is currently assessing the methodologies used 
this summer to measure work readiness and plans to further refine the 
work readiness indicator and determine a more effective way to measure 
it. In the event that a significant number of local areas have Recovery 
Act funds available for summer employment in 2010, or if Labor receives 
funds for future summer employment activities where the work readiness 
measure is used to gauge effectiveness, Labor indicated that it will 
issue further guidance that provides for reporting of more consistent 
and meaningful data.

In addition, Labor commented that it considers the work readiness 
measure meaningful at the local level and suggested that we qualify our 
findings to acknowledge this point. In our view, the work readiness 
measure may be meaningful at the local level to the extent that a local 
area uses appropriate and consistent measures across worksites. 
However, it is unclear the extent to which this is occurring. Our work 
identified instances in which a local area was using measures that 
varied by contractor or was not using required pre- and post-tests at 
all. Thus, we did not revise our findings. Labor also provided 
technical comments, which we incorporated as appropriate.

A Growing Number of Housing Agencies Are Obligating and Beginning to 
Draw Down Recovery Act Formula 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. As we noted in our July 
report, HUD allocated Capital Fund formula dollars to public housing 
agencies shortly after passage of the Recovery Act and, after entering 
into agreements with more than 3,100 public housing agencies, obligated 
these funds to public housing agencies on March 18, 2009.[Footnote 63] 
As of September 5, 2009, 2,211 public housing agencies (71 percent of 
the housing agencies that entered into agreements with HUD for Recovery 
Act funds) had reported to HUD that they had obligated a total of $957 
million, or about 32 percent of the total Capital Fund formula funds 
HUD allocated to them. According to HUD officials, housing agencies 
report obligations when they have entered into binding commitments to 
undertake specific projects. A majority of housing agencies that had 
obligated funds—1,578 of 2,211 housing agencies—had also drawn down 
funds in order to pay for project expenses already incurred. In total, 
public housing agencies had drawn down almost $146 million, or just 
less than 5 percent of the total HUD allocated to them. Funds drawn 
down increased by $114 million from the level reported as of June 20, 
2009. 

Figure 7: Percentage of Public Housing Capital Fund Formula Grants 
Allocated by HUD That Have Been Obligated and Drawn Down Nationwide, as 
of September 5, 2009: 

[Refer to PDF for image: three pie-charts] 

Funds obligated by HUD: 99.9%; $2,982,132,788; 
Funds obligated by public housing agencies: 32.1%; $956,829,705; 
Funds drawn down by public housing agencies: 4.9% $145,566,831. 

Number of public housing agencies: 
Entering into agreements for funds: 3,122; 
Obligating funds: 2,211; 
Drawing down funds: 1,578. 

Source: GAO analysis of HUD data. 

Note: The 3,122 housing agencies to which HUD obligated funds includes 
one housing agency that HUD officials subsequently stated had rejected 
funds totaling $151,174. 

[End of figure] 

The number of housing agencies that had reported any obligations grew 
by 728 since our July 2009 report. The new obligations by housing 
agencies that had not previously reported obligations totaled about 
$178 million. In addition, 710 housing agencies that had previously 
reported obligations increased the amount they had obligated since our 
July 2009 report by $322 million. Of note, 744 housing agencies had 
obligated 100 percent of their funds as of September 5, 2009, placing 
them well ahead of the Recovery Act’s 12-month deadline for public 
housing agencies to obligate all of their grant funds. The remaining 
2,378 housing agencies—including 911 housing agencies that had 
obligated no funds as of September 5, 2009—have until March 17, 2010, 
to obligate 100 percent of their funds. HUD will recapture any funds 
not obligated at that time. 

Of the 47 housing agencies we selected for in-depth review throughout 
our Recovery Act work, 44 had obligated funds totaling $147 million, or 
about 28 percent of the total Capital Fund formula funds HUD had 
allocated to them. Obligations increased by about $81 million from the 
level we reported in July and included obligations by 14 housing 
agencies that had not previously reported any obligations. A majority 
of housing agencies that had obligated funds—37 of 44 housing agencies— 
had also drawn down funds. In total, these housing agencies had drawn 
down $13.1 million, or about 2.5 percent of the total allocated to them 
by HUD—an increase of about $10.5 million from the level we reported in 
July 2009. 

Figure 8: Percentage 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 September 5, 2009: 

[Refer to PDF for image: three pie-charts] 

Funds obligated by HUD: 100%; $531,001,215; 
Funds obligated by public housing agencies: 27.7%; $147,083,554; 
Funds drawn down by public housing agencies: 2.5% $13,130,686. 

Number of public housing agencies: 
Entering into agreements for funds: 47; 
Obligating funds: 44; 
Drawing down funds: 137. 

Source: GAO analysis of HUD data. 

[End of figure] 

HUD officials stated that obligations were being reported at a somewhat 
slower pace than what they had expected. They cited the “Buy American” 
provision of the Recovery Act[Footnote 64]—specifically, the time it 
took to get clear guidance on how that provision applied to housing 
agencies—as one factor that may have slowed housing agencies down in 
obligating Recovery Act funds. According to HUD guidance issued August 
21, 2009, unless the size of the Recovery Act grant or the size of a 
contract funded by the grant is less than $100,000, projects funded 
with Recovery Act grant funds are subject to this provision, provided 
no other exceptions are granted. In some cases, HUD officials had heard 
from public housing agencies that this provision had forced housing 
agencies to find new vendors and contractors. In other cases, public 
housing agencies were taking more time to make sure they were in 
compliance with this and other procurement requirements, given the 
extra level of scrutiny being given to Recovery Act projects.[Footnote 
65] As we reported previously, public housing agencies we visited had a 
mixed assessment of the impact of this provision on their ability to 
obligate funds quickly.

Housing Agencies Receiving Smaller Recovery Act Grants Are Obligating 
and Drawing Down Funds Faster Than Housing Agencies Receiving Larger 
Grants: 

Several factors could explain differences in rates of obligating and 
drawing down funds among housing agencies, including the size of the 
grant received, the types of projects being undertaken, or additional 
monitoring by HUD. We found that housing agencies that received 
Recovery Act formula grants of less than $100,000 had obligated and 
drawn down funds at a faster rate than housing agencies that received 
grants of more than $500,000.[Footnote 66] We analyzed the rates at 
which housing agencies had obligated and drawn down funds, grouping 
housing agencies by the size of the Recovery Act formula grant they had 
received and calculating the average percentage of funds obligated and 
drawn down for each group. For housing agencies with smaller grants— 
that is, less than $100,000—the average percentage of Recovery Act 
funds obligated was about 48 percent, while for housing agencies with 
larger grants—that is, more than $500,000—the average percentage of 
Recovery Act funds obligated was 35 percent (see table 13). Similarly, 
the average percentage of Recovery Act funds drawn down was 24 percent 
for housing agencies with smaller grants, compared with 7 percent for 
housing agencies with larger grants. 

Table 13: Comparison of the Average Percentage of Funds Obligated and 
Drawn Down among Housing Agencies Grouped by Size of Recovery Act 
Grant, as of September 5, 2009

Number of housing agencies: 
Amount of Recovery Act Grant: Less than $100,000: 924; 
Amount of Recovery Act Grant: $100,000 to $500,000: 1,398; 
Amount of Recovery Act Grant: More than $500,000: 800; Total: 3,122. 

Portion of total Recovery Act formula grant funds: 
Amount of Recovery Act Grant: Less than $100,000: 2%; 
Amount of Recovery Act Grant: $100,000 to $500,000: 11%; 
Amount of Recovery Act Grant: More than $500,000: 87%; Total: 100%. 

Average percentage of funds obligated: 
Amount of Recovery Act Grant: Less than $100,000: 47.9%; 
Amount of Recovery Act Grant: $100,000 to $500,000: 43.4%; 
Amount of Recovery Act Grant: More than $500,000: 35.1%; Total: 42.6%. 

Average percentage of funds drawn down: 
Amount of Recovery Act Grant: Less than $100,000: 24.5%; 
Amount of Recovery Act Grant: $100,000 to $500,000: 15.3%; 
Amount of Recovery Act Grant: More than $500,000: 7.1%; Total: 15.9%. 

Source: GAO analysis of HUD data. 

[End of table] 

One reason housing agencies that received smaller grants may be 
obligating and drawing down funds at a faster rate is that they more 
often operate under simplified and less formal procurement guidelines, 
known as small purchase procedures, for contracts under the simplified 
acquisition threshold of $100,000 established by federal regulations. 
These conditions allow them to enter into contracts with fewer 
procurement restrictions relative to the restrictions facing housing 
agencies receiving larger grants, which may be more likely to enter 
into contracts of more than $100,000 given the resources they have 
available to them. HUD officials concurred that the difference in the 
rates of obligating and drawing down funds may be related to these 
procurement regulations. In the future, agencies receiving smaller 
grants also may benefit from an exception to the “Buy American” 
provision of the Recovery Act. That is, HUD guidance specifies that 
where the size of the Capital Fund formula grant is less than $100,000, 
the “Buy American” requirement does not apply. 

As we reported in July 2009, many of the projects already under way at 
the housing agencies we visited are small and narrowly focused. Based 
on our review of housing agency plans and our prior interviews with 
selected public housing agency officials, we also found that housing 
agencies that received smaller grants are using Recovery Act funds on a 
limited number of these types of projects—some that simply involve 
exchanging old equipment or appliances for new—rather than undertaking 
complex architectural, engineering, or redesign work on building 
structures. HUD officials also told us that housing agencies that 
received smaller grants tend to have fewer people involved in making 
decisions about projects in order to begin projects and tend to focus 
on smaller projects. For example, Evansdale Municipal Housing Authority 
in Iowa planned to use its $77,364 grant on five projects: installing 
new ceiling lights, replacing carpet and vinyl flooring in several 
units, reroofing storage sheds and eight duplexes, and replacing hot 
water heaters. As of September 5, 2009, Evansdale Municipal Housing 
Authority had obligated 100 percent of its grant funds and drawn down 
about 60 percent. Similarly, Holyoke Housing Authority in Colorado 
planned to use its $59,934 grant on four projects: replacing an 
underground sprinkler system, patio fences, patio doors, and a sewer 
line camera. As of September 5, 2009, Holyoke Housing Authority had 
obligated and drawn down 54 percent of its Recovery Act grant funds. 

In contrast, the plans of and interviews with selected housing agencies 
that received larger Recovery Act grants indicate that they are using 
Recovery Act funds on either a larger number of projects (of various 
sizes or scopes) or on projects with a broader scope, some of which may 
involve architectural, engineering, or redesign work on building 
structures that may be more complex than other projects. HUD officials 
told us that HUD field office staff automatically review any housing 
agency’s plan that includes funds for development activities—such as 
constructing new buildings—in order to make sure the plans are sound. 
This process requires the housing agency to obtain additional 
approvals. As a result, it can take additional time and may contribute 
to housing agencies obligating funds at a slower rate. In addition, 
unless a contract is less than $100,000 or an exception is granted, 
these projects are subject to the “Buy American” requirement noted 
previously. As we reported in July, these larger projects generally had 
not yet begun or were only just beginning, and as a result, very little 
funding had been obligated or drawn down. For example, the Philadelphia 
Housing Authority planned to use its $90.6 million grant on six broad 
projects, including rehabilitating 300 units at scattered sites for 
$29.5 million, performing mechanical and elevator upgrades at 31 sites 
for $21 million, and reconfiguring a midrise building from 71 units to 
at least 53 units for $14.6 million. As of September 5, 2009, the 
Philadelphia Housing Authority had obligated 32 percent of its Recovery 
Act grant funds but had drawn down about 2 percent of its funds. 
Similarly, the Buffalo Municipal Housing Authority planned to use its 
$14.5 million grant on 42 projects at various sites. As of September 5, 
2009, the Buffalo Municipal Housing Authority had obligated about 1 
percent of its funds and had drawn down less than 1 percent of its 
Recovery Act grant funds. Some large housing agencies that received 
large Recovery Act grants did not undertake a large number of projects 
or projects with a broader scope. For example, the City of Des Moines 
Municipal Housing Authority added its $1,455,108 Recovery Act grant to 
other funds to complete a single project. As of September 5, 2009, it 
had obligated 100 percent of its Recovery Act funds, although it had 
not yet drawn down any funds. 

HUD Continues to Monitor Troubled Housing Agencies’ Use of Recovery Act 
Funds: 

As we reported in July 2009, HUD has identified 172 housing agencies 
that it has designated as troubled under its Public Housing Assessment 
System (PHAS)[Footnote 67]. Of these 172 troubled housing agencies, 106 
(61.6 percent) were considered by HUD to be low-risk troubled, 53 (30.8 
percent) were considered medium-risk troubled, and the remaining 13 
(7.6 percent) were considered high-risk troubled. As of September 5, 
2009, these troubled housing agencies accounted for 6 percent of all 
Recovery Act funds provided by HUD, and they continue to obligate and 
draw down Recovery Act funds at a slower rate than nontroubled housing 
agencies (see figure 9). 

Figure 9: Comparison of Troubled Housing Agencies and Nontroubled 
Housing Agencies’ Obligation and Drawdown Rates: 

[Refer to PDF for image: seven pie-charts] 

Recovery Act funds allocated by HUD (Total: $2,985,000,000): 
Nontroubled housing agencies (2,962 agencies): $2,799,055,753; 94%; 
Troubled housing agencies (172 agencies): $185,944,247; 6%. 

Troubled housing agencies: 
Funds obligated by HUD: $185,944,247 (100%); 
Funds obligated by housing agencies: $26,515,934 (14.3%); 
Funds drawndown by housing agencies: $4,372,842 (2.4%). 

Nontroubled housing agencies: 
Funds obligated by HUD: $2,796,188,541 (99.9%); 
Funds obligated by housing agencies: $930,313,771 (33.3%); 
Funds drawndown by housing agencies: $141,193,989 (5.1%). 

Source: GAO analysis of HUD data. 

Note: As of September 5, 2009, 12 of the 2,962 nontroubled housing 
agencies had not entered into agreements with HUD for Recovery Act 
funds, and therefore HUD did not obligate funds to them. HUD officials 
subsequently stated that one additional housing agency had rejected 
funds totaling $151,174. 

[End of figure] 

One reason for these slower obligation and draw down rates is the 
additional monitoring that HUD is implementing for housing agencies 
that are designated as troubled performers under PHAS. For example, 
according to HUD officials, all 172 troubled public housing agencies— 
regardless of risk category—have been placed on a “zero threshold” 
status, which means HUD has not allowed them to draw down Recovery Act 
funds without HUD field office approval.[Footnote 68] HUD officials 
stated to us that the ability to place housing agencies on “zero 
threshold” has always been available and had been used for housing 
agencies that have had problems obligating and expending their Capital 
Fund grants appropriately prior to the Recovery Act. However, HUD has 
implemented more extensive monitoring for all troubled housing 
agencies, including requiring that HUD field office staff review all 
award documents (i.e., solicitations, contracts, or board resolutions, 
where applicable) prior to actual obligation of Recovery Act funds. 

In addition to reviewing supporting documentation prior to approval of 
all obligations and drawdowns, HUD’s strategy for monitoring troubled 
housing agencies has included conducting on-site and remote reviews of 
troubled housing agencies. Specifically, HUD officials stated to us 
that they have completed on-site and remote reviews of all 13 of the 
high-risk troubled housing agencies and have completed remote reviews 
for all of the medium- and low-risk troubled housing agencies. HUD 
officials stated that they are in the process of completing on-site 
reviews for the medium-risk troubled housing agencies and the low-risk 
troubled housing agencies by September 30, 2009 and December 31, 2009 
respectively. On-site reviews are conducted on the premises of housing 
agencies by teams comprised of staff from the Office of Field 
Operations, both at headquarters and field offices. While on site at 
housing agency premises, these teams are to conduct various activities 
including following up on outstanding items from the remote review. In 
addition, on-site reviews are to assess whether the housing agency is 
appropriately and effectively administering their Recovery Act Capital 
Fund grant. On-site reviews are also to include identification of any 
new open audit findings since the prior review, as well as follow up on 
annual statement revisions and environmental reviews. 

Remote reviews of troubled housing agencies are not conducted on 
housing agency premises. According to HUD officials, these reviews 
focus on grant initiation activities, the annual statement, 
environmental compliance, procurement, and Recovery Act grant 
performance. Also during on-site reviews, HUD staff are to consider 
open audit findings related to Capital Fund grants. In reviewing 
procurement activities, HUD staff are to determine if troubled housing 
agency procurement procedures ensure compliance with the Recovery Act’ 
s “Buy American” provisions. HUD officials stated they are reviewing 
the results of on-site and remote reviews for consistency before 
presenting final reports but that field office teams inform housing 
agencies of any identified deficiencies as a result of the reviews.

HUD Is Developing a Strategy for Monitoring Nontroubled Housing 
Agencies: 

Building on its efforts to more closely monitor the use of Recovery Act 
funds by troubled housing agencies, HUD is developing a strategy for 
monitoring nontroubled housing agencies which HUD stated will be 
effective by October 1, 2009. HUD officials stated that under its draft 
strategy, they have identified 2,950 nontroubled housing agencies and 
have separated them into two groups for the purposes of monitoring and 
oversight: high risk and low risk.[Footnote 69] The high-risk group is 
composed of the 332 housing agencies that have been identified as the 
highest risk based in part on the amount of their Recovery Act funding. 
The low-risk group consists of the remaining 2,618 nontroubled housing 
agencies. HUD’s draft strategy calls for remote reviews to be completed 
by January 15, 2010, on all nontroubled housing agencies in both the 
high- and low-risk groups. In addition, HUD’s draft strategy calls for 
on-site reviews for a sample of nontroubled housing agencies from each 
of the two risk groups, with the objective of reaching those at 
greatest risk and ensuring coverage of grantees constituting the 
greatest amount of formula grant dollars. Under the draft strategy, HUD 
plans to use Office of Field Operations (OFO) headquarters and field 
office staff to conduct the reviews. HUD plans to have the remote 
reviews focus on four main components: grant initiation, environmental 
compliance, procurement, and grant administration. On-site reviews of a 
sample of housing agencies will focus on the same four components of 
the remote reviews and will also include a review of the contract 
administration of the procurements related to the use of Recovery Act 
funds. While HUD has not finalized its procedures of on-site and remote 
reviews of nontroubled housing agencies officials stated that they 
expect the procedures to be very similar to those for troubled housing 
agency’s remote and on-site reviews. 

HUD’s draft strategy calls for on-site reviews for a sample of the 
high-risk nontroubled housing agencies to be completed by February 15, 
2010. HUD plans to identify this sample as follows: 

* housing agencies that represent the top 100 housing agencies in the 
high-risk group based on the amount of Recovery Act funding received, 

* housing agencies that have more than 500 public housing units and are 
within a 50-mile radius of the field office, and, 

* housing agencies identified by the field office as having one or more 
risk factors that warrant an on-site review.

For the remaining 2,618 housing agencies in the low-risk group, HUD’s 
draft strategy calls for on-site reviews for a sample to be completed 
by February 15, 2010. HUD plans to identify this sample of housing 
agencies for on-site reviews as follows: 

* housing agencies that have more than 500 public housing units and are 
within a 50-mile radius of the field office, and, 

* housing agencies identified by the field office as having one or more 
risk factors that warrant an on-site review.

HUD officials stated that one of the risk factors, among others, that 
field offices may consider in selecting additional nontroubled housing 
agencies for on-site reviews (in both the high- and low-risk 
categories) is the status of open Single Audit findings that are 
related to the Capital Fund program. However, HUD stated that the 
strategy will not require that field offices target and expedite on- 
site reviews of housing agencies that have open findings that could 
affect their use of Recovery Act funds. Open audit findings may 
indicate housing agencies that have greater risk of misusing Recovery 
Act funds. Single Audits provide federal agencies with information on 
the use of federal funds, internal control deficiencies, and compliance 
with federal program requirements. HUD began tracking the status of 
Single Audit findings through a centralized system in 2007 and has 
tracked whether findings have been appropriately addressed and closed 
by the housing agency in this system since that time.[Footnote 70] HUD’ 
s centralized system does not contain information on the status of 
audit findings reported prior to 2007. While HUD is working with 
housing agencies to ensure that appropriate action is taken to resolve 
and correct findings of deficiency that these audits have identified, 
many housing agencies that have received Recovery Act funds have open 
findings that appear unresolved in HUD’s tracking system. 

Housing agencies with recent Single Audit findings have received more 
than $900 million in Recovery Act funds. Specifically, 31 percent of 
all Recovery Act Capital Fund grants awarded to housing agencies have 
been provided to 464 nontroubled housing agencies that had at least one 
audit finding reported in 2007, 2008, or both. These housing agencies 
are obligating and drawing down Recovery Act funds at a faster rate 
than troubled housing agencies but at a slightly slower rate than 
nontroubled housing agencies that have not had Single Audit findings 
(see figure 10). 

