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Highlights

What GAO Found

In response to the national public health and economic threats caused by COVID-19, four relief laws were enacted as of June 2020, including the CARES Act, in March 2020. These laws have appropriated $2.6 trillion across the government. Six areas—Paycheck Protection Program (PPP); Economic Stabilization and Assistance to Distressed Sectors; unemployment insurance; economic impact payments; Public Health and Social Services Emergency Fund; and Coronavirus Relief Fund—account for 86 percent of the appropriations (see figure).

Appropriations for COVID-19 Response from COVID-19 Relief Laws Enacted as of May 31, 2020

Note: COVID-19 relief laws enacted as of May 31, 2020, include the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146; Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020); CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020); and Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020).
These amounts represent appropriation warrants issued as of May 31, 2020, by the Department of the Treasury (Treasury) to agencies in response to appropriations made by COVID-19 relief laws. A warrant is an official document issued upon enactment of an appropriation that establishes the amount of money authorized to be withdrawn from the Treasury. These amounts could increase in the future for programs with indefinite appropriations. In addition, this figure does not represent transfers of funds that agencies may make between accounts or transfers of funds they may make to other agencies, to the extent authorized by law.

Total federal spending data are not readily available because, under Office of Management and Budget guidance, federal agencies are not directed to report COVID-19 related obligations (financial commitments) and expenditures until July 2020. It is unfortunate that the public will have waited more than 4 months since the enactment of the CARES Act for access to comprehensive obligation and expenditure information about the programs funded through these relief laws.

In the absence of comprehensive data, GAO collected obligation and expenditure data from agencies, to the extent practicable, as of May 31, 2020. For the six largest spending areas, GAO found obligations totaled $1.3 trillion and expenditures totaled $643 billion. The majority of the difference was due to the PPP, for which the Small Business Administration (SBA) obligated $521 billion. The amounts for loan guarantees will not be considered expenditures until the loans are forgiven, and for those that are not forgiven, whether they are timely repaid.

GAO also collected expenditure data on other programs affected by the federal response. For example, GAO also found that the Department of Health and Human Services (HHS) has provided $7 billion in COVID-19 Medicaid funding related to a temporary increase in the Federal Medical Assistance Percentage (FMAP), the statutory formula the federal government uses to match states’ Medicaid spending. Based on the information GAO collected, government-wide spending totals at least $677 billion, as of May 31, 2020.

Given the sweeping and unfolding public health and economic crisis, agencies from across the federal government were called on for immediate assistance, requiring an unprecedented level of dedication and agility among the federal workforce, including those serving on the front lines to quickly establish services for those infected with the virus. Consistent with the urgency of responding to serious and widespread health issues and economic disruptions, agencies have given priority to moving swiftly where possible to distribute funds and implement new programs. As tradeoffs were made, however, agencies have made only limited progress so far in achieving transparency and accountability goals.

GAO has identified several challenges related to the federal response to the crisis, as well as recommendations to help address these challenges, including the following:

Viral testing. The Centers for Disease Control and Prevention (CDC) reported incomplete and inconsistent data from state and jurisdictional health departments on the amount of viral testing occurring nationwide, making it more difficult to track and know the number of infections, mitigate their effects, and inform decisions on reopening communities. However, HHS issued guidance on June 4, 2020, to laboratories that identifies required data elements to collect and how to report it to CDC. GAO will continue to examine activities related to COVID-19 testing.

Distribution of supplies. The nationwide need for critical supplies to respond to COVID-19 quickly exceeded the quantity of supplies contained in the Strategic National Stockpile, which is designed to supplement state and local supplies during public health emergencies. HHS has worked with the Federal Emergency Management Agency (FEMA) and the Department of Defense (DOD) to increase the availability of supplies. However, federal, state, and local officials have expressed concerns about the distribution, acquisition, and adequacy of supplies. GAO will continue to examine these issues as well as the administration’s efforts to mitigate supply gaps.

Paycheck Protection Program. As of June 12, 2020, the SBA had rapidly processed over $512 billion in 4.6 million guaranteed loans through private lenders to small businesses and other organizations adversely affected by COVID-19. As of May 31, 2020, SBA had expended about $2 billion in lender fees. SBA moved quickly to establish a new nationwide program, but the pace contributed to confusion and questions about the program and raised program integrity concerns. First, borrowers and lenders raised a number of questions about the program and eligibility criteria. To address these concerns, SBA and the Treasury issued a number of interim final rules and several versions of responses to frequently asked questions (see figure). However, questions and confusion remained. The Paycheck Protection Program Flexibility Act of 2020, enacted in June 2020, modified key program components. Second, to help quickly disburse funds, SBA allowed lenders to rely on borrower certifications to determine borrowers’ eligibility, raising the potential for fraud. GAO recommends that SBA develop and implement plans to identify and respond to risks in PPP to ensure program integrity, achieve program effectiveness, and address potential fraud. SBA neither agreed nor disagreed, but GAO believes implementation of its recommendation is essential.

Timeline for Paycheck Protection Program, as of June 12, 2020

Economic impact payments. The Internal Revenue Service (IRS) and the Treasury moved quickly to disburse 160.4 million payments worth $269.3 billion. The agencies faced difficulties delivering payments to some individuals, and faced additional risks related to making improper payments to ineligible individuals, such as decedents, and fraud. For example, according to the Treasury Inspector General for Tax Administration, as of April 30, 2020, almost 1.1 million payments totaling nearly $1.4 billion had gone to decedents. GAO recommends that IRS should consider cost-effective options for notifying ineligible recipients how to return payments. IRS agreed.

Unemployment insurance (UI). States are implementing three new, federally funded UI programs created by the CARES Act and, as of May 2020, states have received more than 42 million UI claims. The Department of Labor (DOL) has taken steps to help states manage demand, but DOL is developing its approach to overseeing the new UI programs. GAO will be evaluating DOL’s monitoring efforts in future reports. Further, the UI program is generally intended to provide benefits to individuals who have lost their jobs; under PPP, employers are generally required to retain or rehire employees for full loan forgiveness. According to DOL, no mechanism currently exists that could capture information in real time about UI claimants who may receive wages paid from PPP loan proceeds. GAO recommends that DOL, in consultation with SBA and Treasury, immediately provide information to state unemployment agencies that specifically addresses PPP loans, and the risk of improper payments associated with these loans. DOL neither agreed nor disagreed with the recommendation, but noted it was planning forthcoming guidance.

Contract obligations. Government-wide contract obligations in response to the COVID-19 pandemic totaled about $17 billion as of May 31, 2020. Goods procured include ventilators; services contracted for include vaccine development. In addition, the CARES Act provided $1 billion for Defense Production Act (DPA) purchases—$76 million of which, for example, was awarded to increase production of N95 respirators.

GAO recommends Congress consider taking legislative action in the following areas:

Aviation-preparedness plan. In 2015, GAO recommended that the Department of Transportation (DOT) work with federal partners to develop a national aviation-preparedness plan for communicable disease outbreaks. DOT agreed, but as of May 2020, it maintained that HHS and Department of Homeland Security (DHS) should lead the effort. Thus far, no plan exists. GAO recommends Congress take legislative action to require DOT to work with relevant agencies and stakeholders to develop a national aviation-preparedness plan to ensure safeguards are in place to limit the spread of communicable disease threats from abroad while at the same time minimizing any unnecessary interference with travel and trade.

Full access to death data. The number of economic impact payments going to decedents highlights the importance of consistently using key safeguards in providing government assistance to individuals. IRS has access to the Social Security Administration’s full set of death records, but Treasury and its Bureau of the Fiscal Service, which distribute payments, do not. GAO recommends that Congress provide Treasury with access to the Social Security Administration’s full set of death records, and require that Treasury consistently use it, to help reduce similar types of improper payments.

Medicaid. GAO previously found that during economic downturns—when Medicaid enrollment can rise and state economies weaken—the FMAP formula does not reflect current state economic conditions. GAO previously developed a formula that offers an option for providing temporary automatic, timely, and targeted assistance. GAO recommends Congress use this formula for any future changes to the FMAP during the current or any future economic downturn to help ensure that the federal funding is targeted and timely.

Evolving lessons from the initial response highlight the importance of the following:

  • Establishing clear goals and defining roles and responsibilities for the wide range of federal agencies and other key players are critically important actions when preparing for pandemics and addressing an unforeseen emergency with a whole-of-government response.
  • Providing clear, consistent communication in the midst of a national emergency—among all levels of government, with health care providers, and to the public—is key.
  • Collecting and analyzing adequate and reliable data can inform decision-making and future preparedness—and allow for midcourse changes in response to early findings.
  • Establishing transparency and accountability mechanisms early on provides greater safeguards and reasonable assurance that federal funds reach the intended people, are used for the intended purposes, help ensure program integrity, and address fraud risks.

Why GAO Did This Study

The outbreak of COVID-19 quickly spread around the globe. As of June 17, 2020, the United States had over 2 million reported cases of COVID-19, and over 100,000 reported deaths, according to federal agencies. Parts of the nation have seen severely strained health care systems. Also, the country has experienced a significant and rapid downturn in the economy. Four relief laws, including the CARES Act, were enacted as of June 2020 to provide appropriations to address the public health and economic threats posed by COVID-19. In addition, the administration created the White House Coronavirus Task Force.

The CARES Act includes a provision for GAO to report bimonthly on its ongoing monitoring and oversight efforts related to the COVID-19 pandemic. This initial report examines key actions the federal government has taken to address the COVID-19 pandemic and evolving lessons learned relevant to the nation’s response to pandemics, among other things.

GAO reviewed data and documents from federal agencies about their activities and interviewed federal and state officials as well as industry representatives. GAO also reviewed available economic, health, and budgetary data.

What GAO Recommends

GAO is making three matters for consideration for Congress and three new recommendations for agencies that are detailed in this Highlights and in the report.

Recommendations

Matters for Congressional Consideration

Number Matter
1

In the absence of efforts to develop a plan, we urge Congress to take legislative action to require the Secretary of Transportation to work with relevant agencies and stakeholders, such as the Departments of Health and Human Services and Homeland Security, and members of the aviation and public health sectors, to develop a national aviation-preparedness plan to ensure safeguards are in place to limit the spread of communicable disease threats from abroad while at the same time minimizing any unnecessary interference with travel and trade. (Matter for Consideration 1)

2

To provide agencies access to Social Security Administration’s more complete set of death data, we urge Congress to provide the Department of the Treasury with access to the Social Security Administration’s full set of death records, and to require that the Department of the Treasury consistently use it. (Matter for Consideration 2)

3

To help ensure that federal funding is targeted and timely, we urge Congress to use GAO’s Federal Medical Assistance Percentage formula for any future changes to the Federal Medical Assistance Percentage during the current or any future economic downturn. (Matter for Consideration 3)

Recommendations for Executive Action

Recommendations for Executive Action

We are making a total of three recommendations—one each to the Department of Labor, Internal Revenue Service, and Small Business Administration:

Number Agency Recommendation
1 Department of Labor

The Secretary of Labor should, in consultation with the Small Business Administration and the Department of the Treasury, immediately provide information to state unemployment agencies that specifically addresses the Small Business Administration’s Paycheck Protection Program loans, and the risk of improper payments associated with these loans. (Recommendation 1)

2 Department of the Treasury : Internal Revenue Service

The Commissioner of Internal Revenue should consider cost-effective options for notifying ineligible recipients on how to return payments. (Recommendation 2)

3 Small Business Administration

The Administrator of the Small Business Administration should develop and implement plans to identify and respond to risks in the Paycheck Protection Program to ensure program integrity, achieve program effectiveness, and address potential fraud, including in loans of $2 million or less. (Recommendation 3)

View recommendation(s) status

Introduction 


Congressional Committees

Pandemic outbreaks can lead to catastrophic loss of life, as well as sustained damage to the economy, societal stability, and global security. The outbreak of Coronavirus Disease 2019 (COVID-19), a strain of coronavirus to which the public does not have immunity, was first reported on December 31, 2019, in Wuhan, China. In the weeks that followed, the virus quickly spread around the globe. On January 31, 2020, the Secretary of Health and Human Services declared a public health emergency for the United States, retroactive to January 27. [1] On March 11, 2020, the World Health Organization (WHO) characterized COVID-19 as a pandemic.

Unlike incidents that are discretely bounded in space or time (e.g., most natural or man-made disasters), a pandemic is not a singular event, but is likely to come in waves, each lasting weeks or months, and pass through communities of all sizes across the nation and the world at various times. Health care systems in some U.S. communities were put under severe strain and required assistance from federal and state governments, which led to the construction of temporary hospitals in untraditional locations, such as convention centers. And while a pandemic will not directly damage physical infrastructure such as power lines or computer systems, it threatens the operation of critical systems by potentially removing the essential personnel needed to operate them from the workplace for weeks or months.

The nation has already seen the spillover effects of a pandemic on the economy as millions have lost their jobs due to stay-at-home orders and business closures aimed at “flattening the curve,” or taking the burden off the health care system by reducing infections to a manageable level. From March 21 to May 30, 2020, there was an increase of over 42 million unemployed Americans, turbulence in the stock market, and an overall downturn in the U.S. economy. As of June 17, the United States had approximately 2,104,000 reported cases and 103,000 reported deaths. [2]

In response to this unprecedented global crisis, Congress and the administration have taken a series of actions to protect the health and well-being of Americans. Notably, in March 2020, Congress passed, and the President signed into law, the CARES Act, which provides over $2 trillion in emergency assistance and health care response for individuals, families, and businesses affected by COVID-19. [3] In addition, the Paycheck Protection Program and Health Care Enhancement Act, enacted in April 2020, provides additional appropriations for small business loans, grants to health care providers, and COVID-19 testing. [4] Moreover, agencies from across the federal government were called on for assistance while shifting staff to telework, requiring an unprecedented level of dedication and agility among the federal workforce, including those serving on the front lines to quickly establish services for those infected with the virus.

The CARES Act also includes a provision for GAO to conduct monitoring and oversight of the use of funds made available to prepare for, respond to, and recover from the COVID-19 pandemic. [5] GAO is to report on, among other things, the pandemic’s effects on the public health, economy, and public and private institutions of the United States, including the federal government’s public health and homeland security efforts. Additionally, GAO is to report on loans, loan guarantees, and other investments and to conduct a comprehensive audit and review of charges made to federal contracts pursuant to the CARES Act, among other things.

Work on these oversight responsibilities is ongoing. As of June 17, 2020, GAO has 51audits under way related to the pandemic examining a variety of issues, including small business programs, the Strategic National Stockpile (SNS), the Defense Production Act (DPA), the Department of Veterans Affairs’ response to COVID-19, child welfare and education, worker safety, homeowner and renter protections, and COVID-19 testing.

The CARES Act includes a provision for GAO to submit a report within 90 days of enactment on its ongoing monitoring and oversight efforts related to the COVID-19 pandemic, with subsequent reports due every 60 days. This report is the first in a series of bimonthly reports that will be issued between June 2020 and March 2021. GAO also plans to issue additional reports focusing on specific topics.

This first report examines

  1. the key actions the federal government has taken, to date, to respond to and recover from COVID-19;
  2. potential indicators for monitoring the public health system’s preparedness for, response to, and recovery from COVID-19 and key areas of the economy targeted by federal efforts; and
  3. evolving lessons learned relevant to the nation's response to the COVID-19 pandemic.

For this initial work, to examine key actions the federal government has taken to respond to the COVID-19 pandemic, we examined federal laws and agency documents, guidance, processes, and procedures, and available agency budgetary data; and we interviewed federal and state officials and industry representatives. Centralized data on federal spending for the pandemic response were not yet available as of June 2020; therefore, we obtained agency spending data from specific agencies that received some of the largest appropriations in the four COVID-19 relief laws. Data are generally reported as of May 31, 2020 unless otherwise noted in the report. We report the data as provided by the agencies. We found the data to be sufficiently reliable for our purposes.

To identify agencies’ contract obligations in response to COVID-19, we reviewed Federal Procurement Data System-Next Generation data through May 31, 2020. We identified obligations related to COVID-19 using the National Interest Action code, as well as the contract description. We assessed the reliability of federal procurement data by reviewing existing information about the Federal Procurement Data System-Next Generation and the data it collects—specifically, the data dictionary and data validation rules—and performing electronic testing. We determined that the data were sufficiently reliable for the purposes of describing agencies’ reported contract obligations in response to COVID-19.

We also reviewed prior GAO work, information from relevant federal agencies responsible for the pandemic response and oversight of the health care system, selected studies produced by experts in public health and epidemiology, data collected by state health departments, and examples of federal government response to past national emergencies. [6] We reviewed testing data and limitations reported by the Centers for Disease Control and Prevention (CDC) over time, including the most recent information from CDC’s COVID Data Tracker website as of May 31, 2020. We also interviewed CDC officials to obtain information on steps taken to report testing data, and we reviewed federal laws, other requirements, and CDC guidance related to states’ and laboratories’ submission of testing data. We also visited alternate care facilities constructed by the U.S. Army Corps of Engineers in Colorado and the District of Columbia. We selected these facilities based on the type and size of the facility and geographic diversity.

To identify potential indicators for monitoring areas of the economy supported by the federal response to the pandemic, we reviewed a number of sources, including prior GAO work, releases from federal statistical agencies, data available on the Bloomberg Terminal, and input from internal GAO experts.

In carrying out our statutory oversight responsibilities, we generally received good cooperation from the audited agencies. However, we were not able to obtain timely information from some agencies, and for that reason we were not able to conduct some of the analyses we had planned. We encountered the most difficulty trying to obtain information from the Small Business Administration (SBA), and we are continuing to work with SBA to obtain information for our subsequent reports. See appendix I for additional details on the scope and methodology for this report.

In carrying out our work, we coordinated with other entities providing oversight of the nation’s response to COVID-19. Specifically, the CARES Act created the Pandemic Response Accountability Committee within the Council of the Inspectors General on Integrity and Efficiency. [7] The mission of the Council of the Inspectors General on Integrity and Efficiency is to (1) prevent and detect fraud, waste, abuse, and mismanagement and (2) mitigate major risks that cut across program and agency boundaries. [8] Within a week of the enactment of the CARES Act, we began coordinating our work with Pandemic Response Accountability Committee leadership and the inspectors general of various agencies. This communication and coordination with these entities continues. Working with the National Association of State Auditors, Comptrollers, and Treasurers, we also established a working group consisting of inspectors general and auditors from the state and local levels of government. The CARES Act also established the Special Inspector General for Pandemic Recovery within the Department of the Treasury (Treasury), and we plan to coordinate with this office once it is operational. Finally, we plan to coordinate with the Congressional Oversight Commission, which was established to oversee implementation of the economic stabilization provisions by Treasury and the Board of Governors of the Federal Reserve System (Federal Reserve), and with the House of Representatives’ Select Subcommittee on the Coronavirus Crisis.

We conducted this performance audit from March 2020 to June 2020 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Background 


COVID-19 is caused by a new coronavirus named Severe Acute Respiratory Syndrome CoV-2 (SARS-CoV-2). There are several different types of coronaviruses, some of which are responsible for the common cold, and some of which cause severe respiratory illness and have high mortality rates. [9] In addition to COVID-19, other severe outbreaks of respiratory illness caused by coronaviruses in the past 20 years include SARS and Middle East Respiratory Syndrome.

As of May 2020, researchers generally expect that those individuals who contract COVID-19 will develop antibodies that may provide some level of immunity. However, according to CDC, it is currently unknown if such antibodies can protect from reinfection with the same strain of virus or how long this protective immunity might last. Potential vaccines and therapies for COVID-19 are in the early stages of a multistep development process, so the timing of vaccine availability is still unknown. [10] The administration has a program to accelerate vaccine development, which aims to have a vaccine available by January 2021.

Health Effects of COVID-19

As of June 17, 2020, according to the WHO, there had been approximately 8,062,000 reported cases of COVID-19 that had resulted in 440,000 reported deaths worldwide. As mentioned above, there had been approximately 2,104,000 reported cases and 103,000 reported deaths in the United States. [11] However, according to CDC, the actual number of COVID-19 cases and deaths is unknown. [12] Figures 1 and 2 show the reported cumulative number of COVID-19 cases and deaths, respectively, in the United States from March 7 through June 17, 2020.

Figure 1: Reported Cumulative COVID-19 Cases: United States, as of June 17, 2020

Note: Reported COVID-19 counts include confirmed and probable cases. According to CDC, the actual number of cases are unknown for a variety of reasons, including that people who have been infected may have not been tested or may have not sought medical care. CDC reports daily case counts. While June 15, 2020, was the last available date for daily cases reported, the data presented in the figure were last updated on June 17, 2020.

Figure 2: Reported Cumulative COVID-19 Deaths: United States, as of June 17, 2020

Note: National Center for Health Statistics (NCHS) provisional death counts include both confirmed and probable or presumed deaths. The counts reported are the total number of deaths received and coded as of the date of analysis and do not represent all deaths that occurred in that period. Provisional counts are incomplete because of the lag in time between when the death occurred and when the death certificate is completed, submitted to NCHS, and processed for reporting purposes. This delay is an average of 1-2 weeks and can range from 1 to 8 weeks or more, depending on the jurisdiction, age, and cause of death. NCHS also notes that COVID-19 deaths may be misclassified as deaths due to pneumonia or influenza in the absence of a positive test result. NCHS reports weekly death counts. While June 13, 2020, was the last available week-ending date for deaths reported, the data presented in the figure were last updated on June 17, 2020.

Economic Effects of COVID-19

The COVID-19 pandemic and related policies that limited certain economic activities have had a rapid and severe effect on the U.S. and global economies—by many measures, more rapid and more severe than the December 2007-June 2009 Great Recession. In order to limit social contact and slow the spread of the pandemic, nearly all U.S. states implemented policies that had the effect of limiting certain economic activities, in particular closures of nonessential businesses. Similarly, many other businesses and organizations voluntarily limited, substantially altered, or ceased operations in response to falling demand or in order to reduce the risk of contagion among their employees. Widespread business closures led to immediate and substantial job losses and have led to growing losses in revenue for those businesses. Measured economic activity has similarly slowed dramatically, as indicated, for example, by falling industrial production, retail sales, and personal income in the United States.

The pandemic has also led to a considerable degree of uncertainty about future economic activity, which has caused businesses to delay plans for investment and households both to delay large expenditures and to shift remaining spending toward essential household needs. Falling incomes and lower spending will reduce tax revenues to federal, state, and local governments, while heightened demands on federal and state social programs are likely to increase expenditures. [13]

While these and other effects have been widespread across the U.S. economy, they have also disproportionately affected certain industries and households. Businesses that depend on interpersonal contact for providing goods and services—and others deemed nonessential under state orders—have been more severely impacted, including businesses in the leisure and hospitality sector and certain retailers. Moreover, low-income households have few liquid financial assets to assist in weathering even a relatively short economic downturn, and some of the most affected sectors tend to have significantly lower average earnings than other sectors. In addition, tribal governments are particularly dependent on revenues from tribally owned businesses, including in the severely affected leisure and hospitality sectors.

Timeline of Key Congressional and Administration Actions

In response to the COVID-19 pandemic and its effects, Congress and the administration have taken a series of actions. Figure 3 shows significant federal actions taken from January to June 2020.

Figure 3: Significant Federal Actions Related to COVID-19, as of June 5, 2020

aThe Secretary of Health and Human Services may declare a public health emergency if the Secretary determines that (1) a disease or disorder presents a public health emergency or (2) a public health emergency, including significant outbreaks of infectious disease or bioterrorist attacks, otherwise exists. 42 U.S.C. § 247d.
bThe Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 provides $7.8 billion to agencies for health emergency prevention, preparedness, and response activities related to COVID-19, with HHS appropriated a majority of the funds. Pub. L. No. 116-123, 134 Stat. 146 (2020).
cA declaration under the National Emergencies Act authorizes the President to activate existing emergency authorities in other statutes, and the President must cite the authorities being exercised. 50 U.S.C. § 1621. A governor may request an emergency declaration under the Stafford Act if the situation is of such severity and magnitude that effective response is beyond the capabilities of the state and the affected local governments, and federal assistance is necessary. 42 U.S.C. § 5191. According to the Federal Emergency Management Agency, the President declared a nationwide emergency pursuant to 42 U.S.C. § 5191(b) to avoid governors needing to request individual emergency declarations.
dThe Families First Coronavirus Response Act provides supplemental appropriations for nutrition assistance programs and public health services and authorizes the Internal Revenue Service to provide tax credits for paid emergency sick leave and expanded family medical leave that the act requires certain employers to provide. In addition, the act provided states with flexibility to temporarily modify provisions of their unemployment insurance laws and policies related to certain eligibility requirements and provided additional federal financial support to the states. Pub. L. No. 116-127, 134 Stat. 178 (2020).
eThe Defense Production Act gives the President broad authority to mobilize domestic industry in service of national defense (including programs for certain military activities, homeland security, stockpiling, space, and emergency preparedness activities under the Stafford Act, among other things). 50 U.S.C. § 4501 et seq.
fA governor may request a major disaster declaration under the Stafford Act if the disaster is of such severity and magnitude that effective response is beyond the capabilities of the state and affected local governments, and federal assistance is necessary. 42 U.S.C. § 5170.
gThe CARES Act provides supplemental appropriations for federal agencies to respond to COVID-19. In addition, it also funds various loans, grants, and other forms of assistance for businesses, industries, states, local governments, and hospitals; provides tax rebates for certain individuals; temporarily expands unemployment benefits; and suspends payments and interest on federal student loans. Pub. L. No. 116-136, 134 Stat 281 (2020).
hThe Paycheck Protection Program and Health Care Enhancement Act provides additional appropriations for small business loans, grants to health care providers, and COVID-19 testing. Pub. L. No. 116-139, 134 Stat. 620 (2020).
iThe Paycheck Protection Program Flexibility Act of 2020 expands the amount of time Paycheck Protection Program borrowers have to use Program funds and modifies several key program components such as forgiveness eligibility criteria and limits on the use of funds for non-payroll costs. Pub. L. No. 116-142, 134 Stat. 641.

Structure of the U.S. Government’s Pandemic Response

The COVID-19 pandemic has affected the entire country and required solutions to issues that have arisen as the event unfolded. As such, the operational response to the pandemic has required support from all of the nation’s existing systems and structures designed to help manage the response to both public health emergencies and natural disasters across multiple federal departments. Overall, the White House Coronavirus Task Force is responsible for coordinating the whole-of-government response. The U.S. Government COVID-19 Response Plan (PanCAP) describes the structure and authorities to lead and coordinate this response. [14] According to officials responsible for supporting the response at the Federal Emergency Management Agency (FEMA) and the Department of Health and Human Services (HHS), although rapidly evolving situations have required some adaptation as the response unfolds, the PanCAP generally remains the operative plan for the federal response.

As described in the PanCAP, the Unified Coordination Group—made up of the FEMA Administrator, the HHS Assistant Secretary for Preparedness and Response (ASPR), and a CDC representative—has responsibility for operational command, leadership, and decision making for the COVID-19 pandemic response. The three leaders are partners in operational decision-making for the whole-of-government response and provide input to the White House Coronavirus Task Force. The National Security Council also provides guidance to the White House Coronavirus Task Force on matters of policy.

According to FEMA and HHS officials involved in the response and operational documents used in response coordination, FEMA, ASPR, and CDC have complementary roles that correspond to their missions and expertise. The FEMA Administrator, for example, focuses on directing nationwide operational needs—such as the logistics of moving material, supplies, and personnel to meet emergent needs and tracking the delivery of these supplies. The ASPR and CDC representatives focus on issues that require their medical and public health expertise—such as community-based testing, hospital preparedness, and development and testing of potential therapeutics.

As with any emergency or major disaster triggering the need for a coordinated federal emergency protective measure response, the National Response Coordination Center (NRCC), which operates out of FEMA, is the hub for coordinating response actions and resources across federal agencies. To address the multiple dimensions of a pandemic response, eight operational task forces work out of the NRCC. For example, a laboratory diagnostic task force is responsible for coordinating with stakeholders to understand the COVID-19 testing supply chain and rapidly evolving testing needs. According to FEMA officials, these task forces bring together federal departments and agencies with the relevant expertise, authorities, and capabilities necessary to address unmet needs. Through these task forces, the NRCC can use existing authorities, processes, resources, and funding for each of the agencies that comprise each Emergency Support Function (ESF) under the National Response Framework to meet the needs of the response as they arise. [15] See appendix II for more information on federal structures to lead and coordinate the overall pandemic response.

Major Findings 

Key Federal Actions to Respond to and Recover from COVID-19

The federal response to COVID-19 has been a whole-of-government effort. In particular, the four COVID-19 relief laws appropriated about $2.6 trillion to fund response and recovery efforts, as well as to mitigate the public health, economic, and homeland security effects of COVID-19. [16] The Paycheck Protection Program, Economic Stabilization and Assistance to Distressed Sectors, unemployment insurance, Internal Revenue Service (IRS) economic impact payments, Public Health and Social Services Emergency Fund, and Coronavirus Relief Fund comprise $2.2 trillion, or 86 percent, of the $2.6 trillion appropriated as of May 31, 2020. Figure 4 shows appropriations for the COVID-19 response by major spending area.

Figure 4: Appropriations for COVID-19 Response from COVID-19 Relief Laws Enacted, as of May 31, 2020, by Major Spending Area

Notes: COVID-19 relief laws enacted as of May 31, 2020, include the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146; Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020); CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020); and Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020).
These amounts are based on warrants issued as of May 31, 2020 by Treasury to agencies in response to appropriations made by COVID-19 relief laws. A warrant is an official document issued upon enactment of an appropriation that establishes the amount of money authorized to be withdrawn from the Treasury. These amounts could increase in the future for programs with indefinite appropriations, which are appropriations that, at the time of enactment, are for an unspecified amount. In addition, this figure does not represent transfers of funds that agencies may make between accounts or transfers of funds they may make to other agencies, to the extent authorized by law.

Total federal spending data are not readily available because under Office of Management and Budget (OMB) guidance, federal agencies are not directed to report COVID-19 related obligations (government financial commitments) and expenditures until July 2020. [17] We will examine these spending data when they become available and include our analysis in our future reporting.

In the absence of comprehensive data, we collected obligation and expenditure data from agencies, to the extent practicable, as of May 31, 2020. For the six largest spending areas, we found obligations totaled $1.3 trillion and expenditures totaled $643 billion.

GAO also collected expenditure data on other programs impacted by the federal response. For example, we found that HHS has provided $7 billion in COVID-19 Medicaid funding to states and territories, most of which is the result of the increased Federal Medical Assistance Percentage (FMAP), the statutory formula according to which the federal government matches states’ spending for Medicaid services. Increased spending in Medicaid is not accounted for in the appropriations provided by the relief laws because they did not include supplemental appropriations for the FMAP increase. [18] Based on the information we collected, government-wide spending totals at least $677 billion, as of May 31, 2020.

The administration has taken a number of actions to respond to and recover from COVID-19. While certain federal departments and agencies—including HHS, Treasury, SBA, and FEMA—have lead roles, the federal response has spanned the government. In examining federal efforts, we grouped them into the following categories:

  • Public health response
  • Assistance to individuals
  • Industry/economic support
  • Assistance to states, localities, and tribes
  • Federal contracting
  • International response

We examine many of these efforts below, and additional information is provided in enclosures presented in appendix III.

HHS Took Action but Experienced Substantial Challenges with Its Initial COVID-19 Public Health Response

The four COVID-19 relief laws appropriated more than $250 billion to HHS to address various aspects of the public health response. According to HHS, the department has obligated about $101 billion of these appropriations and expended about $67 billion as of May 31, 2020, through grants, contracts, loans, direct payments, and other awards. For additional information on the supplemental appropriations to HHS and related obligations and expenditures, see “HHS COVID-19 Funding” in appendix III. Examples of obligations and expenditures include the following:

  • As of May 31, 2020, HHS expended about $65 billion to provide funding to providers, such as hospitals, to respond to COVID-19, according to the department. [19] This includes funding for Medicare providers, as well as providers heavily impacted by COVID-19; rural health care providers; skilled nursing facilities; and Indian Health Service, tribal, and Urban Indian facilities.
  • CDC allocated about $12.1 billion for awards to state, local, territorial, and tribal organizations as of May 31, 2020, according to agency officials. Of this amount—about $10.3 billion—is to support COVID-19 testing nationwide. [20] CDC awarded the remaining $1.8 billion to these entities to support activities, including COVID-19 surveillance, epidemiology, laboratory capacity, infection control, mitigation, communications, and other preparedness and response activities. [21]
  • As of May 31, 2020, HHS reported obligations of about $3.612 billion to support treatments or vaccines for COVID-19, of which about $18 million had been expended.

HHS and other agencies have taken a number of actions to respond to the medical and public health needs of the unprecedented COVID-19 pandemic. However, initial observations of the public health response have highlighted substantial challenges. These challenges are specific to COVID-19 testing and the distribution, acquisition, and adequacy of critical supplies and are detailed below.

CDC’s Efforts to Collect Testing Data

HHS and its agencies, including CDC, have taken steps to meet the unprecedented need for COVID-19 testing data, although the data reported through May 31, 2020, have not been complete or consistent. Testing provides information that is paramount to protecting public health, according to CDC. HHS agencies faced a number of challenges with regard to testing. [22] CDC developed the first COVID-19 test, which was authorized for use on February 4, 2020. However, this test experienced accuracy and reliability issues that resulted in significant delays in testing nationwide during the critical early weeks of the outbreak.

Performing sufficient testing is an important consideration for reopening communities. Viral tests can detect the virus that causes the disease to identify those who currently have COVID-19, while serology tests, also known as antibody tests, detect antibodies produced by patients who had previously been infected and provide information on prevalence of past infections in a community. According to principles put forward by the White House, CDC, and Food and Drug Administration on April 27, 2020, states manage COVID-19 testing programs—with federal support—and they must have systems in place to collect and report critical data. [23] Testing data, particularly the total number of viral tests performed for COVID-19 and the percentage of viral tests with positive results, should be used to make decisions about reopening communities, according to federal guidelines. [24]

CDC—the official federal source for testing data—has reported testing data provided by state and jurisdictional health departments, which, in turn, received these data from laboratories. The data that CDC reported on the amount of viral testing occurring nationwide was not complete or consistent, but HHS recently took an initial step intended to improve these data by implementing its new authority under the CARES Act to prescribe the testing data that all laboratories must report, as discussed later in this section.

  • CDC reported data that were not complete. Initial delays in testing during the early pandemic stages have resulted in limited information on the spread of COVID-19 in communities, and the sources of testing data CDC has used have changed with changes in testing practices over time. CDC initially reported that about 4,000 viral tests had been conducted nationwide from January 18, 2020, to February 29, 2020. These tests were performed by CDC, state, and other public health laboratories, which initially conducted all testing in the United States. Over time, CDC has added testing data from clinical or commercial laboratories, which CDC collected from states, in order to reflect additional types of laboratories performing tests, but as of May 31, 2020, testing data remained incomplete. [25]

    CDC’s website stated that the data posted there included the majority of, but not all, data on testing in the United States, as of May 31, 2020. For example, testing data that CDC reported may not have included all tests performed by laboratories at point-of-care settings, such as physicians’ offices. [26] Reporting all such data will likely become increasingly important because HHS estimated point-of-care testing will grow to 25 million tests per month by September 2020, or roughly half of the total tests that will be available at that time. According to CDC, collecting point-of-care testing data is crucial and, as of June 4, 2020, it had undertaken multiple efforts to assist laboratories with reporting these data.

  • CDC reported data that were not consistent. CDC reported testing data from different sources that have varied over time and have not been counting the tests the same way. The agency sought to improve the consistency of testing data by posting guidance on its website on May 6, 2020, for how the data should be submitted to states from clinical laboratories, which are one source of laboratory data, but not all sources from which CDC has collected state data have provided consistent testing data. For example, when states did not report data for a given day, CDC collected and reported testing data from states’ websites that aggregate testing data, but some states’ websites count the number of people tested while others count the number of samples tested, which could include multiple tests of one person.

    Further, in May 2020, CDC began reporting testing data it received directly from state health departments or obtained from other sources—reporting 16.8 million tests as of May 31, 2020. [27] CDC’s website initially referred to these data as viral testing data. However, these data were inaccurate because some state submissions also included antibody tests that detect prior COVID-19 infections. CDC subsequently changed its website to acknowledge that the data may include antibody tests from some states. According to CDC, in order to act quickly, it began collecting data from states on the total number of tests performed in early April—when antibody tests were not common—and has since taken steps to distinguish viral and antibody testing data. However, as of June 9, 2020, CDC continued to report these types of tests together. [28]

We determined that the testing data that CDC has reported have not provided sufficiently reliable information on the amount of COVID-19 viral testing occurring over time because data have been incomplete and inconsistent, but a recent action could improve the testing data CDC reports. CDC maintains that these were the best testing data available and they have provided critical insights into how much testing has occurred. However, CDC acknowledged limitations to these data and we found that the absence of complete and consistent COVID-19 testing data reported through May 31, 2020, has made it more difficult to track and know the infection rate, mitigate the effect of infections, and inform decisions on reopening communities. The CARES Act included a provision requiring laboratories to submit the result of each COVID-19 test in a manner specified by the Secretary of Health and Human Services. [29] Accordingly, on June 4, 2020, HHS issued guidance, pursuant to its new authority under the CARES Act, that requires all laboratories performing viral tests or other tests to diagnose a possible case of COVID-19 to submit data for these tests. [30] Required data include those on point-of-care tests and those that identify whether a viral or antibody test was performed. Importantly, the guidance also identifies other required data elements, such as patient demographic information, and directs laboratories to use existing regional, state, or local submission methods to provide these data, which, in turn, are sent to CDC. Laboratories must submit these data daily, starting as soon as possible and not later than August 1, 2020, according to the HHS guidance. We will continue to conduct work examining HHS and its component agencies’ data reporting, plans, and activities related to COVID-19 testing.

Distribution, Acquisition, and Adequacy of Critical Supplies

The nationwide need for critical supplies to respond to COVID-19 quickly exceeded the quantity contained in the SNS, which is designed to supplement state and local supplies during public health emergencies. According to the President’s budget proposal for fiscal year 2021, the SNS is the largest federally owned repository of pharmaceuticals, critical medical supplies, federal medical stations, and medical equipment available for rapid delivery to support the response to a public health emergency when state and local supplies are depleted. [31] In such an event, the SNS can be used as a short-term, stop-gap buffer, according to HHS officials. HHS’s ASPR is responsible for overseeing the SNS.

According to ASPR officials we interviewed in April 2020, the SNS did not have the capacity to provide states with supplies at the scale necessary to respond to a nationwide event such as the COVID-19 pandemic. For example, according to an ASPR official, the SNS did not contain the number of N95 respirator masks that would be needed in a severe pandemic. In a hearing before the Senate Committee on Appropriations on February 25, 2020, the Secretary of Health and Human Services said that the SNS contained 30 million N95 respirator masks; he further noted that health care workers could need 300 million to respond to the COVID-19 pandemic. [32] According to ASPR officials, HHS did not replenish personal protective equipment to previous levels following the H1N1 pandemic of 2009, because of a lack of funding. Further, according to ASPR’s website, the SNS is primarily designed and resourced to address discrete events—for example, limited displacements or localized disasters, such as hurricanes or terrorist attacks.

Annual appropriations for the SNS over the past decade ranged between $478 million (fiscal year 2013) and $705 million (fiscal year 2020), exclusive of the supplemental appropriations made available through the four relief laws enacted to assist the response to COVID-19. [33] However, ASPR officials told us that annual appropriations have not been sufficient to cover the costs associated with maintaining medical countermeasures necessary to respond to the tremendous increase in the number of material threats over the same period. In its fiscal year 2018-2022 budget plan for medical countermeasure development, HHS noted the challenge of maintaining a stockpile of medical countermeasures to use against many low-probability, high-consequence threats, while also maintaining the capacity to rapidly respond to novel threats, like emerging infectious diseases. [34] In nine of the twelve years during this period (fiscal years 2009 through 2020), Congress appropriated to the SNS amounts equal to or more than what the administration requested. In fiscal year 2020, the administration did not make a separate request for SNS funding.

HHS has worked in coordination with FEMA and the Department of Defense (DOD) to increase the availability of supplies for COVID-19. For example, HHS, FEMA, and DOD have purchased additional supplies, which they have distributed to states and others. According to DOD officials, distribution was based on allocation guidance provided by HHS and FEMA. However, there have been reports that the federal acquisition and distribution efforts to supplement SNS supplies lacked coordination, and resulted in challenges obtaining supplies. For example, in April 2020, the National Governors Association—whose membership comprises state governors, territories, and commonwealths—noted in a memorandum to governors’ offices that governors individually and through the association had called for improved coordination in the federal response to enable states to obtain critical supplies. [35]

The National Governors Association further noted that a more coordinated federal role would help states to obtain personal protective equipment, ventilators, and other critical supplies to protect responders and save lives without competition between states and with the federal government. Similarly, the Governors of Colorado and Michigan testified before the House Committee on Energy & Commerce in June 2020 that coordination of supplies between the federal government and states needed to be improved.

In addition, the United States Conference of Mayors surveyed 213 mayors in March 2020 and found that most cities did not have and could not obtain adequate equipment and supplies such as test kits, face masks, and ventilators. As a result, the United States Conference of Mayors asked the administration to “fully enforce” the Defense Production Act (DPA) for the purpose of increasing medical supplies. [36] That same month, the HHS Office of Inspector General reported on hospital shortages of personal protective equipment and other supplies, such as nasal swabs needed to test patients for COVID-19, in part due to supply chain issues or because supplies received from the SNS were not sufficient in terms of quantity or quality. [37] The President has taken several actions to allow federal agency use of DPA authorities to mitigate COVID-19 supply chain issues.

ASPR and FEMA officials told us that they did not consider the views of the National Governors Association or the United States Conference of Mayors to be representative or reflective of the entire response effort. Moreover, ASPR officials noted that many state stockpiles were inadequate, and that public reporting provides examples of where governors and mayors made unnecessarily large demands for federal resources. FEMA officials also noted that states overestimated their needs for supplies, such as ventilators. Although we requested information on the SNS inventory prior to the pandemic, the types and amounts of supplies that states requested, as well as what ASPR and FEMA distributed from the SNS in response to states’ requests, HHS and FEMA had not provided this information as of June 12, 2020. We plan to continue to seek this information from the agencies.

Findings from a 2019 pandemic planning exercise conducted by HHS’s ASPR in conjunction with multiple federal agencies, states, and stakeholders highlighted concerns about supply availability, as well as the SNS more generally, even before the emergence of COVID-19. [38] For example, ASPR’s findings noted that domestic manufacturing capacity would be unable to meet the demands for personal protective equipment and other supplies in the event of a global influenza pandemic. The concerns highlighted by the planning exercise echo concerns we raised almost two decades ago. Specifically, in 2003, we reported that urban hospitals lacked the necessary equipment, such as personal protective equipment, to respond to a large influx of patients experiencing respiratory problems caused by a bioterrorism event requiring a similar response to a naturally occurring disease outbreak. [39]

In response to the findings from the 2019 exercise, ASPR recommended several actions, including the development of a prioritization strategy for the distribution and allocation of scarce resources, a report to Congress detailing supply chain shortages, and a legislative proposal to support the investment in and development of domestic manufacturing capability. HHS officials told us that the department had been unable to take action to address these recommendations prior to the COVID-19 pandemic. However, in comments provided by HHS, the Department said ASPR officials had met with key congressional staff in October 2019 to highlight findings from the exercise, including supply chain and personal protective equipment shortages, lack of domestic manufacturing capacity, and potential funding requirements for medical countermeasures development. Further, HHS officials told us that they have used lessons learned from the exercise to inform the ongoing response to the COVID-19 pandemic, but did not provide any specific examples.

As a result of ongoing supply issues, in addition to new purchases, FEMA, HHS, and DOD have provided supplies through other federal inventories and other efforts. For example, the Supply Chain Task Force—jointly led by detailees from FEMA and DOD—has focused extensively on identifying and providing personal protective equipment, ventilators, and other resources requested by states, tribes, and territories, according to FEMA officials. The Supply Chain Task Force launched Project Air Bridge on March 29, 2020, to expedite the delivery of critical supplies. [40] Through this project, these agencies transport supplies from oversees manufacturers to distribute them to areas of need in the United States, reducing shipment time from weeks to days, according to FEMA’s website.

More recently, on May 14, 2020, the Administration announced plans to restructure the SNS based on lessons learned from recent pandemics, including COVID-19. The President signed an Executive Order providing authority to the International Development Finance Corporation to make loans and take other actions to expand domestic production of strategic resources needed to respond to the COVID-19 pandemic. [41] Following the administration's announcement and Executive Order, ASPR issued a request for information to gather information from the private sector and other organizations on how to restructure the SNS and improve supply availability, among other things. We have ongoing work examining the materials states requested from the SNS for COVID-19; the alignment of supplies in the SNS with threat risks; coordination and communication with states, territories, localities, and tribes; and actions taken, if any, to mitigate supply gaps. We are also examining how federal agencies used authority under the DPA to obtain needed supplies.

Table 1 provides a summary of additional information on the federal public health response presented in enclosures in appendix III, which also include descriptions of GAO’s future work.

Table 1: Areas in Which the Federal Government Has Taken Action in the Public Health Response to COVID-19
Area name Description
Relief for Health Care Providers The Department of Health and Human Services is distributing more than $177 billion to financially support health care providers, finance care for COVID-19 patients and underserved populations, and finance existing Health Resources and Services Administration programs.
Nursing Homes The Department of Health and Human Services required state survey agencies to focus on infection control inspections as many nursing homes faced outbreaks of COVID-19, and past inspections show that infection control deficiencies had been widespread and persistent prior to the pandemic.
Federal Efforts to Provide Medical Supplies States’ requests for medical equipment and supplies, such as personal protective equipment, quickly exceeded the capacity of the Strategic National Stockpile, resulting in a multiagency response to acquire and distribute material.
COVID-19 Testing The Department of Health and Human Services plays a key role in coordinating test development and implementation, but faces challenges in facilitating testing and reporting results.
Vaccine and Therapeutics Development Multiple federal agencies are taking actions to develop vaccines and therapeutics to prevent and treat COVID-19, including funding research and clinical trials, but it is not known when or if a safe and effective vaccine (or vaccines) and therapeutics will be widely available.
Medicaid Financing, Waivers, and Flexibilities Federal assistance related to COVID-19 provided increased federal Medicaid funding for states and territories to support the costs of their Medicaid programs, including COVID-19 testing and treatment costs. The Centers for Medicare & Medicaid Services has also approved waivers and other flexibilities to help state Medicaid programs respond to the COVID-19 pandemic.
Medicare Waivers In response to COVID-19, the Centers for Medicare & Medicaid Services expanded availability of Medicare services through widespread use of program waivers, including for telehealth services. Careful monitoring and oversight are required to prevent potential fraud, waste, and abuse that can arise from these new waivers.
Indian Health Service Indian Health Service received over $1 billion in supplemental funds to prevent, prepare, and respond.
Veterans Health Care The Veterans Health Administration has increased its capacity to deliver COVID-19 care for veterans, through efforts such as hiring clinical staff and increasing telehealth services, using existing and supplemental funds.
Military Health The Department of Defense has taken steps to test and track COVID-19 cases among servicemembers, provide care through the military health system, and protect the health of U.S. military forces.
Medical Surge Multiple federal agencies have deployed personnel, alternative care sites, and equipment to help surge medical and public health capabilities during the COVID-19 response.
DOD Support to Civil Authorities The Department of Defense is providing people, equipment, and supplies to support civil authorities during the COVID-19 pandemic.
HHS COVID-19 Funding Congress appropriated more than $250 billion to the Department of Health and Human Services to address various aspects of the public health response to COVID-19, of which about $101 billion had been obligated and about $67 billion had been expended as of May 31, 2020, according to department officials.
Source: GAO. | GAO-20-625

Intergovernmental Coordination, Efficiency, and Program Integrity Pose Challenges in Quickly Delivering Assistance to Individuals and Households

Multiple agencies provided timely assistance to individuals and households to alleviate the financial hardships faced by many as the country worked to stop the spread of COVID-19. Key efforts in this area included economic impact payments, unemployment insurance, and nutrition assistance. Agencies often faced challenges with intergovernmental coordination, efficiency, and program integrity.

