CONSUMER ASSISTANCE TO RECYCLE AND 

SAVE PROGRAM: MOST TRANSACTIONS MET 

PROGRAM REQUIREMENTS, BUT PROGRAM 

COMPLETION ACTIVITIES CONTINUE

National Highway Traffic Safety Administration

Report Number: MH-2010-054

Date Issued: April 29, 2010
U.S. Department of

Memorandum

Transportation

Office of the Secretary

of Transportation

Office of Inspector General

Subject: ACTION: Consumer Assistance to Recycle and 

Save Program: Most Transactions Met Program 

Requirements, But Program Completion Activities 

Continue

National Highway Traffic Safety Administration

Report No. MH-2010-054

Date: April 29, 2010

From:

Joseph W. Comé

Assistant Inspector General

for Surface and Maritime Program Audits

Reply to 

Attn. of: JA-40

To: National Highway Traffic Safety Administrator

The Consumer Assistance to Recycle and Save (CARS) Act of 20091 required the 

National Highway Traffic Safety Administration (NHTSA) to establish and 

administer a program that would encourage consumers to trade in their vehicles 

for new, more fuel-efficient vehicles. The primary objectives of the program were 

to stimulate the economy and promote sales of vehicles with higher fuel economy. 

The CARS Act established an aggressive schedule for NHTSA to implement this 

complex program, and 12 days into implementation, Congress tripled program 

funding from $1 billion to $3 billion.2

To provide oversight of this high risk program, Congress required the Government 

Accountability Office (GAO) and the Department of Transportation (DOT) Office 

of Inspector General (OIG) to review and report on the administration of the 

program. In August 2009, Senator Charles Grassley also expressed concerns to 

OIG about NHTSA’s ability to ensure program integrity. In response to 

congressional interest, we (1) examined the effectiveness of NHTSA’s controls to 

ensure that CARS transactions met Federal requirements; (2) identified challenges 

NHTSA faced in implementing the program; and (3) assessed NHTSA’s progress 

in closing out the program, including evaluating compliance and accounting for 

 After 1 month, dealers requested payment

for over 690,000 vehicle sales, nearly exhausting program funds.

 1 Public Law 111-32. 2 Public Law 111-47.
2

total program costs. GAO’s report, also being issued today, examines the extent 

that the CARS program achieved its objectives, stakeholders’ experiences, and 

other domestic and international vehicle retirement programs.3

To conduct our work, we interviewed NHTSA and other DOT officials and 

reviewed relevant agency documents. We also conducted site visits and 

interviews at automobile dealerships and vehicle disposal facilities4

RESULTS IN BRIEF

across the 

country related to a statistical sample of 393 CARS transactions as of October 9, 

2009. We conducted this performance audit 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. See details on our scope and 

methodology in exhibit A.

While NHTSA’s controls ensured that most CARS transactions met basic program 

eligibility requirements—such as fuel efficiency, ownership, and insurance—

controls related to trade-in vehicle disposal are less effective. Based on our 

statistical sample, we project that the majority of transactions, almost 97 percent, 

met basic eligibility requirements and 3 percent of CARS transactions lacked at 

least some supporting documentation. These unsupported transactions could result 

in improper payments to dealers totaling almost $94 million of the $2.83 billion 

approved for payment at the time of our audit. Some of these transactions might 

ultimately prove to meet program requirements with additional documentation, but 

did not based on information in the CARS database as of October 9, 2009.

5

 3 GAO's report is available on its website: 

 

NHTSA achieved this high rate of compliance by establishing transaction controls, 

including a two-level manual review and approval of each payment and automated 

checks to prevent duplicate payments. NHTSA also required dealers to certify 

that they would disable trade-in vehicle engines to prevent resale. However, one 

of the main controls related to the trade-in vehicles’ final disposal—the 

Department of Justice’s National Motor Vehicle Title Information System 

(NMVTIS)—cannot be relied on to confirm the final status of trade-in vehicles. 

Fewer than half of the states fully use the system. Further, some disposal facilities 

http://www.gao.gov/new.items/d10486.pdf. 4 In this report, disposal facilities refers to salvage entities, which sell automotive parts for reuse, or scrap entities, 

which shred vehicles and separate the remaining materials for reuse. For the CARS program, NHTSA created a list 

on www.cars.gov/disposal of facilities eligible to receive trade-in vehicles for crushing or shredding. 5 Our estimates are based on an analysis of transactions with a paid or ready-for-payment status in the CARS 

transaction database on October 9, 2009. We are 95 percent confident that the precision of our estimate does not 

exceed ±1.7 percentage points.
3

have not reported to NHTSA or NMVTIS on the receipt and destruction of tradein vehicles, as required. To compensate for weaknesses in NMVTIS, NHTSA 

shared the CARS trade-in vehicle identification numbers (VINs) with commercial 

car history vendors, increasing the opportunities to alert consumers to potentially 

fraudulent vehicle sales.

Immediate consumer response and the infusion of additional program dollars 

presented significant challenges to NHTSA’s implementation of the CARS 

program. With limited time to plan and prepare for CARS implementation, 

NHTSA based program decisions on certain assumptions that proved to be 

incorrect. For example, in determining staffing levels needed to process 

transactions, NHTSA assumed dealer requests for payment would occur at a 

constant rate of 3,000 per day. In the first 10 days, however, NHTSA received 

more than 224,000 requests—more than 7 times what it expected. NHTSA also 

assumed that most initial payment requests would have the required data for 

approval. Instead, most were rejected due to insufficient or inaccurate 

information, requiring dealers to resubmit requests with the deficiencies corrected. 

The high volume of requests also exposed certain weaknesses in the information 

technology (IT) system used to process transactions. With just 30 days to roll out 

a CARS IT system, NHTSA deferred completion of some standard development 

practices—including assessing risks, such as the need for software changes, and 

testing the system. Congress’ tripling of CARS funding further burdened 

NHTSA’s already overwhelmed processing capacity and IT system.

NHTSA has begun to take action to evaluate program compliance and to 

determine total program costs—two major activities remaining to close out the 

CARS program. As of February 2010, about 15 percent of the more than 2,900 

transactions identified for evaluation had been initiated or closed, and 20 

individual cases were being prepared for civil penalties. Also, almost $4 million 

had been returned as a result of these evaluations or voluntary dealer repayments. 

However, at the time of our audit, NHTSA did not have a comprehensive plan that 

identified the level of effort, scope, and timing of these and other close-out 

activities, including identifying total program costs. Total program costs remain 

unknown, in part because close-out activities—such as determining the cost of 

tracking trade-in vehicle disposal certificates and archiving program data—are 

ongoing. In addition, NHTSA is still determining the award fee on one of CARS’s

biggest contracts. Implementing a comprehensive plan would help NHTSA more 

efficiently carry out these remaining close-out activities and better inform the 

Secretary of Transportation and Congress of its progress and overall program 

performance.

We are recommending that NHTSA leverage lessons learned to further improve 

DOT’s and the Federal Government’s ability to respond to future vehicle 
4

retirement or other short-term programs, and to finalize and implement a 

comprehensive action plan to ensure efficient close out of the CARS program. In 

responding to a draft of this report, NHTSA concurred with our recommendations 

and provided a description of the actions it took to address the many challenges in 

implementing the program under tight deadlines. NHTSA's response also 

describes actions it plans to implement to complete the program. A complete 

discussion of NHTSA’s comments to our draft report and our response begins on 

page 18.

BACKGROUND

On June 24, 2009, the President signed the CARS Act to establish a $1 billion 

temporary program to stimulate the economy and encourage consumers to 

purchase fuel-efficient vehicles. The CARS Act permitted participating dealers to 

request payment from NHTSA for credits they extended to consumers for eligible 

vehicle sales that occurred between July 1, 2009, and November 1, 2009, or until 

all funds were expended. When consumers traded in eligible vehicles, 

participating dealers provided a $3,500 or $4,500 credit, depending on the increase 

in fuel efficiency, to help consumers buy or lease new, more fuel-efficient, eligible 

vehicles. Exhibit B provides details about the eligibility requirements.