Figure 10: Comparison of Obligation and Drawdown Rates for Nontroubled 
Agencies with No Audit Findings, Troubled Agencies, and Nontroubled 
Agencies with Audit Findings: 

[Refer to PDF for image: ten pie-charts] 

Recovery Act funds allocated by HUD (Total: $2,985,000,000): 
Nontroubled housing agencies without findings (2,498 agencies): 63%; 
Nontroubled housing agencies with findings (464 agencies): 31%; 
Troubled housing agencies (172 agencies): 6%; 

Nontroubled housing agencies without findings (2,498 agencies): 
Funds obligated by HUD: $1,889,641,904 (99.9%); 
Funds obligated by housing agencies: $658,663,448 (34.9%); 
Funds drawn down by housing agencies: $111,788,171 (5.9%). 

Nontroubled housing agencies with findings (464 agencies): 
Funds obligated by HUD: $908,170,134 (99.9%); 
Funds obligated by housing agencies: $271,650,323 (29.9%); 
Funds drawn down by housing agencies: $29,405,818 (3.2%). 

Troubled housing agencies (172 agencies): 
Funds obligated by HUD: $185,944,247 (100%); 
Funds obligated by housing agencies: $26,515,934 (14.3%); 
Funds drawn down by housing agencies: $4,372,842 (2.4%). 

Source: GAO analysis of HUD data. 

[End of figure] 

An open finding may not necessarily affect the use of Recovery Act 
funds. HUD officials stated to us that its centralized system for 
tracking audit findings does not contain information that would allow 
it to definitively determine if an open finding could directly or 
indirectly affect Recovery Act funding. For example, HUD’s centralized 
system for tracking findings does not contain budget codes that would 
identify the specific HUD funds, such as public housing Capital Funds, 
that the housing agency auditors determined were affected by the 
finding. Of the 464 nontroubled housing agencies that have had recent 
findings, we identified 155 that have unresolved deficiency findings 
identified by recent Single Audits, according to information from HUD’s 
tracking system. These deficiencies were either material weaknesses or 
significant deficiencies.[Footnote 71] A material weakness means there 
is a deficiency or combination of deficiencies in the housing agency’s 
internal control such that there is a reasonable possibility that the 
housing agency will not prevent, detect, and correct material 
noncompliance. A significant deficiency is less severe than a material 
weakness, but it is required to be reported in housing agency Single 
Audits reporting package. According to HUD officials, after reviewing 
the status of these findings, HUD Office of Field Operations staff were 
able to identify 94 housing agencies where audit findings should have 
been shown as closed in HUD’s tracking system, and an additional 13 
housing agencies that had audit findings not related to the Capital 
Fund, leaving 48 housing agencies with open audit findings relevant to 
administration of the Capital Fund program. HUD’s analysis of findings 
was limited to those housing agencies with findings reported in its 
tracking system and thus did not include findings that may have been 
reported prior to 2007. It is important that HUD continue to monitor 
housing agencies with open audit findings that may have a direct or 
indirect effect on the housing agencies’ use and reporting on the use 
of Recovery Act funds. We recommended that HUD systematically evaluate 
the results of audits to identify and understand problems of 
inappropriate use and mismanagement of public housing funds, identify 
emerging issues, and evaluate overall monitoring and oversight 
processes.[Footnote 72] Identifying and targeting housing agencies with 
open audit findings related to Recovery Act funds for enhanced 
monitoring, such as on-site reviews, could achieve this objective. 
Further, HUD’s strategic goals for its public housing program call for 
the department to resolve issues identified by audits and improve its 
management of internal controls to, among other things, eliminate 
fraud, waste, and abuse. 

HUD officials stated that they estimate their strategy as currently 
proposed would allow for on-site reviews at housing agencies that have 
received at least $2 billion, or two-thirds of the noncompetitive 
Capital Fund grants provided to housing agencies under the Recovery Act 
and that its goal was to conduct on-site reviews at those housing 
agencies with the greatest risk which it has identified as those with 
the largest amounts of Recovery Act dollars. According to HUD, 18 of 
the 48 housing agencies with outstanding findings have received over 
$44 million dollars in Recovery Act funds and are already among the 
agencies targeted to receive on-site reviews, which were selected based 
on factors such as the size of their Recovery Act grant and the number 
of housing units they manage. The remaining 30 housing agencies with 
open findings received almost $11 million of the total Recovery Act 
funds; however HUD has not currently targeted these housing agencies 
for on-site reviews. HUD has taken important steps in developing its 
strategy for monitoring nontroubled housing agencies, including 
developing a risk-based approach, and reviewing open audit findings to 
determine whether they may affect the housing agencies’ reporting on 
and use of Recovery Act funds. Expanding its criteria for selecting 
housing agencies for on-site reviews to include those with open audit 
findings related to the housing agencies administration of their 
Capital Fund Grant increases the potential for HUD to detect misuse of 
funds. This is particularly important for Recovery Act funds because of 
the accelerated obligation and draw down rates instituted by the Act. 

Recommendation: To enhance HUD’s ability to prevent, detect, and 
correct noncompliance with the use of Recovery Act funds, we recommend 
that the Secretary of the Department of Housing and Urban Development 
expand the criteria for selecting housing agencies for on-site reviews 
to include housing agencies with open Single Audit findings that may 
affect the use of and reporting on Recovery Act funds.

HUD Has Begun to Review Applications for Capital Fund Recovery 
Competition Grants: 

HUD is required to award nearly $1 billion to public housing agencies 
based on competition for priority investments, including investments 
that leverage private sector funding or financing for renovations and 
energy conservation retrofit investments. In a Notice of Funding 
Availability (NOFA) published May 7, 2009, and revised June 3, 2009, 
HUD outlined four categories of funding for which public housing 
agencies could apply: 

* creation of energy-efficient communities ($600 million);

* gap financing for projects that are stalled due to financing issues 
($200 million);

* public housing transformation ($100 million); and; 

* improvements addressing the needs of the elderly or persons with 
disabilities ($95 million). 

For the energy-efficient communities category, public housing agencies 
self-scored their applications—which were due July 21, 2009—according 
to criteria outlined in the NOFA.[Footnote 73] The last three 
categories were threshold based, meaning applications that met all of 
the threshold requirements will be funded in order of receipt.[Footnote 
74] If funds were available after all applications meeting the 
thresholds had been funded, HUD could remove thresholds after August 1, 
2009, in order to fund additional applications in the order of receipt 
until all funds have been awarded. Applications in these three 
categories were accepted until August 18, 2009. If funds remain in a 
category after all eligible applications have been funded, HUD also has 
the authority to transfer funds to another category. As of September 9, 
2009, HUD officials told us they have not transferred funds between 
categories. 

Large Response to Capital Fund Recovery Competition Has Slowed HUD’s 
Review Process: 

HUD has begun reviewing applications for all four funding categories of 
the Capital Fund Recovery Competition (CFRC) program, which has $995 
million available to award. HUD officials told us that as of August 18, 
2009, HUD received and is reviewing 1,759 applications.[Footnote 75] 
HUD staff review applications in all four funding categories to check 
that required documents, such as signed antilobbying certifications, 
project narratives, proposed budgets, and expected timelines, are 
included in the package. For applications in the energy-efficient 
communities category only, HUD reviewers allow applicants to correct 
incomplete applications within five days and resubmit until the 
deadline. Following the initial check, all applications undergo a 
three-step process: (1) a reviewer evaluates the project narrative, 
proposed budget, and timeline; (2) a verifier performs a check for 
compliance with the NOFA and other regulations; and (3) a designated 
approver makes an award or ineligibility decision. Applications in the 
energy-efficient communities category are subject to an additional 
review process. For these applications, public housing agencies self-
certify that their applications meet specific criteria, attest to their 
accuracy, and develop a detailed narrative about project costs and 
budgeting prior to submitting their applications. HUD gives points to 
each application based on the certifications made by public housing 
agencies and ranks them in descending order by score to determine award 
funding. 

Officials told us that although there have been approximately 40 to 50 
staff reviewing applications part time or full time, the review process 
has been slower than expected. According to officials, this is due to 
the number of applications with lengthy narratives needing review. 
Further, HUD officials stated that their staff are reviewing CFRC 
applications while carrying out their ongoing responsibilities related 
to managing the public housing capital fund program. Nevertheless, the 
officials said there are many applications in process. According to 
program guidance published on HUD’s Recovery Act Web site, program 
officials had set August 31, 2009, as a milestone for awarding all CFRC 
grants. However, because of the large number of applications received 
by July 6, 2009, HUD officials determined they needed additional time 
to complete their reviews; in turn, they decided to award the grants on 
a category-by-category basis. As of September 3, 2009, HUD had awarded 
$96 million in the transforming public housing category to 15 public 
housing agencies. These awards are meant to help redevelop blighted 
public housing that is distressing the surrounding community. Per the 
requirements of the Recovery Act, HUD must obligate all CFRC grant 
funds to public housing agencies by September 30, 2009. According to 
HUD officials, they anticipate meeting the deadline. 

HUD is developing a strategy for monitoring the grants after they are 
awarded. HUD officials said that developing the strategy would be a 
joint effort between the interested offices in HUD headquarters. 
Officials told us there are some challenges to monitoring the 
competitive grants, relative to monitoring formula fund grants. These 
include needing more time to assess the use of grant funds because 
projects must meet specific criteria as outlined in the NOFA and 
searching for and hiring employees with special skills and expertise, 
such as in energy usage, to work on monitoring. HUD officials told us 
that two new headquarters employees dedicated to implementing the 
Recovery Act have already begun work, and that the Department is in the 
process of hiring three more of these employees. According a HUD 
official, criminal and civil penalties for misrepresentation in the 
applications are likely to deter public housing agencies from such 
action.

HUD and Industry Stakeholders Report That Public Housing Agencies Have 
Encountered Few Challenges during the Application Process: 

HUD officials told us they are generally satisfied with the CFRC 
process and that the review process is progressing with relatively few 
problems, though administering the program solely from HUD headquarters 
has been a challenge. The officials noted that they received positive 
feedback from public housing agencies on their handling of the 
competition, especially on the prepopulated spreadsheets developed for 
use during the application process. Some of the public housing industry 
officials we spoke with heard of few challenges or problems from their 
members regarding the competitive grant application process, though 
they note that public housing agencies have been reluctant to publicize 
or share the content of their CFRC applications while the competition 
is ongoing. However, other public housing industry officials also said 
they were concerned about the Capital Fund competition on behalf of 
smaller public housing agencies. HUD officials said some agencies 
reported problems submitting applications for CFRC grants because of 
technology challenges, such as access to the Internet only through 
dial-up service, or misunderstanding the NOFA. For agencies having 
problems applying, HUD officials dealt directly with agencies’ 
questions in order to ensure agencies could submit their applications 
on time. The officials noted, however, that public housing agencies 
that waited until the last minute to submit their applications faced 
challenges meeting the submission deadline. Representatives from one of 
the public housing industry groups told us that their members have been 
largely satisfied with the level of guidance and support provided by 
HUD during the CFRC application process.

HUD Guidance on Two Recipient Reporting Solutions Is Forthcoming: 

HUD is using two ways to satisfy reporting requirements for public 
housing agencies under the Recovery Act: (1) FederalReporting.gov 
created and managed by OMB and the Recovery Accountability and 
Transparency Board (RATB) for all Recovery Act recipients to report on 
the nature of projects undertaken with Recovery Act funds and on jobs 
created and retained[Footnote 76] and (2) the Recovery Act Management 
and Reporting System (RAMPS) system HUD developed for Recovery Act 
reporting purposes, including public housing agencies’ compliance 
information for the National Environmental Policy Act (NEPA), as 
required by the Recovery Act.[Footnote 77] HUD officials told us they 
have been meeting biweekly with OMB staff, and officials from various 
federal agencies, to express views on a reasonable level of reporting 
burden for grantees. HUD officials noted that while public housing 
agencies have had to comply with NEPA since it was enacted in 1970, 
reporting on environmental assessments is a new requirement for public 
housing agencies. They stated they intend to expand measures in RAMPS 
to accommodate future information requests. 

HUD also plans to use RAMPS to perform data quality checks on recipient 
reports. According to officials, the department is designing a data- 
quality strategy using RAMPS to pull data from OMB’s 
FederalReporting.gov after they are published. As of September 9, 2009, 
HUD officials reported that staff is finalizing the data quality 
strategy.

HUD Recently Issued Recipient Reporting Guidance for Public Housing 
Agencies, Though Officials Are Concerned There Is Insufficient Time to 
Become Familiar with OMB’s Reporting Solution: 

HUD issued guidance to public housing agencies on recipient reporting 
on September 9, 2009. The guidance, in the form of a letter from the 
HUD Secretary and addressed to public housing agencies that have 
received grants under the Recovery Act, provided guidance and 
instructions on both of their reporting obligations: to OMB for jobs 
and funding-related activities and to HUD for reporting on NEPA 
compliance. The letter directed the public housing agencies to the 
FederalReporting.gov Web site for reporting on jobs and activities 
under the Recovery Act, and it informed public housing agencies that 
they will use HUD’s RAMPS system for reporting data on NEPA. Lastly, 
the letter directed public housing agencies to register at 
FederalReporting.gov as soon as possible, but also said that 
registration for RAMPS, which is a separate from FederalReporting.gov 
registration and is a requirement to use the RAMPS system,was not yet 
available. HUD is working with grantees to identify those who need to 
be registered in RAMPS. The letter also provided Web site addresses 
where public housing agencies could find more information about both 
reporting requirements and an e-mail address they could use to send e- 
mails with questions about recipient reporting. 

HUD has published several FAQs on recipient reporting but noted that 
until OMB’s reporting system was fully developed and operational, they 
could not finalize program-level reporting guidance for public housing 
agencies. OMB has issued various guidance materials for recipient 
reporting, including a data dictionary explaining each data element 
required in the reports, a registration guide providing information on 
registering in the system, and two memorandums detailing recipient 
reporting requirements—the most recent issued on June 22, 2009. HUD 
officials said that the June recipient reporting guidance was not 
posted to HUD’s Web site until September 3, 2009. Officials from a 
housing industry group told us their members were not aware of the OMB 
guidance on recipient reports until GAO inquired about it. Because the 
system will not be available for data submission until October 1, 2009, 
and recipient reports are due by October 10, 2009, both HUD officials 
and industry stakeholders voiced concern that grantees will not have 
enough time to become familiar with OMB’s reporting system. HUD 
officials reported that OMB’s Web seminars had been available online 
since mid-summer.

Though Primarily Relying on OMB Support for Recipient Reporting, HUD Is 
Taking Additional Steps to Ensure Public Housing Agencies Meet 
Reporting Requirements: 

Though HUD plans to provide Recovery Act-specific assistance and 
training to public housing agencies on recipient reporting, they will 
reinforce to public housing agencies that they must submit reports 
through OMB’s reporting solution and that all technical questions on 
recipient reporting must be directed to OMB. The officials also noted 
that OMB will be the primary agency responsible for issuing all 
guidance related to recipient reporting requirements and the use of the 
FederalReporting.gov solution. The officials stated that HUD’s role 
will be to reinforce and assist public housing agencies in complying 
with OMB’s guidance while addressing the HUD-specific reporting 
requirements related to environmental assessment reports. However, to 
assist public housing agencies with OMB reporting, HUD officials told 
us they are working to develop templates with prepopulated “dummy” data 
to provide public housing agencies with an example of a correct and 
data-compliant recipient report. Leaders of housing industry groups 
told us they plan to work with member public housing agencies to 
educate them about the OMB guidance and troubleshoot problems prior to 
the October 10, 2009, deadline for recipient reporting. 

HUD plans to take other steps to ensure public housing agencies meet 
the environmental review reporting requirements under the Recovery Act, 
including assembling a compliance planning team to troubleshoot 
problems, continuing to issue guidance for using RAMPS, and developing 
a HUD-wide call center for program-level information and technical 
questions on environmental assessment reporting requirements (and 
program-level questions only for the OMB-required jobs and activities 
reports). HUD headquarters officials have been meeting with field 
office officials to develop guidance that will allow field offices to 
instruct public housing agencies on how to comply with environmental 
assessment requirements. They also plan to conduct Web-based seminars 
to walk public housing agencies through the environment assessment 
reporting requirements.

Housing Industry Stakeholders Are Concerned about the Capacity of 
Recipient Reporting Systems but Think Public Housing Agencies Will Be 
Able to Measure Job Creation Easily: 

Some industry stakeholders were concerned that HUD’s information 
technology systems may not have the capacity to handle the new 
environmental assessment reporting requirements because of problems 
public housing agencies have experienced with HUD systems in the past. 
HUD officials said that although Recovery Act reporting is a major 
deviation from HUD’s regular programmatic reporting, RAMPS is ready to 
receive increased levels of reports by the first reporting deadline of 
October 10, 2009. The system’s data entry forms and fields are 
currently able to accept environmental assessment reports; however, HUD 
officials said they continue to modify the appearance of the reporting 
module and plan to add functionality through a series of technological 
updates over the next several months. 

Some of the housing industry officials viewed collecting data to count 
jobs created and retained as relatively straightforward for public 
housing agencies because they already submit reports in compliance with 
Department of Labor regulations that include hourly rates of pay and 
number of hours worked.[Footnote 78] To meet the OMB requirements, 
public housing agencies can collect timesheets from contractors to 
record and measure the number of hours workers spend on a project in 
terms of full-time equivalents, thus providing a reasonable starting 
point to estimate the number of jobs created and retained. However, the 
official from one group also told us that calculating job creation and 
retention from data they already collect could be a challenge because 
public housing agencies are not familiar with using the formulas OMB 
provided to perform such calculations.[Footnote 79] HUD published 
specific guidance for public housing agencies on how to report on jobs 
created and retained on September 3, 2009; however, according to HUD 
officials, OMB changed the formula for full-time equivalents and 
requested modifications to the document after HUD posted it to their 
Recovery Act Web site. HUD staff plan to finalize and republish the 
document.

Agency Comments: 

We provided HUD with excerpts from a draft of this report and received 
written comments from the HUD Office of Capital Improvements and Office 
of Field Operations, both of which are within HUD’s Office of Public 
and Indian Housing. HUD generally agreed with our findings and provided 
technical corrections, which we incorporated as appropriate. In regards 
to our recommendation, HUD noted its recent actions to identify housing 
agencies with open findings related to the administration of the 
Capital Fund Program and HUD’s plans to conduct remote reviews of all 
public housing agencies receiving Recovery Act funds as well as on-site 
reviews targeting housing agencies that collectively have received more 
than $2 billion dollars in Recovery Act funds. We have accordingly 
modified our report to describe recent efforts, and HUD’s plans to 
conduct on-site reviews at some, but not all housing agencies with 
relevant open audit findings. In addition we modified our 
recommendation to specify that HUD expand its criteria for selecting 
housing agencies for on-site reviews to include agencies with open 
audit findings.

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, 
and seven territories and Indian tribes. The program enables low-income 
families to reduce their utility bills by making long-term energy 
efficiency improvements to their homes by, for example, installing 
insulation; sealing leaks; and modernizing heating equipment, air 
circulation fans, or air conditioning equipment. Over the past 32 
years, the Weatherization Assistance Program has assisted more than 6.2 
million low-income families. By reducing the energy bills of low-income 
families, the program allows these households to spend their money on 
other needs, according to DOE. The Recovery Act appropriation 
represents a significant increase for a program that has received about 
$225 million per year in recent years. 

As of September 14, 2009, DOE had approved all but two of the 
weatherization plans of the states, the District of Columbia, the 
territories, and Indian tribes—including all 16 states and the District 
of Columbia in our review. DOE has provided to the states $2.3 billion 
of the $5 billion in weatherization funding under the Recovery Act. Use 
of the Recovery Act weatherization funds is subject to Section 1606 of 
the act, which requires all laborers and mechanics employed by 
contractors and subcontractors on Recovery Act projects to be paid at 
least the prevailing wage, including fringe benefits, as determined 
under the Davis-Bacon Act.[Footnote 80] Because the Davis-Bacon Act had 
not previously applied to weatherization, the Department of Labor 
(Labor) had not established a prevailing wage rate for weatherization 
work. In July 2009, DOE and Labor issued a joint memorandum to 
Weatherization Assistance Program grantees authorizing them to begin 
weatherizing homes using Recovery Act funds, provided they pay 
construction workers at least Labor’s wage rates for residential 
construction, or an appropriate alternative category, and compensate 
workers for any differences if Labor establishes a higher local 
prevailing wage rate for weatherization activities. Labor then surveyed 
five types of “interested parties” about local labor rates for 
weatherization work in each of the states.[Footnote 81] The department 
completed determining county-by-county prevailing wage rates in each of 
the 50 states and the District of Columbia by September 3, 2009.