Economic Impact Payments

The Internal Revenue Service (IRS) moved quickly to identify eligible recipients of the economic impact payments. Within 2 weeks after enactment of the CARES Act, Treasury, through its Bureau of the Fiscal Service (BFS), and IRS disbursed more than 81 million payments totaling more than $147 billion, all through electronic transfers to recipients’ bank accounts. As of May 31, 2020, IRS and Treasury had disbursed 160.4 million payments worth $269.3 billion through a combination of electronic transfers to bank accounts, paper checks, and prepaid debit cards. [42]

The agencies faced difficulties with (1) identifying and then delivering payments to people who did not file tax returns for 2018 or 2019, including recipients with low adjusted gross incomes or whose sole income is federal benefits, such as Social Security; (2) delivering payments to recipients without bank accounts or who have limited or no internet access; and (3) quickly distributing paper checks, given that Treasury has capacity to deliver 5 to 7 million paper checks a week in addition to checks for other federal programs.

IRS and Treasury face additional risks related to making improper payments to ineligible individuals and fraud. [43] For example, IRS typically uses third-party data, such as the death records maintained by the Social Security Administration (SSA), to detect and prevent erroneous and fraudulent tax refund claims. Treasury and IRS did not use the death records to stop payments to deceased individuals for the first three batches of payments because of the legal interpretation under which IRS was operating. The first three batches of payments accounted for 72 percent of the payments disbursed as of May 31. According to the Treasury Inspector General for Tax Administration, as of April 30, almost 1.1 million payments totaling nearly $1.4 billion had gone to decedents. [44]

According to IRS officials, an IRS working group charged with administering the payments first raised questions with Treasury officials about payments to decedents in late March as Congress was drafting legislation. IRS counsel subsequently determined that IRS did not have the legal authority to deny payments to those who filed a return for 2019, even if they were deceased at the time of payment. IRS counsel further advised that the agency should exercise discretion provided for in the CARES Act to apply the same set of processing rules to recipients who had filed a 2018 return but not yet a 2019 return. IRS officials said on the basis of this determination they did not exclude decedents in their programming requirements.

According to Treasury officials, the CARES Act directed payments to taxpayers who filed a 2018 or 2019 return, or allowed IRS to use information from taxpayers’ 2019 Social Security or Railroad Retirement Benefit Statement. Some of these taxpayers may have been deceased at the time the payments were delivered. Treasury officials also stated that the CARES Act mandated the delivery of the economic impact payments as “rapidly as possible.” To fulfill this mandate, Treasury officials said Treasury and IRS used many of the operational policies and procedures developed in 2008 for the stimulus payments, and therefore did not use the death records as a filter to halt payments to decedents in the first three batches of payments. [45] However, in 2013, GAO identified weaknesses in IRS processes that allowed payments to deceased individuals and recommended corrective actions. As a result, IRS implemented a process to use death records to update taxpayers’ accounts in order to identify and prevent improper payments. [46] Bypassing this control for the economic impact payments, which has been in place for the past 7 years, substantially increased the risk of potentially making improper payments to decedents.

According to a Treasury official from the Office of Tax Policy, Treasury was unaware the payments may go to decedents. Treasury officials said that upon learning that payments had been made to decedents, Treasury and IRS, in consultation with counsel, determined that a person is not entitled to receive a payment if he or she is deceased as of the date the payment is to be paid. Such payments are potentially improper payments under the Payment Integrity Information Act of 2019. [47] BFS and IRS removed such payments starting with the fourth payment batch.

On May 6, 2020, IRS announced on its website that if a payment was issued to a decedent or incarcerated individual, the total amount should be returned. [48] However, IRS does not currently plan to take additional steps to notify ineligible recipients on how to return payments. Internal control standards state that management should communicate the necessary information to achieve the entity’s objectives. Also, management should select appropriate methods to communicate, considering factors such as intended audience, availability of information, and cost to communicate information. [49] Ineligible payment recipients who do not visit IRS’s website or do not have internet access may not be aware of the process to return payments.

IRS should consider cost-effective options for notifying ineligible recipients on how to return payments. For example, IRS sent letters to payment recipients’ last known address, within 15 days after the economic impact payments were made, to provide information on how the payment was made and how to report any failure to receive the payment. IRS could consider sending a similar letter to all recipients or a subset of ineligible recipients notifying them about the payment return process. Without exploring cost-effective options to communicate the payment return process, ineligible recipients who would otherwise want to return the payments may be unaware how to do so.

The number of economic impact payments going to decedents also highlights the importance of consistently using safeguards in providing government assistance to individuals. IRS has full access to the death data maintained by SSA, but Treasury and BFS do not. Starting with the fourth batch of payments, IRS provided BFS temporary access to the full death data to filter out decedents until IRS was able to put in place its own process for filtering out such payments. We have suggested that Congress consider amending the Social Security Act to explicitly allow SSA to share its full death data with Treasury for data matching to prevent payments to ineligible individuals. [50] Both Treasury and IRS having full access to death data will help ensure the integrity of direct payments to individuals if Congress considers this type of assistance in the future.

IRS is also concerned that fraudsters could be using personally identifiable information to receive payments that belong to eligible recipients by accessing the IRS Get My Payment portal and routing the payment to a fraudster’s bank account. We previously raised concerns about the authentication safeguards of IRS’s online portals and applications, including the need to implement updated guidance. [51]

Unemployment Insurance

The unprecedented number of unemployment insurance (UI) claims in the wake of the COVID-19 pandemic is posing challenges to states’ capacity to process them, making it difficult for individuals to access UI benefits [52] . From March 21 to May 30, 2020, initial UI claims surpassed 42 million—compared to 5.1 million beneficiaries in all of fiscal year 2019, according to data provided by the Department of Labor (DOL)—and unemployment is expected to remain elevated. States are also implementing three new, federally funded programs created by the CARES Act that expand UI eligibility and benefits: [53]

  • Pandemic Unemployment Assistance, which generally authorizes up to 39 weeks of UI benefits to those who would not otherwise be eligible, including the self-employed and certain gig workers, who are unable to work as a direct result of COVID-19; [54]
  • Federal Pandemic Unemployment Compensation, which generally authorizes an additional $600 weekly benefit that augments UI benefits through July 2020; [55] and
  • Pandemic Emergency Unemployment Compensation, which authorizes an additional 13 weeks of UI benefits to those who exhaust their regular UI benefits. [56]

According to DOL officials and state workforce agency representatives, states face the following challenges in their efforts to address the needs of unemployed workers:

  • Antiquated data systems that cannot process such large volumes of claims. According to DOL and representatives of state workforce agencies, states with UI information technology systems that date as far back as the 1970s have reported crashes due to the current claims volumes. While DOL has assisted states’ efforts to modernize their UI systems in recent years by, for example, providing grants, technical assistance, and guidance, relatively few states had load-tested their systems for the current volume of claims, according to representatives of state workforce agencies.
  • Lack of adequate staff with the necessary experience to process claims. DOL officials and state workforce agency representatives told us that many states had reduced the number of staff that manage UI claims before the pandemic, in response to strong economic conditions and historically low unemployment rates. These officials also explained that given the complex nature of the UI program, training staff to process claims can require several months, and the claims of self-employed and gig workers add another layer of complexity.
  • The increased risk of improper payments given the new programs and increased number of UI claims. Overall, due to its reported level of improper payments, estimated at over $2.7 billion in overpayments in fiscal year 2019, the UI program has been designated as a high-priority program by DOL’s Office of Inspector General. Furthermore, DOL’s experience with temporary UI programs following natural disasters suggests there may be an increased risk of improper payments associated with CARES Act UI programs. For example, DOL’s Office of Inspector General has found improper payments in past audits of the Disaster Unemployment Assistance program, the regulations for which generally apply to Pandemic Unemployment Assistance program. Specifically, improper payments may occur when UI claimants return to work but fail to report their employment, while continuing to claim benefits, among other reasons. There is also a risk of improper payments being made as a result of the new Paycheck Protection Program (PPP), [57] designed to provide loans to small businesses to help them keep their workers on payroll. Improper payments could occur if certain workers paid with PPP proceeds simultaneously also receive UI benefits.

These challenges have resulted in delays and frustrations for individuals seeking UI benefits. For example, according to a nationwide Washington Post-Ipsos poll conducted in late April and early May 2020, 40 percent of respondents who applied for UI benefits were unable to complete their applications due to technical problems, such as busy phone lines or system failures. [58]

As businesses reopen and claimants seek reemployment, the UI program and its partners will face additional challenges, with large numbers of workers returning to work. [59] As of June 3, 2020, DOL had issued no new information specific to COVID-19 to states and others regarding reemployment services, although DOL has reminded states and other partners of existing resources and flexibilities that can support services for all jobseekers. According to DOL, states already have full authority to operate the programs that can serve jobseekers. Additionally, according to DOL, states and local partners are beginning to deliver services both virtually and in person, and are developing plans to deliver in-person services safely, such as by reconfiguring physical space. [60]

Even as individuals are offered the opportunity to return to work, they may choose not to do so. For example, although the $600 additional weekly benefit under Federal Pandemic Unemployment Compensation, currently available through July 2020, can help claimants and promote public health, it may be one of the reasons that individuals chose not to return to work as quickly as they could. Also, claimants may have health and safety concerns, making them hesitant to return to work. [61] DOL has encouraged states to ask employers to provide information when workers refuse to return to their jobs for reasons that do not support their continued eligibility for benefits. [62]

To assist states, DOL issues guidance documents and provides technical assistance and funding. DOL also conducts oversight of state UI activities, and is continuing to fully develop and implement its approach for overseeing the new UI programs. DOL began issuing guidance to states in March 2020 to assist them in processing their claims volume and implementing new CARES Act programs, which included, among other things, guidance to help states identify and prevent improper payments.

Specifically, DOL has provided technical assistance to states through webinars and conference calls; created a COVID-19 website for the UI programs; and created a COVID-19 email account for states’ questions. Additionally, according to DOL, the department has worked collaboratively with an association of state workforce agencies to develop training to support implementation of the Pandemic Unemployment Assistance program and has provided technical assistance by, for example, leveraging the assistance of its Chief Information Officer. DOL has disbursed to states nearly all of the $1.0 billion in emergency administrative funds provided through the Families First Coronavirus Response Act. [63] This additional funding is expected to assist states by addressing their capacity to process the massive volume of claims. [64]

DOL officials told us that they are developing comprehensive monitoring materials and training to guide DOL staff in conducting program reviews of states to help ensure that states have the necessary processes in place to properly operate the programs and to detect and recover overpayments. Improper payment prevention and detection for the UI program has long been a concern identified by the DOL Office of Inspector General.

In addition to the UI programs, the CARES Act created some programs through SBA to, among other things, help small businesses keep workers on their payroll. The new PPP created by the CARES Act could increase the risk of improper payments in the UI program. The UI program is generally intended to provide benefits to individuals who have lost their jobs; under PPP, employers are generally required to retain or rehire employees (or face reductions in loan forgiveness eligibility). [65] According to SBA officials, consistent with PPP regulations, employers that take PPP loans must generally rehire laid-off employees or face loan forgiveness reductions, and must report to the state UI agency if any of those employees refuse to return to work. [66]

In the information DOL has provided to state unemployment agencies, it notes that states are expected to enforce statutory provisions related to fraud, or risk violating their agreement to administer the CARES Act UI programs. However, this information does not mention PPP loans or the risk of improper payments associated with such loans. According to DOL, no mechanism currently exists that could capture information in real time about UI claimants who may receive wages paid from PPP loan proceeds. DOL told us it plans to issue questions and answers to state agencies about this risk in the near future. Federal internal control standards state that effective information and communication are vital for an entity to achieve its objectives. [67] As such, the standards state that management should externally communicate the necessary quality information to achieve its objectives. Given the large number of SBA PPP loans and the millions applying for UI benefits, such clarification would call state attention to the potential for fraudulent or otherwise improper payments.

Nutrition Assistance

To help people access grocery and meal assistance and reduce administrative demands on state agencies due to the pandemic, the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) has approved hundreds of waivers and allowed other flexibilities across the Supplemental Nutrition Assistance Program (SNAP), child nutrition programs, and other programs. [68] For example, FNS allowed states to provide increased SNAP benefits through emergency allotments to households not already receiving the maximum amount to purchase food.

However, FNS has also denied some waiver requests from states, including some of which may affect particularly vulnerable populations. For instance, FNS denied requests from 31 states to suspend the requirement that college students work at least 20 hours per week or participate in federal work study to be eligible for SNAP. In letters to FNS, states reported that otherwise eligible students could not meet these requirements due to campus and business closures. FNS has also reiterated that states cannot provide emergency allotments to households that are already receiving the maximum SNAP benefit amount. [69] In a letter explaining these denials and others, FNS stated that it considered factors outlined in the Families First Coronavirus Response Act. [70] FNS officials further explained that they did not consider waiving restrictions on students’ eligibility to be allowable under these factors, and that providing emergency allotments above maximum SNAP benefit amounts was prohibited based on provisions in the Families First Coronavirus Response Act and the Food and Nutrition Act of 2008.

Table 2 provides a summary of additional information on federal assistance to individuals presented in enclosures in appendix III, which also include descriptions of GAO’s future work.

Table 2: Areas in Which the Federal Government Has Taken Action to Assist Individuals in Response to COVID-19
Area name Description
Nutrition Assistance The federal response to the COVID-19 pandemic included additional funds and increased flexibilities for state, tribal, and local agencies to provide nutrition assistance across various programs; however, some vulnerable populations may not be able to access assistance, and there are operational challenges in implementing program changes.
Child Care The Administration for Children and Families’ Office of Child Care is helping states to implement available flexibilities in the CARES Act and the Child Care and Development Block Grant Act of 1990, as amended, to address the impacts of COVID-19, but has not determined how it will collect data on states’ use of CARES Act supplemental funding.
Emergency Financial Aid for College Students The Department of Education awarded schools nearly all of the initial $6.3 billion designated for college students’ emergency financial aid, but the department’s evolving communications may have delayed schools’ distribution of funds to students.
Leave Benefits and Tax Relief for Employers Employers have begun claiming refundable tax credits to mitigate the cost of paid leave for employees; agreements between the Internal Revenue Service and the Small Business Administration to help ensure compliance have not been finalized.
Department of Housing and Urban Development Programs The CARES Act appropriated approximately $12.4 billion to the Department of Housing and Urban Development, and the agency had obligated approximately 18 percent of program funds as of May 31, 2020.
Retirement Accounts Expanded options for withdrawals and loans from retirement accounts can provide financial assistance during the pandemic, but may affect future retirement security.
Tax Deduction for Charitable Contributions The CARES Act increases tax benefits for individuals and corporations that donate to nonprofits, but the effect on charitable giving is uncertain.
Unemployment Insurance Programs The unprecedented volume of new unemployment insurance claims in the wake of the COVID-19 pandemic poses major challenges for federal and state officials to provide benefits, help with reemployment, and identify and prevent improper payments.
Federal Student Loans The Department of Education quickly suspended interest accrual and student loan payments but some types of involuntary collections and communications to borrowers were more challenging to address quickly.
Economic Impact Payments As of May 31, the Department of the Treasury and Internal Revenue Service (IRS) sent over 160 million payments to recipients for whom IRS has the necessary information. These payments totaled $269.3 billion. Treasury and IRS still face challenges to ensure that eligible individuals receive their payments, to prevent improper payments, and to combat fraud.
Housing Protections Agencies have issued guidance on CARES Act housing protections, but challenges remain in ensuring that homeowners and renters benefit.
Source: GAO. | GAO-20-625

While Millions of Loans Were Made Quickly, Limited Safeguards and Lack of Timely and Complete Guidance Affected Economic and Industry Support

The CARES Act includes a number of programs to help industries and businesses. SBA’s PPP is the largest of these programs and one of the first to be implemented. However, the limited safeguards and lack of timely and complete guidance and oversight planning have increased the likelihood that borrowers may misuse or improperly receive loan proceeds. For example, while SBA planned to review loans of more than $2 million, as of June 15, 2020, it had not provided details on how it planned to carry out that work, and it had not provided information on oversight plans for the more than 4 million loans of less than $2 million each.

The CARES Act authorized and appropriated $349 billion for SBA to guarantee loans to small businesses and other organizations adversely affected by COVID-19. [71] PPP loans, which are made by lenders but are guaranteed 100 percent by SBA, are low-interest (1 percent) and will be fully forgiven if certain conditions are met. As originally implemented by SBA, at least 75 percent of the loan forgiveness amount must have been for payroll costs. However, the Paycheck Protection Program Flexibility Act of 2020 modified this limit to at least 60 percent.

Status of Implementation

Lenders and SBA moved quickly to make and process PPP loans. As a result, the CARES Act funding for the program was exhausted within 2 weeks of its launch. Congress appropriated an additional $321 billion for PPP through the Paycheck Protection Program and Health Care Enhancement Act. [72] As of June 12, 2020, lenders had made about 4.6 million loans totaling about $512 billion or approximately 76 percent of the available funds. [73] The $512 billion represents loan guarantee obligations for SBA and does not include lender fees authorized by the CARES Act. The amount SBA will ultimately expend depends on the number of loans forgiven and, for those that are not forgiven, whether they are timely repaid. As of May 31, 2020, SBA had obligated about $521 billion in total for the PPP program and expended about $2.1 billion in lender fees.

To implement the program, SBA had issued 18 interim final rules and 17 updates to its frequently asked questions, as of June 15, 2020 (see fig. 5). The interim final rules and frequently asked questions address topics such as eligibility, calculating payroll costs, and loan forgiveness.

Figure 5: Timeline for Paycheck Protection Program, as of June 15, 2020

Critical Information on Loan Forgiveness

In its initial interim final rule posted on April 2, 2020, SBA provided some information on loan forgiveness for both borrowers and lenders, such as the percentage that borrowers had to spend on payroll costs to be eligible for forgiveness. [74] However, SBA did not release the loan forgiveness application until May 15, 2020, and delayed posting key regulations on loan forgiveness until May 22, 2020. [75] In the interim final rule, SBA stated that the agency was addressing lenders’ and borrowers’ need for clarity and certainty concerning loan forgiveness requirements. As a result, more than 4 million loans were approved before borrowers received this critical clarifying information on loan forgiveness.

Under the CARES Act, borrowers originally had 8 weeks after loan disbursement to use the funds and be eligible for forgiveness. [76] Representatives of a lender and a small business association told us that some borrowers were afraid to close their loans or start using the funds without additional guidance, resulting in additional economic stress for employees. Similarly, there have been reports of small businesses returning their loans out of concern that they may not qualify for loan forgiveness because there has been limited guidance on this topic.

Initial Safeguards

Given the immediate need for PPP loans, SBA worked to streamline PPP so that lenders could begin distributing funds as quickly as possible. SBA’s initial interim final rule allowed lenders to rely on borrower certifications to determine the borrower’s eligibility and use of loan proceeds, and required limited lender review of documents provided by the borrower to determine the qualifying loan amount and eligibility for loan forgiveness. [77]

Among other things, as set forth in the CARES Act, borrowers had to certify in good faith that (1) current economic uncertainty made the loan request necessary to support the applicant’s ongoing operations and (2) the funds would be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments. To streamline the process, SBA required minimal loan underwriting from lenders—limited to actions such as confirming receipt of borrower certifications and supporting payroll documentation—leaving the program more susceptible to fraudulent applications. [78] As we have previously reported, reliance on applicant self-certifications can leave a program vulnerable to exploitation by those who wish to circumvent eligibility requirements or pursue criminal activities. [79]

In the initial interim final rule, SBA also stated that it would direct a small business that used PPP funds for unauthorized purposes to repay those amounts, and that the applicant could be subject to additional liability, such as fraud charges, if these funds were knowingly used for unauthorized purposes. [80] The rule also included some safeguards for lenders that were not federally insured depository institutions or federally insured credit unions, such as requiring that they comply with Bank Secrecy Act requirements. [81]

Ongoing Oversight

Because SBA had limited time to implement up-front safeguards for the loan approval process and assess program risks, ongoing oversight will be crucial. SBA has announced efforts to implement safeguards after loan approval but has provided limited information on how it will implement these safeguards. On April 28, 2020, Treasury and SBA announced that SBA would review loans of more than $2 million (about 30,000 loans that represent about 21 percent of the approved dollar amount of PPP loans as of June 12, 2020) to confirm borrower eligibility after the borrower applied for loan forgiveness. [82] In an interim final rule posted on May 22, 2020, SBA noted that it may review any PPP loan it deems appropriate.

These reviews may include whether a borrower was eligible for the PPP loan, calculated the loan amount correctly, used loan proceeds for the allowable uses, or was entitled to loan forgiveness in the amount claimed. [83] However, as of June 15, 2020, SBA had not provided us additional details—including time frames and specific review procedures—on how it would conduct its review of all loans for more than $2 million. Further, SBA had not informed us of any specific oversight plans for the more than 4 million loans of less than $2 million, including how it would identify which loans to review and the number of reviews planned. [84]

Federal internal control standards state that management should consider the potential for fraud when identifying, analyzing, and responding to risks. [85] Because of the number of loans approved, the speed with which they were processed, and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved. In addition, the lack of clear guidance has increased the likelihood that borrowers may misuse loan proceeds or be surprised they do not qualify for full loan forgiveness.

As discussed above, Congress has charged SBA with implementing the PPP and other provisions crucial to the nation’s economic recovery. However, SBA to date has failed to provide information critical to our review, including a detailed description of data on loans made. [86] The agency provided primarily publicly available information in response to our inquiries. SBA officials met with GAO in the beginning of June to discuss questions we had provided about 6 weeks earlier. GAO continues to work with SBA officials to obtain needed data and other information.

Most agencies were generally able to provide GAO timely access to information for this report while executing their responsibilities during this unprecedented national crisis. In this regard, they have shown that it is not only possible but imperative to cooperate in a meaningful way with oversight of the trillions of dollars of public money appropriated in the COVID-19 relief laws as they carry out their responsibilities.

Federal Reserve Loans

The CARES Act also provides economic and business support by authorizing up to $454 billion and potentially certain other amounts for Treasury to support the Board of Governors of the Federal Reserve System (Federal Reserve) in establishing lending programs (or facilities) to provide liquidity to the financial system that provides lending to states, tribes, municipalities, and eligible businesses. The facilities are authorized under section 13(3) of the Federal Reserve Act and must be approved by the Secretary of the Treasury. [87]

In March and April 2020, the Federal Reserve introduced seven lending facilities supported through Treasury’s CARES Act appropriated funds (see table 3). As of June 8, 2020, Treasury had committed $195 billion, or about 43 percent, of the $454 billion available from the CARES Act to support the seven facilities, and Treasury’s funding will allow the facilities to support up to $1.95 trillion of transactions. As of the same date, two of the seven lending facilities—the Secondary Market Corporate Credit Facility and the Municipal Liquidity Facility—were operational, for which Treasury had disbursed $37.5 billion and $17.5 billion, respectively.

Table 3: Federal Reserve Lending Facilities with CARES Act Funding, as of June 8, 2020
Name of facility Purpose Facility activity

1. Primary Market Corporate Credit Facility

2. Secondary Market Corporate Credit Facility

Support large businesses

Primary market facility: purchase qualifying bonds directly from and purchase portions of syndicated loans made to eligible issuers.

Secondary market facility: purchase qualifying corporate bonds and U.S.-listed exchange-traded funds in the secondary market.

3. Main Street New Loan Facility

4. Main Street Priority Loan Facility

5. Main Street Expanded Loan Facility

Support small- and medium-sized businesses

New loan and priority loan facilities: purchase 95 percent participation interests in newly issued eligible loans that eligible lenders make to eligible borrowers.

Expanded loan facility: purchase 95 percent participation interests in a new extension of credit under an existing eligible loan made by an eligible lender to an eligible borrower.

6. Municipal Liquidity Facility Support states, and certain counties, cities, multi-state entities, and revenue bond issuers Purchase eligible notes directly from eligible issuers at time of issuance.
7. Term Asset-Backed Securities Loan Facility Support consumers and businesses Provide non-recourse loans to U.S. companies secured by qualifying asset-backed securities generally backed by recently originated consumer and business loans.
Source: GAO analysis of Board of Governors of the Federal Reserve System (Federal Reserve) documents. | GAO-20-625

Treasury officials said they are monitoring market conditions to help inform how best to commit the remaining funds. Federal Reserve and Treasury officials said they are taking steps to bring the other five facilities into operation, but officials do not have specific dates for when most of the other facilities will become active. In its most recent periodic reports to Congress on the lending facilities, the Federal Reserve Board stated it continues to expect that the facilities will not result in losses to the Federal Reserve. Based in part on information from the Federal Reserve Board, the Congressional Budget Office (CBO) estimates no deficit effect to the federal government.

Table 4 provides a summary of additional information on federal support for industry and the economy presented in enclosures in appendix III, which also include descriptions of GAO’s future work.

Table 4: Areas in Which the Federal Government Has Taken Action to Support Industry and the Economy in Response to COVID-19
Area name Description
Small Business Programs The Small Business Administration approved more than 1 million economic injury disaster loans, but information technology challenges and processing delays hampered implementation.
Paycheck Protection Program The Paycheck Protection Program was designed to give assistance to small businesses and other organizations that were affected by COVID-19.
Federal Reserve Emergency Lending Programs In response to the economic downturn caused by COVID-19, among other actions, the Board of Governors of the Federal Reserve System, with the Department of the Treasury approval, authorized the establishment of seven emergency lending programs (or facilities) supported through the Department of the Treasury funding appropriated under the CARES Act. The facilities are to help provide credit to eligible businesses, states, tribes, and municipalities. As of June 8, 2020, only two of the seven facilities were operational.
Tax Relief for Businesses It is too early to know the extent businesses are taking advantage of certain tax relief options—such as carrying additional losses back to prior tax years—but refunds may be delayed if businesses who must submit amended returns do so on paper.
Aviation Sector Financial Assistance The Department of the Treasury and the Federal Aviation Administration have begun to provide funding to help the nation’s aviation industry and airports respond to and recover from the economic effects of the COVID-19 pandemic.
Agriculture Spending and Food Safety Inspections The U.S. Department of Agriculture is providing $16 billion in direct payments to agricultural producers, as well as $3 billion in food purchases for redistribution to food banks, nonprofits, and other entities. Federal inspections of meat and poultry plants continue.
U.S. Department of Agriculture Support for Rural America CARES Act funding provides support for U.S. Department of Agriculture programs to help address the COVID-19 pandemic in rural America.
Temporary Financial Regulatory Changes Federal agencies have issued rules or statements on financial regulatory changes and have not exercised certain emergency authorities under the CARES Act.
Department of Commerce Support for Industries and the Economy The CARES Act provided additional appropriations for four Department of Commerce bureaus to aid the economy and industries affected by the COVID-19 pandemic.
Department of Defense Working Capital Funds COVID-19 could further impact the Department of Defense’s working capital fund balances, even with additional appropriated amounts provided by the CARES Act.
Source: GAO. | GAO-20-625

The Four COVID-19 Relief Laws Provide Aid to States, Localities, Territories, and Tribes through Various Programs

The four COVID-19 relief laws enacted at the time of our review provide an estimated $335 billion in funds to agencies for assisting U.S. states, localities, territories, and tribes in their responses to the COVID-19 pandemic. [88] Six programs account for approximately 89 percent, or $299 billion, of the total estimated funding.

  • Coronavirus Relief Fund. This new funding source, administered by Treasury, provides direct assistance to states, localities, tribal governments, the District of Columbia, and U.S. territories to help offset costs of their response to the COVID-19 pandemic.
  • Medicaid. Medicaid is administered by states and territories according to plans approved by CMS, which oversees Medicaid at the federal level. This program finances health care for certain low-income and medically needy individuals, through federal matching of states’ and territories’ health care expenses. The Families First Coronavirus Response Act temporarily increased the federal matching rate for states that meet specific requirements and increased the federal Medicaid spending cap for territories. The act also provided an additional coverage option for the duration of the COVID-19 public health emergency.
  • FEMA’s Disaster Relief Fund. This fund is the major source of federal disaster recovery assistance for state, local, and territorial governments when a disaster occurs. For the COVID-19 pandemic, recipients can use funds to lessen the immediate threat to public health and safety, like standing up emergency medical facilities. [89]
  • Education Stabilization Fund. Administered by the Department of Education, this fund provides formula and discretionary grants to states for support of educational services. [90] For example, local educational agencies, which receive funds from their state, may use funds for a variety of purposes in response to COVID-19, including technology acquisition to facilitate remote learning, activities to address unique needs of low-income students, and mental health services, among others. U.S. territories and Bureau of Indian Education programs receive funds under the Education Stabilization Fund as well.
  • Transit grants. These are formula grants, administered by the Department of Transportation (DOT), that provide funding through pre-existing federal grant programs to state and local transit agencies and are available, among other things, to cover certain eligible operating, planning, and capital expenses, including administrative leave for workers, in response to conditions caused by COVID-19.
  • Airport grants. These are formula grants, administered by DOT, that provide funds for airports to prevent, prepare for, and respond to the effects of the COVID-19 pandemic. [91]

According to agency data, $159 billion of funds from these six programs had been disbursed (i.e., expended) as of May 31, 2020 (see table 5 for appropriations and expenditures). One program, the Coronavirus Relief Fund, has disbursed almost all appropriated funds, although the administering agency, Treasury, missed a deadline for disbursing these funds to tribal governments. Other programs have disbursed a smaller portion of available funds.

Table 5: Appropriations and Expenditures for Selected Federal Programs Providing COVID-19 Related Aid to States, Localities, Territories, and Tribes
Program Appropriations (in dollars) Expenditures as of May 31, 2020 (in dollars)
Coronavirus Relief Fund $150 billion $147 billion
Medicaid 52 billiona 7 billion
Federal Emergency Management Agency’s Disaster Relief Fund 45 billion 1 billionb
Transit grants 25 billion 3 billion
Education Stabilization Fund 17 billionc 83 million
Airport grantsd 10 billion 288 million
Source: GAO analysis of federal laws; Congressional Budget Office (CBO) data and information and data from the Centers for Medicare & Medicaid Services, the Departments of Education, Homeland Security, and Transportation, and Department of the Treasury. | GAO-20-625

Note: The COVID-19 relief laws appropriating the amounts described in this table are the Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020) and the CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020). Some appropriation amounts include an amount available for administration expenses or for the relevant inspectors general. Numbers are rounded to the nearest million or billion.
aSeveral provisions in the Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020), authorized an increase in Medicaid funds for states and territories. The largest increase to federal Medicaid spending is based on a formula change rather than a specific appropriated amount. The Congressional Budget Office estimated that federal expenditures from this change would be approximately $50 billion
bThis amount represents all expenditures as of May 31, 2020, from the Disaster Relief Fund for COVID-19, some of which was for the Federal Emergency Management Agency’s Public Assistance program, which provides assistance to states, territories, and tribes. Obligations for the Public Assistance program as of May 31, 2020, were $1.2 billion.
cThis amount is an approximation and includes funds for the Elementary and Secondary School Emergency Relief Fund, the Governor’s Emergency Education Relief Fund, Education Stabilization Fund discretionary grants, formula grants to other U.S. territories, and programs operated or funded by the Bureau of Indian Education. It does not include the nearly $14 billion in aid for institutions of higher education through the Education Stabilization Fund.
dFunds are available to eligible sponsors of airports. Nearly all of these airports are under city, state, county or public-authority ownership.

According to CBO estimates, over 85 percent of funds provided for these six programs will be expended in fiscal years 2020 and 2021 (see fig. 6). CBO estimates that Treasury will disburse all funds from the Coronavirus Relief Fund in fiscal year 2020 and that increased Medicaid payments will be made in fiscal years 2020 and 2021. [92] From fiscal years 2020 to 2030, agencies will expend funds for the programs that provide aid for disaster relief, education, transit, and airports.

Figure 6: Estimated Federal Expenditures for Selected Programs That Include COVID-19-Related Assistance to States, Localities, Territories, and Tribes

Note: The selected programs included are (1) the Coronavirus Relief Fund, (2) Medicaid, (3) the Federal Emergency Management Agency’s Disaster Relief Fund, (4) the Education Stabilization Fund, (5) transit grants, and (6) airport grants. Estimated expenditures depicted in the figure for these programs total $312 billion, of which approximately $299 billion is for assistance to states, localities, territories, and tribes. The Congressional Budget Office’s (CBO) estimates for the Education Stabilization Fund includes $14 billion for institutions of higher education. For the Disaster Relief Fund, CBO estimates expenditures of less than $500 million in fiscal years 2028 to 2030. Data for this figure come from CBO’s analysis of COVID-19 relief laws, specifically: the Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020) and the CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020).

In addition to these large programs, states, localities, territories, and tribes have access to smaller amounts of funding through a number of other provisions in the COVID-19 relief laws, such as homeless assistance grants and economic development assistance. The Paycheck Protection Program and Health Care Enhancement Act requires HHS, as part of a larger appropriation for the agency, to provide $11 billion to states, localities, territories, and tribes for expenses associated with COVID-19 testing. [93] Also, the CARES Act appropriated funding to support loans available to states, the District of Columbia, and localities through the Federal Reserve’s Municipal Liquidity Facility. [94] According to CBO estimates, these loans would have no effect on the federal budget deficit.

Table 6 provides a summary of additional information on federal assistance to states, territories, localities, and tribes presented in enclosures in appendix III, which also include descriptions of GAO’s future work.

Table 6: Areas in Which the Federal Government Has Taken Action to Assist States, Localities, Territories, and Tribes in Response to COVID-19
Area name Description
Education Stabilization Fund The Education Stabilization Fund provides emergency funding to address the effects of the COVID-19 pandemic on education. It is too early to know how states and school districts will spend these funds and the effect they may have, but the understandable desire to spend the money quickly may increase the risks of noncompliance with spending and accountability requirements.
Transit Industry The Federal Transit Administration has begun to distribute CARES Act funding, with most grants going to operating expenses.
Coronavirus Relief Fund Almost the entire $150 billion fund has been disbursed to states, localities, tribal governments, the District of Columbia, and U.S. territories to help cover the costs of responding to the COVID-19 pandemic.
Assistance for Tribal Entities Federal programs for tribes and their members received at least $9 billion in supplemental funding to respond to the COVID-19 pandemic, and tribal entities may be eligible for funding from other programs; however, federal agencies have sometimes delayed disbursements to tribal governments or limited tribal businesses’ eligibility.
Disaster Relief Fund The CARES Act appropriated $45 billion to the Disaster Relief Fund—the primary source of federal funding to provide disaster assistance to state, local, tribal, and territorial governments, among other things, following major disasters and emergencies declared by the President under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
Source: GAO. | GAO-20-625

Federal Agencies Have Obligated About $17 Billion on Contracts to Provide Critical Goods and Services

Government-wide Contract Obligations

Government-wide contract obligations in response to the COVID-19 pandemic totaled about $16.9 billion as of May 31, 2020, with HHS accounting for about half of these obligations. [95] See figure 7 for total contract obligations broken down by agency and figure 8 for the top categories of goods and services procured.

Figure 7: Contract Obligations in Response to COVID-19 by Agency, as of May 31, 2020

Note: Thirty departments and agencies across the federal government are included in the $339.2 million, or about 2 percent of total obligations, denoted as all other agencies. Federal procurement contract obligations do not include grants, cooperative agreements (such as those under Title III of the Defense Production Act), other transactions, real property leases, requisitions from Federal stock, training authorizations, or other non-FAR based transactions.

Figure 8: Top Products and Services Procured through Federal Contracts in Response to COVID-19, as of May 31, 2020

Note: Federal procurement contract obligations do not include grants, cooperative agreements (such as those under Title III of the Defense Production Act), other transactions, real property leases, requisitions from Federal stock, training authorizations, or other non-FAR based transactions.
aAccording to Defense Logistics Agency officials, many of the items they procured in response to COVID-19 were orders placed on a certain contract that, due to a system coding limitation, .were coded as marine lifesaving and diving equipment. These obligations include gowns and critical care decontamination systems for face masks.

According to federal procurement data, examples of goods procured within the two categories of “medical and surgical equipment” and “hospital and surgical clothing” included about $3 billion for ventilators and about $2.1 billion for personal protective equipment, like N95 respirators and gloves. Examples of services included about $1.7 billion for basic and advanced biomedical research and development, about half of which was for vaccination development.

Federal agencies are tracking contract obligations in response to COVID-19 through the use of a National Interest Action code in the Federal Procurement Data System-Next Generation. The COVID-19 National Interest Action code was established on March 13, 2020, to track contract obligations, and is currently slated to expire on September 30, 2020. [96] Our prior work has reported on the importance of such codes for providing visibility into emergency or contingency contracting activities, which could have implications for tracking contract obligations in response to COVID-19 over the longer term. [97] We will continue to monitor how long this code should be maintained.

Defense Production Act

The President has taken several actions to allow federal agency use of DPA authorities to mitigate COVID-19 supply chain issues, and the CARES Act provided $1 billion for DPA purchases to prevent, prepare for, and respond to the coronavirus, domestically or internationally. [98] In an Executive Order issued on March 18, 2020, the President delegated to the Secretary of Health and Human Services authority under the DPA to require preferential performance of contracts with respect to health and medical resources. [99] The President subsequently delegated further authorities under the DPA to, among other things

  1. provide the Secretary of Health and Human Services the authority to prevent hoarding and price gouging of resources, such as personal protective equipment and disinfecting and sanitizing products;
  2. provide the Secretary of Health and Human Services and the Secretary of Homeland Security the authority to expand production capacity of resources such as personal protective equipment and ventilators and to appoint the Assistant to the President for Trade and Manufacturing Policy as the National Defense Production Act Policy Coordinator during COVID-19 response;
  3. provide the Secretary of Agriculture the authority to ensure that meat and poultry processors continue operations consistent with the guidance for their operation jointly issued by CDC and the Occupational Safety and Health Administration; [100] and
  4. provide the Chief Executive Officer of the United States International Development Finance Corporation the authority to, among other things, make loans to create, maintain, protect, expand, and restore the domestic industrial base capabilities, including supply chains within the United States and its territories. [101]

Since March 18, 2020, federal agencies have reported various uses of DPA authorities. For example, HHS announced that it used DPA authority to prioritize at least eight contracts to produce more than 150,000 ventilators for $2 billion by the end of 2020. Our analysis of agency data shows that the largest prioritized contract under the DPA was awarded in April 2020, to Philips for $646.7 million to produce 43,000 ventilators—2,500 of which were to be delivered to the SNS by the end of May 2020. According to HHS, as of June 12, 2020, Philips has delivered 2,524 ventilators to the SNS.

DOD reported awarding agreements under the DPA to expand domestic production of health and medical resources, such as N95 respirators and swabs. For example, in April 2020, DOD announced that it signed a $76 million technology investment agreement with 3M to help produce an additional 78 million N95 respirators by October 2020. 3M is expected to convert a current equipment supplier into an N95 producer and will also expand its own production capabilities to produce the respirators.

Contracting Flexibilities to Aid Response

The CARES Act authorized additional flexibilities for agencies when contracting for critical goods and services, including the following:

  • Undefinitized contract actions. This contracting method allows contractors to begin work before reaching a final agreement with the government on contract terms and conditions. The CARES Act allows DOD to waive requirements related to time frames and limitations on the amounts that can be obligated by DOD before the contract action is defined. [102] Undefinitized contract actions can allow the government to fulfill requirements that are urgent or need to be met quickly when there is insufficient time to negotiate all terms. Our prior work has noted that undefinitized contract actions can pose risks to the government, such as when contractors lack incentives to control costs before all contract terms and conditions are defined. [103]
  • Other transaction authority. Other transactions enable federal agencies to negotiate terms and conditions specific to a project without requiring them to comply with certain federal regulations. The CARES Act removes certain limitations on the use of other transactions for HHS and DOD, such as congressional reporting requirements and who can approve certain transactions. [104] Our prior work has noted that other transactions can enable the government to attract companies it has not typically done business with to perform research, prototyping, and production of new technologies or products. We have also noted challenges with their use in terms of a risk of reduced accountability and transparency. [105]

The Federal Acquisition Regulation also has a variety of acquisition flexibilities to allow the government to more rapidly respond to its needs. For example, the regulation raises spending thresholds for using government purchase cards or simplified acquisition procedures when an emergency or major disaster is declared under the Stafford Act, and allows soliciting from only one source if, for example, the contracting officer determines that the circumstances of the contract action deem only one source reasonably available. [106]

Finally, the CARES Act included a provision that GAO provide a comprehensive audit and review of charges made to federal contracts pursuant to authorities provided in the act. [107] Our future work will evaluate agencies’ planning and management of contracts awarded in response to the pandemic, including agencies’ use of the flexibilities outlined above. Additionally, we plan to examine agencies’ execution of section 3610 of the CARES Act, which allows federal agencies to reimburse contractors, subject to certain limitations, for expenses incurred to keep contractors’ employees or subcontracts in a ready state during the public health emergency. [108] We also plan to assess the federal government’s use of DPA authority to obtain the health and medical resources necessary to combat COVID-19 and to mitigate industrial base risks.

U.S. Agencies Have Taken Steps to Respond to COVID-19 Abroad with Existing and Supplemental Funding

Funding for U.S. Agencies’ International Response

Congress appropriated about $3 billion in supplemental funding to support the U.S. government’s international response to the COVID-19 pandemic. [109] Of this funding the Department of State (State) and the U.S. Agency for International Development (USAID) received about $2.2 billion for diplomatic and foreign assistance programming, and Congress designated at least $800 million of CDC’s COVID-19 supplemental appropriations for CDC’s global disease detection and emergency response (see fig. 9). As of May 20, 2020, State and USAID reported allocating about $1.2 billion of the approximately $2.2 billion, while CDC officials told us that as of May 19, 2020, CDC had developed plans for $300 million of the $800 million. [110]

Figure 9: Key Areas of 2020 Supplemental Funding for International Response to COVID-19, as of June 1, 2020

Note: The supplemental funding also provided $95 million to USAID for operating expenses and $1 million to the USAID Office of Inspector General for COVID-19 related work. Pub. L. No. 116-123, tit. IV, 134 Stat. at 152; Pub. L. No. 116-136, div. B, tit. XI, 134 Stat. at 590. We did not include these funds in this figure.

Agency Strategies for Responding to COVID-19

State and USAID joint strategy. State and USAID developed a joint strategy organized under four pillars to respond to COVID-19 abroad. Each pillar in the strategy is associated with the different accounts managed by State and USAID that received supplemental funding. Figure 10 shows the strategy’s objectives and planned lines of effort under each pillar.

Figure 10: March 2020 State and USAID Strategy on the Use of Supplemental Funding to Respond to COVID-19 Abroad

CDC strategy. CDC officials told us that the agency developed a strategy for its global response to COVID-19 that provides an overarching framework for working to reduce the global burden of the pandemic while building the global capacity to prevent and control future pandemics. According to CDC officials, the agency’s objectives include

  • mitigating COVID-19 transmission in the community, across borders, and in healthcare facilities;
  • supporting governments, nongovernmental organizations, and health care facilities in rapidly identifying, triaging, and diagnosing potential cases;
  • addressing crucial unknowns regarding clinical severity and extent of transmission and infection; and
  • ensuring readiness to implement vaccines and therapeutics when available.

Repatriation of U.S. Citizens and Global Health Assistance

Prior to the appropriation of supplemental funding, State, USAID, and CDC used available emergency funds to respond to COVID-19 abroad to repatriate U.S. citizens and provide health assistance. [111]

  • State’s repatriation efforts. As of May 31, 2020, State reported that it had obligated $159 million in emergency funds for expenses associated with evacuation and repatriation efforts, primarily on State-funded charter and contract aviation flights. As of May 31, 2020, State reported it had coordinated the repatriation of 98,726 Americans on 1,080 flights from 139 countries and territories since January 29, 2020, and was tracking some 10,000 additional people who had indicated an interest in being repatriated. [112]
  • USAID’s global health assistance. As of April 6, 2020, USAID had obligated nearly $100 million in existing, emergency funding to provide global health assistance in response to COVID-19 to over 50 countries. According to USAID, this funding supported interventions that included preventing and controlling infections in health facilities; conducting contact tracing; improving readiness to rapidly identify and treat cases; raising awareness in populations through risk communication; screening people at points of entry and exit; and purchasing key commodities.
  • CDC’s global health assistance and repatriation efforts. CDC officials told us that, before receiving supplemental funding, they used the Infectious Disease Rapid Reserve Fund to respond to the most urgent and immediate overseas needs. [113] CDC reported that, as of April 30, 2020, it had obligated more than $91 million of the $105 million available from this fund. [114] Among other things, the funding supported enhanced laboratory capacity, communication and education materials, training resources, and technical assistance to ministries of health in partner countries, as well as guidance on different aspects of repatriation, including transport, screening, isolation, and quarantine.

Table 7 provides a summary of additional information on federal actions related to the international response presented in enclosures in appendix III, which also includes descriptions of GAO’s future work.

Table 7: Areas in Which the Federal Government Has Taken Action on the International Response to COVID-19
Area name Description
International Trade U.S. agencies have taken trade-related actions to address medical supply chain issues and support U.S. international businesses
Response Efforts Abroad In response to supplemental appropriations of about $3 billion to respond to COVID-19 abroad, the Department of State, the U.S. Agency for International Development, and the Centers for Disease Control and Prevention developed strategies and began to allocate these new funds.
Source: GAO. | GAO-20-625

Key Indicators to Facilitate Monitoring of Recovery Following the Federal Pandemic Response

In light of the CARES Act provision directing GAO to examine the effects of the pandemic, we are developing a series of indicators to monitor key areas of the health care system and the economy. [115] Indicators can be powerful tools both for assessing the overall position and for monitoring the progress of our nation in key areas. Indicators can help policymakers frame strategic issues, support public policy choices, and enhance accountability. [116] Indicators also play an important role in times of crisis. The COVID-19 pandemic and subsequent response have not only resulted in a significant public health crisis that is testing the limits of our health care system, but also has had a sizeable effect on the U.S. economy.

This first report presents several preliminary indicators or concepts for potential indicators. While these indicators may be suggestive of the ongoing effect of COVID-19 or the federal response, they are not exhaustive. We will continue to refine and update such indicators as conditions evolve and better, more timely data become available, especially for those related to public health.

Indicators to Monitor Areas of the Health Care System Supported by the Federal Pandemic Response

CDC and other federal entities have identified a framework of capabilities for preparing for, responding to, and recovering from public health emergencies. Relying on this framework, we reviewed a number of sources, including prior GAO work, information from relevant federal agencies, and selected studies to begin identifying potential indicators that could be used to monitor the effect of COVID-19 on the nation’s health care system (see app. I for more details). [117]

These selected indicators are intended to assess the nation’s immediate response to COVID-19 as it first took hold, gauge its recovery from the effects of the pandemic over the longer term, and determine the nation’s level of preparedness for future pandemics, involving either subsequent waves of COVID-19 or other infectious diseases. All of the indicators we identify below can be used to assess multiple effects with regard to response, recovery, and preparedness and, in most cases, could be used to measure progress or improvement in all three areas.

For additional GAO reports required under the CARES Act, we will continue to develop and refine these and other indicators and continue to monitor the effects of the pandemic on the health care system. [118] In particular, we will work to determine what key aspects of the pandemic response would be most useful to monitor from a federal public health perspective—which will then drive the development and refinement of indicators, the unit of analysis, and the data needed. The following describes potential indicators that we will continue to refine.

