prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: WMATA was created in 1967 through an interstate compact—matching legislation passed by the District of Columbia, state of Maryland, and Commonwealth of Virginia, and then ratified by Congress—to plan, develop, finance, and operate a regional transportation system in the National Capital area  A board of eight voting directors and eight alternate directors governs WMATA  The directors are appointed by the District of Columbia, Virginia, Maryland, and the federal government, with each appointing two voting and two alternate directors  WMATA operates six rail lines—the Red, Orange, Blue, Green, Yellow, and Silver Lines—connecting various locations within the District of Columbia, Maryland, and Virginia  WMATA’s rail system has 118 linear miles of guideway: 51 miles of subway, 58 miles at ground level, and 9 miles on aerial structures  WMATA’s capital investments are funded through multiple sources  These include a combination of grants it receives from the federal government, along with matching funds and other contributions it receives from the states and local jurisdictions in which it operates (see fig  1)  From fiscal years 2011 through 2017, WMATA received about $5 8 billion in capital funding  Over half of this funding came from the federal government ($3 2 billion), and state and local jurisdictions provided 41 percent ($2 4 billion)  WMATA also took on about $230 million in long- term debt to finance its capital program during this time period  The federal funding included grant awards, in addition to annual appropriations authorized under PRIIA  In 2008, PRIIA authorized $1 5 billion to WMATA, available in increments over 10 years beginning in fiscal year 2009, or until expended, for capital improvements and preventive maintenance  PRIIA funding and certain federal grants require state or local jurisdictions to provide matching funds  Additionally, a large portion of funding from state and local jurisdictions is governed by capital-funding agreements, which are periodically negotiated between WMATA and the states and localities  From fiscal years 2011 through 2017, state and local jurisdictions contributed on average about $340 million annually to WMATA, generally for capital purposes  The annual capital contributions from the jurisdictions are expected to more than double as a result of the recent legislation enacted by the District of Columbia, Maryland, and Virginia in 2018  In addition, WMATA officials told us that it will have the ability to further leverage this dedicated funding and issue debt to finance its capital projects  WMATA has several steps in its capital planning process  These include developing the following: Capital Needs Inventory  WMATA periodically identifies its capital investment needs in this inventory  WMATA issued a Capital Needs Inventory in February 2010 and another in November 2016, each covering a 10-year period  According to WMATA, Capital Needs Inventories help inform the annual capital budget and capital improvement program  Annual Capital Budget  Each year, WMATA prepares an annual capital budget, which identifies projects WMATA plans to undertake in the next fiscal year  WMATA’s fiscal year 2019 annual capital budget was approved by the board of directors at $1 3 billion  Six-Year Capital Improvement Program  Within WMATA’s annual capital budget, WMATA includes a Six-Year Capital Improvement Program identifying capital projects WMATA plans to implement over a 6-year period  WMATA’s most recent Six-Year Capital Improvement Program (covering the fiscal year 2019—2024 period) was approved by the board of directors at $8 5 billion  According to WMATA officials, WMATA is currently implementing a new capital planning process through which it will develop its fiscal year 2020 Capital Budget and fiscal year 2020-2025 Six-Year Capital Improvement Program  WMATA adopts and implements the capital budget by June 30 for the new fiscal year, which begins on July 1  The fiscal year 2020 Capital Budget is scheduled to be adopted and implemented by June 30, 2019  Among other things, the goals and objectives of this new capital planning process are to construct an objective, data-driven, and risk-based approach to estimate major rehabilitation and capital asset replacement needs; build a capital investment prioritization methodology aligned with WMATA’s strategic goals and grounded in asset inventory and condition assessments; and develop a process that will support the construction and ongoing stewardship of its Transit Asset Management Plan  The latter is discussed in more detail below  WMATA has also recently undertaken efforts to address issues related to the condition and maintenance of its track  After SafeTrack concluded in June 2017, WMATA implemented what officials describe as its first track preventive maintenance program designed to incorporate industry-wide best practices related to track maintenance, in order to improve the rail system’s long-term safety and reliability  The new program commenced in June 2017, and WMATA’s board reduced late-night service to allow for longer maintenance work hours  To make the best use of the extra maintenance hours, WMATA focused its new program on six separate initiatives that together would address what WMATA viewed as its two most pressing track maintenance concerns—electrical fires caused by cable and insulator defects along the track wayside, and defects to the track itself, including unsecured rail fasteners and worn track switches (see table 1)  These initiatives are planned to cover the entire transit system and will take various amounts of time to complete  FTA also plays a role in WMATA activities by providing and directing the use of federal funds, overseeing safety, and requiring transit asset management  FTA provides grants that support capital investment in public transportation, consistent with locally developed transportation plans, and has provided such funding to WMATA as noted above  Additionally, though states play a role in safety oversight of rail transit systems through state safety oversight programs, FTA also has the authority to conduct various safety oversight activities such as inspections and investigations  Furthermore, FTA has the authority to assume temporary, direct safety oversight of a rail transit system if it finds the state safety oversight program is inadequate, among other things  After FTA conducted a safety management inspection and issued a safety directive with 91 required actions, it found WMATA’s state safety- oversight program to be inadequate and assumed direct safety-oversight of WMATA in October 2015  Finally, FTA is responsible for assisting public transportation systems to achieve and maintain their infrastructure, equipment, and vehicles in a state of good repair  Specifically, in July 2016, FTA issued regulations establishing a National Transit Asset Management System  Applicable transit agencies were required to have an initial transit asset management plan completed by October 1, 2018  For “tier I providers,” such as WMATA, this plan is to contain nine elements, including an inventory of the number and type of capital assets, and a condition assessment of those inventoried assets for which a provider has direct capital responsibility  WMATA completed its Transit Asset Management plan, dated October 1, 2018  This plan outlines WMATA’s policy, approach, and targeted actions to improve its asset management practices over the next 4 years  WMATA expends its capital funds on a variety of capital assets as part of its capital budget and Capital Improvement Program  From fiscal year 2011 through 2017, WMATA expended approximately $5 9 billion on capital investments  Of this amount, WMATA expended the largest portion on assets related to the replacement, rehabilitation, and maintenance of its revenue vehicles (railcars, buses, and vans) and lesser amounts on other categories of assets, as discussed below and shown in figure 2  Rail and Bus Vehicle Fleet: WMATA expended approximately $2 16 billion (36 percent) of the total $5 9 billion on projects related to its rail and bus fleet from fiscal years 2011 through 2017  The $2 16 billion included approximately $1 1 billion (51 percent) on replacing, expanding, and rehabilitating its rail fleet and approximately $956 million (44 percent) on its bus fleet  According to WMATA, it initiated its railcar replacement program in 2005 to increase capacity and reduce maintenance costs  In addition, a June 2009 Red Line collision of two trains near Fort Totten resulted in nine deaths and led the NTSB to recommend that WMATA retire and replace all 1000 series railcars  From fiscal year 2011 through 2017, WMATA expended almost $656 million on replacing these and other railcars and expanding its overall fleet  This effort includes WMATA’s planned purchase of a total of 748 new 7000-series railcars (see fig  3)  Approximately $530 million was expended on replacing vehicles from fiscal years 2015 through 2017  For example, in fiscal year 2017 WMATA accepted delivery of about 50 percent (364 railcars) of its planned purchase of 748, 7000-series railcars  WMATA expects to complete its current railcar replacement program by fiscal year 2024, with an estimated total program cost of about $1 7 billion  Fixed Rail Infrastructure: WMATA expended about $1 23 billion of the total $5 9 billion (21 percent) to maintain its fixed-rail infrastructure  Of this $1 23 billion, WMATA expended about $650 million (53 percent) on rail infrastructure and rehabilitation projects and $573 million (47 percent) on improvements to its track and structures (e g , bridges and tunnels)  According to WMATA, the rail infrastructure and rehabilitation projects began in 2009 and were the first comprehensive rehabilitation of WMATA’s rail infrastructure in its history  Typical projects included rehabilitating WMATA’s water drainage pumps and tunnel ventilation, fire, and communications systems, among other things  WMATA work related to track and structures involved the maintenance and rehabilitation of the steel rail that guides railcars, the cross ties and fasteners that hold the rail in place, the third rail that provides power to trains, and the bridges and tunnels the track runs on or through  The share of WMATA’s total capital expenditures going to track and structures increased from about $80 million in fiscal year 2016 to $158 million in fiscal year 2017  This expenditure was primarily to implement SafeTrack  Maintenance Facilities and Equipment: WMATA expended approximately $1 1 billion of the total $5 9 billion (19 percent) on assets related to maintenance facilities and equipment, which include rail yards, bus garages, and equipment used to rehabilitate and maintain WMATA’s track and vehicle fleet  For example, from fiscal years 2011 through 2017 WMATA expended approximately $75 million in constructing the Cinder Bed Road bus maintenance facility in Lorton, Virginia  Passenger and Other Facilities: WMATA expended about $814 million of the total $5 9 billion (14 percent) on passenger, business, and security support facilities  Such facilities include rail and bus stations, police facilities, and elevator and escalator rehabilitation  Business Systems and Project Management Support: WMATA also expended about $628 million of the total $5 9 billion (11 percent) on assets related to operations and business support software and equipment  From fiscal years 2011 through 2017, WMATA frequently over-estimated in its annual budgets the annual amount of capital investments it could implement (see fig 4)  Out of the approximately $7 5 billion that WMATA budgeted for capital investments over this period, it expended approximately $5 9 billion (80 percent)  WMATA’s ability to fully expend its capital budget has varied from year to year  Specifically, WMATA expended about 65 percent ($700 million) of its $1 1 billion capital budget in fiscal year 2015, compared with 85 percent ($1 1 billion) of its $1 2 billion capital budget in fiscal year 2016  In fiscal year 2017, WMATA expended nearly 100 percent of its $1 18 billion capital budget  WMATA attributed the increased expenditures to intensified efforts to address deferred maintenance, primarily through the SafeTrack initiative and an increased delivery and acceptance rate for the new 7000-series railcars, among other things  The total amount expended in fiscal year 2017 to replace the older railcars with new vehicles totaled about $335 million  According to WMATA, there are a number of reasons why it has not fully expended its capital budget in any given year: Contracting and Scheduling Issues: WMATA officials stated that there were contract and scheduling delays in the implementation of planned capital projects  For example, WMATA officials said contracts were sometimes not executed during the fiscal year in which funds were originally budgeted for the work, and in other instances contract work was not carried out according to schedule and expenditures were delayed  Changing Priorities: WMATA officials stated that in some instances, the reevaluation and reprioritization of contracted projects affected WMATA’s ability to expend its capital budget  In such cases, new capital needs were sometimes identified and prioritized over other needs, which caused delays in work schedules and potential financial claims by contractors due to delays  For example, WMATA stated that in fiscal year 2011 the initiation of the Red Line rehabilitation program was delayed as a result of the prioritization of the safety needs in response to the 2009 Fort Totten accident  Federal Reimbursement Restrictions: WMATA officials cited FTA restrictions on its reimbursement of federal funds between fiscal years 2014 and 2015 as a reason for its inability to expend budgeted capital funds in those years  In a financial management oversight review completed by FTA in 2014, FTA found material weaknesses and significant deficiencies in WMATA’s financial management controls, policies, and procedures regarding its receipt of federal grant funds  Based on these preliminary findings, FTA restricted WMATA’s ability to automatically access federal grant reimbursements until WMATA undertook corrective actions  During these years, WMATA reported its management slowed expenditures on targeted capital projects due to concerns over reimbursement of grants  By October 2017, after WMATA implemented an action plan to improve its financial controls, FTA reinstated WMATA’s ability to automatically receive all awarded federal funds on a regular schedule  Unpredictable Funding: WMATA officials stated that unpredictable funding affected the level of its capital expenditures from year to year  Since WMATA had multi-year capital projects with multi-year procurements, according to WMATA officials, uncertainty with regard to how much capital funding would be received on an annual basis affected the implementation of projects  Inadequate Capital Planning Process: WMATA attributed some of its inability to expend budgeted capital funds to the absence of a uniform and efficient capital planning process  According to WMATA, it lacked formal procedures to initiate projects and newer projects often experienced delays in implementation, which delayed expenditures on these projects  Later in this report, we discuss WMATA’s efforts to develop a new capital planning process  Although WMATA expended more of its capital budget in fiscal year 2017 than it had in prior years, it estimated that capital spending will need to increase even more to address state-of-good-repair needs  In 2016, WMATA projected that its state-of-good-repair needs amounted to about $17 4 billion from 2017 through 2026  This level is almost $10 billion more than WMATA estimated for its state-of-good-repair needs from 2011 through 2020 in its February 2010 Capital Needs Inventory  WMATA officials attributed the increase to a capital planning process insufficient to identify capital needs and an increase in cost of needs that were previously unmet  In addition, WMATA officials said the quality and quantity of asset data had improved over time  To address its state-of- good-repair needs, in November 2016 WMATA estimated that it will need to expend about $1 74 billion annually on capital expenditures from 2017 through 2026  This is more than twice the $845 million average annual capital expenditures from fiscal year 2011 through fiscal year 2017  WMATA’s new capital planning process could address some of the weaknesses it identified in the previous process, such as better distinguishing capital needs (investments in groups of related assets) from capital projects (investments in specific assets)  However, WMATA has not established documented policies and procedures to guide the developed performance measures to assess capital projects and the capital planning process; and developed a plan to obtain complete information about the inventory and condition of WMATA assets  These remaining weaknesses could hinder sound capital investment decisions  WMATA’s new capital planning process could facilitate better identification of capital investment needs  Leading practices for capital planning, among other things, call for an organization to conduct a comprehensive assessment of its needs to meet its mission  WMATA uses the Capital Needs Inventory to assess its capital needs over a 10- year period across its various assets and help identify specific projects to include on subsequent capital improvement programs  In November 2016, WMATA issued its most recent Capital Needs Inventory, covering calendar year 2017 through 2026, and reported there were weaknesses and limitations