Most States Have Not Begun to Weatherize Homes Partly Because of Their 
Concerns about Prevailing Wage Rate Requirements: 

DOE has provided all 16 states and the District of Columbia in our 
review with half of their weatherization formula funds under the 
Recovery Act. (See table 14.) As of June 30, 2009, DOE had provided 
each with the initial 10 percent of its allocation and had provided 9 
states and the District of Columbia with the next 40 percent of their 
funds based on the department’s approval of their weatherization 
plans.[Footnote 82] Since that time, DOE has finished approving the 
weatherization plans of all of the states in our review. DOE has 
provided the 16 states and the District of Columbia with the second 
portion of their weatherization funds, giving them access to more than 
$1.4 billion, or 50 percent of their total allocation. DOE plans to 
release the final 50 percent of funding to each state based on the 
department’s progress reviews examining each state’s performance in 
spending the first half of its funds and the state’s compliance with 
the Recovery Act’s reporting and other requirements. 

Table 14: DOE’s Allocation of the Recovery Act’s Weatherization Funds 
for 16 States and the District of Columbia, as of August 31, 2009: 

State: Arizona;
Total allocation: $57,023,278[A]; 
Initial allocation: $5,702,328;
Date received (2009): April 10;
Second allocation: $22,809,311; 
Date received (2009): June 8;
Allocation provided to date: $28,511,639. 

State: California;
Total allocation: $185,811,061;
Initial allocation: $18,581,106; 
Date received (2009): April 10;
Second allocation: $74,324,424;
Date received (2009): June 18;
Allocation provided to date: $92,905,530. 

State: Colorado;
Total allocation: $79,531,213;
Initial allocation: $7,953,121; 
Date received (2009): April 1;
Second allocation: $31,812,485;
Date received (2009): August 13;
Allocation provided to date: $39,765,606. 

State: District of Columbia;
Total allocation: $8,089,022;
Initial allocation: $808,902; 
Date received (2009): March 30;
Second allocation: $3,235,609;
Date received (2009): June 18;
Allocation provided to date: $4,044,511. 

State: Florida;
Total allocation: $175,984,474;
Initial allocation: $17,598,447; 
Date received (2009): April 10;
Second allocation: $70,393,790;
Date received (2009): June 18;
Allocation provided to date: $87,992,237. 

State: Georgia;
Total allocation: $124,756,312;
Initial allocation: $12,475,631; 
Date received (2009): April 20;
Second allocation: $49,902,524;
Date received (2009): June 26;
Allocation provided to date: $62,378,155. 

State: Illinois;
Total allocation: $242,526,619;
Initial allocation: $24,252,662;
Date received (2009): April 1;
Second allocation: $97,010,647;
Date received (2009): June 26;
Allocation provided to date: $121,263,309. 

State: Iowa;
Total allocation: $80,834,411;
Initial allocation: $8,083,441; 
Date received (2009): March 27;
Second allocation: $32,333,764;
Date received (2009): July 6;
Allocation provided to date: $40,417,205. 

State: Massachusetts;
Total allocation: $122,077,457;
Initial allocation: $12,207,746; 
Date received (2009): April 3;
Second allocation: $48,830,983;
Date received (2009): July 6;
Allocation provided to date: $61,038,729. 

Michigan;
Total allocation: $243,398,975;
Initial allocation: $24,339,898; 
Date received (2009): March 27;
Second allocation: $97,359,590;
Date received (2009): July 6;
Allocation provided to date: $121,699,488. 

State: Mississippi;
Total allocation: $49,421,193;
Initial allocation: $4,942,119; 
Date received (2009): April 3;
Second allocation: $19,768,477;
Date received (2009): June 8;
Allocation provided to date: $24,710,596. 

State: New Jersey;
Total allocation: $118,821,296;
Initial allocation: $11,882,130;
Date received (2009): April 7;
Second allocation: $47,528,518;
Date received (2009): July 10;
Allocation provided to date: $59,410,648. 

State: New York;
Total allocation: $394,686,513;
Initial allocation: $39,468,651; 
Date received (2009): April 13;
Second allocation: $157,874,605;
Date received (2009): June 26;
Allocation provided to date: $197,343,256. 

State: North Carolina;
Total allocation: $131,954,536;
Initial allocation: $13,195,454; 
Date received (2009): April 1;
Second allocation: $52,781,814;
Date received (2009): June 18;
Allocation provided to date: $65,977,268. 

State: Ohio;
Total allocation: $266,781,409;
Initial allocation: $26,678,141; 
Date received (2009): March 27;
Second allocation: $106,712,564;
Date received (2009): June 18;
Allocation provided to date: $133,390,705. 

State: Pennsylvania;
Total allocation: $252,793,062;
Initial allocation: $25,279,306; 
Date received (2009): March 27;
Second allocation: $101,117,225;
Date received (2009): August 25;
Allocation provided to date: $126,396,531. 

State: Texas;
Total allocation: $326,975,732;
Initial allocation: $32,697,573; 
Date received (2009): April 10;
Second allocation: $130,790,293;
Date received (2009): July 10;
Allocation provided to date: $163,487,866. 

Source: GAO analysis of DOE information. 

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] 

While DOE has provided each of the states in our review with half of 
their total allocations, 8 of the 14 states for which we collected 
information had not started weatherizing homes using Recovery Act funds 
as of August 31, 2009.[Footnote 83] (See table 15.) However, many of 
the 14 states had used Recovery Act funds for startup activities such 
as hiring and training staff, procuring equipment and vehicles, and 
performing energy audits of eligible homes. Other states told us that 
they would begin weatherizing homes shortly. For example, Florida 
officials expected to award final contracts to local agencies to 
weatherize homes by early September 2009, while Iowa officials had 
informed local agencies that they could start issuing contracts and 
begin weatherization activities. Three states—New York, North Carolina, 
and Pennsylvania—reported not having used any Recovery Act funds for 
the Weatherization Assistance Program as of August 31, 2009, though 
they indicated they were using funds from DOE’s annual appropriations 
for weatherization activities in anticipation of using Recovery Act 
funds. Six states reported having weatherized homes with Recovery Act 
funds. For example, local agencies in Ohio had weatherized more than 
900 homes by the end of July 2009, and local agencies in Colorado 
reported using Recovery Act funds for basic weatherization activities, 
such as installing insulation and energy-efficient appliances. 

Table 15: Use of Recovery Act Weatherization Funds by 14 States, as of 
August 31, 2009: 

State: Arizona;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? Yes. 

State: California;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? No. 

State: Colorado;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? Yes. 

State: Florida;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? No. 

State: Georgia;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? Yes. 

State: Iowa;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? No. 

State: Michigan;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? Yes. 

State: Mississippi;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? Yes. 

State: New Jersey;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? No. 

State: New York;
Funds used for start-up activities? No[A]; 
Funds used for weatherizing homes? No. 

State: North Carolina;
Funds used for start-up activities? No[A]; 
Funds used for weatherizing homes? No. 

State: Ohio;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? Yes. 

State: Pennsylvania;
Funds used for start-up activities? No[A]; 
Funds used for weatherizing homes? No. 

State: Texas;
Funds used for start-up activities? Yes; 
Funds used for weatherizing homes? No. 

Source: GAO analysis of state information. 

[A] The state did not use Recovery Act funds to support its 
weatherization activities. Instead, the state used funds from DOE’s 
annual weatherization appropriation. 

[End of table] 

As shown in table 16, many of the states we reviewed reported that 
Davis-Bacon Act requirements—which have been applied to DOE’s 
Weatherization Assistance Program for the first time under the Recovery 
Act—are a reason they have not yet started weatherizing homes. 
Specifically, state weatherization officials expressed concerns about 
wage rates and administrative requirements under the Recovery Act’s 
Davis-Bacon provision. 

Table 16: Prevailing Wage Rates for Weatherization Work: 

State: Arizona;
Date wage rate available: August 30, 2009; 
Weatherization of homes delayed until wage rate available? Yes[A]; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Administrative requirements[B]. 

State: California;
Date wage rate available: September 3, 2009; 
Weatherization of homes delayed until wage rate available? Yes; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates and administrative requirements[B]. 

State: Colorado;
Date wage rate available: September 1, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates. 

State: District of Columbia
Date wage rate available: August 24, 2009[C]; 
Weatherization of homes delayed until wage rate available? n/a[D];  
Areas of Davis-Bacon Act concerns identified by state and local 
officials: n/a[D]. 

State: Florida;
Date wage rate available: September 2, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Administrative requirements[B]. 

State: Georgia;
Date wage rate available: August 29, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates and administrative requirements[B]. 

State: Illinois;
Date wage rate available: September 3, 2009; 
Weatherization of homes delayed until wage rate available? n/a[D]; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: n/a[D]. 

State: Iowa;
Date wage rate available: August 19, 2009; 
Weatherization of homes delayed until wage rate available? Yes; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates and administrative requirements[B]. 

State: Massachusetts;
Date wage rate available: August 17, 2009; 
Weatherization of homes delayed until wage rate available? n/a[D]; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: n/a[D]. 

State: Michigan;
Date wage rate available: August 12, 2009; 
Weatherization of homes delayed until wage rate available? Yes; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates[E]. 

State: Mississippi;
Date wage rate available: August 24, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: None cited. 

State: New Jersey;
Date wage rate available: August 17, 2009; 
Weatherization of homes delayed until wage rate available? Yes; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates. 

State: New York;
Date wage rate available: September 3, 2009; 
Weatherization of homes delayed until wage rate available? Yes; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates and administrative requirements[B]. 

State: North Carolina;
Date wage rate available: August 27, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: None cited. 

State: Ohio;
Date wage rate available: September 3, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Administrative requirements[B]. 

State: Pennsylvania;
Date wage rate available: September 3, 2009; 
Weatherization of homes delayed until wage rate available? No; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Administrative requirements[B]. 

State: Texas;
Date wage rate available: September 2, 2009; 
Weatherization of homes delayed until wage rate available? Yes; 
Areas of Davis-Bacon Act concerns identified by state and local 
officials: Wage rates and administrative requirements[B]. 

Source: GAO analysis of information from the Department of Labor and 
the states. 

[A] All but one locality (city of Phoenix) decided to wait for the wage 
determination before beginning weatherization activities. 

[B] Administrative requirements include paying workers on a weekly 
basis and submitting weekly certified payroll records. 

[C] Labor’s General Wage Determination will be used for the District of 
Columbia because Labor received insufficient information on constructed 
weatherization projects to enable the issuance of a wage determination. 

[D] We did not collect weatherization information from the District of 
Columbia, Illinois, or Massachusetts. 

[E] Michigan officials said their initial concerns about the prevailing 
wage rates have dissipated now that the actual wage rates are known. 

[End of table] 

Regarding wage rates, officials in about half of the states we reviewed 
decided to wait to begin weatherizing homes until Labor had determined 
county-by-county prevailing wage rates for their state. These officials 
explained that they wanted to avoid having to pay back wages to 
weatherization workers who started working before the prevailing wage 
rates were known. 

Arizona officials said all but one of its local service providers 
decided to wait to weatherize homes until the prevailing wage rates 
were determined because they were concerned about the time required to 
reconcile differences in wage rates. Similarly, Iowa officials told us 
paying back wages would be especially burdensome to smaller 
contractors. Michigan officials explained that their initial concerns 
about the prevailing wage rates have been diminished now that Labor has 
determined wage rates. However, officials in Colorado, which had 
proceeded with weatherizing homes, told us that their concerns have 
increased because Labor’s county-by-county wage rates are higher than 
the rates the local administering agencies had previously paid 
weatherization workers. As a result, Colorado may adjust one of its 
weatherization performance measures, and one county decided to conduct 
all Recovery Act weatherization work with county employees rather than 
awarding contracts.[Footnote 84] California officials were also 
concerned about the prevailing wage rates, and they wrote DOE to 
inquire about the possibility of requesting an exemption from the 
Davis-Bacon Act requirements for weatherization workers hired through 
the state’s federal, state, and local workforce development 
partnerships aimed at creating training and employment opportunities 
for youth and dislocated workers. California officials told us that the 
Davis-Bacon Act could weaken or eliminate workforce development as a 
significant component of its weatherization program, stating that 
paying prevailing wages to the inexperienced, entry-level workers 
typically hired through these programs would not be 
appropriate.[Footnote 85] While officials in about half of the states 
reviewed were concerned about prevailing wage rates prior to Labor’s 
determination, officials in North Carolina and Mississippi were not 
concerned because they expected that the prevailing wages rates would 
be similar to the existing wages being paid to weatherization workers; 
thus, they were not worried about possibly paying back wages. 

Regarding administrative requirements, officials in several states also 
cited concerns about ensuring weatherization activities funded with 
Recovery Act funds comply with Davis-Bacon requirements. Specifically, 
several officials cited concerns about the requirement that contractors 
and subcontractors pay covered workers weekly and submit weekly 
certified payroll records to the contracting agency. Florida officials 
expressed concerns about the increased documentation and administrative 
tasks required for weekly certified payroll. In Georgia, service 
providers also expressed concern about the requirements for a weekly 
payroll and were confused as to which employees would fall under the 
act’s guidelines. New York officials said one strategy that local 
agencies might use is to subcontract all weatherization work funded by 
the Recovery Act in order to limit the impact of Davis-Bacon to just 
those subcontracts. New York officials explained that these weekly 
payroll requirements are new to the organizations administering 
weatherization services and represent a new cost to the program. 

To facilitate better understanding of Davis-Bacon requirements, DOE and 
Labor have recently hosted conferences that contain sessions pertaining 
to the Davis-Bacon Act requirements. DOE sponsored the 2009 National 
Weatherization Conference that included sessions on the Davis-Bacon Act 
and officials from North Carolina said this conference provided them 
needed information.[Footnote 86] Additionally, Labor has hosted four 
Prevailing Wage Conferences and, according to its Web site, Labor will 
host three additional Prevailing Wage Conferences in September to 
address topics such as the administration and enforcement of the Davis- 
Bacon Act and the labor standards provisions of the Recovery Act. 
Additional guidance has been provided via memos to the states. For 
example, Labor’s May 29, 2009, memorandum on the applicability of 
Davis-Bacon labor standards to federal and federally assisted 
construction work funded in whole or in part under the provision of the 
Recovery Act states that the department’s long-standing view is that a 
project consists of all construction necessary to complete the building 
or work regardless of the number of contracts involved so long as all 
contracts awarded are closely related on purpose, time, and place. The 
memorandum also states in a footnote that the $2,000 threshold for 
Davis-Bacon and related act coverage pertains to the amount of the 
prime construction contract, not to the amount of individual 
subcontracts. Cognizant Labor officials told us that, for the 
Weatherization Assistance Program, the prime contract would be the one 
that a state signed with each of its community action agencies. 

Local Agencies Generally Have Responsibility for Procuring 
Weatherization Materials: 

Nearly all of the states we reviewed have left responsibility for the 
procurement of weatherization materials with local agencies rather than 
centralizing procurement at the state level. For example, Colorado 
officials approve local agencies’ procurement processes, but the local 
agencies acquire weatherization materials on their own using a 
competitive bid process. In Mississippi, local agencies develop their 
own list of suppliers and purchase materials that meet DOE standards 
for weatherization, while in North Carolina local agencies are 
responsible for developing their own fair market price list for 
materials. An exception is Pennsylvania, where local agencies will be 
required to purchase materials and equipment through the state’s 
cooperative purchasing program, which has established contracts with 
qualified suppliers.

DOE Has Issued Guidance to Mitigate Risk in the Weatherization Program, 
and Some States Have Established Additional Measures: 

DOE has issued guidance requiring recipients of Recovery Act 
weatherization funds to implement a number of internal controls to 
mitigate the risk of fraud, waste, and abuse.[Footnote 87] 
Specifically, DOE requires state weatherization agencies to conduct on- 
site monitoring of all weatherization service providers to inspect the 
management of funds and the production of weatherized homes. These 
monitoring visits consist of a financial review of the service 
provider’ s records pertaining to salaries, materials, equipment, and 
indirect costs; program reviews of the service provider’s records, 
contracts, and client files; and a production review, consisting of the 
inspection of weatherized homes by the state agencies and by the 
service provider. DOE requires that each state agency inspect at least 
5 percent of the weatherized units and each service provider inspect 
all of the completed units or units in the process of being 
weatherized. If an inspection reveals reporting inconsistencies, 
quality control issues, or other problems, the state agency is required 
to increase the number of units monitored and frequency of inspection. 
DOE is implementing an enhanced monitoring plan that would allow DOE’s 
weatherization project officers to track each state’s performance. As 
part of this enhanced monitoring, DOE has submitted a deviation request 
to OMB to require the states to submit monthly, rather than quarterly, 
reports. As a result of the significant increase in program funding, 
many of the states are reporting a need to increase staff to implement 
internal controls. DOE provides state agencies with the discretion to 
develop and implement these internal controls in accordance with each 
state’s weatherization plan. 

State officials can also determine the effectiveness of a recipient’s 
internal controls through assessments conducted as part of the Single 
Audit Act.[Footnote 88] These audits review the performance and 
management of nonfederal entities receiving $500,000 or more in federal 
awards. Some state weatherization programs, however, have been 
considered too small to be monitored during the state’s Single Audit. 
Only 1 of the 14 states we reviewed had an unresolved Single Audit 
issue with its state weatherization program. State officials told us 
that the corrective action plan for addressing the Single Audit 
findings is waiting for federal approval. 

Some state weatherization agencies have conducted risk assessments to 
monitor the use of funds and identify service providers that may need 
additional help implementing the weatherization program. In Georgia, 
for example, state officials conducted a risk assessment of all service 
providers and assigned a risk level to each provider. Risk mitigation 
activities in other states include annual reviews of independent 
auditors’ reports, increased frequency of on-site monitoring of service 
providers and weatherized homes, fraud detection training, the 
requirement of monthly reports from service providers, and the use or 
proposed use of a Web-based reporting database. Some states, however, 
believe that current controls are sufficient, but they will need to 
hire additional staff to accommodate the increase in Recovery Act 
funding.

States Are Beginning to Monitor Recovery Act Weatherization Impacts, 
and Most Plan to Meet Reporting Requirements: 

In guidance supplied to the states, DOE stated that, as a minimum, 
states now have to report oversight visits, training, and equipment 
purchases that exceed $5,000. In addition, state officials must report 
on the number of housing units weatherized and the resulting impacts to 
energy savings and jobs created and retained at both the state and 
local agency level. While state officials have estimated the number of 
housing units that they expect to weatherize using Recovery Act funds, 
only a few of the states have begun collecting data about actual 
impacts. This is primarily because most states are just beginning to 
use the Recovery Act funds to weatherize homes or because they are 
waiting for further guidance about how to calculate impacts. Some 
states plan to use performance measures developed by DOE, while others 
have developed their own measures. Florida officials, for example, plan 
to measure energy savings by tracking kilowatts used before and after 
weatherization, primarily with information from utility companies. 

OMB issued guidance in June 2009 describing how prime recipients and 
subrecipients of Recovery Act funds are to report on their use of those 
funds.[Footnote 89] For example, beginning with the quarter ending 
September 30, 2009, Section 1512 of the Recovery Act requires reports 
on the use of Recovery Act funding by recipients no later than the 10th 
day after the end of each calendar quarter. In August 2009, OMB updated 
its June guidance identifying the data elements for states to report. 
As a result, every state must, by October 10, 2009, submit to OMB 
detailed information about their use of Recovery Act funds.[Footnote 
90] Although weatherization officials in most states that we reviewed 
believe they would be able to meet this deadline, a few were less 
certain. For example, Colorado officials said that unresolved issues 
such as uploading consolidated data to OMB and completing the 
development and testing of the elements that will be used to collect 
data from grant recipients may affect the completeness and timeliness 
of the state’s report. Michigan officials stated that certain agency 
data for fiscal year 2009 would not be finalized until October 24 or 
25, 2009. To assist local subrecipients in understanding reporting 
requirements, some state agencies have issued guidance, but most are 
waiting for further DOE guidance.

In Response to Significant Risks with the Initial Section 1512 
Reporting Process, OMB and the States Are Taking Various Actions: 

Section 1512 recipient reporting[Footnote 91] and related OMB guidance, 
as discussed earlier in this report, requires recipients to report the 
total amount of Recovery Act funds received, the projects and 
activities being funded, the completion status of the projects being 
funded, and the impact on job creation and retention. Section 1512 of 
the act requires reports on the use of Recovery Act funds by recipients 
no later than the 10th day after the end of each calendar quarter 
(beginning the quarter ending Sept. 30, 2009). The first recipient 
reports are due to be reported to [hyperlink, 
http://www.federalreporting.gov] on October 10, 2009. 

This recipient reporting is intended to provide the public with an 
unprecedented level of transparency into how federal dollars are being 
spent and help drive accountability for the timely, prudent, and 
effective spending of recovery dollars. However, significant risks 
exist that will likely negatively impact the completeness, accuracy, 
and reliability of the information reported in the initial round of 
Section 1512 reporting. First, the reporting requirements are new, and 
many recipients who will be required to report information have never 
been required to report such information in the past. Recipients’ 
systems and processes have not previously been set up to provide 
reliable and accurate data for the currently required reporting, and 
recipients may not have sufficient personnel with the skills needed to 
provide assurance over the quality of the recipient reporting. The 
large number of recipients also adds to this risk, as it is difficult 
for states and the federal government to monitor data quality coming 
from the recipients. Data quality issues impact the usefulness and 
reliability of the summarized information at the state and federal 
levels. Significant risks also exist because two new systems have been 
implemented at the federal level for collecting, summarizing, and 
reporting the information. 