  • Rate of COVID-19 testing performed. An adequate amount of appropriately targeted testing is critical for informing national responses to the COVID-19 pandemic. Viral tests—such as polymerase chain reaction tests—provide data on ongoing infections, while antibody tests, once they are more fully developed and implemented, will provide data on prevalence of past infections. Results from COVID-19 testing over time can help to determine the extent of infections across states and localities or other discrete populations and provide an evidence base for making decisions to either increase or decrease social distancing policies. Moreover, a sufficient rate of testing in states or localities where the number of confirmed cases of COVID-19 is increasing is needed to implement effective contact tracing and isolation, which is the established public health method for slowing the spread of an infection.

    One metric of the sufficiency of viral testing for COVID-19 is the proportion of tests in a given population that are positive for infection. The World Health Organization has recommended that governments bring their positivity rate to under five percent over a time period of at least two weeks. [119] A higher rate indicates that testing is focused on those mostly likely to be infected, which fails to detect other COVID cases, such as individuals who are infected but asymptomatic. Achieving a sufficient rate of testing depends, in part, on ensuring that all the supplies required to conduct the tests are made available. Thus, these supply requirements should figure into preparedness planning for potential future pandemic surges involving subsequent waves of COVID-19 infections. As noted earlier in this report, CDC obtains data from state health departments on the number of COVID-19 viral tests conducted, but aggregation to the national level is limited by inconsistencies in how the states report these data. [120]

    Proportion of intensive care unit beds available. The sickest patients infected with COVID-19 often require care in hospital intensive care units (ICU), potentially including respiratory support on a ventilator, to survive. Tracking the proportion of hospital ICU beds that are available at regular intervals over time in particular geographic areas, such as states or localities, offers insight on changes in health systems’ capacity to meet this need over the course of the pandemic. Individual states collect and publish ICU beds available on public dashboards and as part of their state re-opening plans.

    In addition, the Secretary of HHS has requested hospitals to voluntarily submit data relating to COVID-19, including ICU bed availability data, on a daily basis through one of several mechanisms. [121] Most hospitals—60 percent as of early June 2020—have submitted their data to CDC’s National Healthcare Safety Network. The data that hospitals submit through other mechanisms is recorded in a separate HHS data system called HHS Protect. However, these data are not currently merged with the data in NHSN on state and local ICU bed availability that CDC shares with state health departments and posts on its public website. CDC has suggested that participation is needed from 95 to 100 percent of hospitals to provide for effective analysis. [122] In addition, tracking the extent of ICU bed use over time by patients infected with COVID-19 could support preparedness planning of ICU surge capacity for potential future outbreaks of COVID-19 or other pathogens. We plan to examine how CDC and other HHS agencies continue to monitor ICU bed availability across states and localities in subsequent reports.

  • Higher than expected deaths from all causes. Mortality from all causes compared to historical norms provides a potential indicator of the pandemic’s broad effect on health care outcomes. [123] As the pandemic has affected the care provided to patients across the continuum of health care services, from primary care visits to emergency treatment of heart attacks, the full effect of COVID-19 goes beyond those infected with the disease. Of particular concern is the effect of COVID-related disruptions of the health care system on mortality.

    Data on pre-COVID-19 mortality is widely available at the state and local level, as well as nationally. Seasonally adjusted, these rates have tended to be highly consistent from year to year. That allows an estimation of how much mortality rose with the onset of the pandemic, and also provides a baseline by which to judge a return to pre-COVID levels. Notably, by focusing on mortality from all causes, this indicator is not affected by differences in how the states determine which deaths were caused by COVID-19. For example, figure 11 illustrates how mortality in the United States has increased since the onset of the COVID-19 pandemic relative to the rate of expected mortality that the CDC calculates for each week of the year based on seasonal variations in previous years. [124] This means that comparisons across jurisdictions will not be biased by any such inconsistencies.

Figure 11: CDC Data on Higher Than Expected Weekly Mortality

Notes: The figure shows the number of deaths in a given week that exceeded the upper bound threshold of expected deaths calculated by CDC on the basis of variation in mortality experienced in prior years. Please refer to https://www.cdc.gov/nchs/nvss/vsrr/covid19/excess_deaths.htm, accessed on May 26, 2020, for further details on how CDC estimates this upper bound threshold. Changes in the observed numbers of deaths in recent weeks should be interpreted cautiously as this figure relies on provisional data that are generally less complete in recent weeks.
  • Contact tracer workforce per capita. In a public health crisis such as the COVID-19 pandemic, it is critical to have a sufficiently scaled workforce of contact tracers, who trace the contacts of each case of COVID-19 (or any other contagious) infection and quarantine exposed contacts in their homes or dedicated facilities. Although state and local public health agencies typically maintain an existing capacity to conduct contact tracing for infectious diseases, the capacity is sufficient only to respond to isolated outbreaks or individual cases.

    Contact tracing is resource intensive, since as cases rise, more individuals will be needed to ensure comprehensive contact tracing of all confirmed cases. The particular features of the COVID-19 pandemic—asymptomatic infected persons, lack of any treatment, and its ability to spread rapidly—requires a significantly larger workforce than currently exists. According to the National Association of County and City Health Officials, the benchmark rate is 30 contact tracers per 100,000 people. This equates to about 98,460 contact tracers needed to cover the entire U.S. population during the peak of the pandemic.

Although the health care system generates enormous amounts of data, many factors make it challenging to identify indicators that can appropriately characterize an evolving event such as a pandemic. For example, although the number of ICU beds is collected through a variety of sources, there is no national standard for what specific treatments are made available to patients who occupy those beds. As a result, ICU bed availability provides a broad indicator of hospital capacity, but does not identify the specific areas where hospital resources for treating COVID-19 patients may be lacking. There are also gaps in reporting on the public health workforce, including the number of contact tracers currently employed by state and local health departments. Although many states and localities are actively recruiting for contact tracing personnel, there is no comprehensive source of continuous data.

Developing a robust system of indicators will require systems to collect standardized data that can be used to facilitate continuous, real-time data sharing on COVID-19 between health care providers, as well as among public health authorities at the national, state, and local levels. As part of our ongoing work, we will continue to examine where there are gaps in the data being collected and will identify ways to improve such data collection efforts.

Indicators to Monitor Areas of the Economy Supported by the Federal Pandemic Response

We identified a number of economic indicators to facilitate ongoing and consistent monitoring of areas of the economy supported by the federal pandemic response, in particular the COVID-19 relief laws. [125] These indicators provide a foundation for more rigorous analytical work over time to better identify whether federal responses are having their intended effect. They include measures of labor market stress, household financial stress, small business credit markets, corporate credit markets, and state and local government finances (see table 8 below). [126] To the extent that federal pandemic responses are effective, we would expect to see improvements in outcomes related to these indicators. However, while trends in these indicators may be suggestive of the effect of provisions of the CARES Act and related legislation over time, those trends will not on their own provide definitive evidence of effectiveness. [127]

The Federal Reserve has acted to support the economy as well, by lowering interest rates, expanding the money supply, and announcing a range of programs to provide liquidity to businesses of varying sizes—some supported by funds appropriated under the CARES Act through the Treasury’s Exchange Stabilization Fund. The effect of public health measures against the pandemic and the decisions of state government officials to relax policies that limit certain economic and social activity could also have a significant impact on the economy and the indicators we have identified. We continue to consider a variety of additional indicators and qualitative sources of information, and may include them in future reports as more data become available or as circumstances related to the pandemic and the economy evolve.

Table 8: Indicators for Monitoring Areas of the Economy Supported by the Federal Pandemic Response
Category Key indicators
Labor market stress
  • Initial unemployment insurance claims
  • Employment-to-population ratio
Household financial stress
  • Consumer Credit Default Composite Index
  • Supplemental Nutrition Assistance Program (SNAP) household participation
Small business credit markets
  • Small Business Health Index
  • Underwriting standards on small business loans
Corporate credit markets
  • Spreads on investment grade corporate bonds
State and local government finances
  • Spreads on municipal bonds
  • State and local government employment
Health sector
  • Health care employment
  • Volume of elective procedures
  • Hospital operating margins
  • Gross domestic product in health care services
Source: GAO. | GAO-20-625

Note: Initial unemployment claims, state and local government employment, and the employment-to-population ratio are from the Department of Labor. The Consumer Credit Default Index is from S&P/Experian. Supplemental Nutritional Assistance Program household participation is from the Department of Agriculture. The Small Business Health Index is from Dun & Bradstreet. Underwriting standards on small business loans are from the Board of Governors of the Federal Reserve System and Federal Reserve Bank of Kansas City. Spreads on investment grade corporate bonds are from option-adjusted spreads on dollar-denominated investment grade corporate bonds available through Bloomberg’s Fixed Income Credit Monitoring. Spreads on municipal bonds are based on the Bloomberg-Barclays Municipal Bond Index. See appendix IV of the report for additional information.

Available data thus far primarily reflect the severity of the pandemic. For example, the employment-population ratio rose by 1.5 percentage points to 52.8 percent in May, remaining near its lowest level ever recorded in April (see fig. 12), credit card defaults are at their highest level since 2012, and banks are tightening standards on loans to small businesses. [128] In addition, investor perceptions of risk increased substantially in corporate and municipal credit markets in February and March, but have fallen somewhat since the Federal Reserve announced programs to provide support to these markets. If federal responses are effective, then over time these data could become more reflective of federal efforts. For example, monthly hospital margins may reflect whether federal efforts to increase reimbursement and funding to providers is positively affecting their bottom line and financial health. The indicators and recent trends are discussed in more detail in appendix IV.

Figure 12: Employment-to-Population Ratio, January 2019 to May 2020

Note: While both the employment-to-population ratio and the unemployment rate will be sensitive to how the Bureau of Labor Statistics measures the number of employed individuals, calculating the employment-to-population ratio requires fewer assumptions and will be more stable to fluctuating measures of who is in the labor force.

To complement these indicators, various rigorous analytical methods, along with information on the implementation of federal responses to the pandemic, can be used to assess program effect and produce reliable evidence. For example, estimation techniques, such as regression discontinuity design, difference-in-difference, event study, and interrupted time series, can be used to better identify the effectiveness of a program by comparing observed outcomes to an estimate of what would have happened in the absence of the program. [129] Impact estimates are a critical component of a program’s net social benefits, along with program costs, risks borne by the federal government, and any moral hazard federal actions might induce in private behavior.

Aggregate economic conditions will have a significant influence on the more targeted indicators that we identified. We intend to monitor broader economic conditions in order to better understand their effect on the areas of the economy supported by the federal response to the pandemic. [130] A range of measures of national economic activity in recent months have made clear that the economy remains under substantial stress. For example, a measure of weekly economic activity that aggregates several disparate economic indicators provided further evidence of a rapid and severe economic contraction in the United States (see fig. 13). [131] In addition, falling demand has substantially reduced actual and expected inflation in the near term, with some forecasters and market prices predicting deflation, a critical economic risk. [132]

Figure 13: Weekly Economic Index, January 2019 to May 16, 2020

Note: The level of the Weekly Economic Index corresponds to a year-over-year growth rate in gross domestic product were conditions to remain at that level for a full quarter.

The fiscal response from Congress combined with the severe economic contraction will generate a substantial increase in federal debt, as expenditures increase and tax revenues fall. Federal debt held by the public increased by $1.4 trillion in April alone. While interest rates on Treasury securities are low at the moment, reducing the cost of newly issued debt, the long-term fiscal challenges facing the United States have been exacerbated by the pandemic and will require attention once the economy has returned to consistent growth and public health goals have been attained. [133]

Total U.S. imports and exports also fell markedly in March and April relative to a year ago, with travel and transportation services trade falling at much faster rates than overall trade. Imports of COVID-19-related products, which include protective garments and medical devices, surged in March and April relative to a year ago, although COVID-19-related exports fell in April after increasing in March. [134] Abroad, measures of economic and financial risk remain elevated in advanced and emerging market economies.

Evolving Lessons Learned from Initial COVID-19 Response and Past Crises and Emergencies Highlight Areas for Continued Attention

The nation has made some progress in fighting COVID-19. However, the virus continues to pose risks to all Americans and there is a concern of another wave of infection this fall, which could coincide with the seasonal influenza and hurricane season—further straining federal agencies responsible for responding to these events, as well as the health care system. Additionally, the nation’s initial response to COVID-19 highlights the challenges presented by an inherent fragmentation across responsibilities and capabilities in the federal biodefense response and health care system, which includes private, public (local, state, and federal governments), and nonprofit entities.

Lessons from the initial response, as well as experience from past economic crises, disasters, and emergencies, highlight areas where continued attention and oversight are needed—with the focus on improving ongoing response efforts and preparing for potential additional waves of infection. These lessons include establishing clear goals and defining roles and responsibilities among those responding to a crisis, providing clear communication, collecting and analyzing data to inform future decisions, and establishing mechanisms for accountability and transparency.

Establish clear goals and define roles and responsibilities. The unprecedented scale of the COVID-19 pandemic and the whole-of-government response required to address it highlights the critical importance of clearly defining the roles and responsibilities for the wide range of federal departments and other key players involved when preparing for pandemics and addressing an unforeseen emergency. Following prior catastrophic events, we have noted challenges related to a lack of coordination and communication within the federal government.

In February 2020, we issued a report evaluating early implementation efforts of the National Biodefense Strategy which, among other things, sets goals and objectives to help the nation prepare for and rapidly respond to biological incidents to minimize their effect. Implementing the strategy could help the federal government prepare for large-scale events like the COVID-19 pandemic by ensuring coordination across federal programs. However, at the time of the COVID-19 pandemic, implementation efforts were new, and we reported a number of challenges that could limit the successful implementation of the strategy in the longer term. [135] For example, we found that the strategy did not provide clear, detailed processes, roles, and responsibilities for joint decision-making. We recommended, and HHS agreed, that the Secretary of Health and Human Services should take steps to clearly document agreed-upon processes, roles, and responsibilities for making and enforcing enterprise-wide decisions.

During the response to Hurricanes Irma and Maria—which hit the U.S. Virgin Islands and Puerto Rico within 2 weeks of each other in September 2017, causing catastrophic damage—there was at times a lack of clarity in the roles and responsibilities of the supporting agencies, and agency capabilities were not always aligned with response needs. [136] For example, in September 2019, we reported that HHS was responsible for leading the federal public health and medical services response during the disaster, and in that role called upon support agencies, including the Department of Veterans Affairs (VA), to assist. During the response there were conflicting expectations of VA’s role—VA had expected to run shelter operations, while HHS had expected the agency to support medical operations. As a result of this work, we made seven recommendations to HHS to improve its planning for public health emergencies. HHS agreed with five of the seven recommendations.

This example from a past federal emergency response effort highlights the importance of clearly defined federal roles and responsibilities in any newly established programs and activities such as the federal response to the COVID-19 pandemic. We will draw on these lessons to inform our ongoing and future audit work in response to our CARES Act oversight responsibilities. See appendix VI for a list of ongoing work spanning the spectrum of the federal government’s efforts to respond to and recover from the COVID-19 pandemic, as of June 17, 2020.

Provide clear, consistent communication. In the midst of a nationwide emergency, clear and consistent communication—among all levels of government, with health care providers, and to the public—is key. We have reported that uncoordinated communication from federal to state and local jurisdictions, and to providers and the general public, has contributed to confusion, frustration, and in some cases, individuals’ failure to seek or receive public health interventions, such as influenza vaccination, in the past. [137]

We reported that in the summer of 2009, HHS conveyed to state and local jurisdictions, and to the public, that a robust H1N1 vaccine supply was expected to be available in October 2009. Ultimately, however, far fewer doses were made available that month, which fell short of the expectations of state and local governments and the public. As a result, the credibility of the federal government was diminished. [138] In addition, before it became apparent that the H1N1 pandemic would require a primarily public health response, some state officials cited concerns about the shared federal leadership roles of HHS and the Department of Homeland Security (DHS). State officials reported receiving large volumes of information—often through multiple daily conference calls or via e-mail—from both federal agencies. The amount of information—which was sometimes the same information and sometimes inconsistent—was overwhelming.

Similarly, in March 2020—in the midst of responding to the COVID-19 pandemic—the federal government issued inconsistent guidance regarding the safety of group gatherings. On March 15, 2020, CDC published guidance stating that because large gatherings can contribute to the spread of COVID-19, in-person gatherings should be limited to 50 people or fewer. The next day, the White House issued guidance—including the CDC logo—encouraging people to avoid social gatherings of more than 10 people. [139]

It is important to note that in an emergency, information may change rapidly as a situation evolves, so some corresponding evolution of messages to the public is understandable. The continued evolution of events in a crisis places an even greater premium on effective communication. As more information became known about how COVID-19 spread, federal guidelines shifted to include new advice to the public on precautions such as wearing face masks in public and social distancing. However, failure to effectively manage expectations and communication during a pandemic could undermine the public’s trust in the government at a time when the government’s responsibility to convey critical health and safety information is paramount. The lack of clear, consistent communication from the federal government can lead to a loss of credibility with the public and other stakeholders, which is very important, since responding effectively to a pandemic requires the public’s participation.

Collect and analyze adequate and reliable data to drive future decisions. Data collection and analysis efforts during a pandemic can inform decision-making and future preparedness—and allow for midcourse changes in response to early findings. Previous GAO work on preparedness highlights how data collection and analysis could inform the response to COVID-19, and preliminary data emerging from the initial response could inform preparations for a second wave of infections.

  • Since 2006, HHS has been required to establish and improve upon, in collaboration with state, local, and tribal public health officials, a near real-time electronic nationwide public health situational awareness capability through an interoperable network of systems to share data and information to enhance early detection, rapid response to, and management of potentially catastrophic infectious disease outbreaks such as COVID-19, novel emerging threats, and other public health emergencies. [140] However, HHS has made little progress in establishing such a network. [141] We currently have open recommendations to HHS related to this lack of progress and plan to begin new work evaluating the status of the capability in the summer of 2020. [142]
  • Information collected and reported following a pandemic can inform response to future public health emergencies. FEMA policy requires that after-action reviews be conducted after presidentially-declared major disasters to identify strengths, areas for improvement, and potential best practices of response and recovery efforts. However, we reported in May 2020 that, as of January 2020, FEMA had completed after-action reviews for only 29 percent of disasters since January 2017. [143]

    Further, we reported that FEMA lacks a formal mechanism for documenting and sharing best practices, lessons learned, and corrective actions nationwide. We recommended that FEMA prioritize the completion of after-action reviews, document lessons learned at the headquarters level, and develop guidance for sharing such reviews with external stakeholders when appropriate. DHS concurred with our recommendations and stated it is taking steps to address them, including by implementing a new system for tracking best practices and lessons learned, among other things. Ensuring that FEMA and all other agencies participating in the COVID-19 response are consistently identifying best practices and areas of improvement will be critical to mounting an effective response now and in the future.

  • Preliminary information on the effects of COVID-19 highlight the importance of additional data collection to target response activities to the most affected groups. For example, though all populations are at risk of COVID-19, early monitoring indicated that certain populations are more at risk. Preliminary findings indicate that older adults—those over the age of 65—are more likely to be hospitalized and to die from the virus, and the majority of persons hospitalized also have underlying medical conditions, such as hypertension, obesity, or chronic lung disease. [144] Additionally, those findings indicate that black populations might be disproportionately affected, representing a larger proportion of hospitalized COVID-19 patients. [145] Nursing homes and other congregate care settings, such as jails and prisons, have also been severely affected by COVID-19 due to limited capacity to isolate infected individuals and inability to practice social distancing. [146] More study of these early findings can help target a response to appropriate communities.

Establish transparency and accountability mechanisms. In emergency situations, such as the COVID-19 pandemic, it is understandable, and appropriate, for agencies to want to get funds out the door quickly. However, without the necessary safeguards in place, funds may not get to the intended places or be used for the intended purposes. [147] Therefore, it is important that agencies integrate transparency and accountability mechanisms with mission achievement.

For example, clearer explanations of the good faith necessity certification in SBA’s initial interim final rule for PPP could have helped avoid uncertainty concerning loan eligibility. To help quickly disperse funds, SBA’s initial interim final rule allowed lenders to rely on borrower certifications to determine the borrower’s eligibility; however, the rule provided minimal additional information to borrowers on the required good faith necessity certifications. [148] On April 23, 2020—20 days after the program launched—SBA posted an answer to a frequently asked question, stating that it is unlikely that publicly traded companies with substantial market value and access to capital markets will be able to make the required good faith necessity certification. According to data from FactSquared as of June 1, 2020, about 70 publicly traded companies that were approved for about $435 million had returned their PPP loans. [149]

Agencies need to provide transparent reporting so that Congress and others have assurance that effective and efficient safeguards over federal funds are established—and that funds are being used for their intended purposes. Lessons from the Recovery Act demonstrate the value of having a transparent website for publicly reporting spending, as well as how such data provides a foundation for identifying fraud, waste, and abuse. [150] A key feature of the Recovery.gov website was the ability to allow users to track spending by project and the location where funds were spent. [151] We also reported on how the Recovery Accountability and Transparency Board’s Recovery Operation Center effectively served as a centralized location for analyzing data on Recovery Act spending and its recipients through use of advanced data analytics.

The Pandemic Response Accountability Committee has established a website—pandemic.oversight.gov—which will eventually serve as a repository of detailed information on federal spending related to COVID-19. [152] The site will include monthly obligations and expenditures on federal awards and contracts related to COVID-19 funds as reported by participating agencies. However, as of June 1, 2020, this information is not yet available. The site will also include reports related to COVID-19 by the Pandemic Response Accountability Committee itself, individual inspectors general offices, and us.

Early implementation of such capabilities would help ensure real-time oversight and monitoring of COVID-19 funding and facilitate identifying fraud and errors before payments are made. [153] As we have previously reported, preventive activities generally offer the most cost-effective investment of resources. [154] Therefore, effective managers of fraud risks focus their efforts on fraud prevention in order to avoid a costly “pay-and-chase” model, to the extent possible.

To date, the transparency of the use and distribution of CARES Act funding has been mixed. According to Treasury, spending information should soon be available and we will examine the level of transparency of the reported information. In addition, in some cases, agencies have already released information about where COVID-19 funds are flowing. For example, HHS released data on all providers that (1) received Provider Relief Fund payments, and (2) certified they meet the terms and conditions for those payments. In other cases, such information has not been released. SBA has not been as transparent in its reporting on the $670 billion PPP. SBA has regularly published summary data, including on the number and dollar amount of loans approved, number of lenders and loans by lender type, and loans by state and industry. However, SBA has not made data on individual loans available on its website as it has done for other loan guarantee programs, although SBA has stated on its website that it plans to do so at an unspecified future date. In an interview on June 1, 2020, SBA officials declined to comment on whether they planned to release loan-level data. The officials later noted concerns about personal privacy and commercially sensitive business information that they said were not presented by traditional SBA business loan programs.

Total federal COVID-related spending will be publicly reported using existing reporting requirements within agency financial systems and existing reporting under the Federal Funding Accountability and Transparency Act of 2006, as amended by the Digital Accountability and Transparency Act (DATA Act). [155] Federal agencies that have received COVID-19 supplemental appropriations are required to report obligations and expenditures on a monthly basis using a disaster emergency fund code provided by OMB to link these funds to the supplemental appropriations. [156] According to OMB, agencies will begin the monthly reporting, as required by the CARES Act, with June 2020 data to be displayed on USASpending.gov in July 2020. [157] It is unfortunate that the public will have waited more than 4 months since the passage of the CARES Act for access to spending information presented in a systematic way. GAO will monitor USASpending.gov regarding the accessibility and transparency of this reporting.

As monthly data related to COVID-19 spending become available on USAspending.gov, Treasury faces the challenge of ensuring that the data are presented in a way that maximizes their transparency and usefulness. We have previously identified several key practices to help ensure the transparent presentation of federal spending data, including by presenting data in a way that enables users to easily explore them. [158] These practices include tools such as interactive maps and visualizations and search functions to help users find information or display search results using tables, charts, and maps.

We have also previously reported on the importance of being transparent about the quality of the information presented on USAspending.gov, including the value of clearly identifying data limitations. [159] Treasury has made progress related to both of these issues for data displayed on USAspending.gov. As Treasury moves forward with CARES Act implementation, the inclusion of COVID-19 spending data on USAspending.gov presents an opportunity to further build on these efforts. Clear presentation of these data, search functions that provide a roadmap to COVID-19-specific data, and information regarding any data limitations will enhance transparency and help ensure that Congress and the public can quickly and easily find, understand, and analyze CARES Act spending data.

Issues for congressional oversight. While Congress has taken a number of actions to help address the pandemic, it continues to consider additional actions—both to improve ongoing efforts and implement new ones—and develop plans for congressional oversight of the nation’s response to and recovery from COVID-19. As we have previously reported, congressional oversight plays a vital role in spurring agency progress on matters of national importance. [160] On the basis of our work on past large scale government responses to economic downturns and other crises, we have identified several key areas for congressional oversight that are applicable to the current efforts to combat the pandemic (see table 9).

Table 9: Key Areas for Congressional Consideration in Overseeing the Federal Response to the COVID-19 Pandemic
Key area Oversight considerations
Fiscal assistance How effective are current funding delivery mechanisms for providing fiscal assistance to individuals, states, and localities, and should they be modified or supplemented by other approaches to support the delivery of public services?
Whole-of-government response and recovery How effectively is the federal government communicating and collaborating? How effectively is it implementing and assessing policy changes enacted in response to the pandemic? What more needs to be done?
Collaborative governance What can the federal government do to better partner with state and local governments and the nonprofit and private sectors to leverage the public investment in addressing the economic crisis and fostering recovery?
Source: GAO. | GAO-20-625 .

While all three key areas are relevant to ongoing discussions about additional action, three issues in particular—which relate to fiscal assistance and whole-of-government response and recovery and where we have made recommendations that agencies have not implemented—merit congressional attention and consideration:

  • Aviation preparedness. With the recurring threat of communicable diseases quickly spreading around the globe through air travel, it is imperative that the U.S. aviation system is sufficiently prepared to help respond to any future communicable disease threat. In 2015, we recommended that the Secretary of Transportation work with relevant stakeholders, such as HHS and DHS, to develop a national aviation-preparedness plan for communicable disease outbreaks. [161] Such a plan could establish a mechanism for coordination between the aviation and public health sectors and guide preparation for communicable disease nationally and for individual airlines and airports.

    While the DOT agreed that a plan is needed, as of May 2020, no such plan had been developed. Since our report, DOT has maintained that because HHS and DHS are responsible for communicable disease response and preparedness planning, respectively, these departments should lead any efforts to address planning for communicable disease outbreaks, including for transportation. GAO maintains that DOT is in the best position to lead a multiagency effort to develop a national aviation-preparedness plan and that such a plan is critically needed. Among other reasons, DOT’s Office of the Secretary is the liaison to the international aviation organization that has developed standards—including a national aviation pandemic plan—which member states are obligated to implement under an international aviation treaty signed by the United States. [162]

    In the absence of a national aviation-preparedness plan, DOT officials point to ongoing efforts to engage with interagency partners at HHS and DHS, as well as industry stakeholders, to better collaborate on communicable disease response and preparedness as they relate to civil aviation. While these efforts are helpful, the United States will not be prepared to minimize and quickly respond to future communicable disease events and garner international cooperation in addressing pandemics without such a plan.

  • Full access to death data. According to an analysis by the Treasury Inspector General for Tax Administration, the number of economic impact payments going to decedents—almost 1.1 million payments totaling nearly $1.4 billion as of April 30—highlights the importance of consistently using key safeguards in providing government assistance to individuals. The Social Security Act provides IRS access to SSA’s full set of death records, but does not provide such access to Treasury and BFS, which distribute payments. We have previously suggested that Congress consider amending the Social Security Act to explicitly allow SSA to share its full death data with Treasury for data matching to prevent payments to ineligible individuals. While having this access would not have prevented the economic impact payments to deceased individuals based on IRS’s initial legal determination regarding these payments, such access remains an important safeguard. We maintain that providing Treasury with access to SSA’s full set of death records, and requiring that Treasury consistently use it, could help reduce similar types of improper payments in other circumstances.
  • Fiscal assistance through Medicaid. In the Families First Coronavirus Response Act, Congress provided additional Medicaid funding to states temporarily through the FMAP—the statutory formula according to which the federal government matches states’ spending for Medicaid services. We have found that during economic downturns—when Medicaid enrollment can rise and state economies weaken—the FMAP formula, which is based on each state’s per capita income, does not reflect current state economic conditions. In addition, past efforts to provide states with temporary increases in the FMAP were not as timely or responsive as they could have been.

    To effectively stabilize states' funding of Medicaid programs during such periods, assistance should be provided—or at least authorized—near the beginning of a downturn. Furthermore, to be efficient, funds should be targeted to states commensurate with their level of need.

    To help ensure that federal funding efficiently and effectively responds to states' needs, we previously developed a formula that offers an option for providing temporary automatic, timely, and targeted assistance during a national economic downturn through an increased FMAP. [163] The formula's automatic trigger would use readily available economic data (e.g., the monthly employment-to-population ratio) to begin assistance. Targeted state assistance would be calculated based on (1) increases in state unemployment and (2) reductions in total wages and salaries. Using this formula could help make any future changes to the FMAP during the current economic downturn timelier and targeted.

Conclusions 


The COVID-19 pandemic has had devastating effects on the health and economic well-being of Americans, and it has necessitated a whole-of-government response on an unprecedented scale. Both the Congress and the administration have acted to mobilize resources quickly to help the nation respond to and recover from the pandemic. However, the negative effects of the pandemic on families, communities, and health care systems and on the long-term economic condition of millions of Americans and U.S. businesses are likely to persist into the future. Lessons learned from examining the federal response can be a helpful resource as the nation seeks to rebuild community health care systems and economies and to make them more resilient in the face of future disruptions.

Our work for this first report identified initial opportunities to improve the federal government’s ongoing response and recovery efforts. In particular, we found the following:

  • The federal government continues to lack a national aviation-preparedness plan for communicable disease outbreaks. Until we have a national aviation-preparedness plan, we risk being unprepared to respond quickly and effectively to communicable disease events, including the continued spread of COVID-19.
  • DOL has not provided information to state unemployment agencies about the risk of improper payments associated with certain employees potentially simultaneously receiving both pay funded with PPP funds and unemployment benefits. Confusion about this issue increases the risk of improper payments to beneficiaries and misuse of limited funds.
  • IRS does not currently plan to take additional steps to notify ineligible recipients on how to return payments.
  • SBA has not provided details on how it plans to identify and respond to risks in PPP to ensure program integrity, achieve program effectiveness, and address potential fraud, including in loans of $2 million or less.

In addition, our work highlights the importance of previous matters for consideration for Congress that, if implemented, could improve effectiveness and program integrity of the fiscal assistance provided to states and individuals. These include matters related to Treasury’s access to the full death data, and revising the FMAP formula to be automatically responsive during economic downturns (see fig. 14).

We will continue to provide real-time, ongoing oversight of the federal response to COVID-19 to help ensure transparency and accountability and to identify opportunities for improvement, as appropriate.

Figure 14: Matters for Congressional Consideration and Recommendations

Agency Comments and Our Evaluation 


We shared a draft of this report with multiple agencies for review and comment. [164] Agency comments specific to the enclosures in appendix III are included in each enclosure.

In their comment letters, DHS, HHS, Education, IRS, and Treasury noted the unprecedented level of effort displayed by the federal workforce in responding to the crisis. We agree that the efforts of the federal workforce to respond quickly and broadly to the public health and economic crises have been remarkable, and we added language to our report to this effect.

In addition, agencies provided the following comments:

Department of Labor. While DOL officials neither agreed nor disagreed with our recommendation, In its comments, reproduced in appendix VII, DOL noted that it is preparing questions and answers regarding individuals collecting UI benefits while simultaneously receiving payment from the PPP. DOL also said that it has reached out to SBA to help inform this guidance, and expects to release it to state UI agencies within the next month.

Internal Revenue Service. In its comments, reproduced in appendix VIII, IRS agreed with our recommendation to consider additional options to notify ineligible recipients on how to return payments.

Department of the Treasury. In its comments, reproduced in appendix IX, Treasury highlighted its role in implementing certain CARES Act provisions, including economic impact payments, Payroll Support Program, Coronavirus Relief Fund, Federal Reserve lending facilities, and the PPP. Regarding PPP, Treasury noted the successes of the program, including the speed with which SBA and Treasury launched the program and how quickly loans were processed. Treasury also stated that it and SBA took care to introduce safeguards to prevent fraud and misuse of funds. In the report, we discuss the safeguards that SBA put in place before loan approval. However, we also note that although Treasury and SBA had announced efforts to implement safeguards after loan approval, SBA has provided limited information on how it will implement these safeguards. In its letter and technical comments, Treasury also stated that although our report notes that some of the loan forgiveness regulations were not issued until May, the CARES Act and other regulations that SBA released prior to May addressed loan forgiveness requirements. In the report, we describe SBA’s prior regulations and guidance but note the critical nature of the regulations posted in May, which state that SBA was addressing lenders’ and borrowers’ need for clarity and certainty concerning loan forgiveness requirements.

Small Business Administration. SBA provided written comments that are reproduced in appendix X. [165] In those comments, SBA did not state whether it agreed or disagreed with our recommendation to the agency. However, it commented on our interactions with the agency, as summarized below:

  • SBA stated that we mischaracterized the agency’s interactions with GAO, noting that it had provided documents to GAO and made staff available for meetings. As noted in the report, SBA provided primarily publicly available information in response to our inquiries and in the beginning of June discussed questions we had provided about 6 weeks earlier. In its technical comments, SBA also said that we had requested interviews by June 1, 2020, and that the agency had complied with that request. In fact, we first asked to meet with agency officials on April 13, 2020, and provided a list of questions to discuss on April 15, 2020. We provided June 2, 2020, as the last possible date we could meet with them.
  • Regarding the detailed description of data on loans that SBA had made, SBA stated that we had indicated for the first time in a June 1, 2020, interview that we were seeking individual loan data. In fact, we requested data dictionaries to guide a request for loan-level data on May 21, 2020, and requested loan-level data on May 27, 2020, even though the data dictionaries had not been provided. SBA had not provided the information as of June 17, 2020, or indicated when it planned to do so. We remain interested in receiving the requested data dictionaries and loan-level data and plan to continue to engage with SBA on this matter.

SBA also provided technical comments that we incorporated as appropriate. Some of these comments were more than technical in nature, as summarized below:

  • SBA stated that it was not accurate to suggest that safeguards for PPP are limited or that the agency had not planned for oversight. Specifically, it said that GAO ignored safeguards the agency put in place and interim final rules that it had issued on loan review and forgiveness. In our report, we do discuss the safeguards that SBA put in place before loan approval, and we cite both interim final rules. In an interview on June 1, 2020, we asked SBA for additional details on the reviews it planned for loans of more than $2 million and any reviews of loans of less than $2 million; SBA declined to comment.
  • SBA said that we make an unsupportable leap in linking lenders’ streamlined obligations during loan approval to fraudulent applications. As we note in the report, we have previously reported that reliance on applicant self-certifications can leave a program vulnerable to exploitation by those who wish to circumvent eligibility requirements or pursue criminal activities.
  • SBA said that we had not given it enough credit for the extraordinary work the agency had undertaken to implement the CARES Act. We agree that SBA has significant responsibilities under the CARES Act and has worked quickly to implement new programs such as PPP and to get loans to struggling small businesses quickly. In the report and related enclosures, we note that SBA moved quickly to process an unprecedented volume of loans.
  • SBA questioned our use of testimonial evidence obtained from six lender associations that represent a variety of lenders and one small business association we interviewed, stating that it was not representative. In the two report enclosures on SBA, we note that their views are not generalizable to other lender and small business associations but offered important perspectives.

U.S. Agency for International Development. USAID provided written comments, reproduced in appendix XI, highlighting its efforts to respond to COVID-19 abroad.

Department of Homeland Security/Federal Emergency Management Agency. In its comments, reproduced in appendix XII, DHS outlined the significant challenges facing the nation in responding to the COVID-19 pandemic and FEMA’s lead role in addressing them.

Department of Veterans Affairs. VA provided written comments, reproduced in appendix XIII, highlighting its efforts to respond to the COVID-19 pandemic.

Technical comments. The following agencies also provided technical comments, which we incorporated as appropriate: SBA, State, Education, Treasury, IRS, OMB, USAID, the Federal Reserve, HHS, DHS, DOT, DOD, Department of Commerce, USDA, and VA.

We are sending copies of this report to the appropriate congressional committees, the Acting Director of the Office of Management and Budget, White House Coronavirus Task Force, and other relevant agencies. In addition, the report is available at no charge on the GAO website at https://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-5500 or dodarog@gao.gov . Questions can also be directed to Kate Siggerud, Chief Operating Officer, at (202) 512-5600, A. Nicole Clowers, Managing Director, Health Care, at (202) 512-7114 or clowersa@gao.gov or Orice Williams Brown, Managing Director, Congressional Relations, at (202) 512-4400 or williamso@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.

Gene L. Dodaro

Comptroller General of the United States

Congressional Addressees

The Honorable Richard C. Shelby
Chairman
The Honorable Patrick J. Leahy
Vice Chairman
Committee on Appropriations
United States Senate

The Honorable Lamar Alexander
Chairman
The Honorable Patty Murray
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate

The Honorable Ron Johnson
Chairman
The Honorable Gary C. Peters
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Nita M. Lowey
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives

The Honorable Frank Pallone, Jr.
Chairman
The Honorable Greg Walden
Republican Leader
Committee on Energy and Commerce
House of Representatives

The Honorable Bennie Thompson
Chairman
The Honorable Mike D. Rogers
Ranking Member
Committee on Homeland Security
House of Representatives

The Honorable Carolyn B. Maloney
Chairwoman
The Honorable Jim Jordan
Ranking Member
Committee on Oversight and Reform
House of Representatives

Appendixes 

IN THIS SECTION


Appendix I: Scope and Methodology

To examine key actions the federal government has taken and identify criteria for assessing those actions as appropriate, we reviewed our prior work related to federal disaster management; analyzed the most recent agency data on a range of activities, obligations, and expenditures related to the Coronavirus Disease 2019 (COVID-19) pandemic response as of May 31, 2020 (unless otherwise noted in the report); reviewed federal laws, agency guidance, processes, and procedures; and interviewed agency officials. In addition, we examined publicly released documents or obtained information from agencies within the Board of Governors of the Federal Reserve System, Department of Agriculture, Department of Commerce, Department of Defense, Department of Education, Department of Health and Human Services, Department of Housing and Urban Development, Department of Labor, Department of State, Department of Transportation, Department of the Treasury, Department of Veterans Affairs , Federal Aviation Administration, Federal Emergency Management Agency, Internal Revenue Service, Small Business Administration, and U.S. Agency for International Development.

Where applicable, GAO plans to use the National Center for Health Statistics (NCHS) COVID-19 death data over time in our reporting for consistency, because it is considered to be the most reliable source of data since it is based on official death records. Differences between NCHS data and reports from other sources, such as state health department websites, should reduce over time as data are processed and counts are updated. To assess the reliability of data related to public health and agency spending of funds allocated to address the pandemic, we reviewed information on the sources and methods by which these data were collected and reported, and we followed up with knowledgeable individuals as needed to answer questions about the appropriate use and potential limitations of these data. We found these data to be sufficiently reliable for our purposes.

We reviewed testing data and limitations reported by the Centers for Disease Control and Prevention (CDC) over time, including the most recent information from CDC’s COVID Data Tracker website as of May 31, 2020. We also interviewed CDC officials to obtain information on steps taken to report testing data, and we reviewed federal laws, other requirements, and CDC guidance related to states’ and laboratories’ submission of testing data. We also conducted interviews with laboratory and public health industry groups to obtain their perspectives on agency actions and challenges; six associations that represent a variety of lenders and an association that represents small businesses; representatives from borrower, loan servicer, and private collection agency stakeholder groups; and representatives of the National Association of State Workforce Agencies.

We reviewed information from selected housing industry experts and housing stakeholder groups, the Standards for Internal Control in the Federal Government, A Framework for Managing Fraud Risks in Federal Programs, and GAO’s work on the Internal Revenue Service’s authentication efforts and other measures to address fraud risk and improper payments. [166] In addition, we obtained a listing of all appropriation warrants issued by the Fiscal Service to the respective federal agencies for the COVID-19 relief laws enacted at the time of our review. [167]

We compared each appropriation amount to the respective law or other supporting documentation. We also obtained the amounts that have been obligated and spent directly from some federal agencies’ own financial records as of May 31, 2020. To identify agencies’ contract obligations in response to COVID-19, we reviewed Federal Procurement Data System-Next Generation data through June 1, 2020. We identified obligations related to COVID-19 using the National Interest Action code, as well as the contract description. We assessed the reliability of federal procurement data by reviewing existing information about the Federal Procurement Data System-Next Generation and the data it collects—specifically, the data dictionary and data validation rules—and performing electronic testing. We determined that the data were sufficiently reliable for the purposes of describing agencies’ reported contract obligations in response to COVID-19.

To identify indicators for monitoring the economy, we first reviewed the federal responses to the pandemic, in particular the COVID-19 relief laws, and identified five key provisions intended to support the economy, corresponding to five different areas of the economy: labor markets, households, small business credit markets, corporate credit markets, and markets associated with state and local government finances. [168] We identified these key provisions based on their relative size, in dollars, as well as their potential economic effects. We then identified economic indicators corresponding to those five areas of the economy in order to provide a timely, general sense of how those areas of the economy were performing.

To identify potential indicators, we reviewed a number of sources, including prior GAO work, releases from federal statistical agencies, data available on the Bloomberg Terminal, and input from internal GAO experts. We assessed the reliability of the data we intend to use for monitoring and reporting on areas of the economy supported by the federal pandemic response, in particular the COVID-19 relief laws. We took a number of steps to determine the reliability of proposed data sources and indicators including reviewing relevant documentation, reviewing prior GAO work, and interviewing data providers. The quality of some available data, and collection methods, have been influenced by the COVID-19 pandemic. Nevertheless, we found that, collectively, the indicators were sufficiently reliable to provide a general sense of how these areas of the economy are performing.

Further, we reviewed the federal responses to the pandemic, in particular the COVID-19 relief laws, and identified five key provisions intended to support the economy. We identified these key provisions based on their relative size, in dollars, as well as their potential economic effects. We reviewed measures of the size of the provisions based on the appropriation specified in the laws, when available, or appropriations requested by relevant agencies. [169]

As a result of this analysis, we identified the following five key provisions in support of the U.S. economy in federal responses to the pandemic thus far:

  1. Economic stabilization and assistance to distressed sectors, which provides liquidity to support lending to eligible businesses, states, municipalities, and tribes related to losses incurred as a result of the pandemic.
  2. The Paycheck Protection Program (PPP), which provides funding to the Small Business Administration to guarantee loans—that may be forgiven—to small businesses and other eligible entities to cover payroll and other eligible costs over 8 weeks. [170]
  3. Expanded unemployment insurance, which provides federally funded income support to unemployed individuals by expanding eligibility for unemployment compensation benefits, increasing weekly benefit amounts by $600, and extending the number of weeks of benefit eligibility.
  4. Recovery rebates (also known as economic impact payments), which provide direct payments of up to $1,200 per qualifying adult and up to $500 per qualifying child.
  5. Payments to states, local, tribal, and territorial governments for pandemic-related spending through the Coronavirus Relief Fund.

These provisions and their potential economic effects are summarized in table 10 below. To the extent that these provisions and their implementation through various programs and agencies are effective, we might expect a number of outcomes in different areas of the economy, including businesses continuing operations, making timely payments on obligations, and maintaining employment, as well as reduced financial stress for households facing unemployment and state, local, and tribal governments facing reduced revenues and increased expenditures.

Table 10: Key Provisions of the Federal Response to the Pandemic Intended to Support the Economy and Potential Economic Effects
Program Dollar amount (appropriation or estimate) Potential economic effects
Economic stabilization and assistance to distressed sectors 500 billion (appropriation in CARES Act), including up to 454 billion and potentially certain other amounts in funding to the Department of the Treasury’s Exchange Stabilization Fund to support facilities established by the Federal Reserve to provide liquidity to businesses, states, municipalities, and tribal governments; and not more than 46 billion to support, among other entities, passenger and cargo air carriers and businesses critical to maintaining national security
  • Providing liquidity to businesses based in the U.S.
  • Maintaining employment and preventing household financial stress among workers, as liquidity is contingent on, among other factors, maintaining employment through September 2020
  • Supporting state, municipal, and tribal government finances
Paycheck Protection Program (PPP) 670 billion (appropriation)a
  • Providing guarantees for loans to small businesses for payroll and other expenses, including businesses with fewer than 500 employees and nonprofits
  • Maintaining employment and preventing household financial stress among workers in small businesses
Unemployment insurance 293 billion (appropriation requested by Department of Labor)
  • Preventing household financial stress
Recovery rebates (also known as economic impact payments by IRS) 282 billion (appropriation requested by IRS)b
  • Preventing household financial stress, particularly among low- and moderate-income households
Coronavirus Relief Fund payments 150 billion (appropriation in CARES Act)
  • Helping state, local, tribal, and territorial governments cover the costs of responding to the pandemic
Sources: GAO analysis of Congressional Research Service, Congressional Budget Office, Internal Revenue Service (IRS), and Joint Committee on Taxation (JCT) documents. | GAO-20-625

aThe CARES Act appropriated $349 billion, however, this appropriation was amended by the Paycheck Protection Program and Health Care Enhancement Act to approximately $670 billion. Pub. L. No. 116-139, § 101(a)(2), 134 Stat. 620, 620 (2020).
bAs of May 31, 2020, IRS and Treasury had disbursed 160.4 million payments worth $269.3 billion.

Those aspects of the federal response to the pandemic that are aimed at supporting the economy may help sustain U.S.-based businesses through the economic stabilization and assistance to distressed sectors and PPP programs, as both programs provide liquidity intended to keep businesses viable and allow them to keep employees on payroll. [171] Furthermore, each of these programs provide incentives for businesses to maintain their employment levels in sectors of the economy that have been negatively impacted by widespread policies that limit certain economic activity and falling demand.

  • Businesses may maintain employment to the extent that they are able to access sufficient liquidity from these programs, which will in turn affect the extent to which households will face financial hardship during the pandemic.
  • For those households that do face unemployment and financial stress, the unemployment insurance enhancements and economic impact payments may assist them in paying their bills while the economy remains weak.
  • Like businesses and households, state, local, and tribal governments are also likely to face growing challenges, in particular from falling tax revenue and higher spending. Along with the payments provided to these governments in the COVID-19 relief laws, lending facilities set up by the Federal Reserve—some of which are supported by Department of the Treasury through funding appropriated under the CARES Act—may reduce state and local government fiscal stress while local economies remain weak.

We focused our review of potential health care indicators on response, recovery, and preparedness, which we selected as a well-established framework that is typically used to monitor large-scale, unanticipated adverse events. [172] To identify potential indicators, we reviewed a number of sources, including prior GAO work, information from relevant federal agencies responsible for the pandemic response and oversight of the health care system, selected reports produced by experts in public health and epidemiology, data collected by state health departments, and a review of the re-opening plans for all 50 states and the District of Columbia. [173] We included data to demonstrate how one indicator—number of excess deaths from all causes—could be used to examine patterns over time. We did not independently assess the methodology and underlying data reported by the CDC, but note the limitations, as CDC has reported them, to such an analysis.

Appendix II: Structures to Lead and Coordinate the Federal Pandemic Response

This appendix describes key aspects of the structures in place to help the federal government lead and coordinate the whole-of-government response. Although, it is too early to conduct a full evaluation of the extent to which gaps in planning or issues in implementation have posed response challenges, we are conducting a variety of work that will address such issues.

