GAO 

United States Government Accountability Office

Report to the Congress 

RECOVERY ACT

One Year Later, States’ 

and Localities’ Uses of 

Funds and 

Opportunities to 

Strengthen 

Accountability 

March 2010 

GAO-10-437 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 2010

RECOVERY ACT

One Year Later, States’ and Localities’ Uses of Funds

and Opportunities to Strengthen Accountability 

Highlights of GAO-10-437, a report to the 

Congress 

This report responds to two 

ongoing GAO mandates under the 

American Recovery and 

Reinvestment Act of 2009 

(Recovery Act). It is the fifth in a 

series of reports since passage of 

the Recovery Act on the uses of 

and accountability for Recovery 

Act funds in 16 selected states, 

certain localities in those 

jurisdictions, and the District of 

Columbia (District). These 

jurisdictions are estimated to 

receive about two-thirds of the 

intergovernmental assistance 

available through the Recovery Act. 

It is also the second report in 

which GAO is required to comment 

on the jobs created or retained as 

reported by recipients of Recovery 

Act funds. GAO collected and 

analyzed documents and 

interviewed state and local officials 

and other Recovery Act award 

recipients. GAO also analyzed 

federal agency guidance and spoke 

with officials at federal agencies 

overseeing Recovery Act programs.

As of February 12, 2010, $88.7 billion, or a little more than 30 percent, of the 

approximately $282 billion of total Recovery Act funds for programs 

administered by states and localities had been paid out by the federal 

government. Of that amount, approximately $36 billion has been paid out since 

the start of federal fiscal year 2010. The following table shows the composition 

of Recovery Act funding by sector for fiscal years 2009-2011 and 2012-2019. 

Composition of outlays in percent 

Actual Estimated 

2009 2010 2011 2012-2019

Health 60 39 17 1

Education and Training 28 37 46 8

Transportation 6 9 14 40

Income security 3 7 10 21

Community development 3 5 7 13

Energy & environment 1 3 7 17

 Total 100% 100% 100% 100%

Total dollars in billions $52.9 $103.7 $63.4 $61.9 

Source: GAO analysis of CBO, FFIS, and Recovery.gov data. 

Note: Percentages may not total due to rounding. 

Increased Medicaid Funding 

As of January 29, 2010, the 16 states and the District have drawn down about 

$30 billion in increased Federal Medical Assistance Percentage (FMAP) funds, 

representing nearly 100 percent of these states’ grant awards for federal fiscal 

year 2009 and about 57 percent for the first and second quarters of federal 

fiscal year 2010. Most states reported that, without the increased FMAP funds, 

they could not have continued to support the substantial Medicaid enrollment 

growth they have experienced, most of which was attributable to children. 

Most states reported that the increased FMAP funds were integral to 

maintaining current eligibility levels, benefits, and services and to avoiding 

further program reductions. As for the longer-term outlook for their Medicaid 

programs, the District and all but one of the selected states expressed concern 

about sustaining their programs after the increased FMAP funds are no longer 

available, beginning in January 2011. 

Highway Infrastructure Investment and Transit Funding 

As of February 16, 2010, the Federal Highway Administration (FHWA) had 

obligated $25.1 billion and the Federal Transit Administration (FTA) had 

obligated about $7.5 billion—combined about $32.6 billion (over 93 percent) of 

the $35 billion that the Recovery Act provided for highway infrastructure 

projects and public transportation. Nationwide, Recovery Act funding has been 

obligated for over 11,000 eligible highway projects. However, some 

requirements, such as the Recovery Act’s maintenance-of-effort requirement— 

What GAO Recommends

GAO updates the status of 

agencies’ efforts to implement 

GAO’s 23 previous 

recommendations and makes 5 

new recommendations to the 

Office of Management and Budget 

(OMB) and the Departments of 

Transportation (DOT), Housing and 

Urban Development (HUD), and 

Education. GAO continues to 

believe that Congress should 

consider changes related to the 

Single Audit process. Agency 

responses to new GAO 

recommendations are included on 

the following page.

View GAO-10-437 or key components. For 

more information, contact J. Christopher 

Mihm at (202) 512-6806 or mihmj@gao.gov. 
United States Government Accountability Office

Highlights of GAO-10-437 (continued) 

which is designed to prevent states from substituting 

federal funds for state funds—have proven challenging. 

Many states have yet to complete a maintenance-ofeffort certification that DOT finds fully acceptable, and 

this, coupled with states’ fiscal challenges, raises 

questions as to whether this requirement will achieve its 

intended purpose. In addition, the Recovery Act does not 

require DOT to determine whether states have met this 

requirement until around 6 months after the provision’s 

covered time period expires. GAO recommends that 

DOT gather timely information and report preliminary 

information to Congress within 60 days of the certified 

period (Sept. 30, 2010) on whether states met required 

program expenditures, the reasons that any states did 

not meet these certified levels, and lessons learned from 

the process. DOT is considering GAO’s recommendation. 

Education

As of January 22, 2010, the 16 states and the District had 

drawn down, in total, about $13.3 billion (56 percent) 

from the State Fiscal Stabilization Fund (SFSF); $1.1 

billion (17 percent) of Elementary and Secondary 

Education Act (ESEA) Title I, Part A funds; and $1.2 

billion (17 percent) of Individuals with Disabilities 

Education Act (IDEA), Part B, Recovery Act funds 

available to them. Much of the Recovery Act education 

funds have been used to pay education staff, including 

teachers. In response to GAO’s recommendation that 

Education ensure states monitor subrecipients of SFSF 

funds, Education announced a plan for reviewing states’ 

SFSF subrecipient monitoring plans. GAO is continuing 

to work with Education to address our recommendation 

to enhance transparency by requiring states to include 

an explanation of changes to maintenance-of-effort 

levels in their SFSF application resubmissions. 

Other Selected Recovery Act Programs

Housing agencies are to obligate the $3 billion in Public 

Housing Capital Fund formula grant Recovery Act funds 

they received by March 17, 2010. As of January 30, 2010, 

about 31 percent of these funds had not been obligated. 

Over 200 agencies reported obligating no funds. HUD 

has worked hard to implement the Recovery Act but has 

faced challenges in simultaneously carrying out public 

housing programs mandated by the Recovery Act, 

including designing and carrying out a $1 billion grant 

competition, while meeting its continuing 

responsibilities for the ongoing Public Housing Capital 

Fund program. As a result, HUD delayed obligating its 

fiscal year 2009 funds by 3 months. HUD does not have a 

management plan to determine how to meet these 

competing demands. GAO recommends that HUD 

develop such a plan to determine the adequate level of 

staffing needed to administer its Recovery Act and 

regular capital funds and to determine the most effective 

use of the staff it currently has. While HUD disagrees 

with GAO's recommendation, GAO continues to believe 

HUD would benefit from developing such a plan. With 

regard to the Weatherization Assistance Program, as of 

December 31, 2009, the Department of Energy (DOE) 

had obligated about $4.73 billion to states for 

weatherization activities. On February 24, 2010, DOE 

reported that about 5 percent of the approximately 

593,000 homes DOE originally planned to weatherize 

using Recovery Act funds had been weatherized as of 

December 31, 2009. State and local officials reported 

that weatherization activities had been slowed by 

concerns over compliance with the Davis-Bacon and 

National Historic Preservation Acts. The Recovery Act 

also included $1.2 billion for Workforce Investment Act 

(WIA) youth activities, including summer employment. 

As of December 31, 2009, $765 million of WIA youth 

funds had been drawn down nationwide. Over 355,000 

youths reportedly participated in Recovery Act WIA 

activities. 

Recipient Reporting

Progress was achieved in addressing some data quality 

and reporting issues identified in the first round; 

however data errors, reporting inconsistencies, and 

decisions by some recipients not to use the new job 

reporting guidance for this round compromise data 

quality and the ability to aggregate the data. For 

example in the education area, which was the largest 

category of jobs reported, GAO found that a number of 

states reported job numbers using the old methodology. 

Overall, while significant issues remain, the second 

round of reporting appears to have gone more smoothly 

as recipients have become more familiar with the 

reporting system and requirements. GAO expects that 

the simplified jobs reporting guidance and reporting 

system enhancements will ultimately result in improved 

data quality and reliability. GAO makes specific 

recommendations to Education, HUD, and OMB for 

improving reporting guidance. Education, HUD, and 

OMB generally agreed with the recommendations. 

Accountability

GAO has recommended that OMB adjust the Single 

Audit process to help mitigate the risks posed by 

Recovery Act funding. Although OMB has taken steps to 

implement our recommendations, these efforts do not 

yet fully address the significant risks over Recovery Act 

funds. OMB’s steps include a voluntary Single Audit 

Internal Control Project that encourages earlier 

reporting of deficiencies, so that corrective action can be 

taken. Auditors of states participating in the project 

submitted internal control reports to OMB by December 

31, 2009. For 13 of the 16 states, auditors reported over 

70 internal control deficiencies that affected the states’ 

compliance with federal requirements for Recovery Act 

funds. These states also provided corrective action plans 

for the deficiencies. OMB plans to analyze the project’s 

results to identify improvements to the Single Audit 

process by the spring of 2010. 
Page i GAO-10-437 

Contents 

Letter 1

Background 4 

Uses of Recovery Act Funds by States and Localities in the First 

Year 8 

The Second Round of Recipient Reporting Showed That Improving 

Data Quality Is a Work in Progress 74 

Oversight and Accountability Efforts in the First Year 108 

Recovery Act Funds Alleviate Some Fiscal Pressures as State and 

Local Governments Respond to the Current Recession and 

Confront Long-Term Challenges 126 

New, Implemented, and Open Recommendations; Matters for 

Congressional Consideration 133 

Agency Comments and Our Evaluation 144 

Appendix I Objectives, Scope, and Methodology 148 

States’ and Localities’ Uses of Recovery Act Funds 149 

Recipient Reporting 153 

Assessing Safeguards and Internal Controls 154 

Accountability 154 

State and Local Budget 155 

Data and Data Reliability 156 

Appendix II Comments from the Office of Management and 

Budget 158 

Appendix III Program Descriptions 160 

Medicaid Federal Medical Assistance Percentage 160 

Highway Infrastructure Investment Program 160 

Public Transportation Program 161 

Education 162 

Workforce Investment Act Youth Program 165 

Public Housing Capital Fund 165 

Weatherization Assistance Program 166 

Head Start/Early Head Start 166 

Appendix IV GAO Contacts and Staff Acknowledgments 167 

 Recovery Act 
Related GAO Products 171 

Tables 

Table 1: Composition of State and Local Recovery Act Funding, 

Fiscal Year 2009 Actual and Fiscal Years 2010 through 

2012 Estimated 7 

Table 2: Increase in State Share between Preliminary First Quarter 

Fiscal Year 2010 Increased FMAP and Fiscal Year 2011 

Regular FMAP 15 

Table 3: Percentage of Awarded Education Stabilization, ESEA 

Title I, and IDEA, Part B Recovery Act Funds Drawn Down 

by States as of January 22, 2010 33 

Table 4: DOE’s Recovery Act Weatherization Assistance Program 

Obligations 57 

Table 5: Selected States’ Drawdowns of Recovery Act WIA Youth 

Funds and Drawdowns Nationwide as of December 31, 

2009 70 

Table 6: WIA Youth Served with Recovery Act Funds in Selected 

States and Nationwide, as of November 30, 2009 71 

Table 7: Recovery Act-Funded WIA Youth Participation in Summer 

Employment in Selected States and Nationwide, as of 

November 30, 2009 72 

Table 8: Work Readiness Attainment Rate for Youth in Summer 

Employment in Selected States and Nationwide, as of 

November 30, 2009 74 

Table 9: Fourth Quarter, 2009—Count of Prime Recipient Reports 

by Presence or Absence of FTEs and Recovery Act Funds 

Received or Expended 80 

Table 10: Project Status of Fourth Quarter, 2009 Prime Recipient 

Reports Marked As Final Report with Less Than 75 

Percent of Funds Received or Expended 85 

Table 11: FederalReporting.gov Edit Checks for January 2010 

Recipient Reporting 89 

Table 12: Fourth Quarter 2009 Prime Recipient Reports Reviews 

and Corrections 96 

Table 13: Parameters HUD Established to Identify Significant 

Errors for the Capital Fund 98 

Table 14: Number of Potential Significant Errors Identified by Field 

for the October 2009 and January 2010 Reporting Cycles 99 

Table 15: Status of FraudNet Allegations 117 

Page ii GAO-10-437 Recovery Act
Figures 

Figure 1: Estimated versus Actual Federal Outlays to States and 

Localities under the Recovery Act 6 

Figure 2: Components of Fiscal Year 2009 FMAP Increases 9 

Figure 3: Cumulative Increased FMAP Funds Drawn Down by the 

Sample States and the District by Month, February 2009 

through January 2010 11 

Figure 4: Cumulative Quarterly Medicaid Enrollment Growth in the 

Sample States and the District since October 2007 13 

Figure 5: Cumulative Recovery Act Highway and Public 

Transportation Funding and Obligations Nationwide 18 

Figure 6: Cumulative Recovery Act Highway and Public 

Transportation Funds Reimbursed by FHWA and FTA 

Nationwide 20 

Figure 7: Nationwide Recovery Act Highway and Public 

Transportation Obligations by Project Type 21 

Figure 8: Estimated Percentage of LEAs Nationally with Funding 

Decreases and Increases of 5 Percent or More for School 

Year 2009-2010, by Source of Funding 31 

Figure 9: Estimated Percentage of LEAs Expecting Decreases in 

the Number of Jobs, Even with Recovery Act SFSF Funds, 

by State 35 

Figure 10: Estimated Percentage of LEAs Nationally Planning to 

Use More Than 25 Percent of Their Recovery Act Funds 

from the SFSF, ESEA Title I, and IDEA Programs for 

Professional Development, Technological Equipment, and 

Instructional Materials 36 

Figure 11: Percentage of Public Housing Capital Fund Formula 

Grants Allocated by HUD That Have Been Obligated and 

Drawn Down Nationwide as of January 30, 2010 41 

Figure 12: Housing Agencies’ Obligations of Recovery Act Funds by 

Quartile as of January 30, 2010 42 

Figure 13: National Drawdown Rates for Recovery Act Funds for 

the WIA Youth Program, as of December 31, 2009 69 

Figure 14: The Potential Employment Effects of Recovery Act 

Funds 77 

Figure 15: State and Local Model Operating Balance Measure, as a 

Percentage of Gross Domestic Product (GDP) 128 

Figure 16: State and Local Government Taxes, as a Percentage of 

GDP 129 

Figure 17: State and Local Government Grants, as a Percentage of 

GDP 130 

Page iii GAO-10-437 Recovery Act
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Page iv GAO-10-437 Recovery Act
Page 1 GAO-10-437 

 

United States Government Accountability Office

Washington, DC 20548 

 

March 3, 2010 

Report to the Congress 

The American Recovery and Reinvestment Act of 2009 (Recovery Act) was 

enacted on February 17, 2009, in response to what is generally reported to 

be the most serious economic crisis since the Great Depression.1

 The 

purposes of the Recovery Act include promoting economic recovery, 

making investments, and minimizing and avoiding reductions in state and 

local government services. Specifically, the stated purposes of the 

Recovery Act are to 

• preserve and create jobs and promote economic recovery; 

• assist those most impacted by the recession; 

• provide investments needed to increase economic efficiency by 

spurring technological advances in science and health; 

• invest in transportation, environmental protection, and other 

infrastructure that will provide long-term economic benefits; and 

• stabilize state and local government budgets in order to minimize and 

avoid reductions in essential services and counterproductive state and 

local tax increases. 

Initially estimated to cost $787 billion, the Recovery Act includes an 

estimated $580 billon of federal outlays, of which nearly half—or 

approximately $282 billion—will flow to states and localities affecting 

about 50 state formula and discretionary grants as well as about 15 

entitlement and other countercyclical programs. The remaining Recovery 

Act funds are in the form of a wide variety of tax provisions assisting 

individuals, businesses, and state and local governments. These include, 

for example, the Making Work Pay tax credit, various energy-related 

incentives, and special bond financing provisions for state and local 

governments. On February 10, 2010, we issued a report reviewing various 

tax-related aspects of the Recovery Act.2

 The volume of funds, the number 

of entities involved in their distribution, and short time frames all speak to 

the need for oversight to ensure transparency and accountability. Indeed, 

GAO has been given a number of roles related to oversight of these 

1

Pub. L. 111-5, 123 Stat. (Feb. 17, 2009). 

2

GAO, Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting and 

Enforcement Improvements Are Needed, GAO-10-349 (Washington, D.C.: Feb. 10, 2010). 

 Recovery Act 
 

Recovery Act programs and has issued more than 39 Recovery Act 

products. See the Related GAO Products section for a list of these 

products. Federal agency inspectors general, state and local auditors, as 

well as the Recovery Accountability and Transparency Board (the board),3

which was established by the Recovery Act, all play roles in oversight of 

Recovery Act spending. 

In response to a Recovery Act mandate, we have conducted bimonthly 

reviews of programs for which states and localities have received major 

funding.4

 Specifically, in four previous reports, we have collected and 

reported data on programs receiving substantial Recovery Act funds 

during this first year of implementation in 16 selected states, certain 

localities, and the District of Columbia, and made recommendations when 

changes could result in improvements.5

 The selected jurisdictions for our 

in-depth reviews contain about 65 percent of the U.S. population and are 

estimated to receive collectively about two-thirds of the intergovernmental 

assistance available through the Recovery Act.6

This report, the fifth in response to the Recovery Act’s mandate, updates 

and adds new information on the following: (1) selected states and 

localities use of Recovery Act funds for specific programs, (2) the 

approaches taken by selected states and localities to ensure accountability 

for Recovery Act funds, and (3) state activities to evaluate the impact of 

the Recovery Act funds they receive. The programs we selected for review 

 

3

The Recovery Act established the Board to coordinate and conduct oversight of covered 

funds to prevent fraud, waste, and abuse. The Board is composed of a chairperson and 12 

inspectors general. To carry out its oversight mission, the Board employs 47 staff, of whom 

19 are detailed from agencies throughout the federal government. In addition, the Board 

established three committees drawn from the 12 inspectors general on the Board. Recovery 

Act, div. A, §§ 1521-1525, 123 Stat. 289-93. 

4

Recovery Act, div. A, title IX, §901. 

5

GAO, Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts to Ensure 

Accountability, GAO-10-231 (Washington, D.C.: Dec. 10, 2009); Recovery Act: Funds 

Continue to Provide Fiscal Relief to States and Localities, While Accountability and 

Reporting Challenges Need to Be Fully Addressed, GAO-09-1016 (Washington, D.C.: Sept. 

23, 2009); Recovery Act: States’ and Localities’ Current and Planned Uses of Funds While 

Facing Fiscal Stresses, GAO-09-829 (Washington, D.C.: July 8, 2009); and Recovery Act: As 

Initial Implementation Unfolds in States and Localities, Continued Attention to 

Accountability Issues Is Essential, GAO-09-580 (Washington, D.C.: Apr. 23, 2009). 

6

Selected states are Arizona, California, Colorado, Florida, Georgia, Illinois, Iowa, 

Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, 

Pennsylvania, and Texas. We also visited the District of Columbia. 

Page 2 GAO-10-437 Recovery Act
 

were chosen primarily because they have begun disbursing funds to states 

or have known or potential risks. The risks can include existing programs 

receiving significant amounts of Recovery Act funds or new programs. In 

some cases we have also collected data from all states, and from a broader 

array of localities, to augment the in-depth reviews. This report focuses on 

the following programs: 

• Federal Medical Assistance Percentage (FMAP). 

• Federal-Aid Highway Surface Transportation and Transit Capital 

Assistance Programs. 

• State Fiscal Stabilization Fund (SFSF). 

• Title I, Part A of the Elementary and Secondary Act of 1965, as 

amended (ESEA). 

• Parts B and C of the Individuals with Disabilities Education Act, as 

amended (IDEA). 

• Public Housing Capital Fund. 

• Weatherization Assistance Program. 

• Workforce Investment Act of 1998 (WIA) Youth Program. 

The Recovery Act also requires that nonfederal recipients of Recovery Act 

funded grants, contracts, or loans submit quarterly reports on each project 

or activity, including information concerning the amount and use of funds 

and jobs created or retained.7

 The first of these recipient reports was to 

cover the cumulative activity since the Recovery Act’s passage through the 

quarter ending September 30, 2009. The Recovery Act requires us to 

comment on the estimates of jobs created or retained after the recipients 

have reported. We issued our initial report related to recipient reporting, 

including recommendations for recipient report improvements, on 

November 19, 2009.8

 A second major focus of the current report is to 

provide updated information concerning recipient reporting in accordance 

with our mandate for quarterly reporting.9

 

7

Recovery Act, div. A, § 1512, 123 Stat. 287-288. We will refer to the quarterly reports 

required by section 1512 as recipient reports. 

8

GAO, Recovery Act: Recipient Reported Jobs Data Provide Some Insight into Use of 

Recovery Act Funding, but Data Quality and Reporting Issues Need Attention, 

GAO-10-223 (Washington, D.C.: Nov. 19, 2009). 

9

The Recovery Act requires recipients of funding under the Act to report quarterly on the 

use of these funds including jobs created or retained with Recovery Act funding. The first 

recipient reports filed in October 2009 cover activity from February 2009 through 

September 30, 2009. The second quarterly recipient report was filed in January 2010 and 

cover activity through December 31, 2009. 

Page 3 GAO-10-437 Recovery Act
 

This report also discusses state and local budget stabilization, federal 

requirements and guidance, and oversight, transparency, and 

accountability issues related to the Recovery Act and its implementation. 

It also provides information on the status of our prior recommendations 

related to the Recovery Act and includes additional new 

recommendations. 

We analyzed guidance and interviewed officials at the Office of 

Management and Budget (OMB). We also analyzed grant award amounts—

as well as relevant regulations and federal agency guidance on programs 

selected for this review—and spoke with relevant program officials at the 

Departments of Education, Energy, Health and Human Services (Centers 

for Medicare and Medicaid Services), Housing and Urban Development, 

and Transportation. We also integrated information from our prior 

Recovery Act reports into this review where appropriate. 

Where statements about state law are attributed to state officials, we did 

not analyze state legal materials for this report but relied on state officials 

and other state sources for description and interpretation of relevant state 

constitutions, statutes, legislative proposals, and other state legal 

materials. The information obtained from this review cannot be 

generalized to all states and localities receiving Recovery Act funding. A 

detailed description of our scope and methodology can be found in 

appendix I. 

We conducted this performance audit from December 5, 2009, to March 3, 

2010, 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. 

The Congressional Budget Office (CBO) originally estimated that the 

Recovery Act’s combined spending and tax provisions would cost $787 

billion through 2019, with more than 90 percent of the spending and tax 

reductions occurring before the end of fiscal year 2011. As of December 

31, 2009, the Council of Economic Advisors (CEA) reported that 

approximately one-third of the $787 billion (or $263 billion) had been 

outlayed or provided to households and businesses in the form of tax 

reductions. In addition to that amount, CEA reported that another $150 

billion had been obligated. 

Background 

Page 4 GAO-10-437 Recovery Act
 

On January 26, 2010, CBO updated its estimate of the cost of the Recovery 

Act. It now estimates that the Recovery Act will cost $75 billion more than 

originally estimated—or a total of $862 billion from 2009 through 2019. It 

cited the following key reasons for the increase: 

• Unemployment compensation will be $21 billion more than originally 

estimated due to higher than anticipated unemployment. 

• Supplemental Nutrition Assistance Program is now expected to cost 

$34 billion more than originally estimated because the increased family 

benefit amount under the Recovery Act is now estimated to exceed the 

unadjusted benefit amount through 2019. 

• Participation in the Build America Bond program is significantly higher 

than originally estimated. More than $60 billion in new bonds have 

been issued since the program began in April, leading CBO to increase 

its projected cost of the program by $26 billion. 

With the intent of disbursing funds quickly to create and retain jobs and 

stabilize state and local budgets, major Recovery Act funding to states and 

localities is front-loaded into the first 3 years since the enactment. Nearly 

80 percent of funding to states and localities is projected to be distributed 

within the first 3 years, with about 56 percent in just the first 2 years. Peak 

projected outlays are in fiscal year 2010, with outlays that year projected 

to be more than twice the level of fiscal year 2009 outlays. Figure 1 shows 

the projected federal outlays to states and localities for fiscal years 2009 

through 2016, as well as actual outlays to date as reported by federal 

agencies on Recovery.gov. 

Page 5 GAO-10-437 Recovery Act
 

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

the Recovery Act 

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

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014 2015 2016

Dollars (in billions)

Federal fiscal year (Oct. 1 to Sept. 30)

Actual as of February 12, 2010

Original estimate

Note: Data reflect estimated and actual federal outlays for a select set of Recovery Act funded 

programs administered by states and localities. The Supplemental Nutrition Assistance Program 

(food stamps) and unemployment compensation payments are not included. 

As shown in table 1, actual federal outlays to states and localities under 

the Recovery Act were slightly above the projected level in fiscal year 

2009. Across the United States, as of February 12, 2010, the Department of 

the Treasury has paid out $88.7 billion in Recovery Act funds for use in 

states and localities. Of that amount, approximately $36 billion has been 

paid out since the start of fiscal year 2010 on October 1, 2009. 

In addition to variation in outlays over the years, outlays also vary 

substantially by sector. As shown in table 1, outlays in health and 

education and training constituted 88 percent of total outlays to states and 

localities in fiscal year 2009. Outlays for transportation, income security, 

energy and the environment, and community development are all 

substantially smaller. However, by fiscal year 2012, investments in 

highways, transit, high-speed rail, and other transportation infrastructure 

will be the largest share of state and local Recovery Act funding, albeit of a 

substantially smaller total outlay. Taken together, transportation 

Page 6 GAO-10-437 Recovery Act
 

spending—along with investments in the community development, energy, 

and environmental areas—that is geared more toward creating long-run 

economic growth opportunities will represent approximately two-thirds of 

state and local Recovery Act funding after 2011. Thus, across the years, 

spending shifts from a primary focus on recovery to a primary focus on 

reinvestment. 

Table 1: Composition of State and Local Recovery Act Funding, Fiscal Year 2009 

Actual and Fiscal Years 2010 through 2012 Estimated 

Composition of outlays in percent 

Actual Estimated 

2009 2010 2011 2012-2019

Health 60 39 17 1

Education and training 28 37 46 8

Transportation 6 9 14 40

Income security 3 7 10 21

Community development 3 5 7 13

Energy and environment 1 3 7 17

Total 100% 100% 100% 100%

Total dollars in billions $52.9 $103.7 $63.4 $61.9 

Source: GAO analysis of CBO, FFIS, and recovery.gov data. 

Note: Percentages may not total due to rounding. 

There is also a major change in the amount of flexibility states will have 

concerning the use of funds. Health and education and training funds are 

the predominant sectors of funding in the first 2 years. Education and 

training funds allowed states some flexibility in how they chose to use the 

funds. States also experienced flexibility as to their use of state funds 

made available as a result of the increased FMAP. In later years, this 

flexibility will be reduced as funds are specifically designated by purpose. 

Page 7 GAO-10-437 Recovery Act
 

Uses of Recovery Act 

Funds by States and 

Localities in the First 

Year 

Timely Access to 

Increased FMAP Funds 

Facilitated States’ Efforts 

to Support Medicaid 

Enrollment Growth and 

Minimize Program 

Reductions, but States 

Remain Concerned about 

Longer-Term Program 

Sustainability 

Medicaid is a joint federal-state program that finances health care for 

certain categories of low-income individuals, including children, families, 

persons with disabilities, and persons who are elderly. The federal 

government matches state spending for Medicaid services according to a 

formula based on each state’s per capita income in relation to the national 

average per capita income. The rate at which states are reimbursed for 

Medicaid service expenditures is known as the Federal Medical Assistance 

Percentage (FMAP), which may range from 50 percent to no more than 83 

percent. The Recovery Act provides eligible states with an increased 

FMAP for 27 months from October 1, 2008, to December 31, 2010.10 On 

February 25, 2009, the Centers for Medicare & Medicaid Services (CMS) 

made increased FMAP grant awards to states, and states may retroactively 

claim reimbursement for expenditures that occurred prior to the effective 

date of the Recovery Act. Generally, for fiscal year 2009 through the first 

quarter of fiscal year 2011, the increased FMAP, which is calculated on a 

quarterly basis, includes (1) a “hold harmless” provision, which maintains 

states’ regular FMAP rates at the highest rate of any fiscal year from 2008 

through 2011, (2) a general across-the-board increase of 6.2 percentage 

points in states’ FMAPs, and (3) a further increase to the FMAPs for those 

states that have a qualifying increase in unemployment rates. 

As a result, the increased FMAP available to the 16 states and the District 

of Columbia (the District) by the fourth quarter of fiscal year 2009 

averaged over 10 percentage points higher than their regular 2009 FMAP 

rates, with increases ranging from about 8 percentage points in Iowa to 

about 12 percentage points in Florida. For all states, the largest proportion 

of the increased FMAP was attributable to the across-the-board increase of 

 

10Recovery Act, div. B, title V, § 5001. The Department of Health and Human Services (HHS) 

Office of Inspector General found that HHS’s Office of the Assistant Secretary of Planning 

and Evaluation and CMS correctly calculated the increased FMAP in accordance with 

applicable provisions of the Recovery Act. See HHS Office of the Inspector General, 

“Review of the Calculations of Temporary Increases in Federal Medical Assistance 

Percentages Under the American Recovery and Reinvestment Act,” (A-09-09-00075), and 

“Review of the Calculation of Additional Medicaid Funding Awarded Under the American 

Recovery and Reinvestment Act,” (A-09-09-00080). 

Page 8 GAO-10-437 Recovery Act
 

6.2 percentage points; however, qualifying increases in unemployment 

rates also contributed to the increase in each of the states. The “hold 

harmless” provision further contributed to the increased FMAP in 4 states 

in our review, albeit to a lesser extent. (See fig. 2.) In the first quarter of 

fiscal year 2010, qualifying increases in unemployment rates or increases 

in regular FMAP rates have contributed to further increases in FMAP rates 

for half of the sample states. 

Figure 2: Components of Fiscal Year 2009 FMAP Increases 

FMAP Increase (percentage points)

States

Hold-harmless provision

Qualifying increases in unemployment

Across-the-board increase

Source: GAO analysis of HHS data.

0

2

4

6

8

10

12

14

AZ CA CO DC FL GA IA IL MA MI MS NC NJ NY OH PA TX

10.16

11.59 11.59

9.29

12.24

9.93

8.09

11.56 11.59

10.41

8.40

9.91

11.59 11.59

10.20

11.07

10.41

For states to qualify for the increased FMAP available under the Recovery 

Act, they must comply with a number of requirements, including the 

following: 

Page 9 GAO-10-437 Recovery Act
 

• States generally may not apply eligibility standards, methodologies, or 

procedures that are more restrictive than those in effect under their 

state Medicaid programs on July 1, 2008.11

• States must comply with prompt payment requirements.12

• States cannot deposit or credit amounts attributable (either directly or 

indirectly) to certain elements of the increased FMAP in any reserve or 

rainy-day fund of the state.13

• States with political subdivisions—such as cities and counties—that 

contribute to the nonfederal share of Medicaid spending cannot 

require the subdivisions to pay a greater percentage of the nonfederal 

share than would have been required on September 30, 2008.14

In addition, CMS requires states to separately track and report on 

increased FMAP funds. 

CMS distributed the increased FMAP funds to states through an existing 

payment management system, thereby providing states with timely access 

Reliance on Existing Payment 

System to Distribute Increased 

FMAP Funds and CMS Efforts 

to Provide Guidance Facilitated 

States’ Access to Available 

Funds 

11In order to qualify for the increased FMAP, states generally may not apply eligibility 

standards, methodologies, or procedures that are more restrictive than those in effect 

under their state Medicaid plans or waivers on July 1, 2008. See Recovery Act, div. B, title 

V, §5001(f)(1)(A). 

12Under the Recovery Act, states are not eligible to receive the increased FMAP for certain 

claims for days during any period in which that state has failed to meet the prompt 

payment requirement under the Medicaid statute as applied to those claims. See Recovery 

Act, div. B, title V, §5001(f)(2). Prompt payment requires states to pay 90 percent of clean 

claims from health care practitioners and certain other providers within 30 days of receipt 

and 99 percent of these claims within 90 days of receipt. See 42 U.S.C. §1396a(a)(37)(A). 

13A state is not eligible for certain elements of increased FMAP if any amounts attributable 

directly or indirectly to them are deposited in or credited to a state reserve or rainy-day 

fund. Recovery Act, div. B, title V, §5001(f)(3). 

14In some states, political subdivisions—such as cities and counties—may be required to 

help finance the state’s share of Medicaid spending. Under the Recovery Act, a state that 

has such financing arrangements is not eligible for certain elements of the increased FMAP 

if it requires subdivisions to pay during a quarter of the recession adjustment period a 

greater percentage of the nonfederal share than the percentage that would have otherwise 

been required under the state plan on September 30, 2008. See Recovery Act, div. B., title V, 

§ 5001(g)(2). The recession adjustment period is the period beginning October 1, 2008, and 

ending December 31, 2010. 

Page 10 GAO-10-437 Recovery Act
 

to the funds.15 Specifically, by March 27, 2009—30 days after the increased 

FMAP grant awards first became available—13 of the sample states and 

the District had drawn down nearly $5.7 billion, or just over one-half of the 

funds available at that time, and by April 30, 2009, all sample states and the 

District had drawn down increased FMAP funds.16 Through January 29, 

2010, the sample states and the District have drawn down about $30 billion 

in increased FMAP funds and in the aggregate have done so at a fairly 

continuous pace. (See fig. 3.) 

a fairly 

Figure 3: Cumulative Increased FMAP Funds Drawn Down by the Sample States and the District by Month, February 2009 

through January 2010 

0

5

10

15

20

25

30

Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec. Jan.

Funds drawn (in billions)

Source: GAO analysis of HHS Payment Management System data.

Months

2009 2010

Note: The amounts shown represent the funds that had been drawn down as of the end of each 

month. The funds were first available on February 25, 2009. 

The $30 billion in increased FMAP funds drawn by the sample states and 

the District through January 29, 2010, represents nearly 100 percent of 

 

15CMS provided the increased FMAP funds to states through a separate account in the 

payment management system, allowing the funds to be tracked separately from regular 

FMAP funds as required by the act. 

16Nationwide, all but 5 states had begun to draw down increased FMAP funds by this date. 

Page 11 GAO-10-437 Recovery Act
 

these states’ grant awards for fiscal year 2009,17 and about 57 percent of 

the grant awards for the first and second quarters of fiscal year 2010. 

Nationally, the 50 states, the District, and several of the largest U.S. insular 

areas combined have drawn down about $44 billion. 

In addition to distributing the increased FMAP funds through the existing 

Medicaid payment system, CMS provided guidance to states to facilitate 

their timely access to these funds. For example, CMS issued three State 

Medicaid Director letters that provided specific guidance on how to 

comply with certain Recovery Act requirements, including the prompt 

payment and maintenance of eligibility requirements.18 CMS also issued 

fact sheets and written responses to states’ frequently asked questions, 

and hosted conference calls for all states in February and March 2009 to 

discuss issues related to compliance with these requirements. Because of 

the variation in state operations, funding processes, and political 

structures, CMS frequently worked with states on an individual basis to 

resolve compliance questions. For example, CMS advised Arizona that it 

would have to reverse a change the state had made to the frequency with 

which it conducted eligibility determinations in order to qualify for the 

increased FMAP,19 and consulted with California on issues related to its 

compliance with the Recovery Act’s requirement related to political 

subdivisions. Although most sample states and the District reported no 

delay in drawing down increased FMAP funds, 10 states indicated that it 

had been somewhat difficult or difficult to comply with the Recovery Act’s 

eligibility requirements, and 12 reported making adjustments to their 

Medicaid programs in order to comply. 

 

17States can continue to draw from their increased FMAP grant awards for third and fourth 

quarter fiscal year 2009 expenditures until CMS finalizes the grant awards for these 

quarters, a process the agency has not yet completed. As part of the normal Medicaid grant 

award process, CMS reconciles states’ quarterly estimated and actual Medicaid 

expenditures and finalizes the quarterly grants once the reconciliation is complete. 

18As of January 29, 2010, these State Medicaid Director Letters were available on the CMS 

Web site. See 

http://www.cms.hhs.gov/SMDL/SMD/list.asp?sortByDID=1a&submit=Go&filterType=none

&filterByDID=-99&sortOrder=ascending&intNumPerPage=10. 

19Arizona initially drew down increased FMAP funds in March 2009, but was advised by 

CMS that it was not eligible for the funds because it had changed the frequency of certain 

Medicaid eligibility determinations from 12 to 6 months. CMS determined that this change 

constituted a more restrictive eligibility standard. Therefore, Arizona did not actually claim 

these drawn down funds, or resume drawing down additional funds, until the state 

legislature had reversed the change. 

Page 12 GAO-10-437 Recovery Act
 

Most states reported that without the increased FMAP funds, they could 

not have continued to support the substantial Medicaid enrollment growth 

they have experienced. Overall Medicaid enrollment in the sample states 

and the District increased by 11.3 percent between the beginning of fiscal 

year 2008 and the end of fiscal year 2009, with the majority of enrollment 

growth occurring in fiscal year 2009. (See fig. 4.) Specifically, in fiscal year 

2008, overall Medicaid enrollment among the 16 states and the District 

increased by 4 percent, with increases in individual states ranging from 1.6 

percent in New York to 12 percent in Ohio. By the end of fiscal year 2009, 

overall enrollment had further increased by 7.3 percent, with increases in 

individual states ranging from 4.6 percent in California to 15.4 percent in 

Arizona. For over two-thirds of the sample states and the District, the rate 

of enrollment growth in fiscal year 2009 was double or nearly double the 

rate of growth in fiscal year 2008. Most of the enrollment growth in both 

fiscal years was attributable to children, a population group that is 

sensitive to economic downturns. 

Increased FMAP Funds Were 

Critical to States’ Efforts to 

Support Increasing Medicaid 

Enrollment Growth and 

Minimize Program Reductions 

Figure 4: Cumulative Quarterly Medicaid Enrollment Growth in the Sample States 

and the District since October 2007 

0

2

4

6

8

10

12

Oct. Dec. Mar. Jun. Sept. Dec. Mar. Jun. Sep.

Percent increase

Source: GAO analysis of state reported data.

Months

2007 2008 2009

Given enrollment growth, most states reported that the increased FMAP 

funds were integral to their efforts to maintain current eligibility levels, 

benefits and services, and to avoid further program reductions. For 

Page 13 GAO-10-437 Recovery Act
 

example, Georgia reported using these funds to avoid reductions in 

eligibility and optional benefits, and Colorado reported using the funds to 

reduce planned cuts to provider payment rates. However, most states 

reported that the availability of the increased FMAP funds did not fully 

prevent the need for Medicaid program reductions. Nine states reported 

reducing or freezing provider rates, and 5 states reported reducing certain 

optional Medicaid benefits or services in fiscal years 2009 or 2010; for 

example, California reported cutting adult dental services. Given that the 

District and all but 2 states reported that the amount of increased FMAP 

funds was not fully sufficient to maintain their Medicaid programs in fiscal 

year 2010, such program reductions may become more common.20 Looking 

ahead to fiscal year 2011, 5 states and the District reported they were 

considering eligibility reductions; 8 states and the District reported 

considering reductions to benefits and services; and 10 states and the 

District reported considering reductions to provider payment rates. 

While the increased FMAP funds are for Medicaid services only, the 

receipt of these funds may free up funds that states would otherwise have 

had to use for their Medicaid programs. Virtually all of the sample states 

and the District reported using the freed-up funds for multiple Medicaid 

purposes as well as for other purposes, such as financing general state 

budget needs. Only 2 states—North Carolina and Ohio—reported using 

freed-up funds exclusively to finance general state budget needs. 

As for the longer-term outlook for their Medicaid programs, the District 

and all but 1 of the sample states expressed concern about sustaining their 

Medicaid programs beginning in January 2011, after the increased FMAP 

funds are no longer available. When asked about the factors driving their 

concerns, virtually all of the states and the District cited the increase in the 

state’s share of Medicaid payments that will occur in January 2011 because 

of the end of the increased FMAP—an increase that will range from about 

7.5 percentage points to about 12.2 percentage points (an average of 10.5 

percentage points) compared with the first quarter 2010 increased FMAP. 

(See table 2.) 

States Reported Concerns 

about the Sustainability of 

Their Medicaid Programs once 

Increased FMAP Is No Longer 

Available 

 

20The amount of these funds was more often viewed as sufficient for fiscal year 2009. 

Specifically, 7 states and the District reported that the amount of increased FMAP funds 

was sufficient to maintain their Medicaid programs and provide fiscal relief to the state in 

fiscal year 2009, whereas 2 states reported that the funds were sufficient for these purposes 

in fiscal year 2010. 

Page 14 GAO-10-437 Recovery Act
 

Table 2: Increase in State Share between Preliminary First Quarter Fiscal Year 2010 

Increased FMAP and Fiscal Year 2011 Regular FMAP 

State 

Preliminary

fiscal year

2010 increased

FMAP, first quartera

Fiscal year 2011 

regular FMAPb

Percentage

point difference

in state share

between preliminary

first quarter 2010 

increased FMAP and 

2011 regular FMAP

Arizona 75.93 65.85 10.08

California 61.59 50.00 11.59

Colorado 61.59 50.00 11.59

District of Columbia 79.29 70.00 9.29

Florida 67.64 55.45 12.19

Georgia 74.96 65.33 9.63

Illinois 61.88 50.20 11.68

Iowa 72.55 62.63 9.92

Massachusetts 61.59 50.00 11.59

Michigan 73.27 65.79 7.48

Mississippi 84.86 74.73 10.13

New Jersey 61.59 50.00 11.59

New York 61.59 50.00 11.59

North Carolina 74.98 64.71 10.27

Ohio 73.47 63.69 9.78

Pennsylvania 65.85 55.64 10.21

Texas 70.94 60.56 10.38

Average difference 10.53

Source: GAO analysis of HHS data. 

a

The preliminary increased FMAP rates listed for the first quarter of federal fiscal year 2010 were 

provided by CMS on November 13, 2009. 

b

The fiscal year 2011 FMAP rates were published in the Federal Register on November 27, 2009. 

The size of the increase in state share does not necessarily reflect the 

difficulty that a state may have in absorbing these costs. Ultimately, the 

impact of states’ increased share in Medicaid payments will vary 

depending on factors such as program enrollment and state fiscal 

circumstances. For example, according to Kaiser Family Foundation 

estimates, about 27 percent of New York’s population was enrolled in 

Medicaid in 2006 compared with about 11 percent of New Jersey’s 

Page 15 GAO-10-437 Recovery Act
 

population.21 Similarly, state fiscal circumstances also vary considerably 

among the 16 states and the District. The December 2009 unemployment 

rate, which is one indicator of fiscal circumstances, varied from 6.6 

percent in Iowa to14.6 percent in Michigan. As a result, the impact of the 

increased state share of Medicaid payments will vary on a state-by-state 

basis. 

Recovery Act 

Transportation Projects on 

Track to Meet Legislative 

Time Frames, but Other 

Requirements Presented 

Challenges 

Using the existing federal surface transportation program structure, states 

and transit agencies were on track to meet the March 2010 legislative 

deadline for obligating all Recovery Act highway and public transportation 

funds when we completed our work.22 The existing federal surface 

transportation structure has well-established programs and processes that 

were understood by state departments of transportation, local transit 

agencies, and others. For example, Recovery Act highway funds were 

distributed under the rules governing the Federal-Aid Highway Program 

generally and its Surface Transportation Program in particular. State 

departments of transportation were well acquainted with the type of 

projects eligible for and the federal requirements associated with this 

funding. Similarly, public transportation funds were primarily distributed 

through well-established programs, with most of the funds distributed 

through the Transit Capital Assistance Program. Like state departments of 

transportation, project sponsors (typically transit agencies) are familiar 

with the grant application processes of these programs. Federal surface 

transportation programs are administered through established federalstate or federal-local partnerships, where each agency is aware of its 

specific roles and responsibilities. For example, the Federal Highway 

Administration (FHWA) has an office in every state and the District of 

Recovery Act Transportation 

Projects on Track to Meet 

Legislative Time Frames 

 

21“Medicaid Enrollment as Percent of Total Population, 2006.” The Kaiser Family 

Foundation, statehealthfacts.org.