In our July 2009 report, we noted that challenges exist in tracking the 
Recovery Act funds in the selected states we reviewed,[Footnote 92] 
which could also impact the recipient reporting processes for those 
states. The states have also expressed concerns about the ability of 
other entities to track and report on Recovery Act funds. These 
entities generally have not had experience in reporting to the federal 
government on an ongoing basis, and numerous Single Audits have raised 
concerns about subrecipient reporting. In our April 2009 report, we 
noted that significant concerns exist regarding subrecipient 
monitoring, as it is an area where limited experience and known 
vulnerabilities exist.[Footnote 93] The extent to which these entities 
have the capacity to accurately report is unknown. Inherent risks also 
exist with the implementation of new reporting systems at the federal 
level. The large number of recipients and subrecipients related to 
Recovery Act reporting presents a huge challenge to OMB and the RATB in 
the design and activation of the reporting function. 

In an effort to address information risks, OMB’s June 22nd guidance 
includes a requirement for data quality reviews. The data quality 
guidance is intended to emphasize the avoidance of two key data 
problems—material omissions[Footnote 94] and significant reporting 
errors.[Footnote 95] Material omissions and significant reporting 
errors are risks that the financial information is incomplete and 
inaccurate. Reliable financial information should be accurate and 
complete, so that decision makers such as Congress and federal agencies 
can make informed decisions. OMB, federal agencies, state agencies, and 
others have taken various actions in preparation for the October 
reporting. OMB has issued guidance in February 2009, April 2009, June 
2009, and September 2009; presented at conferences; and provided 
training through webinars.[Footnote 96] The OMB June 22 memorandum 
stated that “it is anticipated that federal agencies will, as 
appropriate, issue clarifying guidance to funding recipients.” As noted 
elsewhere in our report, relevant federal agencies have issued or are 
planning on issuing guidance. The selected states and the District have 
issued their own guidance and requirements to state offices, 
localities, and other recipients in order to prepare for the initial 
recipient reporting. For example, the New Jersey Governor’s Chief of 
Staff issued a memorandum on July 10, 2009, requiring departments to 
submit comprehensive outlines of their strategy to comply with Section 
1512 reporting.[Footnote 97] 

In order to prepare for recipient reporting, states and their program 
offices are taking various actions to implement procedures and internal 
controls for recipient reporting. For example, Colorado has assigned a 
staff member to focus on Recovery Act reporting requirements to ensure 
reporting occurs as required by OMB. Also, the New Jersey Recovery 
Accountability Task Force issued written guidance to both state 
agencies and local government units concerning Recovery Act issues, 
such as reporting requirements, project selection criteria, effective 
contract and grant management. In addition, in New Jersey, the Recovery 
Accountability Task Force and the State Inspector General have been 
meeting with departments since May to discuss internal control 
policies. Similar meetings are beginning with municipalities and cities 
in New Jersey. The New Jersey Housing and Mortgage Finance Agency has 
provided seminars to multifamily property owners, developers, and 
managers, in addition to shifting staff resources. Some states have 
conducted dry runs as part of their preparation for the first reporting 
in order to identify areas where additional internal controls and 
procedures may be necessary. For instance, Florida has performed an 
initial recipient reporting pilot by having three agencies provide the 
data to populate the state database. Florida also plans dry runs and 
submission of test data to OMB once OMB has the capability of receiving 
the data. 

The states and District of Columbia have taken different approaches— 
centralized and decentralized—for Section 1512 recipient reporting. The 
11 states and the District with centralized approaches generally are 
planning on having the prime recipients provide the reporting 
information to a state office. For example, Ohio’s recipients are 
providing their information through a reporting hub to Ohio’s Office of 
Budget and Management. Ohio’s Office of Budget and Management will then 
report the information to FederalReporting.gov. Five states are using a 
decentralized approach and are generally planning on having the prime 
recipients, such as state departments, report their information 
directly to FederalReporting.gov. Table 17 indicates our classification 
of the reporting approaches the selected states and District are 
planning on using. 

Table 17: Selected states and the District implemented tracking 
mechanism to identify the state’s prime recipients and subrecipients 
for reporting purposes, in accordance with OMB guidance Section 1512: 

Centralized: 
Arizona; 
California;
Colorado;
District of Columbia;
Florida;
Illinois;
Iowa;
Massachusetts;
Michigan;
North Carolina;
Ohio;
Pennsylvania. 

Decentralized: 
Georgia;
Mississippi;
New Jersey;
New York;
Texas. 

Source: GAO analysis of interviews of cognizant officials. 

[End of table] 

The Director of Michigan’s Economic Recovery Office said she believes 
the state will be able to report centrally, but state agencies could 
report directly through the FederalReporting.gov website if needed. 
Some states are planning on using their existing accounting systems 
with some modifications for their reporting. For instance, Colorado is 
developing a centralized reporting process that primarily uses its 
existing accounting and contract management systems with certain 
enhancements, as well as manually generated spreadsheets. Other states, 
such as Florida, are developing or have developed a new reporting 
system. 
The risk associated with recipient reporting is also reflected in 
concerns some state representatives have expressed. To address these 
concerns and clarify the information it has provided, OMB has taken 
numerous steps. In addition to memorandums, webinars, and conferences, 
OMB has held several teleconferences with numerous stakeholders at the 
state and local levels, including recovery czars, budget, information 
technology, financial, and audit officials. OMB also plans to send 
federal officials to all states and some other locations to provide a 
resource during the initial reporting period. At the time of our 
report, some of the recovery czars and other officials noted that 
confusion remains regarding the guidance. Generally, OMB has been 
working with states to resolve issues as it becomes aware of them. For 
example, in August 2009 an Iowa official said that they wanted to 
confirm that they could use a single D-U-N-S number to report Section 
1512 information centrally. OMB made some changes to better accommodate 
centralized reporting in response. However, even though OMB’s outreach 
and coordination with the states has been much greater than has 
occurred in the past, the unprecedented reliance upon recipient 
reporting calls for such intensive efforts. 

Although OMB has moved quickly, concerns have arisen as the reporting 
deadline looms, reflecting the uncertainty inherent in this new and 
more transparent way of working together across levels of government. 
The transparency and expectation for accountability raises the stakes, 
as issues will be visible to the public, the media, and Congress, and 
the possibility of misunderstandings related to the data reported are 
of concern to all involved. Some state representatives noted that 
conflicting responses have been provided to questions about recipient 
reporting. For example, New Jersey noted that OMB’s June 22nd guidance 
clarifies that states will not be counting indirect jobs. However, 
during the webinars, there was discussion from OMB staff that this may 
not, in fact, be the case. Duplicate reporting is another risk, 
according to Florida, because some federal agencies informed their 
state counterpart agencies that they should report information directly 
to the federal agency, in addition to, or instead of, the federal site 
for data collection. 

Concluding Observations: 

Section 1512 recipient reporting is intended to provide the public with 
an unprecedented level of transparency into how federal dollars are 
being spent and help drive accountability for the timely, prudent, and 
effective spending of recovery dollars. However, significant risks are 
inherent in the upcoming, initial round of reporting that will likely 
negatively impact the completeness, accuracy, and reliability of the 
information reported. Although OMB and the states are actively taking 
steps to mitigate these risks, the first round of recipient reporting 
will likely present many examples where improvements will be needed. We 
believe that the Section 1512 process will, by necessity, evolve with 
future improvements needed after the first round of reporting as OMB 
and RATB continue to take steps to ensure data quality and the 
efficiency of Section 1512 reporting process in subsequent quarters. 

OMB Has Taken Some Steps Related to Single Audits’ Focus and Reporting 
on the Recovery Act, but Additional Actions Are Needed: 

As we reported in both our April and July 2009 reports, effective 
internal controls over the use of Recovery Act funds are critical to 
help allow effective and efficient use of resources, compliance with 
laws and regulations, and in achieving accountability over Recovery Act 
programs. In its guidance, OMB has stated that Single Audit reports 
[Footnote 98] will serve as an important accountability mechanism for 
Recovery Act programs. 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 no later than 9 months after the end of 
the period audited. 

As we reported in April and July 2009, we are concerned that, as 
federal funding of Recovery Act programs accelerates in the next few 
months, 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. 
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 financial 
reporting packages, including the Single Audit report, to the federal 
government no later than 9 months after the end of the period being 
audited.[Footnote 99] 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. According to an HHS OIG official, 
beginning in May 2009 HHS IG adopted a policy of no longer approving 
requests for extensions of the due dates of Single Audit reporting 
package submissions. OMB staff have stated that they are evaluating the 
elimination of time extensions on the reporting package but have not 
issued any official guidance or memorandums to the agencies, OIGs, or 
federal award recipients. Our April and July 2009 reports on the 
Recovery Act 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. 

In our July 2009 report, we included a matter for congressional 
consideration pointing out that Congress is considering a legislative 
proposal 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. 

Although OMB had taken several steps through August 2009 in response to 
our recommendations, those actions did not sufficiently address the 
risks leading to our recommendations. To focus auditor risk assessments 
on Recovery Act-funded programs and to provide guidance on internal 
control reviews for Recovery Act programs, OMB was working within the 
framework defined by existing mechanisms—Circular No. A-133 and the 
Compliance Supplement. In this context, OMB made limited adjustments to 
its Single Audit guidance. 

On September 10, 2009, OMB announced a proposed pilot project that, if 
properly implemented with sufficient coverage of Recovery Act-funded 
programs, could address concerns about the timeliness of Single Audit 
reporting related to internal control weaknesses in Recovery Act 
programs. Accordingly, in our September 10, 2009, testimony for the 
Senate Homeland Security and Governmental Affairs Committee,[Footnote 
100] we recommended that the Director of OMB take steps to achieve 
sufficient participation and coverage in the pilot project that 
provides for early written communication of internal control 
deficiencies to achieve the objective of more timely accountability 
over Recovery Act funds. 

Focusing Auditors’ Program Risk Assessments on Programs with Recovery 
Act Funding: 

On May 26, OMB issued the 2009 edition of the Circular A-133 Compliance 
Supplement. The new Compliance Supplement is intended to focus auditor 
risk assessment on Recovery Act funding by, among other things, (1) 
requiring that auditors specifically ask auditees about and be alert to 
expenditure of funds provided by the Recovery Act, and (2) providing 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 they are considered low risk. It also calls for 
recipients to separately identify expenditures for Recovery Act 
programs on the Schedule of Expenditures of Federal Awards. 

On August 6, 2009, OMB issued Compliance Supplement Addendum No. 1 to 
provide additional guidance related to specific compliance requirements 
for some Recovery Act programs (Part 4 of the Addendum). This addendum 
modified the 2009 Compliance Supplement by indicating the new Recovery 
Act programs and new program clusters, providing new cross-cutting 
provisions related to the Recovery Act programs, adding compliance 
requirements for existing programs as a result of Recovery Act funding, 
and emphasizing the importance of internal controls for compliance for 
programs with Recovery Act expenditures (Part 6 of the Addendum). 

Even with the two documents issued in May and August, the 2009 
Compliance Supplement does not yet provide specific auditor guidance 
for some 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. OMB acknowledges that 
additional guidance is called for and plans to address specific 
Recovery Act-related compliance requirements in its guidance to be 
issued at the end of September 2009 and its 2010 Compliance Supplement. 

The audit approach in OMB Circular 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. Although OMB is 
using clusters for Single Audit selection to make it more likely that 
Recovery Act programs would be selected as major programs subject to 
internal control and compliance testing, the dollar formulas for 
determining major programs have not changed. This approach may not 
provide sufficient assurance that smaller, but nonetheless significant, 
Recovery Act-funded programs would be selected for audit. 

In our discussions with state audit officials, many indicated that the 
above approach would not result in a significant increase in the number 
of major programs in the fiscal year 2009 Single Audit of their states. 
However, these officials are anticipating a much larger increase in the 
number of major programs for the fiscal year 2010 Single Audit in their 
respective states as Recovery Act funding is expended. 

Steps toward More Timely Reporting on Internal Controls over Recovery 
Act-Funded Programs: 

To provide additional focus on internal control reviews, OMB’s August 6 
guidance emphasized the importance of prompt corrective action by 
management. This guidance also encouraged early communication by 
auditors to management and those charged with governance of identified 
control deficiencies related to Recovery Act funding that are, or 
likely to be, significant deficiencies or material weaknesses. Such 
early communication is intended to allow management to expedite 
corrective action and mitigate the risk of improper expenditure of 
federal awards. 

In our July 2009 report, we stated that OMB was encouraging 
communication of weaknesses to management early in the audit process 
but did not add requirements for auditors to take these actions. This 
step was insufficient and did not address our concern that internal 
controls over Recovery Act programs should be reviewed before 
significant funding is expended. Under 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. 

Auditors vary in the timing and formality of communication of internal 
control findings during the course of the audit. All of the auditors we 
interviewed indicated that they inform program management of 
deficiencies or potential deficiencies prior to the release of the 
Single Audit report. However, the auditors indicated a variety of means 
of reporting and of the anticipated level of government to which the 
reports will be made. One state audit office indicated that it plans to 
release interim reports on internal control to the governor, state 
legislature, and the heads of agencies responsible for administering 
Recovery Act funding. Several state auditors said they release a letter 
addressing internal control issues, including management responses to 
findings, after completion of audit fieldwork but before the release of 
the Single Audit report. Others said that the main means of early 
communication of audit findings was through verbal comments by auditors 
to program management. 

Under the proposed pilot project announced by OMB on September 10, 
2009, a limited number of voluntarily participating auditors performing 
the Single Audits for states would communicate in writing internal 
control deficiencies noted in the Single Audit within 6 months of the 
2009 fiscal year-end, rather than the 9 months required by the Single 
Audit Act. As currently envisioned, an auditor participating in the 
pilot would formally report internal control deficiencies identified in 
the course of the Single Audit to state and federal officials within 6 
months of the end of the audited entity’s fiscal year in order to 
achieve more timely accountability for selected Recovery Act-funded 
programs. Most states have a June 30 fiscal year-end; consequently, 
most of the preliminary internal control communications would be due by 
December 31, 2009. Participating auditors would be required to focus 
audit procedures on Recovery Act-funded programs in accordance with 
guidelines prescribed by OMB. OMB would offer to waive Circular A-133’s 
requirement for risk assessment and audit procedures for smaller 
programs not receiving Recovery Act funding as an inducement to 
participate. OMB plans to identify the participating auditors and the 
programs that will be included by the end of September 2009. GAO 
believes that, if the pilot is properly implemented and achieves 
sufficient coverage of Recovery Act-funded programs, it may be 
effective in addressing concerns about the timeliness of Single Audit 
reporting related to internal control weaknesses in Recovery Act 
programs. The pilot is, however, still in its early stages and many 
surrounding issues are yet to be resolved. It is important to note that 
the pilot project is dependent on voluntary participation, which could 
impact OMB’s ability to achieve sufficient scope and coverage for the 
project to meet its objectives. 

Providing Relief to Balance Expected Increased Workload: 

While OMB has noted the increased responsibilities falling on those 
responsible for performing Single Audits, it has not issued any 
proposals or plans to address this recommendation to date. Many state 
audit officials we talked with told us their offices have experienced 
severe cutbacks in staff, and several have multiple furlough days for 
all staff. 

States and auditors volunteering to participate in OMB’s proposed pilot 
program will be granted some relief in the workload because the auditor 
will not be required to perform 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. In addition, OMB has 
indicated that additional relief may be granted to participants for 
low-risk programs not receiving Recovery Act funds. 

Congress is currently considering a bill that could provide some 
financial relief to auditors lacking the staff capacity necessary to 
handle the increased audit responsibilities associated with the 
Recovery Act. S. 1064, which is currently before the Senate Committee 
on Homeland Security and Governmental Affairs, and its companion bill 
that was passed by the House, H.R. 2182, would amend the Recovery Act 
to provide for enhanced state and local oversight of activities 
conducted pursuant to the act. One key provision of the legislation 
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. In its 
current form, this does not specifically address audit funding needs. 

Conclusions: 

Although OMB has taken some steps in response to our recommendations, 
significant uncertainties exist regarding the scope of the pilot 
project and its effectiveness as an accountability mechanism for 
reporting on internal controls over Recovery Act programs. Therefore, 
we are repeating our recommendation from our September 10, 2009, 
testimony that the Director of OMB take steps to achieve sufficient 
participation and coverage in the pilot project that provides early 
written communication of internal control deficiencies to achieve the 
objective of more timely accountability over Recovery Act funds. 

Recommendations: 

Accountability and Transparency: 

To leverage Single Audits as an effective oversight tool for Recovery 
Act programs, the Director of OMB should: 

* 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;

* 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;

* evaluate options for providing relief related to audit requirements 
for low-risk programs to balance new audit responsibilities associated 
with the Recovery Act;

* develop mechanisms to help fund the additional Single Audit costs and 
efforts for auditing Recovery Act programs; and

* take steps to achieve sufficient participation and coverage in the 
Single Audit pilot program that provides for early written 
communication of internal control deficiencies to achieve the objective 
of more timely accountability over Recovery Act funds.

To reduce the impact of untimely Single Audit reporting, the Director 
of OMB should: 

* Formally advise federal cognizant agencies to adopt a policy of no 
longer approving extensions of the due dates of single audit reporting 
package submissions beyond the nine month deadline, and 

* Widely communicate this revised policy to the state audit community 
and others who have responsibility for the conducting single audits and 
submitting the single audit reporting package.

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, in 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 the grantee’s fiscal year—far too late to preemptively 
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 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.

States Face Actual and Looming Revenue Shortfalls Cushioned by Recovery 
Act Funding: 

Since our July report, state revenues continued to decline and state 
budget officials anticipated continued fiscal stress cushioned by the 
temporary infusion of Recovery Act funds. Seven of the 16 selected 
states completed their fiscal year 2010 budgets since our July report 
and one state, Pennsylvania, continued to work toward agreement on the 
fiscal year 2010 budget even though its fiscal year began July 1. 
[Footnote 101] In addition, Michigan and the District continue to 
negotiate their budgets in anticipation of fiscal years beginning 
October 1.[Footnote 102] Some state budget officials also reported 
their use or planned use of reserve or rainy-day funds since our July 
report. State budget officials also discussed actions planned and taken 
to recover central administrative costs related to Recovery Act 
oversight implementation. Officials in some states told us they had or 
plan to seek reimbursement of their central administrative costs 
through methods outlined in OMB guidance, while officials in one state 
plan to absorb these costs. 

Many of the selected states and the District continued to experience 
steep declines in revenue. For example, officials in Michigan’s 
Economic Recovery Office said that in each month since our July report, 
revenue collections dropped below already declining state projections, 
thus creating the potential for a $2 billion budget shortfall by the 
end of the current fiscal year—which in Michigan ends September 30, 
2009. Officials from Michigan’s House Fiscal Agency estimate that the 
state’s general fund revenues for the upcoming fiscal year may fall to 
levels not seen since the 1960’s (after adjusting for inflation). In 
New York the use of Recovery Act funds, as well as other measures, had 
already addressed a $20.1 billion budget gap for fiscal years 2008-2009 
and 2009-2010. Continued declining revenues have now contributed to an 
anticipated $2.1 billion budget shortfall by the end of the first 
quarter of the current fiscal year. According to New York officials, 
the state’s growing budget gap is due almost entirely to a reduction in 
state revenues. Officials in the Ohio Governor’s Office also said they 
had revised revenue estimates. According to state officials, Ohio’s 
revenue projections are nearly 6.5 percent below the amount included in 
the first budget submission developed for the current fiscal year just 
seven months ago in February 2009. Budget officials in Colorado 
responded to the current fiscal situation by asking most state agencies 
to submit revised fiscal year 2009-2010 budgets reflecting a ten 
percent reduction in expenditures from the appropriated levels. Georgia 
took similar steps and began fiscal year 2010 with a five percent 
withholding for all state agencies. Georgia budget officials are now 
asking agencies to submit budget reduction plans of four, six, and 
eight percent for the amended fiscal year 2010 and fiscal year 2011 
budgets. New Jersey officials reported that projected base income and 
corporate tax revenues for fiscal year 2010 will likely come in less 
than the actual fiscal year 2005 collections for those taxes. 
Preliminary projections by California’s Department of Finance indicated 
that the state’s revenues could continue to deteriorate and result in a 
$7 billion shortfall during the current fiscal year, with potentially 
greater shortfalls in future years. California’s Legislative Analyst’s 
Office also expects the state will have cash flow deficits for the next 
three to five years.