The CARS Act required NHTSA to issue a final rule and begin implementing the 

program within 30 days of enactment. NHTSA issued the final rule on July 23, 

2009, and began accepting dealer requests for payment on July 27, 2009. The rule 

established eligibility requirements and payment procedures. To request payment 

from NHTSA, dealers created invoices by submitting consumer trade-in-vehicle 

and new vehicle information to the CARS transaction database. They also 

submitted a minimum of eight supporting documents, including consumer 

identification and proof of ownership, insurance, and registration for the trade-in 

vehicle. After NHTSA paid the invoice, the dealer had to disable the trade-in 

vehicle engine and transfer the vehicle to an eligible disposal facility. The 

disposal facility then had 7 days to report receipt of the trade-in vehicle to the 

Department of Justice’s NMVTIS. The disposal facility had up to 270 days to 

crush or shred the vehicle. Parts of the vehicle other than the engine block and 

drive train may be sold prior to disposal. Finally, the disposal facility had 7 more 

days to report the final destruction to NMVTIS. Figure 1 below provides a 

general overview of the CARS process.
5

Figure 1: Significant Steps in the CARS Process

* A dealer can also transfer the trade-in vehicle to a salvage auction that reports to NMVTIS within 3 days, transfers 

the vehicle to a disposal facility within 7 days, and submits a form to NHTSA.

Source: OIG

On August 7, 2009, Congress provided $2 billion in supplemental appropriations 

to continue the CARS program and increase its total funding to $3 billion. On 

August 25, 2009, DOT stopped accepting dealer requests for payment. By 

September 30, 2009, NHTSA had reviewed 99 percent of them and paid dealers a 

total of $2.83 billion.

MOST CARS TRANSACTIONS MET FEDERAL REQUIREMENTS,

BUT CONTROLS RELATED TO TRADE-IN VEHICLE DISPOSAL 

ARE LESS EFFECTIVE

NHTSA program controls ensured that most transactions met the CARS eligibility 

and fraud prevention requirements. However, controls related to trade-in vehicle 

disposal are less effective, making it difficult to verify the vehicles’ final 

destruction. NHTSA also lacked effective controls to monitor transaction activity 

early in the program and to ensure the integrity of transaction data. With limited 

visibility on the volume and pace of CARS transactions occurring at dealerships, 
6

NHTSA risked having to deny an estimated $380 million in potentially eligible 

claims. (Exhibit C provides details about how we determined sample eligibility.)

Transaction Controls Were Generally Effective

NHTSA used several controls to help ensure that transactions met Federal 

requirements before approving dealer payment requests. First, reviewers used a 

standard checklist to determine whether dealers provided accurate information and 

supporting documentation. This review was conducted twice for each request. 

Further, NHTSA built edit checks into the IT system to screen for invalid 

transactions. For example, some controls were designed to ensure that:

• each trade-in VIN was unique to prevent more than one payment for the same 

VIN,

• each purchaser’s identification was unique to prevent the same individual from 

obtaining more than one credit, and

• the purchase date of the new vehicle was July 1, 2009, or later.

Our statistical sample indicates that these controls ensured that 96.7 percent of 

CARS transactions met program requirements, while 3.3 percent did not. Some of 

these transactions might ultimately prove to meet program requirements with 

additional documentation, but did not based on information in the CARS database

as of October 9, 2009.

6 Based on the 3.3 percent, we project that almost 22,000 

transactions lacked supporting documentation, such as proof of insurance, in the 

CARS database at the time of our audit to meet program requirements. The total 

value of these transactions could equal almost $94 million of the $2.83 billion 

approved for payment at the time of our audit (see table 1). Under the Improper 

Payments Information Act,7

 6 We determined whether transactions had sufficient support using NHTSA’s September 7, 2009, transaction review 

checklist, which specifies which documents are acceptable evidence.

permanent government programs with improper 

payments that exceed $10 million or 2.5 percent of program payments trigger 

Office of Management and Budget reporting requirements for high-risk programs. 

We advised NHTSA of the unsupported transactions that we found, which should 

help it determine whether to pursue repayments or additional documentation.

7 Public Law 107-300.
7

Table 1: Projected Unsupported CARS Transactions Based on 

OIG Sample*

Document Not Provided Projected 

Unsupported CARS 

Transactions 

Projected Value

Proof of insurance for 1 year with no more than a 

10-day lapse in coverage 8,448 $36,246,240

Front of Manufacturer’s Certificate of Origin 6,835 $29,109,824

Proof of current registration 3,317 $14,925,706

Proof of purchaser identification 3,317 $13,265,369

Total 21,917 $93,547,140

* The precision of our estimates does not exceed +/-1.7 percent of invoices in the universe, with a confidence level 

of 95 percent.

Source: OIG projection based on a sample of NHTSA transaction data, as of October 9, 2009

NHTSA missed opportunities to strengthen supporting documentation 

requirements and further mitigate the risk of improper payments. For example, 

NHTSA did not consistently require processors to review the new vehicle

manufacturer’s certificates of origin (MCO) for all transactions. Instead, NHTSA 

relied on dealer-reported information to determine whether the purchased vehicle 

met the program requirement of being a new vehicle. In addition, NHTSA did not 

require dealers to submit the back of the MCO signed by the consumer, which

could have provided additional assurance that a consumer did not participate in the 

program more than once.8

Some dealers had difficulty complying with the transaction controls, which 

resulted in repeated submissions and reviews and slower payments to dealers. For 

example, to ensure that consumers met CARS Act ownership provisions, NHTSA 

required dealers to prove that the trade-in vehicles had current registration and 

continuous insurance for the 12 months preceding the new vehicle purchases. 

According to dealers we interviewed, dealers and consumers frequently had to 

coordinate with insurance companies to obtain such evidence. Some dealers also 

noted that the NHTSA requirement to submit electronic copies of documents, such 

as the new vehicle sales agreement, was resource intensive and delayed some 

 8 The CARS Act specifies that only one credit may be issued to a single person, and only one credit may be issued for 

joint registered owners of a single eligible trade-in vehicle.
8

payment requests. (Exhibit D provides selected dealer views about the CARS 

program.)

Controls Related to Trade-in Vehicle Disposal Are Less Effective

One of the main controls related to vehicle disposal—the Department of Justice’s 

NMVTIS—is not reliable for confirming the final status of trade-in vehicles

because of limited state participation. Moreover, some of the 22 disposal facilities 

we visited were not following CARS requirements to report to NMVTIS on the 

receipt and disposal of vehicles. As a result, NHTSA will have difficulty tracking 

final disposition of trade-in vehicles.

NMVTIS was created to prevent vehicle theft and fraud by providing motor 

vehicle administrators, law enforcement officials, and consumers an electronic 

means to verify and exchange title, brand,9

We found noncompliance with trade-in vehicle controls at selected disposal 

facilities. Seven (32 percent) of the 22 facilities we visited did not report to 

NMVTIS as required by NHTSA. For example, one facility, which received 357 

CARS vehicles at the time of our audit, was not aware of NMVTIS and therefore,

had not reported any information on the status of those vehicles. The other 

facilities did not report to NMVTIS either at the time of receipt or after the 

vehicles had been crushed or shredded. In addition, one facility we visited did not 

sign or date the disposal certification forms for the 27 trade-in vehicles it handled. 

Without signed and dated forms, NHTSA cannot determine whether the disposal 

and other data. Specifically, states can 

query NMVTIS on a real-time basis before issuing a title for an out-of-state 

vehicle, and, preferably, before every title verification regardless of its origin or 

reason. The Federal regulatory deadline for all states to participate fully in 

NMVTIS was January 1, 2010. However, as of February 2010, only 15 states 

(30 percent) were full participants. Of the states that are not full participants, 16

provide data but do not query the system, and 15 states are developing the 

capabilities either to provide data or to become full participants. The remaining 

states and the District of Columbia are not participating at all. The Department of 

Justice cannot impose penalties for non-participation in NMVTIS. However, to 

compensate for weaknesses in NMVTIS, NHTSA shared the CARS trade-in VINs 

with commercial car history vendors, increasing the opportunities to alert 

consumers to potentially fraudulent vehicle sales. Additionally, for a fee, 

consumers can search NMVTIS for vehicle histories, including previous titling 

states and odometer readings. NHTSA has also been coordinating with 

U.S. Customs and Border Protection and the National Insurance Crime Bureau to 

monitor vehicle exports.