22The Secretary of Transportation is to withdraw and redistribute to eligible states any 

amount that is not obligated within this time frame. 

Page 16 GAO-10-437 Recovery Act
 

Columbia to work with state transportation departments, and the Federal 

Transit Administration (FTA) has 10 regional offices that work with transit 

providers. Finally, there is a long-standing transportation planning process 

that states and metropolitan areas are required by law to follow for both 

short-range and long-range transportation planning.23 This transportation 

planning process is meant to foster better transportation investment 

decisions. 

Using existing programs and processes, state departments of 

transportation and local transit agencies were able to identify over 11,000 

highway projects and submit over 960 grant applications24 for transit 

funds, respectively, that could be quickly started and promote state and

local transportation goals, with the following results: 

 

• The majority of the approximately $35 billion that the Recovery 

Act provided for highway infrastructure projects and public 

transportation has been obligated. As of February 16, 2010, FHWA 

has obligated $25.1 billion of the $26.7 billion (around 95 percent)25

that was apportioned to all 50 states and the District of Columbia for 

over 11,000 highway infrastructure and other eligible projects 

nationwide. In addition, FTA has obligated about $7.5 billion of the 

$8.4 billion (around 89 percent)26 that was appropriated to fund public 

transportation throughout the country by awarding over 740 grants 

23Transportation improvement programs (TIP), based on the long-range (20-year) 

transportation plan, are required for each metropolitan urbanized area with a population of 

more than 50,000 and should be designed to achieve an area’s transportation goals using 

spending, operating, management, and financial tools. State transportation improvement 

programs (STIP) are similar to TIPs in that they identify 4 years of transportation project 

priorities and must be fiscally constrained. STIPs must be approved by both FHWA and 

FTA. 

24Number of grant applications and number of grants awarded are as of February 11, 2010. 

25As of February 16, 2010, $406.7 million and $25.7 million of the $26.7 billion apportioned 

for highways was transferred from FHWA to FTA and DOT’s Maritime Administration for 

transit and other projects, respectively, leaving $26.2 billion available for highways. 

Information on amount and the percent of funds obligated does not include obligations 

associated with these transferred funds. Specifically, the 95 percent represents the $25.1 

billion obligated as of February 16, 2010 of the $26.2 billion that remained available for 

highway projects. 

26This amount includes nearly $283 million that had been obligated as of February 16, 2010 

from the total funds that were transferred from FHWA to FTA, but this funding is not 

included in the Recovery Act public transportation appropriations of $8.4 billion. 

Page 17 GAO-10-437 Recovery Act
 

nationwide.27 Figure 5 shows Recovery Act highway and transit 

funding and obligations nationwide. As provided for in the Recovery 

Act, 50 percent of apportioned highway funds were obligated before 

June 30, 2009, and 50 percent of Transit Capital Assistance Program 

and Fixed Guideway Infrastructure Investment program funds were 

obligated before September 

 the Recovery 

1, 2009.28

Figure 5: Cumulative Recovery Act Highway and Public Transportation Funding and Obligations Nationwide 

Dollars (in billions)

0

4

8

12

16

20

24

28

Feb.

2010

Jan.

2010

Dec.

2009

Nov.

2009

Oct.

2009

Sept.

2009

Aug.

2009

July

2009

June

2009

May

2009

Apr.

2009

Mar.

2009

Source: GAO analysis of FHWA and DOT data.

Month

Highway

Public transportation

Highway

apportionment

$26.7

Public 

transportation

appropriation

$8.4 

Note: Public transportation obligation amounts include obligations associated with funds that were 

transferred from FHWA to FTA for public transportation projects. February 2010 data are as of 

February 16, 2010. 

 

27Recovery Act funding for public transportation was distributed through three existing 

FTA formula grant programs, the Transit Capital Assistance Program, the Fixed Guideway 

Infrastructure Investment program, and the Capital Investment Grant program, and one 

discretionary grant program, the New Starts program. An FTA grant may be limited to one 

specific project or include multiple individual projects. 

28DOT has interpreted the term obligation of funds to mean the federal government’s 

commitment to pay for the federal share of the project. This commitment occurs at the 

time the federal government signs a project agreement (highways) or grant agreement 

(public transportation). 

Page 18 GAO-10-437 Recovery Act
 

Reimbursements continue to increase. After federal funds have 

been obligated, and once portions of the work have been completed, 

states and transit agencies may request reimbursement from FHWA 

and FTA.29 Therefore, reimbursements generally lag behind obligations 

since it takes time for a state or transit agency to bid, award, and start 

work on specific projects. As of February 16, 2010, FHWA has 

reimbursed $6.29 billion (25 percent) to states nationwide, and FTA 

has reimbursed $1.8 billion (24 percent) to states and transit agencies 

nationwide, with the amount of reimbursements almost doubling since 

September 2009 (see fig. 6). Even though reimbursement rates for 

Recovery Act highway funds have been increasing nationwide, our 

analysis shows that wide differences exist across states, mainly 

because of the complexity of the types of projects that states 

undertook and the extent to which projects were administered by local 

governments. The reimbursement rate for Recovery Act funds for 

public transportation projects has also been increasing. Transit 

officials we interviewed noted that their agencies are reimbursed as 

work is completed. Therefore, while for some projects, such as the 

construction projects, agencies may request reimbursement quickly as 

the projects meet certain schedule milestones, for other projects, such 

as bus purchases, agencies may not request any reimbursements until 

the actual delivery dates, which could be years from now. 

 

29States and transit agencies make payments to contractors for completed work, and FHWA 

or FTA, through the U.S. Department of the Treasury, pays the state or transit agency after 

it pays out of its own funds for project-related purposes. All reimbursements under public 

transportation programs funded through the Recovery Act must be completed by 

September 30, 2015, except those for administration, management, and oversight purposes. 

Page 19 GAO-10-437 Recovery Act
 

Figure 6: Cumulative Recovery Act Highway and Public Transportation Funds Reimbursed by FHWA and FTA Nationwide 

Dollars (in millions)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

Feb.

2010

Jan.

2010

Dec.

2009

Nov.

2009

Oct.

2009

Sept.

2009

Aug.

2009

July

2009

June

2009

May

2009

Apr.

2009

Mar.

2009

Source: GAO analysis of FHWA and DOT data.

Month

Highway

Public transportation

Note: February 2010 data are as of February 16, 2010. 

• States and transit agencies have used Recovery Act funding to 

meet transportation goals. While many officials noted that they 

selected projects that could be started quickly, states and transit 

agencies have used the considerable latitude they have under the 

existing federal surface transportation structure to address a variety of 

state and local goals. For example, Iowa officials stated that they used 

a significant portion of their Recovery Act funds for resurfacing 

projects, which will reduce the demand for these types of projects and 

free up federal and state funding for larger, more complex projects in 

the near future. Massachusetts officials told us that the focus of the 

state’s projects for reconstructing and rehabilitating roads is to select 

projects that promote the state’s broader long-term economic 

development goals. Pennsylvania used nearly a third of its Recovery 

Act funds for bridge improvement and replacement (compared with 10 

percent nationally), in part because a significant percentage of its 

bridges are structurally deficient. In addition, many transit agency 

officials told us that they decided to use Recovery Act funding for 

transit infrastructure construction projects and related activities—

Page 20 GAO-10-437 Recovery Act
 

ranging from large-scale projects, such as upgrading power 

substations, to a series of smaller projects, such as installing enhanced 

bus shelters—since they were high-priority projects that either 

improve safety or would otherwise not have been funded. The 

Metropolitan Transportation Authority in New York State, for example, 

funded a number of public transportation projects that had been 

postponed because of budget constraints. Figure 7 shows obligations 

by the types of highway and public transportation projects funded. 

Figure 7: Nationwide Recovery Act Highway and Public Transportation Obligations by Project Type 

Bridge improvement

($1.2 billion)

Other ($4.2 billion)

Pavement widening

($3.5 billion)

Source: GAO analysis of FHWA and FTA data.

Pavement improvement:

resurface ($5.4 billion)

Bridge replacement

($1.2 billion)

23%

7%

18%

New bridge construction

($626 million)

15%

25%

New road construction

($1.5 billion)

Less then 1%

5%

5%

3%

Pavement improvement: 

reconstruction/

rehabilitation ($6.0 billion)

Bus purchases and 

rehabilitation

($2 billion)

Transit infrastructure 

construction ($3.7 billion)

Rail car purchases and 

rehabilitation ($281 million)

Preventive maintenance 

($622 million)

Operating expense

($6 million)

Highway obligations Public transportation obligations

4%

8%

12%

26%

50%

Other capital expense

($906 million)

Notes: Highway percentages may not add to 100 because of rounding. “Other” includes safety 

projects, such as improving safety at railroad grade crossing, and transportation enhancement 

projects, such as pedestrian and bicycle facilities, engineering, and right-of-way purchases. 

Public transportation percentages may not add to 100 because of rounding. “Transit infrastructure 

construction” includes engineering and design, acquisition, construction, and rehabilitation and 

renovation activities. “Other capital expenses” includes leases, training, finance costs, mobility 

management project administration, and other capital programs. This amount does include Recovery 

Act funds that were transferred from FHWA to FTA. 

Highway data are as of February 1, 2010 and public transportation data are as of January 15, 2010. 

Page 21 GAO-10-437 Recovery Act
 

While funding is apportioned under the rules governing the current federal 

surface transportation structure, the Recovery Act has additional 

requirements that limit the latitude and flexibility that states and transit 

agencies normally have under the existing programs. Three Recovery Act 

requirements in particular have presented some challenges to some states 

and transit agencies, which have required the U.S. Department of 

Transportation (DOT) and the Office of Management and Budget (OMB) to 

issue multiple sets of clarifying guidance over the course of the year since 

the passage of the Recovery Act. 

Recovery Act Requirements 

Have Presented Challenges to 

Transportation Agencies 

One Recovery Act requirement is to give priority to projects that can be 

completed within 3 years and are that are located in economically 

distressed areas.30 As we previously reported, there has been substantial 

variation in the extent to which states prioritized projects in economically 

distressed areas and how they identified these areas. For example, we 

found instances of states developing their own eligibility requirements for 

economically distressed areas using data or criteria not specified in the 

Public Works and Economic Development Act. State officials told us that 

they did so to respond to rapidly changing economic conditions and, 

according to DOT officials, several states found that the data specified in 

the Public Works and Economic Development Act failed to recognize 

areas that suffered severe economic disruption, in part due to the difficulty 

in obtaining current data. In response to our July 2009 recommendation, 

FHWA, in consultation with the Department of Commerce, issued 

guidance to the states in August 2009 on (1) identifying and giving priority 

to economically distressed areas and (2) criteria to identify “special need” 

economically distressed areas that do not meet the statutory criteria in the 

 

30Economically distressed areas are defined by the Public Works and Economic 

Development Act of 1965, as amended. To qualify as an economically distressed area, an 

area must (1) have a per capita income of 80 percent or less of the national average; (2) 

have an unemployment rate that is, for the most recent 24-month period for which data are 

available, at least 1 percent greater than the national average unemployment rate; or (3) be 

an area that the Secretary of Commerce determines has experienced or is about to 

experience a “special need” arising from actual or threatened severe unemployment or 

economic adjustment problems resulting from severe short- or long-term changes in 

economic conditions. In response to our recommendation, FHWA, in consultation with the 

Department of Commerce, issued guidance on August 24, 2009, that provided criteria for 

states to use for designating special need areas for the purpose of Recovery Act funding. 

The criteria align closely with special need criteria used by the Department of Commerce’s 

Economic Development Administration in its own grant programs, including factors such 

as actual or threatened business closures (including job loss thresholds), military base 

closures, and natural disasters or emergencies. FHWA issued “questions and answers” on 

November 12, 2009, to further address implementation questions. 

Page 22 GAO-10-437 Recovery Act
 

Public Works and Economic Development Act. Three states in our 

review—Arizona, California, and Illinois—developed their own eligibility 

requirements or applied a special need criterion that would have increased 

the number of counties being designated as economically distressed in 

these states. California’s use of the special need criteria resulted in an 

increase from 49 to all 58 counties being designated as distressed. FHWA 

reviewed the documentation provided by the three states and determined 

that the types of data used by those states are not consistent with FHWA 

guidance. FHWA is working with those states to identify conforming 

special need criteria.31 As we previously reported, widespread designations 

of special need areas would give added preference to highway projects for 

Recovery Act funding; however, it would also make it more difficult to 

target Recovery Act highway funding to areas that have been the most 

severely affected by the economic downturn. 

Another Recovery Act requirement is for the governor of each state to 

certify that the state will maintain the level of spending for the types of 

transportation projects funded by the Recovery Act that it planned to 

spend the day the Recovery Act was enacted. As part of this certification, 

the governor of each state is required to identify the amount of funds the 

state plans to expend from state sources from February 17, 2009, through 

September 2010.32 However, the challenges that states have faced in 

submitting their certifications coupled with their fiscal challenges raise 

questions as to whether the maintenance-of-effort provision will achieve 

its intended purpose of preventing states from substituting federal funds 

for some of their planned spending on transportation programs. 

Maintenance-of-effort and similar provisions are important mechanisms 

for helping ensure that federal economic stimulus spending achieves its 

intended effect of providing countercyclical assistance and increasing 

overall spending and investment. This can be particularly important in the 

 

31Each state used FHWA’s special need criterion that relates to severe job dislocation 

resulting from actual or threatened business closure or restructuring. These states have 

been notified of FHWA’s determination and advised that in order to be consistent with the 

FHWA guidance, the states must have data that show a connection between demonstrated 

severe job losses and actual, identified firm closures and restructurings. FHWA continues 

to work with the states wishing to use the special need provision of the Public Works Act 

and will review any additional data submissions from the states for consistency with the 

statute and FHWA guidance. We will continue to monitor this issue in our subsequent 

Recovery Act bimonthly reports. 

32A state that does not meet its level of effort will be prohibited from participating in the 

redistribution of federal-aid highway obligation authority scheduled to occur in August 

2011. 

Page 23 GAO-10-437 Recovery Act
 

highway program, as we have found in previous work that increasing 

federal highway funds influences states and localities to substitute federal 

funds for funds they otherwise would have spent on highways.33 Such 

substitution makes it difficult to target an economic assistance package 

that results in increased spending and investment. 

This requirement has proven challenging to implement. Although the 

Recovery Act gave the states 30 days after enactment of the act to provide 

their certifications, many states have yet to complete a maintenance-ofeffort certification that DOT finds fully acceptable.34 For example, as we 

reported in July 2009, most states had to revise their initial certifications 

because DOT found that many states submitted explanatory or conditional 

certifications that were subject to certain assumptions, future legislative 

action, or other conditions. DOT informed the states that such explanatory 

or conditional certifications were not permitted by the Recovery Act. 

Subsequently, in assessing the states’ certified amounts for 

reasonableness, DOT found inconsistencies and confusion among the 

states, including how states calculated their planned expenditures and 

how states treated funding related to in-kind contributions, bond 

proceeds, and aid to local governments. Given the inconsistencies and 

confusion, and in response to questions from the states, DOT has issued 

multiple guidance documents to the states and some states have submitted 

multiple revisions to their certifications. On February 9, 2010, DOT 

requested that each state review its current certification and take any 

corrective action with regard to the state’s calculation of the maintenanceof-effort amount on or before March 11, 2010.35 According to FHWA 

officials, they expect many states to submit revised certifications, 

 

33GAO, Federal-Aid Highways: Trends, Effect on State Spending, and Options for Future 

Program Design, GAO-04-802 (Washington, D.C.: Aug. 31, 2004). We have found that the 

preponderance of evidence suggests that increasing federal highway funds influences 

states and localities to substitute federal funds for funds they otherwise would have spent 

on highways. In 2004 we estimated that during the 1983 through 2000 period, states used 

roughly half of the increases in federal highway funds to substitute for funding they would 

otherwise have spent from their own resources, and that the rate of substitution increased 

during the 1990s. The federal-aid highway program creates the opportunity for substitution 

because states typically spend substantially more than the amount required to meet federal 

matching requirements. As a consequence, when federal funding increases, states are able 

to reduce their own highway spending and still obtain increased federal funds. 

34Recovery Act, div. A, title XII, § 1201(a). 

35According to its February 2010 guidance, DOT determined that the Recovery Act requires 

states to maintain their level of effort for each individual covered program (e.g., highways, 

transit) rather than maintaining a total level of effort for all covered programs. 

Page 24 GAO-10-437 Recovery Act
 

including 12 of the 16 states and the District that we reviewed for our 

study. As a result, these states are now in the position of determining what 

they planned to spend over a year ago on transportation from February 17, 

2009, through September 30, 2010, and adjusting these planned 

expenditure levels to reflect various guidance from DOT but not for the 

economic and budgetary changes their states have experienced over the 

last year. According to DOT officials, DOT has not determined a date for 

finalizing its review of these certifications because department officials 

are uncertain what will be included in the certifications and whether they 

will comply with DOT guidance. 

Given the fiscal condition of many states, it is unclear whether states will 

be able to maintain the certified levels of effort. Although the state 

officials we spoke with are committed to trying to meet the maintenanceof-effort requirements, several told us that the current decline in state 

revenues, such as declines in state fuel tax and other sources used for 

state and state-funded local highway projects, as well as possible 

reductions in their departments’ fiscal years 2010 or 2011 budgets, may 

make it more difficult for them to maintain their levels of transportation 

spending. For example, Mississippi and Ohio transportation officials stated 

that if their legislatures reduce their respective departments’ budget for 

fiscal years 2010 or 2011, the departments may have difficulty maintaining 

certified spending levels. 

DOT officials told us they will continue to monitor the progress states are 

making to meet their maintenance-of-effort requirements and to collect 

and disseminate lessons learned from the process. However, the Recovery 

Act does not require DOT to make a determination as to whether states 

have met their required program expenditures until around 6 months after 

the maintenance-of-effort provision covered time period expires on 

September 30, 2010. Specifically, the act does not require states to report 

the amount of funds they planned to expend and the actual expenditures 

from state sources until February 2011, and DOT to assess the penalty for 

not meeting the requirement until August 2011. More timely information 

from the states on the progress they are making in meeting the 

maintenance-of-effort requirements could better inform policymakers’ 

decisions on the usefulness and effectiveness of the maintenance-of-effort 

requirements and of imposing similar provisions in future legislation. 

State highway and transit officials have also had challenges in complying 

with the reporting requirements under Section 1201(c) and the Section 

1512 recipient reporting requirements of the Recovery Act, which have 

necessitated multiple issuances of supplemental guidance from both DOT 

Page 25 GAO-10-437 Recovery Act
 

and OMB. Section 1201(c) is only required for recipients of Recovery Act 

transportation funds, while the Section 1512 recipient reporting 

requirement is required for recipients of any Recovery Act funds. While 

DOT and OMB have provided training and guidance, such as conducting 

webinars—three on the Section 1201(c) reporting process and four on the 

recipient reporting process—and issuing implementing guidance on 

recipient reporting, we found that there was confusion among states about 

a number of reporting requirements, including how to calculate the 

number of jobs created or sustained. For example, four transit agencies in 

Pennsylvania used different denominators to calculate the number of fulltime equivalent (FTE) jobs they reported for their September 30, 2009, 

recipient report submissions. The conflicting requirements between 

Section 1201(c) and Section 1512, of direct and indirect jobs created or 

retained, posed challenges as to how transit agencies should report project 

contractors and subcontractors and what FTE methodology recipients 

should use for the first recipient reporting period. OMB issued guidance 

on December 18, 2009, that simplified the FTE calculation and the period 

of performance for the recipient reporting requirement. In addition, on 

February 1, 2010, FTA issued guidance to transit agencies instructing them 

to use the same methodology for calculating jobs retained through vehicle 

purchases under Section 1201 as they had been using for the recipient 

reporting. This revised previous guidance that had instructed transit 

agencies to use different methodologies for vehicle purchases under 

Section 1201 and Section 1512. The Recovery Act requirements and 

supplemental guidance have created many challenges for state highway 

and transit program officials who were only accustomed to meeting 

normal reporting requirements. 

Another Recovery Act requirement is for states and transit agencies to 

ensure that all apportioned Recovery Act funds are obligated within 1 

year—the Secretary of Transportation is to withdraw and redistribute to 

eligible states any amount that is not obligated within this time frame. As 

of February 16, 2010, when we completed fieldwork, states and transit 

agencies were well on their way to meeting the 1-year deadline. Obligating 

funds in a timely manner is an important feature of the Recovery Act, as an 

economic stimulus package should, as we have reported, include projects 

that can be undertaken quickly enough to provide a timely stimulus to the 

economy.36 However, our prior reports have also identified challenges and 

 

36GAO, Physical Infrastructure: Challenges and Investment Options for the Nation's 

Infrastructure, GAO-08-763T (Washington, D.C.: May 8, 2008). 

Page 26 GAO-10-437 Recovery Act
 

issues associated with the 1-year deadline, in particular, for highways. 

These challenges and issues have required DOT, through FHWA, to 

exercise diligence as the deadline approached to ensure that Recovery Act 

funds were not only obligated in a timely manner, but also used to meet 

the goals of the act. Specifically, we have previously reported the 

following: 

• Obligations for projects in suballocated areas generally lagged 

behind obligations for statewide projects in many states and 

lagged considerably in a few states, but these obligations have 

been increasing. As of February 16, 2010, all states and suballocated 

areas appeared to be on track to meet the deadline. However, some 

states needed to obligate a significant amount of funds quickly as the 

deadline approached, and this posed some challenges for both states 

and FHWA. For example, according to a senior FHWA official, some 

states have minimal “shelf depth,” that is, projects that are ready to be 

started and are eligible for Recovery Act funding. This requires states 

to either accelerate project planning or have those Recovery Act funds 

withdrawn. As the DOT Office of Inspector General has reported, 

FHWA faces oversight challenges when states accelerate project 

planning, as hastily amended plans could result in states or localities 

selecting imprudent projects or ones that do not meet Recovery Act 

goals.37 We will continue to monitor the states’ and FHWA’s actions 

leading up to the 1-year deadline for our subsequent Recovery Act 

bimonthly reports. 

• Many highway contracts were awarded for less than the original 

cost estimates. These “bid savings” allowed states to fund more 

projects with the Recovery Act funding than were initially anticipated. 

To use bid savings, a state may need to request that DOT deobligate 

the funds associated with the bid savings and then obligate the funds 

for a new project. In addition, any funds that were deobligated prior to 

the March 2, 2010, deadline must also have been obligated for a new 

project before March 2 to avoid being withdrawn for redistribution to 

other states. However, if funds are deobligated after the March 2, 2010, 

deadline, those funds will be available for obligation to new projects 

until September 30, 2010. Thus, for known bid savings, it was 

important for DOT to carefully monitor and determine that states did 

 

37Department of Transportation, Office of Inspector General, DOT’s Implementation of the 

American Recovery and Reinvestment Act: Continued Management Attention Is Needed 

to Address Oversight Vulnerabilities, MH-2010-024 (Washington, D.C., Nov. 30, 2009). 

Page 27 GAO-10-437 Recovery Act
 

not attempt to circumvent the 1-year requirement—which is intended 

to ensure that funds are put to use quickly. To that end, in December 

2009 and January 2010, FHWA provided guidance to its field offices 

reminding them that the FHWA regulations require that within 90 days 

of determining that the estimated federal share of project costs has 

decreased by $250,000 or more, states are required to request that 

FHWA deobligate these funds. FHWA’s guidance also stated that above 

and beyond the 90-day rule, it was in the states’ best interest to ensure 

that as much as possible was deobligated before the Recovery Act 1-

year deadline, consistent with normal state processes for such 

activities. While states have been having FHWA deobligate Recovery 

Act funds regularly since the passage of the act, some states with 

known bid savings decided not to request that FHWA deobligate funds 

for projects for contracts awarded after mid-December 2009 because, 

according to these states, there was not sufficient time to deobligate 

funds and submit new projects for obligation before the March 2, 2010, 

deadline. We will continue to report on the status of contract bid 

savings and the deobligation of Recovery Act highway funds after the 

March deadline for our subsequent Recovery Act bimonthly reports 

and to monitor whether actions states took were consistent with state 

processes and FHWA guidance. 

• FHWA has the authority to transfer Recovery Act highway 

infrastructure funds to FTA for eligible transit projects.38 In 

September and December 2009, we reported that FHWA had 

transferred approximately $290 million to FTA. As of February 1, 2010, 

this amount increased to $332 million, and, as of February 16, to $407 

million—an increase of $75 million in a 2-week period. DOT officials 

believe that Recovery Act funds transferred to FTA do not have to 

comply with either the highway or transit Recovery Act 1-year 

obligation deadline because other provisions of law govern how funds 

made available through transfers for projects or transportation 

planning are treated, but that transferred funds must meet the 

Recovery Act’s requirement that all funds be fully obligated by the 

September 30, 2010. Thus, according to DOT’s interpretation, a state 

 

38Generally, FHWA has authority pursuant to 23 U.S.C. § 104(k)(1) to transfer funds made 

available for transit projects to FTA. For FHWA to transfer Recovery Act highway funds to 

FTA, a metropolitan planning organization must request the transfer and have a specific 

transit project identified that will receive the funds. Once the transfer request has been 

made, but before funds are officially transferred, FTA will include the transit project 

receiving the funds in its grant management system and will report that it is a pending 

project. The funds are officially transferred from FHWA to FTA when the U.S. Treasury 

executes the transfer. 

Page 28 GAO-10-437 Recovery Act
 

that did not have 100 percent of its highway funds obligated as it 

approached the 1-year deadline could request a transfer of highway 

funds to FTA for an identified transit project after which it would have 

until September 2010 to have FTA obligate these funds. We will 

continue to monitor the status of transferred funds, including the 

amounts transferred and how these funds were used. 

While we will continue to monitor DOT’s efforts other government entities 

are also planning audit activity related to Recovery Act funds. For 

example, DOT’s Inspector General has completed an audit on DOT’s 

implementation of the Recovery Act. The DOT Inspector General is also 

conducting several audits on other Recovery Act issues such as job 

creation and DOT oversight. In addition, eleven of our selected states and 

the District have completed, are conducting, or plan to conduct audit 

activities involving Recovery Act funded transportation/highway projects. 

The Secretary of Transportation should gather timely information on the 

progress states are making in meeting the maintenance-of-effort 

requirements and report preliminary information to Congress within 60 

days of the certified period (Sept. 30, 2010), on (1) whether states met 

required program expenditures as outlined in their maintenance-of-effort 

certifications, (2) the reasons that states did not meet these certified 

levels, if applicable, and (3) lessons learned from the process. 

Recommendation for Executive 

Action 

Recovery Act Education 

Funds Have Been Used 

Primarily to Fund 

Education Staff and, to a 

Lesser Extent, Innovation 

and Reform 

Even with the influx of Recovery Act funds, the budget condition of local 

educational agencies (LEA) across the country is mixed, with some still 

facing large budget cuts. The Recovery Act provided $53.6 billion39 in 

appropriations for the State Fiscal Stabilization Fund (SFSF) to be 

administered by the U.S. Department of Education (Education), as well as 

additional funds for existing education programs, including Title I, Part A 

of the Elementary and Secondary Education Act of 1965 (ESEA), as 

amended, and parts B and C of the Individuals with Disabilities Education 

Act (IDEA), as amended. Education, in its guidance and communications 

to states and LEAs, has emphasized the opportunity for education funds 

under the Recovery Act to be used for innovation and reform. Most LEAs 

reported that they considered Education’s stated goals to be important 

 

39While $53.6 billion was appropriated for the State Fiscal Stabilization Fund in its entirety, 

$5 billion of these funds are reserved for specific competitive grants, leaving approximately 

$48.6 billion for the U.S. Department of Education to allocate among the states as State 

Fiscal Stabilization Fund formula grants. 

Page 29 GAO-10-437 Recovery Act
 

when planning for uses of Recovery Act funds, although in the context of 

decreasing state and local revenues, much of the Recovery Act education 

funds have been used to fund education staff positions, including teachers. 

Other uses include items that could help build long-term capacity and 

advance educational goals and reform while also avoiding recurring costs 

for LEAs. Education has worked closely with states and localities in 

helping them use Recovery Act funds, but the influx of funds has 

illustrated the need for Education to work with states to ensure that they 

have adequate cash management processes in place, as well as transparent 

means to establish that they are complying with maintenance-of-effort 

provisions. Education has also engaged in numerous efforts to facilitate 

reporting by states and LEAs on jobs created and retained by the Recovery 

Act, but state and local officials we spoke with raised some concerns 

about the quality of jobs data reported in October 2009. 

Even with the current infusion of Recovery Act funding for education 

programs, the budget condition of LEAs across the country is mixed, 

according to our national survey of LEAs. According to the Congressional 

Research Service, the Recovery Act provided approximately $100 billion 

for discretionary education programs—elementary, secondary, and 

postsecondary—in fiscal year 2009, which, when combined with regular 

appropriations, represents about a 235 percent increase in federal funding 

compared to fiscal year 2008. Based on our national survey results, we 

estimate that approximately the same amount of LEAs—17 percent—face 

decreases of 5 percent or more in total education funding—federal, state, 

and local—as face funding increases of 5 percent or more for the current 

school year. On the other hand, an estimated 57 percent of LEAs reported 

smaller or no funding changes for the current school year. Education 

funding in the United States primarily comes from state and local 

governments. Prior to the influx of Recovery Act funding for education 

from the federal government, LEAs, on average, derived about 48 percent 

of their fiscal year 2007 funding budget from state funds, 44 percent from 

local funds, and 9 percent from federal funds.40 Figure 8 shows the 

estimated percentage of LEAs nationally that are facing budget 

fluctuations of 5 percent or more by funding source—state, local, and 

federal. 

Even with Recovery Act Funds, 

LEAs’ Budget Situations Vary 

 

40The percentages do not add to 100 percent due to rounding. L. Zhou, Revenues and 

Expenditures for Public Elementary and Secondary Education: School Year 2006-07

(Fiscal Year 2007) (NCES 2009 337) (Washington D.C.: National Center for Education 

Statistics, U.S. Department of Education), 

http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2009337 (accessed Nov. 16. 2009). 

Page 30 GAO-10-437 Recovery Act
 

Figure 8: Estimated Percentage of LEAs Nationally with Funding Decreases and Increases of 5 Percent or More for School 

Year 2009-2010, by Source of Funding 

Percentage of LEAs with decrease of 5 percent or more Percentage of LEAs with increase of 5 percent or more

Total funding

State

Source of funding

Local

Federal

Source: GAO survey of LEAs.

6 50

7

17 9

41

17 17

Notes: Percentage estimates for these nationwide estimates have margins of error, at the 95 percent 

confidence level, of plus or minus 5 percentage points or less. 

The budgetary picture for LEAs ranges widely across states. According to 

our survey, we estimate that nearly 40 percent of LEAs in California, 

Georgia, and North Carolina face overall funding cuts of 5 percent or 

more, while about 30 percent of LEAs in Texas, Mississippi, and New 

Jersey reported total education funding increases of 5 percent or more.41

Rates of spending for education under the Recovery Act have varied: as of 

January 2010, 9 states had drawn down 75 percent or more of their 

awarded education stabilization funds, while 3 states and the District of 

Columbia had drawn down less than 25 percent of these funds.42 (See table 

3.) Budget debates at the state level delayed the initial allocation and 

States Varied in the Rate at 

Which They Have Drawn Down 

Recovery Act Funds for 

Education Programs 

 

41For more details on how the budget situations of LEAs varied across states, see GAO, 

Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts to Ensure 

Accountability, GAO-10-231 (Washington, D.C.: Dec. 10, 2009). 

42The District of Columbia had not drawn down Recovery Act funds as of January 22, 2010. 

District of Columbia officials told us that they were making an effort to strengthen 

accountability systems for federal education funds prior to drawing down funds. In 

addition, officials told us that many LEAs had carryover funds from prior years that had not 

been spent. In the District, LEAs are reimbursed for approved uses of federal funds, and 

LEAs may have obligated some Recovery Act funds but have not yet been reimbursed by 

the District. 

Page 31 GAO-10-437 Recovery Act
 

spending of education-related funds in some states. According to officials 

in 3 of the states we visited, the state budget process slowed the release of 

funds and the ability of local and state educational agencies to finalize 

their plans for using ESEA Title I Recovery Act funds. For example, in 

Pennsylvania, ESEA Title I and IDEA funds could not be expended until 

the legislature passed a stopgap budget in August 2009, according to state 

officials. Also, the rate of spending was affected by how quickly some 

states were able to obtain assurances and applications from their LEAs 

that the funds would be used in accordance with applicable provisions of 

the Recovery Act and other requirements. Nearly all of the 16 states and 

the District of Columbia required each LEA to submit an application, a 

budget, or a detailed plan as a condition for receiving Recovery Act 

funding, but the amount of time needed to complete these processes 

varied. According to a Pennsylvania official, in February 2010, the state 

completed its review of LEAs’ SFSF applications and was finalizing the 

documentation needed to provide the funds to LEAs, and most LEAs were 

expected to receive SFSF funds in March 2010. 

Page 32 GAO-10-437 Recovery Act
 

Table 3: Percentage of Awarded Education Stabilization, ESEA Title I, and IDEA, 

Part B Recovery Act Funds Drawn Down by States as of January 22, 2010 

Percentage of awarded 

Recovery Act funds drawn down 

State 

Education 

stabilization funds ESEA Title I IDEA, Part B

Arizona 90 18 14

California 90 41 22

Colorado 75 4 6

District of Columbia 0 0 0

Florida 34 19 24

Georgia 89 10 12

Illinois 92 6 22

Iowa 82 32 40

Massachusetts 76 11 17

Michigan 85 14 7

Mississippi 49 8 2

New Jersey 92 1 4

New York 10 1 6

North Carolina 57 20 26

Ohio 41 16 20

Pennsylvania 0 30 25

Texas 16 14 15

Total 58 17 17

Source: GAO analysis of U.S. Department of Education data. 

Our survey results indicate that job retention for education staff, including 

teachers, was the top planned use for Recovery Act funds for LEAs across 

the three federal education programs we reviewed. An estimated 63 

percent of LEAs plan to use more than 50 percent of their Recovery Act 

SFSF funds to retain jobs, while an estimated 25 percent and 19 percent of 

LEAs said they planned to use over half of their Recovery Act funds on job 

retention under ESEA Title I, Part A and IDEA, Part B, respectively. In one 

example, education officials in the small, rural school district of JasperTroupsburg in upstate New York told us that they would use 95 percent of 

their Recovery Act funds to retain jobs. Because employee-related 

expenditures are the largest category of school expenditures—with 

salaries and benefits accounting for more than 80 percent of local school 

expenditures, according to Education’s most recent estimates—it is 

understandable that LEAs would use much of their Recovery Act funds for 

With Many LEAs Facing Budget 

Cuts and Fiscal Pressures, Job 

Retention Is the Primary 

Planned Use of Recovery Act 

Education Funds 

Page 33 GAO-10-437 Recovery Act
 

staff salaries. Also, given the fiscal uncertainty and substantial budget 

shortfalls facing states, federal funds provided by the Recovery Act give 

LEAs additional support for the retention of teachers and other education 

staff. Overall, the nationwide impact of Recovery Act education funds on 

job retention may be significant because K-12 public school systems 

employ about 6.2 million staff, based on Education’s estimates, and make 

up about 4 percent of the nation’s workforce. 

However, an estimated 32 percent of LEAs nationally expected to lose 

jobs, even with SFSF funds, but the percentage of LEAs expecting to lose 

jobs varies by state. (See fig. 9.) Among the states with higher percentages 

of LEAs expecting job losses even with SFSF funds were Georgia, Florida, 

North Carolina, and California.43 According to our analysis, in all of these 

states except for Florida, the proportion of LEAs that experienced 

decreases of 5 percent or more in total education funding from last year 

was larger than the national average of 17 percent. 

 

43A Florida official attributed staff reductions at Florida LEAs at least partially to an overall 

decline in student enrollment, requiring fewer teachers in the 2009-2010 school year. 

Page 34 GAO-10-437 Recovery Act
 

Figure 9: Estimated Percentage of LEAs Expecting Decreases in the Number of Jobs, Even with Recovery Act SFSF Funds, 

by State 

0

10

20

30

40

50

60

70

Penns

Illinoi

ylvania

s

New Jersey

Ohio

Mississippi

Texas

Massachusetts

Iowa

New York

Arizona

Michigan

California

North Carolina

Geor

Florida

gia

Percentage

Source: GAO survey of LEAs.

States

National average

Notes: Colorado was not included in our analysis of SFSF fund use because the state did not allocate 

these funds to LEAs. Given its ongoing fiscal support to LEAs, Colorado allocated its education 

stabilization funds to institutions of higher education. 

Percentage estimates for states have margins of error, at the 95 percent confidence level, of plus or 

minus 12 percentage points or less (Arizona, Iowa, Mississippi, and Pennsylvania have a margin of 

error of 13 percent; New Jersey has a margin of error of 15 percent; and Massachusetts has a margin 

of error of 16 percent). The nationwide percentage estimates have a margin of error of plus or minus 

5 percentage points. 

In our survey, LEAs reported that they planned to spend some of their 

Recovery Act funds on items that could help build long-term capacity and 

advance educational goals and reform while also avoiding recurring costs 

for LEAs. In addition to helping stabilize budgets and retain and create 

jobs, Education’s guidance released to states in April 2009 noted that 

education funds under the Recovery Act “provide a unique opportunity to 

jump start school reform and improvement efforts,” and suggested 

possible ways to use Recovery Act funds in several categories. We 

estimate that most LEAs—about 80 percent—gave great or very great 

importance to “improving results for students” in deciding how to use 

Recovery Act funds, while “increasing educators’ long term capacity” was 

the next most cited. After job retention and creation, LEAs surveyed also 

reported several onetime expenditures, such as purchasing technological 

Page 35 GAO-10-437 Recovery Act
 

equipment, including new computers; providing professional development 

for instructional staff; and purchasing instructional materials, as among 

the highest uses of funds. Figure 10 shows the national estimated 

percentages of LEAs that reported planning to use more than a quarter of 

their Recovery Act funds for these three nonrecurring budgetary items 

across the three education programs. 

Figure 10: Estimated Percentage of LEAs Nationally Planning to Use More Than 25 

Percent of Their Recovery Act Funds from the SFSF, ESEA Title I, and IDEA 

Programs for Professional Development, Technological Equipment, and 

Instructional Materials 

Source: GAO survey of LEAs.

Percentage

Recovery Act funding source 

Providing professional development for instructional staff

Purchasing technological equipment

Purchasing instructional materials

0

5

10

15

20

25

IDEA Title I SFSF

Note: Percentage estimates for these nationwide estimates have margins of error, at the 95 percent 

confidence level, of plus or minus 5 percentage points or less. 

The substantial increase in federal education funds going to states because 

of the Recovery Act has increased the importance of having cash 

management systems in place to ensure that funds are spent timely once 

they are drawn down by states. However, several states did not initially 

have cash management systems in place for SFSF funds that could 

disburse funds to LEAs when they were needed and ensure the calculation 

Education Continues to Work 

with Some States to Address 

Cash Management Challenges 

Page 36 GAO-10-437 Recovery Act
 

and remittance of any interest due.44 For example, Illinois has distributed 

SFSF funds to LEAs in semimonthly payments, but according to state 

officials, the state did not have the ability to identify specific cash needs 

from LEAs prior to distributing these funds. Also, California drew down 80 

percent of its available ESEA Title I, Part A Recovery Act funds in May 

2009 and immediately distributed them to LEAs. According to Education 

officials, California Department of Education (CDE) officials said that the 

drawdown was in lieu of its normally scheduled drawdown of school year 

2008-2009 ESEA Title I funds, and therefore the schools would be ready to 

use the funds quickly. However, in August, we contacted the 10 LEAs in 

California that had received the largest amounts of ESEA Title I, Part A 

Recovery Act funds and found that 7 had not spent any of these funds and 

that all 10 reported large cash balances—ranging from $4.5 million to 

about $135 million—which raised issues about the state’s compliance with 

applicable cash management requirements. In order to address its cash 

management issues, CDE has implemented a pilot project to test its Webbased cash management data collection system. CDE officials said they 

plan to expand the pilot to include regular and Recovery Act ESEA Title I 

and SFSF cash balances by October 2010.45 Illinois has also taken action to 

help ensure compliance with cash management requirements, and 

Education is providing these states, and others, with targeted technical 

assistance on cash management. Education’s Office of Inspector General 

has also focused on cash management practices in its work and issued an 

alert memo on October, 21, 2009, which pointed out that states need to 

ensure that funds are distributed to LEAs when they are needed to pay 

program costs, and that states need to have controls in place to ensure 

that LEAs remit interest earned on Recovery Act fund balances at least 

quarterly.46 We will continue to monitor cash management issues related 

to Recovery Act education funds. 

 

44Education’s cash management rules require LEAs to promptly remit interest earned on 

cash advances for any amounts exceeding $100, and to do so at least quarterly. 

45Additionally, in January, 2010, CDE issued guidance to LEAs underscoring the 

requirement to remit interest earned on federal cash balances at least quarterly and 

including detailed methodology on how the interest should be calculated. 

46U.S. Department of Education, “State Educational Agencies’ Implementation of Federal 

Cash Management Requirements under the American Recovery and Reinvestment Act, 

Alert Memorandum,” ED-OIG/L09J0007 (Washington, D.C., Oct. 21, 2009). 

Page 37 GAO-10-437 Recovery Act
 

The Recovery Act requires that each state make assurances that it would 

meet maintenance-of-effort (MOE) requirements for elementary and 

secondary (K-12) education and public institutions of higher education 

(IHE) as a condition of receiving SFSF funds. Education required 

governors in their phase I SFSF applications to provide assurances that 

their states will meet MOE requirements or that they will be able to 

comply with waiver provisions,47 and for phase II states are required to 

attest that they met MOE requirements in fiscal year 2009. In order to meet 

SFSF MOE requirements, a state must maintain state support for K-12 

education and IHEs at least at fiscal year 2006 levels in fiscal years 2009, 

2010, and 2011. 

Education Is Developing Plans 

to Monitor and Enforce State 

Compliance with Maintenanceof-Effort Requirements and 

Subrecipient Monitoring 

After maintaining state support at no less than fiscal year 2006 levels, 

states must first use education stabilization funds to restore state funding 

to the greater of fiscal year 2008 or 2009 levels for state support to K-12 

school districts and IHEs in fiscal years 2009 through 2011. Education 

disseminated several guidance documents to states in the spring and 

summer of 2009 to assist states in defining their MOE amounts. In 

determining, for MOE purposes, the state level of support for K-12 

education in fiscal year 2006, Education guidance said states must include 

funding provided through their primary formulas for distributing funds to 

school districts. However, Education also allowed states some flexibility 

in choosing the basis they use to measure MOE, as well as in what they 

include or exclude in their MOE definition. Further, Education directed 

states to amend their SFSF applications to reflect any final budget changes 

and, in the amended applications, provide final assurance that they will 

meet MOE levels or apply for waivers. Specifically, according to Education 

guidance, a state must amend its SFSF application if there are changes to 

the reported levels of state support for education that were used to 

determine the MOE amount or to calculate the amounts needed to restore 

state support for education to the fiscal year 2008 or 2009 level. Education 

officials said adjustments were made to fiscal year 2006 MOE levels 

because, as state fiscal year 2009 budgets become final, states are 

attempting to develop equivalent information for both their fiscal year 

2006 levels of support calculation and their calculations for fiscal year 

2009. However, guidance from Education does not require states to 

include an explanation for changes made to MOE calculations in their 

 

47For a state to be eligible to receive a waiver, the percentage of total state revenues used 

to support education cannot decrease from the previous year. Waivers are granted based 

on a state’s total level of support for education as a percentage of state revenue, while MOE 

levels are based on a selected measure of state spending for education. 

Page 38 GAO-10-437 Recovery Act
 

resubmitted applications, reducing transparency in terms of what has 

changed from previously approved applications. Given that some states 

decreased their fiscal year 2006 MOE funding levels by billions of dollars, 

an explanation of why this change was made would allow the public and 

policymakers alike the ability to better understand the action. We 

recommended in November 2009 that the Secretary of Education take 

further action to enhance transparency by requiring states to include an 

explanation of changes to MOE levels in their SFSF application 

resubmissions.48 Education agreed with our recommendation, and we are 

continuing to work with Education to ensure that actions are taken to 

enhance transparency of state MOE changes. 