Response Plans

The COVID-19 Pandemic Crisis Action Plan

The Pandemic Crisis Action Plan Adapted U.S. Government COVID-19 Response Plan (PanCAP), issued March 13, 2020, was created to outline key federal decisions, federal actions, and interagency coordination structures that may be used during the Coronavirus Disease 2019 (COVID-19) pandemic response. The mission of the federal response is to leverage available federal resources to prepare for, respond to, and recover from COVID-19. The plan aims to help federal departments and agencies to coordinate activities to limit the spread of COVID-19; to mitigate the effect of illness, suffering, and death; and to sustain critical infrastructure and key resources in the United States.

Response Plans and Structures that Support the PanCAP

According to the PanCAP, the overall response should be conducted under the National Response Framework and the Biological Incident Annex to the Response and Recovery Federal Interagency Operational Plans, and federal agencies are to support the response through the Emergency Support Functions (ESF).

  • National Response Framework. The National Response Framework (Fourth Edition October 2019), which builds on over 25 years of emergency management guidance, is a guide to how the nation responds to all types of incidents. It describes specific authorities and best practices for managing incidents that range from the serious but purely local to those that are catastrophic and national in scope. Within the framework, the term “response” includes actions to save lives, protect property and the environment, stabilize the incident, and meet basic human needs following an incident. The National Response Framework is one of five planning frameworks (Prevention, Protection, Mitigation, Response, and Recovery) designed to support the overarching vision for working to create a secure, resilient nation. [174]
  • Federal interagency operational plans. As with the frameworks, these plans are part of the National Preparedness System. Their purpose is to describe the concept of operations for integrating and synchronizing existing national-level capabilities to support the corresponding local, state, tribal, territorial, insular area, and federal plans.
  • The Biological Incident Annex to the Response and Recovery Federal Interagency Operational Plans. This annex was published in August 2008 to outline the actions, roles, and responsibilities associated with response to a human disease outbreak of known or unknown origin that requires federal assistance.
  • Emergency Support Functions. ESFs are the federal government’s primary coordinating structure for building, sustaining, and delivering response capabilities. There are 15 ESFs, organized by specific functional areas for the most frequently needed capabilities during an emergency. ESFs are designed to coordinate the provision of related assets and services by federal departments and agencies. Table 11 details the federal department or agency that serves as the designated coordinator for each of the 15 ESFs.
Table 11: Emergency Support Functions (ESF)
Emergency Support Function Lead federal agency
ESF #1: Transportation Department of Transportation
ESF #2: Communications Department of Homeland Security National Communication System
ESF #3: Public Works and Engineering Department of Defense/U.S. Army Corps of Engineers
ESF #4:Firefighting U.S. Forest Service
ESF #5: Information and Planning Federal Emergency Management Agency (FEMA)
ESF #6 Mass Care, Emergency Assistance, Housing, and Human Services FEMA
ESF #7: Logistics Management General Services Administration and FEMA
ESF #8: Public Health and Medical Services Department of Health and Human Services
ESF #9: Search and Rescue FEMA
ESF #10: Oil and Hazardous Materials Response Environmental Protection Agency
ESF #11:Agriculture and Natural Resources Department of Agriculture
ESF #12: Energy Department of Energy
ESF #13: Public Safety and Security Department of Justice
ESF #14 Cross-Sector Business Coordination Department of Homeland Security (DHS) and Cybersecurity and Infrastructure Security Agency
ESF #15 External Affairs DHS
Source: GAO analysis of National Response Framework and FEMA documentation. | GAO-20-625

Key Players

The White House Coronavirus Task Force. This task force, led by the Vice President, is responsible for coordinating a whole-of-government approach, including governors, state and local officials, and members of Congress, to develop the best options for the safety, well-being, and health of the American people. The task force was formed on January 27, 2020, and the Vice President began leading it on February 26, 2020.

Unified Coordination Group. The group comprises senior leaders representing state, tribal, territorial, insular area and federal interests and, in certain circumstances, local jurisdictions, the private sector, and nongovernmental organizations (see fig. 15). Members must have significant jurisdictional responsibility and authority. The composition of the group varies, depending on the scope and nature of the disaster. The Unified Coordination Group leads the unified coordination staff. As the primary field entity for federal response, the group integrates diverse federal authorities and capabilities and coordinates federal response and recovery operations. The Administrator of the Federal Emergency Management Agency (FEMA), the Department of Health and Human Services’ (HHS) Assistant Secretary for Preparedness and Response (ASPR), and a representative of the Centers for Disease Control and Prevention (CDC) jointly lead the Unified Coordination Group for COVID-19.

Figure 15: Organizational Structure of the Unified Coordination Group

Eight operational task forces. These task forces exist to provide operational guidance and secure resources to coordinate the whole-of-government response to COVID-19. Table 12 describes the responsibilities of these task forces and examples of their actions.

Table 12: Description of Operational Task Forces and Examples of Actions
Task force & key federal agencies Responsibilities and key tasks Examples of actions taken

Laboratory Diagnostic Task Force (LDTF)

Department of Health and Human Services (HHS) and the Federal Emergency Management Agency (FEMA)

Coordinate with stakeholders to understand the COVID-19 testing supply chain and rapidly evolving testing needs.

Inform supply, allocation, and prioritization of resources for testing, diagnostics, and reporting.

Increase clarity in guidance to laboratory stakeholders and provide assistance to enable labs to test at their full capacity.

Established connection with the Centers for Disease Control and Prevention (CDC) on tribal testing strategies and future support.

Supports states requesting additional technical assistance.

Community Based Testing Sites Task Force (CBTSTF)

HHS and FEMA

Create community-based testing sites that are federally supported, state managed, and locally executed to increase provisional nationwide COVID-19 testing. From March 20, 2020, through June 8, 2020, 247,616 samples were collected from CBTSTF locations and 243,145 tests were processed for results.

Supply Chain Task Force (SCTF)

Department of Defense (DOD) and FEMA

Maximize the nationwide availability of mission-essential protective and lifesaving resources and equipment based on need.

From June 5 – 7, 2020, six Project Airbridge flights carrying essential supplies arrived in New York, NY; Columbus, OH; and Chicago, IL.

As of June 8, 2020, more than 200 of these supply flights had been completed.

Healthcare Resilience Task Force (HRTF)

HHS and FEMA

Develop and provide guidance and procedures to build, preserve, and extend health and medical capacity.

Work to optimize health care delivery, including the health care workforce, facilities, and supplies.

Supporting HHS’s Assistant Secretary for Preparedness and Response (ASPR).

Working with Emergency Medical Services (EMS) stakeholders and interagency partners to propose courses of action and mitigation options to address funding and the personal protective equipment (PPE) needs of EMS agencies.

Community Mitigation Task Force (CMTF)

HHS and FEMA

Assist state, local, tribal, territorial, and federal leaders to implement and continually revise community mitigation strategies to slow disease transmission, and reduce morbidity and mortality.

Keep a particular focus on protecting individuals at higher risk for severe illness, while preserving the health care and public health systems, critical infrastructure and essential workforce.

Developing new language on risk by age groups; underlying conditions; and ethnic and minority populations.

Discussed strategies and CDC resources on returning workforces to worksites with the U.S. Pan Asian American Chamber of Commerce.

Medical Countermeasures Task Force (MCMTF)

HHS and FEMA

Establish baseline understanding of current status, needs, and gaps for COVID-19 medical countermeasures (MCM) development across the United States Government (USG).

Align MCM development and utilization across department and interagency partners to avoid duplication of effort, identify opportunities for synergy, and fill potential gaps.

Identify and prioritize approaches and related needs to accelerate MCM development and address questions regarding use of currently available MCMs.

Provide reports to ASPR, MCM lead, and other USG response managers.

Emergency Use Authorizations granted by the Food and Drug Administration include 61 molecular diagnostic tests, 28 laboratory-developed tests, 12 antibody tests, one antigen test, and one home collection kit.

Supporting development, preclinical studies, clinical trials, and manufacturing efforts for vaccines and therapeutics.

Data and Analysis Task Force

HHS and FEMA

Provide comprehensive data and analytics to support evidence-based decisions for COVID-19 response and recovery operations.

Provides daily situational awareness reports on COVID-19 indicators and collects daily hospital data for states and territories, according to FEMA officials.

These officials also stated that the task force projects demand, by state, for ventilators, PPE, and therapeutics and estimates the potential impact of community mitigation strategies.

Continuity Task Force (CTF)

FEMA

Maintain situational awareness and coordination across federal departments and agencies.

Identify operational risks.

Report on status of activities.

Facilitate opportunities to mitigate effects to operations.

The CTF is continuing to monitor COVID-19 related announcements sent by state and local authorities.
Source: GAO analysis of FEMA documentation. | GAO-20-625

The Department of Defense (DOD). DOD has specific roles, resources and authorities to bring to bear on pandemic response. Under the authority, direction, and control of the Under Secretary of Defense (Policy), the Assistant Secretary of Defense (Homeland Defense Global Security) provides overall coordination for DOD support to civil authorities. In a health crisis, the Assistant Secretary serves as the DOD focal point for federal departments and agencies and other entities on public health and medical support, preparedness, and policy matters for the defense support of civil authorities. The U.S. Northern Command and U.S. Indo-Pacific Command provide support to U.S. civil authorities—such as the Department of Homeland Security (DHS) or other federal agencies—for domestic emergencies and other activities in their respective areas of responsibility, when authorized or directed to do so by the President or the Secretary of Defense. [175] The National Guard Bureau coordinates the deployment of National Guard resources residing in the U.S. Northern Command and U.S. Indo-Pacific Command areas of responsibility. [176] In addition, the U.S. Army Corps of Engineers is the federal government's lead public works and engineering support agency. The Defense Logistics Agency works with other U.S. government departments and agencies to facilitate medical logistics support, including the transportation of personal protective equipment, to and between critical areas.

Coordination and Communication Centers

National Response Coordination Center (NRCC). The NRCC is a multiagency coordination center located within FEMA Headquarters. By statute and policy, the FEMA Administrator has overall responsibility and authority for operating the NRCC. [177] The NRCC’s staff coordinates the overall federal support for major incidents and emergencies. These staff consist of FEMA personnel, appropriate ESFs from various federal agencies, and other appropriate personnel and agencies. In addition, Regional Response Coordination Centers operate within each of FEMA’s 10 regional offices to facilitate communication between the NRCC and state, local, territorial, and tribal governments. According to a senior FEMA official, these regional offices help to ensure that state and local governments receive important information and are able to ask questions regarding COVID-19 response and recovery efforts. Further, the NRCC makes and manages mission assignments—work orders directing another federal agency to utilize its authorities and resources under federal law in support of response efforts (see table 13). [178] Mission assignments are a critical way to apply federal resources to the response, and FEMA can reimburse federal agencies out of the Disaster Relief Fund for carrying them out.

Table 13: Selected Examples of Mission Assignments for the COVID-19 Pandemic Response as of May 13, 2020
Description of mission assignment

Estimated cost at time of request

(in dollars) a

The Department of Defense (DOD) was tasked with providing 10 million N95 respirators to FEMA to support critical equipment shortfalls during COVID-19 response. 10 million
The Department of Veterans Affairs (VA) National Acquisition Center was tasked with receiving, processing, and responding to requests from FEMA regions for deliveries of pharmaceuticals. VA will execute operational management and oversight of requests and track VA deliveries of pharmaceuticals to state requestors. 3 million
The U.S. Army Corps of Engineers (USACE) was tasked with providing enterprise-wide tracking and reporting related to nationwide efforts to address medical facility shortages arising from the COVID-19 pandemic. 6.5 million
Source: GAO analysis of Federal Emergency Management Agency (FEMA) data. | GAO-20-625

aThis is a rough estimate entered in the request system—not the financial system of record—at the time the request and is not a reliable indicator of actual costs. Reliable data about actual costs are available later in the process after FEMA reconciles the mission assignments in its financial system.

HHS Secretary’s Operation Center (SOC). The SOC is the primary emergency operations structure for HHS tasked with protecting the health, safety, and security of the nation. It serves as the focal point for public health and medical information collection, sharing, and analysis, and it facilitates the coordination of HHS preparedness, response, recovery, and mitigation. The SOC also provides strategic situational awareness to support decision-making at the HHS leadership level.

HHS Joint Information Center. The Joint Information Center coordinates incident-related public information under ESF #8 (public health and medical services) and is authorized to release general medical and public health response information to the public. When possible, a recognized spokesperson from the public health and medical community (state, local, or tribal) delivers relevant community messages. After consultation with HHS, the lead Public Affairs Officer from other relevant centers may also release general medical and public health response information.

Appendix III: Report Enclosures

Relief for Health Care Providers

The Department of Health and Human Services is distributing more than $177 billion to financially support health care providers, finance care for COVID-19 patients and underserved populations, and finance existing Health Resources and Services Administration programs.

Entities involved: Department of Health and Human Services, Centers for Medicare & Medicaid Services, Health Resources and Services Administration

Key Considerations and Future GAO Work

As the Department of Health and Human Services (HHS) works to get funds to providers quickly, it will be important that robust internal controls are in place to help ensure funds are appropriately distributed and used. For example, it is important that funds not be provided to ineligible providers, such as hospitals that have closed, despite the imperative of a quick federal response to the COVID-19 crisis. We plan to conduct additional work to examine HHS’s efforts to provide assistance to providers.

Background

The scale of the nationwide COVID-19 pandemic requires a whole-of-government approach to respond, including multiple federal agencies to support the public health and medical response. HHS is designated as the lead agency for responding to a public health emergency, including a pandemic. [179] The COVID-19 pandemic has severely strained health care resources in some areas and severely reduced revenue that hospitals and other health care providers generate from the provision of nonessential health services.

To respond to these crises, the CARES Act and other laws enacted in response to the pandemic provided significant additional funding for health care providers, including increased Medicare payments to eligible providers. The Centers for Medicare & Medicaid Services (CMS), within HHS, administers Medicare. The Health Resources and Services Administration (HRSA), also within HHS, provides funding and support for a wide variety of programs, most commonly through grants that serve millions of people each year, that are designed to improve access to health care services for people who are uninsured, isolated, or medically vulnerable.

The CARES Act appropriated $100 billion to reimburse eligible health care providers for health-care-related expenses or lost revenues that are attributable to COVID-19, known as the Provider Relief Fund. [180] The Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA) appropriated an additional $75 billion for the fund. [181] The CARES Act also appropriated about $1.6 billion for HRSA programs. [182] In addition, the Coronavirus Preparedness and Response Supplemental Appropriations Act appropriated $100 million, and the PPPHCEA appropriated $600 million for HRSA programs. [183]

Overview of Key Issues

Provider Relief Fund. As of May 31, 2020, HHS had allocated almost $77.4 billion from the Provider Relief Fund, with about $97.6 billion not yet allocated. HHS made about 380,000 payments based on provider billing information by that date, totaling almost $65.2 billion. Payments range from less than $100 for some medical practices to more than $100 million for some hospital systems. HHS allocated $50 billion for general relief for health care providers and almost $27.4 billion targeted for high-impact hospitals, rural providers, Indian Health Service facilities, and skilled nursing facilities. [184]

  • General relief for health care providers. HHS allocated $50 billion from the Provider Relief Fund for general distribution to Medicare facilities and providers based proportionally on eligible providers’ share of 2018 net patient revenue from the Medicare fee-for-service program. [185] These funds were distributed in two waves. The initial $30 billion distribution began on April 10, 2020, 2 weeks after the enactment of the CARES Act. Distribution of the remaining $20 billion began on April 24, 2020. Providers were required to sign an attestation confirming receipt of the funds and agreeing to the terms and conditions within 90 days of receiving payment or return the funds. The conditions include having active Medicare billing privileges and treating Medicare patients after January 31, 2020.
  • High-impact hospitals. The COVID-19 pandemic has had a particular impact on hospitals in certain parts of the nation, and therefore, HHS is distributing $12 billion to hospitals on the front lines. Specifically, these payments are going to 395 hospitals that, based on information they submitted to HHS, provided inpatient care for 100 or more COVID-19 patients through April 10, 2020. Collectively, these facilities accounted for about 130,000 COVID-19 admissions, roughly 70 percent of the national total reported to CMS. Of the $12 billion allocation, $2 billion of these payments are being distributed among the hospitals based on their Medicare Disproportionate Share funding. The remaining $10 billion is being distributed based on the number of COVID-19 admissions, with each recipient hospital receiving about $77,000 per admission. Hospitals in New York and New Jersey received a total of about $6.7 billion of this funding.
  • Rural providers. HHS is distributing $10 billion to rural hospitals, including rural acute care general hospitals and Critical Access Hospitals, Rural Health Clinics, and Community Health Centers located in rural areas. HHS said that this funding reflects the greater risk of closure of rural entities due to the reduced patient volumes attributable to COVID-19. According to HHS, these entities have lower operating margins than providers in more populated areas.
  • Skilled nursing facilities. HHS is distributing nearly $4.9 billion to skilled nursing facilities (SNF). Each SNF is to receive a fixed distribution of $50,000, plus a distribution of $2,500 per bed. All certified SNFs with six or more certified beds are eligible for this targeted distribution.
  • Indian health care providers. Another $500 million was allocated for Indian Health Service, tribal, and Urban Indian organization facilities. Distribution includes a base payment plus an amount based on operating expenses. This funding complements other funding provided to Indian Health Service, tribal, and Urban Indian organization facilities for responding to COVID-19, including but not limited to, expanding capacity for telehealth.

See table below for a summary of Provider Relief Fund allocations.

Summary of Allocations from the Provider Relief Fund, as of May 31, 2020
Description Amount (dollars) When distribution began
General relief to health care providers 50 billion April 10, 2020
Relief to high-impact hospitalsa 12 billion May 1, 2020
Relief to rural health care facilities 10 billion May 1, 2020
Relief to skilled nursing facilities 4.9 billion May 22, 2020
Relief to Indian health care providers 500 million May 22, 2020
Unallocated funds 97.6 billion not applicable
Source: Summary of Department of Health and Human Services funding data. | GAO-20-625

aOf the $12 billion allocation, $2 billion of these payments are being distributed among the hospitals based on their Medicare Disproportionate Share funding.

HRSA programs. Congress appropriated nearly $2.3 billion in funding for a number of existing HRSA programs as part of the response to the COVID-19 pandemic. [186] The majority of the funds appropriated for HRSA programs—$2.02 billion—are for the Health Center Program. This program makes grants to health centers that provide a comprehensive set of primary and preventative health care services to individuals regardless of their ability to pay. As of May 31, HHS obligated $2.00 billion and expended almost $215 million of the funds appropriated for the Health Center Program. Also as of May 31, approximately one-third of health centers had accessed supplemental funding under the CARES Act (see table below). According to HRSA officials, health centers may wait to access the supplemental funding until they have created a budget that aligns with the funding requirements, and some may wait until the budget is approved by HRSA.

Summary of Supplemental Funding Distributed to Health Resources and Services Administration (HRSA) Grantees, as of May 31, 2020
Program or activity Appropriations (source) a Number of awards and type of recipient Number (percentage) of grantees that accessed award funds b
Health Centers Program $1.32 billion (CARES Act) 1,387 Health Centers 463 (33.3)
$100 million (Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020) 1,381 Health Centers 817 (59.2)
$600 million (Paycheck Protection Program and Health Care Enhancement Act) 1,385 Health Centers 33 (2.4 )
Rural Health $180 million (CARES Act)

46 states for Small Rural Hospital Improvement Program

14 Telehealth Resource Centers

52 tribal organizationsc

16 (34.8)

0 (0.0)

not availabled

Ryan White HIV/AIDS Program $90 million (CARES Act) 581 program recipients 33 (5.7)
Health Care Systems’ Poison Control Activities $5 million (CARES Act) 52 organizations representing 55 Poison Control Centers 1 (1.9)
Source: GAO summary of information from Department of Health and Human Services websites and HRSA officials. | GAO-20-625

a HRSA has allocated a small proportion of total funding for activities such as program oversight, documenting outcomes, and technical assistance. Funding sources are CARES Act Pub. L. No. 116-136, 134 Stat. 281 (2020), Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146 (2020), and Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020).
b The percentage of grant recipients accessing funds is as of May 31, 2020.
c The CARES Act directs HRSA to allocate at least $15 million of these funds to tribes, tribal organizations, Urban Indian Health organizations, or health service providers to tribes. HRSA made these grant awards on May 28, 2020.
d Grants to tribal organizations were awarded a few days before the cutoff date of reporting fund access.

To manage the funds and activities related to the COVID-19 response, HRSA officials said they plan to continue to use established controls, such as requiring grantee reporting requirements; HRSA has also added new protocols specific to COVID-19 funding. For example, these new protocols include creating distinct accounting codes to separately track the use of the supplemental funding by the originating law; analyzing spending data to identify outliers, anomalies, and patterns; and providing targeted technical assistance to grantees.

Additional relief for Medicare providers. The CARES Act authorized additional financial relief to certain providers. Among those provisions were the following:

  • Expansion of the Accelerated and Advance Payment Programs. Section 3719 of the CARES Act authorized the expansion of the Accelerated and Advance Payment Programs, which are typically used to make available emergency funding and address cash flow issues for providers and suppliers when there is disruption in claims submission or claims processing, including during a public health emergency or presidentially declared disaster.

    Under the expanded programs, active Medicare providers can apply for loans of up to 100 or 125 percent of the payments they received for a prior 3-month or 6-month period, depending on the type of provider or supplier. Recoupment of the advance and accelerated payments, through the offsetting of new Medicare claims, begins not more than 120 days after the funds are disbursed and continues for 3 or 8 months, depending on the type of provider or supplier. Any remaining balances not recovered through withholding of Medicare claims payments will be demanded for payment. Provider applications for the Advanced Payment Program were discontinued beginning on April 26, 2020, in light of grant payments made available through the Provider Relief Fund. CMS has made accelerated and advance payments of about $100 billion.

  • Sequestration adjustment. The CARES Act temporarily suspends a 2-percent reduction in Medicare payments required under prior law between May 1, 2020, and December 31, 2020. The Congressional Budget Office estimated that this will increase Medicare payments to providers by $6 billion in 2020.
  • Prospective payment add-on. For the emergency period, in some circumstances hospitals will be paid 20 percent more for treating patients with confirmed cases of COVID-19 who are enrolled in fee-for-service Medicare. The Congressional Budget Office estimated that the add-on will apply to about 1 million Medicare beneficiaries and increase Medicare payments by about $2 billion in 2020.

GAO Methodology and Agency Comments

To conduct our work, we examined publicly released HHS documents and obtained information from CMS and HRSA. We provided a draft of this report to HHS and the Office of Management and Budget for review and comment. Both agencies provided technical comments on this enclosure, which we incorporated as appropriate.

Contact information: James Cosgrove, (202) 512-7114, cosgrovej@gao.gov

Nursing Homes

The Department of Health and Human Services required state survey agencies to focus on infection control inspections as many nursing homes faced outbreaks of COVID-19, and past inspections show that infection control deficiencies had been widespread and persistent prior to the pandemic.

Entities involved: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Centers for Disease Control and Prevention

Key Considerations and Future GAO Work

Given the number of COVID-19 cases and deaths at nursing homes, we plan to examine Centers for Medicare & Medicaid Services (CMS) guidance and oversight of infection prevention and control and emergency preparedness in nursing homes in more depth in future GAO work.

Background

Nationwide, approximately 15,500 nursing homes provide care to about 1.4 million elderly or disabled residents, who are particularly vulnerable to the spread of infections. Because of this, the health and safety of nursing home residents—who are often in frail health and living in close proximity to one another—has been a particular concern during the COVID-19 pandemic. [187] One of the first major outbreaks reported in the United States occurred in a Washington State nursing home in February 2020. Since then, there has been a rapid increase in the number of U.S. nursing home cases and deaths. According to CMS, nursing homes reported over 95,000 confirmed cases and almost 32,000 deaths as of May 31, 2020 (based on reporting from 88 percent of nursing homes). [188]

CMS, an agency within the Department of Health and Human Services (HHS), is responsible for ensuring that nursing homes nationwide meet federal quality standards to participate in the Medicare and Medicaid programs. These standards require, for example, that nursing homes establish and maintain an infection prevention and control program. To monitor compliance with these standards, CMS enters into agreements with agencies in each state government—known as state survey agencies—and oversees the work the state survey agencies do.

CMS’s Center for Clinical Standards and Quality has responsibility for overseeing state survey agencies’ survey and certification activities, among others. In response to the pandemic, the Centers for Disease Control and Prevention (CDC) has provided infection prevention and control assessments through on-the-ground deployments and remote technical assistance. [189] The HHS Assistant Secretary for Preparedness and Response has also been involved in the response to COVID-19 in nursing homes.

Congress specifically appropriated $100 million in the CARES Act for the survey and certification program, and it directed the agency to prioritize the use of funds for nursing home facilities in localities with community transmission of COVID-19. [190] According to CMS, the agency plans to provide state survey agencies approximately $81 million through September 30, 2023.

Overview of Key Issue

Through our analysis of CMS data on infection prevention and control deficiencies cited in nursing homes surveyed prior to the pandemic, we found the following:

  • Infection prevention and control deficiencies were the most common type of deficiency state survey agencies cited, with most nursing homes having an infection prevention and control deficiency cited in 1 or more years from 2013 through 2017 (13,299 nursing homes, or 82 percent of all surveyed homes). In each individual year from 2013 through 2017, the percentage of surveyed nursing homes with an infection prevention and control deficiency ranged from 39 percent to 41 percent. In 2018 and 2019, we found that this continued, with about 40 percent of surveyed nursing homes having an infection prevention and control deficiency cited each year. This is an indicator of persistent problems at these nursing homes.
  • Further, in each year from 2013 through 2017, nearly all infection prevention and control deficiencies (about 99 percent in each year) were classified by surveyors as not severe, meaning the surveyor determined that residents were not harmed. Our review of CMS data shows that CMS rarely implemented enforcement actions for these deficiencies: from 2013 through 2017, CMS implemented enforcement actions for 1 percent of these infection prevention and control deficiencies classified as not severe. [191]

In response to the pandemic, HHS, primarily through CMS and CDC, has taken actions to address infection prevention and control in nursing homes, and a selected list of these actions is included below. These actions include, for example, providing guidance and technical assistance to nursing homes to improve infection control practices, shifting to targeted infection control inspections of nursing homes, and enhancing reporting requirements for nursing homes. Specifically:

  • On March 1, CDC released infection control and prevention strategies for long-term care facilities, including nursing homes and assisted living facilities. The strategies encourage long-term care facilities to actively screen all residents daily for fever and COVID-19 symptoms, and to notify state or local health departments within 24 hours of suspected or confirmed COVID-19 cases, severe respiratory infections causing hospitalization or death, and clusters of respiratory infections. This guidance was updated on May 19.
  • On March 4, CMS limited and prioritized the types of survey activities allowed in health care facilities. On March 20, CMS temporarily suspended state survey agencies’ use of standard surveys for nursing homes, and instead required state survey agencies to conduct targeted infection prevention and control surveys of selected providers identified through collaboration with CDC and the HHS Assistant Secretary for Preparedness and Response.
  • On March 13, CMS issued guidance for nursing homes to improve their infection control practices in order to help prevent the transmission of COVID-19, including by restricting visitors and cancelling communal dining and group activities.
  • On April 19, CMS notified state survey agencies about planned requirements for nursing homes to report COVID-19 cases and deaths through CDC’s National Healthcare Safety Network and to inform residents, their families, and residents’ representatives of COVID-19 cases in their facilities. On April 25, CDC launched the online nursing home COVID-19 reporting tool through its National Healthcare Safety Network. On May 8, CMS issued an interim final rule to establish these requirements and make this COVID-19 reporting to CDC mandatory. [192]
  • On April 30, CMS announced that it will convene an independent commission to help guide nursing homes during the President’s "Opening Up America Again" initiative.
  • On May 18, CMS provided recommendations to state and local officials for reopening nursing homes. These included criteria for relaxing restrictions as well as survey activities and visitation considerations for each phase of reopening.
  • On May 19, CDC released guidance on CDC recommendations for nursing homes and health departments related to COVID-19 testing, including recommendations on how to prioritize and conduct testing.
  • On June 1, CMS released data as of May 24 on the results of its new federal reporting requirement for nursing homes to report COVID-19 cases and deaths to CDC. On June 4, these data were updated with results as of May 31.
  • On June 4, CMS released data on the results of the infection control focused surveys state survey agencies had completed since March.

GAO Methodology and Agency Comments

To conduct this work, we reviewed agency guidance and other relevant information on CMS’s response to the COVID-19 pandemic. We also summarized information from our May 2020 report that analyzed data obtained from CMS on nursing home infection control deficiencies from 2013 through 2017, as well as similar publicly available data on infection control deficiencies in 2018 and 2019. [193]

We provided a draft of this report to HHS for review and comment. HHS provided technical comments on this enclosure, which we incorporated as appropriate.

Contact information: John E. Dicken, (202) 512-7114, dickenj@gao.gov

Related GAO Product

Infection Control Deficiencies Were Widespread and Persistent in Nursing Homes Prior to COVID-19 Pandemic. GAO-20-576R . Washington, D.C.: May 20, 2020.

Federal Efforts to Provide Medical Supplies

States’ requests for medical equipment and supplies, such as personal protective equipment, quickly exceeded the capacity of the Strategic National Stockpile, resulting in a multiagency response to acquire and distribute material.

Entities involved: Department of Health and Human Services, Assistant Secretary for Preparedness and Response, Federal Emergency Management Agency, Department of Defense

Key Considerations and Future GAO Work

While agencies have taken actions to provide medical equipment and supplies, such as personal protective equipment (PPE) and ventilators, to states and other entities to help health care workers to respond to the COVID-19 pandemic, concerns have been reported about the distribution, acquisition, and adequacy of supplies from the Strategic National Stockpile (SNS) and other sources. For example, in April 2020, the National Governors Association, whose membership comprises state governors and the leaders of territories and commonwealths, noted in a memorandum to governors’ offices that the need for PPE, ventilators, and other supplies was resulting in competition between states and with the federal government. [194] We previously raised concerns about supply gaps. Specifically, in 2003, we reported that urban hospitals lacked the necessary equipment, such as PPE, to respond to a large influx of patients experiencing respiratory problems caused by a bioterrorism event requiring a similar response to a naturally occurring disease outbreak.

Findings from a 2019 pandemic planning exercise conducted by the Office of the Assistant Secretary for Preparedness and Response (ASPR) within the Department of Health and Human Services (HHS) in conjunction with multiple federal agencies, states, and stakeholders highlighted similar concerns about supply availability, as well as the SNS more generally. [195] For example, the report noted that domestic manufacturing capacity would be unable to meet the demands for PPE and other supplies in the event of a global influenza pandemic. In response to these findings, ASPR recommended several actions, including the development of a prioritization strategy for the distribution and allocation of scare resources, a report to Congress detailing supply chain shortages, and a legislative proposal to support the investment in and development of domestic manufacturing capability. HHS officials told us that the department had been unable to take action to address these recommendations as of June 2020 due to the COVID-19 pandemic. However, in comments provided by HHS, the department told us ASPR officials had met with key Congressional staff in October 2019 to highlight findings from the exercise, including supply chain and PPE shortages, lack of domestic manufacturing capacity, and potential funding requirements for medical counter measures development. Further, HHS officials also told us that they have used lessons learned from the exercise to inform the ongoing response to the COVID-19 pandemic, but did not provide any specific examples.

We are conducting a comprehensive body of work on the SNS in response to the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019 and the CARES Act. [196] This work includes examining the materials states requested from the SNS for COVID-19 and, more generally, the decisions behind purchases for the SNS over time. As part of this work, we plan to review progress made in restructuring the SNS based on lessons learned from recent pandemics, an effort the administration announced on May 14, 2020. Further, we also plan to examine the alignment of supplies in the SNS with threat risks; coordination and communication with states, territories, localities, and tribes; and actions taken, if any, to mitigate supply gaps. We are also examining the role that the Federal Emergency Management Agency (FEMA) played in distributing supplies in conjunction with HHS and others, and how federal agencies used authority under the Defense Production Act to obtain needed supplies.

Background

The SNS, overseen by ASPR, is the largest federally owned repository of pharmaceuticals, critical medical supplies, federal medical stations, and medical equipment available for rapid delivery to support the response to a public health emergency when state and local supplies are depleted, according to the President’s budget proposal for fiscal year 2021. [197] In such an event, the SNS can be used as a short term stop gap buffer, according to HHS officials. Critical equipment and supplies needed by healthcare workers during the pandemic have included PPE—such as N95 respirator masks, surgical gowns, and gloves—and ventilators to assist critically ill patients with breathing.

HHS is designated as the lead agency to address the public health and medical portion of the response, and as the needs of the pandemic increased nationwide, FEMA was designated as the lead agency for coordinating the overall federal response. At that point, responsibility for supporting and informing decisions about the allocation, distribution, and procurement of COVID-related supplies shifted to the Supply Chain Task Force, one of eight task forces run by the Unified Coordination Group. [198] The Supply Chain Task Force is jointly led by detailees from FEMA and the Department of Defense (DOD). In some cases, the White House Task Force—to which the Unified Coordination Group provided input—may make final decisions about supply issues, according to ASPR officials.

The four relief laws enacted to assist the response to COVID-19 appropriated funding for HHS activities that could include but were not limited to the SNS. [199] As of May 31, 2020, HHS reported it plans to use $16.71 billion to purchase PPE and ventilators for immediate use as well as to replenish SNS inventory, and to purchase supplies to expand testing for COVID-19, among other purposes. In addition, HHS reported obligations of almost $6.9 billion for the SNS, of which about $330 million had been expended as of May 31, 2020.

Overview of Key Issues

The nationwide need for critical PPE and supplies to protect responders and to treat Americans sickened with COVID-19 quickly exceeded quantities contained in the SNS. Specifically, in March 2020, ASPR began distributing supplies from the SNS to states and other entities, and within 1 month, the inventory of requested supplies was largely exhausted. [200]

ASPR distributed SNS supplies to states primarily using a pro-rata allocation strategy, an approach ASPR officials said the Centers for Disease Control and Prevention—which most recently managed the stockpile until October 2018—used to distribute materials to states in previous public health emergencies, including the H1N1 pandemic of 2009. This pro-rata strategy allocated supplies to states in proportion to their populations. Given the finite amount of supplies contained in the SNS and the widespread demand, ASPR officials told us and information on ASPR’s website noted that this allocation strategy was the most equitable approach. [201]

In each of the first and second allocations, ASPR distributed 25 percent of available SNS supplies to 62 areas across all 50 states, four large metropolitan areas, and the eight territories and freely associated states, according to ASPR officials. [202] In the last substantial distribution of supplies from the SNS—based on a decision made by the Unified Coordination Group—ASPR provided most of the remaining SNS inventory to states, reserving 10 percent for federal health care and other responders.

ASPR’s website noted that the supplies distributed from the SNS were likely less than states had requested. According to the Governor of Michigan, who testified before the House Committee on Energy & Commerce Congress in June 2020, the supplies the state received from the SNS were insufficient to meet the state’s needs in the early days of the pandemic. FEMA officials told us, however, that in the early days of the pandemic it was difficult for states to assess their true resource needs. As such, officials noted many states submitted requests that over-estimated the amount of supplies and medical equipment they needed. We requested information on the SNS inventory prior to the pandemic, the types and amounts of supplies that states requested, as well as what ASPR and FEMA distributed from the SNS in response to states’ requests; however, HHS and FEMA did not provide this information as of June 12, 2020. We plan to continue to seek this information from the agencies.

According to ASPR officials, the SNS was not designed or funded to provide states with supplies at the scale necessary to respond to a nationwide event such as the COVID-19 pandemic. According to ASPR’s website, the SNS is primarily designed and resourced to address discrete events—for example, limited displacements or localized disasters, such as hurricanes or terrorist attacks. Annual appropriations for the SNS over the past decade ranged between $478 million (fiscal year 2013) and $705 million (fiscal year 2020), exclusive of the supplemental appropriations made available through the four relief laws enacted to assist the response to COVID-19. [203] However, ASPR officials told us that annual appropriations have not been sufficient to cover the costs associated with maintaining medical countermeasures necessary to respond to the tremendous increase in the number of material threats over the same period. In its multiyear fiscal year 2018-2022 budget plan for medical countermeasure development, HHS noted the challenge of maintaining a stockpile of medical countermeasures to use against many low-probability, high-consequence threats, while also maintaining the capacity to rapidly respond to novel threats, like emerging infectious diseases. [204] In nine of the twelve years during this period (fiscal years 2009 through 2020), Congress appropriated to the SNS amounts equal to or more than what the administration requested. In fiscal year 2020, the administration did not make a separate request for SNS funding.

According to an ASPR official, the SNS did not contain the number of N95 respirator masks that would be needed in a severe pandemic. In a hearing before the Senate Committee on Appropriations on February 25, 2020, the Secretary of Health and Human Services said that the SNS contained 30 million N95 respirator masks; he further noted that health care workers could need 300 million to respond to the COVID-19 pandemic. [205] According to ASPR officials, most of the remaining masks contained in the SNS were purchased in response to the H1N1 pandemic of 2009 and therefore were dated. [206] ASPR distributed these masks with a caution to states to inspect them upon receipt and discard masks that were unusable due to their quality. In May 2020, FEMA officials told us that demand for PPE has been greater than ever before.

As a result of the near depletion of the SNS, as well as the shift in responsibilities from HHS to the Supply Chain Task Force, FEMA, HHS, and other federal agencies have taken actions to provide additional supplies to states and other entities. For example:

  • Supplies from other federal inventories. DOD made materials from its own stockpile, intended to support the military, available for the public health response. For example, according to FEMA, DOD has distributed almost 14 million N95 respirator masks from its inventory to cities, states, and the Department of Veterans Affairs (VA). In addition, federal agencies report any excess personal property, including supplies, to a centralized database maintained by the General Services Administration (GSA), which provides reports of available material to FEMA daily, according to GSA officials. [207]
  • New purchases. HHS, FEMA, and DOD have purchased additional supplies, which they have distributed to states and others. [208] According to HHS and our review of federal procurement data, in March and April 2020, HHS awarded contracts to purchase approximately 600 million N95 respirator masks and over 60,000 ventilators. HHS also announced an agreement to purchase up to 4.5 million protective fabric suits. ASPR officials told us that they distribute most of these supplies to states as they are available or that manufacturers distribute them to their existing customers. However, the manufacture and delivery of some supplies may take over a year. According to FEMA officials, in addition to PPE, to aid states in their COVID-19 testing efforts, the agency has purchased and distributed swabs and products used to preserve collected specimens. According to DOD, as of May 20, 2020, it had purchased 4.6 million N95 respirator masks, 14.1 million other masks, 8,000 ventilators, and 2.6 million gowns, among other things, for military and federal agencies. FEMA officials told us in May 2020 that HHS, FEMA, and the Supply Chain Task Force were transitioning some of the procurement responsibilities—which have largely been led by FEMA—to DOD and that DOD’s responsibilities would include purchasing materials to refill the SNS. While DOD officials said they would purchase some of the materials for the SNS, HHS would determine the procurement needs.
  • Donations. HHS received donations of pharmaceuticals for the SNS, which it then distributed to several states at their request. HHS also planned to distribute one of these pharmaceuticals to VA. For example, in March 2020, Sandoz and Bayer Pharmaceuticals donated 30 million doses of hydroxychloroquine sulfate and 1 million doses of Resochin (chloroquine phosphate), respectively. On March 28, 2020, the Food and Drug Administration (FDA) granted an emergency use authorization (EUA) for the use of these two pharmaceutical products for treatment of certain hospitalized patients. [209] However, on June 15, 2020, FDA announced that it was revoking the EUA, because the agency determined these products were unlikely to be effective treatments for COVID-19 and that the known and potential benefits of these products do not outweigh their known and potential risks, which include serious cardiac adverse events. In addition to receiving donations of chloroquine phosphate and hydroxychloroquine sulfate, in May 2020, Gilead Sciences, Inc., donated quantities of remdesivir to the SNS to treat approximately 78,000 patients. [210]
  • Project Airbridge. This effort, operated by the Supply Chain Task Force, was created to reduce the time it takes for six large U.S. medical supply distributors to bring PPE and other critical supplies from overseas manufacturers into the country for their respective customers. According to FEMA, the agency pays for the air transportation of the supplies from overseas into the United States. Once the supplies are in the country, the medical suppliers distribute 50 percent to areas of need, as indicated by Centers for Disease Control and Prevention data. They then distribute the remaining 50 percent through their normal commercial networks, although the federal government has purchased some of these supplies to provide to states, according to FEMA officials. According to FEMA’s website, this effort reduces shipment time from weeks to days.

GAO Methodology and Agency Comments

To understand the federal distribution and acquisition of PPE and other supplies from the SNS and other sources, we reviewed information contained in FEMA daily situation briefs and on HHS, DOD, and FEMA websites. The information in this enclosure highlights examples of the types of distribution and acquisition that these entities made; it is not an exhaustive list. In addition, we interviewed or obtained written responses from ASPR and FEMA about agency actions to increase supply and how they made distribution decisions. We provided a draft of this report to HHS, DHS, and DOD for review and comment. HHS, DHS, and DOD provided technical comments on this enclosure, which we incorporated as appropriate

Contact information: Mary Denigan-Macauley, (202) 512-7114, deniganmacauleym@gao.gov

Related GAO Product

Hospital Preparedness: Most Urban Hospitals Have Emergency Plans but Lack Certain Capacities for Bioterrorism Response. GAO-03-924 . Washington, D.C.: August 6, 2003.

COVID-19 Testing

The Department of Health and Human Services plays a key role in coordinating test development and implementation, but faces challenges in facilitating testing and reporting results.

Entities involved: Department of Health and Human Services, Centers for Disease Control and Prevention, Food and Drug Administration, National Institutes of Health, Federal Emergency Management Agency

Key Considerations and Future GAO Work

The Department of Health and Human Services (HHS) and other agencies have taken key actions to facilitate COVID-19 testing development, but faced several challenges resulting in significant delays in testing nationwide and a dearth of quality information on testing at the federal level. Specifically, agencies faced challenges developing accurate tests quickly and coordinating needed testing supplies. Furthermore, the absence of complete and consistent COVID-19 testing data reported through May 31, 2020, has made it more difficult to track and know the number of infections, mitigate their effects, and inform decisions on reopening communities.

We will continue to conduct work examining HHS and its component agencies’ ongoing roles with regard to testing. This will include an examination of trends and gaps in testing, as well as data reporting, among other things, to help further identify challenges faced by the federal government and others in expanding testing capacity. It will also include an examination of federal funding directed toward COVID-19 testing.

Background

Testing people for COVID-19 and isolating those who test positive are of paramount importance to help control the virus’s spread in the community, according to the Centers for Disease Control and Prevention (CDC). The absence of approved drugs to treat COVID-19 and uncertain timing for a vaccine to prevent the disease underscore the importance of federal efforts to help facilitate adequate testing to control the spread of the virus and collect complete and standardized testing data to track and make adjustments to the levels of testing where needed.

The Food and Drug Administration (FDA), the agency in charge of regulating medical device products (including diagnostic tests) marketed in the United States for use in detecting or diagnosing COVID-19 infections, has authorized three types of tests for this purpose: molecular and antigen diagnostic tests to detect the presence of the virus that causes COVID-19 (known as viral tests), and serology tests to detect antibodies produced in the bodies of patients who have had COVID-19, even if they did not show symptoms (known as antibody tests). [211]

The CARES Act contains several provisions related to testing, including those providing appropriations. For example, it requires laboratories that perform or analyze COVID-19 tests to report the results to HHS in a form and manner as the Secretary prescribes until the end of the emergency declaration. [212] With regard to funding, the CARES Act appropriates $4.3 billion to CDC, including $1.5 billion for grant funding for state, territorial, local, or tribal organizations, to carry out surveillance and ensure laboratory capacity, among other things, and provides for continuity of funding for fiscal year 2019 Public Health Emergency Preparedness (PHEP) cooperative agreement recipients. [213] In addition to CARES Act appropriations, funding was appropriated for testing in other COVID-19 relief laws, including $25 billion in the Paycheck Protection Program and Health Care Enhancement Act, 2020, of which $11 billion is directed to state, territorial, local, or tribal organizations. [214] Furthermore, $2 billion was appropriated to provide funding for testing for the uninsured. [215] As of May 31, 2020, HHS reported obligations of about $714 million to specifically support testing, of which about $44 million had been expended. In addition, HHS reported over $12 billion in obligations supporting state, local, territorial, and tribal organizations’ response to COVID-19, including testing support, among other things, of which $489 million has been expended.

Overview of Key Issues

As the coordinating agency for the federal response to public health and medical emergencies, HHS has a lead role in facilitating and overseeing the development and implementation of COVID-19 tests. [216] According to principles put forward by HHS agencies and the White House, states manage COVID-19 testing programs with federal support, and federal agencies play a key role in facilitating the development and implementation of those programs by, among other things, providing expedited regulatory authorization and guidance and accelerating research. The Assistant Secretary for Health was appointed by the Secretary of Health and Human Services to coordinate testing efforts across key HHS agencies, which took the following selected actions:

  • FDA authorized COVID-19 viral and serology tests under an Emergency Use Authorization (EUA) authority that was provided in the Pandemic and All-Hazards Preparedness Reauthorization Act. [217] As of June 16, 2020, FDA had issued 139 EUAs to test kit manufacturers and commercial and other laboratories; 119 EUAs were for molecular and antigen diagnostic (viral) tests, and 20 were for antibody tests.
  • CDC issued guidance, including priorities for testing and guidance on reopening, and awarded more than $12 billion to state, territorial, local, and tribal organizations to respond to COVID-19, such as by expanding laboratory capacity for testing, with CARES Act and other supplemental appropriations. As of May 31, 2020, CDC had deployed more than 1,000 of its staff for the COVID-19 response, including joining emergency response teams to assist in local public health efforts such as providing guidance on laboratory capacity and testing strategies, according to CDC officials.
  • The National Institutes of Health (NIH) launched a $1.5 billion program to speed the development of COVID-19 testing called Rapid Acceleration of Diagnostics (RADx). Under the program, private entities can submit proposals for diagnostic innovations, and NIH can select, fund, and support certain proposals. NIH also began a study to quantify undetected cases of COVID-19 through antibody testing, has undertaken the development of new tests, and has been providing validation support in the development of new antibody testing in collaboration with CDC and FDA.

Other agencies have taken on important roles in the COVID-19 testing response. [218] For example, the Federal Emergency Management Agency (FEMA) is working to source and procure testing supplies that are to be provided to states, territories, localities, and tribes to help increase testing capacity for a limited duration in support of their individualized reopening and testing plans. HHS and FEMA are also leading a joint federal Laboratory Diagnostics Task Force focused on increasing nationwide COVID-19 testing by providing equipment, supplies, and testing resources, and by establishing community-based testing sites in certain locations prior to turning those over for state management. In addition, the White House issued a testing blueprint for states in April that establishes broad roles and principles for states, localities, tribes, the federal government, and the private sector in facilitating expansion of needed testing capacity.

Nonetheless, federal agencies faced several challenges in facilitating COVID-19 testing development, resulting in significant delays in testing capacity nationwide and a dearth of quality information on testing at the federal level. Challenges included the following:

  • Developing accurate tests quickly. In early February, the sole FDA-authorized COVID-19 viral test was deployed by CDC to state public health laboratories, and it experienced accuracy and reliability issues that resulted in significant delays in testing nationwide during the critical early weeks of the outbreak. [219] In response to concerns about the availability of COVID-19 tests, FDA made several policy changes. In late February, FDA announced that it did not intend to object if certain laboratories began viral testing with their own equipment while they prepared an EUA request, provided the test was validated and notification was provided to FDA, as described in the guidance document. According to FDA, this helped balance the urgent need to increase testing capacity in the United States while providing enough oversight to provide assurance that patients could depend on the results of these tests. Subsequently in mid-March, FDA revised the policy to apply to manufacturers of commercial test kits. Also in mid-March, testing increased in commercial laboratories, and the EUA for the initial CDC test was updated to address the accuracy and reliability concerns.