in the process used to prepare the previous Capital Needs Inventory, issued in 2010  Those weaknesses and the actions WMATA has taken to address them include the following: Distinguishing capital needs from capital projects  WMATA reported in 2016 that the 2010 Capital Needs Inventory was primarily a list of proposed projects and did not provide proper attention to evaluating WMATA’s overall asset needs and the readiness of projects for programming in the capital improvement program  WMATA has taken actions to potentially address this weakness  In April 2016, WMATA issued a policy/instruction document that established policies and procedures for preparing capital needs inventories  This document defined the process for capital needs identification and established a framework evaluating and prioritizing capital investment needs  Among other things, this framework requires that WMATA departments develop capital needs justification packages and that these packages be reviewed by the Capital Program Advisory Committee for completeness and accuracy before being forwarded for further review  The guidance also requires that WMATA’s strategic objectives be considered when identifying and prioritizing capital projects  Qualitative rather than quantitative prioritization of needs  In 2016, WMATA reported that the prioritization of capital needs in the 2010 Capital Needs Inventory was primarily based on qualitative assessments by management rather than being driven by quantitative information and condition assessments  According to WMATA, the 2010 Capital Needs Inventory was largely based on the professional judgment of staff in consideration of WMATA’s strategic goals but was not data-driven  WMATA has taken actions to address this weakness by issuing a policy that requires WMATA’s senior management serving on the Capital Program Advisory Committee to use a more quantitative-based capital prioritization formula in preparing the Capital Needs Inventory  For example, the November 2016 Capital Needs Inventory used a quantitative approach to rank and prioritize capital needs  This approach included the use of four criteria—asset condition, safety and security, service delivery, and ridership impact— to numerically score capital needs and WMATA then used a risk- based weighting approach to combine these criteria into a single overall prioritization score  While WMATA has addressed some weaknesses it identified in its prior planning, it has not established documented policies and procedures to guide the annual capital planning process, or developed measures to assess capital project and program performance and a plan to obtain complete information on its assets and their physical condition  Although WMATA established policies and procedures for prioritizing capital needs—that is, investments in groups of related assets—for the 2016 Capital Needs Inventory, it has not established documented policies and procedures for the new capital planning process, including how WMATA will rank and select individual projects to address those needs through its annual capital budgets and Six-Year Capital Improvement Program  For example, through its Capital Needs Inventory WMATA stated it needed to invest $17 4 billion over a 10-year period to address its state-of-good-repair needs, including replacing vehicles, rehabilitating stations, and investing in other types of assets  WMATA uses the annual capital budget and Six-Year Capital Improvement Program to identify the specific projects to be funded to meet the 10-year investment needs  However, because WMATA has not established documented policies and procedures for the new capital planning process, it has not yet identified the specific methodologies to rank and select projects for funding on an annual basis  According to WMATA officials, the legacy annual capital planning process was based on implementing the list of projects that resulted from its 2010 Capital Needs Inventory and WMATA did not have a documented capital planning process that it followed on an annual basis  WMATA officials told us that the legacy capital planning process was “ad hoc” in nature, in part because WMATA was reacting to emergencies  For example, because WMATA needed to address the NTSB recommendation to replace the 1000-series railcars and address FTA safety directives after the 2015 smoke incident at the L’Enfant Plaza Station, it did not adhere to a formal annual-planning process  The COSO internal control standards point out the importance of organizations documenting their processes to facilitate retention and sharing of organizational knowledge  Leading practices contained in the Executive Guide also recommend that organizations have defined processes for ranking and selecting projects for capital funding  In addition, the Executive Guide noted that organizations find it beneficial to rank projects because the number of requested projects often exceeds available funding  Officials from all five of the peer transit agencies we spoke with told us they had or planned to develop documented processes for making capital investment decisions  For example, officials from four of the five peer transit agencies we spoke with said they use a project scoring and ranking system in their capital planning process, and officials from the fifth agency told us it plans to develop such a system  Officials from one agency provided us with its project evaluation and scoring system that assigns scores using eight selection criteria that are tied to the agency’s strategic business plan and state priorities  The selection criteria include such things as system preservation, safety, and cost-effectiveness  Officials from another agency told us they use an analytical tool to score projects and that every project (new or existing) gets re-scored annually  As a result of WMATA not having documented policies and procedures for its capital planning process, it is unclear how important parts of the process will work and the basis for WMATA’s investment decisions  WMATA has outlined some high-level policies for the capital planning process and prepared limited guidance for certain parts of the process  For example, WMATA officials told us that its recently issued Transit Asset Management Plan contains asset management policies that address the ranking and selecting of capital projects  Although the Transit Asset Management Plan discusses the process for estimating and prioritizing capital needs and, which are precursors of projects, the plan does not specifically address how projects would be selected for annual capital budgets and the capital improvement program  In addition, WMATA developed limited guidance for staff to use in developing new capital projects  Under this guidance, capital funds could be provided to evaluate, plan, and develop projects  While this guidance may be useful for developing projects, it does not establish the policies and procedures WMATA will follow to decide which projects will be funded through the annual capital budget and the capital improvement program  Further, the documentation prepared by WMATA to date does not establish policies and procedures for the entire capital planning process and how decisions will be made throughout the process  WMATA reported in its fiscal year 2019 annual budget that it had created a capital program manual that identifies the roles, responsibilities, processes, and calendars of events to inform the fiscal year 2020 capital program  WMATA officials told us that the previous Director of the Capital Planning and Program Management Department had included this information in the draft budget proposal when these documents were being developed  However, WMATA officials told us that these documents were not completed, and that the information was mistakenly not removed from the budget before the previous director of the department left the agency  WMATA officials told us they plan to formalize policies, procedures, and manuals for the fiscal year 2021–2026 capital-investment program cycle  The current leadership of the Capital Planning and Program Management Department told us that given the time-constraints facing WMATA in the current fiscal year 2020 planning cycle, WMATA decided not to formally document the new capital planning process until after WMATA has had a chance to test it through the current planning cycle to see how it works  According to the official, the department’s leadership has instructed staff to document steps taken in implementing the new process so that WMATA will have the opportunity to learn from the new process and make necessary changes before developing formal, written procedures that will guide future planning cycles  Although delaying formal development of policies and procedures may provide an opportunity to learn from the process while implementing it, it does not provide the guidance necessary now as WMATA uses its new capital planning process to develop the fiscal year 2020 capital program  In particular, because WMATA has not established policies and procedures for ranking and selecting projects, WMATA does not have a framework or clear criteria for programming projects in the annual capital budget for fiscal year 2020  WMATA has proposed a fiscal year 2020 capital budget of $1 4 billion  In addition, WMATA’s plan to document steps taken in implementing the new process as it is occurring does not provide reasonable assurance that WMATA is making decisions using a consistent process to direct investments toward WMATA’s highest priority needs  A consistent process is all the more important to ensure that WMATA does not continue to use an ad-hoc process for capital investment decisions, as it did in its legacy process  WMATA’s annual capital spending is anticipated to increase substantially over the fiscal year 2020-2025 period, as WMATA expects to be programing the additional $500 million annually for capital purposes committed by the District of Columbia, Maryland, and Virginia  Without a documented planning process that includes procedures for ranking and selecting projects for funding in the fiscal year 2020 capital budget, WMATA’s stakeholders lack reasonable assurance that WMATA’s capital investment decisions will be made using a sound and transparent process  WMATA has also not developed performance measures to assess capital projects and the capital planning process  Leading practices from the Executive Guide suggest that one way to determine if a capital investment achieved the benefits that were intended when it was selected is to evaluate its performance using measures that reflect a variety of outcomes and perspectives  By looking at a mixture of measures, such as financial improvement and customer satisfaction, managers can assess performance based on a comprehensive view of the needs and objectives of the organization  Leading organizations we studied in preparing the Executive Guide, such as private sector companies, use financial and non-financial criteria for success that are tied to organizational goals and objectives  According to the Executive Guide, project-specific performance measures are then used to develop unit performance measures and goals, which are ultimately used to determine how well an organization is meeting its goals and objectives  WMATA officials told us they have not developed performance measures for assessing the performance of individual projects or the capital planning process as a whole  One WMATA official told us that WMATA would like to evaluate results of the new capital planning process to determine whether organizational goals have been met  The official suggested that WMATA would work with a consultant to demonstrate a linkage between capital planning goals and WMATA’s organizational goals  However, the official did not indicate when this step would occur or provide additional information  Moreover, it is unclear whether the official’s intentions for this effort would result in measures for assessing individual projects as well as the overall capital planning process  By developing measures, WMATA will be better positioned to assess whether specific capital investments met their intended outcomes or if the capital planning process itself is helping WMATA achieve its strategic goals and objectives and effectively using taxpayer funds  WMATA also does not have a complete inventory or physical condition assessments of its assets  Leading practices for good capital decision- making call for organizations to conduct a comprehensive assessment of their needs and identify the organization’s capabilities to meet these needs  This process includes taking an inventory of assets and their condition and assessing where there are gaps in meeting organizational needs  The Transit Cooperative Research Program has also identified asset inventory and condition assessments as the first step in determining what asset rehabilitations and replacements are needed as transit providers address their state-of-good-repair requirements  Asset inventories and condition assessments provide critical information for capital-investment decision making  WMATA has initiated various efforts to obtain better information about its assets and their condition  These efforts have included: Transit Asset Inventory and Condition Assessment Project  In 2016, WMATA began this project to provide a physical inventory of WMATA assets and their condition, in part to comply with FTA’s Transit Asset Management regulations  According to WMATA, this project was to be the cornerstone in ensuring a complete, consistent, accurate, and centralized repository of relevant asset-related data  However, WMATA officials said that the project primarily focused on obtaining an inventory and condition assessment of WMATA facilities and equipment  A February 2018 WMATA memo to senior management stated that even when the project was completed, WMATA would still lack a robust database of track, guideway, infrastructure (e g , tunnels and bridges), systems, and communication assets—elements that the November 2016 Capital Needs Inventory noted were the largest gaps in the asset information used to support capital needs forecasting  According to WMATA, this project produced inventory and condition assessments for about 30 percent of WMATA’s asset base  As of October 2018, WMATA considered the project complete since it provided information to help prepare WMATA’s completed Transit Asset Management Plan, dated October 1, 2018  WMATA officials noted that they will continue to develop their asset inventories and condition assessments through its new Enterprise Asset Management Program, described below  Enterprise Asset Management Program  In December 2017, WMATA began development of an Enterprise Asset Management Program  According to WMATA, this program is an effort to institutionalize asset management practices that are aligned with industry best practices to provide, among other things, high quality asset data for informed decision-making, including for capital planning
Report 2:  Better selection criteria for its lender reviews could, in turn, improve identification and remediation of such noncompliance, helping ensure that the 7(a) program serves its target population  Representatives at 8 of the 11 lenders that we contacted said they believed that SBA’s current credit elsewhere criteria are adequate in targeting small business borrowers who cannot obtain credit at reasonable terms  Representatives of these lenders also agreed that the criteria generally serve the types of small businesses that would otherwise have trouble obtaining conventional credit, such as new businesses or those with a shortage of collateral  One lender representative told us its most commonly used criterion related to the overall time in business because of the higher risk of failure  Another lender representative cited the lack of collateral as the most common criterion used  Additionally, representatives at an industry association told us that one of the most commonly used criteria was the one related to loan maturity and many small businesses seek 7(a) loans because they offer repayment terms of up to 10 years, compared to 1 to 3 years for conventional loans  Representatives of two other lenders suggested that the credit elsewhere criteria should not be overly prescriptive, which could limit lenders’ ability to make 7(a) loans to some businesses  For example, one representative said the credit elsewhere criteria should remain flexible because banks have different lending policies  In addition, representatives at three lenders indicated that they were hesitant to use the “other factors” criterion  One lender believed the requirement was open to interpretation and could be used inappropriately with lenders determining their own individual conventional loan policies  Another lender commented that the criterion was vague and rarely used by his institution, noting that SBA should provide some additional guidance on its use  Lenders consider multiple factors in determining whether to offer small businesses a conventional loan or a 7(a) loan, according to stakeholders with whom we spoke  For example, representatives at an industry association stated that a bank goes through several analyses to determine what loan product to offer the borrower  These representatives stated that the credit elsewhere requirement is embedded in the analysis a bank performs, such as whether the borrower qualifies for a loan and has a financial need for an SBA loan and whether the 7(a) program is right for that borrower  Representatives at two other lenders also stated that many small businesses have already been turned down for conventional loans before they seek a 7(a) loan  One representative