Education has informed states of the requirements for monitoring 

subrecipients’ use of SFSF funds, but it is not clear that states have 

focused on this requirement. Education enumerated administrative 

requirements in the SFSF application and required governors to provide 

assurances that they would comply with the requirements. However, we 

previously reported in September 2009 that it was not clear that all states 

had begun to put in place subrecipient monitoring systems that comply 

with Education’s requirements, which include a monitoring schedule, 

procedures, and processes to verify that corrective actions are 

implemented. We recommended that the Secretary of Education take 

further action, such as collecting and reviewing documentation of state 

monitoring plans, to ensure that states understand and fulfill their 

responsibility to monitor subrecipients of SFSF funds and consider 

providing training and technical assistance to states to help them develop 

and implement state monitoring plans for SFSF. Education developed a 

plan to monitor state implementation of the SFSF program that will 

include reviewing state processes and documents for monitoring 

subrecipients and making site visits to selected states. Education officials 

also said they are taking several steps both to monitor information they 

are receiving from states and to provide technical assistance to states. For 

example, according to Education officials, prior to approving SFSF 

 

48For more details on the MOE requirements, see GAO, Recovery Act: Planned Efforts and 

Challenges in Evaluating Compliance with Maintenance of Effort and Similar 

Provisions, GAO-10-247 (Washington, D.C.: Nov. 30, 2009). 

Page 39 GAO-10-437 Recovery Act
 

awards, Education reviewed each state’s application to ensure that the 

state complied with statutory requirements to receive the funds.49

Housing Agencies Have 

Continued to Make 

Progress on Obligating 

Recovery Act Funds, but 

Capacity Issues Have 

Presented Challenges to 

Both HUD and Some 

Housing Agencies 

The Recovery Act requires the U.S. Department of Housing and Urban 

Development (HUD) to allocate $3 billion through the Public Housing 

Capital Fund to public housing agencies using the same formula for 

amounts made available in fiscal year 2008. HUD allocated Capital Fund 

formula dollars to public housing agencies shortly after passage of the 

Recovery Act and, after entering into agreements with more than 3,100 

public housing agencies, obligated these funds on March 18, 2009.50 A HUD 

Inspector General report found that HUD had allocated the funds 

appropriately and met the requirements of the Recovery Act.51 As of 

January 30, 2010, 2,910 public housing agencies (93 percent of the housing 

agencies that entered into agreements with HUD for Recovery Act funds) 

had reported to HUD that they had obligated a total of $2.07 billion, or 

about 69 percent of the total Capital Fund formula funds HUD allocated to 

them (see fig. 11). According to HUD officials, housing agencies report 

obligations after they have entered into binding commitments to 

undertake specific projects. Housing agencies previously were required to 

report obligations at least once per month, but in December 2009 HUD 

officials requested that housing agencies report obligations as funds are 

obligated in order to provide HUD with up-to-date data to inform 

monitoring and outreach efforts. A majority of housing agencies that had 

obligated funds—2,514 of 2,910 housing agencies—had also drawn down 

funds in order to pay for project expenses already incurred. In total, as of 

January 30, 2010, public housing agencies had drawn down almost $653 

million, or about 22 percent of the total HUD allocated to them. The 

Recovery Act requires 60 percent of the funds to be expended by March 

2011 and 100 percent by March 2012. 

 

49For more details on subrecipient monitoring, see the recipient reporting section of this 

report, and GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to States and 

Localities, While Accountability and Reporting Challenges Need to Be Fully Addressed, 

GAO-09-1016 (Washington, D.C.: Sept. 23, 2009). 

50HUD allocated Capital Fund formula dollars from the Recovery Act to 3,134 public 

housing agencies, but obligated funds to 3,122 housing agencies. According to HUD 

officials, 12 housing agencies chose not to accept Recovery Act funding or no longer had 

eligible public housing projects that could utilize the funds. 

51HUD Office of Inspector General, Review of American Recovery and Reinvestment Act 

Formula Allocations, 2009-FO-0006 (Washington, D.C.: September 25, 2009). 

Page 40 GAO-10-437 Recovery Act
 

Figure 11: Percentage of Public Housing Capital Fund Formula Grants Allocated by HUD That Have Been Obligated and 

Drawn Down Nationwide as of January 30, 2010 

Drawing down funds

Obligating funds

Entering into agreements for funds

Funds obligated by HUD

99.9%

$2,982,579,023

Funds obligated 

by public housing agencies

69.5%

$2,073,764,791

Funds drawn down

by public housing agencies

21.9%

$653,217,419

2,910

Number of public housing agencies

Source: GAO analysis of data from HUD's Electronic Line of Credit Control System.

3,122

2,514

The Recovery Act requires that housing agencies obligate 100 percent of 

their funds within 1 year from when the funds became available, which 

means they have until March 17, 2010, to obligate 100 percent of their 

funds. As of January 30, 2010, 559 housing agencies (18 percent) had 

reported obligating 25 percent of their funds or less, including 212 (7 

percent) that had reported obligating none of their Recovery Act funds 

(see fig. 12). However, about half of housing agencies had reported 

obligating 100 percent of their funds as of January 30, 2010, placing them 

ahead of the Recovery Act’s 12-month deadline. An additional 522 housing 

agencies (17 percent) had reported obligating more than 75 percent of 

their funds as of January 30, 2010. 

Page 41 GAO-10-437 Recovery Act
 

Figure 12: Housing Agencies’ Obligations of Recovery Act Funds by Quartile as of 

January 30, 2010 

Percentage of housing agencies

Source: GAO analysis of data from HUD's Electronic Line of Credit Control System.

Percent of funds obligated

0

10

20

30

40

50

60

70

75.01-

100%

50.01-

75%

25.01-

50%

0-25%

Public housing agencies may use Recovery Act funds for any eligible uses 

allowed under the regular Capital Fund program, except that no funds may 

be used for operations or rental assistance, and HUD regulations limit the 

amount of funds that can be used for administration and management 

improvements. We examined 83 projects at 47 selected housing agencies 

in greater depth. Housing agency officials stated that 31 of these projects 

include roofing or gutter work, 23 include replacing windows or doors, 19 

involve rehabilitating unit interiors, and 16 projects include replacing 

heating, cooling, or hot water systems. Other uses we encountered include 

renovating common areas, repairing sidewalks, repaving parking lots, and 

replacing security systems. Depending on the scope of the projects, 

multiple activities could be undertaken for a single project. 

The Recovery Act required housing agencies to give priority to projects 

already under way or in their 5-year plans, projects that can award 

contracts based on bids within 120 days, and projects that rehabilitate 

vacant rental units. Housing agencies generally selected projects that were 

in their 5-year plans. In addition, HUD required housing agencies that 

wanted to use Recovery Act funds on work items not already in an 

approved annual or 5-year plan to revise their plans to include the work 

items and resubmit the plans for HUD approval. Twenty-eight of the 47 

Page 42 GAO-10-437 Recovery Act
 

housing agencies we selected said they were able to award at least one 

contract based on bids within 120 days of the funds becoming available. 

Most of the selected housing agencies reported having few vacant units. 

Some of their projects involved rehabilitating a few vacant units at one or 

more properties, while others focused on other priorities. For a few 

housing agencies we spoke with, however, vacant units were a major 

issue, and these housing agencies were more likely to include projects that 

rehabilitate vacant units in their plans for Recovery Act funds. In 

particular, 5 housing agencies—Newark Housing Authority in New Jersey, 

Philadelphia Housing Authority, San Francisco Housing Authority, 

Cuyahoga Metropolitan Housing Authority in Ohio, and Chicago Housing 

Authority—planned to use Recovery Act funds to rehabilitate a total of 

about 1,400 vacant units.52

The 47 selected housing agencies were able to address several priorities of 

the Recovery Act with some project selections. Across all their projects, 12 

of the 47 selected housing agencies reported that they were able to 

address all three priorities by selecting projects from an approved 5-year 

plan, awarding at least one contract within 120 days, and rehabilitating 1 

or more vacant units. Of the 83 projects we examined in greater depth at 

the 47 selected housing agencies, housing agency officials said 9 projects 

addressed all three priorities, while 36 projects addressed two of the three 

priorities. The selected housing agencies were more likely to have projects 

for which they could award one or more contracts within 120 days than to 

have projects that rehabilitate vacant rental units. 

In addition to awarding Capital Fund formula dollars, HUD was also 

required under the Recovery Act to award nearly $1 billion to public 

housing agencies based on competition for priority investments, including 

investments that leverage private sector funding or financing for 

renovations and energy conservation retrofitting. HUD accepted 

applications from June 22 to August 18, 2009, and according to a HUD 

official, 746 housing agencies submitted 1,817 applications for these 

competitive grants. In September 2009, HUD awarded 396 competitive 

grants in the amount of $995 million for the creation of energy-efficient 

communities, gap financing for projects stalled because of financing 

 

52Newark Housing Authority in New Jersey planned to rehabilitate 493 vacant units, 

Philadelphia Housing Authority planned to rehabilitate 410 vacant units, San Francisco 

Housing Authority planned to rehabilitate 171 vacant units, Cuyahoga Metropolitan 

Housing Authority in Ohio planned to rehabilitate 161 vacant units, and Chicago Housing 

Authority planned to rehabilitate 142 vacant units. 

Page 43 GAO-10-437 Recovery Act
 

issues, public housing transformation, and improvements addressing the 

needs of the elderly or persons with disabilities. As of January 30, 2010, 

housing agencies had reported obligations totaling about $79 million for 

128 grants. 

Capacity, especially with regard to staffing levels, was a substantial barrier 

to applying for competitive grants for a variety of housing agencies we 

visited, including at least three housing agencies that were awarded 

competitive grants.53 Some housing agency officials that we interviewed 

stated that timing constraints presented issues when applying. For 

example, officials from one agency had a contractor assist with the 

application because their staff did not have the capacity to complete it in 

time. These officials further stated that the timing for the competitive 

grant applications drained limited resources and caused delays in 

administering the formula grant funds. Also, the officials stated that the 

Recovery Act did not allow recipients to adequately strengthen their 

workforces to handle the additional workloads brought on by the act’s 

funding. Similarly, officials from another housing agency stated that the 

agency lacked the time and staff to complete the water and energy 

consumption assessments to include in their competitive grant 

application. They instead used conservative water- and energy-saving 

estimates, which resulted in a lower application score and which they 

believe contributed to their agency not receiving any competitive grant 

funding. In addition, officials from one housing agency believed that larger 

housing agencies were able to put together better applications and were 

more likely to be awarded grants because they had professional staff inhouse to put the applications together. Another housing official also felt 

that the process favored large housing agencies and preferred that HUD 

allocate the money using the same formula as other Recovery Act Capital 

Funds. Public housing industry officials correspondingly stated their 

desire for HUD to provide formula grants as opposed to competitive 

grants, since smaller members would be less likely to receive competitive 

grant funds than larger members. 

Some Housing Agencies Lacked 

Capacity to Apply for and 

Administer Recovery Act 

Grants 

Similarly, at least six public housing agencies we visited did not apply for 

Recovery Act competitive grants because of insufficient time and 

resources to do so. For example, officials from four housing agencies we 

visited stated they did not apply because they did not have enough time or 

 

53We visited 28 housing agencies that applied for competitive grants, including 18 that 

received competitive grant awards. 

Page 44 GAO-10-437 Recovery Act
 

staff to pull together the information required before the deadline. Agency 

officials from one housing agency stated they did not apply because they 

were not sure that they had the capacity to administer the competitive 

grant within the time frames specified in the Recovery Act. Another 

housing agency did not apply for competitive grants because of resource 

constraints. Housing officials at the agency questioned whether it was 

worthwhile to apply for some projects. They stated that it did not make 

sense to expend resources satisfying the multiple requirements to apply 

for competitive grants for fairly small projects, such as window 

replacements. HUD officials stated that if housing agencies did not have 

the capacity to apply for the competitive grants, this might be an indicator 

that they do not have the capacity to administer another grant. HUD 

officials noted that they developed an electronic version of the 

competitive grant application to simplify the process for housing agencies 

and extended the deadline for initial application submissions to enable 

smaller housing authorities to have sufficient time to submit an 

application. 

Capacity issues also affected the ability of housing agencies to administer 

Recovery Act funds. According to recent reviews conducted by HUD’s 

Office of Inspector General, some housing agencies had capacity 

deficiencies that limited their ability to effectively administer Recovery 

Act funds. For example, 1 housing agency that received approximately 

$114,000 in capital funds under the Recovery Act did not have the capacity 

to administer these funds in accordance with applicable rules and 

regulations. The HUD Inspector General noted that this housing agency 

had been rated as troubled for years, and despite intense technical 

assistance from HUD was unable to establish sound financial and 

operational management.54 In response to these findings, the housing 

agency has selected a management services agency to take over its 

management and has also entered into a memorandum of agreement with 

a local nonprofit agency to oversee its Recovery Act work. Another 

housing agency that received $4.9 million in Recovery Act funds had 

weaknesses that the HUD Inspector General noted could adversely affect 

its ability to administer these funds, including failure to adequately 

document monitoring of its Capital Fund activities as well as not 

 

54HUD Office of Inspector General, The Housing Authority of the City of Eloy Lacked 

Capacity to Administer Its Recovery Act Capital Fund Grant Without Outside 

Assistance, 2009-LA-1021 (Sept. 25, 2009). 

Page 45 GAO-10-437 Recovery Act
 

maintaining complete contract files.55 In response to these findings, the 

housing agency took actions to monitor and verify work performed by its 

contractor and noted that it had taken steps to ensure that an independent 

cost estimate is performed on every project. 

HUD has taken several steps to assist public housing agencies in obligating 

Recovery Act funds. HUD officials stated in recent months they have been 

emphasizing the formula grant 1-year deadline of March 17, 2010, to 

housing agencies, and they pointed to notices, frequently asked questions, 

and Web seminars as evidence. In addition, they have stressed that the 

Recovery Act does not provide HUD with any way to grant exceptions or 

extensions. HUD will recapture any funds not obligated by the deadline 

and will reallocate those funds to other housing agencies. According to 

HUD officials, in November 2009 HUD field staff began to contact housing 

agencies that have not obligated any Recovery Act funds by phone, by email, or in person in order to understand where these housing agencies are 

in the process of awarding contracts and obligating funds, and they 

continue to do so. They repeated the process for housing agencies below 

obligation levels of 100 percent in early December. For housing agencies 

that continued to struggle to obligate their funds, HUD officials said they 

provide additional technical assistance, including answering procurement 

questions. HUD officials noted that the technical assistance required varies 

by the size of the housing agencies and the tenure of their staff. 

HUD Has Taken Steps to Help 

Housing Agencies Obligate 

Recovery Act Funds 

HUD has made progress in completing its remote and on-site reviews of 

housing agencies’ administration of the Recovery Act for both nontroubled 

and troubled agencies, as determined under its Public Housing Assessment 

System.56 According to HUD officials, HUD had completed remote reviews 

of all 172 troubled housing agencies by December 2009, and as of February 

3, 2010, had completed 2,891 out of 2,950 remote reviews of nontroubled 

 

55HUD Office of Inspector General, The East St. Louis Housing Authority Had Weaknesses 

That Could Affect Its Capacity to Administer Its Recovery Act Funding, 2009-KC-1801 

(Sept. 18, 2009). 

56HUD developed the Public Housing Assessment System to evaluate the overall condition 

of housing agencies and to measure performance in major operational areas of the public 

housing program. These include financial condition, management operations, and physical 

condition of the housing agencies’ public housing programs. Housing agencies that are 

deficient in one or more of these areas are designated as troubled performers by HUD and 

are statutorily subject to increased monitoring. 

Page 46 GAO-10-437 Recovery Act
 

housing agencies, which HUD planned to complete by January 15, 2010.57

HUD officials also noted that on-site reviews are in progress. As of 

February 3, 2010, HUD field staff had completed all of the on-site reviews 

of troubled housing agencies. HUD had also completed 278 of 542 on-site 

reviews of nontroubled housing agencies, which were to be completed by 

February 15, 2010. According to HUD officials, these systematic reviews 

across the country have identified potential issues and led to better 

guidance to housing agencies on obligations and procurement policies, 

among other topics. For example, on December 11, 2009, HUD sent an email to housing agencies clarifying the proper procedures for obligating 

and drawing down funds for administration of Recovery Act grants. HUD 

officials told us that they are developing additional guidance to be issued 

to housing agencies and field staff on topics including physical needs 

assessments and procurement issues. 

To determine what additional steps HUD should take to assist housing 

agencies in meeting the March 2010 deadline for obligating 100 percent of 

Recovery Act funds, HUD field staff prepared status reports in December 

2009 for housing agencies that had obligated less than 50 percent of their 

funds. As noted above, HUD has also decided to ask housing agencies to 

report obligations as funds are obligated—agencies usually report 

monthly—so that HUD can have up-to-date information to determine 

ongoing outreach and monitoring efforts, and notified all housing agencies 

of this reporting change in early December. HUD officials told us they are 

also creating a database to collect project-level information from its field 

offices on 985 formula grants, which will capture housing agency 

obligation and expenditure timeline projections and their backup plans for 

ensuring funds are obligated prior to the deadline.58 In addition, HUD 

officials noted that they sent a letter to all housing agencies below 100 

percent obligations as of February 12, 2010, with contact information for 

the HUD field offices. As the March deadline approaches, HUD officials 

expect more housing agencies will achieve 100 percent obligations, 

allowing HUD to better target its outreach efforts. 

 

57According to HUD officials, HUD staff have completed approximately 50 additional 

remote reviews, but these reports had not yet been uploaded to HUD’s tracking system and 

therefore are not reflected in these figures. 

58HUD officials noted that these 985 grants accounted for 90 percent of the funds awarded. 

Page 47 GAO-10-437 Recovery Act
 

HUD has taken several steps in recent months to assist housing agencies 

with obligating funds prior to the March 2010 deadline. However, HUD’s 

overall administration of Recovery Act funds as well as its existing Capital 

Fund program has been challenged over the past year by capacity issues 

that HUD has not addressed. As we reported in September 2009, the large 

response to HUD’s Capital Fund Recovery Competition program created a 

slower than expected review process for HUD staff.59 While HUD 

dedicated 40 to 50 staff members to review these applications, a number of 

applications had lengthy narratives needing review. HUD was required to 

complete these reviews and obligate all funds by September 30, 2009. In 

part because of dedicating so many staff members to reviewing 

competitive grant applications, HUD did not obligate fiscal year 2009 funds 

for its existing Capital Fund program until September 2009, 3 months later 

than anticipated. HUD officials emphasized that they obligated these funds 

by the end of the fiscal year.60 According to public housing industry 

officials, while housing agencies understood that HUD was overwhelmed 

with Recovery Act issues, not having their regular capital funds when 

expected may have resulted in significant delays in capital expenditures. 

HUD staff then concentrated their efforts on the October 2009 recipient 

reporting period, when they were not only to help housing agencies 

comply with the reporting guidelines but also to conduct quality reviews of 

recipient-reported data. HUD officials told us that in November 2009, they 

were able to focus their efforts on trying to assist those housing agencies 

with low obligation rates in meeting the March 17, 2010, obligation 

deadline. Overall, HUD officials stated that their internal collaboration 

permitted it to distribute the workload and meet Recovery Act and 

ongoing program requirements. HUD also noted that it is now developing a 

second-year strategy for monitoring and overseeing housing agencies. 

HUD Administration of 

Recovery Act Funds Has Been 

Challenged by Capacity Issues 

and Would Benefit from a 

Management Plan 

HUD has not yet finalized how it will reallocate formula grant funds not 

obligated by the March 17, 2010, deadline. While HUD’s goal is that 

agencies achieve 100 percent obligations, officials said that realistically 

some housing agencies probably will not obligate all of their funds in time. 

HUD officials said that part of the process of reaching out to housing 

agencies with low obligations is to identify which housing agencies do not 

expect to make the deadline so that HUD can begin planning for 

 

59GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to States and Localities, 

While Accountability and Reporting Challenges Need to Be Fully Addressed, GAO-09-1016

(Washington, D.C.: Sept. 23, 2009). 

60In comparison, HUD obligated its fiscal year 2008 capital funds in June 2008. 

Page 48 GAO-10-437 Recovery Act
 

recapturing and reallocating the funds. HUD officials have drafted a 

memorandum for recapturing and reallocating unobligated formula grant 

funds. The memorandum includes an outline of how and when HUD 

proposes to notify housing agencies at risk of not meeting the obligation 

deadline about the recapture process, how HUD proposes to recapture 

funds, and how the recaptured funds will be redistributed. However, HUD 

officials told us that they cannot establish a deadline for redistributing 

these funds until they determine the amount of funds to be recaptured. 

Finalizing this memorandum quickly would position HUD to meet 

Recovery Act goals of managing and expending the funds quickly. 

HUD officials told us that given the additional responsibilities that would 

be associated with administering the Recovery Act funds, they conducted 

a personnel needs assessment in February 2009 but did not develop a 

management plan to determine how best to meet the competing demands 

of administering both the Recovery Act funds and the existing Capital 

Fund program. In its initial assessment, HUD determined that it would 

need to hire five staff members at the headquarters level to administer the 

new funds. As of December 2009, HUD had hired only three additional 

staff members and was in the process of hiring a fourth. HUD had 

canceled its solicitation for the fifth position, but as of December 2009 was 

working to reissue the solicitation. HUD officials also stated they had 

hired three additional staff members and were in the process of hiring a 

fourth to help with the existing capital funds program. At the Field 

Operations level, HUD hired two additional staff members to handle 

Recovery Act work. HUD officials noted that the agency has not developed 

a management plan that addresses all of its added responsibilities under 

the Recovery Act, although it did develop a spending plan for the 

approximately $20 million it received to fund administration of the 

Recovery Act funds. HUD officials stated that it would be beneficial to 

determine the optimal level of resources needed to address all of the 

agency’s added responsibilities under the Recovery Act. However, HUD 

has not done so because of the volume of daily work and near-term 

challenges associated with meeting Recovery Act deadlines. Instead of 

developing a formal plan for managing its resource needs, the agency has 

been addressing staffing needs for Recovery Act work by shifting 

resources between field offices and within headquarters on an as-needed 

basis rather than determining the most efficient use of its resources. A 

management plan would help HUD to identify not only any additional 

staffing needs but also how to most effectively use the resources it 

Page 49 GAO-10-437 Recovery Act
 

currently has.61 Without a plan, HUD cannot be assured that its staffing 

levels are sufficient not only to administer its existing Capital Fund 

program but also to continue its administration of Recovery Act funds, 

including monitoring of housing agency obligations and expenditures, as 

well as potentially recapturing and reallocating any funds not obligated by 

HUD’s deadlines. 

For the first quarterly reporting period, ending on September 30, 2009, we 

found that a lack of system input controls in the FederalReporting.gov 

system made it difficult for HUD to locate and validate recipient data 

because some grantees had entered incorrect information.62 For example, 

HUD initially achieved a reporting rate of approximately 84 percent 

because of a substantial number of housing agencies incorrectly entering 

values into certain identification (ID) fields, such as the award ID number, 

the awarding agency, or the type of funding received. HUD officials said 

the system did not have validation measures in place to ensure the correct 

award ID numbers were entered. In addition, housing agencies could not 

edit the award ID number without submitting a new report. For example, 

one housing agency official told us HUD instructed him to file a second 

recipient report with the correct award number, which led to two reports 

for the same award being posted on the Recovery.gov Web site for the first 

reporting period. The housing agency official told us he cannot delete a 

recipient report once it is created.63 After an intensive review of all reports 

submitted with nonmatching award ID numbers and the Office of 

Management and Budget’s (OMB) list of reports that could not be matched 

to a federal agency, HUD was able to determine a rate of reporting of 

approximately 96 percent. According to a HUD official, there were 152 

HUD and Public Housing 

Agencies Faced Challenges 

with Recipient Reporting 

during the First Reporting 

Period 

 

61GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999). 

62The FederalReporting.gov system was created and managed by OMB and the Recovery 

Accountability and Transparency Board for all Recovery Act recipients to report on the 

nature of projects undertaken with Recovery Act funds and on job creation estimates. 

63According to HUD officials, recipients have been able to deactivate reports in 

FederalReporting.gov for both reporting cycles. However, once the October 2009 reports 

were published on the Recovery.gov Web site, recipients were no longer able to deactivate 

those recipient reports in FederalReporting.gov or cause the reports to be taken down. In 

contrast, for the current reporting cycle Recovery.gov will be refreshed every 2 weeks 

beginning February 10, 2010, permitting regular updates from FederalReporting.gov, 

including the removal of deactivated reports, due to the newly instituted continuous 

corrections period. Despite this change, recipients remain unable to deactivate or modify 

reports in FederalReporting.gov from the October 2009 recipient reporting period that were 

already published in Recovery.gov. 

Page 50 GAO-10-437 Recovery Act
 

Capital Fund formula and competitive grant awards for which a report was 

required but for which no report was found. HUD officials told us they 

sent warning e-mails on December 4, 2009, to the 152 nonreporting 

housing agencies reminding them to report in the second reporting period. 

In November 2009, OMB issued a memo requiring federal agencies to take 

steps to improve compliance with recipient reporting requirements in 

future reporting cycles. OMB requires agencies to identify and document 

any noncompliance, and continue to monitor recipients’ reporting activity 

during the following reporting cycle. In cases where noncompliance 

appears to be fraudulent, OMB instructs the agency to refer the matter to 

the appropriate agency officials, such as the officer responsible for 

criminal investigation. HUD notes on its Web site that a housing agency’s 

failure to report is a violation of the agreement it entered into with HUD in 

order to receive Recovery Act funds, which subjects the housing agency to 

further actions. HUD also developed a Recovery Act Non-Reporting 

Enforcement Plan in September 2009 that states that all recipients who fail 

to report in FederalReporting.gov by the end of their first applicable 

reporting cycle will receive a warning letter from HUD program staff. If 

recipients fail to report a second time, HUD will initiate further 

enforcement actions, which can include formal or informal hearings, 

suspension of access to funds, or other actions. 

To address the issue of making corrections to recipient reports, in 

November 2009 HUD submitted recommendations to OMB that, among 

other things, allowed for (1) grantees to make corrections to the award 

number field after the initial reporting period or (2) the award number 

field to be validated against a list provided by the agency to OMB. 

Subsequently, OMB published guidance on December 18, 2009, that 

announced that starting with the data submitted for the current quarter, 

the FederalReporting.gov solution will be open for periods of continuous 

corrections of all data submitted. Furthermore, recipients will have the 

ability to make corrections up until the start of the next reporting period. 

The guidance also requires federal agencies to provide recipients with key 

award information such as the award number, funding agency code, and 

awarding agency code in a single source document by December 24, 2009. 

According to a HUD official, Office of Field Operations staff sent an e-mail 

for each grant on December 23 containing the data for the specified data 

fields, such as the award number, award amount, and award date, along 

with detailed instructions about reporting. The HUD official told us this 

information was sent again on January 13, 2010, to housing agencies that 

had not yet reported. 

Page 51 GAO-10-437 Recovery Act
 

According to HUD officials, public housing agencies encountered 

challenges related to registration and system access controls for the 

FederalReporting.gov system. For example, a housing agency official 

stated that she was initially unable to access the reporting system during 

the first round of recipient reporting because the personal identification 

number (PIN) was sent only to the housing agency’s Executive Director, 

who could not be contacted. However, the housing agency official 

reported she was able to contact a support representative on October 10, 

at which point she received a temporary PIN and had no further problems 

submitting her report. The FederalReporting.gov system takes each 

recipient’s point of contact information directly from the Central 

Contractor Registration (CCR), and if an organization changes its point-ofcontact information, it takes 48 hours for FederalReporting.gov to receive 

the change and e-mail the Federal Reporting Personal Identification 

Number (FRPIN) and temporary password to the new point of contact. 

According to a HUD official, housing agencies are responsible for entering 

any changes in their contact information in the CCR system, but the 

housing agencies often do not update the system in time for access to be 

correctly transferred. HUD made an additional recommendation to OMB in 

November 2009 requesting an alternative procedure for validating reports 

or obtaining an FRPIN. However, the procedure for obtaining an FRPIN 

and validating recipient reports for the second reporting cycle still relies 

on point-of-contact information contained in the CCR system. A HUD 

official told us that OMB allows for sufficient feedback from federal 

agencies, but not all of HUD’s recommendations could be accommodated 

in time for the January recipient reporting cycle. 

As we reported in December 2009, during the first quarterly reporting 

period there was widespread misunderstanding by public housing 

agencies about OMB’s methodology for calculating the number of jobs 

created or retained by the Recovery Act, in part because housing agencies 

are not familiar with reporting jobs information. In a few cases, we found 

that public housing agencies had reported the number of jobs created or 

retained into FederalReporting.gov without converting the number into 

full-time equivalents. In early September, HUD posted the OMB guidance 

from June 22, 2009, to its Web site and provided information by e-mail to 

housing agencies on registration for FederalReporting.gov, as well as links 

to Web seminars and training provided by OMB. HUD issued further 

guidance to public housing agencies by e-mail on September 25, 2009, 

approximately 2 weeks before the October 10, 2009, deadline for recipient 

reporting, providing templates and data dictionaries tailored to the Public 

Housing Capital Fund. HUD also posted a jobs calculator spreadsheet to 

its Web site, and HUD field staff directed housing agencies to this 

Page 52 GAO-10-437 Recovery Act
 

guidance when they asked specific questions about how to calculate jobs. 

HUD officials told us they did not have enough time to translate some of 

the terminology into concrete terms that would be clearer to housing 

agency officials, partly because of their continuing discussions with OMB 

on clarifying its guidance. According to a HUD official, HUD held a Web 

seminar in December 2009 on reporting jobs created as well as on 

reporting obligations. 

The revised guidance OMB published on December 18, 2009, required 

federal agencies to submit their guidance documents to OMB for review 

and clearance by December 22, 2009, and from time to time thereafter as 

required by OMB in order to promote consistency between OMB guidance 

and agency supplemental guidance. According to a HUD official, HUD 

submitted two documents to OMB pertaining to job guidance on 

December 28. The first document was a bullet point summary of the 

December 18 OMB guidance followed by some hypothetical job-counting 

scenarios using HUD grantees. The HUD official told us OMB approved the 

use of this document and it is currently posted on HUD’s Recovery Act 

Web site. HUD also provided its job-counting calculator spreadsheet to 

OMB according to the HUD official. The HUD official told us that OMB 

asked HUD not to use the calculator for the current reporting period 

because OMB wanted to have the opportunity to have several offices 

review the calculator before it is publicly released. As a result, the HUD 

official told us HUD did not distribute the jobs calculator spreadsheet to 

housing agencies. 

HUD developed the Recovery Act Management and Performance System 

(RAMPS) to meet the requirements for reporting on environmental 

assessments as outlined in Section 1609 of the Recovery Act.64 HUD 

officials said that while public housing agencies have had to comply with 

the National Environmental Policy Act (NEPA) since it was enacted in 

1970, reporting on environmental assessments is a new requirement for 

public housing agencies. A HUD official told us most of the challenges that 

housing agencies faced with RAMPS during the first quarterly reporting 

period were related to registration and accessing the system rather than 

entering data. For example, some housing agencies reported having 

difficulty gaining access to RAMPS. An official from a public housing 

HUD Is Improving Registration 

for the Recovery Act 

Management and Performance 

System and Expanding the 

System to Measure 

Performance Outcomes 

 

64Section 1609 of the Recovery Act requires that adequate resources be devoted to ensuring 

that applicable environmental reviews under the National Environmental Policy Act 

(NEPA) are completed expeditiously and that the shortest existing applicable process 

under NEPA shall be used. 

Page 53 GAO-10-437 Recovery Act
 

industry association told us that HUD has since conducted outreach 

programs to housing agencies regarding accessing RAMPS, which the 

industry group’s members found to be effective. According to a HUD 

official, to ensure that housing agencies do not face similar registration 

issues in the future, HUD has registered all users from other HUD systems 

for RAMPS, where previously it registered only one administrative staff 

member per housing agency. Also, HUD centralized the registration 

process through its Recovery Act Web site. According to a HUD official, 

this required HUD to construct an agencywide access system that 

previously did not exist. HUD is also cleaning up data in order to resolve 

registration issues that were caused by data matching errors. 

According to HUD guidance, HUD added a new core activities module to 

RAMPS to capture information at the project level on development, 

modernization, and energy efficiency work funded by the Recovery Act. 

Specifically, the core activities module of RAMPS collects information on 

units of affordable housing developed or modernized using Capital Fund 

Recovery Grant funds as well as data on energy efficiency improvements 

included in those units. A HUD official told us that HUD began collecting 

this information through RAMPS on December 29, 2009. A HUD official 

told us that in December 2009 HUD asked each housing agency to prepare 

a Recovery Act Performance Report as a temporary way of gathering this 

information. According to a HUD official, HUD populated RAMPS with the 

data collected through the Recovery Act Performance Reports, and 

housing agencies are updating the data in RAMPS during the current 

reporting cycle. The official told us he expects the data will be vastly 

improved both in RAMPS and in the recipient reports now that housing 

agencies have had experience with the systems and the data elements. 

To help HUD achieve Recovery Act objectives and address challenges with 

its continued administration of Recovery Act funds, we recommend that 

the Secretary of Housing and Urban Development develop a management 

plan to determine the adequate level of agency staff needed to administer 

both the Recovery Act funds and the existing Capital Fund program going 

forward, including identifying future resource needs and determining 

whether current resources could be better utilized to administer these 

funds. 

Recommendation for Executive 

Action 

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

response from HUD’s Director, Office of Capital Improvements, HUD 

noted that the report documented its efforts under way and the status of 

implementation of the Recovery Act work to date but thought the report 

could more fully reflect actions and achievements. In response, we 

Agency Comments and Our 

Evaluation 

Page 54 GAO-10-437 Recovery Act
 

provided greater descriptions of HUD’s efforts to assist agencies applying 

for competitive grants and HUD efforts to monitor agencies with low 

obligation rates. HUD also provided some technical comments that we 

incorporated, as appropriate. 

HUD did not concur with our recommendation to develop a management 

plan to determine the adequate level of staff needed to administer both the 

Recovery Act and the existing Capital fund program. HUD cited what it 

considered effective and efficient collaborative efforts to meet the 

requirements of the act. We continue to believe HUD would benefit from 

developing a management plan as it continues to address the Recovery Act 

challenges. In its comments, HUD notes that the competitive grant 

program has expanded the complexity of the program, and the increased 

focus on transparency and accountability has increased significantly its 

oversight and monitoring responsibilities. HUD has thus far relied on 

shifting resources to meet demands. However, we continue to believe that 

without a detailed management plan, HUD cannot be assured that its 

staffing levels are sufficient not only to administer its existing Capital 

Fund program but also to continue its administration of Recovery Act 

funds. 

Most States Are Just 

Beginning to Use DOE’s 

Weatherization Assistance 

Program Recovery Act 

Funds to Weatherize 

Homes 

The Recovery Act appropriated $5 billion for the Weatherization 

Assistance Program, which the Department of Energy (DOE) is 

distributing to each of the states, the District of Columbia (District), and 

seven territories and Indian tribes. During the past 32 years, the program 

has helped more than 6.2 million low-income families by making such 

long-term energy-efficiency improvements to their homes as installing 

insulation; sealing leaks; and modernizing heating equipment, air 

circulation fans, and air conditioning equipment. These improvements 

enable families to reduce energy bills, allowing these households to spend 

their money on more pressing needs, according to DOE. The Recovery Act 

appropriation represents a significant increase for a program that has 

received about $225 million per year in recent years. 

During 2009, DOE obligated about $4.73 billion of the Recovery Act’s 

weatherization funding to the states, while retaining about 5 percent of 

funds to cover the department’s expenses, such as those for training and 

technical assistance, and management and oversight for the expanded 

weatherization program. DOE first provided each state with the initial 10 

Page 55 GAO-10-437 Recovery Act
 

percent of its Recovery Act funds, which could be used for start-up 

activities such as hiring and training staff, purchasing needed equipment, 

and performing energy audits of eligible homes, among other things.65 The 

District and the states in our review all received their initial 10 percent in 

March and April 2009.66 DOE required each state to submit a 

weatherization plan outlining how it would use its Recovery Act 

weatherization funds before DOE provides states with the next 40 percent 

of their respective funds. These plans included the states’ strategies for 

monitoring and measuring performance and the number of homes to be 

weatherized, among other things. By the time we issued our December 

Recovery Act report, DOE had approved the weatherization plans of all of 

the states, the District, and seven territories and Indian tribes.67 Each now 

has access to 50 percent of its funds, and DOE plans to provide access to 

the remaining funds once a state has completed weatherizing 30 percent of 

the homes identified in its state weatherization plan. Under Section 1603 of 

the Recovery Act, funds are available for obligation by DOE until 

September 30, 2010, and DOE has indicated that the states are to spend the 

funds by March 31, 2012. 

 

65See GAO, Recovery Act: States’ and Localities’ Current and Planned Uses of Funds 

While Facing Fiscal Stress, GAO-09-829 (Washington D.C.: July 8, 2009). 

66Our discussion on weatherization is primarily limited to the 16 states and the District of 

Columbia that are the focus of this report. 

67See GAO, Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts to 

Ensure Accountability, GAO-10-231 (Washington D.C.: Dec. 10, 2009). 

Page 56 GAO-10-437 Recovery Act
 

Table 4: DOE’s Recovery Act Weatherization Assistance Program Obligations 

Funding recipients 

States we reviewed Total obligations

Arizona $66,091,428

California 185,811,061

Colorado 79,531,213

District of Columbia 8,089,022

Florida 175,984,474

Georgia 124,756,312

Illinois 242,526,619

Iowa 80,834,411

Massachusetts 122,077,457

Michigan 243,398,975

Mississippi 49,421,193

New Jersey 118,821,296

New York 394,686,513

North Carolina 131,954,536

Ohio 266,781,409

Pennsylvania 252,793,062

Texas 326,975,732

Other states and territories 

Alabama 71,800,599

Alaska 18,142,580

American Samoa 719,511

Arkansas 48,114,415

Connecticut 64,310,502

Delaware 13,733,668

Hawaii 4,041,461

Guam 1,119,297

Idaho 30,341,929

Indiana 131,847,383

Kansas 56,441,771

Kentucky 70,913,750

Louisiana 50,657,478

Maine 41,935,015

Maryland 61,441,745

Page 57 GAO-10-437 Recovery Act
 

Funding recipients 

Other states and territories Total obligations

Minnesota 131,937,411

Missouri 128,148,027

Montana 26,543,777

Nebraska 41,644,458

Nevada 37,281,937

New Hampshire 23,218,594

New Mexico 26,855,604

North Dakota 25,266,330

Northern Mariana Islands 795,206

Oklahoma 60,903,196

Oregon 38,512,236

Puerto Rico 48,865,588

Rhode Island 20,073,615

South Carolina 58,892,771

South Dakota 24,487,296

Tennessee 99,112,101

Utah 37,897,203

Vermont 16,842,576

Virginia 94,134,276

Virgin Islands 1,415,429

Washington 59,545,074

West Virginia 37,583,874

Wisconsin 141,502,133

Wyoming 11,195,471

Total obligations: states and territories 4,728,750,000

DOE departmental expenses, such as 

training and technical assistance, 

management and oversight, etc. 

271,250,000

Total obligations $5,000,000,000

Source: GAO analysis of DOE information. 

Although each state has access to half of its Recovery Act weatherization 

funds, the states have used only a small percentage of their available funds 

in 2009, mostly because state and local agencies needed time to develop 

the infrastructures required for managing the significant increase in 

weatherization funding and for ensuring compliance with Recovery Act 

Page 58 GAO-10-437 Recovery Act
 

requirements.68 According to DOE officials, many local weatherization 

agencies have been spending their DOE annual appropriation funds—

which are not subject to some key Recovery Act requirements—to 

weatherize homes before using their Recovery Act funds. As of December 

31, 2009, according to available DOE data, 47 states and 5 territories 

reported they had begun to use Recovery Act weatherization funds, while 

3 states, the District of Columbia, and two Indian tribes reported they had 

not used any Recovery Act funds.69 The 52 states and territories also 

reported that, as of December 31, 2009, they had spent about $372 million, 

or about 8 percent, of the $4.73 billion for weatherization activities. States 

and territories have separated their Recovery Act expenditures into 

various categories, including expenditures for program operations, 

administration, training and technical assistance, and other activities. 

According to DOE, variances among the states in the percentage of funds 

devoted to program operations reflect different levels of maturity in, for 

example, providing the infrastructure needed to manage the expanded 

weatherization program. 

During 2009, federal, state, and local governments planning to use 

Recovery Act funds to weatherize homes were challenged by concerns 

about ensuring that weatherization activities complied with various 

requirements. A significant challenge involved compliance with DavisBacon provisions, which were applied by the Recovery Act to the 

weatherization program for the first time in 2009.70 Specifically, 

weatherization contracts were delayed because state and local officials 

had concerns that wage rates for weatherization had not yet been 

determined by the Department of Labor (Labor). The Davis-Bacon 

provisions of the Recovery Act require that all laborers and mechanics 

employed by contractors and subcontractors on Recovery Act-funded 

projects be paid at least the prevailing wage, including fringe benefits, as 

determined by the Secretary of Labor. State and local officials also had 

concerns about whether local agencies could handle increased 

administrative tasks and had the proper infrastructure in place to 

administer the program requirements related to the Davis-Bacon 

Federal, State, and Local 

Governments Have 

Experienced Challenges Using 

Recovery Act Funds for 

Weatherization 

 

68See GAO-10-231. 

69The quarter ending December 31, 2009, is the most recent quarter for which the states are 

required to report data under the Recovery Act. DOE officials noted that the states and 

territories also have access to annually appropriated funds for weatherization activities. 

70The Davis Bacon Act is codified at 40 U.S.C. § 3141 et seq. The Recovery Act’s DavisBacon provisions are located at section 1606 of the act. 

Page 59 GAO-10-437 Recovery Act
 

provisions. Finally, some state officials expressed concerns about 

compliance with the National Historic Preservation Act, specifically the 

increased number of homes that may fall under the protection of the act 

that require historic preservation reviews.71

Regarding the Davis-Bacon provisions, officials in about half of the states 

we reviewed had decided to wait to begin weatherizing homes until Labor 

had determined county-by-county prevailing wage rates for their state to 

ensure compliance with Davis-Bacon requirements. These officials 

explained that they wanted to avoid having to pay back wages to 

weatherization workers who started working before the prevailing wage 

rates were known.72 Arizona officials said all but one of its local service 

providers decided to wait to weatherize homes using Recovery Act funds 

until the prevailing wage rates were determined because they were 

concerned about the time required to reconcile differences in wage rates. 

Similarly, Iowa officials told us paying back wages would be especially 

burdensome to smaller contractors. California officials were also 

concerned about the prevailing wage rates, and they wrote DOE to inquire 

about the possibility of requesting an exemption from the Davis-Bacon 

requirements for weatherization workers hired through the state’s federal, 

state, and local workforce development partnerships aimed at creating 

training and employment opportunities for youth and dislocated workers. 

California officials told us that the application of Davis-Bacon provisions 

could weaken or eliminate workforce development as a significant 

component of its weatherization program, stating that paying prevailing 

wages to the inexperienced, entry-level workers typically hired through 

these programs would not be appropriate.73 According to DOE officials, as 

a result of these concerns, some local agencies held off on spending their 

Recovery Act money, instead spending money obtained from DOE’s 

 

71Pub. L. No. 89-665, 80 Stat. 915 (codified as amended at 16 U.S.C. § 470 et seq.). 

72In July 2009, DOE and Labor issued a joint memorandum to Weatherization Assistance 

Program grantees authorizing them to begin weatherizing homes using Recovery Act funds, 

provided they pay construction workers at least Labor’s wage rates for residential 

construction, or an appropriate alternative category, and compensate workers for any 

differences if Labor establishes a higher local prevailing wage rate for weatherization 

activities. 

73According to Labor officials and guidance provided on its Web site, individuals who meet 

Labor's definition of apprentices and trainees may be paid a percentage of the journeyman 

rate on the wage determination. To do so, however, these individuals must be participating 

in a program that has been registered with Labor or with a State Apprenticeship Agency 

recognized by Labor. 