    FDA also announced in mid-March that it did not intend to object to test developers distributing antibody tests without an EUA, provided that they validated the tests and included certain statements noting any limitations with the tests. According to FDA, it did so to enable the initial use of these tests to determine the prevalence of COVID-19 infections in different communities and to aid in research on the extent to which antibodies may protect against infection. FDA officials further noted that facilitating the development of tests early on was necessary to learn more about how best to use antibody tests. Nonetheless, quality and reliability concerns arose concerning available antibody tests, and FDA reevaluated the risks and benefits of this approach, announcing on May 4, 2020, that test developers must submit EUA applications with test validation data. Concerns surrounding the accuracy of both viral and antibody tests continued into May and June; for example, on May 14, 2020, FDA announced it was investigating reports of false-negative results with Abbott’s ID NOW viral test, and on May 21, 2020, FDA announced the removal of 27 antibody tests from the market, including those for which there was not a pending EUA request or issued EUA and those voluntarily withdrawn from the market. In addition, on June 16, 2020, FDA revoked the EUA it had granted for an antibody test developed by Chembio Diagnostic System, Inc. due to concerns with the accuracy of the test.

  • Coordinating sufficient testing supplies. Early in the national response to COVID-19, shortages of key testing supplies became problematic due to unprecedented domestic demand and overall global competition, which contributed to the delay in broad-scale testing. There were shortages in test kit supplies such as swabs and testing reagents, which the United States had not stockpiled, according to FDA officials, and also shortages in personal protective equipment needed to administer tests.

    According to FDA officials, the agency has limited authority to address supply shortage issues, but took steps to encourage increased manufacturing of supplies. [220] For example, FDA worked to seek potential alternatives to key testing components that were in short supply, including swabs and transport media to keep the sample viable for testing, through publishing and updating information about these alternatives once they were validated to ensure they would not adversely affect test performance. CDC officials told us they worked with FEMA to expand the items that are supplied through the International Reagent Resource (IRR)—a CDC-established entity providing public health laboratories with reagents and other resources—to make it easier for public health laboratories to obtain necessary supplies. However, the IRR was hampered by a lack of available reagents needed to run the tests, according to CDC officials. Laboratory and public health industry groups said they experienced ongoing needs with regard to supplies, including shortages of federal funding for manufacturing and testing machines and the need for centralized federal coordination for procurement of needed supplies.

  • Facilitating the collection of complete and consistent testing data. CDC has taken steps to meet the unprecedented need for COVID-19 testing data, although the data reported on its website through May 31, 2020, have not been complete or consistent. CDC reports testing data that it collects from public health, hospital, private, and commercial laboratories, as submitted to state and jurisdictional health departments. As of May 31, 2020, CDC’s website stated that the data posted there included the majority of, but not all, data on testing in the United States. For example, testing data that CDC reported may not have included all tests performed by laboratories at point of care settings, such as physicians’ offices. [221] In addition, CDC reported testing data from different sources that have varied over time and have not been counting tests the same way. The agency sought to improve the consistency of testing data by posting guidance on its website on May 6, 2020, for how the data should be submitted to states from clinical laboratories, which are one source of laboratory data. However, not all sources from which CDC has collected state data have provided consistent testing data. For example, when states did not report data for a given day, CDC collected and reported testing data from states’ websites that aggregate testing data, but some states’ websites count the number of people tested while others count the number of samples tested, which could include multiple tests of one person. Furthermore, some state submissions of viral testing data included in CDC’s data also included antibody tests. According to CDC, in order to act quickly, it began collecting data from states on the total number of tests performed in early April—when antibody tests were not common—and has since taken steps to distinguish viral and antibody tests. However, as of June 9, 2020, CDC continued to report these types of tests together. [222]

    Further, in June, HHS took an additional step intended to help collect complete and consistent viral testing data by implementing authority enacted in March as part of the CARES Act. Specifically, the CARES Act included a provision requiring laboratories to submit the result of each COVID-19 test in a manner specified by the Secretary of Health and Human Services. [223] Accordingly, on June 4, 2020, HHS issued guidance that, pursuant to its new authority under the CARES Act, requires all laboratories to submit data on viral tests and other tests they perform to diagnose a possible case of COVID-19. Required data include those on point-of-care tests and those that identify whether a viral or antibody test was performed. [224] Importantly, the guidance also identifies other required data elements, such as patient demographic information, and directs laboratories to use existing regional, state, or local submission methods to provide these data, which, in turn, are sent to CDC. Laboratories must submit these data daily, starting as soon as possible and not later than August 1, 2020, according to the HHS guidance. We will continue to conduct work examining HHS and its component agencies’ data reporting, plans, and activities related to COVID-19 testing.

GAO Methodology and Agency Comments

To conduct this work, we reviewed testing data and limitations reported by CDC over time, including the most recent information from CDC’s COVID Data Tracker website as of May 31, 2020. We also interviewed HHS agency officials to obtain information on steps taken to develop tests, coordinate supplies, and report testing data, and we reviewed federal laws, other requirements, and CDC guidance related to states’ and laboratories’ submission of testing data. Further, we conducted interviews with laboratory and public health industry groups to obtain their perspectives on agency actions and challenges with regard to testing. [225] We provided a draft of this report to HHS, FEMA, and the Office of Management and Budget (OMB) for review and comment. HHS and OMB provided technical comments on this enclosure, which we incorporated as appropriate. FEMA did not provide comments on this enclosure.

Contact information: Mary Denigan-Macauley, (202) 512-7114, deniganmacauleym@gao.gov

Related GAO Products

Science & Tech Spotlight: COVID-19 Modeling. GAO-20-582SP . Washington, D.C.: June 4, 2020.

Science & Tech Spotlight: COVID-19 Testing. GAO-20-584SP . Washington, D.C.: May 20, 2020.

Vaccine and Therapeutics Development

Multiple federal agencies are taking actions to develop vaccines and therapeutics to prevent and treat COVID-19, including funding research and clinical trials, but it is not known when or if a safe and effective vaccine (or vaccines) and therapeutics will be widely available.

Entities involved: Department of Health and Human Services, Food and Drug Administration, Department of Veterans Affairs, Department of Defense, Biomedical Advanced Research and Development Authority, National Institutes of Health

Key Considerations and Future GAO Work

While multiple federal agencies are taking actions to develop vaccines and therapeutics to prevent and treat COVID-19, questions remain about their timing and distribution. Even with federal efforts to accelerate development of numerous vaccine candidates, a vaccine will not be available for some time and may initially be available for emergency use, meaning it has not yet been determined to be safe and effective for use. Significant manufacturing capacity will be required; other potential hurdles in the eventual delivery of vaccines include cost, distribution systems, and special handling called cold chain requirements (i.e., maintaining proper vaccine temperatures during storage and handling to preserve potency).

The number of vaccine doses that need to be produced to protect more than 300 million Americans and the global community is unknown, since effective protection against COVID-19 may require more than one dose per person. In addition, with vaccine development underway at large manufacturers located in multiple countries, concerns have been raised regarding the extent to which any vaccine developed or manufactured in one country would be available globally, beyond the borders in which it is produced.

Following the 2009 H1N1 influenza pandemic, in June 2011 we reported lessons learned from the federal response to that pandemic, which could be considered in the current pandemic response. Specifically, we found that effective communication on the availability of vaccine is central to a successful response. Although the federal government was able to purchase and distribute millions of doses of H1N1 vaccine, the vaccine was not widely available when the public expected it and at the peak of demand. Because the failure to effectively manage public expectations can undermine government credibility, it is essential that vaccine production efforts be paired with effective communication strategies regarding the availability of a vaccine once it is available.

As of May 31, 2020, the Department of Health and Human Services (HHS) reported it had allocated $5,467 million in supplemental appropriations provided under the COVID-19 relief laws enacted as of that date to support efforts related to COVID-19 vaccines and therapeutics; of this amount, $3,612 million has been obligated and $18 million has been expended. [226] We plan to conduct further work in this area in response to the CARES Act, including work on (1) federal efforts to accelerate and coordinate development and testing of vaccines and therapeutics and (2) the process and policies related to development, approval, and distribution of vaccines and therapeutics.

Background

Vaccination is critical for reducing infection rates and severity of disease and mortality due to COVID-19, but as of June 2020, there are no COVID-19 vaccines approved by the Food and Drug Administration (FDA), and developing a vaccine takes time. Vaccine development is a lengthy process that involves a rigorous series of steps to identify a potential vaccine candidate, conduct preclinical research and clinical trials to assess safety and effectiveness, and manufacture it. Because COVID-19 is a novel virus with no documented immunity in the general population, public health experts say safe and effective vaccines for COVID-19 would provide the most efficient path for fully resuming normal activities.

Therapeutics to treat COVID-19 are also important, particularly until a vaccine becomes available; however, no drug has been proven to be safe and effective and approved by FDA for treating COVID-19 at this time. The time frame for developing and distributing an effective vaccine and therapeutics is uncertain. Some reports have predicted that distribution of a vaccine may be 12 to 18 months away at the earliest, and initial distribution may be limited (e.g., to health care providers or first responders) until more doses are manufactured.

Numerous federal agencies, including the Departments of Health and Human Services (HHS), Veterans Affairs (VA), and Defense (DOD), are involved in supporting the development of vaccines and therapeutics for COVID-19. Within HHS, the Biomedical Advanced Research and Development Authority (BARDA) and the National Institutes of Health (NIH) generally fund and conduct research and development, including support for clinical trials. [227] FDA is responsible for regulating and approving vaccines and therapeutics for marketing in the United States, and it may issue an emergency use authorization to allow the emergency use of unapproved drugs or unapproved uses of approved drugs if certain criteria are met. DOD and VA also generally fund and conduct research of candidates for vaccines and therapeutics and can provide testing sites for clinical trials.

The CARES Act and the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, appropriated funding for HHS activities to support the development of vaccines and therapeutics for COVID-19. [228] This funding included the following:

  • FDA. The CARES Act appropriated $80 million for activities that include, but are not limited to, the development of necessary medical countermeasures and vaccines. The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, appropriated $61 million to prevent, prepare for, and respond to coronavirus, domestically or internationally, including, but not limited to, the development of necessary medical countermeasures and vaccines. [229]
  • NIH. The CARES Act appropriated $945.4 million, including $706 million for the National Institute of Allergy and Infectious Diseases, to prevent, prepare for, and respond to coronavirus, of which not less than $156 million is provided for vaccine and infectious diseases research facilities. The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, appropriated $836 million to the National Institute of Allergy and Infectious Diseases to prevent, prepare for, and respond to coronavirus, domestically or internationally. [230]
  • Public Health and Social Services Emergency Fund. The CARES Act appropriated $27.015 billion to this HHS emergency fund for activities that include, but are not limited to, developing countermeasures and vaccines and purchasing vaccines and therapeutics. Not less than $3.5 billion of this money is provided to BARDA for manufacturing, producing, and purchasing vaccines and therapeutics, among other things. The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, appropriated a total of $3.4 billion to this fund to prevent, prepare for, and respond to coronavirus, domestically or internationally, including the development of necessary medical countermeasures and vaccines, prioritizing platform-based technologies with U.S.-based manufacturing capabilities, and the purchase of vaccines, therapeutics, among other things. [231]

Overview of Key Issues

Numerous federal agencies are facilitating the development of multiple candidates for vaccines and therapeutics for COVID-19. These efforts include developing vaccines using different mechanisms to prompt the body to produce antibodies and efforts to accelerate the time frame in which a vaccine could be available. However, the timing of when a vaccine or therapeutic will be available to the general public is unknown due to the lengthy multistep development process. Additionally, it is likely that many candidates will fail to complete the multistep process.

NIH, BARDA, FDA, VA, and DOD are all participating in the Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) partnership with the European Medicines Agency and biopharmaceutical companies. This new public-private partnership, which includes senior scientists representing government, industry, non-profit, philanthropic, and academic organizations, has four focus areas: preclinical therapeutics, clinical trial therapeutics, clinical trial capacity, and vaccines. According to NIH, the preclinical therapeutics working group is standardizing and sharing preclinical evaluation methods. These federal agencies are also participating in Operation Warp Speed, a public-private partnership to facilitate the development, manufacturing, and distribution of COVID-19 countermeasures, including vaccines, according to HHS. The department reported that financial resources for this effort include CARES Act and other supplemental funding.

As of June 1, 2020, there were at least 14 federally funded clinical trials related to COVID-19 vaccine or therapeutics at various stages, according to NIH’s ClinicalTrials.gov. [232] Of these, at least two were trials of vaccine candidates and at least 12 were trials related to therapeutics. Currently, drugs or vaccines approved or developed for other purposes, as well as other investigational therapeutic agents, are being studied for the treatment of COVID-19. Additional planned and ongoing federally funded trials have not yet been posted on the ClinicalTrials.gov website.

Examples of HHS agencies’ activities include the following:

  • BARDA has expanded existing partnerships and established new ones to develop vaccines, therapeutics, and other medical countermeasures to protect against COVID-19. As of June 1, 2020, BARDA reported funding development activities for five vaccines and eight therapeutics. For example, BARDA awarded more than $430 million to one company for late-stage development of an investigational vaccine the company developed with NIH, with the ultimate goal of FDA licensure. The agency also awarded about $456 million to support nonclinical studies and a phase 1 clinical trial for another COVID-19 investigational vaccine using the same vaccine platform as an investigational Ebola vaccine. [233] This clinical trial is set to begin no later than fall 2020, with the goal of making COVID-19 vaccine available for emergency use in the United States in early 2021. BARDA is also working with a manufacturer to accelerate advanced clinical trials and large-scale manufacturing to produce up to 300 million vaccine doses for the United States.
  • FDA is reviewing regulatory submissions related to vaccines, therapeutics, and other medical countermeasures and is conducting work, such as scientific and technical evaluation of data, related to emergency use authorizations for some of those products. Under an emergency use authorization, FDA may allow therapeutics and vaccines to be used to respond to a declared emergency such as COVID-19 without formal FDA approval, as long as certain conditions are met and the scientific evidence suggests the benefits outweigh the potential risks.

    According to HHS, FDA’s activities are new or are continuations of activities started under funding from the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. For therapeutics, FDA has created a special emergency program, the Coronavirus Treatment Acceleration Program, to move new treatments to patients as quickly as possible, while at the same time finding out whether they are helpful or harmful. As of June 1, 2020, FDA reported 186 active trials of therapeutic agents and another 467 development programs for therapeutic agents in the planning stages. FDA has also granted emergency use authorization for one therapeutic to treat COVID-19 as of June 15, 2020. [234] The agency has used its authority to make experimental COVID-19 treatments available through expanded access to patients not eligible to participate in clinical trials. FDA has not granted emergency use authorization of a COVID-19 vaccine to date. Under an emergency use authorization, FDA may allow the use of unapproved therapeutics and vaccines (or unapproved uses of approved products) to respond to a declared emergency such as the COVID-19 pandemic provided that certain criteria are met. These include an FDA determination that, based on the available scientific evidence, the product’s known and potential benefits outweigh its known and potential risks.

  • NIH is expanding upon earlier research on other coronaviruses—for example, severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome (MERS)—to inform the development of vaccine and therapeutic candidates for COVID-19. NIH is also conducting and supporting research on a number of vaccine candidates in various stages of development and several studies of possible therapeutics for COVID-19, including a number of preclinical activities. For example, NIH is providing preclinical services such as research to assess different animal models that replicate COVID-19 disease. NIH is also studying whether convalescent plasma—blood plasma from individuals who have recovered from COVID-19—can help reduce the progression of the disease in patients with mild symptoms, according to HHS. In addition, NIH posted on its website treatment guidelines for COVID-19, based on scientific evidence and expert opinion, that it plans to update frequently as additional data and information become available.

DOD and VA are working with HHS agencies and have ongoing activities related to vaccines and therapeutics for COVID-19. Examples of activities include the following:

  • DOD is funding and conducting research on candidates for vaccines and therapeutics. For example, DOD is conducting research on different therapeutic candidates, including a study on the investigational drug remdesivir.
  • VA is conducting and providing sites for clinical trials for vaccine and therapeutic candidates. For example, VA is conducting a clinical trial to determine if a treatment approved for patients with prostate cancer (degarelix) is beneficial in treating veterans who have been hospitalized with COVID-19. VA facilities are also serving as sites for an NIH-led clinical trial studying remdesivir as a treatment for COVID-19.

GAO Methodology and Agency Comments

To conduct this work, we reviewed the most recent HHS, DOD, and VA information on vaccine and therapeutic development efforts as of June 2020, including clinical trial information from NIH’s clinical trial website, ClinicalTrials.gov, (accessed June 1, 2020); relevant federal laws; and agency documents (e.g., agency strategic plan for COVID-19 research). The information in this enclosure highlights examples of the types of development activities conducted or supported by these agencies; it is not an exhaustive list.

We provided a draft of this report to HHS, DOD, VA, and the Office of Management and Budget (OMB) for review and comment. HHS and OMB provided technical comments on this enclosure, which we incorporated as appropriate. DOD and VA did not provide comments on this enclosure.

Contact information: Mary Denigan-Macauley, (202) 512-7114, deniganmacauleym@gao.gov ; Alyssa M. Hundrup, (202) 512-7114, hundrupa@gao.gov

Related GAO Products

Science & Tech Spotlight: COVID-19 Vaccine Development. GAO-20-583SP . Washington, D.C.: May 26, 2020.

Influenza: Progress Made in Responding to Seasonal and Pandemic Outbreaks. GAO-13-374T . Washington, D.C.: February 13, 2013.

Influenza Vaccine: Federal Investments in Alternative Technologies and Challenges to Development and Licensure. GAO-11-435 . Washington, D.C.: June 27, 2011.

Influenza Pandemic: Lessons from the H1N1 Pandemic Should Be Incorporated into Future Planning. GAO-11-632 . Washington, D.C.: June 27, 2011.

Influenza Pandemic: Applying Lessons Learned from the 2004–05 Influenza Vaccine Shortage. GAO-06-221T . Washington, D.C.: November 4, 2005.

Medicaid Financing, Waivers, and Flexibilities

Federal assistance related to COVID-19 provided increased federal Medicaid funding for states and territories to support the costs of their Medicaid programs, including COVID-19 testing and treatment costs. The Centers for Medicare & Medicaid Services has also approved waivers and other flexibilities to help state Medicaid programs respond to the COVID-19 pandemic.

Entities involved: Centers for Medicare & Medicaid Services, Department of Health and Human Services

Key Considerations and Future GAO Work

We designated Medicaid a high-risk program in 2003 because the size, growth, and diversity of the program present oversight challenges for states, territories, and the federal government. These factors, among others, may contribute to the risk of inadequate oversight and reporting on Medicaid’s COVID-19 funds to states and territories.

  • Public reporting of COVID-19 Medicaid spending. The CARES Act requires each agency administering COVID-19 funds to report monthly to the Office of Management and Budget (OMB) and others on the use of those funds. OMB guidance specifies that agencies should submit spending information for COVID-19 funds to USAspending.gov for public reporting. [235] According to officials from the Centers for Medicare & Medicaid Services (CMS), CMS will not separately report the COVID-19 components of Medicaid payments through USAspending.gov. Instead, CMS officials told us they are coordinating with OMB and are considering ways to report Medicaid COVID-19 funding publicly through sites other than USAspending.gov.

    Exempting large amounts of spending from the standard COVID-19 reporting reduces the usefulness of that information to the Congress and the public. It will be important for CMS to report the data in a way that allows Congress and the public to quickly and easily find, understand, and analyze Medicaid spending, including enabling it to be combined with the USAspending.gov data. We will continue to follow developments related to CMS’s public reporting, including the timing of that reporting, in future updates.

  • Potential for duplicate or overlapping payments. COVID-19 funds are available through multiple agencies within the Department of Health and Human Services (HHS), as well as agencies outside of HHS, such as the Small Business Administration. Absent proper communication and tracking of payments across these different entities, there is a risk for duplicate or overlapping payments.

    For example, CMS has authorized at least 35 states to make retainer payments to support home- and community-based service providers (such as adult day-care centers) to help ensure their availability once the public health emergency ends. If retainer payments are made to the centers, as well as to the individuals providing the services (such as personal care attendants), these payments could duplicate financial assistance provided through unemployment benefits or small business loans. We have work underway looking at efforts to monitor use of funding activities, including addressing risks and challenges—such as the potential for duplication—associated with these activities.

  • Potential for improper payments. In 2018, over one-third of the $36 billion of estimated Medicaid improper payments were related to states’ noncompliance with provider screening and enrollment requirements. States maintain their primary responsibility for screening providers to ensure that they have not been convicted of program-related fraud and abuse and are not operating with suspended or revoked medical licenses, among other things. States may seek CMS approval to waive certain other provider screening and enrollment requirements during the pandemic, which may increase risks of improper payments and improper medical care. CMS and states will need to work together to consider how to best track and identify ineligible providers during this pandemic.
  • Ensuring state spending is appropriately matched with federal funds. States and territories share the costs of Medicaid with the federal government. The federal government matches states’ spending for Medicaid services, and that match can vary across different groups of individuals. States will need to adjust their information systems to account for the temporary increase in federal matching funds authorized by the Families First Coronavirus Response Act (FFCRA), including the optional 100 percent federal matching funds for uninsured individuals who receive COVID-19 testing or related services. Federal oversight will be important to help ensure that these different matching rates are appropriately applied.

    CMS is modifying the system used by states to report quarterly Medicaid expenditures. This includes labeling expenditures matched at the increased federal matching rate and expenditures for COVID-19 testing or related services with a 100 percent federal matching rate. CMS officials also reported they are modifying oversight to include reviews of these expenditures reported at higher or increased federal matching rates specific to the COVID-19 relief laws.

    In August 2018, we found that CMS had not consistently reviewed expenditures with higher matching rates when reviewing states’ use of federal matching funds. While CMS has taken some steps to improve its oversight, we have outstanding recommendations aimed at further actions, including clarifying guidance for reviewers to better ensure appropriate matching rates are used. Taking action to more systematically review states’ use of different matching rates could help ensure that COVID-19 funds are being used appropriately.

Background

Medicaid is one of the nation’s largest sources of funding for health care services for low-income and medically needy individuals, covering an estimated 76 million people and spending approximately $667 billion in fiscal year 2019. Medicaid offers a wide range of benefits, including inpatient and outpatient hospital care, physician services, laboratory testing, and x-ray services. Medicaid is also the largest source of coverage for long-term care services and supports, which provide assistance for low-income individuals who are elderly or disabled. These services totaled over $167 billion in 2016 and were provided in institutional facilities, such as nursing homes and intermediate care facilities, or through home- and community-based care. [236]

States and territories administer their Medicaid programs within broad federal rules and according to state plans approved by CMS, which oversees Medicaid at the federal level. The federal government matches states’ spending for Medicaid services according to a statutory formula known as the Federal Medical Assistance Percentage (FMAP). [237]

Additionally, states may request approval from CMS to waive certain Medicaid requirements. If approved, such waivers can allow states to limit the availability of services geographically, to target services to specific populations or conditions, or to limit the number of persons served—actions not generally allowed for state plan services.

The Families First Coronavirus Response Act (FFCRA) made a few key changes to the Medicaid program. [238] These changes increase federal funding available to states and territories to help them respond to the COVID-19 pandemic.

  • FMAP increase. FFCRA provides for a temporary 6.2 percentage point increase in the FMAP—retroactive to January 1, 2020—for states that meet specific requirements. The Congressional Budget Office (CBO) estimates spending on these increases to be approximately $50 billion, occurring over fiscal years 2020–2021. [239]
  • Diagnostic testing for the uninsured. FFCRA creates an option for states to provide Medicaid coverage of COVID-19 diagnostic testing and related services to uninsured individuals. This coverage, if elected by the state, is eligible for a 100 percent federal match. CBO estimates that federal expenditures on this provision will total approximately $2 billion in 2020 and 2021.

Overview of Key Issues

Medicaid spending. As of May 31, 2020, COVID-19-related federal Medicaid expenditures totaled approximately $7.2 billion, or 7 percent of total federal spending on Medicaid services for this time period. [240] The table below provides a breakout by state and territory of the federal Medicaid spending for COVID-19-related and total Medicaid services. [241]

Federal Medicaid COVID-19 and Total Expenditures, by State and Territory
State or territory

COVID-19-related federal Medicaid expenditures a

($ in millions)

Total federal Medicaid services expenditures in 2020 a

($ in millions)

Alabama 98 1,248
Alaska 18 389
Arizona 145 2,901
Arkansas 79 1,365
California 538 14,639
Colorado 126 1,475
Connecticut 105 1.270
Delaware 33 426
District of Columbia 41 612
Florida 428 4,423
Georgia 166 1,941
Hawaii 26 352
Idaho 33 468
Illinois 279 3,741
Indiana 190 3,038
Iowa 68 972
Kansas 58 612
Kentucky 125 2,457
Louisiana 150 2,568
Maine 45 567
Maryland 1 10
Massachusetts 267 3,138
Michigan 212 3,286
Minnesota 6 73
Mississippi 88 1,185
Missouri 156 1,879
Montana 16 330
Nebraska 35 340
Nevada 43 746
New Hampshire 22 286
New Jersey 197 2,480
New Mexico 66 1,385
New York 1,088 11,851
North Carolina 180 2,111
North Dakota 17 210
Ohio 323 4,572
Oklahoma 82 951
Oregonb less than $1millionb 1,899
Pennsylvania 400 4,520
Rhode Island 31 434
South Carolina 103 1,260
South Dakota 14 160
Tennessee 176 1,958
Texas 632 7,280
Utah 43 614
Vermont 24 294
Virginiac -- 2
Washingtonc -- --
West Virginia 51 865
Wisconsin 245 1,791
Wyoming 8 96
States total d 7,195 101,468
American Samoac -- --
Guam 1 25
Northern Mariana Islands 1 9
Puerto Rico 21 550
Virgin Islands 1 20
Territories total d 24 604
Legend: -- = not applicable
Source: GAO analysis of data from the Centers for Medicare & Medicaid Services. | GAO-20-625

Note: Federal Medicaid payments were available for the second quarter of fiscal year 2020—January 1, 2020, through March 31, 2020—and do not include expenses for program administration. Five states (Delaware, Maryland, Massachusetts, Minnesota, and Nevada) and two territories (Puerto Rico and Virgin Islands) reported uncertified state expenditures. Certified state expenditures have been reviewed by states and are certified as being Medicaid allowable expenditures. Both certified and uncertified state expenditures are preliminary, as they are subject to further review and are likely to be updated as states continue to report their expenditures and receive federal matching funds. States can report payments and adjustments to payments up to 2 years after a quarter ends.
aExpenditures from January 1, 2020, through March 31, 2020.
bOregon reported $29,707 in COVID-19 expenditures.
cVirginia, Washington, and America Samoa had no reported COVID-19 expenditures.
dTotals may not sum exactly due to rounding.

State waivers and flexibilities. In addition to its normal waiver authority, CMS has additional authorities in certain emergency circumstances to waive Medicaid requirements to help ensure the availability of care. As of May 31, 2020, CMS had approved 200 different waivers to provide states with flexibility to respond to the pandemic. Common types of flexibilities that states sought and CMS approved are shown in the table below.

Common Types of State Flexibilities Approved by Centers for Medicare & Medicaid Services, March 16, 2020, to May 31, 2020
Purpose of flexibility Number of specific flexibilities approved
Maintain beneficiary eligibility for services
  • Forty-three states suspended fee-for-service prior authorizations, which are normally required before beneficiaries can obtain certain services.a
  • Forty-two states extended the dates for reassessing and reevaluating beneficiaries’ needs, which are normally required for beneficiaries to retain eligibility for some home- and community-based services.b
Expand beneficiary eligibility
  • Forty-four states permitted virtual evaluations, assessments, and person-centered planning normally conducted in person.b
  • Sixteen states expanded coverage to uninsured individuals for COVID-19 testing.c
Remove obstacles to beneficiary access to care
  • Forty-four states allowed telehealth to continue to provide some services that were previously provided in person.c
  • Ten states were approved to allow early refills of certain medications to avoid interruption in care.c
Increase the availability of providers
  • Fifty-one states waived some requirements to allow licensed out-of-state providers to enroll in their programs—to provide needed services without being licensed in the state or enrolled in another state Medicaid program or Medicare—to maintain provider capacity.a,d
  • Eleven states authorized payments changed or added for telehealth services.c
Source: GAO analysis of Centers for Medicare & Medicaid Services approval documentation for states and District of Columbia. | GAO-20-625

aStates received approval under section 1135 of the Social Security Act, which authorizes the Secretary of Health and Human Services to temporarily waive or modify certain federal health care program requirements, including Medicaid requirements, to ensure that sufficient health care items and services are available to meet the needs of enrollees during an emergency.
bStates received approval to make changes to their section 1915(c) home- and community-based services waivers under an Appendix K amendment in order to respond to the emergency.
cStates received approval to revise policies in their Medicaid state plan related to eligibility, enrollment, benefits, premiums and cost sharing, and payments. To make these changes, states must submit a State Plan Amendment to the Centers for Medicare & Medicaid Services for approval.
dStates approved to temporarily enroll licensed out-of-state providers must follow certain requirements, which include screening providers to ensure they are licensed in another state and are not on the Department of Health and Human Services Office of the Inspector General’s list of providers excluded from participating in the Medicaid or Medicare program.

GAO Methodology and Agency Comments

To conduct this work, we reviewed federal laws, the most recently available CMS data, CMS Medicaid guidance, OMB guidance, CBO spending estimates, and our prior work related to Medicaid. We also discussed CBO estimates with CBO officials. We discussed CMS’s Medicaid expenditure reporting system with CMS officials and conducted data reliability checks on state-reported expenditure data.

We provided a draft of this report to HHS and OMB for review and comment. HHS provided technical comments on this enclosure, which we incorporated as appropriate. OMB did not provide comments on this enclosure.

Contact information: Jeff Arkin, (202) 512-6806, arkinj@gao.gov ; Carolyn L. Yocom, (202) 512-7114, yocomc@gao.gov

Related GAO Product

Medicaid: CMS Needs to Better Target Risks to Improve Oversight of Expenditures. GAO-18-564 . Washington, D.C.: August 6, 2018.

Medicare Waivers

In response to COVID-19, the Centers for Medicare & Medicaid Services expanded availability of Medicare services through widespread use of program waivers, including for telehealth services. Careful monitoring and oversight are required to prevent potential fraud, waste, and abuse that can arise from these new waivers.

Entities involved: Centers for Medicare & Medicaid Services, Department of Health and Human Services

Key Considerations and Future GAO Work

The Medicare program has longstanding requirements and safeguards to help ensure that beneficiaries receive only medically necessary services and quality care. Despite these safeguards, our past work has shown that Medicare’s improper payments—payments that were either incorrect or should not have been made at all—reached an estimated $46 billion in fiscal year 2019. As the Centers for Medicare & Medicaid Services (CMS) approves waivers and flexibilities to expand the availability of Medicare services during the COVID-19 pandemic, it will need to carefully monitor such services to identify potential fraud, waste, and abuse given the temporary suspension of some of these program safeguards.

Telehealth services can enable beneficiaries to receive and providers to furnish services in a safe environment, but they also raise several challenges. For example, the transmission of patients’ medical information over potentially unsecure systems such as cell phones raises challenges involving patient privacy and cybersecurity. Moreover, telehealth services may not alleviate all access concerns since many beneficiaries lack the technical capability to utilize some of these services.

Whether CMS will have complete and accurate data to track utilization and spending on services furnished under the new flexibilities and waivers is not clear. Specifically, while CMS is requiring the use of certain identifiers to be included on claims for these services, the extent to which providers will actually be using the identifiers is not clear.

GAO plans to conduct additional work on the processes CMS used to determine which waivers to issue and their effects on Medicare providers and beneficiaries.

Background

Section 1135 of the Social Security Act authorizes the Secretary of Health and Human Services to temporarily waive or modify certain federal health care requirements, including in the Medicare program, to increase access to medical services when both a public health emergency and a disaster or emergency have been declared. The Administrator of CMS typically implements section 1135 waivers, which apply only to federal requirements. CMS was authorized to begin issuing section 1135 waivers on March 13, 2020, as a result of the Secretary’s declaration of a public health emergency in response to COVID-19 on January 31, 2020, and the President’s declaration of a disaster or emergency under both the Robert T. Stafford Act Disaster Relief and Emergency Assistance Act and the National Emergencies Act on March 13, 2020.

The 1135 waivers are generally retroactive to March 1, 2020, and will end no later than the termination of one of the underlying emergencies or 60 days from the date the waiver is published, unless the Secretary extends it for additional periods of up to 60 days. For the purposes of this enclosure, we refer to the duration of the waiver as the “emergency period.”

There are two types of Medicare 1135 waivers:

  • Blanket waivers apply automatically to all applicable providers and suppliers in the emergency area, which encompasses the entire United States in the case of the COVID-19 pandemic. Providers and suppliers do not need to apply individually or notify CMS that they are acting upon the waiver. They are required to comply with normal rules and regulations as soon as it is feasible to do so.
  • Provider/supplier individual waivers may be issued upon application for states, providers, or suppliers only if an existing blanket waiver is not sufficient.

In response to the pandemic, Congress also enacted legislation to expand the Secretary’s authority to waive certain Medicare requirements. The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, amends section 1135 of the Social Security Act to allow the Secretary to waive certain Medicare telehealth payment requirements during the emergency period. [242]

The CARES Act further expands the Secretary’s authority to approve telehealth flexibilities under section 1135 waivers as well as providing other flexibilities. For example:

  • Section 3705 authorizes the Secretary of Health and Human Services to temporarily waive the requirement for face-to-face visits between home dialysis patients and physicians during the emergency period.
  • Section 3706 allows physicians and nurse practitioners to conduct face-to-face visits required to recertify patients’ ongoing eligibility for hospice care via telehealth during the emergency period.
  • Section 3708 allows nurse practitioners, clinical nurse specialists, and physician assistants to order home health services for Medicare beneficiaries in accordance with state law. [243]

Overview of Key Issues

As of May 15, 2020, CMS had issued over 200 blanket waivers after receiving thousands of individual requests. The blanket waivers cover flexibilities for hospitals, skilled nursing facilities, home health agencies, and hospices, among others. They also cover provider licensing and enrollment, enforcement activities, and documentation requirements. Providers may use flexibilities provided under the blanket waivers to the extent they are consistent with applicable state laws, state emergency preparedness plans, and state scope of practice rules.

In addition to waivers of statutory requirements, CMS has also used its authority to waive or modify its policies or regulations in order to allow providers greater flexibility in treating beneficiaries during the emergency period.

The following are examples of changes that CMS has approved, including under blanket waivers. [244]

Expansion of telehealth services. Typically in Medicare, telehealth services may only be furnished under limited circumstances—for example, in certain (largely rural) areas, to patients located in certain medical facilities. Changes that CMS has approved include the following:

  • Telehealth services may be furnished to patients in any part of the country (including nonrural areas) and at any location, including patient homes.
  • Telehealth services may be furnished to both new and established patients.
  • Additional nonphysicians (including physical/occupational therapists and speech language pathologists) may also furnish telehealth services.
  • More than 130 new service types were added to the approximately 100 existing telehealth service types, and frequency limits on several types of services were lifted.

Increased capacity. CMS approved a number of flexibilities that expand the capacity of hospitals and health care systems to treat COVID-19 patients in nontraditional sites. For example:

  • Expansion of hospital capacity. Hospitals typically must meet certain requirements to participate in Medicare, including providing services within their own buildings. Changes that CMS has approved include the following:
    • Hospitals may provide patient care at nonhospital buildings or spaces provided that the location is approved by the state.
    • Rural Health Clinics and other health centers may expand service locations without the new locations being independently approved by Medicare.
  • Emergency Medical Treatment and Active Labor Act (EMTALA). By law, any Medicare-participating hospital with a dedicated emergency department must provide a medical screening examination and, if necessary, stabilizing treatment to any individual who arrives in its emergency department for examination or treatment, regardless of the ability to pay for the services.
    • CMS is allowing hospitals to set up alternative screening sites on campus to perform medical screening examinations as a triage function, as well as allowing hospitals to redirect, relocate, and screen individuals at a location other than the hospital campus for the medical screening examination in accordance with a state emergency or pandemic preparedness plan.
  • Physician Self-Referral Law (Stark Law). Federal law generally prohibits a physician from making referrals for certain health care services to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies. Entities that submit claims for services furnished pursuant to a prohibited referral are subject to financial sanctions.
    • CMS issued blanket waivers of sanctions for certain referrals that would otherwise violate the Stark Law as long as they are solely for COVID-19 purposes. For example, a physician may refer, without penalty of sanctions, a Medicare beneficiary to a home health agency owned by the physician’s immediate family member that does not meet the requirements for the rural provider exception.

Workforce expansion. CMS is making it easier for physicians and other practitioners to enroll and provide services in Medicare. Once the public health emergency is lifted, providers will be required to come into full compliance with all screening and enrollment requirements.

  • Expedited process for provider enrollment in Medicare. Changes that CMS has approved include the following:
    • Expediting any pending or new applications and waiving criminal background checks associated with fingerprint-based criminal background checks.
    • Allowing physicians whose privileges to practice at a hospital will expire to continue practicing at the hospital and allowing new physicians to begin practicing before full approval.
  • Use of nonphysicians. Federal regulations require that certain services can only be furnished by physicians and may not be delegated to nonphysicians such as nurse practitioners or physician assistants. Changes that CMS has approved include the following:
    • Physicians in skilled nursing facilities may delegate tasks to nonphysicians, although the physician must continue to provide supervision.
  • In-person or on-site visits. Federal regulations require providers to conduct certain in-person or on-site visits for patients in certain settings such as skilled nursing facilities. Changes that CMS has approved include the following:
    • Allowing in-person visits for skilled nursing facility patients to be conducted via telehealth, as appropriate.

Reducing administrative burdens. CMS is temporarily eliminating certain reporting and other paperwork requirements that providers must complete in order to be paid by Medicare. For example, CMS is delaying scheduled program audits that may require additional information from providers, such as additional documentation to support the billing of services.

GAO Methodology and Agency Comments

To conduct this work we reviewed agency materials, applicable federal laws, and agency guidance, and obtained written answers to questions from CMS officials. HHS and the Office of Management and Budget provided technical comments on this enclosure, which we incorporated as appropriate.

Contact information: Jessica Farb, (202) 512-6991, farbj@gao.gov

Indian Health Service

Indian Health Service received over $1 billion in supplemental funds to prevent, prepare, and respond.

Entities involved: Indian Health Service, Department of Health and Human Services

Key Considerations and Future GAO Work

We plan to monitor the Indian Health Service’s (IHS) use of CARES Act-related funds going forward and the agency’s response and recovery efforts. Separately, we also plan to examine disparities in health outcomes related to COVID-19 among different populations, including the American Indian and Alaska Native (AI/AN) population, and the behavioral health impacts of COVID-19.

Background

IHS, an agency within the Department of Health and Human Services (HHS), is charged with providing health care services to over 2 million AI/AN people who are members or descendants of federally recognized tribes. [245] IHS provides health care services either directly through a system of facilities such as hospitals, health clinics, and health stations that are federally operated by IHS, or indirectly through facilities that are operated by tribes or others. [246] In addition, IHS awards contracts and grants to Urban Indian Organizations that provide health care to AI/AN people residing in urban centers.

The AI/AN people tend to experience health disparities when compared to other Americans. As of October 2019, AI/AN people had a life expectancy that was 5.5 years less than all other races or ethnicities in the United States and died at higher rates than other Americans from many preventable causes, including diabetes mellitus and chronic lower respiratory diseases. Such health disparities underscore the importance of access to quality health care, particularly given that individuals with these health conditions are at greater risk of developing serious complications from COVID-19. As of May 31, 2020, IHS had reported 11,220 confirmed cases of COVID-19, with the Navajo Nation experiencing more cases per capita than most U.S. states. [247]

Congress provided IHS supplemental funding for its COVID-19 efforts in two of the four enacted COVID-19 relief acts, including $64 million in the Families First Coronavirus Response Act and $1.032 billion in the CARES Act. [248] The table below provides more information on the sources of these funds and how IHS allocated them.

Allocation of Supplemental Funding Provided to the Indian Health Service (IHS) to Address COVID-19
Funding source Purpose Amount ($)
Families First Coronavirus Response Act COVID-19 testing 64 million
CARES Act IHS, tribal, and Urban Indian Organization COVID-19 prevention and response activities 515 million
Purchased/referred care 155 million
Expansion of telehealth 95 million
Medical equipment needs 74 million
Electronic health record stabilization and support 65 million
Facilities maintenance and improvement 41 million
Unanticipated needs 30 million
Support Tribal Epidemiology Centers and national surveillance coordination activities at IHS headquarters 26 million
Public health support and federal staff support 16 million
Sanitation and potable water 10 million
COVID-19 test kits and materials 5 million
Total a 1.096 billion
Source: GAO review of federal laws and agency documents. | GAO-20-625

aThe total does not include allocations by the Department of Health and Human Services (HHS) to IHS, tribal, or Urban Indian Health Programs. For example, it does not include $70 million HHS allocated to IHS—$30 million of which went to IHS-operated health programs and $40 million of which went to IHS National Supply Service Center—from the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. It also does not include $500 million HHS allocated to IHS, tribal, and Urban Indian facilities from the Provider Relief Fund, for which Congress provided funding to reimburse eligible health care providers for health care related expenses and lost revenues attributable to coronavirus. See, e.g., Pub. L. No. 116-136, div. B, tit. VIII, 134 Stat. 281, 563 (2020). It also does not include appropriations specific to tribes, tribal organizations, or Urban Indian Health Programs. For example, it does not include $750 million Congress appropriated specifically for tribes, tribal organizations, Urban Indian Health Programs, and health care service providers to tribes for testing in the Paycheck Protection Program and Health Care Enhancement Act. Pub. L. No. 116-139, div. B, tit. I, 134 Stat. 620, 624 (2020).

Overview of Key Issues

As of April 23, 2020, IHS had allocated all $1.096 billion in supplemental funding to support IHS-identified priorities related to COVID-19, including prevention, detection, treatment, and recovery. Of this amount, $515 million was allocated to federal, tribal, and Urban Indian programs for prevention and response activities. [249]

Examples of additional efforts supported by the supplemental funds include the following:

  • Access to testing. IHS allocated a total of $69 million in supplemental funds to support testing. This included $64 million from the Families First Coronavirus Response Act that was used to purchase rapid point-of-care tests for IHS and tribal health facilities ($61 million) and Urban Indian Organizations ($3 million). IHS also reported that it allocated an additional $5 million from the CARES Act for testing. As of April 13, 2020, IHS reported that it had received 250 rapid testing machines and distributed them to select locations to ensure remote and rural populations are being reached. According to IHS, as of April 27, 2020, the agency had expanded testing capacity from 98 to 298 sites primarily due to the distribution of these machines.
  • Telehealth services. IHS allocated $95 million to expanding telehealth services to help ensure AI/AN people can access health care they need from home without putting themselves or others at risk. [250] IHS reported that it conducted a pilot project with six IHS sites using a secure meeting system already in place in certain locations for behavioral health services. After addressing lessons learned, IHS began training employees across the agency on how to use its system.
  • Public health support efforts. According to IHS officials, they used funds to support various public health efforts. For example, IHS developed a reporting system that provides information on available hospital beds, intensive care unit beds, tests, ventilators, and personal protective equipment. IHS officials told us they will be using funds from the $26 million allocated for Tribal Epidemiology Centers and to expand national surveillance coordination activities. In addition, IHS officials told us they switched to a web-based reporting system to make it easier for tribes and Urban Indian Organizations to report and tabulate data. IHS officials told us that federal facilities are required to report data and tribes and Urban Indian Organizations can do so voluntarily. According to officials, IHS is receiving more reports from tribes and Urban Indian Organizations than it was prior to this change.

IHS officials described several challenges as they work to implement these efforts. For example, IHS officials noted they faced challenges obtaining personal protective equipment and material for IHS, tribal organizations, and Urban Indian Organizations. [251] In another example, IHS reported that the increased use of telehealth services is pushing or exceeding the limits of broadband availability in remote and rural areas. Officials told us they are assessing bandwidth at IHS facilities to identify ways to address issues. IHS officials also reported that the agency is seeing staffing shortages associated with personnel who have health conditions that put them at high-risk of COVID-19 and other related sick leave, or are experiencing impacts of school closures. In addition, IHS officials said that federal, tribal, and Urban Indian facilities are reporting surges in behavioral health issues, including domestic violence, which the officials said will have long-lasting effects on the AI/AN population.

GAO Methodology and Agency Comments

To conduct this work, we reviewed federal laws and agency documents, including weekly letters sent from IHS to tribes and Urban Indian Organizations that summarize the agency’s actions to date, and interviewed agency officials. We provided a draft of this report to HHS for review and comment. HHS did not provide comments on this enclosure.

Contact information: Jessica Farb, (202) 512-7114, farbj@gao.gov

Veterans Health Care

The Veterans Health Administration has increased its capacity to deliver COVID-19 care for veterans, through efforts such as hiring clinical staff and increasing telehealth services, using existing and supplemental funds.

Entities involved: Department of Veterans Affairs, Veterans Health Administration

Key Considerations and Future GAO Work

We have previously reported shortcomings in staffing capacities and human capital management at the Department of Veterans Affairs (VA). For example, in October 2017, we recommended that the Veterans Health Administration (VHA) develop and implement a process to accurately count all physicians providing care at each medical center. As of January 2020, VHA continued to disagree with this recommendation and previously asserted that the ability to count physicians does not affect its ability to assess workload. We maintain that an accurate count of all physicians is necessary for effective workforce planning, and we have identified this recommendation as warranting priority attention from the head of the department. While VA is currently reporting sufficient staffing at all facilities, it will be important to monitor the extent to which VHA has the staffing capacity to respond to the evolving medical needs of veterans during the COVID-19 pandemic.

We have also previously reported shortcomings in VA’s oversight of its nursing home care. [252] Specifically, in July 2019, we found that VA did not conduct the quarterly monitoring of contractor performance for community living center and state veterans home inspections. We also found that VA did not require the state veterans home contractor to identify all failures to meet quality standards as deficiencies during its inspections. We recommended that the Under Secretary of Health develop a strategy to regularly monitor the contractors’ performance in conducting these inspections. We also recommended that the Under Secretary of Health require that all failures to meet quality standards be cited as deficiencies in state veterans home inspections. In light of these prior concerns, as well as the high incidence of COVID-19 in nursing homes, we have additional work planned to review VA’s oversight of nursing home care provided to veterans during the COVID-19 pandemic.

In addition, Congress raised concerns in April 2020 about personal protective equipment (PPE) shortages at VA medical centers, concerns that were also cited in a VA Office of Inspector General report and multiple media reports based on accounts by VA employees and others. VHA officials reported on May 6, 2020, they had a sufficient PPE supply to allow them to distribute equipment among sites based on need and they followed CDC guidance for conservation and prioritization of equipment. Ensuring an adequate supply of PPE is essential to the safety and well-being of both employees and veterans. Given the importance of this issue, we will be examining the acquisition and management of PPE, among other COVID-19 supply chain and acquisition management matters.

Given these concerns, we plan to examine, among other things, VA’s support of the civilian public health response to COVID-19; VA’s use and oversight of the supplemental funds for COVID-19; infectious disease prevention in VA’s long-term care programs; and VA’s management and expenditure of COVID-19 emergency funds to procure necessary, time-critical medical supplies, such as PPE.