noted that the “reasonable rates and terms” component of the 7(a) program was important as it allows lenders to look more broadly at a borrower’s needs  For instance, the representative explained, lenders can assess whether repayment terms are reasonable given a particular borrower’s situation and the resources the borrower will have to repay the loan  Economic conditions also affect lending policies, including whether borrowers qualify for a conventional loan, according to representatives at seven lenders with whom we spoke  For example, during the recent economic downturn, banks tightened their underwriting standards for small businesses and were less willing to lend without a government guarantee, according to one lender representative  SBA has issued revised primary operational guidance for the 7(a) program, effective January 1, 2018  As discussed previously, lenders are required to make a determination that the desired credit is not available to the applicant from nonfederal sources  Under the previous guidance, the lender had to determine that some or the entire loan was not available from nonfederal sources or the resources of the applicant business  However under the revised guidance, the scope of nonfederal sources a lender must review was further defined to include sources both related and unrelated to the applicant  The updated guidance states that lenders must consider: Nonfederal sources related to the applicant, including the liquidity of owners of 20 percent or more of the equity of the applicant, their spouses and minor children, and the applicant itself; or Nonfederal sources unrelated to the applicant, including conventional lenders or other sources of credit  Representatives of five lenders told us they have been determining how to interpret the new procedures with a few stating they would like additional guidance, including what information to retain in the file  Representatives of two lenders stated that there is some ambiguity in how to determine nonfederal resources and how to assess whether small business owners have too many available liquid resources to qualify for a 7(a) loan  One representative said that lenders can have different interpretations of what constitutes “available resources,” which is not specified in the new SOP  As a result, he said, there may be some confusion about how to assess family members of the borrower who have high net worths and whether the borrower should decline a family member contribution to qualify for an SBA loan  A representative of one lender stated that lenders will not know what SBA expects until loans are approved under the new procedures, default, and are then reviewed  Another lender’s representative suggested additional guidance on documentation, such as whether the bank must obtain a personal financial statement for each owner of the business  A SBA staff told us SBA has provided multiple training presentations to SBA staff, lenders, and trade associations on the statutory changes to the credit elsewhere requirements and standard operating procedure updates  These have included a presentation at a trade association conference, four monthly conference calls for SBA staff, and two conference calls for SBA lenders  SBA staff said SBA also plans to hold monthly training sessions with SBA field offices, quarterly training sessions with the industry, and at least four training sessions in 2018 at lender trade conferences  Additionally, a representative from an industry association told us it is providing industry training on SBA’s revised procedures, including the credit elsewhere liquidity requirement  SBA’s 7(a) loan program is required to serve creditworthy small business borrowers who cannot obtain credit through a conventional lender at reasonable terms, and SBA largely relies on lenders with delegated authority to make credit elsewhere determinations  However, although there is a high rate of lender noncompliance with the credit elsewhere documentation requirement, SBA does not require its reviewers to document their assessment of the policies and procedures lenders use to meet the requirement  Without better information from lender reviews on how lenders are implementing the requirement to document their credit elsewhere decisions, SBA may be limited in its ability to promote compliance with requirements and, in turn, use such information to help ensure that 7(a) loans are reaching their target population  Furthermore, SBA does not routinely collect or analyze information on the criteria used for credit elsewhere justifications to evaluate patterns in lender practices  SBA recently began collecting some information on lenders’ use of the criteria, but this information is limited, and SBA does not analyze the information that it does collect to better understand lenders’ practices  Without more robust information and analysis, SBA may be limited in its ability to understand how lenders are using the credit elsewhere criteria and whether 7(a) loans are reaching borrowers who cannot obtain credit from other sources at reasonable terms  We are making the following three recommendations to SBA  The Administrator of SBA should require reviewers to consistently document their assessments of a lender’s policies and practices  (Recommendation 1) The Administrator of SBA should use its on-site and off-site reviews to routinely collect information on lenders’ use of credit elsewhere criteria as part of its monitoring of lender practices related to the credit elsewhere requirement  (Recommendation 2) The Administrator of SBA should analyze information on lenders’ use of credit elsewhere criteria obtained from its reviews to identify lenders that may be at greater risk of noncompliance and to inform its selection of lenders for further review for credit elsewhere compliance  (Recommendation 3) We provided a draft of this report for review and comment  SBA’s written comments are reprinted in appendix IV  SBA generally agreed with the recommendations  SBA also provided additional comments on certain statements in the draft report, which are summarized below with our responses  SBA noted that the draft Highlights did not discuss how credit elsewhere is determined for nondelegated loans  We have not revised the Highlights in response to this comment because our review focused on delegated lenders  In the body of the report we note that approximately 70 percent of 7(a) loans are approved under delegated authority  We also refer to SBA’s nondelegated loans in the report for additional context  According to SBA, the statement on our draft Highlights did not fully reflect its monitoring of lender compliance  SBA identified a variety of reviews it uses in addition to on-site reviews by third party contractors, which we discuss in the body of the report  We have modified the Highlights to reflect these other reviews  Also in reference to the draft Highlights, SBA stated that it provides oversight on every on-site lender review and that an SBA employee is present as a subject-matter expert on every review  We revised the Highlights by adding that SBA provides oversight to the on-site reviews conducted by third-party contractors  In response to a statement in our draft report that SBA guarantees loans to small businesses for working capital and other general business purposes, SBA commented that working capital generally is not the primary purpose for SBA-guaranteed loans  We did not revise the statement because SBA’s SOP 50 10 5 (version J) specifies that SBA’s 7(a) loan proceeds may be used for permanent working capital and revolving working capital, among other things  In relation to a footnote in our report that mentions two lender reviews for which we did not receive documentation, SBA stated that on February 15, 2018, it provided documentation to us related to the reviews and that we had confirmed its receipt  However, the text in the footnote in question refers to two targeted lender reviews from 2016 that included corrective actions  The information SBA provided to us on February 15, 2018, was related to on-site reviews conducted in 2016  As a result, we did not revise the footnote  SBA’s letter also contained technical comments that we incorporated as appropriate  We are sending copies of this report to congressional committees, agencies, and other interested parties  In addition, this report will be available at no charge on our website at http://www gao gov  If you or your staff members have any questions about this report, please contact me at (202) 512-8678 or shearw@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix V  This report discusses (1) 7(a) lending to selected categories of small business borrowers from fiscal years 2007 through 2016; (2) how the Small Business Administration (SBA) monitors lenders’ compliance with the credit elsewhere requirement; (3) the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement; and (4) lenders’ views on the criteria used to determine eligibility for 7(a) loans and other issues related to the 7(a) program  For background on the 7(a) program and the credit elsewhere requirement, we reviewed the legislative history of the 7(a) program and our previous reports  We also interviewed officials from SBA’s Office of Credit Risk Management on guidance provided to 7(a) lenders  For background on constraints in the small business credit market, we reviewed recent academic literature on the characteristics of small businesses that historically have had more difficulty accessing credit  In addition, we reviewed recent studies published by the Federal Reserve Banks of Atlanta; Cleveland; Kansas City; and New York  To describe the population of borrowers served by the 7(a) program, we selected characteristics (such as gender, minority status, and percentage of new business) that we used in our 2007 report and that were the subject of the recent studies by Federal Reserve Banks  We obtained and analyzed SBA loan-level data to describe 7(a) loans and borrowers  Specifically, SBA provided us with 581,393 records from its administrative data systems, which contained information on all loans approved and disbursed in fiscal years 2007 through 2016  The SBA data included various types of information describing each loan, including the total gross approval amount; the amount guaranteed by SBA; the loan term; and the interest rate; delivery method; and status of the loan  The SBA data also included information on borrower characteristics: Age of business  Firms were classified as new (less than 2 years in operation) or existing  Gender  Firms were classified as 100 percent male-owned; 50 percent or greater women owned; 50 percent or less women-owned; or “unknown ” Information on gender was voluntarily provided by borrowers  Economically distressed area  We identified borrowers in economically distressed areas by matching borrower zip codes provided by SBA to those in the 2011 through 2015 American Community Survey  We defined distressed areas as zip codes where at least 20 percent of households had incomes below the national poverty line  In about 1 percent of the cases, we were unable to classify a lender because a zip code had changed or had insufficient population to report a poverty rate  We consider 1 percent of unmatched cases to be low by data reliability standards  Race/ethnicity  Borrowers were placed in one of nine categories of race/ethnicity, including an “unknown” category  We aggregated these to create minority, nonminority, and undetermined categories  The minority category included all borrowers who reported being a race/ethnicity other than white  The nonminority category included borrowers who reported being white  Information on race was voluntarily provided by borrowers  Industry  Firms were assigned a North American Industrial Classification code  These six-digit codes begin with a two-digit sector code that we used to draw more general conclusions about industries  Geographic information  The data provided the state where the borrower is located  In addition, we obtained information from SBA on loan- and lender-level Small Business Risk Portfolio Solution scores (predictive scores) provided by Dunn & Bradstreet and Fair Isaac Company, for loans approved in fiscal year 2016, the latest available  We were able to obtain predictive scores for approximately 81 percent of the loans for which SBA had provided other information  According to SBA, some loans may not have been disbursed at the time we obtained the predictive scores and, as a result, we do not have scores associated with these loans  We analyzed the information to determine the range of predictive scores and the range of average predictive scores by lender  To assess the reliability of loan-level data on borrower and loan characteristics and predictive scores we received from SBA, we interviewed agency officials knowledgeable about the data and reviewed related documentation  We also conducted electronic testing, including checks for outliers, missing data, and erroneous values  We determined that the data were sufficiently reliable for the purposes of describing the characteristics of borrowers who received 7(a) loans and the distribution of predictive scores  To assess how SBA monitors lenders’ compliance with the credit elsewhere requirement and criteria, we reviewed SBA’s standard operating procedures and other guidance on 7(a) program regulations and lender oversight  Specifically, we reviewed SOP 50 10 5 (versions I and J) on Lender and Development Company Loan Programs, SOP 50 53(A) on Lender Supervision and Enforcement, and SOP 51 00, On-Site Lender Reviews/Examinations, as well as information and policy notices related to the credit elsewhere requirement  Additionally, we interviewed representatives including those at SBA’s Office of Capital Access and Office of Credit Risk Management on lender oversight and lender review processes  We reviewed all the on-site lender review reports (40 reviews), including corrective actions or requirements related to the credit elsewhere requirement (documentation for 11 lenders), and targeted review reports that had credit elsewhere findings (7 reviews) that SBA conducted in fiscal year 2016  We also interviewed officials and reviewed recent reports from SBA’s Office of Inspector General  To assess the extent to which SBA evaluates trends in lender practices related to the credit elsewhere requirement, we interviewed SBA officials and reviewed documentation for SBA’s online portal for loan origination  We also incorporated information from interviews with a nongeneralizable, nonrepresentative sample of 7(a) lenders, which we discuss below  To obtain lenders’ views on the criteria used to determine eligibility for 7(a) loans and other program-related issues, we interviewed SBA staff including from the Office of Capital Access, and representatives of the National Association of Government Guaranteed Lenders; American Bankers Association; Independent Community Bankers Association; and National Federation of Independent Businesses  We also interviewed 11 banks (one bank provided written responses) in order to obtain the lender perspective of credit elsewhere  Nine of the banks were selected by us using a random process that concentrated on larger lenders  These nine lenders selected by us represent about 13 percent of the loans approved and 16 percent of the dollars approved in 2016  In addition, we interviewed two additional banks that represented an industry group – one larger bank and one small bank  Although we partially selected at random, the lenders we interviewed should not be considered generalizable because of the small number  We conducted this performance audit from August 2017 to June 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In this appendix, we provide information on the total amount and number of approved 7(a) loans and the top eight industry sectors receiving 7(a) loans  Data are also presented on fiscal year 2016 loan volume by state and per capita  As shown in figure 6 below, the total amount of approved 7(a) loans decreased during the period associated with the Great Recession (2007 through 2009)  From fiscal year 2009 on, the total amount of approved 7(a) loans increased until a decline in fiscal year 2012  During this timeframe, the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010 provided fee relief and higher guaranties  The Small Business Jobs Act of 2010 also provided a temporary increase in Small Business Administration (SBA) Express loan limits to $1 million (instead of $350,000)  These programs have since expired  7(a) Loans by North American Industry Classification System (NAICS) code  Table 1 shows the largest eight industrial sectors by proportion of the total amount of 7(a) loans approved, using the NAICS code  The combined share of the top eight sectors declined slightly from 85 percent to 80 percent of the total lending from fiscal years 2007 through 2016, with an average of 82 percent  During this period, the Accommodation and Food Services sector had the largest average share of total loan amount at 17 percent, followed by the Retail Trade sector at 15 percent  Approved loan amount and per capita dollars by state  As shown in figure 7, California; Texas; Florida; Georgia; and New York received the highest total of approved loan dollars in fiscal year 2016  The average approval amount across all loans was $380,619  Georgia and Arkansas had the largest average approval amount in 2016  Also, during this period, Utah; Colorado; Georgia; California; and Washington received the highest per capita approved loan dollars  In fiscal-year 2016, creditworthiness varied widely among 7(a) program borrowers  We analyzed creditworthiness using the Small Business Administration’s (SBA) Small Business Risk Portfolio Solution score (predictive score), which ranges from 70 to 300, with 300 indicating the least risky loan  According to SBA, loans with scores above 180 are considered “lower risk,” scores between 140 and 179 are considered “moderate risk,” and scores 139 and lower are considered “higher risk ” There did not appear be differences in score based on the gender of the borrower or the age of the business  While SBA relies on the Predictive Score data to identify lenders that may pose excessive risk to the SBA 7(a) portfolio, the data also provide potential insights related to lender implementation of the credit elsewhere requirement  Variation  We found that some 7(a) borrowers were much more creditworthy than others  In 2016, the only year for which we obtained data, the predictive score at origination varied widely among borrowers  In 2016, the scores of borrowers ranged from a low of 91 to a high of 246  However, most scores were between 171 and 203, and the median score was 188  Race/ethnicity  We found that there were slight differences in creditworthiness by race/ethnicity, with median scores ranging from 180 to 189 depending on the category  Specifically, loans to African Americans in 2016 had a median score of 180, and loans to Hispanics had a median score of 183  In contrast, loans to whites had a median score of 188, and loans to Asian and Pacific Islanders had a median score of 189  Lender size  We found that lenders with larger numbers of SBA loans tended to have slightly more creditworthy borrowers  The top 5 percent of lenders had a median average score of 187, whereas the bottom 75 percent of lenders had a median average score of 182 5  Among the top 5 percent of lenders (with 374 loans per lender on average, collectively representing about 70 percent of the loans approved), the average score ranged from 171 to 195  Among all lenders, the average score ranged from 116 to 233  However, because many lenders only approved one or two loans in 2016, the average may reflect very few borrowers for that lender, making it difficult to tell whether the scores reflect a real difference between lenders  In addition to the contact named above, Harry Medina (Assistant Director); Janet Fong (Analyst in Charge); Benjamin A  Bolitzer; Gita DeVaney; David S  Dornisch; Amanda D  Gallear (intern); Marc W  Molino; Jennifer W  Schwartz; and Tyler L  Spunaugle made key contributions to this report 