 9 Brands are distinctive labels regarding the status of a motor vehicle, such as “junk,” “salvage,” and “flood” vehicles. 

The CARS program has its own brand in NMVTIS.
9

facility complied with the requirement to crush or shred the vehicles within 

270 days of taking possession.

Other Transaction Controls Were Ineffective

Although NHTSA monitored the CARS database to prevent exceeding funding, 

NHTSA lacked controls to manage an orderly ramp down of the program once 

funds from the initial appropriation were spent. NHTSA used a contractor to 

estimate future dealer requests for payment through surveys on vehicle sales. By 

the time NHTSA’s contractor delivered its first survey results on August 6, 2009, 

it estimated that dealers had already completed CARS transactions worth 

$1.38 billion if approved by NHTSA, which was $380 million more than the 

program's original appropriation. The additional $2 billion appropriated on 

August 7, 2009, allowed NHTSA to avoid an abrupt shut down of the program and 

the need to deny hundreds of millions of dollars of dealer claims. NHTSA’s 

contractor continued to survey dealers for the remainder of the program, providing 

information to determine the timing of the program’s ultimate ramp down.

NHTSA also lacked controls to ensure the accuracy of transaction data and 

compliance with some Federal and DOT policies. For example:

• NHTSA did not validate VINs before paying dealers. Our review of the 

transaction database revealed over 23,000 invalid trade-in and new VINs, most 

of which were dealer entry errors. In response to our draft report, NHTSA 

officials claimed they have corrected approximately 11,000 incorrect trade-in 

VINs, and updated NMVTIS to reflect those corrections. We have not verified 

or validated these corrections.

• NHTSA did not follow some Federal security procedures for updating and 

correcting dealer bank information, thereby creating a risk of unauthorized 

access or interception of this information.10

• NHTSA did not comply with Federal standards to secure personally 

identifiable information (PII). Specifically, NHTSA did not encrypt PII stored

in the CARS database.

• NHTSA did not have an IT system control to prevent errors in sales dates

(when transactions occurred between the dealers and consumers) and invoice 

dates (when dealers created an invoice in the CARS database). Consequently, 

NHTSA’s ability to use this information to screen invalid transactions and 

report on program activity was limited.

 10 NHTSA collected, stored, and verified dealers’ bank information to enable electronic transfer of approved payments.
10

• NHTSA’s database contained 970 duplicate records at the time of our audit. 

According to our review, none resulted in duplicate payments.

• NHTSA did not verify stated fuel economy increases from trade-ins to new 

vehicles. Dealers were required to use fueleconomy.gov11

Errors and omissions such as these require NHTSA to expend resources for 

corrections and limit its data analysis in support of compliance review activities.

to compare fuel 

efficiency ratings for each transaction. However, 29 (7 percent) of the 393 

transactions in our sample had errors related to this requirement, such as 

selecting the wrong engine size or using a manufacturer’s website instead of 

the required government one. We determined that these 29 transactions were 

eligible for the program, although one received $4,500 instead of $3,500, and 

another received $3,500 when it was eligible for $4,500.

Finally, some fundamental contracting oversight tools were not in place during the 

program, limiting NHTSA’s ability to oversee contractors that supported 

transaction processing and the IT system. For example, NHTSA did not maintain 

oversight files or document oversight responsibilities assigned to its staff that was 

monitoring the contracts. To address these shortcomings, NHTSA conducted 

monitoring activities, including daily conference calls, site visits, and e-mails.12

RAPID SUMBISSION OF PAYMENT REQUESTS AND INCREASED 

FUNDING CHALLENGED NHTSA’S IMPLEMENTATION

Consumer response to CARS presented significant program implementation 

challenges for NHTSA. Because NHTSA assumed transactions would occur at a 

constant rate throughout the life of the program, it was unprepared to respond to 

the immediate demand. The increased volume of transactions that occurred when 

Congress tripled CARS funding further burdened NHTSA’s already overwhelmed 

processing capacity and IT system.

Transaction Processing Required Additional Capacity and 

Modifications to Pay Dealers

With limited time to plan and prepare for CARS implementation, NHTSA based 

its staffing decision on certain assumptions. These assumptions did not adequately 

account for program risks, such as higher participation levels or transaction 

rejection rates, and ultimately proved to be incorrect. When NHTSA began 

 11 The Environmental Protection Agency sponsors this website. 12 We did not assess the effectiveness of these monitoring activities.
11

accepting dealer payment requests, its processing capacity was inadequate to 

accommodate the large volume of transactions.

NHTSA assumed that the initial $1 billion program funding would support 

250,000 dealer credits and that dealers would submit about 3,000 correct payment 

requests per day throughout a 3-month program. NHTSA also assumed each 

transaction processor would need 30 minutes to manually review, approve, or

reject each dealer request for payment. Using these assumptions, NHTSA

determined it would need 200 full-time equivalents (FTE) to process 

transactions.13

When NHTSA began processing dealer requests for payment, its processing 

contractor, Citibank, had 38 FTEs available. At this staffing level, each FTE 

processor would have no more than 6 minutes per transaction to complete 3,000 

transaction reviews per day.

If the transaction processing function had been fully staffed at 200 FTEs, it would 

have still been overwhelmed by circumstances NHTSA had not factored into its 

plans.

• The number of dealer payment requests in the first days of the program greatly 

exceeded the number NHTSA expected. On the first day that NHTSA 

accepted payment requests, July 27, 2009, dealers submitted nearly 4,000

requests. Within the first 10 days, dealers submitted more than 224,000 

payment requests, not the 30,000 for which NHTSA planned.

• According to the CARS Act, vehicle sales were eligible beginning July 1, 

2009, 26 days before NHTSA accepted the first payment request. NHTSA’s 

processing plans did not reflect this gap. According to dealer-provided data, 

NHTSA started with a backlog of over 51,000 sales.14

• Despite guidance on requesting CARS payments available through the CARS 

website and webinars, almost 92 percent of dealer payment requests in the first 

week included incorrect or insufficient documentation. Dealers had to 

resubmit requests with corrected or additional information. By the end of the 

program, the average transaction needed more than 3 reviews and 30 days from 

the dealer’s first submission to payment. The average period from the dealer’s 

last correct submission to final payment was 16.9 days, rather than the 10 days 

required by the CARS Act.

 13 A full-time equivalent (FTE) is the basic measure of employment for budgeting purposes—total hours to be worked 

divided by the number of compensable hours in the fiscal year. 14 NHTSA found data quality issues with dealer-reported sales dates.
12

Moreover, the $2 billion in supplemental appropriations 12 days into the program 

tripled program funding and NHTSA’s workload for processing transactions. As a 

result, NHTSA had a backlog of approximately 650,000 transactions when it 

stopped accepting dealer requests for payment on August 25, 2009 (see figure 2).

To help reduce the backlog, NHTSA began hiring more processors in mid-August 

2009. Although Citibank assigned 550 additional FTEs to CARS by September 3, 

2009, Citibank alone could not address the backlog of dealer payment requests in a 

timely manner. Using emergency contracting and interagency agreements, 

NHTSA assembled a transaction-processing workforce of more than 7,000 Federal 

Aviation Administration, Internal Revenue Service, and private vendor employees 

across the country. NHTSA also used about 100 DOT employees from other 

agencies for about 10 days to process transactions.

In addition, NHTSA modified its transaction review checklist 12 times. One 

significant change was to relax proof of registration requirements for the trade-in 

vehicles—instead of requiring dealers and consumers to prove registration for the 

previous 12 months, NHTSA required proof of registration that was current at the 

time of vehicle trade in and sale. NHTSA determined that a title and proof of 

Figure 2: Pending Dealer Payment Requests, August 2009 and 

September 2009

99,843 

649,522 

24,251 

-

100,000 

200,000 

300,000 

400,000 

500,000 

600,000 

700,000 

Aug 1, 2009 Aug 16, 2009 Aug 31, 2009 Sep 15, 2009 Sep 30, 2009

NHTSA Stops Accepting Dealer Requests for Payment

Number of Transactions

Source: OIG analysis of NHTSA data
13

1 year of insurance was sufficient to demonstrate ownership and drivability. This 

change also reduced dealer and consumer frustration.