Background

VA administers one of the largest health care systems in the United States and is charged, through VHA, with providing health care services to the nation’s eligible veterans and beneficiaries. VHA provides health care to more than 9 million veterans through VA medical centers, community-based outpatient clinics, and community living centers. [253]

VA received approximately $20 billion in supplemental funding to support its efforts to address COVID-19. [254] VHA plans to use these supplemental funds, along with existing funds, to deliver care for veterans in response to COVID-19. According to VA documents, VHA reported 14,140 cumulative veteran cases of COVID-19, including 1,440 active veteran cases, 11,329 convalescent veteran cases, and 1,371 veteran deaths as of June 12, 2020. [255]

Overview of Key Issues

In response to COVID-19, VHA officials told us that they increased capacity, tested both veterans and staff, and expanded telehealth services to care for veterans, among other actions. In addition, VHA supports the civilian public health response as part of VA’s statutory mission to fulfill its obligations during times of national public health emergency, including providing support to the Department of Defense and the Public Health Service.

Health care capacity. VHA announced it had increased capacity for COVID-19 patients by taking a number of steps:

  • postponing elective admission or procedures, such as dental care or nonemergency surgeries;
  • discharging patients who did not need continued hospitalization;
  • providing outpatient care for veterans through telehealth services when possible;
  • separating inpatient care into two zones, one for patients who have been diagnosed with or suspected of COVID-19 and one for those who have not; and
  • activating new or nonclinical areas, such as repurposing specialty care areas, operating rooms, and administrative spaces, to increase bed capacity for potential surge of COVID-19 patients.

According to VHA documents, VA medical centers had occupancy rates of 54 percent or less for its acute care beds, its intensive care unit beds, and its negative pressure beds as of June 12, 2020. [256] VHA officials told us achieving such capacity better positions them to provide support to veteran and civilian public health response.

Testing and screening. VHA officials told us they follow Centers for Disease Control and Prevention (CDC) guidance to determine when to test veterans for COVID-19. [257] According to VA documents, VHA tested 230,846 patients, which primarily includes veterans and may also include tests for employees or civilians being treated at VA as part of its public health emergency response as of June 12, 2020. VHA officials told us that they test patients both at VA facilities and by sending specimens to off-site labs for processing.

VHA told us it is screening its employees, contractors, and visitors for COVID-19 symptoms when they enter the grounds of a VA facility. If they screen positive for symptoms, employees or contractors are referred for COVID-19 testing at the VA facility or through private providers.

PPE. According to officials, VHA has issued protocols for PPE usage that align with CDC guidance. [258] VHA officials also told us they created a national tracking tool for PPE supplies. As of April 20, 2020, medical center staff are required to manually enter PPE quantities in the tracking tool daily, and the tool allows VHA to reallocate supplies if a facility is expected to have a shortage. VHA uses its national supply to rebalance PPE supplies if it anticipates shortages.

Telehealth services. VHA officials told us they have increased network bandwidth to support telework and telehealth video connections between physicians and patients. VHA officials also said they are well within their network bandwidth capacity based upon bandwidth expansion performed during the early phase of VA’s response to COVID-19. VHA told us it has increased its telehealth video visits from 2,400 a day prior to COVID-19 to approximately 26,000 a day as of May 21, 2020. According to VHA officials, VHA increased its telephone visits from 20,000 a day prior to COVID-19 to approximately 170,000 a day as of early May 2020.

Staffing. VHA told us it is using various strategies for staffing, recruiting, and retaining employees in response to COVID-19. VHA officials told us that all facilities have adequate staffing, and hiring was ramped up between March 29 and May 28, 2020, to bring on 3,410 nurses and 539 physicians. VHA also noted that overall staff absenteeism between April and May 2020 was lower than average. To help ensure adequate staffing, VHA told us that it has recruited staff by offering benefits such as dual compensation waivers to retirees (primarily nurses), expanding child care subsidies, and decreasing onboarding times. [259] VHA is supplementing staff in areas harder hit by the pandemic through its VA Travel Nurse Corps Program and deploying VHA staff through its Disaster Emergency Medical Personnel System. [260]

Community living centers. As of March 10, VHA required community living centers to implement safeguards aimed at limiting COVID-19 exposure risk for two of its most susceptible patient populations: nursing home residents and spinal-cord injury patients. These requirements include no visitors except for end-of-life hospice patients, suspension of new patient admissions, and daily screening of staff. [261] VHA officials told us that centers nationwide conducted testing of all patients and staff for COVID-19, although this testing is not performed on a recurring basis due to limited testing supplies. VHA officials told us that they isolate patients in these centers who test positive for COVID-19.

Community care. When veterans need health care services that are not available at VA medical facilities or within required driving distances or time frames, VHA may purchase care from non-VA providers through its community care program. [262] On March 24 and March 30, 2020, VHA issued guidance for community care in response to COVID-19, which advised providers to weigh the need for a community care authorization for routine care against the risks of exposing veterans to COVID-19. VHA told us that urgent visits in the community decreased by 50 percent in March 2020. [263] However, VHA told us that other referrals to community care, such as home health authorizations and inpatient care, have increased. VHA told us that urgent and emergency care in the community is available and is being utilized.

GAO Methodology and Agency Comments

To conduct this work, we reviewed VHA guidance and documents, reviewed federal laws, and interviewed VHA officials. We provided a draft of this report section to VA for review and comment. In its comments, VA noted that it has been open, throughout the pandemic, for all care where clinical urgency outweighed the risk of COVID-19. VA said it began expanding services on May 18, 2020 at 20 sites, using a phased approach centered on veteran safety, in alignment with White House and CDC guidance. VA also provided technical comments, which we incorporated as appropriate.

Contact information: Debbie Draper, (202) 512-7114, draperd@gao.gov ; Sharon Silas, (202) 512-7114, silass@gao.gov

Related GAO Products

VA Nursing Home Care: VA Has Opportunities to Enhance Its Oversight and Provide More Comprehensive Information on Its Website. GAO-19-428 . Washington, D.C.: July 3, 2019.

Veterans Health Administration: Better Data and Evaluation Could Help Improve Physician Staffing, Recruitment, and Retention Strategies. GAO-18-124 . Washington, D.C.: October 19, 2017.

Military Health

The Department of Defense has taken steps to test and track COVID-19 cases among servicemembers, provide care through the military health system, and protect the health of U.S. military forces.

Entities involved: Department of Defense, Defense Health Agency

Key Considerations and Future GAO Work

We plan to examine the Department of Defense’s (DOD) actions to provide care within the military health system and to protect the health of U.S. military forces in response to COVID-19 in future work.

Background

The COVID-19 global pandemic has the potential to affect DOD’s ability to accomplish its mission and impair the military’s readiness. In addition to supporting the national response to the COVID-19 pandemic, DOD must also maintain the medical readiness of the U.S. military force. To that end, the department must continue to provide health care for servicemembers, among others, as well as institute measures to protect the health of military servicemembers. To do this, DOD has taken steps to provide testing and treatment through the military health system, among other actions.

DOD received approximately $10 billion in funding from the CARES Act, including $3.8 billion for the Defense Health Program to prevent, prepare for, and respond to COVID-19. [264] The Defense Health Program was also appropriated $82 million by the Families First Coronavirus Response Act for health services consisting of COVID-19 related items and services. [265]

Overview of Key Issues

In 2019, DOD provided health care for approximately 9.6 million individuals, including servicemembers and their dependents, and operated 475 military Medical Treatment Facilities (MTF) across the military health system. [266] Since 2017, DOD has been reforming the military health system, including consolidating the administration of the MTFs under the Defense Health Agency (DHA). However, DOD and the DHA have temporarily paused reform efforts to prioritize their response to COVID-19. Key aspects of DOD’s response to COVID-19 include the following:

COVID-19 testing in the military health system. DOD has shifted its COVID-19 testing efforts from an initial diagnostic testing focus on individuals with symptoms to include screening of asymptomatic individuals. On April 22, 2020, DOD announced a tiered approach to testing, prioritizing diagnostic testing for personnel in the following order:

  • Tier 1: personnel responsible for critical national defense capabilities;
  • Tier 2: engaged fielded forces around the world;
  • Tier 3: forward-deployed and redeploying forces; and
  • Tier 4: remaining DOD personnel.

In April 2020, DOD officials stated the department’s goal of testing 60,000 personnel by early June 2020, and then 200,000 per month thereafter. DOD reported in early May that it had completed Tier 1 testing. As of May 21, 2020, DOD officials stated that the department had performed 93,536 tests in DOD labs. As of June 1, 2020, DOD had identified 9,885 confirmed cases of COVID-19 within the department (see table). The Navy accounts for approximately 38 percent of cases among servicemembers.

Number of COVID-19 Cases Reported by the Department of Defense, as of June 1, 2020
Cumulative cases Hospitalized Deaths
Military 6,596 189 3
Civilian 1,516 145 19
Dependent 1,124 51 5
Contractor 649 63 9
Total 9,885 448 36
Source: GAO analysis of Department of Defense data. | GAO-20-625

DOD has taken steps to advance testing capability in the military health system for its personnel. For example:

  • DOD leveraged an existing contract to develop a COVID-19 test that can be processed on the diagnostic system currently used throughout the military health system.
  • Army officials stated that the Army is working to develop high-throughput tests for COVID-19, which would increase processing capacity from approximately 60 patient tests every 8 hours to 275 or more patient tests every 8 hours.
  • DHA established procedures for MTFs that lack in-house testing capacity, including a goal of ensuring all tests are processed in 72 hours or less.

COVID-19 treatment in the military health system. DOD has taken steps to advance treatment of COVID-19 patients in the military health system. For example:

  • DOD officials stated that the department obtained treatment courses of the antiviral drug remdesivir, originally in development by DOD to counter the Ebola virus. The Army signed a cooperative agreement with an industry partner to provide the drug for treatment of COVID-19 patients in the military health system. Currently, 13 MTFs have this capability, and several patients have received the treatment.
  • DHA has issued periodic guidance to the MTFs, including interim guidance on topics such as medical countermeasures and personal protective equipment, among others.

Protecting the health and medical readiness of U.S. military forces. DOD Instruction 6200.03, Public Health Emergency Management (PHEM) Within the DOD (March 28, 2019), establishes policy, assigns responsibilities, and provides direction to ensure mission assurance and readiness for public health emergencies. In addition, the department issued initial health protection guidance specific to COVID-19 on January 30 and has issued 11 supplemental guidance documents since (see table).

Health Protection Guidance and Supplements Issued by the Department of Defense in Response to the COVID-19 Pandemic, as of June 11, 2020
Guidance Issue date Subject
Initial guidance January 30, 2020 Force Health Protection Guidance for the Novel Coronavirus Outbreak
Supplement 1 February 7, 2020 Monitoring Personnel Returning from China During the Novel Coronavirus Outbreak
Supplement 2 February 25, 2020 Military Installation Commanders’ Risk-Based Measured Responses to the Novel Coronavirus Outbreak
Supplement 3 March 10, 2020 Use of Personal Protective Equipment and Non-Pharmaceutical Interventions during the Coronavirus Disease 2019 Outbreak
Supplement 4 March 11, 2020 Personnel Traveling During the Novel Coronavirus Outbreak
Supplement 5 April 7, 2020 Movement and Medical Treatment of COVID-19 Patients, Symptomatic Persons Under Investigation, or Potentially Exposed COVID-19 Persons
Supplement 6 April 7, 2020 Coronavirus Disease 2019 Laboratory Diagnostic Testing Services
Supplement 7 April 8, 2020 Use of Cloth Face Coverings, Personal Protective Equipment, and Non-Pharmaceutical Interventions During the Coronavirus Disease 2019 Pandemic
Supplement 8 April 13, 2020 Protecting Personnel in Workplaces during the Response to the Coronavirus Disease 2019 Pandemic
Supplement 9 May 26, 2020 Deployment and Redeployment of Individuals and Units during the Novel Coronavirus Disease 2019 Pandemic
Supplement 10 June 11, 2020 Coronavirus Disease 2019 Clinical Laboratory Diagnostic Testing Services
Supplement 11 June 11, 2020 Coronavirus Disease 2019 Surveillance and Screening with Testing
Source: GAO analysis of DOD information. | GAO-20-625

Note: The issuance of Supplement 7 on April 8, 2020, rescinded the guidance provided by Supplement 3.

DOD has taken steps designed to prevent infection and spread of COVID-19. For example, DOD issued travel restrictions in March 2020 and later extended them through June 30, including permanent changes of station, work-related travel, and servicemember leave.

In addition, DOD agencies have been encouraged to maximize telework, and officials estimated that 970,000 active-duty and civilian personnel were teleworking. [267] However, DOD officials stated that some personnel, such as new recruits or Navy sailors deployed on ships, are unable to telework or maintain social distancing due to mission requirements. DOD officials announced guidelines on April 22 to prevent infection in those cases:

  • screening with questionnaires and temperature checks to identify at-risk individuals;
  • mandating a 14 to 21 day quarantine, depending on a risk assessment;
  • requiring additional testing and temperature checks prior to leaving quarantine;
  • limiting interaction outside of the unit; and
  • observing protective measures such as face covering and hand washing.

GAO Methodology and Agency Comments

To conduct this work, we reviewed DOD guidance and documentation and the most recent DOD data available as of June 11, 2020. We also interviewed DOD officials knowledgeable about COVID-19 response efforts and reviewed publicly available DOD media reports, statements, and documents. We provided a draft of this report to DOD for review and comment. DOD provided technical comments on the report, but had no comments related to this enclosure.

Contact information: Brenda Farrell, (202) 512-3604, farrellb@gao.gov

Medical Surge

Multiple federal agencies have deployed personnel, alternative care sites, and equipment to help surge medical and public health capabilities during the COVID-19 response.

Entities involved: Department of Health and Human Services, Office of the Assistant Secretary for Preparedness and Response, U.S. Public Health Service, Centers for Disease Control and Prevention, Department of Defense, Department of Veterans Affairs, Department of Homeland Security, Federal Emergency Management Agency

Key Considerations and Future GAO Work

In June 2020, we reported on shortcomings related to the Department of Health and Human Services’ (HHS) Office of the Assistant Secretary for Preparedness and Response’s (ASPR) planning for, and training of, its National Disaster Medical System (NDMS) responder workforce. We found that these shortcomings hinder ASPR’s ability to ensure that it has an adequate number of responders, with the right skill sets, enrolled in NDMS to respond effectively to public health emergencies, such as COVID-19. We made five recommendations, including that HHS develop an NDMS responder workforce target that accounts for the critical skills and competencies needed to meet current and future programmatic results, and develop a process to better evaluate the training provided to NDMS responders. HHS agreed with our recommendations but has not yet taken action to address them.

Further, in September 2019, we identified several deficiencies in HHS’s leadership in the public health and medical response to Hurricanes Irma and Maria in 2017, including that HHS experienced shortages of responders and relied on the Department of Defense (DOD) to provide medical response personnel, which could create vulnerability if DOD is needed for its primary missions. In that report, we also identified concerns about coordination and misalignment of federal resources, including resources from DOD, the Department of Veteran’s Affairs (VA), and the Department of Homeland Security (DHS). We recommended that HHS develop agreements with support agencies that include response capability and limitation information. HHS has yet to take action to address this recommendation.

In light of these prior concerns, and in response to the CARES Act, in our future work we plan to monitor the extent to which HHS and other agencies are coordinating deployments and ensuring resources are being used most effectively to respond to the medical and public health needs during the COVID-19 response. As part of our work, we plan to examine HHS’s and DHS’s response and recovery efforts to COVID-19 and related coordination among supporting agencies.

Background

The scale of the nationwide COVID-19 pandemic requires a whole-of-government approach to respond, including multiple federal agencies to support the public health and medical response. HHS is designated the lead agency for responding to a public health emergency, including a pandemic. [268] As part of this role, HHS provides resources such as surge personnel and equipment to support the public health and medical needs of the response. Additionally, HHS may work with its federal partners, including DOD, DHS, and VA, which can also deploy related supports to help surge medical and public health capabilities during a response to a public health emergency.

Overview of Key Issues

Since January 2020, HHS and its federal partners—DOD, VA, DHS—have deployed personnel to surge the national public health and medical response to the COVID-19 pandemic. Several of these agencies also supported the response by providing alternative care sites or equipment to supplement state and local health systems.

Examples of HHS agencies’ personnel and equipment deployed for the medical and public health response to COVID-19 between January and May 2020 include the following:

  • ASPR. ASPR deployed more than 135 of its staff to assist in the COVID-19 response, as well as about 1,200 public health and medical responders enrolled in its NDMS, according to ASPR officials. These individuals, such as physicians, nurses, and paramedics, work outside the federal government but are placed in an intermittent employee status when deployed to respond to public health emergencies. [269]

    ASPR deployed some of these responders to help American citizens who were potentially infected with COVID-19 disembark from cruise ships to quarantine locations in the United States, as well as repatriate citizens returning from China. In addition to personnel, ASPR also deployed more than 40 Federal Medical Stations, a form of alternative care site and medical equipment, to provide additional bed capacity and related equipment to local health systems across the country. [270] For example, these Stations were used to augment state medical response resources in Louisiana.

  • U.S. Public Health Service. U.S. Public Health Service, within HHS, deployed more than 4,100 Commissioned Corps Officers to support the COVID-19 response, according to U.S. Public Health Service officials. Overseen by the U.S. Surgeon General, the Commissioned Corps is a team of public health officers whose duty stations are typically within federal agencies, including the Centers for Disease Control and Prevention (CDC), Food and Drug Administration, Indian Health Service, and National Institutes of Health. However, these officers can be temporarily assigned to assist with a federal response.

    Many of these officers include physicians, nurses, pharmacists, and others who can provide public health and medical care. For the COVID-19 response, these officers were deployed to provide surge capacity to support field hospitals and other public health and medical missions. For example, agency officials reported that Commissioned Corps Officers were deployed to assist American citizens returning from China and Japan and to provide clinical care at a long-term care nursing facility in Kirkland, Washington, and at alternative care sites in New York City and Detroit. In addition, Commissioned Corps Officers have deployed to provide assistance in community-based testing sites across the country, according to agency officials. [271]

  • CDC. CDC deployed more than 1,000 of its staff for the COVID-19 response, according to the agency. For example, CDC officials stated that the agency deployed personnel to staff domestic quarantine stations established to prevent, delay, and mitigate the introduction of additional cases and transmission to the United States. At the request of state health departments, CDC also deployed emergency response teams to provide services, including implementing infection control measures, supporting laboratories, establishing surveillance systems, and investigating outbreaks in high-risk settings, such as long-term care facilities.

Examples of DOD, DHS, and VA personnel; alternative care sites; and equipment deployed for the medical and public health response to COVID-19 between January and May 2020 include the following:

  • DOD. DOD deployed over 60,000 personnel, including more than 4,000 medical personnel, to respond to COVID-19 through its Defense Support of Civil Authorities Mission, which allows other federal agencies, such as HHS, to call on DOD for support during disasters and declared emergencies. For example, to assist with COVID-19, DOD medical personnel have provided medical support at alternative care facilities and worked alongside civilian medical staff at medical hospitals and facilities in various states. In addition, the U.S. Army Corps of Engineers, which serves as the primary federal agency for engineering-related response efforts, supported the response to the pandemic by leading the construction of 38 alternative care sites that supplied more than 15,000 additional beds for patients with COVID-19, according to agency officials (see figure). (For more information see “DOD Support for Civilian Authorities” in appendix III.)

U.S. Army Corps of Engineers Constructed Alternative Care Facilities in Washington, D.C., and Loveland, Colorado

  • Federal Emergency Management Agency (FEMA). Within DHS, FEMA’s workforce is designed to scale up and deploy to help support response to and recovery from all types of disasters, including during a pandemic. FEMA deployed more than 3,100 employees across all states and territories to support the COVID-19 response. According to FEMA officials, these employees provided support for response coordination and communication. For example, at state request, FEMA deployed Incident Management Assistance Teams to serve as initial responders to assess state and local needs and facilitate local response to COVID-19.
  • VA. In addition to its role providing health care and benefits to veterans, the VA’s “Fourth Mission” is to serve as a health care backup to the general public during times of war, terrorism, national emergencies, and natural disasters through requests from other agencies, such as HHS. In response to COVID-19, VA deployed personnel and equipment and provided beds in its medical facilities as surge capacity to care for nonveterans. For example, VA reported that it had deployed more than 540 staff to support state and community nursing homes. VA also provided more than 240 beds to civilians in at least 10 of its medical centers. VA also loaned a mobile pharmacy unit and deployed VA staff to assist an alternative care site in Michigan and deployed Veterans Health Administration clinical staff to Connecticut to help treat COVID-19 patients who were experiencing homelessness.

GAO Methodology and Agency Comments

To conduct this work, we collected deployment information and interviewed officials from HHS and three of its federal partners—DOD, DHS, and VA—which had provided personnel and alternative care sites during the medical and public health response to Hurricanes Irma and Maria in the U.S. Virgin Islands and Puerto Rico (see our September 2019 report). Deployment information includes examples of personnel deployed to support the public health and medical response to COVID-19, as well as alternative care sites and equipment deployed for that purpose. Dates for deployment information vary by agency.

Further, the information in this enclosure highlights examples of the types of medical and public health personnel, alternative care sites, and equipment supports provided by these agencies; it is not an exhaustive list of all supports provided by HHS, DOD, DHS, and VA during the response to COVID-19. For example, for additional information on medical supplies and equipment provided by federal agencies from the Strategic National Stockpile, see “Federal Efforts to Provide Medical Supplies” in appendix III.

We provided a draft of this report to HHS, DOD, DHS, and VA for review and comment. HHS and DOD provided technical comments on this enclosure, which we incorporated as appropriate. DHS and VA did not comment on this enclosure.

Contact information: Mary Denigan-Macauley, (202) 512-7114, deniganmacauleym@gao.gov

Related GAO Products

Public Health Preparedness: HHS Should Take Actions to Ensure It Has an Adequate Number of Effectively Trained Emergency Responders. GAO-20-525 . Washington, D.C.: June 18, 2020.

Disaster Response: HHS Should Address Deficiencies Highlighted by Recent Hurricanes in the U.S. Virgin Islands and Puerto Rico. GAO-19-592 . Washington, D.C.: September 20, 2019.

2017 Hurricanes and Wildfires: Initial Observations on the Federal Response and Key Recovery Challenges. GAO-18-472 . Washington, D.C.: September 4, 2018.

DOD Support to Civil Authorities

The Department of Defense is providing people, equipment, and supplies to support civil authorities during the COVID-19 pandemic.

Entities involved: Department of Defense, including active duty, reserve and National Guard forces, the U.S. Army Corps of Engineers, and the Defense Logistics Agency

Key Considerations and Future GAO Work

In February 2017, we reported that severe infectious disease would likely limit the Department of Defense’s (DOD) ability to provide support to civil authorities as part of the broader national response. At that time we recommended that DOD use existing coordination mechanisms with the Department of Health and Human Services (HHS) and the Federal Emergency Management Agency (FEMA) to explore opportunities to improve preparedness and response to a pandemic if DOD’s capabilities are limited. DOD concurred with this recommendation and implemented it by expanding interagency coordination and exercises with HHS and FEMA. The COVID-19 pandemic will test the effectiveness of these coordination mechanisms.

We plan to examine the support DOD provides to civil authorities as part of the response to and recovery from COVID-19 and related coordination among the supporting agencies.

Background

While DOD’s primary mission is to defend the nation, the department is often asked to play a prominent role supporting civil authorities and must be prepared to provide rapid response when called upon during disasters and declared emergencies (natural or man-made). DOD provides such support through its Defense Support of Civil Authorities mission.

Consistent with the National Response Framework—a guide to how the federal government, states, and localities, and other public and private-sector institutions should respond to disasters and emergencies—DOD is authorized to provide support to civil authorities when requested by another federal agency and approved by the Secretary of Defense, or when directed by the President. Requesting agencies could include, for example, FEMA, HHS, or U.S. Department of Agriculture. DOD provides such support through federal military forces, DOD civilians, DOD contract personnel, or DOD component assets—to include the National Guard and the U.S. Army Corps of Engineers.

National Guard forces may provide support to civil authorities when ordered to active duty—commonly referred to as Title 10 duty status. [272] When ordered to active duty, National Guard forces are funded and commanded by DOD. National Guard personnel may also be ordered in a duty status pursuant to Title 32 U.S.C. § 502(f)—commonly referred to as Title 32 duty status—by the President or Secretary of Defense and with the consent of the Governor. [273] When operating in a Title 32 duty status, National Guard forces are funded by DOD and commanded by the state. [274]

Overview of Key Issues

Multiple federal agencies, including FEMA, HHS, and the U.S. Secret Service, have requested assistance from DOD for the COVID-19 pandemic. Specifically, as of June 5, 2020, DOD had responded to more than 253 FEMA mission assignments. To conduct that assistance, as of May 2020, more than 57,200 military personnel, including more than 41,000 National Guard personnel in Title 32 status, had supported the COVID-19 response. Initially DOD supported multiple requests for assistance from HHS and U.S. Secret Service—including providing temporary housing for U.S. citizens who were evacuated from China and the Grand Princess cruise ship and medical support to the White House. After the COVID-19 emergency declaration on March 13, 2020, FEMA assumed its role as the lead federal agency for the federal government’s response to COVID-19, while HHS is continuing to lead the public health and medical response.

In responding to these requests for assistance and mission assignments, DOD organizations, units, and personnel (including active duty and reserves) have provided a number of capabilities, such as medical supplies (including personal protective equipment (PPE), ventilators, and testing materials); medical units and personnel; mobile medical facilities (including hospitals and ships); support personnel (e.g., planners and public affairs); access to and use of military bases; and transportation capabilities. For example:

  • Medical personnel have supported civil authorities in a variety of capacities, including providing medical support at personal housing units for patients awaiting COVID-19 test results, providing medical support at alternative care facilities, and working alongside civilian medical staff at medical hospitals and facilities. As of May 27, 2020, more than 500 DOD medical personnel, including doctors, nurses, respiratory therapists, and medical support personnel, remained in support of COVID-19 operations.
  • The Navy deployed the medical ships USNS Comfort and USNS Mercy, which provided medical care to COVID-19 and non-COVID-19 patients in New York and California, respectively. The USNS Comfort treated 182 patients while docked in Manhattan, New York, from March 30, 2020 to April 30, 2020. The USNS Mercy docked in Los Angeles, California, on March 27, 2020, and treated 77 non-COVID patients before departing on May 15, 2020. Both ships were initially tasked with providing trauma, emergency, and other care to non-COVID patients, to provide relief to shore-based civilian hospitals and allow them to focus on the treatment of COVID-19 patients. However, on April 6, 2020, the USNS Comfort began accepting COVID-19 patients to admit more patients and relieve pressure on New York City hospitals.
  • The Defense Logistics Agency has provided a number of medical supplies and equipment to federal agencies, including N95 masks, ventilators, more than 1 million commercial-shelf meals, hand sanitizer, 100,000 human remains bags, and $10 million in pharmaceutical items. The agency also delivered 11,000 face shields to New York first responders, which it produced using 3D printing. In addition, the agency provided excess vehicles to state officials for delivering school lunches. (For more information on federal distribution and acquisition of PPE and other supplies, see "Federal Efforts to Provide Medical Supplies" in appendix III.
  • The U.S. Army Corps of Engineers responded to 64 mission assignments from FEMA, totaling $1.8 billion, and an additional $4.5 million from the National Emergencies Preparedness Program. The U.S. Army Corps of Engineers conducted 1,155 assessments for alternate care facilities and awarded 38 construction contracts to add 15,074 beds to the nation’s health care system. The construction of these facilities includes modifying 21 existing sports arena and convention centers, and 17 existing hotels and dormitories in 18 states, the District of Columbia, and the Virgin Islands. The design of these alternate care facilitates can allow for treatment of both COVID-19 and other patients.
  • More than 80 military laboratories performed certified clinical COVID-19 testing, and DOD is involved in five different vaccine research and development efforts.
  • On April 20, 2020, the Defense Logistics Agency procured and distributed 6.8 million N95 respirators from a private manufacturer.
  • DOD provided 20 million N95 respirators to FEMA and HHS.

Army Medical Personnel Transport a Patient to Intensive Care Unit at an Alternative Care Facility in New York During COVID-19 Pandemic

As of May 2020, more than 40,000 National Guard members from almost all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico, and Guam had provided support in State or Territorial Active-duty, Title 32, or Title 10 status to support the COVID-19 pandemic response efforts. [275] These efforts include activating National Guard personnel from their civilian occupations, as well as employing National Guard teams in each state and territory specifically created to respond to chemical, biological, radiological, and nuclear incidents. [276]

National Guard personnel have supported their state, tribal, and local authorities in a variety of manners, including the following:

  • Supporting COVID-19 testing efforts. For example, the Nebraska National Guard supported three mobile testing sites, the Florida National Guard provided personnel for testing teams to assist nursing homes and veterans’ nursing facilities, and the Rhode Island National Guard is providing over half of the state’s testing capacity.
  • Supporting the production, delivery, and training of PPE supplies. For example, the Texas National Guard assisted in the production of medical PPE masks, the Arizona National Guard provided PPE supplies to the Navajo Nation, and the Kansas National Guard provided PPE training to inmates and staff at the Lansing Correctional Facility.
  • Supporting food distribution efforts. For example, the Maryland National Guard prepared and delivered meals to emergency encampments for homeless people displaced due to COVID-19, the North Carolina National Guard supported community food banks, and the Louisiana National Guard delivered over 2 million pounds of food.
  • Other support and missions. For example, when first responders were overtasked, the New York National Guard provided daily support at the Rotterdam call center, vetting incoming calls as well as decreasing wait times for the New York State Coronavirus Hotline.

Georgia National Guard Member Provides Food to Local Schools During COVID-19 Pandemic

GAO Methodology and Agency Comments

To conduct this work, we reviewed documentation and the most recent data available from DOD through June 5, 2020, interviewed DOD officials, and obtained information from military websites (e.g., Defense Visual Information Distribution Service photos). We provided a draft of this report to DOD for review and comment. DOD provided technical comments on this enclosure, which we incorporated as appropriate.

Contact information: Diana Maurer, 202-512-9627, maurerd@gao.gov

Related GAO Products

2017 Hurricanes and Wildfires: Initial Observations on the Federal Response and Key Recovery Challenges. GAO-18-472 . Washington, D.C.: September 4, 2018.

Defense Civil Support: DOD, HHS, and DHS Should Use Existing Coordination Mechanisms to Improve Their Pandemic Preparedness. GAO-17-150 . Washington, D.C.: February 10, 2017.

HHS COVID-19 Funding

Congress appropriated more than $250 billion to the Department of Health and Human Services to address various aspects of the public health response to COVID-19, of which about $101 billion had been obligated and about $67 billion had been expended as of May 31, 2020, according to department officials.

Entities involved: Department of Health and Human Services

Key Considerations and Future GAO Work

As part of our monitoring and oversight responsibilities in the CARES Act, we are conducting work examining the Department of Health and Human Services’ (HHS) use of appropriations contained in four relief laws enacted to help fund the response to COVID-19. Specifically, we will be examining the status of obligations and expenditure of these funds; the activities funded, including how those activities were determined; and efforts to monitor funding use and any related challenges.

Background

HHS received approximately $250.6 billion in supplemental appropriations from four relief laws enacted to assist the response to COVID-19. [277] The following table provides HHS appropriations and HHS’s reported obligations and expenditures, by COVID-19 relief law.

Supplemental Appropriations to HHS for COVID-19 Response and HHS’s Reported Obligations and Expenditures, by Law, as of May 31, 2020
Legislation

Appropriations

($ millions)

Obligations

($ millions)

Expenditures

($ millions)

Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (Pub. L. No. 116-123) 6,497.0 4,398.9 484.4
Families First Coronavirus Response Act (Pub. L. No. 116-127) 1,314.0 351.2 152.1
CARES Act (Pub. L. No. 116-136) 142,833.4 55,733.6 38,197.2
Paycheck Protection Program and Health Care Enhancement Act (Pub. L. No. 116-139) 100,000.0 40,247.9 28,555.8
Total 250,644.4 100,731.5 67,389.5
Source: Department of Health and Human Services (HHS) data and GAO analysis of appropriation warrant information provided by the Department of the Treasury. | GAO-20-625

Note: HHS reported that of its total COVID-19 supplemental appropriations, the agency transferred $289 million to the Department of Homeland Security, and $300 million in appropriations are not available until future actions by HHS.

Overview of Key Issues

Of the $250.6 billion appropriated, HHS reported that it had obligated about $100.7 billion and expended about $67.4 billion, as of May 31, 2020. The following table provides HHS’s reported appropriations, obligations, and expenditures by HHS agency.

HHS Reported Appropriations, Obligations, and Expenditures for COVID-19 Response, by Agency, as of May 31, 2020
Agency or key fund

Appropriations

($ millions)

Obligations

($ millions)

Expenditures

($ millions)

Administration for Children and Families 6,274.0 5,410.9 256.9
Administration for Community Living 1,205.0 1,204.7 69.0
Agency for Toxic Substances and Disease Registry 12.5 1.4 0.5
Centers for Disease Control and Prevention 6,500.0 1,998.6 231.1
Centers for Medicare & Medicaid Servicesa 200.0 11.5 0.0
Food and Drug Administration 141.0 8.0 0.4
Health Resources and Services Administration 1,320.0 1,317.8 167.2
Indian Health Service 1,096.0 611.2 567.6
National Institutes of Health 1,781.4 247.2 7.9
Public Health and Social Services Emergency Fund (PHSSEF)b 231,689.5 89,536.1 66,088.6
Office of the Assistant Secretary for Preparedness and Response 19,323.0 8,128.4 492.4
Biomedical Advanced Research and Development Authority 6,190.0 3,658.3 19.9
Provider Relief Fundc 177,000.0 65,360.6 65,204.0
Other PHSSEF 29,176.5 12,388.8 372.3
Substance Abuse and Mental Health Services Administration 425.0 384.2 0.5
Total 250,644.4 100,731.5 67,389.5
Source: Department of Health and Human Service (HHS) data. | GAO-20-625

Note: The COVID-19 relief laws included provisions for HHS to transfer appropriated funds to various HHS agencies. HHS also reported that of its total COVID-19 appropriation, the agency transferred $289 million to the Department of Homeland Security, and $300 million in appropriations are not available until future actions by HHS.
aThese amounts do not reflect Medicaid and Medicare expenditures. As of May 31, 2020, COVID-19 related federal Medicaid expenditures totaled approximately $7.2 billion or 7 percent of total spending on Medicaid services for this time period. In addition, the Congressional Budget Office estimated that some provisions of the CARES Act will increase Medicare payments to providers by $8 billion in 2020 and 2021.
bThe Public Health and Social Services Emergency Fund (PHSSEF) is an account HHS generally uses to provide appropriations to certain HHS offices, such as the Office of the Assistant Secretary for Preparedness and Response. Congress has appropriated amounts to this fund for the COVID-19 response to support certain HHS agencies and response activities. PHSSEF appropriations transferred to other HHS agencies or key funds not specifically listed are included under “Other PHSSEF.” For example, the Health Resources and Services Administration received $975 million in transfers from the PHSSEF, and this is represented in the table in “Other PHSSEF.”
cThe Provider Relief Fund reimburses eligible health care providers for health care related expenses or lost revenues that are attributable to COVID-19. The CARES Act and Paycheck Protection Program and Health Care Enhancement Act appropriated $175 billion in funding for provider relief. In addition, the Families First Coronavirus Response Act and the Paycheck Protection Program and Health Care Enhancement Act designated up to $2 billion to reimburse providers for COVID-19 testing for uninsured individuals.

HHS’s reported obligations and expenditures have been for a variety of COVID-19 selected response activities, including activities to support testing, the development of vaccines or therapeutics, and the acquisition of critical supplies. The following table provides HHS’s reported appropriations, obligations, and expenditures by key response activity.

HHS’s Reported Appropriations, Obligations, and Expenditures for COVID-19 Response, by Selected Key Response Activity, as of May 31, 2020
Key activity

Total HHS appropriations

($ in millions)

Total HHS obligations

($ in millions)

Total HHS expenditures ($ in millions)
Health Centersa 2,020.0 2,000.5 214.7
Head Start 750.0 1.8 0.0
Provider Relief Fundb 177,000.0 65,360.6 65,204.0
Support to state, local, territorial, and tribal organizations for preparedness 13,980.1 12,209.8 489.4
Strategic National Stockpile 16,710.0 6,880.6 330.2
Telehealth 159.5 35.0 0.0
Testing 3,094.8 714.5 43.7
Vaccines or therapeutics 5,467.2 3,612.4 18.1
Other response activities 31,462.8 9,916.3 1,089.5
Total 250,644.4 100,731.5 67,389.5
Source: Department of Health and Human Service (HHS) data. | GAO-20-625

Note: HHS reported appropriations, obligations, and expenditures for these activities based on the primary programmatic recipient organization of the funds, although some activities apply to multiple categories. For example, certain funds in the “support to state, local, territorial, and tribal organizations for preparedness” category were provided for testing but are not reflected in the “testing” category.
aHealth Centers provide a comprehensive set of primary and preventative health care services to individuals regardless of their ability to pay. Approximately $17 million of this funding is for Health Center Program look-alikes, which are centers that do not receive Health Center Program funding but meet program requirements.
bThe Provider Relief Fund reimburses eligible health care providers for health care related expenses or lost revenues that are attributable to COVID-19. The CARES Act and Paycheck Protection Program and Health Care Enhancement Act appropriated $175 billion in funding for provider relief. In addition, the Families First Coronavirus Response Act and the Paycheck Protection Program and Health Care Enhancement Act designated up to $2 billion to reimburse providers for COVID-19 testing for uninsured individuals.

GAO Methodology and Agency Comments

We requested, and HHS provided, data on appropriations, obligations, and expenditures by HHS agency and by key response activity, as of May 31, 2020. We also obtained and analyzed appropriation warrant information provided by the Department of the Treasury as of May 31, 2020. To assess the data provided by HHS, we compared them with the federal spending database, USASpending.gov, as well as HHS’s spending database, taggs.hhs.gov, and HHS’s website, but we did not independently validate the data. [278] We also reviewed the four relief laws enacted to assist the response to COVID-19. We provided a draft of this report to HHS and the Office of Management and Budget (OMB) for review and comment. HHS did not comment on this enclosure. OMB provided technical comments, which we incorporated as appropriate.

Contact information: Carolyn L. Yocom, (202) 512-7114, yocomc@gao.gov

Nutrition Assistance

The federal response to the COVID-19 pandemic included additional funds and increased flexibilities for state, tribal, and local agencies to provide nutrition assistance across various programs; however, some vulnerable populations may not be able to access assistance, and there are operational challenges in implementing program changes.

Entities involved: Department of Agriculture, Food and Nutrition Service; Department of Health and Human Services, Administration for Community Living

Key considerations and Future GAO Work

We will continue to monitor these issues in ongoing and planned work regarding the effect of COVID-19 on nutrition assistance programs.

Background

Several long-standing nutrition programs provide assistance to different populations in need, including the following:

  • The Supplemental Nutrition Assistance Program (SNAP), the largest nutrition assistance program, is intended to help low-income individuals and households obtain a more nutritious diet by supplementing their income with benefits to purchase allowed food items.
  • Child nutrition programs, including the National School Lunch Program, the School Breakfast Program, Summer Food Service Program, the Child and Adult Care Food Program, and other programs provide paid, free, or reduced-price meals and snacks to eligible children in child care centers and schools, or during the summer or when schools are otherwise closed.
  • The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides benefits to purchase food packages, such as infant formula and vegetables, to low-income pregnant, breastfeeding and nonbreastfeeding postpartum women, infants, and children up to age 5 who are at nutritional risk, as well as health and nutritional support services.
  • The Emergency Food Assistance Program (TEFAP) provides groceries to low-income individuals through food banks.
  • Older Americans Act (OAA) nutrition services provide meals and other nutrition services for older adults delivered either at home or in a congregate setting.

In fiscal year 2019, these programs received $103.7 billion in federal funds, of which SNAP accounted for $73.5 billion, and child nutrition programs accounted for $23.1 billion. [279] SNAP, child nutrition programs, WIC, and TEFAP are administered by the Department of Agriculture’s Food and Nutrition Service (FNS), while nutrition services provided under the OAA are administered by the Department of Health and Human Services’ Administration for Community Living (ACL).

Overview of Key Issues

In response to COVID-19, the Families First Coronavirus Response Act (FFCRA) and the CARES Act provided additional funding for these nutrition assistance programs to meet the needs of existing and new recipients of these benefits. [280] Federal officials anticipate much of the additional funding will be used for new recipients. For example, unofficial 2020 data from FNS show weekly SNAP applications increasing in most states in the period from mid-March through April, compared with the month of January, with 16 states experiencing an average increase of 100 percent or more. [281] (see table). Some of these program flexibilities were provided on a nationwide basis, while others were provided on a state-by-state basis, in some cases subject to federal approval or notification.

Additional Funding and Examples of Program Flexibilities Provided for Nutrition Assistance Programs Due to COVID-19
Program name Additional funding provided (in dollars) a Examples of program flexibilities provided in response to COVID-19 under authorities in FFCRA, the CARES Act, or other authorities b
Supplemental Nutrition Assistance Program (SNAP) 15.5 billionc
  • Time limits for SNAP benefits for certain working-age adults without disabilities or dependents and who are not meeting specified work requirements are suspended.
  • Current SNAP recipients may receive emergency allotments up to the maximum amount allowed per household size.
  • Applicant or recipient interview requirements can be waived or adjusted.

Child nutrition programs

(e.g., school and summer meals programs)

8.8 billion
  • Meals can be served outside meal times and in noncongregate settings.
  • Parents or guardians can pick up meals to bring home to eligible children without the child needing to be present.
  • Summer meals programs can serve areas that do not meet the requirement that at least half of the children are in low-income households.
The Emergency Food Assistance Program (TEFAP)

850 million

Of this amount, 250 million can be used for costs associated with the distribution of commodities.

  • States may adjust TEFAP income eligibility guidelines to expand participant eligibility at any time, consistent with program regulations.
  • States have the flexibility to collect addresses to account for social distancing, such as over the phone or by photographing a written address as an individual maintains a safe distance.
  • Eligible recipient agencies can utilize a drive-through model, or deliver foods to central pick-up locations or to participants’ homes.
Nutrition services under the Older Americans Act (OAA)

750 million

Of this amount , 30 million are for Native American nutrition services.

  • Meals provided at congregate sites can be packaged to take home.
  • States can transfer 100 percent of OAA nutrition services funds between the congregate and home-delivered meal programs to address identified needs.
  • Nutrition requirements can be waived for meals to address limited food availability.
Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) 500 million
  • Beneficiaries do not need to be physically present to enroll or reenroll in WIC or to pick up electronic benefit cards or paper coupons.
  • Substitutions are allowed for types and amounts of certain WIC-prescribed foods if their availability is limited.
  • State agencies may issue up to 4 months of benefits on benefit cards at one time to reduce need for contact with WIC staff.
Source: GAO analysis of relevant provisions of the Families First Coronavirus Response Act (FFCRA) and the CARES Act (funding information), and information from the Department of Agriculture’s Food and Nutrition Service and the Department of Health and Human Services’ Administration for Community Living. | GAO-20-625

aThe funding shown in this table only includes funds provided under FFCRA, the CARES Act, or both, depending on the program. Other funding may have been separately provided for these programs, such as through annual appropriations acts.
bSome of these program flexibilities were provided on a nationwide basis, while others were provided on a state-by-state basis, in some cases subject to federal approval or notification. All of the flexibilities described in the table, whether nationwide or on a state-by-state basis, are temporary in nature, and the duration varies depending on the program and the specific flexibility.
cThe Department of Agriculture received an indefinite appropriation of necessary amounts for Pandemic EBT (Electronic Benefits Transfer). The Office of Management and Budget subsequently apportioned $8.9 billion for Pandemic EBT for fiscal year 2020. This amount is not included in the $15.5 billion for SNAP shown in this table.

FNS has also denied some states’ waiver requests for certain nutrition programs, including some which may affect particularly vulnerable populations. For example:

  • For SNAP, as of June 1, 2020, FNS had approved 97 requests from states for waivers and denied 128, including denying requests from 31 states asking to suspend the requirement that college students work at least 20 hours per week or participate in federal work study to be eligible for SNAP. [282] In letters to FNS, states reported that otherwise eligible students could not meet these requirements due to campus and business closures. In a letter explaining this denial and others, FNS stated that it considered factors outlined in FFCRA, which allows the Secretary of Agriculture to adjust SNAP issuance methods and application and reporting requirements to be consistent with what is practicable under actual conditions in affected areas. [283] FNS officials said that the agency did not consider waiving restrictions on students’ eligibility to be allowable under FFCRA’s factors for adjustments. In the same denial letter, FNS reiterated that states are not able to provide emergency allotments to households that are already receiving the maximum SNAP benefit amount. [284] FNS officials told us this was prohibited based on provisions in the Food and Nutrition Act of 2008 as well as FFCRA.
  • For WIC, as of June 1, 2020, FNS had approved over 600 waiver requests and denied or deemed not waivable 60 waiver requests from states. For example, FNS denied requests related to waiving certain food package items. The agency also deemed not waivable requests to permit recipients to roll over unused benefits into subsequent months. FNS officials explained that the agency does not have authority to waive this requirement or to approve requests that do not meet criteria for WIC waivers laid out in FFCRA. [285]

For other programs, such as child nutrition programs and OAA nutrition services, agency officials told us that states or localities could exercise most program waivers or flexibilities provided under FFCRA or the CARES Act without first obtaining federal agency approval. [286]

Federal agencies have faced various challenges in their efforts to respond to the pandemic. FNS and ACL officials said the volume of requests and questions from states during this period has been unprecedented, and providing guidance in an ever-changing and uncertain environment has been challenging. For example, FNS officials told us that it was challenging to integrate aspects of SNAP and the school meals programs for “Pandemic EBT” (Electronic Benefits Transfer), but that FNS did so in order to quickly issue guidance for this new program. This program, authorized under FFCRA, provides supplemental allotments to households already receiving SNAP benefits and new issuances to households not already receiving benefits through the EBT card system for families with children who would have received free or reduced-price school meals, if not for school closures due to COVID-19. [287] Also, ACL officials discussed, for example, the challenge of providing guidance to help keep older adults, staff, and volunteers safe from exposure to COVID-19, and the need for additional considerations as some states began to reopen.

Federal officials said that state and local agencies are facing operational challenges due to having to operate in the new pandemic environment that is affecting business processes, staff capacity, and technology. For instance, federal officials said the ability to easily modify data systems to incorporate new flexibilities varies among state and local agencies, and agencies are concerned with associated costs. In the case of Pandemic EBT, federal officials noted that states are needing to coordinate across data systems for SNAP and school meals in order to serve existing SNAP households alongside a new population of non-SNAP households, and such coordination may be challenging. As of June 1, 2020, 39 states had approved plans to issue Pandemic EBT benefits in their states, according to information provided by FNS. In addition, federal officials said that state or local capabilities to provide assistance remotely vary widely. For WIC, for example, while providing assistance online or by phone rather than in person has resulted in fewer missed appointments for some WIC recipients, limited technology at local WIC clinics can create challenges to delivering services, FNS officials said.

GAO Methodology and Agency Comments

To conduct our work, we reviewed the most recent data available from FNS on states’ requests for flexibilities as of June 1, 2020, as well as unofficial data collected by FNS on states’ SNAP applications for January through April 2020. We also reviewed relevant federal laws and agency guidance and interviewed agency officials at FNS and ACL. We provided a draft of this enclosure to FNS and ACL for review and comment. FNS provided technical comments, which we incorporated as appropriate. ACL did not provide comments on this enclosure.