ground_truth: Georgia is one of the United States' closest partners among the states that gained their independence after the USSR collapsed in 1991. With a history of strong economic aid and security cooperation, the United States has deepened its strategic partnership with Georgia since Russia's 2008 invasion of Georgia and 2014 invasion of Ukraine. U.S. policy expressly supports Georgia's sovereignty and territorial integrity within its internationally recognized borders, and Georgia is a leading recipient of U.S. aid to Europe and Eurasia. Many observers consider Georgia to be one of the most democratic states in the post-Soviet region, even as the country faces ongoing governance challenges. The center-left Georgian Dream-Democratic Georgia party (GD) has close to a three-fourths supermajority in parliament and governs with limited checks and balances. Although Georgia faces high rates of poverty and underemployment, its economy in 2017 and 2018 appeared to show stronger growth than it had in the previous four years. The GD led a coalition to victory in parliamentary elections in 2012 amid growing dissatisfaction with the former ruling party, Mikheil Saakashvili's center-right United National Movement, which came to power as a result of Georgia's 2003 Rose Revolution. In August 2008, Russia went to war with Georgia to prevent Saakashvili's government from reestablishing control over the regions of South Ossetia and Abkhazia, which broke away from Georgia in the early 1990s and became informal Russian protectorates. Congress has expressed firm support for Georgia's sovereignty and territorial integrity. The Countering Russian Influence in Europe and Eurasia Act of 2017 (P.L. 115-44, Title II, §253) states that the United States "does not recognize territorial changes effected by force, including the illegal invasions and occupations" of Abkhazia, South Ossetia, and other territories occupied by Russia. In September 2016, the House of Representatives passed H.Res. 660, which condemns Russia's military intervention and occupation of Abkhazia and South Ossetia. In February 2019, the Georgia Support Act (H.R. 598), which originally passed the House by unanimous consent in the 115th Congress (H.R. 6219), was reintroduced in the 116th Congress. The act would express support for Georgia's sovereignty, independence, and territorial integrity, as well as for its democratic development, Euro-Atlantic integration, and peaceful conflict resolution in Abkhazia and South Ossetia. The United States provides substantial foreign and military aid to Georgia each year. Since 2010, U.S. nonmilitary aid to Georgia has totaled around $64 million a year on average, in addition to a five-year Millennium Challenge Corporation grant of $140 million to support education. In FY2019, Congress appropriated almost $90 million in nonmilitary aid to Georgia. Since 2010, U.S. military aid to Georgia has been estimated at around $68 million a year on average. In FY2019, Congress appropriated $35 million in Foreign Military Financing and $2 million in International Military Education and Training funds. Defense assistance also includes a three-year, $35 million training initiative, the Georgia Defense Readiness Program.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: Historically located between empires, various Georgian kingdoms and principalities were incorporated into the Russian Empire beginning in the early 19 th century  Georgia enjoyed a brief period of independence from 1918 until its forcible incorporation into the Union of Soviet Socialist Republics (USSR, or Soviet Union) in 1921-1922  Georgia gained independence in 1991 with the collapse of the Soviet Union  Georgia is located in the South Caucasus, a region between the Black and Caspian Seas and separated from Russia by the Greater Caucasus mountain range  The South Caucasus also borders Iran and Turkey (see Figure 1 )  Georgia's South Caucasus neighbors, Armenia and Azerbaijan, have been locked in territorial conflict for almost three decades over the predominantly Armenian-populated region of Nagorno-Karabakh, formally part of Azerbaijan  Georgia has its own unresolved conflicts with two Russian-supported regions, Abkhazia and South Ossetia  These regions, in addition to being settled by ethnic Georgians, are home to ethnic groups that more closely identify with ethnic kin in Russia's North Caucasus, located across the Caucasus mountain range  After a short war with Georgia in 2008, Russia unilaterally recognized the independence of these breakaway regions and stationed military forces on their territory  Georgians speak and write their own distinct Caucasian language, with a written literary form that emerged at least as early as the fifth century  The Georgian Orthodox Church, to which most Georgians belong, is autocephalous (independent), with roots that date back to the fourth century  Today, many observers consider Georgia to be one of the most democratic states among the USSR's successor states  The U S -based nongovernmental organization (NGO) Freedom House considers Georgia to be the freest post-Soviet state (not including the Baltic states), followed by Ukraine, Moldova, and Armenia  Georgia has a parliamentary system of governance, resulting from constitutional reforms that came into effect in 2013 and 2018  The prime minister is the country's most powerful executive  Georgia's president is commander in chief of the armed forces and has the power to veto legislation and dissolve parliament under certain circumstances  Georgia's prime minister, Mamuka Bakhtadze (aged 36), assumed office in June 2018  Bakhtadze was Georgia's minister of finance from November 2017 to June 2018; he previously served as the head of Georgian Railways and the Georgian International Energy Corporation  Georgia's president, elected in November 2018, is Salome Zurabishvili (aged 67), a former member of parliament (2016-2018) and minister of foreign affairs (2004-2005) who was previously a French national and diplomat  The parliamentary chairman is Irakli Kobakhidze (aged 40), a former professor of law and politics  Georgia has a unicameral legislature with 150 members elected for four-year terms by two methods: 77 by party list and 73 by majoritarian district  The most recent parliamentary elections in 2016 resulted in a sizeable win for Georgia's center-left ruling party, Georgian Dream-Democratic Georgia (GD), which initially led a ruling coalition after coming to power in 2012 and now governs alone  GD won 49% of the party list vote and nearly all majoritarian races, leading to control of more than 75% of parliamentary seats (116 of 150 deputies)  Before losing this supermajority in February 2019 (see " Ruling Party Tensions " below), GD had enough votes to unilaterally enact changes to Georgia's constitution  This led many observers and opposition supporters to express concern that there were insufficient checks and balances against the ruling party  GD's main competitor in 2016 was the center-right United National Movement (UNM), the former ruling party previously led by ex-president Mikheil Saakashvili  The UNM received 27% of the party vote and 27 seats (18%)  After months of infighting, the UNM fragmented in 2017, and most of its deputies, including much of the party's senior leadership, formed a new opposition party called European Georgia-Movement for Liberty  A third electoral bloc, the nationalist-conservative Alliance of Patriots of Georgia-United Opposition, cleared the 5% threshold to enter parliament with six seats  Georgia's most recent local elections were in 2017  They provided a similar picture of ruling party dominance across the country  In the party-list portion of the vote to local councils, GD won in all 73 districts, with a total of 56% of the vote  The UNM and European Georgia won 27% of the vote (17% and 10%, respectively)  The nationalist-conservative Alliance of Patriots won 7%  GD won more than 92% of majoritarian seats, giving it a total of 77% of seats in local councils nationwide  GD also won mayoral elections in all but two districts  The most recent presidential elections were held in two rounds in October and November 2018  The victor, Salome Zurabishvili, won 60% of the vote in the second round  Zurabishvili ran as an independent candidate, although she was supported by GD  UNM candidate Grigol Vashadze, like Zurabishvili an ex-foreign minister, received 40%  The first round of the election was a closer race (39% to 38%), but Zurabishvili appeared to benefit from greater turnout in the runoff (56%, compared to 46% in the first round)  Domestic and international observers considered the election to be competitive but flawed  Observers noted instances of official pressure against state employees to support Zurabishvili, as well as incidents of ballot box stuffing  They also expressed concern about allegations of mass vote-buying, related to Prime Minister Bakhtadze's pre-runoff announcement that a philanthropic foundation associated with GD founder and chairman Bidzina Ivanishvili had agreed to purchase and forgive the small private debts of more than 600,000 individuals  The U S  Department of State said it shared the concerns of observers and indicated "these actions are not consistent with Georgia's commitment to fully fair and transparent elections " Since 2018, GD has exhibited signs of internal tension  Many observers believe that GD founder Ivanishvili continued to maintain an influential behind-the-scenes role in government after stepping down as prime minister in 2013  Ivanishvili formally returned to politics as GD's party chairman in 2018, reportedly due to frustration with the party's growing internal divides  Then-Prime Minister Giorgi Kvirikashvili resigned less than two months later, citing "disagreements" with Ivanishvili  Kvirikashvili's resignation also followed a series of anti-government demonstrations against what protestors perceived to be heavy-handed police raids and judicial bias  Prime Minister Bakhtadze succeeded Kvirikashvili in June 2018  More recently, GD suffered parliamentary defections in February 2019, as a result of a dispute concerning judicial appointments (see " Dispute over Judicial Reforms " below)  By the end of March 2019, eight members of parliament, led by Eka Beselia, former chairwoman of the parliamentary committee on legal affairs, had left GD  Beselia and most of the defecting MPs were expected to establish a new faction, while two MPs joined the Patriots of Georgia faction  The GD government also has had tense relations with the presidency  Ex-President Giorgi Margvelashvili, who was elected in 2013, initially was allied to GD  He subsequently adopted a more independent stance and fell out of favor with then-Prime Minister Ivanishvili  Margvelashvili frequently criticized the government and vetoed legislation several times, although parliament usually overrode his veto  Margvelashvili chose not to run for reelection in 2018  For the 2018 election, GD did not nominate its own presidential candidate  This possibly reflected a belief within the party leadership that the powers of the presidency were too limited to warrant fielding a candidate for the position  After some deliberation, however, GD decided to support Zurabishvili, an independent candidate  Before making this decision, government officials had criticized Zurabishvili for comments she made on the 10 th anniversary of the August 2008 war that appeared to blame Georgia's ex-leadership for the war  One of the government's internal disputes concerns judicial reform  A series of reforms from 2013 to 2017 restructured Georgia's judicial institutions  A High Council of Justice oversees the appointment and dismissal of judges  The council has 15 members, a majority of whom are selected by the Conference of Judges, the judiciary's self-governing body  In December 2018, several GD members of parliament criticized the High Council's decision to nominate several judges to Georgia's 28-seat Supreme Court whom they considered tainted by association with the UNM  The dispute sparked an intensive debate within the ruling party, as well as with some NGOs who sided with the dissenting GD members out of a concern that the nominated judges could be susceptible to corruption  Ultimately, the Supreme Court nominees withdrew their candidacies  GD's leadership agreed to further debate the rules of appointment and blamed the dispute on the opposition  Appointments to a nine-member Constitutional Court are divided between the parliament, president, and the Supreme Court  In recent years, the Constitutional Court has been the focus of various disputes concerning possible bias (sometimes against the government, other times against the opposition)  In July 2018, the Constitutional Court received international attention for ruling that marijuana use was not a criminal offense, a decision government officials and church representatives heavily criticized  In response, parliament passed legislation imposing strict limitations on marijuana use  After GD won a supermajority in 2016, Georgia's parliament convened a State Constitutional Commission to draft additional reforms to the constitution intended to consolidate Georgia's transition to a parliamentary system of governance  Parliament passed the reforms in September 2017 by a vote of 117-2  Opposition parties, who opposed certain measures that appeared to strengthen the ruling party, refused to participate in the vote; civil society organizations also registered opposition  Then-President Margvelashvili vetoed the amendments and proposed alternative reforms  Parliament overrode his veto, and the president signed the amendments into law  The constitutional reforms entered into force after the 2018 presidential election  The reforms affect Georgia's parliamentary system in several ways  One of the main changes is the abolition of Georgia's directly elected presidency beginning in 2023  Instead, the president is to be indirectly elected by a college of electors made up of parliamentary deputies and local government representatives  Another major change is that parliamentary elections are to be held entirely on the basis of party lists, eliminating single-member districts  In theory, this change is expected to lead to greater opposition representation in parliament, as in Georgia parties that win the party-list vote tend to overwhelmingly win single-member districts  Although this change was to take effect in 2020, parliament voted to push back its implementation to 2024, a move many observers interpreted as an attempt to prolong the ruling party's dominance  In January 2019, several opposition parties launched a petition to pressure the government to implement the shift to a fully proportional system in advance of the 2020 parliamentary elections  In the course of adopting constitutional reforms, parliament considered several recommendations of the Council of Europe's Venice Commission, a legal and democratic advisory body  In the end, the commission provided a "positive assessment" of the reforms, although it noted "the postponement of the entry into force of the proportional election system to October 2024 is highly regrettable and a