These actions and the closing of the payment request period allowed NHTSA to 

clear the backlog of transactions. By the end of August 2009, NHTSA was 

approving 10,000 transactions per day, and by the end of September 2009, 

99 percent of the transactions had been resolved. However, some of the 

modifications NHTSA made to clear the backlog negatively impacted its quality 

assurance approach. Originally, each processing center was responsible for 

reviewing each dealer request twice before approving it for payment, and 

conducting quality assurance reviews on approved transactions. To maximize the 

productivity of the expanded workforce, NHTSA continuously redistributed work 

among the centers. As a result, a processing center might not perform both 

reviews on an individual transaction. Therefore, transactions reviewed at separate 

processing centers were not included in NHTSA’s quality assurance reviews. This

sharing of work limited NHTSA’s ability to oversee processing functions and 

assess individual processing center performance.

High Volume of Transactions Exposed IT System Risks

With 30 days to develop, test, and implement an IT system to register dealers, 

capture transaction information, and pay dealers, NHTSA deferred completion of 

standard practices designed to mitigate certain performance and security risks. 

NHTSA finished developing the IT system 1 day prior to the program launch, not 

allowing time for adequate developmental testing and evaluation. NHTSA did not 

complete required certification and accreditation until September 23, 2009, about 

60 days after program launch and several weeks after NHTSA stopped accepting 

dealer payment requests. According to National Institute of Standards and 

Technology guidance and standards, the certification and accreditation process 

ensures that agencies have the best information to make timely, credible, riskbased decisions about authorizing operation of Federal IT systems. Until testing 

and certification requirements could be completed, NHTSA granted conditional 

authority to operate the system. However, DOT policy does not recognize such 

authority.15

Immediately after launching dealer registration on July 24, 2009, NHTSA’s IT 

system experienced performance problems. At times, dealers were unable to 

submit requests for payment and processors were unable to access the system and 

process transactions. Further, running management reports on the large database 

interfered with system performance. According to NHTSA, unplanned system 

outages eventually totaled 80 hours, in addition to extended periods of intermittent 

 15 DOT Order 1351.6, CIOP Chapter 1351.6, Certification, Accreditation and Security Assessments (CA) Controls, 

Security Accreditation (CA-6), May 14, 2009.
14

or slow service. NHTSA did not stabilize the system until August 28, 2009—

3 days after NHTSA stopped accepting dealer payment requests.

The IT system NHTSA selected to manage dealer registration and the transaction 

database—Oracle’s iSupplier—offered some advantages. According to NHTSA 

officials, iSupplier was comparatively low-cost, could be put into production in 

30 days, had the capacity to interact with multiple dealers, and could interface 

with Delphi—NHTSA’s electronic payment system. In addition, DOT was 

already considering using iSupplier to support its acquisition program, thereby 

reducing the time and cost of training CARS staff. Despite these advantages, 

iSupplier was designed as a payment application and required significant software 

and hardware modifications to manage the CARS transaction processing workflow 

at multiple processing centers. Further, according to NHTSA officials, their 

ability to monitor program activity was limited because the iSupplier standard 

queries were unclear.

NHTSA LACKS A COMPREHENSIVE PLAN TO MONITOR 

PROGRESS OF REMAINING PROGRAM ACTIVITIES

NHTSA has begun to take action to evaluate program compliance and to 

determine total program costs—two activities needed to close out the CARS 

program. At the time of our audit, NHTSA did not have a comprehensive plan for 

completing these activities. Staff availability to conduct compliance activities has 

been particularly problematic. Developing and implementing an action plan that 

identifies the level of effort, scope, and timing needed to complete these activities 

would help NHTSA close out the program efficiently and better inform the 

Secretary of Transportation and Congress of the program’s progress and overall 

performance.

Compliance Evaluation Activities Are Under Way

NHTSA has identified more than 2,900 transactions that warrant further 

examination. The CARS compliance division has either closed or initiated 

examination of approximately 450 (about 15 percent) of these transactions, and 

NHTSA personnel are preparing 20 individual cases for civil penalties. By the 

end of February 2010, compliance activities had led to $82,000 in returned dealer 

payments. According to NHTSA officials, an additional $3.7 million in 

voluntarily returned payments could be related to compliance division requests for 

dealers to review their transactions. We also forwarded for NHTSA’s review the 

unsupported transactions in our sample and three instances where it appeared that 

one individual participated in more than one CARS transaction.
15

Our statistical sample indicates that a much larger population of transactions likely 

requires further review and possible investigation. We estimate with 95 percent 

confidence that 3.3 percent of transactions lacked supporting documentation in the 

CARS database at the time of our audit, meaning that almost 22,000 approved 

transactions could lack proper evidence. (The precision of the estimate does not 

exceed ±1.7 percent of invoices in the universe.)

Of particular concern is the need for NHTSA to expeditiously complete 

compliance reviews related to trade-in vehicle disposal. NHTSA is tracking

receipt of the certificates that disposal facilities are required to submit after 

receiving trade-in vehicles. NHTSA is also sampling VINs in NMVTIS, visiting

disposal facilities, and speaking with associations and plans to conduct a webinar 

to promote program compliance. Once the trade-in vehicles are disposed of, 

physical evidence will no longer exist to verify that disposal requirements have 

been met. We estimate that most vehicles should be crushed or shredded by July 

2010, based on when most dealers received their payments.

Figure 3: Vehicle Crusher at Participating Disposal Facility

Source: OIG

Sufficiently staffing compliance activities has been a problem for NHTSA. To 

fulfill immediate tasks in the first 30 days of accepting dealer payment requests, 

NHTSA assigned most of its compliance personnel to processing transactions, 

answering hotline calls, and conducting training. As a result, NHTSA has a 

backlog of compliance work, such as entering data from field reviews and 

analyzing the CARS database.
16

According to its draft staffing plan, NHTSA intends to staff its CARS compliance 

division with 27 employees. As of March 2010, 19 staff comprised the division—

9 field investigators and 10 headquarters employees. According to NHTSA 

officials, the agency plans to hire more staff to conduct its remaining compliance 

work. However, an additional 8 compliance employees might not be sufficient

because NHTSA did not revise its compliance staffing estimate to reflect the

tripling of CARS funds. Moreover, without gauging the scope and timing of the 

work or identifying the level of resources it can commit, NHTSA cannot

accurately estimate the resources needed to complete compliance reviews, initiate 

administrative actions to recover payments, and impose civil penalties, when 

appropriate. 

Until Pending Expenses Are Finalized, Total Program Costs Will 

Remain Uncertain

NHTSA has resolved most dealer requests for payment but does not yet know total 

program costs. NHTSA continues to incur expenses as it completes program 

activities, such as responding to Freedom of Information Act requests, establishing 

program data archives, and determining the award fee related to Citibank’s 

transaction processing contract.16

Table 2: CARS Administrative Costs

 NHTSA estimates these contingent costs will 

add more than $9 million to the $81 million already obligated (see table 2). We 

did not assess the accuracy of this estimate.

Purpose Dollars Percent of

Obligated Funds

Transaction Processing $39,681,962 48.75%

Information Technology Services $33,468,612 41.12%

Staffing $4,763,913 5.85%

Outreach and Education $2,986,634 3.67%

Internal Controls $397,958 0.49%

Space Rental and Infrastructure $100,000 0.12%

Obligated Funds as of February 18, 2010 $81,399,079 100.00%

Pending Costs $9,100,000

Total with Pending Costs $90,499,079

Source: NHTSA data

 16 The contract provides for up to $650,000 in performance awards.
17

In addition, NHTSA has not determined or estimated the cost of approximately 

100 DOT employees who helped process dealer payment requests over 10 days in 

August 2009. The employees charged their employing agencies for the time they 

spent processing CARS transactions. NHTSA tracked the employees’ time as 

total FTEs each day, but did not track the hours by individual. As a result, 

NHTSA cannot calculate the cost to the CARS program using actual salary or 

hourly rates. We estimate that the salary and indirect costs for the employees’

time spent processing CARS transactions is about $208,000.