Contact Information: Kathryn A. Larin, (202) 512-7215 or larink@gao.gov

Related GAO Products

Nutrition Assistance Programs: Agencies Could Do More to Help Address the Nutritional Needs of Older Adults. GAO-20-18 . Washington, D.C.: November 21, 2019.

Food Insecurity: Better Information Could Help Eligible College Students Access Federal Food Assistance Benefits. GAO-19-95 . Washington, D.C.: December 21, 2018.

Supplemental Nutrition Assistance Program: More Complete and Accurate Information Needed on Employment and Training Programs. GAO-19-56 . Washington, D.C.: November 20, 2018.

Summer Meals: Actions Needed to Improve Participation Estimates and Address Program Challenges. GAO-18-369 . Washington, D.C.: May 31, 2018.

Child Care

The Administration for Children and Families’ Office of Child Care is helping states to implement available flexibilities in the CARES Act and the Child Care and Development Block Grant Act of 1990, as amended, to address the impacts of COVID-19, but has not determined how it will collect data on states’ use of CARES Act supplemental funding.

Entity involved: Office of Child Care, Administration for Children and Families, Department of Health and Human Services

Key Considerations and Future GAO Work

In March 2020, we found issues with the Office of Child Care’s (OCC) oversight of State Plans, and we made several relevant recommendations to help strengthen Child Care and Development Fund (CCDF) program integrity, with which the Department of Health and Human Services (HHS) agreed. Implementing these recommendations could also help OCC to improve states’ accountability in overseeing the use of CCDF and CARES Act funds received after our March 2020 report. These recommendations include, among others, that the Director of OCC (1) establish internal written policies to effectively implement and document the State Plan review and approval process for future review and approval periods, (2) define informational needs related to the results of state program-integrity activities, and (3) communicate externally to the states its informational needs related to the results of states’ program-integrity activities.

In related work, we will review OCC’s plans to oversee spending of the CARES Act monies and to support states in their efforts to address the child care impacts of COVID-19.

Background

The Child Care and Development Block Grant (CCDBG) Act authorizes discretionary funding for the federal child care subsidy program known as CCDF, which was appropriated more than $8 billion in federal funds in 2019, and, on average, assists about 1.3 million eligible children from low-income families on a monthly basis. The CCDF is administered as a block grant to the states by OCC, an office within HHS’s Administration for Children and Families (ACF). [288]

The CARES Act provides an additional $3.5 billion for the Child Care and Development Block Grant, the discretionary funding portion of CCDF, to help states prevent, prepare for, and respond to coronavirus. [289] For example, under the provisions of the CARES Act, states may use funds to provide child care assistance to health care sector employees and other essential workers without regard to the CCDBG Act’s income eligibility requirements. States may also use funds to provide payments and assistance to child care providers facing decreased enrollment or related closures, and, further, are encouraged to place conditions on payments to child care providers that ensure providers continue to pay their staff’s salaries and wages. [290]

Overview of Key Issues

OCC finalized and provided CARES Act supplemental funding allocations to states on April 14, 2020. Funds were allocated to states based on the CCDF discretionary funding formula in the CCDBG Act. [291] OCC has also developed and updated a variety of CCDF-specific guidance and resources to help states implement program flexibilities in the CARES Act and the CCDBG Act that may help address the impacts of COVID-19. [292] OCC officials said their most pressing priority has been to help states understand the federal flexibilities that already exist under the CCDBG Act for using the child care funding available to them and how to use these flexibilities appropriately. To do so, OCC officials have held calls with state CCDF administrators and developed several guidance documents that summarize applicable provisions of the CARES Act and highlight available flexibilities in the CCDBG Act.

According to OCC, if states cannot meet certain CCDF program requirements—such as for comprehensive background checks for child care providers—due to a national emergency, for instance—or wish to substantially change elements of their State Plans that are required to receive CCDF funding, they can submit a waiver request or a Plan amendment. [293] In a tip sheet for states, OCC describes conditions under which states may choose to submit a request to waive certain federal requirements or amend their State Plans and time frames for doing so. As of June 8, 2020, HHS had approved waiver requests from 35 states, most frequently related to health and safety inspections (see figure).

States with Approved Child Care and Development Block Grant Act Waivers, as of June 8, 2020

Upon requesting a waiver, states must certify and describe how the health, safety, and well-being of children served through CCDF would not be compromised as a result of the waiver. [294] OCC officials said they expect states to satisfy the intentions of CCDBG Act requirements, to the extent possible. For example, an OCC official noted that it is currently difficult, if not impossible, for child care providers in some locations to obtain and process fingerprint checks—one component of a state’s background check requirements—due to COVID-19. In such cases, they said, HHS may grant a waiver for the fingerprint requirement specifically, but not for the background check more generally, which states could still conduct using a provider’s name, Social Security number, or other identifying information.

OCC officials have not yet determined specifically how they will monitor and oversee CARES Act supplemental funding. These officials said they envision using certain existing CCDF practices, such as quarterly financial reports and reviews of State Plans, but are still considering what additional steps or modifications to current data collection will be needed. Without modifications, current CCDF reporting requirements will not necessarily capture complete information on the use of CARES Act funds, such as the number of essential workers that are provided child care subsidies regardless of income, the number of child care providers that receive assistance while closed to aid in their possible reopening, and the number of child care providers that receive assistance that had not done so prior to the pandemic. An OCC official did note that OCC will probably need to track CARES Act funding separately because it has a different obligation period for the states than CCDBG Act funding; however, the official expressed concern about states’ current capacity to make internal changes to their data management systems. Additionally, OCC officials said they will need to consider whether additional reporting requirements would require Office of Management and Budget clearance and the additional burden such requirements may place on states as they respond to the pandemic.

GAO Methodology and Agency Comments

To conduct this work, we reviewed relevant federal laws and the most recent agency guidance as of June 8, 2020, and interviewed OCC officials.

ACF provided technical comments, which we incorporated as appropriate.

Contact information: Kathryn A. Larin, (202) 512-7215, larink@gao.gov

Related GAO Products

Child Care and Development Fund: Office of Child Care Should Strengthen Its Oversight and Monitoring of Program-Integrity Risks. GAO-20-227 . Washington, D.C.: March 2, 2020.

Child Care and Development Fund: Subsidy Receipt and Plans for New Funds. GAO-19-222R . Washington, D.C.: February 15, 2019.

Child Care: States Report Child Care and Development Funds Benefit All Children in Care. GAO-19-261 . Washington, D.C.: April 25, 2019.

Emergency Financial Aid for College Students

The Department of Education awarded schools nearly all of the initial $6.3 billion designated for college students’ emergency financial aid, but the department’s evolving communications may have delayed schools’ distribution of funds to students.

Entities Involved: Department of Education

Key Considerations and Future GAO Work

GAO plans to conduct additional work on the needs of college students during the pandemic and how the Department of Education (Education) and institutions of higher education are working to address these needs.

Background

Institutions of higher education (schools) throughout the country have faced unprecedented disruptions due to COVID-19. In March 2020, schools across the nation closed their physical campuses and began exclusively providing online classes. As a result, students may have incurred additional unexpected expenses, such as the purchase of a laptop or a last-minute flight home. For students with limited financial resources, these unplanned expenses, in combination with a declining economy, could potentially disrupt their educational pursuits. In fact, some higher education associations predict that college enrollment in academic year 2020–2021 will generally decrease as a result of COVID-19’s effects on the economy and changes to instruction delivery and campus operations.

The CARES Act appropriated about $14 billion for the Higher Education Emergency Relief Fund (HEERF), of which about $12.6 billion was appropriated for grants to schools to prevent, prepare for, and respond to the coronavirus. [295] The CARES Act directed Education to allocate these funds to eligible schools using a funding formula. [296] Schools are required to distribute at least 50 percent of the funds they receive—about $6.3 billion—to students as emergency financial aid grants (emergency student aid) for expenses related to disrupted campus operations due to the coronavirus. [297] Schools can use the remaining funds for additional student grants, or to cover institutional costs associated with significant changes in instruction delivery due to the coronavirus.

Education decided to award the $12.6 billion to schools in two stages, starting with $6.3 billion designated for emergency student aid. In the 2 weeks after the CARES Act was enacted, Education got the new grant program up and running, which included determining how to apply the funding formula, calculating the amounts allocated to each school, and developing procedures needed to operationalize the program. Education officials told us that applying the funding formula was time consuming because it required data the department does not collect, including student enrollments calculated in full time equivalents and the number of students enrolled in online programs. They also said that Education immediately coordinated with the Department of the Treasury to determine whether the grants could be disbursed to students as “emergency assistance,” and therefore be exempt from taxation and consideration in future financial aid determinations. [298] Education’s application of the funding formula resulted in more than two-thirds of the $6.3 billion designated for emergency student aid being allocated to public 2-year and 4-year schools (see figure).

Allocation of Higher Education Emergency Relief Funds Designated for Emergency Student Aid Due to COVID-19, by Sector

Notes: Schools of less than 2 years are included in the 2-year school categories above. The Department of Education also allocated about $25 million to 2-year private, nonprofit schools and about $1.7 million to the Commonwealth of Puerto Rico Department of Education.

On April 9, 2020, Education notified schools of their individual allocations to help inform their planning and provided them with the paperwork required to apply for the emergency student aid funds. About 1 week later, on April 17, 2020, Education began to award HEERF emergency student aid funds to schools.

Overview of Key Issues

As of May 31, 2020, Education had awarded more than $6 billion in HEERF emergency student aid to more than 4,000 schools, according to Education’s data. [299] However, representatives from five of the seven higher education associations we contacted said that Education’s evolving communications created difficulties that contributed to delays in schools’ disbursing emergency student aid. Education introduced new information about student eligibility nearly 2 weeks after schools began to submit the required paperwork for funding and also took subsequent actions on the issue of eligibility.

Evolving communications. In a letter provided to schools on April 9, 2020, concurrent with the grant announcement, Education stated that the CARES Act provides schools with significant discretion on how to award the emergency aid to students. The letter also stated that each school may develop its own system and process for determining how to allocate these funds. On April 21, 2020—when half of eligible schools had already applied for funds—Education released a “Frequently Asked Questions” (FAQ) document that provided new information about student eligibility. Specifically, it stated that only students who are, or could be, eligible for federal student aid programs under section 484 of the Higher Education Act of 1965, as amended, may receive emergency financial aid grants. [300] The document further specified that the criteria to participate in such programs include, among other things, U.S. citizenship or eligible noncitizen status; a valid Social Security number; registration with Selective Service (if the student is male); and a high school diploma, GED, or completion of high school in an approved homeschool setting. Students who are not eligible for federal student aid programs include undocumented students, including those with Deferred Action for Childhood Arrivals (DACA) status, among others. [301]

These changes created challenges for schools, according to representatives of five higher education associations we contacted. Representatives from one association told us that some schools had already developed their plans for how to distribute the funds prior to the release of Education’s FAQ document, so they had to start their planning process over in response to the new information provided on student eligibility. This association also conducted a survey of its members in May and reported that more than half of its respondents said the new information about student eligibility greatly altered schools’ plans for distributing funds. [302] Absent Education’s FAQ document, more than three-quarters of respondents indicated they would not have restricted funds to students eligible to participate in federal student aid programs.

To confirm students’ eligibility for federal student aid for purposes of awarding student emergency aid grants, schools generally plan to use the federal student aid application (Free Application for Federal Student Aid or FAFSA), according to representatives of all seven higher education associations we contacted. Representatives of four associations told us that schools were uncertain about how else they could verify student eligibility, and two of them said that as of May 2020 schools were awaiting further direction from Education as to whether students could self-attest to meeting the eligibility requirements. Given this uncertainty, some schools only planned to award grants to students currently verified as eligible for federal student aid, according to four associations. This approach may exclude potentially eligible students who are also in need. For example, it may limit emergency aid to veterans, who are less likely to have applied for federal student aid, according to one veterans’ education organization.

In late May and June, Education took additional actions related to student eligibility for emergency student aid. On May 21, 2020, Education posted an update to its website reiterating the statements in its FAQ document about student eligibility for emergency aid, and also stating that the agency would not initiate any enforcement action based solely on the statements because they lack the force and effect of law. [303] On June 17, 2020, Education published an interim final rule in the Federal Register to formalize its interpretation that eligibility for emergency student aid is limited to those students who are eligible for federal student aid. [304] In the rule, Education also states that it will not enforce this eligibility interpretation against schools that distributed HEERF funds to students prior to the publication of the rule. The rule also describes processes schools could use to verify the eligibility of students who are not currently receiving federal student aid. [305] Two federal courts have issued preliminary injunctions, temporarily prohibiting Education from enforcing the student eligibility provisions in its April 21, 2020 FAQ document and the interim final rule with respect to certain schools in Washington and California. [306]

Distribution approaches. Schools are using various approaches to determine generally who receives emergency student aid, according to representatives of all seven higher education associations we contacted. These representatives also said that schools may be using multiple approaches, which could include the following:

  • Applications: Representatives of all seven associations said some schools are using applications, and four associations noted that the applications they have seen were short and generally asked students to identify the expenses they incurred due to COVID-19’s disruption of their studies.
  • Formulas: Representatives of six associations said some schools are using formulas to distribute funds based on students’ level of financial need. For example, some schools are awarding a greater amount to students who qualify for Pell Grants because they have demonstrated exceptional financial need.
  • Identifying student groups: Representatives of four associations said some schools are identifying groups of eligible students with demonstrable expenses and distributing funds based on those expenses without requiring an application. For example, they said a group could include students in a certain course who must purchase supplies to continue their studies.

Reporting requirements. Representatives from five of the seven higher education associations we contacted said the reporting requirements described in Education’s April 9, 2020, funding certification and agreement were not sufficiently clear. [307] On May 6, 2020, Education issued a letter to schools that modified the timing, scope, and format of these reporting requirements. The May 6 letter temporarily instructed schools to post spending information on their school websites. Required information includes the estimated number of students eligible for aid, the method for determining which students received aid and how much, and the total amount of funds awarded, among other things. It is unclear how long schools will report in this manner, as Education officials told us they are still determining how schools will report to Education and when such reporting will occur.

Timing of aid. With regard to timing, Education’s April 9 letter to schools emphasized the goal of getting money to students in need as quickly as possible. While schools have 1 year to spend the funds, representatives from three higher education associations told us that most schools plan to distribute the majority of their funds before the fall term begins. [308] Representatives from the other four associations noted varying trends among schools, with some schools planning to distribute the majority of their funds before the fall 2020 term begins and others planning to retain some funds for distribution later in the year.

GAO Methodology and Agency Comments

To conduct this work, we reviewed Education documents and its most recent obligation data, available as of the end of May 2020, as well as relevant federal laws and regulations. We interviewed officials from Education. We also interviewed or received written responses from representatives of seven higher education associations, whose collective membership includes thousands of schools. We selected these associations to reflect a range of school sectors and relevant school administrators. We conducted these interviews in late April and received written responses from all seven associations in early May.

We provided a draft of this report to Education for review and comment. In its written comments, Education stated that the report sections related to Education’s actions in response to the pandemic were inaccurate, flawed, incomplete, and unfair. We disagree with this characterization and note that Education did not identify any specific statement in this enclosure as inaccurate. We believe that we accurately described the key facts relating to Education’s implementation of the emergency student aid grants under the CARES Act. Education also raised questions about certain information sources. In developing our methodology, we followed our quality assurance framework, and we developed criteria to select higher education associations that are knowledgeable, credible, and provide diverse views.

Education commented that the draft report and enclosures are unfair and incomplete because GAO did not mention the Department's diligence enough. More specifically, for this enclosure, Education noted that GAO did not convey the magnitude and speed under which its CARES Act grant work was completed. We acknowledge Education’s broader efforts to administer its sizable grant portfolio and note that this enclosure credits Education with taking steps to implement the HEERF emergency student aid grant program within 2 weeks of the enactment of the CARES Act, specifically mentioning the need for Education to apply the funding formula, calculate individual school allocations, and develop operational procedures in that time. Further, we also noted that Education began to award funds about a week after schools could apply. In response to Education’s comments, we added details about Education’s work with the Department of the Treasury as well as the difficulties Education faced in implementing the funding formula. Further, Education noted that our enclosure was incomplete because we did not compare Education's work under the CARES Act to the prior administration's work in implementing the American Recovery and Reinvestment Act of 2009. Such a comparison was beyond the scope of our work for this enclosure.

In its comments, Education also stated that developing guidance in anticipation of every question any school could have would have resulted in delays in disbursing funds, noting that it did not want to hold up the disbursement of funds because some schools would need additional explanation on which students are eligible for this aid. Education further stated that there should have been no question about which students were eligible for emergency aid. Education stated that it nonetheless provided additional clarification, including in FAQ documents, in response to an increasing number of questions about student eligibility. Education noted that our example of some schools discarding their initial distribution plans after Education released its April 21 FAQ document ignored the flexibility of its communications not being legally binding at that time. However, Education did not clarify that its interpretation of student eligibility was not legally binding until May 21, 1 month after the release of the FAQ document. Further, Education appears to intend its interpretation to be legally binding, as indicated by the issuance of the interim final rule. Education also provided technical comments, which we incorporated as appropriate.

Contact Information: Melissa Emrey-Arras, (617) 788-0534, emreyarrasm@gao.gov

Leave Benefits and Tax Relief for Employers

Employers have begun claiming refundable tax credits and deferring employer payroll taxes to mitigate the cost of paid leave for employees; agreements between the Internal Revenue Service and the Small Business Administration to help ensure compliance have not been finalized.

Entities involved: Department of the Treasury, Internal Revenue Service, Small Business Administration, Department of Labor

Key Considerations and Future GAO Work

Establishing controls, and using data to test those controls, helps the Internal Revenue Service (IRS) ensure compliance with tax laws. Obtaining Small Business Administration (SBA) data to identify Paycheck Protection Program (PPP) loan recipients is an important step to ensure employers comply with requirements for the Employee Retention Credit. We have ongoing work examining PPP and will continue to monitor the establishment of controls and collaboration and data sharing efforts between IRS and SBA.

Background

As the COVID-19 pandemic contributed to a fall in the employment-population ratio, Congress passed and the President has signed into law legislation intended to help employers support and retain affected employees. [309] Specifically, the enacted legislation generally allows employers to use tax credits and payroll tax deferrals to offset certain paid sick leave and other employee-related expenses. IRS is responsible for administering and ensuring compliance with the tax aspects of these provisions. The Department of Labor (DOL) oversees leave policy compliance under this legislation. IRS’s general capacity to implement new initiatives such as these is an ongoing challenge cited in our High Risk Report.

The Families First Coronavirus Response Act (FFCRA), as amended by the CARES Act, requires covered employers to provide emergency paid sick leave and expanded family and medical leave to eligible employees affected by COVID-19 through December 31, 2020. Covered employers generally must provide eligible employees (1) up to 80 hours of emergency paid sick leave, subject to an aggregate payment cap, and (2) up to 12 weeks of emergency family and medical leave, including 2 weeks unpaid and 10 weeks paid at no less than two-thirds the eligible employee’s regular rate of pay, subject to an aggregate payment cap. [310] Covered employers generally face liability for not offering the leave or discharging, disciplining, or discriminating against any employee for taking paid leave. [311]

FFCRA and the CARES Act include provisions for tax credits to mitigate the cost of this leave for smaller employers and to provide other tax relief. The Joint Committee on Taxation estimates that these provisions will lead to about $172 billion in foregone revenue for fiscal years 2020–2030.

  • Paid leave credits. Businesses and tax-exempt organizations with fewer than 500 employees, as well as self-employed individuals are eligible for refundable FFCRA credits. [312] The credits are equal to the qualified leave wages, plus the employer share of Medicare taxes paid with respect to the qualified wages and allocable health plan expenses, from April 1 through December 31, 2020. Credit recipients who receive a PPP loan cannot count the wages paid for by the credit as payroll costs toward loan forgiveness. [313]

    The payroll tax credits may be claimed on the employer’s employment tax return, typically Form 941, Employer’s Quarterly Federal Tax Return. To receive immediate relief, employers may reduce their semiweekly or monthly payroll tax deposits by the amount of their credit. If an anticipated credit amount remains after reducing deposits, the employer may receive an up-front refund by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

  • Employee Retention Credit. Under the CARES Act, employers of any size—including tax-exempt entities and self-employed individuals with employees—can receive the refundable Employee Retention Credit. The credit equals 50 percent of qualified wages (up to $10,000 per employee) paid from March 13 through December 31, 2020, including certain health care expenses. [314] Eligible employers are those who experience, in calendar year 2020, either (1) full or partial suspension of operation during any calendar quarter due to government orders limiting activity in response to COVID-19, or (2) a decline in gross receipts of more than 50 percent, compared with the same quarter in 2019.

    PPP recipients are not eligible for the Employee Retention Credit, unless they repaid the loan by May 18, 2020. Wages for which the FFCRA credits are allowed are not included in wages for the Employee Retention Credit, among other exclusions from wages. [315] Employers can claim the credit on Form 941 and may reduce payroll tax deposits by the credit amount, or file Form 7200 for an advance refund.

  • Deferred payroll tax payments. The CARES Act granted all employers the option to defer deposits and payments of the employer share of Social Security tax that they would otherwise be required to make during the period beginning March 27 through December 31, 2020. [316] Self-employed individuals may defer half of their Social Security tax due. [317] Deferred deposits are to be reported on Form 941.

Overview of Key Issues

The Wage and Hour Division (WHD) within DOL began enforcement actions related to the leave implementation on April 18, 2020, after a limited stay of enforcement. [318] Employees who believe their covered employer violated FFCRA may call a toll-free number for technical assistance or to file a complaint. As of May 29, 2020, WHD reported it had resolved over 700 compliance actions and had hundreds more underway. WHD investigators are conducting investigations remotely due to COVID-19 health concerns, and the agency reports it remains fully operational. According to DOL, covered employers must document the name of the employee, the dates of requested leave, a statement from the employee that he or she is unable to work, and the reason. For example, in the case of an employee’s request to self-quarantine, DOL recommends that employers document the name of the health care provider who gave that advice.

For the employer tax credits, IRS began releasing guidance and is processing refunds. As of May 31, 2020, IRS said it had received 8,754 e-fax submissions, reviewed 7,185 Form 7200s, and issued $54.2 million in refunds. [319] More information will be available, including amounts of payroll tax deferrals and the number of employees of credit recipients, after second quarter Form 941s are due on July 31, 2020.

IRS released Form 7200 and its instructions on April 1, 2020. In late March IRS began posting, and has updated, online information for each of the credits, followed by information in early April on the payroll tax deferrals. IRS also released draft revisions to Form 941 and its instructions, with final versions expected by the end of June 2020, according to IRS officials. When second quarter paper Form 941s with credit claims are filed, IRS officials said they will be grouped by date received and processed as IRS employees are available and facilities reopen.

For each of the credits, IRS shared with us its initial plans on ensuring compliance, addressing outreach, revising forms, updating technology, and training. IRS also provided staff with guides for reviewing and processing Form 7200, including steps to verify filer identity and signatures. IRS officials said they have met with SBA to develop a memorandum of understanding for SBA to provide data on PPP recipients to help ensure employers comply with requirements. They anticipated finalizing the memorandum this summer.

GAO Methodology and Agency Comments

To conduct this work, we reviewed DOL and IRS data as of May 31, 2020; reviewed federal laws, agency guidance and plans; and interviewed agency officials. IRS and Treasury provided technical comments, which we integrated as appropriate. DOL and SBA did not have any comments on this enclosure.

Contact information: Cindy Brown-Barnes, (202) 512-7215, brownbarnesc@gao.gov ; Jessica Lucas-Judy, (202) 512-9110, lucasjudyj@gao.gov

Department of Housing and Urban Development Programs

The CARES Act appropriated approximately $12.4 billion to the Department of Housing and Urban Development, and the agency had obligated approximately 18 percent of program funds as of May 31, 2020.

Entities involved: Department of Housing and Urban Development

Key Considerations and Future GAO Work

When disasters occur, Congress often appropriates additional Community Development Block Grant funding for disaster recovery (CDBG-DR) through supplemental appropriations. These appropriations often provide HUD the authority to waive or modify many of the statutory and regulatory provisions governing the CDBG program, thus providing states with flexibility and discretion to address recovery needs. Congress provided HUD the same broad authority to waive statutory and regulatory requirements for the HUD programs that received CARES Act supplemental appropriations. [320] We reported in March 2019 that both HUD and CDBG-DR grantees have encountered administrative challenges, such as issues with grantee capacity, procurement, and improper payments. We recommended that HUD develop and implement a comprehensive monitoring plan to effectively manage the CBDG-DR grant portfolio. HUD agreed with this recommendation. [321] Such comprehensive monitoring plans could be beneficial to the HUD programs responsible for carrying out the additional administrative and oversight responsibilities under the CARES Act. [322] HUD officials noted that CDBG-DR grants are higher risk due to their scale and the types of permitted activities and that they believe CDBG funding provided by the CARES Act does not pose the same risk. Further, HUD officials also noted that extending hiring flexibilities and lengthening temporary positions would help the agency achieve the full benefits of the comprehensive monitoring program, as most of the CARES Act grants will last and require monitoring beyond 2021.

Additionally, we and HUD’s Office of Inspector General have reported on persistent management challenges at HUD, which could affect the agency’s management and oversight of the funding provided by the CARES Act. [323] Specifically, in July 2016, we found that HUD had not consistently incorporated key practices into its operations requirements to help ensure effective management, including in the areas of performance planning and reporting, information technology, and human capital. Turnover among senior leadership, shifting priorities, and resource constraints had contributed to difficulties implementing needed changes at the agency. We made eight recommendations for HUD to more fully implement key practices; three remain open, including two designed to improve agency governance and operations. [324] By implementing these recommendations, HUD will be better positioned to address the challenges posed by COVID-19.

We plan to continue to monitor HUD’s use of CARES Act-related funds going forward.

Background

The CARES Act appropriated funds to HUD programs for purposes of providing additional resources to prevent, prepare for, and respond to housing needs related to COVID-19. [325] The act included more than $9 billion for grant programs (CDBG, homeless assistance grants, and Housing Opportunities for Persons with AIDS); $3.3 billion for rental housing assistance and public and Native American housing (Tenant-Based Rental Assistance, Project-Based Rental Assistance, Public Housing Operating Fund, Native American programs, and rental assistance for the elderly and disabled); and $2.5 million for fair housing programs (see figure).

Status of Supplemental CARES Act Funding Obligations for HUD Programs as of May 31, 2020

aThe CARES Act also appropriated $50 million to HUD for management and administration of CARES Act funding and $5 million to the HUD Office of the Inspector General for audits and investigations. Pub. L. No. 116-136, div. B, tit. XII, 134 Stat. at 601, 612.
bFunding for permanent supportive housing competitive grantees ($10 million) is to remain available until September 30, 2022.

Under the CARES Act, HUD must develop new formulas for allocating the appropriated funds for certain programs based on need or other metrics. [326] Tenant-Based Rental Assistance funds will be allocated based on need, as determined by the HUD Secretary, to provide additional subsidy for tenants facing higher rental costs due to the pandemic. In addition, funds designated for CDBG and Emergency Solutions Grants (homeless assistance) require new allocation formulas.

Further, the CARES Act included funding to help support HUD’s administration and oversight of the programs, including $50 million for management and administration. [327] The $50 million comprises $35 million for administrative support—which includes information technology needs and telework support—and $15 million for the program offices administering most of the funding. Further, the act appropriated $5 million to the HUD Office of Inspector General for audits and investigations. [328]

Overview of Key Issues

  • Implementation challenges. The CARES Act provided HUD with broad authority to waive statutes and regulations related to many of its programs. [329] Accordingly, HUD published a waiver notice on April 10, 2020, that encouraged public housing authorities to continue using available funding to house families, keep families in their homes, and conduct critical operations that can be done remotely and safely. However, a few industry groups have cautioned that because the thousands of local agencies that administer HUD programs are not required to seek waivers for these and other eligible activities, they may not use them. Inconsistent use or implementation of these waivers may result in many households not receiving needed subsidy increases, losing their subsidies, or being evicted.
  • Oversight challenges. Since HUD received CARES Act funding for several of its programs, the agency designed an approach to help manage resources across the agency, strengthen data and technology systems in support of additional processing and reporting, and monitor program performance, among other goals. Specifically, HUD established the HUD Cares Act Compliance Response Team, which is tasked with implementing an oversight plan that focuses on the impact of the CARES Act on HUD people, processes, and technology. In addition, HUD established a central website with CARES Act funding information, guidance, and other information for grantees and other entities. While some program officials noted that they had not encountered any challenges to implementing the CARES Act provisions to date, another noted that administering the funds during an agency-wide shift to telework had been challenging. [330] In addition, officials from two program offices noted that they anticipated ongoing challenges with monitoring and reporting using HUD’s databases and technology resources.

GAO Methodology and Agency Comments

To conduct this work, we reviewed HUD guidance and other documentation on the agency’s website, written responses from HUD officials, our past work on the identified programs, and information from selected housing industry experts.

We provided a draft of this report section to HUD for review and comment. In its comments, reproduced in appendix XV, HUD noted that its Cares Act Compliance Response Team had identified reporting-related challenges to implementing the CARES Act. The agency said that it would continue putting processes in place to overcome challenges, and the CARES Act Compliance Response Team would continue working to provide comprehensive and timely compliance monitoring. HUD also noted that top leadership is providing oversight and governance through a steering committee. In addition, HUD provided technical comments, which we incorporated as appropriate.

Contact information: John Pendleton, (404) 679-1816, pendletonj@gao.gov

Related GAO Products

Priority Open Recommendations: Department of Housing and Urban Development. GAO-20-500PR . Washington, D.C.: April 23, 2020.

Disaster Recovery: Better Monitoring of Block Grant Funds Is Needed . GAO-19-232 . Washington, D.C.: March 25, 2019.

Department of Housing and Urban Development: Actions Needed to Incorporate Key Practices into Management Functions and Program Oversight. GAO-16-497 . Washington, D.C.: July 20, 2016.

Retirement Accounts

Expanded options for withdrawals and loans from retirement accounts can provide financial assistance during the pandemic, but may affect future retirement security.

Entities involved: Department of the Treasury, Department of Labor, the Federal Retirement Thrift Investment Board

Key Considerations and Future GAO Work

We will continue to monitor these issues in additional work regarding the effect of COVID-19 on retirement accounts.

Background

Federal law both encourages workers to save for retirement and allows early access to retirement account assets. In the case of employer-sponsored retirement plans, such as 401(k) plans, early access to assets is allowed under certain circumstances, such as financial hardship. In addition, owners of individual retirement accounts (IRA) can access savings from their IRA at any time for any reason, though early withdrawals (before age 59 ½) from both IRAs and employer-sponsored retirement plans may be subject to an additional 10 percent tax and are generally included in taxable income. IRAs and employer-sponsored defined contribution plans, like 401(k) plans, contained more than $19 trillion at the end of 2019, according to data from the Investment Company Institute. In March 2019 we reported that individuals in their prime working years (ages 25 to 55) removed about $69 billion of their retirement savings early, according to 2013 data. The Internal Revenue Service, within the Department of the Treasury, is primarily responsible for enforcing IRA tax laws and works together with the Department of Labor to enforce laws governing 401(k) plans.

To provide assistance to those affected financially by the pandemic, the CARES Act temporarily expanded options for withdrawals from retirement accounts—for example, by waiving the 10 percent additional tax on some early withdrawals. [331] The act also expanded loan options for employer-sponsored retirement accounts and allowed for repayment of assets withdrawn from IRAs related to COVID-19. [332] It also temporarily suspended the requirement that individuals with certain retirement accounts must begin taking withdrawals in retirement (known as required minimum distributions) at a certain age, typically 72. [333] The Joint Committee on Taxation estimates that these CARES Act provisions will reduce federal tax revenues by about $7 billion over the 2020–2030 period, primarily in the first few years.

Overview of Key Issues

Withdrawals and loans from retirement plans. The CARES Act waives the 10 percent additional tax for certain early withdrawals from eligible retirement accounts for amounts up to $100,000 taken between January 1, 2020, and December 31, 2020. [334] The act also allows loans of up to $100,000 from employer-sponsored retirement accounts within 180 days of enactment and extended due dates of current loans by 1 year. [335] These changes apply to individuals affected by COVID-19. This includes individuals (or their spouse or dependent) who tested positive for COVID-19, or who face adverse financial consequences due to COVID-19—for example, from being quarantined, losing child care, being furloughed or laid off, or having reduced work hours. Retirement plan sponsors may rely on self-certification that the individual is affected by COVID-19.

While such withdrawals or loans can help workers facing financial difficulties, they can also affect a worker’s long-term retirement security by reducing account assets and investment gains that could have been realized if those assets had remained in the account. While data on the number of COVID-19-related withdrawals or loans are not currently available, the Federal Retirement Thrift Investment Board anticipates being able to track such data for federal workers by July 2020. While federal workers have generally had more employment stability than private-sector workers during the pandemic, they may still have experienced child care loss, spousal employment loss, or other COVID-19-related situations, so their future withdrawal and loan activity patterns may give an indication of potential trends nationwide.

Some situations may affect the process of withdrawing retirement account assets or paying them back.

  • Some individuals with employer-sponsored retirement plans may have trouble accessing their account savings during the pandemic if their employer goes out of business or is temporarily closed.
  • While loans from employer-sponsored retirement accounts may be repaid through payroll deduction, repayment of IRA assets that are withdrawn may be handled differently because individuals do not typically contribute to IRAs through payroll deduction.

Required minimum distributions. Required minimum distributions from certain retirement accounts were also suspended by the CARES Act through December 31, 2020, which effectively makes the tax for failing to make such withdrawals inapplicable for this period. [336] This flexibility could allow individuals with such accounts to avoid making withdrawals during a period of depressed financial market conditions. In such conditions, the required minimum distribution may be proportionally larger than it would be in typical market conditions because the distribution amount is calculated based on the account balance at the end of the prior year. Suspending the required minimum distributions may also allow individuals to maintain their current tax bracket by eliminating an income stream that could have otherwise increased their taxable income.

GAO Methodology and Agency Comments

To conduct this work we reviewed federal laws, agency guidance, and relevant data and publications, and interviewed agency officials. The Department of the Treasury provided technical comments, which we incorporated as appropriate. The Department of Labor and the Federal Retirement Thrift Investment Board did not provide comments on the enclosure.

Contact information: Charles Jeszeck, (202) 512-7215, jeszeckc@gao.gov

Related GAO Products

Retirement Savings: Additional Data and Analysis Could Provide Insight into Early Withdrawals. GAO-19-179 . Washington, D.C.: March 28, 2019.

The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed to Better Promote Future Retirement Security. GAO-18-111SP . Washington, D.C.: October 18, 2017.

Tax Deduction for Charitable Contributions

The CARES Act increases tax benefits for individuals and corporations that donate to nonprofits, but the effect on charitable giving is uncertain.

Entities Involved: Internal Revenue Service

Key Considerations and Future GAO Work

We plan to monitor the Internal Revenue Service’s (IRS) implementation of the new provisions as part of our annual IRS Filing Season work and our oversight of business-related provisions of the CARES Act.

Background

Our nation depends on charitable organizations to provide vital services to citizens. The nonprofit sector comprises a significant part of our economy. Researchers estimated that giving to charitable organizations totaled $428 billion in 2018. [337] Federal tax law permits individual and corporate taxpayers to reduce their tax liability by deducting contributions to charitable organizations on their income tax returns. Individual taxpayers may deduct the amount of a contribution to a charitable organization from their gross income if they itemize their deductions. Charitable contributions are generally limited to 10 percent of a corporation’s taxable income and to 50 percent of an individual’s contribution base (generally, adjusted gross income). [338]

The statute known as the Tax Cuts and Jobs Act, indirectly reduced the scope of this tax benefit, among other things. [339] The act increased the standard deduction amount for individuals and limited the deduction for state and local taxes and the mortgage interest deduction. [340] These changes caused more individuals to claim the standard deduction instead of itemizing their deductions. As a result, many individuals who previously deducted charitable contributions no longer itemized their deductions and therefore no longer claimed the charitable contributions deduction.

The CARES Act made a number of changes to the charitable contributions deduction, including the following:

  • allowing individuals who do not itemize to deduct up to $300 from their adjusted gross income. The deduction is available for cash contributions made only during 2020, [341]
  • suspending the limit on the tax deduction for charitable contributions of cash made by individuals in 2020,
  • increasing the limit to 25 percent of the corporation’s taxable income for the tax deduction for charitable contributions of cash made by corporations in 2020, and [342]
  • increasing the limit to 25 percent of the contribution base for the tax deduction for charitable contributions of food inventory in 2020

The Joint Committee on Taxation estimates these provisions will lead to more than $2.5 billion in reduced federal revenue in fiscal years 2020 to 2030. However, the effect of these changes will likely not be known until after the end of the 2020 filing season.

Overview of Key Issues

According to IRS officials, IRS is in the process of updating guidance related to these changes. However, IRS has not yet issued that guidance or updated the forms on which the charitable tax deductions are claimed. In our 2019 report on tax-exempt entities, we found that taxpayers may engage in abusive tax schemes that take advantage of charitable deductions. However, IRS audits of all abusive tax schemes were trending downward between 2008 and 2017. We also found that IRS could better leverage data it already collected on abusive tax schemes involving tax-exempt entities. In response, we made a number of recommendations to IRS to enhance its efforts to identify and combat abusive tax schemes that involve tax-exempt entities. IRS has not yet implemented those recommendations.

GAO Methodology and Agency Comments

To review how IRS administered the deduction, we examined federal laws, agency guidance, and GAO’s work on tax-exempt organizations.

We provided a draft of this enclosure to Treasury, OMB, and IRS for review and comments. In written comments, IRS provided technical comments, which we incorporated as appropriate. OMB and Treasury did not comment on this enclosure.

Contact Information: James R. McTigue Jr.,(202) 512-9110, mctiguej@gao.gov

Related GAO Products

Tax-Law Enforcement: IRS Could Better Leverage Existing Data to Identify Abusive Schemes Involving Tax-Exempt Entities. GAO-19-491 . Washington, D.C.: September 5, 2019.

Tax-Exempt Organizations: Better Compliance Indicators and Data, and More Collaboration with State Regulators Would Strengthen Oversight of Charitable Organizations. GAO-15-164 . Washington, D.C.: December 17, 2014.

Unemployment Insurance Programs

The unprecedented volume of new unemployment insurance claims in the wake of the COVID-19 pandemic poses major challenges for federal and state officials to provide benefits, help with reemployment, and identify and prevent improper payments.

Entity involved: Department of Labor

Key Considerations and Future GAO Work

As the nation begins to recover from the COVID-19 crisis, the workforce system and the unemployment insurance (UI) program will face challenges with reemployment and program integrity efforts. [343] Reemployment efforts could be slowed by, among other things: (1) minimal information from the Department of Labor (DOL) to its UI partners to date on how to assist millions of Americans in returning to work, and (2) enhanced UI benefits that could discourage certain individuals from returning to work when their workplaces reopen because their UI benefits are greater than their regular wages. Also, experiences with previous temporary UI expansions—such as disaster-related UI programs—and efforts to identify those claimants who return to work while improperly receiving UI benefits suggest that the CARES Act programs may be at an increased risk of improper payments.

One such program that could expose the UI program to improper payments is the new Paycheck Protection Program (PPP), designed to provide loans to small businesses to help them keep their workers on payroll. Improper payments could result if certain workers paid with PPP proceeds simultaneously receive UI benefits. The Small Business Administration (SBA), which administers the PPP, has stated that, consistent with PPP regulations, employers that take PPP loans must generally rehire laid-off employees or face loan forgiveness reductions, and must report to the state UI agency if any of those employees refuse to return to work. For its part, DOL has an opportunity to address this risk, in coordination with SBA. Although DOL plans to issue questions and answers to state unemployment agencies about this risk in the near future, it has not yet provided such information.

To ensure that proper controls are in place to prevent and detect certain individuals from simultaneously receiving pay funded with PPP and UI payments, we recommend that DOL, in consultation with the SBA and Treasury, immediately provide information to state unemployment agencies that specifically addresses SBA’s PPP loans, and the risk of improper payments associated with these loans. Challenges stemming from such program integrity issues could result in the loss of millions of dollars that may be difficult to recover.

We are starting work that will examine, among other issues, states’ challenges in processing the record level UI claims and addressing program integrity, as well as DOL’s related assistance in these areas.

Background

The need for UI benefits has rarely been greater than during the COVID-19 pandemic. The UI program is a federal-state partnership that, among other things, provides temporary financial assistance to eligible workers who become unemployed through no fault of their own. [344] The regular UI program is funded primarily through federal and state taxes levied on employers. States design and administer their own UI programs within federal parameters, and DOL oversees states’ compliance with federal requirements, such as ensuring that states pay benefits when they are due. To be eligible for UI benefits, applicants generally must be able and available to work, and actively seeking work. [345]

In addition to the regular UI program, the CARES Act created three new, federally funded temporary UI programs that expand UI benefit eligibility and enhance benefits: [346]

  1. Pandemic Unemployment Assistance (PUA) generally authorizes up to 39 weeks of UI benefits to individuals not otherwise eligible for UI benefits, such as the self-employed and certain gig economy workers, who are unable to work as a result of COVID-19; [347]
  2. Federal Pandemic Unemployment Compensation (FPUC) generally authorizes an additional $600 benefit that augments weekly UI benefits available under the regular UI program, as well as CARES Act UI programs; [348] and
  3. Pandemic Emergency Unemployment Compensation (PEUC) authorizes an additional 13 weeks of UI benefits to those who exhaust their regular UI benefits. [349]

In addition to the CARES Act, the Families First Coronavirus Response Act (FFCRA) provided up to $1 billion in emergency grant funding to states in fiscal year 2020 for administrative purposes. The first half of the funding is available to states that meet requirements related to notifications related to UI and access to the application process. The second half of the funding is available to states that experience at least a 10 percent increase in quarterly UI claims over the same quarter of the previous calendar year, and meet, among others, certain requirements related to easing UI eligibility requirements for individuals, such as waiving work search requirements.

Overview of Key Issues

Record new UI claims and CARES Act program implementation. In the wake of the COVID-19 pandemic, new claims have reached historic levels, posing challenges for states’ capacity to process them and for state and federal implementation of the CARES Act programs. In fiscal year 2019, the most recent year of data available, the UI program paid about $27.3 billion in benefits for 5.1 million beneficiaries, according to information provided by DOL. However, over the 3-month period from March through May 2020, the number of initial UI claims had surpassed 42 million, compared to about 2 million claims in all programs as of the end of February 2020, and unemployment is expected to remain elevated. For the period from March 21 to May 30, 2020, eleven states each had over 1 million initial UI claims (see figure).

Total Initial Unemployment Insurance Claims by State, March 21 to May 30, 2020

Note: Data reflect information on initial regular unemployment insurance claims, reported weekly by the Department of Labor and are subject to change. Data presented in the figure are not seasonally adjusted. Additionally, according to the Department of Labor, although the department instructed states to report Pandemic Unemployment Assistance claims separately, it is possible that some states included data for such claims in their regular claims data. Data retrieved on June 8, 2020.

According to DOL officials, state UI programs face challenges with antiquated data systems and an insufficient level of staff with the necessary experience to process claims, especially those involving claims for gig and other non-traditional workers who ordinarily would not qualify for UI benefits. For example, DOL officials told us that states with older information technology (IT) systems—that in some cases date as far back as the 1970s—have reported crashes with the current claims volumes. In addition, some individuals have reported having difficulty accessing UI benefits.

While DOL has assisted states’ efforts to modernize their IT systems in recent years by, for example, providing grants, technical assistance, and guidance, relatively few states had load-tested their systems for the volume of claims they have been receiving, according to the National Association of State Workforce Agencies (NASWA). [350] To support states’ implementation of the CARES Act UI programs, DOL has provided technical assistance by, for example, leveraging the assistance of its Chief Information Officer, according to DOL. Regarding states’ challenges with insufficient staffing, NASWA officials told us that many states had reduced the number of staff that manage UI claims in response to strong economic conditions and historically low unemployment rates that prevailed before the pandemic. NASWA officials also explained that given the complex nature of the UI program, training staff to process claims can require several months of training. Additionally, NASWA and DOL Office of Inspector General (OIG) officials said that even for staff experienced in processing UI claims, learning to process claims for gig and other nontraditional workers presents an added layer of complexity. To address the processing of such workers’ claims, DOL has collaborated with NASWA to develop training, according to DOL.

DOL has disbursed to states nearly all of the emergency administrative funding under FFCRA. DOL officials provided information that they had disbursed all of the $500 million for the first half of administrative funding, and disbursed about $498 million of the $500 million authorized for the second half of the funding. As of June 3, 2020, Puerto Rico is the only state or territory that has not applied for the second allotment.

Reemployment challenges. The UI program and public workforce system will face the challenge of large numbers of workers returning to their job as businesses reopen, with little information to date from DOL on reemployment efforts. Although as of June 3, 2020, DOL has reminded states and workforce system partners of existing resources and flexibilities that can support services for jobseekers overall, DOL had issued no new information to workforce system partners regarding reemployment of UI claimants affected by the COVID-19 pandemic. According to DOL, states already have full authority to operate the programs that can serve jobseekers. Additionally, according to DOL, states and local partners are beginning to deliver services both virtually and in person, and are developing plans to deliver in-person services safely, such as by reconfiguring physical space.

Even as individuals are offered the opportunity to return to work, they may choose not to do so. While the $600 additional weekly benefit under FPUC, currently available through July 2020, may help claimants by, for example, helping them avoid taking on debt or accessing their retirement funds [351] and may play a role in promoting public health, it could pose challenges to efforts to rehire certain workers—especially minimum-wage earners and others with lower paying jobs—throughout its duration. Also, claimants may have health and safety concerns, making them hesitant to return to work. [352] DOL has encouraged states to ask employers to provide information when workers refuse to return to their jobs for reasons that do not support their continued eligibility for benefits. [353]

Program integrity efforts. State UI agencies are expected to face challenges with efforts to identify and detect improper payments. [354] To assist states with these efforts, DOL has provided guidance to state UI agencies that the CARES Act UI programs operate in tandem with the regular UI program’s existing eligibility requirements. In addition, DOL stated that it will work with its OIG, which received appropriations under the CARES Act to conduct certain oversight activities.

Program integrity will likely remain an ongoing concern for DOL and the states with the implementation—and cessation—of CARES Act UI programs. Due to its level of reported improper payments, UI has been designated as a high priority program for addressing this issue by the DOL OIG. Experience with temporary UI programs following natural disasters suggests there may be an increased risk of improper payments associated with CARES Act UI programs. For example, the DOL OIG has found improper payments in past audits of the Disaster Unemployment Assistance program, the regulations for which generally apply to PUA. DOL reported that 32 percent of the over $2.7 billion in estimated benefits overpaid to claimants in fiscal year 2019 was due to them returning to work while continuing to claim regular benefits. Moreover, according to the Secret Service, multiple states appear to be experiencing organized fraud targeting the UI program involving the misuse of personally identifiable information, with potential losses in the hundreds of millions of dollars. Additionally, the new Paycheck Protection Program (PPP) created by the CARES Act could increase the risk of the UI program for improper payments. The program, administered by the Small Business Administration (SBA) provides guarantees for forgivable loans to assist small businesses in, among other things, keeping their workers on payroll. [355] The UI program is generally intended to provide benefits to individuals who have lost their jobs, while under PPP employers are generally required to retain or re-hire employees (or face reductions in loan forgiveness eligibility).

