Trade Adjustment Assistance:
Commerce Program Has Helped Manufacturing and Services Firms, but Measures, Data, and Funding Formula Could Improve
GAO-12-930: Published: Sep 13, 2012. Publicly Released: Sep 13, 2012.
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What GAO Found
Changes to the Trade Adjustment Assistance (TAA) for Firms program mandated by the Trade and Globalization Adjustment Assistance Act led to program improvements and increased participation, but participation declined when the legislative changes lapsed and the program faced funding uncertainty. The changes resulted in reduced time to certify firms, new performance reporting, and increased participation. For example, officials told GAO that creating a director position and other full-time positions for the program reduced time to certify firms. In fulfilling new reporting requirements, the Economic Development Administration (EDA) collected information on performance measures and issued three annual reports. Also, EDA certified 26 services firms not previously eligible, as well as 32 additional firms based on more flexible certification requirements to demonstrate trade impacts. Although EDA increased the number of certified petitions and approved business recovery plans from fiscal years 2008 through 2010, the lapse in the legislative changes from February to October 2011 and uncertainty about program funding contributed to a decline in certified petitions and approved plans in fiscal year 2011.
EDA's performance measures and data collection for the TAA for Firms program provide limited information about the program's outcomes, although GAO's economic analysis found that participation in the program is statistically associated with an increase in firm sales. EDA collects data to report on 16 measures to gauge the program's performance, such as the number of firms that inquired about the program and the number of petitions filed, but most of these measures do not assess program outcomes. EDA is exploring better ways to assess the effect of their efforts on firms. In addition, EDA does not systematically maintain data collected by the TAA Centers on the firms they assist, resulting in gaps in centralized data that EDA could use to evaluate the program and meet reporting requirements. However, GAO's analysis of data collected from the centers showed that the program was associated with increased sales and productivity for manufacturing firms, although some factors were more strongly correlated with improved performance than was participation in the TAA for Firms program. GAO's survey of and interviews with firms participating in the program found that many firms reported satisfaction with the program's impacts. Notably, 73 percent reported that the program helped them with profitability; 71 percent that it helped them retain employees; and 57 percent that it helped them hire new employees.
To allocate funding to the TAA Centers, EDA uses a formula of weighted factors, such as each center's share of approved business recovery plans. However, the formula does not factor in differences in program need and costs in centers' service regions, even though centers varied in their use of program funds. For example, the formula does not take into account potential need for the program based on its objective of assisting firms that have lost sales and employment due to import competition. The formula also does not take into account the considerable differences in the costs of operating the centers to assist firms. As a result, some centers had spent their entire allocation by the conclusion of the most recent grant period, while other centers had not. Although EDA de-obligates and reallocates any unspent funds, it uses its allocation funding formula to do so, thus perpetuating the deficiency of failing to consider variable needs and costs.
Why GAO Did This Study
Over the past decade, U.S. imports of goods and services have almost doubled, reaching $2.7 trillion in 2011. Although trade expansion can enhance economic welfare, many firms and workers experience difficulties adjusting to import competition. The TAA for Firms program assists tradeimpacted, economically distressed U.S. firms in making adjustments that may enable them to remain competitive in the global economy. The Department of Commerce's EDA administers the $15.8 million program through 11 TAA Centers throughout the United States. In 2009, the Trade and Globalization Adjustment Assistance Act, as part of American Recovery and Reinvestment Act, amended the TAA for Firms program and mandated that GAO review its operation and effectiveness. GAO examined (1) the results of the legislative changes on program operations and participation, (2) the performance measures and data EDA uses to evaluate the program and what these tell us about the program's effectiveness, and (3) how program funding is allocated and spent.
GAO reviewed pertinent legislation, program documentation, and data; conducted an economic analysis and a survey of participant firms; and met with EDA officials, representatives of the 11 TAA Centers, and others.
What GAO Recommends
GAO recommends that Commerce establish more effective measures of program outcomes, improve its data collection, and allocate funds in a way that considers program needs and costs. Commerce concurred with GAO's findings and recommendations.