CONCLUSION

Developing and implementing a multi-billion dollar program in a compressed time 

frame is a challenging and high-risk task. In just 30 days, NHTSA launched the 

CARS program; and in 2 months paid almost $3 billion to dealers and largely 

complied with numerous Federal requirements. In meeting this time frame, 

however, NHTSA did not adequately assess program risks or test the IT system it 

used to manage dealer registration and the transaction database. Ultimately, these 

shortcomings resulted in confusion, frustration, and delays. As it closes out the 

program, NHTSA will be challenged to address risks associated with completing

compliance reviews, ensuring that trade-in vehicles are accounted for and 

destroyed, and determining total program costs. Careful planning would help 

minimize these risks.

NHTSA’s experience implementing and closing the CARS program provides a

unique opportunity to inform future, related programs. Efficiently completing 

remaining program activities and leveraging lessons learned would provide agency 

and other Federal officials and decision makers with valuable information to 

assess the CARS program and better prepare for other high-risk programs.

RECOMMENDATIONS

To ensure that NHTSA has the ability to respond to unforeseen challenges in 

future vehicle retirement or other programs, we recommend that the National 

Highway Traffic Safety Administrator:

1. Leverage CARS lessons learned to develop new program design guidelines 

that incorporate risk mitigation and contingency plans for transaction 

processing, IT systems, and activity monitoring and reporting.

2. Report these guidelines to the Secretary of Transportation and Congress so that 

knowledge gained from the CARS program can inform other agencies facing 

similar challenges.
18

To enable taxpayers and decisions makers to determine the CARS’s program 

performance and final program cost, we recommend that the National Highway 

Traffic Safety Administrator:

3. Finalize and implement an action plan for completing remaining program 

activities, including evaluation of compliance and accounting for all program 

costs.

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE

We provided a draft of this report to NHTSA for review and comment. NHTSA 

provided us formal comments and additional technical and informal comments. 

NHTSA’s formal comments are included in their entirety as an appendix to this 

report. In its formal comments, NHTSA described the actions it took to address 

the many challenges in implementing the program under tight deadlines. 

NHTSA’s response also describes actions it plans to implement to complete the 

program. Our report recognizes the challenging nature of the program and we 

welcome the additional insights NHTSA provided in its response. We 

incorporated technical comments into this report, as appropriate.

NHTSA concurred with our recommendations and provided target completion 

dates for recommendations 1 and 2. With regard to recommendation 3, NHTSA 

provided us with a close-out plan on April 14, 2010. The plan establishes a 

schedule to make necessary policy decisions to determine how to close out the 

program. NHTSA also identifies certain activities that must be completed before 

NHTSA can make those policy decisions, including transaction sampling and pilot 

studies to determine the level of effort, time frames, and costs to complete 

remaining program activities. Although they provided us with a plan, success will 

be in the implementation of close-out actions. We will monitor NHTSA’s 

remaining program activities, including pilot studies and policy decisions, 

development of a comprehensive close-out plan, and implementation of close-out 

actions. 

ACTIONS REQUIRED

We consider NHTSA’s planned actions for our recommendations to be reasonable 

and resolved, subject to the follow-up provisions in Department of Transportation 

Order 8000.1C. When NHTSA completes its pilot studies, we request that 

NHTSA provide us target action dates for completing remaining program 

activities.
19

We appreciate the courtesies and cooperation of Department and NHTSA 

representatives during this audit. If you have any questions concerning this report, 

please call me at (202) 366-5630 or Gary Middleton, Program Director, at 

(202) 366-0625.

#
20

Exhibit A. Scope and Methodology

EXHIBIT A. SCOPE AND METHODOLOGY

We evaluated NHTSA’s Consumer Assistance to Recycle and Save (CARS) 

Program to examine the effectiveness of NHTSA’s controls to ensure that CARS 

transactions met Federal requirements; to identify challenges NHTSA faced in 

implementing the program; and to assess NHTSA’s progress in completing the 

program, including evaluating compliance and accounting for total program costs. 

Further, at the request of Senator Charles Grassley, we focused on NHTSA’s 

implementation of the program and its ability to ensure program integrity. This 

report concludes our audit work to fulfill the congressional requirement for the 

Department of Transportation Office of Inspector General (OIG) to review and 

report on the administration of the program.

To conduct this audit, we interviewed personnel from NHTSA’s Office of Car 

Allowance Rebate System, Office of Enforcement, Office of Policy and 

Operations, Office of Planning, Administrative and Financial Management, and 

Chief Information Office to determine roles, responsibilities, and direct 

involvement in the management and oversight of the CARS program. In addition, 

we reviewed relevant laws, regulations, policies, procedures, and planning 

documents that established the CARS program, including the authority to operate; 

guidance for information technology, acquisition, transaction processing and 

approval, data quality, compliance, and administrative costs and quality assurance; 

contracts, interagency agreements, and other source selection materials.

We visited the Federal Aviation Administration's (FAA) Enterprise Service Center 

to gain an understanding of its role in the CARS transaction payment process. We 

met with officials from the American Association of Motor Vehicle 

Administrators, Department of Justice, and National Motor Vehicle Title 

Information System (NMVTIS) regarding the use of NMVTIS to track VINs and 

brand titles of trade-in vehicles for the CARS program.

We visited several processing centers contracted by NHTSA to review dealer 

submissions for the CARS program. Locations visited include Citigroup in New 

Castle, Delaware and Newark, Delaware; Vangent in Chester, Virginia; Internal 

Revenue Service in Austin, Texas; and FAA Enterprise Service Center in 

Oklahoma City, Oklahoma. During our visits, we interviewed managers and 

employees about processing operations and observed actual transaction reviews. 

We also visited Telesis Corporation, which operated the NHTSA CARS hotline in 

Beltsville, Maryland.

To project the number and amount of unsupported transactions, we selected a 

3-stage probability proportional to size sample from NHTSA’s 673,376 paid or 

ready for payment dealer submissions. For stage 1, we randomly selected 10 
21

Exhibit A. Scope and Methodology

states with a probability proportional to a state's total invoice amount. The states 

selected were California, Georgia, Illinois, Indiana, Kansas, New Jersey, North 

Carolina, Ohio, Pennsylvania, and Texas. For stage 2, we randomly selected 4

dealerships with a probability proportional to a dealership's total invoice amount 

from each of the 10 states. Finally, for stage 3, we selected a simple random 

sample of 10 invoices from each of the 40 dealerships. One dealership had only 

four invoices, and one invoice was deleted from the sample. Selections were also 

made with replacement, meaning a state or dealership could have been selected 

more than once, which happened in Texas; one dealership was selected twice and 

two invoices were selected twice, resulting in an actual sample size of 39

dealerships and 391 unique invoices. Payment for these transactions was from 

funds appropriated for the CARS program to operate from July 1, 2009, through 

November 1, 2009.

We conducted site visits at each of the 39 dealerships and verified the eligibility of 

the randomly sampled dealer submissions that were approved for payment by 

NHTSA. Sampled items were extracted from the CARS information technology 

system and tested against original dealer records kept onsite at each dealership and 

against transaction eligibility requirements. We also verified the CARS database 

information against records kept onsite at selected disposal facilities. We used 

OIG-generated checklists and scanners to record evidence obtained from original 

dealership and disposal facility records. We interviewed auto dealer and disposal 

facility personnel to get an understanding of the process used for their 

participation in the CARS program, and to examine inconsistencies in auto dealer 

and disposal facility records for CARS transactions. We also assessed the random 

sample to identify errors in the transaction data and to detect noncompliance with 

program requirements.

Of the 22 disposal facilities we visited, 18 were randomly selected based on the

transactions in our sample. The sample of disposal facilities is too small to project 

over the universe of transactions. However, it is an unbiased sample that provides 

insights into the disposal phase of the program and indicators of program 

performance and controls. The other four facilities include one near Washington, 

D.C., and three others that we visited at the start of our audit to test our 

methodology.

We obtained assistance from the OIG senior statistician in developing the 

sampling methodology, selecting the sample, and projecting the sample results.

We consulted with the OIG Office of Legal, Legislative, and External Affairs on 

legal and congressional issues related to the CARS program. We also coordinated 

with the OIG Office of Investigations Desk Officer on investigative issues and 

with the Director of the OIG Complaint Center to identify and acquire information 

on any current or recently completed investigations, including hotline complaints. 
22

Exhibit A. Scope and Methodology

We provided the Office of Investigations with transactions that appeared to be 

questionable, based on the requirements of the program, for further review by the 

OIG Investigations and NHTSA’s Office of Enforcement.