At least two states, Ohio and Florida, have plans for new revenue 
sources to address declining tax receipts. Ohio’s enacted budget relies 
on a new revenue source—proceeds from new video lottery terminals, 
while Florida officials expect cigarette surcharges, motor vehicle 
fees, and court fees to produce more than $2 billion in new revenues. 

Officials in Illinois, Florida and Texas said they were somewhat 
optimistic that an economic recovery would produce increased revenues 
later in the current fiscal year or beginning in 2011. Officials from 
Illinois anticipated that the state will enact legislation that will 
increase tax revenues and provide the fiscal support necessary to 
transition into fiscal year 2011 without the need for additional fiscal 
stabilization funds from the Recovery Act. However, officials from many 
states did not share this outlook, and instead reported that they 
foresee continued revenue declines. In a few states, such as Arizona 
and Colorado, officials also projected increases in expenditures. 
Colorado officials, for example, anticipate that fiscal year 2011 will 
be, in their words, “brutal,” resulting in additional budget cuts, 
while expenditures associated with Medicaid, corrections facilities, 
and higher educational enrollments are expected to increase. 

All of the selected states and the District have at least one rainy day 
or reserve fund and, as reported in our April and July reports, states 
continued to use these reserve funds to address declining revenues. 
More than half of the 16 selected states used their rainy-day or 
reserve funds to address budget shortfalls in either fiscal year 2009, 
2010 or both. For example, officials in Massachusetts used $1.39 
billion in state rainy-day funds to help stabilize the state’s budget 
during fiscal year 2009, and state officials anticipate using $214 
million in rainy-day funds in fiscal year 2010. This would leave 
Massachusetts’ rainy-day fund with a projected balance of $571 million 
at the end of fiscal year 2010. According to budget officials in a few 
states it is too soon to tell whether their revenue shortfalls will 
require them to tap into their reserve funds, sometimes for a second 
time, for their current fiscal year. New York and Texas, as well as the 
District of Columbia, specifically decided not to use their rainy-day 
funds to fill budget gaps—in fiscal year 2009-2010 for New York, in 
fiscal years 2009-2010 and 2010-2011 for the District or in biennium 
2010-2011 for Texas. The reasons for this decision varied—the District, 
for example, chose not to use the reserves because according to 
officials, local law requires repayment within a short time frame. The 
Texas Governor’s Office explained that it did not anticipate a need to 
use the rainy-day fund in their fiscal year 2010-2011 budget, adding 
that the fund is not a readily available option because approval for 
its use requires a supermajority vote of the state legislature. 
Arizona, Ohio, Florida, Michigan, and New Jersey have depleted, or 
nearly depleted, their formal rainy-day funds. However, while New 
Jersey used its entire rainy-day reserve to help close a $735 million 
budget gap for fiscal year 2009, the state also plans to set aside $500 
million for fiscal year 2010. New Jersey state budget officials 
explained that rather than continue to fund their rainy-day fund, which 
has restricted uses, they plan to maintain the $500 million in a “free 
balance” account that budget officials can use for any purpose without 
restrictions. 

States Expressed Concerns Regarding the Feasibility of Recovering 
Central Administrative Costs and Have Proposed Alternate Methods: 

States recover administrative costs for federal grant programs pursuant 
to OMB Circular A-87 guidelines.[Footnote 103[ OMB also issued 
Memorandum 09-18 which applies A-87 guidelines to recouping central 
administrative costs related to Recovery Act programs.[Footnote 104] 
States generally recover central administrative costs associated with 
federal grant programs, including the Recovery Act, after expenses are 
incurred.[Footnote 105] OMB guidance does not provide additional funds 
for these costs, rather, it permits central costs to be recovered from 
program funds. To recover administrative costs, states submit a State- 
Wide Cost Allocation Plan (SWCAP)[Footnote 106] annually to the 
Division of Cost Allocation (DCA) of the U.S. Department of Health and 
Human Services (HHS). With respect to Recovery Act central 
administrative costs, states are expected to update their SWCAP to 
include the costs of administering Recovery Act programs, as indicated 
in OMB Memorandum M-09-18. The OMB memorandum indicates that states can 
recover central administrative costs up to 0.5 percent of the total 
Recovery Act funds received by the state.

The guidance also identifies two alternatives by which states can 
recover central administrative costs for Recovery Act programs.

* Allocated cost method: States can use budgeted or estimated costs for 
Recovery Act administrative costs in the SWCAP submission, and costs 
must not total more than 0.5 percent of total Recovery Act funds 
received by the state. States must justify the services billed and the 
basis for the amounts estimated. Reconciliation between actual costs 
and claimed costs will be adjusted in the subsequent year review of the 
SWCAP by HHS.

* Billed services method: States can submit a methodology for 
identifying, recording, and charging administrative costs within the 
SWCAP and must detail the services provided and billing rates. Once 
approved, the methodology can be used to charge administrative program 
costs to state agencies that would recover these costs through billing 
the Recovery Act programs. Costs must not total more than 0.5 percent 
of total Recovery Act funds received by the state. 

As shown in table 18, nine states and the District reported that they 
are moving forward with the administrative cost recovery process 
described in the OMB guidance. One state reported plans to absorb 
administrative costs. Iowa officials reported that the state had to 
absorb administrative costs because Recovery Act funds had already been 
allocated to programs through the state budget process and it was not 
possible to re-allocate funds for administrative purposes without state 
legislative approval. At least four states, Florida, Illinois, New 
York, and North Carolina are undecided about what they will do while 
four states, Arizona, California, Colorado, and Massachusetts have 
proposed alternative methods to HHS, discussed later in this section.

Table 18: State Approaches to Recouping Recovery Act Administrative 
Costs: 

Using OMB alternatives: 
Arizona; 
District of Columbia; 
Colorado; 
Georgia; 
Massachusetts; 
Michigan; 
New Jersey; 
Ohio; 
Pennsylvania; 
Texas. 

Absorbing costs: 
Iowa. 

Undecided: 
Florida; 
Illinois; 
New York; 
North Carolina. 

Proposing alternative to OMB methods: Arizona; 
California; 
Colorado; 
Massachusetts. 

Source: GAO analysis of interviews with state officials. 

Note: Some state officials indicated they are utilizing more than one 
approach for example, using OMB alternatives and proposing alternative 
methods to HHS, therefore they are identified in the table in both 
categories. 

[End of table] 

Due to state officials’ uncertainty regarding the central 
administrative cost recovery methods outlined in OMB’s initial 
guidance, at least two states, Massachusetts and California, had 
concerns regarding which Recovery Act programs could be billed or 
charged to cover central administrative activities such as oversight 
and reporting. For instance, state officials said it was unclear 
whether some programs, such as Medicaid FMAP or competitive grant 
awards, could contribute toward the funding of these central 
administrative activities. OMB subsequently issued a FAQ on its Web 
site to clarify the process for recovering administrative costs. 
[Footnote 107] This FAQ clarifies that all Recovery Act funds coming to 
the state as a prime recipient are eligible to be charged for central 
administrative costs unless otherwise subject to specific limitations 
or restrictions on central administrative cost recovery.[Footnote 108] 
However, the FAQ does not explicitly state which programs are excluded 
when calculating the 0.5 percent for central administrative costs for 
Recovery Act programs. 

NASACT submitted a Proposal to Allow Waivers of Some Provisions of the 
SWCAP Process on Behalf of States; HHS Final Approval is Dependent on 
OMB: 

The National Association of State Auditors, Comptrollers, and 
Treasurers (NASACT) wrote a letter to OMB on August 7 to clarify 
states’ responsibilities and propose a waiver of certain requirements 
of OMB Circular A-87, which governs the SWCAP process.[Footnote 109] 
NASACT outlined two proposals. First, NASACT proposed waiving the 
requirement that states must depreciate equipment over the life of the 
equipment.[Footnote 110] Second, NASACT proposed waiving the 
requirement that reimbursement be after the funds are expended rather 
than prior to the expenditures. As stated in the letter, Recovery Act 
capital assets are needed primarily to fulfill reporting and compliance 
with Recovery Act mandates. NASACT’s concern is that Recovery Act 
assets, primarily information technology, are needed for the Recovery 
Act period, which is shorter than the depreciation life cycle for these 
assets. In addition, according to the letter, Recovery Act funds have a 
substantial impact on state budgets and require a commitment of 
additional state resources for oversight and implementation. Timely 
reimbursement for these administrative costs is particularly essential 
for states during a time of fiscal stress. At least four of the states 
we spoke with—Arizona, California, Colorado, and Massachusetts— 
expressed support for these proposals. Arizona and California were 
concerned that they would not be able to recover the full costs of 
depreciable equipment dedicated to Recovery Act purposes, since the 
equipment is expected to last longer than is needed for Recovery Act 
reporting periods. Many states, Arizona, California, Colorado, 
Illinois, Massachusetts, Mississippi, New York and Texas, also 
expressed frustration with using the traditional cost allocation 
method, whereby states estimate costs for each type of administrative 
cost using a separate methodology for each. California and 
Massachusetts proposed two alternate cost allocation methods to allow 
states to estimate costs and reconcile the differences later, and to 
allow states to allocate based on budget, respectively. Massachusetts’ 
proposal, which mirrors the NASACT proposal, was submitted as part of 
its SWCAP addendum. State officials told us that HHS gave provisional 
approval of the proposal but stated that final approval is contingent 
on OMB approval of the waiver requested by NASACT. HHS is designated by 
OMB as the cognizant federal agency for reviewing, negotiating and 
approving cost allocation plans. According to HHS officials, HHS does 
not have the authority to grant Recovery Act central administrative 
cost waivers which are covered by OMB memorandums and circulars. OMB 
staff said they are continuing to review the NASACT waiver request. 

Concluding Observation and Recommendation: 

Administrative cost reimbursement proposals: State fiscal relief is one 
of the purposes of the Recovery Act. During a time when states are 
grappling with unprecedented levels of declining state revenues and 
fiscal stress, states continue to seek relief from additional pressures 
created by requirements to implement and comply with the Recovery Act. 
States play a central role in the prudent, timely and transparent 
expenditure of Recovery Act funds. To fulfill this role properly, 
states often take on additional fiscal and administrative burdens. 
These additional costs can exacerbate states’ existing fiscal stress. 
Therefore it is critical for state governments to quickly and 
effectively build the necessary capacities to meet their reporting 
requirements and responsibilities under the Recovery Act. In order to 
achieve the delicate balance between robust oversight and the smooth 
flow of funds to Recovery Act programs, states may need timely 
reimbursement for these activities.

Recommendation: To the extent that the Director of OMB has the 
authority to consider mechanisms to provide additional flexibilities to 
support state and local officials charged with carrying out Recovery 
Act responsibilities, it is important to expedite consideration of 
alternative administrative cost reimbursement proposals.

Crosscutting Recommendations: 

In addition to the cross-cutting recommendations to the Office of 
Management and Budget that follow, we have made recommendations to the 
Secretaries of Education, Housing and Urban Development, Labor, and 
Transportation within the body of the report. Recommendations are for 
Education’s State Fiscal Stabilization Fund; HUD’s Public Housing 
Capital Fund; Labor’s Workforce Investment Act (WIA) Youth Program; and 
Transportation’s Transit Capital Assistance and federal highways 
programs. The discussion on federal highways also includes an earlier 
recommendation on highway projects in economically distressed areas 
that has been implemented since our last report.

Accountability and Transparency: 

Recipients of Recovery Act funding face a number of implementation 
challenges. 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 ensure transparency and accountability over the use of Recovery Act 
funds. 

Recipient financial tracking and 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 “ 
prime recipients may delegate certain reporting requirements to 
subrecipients.” Either the prime or subrecipient must report the D-U-N- 
S number (or an acceptable alternative) for any vendor or subrecipient 
receiving payments greater than $25,000. In addition, the prime 
recipient must report what was purchased and the amount, as well as a 
total number and amount for subawards of less than $25,000. By 
reporting the D-U-N-S 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) requirements. Like 
the Recovery Act, the FFATA requires a publicly available Web site— 
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. 

These concerns also pertain to recipient financial reporting and its 
federal reporting vehicle, [hyperlink, 
http://www.federalreporting.gov]. OMB guidance does not explicitly 
mandate a methodology for conducting quality reviews. Rather, federal 
agencies are directed to identify material omissions and significant 
reporting errors 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. 

Recommendation: In our July 2009 report we recommended that 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. 

Status of recommendation: Although OMB clarified that the prime 
recipient is responsible for [hyperlink, 
http://www.federalreporting.gov] data in its June 22 guidance, no 
statement of assurance or certification will be required of prime 
recipients on the quality of subrecipient data. Moreover, federal 
agencies are expected to perform data quality checks, but they are not 
required to certify or approve data for publication. We continue to 
believe that there needs to be clearer accountability for the data 
submitted and during the subsequent federal review process. 

Agency comments and our evaluation: OMB agreed with the recommendation 
in concept but questioned the cost/benefit of data certification given 
the tight reporting time frames for recipients and federal agency 
reviewers. OMB staff stated that grant recipients are already expected 
to comply with data requirements appropriate to the terms and 
conditions of a grant. Furthermore, OMB will be monitoring the results 
of the quarterly recipient reports for data quality issues and would 
want to determine whether these issues are persistent problems before 
concluding that certification is needed. 

We agree that OMB will need time to assess the data quality of 
recipient reports and that what it proposes to do is an important first 
step. We also recognize that there may be more than one way to ensure 
data quality and that a global requirement may not be the best 
approach. We will continue to monitor the situation. 

Reporting on Impact: 

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 as required by Section 
1512 of the Recovery Act. In addition to statutory requirements OMB has 
directed federal agencies to collect performance information and to 
assess program accomplishments. 

Section 1512 recipient reporting: 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. The unprecedented public disclosure on 
the use of these funds required by the act and the expectation that 
information will be updated quarterly to the federal government through 
a newly created system, [hyperlink, http://www.federalreporting.gov], 
have raised concerns for reporting officials. 

Recommendation: In our July 2009 report, we recommend that OMB work 
with federal agencies to provide program-specific examples to increase 
reporting consistency and to seek opportunities to educate state and 
local officials through Web- or telephone-based information sessions. 
Finally, we recommended that OMB and federal agencies clarify which new 
or existing performance measures should be used and data collected to 
demonstrate the impact of Recovery Act funding.[Footnote 111] 

Status of recommendation: In recent weeks, federal agencies have issued 
guidance that expands on the OMB June 22 governmentwide recipient 
reporting guidance and provided education and training opportunities 
for state and local program officials. Agency-specific guidance 
includes frequently asked questions—FAQs—and tip sheets. Additionally, 
agencies are expected to provide examples of recipient reports for 
their programs, which is consistent with what we recommended. We have 
not yet assessed the sufficiency of this additional guidance. 

In addition to the federal agency efforts, OMB has issued FAQs on 
Recovery Act reporting requirements. The June 22 guidance and 
subsequent actions by OMB are responsive to much of what we said in our 
April 2009 report. OMB is also preparing to deploy regional federal 
employees to serve as liaisons to state and local recipients in large 
population centers. The objective is to provide on-site assistance and, 
as necessary, direct questions to appropriate federal officials in 
Washington, D.C. OMB plans to establish a call center for entities that 
do not have an on-site federal liaison.

Communications and Guidance: 

Since enactment of the Recovery Act in February 2009, OMB has issued 
three sets of guidance—on February 18, April 3, and June 22, 2009 
[Footnote 112]—to, among other things, assist recipients of federal 
Recovery Act funds in complying with reporting requirements. OMB plans 
to respond as needed to questions that arise through FAQs and other 
forms of communication, including outreach efforts with the Recovery 
Accountability and Transparency Board for the first quarterly recipient 
report. Federal agencies are responsible for program-specific Recovery 
Act guidance.

Funding notification 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 midcourse 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 longer range timeline that gives some structure to states’ 
and localities’ planning efforts. 

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 recommendation: OMB has made important progress in notifying 
recipients when Recovery Act funds are available, communicating the 
status of these funds at the federal level through agency Weekly 
Financial Activity reports, and disseminating Recovery Act guidance 
broadly while actively seeking public and stakeholder input. Beginning 
August 28, OMB has taken the additional step of requiring federal 
agencies to notify recovery coordinators in states, the District of 
Columbia, commonwealths, and territories within 48 hours of an award to 
a grantee or contractor in their jurisdiction. This latest effort may 
provide the real-time notification we recommend. We will continue to 
monitor the situation and will report on the effectiveness of OMB’s 
approach in a future report. 

We continue to recommend the addition of a master schedule for 
anticipated new or revised federal Recovery Act program guidance and a 
more structured, centralized approach to making this information 
available, such as what is provided at [hyperlink, 
http://www.recovery.gov] on recipient reporting.

We are sending copies of this report to the Office of Management and 
Budget and to the Departments of Education, Labor, Housing and Urban 
Development, and Transportation. In addition, we are sending sections 
of the report to the officials in the 16 states and the District 
covered in our review. The report will 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: 

Addressees: 

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 of 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 113] 

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 168 localities during July and August 
2009.[Footnote 114] 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 earlier bimonthly reports, 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; the Transit Capital Assistance 
Program, and the Weatherization Assistance Program. We also reviewed 
how Recovery Act funds are being used by states to stabilize their 
budgets. In addition, we analyzed [hyperlink, http://www.recovery.gov] 
data on federal spending.

Medicaid Federal Medical Assistance Percentage: 

For the increased FMAP grant awards, we obtained increased FMAP draw 
down figures for each state in our sample and the District from the 
Centers for Medicare & Medicaid Services (CMS). To examine Medicaid 
enrollment, changes to states’ Medicaid programs, states’ efforts to 
comply with the provisions of the Recovery Act, and related 
information, we relied on our web-based inquiry, asking the 16 states 
and the District to provide new information as well as to update 
information they had previously provided to us. We also spoke with CMS 
officials regarding CMS oversight of increased FMAP grant awards and 
funds drawn down by states, and guidance to states on Recovery Act 
provisions.

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, reimbursements, 
and types of projects funded with Recovery Act highway infrastructure 
funds nationally and for the District and each of the 16 states 
selected for our last Recovery Act report. From state DOT officials, we 
obtained information on the status of projects and contracts, including 
the number of projects planned, out for bid, awarded and completed. We 
interviewed contracting and state highway officials for two highway 
projects in each selected state, and collected information to assess 
how states manage and oversee the significant additional amounts of 
funding they receive for Recovery Act projects. 

We interviewed officials from departments of transportation and 
metropolitan planning organizations in four states—Arizona, 
Massachusetts, New Jersey, and Ohio—to determine what plans the states 
have for using Recovery Act funds in metropolitan areas. We selected 
these four states because they had the lowest obligation rates for 
suballocated areas among the states we reviewed. To obtain information 
on the designation of Economically Distressed Areas, we interviewed 
officials from the U.S. Department of Transportation and the Economic 
Development Administration (EDA) within the U.S. Department of Commerce.

SFSF, ESEA Title I, and IDEA: 

To understand how the U.S. Department of Education (Education) is 
implementing SFSF, ESEA Title I, and IDEA under the Recovery Act and 
monitoring states’ use of Recovery Act funds, we reviewed relevant 
laws, guidance, and communications to the states and interviewed 
Education officials. For SFSF, Title I, and IDEA, we obtained data from 
Education on the amount of funds made available to the 16 states and 
the District of Columbia covered by our review and the amount of funds 
these states have drawn down from their accounts with Education. Also, 
from these states we obtained data on local education agencies’ (LEAs) 
expenditures of SFSF, Title I, and IDEA Recovery Act funds. To learn 
about expenditures of SFSF funds by institutions of higher education 
(IHEs), we obtained expenditure data from 6 states covered by our 
review— Arizona, Colorado, Illinois, Iowa, North Carolina, and Ohio. We 
reviewed relevant documents, spoke with state officials, or visited 
local areas to learn about specific issues related to Recovery Act 
funds for education programs in Arizona, California, Colorado, the 
District of Columbia, Illinois, Iowa, Massachusetts, Mississippi, New 
Jersey, North Carolina, and Ohio.