Recommendations for Executive Action
Comments: Commerce concurred with our findings and recommendations. In August 2018, EDA provided additional information on its progress in implementing our recommendation. In 2012, EDA commissioned a study to inform the development of performance metrics and evaluation methods for the TAA for Firms program. Issued in October 2014, the study provided recommendations to EDA on potential performance metrics, tested the metrics by conducting a statistical analysis of TAA for Firms clients against a control group as well as a survey, and suggested data sources for conducting future evaluations of the TAA for Firms program. According to EDA officials, the study will help provide a foundation for more robust longitudinal performance measurement and enhanced policy analysis, thereby enabling EDA to more comprehensively evaluate the program. These officials noted that, in April 2017, the authors of the study finalized an operational toolkit containing recommended metrics and protocols for data collection and impact evaluation methods. In June 2017, EDA began to pilot test these recommended metrics and evaluation methods to improve program evaluation. In December 2017, EDA formed a working group to further refine the new evaluation system and metrics based on the results of the pilot tests. In May 2018, EDA's working group concluded the refinement of the metrics. As of August 2018, EDA continued to collect data on these metrics from its grantees using a pilot survey. EDA expects to continue to refine the metrics as EDA receives additional responses and feedback about the pilot survey from grantees. EDA expects to implement the new evaluation system and metrics by the beginning of fiscal year 2020, according to EDA officials. We will continue to monitor Commerce's efforts to implement our recommendation.
Recommendation: To ensure that the performance measures used to evaluate the TAA for Firms program demonstrate program results and to help ensure that EDA can comprehensively evaluate the effectiveness of the program, the Secretary of Commerce should broaden the program's evaluation approach, for instance, by developing additional quantifiable outcome-oriented performance goals and measures for key program areas and conducting further analysis of the data to isolate the impact of the TAA for Firms program from other influences, such as economic trends.
Agency Affected: Department of Commerce
Comments: Commerce concurred with our findings and recommendations. In September 2018, EDA provided additional information on its progress in implementing our recommendation. According to EDA officials, in fiscal year 2017, EDA had developed an improvement plan for its agency-wide data system for collecting data on program operations. According to these officials, EDA expects that the plan will guide EDA in transitioning to a new data system for the TAA for Firms program. As of September 2018, EDA is evaluating and updating its business processes to better take advantage of potential data systems. EDA has piloted business process improvements at one of its regional offices and is in the process of learning from the pilot. We will continue to monitor Commerce's efforts to implement our recommendation.
Recommendation: To improve the data available to manage and evaluate the TAA for Firms program, the Secretary of Commerce should develop a data system to consistently collect, maintain, and analyze sufficiently reliable and up-to-date data on program operations and participant firms.
Agency Affected: Department of Commerce
Status: Closed - Implemented
Comments: In April 2016, EDA revised the factors and weights of the TAA for Firms program's funding allocation formula for the five-year cooperative agreement period, 2016 to 2021. The revised funding allocation formula reduced the percentage of funding divided equally among the TAA Centers and introduced a new measure of program need. Specifically, the revised formula allocates 15 percent of program funding among the 11 centers according to the difference between the share of each state's total value of goods and services produced by firms in the agricultural, mining, and manufacturing sectors and the share of firms in these sectors that each center assists. EDA included this factor in its funding allocation formula to help ensure equitable coverage of program funding to firms across states. EDA also reevaluated the centers' costs in providing assistance to firms for cooperative agreement years 2016 to 2021. In May 2016, EDA negotiated the percentage of program funds that the centers may use for indirect costs, including the facilities and administrative costs of operating the centers to provide assistance to firms. As a result, EDA reduced the negotiated indirect cost rates across the centers by an average of 25 percent. In addition, for cooperative agreement years 2016 to 2021, EDA monitors the percentage of awarded funds that the centers use to fund adjustment assistance. Those centers that do not meet EDA's targets for the percentage of awarded funding used to assist firms must reevaluate their expenditure of awarded funds.
Recommendation: To ensure that EDA's allocation of funding to TAA Centers reflects varied program needs and costs, the Secretary of Commerce should revise the program's funding formula by reevaluating the factors and weights it uses to allocate funding under its cooperative agreements, and include measures of need, such as the number of import-impacted firms in each center's service region and the center's costs in providing assistance to firms.
Agency Affected: Department of Commerce