major obstacle to reaching consensus " The Venice Commission said the reform "completes the evolution of Georgia's political system towards a parliamentary system and constitutes a positive step towards the consolidation and improvement of the country's constitutional order, based on the principles of democracy, the rule of law and the protection of fundamental rights " For more than two decades, Georgia has been recovering from the severe economic decline it experienced after the Soviet Union collapsed  It remains a relatively poor country  In 2018, Georgia's GDP was around $16 7 billion (approximately 16 times less than that of Connecticut, a U S  state with a similar population size)  Its per capita GDP ($4,506) is midsized in comparison to Russia and other post-Soviet states  In 2017-2018, Georgia's economy appeared to enter a period of relatively strong growth  After average GDP growth of around 3% a year from 2013 to 2016, Georgia's GDP grew at 4 8% a year in 2017 and 2018  Increased economic growth has been based on strengthening domestic consumption and external demand, as well as "generally strong policy efforts," according to the International Monetary Fund (IMF)  The IMF forecasts a sustained rate of GDP growth of around 4 9% annually from 2019 to 2021  In February 2019, the IMF commended Georgian authorities "for advancing structural reforms [but] stressed the need for continued efforts to promote inclusive growth and higher economic resilience to external shocks " Poverty has declined in recent years, although it is still relatively high  According to official data, 22% of the population lived in poverty in 2017 (down from 39% a decade before)  In recent years, recorded unemployment has been around 14%; some surveys suggest a higher rate of unemployment  More than 40% of Georgian laborers work in agriculture, a sector of the economy that accounts for less than 10% of GDP  Georgia's economy depends in part on remittances from labor migration  From 2013 to 2017, remittances made up around 11% of Georgia's GDP  In 2017, Russia was estimated to be the source of almost 60% of Georgian remittances, followed by Ukraine (8%), Greece (5%), and Armenia (4%)  In 2017, the IMF approved a three-year Extended Fund Facility arrangement to provide Georgia with around $285 million in loans to support economic reforms focusing, among other things, on financial stability and infrastructure investment  The IMF noted the need for Georgia to increase its agricultural productivity, improve its business environment, and reform its education system  Georgia has suffered in the past from energy shortages and gas cutoffs, but it has improved its energy security in recent years  Georgia has rehabilitated hydropower plants and constructed new ones  Nearly all its natural gas supplies come from neighboring Azerbaijan  In 2018, Georgia's three largest merchandise trading partners were Turkey ($1 7 billion, or 14% of Georgia's trade), Russia ($1 4 billion, 11%), Azerbaijan ($1 1 billion, 9%), and China ($1 0 billion, 8%)  Trade with the European Union (EU), as a whole Georgia's largest trading partner, made up around 27% of total trade ($3 4 billion)  More than half of Georgia's merchandise exports (51%) went to five countries: Azerbaijan, Russia, Armenia, Bulgaria, and Turkey  Its main exports were copper ores, beverages (wine, water, and spirits), motor vehicles, and iron and steel  Free trade agreements with the EU (signed in 2014) and China (signed in 2017) may improve Georgia's prospects for export-led growth  Georgia is also exploring a trade agreement with India  However, Georgia's manufacturing sector is small, and its top exports include used foreign cars and scrap metal, which provide low added value  The IMF indicates that Georgia could further diversify its agricultural exports but notes the need to improve quality and standards  Tourism to Georgia has increased in recent years and annual tourism-related income has more than quadrupled since 2010  In 2018, the number of international visitors who stayed in the country overnight was around 4 8 million, a 345% increase since 2010  Most tourists are from neighboring countries: Russia, Azerbaijan, Turkey, and Armenia  In recent years, foreign direct investment (FDI) appears to have exceeded the high levels Georgia enjoyed in 2006 to 2008, before the global financial crisis, when FDI averaged $1 5 billion a year  From 2014 to 2018, FDI averaged $1 64 billion a year  More than 60% of the total amount came from Azerbaijan, the Netherlands, the United Kingdom, and Turkey  During this period, most FDI was in transport and communications (28%); other leading sectors were finance (13%), construction (13%), and energy (10%)  In 2017, the IMF noted that attracting FDI to sectors with high export potential, including tourism and agriculture, is "crucial to ensure growth in foreign markets " Georgia aspires to be a key transit hub for the growing East-West overland trade route between China and Europe  In pursuit of this goal, a U S -Georgian consortium is constructing a major new deepwater port and free industrial zone in Anaklia, which is located on Georgia's Black Sea coast and abuts the Russian-occupied region of Abkhazia  The port, scheduled to begin operations in 2021, is considered Georgia's largest-ever infrastructure investment and is to be accompanied by major government investments in Georgia's road and rail infrastructure  The Georgian government has long made closer integration with the EU and NATO a priority  According to recent polls, over 80% of the Georgian population supports membership in the EU and over 75% supports membership in NATO  In 2014, Georgia concluded an association agreement with the EU that included a Deep and Comprehensive Free Trade Area (DCFTA) and encouraged harmonization with EU laws and regulations  The EU granted Georgia visa-free travel in 2017  The EU also is a major provider of foreign aid to Georgia, providing on average over €120 million (around $135 million) a year in 2017 and 2018  As of 2018, the benefits of the EU free-trade agreement for Georgia remain unclear  In 2018, the total value of Georgian exports to the EU was 17% greater than in 2014  Exports to the EU as a share of Georgia's total exports, however, were the same in 2018 as they were in 2014 (22%)  The EU asserts that Georgia is "reaping the benefits of economic integration" with the EU but notes that "further efforts are needed to stimulate exports and improve the trade balance " Georgia has close relations with NATO, which considers Georgia one of its "closest operational partners " A NATO-Georgia Commission, established in 2008, provides the framework for cooperation  At its 2014 Wales Summit, NATO leaders established a "Substantial NATO-Georgia Package" to help Georgia bolster its defense capabilities, including capacity-building, training, exercises, and enhanced interoperability  In 2015, Georgia joined the NATO Response Force, a rapid reaction force  Georgia is one of the top troop contributors (and the top non-NATO contributor) in the NATO-led Resolute Support Mission in Afghanistan  At its height, Georgia's deployment to NATO's previous International Security Assistance Force (ISAF) reached over 1,500 troops, who served with no operational caveats  As of December 2018, Georgia is the fifth-largest contributor to the Resolute Support Mission, with 870 troops  Georgia also contributed more than 2,250 troops to the NATO-led Kosovo Force, or KFOR, between 1999 and 2008  In 2015, NATO opened a Joint Training and Evaluation Center in Georgia to provide training, evaluation, and certification opportunities to enhance interoperability and operational readiness  The center hosted its second joint NATO-Georgia exercise in March 2019 (the first one was held in 2016)  Some NATO member states also participate in two sets of annual U S -Georgia military exercises: Agile Spirit and Noble Partner (see " Security Assistance Since the August 2008 War ," below)  NATO also has established a Defense Institution Building School for professional development and training  Many observers consider that closer integration with the EU and NATO has not enabled Georgia to improve its near-term prospects for membership in these organizations  The EU is unlikely to consider Georgia a candidate for membership soon, given the EU's internal challenges and a lack of support for enlargement among many members  In 2008, NATO members agreed that Georgia and Ukraine would become members of NATO, but Georgia has not been granted a NATO Membership Action Plan (MAP) or other clear path to membership  Many observers attribute Georgia's lack of a clear path to NATO membership to some members' concerns that Georgia's membership could lead to a heightened risk of war with Russia, which currently occupies around 18% of Georgia's territory  Many believe that NATO will not move forward with membership as long as Russia occupies Georgian territory and the conflict remains unresolved  Georgia's secessionist regions of Abkhazia and South Ossetia broke away from Georgia in the early 1990s, during and after Georgia's pursuit of independence from the USSR  Since then, Georgia's relations with Russia have been difficult, as Tbilisi has blamed Moscow for obstructing Georgia's Western leanings  Many observers believe that Moscow supports Abkhazia and South Ossetia to prevent Georgia from joining NATO  Georgia's relations with Russia worsened after ex-President Saakashvili came to power in 2003 and sought to accelerate Georgia's integration with the West  After clashes increased between Georgian and secessionist forces, Russia invaded Georgia in August 2008 to prevent Georgia from reestablishing control over South Ossetia  Russia subsequently recognized Abkhazia and South Ossetia as independent states  Over the last decade, Russia has tightened control over Abkhazia and South Ossetia  It has constructed border fencing and imposed transit restrictions across the administrative boundary lines dividing the two regions from the rest of Georgia  Russia has established military bases that reportedly house around 3,500 personnel each, and it also stations border guards in the two regions  In 2016, Russia finalized an agreement with the de facto authorities of Abkhazia, establishing a combined group of military forces  In 2017, Russia concluded an agreement with South Ossetia to integrate the breakaway region's military forces with its own  Since coming to power in 2012, the GD government has sought to improve relations with Russia, particularly economic ties  In 2013, Moscow lifted an embargo on popular Georgian exports (including wine and mineral water) that had been in place since 2006  As a result, Russia again became one of Georgia's main trading partners  The share of Georgia's merchandise exports to Russia as a percentage of its total exports rose from 2% in 2012 to 13% in 2018  Improved economic relations with Russia have not led to progress in resolving the conflicts over Abkhazia and South Ossetia  The EU leads an unarmed civilian Monitoring Mission in Georgia (EUMM) that monitors compliance with the cease-fire agreements that ended the August 2008 war  Although the EUMM's mandate covers all of Georgia, local and Russian authorities do not permit it to operate in Abkhazia and South Ossetia; EUMM representatives have been allowed to cross the boundary line on a few occasions to address specific issues  All parties to the conflict, together with the United States, the EU, the United Nations (U N ), and the Organization for Security and Cooperation in Europe (OSCE), participate in the Geneva International Discussions, convened quarterly to address issues related to the conflict  They also participate in joint Incident Prevention and Response Mechanisms (IPRM), together with the U N  and OSCE, designed to address local security issues and build confidence  Abkhaz and South Ossetian representatives periodically have suspended their participation in the IPRM, however; the IPRM for Abkhazia did not convene at all from 2012 to 2016  In general, efforts to rebuild ties across conflict lines or return internally displaced persons have made little progress  In 2018, the Georgian government unveiled a peace initiative and enacted related legislative amendments to facilitate greater engagement with Abkhazia and South Ossetia in trade and educational affairs  The United States and the EU have expressed support for this initiative  Whether Russia and the two regions will accept any of the initiative's elements remains to be seen  Improved relations with Russia do not appear to have led to greater public support in Georgia for closer integration with Russia  Several overtly pro-Russian parties performed poorly in the 2016 parliamentary elections  One electoral bloc critical of Georgia's European integration, the nationalist-conservative Alliance of Patriots, cleared the 5% threshold to enter parliament, but even this bloc's leadership did not campaign for membership in the Russia-led Eurasian Union  In a 2018 survey, less than 30% of respondents expressed support for joining the Eurasian Union  Georgia is one of the United States' closest partners among the post-Soviet states  With a history of strong economic aid and security cooperation, the United States and Georgia have deepened their strategic partnership since Russia's 2008 invasion of Georgia and 2014 invasion of Ukraine  A U S -Georgia Charter on Strategic Partnership, signed in 2009, provides the framework for much of the two countries' bilateral engagement  A Strategic Partnership Commission convenes annual plenary sessions and working groups to address political, economic, security, and people-to-people issues  Before the 2008 war, the United States supported granting Georgia a NATO Membership Action Plan and backed NATO's April 2008 pledge that Georgia eventually would become a member of NATO  In August 2017, U S  Vice President Michael Pence said in Tbilisi that the Trump Administration "stand[s] by the 2008 NATO Bucharest statement, which made it clear that Georgia will one day become a member of NATO " At a press conference after the July 2018 NATO summit in Brussels, President Trump said that "at a certain point [Georgia will] have a chance" to join NATO, if "not right now " U S  policy expressly supports Georgia's sovereignty and territorial integrity  In a visit to Tbilisi in August 2017, Vice President Michael Pence said the United States "strongly condemns Russia's occupation on Georgia's soil " In January 2018, the State Department indicated that "the United States' position on Abkhazia and South Ossetia is unwavering: The United States fully supports Georgia's territorial integrity within its internationally recognized borders " The United States supports a resolution to the conflict within these parameters  The United States calls on Russia to comply with the terms of the 2008 cease-fire agreement, including withdrawal of its forces to prewar positions, and to reverse its recognition of Abkhazia and South Ossetia as independent states  The U S  government has expressed support for Georgia's "commitment to dialogue and a peaceful resolution to the conflict," and in 2018 the State Department welcomed the new peace initiative that the government of Georgia unveiled  The State Department regularly participates in the Geneva International Discussions  Congress also has expressed firm support for Georgia's sovereignty and territorial integrity  The Countering Russian Influence in Europe and Eurasia Act of 2017 ( P L  115-44 , Title II, §253) states that the United States "supports the policy known as the 'Stimson Doctrine' and thus does not recognize territorial changes effected by force, including the illegal invasions and occupations" of Abkhazia and South Ossetia, and other territories occupied by Russia  As with previous appropriations, FY2019 foreign operations appropriations prohibit foreign assistance to governments that recognize Abkhazia or South Ossetia and restrict funds from supporting Russia's occupation of Abkhazia and South Ossetia ( P L  116-6 , §7047(c))  The 2014 Ukraine Freedom Support Act ( P L  113-272 ) provides for sanctions against Russian entities that transfer weapons to Georgian territory  In February 2019, the Georgia Support Act ( H R  598 ) was reintroduced in the House  The act originally passed the House by unanimous consent in December 2018, during the 115 th Congress  The act would express support for Georgia's sovereignty, independence, and territorial integrity, as well as for its democratic development, Euro-Atlantic and European integration, and peaceful conflict resolution  The act would require the Secretary of State to submit to Congress reports on U S  security assistance to Georgia, U S -Georgia cybersecurity cooperation, and a strategy to enhance Georgia's capabilities to combat Russian disinformation and propaganda  The act also would require the President to impose sanctions on those responsible for serious human rights abuses in Abkhazia and South Ossetia  Many Members of Congress have expressed their support for Georgia in House and Senate resolutions  In September 2016, during the 114 th Congress, the House of Representatives passed H Res  660, which expressed support for Georgia's territorial integrity, in a 410-6 vote  The resolution condemned Russia's military intervention and occupation, called upon Russia to withdraw its recognition of Abkhazia and South Ossetia as independent states, and urged the U S  government to declare unequivocally that the United States will not recognize Russia's de jure or de facto sovereignty over any part of Georgia under any circumstances  In January 2019, a