WIA: 

We reviewed the Recovery Act-funded WIA Youth program in 10 of our 16 
states (California, Florida, Georgia, Illinois, Massachusetts, 
Michigan, New York, Ohio, Pennsylvania, and Texas). We primarily 
focused on the results of local efforts to provide summer youth 
employment activities. To learn about program implementation and 
operation, the use and oversight of funds, and the challenges faced, we 
interviewed local workforce development officials in all 10 states for 
a total of 21 local areas. We also designed and implemented an email 
survey to gather information about state expenditures and spending 
targets, the number of expected and actual participants and their 
characteristics, monitoring activities and safeguards, and the 
measurement of post-program outcomes related to WIA summer youth work 
activities. We sent our survey to state workforce development officials 
in all 10 states and achieved a 100 percent response rate. We obtained 
and reviewed state portions of monitoring plans. We also reviewed 
relevant documents obtained from state and local officials. In 
addition, we supplemented our work in the 10 states by analyzing 
national data on the characteristics of youth participating in Recovery 
Act-funded WIA youth activities and the extent to which funds have been 
drawn down. We also 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 Control System (ELOCCS) on the amount of Recovery Act funds that 
have been obligated and drawn down by each housing agency in the 
country, and calculated rates of obligating and drawing down funds 
using these data. We reviewed statements made by officials at selected 
housing agencies during earlier interviews with GAO and the plans for 
Recovery Act funds submitted to HUD by selected housing agencies in 
order to understand the nature of Recovery Act projects and to help 
explain patterns in rates of obligating and drawing down Recovery Act 
funds. To obtain the current status of HUD’s Capital Fund Recovery 
Competition, we interviewed agency officials and analyzed data on 
number of applications available on HUD’s web site. We also reviewed 
agency documents, laws, and regulations applicable to the competition. 
To learn about HUD’s initiatives on recipient reporting, we interviewed 
knowledgeable officials about the Department’s plans to develop 
reporting solutions to enable Recovery Act grant recipients to meet the 
requirements of the law. To gain knowledge of reporting requirements, 
we reviewed relevant documentation on recipient reporting from the 
Office of Management and Budget. We also interviewed officials from 
public housing industry groups to get their views on the competitive 
grant application process and the recipient reporting requirements. We 
obtained information from HUD’s Monitoring and Planning System (MAPS) 
as of June 10, 2009 to identify housing agencies with open Single Audit 
findings and determine the amount of Recovery Act funds that have been 
allocated to such housing agencies. We also interviewed HUD officials 
to understand their procedures for monitoring housing agency use of 
Recovery Act funds and identify specific actions that are being taken 
to close open findings. 

We assessed the reliability of the data by (1) interviewing agency 
officials knowledgeable about the data, and (2) examining data elements 
used in our work by comparing actual with anticipated values and with 
published data. For the ELOCCS data, we obtained explanations on 
inconsistencies we found in the data from agency officials. For the 
MAPS data, we obtained written explanations of the procedures HUD 
undertakes to determine the accuracy of the data. We determined that 
the data were sufficiently reliable for the purposes of this report.

Transit Capital Assistance Program: 

For Recovery Act public transit investment, we focused on the Federal 
Transit Administration’s (FTA) Transit Capital Assistance Program. 
Based on Recovery Act funds apportioned to urbanized and nonurbanized 
areas, we chose to focus our work on a geographically dispersed mix of 
urbanized and nonurbanized areas in eight states—California, Colorado, 
Georgia, Illinois, Massachusetts, New Jersey, New York, and 
Pennsylvania—and the District of Columbia. We reviewed status reports 
and guidance to the states and discussed these with U.S. Department of 
Transportation (DOT) and FTA officials. To determine the current status 
of transit funding, we obtained data from FTA on obligations and 
unobligated balances for Recovery Act grants nationally and for each of 
our selected urbanized and nonurbanized areas, and the numbers and 
types of projects funded. We reviewed information from selected 
urbanized and nonurbanized areas to include how projects were chosen, 
how funds were used and how progress was reported and we compared that 
to project schedules and milestones, when available. To determine how 
transit agencies and states are ensuring the accountability of funds 
and addressing reporting requirements, we reviewed the guidance each 
state uses to meet reporting requirements, including reporting on 
project status, subcontracts and estimated jobs created.

Weatherization Assistance Program: 

For the Weatherization Assistance Program, we reviewed relevant 
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 collected information from 14 
states. We conducted semi-structured interviews of officials in the 
states’ energy agencies that administer the weatherization program. We 
collected data about each state’s total allocation for weatherization 
under the Recovery Act, as well as the allocation already provided to 
the states. We asked DOE officials about the status of state energy 
plan reviews and met with Department of Labor officials to discuss the 
status of their prevailing wage survey for weatherization workers. 
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 further understand how states and the District continue to use 
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. We interviewed state budget and legislative 
officials to determine how states are using Recovery Act funds to avoid 
reductions in essential services, using “rainy day” funds, closing 
budget gaps and developing exit strategies to plan for the end of 
Recovery Act funding. In addition, we interviewed state and federal 
officials and analyzed relevant federal guidance to determine how 
states and the District are recouping Recovery Act centralized 
administrative overhead costs.

Assessing Safeguards and Internal Controls: 

To determine how states are planning for the recipient reporting 
requirements of the Recovery Act, the teams for the 16 states and the 
District asked cognizant officials to describe the responsibility for 
recipient reporting, guidance that has been issued to state agencies 
and subrecipients, monitoring plans, and policies and procedures that 
have been developed for recipient reporting. We also reviewed relevant 
recipient reporting guidance issued by OMB. For single audit, we 
reviewed the OMB guidance and discussed with relevant OMB staff the 
Single Audit reports and guidance. We also discussed Single Audit risks 
and review of early design of internal control with State Auditors. In 
addition, we analyzed how OMB was addressing the recommendations 
related to the Single Audit in the April and July 2009 Recovery Act 
reports.

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 
information. We collected data on states’ and localities’ uses and 
tracking of Recovery Act funds during interviews and follow-up meetings 
with state officials. Based on our limited examination of this 
information thus far, 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 July 3rd, 2009, to September 
18th, 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 Department of Labor: 

U.S. Department of Labor: 
Assistant Secretary for Employment and Training: Washington, D.C. 
20210: 

September 18 2009: 

Mr. J. Christopher Mihm: 
Managing Director for Strategic Issues: U.S. Government Accountability 
Office: 441 G. Street, N.W. 
Washington, D.C. 20548: 

Dear Mr. Mihm: 

Thank you for the opportunity to review and comment on the section 
pertaining to Workforce Investment Act (WIA) Youth summer employment 
activities from the Government Accountability Office (GAO)'s September 
2009 bi-monthly draft report on the American Recovery Act and 
Reinvestment Act (Recovery Act). 

The U.S. Department of Labor (the Department) has two key roles in the 
Recovery Act effort: providing worker training for the jobs created or 
saved; and easing the burden of the recession on workers and employers 
by providing extended and expanded unemployment benefits and assisting 
and educating them regarding expanded access to continued health 
benefits. The Department received $44.9 billion, of which $1.2 billion 
was designated to provide funds for Workforce Investment Act (WIA) 
youth activities, including summer youth employment. 

Although the Department's timeframe to review and draft a response to 
the draft report was limited, the Department has done its best to 
complete its initial review and provide thoughtful responses to GAO's 
two recommendations. 

GAO made two recommendations in this report: 

To better support state and local efforts to provide youth with 
employment and training in green jobs, the Secretary of Labor should 
provide additional guidance about the nature of these jobs and the 
strategies that could be used to prepare youth for careers in green 
industries. 

To enhance the usefulness of data on work readiness outcomes, the 
Secretary of Labor should provide additional guidance on how to measure 
work readiness of youth, with a goal of improving the comparability and 
rigor of the measure. 

The Department of Labor agrees with both of these recommendations. In 
response to the recommendation to provide additional guidance on green 
jobs, the Department recognizes the need to provide assistance to 
states and local workforce areas to assist them in preparing youth for 
careers in green industries. In addition to continuing to work to 
support the state and local workforce system through guidance and 
technical assistance, the Department has several significant efforts 
underway. 

Directly related to WIA Youth, the Department currently is planning two 
Recovery Act WIA Youth technical assistance forums in November and 
December of 2009. A primary focus of these forums will be preparing 
youth for careers in green industries and identifying the necessary 
training and appropriate work experiences to assist youth in green 
career pathways. 

In addition, the Department of Labor's Bureau of Labor Statistics (BLS) 
is developing a definition for green sectors and green jobs that will 
inform state and local workforce development efforts to identify and 
target the green jobs and their training needs. The Department also has 
supported occupational research that begins to: define green jobs; 
review industry sectors impacted by green investments; and gain a 
better understanding about how new, green technologies and materials 
will affect various occupational requirements. The Department has 
funded the Occupational Information Network (O*NET) project which 
produced a research paper titled, Greening of the World of Work: 
Implications for O*NET-SOC and New and Emerging Occupations. This study 
reflects three general categories of occupations, based on different 
consequences of green economy activities and technologies: (1) existing 
occupations expected to experience primarily an increase in employment 
demand; (2) existing occupations with significant change to the work 
and worker requirements; and (3) new and emerging green occupations. 
The Department hopes that this research will be used as a starting 
point for identifying green industries and occupations and informing 
the development of training and job placement programs. 

Finally, the Recovery Act provided the Department of Labor with $500 
million to prepare workers to pursue careers in energy efficiency and 
renewable industries. On June 24, 2009, Secretary Solis announced five 
grant competitions which made funds available for research, labor 
exchange and job training projects. One of these competitive 
opportunities, the State Labor Market Information Improvement Grants, 
will fund state workforce agencies to collect, analyze and disseminate 
labor market information to educate individuals about careers in green 
industries. Sponsored by the Department, the green jobs research 
conducted by state workforce agencies and consortia of these agencies 
will provide valuable resources for the delivery of services to youth 
(and others) along green career pathways. Further, through additional 
competitive grant opportunities, funded through both the Recovery Act 
and the proposed FY 2010 Green Jobs Innovation Fund, the Department 
will provide green job training to individuals 18 and over. The 
Department will evaluate these experiences, gather examples and models 
from different grantees, and share what works through technical 
assistance efforts. 

In response to GAO's recommendation on the work readiness measure, the 
Department recognizes that the flexibility provided by the Department's 
guidance for measuring work readiness leads to a lack of consistency 
among states in how the attainment of work readiness skills is 
measured. Given the short time frame to implement summer employment 
under the Recovery Act, the Department opted to remain consistent with 
the definition of a work readiness skill gain as measured under the WIA 
skill attainment rate. This current definition provides a framework for 
measuring work readiness, but allows for state and/or local flexibility 
in assessment instruments and what constitutes a gain so as not to 
create an additional burden on states and local areas. While the work 
readiness indicator is meaningful in a specific local area, it becomes 
less meaningful at the state and national level due to the lack of 
comparability. 

Through its WIA Youth Recovery Act process evaluation and through 
regional monitoring visits, the Department currently is assessing the 
methodologies used this summer to measure work readiness. Based on the 
information gathered, the Department plans to further refine the work 
readiness indicator and determine a more effective way of measuring 
work readiness. In the event that a significant number of local areas 
have Recovery Act finds available for summer employment in 2010, or if 
the Department receives funds for future summer employment activities 
where the work readiness measure is used to assess the effectiveness of 
summer employment, the Department will issue further guidance for 
measuring work readiness that allows for the reporting of more 
consistent and meaningful data. In either case, the Department will 
provide technical assistance to states and local areas on effective 
ways to measure work readiness based on the information learned this 
summer and further research on best practices. 

GAO's report asserts that "...flexibilities given to states and local 
areas in how they measure work readiness...provide little understanding 
of what the program actually achieved." While the Department 
acknowledges that the work readiness measure, when aggregated at the 
national level, limits comparability, the Department believes the work 
readiness indicator does offer valuable data on the achievement of work 
readiness skills gained at the local level. The Department recommends 
qualifying the finding to state that the while the measure provides 
challenges with comparability at the national level, it is meaningful 
at the local level. 

If you would like additional information, please do not hesitate to 
call me at (202) 693-2700. 

Sincerely, 

Signed by: 

Jane Oates: 
Assistant Secretary: 

[End of section] 

Appendix III: Local Entities Visited by GAO in Selected States and the 
District of Columbia: 

Table 19: Location of Highway Projects Visited by GAO: 

States and the District of Columbia: Florida; 
City/location: Chipley;
Name: Florida Department of Transportation. 

States and the District of Columbia: Florida; 
City/location: Lake City;
Name: Florida Department of Transportation. 

States and the District of Columbia: Georgia; 
City/location: Atlanta;
Name: Georgia Department of Transportation. 

States and the District of Columbia: Georgia; 
City/location: Lawrenceville;
Name: Gwinnett County Department of Transportation. 

States and the District of Columbia: Illinois; 
City/location: Chicago;
Name: Chicago Department of Transportation. 

States and the District of Columbia: Illinois; 
City/location: Grundy County;
Name: Illinois Department of Transportation. 

States and the District of Columbia: Iowa; 
City/location: Atlantic;
Name: Cass County Engineer’s Office. 

States and the District of Columbia: Iowa; 
City/location: Council Bluffs;
Name: Iowa Department of Transportation-District 4. 

States and the District of Columbia: Iowa; 
City/location: Des Moines;
Name: Polk County Public Works Department. 

States and the District of Columbia: Iowa; 
City/location: Sioux City;
Name: Iowa Department of Transportation-District 3. 

States and the District of Columbia: Massachusetts; 
City/location: Boston;
Name: Boston Region Metropolitan Planning Organization. 

States and the District of Columbia: Massachusetts; 
City/location: Taunton;
Name: Southeastern Massachusetts Metropolitan Planning Organization. 

States and the District of Columbia: Michigan; 
City/location: Flint;
Name: Genesee County Road Commission; 

States and the District of Columbia: Mississippi; 
City/location: Covington;
Name: US 49 from N of Seminary. 

States and the District of Columbia: Mississippi; 
City/location: Gulfport;
Name: Gulf Regional Planning Commission. 

States and the District of Columbia: Mississippi; 
City/location: Hattiesburg;
Name: Hattiesburg-Petal-Forrest-Lamar Metropolitan Planning 
Organization. 

States and the District of Columbia: Mississippi; 
City/location: Jackson;
Name: Central Mississippi Planning and Development District. 

States and the District of Columbia: Mississippi; 
City/location: Panola;
Name: Benson-Herron Road Bridge Reconstruction. 

States and the District of Columbia: Mississippi; 
City/location: Panola;
Name: Mt. Level Road Bridge Reconstruction. 

States and the District of Columbia: New York; 
City/location: Albany;
Name: Albany County. 

States and the District of Columbia: New York; 
City/location: Between the Town of Verona and the City of Rome; 
Name: Oneida County. 

States and the District of Columbia: North Carolina; 
City/location: Edenton;
Name: North Carolina Department of Transportation Highway Division 1. 

States and the District of Columbia: North Carolina; 
City/location: Raleigh;
Name: Federal Highway Administration-North Carolina Division. 

States and the District of Columbia: North Carolina; 
City/location: Raleigh;
Name: North Carolina Department of Transportation. 

States and the District of Columbia: North Carolina; 
City/location: Wilson;
Name: North Carolina Department of Transportation Highway Division 4. 

States and the District of Columbia: Ohio; 
City/location: Cincinnati;
Name: Ohio-Kentucky-Indiana Regional Council of Governments (OKI). 

States and the District of Columbia: Ohio; 
City/location: Cleveland;
Name: Northeast Ohio Areawide Coordinating Agency (NOACA). 

States and the District of Columbia: Ohio; 
City/location: Columbus;
Name: Mid-Ohio Regional Planning Commission (MORPC). 

States and the District of Columbia: Ohio; 
City/location: Dayton;
Name: Miami Valley Regional Planning Commission (MVRPC). 

States and the District of Columbia: Pennsylvania; 
City/location: Bedford;
Name: Bedford County. 

States and the District of Columbia: Pennsylvania; 
City/location: Chester;
Name: Chester County. 

Source: GAO. 

[End of table] 

Table 20: Location of Transit Projects Visited by GAO: 

States and the District of Columbia: California; 
City/location: Los Angeles;
Name: Los Angeles County Metropolitan Transportation Authority. 

States and the District of Columbia: California; 
City/location: Los Angeles;
Name: Southern California Association of Governments. 

States and the District of Columbia: California; 
City/location: Orange;
Name: Orange County Transportation Authority. 

States and the District of Columbia: California; 
City/location: Stockton;
Name: San Joaquin Council of Governments. 

States and the District of Columbia: California; 
City/location: Stockton;
Name: San Joaquin Regional Rail Commission. 

States and the District of Columbia: California; 
City/location: Stockton;
Name: San Joaquin Regional Transit District. 

States and the District of Columbia: Colorado; 
City/location: Denver;
Name: RTD-Denver. 

States and the District of Columbia: Colorado; 
City/location: Summit County;
Name: Summit Stage. 

States and the District of Columbia: Georgia; 
City/location: Atlanta;
Name: Metropolitan Atlanta Rapid Transit Authority (MARTA). 

States and the District of Columbia: 
City/location: Lawrenceville;
Name: Gwinnett County Transit. 

States and the District of Columbia: Illinois; 
City/location: Chicago;
Name: Chicago Metropolitan Agency For Planning. 

States and the District of Columbia: Illinois; 
City/location: Chicago;
Name: Chicago Transit Authority. 

States and the District of Columbia: Illinois; 
City/location: Chicago;
Name: Metra. 

States and the District of Columbia: Massachusetts; 
City/location: Boston;
Name: Massachusetts Bay Transportation Authority. 

States and the District of Columbia: Massachusetts; 
City/location: Springfield;
Name: Valley Transit Authority. 

States and the District of Columbia: New York; 
City/location: Fort Edward;
Name: Adirondack/Glens Falls Transportation Council. 

States and the District of Columbia: New York; 
City/location: New York;
Name: Metropolitan Transportation Authority. 

States and the District of Columbia: New York; 
City/location: New York;
Name: New York Metropolitan Transportation Council. 

States and the District of Columbia: New York; 
City/location: Queensbury;
Name: Greater Glens Falls Transit. 

States and the District of Columbia: Pennsylvania; 
City/location: Butler;
Name: Butler Transit Authority. 

States and the District of Columbia: Pennsylvania; 
City/location: Philadelphia;
Name: Delaware Valley Regional Planning Commission. 

States and the District of Columbia: Pennsylvania; 
City/location: Philadelphia;
Name: Southeastern Pennsylvania Transportation Authority. 

States and the District of Columbia: Pennsylvania; 
City/location: Pittsburgh;
Name: Port Authority of Allegheny County. 

States and the District of Columbia: Pennsylvania; 
City/location: Pittsburgh;
Name: Southwestern Pennsylvania Commission. 

Source: GAO. 

[End of table] 

Table 21: Educational Institutions Visited by GAO (to Review Use of 
State Fiscal Stabilization Fund): 

States and the District of Columbia: Arizona; 
City: Tempe;
Name: Arizona State University. 

States and the District of Columbia: Arizona; 
City: Tempe;
Name: Maricopa Community College. 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: District of Columbia Public Schools. 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: Friendship Public Charter School. 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: William E. Doar, Jr. Public Charter School. 

States and the District of Columbia: Iowa; 
City: Ames;
Name: Iowa State University. 

States and the District of Columbia: Iowa; 
City: Creston;
Name: Southwestern Community College. 

States and the District of Columbia: North Carolina; 
City: Hertford;
Name: Perquimans County Schools. 

States and the District of Columbia: North Carolina; 
City: Lincolnton;
Name: Lincoln County Schools. 

States and the District of Columbia: Ohio; 
City: Wilberforce;
Name: Central State University. 

Source: GAO. 

[End of table] 

Table 22: School Districts Visited by GAO (Local School Districts: 
Title I-LEA, IDEA): 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: District of Columbia Public Schools. 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: Friendship Public Charter School. 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: William E. Doar, Jr. Public Charter School. 

States and the District of Columbia: Illinois; 
City: Chicago;
Name: Chicago Public Schools. 

States and the District of Columbia: Michigan; 
City: Detroit;
Name: Detroit Federation of Teachers. 

States and the District of Columbia: Michigan; 
City: Detroit;
Name: Detroit Public Schools. 

States and the District of Columbia: Michigan; 
City: Lansing;
Name: MI Association of School Boards. 

States and the District of Columbia: Michigan; 
City: Lansing;
Name: MI Education Association. 

States and the District of Columbia: Michigan; 
City: Wayne;
Name: Wayne County Regional Educational Service Agency. 

States and the District of Columbia: Mississippi; 
City: Brandon;
Name: Rankin County Public Schools. 

States and the District of Columbia: Mississippi; 
City: Greenville;
Name: Greenville Public Schools. 

States and the District of Columbia: Mississippi; 
City: Jackson;
Name: Jackson Public School District. 

Source: GAO. 

[End of table] 

Table 23: Workforce Investment Act Youth Programs Visited by GAO: 

States and the District of Columbia: California; 
City/county: Los Angeles
Name: Boyle Heights Technology Youth Center 

States and the District of Columbia: California; 
City/county: Los Angeles;
Name: Clean & Green. 

States and the District of Columbia: California; 
City/county: Los Angeles;
Name: Los Angeles Community Development Department. 

States and the District of Columbia: California; 
City/county: Los Angeles;
Name: LA Conservation Corps. 

States and the District of Columbia: California; 
City/county: Los Angeles;
Name: Million Trees LA. 

States and the District of Columbia: California; 
City/county: San Francisco;
Name: African American Art & Culture Complex. 

States and the District of Columbia: California; 
City/county: San Francisco;
Name: Bayview Opera House/Urban YMCA. 

States and the District of Columbia: California; 
City/county: San Francisco;
Name: Larkin Street Youth Services. 

States and the District of Columbia: California; 
City/county: San Francisco;
Name: San Francisco Office of Economic and Workforce Development. 