Page 60 GAO-10-437 Recovery Act
 

annual appropriations—which are not subject to Davis-Bacon 

requirements. However, one of the states we reviewed, Ohio, started to 

use Recovery Act funds before wage rates were determined. While 

officials in about half of the states reviewed were concerned about 

prevailing wage rates prior to Labor’s determination, officials in North 

Carolina and Mississippi were not concerned because they expected that 

the prevailing wage rates would be similar to the existing wages being paid 

to weatherization workers. 

On September 3, 2009, Labor completed its initial determination of wage 

rates for weatherization work conducted on residential housing units in 

each county of the 50 states and the District.74 However, state and local 

officials in several states expressed concern over the need to use different 

wage rates for weatherization activities in different types of buildings. 

Labor determined that the revised prevailing wage rates for weatherization 

workers were limited to multifamily residential buildings of four or fewer 

stories. However, Labor’s commercial building construction wage rates 

(which apply to plumbers, carpenters, and other laborers) apply to 

multifamily residential buildings of five or more stories. As a result, local 

agencies conducting weatherization work on multifamily units in high-rise 

buildings must pay their workers wage rates that can be significantly 

higher than what local agencies pay weatherization workers for residential 

housing units. For example, in New York County (Manhattan), commercial 

prevailing wage rates were three times the rates for residential 

weatherization laborers. Representatives of two local agencies in New 

York told us that they intend to subcontract out all weatherization work 

conducted on buildings over four stories because they could not pay their 

workers vastly different wages based on the type of building involved. 

According to Ohio officials, some local agencies had delayed projects in 

larger multifamily buildings until they could better estimate project costs. 

Under 10 CFR §440.21(d), weatherization materials installed must be cost 

effective, resulting in energy cost savings over the lifetime of the measure. 

However, because of higher wage rates required for weatherization work 

done on building of five or more stories (high-rise buildings), materials 

installed on high-rise buildings may not have been able to meet the costeffectiveness requirement established by regulation. In response to states’ 

concerns, DOE’s November 10, 2009, guidance allows the states to 

calculate the cost effectiveness over the lifetime of a project by using the 

new weatherization wage rates rather than the prevailing commercial 

 

74The wage rates were revised in December 2009. 

Page 61 GAO-10-437 Recovery Act
 

wages for plumbers, carpenters, and other laborers working on high-rise 

buildings. 

Concerns about administrative burdens of the Davis-Bacon provisions also 

affected use of Recovery Act funds in several states. For example, several 

state agencies delayed disbursing Recovery Act funds to local agencies 

because of concerns about the impact of these administrative tasks on 

small contractors, citing that these contractors generally have fewer 

resources and less experience with accounting processes. Some state 

agency officials said they were not satisfied that local agencies had the 

proper administrative infrastructure in place to comply with Davis-Bacon 

requirements, including the requirement that contractors submit weekly 

certified payroll records to the contracting agency. For example, 

Pennsylvania officials told us that delays occurred because some local 

agencies had initially submitted management plans that had not included 

language describing how they would comply with the Davis-Bacon 

requirements. In California, where according to state officials local 

agencies must certify that they can comply with the Davis-Bacon 

requirements before these agencies are provided with Recovery Act funds 

to weatherize homes, only 2 of California’s 35 local agencies that were 

awarded Recovery Act funds accepted these required amendments by the 

initial October 30, 2009, deadline. 

Many state and local agencies took time to hire additional staff or make 

infrastructure upgrades to better ensure compliance with administrative 

requirements. For example, Michigan officials told us their agency planned 

to add 22 staff members, including a Davis-Bacon analyst, and told us that 

federal administrative requirements, such as weekly certified payroll, 

required them to make technological upgrades in their weatherization 

division to ensure compliance with Recovery Act requirements. District of 

Columbia officials told us that their agency had not expended Recovery 

Act funds to weatherize homes because they have been developing the 

infrastructure to administer the program by, for example, hiring new staff. 

Local agencies in California, Michigan, New York, and Ohio had also hired 

new staff to process Davis-Bacon paperwork. 

State officials noted that the National Historic Preservation Act may 

present another challenge that could slow the use of the Recovery Act’s 

Page 62 GAO-10-437 Recovery Act
 

weatherization funds.75 Enacted in 1966, the National Historic Preservation 

Act requires federal agencies to, among other things, take into account the 

effect of any federal or federally assisted undertaking on historical 

properties included in a national register of historic sites, buildings, 

structures, and objects. Michigan state officials told us that, under the act, 

its State Historic Preservation Office is allowed to conduct a historic 

review of every home over 50 years of age if any work is to be conducted. 

They explained that, in Michigan, this could mean an estimated 90 percent 

of the homes to be weatherized would need such a review, which could 

cause significant delays. However, in November 2009, Michigan state 

officials signed an agreement with the State Historic Preservation Office 

that is designed to expedite the review process. With this agreement in 

place, state officials said they are confident that the historic preservation 

requirements can be met without causing further delays. New York 

officials told us that several entire neighborhoods in their state fall under 

the protection of the act and noted that the State Historic Preservation 

Office may have to conduct a review before any residential units in such a 

neighborhood can be weatherized. State officials in Iowa expressed 

similar concerns. State officials in New York and Iowa have contacted 

their respective historic preservation offices to develop approaches for 

addressing the review process. 

DOE has issued guidance requiring recipients of Recovery Act 

weatherization funds to implement a number of internal controls to 

mitigate the risk of fraud, waste, and abuse.76 Specifically, DOE requires 

state weatherization agencies to conduct on-site monitoring of all 

weatherization service providers to inspect the management of funds and 

the production of weatherized homes.77 These monitoring visits consist of 

a financial review of the service provider’s records pertaining to salaries, 

materials, equipment, and indirect costs; program reviews of the service 

provider’s records, contracts, and client files; and a production review, 

consisting of the inspection of weatherized homes by the state agencies 

and by the service provider. DOE requires that each state agency inspect 

DOE Has Issued Guidance to 

Mitigate Risk in the 

Weatherization Program, but 

Federal, State, and Local 

Agencies Face Challenges in 

Monitoring the Use of Recovery 

Act Weatherization Funds 

 

75DOE officials told us in January 2010 that they were in the process of developing an 

agreement with the Advisory Council on Historic Preservation and the National Conference 

of State Historic Preservation Officers to create a manageable framework for streamlining 

DOE's compliance with the requirements of the National Historic Preservation Act. 

76See, for example, DOE, “Weatherization Program Notice 09-1B” (Mar. 12, 2009). 

77Service providers weatherize homes; local agencies manage service providers but are 

sometimes qualified to provide weatherization services themselves. 

Page 63 GAO-10-437 Recovery Act
 

at least 5 percent of the weatherized units and each service provider 

inspect all of the completed units or units in the process of being 

weatherized. If an inspection reveals reporting inconsistencies, quality 

control issues, or other problems, the state agency is required to increase 

the number of units monitored and frequency of inspection. DOE is 

implementing an enhanced monitoring plan that would allow DOE’s 

weatherization project officers to track each state’s performance. As part 

of this enhanced monitoring, DOE submitted a deviation request to the 

Office of Management and Budget (OMB) to require the states to submit 

monthly, rather than quarterly, reports. OMB approved this request on 

December 1, 2009. As a result of the significant increase in program 

funding, many of the states are reporting a need to increase staff to 

implement internal controls. 

DOE is hiring staff to provide national oversight to the Recovery Act 

weatherization program. DOE officials told us that each state will be 

assigned a project officer who will review the state’s fiscal and 

programmatic reports. Project officers will also be responsible for 

coordinating site visits to the state and local agencies responsible for 

weatherization, as well as visiting a sample of projects being weatherized 

with Recovery Act funds. 

DOE provides state agencies with the discretion to develop and implement 

these internal controls in accordance with each state’s weatherization 

plan. One way that state officials can determine the effectiveness of a 

recipient’s internal controls is through an assessment conducted as part of 

the Single Audit Act.78 These audits review the performance and 

management of nonfederal entities receiving $500,000 or more in federal 

awards. Some state weatherization programs, however, have been 

considered too small to be monitored during the state’s Single Audit. Other 

risk mitigation strategies include annual reviews of independent auditors’ 

reports, increased frequency of on-site monitoring of service providers and 

weatherized homes, fraud detection training, the requirement of monthly 

reports from service providers, and the use or proposed use of a Web-

 

78The Single Audit Act of 1984, as amended (31 U.S.C. §§ 7501-7507), requires that each 

state, local government, or nonprofit organization that expends at least a certain amount 

per year in federal awards—currently set at $500,000 by OMB—must have a Single Audit 

conducted for that year subject to applicable requirements, which are generally set out in 

OMB Circular No. A-133, Audits of States, Local Governments and Non-profit Organizations 

(June 27, 2003). If an entity expends federal awards under only one federal program and 

when federal laws, regulations, or grant agreements do not require a financial statement 

audit of the entity, the entity may elect to have an audit of that program. 

Page 64 GAO-10-437 Recovery Act
 

based reporting database. Some states, however, believe that current 

controls are sufficient, but they will need to hire additional staff to 

accommodate the increase in Recovery Act funding. 

While the states have spent relatively little of their total funds and we have 

reviewed weatherization activities in only a few locales, we have identified 

challenges for DOE and the states to address in order to ensure that 

Recovery Act funds are spent prudently and that the performance of local 

agencies is well-managed. For example, in Ohio we found during our site 

visits that grantees had inconsistent practices for reporting the number of 

homes weatherized and, in one case, a grantee used Recovery Act funds to 

weatherize the home of an ineligible applicant. Faced with these early 

implementation challenges, on November 20, 2009, Ohio officials issued 

new guidance to all state agencies regarding reporting requirements. The 

guidance indicated that state officials will begin administrative monitoring 

in December 2009 and fiscal monitoring in January 2010. Challenges in 

Pennsylvania include expanding the state’s oversight capacity, training and 

certifying of weatherization workers, and implementing a statewide 

procurement system for weatherization materials purchased with 

Recovery Act funds. Among the challenges that California will be handling 

will be the monitoring of local agencies. For example, the state’s Inspector 

General has identified one local agency designated as high risk because of 

questionable spending.79

Some state officials have also cited the substantial influx of new money as 

a reason to audit the spending of weatherization funds. For example, 

because of the large increase in weatherization funding received by Texas, 

the Internal Auditor of the Texas Department of Housing and Community 

Affairs is currently auditing the department’s monitoring and oversight of 

the program. Also, in a few states, prior audits have identified deficiencies 

in weatherization programs. For example, Michigan’s State Auditor 

General found that the Michigan Department of Human Services’ internal 

controls over the weatherization program did not ensure compliance with 

federal laws and regulations regarding subrecipient monitoring during the 

2-year period that ended on September 30, 2008. 

 

79A November 3, 2009, press release issued by the State of California Office of the Inspector 

General noted serious problems with the Economic Opportunity Council of San Francisco, 

including financial management deficiencies. 

Page 65 GAO-10-437 Recovery Act
 

Local agencies also utilize risk assessments to prevent fraudulent or 

wasteful use of Recovery Act funds. For example, some local agencies 

reported that new contractors are subjected to a higher level of scrutiny 

than more experienced contractors. Local agency officials in New York, 

California, and Ohio told us a long history of weatherization service 

mitigates the risk that a contractor will improperly use funds. 

Furthermore, most local agencies have procedures in place to ensure they 

do not contract with service providers that have been placed on the 

“Excluded Parties List” due to a history of fraudulent business practices.80

Local agencies reported the most common procedure to evaluate a 

contractor’s reputation was to check the contractor’s name online against 

the “Excluded Parties List.” Other local agencies require contractors to 

sign documentation stating that they have not been debarred or bankrupt. 

In March 2009, DOE issued guidance that directed the states to report on 

the number of housing units weatherized and the resulting impacts to 

energy savings and jobs created and retained at both the state and local 

agency level. However, reporting about impacts, especially energy savings, 

is still somewhat limited. On February 24, 2010, DOE reported that 30,252 

homes have been weatherized with Recovery Act funds as of December 31, 

2009. This represents about 5 percent of the approximately 593,000 total 

homes that DOE originally planned to weatherize using Recovery Act 

funds.81 In addition, available data shows that about 8,500 jobs have been 

created through the use of Recovery Act weatherization funds.82 But 

although many local officials have collected data about new hires, none 

Reporting on the Impacts of 

Recovery Act Funds Is Still 

Limited 

 

80The General Services Administration maintains the Excluded Parties List System, which 

identifies parties excluded from receiving federal contracts, certain subcontracts, and 

certain other assistance and benefits. In GAO-09-174, Excluded Parties List System: 

Suspended and Debarred Businesses and Individuals Improperly Receive Federal Funds, 

we recommended that the General Services Administration take actions to strengthen 

controls over the system. 

81DOE collects data reported by states and territories on the number of homes weatherized 

and on state and territory expenditures of funds on a quarterly basis. The data reported by 

states as of a certain date (such as for the quarter ending December 31, 2009) can change 

as states finalize figures for homes weatherized and funds spent. For example, in January, 

2010, DOE reported that about 9,100 homes had been weatherized as of December 31, 2009.

DOE originally planned to weatherize about 593,000 homes with Recovery Act funding by 

March 31, 2012. A DOE report issued on February 24, 2010, indicated that 30,252 homes had 

been weatherized nationwide as of December 31, 2009. 

82According to the guidance issued by OMB on December 18, 2009, the estimate of the 

number of jobs created or retained by the Recovery Act should now be expressed as fulltime equivalents (FTE). 

Page 66 GAO-10-437 Recovery Act
 

could provide us with data on energy savings. Contributing to the lack of 

information about impacts is that most state and local agencies either are 

just beginning to use Recovery Act funds to weatherize homes or have not 

yet begun to do so. 

Some states told us they plan to use performance measures developed by 

DOE, while others have developed their own measures. For example, 

Florida officials told us they plan to measure energy savings by tracking 

kilowatts used before and after weatherization, primarily with information 

from utility companies. In addition, local agencies in some states either 

collect or plan to collect information about other aspects of program 

operations. For example, local agencies in both California and Michigan 

collect data about customer satisfaction. In addition, a local agency in 

California plans to report about obstacles, while an agency in New York 

will track and report the number of units on the waiting list. 

In regard to recipient reporting, officials in all eight states that we 

reviewed for the December Recovery Act report said they submitted these 

reports on schedule, although weatherization officials from Massachusetts 

and Ohio cited issues with the reporting requirements that existed prior to 

the changes that came about as a result of the December 18, 2009, 

guidance. In Massachusetts, state officials told us of confusion that had 

been associated with terminology related to new or retained jobs, and 

local officials said that the Massachusetts Recovery and Reinvestment 

Office requires additional information about demographics not required by 

OMB. Ohio officials told us that for reporting purposes, they had estimated 

the number of jobs that could potentially be created. The inconsistency 

between potential positions and actual hours worked resulted in an 

inaccurate reporting of jobs created. One of the local agencies we visited 

reported 36 jobs created, but officials acknowledged they had only filled 

20 positions at the time of our visit. Another local agency reported 14 

agency and 8 contractor jobs created, but an official confirmed that only 6 

agency and 7 contractor positions had been filled. According to Ohio 

officials, the process followed by the local agencies that resulted in these 

inaccurate reports of jobs created has since been corrected in the second 

quarter recipient reports. 

Page 67 GAO-10-437 Recovery Act
 

The Recovery Act provides an additional $1.2 billion in funds for 

Workforce Investment Act (WIA) Youth Program activities, including 

summer employment.83 Administered by the Department of Labor (Labor), 

the WIA Youth Program is designed to provide low-income in-school and 

out-of-school youth 14 to 21 years old, who have additional barriers to 

success, with services that lead to educational achievement and successful 

employment, among other goals. The Recovery Act also extended 

eligibility through age 24 for youth receiving services funded by the act. 

While the Recovery Act does not require all funds to be used for summer 

employment, in the conference report accompanying the bill that became 

the Recovery Act,84 the conferees stated that they were particularly 

interested in states using these funds to create summer employment 

opportunities for youth. While summer employment is a required 

component of the WIA Youth Program, Labor issued guidance indicating 

that local areas have the flexibility to implement stand-alone summer 

youth employment activities with Recovery Act funds.85 Local areas may 

design summer employment opportunities to include any set of allowable 

WIA youth activities—such as tutoring and study skills training, 

occupational skills training, and supportive services—as long as it also 

includes a work experience component. 

WIA Youth Program 

Outcomes Show States 

Provided Many Youth with 

Summer Employment and 

Training Opportunities 

Gearing up to provide or expand summer employment activities presented 

challenges for many state and local areas. Once the Recovery Act was 

passed, officials had a few months to get their summer youth employment 

activities up and running. Moreover, in implementing the year-round 

service requirements of the WIA Youth Program, many states and local 

areas had greatly reduced their summer youth employment programs and 

no longer offered a stand-alone summer program—or they had found 

funding sources other than WIA, such as state, local, or foundation funds, 

to cover it. Local areas without recent experience had to build the 

program from the ground up. 

 

83For purposes of the Recovery Act funds, the period of “summer” is from May 1 through 

September 30. 

84H.R. Rep. No. 111-16, at 448 (2009). 

85Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

Page 68 GAO-10-437 Recovery Act
 

As of December 31, 2009, 66 percent of Recovery Act WIA youth funds 

($765 million) had been drawn down nationwide, according to Labor 

data—an increase of 32 percentage points from the 34 percent we reported 

as of August 31, 2009 (see fig. 13). 

States Have Drawn Down 

about Two-thirds of Funds 

Figure 13: National Drawdown Rates for Recovery Act Funds for the WIA Youth 

Program, as of December 31, 2009 

0

10

20

30

40

50

60

70

May June July Aug. Sept. Oct. Nov. Dec.

Percentage of funds spent 

Source: GAO analysis of Department of Labor data.

Month

1%

19%

34%

47%

56%

61%

66%

7%

Among the 16 states, the percentage drawn down ranged from 51 percent 

for Arizona to 82 percent for Mississippi (see table 5). 

Page 69 GAO-10-437 Recovery Act
 

Table 5: Selected States’ Drawdowns of Recovery Act WIA Youth Funds and 

Drawdowns Nationwide as of December 31, 2009 

Dollars in millions 

State Allotment

Amount 

drawn down 

Percentage

drawn down

Arizona $17.8 $9.1 51

California 186.6 99.9 54

Colorado 11.9 8.3 70

Florida 42.9 31.9 74

Georgia 31.4 23.1 74

Illinois 62.2 44.5 72

Iowa 5.2 3.9 75

Massachusetts 24.8 15.7 63

Michigan 73.9 51.4 70

Mississippi 18.7 15.3 82

New Jersey 20.8 12.4 60

New York 71.5 41.6 58

North Carolina 25.0 16.9 68

Ohio 56.2 40.0 71

Pennsylvania 40.6 21.5 53

Texas 82.0 62.0 76

Nationwide $1,167.2 $765.0 66

Source: GAO analysis of Department of Labor data. 

Nationwide, as of November 30, 2009, 355,320 youths had participated in 

Recovery Act-funded WIA youth activities—a 20 percent increase from the 

297,169 youth who had participated as of July 31, 2009. Sixty-four percent 

of youth participants were 14 to 18 years old, making up the largest 

category of participants. Nine percent of youth were ages 22 to 24, the new 

age category authorized under the Recovery Act. Of the youth served with 

Recovery Act funds, 36 percent were out-of-school youth.86 Table 6 

provides information on WIA youth served with Recovery Act funds 

nationwide and in our 16 study states. 

Recovery Act-Funded WIA 

Youth Program Served over 

355,000 Youths 

 

86Under WIA, local areas must ensure that a minimum of 30 percent of funds, including 

Recovery Act funds, are used for serving out-of-school youth. 

Page 70 GAO-10-437 Recovery Act
 

Table 6: WIA Youth Served with Recovery Act Funds in Selected States and Nationwide, as of November 30, 2009 

State Number serveda

Percentage

who were

14-18 years old

Percentage

who were

19-21 years old

Percentage 

who were 

22-24 years old 

Percentage

who were

out-of-school youth

Arizona 3,404 75 19 6 31

California 45,267 68 24 8 41

Colorado 3,328 69 24 7 40

Florida 14,548 62 27 11 39

Georgia 11,192 72 21 7 30

Illinois 17,868 64 26 10 46

Iowa 1,375 52 35 14 45

Massachusetts 6,917 79 16 5 25

Michigan 20,649 68 23 9 33

Mississippi 6,742 62 27 10 46

New Jersey 6,195 62 27 10 42

New York 25,323 71 21 7 27

North Carolina 6,436 65 25 10 42

Ohio 17,861 56 30 13 39

Pennsylvania 9,359 68 24 7 29

Texas 24,669 67 23 9 29

Total for 16 states 221,133 67 24 9 36

Nationwide 355,320 64 24 9 36

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

Note: The sum of percentages for youth in the age categories of 14-18, 19-21, and 22-24 in each of 

the states may not equal 100 percent due to rounding. According to Labor, nationwide totals do not 

equal 100 percent due to data reporting issues in some of the other states and territories. 

a

According to Labor, this represents the number of WIA youth served with Recovery Act funds, which 

includes those youth who participated in summer employment or other allowable WIA activities during 

the summer months. 

Nationwide, of the youth who participated in Recovery Act-funded WIA 

youth activities, 313,821—88 percent—were placed in summer 

employment, according to Labor’s data. Eighty-two percent of youth 

placed in summer employment completed their work experience, as 

shown in table 7.87

 

87The summer employment completion rate represents the percentage of youth who 

completed their summer work experience without dropping out prior to the scheduled end 

date of the work experience. 

Page 71 GAO-10-437 Recovery Act
 

Table 7: Recovery Act-Funded WIA Youth Participation in Summer Employment in 

Selected States and Nationwide, as of November 30, 2009 

State 

Number of youth placed 

in summer employment 

Percentage

who completed their

summer employment

Arizona 2,982 89

California 42,066 87

Colorado 3,138 80

Florida 13,652 92

Georgia 11,027 91

Illinois 16,626 81

Iowa 1,270 80

Massachusetts 6,795 92

Michigana 18,364 68

Mississippi 6,543 75

New Jersey 5,888 32

New York 23,888 85

North Carolina 6,436 71

Ohio 10,481 85

Pennsylvania 9,238 74

Texas 21,851 87

Total for 16 states 200,245 82

Nationwide 313,821 82

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

a

Because of delayed reporting, Michigan’s denominator for its summer employment completion rate 

does not include the full cohort of youth who were placed in employment and may be understated by 

about 2,918 youth. Labor officials told us that some other states may have also underreported this 

data element, but to a much lesser extent. 

Those youth participating in Recovery Act-funded WIA youth activities 

who were not placed in summer employment included younger in-school 

youth and older youth who were participating in other allowable WIA 

youth activities, within and outside of the summer months, such as career 

exploration, classroom training, employment preparation services, and 

academic improvement services, according to Labor. 

Page 72 GAO-10-437 Recovery Act
 

The Recovery Act requires that only the work readiness measure, also 

referred to as the work readiness attainment rate, be used to assess the 

effects of the summer-only youth employment activities. This measure is 

defined as the percentage of participants in summer employment who 

attain a work readiness skill goal. A work readiness skill goal is defined as 

Three Quarters of Youth 

Participants Achieved a Work 

Readiness Skill Goal 

“a measurable increase in work readiness skills including world-of-work 

awareness, labor market knowledge, occupational information, values 

clarification and personal understanding, career planning and decision making, 

and job search techniques (resumes, interviews, applications, and follow-up 

letters). It may also encompass survival/daily living skills such as using the phone, 

telling time, shopping, renting an apartment, opening a bank account, and using 

public transportation. It may also include positive work habits, attitudes, and 

behaviors such as punctuality, regular attendance, presenting a neat appearance, 

getting along and working with others, exhibiting good conduct, following 

instructions and completing tasks, accepting constructive criticism from 

supervisors and co-workers, showing initiative and reliability, and assuming the 

responsibilities involved in maintaining a job. It entails developing motivation and 

adaptability, obtaining effective coping and problem-solving skills, and acquiring 

an improved self-image.”88

Nationwide, the work readiness attainment rate was 75 percent. This is a 

good baseline that shows a high level of achievement but leaves room for 

growth, according to a Labor official. Among the 16 states, the work 

readiness attainment rates ranged from 22 percent in New Jersey to 91 

percent in Georgia (see table 8). 

 

88Department of Labor, Attachment B-Training and Employment Guidance Letter No. 17-05 

(Feb. 17, 2006). 

Page 73 GAO-10-437 Recovery Act
 

Table 8: Work Readiness Attainment Rate for Youth in Summer Employment in 

Selected States and Nationwide, as of November 30, 2009 

State Work readiness attainment rate

Arizona 87%

California 74%

Colorado 79%

Florida 87%

Georgia 91%

Illinois 80%

Iowa 79%

Massachusetts 85%

Michigan 68%

Mississippi 72%

New Jersey 22%

New York 83%

North Carolina 62%

Ohio 89%

Pennsylvania 72%

Texas 83%

Nationwide 75%

Source: Department of Labor. 

The Recovery Act mandates that we comment on the estimates of jobs 

created or retained as reported by recipients of Recovery Act funding. Our 

initial report on November 19, 200989 covered the first period of recipient 

reports including activity since the Recovery Act’s passage in February 

2009 through the quarter ending September 30, 2009. This section 

discusses our comments on the second round of recipient reports covering 

the period October 1, 2009, through December 31, 2009. 

The raw data from recipients of federal contracts, grants, and loans from 

the first round of recipient reporting contained many recipient mistakes. 

For the second submission of reports, because many first round recipients 

did not understand how to report correctly the number of jobs created or 

The Second Round of 

Recipient Reporting 

Showed That 

Improving Data 

Quality Is a Work in 

Progress 

 

89GAO-10-223. 

Page 74 GAO-10-437 Recovery Act
 

retained, OMB clarified its guidance and is working with federal agencies 

to improve the agencies’ reviews of recipient data for mistakes and other 

problems. In addition, for this second round of reporting, the Board 

developed technical and content changes to try to help improve the quality 

of recipient data and streamline the reporting process. 

On January 30, 2010, the Board published the results of the second round 

of recipient reporting on Recovery.gov. According to the Web site, 

recipients submitted over 160,000 reports indicating that the Recovery Act 

funded nearly 600,000 jobs during the quarter ending December 31, 2009. 

As reported by the Board, the job calculations are based on the number of 

hours worked in a quarter and funded under the Recovery Act. The data 

also solely reflect the direct hours worked and funded by the Recovery Act 

and reported by recipients of grants, contracts, and loans. 

While significant issues remain, the second round of recipient reporting 

appears to have gone more smoothly as recipients have become more 

familiar with the reporting system and requirements. OMB and the Board’s 

responsiveness to feedback and lessons learned during the first round led 

to new simplified jobs reporting guidance and system enhancements that 

we believe will ultimately improve data quality and reliability. This round 

of reporting represents somewhat of a transition as recipients worked to 

implement the new reporting guidance, but clearly progress was achieved 

in addressing some of the major data quality and reporting issues 

identified in the first round. As recipient reporting moves forward, we will 

continue to review the processes that federal agencies and recipients have 

in place to ensure the completeness and accuracy of data. 

Economic Methods and 

Recipient Reports 

Together Are Needed to 

Provide Insight into the 

Employment Effects of 

Fiscal Stimulus 

Tracing the effects of the Recovery Act through the economy is a 

complicated task. Prospectively, before the act’s passage or before funds 

are spent, the effects can only be projected using economic models that 

represent the behavior of governments, firms, and households. While 

funds are being spent, some effects can be observed but often relevant 

data on key relationships and indicators in the economy are available only 

with a lag, thereby complicating real-time assessments. When a full range 

of data on outcomes becomes available, economic analysts undertake 

retrospective analyses, where the findings are often used to guide future 

policy choices and to anticipate effects of similar future policies. Stimulus 

spending under the broad scope of the Recovery Act will reverberate at 

the national, regional, state, and local levels. Models of the national 

economy provide the most comprehensive view of policy effects, but they 

do not provide insight, except indirectly, about events at smaller 

Page 75 GAO-10-437 Recovery Act
 

geographical scales. The diversity and complexity of the components of 

the national economy are not fully captured by any set of existing 

economic models. Some perspective can be gained by contemporaneous 

close observation of the actions of governments, firms, and households, 

but a complete and accurate picture of the Recovery Act’s impact will 

emerge only slowly. The information reported by recipients can provide 

such insight into the use and impact of Recovery Act funds in local 

communities and regions. 

The recipient reports are not estimates of the effects of the Recovery Act, 

although they do provide a real-time window on the aftermath of Recovery 

Act spending. Recipients are expected to report accurately on their use of 

funds; recipients are not required to say what they would have done 

without the benefit of the program. Neither the recipients nor analysts can 

identify with certainty the impact of the Recovery Act because of the 

inability to compare the observed outcome with the unobserved, 

counterfactual scenario (in which the stimulus does not take place). At the 

level of the national economy, models can be used to simulate the 

counterfactual. At smaller scales, comparable models of economic 

behavior either do not exist or cover only a very small portion of all the 

activity in the macroeconomy. 

In interpreting recipient reporting data, it is important to recognize that 

the recipient reporting requirement covers a defined subset of the 

Recovery Act’s funding. The reporting requirements apply to nonfederal 

recipients of funding, including all entities receiving Recovery Act funds 

directly from the federal government, such as state and local governments, 

private companies, educational institutions, nonprofits, and other private 

organizations. OMB guidance, consistent with the statutory language in the 

Recovery Act, states that these reporting requirements apply to recipients 

who receive funding through the Recovery Act’s discretionary 

appropriations, not recipients receiving funds through entitlement 

programs, such as Medicaid, or tax provisions. Recipient reporting also 

does not apply to individuals. In addition, the required reports cover only 

direct jobs created or retained as a result of Recovery Act funding; they do 

not include the employment impact on materials suppliers (indirect jobs) 

or on the local community (induced jobs). Figure 14 shows the division of 

total Recovery Act funds and their potential employment effects. 

Page 76 GAO-10-437 Recovery Act
 

Figure 14: The Potential Employment Effects of Recovery Act Funds 

Source: GAO.

Total Recovery Act funds (in billions) Potential employment effects of Recovery Act funds

Contracts, grants,

and loans

$275

Entitlements

$224 Tax relief

$288

Recipient reporting

coverage

Tax relief

employment

 effect

Entitlements

employment

effect

Contracts, grants,

and loans

Induced

Indirect

Direct

Total $787

Note: The potential employment effects of the different types of Recovery Act funds are based on 

historical data and are reflected in the size of the circles. The amounts shown reflect the original cost 

estimate of the Recovery Act as reported on Recovery.gov. 

Recipients are to file reports for any quarter in which they receive 

Recovery Act funds directly from the federal government, and recipients 

are to submit reports no later than 10 days after the end of each calendar 

quarter in which they received Recovery Act funds. Each report is to 

include the total amount of Recovery Act funds received, the amount of 

funds expended or obligated to projects or activities, and a detailed list of 

those projects or activities. For each project or activity, the detailed list 

must include its name and a description of the project or activity, an 

evaluation of its completion status, and an estimate of the number of jobs 

created or the number of jobs retained by that project or activity. Certain 

additional information is also required for infrastructure investments made 

by state and local governments. 

Page 77 GAO-10-437 Recovery Act
 

In response to suggestions made by recipients, agencies, our 

recommendations, and others, on December 18, 2009, OMB issued a 

memorandum for the heads of executive departments and agencies 

updating its guidance on the Recovery Act, data quality, nonreporting 

recipients, and reporting of job estimates, among other important 

reporting requirements.90 The updated guidance standardized the period of 

measurement of jobs created or retained as one quarter and removed the 

requirement that recipients must sum various data on hours worked 

across multiple quarters of data when calculating jobs estimates. OMB 

now defines FTEs as the total number of hours worked and funded by 

Recovery Act dollars within the reporting quarter divided by the quarterly 

hours in a full-time schedule. The guidance also removed the need for 

recipients to make a judgment on whether jobs were created or retained 

because of the Recovery Act and made more explicit that jobs created or 

retained are to be reported as hours worked and paid for with Recovery 

Act funds. The guidance further clarified that jobs are to be counted only if 

a recipient will eventually be reimbursed with Recovery Act funding and 

specified that jobs will be counted based on the proportion of Recovery 

Act funding provided for the job. In addition, the guidance provided a 

series of practical examples of how the simplified formula for jobs 

calculation should be applied. 

Updated OMB Guidance 

and Board Procedures 

Changed Important 

Reporting Elements for 

Recipients 

The updated guidance also provided federal agencies with a list of 

minimum actions that they must conduct regarding data quality reviews 

including a review of significant errors in high priority data fields and 

material omissions. Material omissions include not reporting on a received 

award, or data in a report that is not responsive to a specific data element. 

Federal agencies will be required to evaluate continuously recipient and 

subrecipient efforts to meet recipient reporting requirements, as well as 

the requirements of OMB implementing guidance and any relevant federal 

program regulations. The guidance requires that federal agencies inform 

OMB of recipients who are noncompliant because they did not report on 

their uses of funds and FTEs created or retained. 

Additionally, the Board modified its procedures to (1) permit continual 

correction by recipients of data in FederalReporting.gov beginning 

February 2, 2010, as well as continuous review by federal agencies; (2) 

 

90OMB Memorandum, M-10-08, Updated Guidance on the American Recovery and 

Reinvestment Act – Data Quality, Non-Reporting Recipients, and Reporting of Job 

Estimates (Dec. 18, 2009). 

Page 78 GAO-10-437 Recovery Act
 

implement updating of Recovery.gov at biweekly intervals, beginning 

February 10, 2010; and (3) outline new internal logic checks preventing 

errors such as misidentification of recipient congressional districts and 

entry of expenditure data indicating recipients expended more funds than 

they received. 

In our previous review of the prior quarter’s prime recipient reports, we 

examined the relationship between recipient reports showing the presence 

or absence of any FTE counts with the presence or absence of funding 

amounts shown in either or both data fields for amount of Recovery Act 

funds received and amount of Recovery Act funds expended. While there 

were more reports, in terms of both percentage and count, for reporting 

FTEs, there were fewer reports showing FTEs but no funds either received 

or expended. Fifty-six percent of the prime recipient reports, as compared 

to 44 percent from the previous quarter, showed an FTE value. Previously, 

we identified 3,978 prime recipient reports where FTEs were reported but 

no dollar amount was reported in the data fields for amount of Recovery 

Act funds received and amount of Recovery Act funds expended. These 

records constituted 16 percent of all the reports showing FTEs and 

accounted for about 9 percent of the total FTEs reported at that time. As 

shown in table 9, for the most recent quarter, we identified 2,059 such 

reports, which accounted for 6 percent of all reports showing FTEs and 

about 1.4 percent of the total FTEs. Our follow up with a sample of cases 

found that while recipients made mistakes, some seemingly anomalous 

results were reasonable. For example, DOT funds highway and 

transportation programs on a reimbursement basis, so there is a time lag 

between the payment of workers by contractors and reimbursement by 

DOT made with Recovery Act dollars. We flagged four Mississippi 

transportation program recipient reports because the amounts expended 

in comparison to the FTEs seemed too high or too low. However, after we 

analyzed the data the Mississippi Department of Transportation used to 

calculate FTEs, we were able to verify that their calculations were correct. 

On the other hand, we flagged a round one Georgia Head Start recipient 

report because of the high number of FTEs reported. Officials did not 

know the number reported in round one was wrong until after they 

submitted the report. Although they believed the number seemed off, the 

officials reported submitting it based on the direction of an official 

representing the federal reporting hotline. The issue was not applicable to 

round two reporting, as Head Start had issued guidance after round one 

stating that recipients were not to include cost of living adjustments or 

quality improvement in the calculation of the jobs created or retained. 

Fewer Reports Show FTEs 

with No Funds Either Received 

or Expended 

Page 79 GAO-10-437 Recovery Act
 

In addition, OMB’s December guidance stated that recipients may decide 

to begin hiring new employees as soon they are notified of the amount of 

their Recovery Act award, but before Recovery Act dollars are received or 

expended. In such a situation, where non-Recovery-Act dollars that are 

paying the wages of the new employees are used as an advance on the 

Recovery Act dollars awarded, recipients can appropriately report these 

jobs as created or retained. 

Table 9: Fourth Quarter, 2009—Count of Prime Recipient Reports by Presence or 

Absence of FTEs and Recovery Act Funds Received or Expended 

Recovery Act funds Report with FTEs Reports without FTEs

Received or expended 

funds reporteda

35,045 

(94%) 

14,353

(50%)

No received or expended 

funds reported 

2,059 

(6%) 

14,370

(50%)

Total 37,104 

(100%) 

28,723

(100%)

Source: GAO analysis of prime recipient reports for 4th quarter, 2009 from Recovery.gov as of January 30, 2010. 

a

Prime recipient reports showing a nonzero dollar amount in either or both Recovery Act funds 

received or expended data fields. 

In our previous report, we noted that 10 recipient reports accounted for 

close to 30 percent of the FTEs reported. In this second round of recipient 

reports, we noted 10 reports accounting for 25 percent of the FTEs. Those 

10 reports described funding support for education-sector related 

positions. 

Previously, 71 percent of those prime recipient reports that showed no 

FTEs also showed no dollar amount in the data fields for amount of 

Recovery Act funds received and amount expended. As shown in table 9 

above, reports showing no FTEs are equally split between those reporting 

and not reporting funds received or expended. The total cumulative value 

of funds reported in the expenditure field for recipient reports showing no 

FTEs but having received or expended funds was $3.2 billion. The switch 

to reporting FTEs on a quarterly basis while continuing to report Recovery 

Act funding on a cumulative basis will mean that such comparisons will 

become less meaningful over time and, therefore, must be made with care. 

For example, projects that are completed during a reporting quarter may 

show few or no FTEs but significant Recovery Act funding due to the 

cumulative funding reporting and the delay in receiving funds in cases 

where funds are used to reimburse expenses already incurred. 

Page 80 GAO-10-437 Recovery Act
 

Several factors need to be taken into consideration when interpreting the 

FTE data from the recipient reports. First, in our November report, we 

noted that the concept of an FTE should allow for the aggregation of 

different types of jobs—part-time, full-time, or temporary—and should 

cover a standard period of performance. OMB’s updated guidance on the 

FTE calculation accomplished this. However, our review of second round 

reporting indicates that some recipients, particularly in the education area, 

did not follow the new calculation and do not expect to do so until the 

third round of reporting. We previously cautioned against aggregation of 

first round FTE data, and it holds for this round of reporting as well. 

Because not all recipients used the new calculation, we are not able to 

compare FTEs across projects or add the FTEs together. As recipients 

follow the updated guidance on calculating FTEs, this may be possible. 

Even if all recipients had reported data consistent with the updated OMB 

guidance, however, there are important implications to consider when 

using an FTE number to analyze projects funded under the Recovery Act. 

For example, firms may choose to increase the hours of existing 

employees, which can certainly be said to increase employment but not 

necessarily be an additional job in the sense of adding a person to the 

payroll. FTE counts can also vary across projects that might otherwise 

look similar and therefore should be considered in the context of a 

specific project through its completion. In some cases, Recovery Act funds 

were used to fund capital investment for a project, not to fund direct 

hours. As part of its data quality checks, for example, FHWA asked 

recipients to explain the relationship between FTEs to the funds expended 

field relative to how large or small the relationship is compared to 

expected values. In many cases, the recipient noted that they used funds to 

initiate a project, which could include purchasing items such as material 

and moving equipment. 

Interpretation of the FTE Data 

Improved Data Quality Is a 

Work in Progress 

We performed an initial, limited set of edit checks and basic analyses on 

the first quarter recipient report data that were posted and available for 

download from Recovery.gov on October 30, 2009. Based on that review 

work, we identified recipient report records that showed certain data 

values or patterns in the data that were either erroneous or suggested that 

some further review could be merited due to an unexpected or atypical 

data value or relationship between data values. As a means of assessing 

the extent to which instances of those data values or patterns continued to 

recur, we performed these analyses again as well as some new analyses on 

the second round of quarterly recipient reports covering the period 

October 1, 2009, through December 31, 2009 (the fourth calendar quarter 

of 2009), which we downloaded from Recovery.gov on January 30, 2010. 

Page 81 GAO-10-437 Recovery Act
 

For the most part, the number of records identified by our edit checks was 

relatively small compared to the 65,827 prime recipient report records 

downloaded from Recovery.gov. This number represents 8,841 more 

recipient reports than the previous quarter and represents about a 16 

percent increase. About a third of this increase consists of reports 

covering highway projects. Large increases were also seen in reports from 

the Army Corps of Engineers and the Department of Energy. Reports from 

recipients of funding from Health and Human Services programs also 

showed a large increase. 

While we noted a reduction in certain types of errors, inconsistencies, or 

atypical patterns, others have persisted into the second quarter of reports. 

The occurrence of such errors or inconsistencies is indicative of 

inaccurate or incomplete data and raises concerns about the quality of 

information in other data fields that cannot be readily detected through 

various automated checks of the data. 

In our analyses of the data fields showing Recovery Act funds, we 

previously identified 132 recipient reports where the award amount was 

zero or less than $10, which suggests data entry errors or other mistakes. 

For this second round of quarterly reports, there were just 31 such reports. 

Previously, we identified 133 records where the amount reported as 

received exceeded the reported award amount by more than $10. There 

were no such reports in the second round. It appears that edit checks are, 

for the most part, successfully addressing these issues. 

In our review of the first round of recipient reports, we noted that while 

the data fields for Treasury Account Symbol (TAS) codes and Catalog of 

Federal Domestic Assistance (CFDA) numbers showed no invalid values 

on recipient reports, the values on some reports were not congruent with 

their associated agency name fields and either the agency name or the 

code were likely to be erroneous.91 Both TAS and CFDA values are linked 

to specific agencies and their programs. In the first round of quarterly 

reports, we identified 454 reports as having a mismatch on the CFDA 

 

91The TAS codes identify the Recovery Act funding program source. The two left most 

characters of each TAS code form a data element, which is identical with the two-digit 

numerical code used in the federal budgetary process to identify major federal 

organizations. The CFDA is a governmentwide compendium of federal programs, projects, 

services, and activities that provide assistance or benefits. It contains assistance programs 

administered by departments. Each program is assigned a unique number where the first 

two digits represent the funding agency. 

Page 82 GAO-10-437 Recovery Act
 

number, that is the CFDA number shown on the report did not match the 

CFDA number associated with either the funding or awarding agency 

shown on the report. On TAS codes, we identified 595 reports where there 

was no TAS match including 76 instances where GAO was erroneously 

identified as either the funding or awarding agency. Our repeat of this 

analysis on the second round of quarterly reports showed a reduction in 

but not an elimination of the number of reports where a mismatch 

between the codes occurred. We identified 232 reports as having a 

mismatch on the CFDA number and 157 reports where there was no TAS 

match. In our TAS match, we found no instances where GAO was 

erroneously identified. Although the frequency of misalignment of TAS 

and CFDA values with their appropriate agency names has been reduced, 

this small set of reports where it continues calls into question the 

timeliness or efficacy of any edit checks that were implemented to address 

this issue. 

To assess the congruence between the summary values of selected data 

fields reported on Recovery.gov and the sums derived from those same 

data fields using the downloaded reports, we calculated the overall sum 

and sum by states for number of FTEs reported, award amount, and 

amount received. We found that the FTE values matched the total reported 

on Recovery.gov. The award amount and amount received data fields 

corresponded closely with the values shown for the summary data shown 

on Recovery.gov if the values in these data fields for all reports that appear 

in either or both rounds of quarterly reports are added together. However, 

there is some basis for concern that the values being aggregated in this 

way may include some double counting. 

The Board has noted that despite improvements in this round, they are 

experiencing difficulties cross-referencing reports from the first and 

second submission of reports because of inconsistencies in the way 

recipients entered award identifiers. For example, in some cases 

recipients used hyphens in their award key in round one but not in the 

second round. Based on a match we performed between first and second 

round reports on the basis of an award key data field,92 we identified a 

subset of reports that appeared in the first round of quarterly reports but 

 

92An award key is a derived field that identifies an award. This field is derived using a 

distinct combination of the following component fields: Award_type, Prime_DUNS, 

Award_id and Order_number. Board representatives indicated that while the same 

award_key value for a specific project could be assigned from one quarter to the next, it 

could not be presumed that this would always be the case. 