resolution (H Res  93) was reintroduced in the House supporting Georgia's territorial integrity and condemning a decision by the Syrian government to recognize Abkhazia and South Ossetia as independent states  The Senate and House have passed other resolutions in support of Georgian sovereignty and territorial integrity: in 2011-2012 ( S Res  175 , H Res  526), in September 2008 ( S Res  690 ), and, before the conflict, in May-June 2008 (H Res  1166, S Res  550 ) and December 2007 ( S Res  391 )  Georgia has long been a leading recipient of U S  foreign and military aid in Europe and Eurasia  In the 1990s (FY1992-FY2000), the U S  government provided over $860 million in total aid to Georgia ($96 million a year on average)  In the later part of the decade, the United States began to provide Georgia with increased amounts of aid to improve border and maritime security and to combat transnational crime, including through the development of Georgia's Coast Guard  In the 2000s, Georgia became the largest per capita recipient of U S  aid in Europe and Eurasia  From FY2001 to FY2007, total aid to Georgia amounted to over $945 million ($135 million a year, on average)  In 2005, Georgia also was awarded an initial five-year (2006-2011) $295 million grant from the U S  Millennium Challenge Corporation (MCC) for road, pipeline, and municipal infrastructure rehabilitation, as well as for agribusiness development  The United States gave increased amounts of military aid to Georgia after the terrorist attacks of September 11, 2001  At the time, the George W  Bush Administration considered Georgia part of a "second stage" in the "war on terror," together with Yemen and the Philippines, and supported Georgia with a two-year Train and Equip Program  This program was followed by a Sustainment and Stability Operations Program through 2007 that supported a Georgian troop deployment to Operation Iraqi Freedom  After Russia invaded Georgia in August 2008, the United States substantially increased its assistance to Georgia  The U S  government immediately provided over $38 million in humanitarian aid and emergency relief, using U S  aircraft and naval and coast guard ships  In September 2008, then-Secretary of State Condoleezza Rice announced a total aid package worth at least $1 billion  Total U S  assistance to Georgia for FY2008-FY2009 amounted to $1 04 billion, which included $250 million in direct budgetary support and an additional $100 million in MCC funds (taking the total amount of Georgia's initial MCC grant to $395 million)  Since the 2008 war, Georgia has continued to be a major recipient of U S  foreign aid in the Europe and Eurasia region  Nonmilitary aid totaled $60 million a year on average from FY2010 to FY2017  In addition, Georgia was awarded a second five-year (2014-2019) MCC grant of $140 million to support educational infrastructure and training, and to improve the study of science and technology  In FY2018, U S  nonmilitary aid to Georgia totaled $70 8 million  For FY2019, Congress appropriated $89 8 million in nonmilitary aid  The president's FY2020 nonmilitary aid request for Georgia is $42 4 million  After the 2008 war, Georgia continued to receive U S  military assistance, including around $144 million in postwar security and stabilization assistance in FY2008-FY2009  Since FY2010, Georgia has received further military assistance, primarily through Foreign Military Financing (FMF) aid, Coalition Support Funds, and Train and Equip and other capacity-building programs  These funds have been used to support Georgia's deployments to Afghanistan in ISAF and the follow-on Resolute Support Mission, as well as for Georgian border security, counterterrorism, and defense readiness  U S  military assistance to Georgia in FY2010-FY2017 is estimated to have been around $74 million a year on average  For FY2018, military aid to Georgia is estimated to have totaled $40 4 million  This includes $35 million in FMF assistance, $2 million in International Military Education and Training (IMET), and $3 4 million for counter-weapons of mass destruction (WMD) capacity-building assistance  For FY2019, Congress again appropriated $35 million in FMF and $2 million in IMET funds  Additional defense funding includes $4 3 million in maritime capacity-building assistance and $2 5 million in counter-WMD capacity-building assistance  Outside of Afghanistan, the United States has gradually deepened its postwar defense cooperation with Georgia  The Obama Administration refrained from approving defensive (anti-tank and antiaircraft) arms sales to Georgia  Observers considered various reasons for this hesitation, including doubts regarding the deterrent effect of such weapons, concerns about encouraging potential Georgian offensives to retake territory, and a desire to avoid worsening relations with Russia as the Administration embarked on a new "reset" policy with Moscow  In testimony to the Senate Foreign Relations Committee a year after Russia's invasion, then-Assistant Secretary of Defense Alexander Vershbow characterized U S  defense cooperation with Georgia as "a methodical, yet patient, strategic approach … [focused] on building defense institutions, assisting defense sector reform, and building the strategic and educational foundations" for training and reform  He said the United States was "carefully examining each step [of its military assistance program] to ensure it would not be counterproductive to our goals of promoting peace and stability in the region " U S -Georgia defense cooperation deepened over time  In a 2012 visit to Georgia, then-Secretary of State Hillary Clinton said that increased cooperation would help improve Georgia's self-defense capabilities, promote defense reform and modernization, and provide training and equipment to support Georgia's ISAF deployment and NATO interoperability  U S -Georgia security cooperation expanded further in 2016  In July 2016, then-U S  Secretary of State John Kerry and then-Georgian Prime Minister Giorgi Kvirikashvili signed a Memorandum on Deepening the Defense and Security Relationship between the United States and Georgia  In December 2016, the two countries concluded a three-year framework agreement on security cooperation that would focus on "improving Georgia's defense capabilities, establishing [an] effective and sustainable system of defense, enhancing interoperability of the Georgian Armed Forces with NATO, and ensuring effective military management " The framework agreement led to the launching in February 2017 of a three-year, $35 million training initiative, the Georgia Defense Readiness Program  This initiative seeks to build the capacity of Georgia's armed forces "to generate, train and sustain forces in preparation for all national missions " Unlike the Obama Administration, the Trump Administration approved the provision of major defensive lethal weaponry to Georgia  In November 2017, the U S  State Department approved a Foreign Military Sale of over 400 Javelin portable anti-tank missiles, as well as launchers, associated equipment, and training, at a total estimated cost of $75 million  The Georgian Ministry of Defense confirmed that the "first stage" of two sales was complete as of January 2018  In June 2018, then-U S  Assistant Secretary of State for European and Eurasian Affairs Wess Mitchell said the United States seeks to "check Russian aggression," including by "building up the means of self-defense for those states most directly threatened by Russia militarily: Ukraine and Georgia " The United States and Georgia have held annual joint military exercises in Georgia since 2011  Initial exercises, dubbed Agile Spirit, began as a counterinsurgency and peacekeeping operations training exercise and shifted to a "conventional warfare focus" in 2015, the year after Russia's invasion of Ukraine  That year, Agile Spirit began to include other NATO partners  A second bilateral exercise, Noble Partner, was launched in 2015; the Department of Defense characterized it as the "most robust" U S -Georgia exercise ever, designed to support Georgia's integration into the NATO Response Force  In 2018, the United States was Georgia's seventh-largest source of merchandise imports and eighth-largest destination for exports  The value of Georgia's merchandise imports from the United States—mainly vehicles, industrial machinery, and meat—was $360 million in 2018  The value of merchandise exports to the United States—mainly iron and steel and inorganic chemicals—was $160 million in 2018  Since 2012, the United States and Georgia periodically have discussed the possibility of a free-trade agreement  The two countries have signed a bilateral investment treaty and a Trade and Investment Framework Agreement  They also have established a High-Level Dialogue on Trade and Investment  During Vice President Michael Pence's August 2017 visit to Georgia, he expressed the United States' "keen interest in expanding our trade and investment relationship with Georgia "


Report 2:  Expected program tasks include updating asset records and improving and consolidating asset inventories in WMATA’s asset system of record (called Maximo)  WMATA’s efforts to develop more complete asset inventory and condition assessments are not complete  Among other things, WMATA documentation on the Enterprise Asset Management Program cited “inattention, poor standardization, and organizational silos” as factors that have resulted in WMATA having multiple sets of asset records in various states of accuracy and usefulness  The Enterprise Asset Management Program, according to WMATA, is an effort to help address this situation and improve asset data quality, including inventory and condition assessments  Although WMATA is developing a new Enterprise Asset Management Program, it has yet to develop a plan for obtaining a complete inventory or physical condition assessments of its assets  The Project Management Institute’s Guide to the Project Management Body of Knowledge, PMBOK® Guide describes the elements of good project management and their importance in achieving organizational goals  Among these elements are: Having a project charter that formally authorizes a project, that commits resources to the activity, and that provides a direct link to organizational strategic objectives; Preparing a project plan to define the basis of the project’s work and how the work will be performed; and Establishing a monitoring and control process to track, review, and report overall progress in meeting the plan’s objectives  WMATA has prepared draft documents that describe how it will implement the Enterprise Asset Management Program and that contain some elements of good project management  For example, in January 2018 WMATA circulated a proposed charter that once approved would authorize the Enterprise Asset Management program, identify needed resources, and link to WMATA’s strategic goals  As of October 2018, this proposed charter had not yet been finalized  Draft program documents also indicate there would be a monitoring and control process that would establish regular reporting to internal stakeholders to assess program accomplishments and progress implementing the program  While WMATA has developed a proposed charter and a monitoring and control process for its Enterprise Asset Management Program, it has not established a plan for collecting asset inventory and condition assessment information  The draft program charter includes general tasks for updating asset records and improving and consolidating asset inventory data in Maximo  However, a plan would provide more specific details for how the work would be completed, such as the information to be collected on different assets, how and when this information would be consolidated into Maximo, milestones for completing the work, or how the effort would be funded  Without a plan to obtain asset inventory and condition assessment information WMATA will continue to lack critical information needed for good capital planning and sound investment decision-making  WMATA has reported significant progress toward its goals of reducing track defects and fire incidents, but still faces several challenges with implementing its track preventive maintenance program  WMATA defines an incident as any unplanned event that disrupts rail revenue service  According to WMATA officials, within the track preventive maintenance program WMATA seeks to reduce incidents specifically caused by electrical wayside fires and track defects each by 50 percent from fiscal year 2017 to fiscal year 2019  WMATA reported that in fiscal year 2018 it had met its goal for track defect incidents but not for electrical wayside fires  According to officials, track defect incidents—which include incidents caused by defective fasteners, switches, and “ballast”—were reduced by 50 percent from a total of 778 in fiscal year 2017 to 387 in fiscal year 2018  Electrical-wayside-fire incidents—including incidents caused by cable and insulator fires—went down 20 percent from a total of 55 in fiscal year 2017 to 44 in fiscal year 2018 (see fig 5)  Although WMATA has reduced both track defect incidents and electrical fires, the track preventive maintenance program is not intended to address the full range of all defects and track fires that may occur on the system  WMATA officials told us that the track preventive maintenance program specifically seeks to reduce electrical-wayside-fire incidents, which are a specific sub-set of overall track fires, and does not include non-electrical fires or smoke incidents, such as the ones caused by railcars or debris  WMATA captures and publicly reports the non-electrical fires as part of its quarterly Metro Performance Report, but according to WMATA officials, these fires are not specifically addressed through the track preventive maintenance program  While electrical fires decreased in fiscal year 2018, non-electrical fires did not change, as WMATA reported 23 non-electrical fires for both fiscal years 2017 and 2018  Additionally the track preventive maintenance program addresses a certain sub-set of track defect incidents such as those caused by loose fasteners and defective switches  According to WMATA, these track defect incidents can be addressed through its track geometry, torqueing, and switch maintenance initiatives  WMATA addresses other types of track defects, such as rail breaks and third-rail defects, through its capital program  However, according to WMATA, track defects attributable to the capital program are still included as part of the overall goal to reduce all track defect incidents by 50 percent by fiscal year 2019  WMATA established goals for completing each of the six track preventive maintenance initiatives within a certain time period and reported that in fiscal year 2018 it was on-track to meet or exceed those goals for four of the initiatives  For example, in implementing its “cable meggering” initiative, WMATA established a goal to inspect and replace electric cables across its entire rail system within 4 years  According to WMATA, it met its target for fiscal year 2018 by completing 25 percent of the entire system in that year  In addition to cable meggering, WMATA also met its annual targets for the switch maintenance, track bed cleaning, and stray current-testing initiatives  As for the two initiatives behind schedule, the torqueing initiative was 70 percent complete and the tamping initiative stood at 90 percent for the 2018 target (see table 2)  Officials told us they have developed various ways to improve efficiency with these initiatives  For instance, WMATA improved the productivity of its switch maintenance initiative by separating the work to inspect the switches from the follow-up repair work to grind and weld them  These activities had previously been conducted by the same team  However, WMATA faces challenges in implementing the track preventive maintenance program moving forward  WMATA officials described track preventive maintenance as a necessary operation that must be continuously performed and balanced in conjunction with regular train operations that provide service to their customers  According to WMATA officials, executing this new program requires regular refinements to ensure it continues to progress toward its desired outcomes  Among the implementation challenges identified by WMATA officials were the following: Securing Sufficient Track Time  WMATA officials told us that getting adequate time to perform track maintenance is difficult because it requires reducing the number of hours in which WMATA provides service to customers  Consequently, increased maintenance hours can result in lost revenue  Officials from the peer transit agencies we interviewed stated that the tension between conducting maintenance and providing service is common in the transit industry  According to WMATA officials, prior to SafeTrack, windows for performing track maintenance were not sufficient to complete all necessary work, partially because of this need to balance maintenance hours and service hours  To address this issue, WMATA increased its weekly overnight work hours from 33 hours to 39 hours during SafeTrack  After SafeTrack was complete, WMATA extended weekly overnight work hours again to a total of 41 hours  However, maintaining these extended overnight work hours past fiscal year 2019 requires approval from WMATA’s board of directors  As a result, the long-term viability of WMATA’s track preventive maintenance program is partially dependent on the board’s decision to balance the competing demands for service hours and maintenance time  Work Time Productivity  To maintain extended track-maintenance hours into succeeding years, it