States and the District of Columbia: California; 
City/county: San Francisco;
Name: TJ Maxx; 

States and the District of Columbia: California; 
City/county: San Francisco;
Name: Vietnamese Youth Development Center. 

States and the District of Columbia: Florida; 
City/county: Broward; 
Name: Workforce One, Employment Solutions. 

States and the District of Columbia: Florida; 
City/county: Hillsborough;
Name: Tampa Bay WorkForce Alliance. 

States and the District of Columbia: Georgia; 
City/county: Atlanta;
Name: Atlanta Regional Workforce Board. 

States and the District of Columbia: Georgia; 
City/county: Atlanta;
Name: Ashton Staffing, Inc. 

States and the District of Columbia: Georgia; 
City/county: Augusta;
Name: Richmond/Burke Job Training Authority, Inc. 

States and the District of Columbia: Georgia; 
City/county: Duluth;
Name: CorVel Healthcare Corporation. 

States and the District of Columbia: Georgia; 
City/county: Riverdale;
Name: Hearts to Nourish Hope. 

States and the District of Columbia: Georgia; 
City/county: Savannah;
Name: Coastal Workforce Services. 

States and the District of Columbia: Georgia;
City/county: Savannah;
Name: The Paxen Group. 

States and the District of Columbia: Georgia; 
City/county: Savannah;
Name: Savannah Impact Program. 

States and the District of Columbia: Georgia; 
City/county: Savannah;
Name: Telamon Corporation. 

States and the District of Columbia: Illinois; 
City/county: Chicago;
Name: Central States Ser-Jobs for Progress, Inc. 

States and the District of Columbia: Illinois; 
City/county: Chicago;
Name: Chicago Department of Family Support Services. 

States and the District of Columbia: Illinois; 
City/county: Chicago;
Name: Chicago Workforce Board. 

States and the District of Columbia: Illinois; 
City/county: Chicago;
Name: Museum of Science and Industry. 

States and the District of Columbia: Illinois; 
City/county: Kankakee.
Name: Community Foundation of Kankakee River Valley. 

States and the District of Columbia: Illinois; 
City/county: Kankakee;
Name: Grundy-Livingston-Kankakee Workforce Board. 

States and the District of Columbia: Illinois; 
City/county: Kankakee;
Name: Kankakee Community College. 

States and the District of Columbia: Illinois; 
City/county: Kankakee;
Name: Kankakee Community Resource Center. 

States and the District of Columbia: Massachusetts; 
City/county: Lawrence;
Name: Merrimack Valley Workforce Investment Board. 

States and the District of Columbia: Massachusetts; 
City/county: Worcester;
Name: Central Massachusetts Regional Employment Board. 

States and the District of Columbia: Michigan; 
City/county: Detroit;
Name: CVS/pharmacy. 

States and the District of Columbia: Michigan; 
City/county: Detroit;
Name: Detroit Workforce Development Department. 

States and the District of Columbia: Michigan; 
City/county: Detroit;
Name: Young Detroiter Magazine. 

States and the District of Columbia: Michigan; 
City/county: Lansing; 
Name: Eaglevison Ministries. 

States and the District of Columbia: Michigan; 
City/county: Lansing;
Name: Inghan County School Districts. 

States and the District of Columbia: Michigan; 
City/county: Lansing;
Name: Sparrow Health System. 

States and the District of Columbia: Michigan; 
City/county: Lansing;
Name: Spartan Internet Consulting Corporation. 

States and the District of Columbia: New York; 
City/county: Rome;
Name: Resource Center for Independent Living. 

States and the District of Columbia: New York; 
City/county: Utica;
Name: Oneida County Workforce Development. 

States and the District of Columbia: New York; 
City/county: Utica;
Name: Mohawk Valley Community College. 

States and the District of Columbia: New York; 
City/county: Utica;
Name: Utica Municipal Housing Authority. 

States and the District of Columbia: Ohio; 
City/county: Columbus;
Name: The Center for Automotive Research (CAR). 

States and the District of Columbia: Ohio; 
City/county: Columbus;
Name: Central Ohio Workforce Investment Corporation (COWIC). 

States and the District of Columbia: Ohio; 
City/county: Columbus;
Name: Centro Esperanza Latina. 

States and the District of Columbia: Ohio; 
City/county: Columbus;
Name: Columbus State Community College Center for Workforce 
Development. 

States and the District of Columbia: Ohio; 
City/county: Columbus;
Name: Godman Guild Association. 

States and the District of Columbia: Ohio; 
City/county: Columbus;
Name: The Publishing Group Ltd. 

States and the District of Columbia: Ohio; 
City/county: Dayton;
Name: Allstate Insurance Company. 

States and the District of Columbia: Ohio; 
City/county: Dayton;
Name: Area 7 Workforce Investment Board. 

States and the District of Columbia: Ohio; 
City/county: Dayton;
Name: Encore Consignments & More. 

States and the District of Columbia: Ohio; 
City/county: Dayton;
Name: Montgomery County Department of Job and Family Services (MCDJFS). 

States and the District of Columbia: Ohio; 
City/county: Marysville;
Name: Union County Department of Job and Family Services. 

States and the District of Columbia: Pennsylvania; 
City/county: Harrisburg;
Name: South Central Workforce Investment Board. 

States and the District of Columbia: Pennsylvania; 
City/county: Philadelphia;
Name: Philadelphia Workforce Investment Board. 

States and the District of Columbia: Texas; 
City/county: Arlington;
Name: North Central Workforce Development Board. 

States and the District of Columbia: Texas; 
City/county: Houston;
Name: Gulf Coast Workforce Development Board. 

Source: GAO. 

[End of table] 

Table 24: Weatherization Programs Visited by GAO: 

States and the District of Columbia: Arizona; 
City: Flagstaff;
Name: Northern Arizona Council of Governments (NACOG). 

States and the District of Columbia: Arizona; 
City: Phoenix;
Name: Arizona Department of Commerce (ADOC) Energy Office. 

States and the District of Columbia: Arizona; 
City: Phoenix;
Name: City of Phoenix, Neighborhood Services Department. 

States and the District of Columbia: Arizona; 
City: Phoenix;
Name: FSL Home Improvements Southwest Building Science Training Center. 

States and the District of Columbia: Colorado; 
City: Denver;
Name: Arapahoe County. 

States and the District of Columbia: Colorado; 
City: Grand Junction;
Name: Housing Resources of Western Colorado. 

States and the District of Columbia: Florida; 
City: Live Oak;
Name: Suwannee River Economic Council, Inc. 

States and the District of Columbia: Iowa; 
City: Des Moines;
Name: Polk County Public Works Department. 

States and the District of Columbia: Iowa; 
City: Harlan;
Name: West Central Community Action Agency. 

States and the District of Columbia: Mississippi; 
City: D’Lo;
Name: South Central Community Action Agency. 

States and the District of Columbia: Mississippi; 
City: Greenville;
Name: Warren Washington Issaquena Sharkey Community Action Agency; 

States and the District of Columbia: Mississippi; 
City: Jackson.
Name: Mississippi Department of Human Services - Division of Community 
Services. 

States and the District of Columbia: Mississippi; 
City: Jackson;
Name: Mississippi Department of Human Services - Division of Program 
Integrity. 

States and the District of Columbia: Mississippi; 
City: Meridian;
Name: Multi-County Community Service Agency. 

States and the District of Columbia: North Carolina; 
City: Raleigh;
Name: Department of Health and Human Services Office of Economic 
Opportunity. 

States and the District of Columbia: New Jersey; 
City: Burlington;
Name: Burlington County Community Action Program. 

States and the District of Columbia: New Jersey; 
City: Trenton;
Name: New Jersey Housing Mortgage and Finance Agency. 

States and the District of Columbia: New York; 
City: Centereach;
Name: Community Development Corporation of Long Island. 

States and the District of Columbia: New York;
City: Syracuse;
Name: People’s Equal Action and Community Effort, Inc. 

States and the District of Columbia: Ohio; 
City: Columbus;
Name: Mid-Ohio Regional Planning Commission (MORPC). 

States and the District of Columbia: Ohio; 
City: Dayton;
Name: Community Action Partnership of the Greater Dayton Area. 

Source: GAO. 

[End of table] 

Table 25: Localities Visited by GAO to Assess Other Recovery Act 
Programs and Issues: 

States and the District of Columbia: District of Columbia; 
City: Washington;
Name: District of Columbia Housing Authority. 

States and the District of Columbia: Michigan; 
City: Flint;
Name: City of Flint. 

States and the District of Columbia: North Carolina; 
City: Bethel;
Name: Bethel. 

States and the District of Columbia: North Carolina; 
City: Hendersonville;
Name: Hendersonville. 

States and the District of Columbia: North Carolina; 
City: Raleigh;
Name: North Carolina Office of Economic Recovery and Investment. 

States and the District of Columbia: North Carolina; 
City: Williamston;
Name: Williamston. 

States and the District of Columbia: North Carolina; 
City: Woodfin;
Name: Woodfin. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

J. Christopher Mihm, Managing Director for Strategic Issues, (202) 512- 
6806 or mihmj@gao.gov. 

For issues related to WIA, SFSF, and other education programs: Cynthia 
Fagnoni, Managing Director of Education, Workforce, and Income 
Security, (202) 512-7215 or fagnonic@gao.gov. 

For issues related to Medicaid programs: Dr. Marjorie Kanof, Managing 
Director of Health Care, (202) 512-7114 or kanofm@gao.gov. 

For issues related to highways, transit, 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 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 
Franzel, Managing Director of Financial Management and Assurance, (202) 
512-9471 or franzelj@gao.gov. 

For issues related to contracting and procurement: Paul 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); Sandra 
Beattie (Analyst-in-Charge); and Allison Abrams, David Alexander, 
Judith Ambrose, Peter Anderson, Lydia Araya, Darreisha Bates, Thomas 
Beall, Jessica Botsford, Anthony Bova, Cheron Brooks, Karen Burke, 
Richard Cambosos, Ralph Campbell Jr., Virginia Chanley, Tina Cheng, 
Marcus Corbin, Sarah Cornetto, Robert Cramer, Michael Derr, Helen 
Desaulniers, Ruth “Eli” DeVan, Kevin Dooley, Holly Dye, Abe Dymond, 
James Fuquay, Doreen Feldman, Alice Feldesman, Michele Fejfar, Shannon 
Finnegan, Alexander Galuten, Ellen Grady, Vicky 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, Jean K. Lee, 
Amertha Liles, John McGrail, Sarah McGrath, Jean McSween, Donna Miller, 
Kevin Milne, Marc Molino, Susan Offutt, Josh Ormond, Sarah Prendergast, 
Brenda Rabinowitz, Carl Ramirez, James Rebbe, Aubrey Ruge, Sidney 
Schwartz, Jeremy Sebest, Jena Sinkfield, John Smale Jr., Kathryn Smith, 
Michael Springer, George Stalcup, Jonathan Stehle, Andrew J. Stephens, 
Gloria Sutton, Barbara Timmerman, Crystal Wesco, and Kimberly Young.

Program Contributors: 

The names of GAO staff contributing to information contained in the 
sections on the selected program are as follows: 

Education—SFSF, IDEA, Title I: 
Cornelia M. Ashby, Ed Bodine, Amy Buck, William Colvin, Rachel Frisk, 
Bryon Gordon, Sonya Harmeyer, Jason Palmer, Kathy Peyman, Michelle 
Verbrugge, Charles Willson, Jean McSween, Doreen S. Feldman, Alex 
Galuten, and James M. Rebbe. 

Medicaid: 
Susan Anthony, Emily Beller, Ted Burik, Julianne Flowers, Martha Kelly, 
JoAnn Martinez, Vic Miller, and Carolyn Yocom. 

Public Housing: 
Don Brown, Nina Horowitz, Don Kiggins, May Lee, John Lord, Paul 
Schmidt, and Matt Scire. 

Safeguarding/Single Audit: 
Marcia Buchanan, Eric Holbrook, Kim McGatlin, Susan Ragland, and 
Melanie Swift. 

State Budget Stabilization: 
Sandra Beattie, Anthony Bova, Stanley J. Czerwinski, Shannon Finnegan, 
Sarah Prendergast, and Michelle Sager. 

Transportation/highway and transit programs: A. Nicole Clowers, Steve 
Cohen, Catherine Colwell, Gary Guggolz, Heather Halliwell, Greg Hanna, 
Delwen Jones, Les Locke, Tim Schindler, Raymond Sendejas, Tina Won 
Sherman, and Susan Zimmerman. 

Weatherization: 
Ric Cheston, Mark Gaffigan, David Marroni, Angela Miles, Stuart Ryba, 
and Jason Trentacoste. 

WIA Summer Youth Program: 
Jamie Allentuck, Dianne Blank, Carolyn Blocker, Edward Bodine, Anna 
Bonelli, Rachael Frisk, Raun Lazier, Claire Li, Paul Schearf, and Andy 
Sherrill. 

Contributors to the Selected States and the District Appendices: The 
names of GAO staff contributing to the selected states and the District 
appendixes are as follows:

Arizona: 
Rebecca Bolnick, Lisa Brownson, Aisha Cabrer, Steven Calvo, Charles 
Jeszeck, Eileen Larence, Steven Rabinowitz, Jeff Schmerling, and Ann 
Walker. 

California: 
Paul Aussendorf, Linda Calbom, Joonho Choi, Michelle Everett, Chad 
Gorman, Richard Griswold, Don Hunts, Delwen Jones, Al Larpenteur, Susan 
Lawless, Brooke Leary, Heather MacLeod, Eddie Uyekawa, Lacy Vong, and 
Randy Williamson. 

Colorado: 
Paul Begnaud, Steve Gaty, Kathy Hale, Susan Iott, Jennifer Leone, Brian 
Lepore, Robin Nazarro, Tony Padilla, Lesley Rinner, Kay Harnish-Ladd, 
Kathleen Richardson, and Mary Welch. 

District of Columbia: 
Laurel Beedon, Sunny Chang, Marisol Cruz, Nagla’a El-Hodiri, John 
Hansen, William O. Jenkins, Jr., Linda Miller, Justin Monroe, Melissa 
Schermerhorn, Mark Tremba, and Carolyn Yocom. 

Florida: 
Amy Anderson, Susan Ashoff, Fannie Bivins, Patrick di Battista, Rachel 
Frisk, Lisa Galvan-Trevino, Kevin Kumanga, Frank Minore, Brenda Ross, 
Cherie’ Starck, and James Whitcomb. 

Georgia: 
Alicia Puente Cackley, Chase Cook, Nadine Garrick, Erica Harrison, Marc 
Molino, Daniel Newman, Barbara Roesmann, Terri Rivera Russell, Paige 
Smith, David Shoemaker, and Robyn Trotter. 

Illinois: 
Leslie Aronovitz, Cynthia Bascetta, Rick Calhoon, Dean Campbell, Robert 
Ciszweski, Tarek Mahmassani, Paul Schmidt, Roberta Rickey, and Rosemary 
Torres Lerma. 

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 J. Czerwinski, Ramona L. Burton, Nancy J. Donovan, Kathleen M. 
Drennan, Laurie Ekstrand, Keith C. O’Brien, Carol Patey, Salvatore F. 
Sorbello Jr., and Robert Yetvin. 

Michigan: 
Manuel Buentello, Leland Cogliani, Ranya Elias, Kevin Finnerty, Jeff 
Isaacs, Henry Malone, Revae Moran, Robert Owens, Susan Ragland, Melanie 
Swift, and Mark Ward. 

Mississippi: 
James Elgas, Barbara Haynes, John K. Needham, Ellen Phelps Ranen, 
Norman J. Rabkin, Carrie Rogers, Erin Stockdale, and Ryan Stott. 

New Jersey: 
Gene Aloise, Diana Glod, Tarunkant Mithani, Vincent Morello, Tahra 
Nichols, Nitin Rao, Raymond Sendejas, Gary Shepard, Cheri Truett, and 
David Wise. 

New York: 
Jeremiah Donoghue, Colin Fallon, Christopher Farrell, Susan Fleming, 
Emily Larson, Dave Maurer, Tiffany Mostert, Summer Pachman, Frank 
Puttallaz, Barbara Shields, Ronald Stouffer, and Yee Wong. 

North Carolina: 
Cornelia Ashby, Sandra Baxter, Carleen Bennett, Bonnie Derby, Terrell 
Dorn, Steve Fox, Bryon Gordon, Fred Harrison, Leslie Locke, Stephanie 
Moriarty, Anthony Patterson, and Scott Spicer. 

Ohio: 
William Bricking, Matthew Drerup, Cynthia M. Fagnoni, Laura Jezewski, 
Bill J. Keller, Sanford Reigle, David C. Trimble, Myra Watts Butler, 
Lindsay Welter, Charles Willson, and Doris Yanger. 

Pennsylvania: 
Waylon Catrett, Mark Gaffigan, Brian Hartman, John Healey, Phillip 
Herr, Richard Jorgenson, Richard Mayfield, Andrea E. Richardson, 
MaryLynn Sergent, and Laurie F. Thurber. 

Texas: 
Carol Anderson-Guthrie, Fred Berry, Ron Berteotti, Victoria De Leon, 
Wendy Dye, K. Eric Essig, Ken Howard, Michael O’Neill, Daniel Silva , 
and Lorelei St. James. 

[End of section] 

Footnotes: 

[1] Recovery Act, div. B, title V, § 5001. 

[2] The percentage increase is based on state reported enrollment data 
for October 2007 to August 2009. Five states—Colorado, Florida, 
Georgia, Massachusetts, and Mississippi—did not provide Medicaid 
enrollment data for August 2009. In addition, two of these states— 
Massachusetts and Georgia—did not provide enrollment data for July 
2009. We estimated enrollment for these states for these months to 
determine the total change in enrollment for October 2007 to August 
2009. 

[3] 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). 

[4] 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). 

[5] 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). 

[6] 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. 

[7] In contrast to Recovery Act requirements, most states and the 
District did not report difficulty meeting CMS’s requirements that 
increased FMAP funds must be drawn down, tracked, and reported to CMS 
separately. 

[8] Although states can apply to CMS for a waiver from the act’s prompt 
payment requirement, Massachusetts is the only state in our sample that 
reported being in the process of applying for a waiver. 

[9] As of September 4, 2009, these publications were available on the 
CMS Web site; see [hyperlink, 
http://www.cms.hhs.gov/SMDL/SMD/list.asp?sortByDID=1a&submit=Go&filterTy
pe=none&filterByDID=-99&sortOrder=ascending&intNumPerPage=10]. 

[10] For the Federal Highway Program, the U.S. DOT has interpreted the 
term obligation of funds to mean the federal government’s commitment to 
pay for the federal share of the project. This commitment occurs at the 
time the federal government signs a project agreement. 

[11] For the Transit Capital Assistance Program, the U.S. DOT has 
interpreted the term obligation of funds to mean the federal 
government’ s commitment to pay for the federal share of the project. 
This commitment occurs at the time the federal government signs a grant 
agreement. 

[12] States request reimbursement from FHWA as the state makes payments 
to contractors working on approved projects. 

[13] Recovery Act, div. A, title XII, 123 Stat. 115, 206. 

[14] Id. 

[15] 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)). 

[16] Recovery Act, div. A, title XII, § 1201(a). 

[17] We interviewed officials from departments of transportation and 
metropolitan planning organizations in Arizona, New Jersey, and 
Massachusetts—the three states with the lowest levels of obligations in 
suballocated areas. 

[18] FHWA’s guidance specifies that special need determinations will be 
solely for Recovery Act highway funding and will not apply to EDA grant 
programs. 

[19] As part of the federal-aid highway program, FHWA assesses the 
ability of the each state to have its apportioned funds obligated by 
the end of the federal fiscal year (September 30) and adjusts the 
limitation on obligations for federal-aid highway and highway safety 
construction programs by reducing for some states the available 
authority to obligate funds and increasing the authority of other 
states. 

[20] The other two public transit programs receiving Recovery Act funds 
are the Fixed Guideway Infrastructure Investment program and the 
Capital Investment Grant program, each of which was apportioned $750 
million. The Transit Capital Assistance Program and the Fixed Guideway 
Infrastructure Investment program are formula grant programs, which 
allocate funds to states or their subdivisions by law. Grant recipients 
may then be reimbursed for expenditures for specific projects based on 
program eligibility guidelines. The Capital Investment Grant program is 
a discretionary grant program, which provides funds to recipients for 
projects based on eligibility and selection criteria. 

[21] Urbanized areas are areas encompassing a population of not less 
than 50,000 people that have been defined and designated in the most 
recent decennial census as an “urbanized area” by the Secretary of 
Commerce. Nonurbanized areas are areas encompassing a population of 
fewer then 50,000 people. 

[22] The urbanized area program is defined in 49 U.S.C. §5307. Funds 
for urbanized areas were to be apportioned as provided in 49 U.S.C. §§ 
5336 and 5340. According to FTA, there are 152 large and medium sized 
urbanized areas and 349 small urbanized areas. In some cases, urbanized 
areas span multiple states. The nonurbanized area program is defined in 
49 U.S.C. § 5311. 