Page 83 GAO-10-437 Recovery Act
 

not in the second round, a subset of reports that appeared in the second 

round for the first time, and a subset of reports that appeared in both 

rounds. When we further analyzed the 13,506 reports that only appeared in 

the first round but not the second round, we found that 85 percent of them 

did not have the final report data field marked as showing that this first 

round report was to be the final report and that there would be no further 

quarterly reports.93 Sixty-eight percent indicated in the project status field 

that the project was either “Not Started” or “Less Than 50% Completed.” 

Forty-eight percent showed the date of award as being in the last half of 

the 2009 calendar year. In OMB’s comments, the Controller noted that 

OMB conducted a line-by-line review of the 13,506 reports that had been 

identified from round one that did not appear to have a matching report in 

round two. According to the Controller, preliminary indications are that 

“approximately 93 percent of the 13,000 reports were filed in the second 

round of reporting but, due to a technical issue, were not “matched” with 

the corresponding prior-quarter report ...” Overall, OMB believes that the 

actual number of unmatched reports is fewer than 100 that should have 

had a corresponding report from the most recent reporting quarter but did 

not. 

In addition, we note that 5,422 of the 22,337 reports (24 percent) that 

appeared for the first time in the second round of recipient reports, 

showed an award date as occurring in the first half of the 2009 calendar 

year. It seems unlikely that, for at least some of these 5,422 reports, there 

would not have been first round quarterly reports submitted given the 

early award date. 

To the extent that these first-round-only reports and second-round-only 

reports comprised records that should have been linked, summing the 

dollar amounts in the way noted above to obtain the overall totals will 

result in some double counting of the amounts reported. For example, for 

a first-round-only report and a second-round-only report that should have 

been linked but was not, the amount received value submitted in the first 

round, assuming it was a value greater than zero, will also constitute part 

of the cumulative amount received value shown in the unlinked secondround-only report. However, since each report was treated as a separate 

project, both amount received values were included in calculating the 

overall total with the amount reported for the first round being counted 

 

93The final report key shows the status as a final report. It indicates that this is the final 

report and there will be no further quarterly reports. 

Page 84 GAO-10-437 Recovery Act
 

twice. Moreover, it appears that the downloadable records do not provide 

a way to track some projects’ recipient reports from one quarter to the 

next. 

As part of our review of the second round of quarterly reports, we 

examined further the apparent consistency or coherence between the final 

report data field and other report data fields for all second round reports. 

For those reports indicating that they were final reports, we looked at the 

project status data field and whether the dollar amount shown for 

Recovery Act funds received or Recovery Act funds expended was close to 

the award amount. A total of 5,184 prime recipient reports, roughly 8 

percent of all prime recipient reports, indicated that the current report 

was to be the final report. Although almost all of those reports showed a 

“Completed” project status, there were 279 reports where project status 

was either “Not Started” or “Less Than 50% Completed.” For all recipient 

reports marked as final, we also conducted an analysis to identify those 

reports where the amount reported for both Recovery Act funds received 

or expended was less than 75 percent of the award amount or exceeded 

the award amount by 10 percent or more. We did not find any reports 

where both the amount shown as received or expended exceeded the 

award amount by 10 percent or more. We identified 453 reports, about 9 

percent of reports marked as final, where neither the value for amount 

received or expended was within 75 percent of the award amount. The 

project status for these 453 final reports showing less than 75 percent of 

funds received or expended is shown in table 10. 

Table 10: Project Status of Fourth Quarter, 2009 Prime Recipient Reports Marked As 

Final Report with Less Than 75 Percent of Funds Received or Expended 

Project status Number of reports Percentage

Not started 90 20

Less than 50 percent completed 98 22

More than 50 percent completed 87 19

Completed 178 39

Total 453 100

Source: GAO analysis of prime recipient reports for fourth quarter 2009 from Recovery.gov as of January 30, 2010. 

The apparent incongruence between the reported project status and 

funding may warrant further examination or follow up with these reports 

if the designation of final report status is determined not to be in error and 

no further reports will be made. Identifying the reasons for the occurrence 

of recipient reports with the particular characteristics just described could 

Page 85 GAO-10-437 Recovery Act
 

help ensure that reports marked as final are complete and account fully 

for the expenditure of funds. 

A potential problem area we identified previously was the inconsistent 

provision of data on the number and total amount of small subawards of 

less than $25,000. There are data fields that collect information on small 

subawards, small subawards to individuals, and small subawards to 

vendors. We previously noted that there were 380 prime recipient report 

records where we observed the same values being reported in both small 

subawards and small subawards to individuals, and we established that 

there were many more records where these values were being reported 

separately. For this second round of quarterly reports, we found 485 

reports showing this pattern of the same values being reported in both 

data fields. Similarly, we noted 152 reports in the previous quarter’s 

reports where, in either the subawards or subawards to individuals data 

fields, the value for the number of subawards and the total dollar value of 

subawards were exactly the same and, as such, most likely erroneous. In 

this second round of reports, there were 141 such records. These reports 

are not likely to be conveying accurate information on the amount and 

dispersion of subawards. 

Overall, while most recipient report records were not identified as 

potential problems in our second round of edit checks and analyses, and 

some areas of concern and error appear to have been addressed, our 

results continue to indicate a need for further data quality efforts. Further 

improvements in those areas of concern we are able to identify could 

potentially yield a broader sense of assurance about the quality of 

information reported in data fields or relationships not as amenable to the 

type of edit checks and analyses we are able to perform. According to 

OMB’s Controller, OMB recently transmitted a data file to the Board that 

reflects the analysis of the OMB-led review and is working with the Board 

to appropriately link reports and to make additional data corrections. We 

will request further information from OMB about this data file to 

understand how OMB and the Board are using it to address the report 

issues that we identified. 

State Officials Reported 

That OMB’s Updated 

Guidance Improved the 

Round Two Recipient 

Reporting Process 

In response to concerns raised by recipients including states and localities, 

issues identified by GAO, and lessons learned from the first round of 

reporting, OMB issued revised guidance on December 18, 2009 for 

calculating FTEs and estimating jobs created or retained. OMB’s 

responsiveness to incorporate feedback and issue new guidance a month 

after we issued our recommendations represents progress in moving 

Page 86 GAO-10-437 Recovery Act
 

toward more transparency and accountability for federal funds. However, 

with the compressed time frame, demands of the quarterly reporting 

schedule, and the national scale of the recipient reporting exercise, some 

state officials reported that the issuance of guidance approximately two 

weeks before recipients were to begin reporting presented challenges for 

them. For example, several Texas state agencies acknowledged that 

OMB’s FTE calculation simplified the methodology for determining the 

jobs created or retained data element. A number of them commented, 

however, that receiving the updated guidance late in December strained 

their resources. Education state officials reported that the timing of the 

guidance was particularly challenging for them because its release 

coincided with the closing of schools and universities for the winter break. 

As a result, the calculation and reporting of FTE varied in the education 

area across and even within some states. These issues are discussed in 

detail later in this section. 

In the updated guidance, OMB advised recipients that they should 

implement the updated methodology to the greatest extent possible for the 

January reporting period. OMB alerted state representatives in 

teleconferences in November and early December that new guidance was 

forthcoming. State agencies’ responses to the release of the updated 

guidance included actions such as disseminating their own updated 

guidance, hosting trainings, and participating in Webinars to address the 

challenges with the transition to the new guidance. Even with the outreach 

efforts by state agencies, some recipients, however, did not use the 

updated OMB guidance for the second reporting round. Other recipients 

were planning to use the continuous editing process to bring their reports 

into compliance. 

OMB’s guidance is essential to recipients’ understanding of the reporting 

requirements, which correlates directly with the quality of the data 

reported by states. State officials in many of our selected jurisdictions 

noted that the second round of recipient reporting was easier because of 

OMB’s updated guidance on the FTE calculation or their familiarity with 

the reporting process. Under the old guidance, recipients reported being 

confused about counting a job created or retained even though they knew 

the number of hours that were paid for with Recovery Act funds. For 

example, officials in the Pennsylvania State Office of Accountability 

reported that during a national conference call of state reporting leads in 

December, many participants expressed their concern that neither federal 

agencies nor recipients of Recovery Act funds truly understood how the 

previous guidance worked and that the new instructions on job reporting 

were much easier to follow. Pennsylvania’s Accountability Office noted 

Page 87 GAO-10-437 Recovery Act
 

that the changes in the guidance significantly reduced the number of pages 

of instructions for subrecipients and vendors. As another example, 

officials from the Ohio Office of Budget and Management said that the 

second round of reporting was a smoother process, recipients 

collaborated with their office, and they were more accustomed to the 

process. Likewise, Illinois state officials in the Department of Commerce 

and Economic Opportunity stated the determination of the denominator in 

the FTE calculation was much easier in the second round because it was 

less subjective and less time was needed to do the reporting due to prior 

experience. 

Although State Officials 

Reported Improvements in 

the Reporting Process, 

Some New Technical 

Glitches Surfaced 

New edit checks were introduced for the second submission of recipient 

reports to prevent recipients from making certain errors, particularly those 

that received public attention in the first submission of reports. Table 11 

shows the complete list of edits. On December 23, 2009, the Board 

conducted a Webcast to educate recipients about reporting system 

changes for the second submission of recipient reports. The data entry 

system for recipients issued “soft error” messages to flag questionable data 

and allowed recipients to move forward with their answers or correct the 

fields before they submitted their record. The system issued “hard error” 

messages when the recipient entered certain inconsistent data, such as a 

ZIP code that conflicted with the congressional district entered for a 

project, or if the funds expended exceeded the funds awarded. Recipients 

would have to correct these fields before the system would accept their 

submissions. 

Page 88 GAO-10-437 Recovery Act
 

Table 11: FederalReporting.gov Edit Checks for January 2010 Recipient Reporting 

Hard edit checks—entries not allowed • Total Recovery Act Funds Received/Invoiced cannot be more than the Amount of 

Award. 

• If Project Status is “Fully Completed,” Total Recovery Act Expenditures cannot be 

more than the Amount of Award or Total Recovery Act Funds Received/Invoiced. 

• If Project Status is “Fully Completed,” Total Recovery Act Infrastructure 

Expenditures cannot be more than Amount of Award, Total Recovery Act Funds 

Received/Invoiced, or Total Recovery Act Expenditures. 

• Congressional District must match ZIP code+4. A valid congressional district must 

be entered. 

• ZIP code must match State. 

• Sub Award Amount must be greater than or equal to Sub Award Disbursed. 

Soft edit checks—provides alert only • Amount of Award and Total Recovery Act Funds Received/Invoiced is $500,000 or 

more, but Number of Jobs created is less than 1. 

• Project Status is “Fully Completed,” Total Recovery Act Funds Received/Invoiced, 

Total Recovery Act Expenditures, and Amount of Award equal, and Number of 

Jobs equals zero (0). 

• If Number of Jobs is greater than zero (0), then the Number of Jobs cannot equal 

Amount of Award, Total Recovery Act Funds Received/Invoiced, Total Recovery 

Act Expenditures, or Total Recovery Act Infrastructure Expenditures. 

• Project Status cannot have a “Fully Completed” status where Total Recovery Act 

Funds Received/Invoiced equals zero (0). 

• Project Status cannot have a “Fully Completed” status where Total Recovery Act 

Expenditures equals zero (0) and Date of Award is greater than 30 days from the 

date of final submission. 

• Number of Jobs multiplied by $15,600 cannot exceed Amount of Award. 

• Amount received equals zero (0), jobs created/saved is more than 50. 

• Total Recovery Act Expenditures cannot be more than the Amount of Award or 

Total Recovery Act Funds Received/Invoiced. 

• Total Recovery Act Infrastructure Expenditures cannot be more than Amount of 

Award, Total Federal Amount ARRA Funds Received/Invoiced, or Total Federal 

Amount of ARRA Expenditures. 

Source: Recovery Accountability and Transparency Board. 

A number of recipients reported difficulties with hard errors related to 

congressional districts and ZIP codes. According to the Board, 

FederalReporting.gov was programmed using the U.S. Postal Service’s 

(USPS) database of ZIP codes and congressional districts. This database 

was chosen in part because it is used by Congress for constituent mailings. 

According to the Board, the USPS acknowledged that some districts’ ZIP 

codes matches to the correct congressional district were still being 

corrected and resolved. Recipients who failed the congressional district 

edit check were using a variety of source data, not the USPS data which 

were provided on FederalReporting.gov and through the error messages, 

which specified both the recipient record and the congressional district 

Page 89 GAO-10-437 Recovery Act
 

(or range of districts) that corresponded to the ZIP code provided. To help 

ensure accountability, FederalReporting.gov confirms each recipient’s 

business identification through a Dun & Bradstreet DUNS number and 

Central Contractor Registration (CCR).94 According to the Board, many 

recipients found that they had errors in the ZIP codes in their CCR 

registration. When recipients tried to enter their congressional districts, if 

they did not match the ZIP codes they had entered in CCR, they failed this 

edit check. Officials in Massachusetts reported that they received 

information from federal agencies, which led them to change some award 

numbers and DUNS numbers before submission, preventing error flags 

later on. According to these officials, the Department of Health and 

Human Services and the Department of Energy listed business 

identification information for each grant on their Web sites, a practice they 

would like to see other federal agencies adopt. 

Only recipients could edit their data submissions. However, federal 

agencies could attach correction flags when they were reviewing 

individual recipient reports. We interviewed a number of recipients whose 

first round data were incorrect. Some of these recipients did not report 

having a correction flag or any notification from their agency that they 

needed to review their data. One Head Start agency, with a recipient 

report that contained a high number of FTEs because of a misplaced 

decimal, posted a notice on its Web site but was told there was no way to 

correct the information posted in its recipient report. With the new 

features on FederalReporting.gov, recipients will be able to update their 

data for six weeks after the end of the reporting period. 

Department of Education 

Recipients Illustrate the 

Successes and Challenges 

of the Second Reporting 

Period 

A number of state and local education officials we interviewed said that, 

with the exception of the timing of the release of the guidance, the 

recipient reporting process had been smoother during the second 

reporting period and that the new jobs guidance will ultimately simplify 

FTE calculations. Specifically, several state and local education officials 

said that data collection from subrecipients had been much easier in the 

second round of reporting. For example, an Iowa state official told us that 

during the first round of reporting the volume of calls for assistance from 

LEAs had been very high, but he had received far fewer calls during the 

 

94A DUNS number is a unique nine-digit sequence recognized as the universal standard for 

identifying and keeping track of 100 million businesses worldwide. The Central Contractor 

Registration (CCR) system is a secure, single repository of vendor data used 

governmentwide. 

Page 90 GAO-10-437 Recovery Act
 

second round. Regarding the new jobs calculation methodology, a number 

of state officials said that the new methodology, which directs recipients 

to calculate FTEs based on the hours worked and funded by the Recovery 

Act, is clearer than the previous formula.95 The new calculation does not 

require the subrecipient to make a subjective judgment about whether a 

job would have existed in the absence of Recovery Act funds, and a local 

official described the new methodology as more objective. These results 

are encouraging, because funding for education is a significant share of 

the Recovery Act with three programs—the State Fiscal Stabilization 

Fund, Title I, and IDEA—receiving nearly $80 billion in new funding under 

the act and because approximately two thirds of the jobs reported by 

recipients during both reporting periods have been attributed to education 

funds, including funds for government services included in the State Fiscal 

Stabilization Fund administered by the Department of Education. 

While a number of education officials said the new guidance simplified the 

jobs calculations, they also said that the release of the guidance on 

December 18, 2009, was problematic, particularly because the release 

coincided with the closing of schools and universities for the holiday 

break. Specifically, the timing made it harder for state officials to 

communicate new expectations to districts and limited the amount of time 

available to gather revised data from LEAs and IHEs. Officials in several 

states told us that data collection from LEAs was already well under way 

when the new guidance was issued. For example, Pennsylvania allowed 

certain subrecipients that were scheduled to be closed during the holidays 

to submit reports by December 17, 2009, and then recertify the reports 

after the holidays if anything changed. This deadline was one day before 

OMB released the new guidance, and, therefore, Pennsylvania had to go 

back to certain subrecipients to ask for new information to follow the 

revised job guidance. Similarly, state officials in Iowa told us that by 

December 18, 2009, over 90 percent of the Education subrecipient reports 

in their state had already been submitted to the state and verified by 

program staff. When schools reopened on January 4, 2010, state officials 

sent an e-mail to all subrecipients explaining the new requirements and 

asking them to resubmit corrected data by January 8. Overall, state 

education officials in 9 of our 17 jurisdictions told us they had required 

 

95Last quarter LEAs were generally required to calculate a baseline number of hours 

worked, which was a hypothetical number of hours that would have been worked in the 

absence of Recovery Act funds. LEA officials were to use this baseline number to 

determine the number of hours created or retained and to subsequently derive the number 

of FTEs for job estimates. 

Page 91 GAO-10-437 Recovery Act
 

LEAs to submit their data in December. In some of these states, officials 

asked LEA officials to resubmit new data to follow the newly released 

guidance. 

In addition to having to resubmit reports, the fact that a number of states 

required districts to submit data prior to the close of the reporting period 

could affect data or the comparability of data across states. Some, such as 

Iowa and New Jersey,96 asked LEAs to project figures through the end of 

the quarter. In contrast, officials in Massachusetts and the District of 

Columbia told subrecipients to report data from the start of the quarter 

until submission to the state or District (December 24 in Massachusetts 

and December 14 in the District), to retain information on the intervening 

period (between the cut-off date and December 31, 2009), and to include 

data on this period in the third round of recipient reports. Officials in 

California instructed LEAs that if good estimates were available for funds 

expended or obligated through the end of their reporting period, they 

should use them. However, if they did not estimate, but cut off at the end 

of the previous month, they should do so for both jobs created or retained 

and funds expended or obligated. Education officials in Georgia told us 

that they anticipate setting an early cut-off date for the round three reports 

since the deadline coincides with spring break and the Easter holiday, and 

officials in Massachusetts said they hope to have the reporting deadline in 

Massachusetts be the last Friday of the month, at the end of the reporting 

cycle. 

Although they faced challenges, several states were able to obtain jobs 

data and report it following the updated OMB guidance. During a joint 

conference call on January 11, 2010, OMB and Education officials said 

prime recipients could use the corrections period in January to clarify and 

refine numbers in light of the timing of the guidance. Specifically, in 

Florida, Georgia, Iowa, Michigan, North Carolina, and Pennsylvania, the 

prime recipients told LEAs to submit information based on the updated 

OMB guidance or to resubmit such data if LEAs had already submitted 

data using the old guidance. Further, officials in Massachusetts97 and the 

 

96New Jersey officials told us they plan to submit finalized figures during the continual 

correction period. 

97Massachusetts’ reported data also reflect the updated guidance shift to the quarterly 

reporting of jobs data even though the LEAs had reported cumulative data on FTEs funded 

by the Recovery Act. The Massachusetts Department of Education subtracted out FTEs 

reported in the first quarter to compute a quarterly figure. 

Page 92 GAO-10-437 Recovery Act
 

District of Columbia told us they had been able to report following OMB’s 

December 18 guidance using the information they had already collected 

from LEAs. Illinois officials told us they had incorporated corrections for 

some, but not all of Illinois’ LEAs in January, and therefore submitted 

Education-related recipient reports that included FTE counts generated 

using both the new and old guidance. Specifically, Illinois asked the six 

districts with the largest Recovery Act allocations in the state to 

recalculate jobs data based on OMB’s guidance in January and included 

these revised figures in the state’s Education recipient report. 

Other states did not use OMB’s updated guidance, but instead reported 

following the old guidance for at least some of their education program 

recipient reports. Officials in three of these states—Arizona,98 California, 

and New Jersey—said they planned to have LEAs submit updated figures 

during the continual corrections period in February or March. However, 

officials in two other states—Colorado99 and New York—said they did not 

plan on updating the numbers to reflect the new guidance, but plan on 

implementing the new guidance during the next reporting cycle. Officials 

in Arizona and Colorado told us they had followed the updated guidance 

for State Fiscal Stabilization Fund recipient reports. 

Despite the updated guidance, some state and local officials still have 

questions about how to calculate FTEs. A number of state and local 

officials, including officials from the Pennsylvania Department of 

Education, told us that they were unsure about how to calculate FTEs for 

teachers during the quarters spanning the summer months and that 

additional guidance would be useful. OMB’s updated guidance allows 

districts to define the number of hours in a full-time schedule for a 

particular position (the number of hours in the denominator) to account 

for differences in work schedules, but does not offer an example of how to 

 

98Officials at the Arizona Department of Education told us they did not follow OMB’s 

December 18 guidance for the IDEA Part B and ESEA, Title I recipient reports, but planned 

to ask LEAs to submit corrections during February or March. Officials at the Governor’s 

Office of Economic Recovery in Arizona, the prime recipient for SFSF, told us they had 

followed the December 18 guidance for SFSF recipient reports. 

99Colorado Department of Education officials determined, due to the lateness of the 

December 18 guidance, it was not possible to perform another statewide collection of FTE 

data prior to the submission deadlines. Department officials said they are following the 

December guidance for the third reporting round and believe the new guidance will 

increase the consistency of state data. Colorado is directing its SFSF funds to institutions 

of higher education and not LEAs. The SFSF recipient reports were prepared using OMB’s 

December 18th guidance. 

Page 93 GAO-10-437 Recovery Act
 

adjust this denominator in quarters when school is not in session or 

provide guidance as to how to apply the numerator, “hours worked and 

paid for with Recovery Act funds,” to an education context. While teachers 

typically work 10 months out of the year, in some districts they are paid 

year round and are considered full-time employees. Local officials we 

spoke to varied in whether they expected to report FTEs for teachers 

during the summer months. For example, one official told us he was 

concerned that if he reported actual hours worked for teachers during the 

summer months he would not show any FTEs, even though there would be 

salary expenditures. In contrast, local officials in another district indicated 

that they would report FTEs during the summer months for teachers 

because teachers are paid 12 months out of the year. 

State education officials reported implementing a number of strategies to 

improve the reliability of data and to validate jobs or expenditure data 

submitted by LEAs. For instance, Arizona, Georgia, Iowa, North Carolina 

and New Jersey indicated that they pre-populated a number of fields for 

LEAs, such as by inserting DUNS numbers or the amount of the grant 

award, which reduced the fields LEAs must complete. In addition, officials 

from Arizona, Iowa, and Georgia said that they compared data with 

information in their financial and budget planning systems. Iowa, 

Michigan, and New York state officials also said they compare an LEA’s 

reported FTE calculation to the approved budget or application for that 

district to see if the reported figure is reasonable. Officials from Florida 

and Georgia said that they review reported numbers for anomalies, such as 

FTE numbers greater than zero with no related expenditures or 

expenditures greater than zero with no related FTEs. Finally, many 

officials told us they check the data for basic reasonableness. 

State education officials told us they had taken steps to try to ensure the 

completeness of their required recipient reports. For instance, officials in 

Pennsylvania said they had compared reports of recipients that had 

reported to the list of LEAs in the state who were required to report and 

followed up with districts that had not submitted reports. Officials in the 

District of Columbia told us that their data collection method creates an 

added incentive for LEAs to report—the data collection tool for the 

recipient reports is part of the LEA’s process to request reimbursement. In 

contrast, an Iowa official reported that at least seven subrecipients had not 

reported data for this reporting period, and as a result, the official had 

entered zeros for these districts for jobs and expenditures. When we 

followed up with the districts, two districts told us they thought they had 

submitted the required information, three said they had submitted initial 

reports during December but had missed the request for updated data in 

Page 94 GAO-10-437 Recovery Act
 

January, and two districts, under the same superintendent, had not 

reported because the superintendent had difficulty accessing the system. 

Of these seven districts, two had not yet spent any funds. We followed up 

with the Iowa official and he said that he did not know why a report would 

not have been recorded if it had been submitted, that even districts that 

had not spent funds were required to submit reports, and that he did not 

plan to submit corrections on the data. 

To improve the consistency of FTE data collected and reported, we 

recommend that the Secretary of the Department of Education 

(Education) and the Director of the Office of Management and Budget 

(OMB) provide clarifying guidance to recipients on how to best calculate 

FTEs for education employees during quarters when school is not in 

session. 

Recommendation for Executive 

Action 

OMB’s Updated Guidance 

Emphasizes Federal Data 

Quality Checks on 

Recipient Reports 

Recipient reporting data quality is integral as part of the effort to bring 

transparency and accountability to the Recovery Act funds. While 

recipients we contacted during the first round of recipient reporting 

appeared to have made good faith efforts to ensure complete and accurate 

reporting, our fieldwork and analysis of first round data indicated that 

there were a range of significant reporting and quality issues that needed 

to be addressed. Collecting information from such a large and varied 

number of entities in a compressed time frame, as required by the 

Recovery Act will continue to be a huge task, and developing systems to 

check the data submitted under these circumstances takes on increased 

importance. 

OMB’s updated December 2009 guidance outlined steps to address the 

issue of federal agency data quality checks on recipient reported data. The 

guidance lays out ways in which agencies can help recipients report better 

data. OMB reinforces that agencies, at a minimum, are to establish data 

quality plans that articulate their review process to focus on significant 

reporting errors and material omissions and ensure complete, accurate, 

and timely reporting of all amounts funded by the Recovery Act. In 

addition, agencies are now advised to provide recipients with key award 

information, such as recipient name and award amount. The agencies also 

are instructed to have recipients examine their reports for logical 

inconsistencies, such as if a recipient indicates that the project is fully 

completed but the funds received are minimal compared to the award 

amount. 

Page 95 GAO-10-437 Recovery Act
 

Federal agencies’ recipient reporting data quality review efforts continue 

to develop. In particular, from the federal agencies we reviewed, various 

processes were in place for outreach, identifying nonreporters, monitoring 

compliance, and identifying errors in reporting. The prime recipient report 

records include data on whether or not the federal agency reviewed the 

record during the data quality review time frames. In addition, the report 

includes a flag as to whether or not a correction was initiated. A 

correction could be initiated by either the prime recipient or the reviewing 

agency. In our review of the prior quarter reports, we examined the 

number and percentage of prime recipient records that were marked as 

having been reviewed by the federal agency. We repeated that analysis for 

the most current quarter—table 12 below shows the results. 

Table 12: Fourth Quarter 2009 Prime Recipient Reports Reviews and Corrections 

Reviewed 

by agency Correction Percentage 

Number of prime 

recipient reports

No No 23 15,178

No Yes 11 7,464

Yes No 54 35,269

Yes Yes 12 7,916

Total 100 65,827

Source: GAO analysis of prime recipient reports for fourth quarter 2009 from Recovery.gov as of January 30, 2010. 

Relative to the prior quarter, both the percent and number of prime 

reports marked as reviewed by agency were lower in the 2009 fourth 

quarter. In the prior quarter, 80 percent (45,825 records) of the prime 

recipient reports were marked as having been reviewed by the agency. As 

shown above in table 12, 66 percent (43,185 records) of the prime recipient 

reports were marked. 

Education’s efforts to facilitate jobs reporting and data quality include 

coordinating with OMB, hosting conference calls, monitoring recipients, 

and conducting data quality reviews. Education provided guidance and 

technical assistance to states. As part of its guidance and technical 

assistance efforts, Education hosted three conference calls before and 

after the updated guidance was released to address reporting changes. 

Department of Education 

Education developed a quality review plan that included processes for 

identifying errors through various cross-checking mechanisms. According 

to Education officials, one example of such a mechanism is a series of 

comparisons of second round data to data reported in the first quarter by 

Page 96 GAO-10-437 Recovery Act
 

using data elements such as number of jobs and job descriptions. 

Similarly, Education compares various data elements in recipient reports, 

such as award number and CFDA numbers, with information in its grant 

management system to identify incorrect data elements that could make it 

appear that a recipient had not submitted a report. Before the federal 

agency review period began, officials ran daily reports and compared 

these reports to first quarter reports to check data, such as project status. 

According to a program official, these reports were invaluable to the 

program offices because they made it easier for them to assist state 

officials in fixing errors before the actual corrections period. 

To aid in identifying nonreporters, Education has implemented, through a 

monitoring questionnaire sent to state officials for Title I and SFSF, 

compliance measures, which in some circumstances also allow Education 

officials to identify errors before the reporting deadline. For example, 

Education officials we interviewed noted a situation in Illinois where LEA 

reporting was lower than they expected. Illinois officials also told us that 

they had observed that the number of LEAs shown in the system was too 

low, that this error was due to an incomplete upload of their report, and 

that they had subsequently resubmitted the report. Finally, officials told us 

that the department plans to do a reasonableness check on subrecipient 

reports from the second quarter across programs. As part of this check, 

officials will observe whether the number of reports for each grant appear 

to be consistent with the number of LEAs they expect to see and will 

contact state officials to discuss inconsistencies that arise. 

Education officials said that the recipient reporting process has improved 

their knowledge of states’ cash management practices and that this 

information will help them to monitor states and offer them targeted 

technical assistance. For example, a department official told us that as a 

result of the Recovery Act, program officials have learned in more detail 

how funds flow from SEAs to LEAs in each state, and that this information 

has been very important in helping program staff interpret the expenditure 

numbers they see on the recipient reports in their monitoring efforts. For 

instance, a state’s reported expenditures might appear low because the 

state operates on a quarterly reimbursement basis and districts have been 

spending their own funds expecting reimbursement—without the 

knowledge of the state’s cash management practices such numbers could 

be misinterpreted. This official told us that her specific program office will 

use this information to train program office staff in how to use this 

information in their monitoring efforts. The official added that the 

financial management information they have learned through the recipient 

reporting process adds another layer to the information gathered through 

Page 97 GAO-10-437 Recovery Act
 

broader, systems-based questions they have asked during IDEA 

monitoring visits over the last 5 years. Further, she believes that this more 

nuanced understanding of how state finances work will help department 

officials provide more tailored technical assistance to states. 

In response to OMB’s guidance, HUD has engaged in efforts to facilitate 

timely and accurate jobs reporting. HUD’s efforts included outreach to 

recipients, developing processes for error detection, and identifying 

nonreporters. According to officials, HUD contacted recipients by e-mail 

with reminders to report and provided key information that should be 

included in certain data fields. In addition, HUD provided technical 

assistance to walk unfamiliar recipients through the reporting process. 

Department of Housing and 

Urban Development 

HUD also developed data quality review processes with cross-checking 

mechanisms to detect errors. For example, the Recovery Act Management 

and Performance System (RAMPS) compared data in four key fields from 

FederalReporting.gov against parameters HUD established to identify 

potential significant errors (see table 13).100 RAMPS also flagged duplicate 

entries, awards entered incorrectly as contracts, and reports entered with 

invalid award ID numbers. 

Table 13: Parameters HUD Established to Identify Significant Errors for the Capital 

Fund 

Data field Parameter for determining significant error 

Award amount Compared directly to Office of the Chief Financial Officer (OCFO) 

obligation, with a 0% variance allowed.a

Total received Compared directly to OCFO disbursement, with a +/-10% variance 

allowed. 

Total spent May not exceed OCFO obligation. 

Jobs Related to OCFO obligation. The number of jobs may not exceed 

a +50% variance from the following: 

OCFO obligation/$205K. 

Source: HUD officials. 

a

For the first round of recipient reports, this parameter allowed a +/-10 percent variance. 

 

100HUD’s data quality process proposal defines a significant error in the fields award 

amount, total received, total spent, and jobs as any entry that varies from a HUD 

comparison source value taken from corresponding HUD Office of Chief Financial Officer 

award records for obligations and disbursements. 

Page 98 GAO-10-437 Recovery Act
 

Moreover, for the second cycle HUD officials told us they further 

incorporated suggestions from OMB’s guidance to agencies to improve the 

data quality review process. The department identified some material 

omissions by examining fields with narrative responses to determine 

whether they contained a minimum number of characters as an indicator 

of whether the responses adequately addressed requirements for those 

fields. HUD officials said that the most prevalent errors in reported data 

were in the number of jobs field. They said that confusion persists among 

public housing agency officials regarding how to calculate and count jobs, 

which is reflected in the number of potential errors identified by the data 

quality review process. HUD officials said they first followed up on the 

most egregious errors—large overcounting or undercounting—that 

remained uncorrected after their initial review of the data before 

addressing other errors. Table 14 identifies the number of potential 

significant errors identified by HUD in each field for Public Housing 

Capital Fund formula grants and competitive grants for each quarterly 

reporting cycle. 

Table 14: Number of Potential Significant Errors Identified by Field for the October 

2009 and January 2010 Reporting Cycles 

Data field 

Number 

of potential errors, 

October reporting 

cycle 

Number

of potential errors,

January reporting 

cycle

Award amount 55 28

Amount received 639 730

Total spent 5 1

Jobs 1,437 1,118

Total 2,136 1,877

Source: GAO analysis of HUD data. 

Note: A single report can have multiple significant errors identified. 

HUD’s data quality process proposal defines material omissions as any 

grantee that failed to report at all. HUD developed a Recovery Act NonReporting Enforcement Plan in September 2009, which states that all 

recipients who fail to report in FederalReporting.gov by the end of their 

first applicable reporting cycle will receive a warning letter from HUD 

program staff. If recipients fail to report a second time, HUD will initiate 

further enforcement actions which can include formal or informal 

hearings, suspension of access to funds, or other actions. In the first 

recipient reporting cycle, HUD identified 152 Capital Fund formula and 

competitive grants for which a report was required but none was found, 

Page 99 GAO-10-437 Recovery Act
 

according to HUD officials. Officials told us HUD provided technical 

assistance to housing agencies on its nonreporter list, including walking 

them systematically through the reporting process. HUD officials told us 

they also sent reminder e-mails on December 4, 2009 to the 152 

nonreporting housing agencies reminding them to report in the second 

reporting period and warning them that HUD may take additional action if 

they failed to report in the next reporting period. In the second reporting 

cycle, HUD identified 27 grants for which a report was required but none 

was found, including 6 grants for which no report was found for either 

cycle. HUD officials told us they followed up by phone with all housing 

agencies for which no report was found for either cycle. 

HUD officials questioned the accuracy and validity of the data submitted 

through recipient reports and said they were not yet comfortable relying 

on these data because of the level of confusion expressed by housing 

agency officials regarding jobs reporting and the large number of potential 

errors HUD identified in the “number of jobs” field. In addition, they said 

HUD already has most of the information collected through the recipient 

reports—jobs information and project status were two exceptions—and 

uses other systems for that information because HUD officials believe the 

data are more reliable than the recipient-reported data. Although HUD has 

received feedback from housing agencies that are confused or frustrated 

over the reporting process, it has not received substantive feedback from 

external stakeholders, such as OMB, the HUD IG, interest groups, or the 

media on recipient data for the Capital Fund grant program. 

For the first submission of recipient reports, we noted that public housing 

agencies experienced problems with the process of recipient reporting and 

the FTE calculation. These problems appeared to continue in round two. 

For example, officials at one Mississippi housing authority reported the 

same 6 jobs in round two that they reported in round one. We determined 

their calculations did not conform to the OMB guidance of December 18, 

and they did not recall receiving guidance from HUD or OMB on job 

calculations for round two. However, HUD officials told us HUD sent 

several e-mails to each grantee between December 23 and the end of the 

reporting period that included a link to HUD’s explanation of the job count 

and the change in job count guidance from OMB. 

Officials from a Mississippi and a Pennsylvania housing authority reported 

using a jobs calculator produced by HUD to calculate the number of jobs 

they reported in the second round. HUD had posted a jobs calculator for 

the first round of recipient reporting, which was designed to calculate jobs 

cumulatively across reporting periods, but removed it prior to the second 

Page 100 GAO-10-437 Recovery Act
 

round of reporting after OMB changed the guidance for calculating jobs. 

According to a HUD official, their jobs calculator for the second round—

which reflected the changes in OMB guidance for calculating jobs—was 

posted for about 1 week in December 2009 before OMB requested that it 

be taken down in order to review it further. After reviewing the HUD 

guidance to housing agency officials, it appears that HUD did not take 

steps to instruct housing agencies not to use the jobs calculator from the 

first round. As a result, housing agencies may have incorrectly used the 

jobs calculator from the first round to calculate the number of jobs for the 

second round. 

We recommend that the Secretary of Housing and Urban Development 

instruct housing agencies to discontinue use of the jobs calculator 

provided by HUD in the first round of recipient reporting for subsequent 

rounds of reporting to ensure the correct job calculation is used. 

Recommendation for Executive 

Action 

DOT officials noted that the combination of information sharing among 

the operating administrations (OA),101 prior knowledge of reporting by the 

recipients, and the dissemination of training and guidance helped the 

department and recipients comply with reporting in the second 

submission of reports. DOT’s OAs engaged in several efforts of outreach to 

assist in accurate recipient reporting. The OAs conducted Webinars and 

meetings, sent e-mails, and made telephone calls to brief and train their 

program recipients. According to officials, they wanted to ensure that, 

along with keeping recipients updated on requirement changes, first-time 

recipients would be successful in reporting. In addition, during the first 

reporting period, DOT learned that the OAs, working together as a group, 

allowed sharing of information and mediation of reporting challenges. 

Department of Transportation 

To identify the nonreporters, the OAs compared the list of recipients with 

reports found in FederalReporting.gov. As a result, they identified 64 

recipients that failed to report during the first reporting period. The OAs 

worked one-on-one with these recipients and received assurances from 

these nonreporters that they would comply with future reporting 

requirements. 

 

101The department’s operating administrations overseeing the implementation of the 

Recovery Act include the Federal Aviation Administration, Federal Highway 

Administration, Federal Railroad Administration, Federal Transit Administration, and 

Maritime Administration. 

Page 101 GAO-10-437 Recovery Act
 

According to officials, DOT and its OAs took numerous steps to address 

the quality of the recipient reported data and identify errors. To address 

reporting, DOT modified contract terms and conditions to include 

recipient reporting requirements and warnings that were sent to recipients 

reminding them that reporting data is a condition of the Recovery Act 

funding. Further, officials reported that each OA has developed a written 

process to conduct data quality reviews. To understand the reasons for 

identified inaccuracies in reported data, DOT relied on direct contact and 

follow-up with its recipients. When asked how DOT planned to use the 

recipient reported data, officials said they did not have plans to use the 

information from recipient reports in future decision making. Instead, they 

planned to rely on other department data collection methods. 

DOT took steps to promote consistency between OMB definitions and the 

unique nature of FHWA programs. However, guidance provided by FHWA 

raised concerns with some state and local officials we interviewed. OMB 

encouraged federal agencies to provide supplementary reporting guidance 

to their recipients. To improve consistency in the guidance recipients 

receive, OMB requires agencies to clear any supplemental guidance 

through OMB. FHWA approached OMB to clarify the number recipients 

should report for total federal Recovery Act funds received. To meet the 

statutory requirement of reporting at the project or activity level, OMB and 

FHWA determined that recipients should report the amount awarded and 

the amount received as the same regardless of expenditures, since 

recipients report expenditures in a subsequent field. 

Some state officials stated that the supplementary guidance from FHWA 

raised definitional and transparency issues. We also found that the states 

we reviewed differed in the application of the guidance. In some cases, 

states did not report the same number in the amount awarded and amount 

received column. In one case, the state response was that funding values 

for all amounts were taken from the state accounting system and were 

consistent across all of the state recipient reports. A few other states made 

the changes to conform to the guidance, but expressed concerns about the 

definition of this field and the transparency of the reporting. FHWA and 

OMB officials are aware that some state officials have raised concerns 

with this guidance and are working with state officials to try to resolve this 

issue. However, as OMB clearly states in its guidance, although federal 

agencies are able to comment and suggest changes to the reports, prime 

recipients are ultimately responsible for the data reported into 

FederalReporting.gov. We will continue to monitor this matter. 

Page 102 GAO-10-437 Recovery Act
 

DOE made several outreach efforts to their program recipients to ensure 

timely reporting. These efforts included e-mail reminders for registration 

and Webinars that provided guidance on reporting requirements. For the 

first round of reporting, DOE developed a quality assurance plan to ensure 

all prime recipients filed quarterly reports, while assisting in identifying 

errors in reports. The methodology for the quality assurance review 

included several phases and provided details on the role and 

responsibilities for DOE officials. 

Department of Energy

According to DOE officials, the data quality assurance plan was also 

designed to emphasize the avoidance of material omissions and significant 

reporting errors. More specifically, as reported by the OIG and DOE 

officials, the plan outlined a qualitative comparison of recipient data 

obtained from FederalReporting.gov to agency data obtained from the 

department’s financial and procurement systems. To aid in the 

comparative analysis, DOE established threshold deviations for the first 

round of recipient reporting. More specifically, the jobs creation or 

retention thresholds were originally established by the Political Economy 

Research Institute (PERI) at the University of Massachusetts-Amherst, 

acting as a consultant to DOE. According to DOE officials, PERI was able 

to create this list of expected job creation from the project operation plan 

provided by DOE and used them in their quality assurance analysis. DOE 

plans to adjust these thresholds based on the first and second round of 

recipient reporting. OIG officials noted that, based on their October 

review, DOE officials are instructing programs to use information from the 

quality assurance analysis when considering future funding and for 

management purposes. 

To address data quality, HHS operating agencies engaged in various efforts 

of outreach, reporting error detection, and identifying nonreporters. HHS 

officials stated that they contacted recipients to determine the cause of 

errors, correct errors, and offer assistance. HHS was able to identify areas 

for improvement for the January reporting period through their series on 

lessons learned within the agency. Because of these efforts, HHS provided 

guidance to recipients on how to correct the key award information when 

using the copy forward feature in FederalReporting.gov during the January 

reporting period. Lastly, during the first reporting period, HHS developed a 

Web site, that provides recipients with award information needed to 

complete their reports, such as award amount, award ID, and date of 

award. Additionally, to aid with correcting errors, HHS reports that the 

Health Resources and Services Administration has sent e-mail 

notifications and initiated technical assistance calls emphasizing the 

importance of correcting fields with identified errors during the January 

Department of Health and 

Human Services 

Page 103 GAO-10-437 Recovery Act
 

reporting period. HHS reports that programs have been reaching out to 

recipients that made errors to determine the cause of those errors and to 

develop a strategy for correcting them. 

Nonreporters are tracked by HHS on a master list that includes recipients 

from their Operating Divisions. HHS relied on individual Operating 

Divisions to provide information on the number of recipients who did not 

report. According to HHS staff, these programs compared the list of 

reports that they expected to receive with the list of reports that they 

actually received in order to identify nonreporters. HHS reports that each 

HHS Operating Division, or agency, is responsible for contacting the 

recipient and providing technical assistance as needed. Each Operating 

Division contacted all recipients who did not report to identify the reasons 

for noncompliance. The HHS Office of Recovery Act Coordination 

compiled these reasons in a master spreadsheet and sent it to OMB. 

A number of press articles in November 2009 discussed concerns with the 

jobs reporting done by HHS Head Start grantees. During round two, we 

followed up with two Head Start grantees in Georgia, who reported that 

guidance from the Office of Head Start program after the last round of 

reporting improved their understanding of the recipient reporting process. 

While the grantees complied with OMB’s new guidance for reporting FTEs, 

there were a few errors in the recipient report that one of the grantees 

initially submitted, resulting in revisions to the ZIP code, congressional 

district, and award number. 

Agency Officials Are 

Unclear about the Federal 

Agency Role during the 

Continual Review Period 

Following the first round of recipient reporting, the Board made several 

major reporting changes that took effect in the second round. One of these 

changes allows recipients to correct reporting mistakes on a continual 

basis. This new process began on February 2 and will last until March 15 

for the second submission of recipient reports. According to 

Recovery.gov, recipients can change or correct their reports multiple 

times during this extended review period. In conjunction with this, OMB’s 

December 18 guidance instructed federal agencies to evaluate on a 

continuous basis recipient and subrecipient reports. This differs from the 

framework of the initial review of submissions during which agencies had 

8 calendar days to review and comment on submissions. During the initial 

review period, the reports were locked and only the federal agency could 

unlock reports for recipients to make changes. In contrast, during the 

continual review period, recipients can make multiple changes up to 

midnight Monday the week the data are posted on Recovery.gov. Federal 

agencies have a one-day period to review the final submissions before the 

Page 104 GAO-10-437 Recovery Act
 

data are downloaded and posted on Recovery.gov. This shortened period 

for agency review of “final” reports may not allow for the same quality 

assurance as in the initial review period. The Board released the first 

updated data set on February 10 on Recovery.gov, and it anticipates that 

the updates will occur every other Wednesday, with the final update for 

the quarter ending December 31, 2009, occurring on March 17, 2010. 