We met with GAO to share relevant audit information, to avoid duplication of 

effort and to coordinate audit milestones in response to the congressional request 

for both agencies to audit the CARS program.

Our audit was conducted from September 2009 through March 2010. We 

conducted this performance audit in accordance with generally accepted 

government auditing standards as prescribed by the Comptroller General of the 

United States. 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.
23

Exhibit B. CARS Eligibility Requirements for Trade-in and New 

Vehicles

EXHIBIT B. CARS ELIGIBILITY REQUIREMENTS FOR TRADE-IN 

AND NEW VEHICLES

To meet program eligibility requirements, trade-in vehicles had to:

1. Be in drivable condition;

2. Have been continuously insured, in accordance with state law, and registered 

in the same owner’s name for the 1 year prior to the trade-in;

3. Have been manufactured not earlier than 25 years before the date of trade-in,

and, in the case of a category 3 vehicle, also be not later than model year 2001;

and

4. Have a combined fuel economy of 18 miles per gallon or less for a passenger 

automobile, category 1 truck, or category 2 truck.

To be eligible to participate in the program, new vehicles had to be a passenger 

vehicle, a category 1 truck (e.g., sport utility vehicle), a category 2 truck 

(e.g., larger light duty pickup truck), or a category 3 truck (e.g., medium-duty 

pickup truck).

Table 3: CARS Eligibility and Incentives

New Vehicle Trade-in Vehicle MPG Improvement Incentive

Type Combined 

MPG*

Type **

Passenger Car at least 22

Passenger Car 4 to 9 $3,500

Category 1 Truck 4 to 9 $3,500

Category 2 Truck 10 or more $4,500

Category 1 Truck at least 18

Passenger Car 2 to 4 $3,500

Category 1 Truck 2 to 4 $3,500

Category 2 Truck 5 or more $4,500

Category 2 Truck at least 15

Category 2 Truck 1 $3,500

Category 2 Truck 2 or more $4,500

Category 3 Truck not applicable $3,500

Category 3 Truck not applicable Category 3 Truck *** Similar in size or 

smaller than trade-in $3,500

* MPG—Miles per gallon of gasoline.

** Combined MPG less than 18.

*** Model year 2001 or older.

Source: NHTSA
24

Exhibit C. Program Controls Reviewed by OIG for Selected Eligibility 

Requirements

EXHIBIT C. PROGRAM CONTROLS REVIEWED BY OIG FOR 

SELECTED ELIGIBILITY REQUIREMENTS

During our visits to 39 auto dealerships, we verified the original documents that 

dealer locations submitted to NHTSA to support their requests for payment. We 

compared original documents for CARS transactions from dealer files with 

electronic records that dealerships provided to NHTSA’s iSupplier system. 

Relying on NHTSA guidance and the checklist used by CARS transaction 

processors, we analyzed the following items to validate the eligibility of the 393 

CARS transactions selected in our statistical sample.

Table 4: Selected Eligibility Requirements and Program 

Controls

Eligibility 

Requirement

Work OIG Auditors Performed Program Control

Front of the 

Trade-in Vehicle 

Title

Auditors compared the name, address, signature, and 

VIN on the original title with title information in iSupplier 

and performed a full 17-digit VIN check. Auditors also 

confirmed whether the titles had “Junk cars.gov” or 

variations, such as “cash for clunkers” written on them.

Prevent titling and 

resale of trade-in 

vehicle.

Back of the 

Trade-in Vehicle 

Title

Auditors assessed whether “Junkcars.gov” or a 

variation such as “Cash for Clunkers” was written on 

the backs of the titles.

Prevent titling and 

resale of trade-in 

vehicle.

Current Trade-in 

Vehicle 

Registration

Auditors verified proof of current registration by 

examining the type of proof provided (e.g., registration 

card, Carfax report). The name, date of registration,

and VIN number were compared with iSupplier 

information to confirm proof of current registration prior 

to sale. OIG auditors performed a full 17-digit VIN 

check. NHTSA transaction processors checked the 

last six digits.

Ensure trade-in 

vehicle was in use 

prior to program and 

was owned by the 

consumer.

Proof of 

Insurance for 

Trade-in

Auditors validated continuous 1-year proof of insurance 

(e.g. insurance card, letter from insurance company) for 

the year prior to the sales date. Auditors reviewed 

proof of insurance documents to compare name, make, 

model, year of trade-in, VIN, and dates of coverage 

with iSupplier information. A gap in insurance of 10 

days or less was acceptable. OIG auditors performed 

a full 17-digit VIN check. NHTSA transaction 

processors checked the last six digits.

Ensure trade-in 

vehicle was in use

prior to program.
25

Exhibit C. Program Controls Reviewed by OIG for Selected Eligibility 

Requirements

Eligibility 

Requirement

Work OIG Auditors Performed Program Control

Purchaser 

Identification

Auditors confirmed the identification (ID) of purchasers 

who participated in the CARS program by comparing 

the original ID (e.g., state issued driver’s license) and 

title information with the ID and title information in 

iSupplier. We examined the name, address, and ID 

number of identification documents. In the case of copurchasers, we examined co-purchaser name, 

address, and ID number, and in the case of 

businesses, we examined the identification and/or 

other pertinent documentation.

Track the participants 

in the program, verify 

they are the owners of 

the trade-in vehicle 

and purchaser of the 

new vehicle, ensure 

they only participate 

in the program once.

Manufacturer’s 

Certificate of 

Origin (MCO)

Auditors matched the VIN, make, model, year, 

purchaser name, and address on the manufacturer’s 

certificate of origin (MCO) for the new vehicle with the 

MCO in iSupplier. OIG auditors performed a full 17-

digit VIN check. NHTSA processors also checked all 

17 digits of the VIN for many transactions. For 

Michigan and California, an application for title or 

invoice could be submitted in lieu of an MCO. 

Purchase orders from the manufacturer were 

acceptable substitutes for MCOs for vehicles that had 

not been manufactured by the sales date.

Provides NHTSA with 

details of the 

purchased vehicle.

NHTSA Summary 

of Sale or Lease

Auditors verified the purchaser name and signature, 

dealer signature, dealership sales sheet, voucher 

amount, manufacturer’s suggested retail price below 

$45,000, the trade-in make, model and year, trade-in 

VIN, and new vehicle VIN on the NHTSA Summary of 

Sale/Lease with iSupplier Sale/Lease documents. 

Auditors reviewed co-purchaser information where 

applicable.

Provides certification 

that the dealer and

consumer have 

participated in the 

program and 

documents their 

understanding of 

penalties for violating 

Federal requirements.

Fuel Economy 

Comparison

Auditors validated the correct CARS incentive amount, 

the trade-in vehicle make, model, year and description, 

the new vehicle make, model year and description and 

the fuel economy side-by-side comparison date with 

iSupplier to ensure that the transaction met the miles 

per gallon standard based on information provided by 

the Environmental Protection Agency at 

fuel.economy.gov.

Provides 

documentation that 

the trade-in and new 

vehicle meet the 

requirements of the 

program and 

documents the 

incentive amount.
26

Exhibit D. Selected Dealer Views about CARS

EXHIBIT D. SELECTED DEALER VIEWS ABOUT CARS

To obtain dealer views about the program, we interviewed personnel onsite at the 

39 dealerships in our statistical sample. The majority of dealerships stated that 

they were able to register for the program in a timely manner. However, a 

majority of dealers reported that they had difficulty obtaining supporting 

documentation from the consumers. About half of the dealers commented that 

they were able to determine which NHTSA payments they received were for 

which vehicle sales and why NHTSA rejected some requests for payments. 

Further, about half of the dealers had problems with the trade-in vehicle disposal 

process. All 39 dealerships told us they would participate in the program again. 

Table 5 summarizes the dealerships’ responses to our questions.