[23] The 2009 Supplemental Appropriations Act authorizes the use of up 
to 10 percent of each apportionment for operating expenses. Pub. L. No. 
111-32, §1202, 123 Stat. 1859 (June 24, 2009). In contrast, under the 
existing program, operating assistance is generally not an eligible 
expense for transit agencies within urbanized areas with populations of 
200,000 or more. 

[24] The federal share under the existing formula grant program is 
generally 80 percent. 

[25] Designated recipients are entities designated by the chief 
executive officer of a state, responsible local officials, and publicly 
owned operators of public transportation to receive and apportion 
amounts that are attributable to transportation management areas. 
Transportation management areas are areas designated by the Secretary 
of Transportation as having an urbanized area population of more than 
200,000, or upon request from the governor and metropolitan planning 
organizations designated for the area. Metropolitan planning 
organizations are federally mandated regional organizations, 
representing local governments and working in coordination with state 
departments of transportation that are responsible for comprehensive 
transportation planning and programming in urbanized areas. MPOs 
facilitate decision making on regional transportation issues including 
major capital investment projects and priorities. To be eligible for 
Recovery Act funding, projects must be included in the region’s TIP and 
the approved State Transportation Improvement Program (STIP). 

[26] Recovery Act, div A, title XII, 123 Stat. 115, 209. The Recovery 
Act states that 180 days following the apportionment of transit capital 
assistance funds (i.e., on Sept. 1, 2009), the Secretary “shall 
withdraw from each urbanized area or State an amount equal to 50 
percent of the funds apportioned to such urbanized areas or States less 
the amount of funding obligated” by that date. (Emphasis added.) 

[27] Recovery Act, div. A, title XII, § 1201(a). 

[28] FTA points to 49 U.S.C. § 5336(e) and (f) as justifying its 
approach. Section 5336(e) has long authorized states’ chief executive 
officers (Governors) to expend small urbanized area funds for areas for 
which no designated recipient has been assigned. Among other things, 
section 5336(f) permits governors to transfer apportionments between 
small urbanized areas, or to other urbanized or nonurbanized areas, 
after consulting with responsible local officials and publicly owned 
operators of public transportation. FTA states that since the inception 
of the program it has treated each state’s small urbanized areas 
apportionments as one cumulative apportionment to the Governor. 

[29] The first periodic report was due no later than 90 days after the 
date of enactment of the act, with updated reports due no later than 
180 days, 1 year, 2 years, and 3 years after enactment. 

[30] Beginning on July 1, 2009, Education released the remaining 33 
percent of government services funds to states with approved 
applications. 

[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] 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 obligate all of their funds by September 30, 2011. This will 
be referred to as a carryover limitation. 

[33] As of August 28, 2009, Education had made $21 billion in SFSF 
grants for education, including government services funds, available to 
the 15 states and the District of Columbia—of which over $7.7 billion 
had been drawn down. 

[34] On September 4, 2009, Education announced that it had made the 
second half of Title I, Part A funds available to states. 

[35] On September 4, 2009, Education announced that it had made the 
second half of IDEA Recovery Act funds available to states. 

[36] The Race to the Top grant program is also referred to as the State 
Incentive Grant Fund. Education has indicated that it will issue 
proposed requirements in the winter of 2009-2010 and award up to $650 
million for a related program for LEAs—the Innovation Fund. 

[37] 74 Fed. Reg. 41402 (August 17, 2009). 

[38] According to officials, the proposal increases funds for IDEA, 
Part B, Grants to States (IDEA Section 611). 

[39] The amount of Title 1, Part A funds that a state educational 
agency (SEA) may currently reserve for state administration is limited 
by section 1004(b) of the ESEA to no more than 1 percent of the amount 
the SEA would receive under Title I, part A, if $14 billion were 
appropriated for parts A, C, and D of Title I. Any SEA whose amount 
under section 1004(b) would be less than $400,000 is permitted to 
reserve up to $400,000. The total amount appropriated in fiscal year 
2009 exceeds $14 billion, triggering this cap. The amount of IDEA, Part 
B grants to states that an SEA may currently reserve for state 
administration is limited by section 611(e)(1) of IDEA to not more than 
the maximum amount the SEA was eligible to reserve for fiscal year 2004 
or $800,000 (adjusted annually for inflation), whichever is greater. 

[40] Under the proposal, states that apply for Title I waivers on 
behalf of their LEAs would be eligible to receive a higher level of 
funding for administration than if they did not apply for such waivers. 

[41] Unlike LEAs applying directly to Education, LEAs that apply to 
implement an approved SEA waiver do not have to fulfill various 
requirements for notice and comment and reporting—the SEA assumes 
responsibility for these requirements. 

[42] Without the waiver, an SEA could waive the carryover limitation 
for an LEA at most once every three years if (1) it determined that the 
LEA’s request was reasonable and necessary or (2) a supplemental Title 
I, Part A appropriation became available. 

[43] The questions are: (1) Will the proposed use of funds result in 
improved outcomes? (2) Will the proposed use of funds increase 
capacity? (3) Will the proposed use of funds accelerate systems change? 
(4) Will the proposed use of funds avoid the cliff and serve as a 
bridge to improve productivity? (5) Will the proposed use of funds 
foster continuous improvement? 

[44] The sixth state/territory, Puerto Rico, is not covered by GAO’s 
review. 

[45] The 12 states are Arkansas, Colorado, Delaware, Florida, Idaho, 
Louisiana, Massachusetts, Missouri, New Jersey, New York, North 
Carolina, and Oklahoma. 

[46] The 16 states and territories are Arizona, Alaska, Bureau of 
Indian Education, Delaware, District of Columbia, Federated States of 
Micronesia, Louisiana, Minnesota, Missouri, Montana, New Hampshire, 
Ohio, Vermont, Virginia, Washington, and Wisconsin. 

[47] OSEP’s focused monitoring priorities, which helped determine which 
states to visit for 2009-2010 are: timely provision of early 
intervention services; Part C to Part B transition; and placement in 
the least restrictive environment. 

[48] Generally, in any fiscal year in which an LEA’s IDEA, Part B 
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 under the Act, and (3) can provide each child a free and 
appropriate public education. 

[49] CEIS are services provided to students in kindergarten through 
grade 12 (with a particular emphasis on students in kindergarten 
through grade 3) who are not currently identified as needing special 
education or related services but who need additional academic and 
behavioral supports to succeed in a general education environment. IDEA 
regulations permit LEAs to set aside up to 15 percent of the amount the 
LEA receives under IDEA Part B to develop and implement CEIS, minus any 
amount by which the LEA reduces its local maintenance-of-effort, using 
the flexibility described in the previous footnote. IDEA regulations 
require an LEA to reserve 15 percent of IDEA Part B funds available for 
comprehensive CEIS if there is significant disproportionality based on 
race or ethnicity with respect to the identification of children with 
disabilities; the identification of children in specific disability 
categories; the placement of children with disabilities in particular 
educational settings; or the incidence, duration, and type of 
disciplinary actions, including suspensions and expulsions. 

[50] The Cash Management Improvement Act of 1990, as amended, requires 
the Secretary of the Treasury, along with the states, to establish 
equitable funds transfer procedures so that federal financial 
assistance is paid to states in a timely manner and funds are not 
withdrawn from Treasury earlier than they are needed by the states for 
grant program purposes. The act requires that states pay interest to 
the federal government if they draw down funds in advance of need and 
requires the federal government to pay interest to states if federal 
program agencies do not make program payments in a timely manner. The 
Department of the Treasury promulgates regulations to implement these 
requirements. 31 C.F.R. pt. 205. However, cash management by 
subgrantees, such as LEAs, is subject to Department of Education grant 
administration regulations, which may require subgrantees to remit to 
the U.S. government interest earned on excess balances. See 34 C.F.R. 
§§ 74.22, 80.21. 

[51] The OIG reported in March 2009 that the California Department of 
Education needed to strengthen controls to ensure that LEAs correctly 
calculate and promptly remit interest earned on federal cash advances 
(ED-OIG/A09H0020, March 2009). The OIG plans to issue a report on 
Illinois’s cash management later this fall. 

[52] U.S. Department of Education Office of Inspector General, Fiscal 
Issues Reported in ED-OIG Work Related to LEAs and SEAs, ED- 
OIG/X05J0005 (Washington, D.C.: July 21, 2009). 

[53] Single Audits are prepared to meet the requirements of the Single 
Audit Act, as amended, and provide a source of information on internal 
control and compliance findings and the underlying causes and risks. 
The Single Audit Act requires states, local governments, and nonprofit 
organizations expending $500,000 or more in federal awards in a year to 
obtain an audit in accordance with the requirements set forth in the 
act. A Single Audit consists of (1) an audit and opinions on the fair 
presentation of the financial statements and the Schedule of 
Expenditures of Federal Awards; (2) gaining an understanding of and 
testing internal 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. 

[54] H.R. Rep. No. 111-16, at 448 (2009). 

[55] Department of Labor, Training and Employment Guidance Letter No. 
14-08 (Mar. 18, 2009). 

[56] Current federal wage law specifies a minimum wage of $7.25 per 
hour. Where federal and state laws have different minimum wage rates, 
the higher rate applies. 

[57] We reviewed WIA youth activities in California, Florida, Georgia, 
Illinois, Massachusetts, Michigan, New York, Ohio, Pennsylvania, and 
Texas. 

[58] California and Ohio reported that they did not set targets for the 
number of youth they expected to serve in summer activities. 

[59] Drawdowns represent cash transactions: funds drawn down by states 
and localities to pay their bills. These are cash drawdowns 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. 

[60] To be eligible for services under the WIA Youth Program, an 
individual must be between the ages of 14 and 21 (24 for services 
funded by the Recovery Act), be a low-income individual, and have at 
least one of the following listed barriers: Be (1) deficient in basic 
literacy skills; (2) a school dropout; (3) homeless, a runaway, or a 
foster child; (4) pregnant or parenting; (5) an offender; or (6) an 
individual (including a youth with a disability) who requires 
additional assistance to complete an educational program, or to secure 
and hold employment. 

[61] All 10 states reported having statewide requirements for 
documenting eligibility for the WIA Youth Program. Acceptable forms of 
eligibility documentation vary depending on the data element. Examples 
include public assistance identification cards to support total 
household income, birth certificates for proof of citizenship, and 
applicant statements to document those items, which, in some cases, are 
not verifiable or which may cause undue hardship for individuals to 
obtain, such as residency for homeless individuals not residing in a 
shelter or income for individuals who claim little to no income. 

[62] The job creation estimates are to include all paid work 
opportunities funded with the Recovery Act WIA Youth funds and are not 
to include academic opportunities, according to Labor’s guidance. 

[63] HUD allocated Capital Fund formula dollars from the Recovery Act 
to 3,134 public housing agencies, but as of September 5, 2009, 12 
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 were not obligated by HUD. HUD officials 
subsequently stated that one additional housing agency had rejected 
funds totaling $151,174. 

[64] Section 1605(a) of Title XVI of the Recovery Act (Pub. L. 111-5) 
states, “None of the funds appropriated or otherwise made available by 
this Act may be used for a project for the construction, alteration, 
maintenance, or repair of a public building or public work unless all 
of the iron, steel, and manufactured goods used in the project are 
produced in the United States.” 

[65] The Secretary of Housing and Urban Development exercised authority 
granted by the Recovery Act to direct that requirements relating to the 
procurement of goods and services arising under state and local laws 
and regulations shall not apply to amounts made available for Capital 
Fund formula grants. Additional guidance from HUD stated that public 
housing agencies must follow procurement requirements found in 24 CFR 
Part 85 and shall amend their procurement policies to remove any 
requirements that are contrary to these regulations. 

[66] We selected these amounts as thresholds for comparing groups of 
housing agencies because they were more and less than the median grant 
amount ($192,198). Under 24 CFR Part 85, the “simplified acquisition 
threshold” is $100,000. We compared various thresholds greater than the 
median and determined that $500,000—which is the minimum amount of 
federal funds expended by nonfederal entities to be subject to Single 
Audits—was an appropriate threshold, in part because the number of 
housing agencies with grants of more than $500,000 is similar to the 
number of housing agencies with grants of less than $100,000. 

[67] 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. 

[68] The Recovery Act provided HUD with the authority to decide whether 
to provide troubled housing agencies with 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 Recovery 
Act requirements. 

[69] The total number of nontroubled housing agencies to be monitored 
by HUD excludes 12 housing agencies that 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 of September 5, 2009. HUD officials subsequently 
stated that one additional housing agency had rejected funds, which 
would bring the total number of nontroubled housing agencies to be 
monitored to 2,949, of which 2,617 would be low risk. 

[70] HUD’s Monitoring and Planning System (MAPS) is used to track 
resolution of audit findings. 

[71] Sixteen of these housing agencies had both a material weakness and 
a significant deficiency. These were only counted once in the material 
weakness category. 

[72] 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.: June 11, 
2009). 

[73] Applications in this category are to be ranked against criteria 
that increase energy efficiency and the energy performance of public 
housing properties, thus reducing energy usage, generating cost 
savings, and reducing greenhouse-gas emissions. 

[74] NOFA requirements establish multiple rounds of funding that lift 
funding limits and threshold requirements one by one over time if there 
are insufficient successful applications to consume the funding 
available under each level. See HUD’s Fiscal Year (FY) 2009 Notice of 
Funding Availability (NOFA) for the Capital Fund Recovery Competition 
Grants; Revised to Incorporate Changes, Corrections, and 
Clarifications, Docket No. FR-5311-N-02 (June 3, 2009). 

[75] HUD accepted applications in the creating energy-efficient 
communities category from June 22, 2009, until July 21, 2009. HUD 
accepted applications for the other three categories from June 22, 
2009, until August 18, 2009. Before July 6, 2009, HUD staff reviewed 
applications in the gap financing, transforming public housing, and 
improvement for the elderly and persons with disabilities categories 
regardless of the order in which they were received. Applications 
received after July 6, 2009, were assigned a number in order of receipt 
and were reviewed based on the assigned order. 

[76] Pub. L. 111-5, §Sec. 1512, 123 Stat. 115, 287 (Feb. 17, 2009). 

[77] Section 1609 of the Recovery Act requires that adequate resources 
must be devoted to ensuring that applicable environmental reviews under 
the National Environmental Policy Act are completed on an expeditious 
basis and that the shortest existing applicable process under the 
National Environmental Policy Act shall be utilized. The National 
Environmental Policy Act protects public health, safety and 
environmental quality: by ensuring transparency, accountability and 
public involvement in federal actions and in the use of public funds. 

[78] Department of Labor regulations applies to any contract which is 
subject to Federal wage standards and which is for the construction, 
prosecution, completion, or repair of public buildings, public works or 
buildings or works financed by loans or grants from the United States. 
29 C.F.R. § 3.1 et seq. 

[79] OMB uses a simple calculation to convert part-time or temporary 
jobs into “full-time equivalent” jobs to avoid overstating the number 
of other than full-time, permanent jobs. To perform the calculation, a 
recipient divides the total number of hours worked that are funded by 
the Recovery Act by the number of hours in a full-time schedule for a 
quarter. 

[80] The Weatherization Assistance Program funded through annual 
appropriations is not subject to the Davis-Bacon Act. 

[81] The five types of “interested parties” are state weatherization 
agencies, local community action agencies, unions, contractors, and 
congressional offices. 

[82] GAO, Recovery Act: States’ and Localities’ Current and Planned 
Uses of Funds While Facing Fiscal Stresses, GAO-09-829 (Washington, 
D.C.: July 8, 2009). 

[83] We did not collect weatherization information from Illinois, 
Massachusetts, and the District of Columbia. 

[84] Davis-Bacon Act prevailing wage requirements do not apply to local 
government employees. 29 C.F.R. § 5.2(h); see also Department of Labor 
Advisory Letter to Department of Energy, dated June 1, 2009. 

[85] According to Labor officials and guidance provided on its Web 
site, individuals who meet Labor’s definition of apprentices and 
trainees may be paid a percentage of the journeyman rate on the wage 
determination. To do so, however, these individuals must be 
participating in a program that has been registered with Labor or with 
a State Apprenticeship Agency recognized by Labor. 

[86] The 2009 National Weatherization Training Conference was held July 
20-23, 2009. 

[87] See, for example, DOE, “Weatherization Program Notice 09-1B,” 
(Mar. 12, 2009). 

[88] The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507), 
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 OMB 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. 

[89] 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). 

[90] Recipients must report the total amount of funds received and, of 
that, the amount spent on projects and activities; a list of those 
projects and activities funded by name to include description, 
completion status, and estimates on jobs created or retained; and 
detail on subawards and other payments. See OMB memorandum M-09-21, p. 
8. 

[91] Pub. L. No. 111-5, Sec. 1512 (c), 123 Stat. 115, 287 (Feb 17, 
2009). 

[92] [hyperlink, http://www.gao.gov/products/GAO-09-829]. 

[93] 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.: 
April 23, 2009). 

[94] OMB defines material omissions as instances where required data 
are not reported or reported information is not otherwise responsive to 
the data requests, resulting in significant risk that the public is not 
fully informed as to the status of a Recovery Act project or activity. 

[95] OMB defines significant reporting errors as those instances where 
required data are not reported accurately and such erroneous reporting 
results in significant risk that the public will be misled or confused 
by the recipient report in question. 

[96] [hyperlink, 
http://www.whitehouse.gov/Recovery/WebinarTrainingMaterials]. 

[97] The memorandum specifically requested plans identifying likely 
subrecipients and vendors, the proposed process for entering data into 
FederalReporting.gov, and comparing current data collected with the 
data required under Section 1512 of the act. 

[98] The reports are required by the Single Audit Act, 31 U.S.C. § 
7502, and prepared in accordance with OMB Cir. No. A-133, Audits of 
States, Local Governments, and Non-Profit Organizations, which provides 
guidance to auditors on selecting federal programs for audit and the 
related internal control and compliance audit procedures to be 
performed. 

[99] 31 U.S.C. § 7502(b), (h)(2)(B). 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 remediated. 

[100] GAO, Recovery Act: States’ and Localities’ Current and Planned 
Uses of Funds While Facing Fiscal Stresses, GAO-09-908T (Washington, 
D.C.: Sept. 10, 2009). 

[101] In July we reported that Mississippi did not have a fiscal year 
2010 budget as of early June 2009; Mississippi’s legislature approved 
the state’s fiscal year 2010 budget on June 30, 2009. 

[102] Not all jurisdictions have the same fiscal year. Most of the 
states we visited have fiscal years beginning July 1, with the 
following exceptions: The fiscal year for Texas begins on September 1; 
the fiscal year for the District of Columbia and Michigan begins 
October 1; and New York’s fiscal year begins April 1. 

[103] OMB Circular, No. A-87, Cost Principles for State, Local, and 
Indian Tribal Governments (CFR, Part 225). OMB Circular No. A-87 
established principles for determining the allowable administrative 
costs incurred by state, local and federally recognized Indian tribal 
governments. 

[104] OMB Memorandum, M-09-18, Payments to State Grantees for 
Administrative Costs of Recovery Act Activities (May 11, 2009). This 
memorandum clarifies and encourages states to utilize existing 
flexibilities to recover administrative costs related to carrying out 
Recovery Act programs and activities in a more timely manner. 

[105] Other entities, such as colleges and universities, are able to 
recover administrative costs in an up-front manner pursuant to 
principles established by OMB Circular, No. A-21, Cost Principles for 
Educational Institutions (2 CFR, Part 220). 

[106] The statewide cost allocation plan is a required document that 
identifies, accumulates, and allocates; or develops billing rates based 
on the allowable costs of services (e.g., accounting, purchasing, 
computer services, motor pools, fringe benefits, etc) provided by a 
governmental unit to its departments and agencies. 

[107] See, [hyperlink, http://www.whitehouse.gov/omb/recovery_faqs/]. 

[108] According to OMB Memorandum M-09-21, Implementing Guidance for 
the Reports on Use of Funds Pursuant to the American Recovery and 
Reinvestment Act (June 22, 2009), the prime recipients are non-federal 
entities that receive Recovery Act funding as federal awards in the 
form of grants, loans, or cooperative agreements directly from the 
federal government. 

[109] The National Association of State Auditors, Comptrollers and 
Treasurers (NASACT) is an organization of state auditors, comptrollers 
and treasurers in the 50 states, the District of Columbia, and U.S. 
territories who deal with the financial management of state government. 

[110] Depreciation reflects the use of the asset(s) during specific 
operating periods in order to match costs with related revenues in 
measuring income or determining the costs of carrying out program 
activities. 

[111] 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. 

[112] 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, OMB 
Memorandum M-09-10, Initial Implementing Guidance for the American 
Recovery and Reinvestment Act of 2009 (Feb. 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). 

[113] 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). 

[114] 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. 

[End of section] 

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