Federal agency officials we spoke with are concerned about fulfilling 

OMB’s directive to evaluate recipient data on a continuous basis. OMB’s 

December 18 guidance states simply “federal agencies are required to 

make reasonable efforts to monitor such corrections...” For example, 

Education officials said that there is a need for more guidance on how the 

new review period will work. They added that developing monitoring 

plans or drafting policies and procedures is difficult until guidance has 

been issued. Education officials told us that during a conference call on 

February 3, 2010, OMB raised the topic of creating agency guidance for the 

continuous corrections process and that a number of Education officials 

had offered to help develop the guidance. Education officials later told us 

that this topic has been revisited during subsequent working group calls, 

and that agencies and OMB concluded that more experience with this new 

process was needed before meaningful guidance could be developed. HUD 

officials told us that the department does not have a plan in place to 

address the new period of continuous corrections and is waiting for 

guidance from OMB and potentially the Board on what the expectations 

are for federal agencies. HUD has had internal discussions regarding 

monitoring corrections, but officials were not sure what types of changes 

would be possible for a recipient to make during the second round of 

reporting. HUD officials expressed concern that the new continual 

corrections period for recipients may pose monitoring issues for both 

HUD and prime recipients. DOT officials expressed similar concern with 

the lack of formal guidance regarding the department’s role in reviewing 

recipient data during the continual update phase. DOT continues to 

monitor the data submitted on a daily basis in anticipation of OMB or the 

Board implementing a formalized process. Officials also noted that 

keeping track of changes made by recipients could be challenging due to 

the staff effort required to monitor the changes and the fact that recipients 

can make multiple changes throughout the period. In addition, a senior 

DOE official in the department’s Recovery Operations Group noted that 

without understanding the Board and OMB’s expectations for federal 

agencies during the recipients’ continual review period, agencies have had 

difficulty developing their monitoring efforts. According to the official, the 

continual edit capability now requires agencies to inquire daily on what 

has changed in order to monitor the recipient reports. DOE officials also 

Page 105 GAO-10-437 Recovery Act
 

expressed concern regarding the amount of staff time required to maintain 

this level of review on a daily basis for thousands of reports. 

A senior Board official explained that they designed the new process to 

address the concerns of state officials that under the old process, they had 

limited opportunities to correct erroneous data. Under the approach used 

in the first round of recipient reporting, recipients could only correct data 

prior to their public release on Recovery.gov; recipients were concerned 

that they could not address mistakes in the data until the next official 

reporting cycle. During the first round initial review period, only the 

federal agency could unlock reports for recipients to make changes. 

According to FederalReporting.gov, federal agencies under the new 

process are to identify errors in recipient reports and add comments 

addressing those errors through the entire continual review period. The 

senior Board official acknowledged that this change was not one that 

many federal agencies’ officials agreed with because of the difficulty in 

tracking changes, but he stressed that the states—often the prime 

recipients—had the most accountability for the data, and that they needed 

more flexibility in correcting data. The official said that he expected that 

the Board, OMB, and federal agencies would discuss this issue at an 

upcoming “lessons learned” session covering the second round of 

recipient reporting and at weekly working group meetings that OMB has 

with federal agency recipient reporting teams. 

OMB should work with the Board and federal agencies, building on the 

lessons learned, to establish a formal and feasible framework for review of 

recipient changes during the continual update period and consider 

providing more time for agencies to review and provide feedback to 

recipients before posting updated reports on Recovery.gov. 

Recommendation for Executive 

Action 

The Board Is Working with 

Federal Inspectors General 

to Establish a Multiphased 

Recipient Data Federal 

Agency Review Process 

In light of the importance of the quality of the Recovery Act data, the 

Board is working with Federal Inspectors General to establish a 

multiphased federal agency review process to look at the quality of the 

data submitted by Recovery Act recipients. Over the coming months, the 

Board and the Federal Inspectors General plan to issue subsequent reports 

that look at the causes of inaccurate reporting, the effectiveness of the 

agency data quality review processes, and, in some cases, Federal 

Inspectors General will review the accuracy of specific recipient reports. 

The Board’s Recovery Funds Working Group, which includes 

representatives from the 29 inspectors general, meets monthly to discuss 

issues related to oversight of Recovery Act funds. In addition, the Board’s 

Page 106 GAO-10-437 Recovery Act
 

Working Group has taken steps to assess federal agencies’ efforts to 

review the quality of recipient reported data. In December 2009, the 21 

inspectors general reported that 17 federal agencies had processes to 

perform limited data-quality reviews for identifying material omissions or 

significant errors in the recipient reported information and to notify 

recipients of the need to make any changes, while 4 federal agencies—the 

Departments of Agriculture, Defense, and Homeland Security, and the 

Small Business Administration—had weaknesses in their respective 

processes.102

Providing Information and 

Access to the Public 

The Board is responsible for providing information about Recovery Act 

spending via Recovery.gov. This Web site promotes official data for use in 

public debate, assists in providing fair and open access to Recovery Act 

opportunities, and promotes an understanding of the local impact of 

Recovery Act funding. Data reported by recipients of Recovery Act funds 

through the nationwide data collection system at FederalReporting.gov are 

available to the public for viewing and downloading on Recovery.gov. 

To increase the public’s access to data, OMB encouraged states to post 

information about the impact of Recovery Act funds on a state Recovery 

Act Web site. These Web sites vary in content between states. For 

example, Pennsylvania and Massachusetts presented information targeted 

at citizens, including analysis of local impacts of the Recovery Act, 

detailed explanations of FTE counts, ongoing project updates, instructions 

in applying for Recovery Act funds, and definitions of terms used to 

describe Recovery Act funding. Some states posted information targeted at 

recipients, with basic FTE calculations or links to reporting guidance. 

Many state Recovery Act Web sites also encourage reporting of fraud and 

abuse of Recovery Act funds. Eight states in our 17 jurisdictions—Arizona, 

California, Colorado, Illinois, New Jersey, North Carolina, Pennsylvania 

and Texas—included information about fraud reporting hotlines on their 

Recovery Web sites. Michigan and Iowa instead posted links to federal 

fraud reporting Web sites. 

 

102U.S. Department of Health and Human Services, Office of Inspector General, Summary 

of Inspectors General Reports on Federal Agencies’ Data-quality Review Processes, No. A09-10-01002 (November 2009). 

Page 107 GAO-10-437 Recovery Act
 

Oversight and 

Accountability Efforts 

in the First Year 

OMB Has Taken Steps 

toward Implementing GAO 

Recommendations for 

Improving the Single Audit 

Process for Recovery Act 

Programs, and Actions Are 

Ongoing 

Since our first bimonthly report in April 2009, we have made 

recommendations to OMB for improving the accountability and oversight 

of Recovery Act funds. These recommendations were intended to help 

mitigate risks related to Recovery Act funds and to strengthen internal 

controls over the use of those funds through the Single Audit Act and OMB 

Circular No. A-133 for Single Audits.103 OMB has taken steps to implement 

our recommendations. However, these efforts do not yet fully address the 

significant risks related to Recovery Act funds. In October 2009, in 

response to our recommendations, OMB implemented a Single Audit 

Internal Control Project (project), which is under way. The project is a 

collaborative effort between the states receiving Recovery Act funds that 

volunteered to participate, their auditors, and the federal government. One 

of the project’s goals is to achieve more timely communication of internal 

control deficiencies for higher-risk Recovery Act programs so that 

corrective action can be taken. The project required the auditors for each 

of the 16 volunteer states to issue interim reports on internal control of 

major Recovery Act programs as of November 30, 2009. These reports 

were to be presented to auditee management prior to December 31, 2009 

(3 months sooner than the 9-month time frame required by OMB Circular 

No. A-133). Under the project, auditee management was to provide the 

report and a corrective action plan to the appropriate federal agency by 

January 31, 2010. When OMB completes the project, we plan to analyze the 

results and other actions that OMB has taken to more fully implement our 

recommendations to achieve improved and timelier oversight of Recovery 

Act funds. 

OMB has taken several steps in response to our recommendations. 

However, additional actions are needed to sufficiently address the risks 

leading to our recommendations. As we previously reported, Recovery Act 

OMB Has Taken Steps to 

Implement GAO 

Recommendations 

 

103OMB Circular No. A-133 sets out implementing guidelines for the Single Audit and 

defines roles and responsibilities related to the implementation of the Single Audit Act, 

including detailed instructions to auditors on how to determine which federal programs are 

to be audited for compliance with program requirements in a particular year at a given 

grantee. 

Page 108 GAO-10-437 Recovery Act
 

funds engender unique risks that were not addressed in OMB Circular No. 

A-133. The most significant of these risks are associated with 

• new programs that may not have the internal controls and accounting 

systems in place to help ensure that funds are distributed and used in 

accordance with program regulations and objectives, 

• Recovery Act funding increases for existing programs that may exceed 

the capacity of existing internal controls and accounting systems, 

• the more extensive accountability and transparency requirements for 

Recovery Act funds that require the implementation of new controls 

and procedures, and 

• increased risks because of the need to spend funds quickly. 

To help mitigate risks relating to Recovery Act programs, in our April, 

July, and September 2009 reports, we recommended that OMB adjust the 

current Single Audit process to 

• focus the risk assessment auditors use to select programs to test for 

compliance with 2009 federal program requirements on Recovery Act 

funding; 

• provide for review of the design of internal controls over programs to 

receive Recovery Act funding during 2009, before significant 

expenditures in 2010; and 

• evaluate options for providing relief related to audit requirements for 

low-risk programs to help balance new audit responsibilities 

associated with the Recovery Act. 

Below is a summary of OMB’s efforts to implement the recommendations 

from our bimonthly reviews. We will continue to report on these actions 

and subsequent OMB efforts, including the project’s results. 

• To focus auditor risk assessments on Recovery Act-funded programs 

and to provide guidance on internal control reviews for Recovery Act 

programs, OMB worked within the framework defined by existing 

mechanisms—Circular No. A-133 and the Circular No. A-133 

Compliance Supplement (Compliance Supplement).104 In this context, 

we reported in September 2009 that OMB had made limited 

adjustments to its Single Audit guidance. OMB issued the Compliance 

Supplement in May 2009, which focused risk assessments on Recovery 

 

104The Compliance Supplement is issued annually to guide auditors on what program 

requirements should be tested for programs audited as part of the Single Audit. 

Page 109 GAO-10-437 Recovery Act
 

Act-funded programs. In August 2009, OMB issued the Circular No. A133 Compliance Supplement Addendum I, which provided additional 

guidance for auditors and modified the Compliance Supplement to, 

among other things, focus on new Recovery Act programs and new 

program clusters. 

• We reported in April and July 2009 that the Single Audit reporting 

deadline is too late to provide audit results in time for the auditee to 

take action on deficiencies noted in Recovery Act programs prior to 

the expenditure of significant funds under those programs. 105 The 

timing problem was exacerbated by the extensions to the 9-month 

deadline that were routinely granted by the awarding agencies, 

consistent with OMB guidance. The Department of Health and Human 

Services, the cognizant agency106 for the 16 states participating in the 

project, adopted a policy of no longer approving requests for such 

extensions. OMB officials have stated that they plan to eliminate 

allowing extensions across all agencies and programs but have not yet 

issued any official guidance to this effect. In February 2010, OMB 

officials stated that they plan to discuss this issue with federal 

agencies for governmentwide implementation. 

• In our September 2009 report, we reported that OMB noted the 

increased responsibilities falling on those responsible for performing 

Single Audits. OMB issued two separate memoranda that allowed state 

and local governments to more timely recover administrative costs 

(including oversight, reporting and audit costs) related to Recovery 

Act programs. 107

 

105Single Audit Act requires that recipients submit their financial reporting packages, 

including the Single Audit report, to the federal government no later than 9 months after 

the end of the period being audited. As a result, an audited entity may not receive feedback 

needed to correct an identified internal control or compliance weakness until the latter 

part of the subsequent fiscal year. 

106Each award recipient expending more than $50 million is assigned a cognizant agency for 

audit. Generally, the cognizant agency for audit is the federal awarding agency that 

provides the predominant amount of direct funding to a recipient unless OMB assigns this 

responsibility to another agency. Some of the responsibilities of the cognizant agency 

include performing quality control reviews, considering auditee requests for extensions, 

and coordinating a management decision for audit findings that affect federal programs of 

more than one agency. 

107OMB, Payments to State Grantees for Administrative Costs of Recovery Act Activities, 

M-09-18 (Washington, D.C.: May 11, 2009), and OMB, Payments to State Grantees for their 

Administrative Costs for Recovery Act Funding – Alternative Allocation Methodologies, 

M-10-03 (Washington, D.C.: Oct. 13, 2009). 

Page 110 GAO-10-437 Recovery Act
 

• In addition, states that volunteered to participate in the project were 

eligible for some relief in their workloads because OMB modified the 

requirements under Circular No. A-133 to reduce the number of lowrisk programs that must be included in the Single Audits. 

• In December 2009, we reported that OMB implemented the project to 

encourage timelier reporting by auditors to identify and communicate 

deficiencies in internal control and corrective action by the auditee. 

The project’s scheduled completion is early spring 2010. While its 

coverage could be more comprehensive, OMB’s analysis of the 

project’s results could provide meaningful information for improving 

future use of the Single Audits for oversight of Recovery Act programs. 

OMB has made progress in implementing the project since we last 

reported in December 2009. One of the project’s goals is to encourage 

auditors to identify and communicate significant deficiencies and material 

weaknesses in internal control over compliance for selected major 

Recovery Act programs 3 months sooner than the 9-month time frame 

currently required under statute. If effective, the project should allow 

auditee program management to expedite corrective action and help 

mitigate the risk of improper Recovery Act expenditures. In December 

2009, we reported that OMB officials met their goals for the scope of the 

project, stating that overall they were satisfied with the range of 

populations and geographic diversity of the 16 states that volunteered for 

the project.108 The project’s first interim milestone was scheduled for 

December 31, 2009. Under the project, the auditors were required to issue, 

in writing based on OMB Circular No. A-133, an early communication by 

that date of significant deficiencies and material weaknesses in internal 

control over compliance in effect for the period ended June 30, 2009, to 

auditee management. 

OMB Has Made Progress in 

Implementing Its Single Audit 

Internal Control Project 

For the 16 states participating in the project, 12 auditors submitted the 

required reports, which identified significant deficiencies, material 

weaknesses, or both. In addition, an auditor for another state provided a 

report but did not indicate whether the findings were material weaknesses 

or significant deficiencies as required under the project’s guidelines. 

Auditors for 2 other states reported that while they performed interim 

procedures as required, they did not identify any significant deficiencies or 

 

108The following 16 states volunteered to participate in the Project: Alaska, California, 

Colorado, Florida, Georgia, Louisiana, Maine, Missouri, Nevada, North Carolina, Ohio, 

Oklahoma, South Dakota, Tennessee, Texas, and Virginia. 

Page 111 GAO-10-437 Recovery Act
 

material weaknesses and therefore did not issue written reports. One 

state, with a fiscal year ending on August 31, 2009, had until March 1, 2010, 

to report. OMB granted the extension so that the auditor would have the 

same amount of time to complete their test work as the auditors for the 

other project participants. The project’s second milestone required that 

auditee management provide the interim communication report and a 

corrective action plan to the cognizant federal agency by January 31, 2010. 

For 10 of the 13 states that submitted the required internal control report, 

the corrective action plans were included in the interim communication 

report. In three instances, the plans were provided in a separate report. 

We reviewed the internal control reports provided to OMB by the auditors 

of the project’s participants by December 31, 2009, and noted that auditors 

for 13 of the 16 states reporting deficiencies had identified over 70 

instances where internal controls over compliance were insufficient to 

prevent or detect noncompliance with federal regulations over Recovery 

Act funding. Moreover, auditors for 5 states identified findings that were of 

a more serious nature and qualified as material weaknesses.109 In some 

instances, the state auditors had previously reported the same 

deficiencies, including a material weakness, but corrective action had not 

yet been taken or was insufficient to resolve these issues. 

Most of the deficiencies reported under the project varied by program and 

state, but there were several that were similar across a number of 

programs and states. Specifically, a number of auditors reported concerns 

with (1) the auditees’ ability to reliably report under the financial reporting 

requirement on federal expenditures and awards of Recovery Act funds, 

(2) the lack of documentation to determine whether the federal 

expenditure was allowed based on federal requirements, and (3) the lack 

of documentation to support whether payments of Recovery Act funding 

were made to eligible recipients. For example, one auditor reported that 

some documents required to determine eligibility for child care subsidies 

were not in the case files, and the responsible state agency did not have 

assurance that only eligible households are receiving child care subsidies. 

For this finding, the state agreed in October 2009 to implement a 

corrective action plan with full implementation by November 2010 to help 

ensure that verification documents are completed and maintained 

 

109A material weakness is a significant deficiency or combination of significant deficiencies, 

which results in more than a remote likelihood that a material misstatement of the subject 

matter will not be prevented or detected. 

Page 112 GAO-10-437 Recovery Act
 

regarding family eligibility for child care subsidies. The state agreed that a 

monthly audit on a random sample of files would be conducted and that 

reimbursement of questioned costs would be requested. 

An example of a material weakness reported by one auditor was that a 

state workforce commission paid about $21 million in Unemployment 

Insurance benefits to other states during fiscal year 2009 without 

recouping the cost of these claims from employers in the state. The 

auditor also reported that the workforce commission had not implemented 

procedures to determine if claimants filing in other states were working in 

the audited state at the time the claims were filed and during the duration 

of the claims. Effective internal controls did not exist to help ensure that 

the workforce commission notified employers of interstate claims and 

verified the work status of claimants to reduce the risk of payments on 

fraudulent claims. 

OMB said that it will determine the success of the project by evaluating 

whether 

• there has been sufficient participation from the auditees, auditors, and 

federal agencies; 

• the early communication process provides auditee and federal 

program management with useful information regarding internal 

control deficiencies in the Recovery Act programs administered by the 

states, thus resulting in expedited correction of deficiencies and 

reduced risk to Recovery Act programs; and 

• the process accelerates the audit resolution by the federal agencies 

and therefore provides auditee management with early feedback to 

assist in correction of the high-risk deficiencies in the most 

expeditious manner. 

OMB has decided to use the Single Audit process as the key accountability 

tool because a significant portion of Recovery Act expenditures are in the 

form of federal grants and awards. However, the Single Audit Act and 

related OMB Circular No. A-133 did not reflect the risks associated with 

the current environment where large amounts of federal awards are being 

expended quickly through new, greatly expanded, and existing programs. 

Since significant disbursements of Recovery Act funding are planned for 

fiscal years 2010 and 2011, effective internal controls over the use of these 

funds and early notification and correction of internal control weakness 

are critical to help (1) ensure effective and efficient use of resources, (2) 

comply with laws and regulations, (3) achieve accountability, and (4) 

mitigate risks over Recovery Act programs. Thus, it is essential that OMB 

Page 113 GAO-10-437 Recovery Act
 

continue its efforts for improving the use of Single Audits to provide better 

safeguards over subsequent Recovery Act disbursements. If OMB 

concludes that it is unable to take the necessary steps under the current 

framework to adequately address accountability for the Recovery Act 

programs and related risks and to provide for more timely reporting, 

legislative changes may be necessary. 

States and Federal 

Agencies Continue to 

Implement and Modify 

Controls to Mitigate Risk 

and Oversee Use of 

Recovery Act Funds 

Since the Recovery Act was enacted in February 2009, states and federal 

agencies have taken and continue to take various actions to oversee the 

use of Recovery Act funds and to address the quality of data that states 

and other recipients maintain and report regarding their use of funds. 

Among other actions, states have established or modified existing internal 

controls and systems and provided guidance to recipients of Recovery Act 

funds. State and federal oversight has identified weaknesses and program 

issues and has made states and federal agencies focus on those 

weaknesses and issues and plan corrective actions. 

Control over Recovery Act funds is critical to help ensure effective and 

efficient use of resources and compliance with laws and regulations. 

Further, controls are important to address the risks inherent in 

implementing the Recovery Act’s recipient reporting requirements to help 

ensure the completeness, accuracy, and reliability of the reported data. 

Although the specifics of states’ internal control processes varied 

depending on factors such as a state’s statutory requirements, 

organizational structure, and whether the state took a centralized or 

decentralized approach to reporting, the internal control processes were 

aimed at helping to ensure accountability and transparency of Recovery 

Act funds. 

In our previous reports on Recovery Act implementation, we found that 

the 16 states and the District of Columbia were taking various approaches 

to manage and mitigate risk. For example, officials in 8 states told us they 

would use existing systems of internal control with some modifications, 

and all 16 states and the District took steps, such as using unique codes in 

their accounting systems, to identify and track the use of Recovery Act 

funds, as required. As the states and the District gained more experience in 

implementing the act during the past year, officials in 6 states told us they 

have more recently taken actions to revise or update their controls and 

guidance related to Recovery Act funds. 

• California Department of Education officials told us they added data 

quality checks in its system to ensure timely reporting and accuracy 

Page 114 GAO-10-437 Recovery Act
 

and completeness of reported data. 

• Illinois Department of Transportation officials told us they hired three 

consultants to assist in the monitoring of subrecipients. 

• Officials in two Mississippi state agencies responsible for oversight—

the Office of the State Auditor and the Department of Finance and 

Administration’s Office of Fiscal Policy—told us they have contracted 

with accounting firms to review internal controls and operations of 

programs receiving Recovery Act funds. The reviews are to result in 

reports that could contain recommendations to improve or strengthen 

internal controls. 

• Massachusetts officials told us an accounting firm conducted a risk 

assessment in late summer 2009 and found that prevention and 

detection of fraud, waste, and abuse was an area needing attention. 

The Comptroller’s office asked state departments to update their 

internal control procedures in response to the findings of the risk 

assessment. 

• In Michigan, officials administering Workforce Investment Act 

programs said they are strengthening controls over payroll distribution 

processes for the Summer Youth Program in Detroit. Officials from 

Michigan’s Office of Internal Audit Services (OIAS) told us that the 

office assigned two of its internal audit staff to work full time on 

programs funded by the Recovery Act. In addition, OIAS officials told 

us they selected programs for detailed review based on an assessment 

of the control risks posed by the programs and planned to conduct 

further reviews of the selected programs as spending occurred. 

• An official from Ohio’s Office of Internal Audit (OIA) told us that the 

office increased its internal audit staff from 9 to more than 25. Also, in 

December 2009, OIA issued audit reports assessing the adequacy and 

design of internal controls for six Recovery Act related programs and 

has ongoing audit work to assess the design or effectiveness of seven 

other Recovery Act related programs. 

As shown in the following examples, federal offices of inspector general 

(OIG) continue to provide oversight of Recovery Act funds, including 

monitoring and reviewing aspects of state and federal programs, and state 

and federal agencies are taking actions to address issues found by the 

OIGs. 

Page 115 GAO-10-437 Recovery Act
 

• The Department of Energy’s OIG reported that it is reviewing and 

evaluating internal control structures related to the weatherization 

program at both the federal and state levels. In December 2009, 

Energy’s OIG reported that it identified significant internal control 

deficiencies in Illinois’s weatherization program, including problems 

with on-site monitoring and inspection. The OIG also reported that 

state and local officials took action to address the immediate problems 

and that the department has developed corrective actions to prevent 

future issues. 

• As previously mentioned, in October 2009, the Department of 

Education’s OIG reported that it had identified issues with cash 

management practices in five states. Specifically, the OIG identified a 

number of instances where state educational agencies disbursed 

Recovery Act funds without adequate information on whether local 

educational agencies (LEA) were ready to spend the funds and did not 

ensure that LEAs remitted interest earned on funds received in 

advance. The OIG noted that Education had provided guidance in April 

2009 that included cash management requirements and was providing 

technical assistance related to cash management to state and local 

agencies. 

States and federal agencies are likely to continue to modify and revise 

their controls and guidance as necessary to provide oversight for Recovery 

Act funds and to help ensure the completeness and accuracy of reported 

data. Further, as states and federal agencies identify issues through their 

monitoring and oversight activities, it is important that they address the 

issues. We will continue to review states’ and federal agencies’ actions 

related to their oversight of Recovery Act funds, including reviewing 

selected payments and analyzing Single Audit reports for programs with 

identified internal control weaknesses. 

Fraud, Waste, and Abuse 

Allegations GAO Has 

Received That Are Related 

to the Recovery Act 

As of December 30, 2009, we have received 179 allegations of Recovery 

Act wrongdoing from the public. The allegations relate to a wide range of 

federal spending, including rail work; renovation and repair of public 

buildings; education programs and entities, such as Head Start, public 

schools systems, and universities; tax credits and weatherization for 

homes; job creation; and health benefits. Specifically, they include alleged 

conflicts of interest, misallocation of funds, and ineligible recipients 

receiving Recovery Act money. As with all allegations received through 

Page 116 GAO-10-437 Recovery Act
 

FraudNet,110 we have carefully reviewed those related to Recovery Act 

funding and pursued or referred those that warrant further attention. 

Most of the 179 allegations have been closed: 117 were nonspecific or 

lacked information about fraud, waste, or abuse; 32 were investigated 

further and closed by us or an agency inspector general (IG) when no 

violations were found. Of those allegations that are open and currently 

under investigation, 13 are being handled by us and 17 by an IG. We 

generally refer allegations to an IG when that office is already pursuing the 

same or a similar complaint. We periodically contact the IGs to determine 

the status of our referrals. Table 15 shows the status of the Recovery Act 

allegations we have received. 

Table 15: Status of FraudNet Allegations 

Investigation Percentage

Closed because of nonspecific or unrelated information 66

Closed after GAO or IG investigation 18

Open with IGs 9

Open with GAO 7

Source: GAO. 

Investigations closed because of nonspecific or unrelated 

information. Most of these cases were complaints about the allocation of 

funds, the decisions and actions of local officials, and the location of such 

infrastructure projects as rest stops or interchanges. These cases were 

closed because they contained no specific information or were unrelated 

to fraud, waste, or abuse of federal funds. 

Investigations closed after GAO or IG investigation. These 

allegations were specific enough to warrant an investigation by us or an IG 

but could not be substantiated. For example, a church was claimed to be 

shown erroneously on www.recovery.gov (Recovery.gov) as having 

received Recovery Act funds. Our investigation found that the church 

previously owned real estate that qualified for Section 8 housing 

 

110FraudNet is a hotline GAO created in 1979 to solicit help from the public in combating 

fraud, waste, abuse, mismanagement, and criminal activities occurring in federal programs. 

We have specifically urged private citizens, government workers, contractors, and others to 

use FraudNet to report concerns about Recovery Act spending. FraudNet is primarily an 

Internet-based operation that provides a secure means for individuals to confidentially 

communicate such concerns. 

Page 117 GAO-10-437 Recovery Act
 

assistance payments but had sold the property. HUD was subsequently 

notified and updated its records. Recovery.gov was also updated. 

Open investigations with GAO. It is too early to determine whether 

these investigations will result in substantiated claims of fraud, waste, or 

abuse. However, at this point the allegations appear to be credible, and we 

will determine the extent of any possible violations. One investigation 

involves a large water project alleged to improperly include Recovery Act 

funding. The allegation claims the project cannot fulfill its intended 

purpose and will require additional funding and infrastructure 

improvements before getting under way. 

Open investigations with IGs. Similarly, results for these investigations 

are not yet available. We are working closely with the appropriate IGs to 

monitor the status of their investigations. In one investigation, a laboratory 

operated for the Department of Energy allegedly used Recovery Act funds 

to award a contract to an entity that is claimed to be an “inverted domestic 

corporation”—that is, incorporated in a foreign country or a subsidiary of 

a foreign company. In another, a Head Start grantee is alleged to be 

planning not to provide a cost-of-living adjustment to its staff despite 

receiving Recovery Act funds designated for that purpose. Instead, the 

claim suggests the money will be used for other initiatives related to the 

grantee’s Head Start program. 

We will continue to evaluate all Recovery Act allegations received through 

FraudNet and provide updates in future reports. 

Recovery Accountability 

and Transparency Board 

Oversight of Federal 

Contract Spending 

The Recovery Accountability and Transparency Board (the Board) has 

launched a number of oversight initiatives on Recovery Act funds since it 

began meeting in March 2009. These initiatives include the establishment 

of a public Web site and the Recovery Board Fraud Hotline. The Board’s 

initiatives are being executed by the Board’s executive staff, as well as by 

the 29 inspectors general responsible for Recovery Act oversight. The 

initiatives include reviewing federal contracts and grants to help ensure 

they meet applicable standards, follow OMB guidance, and satisfy 

applicable competition requirements; the initiatives also are aimed at 

identifying risk areas for fraud, waste, and abuse. The Board, with the help 

of the inspectors general, is assessing the capacity of federal agency 

acquisition workforces to determine if they have sufficient numbers of 

trained acquisition and grants personnel to manage the Recovery Act 

workload. Because many of the initiatives are in their early stages of 

Page 118 GAO-10-437 Recovery Act
 

implementation, it is too soon to evaluate their success or shortcomings 

for providing sound oversight. 

The Board is responsible for providing information about Recovery Act 

spending via www.recovery.gov (Recovery.gov). This Web site was 

created to provide accurate, user-friendly information to the public related 

to spending on Recovery Act programs. Recovery.gov is the official source 

of information related to the Recovery Act, and it contains official data for 

use in public debate, assists in providing fair and open access to Recovery 

Act opportunities, and promotes an understanding of the local impact of 

Recovery Act funding. 

Providing Information to and 

Access for the Public 

On September 28, 2009, the Board established the Recovery Board Fraud 

Hotline for the public to report potential cases of fraud, waste, and abuse 

via telephone, facsimile, Recovery.gov, or postal mail. This hotline service 

maintains a database of all reported incidents to identify recurring issues, 

companies, or participants related to potential cases.111 The Board reviews 

the complaints and refers potential cases to the respective inspector 

general or agency for further review. As of January 19, 2010, the Board had 

received 948 complaints and has referred 79 cases to various inspectors 

general.112

The Board uses several approaches to monitor federal contracts, including 

a manual review performed on the contract solicitations and awards 

posted daily on the Federal Business Opportunities Web site 

(FedBizOpps.gov) to ensure that Recovery Act-related Federal Acquisition 

Regulation requirements are followed and to identify any contracts that 

were awarded to contractors that might be in the Excluded Parties List 

System.113 In addition, Board staff review data on Recovery Act-funded 

Monitoring Federal Recovery 

Act Contracts and Identifying 

Areas Vulnerable to Risk 

 

111According to Board staff, the government-managed hotline was set up using a previously 

established cooperative agreement between the Department of Justice and Louisiana State 

University. 

112According to the Board staff, the majority of the complaints received via the fraud 

hotline did not contain any actionable information; for example, some complaints 

contained a generalized comment on the Recovery Act rather than any specific allegation 

of wrongdoing. The Board refers those that are actionable to the appropriate inspector 

general when there is a specific allegation of wrongdoing or multiple factors indicate a 

possible area of risk. 

113The Excluded Parties List System, which is maintained by the General Services 

Administration, is a database listing the parties suspended, proposed for debarment, 

debarred, declared ineligible, or excluded or disqualified from government contracting. 

Page 119 GAO-10-437 Recovery Act
 

contracts from the Federal Procurement Data System-Next Generation to 

identify the reasons for the noncompeted contracts. 

The Board also established a Recovery Operations Center, which became 

operational the last week of October 2009, and supports a three-tiered 

system to identify potential risk areas related to Recovery Act spending for 

oversight purposes. The first tier of the system uses screening models to 

analyze volumes of data to isolate potential high-risk recipients. The 

second tier uses a link-analysis tool to uncover nonobvious relationships 

between entities. The third tier uses the results of the first two tiers, along 

with historical risk factors and present-day trends, to create risk-based 

resource management tools for the oversight community. The results of 

these analyses are shared with the inspectors general to provide 

information for (1) investigations or audits of federal programs and 

recipients of Recovery Act funds and (2) decisions related to expanding or 

helping focus oversight resources. According to a Board representative, 

Board staff started identifying high-risk areas at the end of 2009 and have 

provided information to the inspectors general that is being used in active 

investigations. 

The Board’s Recovery Funds Working Group, which includes 

representatives from the 29 inspectors general, meets monthly to discuss 

issues related to oversight of Recovery Act funds. The working group 

representatives identify specific initiatives that the inspectors general are 

expected to carry out to support the Board’s oversight of Recovery Act 

funds. In August 2009, for example, 28 of the 29 inspectors general on the 

working group administered a survey to their respective agencies to assess 

their overall workforce capacity for handling the management and 

oversight of contracts and grants being awarded with Recovery Act funds. 

The results of the survey are expected to be issued by the end of April 

2010. 

Oversight and Coordination of 

Inspectors General Efforts 

The inspectors general also report monthly to the Board on the number 

and status of Recovery Act-related audits and investigations they have 

initiated. As of December 31, 2009, the inspectors general reported they 

had 141 investigations and 457 audits, inspections, evaluations, or reviews 

in process. They also reported they have issued 324 reports on Recovery 

Act-related issues since the act was passed. The scope of the inspectors 

general reports varied and ranged from compliance with program 

requirements at individual states or localities within a given program to 

assessments of internal controls across entire programs or agencies. Many 

of the reports did not identify wrongdoing or systematic weaknesses in 

management but did make recommendations to improve the 

Page 120 GAO-10-437 Recovery Act
 

implementation and oversight of programs using Recovery Act funds. For 

example, the Department of Energy Inspector General had published 13 

reports on Recovery.gov as of February 2010 that addressed aspects of 

Recovery Act issues—one issued in December 2009 identified the 

department’s efforts and challenges in implementing the Recovery Act in 

selected program offices. The report contained a number of 

recommendations aimed at addressing the department’s remaining 

challenges, including the need to revise financial assistance guidelines to 

incorporate additional Recovery Act requirements for monitoring and 

oversight and the need to perform staffing reviews to determine the level 

of personnel needed to oversee Recovery Act projects. As another 

example, the General Services Administration Inspector General has 

published two reports since the Recovery Act was passed.114 A September 

2009 report provided observations related to the use of project plans on 

the Public Building Service’s major construction and modernization 

projects being funded under the Recovery Act. Additional information 

about program-specific audit work of the inspectors general is located in 

the program sections of this report. 

Federal, State, and Local 

Audit Communities Have 

Been Coordinating Audit 

Efforts 

Multiple audit organizations that span audit communities have taken steps 

to enhance communication and coordination of audit efforts in relation to 

Recovery Act Programs. The frequency of communication and depth of 

information sharing across all levels of government have strengthened the 

ability of the overall audit community to fulfill its responsibilities in 

relation to accountability for Recovery Act funds. 

Both the annual meeting of the National Intergovernmental Audit Forum 

and quarterly Regional Intergovernmental Audit Forum meetings have 

routinely included presentations concerning Recovery Act issues. These 

forums, attended by key state and local auditors, representatives of the 

inspectors general (IG) community, and others, including GAO officials, 

have always been a setting for dialogue concerning accountability issues. 

Since passage of the Recovery Act, these meetings have provided an 

opportunity for us to update the audit community concerning our 

Recovery Act work in selected states and the District of Columbia (the 

District). 

 

114The General Services Administration Inspector General has issued 38 reports on 

Recovery Act-related issues as of December 2009; however, 36 of the 38 reports were not 

published on Recovery.gov because they contain proprietary information. 

Page 121 GAO-10-437 Recovery Act
 

The depth and frequency of the discussion of Recovery Act issues among 

members of the audit community have been enhanced by weekly and 

monthly telephone conferences. The National Association of State 

Auditors, Comptrollers and Treasurers (NASACT) has coordinated a 

weekly teleconference to provide state associations with updates on the 

status of OMB guidance on reporting requirements for Recovery Act 

funds.115 Participants in this call include representatives from OMB, the 

Board, GAO, the National Governors Association, the National Association 

of State Budget Officers (NASBO), and state stimulus czars, as well as 

NASACT. These teleconferences have afforded the opportunity for 

information sharing and problem solving and have involved over 40 

people. For example, discussions of the full-time equivalent (FTE) 

calculation for recipient reporting led to in part a recommendation that 

has clarified the calculation. In addition to this teleconference, NASACT, 

through its associate organization the National State Auditors Association, 

convenes a monthly conference call that includes OMB, the Board, GAO, 

inspectors general, and representatives from the state and local audit 

communities. The Association of Government Accountants and the 

Association of Local Government Auditors have also been active 

participants in discussions of Recovery Act auditing issues. In an effort to 

ensure information sharing about allegations of fraud, we are also working 

with state and local auditors to develop plans for routine sharing of 

information. 

Across our 16 selected states, and in the District of Columbia, a wide 

variety of entities are responsible for, and involved in, oversight and audit 

of Recovery Act Programs. Each state is unique in its configuration of 

oversight and audit agencies, yet some common features span many 

jurisdictions. Cities and towns, housing and transit authorities, and other 

units of government also differ widely in capacity and structure for 

oversight and auditing activities. 

Oversight and Audit of 

Recovery Act Programs at the 

State and Local Levels 

Many states created new positions and/or task forces to specifically 

manage and oversee Recovery Act programs. California, Colorado, 

Georgia, Iowa, Massachusetts New Jersey, New York, Pennsylvania, and 

Texas are among the states that are using this strategy as part of their 

management and oversight efforts. Inspector general offices in some of 

 

115The National Association of State Auditors, Comptrollers and Treasurers is an 

organization of state auditors, comptrollers, and treasurers in the 50 states, the District of 

Columbia, and U.S. territories who deal with the financial management of state 

government. 

Page 122 GAO-10-437 Recovery Act
 

our selected states investigate cases of alleged fraud, waste, or abuse.116

Internal auditors across state agencies, such as state departments that 

manage transportation and education, are engaged to various degrees in 

the oversight and auditing of Recovery Act funds. 

All selected states have multiple offices engaged to some extent in the 

oversight and audit of Recovery Act programs. For example, in Ohio the 

State Audit Committee, the Office of Budget and Management (OBM), 

OBM’s Office of Internal Audit (OIA), the Auditor of State (AOS), and the 

state-appointed Deputy Inspector General all share responsibility for 

oversight and auditing of Recovery Act programs. OIA has completed six 

audit reports on programs through which the Recovery Act provided funds 

for weatherization, foster care, job training, law enforcement, addressing 

violence against women, and highways as well as on Recovery Act central 

reporting. OIA found, for example, that the weatherization and job training 

programs need additional identification and documentation of key 

Recovery Act-related risks and mitigating internal controls. In contrast, the 

OIA audit of the adequacy and design of internal controls for the Highway 

Infrastructure Investment Recovery Act Program had no findings. 

The Ohio Auditor of State is responsible for audit activities at housing 

authorities and other grantees that receive funding directly from the 

federal government rather than through the state. Additionally, the Ohio 

Auditor of State is conducting the state’s Single Audit for fiscal year 2009, 

which will include some programs that receive Recovery Act funds. The 

Deputy Inspector General holds a position that was specifically created to 

monitor state agency distribution of Recovery Act funds. Investigations of 

potential criminal activities related to Recovery Act programs are handled 

by the Ohio Office of Inspectors General. This office has completed two 

investigations and has three ongoing. Both completed investigations 

involved funds to be overseen by the Ohio EPA. In one case the funds 

were found not to be Recovery Act funds, in the other case the IG found 

no wrongful act had occurred. 

In Georgia, oversight and auditing responsibilities rest with the Office of 

Planning and Budget, State Accounting Office, State Auditor, State 

Inspector General, and agencies’ internal audit departments. For example, 

the State Auditor included audits of Recovery Act programs administered 

 

116In the District of Columbia, the Inspector General conducts program audits as well as 

investigating allegations of waste, fraud, and abuse. 

Page 123 GAO-10-437 Recovery Act
 

by the Georgia Department of Education, Georgia Department of Human 

Services, Georgia Department of Labor, and Georgia Department of 

Transportation (GDOT) in the 2009 Single Audit. The Single Audits for 

fiscal years 2010 and 2011 are expected to include audits of Recovery Act 

funding awarded to all 157 local education agencies (LEA). The State 

Inspector General’s office has responded to complaints concerning 

Recovery Act programs. The State Inspector General’s office has received 

two complaints concerning Recovery Act programs. One was a complaint 

about Recovery Act funds being used to purchase road signs for GDOT 

projects funded by the Recovery Act; GDOT has discontinued the practice 

of posting these signs. The Inspector General’s investigation of the second 

complaint, which involves issues with funds received by the Georgia 

National Guard, has just begun. Internal auditors for the Georgia 

Environmental Facilities Authority, GDOT, and the Georgia Department of 

Human Services all plan to audit Recovery Act programs. 

In a few cases, the auditing of Recovery Act programs is melded into the 

general audit of an overall program that includes Recovery Act funds along 

with other funds. For example, an audit of spending for a highway 

construction project may include a review of Recovery Act funds as part 

of the audit of all funding for the project. In New Jersey, for example, the 

Office of the State Auditor is or will be surveying agencies about their 

internal controls for Recovery Act funds as part of already planned audits; 

these include audits related to community service block grants, bridge 

maintenance contracts, regular school district audits, and clean water 

state revolving funds. 

Many of our selected states, including Ohio and Georgia, discussed above, 

are including some Recovery Act funding in their Single Audits. Officials at 

the Arizona Auditor General’s office told us that Recovery Act-specific 

reviews will be part of the Single Audit work. Illinois officials said that 

their Single Audit covers only the state government and does not include 

component units. The programs to be included in their Single Audit will be 

selected in part on the basis of funding levels, and Recovery Act funds 

would be included in the scope of the audit. However, Illinois officials 

stated that, following the requirements set forth in OMB Circular A-133, 

the programs included in the audit are selected based on factors such as 

amount of funding; therefore, not all programs that received Recovery Act 

funding will be included in the audit’s scope. GAO has recommended to 

OMB that it evaluate options for providing relief related to audit 

requirements for low-risk programs to help balance the new audit 

responsibilities associated with the Recovery Act. Seven out of our 16 

Page 124 GAO-10-437 Recovery Act
 

selected states volunteered to participate in the OMB Single Audit pilot 

project discussed in the Single Audit section of this report.117

A number of cities and counties have included auditing of Recovery Act 

funds in their current audit plans. Austin, Texas, for example, has 

specifically designated some resources for Recovery Act auditing. Denver, 

Colorado, has completed two Recovery Act-specific nonaudit services, 

known as Audit Alerts, and will issue an audit report later in 2010; the city 

auditor in Atlanta, Georgia, will issue a Recovery Act audit report within 

the next few months and is considering additional work; and Jackson, 

Mississippi, is initiating an audit of Recovery Act funds awarded to city 

agencies in the near future. According to county officials, Maricopa 

County, Arizona, has multiple levels of review to monitor Recovery Act 

programs. At the local level, local governments plan to incorporate 

Recovery Act auditing into their Single Audit reviews. 

Some Local Communities Have 

Also Initiated Recovery Act 

Audit Activities 

Officials in a number of communities, however, told us that they have not 

initiated specific Recovery Act audit activities. This is particularly the case 

with small communities in our sample. Officials in these communities told 

us that in part, this is because they have only recently received funds, or 

are anticipating that the amount of funds they will receive is small. Plano, 

Texas, is a small community that is not planning to audit Recovery Act 

programs for these reasons. A few jurisdictions also indicated that they did 

not have the resources to conduct audit work. The City of Macon and Tift 

County, in Georgia, are examples of other local governments that are not 

planning audit activities related to Recovery Act programs. 

Other government entities are also planning audit activity related to 

Recovery Act funds. For example, the New York Metropolitan 

Transportation Authority Audit Services Department is planning to include 

all 22 Recovery Act projects within its jurisdiction in its 2010 audit plans. 

Greater Glens Falls Transit’s (New York State) Single Audit for calendar 

years 2009 and 2010 will include Recovery Act-funded projects. 

 

117The following 16 states volunteered to participate in the project—Alaska, California, 

Colorado, Florida, Georgia, Louisiana, Maine, Missouri, Nevada, North Carolina, Ohio, 

Oklahoma, South Dakota, Tennessee, Texas, and Virginia. 