According to SBA officials, consistent with PPP regulations, employers that take PPP loans must generally rehire laid-off employees or face loan forgiveness reductions, and must report to the state UI agency if any of those employees refuse to return to work. [356] In its guidance to state unemployment agencies, DOL notes that states are expected to enforce statutory provisions related to fraud, or risk violating their agreement to administer the CARES Act UI programs. However, it does not address PPP loans specifically, or the risk of improper payments associated with such loans, although DOL told us it plans to issue questions and answers about this risk in the near future. According to DOL, although UI claimants’ income and reemployment are both reportable, no mechanism currently exists that could capture information in real time about UI claimants who may receive wages paid from PPP loan proceeds. Federal internal control standards state that effective information and communication are vital for an entity to achieve its objectives. [357] As such, the standards state that management should externally communicate the necessary quality information to achieve its objectives. Given the large number of SBA loans and the millions applying for unemployment benefits, additional information would call state attention to the potential for improper payments.

GAO Methodology and Agency Comments

To conduct this work, we reviewed information DOL provided as of May 2020; reviewed relevant federal laws, agency guidance, and DOL Office of Inspector General reports; and interviewed DOL and SBA officials, DOL Office of Inspector General officials, and representatives of the National Association of State Workforce Agencies.

We shared a draft of this report with DOL and SBA officials. While DOL neither agreed nor disagreed with our recommendation, it noted that DOL is preparing questions and answers regarding individuals collecting UI benefits while simultaneously receiving payment from the PPP. DOL also said that it has reached out to SBA to help inform this guidance, and expects to release it to state UI agencies within the next month. SBA provided technical comments that we incorporated as appropriate.

Contact information: Thomas Costa, (202) 512-7215, costat@gao.gov

Federal Student Loans

The Department of Education quickly suspended interest accrual and student loan payments but some types of involuntary collections and communications to borrowers were more challenging to address quickly.

Entities involved: Department of Education

Key Considerations and Future GAO Work

As the Department of Education (Education) continues to implement applicable CARES Act provisions and other agency actions to offer student loan relief and to address areas of borrower confusion, it must also plan for returning to normal operations, currently scheduled to begin after September 30, 2020. It will be critical to ensure that borrowers are fully informed and prepared for federal student loan interest accrual, payments, and collections when they resume. We will continue to review Education’s implementation and communication efforts.

Background

Federal student loans are an important resource to help individuals access higher education. As of March 31, 2020, student borrowers had a combined $1.5 trillion in outstanding federal student loan debt, according to data from Education. The majority of these loans are part of the William D. Ford Federal Direct Loan (Direct Loan) program and are owned by Education. However, some older federal student loans were made under the Federal Family Education Loan (FFEL) and Federal Perkins Loan programs, and may not be owned by Education. Loan servicers under contract with Education are responsible for maintaining federal student loan records, communicating with borrowers about the status of their loans, and processing payments. Education also contracts with private collection agencies to collect payments from borrowers who have defaulted on their loans.

The CARES Act and actions taken by Education provided several types of relief to borrowers with federal student loans owned by Education. These included suspending: (1) interest accrual, (2) all payments due, and (3) involuntary collections for any such loans in default. [358] According to Education, this relief applies to the period between March 13, 2020, and September 30, 2020. See figure for more information about the number of borrowers eligible for this relief. Private student loans and federal loans owned by commercial lenders or schools (rather than Education) are not eligible for this relief.

Number of Borrowers Eligible for Relief under the CARES Act Federal Student Loan Provisions and Department of Education (Education) Actions, April 2020

Note: According to Education, the numbers of borrowers whose loans were in default and borrowers whose loans were not in default do not add to 40.7 million due to rounding.

Overview of Key Issues

Suspending interest accrual and payments. Education reported that, as of mid-April 2020, it had suspended federal student loan interest accrual and payments for all eligible borrowers, effective through September 30, 2020. This included suspending interest accrual for all 40.7 million borrowers with loans owned by Education and suspending payments for 32.6 million of those borrowers whose loans were not in default, according to Education. Education implemented these suspensions retroactively to March 13, 2020, the date a national emergency was declared. [359]

Suspending involuntary collections for defaulted loans. Some types of involuntary collections, particularly wage garnishments, were more challenging to halt. Given that some involuntary collections occurred on or after March 13, 2020, Education implemented processes to provide refunds to borrowers.

  • Some borrowers continued to have their wages garnished as of early June 2020, according to Education. Education officials said halting garnishment of wages on defaulted loans has been challenging because Education must first notify employers in writing, and then employers must stop the garnishments. Education reported that its designated servicer began sending notifications to employers who were garnishing wages in mid-April, after the servicer established a new automated process for notifying employers. [360] Once notifications were sent, Education officials, as well as a private collection agency group and a borrower group, noted that some employers may have experienced delays in receiving these notifications due to telework operations, suspended operations, or outdated contact information. Given continued wage garnishments, Education reported that it started to issue refunds to borrowers in mid-April and it has since reduced the time it takes to process a refund. Education said that it was conducting additional outreach to employers that continue to garnish wages. [361]
  • Education reported that, as of March 2020, it had ordered other collections on defaulted loans taken from Social Security payments and federal tax refunds by the Department of Treasury (Treasury), as well as collection activities such as phone calls to borrowers by private collection agencies, to be halted for borrowers who were subject to such collections on or after March 13, 2020. Education stated in June 2020, that Treasury collected over $2.3 billion from over 1 million borrowers before halting collections and that most of these collections occurred on or after March 13, 2020 and before March 20, 2020 when Education ordered that those collections be halted. Education also reported that it had requested that Treasury refund involuntary payments collected on or after March 13, 2020. [362] Similarly, Education reported working with its collection contractors to issue refunds for any collections they made on or after March 13, 2020. [363]

Ineligible loans. For at least 6.9 million borrowers with federal student loans, one or more of their loans were ineligible for relief under the CARES Act provisions or Education’s actions because they are not owned by Education. This includes more than 50 percent of borrowers with FFEL loans (about 6.9 million borrowers) and about 80 percent of borrowers with Perkins Loans (about 1.6 million borrowers), according to Education as of April 2020. [364] Federal loans that are ineligible for the pandemic-related relief under the CARES Act provisions or Education’s actions may be eligible for other types of relief, such as income-driven repayment plans or emergency forbearance. [365] Some loan holders have voluntarily suspended payments or interest accrual for ineligible federal or private loans. Examples of relief being offered include:

  • One state university system that holds over $90 million in Perkins Loans announced in April 2020 that it would (1) suspend interest accrual for all loans and (2) suspend loan payments for borrowers with overdue payments and for others upon request, through September 30, 2020.
  • Some private student loan lenders—including at least two that also service a large proportion of federal student loans—are offering borrowers relief options such as 90 days of suspended payments.

Communicating with borrowers. Education faced challenges in providing borrowers with timely and accurate information during the initial weeks of implementing the CARES Act provisions and agency actions to provide relief to borrowers. Implementing this relief involved Education quickly making changes to its contracts with servicers to include the new policies and servicers quickly reprogramming their loan processing systems in order to apply the provisions retroactively. Education and a servicer stakeholder group noted that these steps were occurring at the same time that staff were moving to remote work during the pandemic. While these changes were occurring, some borrowers may have received incorrect information. For example, Education reports and borrower groups described instances in which loan records did not initially reflect suspended payments and interest accrual or were incorrectly marked as delinquent. In addition, Education identified instances in which call centers experienced high rates of dropped calls or representatives provided incorrect information. For example, three of nine servicers responded incorrectly to at least 40 percent of Education’s “secret shopper” questions on April 7, 2020.

By mid-April 2020, Education and servicers had increased communication to borrowers about student loan relief by updating and expanding their websites and sending out individual borrower communications. Specifically, Education updated its website about available relief to expand and revise the information it began posting on March 13, 2020. It also verified that servicer websites included a prominent link to their frequently asked questions web pages. Servicers varied in the extent to which they chose to provide supplementary information to help borrowers understand how the available student loan relief applied to their circumstances. For example, one servicer included multiple pages of information on various borrower scenarios, and another provided more general information and advised borrowers to refer to Education guidance. Once certain types of relief had been implemented, servicers were also required to distribute notification letters to borrowers, using a template provided by Education.

Education has tracked implementation and communication of student loan relief through daily monitoring reports and other communications with servicers. [366] Among other information, these daily reports track call center traffic and wait times; the results of Education’s “secret shopper” calls to servicer call centers; and borrower opinions on social media. Officials told us that they worked with servicers to address identified issues. In mid-April 2020, Education sent servicers letters outlining their specific strengths and areas of needed growth, based on its daily monitoring reports. For example, on April 10, 2020, Education instructed one servicer to improve its call center operations because its wait times were longer than most other servicers, and about 10 percent of borrower calls were dropped during the reviewed time period.

While the availability and accuracy of information on the CARES Act provisions and agency actions to provide student loan relief generally improved over time, some areas of confusion or inaccuracy persisted into late April and May. Education monitoring reports identified fewer instances of inaccurate responses by call center staff, and borrower advocacy groups told us that many initial areas of confusion improved by mid-April 2020. However, Education and stakeholder groups identified continuing challenges or additional actions needed, which Education has worked to address. For example:

  • Loan forgiveness: Throughout April 2020, Education monitoring reports identified inconsistencies in the information the agency provided to servicers regarding how borrower relief affected the Public Service Loan Forgiveness program. [367] The agency found that this led servicers to provide some borrowers with inaccurate information. Education reported taking actions in May to address it, such as by revising servicer contracts to include consistent information to servicers about this issue.
  • Credit reports: Borrower stakeholder groups identified concerns about how suspended payments could affect the credit scores of some borrowers. According to Education, it identified challenges related to credit reporting through its monitoring efforts. For example, it identified an issue with one of its loan servicers incorrectly reporting suspended loan payments to credit service companies as a deferred payment due to a coding error, which negatively affected borrower credit information reported by at least one credit service company. Education reported that the servicer has updated its coding and sent corrected files to credit service companies. [368] Education also reported coordinating with the Consumer Financial Protection Bureau to reach out to a credit service company about its approach to factoring suspended student loan payments into its credit reporting.
  • Loans in Default: Education monitoring reports continued to identify challenges related to private collection agency call centers for borrowers with defaulted loans, such as long wait times and dropped calls. In late April 2020, Education officials said they were developing plans to improve private collection agency customer service. Education also identified a need to develop default loan servicer procedures specifically related to rehabilitating defaulted loans during the period of student loan relief and communicate this information to borrowers. [369] In mid- to late April, the agency updated its default loan servicer contract and issued guidance to provide such information.

GAO Methodology and Agency Comments

To conduct this work, we reviewed data reported by Education; reviewed relevant federal laws and agency guidance, and interviewed Education officials, as well as representatives from borrower, loan servicer, and private collection agency stakeholder groups. We assessed the reliability of data reported by Education by reviewing documents and responses from officials.

We provided a draft of this report to Education for review and comment. In its written comments, Education stated that report sections related to Education’s actions in response to the pandemic were inaccurate, flawed, incomplete, and unfair. In its comments on this enclosure, Education stated that GAO did not correctly describe the actions taken by the agency or the role of its monitoring efforts in identifying and addressing challenges that arose. We disagree with this characterization and believe we accurately described and characterized the key facts relating to Education’s implementation of applicable CARES Act provisions and Education’s actions to provide relief to student borrowers. The enclosure notes that the agency was facing a significant task in quickly implementing wide-ranging relief to borrowers. For example, we noted that Education quickly made changes to its contracts with servicers to include the new policies, while servicers quickly reprogrammed their loan processing systems in order to apply the provisions retroactively. We describe these steps to provide context about the work involved in implementing student loan relief. While recognizing these efforts by Education, we also noted that the process of quickly implementing these changes involved some instances of temporary or ongoing confusion for borrowers, as well as cases where Education’s own monitoring reports found that servicers were providing incorrect information. This is an important part of illustrating the complex process of implementing the CARES Act provisions and related agency actions to provide student loan relief, including the impact on borrowers.

Education also objected to our use of the phrase “challenges” to describe aspects of implementing and communicating about student loan relief provided under the CARES Act and agency actions. We continue to believe that “challenges” is an appropriate term because it encapsulates both the complex tasks required of Education and servicers to implement far-reaching relief quickly and the impact on borrowers who were waiting to obtain complete information, see the relief reflected in their loan records, and receive refunds, where appropriate, during a time where many people are facing economic challenges.

Further, Education stated that we referenced findings from its monitoring reports without acknowledging that the monitoring reports themselves allowed Education to identify issues and act to address them. We disagree with this characterization. We described Education’s oversight in several places, including a full paragraph that highlights Education’s monitoring efforts, as well as references throughout the enclosure noting that Education took action when challenges were identified. We did not provide detailed descriptions of Education’s efforts to improve its overall monitoring processes prior to the implementation of student loan relief related to the pandemic because that is outside the scope of this review. While recognizing the value of Education’s daily monitoring reports and noting that Education employed them to take action, findings from the reports are important to include because they illustrate borrowers’ experiences during a stressful time as well as the ongoing work needed to fully and accurately implement borrower relief for a variety of types of loans and repayment scenarios.

In a few instances, we modified text in the enclosure to provide additional context or clarity or to add information provided by Education in its response. For example, we added contextual information noting that Education and servicers were implementing relief while working remotely during the pandemic, and provided additional details about involuntary collections that Education provided in its comment letter. We also modified our description of Education’s new guidance and contract changes regarding loan rehabilitation to clarify that these actions were taken to provide additional information rather than to correct existing information. Education also provided technical comments, which we incorporated as appropriate.

Contact Information: Melissa Emrey-Arras, (617) 788-0534, emreyarrasm@gao.gov

Economic Impact Payments

As of May 31, the Department of the Treasury and Internal Revenue Service (IRS) sent over 160 million payments to recipients for whom IRS has the necessary information. These payments totaled $269.3 billion. Treasury and IRS still face challenges to ensure that eligible individuals receive their payments, to prevent improper payments, and to combat fraud.

Entities Involved: Department of the Treasury, Internal Revenue Service, and Bureau of the Fiscal Service, Social Security Administration, U.S. Department of Veterans Affairs, and Railroad Retirement Board.

Key Considerations and Future GAO Work

The Department of the Treasury (Treasury) has stated that certain barriers currently prevent it from identifying and preventing payments to ineligible recipients. For example, Treasury and the Internal Revenue Service (IRS) sent almost 1.1 million payments totaling nearly $1.4 billion to deceased individuals. [370] IRS announced that if a payment was issued to a deceased or incarcerated individual, the total amount should be returned. However, IRS does not currently plan to take additional steps to notify ineligible recipients on how to return payments. IRS should consider cost effective options for notifying ineligible recipients on how to return payments; without which, ineligible recipients who would otherwise want to return the payments may be unaware how to do so. Also, IRS has full access to the death data maintained by the Social Security Administration (SSA), but Treasury and its Bureau of the Fiscal Service (BFS), which distribute the payments, do not. We have suggested that Congress consider amending the Social Security Act to explicitly allow the SSA to share its full death data with Treasury for data matching to prevent payments to ineligible individuals. [371] We are currently doing additional work evaluating IRS’s administration of the Economic Impact Payments.

Background

The CARES Act included direct payments for eligible individuals to address financial stress due to the pandemic. These Economic Impact Payments provide up to $1,200 per eligible individual or $2,400 for individuals filing a joint tax return, plus up to $500 per qualifying child. [372] The payment phases out gradually based on adjusted gross income (AGI). [373] The payments can be offset by the federal government only to collect delinquent child support obligations. [374] The Joint Committee on Taxation estimates that in fiscal year 2020, the payments will total almost $270 billion.

Treasury and IRS are working together to quickly identify eligible recipients and process payments. [375] As of May 31, 2020, Treasury and IRS disbursed 160.4 million payments totaling $269.3 billion.

Overview of Key Issues

On April 10, two weeks after passage of the CARES Act, IRS and Treasury disbursed the first batch of more than 81 million payments, totaling more than $147 billion. They deposited payments directly into taxpayers’ bank accounts using information from Tax Years 2019 or 2018 tax returns. [376] On April 17, IRS and Treasury also began sending paper checks to eligible individuals for whom banking information was unavailable. The first batch of checks was sent to 7 million individuals. Starting on May 15, BFS also sent debit cards to nearly 4 million qualified recipients for whom the IRS has no bank account information on file. See first figure for a timeline of Treasury and IRS actions and second figure for number of payments made by direct deposit, paper check, and debit card as of May 31.

Timeline of Treasury and IRS Actions to Deliver Economic Impact Payments

a IRS does not begin payments to representative payees for Social Security, Railroad Retirement Board, and Supplemental Security Income benefits until May 22; payments to representative payees for Veterans' Administration benefits begin May 29.

Total Number of Payments Made by Direct Deposit, Paper Check, or Debit Card as of May 31, 2020

a Individual payment types may not sum to total due to rounding.

IRS and Treasury faced a number of challenges to distribute the payments quickly:

  • Limited paper check capacity: According to Treasury officials, Treasury can distribute 5 to 7 million paper checks a week in addition to the checks it distributes for other Federal programs. IRS and Treasury initially prioritized mailing checks to people with low AGI, starting with individuals with an AGI of less than $20,000, then mailed checks to individuals with progressively higher AGI amounts IRS plans to continue issuing payments through December 10; the majority of these payments will be corrections of returned payments. On June 3, Treasury announced that payments had been sent to all eligible individuals for whom the IRS has the necessary information to make a payment.
  • No, or incorrect, bank information: IRS does not have bank account information for all taxpayers. For example, some taxpayers chose to receive a paper check refund for 2019 and 2018. Also, some tax filers use temporary accounts during the filing season; these accounts are typically opened by a tax preparation service and closed after the filing season ends. Any payments made to inactive or closed accounts are rejected by the bank, returned to Treasury, and converted to a paper check. On April 15, IRS launched Get My Payment (GMP), an online portal that allows taxpayers to enter their bank account information to receive a direct deposit. [377] As of May 15, IRS reported 434 million visits to GMP, 14.2 million bank accounts received, and 179 million taxpayers who received confirmation of their payment status.
  • Non-filers: IRS had to figure out how to deliver payments to people who did not file tax returns for 2019 or 2018. Individuals with gross income below a certain amount, including some individuals who receive federal benefits, such as Social Security that is not subject to tax, are among those who do not generally need to file a tax return. IRS announced it would automatically deliver payments to eligible non-filers using data provided by the SSA, U.S. Department of Veterans Affairs (VA) and the Railroad Retirement Board (RRB). However, the data did not include information on qualifying children. [378] To get a payment for a qualifying child, SSA, RRB, and VA benefit recipients, who did not file a tax return for tax years 2018 or 2019, needed to use an online non-filer tool to enter information about a qualifying child by certain dates. [379] Otherwise, IRS said these recipients will have to file a Tax Year 2020 return (in 2021) to receive a payment for a qualifying child.

    According to IRS officials, from April 10 to May 17, 2020, payment calculations did not include additional money for qualifying children claimed on returns submitted through the online non-filer tool. IRS officials estimate up to 450,000 recipients did not receive a payment that included additional money for their qualifying children. IRS officials said they are working to identify and adjust the accounts of these filers to recognize the number of qualifying children claimed and provide supplemental payments by the end of July. IRS officials said that returns received after May 17 marked the qualifying children correctly and they were included in the payment computation.

  • Hard-to-reach populations: IRS recognized it would have challenges reaching individuals without bank accounts (unbanked), who are homeless, who have limited or no internet access, or who have limited English proficiency. To assist these populations, IRS is working with other federal agencies and community partners such as the United States Interagency Council on Homelessness and Men of Valor, which works with newly released prisoners. IRS also produced outreach materials, such as social media posts, in multiple languages and IRS launched a Spanish version of the Get My Payment tool on May 4, 2020. Treasury and IRS also began sending prepaid debit cards to nearly 4 million qualified recipients for whom the IRS has no bank account information on file starting on May 15.
  • U.S. territories: Residents of the five U.S. territories who meet income thresholds and other CARES Act eligibility requirements are eligible for the Economic Impact Payments. [380] According to IRS officials, IRS and Treasury do not directly oversee the administration of payments to residents in the U.S. territories. Each territory developed a plan to disburse payments to eligible residents. IRS and Treasury reviewed and approved these plans to ensure they comport with the CARES Act and then provided funding to the local tax authority. [381] In return, local tax authorities are responsible for distributing payments and for reconciling any payments made to ineligible recipients, such as decedents. IRS officials reported that as of May 18, territories received 80 percent of their total funds approved. [382] According to IRS officials, there have been instances where territory residents submitted their bank information through the IRS’s online tools. IRS officials are coordinating with local tax authorities to avoid making duplicative payments.

Treasury and IRS sent some payments to households with deceased individuals. Typically, IRS uses third-party data, such as the death records maintained by the SSA to detect and prevent erroneous and fraudulent tax refund claims. However, Treasury and IRS did not use the death records to stop payments to deceased individuals for the first three batches of payments because of the legal interpretation under which IRS was operating. The first three batches of payments accounted for 72 percent of the payments disbursed as of May 31. According to the Treasury Inspector General for Tax Administration, as of April 30, almost 1.1 million payments totaling nearly $1.4 billion went to decedents. [383]

According to IRS officials, an IRS working group charged with administering the payments first raised questions with Treasury officials about payments to decedents in late March as Congress was drafting legislation. IRS Counsel subsequently determined that IRS did not have the legal authority to deny payments to those who filed a return for 2019, even if they were deceased at the time of payment. IRS Counsel further advised—exercising discretion provided for in the statute—to apply the same set of processing rules to recipients who had filed a 2018 return but not yet a 2019 return. IRS officials said on the basis of this determination, they did not exclude decedents in their programming requirements.

According to Treasury officials, the CARES Act directed payments to taxpayers who filed a 2019 return, or 2018 return, or allowed IRS to use information from their 2019 Social Security or Railroad Retirement Benefit Statement. Some of these taxpayers may have been deceased at the time the payments were delivered. Treasury officials also stated that the CARES Act mandated the delivery of the economic impact payments as “rapidly as possible.” To fulfill this mandate, Treasury officials said that for the first three batches of payments, Treasury and the IRS used many of the operational policies and procedures developed in 2008 for the stimulus payments which did not include using death records as a filter to halt payments to decedents. [384] However, in 2013 GAO identified weaknesses in IRS processes that allowed payments to deceased individuals and recommended corrective actions. As a result, IRS implemented a process to use death records to update taxpayers’ accounts in order to identify and prevent improper payments. [385] Bypassing this control for the economic impact payments, which has been in place for the past seven years, substantially increases the risk of potentially making improper payments to decedents.

According to a Treasury official from the Office of Tax Policy, Treasury was unaware the payments would go to decedents until it was reported in various media outlets. Treasury officials said that upon learning that payments had been made to decedents, Treasury and the IRS in consultation with counsel, determined that a person is not entitled to receive a payment if he or she is deceased as of the date the payment is to be paid. Therefore, Treasury instructed IRS and the Bureau of the Fiscal Service to remove decedents from receiving the payments, consistent with Treasury’s and the IRS’s legal determination. Such payments are potentially improper payments under the Payment Integrity Information Act of 2019. [386] BFS and IRS removed such payments starting with the fourth payment batch.

On May 6, 2020, IRS announced that if a payment was issued to a deceased or incarcerated individual, the total amount should be returned. IRS also published guidance on its website instructing such individuals on how to return the payments. According to IRS officials, IRS also worked with federal and state prison officials to assist in the return of payments made to incarcerated individuals. BFS also included a checkbox on the envelope that contained an EIP paper check and instructions for returning the check. These instructions directed individuals who received the check to return the unopened envelope by mail to the Treasury if the recipient were deceased. However, IRS does not currently plan to take additional steps to notify ineligible recipients on how to return payments.

Internal control standards state that management should communicate the necessary information to achieve the entity’s objectives. Also, management should select appropriate methods to communicate, considering factors such as intended audience, availability of information, and cost to communicate information. [387] Ineligible payment recipients who do not visit IRS’s website or do not have internet access may not be aware of the process to return payments. IRS should consider cost effective options for notifying ineligible recipients on how to return payments. For example, for the economic impact payments, IRS sent letters to payment recipients’ last known address, within 15 days after the payment was made, to provide information on how the payment was made and how to report any failure to receive the payment. IRS could consider a similar letter to all recipients or a subset of ineligible recipients notifying them about the payment return process. Without exploring cost effective options to communicate the payment return process, ineligible recipients who would otherwise want to return the payments may be unaware how to do so.

IRS is also concerned about fraud risks related to identity theft. For example, if fraudsters have acquired someone’s personally identifiable information, they could use this information to access IRS’s Get My Payment and the Free-Filer/Non-Filer Return portals to enter their own bank account information, and receive a fraudulent payment. In addition, fraudsters who filed a false tax return for 2019 or 2018, evaded IRS’s fraud detection, and received a refund may receive another payment from IRS. In June 2018, GAO raised concerns about IRS’s inability to securely authenticate taxpayers online, including that IRS had not yet implemented security controls for authenticating taxpayers consistent with updated guidance from the National Institute of Standards and Technology. For example, we recommended that IRS develop a plan for implementing changes to its online authentication programs consistent with new guidance and implement improvements to IRS's systems to fully implement the new guidance. As of January 2020, IRS had taken steps on these recommendations but not yet fully implemented them. In addition, full access to the death data by Treasury and BFS as GAO has previously suggested, along with consistent use of the full death data when making payments, by both IRS and Treasury, should help reduce fraudulent payments.

GAO Methodology and Agency Comments

To review how IRS and Treasury administered the payments, we reviewed the most recent IRS data as of May 31, 2020, examined federal laws and agency guidance, outreach and communication plans; and interviewed IRS and Treasury officials. We also reviewed the Standards for Internal Control in the Federal Government, GAO’s fraud risk framework, and GAO’s work on IRS authentication efforts and other measures to address fraud risk and improper payments.

We provided a draft of this enclosure to Treasury, OMB, and IRS for review and comments. In written comments, IRS agreed with our recommendation to consider additional options to notify ineligible recipients on how to return payments. Treasury, OMB, and IRS also provided technical comments which we incorporated as appropriate.

Contact Information: James R. McTigue Jr., (202) 512-9110, mctiguej@gao.gov

Related GAO Products

Improper Payments: Strategy and Additional Actions Needed to Help Ensure Agencies Use the Do Not Pay Working System as Intended, GAO-17-15 Washington, D.C.: Oct. 14, 2016.

Identity Theft: IRS Needs to Strengthen Taxpayer Authentication Efforts, GAO-18-418 Washington, D.C., June 22, 2018.

Financial Audit: IRS’s Fiscal Years 2018 and 2017 Financial Statements, GAO-19-150 Washington, D.C.: Nov. 9, 2018.

Housing Protections

Agencies have issued guidance on CARES Act housing protections, but challenges remain in ensuring that homeowners and renters benefit.

Entities involved: Federal Housing Finance Agency, Department of Housing and Urban Development, Department of Veterans Affairs, Department of Agriculture, Consumer Financial Protection Bureau, Fannie Mae and Freddie Mac (the enterprises).

Key Considerations and Future GAO Work

As the COVID-19 pandemic continues, it will be important for the agencies and government-sponsored housing enterprises to sustain efforts to provide clear and accessible information to affected parties about the CARES Act’s homeowner and renter protections. Individuals lacking internet access or having difficulty determining whether the protections apply to them are among those for whom continued outreach will be critical.

Given the broad reach and time-limited nature of the act’s housing protections, the agencies also will need to ensure that their compliance monitoring is comprehensive and timely as possible. Accomplishing this goal during the COVID-19 pandemic may require adjusting standard practices or schedules, particularly if compliance monitoring is typically conducted on-site or infrequently. Also, because the act did not define specific oversight responsibilities, agencies will need to be proactive in developing or directing monitoring efforts.

Finally, the agencies and enterprises will need to carefully manage information on mortgage forbearances granted under the act. The rapid implementation of new loan status codes has the potential to introduce errors and reduce the reliability of data for reporting purposes.

We plan to conduct additional work on the implementation of the CARES Act’s homeowner and renter protections, including the extent to which compliance with these protections is being monitored and enforced.

Background

Many mortgage borrowers and renters either are, or are at risk of, falling behind on housing payments as a result of lost income due to COVID-19. The CARES Act provides temporary protections for millions of households against foreclosure and eviction, as well as temporary forbearance on mortgage payments. These provisions apply to single-family (one-to-four unit) and multifamily (five-or-more unit) properties with federally backed mortgages and renters living in properties with federally backed mortgages or that receive certain types of federal housing assistance. [388]

As of the second quarter of calendar year 2020, there were more than 40 million federally backed single-family mortgages and more than 80,000 federally backed multifamily mortgages outstanding. [389] In addition, there were more than 10 million rental units in properties with federally backed multifamily mortgages and millions of additional rental units financed with Low-Income Housing Tax Credits or that receive various types of federal rental housing assistance (public housing, for example). [390] The table provides more information on the CARES Act housing protections.

Foreclosure, Eviction, and Mortgage Forbearance Protections in the CARES Act
Covered population CARES Act protection
Property owners with federally backed single-family mortgages Section 4022 prohibits foreclosures and foreclosure-related evictions for 60 days beginning on March 18, 2020, and provides up to 180 days of mortgage forbearance (with potential extensions of up to an additional 180 days) for borrowers who have experienced a financial hardship related to the COVID-19 emergency. Borrowers are not required to document financial hardship to receive forbearance.
Property owners with federally backed multifamily mortgages Section 4023 provides up to 90 days of mortgage forbearance for borrowers who have experienced a financial hardship related to the COVID-19 emergency. Borrowers receiving forbearance may not evict tenants for nonpayment of rent or charge fees to tenants for late payment of rent for the duration of the forbearance period.
Tenants in properties with federally backed mortgages or assisted by specified federal housing programs. Section 4024 prohibits landlords for a 120-day period, beginning March 27, 2020, from (1) initiating legal action to recover possession of a rental unit due to nonpayment (i.e., evict a tenant) or (2) charging fees to tenants for nonpayment of rent.
Source: Coronavirus Aid, Relief, and Economic Security Act (CARES Act). | GAO-20-625

Note: Vacant or abandoned properties are not covered by the foreclosure moratorium. In May 2020, federal agencies and the enterprises extended moratoriums on foreclosures and foreclosure-related evictions for property owners with federally backed single-family mortgages through June 30, 2020.

As of early June 2020, federal agencies were still compiling information from mortgage servicers on the number of forbearances granted under the CARES Act through May 2020. However, industry estimates provide some perspective on the number of single-family borrowers struggling with mortgage payments due to the COVID-19 pandemic. According to estimates from the Mortgage Bankers Association (MBA), the percentage of single-family mortgages in forbearance grew from 0.25 percent as of March 8, 2020 (about 3 weeks prior to the enactment of the CARES Act) to 8.46 percent as of May 24, 2020 (about 8 weeks after enactment). [391] According to MBA, the 8.46 percent figure represents about 4.2 million homeowners.

Overview of Key Issues

The federal rollout of guidance to affected parties about the CARES Act housing protections was initially fragmented and uneven, but has improved over time with the development of more centralized and comprehensive information sources, including the launch of a joint Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA), and Department of Housing and Urban Development (HUD) website in May 2020. [392] As discussed below, federal agencies and the government-sponsored housing enterprises have issued guidance or made information available to housing stakeholders.

Guidance to servicers. Agency and enterprise guidance to servicers includes, among other things, the moratorium periods for foreclosures and evictions, the length of initial and any renewal forbearance periods, and loan status codes to use for reporting CARES Act forbearances. Agency and enterprise officials said that, in addition to formal written notices, they provided or clarified guidance through other means, such as web-based training and conference calls. The enterprises also issued scripts for single-family mortgage servicers to guide their discussions with borrowers about CARES Act forbearances. Although not specifically required by the act, guidance from the agencies and enterprises states that borrowers will not be required to repay missed mortgage payments in one lump sum after the forbearance period ends.

Information for borrowers and renters. The agencies and enterprises have information on their websites to help renters and mortgage borrowers (including landlords) understand the protections and responsibilities that apply to them. They also have disseminated information in other ways. For example, HUD developed flyers or brochures for HUD-assisted public housing agencies and multifamily property owners to distribute to tenants on the eviction moratorium and what to do if they are having trouble paying rent. Additionally, the enterprises created online loan lookup tools that allow renters in multifamily properties to determine whether the property they live in has a mortgage purchased or securitized by Fannie Mae or Freddie Mac and is therefore covered by the CARES Act protections. [393]

A number of implementation and oversight challenges will need to be overcome to help ensure that homeowners and renters receive the CARES Act protections.

  • Helping borrowers and renters. Given the complexity of the provisions and the multiple types of federal housing assistance, a key challenge is helping borrowers and renters understand whether the act’s protections apply to them and what the protections are. The act did not require covered borrowers and renters to be directly notified of their rights and options, and much of the information available to these individuals is on agency and enterprise websites. As a result, individuals lacking internet access or having difficulty determining whether they live in a covered property may not be exercising protections they are entitled to. Tenants in single-family properties in particular could have difficulty determining whether their residence has a federally backed mortgage. [394] Existing loan lookup tools for single-family properties are designed for property owners and require inputting information a tenant likely would not have. [395]

    Representatives of a housing advocacy group we spoke with said they were aware of reported cases where renters covered by the CARES Act protections had wrongly received notices of eviction. They also expressed concern that homeowners who were misinformed about or unaware that lump-sum repayment of missed mortgage payments is not required after a forbearance might choose to forgo a forbearance and end up in default. These scenarios illustrate the importance of timely and accessible information for affected parties about the act’s housing protections.

  • Managing data and financial implications. The rapid implementation of the CARES Act created challenges in recording forbearances in agency and enterprise loan monitoring systems used by mortgage servicers. The agencies and enterprises repurposed existing loan status codes or made changes to their loan monitoring systems to capture CARES Act forbearances. Additionally, HUD and USDA instructions to servicers in May 2020 acknowledged that servicers may previously have been using more than one code to record the forbearances, but should use a single designated code going forward. Because these changes may increase the potential for miscoding and misinterpretation of data, careful management and analysis of loan information will be needed to ensure accurate reporting on CARES Act forbearances.

    Additionally, while the forbearances may help stabilize the mortgage market and potentially mitigate long-term credit losses, actions to manage the back end of the forbearance periods will require significant financial commitments by the agencies and the enterprises. For example, HUD’s Federal Housing Administration (FHA) developed a new foreclosure mitigation option for the COVID-19 pandemic. For eligible borrowers, FHA will effectively fund no-interest, no-fee loans subordinate to the original mortgage. These loans will cover payments missed during the forbearance period and will not come due until the borrower refinances, pays off the mortgage, or sells the home. The size of the associated financial commitments will depend, in part, on the ultimate number and length of forbearances granted under the CARES Act, which is not yet known.

  • Overseeing implementation. Overseeing servicer and landlord implementation of CARES Act provisions also will present challenges. The act does not define specific oversight responsibilities or contain reporting requirements for servicers and landlords, so detection of any noncompliance with the act’s protections will depend on monitoring programs developed or directed by each agency. Agency officials described steps they are taking to update their oversight tools in light of the CARES Act housing protections, including changes to information systems and servicer quality assurance and compliance reviews. However, monitoring and enforcing protections for millions of households during the COVID-19 pandemic could strain the capacity of the agencies to provide timely and comprehensive oversight, particularly if compliance monitoring is typically performed on-site or only once a year. [396] Additionally, enterprise officials said that while they will respond to any reported violations of CARES Act protections, their compliance monitoring is focused on their own policies. Further, agencies may not have information needed to monitor protections for all renters. For example, agency officials said they do not have information on rental agreements for or tenants in single-family properties with federally backed mortgages.

GAO Methodology and Agency Comments

To conduct this work, we reviewed agency and enterprise data, guidance, and other documentation, including information on their websites. We also interviewed or reviewed written responses from agency and enterprise officials and selected housing stakeholder groups.

We provided a draft of this enclosure to HUD, FHFA, USDA, CFPB, the Department of Veterans Affairs, the Office of Management and Budget, Fannie Mae, and Freddie Mac for review and comment. In its comments, reproduced in appendix XV, HUD noted its efforts to inform affected parties about the CARES Act’s housing protections and said it was working to provide timely and comprehensive compliance monitoring. Additionally, HUD, FHFA, the Office of Management and Budget, and Freddie Mac provided technical comments, which we incorporated as appropriate. USDA, CFPB, the Department of Veterans Affairs, and Fannie Mae did not provide comments.

Contact information: John Pendleton, (404) 679-1816, pendletonj@gao.gov

Small Business Programs

The Small Business Administration approved more than 1 million economic injury disaster loans, but information technology challenges and processing delays hampered implementation.

Entities Involved: Small Business Administration

Key Considerations and Future GAO Work

As COVID-19 continues, it will be important for the Small Business Administration (SBA) to address the following as it implements the Economic Injury Disaster Loan (EIDL) program: information technology challenges, transparency around loan and advance amounts, processing delays, and communication issues, among other issues.

We will soon begin additional work on the EIDL program, including on SBA guidance, policies, and procedures, and on the types of borrowers using the program.

Background

A majority of the more than 30 million small businesses in the United States have been adversely affected by COVID-19. In response, the CARES Act expanded existing SBA programs and appropriated additional funding to help impacted businesses. The CARES Act also created the Paycheck Protection Program (PPP). (A separate enclosure covers PPP.)

The CARES Act temporarily expanded eligibility for SBA’s EIDL program and appropriated funds for related emergency EIDL advances. [397] The EIDL program provides low-interest loans of up to $2 million for expenses—such as operating expenses—that cannot be met because of a disaster. [398] The CARES Act expanded EIDL program eligibility to include additional small business entities and relaxed some approval requirements, such as demonstrating that the business could not obtain credit elsewhere. [399] It also appropriated $10 billion to create a program to provide small businesses up to $10,000 in advances toward payroll, sick leave, and other business obligations. Borrowers do not have to repay these advances, even if they are subsequently denied the EIDL.

The CARES Act also provided $17 billion in funding to SBA to cover the principal, interest, and any associated fees that small businesses owe on certain loans for a 6-month period. [400] Further, it provided $240 million in grants for selected SBA resource partners to provide counseling, training, and education on SBA resources and business practices related to COVID-19.

Overview of Key Issues

The CARES Act created new SBA programs and expanded existing ones, but some experienced implementation challenges. These programs include the following:

EIDL and EIDL Advances. SBA closed its application portal and stopped accepting new EIDL applications on April 15, 2020 (see figure below). The next day the agency announced that the lending authority for EIDLs and the funding for EIDL advances had been exhausted. In the Paycheck Protection Program and Health Care Enhancement Act enacted on April 24, 2020, Congress appropriated an additional $50 billion in loan subsidy for EIDLs and $10 billion for EIDL advances. [401] With this additional funding, on May 4, 2020, SBA resumed processing previous applications and accepting new applications from agricultural enterprises only.

Timeline for the Economic Injury Disaster Loan Program, as of June 15, 2020

As of June 11, 2020, SBA had approved about 1.3 million EIDLs totaling about $91 billion, or an average of about $68,000 for each loan. According to SBA officials, this was more EIDLs than SBA had approved for all previous disasters combined. As of June 11, 2020, SBA had processed about 3.2 million advances totaling about $11 billion, or an average of about $3,300 for each advance.

Both the EIDL and EIDL advance programs encountered various challenges, including:

  • Information technology: SBA’s application portal exposed applicant data, and some applicants had to reapply to the program when SBA transitioned to a new application system. Prior to the CARES Act, SBA accepted EIDL applications on its Disaster Loan Application Portal. SBA shut down this portal on March 25, 2020, after the data incident. [402] The next day, SBA provided a temporary solution that allowed applications to be submitted via a document-hosting service. Subsequently, SBA launched a new application portal with a streamlined application. According to SBA officials, the agency asked applicants that had not yet been processed in the old system to reapply through the new portal because their applications would be processed faster and they would be able to request an EIDL advance. SBA officials also told us that those that reapplied kept their original position in the application queue.
  • Size of loans and advances: SBA placed limits on the size of both EIDLs and EIDL advances. SBA’s standard operating procedures for EIDL state that the legislative limit of $2 million applies to EIDLs, depending on the financial effect of the disaster. [403] According to SBA officials, when SBA first began to provide EIDLs related to COVID-19, it limited the loans to 6 months of working capital up to a maximum of $500,000. They then noted that as SBA began to process thousands of applications, the agency lowered the cap to $15,000 for several days as it monitored available funding before restoring the maximum to $500,000. The officials told us that when SBA reopened its EIDL application portal on May 4, 2020, the agency established the maximum loan amount at $150,000 where it has remained. In addition, SBA announced on April 13, 2020, that all advances would be limited to $1,000 per employee up to a maximum of $10,000. [404] According to SBA officials, they took these steps to provide assistance to as many small businesses as possible with the funds available. SBA officials also said that the change in the applicant’s financial condition attributable to the effect of the disaster is often less than the loan limits. However, the U.S. Chamber of Commerce, for example, has stated that low limits would result in insufficient funding for many small businesses.
  • Processing times: Businesses reported delays in receiving loans and advances from SBA. For example, representatives from a small business association we interviewed stated that some applicants had not received their loans or advances more than a month after submitting an application. SBA officials said that as loan requests reached historical levels, it eliminated projections for EIDL processing times. The CARES Act requires SBA to provide EIDL advances to applicants within 3 days after receiving an application. However, SBA officials stated that the agency faced challenges in processing the advances in the 3 days required by the CARES Act. But they noted that they established the new advance program in 7 business days and were able to disburse over $10 billion in advances in about a month. To improve processing of both loans and advances, the officials told us that SBA increased its staffing, made process improvements, and improved its technology.
  • Lack of communication: Business owners have reported a lack of communication from SBA, contributing to their uncertainty about future planning. For example, representatives from a small business association said that its members were frustrated with the lack of communication from SBA regarding their application status. SBA officials said that although the application portal does not show an applicant’s status, applicants could contact SBA call center agents for status updates and that SBA sends emails at different stages of the process to applicants. Additionally, SBA has not provided important program information, such as the maximum amounts it has imposed on the loans, on its website or in announcements. However, SBA officials said that applicants become aware of such information when they engage with a SBA loan officer or are preliminarily offered a loan amount.

Other SBA programs. The CARES Act supported other SBA programs such as:

  • Debt relief for certain 7(a) loans, 504 loans, and microloans: The CARES Act appropriated $17 billion to pay the principal, interest, and any associated fees that small businesses owe on these loans for a 6-month period. [405] SBA has issued implementation notices for these programs.
  • Funding for Small Business Development Centers and Women’s Business Centers: The CARES Act appropriated $240 million for grants to SBA resource partners for small business education and counseling and $25 million for resource partner associations to establish a centralized hub for information related to COVID-19 disruptions and a related training program. [406] SBA published funding opportunities in April 2020.

GAO Methodology and Agency Comments

To conduct this work, we reviewed SBA documentation on the programs and interviewed SBA officials. In addition, we interviewed officials from six associations that represent a variety of lenders and an association that represents small businesses. Their views are not generalizable to other lender and small business associations but offered important perspectives.

SBA provided written comments on the draft report, which we summarize in the agency comments section of the report. The agency also provided technical comments that we incorporated as appropriate.

Contact Information: William B. Shear, (202) 512-4325, shearw@gao.gov

Related GAO Products

Small Business Administration: Disaster Loan Processing Was Timelier, but Planning Improvements and Pilot Program Evaluation Needed, GAO-20-168 . Washington, D.C.: February 7, 2020.

Small Business Administration: Agency Has Controls to Comply with Paperwork Reduction Act but Could Improve Accessibility and Consistency of Disaster Loan Information, GAO-17-67 . Washington, D.C.: November 21, 2016.

Small Business Administration: Additional Steps Needed to Help Ensure More Timely Disaster Assistance, GAO-14-760 . Washington, D.C.: September 29, 2014.

Paycheck Protection Program

The Paycheck Protection Program was designed to give assistance to small businesses and other organizations that were affected by COVID-19.

Entities involved: Small Business Administration, Department of the Treasury

Key Considerations and Future GAO Work

To ensure program integrity, achieve program effectiveness, and address potential fraud in the program, we recommend that the Small Business Administration (SBA) develop and implement plans to identify and respond to risks in the Paycheck Protection Program (PPP), including in loans of $2 million or less.

We have additional work underway on PPP, including on the types of lenders making PPP loans, the borrowers receiving the loans, and the safeguards that SBA has implemented to help ensure that lenders and borrowers complied with program requirements.

Background

There are more than 30 million small businesses in the United States, many of which have been adversely affected by COVID-19. The CARES Act appropriated $349 billion for PPP under SBA’s 7(a) small business lending program. [407] PPP loans are low-interest loans that will be forgiven if certain conditions are met. [408] Key features of PPP loans include:

  • Eligibility. In addition to 7(a) eligible businesses, the following are eligible: a business, 501(c)(3) nonprofit organization, 501(c)(19) veteran's organization, or tribal business that has 500 or fewer employees or, if applicable, the SBA's size standard for the number of employees for the industry in which they operate; sole proprietors; independent contractors; and eligible self-employed individuals. [409]
  • Rate and terms. PPP provides loans with a 100 percent SBA loan guarantee. As implemented by SBA, PPP loans have a maximum term of 2 years and a 1 percent interest rate. [410]
  • Usage. Loans can be used for payroll and non-payroll costs. Payroll costs include compensation to employees; payments for vacation, parental, family medical, or sick leave; and payments for the provision of employee health and retirement benefits. Non-payroll expenses include costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave; mortgage interest payments; rent payments; utility payments; and interest payments on any other debt obligations that were incurred before February 15, 2020. As originally implemented by SBA, at least 75 percent of the loan proceeds must have been used for payroll costs. However, the Paycheck Protection Program Flexibility Act of 2020 modified this limit to at least 60 percent.
  • Participating lenders. In addition to approved 7(a) lenders, additional authorized lenders determined by SBA and the Department of the Treasury (Treasury) to have the necessary qualifications to process, close, disburse, and service loans under PPP can participate. [411]

Overview of Key Issues

Implementation status. On April 3, 2020, SBA began administering PPP in collaboration with Treasury, and the $349 billion originally appropriated in the CARES Act for the program was obligated by April 16, 2020. [412] On April 24, 2020, Congress appropriated an additional $321 billion for PPP through the Paycheck Protection Program and Health Care Enhancement Act, for a total of $670 billion. [413] On April 27, 2020, SBA resumed accepting new applications for the program.

Approved loans. As of June 12, 2020, lenders had made about 4.6 million loans totaling about $512 billion, using up about 76 percent of the available funds. [414] This greatly exceeded all of SBA’s lending under the 7(a) program in fiscal years 1990-2019 combined. [415]

Lenders. As of June 12, 2020, about 5,500 lenders had made PPP loans. [416] About 65 percent of the lenders were banks with less than $1 billion in assets, and about 17 percent were nonbanks. [417]

Loan amounts. As shown in the table below, about 86 percent of loans (about $137 billion) were for loans of $150,000 or less; however, the almost 2 percent of loans that were greater than $1 million (about $180 billion) accounted for 35 percent of funds, as of June 12, 2020.

Number, Dollar Amount, and Distribution of Paycheck Protection Program Loans, as of June 12, 2020
Amount of loan (dollars) Number of approved loans Approved dollars ($) Percent of approved loans (%) Percent of approved dollars (%)
150,000 and less 3,926,477 136,683,699,300 85.8 26.7
150,001 - 350,000 370,507 83,240,884,629 8.1 16.2
350,001 - 1,000,000 197,277 112,238,433,258 4.3 21.9
1,000,001 - 2,000,000 52,586 72,856,742,215 1.1 14.2
2,000,001 - 5,000,000 24,734 73,523,496,712 0.5 14.4
More than 5 million 4,807 33,728,428,031 0.1 6.6
Total 4,576,388 512,271,684,145 100 100
Source: Small Business Administration | GAO-20-625

Distribution of funds. As of June 12, 2020, businesses in six states had received $20 billion or more in loans totaling 33 percent (or about $218 billion) of the appropriated funds.