Table 5. Dealer Responses During OIG Site Visits*

Question Yes No

Did the dealership understand the program requirements at the 

beginning of the program (July 24, 2009)? 7 28

Did the registration process enable the dealership’s timely participation

in the program? 34 4

Did the dealership participate in a NHTSA webinar? 18 21

Did the dealership have difficulty registering its bank

account information? 7 32

Did the dealership have difficulty changing its bank

account information? 3 34

Did the dealership have difficulty obtaining supporting

documentation from the consumers? 34 4

Did the dealership understand why NHTSA rejected some requests for

payment? 19 19

Could the dealership determine which NHTSA payments were for

which vehicle sales? 20 18

Did the dealership encounter problems with the trade-in vehicle

disposal process? 20 19

Did the dealership require consumers to sign contingency agreements

in case NHTSA did not approve the request for payment? 8 30

Did the dealership retain the new vehicle until NHTSA paid the CARS

amount? 2 34

Did the dealership disable any trade-in vehicles' engines

for transactions that were later found to be ineligible? 1 32

Would the dealership participate in this program again? 39 0

* Some questions have fewer than 39 responses because some dealerships did not offer opinions for all questions.

Source: OIG
27

Exhibit E. Major Contributors to this Report

EXHIBIT E. MAJOR CONTRIBUTORS TO THIS REPORT

Gary Middleton Lead Program Director

Name Title

Kerry Barras Program Director

Krystal L. Patrick Lead Project Manager

Joann K. Adam Project Manager

Darrell Riegel Project Manager

Patrick D. Conley Senior Auditor

Maria (Lynn) Dowds Senior Auditor

Tim Roberts Senior Auditor

Maurice Toval Senior Auditor

Stephen M. Berkeridge Auditor

Brian Chapman Program Analyst

Carlton H. Hamilton Auditor

Susan Todd Program Analyst

Petra Swartzlander Senior Statistician

Special thanks goes to Heather Albert, Special Investigations and Analysis, and 

William Owens, National Investigative Programs and Operations, and their 

teams for their support on matters related to investigations and hotline 

complaints.
Memorandum 

U.S. Department of 

Transportation 

National Highway Traffic

Safety Administration

Subject:

INFORMATION: Response to Office of Inspector General

(OIG) Draft Report, “Consumer Assistance to Recycle and 

Save (CARS) Program: Most Transactions Met Federal 

Program Requirements, But Program Completion Activities 

Continue.”

Date: April 22, 2010

From:

David L. Strickland

Administrator

Reply to

Attn. of:

To: Calvin L. Scovel III

Inspector General

The CARS program implementation by the National Highway Traffic Safety Administration 

(NHTSA) was a remarkable success story and an example of exemplary service provided by 

the Federal Government to the American people in times of crisis. NHTSA staff and 

management, with assistance from the Office of the Secretary of Transportation (OST) and 

elsewhere in the executive branch, accomplished what had heretofore been impossible –

implementing a complex subsidy program, complete with regulatory requirements, systems 

and strong internal controls, in 30 days. Within 30 days of the CARS Act enactment, 

NHTSA issued final rules for the program and automobile dealers were able to begin 

submitting transactions for approval 4 days later. Given the economic uncertainty during this 

period, the agency was unsure of public response to the program. We quickly realized the 

public response exceeded all expectations, outstripping the initial tranche of funding in about 

a week, and the subsequent $2 billion within less than 30 days.

The program was highly successful in accomplishing its primary goals of stimulating the 

economy and aiding the environment. Additional detailed information on program 

implementation and accomplishments is available in NHTSA’s report to Congress, 

“Consumer Assistance to Recycle and Save Act of 2009,” available online at 

http://www.cars.gov/files/official-information/CARS-Report-to-Congress.pdf . With over 

18,908 dealers participating in the program throughout the Nation and its territories, 690,114 

voucher applications were filed, and reviewed by NHTSA’s multi-tiered system of internal 

controls, to ensure the transactions were legitimate, appropriate, and in compliance with 

statutory and regulatory requirements. NHTSA denied or dealers retracted 12,272 

applications. Ultimately, NHTSA approved 677,842 transactions valued at $2.85 billion. 

We estimate that this resulted in a $3.8 to $6.8 billion increase in GDP and over 60,000 jobs 

created or saved. The new vehicles obtained under this program were 58 percent more fuel 
2

efficient than the vehicles they replaced, with an average combined EPA rating of 24.9 miles 

per gallon (MPG), versus 15.8 MPG for the vehicles they replaced, reducing fuel 

consumption by 33 million gallons per year with concomitant reductions in green house 

gases and other pollutants.

NHTSA Implemented Strong, Multi-tiered Transaction Approval Controls to Ensure 

Compliance

NHTSA developed a formidable system of transaction controls with multiple levels of review 

to ensure that transaction applications were complete, legitimate, and in compliance with 

applicable requirements. The agency carefully trained the reviewers to ensure that their 

actions would be complete, thorough, and accurate. Upon completion of the program,

NHTSA immediately conducted an internal audit of 1,200 transactions that initially found 

97.5 percent of transactions were fully supported at the time of approval, and that 

documentation was available to fully support 99.96 percent of the transactions approved. 1

The OIG report demonstrates a similar success rate for transaction approval. While the 

OIG’s analysis is based on a smaller sample of 393 approved transactions, OIG found that 97 

percent of transactions were accompanied with complete documentation demonstrating 

compliance with program requirements. For the 13 transactions that OIG did not identify 

complete documentation in the files at the time of its review, OIG referred those files to 

NHTSA for subsequent review. 

 

This is an impressive accomplishment by any measure, but particularly when one considers 

the 30 day timeframe for program development and implementation.

Based on NHTSA’s review of these files, it determined that all 13 of the questioned 

transactions are fully supported by available documentation. This includes three files that 

NHTSA determined OIG, using its review criteria, could have determined were fully 

documented.

2

Economic and Customer Response Uncertainty Complicated Planning

 As for the remaining 10 files, NHTSA’s subsequent detailed review 

determined the transactions were acceptable; however, the files lacked sufficient 

documentation at the time of OIG’s review. NHTSA has now supplemented those files with 

the documentation that had been missing. In total, NHTSA determined that 100 percent of 

the transactions in OIG’s sample were fully supported and appropriate. 

The dire economic conditions at the time of the CARS statute was signed made it difficult to 

anticipate consumer response. Because of the serious economic downturn prior to CARS 

implementation, there were concerns about being able to obtain sufficient participation in the 

program and NHTSA had contingency plans available to draw attention to the program in an 

 1 A summary of NHTSA’s audit and other program details can be found in its report to Congress cited earlier.

2 The OIG auditors limited their review to the NHTSA checklist and did not consider other training aids 

developed to educate reviewers on alternate forms of supporting documentation. Two of the transactions 

contained an alternative for the MCO/MSO for vehicles that were not in inventory at the time of sale. One 

transaction contained proof of registration in the form of a vehicle history report and title with an issue date 

at least one year prior to the date of sale.
3

effort to increase participation. Congress shared these concerns as indicated by the CARS 

Act provision calling for a public awareness campaign to attract buyers. Further, NHTSA 

consulted knowledgeable industry sources prior to the program’s launch that also were 

unable to foresee the overwhelming response, further validating programmatic assumptions. 

In retrospect, the opposite occurred, and the program drew unprecedented levels of 

participation. During the program’s first 7 days, dealers entered more than 100,000 

transactions into the system, and on 1 day alone, entered as many as 42,000 transactions. As 

a result, OIG’s conclusion that NHTSA made incorrect assumptions in planning program 

staffing and systems does not fully accommodate the context of uncertainty surrounding the 

public response. Although those assumptions proved inaccurate, the data on which to base 

better assumptions were not apparent. The strength in NHTSA’s implementation was not 

only the advance planning, but also careful monitoring of near real time program conditions,

its flexibility in implementing alternative approaches, and its unrelenting determination to 

achieve excellence in completing the program.

NHTSA Quickly Ramped up Program Resources and Proved Resilient Addressing

Program Demand Surge

While no logical programmatic assumptions indicated that the program would exhaust $1 

billion in funding in a week, and $3 billion in under a month, NHTSA responded quickly and 

effectively to the high volume response. With regard to staffing, NHTSA’s actions proved 

both thoughtful and creative. By identifying an initial contractor accustomed to contending 

with high volumes of transactions, NHTSA thought it would be well equipped to handle 

program transactions. However, the level of transactions quickly proved overwhelming and 

NHTSA obtained additional assistance from staff elsewhere in DOT as well as resources

from the Internal Revenue Service and additional contractors. In this way it was able to 

rapidly increase the number of people processing transaction applications to a maximum that 

exceeded 7,000 by early September 2009. It should be noted that equally important, to 

minimize program costs, that peak was short lived, as NHTSA constantly monitored 

workload, and very quickly shed workforce, maintaining only what was needed to process 

the remaining transactions. 