Page 125 GAO-10-437 Recovery Act
 

Recovery Act funds began flowing as state and local governments faced 

steep revenue declines in 2009. States’ revenue declines have been 

cushioned by the temporary infusion of Recovery Act funds. The results 

from our March 2010 State and Local Fiscal Model Update provide 

additional detail regarding these and other trends in state and local fiscal 

conditions.118 The fiscal model update includes the increased federal grant 

funding made available to state and local governments through the 

Recovery Act. It also shows that the state and local government sector is 

facing short-term declines in its operating balance while also confronting 

long-term fiscal challenges, which have been growing over time. 

Specifically, the model projects operating deficits of about $39 billion for 

2010 and $124 billion for 2011. The cumulative 2-year projected operating 

deficit totals approximately $163 billion. The operating deficit projections 

in our model reflect the pressures facing the sector in the aggregate and 

provide a sense of the magnitude of policy actions necessary for these 

governments to balance their operating budgets.119 Reports from 

associations representing state and local officials corroborate these 

findings. The National Association of State Budget Officers’ most recent 

fiscal survey of the states noted that states will have faced $256 billion in 

budget gaps between fiscal years 2009 and 2011 and an average decline in 

state general fund spending of 5.4 percent for fiscal year 2010—the largest 

margin ever shown through this survey. The National Association of 

Counties reported that 56 percent of counties responding to its survey 

reported starting their most recent fiscal years with projected shortfalls. A 

National League of Cities’ (NLC) survey showed that 88 percent of city 

finance officers reported that their cities were less able to meet fiscal 

needs in 2009 than in the previous year, and the pessimism about the 

ability to meet city fiscal needs is at its highest level in the history of NLC’s 

24-year survey. 

Recovery Act Funds 

Alleviate Some Fiscal 

Pressures as State and 

Local Governments 

Respond to the 

Current Recession 

and Confront LongTerm Challenges 

 

118See GAO, State and Local Governments’ Fiscal Outlook March 2010 Update, 

GAO-10-358 (Washington, D.C.: Mar. 2, 2010). This and related products can be found at 

http://gao.gov/special.pubs/longterm/longterm.html. Our update of the state and local 

model uses data from the National Income and Product Accounts of the Bureau of 

Economic Analysis as the primary data source for projections of the level of receipts and 

expenditures for the sector until 2060, based on current and historical spending and 

revenue patterns. We assume that the current set of policies in place across federal, state, 

and local governments remains constant. Actual amounts will reflect policy actions taken 

by state and local governments to balance their budgets. Years are calendar years. 

119Because the model covers the sector in the aggregate, the fiscal outcomes for individual 

states and localities cannot be captured. 

Page 126 GAO-10-437 Recovery Act
 

The updated simulations in our state and local fiscal model also show that 

the sector continues to face growing long-term fiscal challenges over time, 

which have been exacerbated by the current recession. Our state and local 

sector fiscal model uses the operating balance as a measure of fiscal 

balance for the sector for each year until 2060.120 The operating balance is 

a measure of the sector’s ability to cover its current expenditures out o

current receipts. As illustrated in figure 15, the operating balance measure 

generally was positive in the past except during and after recent 

recessions. This suggests that in the aggregate the sector has been able to 

cover its expenses with incoming receipts. 

f 

 

120The explicit definition of our operating balance measure is all receipts, excluding funds 

used for long-term investments, minus current expenditures. To develop this measure, we 

subtract funds used to finance longer-term projects—such as investments in buildings and 

roads—from receipts since these funds would not be available to cover current expenses. 

Page 127 GAO-10-437 Recovery Act
 

Figure 15: State and Local Model Operating Balance Measure, as a Percentage of Gross Domestic Product (GDP) 

-6

-5

-4

-3

-2

-1

0

1

2

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

Percentage of GDP

Source: GAO simulations, updated March 2010 and January 2009 adjusted.

Year

Operating balance March 2010

Operating balance January 2009 adjusted

-1.0

-0.8

-0.6

-0.4

-0.2

0

0.2

2008 2009 2010 2011 2012 2013

Percentage of GDP

Deficit 

(Negative balance)

Surplus 

(Positive balance)

Insert magnifying near-term fiscal position

March 2010

January 2009 

adjusted

Notes: Historical data are from the Bureau of Economic Analysis’s National Income and Product 

Accounts from 1980 to 2008. Data in 2009 are GAO estimates aligned with published data where 

available. GAO simulations are from 2010 to 2060, using many Congressional Budget Office 

projections and assumptions, particularly for the next 10 years. Simulations are based on current 

policy. 

While our state and local model continues to illustrate the long-term 

pressures facing the sector, recent economic fluctuations also resulted in 

shifts in the model’s short-term results. The temporary growth in federal 

grant funding provided by the Recovery Act helped offset the sector’s tax 

receipt declines. As a percentage of GDP, state and local personal income 

tax declines exceeded revenue shifts from sales and property tax, as 

shown in figure 16. Total tax receipts for the sector declined from about 

9.25 percent of GDP in 2008 to 8.8 percent of GDP in 2009. We project a 

slight increase in total tax receipts to 8.82 percent of GDP in 2010. 

Personal income tax receipts declined from about 2.3 percent of GDP in 

Page 128 GAO-10-437 Recovery Act
 

2008 to 1.9 percent of GDP in 2009. We project a slight increase in total tax 

receipts in 2010. 

Figure 16: State and Local Government Taxes, as a Percentage of GDP 

Sales tax

Property tax

Personal income tax

Year

Percentage of GDP

Source: GAO simulations, updated March 2010.

0

1

2

3

4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Notes: Historical data are from the Bureau of Economic Analysis’s National Income and Product 

Accounts from 1980 to 2008. Data in 2009 are GAO estimates aligned with published data where 

available. GAO simulations are from 2010 to 2060, using many Congressional Budget Office 

projections and assumptions, particularly for the next 10 years. Simulations are based on current 

policy. 

The recent update of the model shows short-term declines in the fiscal 

position of the sector, even after the inclusion of National Income and 

Product Accounts data—which reflect Recovery Act grant funds received 

by state and local governments for programs such as Medicaid, highways, 

and education that are discussed in this report. Federal Recovery Act 

grants to state and local governments did help offset declines in state and 

local tax receipts between our January 2009 and March 2010 simulations. 

Federal Medicaid and other grants grow as a share of GDP through 2010 

(see fig. 17). Federal grants-in-aid comprised the second largest source of 

Page 129 GAO-10-437 Recovery Act
 

receipts for the sector in 2008, providing about $392 billion, or about 20 

percent of current receipts for the sector.121 In 2009, this amount inc

to $477 billion as Recovery Act funds flowed

 2009, this amount increased 

 to these governments 

through intergovernmental grant programs. 

Figure 17: State and Local Government Grants, as a Percentage of GDP 

Medicaid grants

Other grants

Year

Percentage of GDP

Source: GAO simulations, updated March 2010.

0

1

1.5

2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Notes: Historical data are from the Bureau of Economic Analysis’s National Income and Product 

Accounts from 1980 to 2008. Data in 2009 are GAO estimates aligned with published data where 

available. GAO simulations are from 2010 to 2060, using many Congressional Budget Office 

projections and assumptions, particularly for the next 10 years. Simulations are based on current 

olicy. 

tates 

 

p

State officials we contacted acknowledged the Recovery Act’s 

contributions to easing immediate fiscal pressures in the selected s

but remain wary of fiscal pressures likely to continue after federal 

assistance ends. Local officials also cautioned that their reduced tax 

receipts exceed the influx of Recovery Act funds. Officials in all of our 

Recovery Act

nds 

Address Budget 

Gaps 

State and Local Officials’ 

Use of Recovery Act Fu

Helps 

121The sector’s current tax receipts, including income, sales, and property tax, totaled $1.3 

billion, or about 68 percent of the sector’s receipts in 2008. 

Page 130 GAO-10-437 
 

selected states indicated that they were able to reduce or eliminate cur

and anticipated budget shortfalls through a variety of budget actions, 

including the incorporation of Recovery Act funds in their budgets for 

fiscal years 2009 and 2010. The use of Recovery Act funds affected the siz

and scope of some states’ budgeting decisions, and many of the selected 

states reported that they would have had to make further c

rent 

e 

uts to services 

and programs had they not received Recovery Act funds. 

er 

ghs, 

ating 

very 

e 

into their reserve funds in fiscal year 2009, fiscal year 2010, or both.122

ngch 

 

State officials reported that their efforts to balance their budgets while 

using Recovery Act funds focused on maintaining current services rath

than creating new programs or staff positions that could extend their 

state’s financial liabilities beyond the end date for Recovery Act funds. 

Despite the infusion of Recovery Act funds into state budgets, some state

officials reported that the current fiscal situation still required action to 

maintain balanced budgets. These actions included staff layoffs, furlou

program cuts, fee increases, and scaling back of state rebates of local 

property taxes. For example, in Georgia, for fiscal year 2009, officials 

amended the state budget by reducing revenue estimates, using reserves,

and cutting program funding. In New Jersey, the largest cuts came from 

scaling back state rebates of local property taxes and reducing payments 

to the state’s pension funds. To balance the fiscal year 2010 budget, North

Carolina officials incorporated $1.4 billion of Recovery Act funds, cut $2 

billion from the budget, and included $1.4 billion in tax and fee increases. 

In addition to these budget actions, some states also reported acceler

their use of Recovery Act funds to stabilize deteriorating budgets. In 

Massachusetts, state officials said that accelerating their use of Reco

Act and state rainy-day funds presented the most viable solution to 

balance their budget. California’s dire fiscal condition also prompted the 

state to accelerate the initial use of its Recovery Act funds, along with th

use of a number of additional measures to reduce the state’s fiscal year 

2008-2009 budget gap. More than half of the selected states also tapped

Most Recovery Act funds to local governments flow through existing 

federal grant programs. The use of Recovery Act funds helped to fund 

existing programs for some local governments for nonrecurring projects, 

while some governments did not apply for grants that would result in lo

term financial obligations. In addition to Recovery Act funds for whi

local governments were prime recipients, several local government 

Recovery Act

 to 

d 

e Fiscal 

Challenges 

Recovery Act Funds Flow

Local Governments an

Cushion Som

122All of the selected states and the District have at least one rainy-day or reserve fund. 

Page 131 GAO-10-437 
 

officials reported that additional Recovery Act funds were received by 

other entities within their local jurisdictions.123 These entities include

housing authorities, transit authorities, nonprofit organizations, and 

school systems. Some local governments reported experiencing c

in applying for and administering Recovery Act grants, including 

insufficient staff capacity, lack of guidance, budget constraints, short 

application timetables, and matching requirements. Local government 

officials reported that use of Recovery Act funds helped to support loc

services, but recent revenue declines still resulted in midcycle budget 

shortfalls. Recovery funds plugged gaps in program fund

d 

hallenges 

al 

ing, but budget 

challenges continued despite the receipt of these funds. 

e 

hat 

es 

he 

ry 

e 

eported that they were still planning for the end 

of specific grant periods. 

 

States’ and localities’ approaches to developing exit strategies for 

continuing services after their use of temporary Recovery Act funds ends 

reflect the balanced budget requirements in place for the selected states,

the District, and selected local governments included in our work. Stat

budget officials referred to the temporary nature of the funds and the 

fiscal challenges that are expected to extend beyond the timing of funds 

provided by the Recovery Act. Officials discussed a desire to avoid w

they referred to as the “cliff effect” associated with the dates when 

Recovery Act funding ends for various federal programs. Budget officials

in some of the selected states reported that they were preparing for the 

end of Recovery Act funding by using funds for nonrecurring expenditur

and hiring personnel to fill limited-term positions to avoid creating longterm liabilities. Some local officials also said that because Recovery Act 

funds were generally used for one-time projects, which will not result in

long-term liabilities, they did not plan to develop exit strategies. On t

other hand, a number of local governments reported that they were 

developing plans to sustain current Recovery Act projects after Recove

Act funding ends. Other local governments reported developing more 

general exit strategies consisting of reductions in expenditures or possible 

increases in revenue to prepare for the end of Recovery Act funding. Som

local government officials reported that their governments did not need

exit strategies because of the limited effect of the use of Recovery Act 

funds. However, officials r

Approaches to Developin

Strategies for the End of 

Recovery Act Funding Refle

the Nature of Funding and 

g Exit 

ct 

Balanced Budget Requirements 

123For our December 2009 Recovery Act report, we expanded our focus on the use of 

Recovery Act funds to include 44 local governments. 

Page 132 GAO-10-437 Recovery Act
 

For this report, GAO both updates the status of agencies’ efforts to 

implement GAO’s previous 23 recommendations and makes 5 new 

recommendations to the Office of Management and Budget (OMB) and the 

Departments of Transportation (DOT), Housing and Urban Development 

(HUD), and Education to improve accountability for Recovery Act funds.124

Lastly, we update the status of our Matters for Congressional 

Consideration. 

New, Implemented, 

and Open 

Recommendations; 

Matters for 

Congressional 

Consideration 

Department of 

Transportation 

The Secretary of Transportation should gather timely information on the 

progress states are making in meeting the maintenance-of-effort 

requirement and report preliminary information to Congress within 60 

days of the certified period (Sept. 30, 2010), (1) on whether states met 

required program expenditures as outlined in their maintenance-of-effort 

certifications, (2) the reasons that states did not meet these certified 

levels, if applicable, and (3) lessons learned from the process. 

New Recommendation 

Recipients of highway and transit Recovery Act funds, such as state 

departments of transportation and transit agencies, are subject to multiple 

reporting requirements. Both the Department of Transportation and OMB 

have issued implementation guidance for recipient reporting. Despite 

these efforts, state and local highway and transit officials expressed 

concerns and challenges with meeting the Recovery Act reporting 

requirements. We recommended in our September 2009 report that the 

Secretary of Transportation should continue the department’s outreach to 

state departments of transportation and transit agencies to identify 

Implemented Recommendation 

 

124GAO, Recovery Act: As Initial Implementation Unfolds in States and Localities, 

Continued Attention to Accountability Issues Is Essential, GAO-09-580 (Washington, D.C.: 

Apr. 23, 2009); Recovery Act: States’ and Localities’ Current and Planned Uses of Funds 

While Facing Fiscal Stresses, GAO-09-829 (Washington, D.C.: July 8, 2009); Recovery Act: 

Funds Continue to Provide Fiscal Relief to States and Localities, While Accountability 

and Reporting Challenges Need to Be Fully Addressed, GAO-09-1016 (Washington, D.C.: 

Sept. 23, 2009); Recovery Act: Recipient Reported Jobs Data Provide Some Insight into 

Use of Recovery Act Funding, but Data Quality and Reporting Issues Need Attention, 

GAO-10-223 (Washington, D.C.: Nov. 19, 2009); Recovery Act: Status of States’ and 

Localities’ Use of Funds and Efforts to Ensure Accountability, GAO-10-231 (Washington, 

D.C.: Dec. 10, 2009). 

Page 133 GAO-10-437 Recovery Act
 

common problems in accurately fulfilling reporting requirements and 

provide additional guidance, as appropriate. 

In September 2009, in responding to our recommendation, DOT said that it 

had conducted outreach, including providing technical assistance, 

training, and guidance to recipients, and will continue to assess the need 

to provide additional information. For example, in February 2010, FTA 

continued three training webinars to provide technical assistance in 

complying with reporting requirements under section 1201(c) of the 

Recovery Act. In addition, on February 1, 2010, FTA issued guidance to 

transit agencies instructing them to use the same methodology for 

calculating jobs retained through vehicles purchased under section 1201 as 

they had been for the recipient reporting. This reversed previous guidance 

that had instructed transit agencies to use a different methodology for 

vehicle purchases under sections 1201 and recipient reporting. 

Agency Actions 

The Department of Transportation and the Federal Highway 

Administration (FHWA) have yet to provide clear guidance regarding how 

states are to implement the Recovery Act requirement that economically 

distressed areas (EDA) are to receive priority in the selection of highway 

projects for funding. We found substantial variation both in how states 

identified EDAs and how they prioritized project selection for these areas. 

To ensure states meet Congress’s direction to give areas with the greatest 

need priority in project selection, we recommended in our July 2009 report 

that the Secretary of Transportation develop clear guidance on identifying 

and giving priority to economically distressed areas that are in accordance 

with the requirements of the Recovery Act and the Public Works and 

Economic Development Act of 1965, as amended, and more consistent 

procedures for the Federal Highway Administration to use in reviewing 

and approving states’ criteria. 

Implemented Recommendation 

In August 2009, in response to our recommendation, FHWA, in 

consultation with the Department of Commerce, developed guidance that 

addresses our recommendation. In particular, FHWA’s August 2009 

guidance defines “priority,” directing states to give priority to projects that 

are located in an economically distressed area and can be completed 

within the 3-year time frame over other projects. In addition, FHWA’s 

guidance sets out criteria that states may use to identify economically 

distressed areas based on “special need.” The criteria align closely with 

special need criteria used by the Department of Commerce’s Economic 

Development Administration in its own grant programs, including factors 

such as actual or threatened business closures (including job loss 

thresholds), military base closures, and natural disasters or emergencies. 

Agency Actions 

Page 134 GAO-10-437 Recovery Act
 

Department of Housing 

and Urban Development 

To help HUD achieve Recovery Act objectives and address challenges with 

its continued administration of Recovery Act funds, we recommend that 

the Secretary of Housing and Urban Development develop a management 

plan to determine the adequate level of agency staff needed to administer 

both the Recovery Act funds and the existing Capital Fund program going 

forward, including identifying future resource needs and determining 

whether current resources could be better utilized to administer these 

funds. 

New Recommendation 

We recommend that the Secretary of Housing and Urban Development 

instruct housing agencies to discontinue use of the jobs calculator 

provided by HUD in the first round of recipient reporting for subsequent 

rounds of reporting to ensure the correct job calculation is used. 

New Recommendation 

To enhance HUD’s ability to prevent, detect, and correct noncompliance 

with the use of Recovery Act funds, we recommended in September 2009 

that the Secretary of the Department of Housing and Urban Development 

expand the criteria for selecting housing agencies for on-site reviews to 

include housing agencies with open Single Audit findings that may affect 

the use of and reporting on Recovery Act funds. 

Implemented Recommendation 

In October 2009, HUD expanded its criteria for selecting housing agencies 

for on-site reviews to include all housing agencies with open 2007 and 

2008 Single Audit findings as of July 7, 2009, relevant to the administration 

of Recovery Act funds. HUD has identified 27 such housing agencies and 

planned to complete these on-site reviews by February 15, 2010. 

Agency Actions 

Department of Education 

To improve the consistency of FTE data collected and reported, we 

recommend that the Secretary of the Department of Education 

(Education) and the Director of the Office of Management and Budget 

(OMB) provide clarifying guidance to recipients on how to best calculate 

FTEs for education employees during quarters when school is not in 

session. 

New Recommendation 

We recommended in September 2009 that the Secretary of Education take 

further action such as collecting and reviewing documentation of state 

monitoring plans to ensure that states understand and fulfill their 

Implemented Recommendation 

Page 135 GAO-10-437 Recovery Act
 

responsibility to monitor subrecipients of SFSF funds and consider 

providing training and technical assistance to states to help them develop 

and implement state monitoring plans for SFSF. 

In February 2010, Education instructed states to submit to Education for 

review their plans and protocols for monitoring subrecipients of SFSF 

funds. Education also issued its plans and protocols for monitoring state 

implementation of the SFSF program. The plan includes on-site visits to 

about half the states and desk reviews of the other states to be conducted 

over the next year. 

Agency Actions 

We recommended in November 2009 that the Secretary of Education take 

further action to enhance transparency by requiring states to include an 

explanation of changes to MOE levels in their State Fiscal Stabilization 

Fund application resubmissions.125

Open Recommendation 

Education has not taken action on this recommendation, but GAO is 

continuing to work with Education to ensure actions are taken to enhance 

transparency of state maintenance–of-effort changes. In its response to the 

recommendation, Education reported that it has always required states 

seeking to amend the maintenance-of-effort information in their SFSF 

applications to provide the basis for such amendments. Once approved, 

the amended applications are posted to Education’s Web site. However, 

the approved and publicly available applications do not always provide a 

complete explanation of the basis for the amendments. For example in 

August 2009, California changed its maintenance–of-effort level from an 

aggregate measure to a per-pupil basis. California’s resubmitted 

application did not state why the change to a per-pupil basis was made. 

Agency Actions 

Department of Labor 

Our September 2009 bimonthly report identified a need for additional 

federal guidance in two areas—measuring the work readiness of youth 

and defining green jobs —and we made the following two 

recommendations to the Secretary of Labor: 

Open Recommendation 

 

125For more details on the maintenance-of-effort requirements, see GAO, Recovery Act: 

Planned Efforts and Challenges in Evaluating Compliance with Maintenance of Effort 

and Similar Provisions, GAO-10-247 (Washington, D.C.: Nov. 30, 2009). 

Page 136 GAO-10-437 Recovery Act
 

• To enhance the usefulness of data on work readiness outcomes, 

provide additional guidance on how to measure work readiness of 

youth, with a goal of improving the comparability and rigor of the 

measure. 

• To better support state and local efforts to provide youth with 

employment and training in green jobs, provide additional guidance 

about the nature of these jobs and the strategies that could be used to 

prepare youth for careers in green industries. 

Labor agreed with both of our recommendations and has already begun to 

take actions to implement them. With regard to the work readiness 

measure for WIA Youth summer employment activities, Labor 

acknowledged that a lack of comparability in the way work readiness 

gains were measured across local areas has led to a less meaningful 

outcome measure at the state and national level. Labor indicated that, 

through its WIA Youth Recovery Act process evaluations and regional 

monitoring visits, it will continue to assess the methodologies used to 

measure work readiness and plans to further refine the work readiness 

indicator and determine a more effective way to measure it. In the event 

that a significant number of local areas have Recovery Act funds available 

for summer employment in 2010, or if Labor receives funds for future 

summer employment activities where the work readiness measure is used 

to gauge effectiveness, Labor indicated that it will issue further guidance 

that provides for reporting of more consistent and meaningful data. 

Agency Actions 

Regarding our recommendation on the green jobs, Labor indicated that it 

recognizes the need to provide assistance to states and local areas to help 

them prepare youth for careers in green industries and is taking several 

steps to better understand and define green jobs. First, Labor held two 

technical assistance forums in November and December 2009 that focused 

on strategies for creating green educational and career pathways. The 

forums offered training workshops in areas such as identifying green 

industrial sectors and job opportunities and appropriate work experiences 

to assist youth in green career pathways. Second, Labor reported that the 

Bureau of Labor Statistics is developing a definition for green industries 

and jobs to ensure consistent surveying and counting of these jobs. 

Officials hope this will inform state and local workforce development 

efforts to identify and target green jobs and their training needs. Third, 

Labor noted that it has supported an Occupational Information Network 

project that resulted in research that can be used as a starting point for 

identifying green industries and occupations and informing the 

development of training and job placement programs. Labor also plans to 

Page 137 GAO-10-437 Recovery Act
 

leverage the results of Recovery Act-funded competitive grants for green 

job training to provide insights on delivering services to youth, and others, 

along green career pathways. Additionally, Labor officials told us that 

once these grants are under way, it intends to gather and share examples 

of effective strategies and training models through technical assistance 

efforts. 

Executive Office of the 

President: Office of 

Management and Budget 

(OMB) 

OMB should work with the Recovery Accountability and Transparency 

Board and federal agencies, building on lessons learned, to establish a 

formal and feasible framework for review of recipient changes during the 

continual update period and consider providing more time for agencies to 

review and provide feedback to recipients before posting updated reports 

on Recovery.gov. 

New Recommendation 

To leverage Single Audits as an effective oversight tool for Recovery Act 

programs, we recommended from April to December 2009 that the 

Director of OMB should 

Open Recommendation 

(1) provide more direct focus on Recovery Act programs through the 

Single Audit to help ensure that smaller programs with higher risk have 

audit coverage in the area of internal controls and compliance; 

(2) develop requirements for reporting on internal controls during 2009 

before significant Recovery Act expenditures occur, as well as for ongoing 

reporting after the initial report; 

(3) evaluate options for providing relief related to audit requirements for 

low-risk programs to balance new audit responsibilities associated with 

the Recovery Act; 

(4) develop mechanisms to help fund the additional Single Audit costs and 

efforts for auditing Recovery Act programs; and 

(5) take steps to achieve sufficient participation and coverage in a Single 

Audit program—the Single Audit Internal Control Project—that provides 

Page 138 GAO-10-437 Recovery Act
 

for early written communication of internal control deficiencies to achieve 

the objective of more timely accountability over Recovery Act funds. 

To reduce the impact of untimely Single Audit reporting, we further 

recommended that the Director of OMB should 

(6) formally advise federal cognizant agencies to adopt a policy of no 

longer approving extensions of the due dates of Single Audit reporting 

package submissions beyond the 9-month deadline, and 

(7) widely communicate this revised policy to the state audit community 

and others who have responsibility for conducting Single Audits and 

submitting the Single Audit reporting package. 

OMB has taken several steps in response to our recommendations. Its 

efforts, however, are ongoing, and further actions are needed to fully 

implement our recommendations to help mitigate risks related to 

Recovery Act funds. We include a summary of OMB’s efforts to implement 

these recommendations from our bimonthly reviews. 

Agency Actions 

To focus auditor risk assessments on Recovery Act-funded programs and 

to provide guidance on internal control reviews for Recovery Act 

programs, OMB worked within the framework defined by existing 

mechanisms—Circular No. A-133 and the Circular No. A-133 Compliance 

Supplement (Compliance Supplement).126 In this context, OMB has made 

limited adjustments to its Single Audit guidance. OMB issued the 

Compliance Supplement in May 2009, which focused risk assessments on 

Recovery Act-funded programs. In August 2009, OMB issued the Circular 

No. A-133 Compliance Supplement Addendum I, which provided 

additional guidance for auditors and modified the Compliance Supplement 

to, among other things, focus on new Recovery Act programs and new 

program clusters. 

In October 2009, OMB began a Single Audit Internal Control Project 

(project), which is currently under way. One of the project’s goals is to 

encourage auditors to identify and communicate significant deficiencies 

and material weaknesses in internal control over compliance for selected 

major Recovery Act programs 3 months sooner than the 9-month time 

 

126The Compliance Supplement is issued annually to guide auditors on what program 

requirements should be tested for programs audited as part of the Single Audit. 

Page 139 GAO-10-437 Recovery Act
 

frame currently required under statute. According to OMB, the project 

remains on schedule for completion in early spring 2010, when OMB plans 

to analyze the results to identify the need for potential modifications to 

improve OMB guidance related to Recovery Act-funded programs. 

Although OMB noted the increased responsibilities falling on those 

responsible for performing Single Audits, it has yet to issue proposals or 

plans to address this issue. States that volunteered to participate in the 

project were eligible for some relief in their workloads because OMB 

modified the requirements under Circular No. A-133 to reduce the number 

of low-risk programs for inclusion in the Single Audits. 

States have been concerned about the burden imposed by new 

requirements, increased accounting and management workloads, and 

strains on information systems and staff capacity at a time when they are 

under severe budgetary stress. We recommended in April 2009 that the 

Director of OMB clarify what Recovery Act funds can be used to support 

state efforts to ensure accountability and oversight, especially in light of 

enhanced oversight and coordination requirements. 

Implemented Recommendation 

On May 11, 2009, OMB released M-09-18, Payments to State Grantees for 

Administrative Costs of Recovery Act Activities, clarifying how state 

grantees could recover administrative costs of Recovery Act activities. 

Agency Actions 

States and localities are expected to report quarterly on a number of 

measures, including the use of funds and an estimate of the number of jobs 

created and the number of jobs retained as required by section 1512 of the 

Recovery Act. We recommended in our July 2009 report that to increase 

consistency in recipient reporting of jobs created and retained, the 

Director of OMB should work with federal agencies to have them provide 

program-specific examples of the application of OMB’s guidance on 

recipient reporting of jobs created and retained. 

Implemented Recommendation 

OMB has issued clarifications and frequently asked questions (FAQ) on 

Recovery Act reporting requirements. During the first reporting period, 

OMB also deployed regional federal employees to serve as liaisons to state 

and local recipients in large population centers and established a call 

center for entities that did not have an on-site federal liaison. In addition, 

federal agencies issued additional guidance that builds on the OMB June 

22 recipient reporting guidance for their specific programs. This guidance 

is in the form of FAQ, tip sheets, and more traditional guidance that builds 

on what was provided on June 22. Federal agencies have also taken steps 

to provide additional education and training opportunities for state and 

Agency Actions 

Page 140 GAO-10-437 Recovery Act
 

local program officials on recipient reporting, including web-based 

seminars. 

To foster timely and efficient communications, we recommended in April 

2009 that the Director of OMB should continue to develop and implement 

an approach that provides easily accessible, real-time notification to (1) 

prime recipients in states and localities when funds are made available for 

their use, and (2) states—where the state is not the primary recipient of 

funds but has a statewide interest in this information. 

Implemented Recommendation 

In response to our recommendation, OMB has made important progress in 

notifying recipients when Recovery Act funds are available, 

communicating the status of these funds at the federal level through 

agency Weekly Financial Activity reports, and disseminating Recovery Act 

guidance broadly while actively seeking public and stakeholder input. 

OMB has taken the additional step of requiring federal agencies to notify 

Recovery Act coordinators in states, the District of Columbia, 

commonwealths, and territories within 48 hours of an award to a grantee 

or contractor in their jurisdiction. 

Agency Actions 

Responsibility for reporting on jobs created and retained falls to 

nonfederal recipients of Recovery Act funds. As such, states and localities 

have a critical role in determining the degree to which Recovery Act goals 

are achieved. Given questions raised by many state and local officials 

about how best to determine both direct and indirect jobs created and 

retained under the Recovery Act, we recommended in April 2009 that the 

Director of OMB continue OMB’s efforts to identify appropriate 

methodologies that can be used to: (1) assess jobs created and retained 

from projects funded by the Recovery Act; (2) determine the impact of 

Recovery Act spending when job creation is indirect; and (3) identify those 

types of programs, projects, or activities that in the past have 

demonstrated substantial job creation or are considered likely to do so in 

the future. We also recommended that the Director of OMB consider 

whether the approaches taken to estimate jobs created and retained in 

these cases can be replicated or adapted to other programs. 

Implemented Recommendation 

On June 22, 2009, OMB issued additional implementation guidance on 

recipient reporting of jobs created and retained, (OMB memoranda, M-09-

21, Implementing Guidance for the Reports on Use of Funds Pursuant to 

the American Recovery and Reinvestment Act of 2009). This guidance is 

responsive to much of what we recommended. The June 2009 guidance 

provided detailed instructions on how to calculate and report jobs as fulltime equivalents (FTE). It also describes in detail the data model and 

Agency Actions 

Page 141 GAO-10-437 Recovery Act
 

reporting system to be used for the required recipient reporting on jobs. It 

clarifies that the prime recipient and not the subrecipient is responsible 

for reporting information on jobs created or retained. Federal agencies 

have issued guidance that expanded on the OMB June 22 governmentwide 

recipient reporting guidance and provided education and training 

opportunities for state and local program officials. Agency-specific 

guidance includes FAQs and tip sheets. Additionally, agencies are 

expected to provide examples of recipient reports for their programs, 

which is also consistent with what we recommended. In addition to the 

federal agency efforts, OMB has issued FAQs on Recovery Act reporting 

requirements. The June 22 guidance and subsequent actions by OMB are 

responsive to much of what we said in our recommendation. 

We have noted in prior reports that in order to achieve the delicate 

balance between robust oversight and the smooth flow of funds to 

Recovery Act programs, states may need timely reimbursement for these 

activities. We recommended in September 2009 that to the extent that the 

Director of OMB has the authority to consider mechanisms to provide 

additional flexibilities to support state and local officials charged with 

carrying out Recovery Act responsibilities, it is important to expedite 

consideration of alternative administrative cost reimbursement proposals. 

Implemented Recommendation 

In response to this recommendation, OMB issued a memorandum on 

October 13, 2009, to provide guidance to address states’ questions 

regarding specific exceptions to OMB Circular A-87, Cost Principles for 

State, Local and Indian Tribal Governments. In the memorandum, OMB 

provided clarifications for states regarding specific exceptions to OMB 

Circular A-87 that are necessary in order for the states to perform timely 

and adequate Recovery Act oversight, reporting, and auditing. We believe 

the October 2009 OMB guidance provides the additional clarification 

needed for states and localities to proceed with their plans to recoup 

administrative costs. 

Agency Actions 

To improve the consistency of FTE data collected and reported, we 

recommended in November 2009 that OMB clarify the definition and 

standardize the period of measurement for the FTE data element in the 

recipient reports. 

Implemented Recommendation 

After the first round of reporting by states on their use of Recovery Act 

funds in October 2009, OMB updated the recipient reporting guidance on 

December 18, 2009. According to the agency, this guidance aligns with 

GAO’s recommendation by requiring recipients to report job estimates on 

a quarterly rather than a cumulative basis. As a result, recipients will no 

Agency Actions 

Page 142 GAO-10-437 Recovery Act
 

longer be required to sum various data on hours worked across multiple 

quarters of data when calculating job estimates. The December guidance 

incorporated lessons learned from the first round of recipient reporting 

and also addressed recommendations we made in our November 2009 

report on recipient reporting. According to OMB, the December guidance 

is intended to help federal agencies improve the quality of data reported 

under Section 1512 and simplifies compliance by revising the definitions 

and calculations needed to define and estimate the number of jobs saved. 

To improve the consistency of FTE data collected and reported, we also 

recommended in November 2009 that OMB consider being more explicit 

that “jobs created or retained” are to be reported as hours worked and 

paid for with Recovery Act funds. 

Implemented Recommendation 

In response to our recommendation, OMB issued guidance on December 

18, 2009, that no longer requires recipients make a subjective judgment of 

whether jobs were created or retained as a result of the Recovery Act. 

Instead, recipients will more easily and objectively report on jobs funded 

with Recovery Act dollars. 

Agency Actions 

To improve the consistency of FTE data collected and reported, we also 

recommended in our November 2009 report that OMB continue working 

with federal agencies to provide or improve program-specific guidance to 

assist recipients, especially as it applies to the full-time equivalent 

calculation for individual programs. 

Implemented Recommendation 

In response to our recommendation, OMB issued guidance on December 

18, 2009, that required federal agencies to submit their guidance 

documents to OMB for review and clearance to ensure consistency 

between federal agency guidance and the guidance released by OMB. 

Agency Actions 

To improve the consistency of FTE data collected and reported, we 

recommended in November 2009 that OMB work with the Recovery 

Accountability and Transparency Board and federal agencies to reexamine review and quality assurance processes, procedures, and 

requirements in light of experiences and identified issues with the initial 

round of recipient reporting and consider whether additional 

modifications need to be made and if additional guidance is warranted. 

Implemented Recommendation 

In response to our recommendation, on December 18, 2009, OMB issued 

updated guidance on data quality, nonreporting recipients, and reporting 

of job estimates. The agency stated that the updated guidance 

incorporates lessons learned from the first reporting period and further 

Agency Actions 

Page 143 GAO-10-437 Recovery Act
 

addresses GAO’s recommendations. The guidance also provides federal 

agencies with a standard methodology for effectively implementing 

reviews of the quality of data submitted by recipients. 

Matters for Congressional 

Consideration 

To the extent that appropriate adjustments to the Single Audit process are 

not accomplished under the current Single Audit structure, Congress 

should consider amending the Single Audit Act or enacting new legislation 

that provides for more timely internal control reporting, as well as audit 

coverage for smaller Recovery Act programs with high risk. 

Matter 

GAO continues to believe that Congress should consider changes related 

to the Single Audit process. 

To the extent that additional coverage is needed to achieve accountability 

over Recovery Act programs, Congress should consider mechanisms to 

provide additional resources to support those charged with carrying out 

the Single Audit Act and related audits. 

Matter 

GAO continues to believe that Congress should consider changes related 

to the Single Audit process. 

We provided a draft of sections of this report to the Director of the Office 

of Management and Budget (OMB); the Secretaries of the Departments of 

Education, Energy, Housing and Urban Development (HUD), Labor, and 

Transportation; and officials from the Centers for Medicare & Medicaid 

Services. OMB generally agreed with the recommendations in the report 

and provided written comments, which we incorporated as appropriate. 

OMB’s letter is reproduced in appendix II. The Departments of Education, 

Energy, Labor, and Transportation provided technical comments, which 

we incorporated as appropriate. The Department of Education agreed with 

our recommendation. HUD did not concur with our recommendation, 

which is discussed in the Public Housing Capital Fund section of this 

report. HUD also provided technical comments on the recipient report 

section, which we incorporated. The Department of Transportation is 

considering our recommendation. Officials from the Centers for Medicare 

& Medicaid Services did not provide any comments. 

Agency Comments 

and Our Evaluation 

Page 144 GAO-10-437 Recovery Act
 

We are sending copies of this report to the Office of Management and 

Budget; the Centers for Medicare & Medicaid Services; the Departments of 

Education, Energy, Housing and Urban Development, Labor, and 

Transportation; and the Recovery Accountability and Transparency Board. 

The report is available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

me at (202) 512-5500. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in 

Gene L. Doda

appendix IV. 

ro 

Acting Comptroller General of the United States

Page 145 GAO-10-437 Recovery Act
 

List of Addressees 

The Honorable Nancy Pelosi 

Speaker of the House of Representatives 

The Honorable Robert C. Byrd 

President Pro Tempore of the Senate 

The Honorable Harry Reid 

Majority Leader 

United States Senate 

The Honorable Mitch McConnell 

Republican Leader 

United States Senate 

The Honorable Steny Hoyer 

Majority Leader 

House of Representatives 

The Honorable John Boehner 

Republican Leader 

House of Representatives 

The Honorable Daniel K. Inouye 

Chairman 

The Honorable Thad Cochran 

Vice Chairman 

Committee on Appropriations 

United States Senate 

The Honorable Dave Obey 

Chairman 

The Honorable Jerry Lewis 

Ranking Member 

Committee on Appropriations 

House of Representatives 

Page 146 GAO-10-437 Recovery Act
 

The Honorable Joseph I. Lieberman 

Chairman 

The Honorable Susan M. Collins 

Ranking Member 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Edolphus Towns 

Chairman 

The Honorable Darrell E. Issa 

Ranking Member 

Committee on Oversight and Government Reform 

House of Representatives 

Page 147 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

Page 148 GAO-10-437 

Appendix I: Objectives, Scope, and 

Methodology 

This appendix describes our objectives, scope, and methodology for this 

review of the Recovery Act. A detailed description of the criteria used to 

select the core group of 16 states and the District of Columbia (District) 

and programs we reviewed is found in appendix I of our April 2009 

Recovery Act bimonthly report.1

This report, the fifth in response to the Recovery Act’s mandate, updates 

and adds new information on the following: (1) selected states’ and 

localities’ use of Recovery Act funds for specific programs, (2) the 

approaches taken by selected states and localities to ensure accountability 

for Recovery Act funds, and (3) state activities to evaluate the impact of 

the Recovery Act funds they receive. We selected programs for review 

primarily because they have begun disbursing funds to states or because 

they have known or potential risks. The risks can include existing 

programs receiving significant amounts of Recovery Act funds or new 

programs. In some cases, we have also collected data from all states, and 

from a broader array of localities, to augment the in-depth reviews. 

The act requires that nonfederal recipients of Recovery Act-funded grants, 

contracts, or loans submit quarterly reports on each project or activity 

including information concerning the amount and use of funds and jobs 

created or retained.2

 The first of these recipient reports covered 

cumulative activity since the Recovery Act’s passage through the quarter 

ending September 30, 2009. The Recovery Act requires us to comment on 

the estimates of jobs created or retained after the recipients have reported. 

We issued our initial report related to recipient reporting, including 

recommendations for recipient report improvements, on November 19, 

2009.3

 A second major focus of the current report is to provide updated 

 

1

GAO, Recovery Act: As Initial Implementation Unfolds in States and Localities, 

Continued Attention to Accountability Issues Is Essential, GAO-09-580 (Washington, D.C.: 

Apr. 23, 2009). 

2

Recovery Act, div. A, §1512, 123. We will refer to the quarterly reports required by section 

1512 as recipient reports. 

3

GAO, Recovery Act: Recipient Reported Jobs Data Provide Insights into Use of Recovery 

Act Funding, but Data Quality and Reporting Issues Need Attention, GAO-10-223

(Washington, D.C.: Nov. 19, 2009). 

 Recovery Act 
Appendix I: Objectives, Scope, and 

Methodology 

information concerning recipient reporting in accordance with our 

mandate for quarterly reporting.4

Using criteria described in our earlier bimonthly reports, we selected the 

following streams of Recovery Act funding flowing to states and localities 

for review during this report: increased Medicaid Federal Medical 

Assistance Percentage (FMAP) grant awards; the Federal-Aid Highway 

Surface Transportation Program; the Transit Capital Assistance Program, 

the State Fiscal Stabilization Fund (SFSF); Title I, Part A of the Elementary 

and Secondary Education Act of 1965, as amended (ESEA); Parts B and C 

of the Individuals with Disabilities Education Act (IDEA); the Public 

Housing Capital Fund; the Weatherization Assistance Program; and the 

Workforce Investment Act of 1998 (WIA) Youth Program. We also 

reviewed how Recovery Act funds are being used by states and localities. 

In addition, we analyzed www.recovery.gov data on federal spending. 

States’ and Localities’ 

Uses of Recovery Act 

Funds 

Federal Medical 

Assistance Percentage 

For the increased FMAP grant awards, we obtained increased FMAP grant 

and drawdown figures for each state in our sample and the District from 

the Centers for Medicare & Medicaid Services (CMS). To examine 

Medicaid enrollment, states’ efforts to comply with the provisions of the 

Recovery Act, and related information, we relied on interviews with states 

and our 4 prior web-based surveys, which asked the 16 states and the 

District to provide information as well as to update information they had 

previously provided to us. When necessary, we interviewed Medicaid 

officials from certain states to clarify survey responses. We also 

interviewed CMS officials regarding the agency’s oversight of increased 

FMAP grant awards and its guidance to states on Recovery Act provisions. 

To assess the reliability of increased FMAP drawdown figures, we 

interviewed CMS officials on how these data are collected and reported. 

To establish the reliability of our Web-based survey data, we pretested the 

survey with Medicaid officials in several states and also conducted 

consistent follow-up with all sample states to ensure a high response rate. 

Based on these steps, we determined that the data provided by CMS and 

 

4

The Recovery Act requires recipients of funding from federal agencies to report quarterly 

on jobs created or retained with Recovery Act funding. The first recipient reports filed in 

October 2009 cover activity from February through September 30, 2009. This bimonthly 

report incorporates second quarterly recipient report covering activity through December 

31, 2009. 

Page 149 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

submitted by states were sufficiently reliable for the purposes of our 

engagement. 

Federal-Aid Highway 

Surface Transportation 

For highway infrastructure investment, we reviewed status reports and 

guidance to the states and discussed these with the U.S. Department of 

Transportation (DOT) and Federal Highway Administration (FHWA) 

officials. We obtained data from FHWA on obligations and 

reimbursements, and the numbers and types of projects funded with 

Recovery Act highway infrastructure funds nationally. We also interviewed 

DOT and FHWA officials on the status of the states’ maintenance of effort 

certifications and economically distressed area designations. From state 

DOT officials, we obtained information on the status of projects and 

contracts and the progress in meeting the 1-year obligation deadline. We 

obtained data on some highway project cost estimates and contract 

awards and analyzed these data to determine the savings from awarding 

contracts for less than the estimated costs and the estimated amounts to 

be deobligated. Finally, we also interviewed state officials regarding the 

progress of project and highway development in metropolitan areas. 

Transit Capital Assistance 

Program 

For public transportation investment, we reviewed information on the 

Federal Transit Administration’s (FTA) Transit Capital Assistance 

Program and examined the Fixed Guideway Infrastructure Investment 

Program. We reviewed status reports and guidance to the states and 

discussed these with FTA officials as well as the amount of Recovery Act 

funds transferred from FHWA. To determine the current status of public 

transportation funding, we obtained data from FTA on obligations and 

reimbursements for Recovery Act grants nationally and the numbers and 

types of grants funded. We interviewed and reviewed information from 

transit agencies to include how projects were chosen, how funds were 

used and how progress was reported and we compared that to project 

schedules and milestones, when available. Finally, to ensure the 

accountability of funds and address reporting requirements, we 

interviewed FTA, state, and transit agency officials and reviewed guidance 

these officials used to meet reporting requirements, including reporting on 

project status, subcontracts, and estimated jobs created. 