will be important for WMATA to demonstrate the new program’s productivity  According to WMATA officials, making the most productive use of the extended working hours is a challenge, but it will be necessary to justify the extended maintenance windows  WMATA officials told us that only a portion of overnight work hours yields productive maintenance time  For example, once a line ceases operations, it takes an additional hour for all trains to reach their final destination, and another hour after that to safely turn off all power running to the track and then establish a work zone  Once maintenance work is completed, additional time must be allotted for restoring power and allowing trains to move back into position  Because of these requirements, a five-hour work window may only yield two hours of productive work time (called “wrench time”)  For this reason, WMATA began tracking its wrench time at the beginning of fiscal year 2018  As of June 2018, WMATA reported that average wrench time had increased from about 2 0 hours per day in July 2017 to 2 37 hours  Resource Constraints  According to WMATA officials, having sufficient people with the necessary skills and experience to perform track maintenance work is a significant challenge  For instance, expanded maintenance windows have increased WMATA’s workforce requirements  As a result, WMATA has used contractors to assist with its stray-current testing and track bed cleaning initiatives  In another example, WMATA’s torqueing initiative is particularly resource intensive as the entire rail system contains 135 miles of “direct fixation” track, where the torqueing work is being done, and over 504,000 fasteners to check and tighten as necessary  According to WMATA officials, bolts and fasteners are torqued during their initial installment and then again 90 days afterward as part of the initial capital expenditure  After that, any subsequent torqueing is executed as part of the new track preventive maintenance program  WMATA stated that the torqueing initiative seeks to torque all 135 miles of direct fixation track annually  WMATA officials said the torqueing initiative is a mix of contractor and in-house staff, with contractors supplementing WMATA forces as needed  WMATA’s track preventive maintenance program has followed certain leading program management practices such as establishing key performance metrics and monitoring progress toward them  Leading practices recommend that organizations establish performance baselines for their programs and communicate performance metrics to key stakeholders  For instance, as previously noted, WMATA established a measureable program goal to reduce track-defect and electrical-wayside- fire incidents by 50 percent within 2 years, and WMATA also established time periods to complete its system-wide preventive maintenance initiatives  In addition, WMATA’s Rail Services Department—which manages the track preventive maintenance program—among other things, holds a monthly “RailSTAT” meeting in which the teams leading the preventive maintenance initiatives report their progress toward these goals to WMATA’s management  However, WMATA’s program does not fully align with other applicable internal-control standards or leading program-management practices  Specifically, COSO internal control standards and leading practices identified by the Project Management Institute’s The Standard for Program Management stresses the importance of identifying and assessing program risks and developing a program management plan  COSO recommends that organizations identify risks to the achievement of its objectives and analyze risks as a basis for determining how the risks should be managed  Furthermore, the risk identification is to be comprehensive  The Standard for Program Management also recommends that when identifying risks, the assessments be both qualitative and quantitative in nature  Regarding program management plans: The Standard for Program Management recommends that organizations develop program management plans that align with organizational goals and objectives  This includes aligning the program management plan with the organization’s overall strategic plan  Elements of the plan are to provide a roadmap that identifies such things as milestones and decision points to guide program activities  In developing the track preventive maintenance program, WMATA did not fully identify or quantitatively assess risks associated with the program  WMATA officials told us that in developing the track preventive maintenance program they used their professional judgment to identify track-defect and fire incidents as the most significant risks that they needed to address through the program  However, WMATA’s risk identification was not comprehensive in nature, as it only considered two technical aspects of track maintenance: electrical fires and track defects  As previously mentioned, non-electrical fires—which were not included in the scope of the program or risk assessment—did not change from fiscal year 2017 through 2018 and represent approximately 30 percent of all fires on the system over those years  Although WMATA officials told us in designing the program they reviewed track-related incident data from 2016, they did not quantitatively analyze the impact of these incidents on service or safety  In addition, WMATA did not consider broader strategic risks to its program, such as the availability of a program’s funding and stakeholders’ support for the continuation of the program  Specifically, while WMATA has identified several challenges with implementing the program—such as securing sufficient track time, demonstrating work time productivity, and overcoming resource constraints—none of these factors, or potential mitigations, were documented in a risk assessment in developing the program  WMATA has also not prepared a program management plan for the track preventive maintenance program  Although WMATA has identified program goals, officials told us that WMATA has not formally documented the overall structure of the program or how it would be implemented  Instead, the officials said the presentations they provide to WMATA’s board of directors, along with their ongoing staff and executive team meetings, regarding the track preventive maintenance program cover the relevant information needed for running the program  While providing such information to the WMATA board of directors provides some accountability for the program, these presentations do not represent a formal program management plan that links with WMATA’s strategic plan or that identifies milestones and decision points necessary to guide the program  As we previously reported, WMATA did not develop a project management plan before starting its SafeTrack work, and due to this omission and other issues, we found that WMATA lacked assurance that the approach taken with SafeTrack was the most effective way to identify and address safety issues  Furthermore, as this is the first time WMATA has implemented a track preventive maintenance program, a program management plan could help formally establish the program, provide strategic guidance for this new program by providing accountability for both internal and external stakeholders, and ensure that program goals are met  A program management plan could also provide practical benefits, such as helping ensure that WMATA’s extended overnight work hours are efficiently implemented and that sufficient resources are devoted to the program  Without the strategic direction provided by a comprehensive risk assessment and a formal program management plan, WMATA lacks a documented vision for how the track preventive maintenance program should be structured and implemented in order to meet the agency’s strategic goals and improve track safety  Specifically, without a risk assessment that uses quantitative and qualitative data to assess risks— such as data for all fires on the system and qualitative risks such as securing sufficient time for maintenance—WMATA lacks assurance that the program is comprehensively designed to address risks affecting the safety of the rail system or other risks that could hinder the program’s success  Moreover, a program management plan that draws on information from a comprehensive risk assessment would provide WMATA officials with the assurance that they are prepared to respond to current and future challenges that could threaten the long-term viability of the program  Finally, although WMATA developed the track preventive maintenance program to prevent the need for another emergency repair project like SafeTrack, without a formal program management plan, the WMATA employees charged with managing and implementing the program lack an important document to guide their decision-making to meet that objective and the agency’s overall strategic objectives  Developing a program management plan would outline the specific requirements to successfully implement the program, including necessary track time, expected productivity of program initiatives, and required resources  Furthermore, it would provide WMATA’s board of directors with confidence that the program has a clear roadmap with milestones and decision points as the board considers maintaining the extended overnight work hours necessary to implement the program  WMATA’s rail and bus systems provide nearly a million passenger trips each day, and those passengers rely on WMATA for safe and reliable public transportation in the nation’s capital and the surrounding areas  The federal, state, and local jurisdictions that fund WMATA expect WMATA to wisely use taxpayer funds to ensure the system is safe and reliable  WMATA can better meet these expectations by establishing documented policies and procedures that outline how the new capital planning process will work and the basis of investment decisions  In addition, developing measures to assess the performance of individual projects and the capital planning process would provide greater assurance to WMATA’s funding partners that its investment decisions result in a measurable improvement in operating performance, reliability, or other metrics  Furthermore, WMATA’s recent efforts to establish an Enterprise Asset Management Program, once finalized, could help WMATA develop a more complete inventory of its assets and collect critical information on their condition—both of which are consistent with sound capital planning  However, without a plan that provides specific details for obtaining this information, WMATA will continue to lack the critical asset information necessary to make lasting improvements in its capital planning process and make sound capital-investment decisions  Similarly, track preventive maintenance plays a critical role as WMATA works to reduce the track defects and fires that have endangered safety and service reliability  WMATA could better demonstrate the direction of the track preventive maintenance program and how it can improve track safety by more comprehensively assessing the technical and broader risks facing the program and by developing a formal plan that provides greater assurance WMATA is prepared to address challenges that could threaten the long-term viability of the program  Both actions would help WMATA better focus the program on critical maintenance needs and demonstrate its value to WMATA’s board of directors and other stakeholders as WMATA endeavors to provide safe, reliable, and quality service to its riders  We are making the following five recommendations to WMATA  The General Manager of WMATA should establish documented policies and procedures for the new capital planning process  These policies and procedures should include methodologies for ranking and selecting capital projects for funding in WMATA’s fiscal year 2020 capital budget and fiscal years 2020-2025 Capital Improvement Program and for future planning cycles  (Recommendation 1) The General Manager of WMATA should develop performance measures to be used for assessing capital investments and the capital planning process to determine if the investments and planning process have achieved their planned goals and objectives  (Recommendation 2) The General Manager of WMATA should develop a plan for obtaining complete information regarding WMATA’s asset inventory and physical condition assessments, including assets related to track and structures  (Recommendation 3) The General Manager of WMATA should conduct a comprehensive risk assessment of the track preventive maintenance program that includes both a quantitative and qualitative assessment of relevant program risks  In addition to considering technical program risks, WMATA should also consider broader program risks, such as the availability of funding for the program and stakeholders’ support  (Recommendation 4) The General Manager of WMATA should prepare a formal program management plan for the track preventive maintenance program that aligns with WMATA’s strategic plan, addresses how the program is linked to overall strategic goals and objectives, and includes program milestones and decision points  (Recommendation 5) We provided a draft of this report to WMATA and the Department of Transportation for review and comment  WMATA provided written comments, which are reprinted in appendix II, and technical comments, which we incorporated as appropriate in the report  The Department of Transportation provided technical comments, which we incorporated as appropriate  WMATA concurred in part, or with the intent of four of the recommendations, and disagreed with a fifth  Specifically, regarding the first recommendation, which is that WMATA establish documented policies and procedures for the new capital planning process, and that the policies and procedures include methodologies for ranking and selecting capital projects for the fiscal year 2020 capital budget and fiscal year 2020—2025 capital-improvement program  WMATA stated that it agreed with the recommendation, in part  WMATA said it will continue its efforts to finalize and document policies and procedures for the capital planning process for fiscal year 2021 and beyond  WMATA noted that it already has in place numerous planning tools, such as the 2016 Capital Needs Inventory assessment, which helped inform the fiscal year 2020 capital planning process  According to WMATA, it is currently reviewing policies, procedures, training materials, and other documents for the fiscal year 2020 planning process, and those documents will be updated and formalized through final documentation in fiscal year 2021  WMATA noted that it anticipates that many of the elements we recommend regarding the capital planning process will be part of the process documented in fiscal year 2021  For example, WMATA expects that additional automation, decision-making, governance, and reporting capabilities, will be part of the process that will be documented for fiscal year 2021  However, while WMATA has tools available to inform the capital planning process, it has not prepared documented policies and procedures for this process in fiscal year 2020  As we reported, without documented policies and procedures, including those for ranking and selecting projects for the fiscal year 2020 capital budget, WMATA’s stakeholders do not have reasonable assurance that capital investment decisions are made using a sound and transparent process  Taking action now to establish methodologies for ranking and selecting projects for the fiscal year 2020 capital budget would provide WMATA with an opportunity to improve upon those methodologies for the fiscal year 2021 capital planning process to better ensure investments are directed to WMATA’s highest priority needs  As such, we continue to believe this recommendation is valid and that WMATA should fully implement it  Regarding the second recommendation that WMATA develop performance measures for assessing capital investments and the capital planning process, WMATA stated that it agreed with the intent of the recommendation  WMATA also stated that it has developed such measures through compliance with federal requirements, including the FTA’s performance-based planning requirements and the requirement under MAP-21 that tier I transit providers, such as WMATA, establish state-of-good-repair targets that are linked to the capital program  WMATA noted these targets are set forth in its Transit Asset Management Plan  Although WMATA’s October 2018 Transit Asset Management plan includes some broad performance measures and targets for the state-of-good-repair for its various asset classes, as we reported, WMATA has not developed performance measures to assess individual capital projects or the capital planning process itself, as suggested by leading practices in the Executive Guide  As discussed in the report, such measures are important to determine if capital investments have achieved their expected benefits and if they have achieved organizational goals  Leading practices also indicate that by using a mixture of measures managers can assess performance based on a comprehensive view of the needs and objectives of an organization  These needs and objectives can go beyond just the state-of-good-repair to include such things as measures for assessing projects that would improve service reliability, expand capacity, or achieve financial objectives  We continue to believe that fully implementing this recommendation would help ensure that capital investments meet their intended outcomes and that the capital planning process helps WMATA achieve its strategic goals and objectives  Regarding the third recommendation that WMATA develop a plan for obtaining complete information about asset inventories and condition