Information technology resources dedicated to the program were also subject to the strain of 

the unprecedented demand for participation in the program. Under the direction of the DOT 

Office of the Chief Information Officer (OCIO), NHTSA was granted a conditional authority 

to operate the CARS IT System. This authority allowed for production deployment within 

the timeframe to meet the 30 day legislative mandate. This authority also required NHTSA 

to complete certification and accreditation within 60 days. The review and subsequent 

accreditation was successfully completed within the required timeframe. It should be noted 

that the CARS system authority was not an interim authority to operate (IATO) the CARS 

system. A conditional authority to operate is referred to within National Institute of Stands 

and Technology guidance and is part of the U.S. Department of Transportation policy; as 

such DOT does recognize such authority for system implementation.
4

While OIG is correct that the dedicated processing capability was quickly overwhelmed by 

the surge in demand, NHTSA weathered the storm by providing innovative, cutting edge 

approaches, that could be quickly implemented while providing the protections necessary for 

personally identifiable information (PII) and from outside attacks on system resources.

Furthermore, NHTSA was careful to ensure appropriate protection of PII, consistent with 

Federal and Departmental requirements. These security requirements were embodied in an 

infrastructure-related contractual agreement with the primary IT contractor for the program, 

and a related interconnection security agreement. Due to the extraordinary nature of the 

program, NHTSA had to complete systems development within incredibly tight time 

constraints; however, it completed functional, systems and user acceptance testing, and 

additional security testing including secure access control in advance of system deployment.

While it would have been useful to perform more robust stress testing, it was not possible 

due to the extremely tight deadlines established by the statute.

Throughout the program NHTSA worked with dealers to provide training and information on 

how to submit proper claims. Because there were only 4 days between the issuance of the 

final rule and program implementation, there was not time to do much advance training. As 

the program was implemented, NHTSA focused on providing frequent updates to its website 

and a series of webinars that provided detailed instructions for completing the vouchers. 

NHTSA conducted 10 dealer webinars beginning on the first day of the program reaching 

thousands of automobile dealers. NHTSA also worked extensively with vehicle dealers 

calling its hotline and a special helpdesk. The combination of rapidly increasing staff, 

training, IT resources, and improving dealer training enabled NHTSA to complete review of 

99 percent of dealer submissions by late September, handling three times as many 

transactions as initially planned. In all, the average time from receipt of a fully documented 

voucher to payment was just over 2 weeks.

NHTSA Protected Sensitive Financial Information

The OIG report questions NHTSA’s adherence to Federal security procedures governing

updates and corrections to dealer bank account information. OIG staff recently provided the 

specific procedures it believes were not followed. My staff reviewed these procedures and 

has forwarded its technical comments directly to your program director. As indicated in our

comments, NHTSA believes that its safeguards accomplished the requirements of the 

procedures cited by OIG and effectively controlled any risk of unauthorized access or 

interception of sensitive financial information.

NHTSA Implementing Robust Vehicle Disposal Controls

While the primary focus of NHTSA’s initial activities was necessarily on the front end 

program transactions, NHTSA has transitioned its focus to ensuring that vehicles are 

disposed of in compliance with program requirements. NHTSA is conducting outreach and 

program compliance activities intended to ensure that CARS trade-in vehicles are disposed of 

in a manner in full compliance with program requirements. We appreciate the OIG’s 

recognition of the value of making CARS trade-in VINs available to commercial vehicle 

history report providers. It should be noted that, in addition to consumers, State motor 
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vehicle administrations make use of these services, further reducing the risk of fraud. 

NHTSA has also developed computer software to identify CARS trade-in VINs for which we 

have not received a properly completed disposal form and/or National Motor Vehicle Title 

Information System (NMVTIS) entry. This tool will be leveraged to develop the sample 

populations in our close-out plan. To reduce risk and increase visibility into potential 

exportation of CARS trade-in vehicles, NHTSA partnered with Customs & Border Patrol 

(CBP) and the National Insurance Crime Bureau (NICB) whose monitoring of vehicle 

exports has already proven to be effective. 

NHTSA Has Completed a Program Close-Out Plan

NHTSA has completed a program close-out plan that lays out the continuing challenges and 

choices NHTSA faces in completing program activities. While we recognize that the plan 

was completed too recently to be included in the OIG report, the plan provides a 

comprehensive approach for identifying and addressing remaining programmatic issues. The 

plan highlights NHTSA’s approach to key aspects of the program including data integrity, 

interim and ultimate disposition of data gathered during the program, actions to ensure 

compliance for initial transactions as well as ultimate vehicle disposal, final resource needs, 

and civil and criminal implications for any potential enforcement actions.

NHTSA’s close-out compliance activities include pilot samplings of suspect transactions 

identified through data analysis and of trade-in vehicles for which disposal forms or 

NMVTIS entries are missing. By the end of FY2010, NHTSA expects to have made all of 

the decisions necessary to determine exactly how the CARS program will be closed out. At 

that time, NHTSA will make any necessary organizational changes to effectuate the final 

tasks.

Recommendations and Response

Recommendation 1: Leverage CARS lessons learned to develop new program design 

guidelines that incorporate risk mitigation and contingency plans for transaction processing, 

IT systems, and activity monitoring and reporting. 

Response: Concur. In December 2009, NHTSA completed and reported to the Congress on 

the results of the CARS program. This effort was useful to begin collecting information on 

lessons learned. As NHTSA continues to conduct program closeout activities, it is collecting 

and compiling feedback from key program participants in the Department, industry, systems 

developers, transaction reviewers, automobile dealers and other stakeholders. It is important 

to recognize that the circumstances surrounding the implementation of the CARS program 

were unique and it is not clear the extent to which many lessons learned from the program 

may enjoy more general applicability in the form of new program design guidelines. 

Nonetheless, NHTSA anticipates that there is substantial useful information that can be 

garnered by compiling and analyzing lessons learned from the program and anticipates 

completing this effort by June 2011.
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Recommendation 2: Report these guidelines to the Secretary of Transportation and 

Congress so that knowledge gained from the CARS program can inform other agencies 

facing similar challenges. 

Response: Concur. As indicated in response to recommendation 1, NHTSA will compile 

information on lessons learned from the program, and analyze the information to assess its 

potential for more general applicability. NHTSA will report its results to the Secretary by 

June 2011.

Recommendation 3: Finalize and implement an action plan for completing remaining 

program activities, including evaluation of compliance and accounting for all program costs. 

Response: Concur. On April 14, 2010, NHTSA issued an action plan for the CARS 

program. NHTSA is implementing the plan and, in accordance with the plan, anticipates 

making the decisions necessary to determine specifically how and when the program will be 

closed out by September 30, 2010.

* * *

In summary, we are pleased that the CARS program achieved the objectives set out by 

Congress to increase automotive sales and aid the environment. In just a few short weeks of 

sales, nearly 680,000 older vehicles were replaced by new, more fuel-efficient vehicles. The 

Nation’s economy benefited immediately from this stimulus program, which caused a 

distinct upward movement in GDP and created or saved tens of thousands of jobs at a very 

critical time in the recovery process. Because of the unanticipated strength of consumer 

response, the program led to a sharp decline in dealer inventories and caused several major 

automakers to increase production schedules through the end of 2009, leading to an increase 

in employment and GDP in the fourth quarter as well. The environment will benefit over the 

longer term because operation of the new vehicles in place of the trade-ins will reduce oil 

consumption and emissions of carbon dioxide and related greenhouse gases over the next 25 

years.

We greatly appreciate the courtesy shown by OIG audit staff and the full cooperation of the 

OIG investigations staff in webinars and training for dealers and disposal entities. Please 

contact Daniel C. Smith, Associate Administrator for Enforcement, if there are any questions 

or if we may be of further assistance.