SFSF, ESEA Title I, and 

IDEA 

To obtain national and selected state-level information on how Recovery 

Act funds made available by the U.S. Department of Education 

(Education) under SFSF, ESEA Title I, and IDEA are being used at the 

local level, we designed and administered a Web-based survey of local 

Page 150 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

education agencies (LEA) in the 50 states and the District of Columbia. We 

surveyed school district superintendents across the country to learn if they 

have received or expect to receive Recovery Act funding and how these 

funds are being used. We conducted our survey from August to October 

2009, with a 73 percent final weighted response rate at the national level. 

We selected a stratified random sample of 2,101 LEAs from the population 

of 16,028 LEAs included in our sample frame of data obtained from the 

Common Core of Data (CCD) in 2006 and 2007. In order to make estimates 

for each of the 16 states and the District of Columbia, we stratified the 

sample based on those specific states. With the exception of the District of 

Columbia, all of our sample states had a response rate that exceeded 70 

percent, with final weighted response rates ranging from 71 percent for 

Iowa to 90 percent for Georgia. 

We took steps to minimize nonsampling errors by pretesting the survey 

instrument with officials from five LEAs in July and August 2009. Because 

we surveyed a sample of LEAs, survey results are estimates of a 

population of LEAs and thus are subject to sampling errors that are 

associated with samples of this size and type. Our sample is only one of a 

large number of samples that we might have drawn. As each sample could 

have provided different estimates, we express our confidence in the 

precision of our particular sample’s results as a 95 percent confidence 

interval (e.g., plus or minus 10 percentage points). We excluded 14 of the 

sampled LEAs for various reasons—because they were no longer 

operating in the 2009-2010 school year, were a duplicate entry, or were not 

an LEA—and therefore were considered out of scope. All estimates 

produced from the sample and presented in this report are representative 

of the in-scope population and have margins of error of plus or minus 5 

percentage points or less for our overall sample and 12 percentage points 

or less for our 16 state samples, excluding the District, unless otherwise 

noted. 

To understand how Education is implementing SFSF, ESEA Title I, and 

IDEA under the Recovery Act and monitoring states’ use of Recovery Act 

funds, we reviewed relevant federal laws, regulations, guidance, and 

communications to the states and interviewed Education officials. For 

SFSF, ESEA Title I, and IDEA, we obtained data from Education on the 

amount of funds made available to the 16 states and the District covered 

by our review and the amount of funds these states have drawn down from 

their accounts with Education. To obtain specific examples of how LEAs 

are using Recovery Act funds, we visited LEAs in selected states and 

interviewed LEA officials. To learn about issues related to Recovery Act 

Page 151 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

funds for education, we interviewed officials in the District and state 

officials in each of the 16 states covered by our review. 

Public Housing Capital 

Fund 

For Public Housing, we obtained data from HUD’s Electronic Line of 

Credit Control System on the amount of Recovery Act funds that have 

been obligated and drawn down by each housing agency in the country 

that received public housing capital funds. To monitor progress on how 

housing agencies are using these funds, we visited 47 housing agencies in 

16 states and the District of Columbia for our longitudinal study, as well as 

2 additional agencies.5

 At the selected agencies, we interviewed housing 

agency officials and conducted site visits of Recovery Act projects. We 

also selected at least one Capital Fund Recovery Competition grant in all 

but one of the 16 states and the District and collected information on the 

housing agencies’ use of those funds. We also interviewed HUD officials to 

understand their procedures for assisting and monitoring public housing 

agencies in obligating Recovery Act funds and to understand HUD’s 

capacity to administer Recovery Act funds. In addition, we interviewed 

public housing industry officials to understand the challenges that their 

members faced in meeting the obligation deadline and reporting to 

FederalReporting.gov. 

Weatherization Assistance 

Program 

For the Weatherization Assistance Program, we reviewed relevant 

regulations and federal guidance and interviewed Department of Energy 

officials who administer the program at the federal level. In addition, for 

this report, we collected information from selected states and the District 

of Columbia on their weatherization programs. We conducted 

semistructured interviews of officials in the states’ agencies that 

administer the weatherization program and with local service providers 

responsible for weatherization production. These interviews covered 

updates on the use of funds, the implementation of the Recovery Act’s 

Davis-Bacon provisions, accountability measures, and impacts of the 

Recovery Act Weatherization program. We also conducted site visits to 

interview local providers of weatherization and to witness weatherization 

production. We continued to collect data about each state’s total 

 

5

The states we visited are Arizona, California, Colorado, District of Columbia, Florida, 

Georgia, Illinois, Iowa, Massachusetts, Michigan, Mississippi, New Jersey, New York, North 

Carolina, Ohio, Pennsylvania, and Texas. 

Page 152 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

allocation for weatherization under the Recovery Act, as well as the 

allocation already provided to the states and the expenditures-to-date. 

Workforce Investment Act 

of 1998 Youth Program 

We analyzed national data that we received from the Department of Labor 

(Labor) on the extent to which Recovery Act WIA youth funds have been 

drawn down, the characteristics of youth that participated in Recovery 

Act-funded WIA youth activities, and program participation and outcomes. 

We did not assess the reliability of Labor’s data. However, we interviewed 

Labor officials about the limitations of its data and determined that the 

data were sufficient for our purposes. We also reviewed the statement of 

executive action that Labor provided us in response to the 

recommendations we made in our September 2009 bimonthly report. 

The recipient reporting section of this report responds to the Recovery 

Act’s mandate that we comment on the estimates of jobs created and 

retained by direct recipients of Recovery Act funds. For our review of the 

second submission of recipient reports, we built on findings from our first 

review of the reports. We performed edit checks and basic analyses on the 

second submission of recipient report data that became publicly available 

at Recovery.gov on January 30, 2010. We calculated the overall sum, as 

well as sum by states, for the number of full-time equivalents (FTE) 

reported, award amount, and amount received and found that they 

corresponded closely with the values shown for these data on 

Recovery.gov. We also reviewed the Office of Management and Budget’s 

(OMB) updated December 2009 guidance on recipient reporting to 

determine the extent of changes and clarifications for the second 

submission of recipient reports. We had discussions about the updated 

guidance and recipient reporting changes with representatives from OMB 

and the Recovery Accountability and Transparency Board (Board). In 

addition, we examined reports from federal inspectors general on 

Recovery Act data quality reviews and interviewed federal agency officials 

who have responsibility for ensuring a reasonable degree of quality across 

their program’s recipient reports. 

Recipient Reporting 

From the second submission of recipient reports, we reviewed reports for 

transportation, transit, and education programs, as we did for the first 

submission of reports. In addition to those areas, we also reviewed 

selected recipient reports for Department of Energy, Department of Health 

and Human Services, and Department of Housing and Urban Development 

programs. These areas of focus cover a wide range of recipients, types of 

funding, and diverse activities. Our teams in the 16 states and the District 

Page 153 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

interviewed both recipients that filed reports in October 2009 and new 

recipients of Recovery Act funding. In total, our teams reviewed 

approximately 250 reports and interviewed the recipients responsible for 

those reports. Each team made a nonstatistical selection of approximately 

12 recipient reports from our program areas to review and interviewed 

recipients regarding OMB’s guidance and processes for the first and 

second rounds of reporting, or in some cases, only the second round of 

reporting. We visited the 16 selected states and the District of Columbia 

during late January and early February 2010 and discussed with recipients 

the numbers used in the FTE calculation and investigated the application 

of the new FTE calculation. We gathered and examined issues raised by 

recipients in these jurisdictions regarding reporting and data quality and 

interviewed recipients on their experiences using the 

FederalReporting.gov Web site. We also interviewed state officials 

regarding state plans for managing, tracking, and reporting on Recovery 

Act funds and activities. 

To determine how states, federal agencies, and OMB are overseeing the 

use of Recovery Act funds and the quality of data states and other 

recipients maintain and report regarding their use of funds, we relied on 

our previous work, and we followed up with cognizant state officials to 

learn of any changes they have made to their internal controls or guidance 

since we last reported. We also reviewed federal agency inspector general 

reports and OMB’s updated guidance related to recipient reporting. To 

perform audit work relating to Single Audits, we discussed with OMB their 

efforts toward implementing our recommendations related to Single 

Audits that we reported in prior Recovery Act reports. We examined 

relevant documentation that supported those efforts. We reviewed internal 

control reports dated December 31, 2009, that were prepared by the 

auditors of the states participating in OMB’s Single Audit Internal Control 

Project. We also reviewed the corrective action plans to resolve internal 

control deficiencies that were dated January 31, 2010. The management of 

the states participating in the project provided these plans to the cognizant 

federal agencies as required by the project’s guidelines. 

Assessing Safeguards 

and Internal Controls 

To assess actions taken by the state and local audit community to monitor 

the use of Recovery Act funds, we have interviewed state and local 

auditors and state inspectors general about their ongoing and planned 

audit activities. We have also reviewed state and local audit reports. In 

addition, in an effort to update the audit community concerning our 

Recovery Act work and participate in information sharing about Recovery 

Accountability 

Page 154 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

Act issues, we are working with state and local auditors and their 

associations to facilitate routine telephone conference calls to discuss 

Recovery Act issues with a broad community of interested parties. The 

conference call participants include the Association of Government 

Accountants; the Association of Local Government Auditors; the National 

Association of State Auditors, Comptrollers, and Treasurers; OMB; the 

Recovery Accountability and Transparency Board; federal inspectors 

general; the National Governors Association; the National State Budget 

Officers Association; and state stimulus czars. In an effort to ensure 

information sharing about allegations of fraud, we are also working with 

state and local auditors to develop plans for routine sharing of 

information. 

To determine the actions taken by the Board, we met with representatives 

of the Board to discuss the initiatives they have taken to monitor the 

number and types of contracts issued by federal agencies for the Recovery 

Act and their plans to assess the extent to which laws and regulations are 

being complied with or circumvented. We reviewed available 

documentation related to the Board’s initiatives. 

The state and local budget section of this report focuses on two areas: 

first, our long-term fiscal simulations (or model) for the state and local 

government sector; and, second, our continued review of the use of 

Recovery Act funds by the 16 selected states and the District. 

State and Local 

Budget 

For the long-term fiscal simulations we use the U.S. Bureau of Economic 

Analysis’s National Income and Product Accounts (NIPA) as the primary 

data source. Our model projects the level of receipts and expenditures for 

the sector until 2060 based on current and historical spending and revenue 

patterns. We assume the current set of policies in place across federal, 

state, and local governments remains constant. This update incorporates 

NIPA data including increased federal grant funding made available to the 

sector through the Recovery Act. The model simulates the long-term fiscal 

outlook for the state and local sector as a whole and, while the model 

incorporates the Congressional Budget Office’s (CBO) economic 

projections, adjustments are made to capture the budgetary effects of 

short-term cyclical swings in the economy. Because the model covers the 

sector in the aggregate, the fiscal outcomes for individual states and 

localities cannot be captured. This product is part of a body of work on the 

long-term fiscal challenge. Related products can be found at 

http://www.gao.gov/special.pubs/longterm. 

Page 155 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

For our continued review of the use of Recovery Act funds for the 16 

states and the District, we conducted interviews with state budget and 

legislative officials to determine how states are using Recovery Act funds 

to avoid reductions in essential services, using “rainy day” funds, closing 

budget gaps, and developing exit strategies to plan for the end of Recovery 

Act funding. To gain an understanding of local governments’ use of 

Recovery Act funds, we met with the chief executives, recovery 

coordinators, auditors, and finance officials at the selected local 

governments. 

To select local governments for our review, we identified localities 

representing a range of types of governments (cities and counties), 

population sizes, and economic conditions (unemployment rates greater 

than or less than each state’s average). We balanced these selection 

criteria with logistical considerations including other scheduled Recovery 

Act work, local contacts established during prior reviews, and the 

geographic proximity of the local government entities. We reported the 

latest unemployment rates and population counts that were available in 

the December report. 

Due to the small sample size and judgmental nature of the selection, our 

findings are not generalizable to all local governments. The list of local 

governments selected in each state is found in appendix III of our 

December report.6

We collected funding data from www.recovery.gov and federal agencies 

administering Recovery Act programs for the purpose of providing 

background information. We used funding data from www.recovery.gov—

which is overseen by the Board—because it is the official source for 

Recovery Act spending. Based on our limited examination of this 

information thus far, we consider these data sufficiently reliable with 

attribution to official sources for the purposes of providing background 

information on Recovery Act funding for this report.7

 Our sample of states, 

localities, and entities has been purposefully selected and the results of 

Data and Data 

Reliability 

 

6

GAO, Recovery Act: Status of State’s and Localities’ Use of Funds and Efforts to Ensure 

Accountability, GAO-10-231 (Washington, D.C.: Dec. 10, 2009). 

7

See GAO, Recovery Act: Recipient Reported Jobs Data Provided Some Insight into Use of 

Recovery Act Funding, but Data Quality and Reporting Issues Need Attention, GAO-10-223

(Washington, D.C.: Nov. 19, 2009), for an assessment of recipient report data. 

Page 156 GAO-10-437 Recovery Act
Appendix I: Objectives, Scope, and 

Methodology 

our reviews are not generalizable to any population of states, localities, or 

entities. 

We conducted this performance audit from December 5, 2009, to March 3, 

2010, 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. 

Page 157 GAO-10-437 Recovery Act
Appendix II: Comments from the Office of Appendix II: Comments from the Office of Management and Budget 

Management and Budget 

Page 158 GAO-10-437 Recovery Act 
Appendix II: Comments from the Office of 

Management and Budget 

Page 159 GAO-10-437 Recovery Act
Appendix III: Program Descriptions 

Page 160 GAO-10-437 

Appendix III: Program Descriptions 

Following are descriptions of selected grant programs discussed in this 

report. 

Medicaid is a joint federal-state program that finances health care for 

certain categories of low-income individuals, including children, families, 

persons with disabilities, and persons who are elderly. The federal 

government matches state spending for Medicaid services according to a 

formula based on each state’s per capita income in relation to the national 

average per capita income. The Centers for Medicare & Medicaid Services, 

within the Department of Health and Human Services, approves state 

Medicaid plans, and the amount of federal assistance states receive for 

Medicaid service expenditures is known as the Federal Medical Assistance 

Percentage (FMAP). The Recovery Act’s temporary increase in FMAP 

funding will provide states with approximately $87 billion in assistance. 

The Recovery Act provides funding to states for restoration, repair, and 

construction of highways and other activities allowed under the Federal 

Highway Administration’s Federal-Aid Highway Surface Transportation 

Program and for other eligible surface transportation projects. The 

Recovery Act requires that 30 percent of these funds be suballocated, 

primarily based on population, for metropolitan, regional, and local use. 

Highway funds are apportioned to states through federal-aid highway 

program mechanisms, and states must follow existing program 

requirements. While the maximum federal fund share of highway 

infrastructure investment projects under the existing federal-aid highway 

program is generally 80 percent, under the Recovery Act, it is 100 percent. 

Medicaid Federal 

Medical Assistance 

Percentage 

Highway 

Infrastructure 

Investment Program 

Funds apportioned for highway infrastructure spending must be used in 

accordance with Recovery Act requirements. States should ensure that all 

apportioned Recovery Act funds—including suballocated funds—are 

obligated1

 within 1 year. The Secretary of Transportation is to withdraw 

and redistribute to eligible states any amount that is not obligated within 

that time frame.2

 Additionally, the governor of each state must certify that 

 

1

For the Highway Infrastructure Investment program, the U.S. Department of 

Transportation has interpreted the term “obligation of funds” to mean the federal 

government’s commitment to pay for the federal share of the project. This commitment 

occurs at the time the federal government signs a project agreement. 

2

Recovery Act, div. A, title XII, 123 Stat. 206. 

 Recovery Act 
Appendix III: Program Descriptions 

the state will maintain its level of spending for the types of transportation 

projects funded by the Recovery Act it planned to spend the day the 

Recovery Act was enacted. As part of this certification, the governor of 

each state is required to identify the amount of funds the state plans to 

expend from state sources from February 17, 2009, through September 30, 

2010.3

The Recovery Act appropriated $8.4 billion to fund public transportation 

throughout the country through existing Federal Transit Administration 

(FTA) grant programs, including the Transit Capital Assistance Program, 

and the Fixed Guideway Infrastructure Investment program. Under the 

Transit Capital Assistance Program’s formula grant program, Recovery Act 

funds were apportioned to large and medium urbanized areas—which in 

some cases include a metropolitan area that spans multiple states—

throughout the country according to existing program formulas. Recovery 

Act funds were also apportioned to states for small urbanized areas and 

nonurbanized areas under the Transit Capital Assistance Program’s 

formula grant programs using the program’s existing formula. Transit 

Capital Assistance Program funds may be used for such activities as 

vehicle replacements, facilities renovation or construction, preventive 

maintenance, and paratransit services. Recovery Act funds from the Fixed 

Guideway Infrastructure Investment program4

 were apportioned by 

formula directly to qualifying urbanized areas, and funds may be used for 

any capital projects to maintain, modernize, or improve fixed guideway 

systems.5

 As they work through the state and regional transportation 

planning process, designated recipients of the apportioned funds—

typically public transit agencies and metropolitan planning organizations 

Public Transportation 

Program 

 

3

Recovery Act, div. A, title XII, § 1201(a). 

4

Fixed guideway systems use and occupy a separate right-of-way for the exclusive use of 

public transportation services. They include fixed rail, exclusive lanes for buses and other 

high-occupancy vehicles, and other systems. 

5

Generally, to qualify for funding under the applicable formula grant program, an urbanized 

area must have a fixed guideway system that has been in operation for at least 7 years and 

is more than one mile in length. 

Page 161 GAO-10-437 Recovery Act
Appendix III: Program Descriptions 

(MPO)—develop a list of transit projects that project sponsors (typically 

transit agencies) submit to FTA for approval.6

Funds appropriated for the Transit Capital Assistance Program and the 

Fixed Guideway Infrastructure Investment program must be used in 

accordance with Recovery Act requirements. States should ensure that all 

apportioned Recovery Act funds are obligated7

 within 1 year. The 

Secretary of Transportation is to withdraw and redistribute to each state 

or urbanized area any amount that is not obligated within that time frame.8

Additionally, governors must certify that the state will maintain the level of 

state spending for the types of transportation projects funded by the 

Recovery Act it planned to spend the day the Recovery Act was enacted. 

As part of this certification, the governor of each state is required to 

identify the amount of funds the state plans to expend from state sources 

from February 17, 2009, through September 30, 2010.9

Education 

State Fiscal Stabilization 

Fund 

The State Fiscal Stabilization Fund (SFSF) included approximately $48.6 

billion to award to states by formula and up to $5 billion to award to states 

as competitive grants. The Recovery Act created the SFSF in part to help 

state and local governments stabilize their budgets by minimizing 

budgetary cuts in education and other essential government services, such 

as public safety. Stabilization funds for education distributed under the 

Recovery Act must first be used to alleviate shortfalls in state support for 

 

6

Metropolitan planning organizations are federally mandated regional organizations, 

representing local governments and working in coordination with state departments of 

transportation, that are responsible for comprehensive transportation planning and 

programming in urbanized areas. MPOs facilitate decision making on regional 

transportation issues, including major capital investment projects and priorities. To be 

eligible for Recovery Act funding, projects must be included in the region’s Transportation 

Improvement and State Transportation Improvement Programs. 

7

For the Transit Capital Assistance Program and Fixed Guideway Infrastructure Investment 

program, the U.S. Department of Transportation has interpreted the term “obligation of 

funds” to mean the federal government’s commitment to pay for the federal share of the 

project. This commitment occurs at the time the federal government signs a grant 

agreement. 

8

Recovery Act, div. A, title XII, 123 Stat. 210. 

9

Recovery Act, div. A, title XII, § 1201(a). 

Page 162 GAO-10-437 Recovery Act
Appendix III: Program Descriptions 

education to local educational agencies (LEA) and public institutions of 

higher education (IHE). States must use 81.8 percent of their SFSF 

formula grant funds to support education (these funds are referred to as 

education stabilization funds) and must use the remaining 18.2 percent for 

public safety and other government services, which may include education 

(these funds are referred to as government services funds). For the initial 

award of SFSF formula grant funds, Education awarded at least 67 percent 

of the total amount allocated to each state,10 but states had to submit an 

application to Education to receive the funds. The application required 

each state to provide several assurances, including that the state will meet 

maintenance-of-effort requirements (or will be able to comply with the 

relevant waiver provisions) and that it will implement strategies to 

advance four core areas of education reform, as described by Education: 

(1) increase teacher effectiveness and address inequities in the 

distribution of highly qualified teachers; (2) establish a pre-K-throughcollege data system to track student progress and foster improvement; (3) 

make progress toward rigorous college- and career-ready standards and 

high-quality assessments that are valid and reliable for all students, 

including students with limited English proficiency and students with 

disabilities; and (4) provide targeted, intensive support and effective 

interventions to turn around schools identified for corrective action or 

restructuring.11 In addition, states were required to make assurances 

concerning accountability, transparency, reporting, and compliance with 

certain federal laws and regulations. After maintaining state support for 

education at fiscal year 2006 levels, states must use education stabilization 

funds to restore state funding to the greater of fiscal year 2008 or 2009 

levels for state support to LEAs and public IHEs. When distributing these 

funds to LEAs, states must use their primary education funding formula, 

but they can determine how to allocate funds to public IHEs. In general, 

LEAs have broad discretion in how they can use education stabilization 

funds, but states have some ability to direct IHEs in how to use these 

funds. Applications for SFSF Phase II funds were due to Education by 

January 11, 2010. According to the Phase II application, in order to receive 

the remainder of their SFSF allocation, states must agree to collect and 

publicly report on more than 30 indicators and descriptors related to the 

 

10Beginning on July 1, 2009, Education awarded the remaining government services funds 

to states with approved applications. 

11Schools identified for corrective action have missed academic targets for 4 consecutive 

years, and schools implementing restructuring have missed academic targets for 6 

consecutive years. 

Page 163 GAO-10-437 Recovery Act
Appendix III: Program Descriptions 

four core areas of education reform described above. Additionally, states 

generally must, among other things, provide confirmation that they 

maintained support for education in 2009 at least at the level of such 

support in fiscal year 2006 and reaffirm or provide updated information 

that they will maintain state support in 2010 and 2011. 

ESEA Title I, Part A The Recovery Act provides $10 billion to help LEAs educate disadvantaged 

youth by making additional funds available beyond those regularly 

allocated through Title I, Part A of the Elementary and Secondary 

Education Act of 1965,12 as amended. Title I funding is administered by the 

Office of Elementary and Secondary Education within the Department of 

Education. The Recovery Act requires these additional funds to be 

distributed through states to LEAs using existing federal funding formulas, 

which target funds based on such factors as high concentrations of 

students from families living in poverty. In using the funds, LEAs are 

required to comply with applicable statutory and regulatory requirements 

and must obligate 85 percent of the funds by September 30, 2010.13

Education is advising LEAs to use the funds in ways that will build the 

agencies’ long-term capacity to serve disadvantaged youth, such as 

through providing professional development to teachers. 

IDEA, Parts B and C The Recovery Act provided supplemental funding for Parts B and C of the 

Individuals with Disabilities Education Act (IDEA), as amended—the 

major federal statute that supports early intervention and special 

education and related services for children, and youth with disabilities. 

Part B provides funds to ensure that preschool and school-aged children 

with disabilities have access to a free and appropriate public education 

and is divided into two separate grant programs—Part B grants to states 

(for school-age children) and Part B preschool grants. Part C funds 

programs that provide early intervention and related services for infants 

and toddlers with disabilities—or at risk of developing a disability—and 

their families. 

 

12For the purposes of this report, “Title I” refers to Title I, Part A of the Elementary and 

Secondary Education Act of 1965 (ESEA), as amended. 

13LEAs must obligate at least 85 percent of their Recovery Act ESEA Title I, Part A funds by 

September 30, 2010, unless granted a waiver, and must obligate all of their funds by 

September 30, 2011. This will be referred to as a carryover limitation. 

Page 164 GAO-10-437 Recovery Act
Appendix III: Program Descriptions 

The Recovery Act provides an additional $1.2 billion in funds for 

Workforce Investment Act (WIA) Youth Program activities, including 

summer employment.14 Administered by the Department of Labor (Labor), 

the WIA Youth Program is designed to provide low-income in-school and 

out-of-school youth 14 to 21 years old, who have additional barriers to 

success, with services that lead to educational achievement and successful 

employment, among other goals. The Recovery Act also extended 

eligibility through age 24 for youth receiving services funded by the act. 

While the Recovery Act does not require all funds to be used for summer 

employment, in the conference report accompanying the bill that became 

the Recovery Act,15 the conferees stated they were particularly interested 

in states using these funds to create summer employment opportunities 

for youth. While summer employment is a required component of the WIA 

Youth Program, Labor issued guidance indicating that local areas have the 

flexibility to implement stand-alone summer youth employment activities 

with Recovery Act funds.16 Local areas may design summer employment 

opportunities to include any set of allowable WIA youth activities—such 

as tutoring and study skills training, occupational skills training, and 

supportive services—as long as it also includes a work experience 

component. 

The Public Housing Capital Fund provides formula-based grant funds 

directly to public housing agencies to improve the physical condition of 

their properties; to develop, finance, and modernize public housing 

developments; and to improve management. Under the Recovery Act, the 

Office of Public and Indian Housing within the U.S. Department of 

Housing and Urban Development (HUD) allocated nearly $3 billion 

through the Public Housing Capital Fund to public housing agencies using 

the same formula for amounts made available in fiscal year 2008 and 

obligated these funds to housing agencies in March 2009. 

Workforce Investment 

Act Youth Program 

Public Housing 

Capital Fund 

HUD was also required to award nearly $1 billion to public housing 

agencies based on competition for priority investments, including 

investments that leverage private sector funding or financing for 

 

14For purposes of the Recovery Act funds, the period of “summer” is from May 1 through 

September 30. 

15H.R. Rep. No. 111-16, at 448 (2009). 

16Department of Labor, Training and Employment Guidance Letter No. 14-08 (Mar. 18, 

2009). 

Page 165 GAO-10-437 Recovery Act
Appendix III: Program Descriptions 

renovations and energy conservation retrofitting. In September 2009, HUD 

awarded competitive grants for the creation of energy-efficient 

communities, gap financing for projects stalled due to financing issues, 

public housing transformation, and improvements addressing the needs of 

the elderly or persons with disabilities. 

The Recovery Act appropriated $5 billion for the Weatherization 

Assistance Program—which the Department of Energy (DOE) is 

distributing to each of the states, the District of Columbia, and seven 

territories and Indian tribes—to be spent over a 3-year period. The 

program, administered by the Office of Energy Efficiency and Renewable 

Energy within DOE, enables low-income families to reduce their utility 

bills by making long-term energy-efficiency improvements to their homes 

by, for example, installing insulation, sealing leaks, and modernizing 

heating equipment, air circulation fans, and air-conditioning equipment. 

Over the past 32 years, the Weatherization Assistance Program has 

assisted more than 6.2 million low-income families. By reducing the energy 

bills of low-income families, the program allows these households to 

spend their money on other needs, according to DOE. The Recovery Act 

appropriation represents a significant increase for a program that has 

received about $225 million per year in recent years. DOE has approved 

the weatherization plans of the 16 states and the District of Columbia that 

are in our review and has provided at least half of the funds to those areas. 

The Head Start program, administered by the Office of Head Start of the 

Administration for Children and Families within the Department of Health 

and Human Services, provides comprehensive early childhood 

development services to low-income children, including educational, 

health, nutritional, social, and other services, intended to promote the 

school readiness of low-income children. Federal Head Start funds are 

provided directly to local grantees, rather than through states. The 

Recovery Act provided an additional $2.1 billion in funding for Head Start, 

including $1.1 billion directed for the expansion of Early Head Start 

programs. The Early Head Start program provides services to low-income 

families designed to promote the development of very young children, as 

well as to enable their parents to fulfill their parental duties and move 

toward self-sufficiency. 

Weatherization 

Assistance Program 

Head Start/Early Head 

Start 

Page 166 GAO-10-437 Recovery Act
Appendix IV: 

A

GAO Contacts and Staff 

cknowledgments 

Page 167 GAO-10-437 

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

J. Christopher Mihm, Managing Director for Strategic Issues, (202) 512-

6806 or mihmj@gao.gov 

For issues related to WIA, SFSF, and other education programs: Barbara 

D. Bovbjerg, Managing Director of Education, Workforce, and Income 

Security, (202) 512-7215 or bovbjergb@gao.gov 

For issues related to Medicaid programs: Dr. Marjorie Kanof, Managing 

Director of Health Care, (202) 512-7114 or kanofm@gao.gov 

For issues related to highways, transit, and other transportation programs: 

Katherine A. Siggerud, Managing Director of Physical Infrastructure, (202) 

512- 2834 or siggerudk@gao.gov 

For issues related to energy and weatherization: Patricia Dalton, Managing 

Director of Natural Resources and Environment, (202) 512- 3841 or 

daltonp@gao.gov 

For issues related to public housing: Richard J. Hillman, Managing 

Director of Financial Markets and Community Investment, (202) 512-8678 

or hillmanr@gao.gov 

For issues related to internal controls and Single Audits: Jeanette Franzel, 

Managing Director of Financial Management and Assurance, (202) 512-

9471 or franzelj@gao.gov 

For issues related to contracting and procurement: Paul Francis, Managing 

Director of Acquisition and Sourcing Management, (202) 512-4841 or 

francisp@gao.gov 

For issues related to fraud, waste, and abuse: Gregory D. Kutz, Managing 

Director of Forensic Audits and Special Investigations, (202) 512-9505 or 

kutzg@gao.gov 

The following staff contributed to this report: Stanley Czerwinski, Denise 

Fantone, Susan Irving, and Yvonne Jones, (Directors); Thomas James, 

James McTigue, and Michelle Sager, (Assistant Directors); Sandra Beattie 

(Analyst-in-Charge); and Marie Penny Ahearn, Judith Ambrose, Peter 

Anderson, Thomas Beall, James Bennett, Noah Bleicher, Jessica Botsford, 

Anthony Bova, Lauren Calhoun, Richard Cambosos, Ralph Campbell Jr., 

Virginia Chanley, Tina Cheng, Robert Cramer, Michael Derr, Helen 

Desaulniers, Ruth “Eli” DeVan, David Dornisch, Kevin Dooley, 

GAO Contacts 

Staff 

Acknowledgments 

 Recovery Act 
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Abe Dymond, Laurie Ekstrand, James Fuquay, Alice Feldesman, Doreen 

Feldman, Alexander Galuten, Ellen Grady, Chelsa Gurkin, Anita Hamilton, 

Geoffrey Hamilton, Tracy Harris, Bert Japikse, Karen Keegan, John Krump, 

Jon Kruskar, Hannah Laufe, Jean K. Lee, Teague Lyons, Stephanie May, 

Sarah M. McGrath, Jean McSween, Donna Miller, Kevin Milne, Sheila 

McCoy, John McGrail, Marc Molino, Mimi Nguyen, Jungjin Park, Ken 

Patton, Anthony Pordes, Brenda Rabinowitz, Carl Ramirez, James Rebbe, 

Beverly Ross, Aubrey Ruge, Sidney Schwartz, John Smale Jr., Kathryn 

Smith, Andrew J. Stephens, Alyssa Weir, Crystal Wesco, and Kimberly 

Young. 

The names of GAO staff contributing to information contained in the 

sections on the selected program are as follows: Program Contributors 

Education—SFSF, IDEA, Title I Jaime Allentuck, Cornelia M. Ashby, James L. Ashley, Sandra Baxter, 

Edward Bodine, Jessica Botsford, Karen A. Brown, Amy Buck, Alexander 

Galuten, Bryon Gordon, Sonya Harmeyer, Susan Lawless, Ying Long, 

Sheila McCoy, Jean McSween, Elizabeth Morrison, Mimi Nguyen, Karen V. 

O’Conor, Kathy Peyman, Jason Palmer, James M. Rebbe, Michelle 

Verbrugge, Charles Willson and Jill Yost 

Medicaid Susan Anthony, Emily Beller, Ted Burik, Julianne Flowers, Martha Kelly, 

and Carolyn Yocom 

Public housing Don Brown, Don Kiggins, May Lee, John McGrail, Marc Molino, Deena 

Richart, Paul Schmidt, Jennifer Schwartz, Mathew Scire, and Marie Webb 

Recipient reporting Darreisha Bates, Sue Irving, Yvonne Jones, Judith Kordahl, Hayley 

Landes, James McTigue, Patricia Norris and Jon Stehle 

Internal Controls/Single Audit Phyllis Anderson, Andrew Grimaldi, Eric Holbrook, Kim McGatlin, Diane 

Morris, Susan Ragland, Sandra Silzer, and Doris Yanger 

State and local budget Sandra Beattie, Anthony Bova, Stanley J. Czerwinski, Jungjin Park, and 

Michelle Sager 

Transportation/highway and transit 

programs 

Aisha Cabrer, A. Nicole Clowers, Steve Cohen, Dean Gudicello, Delwen 

Jones, Les Locke, Tim Schindler, and Raymond Sendejas 

Weatherization Jessica Bryant-Bertail, Ric Cheston, Mark Gaffigan, Kim Gianopoulos, Kris 

Massey, Stuart Ryba, and Jason Trentacoste 

WIA Youth Program Dianne Blank, Raun Lazier, and Andrew Sherrill 

Page 168 GAO-10-437 Recovery Act
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Contributors to the 

Selected States and 

the District 

Arizona Karyn Angulo, Rebecca Bolnick, Tom Brew, Lisa Brownson, Aisha Cabrer, 

Steven Calvo, Eileen Larence, Radha Seshagiri, and Jeff Schmerling 

California Linda Calbom, Joonho Choi, Guillermo Gonzalez, Chad Gorman, Richard 

Griswold, Susan Lawless, Gail Luna, Heather MacLeod, Emmy Rhine, 

Eddie Uyekawa, Lacy Vong, and Randy Williamson 

Colorado Paul Begnaud, Kathy Hale, Kay Harnish-Ladd, Susan Iott, Jennifer Leone, 

Brian Lepore, Tony Padilla, Leslie Pollock, Kathleen Richardson, Dawn 

Shorey, and Mary Welch 

District of Columbia Laurel Beedon, Sunny Chang, Nagla’a El-Hodiri, Mattias Fenton, John 

Hansen, Adam Hoffman, William O. Jenkins, Jr., and Linda Miller 

Florida Patrick di Battista, Lisa Galvan-Trevino, Sabur Ibrahim, Kevin Kumanga, 

Frank Minore, Brenda Ross, Andy Sherrill, Bernard Ungar, Margaret 

Weber, and James Whitcomb 

Georgia Alicia Puente Cackley, Waylon Catrett, Chase Cook, Nadine Garrick 

Raidbard, Daniel Newman, John H. Pendleton, Paige Smith, David 

Shoemaker, and Robyn Trotter 

Illinois Silvia Arbelaez-Ellis, Dean Campbell, Debra Draper, Gail Marnik, Cory 

Marzullo, Paul Schmidt, Roberta Rickey, and Rosemary Torres Lerma 

Iowa Tom Cook, Dan Egan, Christine Frye, Marietta Mayfield, Ronald Maxon, 

Mark Ryan, Lisa Shames, and Ben Shouse 

Massachusetts Stanley J. Czerwinski, Laurie Ekstrand, Nancy J. Donovan, Kathleen M. 

Drennan, Lorin Obler, Keith C. O’Brien, Kathryn O’Dea, Carol Patey, and 

Robert Yetvin 

Michigan Ranya Elias, Kevin Finnerty, Patrick Frey, Henry Malone, Giao N. Nguyen, 

Robert Owens, Susan Ragland, and Amy Sweet 

Mississippi James Elgas, Barbara Haynes, John K. Needham, Norman J. Rabkin, Anna 

Russell, Gary Shepard, Erin Stockdale, and Ryan Stott 

New Jersey Gene Aloise, Kisha Clark, Diana Glod, Alexander Lawrence Jr., Nancy 

Lueke, Tarunkant Mithani, Tahra Nichols, Nitin Rao, and David Wise 

Page 169 GAO-10-437 Recovery Act
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

New York John H. Davis, Christopher Farrell, Susan Fleming, Emily Larson, Dave 

Maurer, Tiffany Mostert, Summer Pachman, Frank Putallaz, Ronald 

Stouffer, and Yee Wong 

North Carolina Cornelia Ashby, Sandra Baxter, Bonnie Derby, Terrell Dorn, Steve Fox, 

Bryon Gordon, Fred Harrison, Charlene Johnson, Leslie Locke, Anthony 

Patterson, and Paula Rascona 

Ohio Debra Cottrell, Matthew Drerup, Laura Jezewski, Bill J. Keller, Sanford 

Reigle, George A. Scott, Brian Smith, David C. Trimble, Lindsay Welter, 

and Doris Yanger 

Pennsylvania Eleanor Cambridge, Mark Gaffigan, John Healey, Phillip Herr, Shirin 

Hormozi, Richard Jorgenson, Richard Mayfield, James Noel, Jodi M. 

Prosser, Andrea E. Richardson, and MaryLynn Sergent 

Texas Fred Berry, Danny Burton, James Cooksey, K. Eric Essig, Erinn Flanagan, 

Ken Howard, Michael O’Neill, Gloria Proa, Bob Robinson, and Lorelei St. 

James 

Page 170 GAO-10-437 Recovery Act
Related GAO Products Related GAO Products 

State and Local Governments’ Fiscal Outlook March 2010 Update. 

GAO-10-358. Washington, D.C.: March 2, 2010. 

Recovery Act: Project Selection and Starts Are Influenced by Certain 

Federal Requirements and Other Factors. GAO-10-383. Washington, D.C.: 

February 10, 2010. 

Recovery Act: IRS Quickly Implemented Tax Provisions, but Reporting 

and Enforcement Improvements Are Needed. GAO-10-349. Washington, 

D.C.: February 10, 2010. 

Status of the Small Business Administration’s Implementation of 

Administrative Provisions in the American Recovery and Reinvestment 

Act of 2009. GAO-10-298R. Washington, D.C.: January 19, 2010. 

Recovery Act: States’ Use of Highway and Transit Funds and Efforts to 

Meet the Act’s Requirements. GAO-10-312T. Washington, D.C.: December 

10, 2009. 

Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts 

to Ensure Accountability. GAO-10-231. Washington, D.C.: December 10, 

2009. 

Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts 

to Ensure Accountability (Appendixes). GAO-10-232SP. Washington, 

D.C.: December 10, 2009. 

Recovery Act: Planned Efforts and Challenges in Evaluating Compliance 

with Maintenance of Effort and Similar Provisions. GAO-10-247. 

Washington, D.C.: November 30, 2009. 

Recovery Act: Contract Oversight Activities of the Recovery 

Accountability and Transparency Board and Observations on Contract 

Spending in Selected States. GAO-10-216R. Washington, D.C.: November 

30, 2009. 

Recovery Act: Recipient Reported Jobs Data Provide Some Insight into 

Use of Recovery Act Funding, but Data Quality and Reporting Issues 

Need Attention. GAO-10-223. Washington, D.C.: November 19, 2009. 

Recovery Act: Recipient Reported Jobs Data Provide Some Insight into 

Use of Recovery Act Funding, but Data Quality and Reporting Issues 

Need Attention. GAO-10-224T. Washington, D.C.: November 19, 2009. 

Page 171 GAO-10-437 Recovery Act 
Related GAO Products 

Recovery Act: Agencies Are Addressing Broadband Program Challenges, 

but Actions Are Needed to Improve Implementation. GAO-10-80. 

Washington, D.C.: November 16, 2009. 

Recovery Act: Preliminary Observations on the Implementation of 

Broadband Programs. GAO-10-192T. Washington, D.C.: October 27, 2009. 

First-Time Homebuyer Tax Credit: Taxpayers’ Use of the Credit and 

Implementation and Compliance Challenges. GAO-10-166T. Washington, 

D.C.: October 22, 2009. 

High Speed Passenger Rail: Developing Viable High Speed Rail Projects 

under the Recovery Act and Beyond. GAO-10-162T. Washington, D.C.: 

October 14, 2009. 

Tax Administration: Opportunities Exist for IRS to Enhance Taxpayer 

Service and Enforcement for the 2010 Filing Season. GAO-09-1026. 

Washington, D.C.: September 23, 2009. 

Recovery Act: Funds Continue to Provide Fiscal Relief to States and 

Localities, While Accountability and Reporting Challenges Need to Be 

Fully Addressed. GAO-09-1016. Washington, D.C.: September 23, 2009. 

Recovery Act: Funds Continue to Provide Fiscal Relief to States and 

Localities, While Accountability and Reporting Challenges Need to Be 

Fully Addressed (Appendixes). GAO-09-1017SP. Washington, D.C.: 

September 23, 2009. 

Recovery Act: States’ and Localities’ Current and Planned Uses of Funds 

While Facing Fiscal Stresses. GAO-09-908T. Washington, D.C.: 

September 10, 2009. 

Recovery Act: States’ Use of Highway Infrastructure Funds and 

Compliance with the Act’s Requirements. GAO-09-926T. Washington, 

D.C.: July 31, 2009. 

Unemployment Insurance Measures Included in the American Recovery 

and Reinvestment Act of 2009, as of July 2009. GAO-09-942R. 

Washington, D.C.: July 27, 2009. 

Grants Management: Grants.gov Has Systematic Weaknesses That 

Require Attention. GAO-09-589. Washington, D.C.: July 15, 2009. 

Page 172 GAO-10-437 Recovery Act
Related GAO Products 

Recovery Act: States’ and Localities’ Current and Planned Uses of Funds 

While Facing Fiscal Stresses. GAO-09-829. Washington, D.C.: July 8, 2009. 

Recovery Act: States’ and Localities’ Current and Planned Uses of Funds 

While Facing Fiscal Stresses. GAO-09-831T. Washington, D.C.: July 8, 

2009. 

Recovery Act: States’ and Localities’ Current and Planned Uses of Funds 

While Facing Fiscal Stresses (Appendixes). GAO-09-830SP. Washington, 

D.C.: July 8, 2009. 

Recovery Act: The Department of Transportation Followed Key Federal 

Requirements in Developing Selection Criteria for Its Supplemental 

Discretionary Grants Program. GAO-09-785R. Washington, D.C.: June 30, 

2009. 

High Speed Passenger Rail: Effectively Using Recovery Act Funds for 

High Speed Rail Projects. GAO-09-786T. Washington, D.C.: June 23, 2009. 

Recovery Act: GAO’s Efforts to Work with the Accountability Community 

to Help Ensure Effective and Efficient Oversight. GAO-09-672T. 

Washington, D.C.: May 5, 2009. 

Recovery Act: Consistent Policies Needed to Ensure Equal Consideration 

of Grant Applications. GAO-09-590R. Washington, D.C.: April 29, 2009. 

Recovery Act: Initial Results on States’ Use of and Accountability for 

Transportation Funds. GAO-09-597T. Washington, D.C.: April 29, 2009. 

Recovery Act: As Initial Implementation Unfolds in States and 

Localities, Continued Attention to Accountability Issues Is Essential.

GAO-09-580. Washington, D.C.: April 23, 2009. 

Recovery Act: As Initial Implementation Unfolds in States and 

Localities, Continued Attention to Accountability Issues Is Essential.

GAO-09-631T. Washington, D.C.: April 23, 2009. 

Small Business Administration’s Implementation of Administrative 

Provisions in the American Recovery and Reinvesment Act. 

GAO-09-507R. Washington, D.C.: April 16, 2009. 

Page 173 GAO-10-437 Recovery Act
Related GAO Products 

American Recovery and Reinvestment Act: GAO’s Role in Helping to 

Ensure Accountability and Transparency for Science Funding. 

GAO-09-515T. Washington, D.C.: March 19, 2009. 

American Recovery and Reinvestment Act: GAO’s Role in Helping to 

Ensure Accountability and Transparency. GAO-09-453T. Washington, 

D.C.: March 5, 2009. 

Estimated Adjusted Medicaid Funding Allocations Related to the 

Proposed American Recovery and Reinvestment Act. GAO-09-371R. 

Washington, D.C.: February 5, 2009. 

Estimated Temporary Medicaid Funding Allocations Related to Section 

5001 of the American Recovery and Reinvestment Act. GAO-09-364R. 

Washington, D.C.: February 4, 2009. 

(450808) Page 174 GAO-10-437 Recovery Act
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