assessments, WMATA stated that it agreed with the intent of the recommendation and that its 2018 Transit Asset Management Plan outlines plans for continuing its asset inventory update  WMATA also said that it is working to ensure it has a complete asset inventory that addresses legacy information and that includes accurate, up-to-date condition assessments  As we reported, the Enterprise Asset Management Program—the program that WMATA told us it plans to use to continue development of asset inventories and condition assessments—includes some elements of good project management, but it also lacks an established plan for collecting asset inventory and condition assessment information  Without a plan to obtain asset inventory and condition assessment information WMATA will continue to lack critical information needed for good capital planning and sound investment decision-making  Thus, we continue to believe that this recommendation is valid and that WMATA should fully implement it  Regarding the fourth recommendation that WMATA conduct a comprehensive risk assessment of the track preventive maintenance program that includes both quantitative and qualitative assessment of relevant program risks, WMATA stated that it agreed with the intent of the recommendation and is putting in place a new process that will address it  Specifically, WMATA stated it is in the process of developing a new Reliability Centered Maintenance process that will include a comprehensive risk assessment of track infrastructure that includes consideration of broader risks such as costs, funding, and track access  According to WMATA, the new process is an engineering framework that will define the maintenance regimen, including preventive maintenance, and improve safety, reliability, and cost-effectiveness  During our review, WMATA officials did not discuss the Reliability Centered Maintenance process in detail or provide documentation that allowed us to evaluate how this process might interface with the current track preventive maintenance program  As a result, we were not able to evaluate how it might address identification and assessment of risks associated with track preventive maintenance  As we reported, going forward track preventive maintenance will play a critical role as WMATA works to reduce track defects and fires  We will review WMATA’s actions to conduct a comprehensive risk assessment as part of our routine recommendation follow-up process  Regarding the fifth recommendation that WMATA prepare a formal program management plan for the track preventive maintenance program, WMATA stated that it disagreed with the recommendation  WMATA noted that specific technical details of the track preventive maintenance program are evolving as it better understands the most effective maintenance regime through implementation of the Reliability Centered Maintenance process  WMATA stated that it believes the framework of Reliability Centered Maintenance is better suited to the ongoing mission of physical asset management than traditional project and program management tools  According to WMATA, the purpose of Reliability Centered Maintenance is to ensure that all efforts are focused on the safety, reliability, and cost-effectiveness of assets through their lifecycle, which is more relevant and applicable to WMATA’s strategic plan than any individual preventive maintenance program  As stated above, WMATA did not provide details about Reliability Centered Maintenance during our review so we are not able to evaluate this process in relation to the track preventive maintenance program  We will review WMATA’s actions related to implementation of the Reliability Centered Maintenance process as part of our routine recommendation follow-up process  We continue to believe this recommendation is valid and that WMATA should fully implement it  We will send copies of this report to appropriate congressional committees, the Secretary of Transportation, the Administrator of the Federal Transit Administration, and the General Manager of WMATA  In addition, we will make copies available to others upon request, and the report will be available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-2834 or goldsteinm@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  This report examines: (1) How WMATA expended its capital funding from fiscal years 2011 through 2017; (2) How WMATA’s new capital planning process addresses weaknesses it identified in the previous process; and (3) WMATA’s progress toward its track preventive maintenance goals and how the program aligns with leading program management practices  For each of our objectives we reviewed pertinent federal statutes and regulations as well as WMATA and FTA policies and documents  We also selected a non-generalizable sample of five similar U S  transit agencies based on similarity to WMATA in transit route mileage, system use, capital spending, system age, and rail fleet age  We also factored geographical diversity into our selection process  We then interviewed the officials from these selected transit agencies using a standard set of questions to learn how they utilize their capital funds, conduct capital planning, and oversee maintenance; and then we compared their processes to WMATA  Transit route mileage, system use, capital spending, and rail fleet age were measured using data from FTA’s National Transit Database  We measured system age according to data available within the American Public Transportation Association’s 2017 Public Transportation Fact Book, and geographical diversity was determined through data available from the U S  Census Bureau  The transit agencies we selected were: (1) Bay Area Rapid Transit, Oakland, California; (2) Chicago Transit Authority, Chicago, Illinois; (3) Massachusetts Bay Transportation Authority, Boston, Massachusetts; (4) Metropolitan Atlanta Rapid Transit Authority, Atlanta, Georgia; and (5) Southeastern Pennsylvania Transportation Authority, Philadelphia, Pennsylvania  To assess WMATA’s capital spending from 2011 through 2017, we interviewed knowledgeable officials from WMATA and FTA and also reviewed WMATA annual budgets, fourth-quarter and year-end financial reports, budget reconciliation reports, comprehensive annual financial reports, and FTA grant awards  We selected fiscal year 2011 because it was the first year in which WMATA received federal funding authorized by the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), and we selected fiscal year 2017 because it was the most recent year that capital expenditure data were available at the time of our review  By analyzing this information we determined that the following sources provided the most comprehensive and reliable available data on each of the following topics for our report (see table 3): We collected the aforementioned data, analyzed them to identify errors or other anomalies, and interviewed officials to determine how the data are compiled and checked for accuracy  We determined that these data had some limitations, as an external audit report of WMATA financial information for fiscal year 2016 noted a material weakness with WMATA’s process for accounting acquisition costs of capital assets  Specifically, there were inconsistencies between WMATA’s general ledger and sub- ledger, which are used to record acquisition costs, depreciation, and other financial information related to capital assets  As a result, additional steps were required to reconcile the differences between the two sources and could have resulted in a material error  However, after interviewing WMATA officials about the weakness and assessing the available financial information, we determined that the data we used were sufficiently reliable for our purpose of showing general trends of capital expenditures  Our analysis sought to depict how WMATA allocates and expends funds according to major asset categories within its capital-improvement plan  However, these asset categories only remained consistent from 2011 through 2015, and were revised during 2016 and 2017  However, we determined that each asset category consisted of Capital Improvement Projects that were each assigned a number  These projects and their corresponding numbers remained in existence from fiscal year 2011 through 2017, even though the asset categories were updated in fiscal year 2016  Tracking by Capital Improvement Project number provided a means to report consistently through that time period  Therefore, we used the asset categories from fiscal years 2011 through 2015 as our base reporting categories  These categories consisted of: (1) Vehicles/Vehicle Parts, (2) Rail System Infrastructure Rehabilitation, (3) Maintenance Facilities, (4) Systems and Technology, (5) Track and Structures, (6) Passenger Facilities, (7) Maintenance Equipment, (8) Other Facilities, and (9) Project Management and Support  We consolidated WMATA’s nine asset categories into five asset categories in order to represent broader categories of investment: Rail and Bus Vehicle Fleet (Vehicle/Vehicle Parts), Fixed Rail Infrastructure (Rail System Infrastructure and Track and Structures), Maintenance Facilities and Equipment (Maintenance Facilities and Maintenance Equipment), Passenger and Other Facilities (Passenger Facilities and Other Facilities), and Business Systems and Project Management Support (Systems and Technology and Project Management and Support)  We then reviewed WMATA’s fiscal year 2016 Fourth Quarter Report, fiscal year 2017 Fourth Quarter Report, and fiscal year 2017 Budget Reconciliation Report to match each project number from those two years to their corresponding category from fiscal year 2011 through 2015  To assess WMATA’s new capital planning process and how it addresses weaknesses WMATA identified in the previous process, we interviewed WMATA officials about their capital planning process and reviewed WMATA documentation related to the capital planning process  This included Capital Needs Inventories, WMATA’s policy for preparation of the 2010 and 2016 Capital Needs Inventories, annual capital budgets—to include capital improvement programs, and guidance documents issued by WMATA related to submitting projects for inclusion in the annual capital budget  We also reviewed the fiscal year 2018 business plan for WMATA’s Capital Planning and Program Management Department  We also interviewed officials from the Metropolitan Washington Council of Governments, the American Public Transportation Association, and FTA to discuss WMATA’s capital planning and budgeting processes  Furthermore, we compared WMATA’s capital planning practices to leading practices identified in GAO’s Executive Guide  The Executive Guide was used since it identifies leading practices for capital decision- making that are applicable to a wide variety of organizations, both public and private  For example, the Executive Guide developed leading capital planning practices by (1) identifying government and private sector organizations recognized for outstanding capital decision-making practices and (2) identifying and describing the leading capital decision- making practices implemented by these organizations  To identify leading practices for capital planning, we also reviewed Transit Cooperative Research Program Report 157  This report developed a framework for transit agencies to use when prioritizing the rehabilitation and replacement of capital assets and discusses leading practices in how to do this  We also identified project management principles from the Project Management Institute, Inc  Finally, we discussed capital planning with the peer transit agencies and prepared a summary of various aspects of capital planning in these agencies  To examine progress toward goals in WMATA’s track preventive maintenance program and how the program compares with leading program management practices, we reviewed WMATA documentation about the program, interviewed WMATA officials, and analyzed track- defect data and electrical-wayside-fire data provided by WMATA for fiscal years 2016 through 2018—which were the only years detailed track defect and electrical fire incident data were available  In order to determine whether the data provided were sufficiently reliable, we checked the data for errors, conducted interviews with knowledgeable officials to learn their procedures for collecting and analyzing the data, and performed independent tests that included verifying WMATA’s final tally of track defect and fire incidents and verifying there were no extended periods of time where data was missing  We also provided a set of data reliability questions to determine whether procedures were sufficient  After performing these steps we determined that the data were sufficiently reliable for the purposes of our report  In our interviews with WMATA, officials also described what goals they had created for the track preventive maintenance program, their progress in meeting those goals, and provided documentation to demonstrate their progress, which we reviewed  We also interviewed officials from the American Public Transportation Association and the American Railway Engineering and Maintenance-of-Way Association about best maintenance practices in the transit industry  We then compared WMATA’s track preventive maintenance program to leading program management practices identified by the Project Management Institute, Inc ’s The Standard for Program Management and internal control standards published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)  The Project Management Institute’s, standards are utilized worldwide and provide guidance on how to manage various aspects of projects, programs, and portfolios  In particular, The Standard for Program Management provides guidance that is generally recognized to support good program-management practices for most programs, most of the time  We conducted our work from November 2017 to January 2019 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Matt Barranca (Assistant Director), Richard Jorgenson (Analyst in Charge), Melissa Bodeau, Lacey Coppage, Cory Gerlach, Erin Guinn-Villareal, Kirsten Lauber, Joshua Ormond, and Patrick Tierney made significant contributions to this report 

ground_truth: Safety incidents in recent years on WMATA's rail system have raised questions about its processes for performing critical maintenance and replacing capital assets. WMATA initiated a new preventive maintenance program for its rail track in 2017, and is currently implementing a new capital planning process. GAO was asked to examine issues related to WMATA's capital funding and maintenance practices. This report examines: (1) how WMATA spent its capital funds from fiscal years 2011 through 2017, (2) how WMATA's new capital planning process addresses weaknesses it identified in the prior process, and (3) WMATA's progress toward its track preventive maintenance program's goals and how the program aligns with leading program management practices. GAO analyzed WMATA's financial and program information, interviewed officials of WMATA, the Federal Transit Administration, and five transit agencies selected for similarities to WMATA. GAO compared WMATA's capital planning process and track maintenance program with leading practices. From fiscal years 2011 through 2017, the Washington Metropolitan Area Transit Authority (WMATA) spent almost $6 billion on a variety of capital assets, with the largest share spent on improving its rail and bus fleet (see figure). Over this period, WMATA's capital spending was, on average, about $845 million annually. WMATA's new capital planning process could address some weaknesses it identified in the prior process. WMATA established a framework for quantitatively prioritizing capital needs (investments to a group of related assets) over a 10-year period. However, WMATA has not established documented policies and procedures for implementing the new process, such as those for selecting specific projects for funding in its annual capital budget. WMATA is currently using its new capital planning process to make fiscal year 2020 investment decisions. WMATA has proposed a fiscal year 2020 capital budget of $1.4 billion. Without documented policies and procedures for implementing the new planning process, WMATA's stakeholders do not have reasonable assurance that WMATA is following a sound process for making investment decisions. WMATA has made significant progress toward its track preventive maintenance program's goals, which are to reduce both track-defect and electrical-fire incidents by 50 percent in fiscal year 2019 compared with 2017. In fiscal year 2018, WMATA met its goal for reducing track defect incidents and reduced electrical fire incidents by 20 percent. However, in designing the program, WMATA did not fully assess risks. For example, WMATA did not quantitatively assess the impact of track defects or electrical fires on its ability to provide service, nor did it consider other risks such as non-electrical track fires, which represent about 30 percent of all fires on the system, or other factors, such as resources or track time. Without a comprehensive risk assessment, WMATA lacks reasonable assurance that the program is designed to address risks affecting the safety of the rail system or other risks that could hinder the new program's success. GAO is making five recommendations, including that WMATA establish documented policies and procedures for the new capital planning process and conduct a comprehensive risk assessment for the track preventive maintenance program. WMATA described actions planned or underway to address GAO's recommendations. GAO believes the recommendations should be fully implemented, as discussed in the report.